All right, y'all, welcome to the Scott Horton Show.
I am the Director of the Libertarian Institute, Editorial Director of Antiwar.com, author of the book Fool's Errand, Time to End the War in Afghanistan, and I've recorded more than 5,000 interviews going back to 2003, all of which are available at scotthorton.org.
You can also sign up for the podcast feed.
The full archive is also available at youtube.com slash scotthortonshow.
Okay guys, on the line, I've got Ryan McMacken.
He is Senior Editor of the Ludwig von Mises Institute and their great website at mises.org.
Welcome back to the show.
How are you doing?
Hi, I'm great.
How are you doing?
Good.
Very happy to have you here.
So, there's so much going on, I almost don't know where to begin, but I guess we've got to start with the latest and biggest breaking news from yesterday afternoon.
The Fed says they're going to dump $1.5 trillion into these and those markets in order to make everything okay.
Please explain.
Well, I mean, it's pretty much the same old, same old.
I mean, there are lots of different variations on its own, but it's all about providing liquidity to the market.
But it's essentially, I think what the real fight is going to be over is whether we're just going to admit that this is really just another bailout.
If you read the academic economists and the people who are firmly enmeshed in the world of trained economists, they're all using euphemisms like, oh, it's a liquidity injection, and oh, they're not just giving money away, it's a loan.
And the reality, of course, is that, as happened in 2009, if you give a gigantic bank a loan because the bank failed to maintain proper liquidity for itself, you're essentially bailing that bank out.
The fact that the bank pays you back later doesn't mean anything, because what it means is in reality, that bank would have had to liquidate itself, lower prices, or do any number of things in order to cope with market pressures.
But all you're doing by giving it one of these cheap loans that, whether it's done through Congress or through the Fed, you're perpetuating an inefficient institution, a wasteful institution that squandered its resources.
So what you're saying is, well, I have friends at that institution, so I'm going to make sure that bank doesn't fail.
We're going to make sure it keeps going forever, and that nothing bad ever happens to these millionaires and billionaires who ran these banks into the ground, and we'll just keep things the way they are forever.
And that's essentially what this is.
Let's maintain the status quo by printing more money, by funneling more funds into the banking system as is, so that the people who run the system never have to actually face the music.
And so all this stuff about, oh, it's not a bailout, we're just taking prudent steps to provide liquidity, this is what you'll hear from economists, because this is the world that these academic economists live in, where they all talk to each other, it's basically an echo chamber.
And these terms, they think, make perfect sense to them, and are all reasonable, and of course it's not a bailout, et cetera, and all those dumb populists don't understand what's really going on.
So you can mostly ignore those people.
Yeah, exactly.
Well, so, but let me play the devil's advocate here for a second.
Black Swan event, and deflationary spiral, and things like that.
So we're not just talking about some rich jerk's super yacht money here, we're talking about the structure of our financial system, which could unravel and kill us all, far worse than the terrible, dangerous virus that's coming our way.
Well, if you have an issue of people who are being unemployed and so on, the question you have to ask yourself is, do we want to then perpetuate the financialized system that we have?
All the solutions involve doing the exact same thing.
It is, let's financialize the system further.
And financialization is just simply what has occurred since the 1980s, where we take our economy and we make it more and more reliant on large financial institutions.
And so the only solutions that are then offered is, let's funnel money directly to banking institutions.
And that's just always seen as the solution.
Now, you can be out there making cases of, well, these people are suffering, so you got to do something.
Well, then why is it that the only solution ever offered is to just offer endless amounts of cash to financial institutions only?
Now, you've already got bankers out there, or you've already got economists out there saying, oh, well, fiscal policy doesn't really work because of this study I saw.
Well, there's plenty of studies showing that the economy is becoming more and more fragile and more and more prone to bubbles because it has been focused almost solely on bailouts through financial mechanisms.
So I mean, we can argue the issue of, should you use public relief for people who find themselves unemployed and so on?
If you win that argument, then my question to you is, okay, well, then which is the solution?
Are you going to put money into the economy through Main Street, or are you going to put money into the economy through Wall Street?
Because all we're talking about is yet again doing what happened in 2001, 2009.
Oh, we got to bail out financial institutions.
And David Stockman talked about this in his book, The Great Deformation.
And he talked about how there's not actually any evidence to show that the system of bailing out financial institutions only is how you save an economy.
But that's who runs, that's who has the most lobbying clout in Washington.
But it also seems easy to the Fed, since they've got a direct line to funnel money directly to financial institutions.
Oh, that's the easy thing to do.
Let's just do that.
But he points out that this is just the way it's done.
It's never been proven or shown that Main Street collapses automatically when Wall Street has a problem, when the Dow goes down and so on.
It hasn't actually been shown that if AIG goes bankrupt, the economy collapses.
And it's also not been shown through research or anything like that, that, okay, well, we'll give a half a trillion dollars to AIG and some banks and Fannie Mae and Freddie Mac, and that is the proper way then to save the economy.
So there's so many issues here that are just taken on faith.
And so I question kind of the whole way the discussion is structured.
Well, so John McCain in 2008, who admittedly said he didn't know anything about the economy, but he was reading Greenspan's book right as the whole thing was unraveling, hilariously enough, but he was probably parroting some expert told him this, and he proposed in his campaign as a last-ditch thing there, the economy for people who don't remember.
It crashed two months before the election of 2008 there, a month and a half, I guess.
