August 15, 1971: The Day We Wanted a Life We Couldn't Afford

Chris Martenson with joined The Glenn Beck Program today to talk about the federal reserve raising interest rates and its primary concern: its own credibility.

"Everybody I talked to says, Look, I like falling prices. That's not what the fed is targeting when it's worried about deflation. They have a different thing they're worried about, where prices rising or falling is the symptom, but the cause is what they're concerned about. And the cause is either our credit markets are expanding, or they're contracting," Martenson said.

To put the problem into context, Martenson quoted Austrian economist Ludwig von Mises:

There's no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved.

"These things have all been building for a really long time, Glenn. And I think if we had to, if we wanted to put our finger on something, we would say August 15th, 1971, when the United States abandoned the gold standard for the world, that's really where all of this started. And these imbalances are enormous now," Martenson said.

For fundamentals on the dangers of manipulating credit markets and currencies, read Martenson article, Money Under Fire: A Reminder of the Great Wealth Transfer Underway.

Listen to this segment from The Glenn Beck Program:

Below is a rush transcript of this segment, it might contain errors:

GLENN: Well, as I'm reading the news, China is being negotiated. I mean, I want to put the good spin on this. Donald Trump is obviously negotiating with China. And China has responded saying it's -- the One-China policy will not be a part of any negotiation. And if you want to threaten us with that, all negotiations and future partnership will be over. They're taking a hard-lined stand, and so is Donald Trump. It's kind of a white knuckle kind of thing, quite honestly.

Russia is now our new best friend, and the Russian ruble is going through the roof. Oil is starting to go up. And this week, we are expecting the fed to raise interest rates. And Christmas Martenson is here. He is with He is a guy who I think really understands the economy and understands the history of the currency war and the gold standard and trade and can kind of help explain -- because I think we're going to need a real basis of -- of history and knowledge to be able to talk our friends down from crazy tree in the coming months and years.

Chris, welcome to the program. How are you?

CHRIS: Glenn, I'm doing really well. It's a real pleasure to be back with you and all your listeners.

GLENN: So tell me, Chris, what you're thinking the fed will do this week and how it's going to affect us.

CHRIS: Well, they're going to have to raise rates because they're behind the curve here. The fed cares about their credibility, as much as everything. Remember, we have a lot of academics sort of at the helm of the fed. And, of course, to them, credibility is like the most important thing to preserve.

So they have to raise. And it's a very weird environment to be raising rates in. It's certainly created a lot of boost to the dollar. The dollar strengthened a lot lately. But we're seeing a lot of strengthening in the price of oil as well. And a lot of signs, Glenn, of weakening in the overall global economy. The stock market, notwithstanding. The trade data is looking iffy.

GLENN: Okay. So if the dollar -- if we raise the interest rates, that will boost the dollar. And if we boost the dollar, that actually hurts the job front at home and hurts prices at home. Right?

CHRIS: Yes. Except for the prices at home. Typically if the dollar is stronger, we'd be able to buy the BMWs cheaper.

GLENN: Okay.

CHRIS: But a rising dollar is not good for corporate profits in the United States. A little over 40 percent of all revenues from US companies are derived not in the United States. From overseas. So --

GLENN: And it makes -- it makes it harder for other countries to buy our products because our dollar is stronger. And them coming over here and buying our products is, it's more expensive.

CHRIS: Right. So typically what happens when your currency gets stronger, your trade, your exports go down, and your imports start to go up. Because you can afford more from other people. They can afford less of your stuff. That is the substance of the charge that Donald Trump has put against China, that they're a currency manipulator, by which he means they're keeping their currency much weaker than it should be because if the Chinese currency strengthened, then their exports would slow down. Their imports would rise. That would help to balance things.

STU: Right.

CHRIS: So that's his charge there.

