04/05/13 – Robert P. Murphy – The Scott Horton Show

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All right, y'all.
Welcome back to the show.
I'm Scott Horton, and our next guest on the show today is the great Bob Murphy from the Ludwig von Mises Institute, where he is a senior fellow.
And like I was saying on the show earlier, he is the author of the books The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to the Great Depression and The New Deal, both of which are just absolutely incredible.
Welcome back to the show, Bob.
It's been way too long.
How are you?
I'm doing great.
Thanks for having me.
Well, you're welcome.
I'm very happy to have you here today, and it's a big deal today.
It's Trevor Lyman, every Ron Paulian's good friend, Trevor Lyman.
He runs the website Liberty Crier, of course, and he's trying to start up what's called Federal Reserve Awareness Day on the fifth of every month.
And there's so many horrible things about the Federal Reserve.
It seems like that could go on until it's gone.
And so that's good, and I want to try to get off my part to a good start with you today and hope that you could explain to my audience a little bit of the history of the central bank and its usefulness to the government in waging wars.
And as Bob Higgs was saying on the show the other day, it's 100 years later from 1913, the year that many things changed for the worse, one of them being the creation of the central bank.
And then, of course, America was involved in the Great War in Europe by 1917.
And so I guess can we start there?
What was the Federal Reserve's role in America's participation in the First World War?
Okay, well, sure.
So the basic big picture here is that when the government goes to war, it wants to spend a bunch of money.
And, of course, it raises more in taxes than it normally does, and it really hits the citizens up, and they, of course, have a much lower standard of living and so on.
But that's not enough, that the government wants to spend even more money, and so it borrows.
So typically governments run huge deficits during war.
You see the debts going way up in the U.S.
You see that throughout history, that a chart of the gross federal debt, just every time it jumps, oh, that's because there was a war, the Civil War, World War I, and so forth, down the line.
And the problem is they want to spend even more than people are willing to lend to them.
So then the last thing that they do is they turn to the central bank, and so basically the central bank, the Federal Reserve in the U.S., creates money out of thin air and then uses that to buy government bonds.
And so that's the trick.
I'm sorry for interrupting.
I guess I asked probably the wrong question.
You mentioned the Civil War there.
Maybe that's where we should start rather than after the central bank, the current incarnation of the central bank was created.
Well, I mean, it's just the same pattern of, you know, if you look at a chart of the federal government debt is what I'm saying, that, you know, it's depending on what scale you're looking at.
Every time you see the chart jump and you look and say, oh, what happened right then, it's always a major war.
That's what the issue is, except for this last thing with the, you know, the global recession.
Well, there wasn't a central bank during the Civil War, right?
So what's the difference?
Well, that's when Abraham Lincoln started issuing greenbacks.
So, I mean, probably a more fundamental thing would be to say that they want to get away from the gold standard.
They want to untie the fetters on how much money they can print.
So, you know, that's the way it happened back under the Civil War, that Lincoln took the dollar off of gold so he could just spend money that way.
So the president was the Federal Reserve at that point, basically, by himself.
Well, yeah, I mean, that's one way of putting it.
They just cut out the middleman.
And some people point to that and say, well, that's better than what we have right now, and that's an open question.
But it is a complicated shell game that they do right now since the Fed was formed in 1913, and you see it right away.
So just before I forget, if people want to see some charts, the kind of things we're talking about in this interview, my blog, if you just Google Bob Murphy Free Advice, you'll find it, and it's the post on April 5, 2013, called War and the Fed.
And I just got some charts there.
That's the kind of thing I'm going to be talking about.
But, you know, you can look at what happened right at the end of or during the World War I period.
Consumer prices are skyrocketing.
That's the highest official price inflation you had in the 20th century in the United States, and up over like 24 percent just from one year to the next.
And so what the basic mechanism was, like I said, the central bank creates money out of thin air and then uses it to lend to the government.
So they buy government bonds, and so that's how the government gets its money.
That's why the government benefits from it, because they need money to go out and buy munitions and so forth.
And so they get the money because the Fed creates it, and then the Fed takes the government's bonds onto its books, and then technically the government pays interest to the Fed, but then the Fed just turns right around and hands it back to the government.
So it's a really complicated thing.
It's almost purposely designed so people don't see what's going on, but it's basically Abraham Lincoln's trick.
And, of course, the Confederacy did the same thing, even more so, that when you want to pay for something, you can't tax people anymore, and you can't borrow from people in the private sector.
You just create money out of thin air, and that's how you do it.
And that's still effectively taxing people, but just the way it works is by printing more money, prices go up.
So that's why you see prices rise so much in World War I and World War II, is because the government was creating more money.
It's not just that, oh, prices go up during war as some sort of fact of nature.
It's that governments create a bunch of money during wartime in order to pay for all the things they want to buy.
Right.
I mean, you could imagine supplies of some things would be cut and prices would go up in some areas, but that's not the same thing as price rise across the board.
In fact, I was thinking while you were talking there, I think maybe the only thing I ever learned about money other than just fractions in math class, but the only thing I learned about money in government school that was valuable really when it comes to this is about the debasement of the currency during the Revolutionary War, and the phrase that sticks is not worth a continental, where they were like Weimar Germany or something, where the paper money was better used to help start a fire to keep you warm because you couldn't buy anything with it for the very same reasons, right?
Yeah, and it's funny.
There's letters from Washington to the Continental Congress complaining that I can't even get standard supplies for my troops because this money that you're paying us with is falling in value.
It's purchasing power.
It's falling so quickly.
And that's why a lot of the people we call the founding fathers, several of them have written extensively on the dangers of what they might call paper money and now they're saying that you want to have hard money, by which they mean the precious metals or paper that's tied to gold and silver, because they saw with their own eyes what happens when the government is allowed to just run the printing press.
This isn't like you or I.
If we had the ability just to, with our printers, fire up $100 bills, that would be convenient for us, but obviously something has to give.
It can't just be that all of a sudden we're millionaires and that doesn't affect anybody else.
The way that it works is when you go out and you're able to spend more and buy things for yourself, yeah, you're better off, but then that raises prices across the board, some more than others, and that means other people are poorer because, of course, the fact that you just printed up a bunch of money doesn't really mean there's more stuff getting produced.
So if you're able to consume more, then that means necessarily somebody else out there or a bunch of people are consuming less, and that's what happens during wartime.
So you're right.
There obviously are real physical disruptions.
If you're getting bombed, obviously that's one reason why your country is truly poor during a war, but I'm saying another mechanism is that the government typically is going to be running the printing press like crazy in order for them to go in the market and bid away steel and bid away iron and so forth, and that drives up prices.
