Gen Z Confronts Me On The Economy

Meta's infrastructure investment is bringing jobs to local communities like Las Lunas, New Mexico.

Phil, who grew up in Las Lunas, has seen the positive impact that Meta's ongoing $600 billion investment in American jobs and infrastructure will bring.

I had to travel for work, missing moments I can't get back. Then Meta opened a data center and brought new jobs.
Now, I don't worry about missing out anymore.

Learn more about Meta's investment at meta.com/slash buildingamerica.

Shopify's point of sale system helps you sell at every stage of your business. Need a fast and secure way to take payments in person?

We've got you covered. How about card readers you can rely on anywhere you sell? Thanks.
Have a good one. Yep, that too.
Want one place to manage all your online and in-person sales?

That's kind of our thing. Wherever you sell, businesses that grow grow with Shopify.
Sign up for your $1 a month trial at shopify.com slash Spotify. Shopify.com slash Spotify.

At blinds.com, it's not just about window treatments. It's about you, your style, your space, your way.

Whether you DIY or want the pros to handle it all, you'll have the confidence of knowing it's done right.

From free expert design help to our 100% satisfaction guarantee, everything we do is made to fit your life and your windows. Because at blinds.com, the only thing we treat better than windows is you.

It's your last chance to score Cyber Monday mega deals. Shop up to 50% off plus a free professional measure right now at blinds.com.
Rules and restrictions apply.

You may notice something about this video already. I'm off center, which means someone is about to roll into frame.
That someone is Madison.

I'm covering. Wow, that wasn't awkward at all.
She's 24 and apparently has questions about affordability and economics. So get ready for some true excitement.

Here we go. Okay, let's talk about affordability.

So specifically, why has affordability gotten as bad as it has? And also, what are some ways that we can get grocery prices specifically down?

Because that's where I approach the most struggle in my daily life as a young 24-year-old. You know, you go there and eggs are like $6 versus the $2 I paid when I was in college.

Yeah, so the best way to sort of understand in very, very basic economic terms how the price of a good is decided, a typical supply-demand curve looks something like this.

Okay, so here on the Y-axis, you have the price of a good. Okay.
Here on the X-axis, you have the quantity of a good.

Okay, so, right, as the supply of a good increases and the demand comes down, then the price decreases.

Okay, so here's where your price would be when they meet, okay, is when the supply meet, this is what we call equilibrium, is where the supply and demand curves meet.

So, some of the egg price crisis that had to do with actual like disease among chickens and mass slaughter of chickens.

Some of that happened a couple of years ago, and the egg prices have sort of reduced from where they were a year or two ago. But everything remains incredibly elevated.

Again, because of the injection of all of this money into the economy under the Biden administration, there are these huge bills that went forth that kind of spread huge amounts of money.

Plus, the Federal Reserve was really, really loose in its lending policy. That's why the interest rates were too low.
So they were injecting enormous amounts of money.

And, you know, again, all of the COVID stimulus that went in in 2020, just free helicopter money to everybody, raises the price. So the question is, what are we comparing grocery prices to?

So if we're comparing grocery prices to where they were six years ago, they're extraordinary.

If we're comparing them to where they were one year ago, then they're slightly higher than they were a year ago, but everybody was freaking out a year ago, and they should have been freaking freaking out a year ago.

And so I think one of the things President Trump is competing with is where the baseline lies. Does the baseline lie from when he took office or is the baseline where kind of all of our heads are at?

Five years ago, I could, you know, go to the grocery store and spend half of what I'm currently spending.

As far as what could be done to bring down grocery prices right now, I mean, he should get rid of the tariffs.

The tariffs are going to temporarily increase grocery prices because they're reducing the supply of the products that you want to buy. He himself is acknowledging this.

He recognizes that, for example, bananas and coffee, too expensive. So what did he just do?

He relieved tariffs on bananas and coffee, which is a tacit acknowledgement that when you get rid of tariffs, then the prices tend to go down.

Now, there is a study that came out recently that suggested that tariff policy leads to deflation, that it leads to lower prices over time. People are reading that study wrong.

What that study says is that tariffs actually lead to job loss. Job loss leads to people not being able to buy things.

When people can't buy things, demand goes down, and so the actual price goes down.

So long-term prices go down because you wreck the economy with big tariff regimes, which is not exactly what you actually want to go for. That's so scary.

Yeah, so I think that we have an excellent supply chain domestically in the United States for food.

The biggest problem is just a generalized problem that we feel mostly at the grocery store because it's the most immediate place we spend a lot of money.

Again, it's kind of like the clearest place that you see is in the food prices, but everything has gone up tremendously over the course of the Biden administration and is kind of coming down, but hasn't gone down all the way under Trump.

When I say gone down, it actually, I should correct. The prices went up like this under Joe Biden, and now the prices are going up like this under Trump.

