November 4, 2025 • 54 mins
7 years before the release of the award winning documentary The Housing Bubble and 13 years before the release of the sequel The Fall of 2008, Jimmy Morrison premiered a teaser for the project in front of 1,400 people at Freedom Fest in Las Vegas. The panel featured Doug Casey, Peter Schiff, and Gene Epstein from the cast, co-writer Tom Woods, and producer David Tice.
Rocksteppy (2017)
The Housing Bubble (2019)
Grid Down (2022)
My Dad The Honor Flight Director (2023)
The Fall of 2008 (2025)
The Bigger Bubble (2026)
Let Us Disagree with Jimmy Morrison:
Rocksteppy (2017)
The Housing Bubble (2019)
Grid Down (2022)
My Dad The Honor Flight Director (2023)
The Fall of 2008 (2025)
The Bigger Bubble (2026)
Let Us Disagree with Jimmy Morrison
Ep. 1 - Jim Rogers
Ep. 2 - Ron Paul
Ep. 3 - Peter Schiff
Ep. 4 - The Fall of 2008 premiere (Steve Forbes, Peter Schiff, Mark Skousen, John Fund)
Ep. 5 - Gary Johnson
Ep. 6 - Grant Williams
Ep. 7 - TJ Miller
Ep. 8 - The Bubble 2012 teaser panel (Doug Casey, Peter Schiff, Tom Woods, Gene Epstein, David Tice)
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
To get our next program underway, got a great one for
you. I think you've probably noticed
Flyers and posters around the hall for something called The
Bubble. It's a movie you're going to
know more about by the time thissession is ended because the
title of our program today is The Bubble, Who caused it, who
(00:21):
called it, and what's next? We've got a great panel for you
and to introduce them and get things underway.
Please join me in welcoming Jimmy Morrison.
He is the co-author and directorof The Bubble Jimmy.
(00:42):
Hi, I'm glad you all can make ittoday.
We're going to start out right away with the world premiere of
our trailer. This project began 2 years ago
and my idea was to track down the people who predicted the
housing crisis, ask them why it happened, and more importantly,
ask them what's next. So right away, we'll start with
the trailer. Thank you.
(01:13):
It just is, right here in America.
If you own your own home, you'rerealizing the American Dream.
I ran for president in large measure because I wanted to
restore that dream. We can put light where there's
darkness and hope where there's despondency in this country, and
part of it is working together as a nation to encourage folks
(01:34):
to own their own home. One of the great successes of
the United States in this century has been the partnership
forged by the national government and the private
sector to steadily expand the dream of home ownership to all
Americans. It.
Means we use the mighty muscle of the federal government in
(01:54):
combination of state and local governments to encourage owning
your own home. That's what that means.
I ask all of you just one more time to look at that chart, and
I wish I had a lot of other shots to show you that would
reinforce that. We have to do something about
it. The question is, what do we do
and how fast do we move? They couldn't see this train
(02:16):
wreck wreck coming, even though it was staring them in the face.
They're the people who are stillin charge.
They're the ones who are fixing the economy when they don't
understand why it broke. In fact, they broke it, and
they're trying to fix it by doing more of what broke it in
the first place. The debt continues to rise and
(02:40):
we're all getting into a worse fundamental situation than we
had before and we're all going to pay for it.
Be very careful and worried about 2013 and 2014.
(03:06):
All right, before we get started, you might notice two
things from this trailer. 1 would be the tone of the people
that were talking. You heard Barack Obama, you
heard Bill Clinton, George Bush.These are two different parties
saying essentially the same thing.
But it wasn't hate that was coming out of out of their
mouths. These people had good
intentions. They were just trying to promote
(03:26):
what they thought would be better for society.
This documentary is not a political documentary.
It's an economics documentary. So what we're looking at is not
their intentions, but what the effects of those policies were.
I I've interviewed 15 people, including all the people you saw
up there. Most of them were in the
Austrian School of Economics. Each president that you saw up
(03:48):
there practice Kenzian economic policies.
So what we want to look at is their ideas and ask these people
who actually saw it coming what ideas they have for the future.
They have the track record in the Austrian School of Economics
of predicting the housing bubble, the Internet bubble, the
S&L crisis, the Great Depression, the stagflation of
(04:08):
the 1970s. I think it's time that we look
at these, look at these beliefs that they have and see how they
were able to see these things coming.
So today we have a Gene Epstein from Barron's.
He's written extensively following the crisis on how the
Dodd Frank regulations have hurtour economy.
He he's written a lot about the Wall Street bankers and the
(04:29):
government side. Some people just look at what
the government's done. Some people just look at what
the private market's done. But Gene does a great job of
looking at both. We also have Peter Schiff, as
you all know, who predicted the crisis long before it came.
And not only that, he predicted all the things that the
government was going to do and what the effects would be.
We also have David Tice with Tice Capital in Dallas.
(04:51):
He held a credit symposium in 19in the late 1990s.
What was the year 99? And he he detailed why he
thought that we had a credit bubble in the late 90s.
So to moderate this panel that looks at what's next in our
economy, we have Doctor Tom Woods who wrote the New York
Times best selling book Meltdown, which the really
(05:13):
inspired this project. I'm sure a lot of you know it
well. So without further ado, Doctor
Tom Woods. OK, Thank you.
Ladies and gentlemen, before we get started, just a quick
program note. I want to bring your attention
(05:34):
to modification in the program tomorrow morning at 9:00 AM.
In this room, you will note thatthere is a presentation taking
place by John Brown regarding the subject of sound money.
But left off the program is the other half of the presentation,
which involves Peter Schiff, andhe's going to be talking about
practical steps that that peoplemight take and that Peter and
(05:57):
his firm are helping people taketo cope with the currency crises
that are certainly coming. So that's 9:00 AM tomorrow
morning right here. OK.
So we're going to dive right into this, and I'm going to be
asking these folks some questions.
And they're a little bit idiosyncratic because they're
just a lot of sorts of things wemight want to know about about
what's what's happened, what's going on, what's likely to take
(06:19):
place in the future. So I want to start off with this
question and I'm not going to put any one of these good
gentlemen on the spot. I'm going to throw the question
out and anybody who wants to take it can take it one at a
time, you know, no pushing. But my first question is we hear
a lot on the Internet and from some left wing outlets about
(06:40):
where are the handcuffs? Why aren't these people in
handcuffs? So my question is, when you
think about the housing market and how it was operating in the
years leading up to the crash, are we talking here about crimes
that were committed? Are we talking about errors that
were made? Are we talking about errors that
(07:00):
were made because government involvement encouraged the
errors? Are we talking about crimes or
errors? Anybody want to jump in on this?
Well, as a matter of fact, this is maybe the one thing I can
comment on. I think looking at the future,
my colleagues are better at The problem with indicting anyone
(07:20):
for what happened is that you have to prove intent to be
fraudulent. You have to do.
You have to prove that they behaved like Bernie Madoff.
There is no question that there are two politicians at least who
clearly had the intent to defraud.
Probably not George W Bush, he'stoo naive.
(07:41):
Probably not Bill Clinton, He too be difficult to make the
charges stick. In that case it was.
It's just fear. Most what politicians do in the
name of good. But the two who are most
vulnerable to being indicted areChristopher Dodd and Barney
Frank. If you actually quote them, you
can see, I mean, Barney Frank was in 2003 denying vociferously
(08:08):
that Fannie Mae and Freddie Mac had government guarantees.
There's no wink and nod guarantee.
There is no implicit guarantee. Now, the problem with indicting
Barney Frank and Christopher Dodd, Christopher Dodd, as you
many of you know, is essentiallysort of dropped out of politics
now running motion pictures in Hollywood.
As you also may know, because hewas, he was put on the VIP list
(08:34):
by Angelo Mazzillo at at at a time when he was a cheerleader
and Angelo Mazzillo's countrywide was, was, was, was
being patronized by Fannie and Freddie.
They clearly could be two peopleyou'd indict.
On the other hand, they also have their name on the Dodd
Frank bill. So, So what are you going to do?
(08:54):
Obviously, it's impossible to indict such people who are
parading as though they solve the problem when they were two
of the principal political villains.
So yes, you can indict somebody,but no, it's not practical.
Yeah. Well, he left off my favorite
candidate that I'd like to see wearing pinstripes.
That's Alan Greenspan. Although I don't know if what he
(09:16):
did was criminalized. I think it was treasonous.
And I think that Alan Greenspan knew better and he and he did it
anyway. But you know, I how much
criminal behavior there was, I know there was fraud, you know,
certainly at the lower levels. I, I, you know, I, I used to
sublet some space to mortgage brokers and I, and I heard first
hand, I saw these guys doctoringup W twos.
(09:38):
And there was a lot of fraud kind of committed lower down.
But most of it was simply bad behaviour that was done under
the influence of the cheap moneythat was supplied by, by the
feds and the moral hazards supplied by Fannie and Freddie
and the FHA. The crime was against
capitalism. It was against the Constitution.
(09:59):
And you know, to the extent thatyou can call it that, it's, you
know, our, our elected officials, they all swore an
oath to uphold the Constitution.And by meddling the way they
did, they all violated that oath.
Maybe they can be prosecuted forthat, but I doubt it.
Yes, I would agree with Peter that there were definitely more
(10:20):
errors. And I also indict Alan Greenspan
because as Peter said, he he knew better.
He wrote about asset inflation, he wrote about credit bubbles,
etcetera. So he should have understood,
but and he actually warned back in 96 about irrational
(10:40):
exuberance. However, he really couldn't take
the heat and unfortunately he was the wrong guy in charge.
And we ended up buying incremental points of GDP in
order to keep, you know, everyone happy and keep
politicians elected. And it resulted in obviously
this disaster that we face today.
(11:02):
And it's really policy makers and economists following wrong
headed economic theory, the Keynesian theory, instead of
understanding the Austrian School of Economics.
I just, I just wanted Mason to add that I would not exempt
mortgage brokers. I would not.
Cigarette is. Stop smoking.
(11:23):
Yes. No, no.
I'm in the entertainment business.
I I'm in the entertainment business.
And you know, when Frank Sinatrawas here years past, he would
smoke a cigarette. Come on.
What is this? This is a Freedom Fest.
What's the matter with you people?
I mean, we these these these damn politically correct and
(11:49):
being an anti smoke Nazi is partof it.
So call the management your way down there in the audience.
And I happen to be smoking courtesy of a Freedom Fest
attendee, a good Cuban cigar. This happens to be a Cohiba
Lancero. So, so get, get the get the get
(12:11):
the management to kick me off the stage.
It's fine. All right, Yeah.
I didn't because I'm just finishing one that I I'm just
why? I'm I'm, I'm sitting next to it.
I'll put up with it. I won't teach this man a lesson
in what real libertarian law is all about.
