The Truth About President Trump's Economy. Prepare Yourself.

you forget the thought or the feeling that the simulation may in fact be the modern Western economy as a whole I wanted to talk about that with a great economist dr. Robert P Murphy he is an Austrian economist which is a school of thought rather than a geographical location he's a senior fellow at the Mises Institute the research assistant professor at Texas Tech University's free market Institute and is the author of several books all of which a great including the politically incorrect guide to capitalism the politically incorrect guide to the Great Depression and the New Deal choice cooperation enterprise in human action and the recently released contra Krugman smashing the errors of America's most famous Keynes e'en he also dr. Murphy that is co hosts the weekly contra Krugman podcast with Tom woods where they regularly refute and eviscerate Paul Krugman's Paul Krugman's New York Times writings you can find out more by dr. Murphy at consulting by rpm com slash and Bob Murphy econ and of course the Contra Krugman Park podcast is at Contra Krugman com without further ado I give you dr. Robin Murphy well thanks Bob for taking the time today how you doing doing great stuff and thanks for having me in so boy there's a lot to talk about in terms of the Mirage of economic recovery that's going on and it's complicated by the fact that Trump is doing a lot of stuff right and it's kind of an egg matt ik as you want a good negotiator to be you know if he was up front with his ideology people could use that as leverage against him in negotiation so where do you think things are from an Austrian perspective my do you think they may be heading well sure so the big thing I've been saying ever since you know 2008 basically you know after the financial crisis and the Fed slash started slashing interest rates and buying up also you know mortgage-backed securities and Treasuries is I was saying that's exactly what Alan Greenspan had done after crash and the on the Austria the business cycle is not a free market phenomenon it's because the banking system and nowadays you know central bank's push the thing you know they push interest rates artificially low that causes a false unsustainable boom and then when they start getting nervous and they raise rates that's where what the bust so I we were just I was just pointing out that what the Fed has been doing since the crisis hit is just setting us up for an even bigger crash and now that the Fed has started raising rates I think that you know that crash is gonna be comes coming sooner rather than later so regardless of what Trump did in office I think you know that was already baked into the cake as far as his policies I don't like his rhetoric for sure I'm trade and then you know we can talk about some of the particulars the the corporate tax cut though I think was a very pro-growth move I think even a lot of free market economists it surprises me how little credence they give to that or how they don't think that's a big deal both politically it was kind of amazing that they got that through just you know because the optics of it but but also in terms of the significant that was a very big move I mean supply-side type economists have been saying for years you know the US has one of the highest corporate income tax rates in the world and now you know they've really made some significant moves on that so the problem now is unfortunately it's kind of hard to disentangle like under Obama everything was just bad and so then there was the other lackluster you know one of the most sluggish recoveries in US history if not these slowest you know you could just say yep see I told you so whereas here it's a little bit hard you know so I'm against protectionism but I can understand people saying oh the economy's doing fine you idiots rewarding us and I'm and I can say well I think it's cuz the corporate tax cut and then likewise the people you know I thought the corporate tax cut was gonna be huge and now people could say well or something crazy if it crashes they can say Oh Murphy you said that corporate tax cut I go yeah but that's cuz the Fed so unfortunately everyone's gonna be right Paul Krugman's gonna be right no matter what happens oh no no that that makes my ears burn think even by accident okay so let's go over the Austrian theory at the business cycle it's been quite a while since I've done a show on that and there is this general perception as you know Bob that well you know these booms and busts it's just part of the roller coaster ride of the free market and I've sort of pointed out yeah people get sick people get better but if the whole town gets sick at once you kind of want to look at the water supply maybe the food supply there's something that's in common and I've never understood how people can imagine that an entire complex economy hundreds of millions of people could suddenly go up and down at the same time unless you start looking at what's in common like money supply interest rates and so on so the Austrians I think have the answer regarding the business cycle so on if you could step people through how it works sure and I like your analogy there because that's exactly right that this isn't you know like a free market economists versus Keynesian interventionist divide even lots of people who like our fans of Milton Friedman whatever I heard them say things along the lines of well yeah you got to have innovation and if you want to have you know free enterprise business cycles or the price we pay there's a no that's not correct you know and so as you say it is weird so obviously any particular business any entrepreneur might make a bad forecast they might you know open up their business and then the consumer demands not there and they go out of business they go bankrupt that's normal but you're right the thing that we have to explain is economists is why are these clusters of mistakes why does it seem like there's alternating periods where business in general seems to be booming lots of businesses all seem to be you know doing well and then all of a sudden it flips so that in general business is bad yeah there could be a few outliers but just you're right it doesn't seem like it's a randomly distributed thing it seems like it comes in these huge cycle cyclical patterns so the Austrians this was originally formulated by Ludwig von Mises and his work the theory of what we translate is the theory of money and credit and then of course Friedrich Hayek helped elaborate and that's one of the major reasons Hayek won the Nobel Prize Mises says it's because of the banking system that for various reasons what we can get into in a minute if you want that the banking system is able to push interest rates artificially low by flooding the market with credit that's not really backed up by genuine saving wait wait okay because when you say the banking system most people gravitate towards the private banking system to which the point the besi well they can't create their own money better control interest rates directly okay so and this gets settled so young missus original theory came out at 1912 alright so that was before the US had a central bank or at least before the Fed they had had the National Bank's so what happens this this brings up the issue of what's called fractional reserve banking and so there is a sense in which even private sector banks if they're allowed to you know you you give a thousand dollars in your checking account deposit and then if they're allowed to lend out some of that to other people there is a sense in which your original thousand dollar deposit and you think you've got a thousand dollars in there but yet if other people are walking around with the money that the bank lent out part of which was your reserves now the community as a whole thinks they have more in checking account balances then you're a thousand dollar savings actually is backing up in this especially if they're lending to have multiples of your savings rightly right yeah yeah so people may didn't remember from their you know horrible college classes on this stuff that yeah there's the multiplier in the banking system so it and this is you know some Austrians you know we quibble about this so this is actually a huge area of disagreement but this is that the standard miss sen story was saying if you think that what the banking system does when things are well functioning is channeled legitimate savings into loans to productive enterprise the interest rate is the price sort of signaling the scarcity and so if the banking system in a sense is allowed to lend more that has been genuinely saved by creating money then there's a mismatch there no well I'm sorry hang on and I've come back and forth on this as well because to me if you put your money in a bank and your contract but the bank is don't ever lend out more than you have in the bank okay then they'll lend out a little bit based upon people's uncertain needs for liquidity in the moment but if you go to a bank that says we land out twenty times the amount of money that's in your bank account well you're gonna get potentially a huge gain you may also get potentially a huge loss so to me you know fractional reserve banking is just a matter of risk tolerance is it mad money can you handle the loss do you want to have the high returns or do you want something more conservative and in a free market I think banks would offer a variety of those options okay yeah so the way so again this gets really nuanced in a totally free market you're right I think a lot of this would just be a red herring because I think normal market mechanisms as you say would constrain banks and so they wouldn't be able to engage in infraction reserve banking to the degree they are allowed to under a heavily regulated system so so that's you know you got and that's fine so clearly in modern times with central banks I mean think about it even the official rationale for why did we need why did the Federal Reserve get created it was to be a lender of last resort right cuz they know you know when there's a crisis we don't want people dependent on JP Morgan's good graces we want a public you know public institution so clearly whatever that you know the issue might be about how would banking work in a totally free market clearly under the heavily regulated system with a cartel enforcement and then a central bank they're willing to bail people out when they get caught with their pants down that clearly exacerbates this you know this notion of fraction reserve banking beyond the margin that would happen in a genuinely free market so well and most people I think I know that I would maybe even as well Bob but most people would want a banking executive board to lose their houses if the bank went bankrupt first you know like they would be living under a bridge in a box they'd be living in a rusty old car because at the moment of course with this corporate shield and people think the corporation somehow part of the free market other than another status invention that allows people to Hoover money out of a business enterprise without exposing their personal assets to risk of loss if the enterprise goes tits-up and so I would want that sort of protection as well and that used to be the case in the 19th century for bank went bust the first thing they do is take the houses of the bank board members and that's kind of being removed to some degree by this corporate shield yeah I agree with that entirely in general the move towards that and away from equity financing is partly a phenomenon or symptom of what we're talking about here these artificially low interest rates another thing this is just recent there