Scott Horton Show - Just the Interviews - 7/25/24 Thomas Eddlem on How the Fed Hurts the Poor

Episode Date: July 28, 2024

Scott interviews Libertarian Institute William Norman Grigg Fellow Thomas Eddlem about two articles he recently wrote. The first focuses on how the Fed’s artificial price inflation is harming those who do and will rely on Social Security. The second examines how the Fed-created housing crisis traps people in poverty. Discussed on the show: “The Trillion Dollar Social Security Trust Fund Robbery” (Libertarian Institute) “Home Ownership Crisis: How the Fed Creates a Financial Underclass” (Libertarian Institute) Thomas R. Eddlem is the William Norman Grigg Fellow at the Libertarian Institute, an economist and a freelance writer published by more than 20 periodicals and websites.  This episode of the Scott Horton Show is sponsored by: 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 hey you guys on the line i have got tom edlam and he is our william norman grig fellow now at the libertarian institute and he also is the author of a great book called a rogues sedition

And did I mention that he's an Austrian school economist, which means he's right about everything, unlike everybody else who's wrong about everything. It kind of comes with the territory. Welcome to the show. How you doing, Tom? I'm doing great, Scott. It's a pleasure to be on again. Very happy to have you here. And, hey, everybody, this is a good reason to help support the Libertarian Institute during our summer fund drive is we're holding it down for free market capitalism for you here.

And in fact, we're so nice, we're even sticking up for beneficiaries of socialism. In this case, this article is about the rip-off fees of the Social Security Trust Fund and just how badly the government rips off everybody. Even when they're ripping us off to pay other people, they're ripping off the people they're paying to. Is that right, Tom? That's right. You know, when you think about it, the Federal Reserve, you know, they've been taxing our wages through inflation all along. And with their interest rate suppression, they tanked our 401Ks with the housing bubble in 2008. And then they took your job in 2009 with the recession.

And then they took your home with foreclosure because the housing market died in 2010. And now, as it turns out, all this interest rate suppression, is tanking the Social Security Trust Fund. Basically, what it is is this. It's a way for the Federal Reserve to steal all the money in the Social Security Trust Fund without the numbers changing much. When you inflate the currency,

you deflate the ability to spend money. So the Social Security Trust Fund is losing value at $100 billion. dollars a year right now without taking a dollar out of the fund. It's it's it's one of these central banking tricks that is you know if you if you're a defender of social security if you if you're of the idea hey I paid into this I should get it well the Federal Reserve is doing its level best to make sure that you never get social security payments. All right now so I remember Ron Paul on the radio on 5.50 a.m. in San Antonio back. What year is it right now? I guess it'd have to be

25 years ago. Oh my God. And he was telling Ricky Ware, speaking of the Cornerstone Church, that was the last interview. He was telling Ricky where? Well, Ricky, they'll keep sending us, or, you know, the people, social security checks. It's just they won't be worth anything. And then also, I guess what you're saying, too, is that the trust fund itself and the government's ability to keep paying Social Security recipients is diminished because they've been collecting an artificially low interest rate on the so-called trust fund this whole time as well, which then means that they do things like raise the age limit or add more means testing or these kinds of things and rip off the people coming and go in that way, right?

Right. I mean, right now, if the trust fund had been earning interest in U.S. Treasury bills, as they say, I mean, that's the old line with the new dealers. No, this is a trust fund. And of course, Al Gore had this, you know, big thing in the 2000 debate for us oldsters saying the Social Security fund is in a lockbox and we're going to put in a lockbox and nobody can touch it. And the paper dollars in there are having been touched. They're all in Treasury bills, but the Treasury bills are worth less. They're earning less than the rate of inflation, so the value of it is going down significantly. And if you look at the Secured Trust Fund back in the 60s, it actually earned about 2.8% per year in Treasury bills, you know, their Treasury bills actually built up the value of it. In fact, if the trust fund had been earning at the rate it was in the years before 2000, Social Security would still have a net, they'd still net be in the black, at least as far as dollar values. They'd still be throwing dollars into the trust fund as opposed to pulling them out as they are now.

Yeah. So that's funny. It reminds me of my old bumper sticker that I made during the W. Bush years. They said, oh, you wanted your Social Security money? Well, maybe you shouldn't have mongered that horrible war in Iraq, because now your money's all gone. And this is just part of that, right? Because, and, you know, my good buddy, Gene Epstein always gets on me for this. He says, I oversimplify or that I'm just wrong, I guess, when I say that Bush and Greenspan conspired to lower interest rates to make the wars seem free. But I guess his only real point, Gene, correct me if I'm wrong here, pal.

