26 Responses to Controversial Truth Episode 10

  1. Phil says:

    Hi guys,

    Glad to hear you’ve beaten the Curse of the Ocho and are powering forward. The book sounds awesome, I’d love to read along but Amazon refuse to sell me the Kindle edition down here in Australia (is it because we use metric electrons?). I’d buy the paper copy, but by the time it arrived, y’all would have moved on to reading either Robb’s new best selling book “Paleo, The Beta-Carotene Buttplug way”, or perhaps Dave’s social commentary follow up “Underpants On Your Head? Try Pulling It Out Of Your Ass, America!”

    But I digress.

    I am struggling to decide how to invest my worthless money whilst I’m able to accumulate it. I own a small farm, and I own tools, and I am developing skills, all with the intent of requiring less debt IOUs in the future. However I still have a work-a-day job that pays okay. I am on the lookout for more farmland, but finding a parcel that I could afford (without going into debt) that was close enough to where I live to make it practical is pretty unlikely. Making money from the land in anything other than a shit-hit-the-fan scenario is tough down here (think about the raw milk dramas you mentioned in an earlier podcast, and multiply it by ten – we live in a regulatory nightmare down here).

    Question for you – what happens in a world with no inflation, but an increasing population? Is it the BitCoin thing where the value just increases to the point where you need smaller and smaller denominations?

    Anyway, still loving the show, and looking forward to the car/transport deal next week. Keep up the great work guys!

  2. Ryan says:

    Debt hit 16 Trillion (with a T) on Tuesday, September 4, 2012. Free I Can Fix America book prize!?

    I kid. But in all seriousness…great podcast. It’s a fascinating dichotomy: tuition prices are through the rough, yet the American’s access to information and knowledge has never been better thanks to TV in the internet. You can watch Jersey Shore on TV and troll Facebook on your iPad, or you can visit Khan Academy, Coursera, Udacity, etc. and arm yourself with knowledge.

    Perhaps that would make a good future podcast: low/now cost alternative education options in the face of 1 Trillion (with a T) dollars of student loan debt.

    Thanks for all you guys do!

    Ryan Martz

  3. Luke B says:

    Guys, I love you both (especially you Robb) and I’ve been listening and enjoying from the start.

    I’ve got to call you out a little bit here though. I appreciate that a lot of what you are doing is riffing and speculating – kind of talking through things as you go but please realize that with great power comes great responsibility. I’m sure you have a decent size audience and some of your speculation on banking is just way off the mark.

    I know that Dave doesn’t like to call himself a libertarian, but you’re coming at things from that perspective and some of the riffing today just really bothered me – specifically Dave questioning if the economy can grow considering that gold is (relatively) finite. That is the point, Dave! If you want to avoid inflation you need to use something that can’t just be printed out of thin air. Gold is a commodity and the value of it will adjust to the market demand for it. If the economy grows while gold isn’t, you can just buy more your gold coin. It isn’t tough. When Dave mentioned Keynes in a positive way for his analysis of gold I almost wasted a good cup of coffee by puking it all over my windshield.

    And Robb- fractional reserve banking is a travesty. I’ll just leave it at that. You guys are holding yourselves out as “fixing” America, but yet you’re discussing a lot of our largest problems with the conventional rhetoric and conventional viewpoint used by politicians.

    Please please please, before you continue with “The Ascent of Money”, read some less conventional viewpoints so you can come at that book with a libertarian perspective.

    My recommendation would be to read Murray Rothbard’s “What has the Government Done to Our Money”. You can literally read it in an afternoon and it is 100% free as a pdf or epub book here:

    http://mises.org/document/617/What-Has-Government-Done-to-Our-Money

    and “The Mystery of Banking” here:

    http://mises.org/document/614/Mystery-of-Banking-The

    I’ll stop there, but please investigate these topics a bit more so you can come at this with a bit more grounding.

