Dave Smith critiques President Biden's admission that sanctions on Russia will cause global food shortages, arguing the true intent is inflicting pain on vulnerable populations rather than deterring Putin. He pivots to Austrian economics, explaining how Federal Reserve money printing and artificially low interest rates since 2008 created an unsustainable boom fueled by high time preference. Smith contends that recent rate hikes toward a 2% target will trigger an inevitable bust, linking predicted food crises to this broader economic collapse. Ultimately, he urges listeners to prepare for severe hardship by adopting a lifestyle of low time preference to avoid depleting future generations' inheritance. [Automatically generated summary]
Transcriber: nvidia/parakeet-tdt-0.6b-v2, sat-12l-sm, and large-v3-turbo
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Government Size and Food Shortages00:13:47
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.
You're listening to part of the problem on the Gash Digital Network.
Here's your host, Dave Smith.
What's up, everybody?
Welcome to a brand new episode of Heart of the Problem.
I'm Dave Smith, and I am flying solo for this episode.
Robbie the Fire Bernstein is out.
He'll be back with us on the next episode.
Don't worry.
He had to go back to got some more comedy gigs in Ukraine.
It's a tour, stops off in Kiev.
Then he's doing some shows in the Donbass region.
And then his final headlining gig is in Moscow, where he will reveal his true Russian loyalty.
For the record, I was against it, but can't.
I don't, I'm not the boss of him.
I'm just a guy.
Okay, so for today's episode, I wanted to, when I do these solo episodes, usually I have a whole like rant and idea of a show in my head.
So I've got an idea for one, but I, you know, it's just all in my head right now.
So let's see how it is, how it comes out.
So let me say this.
For today's episode, I'm going to try my best to talk about some, what I think are some very important things happening right now, which is what I try to focus on on this show, the important things that are happening.
And I'm going to try to kind of connect that to libertarian theory and more specifically to Austrian economic business cycle theory and Austrian economics in general.
So let me say this.
When I say that, what I try to do with this show is talk about things that really matter.
And that is in itself a challenge.
I think it's a challenge for a lot of Americans to focus on what's really important.
And it's particularly difficult in the current day when there are so many crazy things happening all over the place.
And there's, you know, what used to be called the 24-hour news cycle.
That was a term that was big like when I was a kid because cable news had kind of come out and been invented.
When I was a little kid, most people didn't have cable.
But by the time I was like a teenager, it was like something like 80% of Americans had cable.
This was like a drastically different thing where all of a sudden, now it wasn't just like people had five network channels.
Now all of a sudden they had like 60 channels and there were these cable news channels that came out.
So now instead of just like reading a newspaper in the morning or catching the nightly news on TV, there was news all day, 24 hours.
There was CNN and this was like a whole new thing.
And people would talk about the 24-hour news cycle, how this was kind of crazy, you know, because there's just so much information and how do you delineate what's really important, what's really newsworthy.
But that's nothing compared to today.
Now with social media and the internet and all of this, there's just so much information coming at you and every single crazy point of view seems to be on full blast.
So it's very hard to kind of, you know, choose what to focus on and what not to focus on.
And also there are wild, outrageous claims made all the time by people in the corporate press, as well as people in the alternative, you know, internet media.
So, and a lot of them are just complete bullshit.
So it's hard to not focus on all of that stuff.
And I think, I hope we do a pretty good job of doing that on this show.
This is why we kind of have relentlessly been focusing on the war, the war tensions between America and Russia over the last few weeks, why we were focusing so much on the COVID regime, vaccine passports, lockdowns, but why we always focus on war and the economy and things like this.
Try to focus on the things that really matter.
I will be the first to admit that we get, you know, we fall victim to the distractions sometimes, but I think we do a pretty good job of it, which I think is about as good as you can hope to do.
And of course, sometimes the distractions are, they get pushed to a level where they have to be addressed and they're not just distractions anymore.
There might be some silly social issue that isn't really that important.
