WEBVTT NOTE The Bailout, Libertarian Principles and Solutions 1 00:00:00.000 --> 00:00:06.480 Alright, we are back on American Vigilance Coast to Coast with Walter Block, senior fellow 2 00:00:06.480 --> 00:00:08.120 at the Mises Institute. 3 00:00:08.120 --> 00:00:10.040 Professor Block, thank you for calling. 4 00:00:10.040 --> 00:00:11.760 My pleasure. 5 00:00:11.760 --> 00:00:14.760 It is a pleasure to have you on. 6 00:00:14.760 --> 00:00:16.280 We do appreciate you taking the time. 7 00:00:16.280 --> 00:00:23.160 We know you're a busy guy and I have to say just first and foremost, big fan of your work 8 00:00:23.160 --> 00:00:28.120 over there at the Mises Institute, some of the seminars and classes that you give. 9 00:00:28.120 --> 00:00:34.240 I just think you resonate this idea so clearly that I think our listeners are going to benefit 10 00:00:34.240 --> 00:00:40.840 greatly from having you on for an hour to talk about these ideas in a way that is just 11 00:00:40.840 --> 00:00:42.840 so concise and easy to understand. 12 00:00:42.840 --> 00:00:45.080 Well, I hope I've looked up to that. 13 00:00:46.080 --> 00:00:47.080 You've been kind. 14 00:00:47.080 --> 00:00:51.220 Well, you know, one thing we just want to say, the point of the show is, I mean, I know 15 00:00:51.220 --> 00:00:56.680 we could probably talk, we could probably talk to you for hours and hours and get into 16 00:00:56.680 --> 00:01:01.680 of Money, The Theory of Money and State, The Theory of Money and Credit 17 00:01:26.680 --> 00:01:27.680 You're right. 18 00:01:27.680 --> 00:01:35.760 The Congress tutors are economically illiterate, except for Ron Paul, but that's one out of 19 00:01:35.760 --> 00:01:41.320 535, so I think your assessment is a good generalization. 20 00:01:41.320 --> 00:01:47.520 I might give Bill Salley, I might give Bill Salley from Idaho, it might be 534. 21 00:01:47.520 --> 00:01:53.600 Well, there might be two or three others, but Ron Paul is my main man in the Congress. 22 00:01:53.600 --> 00:02:00.560 You got it, man, and he's pretty much my main man across the board there. 23 00:02:00.560 --> 00:02:05.200 We need more like him in the Congress, obviously, and I think that's why a lot of us are so 24 00:02:05.200 --> 00:02:12.840 active now, is because this Ron Paul message, these libertarian ideas have to gain some 25 00:02:12.840 --> 00:02:17.640 traction and we have to have more people in the Congress to see some of these policy shifts 26 00:02:17.640 --> 00:02:21.240 that we need to see happen and some of the changes that we need to get back on the right 27 00:02:21.240 --> 00:02:22.240 track. 28 00:02:22.240 --> 00:02:29.240 I agree entirely, it's very foolish to bail out companies, there's a thing called moral hazard. If you bail out people who make mistakes, you encourage future mistakes, and further mistakes. So you just get more of the same, people will now take more risks. 29 00:02:52.240 --> 00:03:02.240 when they lend money, and they'll say, hey, I'm pretty big, the government will bail me out, I might as well take these risks that are unwarranted based on the economics of it. 30 00:03:02.240 --> 00:03:12.240 So that's not a good plan. It's penny wise and town foolish, or it's a very short run thing, and not even that, because I don't think it's going to help even in the short run. 31 00:03:12.240 --> 00:03:17.240 But in the long run, it's certainly going to hurt as people make foolish decisions in the future. 32 00:03:17.240 --> 00:03:27.240 Professor Block, I don't know if there's a volume on your phone. Is there any way we could get your volume up just a little more? 33 00:03:27.240 --> 00:03:30.240 Is this any better now? 34 00:03:30.240 --> 00:03:33.240 Just a little more if you can. 35 00:03:33.240 --> 00:03:37.240 I ramped it up to the highest level. 36 00:03:37.240 --> 00:03:39.240 That's the best I can do. 37 00:03:39.240 --> 00:03:42.240 Then it will definitely work. 38 00:03:42.240 --> 00:03:45.240 I'll get closer to the speaker. 39 00:03:45.240 --> 00:04:09.760 Well, I got my PhD in economics at Columbia University and am now a professor at Loyola 40 00:04:09.760 --> 00:04:11.640 University, New Orleans. 41 00:04:11.640 --> 00:04:15.540 By the way, if there are any students who want to get a good college degree, come on down 42 00:04:15.540 --> 00:04:16.540 here. 43 00:04:16.540 --> 00:04:21.360 We need students because we lost quite a few with Katrina, and all of my colleagues in the 44 00:04:21.360 --> 00:04:27.840 economics department are all, as am I, Austrian economists and libertarians. 45 00:04:27.840 --> 00:04:32.400 So if you're of that persuasion, you'll be among friends here. 46 00:04:32.400 --> 00:04:39.640 So Professor Block, would you mind if I got a government-backed loan to go to Loyola? 47 00:04:39.640 --> 00:04:45.560 Well, you know, it's interesting. 48 00:04:45.560 --> 00:04:47.560 That question is a very complex question. 49 00:04:47.560 --> 00:04:52.160 What is the proper relationship of the libertarian and the government? 50 00:04:52.160 --> 00:05:00.820 Is it one where the libertarian refuses all government subsidies and a lot of times people 51 00:05:00.820 --> 00:05:05.320 go to public school and they're called hypocrites, libertarians are called hypocrites because 52 00:05:05.320 --> 00:05:08.840 you know you're against public school and yet you're going to a public school and what's 53 00:05:08.840 --> 00:05:38.840 The Theory of Money and Credit 54 00:05:38.840 --> 00:05:59.800 I think that's an incorrect view that libertarians can't take subsidies from government. Have 55 00:05:59.800 --> 00:06:26.800 Have you read Atlas Shrugged by Ayn Rand by any chance? 56 00:06:26.800 --> 00:06:36.800 Oh yes, I read that when I was, I don't know, 22 years old, and I've read it every 10 years since then. So I must have read it five or six times, because I'm 67 now. 57 00:07:26.800 --> 00:07:32.360 Oh yes, that book along with Economics of One Lesson by Henry Houser were the two books 58 00:07:32.360 --> 00:07:34.400 that converted me to libertarianism. 59 00:07:34.400 --> 00:07:39.080 In any case, there's this character Ragnar Danischkohl, the sort of a minor character, 60 00:07:39.080 --> 00:07:44.480 the pirate, and he goes around not stealing from government because you can't steal from 61 00:07:44.480 --> 00:07:49.920 a thief, you can only liberate from a thief, and if you look upon government as a thief, 62 00:07:49.920 --> 00:07:54.800 I think you get the libertarian view. 63 00:07:54.800 --> 00:07:57.240 And I do! And I do! 64 00:07:57.240 --> 00:08:02.520 So if Ragnar Danichkov is justified in liberating at the point of a gun 65 00:08:02.520 --> 00:08:07.360 ill-gotten gains of government and returning it to people like Hank Reardon, the heroes, 66 00:08:07.360 --> 00:08:09.880 we're certainly entitled to 67 00:08:09.880 --> 00:08:13.080 maybe not use a gun and not 68 00:08:13.080 --> 00:08:15.580 take stuff away from them against their will, but 69 00:08:15.580 --> 00:08:19.920 if they offer us free library services, I don't see any reason why we can't. 70 00:08:19.920 --> 00:08:21.280 The libertarian 71 00:08:21.280 --> 00:08:23.520 view that I espouse on this is that 72 00:08:23.520 --> 00:08:30.160 It's wrong to give anything to government, because government is a band of thieves and criminals, so you don't want to support them. 73 00:08:30.160 --> 00:08:35.220 It would be wrong to donate money to government, but there's nothing wrong with taking stuff from them, 74 00:08:35.220 --> 00:08:43.000 whether legal or illegal. I mean, obviously I'm not advocating doing illegal things, because they can put you in jail and they've got more guns than you, 75 00:08:43.000 --> 00:08:47.200 but on a moral basis, you know, if you liberate a library book or something, uh... 76 00:08:47.200 --> 00:08:50.200 I liberate a library book! 77 00:08:50.200 --> 00:08:52.120 I love it, man! 78 00:08:52.120 --> 00:08:57.520 You're not violating any libertarian code. Again, I don't advocate this, but I'm just analyzing it. 79 00:08:57.520 --> 00:09:03.880 So if you can do that, then you can certainly do legal things, like go to a public school, or 80 00:09:03.880 --> 00:09:05.800 you know, use 81 00:09:05.800 --> 00:09:09.520 U.S. currency, even though it's falling apart. 