02/15/13 – Lew Rockwell – The Scott Horton Show

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Welcome back.
Lew, how are you doing?
Hi, Scott.
I'm doing great and great to be on your show.
Well, good.
I'm glad to have you back here.
So your most recent column was actually the text of a speech that you gave here, A Better Century, A Misesian Century, it's called.
And really, it's about, well, the triumph of what you've been working so hard to champion this whole time, the Austrian School of Economics, as compared to, say, for example, the Keynesians and the Chicago School.
And you're saying that this is really just a brand new start for the Austrian School and that we may just have a much brighter future due to the extraordinary number of new people brought into the Austrian School.
So break it down for us.
What's so much better about this way of thinking about economics that you think could actually be much better off for it taking off?
Well, let me mention first that we've had Keynesianism or proto-Keynesianism for a very long time, certainly since the founding of the Fed in 1913.
And there was a lot of propaganda for central banking.
And really, actually, the first central bank was founded at the end of the 17th century, the Bank of England.
So we've had this sort of thing.
And really, we're living in what they probably think of as the triumph of Keynesianism and the triumph of central banking, when we have the entire world with the printing presses running full speed ahead.
Keynes, in what I thought of as an insane science fiction proposal in the general theory, said that interest rates could and should be driven to zero.
He hated interest rates.
He hated people who loan money and, as a result, earn interest from it.
He thought that they were social troublemakers and social parasites and that they really should be subject to euthanasia.
Now, I don't think he probably meant actually murdering them all.
But anyway, that was Keynes' view.
So we've had this period where, if I can put it in the simplest terms possible, where the view that the economy can't run itself, that really the economy is fundamentally irrational, business people, investors, consumers are fundamentally irrational, and they need the guiding hand of government.
Government, of course, which is not irrational, but sees the common good and the general interest and all the rest of that baloney.
But as Joe Salerno points out, Keynesianism is the economics of state power.
It's very good for them.
But they really have gone, even in their own terms, bananas.
So today, because of Ron Paul and because of what Keynesianism has done to the economy, bringing on these recessions and depressions, which are not natural, not normal to a free market economy, but are the result of central bank intervention to benefit the big banks and the government and the oligarchy and hurt the rest of us.
Those kinds of policies bring on recessions and depressions.
So this is the discussion of the business cycle.
So you can have terrible things happen in an economy that aren't the government's fault.
If you live in a country that's heavily dependent, let's say, on coffee, the coffee crop, and there's some horrible freeze that kills all the coffee trees, it's just an economic disaster for everybody who's in that business or who is in any way affiliated with it.
That has nothing to do with government.
But other kinds of disasters, when you have just like the whole economy fail, it seems like all the investments that were made by business people in this most recent trouble, all these houses that were built, all these commercial buildings that were built, that seemed to be such good investments at the time, were actually disasters.
And it's another point that the Austrians hold that the economic trouble is sown during the boom.
That the boom is the time when everything goes bad.
The bust is the necessary correction.
So if there, for example, was a big boom over World War I, then a very short, sharp depression in 1920-21, and thank goodness we had people in government in those days, Warren G. Harding especially as president, who kept their hands off.
And so if you were to look at it on the chart, that depression, the line would go way down sharply and way up again, just a little skinny triangle.
When Herbert Hoover and Franklin Roosevelt faced a similar situation, they did everything wrong.
And as a result, America didn't get out of the 1929 crash and the aftermath of that depression until 1946.
I mean, that was a very long period of time.
So there's always been academic interest in business cycles, but now I think there's far more interest by business people, by investors, by young people, by just regular guys about what the heck is happening.
Why haven't we gotten out of this recession that began so disastrously in 2008?
Are we in another recession?
Is it really a depression?
Murray Rothbard pointed out that they keep changing the name.
These episodes used to be called panics and crashes, but then that was seen to be too panicky.
So then they changed it to depression.
Depression was actually a euphemism, as hard as that is to think now.
But then, of course, depression became too alarming, so they changed it to recession.
I'm sure there's going to be some other, you know, a minor downturn or whatever will be the next euphemism.
But people are ready for a change.
Ron Paul brought millions of new young people into libertarianism and into an interest in Austrian economics, not only in our country, but around the world.
There's never been this much interest.
This is a good boom.
This is a boom with a substantive footing to it, that all over the world, young people, many people, but especially young people, are interested in reading Mises and Rothbard and Hazlitt and Hayek and the other great economists and understanding what the heck is happening.
