"What About Money Causes Economic Crises?" with Peter Schiff - Ron Paul Money Lecture Series, Pt 3/3



good afternoon ladies and gentlemen I'm Lydia Mashburn policy director for Chairman Ron Paul Subcommittee on domestic monetary policy on behalf of the congressman in his office I'd like to thank you all from for coming to our concluding lecture in our afternoon tea series on the basic principles of money today's question is going to be what about money causes economic crises it's sort of the culmination of what our other lectures have led to our first lecture was what is money and then our second one was what is constitutional money in those two lectures our first lecture dr. Salerno very nicely laid out for us what money is that money is a commodity it is a market chosen commodity that serves the role of money and what the market needs money to do is it needs it to be recognizable they need to know that this is the same thing that they're able to trade in future they need to be able to divide it so that they can purchase large or small things they need it to be portable they need to take it with them cattle this money didn't work out very well because it's a little difficult to move them from one place to another and then one of the pinnacle faculties of money is that it has a stable value you need it to maintain the value for which you exchanged it for which then brought us to our second lecture where dr. vera talked to us about constitutional money the founding fathers wanted us to understand or wanted us to keep stable money and it had turned out that the market had chosen gold and silver to fulfill money because it filled all those other properties of divisibility portability recognition and staple value so they set up in the Constitution certain provisions to maintain what the market had chosen his money because they had already experienced through the Revolutionary War and and under the Articles of Confederation some terrible experiments with paper money where it did not retain its value because you could increase it at whim dr. Vieira sort of took us through I think roughly 200 years or more of history and showed how over time that stable value of money has eroded legally and got us to the point where we are today where we are now able to talk about what happens when your money loses its value so while it's terrible that over time your money does lose its value what's even worse or I don't know if it's even worse but it's not good is that it also can cause booms and busts in an economy it causes economic crises and that's what brings us to today's question what about money causes economic crises which is why I'm delighted to say that we have Peter Schiff to answer this question for us he's he's CEO and president of Euro Pacific Capital he's a financial analyst he's an author I think most importantly though at least to me is he was one of the few financial analysts to predict the collapse of the housing bubble everyone else was like housing prices have gone up they just keep going up it's never historically dropped and he said look it's it's going to collapse because it's not sustainable because he understood what it was about money that caused these bubbles in the economy and he knew it was going to collapse analysts running the gambit laughed at his face and when he was proven correct we're now left picking up the pieces but unfortunately we still are not understanding what it is that caused the crisis to begin with so our policy prescriptions are kind of off base in terms of dealing with the aftermath so I'm delighted to welcome and I hope you would join me in welcoming Peter Schiff thanks everybody for coming most of you are not here for the free desserts but all right let me talk a little bit about money man turn my phone off to see just in case somebody decides to call me and I'll just put on silent anyway everybody else I guess can do the same thing yeah what is one of the one of the roles of money is you just alluded to is that money needs to represent a store value and the reason that that's so important is because that facilitates savings right you're not going to save money if you anticipate that its value is going to erode over time so you need something that has a store value and the reason savings are so important in a market economy is because contrary to the conventional wisdom spending is not what grows the economy people who believe that are basically putting the cart before the horse what actually grows an economy is the opposite of spending it's under consumption it's savings it's the money we don't spend that makes the economy grow because when we don't spend it and it's saved that money is available to finance capital investments business expansion job creation all the things that grow the economy flow through from savings you know a popular refrain you know the Occupy Wall Street crowd when they say you know we the businesses don't create tap jobs you know we can attach the job creators they say no no the job creators are the consumers because they're the ones that are spending the money and they say well if there were no customers then there would be no businesses but of course what that theory overlooks is where do the consumers get the money right they get it from their jobs so you can't say that consumers create jobs when you need jobs to have consumers so it's the other way around and what gives the consumer purchasing power is his productivity right if everybody just had a job from the government and the government printed money and gave it to people that would you know there'd be no demand because would be no supply to be nothing to buy because nobody would be working what creates the purchasing power is the production and the production comes from productivity and what makes workers productive is capital its the tools and the equipment that they have if they were simply using their hands they couldn't produce nearly as much and all of that capital all of those tools are only here because of savings so savings are very important and also savings help determine the rate of interest because interest rates are a very important aspect of money because interest rates represent a price and like all prices they are determined by supply and demand the supply is all the savings the demand is all the people that want to borrow money whether it's businesses whether it's college students someone wants to buy a car the government everybody borrowing money is competing for this store of savings because for every money dollar borrowed somebody had to save that dollar somebody had to not consume it and put that dollar in savings so that somebody else could could spend it or invest it and so if you have a lot of savings right then you're going to have lower interest rates because the supply is going to be greater and what does that mean if there's a lot of savings what economic signals is not sending to the market if people are saving a lot of money what that says is that people prefer future consumption to current consumption because after all when you're saving money you're just deferring consumption every dollar you save is going to be spent eventually except you're not going to spend it today you want to spend it tomorrow and hopefully you'll spend the dollar tomorrow plus all the interest that you earned over time and and so it sends out signals that there's if there's a lot of savings that there's low interest rates and then of course the economy will react investments will be made based on the fact that consumption has been deferred to the future and also you know one of the reasons that people might save in a free market economy is in a free market economy contrary to again the conventional wisdom prices go down right the natural tendency in a free market is deflation prices go down prices went down for almost the entire history of the United States until the Federal Reserve you know our grandparents tell us stories about how cheap things were when they were a kid well their grandparents or their grandparents grandparents told the opposite stories how expensive things were when they were kidding how much cheaper they are now and the politicians try to tell us that no no inflation is a good thing money losing value is a good thing because the economy would collapse if prices weren't rising they try to make us feel that falling prices would be a disaster when of course it's the opposite falling prices are a reward for capitalism they make wages more valuable they make savings more valuable you know the idea the argument is that well if prices are falling nobody is going to buy anything they'll just be waiting for lower prices and of course that's absurd we all have cellphones you know we all have laptop computers we all have plasma TVs the prices for those items are falling all the time that doesn't stop people from buying them in fact it encourages people to buy them if cellphones were still as expensive as they were when they first came out nobody in this room would have one the reason that we buy them is because the prices are coming down so it's the exact opposite falling prices create demand it's not the other way around but that's another reason that people save if you save your money and money gains value you can buy more stuff in the future not only because you earned interest but because things got cheaper the money became more valuable so if you have a lot of savings you can have low interest rates if you don't have a lot of savings you're going to have high interest rates and the beauty of this is let's assume that there's not a lot of people saving money and a lot of people want to borrow money well you have a very limited supply you have a lot of demand what happens to price price goes up so interest rates go up higher interest rates discourage people from borrowing because it's more expensive and they encourage people to save and ultimately the market is going to create an equilibrium between savings and debt and you're going to have a market rate of interest and investments are going to be made capital projects are going to be made that can be adequately financed now the problem comes in now that we don't have real money and you don't know what that is now that we have fiat money or a money substitute the Fed can create money out of thin air now when they create money they don't actually create any value it's just they're just printing money so they diminish the the value of the money that already exists but also when the Fed creates money they do it in a way where they they buy up Treasuries and they also control short-term interest