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Feb. 21, 2009 - Freedomain Radio - Stefan Molyneux
28:27
1284 True News 21: What To Do About the Coming Depression (audio to a video)

The root causes and only solution for what we all face.

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Good day, everybody.
I hope you're doing well. It's Stefan Molyneux from Free Domain Radio.
This is The Coming Depression and What to Do About It.
This is the True News series.
I hope that you will have a look at some of the other True News series, as well as at my website, freedomainradio.com, for commercial-free, entirely free podcasts and videos and books.
So... This is the death throes of the existing system, whether we like it or not.
This we can all clearly and fully understand.
If you don't have a sense of impending doom with regard to the existing system, really look down, grab your wrist, and see if you feel any movement, because if you do, then you should feel some stress or anxiety, or perhaps relief, in my case, about the death throes of the existing system.
We all know that the existing system doesn't work.
In fact, it does quite the opposite of working, and that more of the same Will not work.
This idea of fiscal stimulus, of inflating the currency, of artificially pushing down the interest rates of public works, of massive injections of capital and liquidity into a failing system doesn't work.
It didn't work when the Roman emperors poured copper into the gold coins and shaved off the edges.
It didn't work in the Middle Ages.
It didn't work in the Enlightenment.
It didn't work in the Nineteenth century, it didn't work in the Great Depression, it didn't work in the 1970s under stagflation, it didn't work in England, it didn't work in America, it didn't work in Japan, it didn't work anywhere that it's ever been tried throughout thousands of years of history and hundreds and hundreds of countries.
More of the same is not going to work well.
And when I say work, I'm talking about something very specific.
It works very well For those who are pilfering your wallets and your bank accounts with the invisible fingertips of inflation and future debt.
But it just doesn't work for you and it doesn't work for me because we are not exactly face down sniffing the tiles on the floors of the corridors of power.
So it's not working and it's time for us to think and to move beyond idiotic non-explanations like Ooh, it's greed.
The current financial crisis on greed is like blaming gravity for a plane crash.
Gravity is always present.
Why did the plane crash now?
Greed is always present.
Why is it changing now?
And let's stop.
I mean, the one thing that we can get out of this current financial worldwide disaster is we can finally let go of believing that we're riding this invisible pink unicorn called democracy.
The statistics seem to be very clear that over 95% of constituent or voter communications with senators and congressmen were anti-bailout and yet the bailout passed.
And why? Well, because those politicians who voted for the bailout received 54% more money in donations from banks and securities firms, right?
So, when congressmen can buy and sell, the first thing to be bought and sold are?
Well, you know the rest of that one.
So, this is a kleptocracy.
This is a corporate fascistic kleptocracy.
It has nothing to do with democracy and certainly, as I will make the case here, nothing to do with the free market.
I think the other thing that occurs to anybody who's willing to, you know, squint open their eye one little crack is that the leaders have no clue What they're doing.
Again, other than stealing from you, they have no clue what they're doing.
What was the original bailout money going to be used for?
What was essential that we do immediately or face imminent collapse?
Well, it was going to be used to buy up toxic assets, bad mortgages, and so on.
And then the bailout money, the bailout bill was passed late last year.
And, oh yes, then it was going to be used for buying up stocks.
In banks, no, no, no, wait!
We're not going to do that. We're going to use it to prop up consumer credit.
And they have no idea.
It's complete spin-the-wheel nonsense.
It's like, what crap do I have to feed you today to keep stealing your money?
They don't have any idea.
Barack Obama was criticizing the bailout bill, and now, of course, more of the same.
More bailouts, more intervention, more debt, more public works, more Keynesianism.
Which, of course, we'll get into a little bit later.
They've tried in Japan since the 1990s, early 1990s, and now they are entering their 18th year of recession.
So there is a very instructive lesson for us from the land of the rising sun and the falling economy.
When you hear economically literate people talk about bailouts and government stimulus and so on, all they're doing is bribe money.
It's just bribe money, right?
The system is collapsing, as it did in Russia in the 80s.
And as the system is collapsing, the feeding frenzy begins, right?
As the door to the treasure chamber comes down, everybody just grabs whatever they can, stuffs it in whatever orifice is handy, and sprints.
Maybe not even reaching back to grab their leather hat.
We don't know. But this is because the system is collapsing.
