The Bob Zadek Show

Sebastian Edwards on a forgotten episode in U.S. history

The United States Treasury Bill — an IOU issued by the federal government — has long been considered a risk-free investment. It may not offer a high return these days but at least you’re sure to get your money back, they say. After all, the U.S. has never defaulted on its debt in its 240-year history.

In studying the 16-year long saga of Argentina’s default (which began in 2001), UCLA economics professor Sebastian Edwards frequently heard this view expressed, only to discover that it was not true.

His new book, American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold (Princeton University Press, 2018) documents a forgotten episode in which the U.S. technically defaulted on its debts in the form of President Roosevelt’s 1934 devaluation of the dollar.

Most economists agree that the Great Depression was worsened by the collapse in prices — especially commodity prices — which made it impossible for farmers and others to earn a reasonable living or pay back their loans. The sudden rush by the public to hoard gold depleted the financial system of the backing for money, leading to a rapid deflation that crushed borrowers beneath burdensome debts.

One solution, widely acknowledged since Milton Friedman and Anna Schwarz’s Monetary History of the United States, is to create inflation by printing money and devaluing the dollar. However, lending contracts in the 1930s period frequently contained a clause that required debts to be paid back in gold or gold-equivalent. This meant that any devaluation attempt would correspond to even higher dollar payments, sinking debtors even further into debt.

FDR improvised, and on the urging of a heterodox economist named George Warren doubled the price of an ounce of gold with the stroke of a pen, while simultaneously abrogating the gold-backing clauses that would have otherwise thwarted his plan.

Buy the book: American Default: The Untold Story of FDR, the Supreme Court, and the Battle over Gold. Princeton University Press, 2018, Sebastian Edwards

Oddly, Friedman and Schwarz largely neglected this vital chapter of the Great Depression. The first book-length study of the dollar devaluation, American Default splits its focus between the economics and the legal challenges of FDR’s devaluation. 68 pages are dedicated the Supreme Court decision — frequently read in law schools — that upheld FDR’s move as constitutional, since the U.S. still technically paid back its creditors (albeit in devalued dollars).

If this doesn’t debunk the notion that default could never happen here, we might take a look at the U.S. government’s debt as a percentage of GDP. Edwards notes that his colleagues Carmen Reinhardt and Kenneth Rogoff’s research shows that 90% debt-to-GDP ratios have been the historical tipping point triggering default in places like Turkey, Argentina, Mexico, Russia and Chile.

We’ve been watching Venezuela’s slow-motion meltdown at the hands of populist macroeconomics. Could such a fate await the United States if we continue down the path of unsustainable entitlement spending?

Sebastian Edwards joined me for the full hour to discuss his research on the politics and economics of FDR's devaluation, and the parallels to the populist macroeconomics of today.

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When we last heard from Clif Ross, Venezuela’s socialist dictatorship seemed to be on the brink of collapse. Months later, Nicolás Maduro has managed to cling to power throughout the blackouts and riots that have darkened a country with so much natural wealth and potential for prosperity.

Clif, a poet, film director, and former Bolivarian revolutionary, lost many of his former “comrades” when he conclusively rejected socialist ideology once it became impossible for him to ignore its failure in Venezuela. His memoir, Home from the Dark Side of Utopia: A Journey through American Revolutions, documents this conversion and was the subject of Bob’s discussion with him back in January. However, that conversation left little time to dig into the current situation in Venezuela, which is deteriorating more and more each day.

Since January, Clif published a lengthy mea culpa of sorts in Quillette, documenting how he “had drifted — at first gradually, but then definitively — into the camp of my former ‘enemies,’ persuaded by their narrative and by the evidence before my own eyes.”

The article was publicized by Jordan Peterson and others whose praise further eroded whatever remaining sympathies the hard-left may have had for Clif. Despite the adulation from conservatives and libertarians, Clif remains an independent thinker who won’t be pigeonholed into any ideological camp.

Neither left nor right, Clif’s worldview is rooted in more nuanced theological and philosophical ideas. He subscribes to Thomas Sowell’s view, laid out in The Vision of the Anointed, which pits the unconstrained, or utopian worldview against the constrained, or tragic worldview. The latter assumes that people behave in their self interest, and that governments should not be too ambitious in trying to change human nature.

