MSNBC Battles Stansberry Radio

When it comes to capitalism, MSNBC host Chris Hayes and Porter share more in common than you may think.

MSNBC host and Editor of The Nation, Chris Hayes joins Stansberry Radio to discuss meritocracies, the appropriate percentage the government should spend on public programs, and how to solve the "too big to fail" bailouts.

 

Another scumbag is named to the National Scumbag Registry and Porter and Aaron respond to listener comments and voicemails.

Aaron Brabham:         Welcome to Stansberry Radio. I’m Aaron Brabham. Porter?

Porter Stansberry:       I’m here.

Aaron Brabham:         It’s good to see you, buddy.

Porter Stansberry:       On time as always.

Aaron Brabham:         Today we’re interviewing Chris Hayes. Chris hosts Up With Chris Hayes, a weekend political opinion show on MSNBC. He’s gonna be joining us in about ten minutes or so.

Porter, we’ve been receiving a ton of feedback through feedback@StansberryRadio.com, as well as some calls at our toll free number, 855-SARADO. That’s 855-727-2346. We appreciate all the feedback, positive, negative, questions, doesn’t matter to us. Just keep bringing the questions and the heat. Also, we do want to hear from anyone in our listener audience that has any experience with politicians, particularly scumbag politicians, on a local to a national level where they’ve basically seen them being corrupt or affecting you or your community in any way that’s negative.

Before Chris joins us, I’d like to talk about a revelation I had in Vegas.

Porter Stansberry:       I’ve been waiting to hear about Vegas since you left. Where’d you go, the Electronic Daisy Festival?

Aaron Brabham:         Electric Daisy Carnival.

Porter Stansberry:       I’m sorry. Sorry. It’s otherwise known as the world’s largest collection of unemployed freaks.

Aaron Brabham:         I’m pretty sure that’d be correct. Except for my friends, who talked me into going. And it was a three-day event that, of course, I bought the VIP ticket for. Being very optimistic, it started at 8:00 PM and went to 6:00 AM, and I made it one night and realized I’m the old guy.

Porter Stansberry:       You’re the old guy in the club.

Aaron Brabham:         I’m the old guy.

Porter Stansberry:       And I don’t think you do a lot of hard drugs.

Aaron Brabham:         Nope.

Porter Stansberry:       And I don’t think you’re unemployed.

Aaron Brabham:         Nope.

Porter Stansberry:       And you don’t have purple hair.

Aaron Brabham:         Nope.

Porter Stansberry:       And you don’t have glow-in-the-dark tattoos.

Aaron Brabham:         Nope.

Porter Stansberry:       Wrong crowd for you.

Aaron Brabham:         Wrong crowd for me. I did rock my loudmouth golf pants, which people really loved, by the way. And I brought two extra pair, and my buddies thought it was the greatest thing ever, so I just gave it to them. Like, here, anytime you guys attend raves, have at it. They were the hits of the party.

Porter Stansberry:       Yeah. They’re not so popular at the Baltimore Country Club.

Aaron Brabham:         Yeah. I know. I know. I really tried to do like the khaki-style ones there, and –

Porter Stansberry:       Can’t.

Aaron Brabham:         – I still get evil looks.

Porter Stansberry:       Yeah. You can’t do it. Well, what can I tell you?  You’re – Aaron, you just had your birthday at the EDC.

Aaron Brabham:         Correct.

Porter Stansberry:       So you are now 39, 38 years old.

Aaron Brabham:         38.

Porter Stansberry:       Sorry. Didn’t mean to age you.

Aaron Brabham:         That’s okay.

Porter Stansberry:       38 years old. So, it’s – no one there – you were probably the only guy there over 28. You’re ten years out of that.

Aaron Brabham:         Yeah. Disturbingly, there were some dudes in their 50s, which was really creepy, so, yeah, that’s –

Porter Stansberry:       Time to move on.

Aaron Brabham:         I was the guy that realized that was my age and it was time to move on.

Porter Stansberry:       Yes.

Aaron Brabham:         Those guys haven’t realized that yet, so.

Porter Stansberry:       It’s time for you to drop the clubs in the middle of the desert filled with Ecstasy-imbibing –

Aaron Brabham:         Yes.

Porter Stansberry:       – young people, and start joining the clubs of guys your own age doing things that we do, like play golf and poker.

Aaron Brabham:         I think I’m on the verge of that.

Porter Stansberry:       Good.

Aaron Brabham:         I’m actually growing up. So here’s my revelation, because one thing you always talk about is gambling is for the statistically illiterate.

Porter Stansberry:       All right. I was flaming you on Facebook about this, right?

Aaron Brabham:         Yeah. ‘Cause I tagged myself in Aria on Facebook and I was playing blackjack, and you’re like, oh, that’s fine. I’m gonna bring the heat to you. So.

Porter Stansberry:       Entertainer for the statistically illiterate.

Aaron Brabham:         Absolutely. So I sat down and played blackjack probably eight to ten different times on different occasions. I put $120.00 down. That’s what I was willing to lose. That’s fine. Get a couple of drinks. Whatever. And I never lost. Actually, I never got up and left the table without winning. But I never played for more than 15 minutes, either. Just because my other friends don’t play. I was just doing it just to kinda kill time and –

Porter Stansberry:       Quick through.

Aaron Brabham:         I do like a little action. I probably finished up about 900 bucks. So it was a good trip.

Porter Stansberry:       You finished up 900 bucks this trip.

Aaron Brabham:         That’s right.

Porter Stansberry:       Wow.

Aaron Brabham:         At least $900.00.

Porter Stansberry:       Well, you shoulda kept playing.

Aaron Brabham:         Nah, no way. No way. See. No.

Porter Stansberry:       [Laughter]

Aaron Brabham:         No. Because I stand in the cashier’s line when I’m up like $40.00, $50.00, say, $70.00 or $80.00 each time I played, and people were like, I was up $200.00 and you know.

Porter Stansberry:       Yes.

Porter Stansberry:       I lost it all.

Porter Stansberry:       Of course.

Aaron Brabham:         Then I’m like, of course you did. Why wouldn’t you?

Porter Stansberry:       Yeah.

