Rollback: An Interview with Thomas E. Woods, Jr.

0:00Joining us on the program in FSN In Depth this week is Thomas Woods Jr. He's author of a new book called Rollback, Repealing Big Government Before the Coming Fiscal Collapse. You know, Tom, last week I had John Williams on the program and we went through the government's 2010 income statement and what is amazing is you go through this, 80% of the government's This budget entitlements, defense and interest is considered untouchable and in Washington they're arguing over $4 billion or $6 billion worth of budget cuts or $60 billion with money being spent of this magnitude when the government, I think the budget deficit this year is going to be $1.7 trillion.

0:47Is it too late? Well, if we're going to stick with this attitude, it absolutely is. I just saw a poll the other day in which a majority of Americans were saying that social security and Medicare payments should be increased. Now, I mean, that's just, I don't know what kind of la-la land these people are in, but social security and Medicare are already in the hole $114 trillion. Is that not enough for these people? So yeah, if that's the mentality we're going to have, then there is no hope. The only chance that we've got is for people to, for us not to act like seven-year-olds, You know, it was interesting, Tom, I can remember after the November elections and everybody was excited, the Republicans had taken the House and one of the biggest turnovers in Congress since 38, but what I find remarkable, which reflects back on what you just said, In public opinion polls done by the Washington Post and the Wall Street Journal, basically

1:53the gist of those polls were cut spending, don't cut mine, raise somebody else's taxes, don't raise mine. And in your book Rollback you talk about most of the people reading this book will live through one of the most significant periods of change in American history. The scale of the coming inevitable spending cuts will be unlike anything Americans have have ever experienced during peacetime, Americans have never seen federal spending scaled back, even when the newspapers speak of budget cuts, they don't actually mean the budget will be lower than it was the previous year, they mean only that its rate of growth is following. So between now and the entitlement collapse, you talk about what our politicians will likely The Federal Reserve, fiat money, fractional reserve banking, Human Action, Man Economy and State, The Theory of Money and Credit

3:10all off the table in my book, there are also practical considerations. I mean, for example, it seems that there are people in this country, a lot of them, who seem to think there is no problem that taxes couldn't solve, that weren't just for these absolutists to oppose all tax increases why we'd solve this problem in a jiffy. Well, the tricky part of that is that there's a stubborn statistic that most people are unaware of that Jeff Hummel The Professor on the West Coast dug up, and it's this, that ever since the Korean War, no matter what the actual marginal tax rates have been, the actual tax bite that the federal government has been able to confiscate from the public has more or less hovered around 20% of GDP, and only very, very rarely has it gotten slightly above that.

3:59But basically, that's as much as they've gotten, and that is quite an interesting statistic that you know tax rates go up tax rates go down and yet that the tax take hovers around the same amount of percent of GDP so it's like this is some kind of built-in limit so if they're thinking that somehow we'll just seize more property from the people and solve it that way just on practical grounds that's going to run into problems and of course with the terms of borrowing well you're running into practical brick walls there not simply because foreign lenders may I think they begin to lose confidence in the U.S. government, which indeed they will likely do, and indeed should. But the fact is, a lot of the countries that would lend to us are themselves going to be facing pretty substantial problems in the coming years. Japan is already going through a wrenching demographic change in its country, a very rapid aging of the population.

4:50China, with its one-child policy, is going to be reaping the fruits of that. They're going to need a lot of their money at home. They're not so much going to be interested in parking it in 0% return, the lending to the U.S., so that's inevitably going to start to dry up. And then finally, printing the money, I think, refutes itself. The only remaining possibility, other than actually cutting things, is the sort of old supply-side notion that we'll grow our way out of the problem. In order to stop the government's spending juggernaut, you talk about we need to expose The Theory of Money and Credit

6:14Well, this, Jim, is really the key to rollback, which I think of all the titles of mine. I intended this to be the most blow-your-mind sort of book. It's the kind of thing you hand to a tea party guy, and it looks like an anti-Obama book, you'll be comfortable with it. Sure, you know, it's against Obama, but it's the kind of thing you hand to a tea party guy, and it looks like an anti-Obama book, you'll be comfortable with it. Sure, you know, it's against Obama, Programma. But with each chapter, it gets more and more daring in its conclusions, and it's basically arguing this. It's not primarily a book on the budget, it's primarily basically saying what you just said, which is that it would be nice to cut the budget, and I'm all in favor of that, but much more important is to cut the propaganda that leads us to have these big budgets in the first place.