Everybody wants the prices to actually come down. If you want the prices to actually come down, you need a deflation rate, not an inflation rate.
The inflation rate right now is 3%.

So that means that everything is now 3% higher than it was one year ago. Well, if last year it increased by 11%, you're adding another 3% on top of that, then that's still really high.

When people say they want prices to come down, and this is what politicians refuse to understand, they don't mean that they want the trajectory to look like that.

They mean they want the trajectory to look like this. Yes.
Okay, and if you want the trajectory to look like this, you need to pursue actual deflationary policies. And deflationary policies,

you know, that's a scary thing because deflation very typically exists only with radical increase in supply, which, again, we have pretty good supply chains.

So it really isn't a supply problem per se. Yeah.
Or radical decrease in demand. And if you want to radically decrease demand, you have to crash the economy.

Yes, that's typically the way that deflation tends to occur. So basically get used to these prices is all I'm saying.

Unless you have a DeLorean and you can go talk to Jerome Powell about radically reducing interest rates in a time of gigantic government subsidies pushed by both the late Trump administration and the entirety of the Biden administration.

I don't have a time machine. There's never been a period in American history that was significantly deflationary over time that did not coincide with a significant economic downturn.

So essentially the state of what we're living in right now at the end of the day. This is the new normal.
It's the new normal. This is the new normal

because of how high the inflation was. during the Biden administration.
Right.

He was like handing checks, doing lots of subsidies, doing all these things, and now we're suffering the consequences of that.

And I think politically, it's one of the reasons why politicians need to be careful how they talk. So Trump came into office and he said, I'm going to bring the prices back down.

What he should have said is, Joe Biden embedded these prices in the economy. You can't undo everything Joe Biden did.

It's not possible unless I just suck all the money that he gave you, go back in time, suck all the money out of everybody's pocket.

You could increase supply, but it's hard to see how you increase the egg supply.

How do you triple the in order to get back to the old prices? You have to like increase the egg supply by a factor of two or three.

You have to increase the turkey supply by a factor.

How are you going to do that? Very difficult to see how.

During Trump's like last campaign when he won in 2024, everybody kept saying that the reason the economy is so bad is because we're living in the economy that Trump created.

That was like the agenda that the left was pushing was the reason things are so bad is because of what Trump previously did.

But the reality that we're looking at here is that all the government subsidies and Biden, you know, printing money and just handing money to people, I mean, it's monopoly money at that point, because when you print that much money, it loses its worth, is what we saw the last year of his presidency is when we started to see the repercussions of that.

And then when Joe

came in. And there's always truth to the idea that we're living in the consequences of history.

So it is true that Joe Biden came into office on the back of a already inflationary economy that was about to burst because the last year of COVID was that bad. 2020 was really bad.

Now, it could have gone back down if he hadn't continued to inflate it.

He used that as an excuse to continue to just shovel money out the door, helicopter money all through 2021, radically keep those interest rates low, you know, all of that sort of stuff contributed to a heightening of the bubble.

There was this bizarre idea, if you recall all the way back to like 2018, 2019, Elizabeth Warren was promoting it.

She called it modern monetary theory, and her idea was that inflation would never happen again.

That basically you could print as much money as you wanted and that because other countries were going to buy up our debt, then it wouldn't matter.

Obama also had a pretty loose monetary policy and there wasn't tremendous inflation. And the reason there wasn't tremendous inflation is because demand remained low because the economy was stagnating.

Under Trump, what happened is that because it was an artificial crater, it wasn't like a natural crater to the economy, right? We just all went home and we stayed home for like months.

And then we all came back to work. But the problem is in the interim, demand did not go down.
Demand maintained.

And then demand continued to go up because we just shoveled money at people. And so the prices continued to

continue to rise. Okay, so that makes sense.
Then when everybody jumped back into working and suddenly. Yeah, suddenly we all had money up to wazoo, right?

And then everyone's about, wait, this money isn't isn't making me more wealthy, which goes back to the original point, which is money is a ruler. Money is not an actual determinant of wealth.

What you can buy for the money is what is the thing that matters, right? Yeah. So when things become more and more expensive, obviously money becomes less valuable.
Correct. And so.

So wheelbarrow money is not making you richer. Yeah, exactly.
That's so crazy.

It's also shifting my mindset because I've always thought of money in terms of like, oh, if I have this much, I'm in a good place.

Or if we have this house, or if we have these things, but that isn't necessarily true. Right.
It's more about what you can buy for the money. Yes.

And so that's where monetary policy comes in, and fiscal policy, and economic policy, and all the rest of it. So here's a question that I've kind of always had.

This is more of a life question, and you obviously have a lot of life experience. I am old now.
It's true.

You're not old. You're not old.
I have four kids. It's okay.
Oh my gosh, you have four kids? Yeah. Okay, wow.
So I can

safely say that I'm middle-aged at this point.