He has to learn that someday. But that aside, to pursue
another point, it's only that yes, there are capitalists,
(12:34):
crony capitalists that were involved, but but at the risk of
offending some of you who like some of government's wars, it's
like it's, it's like indicting the people at Abu Ghraib, the
soldiers in the field at Abu Ghraib were basically taking
orders from the commanders. If those people deserve to get
punished, then the commanders really deserve to get life.
(12:55):
And the commanders, as my colleagues have pointed out,
include Alan Greenspan. And I have to throw in his
Lieutenant at the time, Ben Bernanke, again a difficult man
to indict, do. You want to jump in on this?
Really giving Alan Greenspan a run for his money for the title
of worst Fed chairman ever. The only thing I can say is that
(13:16):
this whole problem explain to meit's all due to fractional
reserve banking and and so forth.
So I, I, I know that you all will agree that the Federal
Reserve and all central banks serve no useful purpose.
They should be abolished. And we wouldn't have had this
crisis if they hadn't existed. So that's the root of the
problem. The way I see it, it's
(13:37):
criminality at the highest level, and most Americans
approve of it. All right.
Now we're going forward into thefuture and we've had the Dodd
Frank bill. And my question is, I'm pretty
certain just about nobody in this room has read that Bill
Jean might have. I know Jean, you had a session
on this, so I don't want you to have to recapitulate the whole
thing, but do you think Dodd Frank will help prevent future
(14:01):
crises? I I ask this is a bit tongue in
cheek here, but if not, why not?Is it missing the point?
Is it actually making things worse?
What's the problem with it, Dodd?
Frank says nothing at all, by the way, about the the two
elephants in the room, Fannie Mae and Freddie Mac.
(14:21):
Nothing at all because again, it's got Christopher Dodd's name
on it, Barney Frank's name on it.
They're, they are the villains who wrote the legislation.
You might as well call this the Bernie Madoff bill to protect us
against future financial crises.So that's why it's a joke.
It includes, it includes the Volcker Rule.
Paul Volcker himself admitted weneedn't go into the Volcker Rule
(14:42):
because Paul Volcker admitted that whatever the Volcker Rule
addresses proprietary trading bybanks had nothing to do with the
crisis. It includes a provision on more
women and minorities being allowed to serve on banks.
Well, you could create a case that maybe if they had more
women in the banking system, thebanks wouldn't have been so
profligate, but that's sort of reaching.
(15:03):
The fact is that the Dodd Frank bill does not address the issue
at all. It was a sin of Commission on
the part of the government. That's the problem.
It was not a sin of omission to accept, to expect the government
and to expect especially the twoprincipal villains, Christopher
Dodd and Barney Frank, to indictthemselves, to reform
themselves. That's a joke.
(15:23):
That's not going to happen. We only need radical solutions
to solve the problem. Dodd Frank doesn't address it at
all. Yeah, You know, they, they
convened a, a, a Commission in the in the wake of the financial
crisis and they and Congress tried to figure out what caused
it. And it's interesting that none
(15:43):
of the people on this podium or in that film were called as
witnesses to testify. I remember I was trying my best
to get Congress to to call me. I said, you know, I wrote a book
predicting it. Maybe I can come down and
testify as to what I was thinking.
But, you know, they they had a preconceived conclusion which
they wanted to rubber stamp withthese phony hearings.
And they wanted to blame the crisis on a lack of regulation
(16:06):
to just too much capitalism and not enough government.
And the reason is Dodd Frank isn't going to work is we did
have a lot a lack of regulation.It was a lack of free market
regulation. We substituted the free market
for government. The free market would have
prevented all of this from happening.
The free market is an excellent allocator of credit because you
(16:26):
don't loan money to people who can't pay it back.
But when the government gets involved and guarantees the
loans, then people get credit that the free market would have
denied it credit. And that's a good thing.
And everybody always forgets, yes, somebody got a mortgage.
Well, what businessman didn't get a loan because the
government directed that capitaltowards the government
(16:49):
guaranteed loan. And so we make the economy
weaker in the process. So we don't need this bill is
just going to make it worse. More government meddling in the
economy is going to lead to greater malinvestments, a bigger
distortions. What we needed to do is get the
government completely out of housing.
We should have just abolished Freddie and Fannie and the FHA.
And you know, these guys are so brain dead.
(17:10):
I just testified in Congress just like a month ago and this
is what they were considering. They now want to extend
government guarantees through FHA to apartments, multi family
housing after just going througha disaster with single family.
And I was sitting at a podium full of industry lobbyists from
(17:32):
the mortgage industry, from the home builders, from the
Realtors, all saying that the government guarantees would cost
the taxpayers nothing. You know, as if you know what?
You know, we're on the hook for the loans that go bad.
Meanwhile, FHA is on the verge of bankruptcy itself.
It's about to need another government bailout.
(17:53):
Yet we want to put their guarantee behind multi family
housing. You know they've learned
nothing. I I agree Dodd Frank is not the
answer. And to me, the biggest problem
is really the Fed's dual mandateof watching inflation as well as
creating an economic growth. And essentially we have a system
(18:18):
now where the Fed feels as if they can micromanage the economy
and prevent downturns. However, you cannot prevent
economic downturns. Let the market do its job.
If you try to have the Fed come in and prevent those downturns,
you will just have a far worse outcome down the road.
And therefore, you know, that's big problem.
(18:43):
Yeah. And the only thing I would add
with that is the answer is not passing more laws.
It's to abolish all the laws that they've put into place that
have caused this crisis. So the solution is abolishing
laws wholesale, not not passing more laws.
I mean, this is this is asking, this is like medieval monks
(19:06):
asking how many angels condense on the head of a pin.
That's not the issue issues whether the government should be
involved in any of this. It should be involved in none of
it, none of it, none of it. So that's it's, it's very
simple. We shouldn't even be having this
discussion. Well, unfortunately indeed we
are. All right, we're going to switch
(19:28):
gears for a minute, but before we do so, I want to ask you
folks as a favour to help get momentum going for our project
to make sure and subscribe on your social media, Facebook and
Twitter, facebook.com/the BubbleFilm and twitter.com/the Bubble
Film. We would be so super happy.
Like I'm going to come over to your house and thank you.
(19:49):
Although if you found that creepy just just to be a nice
guy, I wouldn't do that. But as long as you will will
help us out. And also at the website
thebubblefilm.com, we have the raw interviews where we haven't
taken the clips out of them yet with several of the people right
here on this panel and others people you admire and respect, I
hope and you get to hear their whole their whole interviews.
All right. Now I want to turn to a slightly
(20:10):
more technical question. But anybody who wants to take
this can and if you prefer to pass, that's fine too.
But the issue of the credit default swap I I wonder if
somebody can explain. What is a credit default swap
and did this contribute to the financial crisis?
And thirdly, is there anything wrong with credit default swaps?
Anybody want to jump in on this?Yeah, well.
(20:33):
Basically what it is is, you know, if you loan somebody money
and there's a risk that they don't pay it back and you want
to hedge that risk, you can sellthe the risk to a counterparty
that is really acting as an insurance company just like you.
Anybody wants to mitigate risk, You want to mitigate the risk of
an auto accident, you buy auto insurance, the counterparty is
(20:55):
on the hook if you have an accident.
The problem in the, in the bubble is that the, they were
writing insurance on the assumption that they would never
have to pay. So a lot of the counterparties
were writing credit default swaps based on the fact that
they thought they would never have to pay.
And a lot of this was made possible based on the the Fed
(21:16):
being there, the implicit guarantee that the Fed would
backstop these institutions, that they were too big to fail
and interest rates were so low. And once you inflated this
housing bubble, part of the problem is people thought that
the insurance it would never have to pay off because people
thought real estate prices wouldnever fall.
I mean, I remember for years when I was talking about warning
(21:37):
about the housing problem, the reason that people dismissed my
warnings out of hand was becausethey were predicated on real
estate prices going down. And that was thought to be
impossible. And, and so, you know, you had
all of this, all these credit default swaps, had the
government allowed companies like AIG was obviously the
biggest offender. And the reason that AIG was
going to go bankrupt was becauseit had taken on all this risk.
(22:00):
Had the government simply let AIG fail and let the
counterparties lose money, then we would have probably stopped
this problem in the bud. It wouldn't have happened again
because the people would have lost a ton of money and they
would have learned their lesson.Instead, we bailed everybody
out. And so the problem persists.
Yeah, the go ahead. I believe one of the biggest
(22:22):
problems with credit default swaps is it it created this
problem of creating unlimited demand for risky long term
paper. And essentially in the past you
have been limited by the amount of demand for long dated paper
that was risky. However, through Wall Street
(22:42):
alchemy, what's happened is through credit default swaps,
you essentially convert a risky instrument to a safe instrument
and then you can utilize variousother derivatives and convert a
long dated instrument to a shortdated instrument.
So what that does is it creates these risky long term paper
(23:08):
becomes money market paper that therefore there is unlimited
demand for. So this is what created this
massive demand for all this risky paper.
And Doug Nolan first wrote aboutthis my compadre at Prudent Bear
Fund, and he calls it the Moneyness.
Of credit, I make a note. You know, before anybody ever
(23:28):
heard of Peter Schiff, the firstwebsite I used to go to every
morning was the Prudent Bear site to read those columns
religiously every morning I did that.
I should only add a credit default swap is a derivative.
Warren Buffett called derivatives weapons of mass
destruction even though he himself uses has used
derivatives. Derivatives include options,
(23:49):
futures. Essentially it derivative is
toxic depending on what it is derived from.
Even a stock arguably is is a derivative and that could be
toxic if it's part of a company that is supported by the
government that's about to go bust.
Anything is toxic if it's derived from something that is
(24:12):
essentially going to go bust. Essentially a part of a bubble.
But that bubble was created by the government.
That bubble and that risk was not even sufficiently
appreciated by the Federal Reserve as late as O6 and O7.
They had absolutely no idea whatwas happening.
The housing market that has cometo light, how would you expect
the average investor who bought those derivatives, who created
(24:34):
them, to know something? The Federal Reserve that has
incredibly more access to knowledge did not know either.
So again, derivatives are bad. If they're derived from
something bad, they aren't in themselves bad.
It's like shooting the messenger.
Maybe they make things a bit worse, but that in itself is not
the fundamental issue. What are they derived from?
(24:55):
I think it's more serious than that of The fact of the matter
is that something like 20% of the American economy is
financial related, and this is greatly overblown.
It's completely ridiculous. Financial, the financial
business should be nothing but away to keep your money liquid
(25:20):
while you actually produce real wealth.
And it's, it's a phenomenon that's been generated by the
creation, hundreds of billions and trillions of currency units
out there where people try to juggle these things around.
The whole financial industry is,is bankrupt and it's going to
collapse. And it should collapse in a
(25:41):
sound economy. The, the banking industry should
be a couple, 3% of the economy. It's about 20% of the economy.