Aaron Brabham:         So but here’s what I was thinking. The casinos were packed. People are having a good time. They’re throwing tons of money down. This one guy sat next to me at Aria with the casino war, which is high card wins. Like you play when you’re a kid. The odds were decent on that because it’s 50/50 chance unless you go to war. He sits down and he’s got a stack of – I don’t know – ten $500.00 chips. And he breaks it up. He’s getting some hundreds. This dude’s like in his like maybe late 20’s, and I’m like, “Hey, man, what’s your story?”

Porter Stansberry:       And he’s playing war at a casino.

Aaron Brabham:         He’s playing casino war.

Porter Stansberry:       This is like the stupidest thing I can imagine doing with your time or your money.

Aaron Brabham:         Not the smartest. That’s for sure. So he sits down and he’s I’m like, “Man, you having a good weekend?”  He’s like, “Well, I just got here.”  And I’m like, “It looks like you’re doing all right unless you just decided to throw down that much cash and get a couple of chips.”  He’s like, “No, I’m up like $4,000.00 on blackjack.”  And I’m like, me, I’m going home after that, or I’m – you know, I’m gonna cash out. I’m gonna get my comps at Aria. I’m gonna get my cabana by the pool. I’m gonna have some cocktails. I’m gonna relax for the rest of the time.

And then it hit me. ‘Cause you had just posted this, you know, about the statistically –

Porter Stansberry:       Illiterate.

Aaron Brabham:         – illiterate. This is exactly what a lot of our subscribers do with their investments.

Porter Stansberry:       Same thing.

Aaron Brabham:         And I read your Friday digest where you talked about trading versus investing. So I’m sitting there thinking all right, I cohost this show with Porter. I know it’s stupid to sit here and gamble, but I’ve got my limits and I don’t get obsessed with it, so that’s fine. I like a little action here and there. But –

Porter Stansberry:       But if you want action, just come to me. I’ll give you all the action you want, anytime you want it. I will play the house for you anytime you would like.

Aaron Brabham:         You’ll do it all day long.

Porter Stansberry:       All day long. Which is why I like selling options. It makes you the house.

Aaron Brabham:         That’s exactly right.

Porter Stansberry:       It’s real simple. If 90 percent of out-of-the-money options expire worthless, why wouldn’t you sell them?

Aaron Brabham:         ‘Cause the 90 percent are sitting on the other side buying them.

Porter Stansberry:       Well, and it’s true. You can get into a lot of trouble selling options, because you have to use a lot of margin, typically, and it can be risky. But my thought is look, just make sure you want to own the security anyways. So if you’re gonna buy shares of say, Coca-Cola at $40.00, why not sell a put at $39.00 until you get filled?  You’re gonna end up with a position. In the meantime, you could collect a dollar a month in premium, on a hundred shares. That’s a hundred bucks every month, just waiting to buy it.

Aaron Brabham:         And you talk about investing in capital-efficient businesses, goodwill companies. I’m sitting there at the table and I know why people don’t do it. Because they want instant results.

Porter Stansberry:       It’s no fun.

Aaron Brabham:         It’s no fun.

Porter Stansberry:       Yeah.

Aaron Brabham:         It’s too slow for them. They don’t feel like they’re making progress. CNBC pumps the top gainers of the day, and you think about all the things you’re missing out on, but the reality is, man, it is a loser’s game for the most part. Trading.

Porter Stansberry:       So the greatest investor in history, in all of human history, is Warren Buffett. He averages 19 percent a year.

Aaron Brabham:         That’s un – I mean, that’s insane.

Porter Stansberry:       Okay. So –

Aaron Brabham:         19 percent is insane.

Porter Stansberry:       So I talk to a lot of our investors who say, oh, I only want to make like 20 or 30 percent.

Aaron Brabham:         That’s –

[Laughter]

Aaron Brabham:         That’s it. That’s all I want to make.

Porter Stansberry:       Yeah. I just want to do better than the best guy ever.

Aaron Brabham:         And what is compounding like –

Porter Stansberry:       Oh, and by the way, I don’t want to read 10Ks. I don’t want to study.

Aaron Brabham:         They don’t want to do that stuff.

Porter Stansberry:       No. I don’t really want to learn anything. I just want my money to magically grow. The same thing when you go to a casino. I want my money to magically grow.

Aaron Brabham:         Right. And that’s why people are there, just throwing all their money away, because what they –

Porter Stansberry:       How strange is that?

Aaron Brabham:         You know what it is?  It’s like people are willing to sacrifice growth for instant gains or instant losses.

Porter Stansberry:       But think about this for a second. I mean, the real estate on the Las Vegas Strip is some of the most valuable real estate in the world. MGM, which owned most of the Strip, makes $700-$800 million a year, and has assets that are worth $26 billion or something like that. Okay?  It’s a great business.

Aaron Brabham:         It’s a phenomenal business.

Porter Stansberry:       And you can see the success of their company. When you walk out onto the Strip, and there’s towers and hotel rooms everywhere, and they’re all new, and it’s all beautiful. Right?  So where did all that money come from?

Aaron Brabham:         It came from people losing all their money.

Porter Stansberry:       It came from people losing. So you can attract millions of people a year to a temple of losses. But in my business, I can’t see a $49.00 newsletter that’s about how to not lose money.

Aaron Brabham:         Right. Or you –

Porter Stansberry:       I’m in the wrong business.

Aaron Brabham:         Or if you do sell it, they don’t pay attention to it at all.

Porter Stansberry:       No.

Aaron Brabham:         They won’t do it, and they’ll refund.

Porter Stansberry:       Right. Well –

Aaron Brabham:         You are in the wrong business. We need to find a business of just taking money from people for instant results.

Porter Stansberry:       We need to build a temple of losses.

Aaron Brabham:         That would be pretty cool.

Porter Stansberry:       Yeah. It’d be much more fun.

Aaron Brabham:         Much more fun, and probably more profitable.

Porter Stansberry:       Yes. So sadly, most people are not rational. They know nothing about statistics, and they will never learn that difference between gambling at Vegas and making safe, reasonable, long-term investments. Oh, well.

Aaron Brabham:         It’s a fact. I did also put down a $50.00 bet on the Pacquiao-Bradley fight.

Porter Stansberry:       Yeah. How’d that go?

Aaron Brabham:         Actually, I put it on Bradley because Bradley was paying plus $350.00. So if you put a hundred down, you get $350.00, and Pacquiao was minus $400.00.

Porter Stansberry:       Ouch.