So, in terms of like what you would do in your life to get to a good place now, obviously speaking, you know, me and my husband work very hard and we have to work very hard to kind of be where we

make the bills and do all the things. And what would your advice be on how to get out of this stage of like the panic of like, okay, I've got to work hard every single day.

I've got to find a way to make it. And there's, you know, barely enough money for the month.
Like, what would you suggest is the best life advice to really get to?

Yeah, so I'm not sure there's actually like a one-piece of general life advice. I'd actually sit with you and your husband and go through your bills, honestly.

Like, this is the best way to do it: to actually sit down, see how much you're earning, how much you're paying in tax, what your bills are, where you can cut, where you can save.

Like, it's an individualized thing, but fiscal responsibility and financial responsibility at home, there's no one-size-fits-all other than you actually just have to sit there with a pocket calculator, not your phone, and

I'm showing my age, and

like an actual Excel spreadsheet and see where you can minimize your expenditures. I mean, again, I've been your age.

You're 24. I got married when I was 24.
My wife was 20 at the time. And we had to absorb her education costs.
We had to absorb her medical school costs.

We had to still pay off some of my Harvard student loans. Like there was all this stuff.

There was a point maybe a year into our marriage where we were down to like the point of, do we need to take out a second credit card to shift debt from one credit card to another for lower interest rate?

Like it's kind of normal at your age.

And then the question is, how do you achieve an income trajectory? What is your career path that is going to take you from making 70 grand a year or 60 grand a year to making 200 grand a year?

And that can take some time. Every wealthy person I know was once not a wealthy person.

And those people had to work and toil in some semi-obscurity until they sort of hit a trajectory.

So my wife and I had a very good life. for sure when we were when we were first married because a good life doesn't require a big house and it doesn't require a huge income.

You can have a great life just living in a small house or a condom like we did when we were first married. And it can be wonderful.

But if you want that trajectory, that economic trajectory, it's all about how do you transition from sort of phase one of your career to phase two? And do you invest in yourself?

How wealthy do you realistically want to be or need to be? Because those are different paths. Right.

You can be intentional about this stuff. Like if you're working for a salary, then you have to look at your company and see, okay, where does the salary path take me?

Maybe it caps out at 100 or 120 or 150, whatever it is. Or is it, do I have an idea for a business? Can I start a business? It's riskier.

Do I have the, do I have the safety net that if I fail, I can try again?

These are all sort of decisions that you have to make, but I think everybody wants the overnight. How do I get from barely being able to pay my bills to being in a mansion?

And the answer is struggling is kind of, I mean, again, these are, these are hard things to just deal with. Struggling is a normal part of being 24 years old.

Okay, I was 24 years old and I struggled when I was 24 years old. Especially when you get married, because it's like, oh my goodness, I'm learning how to be married.

I'm learning how to build a career.

I have a business myself so it's like oh i'm building a business my husband has a business so we're both just like taking risks constantly right exactly like being young means being uncomfortable that's also why you can afford to to take some more risks is because when it's just the two of you and you're just and you don't have kids then you can take more career risks they wouldn't be able to take if you already had a bunch of mouths to feed for example right and so yeah i mean i i think that The biggest thing to take away is, you know, good, sound financial decision making.

Take a look at your bills, take a look at your earnings, see how you can get from point A to point B. Try to have a plan to get from point A to point B.
And just recognize that this is normal.

It's totally normal. There's nothing unnatural about feeling financially uneasy when you're young.
There's nothing sort of terrible about you.

It doesn't mean that the system is, there's never been a system in human history where 24-year-olds felt economically comfortable.

There is no system where that exists. And you can say people in Norway feel more economically comfortable because they have all of these dynamics.
I have lots of friends. They do not.

I mean, they're... They can't get a house.
Correct. No, that's right.
Home ownership in these places. You want to talk about ownership and ability? Home ownership in Europe is almost a non-existent.

Yeah, you rent an apartment for the rest of your life. Correct.
Yeah. So the idea that the American dream is somehow equivalent to the Norwegian dream is just not true.
Right.

It's different perspectives, different ideas.

I think as well, it's very encouraging to hear from someone, especially at your stage of life and like how successful you've been able to be, that it takes time.

I know there's a little bit of hate for my generation, just a little.

I think one thing that my generation has been lied to about specifically, especially because our quality of life has gone up so much, is just that, you know. It's instantaneous.
It's instantaneous.

Again,

people get tired of hearing people my age talk about the travails when you're young and it sounds like your parents walking both ways uphill to school.

But the reality is that like, I remember when my wife and I were first married, and like a great day was I would have a speech at like a local Republican club 30 miles away.

We drive there in our shitty 1986 Honda Civic. That was literally our first car.

And we would drive drive out there and I'd have like a couple of books in the back that my publisher had given me for free. I'd be like, I have 30 books.

And I'd sell them at, you know, 15 bucks a pop. And if I made, if I walked away with a couple hundred bucks by selling like, you know, 15 or 20 copies of the book, that was like a great day.

