Voter's Pipeline; Interview with Howard Ruff.

No news story has affected more Americans of all ages this year than the soaring inflation and the erosion of personal savings and incomes. The average person is asking what he or she can do about it. Responding to that national wave of anxiety is remarkable personality. I would rather author of the current bestseller how to prosper during the coming bad years. TV now presents a special interview for public television with author and TV commentator Howard Ruff. And now here's your host Jim Cooper. With inflation now pegged at 13 percent and the prime rate approaching 16 percent Americans are searching for answers about inflation. The question of the national economy has already been named the number one issue for the 1980 election campaign. Howard Ruff is one of a number of people who have written a book purporting to sort it all out and give people a clearer view of what is happening. He's been called a crackpot a hoarder and a professional purveyor of doom yet his bi weekly newsletter goes out to 80000 people who pay up to one hundred twenty five dollars a year for it. And he has a TV show on 60 television stations. Is he a passing cult leader or does he have some

lasting wisdom for all of us. Mr. Ruff started his current philosophy after his own speed reading franchise went broke you sold right and diet supplements he'd been a stockbroker an actor singer and real estate investment teacher. His analysis is simple federal borrowing is the culprit. Inflation will get completely out of hand and a whole monetary system will collapse and out of it will come a new currency backed on hard metals such as gold. Howard Ruff calls himself an economic ecologist and steadfastly stands by his dire predictions. Well Howard that introduction I'd like to have you give us your scenario for people who have not had the benefit of reading a book. Very briefly I know you can capsulize it. The scenario as you see are economic conditions that the plight that we're all in right now. Well right now we're enjoying If you can use that term the highest inflation rates that I've seen within my lifetime and that's no surprise in my forecast in my book was finished it was I finished the book a year ago this month

and at that time I said that shortly after the publication of this book we'll find ourselves in a recession and we are. I said that we would see inflation rates that with where we would look back on 10 percent inflation with nostalgia. That's exactly what's happening. I said we see a prime rate close to 16 percent. Remember it was I was 15 and a half now. Now I said we see exploding gold and silver prices and we have when I went back and we had to change the numbers in my book for the paperback edition which is coming out in January there's a bag of silver coins as forty two hundred dollars and in my sample that was the summer of 78 record. Well that we know that was in November. Well I got to make the last corrections in November and then you offered it to forty two hundred. You know it was forty two hundred then now it's 11000 to 12000 dollars for the same bag of the things that he said were not of the kinds of gold was around to a little over 200 dollars an ounce it's now has been about 400 still flirting with a 400 level. So in the bases that track record of which I am justifiably proud. I'm expecting that we're going to find is a classic recession scenario. I have a sense of deja vu about

this whole thing like we've been here before and I think we have in 1974 or so this time you will see a deep rather V-shape recession rather than that long a bowl shaped thing that we saw before I think will come exploding out of it with a higher rate of inflation I think that inflation will ease for a while temporarily and it'll look like the administration has got it under control hopefully in time for the next election. I was going to say during 1980 election year. Don't underestimate the ineptitude of this administration messing up the timing timed to lose it. I think we'll see an easing of interest rates and easing of the inflation rate for a while and then starting in late one thousand nine hundred one. What I would call the killer wave of inflation begin back up again all to two heights that we can hardly imagine right now. In late 1992 lines crossed on a chart that are very important. In late 1901 the amount of money necessary to service all the public debt all the federal debt rather I should say will be greater than the total capital generating capacity the country and everybody else is borrowing

needs corporates and city states individuals where nobody has money not to have to go to the printing press to accommodate and that will create this huge burst of inflation that I expect will take about a four year course ultimately resulting in the destruction of our currency and then a recover crash and recovery. Now you say that the destruction of a currency that is very apocalyptic I mean many people feel that you're talking about the collapse of the Social Security system your book you're talking about the collapse of our monetary system maybe replacing it with some other kind of currency that is a very heavy dire prediction. What do you say about that accusation that you're a purveyor of doom. You you've had an answer that I'm sure before. Well I guess you know there's an old tradition that the Greek kings had these to kill the messenger that brought them Bad news guys like you were never very popular. I'm not going to go and have trouble believing this but by nature I've had a hop to mist all my life in fact all the big mistakes I ever made in business or anywhere else came from excess of