And so he said, well, what we ought to do is, the federal government should just pay off every mortgage in America.
And that would be essentially about the same price as bailing out these banks, only in this case, every homeowner is saved and the housing economy is stabilized.
And I think, are you saying that you don't think that would be any more objectionable?
Go ahead and have the government buy a house for everybody who's already buying one?
I don't see a big fundamental difference there between what the time, I don't understand why like Republican types, they're all, they all immediately sign off on these big like financial bails.
But then if it's just helicopter money, they're like, well, you can't do that.
You can't just, you just can't fundamental do regular people.
Plus it's just a loan, they'll pay it back.
But we already discussed the problem with loans and how they're further financializing the economy and actually making it more fragile.
And so, okay, well, I mean, it seems to me like six, one half dozen of another, when you're getting down to this, what you're basically doing is creating a bunch of money, massively expanding deficit spending and so on.
If you're paying off mortgages or, I mean, they're not really going to do that, but I could see them subsidizing them or forcing down interest rates or something like that.
So the payments are lower or so on.
But of course we're in this situation because the feds for so long pushed people to maximize their housing debt in the first place.
So we are in this troubling situation that's so difficult to unravel because the feds put us here.
Well, I mean, if these guys wanted to do a publicity stunt for the Sanders campaign and give him some talking points for this Sunday's debate, I don't think they could do any better.
You know, I have to tell you, I quit Twitter, but I cheat and I still go and I look at the great Aaron Maté's Twitter feed sometimes, him and Matt Taibbi and Glenn Greenwald and a couple others just to troll and see what's the latest I might be missing.
I'm slipping, man.
I'm going back on the, falling off the wagon here.
But I can tell you this, left-wing Twitter thinks one thing about all this.
See, there's all the money in the world to pay for free college.
$1.5 trillion.
That's what Sanders said it would take to pay off everybody's college debt.
But instead, and we could never do that.
That's pie in the sky.
That's communism.
That's crazy.
Oh, here you go, Wall Street, $1.5 trillion.
Yeah.
Well, as long as it's pro-Wall Street communism, I guess it's fine.
I mean, but left-wing Twitters, their lesson from this is free for all.
That's it.
We're not being told no anymore when you guys do this right to our face like this, you know?
Well, I mean, it's all terrible, right?
And so, I mean, I guess like, I mean, I see their point, but the fact is, is that it's all fine.
That it makes no difference.
I guess they're given the ammunition by the economists, because the economists say it's all fine to monetize massive amounts of new debt.
It's fine to have the Fed buy up insane amounts of new assets so that the organizations that hold these assets, hedge funds, banks, and so on, don't basically implode.
So they're saying that's fine.
Let's subsidize.
They want to make sure that it's free markets for the middle class, but socialism for the rich, who don't, they don't have to face the downside of their market choices.
They're just given that ammunition by these Wall Street guys.
So it's easy to see why they're saying, eh, just spend a trillion bucks.
That's no big deal.
Because you got like Dick Cheney saying deficits don't matter.
Yeah.
All right.
But so counterfactual here, right in the middle of how bad this is, as you've described it, the way they've got it all wound up so that the unwinding of it all is just a catastrophe.
That's always the argument for keeping going, right, is he'll die of the kick.
He might as well go ahead and at least keep him on methadone, you know, this kind of deal.
Keep pumping up money, create some kind of soft landing.
Because we are in a situation where if there's a global pandemic and the economy screeches to a halt because they're trying to slow the spread of the thing and asking everybody to stay inside and all that, the market isn't just reflecting that, OK, well, business is slowing down now.
It's reflecting a panic because it's all hot air.
So you have this massive crash.
And you know what?
You've got to zoom out.
I've got cataracts on these issues.
I need you to help me see clearly just how bad of a crash this is, where it fits into the scheme of things compared to, say, 2000 or 2008, and is this the equivalent to that?
They're trying to stop that already.
That's where we're at right now, is September of 2008.
And then, by all means, explain how the response to 2008 helped set us up for this, elaborate on that, and then where we're going now.
But I guess what I'm trying to get to, though, is, is your solution now, if you have iDream and Genie powers to just make this happen however you want, let them crash.
They knew the risks, and that's it.
And there's no time, like a pandemic, for a total economic collapse of, as you say, a fraudulently government-propped-up, financialized system at the expense of real free-market capitalism.
Is that really a good idea?
Right when we have the economy screeching to a halt over this virus, this kind of thing?
Am I making any sense at all?
Moser.
Yeah.
Well, of course, I'm not one of those people who thinks that, let it all burn, and then we'll sort it out afterward, and this new free world will emerge.
I think that's not a great plan.
Because...
Moser.
Well, but what about just a total collapse of the markets?
And as you say, the Goldman's and the Citigroups and the AIGs that should have gone out of business last time.
Go ahead.
No more bailouts for anybody.
Let it all come down this time.
Right.
Well, the theory, of course, is that, well, the financial sector doesn't employ very many people.
So, first of all, if those jobs go away, you're not looking at mass unemployment.
The claim, though, is that, well, if we don't keep interest rates rock bottom, if we don't keep buying up assets with the central bank, if we don't keep all this liquidity lubricating the system, then what you've got are all these companies that won't be able to keep going.
They won't be able to make their debt payments and so on.
What they're really saying when they say this, they're acknowledging that our economy is rife with zombie corporations.
