It's Anti-War Radio, I'm Scott Wharton.
And I gotta tell you guys, I was absolutely astounded when I read this thing this morning.
I thought, really?
Is this actually real?
Bob Wenzel actually from Economic Policy Journal gave a speech to the New York Federal Reserve.
Somehow they let him in the building.
And it's great.
It's absolutely great.
Welcome back to the show, Bob.
How are you doing?
Hey, pretty good.
How are you doing, Scott?
I'm doing great.
I wasn't sure at first whether this was real or not, or this was just sort of like, you know, what I would have said, kind of a fantasy, you know, supposition for the basis of an article kind of a deal.
That's not the right word.
Something.
Basis for an article.
No, you really gave this speech to the New York Fed?
No, I was in the building.
I had to pass through, you know, two sets of security and all that sort of stuff and gave the speech.
Excellent.
Well, boy, I don't want to ruin it because the very end is the very best part.
But I'll say this about you.
You are a very thoughtful gentleman.
Rather than putting all of what's wrong with the Fed on them.
You were nice and you said, I can't understand how you people believe the things that you do.
Right.
Right.
Which is a very nice way to to make it your problem rather than theirs.
So please elaborate for the audience.
What is it about the Federal Reserve that they all have such a tight consensus about that you just can't understand?
Yeah.
As I said in my speech, Scott, it starts from the basic methodology they use to what they actually think they have achieved as far as the accomplishments of the Fed and what they don't do on basic stuff that you think other other people would do.
For example, let's go right to the gold situation in the Federal Reserve building that I was in in the vault in the basement are the gold that it that the Federal Reserve holds for foreign governments.
They give tours of that.
They give guided tours for children.
And I brought up the point, if you're doing all this and you have these gold certificates that were given to you by the Treasury.
Why is it that audited?
Why can't everyone see it?
Why is it such a big secret and no one is able to see it?
And do you actually even know what the fineness is?
Because I suspect to the degree the gold is in Fort Knox, it's probably of a very poor quality that if you were to take it to a gold coin dealer, he'd laugh at you and tell you to go somewhere else with it.
Did you get a response from anybody there about this?
Well, yeah, I mean, we had a little bit of a Q&A session after this.
And because, you know, I think this is the kind of thing that a lot of people have been very curious about for a long, long time.
And I would be willing to bet this the first time anybody ever challenged anyone at this level about why won't you prove how much gold is in Fort Knox?
Yeah.
You know, Scott, one thing I did in the speech throughout is I just sort of listed facts.
So it was very difficult for them to go against what I said.
And basically it was the only thing they said is, well, we don't directly control the gold, it's the Treasury.
And my response to that was, well, if a corporation has on its balance sheet a receipt, a warehouse receipt for anything, a responsible auditing firm is going to try and determine if there's actually anything behind that receipt.
So why aren't you out there trying to find out what gold there is, especially given all these rumors about the quality and quantity of gold at Fort Knox?
And of course, they didn't have any answer for that because there is no sound reason for not having an audit.
I guess it's just speculation and suspicion, but your suspicion is what, that there's a bunch of, you know, plated tungsten in there or there's just a bunch of air or what?
Well, I'll tell you what I suspect, and this is just a guess, okay, that some of the gold in there is a very, very poor quality that was taken from Americans when FDR confiscated the gold and had everybody turn in their gold and there was some jewelry and poor quality gold that was turned in.
And who knows?
I mean, we know for certain that Arthur Burns had agreements with the German Central Bank to manipulate the price of gold and to keep it down.
Who knows if they used Fort Knox gold to do that in some way?
And it's just very, very suspicious that they won't allow anyone to audit the gold or really look at it.
The few people that have looked at it have described it as being somewhat of an odd color which suggests that it's not 99% fineness there.
Now, you're talking to these bankers gathered together at the Fed and you're, I guess, at one part of this speech as republisher at economicpolicyjournal.com, you're sort of instructing them on how the business cycle works and that they are the cause of the business cycle.
Is it your, you still believe it's a fair assumption after seeing their reaction to this speech, etc., that they really have no idea about this?
