All right, y'all, welcome back to the show.
It's Antiwar Radio on the Liberty Radio Network, Simon Kassin on ChaosRadioAustin.org.
And it's my pleasure.
Welcome back to the show.
Robert P. Murphy, he's a scholar at the Ludwig von Mises Institute at Mises.org, and of course is the author of the Politically Incorrect Guide to Capitalism and the Politically Incorrect Guide to the Great Depression and the New Deal.
Welcome back to the show.
Bob, how are you, man?
Thanks for having me, Scott.
I'm doing well.
Good, good.
And thank you again for joining us.
All right.
So I heard something, oh, it was Max Keiser said this the other day on a Max Keiser podcast I was listening to.
And this man said out loud, and I just couldn't believe my ears and I'm too lazy and stupid to go look it up myself.
I figured I'd just get you on the show to straighten me out.
He said that U.S. government spending is half of the gross domestic product of the United States right now.
And I thought, no, that can't be right.
Wouldn't we have already imploded somehow or something?
Yeah, I mean, I'm not sure what he must be including.
No, I mean, so the answer is, if you look at the official statistics, that's not correct.
I mean, the deficit is like, what about the real statistics?
Right.
I mean, so I'm wondering where he I mean, it's possible that he's including like Federal Reserve shenanigans in there, which, you know, economically makes total sense that he would lump those together.
But I mean, no, I don't know what the exact number is, but it's not it's not that high.
If you look at the official budget of the U.S. government compared to the official GDP.
Oh, well, that's good, at least.
Yeah.
You know, thank God.
The first answer Bob gave me was, no, that ain't right, because I was thinking, well, is it anywhere close to that or what do you know?
I mean, I can dig that up for you.
Are we going to go to break and then come back?
Well, we'll go to break at the bottom of the hour.
They're all hard timed in breaks.
And so.
OK, yeah, I guess we'll get back to that.
I can certainly dig that up for you during commercial.
OK, right.
Because, yeah, you know, it occurred to me that I mean, if that's anywhere close to right, I mean, just take it for argument's sake, I think by what would be your definition of gross domestic product, government spending wouldn't count really for any of that gross domestic product would be real savings, real production, goods and services traded.
And government is just the giant blood sucking parasite that takes from the rest of us.
So really, that would be almost like saying government takes the entire GDP of the country rather than they, you know, are half of it.
Right.
Well, let me now that I'm thinking about maybe what he meant was government at all levels, the federal, state and local, because that would be a more defensible.
I think he I think he actually I think he was.
Now, I'm sorry, because I probably didn't state that correctly.
Yeah.
If that's what he meant, then yeah, that's that is I mean, if you look at certain websites, they will say that and they compile things.
Now, I think, again, I mean, this is kind of an anal point, but I think that what they're doing sometimes is they're double counting, like a state government will, if you look at its budget, it will be spending funds.
But technically, some of those came from the federal government and that also shows up as federal spending.
So some of those things, you've got to be a little bit careful in terms of what the official numbers say.
But then the point you raised earlier, so just, for example, the White House for 2009, I think they reported that federal, state and local spending was about thirty five percent of US GDP.
But you're right, because the point you made earlier, technically that is misleading, because when they count GDP, when they calculate it, they count, you know, the money that you spend when you go buy stuff at the store.
But they also spend, you know, if the government spends one hundred billion dollars on tanks, they count that as one hundred billion dollars in output.
But as you know, I mean, those those figures are bogus, you know, that that's just mostly a handout to defense contractors.
And so that's not really one hundred billion dollars in total output.
So if you follow what I'm saying, because the denominator gets inflated because of some of the bogus numbers they throw in there, the real ratio was actually higher than thirty five percent.
So I think if he meant government at all levels, yeah, it probably is true that it's about half of the economy gets consumed by the US government.
Well, now, you know, I'm an anti-government extremist and certainly I'm biased.
There's just no doubt about that.
And so I wonder if I'm too quick to discount then the value to the economy or however you call it of all the money that the government employees make, because I'm sure you saw all these numbers coming out saying that on average and maybe this was just U.S. government employees, although I'm not sure that on average government employees make twice what the average private citizen makes in this country.