And that has happened over the last few years.
In other words, you're saying any corporation that is this susceptible, if they're not a zombie, they ought to have a rainy day fund for a black swan like this and survive it just fine.
But the ones who really would go out are essentially marginal anyway.
And you're talking especially about the big corporations.
If they're in that kind of danger, then they must be propped up on funny money in the first place.
Well, and the problem is that there's so many of them now because of the two big waves of bailouts that started in 2002 and then again in that 2009 period.
So the zombie corporation, in case listeners don't know, this is a corporation that doesn't actually make enough revenue or any sort of enterprise.
It doesn't make enough revenue to actually cover its costs and payroll and debt service.
And so the only way it can stay afloat is because interest rates go down again or they're kept low so they can borrow more money to keep themselves afloat and to pay off their debts with new borrowing.
And so they're just kept alive by cheap money, hence the term zombie.
They're not actually a functioning company in terms of producing something that brings in the revenue that covers their costs.
Now, if the economy had been functioning as a normal economy, I'm not talking about some like totally free market or anything, I'm just talking about a market that was mostly free and actually where enterprises had to cover their costs by producing something for consumers in the marketplace and couldn't just rely on another interest rate cut coming down the line to cover my costs.
But over the last 20 years, we've got so many of those enterprises.
I don't know really how many are out there now, but there's a good reason to believe there's a lot.
And so how many people did those enterprises employ?
Probably a lot.
And so that's the big danger and that's what they're saying is that, well, if we allow interest rates to go up and if the Fed starts selling assets and all of that sort of thing, those companies are going to go belly up and they're going to lay off half their workers or more.
And then you've got massive unemployment, massive deflation, and you also got like civil unrest possibilities and that sort of thing.
And thanks, Fed.
That's where we are.
That's what they've caused.
And now they're saying, well, let's just keep it going.
Let's just keep the machine going because we can't stop now.
We can't stop ever.
And so at some point, it's going to stop.
It's going to get ahead of them.
And unfortunately, they should have just said in 2008, we're going to have to see our standard of living fall because this has been going on eight, nine years and we've got a serious problem.
Because they just want to keep it going.
And so now here we are 10 years later and we've got an even bigger problem.
So there's no way of escaping it at some point that there's going to be a significant decline in the standard of living.
What you need, though, then, are coping mechanisms.
You've got to have some way that people can bring in work.
Now I'm not one of those people who think that people will be starving in the streets or something.
We've seen it happen in other countries.
Other countries experience significant declines in their standard of living and it doesn't lead to chaos.
It doesn't mean people are living in shacks.
But what it does mean is that no more of that, they're going to have to have a period where people are cutting back the international travel, where companies like Disney are going to be hit hard.
We're already seeing it now where purely elective entertainment industries are being hard hit by the whole virus scare and all of that because people just aren't going out to these things that just seem purely elective.
And so there's going to have to be massive realignment in the economy.
And we did see a certain amount of that in 2009.
You had a lot of people who had jobs in real estate and so on because the housing bubble was so huge.
People then had spent years getting trained as housing appraisers and all that stuff.
And a lot of those jobs just simply went away and those people had to then open lawn mowing businesses where they had to completely get retrained.
They lost a lot of savings in that period and they lost a lot of their standard of living.
They had to go from one income to two income households and so on.
So those are the sorts of coping mechanisms that are going to have to be happening.
And at some point, you've got to let that happen.
And so when?
When are you going to let that happen?
And now, how do you make that less bad?
One thing is that you do more deregulation to help the small business economy.
And this is what happened in 2009.
A lot of people had to go into small businesses for themselves.
The thing about small businesses is, especially when you start them, and I'm not talking about like a mom and pop hardware place, I'm talking about mostly services.
That's where most small businesses are in, in the modern day.
The thing about it is you start out with low wages and so you've got to take a hit to your standard of living.
But people eat in those situations.
But to make it easier for people, you've got to start cutting regulations.
You've got to cut licensing.
You've got to cut the ability or the need for all these people to go through so much red tape just to open a small business and hire a couple of people.
Anyone who's owned a small business knows that it's far worse today than it was 20 years ago.
And the government has made it that way.
So thanks to all of that, thanks to massive regulation, the government has basically, has greatly centralized then business in terms of there's fewer small businesses now.
There's less self small business ownership and it's harder to make it work because of so much regulation.
You've got to do something about that.
You've got to let people be able to go out there and do that.
And we're not talking about that.
The other issue is free trade.
I know there's this complete myth that all these protectionists are pushing out there like, oh, there's no more.
There's nothing on trade to prevent it anymore.
We've sold our future because now anybody can import anything into America unimpeded.
Completely false, complete myth.
There are insane mountains of requirements to import anything into the United States, whether it's complying with all these free trade agreements, which have just thousands of pages of things you have to comply with in terms of labor, in terms of environmental regs, in terms of where the components of those goods that you want to import were originally made and all of that.
This adds immense cost to importing goods into the United States and that makes it much harder for business people, for small business people especially, to get the goods they need to then sell their own goods and services.
So there's two places right there where you need massive reform.
You've got to make importation easier.
It's not about tariffs.
It's about these other requirements.
And you've got to make it easier for small businesses to do something so that they can start building up the new economy as these huge dinosaur-like enterprises then start to cut back that are basically zombie corporations.
