Gene Epstein critiques the "Great Suppression," arguing government lockdowns forcibly shut down solvent businesses rather than correcting malinvestment, creating moral hazard through bailouts and zero-interest rates. He dismisses a proposed $1,200 monthly UBI for low earners as ineffective against collapsing prices like oil at $25, while condemning $25 million in pork-barrel spending for the Kennedy Center. Epstein contends that free markets would have rapidly produced masks and ventilators without price gouging bans, suggesting voluntary community exclusion of reckless individuals yields a less painful contraction than state-enforced shutdowns that sacrifice economic well-being. [Automatically generated summary]
Transcriber: nvidia/parakeet-tdt-0.6b-v2, sat-12l-sm, and large-v3-turbo
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Welcome To Part Of The Problem00:01:57
Fill her up!
You're listening to the Gash Digital Network.
We need to roll back the state.
We spy on all of our own citizens.
Our prisons are flooded with nonviolent drug offenders.
If you want to know who America's next enemy is, look at who we're funding right now.
Every single one of these problems are a result of government being way too big.
Hello, hello.
What's up, everybody?
Welcome to a brand new episode of Part of the Problem.
I have with me, as those of you watching the video can see already, the great Gene Epstein, who is one of my favorite guests to have on the show.
And I very much wanted to talk to him because I wanted to talk to an economist about what's going on because there is obviously a huge, massive effect on the economy from these government shutdowns of major cities and states all across the country.
Gene, of course, is the head of the New York crime family of libertarians.
He is the director of the Soho Forum, which is just a wonderful debate series, which, of course, much like everything else in this country, has also been affected by the shutdown.
But anyway, you can go to thesohoforum.org and you can see all of the previous debates.
And we're hoping to get back on their feet, just as every business in New York is hoping right now.
So why don't we start there?
How has the Soho Forum been affected by the shutdown?
Well, indeed, we've been affected pretty severely.
Soho Forum Debate Impact00:11:29
But first, I want to thank you, Dave, for having the courage to show up at our March 9th debate.
That was pretty recent.
And I did get a few emails from concerned folks who said, for example, aren't you going to feel bad in a couple of days if some people die from this cluster of folks who are coming to the subculture theater?
And I felt at that early stage, as long as we take all precautions, I emphasize, of course, Japanese bowing and keeping your distance as best you could, that the show should go on.
And in fact, part of what was going on is that we were selling out big time.
And that when we actually did declare sellout, people still went on waiting lists for this event.
That was on big tech and antitrust with Tim Wu versus Richard Epstein.
And I think that the event went off quite well and in a sanitary way, because at that point, certainly there were very few afflicted people.
And I felt only healthy people are going to come.
So we did have a capacity crowd on March 9th.
Then a few days later, we realized that our two events in April should be postponed.
We did that.
And then we were hoping against hope about our May 10th event, which I know you were looking forward to, Dave.
That was, of course, Scott Horton versus William Crystal.
And then we suddenly get a note in the mail from the news school, which has the 800-seat auditorium we're going to have this in, that they're shutting down for the month of May anyway.
So we couldn't have it there.
We then actually scrambled because we're intrepid and we didn't want to disappoint people.
And we contacted Symphony Space.
Symphony Space, a more commercial space uptown, used to be a theater almost the same size as the 800-seater.
And they said they could give us a slot on May 27th, is what we chose, late May.
And we actually have that tentatively set down.
And then we also tentatively have the new school.
Meanwhile, of course, I want to assure everybody that both William Crystal and Scott Horton and William Crystal, especially, I should emphasize, have graciously agreed to be flexible and to show up when we can accommodate them.
And so I end up, by the way, defending William Crystal's character because people keep accusing him of dropping out, dumb gallows humor jokes.
He brought this about because he's scared to debate Scott Horton.
He is being a perfect gentleman about this.
And he's saying, fine, let's do it when you can make it.
And he's accepting, by the way, the same chump change we're paying Scott Horton.
He hasn't jacked up his fee.
And so I have to give him credit for that.
And I want that known.
And please, of course, you people out there, quit assassinating the character of William Crystal.
Come hear him debate when the time comes and boo and hiss and cheer when you want to, but don't assassinate the man's character anymore.
So we're looking for, and then I also want to announce that we're trying to go online, we're trying to do some creative things.
So we're promoting our Soul Forum inner circle.
We stole that term from you, Dave, and you're not suing because you don't believe in intellectual property.
The Soul Forum Inner Circle Facebook.
And we thought that since we have a library now of 41 fascinating debates, we thought that we choose one a week for people to comment on.
The question is: if you saw the debate already, if you attended the debate or saw it or listened to it, by the way, go into the Soho Forum debates podcast, the Soho Forum Debates podcast to listen to any of our debates.
Then explain how you voted and then explain why.
And then, of course, if you haven't listened to it, listen to it and explain how you voted and then explain why.
And we thought that given the fact that the Democratic and Republican candidates are pretty much anointed, and given the fact that the LP candidate is summed up for grabs, that we would resurrect and feature a discussion of Dave Smith's debate with Nicholas Sarwak.
And so that's the debate, not do sure, but do week that we're going to be discussing online because I think it is topical.
And by the way, I'm not going to do any spoilers about who won that debate, Dave, because I want to have people incentivized to listen to it.
And I know that Jane is, of course, giving you a freebie.
You know, like I've been a journalist all my life and we're moochers inherently.
We depend on our freebies.
You're going to get a freebie membership.
It's only $10 to join, but you're going to get a freebie, Dave.
It's going to be zero because you might find some interesting commentary on that site.
Go to thesoholeforum.org, thesoulforum.org, to get to become a member of the Soul Forum inner circle and listen to or watch Dave's debate with Nick Sarwalk.
So that's how we're staying alive and well and continuing as the Soul Forum.
No doubt we'll have those live events again.
Because again, the Soul Forum has a two-fold mission, not just to have stimulating the debates or indeed to put those debates online.