But then again, they all get to buy boats and coke and prostitutes and all the wonderful things that government employees get to do with all their government money that they take from us.
So in a sense, it's not completely a loss.
Right.
I can see certainly how a tank is nothing but a broken window.
But what about, you know, paying some parasite to then go and spend his money on the kinds of things that private people do on the weekend or whatever?
You understand?
Yeah, I understand you're saying.
I think the problem is when you're trying, you got to think about it consistently.
So if what we're trying to isolate is our people actually being productive and adding to the economy, it's not their consumption that's the issue.
It's the problem is not to get someone to go to the mall and buy stuff.
That's the easy part.
When it comes to, you know, an economic system, the hard part is getting workers to go and transform resources into things that people actually want.
And so if you look at somebody's paycheck, if you look at somebody in the private sector and there's a doctor who earns $300,000 a year, you know, a brain surgeon or something compared to a guy who works at the oil change place and he earns $20,000 a year, the reason we think that the first guy is more productive is that we're saying, well, because people are paying more for the services he's providing.
So that's like a gauge of why he's producing more.
But you're right.
That doesn't work when you apply it to government because, you know, guys at the DEA could be getting paid a lot of money to go burn marijuana crops, and that's not a reflection of how much we citizens value that activity because that money is being taken from us and given to them against our will.
And so you can't just look at government spending and say, oh, that's analogous to, you know, when consumers voluntarily spend money on goods and services.
So no, I don't think, I mean, it's not true, I think, to say that these guys, by spending money, are stimulating the economy because if the government just didn't pay them, other people would be able to get those goods and services, you see what I'm saying?
Right.
It's like the seen and the unseen.
Right.
So it's like the government employees, if they're really not contributing something useful, I mean, some of them, you know, we make jokes about public schools and what have you, but I mean, obviously, if the government can be paying someone to do something, I'd rather them be teaching third graders how to read than, you know, arresting people or something or, you know, blowing people up in foreign countries.
So it's certainly, it's not, I'm not lumping everything that government employees do is inherently evil.
I think there's, you know, a spectrum.
But the point is that without having that feedback of consumers voluntarily giving the money over, there's really, there's really no way to regulate that.
And so I think it's right that you're very suspicious of that, but it's not, I don't think it, I think we need to get out of the mindset that when someone goes and buys something that stimulates the economy, that the real way you contribute is if you go produce something.
Right.
Well, gee, I'm not sure if we really have enough time to address this going out to break here, but, you know, assuming that, you know, we're state, local and federal and whatever altogether is anything in the ballpark of half the productive value of America's economy.
And if it's really true that government employees on average make twice what regular Americans make, it makes me wonder, and I guess I'll give you a chance to answer this when we get back from the break here, Bob.
It makes me wonder in the larger sense, whether this is the kind of thing that's really a wake up call.
Like, wow, we really are living in a brown shirted fascist state right now.
Not it's coming, but we're here.
I wonder what you think.
It's Bob Murphy from the Mises Institute.
We'll be right back, y'all.
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All right, y'all.
Welcome back to the show.
It's Antiwar Radio.
I'm Liberty Radio Network and Chaos Radio 95.9 in Austin, Texas.
I'm talking with the great Bob Murphy, author of the Politically Incorrect Guide to the Great Depression and the New Deal, scholar at the Mises Institute and keeper of the blog Free Advice at Consulting by RPM dot com.
And Bob, I don't know if you had a chance to Google up those numbers a little bit during the break there.
But the larger kind of question I was getting at was, wowie zowie.
So the government, they own the banks, they own the auto companies, they their employees make twice what everybody else makes.
Their amount of spending is almost as much as the whole freaking rest of the country produces every year.
And also a state of permanent warfare against the weak around the world.
Maybe we should start calling Obama a douche.
Yeah, I mean, that's the sort of thing I talk about on my blog a lot, too, is that it really, you know, people keep saying, oh, the path we're going down, you know, we're at the bottom now.
