Holistic Survival
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Holistic Survival #26 – Fear, Ideology, Growth of Government

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Jason Hartman talks with Robert Higgs, a Senior Fellow in Political Economy for The Independent Institute and Editor of the Institute’s quarterly journal The Independent Review. Visit: http://holisticsurvival.com/category/audio-podcast/. He received his Ph.D. in economics from Johns Hopkins University, and he has taught at the University of Washington, Lafayette College, Seattle University, and the University of Economics, Prague. He has been a visiting scholar at Oxford University and Stanford University, and a fellow for the Hoover Institution and the National Science Foundation.

He is the recipient of numerous awards, including the Gary Schlarbaum Award for Lifetime Defense of Liberty, Thomas Szasz Award for Outstanding Contributions to the Cause of Civil Liberties, Lysander Spooner Award for Advancing the Literature of Liberty, Friedrich von Wieser Memorial Prize for Excellence in Economic Education, and Templeton Honor Rolls Award on Education in a Free Society.

Dr. Higgs is the editor of The Independent Institute books Opposing the Crusader State, The Challenge of Liberty, Re-Thinking Green, Hazardous to Our Health and Arms, Politics, and the Economy, plus the volume Emergence of the Modern Political Economy.

He is also the author of Depression, War, and Cold War, The Decline of American Liberalism, Opposing the Crusader State, The Challenge of Liberty, Politická ekonomie strachu (The Political Economy of Fear, in Czech), Resurgence of the Warfare State, Against Leviathan, The Transformation of the American Economy 1865-1914, Competition and Coercion, and Crisis and Leviathan. A contributor to numerous scholarly volumes, he is the author of more than 100 articles and reviews in academic journals.

His popular articles have appeared in The Wall Street Journal, Los Angeles Times, Providence Journal, Chicago Tribune, San Francisco Examiner, San Francisco Chronicle, Society, Reason, AlterNet, and many other publications and Web sites, and he has appeared on Fox News, NPR, NBC, ABC, C-SPAN, CBN, CNBC, America’s Talking Television, Radio America Network, Radio Free Europe, Talk Radio Network, Voice of America, Newstalk TV, the Organization of American Historians’ public radio program, and scores of local radio and television stations. He has also been interviewed for articles in the New York Times, Washington Post, Terra Libera, Investor’s Business Daily, UPI, Orlando Sentinel, Seattle Times, Chicago Tribune, National Journal, Reason, Washington Times, WorldNetDaily, Folha de Sao Paulo, Newsmax, Financial Times, Al-Ahram Weekly, Creators Syndicate, and elsewhere.

Dr. Higgs has spoken at more than 100 colleges and universities and at the meetings of such professional organizations as the Economic History Association, Western Economic Association, Population Association of America, Southern Economic Association, International Economic History Congress, Public Choice Society, International Studies Association, Cliometric Society, Allied Social Sciences Association, American Political Science Association, American Historical Association, and others.

Narrator: Welcome to the Holistic Survival Show with Jason Hartman. The economic storm brewing around the world is set to spill into all aspects of our lives. Are you prepared? Where are you going to turn for the critical life skills necessary to survive and prosper? The Holistic Survival Show is your family’s insurance for a better life. Jason will teach you to think independently, how to understand threats, and how to create the ultimate action plan. Sudden change or worst case scenario, you’ll be ready. Welcome to Holistic Survival, your key resource for protecting the people, places, and profits you care about in uncertain times. Ladies and gentlemen, your host, Jason Hartman.

Jason Hartman: Welcome to the Holistic Survival Show. This is your host, Jason Hartman, and this is episode #26. Today I want to thank our listener Drew Baker for recommending this guest, Robert Higgs. And the book is entitled Neither Liberty nor Safety. Fear ideology and the growth of government as we are talking about protecting the people, places, and profits you care about in uncertain times, nothing could be more threatening to that cause than government. Around the world, governments are collapsing under their own weight. Look at what is happening in Greece. Look at what has happened in different states and cities around The United States and in numerous countries around the world. This is a real concern nowadays, folks. And we’ve got to talk about being aware of the situation and protecting ourselves. And if you’d like to know more about the third pillar of holistic survival in uncertain times, and that is the profits pillar, be sure to listen to my other show, the Creating Wealth show, and visit JasonHartman.com. We will be back with the interview with Robert Higgs in less than 60 seconds.