All right, now I think the last part of that that you said is what's going to sound counterintuitive to people who are on the labor left and the protectionist, more nationalist right, that our problem is that we don't have free trade and it needs to be much freer when, as far as they can tell, the freer the trade, the louder that sucking sound of all of our jobs leaving the country and all our production leaving the country because wages are just lower, especially in a place like China where there's a billion people coming up for Maoism and we're never going to be able to race them to the bottom in wages and we sure wouldn't want to, but then we end up all waiting tables somehow.
Well, part of that is, first of all, there's only some sorts of firms where it makes sense or only some sorts of industries where it makes sense to do it on the other side of the planet and then ship it back to North America.
That involves things that are very heavy in terms of industrialization and unpleasant work conditions and those sorts of things.
The other main factor of that is, though, a lot of those businesses aren't just sucked out.
That's the problem.
It's not a sucking sound, necessarily.
It is a ...
I don't know what's a good analogy for this.
It's the sound of being pushed.
These companies are pushed out of the country by massive regulation, by the difficulty of conducting those businesses in the United States.
They move to someone where it's cheap.
The only reason it makes sense in many cases to send all of your capital to the other side of the planet, load it on boats, and then send it back to North America is because it's really inexpensive to do it here in America.
You got to ask, well, why?
How is it made worth it to outsource so much?
Because the cost of labor is just one factor of outsourcing.
If you look at the research on reasons why global trade increased so much, the cost of labor is just one thing.
There's so much of it has to do with other issues in terms of understanding foreign legal systems and communication that makes it possible.
It wasn't just a decline in tariffs or whatever.
It's just simply global trade situations changed.
Now they might claim, oh, well, we got to erect something then because the fact that it's now easier to navigate China's legal system means that now they're just sending more jobs over there.
But we have that.
China now has to comply with a mountain of regulations in terms of the labor laws and all of that.
How well are those enforced?
I don't know.
But I can tell you that it's not just a matter of, here, we got a bunch of good and services now.
I guess you now just automatically import them.
What we really need is better research and a better way to figure out just how high are those costs, really, of importation.
But I would say also the other side of that is the emphasis is completely wrong.
These protectionists always are pushing it strictly in terms of people who work in a factory.
I go work in a big factory.
What they don't realize is that a tiny percentage, I think if I look at the numbers, it's the number of large firms that are employing large amounts of people in manufacturing is around maybe 5%.
And the number of firms that are actually hiring new people are small firms.
They're service sector firms.
These people like to badmouth the service sectors because in their mind, everyone in the service sector is like a waitress or they work at a retail firm, like selling sweaters or something like that.
But that's not the reality of the service sector at all.
There's tons of people who work in logistics firms that have to be based here because they move goods around in North America.
There are tons of people in firms like bookkeeping or insurance or financial services.
And these aren't all people who are like the white collar people.
People have to work in providing the office space.
People have to be the receptionists.
People are the janitors at these places.
Back when I was a janitor, most of my clients were service sector people.
They were architecture firms in many cases, and they have non-white collar people at those places and they employed me.
They provided me income.
So there's this extremely simplistic view of the American economy.
Everybody either sells a t-shirt or they get much higher wages putting automobiles together.
The economy is nothing like that.
And what they really should be looking at is trying to create an economy where it's the people who are building those smaller firms can then access goods and services more inexpensively.
Because yeah, you've got people like Pat Buchanan, we sold our future down the line just so people can buy more trinkets from China.
Well, that's not who's buying stuff from China necessarily.
If you're a small business owner, you've got to buy cars.
You've got to buy goods and services that you can use to found your business.
And then when those people then can cut their costs by importing more affordable goods and services, they can hire more people.
They can provide more services.
And so I'm sick of this whole thing about the only thing that people are buying from China are like cheap plastic toys.
That's not the reality.
And by the way, a lot of these small firms, they have very small profit margins.
So slapping a 25% tariff on steel makes it harder for a small business that uses steel to hire people.
So they've got to cut back now.
Or if they need vehicles for a fleet of vehicles because they're in some sort of courier service or delivery, or they're just a florist who has a company vehicle, now you've ruined their profit margin.
Maybe they got to lay somebody off.
And so, so much of the discussion over trade is the most shallow kind of idea about how our economy is constructed.
Yeah.
On that last point, I know a guy who's a restaurant manager who says that, oh, all this protectionism has just ruined everything because he can't get a steam table.
He can't get an oven.
He can't get any of the major pieces of kitchen equipment that he needs to run his restaurant.
Because all that stuff comes from China.
And in fact, it's just not coming at all now.
It's not coming with a higher tax on top of it.
It's just not even being shipped.
That part of the market has been shut down.
And he and all of his colleague restaurant district managers around are just absolutely infuriated by it all.
And in fact, this guy is a very not political guy.
So it has nothing to do with leaning pro or anti-Trump or anything.
He's just like, man, I can't buy an oven.
What am I going to do?
But I wanted to rewind a little bit as far as the outsourcing part of it.
I wonder, has anybody ever done a real study about how much these American companies are saving in security costs by having the U.S. Navy provide all of their security at our taxpayers' expense to ship all this stuff there and back again?
Not that I've seen, but I haven't looked.
I'd like to see something like that and see just how many companies' margins, if they had to really chip in for their own mercenary force to protect their own lousy boats, whether that would be the difference right there of staying home.
Well, I'll tell you what.
People don't think of the Navy as communism.