optimism. But my concern is not with being pessimistic or optimistic My concern is with being right and I have three reasons for wanting to be right. First I'm the father of nine children and I'm trying to figure out how I can get my assets from here to there I'm trying to come up with a scenario that makes sense against which I can make some investment decisions for the benefit of my family. That's my first responsibility. Second I'm in the newsletter publishing business and in the newsletter publishing business you have to meet the test of the marketplace you have to be right more often than you're wrong or people don't renew their subscriptions and there's not an awful big market for financial advisors who are consistently wrong. And I think third I want to be right because I have a moral obligation myself and anyone of my Listen my advice and I believe right now that we are going to go into this recession is going to be basically a healthy thing for us for a while interest rates coming down the present rate coming down we'll see rising unemployment we'll see a rising bankruptcies it'll be bad for some people good for others. But as far as it being a forecast of doom I would like to specifically disavow that for two reasons. All right one

doom is the end of everything I don't think that's going to happen we're just going through another economic cycle every 50 to 56 years we go through a big downer of some kind. We recovered the nation into a civil war. A couple of big depressions three runaway inflation we survived them all. I'm really very optimistic about the long range future of America that's why one of my recommendations is invest in real estate for the long haul because you're betting on the long term future of the country but invest in real estate not in the large city small town real estate because I happen to think big city real estate prices are going to take a beating for a while. But I'm really optimistic about the long term future but I see some very serious problems in the next few years. But you're not backing off from your rather dire prediction that we will have a total collapse of the monetary system as we know it today. Not at all and not yet a rough period of time where we better have some food. You have dried food that kind of thing and you're not backing off and that's an area not at all let me define collapse of the monetary system collapse of the monetary system is defined as inflation. The monetary system collapsed 15 percent this year. The true inflation

rate really not 13 percent is closer to 15 on the average in the big cities around 16 to 18 percent. That means your money lost purchasing power at the rate of 15 to 18 percent this year the collapse of the monetary system is again the erosion process that take less of a pretty time. That is the inflation process it's a devaluation of money that's what Karajan carried to its most unhappy extreme. What do you see happening ions in the classic runaway inflation scenario as we write this German This German situation. 1023 I think what we will see that the Germans didn't try is a real tough period of wage and price controls which would create severe shortages in the country and great economic disruption as those things do but eventually the the black markets will overwhelm the system just as the speakeasies overwhelm prohibition and eventually was just that it'll have to run its course. The reason for it is that the causes of inflation the creation of money to fund various government programs to meet the demands of various pressure groups in our society and the demands of

consumers to borrow to increase their standard of living without increasing their income all of these things are the fundamentals and until those things change. Inflation is not going to ease and becomes a psychological phenomenon that feeds on itself and gets out of hand I expect that. I also believe that the institutions of this country the fundamental institutions of government the corporations that the pub various forms of public services we expect will probably make it through the bureaucracy just tends to grind on no matter what happens war inflation depression goes on but you see to the place where they'll have to issue in some kind of new currency with premium backed by hard metal like gold. They'll probably make a couple of stabs at introducing some other currency that's not backed by gold always try that and nobody will accept it that will fail and then they'll fail it and then Oldham at least they'll have to revalue gold at much much higher prices so there is enough to back the existing currency and either the related to the existing currency or exchange it for new currency this is the classic.

