✨ What if everything you thought you knew about inflation, money, and wealth was built on a false foundation?
In this eye-opening episode of The Manifestation & Money Podcast, Jenni sits down with Paul Musson—investment expert, former fund manager, and author of Capital Offense: Why Some Benefit at Your Expense—for a raw, real, and powerful conversation about how our modern financial systems are structured to favor a few while leaving the rest behind.
Paul explains in clear, relatable terms what’s really happening in the economy, how inflation and money printing affect generational wealth, and why the cost of living is spiraling out of reach for so many. This isn’t about politics—it’s about understanding the truth and reclaiming our collective financial power.
💸 In This Episode, You’ll Learn:
-
Why inflation is not a necessary evil (and who benefits from it most)
-
The hidden cost of rising real estate prices
-
How central banks create money—and why it quietly extracts your wealth
-
The difference between capital and money (and why that matters)
-
The truth about the wealth gap and housing affordability crisis
-
A powerful analogy that explains why our economy needs healing, not another quick fix
📚 About Paul Musson:
Paul is a 30-year investment professional who managed over $10 billion in assets before stepping away to focus on writing and advocacy. His bestselling book, Capital Offense, is a must-read for anyone who wants to understand how modern monetary policy impacts real people—and what we can do about it. He also writes a weekly blog at Paddington Capital, where he breaks down economic shifts in accessible terms.
🔗 Connect with Paul:
🌐 Weekly blog: Paulitical Economy: www.paddingtoncapitalmgmt.com
📘 Book: Capital Offense — available on Amazon, Indigo, Barnes & Noble, and more
On LinkedIn: https://www.linkedin.com/company/paddingtoncap/
🌟 Join the Manifestation Playground:
Looking for aligned action, community, and manifestation tools?
Join us inside the Manifestation Playground → www.manifestationplayground.ca
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Oh, wow. And so I like to tell young people that. , don't be in a rush. Don't think you have to be here by this age, or, you know what I mean? There's so much pressure these days to do what everybody else is doing, or you're supposed to be on a set schedule. No, just, , follow your dreams.
First, you have to invest properly, , you're gonna make mistakes, but hopefully have more successes than you make mistakes. But then you also have to communicate very clearly to your clients about what it is you do, who you are. So they will have trust in you and they will believe you, that you will do what you say you will do.
And so my wife has already read it a couple of times. She's just as angry as I am now and my daughters have read it. And so I use lots of analogies. We go step by step, chapter by chapter but I can get into that later. My book is called Capital Offense.
Jenni (00:04):
I'm so intrigued by this book because the current landscape that they're, we're dealing with. Is not the same landscape that my grandparents grew up in.
Paul (2) (00:05):
And so particularly younger people. Mm-hmm. And so they're angry, but they don't know who to be angry at. They know the system isn't fair.
That yes, , debts and deficits don't matter. , yes, you do need inflation for an economy to function. No you don't.
If you print trillions of dollars and hand out checks to people that go spending, then GDP goes up. , I can explain later , why that's not a good thing. And also if they print trillions of dollars, stock markets go up. . And so they look at the symptom of a rising stock market, and a politician will say, well, look how strong the stock market is.
And so there are different schools of thought , within economics and some schools of thought definitely recommend high inflation, spending money and debt and all this kind of stuff. So of course politicians are gonna naturally gravitate to whatever. , schools of thought are gonna make them look good in short term.
We're creating real capital. You make a suit, I make a bike, and then we exchange that with each other. Now I've got one of your suits. You've got one of my bikes. We're both better off because we created capital. There was no suit or bike in the economy. Now there's one of each. The economy is that much better off.
You're storing up your capital, that suit in your a thousand dollars. . That's why your a thousand dollars has value because you create a capital and you exchange a thousand dollars for the capital you produced. So the money is called the medium of exchange. Money is what we use to exchange all the capital that's being created around the world. Capital is what makes the world go round, not money. Money's very important. I. Couldn't function without it, but you could have all the money in the world. But if you've got no capital, you're done. Right? You can have a lot of capital, no money. You'd still be okay. It wouldn't be a well functioning economy,
Now, when a central bank creates money out of thin air, there's no capital in that money. The Central Bank did not create any capital to obtain that money. It just solves digital. Right? Theres us a few buttons.
they're not gonna double the money supply overnight, you know, to crash the economy, but I'm just exaggerating , for effect. So capital is extracted from people without their permission, in some ways, without their knowledge. Okay. And that's why the title of my book is Capital Offense.
