Male 1: It’s time for another episode of Stansberry Radio, the show that’s too loud for radio. Here are your hosts, Porter Stansberry and Aaron Brabham.
Aaron Brabham: Welcome to Stansberry Radio. I’m Aaron Brabham. Porter, you’ve had a pretty good week this week, haven’t you?
Porter Stansberry: Oh, we had some fun this week. We took a little time off and did some fishing down in Miami. It was awesome. Caught a huge bull dolphin, big sailfish, celebrated my 40th birthday with some – a lotta good old friends, a dozen guys I’ve known most of my life. It was a great time, and this morning we took the crew out here in Baltimore and went pheasant hunting. It was fantastic.
Aaron Brabham: Perfect conditions.
Porter Stansberry: Nailed some big birds. It’s been a good week. It’s been a great week for the publishing company.
Aaron Brabham: Yes, it has.
Porter Stansberry: Nothing is better for newsletter publishers than a second-term Democratic president, out of control spending, crazy Fed policy. I mean there are so many things out there that people legitimately need to be worried about. I think it’s gonna be four more good years for our publishing company, four bad years for our country.
Aaron Brabham: Four bad years for the country. I hear you.
Porter Stansberry: Four great years for people like me who can tell other people how to protect themselves and how to prevent the damage that’s gonna happen.
Aaron Brabham: I’ll tell you though, it’s – although we love doing the show and it’s for fun and all that, there is a purpose behind it, and the purpose is to educate and inform.
Porter Stansberry: No.
Aaron Brabham: I don’t know. I like to try to feel that way at least.
Porter Stansberry: I thought we were just doing this so you’d have a job.
Aaron Brabham: Well –
Porter Stansberry: That’s why I did it.
Aaron Brabham: All right, well, I’ll take that. It’s your recession – it’s a recession measure.
Porter Stansberry: Part of my recession measure. How many –?
Aaron Brabham: Friends and family; how many you hire.
Porter Stansberry: How many old friends and relatives I employ.
Aaron Brabham: You wanted to see if I could actually make it happen.
Porter Stansberry: No, I think Aaron’s a very talented guy, and I was actually very happy when I recruited him and he came to work. He knows I’m just kidding. But, no, this is a very interesting time for America because right now I’d say 70-plus percent of the country either knows nothing about the fiscal risk we face or doesn’t believe that they will ever become manifest. There are people out there – Dick Cheney, you remember? He said in 2002 deficits don’t matter, and it sure seems like he’s right because the bond market is still strong. Interest rates are still low. Nobody’s noticed so far that their purchasing power is evaporating like water on a hot day, but – and so now we have a setup where there’s no chance that anything is going to happen to change the direction our country is in – no chance. And as we were talking about before the show, not only that, but it looks like there’s been a real change to presidential politics.
Aaron Brabham: Yeah, a couple of statistics that stood out to me. First of all, I thought it was gonna really come down to some battleground states. Oh, no, Obama just –
Porter Stansberry: It wasn’t close.
Aaron Brabham: He just cleaned it up.
Porter Stansberry: Somebody predicted that Obama would win handily, one of us.
Aaron Brabham: Yeah, I think that was Porter.
Porter Stansberry: I think it was me.
Aaron Brabham: I think it was you, and –
Porter Stansberry: And, by the way, that does not mean I wanted him to win. I’m just – I’m a guy who lives with facts. I’m big about empiricism. Tell me what is. Don’t tell me what ought to be ’cause what ought to be never happens, so just tell me the facts.
Aaron Brabham: Yeah, we’re gonna have to pay the welfare payrolls, the ____ ____ doing that. Yeah.
Porter Stansberry: The facts are there’s no way this guy’s gonna lose.
Aaron Brabham: No way, so –
Porter Stansberry: So here’s a good – here – how did I know, Aaron?
Aaron Brabham: Well, you look at all the statistics.
Porter Stansberry: But let’s talk about the white vote.
Aaron Brabham: Okay. So the first time that Bush Junior ran, he achieved 62 – no, I’m sorry, 62 – yeah, 62 percent of the white vote in America. He had 400 Electoral College votes to him. That’s a landslide.
Porter Stansberry: Yep.
Aaron Brabham: Romney achieved – guess how – what percentage of white votes this time?
Porter Stansberry: Sixty-two percent, the same exact majority.
Aaron Brabham: The same exact majority.
Porter Stansberry: In other words, white America overwhelmingly voted Republican back then and still does.
Aaron Brabham: And but this time barely 200 electoral votes.
Porter Stansberry: But getting the white vote isn’t enough to win the country anymore.
Aaron Brabham: Not anymore.
Porter Stansberry: Because Obama has mobilized minorities to vote in a way that’s unprecedented in our election history and here are the numbers that I was thinking. About 40 percent of the country is solidly Democratic, will always vote Democratic ticket. About 40 percent of the county is solidly Republican and will always vote the Republican ticket, okay? So what you’re really left with is the 20 percent in the middle. Well, outta that 20 – so in the – so you got – so to win you’ve gotta get your 40 percent plus 50 percent more, okay? I mean it’s plus – sorry, plus ten percent more.
Aaron Brabham: Plus ten percent more.
Porter Stansberry: Forty and ten.
Aaron Brabham: Right.
Porter Stansberry: Okay, so the African-American population in the United States makes up roughly 12 percent of the population, so if you get all the Democratic regulars and you get all the black vote you’ll win every time.
Aaron Brabham: And they’ve got that on lock now.
Porter Stansberry: And Obama got something like 97 percent of the black vote. He’s gonna be impossible to beat, which brings us to –
Aaron Brabham: The third term.
Porter Stansberry: The third term idea.
Aaron Brabham: Which people laughed at and actually –
Porter Stansberry: Of course. They scoff.
Aaron Brabham: – and mainstream media puts you on blast.
Porter Stansberry: Oh, they’re gonna make – they’re gonna say all those usual things they say about me.
Aaron Brabham: Well, they already did.
Porter Stansberry: I guarantee this. In four years’ time Obama will not leave power. Now obviously the 22nd Amendment, yes, I have read it. It tells that he can’t run for a third term, but it doesn’t say anything about his wife. It doesn’t say anything about some protégé that he could mentor and appoint, Eric Holder, perhaps, attorney general.
Aaron Brabham: God, can you imagine that?
Porter Stansberry: Yeah. Now everyone thinks I’m – I know – full of baloney about this. I think it’s a very, very real possibility for reasons that I eluciate in the report I wrote, that there’s a connection between political tyranny and oil booms. There just is. When’s the last time a president was reelected where there was at least a 7.9 percent unemployment rate?
Aaron Brabham: Man, I don’t know, but I’m gonna have to say it was probably pre-1940.
Porter Stansberry: It was 1940 when FDR was elected for the third term.
Aaron Brabham: The third term.
Porter Stansberry: That’s right. And in that same case you had a demagogic, very liberal, very progressive, expansionist government president, and his entire tax base was fueled by…
Aaron Brabham: Oil boom.
Porter Stansberry: Oil boom, the East Texas find of 1930.
Aaron Brabham: The biggest find ever at the time.
Porter Stansberry: The biggest find ever at a time. So we’ve got all the same economics going on. We’ve got a global financial crisis. We’ve got a incredibly liberal power-hungry president who’s got a lock – a lock – on a majority of the country, and his entire administration is going to be fueled by huge increases to oil revenue, and oil revenues, folks, is all kinds of things. Of course there’s the income taxes and the capital gains taxes on the employees and the workers and the owners, but it’s also for all the licenses and all the royalty sharing ’cause the Department of Interior gets a cut of every oil well in the country, and then it’s the political payoffs because you wanna get an export license for LNG? You wanna get an export license for oil?
Aaron Brabham: No problem; fund our campaigns.
Porter Stansberry: That’s right. You’re gonna be paying off some [response muffled by beeping sound] head in Washington, and all that money – it’s just like in the mob – all the money gets fueled up the chain, and it all is gonna power the new great leader.
Aaron Brabham: It’s funny. I also sent you another article today. I’m sure you saw it. The Energy Information Agency came out and said, “Oh, by the way” – and this doesn’t even make the headlines anywhere – “6.67 million barrels per day in the United States are already –”
Porter Stansberry: 6.7 million barrels a day.
Aaron Brabham: That’s the highest since – what? – ’83?
Porter Stansberry: And we’re talking about we probably drill less than five percent –
Aaron Brabham: Way less than five.
Porter Stansberry: – of the shale wells that we have already identified and well-explored fields. I mean this is gonna get so much bigger. When are we collecting from Chris Martenson? By the way, you folks, if you’re new to the show, go back and listen to me talking to the – Mr. Peak Oil himself, Chris Martenson. It’s a –
Aaron Brabham: I don’t think he ever took the bet, but –
Porter Stansberry: It’s hysterical. He did; he did.
Aaron Brabham: He did.
Porter Stansberry: Yeah, but he was a chicken. I think he took 100 ounces of silver and I told him, “Let’s go 1,000.”
Aaron Brabham: You tried to go 1,000.
Porter Stansberry: He wouldn’t do it.
Aaron Brabham: And I know you do have one with Martin Katusa of Casey Research.
Porter Stansberry: And the bet is that America will never reach a new all-time high level of oil production, which is nine million barrels a day. So we’ve already gone from two and a half million barrels a day to – oh, no, not quite that low, probably four –
Aaron Brabham: Fourish. Yeah, four and a half.