Aaron Brabham:         So you have to put $400.00 down to get $100.00. And I’m like, I’m just going for a long shot here. Who cares?  I have a bunch of friends on Facebook looking at the fight. They’re like, oh, Pacquiao’s up eight rounds. 8 to 0.

Porter Stansberry:       So you’re like, oh, 50 bucks gone.

Aaron Brabham:         Took a little nap.

Porter Stansberry:       Yeah.

Aaron Brabham:         Woke up. I won, because it was the biggest controversial rout on the scorecard ever in the history of boxing.

Porter Stansberry:       Yeah. But didn’t you like how classy Pacquiao took it?

Aaron Brabham:         Absolutely.

Porter Stansberry:       Yeah. Went over and said, “Great fight. You’re gonna be a great champion. Would love to have a rematch. Have a good night.”

Aaron Brabham:         The guy’s very upstanding, man.

Porter Stansberry:       Yeah.

Aaron Brabham:         I liked that a lot.

Porter Stansberry:       But what was nice to see was that the posse that was with him didn’t begin to attack the –

Aaron Brabham:         The other – Bradley’s camp.

Porter Stansberry:       – the entourage of Bradley. Yeah.

Aaron Brabham:         Which we’ve seen uncountable times before in the history of boxing.

Porter Stansberry:       Only in certain types of fights.

Aaron Brabham:         Tyson was notorious for having an encourage that could get rowdy.

Porter Stansberry:       Yeah. Just – oh, well. Surprising.

Aaron Brabham:         Anyway, it was a great weekend for me, but the revelation I had is I’m going Porter-style weekends from now on.

Porter Stansberry:       Porter-style.

Aaron Brabham:         Upscale hotels. Cabanas by the pool. I just want to relax when I’m there. I don’t want to be in all the chaos.

Porter Stansberry:       How about giving up the statistically-illiterate entertainment.

Aaron Brabham:         I don’t know if I’m ready to do that.

Porter Stansberry:       Why not just play –

Aaron Brabham:         I like to spread out a little bit of cash here and there.

Porter Stansberry:       All right, but why not just play – why not just gamble or play poker with your friends?

Aaron Brabham:         I actually like that idea. I just don’t have any that do that, really?

Porter Stansberry:       Well, okay. I love –

Aaron Brabham:         I understand you used to have a little group here that –

Porter Stansberry:       Yeah. I love –

Aaron Brabham:         – you guys would get together. I think we need to start that up again.

Porter Stansberry:       I love – as I think our listeners know, I love to gamble. I wanted to gamble 1,000 ounces of silver.

Aaron Brabham:         That’s true.

Porter Stansberry:       On a sure thing.

Aaron Brabham:         Well, that’s why – yeah.

Porter Stansberry:       [Laughter]

Aaron Brabham:         You like to gamble on the guaranteed bets ‘cause you’re smart.

Porter Stansberry:       Well, I’m not saying I’m smart. I’m just saying that I knew a lot more about oil than Chris Martenson.

Aaron Brabham:         We did get a lot of feedback on that, and you were – more of our readers or our listeners sided with you, but there are still a lot of people out there that say –

Porter Stansberry:       Well, they should –

Aaron Brabham:         – geologically, that’s it.

Porter Stansberry:       They should e-mail me and put their money where their mouth is.

Aaron Brabham:         I like that idea.

Porter Stansberry:       I’m happy to take a bet from anybody out there. A thousand ounces of silver on the amount of oil production in the U.S. reaching a peak sometime in the next ten years.

Aaron Brabham:         Well, Porter, we’re gonna get to our feedback.

Porter Stansberry:       Sorry. Exceeding the previous peak is what I meant.

Aaron Brabham:         Yeah. Exceeding the previous peak.

Porter Stansberry:       So something like – I think the peak in production was ten million barrels.

Aaron Brabham:         Ten million.

Porter Stansberry:       Ten million barrels a day.

Aaron Brabham:         That’s right.

Porter Stansberry:       And I think we will be there in six years, but I want a little wiggle room. So I’ll say –

Aaron Brabham:         And we’ll get to all of our feedback at the end of the show –

Porter Stansberry:       I’ll say ten.

Aaron Brabham:         – but before we do that –

Porter Stansberry:       Any takers?

Aaron Brabham:         _________.

Porter Stansberry:       Yeah.

Aaron Brabham:         Porter’s right here. He’s got it.

Porter Stansberry:       Get in touch.

Aaron Brabham:         You’ve got the silver.

Porter Stansberry:       Yeah. I got the silver, or if you’d rather, we can have an escrow account. Put the money up.

Aaron Brabham:         All right. Porter, let’s go to our guest, Chris Hayes.

Porter Stansberry:       Chris, welcome to Stansberry Radio. Thanks for joining us.

Chris Hayes:               Thanks for having me on.

Porter Stansberry:       You are a young up and comer in the news pundit political commentary space. Congratulations.

Chris Hayes:               Thanks. I don’t know if that’s damning with soft praise, but I appreciate it.

Porter Stansberry:       No. We do a little bit of punditry ourselves here, and we admire your work.

Chris Hayes:               Thanks. I really appreciate it. I’ve had a – I’ve been really lucky and really feel really grateful for the platform that I’ve gotten.

Porter Stansberry:       Well, I’m sure you’ve earned it. And speaking of earning things, I’ve written a couple books. I know how incredibly hard it is to do. Tell me about what led you to write the book Twilight of the Elites: America After Meritocracy.

Chris Hayes:               You know, I wrote it because I spent the ten years of what I call on the book the failed decade, from the period of basically 2001 to 2011 and so forth. I’ve spent that period of time writing on, reporting on public life, and living through it just as an adult citizen moving through the world. And the overriding sense I felt emotionally, just viscerally about watching this what seemed an unending cascade of crises and failures was just a sense of disorientation and distrust. Right?

Who can you listen to?  Who can you trust?  We thought there were weapons of mass destruction in Iraq. There weren’t. We were told the housing bubble was gonna go on forever. It didn’t. In the wake of that, you kinda find yourself asking these question of how do we negotiate through public life when we can’t trust our institutions. And that feeling was matched by encountering some really fascinating, eye-opening data, which is polling about Americans’ attitudes towards their institutions, and whether they trust their core institutions or not. Congress. Wall Street. The news media, for instance.