They'll invent whatever excuses they need in order to continue to steal as much as possible before it all comes crashing down.
It's sort of like the end of Terminator 2 when he's in the vat.
Ah! Making all these faces trying to escape.
This is what they're doing. They're just making sure that they have enough to retire on as the system comes down around everyone's ears.
But hearing educated people talk about stimulus packages, it's like hearing the Surgeon General saying, well, the important thing to do is to bring back leeching in order to balance medieval humours.
It's ridiculous.
And what about the economists?
Well, in November 2008, John Galbraith, who is a very famous economist, claimed that maybe 10 or 12 of the country's 15,000 professional economists saw the crisis coming.
10 or 12 out of 15,000 professional economists.
What can you say?
What could you conceivably say?
Well, of course, these economists are all statists and Keynesians to one degree or another who may give the artitular nod to the free market but basically have their head up the asses of the state to the point where they're only breathing fumes.
This is not true, of course, of the Austrian school, which, in my strong opinion, has a powerful and noble tradition of predicting, anticipating, and explaining these kinds of boom-bust cycles all the way back since the early 1920s, and if you want to go to further descriptions back, you can go to John Stuart Mill, And Adam Smith and other of the free market economists who knew that two things are required to cause a boom-bust cycle, and they're both related.
One is to artificially push down the interest rates, and the other is to pump lots of fiat money into the economy.
To compare these two theories.
This is not a hard theory to understand.
I mean, I've got podcasts on it.
You can go to freedomainradio.com forward slash search.
There's economics feeds you can pick up, or you can go to mises.org, look for this kind of stuff.
It takes about 20 minutes, maybe half an hour, to familiarize yourself with the theory.
It's a lot easier than...
The theory of relativity, yet it's a lot easier.
It's somewhat easier than a theory of evolution.
I mean, to compare, right?
This is not so ridiculous as to why this remains completely obscure to just about everyone.
Darwin's theory took about 70, maybe 75 years from, you know, rough inception to the, let's say, the Scopes Monkey trial.
About 75 years to gain some pretty common coinage in the world, and this basic economic theory that artificially low interest rates and state-controlled fiat currency is responsible for a boom-bust is completely unknown, has been floating around in various forms for at least a couple of hundred years,
really refined in the last 80 years, and a Nobel Prize was awarded in the 70s, I think, to Hayek for explaining this with reference to Mises theory, von Mises theory.
Watching economics experts This is what it looks like when you have half a brain when it comes to economics, and you watch these suited-ass clowns on TV talking about that the way to solve the problem of excessive borrowing is excessive borrowing.
Imagine that Barack Obama or some science expert comes on TV and he says, well, you see, God put dinosaur bones deep in the ground and misprinted them with carbon dating in order to test our faith because, you see, the world is only 6,000 years old, And unicorns bring the rain.
That's exactly what it looks like.
It's just a completely bizarre, superstitious mishmash of destructive and predatory lies.
So, you have to stop listening to people who tell you, That the problem is the free market.
Free market simply means private property, no violence, like no initiation of force.
That's all the free market is, private property and no theft, no stabbing, no assaulting, no raping, no killing, right?
Private property and the non-initiation of force.
That's kindergarten philosophy, people.
This is not something that is overtly complicated.
It does not require you to become an expert in Kantian ethical theory.
All it says is exactly what is said in kindergarten.
Your stuff is your stuff, and don't hit people.
Don't hit the other kids. This is all it's about.
And people who say, well, private property and non-aggression is the source of this catastrophe, it's completely ridiculous.
It's exactly like if I came up to you and said, a guy who's beheaded died because the human body is poorly designed.
It makes as much sense as that.
There is almost no free market in this macroeconomic sphere, right?
In the sphere of capital, like large capital, state financing, state intervention, state regulation, the SEC, all the regulatory agencies that float over, Fannie Mae, Freddie Mac.
These government agencies, I mean, were both totally minor players in the mortgage market in the 90s.
By the end of 2008, Fannie Mae and Freddie Mac, both government agencies, had their hand or their fingers in half of all mortgages and three-quarters of all new mortgages.
Mortgages are a government...
Agency, for the most part these days, and of course it's going to go to hell in a handbasket because the government is force, the government is violence, the government is monopoly, and as we learned in kindergarten, hitting people and taking their stuff is not a good way of doing things.