Porter Stansberry: – million barrels a day to six and a half, on the way back to ten. I guarantee you we’ll be at ten million barrels a day no later than the end of 2013 – no later than the end of 2013.
Aaron Brabham: That’s what reports are – all the big experts out there are saying right now. We had the Maugeri, Leonardo Maugeri, on and this guy, he thinks the same _____ here.
Porter Stansberry: I loved his report, but I couldn’t understand a word he said on the radio.
Aaron Brabham: Oh, don’t worry. I couldn’t either. I faked the entire interview.
Porter Stansberry: I don’t speak Englano.
Aaron Brabham: Italiano Englano.
Porter Stansberry: Englano. He was speaking Englano.
Aaron Brabham: Yeah, he was tough to understand, but it was good, man. It was good. So a couple more things, Porter, before we move on now with the subject about the election, too, is talking about – I remember – we both have political science degrees. I remember one of my political professors used to be a big dog for the presidents. He was a speechwriter. He was the guy that directed them. He ran the whole ship. And back then he said, “Your vote doesn’t matter.”
Now I’m not talking about the Electoral College and all that, but his thing was you’re always gonna have that lower demographic that will never, ever vote. That’s changed. When you get these people to the polls, these people on the welfare payrolls, and now they realize their vote does count, look out, Republicans. They’re gonna have to do something dramatic here. They’re gonna have to get off the old religious right, get out of the whole judging people, and go back to some more liberty-based models, if that’s possible. I don’t know if they’ll do it.
Porter Stansberry: The Old Republican Party is definitely dead, and yet they still control the party, so they’re gonna keep putting forth people like Mitt Romney. I mean Mitt Romney wasn’t even a conservative.
Aaron Brabham: Yeah, he’s as centered as they get.
Porter Stansberry: Yeah. Anyway.
Aaron Brabham: Actually, he agreed with everything in the last debate with Obama –
Porter Stansberry: Yeah, of course.
Aaron Brabham: – just to try to hold down –
Porter Stansberry: The fort.
Aaron Brabham: I agree with you. I’m with you on that one, too. Foreign aid? Oh, let’s just send more. I get it. It’s ridiculous. All right.
Porter Stansberry: Well, but the truth is with the new – Obama has done so much to create additional dependency. Look at what’s happened under his administration to food stamps; it’s doubled. Look at what’s happened under his administration to overall dependency; it’s way up. It’s gone from something like 25 percent of the population to something like 40 percent of the population.
Look at what’s happened with his extension of unemployment benefits. So that there are many people in the world today who won’t go to work because they can make enough money sitting at home. We sent Greg Yenoli out to eastern Washington to pick apples, and he found a job immediately making $26.00 an hour.
Aaron Brabham: That’s good money.
Porter Stansberry: But if you make – you do –
Aaron Brabham: But they can’t fill it. They can’t even get people who are –
Porter Stansberry: They’d rather be making $16.00 an hour sitting at home. Why would you do it?
Aaron Brabham: Right, why would you? Yeah, I was talking to one of the copywriters earlier this morning. I wanna find what that breakeven point is where it actually makes a difference, and I figured it’s probably $16.00 or $17.00 an hour minimum before you’d even get off your butt and look for a job.
Porter Stansberry: So listen to this. This is an interesting fact. If you look at all of the money that’s spent at the federal level, the state level, and the local level, all of the spending on the government, everything, direct payments, Medicare, Social Security, military, the whole [response muffled by beeping sound], the whole thing, it’s $55,000.00 per household. It’s more than the average household income. Average household income is 50 grand, so we’re actually spending more on government than we make in total on average as a country. Now is there anyone who thinks that’s sustainable?
Here’s another interesting fact for you. The federal government’s deficit is $1.5 trillion. It’s been $1.5 trillion every year Obama’s been in power. We never had a trillion-dollar deficit ever until Obama came to power. Now we’ve had them four years in a row. So, in fact, if you look at the debt held by the public, which is a subset of the national debt, he’s doubled it, so just in his one administration that’s pretty impressive.
Aaron Brabham: But that was all Bush’s fault.
Porter Stansberry: Yeah, well, whatever. Like somebody said, “Obama, it’s great he got elected last night, but he’s got a hell of a mess to clean up.”
Aaron Brabham: He sure does.
Porter Stansberry: From the last president.
Aaron Brabham: That’s right.
Porter Stansberry: Anyway, so one – and I don’t wanna bore everyone with figures, but just think about this: federal tax – federal income tax receipts are $1.3 trillion. The federal deficit is $1.5 trillion. If you doubled – you double the total amount of federal taxes collected in income taxes, if you doubled that amount of revenue, you doubled income taxes – whatever your tax rate is, double it –
Aaron Brabham: But you can’t.
Porter Stansberry: So, Aaron, you’re probably paying about 20 percent. Double it. Now you’re gonna pay 40 percent. Stansberry, you’re making – you’re paying 36 percent. Now you’re gonna be paying –
Aaron Brabham: Seventy-two.
Porter Stansberry: – 72 percent. You double it. You double it, right? You’d still have a deficit, so is there any way we’re gonna solve this problem that we have with runaway fiscal problems, runaway debts by raising taxes? No, it can’t be done. And is there any way that Obama is gonna cut spending? No, it’s the –
Aaron Brabham: No chance.
Porter Stansberry: – it’s the heart of his whole political agenda. That’s how he got elected by promising to do it. That’s how he got reelected by doing it, and he’s gonna get a third term by doing even more of it.
Aaron Brabham: And I’m not even gonna say that it could be Michelle or his proxy. I’m gonna throw it out there and say it could be under executive orders. It could be under repeal of an amendment.
Porter Stansberry: Nah.
Aaron Brabham: It could be under one of those things.
Porter Stansberry: Nah, I’m not going there. He’s not gonna change the Constitution. He doesn’t have to. He can stay in power just by –
Aaron Brabham: Put a crony in.
Porter Stansberry: – putting Eric Holder in, putting a proxy in, and you’ll know who it will be because that person will stay on, so the Clinton – Hillary Clinton, she’s leaving the administration. She’s leaving the administration ’cause she plans to run for president, so you’re gonna see. It’s gonna be the Obama faction going for the third term versus the Clinton faction and the Democratic Party, and they’re gonna be battling over the next four years, and I guarantee you’ll see it.
Aaron Brabham: And one more thing that we touched on or we touch on regularly, but I can’t bring this point home enough. The welfare class today is living the best that they’ve ever lived, hands down. Obama phones, free Internet, cable television, 99 weeks of unemployment. You name it. We talk about –
Porter Stansberry: Health care.
Aaron Brabham: – we talk about the disability benefit for life.
Porter Stansberry: Yeah, disability. Gotta go. I gotta go get my disability.
Aaron Brabham: I mean there are more things – rewards for you to sit at home for sure and still have all these luxuries of being able to play video games and watch TV and –
Porter Stansberry: Yeah. More than half of the population of the United States receives some direct benefit from the federal government. Huh? What happened to the land of the free? What happened to rugged individualism? Outta style.
Aaron Brabham: Yeah, we’ve coddled people to the point where it’s not _____.
Porter Stansberry: It is not going to bankrupt us. It’s not going to happen; it has happened. We’re bankrupt, and the truth about the state of our finances will come clear in the next four years. They will be a total catastrophe in the dollar. Mark my words. And Obama will use it to gain more power. There will be a crisis, and he will use it to gain more power. Watch.
Aaron Brabham: All right. Porter, we have a guest on today. His name is Thomas E. Woods. Tom is the senior fellow of history at the Mises Institute and creator of a new documentary, The Bubble. He is a leader within the Libertarian movement. Here’s one thing I didn’t know about the Mises Institute. It’s based in Alabama.
Porter Stansberry: Auburn.
Aaron Brabham: Yeah, that’s a little odd for it to be based in Alabama. I wonder why.
Porter Stansberry: You should ask why that is.
Aaron Brabham: I do wanna know why ’cause it doesn’t seem like it would be – it’s – I thought it would be more maybe in old-school northeast or something like that, but I didn’t think it would be in Alabama.
Porter Stansberry: And Auburn.
Aaron Brabham: Least it’s in Auburn, not Birmingham. That would be a little worse, or Mobile.
Porter Stansberry: I have to admit I have an ignorance of geography when it comes to Alabama. I don’t know where Auburn is located.
Aaron Brabham: That’s fine. You don’t – it’s more northern versus the southern, so I guess it’s maybe – think about Auburn College. It’s a little bit better than University of Alabama. Actually it’s a lot better – a lot better.
Porter Stansberry: Are they both state schools or is one private?
Aaron Brabham: That’s a good question. I’m not sure if I ____ ____.
Porter Stansberry: I know the University of Alabama is not private.
Aaron Brabham: Yeah, that’s right.
Porter Stansberry: But I don’t know about Auburn.
Aaron Brabham: All right, Porter, we –
Porter Stansberry: I think it’s a land grant school. I think it’s public.
Aaron Brabham: I think it is, too. I know it’s tough to get into though. We’ve been receiving a lotta feedback from our listeners that comes in via our firstname.lastname@example.org. We also get our calls weekly, which we appreciate, at 855-SA-RADIO, 855-727-2346. We like to hear your thoughts on the election and Porter’s thesis on the third term which we sent out to our listeners.
