R.K.: Welcome to the Rob Kall Bottom Up Radio Show, WNJC 1360 Am out of Washington Township reaching Metro Philly and South Jersey. Online you can get it at iTunes looking for my name, Rob Kall, K-A-L-L, or at opednews.com/podcasts. The show is sponsored by opednews.com. My guest tonight, coming back for the third, or fourth, or fifth time is Paul Craig Roberts.
He's had careers in scholarship and academia-- Stanford and Georgetown universities. He served in the Congressional Staff and as an Assistant Secretary of the Treasury. He has been a columnist for The Washington Times, The Wall Street Journal, Businessweek, the Scripps Howard News Service, and Creators Syndicate. His latest book is How America Was Lost; From 9/11 to the Police Welfare State. Welcome back, Paul.
R.K.: Okay, so I want to transition to another topic now and that's economics, capitalism, wealth inequality. These are big issues that don't have simple answers, but... and also globalization. I want to throw that in, too. We've got major problems there and it seems to me and a growing number of people that the answer is not capitalism as we've known it. What are you thinking about that?
PCR: Well, we've known different kinds of capitalism. The kind we've had since Clinton allowed the repeal of Glass-Steagall, which separated commercial from investment banks, and since Clinton allowed a handful of firms to concentrate the entire American media. That kind of capitalism is very different from other kinds of capitalism because we now have an unregulated capitalism in which there are no rules and in which fraud is widespread. Manipulation, rigging of markets and the whole thing now works for a handful of people.
You know, the one percent, the ninety-nine percent and this has practically nothing to do with taxation. It literally wouldn't matter what the tax rates were. The same thing would be happening because when you don't regulate human behavior, then everybody in the market can behave like a sociopath and a psychopath. And so we would have a situation where eighty, eighty-five percent of all stock trades today are computers trying to front run trades that have been placed so each firm tries to get a faster computer. It tries to get closer in its physical location to the point of entry of the information. We now have the scandal which has appeared of the stock exchanges themselves selling preferential locations so fast computers can pick up a trade that's about to happen and get in front of the trade before it happens.
Well this is a rigged system. This is like the rigged casino in a gambling joint. The whole system is rigged now. The Fed rigs the bond market by buying huge numbers of bonds. That's why the bond prices are high and the interest rates are low. The money the Fed pours into banks buying the bonds gets into the stock market. They speculate on the stock market, on S&P future stock market futures. Every time the stock market starts to go down the plunge protection team buys the futures. Up it goes. Every time gold starts to go up because people are worried about the dollar the Fed steps in and shorts the gold market.
So you don't have any markets. You don't have capitalism when banks are too big to fail. Under capitalism, nobody is too big to fail. The whole virtue of capitalism, to the extent it has any, is that those companies that make inefficient use of resources go out of business. But they don't go out of business when the government steps in and uses the tax payer money to subsidize the losses. Well that's the way we've been treating the banks now for six years.
We've done this for other companies. So this is like a gangster state capitalism. Now all capitalism, like all human arrangements, has problems and disadvantages and the purpose of regulation is to make the system work for more people rather than for few people. So when you take the regulation out of the system, which is what the liberals and the conservatives and the republicans and the democrats have done, together, then the system doesn't work for anybody, but the handful that have got the power and that are rigging it.
So what could you do? Well, you really need to desperately put back in the regulation. The system failed once before and that's why we had all of this regulation added. It was a response to the 30's which were a result of the 20's. So when you go in and say, well, let's take out everything that's worked all these years. Let's take them out and give carte blanche to greed and corruption and theft and mendacity and all the rest. Then you get failure.
R.K.: Now, what you're talking about, putting in regulations, that is anathema to Milton Friedman Chicago economics-
PCR: No, it's not.
R.K.: -and libertarians. It's not?
PCR: Well, it might be to some libertarians. Certainly not to Milton Friedman or Chicago. The critique that Chicago made of regulations is associated with George Steagall. He said that the real problem with regulation is that the regulatory body ends up being captured by the industry it's supposed to regulate.
And we've seen that in all these recent revelations. You may have seen about a month ago one of the lead prosecutors of the Securities and Exchange Commission at his retirement dinner he gave a speech that stunned everyone. He said the SEC high ups blocked all of my prosecutions of the banks because they were protecting the banks in exchange for big million dollar jobs when they left government service.
So, that's the argument that Chicago made, not that we shouldn't have regulation. It just said, look, it can work for awhile, but sooner or later the regulators are going to be hand in glove with who they are regulating because they'll be bought off. You protect them while you're in office and then look at the big job you get when you leave.