12/19/13 – Charles Goyette – The Scott Horton Show

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Coming soon, Hayek, Hazlitt, Carlin, use promo code Scott Horton and save $5 at MyHeroesThink.com.um man does everybody's phone sound terrible or is it something broken here i was pretty sure it was everybody else's fault but mine but now i'm starting to wonder anyway well this phone should sound great all right well we're gonna we're gonna see what happens um so charles you wrote some books uh one of them is big and yellow and has a melting dollar on the front and it's really easy to recognize at the christmas shopping store it's called the dollar meltdown and it's really good and fun to read and then also there's another one too which isn't quite as fun to read because it it's it's even uh worse about how bad things really are i mean uh it's good on how bad things really are is what i'm trying to say there um but uh yeah so that's a red and blue and broke all over the trouble the american government has got the american country into or something like that i forgot the title uh red and blue and broke all over so everybody ought to go and spend as much money as they can getting the most expensive copy they can from their favorite local bookseller um the dollar meltdown and red and blue and broke all over and check out charles website charlescoyette.com so i'm glad i got a chance to say that because i really like those books a lot and i really do want people to read them and also to pay you well that's that's very generous of you you're really in the christmas spirit yeah so everyone obey my commands and follow my influence all right now so let me ask you this i saw on the tv yesterday and they said that the central bank has decided that they've done a great job and now it's time to go ahead and back off all of their monetary stimulus and all of their what 85 something billion dollars a month worth of securities they've been buying and they're gonna start tapering i mean slowly backing off uh the amount of new money that they're inflating and so i guess you and all the free market guys were proven wrong and interventionism works great and we're living the good times right now because of it because uh that's what they said on cena well i suppose that's one way to put it and that's i'm not surprised you would find it put that way in the national news media this thing has been an absolute debacle it's been uh you know look i i don't take any particular delight to me it's not personal i don't take any particular delight in the uh in ben bernanke leaving the fed next month because he's going to be replaced with somebody who you know worships at the same temple and has the same you know keynesian spin your way to prosperity primitive superstitious beliefs so but he has been an absolute calamity if you think about it you know this may get a little technical for people but when ben bernanke came in the door took the helm of the federal reserve the the monetary base the balance sheet of the fed was just a little over 800 billion dollars and that he that was in 2005 he's walking out the door now the balance sheet of the fed as he leaves will be almost eight times as large almost we're talking about four trillion dollars so what happened well the fed basically created out of thin air during ben bernanke's reign with a monetary base beginning at about 800 billion dollars it suddenly just it just spiked it was a hockey stick curve that went straight up and it doubled and it doubled again and now it's growing again so it has quintupled during his tenure and this all represents money that was just made up out of thin air it was money that was just printed the morning before in the basement of the mariner eccles building in washington dc it's just a few electrons sit spinning around in cyberspace by the keystrokes someplace that created trillions of dollars of new new u.s dollars out of nothing and what did they use the money for well they used the money to buy the downgraded debt of the united states treasury and they used the money to buy you know toxic securities uh a mortgage backed securities toxic paper that uh the major money center banks had gotten into trouble buying and so the fed printed up a bunch of money to reliquify the banks to take those uh those those toxic worthless mortgage securities off the balance sheet of the banks and put them onto the balance sheet of the american people basically on the balance sheet of the u.s dollar so we have seen the most incredible eruption of monetary printing in modern history during the uh the reign of ben bernanke and now as he goes out the door he says he says oh but don't worry situation normal everything out of control and beginning next month instead of printing a little over a trillion dollars a year we're only going to print 900 billion dollars a year hello and so here's the way i look at it if you project where we will be this time next year december of 2014 the monetary of the base because of this brave decision that they've made to taper this week the monetary base of the united states at the end of this time next year at the end of 2014 instead of being five trillion dollars will only be 4.9 trillion dollars what a brave move they have made clearly scott the trajectory of money printing remains alarmingly steep it remains virtually uh the same and why shouldn't it because frankly we haven't had to pay much of a price for it so far well so so far now it seems like if i remember right back in uh say late summer or really i guess all through the summer i'm not sure exactly when it started but anyway summer uh certainly sometime in the summer of 2008 i remember reading over at lou rockwell.com about how um oh they're deflating they're beginning to raise the overnight rates and all that they've gotten spooked they're afraid that they've uh built the bubble up too much and so now they're trying to let the air out but you know what always happens and then there's the rothbard quote about how you can't let the air out slow it always pops and uh i think that's from america's great depression but anyway so then that was what happened just uh at the end of september the