Clif returns to the show this Sunday with producer and guest host Charlie Deist to pick up where he left off, discussing the similarities between Bolivarian socialism and other versions of “Apocalyptic Utopian Messianic Millenarianism (AUMM)” seen throughout history.

When the tragedy in Venezuela is viewed through the lens of mankind’s religious yearnings, Hugo Chavez emerges as a kind of false messiah — one anointed by himself and his followers to usher in heaven on Earth (paging Dr. Muravchik). When the ailing Chavez failed to bring about the promised socialist utopia, he hand-picked Nicolas Maduro as his replacement in an alternative form of apostolic succession. The remaining true believers are scrambling to resuscitate the failing revolution, accusing the opposition leader John Guiado of being a puppet of U.S. imperialists, and calling the popular protests an illegimate coup.

Charlie and Clif discuss the “synoptic delusion” of socialist dictators, which leads them to believe they can steer markets and society through centralized control.

Links:

• [AMAZON] Home from the Dark Side of Utopia: A Journey through American Revolutions by Clifton Ross

• The Bolivarian God That Failed — Quillette by Clif Ross

• In the Shadow of the Revolution [FILM] directed by Clif Ross

• CliftonRoss.com

• CaracasChronicles.com

Related Shows:

• Socialism Reincarnated , Joshua Muravchik, April 2019

• Utopia Unmasked, Clif Ross, January 2019

• Venezuela on the Brink with Fergus Hodgson, April 19, 2017

• Yeonmi Park — North Korean Defector: “Juche” Die, Markets Rise, June 23, 2014

• Ian Vasquez on the Prospects for a Free Cuba, April 03, 2016

• Russia Today (Yesterday & Tomorrow), April 09, 2017

When we last heard from Clif Ross, Venezuela’s socialist dictatorship seemed to be on the brink of collapse. Months later, Nicolás Maduro has managed to cling to power throughout the blackouts and riots that have darkened a country with so much natural wealth and potential for prosperity.

Clif, a poet, film director, and former Bolivarian revolutionary, lost many of his former “comrades” when he conclusively rejected socialist ideology once it became impossible for him to ignore its failure in Venezuela. His memoir, Home from the Dark Side of Utopia: A Journey through American Revolutions, documents this conversion and was the subject of Bob’s discussion with him back in January. However, that conversation left little time to dig into the current situation in Venezuela, which is deteriorating more and more each day.

Since January, Clif published a lengthy mea culpa of sorts in Quillette, documenting how he “had drifted — at first gradually, but then definitively — into the camp of my former ‘enemies,’ persuaded by their narrative and by the evidence before my own eyes.”

The article was publicized by Jordan Peterson and others whose praise further eroded whatever remaining sympathies the hard-left may have had for Clif. Despite the adulation from conservatives and libertarians, Clif remains an independent thinker who won’t be pigeonholed into any ideological camp.

Neither left nor right, Clif’s worldview is rooted in more nuanced theological and philosophical ideas. He subscribes to Thomas Sowell’s view, laid out in The Vision of the Anointed, which pits the unconstrained, or utopian worldview against the constrained, or tragic worldview. The latter assumes that people behave in their self interest, and that governments should not be too ambitious in trying to change human nature.

Clif returns to the show this Sunday with producer and guest host Charlie Deist to pick up where he left off, discussing the similarities between Bolivarian socialism and other versions of “Apocalyptic Utopian Messianic Millenarianism (AUMM)” seen throughout history.

When the tragedy in Venezuela is viewed through the lens of mankind’s religious yearnings, Hugo Chavez emerges as a kind of false messiah — one anointed by himself and his followers to usher in heaven on Earth (paging Dr. Muravchik). When the ailing Chavez failed to bring about the promised socialist utopia, he hand-picked Nicolas Maduro as his replacement in an alternative form of apostolic succession. The remaining true believers are scrambling to resuscitate the failing revolution, accusing the opposition leader John Guiado of being a puppet of U.S. imperialists, and calling the popular protests an illegimate coup.

Charlie and Clif discuss the “synoptic delusion” of socialist dictators, which leads them to believe they can steer markets and society through centralized control.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.bobzadek.com/subscribe

Bill Ottman returns to discuss the latest in the battle for online

free speech

Earlier this week, President Trump sat down in the Oval Office with Twitter CEO Jack Dorsey to talk about, among other things, Twitter’s censorship policies, and his own follower count. Trump asked if Twitter had discriminated against him — his 45 million followers pale in comparison to Barack Obama’s 105 million, not to mention Katy Perry’s 108 million.

