Scott Horton Interviews Charles Goyette

Scott Horton, February 13, 2010

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Charles Goyette, former co-contributor to Antiwar Radio and author of The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments, discusses the FED’s attempt to prevent inflation after creating trillions in new money, our dim future of resource scarcity and martial law, the hyperinflation tipping-point ratio of deficit to national budget reached by the US, the looming reality of US sovereign debt default and the delusion of US fiscal solvency that exists only in the minds of Americans.

MP3 here. (34:06)

Charles Goyette is an award winning morning drive-time radio host from Phoenix, AZ. He is a libertarian commentator, who is noted for his outspoken anti-war views, his opposition to the war in Iraq, and his economic commentary. He is the author of the book The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments.

21 Responses to “Charles Goyette”

  1. Sorry. I'll take Michael Hudson over Mr. Goyette anytime. "Free Markets" that Mr. Goyette recommends are how we got into this mess–predatory capitalism has run amok. "Free Markets" meant the corporations could buy the government. Guess Mr. Goyette went to one of the schools Michael Hudson describes in this talk, where they do not teach classic economics. http://kpfa.org/archive/id/58530

  2. So Linda, what you are saying is that violence is the only solution? Sorry, can't have your cake and eat it too. Regulation/the government/incorporation = a gun.

  3. The good news: when the dollar tanks, the troops will come home. Worthless money means an end to the empire. Too bad we have to destroy our economy and impoverish our country to do it.

  4. This was one of the best interviews ever. Hey all you gray hairs out there (that includes me by the way), do you want to make sure you'll be able to keep on receiving your social security check and your medicare benefits? Then you had better call your congressman and your senator and demand that they end the wars and cut military spending by 80% effective immediately.

  5. Steve, you are 100% correct! What really worrys me is this; since the government's money will be worthless and they won't be able to pay the troops to keep them in line, what are all of those combat-hardened, starving troops going to do? Brace yourself and be prepared. Next stop: the revolution zone.

  6. "the debts are real"

    I disagree with Charles on this point. The "debts" are marks on pieces of paper. That's all.

  7. Aren't "free markets" enforced with cops and judges who prosecute theft, fraud etc.?

  8. Well, the Chinese see those "marks on pieces of paper" as claims to something. If we ever decide or it becomes obvious those claims can't be realized, I see know reason why they would keep the dollar propped up as a peg for their currecy by continuing to buy treasuries. Then we get to see how much fun that turns out to be. :)

  9. So, that's the opinion from the economic standpoint.
    In my view, investments won't mean doodley-squat, because our nation will fold and take the rest of the world with it. Only those with nothing to lose will come out relatively intact. It'll begin in the big cities when those there realize there's no more food, gasoline, and services, leaving the cities smoking ruins, then move to the suburbs, where people will protect what they have with GUNS.
    It'll be all for naught, as even the ultra-rich, deprived of ordinary citizens to rob will eventually succumb.
    Our stupidity and failure to deal with overpopulation, resource depletion, and worldwide pollution will do most of us in.
    Let's face it; we're running out of time to prevent this, and too goddam stupid and indifferent to do what's right.

  10. I guess there are only two ways to act when a ship threatens to run on a cliff. One is to sharply change course in time, remain on deck and hope for the best, the other is not convincing yourself and others the rocks will obediently recede eventually.

  11. excellent interview! Charles Goyette is witty and insightful.

  12. Goyette glosses over Bernanke's proposal to avoid inflationary credit by paying interest on deposits at the Fed. Bernanke gets the money to pay interest from the same place he got the money to expand the money supply. He creates it.

    When the Fed wants bankers to extend less credit, it pays them not to extend the credit. When it wants bankers to extend more credit to employ idle resources (as it does now), it pays less interest on deposits, thus requiring banks either to find profitable lending opportunities in the market or to shrink themselves.

    Like Goyette, I prefer a decentralized monetary system, and I can bicker with Bernanke's policy, but why doesn't it address the fears of inflation? We must address this question rather than avoiding it.

  13. Social comments and analytics for this post…

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  14. I agree with Benjamin to some extent. The Chinese economy is still much less developed than the U.S. economy. It can produce much that we want regardless, because it has over four times as much labor, but its per capita GDP is still only 15% of the U.S. figure on a PPP basis and only 8% on a nominal basis. Official GDP figures are suspect, but they aren't off by an order of magnitude.

    Chinese agriculture is far less productive than U.S. agriculture, China has more than four times as many mouths to feed, and thanks to the one-child policy, China's population is aging much faster. China's labor force stops growing in this decade. She can continue growing by moving labor for agriculture to other industry, but more of her people will support a burgeoning elderly population as well.

    For these reasons, China has good reason to invest in the U.S. What it wants from the U.S. in the future is food. The U.S. can increase its agricultural output of food far more easily than China. Unfortunately, China "invests" largely in entitlement to U.S. tax revenue (Treasury securities) and other entitlement to rents (like the mortgage backed securities we're converting into claims on taxpayers). The U.S. encourages this practice by selling the entitlement to tax revenue. That's the real problem of course, not the trade imbalances per se.

