Full transcript of “Dark Times Coming: Bubble?”. Click a timestamp to open the video at that moment. Need another video? Use the YouTube transcript generator.
0:00 Hey guys, I really have no script for this episode, but what we'll talk about is how house prices never really went up. It seems like a really silly question, but I think this is really the crux of why people don't invest or buy property or land and then expect house prices to crash only to then miss out on future gains. Okay, there might be a lot of ums and a genuinely thinking as I as I talk through it, but I get asked this question a lot. PK, how can house prices continue to go up at such a fast rate when cost of living is through the roof? Inflation, I mean, cumulative
0:46 inflation prices in Australia have gone up more than 30% since the start of co. you know, we only hear about that five or six 7% inflation rate, but if you put all those five or six or 7% together over multiple years is some statistics, you know, actually say that prices have gone up more than 20 30%. So, how can people still afford to buy property? How is this not a bubble? To answer this, you know, the other thing as well is wages haven't really grown. If you look at statistics since 1990 or I should be more specific really since the year 2000 wages have barely kept up with purchasing power in so far as inflation
1:31 that's what I mean so if wages have gone up yeah just a little bit little bit more than CPI a little bit down CPI the house prices have increased at a clip of 4x 5x the rate of wage growth then how's that sustainable like how is that going to carry on? And and if I'm a brand new person in Australia or or first home buyer or upgrader or investor, these are the questions I'm kind of thinking to myself. And it it makes property investing really not viable because even though people like me, you know, it's easy for us to scoff or or or scorn at comments on Facebook groups that say property prices to crash because, you
2:19 know, wages haven't grown because debt to GDP is through the roof, etc., etc. Actually, I think we need to meet those questions or challenges with patience and maturity and empathy because if I had not had or have right now a 10 plus property portfolio, I'd probably be asking those same questions and and probably I have confirmation bias now. And those people because they have no skin in the game and they're seeing all these other people get wealthy and they're left out, they probably have some confirmation bias too to say it's all going to come crashing down, crumbling down. And so to answer all these questions, we actually have to go all the way back to 1970 in the n early 1970s where and I'm
3:09 going to do a much more extravagant and database. I'm going to share with you dozens of charts in a future episode to really validate and edify everything that I'm sharing with you right now, but I just spontaneously wanted to talk about this. I don't know why. Yeah, I'm I don't get out much. No, I do. I do. I'm just being self-deprecating, but yeah, it was just on my mind, so I thought, let let's talk about it. Welcome to the Oz Property Investment Mastery Podcast. My name is PK and I help busy people build passive income by buying top 5% growth and cash flow property and build a portfolio using data without wasting months doing research, spending weekends at
3:54 inspection or catching flights or dropping $10 to $20,000 on buyers agents every single time. So, if you're confused, lack confidence, and just overwhelmed with all the information and marketing misinformation available online and don't know where to start, then this show is for [Music] you. When the Australian dollar, the US dollar, so many currencies back in the early '7s were decoupled from the gold standard. For those of you who don't know, previously a dollar was only worth a dollar, let's say in the US, because it bought a certain amount of gold. It was it was pegged to the price of gold,
4:39 you know. So, you couldn't have unlimited money in the world because there wasn't unlimited gold or at least not uh drilled and not drilled that it's not it's not iron or it's not oil, but it wasn't explored, you know, at least not available gold. Sure, there might be unlimited under the surface of the earth. I don't know. Um, but at least what humans have available to them, it was not unlimited. So therefore, money supply can't and couldn't be unlimited. But what central banks did, and I'm not going to go into, look, you know, this episode and my platform. I think I'll alienate people if I go into a lot of the more conspiracy theories, Freemasons and, you know, new world order, you
5:26 know, you'll own nothing and be happy, WF, you know, I'll let you guys go down that rabbit hole and make your own mind up, okay? I don't want to uh pollute this intellectual thread of what I'm talking about now with things that might uh mean that you lose trust in what I'm saying. So, I'm not going to go down that route. Um, you know, there's elements of of that which I subscribe to, elements of that which I don't subscribe to, but essentially there was a whole bunch of people in power, central banks, and whether they're connected to central governments or not, you be the judge of that. But they certainly made a decision back then, what is that 50 plus years ago, that we think money or currency should be
