09/16/09 – Robert Murphy – The Scott Horton Show

Welcome back to the show, this is Anti-War Radio, Chaos 959 in Austin, Texas, a little bit of BB King for you there, and our next guest is Robert P. Murphy, of course he's the author of the Politically Incorrect Guide to Capitalism and to the Great Depression and the New Deal, and is, I forgot the exact title, at the Ludwig von Mises Institute, he runs the website consultingbyrpm.com, free advice is what it's called, if you just search Bob Murphy, free advice, it'll come right up for you there.
Welcome back to the show, Bob.
Thanks for having me.
Well, it's really good to have you here.
You were wrong, wrong!
You said that everything was going to be a disaster, and TV says everything's fine, Ben Bernanke saved the day, the recession is over.
What the hell's the matter with you?
Well, yeah, it's funny how they do that, I mean, just to give you a few examples of how they've sort of turned reality upside down, and if you're a listener in particular, let me just preface it by saying what they're doing with the economy is the exact same way they deal with a foreign military adventure gone awry.
They can always point to some little bit of news that's a little bit less bad than it was before, and then say, see, we're turning the corner, just give us a few more months and we'll be out of the woods, and they keep saying that for year after year.
And so that's the same sort of thing that's happening here, just to give you two quick examples.
So, unemployment right now, the latest figure was 9.7%.
Back in February, when they were arguing about the stimulus package, at the time, the administration, they came out and their economists had all these projections, and they said, look, if you guys don't give us this stimulus package of $787 billion, then unemployment might get up to over 8%.
And that was what they were terrifying people with by saying, can you imagine unemployment up that high?
And they said, but it won't get that high, it'll be much lower if, instead of that, we pass the stimulus and we'll keep unemployment lower.
And so now, the point is, unemployment is higher than what they were saying the worst case scenario would be if we did nothing.
So you can imagine if, say, the Republicans had filibustered, and then they didn't get their stimulus, and then unemployment were 9.7%, of course the administration would be going nuts, saying, you see how awful things are because we didn't get that stimulus money, we told you things would get bad, look how bad the economy is, it's almost at 10% unemployment.
But since now they did get the money, now all of a sudden they point to the fact that, oh gee, this month we lost fewer jobs than we did last month, so that means we're turning the corner.
They just get to redefine what all the standards are each time, it's like they're fighting a war or something.
Right, and it's like now they're talking about the second derivative, you know, the unemployment keeps getting worse, and yet now they're saying, oh, but the rate at which it's getting bad is shrinking.
Well, and listen, I've got to tell you, I've already been completely inoculated to the understanding that, you know, as the recession is over and things start getting better over the next, geez, maybe decade or more, as the recession continues to end, you're not going to see the unemployment rate fall for a long, long, long time, and that's going to be part of this recovery, is it's going to be an employment-less recovery.
And I've seen that, what, six or seven different places, mostly in the Times and the Post and places like that, so I guess you could be able to sit here, regardless of what they claimed in the first place or whatever, you could sit here, I don't know, a year from now or five years from now and say, look how high the unemployment rate is, and that won't necessarily prove one thing or another about how well we're recovering, Bob, because they've already explained that that's what to expect.
Yeah, you're exactly right, and it's, again, the analogy with what they do when there's a war going on is act here that they, once they realize that their initial projections are, of course, wrong, you know, in other words, in order to get the public on board with the stimulus plan, if they had said back in February, we're going to pass this, and keep in mind, unemployment might still break 10%, and it might be above 9.5% through the year 2010, everyone would have said, what, are you crazy?
Well, no, you can't have $787 billion more to borrow this year when the deficit already is over $500 billion, it's the highest in U.S. history, they wouldn't have given them that much more money, but no, so at the time, they said, don't give us this, and unemployment will be low a few months from now, but you're right, Scott, what happened, they got the money, they started spending, you know, that's all committed now, they have the money to do what they want with, and then, now they've got to soften the public up, they've got to lower the bar of expectations, and they keep, as you say, the trick now is they tell people, now, when we're saying the economy's coming out of recession, we're referring to the output figures.
