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July 13, 2019 - Freedomain Radio - Stefan Molyneux
51:32
Public Schools, Private Hell - Stefan Molyneux of Freedomain Radio Hosts the Peter Schiff Show!
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The revolution starts now.
We have to pass the bill so that you can find out what is in it.
Turn your machine back on!
You are about to enter the Peter Schiff show.
If we lose freedom here, there's no place to escape to.
This is the last stand on Earth.
The Peter Schiff Show is on!
Bye-bye, poor Schiff!
Good morning, brothers and sisters!
How are you doing?
It's Stefan Molyneux from Freedomain Radio, sitting in for the great, the one and only Peter Schiff, who is off enjoying his New Year's today.
I hope that you're having a great, great morning, and we are going to talk a little bit today, and I would love for you to call in and chat about this.
This is something we all know something about.
Because we all went to our lovely, wonderful government schools.
Interestingly enough, designed by the same people who design and maintain prisons.
So, as the Chicago public school teacher's strike goes into its second week, and a great anguished cry arises from Illinois, what are we going to do with our children?
I thought it might be worth bringing a few facts to bear.
Public school teachers have a kind of sainthood automatically bestowed upon them.
There's a huge amount of propaganda that goes on about public school teachers.
They're underpaid.
They work so hard.
It's all they are.
All they care about is the kids and so on.
And I thought it might be fun to shoot a few arrows of facts into the giant helium gas bag of propaganda about public school teachers.
So let's look at some facts.
The first and most important one.
This is I think puts it all in context.
I think it was a 2004 study so it's probably even worse now.
In 2004 they found that almost 40% of Chicago public school teachers put their children into private schools.
Almost 40%.
40%.
Now, the national average is just over 10%, so it's almost four times, three to four times the amount.
What does that say?
Oh, I work at this restaurant.
This restaurant is the best restaurant ever.
Eat here?
Are you kidding?
I would never eat here in a million years, and I would never let the food that I serve touch my children's lips.
That's horrifying.
So clearly, the public school is relatively cheap because it's funded by coercive taxation and blah, blah, blah.
Private school is pretty expensive.
I'm not going to do that.
I think this is probably one of the reasons why our lovely public servants want a big raise.
Because it's really expensive to put your kids into private school and that's what they seem to want to do the most.
So, pay!
Pay for teachers.
73, $74,000 on average for a Chicago teacher, which is close to double the average for the city as a whole.
So they're not exactly being underpaid.
This doesn't count three months off in the summer.
This doesn't count massive pension benefits that are so high that every dollar that is spent in Illinois, every new dollar that is spent in Chicago in schools, in the educational system, 75 cents of that goes to pay existing teacher pensions.
In other words, the vast majority of the money that's spent in education in Chicago, in a true government paradigm, goes to pay people who are no longer teaching.
It just makes your head do that scanner's kabloom thing.
And they also, of course, have health care benefits that they pay almost nothing into.
Of course, in Wisconsin, they're being asked to pay a small amount, and consequently they are rioting.
But weekly pay for teachers, and this is a decade old, or more than a decade, so given how much the private sector income has collapsed, it's probably even worse now.
Weekly pay for teachers in 2001 was about the same, i.e.
within 10%.
As for accountants, biological and life scientists, registered nurses, editors and reporters, and it's, you know, you get all these summer vacations, professional days off, and federal days off, and so on.
Teachers earn more per hour than architects, civil engineers, mechanical engineers, statisticians, atmospheric and space scientists, physical therapists, university-level foreign language teachers, librarians, technical writers, musicians, artists, editors, reporters, and, dare I say, and throw in there, internet podcasters.
So it really is quite astounding how Much sacrifice is perceived and how little sacrifice, i.e.
how much exploitation, there is actually there.
So the American Enterprise Institute did a study and they said those who are education majors, right, so those who are going in to learn how to teach our precious offspring, undergraduate education majors, typically have lower SAT and ACT scores than other students.
So it's not like they're being paid more because they are la creme de la creme, they are the top of the heap.
They're being paid more.
Well, we'll get into that in a bit, but it's not pretty.
For more about why teachers get paid more, please watch the movie The Untouchables.
The lower the quality of the undergraduate institution that a person attends, the more likely he or she is to wind up in the teaching profession.
In 2001, only 60% of people training to be teachers could pass the basic teacher licensing exam in Virginia.
Oh, that's not good.
And so how did Virginia respond?
Well, the brave State Board of Education lowered the requirements.
Ooh, the teachers aren't passing.
Let's lower the bar.
Don't you remember that happening a lot when you were in high school and college?
Me neither.
In Massachusetts, lowered the passing grade for basic skills test for teachers in 1998 when nearly two-thirds failed it.
For those of you currently pursuing your education in the public schools in Chicago, two-thirds is a lot.
Sixty-six out of a hundred.
I don't know if that'll help, but given how few of you are good at math, and I'm so sorry about that, you know, this will help.
And, what about, how safe are the kids?
Well, estimates are that between 1991 and 2000, almost 300,000 children were subjected to physical sexual abuse by teachers or other actual personnel.