82 00:09:09.520 --> 00:09:15.760 So I think you can go to public school, and you know, I sort of have a little vested interest in it because 83 00:09:15.760 --> 00:09:20.600 right now I'm teaching at a private school. It's a Jesuit school, Loyola University, New Orleans, 84 00:09:20.600 --> 00:09:25.600 I taught at public schools in my day, and I make no apology for it. 85 00:09:25.600 --> 00:09:32.600 Sometimes you can use the argument, well, we paid taxes for this, so we might as well get back what they took from us. 86 00:09:32.600 --> 00:09:37.600 But suppose you came from Mars, and you never paid one penny in taxes. 87 00:09:37.600 --> 00:09:42.600 You would still be justified in taking stuff from government, because government is a thief. 88 00:09:42.600 --> 00:09:49.600 When you take stuff from a thief, it's not like taking from the rightful owner. 89 00:09:49.600 --> 00:09:54.600 Indeed, if you want to return it to the rightful owner, the first thing you have to do is take it away from the thief. 90 00:09:54.600 --> 00:10:00.600 So it can hardly be unjustified to take things from thieves, and if you look upon government as a thief, 91 00:10:00.600 --> 00:10:10.600 and I do since it's a compulsory institution, well then I think it's justified to take stuff from government. 92 00:10:10.600 --> 00:10:16.600 So that would be the long roundabout answer to that question that you raised. 93 00:10:16.600 --> 00:10:26.520 You mentioned at Loyola University that all of the economics professors there are Austrian 94 00:10:26.520 --> 00:10:31.360 economists and I would like to hit on that as well, but really I want to ask you, how 95 00:10:31.360 --> 00:10:33.200 would you define libertarianism? 96 00:10:33.200 --> 00:10:37.160 For those who haven't heard of libertarianism and the concepts, how would you define that 97 00:10:37.160 --> 00:10:40.480 and maybe you can squeak Austrian economics in there? 98 00:10:40.480 --> 00:10:52.480 Well, okay, sure. Libertarianism is the view that it's wrong, impermissible, bad, to initiate violence against people. 99 00:10:52.480 --> 00:11:00.480 There are two and only two ways in which we can deal with each other. One is the voluntary way and the other is the coercive way. 100 00:11:00.480 --> 00:11:05.480 Suppose I see you're wearing a nice pair of shoes. There are two ways I can get those shoes. 101 00:11:05.480 --> 00:11:15.480 One, I can get your permission. I can offer you a hundred bucks, or I can say I'll be your best friend forever if you give me the shoes, or, you know, something like that. 102 00:11:15.480 --> 00:11:25.480 And in any way like that, where I gain your permission, I say, you know, I'll trade you my bicycle for your shoes, or I'll give you a hundred bucks, or I'll make promises to you. 103 00:11:25.480 --> 00:11:34.480 In other words, that is the civilized way of dealing with each other, and that's permissible, and that's what it turns is that all acts should be limited to that. 104 00:11:34.480 --> 00:11:39.260 The other way I can get your shoes is to come up to you with a gun and say, unless you give me your shoes, I'm going to blast you. 105 00:11:39.260 --> 00:11:42.280 And then you take off your shoes and you give them to me, and that is 106 00:11:42.280 --> 00:11:44.240 coercion, and that's 107 00:11:44.240 --> 00:11:49.360 untybalized, and that's bad. So, libertarianism is the view 108 00:11:49.360 --> 00:11:54.320 that's based on the non-aggression axiom. It says that all actions, all interactions 109 00:11:54.320 --> 00:11:56.680 between people should be non-aggressive. 110 00:11:56.680 --> 00:12:01.480 You can be assertive, but you can't steal or rob or threaten people with violence. 111 00:12:01.480 --> 00:12:07.400 Now, that's one side of the coin of libertarianism, the non-aggression axiom. 112 00:12:07.400 --> 00:12:12.800 The other side of the coin is property rights, because if I take your shoes at the point 113 00:12:12.800 --> 00:12:14.600 of a gun, have I stolen your shoes? 114 00:12:14.600 --> 00:12:15.600 Well, it depends. 115 00:12:15.600 --> 00:12:19.720 If they're your shoes, then I have, but suppose you stole those shoes from me yesterday and 116 00:12:19.720 --> 00:12:23.040 now I'm just re-possessing those shoes, I have a right to come up to you with a gun 117 00:12:23.040 --> 00:12:26.800 and say, unless you give me those shoes, I'm going to blast you, because I'm just returning 118 00:12:26.800 --> 00:12:27.800 stolen property. 119 00:12:27.800 --> 00:12:37.800 So we have to have a theory as to whether they're your shoes in justice or not, and for libertarians there are two ways to establish property rights. 120 00:12:37.800 --> 00:12:45.800 This sort of goes back to the Lockean lost body and Hoppean view of mixing your labor with land and your natural resources. 121 00:12:45.800 --> 00:12:52.800 Then you get to own them, and then Robert Nozick has this principle of any legitimate title transfer, 122 00:13:22.800 --> 00:13:37.800 People, if you tell them this, they say, well, yeah, of course. I'm a libertarian. I don't rob people. When I get a pair of shoes or a sandwich, I don't rob the store. I go in and I give them money or trade them for something. 123 00:13:37.800 --> 00:13:51.800 Most people are like that, except when they get in the ballot box. Then all of a sudden they're voting for people who are saying, well, you know, if you vote for me, I'm going to take these money from these people and give those money to other people. 124 00:13:51.800 --> 00:13:58.800 I'm going to do it at the force of a gun, because if you don't believe that, try not paying your taxes. Taxes are coercive. 125 00:13:58.800 --> 00:14:07.800 So, the libertarian view is acceptable to most people, except when they have this lacuna, or this, I don't know, blind spot. 126 00:14:07.800 --> 00:14:13.800 When it comes to government, all bets are off. They somehow think, well, it's democracy. 127 00:14:13.800 --> 00:14:23.800 and, you know, if it's democracy, well, then we can take your shoes if we have a better use for it or we can use eminent domain to take your property rights away. 128 00:14:23.800 --> 00:14:32.800 But the proof that this is wrong is suppose, here's a scenario I like to tell to explain this. 129 00:14:32.800 --> 00:14:42.800 Suppose three robbers break into your house and are about to take your TV set and you argue with them because they're philosophical robbers and they're willing to dialogue with you 130 00:15:12.800 --> 00:15:18.800 It's the government gang, the U.S. gang, but all of a sudden, Barack Obama or John McCain 131 00:15:18.800 --> 00:15:22.600 are saying, well, we'll take these zillions of dollars from these people and here's what 132 00:15:22.600 --> 00:15:28.200 we'll do, we'll give healthcare and this and that, but that's coercive and just because 133 00:15:28.200 --> 00:15:30.680 a lot of people vote for it doesn't make it right. 134 00:15:30.680 --> 00:15:37.200 Look, Hitler came to power through a democratic process, so if democracy were a justification 135 00:15:37.200 --> 00:15:40.800 for action, Hitler would have been a great guy. 136 00:15:40.800 --> 00:15:46.400 Well, that's an interesting way to look at it. 137 00:15:46.400 --> 00:15:52.640 I'm sorry I keep saying that, but I guess I never really thought about that way. 138 00:15:52.640 --> 00:15:55.720 And this is why we had you on. 139 00:15:55.720 --> 00:15:57.040 We do appreciate it. 140 00:15:57.040 --> 00:16:03.080 And again, because people need to understand that there's an alternative way to look at 141 00:16:03.080 --> 00:16:04.080 these things. 142 00:16:04.080 --> 00:16:07.680 And you'd probably agree that if you turn on CNN and MSNBC, you're not going to hear 143 00:16:07.680 --> 00:16:09.040 these things, unfortunately. 144 00:16:09.040 --> 00:16:29.040 Well, when Ron Paul was on TV, he heard it. But he was on too little and too late and very rarely, and now not at all. But you're quite right. The average guy on CNBC or Fox or ABC or whatever, this would sound like coming from Mars or something, or Venus. 