Scott Horton Show - Just the Interviews - 2/15/24 Peter St Onge on How the Fed is Making You Poorer

Episode Date: February 20, 2024

Scott is joined by Peter St Onge to talk about how the government uses the Federal Reserve to enrich the politically connected at the expense of everyday people. St Onge explains how we arrived at this crazy economic moment and draws comparisons to the stagflation of the 1970s. He and Scott also talk about the destructiveness of recessions, debunk common myths about inflation and discuss what’s happening in China. Discussed on the show: St Onge’s Youtube Channel The Case Against the Fed by Murray Rothbard Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider Peter St Onge is an economist at the Heritage Foundation and a fellow with the Mises Institute. He makes daily videos breaking down economic news. Follow him on Twitter @profstonge This episode of the Scott Horton Show is sponsored by: Moon Does Artisan Coffee; Roberts and Robers Brokerage Incorporated; Tom Woods’ Liberty Classroom; Libertas Bella; ExpandDesigns.com/Scott. Get Scott’s interviews before anyone else! Subscribe to the Substack. Shop Libertarian Institute merch or donate to the show through Patreon, PayPal or Bitcoin: 1DZBZNJrxUhQhEzgDh7k8JXHXRjY Learn more about your ad choices. Visit megaphone.fm/adchoices

All right, y'all, welcome to the Scott Horton Show. I'm the director of the Libertarian Institute, editorial director of anti-war.com, author of the book, Fool's Aaron, Time to End the War in Afghanistan, and The Brand New, Enough Already, Time to End the War on Terrorism. And I've recorded more than 5,500 interviews since 2004. almost all on foreign policy and all available for you at scothorton.4 you can sign up the podcast feed there and the full interview archive is also available at youtube.com slash scott horton's show all right you guys next up on the show is peter st anj and he's an economist an austrian economist which what other kind is there and uh he does these neat little youtube videos and uh you can find him on Twitter and that kind of thing too. On

YouTube, his address is at Prof. Saint-O-N-G-E. That's S-T-O-N-G-E. And, yeah, I think you'll like a lot of what he has to say. Welcome to the show. How are you doing? Hey, thanks for having me on, Scott.

Happy to have here. Before I ask you a bunch of questions about things, I wanted to ask you a little bit about you because you seem like you're very much Ludwig von Mises type of an economist and you seem to know a hell of a lot and yet you don't seem to be that young in fact your beard is a little whiter than mine

according to your YouTube channel here so I just wonder who are you really and where did you come from and which all institutions and or universities and or what have you been associated with? How would we know you from before? So I am a former professor. I was radicalized because I made a lot of money during the dot-com boom.

Okay, so Paul Krugman gave this interview way back in the 90s where he said the internet was dumb and everybody was going to get sick of showing cat photos and they were going to run out of things to talk about and then the internet was just kind of dribble away. I think the money shot in that interview was he said it would have less impact than the fax machine. And so back in like 1994, I read that interview and I thought that is so stupid. And Paul Krugman has a high IQ. And so I figured if he's that dumb, then there's going to be a lot of people who are that dumb who control a crap load of money.

I don't know if I can curse on this podcast. So I do what you like here, man. Like a shitload of money. And so I figured all that. that money would be flowing into Bitcoin, uh, whoops, into dot coms. Yeah, this is a later bubble. Yeah. Yeah, it is very, very similar. But at any rate, so I put all the money I had onto Yahoo. That was the only thing you could buy back then except for Netflix and or, um, uh, God, Netscape. And Netscape had already kind of been played out. Anyway, put it all in Yahoo. Everybody told me I was an

idiot, you know, went ballistic, ended up splitting so many times. I bought it for like fractions of a penny. So I retired for, I don't know, seven years and partied in Ebisa and did what 25-year-olds do when they're millionaires. And that was when I came across Austrian economics.

You know, so I was kind of in a situation where I could deprogram and sit and read anything and spend my time anyway I wanted. Got into Rothbard, became an anarcho capitalist. Wait, wait. So what years is? Because I got to, we're measuring time based on boom, bust,

cycles here. So you got rich in the dot-com boom, but that all fell apart in 2000. But what happened to you then? You were already reading Mises and so I'd bought gold or what? Yeah, so I'd already been radicalized. And then, so what happened was every time dot-com stocks went down a little bit, you know, I would sell out some of it in order to protect the kitty. And I went back and did my little Excel sheet. And I was like, man, I would have had so much more money if I hadn't done that. And so I said, okay. So anyway, right, like Jason and the Argonaut. You know, tie myself to the mast, I figured, all right, I'm going to move with this tiny little Thai island Kotow that back then had no internet.

And I'm going to like learn Muay Thai and I'm going to enjoy the beach and the Irish nurses who come in for vacation and I'm going to completely ignore the stock market. And that way, when it goes up and down and up and down, I'm just going to hoddle and I'm going to be a millionaire. So that was the plan. And of course, I did that at perfectly bad timing. So that turned out to be the one that you should have. of sold out of. So that was the grand crash. And so I came in on a speedboat to buy cigarettes

and stopped into an internet cafe. And I saw everything had gone down so much. And I figured, oh, man, there must have been a bunch of stock splits. You know, I probably got another couple million. And anyway, I was more or less wiped out. So I had to go back and get a real job. So I moved to Japan, worked in marketing at a big toy company. Takara, which makes Transformers, and eventually kind of, you know, hungered for the intellectual challenge. Yep. And went back at the PhD.