But then once they start propagandizing five-year-olds with it, oh yeah, now it's kind of important and worth talking about.
But anyway, every now and then, my inner spidey senses go off, or you hear something and you go, oh, that's actually a really big deal.
That's not just another thing.
That's not just another, oh, today's, you know, latest news story that, you know, isn't very important.
This is kind of a big deal.
And I think I'm not alone in noticing that this was a big deal, but I think hopefully as I try to do on this show, I'll have maybe a little bit different of a perspective than your average podcaster, commentator, whatever.
So Joe Biden had a meeting in Brussels with other world leaders about the crisis in Ukraine.
And this is what he said when taking some questions from reporters afterward.
With regard to food shortage, yes, we did talk about food shortages.
And it's going to be real.
The price of these sanctions is not just imposed upon Russia.
It's imposed upon an awful lot of countries as well, including European countries in our country as well.
And because both Russia and Ukraine have been the breadbasket of Europe in terms of wheat, for example, just to give you one example.
But we had a long discussion in the G7 with both the United States, which has a significant, the third largest producer of wheat in the world, as well as Canada, which is also a major, major producer.
And we both talked about how we could increase and disseminate more rapidly food shortages.
And in addition to that, we talked about urging all the European countries and everyone else to end trade restrictions on sending, limitations on sending food abroad.
And so we are in the process of working out with our European friends what it would be, what it would take to help alleviate the concerns relative to food shortages.
If you don't get too lost in the ramblings of an apparently senile old man there, what you heard was the president of the United States saying that we're going to have food shortages.
Now, this is what I mean when I say you have to be able to kind of like sort through this stuff and then kind of spot when something is, you're like, oh, no, that's a big deal.
That's really newsworthy.
That is really newsworthy that the president of the United States of America said we're going to have food shortages.
Like that should be leading on every news outlet the next day, but it's not.
I mean, there's a few who are talking about it, but it's not being treated with like, and this is the problem with this whole, you know, media, you know, like system that there's no sense of like kind of prioritizing and picking out.
There'll all just be like a million random things thrown out there.
And then one of them will be, oh, yeah, by the way, the president, the president of the United States of America in 2022 is saying that we will have food shortages.
He didn't say just us.
He also said in European countries.
Now, I'm sorry, it's a little bit, it's, you know, it might not be surprising or shocking to hear about someone talking about food shortages in Somalia.
But to hear the president of the United States saying he expects them in Europe and America, that is pretty surprising.
That is not something that we have really considered for quite a long time.
The idea that food security might be a real issue for Americans and Europeans, for people living in first world countries in the 21st century.
Now, of course, the reason that Biden is or the culprit for this is, as Joe Biden says, the sanctions.
Now, we'll get into that a little bit more and whether that is accurate or not.
But I would just say that if you're going to say, hey, you might be running out of food, average American, Mr. Joe Sixpack, you might have to start thinking about where to get food from.
And maybe you're not going to be able to get it.
And this is also true for these other, you know, starving third world countries like France.
You know, okay, if this is what you're saying and you're saying the reason for this is the sanctions, well, then I think we better be pretty damn clear on why we're having these sanctions, what the intended purpose of these sanctions is and what why they're so necessary.
I mean, I don't, that doesn't seem unreasonable to me if you're going to accept for the second, which we will talk about in a minute, but if you're going to accept that this is because of the sanctions, this is because of Vladimir Putin invading Ukraine and that we're forced to put these sanctions on.
This is going to result in possibly, or not even possibly, Joe Biden is saying they're very real and they will happen.
So we're going to have food shortages.
Well, what is so important that the offsetting cost of food shortages for your people is this is still a no-brainer.
It's still worth it to do.
So that's a pretty important thing to think about.
Let's go to the next clip of Joe Biden in taking questions from the press and what he had to say.
Let's get something straight.
You remember, if you covered me from the very beginning, I did not say that, in fact, the sanctions would deter him.
Sanctions never deter.