rates raise the cost of money to banks and when they do that the Federal Reserve can bring down interest rates and that has the effect of sending the same types of signals to the market that there's more savings because interest rates are low but people aren't saving their money there is no real change in time preference for money it's the same and so you send out this false economic signal to the market and and as a result of that false economic signal a lot of investments are made that really should not be made there's no real viability there but they're made because of these two false signals and I often joke you know when the housing bubble burst and one of the things that President Bush said at the time was he slained everything on Wall Street you know Wall Street Wall Street was drunk and they did a bunch of stupid things see of course yeah they weren't drunk but he never asked a question why you know where'd they get all that alcohol why were they drunk and they were drunk because the Fed liquored him up I mean Alan Greenspan kept interest rates very very low for a long period of time and just like anybody know if you're drunk you know you're going to do some stupid things while you're drunk you don't realize it until you sober up the following morning you know that you you know and and so this is what causes this business cycle right people think that the business cycle is just some flaw in capitalism just for some reason you know you we have these booms and busts and that's not the case these booms are caused by the MAL investments that are created in response to the Fed intervening in money supply where you have the Fed price fixing interest rates creating too much money and fueling these bubbles and one thing all of these bubbles have in common is debt a lot of them are financed by borrowing money particularly the housing market I mean obviously what made it possible for people to buy houses they couldn't afford other than Freddie and Fannie or the FHA that might have been you know guaranteeing the mortgages was the fact that the interest rates were so low when people buy houses in America they buy them based on the monthly payment and the monthly payments were a function of the mortgage rate and especially when you got an interest-only mortgage we're the only thing you're paying is the interest then the low interest rates really made it cheaper and when you had the Fed with interest rates at 1% and the banks are offering teaser rates based on those temporarily low interest rates people could really get in over their head so this was a function of money being too cheap instead of the market setting interest rates you had central government planners at the Fed picking and interest rate and why did they pick one that was so low well the reason is the politicians like the boom right they like it when people feel good when voters feel good because they're more likely to reelect the people who are in office if they feel good if they think they're getting rich in housing if they think they can get rich without working they're going to be happy especially if you're taxing them so much on what they earn if you can create the illusion that they're making money in the real estate market well then they're not going to be as upset at all the taxes they have to pay so the politicians like the boom in fact everybody thinks that the boom is what's good and then when the minute you have a recession what is what does Congress want to do what does the president want to do we need a stimulus we can't have this recession we need to stimulate the economy well they don't understand it is the stimulus is why we have a recession hey the stimulus is what caused the boom but the boom is the problem the boom is where all the mistakes are made the recession is where the mistakes are corrected right that's where the cure takes place so we need the recession now when people say we need the recession they'll try so you're heartless you you're happy that people are suffering it doesn't mean we're happy about it it just means it's necessary it's like if somebody checks into rehab because they're a drug addict and then they're going through withdrawal that doesn't mean that the rehab center is happy that the people are suffering through withdrawal they just know that if they want to get healthy and kick the habit that they're going to go through withdrawal that's just part of the cure you know if when you check into rehab every you started having withdrawal symptom they gave you drugs right you're not going to get cured you might be popular you might be a popular rehab center if you're giving off drugs to everybody but not because you're curing anybody and so what happens is the minute the the the narcotic of the cheap money begins to wear off right and we realize the mistakes that we made people like you know I can't believe I bought that condo you know I can't believe you know how do i buy that internet stock you don't see this when it's the mania but their interest rates eventually rise and the mistakes and so what happens during the recession is the market tries to correct all these imbalances because during the boom resources are miss allocated capital labor right is miss allocated in the housing bubble right too much capital went into building homes remodeling homes too many people were buying all sorts of furnishings for their homes buying cars based on home equity loans too many people working in the mortgage industry in the finance industry there were people had jobs where they shouldn't have gone because the whole idea behind an economy is to allocate the resources which include labor but capital and land in a way to maximize productivity to maximize our enjoyment in our utility from Union from these resources so that we can have a rising standard of living but if capital and labor and land are where they're not supposed to be right that you have to correct that and what does that mean what happens when the bubble bursts well people that made bad investments lose money people that have jobs that they shouldn't have you know they have to lose those jobs so they can get other jobs you see a lot of times in in Washington people don't differentiate between jobs they just think as long as people have a job it's okay right if somebody has a job digging a ditch and someone else has a job filling it back up as far as what watchings is concerned they're both employed but during employed doing what what do you have to show for the labor nothing you know you filled the hole in the ground you have exactly what you had before they started it is we don't want jobs because we want jobs jobs are not and ends jobs are a means what people want when they have a job is they want all the things that they can buy with their paychecks but you can only buy stuff as something something is produced so people have to be employed productively that's the key you know in the old Soviet Union now before it collapsed one of the things they used to brag about is that they had no unemployment they would tell their citizens look at these Americans they have all this unemployment but nobody in Russia is unemployed everybody worked for the government everybody had a job but you know they had to wait in line for six hours to buy some bread or whatever they because nobody was baking bread it was working for the government and so if no-one is producing anything then your salary doesn't have any value because that's just money you can print money all you want you know that's not the solution I mean a lot of people now talk about the fact that we don't have enough demand you hear all the Keynesian are saying the problem of the economy is that Americans are broke they have big mortgage dad they have car loans they have student loans so they don't have any money and so the government needs to print money so we can have more spending but if you're broke just adding money isn't going to change the circumstances because money in and of itself doesn't have any value at all it's a little piece of paper you know they're broke because they're loaded up with debt and they're not productive and more money is it going to change that or if the government does say well the people are broke so the government has to spend spend what if the people are broke the government is broke where does the government get the money doesn't get it from the moon you know it gives it from the people so the people are too broke to spend the government's too broke to spend because the government has to pass the tax them to get the money but one of the problems with the monetary system we have now is that people think well we don't have to tax them to get money we could just just print it and then we can spend that as if there are no adverse consequences to pretty money because that's a tax just like anything else except instead of taking your money away from you what that does is take the purchasing power away from your money so you don't you don't necessarily see the tax but feel the tax but you know when you go to the supermarket and groceries are more expensive where you go to the gas station and gasoline cost more money a lot of people don't make a connection they don't see that that's a tax especially when you have the government or the color The Economist blaming the high prices on a greedy oil company or on OPEC or on natural disasters bad weather on a flood so that's all it's not the government's fault you know and then you'll have the economists say look it's a good thing that the prices are going up because otherwise we might have deflation you know so this is you know this is the price that you have to pay to avoid deflation is you've got to pay higher prices so they don't make the connection so it lets the politicians off the hook because the public doesn't understand how all these benefits are being financed now the the other source of this big bubble of this big problem has to do with the US dollars role as the world's reserve currency I know up until the second world war all the countries were using gold everybody was on a gold standard including the United States and after the second world war we pretty much America pretty much had almost all the world's gold I am 90 percent or more than 90 percent of the world's gold was held by the US government and where did we get all that gold I mean we didn't mind it all we got it because people used it to buy the products that we produced and we're how do we produce all these products we produced him because we were the freest country in the world we had more capitalism and more freedom and as a result