I don't know if this is on your radar but there was this financial institution called the narrow bank so they go by tnb and their business model because right now the Federal Reserve if commercial banks keep their money parked at the Fed the Fed gives them interest on reserves and that is a privilege that only qualified financial institutions like like banks can do like you can't just go leave your money and deposit the Fed and get this guaranteed interest payment so this thing called the narrow bank their business plan was to say okay we'll be a regular bank and we'll just take our customers deposits with us and park them at the Fed and we'll just along the interest so sort of you know they have everyone be able to enjoy that and imagine you not gonna believe this I hope you're so you're not sitting down you should be because the Fed did not approve that Charter the Fed said no and the thing is in a key way the profits might be flowing to regular folk I'm sorry we really had have that it's only for the elites and the thing is it can't be that there's some kind of riskiness involved because this would be literally the safest thing imaginable this would be a hundred percent reserve banking where you know you put your money with in other words they weren't gonna do anything else this was gonna be an entity that solely took customer deposits parked him at the Fed and just flowed through the interest that's the only thing on their books so your money would be absolutely safe and you know unless the Fed just decided to dissolve itself and yet the Fed wouldn't approve that so you would think gee in this environment of wanting financial stability and you know wanting to have capital requirements and we don't want another too big to fail having this option of everyone enjoying these nope so obviously can you imagine I mean to look in the mirror and say I'm a business genius because I can borrow money from the Fed at at 2.25% I can pocket in another account get 3% woohoo I'm a business genius it's like that's not even simple math yeah so it's again obviously you and I know that the real reason is because right now the subsidies they're giving I mean in case people don't realize this I mean the the Fed right now is giving many tens of billions of dollars just in interest payments per year to come the commercial banking system that was that's new that's something that was instituted in October of 2008 right after the crisis you know they had their rationale and their jargon for why they were doing it but the point is they're literally giving tens of billions of dollars a year right now to the commercial banks just an explicit payment say hey don't lend your money out to customers keep it parked with us so I mean the whole thing is interest rates rise that gets more and more expensive to do so clearly yeah they don't want more people in on that little nice little cozy relationship well and this was the big tragedy of oh seven oh eight was that the Federal Reserve and the government as a whole had a huge mandate for banks to lend to low-income people regardless of the future and then when that because this is the question people's that all of these credit default swaps in these bundled mortgage securities boy a lot of people on Wall Street made really bad decisions at the same time it's like that's a clue that's a clue that something beyond their particular purview is going on and yeah there was this mandate to try and get as many low-income people into houses as humanly possible and then when interest rates ticked up every right Nick mortgages kicked in people couldn't afford it and the whole thing went supernova but that's not a free-market situation do you think that banks just woke up one day and said well we've had hundreds and hundreds of years of figuring out who's good at paying back money that we lend to them but we're just gonna throw all of that out of the window and it's like that didn't happen never some mandate that was going on right and there's a documentary coming out to the time Woods was involved with this guy Jimmy Morris and call a it's called the bubble he might be breaking up into two parts now and I've seen a preview of this recently he interviewed me and Peter Schiff and guys like that but he's got great quotes in the beginning like from people like george w bush and barney frank and others in the early 2000s patting themselves on the back you know i think obama might be involved too but i'm not sure about that but in there they're congratulating themselves saying you know we're gonna promote the dream of homeownership you know and and they're so happy at how they're you know through the Community Reinvestment Act and artificially low interest rates at Fannie and Freddie and all those things the whole goal was to get banks to give mortgages to people who otherwise wouldn't qualify so you can't have it both ways it can't be that the government's pad itself in the back and then five years later saying gee how come all these people got mortgages who in retrospect we're not good of credit risk it's like well that was the whole rationale of your program if yeah you got to admire the truth in advertising right you have to admire the truth in advertising calling it the dream of homeownership because one thing that we understand about dreams every single morning is you wake up and they ain't real right so that's the thing it wasn't merely that it was an unintended consequence that was the whole rationale and so for them people will say oh it's a free market I mean that's that's gonna create it so a Jedi back to your earlier question so the Austrian story is that these artificially low interest rates caused by credit expansion you know there's a mismatch that the interest rate does not truly reflect the available supply of savings available for borrowing that the other the credit expansion there's money created that really isn't justified by saving and so that's gonna cause a problem right the interest rate is a price it has a function to serve just like at the government somehow made crude oil prices five dollars a barrel that wouldn't be doing any favors that would be miss allocating it right because that's not the right price so if interest rates are artificially low something screwy happens and in the Austrian story it causes an unsustainable boom and then when rates spiked later on everybody realizes oh that's that's you know I made too grandiose of investments and a lot of entrepreneurs at the same time we're trying to scale back and so that's what we perceive as a recession well and that's the one thing that as far as I understand it Bob only the Austrian school gets right which is why does it happen in the b2b or the business sector first and then the recession hits the more personal or business to consumer market first like why is it that businesses in terms of capital investment and expansion get things wrong with regards to wrong interest rate signals why does it happen to business first and only then to the general consumer as far as I know the Austrian school is the only school with a compelling explanation for that repetitive phenomenon yeah I agree and in just you know in case your listeners don't know that this is even though the Austrians do especially Mises and Rothbard they're very skeptical of you know empirical studies like they're more in terms of a priori theorizing still did don't misunderstand in terms of just empirical like what would the signature of the pattern and the data look like it lines up with the Austrians like some of my favorite essays going against Paul Krugman were when he was saying after the 2008 crisis well gee if this was a story about a housing boom and bust and reallocation and we would see this and so I would go look at the data say yeah that isn't that is what we said you know your story about it's just people are afraid to spend you would think retail would fall off a cliff and then it would percolate back but no as you say stuff and it's the other way around it's like capital good investments those industries take a huge hit in retail and service sector kind of just takes a smaller hit so the story lines up very well with the Austrian approach whereas if it's just a people are afraid to spend and so the economy kind of shrinks that doesn't line up with the particular sectoral adjustments that we see well yeah so I mean just f+ everybody knows this but in straights being the price of money and a subject to the same supply and demand at least in a free market as any other good or service so if you have a whole bunch of money that people are saving then the banks have a lot to lend out and to incentivize they have to lower the price of interest right because they have an excess of supply of capitals have to lower the price of interest so when interest rates are low that means there's a lot of deferred spending going on so businesses want to use that time to ramp up for additional production because they know that people are going to start spending sooner or later but if interest rates are artificially low if they're kept artificially low and it doesn't represent an accumulation of savings or deferred spending then the businesses start building for an expansion that never comes and that's why it hits the business sector first and then flows back into the into the personal sector right that's exactly right so especially for your listeners who understand like how you would reckon like the present value of a flow of you know cash flow stream you know that the higher the discount rate you use the higher the interest rate that means future dollars aren't worth as much today okay and so yes the interest rate if you're an entrepreneur you're like okay we're thinking about building an apartment complex you know it's gonna have like a 30 40 year horizon in terms of us planning we're gonna spend ten million dollars you know this year building the thing and then over the next 40 years what kind of rental return do we think we can get the interest rate is a huge component in your decision whether to go forward with that or not whereas if you're just gonna put up a hot dog stand for the next three weeks the interest rates not really a big deal so so yes in a simple sort of Keynesian macro model the the interest rate at best is just something that like a brake or a gas pedal on total spending whereas in a more sophisticated framework where you have long term projects versus short term the interest rate it doesn't a low interest rate doesn't just stimulate investment it particularly stimulates long term projects and so in the Austrian story that's why an artificially low interest rate it sets in motion long term projects and so that's why you can get entrepreneurs you know they might start something and then when the economy flips now of a sudden they've got a half-finished project and they have to decide do we continue do we just lay people off so in a more simplistic Keynesian story where it's just up there's area demand and that's it you know you can even get those nuances it doesn't even make sense to say stuff guy went into long-term project so we're trying explain like the housing bubble I mean housing and real estate in general those are very long-term projects and that's why I artificially low interest rate would stimulate them in particular right and it's often struck me Bob if you can imagine some basketball game occurring and there's some guy on the sidelines who's got a gravity dial and like then crank the gravity up to triple and then they move it down to like one-sixth of Earth's gravity like moon and they just can you imagine trying to play that game trying to do your shots trying to pass not knowing what the gravity was going to be