And it's because of the creationof all these currency units.
So it's going to get worse and it's all going to collapse and
it's going to be very, very uglyjust.
Just for starters, getting moneyglobally.
(26:02):
There would not be currency traders, there would not be so
many thousands of people tradingcurrencies.
There would be no such thing. The market, the free market
naturally gravitates toward a single currency, or toward maybe
at most 2 currencies. There would be no such things as
dollars, EUR, yen, a whole lot of things for the financial
(26:22):
industry to do that really are unnecessary in a free market,
just as a simple example. All these banks have have rooms
this size full of traders sitting in front of their
screens that are buying and selling.
And it's not with the capital ofthe banks, it's with the money
of the depositors that they're making all these crazy bets.
(26:43):
So it's a very unstable situation.
It will fall apart. All right.
Now Jean referred earlier to radical solutions and saying
that nothing short of radical solutions will suffice and we'll
hold off to the end appropriately enough for for
what the radical solutions wouldbe if we could, we had our
druthers, what would the solution be?
But let's imagine we're in this mixed economy situation right
(27:04):
now where you have a banking system that to the untrained eye
looks like a free market bankingsystem.
But we know it's got a cartel. It's a cartel structure.
It's got the central bank at thefront.
It's got monopoly privileges andmoney creation privileges.
So my question would be in this situation, is there a case to be
made for Prudential Regulation that would say that the banks,
(27:26):
if they're going to have all this implicit or explicit moral
hazard creating institutions like the FDIC or the Fed, then
we have to say that you can onlyhold these types of assets.
And if you hold these types of assets, you have to hold this
much capital in reserve against them.
Is this some kind of a, or is itbetter to just have the banks
(27:47):
just operate without these restrictions but yet still be
covered by the taxpayer? What's the approach we should
take in this less than desirablesituation we're in right now?
Well, the best thing to do wouldbe to remove the guarantees of
deposits and we can have a free market in banking.
I mean, and those guarantees arethere not to protect the
depositors, but to protect the banks, to allow the banks to be
(28:08):
reckless because their customersdon't care about what they do.
So we, we, we really need to getrid of Deposit Insurance.
But unfortunately, if we're going to insure bank deposits,
then it's a non-smoking bill. What?
(28:31):
So. That's his, That's the point.
He's on somebody else's property.
That's right. So, yeah, you know, if we're
going to make the mistake, unfortunately, if we're going to
make the mistake of removing market forces from the equation
and guaranteeing bank accounts, then we have to unfortunately
regulate what the banks do because we obliterate all the
(28:53):
market regulation. So this is a situation where two
wrongs actually make a right. But unfortunately the government
regulation will never be as goodas the market regulation.
And the best solution is to end the Deposit Insurance and then
the banks are going to be under competitive pressures not to do
stupid things with depositors money.
Otherwise they won't have any depositors.
(29:14):
They'll go to the banks that areacting more prudently.
I fully agree with ending Deposit Insurance, but I think
that in in the spirit of the question that was being raised,
I would regard ending Deposit Insurance and by end by the way,
ending all guarantees to investment banks as well as a
radical solution. Of course it's ridiculous.
I mean, I write for barons. Imagine that our subscribers are
(29:38):
guaranteed to us by the federal government, that all of them,
if, if they don't want to pay, the federal government would
pony up. Well, we're not going to be very
well managed. We're not going to be, we're not
going to be run by a guy who I respect, who runs our own
magazine, who worries about the downside, who worries about
losses, worries about losing readers and gaining readers and
(29:58):
gaining advertisers. Indeed, we have an environment
in which we treat banks. We would not need to regulate
the delicatessen on the corner because it can go out of
business. It doesn't need Prudential
Regulation. But banks that have the kind of
FDIC protection up to 50 million, $60 million that it
doesn't matter if they lose depositors because those
(30:19):
depositors don't care. They're not going to lose them
because the money is all guaranteed.
So they are insulated in a in a clear sense.
The problem, however, so therefore I want to say in
response to Peter Schiff's clearly cogent point that, okay,
maybe that's a radical solution.I thought the question was about
reform within the limits of the problems that we have, of the
(30:41):
way in which the government protects the problem and, and
maybe it has a solution is that to some degree within this
context, we still have a case ofthe fox guarding the chicken
coop. We, there's no way in which
potential regulation of any kindcould have made any difference
to Barney Frank, to Bill Clinton, to Christopher Dodd,
(31:02):
to, to any of them at the time. They wanted home ownership rates
pushed up to 70% and beyond. And they would have done and,
and they've zealously pursued those policies.
So imagine being in the Soviet Union.
We've had a famine, as indeed they did have, by the way, a
potential famine. the US bailed them out in the 1970s and they
want to punish the guilty. Well, what are you going to do?
(31:25):
How are you going to work it in an environment in which they
might be pushing their own policies as well?
So we but, but it's possible perhaps, although Dodd Frank is
not going to think this up, it'spossible to have perhaps to have
a two or three very, very clear guidelines for financial
institutions that maybe even politicians couldn't abrogate
(31:45):
smarter heads than. I've been thinking about these
in particular. There's a professor named
Charles Calamaris at Columbia University who's tried to come
up with some idea is granting granting the basic problem that
you're talking about, again, thefox guarding the chicken coop.
You're talking about people who themselves can't be trusted to
police themselves, much less police the financial regulatory
(32:08):
system. So of course, I would prefer,
along with Peter Schiff, to go simply for the radical
solutions. Treat a bank like the way you
treat the deli on the corner or the way you treat barons.
Don't protect it against losing its customers.
That's a simple solution. The more little problem of how
you get the fox to guard the chicken coop, that's really
(32:28):
difficult and I don't have too much to say about it at the
moment. In a free market banking system,
I'm an advocate of what's known as Wildcat banking, where
anybody can start a bank at all.And in that type of an
environment, banks have to compete with each other for, to
show that they can be trusted with their money, with other
(32:50):
people's money. So the only solution to this
problem ultimately is to have totally free banking, totally
unregulated. You deposit your money with the
bank that you believe is most prudent, most solvent, that is
most likely to give your money back.
And banks, if they had to compete on that basis, would
solve the problem. There's no necessity at all for
(33:11):
FDIC or any of these regulatory bodies.
It would. It would force people to take
responsibility for finding the most solvent and prudent banker
to leave your money with. And that's the entire answer.
Yeah, if I could just add 2 brief words to what all these
gentlemen have said. That's responsibility and
(33:31):
consequences. And to Peter's point, as far as
no insurance for depositors, letthere be consequences, let there
be responsibility. And a big problem occurred when
the banks, you know, ended up lending money to people and then
we're able to securitize those assets and essentially offload
(33:53):
all the risk to other entities and essentially have no real
consequences at all. When you think about our
Austrian school of thinking and really free markets, it's about
consequences. And too often, we've gotten away
from consequences. All right.
I don't want to dwell too long about on the Deposit Insurance
question, but I agree completely.
(34:16):
Of course I want to get rid of that.
But I think the average person hearing this would say in
theory, I agree with you that ofcourse this means that the banks
are not going to be as prudent as they would otherwise be
because the FDIC is there. But also in particular, the
depositors won't be as prudent because they don't care because
they're covered up to $250,000. I recognize that people will
(34:36):
say, however I'm willing to livewith that in exchange for being
guaranteed that my money will bethere in the bank to be
guaranteed that the money won't make off with my, the bank won't
just close and fail and then I get.
Screwed. But the the problem though, Tom,
as you probably know where the guarantee is, all it guarantees
is the nominal value of the account in order to provide the
insurance. They create massive inflation to
(34:58):
prop up these insolvent banks. And yes, your deposit is still
there, but it's losing a lot of value.
And who knows, in this next crisis that's coming, the
deposits could lose practically all their value.
And then, you know, everybody suffers.
I think far more money is lost as a result of the inflation
that the the the Federal Reservecreates to prop up the banks
(35:19):
then might be lost in a system of free banking with the few
failures that might actually occur.
What? What may I make an additional
point? When Deposit Insurance was
passed as part of the Glass Steagall Act, one of those
people who opposed it was Franklin Denilo Roosevelt.
At the time they had something called postal savings accounts.
Small depositors could be protected through the post
(35:41):
office through postal savings accounts.
Roosevelt has quoted, Probably somebody else wrote this for him
because I didn't know he knew somuch about economics.
This would only induce profligacy and, and and risk
taking, undue risk taking on thepart of banks to put in Deposit
Insurance. He signed the Glass Steagall Act
reluctantly, even though it had that provision in it.
(36:02):
Now, FDR was right about something that that there's
something wrong with insulating a bank against losing its
customers, just like there wouldbe something wrong with
insulating A delicatessen against losing its customers.
Now, clearly there's a solution.All you have to do is whisper in
the banker's ear. If you want to offer a safe
deposit to your customers, recommend if they put their
(36:24):
money into Treasury bills. OK, we have them for the moment.
We still have them around that that's that's backed by the
federal government, the same as FDIC.
If they want to do that and accept the lower rates, richer
people are going to have to buy their own insurance.
Or they could put their money into Treasury bills as well.
Or they can read various websites that would undoubtedly
(36:46):
arise that would advise them about which bank is safe and
which bank isn't. It's a no brainer to abolish
federal insurance. We don't need to protect the $50
million depositors, which is, bythe way, something that Alan
Blinder, big liberal economist, brought about through something
called CDARS. You can just give a give it back
$50 million and it can through through passing various ways in
(37:10):
which you can it can it contribute various assets to
various banks. It can have it completely
protected by FDIC. That's ridiculous.
Poor people put your money into Treasury bills.
Rich people buy insurance. Everybody else just read the
websites and stick with banks that practice prudence.
Very simple. Right now we've heard reference
(37:30):
to the next one that's coming. Of course, Peter has a book, a
new book called The Next Crash. So maybe you could pardon me.
The real Crash, The real Crash. Sorry, the real.
Crash, I'm actually do you. You wrote a blurb on that, you
know, so you should. Remember, Yeah, sorry.
So I have a lot of books fishingaround in my head.
But I mean, I do. I have a book signing at Laissez
Vares booth tomorrow at 3:30. For that, see, it's a good thing
(37:51):
we brought this up. Yes.
All right. Well, now I guess I'd like a
brief and super brief because I have one more key question I
want to get out of you guys, buta brief overview of from each of
your perspectives, what does this look like?
What exactly is this next thing that's coming?
And then secondly, on the other side of this thing, do we have a
better society? Is it is, is this going to lead
(38:13):
to more totalitarianism, capitalcontrols, things of that sort?
Or is this crisis the thing thatfinally breaks the back of the
federal bureaucracies and and weare emancipated from our chains?
That is the the unanswered question with which I actually
end my book. Not to give away the ending, but
yeah, I think we're heading to avery important fork in the road.
(38:37):
You know, the real crash is coming.