we were more productive and the world wanted the stuff that we produced yet they weren't productive enough to produce stuff for us so they had to give us their gold so we had all this gold and we went around to all the other countries and basically proposed a new monetary system and this was going to be where instead of foreign central banks backing up their currencies with gold they would back them up with a dollar and the dollar that was backed up by gold of course that's the only reason it made sense if the dollar was backed by nothing then we couldn't have conned the world into signing up for this arrangement but everybody knew the dollar was as good as gold and if you had $35 you one ounce of gold that was the deal we made with the world and what was in it for the world was if they held dollars they got interest if they held gold they had storage costs so it made sense hold the dollars run a dollar standard two dollars the reserve currency the dollars backed by gold America's the world's richest country they have the biggest trade surplus store the world's biggest creditor nation they've got all the gold good deal well it was a great deal for us because the minute we got that privilege we abused it because now all of a sudden we could pay for our imports by printing money now technically we were supposed to have the gold to back it up but that didn't stop the governor they just his line right they just wrote they wrote checks that they couldn't really cash assuming that people would just not care or not noticeable after the 1960s when we had you know the guns and butter economy the war on poverty the Great Society we went to the moon you know Vietnam all this stuff we were running big deficits and some of our creditors began to notice this and realize that you know we couldn't possibly have enough gold to back up these IOUs which is what the Federal Reserve notes were they were promises to pay real money the real money was the goal that the Fed had it you know in his inside vault so rather than acting responsibly rather than devaluing the dollar and allowing a deflation to occur and cutting government spending and and doing the right thing the politicians did the expedient thing but almost an unthinkable thing and they defaulted Nixon basically told our creditors we promise to give you gold for your dot for your Federal Reserve notes we're now going to give you nothing you know you can hold on a limb if you want but you're not going to get any gold and you know the world should have gone back on a gold standard at that point right but they didn't now they marked the dollar down rather dramatically the dollar was marked down by about two-thirds during the 1970s the deutsche mark you know in the 1970s began you can buy for deutsche marks for the dollar at the end you can get about a 1 and a half the swiss franc went from like 23 cents to 75 cents the and used to get 360 yen of the dollar later in the decade was down like 150 questions a lot lower now but that was a big drop during the 1970s oil prices went from $3 a barrel to $30 a barrel I mean that's why oil prices went up it wasn't because of the Arabs it was because of Nixon is because of what the government did was all the money we printed money lost value oil prices didn't go up at all but in terms of the you know it depreciated dollar oil went from $3 a barrel the $30 a barrel and you know both prices went up from 35 up to over 800 another thing happened to during the 1970s a lot of women came into the workforce and it wasn't because they were liberated in fact they were liberated before but as a result of all this inflation and all these taxes their husbands could no longer afford to support them so they had it they had to start working now our standard of living declined dramatically with the loss of purchasing power of the dollar and in fact you know I mentioned that oil I often use as an example I think I even used it in that congressional testimony when people say oh you know oil gasoline prices are so high now we're paying almost $4 a gallon these are you know record high prices say they're not they're actually lower than they were in the 1950s well how do you mean they're lower well you know if in back in 1950s or you could buy a gallon of gasoline for a quarter it's all caused 25 cents well if you know if you have a 1957 Chevy and you scoop around in the seat cushions and you find a quarter that was dropped there in 1957 you can still buy a gallon of gas with that quarter you get changed too because it doesn't cost that much it costs less because real money held its value the only reason that will is more expensive is because we're paying for it with depreciated dollars that um that is a problem before what was I talking about before I started talking about that I just lost my train of thought yeah okay so the standard of living went went down dramatically after the 1970s but even though the world marked down the dollar after it collapsed it stabilized it stabilized when Paul Volcker came in and interest rates went up to 20% Ronald Reagan came in promising the reduced government and lower regulations and cut government spending and that created some confidence in the dollar and it kind of stopped the hemorrhaging and the world then began to continue to function the dollar was still the reserve currency even though it was backed by nothing and that is the problem because the whole idea is if the deutsche mark wasn't backed by gold it was backed by the dollar that was backed by gold but if the dortch mark is backed by the dollar and the dollars backed by nothing than to do which mark is backed by nothing so that's when basically we you know embarked on this giant experiment that has failed every time it's ever been tried and fiat money the whole world is on this fiat money system but of course once the world knew the dollar was backed by nothing now it was so much easier for the government to run deficits it much easier than when they had to pretend it was backed by gold at least back then you know when Lyndon Johnson was doing this he had a worried that somebody might figure out what was going on but once we basically told the world you're going to get nothing for your dollars then there was no limit to how many we could print and that's when the US economy began this massive transformation from the world's biggest creditor to the world's biggest debtor from the world you know you know best you know biggest manufacturer of low-cost high quality stuff I mean although low-cost merchandise was made in America everything even even even though we paid the highest wages in the world if something was expensive if some was imported that meant it was expensive people used to brag about the fact that they can afford to buy imports if you bought imported products that meant you were rich because everything that was imported was was was expensive all the bargain-basement stuff was made here and it wasn't because we had low labor cost we had the highest labor cost in the world but our workers were the most productive because they had the most capital they had the most tools in the most equipment and our businesses had the fewest regulations so it was a free it was freedom that made us prosperous but all that changed and we began to live off the print press because when the dollar can be just printed out of thin air and the world is going to take it we can buy all these products from our trading partners for nothing you know when the Chinese are making things for Americans they need land labor and capital people have to work hard in factories to produce stuff what do we give them in return just some money that we ran off a printing press and what do they do with it nothing the kid they can't even spend it all they can do with it is loan it back to us and buy Treasuries and then what you know what our treasury is just more dollars and you know a lot of people again they can whew they confuse this they think that the Chinese are benefiting from this relationship they're not gaining at all we're benefitting right they get we get all this stuff and they get all the work well what good is the work without the stuff see we're trying to say well they get jobs so what the slaves that jobs when a good deal for the slaves you know these jobs are not a good deal for the Chinese if we get all the stuff that they produce right they're working the whole the whole idea behind exporting as not to create jobs it's really to eliminate jobs I mean the reason you export is to import something else because you want to consume and how do you consume as much as possible well if there's something that you can do really well that you can make more efficiently than somebody else rather than try to make everything you just make the things you make best and then you trade for the things that other people make better than you but the whole reason to export something is to you want to buy something else you don't export just so you can have a job that's what you're just wasting your labor now what happens when we trade with the rest of the world they send us stuff and what we basically say is you know whoa I got nothing for you but we you know I got an IOU you know you dollars you know we take the IOU and they take it because it's the reserve currency and maybe in the back of their mind or I guess in the front of their mind they figure that one day they can use it to buy something but meanwhile what are they going to buy what are we making every year we make less and less stuff that they want the stuff that the Chinese want to buy is all made in China I mean that's where the stuff that we want to buy is and but they this is this whole thing is maintained but now we have this entire bubble we have this entire phony economy that is now predicated on Americans borrowing money that they didn't save to buy products that they can't afford and didn't make and this whole thing is phony and all of our all of our economic policy is designed to sustain this nobody wants to allow it to be corrected because the correction happens in a recession we have a lot of problems the biggest problem in the u.s. economy is that interest rates are too low interest rates have to go up we're never going to have a recovery we're never going to have real economic growth we're never going to create productive jobs unless interest rates go up but that's going to be very painful because we're so overly indebted what's going to happen when interest rates go up banks are going to fail and they're not gonna be able to make that next time we can't bail them out what's going to happen