But I mean, yeah, just look at, you know, we have troops all, I mean, if you just look at a map of the Middle East and look at all the countries that we have troops in.
I mean, if I were Iran, you know, just looking around, like they're literally surrounded this point by, you know, U.S. troops.
And it's, you know, I mean, your listeners know it better than anybody.
It's all the powers, the president, his official position is that he can just have U.S. citizens assassinated.
And there's no recourse.
You can't even protest that.
There's no mechanism to say, well, wait a minute, but what if you're wrong?
You know, and so, oh, well, then I guess I'll kill somebody, you know, on accident.
Sorry.
I mean, that's the definition of tyranny.
Absolutely.
Well, and as we all know, the Constitution is a dead letter.
And the real thing is, as more and more people understand that, what they don't seem to understand is it's been this way for a hundred years, right?
It's Theodore Roosevelt who, you know, finally buried the damn thing.
And it's been since then that America has been at a state of permanent warfare with people overseas and the national government and the presidency especially have been able to do whatever they want.
The Constitution only says, we the people create the Congress and it can do what it likes.
Yeah.
I mean, I've just been reading an advanced copy of a Tom Wood's new book on nullification.
And he has some quotes in there that I had never come across before, that apparently when the healthcare legislation passed, a reporter asked Nancy Pelosi, you know, where in the Constitution do you guys have the authority to compel people to buy health insurance?
And she just laughed and said, are you serious?
Are you serious?
You know, meaning what kind of silly question, what do you mean where in the Constitution?
You know, like, and it's, but I think it's very revealing that that's the way they think at this point.
That that's just some anachronism.
Like, what do you mean where in the Constitution?
Get out of here.
You know, we're doing public policy here.
It's for the, you know, the good of the country.
That's, that's what our job is.
And it's just, I mean, the notion that the Constitution, the other thing too, though, I get annoyed when I hear, like, I listen to occasionally, you know, talk radio and just, you know, to see what those people are saying.
And it's hilarious how they say like, you know, under the Obama administration, the Constitution is being torn apart as if, you know, the Constitution was just fine under George Bush.
And now Obama's, you know, assailing it.
Yeah, exactly.
Well, and see, that's the thing too, is as, as times get tougher and, you know, all the Democrats can do is announce that the unemployment numbers are down because we hired a bunch of census workers, but everybody else is, nobody's producing anything.
The velocity of money is stalled.
The real unemployment rate is nearly a fifth.
And as it stays like that longer and longer, all these sore losers from the McCain defeat in 2008, all these talk radio, you know, brown shirts basically complaining that only since this guy took power in 2009 have things gone bad.
It seems to me that, you know, we're likely to see some real kind of upheaval and rather than seeing people focus on, you know, how we got into this mess, such as, you know, the Federal Reserve created boom, bust cycle and such like that, that it becomes very easy for talk radio types, like you're describing to just go ahead and blame the gay and the Mexican and the black and the poor for bringing us down.
That's the way they always do it as demagogue against the weak, instead of the people who actually have done this to us, the Pentagon and the bankers on wall street.
Yeah, you're exactly right.
And it really is just disturbing to see, I mean, as you say, that that's the classic playbook that people empower.
That's the thing.
People are saying stuff like, gee, you know, Bernanke must just be an idiot.
Doesn't he know that these policies are bad or, gee, don't these Democrats in power know they're crippling the economy?
And the point is that, yeah, that they're doing it on purpose to get what they ultimately want, which is more power.
They can't just have a nice economy where everything's humming and people feel secure in their retirement because then they wouldn't so willingly give over their power.
But when it seems like there's this crisis, I mean, for example, the situation with BP, everyone, you know, or most people think that, oh, you know, Obama's just clueless and he doesn't know what he's doing.
But they don't see, suppose your aim were to get more power for the federal government.
What's happening with the situation with BP is perfect.
You've got people on MSNBC, I don't know the guy's name, but literally he was saying, it's about time.
When's Obama going to start being the dictator here and just take over?
Like just throwing that word around, like, when is our president going to be a dictator?
