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June 26, 2006 - Freedomain Radio - Stefan Molyneux
30:07
299 The Crystal Ball Collapse
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Good afternoon, people!
Hope you're doing well and stuff.
How are you? Hope you're having a most excellent evening, slash night, slash morning, slash mid-afternoon, slash tea break.
And that you are ready for another round.
Pulling numbers from my ass.
No, just kidding. They actually come from my armpit.
But let's just simply talk about the question which I was talking about this morning.
This is podcast 2999999.
And tomorrow morning is podcast 300, which should be interesting, let's say.
And this is, gosh, what is it, 26th of June 2006?
20 to 6 in the afternoon slash early evening.
Well, so sometimes people say to me, Steph, how can your head be so shiny?
And I say, actually that happened...
A friend of mine was up visiting me.
He's a professor from George Mason University.
He runs a very popular influential blog called MarginalRevolution.com.
You might want to go and check it out.
So he was up visiting this weekend and his kids were sort of climbing on my lap.
His seven-year-old was climbing on my lap and Of course, for those who haven't seen my headshot, I'm a little of the scalpy persuasion on the top of the head.
And it's not that I've lost hair.
I've gained skin.
And I had a baseball cap on, right?
Because I don't want to get tomato head.
It was sunny up here. So he pulls my baseball cap off.
He's crawling. He pulls my baseball cap off.
Literally, you can see his pupils...
And he holds up his hands as if to shield himself from an interrogation.
He's like, oh, bright, bright!
Because I guess the sun was bouncing straight off my head, so his parents, of course, were quite embarrassed and I thought it was very funny, so...
Bright, bright!
It's because I think so much.
Don't worry, when you get older, you'll understand.
So... So a lot of people ask me, when I say, ooh, I think 10 to 15 years for the United States to eat its own tail, they say to me, well, where are you getting that from?
Well, I've actually been to the future.
And I'm back.
And I'd just like you to know that Schwarzenegger is sent back from the future by President Schwarzenegger to make sure that Governor Schwarzenegger can get an amendment to the Constitution so that Governor Schwarzenegger, though foreign-born, can become President Schwarzenegger.
And it's a movie plot that I'm working on with Governor Schwarzenegger.
So, the question is, why do I come up with this idea?
Well, because...
Every system is dynamic.
One of the amazing things about human choice is that every single system is dynamic.
So, I'll give you an example of that.
People say, oh, you're going to, what are we going to do when we run out of oil?
I sort of wake up one day and there's just no oil anywhere to be found.
Well, what people don't realize, of course, most people who aren't economics geeks and philosophy geeks like me, they don't quite recognize that this is an absolute impossibility.
There is absolutely zero possible chance in the universe in any way, shape, or form that human beings will ever even remotely run out of oil.
No chance whatsoever, ever conceivably, never going to happen, promise you, I would bet a bazillion dollars on it and my kidney.
So, how do I know this?
Well, it's simple, right?
And I'm borrowing this metaphor from a writer who wrote a book whose name escapes me, and so does the name of his book, but at least I'm not pulling it out of my ass.
If you had a room full of pistachio nuts, and I say to you, you love pistachio nuts, I say, you can come and eat all the pistachio nuts that you want, but you can't take out any of the shells.
You can't take any of the shells out of the room.
Well, you're going to be overjoyed.
You're going to come and you're going to crack your pistachio nuts and you're going to be feasting away.
You're going to get so much fiber that you'll be burned up for a week.
And then you'll be back and you'll continue to eat more pistachio nuts.
So, for the first couple of weeks, it's a big room, right?
The first couple of weeks, things are going to go swimmingly, and you're going to be eating all the pistachio nuts that you want, and you're going to be happy, and then you'll notice, of course, as you continue to root around the increasing number of shells and the decreasing number of pistachio nuts themselves per se, ipsofactum, then...
You are going to sort of go to yourself, well, this is kind of a lot of work now.
As I'm running low on pistachio nuts, it's getting to be more and more difficult to find the nuts in amongst all the husks of the shells that I've discarded.
And so you are never, ever going to run out of pistachios.