to the housing market gonna go down more it needs to go down more that's part of the correction prices were too high they're still July what about the government what's going to happen when interest rates go up well the government is going to have to dramatically reduce spending in fact they might have that default on the on the bonds they've already sold because the the only reason the government can pay the interest on the debt is because the rates are really really low what happens when rates go up will they they can't afford we can no longer a no more afford to pay our ba re bonds back then the Greeks can you know for a while interest rates in Greece were at record lows and the Greeks had no problem but then interest rates went up and now you have a crisis the same thing is going to happen here now there are people that think well that'll never happen because interest rates are never going to rise well that's just impossible they have to rise you know what is the consequence of keeping interest rates artificially low we continue to screw up our economy instead of allowing market forces to correct the imbalances we make the imbalances bigger right the more we stimulate the economy with the toxin because that's what the stimulus is it's it's a toxic sedative and eventually you overdose on it right what is happening if we keep interest rates low nobody is going to save I mean who's going to save money that's depreciating in value and so you're going to destroy your savings you're going to destroy the ability of the economy to generate capital generate growth or or production you're going to create massive inflation now the government can lie about inflation for a while they can hide it behind these doctored up CPI numbers that are so you know you know you know mechanized or they so manipulated not there's a conspiracy but the formulas that they use to calculate prices going up are flawed they're deliberately engineered to get a loan number I mean that's how why they're there but of course when they're measuring prices they're not even measuring inflation they're measuring an effect of inflation but at some point the inflation is going to be so pronounced that it's in its effect on prices they're going to be so great that the government is not going to be able to pretend that it doesn't exist and then at that point interest rates are really going to have to rise and then it's all going to hit the fan and I said that's when the banks are going to fail and you know the next time the banks fail if the Fed is doing the right thing and raising rates that means not only do the banks fail not only do the bondholders lose money but the depositors lose money because if the government is having you know trouble paying its own debts how's it going to bail out the FDIC you know we're just gonna get that money it's this so there are tremendous losses all all we're doing now all of our policy is designed to postpone the day of reckoning beyond the next election that's all Congress cares about how can we get through 2012 without it you know hit the fan and they don't care that the policies that they're pursuing are just making all the problems worse and when we look at the economy people say oh the economy is growing look at the GDP economy is not growing we're spending more borrowed money that's not economic growth look at the debt in the last few years right since Obama has been president look how much the debt is skyrocketing it's grown by much more than the GDP so all this consumption has been financed with that it's not real prosperity it's phony it's like it's like looking at half of a balance sheet you're looking at the assets and you're ignoring all the liabilities or on an income statement you look at the income but you don't look at the expenses we are not better off because the GDP went up we're worse off where'd that money come from we borrowed it and what do we do with it we spent it on consumption we didn't invest it we don't have more plant equipment we blew it right we stood government spent it you know the bubble that we had as a result of the cheap money that the Fed created in the 1990s that inflated a stock market bubble when that bubble burst instead of letting the market correct the problem we deliberately gave us more stimulus and that created the housing bubble when that bubble burst instead of again sucking it up admitting that gee we really screwed up after the last bubble let's do the right thing now let's let the market run its course instead of doing that and taking a more painful recession which was now necessary because they didn't take our medicine the first time they did the same mistake and now they're inflating a government bubble the government bubble is bigger than the housing bubble it is bigger than the stock market bubble you know and it's going to burst it's no more sustainable than than the previous bubbles and you can see to the bond market you can see in the currency market but the real prices that's coming then I know we've been talking we'll take questions the real crisis is coming as a result of the fact that we no longer have sound money that we've been printing all this money and running all these huge imbalances is a sovereign debt crisis a collapse in the US government bond market a collapse in the dollar on a much grander scale than what we see playing out right now in Europe and if you remember when the housing bubble first began to crack and the signs showed up first in the subprime market all the experts everybody you know from the administration down to Wall Street was on television reassuring everybody not to worry that it was all contained it was just a subprime problem tiny little problem don't worry about it the market is sound of course at the time I was saying that that's not true it's not a subprime problem was a mortgage problem that we were just seeing the symptoms first in subprime but the symptoms were there and it wasn't even about contagion about spreading everybody was already sick it was just a question of time before the symptoms showed up well the same thing that's happening with sovereigns this is not an Italian problem or a Greek problem or an Irish problem it's a it's a debt problem and we've got more debt than Europe just because we can print money and we have the world's reserve currency doesn't mean that we're immune from these laws right now I think is when this is a time in history where the sovereigns are being held accountable you know just like the Italians or the Greeks have borrowed more money then their citizens can repay American American government has borrowed more money that Americans can possibly repay and you know we're not going to pay these the debts off by raising taxes on the 1% yeah I mean we can't even do it by raising taxes on the 99 percent as if we can even extract all that revenue you know it's going to have to come through a restructuring it's going to have to come through a default one way or another and there's two ways that that can happen we can legitimately default we can we can the Congress can level with its creditors and still if we're not going to pay a hundred cents on the dollar on these Treasuries it can level with people who are expecting a government pension or social security check and level with them and so the money is not there we can't pay you everything that we promised it we'll come up with some way of means testing it or doing something so that we can make do with less or they're going to inflate the currency into oblivion and it won't just be not worth the Continental it'll be not worth a Federal Reserve Note because one way or another the people who loan money to American are going to lose the savers are going to lose the creditors are going to lose either they're not going to get their money back or the money they get back isn't going to have much value but the problem is the longer we wait the worse is going to be for everybody and the more damage that we do to our underlying economy because the longer we allow these malinvestments to build up right the bigger the impact when they collapse and the harder it is to restore balance and part of that would be going back to sound money going back to a bold standard I'm confident that the world is gonna go back at a bolston the question is how much longer is going to take and how high is the price of gold going to be when that happens but if we go back on a gold standard then we will have discipline again in Congress because Congress won't be able to spend money unless they can extract it from the taxpayer they're not going to just be able to print money we're not going to run all these trade deficits if we want to import we're going to have to export if not we're going to have to settle our accounts with gold and if we can't mine the gold and so that is what's going to bring everything back into balance you know the longer we wait to do it the more mistakes we make in the interim the harder it's going to be and the real threat to our Liberty is that this real crisis that's coming and the economic collapse that's coming in the financial crisis is going to be much worse than the 2008 the problem is all these problems resolved from government they wrote they resolved from government government meddling in the economy all these distortions that the regulations and the subsidies and the money printing create but the government is very successful at blaming capitalism for the problems that it creates it mixes capitalism with socialism and then it causes a problem and they say you see capitalism doesn't work we need more government and then they get more government then we get more problems well this is going to be such an enormous problem that we might end up with total government you know and completely change the fabric of our country so I think it's very important that as many people in Congress as possible and that's where you guys can come in understand the root cause of these problems and it's not because we have too much freedom and too much capitalism but the reverse capitals doesn't work when government distorts it and interferes with it when it tries to micromanage it that's where all the problems come from the solutions are going to be in the market ok it's not going to be more government it's less government is rolling back all these rules and regulations that are distorting the market and returning is sound money and if we do that we're going to have real economic growth we're gonna have real prosperity we might have to you know suck it up and bear some pain and just like you know you could taste swallow some