It sure is.
If you ship stuff back and forth across the ocean, it's communism for you.
Oh, sure.
And of course, this is, boy, talk about old habits that die hard.
This goes back, of course, to the 18th century, the idea that we need these ships to protect shipping lanes.
By the way, for people listening, I'm sorry, I don't mean that as just a pejorative.
We're talking about the government forcing people to pay money to, again, big corporations to protect their interests, which is, maybe the C word isn't exactly the right one, but I'm just trying to make the point about the coercion there is all.
Well, and of course, I mean, these topics need to be explored further where we can talk about making things easier, which for actual market solutions, easier for firms to be able to get the goods and services they need to expand.
Back to the financialization issue, nobody has shown the slightest bit of interest in trying to help the economy diversify toward making it easier for medium-sized businesses to expand.
It's all about making sure these huge financial firms get the liquidity they need, because otherwise these companies won't be able to get debt.
But the fact of the matter is they don't need as much debt if you come up with ways to cut their costs, and they should be exploring ways to, fine, you think China's a security risk or whatever, okay, then why are we exploring ways to basically open trade with the rest of the world?
I mean, the idea that there are any tariff barriers imposed against the United Kingdom or Australia or Canada is just absurd.
These countries pose absolutely no geopolitical risk.
They're already first-world countries with all their own regulations and everything.
That's fine.
They should be able to just throw stuff across our border completely unimpeded.
What we need now is more free trade now, more than ever.
Clearly, the virus thing has done great damage to the idea that borders should just be open to people crossing whenever, and that just then makes the need all the more important for ease of trade.
And that's, of course, where the protectionists have always been most bonkers, is the idea that we need the borders to clamp down on both the flow of goods and the flow of migrants.
Because if you close it to the flow of goods, that just increases the motivation of migrants to cross borders, because people want to get to where the capital is and where they can get greater income and be more productive workers.
Well, if you prevent that capital from moving around, well, now the workers have to move around.
And so, just as a point of prudence, we got to get the trade going now more, and this is good for medium and small businesses.
And everyone's talking about it in terms of China, but I mean, there's whole other continents like South America that are greatly underutilized, because in spite of the fact that tariffs are low, there are still rules of origin that have to be met and a host of other requirements that apply to all of those countries.
And so trade isn't really free.
Yeah, I mean, and that's true.
As you said, it's always been like this, the American system and all of that.
It's always been welfare and socialism for the people who already own everything at the expense of everyone else.
And then the poor are saying, me too.
Instead of stop that, or sometimes along with stop that, no more bailouts, but still I want to bail out, that kind of thing.
And so here we are.
It's actually amazing that we don't have an absolute totalitarian state at this point, with the amount of welfare that the rich get, that the rest of everybody else demands for themselves as well.
We could be a lot further down the road to serfdom at this point, it seems like, for the way that that goes.
Yeah, there's really not a sense.
The thing is, it's hard to get numbers and slap a number on just how much this group receives in terms of government handouts versus that group and so on.
It's easy to pull up a budget number on Social Security or TANF or Medicaid or any of that stuff.
It's a lot harder to come up with the actual impact of endless amounts of loans and liquidity being sent to hedge funds and to banks to keep them from going under and to keep from having to face the music and the marketplace.
And that reminds me, too, I've read this thing at Reason, and I'm not trying to pick on Reason, they're good guys and everything.
The guy was saying how absolutely irresponsible Trump's payroll tax cut proposal for the stimulus during the virus crisis here, how irresponsible that was, because you're talking about completely blowing a hole in the deficit.
They need that payroll money to pay for the entitlement programs, which no one's saying we're going to eliminate, we're just going to drive it all into the deficit.
This is like $900 billion we're talking about here.
This is a huge amount of money.
And then they turn right around and announce $1.5 trillion for Wall Street.
There's the perfect example of what they could have done.
No subsidy for anyone, but how about, we're just going to stop taxing you out of your paycheck for all wage earners and salary earners in America.
Tax holiday for the year 2020.
How do you like that?
Absolutely intolerable, cry both parties in Congress, and then the next day, the Fed, two days later, the Fed goes ahead and writes a blank check to the richest, most powerful people in the world.
Yeah, I mean, it's amazing how worked up they get about the one kind of distortion to the marketplace but don't seem to care about the others.
I mean, they do have a point, right?
Yeah, do you know how much this tax cut will cost the government?
As though a tax cut is a subsidy, but then subsidies all day as long as they're going up.
Well, and of course, it's easier to hide the $1.5 trillion thing, because that's going to be a much slower process.
It's going to depend on how much of that actually ends up going out into the real economy.
Because once it does start to go out into the real economy, then there's a real tax in the form of the inflation tax, right?
Because then it devalues all of our property.
Everyone who holds dollars then sees a real decline in their net worth.
But that's harder to calculate, it takes longer for that to work out.
And yeah, they do have a point, that $1.5 trillion, it's not like an immediate grant.
It's the sort of thing that we'll see how much of that actually gets monetized.
So for the moment, it's hard to slap a number on it.
It's easy to point to the payroll tax and say, well, this is how much revenue is collected now.
And if you don't collect that, then yep, it does blow a big hole in the deficit.
The other issue too, though, is that what they're saying is we got to keep more zombie corporations going, and keep this financialized economy going.
So they're kind of picking and choosing what distortions of the economy they want to condemn, and picking and choosing what bad things happen.