GLENN: And it would be good if we didn't have an imbalance and everything else, you know, what it cost to employ people in America. If we could even get close on that level with China, which we could never -- they employ slaves -- but it's good for the person that's walking into Walmart and buying their stuff for the Chinese dollar to be -- or the Chinese yuan to be low and have them devalue. But it's really bad on jobs because they're not buying any of our stuff.

CHRIS: Very little of it.

GLENN: So it's a -- so it's a balance. What I'm trying to get to is, trade and the devaluing or the raising of interest rates especially in an economy as fragile as ours is, is really a very nuanced and delicate dance. And you play it wrong, and the thing spirals out of control.

CHRIS: Well, and that's exactly right. And this should be termed I think as much as anything, the age of imbalances.

So we're talking about an imbalance of trade between China and the United States, but there are similar imbalances that exist within the Eurozone with Italy needing a lot more money than it's got and Germany sort of providing it. And then, air quotes here, balancing it out by creating these massive imbalances in their central banking system inside the country.

These things have all been building for a really long time, Glenn. And I think if we had to, if we wanted to put our finger on something, we would say August 15th, 1971, when the United States abandoned the gold standard for the world, that's really where all of this started. And these imbalances are enormous now.

GLENN: Well, that's when we all started we wanted a life we couldn't afford.

So the United States did that. But we convinced the rest of the world that we'll continue to buy your stuff. So it will be good for you. But we all said -- all of us -- we want more stuff than we can afford if we base our dollar or our currencies on gold. Is that accurate?

CHRIS: It is. Because gold provides a set of restraints that you just can't get around. And if you can't get around those restraints, well, sometimes you get to live beyond your means. But very soon thereafter, you have to live below your means. The world collectively kind of said, "We don't like that below our means part. How can we just forever live above our means?" That's how these imbalances got started. And it's a very human thing, Glenn. We've seen this so many times in history. And here we are again.

GLENN: So we are worried now, if the fed raises their interest rates, that would indicate that they are worried more about inflation than deflation. And deflation is -- is bad. Because everything is -- is worthless. And becomes so cheap, you would think that this is really good. But I'm trying to figure out why it is really bad. And it is. Why is deflation something that they're trying to stay away from, at the fed?

CHRIS: Well, this is a more subtle argument because the way that it's presented to us in the newspapers is that inflation is rising prices and deflation is falling prices. And I can't find anybody who -- well, what's wrong with falling prices? I love buying stuff cheaper. Right?

GLENN: Unless you're selling your house.

CHRIS: Well, unless you're selling your house. Of course.

GLENN: Yeah.

CHRIS: But generally speaking, if you're buying a house, you would prefer to buy one that's cheaper rather than more expensive.

GLENN: Yes, yes.

CHRIS: So everybody I talked to says, "Look, I like falling prices." That's not what the fed is targeting when it's worried about deflation. They have a different thing they're worried about, where prices rising or falling is the symptom, but the cause is what they're concerned about. And the cause is either our credit markets are expanding, or they're contracting.

When they're expanding, which gives us inflation, everything kind of works. You know, governments can continue to run deficits and big banks can do crazy dumb things. And it all seems to work out the opposite though, Glenn, when credit is falling. That's also known as 2009 in the United States. It is deeply scary. What works in forward doesn't work at all in reverse. The whole system shudders and threatens to collapse. It's a really scary moment. So we have a system that either expands --

GLENN: Wait. Wait. Wait. Is that because what I have as collateral is no longer worth as much so I can't get credit, or why is that?

CHRIS: Well, let's take a simple example. We just have a bank, you and I, and all we're doing is making real estate loans. And, you know, we're taking in one dollar and basically loaning nine more dollars back out because that's how our symptom operates. And we loan those $9 out to somebody who's bought a house. And if that house goes up in value, that person will be able to sell their house, service that mortgage before they do, and maybe buy a bigger house, and we'll loan them nine more dollars. Expanding is easy. But as soon as that person can't sell that house for what we've loaned the money them to, then lest all they have to lose is one dollar out of that nine that we loan them, and our entire capital stock of our business, our bank, is now wiped out.