And that polling is very robust, and it comes from a variety of sources. Most of it starts in the 1970s, and it shows that we are now, after this last decade, at a period of historically low levels of public trust in our institutions. And we have an institutional landscape where the major institutions have been discredited. I mean, everything from the big three automakers to local newspapers that have collapsed to Congress, which is the least trusted institution in the entire country, to Wall Street, which is also near the bottom after the financial crisis. And that national mood of distrust and disorientation and frustration and betrayal.

That to me is the central, the core of our public life. The core of our politics. The core of the subtext of the election year is the way the way the people feel – here’s no one left to trust in their life, and that the elite have failed them. And I think that’s really what’s driving our politics right now.

Porter Stansberry:       Well, what do you think about those ideas?  Do you think that our institutions are worthy of our respect and our trust?

Chris Hayes:               Yeah, that’s a good question, because I think that there’s two ways of viewing this distrust, right?  David Brooks wrote a column yesterday in The New York Times saying that our distrust of our institutions is because the people are ungrateful, that people aren’t grateful for good leadership and they want, they’re greedy and they think they know everything. And I actually think if you take a step back and you look at the actual institutional performance of the country, from the Iraq war to watching New Orleans drown on national television to the largest housing bubble in the history of the country in which $8 trillion of wealth evaporated overnight and produced the worst financial crisis in 70 years, I think that there’s actually the reason people distrust institutions is because we’ve had a lot of poor institutional performance in this country.

And the elite who run our pillar institutions have not performed particularly ably in the last ten years, and I think that’s what’s driving it. And I think one of the things I seek to untangle in the book, one of the projects of the book was to figure out why we’ve had this poor institutional performance.  And I think a lot of it gets down to a social model we have produced that over years has created an elite, set of elites, that are increasingly removed – or I use the term in the book social distance – socially distant from the populace for whom they are delegated the responsibility to make decisions.

Porter Stansberry:       I think that you’re exactly right. And I write about these things from the economic and financial perspective a lot. I’m sure you don’t follow my work closely. I’m not – I don’t have a national platform, but I was warning about the bankruptcy of General Motors for five years before it happened. I was warning about the finances at Fanny Mae and Freddie Mac for probably a decade, and in June 2008, I forecast that their losses would be $500 billion, which I think is pretty much right on the mark.

Chris Hayes:               Yeah. That’s gonna be right around the mark.

Porter Stansberry:       What I find so amazing is I’m in the media. I have a financial newsletter business. What I find so amazing is that even today, the amount of misinformation that goes on in the major publications is astounding. There was an article today. There are two articles today in The Wall Street Journal. One predicted that solar panel installation in the United States would double this year, which is completely nonsense. And it was published exactly in conjunction with First Solar putting out a bunch of positive press releases yesterday and moving their stock price up 20 percent. I mean, it’s – in my mind, it’s so completely stock manipulation that it’s laughable, it’s so obvious.

And the second thing that was in The Wall Street Journal today that I thought was just completely PR and totally placed – and as you know, that goes on a lot – was a story about how General Motors is really turning things around. When, in fact, and one of the facts that they said about that was – in the paper, you can find this quote today. Wall Street Journal – said that General Motors paid $3 billion in order to have 20 percent of their pension liabilities wiped out.

And that is actually a lie, in point of fact. They actually paid $30 billion. They had to give $25 billion in pension assets. They had to give a billion dollars in cash to true up the pension assets. And then they had to pay a $2½ billion premium to Prudential Life Insurance in exchange for removing $26 billion of pension liability. So they paid $30 billion, and they got rid of $26 billion. And that’s why the stock market of course is totally unimpressed with what’s going on at General Motors.

Aaron Brabham:         Right.

Porter Stansberry:       But there are so – there’s so much institutional pressure to support that company. First of all, taxpayers still own 60 percent of the shares. Second of all, of course, it’s the national champion, and third of all, really, a lot of Obama’s reputation is dependent upon its success. So no one’s gonna speak the plain truth about what’s happening there. And we see – I see this in all of our institutions, constantly. What do you think about that?

Chris Hayes:               Well, the details of the balance sheet of General Motors are – I am not immersed in at the moment. I mean, I did some reporting in Detroit around General Motors and Chrysler, writing the book, and ended up not including part of it just because the story of the Big Three automakers and Detroit and what’s happened there seemed so distinct in some ways that it was – even if the effects of the fallout of it, I think, are very much part of the themes of the book, which is the things you’re mentioning now. This kind of institutional distrust and institutional failure. The dynamics that were driving the auto industry seem so specific in certain ways and in some ways outside my direct area of expertise.

So I’m curious to hear what you’re saying about the current balance sheet of General Motors. I myself have been cautiously optimistic about the turnaround, but also I think skeptical because I do understand all the pressure that you’ve enumerated about, but political pressures and publicity pressures and to make it a big success.

I do think that the deeper question about whether you can trust what you read in the newspaper is a question that increasingly haunts people. And it haunts people because I mean, the housing bubble’s a great example. Right?  That the business press, by and large, not entirely, but by and large, the mass of it missed what was the biggest story, what proved to be the biggest story of the decade, which is that these massive changes to the way that the housing market was financed and lending standards and securitization had produced this totally unsustainable bubble.

And when you can’t trust what you read in the newspaper, the question is, well, what can you trust?  It becomes very difficult to know how to go about ordering facts and thinking about how to participate as a citizen when you don’t have this bedrock of trust that you can stand on.

Porter Stansberry:       All right. I’m gonna take a little bit of an issue with that claim. I don’t think it’s wholly correct. And I will agree with you that for the vast majority of the American population, it was true only in the sense that housing prices had always risen in their experience. So it was true on its face that housing prices would always go up. But, I don’t – I would not agree with you that to the elites in our country, to the 20 percent of the most educated part of the population, to the people in the housing business itself, to the homebuilders, to the Wall Street analysts, to the mutual fund managers, to the hedge fund managers, there was a widespread appreciation that what was going on with the housing market was not sustainable.

And you can see that in actual issues of things like Fortune and Forbes and The Wall Street Journal. I can show you an article from Fortune magazine as early as 2004.

Chris Hayes:               Sure.