Increases GDP, the final spending number. Central bankers were witnessing that, saying this is a pretty good thing. And then they would give you every quarter, , how much the wealth effect contributed to GDP growth. Isn't this great? So now they gotta keep the stock market growing 'cause they don't want to have a negative wealth effect when stock markets come down.
We'll feel wealthier and then borrow on their home and go spend that borrowed money and that will boost GDP the final spending. So that's exactly what the Federal Reserve did. They dropped rates down to, I believe it was 1%, which is extremely low by historical standards, and kept it there for two years.
They were putting asset prices. Ahead of the optimal functioning of the economy, right? Because when you to improve productivity growth, that takes a lot longer in an economy, but you can impact stock prices and house prices very quickly. Just by dropping , interest rates to zero, , turning , a blind eye to, , shenanigans going on in terms of people applying for mortgages.
They doubled down on what some people call the everything bubble. They started printing trillions of dollars to drive all asset prices higher. So you know, if a stock market is rising because companies are putting capital to productive use. So people save their money, they invest it, companies put it to productive use.
And that's what we've been at. There's still lots of good things going on in the economy, but there's a lot of bad things going on too, because every time stock markets try to, deflate to what their natural level would be, the central banks come roaring back with lower interest rates and printing more money to drive stock markets even higher, which does even more harm to the economy.
, it was good intentions. I don't believe for a second, policymakers tried to create , a housing affordability crisis. They thought, well, we'll drive all the asset prices up. Higher boomers like me are gonna benefit. And then, , the benefits of that will all trickle down to the next generation.
Yeah, more than four times. What was our contribution to society to warrant? Making four times on our home. Zero.
That you could see that it was real capital creation there. There was none of either. Now there's one of each and we exchange, but when a young couple pays four times what we pay for our house, where's the capital creation there? . Nowhere. When you look down, all it is as a redistribution of capital, and that's a redistribution from the young couple's bank account into our bank account or a newcomers.
, from what they know if they want to be able to afford a home. It's just not fair.
Use to pay off your mortgage, right then it doesn't come at anybody else's expense. This is why I've written a book. It's stock markets and housing that it'll only happen when enough people understand how they are benefiting at somebody else's expense. I've been talking about this for years with my friends.
Right. It's not that they're not smart. They just don't want to hear it. And I get it. I get it right, because it's much harder to take something away from people like once they've had it. People factor in the price of their home now into their retirement plans, and they're thinking about what sort of lifestyle they're gonna have in retirement.
And I've got great faith in people. I really do , and these policy makers who have made these decisions, who have got us into this quagmire, I believe they wanna do the right thing too. But policy makers will only do the right thing when we, the people demand it of them. I.
Fairytale, everybody gets a pony doctrine, right? And that comes from understanding how an economy really works. What really truly drives prosperity, it's people like you. It's people out there who are creating capital, , working strong work ethic, a fair distribution or sharing of the capital that is being produced based on efforts and for those who can't produce capital.
(00:26):
Companies, what they do is they retain some of , their profits, retain earnings. They reinvested back in their business to try and figure out how to make things even better. , how can I be more efficient? How can I make these things cheaper? And they're doing that because there's competition, so other companies are trying to compete with them.
And so you have the same amount of money chasing that much more good. So the prices of all those goods had to steadily fall. It's called good deflation. So even if you're on a flat wage, your wages aren't going up. Every year you're becoming wealthier in real terms because your flat wage buys more and more stuff.
It's co complete and utter nonsense. So you know, they come up with this arbitrary 2% target for inflation. And they will tell you that if we have zero inflation, that people will stop spending and the whole economy will spiral down called the paradox of thrift. So in my book, I use an example of how ridiculous this notion is.
That's like , a necessity. But what about discretionary items? Like, let's say you've got a TV. You'd think it might be nice to have another TV in the basement, , for your kids. So they're not making a row upstairs TV is $300, but there's 2% deflation. Now the central banker will think that you won't bother buying that $300 TV today because you'd rather wait 12 months and save $6 and buy it for $294 next year.