    • dduley says:

      LUKE! Certainly didn’t want to ruin a perfectly good cup coffee….sorry about that. I was simply reading what was in the book (pg 59) as a “thinking out loud” question rather than putting a stake in the ground about what is right or wrong. I try to “guess” what might be the a question of some of our listeners and I know from past discussion with people there is a HUGE lack of understanding about the gold standard, etc. I will do a better job of explaining rather than questioning without specific answers! BUT, my goal for the podcast (I won’t speak for Robb) is to explore all options and try to distill solutions down to what is most true, most smart, and measurable. If that happens to be the libertarian view, then so be it. But it is hard for me to “keep my options open” from a knowledge point of view by pigeonholing myself to any one particular school of thought. I just want the damn thing fixed! Thanks for sharing this great data as this is the necessary exploration that everyone needs to be on!

      • dduley says:

        No worries, brother. I didn’t think that AT ALL! Thanks for participating and keep sharing stuff with us!

  4. Glen Nagy says:

    I have read things for years about the creation of money and I always wondered how true this information was. Here are a couple historical quotes on the creation of money:

    If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks…will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered…. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs. – Thomas Jefferson in the debate over the Re-charter of the Bank Bill (1809)

    Jefferson described what is going on now over 200 years ago!

    The Government should create, issue, and circulate all the currency and credits needed to satisfy the spending power of the Government and the buying power of consumers. By the adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity. -Abraham Lincoln

    “Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

    “The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.

    My understanding is that almost all money in the US is created through debt. Most people think the government prints money. I have read this is not true. The government issues a bond and sells it to the Fed. The Fed is the one who creates the money “out of thin air” with a ledger entry. I believe that Bernake said this was so in some senate questioning around ’08. So instead of just creating money the government allows the fed to create money then borrows it and pays interest. This does not make sense to me.

    The money supply has risen from around 1 trillion to somewhere between 10 and 15 trillion I think( it depends on what is classified as money and who you ask) . This increase in the money supply was created through the banking system. If the banks did not have to power to create money couldn’t the government just have created the extra 14 trillion dollars or so and spent them into the economy to pay for government services instead of borrowing the money??? It would not have been any more inflationary than what we have now since the money supply would have increased the same amount. The difference is the US would be virtually debt free as the increase in the money supply is pretty close to the same amount as the debt.

    This seems like a pretty simplistic solution to the debt crisis and I have been looking for years for reasons why this is not the case. I may be totally off base as the resources that discuss these ideas are the tin foil hat type places, and the more mainstream resources don’t discuss them at all. Interested to know your thoughts on letting the government create money. This is one of the three main features of the “american system” of Henry Clay.

    strong government owned central bank

    strong tariffs on imports

    funds generated from central bank and tariffs used to build infrastructure for the country.

    It seems China is using the “American System” more than the US. Maybe that is why china owns so much of the US!!

    • Woodsoul says:

      It’s absolutely correct that modern “fiat” money is based entirely on debt, but not just government debt, which is only a tiny fraction of the security of bank notes: US banks have a reserve requirement of 10%, I think, so they can make 100$ of loans for every 10$ they own in government bonds or have at their account at the Fed. The rest is secured by deposits, which of course often come from other bank loans! (Someone who takes a loan in the bank often deposits most of it in the bank!) So the real amount of money that banks can create is much larger than 10 times the government debt (this number is called the money multiplier) owned by banks.

      Recently, the money multiplier has gone down, because even though the Fed has tried to make the banks create money by giving money to the banks, the banks haven’t created that many new loans. So “stimulus” won’t work unless the banks are willing to play along. And they’re not willing to create inflation, because they’ve just gotten a lot of money for free from the taxpayers so they don’t want to dilute the power of money.

  5. Woodsoul says:

    Hey guys, thanks for another fun and engaging show!

    I thought I might contribute to the discussion by describing money
    from the viewpoint of a free market anarchist:

    Money facilitates trade by splitting the barter transaction. Think of
    barter: each trade is the exchange of two commodities between two
    parties, to the mutual satisfaction of both (otherwise, it would be
    coercion). If you’re a fisher and you want logs to build your house,
    you might be in trouble if the lumberjack doesn’t like fish!