7:06That to cut out this way of thinking that we were all initiated into when we were in in the sixth grade. And we all know this by heart, what we were taught in sixth grade, that government is composed of wonderful self-sacrificing public servants pursuing the common good, and why without them, think of where we'd be, we'd have no art or science, everybody would be an ignorant boob, we'd probably all be doing a rain dance somewhere, we'd all be having our limbs blown off because our computer monitors would be exploding, or we'd all be working in a mine for a dollar a day. We all got this, and I know that it is superficially plausible, but pretty much what I'm doing with Rollback is arguing that given that we're going to have to make wrenching changes anyway, we're going to have to roll this thing back anyway, we're going to have to cut anyway, we might as well embrace this as an opportunity.

7:58This is not a calamity to be deplored, because the various causes on behalf of which the government has racked up all these debts have not in fact helped us. They were not necessary. The myths on which they were handed to us are laughable, and the free market itself has a far better record when it comes to eradicating poverty, providing for consumer safety, providing for sound money, and so on and on down the line, providing for scientific research. It has a much better record than government has. So this is where we need to be, is believing that we as a free people could in fact provide and all these things that we're told we couldn't ever have if it weren't for Joe Biden watching over us all. I don't buy that and I don't think Americans should buy it.

8:43Now just to put this in perspective, how big this problem is, and this is something that just really struck me when I looked at the government's budget last year. We've been doing this every year on the program. Now everybody hears about the debt ceiling over 14 trillion. Unfortunately that's only part of the picture. There's another additional amount that's $111 trillion, I don't even know if people know how big that number is, and even by the own reports published by the Congressional Budget Office, by the year 2020, and Tom, this assumes no major increase in interest rates, the US will be spending close to $1 trillion a year on interest alone, but these budget deficits, As big as they are, don't, I guess, reflect the impending problems of unfunded social security and Medicare, and as you pointed out, they want to increase that even more.

9:41And even a Democrat such as Lawrence Kotlikoff, an economist at Boston University, he said that the fiscal gap is an astonishing 200 trillion. Now he says we can reform it, but he doesn't say how. Yeah, he tells us that he's got several different possibilities, but then you finally track down what they are and none of them are politically plausible. I mean, really, if there were a painless way out of this or a politically feasible way out of it, it would have already been implemented. I mean, that's basically, I mean, anytime somebody comes along and assures you there's some simple way out of this, you know it's not true because they would have done it already if that were the case. But you're right, this is the elephant in the in the Living Room, and in fact, although a lot of attention has been focused on social security, it's actually overwhelmingly Medicare, of that 100 plus trillion dollar figure that you mentioned, overwhelmingly, I mean, 80% of that is Medicare. And of course, part of

10:38the problem here is that we've got an aging population, I mean, a rapidly aging population. We've got a situation in which, in our lifetimes, we're going to see the number of people in in this country aged 100 or over, increasing by 13 times. Now that's not, I say this, Jim, not because I'm sorry that people are living longer lives. That's a wonderful thing. You know, we should be delighted with a development like that. But the problem is no one has made provision for it. And of course, people of that age absorb far more resources in terms of medical care than the people who are younger do. And there's no provision for this. There's no provision has been made. In fact, when Pete Peterson,

11:48What a myth it is that we've been fed that supposedly the private sector is very short-term-oriented. It thinks only about short-term profits, whereas the public sector, well, here we have our far-seeing public servants who think in terms of long-time horizons. To the contrary! It's precisely because they don't have a long-time horizon that we're in this situation in the first place. I want to move on to the numbers that we look at the federal level are staggering in themselves, There's even bigger problems developing at the state and the municipality level. You talk about, for example, just to show how this doesn't work, one of the worst run big cities in the US is in my own state of California, which is San Francisco, despite spending just millions and millions of dollars on homelessness.

12:35The homelessness problem is worse than any other comparable city. It's not only poorly managed, but let's talk about some of the things that we're seeing

13:13I mean, talk about having no dignity whatsoever. I mean, these are people who would, and I know people who live in Greece and who are all too aware of the political culture there, of people's expectations that if I can't retire at age 50, I've got to go burn down a building. I mean, good grief. I hope we have more dignity than that in this country. But, indeed, I mean, what's basically the way that state governments have dealt with public sector unions is they've had to walk a tightrope for a number of years, because on the one hand, the unions demand The Union demands higher and higher salaries, and they can't give them super-duper high wages or salaries because then they're in danger of getting ousted from office, but at the same time they can't ignore these wage and salary demands entirely, then they lose the support of the Union.

