We Have To Stop THIS ECONOMIC DELUSION

The most emotional economist in the world, Gary's Economics, is going to tell us why wealth taxes are good. >> Okay, welcome back to Gary's Economics. Today, we are going to talk about why The Economist hates wealth taxes. >> And why Gary loves them. >> I have recently been interested in sort of what the intelligentsia are thinking about wealth taxes because they are currently the primary blocker of wealth taxes. >> Thank the Lord. Never did I think I would come to the aid of the intelligentsia, but if they really are the ones blocking this, I'm here for it. >> So, I really wanted to know what The Economist was saying. Um I knew they were going to be anti-wealth taxes. >> Because they like to see people prosper? >> There's two articles in there about wealth taxes, and I found the arguments given like incredibly incredibly interesting. All right. So, yeah, there's two articles in there. They don't really give much argument against wealth taxes, but I want to go through everything they they say specifically about wealth taxes. So, that the first thing they have uh is a very short sentence which says, "Wealth taxes would become confiscatory and deter innovation." >> Uh and then they did they refer to like a larger article at the back of the magazine. And if you go to that larger article, to be honest, there's like almost nothing in it. It just says the exact same thing. The costs of deterring innovation are >> Now, in his defense, if they aren't making argumentation, then this is pointless. If you've got people that are on my side of the fence saying, "Hey, there's cause and effect here. The reason that you don't want to get into uh wealth taxes it actually breaks the economy, which it does." Uh but they just want you to feel your way through the issue. It's bad. It's you're confiscating things. Nobody's ever going to be persuaded by that. People are not being realistic about the fact that we live in a very populist moment, which means everybody's reasoning by emotion. And so, if we're ever going to have any chance of winning this argument, we actually have to make the points. Now, I find Gary, and we're going to watch him do it or not do it. I actually haven't seen this clip yet, but um he's either going to come at you with an emotional argument or he's actually going to lay out his cause and effect. Historically, Gary will give you the very beginning of an argument and followed by it doesn't feel right. People aren't going to like it. It's not going to work. And then he'll stop at that rather than offering, okay, what exactly are you going to do? Why is it going to work? And so let's see if the economist also fails us there, uh, then [ __ ] them as well. >> But I really want to focus on the one specific thing they said next, which I found to be really, really interesting, which is this little bit at the end of the article. >> So wait, he's going to move past their actual claims onto something else. Let's see what this is. >> Where it says, "The tax system must ensure that meritocracy prevails over inheritocracy. Broader-based inheritance taxes." And when I heard this, I found this incredibly interesting and I'll explain why. So in the last, like, 1 year, I've been doing a lot of, basically, lobbying of kind of fancy people, politicians, uh, economists, academics, tax lawyers, trying to convince them to do wealth taxes. And this exact argument which the economist makes here in in this week's edition. That no, we definitely shouldn't do wealth taxes and it's it's very, very clear in this article and in previous articles they published that they're very anti-wealth taxes. This idea that we shouldn't do wealth taxes, but we should do more inheritance taxes is an idea that I find so interesting and has come up a couple of times in the conversations that I've had with sort of powerful, sort of influencers in the political world here in the UK. And every time I've heard somebody say to me, "Oh, we definitely >> He's going to say something like this is a wealth tax. And I swear to God, if he cannot navigate the difference between a wealth tax when you're dead and a wealth tax when you're alive, I'm going to lose my [ __ ] >> Oh, we definitely shouldn't do wealth taxes, but what I really want us to do is more inheritance taxes. I find it like an incredibly interesting line of argument to take, and in order to understand why it's so interesting, you basically need to understand what wealth taxes are, and why wealth taxes are so important in our current economy. So, the difference between a wealth tax and an income tax is income taxes tax you on the money you make every year, whereas wealth taxes tax you on the stock of wealth that you have. And the reason that they're so important in the current tax system is our current tax system as it is is very effective at taxing primarily high-earning workers. So, if you are making your money from your work, and you're earning a lot of money, you're probably paying, you know, 50 or even even 60%. Um at the moment, the highest marginal rate of tax in the >> One of the big problems is, and if he doesn't define this, this is going to be maddening. People do not understand the difference between income and wealth, and Gary is so far doing nothing to explain the difference, and this is exactly where it breaks. Now, I'm not for inheritance taxes, it's already been taxed. Uh we'll see how he ends up addressing that, but this is where this gets maddening. You've got to define your terms, you've got to explain why taxing income makes sense, and why taxing wealth doesn't make sense, why those two things are not the same, and why taxing one is easy enough to do, and why taxing the other is absolutely detrimental to the economy. Now, over-taxing either is stupid, but if you don't delineate between the different forms of I'm not sure what you want to call it. One is literally, I've got this income in, it's tangible, it's in my hand. The other is theoretical. Wealth is theoretical. It is not a real thing that you have, which is exactly why trying to do tax it is so maddening. >> So, we're aggressively taxing high earners, but we are really >> Because it's real. You actually have it. It's money. >> really not effectively taxing the very rich. People have enormous amounts of assets at all. So, wealth >> Which is insane and stupid and we should stop doing immediately. >> Wealth taxes really are the only tax that has the power to really rebalance the the current very unfair tax system. I think if you if you look at Zucman's work, he talks about ordinary workers are paying 50%, billionaires paying 20%. Wealth taxes because they tax your stock of wealth rather than just your income every year. >> Gary, here's a question. Can you tax an asset without selling the asset? >> Very rich people don't get their money from working. And because we have a tax system that is largely based around taxing work-based income, >> Do you say why it's unfair, please? >> This is very important within the context of what is currently happening to the wealth distribution