You've had, I think your debate with Nick Sarwalk has done quite well, Dave.
I think it's about 30,000 YouTube views, which is the measure we get.
Now, I have had, my debate with Richard Wolfe has gotten 670,000 YouTubers.
It's the number one debate.
It's actually outdistanced the one we had on Bitcoin.
But yours at 30,000 is quite good, and no doubt it will climb because of all this interest that we're promoting.
Because timeless debate between, I should say, an impassioned guy.
I think of Dave as a kind of a slugger.
Dave was so intense.
He was willing to take blows.
He was just in there, basically arguing passionately for his cause against a professional like Nick Sorwell, who knew how to dance around and bob and weave.
That's why I would analogize it to a pugilistic battle.
And then you'll be surprised at who won the debate.
You will be shocked.
You will be shocked by who won the debate.
Who won the debate.
But of course, we're going to, so to speak, take it to a revote because a lot of new people are going to see it and discuss it and talk about how they voted first and then how they voted second.
Well, of course, I guess the context has changed a little bit because now, although I couldn't believe your discussion with Scott Warden the other day, where Scott is saying, what?
That Joe Biden is going to expire before August.
I guess, is that what you're predicting as well?
He's not going to become the nominee?
That's what Scott was practically saying, right?
No, that's in no mixed words.
That's exactly what Scott was saying.
I'm not quite as convinced as he is, although I do think that there is a possibility that he might be right about that.
I think that Joe Biden is in a steep mental decline and that he actually struggles to answer one single question without fumbling and stuttering and losing his train of thought.
He's done a lot of really, really weird things.
And so I don't know.
I think it is, it's at least a question mark.
And then again, I'm curious about this because, again, I value your ability to predict because you think it through and you're not infrequently wrong, but at least it's worth listening to.
Scott, of course, his specialty and his genius is teaching foreign policy to those fat housewives in Ohio.
If you recall, he once said that in front of you, Dave.
And you didn't have the presence of mind to tell him.
And what about those fat house husbands?
So he talked about that.
But indeed, of course, I'm kidding about Scott.
As I've said many times, you and I are merely brilliant.
Tom Woods is merely brilliant.
Scott is perhaps our only authentic genius.
And so I forgive him even those gaps.
But getting back to you, your forecasting ability in terms of politics is better than his.
So if it's not Joe Biden, it's not going to be Michael Bloomberg.
That's what Scott predicted.
So who could it be?
I mean, you know, if it were to go to the convention, Bernie?
It's theoretically possible, but I just don't see the Democrats giving it to him.
I think they would pick an outsider, a governor, perhaps.
And the guy I'm looking at now is probably Andrew Cuomo because he's really risen to national prominence over his handling of the corona situation.
And there's something about people really, in an emergency, really praise the politician who's seen as the leader, even when they're really not doing anything.
Do you remember how much Giuliani got praised after 9-11?
And really all he did was kind of say what anyone would say in the situation.
And he did and he hugged a lot of people.
He was constantly hugging people.
And that was very sweet.
And indeed, no, when he became, when he went before Congress for some kind of post-mortem, it was pointed out by lots of different reporters of different stripes that there was a lot lacking in the way his organizations were coordinating.
And nobody put him in the hot seat because he was the walk-on-water angel of mercy.
Even though there was a lot of incompetence in the way 9-11 was handled, as inevitably does occur, but they just softballed him, or maybe they were too s ⁇ to ask him some obvious questions.
So that is interesting.
You're right.
It's the calm boys.
And I guess you'd probably say that I will say that Trump didn't sound so bad the other day, a few days ago, when he was doing a press conference.
He sounded like a, you know, he wasn't, how do you think he was?
He was talking in a conciliatory tone.
He was friendly to the Palasi.
Yeah, no, I thought he's, I guess he's done fine.
I mean, and I say the same thing about Cuomo.
I mean, I guess it's fine.
You know, the problem is, as I'm sure you'll agree, is that the state by its very nature is just so incapable of handling these type of situations.
They're incapable of making the right decisions, of knowing, you know, like how, you know, how best to allocate resources.
And so, of course, they, you know, mess up the response to these type of situations just by the very nature of how the organization is top-down organized.
Yeah, no, indeed.
I grant that.
But although, I guess, looking at the, you know, progressives and those who worship power then come back at us and say, but isn't it good to have a mayor who's hugging a lot of people?
Government Spending And Debt Risks00:15:01
Doesn't it make a lot of citizens feel better?
Doesn't it lift the mood and lift the spirits of many and all the rest?
And isn't it great when FDR said the only thing you have to fear is, we have to fear is fear itself.
You know, it's, I guess you'd have to grant that a Hitler or a Mussolini or whoever is leading the country, if a lot of people look up to him, it's nice that people feel better if our leader sounds reassuring, I guess.
Although, of course, that's the guy.
Well, that's the positive side of it.
And the negative side of it are the corpses, the mountains of corpses lying all around the world.
Well, you have a point, Dave.
You have a point.
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All right, let's get back into the show.
So I wanted to mention, I guess, going to the, I put this phrase in the language that probably will only last another 48 hours.
Jeff Tucker liked it.
I'm calling it not the Great Recession or the Great Depression, but the Great Suppression.
They defined as a case in which government's iron fist shuts down a huge share of capital tax between consenting adults, thereby causing a severe economic contraction.
And somebody tweeted to me just an hour ago, yeah, but you know, how about adding that they're doing it in order to address the coronara virus?
And you, Schmach, you know, why don't you point that out?
Why be so biased?
And so I counted by saying, hey, look, yeah, but next time, government is probably going to do it to shut down the economy in order to avoid the threat to civilization as we know it from global warming.
You know, this is they could do it for that reason too.
So, and maybe other reasons as well.
So, the reason isn't inherent in the definition.
There may be the global warming reason is certainly logical enough, causes a great suppression for that reason as well.
So, there's always potentially a reason and maybe a third reason.