bitter tasting medicine it might not taste good but if it works you got to do it but you no denying that you're that you're sick or just exacerbating or covering up the symptoms while you get sicker is it's not the way to go but that's unfortunately what we're doing now anyway let me just open it up to to the questions yeah yeah yeah I mean obviously there's an there's an economic truism that you're gonna get more of what you subsidize or get less of what you tax I mean if you pay people not to work people are going to take you up on it you know I mean I did it myself I remember the one time in my life I collected unemployment benefits I did not look for a job until I exhausted my benefits you know I was in my 20s and I was living in Southern California and the weather was great and I liked the beach and I like that better than working and if I can get paid for lying on the beach as long as I got enough money for gas and booze I was you know it's fine with me and there are a lot of people today that do the same thing I mean it's not wrong it's human nature and if you can collect unemployment for two years and that's a that's a lot of time on the beach and you know people forget that leisure has value I mean you know people would rather not work right people save up so they can retire well you can retire early now on unemployment and a lot of people say well that's ridiculous you know it's only 300 hours a week or $350 a week well true yeah I mean if somebody offered an unemployed person you know $100,000 your job they'd probably take it but what if what if the only job they're offered is $400 a week or $500 a week most people won't take it if they'd rather have unemployment because it's it's like a huge tax on getting a job it's a marginal tax bracket is faced by someone who's collecting unemployment because not only does he have to pay taxes on what he earns he loses all of his unemployment benefits so the tax rate is enormous and of course when people forget is when you get a job you don't get to keep all of your income there's a lot of expenses that the IRS will you deduct you know what if the job that you get offered is it is you know 45 minutes away from your house what's it going to cost you in gas mine they're back you know and maybe you have to eat in a restaurant maybe you have to wear a suit maybe have to go to have a dry cleaner maybe you have a kid what if you have to put your kid in daycare how much is that going to cost so it's so much easier just not to work and so the more lucrative we make it the more people are good work and I've talked to plenty of people small businessmen who've told me they can't find people to work and if they find anybody they're only willing to work if you pay them under the table why because they don't want to give up their unemployment benefits there are people in my family right now that have told me and my family that are collecting unemployment that's what that's their job they don't want you and you know when I did it when I had to do it I actually had to go down in unemployment office and pretend I was looking for work and I remember I used to actually go cuz I was afraid you know that the government might catch me so I actually went and met with I dropped off some resumes I remember walking in and making a little log so I can at least look like I was looking for a job but I didn't want one I just wanted the unemployment benefits but I at least had to pretend that I was looking today you know you have to do that you don't you don't even have to look someone in the eye in line you do it all online you can just you can just be in South America collecting those unemployment benefits you know because they go a lot further if you go down to like you know Costa Rica because the money goes a lot further if you rely on a beach down there so yeah I mean the whole thing is a racket but you know yeah the politician is la because the unemployed yeah extend those benefits because they'll vote for whoever extends them and of course part of the problem you know and then that's where you know you've got all these illegal immigrants coming in it's because who's going to take these jobs if they can get unemployment benefits so we I mean we shouldn't even have mandated unemployment insurance I mean if somebody wants unemployment insurance let them buy it when you buy car insurance you buy health insurance you buy fire insurance if you want to buy insurance against losing your job just go out and buy in the private sector it'd be there if the government didn't provide and at least then it would make more sense you'd have market setting premiums and you know people people who wanted it can buy it and it would have different incentives it would probably pay off in a lump sum if you lost your job you know but now we give people all kinds of incentives not to work and of course we pass laws that make it illegal for people to work right the dumbest law probably we've passed is the minimum wage ball but KY everybody in Congress loves it because they can pretend oh it's terrible nobody should have to work for $5 an hours so let's make the minimum wage and whatever it is 750 all right what does that mean that means if you're not worth 750 it's illegal for you to get a job and it's not just 750 actually you have to cover all your payroll taxes you know other fees mandates and of course there's a lot of legal liability that comes with being an employer so an employer has to assign that value because the minute you hire somebody there's a million ways you can be fined or sued if the government doesn't like the way you're hiring people they'll sue you they don't like the way they're firing people you can be sued all kinds of so it's very risky the government has made it very risky to hire somebody so a lot of people make a rational decision not to hire people or to hire as few people as possible or if you've got to hire somebody hire them in another country we don't have all these liabilities so you know if we got rid of that minimum wage law and we also got rid of all these unemployment benefits a lot more Americans would have jobs now how could it be I mean look at all the stuff that we're importing yet we have all these unemployed people you know what are the statistics I is ridiculous we import 90 percent of our seafood 90 percent of it we're surrounded by oceans we got all these lakes and we got all these unemployed people you don't think they can fish I mean you don't even just pick up a rod go other key but why aren't they doing it they don't have to right so we've got to get rid of all these rules and regulations that are making it illegal for people to work that are making it expensive to hire people because people forget where jobs come from all right I hired a lot of people why did I do that is it because I'm a humanitarian I just want to create jobs no I want to I want to make as much money as possible and I figure I can make more money if I hire people that's the only that's the reason jobs are there because somebody wanted to make money and they hired somebody to make money but the more difficult the government makes it the more expensive the government makes it to hire people the less likely it is that somebody is going to do I mean if I'm gonna hire people that I'm going to lose money obviously I'm not going to do it you know so you have to have more profit more opportunity and of course you know the other thing that you need is a is capital I mean I can't hire workers if I don't have any tools to give them if I don't have any equipment to give them where is that all coming from that comes from savings it comes from under investment from under consumption you know when they think the the government keeps talking about we have to raise taxes we have to raise taxes on the wealthy because they're they're not the ones that are spending money if we just raise taxes on the wealthy they'll just have less money to save yeah which means they have less money to invest which means they create fewer jobs we have you know a lower standard of living so if the politicians that are that are saying we need more jobs if they really understood where jobs come from they would they would understand that they need to reduce the regulations and reduce the taxes on the people that create those jobs well not at this price there's not the gold price is just going to have to go up that's all but the idea that there's not enough gold in the world is ludicrous it doesn't matter how much gold there is it prices are just going to adjust to the to the level of goal that exists money needs to be scarce that's what makes it valuable if it was plentiful if there was if there was all the gold that we needed then it would have no value what makes it rare and valuable is that it's scarce and if you look at historically the gold supply increases by maybe one or two percent a year that's it that's pretty predictable pretty consistent and it works great I mean we had the Industrial Revolution on a gold standard people that say the economy can't grow on a gold standard our economy grew more on a gold standard then since we left it if you look at the standard of living of the average American from let's say 1800 to 1900s and compare the way the average American lived and the way he lived at the end of that century and then compare that to the changes that have made since we've been on the Fiat Standard it's a much bigger difference you know the standard living grew a lot faster and imagine how much wealth in your society would be how much less we would all be working how much more prosperity and leisure we would all enjoy if we had continued on the gold standard for the 20th century instead we went off it and we sacrificed a lot of economic growth in the process yeah if you operate on the assumption if Washington writ large keeps doing basically what it's been doing the right thing and things just progressed the way they can you progress how do you see events unfolding obviously a larger financial crisis how is that going to make how did that manifest themselves in a world where you've got Ben Bernanke determined to do their best not to let nature take its course yeah well I you know eventually it just has to happen just because the numbers are so large you know we've got you know just like the people who are buying houses using a teaser rate on a subprime mortgage the problem was the teaser rates expired and you know they couldn't afford to hire payments well we've got the same thing I think about 40% of the national debt matures in the next year that's a lot of money I mean that's