Narrator: Now’s your opportunity to get the financial freedom report. The financial freedom report provides financial self-defense in uncertain times and it’s your source for innovative forward thinking investment property strategies and advice. Get your newsletter subscription today. You get a digital download and even more. Go to JasonHartman.com to get yours today.

Interview with Robert Higgs

Jason Hartman: It’s my pleasure to welcome Robert Higgs to the show. He is the author of Neither Liberty nor Safety: Fear Ideology and the Growth of Government. So this is a topic that is near and dear to my heart and I think in today’s era we should be very, very concerned about the growth of government and the huge reach that our government has and how they keep getting into our life. So Robert, I’m glad to have you here to talk about it. Welcome.

Robert Higgs: Thank you very much.

Jason Hartman: So tell us a little bit about your book and maybe what the inspiration was.

Robert Higgs: This book is in a sense the latest salvo of barrage I’ve been sending out for about 40 years now. The growth of government has been a principal subject of my research and writing since the early 1980s. I’ve done other things along the way but this has been the recurrent theme for my work. And I started out in 1987 with a book called Crisis and Leviathan. That’s probably my best known book, but I continued to work in the area. It’s a huge subject and new things kept happening and there are many loose ends to tie up. And so I’ve written several additional books and many articles over the years. And Neither Liberty nor Safety is the most recent book in this course of research.

Jason Hartman: So tell us about the way governments use fear in order to gain power. I mean I think everybody would accuse the Bush administration of doing that in the post 9/11 world. I heard that a lot, especially from the left. But give us some examples, maybe throughout history and how it’s being done today?

Robert Higgs: Well fear has always been the principal resource of any government in the sense that we think about government now, a monopoly supplier of legitimate violence in a society. And in the beginning, governments arose from conquests and subjugation and the imposition of tribute on people they conquered. And of course fear was part impartial of how they got started and established since they normally killed a lot of people and enslaved some others in getting themselves established as governments. But governments really go back to the fact that acting as a roving bandit, going around stealing things from people and hauling it away, is less rewarding than acting as what’s been called a stationary bandit or what we call just government. Stationary bandits don’t go away. They come and they loot and they stay and they become institutionalized looters, but they do so in the beginning because people are afraid of being killed or injured by violence. But of course that’s not a very good way to maintain institutionalized apparatus of predation, so all governments quickly added to that fear people had for their lives and limbs by bringing in, for example, a kind of priesthood that would justify the government’s rule and try to persuade people that it was proper and legitimate and that if people resisted it, they would be endangering their souls as it were. So the combination, the union as it were, of the throne and the altar, became the centerpiece of almost all governments around the world for thousands of years. Eventually, of course, the power of organized religion waned somewhat in many parts of the world and was replaced by a kind of new priesthood of intellectuals who serve the same purpose of justifying government’s predation and its other actions. But once again, even the modern priesthood is based in a sense on fear because it propagates a lot of ideas to the effect that people cannot help themselves, that they’re at the mercy of all kinds of threatening events and actions in the world and in order to survive and prosper they have to rely on government to protect them from these terrible things that are always lurking they’re told by the intellectuals. And the intellectuals explain to them that in order to get the government’s protection, they have to of course surrender a large part of their liberty and their property in an ongoing way so that with this kind of institutionalization of the justification of government. We have what all modern states o to some extent or in some way or another, but no matter what we look at in terms of the justification for government actions, we can very easily trace it back quickly to some form of public sphere, either fear for life, fear for one’s eternal salvation, fear for one’s well-being and safety. There’s always at the root of people’s submission to government some kind of fear. And of course governing authorities understand this very well and so they manipulate public fears, sometimes exaggerating them, sometimes inventing them, sometimes cooking up crises if no convenient crisis comes along on its own. And modern governments are all master practitioners of the manipulation of public fear.

Jason Hartman: I would definitely agree with you about that. It is amazing to me that people actually trust government. When you look at the historical track records of governments, I don’t think anything has been more abusive of people, and I’m including organized religions, than government. Government has, in my book, the worst track record of all, I mean just bar none. You look at Mao and Stalin for the worst of the worst, and of course there are many lesser example, Hitler, Pol Pot, etcetera. But it always seem to be that power really concentrates around government, more than the corporatocracy, more than religion, it’s just government. And it’s amazing to me that people still trust them, that they want to just turn over their taxes, they want to turn over their property, they want to turn over their privacy. When you look at the track record, it’s terrible.