So the citizens get hit with a triple whammy of their taxes go up.
They are urged to buy war bonds and things, and then prices skyrocket.
Well, now, in the case of the Depression of 1921, they say that that was the consequence of all the inflation to pay for the war, but do you know which specific markets it was?
Was it the housing market or just the stock market, or what was it that had been blown up into such a bubble that then crashed in 1920?
I don't know the exact breakdown in terms of the asset classes, but, yeah, what happened was, like I said before, that was the chart.
If people go to my blog, you can see exactly what I'm talking about, but price inflation in terms of from the year before this year, like over a 12-month cycle, was up to around 24% by the end of World War I in the United States, which is higher than it was during the entire 20th century.
And so what did they want to do with that?
Well, they said, well, what do you do?
You're going to jack up interest rates.
And so they slammed the brakes on the money creation.
So, in other words, the Fed had printed up a bunch of money to buy a bunch of war bonds to pay for World War I, but then that was leaking out and causing prices to rise at an unacceptable rate.
And so then after the war was over, they slammed on the brakes, and that crashed the whole economy.
And so it was a standard in terms of Austrian economics.
It was a standard Austrian business cycle theory that they printed up a bunch of money that caused this boom, and then when prices started rising too much, they slammed on the brakes, interest rates shot up, and everything crashed.
And so it's pretty straightforward.
Unemployment went up fairly substantially.
But unlike what happened a decade later in the early 20s, the government basically didn't do anything.
In fact, the government slashed its spending tremendously because they were drawn down the war effort.
And so they cut spending something like 65% over a course of two or three years in absolute terms.
I don't mean they slowed the rate of increase.
I mean they literally cut the government's budget by like two-thirds in a few years.
And so there was this adjustment period, but then all of a sudden you had the fairly prosperous 1920s.
So to me it just shows that the economy can't adapt if the government all of a sudden shrinks and if the central bank stops printing money.
There is a temporary painful period, but that's ultimately the way to get to long-term sustainable growth.
All right, now in the 1920s, I guess there was some colonialism going on down in South America and that kind of thing, but the real bubble that preceded the crash of 29 had just really been started in 27, right?
And why was that if it wasn't for a major war?
Yeah, it's a little bit complicated, but even here it's still I would argue ultimately due to war because what happened is in World War I, every major belligerent except the United States went off the gold standard.
And this is what was the classical gold standard.
So all the major powers had had their currencies tied to a specific weight of gold.
The French franc was tied to a certain weight of gold, the British pound and so forth, the U.S. dollar.
So that locked in how those currencies exchanged against each other and the major powers except the U.S. all went off the gold standard during World War I because they said if they had tried to stay on it, then it wouldn't have worked.
They were running their printing presses.
The Bank of England was printing up so many pounds and the Bank of France so many francs and so forth that they would have all run out of gold if they honored their pledge to redeem their paper notes for the fixed weights of gold.
So they all went off the gold standard so they could all inflate and that meant Britain when the war ended, so now we're in the early 1920s after World War I is over, the pound now is much weaker compared to the dollar and to gold than it was before the war because they printed up a bunch of pounds in the meantime.
And so they wanted for matters of prestige to get, you know, and London was the financial capital of the world back then, so they wanted to go back to the pre-war parity.
And so that would have required a massive deflation like to unwind what they had done during World War I, but labor unions were pretty powerful and so that's what really caused the problems in England during the 1920s because they were trying to make their currency get stronger, but labor unions didn't want their wages to fall and so it was this problem where prices were trying to fall but wages weren't and so that's why it was hard for workers to get a job because the stuff they were making wasn't worth as much as they wanted to get paid for.
And so there's some pretty famous correspondence where Benjamin Strong, the guy running the Federal Reserve, the Fed was more decentralized back then.
He was like the head of the New York branch of the Federal Reserve.
It wasn't like it is now.
And so he was kind of the power broker and he was explaining that the Fed was going to inflate in the mid-26, 27 in order to take the pressure off the pound because he said that they were sort of paying themselves into a corner with the situation they had because of what they did during World War I.
In other words, instead of them having to make the pound get stronger, we're going to make the dollar get weaker to help them out.
And you can look at the U.S. stock market when they started doing that and that's when the stock bubble really took off in the late 20s in the United States, which then of course led to the 29 crash.
So it was a really bad mistake.
He didn't know he was building up a bubble that was going to crash like that, but ultimately it was treason, right?
He did this to benefit a foreign power and it led to the Great Depression in America and around the world.
Yeah, I mean, it's funny.
Several years ago I was very reluctant to get into all these types of theories and stuff, but it's not like it's some wild speculation.
You can read it in their diaries and you can read it in their...
It's truly they made a decision that greatly affected the U.S. financial markets because they wanted to help out the Bank of England.
Yeah, I don't think it was ever in dispute that Benjamin Strong and, oh no, now his name escapes me, the head of the Bank of England at the time, Montague Norman, that they were mentor and student.
Yeah, and it was certainly an elite group of people from around the world who were not just subservient to their own countries.
And in their mind they were international.
They were cosmopolitan.
They weren't like the rubes who just cared about their own country.
Yeah, and they thought they knew what they were doing too.
Right, yeah.
We can thread the needle on this one, sure.
Yeah, yeah, exactly.
All right, so now we're already more than halfway through.
We've only got like 12 minutes.
I can keep you overtime and record you all afternoon if you'll let me, but we've got to go fast now.
I guess give us the shortest version of inflation for World War II that you can because there's really interesting stuff to talk about, about the Korean War and NAM and the Reagan years and stuff that I want people to get to hear.
Okay, yeah, sure.
So, I mean, through all this it's the same basic pattern, and I'm just saying you can look at the charts to see with your own eyes that it's amazing.
So in World War II, again, you had this with the second highest rates of price inflation, and also I show in these charts that it's the monetary base, meaning it's a specific measurement of how much money the Fed directly creates.
So you can see, you know, yes, the reason prices are going up is because the Fed is creating more money.
It's not just because, oh, there's wartime shortages or something.
Now one thing, they did have price controls in both the wars too, so it's interesting that these official price measurements are showing up, even though there were official rationing schemes and things like that.
This actually understates how bad it was for consumers because they had to get ration coupons and they had to wait in line and there were things like meatless Tuesdays and so forth.
So in other words, it really hurt the people on the home front more than just the fact that prices were going up 20% a year.