I was a professor in Taiwan for about five years. Kind of felt like things were falling apart during the Trump era that, you know, sort of the deep state was making its play. So I figured that I should come back to the States, that I have a duty to stand on the wall with people like you. rather than goofing around in Taiwan. So it came back in 2019. And nowadays I work, let's see, I'm a visiting fellow at Heritage Foundation.

I'm an outside fellow at Mises Institute. But most of what I do is these daily videos. So I talk about the economy, link at the freedom, basically try and cut through the gas lighting. And, you know, pretty much every element of our monetary system and our economy is crafted, in a way that you can't see how they're ripping you off. And that pisses me off. And so a lot of what I do is just sort of breaking those down and saying, okay, what's really happening here? How is this going to impact you? And hopefully, how can you, you know, either protect yourself from it or at any rate, is there light at the end of the tunnel?

Yeah. Well, it's good to see something like you at Heritage, too, because, you know, they've been pretty heavily taken over by the neo-conservatives for a while. And I had read some quotes from their new chief saying some really smart stuff about Eastern Europe, if I remember right. So, you know, I would always expect them to have like, I would think that they would have, you know, good capitalist Chicago school types or whatever. But if they got a good Austrian, real anti-government guy like you, that speaks highly of the direction they're going now, I think. Yeah, well, when they first hired me, I was surprised.

I was like, do you guys know who I am? I'm anti-war, I'm anti-state, you know, I'm a, but they've actually been really supportive. They've got a bunch of people who are on our side and side. I've also been radicalizing. So, you know, I usually start with Rothbard's, what is the case against the Fed. Okay, that's like the sort of entry-level gold pill for the Austrian deck. Right. So, you know, I usually lead with that.

So I've radicalized a good part of the econ group anyway. I don't know about the military guys, but they are coming around. Current management is absolutely just exceptional. They're doing what they can, right? There's like a sort of political Overton window in D.C. And there's certain positions one has to take. But there are a ton of people in heritage at this point who think like we do. Yeah.

All right. Well, look. So I got a chip on my shoulder or about this boom bust thing because I've seen it happen over and over my whole life and I never have any money to make or lose in the dang thing. But I always wish that I had because I always think, man, I knew I saw it coming and I would have could have known if I just had little cattle. Anyway, but also I see the way it just completely devastates people and I see the cynicism with which the system operates. I like to bring this up every once in a while. there's sort of the Washington Post version of Jekyll Island is called Secrets of the Temple by William Greider.

I bet you'd probably read it. And in there, they talk about how the Fed keeps stats on divorces and foster care and suicides and every kind of bankruptcy, of course, and all these things. I guess it's just said bankruptcies first in the list. But then all the social consequences that come from that, they track all of that too. The homelessness and the crime and the everything.

everything and they take all that into account with what they're doing and then a lot of the time whether they're inflating or deflating and they're causing pain to people they're really screwing us coming or going i'll let you talk more about that but point being that to them it's valorous to stay the course and do what you got to do in order to eventually over the long term do the right thing for the economy even if you have to screw a bunch of regular people on the way to do in it. But of course, the ends are not justified by these means because all they ever do is just make a new boom to replace the last one after they responsibly bust it. And so then they just keep going on and on like this. But I think, you know, it's sort of like you were just saying

where you can see how everybody's getting screwed in the system, but you can see how everybody else can't see it. It's hidden from them and that ain't fair. So they ought to at least be able to have a fighting chance to, you know, understand what's happening to. them. And I like to say to people that, you know, even if you don't agree with libertarians, about hardly anything, like anti-war people listen to show who, they don't want to hear a bunch of Austrian economics about, I don't know, whatever we have to say about the welfare state maybe or the regulatory state or something. People have varying views on those kinds of things. But to me, what's most important is, and even if you like to, you know, cite your university

professors about all the benefits of inflation that they lead you to believe, obviously, There's another side of the story there, but to me, what's the most important part is it's the inflation that causes the boom and the bust. And they taught me in school when I was a kid, seventh grade, that FDR created the Fed to smooth out the boom bus cycle. And they do a real great job of it because before that, there were panics all the time when in fact the truth is very much upside down from there. And to me, it seems like once people really understand it's the government and the paper. money machine or the digital money machine that causes the boom and the bust all the time, then after that we can start, I think, having a productive discussion about the other ills of inflation and possible solutions like gold standards or alternative currencies or

whatever, these kinds of things. But people got to understand that the economy doesn't just fall apart every 10 years because it's because of the government. Ain't that right? Yeah, you're 100% right. And you got a lot of really great points in there. First off, I can appreciate that there are people listening who don't give a crap about Austrian economics, whatever. I grew up progressive. I grew up in Philadelphia.

