From GBTV: Two very different opinions on how to avoid economic collapse

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On GBTV Monday night, Glenn spent some time focused on the credit crisis and where the United States economy is headed. And while they both agreed America was headed for economic trouble, they had very different opinions about what could turn things around and lead to future prosperity.

He interviewed two experts who both agreed America was headed for trouble, but they had very different opinions on what the solutions were.

First he interviewed Richard Duncan, author “The New Depression.”

Earlier in the week, Duncan warned that the current financial crisis was bad it “”so severe that I don’t think our civilization could survive it.”

Moneynews explains:

“In order to understand this crisis, it’s necessary to understand the role that credit has played in bringing it about,” he told CNBC.

“When we broke the link between money and gold, this removed all constraints on credit creation,” Duncan argued. “This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it has already, and if credit begins to contract, there’s a very real danger that we will collapse into a new Great Depression.”

Duncan noted that policymakers believe that if they allow credit to contract, there will be a new depression.

“So they are going to do whatever it takes to keep credit expanding,” he added. “And that means more quantitative easing (QE), and when the Fed does QE3, everyone knows that stock prices are going to go higher,” he said.

“If this credit bubble pops, the depression could be so severe that I don’t think our civilization could survive it,” Duncan noted.

On GBTV, Duncan told Glenn that economic collapse would likely lead to banks failing, lost savings, and a breakdown in global trade. Duncan also said that because the government would have no money, the military would have have to be called home which would weaken the United States as a global power. Crime would also skyrocket.

But what’s the solution? Duncan said there were three ways forward. First would be to balance the budget today, but the result would be America spinning into depression. Second, we could continue on the path we are on now for another five years until reaching a crisis on the level of Greece. Duncan said this was better than option one as “it’s better to die tomorrow than die today”. The third option would be to continue borrowing but to invest heavily in renewable energy and new technology in order to lock in a future of prosperity.

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You can watch the interview ON DEMAND on GBTV!

After Duncan’s interview, Glenn brought on former Reagan economic advisor Art Laffer, who strongly disagreed with what he called Duncan’s “big government solutions”. While Laffer felt like America was in economic trouble, he said that a return to Reagan-era policies would help turn things around. He also said that Romney, who he thinks will win in 2012, would take America in the right direction and it will bring back American prosperity.

“The balance of what Romney will do along with a good Republic Congress will be spectacular and you will have a boom of incredible proportions,” Laffer said. He added that the prosperity could be bigger than what Reagan and Clinton brought America.

Laffer said adopting Paul Ryan’s plan would help balance the budget and bring the debt down over time and increase prosperity.

“It is fixable,” he said. “In ten years you really will have incredible prosperity.”

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  • http://www.artinphoenix.com/gallery/grimm snowleopard (cat folk gallery)

    Understand this much, as Glenn warns, this Nov 6th is the turning point for the future of the nation; and in the case of defeat, I honestly expect Obama and the leftists, along with Reid to push for broke to cripple or set the final collapse in motion for the economy of the nation. A lame duck Congress can push through the Senate or via executive fiat of Obama, any and all UN Treaties that will cripple us and our national sovereignty.

    Understand clearly, this is the alternative to Obama declaring his dictatorship and going for broke in summarily nullifying the elections and trying to remain in power. No matter what, with the narcissist madness of Obama growing, combined with his desperation, he is more and more capable of unleashing anything upon all of us.

    He will rule all or destroy all; there is no inbetween with Obama.

  • http://twitter.com/RosalindWGarret Rosalind W. Garrett

    The balance of what Romney will do along with a good Republic Congress will be spectacular and you will have a boom of incredible proportions,” Laffer said. He added that the prosperity could be bigger than what Reagan and Clinton brought America. http://AlluringWay.blogspot.com

  • Anonymous

    The merchants have already deceived the whole word.  They just haven’t come out to declare they are the gods of the world.  Perhaps they learned from Roman history, it doesn’t go well when you claim “godship”, especially after what Jesus taught.  The pax Romano or Patriot act was only coincidence, it wasn’t to justify taking peoples freedoms/privileges away so we couldn’t go against anything the puppet gov’t does, dictated by the wealthiest illuminated arians, without being labeled a terrorist and carted off to one of many concentration camps outside of major U.S. cities built by KBR, a subsidiary of Haliburton.  Everything is going according to plan    unless Mahatma Ghandi or some other christian realists come out of the woodwork.   

  • landofaahs

    The time is coming soon when it will be time for the Red States to peacefully cut anchor from the blues.  Separation so that we may save a remnant of capitalism and liberty of the individual’s rights.

