RW: What do you think of the prospects for the US economy after the re-election of Obama?
BM: I dont think the election has anything to do with anything. I think the 800-pound gorilla in the room is the debt situation, and certainly the US is one of the worst. Were an economy powered by debt, and its a fractional reserve system, so theres always more debt than money. Sooner or later you have to pay the piper. This concept that you can somehow spend your way to prosperity is like trying to drink yourself sober.
RW: But thats the course the US has been on at least since 2007, and there seems to be no end in sight.
BM: Absolutely correct. How can we have a recovery with a real debt of $7 trillion dollars? I mean its going to blow sky high. Im not saying this as doom and gloom or anything else. The real deficit of the US is $7 trillion a year in an economy of $14 trillion. Thats not sustainable.
RW: The Keynesians, who dominate economics, say that debt isnt a problem because sovereign governments such as the United States can simply print as much money and buy as much of their own money as they choose. And then one day, for reasons that have never been explained to me properly, the economy is going to come roaring back.
BM: Thats one of those theories. Its like the theory of Communism. It really sounds wonderful, but I think that everybody would agree by now that Communism failed, and its a bad philosophy. I dont think there are that many serious people who believe that Keynesian economics works. I know the people in government do, but these guys are out of touch with reality. You can look at what is going on in Europe; they just came out with a report in Greece of 58% unemployment among the young people. That is an accident waiting to happen.
RW: Since the dot.com bust and the decision by the Fed then not to allow what should have been a recession, we have had over a decade of this kind of economics, and the portents become darker and darker. Yet there seems to be no alternative on the horizon. Doesnt this surprise you?
BM: It surprises me only in its duration. I believe to this day and Ill never change my mind on this that we should have let the economy go into a depression in September/October of 2008. We should have let the banks collapse.
Let me give you an analogy. I just came back from Albania a week ago. I thought of Albania as some Third World shithole, that Im going to be in a $20-a-room hotel, and theyll be driving around in rickshaws. I was really amazed that its a booming economy. Those guys are absolutely going gangbusters. Now, in 1997, their economy literally was a lottery, a Ponzi scheme, and it blew up. So every bad thing that could happen to an economy since 1945 happened to the Albanians, and theyre growing like crazy now.
November 22, 2012
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