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July 9, 2010 - Freedomain Radio - Stefan Molyneux
16:07
1695 Stefan Molyneux of Freedomain Radio Interviewed on the Max Keiser Show

The current state of the Canadian economy, the world financial crisis, and how to save the planet!

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Welcome back to The Kaiser Report.
Time now to go to Canada and talk with Stéphane Molyneux of Free Domain Radio.
Stéphane, welcome to The Kaiser Report.
Thank you so much, Max. It's great to be here.
All right. I wanted to jump right into something that's kind of a pressing topic here.
Canada recently spent over $1 billion to protect the G20 leaders from the violent Balaclava-wearing quote-unquote anarchists who mysteriously appeared to conveniently justify overwhelming police force against free speech in the great democracy there of Canada.
What are your thoughts on this old G20 Fandango?
Well, it's been a complete fiasco.
And in the past, Canadian police in Quebec have been openly outed as sending officers undercover into these protesters in order to foment violence.
They've been caught about to throw rocks at other policemen, so it's all complete nonsense.
And one of the things I think is especially powerful about looking at this billion-dollar spending Is that even with a billion dollars of security spending, the most advanced technology, the most thousands and thousands of police officers, the Canadian government still could not protect the downtown from hours of supposed anarchist rioting and looting.
I think that it was just a massive PR stunt in order to divert attention from the real coercion and the real criminality that is going on, which is the economic policies of the G20 nations.
I thought it was a complete fiasco, and unfortunately, people would rather look at a burning cop car rather than actually examine the underlying economic trends that are going on that are stealing them their future and their children's futures.
All right, so it's a billion-dollar PR stunt by the New World Order to justify their draconian wealth-stealing ways.
Well, we knew that all along.
We've been seeing this since the Battle of Seattle back in 1999, and nothing new here, actually.
So let's talk about the global financial system.
You're up there in Canada, and it's an interesting pocket of economic strength because of the speculation in some of the areas of Canadian real estate, which is part of some of the other areas, like Australia, where we're seeing something similar.
But tell us, you're in Canada.
What's going on in the financial system globally and in Canada, Stefan?
There's this myth floating around the G20 and the economic system that Canada has somehow avoided the subprime meltdown and other forms of financial catastrophes.
This is all complete nonsense.
Canadian debt stands at $3.5 trillion, or about $116,000 for every man, woman and child living in this frozen wasteland of socialist paradise.
So it's complete nonsense to assume that Canada has somehow avoided it.
The Canadian government has also become the largest subprime lender in the world.
And we all know what happened to every single US financial institution that focused on subprime lending.
They all went bankrupt. Since 2007, Canada has introduced legislation and supported the government backing of mortgage-backed securities.
Over 90% of Canadian mortgages are now backed by the government, and the amount of mortgages backed by the government has gone from about $130 billion In 2007 to tracking to $500 billion by the end of this year.
And the amount of assets that are in an actual home has declined from over 40% a few years ago to about 6% now.
So Canada is enormously exposed in the subprime lending market.
It just hasn't hit yet. And the last statistic I'll throw at you that will make you chill your britches Is that at the peak of the US housing crisis, housing prices were about five times the average national income.
In Canada right now, they are over 7.4 times the average income or almost 50% higher as the US. So the legislation that has changed which has allowed zero down payment and between 35 and 40 year amortization has invited an enormous number of people into the housing market who simply will not be able to afford it in the U.S. style the moment that interest rates go up, as they're going to have to.
So the U.S. has already gone through what Canada is going to go through.
The main difference is that the U.S. backed the mortgages after the fact, whereas Canada is backing the mortgages ahead of the fact, thus reducing the moral hazard and exposing the risk of the Canadian government and the Canadian taxpayer even more.
Alright, so people say that the Canadian banking system is really quite strong and it's uniquely strong in the world.
But based on what you're saying here, that sounds like that's a bit of an overstatement.
Well, the banks are getting their mortgages backed by the Canadian government in these mortgage-backed securities, and so the banks are taking on all of this mortgage at very low rates, so their balance sheet looks quite healthy.
Of course, the balance sheet of the Canadian government and the Canadian taxpayer goes down proportional to the amount of risky real estate loans that the Canadian banks take on, so it's all a paper sham, it's all a paper shuffle.
Like in the 90s, Canada went through this supposed reduction.
of its government.
20% budgets, half of the science spending was cut.
But it all turned out to be complete smoke and mirrors.
