2137 JP Morgan and the Invisible Pickpockets of Paper Currency! Stefan Molyneux hosts the Corbett Report
Stefan Molyneux, host of Freedomain Radio, takes the helm for this special edition of the Corbett Report! This show analyzes the major causes of the recent multi-billion-dollar loss at J.P. Morgan, discussing inflation, fiat currency, ridiculously low interest rates, the lessons of history, and the utter madness of expecting the debt-addicted Federal Government somehow promote fiscal responsibility in the financial sector!The five largest banks in the United States hold over 75% of all banking assets. This is the highest concentration of banking assets among the top five firms in American history. The concern of banks being too big to fail is worse now than before the financial crisis.
It's Stefan Molyneux from Freedom Main Radio subbing in for James Corbett.
I just wanted to let you know he's sorry that he can't make it this week.
I think he's currently in rehab.
No, wait.
It's not rehab.
It's Europe.
It's really hard to tell the difference these days.
I hope you're having a great week.
I would like to just start off by saying that I really appreciate the opportunity to have a chat with you today.
We're going to talk about the magical world of high finance, the recent two billion with a capital B loss.
That was sustained by JP Morgan, which actually escalates to about 20 billion in losses when you count the loss in share prices or stock prices.
And we're going to talk about a little bit of the causes of this, what is going on, why it's happening, why this will not be the last of these dominoes to go down.
I really can't give you any advice about what to do about it because I'm your friendly neighborhood philosopher.
I don't really know much about how to invest to save yourself.
I buy some gold and food.
That's what I like to have.
You can do whatever you like, of course.
I'm going to take some callers.
Please do call in at 1-800-313-9443.
That's 1-800-313-9443.
So we've got a couple of minutes to set things up.
We'll take a short break.
We'll dig in deeper into the facts and realities behind this kabuku deck of cards known as the modern economic system and then we'll take some calls.
So you probably have heard JP Morgan took a very hot fiery bath in the lava of credit default swap losses recently.
This is something that has been building for a while.
There's this trader There, who is running, ironically enough, the department which controls risk for JP Morgan and makes sure they don't get into too much hot water.
And what do you know?
Our friendly neighborhood credit default swaps are back to slap us around a little bit with the wet fish of fiscal reality.
And they built up these huge positions in these credit default swaps, largely dealing with U.S. corporations.
And then it just grew and it grew and it grew.
And there was such a growth in their position that what happened was traders, particularly in Europe, began taking contrary positions.
You know, in this modern world of whirligig, kaleidoscope, LSD-laced finance, you can make money out of somebody else's losses.
You can make money out of a company's losses.
You can make money out of, I don't know, shooting orphans probably in some scenario.
So what it is that we are trying to understand is how did this come about?
Well, they said that they were very comfortable.
The head of J.P. Morgan said, I'm very, very comfortable with this situation.
They probably read about it in the Wall Street Journal, the amount of positions that they were taking in these credit default swaps.
And then there were counter positions and it turns out that they, so far, have taken a loss of two billion.
They claim to have made some gains around a billion in other areas, but they haven't unraveled their position.
See, you can't.
You can't unravel your position.
They became such a significant player in this particular market that to unravel their position would be pretty much to barbecue their own shorts with a fine marinade of Federal Reserve notes and be forced to eat it themselves.
So unraveling their position turned out to be very tough.
They've unraveled a little bit, and they're going to try and do more slowly over time.
But it really is quite astounding that this keeps happening.
Naturally, you get calls from Elizabeth Warren and others, and Obama, of course, has said, That what we need now, you see, this is why we need more regulation.
This is what happens in the world of unfettered free market, laissez-faire capitalism.
You get these predatory financial sharks swimming around, chewing up The innocent bathers of pension funds and other people who just want to hide their money from rampant inflation.
And if you don't have...
They call this a self-regulating.
Oh, we've had enough of this self-regulation of Wall Street.
It doesn't work.
Look, there's another thing that's lost $2 billion.
We've got to step in.
We've got to regulate these people.
We've got to stop them from doing all of this stuff.
And it is really astounding because we'll talk about this in the next segment.
The degree to which...
The financial industry is left open to the wild frontier of laissez-faire capitalism.
It's so tiny, so infinitesimal.
It's worth examining in more detail.
I hope you'll come back and join me after the break.
We're going to unpack this box and really see what's inside.
Hello, hello, everybody.