I mean, of course, you know, we're horrified at what happens in the Catholic Church with child sexual abuse, but We never hear a thing about public schools where, of course, they're in much more danger statistically.
It is really, really quite astounding.
And how is all of this money going?
$12,000, $14,000, $16,000 per student!
Well, in Chicago, oh, it's truly astounding.
There was one woman who was writing that she was in charge of 43 five-year-olds.
43 five-year-olds!
I mean, that's astounding.
You could never get away with that.
I worked in a daycare when I was a teenager.
You can never get away with that teacher-to-student ratio.
I mean, 43 five-year-olds, that's just mad.
And so, and just think, even if it's at the low end, right?
$10,000 per student, it's much more than that.
But let's just say it was only $10,000 per student, that's over $400,000 per year to pay a teacher a classroom and some, you know, hopefully edible glue.
So, of course, massive amounts of it get sucked up into overhead and all of this sort of stuff.
The administrators, everybody builds their fiefdom in bureaucracy, so it's just completely mad.
So let's see, how is all of this money, how are our precious children doing?
You know, we all love that Whitney Houston song, but as a society often we count a parent like Whitney Houston the mother, not Whitney Houston the singer.
So the Oklahoma Council of Public Affairs did a civic education poll among public school students 77% did not know that George Washington was the first president.
They couldn't name Thomas Jefferson as the author of the Declaration of Independence.
And less than 3% of the students actually passed the citizenship test.
Is that not horrifying beyond words?
These are the people who get to run out and vote.
The Institute of Phoenix, the Goldwater Institute of Phoenix, did the same survey.
This was much better, much better.
Instead of 2.8% of the students passing the civics test, they leapt up, I guess almost a third better, over a third better, 3.5%.
3.5% of students passed the civics test.
3.5% of students passed the civics test.
It is truly, truly astounding.
And another survey showed that more than 50% of students at four-year schools and more than 75% at a two-year college lacked the skill to perform complex literary tasks.
And when they say complex literary tasks, they don't mean deconstructing the syntax and the verbiage and the phonemes of Moby Dick.
What they're talking about, can you even analyze a basic news story?
Do you have the math skills needed to leave a tip at a restaurant or to balance your checkbook?
Truly, truly astounding.
More than 20% of American adults read at or below a fifth grade level, far below the level needed to earn a decent wage.
It is truly astounding.
We will, when we return, get back to all the causes of this truly catastrophic decimation of our children's minds.
This is Stefan Molyneux for the Peter Schiff Show.
I will see you after the break.
talking about the joys of public sector educational unions.
How did we get into this situation where children are just so catastrophically underserved when it comes to public school education?
What happened?
And why oh why is this doing so poorly?
Well, in the beginning, there was darkness and God said, let there be light.
and there was light low there was a lot of light and then God said no no no it's too much light let's let's turn it down just a little bit and he introduced public sector unions in education so this is a quick race through a big picture race through how we got where we got so if you remember there was a little conflict in the middle of the last century called second world war which was to fight two things really national socialism
which was the Nazi variety, and to fight Fascism, largely of the Italian variety.
And to beat National Socialism and Fascism, we had to, and I say we very collectively, we as a society, as the West, we felt that we had to align ourselves with Russian Communism.
Because Russia and Stalin and the Russian army was our ally, you couldn't say boo to a mouse about how destructive Communism was, because they were our ally.
A pro-communist message, pro-communist sympathies who are deeply embedded in Western culture.
Now the intellectuals, and I do in fact have the urge to say intellectuals and then spit on the ground as a curse because they generally tend to be the confusing exploitive plagues of society who tell everyone that the government should do everything for you and of course everything the government does for you it will end up doing to you in very ugly and unpleasant ways.
So they founded Communism, they founded National Socialism, they founded Fascism, they prepared the way for these totalitarian regimes.
When the totalitarian regimes grew into fruition, into their horrible mess that they came into, all these intellectuals fled these new societies and came across to North America and to England, where they got a whole lot of intellectual posts, university professors, think tanks, writers and so on.
And of course at the end of the Second World War there was the GI Bill and other equivalents in other countries which sent a lot of the soldiers who had just finished fighting socialism to university where they were taught by, as you guessed it, socialists.
And so the hedonism and the collectivism and the worship of secular state authority was embedded in our culture as all of these socialists taught Huge cohorts of youth.
This produced the 1960s.
Now in the 1960s, oh my goodness, the faith in government, you know, as the faith in religiosity began to fade, everybody runs to the new bus, as the song goes.
Meet the new bus.
Kind of the same as the old bus.
The old bus was eternal, the new one just feels eternal in terms of the run-up to an election.
And so there was this huge faith in secular government that came out of socialism and secularism and communist sympathizing.
And so you have massive expansions in state power in the 1960s.
You have the Lyndon Johnson's Great Society.
You have the unionization of government workers.
Should never have happened.
Even under socialist theory, there should be no reason whatsoever to unionize government workers.
You see, unions, according to the theory, unions are required because those evil capitalists want to crush and grind down the poor workers in hot pursuit of profits.
Of course, in the public sector, there's no such thing as a profit, and so there should be no downward pressure on workers' wages, so you should not need to unionize, but they did.