You keep talking about that.
Yes, our intention is to have a deterrent effect.
The president believes that sanctions are intended to deter.
The purpose of the sanctions in the first instance is to try to deter Russia from going to war.
The allied relationship is such that we have agreed that the deterrence effect of these sanctions is still a meaningful one.
Okay, so let's pause right real quick right there.
And I appreciate whoever made this YouTube video for splicing that in there.
So here is Joe Biden.
He's saying, well, this was never, the sanctions were never about deterring.
And of course, he says, I've never said that.
For those of you who have been following me from the beginning, I've never said that sanctions were about deterring Vladimir Putin invading Ukraine.
Now, of course, as the video showed, the problem with that, I mean, while it may technically be true that Joe Biden did not say that these sanctions would deter Vladimir Putin from invading Ukraine, I don't know if that's true, but I haven't actually seen a clip of Joe Biden saying it.
So he might technically be right there.
However, your press secretary said that the president believes this.
And your vice president said that this is the purpose.
And your secretary of state said that this is the purpose, as well as several other members of your administration.
So that in itself might even be worse than if you were on record, like that you're this incompetent, that your own people are giving a reason that you yourself do not think is the reason.
Now, again, I'm just saying, if you're talking about something that you are saying is going to lead to food shortages for your people, man, you'd think your team should really be on the same page as to what it is that we're doing here.
However, I will say this also.
I agree with the president and what he's saying.
I don't think there's any argument that these sanctions, I mean, obviously the sanctions didn't deter Vladimir Putin from invading Ukraine.
And I don't think that sanctions in general deter.
I think if you look at the track record of sanctions, I think that, well, first off, I think sanctions are an act of war and it's the worst type of outside of direct military intervention.
It's the worst type of foreign policy you can have.
I think there's a lot of evidence to suggest that they rally the people around their leaders and that they're much more of a provocation than a deterrent, which would kind of make sense seeing as how this whole thing is played out.
But let's get to Joe Biden now saying what these sanctions are about.
Sanctions never deter the maintenance of sanctions, the maintenance of sanctions, the increasing the pain.
And the demonstration why I asked for this NATO meeting today is to be sure that after a month, we will sustain what we're doing, not just next month, the following month, but for the remainder of this entire year.
That's what will stop it.
Sanctions as an Act of War00:03:32
Oh, okay.
So let's be clear about this.
It's not about deterrence.
It's about the maintenance of pain.
So that is why we need to deal with food shortages here, according to the president of the United States of America.
That's what's going on, is that you, yeah, American, yeah, European people, you're going to have to deal with not having food.
But that's necessary to inflict pain.
Now, you might wonder who are we inflicting this pain on?
I mean, they can try to spin it like we're inflicting the pain on Vladimir Putin.
I assure you, no matter what happens throughout all of this, Vladimir Putin will not be dealing with any food shortages.
They talk about the, you know, the pain that we're inflicting on Russian oligarchs, which there might be some.
You know, there might be some Russian oligarch who has, you know, one of his yachts seized and has to make do with only the other two yachts.
That's the type of pain that we're inflicting on oligarchs.
But I guarantee you it won't be food shortages.
However, little old ladies in Russia, they will suffer.
So that's the purpose of these.
We have to make vulnerable people in Russia suffer so that vulnerable people here deal with food shortages.
That's the trade-off.
But you know, it's just, that's just how government works.
You just got to do it.
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You know, I posed this question the other night when I was on Kennedy.
I was talking, the topic of sanctions came up, and I asked, What if you think about something similar?
I think I said on the podcast a couple of weeks ago or a week ago.
I said, if you think about the most vulnerable person you know, whoever it is, maybe some little old lady in your town where you live here in the United States of America, maybe some disabled, unemployed person, whatever, some very vulnerable person in your town.
So, that little old lady, how much do you think she should suffer?
High Time Preference Behavior00:14:29
Should she starve to death?
Should her life be ruined as a punishment for the war in Iraq or any of the other seven wars?