Hope you're doing well.
It's DeFan Molyneux.
We're continuing on.
I'm hosting James Corbett's The Corbett Report, and we're talking about J.P. Morgan and the pseudo-late fascistic end-of-the-empire capitalist unraveling that we're seeing all around us in the economic sphere.
So let's go a little bit more into detail about what happened, and then we'll talk about some of the principles behind it so that you can really understand the nonsense that's been shoveled our direction in the guise of news.
So, the position that JP Morgan took in this particular instrument was about over $150 billion.
The insurance group, the group that was supposed to balance out the portfolio, had about $350 billion in investment securities, which is about 15% of JP Morgan's assets.
There was one trader who was apparently in charge of all this stuff.
This reminds us, of course, of AIG's Joe Cassano.
When Cassano's position went sour in 2008, it cost AIG $200 billion, which triggered the bailout by the Federal Reserve and nearly took down the entire financial system.
We'll talk about that more in a second.
So, the first thing to ask is how on earth How, in this or any other dimension of human existence, could a JP Morgan trader, or even a group of traders, even an entire department, rack up $150 billion on a particular instrument in spending?
Well, the answer is that there are five major banks in the United States, and those five major banks control about 75% of the entire financial industry.
Now, they don't do that because they're so lovey-dovey with Bastiat-style free market principles.
They do that for a variety of reasons we'll get into a little bit later.
But the important thing to remember is these are all considered to be too big to fail.
And the Federal Reserve and the government made that very clear in 2008-2009 when it turned the fire hose of Federal Reserve currency on them and put out all the fires that were set by greed, incompetence, and vitriol.
So when AIG, sorry, when JP Morgan begins to say stuff like, oh, I want to buy more and more and more and more, If you and I try to do that with a bank, the first thing they're going to ask for is collateral.
They're going to ask for our collateral.
Well, what happens if you can't cover these losses?
What's going to happen if you can't cover these losses?
Well, the answer has been made abundantly clear, and not just in 2008 and onwards, but throughout a wide variety of interventions.
You start the Mexican peso, the Argentinian dollar or whatever they were using down there.
You can see this happening over and over again, that when currencies or financial systems get into trouble, Then the World Bank, the Federal Reserve, they just pump money at it.
Because of that, people are not asking for collateral anymore.
Because if you are trying to buy a whole bunch of financial instruments and people are actually asking for collateral, in other words, look, if this goes south, what do I get if you can't pay your bills?
Well, you have to go and say, listen, I need all of this capital to put up as collateral, which is going to restrict the trades that your organization is going to be able to make in other areas, obviously, right?
And it's going to bring everything you're doing to the attention of senior management.
But that restriction, which would actually be the case in a free market system, is not in place anymore.
Because people say to JP Morgan, hey, if you can't write the check, I'm sure Bernanke or whoever is in charge of the Fed when this goes south will be happy to write a check, just like they did last time because you are too big to fail.
And that is something we're going to see over and over again until companies which mess up this badly are absolutely and actually simply allowed to fail.
But unfortunately, the existing not even vestigial free market echo of a fascistic system can't allow these things to fail.
Because if the currency goes into crisis, then the entire political system, not the financial system, and the financial political system are like a yin and a yang.
It's like smoke and fire, really are two sides of the same coin.
But they really can't allow this to happen.
I think this is really important to understand what is really going on here.
I think there are three or four.
Let's see if we can get three in before the end of this segment.
There are three major areas that cause problems.
Again, you want to talk about this or anything else that's going on in your life, in your mind, in your heart, you can call in at 1-800-313-9443.
Talk to our gorgeous producers and come on the line.
Number one, there's this great mistake that is made.
Which is that corporations have something to do with capitalism.
People say corporations are capitalism.
We always hear this, oh, the big corporations will just have their way and they are considered to be the tail that's wagging the dog of the state and so on.
Corporations have nothing.
to do with the free market.
Corporations are not products of the free market.
They are not created by the voluntary interactions and transactions of freely associating individuals.
Corporations are fascist cages for your money and angel wings of political, criminal and economic liberty for all of those in charge of the ruling class of money.
Corporations are something that is set up by the government, limited liability corporations.
They were set up in the 19th century by the government.
They did not come out of the free market.
They came out of the fact that bankers didn't like it when they lost a whole bunch of money, that their own personal assets happened to get seized.
They didn't like that.
What they wanted was a legal shield to protect themselves.