And he's, oh, well, in this one situation, you know, he would, we wouldn't want him to be a dictator elsewhere, but he should be a dictator here.
I mean, that's how this country will get to a true dictatorship.
There's going to be an intermediate period where people are calling for a dictator, but they don't really mean it, you know, and that's how you get there.
And so, I mean, they want this situation to linger, like to have the economy be in the doldrums because that's how they're going to get more power.
No one's ever going to say, the American people, unfortunately, I don't think are going to say, you know what, you tried intervention for the last four years and so let's go back to a free market.
Just no.
Every time this doesn't work, they're going to say, OK, well, let's give you guys a little bit more power.
Maybe you'll get it right this time.
Yeah.
Well, and, you know, there's this thing by the a statement made by the head of the Economic Commission in the European Union saying that he's afraid that the the pigs states of Portugal, Spain, Italy and Greece, and, you know, the correct order to make that acronym there, that as they're in such trouble that he's afraid they are going to lose their democracies and have military coup d'etats because the disorder is going to be so bad.
And this is the business cycle.
I mean, this is the deal is people can say, oh, well, the Greeks built up this giant welfare state, but they built up that giant welfare state in the middle of a giant American Federal Reserve currency bubble that made everybody think they were rich, made everybody miss spend and misallocate their resources and and misunderstand their time horizons and all these things.
And now, you know, we're talking about the head of the European Commission, Bob, is is worried that these Western European states are going to become Franco style dictatorships again.
Yeah.
And unfortunately, though, you know, his point is that's why we need, you know, all these bankers to be bailed out by the government, you know, so it's right, of course.
I mean, that's the thing.
And just like they can you know, people can accurately point to, you know, the unemployed people in the United States who have been unemployed for two years and counting and then saying, you know how that's really, you know, that's that's qualitatively worse than somebody who has been unemployed for three months or something, because it's hard for you to get back in the workforce when you've been out of it so long.
And that's all true.
But then if the conclusion is and that's why we need the Fed to have more regulatory power or something, they don't realize that that's just more of the thing that caused the problem in the first place.
I mean, just not to I hate to sound like Glenn Beck or something by bringing up the H word, but I think people, you know, to bring back, you know, reading the history books, oh, and then Adolf Hitler came to power.
And then we think that there's this other completely separate thing in the history books.
Oh, interwar Germany had massive hyperinflation that completely wiped out the middle class.
And those two things are related that, you know, you had to totally terrorize the population and make them willing to elect people who just are tyrants.
I mean, you have to completely remove their economic security so that they have no hope but to turn to the government.
And that's what happened in Germany after the first world war.
They had met.
I mean, literally, you know, people have heard the anecdotes about people getting paid in wheelbarrows of cash and just running to spend marks on anything because their inflation was so bad that completely wiped out the middle class in Germany.
And so it shouldn't shock us that that somebody really radical like Adolf Hitler was able to take power.
Yeah.
Well, and, you know, I think we're probably more likely to fall by the Soviet model than the German one.
I think people who believe in God should pray for that.
If those are our two choices.
But even if we fall more like the Soviet Union by kind of an internal velvet implosion sort of thing, instead of being carpet bombed off the face of the earth, like what happened to the Germans, then that still means that we either get a puppet dictator of a foreign state like Yeltsin or right wing nationalist dictator like Putin.
My money's on McChrystal.
Hey, can I keep you 10 more minutes here?
Yes.
Everybody, I'm talking with Bob Murphy.
He's a scholar at the Ludwig von Mises Institute, and unfortunately, he's making a lot of sense to me.
Stay tuned.
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All right, y'all, welcome back to the show.
It's Antiwar Radio, Liberty Radio Network, lrn.fm, chaosradioaustin.org, antiwar.com slash radio, and on and on like that.
I'm talking with Bob Murphy, scholar at the Mises Institute, keeper of the blog Free Advice, author of The Politically Incorrect Guide to Capitalism, and all right, Bob, where were we here, man?
I think we were talking about how the world was ending.
Right.
Well, I've got a Bob Higgs article here called Which End, If Any, Is Near?