Because I always sort of figured that since the Fed does nothing but cause booms and busts and that's all it's done for a hundred years, maybe that's what it's for, and that they all secretly have red nieces and they all kind of really understand the way the boom and bust works.
But that's why they do it because they get to, I don't know, for example, finance the creation of a lot of new stuff and then when it all goes bankrupt, they get to buy it up for pennies on the dollar for later and they always get bailed out at everybody else's expense, sort of shake the whole economy, shake the hell out of it so that nobody can catch up with them, that kind of thing.
Scott, I was surprised how clueless they were about Austrian economics and monetary policy in general.
It shocked me.
And monetary policy in general, we'll have to hold it right there.
It's Bob Wenzel from EconomicPolicyJournal.com, my speech delivered at the New York Federal Reserve Bank.
Boy, is this thing worth a read.
You'll love it.
We'll be right back on Anti-War Radio.
Alright, so yeah, I one time asked Ron Paul when he was explaining the business cycle on the show, well that's funny because it seems like no matter what, the people that own the banks are screwing us, coming and going, no matter what.
If it's inflation time, if it's war against inflation time, no matter what, they always win and we always lose and you're telling me that this is an accident that they don't really understand?
And he goes, well, you know, yeah, they're making mistakes in their own favor and there's something to that, I guess, but really, from all my years of being on the hill, and that's a lot of years, right?
All my years of being on the hill and running around in D.C. talking about these things, they don't have any idea.
None of them have any idea.
Here, Ron Paul just spent a generation trying to explain to Barney Frank about business cycle theory and did Barney Frank learn one word, one iota from Dr. Paul, who's a pretty damn good teacher, no.
And so now, I'm on the line with Bob Wenzel, he's telling me, yeah, I just gave a speech where I was talking economics to the guys gathered at the New York Fed and they didn't know anything.
Why did they not understand about, you know, Austrian explanations for the boom and the bust bubble recession cycle?
They don't really know anything about monetary policy at all.
That's what he said right before the break.
Could you please elaborate about that?
Isn't that their job, monetary policy?
I would be happy to.
Scott, here's what went on.
At one point, I asked one of the economists if he was familiar with Austrian business cycle theory or Austrian economics in general, and this is a 20-year-plus member of the Federal Reserve, and he said to me, he says, well, I took two courses in economic history in college and we covered Austrian economics, and he says, you guys have sort of, you know, come out of the classical stream.
So that sort of told me he didn't really know very much at all.
I mean, he got a very mainstream exposure to it, and maybe it was taught that Kallmanger along with two other economists developed the theory of marginal utility, and that's probably about it, never knowing much about the differences in methodological individualism and business cycle theory itself or any of that that clearly was probably not even brought up in his courses.
But what was most amazing is further down, he said, yeah, you guys are the ones that want a set growth in the money supply, and you work with that equation PV equals MT, okay?
Now, that's not Austrian economics he was talking there.
I mean, we don't want any growth in the money supply at all, and I told him that.
But he was explaining Chicago School economics, which is what that is.
Which is really just a subset of Keynesian economics in the first place.
Correct.
But he clearly didn't understand Chicago School monetary policy if he was attributing that to Austrians, okay?
Right.
I mean, there's just no understanding of anything at all outside of a Keynesian belief that money has to be pumped into the system to keep the economy going.
So in other words, these people are what Mencken called the job holders.
They're part of high society or whatever, and so they do their duty serving on this board or that, whether it's at a charity or this corporation or that one.
It doesn't mean they know the first thing about anything.
Yeah, they clearly don't, and these are people that are educated as economists.
But I think, I mean, I was really, really shocked by that, especially when it was clear he did not understand not only Austrian, but something that's much more mainstream in Milton Friedman and Chicago School stuff.
You would think he would have understood that and the difference in that that wasn't Austrian.
So they don't have any really understanding about this at all.
Well, I saw a speech or a debate one time where Tom Woods was debating, I think it was the Chicago School guy, who said, yeah, but what about the economy of Austria's instructor?
That's a tiny little country.
Right, right, right.
And then I forget if Tom came right back with, well, so, but what about the economy of Chicago?
It's never been very big, but that's not what Chicago School economics is about at all, is it?
No, it's just a name of a school of economic thought, you dummy.