Robert Higgs: It is amazing I think. There’s no question in my mind that no other institution comes close to the destructiveness historically of governments. Of course if you attempt to make that point with someone who favors an activist government, they will always try to reshape the history so that it fits their ideological perspective. They’ll say oh well that was communist or that was fascist or that was Turks or that was Chinese or they’ll give some description of who the worst actors were so that they get away from the fact that although institutionalized mass violence and destruction has taken place in many places and among many nationalities and at many times in history, the one common element is all of these is government. It was always the state and only the state has the resources and the organization to carry out violence and destruction on this mass scale.

Jason Hartman: You talk about some problematic propositions in the analysis and the growth of government. Tell us about those.

Robert Higgs: Well, this part of the book goes back to some of my earlier studies in the growth of government. The subject itself became a kind of cottage industry for economists and political scientists starting around 1980 or so. And as the scholars got rolling on the study, they adopted a number of conventions and assumptions and ways of proceeding which I found to be undesirable for one reason or another, sometimes misleading, sometimes not helpful, sometimes actually wrong. And so I did write about 18 distinct ways in which I thought my colleagues in the social sciences and law and philosophy were going wrong in their study in the growth of government. But let me just give you a few examples. One of the ways of going wrong is by mis-measuring how big the government is. By far the most common way to measure the size of government in scholarly studies is by looking at government expenditures relative to some base such as the gross domestic product. And you’ll see over and over that ratio described and analyzed and picked apart. But if you think about what government does, you can easily see that many of the most important aspects of government action don’t even show up in that measure. If, for example, a government begins to conscript people for work as soldiers, well that’s a tremendous reduction of public liberty that people can be forced to serve in the armed forces against their will on pain of imprisonment. But nonetheless, the effect of adopting conscription rather than a voluntary military system is normally to reduce government expenditures because the conscripts are not paid very well. So very often if you adopt this way of measuring government, you get things exactly backwards. Other common mistakes are the mistake of assuming that a given country is operating in a kind of vacuum, that we can analyze the growth of government in the United States, say, while ignoring the rest of the world. But in fact, modern civilizations are either related in countless ways and many of the ways in which government has grown in the United States over the past 150 years or so can be traced to previous events in Europe and particularly in Germany in the last 19th century and early 20th century. The Germans provided models for all kinds of government intervention and they really invented the welfare state almost completely before it got much of a hold on the United States. So you really can’t get very far in a genuine understanding of the growth of government unless you take into account the wider world. And there are many others that I analyzed in the book to demonstrate that the growth of government is a complicated thing and scholars like to reduce complications and particularly economists like to get everything down to one or two or three measurable variables, but very often that way of going about the study only misleads us.

Jason Hartman: I would certainly agree with you. You started off when we initially started talking and everything you were saying was just reminding me of I wanted to ask you how did we get so far out of alignment with the beautiful framework of this country from our founding fathers. It seems like everything today is just decaying into this abyss of this nanny state. There’s no consent of the governed. It’s just been blown way out of proportion. And I guess the part I hate about our founding papers is that they say the general welfare. I think that statement right there has been the one that has just on the left just taken off and used as s huge excuse for the growth of government.

Robert Higgs: Well, that particular wording in the constitution has been used as a lever in a way that the people who wrote it never imagined.

Jason Hartman: Of course they didn’t.

Robert Higgs: It was just kind of an introductory gloss to make the claim that what they were doing was intended to benefit people in general. And then of course they went on to enumerate the powers they intended the government to have and that those were the only powers they thought it should have. But the whole idea of the government of enumerated powers and only enumerated powers began to lose ground almost immediately. In fact, Alexander Hamilton who was one of the people who was most influential in getting the constitution ratified in 1787-1788, himself contributed mightily to the idea that government actually had all these implied powers and that necessary and proper clause of the constitution would allow the government to perform a huge variety of other actions not empowered in the constitution explicitly. So people have been trying to loosen the bounds of the constitution virtually from the time it was ratified to the present. So by the time we get up to the New Deal when the commerce clause was used as a kind of open sesame for all kinds of federal government regulation of economic affairs…

Jason Hartman: Was that the interstate commerce you mean? Is that what you were referring to?