14:00So what they've done is they've given them just modest enough wage and salary increases to keep them happy. University. But really what they've done is they've back-loaded the promises by saying, well, here's what we'll really do. We'll give you these really generous pension programs. And given that the pension program, of course, isn't going to come due until 10, 20, 30 years down the line, it's an easy way for politicians to, in the present, and the payout will come long after the politicians involved are retired. It was a clever scheme. But like many clever schemes, the giant footnote that no one paid attention to is now coming to the fore. And we're seeing now, I was just in Ohio the other day, and apparently there's going to be a similar sort of showdown there, not just with the teachers, but also with police and fire.

14:49I mean, we've seen in New York, they've got countless people retiring with six-figure tax-free pensions. It's astonishing. At some point, in fact, last year, it got so bad that the governor of New York even

15:31I don't know exactly when that moment is, but I certainly wouldn't want to be invested in municipal bonds or anything like that at a time like this. I want to move on to what we're doing with the economy, especially after the credit crisis. And I want to move on to these gargantuan deficits that we have coming from Social Security, Medicaid, Medicare. Medicare, and then on top of that, in 2010, we pass an additional entitlement with Obamacare. I mean, the system's broke as it is, and it's like somebody that has run their credit cards up to the hilt is facing bankruptcy and then is suddenly granted a new credit card to go out and spend even more.

16:16This is insane. It absolutely is, and so in probably one of the tamest of my chapters, I do talk about Obamacare. Basically, it's Obamacare for people like me who are not that interested in the details of health care. Just tell me what's wrong with this thing, why should we not have done it, what would be a better alternative? But one thing that's interesting about this is that one of the architects of the Obama plan, just a few weeks ago even, just openly admitted that this is not a cost-cutting measure, The Cost Cutting Plan, which we were promised, well that'll come down the road, but we thought coverage was more important first. So we've been assured that really people like you and me were just worried about nothing because don't worry, Obamacare is going to do the cost containment for us, and so a lot of these nightmare scenarios aren't going to occur.

17:07But to the contrary, it does nothing. Explain to me what exactly this thing does to contain cost. It aggravates every existing trend that has led to higher costs, and I can think of maybe half a dozen ways that it does that, and this just sort of brings to mind, I have heard through the grapevine that one of the things that Congressman Ron Paul is toying with if he were to run for president, now I don't have any direct line on this, but I've heard indirectly, is this possibility, basically saying to young people who are obviously going to get the short end of this stick. That's obvious. But really to anybody in the country, he's toying with this, saying, what would you say if we offered you this deal? You can be taxed 10%, we'll tax you 10% at that rate, and in return for getting that kind of tax rate, you get to opt out of the system. You don't get any of the so-called benefits, but

18:02all you ever have to pay is 10%. Would you take that deal? I mean, I think there would

18:38The answer to our problems are not going to be found inside that box. That's the source of our problems. That box needs to be crushed into the ground and set on fire and that's more or less what I've committed myself to. Well, it's amazing because, you know, one of the things that always disturbs me, Tom, is whenever they talk about, and you see this in the media with the Sunday Talk shows, that somehow there's some new tax that could pay for all this, or the one my favorite is the Social Security Trust Fund is sound. I mean, I looked at last year's financial statement for the government, and as you know, Tom, the government has been running these huge surpluses in Social Security.

19:26They spend the money and issue an IOU. Well that trust fund, you know, when I think of a trust fund, I think of, you know, like a pension account where money's been set aside. It's invested in stocks and bonds and some kind of asset that will be there to make payments when people need them, as most corporate pension plans are. But the government has no trust fund. Well Jim, not too long ago, Peter Schiff had on his program a former social security actuary.