Course it's followed by inflationary societies and we're headed right down the same road the parallels are absolutely astounding. There are truly remarkable this looks to me very much like Germany of about 1900 with as bad a situation as where you literally had to go in with the wheelbarrows to buy the shoes. Or do you think someone somewhere short of that will get it on a come a little different now you just write a check with more zeros on it. So I have had our interests here and we're going to an election year. People are thinking about that it's been named the number one election issue of the whole year. Exactly what we're talking about from both parties. Obviously we're going to wind up with a real Republican or Democrat doesn't make much difference in your scenario which we have or do you think these inexorable economic predictions are going to occur under either administration. I don't think it really matters I'm not terribly interested in the next presidential election but I'm terribly interested in the Senate and the house. Well because over the last several presidents we've gradually weakened the office of the presidency they talked a lot about the imperial presidency and so forth

but I think that's a myth. I think that the real the real power is in the hands of Congress and we put our presidents in the White House we gradually erode their image their influence we surround them in effect with a web of congressional action where they don't have the freedom they need. In fact I came up with this conclusion not to look for the candidate I hate the most and put him in the White House where he can't do us any harm. I'm I'm really more interested in the Congress I would hope that we would elect some some free market oriented types in the Congress who understand how this system is supposed to work. So they're there to kind of keep the ship of state afloat as you sail through these very stormy waters I think the next 1904 presidential election is going to be the most crucial in the history of the country perhaps because at that time the nation will have been traumatized sufficiently by inflation that it might be willing to do the hard things the difficult and balance the federal budget or to cut in that sort of thing that involve saying no to everybody. That involve hard choices or the hard choices that involves balancing the budget cutting the programs and standing there and doing nothing with the printing presses to alleviate the

pain that is caused by it that's the only way out. And we should tell our viewers that we checked today as of today that federal debt the national debt is 800 billions of dollars that's on the record 800 billion and that the new budget to run the country is five hundred forty seven billion dollar debt to run the United States from this October to next October. Twenty nine billion dollars or 30 billion of that rather we do not have another one of the five hundred forty seven billion dollar budget adopted just this week. We are minus 30 billion of that and that's understated because the projections of income were based on the assumption there would be no recession and that the inflation rate would be running about 8 1/2 percent. So the deficit will be far larger going out of the need to create all the welfare problems because during the recession they have their programs automatically go into effect that inflate the spending while at the same time tax collections fall so we're going to have some monstrous deficits over the next couple of years. Let me quote from your book at one passage because it gets to my next question the double digit annual rates are sustained for over six consecutive months and they have been there will be increasing

political pressures to quote do something about it right now if the rate is close to 10 percent that it might be a year before controls are imposed. No I would not bet my survival on having a full year but if the rate is above 12 percent and we talked about this at maybe 13 What closer to 14 the inflation rate. It will be a lot shorter maybe it will happen by the time you read this. We're talking about price control wages and where we can price controls. Are you predicting we're going to see that this year. Yeah I think we're going to see it this year. There is you know life we have today but oh yes because that will be very politically very popular thing to do all the polls indicate that close to 71 percent of the people in this country would like wage and price controls and we really have it in some very significant sectors of the economy. For example the Carter administration said one of their first legislative priorities was hospital cost containment Act which is price controls on medical care. We have price controls despite the lack of deregulation in energy. But what about the deregulation of oil I mean that has been the deregulation of oil and gas is a myth and a fraud in the first place.

The Web of. The regulations that have to be met to deregulate gas with some twenty six different categories of gas are so complex that the Department of Energy is backed up with four years of cases to give approval for price increases. The Act which deregulated actually made it much more difficult for prices the marketplace that it's only a myth. The deregulation of oil pretty much basically so that bother you when you hear one hundred eighty hundred ninety two hundred percent profit of the oil companies not in the least now that there's one of the other great myths right in the first place. Those percentages of increase were percentages of increase over one of the poorest quarters in the last eight years of the oil business. Now if you didn't know if you only made a little bit of money this year and you had a 200 percent increase you still may not be making very much. So from percentages of increase it looks very bad this quarter compared to last quarter compared to the same quarter last year so it's a percentage of increase over a over a. Over a very poor quarter Secondly a significant percentage of that came from a one time tax windfall due to a change in the British