Yeah, we're referring to us, not you, the stock market, you know, you should have seen him this morning on TV, wow, look at the stock market, and look at the NASDAQ, and look at this thing, and the other thing, boy, all us rich people are getting rich again, it's great!
Yeah, it is funny, the other thing, if I could just briefly mention, this other, just complete myth that's going around, and Timothy Geithner and Ben Bernanke are the ones who are really pushing this thing, is this idea that, you know, now with the anniversary of the collapse of Lehman and these unprecedented interventions that the Fed and the Treasury have engaged in, they said, we've stabilized the credit markets, and you know, there was a chance there, there was a while there where it was touch and go, and it was, there was really a danger that the financing that's so crucial for a capitalist economy, you know, to get small and medium-sized businesses to get the financing they need to pay their employees, there was a period a year ago where that was really in jeopardy, but thank heavens that, you know, the Fed came in and rescued AIG and all that.
Hang on a second now, because this is an extremely important point, and so I want to play the devil's advocate instead of letting you set up your own thing here.
Okay.
The whole, which I'm not going to say it any better than you did, but still, it's going to be different.
John McCain suspended his campaign and rushed back to D.C. to keep the economy from cratering.
That's what the experts said, Bob.
They said, regardless of all of Bob Murphy's, you know, noble Austrian economic theories, if the government had not used its authority to create new money and to make taxpayer-backed guarantees of even more money and give out all this tarp and all this money to bail out these banks, then what would have happened would have been an unraveling of the whole system.
It would have not just taken down Lehman and even Goldman and maybe Citigroup, it would have ended up taking down the entire banking system, it would have ended up taking down much of Main Street.
It would have been a real cratering of the economy, an unzipping of the whole damn pyramid scheme.
And what they did was they injected a bunch of money and they softened that landing so that yes, it's true that we're going through a pretty bad recession and people are out of work, but geez, at least we didn't have massive bank failures all across the country.
And as you pointed out on this show, you could have a company that all things being equal is a perfectly reasonable company to have.
It's a good investment.
It produces goods and services at a tidy profit and everything's fine.
And even a company like that ends up getting screwed whenever the banks have their problems from their big financial pyramid scheme.
So Bob, isn't it true that Ben Bernanke saved America's ass by not letting, or you know, which yeah, it was Bernanke and Hank Paulson, isn't it true that they saved us by not letting that unraveling occur?
Well no, I'm going to say it's not and here's why.
So again, this is the official story, like you say, they were saying we need to rescue these huge investment banks that admittedly made foolish investments and so on and they're in trouble and they would go under and they said because if we let them go down, you know, we don't care about the rich fat cats and their shareholders or even their bondholders, but we want to make sure the credit is available so that loans can keep flowing to the regular businesses, the little guy.
And so what's really ironic, if you look at the actual data and you know, this is, if you go for your listeners who are familiar, the St. Louis Fed, it's called FRED if you just Google, you know, FRED data or something like that, that should probably be the top hit.
But if you go and look at the numbers yourself and look at what's called business loans, commercial and industrial loans, they were at an all-time high and they were rising up through October of 2008 and since then they have fallen sharply, about 10%.
Okay, so again, just to repeat, the official story is there was this credit crunch all through early 2008 and that the crisis really kicked in last September and then fortunately Bernanke and Paulson at the time and now Geithner came in and saved the day and that unclogged the credit markets and got money flowing to businesses again.
But the data is the exact opposite of that story, that loans to business, even commercial real estate loans were actually fine going up through last, you know, September and October, they were at all-time highs and then only after all these unprecedented interventions came in, that's when the volume of loans given to businesses started falling off a cliff.
So now just in fairness, the defenders of the interventions would say, well yeah, but it would have fallen even more had we done nothing.
But my point is, the story you're getting from these people is that, you know, you would have the idea that more loans are available now than were available last October in the midst of the crisis, but no, 10% fewer loans right now are on the books of these banks and so my theory for that, besides just looking at the data, is what Bernanke is doing is he's paying interest on reserves, okay, so the big banks, you know, Bernanke injected all these hundreds of billions of dollars, as I'm sure your listeners know, the Fed's balance sheet, I think at this point it's triple what it was before the crisis, okay, so just hundreds of, over a trillion dollars he injected basically right onto the balance sheets of these big banks, but then he doesn't want that to blow up into price inflation and so he is literally paying them to keep those reserves on balance with the Fed.