I thought conservatives like wrestled alligators. You know, I can totally appreciate differences in points of view. But, you know, when we're talking about the economy and specifically kind of an 800-pound gorilla in the room, which is the Federal Reserve, and sometimes to be. people who don't understand the Fed, it almost sounds cult-like. It's like you guys have this obsession with the Fed. And once you dig in, that's part of the reason why I do lead with Murray Rothbard's book, The Case Against the Fed, because that will absolutely open your eyes to what a beast this thing is, how much damage it does to the world. Just to give a flavor

in there was a study out of a university in Switzerland, a prestigious university, I think from memory it was in Tejad. And they said that the 2008 financial crisis in the U.S., that caused 200,000 deaths. Okay? That was four Vietnam's, in four Vietnam wars, in the United States alone, right? Never mind what it did the rest of the world. The rest of the world is 20 times bigger in the U.S. It is absolutely catastrophic what happens with these boom-bust cycles. And absolutely right, they are not born in nature. The only way, without a central bank or without government intrusion in the money supply, okay, the only way that you're going to have a boom-bust is when you're talking about wars, for example, the Napoleonic wars, the 30-year wars, World War II,

things like that are going to naturally cause boom-bust because once the war starts, people stop spending. They get nervous about the future, and then governments ramp up spending, and you get this kind of natural pattern that looks a lot like moonbuster. But that's wars or absolutely catastrophic events like the Black Death. In nature, that is the only time that you're going to have those kinds of catastrophes. And by the way, with the exception, arguably, of the Black Death, all of those are government caused. All of the rest of this so-called economic cycle that if you pick up a mainstream textbook, this is going to tell you this is just a fact of the act of, of, of, of, of, of, of, of, of human nature, just like the seasons. Things, things go up, things go down. We have spring

and then winter comes. Absolute BS. It is 100%, as you said, caused by inflation. Very specifically what happens is that governments make money very easy, right? In other words, it's very cheap to borrow. They do that by bringing interest rates down. And Japan, for example, is at negative interest rates. They're literally paying corporations to borrow money. So what happens if you pay people to borrow money, right? If you have rates that are lower than inflation, which you know, you're basically just paying people to borrow, well, they're going to borrow a ton. And then they're going to build a bunch of businesses. And sort of iconically, you can have all these stupid businesses like pets.com or we work or whatever. That's kind of the hallmark that you're in

one of these tissue fire booms, one of these easy money booms that you get all these really, really stupid businesses that are worth just hundreds of billions of dollars. The problem is that pumping out all of that cheap money is going to lead to inflation, right? Because if you're effectively creating these money substitutes, these loans, you can use them like money. Okay, so those cheap loans are bidding up the price of things. Right. So if you want to open a machine tool shop in Sheboygan, you've got to compete with some Joker who's got a billion dollars from VCs out in Silicon Valley. Maybe he wants to buy that office space for his. his computers on his, you know, software as a service startup, okay?

So you can't get that office basis. It's being bit away from you. All right. So the prices are going up across the economy. That's going to lead to inflation. Once the inflation shows up, the Federal Reserve, remember, they cause this by putting rates real low. The Federal Reserve, they look at that inflation.

They say, crap, this is going to hit the headlines. People are going to start asking us uncomfortable questions. The voters are going to put pressure on Congress. Congress can put pressure on us. So the Fed has to do something about it. And they go back to their little Federal Reserve textbooks, and the way to stop in inflation is that you raise those rates. Okay, so instead of easy money, now you have artificially tight money.

All right, you are strangling the economy. So now businesses can't even get normal loans, just the loans they would use to function day to day. That is when you get the recession. So you get this beautiful pattern there where you've got this tissue-fired. boom with all these stupid businesses. And then when credit tightens, the stupid businesses go first. So we work just went down, what last year? They're still trying to get more money. The stupid businesses go down first, the pets.com, the rest of them, and then it starts

cutting into the bone. And the solid, the family businesses, the ones who are supporting people in communities that are otherwise quote unquote rust belts, that's when it starts cut into the bone. And that's when you start getting those debts. So you have people who they commit suicide because their business goes under. Maybe they can't support their family anymore. They start drinking. You have domestic violence. That study from in Seattle, I mean, it's just a litany of horrors. And by the way, that was one reason why a lot of us Austrian economists anyway, we were so opposed to the lockdowns, never mind the human rights abuses from a pure, you know, what was that recession that we saw in 2020? I mean, it was much more brutal than it was than 2008.

I don't even want to imagine how many debts were caused, not even by the VACs. I'm talking simply the recession itself, probably killed over $200,000 in the U.S. Yeah, well, I mean, that's an interesting thing because if you think about the history of the boom-bust cycle, the lockdowns themselves, it wasn't a massive increase in interest rates. It was just the lockdowns were the artificially high interest rates this time to force that recession. And then, you know, I remember thinking, I mean, how long can they ask? people to stay home a couple of weeks because after all this country is made up of 10 million businesses who are all going to be telling their congressmen that like hey what are you going to do shut down all our businesses you can't do that but i was so stupid that i especially me

had no excuse at all for not immediately thinking that no do what they'll do is they'll create 10 trillion dollars and give it to all their favorite businesses and they'll be happy to see everybody else killed himself they don't care about us at all and which was apparently right and then but So this wasn't even just the Fed. This is just Congress had the Treasury print checks and send them out. And that was, part of that was just to regular folks, got a few thousand here there. And then there were these other massive programs. And I don't even know if anybody has any idea, really, how many trillions the Congress and or the Fed created during that time,

where, in other words, they're busting and booming the economy all at the same time there. And then that's the bubble that now is starting to be corrected, although I'm getting ahead of myself in your story here, but I have real questions about whether they're going to keep raising rates in an election year when they like the guy in power and don't want the challenger at all. It's not like they're choosing between Bush and Gore and couldn't care less, you know? Yeah, you're absolutely right. And the COVID episode, to me, was just an absolutely iconic version of what I call the crisis industrial complex in Washington. And specifically, the feds roll in that. Okay. So what they do in Washington, they do it with wars.