But again, it's the same basic pattern, and it's the same thing too that once the war ended and the government cut its budget drastically, you had a statistical recession because GDP officially dropped because government spending is part of GDP, but actually the jump in private consumption and investment was like the biggest in U.S. history in 1946.
So again, it's the same patterns are there where the government impoverishes everybody, huge wartime controls, and when the government gets out, there's a readjustment process, but then when those resources are no longer being channeled to making tanks and bombers and going to making radios and things for civilian use, all of a sudden everybody on the home front has a much higher standard of living because obviously having your economy crank out war machinery doesn't make you actually richer.
So in other words, the Truman guys, basically by default, because the war effort was such a big thing that when the bubble popped, all those resources, they had nowhere else to go but to productive use, and so even though it really was a horrible recession on the blue line on your chart, it was actually the best thing that happened to the American people.
Finally, the Great Depression was over in 1946, and they were able to save and invest and trade and produce things.
Yeah, and that's a really important myth that I think economists perpetuate and that somewhat lends rationale and makes war seem like it's a good thing, is this myth that even right-wingers say all the time, oh, it wasn't the New Deal that got us out of the Depression, it was World War II, and that's absolutely not true.
Yeah, even David Stockman said it in his famous piece that ran last weekend that got so much attention there.
Yeah, and so statistically it does look like it's true because if you look at the official GDP figures, yeah, they seem like they turn around and start rising rapidly during the war years and World War II, but if you look at the private sector component, you can see that in 1943 and 1944, private consumption was lower than it was in 1933, which was the absolute depths of the Great Depression.
And so that's kind of an incredible thing that a full 10 years had passed, and yet people in the private sector had a lower standard of living that year than they had in 1933, and that just shows you that it's very misleading to say, oh, that was a great economy.
In other words, the people on the home front were having to do with less in terms of the actual stuff they were getting from the economy than they had back in 1933.
And so it just shows you how much of the national output that the war machinery was devouring.
Am I right that there's a bit of an aberration when it comes to the Korean War?
Is it just that there was so much growth in the real economy and other government cuts that they almost fought the Korean War on a balanced budget?
It doesn't seem like it plays out exactly the same way, but I'm much less familiar with the data than you.
I think you're right.
I mean, you can sit there and try to look at it and zoom in on the chart, but, yeah, it's not nearly as much as you can see it jumping out with the two World Wars, obviously, and then later the Vietnam War, so the Korean War.
I mean, this might be too simplistic, but I think one way of thinking of it is just what happened in World War II, the Korean War was so trivial that it was still, you know, the economy was still benefiting from the fact of all those resources getting returned to the private sector.
Yeah, sort of like the war in Libya now.
It's just it really takes place on the budget margin.
You're right.
Not that it wasn't a big deal to the people who were stuck in the damn thing.
That's a different question.
All right, well, so now what about Vietnam?
When did the bubble really pop on the Vietnam War?
Well, I don't know if this is going to answer your question, but, I mean, it was Vietnam and then in conjunction with the war on poverty, and, you know, again, just anytime the politicians want to do something, what do they do?
They start a war, whether it's literal or metaphorical, because that's what Americans will get behind something.
They're willing to spend a bunch of money as long as it's a war.
It was in the late 1960s when you really saw the pressure building up.
Again, the same pattern because they were spending more than they had, and so they had to rack up government debt, and they couldn't just borrow it all from willing lenders in the private sector, so the Fed was involved.
So you saw prices rising and so forth.
But what was happening is they were putting pressure on the dollar because this was during, you know, the Bretton Woods arrangement where the U.S. dollar was still tied to gold as far as other central banks were concerned.
So other central banks could turn the dollar in or turn in dollars for gold.
And so that was how the U.S. kept other central banks using the dollar.
And so they started getting skittish, particularly in France was in the late 1960s saying, okay, you know, you guys are printing too much money and you're spending too much, and so here we're going to turn in the dollars and you start giving us your gold.
And so the U.S. government realized we're going to run out of gold at this rate.
And that's what ultimately, you know, so they had some panics and some crises.
And then finally in 1971 is when Nixon just threw in the towel and said, okay, you know what, we were kidding.
We actually aren't going to give you guys gold for dollars anymore.
So I would say it was the Vietnam War and the war on poverty spending programs that ultimately pushed Nixon into a corner where he had to decide are we just going to slash spending drastically or are we going to take the dollar off gold, and he chose to do the latter.
Well, and now, you know, it seems like economic consensus, at least at your local college, is that, huh, it turns out we didn't even need to tie to gold in the first place, and Nixon doing that is hardly worth a mention because what difference does it make?
If it makes any difference at all, it just proves that everything's been fine since then and government can just inflate and deficits don't matter, like Dick Cheney said.
And the left and the right, at least in power, all agree, so that's the end of that argument, right?
Yeah, that's right.
I realize you're being flippant there intentionally, but it's funny.
You're right.
Something comparable happened when Great Britain in the 1930s went off gold.
You know, when they threw in the towel at that point and formally went off.
And I forget who it was, but like somebody said, someone in a high position of power said something like, this is the end of Western civilization.
And so nowadays, you know, inflationist supporters of fiat money quote that guy to say, aha, look at these moron gold bugs with their almost religious fervor and support for gold.
But I want to say, you know, the events of the late 1930s and 1940s, isn't that kind of the end of Western civilization?
And everybody agrees World War II could not have happened had all the countries remained on gold, or, you know, in the traditional form.
Everybody agrees that the gold standard checks governments and keeps them from fighting wars of, you know, more magnitude.
And even supporters of it would say, or, you know, people who want to go off the gold, who don't like the gold standard, will say, oh, because it would tie the government's hands in a national emergency.
So it's just ironic that everybody agrees that the gold standard would have prevented World War II from being as bad as it was, even though they wouldn't have phrased it like that.
So the same thing I hear within the 70s.
Like you say, Nixon goes off gold in 71, and then when did we have a really bad stagflation problem?
Oh, the 1970s.
What a coincidence.
As soon as they take the constraint off and allow the printing press to run freely, that's when everybody knows that prices really got out of hand in the United States, even during peacetime.
Right.
But we're supposed to ignore that now, and I guess, because I think what they say is, well, geez, you know, they learned their lesson from that, Bob.
And they had to bring in Paul Volcker, and he raised interest rates up through the roof and basically put the economy in a stranglehold and liquidated every bit of bad debt and a lot of good debt and a lot of good businesses, too, in order to force the recession that they'd been trying to prevent with all that inflation all that time, plus all the welfare state spending and all of that.
But so they say, but yeah, everything's been fine since then.
Yeah, right, and then you say, yeah, I mean, except for, you know, the asterisk of the worst depression since the Great Depression, but other than that.