It makes government debt more affordable to pay off in the future because when you print the money, , you're devaluing the money., It's a big problem. It's been a problem for. , hundreds of years, like policymakers have always tried to get away with debasing the currency and extracting capital from the system without, , contributing.
, you're just saying natural and the natural rate of interest is determined by all the market players who have skin in the game. Right. You have your own capital, you have skin in the game. , now when you are making a decision either to buy something or make an investment, you're thinking about the risk return, trade off.
So, a neutral rate of interest is simply what rate of interest allows for the most debt fueled consumption without creating inflation that's too high above 2%.
But then it starts to slow again, and now we're even further below the natural rate. So it's even more harm to the productive capacity of the economy. And this is what's been going on. , like in in the US you've got debt over a hundred percent to GDP. I never thought I would ever see this.
Well, because I want to fix the situation. I want to fix the economy because yes, it will result in unfortunately people losing their jobs today. But if we don't do it, there's gonna be way more people losing their jobs in the future. And there could be even social upheaval in the future. I think this is the path we're on unless we change.
And there's gonna be contagion. Your family members, due to no fault of their own, they're all gonna have to tighten their belt because you're not gonna be working. But after 18 months, you have been healed. You go back, you work. And it's not up to me to decide how much you should earn or how much you should spend.
It feels good, right? You'll take one of these pills. You'll feel like a million bucks tomorrow. Go right back to work. Make more money than you ever made before. Well, that sounds good, but will the pill cure my tumor? Well, not directly, but there will be a health effect, right? Instead of a wealth effect, a health effect, your body will feel so good.
If you don't feel too good in your stomach, go back to the first doctor. Well, guess what? Tumor's still there. Not only that, but it's bigger. Now. I can still operate and I can still save you, but it's , instead of 18 months, it's now three years of rehab. So the consequences of making the right decision.
That's what they always say. The reason we're now back in this mess is 'cause we didn't print enough money. We didn't take on enough debt, we didn't spend enough money, and then you're back there for the QE three pills or quantitative easing pills. And it's because the pills, the printing of the money only deals with the symptoms and it makes the underlying fundamentals worse.
Jenni (00:39):
How are my kids? Sure, they'll be fine. I could pass on assets to them, but then I look at their peers. Their generation is screwed right now when we're looking at the way that. The monetary system is pulling us 'cause we're just all kind of along for the ride with it. Right?
Mm-hmm. To, to healing. , so the book is, , published by Unicorn, , publishing in the United Kingdom, it's available on whatever book site you like to use. Amazon or in Canada, indigo or Barnes and Noble in the US and others. with Kindle, , on Amazon, and then I also have a website, , where I have a summary of my book and where my blog is. So you can see all my previous posts, , my ranting and raving and , and videos and stuff. And the, , website is called, , Paddington Capital MGMT. So MGMT short for management. So Pat paddington capital mgmt.com and you can just put your email in there and you'll get notifications whenever I send out a post, which is usually once a week.
Oh, wow. And so I like to tell young people that. , don't be in a rush. Don't think you have to be here by this age, or, you know what I mean? There's so much pressure these days to do what everybody else is doing, or you're supposed to be on a set schedule. No, just, , follow your dreams.
First, you have to invest properly, , you're gonna make mistakes, but hopefully have more successes than you make mistakes. But then you also have to communicate very clearly to your clients about what it is you do, who you are. So they will have trust in you and they will believe you, that you will do what you say you will do.
And so my wife has already read it a couple of times. She's just as angry as I am now and my daughters have read it. And so I use lots of analogies. We go step by step, chapter by chapter but I can get into that later. My book is called Capital Offense.
Jenni (00:04):
I'm so intrigued by this book because the current landscape that they're, we're dealing with. Is not the same landscape that my grandparents grew up in.
Paul (2) (00:05):
And so particularly younger people. Mm-hmm. And so they're angry, but they don't know who to be angry at. They know the system isn't fair.
That yes, , debts and deficits don't matter. , yes, you do need inflation for an economy to function. No you don't.