They do it with global warming. They do it with respiratory infections from Wuhan. All right. What they do is they take a molehill and they push that thing up as hard as they can. They push that thing up into this giant boogeyman into a mountain, and then they use that as justification to spend and to seize power. The problem is that normally, if you take a war, for example, this is a nice clean example, you know, if you sat down at the beginning of the Afghan engagement and you told the American people that you were going to spend, what was it, $3 trillion or $6 trillion or something on, you know, rearranging the deck chairs in Afghanistan with much blood loss. But if you sat people down, he actually told them. So, you know, this is going to cost your family, whatever that works out to, 50,000,

75,000. So, you know, you might not be able to put one of the kids through school, but by gum, Afghanistan will be changed. Nobody would go for that, right? I mean, you would be, they would throw tomatoes at you. Well, especially if you told them, and in 20 years we're going to lose anyway, and the Taliban, the current leadership's right-hand men are going to take over. Right.

Yeah, right. replace these Taliban with a whole new generation of Taliban with bigger beards. All right, but the thing is, you didn't have to tell them that it was going to cost them 50 or 75K because the Fed printed it, right? The Fed is like the venture capitalist who hides the costs of every single crisis, okay, until it metastasizes, right, until the crisis big enough now where by gum, yes, it is a crisis because now all those people are trying to kill us because we just spent you know, five years bombing them or whatever. If you consider in COVID, in the very beginning of

COVID, imagine government meeting where they're sitting down and deciding what they're going to do to the economy. And some junior staffer shows up and he says, okay, I got an idea. Let's shut down the entire economy. And yes, tax revenue is going to plunge by half, but that's okay because we can just lay off the government workers because they won't have any work to do. Right. That guy would have been, I mean, he would have been out of there, right? That would be the end of his career. But that never had to happen, right? Because the Federal Reserve, the central banks in every country that imposed lockdowns,

they stood ready to do what it takes to support the lockdown. In other words, it was absolutely costless. And the end result was people like you or me sitting around like, how in the hell are people voting for this, right? How are people accepting these human rights abuses? Like, you could not go to church. I mean, that was a line that had not been crossed since the freaking Treaty of Westphalia in 1648, all right?

Preventing people from going to church, that was inconceivable. So why did people put up with these kinds of human rights abuse, unimaginable abuses, because they were being paid to kick back on the couch and binge Netflix. Why were they being paid to do that? Because the Federal Reserve was stealing your dollars, pouring water into the wine of your dollars, right, printing out these counterfeits in order to bribe them. Now, of course, we know what happened next, which is that inflation took off. Wonder of wonders, right? When you pour

six trillion, six or seven trillion it was out into the money supply. At one point, that was about one and three dollars in existence had fresh income on it, courtesy of the Federal Reserve. And then prices took off. So then at that point, it got complicated, right? The Fed had to ramp up interest rates. It knows from long experience that when you do that, that's going to bring you to the bust part of the cycle. We would be there for now. We had, what, two quarters of negative GDP growth, which is the long established definition of recession. So we had that, what, about a year and a half ago. But since then, their response was to ramp up spending so high that at this point, you know, essentially we're not, our GDP is not negative because the government is spending so much money, but we are getting poorer. So, in other words, it is crashing. It's on the downside of the cycle, but they're trying to just stimulate, well, what they're going to leave interest rates where they are? Are they going to keep raising them? Or are they going to panic and cut them now?

Because they really don't want Trump to win. And if the stock market completely falls through the floor, he will, for sure, right? Yeah. Yeah, we're in a fascinating place in a bad way. And we haven't really been here since the 1970s. And where we are is that the Fed desperately wants to cut rates. And they want to do that, yes, partly for political reasons to help Biden. They also want to do it just in general, what the Fed reacts to is the prospect of negative headlines about inflation and negative headlines about recession.

Because it knows that those are the two things that are going to get the people angry. That's then going to make Congress things angry and then that's going to filter through to them. That's really all they care about. They don't care about the future of the country. They don't care about the children. They care about negative publicity because the people understand that the Fed has some control over inflation and also over recession, right? So that's really all they care about.

So what they're trying to do at this point is they were to lower rates to help Biden and to try to stab off the next recession. But they also, they know that if they lower rates, that's generally going to increase. increase inflation. The problem at the moment is that inflation had come down a bunch since last year. Now, it came down for reasons that had nothing to do with the Fed. It came down because the supply chains finally unstuck. So remember two years ago, you can buy a washing machine or a car. So that finally cleared up because China got rid of their lockdowns. And then the other reason that came down is because of global recession, right? So China is in deep recession

right now. Japan just entered recession. UK just entered recession. Germany is right on the edge. Anyway, you have this global recession, and that always brings energy prices down, because energy is a global market. When you look back to 2008, for example, energy dropped two-thirds leading to the recession. And energy is a big chunk of the CPI, the inflation rate. So energy came down because of global recession. The supply chain's unstuck. inflation came down because of that, okay, it's about half what it was at its peak. But it's very important to identify why it happened because the Fed did not do it.

