Sorry, I'm late.
I had to stop by the Wax Museum again and give the finger to FDR.
We know Al-Qaeda, Zawahiri, is supporting the opposition in Syria.
Are we supporting Al-Qaeda in Syria?
It's a proud day for America, and by God, we've kicked Vietnam syndrome once and for all.
Thank you very, very much.
I say it, I say it again, you've been had.
You've been took.
You've been hoodwinked.
These witnesses are trying to simply deny things that just about everybody else accepts as fact.
He came, he saw, he died.
We ain't killing they army, but we killing them.
We be on CNN like, say our name, Ben, say it, say it three times.
The meeting of the largest armies in the history of the world.
Then there's going to be an invasion.
All right, you guys, introducing David Stockman.
He was budget director under the Ronald Reagan administration there for a little while.
And he's the author of the book, The Great Deformation, and then most recently, his brand new one, Peak Trump.
Welcome back to the show.
How are you doing, David?
Very good.
Happy to be with you.
Very happy to have you on the show, and I always love seeing you on the TV news shows.
I guess the money channels have you on to talk about dollars and cents.
And you always work in a slam on the unnecessary American empire there.
And you're one of the only anti-war people allowed on TV for whatever different reasons.
But they have you on over money, and you always make good use of your time on there.
And I sure appreciate that.
Well, thank you.
Yeah, I'm always looking for the opening where I can segue a little off track in terms of the Wall Street and Washington fiscal policy and so forth into this.
A couple of weeks ago, I was on Morning Joe, and I had a perfect opportunity to say I disagree mostly with what Trump is doing on domestic economic policy.
But at least there was some hope originally that he was going to rein in the empire and, for instance, disband NATO, which is obsolete for 30 years.
And the host, Mika, was shocked.
And it was kind of a classic moment.
But anyway, so we try to get our perspective in when we can.
Yeah, absolutely.
All right.
So first of all, to start off with here, before we get into the book, I wanted to ask you a specific question about Venezuela.
And then, of course, there's this whole coup here.
And so you can comment whatever you have to say about Venezuela.
But my original question on this is, how much of their hyperinflation is due to the fact that the government was expanding the money supply in order to, I guess, monetize debt or directly pay government benefits to people that they could not afford because of the crash in the oil price?
And how much of the inflation would you say is instead because of the economic war inflicted on Venezuela by the United States, different kinds of sanctions and kicking them out of SWIFT and these and those kinds of things?
I'm wondering your take on that.
Yeah, that's a very good point.
And I don't follow it closely enough to make some kind of fine-tuned allocation.
But obviously, we know their economic policy has been off for two decades.
They have been squandering the resources of the enormous oil reserves that they have.
They have run statist financial policies and used the central bank simply as a piggy bank to fund the government.
So naturally, you would expect the economy there to be falling apart, and that high inflation was the inevitable consequence.
But I think we kind of doubled down on the failed economy they produced on their own when we threw on all of these sanctions, especially last year, which essentially cut them off from the global settlements and financial system.
And I think it's a good illustration of the fact that the American empire is more than the Marines or the military and that we are now conducting the most sweeping set of economic sanctions.
And it's really economic warfare.
When push comes to shove and you look at it closely, all around the world, there's something like 30 countries under sanctions today.
And in my book, I mention a list that they publish and update periodically of all the individuals, some of them government officials, some of them allegedly cronies of bad people like Putin and so forth, who are under sanction.
And this list, by my count, is in the hundreds of thousands of people around the world that Washington has decided in its wisdom to put under sanction, which means that if they come to the United States, they'll be apprehended.
Or if they engage in commerce anywhere on the globe where we can intimidate a country into seizing their assets, their assets are going to be seized.
So this is the late stage manifestation of empire that's every bit as destructive and dangerous as what we've been doing with all these military interventions in the far-flung bases and Levin carrier battle groups and every kind of forward power projection capability that we have on the military side.
It's now almost a dual pincer movement, a dual menace in the world economy.
So therefore, you have part of the military industrial surveillance empire complex, if you want to use all those hyphens, in the Treasury Department.
There's a huge operation in the Treasury Department now conducting economic warfare, not only against Venezuela but, as I said, 30 other countries.
And right now it's particularly, as we all know, focused on the Iranians and the fact that we disapprove of their foreign policy.
And therefore we've decided to once again try to isolate them, destroy their economy, and make them an international pariah because, you know, Bibi Netanyahu and his Washington spokesmen don't like the foreign policy they conduct.
The foreign policy they conduct is to be allied with Syria because there is a lot of reasons for it, including that they're both—the Alawites and the Shia are of the same confession within the Islamic world and many other reasons.
But anyway, here we are sending nasty notes around the world to any country that dines to buy oil which is for sale on the world market from the Iranians because Washington has decreed that their oil is embargoed.
This is going to cause some tremendous conflict with a lot of other countries, including the Europeans, as we can see, as they're trying to develop a vehicle to work around these sanctions.
All right.
Now, so as far as the hyperinflation in Venezuela is concerned, then, if we're talking about country X instead of Venezuela with their socialist monetary expansion, and you just had America pick this same kind of economic fight with a country, that could and would result in the devaluing of their currency without necessarily any expansion of their monetary base at all, but just because of how their currency is affected by all the foreign exchanges.
Iran would be a good example, right, because all the new sanctions did lead to some inflation, but then I think it stopped after a few months or something.
Yeah, there was a one-time huge shift in their foreign exchange rate.
Therefore, since they import a lot of their foodstuffs, medical supplies, industrial components, and intermediate material and so forth, there was a huge increase in their price level on a one-time basis.
It took many months for it to work in, but now that has hurt their economy, no doubt about it.
And it's basically, you know, one angle on this that we need to always keep in mind is that at the end of the day, the sanctions punish the middle and lower classes who are consumers in these countries because of the inflation that it triggers and the soaring cost of imports that automatically result when you create arbitrary scarcity.