And you know, when I wrote the my book Crash Proof and I talked
about a coming economic collapse, it hasn't happened
yet. The collapse that I envisioned
was the one that was going to result from all the stimulus
that the government was going tothrow up the economy to try to
reflate the bubble once the housing market burst.
And it and we had the carnage inthe banking sector.
(38:59):
I predicted trillion dollar budget deficits and, you know,
all this money printing and cheap money.
And I thought the economy would ultimately die from not from
the, the disease, but from the government's cure.
And I think that's what's happening, you know, because
right now this whole thing is propped up because the feds got
rates at 0, but it can't keep them there indefinitely.
Is is people like to think that they can, but they can't.
(39:22):
And eventually when rates go up,this whole House of Cards comes
tumbling down. And I think we're in far worse
shape today because we've taken on even greater degrees of debt.
We've expanded government instead of contracting it.
We've made the too big to fail banks even bigger.
And so now it's going to be evenworse.
But, you know, the question is going to be who's going to get
(39:44):
the blame for this disaster? I think the politicians did a
pretty good job of blaming the 2008 financial crisis on
capitalism, even though it was government that did it.
This crisis is going to be even bigger.
And who are we going to blame? You know, are we going to
obliterate whatever remnants of capitalism remain and just fully
(40:05):
embrace A totalitarian, centrally planned economy?
Or are we going to finally get the message and restore limited
government, constitutional government, sound money, and go
back to what made America great?And I don't know the answer to
that question. I mean, as an American, I'm very
hopeful that it's the latter andnot the former.
But you know, I don't know how to handicap it.
(40:30):
I'm hopeful it'll be better at the end of this.
However, I think there's going to be 10 to 15 to 20 years and
some pain. And I just like to refer to my
favorite quote from Ludu von Meeses.
There's no means to avoid the final collapse of a boom brought
about by credit expansion. The alternative is only whether
(40:51):
the crisis should come sooner. Is a voluntary abandonment,
further credit expansion towardsthe final and total catastrophe
of the currency system involved And essentially where we are the
the steps that have been taken since the O 8 crisis are to
replace the the the private sector deleveraging with public
(41:14):
sector leveraging APP and it's going to destroy the currency.
Everything that what the government is doing is not just
the wrong thing, it's exactly the opposite of the right thing.
It will result, as these guys have said, in a total collapse,
and it's going to be very ugly. The good news is that all the
(41:37):
real wealth in the world, the buildings and the skills of the
people, the factories, that'll still exist, but the financial
system is going to collapse and the sooner the better, so things
can reorganize. Unfortunately, I think that
we're looking at a situation much like France in 1789.
I look forward to the collapse of this totally corrupt and
(42:00):
rotten regime. That's the good news.
It's going to collapse and go away.
The bad news is, since the average American has also become
so corrupt that we're likely to get something like they got in
France in 1789, it'll get worse Robespierre or Napoleon before
it eventually gets better. All right, let's go down the the
panel here for our last question, which would be you
(42:23):
have 60 seconds and and you're going to give us not if you can
do it in 45 seconds, even better.
Three things. If you could do three things, no
matter how politically unlikely that would change, that would
fix the situation. I don't care how radical, the
more radical the better. What would the three things be?
Let's start with David Tice. I'd say I would eliminate the
(42:44):
dual mandate of the Federal Reserve for maintaining economic
growth as well as price stability.
Secondly, I would encourage it will ensure that all policy
makers and economists read von Mises, Hayek and Rothbard and #3
(43:10):
boy, you screwed me up by makingme go first here time.
Let's see. I'll I'll defer to these other
brilliant gentlemen. OK.
I guess #1 would be elect Ron Paul president.
See, I'm playing to the crowd #2I guess maybe would elect Gary
Johnson president and then #3 maybe anyone on this paddle or
(43:36):
anyone in this audience president.
And maybe we have a fighting shot.
Well. Clearly Ron Paul already knows
that we should abolish the Federal Reserve.
It has had a terrible record. George Selgin, an economist,
(44:00):
recently showed that by the way,the Fed celebrates his 100th
birthday and next year, December, next December.
Been around for 100 years. And George Selgin did a very
simple before and after the 30-40 years before the Federal
Reserve was created, the 100 years since.
And even if you forgive the Fed,the Great Depression, it was
(44:22):
only practicing. So just take the Federal Reserve
since 1946 and actually in everyconceivable way the economy has
performed worse incidents of recession, boom and bust has
performed worse than it did prior to the creation of the Fed
from 19 approximately 1870 to 1913.
(44:43):
So indeed it it stares you in the face the the role of the Fed
has been abysmal. We can phase out the Fed phase
in a free market in money. Second, of course, obviously the
housing market functions fine inthe capitalist free market.
(45:04):
Bring back the banker we love tohate who didn't give you the
mortgage because your credit wasn't good.
And now we have the casino capitalist still to this day
who's inclined. It was worse, of course, 10
years ago, but it's still not good.
The, the, the, the housing market is still dominated by
government. We need to, to slowly, we need
(45:25):
to phase out. I don't want wrenching change.
We have to we have to do it by degrees, but it shouldn't take
too get rid of Fannie and Freddie, get rid of the the
Department of Housing and Urban Destruction as I would call it,
although it's called development, it's actually all
about destruction of real affordable housing.
(45:46):
And a third, obviously make banks behave like the
delicatessen on the corner. You're on your own.
This is a capitalist system of profit and loss.
Learn how to run your financial institution according to those
principles. Nobody's going to bail you out
any more than we would bail out the delicatessen on the corner.
(46:08):
3 proposals. Great.
Anything left to say? Well.
I really like Ron Paul. He's a wonderful guy.
But if through some miracle he was elected, elected president,
he would have a meeting with thedirectors of the CIA, the part
with the defense, the FBI and all these other praetorian
(46:29):
agencies, and they would lay down the law to him.
So that's not going to help. And if he was elected, by some
odd fluke, he'd just be blamed for the inevitable depression
that's going to happen. So what should be done?
Well, obviously the Fed should be abolished.
All these federal agency should be abolished.
All the assets of the US government should be auctioned
(46:51):
off or privatized, and what's left should perhaps be
distributed to people that have been forced to rely on Social
Security because that's something of a contract,
although a false 1. So all the US government's
assets should be auctioned off and but none of this is going to
(47:12):
happen. the US government's debtshould be defaulted on because
that is turning the next couple of generations into indentured
servants to pay it off with their taxes and so forth.
That's not going to happen either.
So this whole system has a life of its own at this point.
It's out of control. There's really nothing you can
(47:32):
do. I don't believe in political
action. I do believe in going out and
talking to people of goodwill and trying to make them
understand this on a one to one basis, but the situation is
hopeless at this point. That's the bad news.
The good news is that it's not serious.
Life will go on. All right, ladies and gentlemen,
(47:52):
Tom, we're first of all, I'd like to thank the wonderful
gentleman on the panel for theirtime.
I'd like to thank all you folks.I'd like to ask you to follow
the film, The Bubble Film on Facebook, The Bubble Film
Twitter, The Bubble Film. And as we leave, because some
people came in late, it was decided early on that we would
close by running that trailer again.
(48:13):
We get to hear some of these guys again.
So thank you very much for the support.
We'll see you this fall. Thank you.
Take a greater risk on these mortgages, yes.
To give families mortgages they would not have given otherwise,
yes. It means we use the mighty
(48:34):
muscle of the federal governmentin combination with state and
local governments to encourage owning your own home.
That's what that means. I ask all of you just one more
time to look at that chart and Iwish I had a lot of butter shark
to show you that would reinforcethat get.
By a house before you have a job.
Get a job you save for a doubt. Baby, then you buy the house.
(48:56):
A lot of people are going to find out, Oh, my God, you know,
not only is is my my stocks down, my house is down, too.
And now what am I doing? Jim Rogers knew these bubbles
were going to burst, but I didn't.
Neither did film maker Jimmy Morrison, who started a house
painting business less than a month after home prices peak.
His timing couldn't have been worse.
(49:16):
But we don't have to make those mistakes again.
There are people out there who called it.
And next time, maybe we can too.We've got a growing economy,
jobs, incomes, you've got very low mortgage rates.
Housing is going to be a disaster in the next 5 years.
You sell housing stocks and you sell Ben Bernanke.
One myth that's out there is that what we're doing is
(49:38):
printing money. We're not printing money.
These days they don't need a printing press, only do a thing.
It's a computer keyboard. So we're not a free market,
though there is an invisible there is.
A Pennell Billy's. Hand.
That touches them absolutely. These people in the government
apparently don't learn anything at all.
They broke it, and they're trying to fix it by doing more
(49:59):
of what broke it in the first place.
The United States can pay any debt it has because we can
always print money to do that. What?
Of course it can happen again, and it's happened before.
Raw materials were allocated between essential and non
essential business. I hope they don't lose
confidence in their government Ican see but they're why they're
(50:21):
skepticism. But the only government we got.
All this has happened before andit will all happen again.
(50:45):
The reality is we have gone froma stock market bubble, now we
have a housing bubble. And when it breaks, whatever
causes it to pop, then a lot of people are going to find out,
Oh, my God, You know, not all are my stocks down.
My house is down, too. And now what do I do, Charlie?
This was the day we were afraid to wake up to the bankruptcy of
(51:05):
one major Wall Street investmentbank, the shotgun wedding of
another. Ain't being distracted what's
going on with the war or what's wrong with the economy?
Stop worrying about that. They're not only doing the wrong
thing, they're doing exactly theopposite of the right thing.
We got into our mess by spendingtoo much money, running up too
much debt and printing too much money.
And that's exactly. What we're doing, which by the
(51:26):
way, we've seen how we got into the state of affairs in the
first place. You have to work for many kids.
No, you don't. It comes from the machine in the
wall. I've seen it.
Yeah. You just have to push buttons.
(51:53):
I don't think the economy is actually doing well.
That's the problem. It's just the illusion.
It's the stock market going up. It's the real estate market
going up. It makes people think the
economy is doing well, but it's actually doing lousy.
Basically, quantitative easing has been a wonderful boon for
the 1%. It's caused the markets to soar,
(52:13):
but it's not helped the real economy.
Quantitative easing was a very fancy phrase for what an
ordinary civilian might call money printing.
It's a uvenism essentially for printing money and buying up
mortgage instruments, buying up treasuries.
What we're doing is lowering interest rates by buying
Treasury securities and by lowering interest rates, we hope
(52:35):
to stimulate the economy to growfaster.
Over time, it becomes habit for me.
The politicians can't live without it.
Eventually it begins to degrade.Give me.
Some of that quantitative easing, brother.
I don't think they wind it back voluntarily.