And in the 1960s in particular, they unionized the public sector workers in education.
This was really the beginning of the catastrophe we face now, because once teachers could no longer be fired, then they were no longer responsive to students, and once you got the union heads in there, Their goal was to increase wages, because when union heads increase wages, they increase the amount of money coming into their own coffers, because it's a percentage of wages.
They also had a huge drive, you may remember this, to shrink class sizes, because the idea was if you have smaller classes, blah blah blah, better students, better education.
How did that work out?
Well, statistically, it doesn't seem to have worked out in any positive way.
But of course, when you have smaller class sizes, you need to hire more teachers.
Ka-ching!
for the public school union heads.
And for the first generation, this is the weird thing, when you socialize something, when you kind of put it in the government sphere, when you public it, what happens is for the first generation things aren't really so bad because the teachers who were there all came in under a more free market environment.
Again, I know government education has been around since the 1860s, 1870s, which by the way, it came about not to solve any problem in education.
Literacy rates were far higher before government education.
Ninety, ninety-five, I've heard up to ninety-eight percent in Massachusetts, and this was good literacy.
Think of the classic American novels of the nineteenth century.
They were just astounding.
Hawthorne and Melville and the other writers, they were just astoundingly great, and it was a very powerful and strong poetic tradition.
The level of sophistication, even in the pamphlets, and try to read them now, they're all online, it's quite amazing.
So for the first generation you get people who are, you know, they kind of came into the profession when it wasn't unionized and socialized and they could have been fired.
So they developed work habits and skills and those don't just vanish the moment that the government steps in.
They stay there.
They keep going and so I actually, you know, went to school in the seventies and eighties and it wasn't so bad.
I mean, so people say, you know, who are, I guess, over 40 or maybe even over 35, they say, well, you know, it wasn't so bad.
But it's a whole different thing now because now you have all of these people who are statistically substandard, who are coming in, who are not as dedicated to the kids, who aren't in the same way and with the same motive doing it for the love of teaching.
It's about the most secure job you can get.
If you add benefits, you can quickly earn about $100,000 a year.
You understand all of these benefits.
And this is, of course, not to say there are no good teachers out there.
There are.
But statistically, things get worse when government control gets in.
I mean, and this shouldn't take any intelligence to figure out.
And I know this audience can figure it out, but, you know, the media, particularly second-hand intellectuals, They really cover this stuff up.
I mean, it's so ludicrous that it's virtually impossible to fire a teacher.
And the teachers themselves know how ludicrous this is.
All you have to do is ask yourself that basic question and say, hmm, if students couldn't fail a test, if students automatically went forward, what would happen?
If students could never fail a test, how many students would study for, and rigorously learn the contents of the test, if they could never fail.
Well, we all know that.
I mean, I don't know about you, but when I was a kid, the teacher would put on some movie, and the first question would be, is this going to be on the test?
And if it wasn't going to be on the test, then you would create your little Star Wars flipbook comic strips in the corners of your textbooks, and you would pass notes, and you would poke people, and you would make jokes, and all of that, because it wasn't going to be on the test.
Well, for teachers, nothing is on the test.
You can't really be fired.
And so the socialism that we fought, that jumped across the pond and infected the minds of the West, swelled government power.
And now, of course, it's to the point where anytime there's a problem, everybody says, we ought to have another law!
Even if the last 200 laws didn't solve the problem, 201 is going to be the charm and make everything better.
And this is the catastrophe of where we were at.
I really want to hear, if you're a public school teacher, a public school administrator, I guess you've got time if you're in Chicago.
If you'd like to call in, set me straight if I'm wrong, tell me what it's like, tell me all about it.
If you have memories or you have married to a teacher, you went to school, if you've ever seen a school, please feel free to call into the show.
We'd love to chat.
We are going to take a short break in a second or two.
We're going to come back with a fabulous guest who's going to talk quite a bit about finances with us.
And then we're going to talk a little bit, I think it's very interesting, you know, there's two things that the government loves to do.
Well, there's many things, but these two in particular.
Number one, they love to convert non-paid labor to paid labor.
And that's number one.
And number two, I will tell you after we come back for the break, this is Stephen Molyneux for the Peter Schiff Show.
We'll be right back.
All right.
We're back!
So we were talking about what governments like to do other than worm their inky squiddy fingers deep into the crevices of your heart, loins and wallet.
They like to convert non-paid labor into paid labor.
Why?
Well, because of course it's pretty difficult to tax unpaid labor.
And the second thing they like to do, of course, is they love to get those squiddy tentacle fingers deep inside the brains of the youngins, of the chillin.
And so one of the things that happened in the 1960s... I'm aware there's a sensitivity of this topic, so let me just preface by saying I'm a huge fan of equality for women.
Obviously I'm a huge fan of women having every opportunity that men can have and all that kind of good stuff.
That having been said, in the 1960s and in the 1970s, the first wave of feminism really strongly encouraged women to get out of the house, to go to work, and it's really, really important to understand that a lot of this movement was driven by government money.
I mean, I don't know what the numbers are in the US, but here in Canada, I mean, it's astounding!
