Retired Bond Executive's Plan to Fix Healthcare: Subsidize Deductibles, Not Premiums

Tim Hosler [00:00:00] If we had a little bit more influence on what they in Washington DC were doing, but we don't. The influence comes from Vanguard, or the influence comes from Jamie Diamond, or the influence comes from the CEO of UnitedHealthcare. That's who sits around the table. That's who they bring in to say, what's going on? What do you need? What can we do to help you? It's not us, but they're trying to help. Hi, I'm Dan Crow, a small business owner living in Central Illinois, and you're listening to the Vance Crow podcast.

Vance Crowe [00:00:36] Welcome back to the podcast of Glad, glad. Today we sit down with Tim Hausler, longtime listeners of the podcast will remember that Tim was actually my very first podcast guest, and if you wanna learn how the whole podcast got started, there's no better place than to go to episode one. But during this conversation, we continue where the conversation that Tim and I have been having for years about how do you change the system so that it works and not tear it all the way down, but instead figure out how can you make just minor changes, things that are innovative and make things like healthcare and social security work in ways that they clearly aren't right now. We're gonna get to that interview in just a moment, but in this studio, we record Legacy Interviews where I sit down with your loved ones to record the wisdom, values, and stories that they want to pass on to future generations. If you're interested in having me sit down with your loved one to record these stories, then go to Legacy Interviews dot com to find out more. Alright, without further ado, let's head to the interview with Tim Hausler. Tim Hausler, welcome back podcast.

Tim Hosler [00:01:41] Well, thank you very much. Delighted to

Vance Crowe [00:01:43] Be here. So to start off, how much money did you lose in FDX?

Tim Hosler [00:01:48] None. I didn't, I I actually bought some shares of what's the wallet company, Coinbase, and I did write that down a little ways, but didn't, didn't get involved at all in cryptocurrency.

Vance Crowe [00:02:04] Have you followed this whole F-T-X-C-M bankman free?

Tim Hosler [00:02:08] Well, you know, I, I read what's in the journal, or I hear what's, you know, being circulated around the internet. It just sounds like an awful story, but people have been trying to sell air for centuries and some of them get away with it.

Vance Crowe [00:02:23] Yeah. It's amazing that people think they, I mean, I guess there must be people that have gotten away with it and that's why you do it, right? Like Bernie Madoff could have, could have kept that thing going for a little bit longer and died and his family would've been the one ones left.

Tim Hosler [00:02:36] Well, possibly, yeah. And, and I don't, I mean, you bring up Bernie Madoff, what motivates that? I mean, that guy is at the top of his trade, you know, he's doing as well as anybody in industry's doing. He's, you know, serving on very strong and prestigious boards of directors. What in the world? I mean, I, I don't understand what's,

Vance Crowe [00:03:01] But wasn't he a con all the way from the beginning? Like, wasn't it? No, it

Tim Hosler [00:03:05] Wasn't. No, no, no, no. Bernie Madoff was sort of involved early on in over the counter markets and helping over the counter markets develop. And he, you know, he was a over the counter trader and his firm was sort of started some of that order flow, you know, paying for order flow, working in the spread, helped to develop that whole side of the securities industry. He was a leader. The money management was where he did all the nonsense that I, I just don't understand why. Maybe ego, I'm not sure, but

Vance Crowe [00:03:41] Yeah, I mean, like, 'cause at some point there's, there's probably a point when you're first starting out doing it and you're like, Hey, I'm gonna try and do this for just a second. You know, like, I just need to borrow this money and, and run over here. But, but then quickly cascades out of control.

Tim Hosler [00:03:56] Yeah. And, and I don't, I, you know, I don't understand the mechanism that would've gotten him to say, oh, I'm gonna take some vance's money and give a distribution to Tim. Tim's not expecting a distri. I mean, it, it's not like he said, oh, if you invest with me, I'm gonna give you 10% cash on cash every year. So why he felt like he needed to, I don't know. I don't know that much about it. It just seems odd to me that somebody at that point in his career with that level of success would cheat that horrifically.

Vance Crowe [00:04:32] I mean, that, this is shocking to me about him having success beforehand because I, well,

Tim Hosler [00:04:37] I could be wrong.

Vance Crowe [00:04:37] Well, I, I mean, I didn't even know, I mean, the only thing I knew is that Bernie Madoff was a conman, and my impression was he was a conman all the way from the beginning. But I didn't know any, I I mean, I knew he was on boards and things, but yeah,

Tim Hosler [00:04:49] My recollection is he served on the board at AG Edwards, and there wasn't a finer man in the securities industry than Ben Edwards. So, if, if he was a con man, I don't think he would've been able to accomplish the things he accomplished, again, earlier in his career, before he did what he did. But I'm not terribly comfortable talking about him. 'cause I don't, I haven't really studied Bernie Madoff other than to know that an awful lot of people lost an awful lot of money.

Vance Crowe [00:05:19] Well, what are you studying these days?

Tim Hosler [00:05:21] I, my grandchildren. But in terms of what keeps me sort of interested is I focus a lot on the kind of political environment and kind of what's happening in the world today politically that interests me. And I think it's a big part of all news, right? What's happening in the political space. But the thing that's really interesting to me is how ineffective any of the politicians are in terms of doing what they're supposed to be doing. They're supposed to be creating an environment for people to thrive and, and they just aren't. And the reason I, I don't know why they aren't, except that there's this, we, they thing that's developed so aggressively and, and I don't know why, I don't know why people are so loyal to Republicans when they do stupid things. I don't know why people are so loyal to Democrats when they do stupid things, but the loyalty is more important than the outcome right now. And it's odd because in a lot of other democracies, you have multiple parties and, and the objective is to make your party big enough to get you a majority in parliament or, you know, wherever you are. And, you know, you look at Israel and, and you've got these weird fringe groups coming together to form a majority.

Tim Hosler [00:06:54] But it, the, the party itself is the one that has the, maybe the fringe ideology, but the bigger party is more mainstream. And, and in our democracy, democracy right now, you have a situation where the fringe issues help to define a larger party. And the mainstream just gets, I don't know, ignored, taken for granted, who knows what. But the, the opportunity is lost then to listen to the, you know, the mainstream or the thick part of the world and say, this is what we want you to do. This is what we want accomplished. And as a result, you end up with goofy stuff that in order to get those last three votes, you gotta throw some things in that really make no sense to anybody except that very, very small percentage.