But I think all he's saying is, well, I'm just wrong basically to... narrow in on the war. Basically, they just have artificially low interest rates always to make big government in general seem free or cheaper and defer their costs until later. That's precisely right, Scott. I mean, they want to be able to borrow for free, forever, unlimited money. And, you know, I know you had, I don't remember his name, I just listened to the podcast recently from just...

who was talking about it as we reach this 120, 130% of GDP. Oh, Mike Swanson. Mike Swanson, yeah. I don't know if 130% is the magic number. It could be. You know, he's right that the bond market works slowly, but the credit markets tend to work very quickly. Lehman Brothers went from AAA to junk bond in a matter of weeks back in 2007.

So I think my canary in the coal mine is Japan. I mean, Japan has a 260% debt-to-GDP ratio. So when, and their credit rating is still A, as opposed to ours, which is either AAA or double A, depending on the credit monitoring company. So when Japan sinks, we're very soon down, you know, we're very soon next in line. that's I think that's where we're headed but I think you're right in the general point that look if the federal government can borrow unlimited money basically for free they can do the wars they can buy off complaints and they can keep this thing going but they can't keep it going forever and now they're stuck because if they raise interest rates the deficits go through

the roof and there's no way they float all that debt. All they have to, all they are left with is the solution that the Bank of Japan has come upon, which is, well, we'll just have the central bank buy up all the debt. And it's just not sustainable. I mean, Japan is going to crash. And, you know, part of the collateral damage is the Social Security trust fund. They, by suppressing interest rates, the Federal Reserve has basically emptied out the fund. And now people are going to have to choose, people in Washington, the congressmen are going to have to choose. Are we going to make Social Security a full-blown welfare program or are we going to just cut the benefits? And I think they'll probably cut the benefits. I hate to say that to the people who are about

to retire. I'm 58. I'm not that far from it. But that's probably what they'll do. Well, yeah, they're certainly not going to bring the empire home and save a couple of trillion dollars a year that way. I wish that were true. I wish that were true. So, all right, you know, I was, I'm interested in prices around here. You know, Austin is in a unique position because not only we're doing the boom bust in housing like everybody else because of the crazy lockdowns and then the massive. injection of liquid money directly in the form of

checks directly to the population and while at the same time I had these horrible lockdown regimes where right wingers or at least right leaners in liberal states all fled I hope it's mostly right leaners and not the liberals who destroyed California

who all moved here but I guess it's a tradeoff lots of tech people but you know Austin is a relatively small area it's kind of a weird place to put a big city with the hill country and this and that around so um but anyway my point being there's not just monetary inflation affecting prices here you have a huge and possibly somewhat artificial but still like a huge increase in demand for housing around here but at the same time i know it's all

you know propped up on this uh phony paper money and all that and i was watching some YouTube's where they were talking about neighborhoods that had got started, but then the builder lost financing and left. And you have kind of this half-built neighborhood. And you have, as these real estate people are talking about it out of their short-term eyes, they're saying, oh, no, we overbuilt. And they're blaming the city of Austin. You made us overbuild. And now everything is freezing and nothing can sell and everything is messed up. So I just wonder, you know, if that's how it is in Austin, where you really did have not just inflation in, terms of money, but a huge change in the demand for housing here, a pattern of migration of

Americans to Texas during the lockdown era and all of that. And I just wonder what you think about where we are in the boom bus cycle now, especially in housing. I guess we don't have liar loans as bad as we did last time around and that kind of thing. But I'm just very interested in I guess whether prices around here are ever going to come down and or whether interest rates are ever going to come down where a bum like me will ever be able to buy a house man well I I hope interest rates don't come down I hope prices come down and there's a little bit of that happening right now and you know of course housing is one of those rare commodities you know, necessities of life, where people are under the delusion that falling house prices

are a bad thing. You know, in any other necessity of life, you know, car prices going down, food prices going down, it's a good thing. But we have this delusion that, oh, housing prices should always go up. It's an investment. It's not an investment. It's the same house. I mean, That's one thing I love about Peter Schiff. He was always very clear that, hey, a house is a house. You're not going to buy it and sell it for more. Why would it be worth more? It's the same house.

The only reason it would go up is if you're in a bubble, if you're in a Ponzi scheme. And, you know, by the way, I send my prayers out to Peter Schiff. I hope he recovers because I know gold is through the roof right now. It's like $2,400 an ounce. Oh, what happened to him? I know, well, I don't know for sure, but I know that if you have an erection lasting more than two hours, it's a medical issue. He probably had some, no, he's, but he's, I think he's right about that part of it in that there's no reason it should go up. It should be going down. Housing prices should be going down. They're not going down for basically three reasons.