And this is like, you know, the leader of the other side at this debate.
Yeah, I'll tell you what to make.
But, you know, there was one thing there, and I'm going to be putting a picture of it up on my site later, later today.
They had mints on the table.
OK, guess what they were wrapped in?
Gold and silver wrappers.
OK, so this, you know, I sort of got a kick out of that.
You know, you can, you know, you see green wrappers for this and other color, you know, pink wrappers and all that kind of stuff.
The Fed has gold and silver wrappers.
So it's kind of a sort of a subliminal, you know, sense that, hey, you know, gold and silver kind of important or something like that.
So.
So now after you sat there giving these people the what for, for, I don't know, 25 minutes or whatever it took to read this thing, did they learn anything at all?
Or was it just, you know, like Bill Hicks said, a dog being shown a card trick?
Just, huh?
You know, I'll tell you, I think it's the kind of thing that over time will sort of resonate in their minds.
I mean, they seem particularly interested, in my view, which is, of course, something that was originally held by Murray Rothbard, that there's nothing wrong with prices falling.
The greatest products we have now, PCs, cell phones, flat screen TVs, and so on, those prices are dropping and there's nothing wrong with that.
I mean, we look forward to it, getting better quality products at lower prices on sort of every cycle that goes through these product cycles.
And they just seem fascinated by that and clearly never held in their own mind the sort of sense that someone could view the economy that way with prices going down.
And, you know, obviously, that would be a great thing versus the Federal Reserve, which claims it's maintaining prices and keeping stable levels.
And I had my people go back, some of the readers worked on the data for my speech, and prices have increased by 2,100% since the Fed started.
So, you know, what kind of stability is that?
That was a key point to my speech was, you know, you're saying this about the Fed, you know, that they're doing this and they're doing this.
I mean, if you look at the numbers, it's not.
What stability?
2,100% increase.
That's ridiculous.
It says at the end, you say, data released just yesterday shows housing prices have crashed to 2002 levels.
I wonder how many of them took that and said, see, we kept prices the same as 2002.
Oh, just with a gigantic bubble and trillions of dollars and millions of lives destroyed since, you know, in the meantime there.
Yeah.
Well, I'll tell you what's interesting is that I quote, and this is when I got involved in a debate a few years back with two of the economists at the Federal Reserve.
They wrote a paper called, Is There a Housing Bubble?
They wrote this in 2004.
And the answer is that there was no housing bubble.
And I responded by writing a paper saying that they made the greatest mistake, greatest error by saying there's no housing bubble since Irving Fisher in 1929 said stocks were the new all-time high plateau and wouldn't go down.
And, you know, of course, time proved that correct.
And what I found interesting is they asked me, you know, how I knew prices were going to go down, the housing prices.
And I explained to them, I said, you know, it's basic Austrian theory.
When you guys start printing the money, it goes into certain sectors of the economy.
And then at some point you stop because you get afraid of price inflation.
And because of that, what you've been propping up collapses.
And so it was clear the money was going into the housing sector.
And, you know, just as sure as night follows day, at some point you're going to stop that printing because of the fears of inflation.
And the whole thing is going to crash.
And that's exactly what happened.
It wasn't very complicated or anything like that.
But, I mean, they clearly never heard of any of this stuff.
Well, you know, the thing is, too, you got to be really smart and I guess making money and have a vested interest to not be able to see the basic truth of the bubble here.
I mean, I was a Ron Paul fan, so I was hearing him talk about the housing bubble back at the end of the 90s, that kind of thing.
But if you go back, there's a Sam Kinison bit about, oh, yeah, each and every one of us can be a gigantic housing developer and be a millionaire, according to all the infomercials in the middle of the night and whatever like that.
And it's the same thing as at least the myth, I don't know if it's true or not, of Joe Kennedy saying that he got out of the stock market in 29 when his shoeshine boy said he was getting in.
And he said, wait a minute, this is a bubble.
I got to knock this off or whatever.
Well, when every idiot in America can have a job buying and selling houses, not actually producing anything, but just buying and selling houses and have a reality show about it on the Garden Channel or whatever, then you know it's a bubble.
There's just Sam Kinison could have told you, regular people could have told you, you have to be paid very well and be at a very high level of power to be that ignorant and that unaware of what's going on.
