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Jan. 16, 2010 - Freedomain Radio - Stefan Molyneux
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1558 Freedomain Radio Interviews Peter Schiff
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Hello, everybody. This is Stefan Molyneux from Freedom Main Radio.
I have on the line the esteemed Peter Schiff, who I'm absolutely sure to most of my listeners will need no introduction whatsoever.
Thanks so much for taking the time this morning, Peter.
I really do appreciate it. And I have a couple of questions to pepper you with, if that's all right.
Fire away. All right.
So we hear repeatedly in the mainstream media that there's, you know, green shoots are coming up and the recovery is underway.
And it would seem to anybody well-versed in the Austrian School of Economics that the green shoots are actually just statist weeds that are going to take even more effort to pull up later.
Could you tell a little bit about how GDP and government unemployment statistics and the Dow Jones Industrial Average are manipulated into thinking, into helping people to think that some sort of recovery is underway?
Sure. Remember, when we're measuring GDP, we're only looking at half the balance sheet.
We're looking at the money that we're spending.
And the reason that the U.S. economy is in so much trouble is we spent too much money.
We spent a lot of money that we should have been saving, and we consumed too much.
We should have been producing more.
And so the economy became very unbalanced, and we had a collapse.
But rather than allowing market forces to restructure the economy and put it on a sounder footing, what the politicians have done is to try to encourage even more borrowing and spending to create the illusion that things are getting better while they're actually getting worse.
And that's what's happened.
The country has gone much deeper into debt in the last year in order to keep spending money that we don't have, and the debt has just gone off the chart.
But in the short run, if we're simply measuring how much we spend, how much the government is spending, how much individuals are spending, and we get a boost in those numbers, and we try to pretend that that means the economy is getting better, but we ignore the massive amounts of debt that have been accumulated in order to finance that spending, And we have to think of, well, what happens next?
Now the economy is even more crippled with debt than it was before, once the spending binge is over, and now we have a greater economic imbalance to deal with.
We have, you know, we've had another drink of government alcohol, so the hangover is going to be worse.
Yeah, it's sort of like a depressed person saying, I'm happier because I'm on cocaine.
We just know that there's no way that that can last in the long run.
And there's this weird situation, as you've pointed out, I think, where because of the amount of government debt, the Fed really has a vested interest in keeping the interest rates effectively at zero, which means that banks are borrowing from the Fed at zero and lending to the government at a few points, which is scarcely the most challenging business model.
Everybody's in the same boat right now with the Fed, I mean with the government.
The government is loaded up with debt, but of course individuals are loaded up with debt, corporations are loaded up with debt, particularly Wall Street firms, the banks that have been bailed out, they can ill afford an increase in interest rates.
Torrent of cheap money that's responsible for their earnings.
And the only reason they're able to repay the TARP money is because of these artificially low rates.
You take that away and these banks are going to collapse all over again.
So the Fed knows this, but of course the bind that this creates is you further distort the economy by having zero interest rates.
First of all, you punish people for saving money.
Nobody can save when there's no return.
But if you take the savings away, you take the economic growth away because there's no credit.
There's no capital investment without savings.
So in order to have savings, we need to have a positive rate of interest.
But unfortunately, we're so levered up with debt that the debtors can't afford to make payments of a reasonable amount of interest, including the federal government with its enormous debt financed short term.
So the government keeps interest rates artificially low.
That is further undermining our economy and is setting the stage for the next economic crisis, which is going to be a currency crisis.
When the dollar collapses because rates are too low and we're flooding the world with dollars instead of flooding the world with manufactured products, the dollar plunges.
And now interest rates go much higher than otherwise would have been the case had the Fed not intervened.
Consumer prices go much higher.
And now unemployed Americans are confronted with the worst of all worlds because now prices are going up and interest rates are going up and they still don't have a job.
And even those people who have jobs are going to find that their paycheck doesn't go nearly as far as it used to because of higher interest rates and all the inflation created by the government trying to reflate the bubble.
Right. Do you think that the currency crisis is going to have some coincidence with the looming commercial real estate boom, which is off the radar, I think, for the majority of Main Street?
Yeah, I mean, there are a lot of shoes to drop still in the real estate market, both in commercial.
I think there is another major problem coming in the FHA. You know, FHA has been guaranteeing a substantial number of mortgages, I think better than 25% of mortgages.
They've been doing it with 3% down payments.
They've been doing it with artificially low interest rates and with seller kickbacks to the buyers.
This is all a sham.
What FHA is doing is helping people who can't afford homes overpay for homes, moving people who should be renting into homeowners.
Many of these people are going to default, and you're going to see a bankruptcy in the FHA. They're going to need a government bailout.
So that crisis is coming.
The losses at Fannie and Freddie are just getting started.