Robert Higgs: That’s right. That became a kind of judicial key that opened all doors the way that it was interpreted in the late 1930s by the Roosevelt Supreme Court. And since that time, the constitution has virtually amounted to zero effective check on the growth of government I would say. It occasionally has some force, but very, very little. That was a long time in coming and as I say it started almost immediately. It took about 150 years but finally the constitution was basically annihilated as an effective check on the power of government, particularly an economic life. So we can’t look to that, but your initial question about how did we get from the idea of having a government of limited and enumerated powers to having this massive leviathan we have today is a question that only a study of 200 years plus of history can answer, because it’s a long process. If someone had proposed in 1800 that we had the kind of government we have today in 2010, virtually no one would have wanted that . They would have given their lives to avoid it. But if you look episode by episode throughout our history and you see how particularly each period of crisis was used to allow opportunists to rush in and seize new government power in the guise again of protecting people from something they were afraid of such as foreign enemies. Each time we have a crisis, people in the government and people outside the government who want to seize government power in some way rush in. There’s a massive stampede of opportunists to get in there and, as Emanuel puts it, not let the crisis go to waste.

Jason Hartman: Right. Let’s not miss a good crisis here to get stuff done, right?

Robert Higgs: That’s right.

Jason Hartman: That is scary.

Robert Higgs: During a crisis, people in general are much readier to reduce their resistance to the growth of government. They’re much readier to allow tax increases, to allow government to exercise new powers it’s never exercised before. And if those things were done only during the crisis, it wouldn’t be terribly important. But what happens is what I call the ratchet effect, and each crisis brings these new powers into play and then the crisis ends but the new powers don’t all go away. Some of them are always retained and therefore if you go through a century or more of recurrent crises, each one leaving a residue or legacy of new government powers, you eventually arrive at this gigantic, powerful, overweening government that we have today.

Jason Hartman: The crisis power grabs are really in a court of law that type of tactic would really not be allowed because what they would say is well you got this person to agree to say a business deal when they were under duress. I mean the contract would be kicked out of court and said hey, you were holding a gun to the person’s head. I mean you put them under undue duress and they would say you can’t do that.

Robert Higgs: Well, people are always assured during the crisis that these new government powers and these new government exactions are to meet the emergency.

Jason Hartman: Right. And it’s never that way.

Robert Higgs: And that makes sense to them. They say yes, there is an emergency. We’ve got to deal with something that is a terrible threat. And so they relent not understanding their history, that they’re never going to get back to where they were before the crisis if they allow the government to expand.

Jason Hartman: They’ve done it here in California to us several times in the socialist republic of California where I live. We had the San Francisco earthquake, they raised the sales tax. Then we had another thing and they raised the sales tax. And they kept saying oh that’ll just be for a year or two to pay for all those costs of rebuilding. It never goes down. It never goes away because once it becomes entrenched you just can’t get rid of it. Politicians love having that extra money.

Robert Higgs: They do. And of course each time you build some new government program, you build a set of vested interest.

Jason Hartman: Right.

Robert Higgs: So it’s not just the politicians and the people in the bureaucracy or the legislature. It’s also the people who benefit from these targeted government programs. And then they become allies and you get these iron triangles, as the political scientists call them, built up of key members of the legislature and key members of the bureaucracy, and key private sector beneficiaries. And they all join forces and they’re the experts on the program. They know more than the rest of us they say. And they had the enduring interest in watching things whereas we have lives to live and we’re not always watching the matter. And so they’re at great advantage over the public in general and when they try to retain these emergency programs.

Jason Hartman: Let me take a brief pause. We’ll be back in just a minute.

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Jason Hartman: So I’d like to ask you about a reasonably contemporary example, because I just remembered I want to go to 9/11 for a moment. On that day, we all remember how fearful we were. And right after that came the Patriot Act. And there was certainly a chorus of criticism out there. Now, compared to what Obama’s done, it looks like no big deal, but how do you really deal with that? Maybe there was a legitimate reason to be fearful. Something had to be done. All these agencies weren’t coordinating with their intelligence and there was a lot of chatter unaccounted for from the terrorists and so forth. This is what we were all told. I’m no expert, so I don’t really know. But what do you really do? I mean did Bush do the right thing or did he do the wrong thing?