145 00:16:29.040 --> 00:16:49.840 Dr. Block, as far as this last few weeks is concerned, let's talk the free market. I'm 146 00:16:49.840 --> 00:16:53.680 an advocate that if we just let the free market ride out, things would be a lot better in the 147 00:16:53.680 --> 00:16:58.200 in the long run, but you know, a lot of people don't understand that, you know, I think they 148 00:16:58.200 --> 00:17:02.280 really have this Roosevelt-type thinking. 149 00:17:02.280 --> 00:17:07.160 What do you think, let's just say, let's be theoretical here, let's explain the free market 150 00:17:07.160 --> 00:17:12.880 and what, in this specific situation, if we let the free market work, where do you think 151 00:17:12.880 --> 00:17:13.880 we'd be? 152 00:17:13.880 --> 00:17:16.880 I mean, I know that's theoretical, but... 153 00:17:16.880 --> 00:17:21.320 That's okay, that's a very good question and I'm happy to answer that. 154 00:17:21.320 --> 00:17:25.520 Nowadays, a lot of people are saying, well, the reason we're in such dire straits, the 155 00:17:25.520 --> 00:17:29.640 reason we have such great problems, we have too much free enterprise, we have too much 156 00:17:29.640 --> 00:17:35.240 deregulation and too much, it's like we have laissez-faire capitalism going on now, nothing 157 00:17:35.240 --> 00:17:36.640 could be further from the truth. 158 00:17:36.640 --> 00:17:44.000 There are two main causes of the present financial meltdown, and let me go over each of them. 159 00:17:44.000 --> 00:17:48.360 The first one is pretty easy to understand, so I'll start with that one. 160 00:17:48.360 --> 00:17:53.000 And the second one is a little bit more difficult, but since we're doing Economics 101, we might 161 00:17:53.000 --> 00:17:54.840 as well tackle that one too. 162 00:17:54.840 --> 00:18:01.200 Well the first one is this thing called the Community Reinvestment Act, CRA, and what 163 00:18:01.200 --> 00:18:06.080 happened was the Boston SED, whenever I say SED or government you're supposed to boob, 164 00:18:06.080 --> 00:18:07.080 I'm just kidding. 165 00:18:07.080 --> 00:18:14.720 We're going to put the boos in in the post-edit, but I get you, I'm with you though. 166 00:18:14.720 --> 00:18:19.040 What happened was the Boston Fed did a study of the Boston real estate market and they 167 00:18:19.040 --> 00:18:27.320 found out that there were certain ethnic groups that were not getting loans. Banks would redline 168 00:18:27.320 --> 00:18:34.720 their areas, the inner city, and they wouldn't give loans. The reason the banks did this 169 00:18:34.720 --> 00:18:40.200 was because the banks were asking a person who wanted to borrow money to buy a house 170 00:18:40.200 --> 00:18:55.200 Do you have collateral? What's your record of repayment of past loans? Do you have a job? Do you have a fixed address? 171 00:18:55.200 --> 00:18:58.200 Things like that. Namely, are you likely to retain? 172 00:18:58.200 --> 00:19:06.200 And certain people had more of these credentials to get money for mortgages than other people. 173 00:19:06.200 --> 00:19:12.200 And the other people, usually black people, didn't get as many loans proportionally as white people. 174 00:19:12.200 --> 00:19:17.200 And the Fed said that this was unfair, and Congress went along with this, 175 00:19:17.200 --> 00:19:22.200 and they said we can't have banks red lines whole neighborhoods 176 00:19:22.200 --> 00:19:29.200 and refuse to lend money for houses in those neighborhoods because they're afraid that they won't be retained. 177 00:19:29.200 --> 00:19:37.200 So under the CRA, the Community Reinvestment Act, the government landed on the bank and said, 178 00:19:37.200 --> 00:19:40.200 Look, this is unfair, this is racist, you can't do that. 179 00:19:40.200 --> 00:19:46.200 There was this wonderful Eddie Murphy skit, I don't know if you've seen it, it was several years ago on Saturday Night Live 180 00:19:46.200 --> 00:19:51.200 where Eddie put on whiteface and acted like he was a white man 181 00:19:51.200 --> 00:20:11.200 And there was this wonderful scene in the bank where Eddie, the white man, Eddie Murphy, who was a black actor, a comedian, goes into this bank where there's a black banker, and Eddie says he wants a loan, and the guy says, okay, you know, what's your credit rating, and do you have a job, and things like that? 182 00:20:11.200 --> 00:20:41.200 And Eddie doesn't have any of that. And then a white guy comes along and says, the black banker's boss, and he takes Eddie into his office. And he says, you know, you need money? Oh, here it is! You know, you don't have to show any credentials or any fixed address or anything. It was just very funny. It was a lot funnier when Eddie Murphy does it than when I tell it. But this is what the Congress was imposing on bankers. And if they didn't do it, they would 183 00:20:41.200 --> 00:20:44.760 be subject to all sorts of penalties. 184 00:20:44.760 --> 00:20:50.400 So as a result, a lot of loans were made to people, not just black people, but everyone 185 00:20:50.400 --> 00:20:53.400 who were unlikely to pay. 186 00:20:53.400 --> 00:20:57.640 And people were encouraged to buy a house bigger than you thought you could buy and 187 00:20:57.640 --> 00:21:02.640 more expensive than you thought because the view five, ten years ago was that real estate 188 00:21:02.640 --> 00:21:04.800 prices always rise. 189 00:21:04.800 --> 00:21:17.800 So if you buy a house that you really can't afford on this variable mortgage and interest rates were low, and I'll get to that interest rates when I talk about the second cause of the meltdown now. 190 00:21:17.800 --> 00:21:29.800 So people were induced, enticed into buying more expensive houses than they really could afford, because if the price went up, if the value of the house went up, 191 00:21:29.800 --> 00:21:34.200 Then it would be easy to pay the mortgage because you could always borrow more on the 192 00:21:34.200 --> 00:21:35.600 increase in the value of the house. 193 00:21:35.600 --> 00:21:41.320 So like if you bought a house for $200,000 and it went up to $500,000, well, you'd have 194 00:21:41.320 --> 00:21:46.240 a hard time paying the $200,000, it's a lot easier if you have $300,000 more equity in 195 00:21:46.240 --> 00:21:47.240 it. 196 00:21:47.240 --> 00:21:48.240 Nothing like slavery, huh? 197 00:21:48.240 --> 00:21:55.520 Well, slavery and theft, that's what you had, it was really fraud perpetrated on these people. 198 00:21:55.520 --> 00:22:02.520 So then what happened is that banks and other financial intermediaries brought these mortgages 199 00:22:02.520 --> 00:22:08.720 and permitted other debt on top of them and then all of a sudden these people weren't 200 00:22:08.720 --> 00:22:15.720 paying their mortgages and you had a lot of banks, Lehman Brothers and others, Bear Stearns, 201 00:22:15.720 --> 00:22:21.000 that were having trouble because they were making bad loans and bad paper. 202 00:22:21.000 --> 00:22:26.520 So that's one of the causes of the crisis, that a lot of banks got caught with their 203 00:22:26.520 --> 00:22:31.280 pants down around their ankles with these bad loans that were not performing because 204 00:22:31.280 --> 00:22:33.680 people just couldn't afford to pay. 205 00:22:33.680 --> 00:22:38.840 And when interest rates went up, you know, then the mortgages catapulted and then they 206 00:22:38.840 --> 00:22:40.840 certainly couldn't pay. 207 00:22:40.840 --> 00:22:44.440 Okay, that's the first cause of the financial meltdown. 208 00:22:44.440 --> 00:22:49.180 And that's the easy one to understand, namely you give loans, you give mortgages to people 209 00:22:49.180 --> 00:22:53.980 People who were unworthy of them and you pyramid paper on top of that and it's no wonder that 210 00:22:53.980 --> 00:23:00.540 you got bad paper and bankruptcy is the inevitable result of that and that's healthy. 211 00:23:00.540 --> 00:23:04.660 People who make such stupid, well, it's hard to blame them because the government forced 212 00:23:04.660 --> 00:23:06.900 them into it but that's another problem. 213 00:23:06.900 --> 00:23:09.820 Right, I think we do have to, there has to be some responsibility there. 