So you can't have even tiny, tiny contractions in the credit system without really impairing and sometimes destroying the banking system itself. And that's what the fed cares about. Because let's remember, the federal reserve is not really federal. It's a private entity. It's got a charter from the US government. And it operates a very nice monopoly. But its first set of clients always is the banks. So if the banking system is happy and expanding, the fed is happy.

GLENN: Okay. So they're not worried about deflation. They're worried about the bank. But by doing what they've done, they are throwing caution to the wind by printing 7 trillion dollars' worth of currency. Never been done before in the history of the world. And expecting that hyperinflation won't happen. How can we have printed that much money and not had the problem of the Weimar Republic? What's the difference?

CHRIS: The difference is that today we have these really so-called robust financial markets. So I was just at a wealth conference on Monday of last weekend. That question was asked: Hey, where is this inflation? Well, it's in the financial markets. We see highly, highly inflated stock and bond markets. We see inflated real estate markets, especially on the top end.

Now, Glenn, who got that money when the fed printed all those trillions? Well, it kind of went to the upper .1 percent. So guess what, buying a Gulfstream 650 is a very expensive proposition. High-end art, very large diamonds, these all went up extraordinarily in price. So we have seen the beginnings of inflation. It just didn't show up in eggs and milk this time because the fed didn't print and give it to people. They printed and gave it to a financial system.

GLENN: So is that a savior for us?

CHRIS: Well, it's -- I think it's provided temporary appearance of relief. But when those rich people, when those concentrations of money decide, "I don't want another Gulfstream 650, I'm worried about the value of the currency," all of that currency rushes through what are very tiny little doors trying to get into real stuff again and away from paper stuff.

GLENN: And that's why real estate -- that's why art -- I mean, I've looked at the art -- we just sold I think one of the most expensive paintings I think ever. Again, was like $85 million for one piece of art. And I explained that as the people at the very top have so much money, they don't know what to do with it. They know that everything is overvalued. But it's like looking at a -- looking at a -- at a -- at a bill at a very nice restaurant that didn't have any prices on the -- on the menu. And you're looking at the bill, and you're thinking, "How the hell did we get here?" Well, I've got to make the broccoli now $35 a head because I've already priced the meat so far out, that the broccoli is looking like a deal. So the art is looking like a deal, even at $85 million, compared to where everything else is priced. Is that accurate, do you think?

CHRIS: It is. It's what happens when too much money is printed and put into a market. Things get crazy priced. And we saw that for tulips in the 1600s in Holland. And we've seen it with pieces of swampland in Florida. We've seen it over and over again. And the bubbles always have the same self-reinforcing mental map on the way up. It makes sense.

People go, "Well, the last guy paid 79 million. I paid 85. Somebody surely is going to pay me 100 million for this piece of art." That's all self-reinforcing on the way up, and we don't know why. But eventually, there's a pin that that bubble finds. And when it bursts, then you discover what the true value of things is, and things go down very quickly at that point.

GLENN: Chris, you talk to people in your business -- and I have -- this is the reason you work for me on these things now because I couldn't find somebody like you.

Everybody in your business will say, "It's -- no, we have systems now, and it's not going to be that way. And you don't to have worry about those things." No one will tell you what you're saying to me, that this is going to burst and it's going to be you will.

CHRIS: Well, you know, if it's not going to burst, we have to believe in the four most dangerous words in human investing history, which is, "This time it's different."

GLENN: It's different.

CHRIS: It's not different. It's never different. I'm seeing the exact same psychology. Rationalizations. Post-facto rationalizations that people make. "Oh, here's why that -- here's why we had this Trump rally." You know.

To me, it's much easier to understand where we are if you see that we've got a very scared set of central planners. They've worked themselves into a multi-decade corner. They don't know what to do. So they print.

And you can find this story in Roman times. You can find it in the first --

GLENN: Every time.