That was like an amazing day. I did that for years.
Okay. Like, and everybody does that for years.
Oh, yeah. Everybody does that for years.
We're always selling stuff on Facebook Marketplace.

Like, we just moved into a new house, which is... totally a God thing because we're going to get to own our first house.
That's amazing. Crazy.
That's awesome. Literally cannot believe it.

But we moved into a house and we were like selling all our furniture because we were like, okay, we want to get new furniture, so we have to sell it and then get the new things on Facebook Marketplace.

It's life. And I think with the social media age, especially watching all these like influencers and people online just have this overnight success all the time.
And it's fake. It's not real.

I'm just telling you, it's totally not real. It's not.
I've been there. I was an influencer for a few years.
It's all of it's fake. It's all monopoly and then it goes away in an instant, you know?

So, i mean i made the choice to get married young and so when you get married

good for you it was great i love it but we didn't have anything like we were like oh like my husband you know was a missionary kid so it's like he had that you know

i had student debt so i was like what are we doing but it's nice to hear that like it takes effort and it takes work and it you will come out in the end okay and you know have other kids your grandparents did most people on earth today kind of do i mean certainly in the west they do it will be okay is the is the first thing to recognize.

And it'll be especially okay if you just make good decisions.

There's a natural progression to life, and you'll be living in 15 years in a bigger house than you currently live in if you just don't make. I'm trying to remember who said this.

I wish I could remember who said it, but it's a wise line.

The first path to getting rich is not getting poor. Ooh, that sounds like a Dave Ramsey quote.
Yeah, it's going to sound like Dave Ramsey, but that really is it.

It's like avoid the worst decision, and that's like half the battle. We'll get to more on this in a moment.
First, I think a a fresh start means things will be different, but it's the same system.

The banks keep winning. Sometimes you're stuck paying the price.
Fees stack up. Collection calls won't stop.
Every month, it just gets worse. Here's the thing.

You don't have to keep playing that game. PDS debt has already helped hundreds of thousands of people slash their debt and take back control of their money.

That cash should be staying in your pocket where it belongs, not lining the bank's pockets.

Look, if you're dealing with credit card debt, personal loans, medical bills piling up, PDS debt actually takes the time to understand what you're going through. They don't just look at the numbers.

They get that every family's situation is different. They'll work with you to create a plan that fits your life.
The best part, there's no minimum credit score required.

They're not going to turn you away when you need help the most. Their whole focus is helping you save money, knock out that debt faster.

Finally, get some breathing room in your budget so you can take care of what matters, your family. And they've got the track record to back it up.

A-plus rating with the Better Business Bureau, thousands of five-star Google reviews, perfect rating on TrustPilot. That's because they've helped hundreds of thousands of people break free from debt.

They can help you as well. And I have friends who've gotten into debt.
It ruins your life, but you can take your life back. Take back control in 30 seconds.

Get your free personalized assessment and the best option for you at pds.

Shapiro. That's pds dat.com slash Shapiro.
PDS dat.com slash Shapiro.

To people in my generation, what would you say to them when they're kind of pushing these ideals that Zora Mandani has where he's kind of pushing for socialism or as he calls it, democratic socialism?

All I would say is that when we make public policy, you have to look at the unintended consequences of the policies you're making. Okay.
Everything sounds really good on the surface, right?

Okay, fine. I'm just going to throw a check at you.
Oh, my life is better because I have a check now. Okay, that may be true for you in the moment.

And I'm not gonna deny that if I got a $2,000 check today or $5,000 or $100,000 check today, I'd feel better about my life than if I didn't get a $100,000 check.

But that's not how you make public policy because if you give everybody a $100,000 check, inflation will obviously be rampant

and higher prices. And the $100,000 goes away, and everybody else's savings are degraded.
It's very easy to make a political argument where you say, I'm going to just drop a benefit on your head.

It's the free ice cream argument from third grade, right? You have some kid who's running for class president. He says, free ice cream for everybody.

There's no real way for that to be fulfilled in a way that actually is useful to kids. There are downside effects of all of that.

So when you look at the policies, the long-term policy ramifications of these sorts of policies, you actually do have to look at what is going to happen, not the moment you get the check, but what's going to happen over the course of the next six months or the course of the next year.

And so many of the policies that Dharma Amdani in New York

wants to try were tried in the 1970s and were disastrous. I mean, wrecked the city.
So for example, he wants to do a bunch of rent freezes and rent control. They tried this in the 1970s.

And you can go back and you can watch on tape the 1977 World Series, which was played in the Bronx because the Yankees were in the World Series.

And there's a very, very famous video of Howard Cassell, who is commentating the Yankees game. They pull out, there's a helicopter shot of Yankees Stadium, and there's fires everywhere.

And so he says the Bronx is burning. Why was the Bronx burning?

Because apartment owners were burning down their own apartment complexes for the insurance money because the rent control had made it less lucrative for them to continue to operate the apartments than to watch them burn down and take the insurance.