over the next five minutes over the next thirty seconds over the next three seconds you get dialing it up and down got people fallin over the place it would be kind of a weird comedy but that's kind of what it's like being an entrepreneur with a central bank and a politically driven set of interest rates and a politically driven set of a money creation policies you really don't know what's coming down the road and you're trying to play this game but man half the time the basketball goes up your nose half the time you pass it the gravity dials down it sails way over the other half a time it lands on your toes it's really tough to plan with people monkeying with foundational economic signals like this yeah and beyond that too it's you know the standard objection to the Austrian stories oh oh I thought you guys think investors are rational or well you know what what do you you economists know the feds doing this but all the other people in real estate were idiots and part of the explanation is it's not a monolithic thing there are some people who are relatively new who just you know they had never lived through a major boom bust cycle before and so jada and also its kind of thing if the feds handing out money at ridiculously low rates and your competitors are taking it yeah you can play the long game and sit back and let them make super high profits while you kind of just tread water but the only way that's gonna pay off is once the bust happens they should be allowed to fail but if they get rescued well then you're just the sucker because you didn't earn money during the you know the heady boom years and then they didn't go bust later so you have nothing to show for it you know to your to the people investing in your hedge fund or whatever so there's a lot of reasons that yeah the stimulus on the front end and then all the bailouts are the exact wrong thing to do you know it's a profit and loss system if the people who lost a bunch of money aren't to fail then all the incentives are screwed up and that's something I think that's quite confusing for people around the 708 crash you know when was it immediately 600 billion bucks were pumped into various institutions and it's been trillions of dollars I think since if I've got my math right and the question is okay why can't they fail what is the problem I understand what the FDIC that they got a guarantee people's bank accounts so you might as well prop up the bank rather than pay off everyone's bank accounts because just easier but a lot of these institutions that were failing were investments investment places that didn't have FDIC guarantees I mean it's hard to guess what happened with with Paulson and Bush and then Paulson and Obama where it's like hey nice economy you got here be a real shame if something happened to it what do you think the story was about what was going to happen without the bailout I mean we all know that it would have been a crater but then there would have been new growth that would have been sustainable what do you think was told to people that got the the the wallet books open to that degree sure so yes in September and early October going into the table remember Congress originally did voted against harp you know cuz their constituents were again I don't remember the numbers weren't but the phone calls were heavily against it people were like no you're not bailing me out I've seen oh I'm underwater and my mortgage – where's my cheque where's my bailiff forget that you know and and they voted no and then I don't know what was said behind closed doors but then all of a sudden I held another vote and it squeaked through and so yeah Paulson this story is he literally got down on one knee and was begging Pelosi saying you know we need this so yeah they were telling people that your ATMs not gonna work next week we don't approve of this thing and they were sitting with the AIG bailout so the Fed came and I think was 85 billion dollar infusion into the AIG of course is the big insurance company and so people were led to believe my life insurance policy is not gonna be funded and that was completely a lie that AIG it was like its parent company that was doing these you know credit default swaps that was in trouble the money backing up you know individual life insurance policies that was in segregated accounts regulated at the state level obviously not that I'm a huge fan of state regulation but the point is those that money was segregated the AIG Perry if they had just been allowed to fail everybody's life insurance policy would have been fine in the same thing too in general I mean what a regular company corporation goes bankrupt it's not the end of the world you've you know you figure out okay what are the net assets and then there's bankruptcy court and they pay off the creditors in terms of you know what what laia where they stand in the queue and if there's anything left over and the shareholders you know take the hit and the workers get laid off but they get reabsorbed elsewhere by companies that have a better business model that are meeting the needs of consumers so yeah it would have been bad but the point is we didn't avoid that crisis all they did was kick the can down the road so we're still gonna have that day of reckoning it's just gonna be much bigger now so there's that element as well but yeah the idea that the whole financial system was gonna just implode if they didn't come in and bail people out that's crazy the last thing I'll say is if they would want to you know if they were saying oh well the mortgage market and hey we just wanna we have to bail out Wall Street to save Main Street that was one of the slogans but no like I said so one thing is they could have just given checks to people who were underwater that would have saved them more but they didn't do that instead they were spending hundreds of billions on mortgage-backed securities so that show that wasn't you know that was a farce but also remember in October of 2008 the Fed literally started paying commercial banks to not make loans to people okay I mean they didn't use that language to describe but that was Conn paying interest on reserves so one way of thinking about what is the event they were literally paying commercial banks saying we don't want you to lend this money out keep it parked with us so clearly this was not about keeping the lending juices flowing so the average people could still get along that's not at all it was having this was clearly their investment banker buddies screwed up and they were about to lose billions and the Fed came up with a way to bail them all out well and this is the really frustrating thing as well if these guys were really playing some risky poker I mean some of these institutions were lending out like thirty to one me are lending out thirty to one you get a three percent market shift you were completely wiped out and so they were really doing a lot of heavy risk and hey you know sometimes that risk pays off and sometimes it doesn't and that's sort of the whole point and the play that the way it plays out is one of these horrible examples of the scene versus the unseen you know Basti it's old idea because of course the people who get to keep their jobs because of the government bailouts are like woohoo love these government bailouts they're great the people who get to keep their life-savings at the top but of course all the people who otherwise would have had jobs all of the businesses that weren't created all of the new things that didn't come into being those fabled jet packs that I'm still waiting for nobody knows that that didn't happen nobody has a direct visceral experience of what was not brought into being and that mismatch of incentives is one of the reasons why state control of the economy tends to be so corrupting for everyone right you know and after the fact I went and talked so I hope I'm not coming off as if I'm saying oh it was all the government and private sector were angels no you're right there were people in the private sector that were completely reckless we're very short-sighted and I'm sure there was a lot of outright fraud that was it was happening like those things called liar loans where part was going on is yet commercial banks were originating mortgages knowing full well the recipient you know and didn't have a job or was lying about his income because they were able to sell it off to Wall Street but still you got to ask somewhere along the chain someone was doing something stupid why was that process in the ratings agencies were involved and so but ultimately and I talked to people afterwards like people it major investment banks where you know the physics PhDs down the hall were given a triple-a rating to these you know these derivative you know credit default swaps or things like that and part of he says those things were so complex we need to know what they were they were using computer models to evaluate them but one guy said something along the lines to me of we kind of knew that look at all the big banks were into this stuff and we knew if there was a meltdown the Fed was going to come in and not let that happen and there was precedent for that you know the bad hit the Fed had done stuff you know the Fed had come they called it the Greenspan put right that you know when there was a big financial thing and so you know the plunge Protection Team there's all these fancy names you want to call it and so yeah and they were they were right in that respect so it's not that it was like this completely Machiavellian calculation there was a lot of arrogance and hubris involved and they thought oh no you know this was gonna go on who care but ultimately if somebody did raise the question you know we're kind of levered here they would say well no but the kind of scenario you're worried about it's not just that we would go down everybody would go down and the feds not gonna let that happen and they were right so you can't even say I mean you know that it was immoral but they weren't wrong and what they're getting and what their estimate was so yeah you whatever the issue is you can't blame that on the free market that's crazy yeah now the other thing too is that when you do start to prop up these companies with government money government power government protection you do end up with this you know dead company walking zombie come piece it a company scenario which seems to be the case in Japan where they kind of had a freeze time spell you know everyone who's of this particular size in 1990 can now get the same size forever and then you end up with this very strange economy like this Twilight Zone where there just isn't that creative destruction that is the source of me well yeah you're right what's funny to just on that point is a lot of the Keynesian 's when people like me were arguing against the huge rounds of QE and the trillion-dollar-plus deficits under the Obama years were saying hey this is not a good idea and people were saying like well no but Japan's been doing that for twenty years and they you know and they've just been stuck in a rut so it hasn't caused you know hyperinflation of it so on the one hand you're right it didn't cause hyperinflation but also it's like right so we could also have a lost decade just like Japan you know I mean so it's it was weird to me that Keynesian were saying no Japan has been trying our policies for twenty years and so far hasn't worked but it proves it's not you know the end of the world either and so it was just a weird dealing you think they would point to a success story well in Japan as a whole this is actually physically dying off and I'm not saying it's all to do with the economics but it's not unrelated to economics when you