214 00:23:09.820 --> 00:23:14.260 We talked about this in the first hour, I mean, to some degree, I mean, they sign the 215 00:23:14.260 --> 00:23:19.100 line but it's a tough one, you're right, and for another time. 216 00:23:19.100 --> 00:23:26.100 Well, you know, the point is that if the government forces you to do these stupid things, it's 217 00:23:26.100 --> 00:23:31.100 unclear as to whose fault it is. It's not very clear. The bankers shouldn't have done 218 00:23:31.100 --> 00:23:36.100 it, but then the government shouldn't have forced them to do it. And they did threaten 219 00:23:36.100 --> 00:23:41.100 them with all sorts of penalties if they didn't make loans to minority groups. 220 00:23:41.100 --> 00:23:46.100 Okay, that's the first one, and that's pretty much philosophically easy to understand. You 221 00:23:46.100 --> 00:24:09.100 This one has to do with our friend Alan Greenspan. 222 00:24:09.100 --> 00:24:13.660 Talking about Ayn Rand and Atlas Shrug and all, Alan Greenspan, when he was in his thirties 223 00:24:13.660 --> 00:24:19.940 and forties, wrote several very, very good papers for the Ayn Rand newsletter, the Objectivist 224 00:24:19.940 --> 00:24:24.660 newsletter, where he was saying how great gold is and government should have its dollar 225 00:24:24.660 --> 00:24:29.460 based on gold and anyone who's against gold is a socialist or a commie or something. 226 00:24:29.460 --> 00:24:33.940 I'm putting words into his mouth, but that's roughly what he said, that gold is great and 227 00:24:33.940 --> 00:24:39.180 gold is wonderful, and fiat, fractional reserve banking is very bad 228 00:24:39.180 --> 00:24:42.420 and then all of a sudden he becomes head of the Fed 229 00:24:42.420 --> 00:24:45.580 for many years he was head of the Fed, in the 80s and the 90s 230 00:24:45.580 --> 00:24:46.900 and you'd think that 231 00:24:46.900 --> 00:24:52.140 you know, he would sort of end the Fed, but no, he sort of turned his coat 232 00:24:52.140 --> 00:24:56.060 he turned his back on the philosophy of Ayn Rand and free enterprise 233 00:24:56.060 --> 00:24:58.140 and he was the head of the Fed, and he 234 00:24:58.140 --> 00:25:01.140 artificially lowered interest rates 235 00:25:01.140 --> 00:25:06.940 Now, here is the complex thing where you have to get into economics 101. 236 00:25:06.940 --> 00:25:12.660 When you lower interest rates artificially, what you do is you encourage investments in 237 00:25:12.660 --> 00:25:18.860 areas of the economy that wouldn't be viable but for the low interest rates. 238 00:25:18.860 --> 00:25:24.540 See, the low interest rates are a signal that people are saving more, but they're really 239 00:25:24.540 --> 00:25:25.540 not saving. 240 00:25:25.540 --> 00:25:31.080 It's the government that's artificially indicating that they're saving, and when the government 241 00:25:31.080 --> 00:26:01.080 Lowest Interest Rates, Alan Greenspan and now Brent Bernanke, when they artificially lower interest rates, the investment community invests in areas of the economy that are not sustainable, long-run investments such as real estate, among other things, not only real estate but, I don't know, farming and mining and heavy stuff that won't come to market for years and years and years. We're not talking about retail, you know, McDonald's or something, we're talking about very, very long-run investments 242 00:26:01.080 --> 00:26:06.520 like real estate, because houses last for decades or hundreds of years even. 243 00:26:06.520 --> 00:26:15.120 So that's the second source of the real estate debacle, where real estate and stocks in heavy 244 00:26:15.120 --> 00:26:22.040 industry are now falling apart, the stock market is plummeting and real estate prices 245 00:26:22.040 --> 00:26:24.320 are falling. 246 00:26:24.320 --> 00:26:29.560 Because of Alan Greenspan and his Fed policies which lowered interest rates artificially and 247 00:26:29.560 --> 00:26:33.960 and Encouraged Entrepreneurs in Committing Mistaken Investments 248 00:26:33.960 --> 00:26:39.120 The Austrian theory, which I'm now giving you, is a misallocation theory of the business 249 00:26:39.120 --> 00:26:40.120 cycle. 250 00:26:40.120 --> 00:26:44.640 This is in sharp contrast to the Keynesian view, which says, well, it's lack of aggregate 251 00:26:44.640 --> 00:26:48.480 demand or lack of spending or something like that, and we can spend our way out of the 252 00:26:48.480 --> 00:26:51.880 depression, which doesn't work and didn't work. 253 00:26:51.880 --> 00:26:56.480 It didn't work in the 1930s and it won't work now. 254 00:26:56.480 --> 00:27:03.280 These are the two twin causes of the present financial meltdown, the lending of money to 255 00:27:03.280 --> 00:27:08.600 people who weren't worthy of the mortgages and this artificial lowering of interest rates 256 00:27:08.600 --> 00:27:12.560 which misallocated investments. 257 00:27:12.560 --> 00:27:13.560 What should be done? 258 00:27:13.560 --> 00:27:17.720 Well, let me take a breath now and let you guys say something now that I've given this 259 00:27:17.720 --> 00:27:18.720 answer. 260 00:27:18.720 --> 00:27:24.440 I guess the next thing to talk about is what should be done now. 261 00:27:24.440 --> 00:27:28.120 You pretty much asked yourself the right question. 262 00:27:28.120 --> 00:27:32.600 I guess, I mean, that would be the question we'd ask is, what do we do now that we're 263 00:27:32.600 --> 00:27:33.600 in this? 264 00:27:33.600 --> 00:27:38.240 And I would just ask it, my way to ask it and for our listeners would be, don't we 265 00:27:38.240 --> 00:27:40.440 need some sort of regulation though? 266 00:27:40.440 --> 00:27:45.400 I mean, can the free market of its own volition handle all these things? 267 00:27:45.400 --> 00:27:49.840 There needs to be some type of regulation and what do we do now? 268 00:27:49.840 --> 00:27:52.800 No, I think we don't need any regulation. 269 00:27:52.800 --> 00:28:05.800 The reason we got into the mess is because we didn't follow laissez-faire capitalism and the way out of it now is to follow laissez-faire capitalism, not to follow government regulation which got us into the problem and won't solve it. 270 00:28:05.800 --> 00:28:12.800 See, the problem is that there are investments in real estate that the prices of them have to come down because they're overpriced. 271 00:28:12.800 --> 00:28:19.800 So what does the government do? Instead of allowing the market to lower the prices of things that should be lowered, it tries to prop them up. 272 00:28:19.800 --> 00:28:25.800 The Capital Bank of the European Union cut them up for bad short-selling, which is a way of lowering prices. 273 00:28:25.800 --> 00:28:29.800 They did the same thing in the depression. 274 00:28:29.800 --> 00:28:31.800 Only there it was with wages. 275 00:28:31.800 --> 00:28:39.800 And they bail out industries or firms that should be allowed to go belly up, 276 00:28:39.800 --> 00:28:42.800 like Detroit now or the Big Three. 277 00:28:42.800 --> 00:28:47.800 Ford, Chrysler, GM are all in very, very big trouble 278 00:28:47.800 --> 00:28:58.800 The automakers cause a heavy industry, there's been over-investment there, and they're very tied up with unions in a way that Toyota and Honda and other automakers are not. 279 00:28:58.800 --> 00:29:04.800 The ones that are in the South. In the North you have the Rust Belt with heavy unionism. 280 00:29:04.800 --> 00:29:10.800 So what Roosevelt and Hoover did, you see Hoover has this reputation of being laissez-faire, but he was not. 281 00:29:10.800 --> 00:29:13.800 Like Roosevelt, a big government activist, 282 00:29:13.800 --> 00:29:17.800 Hoover, Roosevelt and now George Bush are all, 283 00:29:17.800 --> 00:29:21.800 I guess, socialists because they're very into government regulation. 284 00:29:21.800 --> 00:29:26.800 What they try to do then is pop up wages and that created unemployment. 285 00:29:26.800 --> 00:29:32.800 And then they had this smooth holly tariff, which was a horror, which screwed up international trade. 286 00:29:32.800 --> 00:29:38.800 Well, now they're doing similar things. They're not allowing short sales, which are ways of allowing prices to fall. 287 00:29:38.800 --> 00:29:41.700 The 288 00:29:41.700 --> 00:29:42.700 real estate prices. 