Episode 0: Welcome to the Channel!

Welcome to KJ Politics Live. The show where politics meets clarity. Here we go beyond headlines to provide context, insight and perspective on the foreshad shaping power today. And today we have with us Paul Musin, he is the author of Capital Offense, why some benefit at your expense. He is a veteran investment professional with over 30 years of experience. So we'll learn from him what they don't teach you in school about the money system and why financial literacy may be the most powerful tool for holding policy makers accountable. Welcome to the show Paul. Thank you, Jay. It's great to be here. You're welcome. Welcome to the show. Welcome to India in this online form and I'm sure not just in India, but a lot of people across the globe will benefit from what we are going to talk right now. We'll talk about how money is, you know, political in whatever way we think about it. And that will be learning a lot about all these things with you. But before that, let's learn a bit about your journey, your background, so that the audience knows who they are this people. Sure. Thank you, Jay. So as you said, I was a professional investor for most of my career and started off late in life and discovered that I really loved investing, analyzing businesses and felt that I had a fairly important role to play in society as a professional investor. I had this attitude for many years of trying to do no harm that I only wanted to get out of life what I put in it. And with the idea that if I was taking more out of the economy than I was putting in, then it was coming at somebody else's expense and I didn't want to live that way. So as an investor, and that's by the way, the way a free market capitalist system is supposed to work, you're only supposed to benefit to the extent that somebody else is benefiting from your actions and we could talk exactly about how that works in a second. So as an investor, my felt I was playing an important role. I was taking the, I live in Canada, I was taking the savings capital of my clients who created that capital, spent some, saved some. They gave me their saved capital. I look around the world for the best companies who will put that capital to productive use, to create more capital, increase their profit, hire more people, pay them better, pay dividends to our mutual funds. And if all this is happening, that pushes the share price of the company up. If all the companies in the stock market are doing that, that pushes the stock market up. So it used to be that a rising stock market was symptomatic of lots of good things going on in the economy, capital being produced, companies improving their customer value propositions. There was real wealth creation and it was reflected in stock markets going higher. And so that's all really good. Nobody's benefiting it. Anybody else is expense. But then starting in 2001 in particular, that started to change. And central banks started deliberately driving asset prices higher at the expense of the mainstream economy. And I was very naive about what was going on at the time. And it was a slow realization of what was happening over the years. And then I started talking about this with my clients, writing about it, my quarterly reports. And very clear, intellectually honest communication became my great passion. And so a number of clients had suggested I write a book about all of this because that was the only one who spoke about it in this way, in their opinion. And so I thought, yeah, well, why not? So in 2019, I started writing my book, Capital Offense, Why Some Benefit At Your Expense. And then in 2022, I started a blog, but it was not meant to be a blog. I was just sending a daily email to my wife and my three daughters so they could understand what was going on. Everything I write is in very easy to understand terms, no fancy jargon that intimidates people, intimidate people into silence. No, my goal is to empower people with knowledge and understanding about what's happening so we can change the system. And then my blog just started to grow. Was people were forwarding the email to other people and I'd hear from others, can you put me on your list? Blah, blah, blah. So anyways, long story short, my book got published last year. And I continue to grow the subscribers, which is free, my blog, by the way. And yeah, and here I am. Absolutely, absolutely. So what is it that you are trying to tell through whatever you are doing? Yes, so the cost of living in many countries around the world is rising significantly and faster than people's wages. And so life is becoming increasingly difficult, particularly in countries like Canada and Australia and now the US where you're having these housing affordability crises where people can no longer, younger people can no longer afford to buy a home. The average age of the first time home buyer in America now is 40 years of age. It used to be around 30. So people are putting off starting families because they can't afford to buy a home. And I was listening to a podcast a couple of weeks ago, Juan O'Connor was talking about the global fertility rate now being lower than replacement level. And he said that the main reason for this is because housing prices around the world have soared and people are putting off starting families. So this is a really bad situation. And so what I try to do is explain not only why it's happening, but how it's happening, what were the motives. And I don't believe that the motives were bad, just extremely ill informed and arrogant. So central bankers, this is my opinion now, I believe that they sacrificed the mainstream economy on the altar of higher asset prices. But they thought that by driving asset prices higher, by driving interest rates to zero or printing trillions of dollars to buy assets, yes, they agreed that the wealthy would benefit the most from this. But don't worry, over time, the benefits will trickle down to everybody else. Well, they did not trickle down to everybody else. And theory would have told you that that would not happen. And it's not going to happen. So you have rising wealth disparity, you have slowing productivity growth in economies because interest rates are distorted, price discovery mechanism of capital markets is distorted, we can talk about how that works. And so quite literally, there is no easy way out of this quagmire. And because there's no easy way out, and it would be very harmful, no leader wants to make that decision to do the right thing. So the only way things will change is if the people demand it, change will not come from the top down, it will come from the bottom up, it will be a grassroots movement of people