They're going to get worse. And when you couple that with massive losses with commercial real estate, You know, this problem is getting worse, not better.
Yeah, and I think it's fair to say that the government is running out of the old tricks.
You know, they have a couple of tricks up their sleeve.
Manipulation of interest rates being one, of course, the printing of money being the other.
And I think given the number of foreign creditors to the United States, they're just not going to have those options because they're going to be aware of the currency problem of inflation and how that is going to affect their returns.
I think that the signals like they're not printing the money supply anymore and particularly the shift from is it Treasury to T-bills in terms of funding indicates that I think on the inside of the gates there is a real sense that this can't last much longer.
It's obvious you know you know where there's smoke there's fire and you hear what's happening and see what's happening abroad the world is getting wise to this scam And they are looking for a graceful way out.
Once they realize that there is no graceful way out, I think they will go cold turkey.
They have to stop throwing good money after bad.
They have to stop subsidizing the growth of the American government.
Because the more money that sovereigns like Japan or China loan to the American government, The worse the problem gets, because loaning money to our government undermines our economy further by growing government, not the private sector.
And the bigger the government gets, the less likely it is that we can pay back the money that we've already borrowed.
And so when foreigners realize that we're not good for this money, That global gravy train is going to be over and then we're going to have a real crisis on our hands here in America because the government's ability to pull off these feats of magic will be gone.
The only reason that we can get away with low interest rates and printing money is because foreign governments subsidize it to the detriment of their own citizens.
It's a giant transfer of wealth and purchasing power from the rest of the world to Americans.
But in the short run, that does benefit Americans because we get to live beyond our means.
But in the long run, they're not doing us any favors because they're diminishing the long-term productive output of our economy.
And they're making us that much more vulnerable when they finally withdraw that subsidy, which we know is going to happen eventually.
Right. And one of the challenges, and I don't want to oversimplify the Austrian School, but one of the things that seems to be the case is that the Austrian School of Economics It gets rid of this hazy academic layer between what we all understand as sound fiscal practices within our own households or within our own lives and the government.
It's back to the Adam Smith doctrine that the affairs of a great nation are fundamentally economically indistinguishable from that of a household.
One of the great things that Austrian economics does is it says, look, there's no mystery.
You can't borrow your way into wealth and neither can your government.
You can't spend your way into saving and neither can the government.
Do you think that people are starting to get the message and also What is it going to look like, of course, if people stop using the US dollar as an international currency, if they switch to the one or to the euro or something, it's going to cause a huge loss in value for the US dollar.
How is that going to show up in the economics of the everyday for people?
Well, first, your question about economics.
Hopefully one day we won't say Austrian economics.
We'll just say economics.
Because Austrian economics is economics.
Keynesian, you know, that's like saying, you know, Austrian economics is astronomy and Keynesian economics is astrology.
They don't have anything in common.
The Keynesians, it's almost like a religion.
They just somehow believe in some mystical power that exists in the hands of the government.
That somehow, if government borrows money, it can create prosperity.
That if they print money, that it can create purchasing power.
None of it works. If an individual can't do it, we can't do it collectively, just doing it Under the government.
So the principles that apply to families, that apply to everybody.
It applies to the government.
It applies on bigger scale.
So if we can't borrow our way to prosperity in the private sector as individuals, if we can't consume our way to wealth as individuals, we can't do it collectively.
And it's amazing. How many people believe this?
I think a lot of the fantasy has to do with the fact that it is very popular doctrine for politicians who want to get elected.
Because if they can get elected promising more government, then that's an easier way to get people's votes.
So when you can find some economists to validate the natural tendency of politicians to want to spend money to get elected, you know, it becomes very popular.
We have to discredit that.
And let people understand that economics is really just common sense.
And all this nonsense and all these fancy equations that the Keynesians come up with, you know, it doesn't work.
And that's why we're in trouble.
As far as what's going to happen With the dollar, sure, when the world comes to its senses and stops buying dollars, when foreign economies move off of a dollar standard, when the dollar ceases to act as a reserve currency,
when central banks around the world are exiting the dollar, when the dollar is no longer accepted because Americans are going to be forced to pay for their imports with hard currency, which they're going to have to earn We just don't have the capacity right now to do that.
That's going to require a dramatic diminishment in our standard of living.
Prices are going to go up dramatically to price Americans out of the market.
Countries, citizens of other countries, particularly people in China, they're going to see a dramatic increase in their purchasing power and their ability to buy.
And so many of the Chinese products that are currently exported to the United States will simply stay in China and fill the shelves of Chinese stores, and Chinese consumers will be buying them, and Americans are just going to be left alone.
We're going to have paper.