But also, when you put these sanctions on countries like Iran or Venezuela, you are creating an opportunity for the elites to profit because they're the ones that find ways to smuggle goods into the country and beat the sanctions through, you know, elaborate schemes to launder the movement of, you know, financial payments in various and sundry ways around the world.
So, you know, none of these sanctions work, and what they do is they punish the lower classes.
They make the elites and even government officials rich through corruption, and they give the regime leadership that we're allegedly attempting to replace a political rallying cry that you're being kicked around and pushed around by the imperialists from Washington.
In other words, it's the damn dumbest stupid regime that you could think of, and it's not even theory here.
It's demonstrated over and over in real-world outcomes and consequences, and yet they keep doing it because imperial Washington, as I call it, is so in the grip of this groupthink about, you know, the role of Washington as the indispensable nation and as the leader of the world that they, you know, they think, well, in fact, as a matter of fact, the Democrats find sanctions even more conducive because, allegedly, this is an enlightened way of conducting what I call imperial policy and what they would call global leadership.
So, when you have both parties, a gung-ho for economic warfare and a large share of Washington more or less reconciled to perpetual military warfare, you have a pretty nasty combination that is the reason why our foreign policy is so far off base today.
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Well, so now what do you think about the coup as it's, I guess, the failed push in Venezuela?
I mean, the military did not side with the new government's leader, or the new, you know, proclaimed government leader, so it seems like it didn't work.
But what do you think is going to happen?
What do you think it says about Donald Trump and his foreign policy?
Well, what it says is that he's too damn impulsive, okay?
Essentially, I think he had a view that we needed to reign in the empire.
That's really what the rudiments of America first were about.
And he correctly, other than the first day after the war in Iraq in 2003, even long, long ago, took the right side of that one.
And as he became a candidate and then the nominee, he clearly pointed out that Libya, the intervention in Libya was a total disaster, which it was, that Syria was like a human wreckage dump that had been created by Washington's intervention.
So I think, you know, and he also understood that there was no reason to reignite Cold War 2.0, that there was no fundamental quarrel with Putin, that we need to normalize relations with Putin and in the process rethink NATO.
Because anybody who thinks about it rationally realizes the Cold War ended 30 years ago, and the Cold War was the only reason for NATO in the first place.
So he was coming in the right direction, but he gets into office, he's impulsive, he doesn't have a studied view of anything.
And then unaccountably, but I can explain how it happened, but unaccountably he surrounds himself with advisors who are hardcore neocons or lifetime, you know, deep state apparatchiks who are totally at variance, who have views that are totally at variance with what he was trying to articulate.
And so therefore you get Pompeo.
I mean, where did he come from?
You get Bolton, who's the very epitome of every single thing that's wrong with American foreign policy since the 1970s.
And obviously if you're getting battered day in and day out with viewpoints and messages and pressure from people that you've surrounded yourself with, you're going to make a lot of mistakes.
And clearly Venezuela is one of them.
I'm not trying to rationalize for him.
I voted for him on the grounds that nothing could be worse than Hillary as the custodian of the empire and the status quo domestically and internationally.
But I am truly and profoundly disappointed that he chose to surround himself with people, now Elliott Abrams for crying out loud, in Venezuela that he should have known were going to undermine everything he's trying to accomplish.
And I read even in the last couple of days that no matter how hard he tries and no matter how often he says we're getting out of Syria, they keep finding end runs and excuses to drag their feet.
I read this morning that there's actually 3,000 U.S. forces in Syria now, not the 2,000 that were there when he announced they were leaving.
So this is a case, Venezuela, where his instincts to reign in the empire got overridden either by bad advice or bad impulses.
Sure, I don't make any case at all for the regime there.
It's been on the wrong course for the last two decades.
But on the other hand, non-intervention is non-intervention.
Venezuela is not a threat to anybody or anything in the United States.
They've never threatened us.
They have no ability to threaten us.
They vitally depend on our market for their number one export, petroleum.
They need technology from the international oil companies.
I could go on and on.
So there is utterly no reason whatsoever to be meddling in the internal quarrels that that country is having.
Now, as far as I can see, the government that we've recognized is just a ragtag, ad hoc set of people that more or less were trained and recruited for that role by the deep state, by the CIA and the whole apparatus of Washington State Department.
And they don't represent probably any better future for the country than the existing government.
But in either case, it's none of our business.
And we are clearly almost addicted to empire, I would say, if you look at what's happening right now.
Yeah, well, it sure looks like it.
And I guess let's just hope that it stays fizzled and they don't decide to double down and start trying to build right wing militias there or something like that.
But it doesn't feel like they're going to push that far, right?
Try to turn Venezuela into Syria or something like that.
I don't think they can.
I don't think they can.
But remember, you've got some really bad people close to the action here.
Bolton is a bad guy.
He was, you know, when he was in the Bush, the younger administration back in 2002, 2003, I think it was, he was behind the first attempt at a coup.
And I think Elliott Abrams was the architect of all the intervention with right wing death squads in the Contras and Nicaragua and so forth, way back in the 1980s.
So, you know, you've pulled people out of a time warp.
And Pompeo's just as bad, as long as we're talking about the circle of advisors around Trump.
So if you have Pompeo, Bolton and Abrams all trying to prove that they had the right idea and that they can succeed, you don't know how far they might actually take this.
So we'll see.
I'm with you.
I would hope the thing fizzles and they learn a lesson.
And, you know, Trump knows, learns from this not to trust them ever again.
But you don't know what they could convince him of some afternoon when he's, you know, spending more time tweeting than he is listening to what they're telling him.
Yeah.
Well, and that really is the unfortunate part, as you were kind of referring to before.
He doesn't really read.
So he doesn't even know that there's a skeptics blog at the National Interest or that there's, there aren't very many.
Right.
But there's at least one good bench full of non-interventionists who have the credibility that he could hire.
Right.
Web for Defense, Rand Paul at State.
Maybe you for Treasury.
I don't know.
Doug McGregor for National Security Advisor.
Yeah, that's never going to happen.