Porter Stansberry:       That is making fun of the mom and pop folks who are flipping condos and predicting that there’s gonna – that the whole thing’s gonna end badly. So I would say that there was some idea of something going wrong. But what I would, what gets me is that the people who should have known better, because in fact they did know better, continued to gamble with leveraged balance sheets at the major banks because they knew that the government would bail them out if and when the thing exploded. In the meantime, they were gonna make as much money as they could.

Chris Hayes:               Right.

Porter Stansberry:       So look at what Charlie Prince, the chairman of Citigroup, said in the conference call in early 2006, which was the music’s still playing, so we’re still dancing. You know. There’s no –

Chris Hayes:               Exactly. You have Angelo Mozilo sending, at Countrywide, sending e-mails about adjustable rate mortgages. Pay what you want mortgages, right?  Where you, where actually the principal expands as opposed to amortizes. And he says this is the most toxic thing. And nothing could be more toxic –

Porter Stansberry:       Sell more of it.

Chris Hayes:               – than what we’re selling. And then they sell more of it.

Porter Stansberry:       Yeah. Of course.

Chris Hayes:               And – yeah.

Porter Stansberry:       So I would just dispute the fact that nobody knew what was gonna happen, because –

Chris Hayes:               No. I don’t think it’s that nobody knew. And that’s fair. And actually when you go back and Dean Starkman, who’s a, was a longtime business reporter of The Wall Street Journal, has done a lot of kinda meta analysis of the business press and around the housing bubble. And he’s written a lot about what it got right and what it got wrong. And you can find examples, yeah, as early as 2003-2004 in the business press of people saying this is unsustainable. I think the balance of the coverage did not reflect that. And I think that the message that was being communicated to people – and you say, you know, the top 20 percent. I mean, I knew people that were well educated and quite savvy and smart who were caught up in the notion that buying a tremendously over-priced, poorly-constructed condo was gonna appreciate. And were left, are left underwater.

And again, the other part of this equation, the housing bubble, is that you had Alan Greenspan basically saying there’s no such thing as a housing bubble. You had Ben Bernanke when he was on the Fed, before he became the chairman, saying the idea that we’re gonna have some big crash is ridiculous. And so people that had some institutional authority were also sending the message that the music was gonna keep playing.

Porter Stansberry:       Okay. So I think we’re basically on the same page. Some people definitely knew. More people should have known better. And some people clearly did the wrong things, perhaps because they had the wrong incentives.

Chris Hayes:               Yeah. They had the wrong incentives.

Porter Stansberry:       And that’s one question I would like to get to with you, because there are a couple fun things I’ve been really excited to ask you, and one question I have for you is you grew up in New York.  You went to elite colleges. You have lived your life in a very elite circle. And yet you’re sort of pointing the finger at this community that you are a part of. And I think that’s really actually a noble thing to do, because you know that community far better than I do, and probably far better than everyone else in America.

So the question I have for you is – in particular with the Wall Street thing – the simple way to cure all these problems is you could do it in one fell swoop, and many countries have this law. For example, Brazil. And the law says that if you’re a leveraged financial institution, and you serve on the board of directors, you are personally liable for deposits. That simple. And if you look at the history of Wall Street, this idea that the directors were not personally liable is a very, very new idea. And the first Wall Street house to go public didn’t do it until 1976-1977.

Chris Hayes:               You’re right. They were all private, and they were all private for most of their existence.

Porter Stansberry:       That’s right. And the reason why Glass Steagall was important was because it protected the banks that were backed by the public from engaging in risky behavior. And so you have this fantastic situation, where all the personal capital was replaced with public capital for all of the banks, and then Glass Steagall was replaced, and so you have this enormous – and I’m talking about hundreds of billions, if not multiple trillions, of dollars of incentives to do the wrong thing, which is to risk as much as possible, to make as much as possible, because the people who were running the show were not actually liable for any of the downside.

Chris Hayes:               That’s right. And this goes to, that is the core problem of the lack of accountability on top. Right?  I mean, that is one of the chapters in the book’s called “Moral Hazards,” and it’s about moral hazard and about the fact there’s a phrase that someone – one of the folks in one of the testimony before Carl Levin’s Senate committee on investigations about the crisis used this phrase IBG YBG. Right?  Which means, I’ll be gone, you’ll be gone. And it was used on Wall Street during the bubble years to mean let’s just do the deal. Let’s do the trade.

Porter Stansberry:       Kick it down. Kick it down the – kick the problems down the street.

Chris Hayes:               Exactly. And if it blows up, IBG YBG. I’m gonna be gone, you’re gonna be gone, we’re gonna get our fees. We’re gonna get our cut. We’re gonna get our bonuses. So –

Porter Stansberry:       So where – out of your elite circles, out of this – how do you phrase it – how of the elite circle, out of the elite in America, where’s the guy standing up saying look, I got a better idea. We don’t need all these rules. We don’t need Dodd-Frank, both of whom I think are completely crooks. We don’t need crooks telling us how to fix our banks. We need people to step up and say I’ll be personally responsible.

Chris Hayes:               I mean, I like the idea of personal accountability. I definitely think that the combination of these entities going public and then the repeal of Glass Steagall as you know produces precisely the recipe of moral hazard that we’ve seen. And I think I’m open to a lot of different individual reforms in terms of how the banking sector works, whether it’s breaking up too-big-to-fail banks, which I also think is really important.

Porter Stansberry:       You wouldn’t have to break them up. If you just make people responsible for them.

Chris Hayes:               It would break up naturally if they were – yeah.

Porter Stansberry:       Absolutely. They’d say I can’t be responsible for that part of it.

Chris Hayes:               Right. Right.

Porter Stansberry:       You can sell that to somebody else. But I couldn’t be responsible for this part.

Chris Hayes:               It’s a really interesting idea.

Porter Stansberry:       But I don’t – but it seems so simple. You don’t need all of these regulators. You don’t need all these laws. You don’t need all this incredibly expensive overhead. You just need someone to say I’ll be responsible, which is what used to happen. That’s why our bankers, the great JP Morgan, were not only wealthy but they were icons of –

Chris Hayes:               Revered. Right?

Porter Stansberry:       – of quality, of character, and of decency. They were well regarded and well respected, of JP Morgan famously said, I give credit on the basis of character.

Chris Hayes:               Right.

Porter Stansberry:       And I do that because at the end of the day, I’m personally on the hook for the deposits.