By the way, wars that were much bloodier than this war in Ukraine has been.
Although I suppose give it time, but how much should she suffer for that?
Is that reasonable to think she should starve for that?
That she should deal with severe food shortages, or is that insane?
Is that insane because she's just a little old lady and she had nothing to do with the war in Iraq?
She wasn't, you know, she wasn't making the calls that Dick Cheney and George W. Bush were.
She's just some little old lady.
So, that's what, according to the president, let's be plain about this.
That's what we're talking about here: destroying the lives of vulnerable people in Russia at the expense of destroying the lives of vulnerable people in the United States of America and Europe.
Pretty unbelievable to just hear the president say that how sick the mindset of people in government is will never cease to impress me.
However, aside from that, I'm going to throw out the notion.
I'm not even saying that this is exactly correct, but it's something to think about.
Perhaps we could think about the possibility that this isn't actually about the sanctions and that the sanctions aren't actually what's going to lead to food shortages in the United States of America.
Perhaps this is becoming the fallman.
Now, I'm not saying they have no effect, but maybe there's something much greater at work here.
Maybe the COVID policies over the last two years have something to do with this.
You know, maybe the idea that you could shut down an entire economy and just print trillions of dollars and hand out direct checks, maybe that was unsustainable for an economy.
But maybe that's not the whole story either.
Maybe this is something much, much bigger and much more fundamental to the modern American economy.
Now, as I talk about these things, keep in mind, I'm not an expert.
I'm not a professional economist.
I'm just a guy.
I'm just a comedian who happens to be right about everything.
It's the burden that I bear.
We all have our burdens.
Okay.
But I want to talk about a few ideas that are kind of central to Austrian economics and how they relate to the modern American economy.
All right.
So the first concept is something you may have heard me mention in the past, but it's known as time preference.
And time preference is essentially just like the concept of deferring gratification, right?
So this is the idea that you will put off gratification in the immediate moment for later gratification.
And you get more of it if you put it off.
And as a lot of Austrian economists have really explained and broken down, time preference is essentially the entire process of civilization.
So the time preference basically just means we have a preference for things right now.
We would rather have what we want right now than have to wait for it.
That's part of the human condition, but there are different degrees.
And the higher your time preference is, the more you want things right now.
And the lower your time preference is, the more you're willing to put them off and wait for it in the future.
And if you think about this, this is kind of all of how civilization happens: that people are willing to work right now for a payoff in the future.
If we didn't have that, if we all had enormously high time preference, we'd still be in the stone age, right?
You'd still just be living to hunt for what you can eat right now, right?
Because you're not putting off.
So just like a real life example of something like this would be like, maybe you, I don't know, maybe you like playing video games because video games are fun, but you only have enough money for a PlayStation 4.
So right now you could go buy a PlayStation 4 or you can wait a month and then buy a PlayStation 5, right?
Because you'll save a little bit more money.
So if you have low time preference, you might wait a month and go buy a PlayStation 5.
So the advantage of having high time preference is you'd get a PlayStation 4 right now.
You can have some fun immediately.
Tonight, it'll be set up and you'll be playing.
However, if you're willing to put that off, even though you want to be playing right now, but you're willing to sacrifice that, well, then in a month, you get a PlayStation 5, which is better, I assume.
And so you'll have more fun in a month, right?
Fairly simple concept, but this is everything around you.
And also, this is something just like on a personal level, where people who you know who are successful, they all have low time preferences.
That's part of being successful, that people are willing to work very hard towards some goal in the future.
Now, I would submit to you that one of the major problems in the American economy is rampant high time preference.
And a lot of this exists because of government policies.
But if you think about the idea of consuming in the present at the expense of the future, that describes almost every inch of the American economy, almost every inch of it.
And every policy that we have is set up to encourage that and reward that, right?
So for example, debt is a very good example of this, right?
Debt is very high time preference behavior or incurring a lot of debt is high time preference behavior.