have a what is it they're selling more elderly diapers now than baby's diapers and their projected like within 80 years so it's gonna be like nobody left in Japan except one guy who's really old and squinting at his anime and so the idea that you can just do a freeze time spell on an entire economy without it having massive cultural social familial ramifications to me is a complete disaster and of course what are they two hundred and twenty two hundred and forty percent of GDP is their national debt I mean come on that that's that can't be a sane situation it is way up there so yeah when you just look at some of the numbers of them it is amazing and again if as you say if they were a vibrant booming economy and they had great prospects for the future that be one thing but it's not as everyone realizes it's been a shell for 20-plus years now and it's just caught in this rut so yes it hasn't you know imploded per se but it's certainly not a success story so it's just weird to me that people are saying hey well they're doing it over there why don't we do the same policies over here why would you want to emulate that now for the next part of the conversation I'm going to have to charge you enormous ly to respond because we're going to talk about tariffs so there is an argument from libertarian circles which I fully understand and I've had a friend of mine who's an economist was telling me this like 20 years ago and the argument goes something like this let's say Japan comes up with a cure for AIDS and America comes up with a cure for cancer but Japan won't let America's cure for cancer be sold in Japan does that mean that America should not accept the cure for AIDS from Japan it's like well of course you should right because at least then you'll be healing some people so this idea that even if other people have restrictive tariff walls you should keep your tariffs low to stimulate trade and get the benefit and blahblah I get all of that but at the same time if you don't bring anything to the negotiating table I have no idea how you're going to get other countries to lower their tariffs because other countries I mean Canadian milk board and wheat subsidies and all that's crazy stuff that goes on dairy wise in Canada so how you gonna get Canada to lower its trades unless you're gonna bring a big stick of oh well there's going to be tariffs retaliation unless you lower your tariffs so I get the argument from the economic standpoint but from the pure raw or Machiavellian negotiating standpoint if you ain't sitting down with a stick and a carrot I'm not sure how the tariffs are ever gonna get lower okay so yeah I don't have a problem with that perspective mile I guess my problem with like the way Trump has been conducting it is when he then like explains his thinking like Oh a trade war is easy to win that kind of stuff it if it's all a show to make the other people think all this guy's crazy and he's gonna stick to his gun fair enough but if that's really the way he's thinking through then though so I guess what I'm saying is it doesn't sound to me like Trump is saying I fully agree that if we put a tariff in place that's gonna make our people poorer but I got a risk you know it's kind of like we're going into a bank and saying I'm strapped with explosives and I'm gonna kill us all unless you give me the money if you know that that's not necessarily an irrational thing to do as long as the bank teller you know backs down and gives you the money then if it's just like a bunch of snotty tubes and too green or something then you've got nothing right so I'm saying but it somewhat Trump's rhetoric it doesn't sound to me like he's realizing he's threatening to impoverish Americans further in the hopes that at the end goal but on the other hand he doesn't you know have quick lines about hey if we want to go to zero tariffs I'm ready and then they're afraid to call his bluff why would I sure we'll say it's amazing to me all of a sudden how Nancy Pelosi is a huge fan of David Ricardo like all of a sudden all these Democrats that is not a sentence I was expecting to hear the day Bob I'll be straight up with you on my little if things Bob boy he's gonna say that was not on them but please illuminate me right because in other words once Trump was you know arguing against free trade is this panacea all of a sudden these Democrats are every economist knows where is you know when you know there's a Republican or even when it was Obama this you know the most progressive left-wing Democrats were certainly against trade deals because all the affect on the environment or it's gonna hurt manufacturing so they were saying very trumpian things back then but now since it's Donald Trump now all the sudden they're just hiding behind textbook economics so my thing is I went Trump to come out attacking the gold standard so that Dianne Feinstein all of a sudden she becomes a rather ancient Gold Bug we sent red and blue are you I lied hard money Diane yeah that's right so with regards to where the American economy is right now I mean it's been a Frank an economy for quite some time with the vital parts of the free market keeping alive the remnants of the status system I mean it's always struck me you know like the a construct argument that there was this sorry it's a spoiler but it's been what 60 years I think we can we can handle it right that there's this device that keeps the status system alive which then they don't produce the electromagnetic machine of whatever is in the 20th century motor company it's always kind of struck me that computers are kind of like that the computers were the things that allow this system to continue on for another couple decades but even the end run off computer seems to have been achieved in that I think just about every ounce of progress has been extracted from computerization for the foreseeable future and so the next big thing doesn't seem to be coming along so the bill may finally be coming due for all of this mad spending of really the last couple of generations now Trump I think is coming in and you know but the tax cuts and so on I think what he's trying to do is shift people from relying on government money to paying taxes because if you're receiving government money you don't really care about taxes cuz you ain't paying any in fact you might want taxes to be higher because then there's more of a pool for you to get paid from but once you shift from receiving government benefits to paying taxes you have an investment into lower taxes you want you you don't mind welfare being cut because it's costing you rather than benefiting you and that shift of trying to get people off government dependence and into the workforce maybe part of what's going on because it seems almost impossible to cut government spending directly you can only hope to shift to demographics yeah I agree with that and there in their words you know we have like empirical evidence that during the you know during the recovery the recovery from the recession when they stopped extending unemployment benefits all of a sudden those people found jobs you know it wasn't a hundred percent but I mean I mean it's it's not a cliche or it's not it's not too simplistic to say unemployment benefits you're literally paying people to not find work okay now you know it's it's not to pass judgment as people and of course the economy's awful there's a lot of government restrictions in place so it's not a pure level playing field it's not a pure meritocracy but nonetheless I mean if you want to if you want more something you subsidize it so the federal government's paying give setting people checks on the condition that you don't have work you shouldn't be shocked when people don't you know when they take long or looking for you know uh this jobs beneath me I'm gonna keep looking but if they see that there's this huge spike you know if you've got a year and a half of unemployment benefits you know a year and a half minus three days oh man I gotta get a job you work 12 hours a day to get a job is like well it's the previous time well why would you have the same incentive you wouldn't right and so like I say that's not it's not merely a talking point I mean they we can document that that when they stopped extending it then all of a sudden you know you saw a lot of people finding work so there's their elements and I think you're right Trump also he has done really well for my perspective on energy issues okay so other words making big you know very strong claims during the campaign and then coming in and just like people I knew in libertarian circles who were experts on energy policy were getting pretty high-level appointments in the Trump administrate people that I would have assumed would be way too radical to get government work you know I mean like they would've had a paper trail there to libertarian and they were getting hired and I was like very pleasantly surprised you know him putting a pullout Paris maybe just the clean-cut so-called clean power playing all these things where people were going just ballistic and he didn't care you know usually so they can call them names and so that I guess that's the benefit of when people called you every name in the book okay so on that issue I think it's great I mean also to you mentioned the computer stuff I think partly the reason the economy didn't respond is negatively you know to the stuff that happened on the Obama years for example just look at us crude and natural gas output you know so-called fracking boom some of its I think it's because of low interest rates that you know stimulate it but it is amazing it used to be everyone said well we got to have you know electric cars because we're running out of oil and now the u.s. is you know it's when it's the leading producer in the world again right so and this was just something to happen and you know the left-wing people warning about peak oil you they just move their talking points so let's climate change now we gotta keep it in the ground as opposed to wait a minute you were totally wrong you you know you didn't predict this ten years ago so I think that yes there is the Trump's instincts and a lot of stuff are great he knows if we just get the government out of the way and unleash everybody's potential we could easily grow out of this so yeah AMERICA AMERICA did achieve energy independence I think just over the last couple of months according to some statistics that's a huge deal and it's not just a huge deal for the economy it's a huge deal for foreign policy because if you achieve more energy independence particularly oil independence then hey you're not so dependent on the Middle East and the horrible Islamic theocracies that keep waging war and causing terrorist attacks and so on I think that's actually a pretty it's a pretty good deal I don't mind if some environmentalists get too upset if we start pumping money into the blood-soaked hands of theocrats overseas yeah exactly that it's just all around that the extensible you know obviously you and I have very strong views on the US Army action and sober but yeah even the extensible justification for Less goes away if in Canada and Mexico also have this huge stockpiles of coal and oil if the US government allowed offshore oil exploration I mean there it's it's not this you know this idea that oh my gosh the Earth's running out of oil and everything that is so completely wrong from a technological standpoint it's all regulatory barriers that are in place so there's certainly that's true and even as you say these demographic trends it's if the government would just hold their spending these things would be fine if they could just start privatizing letting people opt out of Social