So what happens is, When money goes into a corporation, you can take that money out in terms of profits and you can put that in your own bank account.
You just scoop your bucket into that fast-running stream of fancy cash and you pour it into your own little private pond.
You can even set up a big spray, a sluice, you can dig a trench, you can have a water cannon, you can do a tsunami, a geyser, you can arc it over with a fire hose, but you can pull all the money you want out of That corporation, I mean, subject to limits of profitability and competition from other corporations and shareholder revenues and so on, but you pull that money out of the corporation, it goes into your own personal bank account.
It becomes yours.
Ah, but what happens if the tide reverses itself, if gravity reverses itself and you make decisions which empty out those coffers and put that corporation into the red, that puts that corporation into debt, what happens then, my friends?
Do you have to give anything back?
Of course not!
Because it's a corporation.
The corporation assumes the losses.
And the corporation may go bankrupt, but you don't have to give a penny back.
You see, it's a one-way, it's like a one-way glass.
You know, it's like those glasses, those windows that you see in interrogation rooms.
It's a one-way glass.
Money passes out of the corporation into the hands of individuals, but it never has to go back if the corporation runs into trouble.
It's like me having a hand puppet.
I can go and commit all the crime, some random crime spree, and then if the police catch me, it's like, oh, here, here's my hand puppet.
You take him to jail.
You try him.
I have nothing to do with it.
I can have all the fun of my criminal madness, and then if the consequences start to accrue, I'm just going to hand you my sock puppet, and you can put that on trial in a Landshop-style Raymond Burr scenario.
So this has nothing to do with the free market.
In fact, if you and I were investing in a corporation or had financial interest in a corporation, particularly a financial corporation that could be subject to enormous losses through leveraging and margin costs, the very first thing that I would want in any financial institution that I was doing business with was to be damn sure that the people at the top who were making all the money and making all the decisions Would be personally liable for losses.
They would lose their houses.
They would lose their cars.
They would lose their children's education.
They would lose the rent on their tuxedos and toupees and wine glasses and chauffeur-driven stretch limos and private jets and all that, that they would end up streetless on a corner saying, we'll talk derivatives for money.
That's what I would want.
Because it would be clear to me, this is what they're going to get on the upside.
Yay!
You know, hey, you're going to invest all this money, make all this profit.
Fantastic.
I applaud that.
You invest, you're wise, you're smart, you beat the market, make all the money you want, give me a bit, that's fine.
But if you lose, then I want you to pay as the executive.
I mean, otherwise, it's like running a casino where everybody who wins gets to take their money out of the casino, but any time that they lose, the casino has to pay.
How long do you think?
A casino like that would stay in operation.
So, corporations as a concept, corporations as a legal fiction, corporations as imaginary personhood is a complete fiction, and it's created by the state.
And the reason it's created by the state, and it was no accident that it was created by the state when the state was incredibly hungry for money to be lent to it, was it's a way of saying to the financial people, okay, okay, You guys understand money and if you ever talk to the general population about the reality of, say, fiat currency and national debts and the fact that all of the personal income tax is going to pay interest on the debt and there's no gold standard.
If you talk to people about this, that's no good.
So we're going to give you legal immunity from the consequences of your own bad decisions in return for a couple of things.
First of all, we're going to keep this whole nonsense fiat currency system a secret between us, you know, just between us gals.
And secondly, we would like to levy corporate taxes so that we're going to create this fictional taxpaying entity called the corporation.
Is that all you ever hear?
Let's raise the taxes on the corporations and then we'll all have our tax rates go down.
Well, that's nonsense.
If you raise the taxes on corporations, You're just raising the taxes on generally three classes of people.
The shareholders in terms of reduced dividends, the employees in terms of reduced opportunities for raises, and in terms of reduced hiring opportunities, and you are going to increase the prices for the consumers.
You jack up corporate taxes by 50%.
They have to pass that cost along somewhere.
It ain't gonna come out of the rich guy's pockets.
So they simply have to raise the rates.
And as a consequence of raising those rates, they then have to raise tariff barriers because other people will then be able to come in from overseas and compete at a better rate.
So they create this legal fiction called corporations, which then everyone thinks we can just go pick the pocket of this imaginary friend called the corporation.
And that way, I can get married to my sock puppet and we'll live happily ever after.
So all of this kind of nonsense is to do with corporations.
And corporations have nothing to do with the free market.