Over 300 million dollars was pumped by the government into various feminist groups recently, and So it's not a natural expression of the collective desires of women and those who sympathize with and desire equality for women.
It's kind of like a tumor that's artificially fed by government money.
And so women started going into the workforce and women started divorcing their husbands.
Maybe those husbands sucked.
I don't know.
But, you know, the divorce rate in the 1970s went up over 300% and women charged into the workforce in great numbers.
Well, this was pretty sweet for the government.
And why is that?
Because when you convert unpaid labor to paid labor, oh, tasty, tasty, tasty, you get to tax it!
And that is juicy, juicy for the government.
So a huge number of things happened to enhance government revenue as a result of feminism.
It really was one of the greatest investments that governments have ever made in enhancing their own revenue.
And so, for instance, right, so a typical woman, She decides, she's got two kids at home, so she decides, I'm going to stop being a full-time mother and I'm going to go and become an accountant.
Because accountancy is huge liberty.
Well, so all of the work that she was doing to take care of her children, somebody else now has to do.
So what happens?
Well, she goes to work, so she starts to become a taxable entity.
Ooh, tasty, tasty money for the government.
And secondly, she has to find someone to take care of her children, And that becomes a secondary source of taxable income.
So her money, when she goes to work, and then whoever at the daycare, whoever is going to be taking care of her kids, for the most part, that becomes taxable income.
Sometimes it's relatives and friends, but for the most part, it becomes taxable income.
And, of course, children then, you know, we have this, I dare say, Stockholm syndrome with the state.
We bond with whoever raises us, and if you spend a lot more time In government daycares with government teachers, I guess it's going to be kind of hard to criticize them later on or look at things objectively because we kind of bonded with them, you know, like those ducks following those orange balloons around.
We just kind of get into that bonding with whoever raises us.
And so that has created a generation of people who have fewer bonds with their parents and more bonds with the state.
So it's a huge win.
for the government all around.
Non-taxable labor becomes taxable labor.
People who weren't paid for taking care of kids now get paid for taking care of kids and they tend to be strangers.
And that's hugely beneficial for the government.
The children are exposed to a lot of pro-government propaganda.
Again, I'm no expert on what happens in the States.
Oh, but I can tell you here, holy, holy!
I'm a stay-at-home dad for the most part and I was at the library with my daughter and one of the kids started singing The Canadian National Anthem.
And all the children, they stood up like little tin soldiers.
Stiff.
And they put their hands over their hearts and they all burst into song.
I mean, it was frankly, kind of like a creep fest.
And yeah, that's, that's pretty alarming.
That's pretty scary.
So this, I think, is really been how it's unraveled so far.
We're going to put that topic aside.
We have been waiting for a fine, fabulous and delightful guest to join us and I believe he is on the line now.
Are we connected, my friend?
Hello, hello.
Hello.
All right.
So this is John Tamney.
He's the editor of Forbes Opinion and a senior economic advisor to H.C.
Wainwright Economics.
So we're going to talk about QE3 and its effects on the election, is that correct?
Yes, among other things.
I hope that's going to have a big impact, although I think opposite what most professionals assume.
Okay, so my layperson perspective is that they're putting QE3 in to give an artificial heroin bump to the economy in order to maintain the system of power that is currently in Washington to keep Obama in.
Because then they can say, oh look, the economy is getting better.
But is your argument that the opposite is going to occur?
No, I think so, and for obvious reasons.
Let's face it, what is QE3 but an explicit devaluation of the dollar?
When you devalue the dollar, you're telling investors whose capital bolsters businesses and allows them to grow and create jobs But if you invest in future growth, we'll devalue those returns.
And so, I think heroin boost is false.
In fact, what Kiwi does is weaken the economy in both the near and long term.
And so, to me, this is just the latest Bernanke kill shot on the economy that's going to make it even more difficult for Obama to get re-elected.
Do you think that the effects are going to be that short?
Because usually when they pump a lot of money into the economy, there's a short-term high, and then, you know, 12 to 18 months later, you get the inflation, which not one person in a thousand can trace back to the original course.
Do you think it's going to be that sudden?
In other words, do you think people are onto this game now so completely?
Oh, I think they completely are.
The electorate's not stupid.
They're starting to realize that it's not market failure, it's not demand from India and China.
That have gasoline at these nosebleed levels of prices.
The reason gasoline's expensive is because the dollar's cheap, and that's been government policy really going back to George W. Bush's presidency.
So I don't buy for one second that the markets are that stupid, and I don't buy that the electric's that stupid.
But if you look throughout history, lots of political regimes have thought if we just goose the money supply that we will achieve some sort of grand political effect.
But most of them would be deemed failures in the aftermath.
And I don't see why this is any different.
Well, certainly throughout history, hundreds and hundreds of fiat currencies have all returned to their intrinsic value, which is a piece of paper with ink on it that you might frame and explain.
and put on the wall.
I think that British Sterling is still going after 300 years but you can only count that successful if you ignore the fact that it's had a 96% reduction in its original value so it's a little hard to maintain.
So do you think that they are trying to boost the economy but they are mistaken or do you think that there's some other reason that they're introducing this?