Anyway, that's my take.
Hey, is there any chance you can stay one more segment with us here, Bob?
Sure, why not?
Okay, great.
Well, put the phone down.
We'll be back at six after.
All righty.
Take a break.
Thanks.
All right, y'all, welcome back to the show.
It's anti-war radio.
Bob Wenzel gave a speech to the New York Fed.
It's nice to know they invite an Austrian dissident there once every century or so to explain the facts of life to him.
Lou Rockwell titled it, Get Out and Leave the Building to the Four-Legged Rats, today at lourockwell.com.
Wish he would quit pulling his punches so much, you know?
But anyway.
All right, so we're talking with Bob Wenzel about his speech.
And now, there's a lot of important and complicated things about the Austrian School of Economics that I don't really understand and sure as hell couldn't teach anybody.
But the most important one, and I think the most important one, well, the most important one to me, and I think the most important one as far as your speech to the Fed is that you guys are the cause of the business cycle.
That's what you're trying to tell them, right?
It isn't capitalism that causes the big boom and then the big bust.
It's them messing around with the money supply.
Did anybody understand that?
I really honestly think they heard that for the first time when I spoke about it.
God dang it!
Developed the thoughts on that in the Q&A after that.
I mean, they come from this Keynesian view that they need to print money so people go out and buy stuff, which makes no sense.
One point I clearly made in my speech was, if you believe in supply and demand, you don't need to print any money.
If there's products out there, prices adjust based on that.
And you could see them later in the Q&A trying to work around that in their minds and trying to understand, because they would say, well, we believe in supply and demand.
We believe in Fay's Law that supply creates its own demand.
And then my question was, well, then why are you printing money?
And of course, they didn't have an answer for that.
Because that's all they know how to do, I guess.
Right, right.
I mean, they're just so schooled in Keynesian thought that they just don't understand anything outside the parameters of that and clearly haven't studied it.
And again, these are not guys that are just coming out of college or anything.
These are 20-year veterans of the Fed as economists.
So really, you've got a teenager who just read The Creature from Jekyll Island that understands the nature of currency in the world to a degree way beyond the masters of the universe at the New York Federal Reserve.
That's what you're telling me.
Yeah, no question about it.
I mean, these guys just do not know.
They have tunnel vision.
They have specific things they're assigned.
And that's what they work on.
You know, I'll tell you another story.
There was a – I attended a Washington, D.C., Economic Club meeting where an assistant treasury secretary spoke, and he talked about what they did during the crisis.
He was assistant treasury secretary when Paulson was the treasury secretary.
And he talked about the different programs the treasury implemented.
And I raised my hand.
I said, do you know what the money supply did in the summer of 2008?
And he said, no.
I said, well, what if I told you it went to zero?
Would that be significant?
After, was it 25%?
Yeah, he said that would be very significant.
And I said, well, did any memos go around?
Did you contact the Fed why they suddenly slowed money supply growth?
He says, well, we have people monitoring.
I said, no, no, no.
Are you aware of anyone?
Were there any memos or anything?
And he had to admit he didn't know.
And basically, it was a situation where these guys have this tunnel vision.
They're assigned jobs, assigned tasks, and they don't look beyond that.
I mean, they're climbing the Washington, D.C., government power ladder, and you don't get anywhere on that ladder if you start questioning things.
You just do what you're told.
Well, and Bob, I mean, come on.
As an economist, I'm a great anti-war guy.
I'm not the master of all this human action and Karl Menger and all of these complicated things.
That's not my beat.
I leave that kind of thing to you guys.
But I knew Goodwill was having the money supply in real time in the summer of 2008 because Gary North was writing about it at LewRockwell.com.
He didn't even have to go to Mises.org.
You could have just stopped by LRC, the politics site, you know?
And there was Gary North saying, wow, they sure are pricking the bubble hard here.
Expect a major crash in the coming weeks.
I mean, it was right there.
Right.
Yeah, no question.
I mean, it was obvious.
I put him on the spot because the way I worded the question, I asked him if he knew what the money supply was doing in 2008.
And if you really watch the money supply numbers, you would know.
I mean, that's something you don't see very often, it dropping.