They are not created through the voluntary contracts of independent and sovereign human beings.
They are a legal fiction created to protect the financial classes, to make the financial classes beholden to, dependent upon, and willing to lend to the government, and to create this legal fiction called the corporation.
So then people think, ah, if we raise taxes on the corporations, we're soaking the rich.
Yeah, let's get the rich to pay, and we'll be fine, which is nonsense.
We're going to talk more about the supercharged stock market when we come back and start to unravel the mess.
we see in modern finance.
Stéphane Molyneux for the Corbet Report.
All right.
How are you doing, everybody?
Stéphane Molyneux for James Corbet of the Corbet Report.
Please feel free to call in at 1-800-313-9443 to interrupt the monologue, which basically what I do is I breathe in for about three hours before a show, and that way, like an expert eternal jazz trumpet player, I can just continue to talk without actually inhaling.
Occasionally, I will inhale through my eyeballs, creating a sound that should not be transmitted over the waves.
So we're talking about how strange the financial system is that we live in.
And I sometimes think about The world of the future and how they're going to look back on us and how they're going to look back and sort of imagine how it was that we looked at the system we live in and were able to keep a straight face.
You know, you sort of look back at time to those, the temples, the hieroglyphics that go on in sort of ancient Egypt.
And you look at these sort of jackal-headed monsters and you hear about, you know, the stories of the Greek gods and this god giving birth to this god through their forehead and all the being raped by a bull and stuff like that.
And you wonder how people sat through those sermons and kept a straight face.
I can't imagine in the future how they're going to look back at us and think that we didn't just look at this entire system and not just fall down laughing at how absurd it really is.
So there's two other things that I really want to talk about, and then we'll sort of end up with another one.
Again, if you want to interrupt and call in, please feel free.
But let's talk about the supercharged stock market.
All right.
So, how many of you out there have got money in the stock market?
I'm betting, unless you're an agorist...
Checking the quality of your silver coins with your teeth and hunting for roots and berries, a good proportion of you.
If you've got a retirement savings plan, if you've got any kind of pension plan, if you've got any kind of investments, you've got money in the stock market.
If it ain't gold in a sock somewhere buried in the bayou, it's going to find its way to the stock market.
Completely not the purpose of the stock market.
It's the exact opposite of the purpose of the stock market.
The stock market was set up to allow knowledgeable investors to easily pool their resources to lend money to promising companies that they understood in fields or areas of business that they had experience in or at least understood deeply.
So if you wanted to start an oil company, then you'd float your stock on the stock market and a whole bunch of people who were knowledgeable about oil and the risks and the rewards and the dangers and the locations and the transportation costs, they would all say, hmm, I think I'll invest in this company.
How many of the investments that you have in the stock market do you have the first clue about?
If you're like me, maybe 3%.
Maybe!
Maybe 3% if you're very generous with your expertise.
And that is really not what the stock market was intended.
So the question is, why do so many of us have all this money, all our pensions, all our savings tied up in this kaleidoscopic casino from hell that we don't really understand how it works, that we don't really have any control all our savings tied up in this kaleidoscopic casino from hell that we don't really understand how it works, that we don't really have any control over, that's investing in all this stuff that we have no clue about, where Why?
Why are we doing this?
Well, it reminds me of something that George Orwell wrote in a very interesting book called Down and Out in Paris and London, where he basically spent, I think, about two years as a hobo in England and as a waiter and plongeur in France.
And he said something where he said, you know, we've got all these tramps that roam around the neighborhood, roam around the countryside, go from town to town.
And he said, I've read so many books theorizing as to why these guys have this wanderlust.
Oh, you know, they come from gypsy stock.
They love to roam around.
They're rootless.
They are symbols of modern bourgeoisie, alienation, or whatever it is, the working class.
And nobody, he said, has even come close to understanding the real reason why these homeless people are constantly on the move.
And the reason is that it's illegal for them to stay in one place.
It's that simple.
It's that simple.
It's like everybody looks at all these sheep running all over the countryside.
And it's like, ideologically, no one can just look at the sheepdog that's actually barking and terrifying these little sheep and causing them to stream this way and that all the way over the countryside.
The reason that the tramps, the homeless people kept moving around was that if you stayed in any town for more than a day, you would be arrested and thrown in jail.
That's why they kept moving.
It's simple.
They were running away from the gun.
They were fleeing the gun.
It wasn't internal.