What is the government doing to us?
How do we fix it?
Because the Austrians have got the only answer to how we fix it, which, of course, has to do with pulling the government out.
Of course, under Bush, under Obama, under all the rest of these guys, the government uses these crises as a chance to benefit itself, grow itself, extend its tentacles into more areas, never letting a crisis go to waste, as the rotten Rahm Emanuel put it.
So it has been true, I guess, ever since the beginning of mankind is a fight between power and market.
But I think the market, despite all the bad stuff that's going on in Washington, all the horrific stuff, is entering a new phase of good information, good opinion, good knowledge about economics, and at the Mises Institute, of course, we're doing everything possible to keep this going with our website, mises.org, and my own website, lewrockwell.com.
And I think it's quite exciting.
So it's all sort of under the surface.
It's not being reported at Fox or MSNBC or in the New York Times or the Washington Post.
Washington Post, which I was delighted to see, had to lay off a lot of people recently, just the other day.
And they tried to keep it secret.
They tried to keep it out of the media.
Somehow journalism doesn't apply to them.
But anyway, you won't read these things or hear about these things in the mainstream media.
But if you're on the internet, if you're dealing with young people, you see really there's a renaissance going on.
And Victor Hugo held, and so did Mises, that ideas are more powerful than armies.
Also, that armies can be stopped.
Ideas can't be stopped.
So there comes a time when it's actually possible to change the climate of opinion.
And everything rests on that, as long as people give their tacit consent to government depredations.
Whether it's the communists or the Nazis or the Roosevelt or Obama or whoever else it is, the government can get away with things.
But once people start to withdraw that consent, once they understand they're being lied to on a formal basis on everything from Chris Dorner to Ben Bernanke's latest actions, once they understand that this is a gigantic lie machine and that the truth lies elsewhere, really there is a chance to make this next century, instead of like this last century, thanks to the Federal Reserve and Keynesianism and similar ideas, has been a century of world war, of concentration camps, of gulags.
And I mean, just get on the list of...
It's only a guess as to how many people in this last century were killed by governments, not including in their wars.
More than 200 million people.
When you include the wars, how we're writing hundreds of millions, that is, it's difficult even to just contemplate it, difficult to think about it, how many people have been murdered, what amount of skulls that would make.
So we have a chance not to replicate that, to move beyond that, to get better, to be better.
And part of that is understanding some economics, which as Mises said is far too important to be left to the economists.
Everybody needs to understand some economics, just so they can't pull the wool over your eyes.
It's a fascinating subject.
It's the truth versus the lies.
And so I see many, many good things bubbling under the surface.
And I think, yes, if we all do our job, this can be a much, much better century.
Yeah, well, so you're right.
What it does take, I guess, is people have to be able to imagine for a minute that really the consensus is wrong.
And it's what got us all screwed up.
And that maybe we need to look a little bit beyond the usual explanation.
And it just seems like when the money has George Washington on it, the money is government money.
That's why people trust it, right?
That's what's legit about it.
And when you're trying to tell them your argument is exactly the opposite, that having the government in charge of their money is the reason that they spend their entire lifetime wondering why.
Sometimes the economy is good.
Sometimes they're living in their car and they can't pay for their kids' medical bills.
You know, why is it sometimes the economy is good?
Sometimes it's bad.
You're telling them it's because of their trust ultimately in that government money.
So could you elaborate a little bit on how exactly that that works?
Why is it or what's an alternative?
How would an alternative prevent that boom and bust?
Well, first of all, the trouble is you're exactly right.
The government having control of the money.
And today it's fiat money.
That is, it's entirely if Bernanke wants to double the money supply overnight, he can do it.
It's all digits, of course.
You don't have to.
We talk about them printing money, but they do print some money.
But of course, the vast majority of the money is created in the Fed's computers and in the bank's computers.
So what this means is that they devalue the value of a dollar if they double the value of the dollar.
And the exact process by which this takes place has to do with everybody's valuation of money.
So in the great German inflation in the 1920s, for a long time, prices went up much slower than would have been indicated by just if you were a Friedmanite by the amount of increase in the money supply.
Then at some point, everybody realized, holy smokes, you know, the mark is being destroyed.
And they started to spend everything to try to get something real instead of the paper money, at which point prices went up much faster than, quote unquote, they should, according to the monetarists, much faster than the increase in the money supply.