Yeah, well, and the crash of 87 and the crash of 99.
How many trillions of dollars were destroyed when the NASDAQ crashed in 99 and the Dow in 2000?
Yeah, I think it would be something like $5 trillion, something like that.
I'd have to look it up, but yeah.
See, that wasn't really hot war, but Clinton did do a lot of arms buildup, spent at least $300 billion, $400 billion a year on the military and expanded NATO and all the number of different nation-states on welfare.
So in a sense, it wasn't a giant war bubble purely, but it was basically in the sense that all that inflation was helping bribe the American people into not noticing that they weren't getting their peace dividend, right?
It sort of felt like they were because, geez, times are running good and whatever, but they weren't dismantling the money and saving new money.
They were just inflating a big imperial bubble.
And now I know an Iraqi would be mad to hear me say that it was peacetime during the 1990s because it wasn't, but in terms of outright hot war big time, it was a different kind of a thing.
And I guess the same could go for the 80s, right, where Reagan spent all that money building the MX missiles and thank God he never used them on anybody.
But that was sort of its own war spending bubble, even though it didn't turn into a hot war with the Soviets.
Yeah, and I think you're right.
And again, we were just talking about when people say, oh, Nixon went off gold and nothing bad happened.
I mean, I don't think it's a coincidence that the more you untie the government's hands and allow them to just literally create money out of thin air with no accountability and just spend it on whatever they want, all these clandestine programs, that's when you see this blossoming of all this stuff that the military is doing that we don't even know about.
So it's like I wouldn't want my neighbor down the street to have his own printing press because he might be doing something bad with it, but I certainly don't want the Pentagon to have it.
Right.
Yeah, exactly.
They're even more dangerous.
Well, now, okay, you mentioned earlier that some people would say, you know what, maybe we'll never be able to get a consensus.
We'll never be able to get people to agree that we've got to go back on gold.
So maybe we could do a situation where instead of the banks getting to loan out fiat money all the time, maybe we should just have government inflate all the time.
And in fact, why not, as Matthew Glacius was writing last week, why not go ahead and put the money right into the pockets of the people who need it the most, sort of like Nixon's guaranteed minimum income kind of a thing, right?
And then, in fact, for that matter, we could abolish the IRS and we'll just have the government create new money for anything that they need to spend money on.
And then that way the IRS will no longer be used as this merciless police state agency against the American people.
They won't be forced into incriminating themselves all the time for every dollar they try to make in their life, right, and putting themselves in jeopardy like that.
And the government will just do what they're doing anyway, which is print the money.
So what's the problem with that?
If we could be assured that they really would forever get rid of all taxes and then whatever the government wanted to spend, it would just print up the money to do it.
And that's how people, we had elections, like various politicians would just say, this is how much money I want to spend and how much inflation I'm going to create.
And that conceivably could be a better system than what we have right now.
But I think it's not that the government taxes us right now just because they need money.
They also do it because it gives them more power over people because then they can tax people they don't like and give exemptions to people in order to give them favors.
I think it's not a coincidence that a lot of the so-called progressive multibillionaires and so-called multimillionaires of the time back in the progressive era supported the federal estate tax and income tax because once their family fortunes were set and they had their dynasty set up, the way you stay on top is you cut anybody else off at the kneecaps every time they try to succeed.
So you have high marginal tax rates so that your competitors stay down.
So what I'm saying is I don't think it would be realistic.
The government might do that in order to get the printing press in its hands with not even having to go through the farce of buying its own bonds, but then we would have taxes again at some point.
They would come up with a rationale.
It's, oh, because we've got to limit carbon emissions.
It's not about revenue.
It's about changing behavior.
We've got to have a cigarette tax because we've got to cut smoking.
God, America, it's like East Germany, isn't it?
Well, now here's the thing, too, is the bubbles, right?
You can't count on, well, okay, so the currency is just going to inflate at 3 percent a year, and everybody can just take that into their calculations, and isn't it great that our government has this magic wand or a gun, whichever you want to call it, that they can get away with doing this.
But then it causes giant bubbles and dislocations and crashes, which is, that seems to me like the real Achilles' heel there, even though I sure like the idea of just no more federal taxes whatsoever and just let them inflate if that's what they're going to do all day anyway, right?
Yeah, well, you just said exactly right that the Austrian economists, their theory of the business cycle, the problem with government inflating and then using it particularly in the credit markets and coming in and buying bonds, it's not merely that, oh, gee, if they keep doing that, prices are going to start rising.
I mean, that is bad, and that is one bad consequence, but that's not the main thing.
The main thing, like you say, is when they first do that, since the money comes into the banking sector, it pushes down interest rates.
In other words, if the Fed just created a bunch of money, went out and bought used cars with it, and that's how the Fed did its open market operations, that would eventually cause prices across the board to rise, but first it would cause used car prices to rise.
Those ones would jump up first before it would sort of percolate around the rest of the economy.
But that's not what the Fed does.
The Fed goes and buys bonds, and so that pushes down interest rates.
And so that causes a distortion, and that causes an unsustainable boom in the Austrian view that then leads to a crash.
So the business cycle itself, as we know it, is because of this mechanism.
So you're right.
It's not just a matter of, oh, gee, if they print too much money, we get rising prices, and so at the store we can't buy as much with our paycheck.
It's also that, gee, why did we have a few good years, and all of a sudden we have six years of an awful economy?
It's because of this mechanism we're talking about.
It makes me wonder whether the whole housing program is really just a big bribe to get people to not pay attention.
The central bank really is there to fund imperial conquest, but how do you get the average American who, you know, I don't know what the percentages are, but it's a super majority of Americans, right, that work are employees and not owners of anything.
And so why would any of them ever like inflation?
Well, if you can get each of them into a house and it seems like the value of their house continues to rise all the time, then you give them what they think is a vested interest, even though the entire economy is going to screw us all sooner or later under that setup when it all comes collapsing down.
But otherwise the average person doesn't really have interest.
I guess they say you take out a loan for dollars and pay back in dimes and that kind of thing, but it seems like that's hardly worth the tradeoff for they make it impossible to save and collect a decent interest rate on your savings if you want to try to save up and create your own business that way.
Well, yeah, and what you just said, that's exactly what people do with their houses.
They take out a fixed rate loan, let's call it a mortgage, and then they have an asset with it that's called their house.
And so, yeah, there's big inflation that pushes up the price of their house, whereas the amount they owe the bank doesn't adjust.
So, yeah, I never thought of it like that before, but you're right.