Absolutely impossible. Because what's going to happen is, when there's only, let's just say, you are absolutely indefatigable...
This is the rap version.
It's the EP. If you are absolutely indefatigable in your pursuit of the pistachio nuts, then you may end up in a situation where the room is like 99.9% husk, and in there, buried meters down, is a couple of pistachios left.
Well, at this point, it's just going to be easier to switch to something else, right?
So, the idea of running out of oil is just economic illiteracy.
It's absolutely impossible for human beings to run out of oil.
When oil becomes so difficult to find and so scarce a resource, then human beings will have a soft landing in their transition to some other fuel source or a complete abandonment of fuel and living in the Fight Club fantasy of drying caribou skins on office towers.
And so there's just no chance.
No chance. You don't wake up one morning and you're just out.
So think about this pistachio example.
You don't sort of say, okay, it was Tuesday and I just said, that's it, I'm done.
What happens is it begins to get a little more difficult and then you don't want to go back as often.
You go back a little less and you go back and then what happens is you go back and you find like...
20 pistachios in 20 seconds, and you're like, hey, this isn't so bad, and then the next time you come back, you find like 5 pistachios in an hour, and then you're like, oh, well, that must have been a blip, and you come back, and, you know, like it's a highly spiky landing, if you think about it from a graph standpoint, your disaffection with the pistachio room.
So, there's no possibility that human beings are ever, ever going to run out of pistachios, because the system is dynamic.
As it becomes harder and harder to figure out oil, to figure out how to find it, and people are very smart about figuring out how to find oil.
So human beings can find oil in places where a generation or two ago it would be impossible.
They can find oil and they can drill oil out that's now directly on the far side of a pile of shale or a huge rock formation.
They have computers that can sniff their way through oil veins to find the source.
There have been incredible advances in nonlinear drilling.
I mean, I remember reading an article about this years ago.
The amount of oil that we can get out of the ground is increasing.
And yes, of course it's finite, of course it's finite, but so is air, I guess.
It's not recycling quite as well as oil is.
But yes, it's finite, but it doesn't matter, because what's going to happen is oil's going to get a little harder to find, a little harder to find, and the price is going to go up.
And so, of course, as soon as the price starts to drift up of oil, assuming no monopoly or no EPA that prevents you from doing anything alternative...
Then you are going to see people begin to look for options to use less gasoline.
They're going to try and find substitutes.
They're going to ride their bikes more.
They're going to walk. They're going to live closer together.
Whatever. Any number of things are going to work out.
And then the reduced demand will bring the price back down and the price will inch back up.
And the reduced demand will bring it down again as people find more options.
And I'm sure you get the basic idea.
But human beings simply don't run out of resources.
It's completely unfathomable that it would ever be the case that you just go full tilt boogie using a billion barrels a day until you just blink run out of it.
I mean, it's not how life works.
It's not how human beings work.
As stuff gets harder to find, people find more alternatives.
So, looking at this is a very important thing to understand.
Looking at these sorts of things is pretty essential if you want to learn about how to think in human terms, in economics and human terms, motivational terms, free will terms, and so on.
But you have to understand that every system is dynamic.
So, when people say, well, in 30 years or 40 years, the government's going to run out of money, well, that's sort of similar.
To you hearing, well, you own this stock, right?
Let's just say that you were clever like me and you bought Nortel stock, and you find out that Nortel, let's just say you hear it on the QT, you hear it on the grapevine, that Nortel is going to miss its quarterly earnings by like 50%, right?
So you know for a fact that the Nortel stock is going to go down in value pretty significantly, probably by at least 50% in a couple of days, like in five days.
So you know, as a holder of Nortel stock, that the stock price is going to go down by 50% in five days.
So what are you going to do? Are you just going to sit there and not take any action and then just say in five days, oh, my stock price has gone down by half.
What a bummer. I guess I'll try and sell now.
Well, of course not. Once you know that the value of what you've got is going to go down catastrophically, or even to a small degree, or even not go up as much as you want, you're going to dump it, right?
Right? So as soon as somebody says, as soon as it becomes generally understood in the marketplace that the Nortel stock is going to go down in five days, the Nortel stock crashes immediately.