289 00:29:42.700 --> 00:29:49.300 They're trying to prop up the stock market and not allowing stock market prices to fall. 290 00:29:49.300 --> 00:29:54.640 What government did is it artificially boosted these things and the market is trying to get 291 00:29:54.640 --> 00:29:59.800 to the right price, which is a lower price, and the government bailout is a way of stopping 292 00:29:59.800 --> 00:30:05.240 these, how shall I say it, beneficial recessions. 293 00:30:05.240 --> 00:30:09.800 You see, the way the Austrians look at it is that the recession or the depression is 294 00:30:09.800 --> 00:30:15.200 a cleansing of the previous misallocation of resources, and when government does not 295 00:30:15.200 --> 00:30:24.200 allow the cleansing, well, then the body economic struggles on and is hit for years and years. 296 00:30:24.200 --> 00:30:32.160 Kenneth, if you take all regulation out of the equation, and you're hearing this a lot 297 00:30:32.160 --> 00:30:37.200 from the mainstream media right now when they're talking about it's greed that caused this. 298 00:30:37.200 --> 00:30:46.560 An unregulated system, now these greedy capitalists are going to take advantage of all the other 299 00:30:46.560 --> 00:30:48.880 people and we're hearing that. 300 00:30:48.880 --> 00:30:55.440 We can talk about it on a theoretical level but that's really what they're trying to blame. 301 00:30:55.440 --> 00:30:58.600 Isn't there something to be said about greed? 302 00:30:58.600 --> 00:31:02.040 How would you look at it from a libertarian perspective? 303 00:31:02.040 --> 00:31:10.040 I'm with, what is his name, Gordon Gekko, I think, who had this wonderful speech in that movie, where he said greed is good. 304 00:31:10.040 --> 00:31:17.040 See, this idea of greed is really silly, because people don't suddenly get greedy. They're always greedy, and everyone's greedy. 305 00:31:17.040 --> 00:31:29.040 Not just businessmen, but so is Obama and McCain. They might not be so greedy for money as power, but people are greedy in the sense that they want more. 306 00:31:29.040 --> 00:31:34.040 Everyone is always 100% greedy, if you interpret it that way. 307 00:31:34.040 --> 00:31:38.040 I mean, even Mother Teresa was greedy for helping the poor. 308 00:31:38.040 --> 00:31:42.040 She wanted stuff. Greed is just a way of saying, I want stuff. 309 00:31:42.040 --> 00:31:47.040 This goes very much against Adam Smith's invisible hand. 310 00:31:47.040 --> 00:31:50.040 So let me talk a little bit about Adam Smith's invisible hand. 311 00:31:50.040 --> 00:31:53.040 Adam Smith, in some ways, wasn't that great a libertarian. 312 00:31:53.040 --> 00:31:57.040 He was certainly no Austrian, but on the invisible hand, he was very good. 313 00:31:57.040 --> 00:32:04.040 What the Invisible Hand says is that people are led by a self-righteous, self-righteous, 314 00:32:27.040 --> 00:32:36.040 They have a selfish interest in promoting their own welfare, and in so doing, they are led by an invisible hand, 315 00:32:36.040 --> 00:32:40.040 the animal smith thought it was God's hand, to do that which is in the public good. 316 00:32:40.040 --> 00:32:46.040 Let me give you a very simple example. Suppose right now we decide we're too fat, 317 00:32:46.040 --> 00:32:54.040 and what we've got to do is cut out the cake and the ice cream and the chocolate, and start eating celery and carrots. 318 00:32:54.040 --> 00:33:00.080 Okay, so what happens? Well, we stop buying chocolate, we stop buying ice cream, we stop 319 00:33:00.080 --> 00:33:06.360 buying cake as much, and the prices of those things go down, and we start buying carrots 320 00:33:06.360 --> 00:33:12.840 and celery and lettuce and things like that, and the prices there go up. So what do farmers 321 00:33:12.840 --> 00:33:18.920 do when they're faced with falling prices of sugar and rising prices of cucumbers? Well, 322 00:33:18.920 --> 00:33:25.640 They start producing sugar and chocolate and ice cream, and they start producing cucumbers 323 00:33:25.640 --> 00:33:28.280 and celery and lettuce. 324 00:33:28.280 --> 00:33:29.280 Why do they do that? 325 00:33:29.280 --> 00:33:34.200 Well, they do it out of greed, if you want, or they do it out of a keen appreciation of 326 00:33:34.200 --> 00:33:35.200 their own self-interest. 327 00:33:35.200 --> 00:33:39.000 It's not out of benevolence that the butcher and the baker and the candlestick maker give 328 00:33:39.000 --> 00:33:40.000 us their product. 329 00:33:40.000 --> 00:33:43.720 It's out of a keen appreciation for their self-interest. 330 00:33:43.720 --> 00:33:47.080 So notice what they're doing out of greed. 331 00:33:47.080 --> 00:33:53.960 Since profits are falling in chocolate and rising in celery, they're slowing down their 332 00:33:53.960 --> 00:33:58.060 rate of production of chocolate and increasing their rate of production of cucumbers and 333 00:33:58.060 --> 00:34:02.880 celery. They're doing it out of greed. Namely, they're doing that which is in the public 334 00:34:02.880 --> 00:34:07.440 interest. Now, we're defining public interest as moving from chocolate to celery in this 335 00:34:07.440 --> 00:34:12.800 case. It could be the other way around. It doesn't matter. It's just an example. So, 336 00:34:12.800 --> 00:34:42.720 Walter, when you get shot, it kind of changes your perspective on things. 337 00:34:42.720 --> 00:34:48.920 Well, no, this was long before he got shot. When he was governor of California, the budgets 338 00:34:48.920 --> 00:34:54.480 rose and he was very good in free market rhetoric, but his actions as governor and president 339 00:34:54.480 --> 00:35:00.480 were not really that free enterprise. But the point is, the magic of the market is the 340 00:35:00.480 --> 00:35:05.480 idea that people are led out of a lure of profits to do that which is in the public 341 00:35:05.480 --> 00:35:12.480 good. If we want a cure for cancer, let's say that's a crisis, cancer is killing too 342 00:35:12.480 --> 00:35:27.480 Well, there will be vast profits to be earned in the cancer cure, and a lot of entrepreneurs will go into cancer cure research in order to take advantage of the higher profits to be earned there, namely, they'll be promoting greed. 343 00:35:27.480 --> 00:35:36.480 So what the magic of the marketplace is, is that the market turns the base metal of greed, if you will, into public service. 344 00:35:36.480 --> 00:35:50.480 If we have a real problem, we want to mobilize all human dimensions or all human capacities towards solving it. 345 00:35:50.480 --> 00:35:58.480 Benevolence, you know, we all have benevolence, but benevolence is in short supply and you never have as much of benevolence as you want. 346 00:35:58.480 --> 00:36:21.480 Let me give you another example. I'm in New Orleans and we had Katrina three years ago in 2005, and what happened then, right after Katrina hit us, well actually it wasn't Katrina, Katrina didn't do much harm, it was the fact that the Army Corps of Engineers screwed up the levees, but that's a whole other issue we don't have to get into. 347 00:36:21.480 --> 00:36:31.480 What happened was that the prices of flashlight batteries and candles and orange juice and water and milk and things like that just jumped through the roof. 348 00:36:31.480 --> 00:36:39.480 And what that would have done had it been allowed to, they called it gouging and they had laws against it, 349 00:36:39.480 --> 00:36:46.480 is it would have increased the motives of people from Tennessee and Montana 350 00:36:46.480 --> 00:36:52.480 to bring those items that were now in short supply in New Orleans to, without those Lises 351 00:36:52.480 --> 00:36:56.480 and prices, the only motivation for those people was breakfast. 352 00:36:56.480 --> 00:37:01.480 And as I say, you can only count on benevolence in emergencies, but ordinarily, it's hard 353 00:37:01.480 --> 00:37:03.480 to count on benevolence. 354 00:37:03.480 --> 00:37:09.480 So, if you allow the market, then what you have in addition to benevolence is you have 355 00:37:09.480 --> 00:37:12.480 the lure of profits or greed. 356 00:37:12.480 --> 00:37:20.760 Do you see the point? There's nothing wrong with markets and self-interest because it 357 00:37:20.760 --> 00:37:25.760 leads you to do that which is in the interest of people who are needy. 