Oh, yeah. And the price of operation goes up over time.
So if it's stuck there,

correct. All these things have unintended consequences.
Everybody wants like an immediate solve.

There's a sugar high, I'm sure, for people who receive this in the immediate term. But if you want to make New York more livable over anything like the mid to long term, you actually have to change.

seriously the underlying policies and prevent people from building extra supply rather than stimulating demand with subsidies and also restricting supply with regulations.

When you're talking about handing people a check, it doesn't really help. It makes me think about in COVID when they started handing out all these stimulus checks.
And for a moment, it felt great.

For a moment, it was like, oh, cool, I can buy a bunch of new stuff. And then it turns out you go on Amazon and everything costs five times what it once did, right?

A Thanksgiving dinner is now $1,000, where Thanksgiving dinner was $300 like five years ago. There's a great chart showing the price of goods in the United States over time.

And what it shows is every single good that government has subsidized, the price goes up. Every single good that government does not subsidize, the price goes down.

And when the government subsidizes the demand for a particular product, let's say college education,

colleges just adjust the price to go up with the increased demand. Got it.
Meanwhile, if the government stays out of it, then the prices tend to find their own level.

TVs have gotten better and cheaper. Yeah.
Because TV companies look at you, they'll look at me and say, oh, those people want cheap TVs. Great.

And if I can make a better TV, then I will be able to make more money. That makes sense.
So when the government steps in and gives money to people to go to college, as it would be,

then they raise the prices just because, oh, well, look, these people are going to college. The government's giving you money.
We'll just charge more money now because we can. Exactly.

And not just because we can, but also because unless they're about to hire a bunch of new professors,

then they still have a limited number of slots at the college or university. When I was at Harvard Law, for example, there were like 500 people per class.

I think there's still about 500 people per class. They've not actually radically increased the number of enrollees at Harvard Law School.
And so what does that mean?

If you have 10,000 applicants as opposed to 2,000 applicants, well, now I know that I have a big pool of people who really want that. And so the price is going to go up.
Yeah.

And I think in the conversation of education as well, when all these subsidies are happening, it doesn't really push people to look for the cheaper options. Right, or even the best options.

One of the things that's happened in the public markets with regard to student loans, for example, is let's say that there were no public markets.

Let's say there were no FISA loans, the government wasn't involved at all. Okay, so you get out of school at 18, you decide, I'm going to go to college.

So you look around and you say, I really want to go to, you know, University of Iowa and I want to major in art history. So now you have to go to a bank.

And the bank is going to look at you and say, why would we possibly loan you without any collateral money to major in art history? There's no way. You're not going to make that money back.

And so the art history major at University of Iowa is going to have a real tough time unless there's a donor subsidizing it, getting anybody to come.

Instead, if you say, I want to go to the University of Iowa and I want to major in geoengineering, and you go to a bank and the bank says, okay, well, it looks like the trajectory for your income path is pretty good.

So I will give you a decent educational loan because I think there's a good shot you're going to get paid back.

So this is what happens, for example, when I went to Harvard Law, the impression that banks, I wouldn't need a publicly subsidized loan to go to Harvard Law.

The salary coming out my first year when I was coming out was $180,000.

And so they knew that if they lent me, you know, $100,000 a year to go to Harvard, that over the course of the next 10 years, there was a very high likelihood that I was going to pay off my loan.

So the private markets are very very good at determining their risk, and that's particularly true in education. In education, bizarrely, the only area where there's no collateral, right?

They can't seize your degree. If you don't pay, they can't take your degree back.
What are they going to do with it? So the question is, why would they loan to you?

And the only answer is because they believe you're going to earn out and then you're going to pay back your education. But the government doesn't care.

The government has an interest in making you feel better. by going to college.
Governmental actors took the wrong lesson from the 60s and 70s.

So in the 60s and 70s, a major income gap began to emerge between college grads and people who are high school grads. Yeah.
And the reason why. Obviously.
Of course. Of course.

Just as there would be a major income differential between people who graduate high school and people who don't graduate high school. Yeah, of course.

So what the government said is, well, the way to solve this is by getting more people to go to college. Okay, well, actually, all that did was it created a striation in college grads.

Right now, there's a new striation, which is if you go to grad school, better income trajectory

than just college. And there's a huge striation in majors.
So if you're an Ed major at Harvard, you're going to earn way less than you would as a STEM major at Harvard. Of course, of course.

I've never thought of it that way. So this is very much blowing my mind, is that the government giving subsidies potentially ruined college education in the sense that

people used to go to college to actually pursue things that would provide a career or a better future for them. Like, I'm going to go to law school, you know, I'm going to become an engineer.

And now we have all of these random majors like I'm going to major in philosophy of kneecaps, like something stupid. That's right.
And not only that, it also screwed up the employment market.