20:19And Schiff just came out and said, do you know what a Ponzi scheme is? And the guy said, well, yeah, of course. And Schiff said, what's the difference between Social Security and a Ponzi scheme? And Jim, I kid you not, the line went dead, dead silence. And of course, on radio, dead silence is murder. I mean, you've got to fill that silence. So Schiff said, look, you know what? I'll give you the whole break to think over your answer. So they went to a commercial break, they come back, the guy still has no answer. Well, it's not like he was asking some critic of Social Security. He's talking to one of the guys who's involved in it, and of course, I mean, this Social Security Trust Fund, I mean, they must think we are seriously a bunch of stupid rubes to still be pulling this Social Security Trust Fund. Yeah, you're right. Any year there's a surplus of income over outlays with Social Security, yeah, there's

21:08a surplus, so you think, oh, that surplus probably goes in the Trust Fund. No, the surplus, as you say, is blown immediately on other things, and IOUs in that amount are

21:47I mean, no one would be able to get away with that, whereas here, when it comes to the government, well, we just consider this to be public policy, and that's just the way it is. It's unbelievable the double standard whereby we will look the other way at the most unbelievable outrage that's perpetrated in the public sector, whereas the private sector is constantly slammed and denounced as the den of exploiters and so on and on, people who care nothing for the common good. It is exactly the opposite, as far as I can see. I want to move on to, once again, something we discussed earlier, and any time there's an economic crisis, you know, there's cries from, you know, the Paul Krugmans in the world and politicians, the government needs to do something about it. And when we take a look at, even the New York Times talked about when the stimulus package was put together, it was drafted by inside corporations so it would favor money distributed

22:43to themselves. and much of the debate over the stimulus turned unfortunately in terms of how much pork the problem was with the fiscal stimulus is really tooth fairy economics as many economists know much of the recovery came from an inventory rebuild and what jobs the only jobs that were created were government jobs and yet you have talk right now about there's even talk what happens in June when the feds QE2 ends, there's even talk about maybe a new spending program, and let's talk about, Tom, in this TARP money that the public saw in bailing out a lot of these banks in corporations. Okay, a lot of those banks have paid back some of the money.

23:30What happened? Was that money used by the government to pay down its debt? No, they spent it. Well, all of this combined, I mean, it's like if you were to try to devise a plan that would would consist of all the wrong things. I couldn't possibly improve on what they've done. And in the short run, they've put some Band-Aids and scotch tape on this crumbling building and saying, hey, look, the thing's still standing. I'd like to know what's in Ben Bernanke's personal portfolio. Is there any way to find that out? I'd love to know, or if anybody on CNBC who tells me I don't need to be in precious metals, that's just a lot of scare talk, how many of them are in precious metal? I just like to know. But yeah, when we look at all this, we look at TARP and we're told that this was all wonderful and the taxpayers made money.

24:18Well, on net, they didn't make money. On net, when you include all the TARP spending, it still was a loss. But also, this is all a good thing only if you think preserving Wall Street as we knew it was an end in itself. Whereas I don't think that was a good thing. I don't think it should be preserved as we knew it. I think it should be forced to restructure. and then in terms of the stimulus package well you're right it's not the pork and of course you can find ridiculous spending programs in the stimulus everybody knows that but the key objection to the stimulus is partly that of course the resources devoted to the stimulus have to come from somewhere so instead of being directed to genuine consumer demand they're redeployed in these arbitrary projects and also that the stimulus spending is totally irrelevant to the problem the problem is is that, as the Austrians would say, is that during the boom, we had artificially low interest rates, and the significance of that is that when interest rates are pushed down, it's not that more investment takes place, it's that different kinds of investment take place than would otherwise take place, investment that is more sensitive to interest rates. So if it's some project whereby I may not see a profit for five years and I'm going to have to borrow for five years, that type of project, like building a new

26:07the Wrong Time, and then we get the crash. Well, how does stimulus spending get us out of it? It just blows a lot of arbitrary money. We don't need more arbitrary money blown. We need the free market unhampered to use the price system to reallocate resources out of bubble sectors and into previously starved sectors. And we can't know what those are because we're not central planners, only entrepreneurs acting in response to what they're seeing in the price system. So in other words, it's not that we're saying we should do nothing. Government should do nothing, but we should do something. Entrepreneurs, private property owners, risking their own capital, they should do something. They should be allowed to do something without constantly being hampered and getting all these false signals and getting bubble sectors propped up and tax credits to keep expanding the bubble sector. No! That is taking wealth away from where it belongs and propping up our Artificial, phony, baloney wealth that never really existed in the first place.