bubble popped and it seemed like um well it seems like bernacchi's learned that lesson sort of again shades we keep somehow this keeps coming up on the show lyndon johnson saying well i'm not going to be the first president to lose a war so i'm just going to make nixon lose it years from now and just who cares about all the people who die between now and then i think bernacchi's learned the lesson that that's the last time he tries to scale back anything very much anyway he's got to keep the pedal to the metal at least until he can pass it off onto the next schmuck where he was greenspan schmuck who had to take the hit for for the giant greenspan bubble or the second giant greenspan bubble uh he's gonna make this yellen or whoever's after her take the hit for him huh yeah i think he you know as a as a matter of fact it's probably pretty shrewd of him to uh to get out now i'm you know fairly certain he was shown the door effectively he was he was uh let it was it was let known that he wasn't going to be reappointed and it was all done very gracefully but i think he's got you know i wouldn't want to i wouldn't want to be a chairman of the fed with uh with what they've got coming and so they put the utterly clueless jenny and uh well you know she's been a factotum of uh of big government uh big fiat money big money printing uh big quantitative easing big keynesian nonsense all of her professional life so i fine let her take the hit well although i mean i don't know can they just keep inflating and inflating i mean it seemed like in the last giant bubble it didn't really turn around until until bernanke got spooked and and made it turn around like if he had just kept inflating would we still be in the housing bubble from then if you're not i can't tell you i can't i can't tell you exactly but uh um you know the market the market's always bigger than the central bank i mean nobody's bigger than the market and you know at some point the you know the market says enough is enough and you know not everybody wakes up at the same time and not everybody heads for the exit at the same time but people get spooked and you know i mean just as a symptom of what we are describing you know the fed you know have issued pronouncements with their quantitative easing uh tapering announcement the other day they also said said that you know they're going to make sure that interest rates don't rise as long as inflation is low they're going to make sure that interest rates don't rise how exactly how exactly are they going to do it they they the only way they've been able to do it is by buying bonds that screwed up the yield curve but uh if they say that they're not going to buy any bonds but they're going to keep interest rates low they've got a real problem because the market says otherwise you know interest rates are probably a point above where they were last year and uh you know mortgage rates are coming up and uh you know impacting the housing market already ultimately ultimately the market is in charge of where interest rates are and uh ultimately lenders creditors are in charge of you know how much money they will lend the united states government so when the government goes out to borrow money the fed says oh we have been the 800 pound gorilla in these treasury auctions we've been taking virtually everything scott they've taken everything i mean last year the fiscal year that ended last year the fed bought the fed bought um i guess just off the top of my head over a hundred percent of the deficit so the fed during the course of fiscal year 2013 that ended in uh september the uh the deficit came in and i don't know what it was it was 690 billion or somewhere in there the fed bought that much printed that much money created that much money out of thin air and another uh probably uh 30 40 50 60 billion on top of it so the fed is basically the big buyer the number one holder of u.s treasury debt period end of story now the fed says well we're not going to have as big a presence uh in these auctions you know and the market's going to have to come in and and uh and fill in for us because the government's still going to be having a rollover debt you know this portfolio of government bonds that you know some of it matures and you know when it matures it has to be rolled over nobody ever thinks the government debt's going to be paid back by any other any other expediency other than selling another bond tomorrow so they've got to have people at the auction tomorrow to buy the new bonds to buy the reissuances and stuff so uh you know ultimately this is a process that uh the market is in charge of and the market you know has been more or less happy to uh buy this debt but you know china has said look i'll tell you i'll tell you a story but i'll just tell you one story about how clueless these people are it was a little over a year ago and barack obama was on the uh david letterman show during the presidential campaign and david letterman said well tell me how big is the national debt and barack obama the president of the united states said well i i don't know precisely and he started fumbling and and so on so letterman tried to help him out and he said well is it is it 10 trillion dollars and the president couldn't answer and so here's the important thing to remember about this and it's not just democrats i could tell you stories about republicans and republican presidential nominees that are utterly as clueless but this is the single most important metric of the solvency of the united states is you know how much debt do we have you know it has to be paid back people have to be taxed for how much debt do we have and the president of the united states doesn't know now he assumes a posture in these debates about whether we have too much or too little debt can borrow more should we raise the debt ceiling but he doesn't know how much the debt is and so letterman said well is it is it 10 trillion dollars well for the record it was 10 trillion dollars when when obama was first elected but at the time of the campaign last year it was over 16 trillion dollars having grown by six trillion dollars during obama's watch and he had no idea how much the