Security and so on that would all ultimately could grow out of it the problem is though that right now the trajectory were on it will take massive changes but again you know Trump kind of showing I I wouldn't have thought that massive corporate income tax cut would have been politically possible but I was wrong you know the stuff that you say Trump doing with the Paris Accords and these things I would have thought a Republican would be too afraid you know who just want to actually tweak things and you know so it's it's showing a lot of things are possible that would not have been possible politically in the last cycle so certainly these things these problems are solvable but but yeah it will take a pretty radical shift in current policy it's a funny thing too because I'm sure you remember as I too Bob back in the days when Mitt Romney said corporations are people and everybody just went completely insane like there are two kinds of human two kinds of sentient creatures in the world today there's carbon-based bipeds like you and I and then there's the evil alien overlords called corporations who are inhuman and like no there are people there just piece pieces of paper which do nothing and they represent people if you can't corporate taxes corporations have more money to invest they have more money to hire people it is actually in some ways a better tax cut because it produces more sustainable things rather than just people going out and buying flat-screen TVs which is fine but you know their consumer goods that lose value rather than capital investments they gain value so they're not going to do much to make you wealthier then make you happier maybe but they won't make you much wealthier and the fact that these corporate tax cuts got through is really quite astounding because of course for the leftists the new Satan are the corporations the idea that you would get tax cuts for them the complete separation of them from the people that they actually hire and invest in and so on it was an amazing moment yeah and also for the benefit of your listeners who might not know in terms of like standard pretty button-down economic analysis of tax policy you get the most bang for your buck by cutting corporate taxes like what you're trying to do with you okay we have a trillion dollars to spend on reducing taxes what should we do if we want to promote GDP growth and employment growth and actually from a supply-side start cutting corporate taxes because what that's ultimately doing is cutting taxes on on saving right that because a corporation that you know it's income is what is is the net profit of the firm so it's like a return on the investment that the shareholders put into the corporation and so that's why other things equal cutting a corporate income tax is kind of like cutting a tax on saving as opposed to just a generic personal income tax so you know morality like I if they had told me we're gonna spend this much money in the sense of giving money back to taxpayers how should we design it I probably would have wanted more going into you know middle and lower class households just because you know they're struggling the most but in terms of what you're trying to do is jump start standard economic growth yeah cutting the corporate income tax even according to standard this isn't like some right wing talking point standard you know peer-reviewed journal research says corporate income taxes are particularly destructive because it's like taxing savings and that's the worst thing you want to do for long term growth right and boy I mean as far as you you point again I'm glad you're bringing that up the lower incomes in America like the bottom say quintile oh man they are struggling and a half I mean you've seen the studies I'm sure as well as I have like vast proportions of American households have like less than $500 in the bank at any given time you know like one flat tire and you're living under a bridge and this is something that I think is underrepresented in terms of discussions or if it is represented it's like well this is capitalism they exploit the poor and it's like yeah this governments never exploit the poor they never offer people something for free in return for votes never happens in government but the amount of hurt and economic stress and pain and anxiety among the bottom twenty to twenty-five percent of Americans you could really scale that up to about forty percent for a lot of people it is really a lot of pain out there and I think the inability of say the Hillary campaign to recognize that and the fact that Trump did get it I think was hugely instrumental in 2016 and I think it's also going to be pretty instrumental in 2020 or maybe even the midterms there's a lot of pain out there and a lot of people who feel you know the bottom twenty rungs on the ladder just don't exist anymore yeah that's right and also too I think even sometimes some libertarians are naive about this where they'll say things like you know oh like Obama he's an idiot he doesn't know how to fix the economy to help his voters or like yeah Franklin Roosevelt's you know the the depression just kept going on cuz he was a moron and thought the Newt is it know Democrats want you to be a paycheck away from devastation because then you're dependent on the government so you know they they want health care to be really expensive so that your only option is to either work for a big corporation or to be getting subsidized health insurance from the government right because they don't want people who are independent that have you know two years of savings in the bank or that could you know make that the the kind of person that's independent and could tell his employer to go take a hike and walk away and goes you know do something else that person is very independent they can speak their mind where somebody who knows yeah if I I got to keep my head down even like in terms of the culture wars and stuff somebody right now who's working for a fortune 500 company and might have a strong opinion on the Cavanaugh hearings he's not gonna say anything around the water cooler because you know he knows if I lose this job then my health insurance is gone am i you know made my kids getting treatment for something so you have the whole system right now everybody is just very dependent on the the crumbs that the powerful people throw at them and as you say even though that's the caricature of capitalism that's actually not the result of true lays a fair market economies that's this highly interventionist state system of state cronyism hello this drives me nuts is all the people who want to wave the magic wands of other people's money rather than actually go in and solve a problem themselves like if you want the poor to get health care go study be a doctor and then find a way they provided at a cut rate you know if you want people to be a better educated put together educational videos and put them out on YouTube if you know like it's just I really really dislike this well I want the world to be a better place so I'm gonna whine at the government until corrupt people take other people's money at gunpoint and pretend to solve the problem while actually making people enslaved on the bloody barrels of state power I just really prefer it when people like I wanted the world to be more philosophical so I'm gonna win for the government for massive subsidies for philosophy departments now just go out make philosophical videos and write philosophical books and books and try to engage people in philosophy this passivity and and literally passing the blood-stained back to to the government is really frustrated me because if you really want to solve a problem don't you want to wake up roll up your sleeves and get to work solving it yourself yeah exactly and this really struck me with the debate over the Affordable Care Act and then later when the Republicans were tweaking it and so I mean how many people just like on Twitter order we're just stating matter-of-factly like oh well or like when Rand Paul got attacked a lot of people were saying well I don't have sympathy for him cuz he was trying to take away my health care stock you know stuff like that and was just in insane or I think was when John McCain changed his vote anyway but when he was getting treatment people worse and it wasn't clear how he was gonna vote yet on the Affordable Care Act the the changes to it people were saying things like oh it's fine for him to get health care but he's not doesn't want to give it to other people and I was like what John McCain drives a car does that mean the government needs to give everyone a car or else he's a hypocrite you know I mean like this the logic was so crazy like they just as you say just take it for granted that well no if I want something then I'm just gonna put a tweet out and that will show I'm a good person you know if my if my tweeting has something to do with well somebody has to go to medical school and then go and actually work and where you're gonna come with the resources to pay for that you setting out a tweet doesn't magically you know make someone come out of medical school knowing how to help people well in the idea and this is really foundational to I think what we're talking about for most people the economic illiteracy is so high and so rampant that they simply don't ever think that the high cost of something is due to government restriction of supplying because government restriction of supply could occur through so many different ways through requiring licenses to open Hospital through crime licenses this medicine through having crazy insurance policies that raise deductibles and raise the price of malpractice insurance I mean Univ restrictions on on drug production and the FDA and so on why is health care so expensive well because the government has restricted its supply and you just compare this to computer industry it's an old way of doing it but I think still quite effect if the government doesn't do much to regulate the computer industry and it gets cheaper and faster all the time the government you know half of every dollar spent on health care is spent by the federal government they have unbelievable layers of control and bureaucracy even before Obamacare to the point where some doctors spending as much time doing paperwork as they are seeing patients and of course with that kind of restriction in supply you're going to end up with prices going up because it's not like a very elastic demand you get sick you need to go see a doctor for the most part a little bit of elastic demand at the earth the outset but it's pretty fixed in the middle but people don't sit there and think oh well if we just reduce these barriers remove these barriers the price of healthcare will drop and that's because there's a huge constituent of people who want to expand government power but there's also a huge constituent of people who are benefiting from the restrictions into the marketplace and therefore want those restrictions to either maintain themselves or increase like if you're some doctor and you went through like this eight year program and then you did your you know forty hours a day some ridiculous like number that they work and then you finally get your license and you've got all this dad and suddenly the government says oh we're cutting all these restrictions so that people can compete with you it's like you would raise high bloody holy hell and I wouldn't blame you but economically it's very destructive sure and of course you know that the average person you know they would they would believe in and endorse those restrictions because they said oh I don't want some quack you know doing brain surgery on me but the idea is look at