And if the U.S. government doesn't respond to this crisis the right way, by raising interest rates, by cutting government spending, by repealing burdensome regulations and taxes that have undermined our industrial base, if they don't allow for a new industrial revolution in this country, So we can start making for ourselves the products that are no longer supplied to us on credit from the rest of the world.
It is going to be a complete, unmitigated disaster.
We will have runaway inflation, and they'll turn this country into a giant banana republic.
Right. And of course, as the U.S. dollar drops and foreign goods become more expensive and that flows throughout the economy, the natural response of the state, this is going to be price controls, which will again be turning us into some third world country.
Yeah, I have warned about that.
I mean, we've repeated the mistakes of the 1930s, so I'm sure we'll repeat the mistakes of the 1970s.
Politicians and most economists do not understand inflation.
They simply think inflation is rising prices.
And if prices are rising, if they can simply cap that, if they can control prices, they think they can stop inflation.
But you can't.
Rising prices result from inflation.
The inflation is the expansion of the money supply.
So if they keep expanding money supply and control prices, they're not going to stop inflation.
It's going to get worse.
But what happens is Prices don't stop rising.
They just rise on the black market.
What happens is when governments impose price controls, you get shortages in the legal market because nobody will sell the goods.
They no longer are available.
Or if they are available, you have to wait in long lines to get rationed goods.
But what happens is the real price then is in the black market and anybody wishing to purchase goods has to do so illegally and risks fines or prosecution.
And what happens is, you know, you get this culture of crime, you get an increase in crime in general, because many people now are hungry because they can't get food, they're cold because they don't have power or they're hot, whatever it is, and they're upset.
And, you know, they're blaming government and you get a big increase in crime.
And, of course, we don't have the money for the police protection because the local governments are broke.
They can't collect taxes because everybody is unemployed.
They can't pay the police.
So it's a situation that is horrible.
And what happens is, in all this civil unrest and all this panic, you have the federal government promising help, promising that if we just surrender more of our rights, if we just give the government complete and absolute power over the economy, that they'll protect us.
And you fall into this spiral of more government and it leads to totalitarianism.
And, you know, a giant welfare state that condemns the American people to generations of stagnation, of a falling standard of living, of poverty, of crime.
I mean, you know, that's the future if we don't do something and do something soon.
Right. Certainly when the necessities of life become illegal, which is what happens with price controls and combined with significant inflation, you also get the final corruption of the government in terms of the bureaucrats will simply take bribes to allocate resources and that really is the beginning of the end.
Sure, then it becomes, you know, if you want to get food, you need political connections.
It's not about, you know, and that's what happens when the state controls things.
It's not who earns the most.
I mean, who contributes the most to society in terms of productivity, providing goods and services, providing employment.
It's who has the most influence in government, who has the best connections.
But of course, the supply of goods continues to diminish over time because of what this does to the economy.
And of course, ultimately what happens is many people, particularly younger people who have ambition and have drive and who are intelligent, they start to leave the country.
They don't want to stay here.
They want to go to other countries where they can succeed, where they're not vilified and taxed and regulated.
And now the government, now they decide, well, are we going to make it illegal for people to leave?
Are we going to force people to stay here so we can tax them, so we can regulate them?
That's the problems that come.
You get capital controls.
You know, when people want to try to get their money out of the country because they're afraid of what's happening, and the government makes it illegal to do that.
That is the slippery slope that we're on.
And, you know, when they get these price controls, the government vilifies the black marketeers for profiteering.
But, you know, without the people in the black market, there'd be no food.
Because, you know, that is the problem.
The problem isn't the price control.
The problem is that food is not available.
And the fact that people have to, you know, Provided illegally is actually a good thing because without it, there would be no food at all.
Yeah, certainly the black market was the only thing that propped up the communist economies for at least as long as they did.
I thought that recently, Peter, you made a fascinating argument to go a little bit from the macro to the micro about the degree to which the Obama levy or tax upon people who don't buy healthcare insurance is going to have to be a lot higher than the 750 a year that was proposed.
I was wondering if you could talk a little about that.
Yes, sir. Hopefully this whole healthcare monstrosity will not pass now that we had this election in Massachusetts yesterday where we put a Republican in the place of Ted Kennedy's seat and he's the 41st vote that might block healthcare and maybe some of the other incumbent Democrats who are coming up for re-election are going to get nervous.
That they might lose their cushy jobs in Washington, and so they might actually do the right thing and vote this down.
But the idea behind the Obama plan was to try to make it illegal for insurance companies to discriminate based on pre-existing conditions.
Now, that's impossible because insurance is all about discriminating based on pre-existing conditions.
If you can't discriminate based on pre-existing conditions, then you can't have insurance.
It's like, I can't buy my fire insurance when my house is on fire.
If you can do that, then no one would buy fire insurance until their house was on fire, which means the insurance companies wouldn't have any money to pay claims because they wouldn't have collected premiums from all the people whose houses didn't burn down.