CHRIS: -- paper money in China. You can find it all throughout history. And it boils down through this, Glenn, it's very simple, humans would rather take a little risk today, instead of some pain today, in the hopes that things turn out better in the future. But we always go down the same path.

GLENN: Real quick, I only have 30 seconds: Are we going to see a hyperinflation situation like the Weimar Republic? Do you think we're going to see that? If so, are we going to see it in the next four years?

CHRIS: We're going to see it at some point. It could come at any time. It will happen at some point. And I think that the best quote on this comes from Ludwig von Mises. He's an Austrian economist. And he said, "There's no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved."

GLENN: Chris, thank you very much. And Chris explains all of this and can help you through it and everything else. Chris Martenson, thank you for being on. And we'll have Chris in the studio with us hopefully several times next year to kind of really lay things out. Because I -- I want to show you what's coming and show you how the whole system works. And Chris is going to be instrumental in that.

Featured Image: Fine standard 400 oz gold bars. Photo Credit: Andrzej Barabasz (Chepry)

Would Glenn make a better bounty hunter or a Jedi? You'll have to find out in a new episode of the Beltway Banthas Podcast, where Glenn goes deep on Star Wars with host Stephen Kent. In this 45 minute discussion, Stephen and Glenn explore the political themes of the Star Wars franchise, Darth Vader's redemption from Return of the Jedi, Glenn's earliest memories of seeing the films and even debate elements of the latest Star Wars films.

If you enjoy the pop culture and nerdy discussions that Glenn, Pat and Stu get into on the radio show, you'll love this! After you're through, you can also check out Stu Burguiere's appearance on Beltway Banthas to talk Star Wars. You can find that here.

It's never too early to start your Christmas, Hanukah, or Kwanzaa shopping. Or even birthday gift shopping. Especially if that special someone in your life is a Democrat. Because at last count, pretty much all the Democrats are now running for president. And that means there has never been a wider selection of official candidate merchandise to choose from. Whether you're into environmentalism, feminism, classism, socialism, or just plain love, there is a smorgasbord of classy items that you and yours will treasure forever... or at least until the next presidential election.

We have browsed each of the candidates' online stores, so you don't have to (it only took us three months). We have curated only the finest items from each of the Democrats running for president of the United States of America. Without further ado, here is your handy progressive gift guide – or maybe your what-not-to-gift guide.

First, the bargain basement options. Hurry! Time is running out to grab your Beto bandana, or your Delaney pack of golf balls, because at this point Stu has as much of a chance as these guys of getting the nomination.

Tom Steyer, for example – is he still in the race?

There's way too much Tom here. That shirt's got more Toms than a Caucasian dentists' convention.

For the slightly more moderate Democrat in your life, perhaps they'd like to join the "Yang Gang"…

Andrew Yang is a lock for Math Club president…

But for actual president? Well, I wouldn't make plans for how you're going to spend your $1,000-per-month Yang allowance just yet.

If you happen to be shopping for your dog, may I suggest this lovely "Dogs for Delaney" dog collar…

John Delaney's definitely going to secure the canine vote with this kind of outreach. As for any human votes, that's another question entirely.

How 'bout this tastefully understated "Natural Canvas" Michael Bennet tote to remind you he's also still here?...

Then again, it's a tote. So, it'll end up on the floor of your closet and you won't have it with you until that one random moment when you're out somewhere and you really need a tote bag. Just like Democrats will really wish they had a moderate when we're in the middle of the socialist nightmare of their creation.

Captain Planet himself, Jay Inslee recently dropped out of the race, but don't let that stop you from picking up what may be the greatest single item sold by anyone in this race…

A children's book called Elvis & the Elves: the Mystery of the Melting Snow. Written and illustrated by Governor Jay Inslee. Talk about a whodunnit – how could that snow possibly be melting? Spoiler alert: it's because of evil, white, patriarchal capitalism. And Donald Trump.

Then there's the candidate who thinks you're a moron that can't pronounce his last name: Steve Bullock...