And the thing I always liked about Ludwig von Mises was, is he always was so thorough in covering, well, you do this thing, you do X, and then Y is going to result, and you do X and Y result.
He didn't seem to be biased in terms of, well, this benefits that social class of people, so that's bad.
He just said, point blank, well, this is going to cause massive distortions, and it's going to be perpetuating this problem with the economy by not letting it work itself out.
And that's what all the rhetoric is going to be, is it's going to be, things are basically fine, we just had a problem where there wasn't enough liquidity.
So we'll just pump a little bit more in, and then we'll help all the poor people that way.
But really what you're doing is helping a certain class of people.
Well, I mean, that's what I've always appreciated about the Austrian school from the beginning.
And I think, you know, certainly a lot of people, you know, who lean left or come from that sort of half of American political culture, and I guess a lot of conservatives too, think of libertarianism as essentially just apology for big business to do whatever they want and get away with it.
And that we are here essentially to run cover for capitalists.
And then you look at Mises.org, and it's like, we don't care which capitalists get wiped out, that's how capitalism is supposed to work.
And that's the system that we defend, profit and loss.
And yeah, as much as you got a grudge against Goldman, we do too.
Let's force them to participate in a free market system and see how well they do then, rather than asking the government to protect us from them, when of course it's always going to be the other way around there.
Let's see what the free market will do to them, you know, in that kind of mean and cynical way.
In other words, let's see Citigroup fall apart.
Let's see all of this fall apart by just forcing them to compete.
That's the real answer.
Well, the thing too is, if you have a group like Citigroup, or even like, say, an actual manufacturing firm, this is what should have happened, for example, instead of the auto bailout.
GM, Ford, they should have been allowed to fail.
That doesn't mean that those jobs go away forever.
It doesn't mean that all the capital used by those firms goes away.
What it means is that competent people who can run a company better and use that capital better would then buy up those factories, buy up that capital, and then probably medium-sized firms, new firms, new entrepreneurs would use it in a much less wasteful way, in a more efficient way, in a more gainful way.
I don't like using the word efficiency because it sounds too technical.
It's not that these firms are inefficient, it's that they're wasteful, these big old legacy firms that when they fail miserably, they just get bailed out.
You remember those joke posters that came out in around 2010, it was like a picture of a Ford car that said, you wouldn't buy our crappy car, so we're going to steal your money anyway.
That was a reference, of course, to the bailout.
People didn't want to buy GM's and Ford's crappy cars, so they went under, oh, well, you wouldn't give us your money voluntarily, so we'll just steal it through the tax mechanism, and then we'll bail out the guys who run Ford and GM.
That's what they did.
They got to keep a hold of that capital.
They got to keep those businesses running, even though these are extremely wasteful enterprises that can't run their own affairs in a profitable way.
It should have been taken over by someone else.
Those goods should have been auctioned off to someone who knew what they were doing, and yep, some people would have lost their jobs temporarily, but it also would have opened up countless opportunities to small and medium-sized firms who would have then been able to acquire those goods at a more reasonable price.
The whole idea here is we got to keep prices high of that stuff, so we'll keep bailing out these firms so they can keep charging goods at the same price as they always were, delivering the same garbage services and goods.
That's really what it comes down to.
What the shame is, as you pointed out, it's all going to be talked about as neoliberalism.
Of course, neoliberalism is really a code word, for the most part, for markets and for capitalists, even though it's not, of course.
I'm sorry, because I meant to kind of focus on this, too, to kind of parse this.
For some people, it's going to be hard to hear you say, listen, what we need is completely globalized people and markets, but not governments, because these things do seem to go together.
Neoliberalism, for example, that is what we have, which is like the horror show, Funhaus Mirror version of libertarianism, what Bill Clinton called free markets and democracy, which means the American empire, free trade according to our rules, because our government says so or else.
These concepts are very much mixed together.
In fact, probably a good leftist would argue that neoliberalism is the true result of capitalism, because look what happens.
It's by congressmen.
They create this system.
Bob Higgs, the heroic Austrian economist, calls it participatory fascism.
It's not democracy.
It's a fascist state, but yeah, you can run for your local office to whatever degree you can have some influence in it.
It's not full Mussolini, but it's certainly cronyism to that degree.
Well, and everything you need to know about the uselessness of the term neoliberalism is the fact that it's applied to describe both Tony Blair and Ludwig von Mises.
If your term covers both of those people under the same alleged ideology, well, then your term basically describes nothing, because these two people couldn't have a view of markets that is any more different, basically, but nevertheless, I think the reality of the usage of the term is that, oh, I don't like this thing that markets are doing.
It's not socialist enough, so I'm just going to call it neoliberalism.
What we're going to see is all these bailouts, all these things that basically screw over medium and small size enterprises, and we're going to call that libertarianism, excessive markets.
That's not the reality.
As you can tell, of course, from my comments in general, I think the key to this is creating a truly free economy that allows actual entrepreneurs and small and medium size businesses to thrive.
I think the shame is that now we've got a country where we're down to only about 10% of the country has people who are actually self-employed and are involved in enterprises, where they understand the problem of meeting payroll, where they understand the issue of finding goods and services at a reasonable price that they can then use to build their own business.
People are just thinking strictly in terms of, well, I got to go work for a giant corporation, and I need the government to create a regime that helps that.
It was different.