It wasn't cultural.
It was just running away from the sheepdog of the state.
And that is an exact description of why so many people's money is in the stock market.
The people's money is in the stock market.
Your money, my money, our money is in the stock market because...
It's forced there at gunpoint because if we don't put it in the stock market, it's going to get taxed away from us.
It's basically the majority of the modern economic system is a mugger coming up to you, sticking a gun in your ribs and saying, listen, man, I want you to give me 50 bucks.
I'll invest it for you.
Maybe I'll give you some back.
But if you don't give it to me for investing, I'm just going to take it anyway.
Well, why not?
Why not give it to the guy to invest?
If he's going to take it anyway, why not give it to him to invest?
In Canada, they're called RSPs.
In America, they're 401k plans.
You have to put your money into those plans or the government will take it at gunpoint through taxation.
So why is there so much money in the stock market?
Because it's forced there.
Because if you don't hand it over to the mugger, he's just going to take it anyway.
And, you know, somebody's going to steal your 20 bucks or you've got to put it on a roulette wheel, you put it on the roulette wheel.
And that's just one of the reasons why.
For a 1K plans, pension plans, you name it, they all have to put their money into the stock market.
Now, that's the number one reason.
The number two reason, of course, is the insidious inflation, which we will get back to right after the break.
Let's defend Moline for the Corbett Report.
Alright, we are back.
This is Stefan Molyneux for the Corbett Report, which you can find at Corbett Report.
That's 2Ts.com.
And we're talking about the madness of the late empire financial maladies that are besetting us which was recently evidenced by a massive $2 billion loss at JP Morgan.
We're looking at some of the symptoms as to why this is.
So we're talking about why so much money has been pumped, forced, cannon fed into the stock market where very few people actually want to be.
We talked about how every time you have to try and evade, legally evade taxes or minimize your tax exposure by putting money into the stock market through 401k plans or something through your deductibles or something through a pension plan or something like that.
But the second reason is something that we've become so used to and I know we've, you know, I'm sure that James has talked about this before so I'll just touch on this relatively briefly or at least relatively briefly for me, which is inflation.
You know, when I first came to Canada in 1977, candy bar cost about a dime.
Now it's about a buck and a quarter.
What is that?
About a 90%, a little over 90% reduction in value in 30 years.
I mean, it's really quite astounding when you think about it.
I mean, my first job I got paid me about two and a quarter an hour.
I was working in a bookstore when I was 11 or 12.
And it's really quite astounding just how much money's value gets eroded.
And this is this sort of invisible termite borrowing at the foundations of our civilization that not one person in a thousand or not one person in ten thousand can accurately see, let alone diagnose.
But inflation is another reason why so much money charges into the stock market.
Use it or lose it.
That is the sad and tragic reality of these constantly evaporating, slowly burning, on-fire Federal Reserve currency toilet paper notes that we are forced to use.
So, imagine.
Imagine a world.
And we don't have to imagine that hard.
This is the 19th century in America.
For over 100 years.
With war, with the end of slavery, with the threat of secession, with...
Jefferson sending pirates over to the Middle East to deal with, I'm sure, not quite oil issues, but, you know, they were dealing with pirates who were trying to rip people off going through particular straits.
With all of the financial and legal and moral upheaval that was going on, you still had about 100 years throughout US history...
Where prices declined and declined and declined.
It was like every commodity, from A to Z, from the top floor of the department store to the basement where in the future you're going to park your cars, all the prices just went down.
It was like every commodity was a computer.
They got better, they got faster, and they got cheaper.
Imagine that.
Imagine if you had $100 now, you stick it under your mattress, and in a couple of years, You can buy $130 worth of goods or $120 worth of goods with that.
In other words, your money grew.
It was like your gold was having sacks in a bag and reproducing.
Wouldn't we all like to see that in slow motion with some Kenny G sacks in the background?
And that's something we just can't fathom.
We can't comprehend what it's like when your money multiplies just when you sit around whittling And picking your nose.
But how many of us, if that was the situation, if our money was increasing in value, 5% a year, 10% a year, would say, hey, I know what I want to do.
I want to take all this money that's getting more valuable just by sticking it under my mattress or sticking it in a lockbox.
I want to take all this money I want to put it in a big sack and I want to mail it off to strangers who are going to do I don't know what with it in some weird, incomprehensible fashion using mathematics that seems like they've come out of Pascal's evil ghost come back to strangle the fiscal common sense of the living.