But if it did, the first thing I would do is that I would, you know, come in with a few sticks of dynamite and blow that whole office of foreign asset surveillance or whatever they call it, the smithereens.
Well, that's a great way to get the job.
Don't say that.
You're just supposed to do that.
No, don't warn him.
I wouldn't warn him ahead of time.
There is one good bench worth of guys who he could hire to run his National Security Council that would do the good part of what he thinks.
But he just doesn't even know who y'all's names are.
And he just he doesn't know enough.
He likes Bolton because Bolton sounds very confident when he says things or something.
And that's good enough for him.
You know, I think it's worse than that, though, if I could just jump on that one.
I think it's the bad advice from his son-in-law, who basically is a houseboy for BB Netanyahu.
You know, his family has been tied to them for decades.
And all of these neocon interventionist impulses all stem from, you know, what I call the war party.
And there are two branches, the Israeli branch and the U.S. branch, and they're all the same people.
And that's how, you know, this is why he got convinced, unlike everything else he saw as a candidate, that the Iranian nuke deal was the worst deal ever.
The worst deal in history, blah, blah, blah.
He never studied it.
But he was told that by Jared Kushner and all those, you know, BB Netanyahu disciples around him.
And he just adopted that position.
And Trump says, you know, I'm Mr. Dealmaker, and therefore I'm going to make a new deal, and blew up the one decent thing the Obama administration did during its eight years in office.
So what I'm saying is, I think a lot of these bad guys have seeped into this administration through that channel, because that's where they – Elliot Abrams?
I mean, you know, where did he come from?
Bolling is really close to Sheldon Adelson, too, who is, again, very close to Likud.
Yeah, well, that's the whole thing.
Likud, BB Netanyahu, Sheldon Adelson, all the rest of them.
And now, you know, the worst thing is, back in my day, I mean, if we could go back a little bit, when I was a kid, way back when protesting the Vietnam War and out on the barricades, I was in SDS and all the rest of it.
We were right then, and I don't know what happened to my generation as time progressed.
But anyway, back then we saw the Council on Foreign Relations as part of the establishment that was behind American interventionism and, you know, the extreme version of the Cold War and so forth.
And so, therefore, it was a suspect institution.
And it's ironic that today – and that was probably a bit of an exaggeration back then – but today it has been totally populated by these right-wing neocons.
I'm shocked.
The Council on Foreign Relations used to be kind of New York, middle of the road, kind of enlightened imperialism or liberalism.
And now, you know, that's where Abrams was before they recruited him for this job.
He was sitting there pontificating at the Council on Foreign Relations.
And the guy that runs it now, you know, he's a hardcore neocon right out of Bush the Younger.
Or CSIS or the Atlantic Council.
My God, that is really a bad outfit funded by foreigners who have an interest in perpetuating the empire for one reason or another.
And you put all of those think tanks and the NGOs and then all of the contractors that populate the imperial city now that we have an $80 billion national intelligence budget, and I think that's another whole angle on this.
That's really money that goes to white-collar people who colonize the Washington area in all these different institutions, the CIA, NSA, and all the rest of them.
But they have resources now that are unimaginable, that would have been unimaginable 20 years ago and certainly in the 1980s when I was there.
And that is another source of this whole suffocating groupthink that we have in imperial Washington today that can't see the folly of the overwhelming sweep of what we're doing.
Yeah, and in fact, the CFR, the president, Richard Haass is not known as a neoconist.
They consider him to be a very kind of typical CFR president, and yet he is a very hardcore hawk and always has been, went along with Iraq War II.
He later said he regretted it, but come on.
And then he just wrote the thing the other day saying, no, we cannot win in Afghanistan, but we still have to stay forever anyway.
Yeah, I saw that.
I posted that in my blog, too, because I thought it was...
So you don't have to be a neocon.
I mean, this is the center.
They're nuts.
Yeah, they're nuts, and they're relentless in their belief that they are enlightened and we're kind of dimwits, and that if you do all this stuff that's failing long enough, it will all work out for the better.
And then we had this vote in the Senate, which is just a case in point of what we're talking about, essentially said you've got to stay in Afghanistan as far as the eye can see.
By 68 to 23, I think the vote was, and we've been there 17 years in the Hindu Kush in pursuit of a war that is unexplainable or will be unexplainable by the history books.
I mean, allegedly we went there because bin Laden was hiding out.
He's been dead for how many years now?
Ten years or nine years.
There was never more than 90 or 100 Al Qaeda people there anyway, according to even the CIA.
They're long gone.
And when has the Taliban ever threatened the United States?
How could they threaten the United States from that woe-begone country that has been basically turned into rubble and disaster by a high-tech war for 17 years?
So it's just another example of the groupthink that is blind to the obvious facts of life.
And that's one of the reasons, I think I might add here, why Trump was a breath of fresh air as a candidate.
He wasn't schooled in Washington.
He wasn't inculcated with the groupthink of years and years and years.
And so he was willing to say, hey, why can't we make a deal with Putin?
Why do we still need NATO in the U.S. funding most of the cost?
These were all the obvious questions.
He gets into government and he's making efforts now and then in the Singapore summit with Kim, in the Helsinki summit with Putin, and he gets back to Washington and they just hem him in and shout him down and undermine even the good impulses he has over and over again.
All right.
Now, well, let's stick with that for a second.
I want to talk about the bubbles and all this.
Pete Trump, the new book.
But on that question, you know, I obviously read and run so many of your articles for Antiwar.com, especially when you write about so-called Russiagate and all of this.
So I guess is it fair to say that then, regardless of where Trump himself supposedly fits on the spectrum, that this whole Russiagate thing you think is a manifestation of essentially like a deep state, a right wing militarist push against the elected leader?
Well, I think it's a combination of the deep state rejecting an alien body, so to speak, because Trump wasn't schooled in their view of the world and their case for the global empire.
But also, I think opportunistically, the Democrats were so shocked by their loss of the election to the worst candidate the Republican Party has fielded in the last 50 years or longer.