6:11 decoupled from gold. And that is a better idea for our increasingly more consumerous society. Now, there's thesis, thesis, thesis, multiple thesis. There's unlimited papers done on the rationale and and everything like that, but that was the gist of it. They thought it made economic sense uh to be able to print money or make money that wasn't pegged or that wasn't dependent on something real. Something real or in other words, gold. Gold is real. Currency or digits in a bank account, they're not real. I mean, a piece of paper that says $5 on it or a, you know, I don't know what they make it out of. Aluminium uh coin or copper coin or iron coin. it's made
6:57 is is valued at nothing. It's what the central bank ascribes to it that gives it any real value or currency. So this is a relatively new concept. Like if you go back in human history hundreds of years, thousands of years, it was always you know originally of course it was largely bering system but then it was based on something real like they would actually trade gold or trade uh precious metals or or gems semi-precious and then it was said okay well we don't want to do that. we're going to base everything on real uh something real. But then in the 70s they decoupled it. Why am I saying all this? You might might be boring you, but I think this is really interesting. I don't think anyone really in the property space at least talks about this at length. This is really important because what that meant is
7:43 that now money supply, the amount of you could say dollars and cents, whether virtual or real, you know, uh regardless of whether they're actually worth anything or not, continued to spike. It actually had a huge jump. Okay? And that's why we had big inflation crisis. Do you think the inflation crisis over the last two years is big? It's nothing compared to that of the 80s etc. And that's why interest rates in Australia reached almost 19% in the 80s but that's that's for another day. So this this is what's happening. It's caused unlimited money almost almost in the world. I mean what is the debt of the USA? I mean it's you know dozens of trillions of dollars.
8:28 It actually rises by a trillion dollars. might get this wrong every week or every month, something like that. It's you can't even fathom it. So, what this means is that well, two things. One, it means that those of you or me or whoever that are working for a wage that are working for a wage, let's say $5 an hour if you're in, you know, not such an advanced country, or 20 bucks an hour, let's say in Australia, whatever it is, your wage has been growing, let's say, at CPI, okay, over the last 30 years. 20, 30 years. But real inflation is actually different to what the ABS reports it as. All right? And this is the thing. They've changed their definition of inflation multiple times
9:14 in the relatively short tenure of the Australian Bureau of Statistics. And so therefore, the reality, if they kept their original definition, the inflation on average over the last 20, 30 years in Australia has been way over, you know, 3 or 4%. It's actually been more than five or 6%. That's one point. The second point I want to make, and I hope you're still with me because I think this is really going to hopefully these points germinate in your consciousness and give you more conviction in your wealth creation goals and how to achieve your your your money happiness pursuits. That's the first thing. And then the second thing is not only has inflation been so high, therefore meaning that
10:00 your real wage growth has taken you further and further back. That's inflation. But then currency debasement. Every now and then we have an economic crisis or crisis. People like to use the word recession flippantly, you know, as a not a clickbait, but like a sensationalist hyperbolic kind of attention grabber. Not all those recessions are all that bad or even steep. There are some that are steep and just like the GFC. And when those occur or happen, then there's a whole bunch of monetary or money supply that gets injected M2 we say technically and economics parliament into the world economy, local economy, national economies. And so if you just understand one point, if there's one point I want
10:46 you to understand is that the amount of money that exists in the world today, okay, today is like a,000x of what existed just 20 years ago. And what existed 20 years ago like at the turn of the century let's say is like 10 or 15x how much existed when these major mostly western democratic sort of current countries decided to decouple their exchange or their currency from the gold standard and so the amount of money supply being pushed into the economies basically money money printing okay to alleviate
11:31 these economic crises and and smooth them over like we're right now talking we kind of have a sense that most a lot of countries around the world will avoid major recessions US Australia potentially um despite all this inflation it's because they're able to better smooth out things they're able to use monetary policy in a way that you know before the global financial crisis they thought okay if we go into a huge recession it's going to take a decade to get out of it. But then there in the GFC, they thought, "Oh, hang on. Let let's just inject trillions of dollars in, give people money, they'll start spending again. Bob's your uncle." And it worked. Like, it really did, right? The GFC didn't last for multiple, I mean, maybe two or three years. And that's the same thing they did in co if they didn't inject so much money into
