Okay. Welcome back to Gary's Economics.

Today we are going to talk about passive income.

Okay. So passive income

is a big sort of trend on the internet.

The smart way to make money is to have passive income.

Don't work for your money. Generate passive income.

And I thought it would be nice to open up a little bit

and explain

what actually passive income

is from a broad economic perspective.

So the first thing to say is

we live in an economy and most of us work,

and a lot of stuff is produced every year.

A lot of goods and services are produced every year.

When I work, when you work,

we produce stuff, we make stuff.

And every year that stuff is consumed

by different people in society.

So some people consume an awful lot,

spend a lot of money, consume

a lot of goods and services, have a very luxurious life

and other people live very basic,

barebones, essential lives

where they live almost lives of poverty.

So what is produced and who consumes it?

Well, basically everything that is produced

every year is consumed by somebody.

And some of it goes to workers.

You know, you probably work a job

and you consume things.

For example, you live in a house and you will eat food,

and if you're lucky, you might get a holiday or two.

You might go to the pub, you might go to a restaurant.

Some of the stuff goes to workers, but a lot of people

get a lot of money that they don't work for.

This is their passive income, and they get to consume

more, basically.

And this passive income essentially

goes to the people who own the assets.

So we talk a lot on this channel about what is wealth.

If you don't watch that video, I strongly recommend it.

Most people never get to own

significant amounts of wealth

other than the house they live in.

Most people are quite preoccupied

to own the house

they live in because it's very difficult to do,

and they never get to own

a lot of the other forms of wealth

that exist in society.

But there are huge amounts of wealth

assets involved in our economy

and the production of the things we produce.

So most obviously

there are the shops on the high street,

there are the office blocks.

There's a lot of skyscrapers here,

office blocks people live in.

There's also the natural resources.

There's the supermarket,

there's all of these buildings

that are involved in producing things.

There's factories, there's farms,

and all of these are owned by somebody.

And basically every year

the things we produce,

some of it goes to

people who work as payment for their work,

and some of it goes to people who own

as payment for ownership. So

behind this concept of passive income

is basically the question of who owns our economy?

And whoever owns our economy,

whoever owns our assets,

they will receive a massive chunk

of what we produce as a society each year.

So here

we have the basic concept of passive income,

and it's related to a video

we did a few weeks ago

saying that rent, interest

and profits are all the same thing,

which is

there's a set of cash flows which go to owners

every single year.

And these owners,

they get cash flows from you

and that's their passive income.

But there is another type of passive income

which is very

heavily marketed, especially on things like TikTok,

especially American TikTok,

which is basically saying borrow a ton of money

buy assets, normally housing, and rent them out,

and then you can make a passive income.

So this is quite interesting, right?

You're actually making a passive

income by borrowing money from the rich

so that you can buy assets

and then rent them out to poorer people.

And I think this kind of exposes a little bit

how our economy works,

because here you have people who might themselves

not particularly be rich,

who are basically paying

to, kind of,

manage the assets of the very rich kind

of standing between the very rich and the rest of us.

And if you look at these landlords,

they're often themselves not extremely rich people,

but they're essentially basically,

they're working as estate agents for the rich.

And I think it kind of shows you

the kind of society we've built

where really the rich own increasingly everything.

And you basically get paid

based on your proximity to the rich.

So, for example, I was working for a large bank

and I was basically managing

huge amounts of money for the rich,

and I got paid a lot of money.

And then I can pay people to work for me.

In a sense,

you're kind of recreating this kind of feudal system

with the rich own everything,

and they pay a group below them to manage stuff

for them, who pay a group

below them to manage stuff for them.

But it all comes down basically to the same point

that passive income is about who owns the resources.

Which brings us to the question of is it possible

for everyone to get a passive income?

Well, in a sense, yes,

because these resources really exist.

So there are some kinds of passive incomes

which are inherently zero sum in society.

So for example, debt and debt interest.

This is about who is in debt and who's in credit.

It's payment from one person to another.

But these resources they do really exist.

You know,

there is an enormous amount of productive capital.

You know, there's a massive stock

market out there which you could own some of.

And they're all of these buildings and properties

which you could own somehow. So

I think in reality,

the thing to realise is we live in a very rich country,

in a very rich world with a lot of real resources,

and you could own some of that.

I think people sometimes see me

calling for taxation of the rich

and think that I'm

some kind of communist,

but what I want is for you to own your own house

without a massive mortgage.

And also I want you to own

a big chunk of the stock market.

I want you to own

a big chunk of the farmland or the natural resources.

I want you,

the ordinary

working people of this country, Britain or whatever

country you’re in, to own the wealth of your country.

And if you do that,

then we can all have a passive income.

We can all live lives like, you know,

I am somebody who has a lot of wealth

and I live off my passive income.

And if I chose to stop working, I could stop working.

I could live off of that.

If we all had the passive income,

then we wouldn't have to work so hard

because we own the properties we're in and we’d

own some of the wealth of our countries.

And we’d live relatively comfortable lives.

But if you look at what's actually happening

to the ownership of wealth,

it's aggressively

being sucked away from the middle class.

You can see that in terms

of reduced homeownership rates,

much higher levels of mortgage debt,

it's being pulled away from the government.

You can see that in terms of government

loss of assets, privatisation of government assets

and the government falling into debt,

and it's being held by the very rich.

What that means is

you're losing a wealth, government's losing a wealth,

and you are losing your passive income,

and you end up in kind of this situation

of the opposite of passive income,

which is not only do you not have a passive

income and ownership of the stock market,

you don't even own enough

to live in a house and to eat food.

You end up in a kind of

passive slavery as you will,

which is you don't own anything

and you need to work your tits off

just to live in a house and eat food.

So, passive income, it could be great.

You know, we could all own

a fair share of the country we live in,

and we could all live nice, comfortable lives where we

generate money just for getting out of bed

like Rishi Sunak does.

And I'm not saying we could all stop working,

but we could live much more comfortable lives.

And the only way that would happen

is if you own the wealth.

But the direction of travel, of wealth

is away from you and towards the rich,

which means not only will

you not have a passive income,

you will not have wealth.

You will not even be able to,

in many cases afford food, housing and energy.

So the end message is passive

income is about wealth distribution.

Passive income is about who owns the wealth.

Do you own it or do the rich own it?

If we get wealth into the hands of ordinary people,

you can live a very comfortable life

just like the rich do now.

If we push wealth in the other direction,

like we are doing,

then increasingly ordinary people will struggle

to feed their kids and turn the heating on.

So passive income, it's great.

The only way to do it is to get wealth into your hands.

The only way to get wealth into your hands

is to significantly increase taxation on the rich,

because they've got it,

and they're not going to give it to you any other way.

So passive income, let's get it.

Let's take the wealth back.

Let's live in a more equal country

where people can live good lives.

I'm going to push through it on this channel.

Keep supporting.

Tell your friends, tell your mum. Take care.