I mean, I do that in my own life that I partly am holding on to my house rather than being in an apartment because it's a hedge against what Bernanke's been doing.
And then I figure, oh, yeah, it's going to be bad if stuff hits, like I think it will, but at least my house is going to go away, but my mortgage payment's going to stay the same.
Right, and at least you didn't buy in 2006.
Right.
You bought it before the last big bubble kind of thing, right?
Right, people did.
Unfortunately, I did buy it myself because I moved in 2006.
Oh, no.
So that was the worst.
So does that mean that you're actually at risk?
I'm sorry to get into your personal finances.
You brought it up, but you're saying so you could actually even be at risk of being underwater on the thing after the next crash, no?
Oh, yeah.
Or am I misunderstanding?
Yeah, no, for sure.
Yeah.
But that's what I mean, that it's – and so you're right, like it's in the back of my mind, not that I would ever want him to do it this way, but in the back of my mind, I think, well, geez, even if this stuff does blow up, at least my house would shoot up.
And so I never thought of it like that before, but you're right, that by getting a bunch of Americans to do that, that does sort of take the pressure off and it makes everyone sort of have a vested interest, like you say, in the dollar getting weaker.
Yeah, and they don't really understand it as such.
They just know that, man, my house got so valuable, I was able to refinance it and buy a bunch of stuff that I like, which is a pretty good deal, it seems like, on the face of it.
Nobody ever asks – everybody always complains about what the government needs to do after the Depression starts, but very few ask about why things seemed so good right before they got so bad.
You have to really take the time out to want to know.
And now before I let you go, is it okay if I keep you just a few more minutes, or are you on a tight schedule?
Sure thing.
Okay, great.
Because I want to bring it back to George W. Bush and the war on terrorism.
We kind of touched on the Reagan and Clinton eras there, and I count Bush Sr. as – well, whatever, he's in between there.
Same kind of thing.
Well, actually, can you talk about Desert Storm?
As long as I've got you here, can we do Desert Storm before the terror war?
And was there a boom and a bust?
Was there certain markets that got thrown off?
I know Clinton won on it's the economy, stupid, and George Bush doesn't care about what a hard time you're having, but was that really right?
What was going on there?
Yeah, I mean, I think part of it was that he raised taxes, you know, when he famously went on to violate his No New Taxes pledge.
So I think that was part of it.
It's really tricky to isolate the specific variables.
But, yeah, I mean, right after – so Greenspan comes in and there's the 87 crash, and how does he, quote, unquote, solve that is he just inflates like crazy.
And so, yeah, I mean, there's a bubble there that then I think, you know, in conjunction with the tax increases there caused that recession, and then that's how Clinton gets in.
So it's – and then, like we said, the dot-com bubble and so forth.
So it's really – I mean, one way of thinking is since going off gold, I mean, the U.S. economy has just gone from one bubble to the next, and they just keep getting bigger.
Right.
The only saving grace at all really is all the advancements in technology and all the new immigrants coming here all the time and all the labor capital that they're bringing with them.
Otherwise, we're just doomed.
Am I wrong?
Yeah.
I think you're right, and, again, it's hard.
I mean, you see all these amazing developments, and there's genuinely a lot of progress in other countries in terms of economic freedom, and, you know, just even political freedoms and so forth.
You know, there's people in China and India and so forth compared to 30 years ago that there's a lot more genuine freedom there.
So it's hard to know what would the world have looked like if the U.S. had had a decent monetary policy and a small government and wasn't building an empire.
And like you said, when the Soviet Union fell, a bunch of us were like, oh, this is great.
Well, no, because I was stupid enough to believe that that's why Reagan had all the big military spending was because it was purely for defense.
And now that the enemy is gone, we're going to massively shrink the government just like these Republicans have been telling us they want to do for the last 30 years.
So, you know, I was dumb enough to believe that back then when it happened.
And so, you know, what if that stuff actually had happened?
And then you had all these amazing developments with the Internet and iPhones and blah, blah, blah, you know, international trade intensifying.
It's amazing to think of how rich things could be right now had you not had those two trends going on at the same time.
Yeah, and, you know, I haven't read Stockman's book, but I like the title, The Great Deformation.
And I only know, you know, bits and pieces from my life.
When it comes to all this economics, I'm a great anti-war guy.
But I remember in I was a cab driver in the late 1990s in Austin, Texas, where there's a hell of a lot of, as I'm sure everyone is aware, hardware and software companies here doing a lot of business.
And it's also they claim the live music capital of the world, although you probably wouldn't want to listen to most of it.
But anyway, so during the South by Southwest Music Festival, I believe it was 1999, Bob.
There were, I don't know, I'm making up numbers, but trust me, it was like, I don't know, 50,000 different California hipsters, each of them with apparently a half million dollar expense account or something to go around schmoozing and whining and dining and hanging out with musicians and partying and doing coke and whatever.
And all of them claiming that their new website is going to be the place to go on the Internet for new music in the world.
And there's so much money going into not just these hacks out, passing their business cards around, but all the computer coder guys that were put to work on building the website where everybody's going to get their music from now on.
And there was 1,000 of them, 10,000 of them.
It was the most ridiculous thing.
And I had just read The Creature from Jekyll Island.
I didn't really know Rothbard or whatever, but J. Edward Griffin, he's really good on gold and money and the business cycle in there.
He's a Misesian, I guess they say.
And so I understood that this is a big inflationary bubble, and I didn't know how bad it was going to be when it popped, but I understood that it was a big fake thing.
And it was really kind of a miracle to watch all of these people.
It was a funny thing to watch, all these people really believing themselves that they were as valuable as the money they were making would indicate, and that it was going to stay that way.
Nobody can see.
It's like Robert Gates says, war through a soda straw.
He's only talking about critics, of course.
But that's how it is.
Everybody only sees their own bank account or their own stock portfolio or their own house going up in value or the awesome paycheck they're getting for walking around giving their business cards to other people just like them all day and not really doing anything.
But to see that as the basis, that kind of funny money system that creates that kind of economy as the basis for America's entire monetary system.
This is the way the most powerful country in the world operates.
It's really kind of ridiculous and hilarious in a way, even though people are blowing their own brains out right now over their horrible failures that they blame all on themselves because they don't understand what the government has done to them.
There's plenty of tragedies come along.
But it can get really, really ridiculous, right?
People building valleys of houses for no one to live in but just valley after valley of houses to build and sell and sell and sell and sell over and over.
Yeah, and you're exactly right.
You were probably fortunate since you were there directly observing it, but you weren't right in it yourself.
And so you could sort of be detached and objective about it.