Vance Crowe [00:07:56] Do you think it's a function of, of modernity and really the media that that like has changed because like, it didn't use to be that ideas could spread this far? I mean, for most of human history, the only way that somebody could hear your ideas is if they were close enough to you,

Tim Hosler [00:08:12] Right? Right.

Vance Crowe [00:08:12] To be able to hear your,

Tim Hosler [00:08:13] Yeah, we've talked about that before and it is sort of intriguing. I definitely think the social media and the mainstream media are, are very invested in helping to pursue specific agendas and issues. But even those issues and agendas, they don't result in tangible things that help people. So, you know, who is helped by, I, I don't even, I I, hes hesitate to mention one, but I'll say like healthcare insurance. So somewhere along the line, and I bet you can guess who somebody talked politicians into the idea that mandating health insurance and supplementing the cost of health insurance was a really good idea for people. It ends up, it's a really good idea for healthcare insurance companies mandating that somebody buys something and then subsidizing the acquisition of it. So the next thing you're gonna see is electric cars. You know, we're all gonna be, you're gonna have to own an electric car and then we're gonna subsidize the electric car. But guess who that's gonna be good for? It's not gonna, it's not gonna make your commute that much nicer. 'cause you're still in a car and we got a wheel and brakes and accelerator. And I don't know that people think all that hard about, you know, what's making the car go?

Tim Hosler [00:09:44] Is it electric power or gas? Who knows? But this idea is gonna help the people who manufacture electric cars. So starting with healthcare insurance, it's like, well, are we really doing what people need or what people want? Shouldn't we be subsidizing healthcare and not healthcare insurance? It, it makes no sense to me to make a family of four of, you know, moderate means pay $1,200 a month and, and have a insurance policy with $3,000 deductible and 80 20 copay. It, it's like not good insurance, especially for somebody who doesn't have that kind of resource. So I, it somehow this concept of, you know, not wanting to do what the other person wants to do has created this Frankenstein situation where we, we are mandating that people buy insurance that really isn't all that good and really doesn't lead to that much better healthcare outcome.

Vance Crowe [00:10:59] When I hear you describing this, I'm suddenly thinking like, well, you could use subsidy of, of health care, but really the problem goes back further a step, right? In the, in the way that we license doctors and how many people can go to medical school and, and like, unless you open up the gates on how many more people can be doctors like you, you're, you're gonna have a shortage, right? And that shortage creates the higher prices among doctors. But so they're, they don't, they're not looking to open it up and have more

Tim Hosler [00:11:27] No, and guess who, guess who really thinks it's an excellent idea to have very few doctors,

Vance Crowe [00:11:33] Doctors, doctors,

Tim Hosler [00:11:34] Right? And, you know, they've, they've banded together and they've got this really strong lobbying arm that goes to the federal government and says, this is what's gonna help us, but it doesn't help us. Right? So I don't know that we really need America to be great again. I think we need America to just work really well and, and look at all the areas where we aren't working well and start systematically trying to make those areas work better. So if you treated healthcare the way we treat food or housing, we, we subsidize the housing or we subsidize the food. We don't create a separate mechanism outside of grocery stores, right? I mean, you get food stamps, you go to a grocery store, the grocery store takes the food stamps like money, and you get food that works. For the most part. We do the same with housing. You get a housing allowance, you go to an apartment, you know, you rent the apartment and some of your rent is paid with your, I don't even know if it's a rent voucher or some subsidy from the federal government. Insurance would work better if people that have need, were able to go to UnitedHealthcare or Aetna or Cigna and get a policy like you and I have, you know, 60% of the population has a traditional insurance policy where they pay a premium and they have a deductible.

Tim Hosler [00:13:10] If, if the people with need had the opportunity to do that, then they'd be mainstream. They'd be like everybody else. They'd go to a doctor and the doctor wouldn't say, oh, you're a Medicaid patient. I'm, I'm sorry, I'm not interested in helping you. They'd say, oh, you got UnitedHealthcare Insurance. That's terrific. So how do you get somebody in need United Healthcare Insurance? Well, you give them a deductible voucher. So you say to United Healthcare, this family has a voucher from the federal government. We pay the first $7,000 of healthcare expense for each member of that family. We're gonna subsidize their healthcare cost. What do you think the premium would be from United Healthcare if they don't have any risk? Because the federal government's gonna cover the first $7,000. They have less risk. Federal government's gonna cover the first $7,000 of healthcare expense, and maybe it's 11,000 for the adults and 5,000 for the kids. Because kids don't use healthcare the way, you know, you do as you, as you get older. So you, you give a voucher to people just like food stamp voucher, just like a housing voucher that works for the deductible. And then they go and get their insurance from United Healthcare and they've got a United Healthcare card, and they walk into the doctor and they're treated like anybody else. And at the end the doctor says, oh, you know, we, we need to collect your deductible.

Tim Hosler [00:14:43] And they whip out their, you know, government deductible card and they say, take it off of here. And UnitedHealthcare goes, great. We're not paying for it. The patient's not paying for it. The patient has good insurance and is getting good healthcare. And the federal government probably ends up paying less money overall. Because at the end of the day, in an, in a given year, not everybody gets sick. Not everybody needs catastrophic healthcare. And that's where the dollars are, right? The dollars are in, somebody breaks a leg or somebody's having a child, or, I mean, it's the catastrophic nature of healthcare that makes it so difficult for people to afford. If it's just a matter of going to the doctor once a year and paying, you know, $60 to go in and get a, that wouldn't be that big a deal or going to urgent care to, 'cause you have an ear ache, not a big deal. It's when you need tubes in the kids' ears, that's when the expenses get great. Or you've got some sort of a, you know, hole in the heart when the kid is born. And, you know, so there there are elements of healthcare costs that are great and we're forcing everybody to get insurance to cover that when it just doesn't happen all that often. And guess who's the beneficiary of all the money being paid to assume all that risk? Well, it's UnitedHealthcare and Aetna and Cigna, and they're all what would 15 times bigger than they were before this started?

Vance Crowe [00:16:16] What would happen to the price of insurance if all of a sudden there was a federal subsidy for it?