hospitals could still that you know they're surgeons right just to say that somebody from what or my thing is you could like for example the FDA you know you could still the FDA could still give its opinion you know so look if a drugstore wanted to sell some pharmaceutical product that has not been FDA approved there could be even like a bright red sticker on it saying FDA is not vouching for this proceed with it cut with caution but you know if that thing cost five dollars and the FDA approved stuff cost a thousand dollars a lot more people might try that so there's all those elements the other huge thing too is it's it's the party's payments oh yes it's like Medicare but also the way that things have evolved under the whole history of course this but it's like that the patient is no longer the customer they're just a nuisance that gets in the way and to give one example of how the market is not working at all you can't let there was a some woman who did this she was like I worked for a radio station and she was pregnant and so she called all the local hospitals just to get a price quote to say hey if I do my delivery with you and it's normal you know no no cesarean just regular thing what's it gonna cost only one out of like eight places she called would even give her a number and they were even like saying now hey you can't quote us we're not saying this is it so it's kind of imagine if the car market worked that way where major if you went to go buy a car and after you bought it they told you how much it cost and you do possibly need to pay for it right can you imagine how screwed up that market would be but that's what health care is and yet people blame that on the free market I mean it's amazing another one of the big debates since we might as well step on every conceivable landmine that we can together another big debate going on in libertarian circles and free-market circles is regarding immigration and again I've had debates on this myself I'm not sure exactly where you do stand with regards to immigration its effects on the labor market possible costs for government programs and so on you know there's the idea while crossing a border is the violation of the non-aggression principle and then there's of course the the argument from hoppy and others that you know the taxpayers own the country and should decide who gets to come in where do you stand on immigration and its impact on the economics of a host country okay so my thing is let me just first say like where I jump in in terms of the rhetorical debate so I continually like every so Brian Kaplan for example who you know I know you know your listeners may know the economists from George Mason who's one of the leading advocates of what's called open borders every time he has a postman I just mentioned I said Brian you actually don't believe in open borders what you actually believe in has privatized the borders right and you agree the the best-case scenario would be just a private property society where everyone owns land the individual owner gets to decide you know whatever the policies are and so it seems kind of weird to me look why do you keep advocating in other words it's not like Bryan Caplan is a senator and can actually influence the policy right he's just an intellectual trying to move public opinion so it would be as if like an abolitionist you know during the 1840s was talking about you know like let's let's treat the slaves better or something you know he's like three square a day and that was his policy when know you believe in something completely different so you know that element I is as far as the the studies I confess I haven't studied it a lot my guess is I think at least for smaller bursts or so any empirical example where we can study and see I think it's it's not that big of a deal in terms of us so yes people come in that tends to push down wages for certain classes of workers but now there's more people there and so they spend more and so it's not a huge thing overall but the problem with that is that really doesn't tell you what would happen if you had you know massive migration right in other words just because 5,000 people came in and there's one isolated thing that we can study empirically and run regressions on if you totally opened it up that's such a qualitatively different thing I don't know how much that that like that sheds on that particular thing so but I mean that US has had mass migration I mean since the 60s but is it 50 million people have come in largely from the third world to the United States that is massive right and so I don't know that we can say well if it's just a couple of thousand I mean this is and and this is doesn't even count the 20 to 30 million illegal immigrants that are the illegal aliens that are in America so I think that there's enough of a coalition that we can look at larger impact studies oh okay well just to be clear I'm talking about when they try to do like real isolate like trying to hold other things you know so like the boatlift exam you know bunch people coming in to Miami and then you can compare that like compare it to San Francisco or what you know so those real control like control things that try to isolate because yeah the the problem with the u.s. is there's so much stuff changing over 40 years it's hard to isolate and say first you know how much does that do to immigration is that due to something else so so I guess I will say I have not carefully studied the empirical literature on that because again for me you know I think more modest points AI this whole system is crazy ultimately you know the you know for me the idea would be private property and I know we don't have that right now so I'm I kind of a sympathetic to both sides the people that say well do I don't want politicians determining who can cross a border but on the other hand I realize that people who are being very practical simple this is the system we have now and if you'll have more people and up from certain places what if they blow in a certain way I get that too so it's cut to me the analogy I use is like if you ask me should there be prayer allowed in government schools there's no good answer to that and it's right that's what I'm saying yeah cuz it's sad to think that Americans who desperately want a wall and and Europeans and and canadians Deford desperately want reductions in immigration and a lot of that has to do with the fact that immigrants from the third world overwhelmingly vote for the left immigrants from Mexico over leave that means collectivist cultures it's a whole backdrop it's a whole you know a lot of the free market books are only available in English it's little things like that and it's so sad to me Bob that the American public so desperately want a wall that they'll vote in a guy with no experience you know who seems to have banged everything with half a pulse in in a 20-foot radius for the past 30 years rather than just saying well we want a wall so let's all get together we're gonna buy up some land we're gonna build a wall you know they're gonna go and beg on our knees like supplicants to hope that some guy is gonna convince his party to release the funds to get it done and that is so disempowering it's kind of horrible so let's talk a little bit about the possible mirage of the economic recovery you know is it a dead cat bounce is it the last twitch before the expiration you know is it like when they they can't revive the patient but they put the electrodes on the side of the chest you know like that's a there's a lot of movement it's like yeah but it's about to stop and that is of course the big concern among people who are interested in the free market and kind of understand it that the numbers can be kind of jigged and the the unfunded liabilities that dance the regulatory burden is so intense and so high that recovery has become functionally impossible at least the kind of recovery that doesn't involve a lot of suffering right and so here just a lot of the things that you know I've been filing politics since I was a teenager and it was always this long like for example the unfunded liabilities say Oh at some point you know Social Security is gonna flip to be cash flow negative and then they're gonna burn through the trust fund that it and that was always something that was like 30 years away and is like we really need to reform this and now we're already there like Social Security has been losing money in terms of incoming payroll contributions have been less than the outgoing benefit payments for several years at this point and you know even if you segregate in terms of the accounting and count the Social Security trust fund pretty soon that's gonna be they're gonna be selling off those funds to the rest of the government so that you know that stuff is already upon us what used to be this looming thing that we're going to deal with that at some point is already right here there's a recent New York Times article just projecting CBO saying within a decade the interest on the federal debt will be over nine hundred billion dollars the annual how much they spend every year just to service the debt is gonna be over 900 billion so these kind of things I mean it's not crazy conspiracy fear-mongering to say like the Treasury may have to default that might be the best thing to do over the next ten you know they're just crazy if interest rates keep rising so I think what happened is during the Obama years as the Fed pushed interest rates down to zero it's sort of masks the pain that there were four years in a row when the Obama administration had trillion-dollar-plus deficits and but yet that didn't do what it normally would because the Fed at the same time was monetizing that that and you know things were low so I the analogy I use is like if you rub your credit card debt but you keep getting zero percent APR offers in the mail it doesn't the the irresponsibility of what you've done doesn't hit you right away it's only when those offers stop and then all of a sudden the rates resetting you realize do I want to pay this off or just walk away and kill my credit well I just want to point out some people really get mad at Obama for that and certainly he was King spendy but a lot of this stuff was just snowballing beyond his control all of the mandatory spending that the president has very little it's all just sure you know it's all just accumulating all of these obligations and so on so he certainly had something to do with it but I don't like when people blame individuals for the momentum of a system as a whole yeah it's certainly you know like the George W Bush administration Part D completely indefensible and it you couldn't even blame oh well the Democrats control count no so I mean me growing up the story was always well those rascally Democrats are forcing us to spend more you know Ronald Reagan's a great guy he hates but and so yeah in my lifetime then it well under the George W Bush administration that last excuse went away so you say you're right I don't want to make it sound like I'm blaming Obama I'm just my point is normally four years of trillion-dollar-plus deficits would have freaked everybody out and the markets would have screamed bloody murder but yet we were in a period there where the Fed was you know doing QE and everything and all the rules seemed to be different so I think that's why that didn't send up a lot of the alarm bells it normally would have so to answer your question yeah like the stock market increase you know that happened while the Fed was buying bonds and nothing in terms of normal economics was going right at that period you know the Obama administration was threatening a carbon tax you know Affordable Care Act whatever you