All the government did, as is so often the case, is it borrowed from the, quote, surpluses in various social programs, thus increasing the downstream risk for these social programs.
They took a dollar out of old age pensions, thus increasing the future liability.
So all they're doing, as governments always do, is borrowing from the future in order to bribe the present, which is vile, despicable, and ultimately completely self-defeating.
Okay, now, in the U.S., down in the Gulf of Mexico, people are freaking out about this huge oil geyser from BP that's causing ecological holocaust.
But you've got something similar going on every single day.
It's called the Canadian tar sands.
Isn't that correct, Stefan?
Yes, I would say that it's a little easier to get at leaks that occur in the tar sands.
And I think the really important thing for the American public and really the people around the world who are all concerned with the environment, which I think includes most of us, particularly the parents, is to ask why this is going on so long.
Why aren't countries that have offered to help the U.S., why aren't they allowed to come in and help the U.S. deal with these oil spills?
There are lots of countries who've dealt with this sort of stuff before.
One of the reasons is it's actually illegal to do so.
It's illegal for foreign ships to operate in American waters.
This is something that has only been partly rescinded by the Obama administration and so foreign ships simply aren't allowed to come in and help and there have been many offers from around the world.
There's a Taiwanese skimmer that can take out of the oil, sorry, can take out of the ocean As much oil in one day as has been done in a week or a month by US methods, but it's not allowed to operate because of these archaic laws which prevent foreign ships from operating in US waters.
There's an EPA regulation which says you can't dump into the ocean oil containing above a certain proportion of oil, which is also being used to prevent the oil from being cleaned up.
Even though it's much cleaner than when it comes out of one of these ships is when it went in.
So the simple answer is always the same.
Why isn't the problem being solved?
Because people will be aggressed against by the government if they try to solve the problem.
And that's the great tragedy of BP. And why are they even operating?
In a mile or two of water because it's illegal for them to operate anywhere else and also because they get specific tax breaks and subsidies for drilling in the Gulf.
It is a ridiculous and an absolute catastrophe and of course who's being blamed is the free market which is always the case.
Right. So they don't mind creating another Niger-Delta-like catastrophe right there in America, as long as the same people who make money in the Niger Delta are making money in the Gulf of Mexico.
And interestingly, as you point out, America is trying to discuss whether or not to impose protectionist measures as a way to defend But the very reasons why these foreign entities are not allowed to come in and scoop out the oil, as you've just talked about, is because of these archaic protectionist measures that are on the books right now.
So protectionism is both killing the ecology, and it's also being discussed as something, well, will it stimulate the economy?
So they can't even see both sides of the same issue in real time.
They can't walk and chew gum at the same time in Washington.
Isn't it completely heartbreaking that the coercive violent monopoly called the state, which is almost completely responsible for forcing the oil companies to drill in the Gulf, for preventing them from drilling anywhere else, for failing to regulate and protect The environment from these entities, from BP and other companies.
BP executives wrote their own health and safety reports apparently in pencil, which the government then filled in.
They had massive conflicts of interest with the people who were on the MMA. The government is not only failing to clean it up and forced the companies to drill there, but everyone is running to the government for the solution.
It is like running to the mugger to protect your property.
It is insane, but of course it's what people...
They have no other solution in their heads than run to daddy president to solve the problem.
But it is the government that is causing and exacerbating all of these problems.
And as soon as we can start to think outside this coercive box called statism, we will actually start to have some real solutions in the world.
Right. You write on your recent episode, Stéphane Molyneux, of Free Domain Radio, that statism is dead.
So this is what you're talking about, that people don't realize that the state that they're making appeals to is actually non-existent.
Well, you know those medical shows, if you've ever watched these medical dramas on TV, you see the same scene every week.
It's some doctor who is pounding the chest of a patient, and he's saying, I can save him, I can save him, and he keeps doing it, and the nurses are all like, dude, he's dead, right?
And eventually someone puts his hand on the doctor and says, Jim, he's dead, or something like that.
And this is exactly what goes on with the government.
The government is like the Titanic.
It hit the iceberg 20 or 30 years ago with these massive social programs which were all funded by deferred spending.
In other words, you bribe the existing population to pay for their bills in terms of health care and old age pensions and unemployment insurance.
You pay for their bills by stealing from the future, from voters who aren't even born yet.
And so, as soon as you start that process, the system as a whole dies.
It's a mortal blow. It's hit the iceberg.
It's going down. And now we're seeing a whole bunch of economic and political leaders slowly edging towards the lifeboat, saying to everybody, there's no need to worry.