Porter Stansberry: And, by the way, before you call in and call me names and do – you can do that if you want. It’s okay. It’s humorous for me. But please understand I am aware of the 22nd Amendment. I do know it’s unlikely that President Obama himself will be elected again for a third term. What I’m talking about is – and the same way Putin kept power by putting forth a puppet –
Aaron Brabham: Medvedev.
Porter Stansberry: – Medvedev, I believe that Obama will do the same. It may his wife Hillary. Maybe it’ll be Eric Holder. It’ll be someone who acts in his place, and – but he will stay in Washington. He will stay in power. He will pull all the strings. He will continue to run our country. He will continue to win the presidency by campaigning for whoever is next, all these kinds of things, and his policies and his actions will remain. That’s my point.
Aaron Brabham: So one more question before we get to our guest, Porter. Who’d you vote for?
Porter Stansberry: You know the answer to that.
Aaron Brabham: You didn’t.
Porter Stansberry: I don’t vote.
Aaron Brabham: I know. Now are they the same reasons why Casey says – the same top five reasons why Casey says not to vote.
Porter Stansberry: Well, I do agree with Casey’s reasonings. It’s degrading to go stand in line, and I’m – and to do something – anything involving the state is degrading. I mean go inside a public school cafeteria. Go –
Aaron Brabham: Go to your DMV.
Porter Stansberry: Go to your DMV. I mean it’s just – it’s a classless –
Aaron Brabham: But at least they give you good customer service when you’re there.
Porter Stansberry: Yeah, right. There’s nothing worse and more disgusting than the trash that inhabits state offices and state facilities, and I’m not gonna go be a part of it, but that’s – and that’s what Doug says as well, but – and I agree with him, but the big reason is that I believe that our democracy is a fraud, and let me be very clear about what I mean when I say it’s a fraud. I don’t mean that my vote will not be counted. I mean that my vote will not count. You can’t have a free election where the other people are allowed to vote themselves my wallet, and that’s what it comes down to, so the structure of our governance says that these guys can vote themselves as much benefits as they want and that they don’t have to pay for it; I do.
So right now 10 percent of the population in the United States, 10 percent of the households is paying for 75 percent of the government. It’s outrageous, and people talk about inequality, and I’m like, “That’s the inequality.” But I know that I’ll get the last laugh on all this because when you have these kinds of structures in democracies, when the masses are allowed to vote themselves the wealth of the minority – look at the same thing has happened so many times in so many places throughout history – what you’ll have happen is the government will grow to an unsustainable level. We’re at that point. Go over the numbers. I already went over the total spending per household versus total tax revenue per household, the runaway deficits. Even if you double income taxes doesn’t solve the problem.
All these things are just classic examples, and now of course we’re printing money to pay for our own government’s debts. I mean this is the final stage of the destruction and deterioration of our country, and we ended up in this place because of this structure of taxes that we have where people can vote for benefits and not have to pay for them. Is there any way we’d have spending at $55,000.00 per household and government expenses if people had to pay for that equally? No. There’s no way we would have that because there’s only $50,000.00 in revenue per household so we couldn’t, so we would have never ended up in this position.
We would have never ended up in these much debts. We would have never ended up with a government this size if people had to actually pay their fair share. So the – what I’ll – so now what happens is the currency is going to collapse. The credit of the country is going to be destroyed. These people’s standard of living will be wiped out. Their wages will be destroyed by inflation. And guess who will have enormous amounts of wealth created because of this crisis?
Aaron Brabham: The super rich.
Porter Stansberry: Guys like me. Guys like me that own real estate offshore, that have gold and silver offshore. Guys like me. So go ahead and tax me and think that you’re winning while you destroy the country and make me even richer. Thank you very much. I sit there and I tell people all the time we need to have a reform of the taxation system in the country. It’s not fair that one citizen pays 39 percent and the other citizen pays nothing – pays nothing – and they say, “Oh, you’re a greedy blah, blah, blah.” No, you don’t want that system because it doesn’t work, because the guy who doesn’t ever have to pay anything will always vote for more government – always – to the point where the country is literally drowning in government.
Aaron Brabham: That’s a fact, and it’s been known for centuries, by the way, and every single country that’s adopted a democracy has suffered these consequences and they will again. We will again.
Porter Stansberry: Yeah. There are absolutely repeatable steps in this process. The first step in the process is that you institute an income tax, which is exactly why income tax was expressly forbidden by the original U.S. Constitution – expressly forbidden. So you get the income tax. Then that’s not enough so then you have paper money so that you have unlimited financial ability. Well, then the paper money starts blowing up, and so then you have quantitative easing or the equivalent, which used to be called papering over the debt, and you get that. And then what’s the next phase? The next phase is always runaway inflation, and normally the democracies challenge runaway inflation by wage and price controls and greater and greater militarism, so what do you think’s gonna happen next?
Aaron Brabham: Well, it’s been happening with militarism on Department of Homeland Security. You name it.
Porter Stansberry: We’re witnessing it, right? Inflation keeps getting worse. The military keeps getting bigger, more heavily armed troops everywhere you look, right?
Aaron Brabham: That whole NSA in the ______.
Porter Stansberry: And then the whole thing devolves into an outright tyrannical dictatorship, and we might have that if you get Obama’s third term going.
Aaron Brabham: All right.
Porter Stansberry: Good news for America.
Aaron Brabham: Man, I’m really pumped about the show now.
Porter Stansberry: So, Porter, why do you have a boat again?
Aaron Brabham: So he can load it with gold and get the hell out of here when need be ’cause it might arise.
Porter Stansberry: Just saying.
Aaron Brabham: All right. I don’t think our 15-foot walls around our compound here is gonna hold everybody out at some point.
Porter Stansberry: I think it will.
Aaron Brabham: I hope so. We’re gonna find out. All right. On the hotline we have Tom Woods on the show. Tom is a senior fellow of history at the Mises Institute and the creator of the new documentary, The Bubble. He is a leader within the Libertarian movement. Tom, welcome to Stansberry Radio.
Porter Stansberry: Tom, can you tell us a little bit about yourself. How’d you end up at the Von Mises Institute?
Tom Woods: Well, when I was in college I had the funny feeling that I wasn’t being told the whole story about pretty much anything, so the Mises Institute was like a lifeline to me about 20 years ago ’cause they had a week-long program where you could go and learn real economics, the kind that you weren’t getting in school, and from that point on I was just completely hooked and as time went on, eventually I became a resident scholar at the institute. We moved away from Alabama a couple of years ago, and now we – I freelance out here in Kansas, but I’m still a senior faculty member of the institute, and I feel like they are – oh, I don’t know. They’re some of the great benefactors of mankind. The sheer amount of free resources just to help educate the public that they’ve made available I think could be put up against any benefactor anywhere.
Porter Stansberry: I completely agree with you. In fact, after I graduated from the University of Florida with a degree in political science and economics, I had to actually educate myself again using your website. It is absolutely spectacular and we’re big fans of it.
Tom Woods: Thanks a lot.
Porter Stansberry: Tell us about the documentary, The Bubble.
Tom Woods: Well, it’s forthcoming early next year, no precise date yet, and we’re still working out exactly what the format will be and whether it’s DVD or exactly what’s gonna happen with it, but the premise of it is very straightforward, that we want to actually look at what happened in 2008 and before by actually asking people who were predicting that it was going to happen. Now that’s the opposite of the approach taken by Michael Moore or the rest of the Hollywood establishment. They wanna talk to all the people who were as clueless as possible and get them in their documentaries. We wanna talk to the people who were warning, “Wait a minute. There’s something wrong with this housing market. There’s something wrong with the Federal Reserve and what it’s doing in these years.”
And they were laughed at and scorned and cast aside, so given that they were right on, as it turns out, we wanna get a sense of how did they know this and, given that they do seem to have a decent track record of understanding long-term trends, where do they think we’re going? What should we do now? So those are the people who are front and center in The Bubble, and we’ve got a website, thebubblefilm.com, where even before the documentary comes out we’ve taken all the interviews that we did, the raw material –
Porter Stansberry: Oh, that sounds great.
Tom Woods: – and just put them up there so that – of course now we’re gonna snip from them and stitch it together and make a nice little story, but I don’t know of any – maybe there’s some example of this – any documentary that has actually done that. You can look at the whole interview we did with everybody on that site.
Porter Stansberry: That sounds really, really – I can’t wait to go see it. About the – ah, geez, I just lost my train of thought. I had a really good one for you. What was I gonna ask?
Aaron Brabham: Tom, I’ll talk to that point for one second. Last week we had James O’Keefe, the founder of Project Veritas, the guy behind ACORN and the voter fraud and all that stuff. He does put up the entire reel to discount the fact that he’s doing extreme editing, so I like that. I like that you’re – you have that.
Tom Woods: I like that, too. It’s the same reason I like C-SPAN. They come, record your event and they just put it up as is.
Porter Stansberry: Yeah, and we’ve had people ask us to edit the podcasts, and we just say, “We won’t publish it if you’re not happy with it because we’re not gotcha journalists, but we’re not gonna edit it so that we create a conversation that didn’t happen.”
Tom Woods: Right, right, right. That’s good.
Porter Stansberry: The question I had for you that I lost my train of thought with was did you ever have the opportunity to meet Kurt Richebacher?