in our economies and our societies, which is most groups of society, poorer people, average people, and even higher earning individuals are getting poorer. Governments are getting poorer. Ordinary people are holding less wealth. Governments are holding less wealth. And all of that wealth is being accumulated >> By the way, so if uh cuz he's not saying any more words about it. If what he's saying is the very thing that would make it um a fair tax system is you're charging workers 50% and then you're charging, which by the way, you're not. The vast majority of people in England pay no taxes. Uh and a very similar thing here in the US. In the US, uh 50% of people pay 3% of the taxes. So, when you have a progressive tax system, what ends up happening is the tax base ends up being paid by the wealthy people. So, the people that are getting taxed at 50%, they're not your person that's struggling to make ends meet. So, that's already something that he's not talking about. But, if you were putting forward, "Hey, let's just be fair because equal percentage, that's fair." So, that's actually one of the changes to a tax code the world over that actually I would understand. If people were putting forward, "Everybody just needs to pay 20% or 25% or whatever it is, and just everybody pays it. And we're not doing a progressive progressive tax system, and we're not letting there be loopholes, and we want to shut all that down, and we want to make sure that everybody pays their {quote} unquote fair share." Great. Put one flat tax, don't let anybody out of it. But, of course, nobody Nobody except maybe I don't know if Thomas Massie or Rand Paul would get behind something like that. But, you're not going to hear a lot of people put that forward. >> almost completely avoid tax. And this is very important within the context of what's currently happening to the wealth distribution in our economies and our societies, which is most groups of society, poorer people, average people, and even higher-earning individuals are getting poorer. Governments are getting poorer. >> What's the mechanism get Governments are getting poorer? Gary, you're going to have to explain that one. What the [ __ ] are you talking about? Okay, so that's the first just outright mad thing. So, if you're talking about tax revenue that's actually being collected, certainly in the US, for every new dollar in tax that we spend, we spend Sorry, every new tax dollar that we bring in, we spend a dollar 58. If you're saying that that's the government getting poorer, that's the government getting poorer because they have horrific spending policies, not because they just Oh my god, you've got so many rich people and they're dodging their taxes. That's not what's happening. The US government, and I'm sure it's very similar in the UK, but the US government has almost doubled It's like 94% almost doubled their tax base in the last 10 years. In the last 10 years, the last decade, we have almost doubled the amount that the government is collecting. That [ __ ] is wild. In what way, Gary? Please state the way. Because I know, I'm sure it feels like governments are getting poorer, but the reality is, on the ground, the governments are getting richer and richer by the second because they are collecting more and more and more tax like a morbidly obese person who is screaming for more calories. I need more calories. I need more calories. The reality is, you don't need more calories. You need to spend your money wisely. You need to spend your money wisely. That is where governments are falling on their face. >> wealth, and all of that wealth is being accumulated amongst the richest people in our society. >> We'll get right back to the show, but first, let's talk about the gap between what you know and what you actually publish. You have the expertise, you have great ideas, you could teach a master class on what you do, but the creators killing it right now aren't smarter than you. They just have more visual content. They are posting daily, shorts, explainers, promos, while you're stuck in one or two videos a month because production takes forever. Trust me, I know it intimately. That gap is where you lose. And it's exactly what Agent Opus by Opus Clips was built to close. Our team has been using Agent Opus, and here is what makes it different. You take a script or an audio file, upload your brand assets, your logo, your product, your characters, pick a visual style, and then Agent Opus produces a full 60-to-90-second animated video >> [music] >> that's coherent and publish ready. It's a real piece of content with your message, your visuals, and your pacing from start to [music] finish. Check out Agent Opus at agent.opus.pro/explore. [music] Now, let's get back to the show. Again, he's not telling you what the difference between income and wealth is. So, if you want the government to get more wealthy, now what you're talking about is you want a sovereign wealth fund. You want the government to own assets, which are going to be volatile, which are going to go up and down. You have to be very careful what you end up putting into um the the sovereign wealth fund. If you have like natural resources and you want to do something like that, I can sort of see an argument for that and you can look at the countries that have done that and what they end up looking like. It does not look like a highly innovative society, but there are certainly places where they have done this well and they're able to use the sovereign wealth fund as a way to push the tax burden down. They still have not created the US, which is the most dynamic economy on the world, which is even now, even as we abuse people with our monetary policy, it is still the place that everyone around the world invest the majority of their dollars. Do not let anybody fool you. You do not have a bunch of money flooding into China, which is tied or just second or just first in terms of size of the economy. They're absolutely massive, but people are super paranoid to put their money in because the government controls everything. So, what he's saying is we want the government to control more, even though that tends to push foreign investment for sure away from it because people don't want the government to be able to control the assets. Why? Because the government has proven time and time again all throughout human history that they are the worst capital allocators of all time. You don't want to give your wealth over to the person who raises a dollar and spends a dollar 58. It is so obviously stupid. If you had a friend that did that, for every dollar that they made working, they spent a dollar 58. You'd be like, I have this financially irresponsible friend. I love him. I want to get things for him, but damn, he cannot manage his money. And yet, that is what the the do. And he wants to see them aggregate more of the country's wealth. It's so crazy. I get why that feels like the right thing. My core argument against Gary, because originally I had a really sort of soft spot in my heart for him, cuz he's capturing the way