The Fed did, they did raise rates, yes, but they didn't actually constrict credit. The reason is that there was all this money sloshing around things like reverse repo and excess reserves of the Fed. Anyway, there are all these kiddies of money that are being tapped instead. So credit never really got strangled for the big guys. Yes, it got strangled for the little guys. Good luck buying a house. Right. But if you were a huge company, you are still getting those billion dollar loans because of all that money sloshing around.

So where the Fed is at the moment is that inflation is rising again. The recession is floating only on these massive deficits, which, you know, Jerome Powell just gave a talk on 60 minutes where he said the federal spending is not sustainable. Of course, it's not. It's like $2 to $3 trillion a year in peacetime for the U.S. this is still peacetime, without, you know, we're not even a full-blown recession. That is an absolutely astounding level of deficit. So essentially, everybody in Washington is backed into a corner, right? If the federal government, if they continue spending like this, then that starts to worry bond markets. In other words, people who own U.S. government debt start to worry that they're not actually going to pay it back.

Okay. So there is some limit to how big those deficits can get before foreigners. It's mostly foreigners start to wonder about their dollar assets. But then meanwhile, you know, the Fed knows that the government spending is the only thing holding the economy up. And then they're sitting here watching inflation rising. Okay, normally when inflation is rising, the Fed has to raise rates in order to choke that off. In this case, they can't because they know the recession is right around the corner. only by the grace of that fake government spending is it being held off, and they desperately

do not want Donald Trump to win. So everybody in Washington at this point, it's almost a Mexican standoff where they're all just aimed at each other and they're sort of paralyzed, just praying that the data comes in. And a couple of days ago, we got data on the CPI, and it shocked everybody. I mean, it's absolutely jumping. It's at a 4% annualized rate. And last month, it was a 3% rate.

month before two, month before one, okay? It is rising very quickly. Now, we have been here before, which was the 1970s. Okay, in the 1970s, we had this huge jump in inflation. It got the double digits. And it was really the same reason because the federal government was spending so much. So they were doing it on guns and butter. They called it back then, which was the Vietnam War and the welfare state that they were imposing on the country. That sent inflation up the double digits. The Fed, you know, raised rates to bring it down. It worked. It came back down. And then the Fed declared victory too early, okay, because the Fed's always afraid of the recession. I mean, you know, they kind of have to balance the headlines to make sure that everybody suffers

just a little bit and not too much that they actually do something about it. So the Fed cut too fast. And then the inflation came right back. And actually came back much worse. So that that second peak in the 1970s, inflation was above 10% for more than five years all the way into the Reagan administration. And the only reason it ended is because Paul Volcker, he was the Fed chair at the time, and he had balls of steel. He raised rates to like 19%. I mean, it was just completely unprecedented. And he did that to choke off the inflation. So kudos to him. But the problem is that Paul Volcker's boss, Jimmy Carter, lost his job because of that, right? They had this huge recession.

And, you know, Reagan just absolutely made mincemeat of Carter. And so the bottom line is that that is not going to happen again, right? Washington's dumb, but they're not that dumb. They're not done when it comes to power. They're very, very clever when it comes to power. So they know what happened last time. They can see that head on a spike. They are not doing that again.

So my concern is that if we do get into that double peak situation, where we get a second round of inflation like we did in the 1970s, I don't see why it would end. Washington's not going to end it on purpose because whoever ends it is, you know, they're going to be done. They're going to be punished. Whichever party ends it is going to be done. So I'm very concerned where we go from here. But in the near term, I think your initial point exactly stands that the Fed, they're certainly not going to raise rates because they don't want Biden. to lose, and they're going to have a very hard time cutting rate because inflation is actually

going up again at this point, and they can read those 1970s charts just like the rest of us. Yeah. Hey, guys, I've had a lot of great webmasters over the years, but the team at Expanddesigns.com have by far been the most competent and reliable. Harley Abbott and his team have made great sites for the show and the Institute, and they keep them running well, suggesting and making improvements all along. Make a deal with Expanddesigns.com for your new business or news site. They will take care of you.

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So, I mean, it looks like, well, I guess I'll go back to the way I was raised, which was never mind the book. boom bust in front of your eyes, inflation is good for you because you can borrow in dollars and pay back in dimes. And after all, people's salary gets a cost of living increase quite a few times over 30 years, and yet they're only paying on the principal that they agreed back in yesterday's prices. And so that's why inflation is good for regular people. everybody just ought to buy property and celebrate the endlessly rising prices of their property.

So maybe all the critics got it wrong. You're just not investing in the right things. Yeah. So the sort of first point there would be that the vast majority of money that is borrowed is borrowed by rich people and the federal government. Well, actually government at all levels, but overwhelming the federal government. Poor people borrow almost nothing. They think a lot about those debts, like a $5,000 debt, if you're living hand to mouth, is a big deal. So their debts have a large presence in their life, but in terms of actual dollars, almost all money that's borrowed is borrowed by rich people and the government.