358 00:37:25.760 --> 00:37:33.880 Exactly. Well, Dr. Block, this is a pretty straightforward question, but we know you 359 00:37:33.880 --> 00:37:38.440 advocate less government, but for all those people who are just, I mean, you have to have 360 00:37:38.440 --> 00:37:52.240 Well, I think that every service that government does, every service that government has ever 361 00:37:52.240 --> 00:37:55.800 done, has been done better by the capitalist system of profit and loss. 362 00:37:55.800 --> 00:37:56.800 Well, both. 363 00:37:56.800 --> 00:38:03.920 Can I jump in real quick? Would you advocate or do you advocate no government or less restricted 364 00:38:03.920 --> 00:38:04.920 government? 365 00:38:04.920 --> 00:38:11.680 Well, both. I think government is best which governs least and government is best of all 366 00:38:11.680 --> 00:38:13.400 that governs not at all. 367 00:38:13.400 --> 00:38:18.640 This is where I edit in the applause. 368 00:38:18.640 --> 00:38:32.480 Let's take some examples. One of my favorites is highways and roads. I'm just coming out 369 00:38:32.480 --> 00:38:37.440 with a book on that. A lot of people say, if you didn't have government roads, how 370 00:38:37.440 --> 00:38:44.520 would we get around? You'd have all sorts of problems. Well, do you know how many people 371 00:38:44.520 --> 00:38:51.520 Douglas Goldstein, CFP®, Financial Planner & Investment Advisor 372 00:39:14.520 --> 00:39:19.120 in Iraq in the six or so years that we've been there, four or five thousand, something 373 00:39:19.120 --> 00:39:24.520 like that. How many people died in 9-11? I think it was only three thousand? Yeah, three 374 00:39:24.520 --> 00:39:29.440 thousand something. Maybe a little bit more than three thousand, but that was just, you 375 00:39:29.440 --> 00:39:34.880 know, a national shock, three thousand, and I think fifteen hundred people died in New 376 00:39:34.880 --> 00:39:40.080 Orleans from Katrina-related things. Well, this is forty thousand people year in, year 377 00:39:40.080 --> 00:39:55.080 And this is government roads. Now, people say, well, it's drunken driving and speeding, but no, it's not really that. It's the fact that the government can't stop the speeding and the drunken driving. And if you had private enterprise, you'd have competition. 378 00:39:55.080 --> 00:40:07.080 Look, suppose government had pizza parlors. Just suppose. The problem with that is that if they made bad pizza, they wouldn't go broke any more than the post office goes broke. 379 00:40:37.080 --> 00:41:05.720 And I'll tell you the truth, Professor Block, nobody wants a pizza with government cheese 380 00:41:05.720 --> 00:41:12.720 This phenomena works not only with pedestrian items like shoelaces, paper cups, pens, pencils and paper, but with very important things like health care, roads, etc. 381 00:41:35.720 --> 00:42:05.720 Safety. Let's take safety for a moment. Where would you want to meet me? In Disneyland tonight? Or maybe in New York City Central Park? Or New Orleans Audubon Park? Well, you know, the point is that if a murder or a rape takes place in Disneyland, they're going to lose money. So they act so as to prevent that. I mean, you know, they have cameras all over the place, and they have ducks and mice packing heed. If you act obstreperously, they'll 382 00:42:05.720 --> 00:42:13.720 It's very safe in Disneyland because if something bad happens in Disneyland, they're going to lose a lot of money. 383 00:42:13.720 --> 00:42:18.720 Whereas suppose some rape occurs on the public streets. Who loses money? 384 00:42:18.720 --> 00:42:21.720 Who's in a position to stop it? The police? The mayor? No. 385 00:42:21.720 --> 00:42:28.720 We pay the police through taxes, we pay the mayor through taxes, whether or not the city is safe. 386 00:42:28.720 --> 00:42:35.720 One of the reasons that the market is much more efficient than government is because you are just reading out process. 387 00:42:35.720 --> 00:42:44.720 So for those people who think that you need government to do all these things, they are in error. 388 00:42:44.720 --> 00:42:51.720 As long as the government stays out and doesn't prop up the ineffective businesses. 389 00:43:21.720 --> 00:43:34.280 In the Soviet Union, they had lousy pizza, they had Coca-Cola, everything was crappy 390 00:43:34.280 --> 00:43:42.280 there because it was all done by government, so the bad guys couldn't exit. 391 00:43:42.280 --> 00:43:47.200 Whereas in the free enterprise system, you have this weeding out of the bad producers. 392 00:43:47.200 --> 00:44:09.200 Now look, it's not a perfect system. There are always newcomers and some of them aren't any better than they should be and it takes time to weed these people out. But it's a slow, well not so slow sometimes, but it's an inexorable process of eliminating bad producers. That's one of the advantages of the marketplace that the government just doesn't have. 393 00:44:09.200 --> 00:44:13.480 You know what I'd always say, and this is very simplistic, this is almost first grade, 394 00:44:13.480 --> 00:44:19.540 I'd say the best example of the free market at work is eBay, ebay.com, you know, the rating 395 00:44:19.540 --> 00:44:20.540 system. 396 00:44:20.540 --> 00:44:24.720 I'll tell you what, every time I go to eBay, when I'm going to buy something, if something's 397 00:44:24.720 --> 00:44:28.480 really cheap and I see somebody who has just a ton of bad ratings, I'm not going to buy 398 00:44:28.480 --> 00:44:29.480 from them. 399 00:44:29.480 --> 00:44:30.480 Absolutely. 400 00:44:30.480 --> 00:44:35.800 eBay is a very good example of capitalism in action, but you don't need eBay, you don't 401 00:44:35.800 --> 00:44:37.960 need something so esoteric. 402 00:44:37.960 --> 00:44:42.640 Just look at, you know, ice cream or pickles or something like that, stuff that we just 403 00:44:42.640 --> 00:44:47.640 sort of take for granted, or socks or, you know, stuff like that, that, you know, they 404 00:44:47.640 --> 00:44:53.000 say the fish is not aware of the water that it floats around in, and we're not really 405 00:44:53.000 --> 00:45:00.600 aware of underwear or combs or, you know, boots or something like that because we take 406 00:45:00.600 --> 00:45:01.600 it for granted. 407 00:45:01.600 --> 00:45:05.640 Well, you take it for granted in this country because we have free enterprise, but there 408 00:45:05.640 --> 00:45:35.640 There are countries in the world where you can't take that for granted 409 00:46:05.640 --> 00:46:11.360 You could just take a couple of minutes to mention that the ends are the same and it's 410 00:46:11.360 --> 00:46:17.440 worth noting that we all want to build a society that's better for everybody and there's no 411 00:46:17.440 --> 00:46:21.480 such thing as a perfect society and I think some still have the illusion that we can create 412 00:46:21.480 --> 00:46:25.400 this perfect society but for those who know it's not perfect, we're all working for the 413 00:46:25.400 --> 00:46:26.400 same ends. 414 00:46:26.400 --> 00:46:32.080 We want the best quality for the most people. 415 00:46:32.080 --> 00:47:02.080 Well, before I answer your question, I'm a professor. I'm never supposed to answer the questions directly. Let me just get to something that we sort of dropped, and that's the Mises Institute. I'm also a senior fellow at the Mises Institute, in addition to being a professor of Loyola. And I highly recommend the Mises Institute to your listeners. You can just Google them and go to their web, and they've got all sorts of the lewrockwell.com, which has got commentary. 416 00:47:02.080 --> 00:47:09.080 on current events and they have books to sell and they have seminars all around the country 417 00:47:09.280 --> 00:47:16.280 and indeed all around the world. So I recommend highly that people google Mises.org or just 418 00:47:19.800 --> 00:47:26.960 M-I-S-E-S and you'll get it. Okay, sorry. I had to nip that in otherwise I would have 419 00:47:26.960 --> 00:47:42.960 What is your ideal structure to ensure the best to the most? 420 00:47:42.960 --> 00:47:48.960 Get government out of everything and just hands off, if not do away with. 421 00:47:48.960 --> 00:47:54.040 Is there anything that maybe we left out to provide that structure which would allow the 422 00:47:54.040 --> 00:47:55.040 most people to flourish? 