In early 2008, money supply was growing at an annualized rate of close to 25 percent, and then it went to zero.
Now, again, I don't think the Fed should be messing with money supply at all.
They shouldn't be going to 25 percent and cutting it off and then bringing it back.
But if you look at that and you see that going on, you know that that's going to really crash the economy.
So that would have stuck in his head if he had known it at all.
He clearly did not know that because I asked him, do you know what happened to the money supply in 2008?
And he had to stand there in front of us.
And this is just a member of the New York Fed board?
This guy's name.
No, no, this is a this guy's name is Phil Swigle.
OK, and I don't want to pick on him because all the other guys.
Phil Swigle is a very, very sharp guy.
OK, which is what's most important.
No, what's important is what's his rank in all this?
This ignorant man.
He was the economic advisor to Hank Paulson, Treasury Secretary Hank Paulson.
At the time in 2008.
So when Paulson looked around to find someone to tell him about the economy, Swigle was the guy that was supposed to do it.
Good times.
And he didn't know what the way he was watching the money supply.
How can you be an economist advising the Treasury secretary?
Well, you're your official title is assistant director of economic policy for the Treasury or something along those lines.
You know, I never understood about all that.
Why did they let Bear Stearns and Lehman and Merrill fall?
Was that just like a Goldman putsch or what the hell happened there?
Yeah, I think they would have just bailed out everybody.
They're all members of the club.
Exactly.
Yeah.
Yeah.
I mean, if you go back to my post at that time, it was clear to me that I thought it was, you know, Goldman Sachs, of course, Hank Paulson, the Treasury secretary came from Goldman Sachs.
He was CEO there.
And he took out some competitors.
He took out Lehman and Bear Stearns.
And what's interesting is in the book, Too Big to Fail, there's a comment made by Warren Buffett where he called Paulson and was thinking about buying into I'm not sure if it was Lehman or Bear Stearns.
Let's get which one.
But he said he knew how Paulson talked in code and Paulson was not energetic about him doing it.
So he did not do it.
And he came up with some other justification for not doing it.
But he clearly said that Paulson did not want Buffett to bail them out.
He wanted them down.
And then the next bank that got into trouble after that was Citibank.
And I wrote at that time, they're going to be bailed out.
It's the end of the crisis as far as banks are concerned, because Robert Rubin was head of Citibank.
I believe he was chairman of the board at that point, or he might have been one of the senior advisors, one or the other.
But he was a Goldman guy, CEO of Goldman.
So they were going to let that go down.
And they did it.
CEO is Citicorp is still out there today.
Well, yeah, Citi and JPMorgan Chase, these are the guys that wrote the Federal Reserve Act.
They're always going to be safe, right?
Right, right.
And really, that's how ignorant they are, too, that even at JPMorgan Chase, they needed a bailout.
They weren't smart enough to realize the same housing bubble that you realize at your blog.
Yeah, well, I think what they did, they just knew that the Fed would give them the money they needed.
So they just didn't care.
And JPMorgan was really picking apart parts of Bear Stearns and all that.
I mean, they got a great deal on that stuff.
Well, yeah, I wish I really understood all the inside stuff about the warfare between the big banks and even when it comes to like America and Britain versus the Europeans and on certain things.
I don't really understand the central bank wars well enough.
I wish I did.
Dick Fold was the president of Lehman Brothers, and the other Wall Street guys just did not like him personally.
And with Bear Stearns, it goes back to Bear Stearns did not want to...
There was a firm by the name of Long-Term Capital Management where there was a crisis.
They blew their portfolio up and lost billions and billions of dollars that I actually mentioned in my speech.
And Bear Stearns did not want to bail out Lehman Brothers way back, I'm sorry, Long-Term Capital Management at that time.
And so this was sort of revenge on Bear Stearns saying, OK, you don't want to bail out Long-Term Capital Management back then.
We're not going to bail you out now and deal with that.
Let me ask you something else, too, as long as I'm keeping you into this break here and recording one more question, I'm going to go ahead and go for it if I can.
They created all this money, and yet they're paying all the banks to not loan it out, but just to keep it on the shelves at the Fed, I guess, virtual ones anyway.