12:17 the economy, basically just printing it, right? Then the COVID recession wouldn't have lasted 2 months or four months. It would have lasted probably 5 years. I mean the unemployment rate went up beyond 10% in under 6 months since the lockdown started. Anyway, I digress. That's tangential. But what I'm suggesting is that going in the recent history and going forward, there's be exponential growth rate in the amount of money in the economy. And what that means is not only is inflation higher than what you reported it to be and therefore your wages, your real purchasing power is going backwards, but this currency debasement phenomenon is meaning that your purchasing power or or the value of real assets goes up higher
13:04 and higher even beyond the rate of inflation. Okay, there's some studies that have been done by World Bank etc. And that's the funny thing about it. Much or many of these large global institutions like IMF, World Bank, they don't like hide any of this stuff. It's like not a conspiracy. They actually present these statistics quite openly. So they say that unless you make 7 12% okay 7 12% return on investment on your money every single year, you're actually just treading water. And you might think, you might say, "Hey, PK, but inflation is less than 7 12% most times." Well, actually it's not. It's actually higher than what they report, but it's still that okay, even if that's less than seven and a half%, the currency debasement phenomenon means that what you're earning on your money
13:51 is just taking you further and further back. All right? There's no scarcity of money in the world right now. There's more than enough for everyone. the scarcity you know when you when I went to university studied econ econometrics first thing they teach you is that the whole basis of economics is based on supply demand and scarce resources there is no such thing as scarce resources guys there's unlimited money in the world and the multiplier effect like when they print money you know they let's say they give it give a hand out to a a business who invests as capex to expand their business therefore they produce more goods and services. All right? They've used a loan from the the bank to do that. And then they sell
14:37 those goods and services. Consumers buy those goods and services much of the time on debt. Then the business gets paid. They make a profit. So they make more than what they initially used to sell those goods and services and they reinvest those profits. So every time the reserve banks or the central banks print a dollar, they're actually injecting more than a dollar into the economy over a 10 20 year period that dollar actually makes itself into $50, $60. Notwithstanding that in that 10 or 20 years time, the exponential rate of injecting dollars goes up and up. You see how it's just I mean some people say, is this sustainable? Is this not? What do you think? Let me know if you're listening to this on the podcast, join
15:23 the Facebook group. Let me know. I've not finished yet, by the way. Or if you're watching this on YouTube, put it in the comments. Do you think this is all sustainable? But let me just wrap it all up in a in a neat knot, in a neat ribbon and give you the package, the package that you really need to know. If you are not keeping up with that 7 12%, you are going backwards. That's one thing. wages have never kept pace with real estate or hard assets, any hard asset because of this phenomenon as well. All right. And the best way to keep up with the 7 12% principle, keep up with inflation, keep up with currency debasement is to invest in an
16:09 asset that is fundamentally holding value. Okay? If you invest in in things that are tied to the currency, you know, you could go up and down. Uh commodities can go up and down, but something that is like land. I'm not talking houses, okay? I'll go get to that in a second as well. It's a nuanced point why we don't just buy land, but it's effectively land that is scarce, just like gold. So if you're able to tap in, if you're able to invest or if you're able to clinch onto something that they can't make unlimited of, right? Then that thing has to go up in value because on one side of the scale, the amount of money in the world in the entire economy globally is going up at an exponential rate. Just you can
16:56 go on to the uh Fed Reserves website and see, you know, I think they report daily of how many more trillions of dollars they're racking up in debt. So on one side you're you're getting the scale so much more money in the in the world on the other side you've got scarce land and for those smart people who don't want to be in a Zimbabwe situation you know Zimbabwe is obviously in a hyperbolic example they had rapid hyperinflation in a short period of time you know $1 meaningless $100 was meaningless a million dollars was almost meaningless at some point as well in their local currency whatever that was this phenomenon is going on everywhere including Australia but just at at a more snail's pace at a not not snail's pace. I would say snail is too extreme. I would say like a a turtoise. Okay, a
17:42 turtoise is faster than uh than a snail but not as fast as a hair as involved way as a hair. So this hyperinflation is it's actually going on but at a slower pace so that it may be a little bit controversial so that you don't realize it's occurring but it's occurring over your lifetime. you know what you own is becoming worth less more and more so. But if you take a bit of that and invest it or hold something that is valuable, something that is actually increasing in value because it's scarce like land, that is the best way to hedge. So for those of you who are saying like who are saying like okay well this is great but how's the average person meant to afford all of this? How's the average person going to buy a house in Brisbane? How are my kids? How are my grandkids going to buy it in Sydney, Melbourne,