  • Anonymous

    Oh boy, where does one start?  I guess if you’re interested in this topic then you should probably understand the difference between Keynesian and Austrian economics.  You should also understand what centrally planned means and looks like.  Remember, the magic is in the language/definitions.  For example, all day long you hear people say, “look, Capitalism doesn’t work.  Our economy is a mess.”  Hmmm.  When I look around I see that government and corporations more or less are in some type of incestual dance with each other (please note I’m not a business hater).  A private bank…I mean the Federal Reserve…controls our markets via interest rates and money supply.  Goldman Sachs and the likes are a revolving door that either lead in and out of the Fed or gov’t offices.  Lobbyists…representing big businesses looking for certain advantages… run Washington and own Congressman.  Your money is stolen from you…I mean revenue is generated…to install these beneficial apparatuses to “promote” those business products or even bail them out.  So if you step back, this isn’t “Capitalism”…it’s Fascism.  Mussolini himself said, “Fascism should more properly be called corporatism because it is the merger of state and corporate power.”  Capitalism….where!?!? If you can wrap your head around that one, then you need to also understand what real money is.  I know, everyone loves to go off on how there isn’t enough gold in the world to back the currency, etc.  I get it.  It doesn’t have to actually have a gold backing, but it does need to be backed by something tangible and of value.  A basket would work quite nicely (gold, silver, copper, palladium, oil, natural gas, land…you get it).  Now if the gov’t gets out of control and starts printing money behind closed doors without telling anyone, and I lose confidence in the currency, then I can take my dollars (or whatever we would call them) and trade them in for something of real value.  The beauty about this system is that it is supposed to keep gov’t within its limits and prevent the growth of tyranny.  But wait, this is the system we had, although in tandem with a central bank, when we got off the gold standard in 1971 (thanks Nixon).  So what happened!?!?  Oh yeah, the world who was forced to use our dollars in exchange for oil via the Brenton Woods agreement didn’t really trust that we weren’t printing money to pay for the growing nanny state, Vietnam, etc.  So they started cashing in their dollars for gold.  Our gold stack was being decimated and so poof…we’re no longer going to honor the dollars for gold arrangement.  Now the gov’t was free to deficit spend to their hearts content.  (Please keep in mind for our future system that the key here isn’t so much what backs the currency, but who controls it.  It should belong to the people and not banks…specifically a private bank that promotes central planning.  Google “Founding Fathers Quotes Banks” and you’ll see that they felt very strongly about this.  In fact, real history tells us that the root of the revolution was when King George forced the colonists to quit using their colonial currencies and instead use the Bank of England’s currency.  This resulted in poverty and unemployment.  Taxes, Writs of Assistance Act, etc. were merely the symptoms of a banking cartel controlling the money supply.) THE IMPORTANT PART HERE IS THAT COMING OFF THE GOLD STANDARD IN 1971 WAS THE ADMISSION THAT WE WERE NO LONGER SOLVENT.  THAT WAS THE DAY WE TECHNICALLY ADMITTED BANKRUPTCY.  WHEN PEOPLE LOOK BACK AT THE 80’S AND THE RECOVERY UNDER THE REGAN ADMINISTRATION, THAT WAS SHORTLY AFTER COMING OFF THE GOLD STANDARD.  THIS IS NOT THE SAME SITUATION THAT MANY LEAD YOU TO BELIEVE.  THIS TIME IS DIFFERENT. Now to the good stuff.  Richard Duncan comes on to Glenn’s show last night and lays out a few scenarios that he sees as our only possibilities of which I understand and see his points.  If one understands that our system is a credit based system (Glenn should understand what this means as he uses the term Ponzi Scheme all the time but I don’t think he really gets it’s analogous meaning or understands the macro picture fully), then you know that the system MUST have constantly expanding credit to prop it up.  If you don’t, then to save the current paradigm you need to “inject liquidity”, lower rates, etc. to “juice” the economy so people will borrow or gov’t will simply borrow for you, spend/give it away as they chose, but all the while signing your name on the IOU.  If you understand this dynamic, then you must agree that the government can’t pay down the deficit as politicians or talking robots love to spew from the mouth.  You can’t do it because the “Ponzi Scheme” collapses on itself when the gov’t stops taking out new loans.  Therefore, Richard Duncan’s point about a resulting Death Spiral in this scenario, would in fact lead to a Depression situation and/or worse.  The system would break down.  So his points last night were that we have a few options, none of which are good.  1 & 2 were basically kick the can trying to stave off the collapse for as long as possible and just “live for today” type of thing, or #3 which is a Hail Mary.  I don’t agree with this at all, but I understand what he is getting at.  Beck is looking at this from a “Liberty vs Tyranny” type thing…free markets, capitalism, small gov’t…etc.  