I think people thought differently when most people had their own farm, for example, or they had a barber shop.
Barber shops used to be a big service that just working class people would open and go into and those sorts of services.
Mechanics too, of course, yeah.
Oh, sure, right?
Those things are being choked and being taken over by large firms, or they're functioning at much smaller profit margins because of the problems of restricted trade and the problem of just so much regulation.
If you want to start helping people, you've got to start freeing up the economy in that way.
Also, it just makes it really hard for people who are trying to save for a business and become small-time investors themselves or buy houses and so on.
This is another topic that we can get into at a completely other time, but the whole regime of forcing down interest rates, of doing so much in order to ensure that we have an economy that's really there to help big banks and hedge funds and so on that can pursue, that can chase yield all the time through riskier and more creative investment instruments and so on, that helps a certain class of people.
It doesn't help conservative investors.
It doesn't help small business owners.
Just the whole economy is geared toward not helping regular people that could actually provide the solution to our massively over-financialized economy that's geared toward essentially keeping huge financial institutions afloat indefinitely, even though they're not actually bringing in enough revenue to cover their costs, hence their zombies.
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Well, so considering the current situation and the current policy, I mean, I think people probably want to, what I'm trying to get a handle on part of this is what to compare this current coronavirus crash to.
In other words, once the virus comes and goes within a matter of a few months or whatever it is, then everything's going back to the way it was in January, or this really is equivalent to the crash of 2008, where on that highest level, like you're talking about, things really do completely unravel and we have that level of great recession.
In other words, this usually happens because they start raising the interest rate and eventually the bubble pops.
But is it just the case that that was coming, but now the virus popped it?
Or where do you see us on that scale of things?
Well, assuming the virus issue gets under control during the summer, you've still got the fact that you've got all these businesses then recovering from the fact that they were majorly dinged in terms of their getting into the black.
So you've got bars, you've got all sorts of entertainment firms, movies, who knows what where people were spending less money and those businesses will be in trouble.
Will they be able to meet their costs for the year?
So we might see significant decline then in terms of quarterly earnings and all that.
It's not going to be economy.
Why?
Because people still need to buy food and they still need to make their mortgage payments and so on.
And if you're in a business where you can work from home, it's not going to be a massive problem.
But it's certainly going to hurt at the margin.
So you're not going to see the growth you were hoping for.
Growth is already really low.
But so let's say that things stabilize a little bit over the summer and they don't keep going down because they're going to blow up another bubble.
There's going to be another massive injection of liquidity and kind of keep things going for a while.
You've avoided the big crash.
But what you've got then is just the ongoing Japanification basically of the global economy.
I mean, that's the third option people don't usually talk about is, well, things will be fine.
We go back to normal and we'll get a bunch of economic growth and so on.
Or there could be this huge global conflagration.
It's also possible that you just have a continual slow decline of the standard of living and people very slowly, they're forced to do what's happening in Japan.
I know that people talk about Japan's like, oh, everything's fine.
They have a high standard of living and there's really no problem.
It's not really what's going on there.
The reality is that people are working very long hours.
Their pensions are going away.
There's a reason they're having one child or no child in most cases.
You can work very, very hard and all you can get is a one bedroom apartment.
This is not, this is a situation where, yeah, the economy is avoiding major crashes.
But the standard of living just simply is not going up or even really holding steady.
And that's a problem in my view.
I don't think that's something to aspire to, but I think that's what people who control the levers of monetary policy and so on are really, that's their best case scenario.
They just want to avoid a major visible crisis so they don't have to worry about people protesting in the streets and that sort of thing.
If they can just get something going like what's going in Japan, then they'll be okay.
But I would say if you got kids and you got a few decades ahead of you of work, that's going to be pretty unrewarding for you and you shouldn't want that either.
It's such a shame too, because this really is right when this somewhat failed neoliberalism, this perversion of libertarianism as our government has spread around the world, the degree to which they really have encouraged markets and capitalism, it's really done great things.
And I'm not saying that the West gets to take the credit for the advent of capitalism all over the world or anything.
It's not exactly like that, but they've almost abolished famines.
I mean, the global rate of people who are starving and going hungry is just, I forgot exactly the numbers, but it's gone from what, like 20% to 5% or something over the last 30 years.
And just when technology and just the compounding advances in efficiency and the growth of more and more capital to continue to be reinvested, we could be abolishing, and I don't mean in a world government way, but just humanity could be abolishing real extreme poverty from the face of the earth right now.
We're pissing all our money away on the worst kind of projects and the worst kind of distortions in the economy, which essentially make it always, at best, two steps forward, one step back, sometimes the other way around, especially for people on the lowest part of the chain.
Yeah.
I guess for perspective, it's always important to bring that up too, right?
Is that places in the world that had been devastatingly poor a generation ago have been benefited considerably from economic globalization.
And because they're producing goods and services that they weren't able to before, because countries that were isolated in terms of the global economy 20, 30 years ago, they really had no options.
They couldn't produce anything.
They couldn't access capital.
And so all of this stuff about, well, we got to close the borders and we can't let anybody move capital anywhere else.
Um, well, okay, that's, that's a big screw you to the poorest parts of the world.
And it's a big screw you to anybody who would have benefited, i.e.small and medium sized firms from getting more inexpensive goods in a partnership with those people who are in the poor part of the world.
And the people who, you know, will, who live in cheap, uh, low standard of living parts of the world, and they have, and they can live on very low, um, wages and so on.