tax laws in areas where the British have Euro stiction which resulted in about a half a billion dollars of profits I mean just paper profits from a tax you would not describe those as obscene profits as some of the congressmen the call I'd like to ask this question where's 100 billion dollars going to come from that the oil companies are going to need to punch holes all over the North American continent to find some oil for us we need oil we need gas we've seen what's happening in Iran our vulnerability. Where's the money going to come from. The oil companies and the energy companies are the only people who are going to get oil or energy for us now they don't have the money with which to do it. Then they're going to say they our energy future is not clear let's go out and do some like buying Montgomery Wards like Exxon says so we can diversify out of this crazy business. Because the government's not allowing us to function but people seem to think oil companies are run by rich billionaires. They don't know that that stock is held by widows and orphans living on their dividends by union pension funds by college and down the funds hundreds of thousands of small stockholders own those companies. I believe that you cannot. Get golden eggs from a goose by kicking it. We're looking at it by cutting its

feet. We're looking at it. I understand what you're saying that you're saying that they'd have to make some money to go out in an ambulance. There's been predictions one of them is from the president of Security Bank who has predicted two security bank that oil prices will rise 15 to 20 percent this coming year alone. What does that do to us in the inflation problem. It means different soil going up 15 to 20 percent a difference of anywhere from a half to three quarters of a point in the inflation rate whatever it is be it'll be higher by that much then it would have been without it. Let's try to give some advice to someone who's listening to this program what you have said. One of the pieces of advice is when your survival is if you can move out of the city take a smaller move to a smaller town buy property in a smaller town where the inflation is still. Yet to Come. I want to read this one scenario that you said I would fear living too close to a welfare slum during the first few weeks of the big city collapse because they're going to be mad and I know where they're going who they're going to blame. I would want to have a place to go away from the city during that brief period after welfare and unemployment checks or stop or during the possible inflation riots or when the

distribution system breaks down. The thing that troubles me is what about the millions and millions and millions of Americans who can't move to a little town in Colorado or Northern California as you suggest. I recommend I said in her book that if you either can't or don't want to because you prefer living in the big city there are other options. One of my major concern even though you did quote that part about the safety factor that wasn't my real concern about moving out of state in my major concern was that I felt that real estate prices were going to break. I recommended a year ago that people borrow against the equity in their home and use it to invest in some properties in the some of the smaller sit in that a lot of miles away. That's that's a rational thing to do. Or perhaps sell their property and rent if they wish to live in the city remain mobile but I would also like to stress that my concern about the possibility of civil disorders when the big city financial system brings in no matter if you owe more than the Social Security promises are broken.

My money German check stop I'm looking for temporary disruptions on an unpredictable random basis you know month where I'm in three months maybe a week maybe two weeks but it'll be very even tempestuous at that time. And if the model is the potential for social disruption when big city finances get in trouble they have a whole raft of New Yorks in Cleveland which we will have in my opinion a riot kind of thing. Oh yes you can see that we've seen it before in this country it's the memory I hope it's not faded too much and those people who are the ones who will be involved in that kind of activity are the victims of the whole situation I have great concern for the great compassion for them and they're the kind of can't very well move out of my own home and start up a new life in Colorado Springs or so absolutely not in the first place they don't understand the problem. Yes in the second place they don't have the option of pulling up roots and moving to what do they do. I wish I had an answer to that. I wish I had an answer. I believe that the worst victims of this whole inflationary spiral the ones who will really pay the bill are the people who