Get it? Bull. Lock. Oh, so that's how you say the name that sounds exactly how it's spelled.

There's another candidate who also thinks you need help pronouncing his last name…

And he is definitely right about that. So, thank you, Pete "Boot Edge Edge." That helps.

Just outside the bargain bin section, but just barely, are candidates like Julian Castro and his "El Presidente" t-shirt…

When your last name's Castro, do you really want to go with a weird drawing of yourself as if you're a classic Latin American dictator on a postage stamp?

If you prefer a little "dark psychic forces" battling in your candidates, you'll love Marianne Williamson's "Turn Love Into a Political Force" rally sign…

"Turn Love Into a Political Force" would be an even better title for a Marianne Williamson album of 80s cover songs. And if you think I'm joking, then you haven't heard Bernie Sanders' classic 1987 folk album, We Shall Overcome. That's not a joke. Well, it is a joke, but it's also a very real thing.

Now, just a quick pause to consider the peculiar baby-wear that way too many candidates are selling…

…including Elizabeth Warren's trans-pride flag onesie. Let me get this straight – we can't force any gender on a child, because that's just cruel. But we can force a political advertisement on a baby? How do we know that baby is actually a Biden or Warren fan? The child may not even be a Democrat or a Socialist at all. That baby might self-identify as a Libertarian, or Republican, or even worse – a moderate Democrat.

Now to the premium items from the premium candidates. Elizabeth Warren – the candidate with the most honesty in her advertising…


Warren's merchandise reflects the woman herself – cold and humorless (watch her "This isn't funny" clip from the last debate here at the 4:27 mark). I'm sure she's really fun once you get to know her. Then again, maybe not.

Speaking of serious women, Kamala Harris wants to be president very badly for you, the people, as you can tell from her "For the People" poster…

At $29.99 though, she's sure not charging "people's" prices. Of course, she might be having to pay royalties to a certain someone for riffing on their poster. Just saying.

For the race's number one socialist, there's a whole lot of capitalism going on in Bernie Sanders' campaign. He sells so many delightful items that it's hard to choose. But we did anyway. The most random item is this hundred-dollar, black, "Art of a Political Revolution – Artists for Bernie Sanders Coaches Jacket"…

Coaches across the land will be clamoring for this one. You know, since coaches are such a strong Bernie-socialist demographic.

If that's a little over your budget you might consider a "Feel the Bern" fanny pack, to help store all those government freebies you'll get from Bernie…

This is the only context in which you'll ever want to hear "feel the burn" and "fanny" in the same sentence.

And finally, from front-runner Joe Biden, we have this fine "Women's Fitted Biden Polo." Which is just about the best polo description ever…

It promises the kind of snug approach that Biden loves to provide women. Even when they don't ask.

This was one of the first homesteads in the area in the 1880's and was just begging to be brought back to its original glory — with a touch of modern. When we first purchased the property, it was full of old stuff without any running water, central heat or AC, so needless to say, we had a huge project ahead of us. It took some vision and a whole lot of trust, but the mess we started with seven years ago is now a place we hope the original owners would be proud of.

To restore something like this is really does take a village. It doesn't take much money to make it cozy inside, if like me you are willing to take time and gather things here and there from thrift shops and little antique shops in the middle of nowhere.

But finding the right craftsman is a different story.

Matt Jensen and his assistant Rob did this entire job from sketches I made. Because he built this in his off hours it took just over a year, but so worth the wait. It wasn't easy as it was 18"out of square. He had to build around that as the entire thing we felt would collapse. Matt just reinforced the structure and we love its imperfections.

Here are a few pictures of the process and the transformation from where we started to where we are now:

​How it was

It doesn't look like much yet, but just you wait and see!

By request a photo tour of the restored cabin. I start doing the interior design in earnest tomorrow after the show, but all of the construction guys are now done. So I mopped the floors, washed the sheets, some friends helped by washing the windows. And now the unofficial / official tour.

The Property

The views are absolutely stunning and completely peaceful.