08/17/15 – Charles Goyette – The Scott Horton Show

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Alright you guys, welcome back.
I'm Scott Horton, it's my show, the Scott Horton Show.
Next up is Charles Goyette, good friend and legendary radio host out of Phoenix, Arizona.
Author of The Dollar Meltdown and Red, Blue, and Broke All Over, which is about the United States.
Hey, welcome back Charles.
How are you?
Scott, great to speak to you, bud.
Hey man, are you still doing the thing with Ron on the radio all the time?
No, we wrap that up at the end of the year.
It kind of led its natural life.
And I'm glad that Daniel McAdams moved down to his neck of the woods so that they could be together in studio and on camera.
And they do a great, great daily commentary.
So it kind of, you know, what we were doing is really needed, you know, to do one commentary a week on a podcast when they're doing it daily.
So we wrapped it up at the end of the year, and I'm very pleased with what they're doing now.
I guess I was most excited about y'all being syndicated out there on AM radio and coming on during, you know, commercials during Rush Limbaugh, and then the after Rush clone on Everytown's major AM.
And then, but have Ron Paul and Charles Goyette interjecting with a little bit of common sense and sort of, kind of, you understand what I mean, from the right, too.
It was a great, that was a great run.
We did that for, I guess, about two years, and we were on I don't, I've forgotten now, but it was certainly a couple hundred radio stations.
And so we had, we had a great reach, and you're right, you know, one of the local stations here in Phoenix where I live ran the commentary in the middle of some neocon talk show.
And it was always, it was always, you know, sort of a breath of fresh air and a point-counterpoint, you know, to hear Ron put the exact opposite of what these people have been listening to for three hours, hear him put succinctly in a two-minute radio spot, you know, what the real situation was.
I just loved it.
Yeah, man, that's always fun.
You know, and especially coming from Ron, because he's just so obviously right.
He just completely dismantles the War Party's arguments, and with such ease.
And with you as Ed McMahon, you know, setting him up, it's just, you know, it's ridiculously good.
So anyway, well, I'm glad that y'all got away with it for as long as you did, anyway.
Anyway, so hey, welcome to the show.
I want to talk to you about the economy.
TV says it ain't so bad.
Except, you know, the people seem to think that it is, and I think that, hey, Bill Clinton was right about one thing, maybe only in life, and that's, it's the economy, stupid.
And it seems pretty obvious that the reason that people are flocking to Bernie Sanders and Donald Trump is because they're not politicians.
They seem like outsiders.
They seem like populists who actually care about the people instead of just power in Washington DC, and they're hurting.
They want somebody to fix it.
And so Donald Trump says, well, look, it's the poor people's fault, and it's lousy trade agreements fault.
He's gonna shut down the trade, and he's gonna, you know, kick out all the lousy immigrants.
We're taking our jobs and that kind of thing.
And then, of course, Bernie Sanders says, well, it's obviously all the billionaires fault.
They're the ones with the power.
They're the ones with the bailouts, and they're the ones who've done this to us.
And so we need to get rid of these trade agreements and tax the hell out of Donald Trump and the rest of his guys.
And the American people seem divided between pretty much those two positions, at least so far in this race, and and don't have a minute for Hillary Clinton and Jeb Bush, which, let me take a minute to praise their disdain for the establishment.
But, you know, populism is not necessarily always libertarian, as we can see in the case of these two candidates.
And I just wonder about, you know, what's your read on the true state of the economy and these populist candidates and what you think of their economic programs and all these kinds of cool things.
Well, you put your finger on it.
There's nothing so great as the sore thumb.
There's nothing so visibly wrong.
There's nothing so egregious in America's economic life as the distortions of crony capitalism and the windfall for the the banksters and the war profiteers and others.
And it has reached the point of being disgusting.
So Americans left, right, and in between all see that.
I mean, that is the single signpost that they are following in this election.
And you're right, whether it's Trump on one side or Bernie Sanders on the other side, they are all responding to this egregious crony capitalism.
I saw, Scott, back, I will guess it was probably in May, I saw Mort Zuckerman on the John McLaughlin show.
This is the editor of U.S. News & World Report.
Yes, and a New York real estate billionaire.
And the question to close out the show went around the roundtable and Pat Buchanan and Eleanor Clift and yada, yada, yada.