    Now the first kind of money to help out is a durable commodity, like
    precious metals or stones, or seashells, or whatever. Within your
    community, you agree that you’ll trade in this commodity, and you
    might even have someone make standardized bits of it, like coins, and
    then you basically barter using these, with everybody realizing that
    everyone else will accept them in trade (because of that fact!). So
    the barter trade is split in two: the fisher sells fish for coin, and
    the lumberjack receives coin for lumber.

    Next, people got tired of always carrying around bags of coins, so
    they deposited them with warehouses that wrote certificates, IOUs, that
    gave the bearer a certain amount of coin on demand. Then they just
    traded with the bills, knowing that there was a pretty good change
    that the credit they represented was solid. But of course sometimes it
    wasn’t, causing bank runs, etc.

    Next, government got involved and started to dictate that only certain
    licensed warehouses, that is, the commercial banks, could issue notes,
    and furthermore that everybody had to accept the licensed notes (legal
    tender laws). This licensing scheme probably happened like all other
    such schemes, because the banks wanted to shut out competitors and
    gain a monopoly. With this monopoly in place, the quality of course
    dwindled. Banks, together with the governments, realized that there
    didn’t have to be a particular commodity behind the notes, that loans
    where often basis enough to secure credit in practice, and government
    dictated that a certain amount of the security had to be government
    bonds or accounts at a central bank, giving us the system now in
    force, where banks have a monopoly on money that is mostly just credit
    on bank loans with a little bit of backing by government bonds, which
    of course are backed by the government’s power to tax.

    The anarchists want to let money be free (as in speech, not in beer!):
    there should be no monopoly on the issue of money, so in principle
    everyone should be able to issue money (backed by gold, land, future
    income, whatever), and competition in the free market will ensure that
    we get secure, stable money with low interest.

    If the fisher can issue his own money based on his power to fish, and
    the lumberjack trusts that that’s valuable to the community (if not to
    him personally), he will accept the money issued by the fisher in
    exchange for lumber, thus splitting the barter. Of course, fishing
    stocks dwindling and fishing in general being a somewhat insecure
    business, the fisher’s money might not win out in the competition with
    all the other money, but there’s no reason to think that only gold
    warehouses’ money would remain, there being many other lines of
    business having a credible basis on which to issue money.

    The anarchist predicts that free money will increase the standard of
    living, because more people will have access to credit, and thus be
    able to start businesses, than under the current system where banks
    have a monopoly on money, thus making credit very expensive.

    As for input on energy and transportation, I can’t do better than to
    refer to the report by Kevin Carson over
    at Center for a Stateless
    Society
    , Energy and
    Transportation Issues: A Libertarian Analysis
    , which argues that
    “it is the state’s constraints on market freedom that have created an
    economy centered on long-distance shipping and the automobile-highway
    complex, and led to the geometrically snowballing consumption of
    subsidized energy inputs with declining net benefit. And it is market
    freedom—simply put, a society in which big business operates on its
    own nickel instead of the taxpayer teat—that will deliver us from our
    enslavement to this unholy monoculture.”

  6. Norcal_Mike says:

    So glad to hear you mention Chris Martenson. He does a great podcast called “Featured Voices”. Another financial podcast is S&A Investor Radio with Frank Curzio.

    Japan Rail:
    http://en.wikipedia.org/wiki/Japan_Railways_Group

    Gold has held its value as money for quite some time. Following the Euro and Dollar crises, owners of just about anything else should be relatively better off.

    I think most retirement investment programs will shuffle your money straight to Wall Street, but you choose your relative risk level. There should ALWAYS be a liquid savings/cash equiv. option. If the markets start falling, a safe haven option inside the vehicle is essential.

    • Norcal_Mike says:

      “Following the Euro and Dollar crises, owners of just about anything else *other than those currencies* should be relatively better off.” Especially durable goods… and booze, Robb.

      If you check out “Featured Voices” podcast, be sure to listen to 8/4/12 with Kirk Sorensen (Thorium Nuclear) and 3/16/12 with Marc Faber (economic genius).