So in health insurance, if you tell people that you can wait until you get a really bad disease and then buy health insurance, then no healthy people are going to want the insurance.
Why bother? And so, the minute you say that insurance companies can't discriminate against pre-existing conditions, you have to require everybody to buy insurance.
And the penalty for not buying it has to be high enough so that there's not an incentive to just pay the penalty over the insurance.
And so, if the penalty is only $750 a year, and by paying $750 a year, I can save $5,000 or $10,000 a year on insurance, I'm going to pay the penalty.
So what the government is going to have to do to keep the industry viable is dramatically increase that penalty.
You know, the real reform that we need in health insurance in America is market-based.
We have to ask the question, why is health insurance so expensive in the first place?
Why isn't it getting cheaper?
Why doesn't capitalism work in healthcare the way it works in other areas?
And the reason is because the government won't let it work.
The government has interfered.
The biggest problem with insurance and healthcare is our tax code.
The tax code says That if your employer pays you wages, you've got to pay income taxes on it.
But to the extent that he can give you some of those wages in the form of health insurance, it's tax-free.
So now you have employees wanting their employers to pay for their health care through their insurance.
But that's not what insurance is for.
Insurance is for major catastrophic problems that are unlikely to happen, so that the premiums are low and you're covered in the event of, you know, a million dollar bill because you get cancer.
But you're supposed to pay for routine medical procedures like the flu, like a sprained ankle, you know, like childbirth.
These type of things should be covered out of pocket through savings where individuals shop around and have some incentive to keep prices in check.
And now we have these third-party payers and we've made it so expensive, somebody walks into the doctor for a checkup and now the doctor has three or four people filing insurance forms because nobody pays for anything in cash.
We've made it so inefficient that prices are going through the roof.
And of course there are other things that we can do.
We can allow insurance companies to compete across state lines.
We can allow international competition.
We can stop the government from mandating That insurance companies cover all sorts of things that people don't really want coverage for.
We're forcing people to buy insurance that they don't want and they don't need and that runs up the price.
We need real meaningful malpractice reform and tort reform so that malpractice premiums can come down, so that more doctors don't have to retire because they can't afford to malpractice.
And so so many doctors don't waste so much time and money on unnecessary procedures, not because the patient needs them, but because the lawyers require them so that they don't get sued.
Right.
Right. And also, I think, encouraging age discrimination because, of course, the younger you are when you start buying health insurance, like life insurance, the cheaper it's going to be.
But there's some legislation which prevents discrimination by age, which is great for the older people because they get subsidized healthcare, but it really is a disincentive for the younger people to get on when it's cheaper.
The only way that young people are going to buy insurance is if you make it inexpensive.
And the beauty is it should be inexpensive because young people are not going to get sick.
They're not going to need it.
So the premiums can be low.
The only insurance that somebody who's young needs is a catastrophic plan.
He can have a $5,000 deductible, but he needs coverage in case he gets a brain tumor.
In case something really bad happens.
But you know what? The odds of that happening are very slim.
It's not going to happen to most people.
So insurance can work because they can collect a lot of premiums from people where they're never going to put in a claim.
But if you keep all those young people out of insurance because you drive up the cost, then the only people who want insurance are the people who need it.
And now they can't get it because then it's too expensive.
Right, right. Now, clearly you were born with a magic prognostication hat that I was wondering if you could just put on for a moment, because the doomsday scenarios, which I know nobody likes to hear that there are storm clouds on the horizon, though I think it's completely indisputable empirically that there are.
The way that I see it is that there could be sort of one of two possibilities for the future.
There seems to be when governments get into this kind of hypergrowth and overprinting of money and economic catastrophes that there's kind of like a slow, soft, stagnant Malaise, like the Japanese model for the last 20 years, where they've just never quite gotten the motor revving with their economy, and they're just kind of languishing and nothing's really happening.
And of course, you know, with the demographic time bomb, that will probably change.
But there's another kind of economic disaster that occurs, like Zimbabwe or the Weimar Republic, where the economy doesn't sort of die by hardening of the arteries, but sort of by going through the windshield.
If you had to take a guess, do you think it would be one or the other, or is there a third way that hasn't occurred to me?
Well, first of all, you know, I wasn't born with any kind of special knowledge or foresight.
I think I was born with the same common sense that we're all born with.
The problem is so many other people lost that over the years because they got brainwashed in the universities with Keynesianism and through government propaganda.
And so they've lost that common sense that I've managed to hang on to.
And so I think that's the gift, for me anyway, is I've managed to see clearly and not be caught up in all this nonsense.
But looking forward, I don't think that we're going to repeat the experience of Japan.
I think that Japan has made many of the same mistakes.