The question was, you know, what will you do if you wake up in the morning on Election Day in November and it's Jeb or it's Hillary?
And everybody went around with their partisan thing, you know, the left guy about, well, you know, Jeb would be bad, Hillary would be great, and so on.
This went around and finally ended up on Mort Zuckerman's desk and he said, if the nominees are Hillary Clinton and Jeb Bush, I will go to sleep early that night without even bothering to watch the returns and I will awaken with a smile on my face in the morning because I know that either way the republic is in good hands.
And of course, of course he would.
I mean, here is, you know, here is the certainty that the Fed will keep stove piping, you know, newly created money to Wall Street in the administration of either one of them so that the, you know, New York real estate billionaires would be very, very happy indeed as they have been over the last 10 years or so.
So, I mean, you know, we're really in a fix and it pains me deeply to see people flocking to Bernie Sanders and to Donald Trump under the circumstances because it just, it simply means they're not discerning.
They see the problem, they see the malady of crony capitalism and the distortions in the economy as a result of it, and they think something must be done and they're right, and so they're willing to take any kind of a medicine, any prescription at all will do, whether it's Dr. Trump's or Dr. Sanders, and of course both of them are the sorts of things that will make you know, the patient sick.
I mean, it's like the cure that's worse than the disease.
It's like, you know, there's nothing holistic about the medical treatment.
It's, you know, let's find a, well, you know, let's find a chemotherapy that may kill the problem everybody's concerned about, but it will kill the patient at the same time, which they will do, drive a nail into the hands and feet of the economy and, you know, bury it with a stake in its heart.
So this pains me deeply, and you probably saw this.
Bob Wenzel at Economic Policy Journal and Target Liberty did a good job looking at Ron Paul's Facebook page.
Ron posted, you know, just a short comment or two about Bernie Sanders' economic confusion and economic statism, and here were, here were all of the Ron Paul fans, people obviously have to be fans of Ron.
They're going to his Facebook page, right?
All of these Ron Paul fans start posting on there why, well, Ron, you don't understand, you know, why Bernie's the man.
Bernie has to be the man because because, you know, he's willing to take on the crony capitalists and so on.
And if the Ron Paul people, if the people who have been educated by Ron Paul since 2007, you know, don't really understand the destruction of Bernie Sanders' state socialism or Marxist economics, then who, who stands as a bulwark against, you know, this kind of economic cataclysm?
Nobody.
If Ron Paul's people don't get it, nobody does.
Well, Ron does.
I went to his birthday party the other day, and I actually got there late and I only caught half his speech, but what he was saying was, so that's why all we need is liberty.
And that's why, no matter what happens, if we have economic calamity, there'd be an adjustment period, but assuming that we could just get some sound money and some, you know, I don't know how else to paraphrase him, basically, let prices float on the market, let, let the bankrupt go bankrupt, and move on, then we'd be all right.
And now I'm getting music's playing, Charles, but when we get back, I'm going to ask you about that, because, you know, if I was a right-winger or a left-winger, I would say, yeah, yeah, yeah, that's all utopian, and I don't believe you.
And so I'm going to challenge you, because I already know that you agree with Ron.
So hang on, everybody.
It's the great Charles Goyette, author of Red, Blue, and Broke All Over.
He's talking about you.
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All right, y'all, welcome back to the show.
So I'm talking with Charles Goyette about the economy and the government.
One of the big tragedies of the campaign of 07, 08 is that the economy crashed, the stock market and the rest of the economy with it, all the housing market and everything, in September 08 instead of September 07.
Ron had been running for a good, you know, eight months, saying, yeah, the economy, man, it's in real bad shape.
And everyone's saying, you don't know what you're talking about.
And he would say, you don't know what you're talking about.
There's a real problem.
There are severe bubbles and there's a correction come and do.
And man, if it had hit one year earlier and then he'd been able to run all through 08 as the Austrian who told you so that whole time, man, that would have been something else instead of what it was instead.
But anyway, so here we are without a Ron.
But like I was saying on the other side of the break that I heard Ron at his FFF speech here at UT a few months back and then again at his birthday party.
What he has to say all the time is there's a natural order.
You know, liberty works.
Believe in liberty.
Trust in liberty.
Don't resort to knee jerk solutions.
Trust in freedom and things will be OK.
So right wingers, you don't need to clamp down on free trade and and, you know, latch on to other kind of protectionist and anti-economic things.