Chris Hayes:               You’re on the _________. Exactly. Right. So that’s the problem, right?  In all circumstances, I mean, you see this – you know, you also saw this in one of the things I report on the book is the abuse scandal in the Catholic Church. Right?  The problem was the bishops had no skin in the game as it were. Right?  They had no – they had no –

Porter Stansberry:       Yeah. Their kids weren’t going to school in those orphanages.

Chris Hayes:               Exactly. That’s exactly right. If you have –

Porter Stansberry:       They don’t have kids.

Chris Hayes:               Whenever you set up a system in which the people at the top, the elites don’t have personal accountability, are not enmeshed in the world of the people that they are making decisions for, right?

Porter Stansberry:       Of course.

Chris Hayes:               I mean, the idea of people lending money based on actual relationships and evaluations and prudential judgments about the creditworthiness of the person on the other side of the deal, right?  We’ve gotten very far away from that. And when you get away from that, you do produce – you produce crisis.

Porter Stansberry:       And the simple test of this, Chris, is so beautiful. It’s ask how many hedge funds ended up failing and causing public losses in 2008 or 2009?  And the answer is none of them globally.

Chris Hayes:               None.

Porter Stansberry:       None of them. Why?  Well, because the managers themselves have their capital at risk.

Chris Hayes:               Had all their money in it.

Porter Stansberry:       Yeah. It’s a very simple question. So a couple more questions for you. I’m enjoying this conversation immensely, and I would really like to know, what is the elite view of what you’re doing?  Because it kinda – I mean, if I was amongst your crowd, I might think that you were stabbing me in the back.

Chris Hayes:               You know, it’s funny. I mean, some people, I think people have resistance when I talk about some of the problems with the meritocracy and I talk about something in the book called the cult of smartness, which is a certain kind of elite pathology, which is to elevate the attribute of smartness above all others. Right?

Porter Stansberry:       The cult of the snarky.

Chris Hayes:               Right. Exactly. To not care about things like judgment, prudence, compassion, wisdom. All sorts of other attributes that would make for good decision makers and to elevate smartness above all else. I do think people – I’m implicated in this, as I said, I mean, I don’t – I come from a very working class background. My dad was an organizer in the Bronx. My mom was an educator. But I went to this public school in New York City that you had to test into, and that was a kind of gateway to this whole world that I’ve now lived through.

And those values are very enmeshed in all of us, I think, that the idea that the smartest should rule, essentially, and smartness is the trumping value. And I do think people have been – there is resistance. I mean, I can even tell you just pitching op eds about the ideas, to places that are bastions of exactly that kind of thinking. People have written back to me like this is ridiculous, on its face. So there is – I think there is –

Porter Stansberry:       We have more in common than I could have ever realized. So let me ask a specific question about some what I think are tough issues for the Democratic Party. Now, I don’t want to mischaracterize your book. I don’t think that your book is partisan. I think it’s a great read about some of the fundamental problems that our country is having. And I don’t want to cast you as partisan, either, though I think that your background indicates that you have –

Chris Hayes:               Sure.

Porter Stansberry:       – more liberal leanings –

Chris Hayes:               Yeah. Yeah.

Porter Stansberry:       – than most. Or than some, I should say. But I’m question – I would like to understand two basic political questions, and one is about the size of government, and the other is about the role of unions. And I think both these questions are tough for Democrats to get right with the majority of Americans. So the question for you is, what do you think is a legitimate size of government in the United States, and I will define that by the amount of spending at the state, federal, and local level on the government. What percentage of GDP do you think is optimal?

Chris Hayes:               I think it’s interesting. It’s really interesting that you phrase it in that way, because I think this is actually a place where the left and right talk past each other. Because I think that the smallness of government as smallness is a value for conservatives. They want to reduce government as an end, because the belief is that the less space government takes up, the more room there is for freedom. Right?  The more room there is for individuals to operate in the free market under their own decisions to make consensual contracts, to go about starting businesses or operating in the world. Right?

And so to phrase the question as a percentage of GDP, from the perspective I come from politically, right, there are a bunch of things I would like to achieve as ends, but the size of government itself is not an end for me. Right?  It’s a means to some ends of certain things I want to see. For instance, really good public universal health coverage. A universal pension system that actually can be both sustainable and care for people in their old age. A universal public education system. A system that promotes innovation and also sustainability in terms of energy.

So there are lots of –

Porter Stansberry:       All right. I got – Chris, I see exactly what you’re saying, and I’m gonna – I gotta cut you off, because whether we like it or not, scarcity is the central economic fact of nature. There is not –

Chris Hayes:               Oh, yeah.

Porter Stansberry:       There is not – you know, entropy exists. There is not universal useful energy. So you have to make choices at some point about what you’re gonna spend on and what you’re gonna include and what you’re not gonna. So I think it’s a reasonable question. You can even answer in a range. I think that it seems reasonable we should accomplish the goals of good governance and still leave plenty of room for private industry. So what would your split be?  Is it 50/50?  Is it 60/40?  Is it 80/20?

Chris Hayes:               I think it’s a much higher than we have it right now. I mean, I think the amount that the government or what are we – right now we’re at –

Porter Stansberry:       Right now we’re at about 46 percent of GDP –

Chris Hayes:               For all levels of government.

Porter Stansberry:       – for state, local, and federal spending. Yeah. And look, government’s government. It doesn’t really matter what level it is, ‘cause it’s still a burden for the taxpayers.

Chris Hayes:               Well, it’s not a burden, right?  I mean, if you talk to – to only look at one side of the ledger seems to miss the point. I mean, the point is that the folks in Milburn, for instance, who are paying – Milburn, New Jersey, which is a great local school system, right?  They’re paying pretty high taxes, property taxes, for the municipality of Milburn, for a school system that they really like. That’s the reason folks are moving there. So yeah, it’s a burden on one end. It’s also an asset on the other, because they provide the public –

Porter Stansberry:       Okay. So if your argument is that doing things collectively in the form of a government is more efficient, then why wouldn’t we have 100 percent of the GDP managed by the state?

Chris Hayes:               Well, because it’s of course more efficient or more equitable in the provisioning of certain things. Right?  There are certain things that are public goods. Education, I think, is –

Porter Stansberry:       Boy. I think you got a tough question there, because you can’t argue – I don’t think that you can say that the educational system, the educating people is any less complicated than doing anything else in the economy. I mean, that’s a very, very, very tough thing to organize and get done. And as you can see, the state’s failing at it almost everywhere.