And maybe I just throw in Barry Goldwater and Alf Landon and be done with it.
You know, maybe the worst Republican candidate ever.
And so they have repaired to the presumption that he couldn't have won in a fair and square election, no way, no how.
And that there had to be external intervention that actually threw the election to someone that shouldn't have had a snowball's chance in a hot place of winning.
So that's where the Democrats came from.
And as time has unfolded here, they've become more and more and more invested in this whole theory.
And so therefore, you get any kind of trivial thing that comes along.
They basically don't even think about it.
They just pick it up as another little evidence of a theory they have on why the election ended up the way it did.
But now, as far as the state itself, though, the FBI, the CIA and the neocons, I mean, they reacted so badly against this guy when, as we've been talking about, he has enough of kind of a right wing sensibility and he's a pushover enough and friendly with Israel enough.
What's the problem?
He hates Iran if you tell him to hate Iran.
He's on board for whatever you want.
Really?
One of the most immediate one part of it is that political, high policy position, political people led by Brennan saw the Trump candidacy come out of the blue, got really agitated and anxious about it during this late spring and summer.
And after the Republican convention, basically decided to draft the machinery that was there of the FBI, NASA, Clapper, who was director of national intelligence.
And he handpicked this small group, you know, we'll find out who their names are one of these days because we know a lot of the names already, but the whole thing, the whole that's the real election meddling conspiracy, all that's going to come out the foot, you know, the fingerprints are there.
And it was a very small group.
It wasn't the overwhelming bulk of the deep state apparatus, the institutional CIA, or even necessarily the institutional FBI, because as you saw, this was all done by people at the very top or people who work for them.
And so they used the dangerous machinery of the deep state and all of their ability to, you know, intercept communications any time of day or night in furtherance of a politically driven top of the Obama administration effort to undermine the opposing candidate.
That's the first place it came from.
The second place it came from was the deep state institutional apparatus now, not just the Brennan cabal at the top, but the institutional apparatus turned heavily against Putin back in late 2013, early 2014, culminating in the coup in February on Kiev.
When Putin adroitly stepped in in August, September 2013, when Obama had drawn his red line and false flag gas attack had occurred, and he was ready to unleash the bombers, and that would have been the coup de grace to take Assad out.
And what happened then, just as the whole regime change project, Syria division, was about ready to be fulfilled or enter the ultimate phase, Putin stepped in, got Assad to agree to have international supervision of the destruction of all of his chemical weapons.
That stopped, you know, the bombing campaign cold.
The Brits didn't want to do it.
They voted it down in Parliament.
Obama kicked it to the Congress.
They sat on their hands.
And the whole apparatus of the deep state policy got stopped cold in Syria.
They blamed Putin for it.
And the whole thing turned against Putin.
And the reason that I think that was the critical point, and then that led to the coup and bringing to bear all the machinery of the State Department, National Endowment for Democracy, Radio Free Europe, etc., etc., in February to get even with Putin for, you know, as I say, frustrating or blocking the regime change.
Yeah, you know, that was what Robert Perry thought, too.
Robert Perry thought that – because look at who we're talking about.
It's Robert Kagan's wife was the one who pushed that policy.
They were all running around there.
McCain was on the ground passing out cookies or something, I don't know, whatever he was doing.
And they really did hate, overall, more than anything, they hated, the hawks did, that Obama was starting to get along with Putin, that they kept finding things to cooperate on, like Putin was really doing Obama a favor in leaning on the Ayatollah to cooperate on the nuclear deal as well.
And they hated that.
Yes, exactly.
But I think that's true, and that came to bear in 2014 and 2015 as the Iranian negotiations, you know, ground towards a successful conclusion.
But I would say it was the Syria front and the stopping cold of, you know, the bombing campaign that really would have destroyed the country and probably the regime.
That was the thing that triggered this immense anti-Putin reaction that got the machinery, not just the political leaders at the top, although Victoria Nuland obviously is a political appointee, but got the machinery turned in a increasingly vituperative anti-Putin posture that, frankly, if you look back, wasn't there.
In my book, I point to one episode that sometimes we forget how much things change in a short period of time, because we've got this recency bias, and you've got cable news, and you've got memories that last two weeks at best, or two days normally.
But if you go back to September 2012 and presidential debates between Romney and Obama, Romney made the statement in that debate that shocked everybody at the time that our number one national security threat was Russia and Putin.
And he got the response to that in the mainstream media was a wave of guffaws and disbelief and, you know, where's he coming from, and how could he be that misguided?
Now, actually, he was misguided, but the point is mainstream opinion at that point had not yet congealed into this irrational, maniacal anti-Putin demonization, because you could see that… Certainly not at Obama's expense they weren't going to go that way.
No, I know.
Maybe Obama was part of it, but the point is Putin had not yet been demonized.
Russia had not been turned into some kind of new Cold War threat.
And that all happened beginning in August 2013, got much worse after the coup, and then, you know, it just festered from there.
And, you know, Washington has no clue, and I spent a lot of time in my book on it on the Ukrainian reality and the history of how it got the way it is, and Crimea doesn't have any Ukrainians living there anyway.
And it was always Russian.
And you could go on to all of that, and it was completely lost on Washington once the coup occurred and the machinery, institutional machinery of the deep state apparatus decided that Putin was the, you know, the new demon that the American empire needed to oppose.
Yeah, you know, that reminds me, actually, that, because I was just looking at your table of contents there looking for the Ukraine coup part, and I saw Woodrow Wilson, and that reminded me that you wrote the best essay that anybody ever wrote, which I guess was the transcript of a speech that you gave or the text of a speech that you gave called, let's see, Woodrow Wilson and Keynesian myths and central planning or some kind of awkward title.
But it's the best thing anybody ever wrote as far as the history of since Woodrow Wilson and the First World War.
This is what happened in America in terms of monetary policy and booms and busts.
And in terms of American foreign interventionism, all tied together there.
It's just great.