Robert Higgs: I don’t think it was the right thing myself. I think it was a very good example of opportunism at work. Virtually every provision in the patriot act was already something that the justice department or some other part of the government had been seeking, in many cases for years, things like the ability to put on wiretaps that rogued around with people instead of getting a warrant for a wiretap of a fixed place. That sort of thing is what of course law enforcement people love to have. They’re not worried about your privacy. They’re just worried about getting more convictions. And so they had long sought that kind of authority, but they hadn’t been able to get it because normally people would say no, that’s too big a reach. It gets us away from our requirements, that all searches be subject to judicial warrant, and so they haven’t been able to get that authority, but in the emergency of course they could come forward with a new excuse for getting it, that we needed to follow terrorists as they roamed around making their plans. And that seemed reasonable to people, as did many other provisions of the patriot act at the time.

Jason Hartman: While you say that, Robert, I want to just play devil’s advocate with you for a moment because in the olden days before cell phones, if you could bug the phone at someone’s house in their office, you really have most of their communications. But nowadays, we’re all much more mobile. And it seems rational to me.

Robert Higgs: It seems to have some basis, however if we keep following its ramifications, what we get to very quickly and what we got to almost immediately after 9/11 was this situation we’re in now where we have and not just the FBI for you to listen in to anybody and everybody, but the NSA intercepting everybody’s communications and having supercomputers comb through these communications listening for key phrases and what not, using their algorithms as filters to supposedly [00:24:14] out to the one bad guy message out of 10 billion ordinary messages. And even if this were a sensible technological way to proceed, we’d have to ask something about its efficiency, but however that may be what we’ve done is we got ourselves in a position now where the government simply monitors everybody. And so our privacy, if people think they have any privacy, they’re just not paying attention.

Jason Hartman: Right, right. No, big brother is definitely watching us. And I remember pre-9/11, the privacy advocates were against the Carnivore. And post 9/11, I’m sure Carnivore is sitting on every server everywhere nowadays, you know?

Robert Higgs: Well, there’s been a tremendous increase in the amount of technological prowess put into intercepting messages and analyzing them and filtering them so that we have made a gigantic leap in the past decade compared to where we started.

Jason Hartman: I’ve even heard, Robert, that the CIA…I have no idea whether this is true but there is a YouTube video about it, that the CIA was one of the original investors in Facebook.

Robert Higgs: That I don’t know anything about. I do know that the CIA was involved in Oracle’s early business and has continued to be an important customer for Oracle. It’s a kind of a key company in what you might call the security industrial complex.

Jason Hartman: Let’s talk about another form of government use of fear which nowadays is on everybody’s mind since the financial crisis really began. And there’s a lot of talk about The Great Depression. And there are a lot of opinions as to how we got into the depression and how we got out of it. IN terms of getting out of it, I like how people say that the greatest public works project of all time was World War II.

Robert Higgs: The Paul Friedman…

Jason Hartman: Right, exactly. And Bill Bonner says it too. And so how did we really get in and out of the depression? What happened there?

Robert Higgs: Well, that’s much, much too big a story to answer quickly for you, Jason, but I can tell you that the idea that World War II got the economy out of the depression is a myth, that what people think happened is not in fact what happened. The war did of course eliminate mass unemployment. And that’s the main reason, even people who lived through those events, think the war ended the depression.

Jason Hartman: Yeah, I don’t think wars are a sustainable economic valuable of any sort. I mean I’ve never bought that argument about wars helping the economy. That’s crazy.

Robert Higgs: To this day, people like Paul Krugman whose got enough credibility to be awarded the Nobel Prize in economics…

Jason Hartman: But so does Al Gore.