One is general price inflation, yes. But housing prices have far outpaced inflation. Another reason is regulations. regulations are much more difficult. And prices and houses are bigger. So there's more of that. And there's land is, at least in some of the major metropolitan areas, is more scarce. But you would think that it would equalize out, especially with all of the telecommuting that's going on compared to what was happening before. But the other major factor in rising house prices is, again, I'm coming back to the Federal Reserve

Bank's long term since two. 2,000 suppression of interest rates to nearly zero. This change in 2022, somewhat, they're now up, you know, up to 3 or 4 percent, but the, you know, the federal rate mortgage prices are now in the 7s, whereas they were in the 3s and 4s before, but if you suppress, because housing prices are based on the purchase using debt. You can raise the price a lot without impacting the ability of the customer to buy. So when the interest rates go down, the prices can come up and you can still pay the same amount. And what we're in the situation in the last couple of years is the Federal Reserve

was because of massive inflation. The official story is that, oh, well, if we have inflation, we have to raise interest rates in order to fight inflation. There's not really much historical evidence that that works, but they've done it. They've raised it from zero to three, four percent. And now what we have is, well, housing is unaffordable. Well, if they keep interest rates higher, the nominal price is going to have to come down,

and it will come down because people have to are at some point, they're going to have to sell their houses and they're going to have to settle for what they can get. But I do think that there's enormous pressure on the Federal Reserve to go back to these fake low interest rates that suppress everything. And this is, of course, couldn't continue to empty out the Social Security Trust Fund. And the Social Security Trust Fund, even with the recent raise in interest rates, is still being looted because the way the Social Security Trust Fund, the interview is still about the Social Security Trust Fund. Sure. Well, you got a great article about the housing crisis and the financial underclass, and it's all tied to the Fed, as you said.

It's the project from Woodrow Wilson, destroying the project from FDR. Hang on just one second for me here. You guys, I'm so proud to announce the publication of the Libertarian Institute's 14th book. It's Israel, winner of the 2003 Iraq Oil War, Undue Influence, Deceptions, and the Neocon Energy Agenda. by Gary Vogler, former senior oil consultant and deputy senior oil advisor for U.S. forces during Iraq War II. Remember how I wrote in enough already about how Ahmed Chalabi sold the neoconservatives on a plan to rebuild the old British oil pipeline from Mosul and Kyrkoq Iraq to Haifa Israel,

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available everywhere. Check it out, along with our other great books, at Libertarian Institute.org slash books. Hey, y'all, let me tell you about Roberts & Roberts, Brokerage, Inc. Nobody trusts the U.S. dollar anymore. Foreign governments are stocking up on gold instead of $100 bills. One, they know they need to, and two, that means you need to, too. Interest rates are up, but for some reason not much for savings accounts. Park your money there and watch Uncle Joe Biden just.

just counterfeit its value away. You can see how the Fed is afraid to raise rates to beat inflation for fear of popping the current bubbles, at least before the election. So more inflation it will continue to be. Gold is your shield against monetary and price inflation, just like it always has been. Now Tim Fry and the guys over at Roberts and Roberts are recommending gold over silver

since the world's almost 200 governments are putting their own pressure on the price, which should help everyone else who makes similar coal. falls on their own. Of course, Roberts and Roberts can help you with platinum, palladium, and silver as well as gold. Don't let the Fed and the war party inflate all your savings away. Look up Roberts and Roberts at rrbi.co. That's rrbi.co. I mean, that's really what it is. It's progressiveism's revenge on the New Deal. But the way the Federal Reserve, the way that the Social Security Administration accounts for the trust fund is they're all invested in treasury bills, but they're all in treasury bills, the average of all treasury bills that mature

four years or longer out. So even if you raise interest rates now, all those treasury bills, those 20-year, 30-year treasury bills that are at 1 and 2 percent, they're still going to be counted in the mix. It really doesn't change much. It requires for the trust fund to get back to a reasonable rate of interest that's not negative after inflation. You have to, have normal interest rates for many years. And I don't think we're going to have that. I think we're still not at normal interest rates. I think interest rates need to be higher than they are, not lower than they are.

I guess in that sense, I'm very much like Peter Schiff. Well, at least people would be able to save money. I mean, it seems like the whole economy is actually, and I guess this is just under the excuse of Keynesian theory or whatever, that everything is. based on new inflation and new credit rather than real capital formation. They would rather you not save up and invest, but instead go into Hawk. Oh, absolutely. The CNN had a piece that ran on my local TV station just today.

It was a print article talking about how the Fed has done a great job. And the economy runs on consumer spending. but it doesn't. It runs on production. I mean, that's what the Austrian view, right? I mean, you can't get rich by spending all your money. You get rich by making more stuff and creating more wealth. And obviously, spending and demand has a role in that, but it is not the deciding factor.

You can charge up your credit card as the federal government is doing now. And when you inflate the dollar, well, who does it hurt first? When the dollar loses its value, working people hurt the most. They're the last ones to get their dollars. And they're the only ones whose money, whose property is in dollar value, right? What are the poorest of the poor who are working? What do they have? They have wages.