what six trillion dollars some with the exact amount but it's two to three times with the government collects in taxes how can we possibly pay that off what we can't and the idea is that we don't have to because we're just going to borrow the money that's the same idea that Bernie Madoff had and it worked for a while for Bernie but it didn't work for ever you know we're not going to be able to constantly roll this debt over not it you know near zero percent interest eventually our creditors are going to want to get paid and we can't pay and and then we're gonna you know that we're not going to have the crisis until it until it's forced out we're not going to do the right thing until there's a crisis right so we're not going to preempt it but we had this phony crisis when we had the debt ceiling crisis when we refused to raise the debt ceiling the real crisis is when the lenders won't won't raise the lending ceiling and in fact we actually admitted to our creditors you know the message you know how much trouble they're in because we said if we don't raise the debt ceiling we're going to default that's what we told them we told them that we're running a Ponzi scheme we didn't say that if we don't raise the debt ceiling we're going to raise taxes so we can pay our debt or we're going to cut social security spending or military spending so that we can honor our commitments we said if we don't raise the debt ceiling we can't borrow more money we're not going to pay off the people that we borrowed money from so we told it you know we told our creditors that they're the little man of the bulb totem pole so they already know this but at some point they're not going to be buying this debt the Chinese are going to wake up they're going to stop buying this I mean people think that the Chinese are going to throw good money after bad indefinitely that you know they've got two trillion in Treasuries and that's they can't afford to lose so they're going to keep buying well pretty soon they're not going to be thinking about the two choy and they have but the five or ten trillion that they're going to buy if they don't stop and you know might as well lose money on two trillion then lose money on ten so at some point they're going to wake up and you know and of course their economy is going to boom the minute they stop doing this that's the biggest irony is you have American politicians beating up on China for manipulating their currency but the beneficiary the benefactors of that policy are not the Chinese it's the Americans we get to buy stuff for cheap we get that we have all this stuff that the Chinese are sacrificing if the chicharrón be went up the Chinese would be buying all this stuff not us they would get to have the fruits of their labor instead of just a labor you know and we had we get the fruits now long term the Chinese aren't doing us a favor because they're helping to undermine our economy but the short-run you know we have a higher standard of living because it's financed on the backs of people in China working in factories and not getting the full benefit of what they produce but the where the crisis is going to come we can't borrow any more money and the Federal Reserve has to print they have to do QE 3 or QE 4 whatever they're calling it at the time or maybe they won't call it anything you don't just do it but and then prices really start to rise much faster I mean I know prices arising for food for energy look I just got my my health insurance premiums from last year and then my initial increase was 19% now I had a shop at around to get might increase down to 12% but that's just in one year for the same coverage you know but it's not it's help it's college tuitions are going up I mean prices are going up I mean the only place that they're not going up is into CPI I wish I could buy this epi but unfortunately I have to buy real things and and they're getting more expensive but at some point they're going to get a lot more expensive and the government's not going to be able to pretend it doesn't exist and you know the dollars is going to collapse I mean Europe is you know right now Europe is temporarily buying us some time but it's going to be very expensive time because it's enabling us to go deeper and deeper into debt but again where is this debt going it's going to finance more government the government bubble is worse than the housing bubble it's worse than a dot-com bubble because at least in the dot-com bubble we got a couple of companies that had value at least the housing bubble we got houses we might have spent too much money on it but they're there you know the crazy thing is guys like alan greenspan argued for burning them you want to destroy them so we would have so we have no benefit whatsoever from the housing bubble at least we got houses right but there's what are we getting from the government bubble yeah you know more bureaucrats and we're getting more consumption more spending so this is the biggest bubble of them all and it is going to unravel and you know the question is what's going to happen when the dollar really starts to collapse and prices start spiraling out of control what are we going to do are we gonna do it Nixon did we going to put on wage and price controls we probably won't need wage controls because wages probably won't be going up that's the one price that probably won't rise but the price of everything else is going to go up which is going to be particularly problematic you know a lot of economists they make the the incorrect assumption that you can't have inflation without rising wages oh yeah you can it's just a lot more painful when the wages don't go up but employment costs go up maybe not wages but other costs associate with employment but people working you know doesn't create inflation in fact people working helps bring prices down is people not working that made prices go up because prices are not just of demand but of supply and people working creates so far and what they're not working you have less supply and also what happens is when the dollar crashes right supply of goods in America goes down because we can't afford to afford to import in addition we export less so what happens is capacity comes down but you can see that now on the airlines right the airlines are raising prices even though fewer people are flying how are they doing that because they're reducing capacity and they're going to have to reduce it a lot more and air prices are going to rise dramatically in the few the next few years even though fewer people are going to fly fewer people are going to fly but they're going to play a pay a lot more same thing is going to happen they're starting to export more refined gasoline now that's more and more that's going to happen so even though Americans are going to be using less gas they're gonna pay a lot more for the gas they use because this supply is going to be less because a lot of the gas that used to be here is going to be filling up a car in China and that's going to be even more dramatic once the Chinese army goes up now once the Chinese let their currency go up everything goes on sale in China so the Chinese buy more of everything but were they getting all the stuff it's the stuff that we used to buy but that we can't afford anymore because when the prices go down for the Chinese to go up for Americans so this whole collapse is coming and if we want to do anything about it we have to recognize right what the vault is and then we have to start dealing with the real cause of the problem which is big government all the regulations all taxes all the spending and we can't just talk about cutting taxes because spending that's the tax make the cost of government is measured by what is spent not what it taxes because if all government is spending has to be paid for one way or another and either they're going to pay for it through taxation or through inflation now temporarily they can borrow but that either means they're going to have to raise taxes in the future or raise inflation in the future so ultimately they can either pass or inflate but that's it so that's the cost when people talk about it then cut your taxes but they have these huge deficits they haven't cut our taxes at all and if government is more expensive right we're paying more to support it one way or another the politicians can lie about it right when they when they run a deficit but ultimately we're going to pay so we have to shrink that government dramatically if we're ever going to get out from under this mess because the only reason this phony economy works now is because we can borrow the money to sustain it because the world will take our paper for their stuff but when that stops America we can't function this economy cannot function with this level of bureaucracy you know we're going to have to agree to have to make some deep-rooted changes and they're obviously going to have to come from from here yeah kind of a two-part question first it's good that the Austrian school is starting to get more attention nowadays but for a long time I was more in the public you sort of intellectual battle between Keynesian and the Chicago School so what do you say to the suggestion that the Chicago School could be very very dangerous because they essentially preach free market except when it comes to currency and debt and then when something goes wrong the Keynesian say well look the pre-money work yeah I mean it's a bad I know it's a bad in comparison you know say you know you give capitalism a bad name when you preach it but don't really practice it that's what happened I think that you really have to start to look at the Austrians who you know have a much better explanation for what's happened and that's better understanding but you know the problem is and the reason that Keynes ism is so popular here on the hill is this exactly what the politicians want the kings gives them a reason to do what they want to do anyway to just you know because it's so easy to just spend government money and if you can argue that that's going to grow the economy and of course you know where you can often you know arguments like they're saying we have to extend unemployment benefits because it's going to help the economy and how does it help the economy they said well because the unemployed people are going to spend the money well if just printing up money and giving it to people to spend through the economy why just limited to the unemployed why not do the benefits everybody then we have even more growth and it and want to double the unemployment benefits then we'll get