And I'll make sure to link to that in the show notes as well.
Okay, well, I appreciate it.
And I remember you being good on Ukraine throughout that whole coup era as well.
Well, you know, I appreciate you saying that.
But, you know, the reason that I dug back that far into history, it's 100 years now.
In fact, we're having all kinds of anniversaries.
This coming year will be the 100 year anniversary of Versailles.
I mean, a few months from now, I think it was finally signed in June or July 1919.
And that was the pivot point in world history.
And the reason I got into it was there was this constant, you know, there's this refrain about America, the exceptional people, the indispensable nation, that somehow the world goes to hell in a handbasket unless American leadership is strong and spread from pillar to post around the globe and so forth.
And I said, where the hell did this idea come from?
And I really trace it back to the huge mistake that Wilson made in April 1917 when he got America into World War I for no reason.
I mean, almost everybody was bankrupt by then.
Germany was bankrupt.
They'd already lost upwards of a million men or more.
Everything was congealed on the Western Front.
There would have been a piece of exhausted combatants within months.
And the reason this is also important is that there wouldn't have been a Leninist coup later that year.
There wouldn't have been the Versailles Treaty of Peace of Victors that was really vindictive that ultimately paved the way for Hitler and Nazism.
You wouldn't have had, therefore, World War II, the Cold War.
You wouldn't have had the American empire.
You even wouldn't have had the Federal Reserve as a manager of the entire economy, because prior to Wilson's converting the Federal Reserve into an apparatus or arm to finance the war after April 1917, the Federal Reserve didn't even have the authority to buy government bonds or bills or notes or intervene in Wall Street in any way, shape, or form.
So all the evils of the contemporary world – I argued in this, and it was kind of pretty compact history – but all the evils of the modern world, the central banking, Keynesianism, imperial foreign policy, the warfare state and military-industrial complex, all of this, Vietnam, Korea, Iraq I, Iraq II, to the very point we're at today, the Venezuelan intervention.
All of this flowed from a gigantic mistake that was made in April 1917 that turned the U.S. from a republic to an empire.
So the article is called Keynesian Myths, Monetary Central Planning, and the Triumph of the Warfare State.
And it's in six parts, and it really could be called a primer to a libertarian understanding of the history of the 20th century as well.
Well, I've condensed it and expanded it a little bit in a chapter in the new book, Peak Trump, because in that whole section, which is part three of my book, I'm trying to just explain where the empire came from and why we keep engaging in this destructive, costly futility.
And I link it back to the indispensable nation, which even Obama signed onto.
And now you scratch any kind of mainstream Democrat in Washington, Nancy Pelosi, and all her minions, and they'll ape the same point about the indispensable nation on the theory – and this is the key point of it, which is so important – that unless there is an imperial power running the world, you're going to end up with two Stalins a week and three Hitlers every other year.
And my argument in here is, no, that isn't the way humanity's DNA is made up, and that what we really had was a freakish confluence of totalitarian societies in the 20s and 30s that stemmed from World War I.
And without that, you wouldn't have had those nightmares of the Holocaust and Nazism and even more people killed by Stalin and even more by Mao.
None of that would have happened, and so therefore my argument is that you don't have a Mao or a Stalin or a Hitler lurking in the unfolding of nations, and therefore you don't need America to be in this global policeman's role of trying to stop every regional dictator who's having a fight with somebody next door.
That's the big issue, because if you argue that in the normal course of things the nations will take care of themselves, and maybe there'll be local spats, but there's no one going to try to conquer the world, then the whole case for 11 carrier battle groups, a giant navy, our Air Force airlift capacity to send, project power into any region of the globe, the whole damn thing would be undermined.
And so now, obviously, the deep state, simply as an institutional matter, has to perpetuate the myth of the indispensable nation, least the natives who every two years elect Congress might suddenly realize that we don't need an 800 billion defense and national security apparatus.
And even more than that, I point out in the book, and you've done it several times too I've seen, that the real warfare state costs a trillion dollars a year because you've got a $200 billion veterans budget that would be practically nothing, because World War II ended long ago and there aren't many veterans left from that, if we hadn't had all these interventions since then that were totally unnecessary.
Right, and of course then there's the care and feeding of the H-bombs and all of these extra costs, you throw all that in the Homeland Security Department.
Homeland Security, the nuclear energy operations of the DOE, I mean, when you go through and carefully count it up, State Department operations, security assistance, foreign aid, all the money we throw into different international institutions like the IMF and the World Bank, the world would be far better off without either of those institutions, obviously.
But they're part of the consensus of empire.
They're really, even though they're not U.S. institutions per se, they are part of the machinery of empire.
Are you a libertarian?
You run an IT business?
Well, then you have to read No Dev, No Ops, No IT by Hussain Badakhshani.
No Dev, No Ops, No IT, it's how to run your computer company like a libertarian should.
All right, now, so we have 10 minutes, so let's talk about 20 years worth of economic bubbles and crashes and crises.
So I guess my first thing for you is so clear that one of them, and you write this as well, one of the reasons for the artificially low interest rates and the constant economic bubbles is so that they don't have to try to sell war bonds to a public that wouldn't buy them.
They don't have to raise taxes and get thrown out of office.
They can make their wars seem free.
And then we have this giant boom-bust system where we spend our time out of work or jumping out of windows or whatever it is, and that's our cost for the war.
We just don't see it that way because they don't explain it that way on TV.
But so the first thing I want to ask you is actually a minor point of fact.
Was there literally, do you know, a meeting, a plot, a conspiracy or an agreement between the Bush Jr. administration and Alan Greenspan that we are really going to lower these interest rates way, way down after the 9-11 attack to make sure that they would be able to have all their wars?
That the small recession that came after the 99 crash in 2000, that that would be papered over and we're going to go pedal to the metal on monetary policy because we got a bunch of wars to start.
Was that a literal thing or just Greenspan knows the time and so he does what is expected of him or a perfect confluence of interests there or what do you think?