So in other words, it's like he gave the big banks a bunch of money and then told them, and by the way, I'll pay you more money each month if you leave that sitting basically on deposit with the Fed instead of making new loans to your customers.
So right at the time, and that switch was made last October, so right when Bernanke decided to make that policy shift and start paying banks to not make loans, lo and behold the amount of loans banks make has fallen off a cliff.
These guys are real sons of bitches, huh?
Wait, do I really understand this?
So what you're saying is, so the guy creates trillions of dollars, and he makes sure that any of his pals who might be in danger of going out of business for all the shoddy business practices and bad loans and bad investments that they had made, they get saved, but he makes sure, and he actually pays interest to even local banks all across the country and whatever, to make sure that they actually do not loan out that money to so-called Main Street, which was the excuse for the whole thing in the first place.
Right, and let me just say in different words, because I know for people who are hearing this the first time it sounds impossible, but you're right, that's exactly what's going on.
And you can realize that, like if you read the latest articles, or even if your listeners want to Google and look up Ben Bernanke Wall Street Journal editorial or op-ed, where he recently went to the Wall Street Journal op-ed page to explain why we don't need to fear inflation, and even there he'll say that, oh the reason is because we have this new tool, and they use the word tool, is that we're allowed to pay interest on reserves now.
And so what's going on here is, you're right, they had to inject all sorts of capital into the banks, and so that was partly through TARP, and then also the Fed will do things like, let's say there's a bank and it's got a bunch of mortgage-backed securities on its books, and if right now with current market prices they would only get let's say 40 cents on the dollar, and so that bank would be insolvent.
So under normal rules, if there were no special government privileges, that bank would be shut down and have to go to bankruptcy, because their assets are less than their liabilities.
But they don't want to do that, they don't want to have the bankruptcy, because it's contagion and all that other stuff, and so what happens is the Fed says, alright, tell you what, you guys give us your mortgage-backed securities and we'll pay you 100 cents on the dollar, and we'll give you a bunch of US treasuries in exchange.
And so they rescue that particular bank, and they do all sorts of other interventions like that.
So now all these banks have all sorts of reserves that Bernanke just pumped into the system, and under normal times, if Bernanke tripled the Fed's balance sheet, that would be incredibly inflationary.
You'd see the prices of milk and eggs going through the roof if Bernanke basically tripled the money supply in six months, which is what he did.
Well, he doubled it in six months.
But you haven't seen that at the stores, and that's why people are saying, what do you mean?
I mean, there's even fewer words than that.
Welfare for rich people, for the very richest, is perfectly fine, but if any of the regular people got any of this new phony money, why, that would be inflationary!
Yeah, yeah, that's a good way of putting it.
So yeah, let me maybe simplify it even more.
In a sense, this is a little bit of a simplification, it's as if Bernanke created, I don't know, at this point it's probably like $1.5 trillion, let's say, he handed it out to a bunch of bankers, but he said, wait a minute, guys, you know if you let this seep out in the rest of the economy and people start going to the store and spending this new $1.5 trillion, that's going to push prices way up and people are going to get mad and then start looking at me saying, what are you doing?
So don't spend that money, don't lend it out.
And then the bank said, well, gee, but if we just sit on it, we're not going to make any money.
And he said, okay, I'll tell you what, I will pay you if you don't lend it out.
And that's what the interest on reserves is.
So he's creating even more new money to give to the bankers to say, I'm bribing you to not lend this new money out into the economy because if prices start rising, people are going to get mad.
You know, I saw this YouTube of a guy, I think his name is Max Keiser, he's this investment guy from England or something, and he's just screaming as loud as he can, I think this is from last year, and he's saying, Osama Bin Laden would be a better Fed chairman than this guy.
They ought to be taken and they ought to be flogged.
And he's saying, this is a coup d'etat, this is unbelievable.
The American people are sitting here and it's basically just like a palace plot being carried out right in front of their eyes.
And we all just sit here helpless going, huh?