It's no good in the government and it's no good on the playground.
Housing foreclosures came about statistically not because of subprime mortgages but because of variable rate mortgages.
The government controls the interest rates and Alan Greenspan is out there telling everyone, oh yeah, pick up on these variable rate interests because, I don't know, I want to beat up the ghost of Ayn Rand or something.
Credit rating agencies, which gave the AAA rating to these mortgage-backed toxic securities.
They're all government agencies, regulated, controlled, monopolized by the government.
And how many high-up civil servants want to go against explicit government policies to get their asses kicked out of Dodge?
Well, of course, right? This is all just a big collusion, shell game, lie, counterfeit nonsense that we are.
And it's going through its death throes.
And for that, I think we should do an Irish jig.
And I would, but I'm not currently cupped.
It is, fundamentally and essentially, of course, it is the Federal Reserve that is to blame for the boom-bust cycle, this government creator and monopolizer of fiat currency.
Created in 1913, Americans were forced at gunpoint to hand over all their gold in 1933.
The US went off the gold standard in the 70s, any remaining gold standard.
So it's all complete nonsense, right?
I mean, it's just a bunch of monopoly money that is pretend money, there's nothing real behind it.
It is the ultimate power that the government has.
It is more powerful than the military, it's more powerful than the police, it's more powerful than the prison systems, because it is the root of paying for all of those things.
If you had the ability to type whatever you wanted into your bank account, you would be a confident asshole too, like our state representatives.
So basically what happened was after 9-11 and for an entire year, when the mortgage rate was pushed down for an entire year, it was at about 1%.
Now, I'm not going to get into a lot of detail about this because you can look at it.
And also I would recommend a book by Tom Woods called Meltdown.
It's a good explanation of this.
But the interest rate balances production across time.
So when the interest rate is low in a free market, the reason an interest rate would be low is because lots of people are saving and relatively few are borrowing, that ratio.
If there are fewer borrowers and more savers, then the price of borrowing money goes down, supply and demand.
And so if more people are saving, what they're doing is deferring consumption.
Into the future. And so, the market sends signals that says, well, interest rates are low, which means you can take on capital projects that will take a long time to complete, right?
Like building malls or building factories or, you know, not stuff that goes directly to the consumer, but stuff that's in the capital infrastructure of the economy.
You can invest in upgrading your farm machinery and all that.
Why? The interest rates will remain low and they will only slowly come up as people stop saving and start spending.
Of course, people will start spending as a result of the investment in the capital infrastructure which results in more at lower goods.
This occurred in the 19th century in America where it was something like you had to pay $65 to buy what $100 bought you a century earlier in sort of the early part of the 20th century because prices decline, right?
When you invest in your capital machinery, it's to produce more goods for the same money or less money for each good, and so prices come down, people buy more.
And then when people buy more, they stop saving and they start spending.
And that means that interest rates go up, which signals people to switch their investments into the production of consumer goods rather than investments into capital goods.
So it balances out beautifully in the free market.
I mean, this is the wonderful excellence of the free market.
But, of course, when governments around the world, as they do, set interest rates according to political pressures and the need to pillage the helpless poor and middle classes, Then all of this stuff gets completely out of whack.
People are just basically blindfolded, injected with toad-based peyote directly to the brain and told to plan their economic futures.
We're herded into the stock market through tax incentives, and it all just becomes complete nonsense.
So, when interest rates are artificially pushed down, everybody starts investing in capital projects, right?
Which is housing and big infrastructure stuff.
And what happens is then interest rates have to bounce back up artificially, as they do.
And then what happens is these capital projects don't get completed, and this money is all wasted and lost and so on, right?
Mises came up with this excellent metaphor, I think it's a good metaphor, where He said, well, a guy who is going to build a house, let's say he has X number of bricks, and he can't buy more, let's just say.
Now, let's say he thinks he has twice the number of bricks that he actually does.
So he starts building this house, and it's got wings and extensions and extra floors and so on, right?
And the sooner he figures out that he doesn't have enough bricks to complete his house, he can actually adapt and adjust everything.
His plan so that he completes the house with the right number of bricks.
If he runs out of bricks, it can't get any more.
Well, the house is only half finished.
Well, he's got to trash the whole house.
It's unlivable. This is what happens when you get wrong signals in a free market from interest rates, right?