If you imagine, think that, let's say you're broke and you have $5,000 worth of bills that are coming in at the end of the month, just to think of a number.
So you're going to owe $5,000 at the end of the month.
You don't have any of it.
Well, that's going to suck.
That's going to be painful.
Whatever.
You know, your car might get taken from you and your whatever.
Things are going to be really bad.
And now, let's say you have the option to open up a $20,000 credit card, a credit card with a $20,000 limit.
And then you go, oh, there you go.
You're set.
Now you don't have to worry about that $5,000 at the end of the month, right?
That is a high time preference attitude.
So you're going to, now you don't have to worry about this short-term pain.
But of course, I think we could all see what the problem here is, right?
Well, geez, I mean, you can't pay this $5,000 at the end of the month.
You got $20,000 here, but that's only four months.
And then at the end of those four months, you're going to owe $25,000.
So that's not good.
And if you can't pay the $5,000 now, you're really not going to be able to pay the $25,000 in a couple months.
So, or a few months.
So you're essentially avoiding a little bit of pain right now for a lot of pain in the future.
And I don't know if you've noticed, but debt kind of has a very central role in the American economy.
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All right.
The other thing that I want to talk about is money printing/slash artificially low interest rates and the boom bust cycle.
So Austrian economists, starting with Ludwig von Mises, and then it was continued by the work on this was continued by F.A. Hayek, who won a Nobel Prize for this, or his work on how the boom bust cycle works.
And I think basically every normal person knows that there are these booms and busts in the economy.
And no one really has a great explanation besides the Austrians for why this is.
Now, I'm not saying there wouldn't be a reason why, say, one sector might be really hot and then kind of cool down.
That kind of makes sense.
But why is it that the entire economy goes in these cycles where it's white hot and then it crashes?
That's not like it's white hot and then it slows down.
It's white hot and then it crashes.
Think of the housing market from 2005 to 2008, you know, and how this takes the entire economy down with it.
And basically what Ludwig von Mises figured out was what's going on here has to do with interest rates, which are essentially the price of money.
Okay.
And interest rates are, so interest rates meaning more or less like how much money you pay to get money, how much interest you pay.
If you borrow money, what's the interest that you pay on that money?
Now that's a price.
That's the price of money.
And this is a very important price for businessmen and for other people as well, but particularly for businessmen.
This is a very important, a very important piece of information.
So in the same way that, you know, if you, let's say, you go to the store and bananas are like crazy expensive.
Bananas have spiked.
You know, it's like 50 bucks for a thing of bananas now.
Well, what's the natural response to that for most people would be to like cut back on bananas.
Bananas are a little bit too expensive right now.
It doesn't really, the amount of nutrients I get from bananas is not really worth 50 bucks for five bananas.
So I'm not going to buy, I'm going to eat more apples or I'll eat something else.
You know, that's kind of what ends up happening.
People adjust their behavior based on the information that prices give them.
And so, and this is, and whatever the reason might be, I mean, I don't know, but like, let's say for whatever reason, bananas became way harder and more expensive to pick.
So that's why they cost so much more.
It's all of a sudden, it's really dangerous to pick bananas.
So you got to pay people a lot more if you want them to go pick bananas for you.
So that's why the price would go up.
It's information.
It's letting you know, hey, this is a lot harder to get.
There's much less, there's less of a supply of it.
This is one of the laws of supply and demand, right?
That if there's less of a supply and the same amount of demand, that the price is going to go up.
So the same thing exists with money.
And if you could imagine that in a free market situation, in a free market economy with 100% reserve rates, without this crazy fractional reserve banking, if there was a lot of, let's say, people were producing a lot.
You had a really strong economy and everybody's producing a lot.
So everyone's getting paid a lot more.
And because we're producing so much, if we have a lot of goods out in the economy, again, that rule of supply and demand, what's going to happen to prices?
They're going to be falling because there's much more supply.
So we're producing a whole bunch of stuff.