that people feel. He's able to mirror back to people, I get why you're suffering. I get why you feel the way you feel. You should be mad. And you should be mad. But he is either unable or unwilling to tell people the mechanism by which the economy has been broken. And just so I don't fall into Gary territory, the way that the economy has been broken is very simple. It is you create a central bank. That central bank creates a wealth pump mechanism by which, through money printing, driven by deficit spending, you end up robbing people of their purchasing power through the ability to print money. So, the dollars in their bank account don't go down, but what they can buy with those dollars does go down. And the only people that are protected from it, because the wealth is literally being pumped somewhere. So, where is that somewhere? It gets pumped into assets. And so, this is why he's so desperate to tax the value of those assets, instead of solving the problem of this wealth mechanism that transfers wealth from everybody, because the wealthy, everybody, everybody, the poor, the wealthy, the middle class, all everybody alike gets taxed by inflation, but only asset holders are able to escape some amount of that punishment. And so, the reality is what he should be saying is, "Hey, either get rid of that, stop deficit spending, stop money printing, get rid of the central bank, go back to sound currency, or if we don't want to do that, because we like the lubricant of money being able to be printed out of thin air and put into the system, which does have its upside, but it creates the ability to do this wealth pump, then we've got to, at a minimum, stop deficit spending. We've got to make sure that we are not causing inflation through the mechanism of money printing. Now, you're still going to get inflation in other ways and I do not want to spiral out of control, but if anybody wants to push back, trust me, there are other ways that the government can create inflation, but those at least have some upsides in the economy. But this is where this is somebody who's walking you through an emotional appeal. He has not yet given you any cause and effect whatsoever. He's not saying, "Okay, this is the mechanism by which we expect people to liquidate their assets so that we can tax them." He's not saying, "The real reason that you have a K-shaped economy and some people are doing so poorly is because of deficit spending and inflation, which is a man-made disease that is quite literally designed to be a hidden tax." He's not saying any of that. He just knows that people are mad at the wealthy because they need someone to blame and that's an easy visible target. >> I got a I got a quick thing in the chat about that. >> Please. >> Capitalism, stock market, it's built on growth. Even the US, we needed 3% GDP growth every year in order to show growth in positive direction. >> Yep. >> Some people say that 2% inflation target, although it's man-made, although it's not real, something we shouldn't do, it's crucial for us to have that 3% growth every year because if the >> You really want to be in the the complexity? Okay, cool. >> Yeah, it's so the where's that? >> isn't crucial, but it is extremely useful for lubricating the economy for something called the velocity of money. So, Japan is the perfect example of what happens when your velocity of money is it's not zero, but it's very very low. So, for almost 40 years Japan has just been stagnant. Meaning, whatever you were getting paid at your job, if you were making $100,000 a year, 40 years later, you're still making $100,000. But, bread is still the same price. So, it's just stagnant. So, if you've ever been to Japan, Japan is beautiful. It's wonderful. It's incredible country. And so, you can have a stagnant economy and still be in a wonderful place. Now, it's very different. You're not going to get the level of innovation. You're not going to get a dynamic economy. You're not going to get money moving around. And so, you're not going to start broke and one day end up being rich. And so, you don't get what the US gets. The US gets Silicon Valley, where the company are each company is fighting for the employees and you've got um Anthropic stealing the best employees from Open AI. And so, can we build something better? And the world wins because there's so much competition in those companies both for employees and to make a better product and to win over the consumer. Money's going around everywhere. One person can aggregate it like Elon Musk and they can do all this incredible innovative stuff, which they're only able to do because they're able to aggregate capital both by winning in the marketplace, meaning I make a better product and therefore I'm able to make more money. And with those profitable dollars, I'm able to aim them at something new. And on the actual stock market, people watch what I'm doing and they're so inspired that they want to own shares in my company, which allows me to raise money from the public markets. And now I can aggregate even more capital and grow even faster. Japan doesn't have that. Japan is stagnant. So, once the world started basically exporting their inflation to Japan by saying, "Oh, you buy this thing from us? Well, COVID took our costs up. And so, we had massive inflation." The US has had 30% inflation in the last 6 years. So, it's like, "Yeah, if Japan is buying stuff from us, it's going to be roughly 30% more expensive." So, now it's all falling apart in Japan. So, a stagnant economy is an economy that's at risk, high risk. Even if emotionally you can stomach being flat, if you're not careful, you run into stagflation, which is wages aren't going up but the price of bread is. And so, that's a disaster zone. Japan is now in danger of finding itself there, so they're actually starting to inflate. People are getting raises. Um the yen unfortunately is weakening. They're having a liquidity crisis. All kinds of weird things are starting to happen to Japan. But, if you understand how all of this works and you can keep the inflation um working so that it's like, "Okay, we as a government are going to create new money at a disproportionate rate of 2 to 3% compared to the value that's being created by our entrepreneurs." So, the debt being taken on, the free cheap easy money, which is the thing that causes inflation. So, that free cheap easy money, we want them to use it to make productive things. So, when Elon Musk uses it to start a new company that both creates Starlink, that people are paying huge amounts of money for, and they they're desperate for it, they love it, great product, this is incredible. So, now it's given people more things to buy. So, new money has come in to the economy, but instead of chasing the same goods, which is definitionally inflation, it's now chasing more goods. And so, you may be like, "I didn't even know that they created more money." Because everything costs the same. Well, costs the same because he created a new thing for people to buy. So, that new money, instead of competing for the same loaves of