I’m a Right Libertarian so trust me I get it.  But this guy is saying it doesn’t matter how you look at it, the system is done.  So do you want to exacerbate the problem by doing the same old and hope a miracle occurs, or do you want to throw a Hail Mary…cause either way it’s over.   So why is it over?  Because we aren’t our grandparents or those who came before them.  We are a weak, apathetic, ignorant, selfish, lazy, dependent society these days (generally speaking but most likely the majority of present company is excluded).  Everything we do is dependent on squeezing pennies just to make a profit.  This is why we have “Lean” supply chains and manufacturing plants.  Given a controlled and stable system, they make perfect sense!  But given a major disruption, you have big problems.  Everything we do is dependent on computers, cheap gas, medicines…you get the point.  And how did our current system explode to where it is today!?!?  That’s right my friends…CREDIT.  I’m not saying that we didn’t make big advancements before 1971, but I am saying that society’s developments really took off not long after in the 80’s.  And yes, there are a bunch of other factors you could point out, but this rant is already too long.  The point being that the current system of credit and Fascism has us free falling from a very high cliff and there is no parachute.  Eventually we’ll splat so the question is what do we do with our final seconds before impact? As for Mr. Art Laffer…(very long / very loud sigh).  Yeah, Mr. Laffer was an “Economic Advisor” to Regan and Regan is a hero to many.  Regan and Volker raise interest rates to suck the excess money back in and saved the day from the inflation that started to get out of control during the Carter years.  Please remember that inflation is the increase in the money supply and rising prices are only the symptom.  Hmmm…so we had rising prices in the later 70’s and early 80’s.  Didn’t we come off the gold standard in 71 which was the beginning of our current day debt expansion?  I know everyone loves to hate on Carter, and I agree he was a horrid president, but he didn’t cause the big inflation problem, he only helped it along.  The inflation stemmed from the sudden increase in the money supply which was possible when we removed the dollar from the gold backing.  Now, we have this emotional attachment with Laffer to Regan which gives many a warm and fuzzy, but please remember he’s an economist.  And we all know that most economists don’t have a clue because very few saw what was coming before 2008 and many are still preaching that sunny days are or will be here again soon.  But for those of you who are interested in understanding him better, learning the truth, and removing the positive emotional attachment with his name, then please go to Youtube and search “Peter Schiff Was Right”, or just click here…http://www.youtube.com/watch?v=2I0QN-FYkpwThe Laffer and Schiff debate is first (in the video on this link).  Schiff talks about the fundamentals based on Austrian theory and talks common sense.  But then Laffer comes in with his same smug arrogant self like he did on Glenn’s show last night.  In fact, he even makes another bet like he did in this clip when Schiff is warning about the housing bubble and that the fictitious wealth that people THINK they have in their homes and how it will evaporate.  Laffer responds by saying, “You’re just way off base.  There’s nothing out there that tells us…we’re going to have a nice slowdown, but it’s not going to be a crash.”  This my friends shows that Laffer doesn’t have an Austrian understanding of a REAL and FREE market.  His theory lives in the world of central planning.  Although he made fun and mocked Richard Duncan last night, he doesn’t have a grasp of reality or anything that lives outside of the Keynesian economic box we live in today.  He thinks that a few tweaks will bring back the glory days.  In fact, he even said last night when talking about a Romney win, “You will have a boom of incredible proportions” and that Duncan doesn’t understand Economics 1…I think he meant 101 but I digress.   My point in all of this is that I believe in Austrian theory.  I hope one day to see a true free market that includes a currency backed by items of value as the means of exchange and that currency is controlled by the people.  I believe in the American culture that once was and I think the hard days ahead could reignite that.  I’m actually optimistic about our future, but distant future, not the next 10 to 20 years.  But Laffer is the one who doesn’t get it.  He was completely off during the housing bubble and he’s completely off now.  I agree and don’t like the government effort required in Duncan’s third option, but I don’t think he was saying big government is the correct fundamental situation for an economy.  He’s simply saying the ship is going down regardless, so do we take advantage of the flaws so we can MAYBE be a step ahead after it goes under, or do we just listen to the band play while we try to maintain the illusion of saving the ship by rearranging the deck chairs? 

  • Anonymous

    Wow. That Richard Duncan was great, right up until the end.  I can’t understand how such intelligent men want to continue with more of the same. He seems to understand the problem. But says the answer is more Solyndra’s? I I just don’t get it?