Well I think they are trying to boost the economy.
I think Ben Bernanke truly believes What he's doing actually creates economic growth.
That it's tragically not doing so really scares you to think that we've got someone so hopelessly wrong in such a position of power.
But I think Bernanke believes it.
Furthermore, I think he realizes that he is wildly unpopular now, particularly among Republicans.
And I think he realizes that if Romney wins, There's going to be a major call among Romney's base to replace him, and so it's just, I think, Bernanke at this point is making a blatant political move.
He thinks that he can help the economy, and that if he helps the economy, he helps Obama get re-elected, and that Obama will protect him, basically reappoint him in 2014.
I think it's a weak calculation.
I think it's going to backfire on both Obama and Bernanke, but that's what they're doing.
Yeah, what's that old joke about Bernanke?
He goes into a pizza store...
And he says, I want a medium pizza.
And the woman behind the counter says, do you want me to cut that into six pieces or eight pieces?
And he says, oh, eight pieces.
I'm really hungry.
Because I think he thinks that somehow slicing up pie gives you more pie.
Now, where is the acceptance of these sort of Keynesian doctrines in the general population as a whole?
It doesn't seem to me to be very believable to people anymore.
How are people, I mean, obviously they're not all the way over to the Austrian school, but Do you have a sense of where, I think investors are on to it, I think that some academics are on to it, but the general population seems to be quite skeptical of money printing and all of this kind of fendangery.
Do you think that's a fair assessment, or are still people catching up?
Oh, I think very much so.
I mean, I'm sorry, and I don't mean to sound flip, but I think even a ten-year-old understands that if money doesn't drive economic growth, that if you print too much of one thing with nothing backing it, really, that it's going to Gradually lose value.
So I think the electorate's long been aware that something's amiss here, that wouldn't it be so easy in life that if ever we ran into economic problems, that basically the central bank engaged in money creation to fix them?
That's not how economies work.
Money's sole purpose is to facilitate the exchange of goods, and that's why you want a stable dollar, a dollar that doesn't change in value.
You don't just print wildly.
Bernanke is misunderstanding the nature of money, and I'm sorry, I think the electorate's aware of it, but the shame to me is I think most economists actually believe in what Bernanke's doing.
They believe that economies should be managed by wise minds like them, rather than by individuals.
Yeah, it is really tragic.
I mean, people don't remember.
Of course, this is the 1984 thing.
So much time has passed that very few people remember since the gold window was finally closed under Nixon in 71.
They don't know!
A hundred years ago, an ounce of gold bought a really good suit.
And now, an ounce of gold buys a really good suit.
And gasoline has actually never been cheaper when it comes to buying it in gold.
It is only this paper currency.
I think you're right about ten-year-olds, and I hope that you can stay on past the break.
I'd like to chat a little bit more about this, but when I was a kid, probably when you were a kid, I was told, uh, money doesn't grow on trees, son.
But the ironic thing is, it actually kind of does, because paper comes from trees, and they just print more.
So money does kind of grow on trees, except they're not limited by the number of trees.
So if you can stay on past the break, I'd appreciate it, because I'd like to talk more about this, particularly what people can do in the face of this coming inflation, this coming reduction in the value of savings, which is hitting the U.S.
so hard.
Savings rates are incredibly low at the moment, and also increased laziness on the part of the banks, who can borrow at zero percent, lend to the Fed at a few points, and consider themselves economic geniuses.
So if you can stay on, could you have time to stay on past the break?
I'd be glad to.
Okay, fantastic.
We will be back in a second.
We'll talk more about economics, and then look forward to your calls.
Call us to Van Molyneux for The Peter Schiff Show.
A million dollars.
Luckily, Peter's intelligence is growing twice as fast.
That's incredible.
Welcome back to your source of sanity in an insane world.
It's The Peter Schiff Show. - Oh my God.
Alright, it's Stefan Molyneux from Freedomain Radio for the Peter Schiff Show.
We are back with John Tamney who is describing all the gold you can eat, the new federal fiscal policy for America in which the Fed is it what 40 billion dollars a month buying up mortgages and other kind of ham securities because you just can't have too many housing bubbles in any particular decade.
Now, John, your argument is that the electorate is smarter in aggregate than any particular individual.
And you would say smarter, I would assume, than some of the financial gurus in Washington.
I I don't agree with that but I'm certainly happy to hear the case and maybe we can have a tussle about it because I think there may be other factors that drive down the average decision making of the electorate but what's your argument that they're smarter than the average?
Well you know the main argument is that you or Peter or anyone might be smarter than most people in a basketball arena or a football stadium but in aggregate they know more.
And if you look at elections going back, really, to the 1960s, and I'm sure we could take it back even farther than that, the electorate's usually gotten it right.
I'm not defending some of their choices, but at the time of each election, you'd say the electorate chose what it deemed the more pro-growth candidate.
And that's more my argument, that the electorate goes for growth.
Candidates seem to be moving in that direction they vote for.
They don't always get it right, but they get it right at the time.
But wouldn't the counterargument be that more than half of American citizens now are either wholly or significantly dependent upon some sort of transfer of income from the government?