Tim Hosler [00:16:22] Well, I would hope it would go down, right? So you're not subsidizing the premium. That's the problem right now is that we're subsidizing the premium. We need to subsidize the deductible so that the insurance company is motivated, just like the

Vance Crowe [00:16:40] Premium being like, this is what I pay each month in order to have it. So, so don't subsidize that part of it. Subsidize when you actually have to go in, just like when you get into a car accident, you gotta pay the first a hundred dollars, first $500 and then they'll kick in,

Tim Hosler [00:16:54] Right? So the, the higher the deductible, the lower the premium because the insurance company's taking less of the risk. So if, if you extrapolate that to a point where, on average, across the entire population, we spend $12,000 per person on healthcare, most of that is spent on people you know, who are older than 14, right? So if you said a family of four with a reasonably healthy mom and dad and reasonably healthy kids, they aren't spending $48,000 a year in healthcare costs. Their grandparents might be spending a lot. They're probably not. So if you make the deductible high enough where all you're asking the insurance company to do is adjudicate claims and administer the, you know, the bills, it's not gonna, they're not gonna charge very much. So they're gonna actually fight for clientele the way the rest of the world fights for clientele, right? I mean, you're gonna, you're gonna compete, but you don't have to compete right now. There's more than enough business for everybody. And when you're subsidizing those premiums every year, you've seen with the Affordable Care Act, the insurance gets worse every year and more expensive. So don't subsidize the premium, subsidize the actual use of healthcare. And if people don't use it, the government's not spending any money.

Vance Crowe [00:18:26] The thing that's interesting about you and me, we've been friends for a long time, is I am always the, the system doesn't work. It's, it's like totally broken. And you always look at the system and say, okay, within the system that we have, how can we generate a better way to, to work? Well,

Tim Hosler [00:18:46] Maybe I've learned something from my younger friend Vance.

Vance Crowe [00:18:49] No, no, no. I like, because I'm very much like, I, I hear you describing all of this and I become so frustrated in that. Like, I, I have, I'm a pessimist, right? Like I don't, there's no chance something will change in health insurance.

Tim Hosler [00:19:03] Well, I'm headed that way. And part of it is because of this political environment really doesn't lend itself to finding solutions. It lends itself to accommodating very, very small groups with a specific objective. 'cause that's where the money gets focused. That's where the votes get focused.

Vance Crowe [00:19:24] It's where the bully pulpit comes, right? If you're talking about the most outlandish thing, then that's where the cameras go. And you know, that's, I heard a guy talking about the FTX stuff beforehand. He was like, look, as soon as one organization, the SEC, the Department of Justice, as soon as there's one guy that decides they're gonna charge him, they're all gonna run to charge him because they all wanna get the bully pulpit. They wanna be the one with him in handcuffs. And,

Tim Hosler [00:19:51] Right. And you and I talked a long time ago about cryptocurrency and, and at the time, as I recall, you sort of were looking at the positive elements of cryptocurrency that are, are there and they're real. But what I sort of came back to you with is there's really nothing or no one standing behind that. It's everyone and no one standing behind that. So the, the whole concept of distributed networks on the internet and not having one owner of the network, there's real value to that. 'cause it, it does eliminate the thumb on the scale from the owner or the possibility of your information getting into wrong hands. But w when you look at it with regard to money, and money essentially has inherent value behind it. Like the federal government of the United States is what makes a dollar worth a dollar. And the UK is what makes a pound worth a pound. There, there is nobody standing behind cryptocurrency that, that when something like this happens, there's no place you can take your cryptocurrency and say, Hey, I'm, I'm done. I want out. I want to trade this in for dollars. You gotta hope there's somebody standing there willing to trade you.

Vance Crowe [00:21:14] Well, we're gonna, I should distinguish something. I am not a fan of cryptocurrency. And in fact, as soon as somebody starts talking about cryptocurrency currency to me, instead of delineating Bitcoin, I know that we're talking about different things. To me, Bitcoin has some inherent qualities about it that make it stronger than what you're suggesting. That that like, there's nobody that there and that it's difficult to, to say, is there somebody that's going to, to be there to buy it from you? If there's not, because with Bitcoin what they created was digital scarcity. And this is a, an actual innovation because the reason that money has value is that it is not infinite. Right? There's a finite amount of it.

Tim Hosler [00:22:02] Yeah. Supposed to be that way.

Vance Crowe [00:22:03] Supposed to be. Right. And so that would actually be a point that the federal government isn't really standing behind it, right? They're, they're printing money, which is in effect really taking on debt. But let's just on the Bitcoin side of it, the innovation there is that no one can print more and that, and that you've created an asset that you and I can, can trade on this thing. And I can be certain that you can't double spend it. You can't say, I'm gonna make a copy of the Bitcoin and give one to this guy and one to that guy. And, and the fact that you know precisely how many there are. Whereas with the US dollar, when you're saying the federal government is standing behind it, it really is just faith, right? And we have faith that it's going to work. But even the federal government itself does not actually know how many dollars they've printed and put into the system.

Tim Hosler [00:22:52] Well they know, they are hesitant to stop because it's just so neat to be able to do all the things you want to do with $1.9 trillion just dumped into the,

Vance Crowe [00:23:05] And then the way that fractional reserve banking works, right? So when I say that they don't know how much money they have, it's because banks essentially create money by taking in the loan, you know, to giving out loans, having those deposits, being able to create more. Like there there is, there's no number that you could point to to say this is how many dollars there are because no one knows that number. Not even the government

Tim Hosler [00:23:28] Well at, at any given point in time. It's changing obviously. But money supply is definitely something that the Federal Reserve measures and tracks and increases pretty dramatically at specific times, like during pandemics and so on. So you end up, I mean, when, when before Barack Obama took office, when you looked at the New York Fed, which is essentially the balance sheet that represents all 12 Federal reserve banks, there was a number there, how many dollars the, the Fed had in securities. And that was a, you know, down to the penny that they calculate that they know exactly how many dollars they have on their balance sheet. And the way the Fed creates money is they buy a bond. When you buy a bond from a bank, the Fed takes the bond and the bank gets cash, and then that's cash that wasn't there before. So the Fed uses the open market system in order to inject cash into the economy. And right now the Fed has somewhere around eight and a half trillion dollars on their books. Which means that, you know, in a very short period of time, the Fed has injected lots and lots of money into the economy. And it, I don't know, maybe, maybe I'm wrong, and and maybe this is too simple, but they go like, oh, we don't know how inflation, you know, we don't know what to do.