I think 1 stimulus package will lead to the next one and to more
(52:55):
money printing. Ben Bernanke didn't magically
undo all those mistakes by creating a trillion dollars and
giving it to bankers, right? Those mistakes were still made,
resources had still been misallocated, and all he really
did was was literally paper overthe problem and push it back a
few years. So the trick is to find the
appropriate moment when to beginto unwind this policy.
(53:17):
And that's what we'll that's what we're going to do.
Why should a bunch of people sitting around the counts remove
the Federal Reserve building? Washington, DC know better about
the proper level of interest rates than they know about the
proper level, say, of corn prices.
The truth of our world, Max. It can't be easily summed up
with the math. There is no simple path guys.
(53:40):
The truth is way more depressing.
They're not even smart enough tobe as evil as you're giving them
credit for. I hope they don't lose
confidence in their government. I can see why there's
skepticism, but the only government we got?
To get our next program underway, got a great one for
you. I think you've probably noticed
Flyers and posters around the hall for something called The
Bubble. It's a movie you're going to
know more about by the time thissession is ended because the
title of our program today is The Bubble, Who caused it, who
(00:21):
called it, and what's next? We've got a great panel for you
and to introduce them and get things underway.
Please join me in welcoming Jimmy Morrison.
He is the co-author and directorof The Bubble Jimmy.
(00:42):
Hi, I'm glad you all can make ittoday.
We're going to start out right away with the world premiere of
our trailer. This project began 2 years ago
and my idea was to track down the people who predicted the
housing crisis, ask them why it happened, and more importantly,
ask them what's next. So right away, we'll start with
the trailer. Thank you.
(01:13):
It just is, right here in America.
If you own your own home, you'rerealizing the American Dream.
I ran for president in large measure because I wanted to
restore that dream. We can put light where there's
darkness and hope where there's despondency in this country, and
part of it is working together as a nation to encourage folks
(01:34):
to own their own home. One of the great successes of
the United States in this century has been the partnership
forged by the national government and the private
sector to steadily expand the dream of home ownership to all
Americans. It.
Means we use the mighty muscle of the federal government in
(01:54):
combination of state and local governments to encourage owning
your own home. That's what that means.
I ask all of you just one more time to look at that chart, and
I wish I had a lot of other shots to show you that would
reinforce that. We have to do something about
it. The question is, what do we do
and how fast do we move? They couldn't see this train
(02:16):
wreck wreck coming, even though it was staring them in the face.
They're the people who are stillin charge.
They're the ones who are fixing the economy when they don't
understand why it broke. In fact, they broke it, and
they're trying to fix it by doing more of what broke it in
the first place. The debt continues to rise and
(02:40):
we're all getting into a worse fundamental situation than we
had before and we're all going to pay for it.
Be very careful and worried about 2013 and 2014.
(03:06):
All right, before we get started, you might notice two
things from this trailer. 1 would be the tone of the people
that were talking. You heard Barack Obama, you
heard Bill Clinton, George Bush.These are two different parties
saying essentially the same thing.
But it wasn't hate that was coming out of out of their
mouths. These people had good
intentions. They were just trying to promote
(03:26):
what they thought would be better for society.
This documentary is not a political documentary.
It's an economics documentary. So what we're looking at is not
their intentions, but what the effects of those policies were.
I I've interviewed 15 people, including all the people you saw
up there. Most of them were in the
Austrian School of Economics. Each president that you saw up
(03:48):
there practice Kenzian economic policies.
So what we want to look at is their ideas and ask these people
who actually saw it coming what ideas they have for the future.
They have the track record in the Austrian School of Economics
of predicting the housing bubble, the Internet bubble, the
S&L crisis, the Great Depression, the stagflation of
(04:08):
the 1970s. I think it's time that we look
at these, look at these beliefs that they have and see how they
were able to see these things coming.
So today we have a Gene Epstein from Barron's.
He's written extensively following the crisis on how the
Dodd Frank regulations have hurtour economy.
He he's written a lot about the Wall Street bankers and the
(04:29):
government side. Some people just look at what
the government's done. Some people just look at what
the private market's done. But Gene does a great job of
looking at both. We also have Peter Schiff, as
you all know, who predicted the crisis long before it came.
And not only that, he predicted all the things that the
government was going to do and what the effects would be.
We also have David Tice with Tice Capital in Dallas.
(04:51):
He held a credit symposium in 19in the late 1990s.
What was the year 99? And he he detailed why he
thought that we had a credit bubble in the late 90s.
So to moderate this panel that looks at what's next in our
economy, we have Doctor Tom Woods who wrote the New York
Times best selling book Meltdown, which the really
(05:13):
inspired this project. I'm sure a lot of you know it
well. So without further ado, Doctor
Tom Woods. OK, Thank you.
Ladies and gentlemen, before we get started, just a quick
program note. I want to bring your attention
(05:34):
to modification in the program tomorrow morning at 9:00 AM.
In this room, you will note thatthere is a presentation taking
place by John Brown regarding the subject of sound money.
But left off the program is the other half of the presentation,
which involves Peter Schiff, andhe's going to be talking about
practical steps that that peoplemight take and that Peter and
(05:57):
his firm are helping people taketo cope with the currency crises
that are certainly coming. So that's 9:00 AM tomorrow
morning right here. OK.
So we're going to dive right into this, and I'm going to be
asking these folks some questions.
And they're a little bit idiosyncratic because they're
just a lot of sorts of things wemight want to know about about
what's what's happened, what's going on, what's likely to take
(06:19):
place in the future. So I want to start off with this
question and I'm not going to put any one of these good
gentlemen on the spot. I'm going to throw the question
out and anybody who wants to take it can take it one at a
time, you know, no pushing. But my first question is we hear
a lot on the Internet and from some left wing outlets about
(06:40):
where are the handcuffs? Why aren't these people in
handcuffs? So my question is, when you
think about the housing market and how it was operating in the
years leading up to the crash, are we talking here about crimes
that were committed? Are we talking about errors that
were made? Are we talking about errors that
(07:00):
were made because government involvement encouraged the
errors? Are we talking about crimes or
errors? Anybody want to jump in on this?
Well, as a matter of fact, this is maybe the one thing I can
comment on. I think looking at the future,
my colleagues are better at The problem with indicting anyone
(07:20):
for what happened is that you have to prove intent to be
fraudulent. You have to do.
You have to prove that they behaved like Bernie Madoff.
There is no question that there are two politicians at least who
clearly had the intent to defraud.
Probably not George W Bush, he'stoo naive.
(07:41):
Probably not Bill Clinton, He too be difficult to make the
charges stick. In that case it was.
It's just fear. Most what politicians do in the
name of good. But the two who are most
vulnerable to being indicted areChristopher Dodd and Barney
Frank. If you actually quote them, you
can see, I mean, Barney Frank was in 2003 denying vociferously
(08:08):
that Fannie Mae and Freddie Mac had government guarantees.
There's no wink and nod guarantee.
There is no implicit guarantee. Now, the problem with indicting
Barney Frank and Christopher Dodd, Christopher Dodd, as you
many of you know, is essentiallysort of dropped out of politics
now running motion pictures in Hollywood.
As you also may know, because hewas, he was put on the VIP list
(08:34):
by Angelo Mazzillo at at at a time when he was a cheerleader
and Angelo Mazzillo's countrywide was, was, was, was
being patronized by Fannie and Freddie.
They clearly could be two peopleyou'd indict.
On the other hand, they also have their name on the Dodd
Frank bill. So, So what are you going to do?
(08:54):
Obviously, it's impossible to indict such people who are
parading as though they solve the problem when they were two
of the principal political villains.
So yes, you can indict somebody,but no, it's not practical.
Yeah. Well, he left off my favorite
candidate that I'd like to see wearing pinstripes.
That's Alan Greenspan. Although I don't know if what he
(09:16):
did was criminalized. I think it was treasonous.
And I think that Alan Greenspan knew better and he and he did it
anyway. But you know, I how much
criminal behavior there was, I know there was fraud, you know,
certainly at the lower levels. I, I, you know, I, I used to
sublet some space to mortgage brokers and I, and I heard first
hand, I saw these guys doctoringup W twos.
(09:38):
And there was a lot of fraud kind of committed lower down.
But most of it was simply bad behaviour that was done under
the influence of the cheap moneythat was supplied by, by the
feds and the moral hazards supplied by Fannie and Freddie
and the FHA. The crime was against
capitalism. It was against the Constitution.
(09:59):
And you know, to the extent thatyou can call it that, it's, you
know, our, our elected officials, they all swore an
oath to uphold the Constitution.And by meddling the way they
did, they all violated that oath.
Maybe they can be prosecuted forthat, but I doubt it.
Yes, I would agree with Peter that there were definitely more
(10:20):
errors. And I also indict Alan Greenspan
because as Peter said, he he knew better.
He wrote about asset inflation, he wrote about credit bubbles,
etcetera. So he should have understood,
but and he actually warned back in 96 about irrational
(10:40):
exuberance. However, he really couldn't take
the heat and unfortunately he was the wrong guy in charge.
And we ended up buying incremental points of GDP in
order to keep, you know, everyone happy and keep
politicians elected. And it resulted in obviously
this disaster that we face today.
(11:02):
And it's really policy makers and economists following wrong
headed economic theory, the Keynesian theory, instead of
understanding the Austrian School of Economics.
I just, I just wanted Mason to add that I would not exempt
mortgage brokers. I would not.
Cigarette is. Stop smoking.
(11:23):
Yes. No, no.
I'm in the entertainment business.
I I'm in the entertainment business.
And you know, when Frank Sinatrawas here years past, he would
smoke a cigarette. Come on.
What is this? This is a Freedom Fest.
What's the matter with you people?
I mean, we these these these damn politically correct and
(11:49):
being an anti smoke Nazi is partof it.
So call the management your way down there in the audience.
And I happen to be smoking courtesy of a Freedom Fest
attendee, a good Cuban cigar. This happens to be a Cohiba
Lancero. So, so get, get the get the get
(12:11):
the management to kick me off the stage.
It's fine. All right, Yeah.
I didn't because I'm just finishing one that I I'm just
why? I'm I'm, I'm sitting next to it.
I'll put up with it. I won't teach this man a lesson
in what real libertarian law is all about.
He has to learn that someday. But that aside, to pursue
another point, it's only that yes, there are capitalists,
(12:34):
crony capitalists that were involved, but but at the risk of
offending some of you who like some of government's wars, it's
like it's, it's like indicting the people at Abu Ghraib, the
soldiers in the field at Abu Ghraib were basically taking
orders from the commanders. If those people deserve to get
punished, then the commanders really deserve to get life.
(12:55):
And the commanders, as my colleagues have pointed out,
include Alan Greenspan. And I have to throw in his
Lieutenant at the time, Ben Bernanke, again a difficult man
to indict, do. You want to jump in on this?
Really giving Alan Greenspan a run for his money for the title
of worst Fed chairman ever. The only thing I can say is that
(13:16):
this whole problem explain to meit's all due to fractional
reserve banking and and so forth.