And then so I guess we don't have this multiplier effect of all this fractional reserve banking until they start making all the loans.
And that's when we risk not just bubbles, but high price inflation all across the board, that kind of thing.
And yet at the same time, it seems like we never can hit bottom as long as the Fed keeps buying up all this bad debt instead of liquidating it all in one kind of bankruptcy maneuver or another.
So I guess I wonder whether you're predicting that kind of, you know, very disruptive 1970 style widespread, you know, across the board in different sectors, price inflation, and if so, when wouldn't the economy have to sort of pick back up in order for to cause that terrible catastrophe?
Then I guess they'd have to force a recession in order to prevent all that inflation, right?
Yeah, that's a very good point.
And you sort of have the scenario correct there.
But I'll tell you one thing interesting about the excess reserves where they now pay interest on them.
Why are they doing that in the old and they argue they needed to control monetary policy and all that sort of stuff.
But if you look at all the other Fed chairman, they were able to control monetary policy and money supply without having to pay money on the excess reserves or it's actually technically on all reserves.
But the most important is on the excess reserves.
And I honestly believe that in certain ways, Fed chairman Ben Bernanke uses the Fed policy to run experiments as far as what will happen to the economy and because of different monetary policy stuff.
I point out in my speech that he's just implemented this Operation Twist.
But in 2004, three economists wrote a paper saying the top guy, the Nobel Prize winning guy by the name of Modigliani, said Operation Twist didn't work when it was tried in 1961 during the Kennedy administration.
And maybe it would work and maybe it won't.
But we don't know because we'd have to do it on a larger scale.
Guess who one of those three economists was that wrote the paper?
Ben Bernanke.
So he says in the paper that Operation Twist didn't work on the level that it was tried.
And maybe it'll work if it's larger, but you'd have to experiment.
And he implements Operation Twist again.
I mean, you know, that's I don't understand that stuff at all.
There are a number of moves before that where I suspected he was just playing around with the economy as an experiment, experimental lab.
And then he comes out and does something that clearly shows he knows it doesn't it didn't work before.
And it may or may not if he tries it on a grand scale.
So he tries it on a grand scale.
I mean, he's experimenting.
You know what?
I hate to commentate all over your interview more, but I'll never forget reading in The Secrets of the Temple, which is, I guess, the Washington Post version of the creature from Jekyll Island.
And the lesson of the book, of course, is inflate more.
But anyway, the anecdote I'm telling is about how they keep charts at the Fed of suicides and foster care and broken businesses and broken marriages and destroyed lives.
And they keep statistics on all of that.
And of course, in the book, the argument is they should never, ever allow there to be a correction because it causes all of these negative consequences.
Never minding that it's the inflation that set them all up for the failure in the first place.
But that's where the rubber meets the road on this thing.
And they're not ignorant of it.
They know good and well that every time they click that interest rate this way or that, whether they understand the real causes and effects of what they're doing, they know that they're responsible for real human suffering.
And when you're talking about trillions of dollars destroyed, you're talking about millions of lives at least disrupted and many lives destroyed.
Epidemics of murder, suicides and foster care and broken homes and marriages and businesses, et cetera, et cetera, et cetera.
Real pain that these men are responsible for in their ignorance and their arrogance.
Scott, I couldn't agree with you more.
I mean, the pain and suffering that goes on in the United States economy for no reason because these guys are playing around and bailing out their friends on Wall Street is obscene.
I mean, that's the only way to describe it.
And I think a lot of these economists are really just sort of channel into thinking where they don't really even think about that kind of stuff.
But the guys at the top certainly know and certainly understand.
And the key is more and more people are understanding what the Fed is about, how they manipulate things.
And so I don't see it lasting long term.
People are just waking up to what's going on.
Thanks to Ron Paul.
Thanks to the Mises Institute and those type of educators.
You have a broad basis of youth coming up who are starting to understand this stuff.
Yeah.
All right.
Well, that's a great place to leave it.
And we got to.
So thanks very much for your time.
I really appreciate it.
My pleasure.
OK, take care.
Everybody, that's Bob Wenzel, economicpolicyjournal.com.
And you can also find him at the top of the page today at LewRockwell.com.
We'll be right back.