And by the way, I should also say, John, we mentioned Scott, and I was impressed by his interview with David Stockman that occurred, that was on March 23rd, a few days ago.
And David, by the way, took David, did take a certain viewpoint that I agree with: that essentially this poses, this, of course, is a joyride for the status.
On the other hand, he does believe, as I do, that there's a fair chance that the economy is going to bounce back.
I believe Peter Schiff disagrees with that.
But the point, though, is that with that said, then the ultimate reckoning in terms of what's happening to moral hazard and also what's happening to the indebtedness of government is going to come sooner rather than later, obviously.
And that we do face enormous risks down the road.
Although, David, if I interpret him correctly, maybe David would disavow this, but he was hoping that maybe some of the awareness of the craziness of what is going on in Washington will begin to reverberate and maybe we can avoid this.
But broad brushstrokes, it is indeed a huge setback for fiscal and monetary sanity.
On the other hand, I think that there is a fair chance that the economy will bounce back by the second half.
But again, the day of reckoning, the Congressional Budget Office warning us of a fiscal Armageddon, given the pileup of debt, that will occur even sooner than the Congressional Budget Office thinks it might occur.
So I've gone out on the limb on my broad brushstroke forecast.
We could go in different directions.
Maybe you want to explore that.
But go ahead.
If you have a question, you looked at my notes.
Where do you want to go?
Well, I guess, you know, I'm happy to hear both you and David Stockman say that you're not convinced that this is going to lead us into a Great Depression, because that is what I was thinking from the very beginning of this, just the idea that you would slow down.
I mean, there's really, you know, you're a few years older than me, I think six or seven years older than me.
Even in I'm still alive at 75, Dave.
There we go.
There we go.
And you're doing great.
So I think that you're 36.
So again, I had obviously twice as much wisdom as you just on arithmetic alone.
We'll leave it to the viewers to crunch the numbers about how many years.
Go ahead, Dave.
So, but I mean, isn't this in many ways unprecedented in your lifetime?
I mean, the comparison that I've heard people making is World War II, where factories were forcefully transitioned into being war factories, and men were drafted and sent off, and women went into the factories, but you didn't have every single coffee shop and everything being shut down.
I mean, even in the height of World War II.
Not to say that World War II had obviously worse, you know, human toll and things like that, obviously.
But this is really unprecedented.
And I just, I almost wonder, like, how can this not have just a devastating effect on the economy?
I mean, how many people are going to lose their jobs?
How many small businesses are going to fail because of this?
Oh, sure.
No, okay, just one thing.
Bear in mind that, of course, I didn't speak about, we're now ending the month of March.
And I guess I stuck my neck out and said in effect that there could be a recovery by the summer quarter.
So the next three months is going to be horrendous.
And of course, the recovery in the summer quarter will mean in terms of conventional measures that we're still below the winter quarter.
In other words, we're just climbing out and the stock market will rebound.
So indeed, your point about that's why I'm calling it the Great Suppression.
They're leveling everything, of course.
And of course, even World War II, by the way, the nightclubs were booming because the nightclubs were effectively exempt from price controls.
And so a lot actually was going on.
And of course, as well, the retail stores, Amazon's stock has been rising during this bear market.
Amazon is looking to hire 100,000 more people.
The retailers generally are looking to hire half a million more people.
So indeed, it isn't a complete disaster for everybody.
And there's a real surge in real response taking place on the part of many companies.
On the other hand, of course.
We just got noticed of a 3 million people filing for unemployment insurance as of this morning's numbers for last week.
And that's up from a couple hundred thousand average.
And that's going to climb again.
Oh, of course.
But let me just try to make your World War II analogy is kind of interesting.
I guess I could pounce and point out that perhaps you're familiar with the fact that by 1943-44, the war ended in 1945.
The Keynesian economists were absolutely alarmed at the prospect of 11 million men being demobilized.
You perhaps know this history a little bit.
And I'm forgetting the name of the one prominent Keynesian, it wasn't Samuelson, who was somebody who was more or less his mentor.
He said, we can't just disband the army.
This is going to cause, and put 11 million men back into the job market.
And this is going to cause a major depression.
And that was the Keynesian belief.
That was the Keynesian forecast.
And you couldn't stop the demobilization.
And most of these guys did not go to college and take advantage of their GI Bill.
Most of them returned to work.
And essentially, and indeed, the government's contribution to GDP in 45 collapsed.
And yet, the economy was basically in a growth path by 1946.
So if you want to extend, now then, of course, you could point about other differences.
But just bear one thing in mind, That it was the Keynesians who were predicting a depression post-World War II that did not occur.
I could talk about why it didn't occur and why they were missing.
So they'll bear that in mind.
No, that's a very good point.
But from my understanding, I would say the real difference going forward is that what you had with, you know, on top of the kind of added benefit of, you know, that every other industrialized country had basically been destroyed by war and we weren't really hit here at home.
But I'm just saying, but aside from that, what you had were real spending cuts and tax cuts after World War II.
Now, what are the odds that we're going to see spending cuts after this great suppression, as you put it?
We're going to see $2 trillion deficits.
We're going to see record high government spending.
And I don't see these interest rates that were just targeted at zero.
I don't see them going anywhere for a long time.
So that's the other element of this: we can almost be assured that we're going to see record high government spending and 0% interest rates.
I think negative interest rates are a more real possibility than they've ever been before.
So who knows?
Yeah.
Okay.
Yeah.
Well, of course, I mean, of course, I would in a way say we've already had negative interest rates if you take into account the rate of price inflation.
The industry has been below the rate of price inflation.
But you raise a good question.
Of course, obviously, I laughed a little bit when you talked about is spending going to come down because I was thinking back on Obama's bullshit about how he incurs these trillion-dollar deficits and then he's bragging about how he brought the deficit down a couple of years later.
You spend like a lunatic and then you can always look good if you're a little less of a lunatic a year or two later.