I think it's more confluence, but it's also accretion if I could use that word.
In other words, once you start down the wrong path and Greenspan did in October 1987 within a month after he took office or two months when we had the Black Monday.
Once you start down a path of policy, then it's very easy to intensify that wrong headed path and double down when unexpected pressures develop or circumstances.
So I think that may have been in the back of Greenspan's mind.
He was a total political preacher.
There's no doubt about that.
But I think by 2001, 2002, the group think of what I call Keynesian central banking or monetary central planning, whatever term you want to use, was so institutionalized at the Fed.
That they more or less did this as the next logical step in going down a rabbit hole that eventually led to the massive money printing by Bernanke and so forth.
But as it relates to the warfare state in the opening of your question, I think it's something really important to point out.
And that is unlike today where we can't seem to stop any war no matter how trivial or stupid.
We still have forces in Libya, by the way, that we get a president elected by an uprising of the people, Donald Trump, and he can't even get 2,000 people out of Syria.
I mean, that's pretty pathetic.
But remember what happened when I was growing up as a college student in the 60s out on the barricades.
We stopped the Vietnam War.
And Washington was totally invested, and Lyndon Johnson was the second largest ego ever to occupy the Oval Office before Trump.
And he was not about to go down in history as the president who lost the war for good, bad, or indifferent reasons.
And the key point I want to make here is three things caused that to grind to a halt.
Number one, there was a draft.
So all of America was impacted.
I went to Divinity School, so I didn't get drafted.
But thousands and hundreds of thousands of middle-class kids had to go to Canada or the National Guard like Bush Jr. did or something.
And that ricocheted through the public and created dissension.
But we don't have any more because we have mercenary armies, basically.
That's the first point.
Second point is, back then, people still believed in balanced budgets.
And even the liberal advisers that Lyndon Johnson had, the Keynesians of that era, convinced him that guns and butter was going to blow up the economy.
And that in 1968, he had to balance the budget.
And to do so, raised taxes quite substantially.
They put on a surtax, which was very unpopular.
But it was bringing home to the electorate the tax consequence of this utterly stupid intervention in Southeast Asia.
Third thing, the Fed was still shackled to the gold standard, the Bretton Woods gold exchange standard in 1967-68.
And our current account and capital flows were falling apart as we tried to finance this massive war in the empire.
And by issuing dollars at the Fed that the rest of the world didn't want.
And so they were bringing them to the window and demanding gold.
And that led to the crisis of 1971 and what Nixon did.
So the point is, you had a draft, you had a reason, you had a tax requirement and a fiscal discipline, and you had a gold standard as three barriers to one of the greatest misadventures of the warfare state of modern times.
Flash forward 50 years, you don't have any of those things, because the Fed has been monetizing all the debt, so the politicians think that deficits don't matter.
The gold standard is now a relic of history, and the Fed basically prints at will.
And as I said before, we have a mercenary army.
So we're like the late stage of the Roman Empire now.
It's bankrupt and we just don't know it yet.
All right, now, so my whole life I've heard people complaining about the national debt.
And I remember when Reagan left office, people said, what a crock, the conservatives, they come into power.
And I'm sure this is no fault of your own.
They come into power preaching all this fiscal conservatism, and they had, I think, less than a trillion dollar debt.
And they left with a four trillion dollar debt.
And that is the end of the world, I remember being told in the 80s.
And now here we are, it's 21.
And so maybe there's no limit on the debt and the government can just go on like this forever and it'll be fine.
Well, that hit a fulcrum point in October 1987.
It's absolutely essential here, because what was happening during late 86, 1987, was the chickens were coming home to roost on these huge Reagan deficits.
They weren't temporary, they weren't stimulus, they were structural permanent.
And something that was beyond anything seen before, 4 or 5 percent of GDP.
The old consequence of permanent large deficits was showing its ugly head, what we called then crowding out, rising interest rates, because the Treasury was trying to finance all this in a limited supply of savings.
And rates went up from about 7 percent at the beginning of the year, 1987, to almost 11 percent right before the great 22 percent crash in October.
So it was about ready.
In other words, the chickens were about ready to come home to roost.
We were within months of a recession.
There would have been a bad recession in 1988.
Reagan would have been blamed for it.
They would have understood the deficit sooner or later, bring the system down, crowd out investment, cause a recession.
But it didn't happen.
I'm talking contrary history here, because Greenspan panicked on Black Monday and just opened up the printing press like never before, sent his henchmen down to Wall Street, forced them to trade with each other even though they knew they shouldn't and there were bad credits and they were at risk.
And it was that point in time where a whole lease on life of big deficits was granted in the form of massive monetization of the public debt, and not just in the United States.
And this is the second key aspect of this that goes back to your original question.
With the passage of time in the 90s, the Greenspan policy of aggressive monetary expansion forced everybody else in the world to do the same thing.
So the Chinese started intervening in the foreign exchange markets by essentially buying dollars in bonds in order to hold down their exchange rate.
And then everybody else did it around the world, because otherwise they would have faced a short-run crisis of a rising exchange rate, falling exports, damage to their mercantilist growth policies and so forth.
So the Keynesian disease that Greenspan institutionalized on Black Monday, October 19th to be precise, 1987, spread to the entire world by the year 2000.
And what happened then is from the year 2000 when the balance sheets of the central banks of the world were about $3 trillion, if you add it all up, everybody, ECB, the Fed, Bank of Japan, Bank of China, Bank of Canada, and all the rest, today is $25 trillion.
In other words, over the course of the first two decades of this century, the central banks of the world have printed about $21 to $22 trillion of credit out of thin air and used it overwhelmingly to buy sovereign debt, not just the United States debt, but the debt of Italy and all the rest of the fiscal basket cases in the world, and especially Japan.
So if you look at that in perspective, when you have $22 trillion of central bank bond buying or fixed income security buying, it fundamentally and powerfully impacted the pricing, the supply and demand in the global market for savings, and it drove interest rates to unspeakably low levels.