Yeah, I was giving them a ride home from the bar was my role in it.
They were good tippers and nice guys, Tivoli guys.
And after the fact, in retrospect, the same thing with the housing bubble years, we can all look back and be like, what the heck were we thinking?
And that's what I think is going to happen now.
I mean, it's astounding to me that there's a growing view among very smart economists that the problem right now is that Bernanke has been too tight with money.
On any objective metric you want to use, it's known that the Fed has been unprecedentedly loose with money, and it's just not working, quote-unquote, the way that they want it to.
So I think once the government bond bubble crashes, and I don't know when that's going to happen, that we'll all look back and say, oh, yeah, running up massive deficits and having the Fed just print money to buy them and sell for piles of bonds, that probably wasn't a good idea.
But right now people don't see it, and they're just like, well, gee, if the Fed were doing something wrong, you'd expect gasoline to be $20 a gallon, but it's not, so it must be fine.
Just like you can always come up with some rationale.
When home prices were rising, they came up with reasons why that made sense.
Or the dot-com bubble, like you said, oh, well, that's because of this newfangled Internet thing.
That's why this makes sense.
Yeah, it's a whole world of truthers.
Everybody's just a walking confirmation bias.
You hear the same thing on both sides of global warming.
Oh, it's hot today, so therefore global warming is a fact.
Oh, it's cold today, so therefore it never happened.
Jesus Christ, people really think that's an argument or whatever?
Wow, it seems like the economy's doing great.
So shut up, you naysayer.
Why do you want to naysay all the time?
We just went through this, you know?
For me, what's really shocking is you mentioned David Stockman.
I haven't read his book yet, but I read his New York Times extended article there.
And just the reaction he's getting, I don't know if your listeners are aware of it, but it's not merely that people are disagreeing with him.
There was a salon piece by some law professor where he literally spent, I believe, more than half the article developing this analogy about how, you know, if you're in a subway talking to a guy and then he casually mentions that he was abducted by people from Venus or aliens from Venus.
And like I said, that was the majority of his article, and there are people referring to it as a spittle-filled screed and so forth.
Like I said, the last time I'd seen anything like this was how people respond to Ron Paul.
You know, it's like he's just so out of the realm of acceptable public opinion, you know, polite society, that we just don't talk about those things like, you know, tying the dollar back to gold.
That's a crazy idea.
We're not even going to debate it because that's so stupid.
Right.
Yeah, that's what Noam Chomsky calls the propaganda model.
All they ever have to really do is make sure the debate takes place between here and here, that anyone who has something to say outside of those margins is immediately attacked.
I think all of us recognize it was a miracle that his article even ran in The New York Times.
It was only because he used to work for Ronald Reagan and was a high enough mucky muck that they couldn't quite reject it, you know.
And so, but, you know, that's exactly what they say.
Glenn Greenwald, when he mocks this exact process, he always capitalizes.
Not serious.
Oh, you're a not serious person with a not serious argument.
And so we don't have to actually confront anything that you said.
We'll just push you to the sidelines like you're the Aryan nation or some ridiculous thing that couldn't possibly have something of value to add.
And it's ridiculous.
It's ridiculous.
And, of course, their goalposts are always between two horrible ideas and wrongs and understandings.
And they always end up blowing up everything and hurting everyone with their consensus that they manufacture, you know.
Yeah, and it's funny.
I mean, I know you know this and probably most of your listeners, too.
This is a familiar theme.
But it's just, it is astonishing how similar, you know, the major pundits are and the allegedly vast gulf between Nancy Pelosi and John Boehner, you know.
No, I mean, it's what they emphasize that's different.
It's not their basic world view or their policies are different.
It's just really amazing, you know.
I still talk to people who are like, oh, yeah, you know, I'll give a talk somewhere in the economy.
And you can imagine what kind of thing I would say in a talk like that.
And people will come up to me and commiserate like too bad our guy didn't win in the last election.
Like they thought I was a Romney supporter.
You know, and I'll explain to them, no, I'm glad he lost because then, you know, the economy would still collapse.
But then it would get blamed on free market policies if Romney had been in there, you know.
And they're kind of taken aback.
Like, oh, gee, well, I thought we wanted to get that crazy guy Obama out of there because he's a big spender as if Republicans wouldn't be big spenders.
Right.
Yeah, no Republicans I ever heard of anyway.
Speaking of which, there's this guy George W. Bush who was the president back in 2001.
This is a terrible thing.
And anyway, so there was a gigantic attack on his watch, which for some reason made him the most popular president ever, up above 90 percent in some polls.
But anyway, so then he and maybe not then, maybe already, there is a Greenspanian economic policy of inflation going on.
We mentioned before that the Nasdaq and the Dow had crashed in the end of 99, beginning of 2000.
I remember when Bush was coming into power, he was saying, hey, this is the Clinton recession, pal.
It was a mess when I got here kind of a thing.
And making sure everybody heard that you can't blame at least this on me.
And I'm sure they had a, you know, certainly Greenspan already.
And I'm sure the Republicans, Dick Cheney, deficits don't matter and all that, encouraged a very loose monetary policy.
But then would I be right to say, I mean, I know you've looked at these numbers.
Is it the case that after September 11th that they really doubled down on the inflation in order to prevent any kind of double or triple dip recession kind of a thing?
Because basically they wanted to have an extra war.
We could probably afford a carpet bomb Afghanistan for a few months, install Hamid Karzai, that kind of thing.
But a whole new war against Iraq and all of that was going to be something extra.
It seems to me like that was the real cause of the housing bubble that has devastated the world's economy, was a policy of let the American people feel like they're winning on this, you know, because at least it's not costing them anything that they can feel immediately.
You could look at the data and make the case you just made.
I'll put it that way.
But it's hard to disentangle and to have a smoking gun because, so here's what happened.
Greenspan started cutting interest rates in 2000 and cut them down through 2003, and that's when they bottomed out at 1% and they started raising them again.
And then you also had, remember there was the Y2K thing?
And so if you're trying to look at pictures of the monetary base or something to see, you know, okay, how much money did the Fed shoot in there, it spikes more right around the end of 1999, but that was because they wanted to reassure the market.
Remember, people were saying, oh my gosh, you know, planes are going to start falling out of the sky once the date goes from 99 to 00.
And so Greenspan flooded the financial sector with a bunch of money, and then once Y2K happened and the world didn't fall apart, then he sucked it right back out.
So that kind of distorts the graph.
But you are right.
I mean, after 9-11, yeah, there is, and I'm looking at the chart right now to make sure I'm telling you the right thing.