And it really is quite amazing how little time it takes.
The market generally absorbs new information like this in the span of like 20 seconds.
So the system is not static.
Now, everyone in the world who's had any exposure to government finances knows that this particular issue of a...
Like, just take the U.S. again.
I'm so sorry to sound like I'm picking on the United States, but it's a very useful system to pick on because it's got such strong elements of retained freedom or remaining freedom.
And yet it's on an absolutely catastrophic course.
And so it's drama, baby.
It's drama. That's what we're aiming for here in Freedom Aid Radio.
Nothing but drama.
So, for the United States, everybody knows that it's on this particular course that the population is getting older.
What's that great line from The Doors?
The old get old and the young get stronger.
Might take all week, but it might take longer.
They've got the guns, but we've got the numbers.
Gonna win, yeah, we're taking over.
Come on! It's a great song.
Get Together one more time.
Great song. Trading your hours for a handful of dimes.
Gonna make it, baby, in our prime.
Great song. Roadhouse Blues.
Also, listen to that, too. If you haven't heard it, fantastic blues riff at the beginning.
Anyway, let's try and stay on target.
Stay on target.
So, everyone knows that the United States is heading towards this perfect storm of fiscal problems in that they're going to have an aging population and They've got this massive expansion of the military machine.
They've got the war on terror.
They've got the war in Iraq.
They've got the problems with the underfunded social security, $47 billion in liabilities overall.
And you're going to have a declining tax base.
You've got fewer residents who are reproducing.
And you have all of these problems sort of coming together.
Pretty much at the same time, and that same time is going to be like 20, 30, 40 years from now.
At some point, right? Nobody gives it much beyond 40 years, I would say, if you just look at the sort of line graph.
Now, this could change, and I'll sort of get back to this in a little bit.
This could change if somebody comes up with one of these Atlas Shrugged 20th century power company, or whatever the heck it was called, motor company, 20th century motor company inventions to suck static electricity out of the air and convert it to real electricity.
If someone comes up with some massive innovation in terms of wealth generation, like teleporting, right?
Yeah, okay, the government will get another generation, maybe another half generation.
But right now, all other things being equal, it's not going to happen.
And the likelihood of it happening goes down considerably as a society gets more fascistic and mercantilistic and the government gets more and more control of the economy.
The chance of this kind of massive entrepreneurial genius flooding the landscape goes down considerably, right?
That's why there's not a huge amount of innovation in Soviet Russia, right?
So the odds go down every year or every day, almost.
So let's just say that it's 40 years.
It's 40 years, right?
The interesting thing is that a lot of people work in these kinds of spheres until they're 65 or 70.
Now, you don't want to be around if you're some public, powerful politician, official, whoever.
You don't want to be around, after having worked your whole life to get your hands on the public purse, you don't want to be around while it's collapsing.
So you want to be out of that system before it's collapsing, because once it collapses, A, you'll be left holding the bag, and B, there just won't be that much money to pillage anymore from the public purse.
So what's the point of being around?
The whole point is to be there is to screw the taxpayer, and if the taxpayer manages to get away, or there's nothing left to screw in the taxpayer, and the pockets are empty, then you don't really want to be around in that situation, because you're not there to, you know...
Bring flowers and hold hands and whisper sweet nothings.
You know, you want the IRS to hold them down while you unbuckle your belt and have you go.
So you have to sort of start work backwards from this, just logically.
Let's just say that people don't want to make a career in politics when they're aware that the system is going to collapse in five years.
Let's make it easier, one year.
So if you knew for sure, as an insider, that the government finances were going to collapse in a year, would you run for office?
Well, of course not. You'll start to see all of this stuff happening.
There's going to be lots of forward warning.
Don't worry. The ruling classes are going to make their inner knowledge pretty evident, right?
They'll have trouble getting people to run for office.
And, of course, they're having trouble getting people to run for office now anyway.
Maybe it's a little further ahead than even I think.
Who knows, right? We'll see as we go forward.
So, if you know that the government's going to collapse in a year, you're going to make a lot of changes, right?
It's going to be like...
And everybody knows.