double the room what a triple quadruple you know why don't I give everybody a million dollars no and of course at some point they're gonna say well that's too much well then what about if they do a dollar less is that too much should it never works because whatever money the government gives the unemployed it has to take it from someplace else the government has nothing all it does is redistribute and so it's not going to help the economy it's going to hurt the economy you know apart from the fact that it's subsidizing people not to work and so the economy is deprived of the labor and the output that otherwise would have a company that work instead somebody is idle but when you transfer money around you're your lesson in economic growth the deficits that we create to pay those unemployment benefits are going to do more damage to the economy than whatever benefit you get from spending is on climate checks so it's easy to to critique that but the the Keynesian view is the more politically popular and that is the problem everything that we need to do all the things that are good for the economy are bad politics and everything that's you know is bad for the economy is good politics even among a lot of the people who understand that govern is a problem you know let's scope a lot of them still you know bought their Social Security benefits they think want a lot of stuff from government and they don't realize it the governor doesn't have the money we've gone over time so I don't want to keep people here who need to go but if there are more questions that want to be asked please feel free to say no so when there's a this collapse does occur is there any country around the world that fare better or how will America fare relative to the company yeah I think the countries that have the most to gain are the countries that are bearing the lion's share of the burden of supporting us so if you look at the countries that are amassing enormous foreign exchange reserves particularly in dollars countries that have these huge shopping wealth funds these are the countries that have the most to gain because they are paying the lion's share of the subsidy this is what America gets a huge subsidy a lot of people will be able to concede that Americans live beyond their means right we buy a lot of things that we didn't produce we borrow and respect so we live beyond our means well that's only possible because other people are content to live beneath their means well the people who have been living beneath their means when they don't do that anymore they're going to see big gain and so you know when let's say the Chinese for example when they allow their currency to rise all of a sudden the Chinese are going to be able to afford to buy a lot of things that today are out of their price range and so the Chinese are going to see a big increase in their standard of living at the same time we're going to see of course by declining ours because now we're not going to have those things and if an American wants to buy something made in China maybe he's gonna have to pay three or four or five times is about money you know and then as an individual is there anything you can do to lessen love for yourself well I mean as an individual you can recognize that the dollar is going to lose value and so you don't save dollars and that's part of the problem right we need savings to grow the economy yet if you have to be a fool to save dollars so therefore we can get the savings that we need if we're chasing capital out of the country but you can buy gold you can buy silver you can you can invest overseas you can have foreign currencies you can have stocks abroad in the economies that are going to prove when you know this dollar at the center of the global monetary system comes to an end you know this is a problem we have polluted the entire global economy we export our bad monetary policy because the dollar is the reserve currency everybody is trying to maintain a parity a relationship with the dollar but instead of being a force for good instability we're of course for instability and recklessness because it's a race to the bottom right and and so it's disrupting the entire global economy we are at the epicenter of these massive global imbalances that are the real who pawns with problems or the booms and busts but you know when that ends you know the world you know collectively can breathe a sigh of relief but it's going to be very difficult in America to get used to actually having to live within our means because then we're going to have to acknowledge how dramatically our means has been diminished over the years and as I said earlier if we're going to restore our you know our economy we can't do it with all this coming and we never could have produced the wealth that we once had if we have all this come and it's the absence of government that allows us to be productive its freedom that's what we needed one if we want to help people we need to give them more opportunity and more freedom and we're not going to get that by passing laws right we get that by repealing laws I thought you just raised your hand that was you can and because for the American history textbook explanation for us leaving the gold standard was in other countries particularly France converted on mass are dead in the gold in the United States if we go through sort of more organized default rather than letting the market you know tear us apart be the only economy that switches back to double standard if there's emperor convertibility if the dollars skyrockets how will you export well just a moment the way we exported before then you know this big if you have a strong currency doesn't mean you can export get a strong currency it diminishes your capital costs you have more savings you have more investment it diminishes your raw material costs it makes the important components less expensive it means you don't have to give wages because your workers are getting wages just in in higher purchasing power they don't need a nominal increase so there are a lot of benefits but yeah I mean if we were to be proactive and admit right now okay the country is broke and let's restructure on our own terms let's figure out you know you know what we have to do because if we need higher interest rates right that is the only way we're going to solve the problem but we have to acknowledge that if we give it if we let interest rates go up you know this whole phony thing collapses which of course is a good thing because the sooner it collapses the sooner we can rebuild something real in his place but everybody is so afraid of the short-term consequences that they want to postpone it as long as possible which means it's not going to be on our own terms it's going to be a crisis that hits us from wrong if we do it ourselves if we preempt it's still going to be painful but it's not going to be as painful and it will it'll be a lot better and of course a lot of the pain it's not going to be eautiful the pain is going to be felt principally other people who are living off of government the people who are getting a check from the governor to have to get smaller checks or in some cases no checks at all we're going to remove the off the backs of the American pollo so it's not going to talk about all staring okay austerity for who right not to people pay the bills the people live in you know the people ride in the way are going to have the house unless there's other people bullying it thirty to get some relief which is what they need but you know some of the things that we can do as far as getting government out away we'll have such immediate benefits right if we got the government out of Education and out of student loans to issues would plummet all of a sudden college wouldn't be a such an insurmountable expense families wouldn't have to worry about saving for college because it won't be that expensive and maybe not all their kids would go I mean now everybody goes to college even if you haven't – food for whatsoever what's the point so point sending a kid to college so we can you know party it up for five years get drunk you know and then graduate you know with a lot of debt and you know no skills no knowledge if we get government out of health care and you know all of a sudden medical costs collapse them they're not going to be a good thing if it doesn't cost so much to go to the not reduce cost so much if you get sick so there are a lot of things that you just get government out away and you get free market efficiencies and you get an immediate benefit now who is that hurt well yes I was going to hurt but tuitions come down some of overpaid administrators at universities are going to have less money oh well you know and some people working at universities they're going to lose their jobs okay go they didn't need those jobs won't they'll have to do something productive and if they do something productive we're all going to benefit you know the more people employed productively everybody benefits from that productivity the more people that we have doing stays they shouldn't be doing because of some government subsidy we're all made for as a result so it's not going to take that long if we do all the right things it's like ripping off a band-aid if you just rip it off it doesn't really hurt that much you know but if you peel it off slowly you know that it hurts so we just get rid of all this government and bring back freedom it's wonder there's not going to be a lot of suffering that log some people sure you know people who thought they were going to retire on Social Security okay well they're going to find out that that's not going to happen they gotta work they gotta save their money but they're not going to get Social Security anyway so why don't we you know let's let's deal with that down instead of paying them off and worthless money what could is happening because that's the end result but the lot of lido politicians have the integrity to do the right thing though so don't even know the right thing is okay so hopefully if we can educate people there's got to be some other in Congress other than Ron Paul right that actually cares about the country and and you know a lot of times with the congressman okay well I can't do that I mean it's too big of a risk well what's the risk that you don't get reelected and what's so terrible about that you know there are people that are that risk their lives on a battlefield for the country you can risk not getting reelected in big deal so people have to understand you know and this is you know this is a very pivotal point in our history