So actually, if Trump does become, does have a second term, he'll probably be echoing Obama and saying, hey, we managed to bring the $2 trillion deficit down.
It's probably what he'll be saying.
So it will look like a spending cut.
But the point is that I do, I guess I hazard the guess to hopefully confronting your point head on, Dave, I hazard the guess that the debt is going to continue to lead a charmed life.
That low interest rate, given the fact that other countries are screwing up.
In fact, the analogy with what you just said, I was smiling when you talked about how other countries were devastated.
And of course, we weren't even attacked during World War II.
The fact is that it's probably similar.
What's really been benefiting the U.S. is that when we look at the dollar or we look at the U.S. economy, we also always have to ask compared to what?
And compared to the Eurosclerosis of Europe and compared to other screw-ups, then that's the point.
And that therefore, the U.S. debt, perhaps you know that the actual cost of servicing the debt is down, even though the debt has ballooned.
And now the Congressional Budget Office points out that the debt servicing, I forget, the average interest rate has been like 1% to 2% on servicing the debt.
Historically, it's been an average of 6%.
And of course, if it tripled, then that would immediately break the Bank of the U.S.
That would really just, the cost of debt servicing would grow through the roof.
But the Congressional Budget Office only projects that it will ultimately, maybe 10 years, climb back to 4.4%.
Now, so again, I'm positing that The charmed life the U.S. debt has been living, given the fact that other countries are weak and that we still look good compared to everybody else, will probably continue.
And that this pileup of debt will still mean that the cost of debt servicing will not break the budget.
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Malinvestment And Business Cycles00:10:59
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All right, let's get back into the show.
I want to make one other point, which of course, which in a way is my main point, which is that a great suppression is a little bit different, especially from an Austrian standpoint, from a great recession or great depression.
Because in this case, it really is hidden in plain sight.
Even though you'd think that even non-Austrians could have understood that it was the housing bubble that precipitated the last recession, the 08, 09 bubble, it was still difficult for them to understand that the way for the economy to reorient is not to goose up housing, but to recognize the next part of the malinvestment story for any Austrian is that the malinvestment is not, you don't throw good money after bad.
The malinvestment is the market's mistake induced by government, and that you have to move away from that.
The economy has to find, has to sort it out on its own and has to find the alternative ways in which it can invest viably.
And so that's the complication for the Keynesians.
In this particular case, it's hidden in plain sight because it really wasn't sparked by malinvestment.
The malinvestment is there, although I would say it isn't quite as severe as it was the last time.
In this case, it really is just a lockdown.
You know, I heard Bob Murphy talk about this the other day, and I wanted to make a point beyond what Bob makes.
Bob says, what's wrong with people just cinching in their belts?
Why are we saying that that's so terrible?
Oh, there's nothing so terrible about people cinching in their belts.
And when I explain Austrian business cycle theory to people, they ask, well, why does it always have to come on the investment side?
Why can't this shock to the economy come from the consumers?
And then I tell them, yeah, the shock to the economy could come from the consumers.
You know how that would work?
If virtually every household suddenly decided this month, we're going to cinch in our belts, we're going to plan better for the future, and we're going to cut back on our consumption by 30%.
If everybody did that overnight and there was suddenly a 30% plummeting in consumer spending, then there would be a recession.
But it's just as a practical matter, that kind of violent behavior does not happen among the broad mass of consumers.
The violent shock occurs on the investment side from malinvestment.
And by the way, not all malinvestment is violent enough to cause to go through, permeate through the economy and cause a great recession.
My point is that that's what has been happening, though, right now in terms of the great suppression.
The great suppression is that these are viable businesses.
The restaurant that is renting to my wife is a viable business.
This is not malinvestment.
This is the government lockdown of good investment.
Most of it has been good investment.
By the way, even in the worst of a pending business cycle, most investment is good investment.
That's a point, by the way, I try to make to my fellow Austrians that there was always a lot of healthy growth and a lot of healthy entrepreneurship taking place in even the most distorted corner capitalist economy.
And so this is what has happened then is that perfectly solvent businesses have been forcibly shut down.
That's the major reason for this great suppression and the major reason for the 3 million spike in investment.
And all that needs to be done is that those good businesses have to be restored.
And what do you think that my wife has done with my advice?
We're obviously doing a lot of forgiveness on the rent to the restaurant that's renting from my wife because we know that they're not insolvent.
They are only illiquid.
They're forced to shut down.
We'll only be shooting ourselves in the foot if we try to make it difficult for them and evict them.
Who the heck else were we going to get?
If we can stay the course with them and get them back on their feet, then we still have a viable business that they built.
So again, my point is that I'm hopeful.
And look, in the end, I could be dead wrong.
There's always so many unknowables, not just in politics, but in anticipating the economy, certainly anticipating the economy over this next several months.
But what does impress me is that this is oddly not quite Austrian business cycle.
This is really a major shock to the economy coming from government's lockdown of not a malinvestment, but a decent investment.
That's why I'm hopeful.
But by the way, that segues into what government might do and what government shouldn't do and what might happen in NCAP society.
But maybe you want to make a final comment about my rosy forecast, Dave, and go on record as Wire might be full of it.
Go ahead.
Well, no, listen, I understand the point that you're making.
I think it's a very good one.
And I hadn't thought about that particularly from a landlord's point of view.
And I think that's a very good point.
That, look, I mean, if you, you know, if you evicting somebody has its own headaches and costs associated with it, you have to then go out and find another good tenant.
And if you've had somebody who's a good tenant who's been paying their rent on time and you know the only reason they're missing their rent is because the government is quite literally forcing them to not open their doors to customers who would be coming in to pay.
Yeah, okay, it kind of makes sense that you would want to bounce, you know, that you would want to keep them and work with them.
So that's a very interesting point.
And I get what you're saying.
It's not just like a problem of malinvestment.
There's very good businesses out there who are just shut down and there's no reason to think they can't bounce back.
And they are the major, they are the major victim, basically the good businesses multiply.
I want to just pounce and say and stand up for landlords.