Everybody on the inside knows that the government's going to collapse in a year.
Well, you're going to have to try and get as much money as humanly possible, right?
This is the situation where everybody knows that this Nortel stock is going to drop 50% in five days when the earnings come out.
Well, immediately they drop catastrophically, right?
Everybody's scrambling to sell because they know it.
And the opposite is going to occur.
I mean, the same principle, but the opposite movement of money.
When people realize in the government that the system can't last, then they're just going to scramble for the money.
They're going to grab anything that they possibly can.
They're going to give themselves massive loans.
They're going to transfer government property to their own names using some nefarious techniques.
They're going to do unbelievable things I mean, if everybody who was in positions of power within the government woke up tomorrow and realized that the government finances could not hold out another year, they would collapse in about three days, or maybe even one day.
Because everybody would go, holy crap!
I worked for 20 years to get to the position of pillaging the public purse, and if you count going to snoring my way through a political science grad to program and getting involved in the Rhodes Scholarship Program and all this kind of crap.
I mean, I didn't get here just to bang interns.
I also wanted to be able to, you know, get myself into the multi-millionaire status through bribery, preferential contracts, general state corruption of all kinds.
And if I don't get to do that...
I was hoping to do that over like 20 or 30 years, right?
So you're some politician, you've just made it into office, and you've sacrificed a hell of a lot with the goal or the idea that you are going to have 20 or 30 years of having a leisurely pillage at the public purse.
But now, after working in grad school and undergrad and internships and all this kind of stuff, you now have gotten to a position of power and you don't get to lazily hang off the jugular of the taxpayer for the next 20 or 30 years, but you've got to get everything done that you wanted to get in 20 or 30 years in terms of pillaging.
You've got to get it done in one year.
And everyone around you has the same belief.
Everyone around you has the same knowledge or understanding.
And so you're just going to grab everything you possibly, possibly can.
The amount of corruption is going to escalate sharply once people on the inside know that this is going to be the situation.
And so if you say, well, we have 40 years, well, people who are getting into their career, yeah, they still feel, well, maybe I've got another 20 years of pillaging to go ahead.
But that's on the very outside.
That's on the very outside.
But it sure as heck isn't going to be 40 years, I'll tell you that much, right?
So let's say it is going to be 40 years.
Well, I would say that around 10 to 15 years, people are going to start to increase their pillaging of the public purse.
If it's not already happening, I'd be surprised, but I could be wrong.
So people are going to start to, like, so automatically, 40 gets reduced to 25 to 30, or just automatically.
Now, as soon as it's reduced to 25 to 30, it's going to get reduced even further, because everybody understands this.
So basically it's like saying it's not going to be five days that your Nortel stock is going to halve in value.
It's not going to be five days in the future.
Instead, it's going to be ten days in the future.
Well, you might not storm to your phone in the same way that if it was five days, but you're still going to sell, right?
It's still going to be a steeper curve than if this knowledge did not exist, if everyone just thought that Nortel stock was going to do its random Brownian motion walk through ups and downs.
So, it's for sure going to accelerate.
Even if the time frame is twice as long, it's still going to accelerate it.
And it's still, sure as heck, not going to be 10 days until everyone sells their stock.
So, if it's 5 days, everyone's going to phone now or this afternoon.
If it's going to be 10 days, maybe people will phone tonight or tomorrow.
And maybe some people will say, you know, I'll wait or whatever.
But it doesn't matter how long you give a particular system.
It's going to be a lot shorter, and whatever number you come up with, it's going to be short.
I know this sounds like it's a self-referencing loop, right?
Like it's iterative.
But that's sort of a basic fact.
So if you say it's going to be 40 years, then people are going to start pillaging at 25 years, maybe 30.
But then everyone's going to be aware that people are going to start pillaging at 25 or 30 years, so it's probably going to be 20 to 25 years.
That's sort of my guess, right?
Now, I don't think myself that it's going to be 40 years.
I sort of put it at around 30 years that the US government, and this could be true for a number of other governments as well, and surely if you have any idea about this, let me know.
I think at the outside, it's 30 years.
Now, you bring that back 10 to 15 years already, right?