Perhaps Trump’s ego is interfering with his ability to see clearly on this issue, but social media censorship is still a vital topic of concern for all Americans who value free speech.

When tech giants like Google, Facebook, and Twitter dominate so much of the online landscape, their speech codes, suspensions, and “deplatforming” campaigns can make or break a person’s business or reputation. Prominent libertarians and conservatives, including Scott Horton of AntiWar.com, have already been flagged or removed from social media for so-called hate speech. Who’s next?

If you believe, as I do, that neither the government nor powerful tech companies should be the arbiters of what counts as unacceptable speech, you should consider moving to Minds.com. Minds is the social network for free exchange— where sunshine is the only remedy for bad ideas, and censorship is the only viewpoint that isn’t tolerated.

Minds CEO and co-founder Bill Ottman joined me last year to talk about the need to diversify away from Big Tech’s monopoly on free speech.

Since then, I published an entire book on the dangers of free speech bubbles — particularly on college campuses — that insulate people from allegedly offensive ideas. Both universities and social networks share a superficially private quality, but are the equivalent of today’s public square. If the First Amendment doesn’t defend free speech here, it’s useless.

The Supreme Court ruled in 1946 [Marsh v. Alabama] that a company town couldn’t prevent one of its residents from distributing religious literature, since the company management was essentially acting as if it were the government. The majority argued that “[w]hile the town is owned by a private company, it is open for use by the public and thus becomes limited by the constitutional rights of the people there, who are entitled to the freedoms of speech and religion.”

I chafe against the idea of any social media network acting as a quasi-government agency, so I think libertarians are better off moving to freer platforms like Minds.com. Until they kick me off, however, I will continue to use Twitter, YouTube, Facebook and the like to spread the word about what’s happening.

Also, catch “The After Show” with me, Bill, and my producer on YouTube, where we continued to discuss the slippery problem of free speech in the digital era.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.bobzadek.com/subscribe

Ilya Somin says there is no legitimacy crisis, unless Democrats demand one.

“If you want to build a democracy that works for everyone, you must have an honest judiciary. If you want an honest judiciary, you #PackTheCourts”

— @PackSCOTUS Twitter account

Two weeks ago, David A. Kaplan warned that the judicial branch had become far too powerful. I agreed.

We’ve felt the effects in the form of bitter partisanship over judicial nominations. When Mitch McConnell gambled on denying Merrick Garland a hearing until after the 2016 election, Democrats saw it as their responsibility to respond in kind by turning Kavanaugh’s nomination into a circus. Since that failed to stop his nomination, some have escalated their rhetoric even further — going as far as reviving FDR’s failed court packing scheme.

Ilya Somin says this is a terrible idea. The Professor of Law at George Mason University School of Law and blogger at The Volokh Conspiracy (now hosted at Reason.com) has written several articles explaining why.

Dangers of Growing Support for Court-Packing

The same logic that ultimately put the idea to rest back in 1937 holds today. Somin quotes a Democratic senator who put it concisely back then:

“Create now a political court to echo the ideas of the Executive and you have created a weapon. A weapon which, in the hands of another President in times of war or other hysteria, could well be an instrument of destruction. A weapon that can cut down those guaranties of liberty written into your great document by the blood of your forefathers and that can extinguish your right of liberty, of speech, of thought, of action, and of religion. A weapon whose use is only dictated by the conscience of the wielder.” — Sen. Burton Wheeler (D)

But the political heat of the moment has apparently made some Democrats forget that the power to turn 9 into 13, 19 or more, could backfire in the hands of the “wrong” president. And without judicial independence, “right” and “wrong” are all a matter of perspective.

Even liberal scholars and politicians, he notes, have opposed the idea — from Noah Feldman and Lawrence Tribe of Harvard Law School, to Senator Corey Booker of New Jersey. They say that court packing is not a proportional response to the failure to give Garland a hearing, and note that it would only worsen the legitimacy crisis that the court’s detractors claim as the reason for packing it.

Somin’s take on the legitimacy crisis is more subtle. He thinks it’s overblown, but with so many mainstream Democratic candidates talking about court packing, it’s not as unthinkable as it once was.