I'm going to do all of this because instead of getting, say, 5% or 10% or 15% per year increase in the value of my money, I want 30% or 40%.
So I'm going to take all my life savings, all the precious sweat of my toil, wrap it in a bag and lob it over a fence into a grand canyon of kaleidoscopic, who knows what is going on, in the hopes that somehow it's going to come back greater.
There's not a sane human being in the world who would take that deal.
So why does everyone take that deal?
Because we are faced with quite the opposite situation.
If you go to shadowstats.com, you will see that according to the kind of Statistics that were going around in the 1980s and the 1990s, looking at a 6-7-8% inflation rate at the moment.
A 6-7% inflation rate at the moment.
That's pretty bad.
I mean, that's really bad.
I mean, if you take out factors like incredibly cheap labor suddenly available to the Western economies from China and India, and if you take out factors like the fact that all the other currencies appear to be doing a slow seppuku suicide over in Europe and other places,
and if you take into account the other factors that are still propping up the value of the currency, and also if you take out the factors like the fact that these lower wages are there, the fact that Walmart It crucifies people to get lower prices and it's estimated to have taken a full percentage point off prices in the U.S. and you factor in things that are going down in price like computers and so on.
The real inflation that's going on is probably in the double digits for the essentials of life, you know, not counting, of course, housing in the U.S. It certainly feels that way.
Feeling, what does it mean?
But, you know, when I am pushing half a car to groceries out the grocery store and it costs me 120 bucks, it's like, And the portion size is getting smaller too because they don't want to pass along all the costs directly because then it's like, oh my god, these people are ripping us off because the middlemen always get blamed for the state policies.
That's why the government needs a middleman, right, so that you don't go straight to the government and complain.
And so this inflation, whether it's 6%, 8%, 10% a year, well, that's like you can put your money under your mattress But it's going to get eaten by the begbugs.
You can put your money under your floorboards, but ghosts are going to dig it up and spirit it away to the Stygian abyss of inflated nonsense.
And so this is the reality of what we're dealing with.
That your money is losing value.
Your money is losing value.
So most people, you know, when you think about it, if you've got inflation running, let's just take the middle of the pack, 8% a year.
I mean, you're not even likely to break even because there are very few investments that are ever going to give you...
I can't think of any investments, not that I'm an expert, but I can't think of any investments where you can reliably say, I'm going to get me sweet and toasty, two bagels snapped on each other, two goose eggs, 8% per year, no risk.
Well, that's not going to happen.
So we give her money over to these sarumens, to these sorons, to these...
These Voldemorts, these dark wizards of Lord knows what black alchemy from hell, because the alternative is to have it stolen by the Federal Reserve.
So it's either the IRS or the Federal Reserve that's going to take your money if you don't hand it over to these people.
And so that's another reason why everybody's handing over their money to these people.
Let's look at another factor and then we'll get to the true comedy, the true black grim comedy of the situation.
And if this doesn't make you laugh, you really have to go get an x-ray for that funny bone and try and get it back because there is something absurdly funny about the situations that we're in.
As you probably know, the Federal Reserve has pretty much pegged the interest rate at about zero.
In other words, there is no time value.
Money is frozen in time.
It's like a fly in amber.
It's like a scorpion in those little brooches that you see in the museums.
Money is trapped in time.
You don't have to pay a penny to rent money.
It's free to rent over time.
So the interest rate is pretty much you can get, you know...
25th a percentage point or something like that.
You can get a tiny little bit.
And, of course, what's happening is banks are getting this money lent to them at absurdly low rates and then just buying bonds at a couple of points and calling themselves financial geniuses.
But really low interest rates combined with high inflation generates a nearly insatiable Necessity to take risks in the investment world, right?
Because normally, if you have high inflation, then you have higher interest rates.
So let's say that the real value of borrowing money is 5% a year.
You know, like a real, like some sort of actual sensible free market rate.
Who knows what it actually is, but let's just say it'd be around 5%.
As you know, if inflation is running at 5% and it costs 5% to borrow money, Well, the real interest rate is 5%, but the interest rate you're charged is 10% because they've got to cover the 5% loss of money that is occurring through inflation.
Because if they only charge you 5%, then you pay them back with dollars that are worth less in the future and they haven't made any money.
So normally, when the government starts printing a lot of money, That's called inflation.