423 00:47:55.040 --> 00:47:58.440 That's what we're all looking for. 424 00:47:58.440 --> 00:48:03.000 With all of the different ways to go about it, government intervention, Keynesian economics, 425 00:48:03.000 --> 00:48:06.200 communism, fascism, they all kind of have the same premise. 426 00:48:06.200 --> 00:48:10.120 They want to create a society that's better for the most people. 427 00:48:10.120 --> 00:48:12.720 And I think Libertarians would advocate no government in that process. 428 00:48:12.720 --> 00:48:19.520 Is there anything else that we're missing for that, to bring about that kind of change? 429 00:48:19.520 --> 00:48:23.520 Well, let me say this, that there are two kinds of libertarians. 430 00:48:23.520 --> 00:48:29.920 There are anarcho-libertarians and anarcho-libertarians such as myself, or libertarian anarchists 431 00:48:29.920 --> 00:48:33.680 who believe that the government should have no role whatsoever. 432 00:48:33.680 --> 00:48:40.240 But most libertarians are not anarchists, most libertarians are more like Ayn Rand, 433 00:48:40.240 --> 00:48:45.480 who believed in extremely limited government, and for her, for example, and she's emblematic 434 00:48:45.480 --> 00:48:50.520 of many of these libertarians, government has one purpose and only one purpose, and that 435 00:48:50.520 --> 00:48:57.760 is to protect people and their property against violence. And to this end, government has 436 00:48:57.760 --> 00:49:04.840 three legitimate functions. One is police, to keep local bad guys off of us. Two is armies, 437 00:49:04.840 --> 00:49:05.840 The Theory of Money and Credit 438 00:49:05.840 --> 00:49:06.840 The Theory of Money and Credit 439 00:49:36.840 --> 00:49:43.840 The Theory of Money and Credit 440 00:50:06.840 --> 00:50:12.840 Government is best which governs least. Government is like a fire. If it stays in the fireplace, that's good. 441 00:50:12.840 --> 00:50:18.840 But if it gets down into the living room and the bedroom and the kitchen and burns the house down, that's no good, and that's what's happening now. 442 00:50:18.840 --> 00:50:30.840 So government needs to be severely curtailed and limited to protecting persons and property and making sure there's no fraud or theft or things like that. 443 00:50:30.840 --> 00:50:53.840 I would say that if we moved to this classical liberal version of libertarianism, where government shrunk from its present 50% of the GDP or 45% of the GDP, and shrunk down to 5% or so, you wouldn't need a very big military if we didn't have adventures here, there, there, and yon. 444 00:50:53.840 --> 00:51:03.840 If we move in that direction, our lives would be much better, we'd be much happier, we'd be much richer, we'd be able to cure poverty much better. 445 00:51:03.840 --> 00:51:14.840 So that would be another libertarian vision. It's not one that I share fully, but I certainly am very sympathetic to it, especially compared to what we've done now. 446 00:51:14.840 --> 00:51:31.960 How would a privatized police force work and how would we keep that police force from becoming 447 00:51:31.960 --> 00:51:37.800 their own private force against the populace? 448 00:51:37.800 --> 00:51:43.200 One answer to how would the private police force work is you're pretty safe when you 449 00:51:43.200 --> 00:51:48.800 When you go to Mises, you're pretty safe when you go to Disneyland, and those are all private 450 00:51:48.800 --> 00:51:49.800 police. 451 00:51:49.800 --> 00:51:54.160 You have a lot of private police now that we don't get credit for. 452 00:51:54.160 --> 00:51:58.960 We somehow see public police more, but private police are there also. 453 00:51:58.960 --> 00:52:05.960 Now whether we go on to bandit police, suppose we had private police courts or courts-police 454 00:52:05.960 --> 00:52:06.960 firms. 455 00:52:06.960 --> 00:52:12.480 Now this is going to take a little bit of a complicated answer, but let me take two 456 00:52:12.480 --> 00:52:15.480 Two or three minutes is a very important question. 457 00:52:15.480 --> 00:52:24.480 Suppose you and I are having a dispute, and I sold you pigs, they weren't good, whatever 458 00:52:24.480 --> 00:52:33.080 it was, and you go to a private court, Danish police force, who's your mother, and you 459 00:52:33.080 --> 00:52:38.320 invite me to come there, and I say, what, your mother, she's biased, so I don't go 460 00:52:38.320 --> 00:52:39.320 there. 461 00:52:39.320 --> 00:52:45.720 If you go to my court, who is, let's say, an honest police court, police-court, each 462 00:52:45.720 --> 00:52:50.320 court would have a police department to sort of enforce its rulings, otherwise it would 463 00:52:50.320 --> 00:52:56.040 be silly to have a court, and I invite you to come to my court, and you refuse. 464 00:52:56.040 --> 00:53:01.880 Now, if both courts agree with one of us, it's case over because we've each, in going 465 00:53:01.880 --> 00:53:06.520 to a court, obligated ourselves to follow what the court says, and the court has got 466 00:53:06.520 --> 00:53:12.520 Let's say your mother and my court both agree that you're right. 467 00:53:12.520 --> 00:53:16.520 Well, then I'm in trouble if I don't pay you what both of them say that I owe. 468 00:53:16.520 --> 00:53:21.520 But now let's take a more difficult case. Suppose the courts disagree. 469 00:53:21.520 --> 00:53:27.520 Your mother says, my sonny boy, he's right. And my court decides that I'm right. 470 00:53:27.520 --> 00:53:32.520 Well, now what happens? Well, here's the theory. There are two kinds of courts. 471 00:53:32.520 --> 00:53:44.520 There are banded courts, courts that either have not anticipated this possibility, or courts that say, I don't care, I disagree, I'll fight. 472 00:53:44.520 --> 00:53:50.520 Those are the banded courts, and then there are legitimate courts, and what legitimate courts do is they anticipate, 473 00:53:50.520 --> 00:53:56.520 one, they anticipate that they might come out on the opposite side of a decision from another court, 474 00:53:56.520 --> 00:54:03.520 One, they anticipate it, and two, they act in a reasonable way, a civilized way, to resolve it, namely, what they say is luck. 475 00:54:03.520 --> 00:54:13.520 If I'm court A, and if I come up against court B with a different decision, I'm willing to go to court C, D, or E, and we'll flip a coin to see which one it is, 476 00:54:13.520 --> 00:54:23.520 and we'll go to that, and that'll be the Supreme Court, and each of the two courts will be bound by what the court C, the third court, says. 477 00:54:23.520 --> 00:54:30.520 Now, fighting is a lot more difficult and more expensive. You have to take combat pay to your workers, 478 00:54:30.520 --> 00:54:34.520 danger pay if you're going to be fighting all the time. 479 00:54:34.520 --> 00:54:38.520 You see, civilized courts will only fight with banded courts. 480 00:54:38.520 --> 00:54:41.520 Banded courts will fight with everyone. 481 00:54:41.520 --> 00:54:47.520 And since fighting is very expensive, we predict that there will be a weeding out of banded courts. 482 00:54:47.520 --> 00:54:51.520 And also, there is such a thing as legitimacy. 483 00:54:51.520 --> 00:54:57.520 Legitimacy is very important. It's why even bad governments survive. 484 00:54:57.520 --> 00:55:01.520 Even the Zimbabwean government is still a going concern. 485 00:55:01.520 --> 00:55:05.520 People, you know, they have to acquiesce. 486 00:55:05.520 --> 00:55:09.520 Even a dictator, if everyone hated a dictator, they'd be a rebellion. 487 00:55:09.520 --> 00:55:13.520 Even the dictator has to please the masses to some degree, 488 00:55:13.520 --> 00:55:20.520 at least convince the masses that rebellion is futile or any alternative would be worse. 489 00:55:20.520 --> 00:55:26.520 So if you get a bandit court, if you go to your mother and say, you know, protect me against everyone, 490 00:55:26.520 --> 00:55:33.520 your mother, I don't mean to pick on your mother, but she has no legitimacy as a court. 