Yeah, I mean, I don't know if you're aware of this, but there's a new book out by one of George W. Bush's speechwriters, Matt Latimer.
Well, I actually have a funny quote from that, but it's probably not about the same subject you're talking about here.
Well, anyway, I haven't read the book, but I've seen bloggers talking about it, and obviously he's going to spin it so that his former boss is cast in a decent light.
And so, but he's trying to make with the whole TARP thing, he's saying that, you know, Paulson basically just came in and said to the president, you know what, you need to give me 700 billion dollars and just trust me, I'll do the right thing or else the world's going to end.
And that, you know, when they were writing this speech up when Bush was going to go on national television and explain to the American people why we need 700 billion dollars to bail out Wall Street, that Bush kept wanting the speechwriters to put in a sentence to the effect that, don't worry, we're going to make money on this, we're going to buy these toxic assets low and then sell them high, because that was Bush's understanding.
And that, you know, and the speechwriters kept saying, well, no, Mr. President, that's, we just talked to the Treasury Secretary, and he says, no, we're going to overpay for these things.
So that's not, we can't put that in, that's not true.
And it was just funny, and this guy in this book is saying that Bush was confused and saying, well, why did I sign on to this thing if I didn't even understand how it works?
And I really, you know, like I said, I'm sure the guy was fudging facts a little bit to make it look like Bush was, you know, the innocent dupe and Paulson was the evil Machiavellian, but I think there's a, you know, that really has a ring of truth to it.
Well, he sure was a dupe.
I don't know how that relieves him of his responsibility.
I guess I'll leave that to others, but.
But the funny thing is, I mean, and there's also even, you know, some bloggers caught the fact that when that was all going down, even Bernanke in his initial testimony to Congress was saying, you know, we're going to pay more for these things, and then had to change the tune, you know, there was this confusion, and then, of course, after they gave Paulson the money, then he completely changed within a few days what he was going to do with it.
Right?
Because originally, remember, it was a troubled asset relief program, the government was just going to use it to buy these toxic assets.
And then once Paulson got the money, he changed the tune and said, no, no, we're not going to buy the assets.
We're going to buy and invest directly and obtain ownership in these banks.
All right.
Now, help me if I understand this right, because I've seen some headlines like this, but it's just like you say, anybody can frame the debate however they want, use damn lies and statistics and all kinds of things.
But I've read that the government could have basically bought every house in the country and then just given them to the people who were already the owners of them, and just said, here, fine, and just paid off every house in the land with the money, the amount of money that, because that was the problem, right, was the housing bust and all that was taking down everything else, for all the money that they've given instead to Citigroup and Goldman Sachs.
Right, yeah, and you're right, it depends on what statistics you look for.
I'm almost positive that, yeah, the amount of money they gave out in bailouts and so on, they could have easily just bought all the subprime mortgages and just paid them all off.
And then, I don't think they could have...
I mean, I'm not saying I'm in favor of that, because Lord knows that leads to all its own problems and everything, but I'm just saying, that's the measure of how much money we're talking about here, basically.
Right, exactly, and then, yeah, in terms of the, yeah, I think it's, I'm not certain, but I think it's safe to say the amount of money they've given out so far, or especially the amount in terms of guarantees that they've advanced, they could have easily taken every in-troubled mortgage and just paid it off.
And that would have, you know, so, you're right, not that we would endorse that, but the point is, what they did was certainly not about fixing the official problem, because there was a much cheaper, more direct way they could have fixed that problem.
This was, you know, instead, how can we use this crisis to funnel literally trillions of dollars to, you know, the most powerful bankers in the world?
And lo and behold, that's what they decided to do.
Right, and that's the whole thing is, it's not really a coup d'etat, it's like a slow-motion coup d'etat that's been going for a hundred years since they passed the Federal Reserve Act in the first place.
I mean, that really is, the guys that passed it, it was Citigroup, right, it was National Citibank, Frank Vanderlip, he's the one who wrote the damn thing, and its purpose was, any time that the Citibank is anywhere near going out of business, it will get bailed out by the U.S. government permanently.
That might as well be the entire text of the act.
That's the whole function of the thing, isn't it?