Tom Woods: I have not, no.
Porter Stansberry: He was a German economist that trained under Von Mises and he ended up being the chairman of Dresdner Bank, and he was a fellow newsletter writer as well in his retirement with Bill Bonner, and he had a great letter called The Richebacher Letter, and I met him several times in the late ’90s, early 2000s, and out of all the people that predicted what happened with Fannie and Freddie Mae no one predicted it earlier than Kurt Richebacher. He was writing about it in 1996 and 1997, and he was explaining exactly what would happen, and every time I saw him he would – he’s, unfortunately – he’s passed on now, but I would see him and he would smack me in the chest, and he would say, “Give me your card. You’re the young radical.”
And we would drink and talk all about central banking, and he would explain that all the inflation in this cycle wasn’t coming out of the brokerage firms like it had in the ’20s and ’30s – or, sorry, in the ’20s – it was coming out of the housing apparatus, and he would show me all the numbers and say, “Look at all of the excess credit and there are no savings. There are no savings. This is inflation.” And he would drink more and more, and he would just get louder and louder and louder and crazier and crazier and crazier, so all over Georgetown there are people out there that will remember the crazy German guy screaming about inflation, and it was back in ’99, 2000, 2001. Unfortunately, you can’t interview him because he’s gone, but he was a real character.
Tom Woods: Yeah. Whereas by contrast we had all these very even-tempered and soothing voices telling us that there’s nothing to fear. The fundamentals are sound. The reason housing prices are going up is just that the fundamentals are there. There’s strong demand and so on and on, and that was the only reason, and you should take out adjustable rate mortgages, and that’s what all the experts said, so-called.
Porter Stansberry: My favorite moment in the whole crisis was in July of 2008 when they called Gingrich and Paulson to testify before Congress, and these guys both said under oath that Fannie Mae and Freddie Mac were well capitalized.
Tom Woods: Oh, yeah, yeah, yeah. And then can I give away the punch line?
Porter Stansberry: Sure.
Tom Woods: And then later obviously Fannie and Freddie more or less collapsed, and so they put Paulson on the spot and said, “Well, didn’t you say that they were well capitalized?” He said, “Well, what I actually said was their regulator said they were adequately capitalized.” But obviously he’s endorsing that diagnosis or I mean like he – but I mean just it is incredible the way the – how sneaky and devious these people are. I mean he clearly intended for us to believe they were well capitalized, and then when it – the bottom fell out, then it turned on, “Well, I never quite said that.” But you obviously meant that, for heaven’s sake.
Porter Stansberry: By the way, he is extremely smart. He knew exactly what was going on. Two weeks later he met with a bunch of hedge fund managers, one of whom is a friend of mine, and told them exactly the opposite so that all of the well-connected guys on Wall Street could make a fortune as Fannie and Freddie went bust. I mean it’s a story that I’m glad you’re telling and that I just – I really wonder what would happen if the American people had any idea how poorly they’re served.
And the other question I had for you about these guys, these leaders, is: how do they sleep at night? And I don’t just mean because they’re so self-serving and such scumbags. I mean they’re sitting on a house of cards that has to blow up. Every single thing that’s true about economics says that this – the dollar will collapse, the bond market will collapse, and they’re gonna end up with mud all over their names forever in history. Do you think they really have no idea the risks they’re taking?
Tom Woods: I think they do realize the risk they’re taking. I think Bernanke is lucky that he’s getting out, and he shouldn’t want to be – to serve as chairman any longer because it would be better for him to be able to wash his hands of the whole thing and be out because you can tell even in their speeches when they engage in all their doubletalk, when you translate the doubletalk it always translates as, “We really don’t know what to do in this situation.”
So they’ll say things like, “We’re engaging in unconventional monetary policy, and it’s not the conventional manipulate-the-Federal-funds-rate policy. We’ve got new policies, and we’re trying this and we’re trying that, and it’s hard to gauge how long we should do it and what kind of effects we should look for, and it’s very tricky.” And which is their way of saying, “I don’t know. I mean I don’t know what’s gonna come of any of this.” So when they get to that point, the so-called experts who are – the Ph.D.’s who have studied all this stuff have no idea what’s going on, then when they basically are admitting it then I think that’s when you know the wheels are coming off.
Porter Stansberry: Tom, what kinda car do you drive? You rocking the new Volt?
Tom Woods: I drive a Hyundai Sonata. It’s the best quality car in its – for its price by far that I’ve seen.
Aaron Brabham: Wait. You’re not a GM guy? Come on.
Tom Woods: No, these people are great. Hyundai, they went from being like ridiculed by everybody to being fantastic, and I’ll have to tell you one thing. I had a – one of my bestselling books was The Politically Incorrect Guy to American History. That was 2004, and so –
Porter Stansberry: Got a copy on my shelf; got a copy on my shelf. Thanks.
Tom Woods: I appreciate that. Well, that did really well, and so I went out and bought a BMW when that came out ’cause I felt like – and this is so childish you’re gonna – I know how juvenile this sounds, but suddenly I thought back to those kids in junior high who made fun of me ’cause I was the smart kid, and I always that was a stupid reason to make fun of somebody, but, boy, they made my life miserable, and I felt like somehow in some mystical way I am sticking it to them by driving this BMW. But now I’m back to – now I got my regular car, regular guy car.
Porter Stansberry: That’s funny. It’s funny how many of the things you do in your life are just still based on trying to overcome all the perceived slights that you suffered growing up.
Tom Woods: Yeah, that’s right, but, boy, did I ever, and it stayed, man.
Porter Stansberry: And then, of course, you meet those people at 20th anniversary or something of your high school reunion and they don’t even remember you. So all their cruelty meant nothing to them.
Aaron Brabham: Well, they were worried about their own issues.
Tom Woods: Yeah, that’s right. That’s right. Actually I find I go to reunions and stuff, and basically everybody just wants to be friends now. Who cares about what happened 20 years ago?
Porter Stansberry: Yeah, I still do. No, I’m teasing. I don’t. Do you have – you’re a very educated economist. You’re a very smart guy, obviously. I’m asked all the time about timing of these things. These things will go on – and when I say “these things,” I mean the runaway fiscal policies of the United States. When is some sense of reality gonna hit the bond market? When are suddenly our trading partners and our foreign investors gonna demand some actual return on their capital?
Tom Woods: Well, it’s a good question because I think if anybody had – I don’t think there’s – there are very many people who thought this would go on for as long as it has, so I think it’s tricky to say, “Oh, it’s bound to come crashing down in the next three weeks,” because it has managed to struggle on for some time. I mean I think it’s not particularly risky to say that between now and the end of the decade something has gotta happen somewhere because even if interest rates stay right where they are – which is a huge if, but let’s say they do – then the U.S. government even under those rosy conditions is still gonna be paying about a trillion dollars a year just on interest payments alone.
Now if interest rates were to double, which was – which is hardly out of the question or even more than that, then you’re facing a French Revolution-type situation, which, of course, the French Revolution got started and they had – because they had to convene the Estates General for the first time in 175 years because they couldn’t even pay to finance their debt, and now you get to the point where you’re dealing with trillions of dollars just in financing charges. How do they get out of – and that’s not even mentioning we all know the unfunded liabilities problem which is not that we owe $222 trillion over the next x number of years; it’s that in order to make good on all those promises we would have to invest $222 trillion right now. That’s the present value of all the payments that’ll have to be made in the future.
Porter Stansberry: Right, it’s absurd, but I understand why you’re saying all that, but I don’t even talk about all those things because those are merely political promises, and they’re never going to be met, but – and I think it takes away from what I see as the more real critical question, which is what about the debts we’re paying interest on right now? We can’t even afford those. If you apply –
Tom Woods: Yeah, that’s right. So we don’t even – yeah, you’re right. We don’t even have to get into this entitlement thing.
Porter Stansberry: Yeah, if you applied a real market rate of interest, say 7 1/2 percent, to the $16 trillion we owe right now, we’re done. Not only that, but so is the state of Illinois. So is the state of California. So is the state of New Jersey.
Tom Woods: Yeah. Oh, absolutely right. I mean and then you’ve got all these – again, not even to mention all the failing pension programs. I mean there are pension programs in a couple dozen of the states that they’re gonna go bust in 2020 or 2025 even assuming they get an eight percent rate of return between now and then, and that’s not gonna happen.
Porter Stansberry: Well, look at General Motors. In my opinion it was the greatest pretend and extend deal of the entire sovereign crisis period, which is now between now and 2008, I mean the last four years, but I don’t know if you saw the deal or not, but GM agreed to get rid of $25 billion in pension obligations by giving the Prudential Life Insurance Company $29 billion, so if you apply that to their entire pension obligation and you look at how much they’ve got in the fund versus how much it would cost to get rid of it, it’s $50 billion in cash today. That’s more than the market value of the entire company post-bankruptcy, and then you realize the government spent $90 billion to, quote, unquote, “save them.” So, in other words, we’re looking at a capital investment of $150 billion plus for an automaker that makes cars that no one wants to buy, and we keep doing things like this.
Tom Woods: Well, it’s true, and the commentator that I was listening to last night at the – or this week when the election returns were coming in, when they got to Michigan they were saying that it looked like based on polling data and public opinion that what put the president over the top was the auto bailout, and so, in other words, doing the completely wrong thing gets you –
Porter Stansberry: Got him elected.