And so that's why they create central banks in the first place is that they can essentially siphon off wealth from, especially the low class and the lower class. class via that inflation. The other element to it is that generally the richer you are, certainly large organizations, they have many ways to get around inflation. Exactly what you're talking about property, for example. So if you buy a house, the house, it won't outpace inflation, but it will keep up with inflation because it's a hard asset, right? So a house just like gold will keep up with inflation.

But of course, when you're the kind of economy that we have today, the Fed is creating so much money that it's pumping house prices to a level that certain, like even middle class people cannot buy them, certainly not younger middle class people. So for example, millennials or Gen Z are not buying houses at all. Poor people have, it's been a long time since they could afford a proper house that isn't the double wide. And so what the Fed at this point is create as an economy where those traditional sort of hedges against inflation, they are only available to the rich, right? You go back to the to the 60s and 70s and the middle class could still protect themselves from inflation by buying a

house. They weren't making out on inflation. Okay, housing back then simply kept up with inflation. That's kind of an iron rule. At least it was until Nixon broke gold. But at least they could protect themselves. And nowadays, that's not happening. And so what you're seeing is there's this epidemic of doom spending, they call it, especially among younger people, some millennials and zoomers, where they look at the lifestyle they grew up in, right, where they had two parents and they lived in a house that their parents actually owned, like a four bedroom or whatever. And that is absolutely out of reach. I mean, that's just unimaginable for them. They, they're not even trying. Okay, so they're not saving for a down payment. They're not trying to build up their

their retirement assets or their stock portfolios. Okay, they're not doing any of that. Instead, they're blowing it. They're going on a cruise of the Bahamas. They're treating themselves. This is a consequence of, I think, what we've, it's intensified a process that's been ongoing, but really took off during COVID, where increasingly the benefits of inflation are only going to, to the rich and the federal government, because it melts away the federal debt, the poor had even less access than they traditionally have to those kinds of hedges

to protect themselves against inflation. So at this point, the poor are absolutely getting wrecked. I think that's a big reason why, you know, you see these newspaper articles where they talk about the brilliant GDP growth and the unemployment rate. And they say, you know, Bidenomics, it's just going gangbusters. Why doesn't anybody see it?

And I mean, as an awesome, You tend to believe what people tell you as opposed to aggregate numbers about them. And I think, in fact, for the working class, of course, but even for the middle class, arguably even the upper middle class, they cannot anymore build assets, right? The GDP growth, the growth and wealth that is overwhelmingly not going to the rich. And, of course, a huge chunk of was being siphoned off by the federal government. Yeah. Well, of course, middle class people are also getting completely jacked by the property tax pigs. You know, here's your windfall. Now your middle class home is in a, you know, say a nice location. Oh, now all of a sudden it's a million dollar home. Aren't you a millionaire, you know, mansion, litter in or now?

But then meanwhile, you get to sell because your property taxes and, you know, the state, they may not be a bunch of Austrian economists, but they know that the housing, prices are booming and are going to bust and that it's temporary. And yet still, they absolutely exploit the bubble and jack up property taxes as high as they possibly can. And I mean, if you got thousands and thousands of dollars a month in property taxes that you're paying just on rent, on your land on a house, even for people who own their homes outright, then of course, if they're not homeless, they're certainly gentrified right out of town. You could ask tens or hundreds of thousands of austinites about that you know there are all kinds of neighborhoods in austin that were like you know small working class and middle class homes but pretty near town

so all of a sudden the property you know in a boom is worth you know and look there's already going to be demand because there are tech companies moving here and whatever a lot of that's driven by artificially cheap capital provided them in the first place but still like um And beyond that, you just have the tons of free money coming in. Of course, people flee in the lockdown states to come to freer states is another part of it. But, yeah, I mean, I remember talking to somebody who lived in Travis Heights, which is this nice neighborhood just south of the river in Austin. Not that nice of a neighborhood, you know. I mean, nice houses, but small houses, you know.

Once upon a time, just a regular middle class neighborhood. And now these are all zillion dollar lots and all the people who are from there. were forced out. Even people who own their homes were forced to move out, you know? Yep. Now, wait, so the leftist on Twitter all day long, they go, yeah, well, this is late capitalism. And so that's just how it is. I mean, is that right? Or is it the case that maybe it doesn't have to be this way? Yeah, well, it's, you know, the government screws up everything it touches.

When you combine that with markets, then, you know, it's very easy to scapego the market parts of it because that's what the people actually see. So like, you know, if you take inflation, for example, it's caused by the Fed printing up money, but people actually experience it at the gas station or the grocery store. Right. So Biden's been going on and going after the grocery stores for jacking up their prices and ripping off people. So groceries are like the lowest margin business on earth, right? The average profit margin in a grocery store is 2.2 cents on the dollar, right? And they are making nothing. That's like, that's darn close to below the cost of their capital, okay?

They're making nothing. And so the idea that, you know, they're sitting there ripping people off and can just kind of wake up one morning and go ahead, you know, prices for groceries have gone up, what, 25, 30%. So the idea that they can just kind of roll in and cut those prices 25%. But the thing is that for a lot of voters, they have no idea how the system works. They don't know how the Fed works. They don't know how inflation works. All they know is that grocery prices have gone up.