But they're making those mistakes in an economy that's fundamentally much sounder than the United States.
And certainly, had the Japanese government not tried to artificially stimulate the economy in the aftermath of the bursting of their stock market and real estate bubbles, had they allowed more banks to fail, had they allowed more businesses to fail, had they allowed a deeper recession In the short run, they would be in much, much better shape today.
But instead, they tried to artificially stimulate the economy with deficit spending and pump priming, and they tried to artificially prop up, keep the US dollar artificially strong and depress the yen so they can keep exporting, and that was the mistake.
But I don't think that we're likely to see that.
I think what we're likely to have is going to be something similar to in Argentina, you know, not as bad as Zimbabwe or Weimar Republic, Germany, I hope, but I think we're going to have much more inflation in the United States because Japan had a domestic manufacturing industry that was sounder.
They had a lot of domestic savings.
They didn't have to borrow their stimulus money from the rest of the world.
They had it. They would have been better off not blowing it But they did.
But we've got to borrow our money from the rest of the world.
That's going to run out.
Meanwhile, we've hollowed out much of our industrial base, and I think that is going to bode very poorly for us.
And looking at how our politicians are inclined at this point to try to fight off the crisis, I think as our economy continues to get worse, we're going to compound the gravity of these mistakes.
We're going to keep reaching for the printing press.
We're going to try to stimulate at all costs.
We're going to try to resist the market forces that are trying to rebalance our economy.
Anytime someone tries to save money, we're going to try to discourage that.
Anytime someone tries to produce, we're going to discourage that.
And we're going to try to borrow and spend our way back to the phony prosperity, and it's going to end in disaster.
Right, and of course the additional overhead that the US government has that Japan didn't is this crazy imperialistic militarism that is just a massive tax gouge.
The other thing that I wanted to point out, and just to see if you agree with it, is that people think that Because of the stimulus package and the loans to the banks that businesses are being prevented from failing, and of course to some degree that's true, but I think what people don't see, and this is always the trick of economics, is to look at what is not shown, right?
So when you spend money to create jobs, it's like woohoo, you know, tons of jobs, but what people don't see is the jobs destroyed.
I think people don't see the degree to which future businesses and existing businesses and jobs are currently and It's always the seen and the unseen and the unintended consequences.
Politicians love to bail out a company because they can specifically point to those jobs that they save at that one company.
But people have to understand that government doesn't have any wealth of its own.
So to the extent that one company is bailed out, the money to do that has to come from someplace.
And what happens is the government redirects capital from businesses that are succeeding to businesses that are failing.
And when they do that, they're propping up an inefficient business, and they're doing it by taxing an efficient one.
And the end result is the economy is less productive and less efficient.
You know, if a business is not profitable, the market needs to put it out of its misery.
Failure is part of capitalism.
Bankruptcy is the way the market says that you're doing something wrong, that you are not combining the factors of production in an effective way to produce a profit.
And so capital that is freed up and made available to other businesses that are doing it right.
But by captivating capital in failed entities, by diverting scarce resources from the broader economy to prop up these failing entities, They're preventing the market from rebalancing and sending capital where it needs to be.
And you look at the fact that so many Americans are unemployed, that so many small businesses can no longer get credit, and the politicians wonder why.
They can't get the credit because it's no longer there because it's been diverted to Wall Street, to investment banks.
And that is why Main Street is suffering and so many other businesses are having problems expanding or are being forced to contract because the resources that they need are being diverted elsewhere.
And of course, the government is borrowing tremendous amounts of money.
So if the government wasn't borrowing that money, that money would have been available for businesses.
Credit is not infinite.
It's limited by the amount of savings.
And if much of that savings is diverted to certain companies that have political connections, or if the government guarantees the deaths of certain individuals, such as people who wanna buy homes, and if the government has borrowed money, that money comes from somewhere.
It's the money that businesses no longer can get.
And the problem is, for the economy, is that businesses would have used that credit to make capital investments, to produce things, to provide employment.
And so we're destroying that.
We're squandering our credit that would have gone to wealth creation and we're using it to finance wealth dissipation.
Right. Now, one of the, I think, most frightening places to be in the modern economy, and I get a lot of communication from my listeners about this, one of the most frightening places to be is to have a good knowledge of economics, particularly, as you say, the actual science of Austrian economics rather than the superstitions of other kinds of economics.
If you have a good knowledge of economics, then you are aware, of course, that paper is not money, paper is not money, paper is not money, and debt is going to cause problems.
But if you don't have a lot of financial resources, then it's almost like you can see the train coming, but you can't get off the track.
So do you have any good tips or investment strategies for people who don't have a lot of money?
I think you mentioned recently, even if you don't smoke, buy cigarettes.
But what are the good ways that people without a lot of money can prepare for what's coming?