Tom Woods: Yeah.
Porter Stansberry: Yeah. And, of course, I’m sure you know that he not only just did the wrong thing economically; he also violated the – some of the longest standing laws of English common law, the bankruptcy law.
Tom Woods: Oh, yeah. Yeah, the bankruptcy law. Yeah, absolutely.
Porter Stansberry: He stole the collateral from underneath the noses of the secured investors at Chrysler and –
Tom Woods: In order to reward political support.
Porter Stansberry: Of course, and –
Tom Woods: I mean this is a – and this is right at a time when everyone in the financial world is saying or everyone with a brain is saying that one of the reasons the recovery is so slow is the same reason it was so slow during the depression, is a general feeling of uncertainty in the private sector. Well, what could you do worse –
Porter Stansberry: To make it – yeah, it’s just –
Tom Woods: – to take something as hallowed as bankruptcy law and just – and turn it upside down just for –?
Porter Stansberry: And completely ignore it.
Tom Woods: Yeah, just for obvious short-term political gain.
Porter Stansberry: It’s insane. And they gave – I’m sure you know, but they – the other thing they did was in the case of GM they didn’t wipe out the secured creditors. Instead, they took two classes of equal creditors, which was the unsecured bondholders and the unsecured VEBA program, which is the health care benefits trust fund, and they gave the health care benefits trust fund $19 billion in benefits upfront, which is cash and stock, and then they gave the bondholders 10, so they gave the union guys twice as much as they gave the bondholders even though they were equal creditors.
But that’s not all they did ’cause the thing that most people don’t realize that they did was that they gave the union 260 million shares of 9 percent yielding preferred stock, which essentially eats up all of the free cash flow that GM can create, and so the long term – in the long term what’ll happen is the union will get 100 cents on the dollar when the bondholders end up getting 15 cents. It was absolutely outrageous. It was the kinda thing that had it happened in a foreign country our government would have condemned it as crony capitalism, but since it happened in America, we just called it the Democratic Party.
Tom Woods: Yeah, it’s true, and of course you could think of all other sorts of bailouts that went on, not just in the auto industry but obviously in the financial world and so on that was basically bipartisan one way or another, and the auto bailouts, I mean the particular way it went down was Obama, but the desire to do it, there was plenty of bipartisan support for this, so it’s not even like there’s somebody who’s on a white horse who’s gonna gallop in and _____.
Porter Stansberry: No, of course not. The first loans – by the way, the first loans were just as much of a travesty. Those were made by the Bush administration, and what really, really irks me about the loans was that the terms that they accepted were so onerous that the management should have never accepted them because they had a fiduciary responsibility not to subordinate the bondholders they already had. That’s one of the things that people don’t know about corporate governance. If you’re on the board of directors, you have fiduciary obligation to respect the property of the shareholders, and you have a fiduciary obligation to respect the obligations of the bondholders, and they didn’t do it and they should have been sued and they weren’t.
And that’s why when Bear blew up, even though Bear had nothing, Bear told the government, “FU. We have a fiduciary responsibility to our bondholders, and unless you give us all the bailout we want, we’re not gonna take it. We’re gonna just go bankrupt because we’d rather just liquidate. We think the terms will be better for our bondholders if we just liquidate.” And that’s what I was hoping would happen with GM because I believed that if they had liquidated then the prime commercial space in Detroit would not be selling for $5.00 a square foot today, which is what it is. The Penobscot Building sold 6 months ago for $5.00 a square foot. Not rented for $5.00 a square foot; sold. Because –
Tom Woods: Well, also these companies, I mean particularly GM at the time that it was in need of help it looks like it was losing somewhere between $2,000.00 and $4,000.00 per car, so this is like a wealth destruction machine. You pour money into it and you get less – much less value out of it and so rescuing them just means let’s keep this wealth destruction machine going instead of saying, “Maybe the thing needs to be pulled apart and reassembled in some other way.”
Porter Stansberry: We poured $90 billion into it to bail it out. The whole company today is only worth $35 billion, and it’s not a viable business even today ’cause it has $50 billion in pension obligations still. It’s all insane. Tom, I got one more question for you, and I know you got better things to do than talk to a bunch of knuckleheads like us, but I wanted to ask – I’ve got one proposal that could really help change our country, just one simple thing, and I’ve got a couple of pet projects, and I would love to talk about all of them, but I just want to say one thing, okay?
Tom Woods: All right.
Porter Stansberry: And this is it and I wanna know the answer from you. My one thing if you’re just gonna change one thing about America it’s real simple. You make people who have a fiduciary obligation personally liable, so if you’re on the board of directors of Citigroup and the government has to bail out your depositors then you go bankrupt first. You do that one thing and the entire financial market changes forever.
Banks stop doing stupid things with other people’s money immediately, and after that because they’re gonna make better decisions, the whole capital system is gonna work better. Capital will be much wiser – be allocated on a much wiser basis and the economy would improve greatly. What’s your one thing you – you’re king for a day. Wave your magic wand. What changes in the country?
Tom Woods: Oh, geez, all right. ’Cause I like yours ’cause if the government is gonna make these guarantees, which they probably shouldn’t, but if they’re going to then they should have some kind of rules or otherwise people will just act stupidly because they know they have the guarantee, so I have no problem with them – with your suggestion and them requiring that.
Porter Stansberry: And, by the way, they get paid gazillions of dollars to serve on these boards. Why don’t they actually do something?
Tom Woods: Yeah, right. Exactly. Exactly. That’s right. That’s right. So what would my one thing – I mean I don’t know. Assuming I can’t make a hugely sweeping change like shut everything down or whatever, if you’re just saying what would my one reform be, I don’t know. Maybe it would be no government borrowing. That could be one. I don’t know.
Maybe it would be absolutely no government guarantees or bailouts of any kind and we actually mean it, like there’ll be some metaphysical guarantee that that would never happen. Hard for me to know. I mean it could also be nobody – from now on nobody’s allowed to initiate violence, and then how would the government get anything done?
Porter Stansberry: There you go. That would be wonderful.
Aaron Brabham: Yeah, that’s good ’cause they are the biggest bully.
Porter Stansberry: So if you don’t pay your taxes they’re just gonna come over and yell at you.
Tom Woods: Yeah, they’re come over and say, “Look, here’s our brochure. Here are these services we offer. If you want to donate, that would be fine.”
Porter Stansberry: Yeah. Well, there are only two actual moral laws, as far as I’m concerned. I know everyone has their own little prejudices, but the two that make the most sense are to never initiate violence and, secondly, do all the things that you promise to do, and if the world worked that way then we wouldn’t need any government at all.
Tom Woods: Well, I would say I’m all in favor of government as long as there’s no violence and no monopolies by the government. Otherwise, do what you want.
Porter Stansberry: Sounds great. Tom, listen, it was a real pleasure. Thanks for stopping by. Hope that you’ll come back when the movie comes out and tell us more about it.
Tom Woods: Absolutely. Check out thebubblefilm.com in the meantime. Thank you, guys.
Porter Stansberry: We’ll do it.
Aaron Brabham: Thank you so much.
Porter Stansberry: Have a great day.
Tom Woods: Okay, thanks.
Aaron Brabham: Younger guy, too.
Porter Stansberry: I tell you, all the –
Aaron Brabham: Born in ’72. He’s a younger guy. Very sharp.
Porter Stansberry: Yeah, my age. My age.
Aaron Brabham: Yeah.
Porter Stansberry: Yeah, younger guy, 40.
Aaron Brabham: Well –
Porter Stansberry: We’re not young anymore.
Aaron Brabham: I still think that I’m 20s.
Porter Stansberry: I tell you, it just always happens this way. The bright guy, the bright Libertarian guys, always so classy, always so easy to talk to, wonderful people.
Aaron Brabham: A little different from Dinesh?
Porter Stansberry: Oh, geez. Way different than Dinesh.
Aaron Brabham: He’s our favorite whipping boy now.
Porter Stansberry: God, he’s awful.
Aaron Brabham: He’s like our GM whipping boy.
Porter Stansberry: You know what? I’ll tell you the truth. I’m gonna celebrate his death.
Aaron Brabham: Whoa. Easy, buddy.
Porter Stansberry: I think I got a good chance to outlive him, and when he dies I’ll actually pop a bottle of champagne and raise a toast.
Aaron Brabham: To the ignoramus.
Porter Stansberry: Just to the general scumbagness of that guy.
Aaron Brabham: He’s a pretty dirty character. All right, Porter, we got a couple of segments. We’re getting into mailbag. We’re gonna get outta here. U.S. regulators are threatening to fine Barclays $470 million to settle allegations that the bank and four traders manipulated California electricity markets. The fine would exceed the sum Barclays paid for the LIBOR rigging rate scandal over the summer. Just another cheap way to get some money.
Porter Stansberry: I’m lost in the whole deal. I mean the – all I can tell you is that the California electricity rules were so poorly drawn up that it was impossible for you not to manipulate them if you had any interest at all in serving your customers. I’m gonna leave it at that because that topic, you could spend your whole life studying it; you would never get to the bottom of it. Let’s just move on.
Aaron Brabham: What was the – real quick though for the – our listeners that haven’t seen it, what was the Enron documentary that was really good that had that piece _____ –
Porter Stansberry: The Smartest Guys in the Room.
Aaron Brabham: Smartest Guys in the Room.