They have to pay their rent. And they might have a few bucks in their checking account. Inflation taxes, every penny of that. The wealthy, what do they have? what do they have? Well, they have stocks, they have yachts, they might have a mortgage. Well, inflation doesn't take a penny out of a yacht. It doesn't take a penny of value out of stocks. And it actually helps someone who has a mortgage. You know, a real estate broker, we think about it. You know, 5% inflation in our $10 trillion wage economy, well, that's $500 billion taken from wage earners every year.

Well, where's it go? Well, imagine you're a real estate developer and you're worth a billion dollars. Okay. Well, if you're worth a billion dollars, generally what happens is you only have 20% equity in your property. So you have titled five billion dollars worth of properties and you have four billion dollars worth of debt and you have a net value of a billion dollars. Well, when you have five percent inflation, it takes five percent. of that $4 billion and says, you don't have to pay it anymore, right? It's a $200 billion gift, $200 million gift, to that real estate developer.

Inflation is literally the most regressive tax that could possibly be imagined. Because the hedge fund operators and the real estate developers all actually benefit from it, and the poorest of the poor get hurt from. it. And this is the Federal Reserve. This is good. The irony is it comes from the left. And they claim to champion the poor, but their policy is the board the, the, the Federal Reserve's policy and the Federal Reserve is Wardrow Wilson's crowning achievement. It is the most regressive government organ on the planet. I mean, it's it's, it's the liberals anyway. But you know, let me ask you this um and i'm sorry because we're almost out of time everything's behind schedule today

apologies everybody but so what about um people who are you know lower middle class or where like their biggest deal is they own their home and i know you know from some at least anecdotal evidence that i've heard where people like yeah my house is worth a lot more now if i sell it and move out to the country or something i guess i make money but meanwhile my property taxes are so high that they're corrupting me. And I'm not getting any windfall out of the artificially high price of my house that I inherited from my dad back when it was worth $7,000 or whatever. Now it's worth a million. You know, this is like someone told me to live in Travis Heights in just barely South Austin, just south of downtown by the river there. And they're like, they got to sell to a Californian because they can't

afford the property taxes on a house that they've owned their whole life, you know? Yeah, that's part of it. And people will not so much benefit, but they will not lose. And if they're paying in a mortgage, they will benefit because the mortgage will go to nothing. I have a friend, I work for many years in the trades. And I had a friend from Venezuela, who I worked with. And he moved to the United States in 2015. But shortly before he moved to America, his friend said, oh, inflation's coming.

you've got to buy properties. So he said, okay. So he put together $30,000, $30,000 boulevars, which was roughly $10 to the U.S. dollar at the time. So, you know, $3,000. And he bought a house for $300,000 boulevars or $30,000. Well, he moved to the United States and started working as a plasterer as a laborer. And about 2018, his wife said to him,

Gee, you know, we still owe three quarters of the principal. You know, we still owe over 200,000 bolivars. But our mortgage payment has fallen below $1 a month from about $250 a month. And she says, I don't get it. And my friend said, well, why don't we find out the payoff amount? And the payoff amount for the whole mortgage, which should have been $20-something,000, was $120. And, you know, so less than one day's wages.

And it was all because inflation had eaten out the value of his mortgage. And so a lot of people are benefiting from that, but not in comparison to what they're losing in the form, working middle class people are losing in terms of their wages every year. You know, if there's 3% inflation, you're losing from your wages. Also, as you pointed out, you're paying higher property taxes and you're losing the value in your checking account, you're losing, I guess that would be about it. But overall, it's not a deal. It's not a deal breaker.

And like you said, you can't actually benefit from it until you sell your house or you lead it to your heirs when you die. So it's not really a benefit that you can touch. Whereas if you're able to keep the full value of your wages, well, that is a real value that you can touch. Right. Well, listen, I wish I could sit around and listen to you talk about economics all day and try to think of good questions for you because I'm no good at this stuff or I'm just barely good enough at it to be interested in it. But I also am always, always out of time and have to go.

But thank you for your great articles. Thank you for being our William Norman Grigg Fellow at the Institute, Tom. And I do hope everyone will read your great pieces home ownership crisis, how the Fed creates a financial underclass. That wasn't the one I want to look. It was this one. It was the trillion dollar. The trillion dollar. Well, I had another one here that was about the left has a point about income.

Something, but I just didn't got time. The trillion dollar Social Security Trust Fund Robbery. That is at Libertarian Institute.org. And also make sure and check out the donate section. We've got matching funds. So help support the Institute. Thank you, Tom. Thank you, Scott.

The Scott Horton show, Anti-War Radio, can be heard on KPF 90.7 FM in LA. APSradio.com, anti-war.com, Scott Horton.org, and libertarian institute.org.