The costs of everything are falling and therefore people have more money left over.
And maybe they save a lot of that money.
Now, if they save a lot of that money, what's going to happen to the interest rates?
Well, the interest rates are going to go down because there's more of a supply of money.
So there's a lot of money to be loaned out.
And so now it's like, hey, look, this is a signal to businessmen in the same way bananas being expensive is a signal to the consumer.
It's a signal that like, look, there's a lot of production going on in the economy and there's a lot of savings.
So this is the time right now to invest, to start something and invest for the future.
Again, this would be low time preference behavior.
However, if you live in the situation where we live, where we have had insanely low interest rates for a very long time, but it's not due to market forces, this is very different.
And when, so what you have is you have the interest rates driven down by Federal Reserve policies, basically a lot of money printing.
Money printing, again, is also a very high time preference behavior.
The idea that we'll print money now, you know, deal with the pain of all of this, and we'll deal, you know, or cover up the pain of all of this, I should say, and we'll deal with the pain later.
So just want to like kind of start there.
I'll get back to the business cycle stuff in a second.
But everything that's been going on in everything that's been going on in the American economy has all been about kicking the can down the road.
You could think about the debt.
You can think about the money printing.
The Mipod Vape Review00:02:45
I mean, look, even think about the stuff over the last two years with COVID.
I mean, what is that really?
It's like, oh, well, no one's working and no one's producing anything.
So what should we do?
Oh, man, this is really going to suck.
We're going to feel a lot of pain.
Okay, so we'll send direct checks out to everybody so we don't feel the pain right now.
But people still weren't producing for that whole period of time during the lockdown.
So that pain's going to be felt, but we'd rather feel it in a little bit.
The opposite of what a healthy, you know, mindset is, which is like I said, let's feel a little bit of pain right now so that we can do, we can feel less of it in the future.
And that is the entire process of civilization.
Let's work all is the grasshopper and the ant, right?
Isn't that the story?
Let's work all summer long, even though we could just relax and enjoy this.
Let's work all summer long so that we don't starve in the winter.
That's the process of civilization.
That's the healthy process of growing an economy and also just being a responsible human being.
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Boom, Crash, and Interest Rates00:13:37
So back to the business cycle theory stuff.
The idea that Mises basically proposed, which he's 100% correct about, is that the reason why the economies, why the economies have these boom bust periods where the entire economy booms, seemingly this kind of like miraculous but unstable boom, and then there's this huge crash, is that when you have artificially low interest rates, artificially low,
not interest rates that are low because there's been so much production and because there's been so much savings, but just because of, you know, fractional reserve banking or in our case, fractional reserve banking mixed with Fed money printing, or I know money printing, by the way, is just kind of like, that's what we say.
A lot of it's not printed these days.
It's just kind of, you know, zeros put into a computer, but in effect, money printing.
When you have that, what you have is that this is, this sends the wrong signal to a whole bunch of businessmen.
And so, um, in the same way that we were talking about before, where these prices are signals, the signal.
So, there, let's say you have interest rates like, you know, I mean, the Fed fund rate was like 0% through most of Obama's administration.
Then it went back down to 0% after all of the COVID stuff happens.
But let's just say, if you want to go borrow money, it's very cheap.
Say it's like 2%, just for the sake of argument, for a loan that a businessman wants to take out to start some new enterprise to expand his business.
Okay.
There are many projects that would make sense at 2% that would not make sense if the interest you owed back was 10%, right?
Because that businessman is probably like, well, I can start this project.
I can expand my business and I'll make whatever percentage off of it.
And it's profitable at 2% interest, but it's not profitable at 10%, right?
So there's a whole lot of business ventures that they would start that they wouldn't have started if the interest rates accurately reflected what was going on.
Like if there were market prices that were letting you know, like, hey, Americans have like no savings.
You ever see those numbers where, you know, they'll talk about how many Americans have like $1,000 put away in case of an emergency.