Tim Hosler [00:25:08] We don't know how to change it. We've gotta raise interest rates in order to slow the economy down. What about selling off some of the eight and a half trillion dollars in sucking some of that cash out of the economy? 'cause inflation is too many dollars chasing too few goods. So there's two things you can do to increase the number of goods. You can reduce the number of dollars. And the way you reduce the number of dollars is you just siphon off.

Vance Crowe [00:25:35] And when you say siphon off, you pay those bonds back, then you, you go to the, the,

Tim Hosler [00:25:40] You sell the bonds and it takes cash out of the system. 'cause you need cash to buy the bond and you own the bond now. So the Federal Reserve could take its eight and a half trillion quantitative easing size balance sheet down to six and a half trillion and pull $2 trillion of cash out of the economy. It's sort of like this, you know, banks are too big, we don't know what to do. Banks are too big, you know, we're just stymied, we don't know what to do. Well guess what? Every bank out there gets to come to you and say, if you put $250,000 in my bank, you'll never lose it. 'cause the federal government guarantees you'll get that $250,000 back. So what if the federal government said, Hey banks, we're not gonna guarantee deposits over $500 billion.

Vance Crowe [00:26:32] Yeah, you've talked about

Tim Hosler [00:26:33] This before. I

Vance Crowe [00:26:34] $50 billion. Yeah,

Tim Hosler [00:26:35] Right. It it, people aren't going to go, oh, well I, I'll go ahead and put my money there anyway. Even though there's a bank over here that's smaller than $500 billion. The federal government wants the banks to be big. It's easier to regulate big banks than small banks. You got five instead of 405. They know how to do it. They just choose not to do it. Because there's some other reason why making banks smaller is something they don't want to have happen. And it has something to do with, I don't know, Jamie Diamond, you know who, but, but the people who can actually speak to the Federal Reserve governors, the senators, the congressmen, the people in the administration, they won't take my call. Any one of them will take Jamie Diamond's call. So when he says, you know, I, I don't think it's a good idea to limit. And I don't know that he ever has. I'm just saying hypothetically, they're gonna listen because he has credibility, he's got influence. And, and if the rest of us think it's better for banks to not be so big and the failure of a big bank, not so threatening that would be a better outcome for us, us but a not a better outcome for them, whoever the them is.

Vance Crowe [00:27:59] Yeah, I I, there's a fascinating video I'll put, I'll put the link in it of called Rules for Rulers. I don't know if I ever sent it to you. It's based off a book. The book is okay. The video is actually better. And it's describing like you think of a king as being the one in charge. He's got all the power. Smartest, right? And, but the reality is the way you become king is you figure out I've got money coming in and I'm going to give it out to a small set of people and this set of people is going to give me things that they have that I want. So it could be things like police and military and it's

Tim Hosler [00:28:35] Continued money coming in. Yeah.

Vance Crowe [00:28:37] And you know, the bankers, the, and that the, the, the actual thing that goes on with power is it's always a, a molecule. You know, it's like a, like a larger thing than just a single person. Once you start viewing the world that way, and then you see like the banks are the government, right? Like the, the government can't run without the banks and the banks can't run without the government. And you, and like we make it very sound, very conspiratorial, but like the, one of the biggest powers that the, that the Federal Reserve has is the ability to grant licenses to other people to be bankers, right? Like, this is like, we'll let you in on the, on the game of printing money and like this, this, this power that governments have. Like they're not, they, they don't, they don't wanna limit the size of banks.

Tim Hosler [00:29:26] Well, at the, the end of the day, we could all get by without Parkside Financial. I like that bank. Great guys, we could all get by without Midwest Bank Center. Terrific. We could all get by without Enterprise Bank and trust. No problem. The problem is we can't get by without JP Morgan City Wells. I mean Yeah,

Vance Crowe [00:29:47] Bank of America. Yeah,

Tim Hosler [00:29:48] Bank of America. Tho those are the, the banks that are too big to fail. And they've gotten substantially bigger now than they were in 2008 when they were too big. And the reason they've gotten so much bigger is because that license allows you and I to say to anybody, give us your $250,000 and it really doesn't matter what stupid things we do with it. You're gonna get it back. If we do things that are so stupid that we lose it. So the, the, the setup for the banks is it, it sort of laid in, right? I mean, it's not that hard to be a banker, it just isn't.

Vance Crowe [00:30:35] Well I think this is the appealing thing of Bitcoin, right? Because like the thing that you need Bank of America for, I had somebody that was, I'm doing workup in Canada next month, they needed to send me money. It was such a pain in the ass to get an a CH wire transfer, you know, is it blah, blah, blah. But it doesn't have to be right. There's no, the only reason that there, that it, that it has to be that way is because you have a small group of people that can do it. They don't have to have innovation. They don't, they don't need to keep getting better and better. Whereas we're living in a digital world and the currency that we're, that we're using is both analog and controlled by a group of people that we have no control over. Where Bitcoin is not controlled by anyone and lives in a digital realm.

Tim Hosler [00:31:22] Right? I i, I definitely, as I started, I definitely see the elements of crypto and Bitcoin that are positive. The, the elements that are positive make sense, but as compared to the currency that, you know, the Venezuelans are responsible for, 'cause they're not gonna respect that currency. They're gonna use it to accomplish what they wanna accomplish. So I think investing in that currency probably isn't very smart as compared to Bitcoin, like you say, because people can't fiddle with it. And the federal government fiddles with the dollar and the Chinese government fiddles with their currency and the French fiddle with the Euro, you know, they can't fiddle as much as they used to with their own currency. But the, the point is that the, the trade off, even though Bitcoin has scarcity, it's, it's still not something that there is in a crisis always somebody there. And to the extent that the somebody is there, they may be there down here, not here,

Vance Crowe [00:32:36] Who's here in the, in the, when you describe a crisis who is going to come and save the day, if something goes wrong with the dollar,

Tim Hosler [00:32:44] The dollar's backed by the United States government, it, it's always gonna be worth a dollar.