    Ultimately, China's yield on dollar investments is limited by real growth in the U.S. economy. If the U.S. didn't sell them entitlement to tax revenue, they'd invest in real assets and they'd stand to lose by overextending credit. By investing in Treasury securities instead, they stand to lose through inflation instead, but inflation doesn't imply hyperinflation. Seventies-style inflation is bad enough. Why expect hyperinflation? Where are the signs of it? Those are questions. I'd like answers.

    So the debts aren't "real". They're nominal. The U.S. will repay the debts in inflated dollars to one extent or another. China really wants to use its influence, as a capitalist investing in the U.S., to move U.S. production toward more agricultural exports. By limiting Chinese ownership of real U.S. capital and selling entitlement to U.S. tax revenue instead, the U.S. government avoids this reorganization. That's my theory anyway.

  15. I also follow Hudson, and I'm not sure you understand him. I'm not sure i understand him either. He sometimes seems to advocate a central authority taxing "useless" profits and spending the tax revenue. If he does, he doesn't advocate classical economics, but I'm not sure he really does. When he does Guns and Butter, he's addressing an audience predisposed to expect this advocacy, but he could be more classically inclined than he seems in this context.

    Profits are not useless. They're signals of added value. If I pay $X for the inputs to some productive process and I sell the outputs for $X + $P, I've added $P to the value of the unprocessed resources. That's a good thing, right? The higher the value of P, the more of this productive process we want. Taxing profits robs profitable producers of their entitlement to reinvest the profits in more, similar productive processes. Why would we want that? Profit attracts more production, expands supply and lowers prices.

    Classical economists distinguished profits from rents. Rents are the value of forcible impositions, including rents on the forcible monopolization of parcels of land by landlords. The market value of rents indicates the scarcity of the resources monopolized. This scarcity value can also play a useful role in capital allocation, but a high value of some monopolized resource doesn't imply that enforcing the monopolies is useful. We can discuss dubious monopolies like patents, but I won't belabor the point here.

    Rather than a central authority taxing profits and spending the revenue, classical economists like Adam Smith advocated something like a progressive consumption tax. The reform I favor entitles individuals to Individual Investment Accounts (IIAs). Like an IRA, contributions to an IIA are tax deferred. Unlike an IRA, contributions to an IIA are unlimited. Bill Gates may contribute a billion dollars to his IIA in a year and pay no tax on the billion; however, he may not personally consume the value of this contribution. He may only reinvest it.

    With the addition of IIAs, I favor more steeply progressive income tax rates, even rates approaching 100%, like the rates we had in the fifties. The steeply progressive rates apply only to consumption, so Gates pays a very heavy tax, say 95%, if he wants to spend a billion bucks in a year building himself a vacation home on the moon or a pyramid for his burial or a vast castle for his personal residence, but he pays no tax at all to reinvest the same billion in a productive organization employing resources and producing goods for others to consume. seeking profits.

    An IIA is not an IRA, because with steeply progressive consumption tax rates, very wealthy individuals like Gates can accumulate account balances that they may never consume. They may invest the resources, but they may never consume them. In this way, a progressive consumption tax creates decentralized authorities entitled to organize resources on a large scale without creating lords entitled to vast personal consumption.

  16. It is in best interest of the US to maximize Chinese dependence upon US agricultural products. This gives us at least a little leverage and some jobs. About all we can do now is threaten to default Us securities or (the equivalent ) grossly inflate the dollar. for obvious reasons, neither of these is very palatable.

  17. Wow you think that the free market is what got us into this mess? What free market would that be? I mean the state regulates literally everything. Furthermore how can we have free markets when we have a central bank that prints money ex-nihlo and artifically sets the interest rates, thereby creating the bubbles and business cycles?

  18. Why is it that you cannot see, even for one half of a second, that BOTH capitalism and socialism have good ideas, that BOTH have been betrayed by the 'modern' economies which seek to create a monster – could call it monopoly capitalism – out of the worst aspects of both? WHY IS THIS SO IMPOSSIBLE FOR YOU TO SEE?

  19. I don't see how political ideologies can be "betrayed" by modern economies if it not simply means that those ideologies don't work as a viable system. I don't think there is any way to demagnetize either money or power or to decouple them. They are an inherent part of the human condition and whatever replaces them will take over their role irrespective of any conceivable political ideology irrespective of how good or bad it works on paper, iow Utopia banished.

  20. Yes, the troops coming home without jobs is a huge problem. I don't think our local law enforcement will hold out very long.

  21. Great interview Scott! I got to have a little exchange with the VP of the Boston Fed, wherein I asked him directly who would buy up all the trash mortgage paper they've accumulated. Needless to say, he had no answer for me, but assured me it wouldn't be a problem… Poor guy, he thought he was gonna come and indoctrinate all the drone Econ students; he clearly wasn't expecting a group of YAL'ers who've been educating themselves on the Fed…

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