And it's like a shockingly low percentage of Americans.
Right.
You shouldn't have low interest rates in a situation like that.
Okay.
This is not the time that you should be sending this signal.
But because the Federal Reserve comes in and interferes, they fix the prices and they send this completely wrong signal.
So it leads to all of this creation of projects.
But the problem is that they're acting as if this is the time to expand your business.
Now, you could see where if everyone had a ton of money and savings and everyone was doing really good and the economy was producing so much and, oh my God, there's all this like production going on.
There'd be these real goods out there.
Okay, this does make sense.
You should expand your business now.
People got money to spend.
Except you're expanding your business and people don't have money to spend.
You're doing it when you shouldn't be.
And you're only doing it because artificially the Federal Reserve has made this profitable at this time when it normally wouldn't be.
So the example, there's a lot of different examples that people have used.
I know Tom Woods used this example of the boom bust where he's at the analogy rather than example.
Where he said, you know, imagine like you're just living off energy drinks.
You're like, I'm not going to eat food and I'm not going to sleep.
I'm just going to chug energy drinks.
Now, that like hour one, hour two, that guy's economy might look great.
It's like, what are you talking about?
He's doing better than anybody else.
This guy's bouncing off the walls.
You know, that might even work through the rest of the day or something like that.
But we all know what's got to come.
And it's not just like, oh, he's got to go from bouncing off the walls to not bouncing off the walls anymore.
He's got to go from bouncing off the walls to crashing, to crashing and burning.
You know, think about like being drunk and then the hangover.
It's not like you just go from being drunk to not being drunk anymore.
You go from being drunk to being way worse than you would have been not drunk.
And so that's kind of the idea.
Now, the analogy that Ludwig von Mises used was he said, picture a master builder who's building some giant development.
And he's been told essentially by the interest rates that he has enough bricks to finish this building, but he doesn't.
He has 20% less than the bricks that he needs to finish this project.
So in the beginning of the building, the economy looks white hot.
Oh, look, there's this huge structure going up.
Look at all these people who he hired to work on that.
They have all these good jobs.
Everything looks great.
But when he gets to the end, not only is he not able, not only does it not go as well as possible, but you realize the whole thing was for nothing.
And all of those people you hired and all of the labor and all of the time and resources and money went towards something that produced nothing.
So this is where you have this seeming boom and then this huge crash.
The huge crash comes down at the end.
Just something to think about.
Now, as it relates to the American economy, we have basically essentially been in this problem.
And this is since 2008, since the last time we had a big crash.
Our response to that was record low, artificially low interest rates and record high government spending.
Our answer to what do you do when you've been doing cocaine all night and you're starting to crash was do more cocaine.
That was our response.
More and more and more.
And we're getting to a point where the crash is inevitable.
Now, I'm just going to throw this out there as something to think about.
So what the Austrian school, what the Austrian business cycle says is that when exactly does this crash come?
Well, this crash comes when interest rates go up.
Once interest rates go up, the entire illusion is broken.
And essentially, that's when the master builder gets told you had 20% less bricks than you thought you had.
And you realize the whole thing has been a waste.
This is, you know, this is what happened with the crash of 2008.
Interest rates ticked back up and then everything fell apart, right?
So if you can think in, you know, if you think about in the economy that we had in, and again, you can understand where this is how the switches flipped, right?
This is where the switches flip from everything's great to everything's terrible.
It's not like everything's great.
Hey, things are cooling off a little bit.
Okay, we're going to go in for a nice smooth landing now.
It's everything's great.
Everything's terrible.
2006, everything's great.
2008, worst economy in 100 years.
You know, it's a drastic change in what the official narrative is.
And you could kind of think, I mean, obviously there's the COVID stuff and there's other stuff related, but you could kind of think of people in 2019 talking about how we had the most, the greatest economy ever.
Donald Trump just bragging about all the numbers.
Look at the stock market and the unemployment and all this.
Yeah.
Okay.