Inflation refers to an increase in the supply of money.
The increase in the prices is just an effect of inflation.
We call it inflation.
I've made that mistake too, but it's not true.
So normally what happens is when you have high inflation, they have to raise the interest rates to cover that.
But we, of course, live in a situation that is so far from the free market that we are in this absurd Kafkaesque topsy-turvy universe Where we have incredibly low interest rates and pretty high inflation.
Now, of course, the reason why the government, there's two major reasons why the government can't raise interest rates.
The first is it's trying to foster this recovery, which is, to me, the equivalent of pumping cocaine directly into the eyeballs of somebody who's having a heart attack.
Okay, they feel a little bit better for a moment, but you ain't exactly helping them in the long run.
But the major reason, of course, is that if the government raises interest rates, then the interest it's going to have to pay on the goodly portion of its debt that's held in US dollars is going to go through the roof, and the government financial system, which is already ridiculously stretched, is simply going to break with a massive amount.
Twang, like you haven't heard since a Chekhov play.
Ooh, there's a really obscure theater school reference for three listeners like, wow, he's talking about the cherry orchard.
But they can't raise the interest rates because the government owes so much money that if the interest rates go up, then their payments are going to go up and the whole system is going to come collapsing down.
So what does this mean?
Well, this means that The money that you have is being eroded by 8% a year.
The interest rates that you can get by putting the money in the bank is zero, pretty much.
And so the only place that you can put your money for any kind of reward, unless you're just willing to, I mean, the 8% is like it's going to erode your money to nothing in less than a decade, pretty much.
I mean, that's just really rapid theft.
I mean, this isn't like Bilbo Baggins rooting around the belly of Smorg and taking five goblets.
I mean, this is like a giant vacuum hooving up your house bricks at the rate of 8% of them per year.
I mean, you ain't going to have no house all too quickly.
And so you've got to do something with your money.
It's being hunted.
It's being hunted.
And so you hand it over to these institutions and these institutions have a huge amount of money, way too much money than they ever should have.
They're like some Russian athlete when they used to do this blood boosting, right?
Like they'd take a pint of blood out of you a couple of weeks before an event and then they'd put it right back into you right before the event so you could better oxygenate your muscles and perform better.
Well, our The economy, the stock market in particular, is so blood boosted.
It looks like this giant ass Pillsbury Doughboy Michelin man taking three steps and then bursting up in a shower of blood.
So you've got these institutions that got all this money.
They got way too much money chasing way too profitable investments.
That's why any company that shows any hint of growth, ah, Apple, you know, let's just throw all the money at Apple because we got way too much money.
We can't put it in anything safe because there is nothing safe.
Because interest rates are so low and inflation is so high.
So you've got to just create these weird, risky, hyper-algorithmic instruments that befuddle and bewilder just about anyone just in the hopes of making a small profit or a medium profit or even a large profit.
But it gets more complicated because all the simple and obvious stuff, which capitalism should just deal with in a free market situation, Doesn't exist anymore.
It doesn't exist anymore.
It's just, it gets kinkier and weirder and kinkier and weirder.
And that's the nature of the financial system that we're dealing with at the moment.
And there's no way out of it.
There's no way to stop it at the moment.
It is a complete and total runaway train, to mix yet another metaphor into the melange of language that comes pouring out of my brain from time to time.
And so this is something that's really essential to understand.
Again, I don't have any magical solutions because I'm just a philosophy guy, so my solution is let's stop pointing guns at everyone.
But people aren't really that interested in that solution, at least not quite yet.
I mean, obviously we should stop pointing guns at people.
We should stop forcing people's money into the stock market.
We should stop taxing people.
We should do all of these other things which are currently massive, chronic, and it seems near permanent violations of the basic moral principle.
Do not initiate force against your fairly man and respect thy property rights.
Our entire system, our entire society, our entire way of life It's like, well, I've had a cocaine habit for 20 years, and I find that itself a little bit lipe on good shut-eye.
Well...
So evil breeds dysfunction, and the dysfunction that we're seeing is traced back to the evil of violating the non-aggression principle, violating people's property rights on a chronic basis.
So that's the way it works now.
We're just going to start on this, and we're going to finish this after the segment that's coming up.
But let me tell you what's so funny about all of this.
It's funny to me.
Maybe it's because I'm losing my mind, but it is actually funny to me.
People are saying...
The government needs to regulate Wall Street.