Robert Higgs: Repeat that mantra. But what happened during World War II was that the government started conscripting men in the middle of 1940. And in the next five years, it conscripted 10 million men. And besides that, it sent the message out to every man of draft age that if he wanted to avoid being drafted and therefore have a better chance of avoiding the infantry, he had better join. So many of the people who enlisted in the armed forces in World War II did so to avoid being drafted and getting some rotten position or job in the armed forces. So we built up this armed force of more than 12 million people by the middle of 1945 starting from only a few hundred thousand in 1940. That meant that we had taken at some point during the war the equivalent of 22% of the pre-war labor force and drawn them into the military by the draft directly or indirectly. So if you want to get rid of unemployment, I can always give you a perfect way to do it. Just draft people willy-nilly by the millions and that will get rid of unemployment. That’s how we did it in World War II. But what we did not do in World War II was create this kind of Keynesian prosperity that people imagined. And we simply didn’t do that. Private goods and services were less available during the war than they had been in 1941. What happened was the resources were moved to the production of military goods and services and away from private goods and services by not only the government’s enormous demand to buy these things but also by a gigantic body of direct controls the government put in place. So it was in some cases for example it simply shut down entire industries. It shut down the civilian automobile industry in the beginning of 1942. So if you have a command economy like we had in World War II and a gigantic constriction program, yeah, everybody’s working, there’s no unemployment, and this looks in a way as if you’ve got out of the depression. But what you haven’t got out of was the kind of privation that was the most essential aspect of the great depression of the 1930. People’s private incomes are still hurting. They can’t buy consumer durables to speak of. They can’t buy new cars. They can’t get tires for their automobile. They can’t even buy more than a few gallons of gasoline a month in most cases. So this was not any period of prosperity properly speaking. But people looked back or even at the time they said well we got rid of unemployment, so the depression is over. What had actually happen is that we’d substituted a different form of depression for the one we had in the 30s. Now what did happen, however, during the war was that in order to run the war economy, Roosevelt had to make peace with big business because he had to depend on big business to produce armaments. And so he had to stop beating him over the head and threatening them and calling them economic loyalists and all the rest of it. He had to placate them and allow them to run the war economy. And he did that starting in 1940. But what it meant was that after five years of having businessmen run the economy, the people’s fears that they’ve built up of the government in the late 1930s fears that the government was going to make itself a dictatorship over the economy. Those things are dissipated. So when the war ended, the need to steer all these resources into producing munitions and military services ended, resources were released for civilian purposes, and the fears that had kept the depression going in the late 1930s no longer existed. Roosevelt was dead, the New Deal was basically over, it had very little political support anymore, and so at that point private investors for the first time since 1929 came out in mass. And that propelled the economy to tremendous prosperity immediately in 1946.

Jason Hartman: That’s a real different story than you would definitely think. And I’ve never believed that wars were the answer to solving economic problems. That’s the stupidest argument I’ve ever heard. So I agree with you there for sure. It’s good to talk about all of this stuff, Robert. It’s certainly good to be aware. So few people are it seems like. It seems like everybody is just sort of trading liberty for security and they’re not going to end up with either one of course. But what can we do? What do we do? Voting has very little impact in my opinion because both sides, they’ve just sold out. We’ve got this two party system we’re stuck with. Writing our congressmen, we’ve got all these entrenched interest. They’ve got the iron triangle set up everywhere. What can we do?

Robert Higgs: I think that a political way of trying to recover our liberties is not going to work, Jason, frankly for the reasons you say and a number of others. The system is all rigged now. The people who run it and benefit from it control it. They control mass communications in the mainstream media. They control the educational system and so forth. Now, of course, what they’re doing is digging their own grave. You know, they control it in the same way that the communists control the economy of the USSR. But they were digging their grave too because the economic apparatus could not sustain itself. And right now, we’ve got a system with so much government intrusion and so much uncertainty occasioned by constant fear of new government intrusions that the economy is working worse and worse. And eventually, it’s not going to work at all. It’s just going to grind into some kind of stagnation or worse. And I don’t think that time is far in the future. Although, I’m not a prophet. I don’t know how long it’s going to take. But what it means is that this system is going to break down eventually. I don’t know if we’re talking about five years or 15 years or 40 years, but it’s going to break down because it’s self-defeating. And so what people can do is be ready. They can start to look for ways to remove themselves, to protect themselves, to withdraw their allegiance as it were, from this system that is ruining them. And people have a variety of ways of protecting themselves. I think the important thing is for people to learn what’s going on. That’s my specialty. I try to teach people how the system works and how it’s come to be in this situation, but there are many more practically oriented people that can tell you how to protect your assets, how to situate yourself, what kind of investments are better and worse. And there are just a great variety of actions people can take without doing anything through the political process. I think relying on politics is a waste of people’s time. All I recommend people do with politics is mock it, condemn it, denounce it.

Jason Hartman: Yeah.

Robert Higgs: And then protect yourself.

Jason Hartman: That’s really good advice. Hey, can I ask you one last question before we go here? You talk a lot about the economy in the book. And what is your vision of the future of our economy? You’re talking about how it would just stagnate, grind to a halt. Do you see with all this money printing, inflationary pressures, do you think there’s a lot more deleveraging and more deflation ahead? I just wanted to get your take on the value of our fake money. We didn’t talk about the Federal Reserve which is another one of my pet peeves. What’s your vision of it?