Porter Stansberry: And, look, lots of companies did things that on paper look terrible to the customers, but they didn’t really have any choice because they were actually following the rules that had been written. The rules were that there was a separate market for wholesale power and a separate market for retail power, and the retail prices were regulated and the wholesale market wasn’t, and, as a result, the supply dried up to the wholesale market because nobody could make money selling prices at the – prices that the regulators set in California, and so therefore there was a shortage, and when there was a shortage, people gouged the hell outta the state of California. That’s what happened, but it’s not – in my –
Aaron Brabham: It’s the regulators. It was fair game.
Porter Stansberry: In my opinion if you tell me you’re only gonna pay me a dollar for gas and gas costs me $3.00 to make, I’m gonna say, “FU. I’m not selling you gas at that price ’cause I’ll go bankrupt if I try to.” And so then when you run outta gas and you say, “I’ll pay whatever; just give me the gas,” well, now I’m gonna stick it to you. Now they’re alleging that that’s a crime, and I’m telling you that’s just good business.
Aaron Brabham: Just play by the rules.
Porter Stansberry: I’m playing by the rules you set up, so the thing infuriates me because everyone says that the failure of the electricity markets in California was a failure of deregulation. It was never deregulated.
Aaron Brabham: Failure of regulation.
Porter Stansberry: They called socialist nonsense deregulation. It wasn’t ever deregulated. I don’t know wanna – I’ve talked about this so many times. I’m actually blue in the face about it. I don’t even wanna talk about it anymore. We are never going to discuss religion on the show again, and we’re never going to discuss California legislation ever again.
Aaron Brabham: Okay, fair enough. Fair enough.
Porter Stansberry: I’m done.
Aaron Brabham: That was the first time –
Porter Stansberry: Just stop.
Aaron Brabham: That was the first time we talked about it, but I get the point.
Porter Stansberry: Stop it. Just stop.
Aaron Brabham: All right, you’re gonna bust a vessel in your head. Take it easy, big man. A Maryland woman, actually a Dundalk woman –
Porter Stansberry: Oh, old Dundalk.
Aaron Brabham: Dundalk is good blue collar part. That was the big port workers back in the day, right?
Porter Stansberry: It’s a great old blue collar town now dominated by some not-so-savory characters, unfortunately.
Aaron Brabham: Yeah, a bunch of Obama supporters that are happy to live on the welfare rolls.
Porter Stansberry: Lots of “EBT accepted” signs out in Dundalk.
Aaron Brabham: You can buy your blue crabs with them. All right, anyway, so she’s so hardworking; makes like $40,000.00 a year. She is one of these obsessive people that decided to put a spreadsheet in for every single tax after her income tax of –
Porter Stansberry: Every sales tax, every use fee.
Aaron Brabham: Every hidden tax.
Porter Stansberry: Yeah, I love it.
Aaron Brabham: So she looked at her cell phone bill; found five taxes on the cell phone bill. One of them was the one we talked about that feeds the Obama phone, universal service charge.
Porter Stansberry: Right, universal service, yeah. Otherwise known as Obama phone.
Aaron Brabham: Otherwise known as Obama phone, which of course we’ll talk about it goes –
Porter Stansberry: I’m gonna get me an Obama phone.
Aaron Brabham: – way back before that, so –
Porter Stansberry: Everybody in Cincinnati is getting an Obama phone. You guys gotta type onto YouTube and write in – type in Obama phone and watch the video that comes up. It’s hysterical.
Aaron Brabham: Have to. The lady that was paid $11.00 an hour to go out there.
Porter Stansberry: And then it’s no longer a mystery why Obama won Ohio.
Aaron Brabham: No longer a mystery. She was paid to do that.
Porter Stansberry: There was no Romney phone available. It was only Obama. But, of course, it was – if it was Romney it’d have to be a horse or something nice. I got my Romney horse.
Aaron Brabham: Yeah, a gold-plated phone or something.
Porter Stansberry: I got my Romney jumper.
Aaron Brabham: Oh, yeah, awesome.
Porter Stansberry: I got my Romney Mercedes.
Aaron Brabham: So this lady looked at some of the taxes and, by the way, Maryland is great. We have the Maryland alcohol tax, the gas tax, the state, federal mandatory union dues, the 9-1-1 fee, excise taxes, et cetera, et cetera. She added it all up ’cause she thought, “Well, I’m just getting taxed for my income and then the rest is just kinda consumption type of things.”
Porter Stansberry: Nah.
Aaron Brabham: No. Twenty-six thousand dollars year to date is where she’s at, and she considers herself fiscally conservative.
Porter Stansberry: Well, everyone considers themselves fiscally conservative, but –
Aaron Brabham: There’s no avoiding those taxes, though. Everything we do is triple, quadruple, quintuple taxed.
Porter Stansberry: It’s amazing.
Aaron Brabham: It’s amazing.
Porter Stansberry: It is amazing.
Aaron Brabham: All right, so the U.S. Justice Department shut down – you like this? – Bal Harbour’s celebrated federal forfeiture program and ordered the police to return more than $4 million, slapping the agency with crushing sanctions for tapping into drug money to pay for first class flights, luxury car rentals and payments.
Porter Stansberry: They should send those guys to jail.
Aaron Brabham: Oh, they’re not gonna do that.
Porter Stansberry: Geez.
Aaron Brabham: But they did shut down the program.
Porter Stansberry: Those guys were literally thugs with badges operating around the country shaking down honest drug dealers.
Aaron Brabham: Well, I don’t know about honest, but shaking down legal drug dealers.
Porter Stansberry: Once upon a time I knew the big cocaine distributor in Miami Beach. He happened to live in the same building I lived in. He, of course, lived in the penthouse. I lived somewhere below him. He was actually a really smart, honest businessman. He was Colombian and his dad had been one of the violent cocaine cowboy kinda characters in Miami Beach in the early ’80s.
But he said, “Look, we haven’t had any violence in a long time. We don’t do that anymore, and now it’s kind of a closed circle. Everybody knows each other. Everyone’s known each other for a few decades. There’s no trouble, and we’re just meeting a market need.”
Aaron Brabham: I can’t remember if it was Malcolm Gladwell’s – one of his books they talked about the drug dealing or maybe – it’s Freakonomics where they talk about the ______.
Porter Stansberry: This is not a guy standing on a street corner.
Aaron Brabham: No. What they found was in the hierarchy all the way down it runs exactly like a corporation. The guy sitting at the top is your CFO. He’s the smartest accounts payable and receivable guy, and all the guys on the bottom, your thugs out in the street, which, by the way, they’re happy to have territory –
Porter Stansberry: No, this guy didn’t – this guy was not serving that market. This guy was serving the hotel concierge, club owners –
Aaron Brabham: No, he was high in cocaine. I got it.
Porter Stansberry: Yeah, he was serving very wealthy people –
Aaron Brabham: He had his elite people.
Porter Stansberry: – providing a service.
Aaron Brabham: By the way, on that note, congrats. This is coming from me. Congrats to Colorado and Washington for passing the recreational use of marijuana yesterday.
Porter Stansberry: Oh, that’s gonna destroy America.
Aaron Brabham: You think so? In what way?
Porter Stansberry: Think how many kids are gonna start smoking marijuana ’cause now it’s legal.
Aaron Brabham: “Dude, marijuana, I can get it. I walk down the hall.” Yeah, okay, I got – I was like, what, did you lose your mind for a second?
Porter Stansberry: No, of course that’s big.
Aaron Brabham: The good news is they’re gonna triple tax it, so they’ll be happy about that.
Porter Stansberry: Of course, I’m kidding.
Aaron Brabham: At least the states can get a little bit of money off it.
Porter Stansberry: They’re already smoking marijuana. It’s not a crime. But let me tell you what happened. I got home one day from work. Actually I worked outta my home in Miami, so I was not coming home. I was coming home from somewhere. I don’t know where. I was outta the country somewhere and I coming back from a trip, whatever, and there were cops all over the building. Could not get within 100 yards of the building. They raided the whole building with 100 cops, and they dragged him out in handcuffs, and it was – that’s when I realized that you don’t wanna have any of these kinds of side businesses.
Aaron Brabham: No, not at all. You don’t even wanna chance it man.
Porter Stansberry: Scary. Scary.
Aaron Brabham: You don’t wanna risk it. You don’t wanna have anything to do with it.
Porter Stansberry: And, by the way, all these states that are legalizing marijuana it’s still against the federal law –
Aaron Brabham: Absolutely, and I’m curious to see what happens.
Porter Stansberry: – which means the feds could come in and bust you any time they want. Imagine the illegal graph that’s going on right now because the local marijuana dispensaries and the federal agents. The federal agent stops by every Monday, collects 500 bucks.
Aaron Brabham: Most certainly.
Porter Stansberry: Says, “You don’t pay me? I’m gonna bust you.”
Aaron Brabham: Most certainly, and another – one of the big hindrances for these legitimate state businesses is federal government said, “Anyone that sets up a bank account that’s FDIC-insured, that’s money laundering for drugs. Your ass is ours.”
Porter Stansberry: It’s crazy.
Aaron Brabham: So it’s – people know they carry massive amounts of cash. You have no – no doubt in my mind these federal agents stop by and are on the dole – no doubt in my mind.
Porter Stansberry: Pay me.
