Joining 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.
Is 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
the 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
all 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.
But 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.
China, 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
Well, 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.
That 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.
This 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.
Now 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.
And 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
the 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,
What 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.
The 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
I 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.
So 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.
I 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
I 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.
This 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.
But 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
all you ever have to pay is 10%. Would you take that deal? I mean, I think there would
The 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.
They 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.
And 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
a 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
I 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
to 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.
What 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.
Well, 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
the 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.
You 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.
JP 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.
If 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.
The 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.
But 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
more 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?
Another 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.
Let'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
The 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.
I 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
is 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.
Well, 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
The Theory of Money and State The Theory of Money and State
Dave Ramsey
Steve Ramsey
Speculator, 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
Tom, 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.
And 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
the 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
have 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
up.
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
The 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
being 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.
It'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
had 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
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You 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.
They'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.
It'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.