And, yeah, there is a big surge.
It's not as big as the Y2K one, but there is a big pop in what the Fed was doing right after 9-11, and it's the same Keynesian mentality, too.
So they would say, well, gee, you know, that was Krugman, for example, right after it was saying, yeah, it's a tragedy and so forth, but at least now this will give policymakers the will to do what they need to do to end this recession, which is in his mind, you know, to go print a bunch of money, cut interest rates, and spend a bunch of money.
And so what I'm saying is I think you're right that the two did coincide, and if you want to say that that's what it was, that was the real reason, you have a lot of evidence on your side, but it's hard to disentangle because the recession did happen right then also, and there was that Y2K thing going on.
But unquestionably, that is when the Fed really started juicing things, and that's when the housing bubble really started taking off.
And, yeah, I agree with you.
I don't think it was a coincidence that that all happened at the same time.
Yeah, I mean, well, gee, Bush was bombing Iraq from the moment he got into office, so that sort of counts as all wartime anyway from bases in Saudi Arabia, of course.
But so then you say they started – when did they start raising again?
You say they bottomed out in 2003, but the bubble only – I guess it started declining in 2007, popped in 2008, correct?
What am I missing?
Well, it depends what bubble.
If you're talking about the housing bubble – so, yeah, so they – interest rates – Hey, the Iraq war bubble, in fact, was popping right around then too.
That might be a coincidence.
Yeah, so they – they cut interest rates from 6 – and by interest rate I mean – I'm talking about the federal funds rate, which, you know, what the press would say, the Fed cut interest rates, but that's what they mean.
So, yeah, they cut it from 6.5% in 2000 down to 1% in June of 2003, held it at 1% for a full year, and then in June of 2004 started raising it up.
So it looked like a staircase if you're looking at the chart.
Every time the Fed met, they would raise it by, whatever, 25 basis points or half a point.
And then it was like around 06, I think, depending on which index you're looking at where housing prices kind of tapered off.
So they had been rising real rapidly, and then they started – you know, the growth slowed down and then finally they peaked and then started coming down.
I think in many indexes, like by 06, they started turning around, and then you had 07, they really started crashing hard.
And then, like you say, in 08 is when, you know, the broader financial sector had all of its troubles.
Well, I remember in – I guess this is really the layman's version in For a New Liberty by Murray Rothbard.
He says that they always try to just prick a tiny little hole in the bubble and let the air out slow, but it never works.
It always ends up crashing, and so you can expect that.
When they start raising that federal funds rate, that's when the whys start bugging out kind of a thing, and that it's basically unavoidable or else they'll start having widespread inflation across the board in a way that becomes, you know, politically disastrous and make them have to crank the interest rates up higher than they want to.
So they got to – you know, anyway, there's a point where they get scared of their own policy and start backing off, but then it always blows up, he says.
Is that basically right?
Yeah, that's correct, and I mean, in terms of what the Fed did, if you look at a graph of the federal funds rate in this period, the housing bubble years, I mean, they were – like you say, they were trying to – you know, in other words, it's not like they panicked and overreacted and jacked rates up at some meeting and scared the crap out of everybody, and the market crashed.
That's not what happened.
They were just right – like I said, it looks like a staircase with really tiny steps on it from June of 2004 onwards.
Like every time they met, they would just raise interest rates a little bit and they communicated to everyone, this is what we're doing.
So it's not like it was a surprise.
And so it looked like they were just trying to real gently, you know, to give a soft landing or to just gently take their foot off the gas.
And all of a sudden you have this huge crash that leads to the worst depression since the Great Depression, and so, you know, it's kind of like – and remember, when Greenspan, when it was apparently working, they were calling him the maestro, and people were raving about, oh my gosh, never before have we had a recession where home prices continued to rise throughout it like we're having now in, you know, 2001.
This is great.
What a smart guy.
We're glad we have this genius at the helm, Alan Greenspan.
And so in terms of a textbook illustration of what you're supposed to do if you're a deft central banker of, you know, putting in the gas when you need to to help the economy get over a big popping of a bubble, but then trying to, you know, not inflate a new bubble and to take your foot off the gas as needed, you know, that's – you can see why Greenspan thought he knew what he was doing.
And then as we know, well, apparently he didn't, and it wasn't like he was off by a little bit.
The thing blew up in everybody's face.
Well, you know, the only reason little old me knew better at the time was because of Ron Paul, because I remember another cab-driving anecdote taking some ladies who were in town for the big real estate trade show thing, and they were quoting Warren Buffett and saying, oh, the dot-com thing is all a big hoax.
Don't invest in that.
It's all about land.
You've got to invest in land.
And I was telling them, well, it may be better than dot-coms, but it's a big bubble too, real estate, and you guys ought to read what this congressman Ron Paul says about all of that.
So he was ahead of that game, and again, that anecdote is from before the turn of the century there.
Before the dot-com crash, when the dot-coms were still the rage.
You know, these ladies knew better than that, but they still didn't understand the business cycle and what was happening in real estate, and I was turning them on to Ron Paul back then, and that was the only reason I knew better, of course, was his speeches on the House floor.
Yeah, I mean, it's really amazing.
A lot of us Austrian economists went back and were trying to compile quotes and things from Austrians who had called stuff, and it's funny, the list that I made, the person who was very accurately describing what was going to happen the furthest out, it wasn't some academic somewhere, it was Ron Paul, giving a speech on the congressional floor or something.
It's kind of funny that the compilation I made, he was the one who was the one calling things earliest, in terms of he said it had to be accurate enough.
It couldn't just be something like, oh, if we go off-goal, there's going to be a crash.
I wanted something fairly specific about housing.
Right.
Well, you know, James Bovard, he doesn't get the credit because almost everything he writes is just in his books, and I guess they don't get enough attention anyway, but in Attention Deficit Democracy, which came out, I think, in 06 or 07, he has a whole thing about housing and inflation and directing the money into the housing market and giving loans to people who can't afford them and the bubble it causes and the danger of the crash that's coming and whatever, and it's excellent.
It's as good as anybody else's.
Before I let you go, Bob, and thanks very much.
Whoa, it's already a half-past, what do you call it?
One more thing here.
We've got to get a little bit more focused on the Obama era.
I believe, I'm being very polite, but I'm going to call you out a little bit.
I believe when we talked after the crash and after Alan Greenspan started inflating, same difference, Ben Bernanke started inflating the money supply so much in order to bail out all of the banks that this was going to lead to pretty widespread price inflation across the board.
And I know that groceries and fuel are more expensive and some things like that, but I don't believe it's quite as bad as what you said.