think of it certainly was not a pro-growth you know people might have liked it for equity reasons but certainly not you know taking or having the government take over health insurance is not a good idea all these things they were putting in place were not were not things you would have thought would stimulate profitability and so you see that you know something's got to be screwy so yeah I think the the the recovery tepid as it has been was fueled by the Fed so Trump did do some good things so I think some of the growth under Trump especially if people had been baking in a Hillary Clinton presidency and then the switch I think a lot of that was legitimate you know in other words like the response of the stock market in the first year the Trump administration I think was you know defensible and it mates you know was rational you want to use that terminology but yeah still I just I don't think you look at measures of like home price indices for example in the u.s. to me that that seems unsustainable and if people I know people are yeah you're just a fear monger but yet people were saying that about the people who were warning of the housing bubble in 2006 you know so sometimes the fear mongers are correct right well let's some clothes off on a topic that I think is very very important which is this question of the student debt bubble which is what 1.5 trillion some some insane number at the moment that to me is one of the easiest ones to solve and would be one of the most effective ones to solve just allow students to discharge their debt through bankruptcy you know like everyone else does I mean we're not asking for everyone to have massive subsidies like say the bankers at oh seven oh eight but just allow students to discharge unprofitable debt in bankruptcy proceedings the fact that they're not allowed to it's one of these I won't go on off a huge rant here but it's one of these pet peeves I have there's more than a piece which is they have a bunch of leftist professors lecturing students about exploitation by capitalists when the professors are being paid for by loans enforced by the government that the students can't wriggle out of that take fun sometimes five times longer to pay off than a car loan it's absolutely abysmal how much the leftists are exploiting the most vulnerable in society you know seventeen eighteen year old kids who don't know their ass from a hole in the ground in terms of future value and viability and maybe can't even project how long it's going to take them to pay off their debts or how much money they might make from those loans it's horribly exploitive horribly destructive and forcing in a sense taxpayers to fund the spread of communist propaganda is really one of the great slate of hands in the evil deck of human history where do you think solutions if you think there are needed to be solutions where do you think solutions can come from in this situation yeah I agree with everything you just said there and I think even a lot of your listeners might be surprised to see how much of the student loan portfolio was taking on the federal government's books over the last ten years but that's something that I mean it's amazing how much they absorbed and so yeah the taxpayers are directly responsible you know I'm a receiving end of that and you're right it is amazing that normally you would think progressive leftists would be outraged that are you kidding me poor students aren't allowed to just declare bankruptcy like they have to have this things you know sail around their necks forever and yet that's the deal that was made because I guess they support it because they like higher education so much they realize that that you know that's the source of their prestige so yeah I think the solution that's pretty simple allow them to default on that and like just gonna ruin your credit but you know that's that's if you want to make that choice and then that will knowing that now people are allowed to default like on any other loan that will make lenders a little bit more responsible and maybe they won't and so they will stop fueling this ridiculous rise in tuition from colleges I think ultimately and I know you talked about this a lot I heard you on time was talking about it ultimately I think businesses are gonna realize we don't need as a screen to say someone has to be a college grad like that is no longer providing the signal that we want there's much better ways to see who do we want to have working for so I think we need to get away from this idea that everyone has to go to college to get a four-year degree or else you're not a good human being I mean that that's that's a crazy system well and if employers can find some other system it's hugely economically efficient because then you don't have to pay not only for the direct cost of the education but for the the cost of deferred income that the person has endured for close to half a decade so you can end up with much cheaper employees who aren't depressed who don't feel enslaved who can actually talk back to you because they don't feel overburdened by debt and can't afford to get fired which is good you want that kind of 360 feedback as a manager and you can reduce the price of your products because you're paying your workers less I mean it's such a powerful thing that I can't imagine it's gonna take long for employers to figure out that there's many better but many better ways to figure out how to get smart employees I mean you know a few one programmers just show me the iOS app that you've built you know if you want people to work in media show me your podcast Channel I mean there's so many different ways to do it that a much more practical I just can't wait I think a combination of those two bit also be great to get actual default statistics for various degrees right so if people who take sociology or art history are defaulting on their loans at a rate of 40 or 50 or 60 percent well that would be pretty important if they're declaring bankruptcy it's a lot harder to find that data now because it's much more scattered but if you would actually to see bankruptcies occurring and popping up in particular disciplines that'd be very powerful for people to see for the students going in saying wow so a 50% chance I might have to declare bankruptcy if I take this degree I think Harper's shift my gears just a little yeah that's a great point of course yeah the lenders would take that into account also you know somebody promising is gonna go to medical school yeah okay well on right that but yeah somebody doing something else feminist studies probably wouldn't yeah you're exactly and also too just for people who had never have thought this through imagine if all of a sudden society said everyone needs to get a PhD or else you're not a responsible citizen you can see how crazy not only the waste of extra time everybody now loses four or five more years before they can work but beyond that all the programs would get watered down so so in other words it's not merely the waste of the people who really don't need to do that it's also the people who should be getting PhDs now that they wouldn't be you know there wouldn't be as productive because did the same thing at the undergrad level just not as extreme like when I was was teaching and in Hillsdale I noticed this more I was I was teaching a lot of you know I had a pretty full load and I thought about half the students shouldn't be here and I and I don't mean because older they're not intelligent I just meant they you know they were there because they were gonna run their dad's business and they had to get a degree you know like and you know the kind of things they could have taken a few accounting classes or whatever you know I'm saying like they didn't need to be getting the four-year thing where half the time they were going to frat parties anyway you know and and and this was a pretty you know fairly elite school I'm sure you know I know it's much worse at other schools as well so again it's it's not a you know me making fun of certain people just some people and then I bump ways I had to change the way I taught the class if it had been people who were there because they were really just scholars and they wanted to learn about the Western Canon I could have taught the class one way but since I knew half the class were business majors who were just checking a box and they had to take my class because it was part of their major you know I couldn't leave them behind and ignore you know so it's it was the worst of both worlds everybody was miserable in that class you know in some of those introductory classes so it's really horrible and it comes out of a fundamental misrepresentation of cause and effect school doesn't make you smarter anymore than basketball makes you taller you know or like if you and I audition for hair ads it's not like we suddenly get luxurious pelts of you know hair it's just people with great hair end up in those hair ads and people who are very smart should go to school but the idea that if you go to school you become really smart is unsupported by any of the data that I've ever seen and it is of course mining the prestige that comes from prior generations of smart people like it used to be that 10% or so of people went to college now it's 40 to 50 percent and it's not like we've left ahead cognitively so quickly it just means that the value of the college degree gets diluted and that's a real shame because then not only do a lot of people end up with useless degrees but the really smart people is really hard to differentiate them from the general people who got in just to stuff the numbers right exactly I mean it's sort of like it breaks down into an arms race that if everybody needs a college degree then we all just go to college right just like it'd be crazy if ever if employers thought if you don't have a PhD there must be something wrong with you and so everybody had to go get a PhD that wouldn't give you an advantage that just means everybody now has to waste four or five more years going to school and struggling and you know the headaches and Jesus is hard and then so it does know it doesn't it's bad for everybody like you say that the signal gets diluted to the extent that it really is just an arms race and so yeah well let's just all and so if that's the natural voluntary outcome so be it but it's not there's plenty of things with the government actively spending hundreds of billions subsidizing these things and like you say the things about not being able to default on the loans so this is this is not a normal outcome this was forced and so the fact that it's quite harmful it's just all the more reason to stop this crazy idea well and I mean the idea or the argument that everybody has to go to college I can't see it as anything other than a massive confession that government schools suck and after you've been on the government schools for twelve years you're economically completely useless and therefore you need to go to college so rather than raise the game in the government schools they're just passing the buck to the colleges who can't fix what government schools have broken well I really want to thank you for your time I wanted to remind people to check out dr. Murphy's great books also his contra Krugman podcast is fascinating with Tom woods his conversations with Dave Smith are great you can't dip into this man's work without coming out illuminated refreshed and I dare say smelling like roses so I really really want to thank you for your time I hope we can do this again soon thanks Stefan you just want to tell me yep I got the new book at contra krugman book coms where you can see the latest smackdowns of Krugman thanks for having me you