18:28 Brisbane, even Perth or Adelaide these days? Like at some point there's a cap. At some point, you know, people can't afford these this land, these properties. Okay, the property that the structure on top is just there so that we can get rent from the tenant to be able to hold it. So, it doesn't cost us anything, right? But really, it's the land that's valuable. Okay? The the structure deteriorates. It depreciates. It can it needs maintenance. it is worthless after 50 years, 100 years if you don't do anything to it. But the land, regardless if there's weeds or whatever growing on it, that just goes up because that is what's scarce. So you might be asking, well, at some point it's going to be completely unaffordable, right? But here's the thing, and it's a harsh reality, and I'm not saying that I like it. I'm just
19:14 reporting on on truth right here because this channel, this platform is all about truth. The reality is that there are always enough. And in fact, through this multiply, money injection, money supply, multiplier effect, there's more and more and more and more rich super rich people in the world. You just have to look around. You just have to like go on a drive on the Gold Coast or Sydney or some other place just to see that even in times like this, like went to the Australian Open this year. We're in the right smackbang in the middle of like these Victorian state economy going bust. You know, everyone's can't afford anything. media headlines, people can't afford, you know, their mortgage repayments, living in tents, all that terrible stuff. Yet, record attendance
19:59 for Australian Open tennis, right? And it was the biggest attendance and the tickets were the most expensive they ever were, right? So, what it's just a one example, right? You can't make a whole thesis or premise based on one example, but there's data to back this up and I will do a separate episode to to edify and validate everything that I'm saying today. What I'm saying is there's enough rich people and those rich people are are rising in number and their assets or their net worth and and also cash flow is rising at an exponential rate that it doesn't matter if the middle class if the middle people if the average the median person in Australia can afford in a capital city or even a large regional town like New I mean Newcastle is so expensive. Jalong's so expensive, Gold
20:46 Coast is so expensive. Sunny Coat I mean all these places used to be cheap now they're not. It's because of these phenomenon that I'm teaching you right now. There's enough of people on the right side of the spectrum that it doesn't matter what affordability is. It doesn't matter. Now, you can disagree with me. Let me know if you do. But this is the observable reality. And Australia, we're kind of like a immature nation. I'm not saying that in a derogatory term at all. I mean, I love Australia. and so grateful um you know for Australia but we're immature in this in the life cycle of our economy of business of real estate if you go to other places around the world like uh Silicon Valley like Singapore Hong Kong despite everything that's happened with China recently Monaco you know other
21:33 places around the world different different countries and not just in first world countries second world countries too you find that house prices don't fall because the average person can't afford them, right? There's always enough rich people. There's al always enough wealthy people that basically dictate the orientation and destiny of real estate prices. Now, I'm not saying real estate prices don't come down. Don't don't take that message away. Even in Australia, long-term, of course, they go up, but there's always cycles, markets within markets, etc., etc. watch so many hundreds of my other videos to get a full context and picture of what I'm trying to illustrate here. But the fortunes of the real estate market in
22:18 the 2020s and more so in the 2030s 40s50s are dictated by the fortunes of the rich. The poor, okay, I don't like to use that word, but just to use it anyway. those on the left hand side of the socioeconomic spectrum, they're not market makers. They're price takers. They're not price makers. They don't dictate what's happening in terms of real estate prices. The middle class used to and probably these are the last few years in Australia where they'll continue to do so. Increasingly so, increasingly so. There's, you know, if you look at a a distribution curve, for most things in life, there's a distribution curve where most people are in the middle, some on the left, some on
23:03 the right. Therefore, it's like this, a bell curve. Increasingly so, the wealth of the world, the democratic western economies, and it was always the case in, you know, developing nations because of corruption or whatever. But even in places like the UK, Canada, USA, New Zealand, Australia, South Africa, etc., it's skewed to the right where, you know, there's a lot of people on the right. Okay? A lot of people on the left, there's a lot of people on the right, there's a lot of people on the left, and not so many people in the middle. The middle class is evaporating. The middle class is getting eliminated by this two-pronged phenomenon. inflation, which is higher than what's being reported, and currency debasement.