You know, it's funny, when I was younger, I used to roll my eyes when people would, you know, say things like, oh yeah, you know, all these wars and all this stuff going on, it's all just a bunch of bankers behind the scenes getting rich, and I used to think, oh come on, that's real simplistic and Marxist, but yeah, I mean, the more I look in and see the specific decisions that are being made, and then when you read things after the fact about the people that were involved, and they say how the decision actually occurred, yeah, it's hard to come up with any other explanation besides the fact that, you know, there are really rich people behind the scenes, and they're the ones, of course, who run the campaigns, and they get to basically decide who the two candidates are, it's not like that's a completely open process, and it's the will of the people being manifested in democracy, and so yeah, it's not surprising if they can control the political process that, gee, it just so happens that all these hundreds of billions of dollars always seem to go into the pockets of the powerful people.
Yeah, funny like that, huh?
Well, of course, there was the economic interpretation of the Constitution by, was it Beard?
Yeah, I think it was Beard.
I always forget if it was Beard or Barnes that wrote, yeah, that's the whole thing, it's a giant welfare program for rich people, man, come on, that's what it's all about, that's what governments are.
All right, well, let me ask you this, I saw Ron Paul on the TV there, well, it was YouTube, to be honest, and I played the audio for the good people in the Chaos Radio audience there, and one of the things that Ron Paul says in this interview is that they've been able to re-inflate the bubble for decades now, and I guess he's referring to the breakdown of Bretton Woods, or maybe even Bretton Woods itself, that basically we've had this kind of phony money standard this whole time, but we've been able to re-inflate the bubble and re-inflate the bubble, but not this time.
It's not going to work this time.
This time we've got to end the Fed and have real change, et cetera, et cetera, like that.
But is that really true?
Why can't they just re-inflate the bubble, and you and I will just figure out what's the right thing to invest in right now, and then there'll be a giant bubble in that, and we'll sell that in 10 years, the next time, before it pops?
Well, I think, I don't know that I would say definitively this time is the end, but certainly they're running out of room.
Each successive bubble is worse than the last one, I think.
So there's the 87 stock market crash, and then they printed to get out of that, and then the dot-com crash was really a big deal, and then they were calling Greenspan the maestro when, gee, he inflated and got us through that, gave us a soft landing, and then the housing bubble was just inconceivable, and now we're in the worst depression since the Great One.
And so I do think that when the present bubble we're in right now, and I agree with Ron Paul, people say, well, gee, what's the next bubble going to be?
I think right now there is a bubble, and it's in U.S. Treasuries, among possibly other things, that once this one pops, I mean, the government already, even by its own estimate, is going to be back up to World War II levels of debt within the next decade or so.
And so the point is that once this thing bursts, they really will have used up all of their political goodwill, if you will, and they already will be mortgaged to the hilt, and so they're really not going to have much more wiggle room.
And so I think that when this next bust occurs, at that point the U.S. government is going to truly be broke, even though now we talk like that, but still people, investors around the world still think they're going to be able to make their payments.
But I mean, they're just going to be in twice as much debt anyway, and they've made all these commitments.
I mean, I think, just to give you another idea, I mean, the people, when they assess the financial condition of the government, a lot of these simulations or these projections are assuming everything is going to go back to normal within the next 18 months or so.
And they're saying, well, yeah, we're taking on a lot of debt, and it's true that Fannie and Freddie now are backing up, and the FHA are backing up 80% of new mortgages and so on, but, you know, that's fine because things are going to go back to normal, and we'll unwind all this stuff.
But what if things don't go back to normal?
I mean, back in, there's, you can find online, there's Wall Street Journal pieces back from the 1930s.
And in the year 1930, people thought they had bottomed out.
They thought, okay, wow, that was an awful six or eight months, and now things are going back to normal.
Right?
But obviously they were tragically mistaken, and I think the same thing is happening now, where people are saying, oh, there's green shoots, and, you know, we finally bottomed out.
And no, in my mind, this thing is just going to keep getting worse and worse for several years, and so all these projections are just going to be out the window.
And so, you know, the U.S. government is in much worse financial shape right now than most of the mainstream analysts think, because all their projections, like I said, are assuming they're going to be able to back away from the edge once things recover.