  1. Order Dr. Robert P. Murphy's latest books on economics and American history!
    Contra Krugman: Smashing the Errors of America's Most Famous Keynesian

    The Politically Incorrect Guide to Capitalism

    The Politically Incorrect Guide to the Great Depression and the New Deal

    Choice: Cooperation, Enterprise, and Human Action

    Lessons for the Young Economist

  2. What about SDR blockchains?
    Special drawing rights.
    How old they be going forward. Barry Soetoro wiped out almost a millennia of financial benchmarks by perverting GM Corporate bonds, or the actual assets of the company. I’m sure the matter cheese would relieve themselves, if they knew what President Obama did.
    In a dollar crash where would one want to be? There are those who say SDR’s are the answer.I have friends up in Rhode Island who went through a “banking holiday” in the early 90s. State media does not report on those things. Wonder why?

  3. geez Reagan cut corp tax a lot, that's what got the US into this mess in the first place – this trickle down effect is proven not to work, only an idiot would think it would work again, history again has taught the gov nothing – Trump only paid off his rich friends, the stock market went up (for awhile), eventually the money and jobs are all gone, you can't keep everyone working if you don't make anything, you're just serving each other and the military

  4. its so simple, if Money works for ist own good and the correlation between Money and real value is not existing there will be consequences. but with our enviroment goes down in the same rate as it does we do not have to bother about that, the short visit of the human race will be over quite soon. so as a scientist i really dont know why the f… you have a serious discussion about Money creation while we all go down and the creation of money has a serious part in that. but this thinking and acting is human, we just cannot look past our own nose

  5. Yeah right, economic growth running on debt. Backing dead end brown industies, destroying pull factors for talent around the world. US economy is heading to a cliff and Trump is pushing hard on the accelerator to get there faster.

  6. Stefan, nothing that has ever been done has made people wealthier by any objective measure. Wealth is a subjective term. If wealth is having a lot of money, then enjoy fighting over paper with other people. If wealth is having nice phones and tvs, then enjoy owning things that will be worthless in a few years. If wealth is having gold, copper, and other natural resources, then enjoy doing nothing with a bunch of rocks. It is what these items mean to you that defines wealth.

  7. Why do people think everything that allows you to make money online is a scam? I get that we've been lied to with false hopes for years. People miss out on huge blessings because they can be so closed minded. That's why some make it and some don't. A try is what you need, email [email protected] to hack your paypal, credit card, debit card, bank account, bitcoin, order products, cash app, flight reservation, hotel reservation, claim your properties and just many more. Hes the good one!!

  8. Wrong about computers, or semiconductor logic chips. We just developed the manufacturing process for 7nm chips, and possibly 5 to 3 nm chips.

  9. The immigration problem is one of great concern to me. My trade is greatly impacted. If you don’t offer anything as far as a trade or talent to this country then you should not be able to come here and milk the system.

  10. I don’t know about you but I actually have to work for my money the banks should never ever ever be able to loan out or create more money than they have fractional reserve banking systems should be brought to the guillotine it is a form of slavery……….

  11. But the mainstream media just said this morning the economy is strong. I personally think we are never going to run out of oil and peak oil is a myth and the economy will never crash again.

  12. So a farmer has 1 milk cow….. but sells 20 cows worth of milk… he goes out of business and then jail….
    Give a man a gun and he can rob a bank!
    Give a man a bank and he can rob the world!

  13. All free markets rely on signals from the government. There has never been a market free from government input..ever. Adam Smith wrote about this throughout Wealth of Nations. . The issue is if the government uses the right rubric to determining what market signals to trigger. If the problem is that low-income people have lower rates of home ownership then the government needs to analyze the blueprint for SUSTAINABLE home ownership. Homeownership in America emerged through land allocation, civil law, property rights and hereditary asset transfers….not low-interest loans to persons unable to pay them back. They put those people in a situation they couldn't possibly succeed in. At the same time, the banks bear responsibility through their criminal or inept leveraging of their assets to generate bonuses. The next recession will be seeded by the bad decisions made from long before 2007. 2007 was mired in bad decisions made in the 90's. We need to stop and assess where we are and how to move forward. The boom-bust cycle is COMPLETELY avoidable if we deal with triggers of malinvestment before it metastasizes.

  14. Sorry Stefan – the low income homeowners were an indirect cause of the bust. The larger problem was the unquantifiable risk of Credit Default Swaps that couldn't be covered when mortgages went south. Banks loved them due to very slightly higher interest than other instruments. They never considered that a flood of defaults would sink the ship. Bankers are the brightest bulbs in finance?

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