23:50 So, they're either hustling and getting on the real estate bandwagon or other hard assets. And, you know, just like when you're clinging off a cliff, you know, maybe with one or two fingers, they're like just trying to make it on the right hand side of the equation towards the the wealthy side of the spectrum. or they don't have the the foresight, wherewithal, resources, and they're falling into the left side. That's a reality that's happening globally, that's happening locally. And that is why that is, I mean, I don't know where I started this episode, but that's why wage growth has no correlation these days to house price growth. That's why house prices actually, if you think about it, just to draw the full loop
24:35 from where I started, that's why house prices never actually rose. Because if you normalize inflation, if you normalize currency debasement, even in the last 20 years, like Melbourne has only gone up like three times or two two times, I should say. It's only doubled. But you'll look at the official stats from Core Logic, you'll be like, "No, hang on PK. Since 2020, Melbourne's gone up like 4x." Yeah, but that's in nominal terms. In real terms, stripping out debasement and inflation has only just doubled. And that's the same as in the last 50 years. going forward this exponential right rate will get get worse and worse depending on which side of the spectrum you're on or better and better I think it's going to cause a huge social calamity at some point I'm not a a sociologist or or an
25:22 anthropologist or I think that's the right term study of humans right I'm not a a political scientist either there are other nations where there comes a a brink a point at which you know it's too much from a social perspective and and there's push back. But we've never really seen that in advance in at least the last 50 years and advanced democratic nations. Democratic for what that word means these days, which uh which is not as much as it used to perhaps when you know the Berlin wall fell. Anyway, it was a bit of a rant today. I understand. I hope that you can take bits and bobs and do your own further research to either disagree or agree or further expand upon your
26:09 knowledge. But this is the sort of content that I want to aim towards now. I really don't care about making money anymore as self-righteous and um and holier than thou that may sound. I really want to speak more and more about truth. Whether that is selfdefacing or self-edifying or whether that helps my back pocket or doesn't help my back pocket. I think this is now more about truth because no one is doing that in Australia. If you want me to do more and more of that and if you give me permission cuz a lot of you might be like, "Oh, this guy's gone, you know, he's gone wild, he's gone NATO, he's gone, you know, into that kind of, you know, tinfoil land." Um, if you want to give me permission to talk more about this, leave the word truth in the
26:56 comments below. Or if you're on listening on iTunes, Google, or Spotify and you can't leave a comment, join my Facebook group and let me know what you want me to talk about because there's unlimited content of this side of the world that I've been dwelling in for a long time that the mainstream media doesn't talk about. The mainstream property pundits, whether they're callers, buyers, agents, mortgage brokers, who have you, they don't talk about. Many of them know what's up, but they don't have the permission, the social capital to talk about it. And ultimately, sometimes it can hurt their businesses. I'm not really in a care in a stage where I care about that anymore. Um, so I want to talk more and more about that. Thank you for being with me. My name is PK and once again, let me know. Leave the word truth if you want
27:41 more and more of this stuff. Thank you for being with me and I'll see you next time. Thanks, guys. [Music] [Music]