So for example, you want to work as a barista at Starbucks. Why do you need a college degree? To work as a barista at Starbucks, you shouldn't have to, right? Or as a hairdresser or whatever.

Like there are a million jobs in America, millions and millions of jobs that should not require a college degree.

The problem is, if everybody goes to college, then it turns into graduating from high school. Right.
It's just like the next level.

And so if you didn't go to college, there's now something wrong with you. And then to make things even worse, basically what college degrees have become is an effective IQ test.

So we look at the degree that's on your diploma,

or we look at the degree that's on your resume rather. And we say, okay, you went to Harvard, that means you're smart.
You went to

Juco, that means you're not as smart. And so we'll give you an advantage if you went to Harvard as opposed to you went to Juco.
Well,

then why do we make the guy who's going to Juco pay $200,000

in order to compete with the guy from Harvard? What would have been better is if we actually actually didn't have that system at all and employers hired without regard to college degrees.

So you're seeing people now like Peter Thiel or like Alex Carper, like we do at this company, actually try to look at the underlying performance in either prior jobs or apprenticeships instead of just looking at the college degree as sort of the be-all, end-all, you know, heuristic shortcut.

Yeah, I really appreciated that when I applied to this company because I ended up dropping out of college.

Two of our three founders did not finish college. Yeah.
Right? Like, I'm the only one with a higher education, really. Well, you're the smartest, smartest, obviously.
I'm just kidding.

I'm just kidding. Caleb, don't, yeah, don't take it that way.
But yeah.

Okay. So I want to better understand what happened with the housing crisis and how we got to a point where houses are as expensive as they are.

What we're getting right now is the impact of a few things. One, massive inflation of the currency.

So that that is putting a lot of money in people's pockets, like just cash money in people's pockets. That's what happened during the Biden administration.

And so they're taking that money and they're saying, where do I put that? So you're seeing it go to the top end of the stock stock market, right?

NVIDIA and the rest, but you're also seeing it go into real estate, people taking that money and saying, I want to buy a house.

Simultaneously, because the inflation was so high, because people had all this money in their pocket, the government is trying to bring the inflation down.

And so the Federal Reserve increased the interest rates. That is a way of making it harder to borrow money.
Yes. Because they don't want people to borrow more.

If you can borrow more money, you continue to have this inflationary price spiral. So what does that mean for people who own houses?

If you wanted to increase the supply of houses, then you need to do one of two things.

Either get people who own houses to sell them and move into a different place, or you need people to build houses. Again, there's a delay effect on the building of the houses.

You'd have to relieve the regulations. They haven't really done that.
So what you end up with is a bunch of people who are older who are not moving out of their houses.

This was a big problem is that you would have high prices. It was sort of a bizarre, sticky real estate situation in places like Florida.

You would have people who are 80, who don't need a five-bedroom house, but they don't want to sell their five-bedroom house. Why?

Because if they sell their five-bedroom house, which they have a 30-year mortgage on at 2%, they now have to get a new mortgage and their new mortgage is at 7%. Yeah, which is a lot of them.

And so they don't want to sell. So they just stick in that house and they stay there.
And then that's not new inventory on the market. So the price doesn't come back down.

So the housing market's been very sticky. Yeah.
I noticed as well in 2020, it felt like so many people were buying homes just because the interest rates were so low and it was so affordable.

Did that cause a lot of the issues as well? Yeah, I mean, as soon as you have a lot of people who have the money in their pocket, your demand has gone up. Yeah.
Right.

So if the supply doesn't go up to meet it, then you have a problem.

So one of the things that happened is that because of the worldwide shutdowns from COVID, for example, all the materials coming into the United States came in slower.

We had these gigantic bottlenecks. It became very expensive to build.
The tariffs are making it more expensive to build right now.

If you talk to contractors, they're having a tough time getting the materials that they need at an affordable price. So the price of building has gone up.

And so you have all of these things kind of meeting in the middle and making it very, very difficult to buy houses.

And that's particularly true in places that are already very pressured in terms of space.

That's really true in big cities and their surrounding suburbs.

Again, this is why I got myself into trouble by making the, I think, eminently obvious suggestion that if you can't afford to live in New York, I'm not talking about should we shift policies in New York?

Of course we should. I'm talking about you as a 24-year-old.
You should pursue the best opportunities available to you.

If that opportunity is not available in New York, just a piece of life advice, then you should really look to move to Nashville or Florida or someplace

or Austin, someplace where you have a better opportunity to do that particular thing. And that's always been a hallmark of economics, is the fluidity of, for example, labor.
You lose your job.

You don't sit around saying, I want my old job back at the same exact factory. You try and find a new job at a different place.

If you can't afford to buy a home in one particular place, typically what we would do in the United States is we would try to find a better place to live. So you'd get population movement.

Fewer Americans are moving now. And because fewer Americans are moving, that means that, again, there's a lot of stickiness in the markets in places like New York or Los Angeles or Seattle.