So everything depends on the persons and the American peoples and the world, because the dollar is the world reserve currency, the valuation of what the dollar is actually worth and is going to be worth in the future.
But when they increase the money supply, it depreciates to one extent or another, the buying power of the dollar.
But much more happens than that, because they increase it.
They could increase it.
Just the treasury could increase it, print the bills and whatever.
That would be bad, although it would be a little bit more transparent.
What they actually do is they do it through the banking system.
So this is why, in fact, the Federal Reserve was set up by the big bankers.
You had representatives of J.P. Morgan.
You had representatives of John D. Rockefeller, of the Kuhn Low banking interest, another big banking interest met at Jekyll Island, Georgia, to write the Federal Reserve Act.
And their main worry was to have a so-called lender of last resort.
It's actually the looter of last resort, but it was a lender of last resort that when they were all inflating, if any of them inflated, the banks issued too many notes, expanded the banks' own money supply through loans, and then got in trouble because of that, because people started wanting their gold versus the paper notes, that the Federal Reserve would step in and protect them.
That was the key purpose.
Government, of course, benefits from inflation.
They can spend their money.
All the interests associated with big government benefit from these inflationary monetary policies.
So that was their thing.
And indeed, this didn't fully happen until after the Great Depression, because there were banks that went out of business in the beginning of the Great Depression.
Last time that's happened, except the Fed allowed it for reasons of its own.
So banks don't go out of existence.
They're too big to fail, as we're told.
So they have to be kept in existence.
They have to be bailed out.
And the money, when there's a stimulus, it has to go to the banks.
Can't go to you.
So that's the way things work.
And so we have money that's worth less and less.
But because of the way it's loaned out through the banks, it causes the interest rates to be lower than they would otherwise have been.
Now, of course, right now they're unbelievably low.
But whenever the Fed is in operation, always they're lower than the natural rate.
So what happens, just very briefly, is that business people, entrepreneurs, are led to make loans and make investments, expand their factories, build new buildings or whatever.
As if there were greater savings in the economy.
Because it's the amount that people save is really how much new money there is available to make new investments.
So the Fed falsifies that, makes it seem like there's a lot more savings in the economy than there is.
So these guys make all these investments that all seem to be great during the boom.
And then when it becomes clear, when the Fed shuts down things to prevent hyperinflation from taking place, or the road to hyperinflation, then all these things that seem great turn out to be disasters and they have to be liquidated.
The Fed in this typically, ever since it was established, and especially if we look at the recent years, has done everything possible to prevent the bad investments from being liquidated.
So as a result, if we just look at housing, they're keeping a huge number of foreclosed housings on their books, as if they're not foreclosed, and as if the loans were still performing.
If the right thing were done with housing, all the houses would have been for sale.
We would have had, for the first time in a long time, actual affordable housing.
Remember the liberals always talk about, we need affordable housing.
Well, right.
But of course they did everything possible to prevent affordable housing from coming about.
And just like Hoover and Roosevelt worked to keep prices up so the market couldn't clear, so the housing market to this day continues to be highly distorted and just messed up in so many different ways.
Our money is going to be worth less and less.
People lose their jobs.
We're in a recession.
Maybe much worse times are ahead.
But this is all unnecessary.
If we look, and it was not a period of laissez-faire, but it was pretty good if we think of the years between once the U.S. went back on the gold standard after the Civil War and up until the time of the Fed.
During that period of time, now what I'm going to say is going to sound like science fiction, but this is the way a free market money and a free economy works.
The money that young people would put away in their savings would be worth more when they retired.
And the reason is because with the gold standard, and I'm not advocating the gold standard today because I think, as Ron Paul always points out, we know a lot more about a monetary system and you can't trust the government with the gold standard anyway.
But in those days, the gold standard still worked far better than the fiat money standard.
And they can't, of course, print gold, much as they might like to, much as the alchemists tried to do that.
They can't actually do it.
So you had a period of decades when money supply was not increasing.
It was very, very little, and the way it was increasing was by gold mining.
So that's an entirely different thing than somebody just printing up stuff.
So you had the money supply increasing just very, very gradually in real ways and in ways that were useful in the economy because, of course, gold has more of a function than money used in, not electronics in those days, but all kinds of jewelry and other kinds of teeth and all other kinds of uses for gold besides money, especially these days now, many more uses in electronics.