So into in the, you know, if you think about the years between 2006, say, and 2008, and what changed there?
Well, look, you have these like, say, adjustable rate mortgages, right?
And okay, people are making their monthly payments.
Maybe they're a little overextended, but I mean, you know, if you take into the, you know, the value of your house keeps going up by 10% or more every year, yeah, you could live with that.
And then maybe you got a HELOC, a home equity line of credit, right?
So you can take out the money from the value of your house and then you can live on that.
So that's fucking cool.
And you got an adjustable rate mortgage, but right now interest rates are low.
So you're making your monthly payments until interest rates aren't low anymore.
And now how about a double whammy?
Interest rates aren't low anymore and the value of your house goes down.
So now you can't take out money from your HELOC.
You can't take it and you can't make your monthly rent payments.
So now you foreclose on the house.
It's like everything went from feeling great to terrible all at once.
So, this is what the Austrian business cycle teaches us: that it's when the interest rates go up, that's when the whole thing falls apart.
Okay.
Now, interest rates can go up for a couple of reasons.
The Fed could lose control of interest rates and not be able to keep them down anymore, or the Fed can see that writing on the wall and decide to raise them themselves.
There's a number of factors that go into that, but this is just the basic.
If you want to learn more about this stuff, there's a whole bunch of great resources out there from professional economist Bob Murphy.
He's talked about this a lot, Tom Woods, Gene Epstein, or you can go right to the sources of like Mises, Hayek, Rothbard, all those guys, and lots of others.
Again, I'm just a comedian who's right about everything.
So, don't, you know, I shouldn't be your final stop on this if you're interested in it.
But when the interest rates go up, that's when the party's over.
And that's when the whole thing comes crashing down.
And you realize that not only, it's like, not only do you realize the party has to end, you realize the whole party was bullshit to begin with.
There was no party.
You were building a structure that you could never finish.
And all of these people, when you were bragging about how they all had good jobs, yeah, but they were working on nonsense.
It's all a big fat illusion.
So, knowing that, knowing that we are in the phase of being drunk, exercising extremely high time preference, sacrificing savings and future wealth for present consumption, and that we're in the middle of this chaos, and that you have the president of the United States telling you that there's going to be food shortages in the United States of America in the year 2022.
Something that I think you should keep in mind is that the Federal Reserve just raised interest rates last week.
Last week, they just announced they're raising interest rates by a quarter of a point and targeting 2% by the end of the year.
So, I would suggest that maybe this isn't just about the sanctions with Russia.
Maybe this isn't just about the COVID policies.
Maybe this is about something much, much bigger and much, much worse.
I'll say this: I think I'm not predicting that the absolute worst will happen, but I would advise people to prepare for it.
I would say you should take it very seriously when the president of the United States predicts food shortages in your country.
I'd say that's something worth thinking about.
And I would also say that this type of stuff is something that we need as many people possibly as possibly can to wake up about.
That we have to, if we're going to have a future, we have to figure out a way to live in a system where we're not essentially spending our children's inheritance on present consumption.
And there's things that you can do in your own life to try your best to live that way.
But right now, if I were you, I'd start thinking about like really being in as secure a place as you can be.
I also think it's really important that we kind of ring the alarm and introduce as many people to these ideas and wake as many people up to what's actually going on.
Don't forget about that first step.
That's a pretty big one, too.
Now, I could maybe I'm guilty here of forcing all of my kind of like theoretical, you know, economic views on the current situation.
But I think there's something to all this.
And I also just, I think it's really interesting and fascinating to think about all that stuff that Austrian economics teaches us.
But there's something big going on here.
And this is why they're talking about food shortages.
And this is why they're talking about, you know, a central bank-backed digital currency.
It's not because of sanctions on Vladimir Putin.
And it's not even because of the wheat production in Russia.
Something much, much bigger than all of that is going on.
It's certainly at least part of it.
So there's my rant for today.
Thank you guys for listening.
And we'll be back with a brand new episode very soon.