how much the debt was so he pivoted you know obama's always pivoting he's pivoting from the middle east to the senkakus to get us in a war down there well he pivoted on the question how much the debt is and he came back with that old liberal refrain that he learned it i don't know columbia or harvard or wherever he went to school and learned from his liberal professors he said well the thing to know about it deflected the question because he didn't know how much it was he said well the thing that you have to know about the national debt is we owe it to ourselves of course we never did you know it was always owed to people who are called bondholders and people who had paid into social security on the bogus representation that they were you know that there was a quote trust fund their words not mine but but in any event it shows you how clueless he is because we no longer owe it to ourselves we owe a third of it to foreigners two and a half trillion dollars almost two and a half trillion dollars just to china and japan so the people that are you know the fiscal authorities republicans and democrats alike are utterly clueless about the nature of our problem and frankly you know yellen and the bernanke and greenspan and the rest of them are utterly clueless as well i mean you remember that uh bernanke told us in 2005 subprime market market mortgage market was contained in 2005 was just getting going alan greenspan said now this is how this is how insular they are in their thought alan greenspan said well nobody saw the housing bubble coming and i'm here to tell you scott since we have a lot of mutual friends i'm here robert bluman you can't push that one over on me there is nobody i know with a rudimentary understanding of austrian economics that missed it but they are so insulated they are they are so solipsistic in their little world of keynesian magical monetary theory that they think nobody saw the the uh the mortgage bubble coming so hey i was good on the housing bubble back in 1999 2000 when it was still the dot-com bubble and there's only one explanation for that of course is i was listening to ron paul yeah sure and he was he was saying oh yeah no look housing is you know land is probably a better bet than a dot-com bubble stock but then again there's a big bubble in housing too you know well when they when the housing bubble popped did the did the governing classes turn to anybody who had seen it coming did they turn to ron paul and said oh gee on the house floor he described exactly how this would unfold and it did we ought to ask him no what to do about it hey wait now let me ask you this because uh you talk about how interest rates have got to go up at some point there's nothing that they can do to hold them back eventually but then uh also you're talking about the national debt now at what 17 trillion dollars etc like that and so um if i remember right back when inflation back the last time the federal reserve tried to contain out of control inflation by raising the interest rates deliberately i guess you could say the same thing for allowing them to rise very high um that that you know what effect that has on the interest payments uh that the government has to make and the last i heard in it like almost a trillion dollars a year or three quarters of a trillion dollars a year just to pay the interest payments on the national debt and so then if the interest rates go up that much more then that means they could break the entire budget just paying interest payments on the national debt never mind any of their empire building or socialism or any of that sure i mean these the prevailing rates are subnormal if you just go back to you know normalize the rates over the last 12 years or so if you just normalize it being interest rates roughly three points higher or so i mean that you add three points to the cost of carrying the national debt that adds a half a trillion dollars in interest every year to the debt so i mean you know nobody can tell you exactly step by step how this one will unfold they can't tell you you know which black swan will appear you know i mean i could i could take you back to uh to to other calamities of the burst into the bubbles up you know well russia defaults on its bonds and it throws long-term capital management uh uh upside down or somebody shoots an arch duke someplace you know the the things the things that you know every every and it's never where people are looking everybody looks at uh well greece or spain and then something happens in someplace like cyprus everybody's looking at iran for a war or or they're looking at syria and then you know an incident takes place in the sinkakus or something so it's never where everybody's looking and it's never expected nobody ever says you know this is going to be the trigger event when the arch duke gets shot but it's always it's always something like that but you know i'm i'm at great pains to try to tell people that it's not the triggering event you know the the bubble won't burst because uh you know because a black swan appeared on the on the scene sometime in 2014 the bubble will burst because it's a bubble that's why the bubble bursts not because you know some foreign country has an economic calamity and it ricochets throughout the world that's yeah you could call that the triggering event but the bubble burst because it was a bubble all right so now when they say that um there are gains in the housing market and gains in the stock market all that is just hot air no i mean it's of course it's true but i mean you know where where are the gains the you know all of this money we're talking about all this money printed all this quantitative easing where's the money going i mean somebody's getting the money wall street's getting the money it's being stovepiped the direction of wall wall street of the influential money center banks i mean it's been stovepiped in the direction of the mortgage market i mean half the money is going to you know to mortgage-backed securities and fannie and freddie they're buying their bonds and uh you know so automobile sales course you know they move heaven and earth and they buy 85 billion dollars a month