The government needs to regulate these financial institutions.
The government Because of its wonderfully stellar record, its Olympic gold of fiscal competence and restraint and paying its debts on time and not going into deficits and dealing with everything proactively and just being so responsible about how it spends the money,
lives, blood, sweat and futures of the unborn, the hyper-competent government that doesn't make any mistakes financially, Is the agency that we should use to regulate Wall Street.
I mean, that is so astoundingly ridiculous.
Unbelievable.
And this is how, I swear to you, in the future they're going to look back, they're going to read our newspapers, and they're going to think, no, this can't be real.
They've got to be putting us on.
We're going to talk about more of this when we finish up after the break.
Stefan Molyne for The Corbett Report.
report thank you so much for listening hello hello everybody We're just going to take a caller in a moment.
I just wanted to finish this part up about debt.
The government is the cavalry that is going to ride to the rescue and save us from financial malfeasance within the financial community.
Do you just know how that is?
I think, last count, last count, the U.S. government had accumulated about $120 trillion in unfunded liabilities.
Can't even remotely come close to balancing its own books.
And is selling off even people who aren't born yet to as many foreigners as will give them a six-pack and 12 bucks.
And so it is absolutely insane.
It is like finding the biggest drunk in the world and saying, hey, I'm going to put you in charge of the tavern because we found that the tavern's been losing a little bit of money.
So bring you, bring all your drunk-arse friends over and have yourself a big party because this is going to solve all the problems in the known universe.
It really is absurd.
The things that are put forward as solutions.
Anyway, we have a caller, John from Alberta.
Let's talk Canuck to Canuck.
Hello, Stefan.
Hello, John.
How are you doing?
It's great to talk to you, man.
I've listened to you for quite a while.
You're so right on.
I want to ask you a question regarding J.P. Morgan.
What do you think about the losses that they are saying that they're having and the release of two or three senior executives?
I've got a suspicion, Stephan, that this is a sucker's bet, that they are trying to drive down the value of their own stock Well, I think that's, I mean, it's really hard to speculate what goes on in the mind of these...
Mental people.
Well, of these money-sucking tentacle brains, but what I will say is that, I mean, I think you're onto something really important here, which is, let's say that a couple of senior J.P. Morgan guys lose their jobs.
Lose their jobs.
Well, so what?
I mean, they already have more than enough money to retire for the next five generations in absolute comfort and luxury.
It doesn't prevent them from working in the same field again.
It probably was an exchange for some, you can't prosecute them, right?
I mean, how much money was showered on Obama in the last presidential campaign from people in Wall Street and how many people have been prosecuted for one of the greatest financial disasters in human history?
Zero, because they're too busy rounding up people from the Occupy Wall Street protests.
But let's say that the stock price, you're right, let's say the stock price goes down.
Well, dollar-cost averaging, they just buy a whole bunch of it.
It's going to go back up because the Federal Reserve has not explicitly said, we ain't bailing these guys out.
Now, what would happen if the Federal Reserve said to J.P. Morgan, we ain't bailing these guys out.
In fact, we're not bailing any of you losers out.
Why?
Because it ain't our money.
And we can't commit the unborn to bail you people out because you're already rich enough, don't you know?
Well, what would happen then?
Their entire trading policies would have to change.
They would actually be liable.
What if they said, look, we're no longer going to shield you from personal losses if you mess up this badly and you're so greedy.
We're not going to set up the system where you keep all the winnings and socialize and taxpayerize all of the losses.
What would happen?
The whole system would change completely.
So what losses are they actually accruing with this?
A couple of people get fired, they're already rich.
Stock price goes down, you're right.
They can just buy it and...
Make more when it goes back up.
So I think you're really onto something.
If this is punishment, give me more of it.
It's like your punishment for breaking your diet is more chocolate cake.
But don't get sucked in.
Just don't get sucked in.
I agree.
Well, listen, our time is up.
Thanks so much for the caller, and thank you for your time and attention.
This is Sven Molnir for the Corbett Report.
I will actually be back for the next, I think, two weeks, so I hope that you will join me next Monday as well.
Oh, we still have 10 seconds.
If you want to hear anything more about me, I'm at freedomainradio.com.
I run the largest philosophy show in the world.
I hope that you will check it out, talk about a wide variety of topics.
But really, corbettreport.com, two Ts.
That's where you want to go to catch more of this.
And thank you so much for the opportunity to talk with you.