I think that may skew people's long-term, big-picture view or decision-making of best fiscal policy.
Best fiscal policy for most individuals is to have the government That's certainly the argument and I hear it a lot.
I don't buy it.
each time rather than have a true reformation, a cut in government spending, which would have a strongly negative effect on their income in the short run.
You know, that's certainly the argument, and I hear it a lot.
I don't buy it.
I mean, look, okay, we can point to these statistics, but the reality is I want to find 50% of Americans who say, you know what?
I like the meager check that I'm getting from the government.
I'm going to sit at home and do nothing all day because I like being lazy.
Americans are a self-selected bunch.
We're descended from immigrants, and because we descend from individuals who have the courage to cross, very often a notion, we tend to be very entrepreneurial and hardworking.
It's no mistake that our entrepreneurs are known globally Unlike those from any other country, and it's not even close.
And so, no doubt, a growing number, and it's discouraging of Americans to have some sort of sustenance coming from the federal government.
But I think for a lot of them, it's a short-term thing, something like a student loan, maybe a mortgage interest deduction.
But most Americans want something better.
And Americans, look, historically go for growth.
They vote for the presidents who present the best growth package.
Well, I think that there could be a change, but it would require a change in social narrative.
I know that's a really dull phrase to use, but human beings can go through unbelievable sacrifices.
You know, I was talking about World War II earlier in the program.
I mean, the sacrifices that were made for World War II were just mind-bending.
Now, we seem to have, to some degree, as a culture, a lust or taste for hard sacrifice, but I think that's simply because we don't have a narrative that makes that sacrifice worthwhile and because there's been such a pro-government, pro-socialist, pro-centralization, pro-Keynesian bias to our societies for many decades it would require someone to explicitly You've got to have a Churchill after a Chamberlain.
If you're going to have a change in policy, usually you need a big change in leadership.
It would require someone who can give a compelling narrative as to why Americans should go through the year or two of significant hardship that it would take to reorient the economy towards a more free market situation.
Do you think that Romney is that guy?
Well, I don't think he's that guy, but I would also say that Americans aren't Keynesians.
I mean, look at Richard Nixon said, we're all Keynesians now, and it took something, his second rate is Watergate, to force him out of office precisely because he went Keynesian in his spending, he went Keynesian in his taxation, went Keynesian in his dollar devaluation.
Carter was a Keynesian.
We kicked him out.
He lost to someone in Ronald Reagan who vowed to return the dollar to gold and who basically discredited Keynesianism.
George W. Bush, or H. W. Bush, reverted and we pushed him out after one term.
Clinton ran somewhat as a growth candidate and was in many ways the anti-Keynesian.
The dollar was stronger in his two terms in office.
He acknowledged that the era of big government was over.
He signed a capital gains cut.
The electorate loved him.
George W. Bush, of course, moved in the Keynesian direction and caused a financial crisis.
Obama has doubled down on Bush's disastrous policies, and if Romney presents a compelling case, and it's a big if, because I don't think he understands economic growth, he would logically beat Obama.
So I don't think we're a nation of Keynesians I just think Romney does not know how to articulate why the Bush-Obama policies have been such stupendous failures.
Well, both Romney and Paul Ryan have explicitly said that they're not going to talk about any areas that they would cut.
I mean, it's tragic, of course, right?
But it's inevitable, because obviously they can't talk public choice theory, and it's very clear.
They can't talk about what they're going to cut.
Because whoever they're going to cut is going to mount multi-million dollar attacks upon them in order to maintain their little fiefdom.
So it really is kind of shooting arrows over a house hoping you're going to hit a target.
You have to kind of vote blind and hope that somehow people are going to follow up on their rhetoric.
Of course the big argument also against the idea that the Americans are wise stewards of future financial growth is the size of government and the size of the debt.
If Americans were good at voting in smaller government candidates, Why has government continued to grow so exponentially?
No, no, I mean, that's a very good point.
And again, I think the electorate wants smaller government.
The electorate doesn't always get it, but let's face it, Ronald Reagan in many ways shrank the size and scope of government.
Not so much the size, but the scope of government.
The electorate liked him.
Clinton was very explicit and goaded along by Republicans.
He was very popular.
I think Americans do like him.
As for Romney and Ryan, I think you're speaking to the problem.
Never more than now, certainly never more in modern times, has government spending as a stimulant been so discredited.
Yet Romney can't even explain the areas in which he would cut.
Romney can't even explain, in terms of tax reform, some of the deductions that he would get rid of.
All those deductions are kind of obvious.
Get rid of the mortgage deduction.
It's an economic somnolent, not a stimulant.
And explain that you want to do it because you want to unlock assets that are stuck in property and move them into productive uses.
15.
That could be the result.
All right.
So listen, John, we've got to take a short break.
If you have a few more minutes, I'm sorry, we stayed mired in theory, which is my fault.
Let's get to some productive things that people can do with their money.
After the break, if you have a few more minutes, really appreciate your time.
Stiff and Molyneux for The Peter Schiff Show.
All right.
We have taken a slight deviation from the Peter Schiff Show from technical issues.