relied on government promises you all going to people you know the retired people who hardly have learned what you people are black the Chicano you know the saying that God must love poor people because he made so many of them and I feel for them. I've heard it said that God must of love the current administration. Love the poor people or the notes give me the current administration most of love poor people has been going to make so many. My. There is the difficult question I have people say to me what about those people have no answer they say well what advice do you have for the person who spends all they have and has to borrow some to live on it. Well I haven't figured out an investment program for people who don't have any money yet and neither is anybody else but you would say you reduce your personal debts I think we should make that clearly as I would like to see people limit all consumer debt from their lives if possible. Eliminate consumer debt. Let's take and Pacific things and Howard I'd like to do is good on the list and just get you to react to them very quickly because I want to cover a lot of territory there a short time. Another book written by John Wesley English and great Emerson Cardiff said we're going to have a collapse of real estate just as you've indicated will have a monetary collapse. There are going to be a real estate collapse

at least in one area they are flying directly in opposition to you because they say Get off your houses Mr Mr Jones whether you have a house in a little town or a big town. Get off of it sell it and then the real estate crash is coming. You are still saying go to the little town and buy a house. So how do you reconcile that the parents 100 needed to be different. Well actually we're not 180 degrees by about 90 degrees apart right now and I happen to believe they're right as far as Big City real estate values are concerned and the expensive suburbs around those properties are selling with very large negative yields in other words you can't buy a piece of property with a decent loan to get a positive cash flow because rents aren't high enough in relation to prices. But you still get positive cash flows in small towns so you're still saying despite this book you're still saying buy the little pop in the little time like reading you're ready for and get that balance that we'll never and then wait if the value should slip for a while that's okay they'll come back they don't have as far down to go they should go down they'll come back so don't buy the house in San Francisco or don't buy the house in L.A. or don't buy the house in. Absolutely not I think that's where dad and I put my money where my

mouth my mouth was I moved out the seven Cisco Bay Area to a small town the Center Valley California and you know years ago I did that because it was a BEST FINANCIAL MOVE ever made you buy a house twice a house for the money. Would you buy the house this week if you got a good buy in a little town like let's say Fresno or Merced sadder Modesto. Wouldn't I learned that by telling what I did I just closed in escrow on two small apartment buildings interlock and also in Provo Utah where I have kids going to school Mase my property's Yeah I did I am and I have. All right but at least you're putting your action where your mouth absolutely I don't advise anybody doing I'm not willing to do myself. We have some time left I'd like to just call out the title and you tell me what to do about it. You ready. Gold and silver. Right now if you have some sell if you don't don't buy at the moment that's a complete change of strategy in mind they occurred about a month ago. The way it's different from the book we should say but you explain the reason quickly when when interest rates are falling and bond and the inflation rate is falling gold prices will fall I think we will see both of those phenomena. The time will come later to get back into it. All right let's take another look. Certificate of Deposit the Savings and Loan every day we're

bombarded. Get your 12 percent interest give your money to the Savings and Loan. Take a 12 percent interest. What do you say if you like losing money to inflation go ahead and do it. The rate you get will not be equal to the rate of inflation you will have a loss of purchasing power every day you have money in one of those. Don't do it don't do it. T-Bills. T-bills only as a temporary parking place for money otherwise unemployed while you're looking for a better place to put it a little safer than CDs. It's really good to deposit TV that because if you don't market is so huge. Other federal insurance instruments like federal farm credits that kind of other federal agency notes. What about that. I prefer not to. The only the only treasury debt isthmus I'd like a long term Treasury bonds right now is simply because when interest rates come down the market value those things goes up even by a big discounts now so I am recommending the purchase of long term bonds. For now I'm betting against inflation for the next six to 18 months because I think it's going to recede for a while and that's a good time to get into those kind of things. Collectibles and diamonds. Yes if you can buy diamonds. True investment grade diamonds between one two carats at true