And Bob is, I know, a Misesian on business cycle theory and is a hardcore anarcho-individualist when it comes to human rights and all these things.
He's Austrian on pretty much everything, I think, with his own interpretations and whatever, but of course well-respected in the libertarian movement, author of a great many wonderful books and a friend of this show, and he says, ah, come on, relax.
You talk about all this hyperinflation, there's no hyperinflation.
Where's that?
And, you know, I talked with that guy Max Keiser, and he goes, look, man, yeah, they're increasing the money supply, and I don't think he has the Austrian definition necessarily of inflation, but he's saying, look, where's the price inflation?
There's no price inflation because they're pouring trillions into a black hole of bazillions of dollars' worth of bad debts that were built up in the last bubble, and they can inflate the money supply all they want.
It's not going to have the effect on prices at all, because the velocity of the money is zero.
And, I don't know, that's exactly the Bob Higgs argument, but he's certainly saying don't panic, so what do you make of that?
Yeah, well, first of all, let me just concede that I've been somewhat of an alarmist on that, and thus far my warnings haven't panned out, that I was warning like a year and a half ago that we were going to see much bigger price increases than we have seen so far.
So I have to say this with a grain of salt, since I haven't been panned out yet.
But on the other hand, I've seen these analyses of the people you're talking about, and I don't think what they're saying quite adds up.
For one thing, I don't know exactly what Max Keiser or Bob Higgs have said, but guys like MISH, for example, if their analysis had been right, we should have seen prices plummeting over the last year.
And they haven't been.
Even the government's official figures, they come out today and yesterday, they came out with the producer price index and the CPI, and the official headline was saying, oh, they went down.
But if you look at the numbers, that's because the government seasonally adjusts them, but the actual prices went up.
And in fact, just to give you an example, from May of 2009 to May of 2010, energy prices went up by 27%.
And so that's partly how the media report the fact that, oh, prices are falling, is they'll report prices with food and energy taken out, and they'll say that thing hasn't gone up very much.
Just like a few years ago, they reported it with housing taken out.
Right.
So I mean, they really transform the numbers to then truthfully report and give the impression that we're on the verge of this deflation, but that's not true.
So it's right that most, I mean, when you look at those scary numbers about seeing what's called the monetary base just going through the roof, I mean, that sort of thing, it's true that hasn't directly caused, when you go to the grocery store, it's not that bread all of a sudden is $10 a loaf, but I mean, it's not that that money isn't in the system, it's just that the banks are sitting on it right now because they're afraid to lend it out because their balance sheets are so awful.
But I mean, it's not like that's play money or that doesn't count somehow.
I mean, Bernanke really did create more than a trillion dollars, and the banks really do have the legal ability to loan up to $10 trillion more if the economy improves.
So like I say, it's true that so far that hasn't happened, but I mean, that doesn't change the fact that money is now sitting sort of on the sidelines and has the potential to make gasoline go up to $15 a gallon unless Bernanke decides to suck it back out.
And when push comes to shove and Bernanke says, okay, am I going to allow prices to rise like crazy, or am I going to just totally destroy the big banks by sucking that money out, I think he's going to opt for letting consumers pay it with higher prices.
I really don't picture Bernanke devastating the banks once again in order to spare consumers from price inflation.
Yeah, but when you say the end is near, what you're talking about is, I guess, would be the consequence of that, that the debt bubble finally breaks and the dollar loses its status as the reserve currency, and we have massive price inflation.
Back to your Weimar Germany example, that's what you're warning about.
Is that right?
Right.
So yeah, I'm not formally predicting that we're going to have Weimar Republic price inflation, but I'm saying, let me put it this way, that if you try to get inside the head of Bernanke and say, what the heck is he doing, and there are a lot of people that have circumstantial evidence saying, well, wouldn't the people in power want to wean Americans off of the dollar and have some regional currency, like the Amero, or if they call it something else that's less likely to raise the ire of Americans, how could they get to that position?
They couldn't just say, oh, by the way, everyone turn your dollars and switch to something else, because people would freak out.