But, okay, so, John, the knowledge that we have at the macroeconomic level, always the challenge, is to bring it down to something useful, tangible, and microeconomic.
So, if you could funnel that, the grand concepts down to what people can do more practically with their money, I think that would be most helpful.
Well, it seems what you can do is the federal government, with the help of the Fed, has made it clear that it is looking to devalue the dollar even more than it's been devalued over the last 11 years.
What that says to investors is that you have to protect the dollar wealth that you have by essentially putting it in inflation hedges.
We're talking anything from gold to oil to rare stamps to art to land, dare I say it, and dare I say it, to real estate.
that is less vulnerable to the devaluation of money.
Where you want to keep it from, of course, is from equity markets and from bond markets.
Bond markets and equity markets are the future.
When you invest in either, you're essentially buying future dollar income streams.
But with the federal government explicit about wanting to devalue the dollar, these will not be good places to be.
You'll want to be in hard assets, and that's a shame.
We are telling investors today to move into the assets and wealth of yesterday to protect themselves rather from the ideas of tomorrow that will actually lead to real economic growth.
Thank you.
Right.
So, anything that has a kind of fixed interest rate is going to be consumed by inflation and you're probably going to end up losing quite a bit.
And of course, anything that is stuff, right?
I mean, it seems so Stone Age almost, you know?
I mean, financial instruments and cash were really the foundation of our modern economic wealth.
And telling people, it's almost like, go back to barter, grow your own food.
It's almost like pretend that the development of cash didn't happen because it is such a manipulative market.
I mean, they can't make more land.
They can't print more land.
They can't print more art.
They can't print more old stamps.
So anything that is fixed and has value, gold, of course, is an important one.
And anything that is going to rely on the value of future money, anything that's interest-bearing, is something to steer clear on.
Is that a fair way to put it?
That's exactly it, and that's the big tragedy at the moment.
When you think about it, devaluation is tautologically a blast to the past, and that's why it is slow economic growth.
When governments devalue, investment flows into the wealth that already exists.
Conversely, when the dollar is strong and stable, investment flows into the stock and bond income streams for wealth that doesn't yet exist, and that's why, during periods of a strong and stable dollar, economic growth is so profound and great, because investors can be intrepid.
They can be offensive in what they do.
Buy and invest in the future.
The government is explicit about how it's going to foster slow growth.
I've never thought of it that way.
I think that's a very intelligent insight.
It's such a sad commentary on where we are, but that's where we're headed.
And that's where we've been headed for quite some time.
I never thought of it that way.
I think that's a very intelligent insight.
So it's almost like we have to freeze time and hoard until inflation begins to cool down, which, of course, is only going to happen when government goes through the necessary pain of it.
This is the pain that Japan has been avoiding for like 20 years, so I don't know how long you can continue avoiding this pain.
The necessary pain of allowing for the short, sharp recessionary or depressionary readjustment, which historically It doesn't have to be that long.
I mean, everybody knows about the crash of 29.
Not many people know about the crash of 1920-21, which was even worse originally, but which was done within about 12 to 16 months because the government didn't do anything about it.
So it's a year to year and a half of pain, and we can be back on the rising smoke plumes of infinite growth.
I still find it hard to imagine how governments are going to be able to... I mean, governments have been shielding people from economic reality for so long that it would take such a reversal to say to people, well, the policies of the last 40 years have been catastrophic.
40 years is about the average lifespan of a fiat currency.
We're right on time, and so we're going to have to tie it back to gold or a basket of commodities so that it's not open to this kind of political manipulation.
That would take a real visionary to come in.
I mean, I think Ron Paul had obviously the economic chops and the personal integrity to make that case, but it's hard to see if there's somebody on the horizon who can do that in a way that is going to allow people to accept the sacrifice.
Well, it's hard to see someone doing it, but I guess I disagree that it would be difficult.
What we're experiencing right now is what's hard and difficult.
When devaluation occurs, once again, investment moves away from the productive ideas, it eviscerates paychecks and it leads to this slow economic growth that means that it's difficult for individuals to find jobs.
It seems anyone with half a brain would say, "This is not working.
Let's go in reverse." And let's be fair, we did it once.
The 1970s were another period of major dollar devaluation malaise.
And let's face it, the Reagan and Clinton years were the opposite of that.
If you look at the dollar price of gold during the Reagan and Clinton years, the price of gold fell substantially, and it fell even more during the Clinton years.
As a result, investment flowed into new ideas.
Unemployment was very low.
Wealth creation was plentiful as a result.
It doesn't seem like it would be very hard, and it would be something that would be very quick.
says tomorrow that it wants to stabilize the value of the dollar at a much higher level, meaning the price of gold would fall, this would be mana from heaven for investors.
They'd say, okay, we're going to be protected if we commit capital to the future Microsofts and Intels and Googles of the world, and you'd see a reorientation of investment away from the inflation hedges into real productive ideas.
This is something the electorate would love.
It would occur in concert with falling gasoline prices, with the rising value of their paychecks.
This would be good.
Would it be recessionary in some places?
Yes.
Places like Texas and North Dakota that are more reliant on commodity wealth would struggle for a time, but eventually they would get through it.