So you mentioned a little bit ago that the tariffs are causing a lot of bottlenecks in the buildings.

So did that start during Trump's presidency at the start of that, all the policies he was putting in place? No,

it's exacerbated a little bit in things like lumber, but it really started during COVID. So during COVID, because the global markets basically shut down and because

all the ports were closed and it created these massive supply chain bottlenecks all over the world, that meant that materials just were not available to build.

And then it took a long time for global shipping to restart. And there were empty ships that were arriving on shores because the ships keep going whether or not they're loaded up.

And so you ended up with this huge supply chain bottleneck, which did in fact contribute to the Biden inflation. It wasn't just that Biden had bad economic and fiscal policy, which he did.

It is true that COVID did create massive supply chain bottlenecks that led to inflation. Because again, if you have bottlenecks in supply, less supply, same demand, higher price.

So how long approximately do you think it would take in order for the demand to actually reach the place that it needs to be to lower housing prices? So demand has to go down or supply has to go up.

Yeah, I mean supply has to go up. Yeah, yeah, in order to go.
Right. So how long would it take for supply to go up? Yes.
It depends on where you are.

So again, in New York City, the answer is it's going to take a while, right? You can't really build it out. There's no place to build it out.
So you have to build up.

It's very expensive to build New York City. The regulations there are.
Really, really exorbitant.

Even if you got rid of most of the really onerous regulations, the taxation, the difficulty in building, it would still take, I would imagine you have to talk to a builder about

three, four years minimum before you start getting a real alleviation in the housing supply in a way that dramatically would lower the prices anyway.

In like in Austin where you can build out, it's a lot easier, right? You can just get some developer. Everybody's yelling at the developers right now.
How dare the developers buy up housing in Austin?

Well, the developers are buying up housing in Austin because what they're frequently doing is they're taking older houses, making them over, and then reselling them at a higher price to to people who want the houses.

And if that continues, then the developer moves on and does that to another neighborhood, and that's actually how you increase the housing supply.

Let's say that somebody is buying up a whole block of single-family homes that are each 900 square feet from when your grandparents were there, and they're flipping those all into 2,500 square foot or 3,000 square foot homes because they're on big plots of land, and

now they're selling them to somebody who's upper-middle class. Okay, well, I would say that's a good thing because you will increase the housing supply.
Why?

Because those developers are now going to take that money, and they now know there are a bunch of people who wanted those houses, who weren't able to get those houses, and now they're going to go build new houses if they have any brains at all.

And if they don't have any brains, what they'll do is they'll take that money, they'll put it in a bank, and that bank will then lend out the money to another developer to take out the money to go build those houses.

If you want more supply, then the incentive of demand creates supply, right?

So the reality that you know a number of people who are willing to buy those crappy houses, then somebody will build the crappy houses, the basic assumption of classical economics.

Now, the only reason that wouldn't happen is over-regulation, right? Prevention of people from building those houses. But there is this sort of assumption that you, but you want that house.

Okay, well, there's no right in economics to that house.

There's no right in America to, quote-unquote, that house. You know, this happens all the time, that there'll be bidding on empty land.
Forget about the house. There's bidding on empty land.
Yeah.

Okay, forget that there's a house already there. You'd like the piece of empty land to build a three-bedroom house that's going to be 1,400 square feet.

I want that piece of empty land to build a 10,000 square foot house. I have more money.
I'm going to buy that piece of land. Yeah.
Okay.

Does that mean that I deprived you of that piece of land? Or does it mean that I was able to pay a higher price?

And that the person who received that payment for that empty piece of land, which maybe they bought 100 years ago, they're not going to take that money and they're going to put that money in a bank.

That bank knows that you still want to buy a piece of land to build that house. And so if you're a good credit risk, they will lend you that money to go out and build that house.

Free flow of capital is the way that more things happen. So you would argue that capitalism is the best route because it will always increase the supply for people.
To meet the demand, yes.

To meet the demands. Correct, exactly.

Because if you're a capitalist, then what you want to do is get your product to the market and take advantage of the fact that people want that product in return from you.

You can talk about sort of a mixed economy and then you can talk about socialism proper.

So socialism proper would be the government just seizes the entire housing supply and then redistributes it as it sees fit and then decides the price of houses and essentially builds ground up by forcing people at the point of gun to build.

And what you end up with is terrible workmanship. You end up with a completely unwieldy market.
You end up with the ugliest housing available. I mean, go look at the Soviet Union.

People are living in the ugliest places. By dint of the government, the government decides where you live.
That's full communism. That's typically not what people are talking about today.

When they say socialism, what they really mean is confiscating wealth from wealthy people and then subsidizing particular people in order to build quote-unquote affordable housing.

So what they're going to do is they're going to go to a developer and they're going to say, okay, in order for you to build X number of luxury units, we're also going to force you to build X number of affordable units.

It does have unintended consequences. So, for example, why does the government need to do that?