Comments
  1. @20:39 "after WW2 the USA had 90%+ of World's Gold"

    Does anyone have a citation for this? I gave a decent effort via the googles, to no avail

  2. Very interesting stuff. I've not heard the idea that deflation could be good and is natural. Very interesting. I'll have to think about that one.

  3. In 2011 he was keep on talking about the coming crash for example in 30:20 35:05.  Today July 2018, stockmarket did not crash.  Here in California the houseprices more than doubled.

  4. But with the exponentially rising debt why don't I hear the effect of money as debt with the current fractional reserve banking system where the money comes into exsistence as debt that balloons every year?

  5. Peter said.. "you are not going to save if you know its going to erode its value over time". That is actually wrong. People don't save because they think the money is worthless, they save because production increases and the things they buy to satisfy demand goes down and thus increases the amount of MONEY someone has. This translates into savings.

  6. Oh please, everybody knew the housing collapse was coming, it's one of the most predictable markets in existence..

  7. I have found a small bird, that cannot fly, and he won't eat or drink, and he's just sitting in one spot breathing slowly, I thought he might of Got frost bite or hit a window, because I found him by a door and window, when I applied heat by way of heater in my truck, he spruced up and started standing again although his equilibrium was off, I tried setting him free, but he just sat down and froze up again and I had to again repeat the process. Any tips?

  8. If China got the short end of the trade deal with the U.S. why are they now buying massively in the U.S.? They got wealthy as a result of exporting to the U.S. plain and simple. Exporting is a good thing and it helps create jobs. It's not the end all be all but it will definitely help our sick economy.

  9. As insightful are the observations made by Peter Schiff, he joins most analysts by linking our boom-to-bust cycles with "debt." Debt exacerbates but does not cause the underlying problem. This problem is our dysfunctional, credit-fueled and speculation driven land markets. Rising land prices always climb to a point where neither consumers of residential housing nor businesses can continue to sustain the rents or prices demanded by landed interests. By 2007, for example, residential property appraisals in many regional markets revealed that the land component of property prices exceeded 50 percent. People were often paying more for the underlying land than for the housing unit.

    They key policy required to tame our boom-to-bust cycles is to remove from our system the potential to profit by speculation rather than production of goods or delivery of services. And, as Adam Smith observed, this can only be achieved by one measure: the societal collection of the rent of land via taxation.

    Every parcel of land, every tract of land (and every land-like asset, such as the broadcast spectrum or take-off and landing slots at airports) have a potential annual rental value under competitive bidding conditions. This rental value is a function of aggregate demand, the comparative advantages of locations (in turn affected by natural as well as societal amenities made available to a location). When (as is the case everywhere today), this rental is privatized rather than made a societal fund landed interests enjoy an imputed or actual unearned rental income stream, capitalized by market forces into a selling price for locations and land-like assets.

    In periods of rising prices for land, landed interests have every incentive to hold these assets off the market in anticipation of greater than average market returns in the future. In the worst case situation the supply curve for land might actually lean to the left when hoarding and speculation become the primary behavior of those who hold land.

    In summary, taming the money creation problem is necessary to prevent the worst consequences of the underlying land markets, but we must tame our land markets if we are to achieve sustainable economic growth.
     

  10. Peter Schiff is the only one with all the answers. This dude knows his shit. Everyone else is kicking rocks. 

  11. Dr. Boushey : If America is one of the richest countries on the planet, then why are we spending borrowed money?

  12. My favorite part was when, after the collapse, suddenly EVERYONE was saying "Yah I saw it coming I predicted it too." Sorry plebs, you aren't Peter Schiff and you never will be!

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