So where did all that money go, or was your theory that a bunch of extra money causes prices to rise?
Is it flawed, or is it just are there some markets, say housing or bomb manufacturing or something like that, the stock market that really are seeing an inflationary bubble but other sectors are being left out?
A couple things, and I'd be in a much better position if we wait a long time and then I can be more sure about what happened, because it is true.
I thought we were going to see more obvious signs of just regular price inflation that every household can see.
I thought it was going to be worse than it's been so far, so that's why I'm not as sure as to what happened.
But there's a couple things that are for sure true.
One is that the money that Bernanke has pumped into the banks, they're largely sitting on it, right?
So they're not lending it out the way that normally would happen, the way you would teach in a normal economics course.
And part of that's because Bernanke is literally paying the banks not to make loans to people.
They call it interest on excess reserves, but one way of describing that is the Fed is subsidizing commercial banks, saying if you keep your funds parked with us instead of making loans to people, then we'll pay you interest.
And that was a new policy they put in place in October of 2008.
Right when they were doing all the TARP and everything and saying how we need to get loans to Main Street, that's when the Fed changed policy to start paying banks to not make loans to people.
So that's one thing.
But then also, like you say, you do see assets spiking every time there's a QE announcement.
Stocks go up, commodity futures go up, typically gold and silver go up.
So, yeah, it's not that bread at the grocery store jumps 50% when Bernanke makes an announcement, but you wouldn't expect that.
You would expect speculators to get that hot money and then to go and put it somewhere as a hedge.
They're not going to run down to the store and buy milk with it.
So it does, I think, make sense what happened, but it is true that in 2009 I thought you were going to see them get painted into a corner more quickly than they have.
In other words, it seems like people believe Bernanke when he says, don't worry, we're going to unwind all this stuff once the economy improves.
So they're taking him at his word.
So that money that was sort of hanging there in limbo, ready to flood the economy, when the banks start lending it out, apparently speculators think that Bernanke is not going to let that happen, and I don't think he's going to be able to do that because he's going to have to crash the financial sector.
It's the only way out.
Right.
See, that's the thing.
In order to prevent things from getting out of control at some point, they have to force the recession that they've been inflating to prevent, because otherwise if their current policy works and the banks then decide that the so-called works anyway, makes the economy seem hot enough that it's a good deal to go ahead and invest in new businesses being created and that kind of thing, and new houses and subdivisions being built, and that's what the banks are going to do.
And so if their policy works, then they'll have to sabotage it.
That's what you're telling me.
Right.
Yeah.
It's sort of paradoxical that right now we're in this weird equilibrium, a calm before the storm where the economy is so awful that the banks don't want to even make loans to anybody because there's no good credit risks out there, there's no enticing projects, and then because of that and because everyone's so fearful of not spending money in terms of your average joes, normal consumer prices actually aren't rising as much as you might have expected.
And so it's this weird thing where we can keep limping along like this, but if the economy ever did start to improve and then banks got more comfortable and now businesses could approach them and say, hey, we want to expand our factory, blah, blah, blah, can you give us a loan, then all that money would start flowing out and then prices would start rising rapidly, and then Bernanke or whoever's in power at that point would have to decide, do we just let prices go through the roof or do we strangle this thing before it gets out of hand?
And so he could.
In other words, it's not a foregone conclusion that the dollar's doomed.
Either they could do what Volcker did or they could do what they did in 1920 and 21 and jack up interest rates and crash the money supply, but then you would get another depression.
And moreover, this one would be concentrated in the financial sector since that's the asset the Fed's sitting on right now.
So in other words, if they wanted to suck all that extra money out of the system, they would have to sell the mortgage-backed securities that they're sitting on right now.
So that's going to destroy all of the big investment banks and whatever that they just got through bailing out.
And so I don't think they're going to do that.
I think if Bernanke has to choose between Wall Street and the dollar, I think he's going to let the dollar take it.
So in other words, either way, we've got a depression.
The only question is whether it's an inflationary depression or a deflationary one.
Yeah, I mean, that's probably one way of putting it, but I think that they should sell those mortgage-backed securities and get an accurate price on them.
You know, I think those investment banks are actually insolvent.
They had legitimate prices, and so just let's acknowledge that reality.
So, yeah, either way, there would be this massive adjustment period, but in my mind that would be a good thing.
They're not sparing us anything by postponing it, just making it that much worse whenever it's going to hit.
Yeah, well, and they've always been lying when they sold this idea, as you just said.
Well, you didn't call them liars, but I'm calling them liars based on the truth that you just referred to, which was they've been paying the banks to not loan this money to Main Street.
They never meant it when they said that they had to bail out Wall Street.
Gee, somehow our financial system got set up in such a way that we have to bail out the richest, most powerful people in the whole world with your money, working man's money.
Otherwise, you won't even be able to work and be a working man anymore, and you wouldn't want that, would you?
And it's all been BS this whole time.
Yeah, and like I said, to me the biggest thing was they pitched it all as, well, yeah, we don't like to bail out these rich cronies, but we have to to keep funds flowing to Main Street to keep those small business loans going and whatever, so the businesses can make their payroll as if the typical small business has to go to the bank and take out a loan just to make payroll.
It doesn't make any sense, but simultaneously the Fed is paying them not to make loans to people.
And people have run the numbers and said, well, geez, the Fed could have literally bought every underwater house in America for the amount they've done in the QE rounds, and yet they're saying, oh, we're doing this to resuscitate the housing market, that kind of stuff.
Amazing.
All right, well, listen, at this point I've kept you way over time.
Thanks very much for your time, Bob.
It's great to talk to you again.
Nice talking to you, Scott.
Thanks for having me.
All right, everybody, that is the great Bob Murphy.
He's a senior fellow at the Ludwig von Mises Institute.
That's mises.org.
He's the author of The Politically Incorrect Guide to Capitalism, priceless, this thing.
I mean, you can get it for less than $20 probably at Amazon, but it's priceless.
The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to the Great Depression and the New Deal.
And then also check out his great blog, consultingbyrpm.com.
That's free advice.
Just Google Robert P. Murphy.
That's consultingbyrpm.com.
And that's it for the show.
Thanks, everybody.
Hey, y'all, Scott Horton here for the Council for the National Interest at councilforthenationalinterest.org.
CNI stands against America's negative role in the ongoing Israeli-Palestinian conflict, the war party's relentless push to bomb Iran, and the roles played by twisted Christian Zionism and neocon-engineered Islamophobia in justifying it all.
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That's councilforthenationalinterest.org.
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