So in those days, you had the money supply just barely, barely increasing.
But in a capitalist economy, just a fantastic outpouring of new goods and services every year, which meant your money would buy more every year.
This is the way economic growth was communicated to the average guy.
Even if you didn't get a raise, your salary bought more this year than it did last year.
The money you would put away in savings would be worth more in the future than it was at the present time.
So when you retired, you could be better off.
I mean, imagine that.
Nobody can retire now, of course.
Retirement has been abolished, and that's, I must admit, probably that's not all bad because I think work is a very good thing.
But really, we should have a choice.
They've taken the choice away from us.
So in a free market economy, as the economy is booming and growing and the money supply is not being inflated, everybody benefits.
So that, of course, was abolished by the Federal Reserve, and it's been a quite terrible thing.
The Fed also made possible world wars.
Central banking, anyway, certainly made possible world wars, which never could have taken place pre-central banking.
So central banking is one of the worst things ever to happen to mankind.
State is the worst thing, of course, but the state's phony baloney monetary system is right up there, right close to the establishment of the state itself and enabling everything.
I'm sorry, Luke, because we're so short on time, but I wanted to get back to the real point of your speech, which is, and as you were saying earlier in the interview, this really is changing because even if in the Fed is not a mainstream position, it's a famous one.
It's a household slogan that everybody's heard, and it's no longer just some crank position that like, yeah, I one time met some guy who went on and on about the central bank, but whatever.
I don't know.
Now it's a, it's a, in fact, on the Simpsons, there were a, Mr. Burns was talking about the economists and there were the Keynesians and the Austrians and nobody ever heard of Milton Friedman in the Chicago school there.
It seems like we're, we're moving on up, you know?
They're right.
Yeah.
They're right.
And it's, it's very exciting because of Ron Paul.
He made the Fed interesting.
And by the way, there was a deliberate attempt to make the Fed boring.
This is not just an happenstance because they don't want people looking into it.
So by making the Fed interesting, but making more and more people realize they're being ripped off, it's quite a tremendous event that has taken place.
Yeah.
Well, I think years ago anyway, we spoke about how in William Greer's book, Secrets of the Temple, he talks about how at the Fed, and this is argument for more inflation, of course, the way they put it, but anyway, they have all the statistics and all the broken businesses and the broken marriages and the foster care rates and the suicides.
And they're keeping track of the pain that they cause.
They know exactly what they're doing.
Well, you know, they're monsters.
I don't, I don't, you know, I mean, I suppose there are well-intended people at that level of government that, you know, can't rule it out.
But these are people who love power.
They love stepping on other people.
That's why they go into government.
So at the Fed, you can really step on people.
You can really put your boot on the neck of millions and maybe billions of people.
You can get a lot of fun of grinding people's face into the mud if that's your, that's your thing in life.
And that is the thing in life of people who, I won't say who go into government, but certainly the people who succeed in government are those types.
So yeah, they're all having a good time.
It's our job to force them to get out and I won't say put them in jail.
Maybe just let them get a real job.
Maybe McDonald's needs them.
Well, you know, I mean, what we are doing, what you're certainly doing at the Mises Institute and, and popularizing libertarianism the way that you're doing is you really are giving people another opposite.
Usually it's only both sides of everything.
And most people generally would conceive of the opposite of what we have now would be socialism of some kind.
In fact, I think Dan McAdams in your recent interview talked about how in the former Soviet Union, they don't like what we call capitalism so much.
But what you're doing is saying, no, the opposite of what we have now is a free market capitalist system so that there's another opposite to what we have now other than worse, you know?
So I think that's really important.
And of course, you always put peace at the forefront of your libertarian message, which is the most important thing of all.
That's right.
All right.
Well, thank you very much for all your time on the show, Lou.
I really appreciate it as always.
I got to do a podcast with you sometime too, by the way.
Hey, I'm around.
Okay.
I've got things to complain about for sure.
Good.
I want to talk about war and peace.
All right.
Thanks very much, Lou.
Thank you, Scott.
Great talking to you.
Everybody, that's Lou Rockwell.
Let's see.
He's got a couple of books, The Left, The Right and The State and Speaking of Liberty.
And lourockwell.com, of course, is his website, his blog and his podcast.
And Mises.org is where they keep 10 million pages of text of good economics, Austrian school economics for you there.
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