So I, I, I know that you all will agree that the Federal
Reserve and all central banks serve no useful purpose.
They should be abolished. And we wouldn't have had this
crisis if they hadn't existed. So that's the root of the
problem. The way I see it, it's
(13:37):
criminality at the highest level, and most Americans
approve of it. All right.
Now we're going forward into thefuture and we've had the Dodd
Frank bill. And my question is, I'm pretty
certain just about nobody in this room has read that Bill
Jean might have. I know Jean, you had a session
on this, so I don't want you to have to recapitulate the whole
thing, but do you think Dodd Frank will help prevent future
(14:01):
crises? I I ask this is a bit tongue in
cheek here, but if not, why not?Is it missing the point?
Is it actually making things worse?
What's the problem with it, Dodd?
Frank says nothing at all, by the way, about the the two
elephants in the room, Fannie Mae and Freddie Mac.
(14:21):
Nothing at all because again, it's got Christopher Dodd's name
on it, Barney Frank's name on it.
They're, they are the villains who wrote the legislation.
You might as well call this the Bernie Madoff bill to protect us
against future financial crises.So that's why it's a joke.
It includes, it includes the Volcker Rule.
Paul Volcker himself admitted weneedn't go into the Volcker Rule
(14:42):
because Paul Volcker admitted that whatever the Volcker Rule
addresses proprietary trading bybanks had nothing to do with the
crisis. It includes a provision on more
women and minorities being allowed to serve on banks.
Well, you could create a case that maybe if they had more
women in the banking system, thebanks wouldn't have been so
profligate, but that's sort of reaching.
(15:03):
The fact is that the Dodd Frank bill does not address the issue
at all. It was a sin of Commission on
the part of the government. That's the problem.
It was not a sin of omission to accept, to expect the government
and to expect especially the twoprincipal villains, Christopher
Dodd and Barney Frank, to indictthemselves, to reform
themselves. That's a joke.
(15:23):
That's not going to happen. We only need radical solutions
to solve the problem. Dodd Frank doesn't address it at
all. Yeah, You know, they, they
convened a, a, a Commission in the in the wake of the financial
crisis and they and Congress tried to figure out what caused
it. And it's interesting that none
(15:43):
of the people on this podium or in that film were called as
witnesses to testify. I remember I was trying my best
to get Congress to to call me. I said, you know, I wrote a book
predicting it. Maybe I can come down and
testify as to what I was thinking.
But, you know, they they had a preconceived conclusion which
they wanted to rubber stamp withthese phony hearings.
And they wanted to blame the crisis on a lack of regulation
(16:06):
to just too much capitalism and not enough government.
And the reason is Dodd Frank isn't going to work is we did
have a lot a lack of regulation.It was a lack of free market
regulation. We substituted the free market
for government. The free market would have
prevented all of this from happening.
The free market is an excellent allocator of credit because you
(16:26):
don't loan money to people who can't pay it back.
But when the government gets involved and guarantees the
loans, then people get credit that the free market would have
denied it credit. And that's a good thing.
And everybody always forgets, yes, somebody got a mortgage.
Well, what businessman didn't get a loan because the
government directed that capitaltowards the government
(16:49):
guaranteed loan. And so we make the economy
weaker in the process. So we don't need this bill is
just going to make it worse. More government meddling in the
economy is going to lead to greater malinvestments, a bigger
distortions. What we needed to do is get the
government completely out of housing.
We should have just abolished Freddie and Fannie and the FHA.
And you know, these guys are so brain dead.
(17:10):
I just testified in Congress just like a month ago and this
is what they were considering. They now want to extend
government guarantees through FHA to apartments, multi family
housing after just going througha disaster with single family.
And I was sitting at a podium full of industry lobbyists from
(17:32):
the mortgage industry, from the home builders, from the
Realtors, all saying that the government guarantees would cost
the taxpayers nothing. You know, as if you know what?
You know, we're on the hook for the loans that go bad.
Meanwhile, FHA is on the verge of bankruptcy itself.
It's about to need another government bailout.
(17:53):
Yet we want to put their guarantee behind multi family
housing. You know they've learned
nothing. I I agree Dodd Frank is not the
answer. And to me, the biggest problem
is really the Fed's dual mandateof watching inflation as well as
creating an economic growth. And essentially we have a system
(18:18):
now where the Fed feels as if they can micromanage the economy
and prevent downturns. However, you cannot prevent
economic downturns. Let the market do its job.
If you try to have the Fed come in and prevent those downturns,
you will just have a far worse outcome down the road.
And therefore, you know, that's big problem.
(18:43):
Yeah. And the only thing I would add
with that is the answer is not passing more laws.
It's to abolish all the laws that they've put into place that
have caused this crisis. So the solution is abolishing
laws wholesale, not not passing more laws.
I mean, this is this is asking, this is like medieval monks
(19:06):
asking how many angels condense on the head of a pin.
That's not the issue issues whether the government should be
involved in any of this. It should be involved in none of
it, none of it, none of it. So that's it's, it's very
simple. We shouldn't even be having this
discussion. Well, unfortunately indeed we
are. All right, we're going to switch
(19:28):
gears for a minute, but before we do so, I want to ask you
folks as a favour to help get momentum going for our project
to make sure and subscribe on your social media, Facebook and
Twitter, facebook.com/the BubbleFilm and twitter.com/the Bubble
Film. We would be so super happy.
Like I'm going to come over to your house and thank you.
(19:49):
Although if you found that creepy just just to be a nice
guy, I wouldn't do that. But as long as you will will
help us out. And also at the website
thebubblefilm.com, we have the raw interviews where we haven't
taken the clips out of them yet with several of the people right
here on this panel and others people you admire and respect, I
hope and you get to hear their whole their whole interviews.
All right. Now I want to turn to a slightly
(20:10):
more technical question. But anybody who wants to take
this can and if you prefer to pass, that's fine too.
But the issue of the credit default swap I I wonder if
somebody can explain. What is a credit default swap
and did this contribute to the financial crisis?
And thirdly, is there anything wrong with credit default swaps?
Anybody want to jump in on this?Yeah, well.
(20:33):
Basically what it is is, you know, if you loan somebody money
and there's a risk that they don't pay it back and you want
to hedge that risk, you can sellthe the risk to a counterparty
that is really acting as an insurance company just like you.
Anybody wants to mitigate risk, You want to mitigate the risk of
an auto accident, you buy auto insurance, the counterparty is
(20:55):
on the hook if you have an accident.
The problem in the, in the bubble is that the, they were
writing insurance on the assumption that they would never
have to pay. So a lot of the counterparties
were writing credit default swaps based on the fact that
they thought they would never have to pay.
And a lot of this was made possible based on the the Fed
(21:16):
being there, the implicit guarantee that the Fed would
backstop these institutions, that they were too big to fail
and interest rates were so low. And once you inflated this
housing bubble, part of the problem is people thought that
the insurance it would never have to pay off because people
thought real estate prices wouldnever fall.
I mean, I remember for years when I was talking about warning
(21:37):
about the housing problem, the reason that people dismissed my
warnings out of hand was becausethey were predicated on real
estate prices going down. And that was thought to be
impossible. And, and so, you know, you had
all of this, all these credit default swaps, had the
government allowed companies like AIG was obviously the
biggest offender. And the reason that AIG was
going to go bankrupt was becauseit had taken on all this risk.
(22:00):
Had the government simply let AIG fail and let the
counterparties lose money, then we would have probably stopped
this problem in the bud. It wouldn't have happened again
because the people would have lost a ton of money and they
would have learned their lesson.Instead, we bailed everybody
out. And so the problem persists.
Yeah, the go ahead. I believe one of the biggest
(22:22):
problems with credit default swaps is it it created this
problem of creating unlimited demand for risky long term
paper. And essentially in the past you
have been limited by the amount of demand for long dated paper
that was risky. However, through Wall Street
(22:42):
alchemy, what's happened is through credit default swaps,
you essentially convert a risky instrument to a safe instrument
and then you can utilize variousother derivatives and convert a
long dated instrument to a shortdated instrument.
So what that does is it creates these risky long term paper
(23:08):
becomes money market paper that therefore there is unlimited
demand for. So this is what created this
massive demand for all this risky paper.
And Doug Nolan first wrote aboutthis my compadre at Prudent Bear
Fund, and he calls it the Moneyness.
Of credit, I make a note. You know, before anybody ever
(23:28):
heard of Peter Schiff, the firstwebsite I used to go to every
morning was the Prudent Bear site to read those columns
religiously every morning I did that.
I should only add a credit default swap is a derivative.
Warren Buffett called derivatives weapons of mass
destruction even though he himself uses has used
derivatives. Derivatives include options,
(23:49):
futures. Essentially it derivative is
toxic depending on what it is derived from.
Even a stock arguably is is a derivative and that could be
toxic if it's part of a company that is supported by the
government that's about to go bust.
Anything is toxic if it's derived from something that is
(24:12):
essentially going to go bust. Essentially a part of a bubble.
But that bubble was created by the government.
That bubble and that risk was not even sufficiently
appreciated by the Federal Reserve as late as O6 and O7.
They had absolutely no idea whatwas happening.
The housing market that has cometo light, how would you expect
the average investor who bought those derivatives, who created
(24:34):
them, to know something? The Federal Reserve that has
incredibly more access to knowledge did not know either.
So again, derivatives are bad. If they're derived from
something bad, they aren't in themselves bad.
It's like shooting the messenger.
Maybe they make things a bit worse, but that in itself is not
the fundamental issue. What are they derived from?
(24:55):
I think it's more serious than that of The fact of the matter
is that something like 20% of the American economy is
financial related, and this is greatly overblown.
It's completely ridiculous. Financial, the financial
business should be nothing but away to keep your money liquid
(25:20):
while you actually produce real wealth.
And it's, it's a phenomenon that's been generated by the
creation, hundreds of billions and trillions of currency units
out there where people try to juggle these things around.
The whole financial industry is,is bankrupt and it's going to
collapse. And it should collapse in a
(25:41):
sound economy. The, the banking industry should
be a couple, 3% of the economy. It's about 20% of the economy.
And it's because of the creationof all these currency units.
So it's going to get worse and it's all going to collapse and
it's going to be very, very uglyjust.
Just for starters, getting moneyglobally.
(26:02):
There would not be currency traders, there would not be so
many thousands of people tradingcurrencies.
There would be no such thing. The market, the free market
naturally gravitates toward a single currency, or toward maybe
at most 2 currencies. There would be no such things as
dollars, EUR, yen, a whole lot of things for the financial
(26:22):
industry to do that really are unnecessary in a free market,
just as a simple example. All these banks have have rooms
this size full of traders sitting in front of their
screens that are buying and selling.
And it's not with the capital ofthe banks, it's with the money
of the depositors that they're making all these crazy bets.