through understanding, this is why I talk about this stuff, empower people with the truth, knowledge, understanding. Then they can finally demand the right actions from our policymakers. And our policymakers are not bad people, they will want to do the right thing. But if they do the right thing today, which is very, which we'd be very damaging, very harmful in the short term, then they will get kicked out of office pretty quick because the people won't like it. But if the people demand it, our leaders will do it. And so that's why I talk about this stuff. Absolutely, absolutely Paul. So when talking about central banks or bankers. And all these people, it happened that it's all across the globe or only a few central banks did it and it worked that way that it could control almost the whole ecosystem around the world. How did that work for the understanding of the audience? Yeah. Well, the central bankers, they all talk to each other. And they're all singing from the same hem sheet, if you will. It's the same playbook and it's based on very fallacious economic doctrine. And because in the short term, it looks like it's working. And also because they, part of this fallacious economic doctrine is that they believe, and most politicians believe, that consumption is the fount of all economic prosperity. You cannot consume your way to riches. But the reason they think this is, so let's say consumption spending would be, let's say, you go out and buy a bike, let's say, a car's 500. If you buy a bike for $500, you're providing the bike seller with an income of $500. So they think that for people to have an income, other people have to spend. Well, that's true. But it depends what is funding you're spending. Are you able to go and buy a bike for $500 because you worked because you created capital and you exchanged that capital for money with somebody else? Now you've got the wherewithal to go and buy a bike. Or are you buying that bike because you borrowed the money? Your spending is debt fueled. This is what's been happening over the last number of years. So GDP, this is what policymakers look at to decide whether or not an economy is in good shape. All GDP is a measure of final spending in the economy. Two-thirds of that is consumption. So now they think consumption is the fount of economic prosperity. So it's saving an investment that allows for sustainable spending. So you can sustainably provide other people with an income if you yourself are producing capital and then selling your capital for money. And so this is the trouble with policymakers. They've misdiagnosed what it takes for an economy to grow. And so they encourage debt fueled consumption by driving interest rates to zero. And this is very harmful to the economy because it distorts what's called the price discovery mechanism of capital markets. You get misallocation of capital. You get zombie companies. The last BIS report or Bank for International Settlement report I saw. I think the total number of zombie companies in the world was about 17%. But zombie is a company that doesn't produce enough operating profit to even pay the interest expense on its debt. So it consumes and destroys capital. And so this is a path which will not end well. You see rising debt to GDP levels in all developed economies. You see rising household debt to GDP levels. You see widening income disparity. You see people getting increasingly angry and increasingly divided. So in America, for instance, in particular, you see this really divisive society now where people can't even talk to each other. They know that the system is not working for them, but they don't understand why. And so then it's very natural in that situation for Democrats to blame Republicans and Republicans to blame Democrats and likewise in other countries. But that's not the issue. The issue transcends politics. But if we don't acknowledge what the real issues are and start trying to fix them and address them, this divisiveness will just increase and get worse. And people won't be able to talk to each other at all. And then there will be no hope of fixing this situation. Absolutely. So what is the purpose of your book called capital offense? Because is the situation at all in a position, especially with a global economy and every economy tied to one another, one or two economies will try and make any strong change that will happen. And especially with artificial intelligence, this whole gap between general people and the people who are making money off the other people in different ways by using the political economy, political systems, hobnobbing with politicians. So we don't know who is hobnobbing with the big money, hobnobbing with the politics politicians or politicians hobnobbing with big money. Amit's all these things. What is the way out for a common person or general person? How much money should I earn that the system works for me rather than me working for the system? Yeah. Listen, there's no easy answer to what you just asked. Now we all need to continue. We are stuck with the system as it is right now. We can change it. It won't be easy. In the meantime, we have to deal with what the issues are. So you need to work. You need to save. You need to invest. You need to invest very carefully. But the bigger issue and the reason I wrote my book is really not to teach people how to invest. I mean, I'm a professional investor. But it was really to educate people with truth, understanding, knowledge, because I believe with that comes great power. And also with understanding, understanding the incentives and the challenges that others are facing with that also comes, I believe, great empathy. And I do believe that most people are very smart, particularly when it comes to deciding what to do with their own hard earned capital. They don't need a policy maker to tell them how much of their money they should be spending and how much they should be saving or they shouldn't be told that no, that house is not too expensive. So go and buy it anyways, or those stocks are not too expensive. This is really irresponsible behavior by so many policy makers. There's an old saying that the people always get the government that they deserve. But that's only true if the people understand what's going on and convote and demand accordingly. And I don't believe that most people do understand that. And that's why I wrote my book. And I've written it in very easy to understand terms. I go very slowly, start with the concept of money. Most people don't understand what money is. That's one of the big problems that we face. I think I have three chapters on money. And I use analogies to comfort people if you will. So they're not