Interest rates are low. It's supposed to be no consumer demand, so let's invest in lowering the prices of things with capital.
Investments, and that's, of course, if it's artificially pushed down and people don't know about it, then they get the wrong signals.
They invest in capital projects, which they then can't complete because it's not deferred spending that's driving down the interest rates.
It is a government artificiality.
What else happened? Well, between 2000 and 2007, more dollars were magically created by the Fed than for the rest of American history combined, and that is pretty substantial.
So, even this supposed crisis, there were four major components to the economic crisis that were endlessly jabbered about in the talking head mosh pit, known as the mainstream media.
October 2008, three economists from the Federal Reserve Bank in Minneapolis showed that these four major scares were false.
There was no decline in business and consumer loans.
Interbank lending was, as they called it, healthy.
Statistically, non-financial businesses showed no sharp decline in their ability to secure short-term loans, or called commercial paper, or sometimes it's going to help you cover payroll and so on.
Because 80% of business borrowing takes place outside the banking system, and I can directly attest to that.
When I co-founded a company, we went around to people to ask for the initial capital of $80,000.
We didn't go to the banking system because with investors, you don't have to pay them back if it fails.
With the bank, you do, right?
So, the fact that banks are tight on credit doesn't mean that business activity has to slow.
Japan, as I mentioned earlier, tried the same crappy nonsense in the 1980s after an inflationary credit expansion where the price of everything went nuts, particularly real estate.
When the real estate prices keep going up, you keep drawing more speculators in who eventually get dinged badly.
When this all crashed from 1989 to 1992, the Japanese stock market dropped from 40,000 to 15,000.
Real estate prices dropped 80% in Japan from 1991 to 1998.
During the 1980s, the Japanese governments launched 10 fiscal stimulus packages costing over 100 trillion yen.
Japanese governments did all the stuff that is being talked about in our crumbling and nonsensical system.
What did they do? They pushed their interest rates to zero.
They propped up prices and bad debts and bad businesses.
They borrowed, they spent, they increased the money supply.
They did all these public works and bailouts and all of the other crap that goes on here.
And what was the result?
Well, Japan hit an economic depression.
For, well, over a decade.
And now it's in its 18th year.
An entire career can be wiped out by this kind of stuff.
Some kid who's 25 is going to face 20 years of depression slash recession because of this stuff.
So let's just talk briefly about how to understand this stuff.
And I hope that you've been sent this by someone who knows more.
Maybe you don't know as much, and we'll just talk about it very briefly.
If all the fish in the ocean start to die, we don't say, gosh, I guess the sharks must be hungrier at the moment.
That would not be a sensible explanation, right?
No, when all the fish in the ocean start to die, we look at the one element that they have in common, which is, of course, the water.
When the economy as a whole starts to die, we don't say, gosh, profit seekers must be much greedier at the moment.
No, because they've always been greedy.
We look at the one element that the economy has in common, which is...
The money, the money supply, which is controlled, completely controlled, monopolized by the government and is functionally and elementally a counterfeit scheme.
Which benefits, right? So when the government pumps more money into the economy, those closest, like think of it as a stone falling into a lake, those closest to the stone get the biggest waves and everyone else basically just gets troughs, right?
So when you drop all of this money, then those who are closest to the supply of that money, right, the banks, the financial institutions and so on, they make out like bandits because They get all the extra money before the inflation hits, but the poor, the middle class, those furthest from the financial centers of power, end up with these terrible losses.
It is an absolutely predatory rape the poor scheme that we have at the moment, completely stone utterly evil, which of course is why it is collapsing, because evil is no worky, morally or practically.
So, there is no such thing as a free market in any way, shape or form when the government controls the money supply.
There is no such thing as the free market when the government controls the money supply.
There's nothing magical about money or banking or financial institutions.
They're just goods and services like everything else.
When money is socialized, nothing is private.
There is no such thing as private property when the money supply is socialized because the government can steal the money in your bank account or the money that's under your mattress through inflation, right?
Through just printing more money and devaluing everything you have.
There is no such thing as private property when the money supply is socialized.
When the money supply is communist, which is what Karl Marx said was the government has to control central banking money supply.
When the money supply is communist, there is no free market.
There may be some vestiges as we see, but there is no free market when the government controls the money supply.