If you print trillions of dollars and hand out checks to people that go spending, then GDP goes up. , I can explain later , why that's not a good thing. And also if they print trillions of dollars, stock markets go up. . And so they look at the symptom of a rising stock market, and a politician will say, well, look how strong the stock market is.
And so there are different schools of thought , within economics and some schools of thought definitely recommend high inflation, spending money and debt and all this kind of stuff. So of course politicians are gonna naturally gravitate to whatever. , schools of thought are gonna make them look good in short term.
We're creating real capital. You make a suit, I make a bike, and then we exchange that with each other. Now I've got one of your suits. You've got one of my bikes. We're both better off because we created capital. There was no suit or bike in the economy. Now there's one of each. The economy is that much better off.
You're storing up your capital, that suit in your a thousand dollars. . That's why your a thousand dollars has value because you create a capital and you exchange a thousand dollars for the capital you produced. So the money is called the medium of exchange. Money is what we use to exchange all the capital that's being created around the world. Capital is what makes the world go round, not money. Money's very important. I. Couldn't function without it, but you could have all the money in the world. But if you've got no capital, you're done. Right? You can have a lot of capital, no money. You'd still be okay. It wouldn't be a well functioning economy,
Now, when a central bank creates money out of thin air, there's no capital in that money. The Central Bank did not create any capital to obtain that money. It just solves digital. Right? Theres us a few buttons.
they're not gonna double the money supply overnight, you know, to crash the economy, but I'm just exaggerating , for effect. So capital is extracted from people without their permission, in some ways, without their knowledge. Okay. And that's why the title of my book is Capital Offense.
Increases GDP, the final spending number. Central bankers were witnessing that, saying this is a pretty good thing. And then they would give you every quarter, , how much the wealth effect contributed to GDP growth. Isn't this great? So now they gotta keep the stock market growing 'cause they don't want to have a negative wealth effect when stock markets come down.
We'll feel wealthier and then borrow on their home and go spend that borrowed money and that will boost GDP the final spending. So that's exactly what the Federal Reserve did. They dropped rates down to, I believe it was 1%, which is extremely low by historical standards, and kept it there for two years.
They were putting asset prices. Ahead of the optimal functioning of the economy, right? Because when you to improve productivity growth, that takes a lot longer in an economy, but you can impact stock prices and house prices very quickly. Just by dropping , interest rates to zero, , turning , a blind eye to, , shenanigans going on in terms of people applying for mortgages.
They doubled down on what some people call the everything bubble. They started printing trillions of dollars to drive all asset prices higher. So you know, if a stock market is rising because companies are putting capital to productive use. So people save their money, they invest it, companies put it to productive use.
And that's what we've been at. There's still lots of good things going on in the economy, but there's a lot of bad things going on too, because every time stock markets try to, deflate to what their natural level would be, the central banks come roaring back with lower interest rates and printing more money to drive stock markets even higher, which does even more harm to the economy.
, it was good intentions. I don't believe for a second, policymakers tried to create , a housing affordability crisis. They thought, well, we'll drive all the asset prices up. Higher boomers like me are gonna benefit. And then, , the benefits of that will all trickle down to the next generation.
Yeah, more than four times. What was our contribution to society to warrant? Making four times on our home. Zero.
That you could see that it was real capital creation there. There was none of either. Now there's one of each and we exchange, but when a young couple pays four times what we pay for our house, where's the capital creation there? . Nowhere. When you look down, all it is as a redistribution of capital, and that's a redistribution from the young couple's bank account into our bank account or a newcomers.
, from what they know if they want to be able to afford a home. It's just not fair.
Use to pay off your mortgage, right then it doesn't come at anybody else's expense. This is why I've written a book. It's stock markets and housing that it'll only happen when enough people understand how they are benefiting at somebody else's expense. I've been talking about this for years with my friends.
Right. It's not that they're not smart. They just don't want to hear it. And I get it. I get it right, because it's much harder to take something away from people like once they've had it. People factor in the price of their home now into their retirement plans, and they're thinking about what sort of lifestyle they're gonna have in retirement.
And I've got great faith in people. I really do , and these policy makers who have made these decisions, who have got us into this quagmire, I believe they wanna do the right thing too. But policy makers will only do the right thing when we, the people demand it of them. I.