Certainly, if you don't have a lot of savings, if you don't have money in the bank, if you don't have a defined benefit pension or a fixed annuity, if you don't have an income stream in dollars, then at least you're not going to watch your life savings wiped out, which is going to happen for a lot of Americans.
Unfortunately, Americans who are retirement age or near retirement age, But for people that have no financial assets, this is still going to be a problem because what's going to be diminished is the real value of their wages.
Americans are going to be taking massive pay cuts in terms of the real value of what they earn in terms of what they can purchase with it.
But certainly what Americans can try to do to the extent that they can You know, manage even a small amount of savings is rather than, you know, putting that money in the bank and watching it evaporate, they can spend the money on things that will not perish,
things that they might need themselves that could be more expensive or in short supply with price controls and rationing, or things that they might be able to barter, things that, you know, as you said, maybe cigarettes if you don't smoke, other people do, or wine, or, you know, Things that people need, razor blades, shaving cream, ordinary things that might be hard to come by, but you can also store food or things of that nature.
People can start a garden in their backyard so they maybe can grow their own food and be able to do things like that.
There are things that people can save.
For a lot of people, Unfortunately, it might mean that they're mobile, that they learn how to speak in other languages, that if their main asset is their labor and their hard work, they don't necessarily have to stay in the United States.
There's an entire world out there where governments are moving in the opposite direction.
And so there is a lot of opportunity.
I'd like to be able to fix the problems in this country so that the best and brightest and hardest working Americans don't leave because we benefited from the opposite flow, you know, a hundred years ago when we were the low cost, the low regulation economy.
Smart, hardworking people from all around the world came here in search of opportunities and left their native countries.
I don't want to see those flows reversed.
I don't want to see this century be the century of emigration.
We need to do things to prevent that.
But your question about what can average people do, first, also they can try to influence the elections if that's possible.
I'm running for the Senate here in Connecticut.
We can try to elect me and people who think like me who understand that government is the source of our problems and that rolling back government is the only solution that will work, that free markets are the only way back to prosperity, that we're not going to get central planning.
That's going to create any kind of economic gain.
The only gains that will be will be for the politicians because they'll gain power and they'll gain influence.
But the average American Is going to suffer.
And certainly, you know, you can come out.
I mean, you know, you can go out and buy silver coins to the extent that you have money.
You know, don't keep dollar bills.
Keep pennies. If you got pennies from before 1981, they're pure copper.
Even the ones that were minted recently, there's ink in there.
You can save nickels.
I'd say pennies and nickels are probably the most effective coins to keep if you're just keeping modern coins.
So keep them in a jar. They're going to have some value.
Who knows? They're going to have a lot more value than paper.
And you mentioned paper is not money.
It's a money substitute. Money is gold.
Money has to have intrinsic value.
Paper has none. What enables paper to work is that it's backed by gold.
It's redeemable into gold.
That's what we had up until 1971.
But when America left the gold standard, we left the money standard.
We substituted real money for just little pieces of paper.
And the problem is politicians can create money at will, out of thin air, to spend as they please to buy their votes.
And the problem is when you do that, money is no longer scarce.
It's abundant. And once it's abundant, it has no value.
Yeah, this is the mad morality of the modern age that if you and I do it, it's counterfeiting, but if the government does it, it's sound fiscal policy.
Now, my listeners will know, and I'm not going to hide this, I'm not a huge fan of political action, but I am a big fan of people doing what they think is best to help free the world until they either make it work or find out that it doesn't.
So with that in mind, I would just like to give you the opportunity for people who are interested in supporting your political activities, and the majority of my listeners are in the United States, if you would like to tell them a little bit more about that and your contact information for that part.
Sure. I mean, what they can do is, first, my website for my campaign is shiftforsenate.com.
And there are two ways that people can help.
One way is with financial support.
You can make a donation on shiftforsenate.com.
The more money, the better. It's going to be an expensive campaign.
I need money to effectively communicate my message to the voters of Connecticut and to convince the Republican establishment that I'm a viable candidate, that I have the means of funding the campaign.
And number two, what you can do is volunteer.
People can volunteer to help.
They can come to Connecticut and work on the ground.
And if they can't do that, people can volunteer from their own living room.
I have a phone bank.
That is on my campaign website.
And if you volunteer, you get access to the phone bank.
And the phone bank has the names and phone numbers of all the registered Republicans in the state of Connecticut.
And I have a small script there.
And you can call them one at a time.
It'll give you a name and phone number.
You call. You tell a voter about Peter Schiff, why they should support me, and then go on to the next caller.
The computer keeps track of everybody who's been called, so nobody Everybody gets called twice until we've gone through the entire database.
So everybody can make a difference.
In the evening, they can call from home.
Most people have plans today where they have unlimited long distance.
So it's completely free.