bread, it's now the same amount of people are competing for the loaves of bread with the same amount of money, but there's this new thing with the new money that they're going after. Now, what the government tries to do is only introduce new money such that it eats through all the innovation. So, they they steal all of that cuz things should get cheaper over time. But, the greatest psyop ever pulled on the world is to convince them that uh deflation is bad. Deflation is amazing. You should want deflation, just not crisis-led deflation, which is what happened to Japan, where velocity of money dropped because everyone was like no matter how much money you pump into the economy uh we're not going to spend it. We're going to save it. We're going to pay down debt. And so Japan's like no matter how much money we make available for us effectively 0% interest, we can't stimulate inflation. We can't get the positive side of inflation going. So the government with inflation at 2 to 3% as a target is that's actually a lie. They're eating all of those positive deflationary coming from innovation and technology plus 2 or 3% and so they're saying I'm going to add just enough money over the new goods to take from you an additional 2 to 3%. Now in doing that you get punished for saving. When you're punished for saving you spend. And so when you spend you create velocity of money. Now you create the ability for an entrepreneur to come in and be like well you're going to spend the money. So now I want you to spend it with me. But the reason you're spending that money is twofold. I made something you wanted and two subconsciously cuz most people don't understand it consciously but subconsciously you know you can't save your way to success because the government is inflating it all away. It's all knowable. It's just confusing enough though that people think for literally my entire life I thought inflation just happened. I thought it was a law of nature. Like seasons change inflation happens. Literally. I never thought about it. It just that was my default assumption. Once you understand the cause and effect of it you can project out of Gary's emotional read on the situation and be like what are we actually trying to do here? Because there is the um Elon Musk is winning and if we think Elon is winning too hard and we really don't like it then ask why is Elon a trillionaire? Like why there was a day where being worth a hundred thousand dollars was like being worth a billion dollars. But inflation happens and suddenly a hundred thousand dollars is not very interesting. You got to be a millionaire. And there was a day where being a millionaire was like being a trillionaire. And then it was like, well, inflation made a million not very cool. Then it was like, well, you had to be a billionaire. And now we've just pushed it to a trillionaire. But the real question is the gap between the wealthiest person and the poorest person. That gap causes blood in the streets, pitchforks, revolutions, all of that is caused by the human propensity for you have more than me and I'm full of resentment. And so I'm going to burn all of this down because I don't like you having more than me. It It is a person who they are locked in insecurity around economics. This is a populist moment. So populism is when people reason by emotion. This is why Gary is so big in a populist moment. He reasons emotionally. So he resonates with people who are reasoning emotionally. But they could eject out of that and say, "Okay, why is Elon getting so rich and I'm not? What's really going on?" And what's really going on is the inflationary cycle. So it has this positive development. But governments always get abusive, always. And so they will end up inflating too much. And it isn't 2 or 3% to keep the money moving, it's a 30% that they try to disguise. And so that's when this just ends up being hyper disastrous, which is where we're at now, where you've got a guy who is creating a ton of value for people, which is part of why he's getting rich, but he's also on the right side of the wealth stealing siphon that is money printing. >> There is a level of cuz I'm looking at it from the Gini coefficient. I'm looking at it from monkeys with grapes and cucumbers. And I think that while yes, inflation running away is the reason that I make $100,000, my neighbor makes $100,000, but they're moving into a bigger house and I'm moving into a I'm downsizing because they put $30,000 into stock market, I put $30,000 under my mattress. I understand why that why why is happening. >> [snorts] >> But I do think that when it comes to somebody like Elon and you start to get to that massive amount of wealth, Elon to the second richest person is further than the poorest person to the You know what I mean? So it's like there is a certain level and I'm not even getting to the fact that the Nasdaq 100 rules were changed, the IPO liquidity rate was changed, the 15-day trading limit, all these things that were financially incentivized to remove guardrails, restrictions, all these things to allow the SpaceX IPO to get to that level. We can't act like if we just balance the budget, the Gini coefficient will reset or if we just like >> can't. So, here's the thing. If you want to be mad at Elon for getting wealthy, um you have to look at what part of his wealth is quote-unquote his fault uh and what part of it is the fault of the policies that we vote for. So, i- anybody that wants to get mad at Elon, there's actually he recently gave you two things that you should rightly be very angry about. Uh one, you should rightly be very angry about. One, you need to keep a close eye, but it could be sinister. And so, the first one is money and politics. So, um he threw hundreds of millions of dollars to get what he wanted politically. Now, he's not the only one, tons of people do it on both sides of the aisle. It's despicable and we should as a society have a zero tolerance policy for that. >> Mhm. >> So, if you want to be mad at Elon on that, I'm right there with you. The second thing that he did that may be good, but it could be catastrophic is when he did the IPO um he has the SpaceX IPO I think he's almost certainly under reporting how expensive the infrastructure buildout for AI is going to be, that the actual life cycle of the chips, um which is the most expensive part of the AI infrastructure buildout, is going to end up being something that's a two to three-year time horizon and he's clocking it at like five to six. That discrepancy hides, if Michael Burry is correct, it hides like a 170 plus billion dollar loss. And so, and that might be industry-wide, it might not just be Elon's company, that might be AI in totality, to to be very clear. Um but if that's true and all the AI companies are basically cooking the books a bit. Uh and then they're using this IPO as excellent liquidity to basically run the 2008 playbook, which was uh oh, the banks all recognize we've got this really shaky debt situation building with AI infrastructure buildout, cuz the revenue's not coming in as quickly as we