27:10You know, one area when you talk about artificial wealth, as we saw in the bailout, we got this saying it was too big to fail. We couldn't let Bear Stearns and AIG and General Motors go under because they were too big. If you take a look at it as the consequence, it creates a different kind of business model in the economy because when you have a financial institution that is so large, it's deemed It's too big to fail. It stands, Tom, to gain an artificial advantage at the expense of its competitors, because smaller competitors are allowed to fail. Lenders know that these big, large firms, and I would say that as a result of the financial crisis, these too big to fail firms have gotten even bigger.

27:57JP Morgan is a much bigger bank today, with a lot more risk exposures. So is Bank of America. So is Wells Fargo, and look at Freddie and Fanny. You couldn't touch them in the 80s, but look how much they're hemorrhaging. Every month they're still losing billions of dollars. Yeah. I've got a bunch of stuff in Rollback about the too big to fail thing, and of course one of the ways that a too big to fail institution gets an artificial advantage is that it can borrow more cheaply, because it has this, you might call it a negative risk premium built in. have this kind of assurance, and as we've seen it's indeed a well-founded assurance, that their money will be perfectly safe and don't worry about it because this is a too big to fail institution, whereas the smaller ones, smaller institutions have a genuine risk premium built in and you know this is an industry in which just the tiniest difference in interest rates which they can borrow means everything, in terms of profits and so forth.

28:59If it goes beyond just the financial sector and Fannie and Freddie, I mean, we see this also, I remember when I was a kid, if anybody would say that we need to look at the military budget, I would have said, what are you, some kind of commie? I mean, of course, nothing wrong with the military budget, perfectly fine. Well, there we also see the too-big-to-fail phenomena, that we have this very cozy relationship between certain military firms and the government, such that we've seen implicit bailouts of these firms, like when Lockheed was in trouble, It got the contract with the Trident missile, or when Boeing was in trouble, it got a bizarre contract to lease 767 passenger jets to the military at a time when the military was actually saying, we don't need these jets, these are not appropriate for what we need, and it would actually be cheaper for us to buy them outright than to lease them from Boeing.

29:47The leasing agreement went through anyway to prop up Boeing when it was in trouble. I mean, this is just, it permeates the whole system, and meanwhile, the brain-dead left clings to the idea that the Federal Government is a wonderful progressive institution looking out for the little guy. How deluded would you have to be to draw that conclusion? I don't know, but you know, here's another one, too. It's not just the bailouts that we've seen, the huge, massive, and I mean massive deficits. I never would have thought in my career when I started in this business 30 years ago we would be sitting here having a conversation about a $1.7 trillion deficit. That kind of number was just unimaginable.

30:33But let's talk about also the financial reform bill, all these regulators. Now I recently interviewed an individual that played an advisory role to the movie Inside

31:14more laws, more regulations if those who charged with enforcing them don't do so because, I mean, look at the SEC when they were given evidence on Bernie Madoff. Yeah. They're too busy watching computer porn to do anything about it. Yeah. I mean, that was seriously true that that was a big problem at the SEC because they're doing that instead. The financial reform bill, it's one of these things where everybody knows that we're going to have to just wait to see what it really means. This really is a Nancy Pelosi, you've got to pass the bill so you can find out what's in it kind of situation, because when you look at the text of it, there are over 100 uses of the phrase, the committee shall decide, the committee shall determine, and gee, who do you think is going to get to have many? Is it going to be Joe Blow at local community bank? Is it going to be some guy with a retail toy store? Who do you think is going to get these meetings?

32:14Another attempt to game the system as before, and then Kotlikoff, whom you mentioned earlier, he identified 115 distinct regulatory bodies for the financial sector. And in doing so, he was implicitly saying, you'll forgive me if I'm skeptical of the idea that if only we had had 116, then we wouldn't have had this problem. Look, first of all, the whole system is screwed up from the Federal Reserve on down. It gives exactly the wrong incentives to every major player. That's a fact, and that plays no role in the financial reform. But secondly, let's consider that the regulators who are supposed to keep us all safe, we attribute to these people superhuman qualities that usually they don't really deserve. I mean, these are usually just time-serving drones.