Vance Crowe [00:32:52] But a dollar is worth less today than it was yesterday, right? Sure.

Tim Hosler [00:32:56] But the point is, is you're always gonna know that that dollar buys you a dollar's worth of things. The things may, you may not be able to buy as many things with the dollar, but with Bitcoin there is nobody backing or protecting the value.

Vance Crowe [00:33:16] Yeah. I mean we, we just have like a, like a ideological difference. To me. The, the, the reason that we have as much faith in the dollar as we do is because we're holding over as a remnant of believing that it is backed by gold or that it, there's something there.

Tim Hosler [00:33:31] Well, it right, the, there's something there is the United States economy, so the where marked, you know, their currency ended up being worth very little because their economy was worth very little. Their country was worth very little. And so we, you know, with, to the extent that the United States falls into that same trap where we continue to, you know, create the currency that devalues the dollar makes it less valuable, we could fall into that same trap as well. And the, the challenge about

Vance Crowe [00:34:12] Do you think we're there like No, no, no, no, no. I read a book called When Money Dies about the Weymar Republic and like one of the crazy stories in there is like, they're printing all this money and they know like, our money isn't worth anything. So the people that are actually the printers walk off the job. Like, they're like, we're not doing this anymore. And because there was no amount of money you could pay them because you were just printing money and handing it to 'em. And so they took them at gunpoint and walked them back into the printing things and said, turn them back on. But the, the challenge was the whole economy was built on, we have to have more money. And I, and I'm very much a pessimist in this way. Like I have to, I have to like stop myself from doom and gloom. Do you think that the US economy can back off printing money without Yeah. Can, can they back it off,

Tim Hosler [00:35:06] Right? Well, absolutely. I mean, it it's not that the people doing it have, I mean some of them have a bias, some of them have an agenda, but there, there are people who control the printing of money that understand the diminishing nature of just printing money. This whole modern monetary theory that you can just print as much as you want. It doesn't matter. Just

Vance Crowe [00:35:35] As long as you don't print more than the other other guys, right? There is their philosophy.

Tim Hosler [00:35:38] So, so the, there are debates around that and you know, we've been through this environment where interest rates were near zero and you could print money and it didn't create an inflationary response until about a year ago. And then they went, oh no, it still does work. Right? You're right. You know, the theory is still true, that if you have too much money chasing too few goods, the value of the dollar goes down, the value of the currency goes down in terms of our economy. But the dollar's actually been pretty strong as compared to other currencies in the world. So, you know, the, the great minds look at that as well, you know, what's happening to the value of the dollar versus the yen or the dollar versus the pound or the euro because that influences trade. So I, I definitely think this, the, the governor governors that sort of keep our federal government or federal treasury from just running the presses our trade with other countries, our C capital markets, our, you know, the banking system. So there, it's not like it's just the federal government that makes the, well, they make the decision, but they, there are lots of places of influence and we aren't in a position where you can put a gun to somebody's head and say, say it's a good thing for us to keep printing money.

Vance Crowe [00:37:25] Do you sense that there is a steady hand somewhere? There's, there's like, there is a group of people that do know what they're doing and they,

Tim Hosler [00:37:34] I I think the steady hand is us is is the big part of the population. And I, I think that's what causes the fringe to not take over. And, and the fringe has tremendous influence. And the thing that, that I have confidence in is that the US is willing to tolerate a lot of fringe accomplishment before we really say, you know, stop. And that's enough. And I think people felt like this election was gonna be one of those times when, you know, the US put our foot down and said, we don't want inflation, we don't want crime. You know, we, there are things that we're gonna, you know, we don't want education to be a free for all for our kids. So it looked to me like, and I think to a lot of people, like there was gonna be a, this was gonna be a time when we were gonna put our foot down.

Vance Crowe [00:38:33] And did it happen?

Tim Hosler [00:38:34] No, I don't think it did. Well, I think it did in part, but I don't think it did the way people expected it to. And, and I have a theory about that, that I, I I, I do believe that the pundits sort of underestimated the influence of the Supreme Court. And, and so there were a lot of people who voted to kind of accommodate what we think should be happening with regard to the issue that the Supreme Court addressed. And I think that sort of fell out of the calculus somehow. And everybody was focused on, you know, president Biden's popularity ratings or you know, the people, 75% of the people were afraid of inflation and 65% felt like crime was out of control. And, and that was, was being o overshadowing the, the other big issue, which was what the Supreme Court had done to overturn Roe v Wade and create that uncertainty. So I, I think there was more influence there than, than the pundits everywhere were prescribing.

Vance Crowe [00:40:06] But it's your sense that if things continue to spiral, I mean, you and I have been talking about how crazy things are since we met, you know, more than a decade ago, we've been like, oh, this, this, you know, things are getting crazier. But your belief is at some point the, the, the collective wisdom of the masses will slow or stop the craziness. And will that rescind

Tim Hosler [00:40:31] Will that, well we, we saw that. I mean, people like Trump, people don't like Trump. It doesn't matter. The point is that that was an example of we saying we need something different. We want, and who knows what it was. We, we want a stronger defense. We want a less porous southern border. We want lower taxes, we want, I don't know, you know, a safer and secure Israel who, who knows what it was. But the, the idea that there were a enough people to say we're gonna change course. I think that's what happens is that the electorate makes those decisions, at least amongst the political classes. And I, I think that ultimately is the governor on, if somebody came up right now and said, I really think the thing we ought to do is print more money and give it away, I think we would say, let's, that's not the right answer. And we would say that's not the right answer in large enough numbers. That that person probably wouldn't be in a position of control.

Vance Crowe [00:41:45] So you've been around for, for to see more cycles than, than I have. It appears to me that we're headed towards a recession, right? Or or we are in one right now. What happens during reception a recession? How, how does this play out?