And so it's very easy to scapegoat them. And this is across the board. You know, if you take the medical system, for example, I mean, healthcare in America is just an absolute shit show because government took control of it and then companies, as they always do, crony companies bought access to the government. They bought laws. And the end result is just this, this horrific, like, fascist marriage of government and private business. And, you know, business will, I mean, humans are greedy. So businesses will always do that. They will always try to take advantage once the government gets some power. The people who work in government themselves are equally greedy, so they're also going to try to maximize any power and sell out to the highest bidder, maybe get some golden parachutes so that when they retire, they can be a consultant or a lobbyist and make a million bucks

to influence pedal. So, right, what the socialists are calling late stage capitalism is the union of government and business, which is always going to be inevitable once the government starts getting involved in something. So socialists will sit there and they sort of paint this beautiful picture where you've got this bunch of just saintly like Jedi Council bureaucrats who are going to roll in and just make the world absolutely perfect. And it never ever occurs to them that those bureaucrats are just as greedy as the businessman. Okay. There's not like some, you know, magic purification machine that you go through when you join government, you're the same greedy mother. Anyway,

you're the same guy that you were before you joined government. You are greedy. And so they always, always become corrupted. And then we see the end result. So there is not an industry in America where you cannot dig in there and see what that crony union of business and government, how it has screwed up. You know, you take even food or farming or something, right? You've got all these additives that are stuck in there. They're lobbied. They pay politicians to stick that crap in there to mandate it so that they can shut down their smaller competitors. And then the end result is that we're eating garbage.

Not because farmers are evil people, but because when you put government into the mix, the evil people will take over. They will take control of the government. We see it in pharmaceuticals, obviously. We see it absolutely across the board. And so the socialists take advantage of the fact that government, government education is so bad that nobody understands how any of that stuff works and they just say, ah, this is capitalism. This is greed. Greed did this. Yeah. Well, I mean, that's what I always say is like they kind of have a point that, you know, as long as people have this much capital to invest

in congressmen, they're going to completely corrupt your republic pretty quick. But so I think the answer is you're just going to have to abolish the government because what are you going to do? Abolish property rights and free exchange? That's not going to. work, and one of them is going to have to go. Yeah, well, that's the thing, because even if you abolish the capital, which I think a lot of leftists are open to the idea that, you know, they might even accept that our government is corrupt, but they say, okay, well, the problem is that you have all these rich people. Well, okay, you can go to countries that are poor, Papua New Guinea or Somalia.

Okay, you can go to countries that are poor, and guess what? It's the same freaking process, all right? It's just instead of the capital being financial, the capital is gunmen or something like that, right? Tribal leaders who are getting some payout again from the government. Maybe they're getting 20% of the U.N. food rations. I mean, this is human nature. Humans are crooked timber, imperfect vessels. You will always have it.

And so the only solution, as you say, is you've got to get rid of the government. Specifically, what that means is you've got to take things out of the realm of power, okay, out of the realm of masters and slaves, and you've got to put it into the volunteerist realm where people are engaging each other because they want to. Not only is that morally superior, that is how you avoid all of these horrific victimizations that crony government is inevitably going to deliver. All right. One more question for you.

I want to ask you here a topic is about China. because you've got some interesting takes on what's going on over there. And after all, it's really far away. And so it's kind of hard to see. The other side of the world, Scott, literally. I know. Well, and listen, all the right-winger say that I should be really afraid. And I do have a grudge left over from when they bribed Bill Clinton back in the 1990s.

Like, I don't know, maybe they're going to invade the West Coast. But you seem to think that they have a pseudo-communist economy and that that's not good for their economy or something like that? In other words, you have no faith in their master plan was the deal. I know, I know. Yeah, I mean, so to kick it off, I think China's the most evil government on earth, without a doubt. I think it's far worse than Russia, it's far worse than any government, the totalitarian regime that they've implemented, what they've done to Falun Gong, to Uyghurs out in the West. I think they're absolutely a horrific regime.

I far prefer the bastards that are in charge in Washington to the ones who were in charge in Beijing. With that, the Chinese had been communist in name only really since about 1989 all the way up until President Xi came in. So they had a very free market economy. There, you know, it was a lot of don't ask, don't tell. You just kind of do what you need to do because the overwhelming goal was that China felt sort of a national stain at a poverty and impotence, and it wanted to rejoin the community of nations and hold its head high, and it wanted to provide for its people, who, of course, were many tens of millions were starved under Mao.

So I think at that stage, we didn't have any strategic conflict with them. They, of course, were doing everything they could to compete unfairly. They were stealing industrial secrets, and by the way, every country does that. China did it probably more aggressively than most. But anyway, you've got these sort of little disputes. But in terms of trying to divide the world and half and having to go to war, we didn't have anything like that. She changed it in many ways.

So she was kind of pined for those old communist days when the government had a lot more control. He's the one who imposed the police state. He also put a lot more control over the private sector. So one of the sort of the Chinese equivalent of Steve Jobs or Elon Musk is a guy named Jack Ma who founded Alibaba. And if you watch like Chinese dramas, my wife loves Chinese dramas, they'll reference Jack Ma as like the sort of standard example of, you know, if some kids really go in places, then he'll have a poster of Jack Ma on his dorm or something like that. Anyway, Jack Ma was arrested by Xi. He was disappeared for a number of months because he had criticized.

the size of central government. That was the kind of thing that never, ever used to happen in the old China. So the Chinese economy, they've got this massive government control now, dumping trillions of dollars of subsidies into specifically manufacturing and housing to try to export more. And housing is a really useful way to soak up a lot of capital and you can generate a lot of apparent GDP growth. Anyway, they dumped too much money into that. Both of those sectors are now in complete free fall.