And the liberals, you don't need to resort to the 10 million different kinds of interventions that you can think of that you'd like to try out on us all.
Just let everybody be.
But then.
So, OK, let me pretend I'm a Democrat for a minute.
That's crazy.
What he's really saying is let the billionaires do whatever they want, Charles, and screw everybody else or something like that.
Yeah, that's that's that's so that that's even that's not even doesn't rise to the level of adolescent analysis.
It's infantile analysis.
That's consensus, pal.
I'm telling you, you had you had investment banks that had been around since the Civil War, like Bear Stearns, that they had survived World War One, World War Two, the Great Depression, on and on and on and on.
And all of a sudden, these banks that have been around forever, they all started failing and falling apart at the same time.
There is a term for that in economics.
It's called the cluster of errors.
And when when you see, look, there's always going to be a rogue bank or a dumb banker or, you know, a speculator or some strung out crackhead banker that goes out and does highly speculative stuff and loses everybody's money at the bank, including the shareholders of the bank who are the first line of defense against that kind of madness, including the board of directors, everybody, you know, everybody is shamed and hurt by the rogue behavior of the rogue banks.
You're always going to have one of those here and there over the course of time.
But what we had is everybody operating off the same playbook.
And when you have everybody sailing the same way, I likened it, I likened it in one of my books to when the pirates of old used to create these false, these fake lighthouses, and they sent bad signals to the shale, the sailing ships, the commerce ships.
And so being misled by these false lighthouses, the ships would crack up on the reefs, and the pirates would go in and plunder all the goods that were cracked up on the smashed up ship.
Well, this is what you have with the Fed, you know, centralizing the function of interest rates, which after all, what are interest rates?
They are a price.
They're supposed to communicate information about the supply and demand of credit about borrowers, willing borrowers and willing lenders.
They're supposed to convey information.
When that information is false, just like a fake lighthouse, then you have all sorts of people acting at once on that false information.
It's not just one rogue banker at Bear Stearns, it's a whole industry responding to signals that are being sent to it by artificially contrived interest rates, instead of normal, organic interest rates that are left free to reflect real conditions of supply and demand.
And so all of the problems of the Fed's bubbles, you know, the dot-com bubble and the housing bubble and the current bubble that they've created, all of these problems get replicated over and over again, and they compound problems in ways that are not even, that are unintended.
You have elderly people that should be seeking safety and safe investment vehicles that can't get an interest rate return, so they're taking higher levels of risk to get, you know, on their life savings to keep the bills paid in their golden years, higher levels of risk than they should, and they will probably universally suffer as a result of that.
Is that because elderly people in this day and age suddenly got stupid?
No, it's because of the centralized economic signals, the misleading economic signals about credit conditions that have been engineered by the world's central banks.
So they're creating another one for us as we speak now, and it is a calamity.
Actually, Scott, it's a calamity.
I wouldn't say that it's waiting to happen because it's kind of begun to happen right now, you know, the growth disappoints, economic, well, business inventories are starting to grow, you know, most recessions throughout time are inventory recessions, you know, businesses build up a lot of inventory, they have unsold inventory, and so all of a sudden they stop buying from producers because they've got to work down this inventory.
Well, you got inventories rising now, so you have an inventory recession that could clearly kick off what would be something much, much larger than a garden variety, simple inventory recession.
All right, now, a couple other things here.
I read a Stockman piece about China and their insane monetary policy and crony system.
I mean, their system of, I mean, I don't know, mercantilism plus totalitarianism is just fascism, right?
What else do you call it?
Boy, do they have distortions in their market, and yet these things that Stockman calls iron laws of economics are coming due over there.
And there's another piece in the American Conservative today by a guy named Charles Hugh Smith saying, forget the Chinese stock market, look at their housing market.
When that thing goes, and I'm sure Stockman would pile on with this, when that thing goes, it's going to drag the whole world down with it.
Now, is that really possible?
Is everybody that cross-invested in everybody else's bogus housing bonds, or what the hell?
Basically, I would say, yeah, it's, you know, you know the old story, butterfly flaps its wings.
China, well, this is much bigger.
This is the dragon flapping its wings.
Listen, China, you know, I read, I think I'm the only person I know that would actually read this, but I read a prolonged interview with one of the senior central bankers, their equivalent of the Federal Reserve, central bankers of China's central bank, about a year or so ago, and it was a long, a long piece, and I thought, well, this will really reveal some stuff.