As a landlord friend of mine said, everybody hates landlords, especially Jewish landlords.
And I'm reading in the New York Times today, Neil Irwin, I'll mention his name.
He's talking about how, oh, if those landlords, those landlords, obviously, he just takes it for granted the landlords don't respond.
Do you know the primary axiom?
Certainly, if you're a landlord in New York City and you're renting to a restaurant, the primary axiom is if you have a restaurant that has never missed a monthly rent payment, you hold on to that restaurant.
You hold on to that client.
And so that's what we're holding on to, of course.
So I want to say something that, again, the whole point is that there's an awful lot of individual actions on the part of solvent businesses that landlords will be taking and that others take.
But again, okay, I just want to put a fine point on it and again, repeat that I've been, in my view, this is not an Austrian collapse.
This is an Austrian business cycle in operation.
This is essentially a government suppression that's bringing about an economic downturn, a suppression of good investment, not a malinvestment.
Because most of these companies, even the airlines, by the way, we could get on those grubbers, but they're good investments too.
People still fly.
That's what's being shut down.
And that's the key point why this is different from any other downturn.
But excuse me for interrupting you, Dave.
No, I think that's all important stuff.
By the way, completely unrelated.
I just, out of curiosity, I checked how much it would cost to fly out to LA right now.
65 bucks.
You can get a round trip ticket to Los Angeles.
Here's the Jew in me.
I almost wanted to go to Los Angeles.
Even though I'm just like, come on, when are we going to get?
$65 round trip to Los Angeles?
That's an unbelievable deal.
It's a tenth of the price that it normally goes.
And you're a grateful Jew.
A greedy Jew would say, I'll wait until it goes to zero.
That's what a greedy Jew would say.
But you're going to grab that $65.
And I think that's terrific, Dave.
Although I gather you decided not to go.
I decided after counsel from my wife, I decided not to.
I won't be going to it.
Okay, now so it'll go down to zero.
Maybe then they'll say, hey, we'll pay you 65 bucks because we want a celebrity like you, Dave, on board.
No, listen, I will.
And this is a little bit of an aside, but I just can't help myself.
But I've always found from what you were talking about with landlords and stuff, I've always found this just tremendous disconnect from the way left-leaning folks or socialists or people like Richard Wolf, who you debated, the way they talk about the relationship between landlords and people who rent or employers and employees, as if it's like this.
It's basically this is the new version of king and subject or ruler and ruled.
And I just wonder how many people have had any life experience.
Like I've rented basically my entire life.
I've never owned, I've always rented.
And I know, like, for example, my in-laws, they own their home.
And it's, I mean, every time something breaks down and my father-in-law is like, you know, down in the basement and his hands and knees, he's fixing the electricity.
He's fixing the plumbing.
He's doing all this work.
Part of owning a home is like a real headache.
And then I sit around and I'm like, hey, we got a clogged drain and my landlord is like rushing over to fix it.
And you're like, I don't really feel as if he's my ruler.
I mean, if anything, it feels quite, you know, it feels like more the opposite.
The truth is, it's a voluntary relationship between two people.
And this is all just imagined, the idea that the landlord is like this, you know, evil figure who, you know, like lords his power over his poor helpless.
And it's inherent in the very phrase, very term, and it does segue into a couple of, of course, obviously it goes way back.
The term landlord goes back to pre-Adam Smith.
Landlord Power And Adam Smith00:02:34
And Adam Smith, one of his big mistakes is that he didn't have any good words for landlords.
He thought they were parasites.
That's one of the real problems with Adam Smith.
And beyond that, obviously, the idea of anybody being the lord of the land when he's renting to you is clearly a misnomer.
Although, with that said, I want to add that if you are an intrepid enough landlord to own a building that's rent stabilized or rent controlled, it does tend to attract a nasty kind of personality.
I wouldn't want to own a building that's rent stabilized or rent controlled because then you do, it's good to be nasty because then you do have to cut corners because it's hard to make a living from running such buildings.
So it does tend to attract the worst kind, that kind of landlord, those kind of people.
And then, of course, obviously, the more general societal problem is that, is that if you're in the business of becoming a landlord, it just doesn't look as good as if you're some kind of a parasite college professor.
It doesn't impress people at parties.
So therefore, it also attracts a slightly nasty group of people.
All right, let's take a quick second.
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Bank Bailouts And Irresponsibility00:14:35
Now, but of course, with that said, there are plenty of decent landlords.
And my wife and I have a reputation for being really nice landlords.
And it sounds like you pay your landlord a decent market rent, although it's not even, can't really be called a market rent because there are 2 million units off the market due to rent stabilization.
And so many more units could be built, but for the heavy hand of government.
But the point is, you have a decent capitalist relationship with your landlord, and so do our tenants.
And so that's, of course, important to say.
And it is important to stand up for landlords.
I'm glad we did that, Dave.
Very good.
All right.
So let's transition back to what you had touched on before.
And that, of course, is what the government response has been so far to this crisis.
And maybe why don't we talk about the government response and then what you think would have been a more appropriate government's response.
I mean, you can talk about how Ann Kapistan could handle this.
But even given that we do have a government, I think there certainly from my perspective, and I'm sure from yours too, could have been better ways to handle this.
I don't think robbing the American people to give a couple trillion dollars to the banks is an ideal solution.
I don't think 0% interest rates was a good solution.
But I want to hear you.
So how about first the actual government response?
What do you think of the big handouts to the big banks?
And what do you think about the lowering interest rates to 0%?
Well, okay, those in particular, the lowering interest rates to 0%, I think, really made virtually no difference.
I guess I would broaden the handouts to the big banks and the handouts now to all the big companies are basically only going to encourage them further to act irresponsibly.
I guess somebody could force me to the wall and say, well, there are some banks that did act irresponsibly.
And if they're going to not be supported, then that could cause some near-term harm.