Aaron Brabham: It’s disgusting.
Porter Stansberry: By the way, just for the record, the cops that busted him were not Miami Beach PD.
Aaron Brabham: No, they were big dogs. ATFs.
Porter Stansberry: It was Miami troopers, state troopers.
Aaron Brabham: Yeah, you don’t want any of that happen.
Porter Stansberry: And just ’cause they own – this guy owned all the cops on the beach, when you go to his parties, who’s up in the penthouse partying?
Aaron Brabham: The cops.
Porter Stansberry: All the cops.
Aaron Brabham: Well, they’re living a expensive lifestyle on a cop budget.
Porter Stansberry: The local cops are serving the needs of the local population, and the local population in Miami Beach needs a lotta cocaine. What’s wrong with that?
Aaron Brabham: It’s something that’s gonna happen. All right, one thing I forgot to talk about earlier, so researchers said two-thirds of the jobs in this country have gone to immigrants during Obama’s four years, so obviously immigrants are real mobile and they’re doing big things with their lives or whatever, so it doesn’t shock me in the least when we see the voter turnout and the results going for Obama.
Porter Stansberry: Hey, you know what? You want a job? Work harder than an immigrant. That’s my advice.
Aaron Brabham: Good luck with that, by the way, ’cause they’re gonna outwork 99.9 percent of all Americans always.
Porter Stansberry: Fine thing. There’s nothing in the Constitution that says you have the right to a job. You want a job? Work hard.
Aaron Brabham: No, earn it.
Porter Stansberry: Yeah, and just stop. Stop crying. I don’t wanna hear it. Get a job.
Aaron Brabham: All right, let’s move on to the feedback. Actually before we get to that, winning the war in middle class, one more segment here. So the capital gains tax rate will increase. Did you see where George Lucas sold his –?
Porter Stansberry: Yeah, of course. Everyone’s gonna sell.
Aaron Brabham: Everybody’s doing it.
Porter Stansberry: I’m selling. I’m out.
Aaron Brabham: It’s a mass exodus –
Porter Stansberry: No, I’m kidding.
Aaron Brabham: – before the end of December for your business.
Porter Stansberry: No, no, no. I’m young enough that I – hopefully I got 20 more years in me to work, and hopefully by the time I’m 60 everyone will figure out that capital gains taxes don’t work. They don’t work because when they’re high people won’t sell, so you don’t collect any revenue, ding-dongs.
Aaron Brabham: I guess what disturbs me about this is we have some really sharp entrepreneurs out there selling their businesses because the government’s sticking their nose in it.
Porter Stansberry: Yeah, by the way, you’re the government. You want George Lucas working.
Aaron Brabham: That’s what I mean. I mean you want the sharpest individuals out there working. That’s what disturbs me. Don’t go fire sale your business.
Porter Stansberry: George Lucas created the Star Wars franchise, which is one of the greatest entertainment franchises in history, that’s made money all around the world – all around the world. Spread America's prestige and power all around the world, and so what are you gonna do? You’re gonna tax him so he leaves the business. You ding-dongs.
Aaron Brabham: I think Disney stole the business for $4 billion or whatever it was. I think they stole it.
Porter Stansberry: It’s ding-dongs.
Aaron Brabham: Ridiculous.
Porter Stansberry: Just stop.
Aaron Brabham: All right, Tim, we got some voice mails. Is that correct?
Porter Stansberry: What a bunch of donkeys.
Aaron Brabham: Muppets.
Porter Stansberry: They’re not even Muppets.
Male 2: Hey, Abram and Porter, this is Mark –
Aaron Brabham: Abram.
Porter Stansberry: Abram.
Male 2: – one of your biggest fans.
Porter Stansberry: Who’s Abram? Did he –?
Male 2: Just wanted your guys take on this $43 trillion suit coming against the government and all the high-level government officials and all the banksters and where you think this thing is gonna end up, particularly with the time with the two murdered and the conspiracy, maybe factual, that’s going on with these ______ –
Porter Stansberry: I’ve already lost it.
Aaron Brabham: Yeah, I missed it and just –
Male 2: – that were murdered in New York, the children of the CNBC executive.
Porter Stansberry: I don’t know anything about it. Sorry.
Aaron Brabham: Yeah. All right, next. And it’s Aaron, by the way.
Porter Stansberry: What did he call you, Brad?
Aaron Brabham: Abram.
Male 3: I really liked, Porter, the recent rant on young people trying to save up and become a millionaire by their 40. I don’t think I’m gonna make it because I don’t have that same sorta dedication like Porter did, and a lotta guys out there ____ ____ my life now –
Porter Stansberry: No, but you’re gonna have to do – I screwed the math on that.
Male 3: – and if I become a millionaire by the time I’m 60, that’s fine for me.
Porter Stansberry: Yeah, well, you might do better than I said because I screwed up the compounding. There was an error in my spreadsheet I didn’t notice. It turns out the return on your investments is as important as your raises, so I gotta work on that.
Aaron Brabham: So what do you need for your return on investments then to –?
Porter Stansberry: You don’t need to do that well.
Aaron Brabham: Not much, right?
Porter Stansberry: No, you need – what – it’s really important to get a ten percent raise every year. If you start out making $9.50 an hour and you get a ten percent raise every year, you’ll be a very rich man by the time you’re 30. No question about it. And that’s just if you work hard. It doesn’t require college. Just work hard.
Aaron Brabham: Nothing tricky, nothing fancy, starting at $9.50.
Porter Stansberry: And you can definitely be a millionaire by the time you’re 40, even if you’re only averaging returns of somewhere between 8 and 12 percent as long as you save half your income, which no one ever does.
Aaron Brabham: No one.
Porter Stansberry: No one. I do it.
Aaron Brabham: I do it. Next –
Porter Stansberry: I’ve always done it.
Aaron Brabham: I live so ridiculously below my means now it’s shocking to me, which I love.
Porter Stansberry: I lived in the ghetto in Baltimore for about four years paying $250.00 a month to share a ghetto apartment.
Aaron Brabham: That’s rough.
Porter Stansberry: Yeah.
Aaron Brabham: I’m living like a king there.
Porter Stansberry: There were prostitutes on my step, not for me.
Aaron Brabham: Not yours. You couldn’t afford them and ____ ____.
Porter Stansberry: No, these were not the kinda girls I was looking for.
Aaron Brabham: Yeah. No, no.
Porter Stansberry: These are crack vials and when I would go jogging in the neighborhood they would say, “Keep running, whitey.”
Aaron Brabham: It does motivate you to keep shredded because you’re gonna run like crazy.
Porter Stansberry: One time a little three-year-old out trick-or-treating, I was running Halloween, early Halloween, he asked his mother if I was a bear.
Aaron Brabham: You had no shirt on.
Porter Stansberry: Had no shirt on.
Aaron Brabham: You know what? That’s the closest bear he’ll ever see in his life, and, by the way, in some sects of this world – S-E-C-T-S – some subcultures, you are a bear technically. I’m not gonna go there though, buddy.
Porter Stansberry: He literally did. He said, “Mommy, is that a bear?” I have a lotta testosterone.
Aaron Brabham: Yes, you do, and I was made fun of for man-scaping. Thank you very much. I’m not a real man. I already admit that. If you weigh below 150 pounds I don’t think you can be classified as a real man, by the way, although I am shredded, but that’s fine. All right, I’m gonna rapid-fire a couple of things at you, Porter. One guy, Steven, requested, “What do you think about whole life insurance through mutual insurance companies as an option for savings?” He knows you like insurance companies.
Porter Stansberry: No.
Aaron Brabham: Yeah. Investing in them is great. Getting their products, not so great.
Porter Stansberry: Not so great.
Aaron Brabham: That’s why they have the good businesses.
Porter Stansberry: Now hang on. Hang on. There are, of course, exceptions to that flat no, so it depends on some things, but in general you’re much better off to do your own saving and investing and not to rely on an insurance company to do it for you.
Aaron Brabham: All right. “Porter talks a lot about staying out of debt, but we both know Porter wouldn’t be where he is today without raising substantial equity from investors. Can you have Porter talk –?”
Porter Stansberry: Huh.
Aaron Brabham: Yeah, this is good. “Can you have Porter talk more about how to find and raise money from investors? I have a small publishing business that did about $500,000.00 last year in revenues, about $150,000.00 net, but took a hit this year because I got sick. I know I could provide a good return for investors and run my business a lot easier with investment capital.” Any advice for him?
Porter Stansberry: Yeah, don’t sell equity in your business ever. Don’t do it.
Aaron Brabham: Go out and hire the best people that you can to build your brand.
Porter Stansberry: So it took $36,000.00 for me to start my company – $36,000.00. We have been in the black every month since. I would never sell equity in my company ever. If you have a good business you’d never sell equity in it, and as far as having it easier to have equity investors –
Aaron Brabham: It makes it harder, I would think.
Porter Stansberry: No, I mean whatever. If that’s important to you to have it easy, fine, but you’re gonna pay unbelievable sums of money to have it easy. So let’s say I wanted to have it easy and let’s say I had raised a million dollars in equity capital and I had sold – I mean let’s say I sold 25 percent of my business, which didn’t exist and no one would pay a million dollars for, but let’s say I had sold 25 percent for a million dollars. Well, how much would I have paid them back already in dividends? No, stop. Stop. And, by the way, being an entrepreneur and starting a business, there’s nothing easy about it. If you want something easy go get a job.