  7. Crystal says:

    Regarding SHTF scenarios… if there ever is a complete economic collapse, there will be a period of time in which you’ll need to be able to barter. Food (livestock, produce, etc.) will be of value, as will common rounds of ammunition (both for hunting and for self-defense).

    There’s a ton of survivalist literature out there. I enjoyed Patriots: Surviving the Coming Collapse. It’s a very compelling story, though the writing is quite amateur – quick and fun read though, and it will give you plenty to think about whilst you polish your tin foil hat.

  8. carlos says:

    I was able to find a 6 part documentary version of acsent of money done by the bbc. Just in case there are any visual learners. There is also a PBS version online as well.

    Also in relation to what Dave said about the gold as a way to invest. Dave Ramsey actually teaches that gold is a horrible investment as it is soley based on fear. If there is a event that brings down the ecomony he says that money will no longer have value. Water, gas and food will be the things that will be more important. There will be more of a barter system.

  9. LukeM says:

    The American Thinker blog claims the Washington Post’s Bob Woodward ‘Inadvertently Confirms The Coming Economic Apocalypse’ in his new book “The Price of Politics”

    {Begin Quote from American Thinker Blog, quoting “The Price of Politics”}
    Another possible outcome, Geithner said, was perhaps worse. “Suppose we have an auction and no one shows up?”

    The cascading impact would be unknowable. The world could decide to dump U.S. Treasuries. Prices would plummet, interest rates would skyrocket. The one pillar of stability, the United States, the rock in the global economy, could collapse.

    “And the people who would bear the pain of that would be the people less prepared,” Geithner told others, “less able to absorb that cost. It would be something you could not cure. It is not something you can come back and say, a week later, ‘Oh, we fixed it.’ It would be indelible, incurable. It would last for generations.”
    {End Quote from American Thinker Blog}

    BTW, I still stand by my earlier question to RobbW (and DaveD) – are you now debt Malthusians, perhaps aligned with Tim “Turbo Tax” Geithner who apparently believes the end might be around the corner, just like Malthus believed the end via over population was just around the corner?

    What was the solution to over population (i know from “The Rational Optimist”; however, the TCT listeners might not know)? Why wouldn’t the over population solution work for over debt?

    Link to American Thinker blog post on the subject … http://www.americanthinker.com/blog/2012/09/bob_woodward_inadvertently_confirms_the_coming_economic_apocalypse.html

  10. Ryan says:

    I am very happy to hear that someone from the paleo/libertarian point of view got some benefit from Dave Ramsey. I think his “steps” and view on debt are generally practical and useful, but I very much disagree with his view on precious metals and paying cash for everything. Paying cash for a house with 4% mortgages is just dumb. Rent for the same house would be $1400 when the mortgage is $800…seems like really bad advice to me.

    Anyway, I really enjoy the podcast. Please continue to do it weekly even if it is not going to prevent Romney being elected and corporations taking over the world.

  11. John Harris says:

    In the Show Notes, the link for investing in real estate with your IRA was broken but I just searched the site for “real estate IRA” and it got me to the article.

  12. John Harris says:

    I’m not totally sold on the idea that there will be economic collapse of any sort, especially not a total SHTF scenario, but it can’t hurt to:

    1. Refinance your adjustable rate mortgage.
    2. Grow some of your own food as much as possible.
    3. Own a firearm and know how to use it.
    4. Pay off your debt; especially anything with an adjustable rate (+1 for Dave Ramsey).
    5. Put some extra canned goods in the pantry.
    6. Save some money and keep some of it in cash.
    7. Put part of your savings in something that is inflation proof (land, gold, your own business etc.)
    8. Get a generator and test it a couple times a year.
    9. Stock your liquor cabinet. 😉
    10. Get your dental work done.
    11. Eat better and work out once in a while.

    These things may not save you in the black swan scenario that is coming but you’ll sleep better and feel better and things will be ok because you are taking responsibility for yourself.

    I used most of the above stuff during our last couple hurricanes in the Houston area. I still don’t have a tinfoil hat but I’m tinkering with a new design with antennas.