This could have been written by Paul Krugman.
It could have been an interview with Ben Bernanke.
It could have been done by the Princeton Economics Department.
It's the same economic thinking.
It's the same Keynesian madness that, you know, that brought us the calamity of 2008, and that is bringing the same sort of thing on.
It's the same economic policies.
You know, these Keynesians and funny money central bankers prevail all over the world.
So, of course, what we went through in 2008 will be replicated there, because they've replicated the monetary policies that brought it on.
And are we all interconnected?
Oh, yeah, I would say we're all interconnected.
I mean, China's devaluation means that the Keynesians and the mad people around the world follow, really, China follows only on the heels of Japan's devaluation.
Everybody scrambling to make their currency cheaper in hopes to get a bigger share of the global market, when the global market, by the way, is a non-growth market to begin with.
So everybody's, you know, willing to trash their own currency in hopes to get a little bigger share of an economy, a global economy that's not growing.
Well, all the currencies in the world can't be the cheapest.
But they will continue destroying their currencies, as will the United States, you know, in an effort to gain a competitive advantage on a currency basis.
So they have created, we are really, we are on the edge of a precipice now.
Man, well, you know, it's interesting, because you don't have to be Austrian, really, right?
Because I don't think anybody would say that Paul Volcker was an Austrian school guy.
He was a Chase Manhattan banker.
And yet he came in and said, listen, inflation, inflation, inflation, inflation forever isn't working.
We need a recession.
And I'm going to make one.
Watch me.
And then he made one.
And then everybody agreed that it worked.
So never mind, you know, anything coming out of, you know, Auburn, Alabama or anything like that.
But just what about experience of the Reagan years?
Doesn't that lessen?
Don't the Japanese, of course, have the same problem when they're living through a perpetual 1970s over there for the same, you know, Keynesian reasons, basically.
It seems like, you know, wouldn't they ever question, hey, maybe we could, especially in China, where they're communists and nobody's overthrowing them.
They got the PLA.
They could force a recession for a couple of years, get a good reset and start again or something like that.
Let prices fall to normal.
Let people move into those mega cities that they've built for no one at actual market prices instead of the ridiculously propped up ones.
But no one seems to ever take that lesson.
They just keep printing and printing and printing.
How come?
Well, it's not just the economic lesson, though, it's because it kind of takes us full circle because it's, you know, it's all cronyism in China as well.
So, you know, the people that built the mega cities, the people that own the giant apartments that they are government functionaries or brother-in-laws are tied in, they are cronies in one respect or another.
So they use their not economic influence, but their crony connections to prevent, to try to prevent the reckoning or the adjustment of the prices that represents their personal wealth.
So they use economic, they use political means to prevent or to forestall the economic correction or the clearing of the malinvestment that has been, you know, has been their livelihood.
Just like in the USA.
Of course, it is exactly the same thing.
Now, but though, so, you know, America, we have some in California and in Florida, maybe you could find neighborhoods where nobody lived and nobody was buying at these prices, maybe a whole valley here or there in California, but in China, they built these mega cities.
So these are, these are distortions that I don't think the world has ever seen before.
Economically speaking, where for political reasons, money is shoveled into projects in the tens.
And I mean, I guess Lockheed is a good comparison, but we get nothing for that.
In this case, they build these giant cities for, you know, tens of billions of dollars, I guess, to build them.
And it just seems like, well, maybe like we're talking about, if they really have a severe crash, that that printing money can't halt and that could bring down America.
But on the other hand, could that prop up the dollar?
Everybody's been talking about the bricks.
Oh, it's the rise of the bricks.
They're going to make the dollar obsolete.
And then it'll be the end of dollar hegemony.
But if, you know, China is the powerhouse of the bricks and their economy is so distorted, then what real threat does that pose to the empire?
Oh, there's a huge threat to the empire, since they're our chief creditor.
I mean, you know, who buys the American debt?
Who wants to buy American debt that pays you basically nothing?
Who wants US Treasury bonds, a 30 year US Treasury instrument, a 10 year Treasury instrument that pays you, you know, one or 2% in the face of quantitative easing, one, two, three, four, five, six, and that infinitum.
So we are utterly dependent on the kindness of foreign strangers to keep our debt funded.