(26:43):
So it's a very unstable situation.
It will fall apart. All right.
Now Jean referred earlier to radical solutions and saying
that nothing short of radical solutions will suffice and we'll
hold off to the end appropriately enough for for
what the radical solutions wouldbe if we could, we had our
druthers, what would the solution be?
But let's imagine we're in this mixed economy situation right
(27:04):
now where you have a banking system that to the untrained eye
looks like a free market bankingsystem.
But we know it's got a cartel. It's a cartel structure.
It's got the central bank at thefront.
It's got monopoly privileges andmoney creation privileges.
So my question would be in this situation, is there a case to be
made for Prudential Regulation that would say that the banks,
(27:26):
if they're going to have all this implicit or explicit moral
hazard creating institutions like the FDIC or the Fed, then
we have to say that you can onlyhold these types of assets.
And if you hold these types of assets, you have to hold this
much capital in reserve against them.
Is this some kind of a, or is itbetter to just have the banks
(27:47):
just operate without these restrictions but yet still be
covered by the taxpayer? What's the approach we should
take in this less than desirablesituation we're in right now?
Well, the best thing to do wouldbe to remove the guarantees of
deposits and we can have a free market in banking.
I mean, and those guarantees arethere not to protect the
depositors, but to protect the banks, to allow the banks to be
(28:08):
reckless because their customersdon't care about what they do.
So we, we, we really need to getrid of Deposit Insurance.
But unfortunately, if we're going to insure bank deposits,
then it's a non-smoking bill. What?
(28:31):
So. That's his, That's the point.
He's on somebody else's property.
That's right. So, yeah, you know, if we're
going to make the mistake, unfortunately, if we're going to
make the mistake of removing market forces from the equation
and guaranteeing bank accounts, then we have to unfortunately
regulate what the banks do because we obliterate all the
(28:53):
market regulation. So this is a situation where two
wrongs actually make a right. But unfortunately the government
regulation will never be as goodas the market regulation.
And the best solution is to end the Deposit Insurance and then
the banks are going to be under competitive pressures not to do
stupid things with depositors money.
Otherwise they won't have any depositors.
(29:14):
They'll go to the banks that areacting more prudently.
I fully agree with ending Deposit Insurance, but I think
that in in the spirit of the question that was being raised,
I would regard ending Deposit Insurance and by end by the way,
ending all guarantees to investment banks as well as a
radical solution. Of course it's ridiculous.
I mean, I write for barons. Imagine that our subscribers are
(29:38):
guaranteed to us by the federal government, that all of them,
if, if they don't want to pay, the federal government would
pony up. Well, we're not going to be very
well managed. We're not going to be, we're not
going to be run by a guy who I respect, who runs our own
magazine, who worries about the downside, who worries about
losses, worries about losing readers and gaining readers and
(29:58):
gaining advertisers. Indeed, we have an environment
in which we treat banks. We would not need to regulate
the delicatessen on the corner because it can go out of
business. It doesn't need Prudential
Regulation. But banks that have the kind of
FDIC protection up to 50 million, $60 million that it
doesn't matter if they lose depositors because those
(30:19):
depositors don't care. They're not going to lose them
because the money is all guaranteed.
So they are insulated in a in a clear sense.
The problem, however, so therefore I want to say in
response to Peter Schiff's clearly cogent point that, okay,
maybe that's a radical solution.I thought the question was about
reform within the limits of the problems that we have, of the
(30:41):
way in which the government protects the problem and, and
maybe it has a solution is that to some degree within this
context, we still have a case ofthe fox guarding the chicken
coop. We, there's no way in which
potential regulation of any kindcould have made any difference
to Barney Frank, to Bill Clinton, to Christopher Dodd,
(31:02):
to, to any of them at the time. They wanted home ownership rates
pushed up to 70% and beyond. And they would have done and,
and they've zealously pursued those policies.
So imagine being in the Soviet Union.
We've had a famine, as indeed they did have, by the way, a
potential famine. the US bailed them out in the 1970s and they
want to punish the guilty. Well, what are you going to do?
(31:25):
How are you going to work it in an environment in which they
might be pushing their own policies as well?
So we but, but it's possible perhaps, although Dodd Frank is
not going to think this up, it'spossible to have perhaps to have
a two or three very, very clear guidelines for financial
institutions that maybe even politicians couldn't abrogate
(31:45):
smarter heads than. I've been thinking about these
in particular. There's a professor named
Charles Calamaris at Columbia University who's tried to come
up with some idea is granting granting the basic problem that
you're talking about, again, thefox guarding the chicken coop.
You're talking about people who themselves can't be trusted to
police themselves, much less police the financial regulatory
(32:08):
system. So of course, I would prefer,
along with Peter Schiff, to go simply for the radical
solutions. Treat a bank like the way you
treat the deli on the corner or the way you treat barons.
Don't protect it against losing its customers.
That's a simple solution. The more little problem of how
you get the fox to guard the chicken coop, that's really
(32:28):
difficult and I don't have too much to say about it at the
moment. In a free market banking system,
I'm an advocate of what's known as Wildcat banking, where
anybody can start a bank at all.And in that type of an
environment, banks have to compete with each other for, to
show that they can be trusted with their money, with other
(32:50):
people's money. So the only solution to this
problem ultimately is to have totally free banking, totally
unregulated. You deposit your money with the
bank that you believe is most prudent, most solvent, that is
most likely to give your money back.
And banks, if they had to compete on that basis, would
solve the problem. There's no necessity at all for
(33:11):
FDIC or any of these regulatory bodies.
It would. It would force people to take
responsibility for finding the most solvent and prudent banker
to leave your money with. And that's the entire answer.
Yeah, if I could just add 2 brief words to what all these
gentlemen have said. That's responsibility and
(33:31):
consequences. And to Peter's point, as far as
no insurance for depositors, letthere be consequences, let there
be responsibility. And a big problem occurred when
the banks, you know, ended up lending money to people and then
we're able to securitize those assets and essentially offload
(33:53):
all the risk to other entities and essentially have no real
consequences at all. When you think about our
Austrian school of thinking and really free markets, it's about
consequences. And too often, we've gotten away
from consequences. All right.
I don't want to dwell too long about on the Deposit Insurance
question, but I agree completely.
(34:16):
Of course I want to get rid of that.
But I think the average person hearing this would say in
theory, I agree with you that ofcourse this means that the banks
are not going to be as prudent as they would otherwise be
because the FDIC is there. But also in particular, the
depositors won't be as prudent because they don't care because
they're covered up to $250,000. I recognize that people will
(34:36):
say, however I'm willing to livewith that in exchange for being
guaranteed that my money will bethere in the bank to be
guaranteed that the money won't make off with my, the bank won't
just close and fail and then I get.
Screwed. But the the problem though, Tom,
as you probably know where the guarantee is, all it guarantees
is the nominal value of the account in order to provide the
insurance. They create massive inflation to
(34:58):
prop up these insolvent banks. And yes, your deposit is still
there, but it's losing a lot of value.
And who knows, in this next crisis that's coming, the
deposits could lose practically all their value.
And then, you know, everybody suffers.
I think far more money is lost as a result of the inflation
that the the the Federal Reservecreates to prop up the banks
(35:19):
then might be lost in a system of free banking with the few
failures that might actually occur.
What? What may I make an additional
point? When Deposit Insurance was
passed as part of the Glass Steagall Act, one of those
people who opposed it was Franklin Denilo Roosevelt.
At the time they had something called postal savings accounts.
Small depositors could be protected through the post
(35:41):
office through postal savings accounts.
Roosevelt has quoted, Probably somebody else wrote this for him
because I didn't know he knew somuch about economics.
This would only induce profligacy and, and and risk
taking, undue risk taking on thepart of banks to put in Deposit
Insurance. He signed the Glass Steagall Act
reluctantly, even though it had that provision in it.
(36:02):
Now, FDR was right about something that that there's
something wrong with insulating a bank against losing its
customers, just like there wouldbe something wrong with
insulating A delicatessen against losing its customers.
Now, clearly there's a solution.All you have to do is whisper in
the banker's ear. If you want to offer a safe
deposit to your customers, recommend if they put their
(36:24):
money into Treasury bills. OK, we have them for the moment.
We still have them around that that's that's backed by the
federal government, the same as FDIC.
If they want to do that and accept the lower rates, richer
people are going to have to buy their own insurance.
Or they could put their money into Treasury bills as well.
Or they can read various websites that would undoubtedly
(36:46):
arise that would advise them about which bank is safe and
which bank isn't. It's a no brainer to abolish
federal insurance. We don't need to protect the $50
million depositors, which is, bythe way, something that Alan
Blinder, big liberal economist, brought about through something
called CDARS. You can just give a give it back
$50 million and it can through through passing various ways in
(37:10):
which you can it can it contribute various assets to
various banks. It can have it completely
protected by FDIC. That's ridiculous.
Poor people put your money into Treasury bills.
Rich people buy insurance. Everybody else just read the
websites and stick with banks that practice prudence.
Very simple. Right now we've heard reference
(37:30):
to the next one that's coming. Of course, Peter has a book, a
new book called The Next Crash. So maybe you could pardon me.
The real Crash, The real Crash. Sorry, the real.
Crash, I'm actually do you. You wrote a blurb on that, you
know, so you should. Remember, Yeah, sorry.
So I have a lot of books fishingaround in my head.
But I mean, I do. I have a book signing at Laissez
Vares booth tomorrow at 3:30. For that, see, it's a good thing
(37:51):
we brought this up. Yes.
All right. Well, now I guess I'd like a
brief and super brief because I have one more key question I
want to get out of you guys, buta brief overview of from each of
your perspectives, what does this look like?
What exactly is this next thing that's coming?
And then secondly, on the other side of this thing, do we have a
better society? Is it is, is this going to lead
(38:13):
to more totalitarianism, capitalcontrols, things of that sort?
Or is this crisis the thing thatfinally breaks the back of the
federal bureaucracies and and weare emancipated from our chains?
That is the the unanswered question with which I actually
end my book. Not to give away the ending, but
yeah, I think we're heading to avery important fork in the road.
(38:37):
You know, the real crash is coming.
And you know, when I wrote the my book Crash Proof and I talked
about a coming economic collapse, it hasn't happened
yet. The collapse that I envisioned
was the one that was going to result from all the stimulus
that the government was going tothrow up the economy to try to
reflate the bubble once the housing market burst.
And it and we had the carnage inthe banking sector.
(38:59):
I predicted trillion dollar budget deficits and, you know,
all this money printing and cheap money.
And I thought the economy would ultimately die from not from
the, the disease, but from the government's cure.
And I think that's what's happening, you know, because
right now this whole thing is propped up because the feds got
rates at 0, but it can't keep them there indefinitely.
Is is people like to think that they can, but they can't.