Everything's just fine. The recovery is just around the corner.
We can see all of these green shoots poking up.
They're going to get on the lifeboats and I think all too many people are going to go down with the ship, which is a real tragedy.
So yeah, the whole system is dead and buried.
What we're seeing now is just the last kind of twitches of muscular activity as life leaves the body.
But there's no options for governments left anymore.
What are they going to do? They can't increase taxes.
They can't cut public sector pensions.
They can't raise the retirement age very reasonably, at least in any time to do anything useful.
They can't borrow any more money because everybody's out of monopoly money and everybody's lending to everybody else.
And so the system is cornered and is going to go down.
It's just my hope that with communication like this we can replace it with something humane and peaceful and voluntary rather than hierarchical, institutional and coercive.
All right, so let's talk a little bit about solutions here in the three minutes or so we have left.
You're saying that, to paraphrase, that there are some possible humane solutions that can take on this entrenched kleptocracy that has basically destroyed capitalism and all the institutions associated with it.
Please, expand on this.
So you're saying I've got two minutes to solve the world's problems?
I'm on! I'm on it! Okay.
Well, what I would say, Max, is that we need a revolution in thinking.
And the revolution in thinking occurs, it's something that I call the gun in the room.
The state is an agency of coercion.
The state prints money, which is called counterfeiting in the free market, and will throw you in jail if you try to create a competitive currency.
If you try to use gold as a regular currency or silver or anything that has intrinsic value, the government will throw you in jail.
The government takes money through force, through taxation.
The government steals from the future through national debts.
The government uses force to impose its will on everyone.
As long as we view the government as some semi-paternal, benevolent agency that's there to help and protect us, we're going to keep running for solutions.
Until and unless We can see that the government is an agency of violence, that the government points guns at people to get things done.
Until we can see what I call the gun in the room, we will not be able to put down the gun in the room and begin to explore voluntary and peaceful ways of having currencies, voluntary and peaceful ways of having banking systems, voluntary and peaceful ways of helping those who are in need, the poor, the sick, the old.
Until and unless we can see the violence inherent in the system that we live under, we will not be able to put down that gun and begin negotiating like civilized human beings about how we're going to solve social problems and stop attempting to pass laws and regulations which throw people in jail, which steal money from people.
Violence will never solve problems.
Violence will only and forever profit the few at the expense of the many.
We seem to solve things in the present while creating more problems down the road.
So until we can see the gun in the room and put it down, simply things are going to get worse and worse and worse until we let go of our addiction to violence in solving problems, which will never ever solve problems at all.
All right, let's talk about one word in this massive social contract equation.
The word is incentive.
The reason you've got massive violence and the reason you've got financial turmoil and price dislocation, because incentives have been skewed.
There was a time when actions of merit were enough of an incentive To get people to do productive things in the society.
Today, if you go down to Wall Street, the incentive is to simply make as much money as possible, even if it causes incredible social harm, as we see down with Goldman Sachs and J.P. Morgan.
They have an incentive to make money, and they don't care if they destroy America doing so.
But if, in fact, we're going to reform the entire system, what incentive can be dangled as the carrot in front of the entrepreneurs and the folks who are going to actually get up at 5 in the morning and do something productive?
What is going to be the incentive?
Because, obviously, the current system of incentives of just pure cash fails.
So what can we incentivize folks with?
We need to chase money out of the stock market.
In other words, we need to have governments, we need to stop governments from fueling and funneling all of this money in the stock market because the more money that there is charging around in the stock market, the more incentive there is for people to do short-term gains, to lie about things, to manipulate things, to avoid long-term investments, to pump things up.
And so we need to have the government stop forcing people to invest in the stock market through 401k plans, through tax incentives, through capital gains incentives.
We need to get money out of the stock market because the more money there is in the stock market, the more you fuel speculation rather than rational investment and the more the stock market goes insane and the more CEOs are focused on short-term gains rather than long-term gains.
That is the only solution.
That's right. Raise interest rates until you encourage savings and productive work.
But, of course, nobody will take that move because they're being held captive by the borrowers and the speculators.
Okay. Stefan Molyneux, thanks so much for being on The Kaiser Report.
Thank you, Max. That's going to do it for this edition of The Kaiser Report.
I want to thank my guests. And that's going to do it for this edition of the Kaiser Report.
I want to thank my guests, Stéphane Molyneux and Stécie Hébert.
If you'd like to send me an email, please do so at kaisereport at rttv.ru.
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