And all politics is local.
You don't need Tip O'Neill to tell you that.
When China needs their reserves to buy off the populace to keep social upheaval minimized in the streets there, because of the economic calamities they've created, what do they do?
They buy more US bonds?
Do they buy more bonds?
Or do they liquidate what they possibly can in the market in an orderly or disorderly manner to spend the money locally to appease the peasants with the pitchforks?
So it's not just a matter of the boom and bust that we have to suffer through, but there's a real limit, you say, to just how long they can keep printing money and keep going into debt here.
Because it seems like, you know, I don't know, I think a lot of Austrians thought that we wouldn't have just another big set of bubbles this time around, that this time we would have widespread price inflation across the board because of all the QE.
And that really hasn't happened.
So maybe they can, maybe we'll have to suffer the boom bust, but maybe they'll still be able to just keep printing dollars forever.
Why not keep buying up bad debt?
They can certainly keep things going longer.
It's just like any market, you know, a bull market seems to always go higher than you could reasonably anticipate, and a bear market goes lower than intellectually seems sound.
So they can keep these games going sometimes longer than one would imagine.
But for example, in the case of the United States, nobody could possibly have anticipated, or those that did anticipate should get a gold star for doing so, that the Fed would actually pay American banks not to loan money.
Because it is in the loaning of money that jobs are created.
So if you have, you know, substandard employment, if you have unemployment that is substandard, and underemployment that is substandard, you would think that the cure for that would be for people to save money, for banks to loan money, to create jobs, you know, new capital equipment, so on and so forth.
But instead, the Fed has pursued a policy for, let's say, seven years now, of encouraging the banks not to loan money.
And all of the Austrians I know, and myself included, have said, you know, the process of massive monetary explosion, of this compounding of the monetary base, all of this is dependent on businesses borrowing in the fractional reserve banking system.
So for the intervening few years, the Fed has been in the business of paying the banks to leave their money in neutral, in shrink wrap, basically in the basement of the Mariner Eccles building, and not loan it into the economy.
Yeah.
Well, I think, you know, Higgs was on the show last week, Robert Higgs, and he was saying, you know, the Fed is actually paying them a quarter percent or some tiny amount to keep the money there, really.
And there are a lot of other reasons why they're not loaning it out, such as just the economy's different, you know, numbers are soft in so many ways.
It's still not economical to loan it out, even though they're really barely bribing them not to.
Yeah, you're absolutely right.
I mean, why take a risk when you can have a risk-free return in an era of uncertainty and pending regime change, to use a Higgs term?
When things are uncertain in the economy, why take a risk, especially with what everybody went through in 2007, 8, 9, 10, and so on, when you can get a risk-free return?
And that's basically, basically what they're doing.
So the Fed has distorted the economy again.
They've created another huge bubble.
Look, this to me is basic Austrian economics.
You've got, you know, you've got the government, the state central bank, always seeking to inflate the supply of money and credit.
And the market is always seeking to correct the excesses.
So you have this constant battle been going on back and forth in this country.
The Fed's constantly trying to reinflate the last bubble, the housing bubble, the automobile bubble, whatever it may be, student loan bubble, constantly trying to force more money into the system to inflate the bubble again.
And yet the economy is constantly trying to get its feet back on the earth and correct the excesses.
So nobody wants to loan money in an economy that is rife with malinvestment.
So they could take a risk-free return from the Fed in the meantime, you know, keep their powder dry, keep their capital intact.
I mean, it makes pretty good sense.
So the Fed is the enemy of the growth of the American economy.
The Fed is creating yet another massive distortion that is hurting, it is hurting, it is hurting savers, it hurts investors, it increases the amount of risk that people take to their ultimate peril.
You know, the Fed is doing all of this to serve the interests of the power group, the banking community that created it in the first place.
Is that such a surprise that they would do that?
Nope.
Sounds like that's the story of the entire Constitution.
It's all regulatory capture from the Convention of 1787 onwards, I think.
Isn't it though?
Yeah.
All right.
Well, thanks for coming back on the show.
I've kept you away over time here, but it's great to talk to you again, my friend.
Scott, you do such great work.
It's great to talk to you.
Thank you, sir.
All right, y'all.
That's Charles Goyette.
Red and Blue and Broke All Over is his book.
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Stop by scottwharton.org slash donate.
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