expected. And so now, like every revolutionary technology before AI, the first wave of investors might get wiped out. But they're savvy and they know that historical example, so they're like, "Hmm, we would much prefer the second wave of investors be the ones that get wiped out. So, let's IPO, which by the way, the IPO's hyper late, which we can blame government regulatory burdens for this, because we should have made it so that these companies want to IPO much earlier, but they don't, they want to stay private much longer because the regulatory burden is so disgusting. But I'll set that aside for a second. So, it's very possible, though I'm not a mind reader, but it's very possible that that's like bad thing number two that Elon is doing. Where it's like he's using the retail investor, who does not understand the historical example, nor does he see through to what Michael Burry is banging the drum about, which is they could have a much bigger loss here than you think they do, which means you may need to be holding these shares for much longer for you to reap the benefits. So, not necessarily, if you've got a 10-year time horizon or a 20-year time horizon, you might win big big, but you might not. And so that one, like I've got my eyes on it. Now, if all of the investors end up making money, then it's like, well, he just did humanity a huge service cuz he made this available. Like you had index funds changing their rules to let more retail investors in. Again, could break absolutely sinister or could break like, holy [ __ ] you just made a lot of people extraordinarily wealthy that otherwise wouldn't have been able to do. The reason I'm sort of on the fence about it is that Elon only gets paid if he is insanely successful. And he has a historical example of being insanely successful of doing something that people thought there's no way he could do this. And so, given that he's riding with everybody, all of that wealth that people are saying that he has, like, that's all tied up in he makes the stock perform. So, they're only floating like 5% of the company. So, all of the like Elon is a trillionaire and all that, it's all make-believe. It's all a projection of like, well, if he pulls it off, then yes, he'll end up being worth a trillion or more, but he's got to pull it off first. And that's why it drives me absolutely [ __ ] insane when you've got someone like Gary or anybody banging the drum about a wealth tax saying, "Tax this guy as if he has already pulled it off and has sold the shares and has them sitting the dollars sitting in his bank account." None of which is true. He hasn't pulled it off, so it's not actually, uh, you know, going to equal that for him. And if he started selling, the price would drop, so he wouldn't be able to realize it anyway, which he would have to do in order to pay the tax. So, it's like, again, when you try to map this to cause and effect, all of Gary's arguments fall away. When you try to map it to, "I'm looking at Elon, he's a trillionaire because I don't understand the difference between wealth and income, uh, and now I'm mad because I'm the guy who's making $100,000 and I'm not the one that's getting rich because I don't understand assets, and so I'm just like, what the fuck?" Okay, so those are the two things. If you want to be mad at Elon, one, you can just be angry, money and politics. The other, if you have a skeptical eye, I'm right there with you. I have a very skeptical eye. I I worry that they are using retail as a way to de-risk and they are pushing the risk onto people that are less savvy. Now, I think people should have to be responsible for themselves in thinking through it, but I still wouldn't smile upon him if that's what he's actually doing. Okay. Now, the part that people aren't mad about that part. They don't even [ __ ] understand it. The part that they are mad about is that he is worth a trillion dollars. Now, they don't understand those are shares. Most of them are locked up. Uh he couldn't wouldn't sell them now even if he wanted to. And so, that's all just a bunch of people speculating on what that would be if he could sell 100% of his ownership right now today, which he can't. So, if people understood that number only spirals up to a trillion dollars in value because of deficit spending and money printing, otherwise the value of the shares would stay much more reasonable. He's getting like a hundred X on his um uh profit ratio. So, a revenue ratio. Might even be worse, revenue. But, like it it is absolute insanity. It's it's a-historic. This is not normally the kind of valuations that people get. So, normally SpaceX would be valued at a much lower number. And so, why isn't it? Well, part of it is Elon's track record of success. So, people are just excited. So, you've got a lot of people that want in cuz they're convinced he's going to be able to pull off another miracle. And then you've got the deficit spending money printing which artificially makes a hundred thousand dollars become a million, become a billion, become a trillion. And so, that thing Elon has nothing to do with. That is the government acting a fool for I mean, since 1913. But, really accelerated since the dot-com crash in 2000, got on everybody's radar in 2008, and then COVID was just absurdity. >> Yeah. Technically '70s when we decoupled from gold, but I get you. >> Well, so 71 is a slightly different problem. So, 71 said, "Hey, let's make it possible for people to abuse the system." That started in 1913, became completely unhinged in 1971, but the actual time where they abused it started in 2000. We'll be right back to the show, but first, let's talk about a number that should concern you. [music] Data breaches have increased 211% in a single year. >> [music] >> And every breach means more of your personal data, your address, your phone number, your social security number, it ends up on data broker sites where anyone can buy it. [music] The question isn't whether your data is out there, it is. The question is whether you're doing anything about it. That's where Incogni comes in. They track down your data across hundreds of sites and remove it automatically. You authorize them once, that's it. [music] They handle everything else. Plus, with custom removals, you send them any link where your information shows up, and their team is going to take [music] it down. The threat is growing. Incogni is the response that grows with it. Go to incogni.com/impact [music] and use code impact for 60% off an annual plan. Try it risk-free for 30 days. Now, [music] let's get back to the show. >> All right. Um, let's get through his next point. >> Let's go, Gary. That we can get wealth back into the hands of ordinary families. And the economist essentially recognize this in in what it says. It says that the tax system must ensure that meritocracy prevails over inheritocracy. So, this is the system that that we're in, >> Gary, the very, very rich already pay when they get income. Now, there's one loophole that everybody points to, which is uh it's borrow something die. I forget. Borrow don't