33:01Let's face it, these are not separate race of supermen. The regulators basically didn't see anything wrong, and they said that repeatedly. I mean, even the Federal Reserve chairman at the time, Greenspan and Bernanke, were The Theory of Money and Credit

33:42The natural watchdog function of these people is artificially diminished by these sorts of interventions. Much more trust somebody with his own box on the line than I would Joe Blow regulator because most of these regulators, let's face it, these are not the kids who graduated number one from Harvard Business School. These are the people who graduated number 512 from Podunk Business School. I'm pretty sure that the bright businessmen are going to run rings around these people regardless of what happens. I don't trust them to keep the system sound.

34:29I want a total reform of the monetary system and I want a much diminished or eliminated Fed. And then we might have some chance of a system that actually works instead of trying to constantly add more scotch tape to a house of cards. I want to move on to the elephant in the room. And so much of my business, Tom, is focused on every single little nuance or pronouncement by the Fed officials, and the Fed is expanding its balance sheet, and there's already talk that QE2 will come to an end, I just don't see that happening. When the government is running a budget deficit of about $130 billion a month, plus we have almost more than $200 billion a month of short-term debt coming due, that's almost $350 billion

35:55is Bernanke has gone before Capitol Hill last week and he's gone before in the various speeches he's made the last couple of weeks where he said look at this QE thing I've done, it's wonderful, look at stock prices since we put QE2 into effect, the stock market is up up, but then he refuses to take any blame for the rise in commodity prices, the rise in food prices, the rise in cost structures that we're seeing as a result of inflation heating up. Let's talk about the Federal Reserve and its role that it has played in these crises. Well, this is another example of, I think it's the classic example of the propaganda version of history as opposed to the real one, and that's why I've got a whole chapter When you look at the Fed's mandate for a number of decades, it's got to keep price inflation low and output and employment high.

37:08Well, okay, has it succeeded or not? Well, we're told repeatedly that, you know, good heavens, what kind of a neanderthal would you have to be not to recognize that things have been much improved since we had the Fed, we've had fewer recessions and they have been shorter and shallower and so on and on. Well, actually, that's not true, believe it or not. I realize that this will meet some resistance, but I've got all the statistics in the Fed chapter. The key thing is that up until relatively recently, we've been relying on statistics from before the Fed that turn out to be unreliable. And in fact, even Christina Romer, who was a chief economist under Obama, so is by no means a Ron Paul and the Fed type, she wrote a couple of very important academic papers that others have followed up on, basically saying that the numbers are so unreliable from the time around the creation of the Fed and beforehand that, I mean, you might as well be using tea leaves to figure out what's

38:02The Theory of Money and State The Theory of Money and State

38:32Dave Ramsey Steve Ramsey

39:27Speculator, going into financial markets where they have no business being in the first place, just to hang on to the purchasing power of their nest egg, how is this? This is how the average person is affected by the Fed. How is this an unambiguous improvement? It isn't. The thing about this is there is no such thing as free lunch, despite Ben Bernanke's speech in 2002 where he said this government has this wonderful invention called the printing

40:53Tom, if we do not take any steps, and the kind of steps that you're talking about, I almost would give the example, it's like you just went to your doctor, you weigh 350 pounds, your cholesterol is 350, your arteries are clogged, and your doctor is saying, look, you need to go on a diet, you need to cut, you need to start exercising gradually, or you're going to die of a heart attack. I mean, the kind of things that you're talking about, given the size of government, you're talking about some dramatic cuts. In one of your chapters, you're talking about we as Americans are going to see something that we have never seen, probably in our nation's history, the kind of cuts that you're talking about that will be either taken voluntarily or be forced upon us.

41:45And every year that the entitlement problem is not addressed, we add to that problem a a figure somewhere between two and four trillion dollars every single year. So when the president says, well, you know, now's not the time to make any real changes. We have to just stand pat. It would be irresponsible to make dramatic changes right now. No, what's irresponsible is not to make them because then when the collapse comes, it's all the worst because then it's been underfunded all the worse all those years. And people continue because again of that naive view they got in the sixth grade that the experts are in charge and they're

42:48the budget by five hundred billion dollars in one year which is you know it's not even one-third of the problem given as you mentioned nearly one point seven trillion dollar deficit they were practically reaching for his heel cut his head off or they just ignored it and so he wrote in the Wall Street Journal he said look if anybody's got a better proposal or you've got other things that you would cut apart from the things I'm proposing I'd love to hear it and the response of course was cricket that no response at all but this is at least he's The Theory of Money and Credit