Calling this fascistic state corporatism and control of the money supply some sort of free market because of a vestige of private property is like saying the Soviet Union was completely capitalist because a man could own a pair of shoes.
It's not accurate at all.
So the only question that remains, really, I mean, I know that this is a sketch, but you can dig into this stuff in more detail, and you really should.
I mean, this is the most important thing that is facing us as people, as citizens, as parents, is what kind of world are we going to leave for our children?
There is nothing more important than for you to familiarize yourself with this kind of stuff and to take a stand about it with people in your life and help them to understand, encourage, and get mad, right?
If you're not mad, you're asleep at the moment.
And to take back the power that we have of our own money, stop being herded around like a bunch of drugged cats with a shovel in this ghastly, horrible, predatory system.
Because the question you really have to ask yourself, and it's really the most fundamental question about this, this whole mess, is how bad does it have to get before you're going to wake up to The reality that statism is violence and violence doesn't work.
Violence is evil and impractical.
That's a synonym, really.
How bad does it have to get? If you've ever known an addict, you know the most fundamental wish of everyone around the addict.
And that fundamental wish is, look, you're either going to die or you're going to change.
Can you change before you die?
Can you change before you hit rock bottom?
That's the wish of every addict.
And we have a society, an intellectual class, a political class, and a corporate class, an upper class, that is addicted to violence and the predation of controlling the money supply.
This addiction, which we as a society either are exercising or seem to be completely blind to, the only people who are more responsible than the Fed are all the academics and intellectuals who talk about everything but the Fed.
How bad does it have to get before we're going to stand up and say, no, we need a change?
Violence is not going to solve social problems.
Violence is a bad way to organize everything, but most of all it is the worst way to organize the currency, which is the lifeblood of any society and every human being.
How bad does it have to get?
Everybody prays to an addict, and I pray, to use a metaphor, for this system.
Please change before you hit bottom.
And please, if you're watching this or listening to this, help people to understand.
Help people to change.
Open your eyes before we hit rock bottom.
Because hitting bottom is so often when addiction is involved.
The bottom is the bottom of a coffin.
And we don't want to go there.
This may sound like hyperbole, but every society that requires fundamental change can do so without hitting rock bottom.
But that part of change is up to you.
It's not up to the states. It's not going to come from the media.
It's not going to come from the states. It's not going to come from academics.
It's not going to come from intellectuals.
It's not going to come from anyone except you and your conversations with what matters, which is not a discussion of the Fed, but a discussion of virtue and nonviolence.
That is up to you. So the real question, the only question, the fundamental question, Will you see reason before it is too late for you, for your society, for your children, for your family, for your friends?
Will you see reason? Will you see virtue?
Will you see truth before it is too late?
After the collapse of the virtually identical fascistic republic of the Roman Empire, the West fell into the Dark Ages, which lasted close on a thousand years.
After centuries of bloody tribal nationalistic religious wars, the separation of church and state was achieved.
Wouldn't it have been nice to have done so before?
Quote, unbelievers and heretics and blasphemers hung from the trees like rotten fruit.
After the slaughter of hundreds of thousands, legal slavery at least was somewhat abolished in the United States.
Wouldn't it have been nice to have done that through reason rather than bloodshed?
The failure to see the causes of the Great Depression, which was state currency manipulation, not just in the US but around the world, was a key factor in triggering and starting the Second World War.
Without the Depression, you would never have gotten Hitler because the middle class in Germany wouldn't have been wiped out.
When the system collapses, people go to militarism.
That is inevitable.
If people don't reason, think, communicate, and learn.
Before communism was discredited as a theory, as a practice, 70 million people in the USSR, hundreds of millions of people around the world, died like rabid dogs.
Ten million starved to death under Mao in China.
Ten million starved to death under Stalin.
The bodies are piled so high they obscure the sun from communism.
Did we have to have that?
No, of course not. If people think they don't have to learn through blood.
The blood either runs to your brains or out of your veins.
There's really no other choice.
You do have The chance to see reason and to speak about virtue and voluntarism and our opposition to violence, which we all have in our private lives and mysteriously vanishes when it comes to the public sphere, the sphere of violence, the sphere of the disorganized crime of statism.
You have the chance to see reason before hitting bottom, and I'm telling you, you don't want to see the world from that place, from bottom.
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