to force interest rates down so of course automobile sales have been great and or better and and and uh you know we had a little boomlet in in housing because you know they were able to force interest rates down and of course wall street's good doing great but i could tell you i could tell you there is an exact perfect overlay if you watched you know the rise since the recession hit in the standard poor 500 and uh the rise in the monetary base since uh the recession hit they are virtually an exact corollary i mean you've never seen an overlay that attracts as well as this they both go up at the same rate of ascent and uh it's only because you know the creation of this money has been you know the wind beneath the wings of the of the stock market so yeah the stock market's very very high all of these things come at the expense of somebody else you know there are two sides to every legacy sheet every balance sheet and so all of these things are at the cost to uh savers you know savers little old ladies in uh retirement that should be saving money you know they're they're forced into taking uh risk higher risk than they should you know buying bonds and places or from people that uh you wouldn't think retired people would to try to get a decent rate of return because the fed has manipulated interest rates down to serve one factor of the economy rather than another one so it's a war it's been a war on savers it's been a war on you know the elderly and people that need to you know are on fixed incomes and so on and so forth so i mean the fed nothing the fed ever does is market neutral you know if they decide to force interest rates low they hurt people on the other side of that equation if they decide to raise interest rates uh then they hurt they hurt other people rather than letting the prevailing interest rates that signal reality about the availability of money and credit in the marketplace interest rates that show you that convey information about what's really going on they manipulate them and they manipulate it down to help one faction or up to help another faction and all it does is create distortion and malinvestment in the economy it favors one class of americans as against another class of americans and as a consequence it is not a social lubricant by any means it is social dynamite and these are some of the pressures that are beginning to build in the fabric of american life yeah well and of course they're always describing it as on behalf of the powerless and of course you know just on the basic level right about you know ultimately regular folk from from farmers to office workers or anybody else who's basically a creditor they all want inflation especially like on their house note right borrowing dollars and payback in dimes by the time you're done paying off what your house costs 30 years later it's not that much anymore because all the you know the contract price is stuck in in olden days by then but it ignores all the other effects of uh the pain of inflation on people like that such as for example they can never even dream of saving up and buying a house they'd have to go ahead and get a giant uh debt a 30-year debt in order to even have one in the first place well your comments consider otherwise your comment reminds me of the old line that you know the federal government must must love poor people because they're creating so many of them but you know the the wealth divide is is growing uh like crazy in the united states i mean i i you know i used to keep at my fingertips you know great examples of it pew studies and milken institute studies and these studies and those studies um you know about the you know how the wealth divide is growing and uh income disparity in america and asset disparity and so on i don't even do it anymore because everybody gets it everybody knows that the uh you know that the fed has well they don't know the fed they know that the wealthy are getting a lot wealthier and you know the morons think it's because of capitalism well i don't know i've been looking everywhere high and low under the bed i don't see any capitalism in this country i see manipulation of markets by the fed i see them stove piping money to their favorites i see them moving monetary and fiscal policy to uh to help the uh the wealthy so you know which should be no surprise i mean we're coming up monday on the hundredth anniversary of the federal reserve created by the banking cartel to serve their interests to begin with and a hundred years later that's exactly what they're doing who should be surprised but you know the morons blame it on the you know capitalism i think capitalism is that caricature and monopoly you know the monopoly man money with the silk hat and the spats and the cane and stuff like that when in fact we don't really have not um capitalism at all we have we have crony corporatism in america with the fed doing everything to enrich them and of course they are enriched at somebody else's good so it's not they're they're not enriched because they're creating great new products and services for americans there are people that have done that there are people at apple and corporations that you know create real things that are creating real wealth for the american people and improving life no wall street's not doing that wall street's getting rich because it's uh it's bleeding off the uh the american people thanks to its gopher thanks to its hay boy thanks to its towel boy in washington in the mariner eccles building in the america that's what they call the central bank tower there that's the marble palatial that's the marble palatial uh hall where you know the headquarters of the private pilots and the you know private chefs and the uh uh you know the limousine drivers that ferry the muckety bucks about as they go about the business of you know draining the people's wealth and uh the direction of the banks my dad has this thing on his desk it says yeah if you're so smart why aren't you rich and uh so uh clearly that applies to me and and the thing of it is uh you know of course because i always insist how smart i am all the time no but uh the point being that i really did read the creature