Tim Hosler [00:42:00] You know, it's interesting because I, I do believe right now that, you know, we have one economy, but we have sectors and there there's this sort of really large and influential aspect of the economy that most people don't see. It's got nothing to do with going to the grocery store. It's got nothing to do with going to the bank. It's the securities activity that happens sort of unbeknownst to any of us, you know, the dark trading pools, the leverage investing and the Federal Reserve by raising interest rates. 'cause they obviously have influence on the long end of the curve with the way they buy and sell bonds. But they control the short end of the curve. And, and so when, when the Federal Reserve raises the short overnight rate to 4.5%, historically, banks would give you four and a half percent on the money in your checking account. Not doing that now, right? The banks are saying, we're gonna give you 75 basis points, but we're making four 50. So when the, when the Federal Reserve raises, when the, when the yield curve gets inverted, the trade of borrowing short to buy long doesn't work. 'cause you don't make as much long as you, as you have to spend short.

Tim Hosler [00:43:32] So the whole concept behind increasing short rates is to sort of reduce activity. So if I'm gonna go buy an apartment complex, right? And, and I'm gonna go build an apartment complex and create jobs and buy materials and create housing right now in this environment, it's tough because my cost of capital is higher, especially my short end cost to capital. And so you're gonna have fewer people building apartment complexes, you're gonna have fewer people adding onto their manufacturing facility. So the Fed historically is used raising rates to tamp down on the economy, which again is, you know, their, their theory, I don't understand it, but their theory is, is if we slow the economy down, that will inflation will fall. But the whole part of the economy that's frustrating the Federal Reserve right now is that until, like yesterday when they came out with retail sales, people are still buying the, the people are still going to the store. People are still going out to dinner. And so you, you have this economy that isn't slowing down the way the Fed wants it to be slowing down in order for inflation to pull back.

Tim Hosler [00:45:11] And

Vance Crowe [00:45:12] I mean really the, what they expect when you raise interest rates is people are gonna lose their jobs. Right? Like it becomes, and then when they lose their jobs, then they won't spend, and then the price of things won't go down. You don't, you don't, you don't watch inflation, you know, deflate out of it well,

Tim Hosler [00:45:27] Right. You don't create deflation, you reduce inflation.

Vance Crowe [00:45:30] Right. And so maybe it will, like the speed at which it grows or the speed at which our dollar is losing value may slow down, but it's not gonna increase in value. Yeah. Right,

Tim Hosler [00:45:40] Right, right.

Vance Crowe [00:45:42] And I, I get the sense that the recession that is coming, one of the reasons people aren't stopping the spending is similar to the Y Mar Republic. Whereas they say, well what else am I going to do with this money? I can't park it in a bank. Right. I'm losing it to inflation. Right. I can't, it, the only place I can put it is to let it ride in the stock market because there's no place to protect it from inflation. Now I, you know, I just heard the other day that bank CDs are, you know, paying 3.5% or four 4% or something like that. But that's, that, you know, compared to 7% inflation, you're just not losing as much money.

Tim Hosler [00:46:21] Yeah, no, it's, it's clearly not a long-term strategy for success. It this, everything that's happening right now, and you know, they use the word transitory for a while. It, it is transitory, it's just longer than a year. Right. It, it'll, it'll get back to a healthier environment where we don't have an inverted yield curve. Because naturally you expect the yields when you're taking risk, you expect to earn a higher return for the more risk you take and the longer that you're out taking risk, that that is sort of a natural economic occurrence that I, I don't think is gonna change. And what, what's happening right now is temporary. It's not gonna be this way for a long time. But it's also the result of this theory that it wouldn't matter how much money we put into the economy and, you know, we can just keep doling money out to people that it's impossible to stick $1.9 trillion in the economy in a day. It takes a while for that money to get out. So some of what we might be seeing are the continued effects of that stimulus money 'cause it's stimulating, but it, it's created a situation now where things are just sort of outta whack.

Vance Crowe [00:47:48] So what do you think, how long will a recession last for,

Tim Hosler [00:47:54] You know, I recessions don't last long because they, you know, the economy is self-correcting to a degree for, for the reason that you say, you know, people lose their jobs. Nobody's willing to take risk and invest and create things. So something happens from an administrative or fiscal perspective that, you know, moves us back into a, an equilibrium that's consistent with where the economy should be. So you, you know, you don't stimulate anymore. You, you stop at the federal level passing out dollars and the Federal Reserve, you know, lowers interest rates instead of raising interest rates or they stimulate by putting more cash in or taking cash out. So I, I think, you know, everybody's ambition is for us to have a, a normalized economy that is not in recession and that's also not overheating. So that's why the Federal Reserve has those targets. You know, we want 2% inflation is okay and 5% unemployment is okay. So they have those targets and they'll get back to managing to those targets when they don't have to manage to whatever they're managing to. Now

Vance Crowe [00:49:16] What is going on, you were talking about the, the, the part of the economy that people don't see 'cause you were in the world of securities and bonds,

Tim Hosler [00:49:24] Not, not there. I I'm, I'm was in the retail part of that world, you know, the stocks and bonds selling to individuals. For the most part the, i I had a little bit of experience with the concept of borrowing short to invest long and I understand how quickly that can get people in trouble because the short rates went up very quickly. But you can't necessarily get out of long bond positions as rapidly. So if you're a pension fund for example, and you're, your objective is to, you know, get a certain rate of return on for your pensioners and, and that certain rate of return is easy when bonds are yielding 6%. If your target return is six and bonds are yielding six, okay, you, you know, I can figure out how to manage that. I just go and buy the bond and I gotta make sure I'm not exposing myself to credit loss. But if I can get a diversified portfolio of government and municipal and, and corporate bonds that give me that blended 6% return, I'm good. But in an environment where those bonds are yielding three, you, you gotta use leverage, right? You, you've or, or not, right? One way to accomplish that goal is to use leverage.

Tim Hosler [00:50:57] So instead of investing $1, you invest $2 and you get 6% because you've invested twice at 3%. But the question is, what does that other investment cost you? Well, if interest rates are near zero and I can pay nine basis points to borrow a billion, I can invest my billion and I can invest that borrowed billion and all of a sudden I'm making, you know, 6% on my portfolio when you measure it against my billion and the cost of my billion that I've borrowed is only nine basis points. So, you know, that's, that's a win. Well when the short end goes up and your nine basis point cost becomes four point a half percent, you can't do that anymore. 'cause you're not gonna pay four point a half percent to invest at three point a quarter percent. So that all comes off, you know, that trade comes off and that's one of the things that the Fed sort of strategizes around. We want to eliminate that leverage out of the economy and eliminate that velocity and that activity. And that's what helps to slow things down, I think.