The idea would be that you have to force somebody who is a luxury builder to build a certain number of affordable units. And the affordable units are going to be, I assume, rent controlled.

It's going to have to be the government telling you what price you can rent at. And

so it's basically... a subsidy from the government to the developer, and you now have to pay the developer to do that.
Okay, well, the government is filled with inefficiencies.

The government is not good at determining prices. What would be better is to just let the developers build as many luxury units as they want.

People who are in these sort of mid-range will then have a better supply of luxury units. They can move from their mid-range apartments to the luxury apartments.
Their apartments are now empty.

The price of those goes down because you have a higher supply of mid-range apartments. And then all the places that are, you know, affordable housing, those people move up.

Like, this is how housing has gotten better over time. So, one of the things people miss is they assume that the housing supply is totally static in terms of quality, right?

They assume, this is why you see these memes online. My grandpa used to to live in 1950 on one salary working at the Ford factory and grandma wasn't working and they could afford a house.

The house they could afford was shit. It was terrible.
If you go back and like, seriously, go back and look at a house built in 1950. Oh, yeah.
I lived in one of those houses. Yeah, they're not good.

They're not nice. I mean, they're really bad.
They're like 950 square feet.

They typically are not particularly well insulated. They don't have central air very often.
Like they're not houses that anybody wants to live in.

So when they say, I can't afford the same thing my parents could afford, that's not true. You can afford the exact same thing

your grandparents could afford. You just wouldn't want to live there.
It's like saying, you know, back in the day, my grandparents, they could afford to live on

one salary in 1955. Okay, well, if you want the rotary telephone back and you wish to have a clunker that gets 10 miles to a gallon, and you don't want a microwave and you don't want an oven,

you don't want any of the nice things that we typically enjoy, we could do that.

I mean, we could do that right now, but that actually is living more like some places in like central and eastern Europe than it is like living typically in the United States.

This is finally clicking in my mind for the first time how it works because my parents they bought you know their first home was fifty thousand dollars and it didn't have a dishwasher or heat or any of those things and they were able to move into a better house over time but even then it took you know 10 years 100 so this is my parents story too right so i grew up in an 1100 square foot house something like that in burbank california two bedrooms one bathroom six people right and and and no like amazing amenities it was fine it was like a nice middle to lower middle class house in in burbank it was a great place to grow up but

my first apartment that I got with my wife, our first condo was like 1,400 square feet. That was like our first one.
So it's bigger than what my parents had when

they were getting married. It's bigger than what they had.
And then we've been able to obviously work our way up to like a really, really nice house. But that's true for my parents also.

So when people talk about the wealth gap and they look at various groups, one thing that happens is people change their wealth status over time.

One of the ways people have traditionally built up wealth in the United States is by going and buying a house in a particular area, holding it for a particular period of time, and then selling the house.

I mean, that's been one way that people have made money. That's buying and holding stock is another way that people have made money.

But yes, I mean, the quality of life that your grandparents had or your parents had is so much lower than kind of the normal quality of life that we all take for granted.

Everyone's grandmother could go down to the local store and for a cent, you could buy a candy bar. Okay, does that mean she was wealthier than we are? Well, no, she was living in 1920.

So, actually, the stuff that she had availability to would be absolute poverty level, like below poverty level crap today. Yeah.
Right. Like every poor person in America has a cell phone.
Okay.

Not one of our grandparents had a cell phone. Right.
Right. Like it's a magical piece of machinery.
Some of them didn't even have landlines. Correct.
They were expensive.

If you go back to like the early 1900s, a huge number of houses in the United States didn't have toilets. They have houses.

So trying to compare. by simply looking at kind of like dollar amounts, what you can buy with the dollar is the thing that's more important.

There's an economist who I like to cite named Marian Tupe. And what he has developed is a measurement that I think is much better than just looking at dollars.

What he has developed is basically how much time would it cost you in your life to purchase a particular unit of a good.

If you go back to 1800, it would cost you multiple days of work to buy basically an hour of light, right? Because you had to buy a candle. And so the candle had to come from somewhere.

Sometimes it came from whale oil. Sometimes it came from wax.

Today, it costs you zero time to buy an hour of light, right? You flip on your light, it's done. You literally can just do it for free.

Okay, so that that is why it's better to use sort of time value and what we have to invest and and that's why if you look at your life right now and you compare it to like how long would it have taken you to get

let's say you order a table from Amazon it takes two days to get there yeah it took you one click of a button and it cost you whatever a hundred dollars okay so How many hours would you have to work in order to earn $100 to pay for that table and to have it shipped and to put it together?

And the answer is it's a lot cheaper now than it was even 30 years ago. Yeah, well, thank you.
Thank you.

I feel like you covered everything, and I really understand kind of where economics are and why the increase of demand and supply kind of affects the economy and also why socialism doesn't work.

Thanks, which I never knew.

Good time.