Chris Hayes:               Well, it’s not failing almost everywhere. I mean, it’s actually pretty successful in some places, and really terrible in other places. But the question cuts in the opposite direction, right?  I mean, you could just say, well, why don’t we have a hundred percent private industry and _________ –

[Crosstalk]

Porter Stansberry:       You know what we call schools in Baltimore, Chris?

Chris Hayes:               What’s that?

Porter Stansberry:       Pre-jail.

Chris Hayes:               Sure. Right. I mean, we have very impacted pathologies up and down –

Porter Stansberry:       So –

Chris Hayes:               _________ _________.

Porter Stansberry:       I want to move – but I want to move past this being argumentative. I mean, clearly there are some places where the state is more of a burden than others, and there are some places where it’s more efficient. That has to be true, but I think overall, economically, you can prove that government is a cost, that it is a burden to the productive sector of the economy. And I don’t really think that’s even a point that you would argue.

Chris Hayes:               Sure. No. No. I would argue it. I mean, I think that’s in fact, I think it’s provably wrong. I think that places that have nonexistence or poor governance, I mean, something like, for instance, having a road that’s good enough to get your goods to market from a rural area where you grow them to a metropolitan area where they’re sold. I mean, that’s the key. In fact, if you look at development indexes across the OECD, one of the things you see is that productive economy, in terms of affluence, per capita income, GDP growth rates, they don’t correlate that neatly with percentage of GDP. You can have countries that have a very high percentage of GDP taken up by governments that are very productive, and you can have countries that have a very high percentage GDP that are total basket cases.

Porter Stansberry:       Only in areas –

Chris Hayes:               That’s not the defining feature.

Porter Stansberry:       Well, then it’s very simple to understand those correlations, and it’s only in areas where they have tremendous public resources. So, for example, there aren’t any property taxes in Alaska, and depending upon how the vote goes today, there may not be in North Dakota. And the reason why they can do that is they have tremendous public resources. Likewise in –

Chris Hayes:               No, but even _________ don’t have –

[Crosstalk]

Porter Stansberry:       – Norway, which is always the example that folks who prefer more government give.

Chris Hayes:               Forget Norway. Norway, that’s very different because of the North Sea, Norway does have a _________.

[Crosstalk]

Porter Stansberry:       Right. But look at – I mean, but look at the classic examples from my point of view. Look at Singapore. Look at Hong Kong. These are places that literally had no resources. They didn’t even have populations, and they became richer than their colonial masters in a single generation because they had low taxes and favored the free markets, while Britain went completely to socialism.

Chris Hayes:               No. Well, now we’re now debating like an eternal question, right?  We’re just _________ that ____.

[Crosstalk]

Porter Stansberry:       Right. And I just wanted to get one answer from you, which is no matter what you believe about the role of government and the role of private sector, there has to be a level where you think that what you need to be achieved can be achieved. What’s the level?

Chris Hayes:               Because I think that decision, like all decisions, and since you’re schooled in economics, you’ll know this, that decision’s made at the margin. You can’t – it’s not made absolutely, right?  It’s not made ex milo. It’s made at the margin. So what goes is the question of, there’s a marginal decision, right, about a given program with a given set of resources that you’re making decisions on. You do not make those decisions _________ –

[Crosstalk]

Porter Stansberry:       All right.

Chris Hayes:               – do not make that decision _________ –

[Crosstalk]

Porter Stansberry:       I’ve given you plenty of chances to answer the question. I’m going to move on. There’s one more question I think is tough for Democrats to answer. Hopefully it won’t be as tough as the last question. But I wonder what your position is in regard to compulsatory union dues and card check.

Chris Hayes:               I’m pro both. I mean, I think that that’s the way collective bargaining works is that we –

Female:                       Excuse me, gentlemen?

Chris Hayes:               Yeah.

Female:                       This is the producer. We’ve gone way over, so we need to move on to the next interview. Sorry about that, Porter.

Porter Stansberry:       Oh, he gets that – he gets out of the tough one.

Chris Hayes:               No. I _________.

[Crosstalk]

Female:                       I’m sorry about that, Porter.

Porter Stansberry:       Chris, listen, it was a real pleasure, and I would –

Chris Hayes:               Thanks very much.

Porter Stansberry:       – like to have you back sometimes. Thanks for being on with us.

Aaron Brabham:         Thanks a lot, Chris.

Chris Hayes:               Okay. Bye.

Aaron Brabham:         Saved by the bell.

Porter Stansberry:       Saved by the censor.

Aaron Brabham:         Well, you guys did agree on a lot of things.

Porter Stansberry:       And I didn’t laugh during his –

Aaron Brabham:         No, you didn’t.

Porter Stansberry:       – speaking, did I?  ‘Cause we got a lot of heat _________.

[Crosstalk]

Aaron Brabham:         Once or twice, but it wasn’t – you weren’t mocking.

Porter Stansberry:       I should have mocked a little bit more.

Aaron Brabham:         Okay. Egging him on a little bit, you know.

Porter Stansberry:       I just, it’s hard for me to understand how a guy that’s clearly this smart can still take these dogmatic positions that he knows good and well don’t make any sense. But he has to take them because without that he’ll lost his position on NBC overnight.

Porter Stansberry:       Absolutely.

Porter Stansberry:       Done.

Porter Stansberry:       Lose all of his viewers.

Porter Stansberry:       He can’t – he cannot say – and by the way, for those of you who don’t know the issue with card check and compulsatory union dues, there are 27 states in the United States where you do not have the right to a job if you do not agree to pay union dues. That is insane, and in fact, the Supreme Court has already ruled against it. They ruled against it in 1985. But the Justice Department won’t do anything to enforce the ruling. So there are 27 states where you have to pay union dues whether you are in the union or not.

Aaron Brabham:         Yeah. I just got back from a state with that. Vegas.

Porter Stansberry:       It’s crazy.

Aaron Brabham:         _________.

[Crosstalk]

Porter Stansberry:       And then what do they – and of course, what do they do with all the union dues?  Well, they put all the union dues towards electing Democrat politicians.

Aaron Brabham:         Of course.