You've got overcapacity. I have empty cities, empty factories. So the Chinese economy is in a really tough spot. If they had the leadership that they used to in the old days, in those communist in name only days, then I'd be very, very confident about their future. They did free market much better than we did. At this point, though, with Xi, I think he's got a lot of red flags. He really can't lose control.

He's also got a ton of enemies within the Chinese government. There's all these different cliques inside the Chinese. government and he's he's sort of specialized in making enemies. So he'll, you know, just to give an example, it might be completely standard that part of a given bureaucrat salary is understood to be routine bribes. And so he'll decide to sort of go through and purge a bunch of these guys and put them to death, not because they're accepting bribes, but because they support the former guy. So he's kind of a wrecking ball. So given that, I think that there is, you can make an argument that China and the U.S. have more to argue about. Now, I mean, of course, from my perspective,

I have no idea why the U.S. would particularly care. It's not our country. If China wants to start a war with Taiwan, it sounds like that's a very important thing for Taiwan to deal with, and perhaps they should seek friends who are nearby. So, you know, I don't personally think that there's any reason for us to go to war with China. But I do think that the new China is certainly more aggressive than it used to be. I think ultimately, I think their goal is, is essentially what our goal is, which is, you know, with the exception of Taiwan, which they seem to want to annex, aside from that, they want what the U.S. does, which is to dominate all the other countries on the world and make them do our bidding. We seem to use that largely for LGBT

promotion, which strikes me as absurd. But at any rate, they want the same thing. Okay, they want to be able to tell African countries to, I don't know, let's say if there's a new standard for a plug, for game consoles, then we want you to mandate that. It's pretty, it's sort of those small ball things, which is mostly what the U.S. uses or traditionally use their influence for as well. So I don't think we have to go to war over that. I don't particularly care if China wants to spend trillions of dollars bullying smaller countries. That's certainly not my personal problem.

So where are they on the boom bus cycle there now? They are very deep in bust at the moment because of all that overcapacity. It's an open question how quickly they work their way out of that. So at this very moment, they've been going through sort of a stock market crash. And under She's direction, the central government's been pumping hundreds of billion dollars into the stock market. That generally doesn't work because, you know, people on the other side of that trade will just kind of see it as free money. So that specifically is unlikely to work. Fundamentally, as with any industry, it goes through a bust, it's eventually going to find its floor.

So if condos were going for a half a million, then, you know, when they go to $200,000, will be, you know, demand match the supply, does it have to go down to $100,000, $50,000. Same with manufacturing. The weaker manufacturers will go bust. They'll lay off a ton of people. China's big, so you're probably talking tens of millions. that people laid off. That is also a problem for the central government. By the way, they stopped publishing youth unemployment statistics, which was that was taken as a pretty big red flag

because, of course, youth unemployment is pretty much the powder keg of revolutions. But yeah, so I think it's an open question. In the long run, I think China is absolutely going to wipe the floor with us. I think that the human capital that's been built in China is just inconceivable to the average American. I did work in Taiwan for five years. I taught business strategy, so I taught them how to compete, and I had to because I couldn't find a job in the U.S. because I'm a libertarian. So I would have been very happy to teach American MBAs, but instead I was teaching Taiwanese MBAs. But at any rate, I can say from being over there, you know, my school, we had 50,000 students, and about two-thirds of them were engineers of one flavor or another. Yeah, I mean,

that the U.S. is doomed unless we seriously, I mean, radically change our education system, the K to 12 specifically, which at this point is just warehousing that actively makes students dumber the longer they're in it. That's actually not a joke. I think we're completely doomed. So she is mortal. She will not be there forever, President Xi. Maybe he'll get a good talking to and change his approach. Maybe he'll try to recapture that GDP growth of times gone. But I think if you sort of zoom out to a 20-30-year horizon, I think absolutely China is eventually going to get back to the way it was 10 years ago.

And I don't see, I mean, we would have to radically change how we do things in the U.S. in order to compete with that. I mean, it doesn't particularly matter. Like if China is much richer than us, you know, Switzerland is much richer than us too. and, you know, that doesn't particularly harm us. So it's not, I don't think it's a huge issue. But I do raise it just because a lot of commentators in America are really interested the sort of horse race

between China and the U.S. At the moment, the U.S. is actually doing better. That's not to say we're doing good. It's just that we are failing less spectacularly than China. But in the long run, I think absolutely China's going to wipe the floor with us. All right, you guys. Well, that is Peter St. Ange. and you can find him on YouTube at slash at Prof St. Ange.

Thanks very much for your time. Good stuff. Thank you, Scott. It's great chatting. The Scott Horton Show, Anti-War Radio, can be heard on KPFK, 90.7 FM in L.A. APSRadio.com, anti-war.com, Scotthorton.org, and Libertarian Institute.org.