But again, I'm in sync with David Stockman by pointing out that you only accumulate, the more government has this, what's called what was referred to as the greenspan put, that basically,
it's through technical terms, basically, the more you put a floor under things, the more you abrogate the capitalist system, which is essentially a profit and loss system, that profits encourage risk-taking, but losses encourage prudence.
And the more you prevent banks, businesses, and others from having to plan for the risk of loss, the more you do that, the more you motivate these institutions to take more and more risk and to be less risk-averse and to be less prudent.
And so that's what's referred to as the moral hazard of continuing to underwrite the bad and imprudent decisions of different institutions.
And so that's why it's potentially a disastrous policy.
I guess David and I, maybe in a moment of sort of vain hope, will hope that people begin to recognize this.
Although, with that said, I was impressed, by the way, at a story in the Wall Street Journal today, which was a very admirable roundup of how much cash on hand the major corporations have.
And that, you know, it's been pointed out, well, you know, that you pointed out by Bob Murphy just last week, the Fed is financing liquidity and yet so that these companies, which are cash short, can stay afloat.
But why are they so bereft of cash in the first place?
Now, it turns out, even Bob admitted that, well, maybe not all of them are bereft of cash, but it turns out that it's not as bad as we necessarily think.
There actually is a surprising amount of cash that these corporations have on hand.
And that, in fact, the outlier is Apple.
Apple actually has like $220 billion worth of cash, enough cash to operate at full capacity for a whole year without even cutting costs.
So what I'm trying to say is that when we talk about encouraging risky behavior on the part of banks and other large corporations, it turns out that they're not quite as stupid as we think, that not all of them act that way.
And that we have to hand it to many of these business people and many bankers.
And perhaps you know, not every investment bank needed to be bailed out in 0809.
They were all told they had to take it.
But we're definitely extending money to undeserving people.
And we're definitely not recognizing the point that I made earlier about insolvency versus illiquidity.
And that the market, just like I, as a landlord, recognize that the restaurant we rent to is illiquid but not insolvent.
That if Boeing, if Boeing blew all its money, and has difficulty paying its bills or even staying afloat and has to get this largesse, then the answer is, well, go out into the marketplace and borrow.
If you have to borrow at 10%, that's your problem.
If you have to beg it, beg for it, that's your problem.
Probably you can convince a lot of potential creditors that you are a credit worthy, that you are solvent, that you deserve to stay in business, similar to the airlines.
The airlines, of course, are getting a huge amount of largesse.
And here's another funny, there was a funny tweet where somebody justifying all this bailout of the airlines, and the guy said sarcastically, I guess we all want to use rowboats to get to Europe next year, or we all want to just use bicycles or go by bus.
And I think it was actually Tom who tweeted this homewoods, which is, I guess this guy really feels that if an airline company goes bankrupt, its planes will melt.
What we don't realize is obviously this is bankruptcy.
And bankruptcy, by the way, is a relatively benign process.
You can declare bankruptcy and you don't even go out of operation.
But if you do go out of operation, the vulture capitalists come in and buy and buy up those planes.
Because again, it's not insolvency, it's illiquidity.
But then, of course, if your company goes out to the marketplace, the Boeing executives go into the marketplace and beg for money, then one of the stipulations on the part of the creditors would mean that we've got to fire all these yo-yos who mishandle things.
I'm only going into the ways in which illiquidity and insolvency are separated in terms of the thousands of decisions that are made in a marketplace and all the ways in which so-called vulture capitalists can pounce and buy distressed assets and recognize that those assets are valid.
So this is done far more efficaciously by the free market than it could possibly be done by government.
And then what's the marginal benefit of government?
There are those who pounce and say, well, but somebody's going to make a mistake.
Some landlord is going to act like a creep and push out the restaurant.
We all know that.
You pounce on the fact there are going to be some stupid decisions in the free market.
And then we focus on that, forgetting, of course, that obviously the stupidity from on high is a blanket bailout of everybody.
And indeed, causing the need for more bailouts later on by encouraging irresponsibility on the part of those in charge.
One final point, because of course I've learned a lot of this from others, but I pride myself on this one point that I've contributed to this dialogue about understanding what happens when you have crony capitalism, when you privatize profits and socialize losses and causing these institutions to act in a foolhardy way.
The worst get on top.
We forget then that the casino capitalists start to run these companies.
The less imprudent start to run these companies.
Because what the hell?
Why don't we shoot for the moon?
Because we can always beg government for a bailout.
So that's the creeping harm that these things do.
And that's the reason why we don't need any of these government bailouts.
Would it be a time to call a halt on it?
Even though I can anticipate the next objection, which is that, but wait a minute.
Government caused this problem.
You know, government caused this problem.
Shouldn't government come in to solve it?
In other words, this really was, is this really something you'd expect every responsible business owner and executive to expect?
That government would suddenly cause a forcible shutdown of your business and that indeed the plague would come, government forces causes this problem.
Well, even despite that, the problem is that if government tries to cure it, it's taking resources from others.
It's reallocating resources inefficiently.
And again, it's abrogating, continuing to abrogate the principle on which capitalism operates.
The profit and law system in capitalism is essential to capitalism's operating.
So I'll shut up and have you comment, Dave.
Go ahead.
No, well, no, I think that was great.
I appreciate every bit of that rant.
And I think you're absolutely right.
And I think that the moral hazard of bailing out all of these big companies is a problem.
It's a problem that we dealt with after the bailouts of 2008.
And it's the problem that we're going to deal with after these bailouts.
And, you know, I agree with you.
One of the things I believe Peter Schiff was making the point on Tom Wood's show is that even if you want to say that the government caused this problem or that there was no real way to foresee that a virus was going to come and wreak all this havoc, there still is a responsibility on businesses who were not planning for an emergency.
They didn't have any plan for what they would do in an emergency situation.
But anyway, I want to just ask you about another proposal that's been floating around, which is the idea of this emergency UBI.
So the idea of just cutting checks to Americans.
I forget exactly how they were going to do it.