intimidated. So they do feel encouraged to learn about this. And if they read the book, they will understand what's going on. I guarantee you that. And then we start that slow process of change. Now, things could change very quickly if we have another global financial crisis which we could very well have. And if that did happen, we could pivot in the right direction. There's an old saying, don't waste a good crisis. In other words, people are already suffering and are willing to go through the hardship that's necessary to finally do the right thing. On the other hand, we could pivot in an even worse direction. People could misdiagnose the disease. They think the disease is capitalism. It's not. It's crony capitalism. It's government policy makers bailing out Wall Street putting forth central bank policies that inordinately benefit the top 1%. These are the issues. The belief that debt and deficits don't matter. All these truths need to come out. But if they don't, and we do misdiagnose the patient, then the wrong medicine will be prescribed and that will be socialism. And if people think the world is a difficult place now, ain't seen nothing yet. Socialism sounds like a good idea, but it's a terrible idea from an economic wealth perspective. It'll be very fair, but everyone will be equal, but they'll be equally poor. And so, yeah, so I'm trying to get ahead of that happening. Absolutely. So, who is your book for Paul? Is it for the policy makers? Is it for the common person? Is it for the big money? Who is it for? Well, I like to think it's for everybody to be honest, AJ. And I've had really good feedback from people who have read it from CEOs to chief investment officers from portfolio managers, from a number of podcasters, financial planners, I've had people say, you know what? I've read a lot of books on economics. This is the best book I've ever read. I never understood that that was what was really happening. But it's also for the next generation because they are the ones most harmed by what is going on. And over time, they are increasingly going to have the vote and they will increasingly have the power to change things. So I'm trying to help them with their understanding and for their own benefit. And my generation, I'm 64, so I'm considered a baby boomer. As you can imagine, I've been talking about this for many years with a lot of people. And at first, my generation doesn't like hearing it because they have benefited. Their house prices have all soared. But house prices have no business going up in price because they're not productive assets. Our house has gone up four times in price over 25 years. But our house is not producing four times as much stuff. It hasn't quadrupled in size. is the same economic good. We make four times on our home because a younger couple has to pay four times what we paid for the same economic good and it's not fair and it's not sustainable and the math doesn't work anymore. People have just stopped buying homes and so it really is the young generation or the next generation are the ones who will benefit the most but I think longer term we all serve to benefit from a society where we are not deluding ourselves with respect to how true wealth is generated and we all serve to benefit in a society where the wealth is shared based on one's contributions how you benefit other people rather than how you can outsmart other people and benefit at their expense that's a terrible system but increasingly that's a system that we've moved towards. Right Paul so have you ever thought about it how or when this reset will start happening in what way it will pan out is it as you said never waste a good crisis so has that crisis started now or you see it coming on in a different way. Yeah so the crisis has started yet well I guess you could say it started many many years ago with these policies who said it's down a bad path and it's sort of like someone who has a bad diet they eat too much drink too much smoke too much don't exercise and you could say well look you know this is not a good idea this is going to end badly for you eventually but they can go on for 10 years with nothing bad happening until they finally have a heart attack but until that happens it looks like this you're getting away with that lifestyle but the the issues are building the fragilities are building within the system but when it finally happens nobody knows I certainly don't and absolutely nobody knows and there are all kinds of opinions out there but there are just opinions all you have just like an investing all you have is price evaluation and fundamentals like is the balance each strong in this case the fundamentals are not very good at all because of the growing disparity the growing debt levels the growing divisiveness within society and so you don't know when it's going to happen all you can do is prepare yourself as best you can for when that day inevitably arrives so you would want some hard assets some real estate if it's not too expensive you know one of the issues is if they double down or triple down on these volatious policies when the next financial crisis hits is that they will resort to financial repression so financial repression is just rapidly increasing the money supply to attempt to flate all assets and inflate away the value of all the debt that governments owe other people and so that's why gold has been very popular over the last few years because central banks cannot print gold now the price has gone very high and the price can fall at any moment but longer term if you believe that financial repression would be the response from policy makers gold would probably do quite well but it's no guarantee and yeah maybe I'll stop there absolutely Paul there is so much to learn about all this from you and your book and I'm sure a lot of people would want to connect with you learn more about you from you and also from your book what's the best way for them to do so yeah thank you AJ so my the best way to get in touch with me or follow me is on my website it's called pattington capital mgmt.com and so on there you can sign up from my free blog no catch no credit card just put your email in and you'll get a weekly notification when it goes out usually on a Monday and all my past posts are there there are links to my book where you can look online buy it online and you can reach out to me there as well my book is also available on audible by the way so for those who prefer to listen to my book and yeah so sign up and reach out to me and would be happy to hear from anybody wonderful with this it's set up on this very special edition of the cage a politics slide thank you so much indeed for joining us