wholesale with those qualifications are a fantastic buy I just bought another one myself. But Howard I'm not an expert in diamond if I want to buy a dime in the most people listening to this program are not experts in diamonds. Can't they get taken terribly by a novice trying to buy a diamond I think are you an expert in diamonds yourself. I know all I need to know about buying them. What what is that. By a Diamond the guidelines are very simple and in fact I've got a chapter in my book which gives you every guideline you need to know to buy safely. One you know you're dealing to one to two carrots three DTG and color four at half or less of the regular retail price five a G.I. a certificate certifying to its quality. And if you meet those requirements you can't really go very far wrong. But they're not very liquid are they. No but there are there are more liquid in real estate. I had another question color gemstones. First of all we should ask the question Are you involved in monetary only or in any other way with a company that sells color gemstones and then I'll ask you to give me advice and I'm not involve monetary with anybody this

sells anything I'm only in the advice business one of the policies in my newsletter has been we received nothing whatsoever from any recommendation we are making right now on the question. What about color gemstones. I like them and I was very dubious of him for about two years because of the lack of standards of certification Dimond's had much better standards that were universally accepted but now they're moving into into the kind of certification standards with colored gemstones that make that a much safer market I think prices are going to explode I'm talking about the semi-precious stones where you can buy one for under $200 on up through the rubies and emeralds which sell for more of the per carat than than even a diamond. I think there's going to be an explosive increase in those prices and I've just moved into recommending that just recently two years ago. But I want to buy gold and silver but by color gemstones this. Yes at the moment. Gold and Silver later they'll be plenty of time for that with a lower price later. Antiques a little like collectibles but antiques Generally speaking yes. If you know that market and make a hobby of it and love it I don't know that Michael Well I don't make a hobby of it but I know enough about economics to know that if you do if you know what you're doing you will make money

in almost any kind of collectibles antique cars and furniture. You could still get burned if you make the wrong buy in that silly That's why said Make sure you make a hobby of it and know what you're doing. Bonds. Well I think we touched on that just a moment ago. I like Bonds now at these very high yields at very deep discount see bond prices rise and fall with the market most people think of buying a bond and holding it till it matures and getting your thousand dollars back at some future time. Well I'd be stupid to take a government bond maturing in the year 2005 and pay off at about $6 with a purchasing power at present inflation rates. But you can buy them and sell them at certain times of the cycle and make capital gains as well as high yields. And right now isn't it time to buy them. It was a close enough to the top of the not in interest rates and the bottom in prices and I'm not scared of it. A year from now hang on to it while in the bottom the price will go up and you make your money by the price appreciation of the bond sometime in the next 6 to 18 months that they will know and clear across the board all bonds will move as a body. Some people are saying this is a good time to buy stocks. Some people are saying stay away from the stock market.

But Howard Ruff say stock markets are overvalued now. We did an interesting study where we took the Dow Jones Industrials stocks which represent a huge percentage of the total assets of America. We adjusted their earnings for inflation. We looked at the inflationary inventory profits which aren't really profits and factored them out we looked at the inadequate depreciation allowances and adjusted that and we found out that 40 percent of the companies in the Dow Jones Industrial Average aren't making enough real money to cover their dividends they're being liquidated by dividends and taxes. So what would you buy stock when we had stock with a ten foot pole. With the possible exception of certain selected energy stocks as a general question in closing here's a guy who has paid off the debts He's working like most of us have to work he had a few thousand dollars to invest but he's not heavily in debt. He had this house. What would you advise this fellow to do with a few thousand of discretionary money. What should we tell him to do right now. First thing I'd suggest you do is go out and get any items that he uses and consumes on a regular basis rent food to clothes to shoes a flashlight batteries to tie spare tires whatever and buy up on sale and stockpile and he'll use them at higher prices a couple of years and what you get is

that for a header that for surviving the rough period basically an inflation hedge and if you have a real referee in your You've got a survival hedge doing the freeze dried food I think. Yeah but strictly an inflation hedge. I also suggest that his money go into bonds right now for now later on into gold and silver as described in my book. On the on the note of that very interesting discussion we're going to have to move along. I want to thank you very much Howard for being with us. Thank you it's been a pleasure. There's been a special broadcast for public television with Howard Ruff author and financial expert. I'm Jim Cooper. Thanks for being with us.