Aaron Brabham: Go become an employee.
Porter Stansberry: Stop.
Aaron Brabham: Kevin said, “Have you considered a newsletter specifically specializing in international stocks?”
Porter Stansberry: No. I got there before you could.
Aaron Brabham: Yeah, I knew it. All right. “Could you please discuss the –
Porter Stansberry: Why?
Aaron Brabham: – merits and drawbacks of a shareholder cumulative voting system?”
Porter Stansberry: Why? Why?
Aaron Brabham: All right.
Porter Stansberry: Why?
Aaron Brabham: How’d you know which ones I was gonna ask?
Porter Stansberry: Why? I didn’t. I just knew where that was going.
Aaron Brabham: Okay.
Porter Stansberry: Why don’t we specifically recommend international stocks? Why?
Aaron Brabham: Well, for my purpose it’s damn near impossible to trade on those exchanges as an investor.
Porter Stansberry: You can’t buy the shares in the U.S. now.
Aaron Brabham: That’s it.
Porter Stansberry: What about I’ve got interactive brokers. I’ve got international assets and Jeff –
Aaron Brabham: They will rape and pillage your account for commissions on those, by the way.
Porter Stansberry: I am not saying that. I don’t –
Aaron Brabham: No, they will.
Porter Stansberry: I don’t know if that’s true or not, but what I do know is that it’s hard enough to get enough subscribers about – when you’re writing about stocks that they can buy. There’s no way you’re gonna keep subscribers when you’re writing about stocks they can’t buy. That simple.
Aaron Brabham: Plus for me, I believe personally as an investor that the United States has better accounting standards for the most part than they would overseas, but that’s a big –
Porter Stansberry: Blah, blah, blah. That’s not necessarily true, but the – but having said all that, guess what we’re doing?
Aaron Brabham: You’re gonna do it.
Porter Stansberry: Yeah, of course we are.
Aaron Brabham: I know. I knew you were. That’s why I was like, no, maybe he scrapped it.
Porter Stansberry: No, we’re gonna do it.
Aaron Brabham: Is it international equities? What are you thinking?
Porter Stansberry: We’re gonna do – I’m gonna build – I want – I like – I’m a glutton for punishment. I like doing things that everyone knows can’t be done, so when we started Extreme Value everyone said, “You cannot publish a high-quality value investing newsletter. No one will buy it, and I said, “Well, we’re gonna charge a lot for it, so we’re only gonna need a couple of subscribers.” And then they said, “Well, then it really won’t work.” And they were right for about five years, but now we’ve got 7,000 subscribers, and at $1,000.00 a year that’s a pretty good business – pretty good. So we’re gonna start International Extreme Value, and we’re gonna have even less people interested in it, and I’ll probably lose money for seven years this time, but you gotta do something.
Aaron Brabham: Well, we’ve got one. Kevin, get ready. We’re gonna –
Porter Stansberry: Oh, by the way, he won’t subscribe.
Aaron Brabham: We’re gonna get you _____. He’ll try it for 30 days, won’t implement anything, and then cancel it.
Porter Stansberry: No, he won’t subscribe. No one will subscribe to this. It’s a letter I’m publishing just for myself.
Aaron Brabham: You are a glutton for punishment. Cheepa said, “I have not missed a single show on your radio. I love to listen to it while I’m cooking. Your last episode gave me some good laughs. Aaron, you always do a good job.” Wonder why I picked this one to read, right?
Porter Stansberry: Aaron always does a good job. What happened to Lapdog?
Aaron Brabham: I’m glad I got rid of that guy. I hate that guy. Don’t ever call in again ever. “No wonder Porter singled you out to sit by him on stage. Love your laugh, Porter. Keep up the good stuff. Oh, please forward this message to Frank Curzio. He needs to honor the bet. Pay it, Frank.”
Porter Stansberry: I agree.
Aaron Brabham: Frank – so we –
Porter Stansberry: I’m gonna start calling him Welsh Curzio.
Aaron Brabham: Oh, Welsh Curzio.
Porter Stansberry: Welsh Curzio, WC.
Aaron Brabham: So Niresh forwarded this feedback from Cheepa, Chepa – sorry, I don’t know – and –
Porter Stansberry: What did the welsher say?
Aaron Brabham: And welsher wrote back, “Our bet was for $80.00. You owe me $50.00.” When Steven was like – Steven Belize is like, “You’re crazy. I was there help crafting the text message to you. He totally agreed with the 80, if you can break 83. He is the biggest welsher ever. Frank, you’re a scumbag.” You are our scumbag nominee. That’s great. Frank Curzio has just been nominated as a scumbag for Stansberry Radio.
Porter Stansberry: I think I –
Aaron Brabham: Did I just blow out the mic?
Porter Stansberry: I think I blew out the mic. I think we know –
Aaron Brabham: All right, we’re back.
Porter Stansberry: I think we know who’s gonna win the scumbag of the year.
Aaron Brabham: Frank, good ole Frank Curzio.
Porter Stansberry: You better pay up, Frank. Welsh, Welsh Curzio, WC.
Aaron Brabham: Yeah, ole Welsh Curzio.
Porter Stansberry: By the way, that’s the loudest you’ve ever been on the radio show.
Aaron Brabham: I got fired up then. I started to get fired up. I started getting into it, man. What can I say? Well, that’s our show for today. Oh, next week we have Robert Greene on, which we prerecorded the interview, by the way, ’cause he’s releasing his new book, Mastery.
Porter Stansberry: This is a great interview. Don’t miss it.
Aaron Brabham: Yeah, he’s excellent.
Porter Stansberry: He’s a brilliant guy.
Aaron Brabham: He’s the author of 48 Laws of Power. We talked about it on the live show. He’s great. By the way, Porter, according to Robert Greene, is a master. Well, I’ll let you guys judge for yourself.
Porter Stansberry: I doubt it.
Aaron Brabham: Special thanks to Tom Woods for joining us on the show. Look forward to seeing his documentary.
Porter Stansberry: Where am I gonna be next week?
Aaron Brabham: You should be here. We just don’t have to do that interview that day, which is fine, but we’ll still do the show.
Porter Stansberry: But we’ve already recorded the interview.
Aaron Brabham: Yeah, so we got that part done. It’ll be easy.
Porter Stansberry: Am I gonna be here next – it seems like I always go somewhere. Where am I going next week?
Aaron Brabham: By the way, Porter, I’ve been –
Porter Stansberry: No, I’m gonna be here.
Aaron Brabham: – you’ve put me in a little basement. You’ve put me to work and the Stansberry Radio, I pretty much have all the details ready. We’re already lining up great guests for our premium podcast, subscribers only. I think our first one is gonna be the Seven Secrets for Gold Coin Investing.
Porter Stansberry: Awesome.
Aaron Brabham: And after that we’re gonna probably get to the investing in commercial –
Porter Stansberry: Excellent.
Aaron Brabham: – achieving 14 percent –
Porter Stansberry: Yeah, my apartment guys.
Aaron Brabham: Yeah, which will be good, so –
Porter Stansberry: Now, listen, I want everybody to e mail us this week, and we’re gonna send you a bumper sticker if you will e mail us and give us an address to send it to you and call and record something on our line. You gotta call. We need a voice and an e mail for you. And the other thing I really wanna encourage you guys all to do is pass along my promotion that I wrote, the sales letter I wrote, for the third term about Obama.
Pass it along to as many people as you know. I don’t care whether they buy a newsletter or not. That’s not the point. I want you to get this thing viral for us because I want there to be a national discussion about the risks that Obama poses because of his coalition to our normal democratic system. I want to become a lightning rod about that issue, and I need your help to do it.
Aaron Brabham: And I tell you what, if you don’t receive e mails from us, go to stansberryradio.com and there’s a couple of e mail boxes. Put your e mail in. We don’t spam you. We don’t do any of that stuff. We actually have great offers for you and entertaining things. Also, we are gonna set it up on obamathirdterm.com. We got the URL.
Porter Stansberry: Oh, nice. So if you call us, give us a voice mail. Tell us everything you don’t like about us. I don’t care what you say. And then give us an e mail so that we’ll know you left a message and everything and we’ll know your address. Just don’t – see, if you say your address on the recording where – it’s too hard to transcribe it. We’re gonna botch it, so make – call us at the 800 number, send us an e mail that you did so.
We’ll send you a bumper sticker for Stansberry Radio. And forward my third term stuff to all your friends, and go ahead and needle them. Go ahead and sizzle them. Go ahead and send it to all the people –
Aaron Brabham: Challenge them.
Porter Stansberry: Go ahead and send it to all the people who’s gonna tell you, “Oh, this guy’s all full of nonsense.” Well, then have them read it and then tell me I’m full of nonsense.
Aaron Brabham: Yeah, we’ll see. All right, guys, thanks for being listeners today. We’ll catch you next week.
Porter Stansberry: Bye.
Male 1: Stansberry Radio is a purely public broadcast and is not intended to be personalized financial advice for any individual specific situation. Each individual’s financial situation is unique, and Stansberry Radio should not be relied upon and/or considered as personalized advice. Stansberry Radio is not licensed to render personalized advice and should be considered simply the public opinions of Stansberry Radio and its guests. Recommendations on specific financial securities are not intended to address any listener’s particular financial situation.
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