from jekyll island back in i think 1996 or something like that and that's all good sound uh mississian gold economics there and so i understood about the business cycle back then i knew better during the whole dot com thing and like i was saying all during the housing thing uh i was warning my friends in 2005 and 6 don't buy a house now wait till the giant bubble crashes but before the interest rates go up and then lock in a low rate at a depressed price you know kind of thing um so that's the proof that i know about this stuff and yet i never participate in it and i never make any money off of it and for uh the the worst example the one that's really uh getting at me now is bitcoins i knew about bitcoins because i'm a libertarian and a radio show host people are telling me about these things the day after they were invented or something but i never had anything to do with that i don't ever have any money and if i did i wouldn't spend them investing in bitcoins or anything but meanwhile i could have turned a thousand dollars into 50 million dollars in the last couple of years something like that if i had just decided to participate in in playing the game that all of these zillionaires are playing at my expense all day anyway right what's wrong with that shouldn't i be in on one or the other of these things well i'll tell you scott this is a deep philosophical question such as we have never encountered before in our conversations but i've known you for a long time i've spent a lifetime in radio and know a lot of radio people and you are among the very very smartest and i think that you performed a wonderful service and i think you've created good karma for yourself so you know uh all the transitory things that are very very nice look we all like to have you know we all like to be wealthy and prosperous i advocate for it every day of my life but you know it's ultimately at the on the very last day it probably matters a lot more what you have done to awaken the people about the needless slaughter of human beings around the the globe and the policies of the people that have led us to this pass and to try to uh stop the bloodshed to the extent that you can't and i think you have been very very you're very capable and you've been very effective and if you would want to switch your focus from uh doing that that you have done so well these many years and folk turn your focus to you know making money on opportunities that come around like bitcoin and it's like the city bus there's always a new opportunity every day if you miss one it's not a problem next bus is coming along if you wanted to change your life and change your focus to that i think the loss would be all of ours well maybe i'd change my focus just a little bit i saw i saw a guy on my facebook feed said he got 40 emails from people saying holy i'm a millionaire and i thought yeah you know i could have been listening to that guy he was just you know one of these evangelical bitcoiners over the last couple of years and uh sure was feeling good the last couple of weeks anyway i don't know how he is today but anyway all right we're over time thank you very much for your time i like talking with you charles oh it's great to speak with you scott thank you so much all right everybody that is the great charles goyette charlesgoyette.com is his website and check out his books they're really great i mean brilliant stuff these are the kind of books that you give to people that you love for christmas the dollar meltdown and red blue and broke all over really i mean it four-star stuff hey all scott horton here for the future freedom the monthly journal of the future freedom foundation as you may already be aware jacob hornberger sheldon richmond and james bovard are awesome they're also in every issue of the future freedom and they're joined by others of the best of the libertarian movement people like anthony gregory wendy mackroy lawrence vance joe stromberg and many more even me sign up for the future freedom at fff.org slash subscribe it's just 25 a year for the print edition 15 to read it online that's the future freedom edited by sheldon richmond at fff.org slash subscribe and tell them you heard it here fact the new nsa data center in utah requires 1.7 million gallons of water every single day to operate billions of fourth amendment violations need massive computers and the water to cool them that water is being supplied by the state of utah fact there's absolutely nothing in the constitution which requires your state to help the feds violate your rights our message to utah turn it off no water equals no nsa data center visit off now.org why does the u.s support the tortured dictatorship in egypt because that's what israel wants why can't why can't america make peace with iran because that's not what israel wants and why do we veto every attempt to shut down illegal settlements on the west bank because it's what israel wants seeing a pattern here sick of it yet it's time to put america first support the council of the national interest at council for the national interest.org and push back against the israel lobby and their sock puppets in washington d.c that's council for the national interest.org hey y'all scott horton here for wallstreetwindow.com mike swanson is a successful former hedge fund manager whose site is unique on the web subscribers are allowed a window into mike's very real main account and receive announcements and explanations for all his market moves the federal reserve has been inflating the money supply to finance the bank bailouts and terror war overseas so mike's betting on commodities mining stocks european markets and other hedges against a depreciating dollar play along on paper or with real money and be your own judge of mike's investment strategies see what happens at wallstreetwindow.com hey y'all scott here hawking stickers for the back of your truck they've got some great ones at libertystickers.com get your son killed jeb bush 2016 fdr no longer the worst president in american history the national security agency blackmailing your congressman since 1952 and usa sometimes we back 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