Vance Crowe [00:52:15] And so then that'll cascade into people's pensions and their ability to get returns on in the stock market, presumably their 4 0 1 Ks. And

Tim Hosler [00:52:24] So you didn't, in the last seven or so years, you didn't hear a lot about pension funds, you know, being underfunded or are we gonna cheat these beneficiaries because we're not gonna be able to meet that obligation? You're gonna hear about that a lot more in the coming few years because they, the, the pension funds may be slightly better off than they were 10 years ago in terms of their underfunded nature because we've had a lot of money flowing into governments and they can take some of that money and put it in pension funds and catch up a little bit. But now there's nowhere to earn returns. You can't, you know, the long end of the curve is three and a quarter. And so where's a pension fund gonna earn a return to hit their targets? Certainly not in the stock market in 2022. I mean they lost a lot of money. So you, you spent a few years putting some money, you know, if you're the city of Dallas putting some money, money into your underfunded pension fund and you had it in private equity and stock market and maybe some fixed income, not very much. 'cause those returns aren't all that exciting. So now all that money you put in, you know, last year you may have lost 14% of it or some percentage of that principle and you're kind of in a hole again. And now how are you going to meet those obligations in the future? You're gonna hear more about that.

Tim Hosler [00:53:56] And we don't like the idea of municipalities not being able to pay their police chiefs who have retired. So we will ultimately do something about that, although I don't know what we do. Maybe print

Vance Crowe [00:54:11] Some more money.

Tim Hosler [00:54:12] No, I don't think so. 'cause that doesn't help unless so, so the theory, the St. Louis, or sorry, the Chicago city schools, their theory is okay, our pension fund isn't fully funded, but that's okay 'cause the city of Chicago will ultimately print the money for us. They'll ultimately bail us out. And the city of Chicago says, well our pension fund is only 42% funded, but that's okay because you know, in a pinch the state of Illinois will bail us out. And the state of Illinois whose pension fund is only 37% funded says, well that's okay because ultimately the federal government will bail us out. So somewhere in that, you know, scheme, there is no money. Right? It and you don't know when that happens. You don't know when the federal government will be unable to bail out the state of Illinois. And the state of Indiana isn't gonna bail out the state, the state of Illinois. So they'll raise taxes in the state of Illinois to fund the pension and then people will move out of the state of Illinois to Indiana and Wisconsin and every place else. And then there'll be fewer people to tax. So that's how you end up with the city of Detroit.

Vance Crowe [00:55:38] Yeah, right.

Tim Hosler [00:55:38] I mean it fails and then they just say to all those poor idiots that borrow, you know, lent money to the state of Illinois. We're starting over again. We're, we're gonna cancel the debt to you and we're just going to borrow some more.

Vance Crowe [00:55:54] You sold city bonds, right? Oh

Tim Hosler [00:55:57] Yeah. The company that I helped to lead was a municipal bond firm. So we, we would help municipalities issue debt. Yeah.

Vance Crowe [00:56:06] Is there a city now that you would, you would say like, ah, that's a good one. Yeah, this, this, this we could go sell bonds for?

Tim Hosler [00:56:12] Well certainly there's plenty of cities and states that are really quite strong. Mostly states more so than cities. But yeah, the, clearly there are, the state of Missouri is a very fine credit or AAA rated. So yeah, that, you know, there are definitely states that manage themselves successfully so that they don't create this ugly liability that needs to be somehow managed year over year.

Vance Crowe [00:56:45] When you talk about the the US I think that on a state level or a county level, like there is an US right? But as you go further and further away and you create this larger and larger corpus, it is hard. It's, it, you know, there are so many interests, there are so many different belief sets. There's so many different things that we've continued to force more management decisions up to the top.

Tim Hosler [00:57:11] Yeah. But remember nine 11, there was a lot of us rallying around a Republican administration who didn't necessarily want that administration to, to administer, right? I mean there were a lot of people that said, hey, this is where it gets bigger than the fringe stuff. This is where we, we need to again sort of step forward and say this is more important. And so I, I think that does happen. I think it's happened a lot historically. The second World war was a perfect example. So people, you know, the US definitely want the America that we use to continue to be useful. And again, my point is I think there are ways for it to be better and more useful that we aren't, that we aren't focused on the, the other thing I I wanted to bring up when we were talking is this, you know, the idea of social security. You know, social security is, everybody says it, that's your age. It may not even be there when, you know, when I get to that point. So how do we save social security? And again, I, I have a way, it may not be the way, but I really, I would trade right now today I would trade the federal government my social security for the rest of my life for one year of tax-free activity.

Tim Hosler [00:58:45] Let me not pay taxes for a year. I'll give you my social security. And I think there are a lot of people that would, you've got IRAs 4 0 1 Ks, you've got, you know, your assets invested in certain securities that, you know, if you wanna realign your portfolio, you gotta pay capital gains tax and that's gonna reduce your principle. I would be very happy right now, and I I'm not a really wealthy person, but when I run the math, how much I'm gonna get from social security versus what I think I could earn if I didn't have to pay taxes to flush all the money outta my 401k and IIRA and realign my portfolio and not pay capital gains tax in this particular year period. I'd do that in a heartbeat.

Vance Crowe [00:59:36] And would the government ultimately lose money or make money on that?

Tim Hosler [00:59:39] So that's an interesting question because when I pass away, if I haven't sold my stocks, my heirs get them without paying estate tax. 'cause I don't have enough wealth to be above the threshold and they get to step up the basis. So I think, I think the government could play a little bit with dollar tax dollars. They're never gonna see. Now to some extent

Vance Crowe [01:00:02] This is, this is brilliant. I had,

Tim Hosler [01:00:04] This

Vance Crowe [01:00:04] Is a good idea.

Tim Hosler [01:00:05] Maybe, I don't know.

Vance Crowe [01:00:06] It's worth exploring anyway.

Tim Hosler [01:00:07] I think it's worth it.