491 00:55:33.520 --> 00:55:36.520 And people will just ignore her. 492 00:55:36.520 --> 00:55:43.160 Look, even in the Godfather movies there was this wonderful case where the baker's daughter 493 00:55:43.160 --> 00:55:51.360 was raped and the baker wanted the rapist to be killed and the Godfather said, well, 494 00:55:51.360 --> 00:55:55.320 you know, the rapist didn't kill your daughter, he only raped her and, you know, I'm going 495 00:55:55.320 --> 00:55:59.680 to give him a beating that will practically triple him, which would be roughly the equivalent 496 00:55:59.680 --> 00:56:00.680 of a rape. 497 00:56:00.680 --> 00:56:06.480 Even the Godfather had to be like a non-banded court otherwise he would have lost respect 498 00:56:06.480 --> 00:56:14.480 I think that this idea that the private police forces will fight each other is problematic. 499 00:56:14.480 --> 00:56:17.480 Let me answer this in another way. 500 00:56:17.480 --> 00:56:24.480 Right now, the relationship between China and Portugal is one of anarchy. 501 00:56:24.480 --> 00:56:27.480 Namely, there's no world government above both of them. 502 00:56:27.480 --> 00:56:31.480 The relation of Brazil and France is also one of anarchy. 503 00:56:31.480 --> 00:56:38.480 The relationship of, I don't know, Canada and Argentina is also one of anarchy. 504 00:56:38.480 --> 00:56:45.480 We have 250 or 300 different countries, all of whom are in a relationship of anarchy with each other. 505 00:56:45.480 --> 00:56:51.480 Now, if you're really afraid that these private police forces will coalesce and therefore you need a government to rule over them, 506 00:56:51.480 --> 00:56:53.480 what you're really saying is we need world government. 507 00:56:53.480 --> 00:56:59.000 Namely, my criticism of the Ayn Rand limited government libertarian view, even though I 508 00:56:59.000 --> 00:57:03.800 certainly favor it compared to what we have now, my criticism of it is that logically 509 00:57:03.800 --> 00:57:05.720 it leads into world government. 510 00:57:05.720 --> 00:57:09.040 And most people don't like world government because, look, you know, if things are bad 511 00:57:09.040 --> 00:57:10.040 here we can go to Canada. 512 00:57:10.040 --> 00:57:12.760 If things are bad in Canada, you can go to Australia. 513 00:57:12.760 --> 00:57:16.320 But if Hitler takes over the whole world, where do you run, the Mars, the Venus? 514 00:57:16.320 --> 00:57:18.480 You know, there's no place to run. 515 00:57:18.480 --> 00:57:26.720 So I think that the argument from ARCII or statism or anti-anarchy is highly problematic 516 00:57:26.720 --> 00:57:32.160 because it's logically equivalent to world government and most people would reject world 517 00:57:32.160 --> 00:57:33.160 government. 518 00:57:33.160 --> 00:57:39.080 Well, Dr. Block, we have a caller and we also have one more question I want you to answer. 519 00:57:39.080 --> 00:57:43.560 Hopefully we can get a brief answer, although I'd love a long answer. 520 00:57:43.560 --> 00:57:46.480 But we also want to take this caller and we're almost running out of time. 521 00:57:46.480 --> 00:57:52.880 And that caller asks, do you think that in the coming days or months or years that the 522 00:57:52.880 --> 00:57:58.000 idea of the Amero, you know, the currency, the Amero will actually be presented and what 523 00:57:58.000 --> 00:57:59.840 do you see that transition being like? 524 00:57:59.840 --> 00:58:02.240 Sorry, I don't understand the question. 525 00:58:02.240 --> 00:58:03.240 The Amero? 526 00:58:03.240 --> 00:58:04.240 The Amero? 527 00:58:04.240 --> 00:58:07.040 You know, the North American currency? 528 00:58:07.040 --> 00:58:09.480 Oh, the U.S. currency. 529 00:58:09.480 --> 00:58:13.040 Oh, I predict the U.S. currency? 530 00:58:13.040 --> 00:58:19.520 There's been a lot of rumors about a North American currency, just like the Euro, but 531 00:58:19.520 --> 00:58:20.520 the Amero. 532 00:58:20.520 --> 00:58:21.520 Oh, I see the Amero. 533 00:58:21.520 --> 00:58:22.520 I didn't understand. 534 00:58:22.520 --> 00:58:25.520 I thought you were talking about bone marrow. 535 00:58:25.520 --> 00:58:26.520 I'll be very brief. 536 00:58:26.520 --> 00:58:32.600 What's going to happen if they monetize this $750 or $850 billion, we're going to have 537 00:58:32.600 --> 00:58:33.600 a lot of inflation. 538 00:58:33.600 --> 00:58:38.400 You know, Zimbabwe, here we come, or the 1923 German hyperinflation. 539 00:58:38.400 --> 00:58:44.440 I expect, look, the dollar has lost an awful lot of value, I think since 1913 when the 540 00:58:44.440 --> 00:58:50.560 Fed came in, the dollar has lost 95% of its value, and I think it's going to lose 95% 541 00:58:50.560 --> 00:58:55.760 of its value in a lot quicker time than 100 years, so that's my brief answer. 542 00:58:55.760 --> 00:59:03.760 All righty, we also, Dr. Block, we have a caller calling in to ask you a question. Caller, are you there? 543 00:59:03.760 --> 00:59:07.760 Hold on, I swear he was there. 544 00:59:07.760 --> 00:59:12.760 I apologize, gentlemen, I was a little bit slow on muting the other stream there for a moment. 545 00:59:12.760 --> 00:59:21.760 Dr. Block, thank you very much for coming on the air. It's a great opportunity to be able to ask a couple of questions and to get some of your more astute ideas. 546 00:59:21.760 --> 00:59:48.600 Do you subscribe to Rand's Theory of Conceptual Cognition and do you further agree that, in 547 00:59:48.600 --> 00:59:54.440 In that theory, the specificity of definition of concept, that is, to define your concepts 548 00:59:54.440 --> 00:59:58.440 properly, is the end result of proper logical deduction. 549 00:59:58.440 --> 01:00:02.360 Well, you know, your voice faded in and out. 550 01:00:02.360 --> 01:00:04.160 It was smart for me to understand everything. 551 01:00:04.160 --> 01:00:06.560 And I think if you just repeated, I wouldn't get it. 552 01:00:06.560 --> 01:00:11.480 But from what I got of your question, first of all, let me just say that I'm a big fan 553 01:00:11.480 --> 01:00:12.480 of Ayn Rand. 554 01:00:12.480 --> 01:00:15.880 She and Nathaniel Branden were the two people who converted me to libertarianism. 555 01:00:15.880 --> 01:00:32.880 I certainly think we should be careful in our definitions. I don't follow her philosophical work as much as I do her economics, so I'm not really a good person to answer your question with any greater specificity, and I apologize for that. 556 01:00:45.880 --> 01:00:51.940 We did have a couple of chat questions that had come through, and maybe going out this 557 01:00:51.940 --> 01:00:54.120 may be a great way to go out. 558 01:00:54.120 --> 01:00:58.400 Can you ask when the next edition of your book, Defending the Undefendable, when that 559 01:00:58.400 --> 01:01:00.000 next edition will be coming out? 560 01:01:00.000 --> 01:01:05.280 Well, I'm on sabbatical this year and I'm supposed to be working on it, and hopefully 561 01:01:05.280 --> 01:01:13.000 it'll come out in 2009 with a whole new cast of characters and a whole new cast of cartoons. 562 01:01:13.000 --> 01:01:23.000 By the first one, it's on sale at the Mises.org. You can buy the book. I think it's $13 or something like that. It's a wonderful book, if I say so myself. 563 01:01:43.000 --> 01:01:51.000 Do you think that Murray Rothbard would be optimistic about the prospects for liberty were he alive today? 564 01:01:51.000 --> 01:02:00.000 Well, Murray was an irrepressible optimist. Even Buckley, one of his enemies, called him the happy scholar. 565 01:02:00.000 --> 01:02:06.000 Murray's up there looking down on us somewhere and I think he's cackling away at our troubles, 566 01:02:06.000 --> 01:02:11.000 but I think in the long run things will get better in Murray's and my view. 567 01:02:11.000 --> 01:02:17.000 That's what we want to hear. We're an optimistic show and we always try to remain optimistic. 568 01:02:17.000 --> 01:02:22.000 And I'm optimistic that we're going to be able to get you on our show again because I think we have a lot more to go through. 569 01:02:22.000 --> 01:02:32.000 I want to get into libertarian analysis of law and reputation, libel, unions, minimum wage, things like that. 570 01:02:32.000 --> 01:02:39.000 I tell you, we could talk all night. Professor Walter Block, we're definitely honored you took the hour and we hope to speak with you again soon. 571 01:02:39.000 --> 01:02:42.000 Thanks for having me. I look forward to coming again.