Robert Higgs: I think it’s very difficult to say, Jason, right now, because the situation we’re in is without precedent. The banking system is holding over 1 trillion dollars in excess reserves. And the banks are just sitting on that, getting a miniscule interest paid to them by the Federal Reserve but they’re doing that because they’re afraid. Many of them are actually insolvent even though their accounts don’t recognize that. And so the banks are trying to rebuild their balance sheets and get themselves in better positions before they start actually making new loans and investments with greater risks. So the question is they’re not going to do this forever, and when they start getting back to normal kinds of business and using these huge amounts of reserves they now hold, how is the Federal Reserve going to prevent a huge increase in the money stock and therefore a huge acceleration of pricing selection? The Fed thinks it’s going to do it if you read their documents. Basically by raising that interest rate, it pays them on holding reserves. It has some other tools it says it can use, but that’s the one that obviously they’re relying on the most. But no matter whether they do that or not, one effect of their trying to disengage from having bought all these rotten assets and pumped up bank reserves in the process is that interest rates are going to rise. We know that interest rates are going to rise. They can’t go anywhere but up.

Jason Hartman: I couldn’t agree more. They have to.

Robert Higgs: And so when they start going up, the question then becomes will the Fed have the political force and standing to resist all the congressmen that come down on it saying you can’t let interest rates go up. We’ve still got unemployment. And will the Fed be able to actually play out its chosen strategy? And even if it does, will it work? Will the Fed be able to staunch the flood of bank lending and investing once the banks feel confident that they can make those loans and investments in a more or less normal way? Again, we’ve never had this situation before, so I don’t know how it’s going to work through this time, but the potential is there for very high rates of inflation. And if they should start to occur, it seems to me, given our history, that the American people will demand and get price controls. We got them at much, much lower rates of inflation back in the 1970s. And so if we have 10%, 15% rate of inflation, many people are going to demand wage and price controls, and politicians of course will see short term gains by slapping those controls on. So if that should happen, then we have another huge can of worms on our hands. How long will they stick with those? How will they work and so forth? There are just a multitude of open questions we face because of this situation the Fed has created by its actions of the past two years.

Jason Hartman: Sure. And price controls are just more central planning and no one can show us any examples of that ever working at any time in history, can they?

Robert Higgs: Well, what it does, Jason, is it works politically in the short run. When Nixon put on the price controls in August 15, 1971, the Dow Jones rose by a greater amount the next day than it had ever risen in a day in its history. Even business loved that in the short run. They think oh, now we’ve solved the problem. But of course it’s a very, very short term solution if it’s really a solution at all.

Jason Hartman: That’s very true. Well, Robert Higgs, thank you so much for joining us. The book is Neither Liberty nor Safety. Do you have a website you want to give out or where can people get the book?

Robert Higgs: Independent.org is a website for information about my writings and information about that book and others I’ve written. And the books can be purchased there or they can be purchased through any bookstore such as Amazon and others.

Jason Hartman: Excellent. Robert, thank you so much for joining us today. Thank you so much for all of these insights, and let’s sure hope that the future is brighter than we see it because this country is going through some incredibly challenging times right now. It’s always sort of pulled through one way or another in the past, but this is no easy time, no question about it.

Robert Higgs: Well, we’ve got our work cut out for us, Jason, and I appreciate you having me on the program.

Jason Hartman: We certainly do. Thanks for joining us.

Narrator: Jason provides an extremely unique service, Deal Evaluator. Are you interested in a property outside of our network? Need a second opinion? No problem. Let our experts evaluate the deal. Find out more about it at JasonHartman.com.

Narrator: Thank you for joining us today for the Holistic Survival Show, protecting the people, places, and profits you care about in uncertain times. Be sure to listen to our Creating Wealth show which focuses on exploiting the financial and wealth creation opportunities in today’s economy. Learn more at www.JasonHartman.com or search Jason Hartman on ITunes. This show is produced by the Hartman Media Company, offering very general guidelines and information. Opinions of guests are their own and none of the content should be considered individual advice. If you require personalized advice, please consult an appropriate professional, information deemed reliable, but not guaranteed. (Top image: Flickr | Sistak)

The Holistic Survival Team

Transcribed by Ralph


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