Vance Crowe [01:00:08] Exploring 'cause like, and, and

Tim Hosler [01:00:10] Does Bill Gates need Social security and guess what? Bill Gates', social Security, most of the social security he takes goes back to the federal government that you can, 85% of your social security can be taxed, but it's not a hundred percent tax rate, right? So even if Bill Gates is up in the 40 percentage in terms of taxes, he pays it. 85% of his social security is taxed at 40%. So 30 x percent of it's going back to the federal government, even though they're paying it out to him, he pays it back in taxes. So there's that dynamic going on that happens with, you know, more affluent receivers of social security. But most people who have some wealth get to 65 or 70 and they say, damn right, I'm taking that social security I've paid in all those years. I deserve it. I don't need it. And if the federal government could entice me with something that I want more than social security, maybe I'd say don't give

Vance Crowe [01:01:15] It to, not to mention the benefits that it would provide to the actual market. I mean, if you allowed people to, Hey, I'm not gonna take all the capital gains I get to rebalance my portfolio. They might make different investment choices into companies that they wanna be in. And like right now you can play all these games inside of your IRA, but it can't come out. You can't move it. This is, this is a very good idea. I I think there's a lot of money caught in confusing inefficient systems because people don't want to take the tax hit, right?

Tim Hosler [01:01:47] Oh, absolutely. And, and so you, you've got this situation where you're approaching a certain age. You, you invested your money back when you were in your mid thirties that you know, to accumulate wealth now you want income off of your portfolio and preferably income off of your portfolio that, you know, you don't have to pay taxes on. So you get to use all your money and,

Vance Crowe [01:02:14] And is this something

Tim Hosler [01:02:15] You could transition all your stocks into municipal bonds that would help municipalities? It would potentially bring down the cost of borrowing cost of capital.

Vance Crowe [01:02:23] And how

Tim Hosler [01:02:23] Many people would need to

Vance Crowe [01:02:24] Do this in order that social security be,

Tim Hosler [01:02:28] I don't know, Vance, I haven't, but when you consider that the people who really need social security are getting $1,600 a month and the people who don't need social security are getting $4,400 a month. I think it would really be a valuable thing to us if the people who were getting the $4,400 said, you know what, I'll trade that off. And the people who are getting $1,600 might actually get a living amount of money, right? That universal income is substantially higher than $1,600. So when you've, when you've worked as the, you know, middle management to upper management of, you know, Mattel, you put a lot of money into Social security and you have reached the maximum amount of benefit. If your wife did the same thing, the two of you are gonna pull out nine grand a month from Social Security where my mom, who was a nurse, you know, when you add her and my dad together, they might be getting $3,600 a month. And it's because, you know, the more you put in, the more you get out. But it's not need based. It was never intended to be need based, but it's turned into a need based solution from the federal government. But we can't afford to pay Warren Buffet $4,400 a month every month

Vance Crowe [01:04:06] For as long as he lives and as long as wife long lives. Yeah.

Tim Hosler [01:04:08] He lives right.

Vance Crowe [01:04:09] It, this is a very innovative idea. It's one that,

Tim Hosler [01:04:13] And I think there would be a lot of innovative ideas if we had a little bit more influence on what they in Washington DC were doing. But we don't, the influence comes from Vanguard or the influence comes from Jamie Diamond, or the influence comes from the CEO of UnitedHealthcare. That's who sits around the table. That's who they bring in to say, what's going on? What do you need? What can we do to help you? It's not us that they're trying to help, because if they did, they'd be doing things so much differently than they are. That's the, at the end of the day, this climate change, you know, is another example. We are suffering all the guilt of a world's worth of whatever's happening in our environment, in our atmosphere. And, and so we can't by ourselves solve the problem. If we said over the next hundred years, we are going to systematically reduce the use of fossil fuels by 1% a year, the entire globe. And if you aren't willing to do it, you can't trade with us and we aren't gonna send you any money to help you, you know, build your schools or do anything. If we were serious about this, we would say it's a global problem. It's something the globe has to share, and we're gonna do it systematically over time.

Tim Hosler [01:05:45] We would not subsidize Elon Musk's sale of a Tesla. It's not the right answer. It doesn't solve the problem. We're not interested in solving the problem. And I admire Elon Musk. I mean, what he's done is spectacular. And

Vance Crowe [01:06:02] Well even he said, don't subsidize the buying of my cars. Don't subsidize don't, don't subsidize the, that's

Tim Hosler [01:06:08] Like putting

Vance Crowe [01:06:08] Out electric

Tim Hosler [01:06:08] Peter, Peter Rabbit. I think, you know, don't, don't throw in in the Briar patch. He wouldn't have been able to do what he did without that subsidy.

Vance Crowe [01:06:18] Well,

Tim Hosler [01:06:19] I, but again, I, I, you know, the, the point is, the solution is not electric vehicles because guess how you create electricity Yeah.

Vance Crowe [01:06:29] Mining and you

Tim Hosler [01:06:30] Burn fossil fuels to create electricity. So it's not the solution to the climate problem. And, and so if we want to develop solutions, we need to be, you know, we need to have ambition to develop a solution. What we're doing instead is we're using this problem to get a small group of people satisfied about something because that small group of people focus money and focus votes. And that's what I need in order to get elected in the state of Missouri, is I need votes. So we're, we're using climate change, we're using abortion, we're using gun rights, we're using lower taxes, we're using those issues to accomplish power. But then we're not getting, we're not using the power to develop solutions to those issues.

Vance Crowe [01:07:24] Well, when are you gonna write your book?

Tim Hosler [01:07:26] I don't know. I, I need, I, I need a little bit more discipline than I currently have.

Vance Crowe [01:07:33] Well, I'm always glad whenever you come by to to chat. You were my very first podcast guest, so we've come a long way since the first one.

Tim Hosler [01:07:41] Sometimes, you know, mistakes lead to learning. Well,

Vance Crowe [01:07:45] I started because you were like, I'm thinking about starting a podcast. And I was like, you should do it. It can't be that hard. And then I was like, I'll, I'll do it. I'll let me prove it to you. And here we are.

Tim Hosler [01:07:54] I am, I am much better at creating ideas than I am seeing them through.

Vance Crowe [01:08:01] Well, I'm always glad when you come on here. So if you don't write a book, come on. Bye.

Tim Hosler [01:08:05] Alright, thanks

Vance Crowe [01:08:06] Man. Have

Tim Hosler [01:08:07] A great day.