But things aren't going to recover.
All right, let me ask you about this cap and trade thing.
Now, I haven't read anything you've written about it or anything.
I don't know how much you do know, but you've got to know, you know, basic news summary kind of analysis, at least.
What exactly is this, and what effect is this going to have on the economy such as it is today?
Okay, sure.
Yeah, actually, in my capacity as the economist for Institute for Energy Research, I've actually done a decent amount on this.
Oh, now, wait a minute.
Does that mean that you're a front man for Exxon or something?
Well, no, but you can take it with a grain of salt if you want.
What cap and trade is, the phrase comes from the fact that the government is going to place a total cap on the amount of carbon dioxide emissions that the U.S. can give off in a given year.
And then they're going to create tradable permits that give you the right to emit a ton of CO2 or whatever it is, and then you can trade those things.
All right, so that's where the cap and the trade aspect of the phrase cap and trade comes from.
It reminds me, like, I wonder what it's going to be like after the year 2000.
Man, it's going to be like some science fiction novel nightmare.
Right.
So, what they're doing, the thing right now, it's called the Waxman-Markey bill, and it passed the House, actually, it was the day Michael Jackson died was when the vote went through, and it squeaked through, and now it has to go through the Senate.
And it would progressively ratchet down that total cap so that by the year 2050, U.S. emissions of greenhouse gases would be 83 percent below the year 2005 level.
So, just to give you an idea of what does that mean, that would mean the U.S. economy would be emitting as much CO2 as it did back in the 1930s.
Right.
That's how much, you know, it doesn't mean necessarily the total output would have to go back then because now we're more efficient and we can produce more stuff for a given ton of emissions than they could back then.
But just to give you an idea in terms of how much it would ratchet back what the U.S. economy is able to do, they would be forcing it to return to the emissions that it had back in the 1930s.
You talk about these credits for, you know, you're allowed to pollute this much and whatever.
If I remember, this is basically the Kyoto Treaty, writ small or whatever, right?
Creating a new, that was an attempt to create a new global currency in these kinds of credits.
Right, exactly, yes.
The U.S. did not.
But it is kind of a currency in itself, isn't it?
Well, yeah, because what happens is these allowances, they give you the legal permission to emit a ton of CO2 and for many businesses that's a crucial byproduct of your operations is it gives off CO2 and so to stay in business you need these things.
I mean, just to completely make an analogy and change the subject, if the government all of a sudden said you're only allowed, each person is only going to get permits to go to the bathroom once a day and every year you get 365 of these things and if you're a person who's, you know, really got diarrhea and you're going twice a day, you need to go out into the market and buy an extra permit every day.
And then the people who are real constipated, you know, they can take half their permits and sell them.
So, I mean, those things obtain market value and the people who really have to go all the time, you know, are going to pay through the nose for them and that's what happens here, that they're going to have these permits and they're going to obtain market value because again, if you're running a business, you need to be in compliance.
You have to show the government, I emitted this many tons for my operations and so here you go, here's 15 permits.
All right, now wait a minute.
Is my bias just to cry for a bunch of evil industrialists who are polluting my sky?
Why shouldn't they all have to pay through the nose?
Well, part of it is, you know, is it really pollution?
So obviously if, you know, somebody is dumping something in the river and it's giving you cancer, you're going to want some mechanism to make that person be aware of what he's doing.
But as you know, the science behind global warming is not nearly as subtle as many people would say.
So there's that aspect that, you know, are they doing all this, you know, in the name of something that isn't really the threat that they say.
But beyond that, I mean, if you look in the specifics of this thing, it's certainly not the case that this is hurting a bunch of rich fat cats and then helping the average person, that what's going to end up happening is electricity and natural gas prices and gasoline prices are going to go way up because of this.
And then specific beneficiaries are going to get these allowances for free from the government.
So in other words, in a sense, the government's creating a new artificial scarcity that people are going to have to pay for and then they're channeling those revenues into the pockets of the politically connected people.
So yeah, if you hate, you know, coal companies, it's true, they're probably going to pay a lot and lose under this thing.