But if there were massive price inflation and people were worried, and then the government said, okay, our emergency plan is we're going to substitute dollars for this new thing that will not inflate as much, that would be plausible, you could see that happening.
And so, when you're trying to understand, if you just look at what Bernanke has done, I mean, it doesn't make sense from anybody's point of view.
Paul Krugman doesn't get what Bernanke's doing, Austrians certainly don't, and Chicago school people don't get what he's doing.
That if he were trying to cause price inflation to sort of kickstart the economy, then he would have allowed things like M1 and M2 to grow, but those have been fairly, M2 at least, has been fairly constant, and that's what people are talking about.
So it's, like I say, Bernanke's actions don't make sense from any major school of thought, but they do sort of make sense if what he's trying to do is set things up so when he wants to, he can unleash this thing that will ruin the dollar.
So again, I'm not saying I know for sure that's what's going on, but I don't trust the man, and I certainly don't think he's doing what he thinks is best for you and me.
Yeah, well, it certainly occurs to me that, well, it's funny, because I guess I'd have to go back and reread a lot of the stuff that helped me form my conclusions when I was younger, but I certainly believe that at least it's very plausible that a lot of the Great Depression and the regime uncertainty and things done to destroy the economy, that maybe a lot of that was deliberate, rather than just really bad economic policy or whatever.
They say Mises was marginalized and Hayek was marginalized and everybody was listening to Keynes and whatever, but we can all go back and quote Thomas Jefferson on the business cycle theory.
It's pretty easy to believe that J.P. Morgan and John D. Rockefeller knew what happened, would know, and their guy, Morgan's man, Benjamin Strong at the Fed, would know if you create a giant bubble, there's going to be a giant recession.
But they don't really care if all the millionaires jump out the window.
As long as the billionaires are still safe, they get to buy up all the millionaires' former property for pennies on the dollar.
Why not go ahead and, like you say, generate crisis, increase their own power, the power of the state, and the power of the people who are already the richest, consolidate their holdings over everybody else further down the road to serfdom?
Then again, maybe they're all just really stupid.
For me, the classic work on this is Griffin, the creature from Jekyll Island, where he makes a very, at least, circumstantial case that the people, like for example in 1929, that there was these secretive meetings between Fed officials and major bankers, and a bunch of those big boys got out of the stock market before it crashed.
So it's not that they can do whatever they want, and that they control the whole world.
If there is an unsustainable boom that the Fed sets in motion, it is going to crash, but the point is, they can get advance warning and they can position themselves so they don't get burned by it, and everybody else gets left holding the bag.
Then, like you say, they can swoop in when the stock market crashes and buy up shares for pennies on the dollar.
This is the story of agribusiness in America, too.
They did all this stimulus and stimulus all the way through the 1970s, and all they did was create stagflation, which the Keynesians said was impossible.
At the time, it was really cheap money, and it was during a technological revolution, and they were telling all the farmers in America, you've got to invest in your farm.
You've got to take out a giant loan.
You've got to buy computers.
You've got to buy a new tractor.
You have to compete with Archer Daniels Midland now.
So they all went deep, deep into debt, and then comes Paul Volcker, finally, at the end of the 70s, beginning of the 80s, to come in and lick inflation by raising the interest rates through the roof, and all those farmers got screwed out of their great-grandfather's farm.
To hear Chris Matthews crying on and on about the right wing and the militia movement of the 90s and whatever, that's where all those guys came from.
They had all lost their grandfather's farm to Archer Daniels Midland and the bankers.
Yeah, and I think to take that example, certainly each step of the way, you can understand how the people in power benefit, so the massive loans and inflation, the bankers earned interest off of those new loans that they create out of thin air, but that's such an emotion.
They would like to have avoided the stagflation, but that was the necessary consequence, and so then they'd say, all right, well, what do we do now?
As the wind tells you, lose.
Right.
All right, thanks, Bob.
All right.
Okay, thanks for having me.
Everybody, that's Bob Murphy from the Mises Institute, Politically Incorrect Guide to Capitalism.
Go and read it.
You'll understand better.