pay back die, something like that. Uh if people want to close that loophole, where if you are borrowing against your assets, that you have to pay that loan back, cool. I would have no beef with that. But, that would be a sensible way to approach this. But, a an illogical emotional way to approach this would just be like, well, the estimates are that you're worth this, so we're going to tax you on that, even if you don't actually have the ability to get a hold of those funds. That's where this gets ridiculous. So, the thing with wealthy people is they usually have made enough money, like I haven't taken money out of Impact Theory. I just reinvest all my money back in the Impact Theory. So, I haven't made money as an individual in 10 years. It's because I already have plenty of money to live on. But, I paid tax when I did sell that money, or when I sold my company. Paid a massive untold millions dollars. So, I'm like, hold on. I paid when I got the wealth that I can now live on, I paid tax, a massive amount of tax. So, that's where it gets very frustrating, where people act like because you don't need to make the money now, that you are secretly making all this money. I mean, I guess in theory, as Impact Theory goes up in value, I am getting richer, but it's like I haven't taken any money out of that. I put all the money back into the company so I can hire more people, so I can build more stuff. And so, yeah, that's where this gets tricky. >> It's the Steve Jobs loophole. I get paid from Apple $1. I get paid in shares, and then with those shares I borrow $100,000 a year against the bank, and my interest rate is 1%. I am going to make 3% with my stock staying in Apple naturally based on the artificial inflation that is coming from the government. So, I make enough to pay back that loan every year. So, I'm getting $100,000 quote-unquote tax-free every year. >> Well, if he's So, yeah, yeah, the only part of that that people have to remember is whatever money he takes out to actually pay the interest, he's getting taxed on. >> [snorts] >> Now, um I need to look deeper at this, but at a cursory glance, um, I read this article that was talking about this the idea that wealthy people could borrow money and then never pay it back. And then when they die and they pass it on to their kids, it's known as a step-up in basis. So, the kids are judged from, well, what are all the assets worth today? And they only pay tax as it goes up from there. And so, people are like, "Hold on, that's a loophole." But the reality is it doesn't seem like many people actually do that because debt puts you in such a vulnerable position because if your collateral goes down in value, the bank can call the loan. And so, I my instinct right now, based on reading that information, is that not a lot of people actually do that because truly the mechanisms of debt are very dangerous. And so, it's far more likely that these guys take the loan to aggregate the capital and then in moments where their equity's worth a lot, they sell, pay down the debt. And in times where their equity isn't worth a lot, then they're going to ride out the loan. And so, they're always look at You can see this where it's like, uh, "Mark Zuckerberg just lost $84 billion in value." So, you can imagine on that day he's not going to sell anything, take it out, and pay off his debt. That's where he's going to be like, "Oh, is the economy in distress? Are interest rates coming down?" Because if the economy's in distress and they're trying to stimulate it with, uh, low interest rates, that's when I'm going to borrow. That's not going to be when I pay back. I'm going to pay back when it's like, "Oh, [ __ ] everything's pumping to the moon. Now I'm able to sell my shares at a, you know, maybe all-time high. I pay off that debt. The debt feels very cheap to me." So, but when he does that, which he is almost certainly going to do because doing everything on debt forever is so high risk, that because if you're doing all that and you're debt-laden and you drop by 84 billion, the banks might be like, "Yo, [ __ ] like, hey, you need to pay up." And this is how people jump off, uh, the Empire State Building in 1929 because they're like, "Oh, [ __ ] I've just got what's called margin called. I I now have nothing left. The bank is already taken all of my assets. So anyway, the likelihood that these ultra wealthy people actually cycle through and are paying off and therefore paying interest when they sell is basically 100% and Elon has said no one has ever paid more tax in history than him. So it's like the very guy you're like somehow saying has not paid his fair share is the largest taxpayer in all of human history. So what are we saying exactly? It's wild. >> Let's jump to 12:30 cuz he talks about innovation. >> So this is why I I I I simply [laughter] cannot understand. I I was really quite amazed to see the economist go with this, right? They're saying that we we we want to tax the very rich more, but we absolutely don't want it to be a wealth tax. We want it to be an inheritance tax. Now every single penny or pound that the very rich own now will be inherited. That is what that is what the >> Gary, are you really that dumb? There's no way he's that dumb. I mean maybe he is, man. Maybe he just does not understand the economy despite the name. Uh it is entirely possible that what you have in Gary's economics is a trader who's good at a certain type of trade. He understands how inflation works and so he's gone and made a bunch of money on that, but he's never actually taken the time to figure out how all of economics works. Like even I am haunted by one truth. As the shore of my knowledge grows, uh sorry, as the island of my knowledge grows, so grows the shore of my ignorance. And it's like you realize how little you actually know. Like if I compare myself to Scott Bessent, he'll run rings around me. This is a guy that can actually go collapse a country's um that he collapsed the pound. I mean it's crazy. Like that kind of knowledge of how economies really >> you did it to Iran. >> And I'm sure he will do it to more places. So it's like there there really are levels to this [ __ ] as they say, but the fact that Gary actually believes that every dollar of wealth, remember he's never taken the time to delineate wealth from income, that every dollar of wealth will be inherited. He doesn't know that. If there's an economic downturn, your wealth gets brutalized. You can on a single day lose 10% of your wealth easily. And so, if you happen to die in a downturn, your kids will not inherit that. So, they'll inherit whatever it's worth the day you die. And then they are taxed if it goes up from there. And so, there is a very real thing that happens, that step up in basis, um that that part I understand. Like, if we really want to have a mechanistic conversation and say, "I don't like the step up in basis." And so, we want to double tax people. And by the way, it would be double tax because people have already paid taxes on the money that they used to buy those assets, or they themselves