You know, at one point there was $14 trillion of government debt that was trading at negative yields, not just in real terms, but in nominal negative yields.
People were paying for the privilege of owning government debt in many different countries and currencies around the world.
So that $22 trillion buy by the central banks that all were kind of some big convoy led by the Fed so distorted fixed income pricing in the entire global financial system that governments everywhere around the world were, you know, let off the hook in terms of fiscal policy.
So fiscal policy essentially ended, I think, at the turn of the century, and now we're just rolling the dice, except even the central banks led by the Fed have now realized they can't keep printing at that rate.
They're beginning to reverse direction to pivot.
That's what this whole thing about QT is about.
And therefore I think we're, you know, at the end game of that 20, 30-year period in which debt was monetized and politicians enjoyed the luxury of a free fiscal lunch.
That's all over, and we're going to end up probably in the next two years facing a giant fiscal crisis with a government presided over by a guy who believes debt is wonderful.
So, you know, you couldn't think of a better, of a more adverse confluence of historic developments and forces than what's coming down the pike right in front of us.
So whereas in 2008 you had crashes in all these and those different markets, particularly in housing and in the stock market and what have you, that had been built up from all the funny money then.
Once that crashed, a lot of people, I guess, all around the world and in the United States institutions, they all went and bought U.S. government debt as a more stable haven for their money while the stock market's crashing.
But what you're talking about is that the next one will be a crash in the dollar itself, a fiscal crisis meaning.
Well, yeah, it'll be a crisis of all central banks, not just the dollar, but the point is about 2008 that you have to remember is the, I just talked about this gigantic expansion of the central bank balance sheet.
So what happened in 2008 is that a drift was already underway that created that crisis, and then they doubled and tripled down.
In other words, in late 2007, the combined central bank balance sheets of the world were less than $7 trillion.
And then they really went to town.
Bernanke went nuts, and let me just give you one more number that tells you how quickly this thing unwound and got off the deep end.
The Fed, on September 2008, the Lehman crisis and that whole crash that began that month and then the TARP bailout and so forth, that was year 94 of the Fed's life existence.
It had spent the first 94 years slowly creating its balance sheet by buying Treasury paper and paying for it out of thin air.
94 years slowly, it was $930 billion at the time of the Lehman crisis.
In the next 13 weeks, or actually a little more, 94 days, this is really a nice comparison, in the next 94 days, Bernanke expanded the balance sheet of the Fed from $930 billion to $2.2 trillion.
In other words, in 94 days, he nearly tripled the balance sheet that had taken 94 years to create by his predecessors.
And once the Fed did that, obviously there was a home for all the bonds that the governments could issue because the Fed was buying them up hand over fist and everybody else soon followed.
If you go back to the crisis in 2008, the balance sheet of the ECB was only about $1.4 trillion.
Now it's $5.4 trillion.
So they did the same thing that the Fed did.
And the Bank of England, on a smaller scale, did the same.
And Japan went even more nuts.
We don't have enough time, but if you went into the rate at which they've expanded their balance sheet by printing money, it's truly staggering.
So double down, triple down in 2009 extended a false fixed income market so governments could issue all the debt they wanted and yields actually fell consistently year after year.
And that was basically a form of euthanasia.
I call it fiscal euthanasia, in which all of the governments in the world went to sleep.
Republicans and even all the remnants of the Freedom Caucus and the fiscal right wing basically gave a lot of speeches but didn't worry about it in the sense of doing something that made a difference.
So we basically, for the last 10, 11 years since the crisis, have had all governments of the world enjoying the fiscal free lunch because the central banks were buying up the paper.
But, as I say, that's now ended and I think in some pretty dramatic way the day of reckoning is around the corner.
Okay, but I guess, and forgive me because I'm really just ignorant about this stuff, but you're telling me that the next crash will be different in kind from the 2008 crash or it'll be the rest of that crash that Bernanke put off.
With all this expansion.
Yes, I think your last statement is exactly it.
The crisis never ended.
It was just driven underground and deferred and papered over by this massive outpouring of central bank money expansion.
But now that they've stopped buying government debt, the market is now slowly going to work its way back to what I call true supply and demand market clearing prices.
And the debt is soaring.
Trump basically has increased dramatically the deficit, which was bad enough that he inherited.
And the rest of the governments around the world are pretty much doing the same.
So now we have an increase in new debt issuance by governments and a dramatic shift.
And let me just maybe highlight that with this number.
A year and a half, two years ago, the central banks of the world were buying in government debt at a rate of about $2 trillion a year.
That is now down to zero.
And the U.S. is actually shrinking its balance sheet.
And I think ECB is not far behind.
And other governments, other central banks are going to have to follow.
So when you go from buying up $2 trillion and thereby relieving the pressure in the bond pits and, you know, repressing yields, to basically not the central banks being on the sidelines or actually negative dumping existing debt into the market, into the bond pits, you're in a totally different world.
And then there's another whole angle to it, and that is that all the smart money on Wall Street, the hedge funds and so forth, basically over the last eight or nine years have said, whatever the Fed is buying, we're going to buy.
And then the speculators in Europe basically, you know, followed suit, whatever the ECB is buying, we're going to buy.
So there is a whole wave of speculators who have been front-running the central banks, realizing they could collect the yield, buy the debt on 98 percent repo, and pay like almost nothing for the overnight carry.
So they were, you know, laughing all the way to the bank.
But now that the central banks are beginning to sell paper, or at least not buy the government debt, all of these front-running speculators are going to get out of the Treasury market, and that's going to only compound, you know, the reckoning, the pricing adjustment that's coming down the pike.
All right, but now, so Donald Trump, though, has some power here, him and the Republican Party, and they've cut taxes, and I guess they've done a lot of spending on, you know, military spending, which in the short term, in their eyes at least, in terms of aggregate demand, is stimulative, right?
So is that going to help, either or both of those things going to help to put off the next crash at all?