(39:22):
And eventually when rates go up,this whole House of Cards comes
tumbling down. And I think we're in far worse
shape today because we've taken on even greater degrees of debt.
We've expanded government instead of contracting it.
We've made the too big to fail banks even bigger.
And so now it's going to be evenworse.
But, you know, the question is going to be who's going to get
(39:44):
the blame for this disaster? I think the politicians did a
pretty good job of blaming the 2008 financial crisis on
capitalism, even though it was government that did it.
This crisis is going to be even bigger.
And who are we going to blame? You know, are we going to
obliterate whatever remnants of capitalism remain and just fully
(40:05):
embrace A totalitarian, centrally planned economy?
Or are we going to finally get the message and restore limited
government, constitutional government, sound money, and go
back to what made America great?And I don't know the answer to
that question. I mean, as an American, I'm very
hopeful that it's the latter andnot the former.
But you know, I don't know how to handicap it.
(40:30):
I'm hopeful it'll be better at the end of this.
However, I think there's going to be 10 to 15 to 20 years and
some pain. And I just like to refer to my
favorite quote from Ludu von Meeses.
There's no means to avoid the final collapse of a boom brought
about by credit expansion. The alternative is only whether
(40:51):
the crisis should come sooner. Is a voluntary abandonment,
further credit expansion towardsthe final and total catastrophe
of the currency system involved And essentially where we are the
the steps that have been taken since the O 8 crisis are to
replace the the the private sector deleveraging with public
(41:14):
sector leveraging APP and it's going to destroy the currency.
Everything that what the government is doing is not just
the wrong thing, it's exactly the opposite of the right thing.
It will result, as these guys have said, in a total collapse,
and it's going to be very ugly. The good news is that all the
(41:37):
real wealth in the world, the buildings and the skills of the
people, the factories, that'll still exist, but the financial
system is going to collapse and the sooner the better, so things
can reorganize. Unfortunately, I think that
we're looking at a situation much like France in 1789.
I look forward to the collapse of this totally corrupt and
(42:00):
rotten regime. That's the good news.
It's going to collapse and go away.
The bad news is, since the average American has also become
so corrupt that we're likely to get something like they got in
France in 1789, it'll get worse Robespierre or Napoleon before
it eventually gets better. All right, let's go down the the
panel here for our last question, which would be you
(42:23):
have 60 seconds and and you're going to give us not if you can
do it in 45 seconds, even better.
Three things. If you could do three things, no
matter how politically unlikely that would change, that would
fix the situation. I don't care how radical, the
more radical the better. What would the three things be?
Let's start with David Tice. I'd say I would eliminate the
(42:44):
dual mandate of the Federal Reserve for maintaining economic
growth as well as price stability.
Secondly, I would encourage it will ensure that all policy
makers and economists read von Mises, Hayek and Rothbard and #3
(43:10):
boy, you screwed me up by makingme go first here time.
Let's see. I'll I'll defer to these other
brilliant gentlemen. OK.
I guess #1 would be elect Ron Paul president.
See, I'm playing to the crowd #2I guess maybe would elect Gary
Johnson president and then #3 maybe anyone on this paddle or
(43:36):
anyone in this audience president.
And maybe we have a fighting shot.
Well. Clearly Ron Paul already knows
that we should abolish the Federal Reserve.
It has had a terrible record. George Selgin, an economist,
(44:00):
recently showed that by the way,the Fed celebrates his 100th
birthday and next year, December, next December.
Been around for 100 years. And George Selgin did a very
simple before and after the 30-40 years before the Federal
Reserve was created, the 100 years since.
And even if you forgive the Fed,the Great Depression, it was
(44:22):
only practicing. So just take the Federal Reserve
since 1946 and actually in everyconceivable way the economy has
performed worse incidents of recession, boom and bust has
performed worse than it did prior to the creation of the Fed
from 19 approximately 1870 to 1913.
(44:43):
So indeed it it stares you in the face the the role of the Fed
has been abysmal. We can phase out the Fed phase
in a free market in money. Second, of course, obviously the
housing market functions fine inthe capitalist free market.
(45:04):
Bring back the banker we love tohate who didn't give you the
mortgage because your credit wasn't good.
And now we have the casino capitalist still to this day
who's inclined. It was worse, of course, 10
years ago, but it's still not good.
The, the, the, the housing market is still dominated by
government. We need to, to slowly, we need
(45:25):
to phase out. I don't want wrenching change.
We have to we have to do it by degrees, but it shouldn't take
too get rid of Fannie and Freddie, get rid of the the
Department of Housing and Urban Destruction as I would call it,
although it's called development, it's actually all
about destruction of real affordable housing.
(45:46):
And a third, obviously make banks behave like the
delicatessen on the corner. You're on your own.
This is a capitalist system of profit and loss.
Learn how to run your financial institution according to those
principles. Nobody's going to bail you out
any more than we would bail out the delicatessen on the corner.
(46:08):
3 proposals. Great.
Anything left to say? Well.
I really like Ron Paul. He's a wonderful guy.
But if through some miracle he was elected, elected president,
he would have a meeting with thedirectors of the CIA, the part
with the defense, the FBI and all these other praetorian
(46:29):
agencies, and they would lay down the law to him.
So that's not going to help. And if he was elected, by some
odd fluke, he'd just be blamed for the inevitable depression
that's going to happen. So what should be done?
Well, obviously the Fed should be abolished.
All these federal agency should be abolished.
All the assets of the US government should be auctioned
(46:51):
off or privatized, and what's left should perhaps be
distributed to people that have been forced to rely on Social
Security because that's something of a contract,
although a false 1. So all the US government's
assets should be auctioned off and but none of this is going to
(47:12):
happen. the US government's debtshould be defaulted on because
that is turning the next couple of generations into indentured
servants to pay it off with their taxes and so forth.
That's not going to happen either.
So this whole system has a life of its own at this point.
It's out of control. There's really nothing you can
(47:32):
do. I don't believe in political
action. I do believe in going out and
talking to people of goodwill and trying to make them
understand this on a one to one basis, but the situation is
hopeless at this point. That's the bad news.
The good news is that it's not serious.
Life will go on. All right, ladies and gentlemen,
(47:52):
Tom, we're first of all, I'd like to thank the wonderful
gentleman on the panel for theirtime.
I'd like to thank all you folks.I'd like to ask you to follow
the film, The Bubble Film on Facebook, The Bubble Film
Twitter, The Bubble Film. And as we leave, because some
people came in late, it was decided early on that we would
close by running that trailer again.
(48:13):
We get to hear some of these guys again.
So thank you very much for the support.
We'll see you this fall. Thank you.
Take a greater risk on these mortgages, yes.
To give families mortgages they would not have given otherwise,
yes. It means we use the mighty
(48:34):
muscle of the federal governmentin combination with state and
local governments to encourage owning your own home.
That's what that means. I ask all of you just one more
time to look at that chart and Iwish I had a lot of butter shark
to show you that would reinforcethat get.
By a house before you have a job.
Get a job you save for a doubt. Baby, then you buy the house.
(48:56):
A lot of people are going to find out, Oh, my God, you know,
not only is is my my stocks down, my house is down, too.
And now what am I doing? Jim Rogers knew these bubbles
were going to burst, but I didn't.
Neither did film maker Jimmy Morrison, who started a house
painting business less than a month after home prices peak.
His timing couldn't have been worse.
(49:16):
But we don't have to make those mistakes again.
There are people out there who called it.
And next time, maybe we can too.We've got a growing economy,
jobs, incomes, you've got very low mortgage rates.
Housing is going to be a disaster in the next 5 years.
You sell housing stocks and you sell Ben Bernanke.
One myth that's out there is that what we're doing is
(49:38):
printing money. We're not printing money.
These days they don't need a printing press, only do a thing.
It's a computer keyboard. So we're not a free market,
though there is an invisible there is.
A Pennell Billy's. Hand.
That touches them absolutely. These people in the government
apparently don't learn anything at all.
They broke it, and they're trying to fix it by doing more
(49:59):
of what broke it in the first place.
The United States can pay any debt it has because we can
always print money to do that. What?
Of course it can happen again, and it's happened before.
Raw materials were allocated between essential and non
essential business. I hope they don't lose
confidence in their government Ican see but they're why they're
(50:21):
skepticism. But the only government we got.
All this has happened before andit will all happen again.
(50:45):
The reality is we have gone froma stock market bubble, now we
have a housing bubble. And when it breaks, whatever
causes it to pop, then a lot of people are going to find out,
Oh, my God, You know, not all are my stocks down.
My house is down, too. And now what do I do, Charlie?
This was the day we were afraid to wake up to the bankruptcy of
(51:05):
one major Wall Street investmentbank, the shotgun wedding of
another. Ain't being distracted what's
going on with the war or what's wrong with the economy?
Stop worrying about that. They're not only doing the wrong
thing, they're doing exactly theopposite of the right thing.
We got into our mess by spendingtoo much money, running up too
much debt and printing too much money.
And that's exactly. What we're doing, which by the
(51:26):
way, we've seen how we got into the state of affairs in the
first place. You have to work for many kids.
No, you don't. It comes from the machine in the
wall. I've seen it.
Yeah. You just have to push buttons.
(51:53):
I don't think the economy is actually doing well.
That's the problem. It's just the illusion.
It's the stock market going up. It's the real estate market
going up. It makes people think the
economy is doing well, but it's actually doing lousy.
Basically, quantitative easing has been a wonderful boon for
the 1%. It's caused the markets to soar,
(52:13):
but it's not helped the real economy.
Quantitative easing was a very fancy phrase for what an
ordinary civilian might call money printing.
It's a uvenism essentially for printing money and buying up
mortgage instruments, buying up treasuries.
What we're doing is lowering interest rates by buying
Treasury securities and by lowering interest rates, we hope
(52:35):
to stimulate the economy to growfaster.
Over time, it becomes habit for me.
The politicians can't live without it.
Eventually it begins to degrade.Give me.
Some of that quantitative easing, brother.
I don't think they wind it back voluntarily.
I think 1 stimulus package will lead to the next one and to more
(52:55):
money printing. Ben Bernanke didn't magically
undo all those mistakes by creating a trillion dollars and
giving it to bankers, right? Those mistakes were still made,
resources had still been misallocated, and all he really
did was was literally paper overthe problem and push it back a
few years. So the trick is to find the
appropriate moment when to beginto unwind this policy.
(53:17):
And that's what we'll that's what we're going to do.
Why should a bunch of people sitting around the counts remove
the Federal Reserve building? Washington, DC know better about
the proper level of interest rates than they know about the
proper level, say, of corn prices.
The truth of our world, Max. It can't be easily summed up
with the math. There is no simple path guys.
(53:40):
The truth is way more depressing.
They're not even smart enough tobe as evil as you're giving them
credit for. I hope they don't lose
confidence in their government. I can see why there's
skepticism, but the only government we got?
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