created the value, at which point it should be taxed as um not ordinary income, but as um capital gains, uh because you took a risk, you did all that stuff, and then you need to reward entrepreneurs for doing that because the vast majority of entrepreneurs will fail, they will lose money over time, they won't make money. Uh and so, given that reality, 94% of all companies fail to make $10 million in revenue. Revenue, not profit. Revenue. So, if 94% of companies fail, bro, you've got to do something to incentivize people, otherwise they're just not going to [ __ ] do it. And by the way, something I never hear Gary talk about, uh when Karl Marx comes into existence and starts talking about communism, uh there's no limited liability company. So, companies literally are only founded by wealthy people because uh if your company went under, you were personally liable. So, only people who had enough wealth that they could survive the death of that company, being sued over whatever, um only people that were like, "Okay, well, this is only 10% of my um net worth that I'm putting at risk, so cool, I'll start this company." So, it's like every company was started by rich people. So, I understand why people get bitter. As a non-rich person who started a company and got rich, I'm telling you it's not how it works today specifically because of limited liability companies made possible by his country. So, that whole thing like completely changed the landscape where anybody could start a company, never more so than today with AI. And so, it's like these are solutions for a time gone by that doesn't make any sense. Anyway, that was all to say that you want that income taxed at capital gains. And so, if people are going to say, "Okay, listen. Uh dear wealthy person who you just pass things on to your kid, um things that you already paid tax on, we're not going to tax. But, if because you've already paid tax. But, if you're going to um give them something when you die and let them inherit something you haven't paid tax on yet, we're not giving them the step-up-in-basis, but we are going to give them the capital gains treatment. Word. Cool. Now, the capital gains is being paid on that from zero, right? From dollar one whenever they started gaining. I would totally get that. I would have no beef. Me passing that on to my kids and being like, "Well, you're still going to pay tax on it the way I would have had I lived." Awesome. But, that's not what they're talking about. >> All right. I want to get through this innovation section. Let's keep going. >> All very rich people do with all of their money. Their wealth never goes down. All of it goes to their kids. >> What are you talking about? >> you if you as the economist are saying listen, we wealth tax is terrible, you know. They're going to What is it they say? They're going to deter innovation. They're going to take money from the >> Why is he laughing? >> seasoned assets of economies most productive people. >> Yes. >> How can you in one breath say that taxing the rich 2% every year is going to destroy the economy? >> Let me answer that question, Gary. The way that you say it is building a company is ridiculously hard. Governments are absolutely uh terrible at allocating capital. And so, all of modern life is predicated on a very, very, very small subset of people who not only have the appetite for risk to take on building a company, but actually have the ability to end up in that 6% of people that have companies that make $10 million or more. And by the way, the way that we do things now is not by, at least not always, showing up with a gun and just confiscating people's wealth like maybe we did in Venezuela, but you're going in and you're telling companies, "Hey, you can get rich." Or you're telling an individual, "You can go get rich by adding value to society." That is how we've gotten to the modern era. That is how we have solved many of the biggest health challenges, for instance, is people understand that they can go build this thing that's of value to people and they can get rich doing it. So, they solve the hardest problems that we're facing. The fastest way to earn a billion dollars, this is like straight out of, um, Peter Diamandis's book, the fastest way to make a billion dollars is to help a billion people. Like, go solve a problem that they really care about and they really want solved. That's how you're going to generate wealth. Again, because of the limited liability company, we create this ability for people to do it. So, when you disincentivize that, then all of a sudden, people go, "Well, if I want to get rich, I have to go steal it." And that's why countries would go and just try to conquer their neighboring countries to get things from them instead of building value and going, "As a country, we're going to let the free market reign and we're going to take some tax dollars off that." And that is literally how America became wealthy. So, uh, they let companies build things that our country wanted, the world wanted. That meant that they were able to aggregate capital from all around the world, make themselves wealthy. The government gets a piece of that. The government gets wealthy, okay? That's how you build wealth. Now, if you disincentivize those people because you're just going to take so much of it that they end up going, "Why am I working this hard? It's so much risk and it's so much hard work and the government's going to take it?" It doesn't make sense. It is disincentivizing. And so, now, then you ask the country, how are you going to get wealthy? And they're either just going to confiscate, confiscate, confiscate, or meaning their tax-paying citizens, or they're going to go do it the world over. We live that. We know what that looks like. So, how he cannot answer that own question for himself is beyond me. >> Let's finish that like analogy, right? Let's say we tax them, they say I don't want to do this no more. In Atlas Shrugged, they went to a mystical land in the hills of Colorado. What do you think happens to the rich people in America if they get to that point where we get that we disincentivize innovation? >> Well, so the honest answer is any smart country the world over is going to go, oh, you guys are being dumb. I, meaning you formerly wealthy nations, have alienated the most productive citizens that you have. We're going to seek them out. And so, they'll become very capital-friendly. So, UAE has done spectacular things, Singapore has done spectacular things. People are going to go >> Free capital gains, free to relocate, come over here. Business-friendly environment. So, the person says I'm not going to do it in America, I'll go to the UAE and start Facebook. >> Correct. And so, that is how countries compete with each other. And one of the brilliant things that America did was they said, we're going to bring together all of these disparate states who will all compete with each other for their citizens. And this is why we see people leaving California to go to Texas, to go to Florida cuz they're like, well, I guess you guys