The primary race has barely just begun, but this already seems to be an area in which Democrats have started a race to the bottom.

Ilya returned to the show to talk about the the history of court packing, and why it’s just as bad an idea today as it was 80 years ago.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.bobzadek.com/subscribe

Why Joshua Muravchik is republishing his history of socialism

(424) BOB-SHOW. Sun. 8–9am PACIFIC

The word “socialism” — like capitalism, liberalism, and fascism — means different things to different people.

While libertarians picture the deprivations of actual socialism in places like the Cuba, Venezuela, and the former Soviet Union, idealists prefer to cherry-pick Scandinavian countries like Sweden and Norway.

Talking with a socialist can be like playing whack-a-mole. You point to a failure and they tell you, “But that wasn’t REAL socialism.”

In his 2003 book Heaven on Earth: The Rise and Fall of Socialism, World Affairs Institute fellow Joshua Muravchik documents the many faces of socialism throughout history, and none of them are pretty. In a piece for the Wall Street Journal this week, Muravchik notes that even the best case scenarios for socialism have been disasters (or else morphed into something that was no longer socialism). Now he’s publishing a new edition that includes “the Afterlife,” on the recent reincarnation of the bad idea that just won’t stay dead.

Bernie Sanders’ popularity as a Democratic candidate is just one worrisome sign that socialism is regaining influence. Humanity might be forgiven for initially falling for socialism and its utopian promises of a “New Socialist Man.” Two centuries later, however, ignorance is no excuse. Marxism was supposed to be scientific, but Karl Marx’s intellectual legacy has brought about more human misery than virtually any ideas in history.

Muravchik charts this tragic history of the world’s worst idea with clarity and fascinating detail. His book includes the story of a relatively obscure Welsh social reformer named Robert Owen, whose efforts to help industrial workers led him to found several experiments in communal living — both in the UK and the US. In almost every case, these experiments were dystopian and short-lived.

But before Owen and his followers coined the term socialism, the French Revolution had given birth to the spirit of Egalité by any means necessary. The Reign of Terror and elimination of the hierarchy would soon morph into a totalizing economic doctrine that swept away traditions of property rights. Much like the Bolshevik Revolution in Russia in the 1900s, the French Revolution used fear and violence to replace religious ideals, customs, and institutions with allegedly more “rational” ones that would usher in heaven on earth.

Socialism, Muravchik demonstrates convincingly, was always a substitute religion — and an extremely popular one at that.

He himself was brought up under this religion, and joined the Young People’s Socialist League in 1962, the same year as Bernie Sanders. However, his anti-communism and growing awareness of the failure of socialist experiments around the world turned him into a neo-conservative.

[Watch this 2002 video of Muravchik in discussion with Irving Kristol and Charles Krauthammer at the American Enterprise Institute]

Resurrecting the Corpse
So what should we make of the rapid ascent of politicians like Alexandria Ocasio-Cortez and Rashida Tlaib? Considering that the Democratic Socialists of America, of which they are members, stand in solidarity with the Bolivarian Revolution, we probably ought to be worried.

In an article for the Weekly Standard, [Up from the Grave, Nov. 8, 2018], Muravchik explains that the seeming compromise of “democratic” socialism is merely a cover for a coercive socialist agenda. Democratic countries never adopt socialism, and real socialism requires taking away people’s democratic rights. Therefore democratic socialism is a contradiction in terms.

But What About Sweden?
Neither are “social democracies” in countries like Norway and Sweden the shining beacons of socialism their proponents claim them to be. After a few decades of lukewarm socialism, most Nordic countries embraced free markets in most areas — using the explosive growth allowed by capitalism to generate revenues for a more expansive welfare state.

Muravchik notes that the kibbutzim in Israel are not the a demonstration that socialism works on a small scale, since these have gradually replaced the shared purse with private ownership. Thankfully, the participants in Israel’s kibbutzim seem to have acknowledged the failures of socialism rather than taking them as evidence for a need to simply expand the scope.

It remains to be seen whether Sanders, AOC, and the vanguard of the unemployed college graduates will organize into a force to be reckoned with, or if we can put socialism back to rest in peace — permanently.

President Trump went on the record at the United Nations recently to say that the United States will never be a socialist country, adding that “America was founded on liberty and independence, not coercion, domination and control.”

Let’s hope he’s right.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.bobzadek.com/subscribe