I don't think so, because this time, the fiscal stimulus, so-called, was not monetized, and the key rule that everyone needs to understand is fiscal deficits do not stimulate growth if they are honestly financed in the bond market, because if the government gets $100 billion, someone else doesn't.
There's a higher yield, and some, you know, home mortgages aren't issued, and houses aren't built, or companies don't borrow money, and plants aren't built, and so forth.
So if the deficit is financed honestly in the bond market, the capital market, there's no stimulus.
It is only stimulative if the Fed monetizes the new debt, or other central banks do, by buying up the extra paper.
That's what we've had in the last three decades, but that's not the case with the Trump stimulus.
There was a tax cut in the Trump defense increase.
The Fed stopped buying paper in late 2014, and there would have been a repercussion even then, except the ECB doubled down during that three-year period and took its balance sheet from about $2 trillion to $5 trillion in less than four years.
But they're out of business now, too.
So you see what I'm saying here is that this time, the big central banks of the world are not monetizing the debt, incremental debt being created by the Trump tax cut, which is massive, $1.7 trillion over 10 years, or the defense increase and all the other spending he's doing.
So I don't think it's going to stimulate.
Maybe we can go into why the temporary GDP blipped a little bit in the second quarter and third quarter last year, but that was mainly artificial pull forward of some exports, because everybody could see the Trump trade war coming, and a temporary dip in household savings because they got the Trump tax cut.
So it did work in the very short run, but I don't think it's going to be sustained.
So the key point in all of this is we're now in month 115 of this expansion that started in June 2009.
It's the weakest one in history, not even a third as strong, if you measure it properly, as the other long expansions we've had, like the 1990s and 1960s.
And so there is recession stamped on the forehead of this economy.
It's old and arthritic.
And when the interest rates start going up because the Fed is not going to back off entirely and because of all this borrowing, we're going to hit another recession, and then it's Katie Barr at the door.
All right, so should I let you go or should I ask you one more?
You can get one more and then call it a...
Yeah, so one more.
So Murray Rothbard says that they always panic and they always realize that, uh-oh, we've expanded too much of the money supply.
We bought too much debt with funny money and this and that, and now we have to start scaling things down.
It's a tough landing, but it never works.
It's always a pop.
And at some point, you'll have, you know, maybe I guess like in the last time around, the analogy would be through 2007, you had Bear Stearns and some of this stuff and everybody, you know, people like you sounding the alarm, but then the big crash didn't come until September of 2008.
So something like that.
But so where are we at on that scale now, do you think?
And I guess, do you agree with that?
That, oh yeah, there will be one really bad day just like we saw in 08, that kind of thing.
Yeah, I actually agree with that because, you know, there's never been a soft landing, but since the Greenspan era of real activist Keynesian central banking, it's gotten even worse.
And now we don't even have Main Street driven credit cycles anymore.
That's what used to cause recessions.
You know, the Main Street borrowing would get overheated.
The mortgage market would get red hot.
Companies would be, you know, expanding their borrowings and investing at very rapid rates, fixed income inventories and so forth.
The Fed would have to pull in the reins, raise interest rates rather sharply, and Main Street would come down and Wall Street would see it coming and there would be an adjustment.
Nowadays, Main Street isn't even affected by the Fed's cheap money anymore because the household sector's got $15 trillion of debt it can't borrow anymore, and it didn't.
Businesses could borrow more, but all the borrowing they did as they took their debt up from about $6 trillion, or excuse me, $11 trillion at the time of the crisis to about $15 trillion now is they spent it on stock buybacks and dividends and so forth, not investment.
So what I'm saying is in the new era of what I call bubble finance, the Fed just creates massive financial bubbles that take 6, 7, 10 years to reach their peak, and then they crash on their own because the last sucker finally gets into the market.
And that triggers a vicious response from what I call the C-suites of corporate America who see their stock options going up in smoke, so they desperately start dumping inventory, restructuring, closing plants, writing off assets, and laying off people big time like they did in the winter of 2008-2009, like 7 million people were laid off in a few months.
Now, that's what causes modern recessions, and I think one of those is in store in the next year or two.
The stock market already started to crash.
I mean, from the peak of 2940 September 20th, it hit as low as 2440, so a huge amount of that bubble came out.
There's been this technical rebound in the last month or so, and Fed kind of caved rhetorically.
I don't think it has in actual policy, but I think this is just a trader-driven rebound that's about running out of gas, and the decline that was underway and got very dramatic on Christmas Eve is likely to reignite in the next couple of months, especially as it becomes clear that Washington is totally shut down, non-functional, and if you think the shutdown we had for 34 days was interesting, when they get to the debt ceiling, then we're going to see the real rubber meets the road, because I don't think there's any consensus to agree on anything right now, and we're going to have a real crisis sometime this spring.
But they always just raise the debt ceiling with a resolution every time it comes up, don't they?
Yeah, but this time, there's such bitter partisan warfare that the kind of deals, the bipartisan deal that they made in October 2015, which handled the problem for a couple years, I think will be very hard to do this time, and both sides are going to be trying to lay onto the debt ceiling what they want.
Trump will try to put his wall on it, and Nancy Pelosi will try to put a retraction of the corporate tax cut or some other pet schemes that the Democrats are going to be pushing as part of their campaign for 2020.
So I think it's going to be very hard to lay onto the debt ceiling this time.
Yeah, never felt so good to have nothing to lose.
Yeah, right.
All right.
Hey, thank you very much for your time.
Great to talk to you, David.
Okay, great.
All right, you guys, that's David Stockman.
The brand new book is called Peek Trump, and it's a great read.
It's just like listening to the man talk out loud is what it is, reading this book, and all about these things.
Check it out right now for sale, and also check out his great blog, David Stockman's contracorner.com David Stockman's contracorner.com and we run a lot of it at antiwar.com as well.
All right, y'all.
Thanks.
Find me at libertarianinstitute.org at scotthorton.org antiwar.com and reddit.com slash scotthortonshow Oh, yeah.
And read my book Fool's Errand Timed and the War in Afghanistan at foolserrand.us