43:48have to be made very quickly in a time of great social upheaval and we will say to ourselves if only we could have made these changes back when we could have done them in times of tranquility and when we could have done them as sober adults, shame on us for missing that opportunity. Tom, how do you think this gets resolved because it doesn't matter whether it's Republicans or Democrats, I mean you've got Republicans talking about 60 billion in cuts in a year The National Debt is growing by leaps and bounds and at some point interest is going to consume almost 40% of government revenues, gross revenues. So sooner or later, we will either hyperinflate our way or we're going to default, but in your opinion, how does this thing get resolved because there doesn't appear to be any awareness or suggestions coming from the media, they're basically like lap dogs at press conferences, you're not seeing it come from Wall Street who loves the party time that stocks are going

44:57up. So how does this get resolved? Well, I'd love it to be resolved by people coming to their senses and saying, look, we're going to go through some very difficult years for a while, but it's unavoidable. And on the other side of this, we will emerge with a more robust economy, we'll be able

45:42The Federal Reserve, fiat money, fractional reserve banking, Human Action, man economy, and we all know our pensions are denominated in dollars so we're not doing that and you could see all kinds of things happen in the crisis you could see congress try to nationalize the fed and get that printing press from them and just start printing the money that's possible that it's more possible they would do that i think than that the fed would just go along with hyperinflation but regardless the possibilities are all pretty grim and as i say they would demand very dramatic changes in a very short amount of time. And when I say repealing big government through the collapse, what I mean is that when it comes down to a question of either we unplug your granny or we abolish the Department of Education, I think I know how most people are going to come down on this. You know, I'm pretty sure local parents could probably run their own schools without the privilege, without paying taxes for the privilege of

47:00being bossed around by their betters. I'm pretty sure we'd get by just fine without I think we had some education in this country before 1979 when we got that department. I think we'll be okay. I think that's when we'll see the big changes and probably not before. I'm doing my best with rollback and my public speaking, whatever, to try to resolve this as quickly as possible so that we don't just... so that this slow motion train wreck can be stopped. But I don't know if it's possible.

48:04It's a shame, again, because I remember years ago before I had children, and people would say, oh gosh, you know, what we're doing to our children, and I'd say, yeah, yeah, yeah, this is all kind of cloying and sentimental, but you know, now I've got four little girls, and I think, my gosh, you know, I think back to the years when I grew up, you know, I mean, I was a kid in the 80s, and I was in college in the early 90s, and you know, I got out of college, and there were just jobs everywhere. was great, booming, and it just seemed almost like this was the natural order of things. And of course it is the natural order of things when you have a normal economy. At that time we still had, I think we've had a lot of fed distortion of the economy, we've had a lot of prosperity that's been not really genuine prosperity, but the point was that we at least

48:51had optimism at that time, and it just seemed like whatever my criticisms of the way the economy is being run, you know, at least it's delivering the goods and somehow it's all

49:28The Theory of Money and Credit

49:58You know, I think it's eventually going to get to that because, you know, politicians as you know will scramble to keep anything going. I mean, they'll kick the can down the road. And I suspect we are going to see QE3. Maybe we'll have to go through some gyrations in the market. But next year is the presidential election year. And it's going to be a tough year. I think it's going to be a tough year. You know, Tom, who's going to want to get on the stump, whether you're running for president, senator or the House of Representatives high? If you elect me, I'm going to cut your benefits, I'm going to raise taxes or I'm going to do something like that. That's not the message you hear from, you know, your politician during an election year.

50:46They're usually handing out lollipops. That's true, but this year what will be interesting is if Ron Paul runs and then also Governor Gary Johnson runs, and Gary Johnson is basically calling for cutting a billion, a trillion The Theory of Money and Credit The name of the book is called Rollback, Repealing Big Government Before the Coming Fiscal Collapse.

51:36It's written by Thomas E. Woods, Jr. Tom's been my guest. Tom, thanks for coming on the program. All the best to you with this book and hopefully we can get enough American people to start reading it and understand the challenges we face in the next decade. Thanks, Jim. In fact, they can read chapter one for free if they go to tomwoods.com. I can read that and that's the most important one, so tomwood.com, read that for free and I'll never bother you again, I promise. Alright, Tom, all the best to you, sir. Thanks a million, Jim, appreciate it.