It was something like $1,200 a month for anyone making under $75,000.
It's in the package, Dave.
Yeah, sure.
Oh, right.
Go ahead.
Now, a lot of times, you know, Austrian economists have been probably more concerned with inflation than any other group of economists.
And one of the things that is pointed out that is a fair point is that a lot of times when there was all this money, like in the quantitative easing rounds and stuff like that, when there's all this money, but it goes to banks and it's not all injected into the economy.
And a lot of it, you know, gets held in reserves and the banks don't actually loan it out.
And therefore, you're not going to have an inflationary effect if the money isn't injected into the economy, at least on price inflation.
But this is different.
This is just good old school dropping money out of helicopters.
We're giving everybody a check.
So what do you think about this proposal?
And doesn't this have to result in obvious price inflation?
Well, okay, the short answer is probably not.
Only because it's $1,200.
And it's ridiculous.
And it's ridiculous, even though, of course, I certainly don't want anybody to be destitute from all these layoffs.
We could talk about what could happen in a free market or what could happen more rationally, but I'm apparently going to get $1,200 in the mail or cost to it.
It isn't a proposal, by the way, although I don't want to lose sight of the fact that most importantly, Nancy Pelosi, you know, that little item, $25 million, the $2 trillion package includes $25 million for the Kennedy Center in Washington, D.C.
This reminds me, by the way, of the feeding frenzy after 9-11.
I know a guy who quit the Senate in disgust because Hillary Clinton got something like $90 million for Ticonderoga.
Just an incredible pork fest after 9-11.
As this guy said facetiously, I'm sure Al-Qaeda is trembling with fear over the subsidy to Napoleon.
But so clearly it's just disgusting from where it goes.
But getting to your question, it's going to be to begin with.
If you just the effects of this, it's a joke, of course, a $1,200 check to people.
But there's not going to be a whole lot.
What do you think I'm going to do with the $1,200?
I'm just going to suck it away somewhere.
Face Masks And Speculation00:13:18
My consumer spending habits are not going to change.
Do you think that there's going to be a rush on many items because people are getting a whole lot of people getting $1,200 checks in the mail?
I mean, by the way, I think that a large percentage of people who get it will spend it.
I mean, that would be my guess.
Well, or ask yourself this question.
I mean, I was going to say, you know that this has happened before Bush sent, George W. Bush sent, I think it was two, $300 checks in the mail.
Do you know that as luck would have it for George Bush and his Keynesian crowd, every time he did this in the calendar quarter or month or two that was supposed to be affected, consumer spending actually fell?
And so my real question is, yeah, they're going to spend it, but is this going to bring about an increase in consumer spending?
Are we going to see an increase in consumer spending from it?
Well, there are lots of reasons to believe that we won't.
Just any kind of increase.
Because a number of people won't spend it, or indeed they will spend it at the bottom.
They will spend it.
The people who are really losing their jobs and can use it will spend it out of necessity.
Obviously, if we're going to continue into the current circumstances, there's not a whole lot to spend it on, unless, of course, it's that $65 flight to LA.
And there, too, that's the absurdity.
We're looking at a price collapse, and here we are potentially considering the possibility of price inflation.
And so the point is that it never seems to have much of an effect.
It certainly didn't goose up consumer spending the last time it happened.
And we could unravel the reasons why.
But part of the reason why is, of course, that went to everybody, by the way.
This is going to be phased out.
I guess it's a small percentage of the population are not going to get it.
It's going to be phased out at $196,000 for couples filing jointly and something like $96,000.
So you're going to get a few bucks, Dave, and the $1,200 is going to come to you, because I know you're not exactly in a league with Tom Woods in terms of what you earn this year.
Who is?
Exactly.
Certainly no working libertarian is in league with Tom Woods for what he makes.
But God bless him, Dave.
We don't begrudge him a nickel of this.
He deserves more.
He deserves more.
Exactly.
He deserves not only to earn 10 times more than you earn today in a single year, but 12 times.
But anyway, but that is right.
What are you going to do with it?
My point again is that it's a one-shot deal.
And it's happening at a time that, again, prices are plummeting.
As you know, last I checked, the oil prices collapsed to 25 bucks.
And part of the reason why the airline is going to charge you so little for the flight is that the cost of jet fuel has plummeted.
So again, maybe I'm talking around this issue, but I'm only saying that if you look at, if you just think about the $1,200 going to the pockets of people who have lost their jobs, who naturally are a little bit concerned about the financial well-being, are they going to blow it all on something or other, particularly at a time when there's a lot of difficulty blowing money on anything or even going out?
And then secondly, are they going to blow a lot of it?
Or indeed, when people are scared, they tend to squirrel money away.
The idea, by the way, that people don't like to say, this doesn't make a whole lot of sense, especially when they're scared, as people are these days.
That's why I do doubt very much that we will see even any kind of perceived influence on prices from this.
If we do see any kind of influence, it'll probably be very slight.
Okay.
Well, that makes sense to me, and it makes me feel a little bit better.
So let me ask you, because we're coming up at the end of the time here.
So let me ask you what you addressed before, free market solutions to this problem.
What would be the free market solution?
No, a completely free market.
You know, you must be familiar with the fact that the Center for Disease Control and the FDA were basically spreading nonsense about face masks.
They were holding up the use of home kits for testing the virus.
I mean, they were part of the problem, not part of the solution, to pick up on a well-worn phrase.
And we probably, maybe I could trace the story this way, that no doubt, when the first word came from China, we're not going to turn China into a free market.
China was suppressing the information.
But by January, the news is coming out.
I hazard the guess that in a free market where the virtue is that, yeah, you have a lot of idiots, but when you have tens of thousands of people who are able to make decisions, make entrepreneurial bets, then you have all kinds of things happening.
You probably would have had a number of speculators and entrepreneurs being able to see the problem, recognize that face masks not only protect others, but protect you, that ventilators could be used, and taking a flyer and turning out a lot of these things on the off chance in the absence of rules against price gouging, that these things would be available.