They're not your enemy.
They could provide you goods and services that you can use to build your business.
And, uh, through those partnerships that have incurred, that have occurred, uh, they've benefited greatly.
And also people here have benefited greatly.
Uh, it's increased, uh, productivity for everybody because by allowing people to import these manufactured goods, they can turn around and use those to build, uh, firms here.
I mean, the perfect case in point is, oh, well, if we let people in other parts of the country build steel, well, then we want to have steel workers.
Okay.
But hardly anybody's involved in making steel by slapping these tariffs on steel.
Yeah.
More, you get a few hundred people, uh, a few thousand maybe making steel, but, oh, by the way, you made it harder for firms that use steel, like automobile manufacturers, many of which are still in the United States to make cars now.
That's more expensive for them for now.
So now they got to lay people off.
I mean, it's just such a bizarre short sighted thing.
Also, here's the moral thing.
What is the moral case for restricting trade?
This is what it comes down to for protectionists.
What they're saying is, well, you can't let a private individual contract with another private individual in another country.
Uh, well, okay.
So now how are you going to prevent that from happening?
Well, obviously you need an army of government employees and bureaucrats and police to enforce that.
And then so anything tries to cross the border, then we got to go through our thousands of pages of regulations, impose the correct duty.
And if any private firms try to contract and acquire goods from foreigners in any non-government approved ways, well, then we'll imprison those people.
We'll go to their houses or their businesses and arrest them and put them in jail and impose fines on them and ruin their lives.
And so the protectionist position, never forget, is a position of using violence against people who just want to enter into a contract with a person in another country.
And they act like they've got the moral high ground.
Oh, we want to protect, um, just a simple working men in America.
Well, how are you going to do that?
Oh, we're going to arrest small business people and throw them in a cage.
Clearly that's the moral thing to do.
I mean, I find that position absolutely repugnant, uh, but they act like that's not the reality.
If you want a big protectionist state, you need an army of government bureaucrats to enforce it.
People with guns also.
And they deny that.
Of course, that's just a complete fantasy.
Yeah.
Well, as Ron Paul pointed out, there was something like 50,000 federal government employees carrying sidearms.
And those are not all FBI and ATF agents out on missions, but they're bureaucrats from all different agencies and departments.
Some of which you've never even heard of, but would be terrified to know, have a SWAT team, you know, um, IRS raids people with SWAT teams, you know, businesses in broad daylight with little old lady secretaries and everything like some ridiculous TV show that you wouldn't believe in except it's your local news.
You know, these people, these people, well, and of course, you know, a lot of conservatives have pointed out these people shouldn't have any jurisdiction whatsoever in the states or with local government.
They should have to request the local sheriff execute the warrant.
The fact that these federal agents can go in on their own and conduct these sorts of raids and SWAT team operations and so on, uh, it's not, not only is it contrary to the spirit of the U S constitution, it's contrary to like 500 years of British common law too.
Yeah.
Well, so much for all that.
Never heard of it.
So anyway.
Yeah.
You know, you know, the English civil war, uh, you know, they responded to a lot of that stuff.
That's the core of the U S constitution is that you had like all these Cromwellians and, and people who work for the monarch going around, just arresting people, torturing people for all sorts of reasons.
I thought maybe we shouldn't let the sovereign just do this sort of stuff.
And, uh, maybe they should, they should have to go through some sort of local legal authority.
I think that was a good idea.
And, uh, you don't have to be some sort of hardcore libertarian or anarchist to agree with this.
Certainly the people who came up with it, weren't that, uh, it's like your, uh, your recent article about putting an expiration date on the constitution.
It reminded me of a Hornberger's campaign.
He doesn't say it this way, but he seems to always imply that he's for the U S constitution, but he's against every law that Congress has ever passed and anything they've ever done.
Go ahead and start over with the same one.
But, um, but sans the entire federal register or however that works, you know, can we do that?
Yeah, it'd be a hell of a long, uh, way toward anarcho-capitalism from where we are now to just reinstate the constitution as written.
Well, they forget that.
Yeah.
A huge portion of what we call like the federal legal system was, is, is extra constitutional and not necessarily anti or unconstitutional, but in the sense that the constitution doesn't mandate it and it's not necessary.
And that's why Rothbard always talked about just repeal the judicial act of the judiciary act of 1789, which created, uh, the federal, uh, legal system, which, which is not mandated by the constitution.
The constitution only mandates the Supreme court.
All other courts in the U S uh, are creations of this one piece of legislation.
So you could do it with just an act of Congress.
He'd get rid of it.
Sounds good to me and leave it to Rothbard to have a simple answer for us to, you know, Hey guys, I found the silver bullets right here.
So of course that would, that would get rid of all of those, uh, federal, uh, SWAT teams and so on, because they wouldn't have a legal system then to prosecute you under.
Yeah.
Well, that'd be the beginning of a great unraveling, but, uh, I'll keep dreaming.
Um, listen, I better let you go, but thank you so much for coming on the show.
Ryan's just been great.
Thank you very much.
All right.
You guys, that's Ryan McMahon.
He is the senior editor over there at Mises.org.
That's the Austrian school of economics.
Mises.org.
The Scott Horton show anti-war radio can be heard on KPFK 90.7 FM in LA, APS radio.com, antiwar.com, scotthorton.org and libertarianinstitute.org.