People have got to have a long leisurely go at the public purse, and you're already back, right?
Quite a bit. So you're already back to 15 to 20 years, and so everyone is aware that it's 15 to 20 years, so why not...
Some time off, another five years, because everyone is aware that people are going to start pillaging 50 to 20 years out, so they're going to move it back a couple of years just to be ahead of the queue.
So I say 10 to 15 years will be when the Great Run is going to occur.
Now, if I'm right, then it's going to be even sooner, right?
So this is the challenge, right?
If I'm right about the 10 to 15 years, then it's going to be 5 to 10 years, but I don't, I mean, that's hard to prove.
It's just, it's going to be sometime before when everybody thinks it is going to be before, because the system is self-adjusting, and as soon as the money looks like it's starting to run out, there'll be a run on it, right?
Yeah, like the old in the 1930s, right?
If there was a run on the banks, you didn't sort of say, oh, I'll go tomorrow, right?
Everybody lining up 12 deep and fistfights and bank managers slithering out the back with bankrolls and bags of money and so on.
So it's not just randomly making this thing up.
It's 10 to 15 years.
And part of the idea came from a fellow I know who's Russian, and I wish this book had been translated.
I can't read Russian, of course, but I wish this book had been translated.
Unfortunately, it hasn't been.
But he said that this, of course, was the case, that the people who are on the inside, and I mentioned this before, the people who are on the inside in the Kremlin, They knew that this was all coming down, this was all come crashing down, and of course as soon as they realized that they weren't going to be able to last their whole careers, and they weren't going to be able to invite new people to come in, right, to part of the politicians' power is getting new people in under their wing as their sort of mentor.
And so on. So they couldn't get people to come in because it became general knowledge.
People were getting out of the government with as much as they could.
They recognized it wasn't going to last.
And this is why the Russian collapse was so sudden and shocking, right?
A lot of people had this idea that, yeah, it was in trouble, but it'll last.
But as soon as people realized that the crash is going to occur within their lifetimes, within their lifetimes, Because they know, right?
What they're going to do is they're going to grab their money out, convert it to gold or whatever, buy property and own it free and clear and maybe take up jujitsu and stock beans.
I don't know. But as soon as they realize that this financial catastrophe is going to occur within their lifetime, Then the shit hits the fan very, very quickly, my friends.
It is not something that people hang around waiting to see how it's going to shake out.
And they have a lot more knowledge about this on the inside than we ever are going to have on the outside.
This is one of the things that makes it so desperately unfair.
Like, insider trading is not allowed in the free market.
Martha Stewart makes a phone call and goes to jail, but the insider trading that goes on in the government, because nobody knows what the government finances are like except a few people on the inside, that kind of insider trading, which is much more deleterious to everyone else in the market than a couple of stocks trading hands, those people know what's going on. which is much more deleterious to everyone else in the Now, I have a general theory, and I don't have any proof for it.
I don't have any proof for the other one other than the example of Russia that I know of, which certainly is a precedence and general self-interest, which you can usually rely on to a fairly high degree.
I actually do have a belief that we're actually in this process already.
I think that the prescription drug program, the war in Iraq, the expansion in defense spending, the war on terror, I think that all of this is occurring because people on the inside know that it can't last, and the pillaging is simply going to get worse and worse and worse, right?
Republican or Democrat, it really doesn't matter.
The fact is that people are aware, I believe, because if you just look at the amount of ridiculous spending that has gone on over the past couple of years, I mean, just absolutely lunatic levels were you...
Then it seems to me very clear that people know what's going on on the inside and they're absolutely pillaging the Baghdad-Smithsonian as we speak.
They're completely pillaging, and that means that as the pile of remaining cash or credit gets smaller and smaller, then people are simply going to grab faster and faster.
There'll be these bloody and bruised political battles and so on.
And I know people are saying, they wrote to me on this LeRocqueville article, they say, well, the government's just going to print money and so on.
But that's not really the option that it used to be.
I mean, everybody's really aware now of the whole printing money thing, although the capital markets are very much aware of the whole printing money thing so that the moment the U.S. begins printing money, they're going to not be able to sell treasury bonds, right?