are going to be the home of innovation. And watching Florida, like during the crypto craze, watching Florida get all the tax dollars from all those crypto guys by saying, yeah, we're going to be the place that is cheap, and so, in terms of taxes, so, come here. And they did. And so, you will see countries compete just like that for talent. So, it's when people act like the most productive citizens in the world are somehow stuck in their country, that might be true if all of your wealth is based on real estate, sure as hell not going to be true if you're doing something that is mobile, global, whether that's finance, whether that is software, those guys are going to go wherever the hell they want. And as things like AI become the most important industry on the planet, they're just going to go wherever the people are most friendly to that industry and friendly to capital. It it's just that simple. Now, where these guys are right is that that will often take decades. And so you'll be able to confiscate a lot of money as they try to leave. You'll put in an exit tax and all that and you'll be able to get a little bit of money. >> [snorts] >> But the problem is in the long run you end up losing catastrophically. And they need not look any further than like Argentina. Places that have attempted this before and on a long enough time frame they always fail. And so I don't know why these guys don't go to what are the things that work really, really well for like 150 years? And the answer is effectively over the last 500 years something akin to free market capitalism. Even China had to finally deploy it. You've now got Cuba making noises about the fact that yeah, trying to control price from the top down just doesn't work. It's like that meme. It's like you're so close. Like they will eventually get it. Or they'll be a backwater for another 100 years. I mean it's really up to them. But economies have physics and that is a thing that Gary just is not leaning into. >> But taxing the rich at at 50% every 30 years is good. Like it's it's It's honestly it's quite mind-blowingly stupid. There's absolutely no logical consistency here and I was fascinated cuz and when this came up in the the two meetings that I had, I think what I think they were both the back end of last year. I remember thinking you know maybe these this is such a such a phenomenally stupid argument. I assumed that these two people must have like got it from each other and and now to see like the economist magazine say it, it's it's honestly this is one of the most interesting things I've seen cuz I think it really reveals what is going on in the heads of I guess sort of polite society in in when they oppose wealth taxes because if you >> Here's the problem. So, he's literally not saying anything. He's just saying it's dumb. I don't know why they do it. They must have gotten it from each other. He has literally put forward not a single argument about why you should do it. He's just saying it's stupid. So, this is what um drives me bonkers about his popularity. So, um there there was a guy named Daniel Priestley who is insanely smart and it is this uh I feel uh I'm so torn. I get why he focuses on business content. He is an entrepreneur and so it's a straight line. It's very Alex Hormozi of him. Stay on message which is the thing I'm pathologically incapable of doing. But, um I wish Daniel Priestley would just just talk about economics. He is really really sharp and I saw him debate Gary's Economics. And every time he would have Gary dead to rights on the cause and effect in the economy, Gary would go, "Fine. Fine. Yeah, no no. No, uh Daniel, let's just keep doing it your way um and then let's let have people revolt." That's just emotion. >> Mhm. >> So, Gary, that's not an argument. Take on his arguments one by one. Because um the French Revolution did not end in peace for all. It was not an uprising of people who actually understood the economy and were tired of being abused. It was the emotional outburst of the overproduced elites who had time to sit around and whine and they ended up becoming such a radical murderous force that Napoleon rises to power, finally strong mans them into being an army, and then goes and kills millions of people all over Europe in a bloodthirsty battle of conquest. And so, it if that's Gary's punchline, it's like, "The [ __ ] are we talking about?" So, Gary, let's say that you really just want to make life better for your friends who aren't making a lot of money. That's part of his origin story. Okay, rad. How do we actually do that, Gary? Because giving them free [ __ ] has never once worked in history. So, what the actual [ __ ] By the way, I have been to Kuwait. Guess what conversation they have about their wealth their sovereign wealth fund. It makes people lazy. Okay? So, it it is not a free pass. Like, you you can't just give people [ __ ] and expect them to be innovative and to play on a world stage because now they finally got enough money to do [ __ ] People in England, people in the US are living lives that I mean, there are people in the US that have iPhones and air conditioning, and they're spiraling because life is so hard to make ends meet. It's like, look, there is a real thing. We have broken the economy. The K-shaped economy is a um terrifying immoral, sinister, evil thing that politicians and bankers have done to us. But, when I see governments that are the equivalent of somebody who's morbidly obese saying the equivalent of, "I need more calories." It it is so illogical, so destructive, and so easy to walk through the cause and effect of how you end up there, and the cause and effect of how you get back out of that problem. And so, Gary's arguments are the equivalent of a morbidly obese person saying, "I need more calories because ice cream tastes good. And if you don't give me ice cream, I'm going to throw a fit, and all my friends are going to throw a fit. It's like, what are we talking about? So, we have done a bad thing to people. We have voted for politicians who deficit spend, and then we have stolen from everybody through money printing via the central bank, and we have created a K-shaped economy where the people who understand how the siphon works get wealthier by the day. Not because they're the ones stealing from you, because they understand how you steal from everyone, and they know how to protect themselves. And then we have people who don't understand how to protect themselves being stolen from every day. So, Gary, you're right that this system is broken. You're right that this system is rigged, but all of your emotional outbursts, all of your emotional argumentation will save exactly nobody. >> If you like this conversation, check out this episode to learn more. >> The thing with socialism, it's it sounds obvious. It's like, hey, you've got one group of people who are billionaires and rising class, and they can afford 10 houses and private jets, and it sounds so obvious that you would just take the money off those guys and give it to people who can't afford to eat. That just seems like