And so we might have had, and certainly over the last few weeks, as Bob Murphy pointed out, the one thing the free market is sort of good at is mass producing items like face masks and ventilators and then selling them in test kits and all kinds of other stuff.
Not all of it would have been good.
Some of it would have been fortunate, but there would have been a huge opportunity perceived by people at the margin.
Who could have told Jeff Bezos?
You know, who would have known, except for Jeff Bezos, that he could go from being a guy of limited means to becoming one of the richest men in the world?
He saw something he bet on and he went for it.
There's always people who do.
So I'm saying that there's a fair likelihood that people would have recognized that these things should be available.
I'm mentioning that point because, especially stressing that point, because it is indeed true that we have a tragic situation going on.
It does appear that face masks help, and a lot of people don't use them, don't wear them.
But if you were marketing face masks, you're selling them, you would have scary advertisements.
Dave Smith, I'm part of the problem.
We've been running an ad for Fred's face masks.
Don't take any risk, guys.
And certainly, I take a special interest in what's going on in Japan.
The fact, as you perhaps know, that they're taking very few precautions.
People are still cramming on the commuter trains, but it looks like they're not social distancing.
And as I keep trying to stress to those naysayers, yeah, they don't know how many people have been afflicted by the virus, but the reporters on the ground are saying that the hospitals are simply not flooded with sick people.
And Japan was hit earlier than the U.S. because they geographically much closer to China.
So I mentioned that only because face masks seem to matter.
Ventilators seem to matter.
They would have been mass-produced.
They would have been coming out.
There would have been no constraints on that.
And then beyond that, as a friend of mine said, as well, well, you're talking about the great suppression, but bear in mind that there would have been a lot of self-suppression, as of course there would be.
There would be a lot of people like me who would be self-quarantining at the age of 75.
But there would have been a lot of restaurants and businesses who could have sorted it out.
Let's say there's no constraint, no constraint at all.
Then, you know, there wasn't the, by the way, the local movie theaters were going, of course, there was originally, as you may recall, an edict that you go on half capacity.
The local movie theaters might have been able to survive, first of all, if they bought up face masks and they distributed them at the door, or maybe distributed gloves, and then made sure that only every third seat were filled.
Now, my point is that all of the ways in which businesses can cope and ways in which individuals can cope would have been occurring even if the virus had come.
Indeed, the virus would come, it would invade us.
But definitely, the Hayekian bottom-up solutions would have been much better.
We would probably not be having massive layoffs.
We would indeed be having a situation in which my stepson, for example, he's a software guy operating in Silicon Valley, and they can all operate remotely.
So their office was shut down.
And of course, that's what would happen on the part of many businesses and many services.
But those businesses and those restaurants and those movie theaters and other groups might have found ways to limit risk and make it possible for people to attend and retain the jobs of so many of their people.
And then, of course, obviously, as I say, the fact is that it's prudent, it's in your self-interest as a landlord not to put a squeeze on a restaurant that's hurting, to work it out.
Because, again, making the distinction between insolvency and illiquidity.
And so I think that, but I guess what's looming before us, the looming question is, but then you always have 10% of the country, the population are always a bunch of jerks, risk-taking jerks who don't mind breathing on you.
Well, there would be a reaction to them.
Certainly, if we had any kind of replication of a minikist or handcapped society, there would, of course, be an awful lot of quarantining in the sense that whole communities and whole groups would be closed to these people.
And people who didn't probably, if you're operating a business in Times Square, you would probably mandate that anybody who comes into your business and patronizes it has got to put on gloves and has got to put on a face mask.
You would probably, probably have a couple of people who would forcibly eject a few doofuses who don't obey that ruling so that you could stay in business.
So perhaps we could go into further detail, but in broad brush strokes, I believe that even the 10% who are jerks, or the point has been made, young people are going to take a lot of risks.
Young people are going to know that their chances of dying from it are very limited.
They want to have fun.
There was a young lady who said, look, I'm going down.
I don't care if I catch the damn virus.
I'm going down to Florida and have some goddamn fun.
You're not going to prevent that.
So indeed, obviously that would mean that older people like me have just got to stay away from these people.
We might be able to, we might have to impose politically incorrect rules that say, look, blanket, if you're under the age of 25, we're going to brand you as a fool unless you can certify that you're not a doofus.
So again, we would be defending ourselves against this 10% element, which looms so large, because that's the usual argument I've been hearing lately from people who put this case to.
What about the 10% doofus factor?
Again, there are lots of ways in which we would, businesses and individuals and old people like me would be defending ourselves against the 10% doofus factor.
With that said, certainly, even in the freest of markets, there would be a severe economic slowdown, even a severe economic contraction from the virus, but it wouldn't be nearly as severe, nearly as painful as what we're experiencing today.
And on top of that, I want to add that the research on how much morbidity and mortality increases with a 15 to 20% unemployment rate is a little bit debated, but certainly we are potentially sacrificing lives and sacrificing economic well-being by going with a lockdown that the government is imposing.
Yeah, it seems no question to me that people are not that they're not giving enough thought to what the human cost of all of these shutdowns could be.
And we're going to end up finding it out.
Human Cost And Wrap Up00:00:53
Gene, I have to wrap up here because I have another show that I'm recording directly.
I was going to mention Donald Trump's Easter parade.
He wants us open by Easter.
Okay.
Oh, well, we'll see.
We'll see.
We'll see about that.
Passover comes too soon.
Passover is a week of.
So we can't be open to a Passover.
No Satyrs, guys.
And you have to have virtual Satyrs.
Virtual Seders.
Look at that.
They always find a way to screw over the Jews.
Don't they, Gene?
Well, Gene, I very much appreciate you taking the time.
And we'll do another remote one coming up soon if we can't get back into the city.
And you and your wife stay safe, enjoy the time together in your beautiful loft apartment.
And thank you for being so kind to your subjects who you rule over as the Lord of the Land.