Yes.
Yeah, I think people don't understand wealth generation.
I mean, it's nothing we're taught about.
It should be taught about starting from, like, grade 5 onwards.
But, I mean, people think that the economy is just some big, giant, smoky machine that produces things like a conveyor belt or something.
But, I mean, I was an entrepreneur in the software field for 15 years and traveled and worked all over the world.
And I know firsthand that if you don't know what the value of money is going to be 12 months from now, 24 months from now, It really becomes hard, if not impossible, to do a lot of investment in R&D, to take your capital and invest in those profit-growing, jobs-growing, business-growing investments that you need to, because you simply have too uncertain environment.
We were, of course, multi-country, so we'd be dealing with exchange rates, we were dealing with the future value of money, and this really became... And when entrepreneurs get too many variables to make intelligent decisions, they tend to not make those investments, and it takes a while for that to show up, because there's always stuff in the pipe.
But I think people don't understand that they're more unstable.
You know, it's like trying to ask people to run hurdles during an earthquake.
Your skill set just becomes kind of nullified by the randomness of the environment.
Oh, I mean, absolutely.
And it's kind of like if they change the length of the minute every day, you'd have a lot of burnt apple pies.
You'd have a lot of mistakes.
And the same with the floating dollar.
You have a lot of mistaken investment that's the result of the money illusion.
And it's got to be stressed, and it's kind of along the lines of your point.
Economic growth is so easy, particularly in a country like the United States, full of the greatest talent that the world has ever seen.
How you achieve economic growth is basic.
Have a light bit of taxation.
Taxation is a price.
Allow for free trade.
Reduce the regulatory state to a minimalist one so that entrepreneurs can be entrepreneurs.
And most importantly of all, offer to those entrepreneurs a dollar that's unchanging in value.
Once you do that, basically once you reduce the imprint of government on economic activity, you get a lot of it, particularly in a country like the United States.
And so what scares me is that so many politicians look at this as austerity or as something that's going to be painful.
No, once again, the pain has been the last 11, 12 years of dollar devaluation that has forced limited capital into the wealth of yesterday and has led to very slow economic growth.
It clearly gave us the underpinnings of the financial crisis because a lot of money flowed into housing wealth that is something least vulnerable to the devaluation.
If you reverse that, that's going to be a positive thing.
It's not going to be a negative.
I agree with that.
So, I guess the last question I have is, I am particularly drawn, obviously, to gold and to things that are of fixed value and certainly increasing value relative to a declining dollar.
I'm also quite fascinated by mining stocks.
I mean, way back in the day after high school, I was actually a gold pan or prospector and plain staker in the north of Canada for a while, and so I have some sort of, obviously, on-the-ground, first-hand experience of that industry.
I find that mining stocks, of course, if gold is worth and other precious metals and resources that come out of the ground are worth, then it would seem that mining stocks are an important thing to get into.
But of course, it's a difficult field to get into.
There's a lot of specialized knowledge.
Do you have any particular places you go for the best information and do you recommend that in general as an approach?
That's certainly another way to do it, to go into mining stocks.
I don't have anything specific.
I don't have a specific website.
Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show.
He is a licensed financial professional both in the U.S.
and Israel.
Securities offered through Portfolio Resources Group, Inc., Member FINRA, SIPC, MSRB, NFA, SIFMA.
valuation.
And so that's sadly where you want to be right now.
I mean, you think about mining stocks, gold, oil, copper, these are so prosaic and boring, low profit margins.
And so yesterday, what's made the US rich in modern times are high margin ideas like the Intel's and Microsoft's and companies like that.
And so investments logically moving away from them.
But for right now that we've got to protect our wealth, I would say if we did move back to some sort of stable dollar regime, there is talk that will do that.
Well, the first thing I would do is buy an ETF on the NASDAQ 100 because you'd suddenly see a lot of reorientation of investment into new ideas rather than the ideas of yesterday.
But right now there's no call to do it.
The Fed has made it very clear that it's going to devalue the dollar with the White House's consent.
But the good news, the silver lining here, is that you may want to have some exposure to technology just a little bit, because the Fed, before our eyes, is discrediting itself.
The electorate is not going to keep putting up with the destruction of their paychecks and the destruction of their job opportunities.
I don't think the Bernanke Fed will have too many more QE's in its system, and it's not going to because the electorate will not allow it.
And I don't think the political class will keep allowing it.
It doesn't work.
Yes, I think that's a great point.
All right, well, I really appreciate your thoughts, your insights and RealClearMarkets.com is where people can go for some of your writings and places where you edit.
Are there any other places on the web where people can come and ping your economic brain?
Well, yes.
I'm also editor of opinions at Forbes and so they can go to Forbes.com slash opinions and they can find my writing and then the writing of a lot of my other writers who feel the same way.
In many instances, the dollar is the biggest problem today and that we've got to rein in the Fed.
And if we do that, we'll see the economic growth that we're used to and that we saw in the Reagan and Clinton 80s and 90s.
Fantastic.
Well, thanks again, John.
That was a really enjoyable chat and I'll talk to you soon.
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