All it's going to take is some of your time.
But that will work.
I mean, look what happened in Massachusetts with the Senate run, with Brown taking that seat that was Ted Kennedy's for 47 years.
Massachusetts is a more liberal state than Connecticut.
They're kind of similar, but if we can do something like that in Massachusetts, we can do it here.
And I think I'm a far better candidate.
I think Brown is a good guy, but I don't know that he's that different from a typical Republican.
And we really need to change the mix in Washington, because the problems that we have are not simply as a result of Republicans, I mean Democrats.
They're also the result of Republicans who govern like Democrats.
We have people from both parties who believe in bigger government and expanding government.
And we need to really change that mindset in Washington.
And if I go to Washington, believe me, things are going to change.
Nothing is going to be the same when I get there.
And I think that is the best hope that we have, is to send me there to force our politicians to do the right thing.
And if they won't do the right thing, then let's replace them with people who will.
I mean, and that is the amazing thing, really, that the same clowns who created, presided over, and are largely profiting from the current economic disasters are the same clowns surrounding Obama as these sort of economic advisors, which shouldn't be nothing more than hands-off or laissez-faire.
And people like yourself, who have, you know, Great track records in terms of predicting these problems, you know, great theoretical examples and great empirical evidence as to why the theories are true are nowhere to be seen.
And it's just astounding.
It's like the same, you're going to give your car to the same guy who drove it off a cliff three times before, and he's going to say, well, I'm going to take the same path and I'm going to hit the same accelerator, but trust me, this time it's going to be different.
It's just amazing. That is the very frustrating part of this.
You know, they just had congressional hearings To try to figure out why there was a financial crisis.
Yet they didn't invite the people that forecasted it or predicted it in advance.
They invited all the same people who were completely clueless and who were part of the problem.
And, of course, they didn't want to know the real reason.
They are looking for an excuse to expand government.
And it's amazing to me that they can listen to the people like Ben Bernanke, like Tim Geithner, people who have consistently gotten it wrong.
And ignore the people who have consistently gotten it right.
And expect that the people who were wrong so many times in the past are suddenly going to be right now.
And what's even more insane is that they believe that the same exact policies that cause the problem are the ones that are going to solve it.
I mean, it is complete insanity, and something has to be done to stop it.
I mean, we have allowed Wall Street to basically take over Washington, brainwash our politicians through bribes and whatever.
We have gotten them to believe That our economy, the success of our economy, hinges on the profitability of investment bankers.
That the only way that we can survive is if bankers are making huge salaries and huge bonuses, and they have to do that.
We have to allow them to speculate with our money for free, or the whole economy is going to collapse.
The truth of the matter is that propping up Wall Street is bleeding the economy dry.
Main Street is suffering because all this wealth is being transferred to people that create nothing.
They don't produce anything.
All that's happening on Wall Street to generate profits is speculation.
They're buying things on credit.
They're investing in commodities.
They're investing in securities.
They're speculating in bonds and currencies.
None of this is creating any real wealth, but it is enriching the people who are benefiting because they're getting all this money from the government.
That has to end. We have to sever that connection.
And it's giving capitalism a bad name.
People think this is capitalism.
It's not. It's cronyism.
It's corporatism.
It's fascism.
There are a lot of names for it.
But the one thing it's not is capitalism.
Yeah, it's like the last 19 pages about the Shrugs.
Now, I want to be sensitive to your time, but I'm always curious about how people who are original thinkers and who sort of stand on their own two feet intellectually, how it is that they got to their existing positions or what were the influences?
Was there any particular influence that really moved you one way or the other or was it more of a slow accumulation of evidence?
Hopefully I'm not in too much light.
I see the sun is coming into the room now where I'm sitting.
It's a beatific glow.
It really gives you a nice sort of biblical nimbus, which is very nice to see, so that's totally fine.
But, I mean, the real secret to my success, I suppose, is my father, who was an Austrian.
In fact, he didn't even know what Austrian economics was originally.
He discovered it after the fact, and he found a science that corroborated what he thought anyway.
But my father was a very sound thinker, understood economics, understood government.
And so from an early age, my father put me on the right track.
And so that when I went into the world and I heard a lot of the nonsense of the Keynesians in high school and in college, I was able to resist it.
I saw it for what it was.
I have a lot of respect for people who have come to these views without the benefits that I had as an early age.
I didn't have to relearn.
I mean, my father started off opposite.
His father was a big Roosevelt Democrat.
My father was basically a socialist when he was a kid.
And ultimately, it was when he went into the workplace for the first time and started to appreciate all the problems.
That government created.
It's like, you know, it's when you get your first paycheck and you see all the taxes that come out of it is when a lot of the liberals from universities start to appreciate how expensive government is.