Fairytale, everybody gets a pony doctrine, right? And that comes from understanding how an economy really works. What really truly drives prosperity, it's people like you. It's people out there who are creating capital, , working strong work ethic, a fair distribution or sharing of the capital that is being produced based on efforts and for those who can't produce capital.
(00:26):
Companies, what they do is they retain some of , their profits, retain earnings. They reinvested back in their business to try and figure out how to make things even better. , how can I be more efficient? How can I make these things cheaper? And they're doing that because there's competition, so other companies are trying to compete with them.
And so you have the same amount of money chasing that much more good. So the prices of all those goods had to steadily fall. It's called good deflation. So even if you're on a flat wage, your wages aren't going up. Every year you're becoming wealthier in real terms because your flat wage buys more and more stuff.
It's co complete and utter nonsense. So you know, they come up with this arbitrary 2% target for inflation. And they will tell you that if we have zero inflation, that people will stop spending and the whole economy will spiral down called the paradox of thrift. So in my book, I use an example of how ridiculous this notion is.
That's like , a necessity. But what about discretionary items? Like, let's say you've got a TV. You'd think it might be nice to have another TV in the basement, , for your kids. So they're not making a row upstairs TV is $300, but there's 2% deflation. Now the central banker will think that you won't bother buying that $300 TV today because you'd rather wait 12 months and save $6 and buy it for $294 next year.
It makes government debt more affordable to pay off in the future because when you print the money, , you're devaluing the money., It's a big problem. It's been a problem for. , hundreds of years, like policymakers have always tried to get away with debasing the currency and extracting capital from the system without, , contributing.
, you're just saying natural and the natural rate of interest is determined by all the market players who have skin in the game. Right. You have your own capital, you have skin in the game. , now when you are making a decision either to buy something or make an investment, you're thinking about the risk return, trade off.
So, a neutral rate of interest is simply what rate of interest allows for the most debt fueled consumption without creating inflation that's too high above 2%.
But then it starts to slow again, and now we're even further below the natural rate. So it's even more harm to the productive capacity of the economy. And this is what's been going on. , like in in the US you've got debt over a hundred percent to GDP. I never thought I would ever see this.
Well, because I want to fix the situation. I want to fix the economy because yes, it will result in unfortunately people losing their jobs today. But if we don't do it, there's gonna be way more people losing their jobs in the future. And there could be even social upheaval in the future. I think this is the path we're on unless we change.
And there's gonna be contagion. Your family members, due to no fault of their own, they're all gonna have to tighten their belt because you're not gonna be working. But after 18 months, you have been healed. You go back, you work. And it's not up to me to decide how much you should earn or how much you should spend.
It feels good, right? You'll take one of these pills. You'll feel like a million bucks tomorrow. Go right back to work. Make more money than you ever made before. Well, that sounds good, but will the pill cure my tumor? Well, not directly, but there will be a health effect, right? Instead of a wealth effect, a health effect, your body will feel so good.
If you don't feel too good in your stomach, go back to the first doctor. Well, guess what? Tumor's still there. Not only that, but it's bigger. Now. I can still operate and I can still save you, but it's , instead of 18 months, it's now three years of rehab. So the consequences of making the right decision.
That's what they always say. The reason we're now back in this mess is 'cause we didn't print enough money. We didn't take on enough debt, we didn't spend enough money, and then you're back there for the QE three pills or quantitative easing pills. And it's because the pills, the printing of the money only deals with the symptoms and it makes the underlying fundamentals worse.
Jenni (00:39):
How are my kids? Sure, they'll be fine. I could pass on assets to them, but then I look at their peers. Their generation is screwed right now when we're looking at the way that. The monetary system is pulling us 'cause we're just all kind of along for the ride with it. Right?
Mm-hmm. To, to healing. , so the book is, , published by Unicorn, , publishing in the United Kingdom, it's available on whatever book site you like to use. Amazon or in Canada, indigo or Barnes and Noble in the US and others. with Kindle, , on Amazon, and then I also have a website, , where I have a summary of my book and where my blog is. So you can see all my previous posts, , my ranting and raving and , and videos and stuff. And the, , website is called, , Paddington Capital MGMT. So MGMT short for management. So Pat paddington capital mgmt.com and you can just put your email in there and you'll get notifications whenever I send out a post, which is usually once a week.
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