You can't sell treasury bonds if you're printing money because there's less and less behind it all the time.
So, they're going to be unable to raise money, and they'll print some money, they'll try and get away with it to some degree, and the other reason that I think this is going on at the moment is that the Fed has stopped publishing the amount of money in circulation, which is not a good sign, It certainly means that they're going to try this whole situation around inflating the money supply and paying off debts through that.
But all that does is accelerates the crash.
All it does is it accelerates the crash.
So it's a transfer of wealth from general society to those who get the counterfeit bills.
I mean, all fiat money is counterfeit money, but in this case, given that there's a generally enforced counterfeit, those who get the counterfeit money up front will make out like bandits and everyone else kind of gets it in the shorts.
So printing money will buy some short-term relief, but it will accelerate the crash for sure.
The markets will figure that out very quickly.
Everyone's going to switch to the euro.
Everyone's going to switch to the yen.
And they're just going to flee the U.S. currency, which will cause further collapses.
There's going to be a run on Treasury bills.
People are going to want payments back.
And people are going to bring hoovering money and assets out of the United States.
But so what? I could care less.
In fact, I welcome it. I wish this boil would lance itself sooner rather than later.
Yeah, there's a risk involved.
Yeah, we might get Hitler. Yeah, we might get fascism, for sure.
But we're getting those if we don't.
Like, if nothing happens, we're getting those anyway, right?
I mean, that for sure is happening anyway.
But at least if there's something that is dramatic and something that is sudden, then at least we have the opportunity to wipe out the political class, right?
I mean, they'll flee, right?
All the public servants, all the people dependent on state money, they'll have to find something else to do.
And what's left standing? Well, so who cares, right?
The people are still there. The capital equipment is still there.
The resources are still there.
The relationships are still there.
The contracts are still there.
I mean, everything that really makes an economy tick is all still there.
So this is the chance that we have when this thing goes to the crapper, right?
When we start to stuff this state pillaging into the wood chipper, this is when we have the chance for freedom, right?
This is when we have the chance to really make a go of it, and this is why I'm putting out so many podcasts.
I think it's sooner rather than later.
I mean, God knows they could be listening to these in a hundred years and say, what an idiot.
Well, maybe not just for this, but hey, if they're listening to me a hundred years from now, Hey!
Hey, future people! Thanks!
Did that whole teleportation thing ever work out?
And is President Schwarzenegger still alive?
Is he like a perfectly quaffed brain in a tank ruling from his Austrian castle?
Who knows? But I'm certainly willing to go out on a limb and say that what is mathematically impossible to sustain will not be sustained.
I mean, I... I have no problem going out on a limb and saying that debt which cannot be repaid off, cannot be paid back, will not be paid back, and debts which are neither paid back nor managed result in bankruptcy.
I don't consider that to be a particularly out-there kind of statement.
The matter is, of course, one of timing.
And whatever number you come up with based on your mathematical intersection between requirements and spending and income and outlays and so on is not going to be accurate.
I guarantee that. For sure.
It's not going to be accurate.
Because systems are self-defining, right?
Systems react to news.
And as soon as you come up with an intersection...
People are going to work backwards from that in the realm of decades, both to pillage the public purse and to stock up their own gold reserves so that when the system does go down, they won't be absolutely caught eating their own shorts.
So that's sort of my suggestion about how to approach this problem.
I'm certainly more than happy to listen to other scenarios.
I don't consider this to be a doomsday scenario.
This is kind of like you want the fever to break, right?
You want this mad fever of state spending and power to break.
And right now, all it's doing is continuing to expand, right?
Like some horrible state leachy kind of pimple.
And you want this thing to bust.
I mean, I certainly do. I think that what will come out of it will be a whole lot freer and better everybody will be much, much better off, except for a couple of the politicos.
And frankly, I'm not going to lose too, too, too, too much sleep over them.
Thank you so much for making it to Podcast 299.
I guess I will talk to you in the morning.
Thank you so much for listening. Please come by and donate some money so that I too can survive the coming crash.
And I appreciate the people who've signed up for FeedBurner, a couple of those today.
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