And, of course, when you work in a real economy and you have a job or if you run a business, And you really appreciate the barriers that government places in your path.
I could be so much more successful as an entrepreneur right now if it wasn't for government.
I would employ far more people than I do today if it wasn't for government rules and regulations.
My customers would be paying lower fees for my services.
I think I would be a lot more prosperous personally.
The whole economy would benefit if government would just get out of the way.
And you start to appreciate that when you're in the real world.
But, you know, from academia, from government, when you're not in the real world, you know, all of these theories all sound great.
And the people that espouse them can feel good about themselves because they think that they care.
They think that, oh, everything would be better if we just did this or did that.
And none of it works, but that never even dodds on them.
Yeah, I really do believe that.
I mean, I founded and grew a business for about 10 years and found the same excitements and frustrations with the amount of regulations that I faced.
I've never met anybody who's been an entrepreneur who thinks that business is just some sort of blank resource, you know, like a well gushing water out of the earth that is going to survive regardless of the amount of impediments you heap upon it.
The one thing that's really frustrating about the people in Washington is that they do not have the entrepreneurial experience and therefore they think it's just some magic resource that's going to forever spit out money no matter what you pillage.
And, you know, they're wondering where all the jobs are.
You know, they said we need a summit on jobs.
Where do they think jobs come from?
You know, I create jobs.
I have about a hundred employees, but I don't create jobs because I'm a humanitarian.
I create jobs because those employers help me make more money, that my capital is more productive if I combine it with other people's labor.
So jobs come from capital and they come from profit motive.
That's the only reason that they exist.
And so anything the government does to diminish the formation of capital or to make profits harder to achieve diminishes employment opportunities.
And that's exactly what they're doing.
They are destroying our capital.
And so without capital, there's no ability to provide jobs because you need tools for your workers.
And without the ability to make a profit, nobody's going to take the risk of hiring somebody.
No one's going to go through the expense and the aggravation.
And so the more regulations they put on small business, the more they tax us, the fewer jobs we're going to create.
That's just reality.
And the politicians haven't figured this out.
They'd rather vilify the small businessman.
They'd rather tax us because they think we earn too much money.
And they don't realize that those profits are the source of the jobs that are disappearing.
The economic growth comes from profits.
The fact that business generates profits, that's why business grows, because you reinvest your profits.
Most of the businessmen I know, myself included, we spend very little of what we earn.
Most of what we earn goes back into the economy.
We go into growing our business, to becoming more productive, to increase employment.
That's where the money goes.
Why would the government want to inhibit that?
Why would government want to raise taxes to stop that from happening?
And I think that we're close.
You know, it's always hard to tell the sort of zeitgeist of the day, but I think we're close to people beginning to really understand that it is not freedom that is failing, but force, right?
It is not volunteerism and not the free market that is failing, but coercion, because it really is hard to miss.
The degree to which the government is so large and so powerful and so overextended, it's really hard for people to miss that.
And I think that's, you know, with the efforts of people like yourself and to a smaller degree myself, the degree to which we're able to get out there that is not freedom that's failing but force, I think people are starting to see that in a way that is quite powerful.
Yeah, that is the real weapon of the status, of the welfare state, is that the more government intrudes into the free market, the worse the problems become.
And the government is very successful in then blaming those problems on the market, on capitalism, and using the problems that it creates as a mechanism to grab even more power to solve those problems.
And it's a self-perpetuating spiral of more problems in greater government.
At some point, The connection between the government and the problems becomes so obvious and so enormous that there's a backlash and we can finally break the cycle.
And hopefully we're nearing that point now in the United States.
Yeah, when you have 10,000 laws which have produced disasters, it's really hard to believe the case that 10,001 is going to produce paradise.
And I think that's where we are.
So I just wanted to applaud you for the amazing work that you're doing in terms of getting out In front of the media and helping people to understand the degree to which it is coercion that is causing all of our problems and we need to get back to voluntarily.
People forget that every time Congress passes a law, they diminish our liberties.
We have tons of laws.
When I'm elected to the United States Senate, my goal is not to pass one single positive piece of legislation.
I don't want any new laws.
All I want to do is abolish existing laws.
I want to repeal laws, repeal rules and regulations that have diminished our freedom and distorted the free market and brought us to the brink of insolvency.
That's what we need to do.
And the more law we can repeal, the smaller we can make government, the bigger the economy can get because we empower individuals, we empower the entrepreneurs, and if we do that, there's no limit to what we can achieve.
Well, I really wanted to, again, I'm conscious of your time, and I know you've got to have some breakfast, so I really do appreciate your time.
Thank you so much, and thank you again for all of the work that you do to help get the message of voluntarism out there, and have a great day.
Let's spread this video around.
Hopefully a lot of people will watch it.
I certainly will. I'll send you a copy as well.
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