But on the other hand, there's also a lot of provisions in this Waxman-Markey bill to give research credits for clean coal technology and stuff like that.
So it's not across the board, everyone's going to be hurt.
It's going to be the people who didn't lobby successfully are going to get screwed.
And then the other big businesses that did get lobbying correctly, especially, you know, all the guys making wind turbines and stuff, they're going to get tons of new money.
So it's, again, just turning over another, or to greater degrees anyway, more of our economy over to the national government and politicizing what is supposed to be regulated by prices and stuff.
Wow.
Well, so I guess we can look forward to a real happy future there.
Tell me about this, man.
Here's the thing.
You started this.
We're talking about how bad this recession is, despite all the propaganda.
And you pointed to the unemployment rate at, I think he says, about 9% now.
Anything over 8% by their own definition is what they're trying to prevent.
And we all know the real unemployment rate, when you count the people who already threw up their hands and quit trying, is approaching 20%.
I think it was 16-point-something or 18-point-something the other day.
But we all know that the problem is that all of our jobs have gone overseas.
And the Chinese, because they live in a one-party dictatorship and have prison manufacturing and pseudo-slave labor all over the place and all this, they're able to undercut fair wages for Americans.
And so American corporations go and take their companies and move them away from here.
And so if we want to have those jobs back, we've probably got to figure out some economic policies, like what Obama has just done to try to bring those jobs back, right, is pass this tariff against Chinese tires to try to protect American tire manufacturers that employ a lot of people.
I realize you're setting me up to disagree.
So no, I disagree.
Well, I'm trying to be fair too.
It makes a lot of sense, in a sense, but then I figure you probably know better, so I'm giving you the chance.
Right, yeah.
So you're right.
I disagree strongly with that version of history that you just gave there.
So on the one hand, with all this stuff, it's difficult because during the Bush years, outsourcing happened, and then people who defended that were saying, hey, this is just free markets and action, and it's efficient, when really, you didn't have free markets during the Bush years, and so a lot of the stuff that happened was not the result of pure capitalism.
It was the result of crony capitalism, of government cutting back backroom deals and giving special favors to big multinational corporations.
So I'm certainly not defending the specific things that happened during the Bush administration in that respect, but what's wrong is when people overgeneralize and they say, oh, and so that's why the government needs to come in and manage these trade deals, and that by, like you say, putting a tariff on foreign products, that's going to make us richer.
No, what that does, a tariff simply is a tax on U.S. consumers.
People think that that's somehow punishing the Chinese, but no, what the tariff is, is it's saying to U.S. consumers, hey, did you want to buy tires?
Well, there was this cheap source of tires that happened to be from China, but no, if you want to buy it, we're going to make it artificially more expensive for you.
And that, yeah, it's true that it helps the U.S. manufacturers of tires, but at the same time, it hurts U.S. consumers when they want to buy cars or anything else that uses the product that has a tariff on it.
And so if you just think about it in general, trade is a good thing that allows countries to specialize in what they're good at, and so if you took it to the extreme, every country should just seal off its borders, and that should create a bunch of jobs, and we would all be fantastically wealthy, and you can just keep tearing the logic out, and every city should just seal off its borders and not trade with neighboring cities, because then it would provide all sorts of jobs for its inhabitants.
But no, obviously, the more we follow that logic, pretty soon we'd all be starving to death.
So there's a flaw in the logic, and the flaw is that when you trade with other people, it allows you to specialize in what you're good at.
And so the tariffs on Chinese tires, yes, it's helping U.S. producers of tires, but at the same time, it's hurting U.S. consumers, because now they have to pay more.
So again, you don't make the country richer by raising taxes on people.
All right, everybody, that's Bob Murphy.
I'm sorry, I've got a million more questions, but there's really no end to them, so I've got to cut this off at some point.
I really appreciate you joining me on the show today, Bob.
Thanks for having me, Scott.
All right, everybody, that's Robert P. Murphy, Mises.org.
The blog, Free Advice, is at consultingbyrpm.com, slash blog, and the books are The Politically Incorrect Guide to Capitalism and The Politically Incorrect Guide to the Great Depression and the New Deal, and we'll be right back with some news about some wars and another interview right after this.