Porter Stansberry:       Duh. They spent – the unions spent a billion dollars on Democratic politicians in 2010. So this is the entire – I want people to understand this. The reason why the Democrats win elections is because they force people at the point of a gun essentially to pay union dues. And that’s supposed to be the party of the people, the party of the poor. The party that’s s'posed to be standing up for the little man. It’s a bunch of nonsense. They’ve got a gun to the not – the little guy’s head, and they’re saying give us money and power. We’re gonna blow, we’re gonna force you out of a job. We’re gonna make you move to a different state. Whatever. That’s nonsense.

The other thing that I think reveals the Democrats for what they are is card check. And card check is a rule that they tried very hard to get passed. They couldn’t get it through Congress, because it’s so asinine. In card check, when you go to unionize, what happens now is that there is a private election, so everyone goes and votes, and your vote is anonymous. So if you want a union to be formed at your company, you can vote for a union. And the National Labor Relations Board supervises the election, so they’re supposed to be honest and fair. All right?

So when you go vote for a president, how do you vote for president?

Aaron Brabham:         Go to the ballot, get your ballot, and vote.

Porter Stansberry:       Yeah.

Aaron Brabham:         You don’t have to be accountable for anything.

Porter Stansberry:       Right. You don’t put your name on your ballot.

Aaron Brabham:         No. It’s anonymous.

Porter Stansberry:       It’s anonymous. Right?  You go in private. You make your selection. You walk out. Now the card check would require you to put your name on a card with your vote.

Aaron Brabham:         So they can cross-check it.

Porter Stansberry:       No. So that they can pressure you to join. So that they can act like a gang of thugs, which in many cases is literally what they are, and tell you if you don’t vote for a union, we’re gonna come and threaten you or your family or burn your house down or fire you.

Aaron Brabham:         You think that would still – you think that would happen?

Porter Stansberry:       But you think. [laughter]

Aaron Brabham:         I would love to have heard his answer on that.

Porter Stansberry:       What I can’t understand is how anyone who is a – I don’t know how to explain it – is a bona fide American, a person who, in my opinion, you know, represents what the values of our country are all about, how they could be in favor of forcing anyone to join a union, and how they could be in favor of anything except for a closed, anonymous election. I don’t care how you feel about unions. And by the way, my thing is, unions are clearly authorized by the Constitution. You have the right to free association. You the right to work or strike. There’s no doubt about that.

But what’s going on with the unions has become a forced mechanism for fundraising for the Democratic Party. And now they’re trying to use the power of the state to make sure that nobody can get out of being in the union. And the whole thing – most people don’t understand this – the whole thing with the governor in Wisconsin, Scott Brown or I can’t remember his – Scott Walker – is he is against that. He said no. You can’t do that anymore in Wisconsin. And of course, that’s why they tried to recall him. But even the Democrats in that state – and that state is highly Democratic – hey say, wait. This doesn’t pass the fairness test. This isn’t American. This isn’t what we’re about.

Aaron Brabham:         They’re rational.

Porter Stansberry:       So I think the Democratic Party has big problems on those issues. What should the size of government be?  And on the issues related to the source of their power, which is union funding.

Aaron Brabham:         All right, Porter, it’s national scumbag registry time. This week we’re adding another name to the national scumbag registry. We received a few suggestions. Some were redundant. We’re gonna post this up on our blog. Maxine Waters, you know, the usual candidates. Corzine, we’ve already nominated him. This week we’re nominating ex-New York Senator Hiram Monseratte. He recently pleaded guilty to scamming more than $100,000.00 in city slush funds to help fund a failed political campaign. When the court asked him about this, he replied, “At the time, I knew this conduct was wrong and not legal, and I take full responsibility for my actions.”  Of course, because he’s busted now. Also, in 2010, he was ousted from his seat for his misdemeanor conviction assault against his girlfriend. Quality scumbag there.

Porter Stansberry:       Ha. That guy. That guy might take the top.

Aaron Brabham:         Yeah. I mean, this guy is uber scumbag.

Porter Stansberry:       Nice.

Aaron Brabham:         Right?

Porter Stansberry:       So he beats his girlfriend, he steals $100,000.00 from the taxpayers, and then he admits his guilt.

Aaron Brabham:         Yeah. Yeah. You’re right. I was wrong the entire time.

Porter Stansberry:       You know what we should do?  We should see if he needs a job.

Aaron Brabham:         Well, right now I think he does.

Porter Stansberry:       Because, you know, sounds like a fun guy to party with.

Aaron Brabham:         Yeah. Absolutely. You get out and slap some people around and steal. Sounds great to me.

Porter Stansberry:       I can’t wait to bring him into the company.

Aaron Brabham:         I got a few you just can’t make this stuff up. Then we’ll get to our mail bag. The State of Indiana’s governor has signed a bill allowing citizens to use deadly force against police officers in the law. The new law allows citizens to use deadly force when they think they are, police officers are illegally entering their homes. Basically their supreme court upheld it and said there’s so many illegal entries that you have a right to defend yourself against police officers. What do you think of that?

Porter Stansberry:       Whoo, boy, that’s a tough one.

Aaron Brabham:         That’s a slippery slope there.

Porter Stansberry:       That’s a tough one. That is really tough. Well, first of all, I’m not so naïve as to believe that a large ____ – I shouldn’t say a large percentage – that an important percentage of the Baltimore PD is not on the take from the local drug dealers and prostitutes and gambling rings. So could there ever be a time like in Training Day where the cops are used as a front for a drug lord?  In my city?  Absolutely. I’m sure it happens all the time.

Aaron Brabham:         It’s happened in the past. I’m sure it happens all the time.

Porter Stansberry:       So I can just tell you that if a police team were to raid my home, I would not shoot them, even if I thought they were entering my house illegally.

Aaron Brabham:         I wouldn’t either.

Porter Stansberry:       Because I would trust the Baltimore County PD to have made an honest mistake, and to do what’s required to repair the door, et cetera, to fix what they had harmed, and I think that my family would get over the shock of being raided by the SWAT team.

Aaron Brabham:         Yeah. ‘Cause I’m pretty sure if you – somebody – if a police officer comes in, you shoot him, you’re gonna be dead and probably in the next minute or so.

Porter Stansberry:       Yeah. I don’t see – yeah, I don’t think I would live to tell my side of the story.

Aaron Brabham:         I don’t think anybody’s going to.

Porter Stansberry:       The other thing is, given what I do for a living, I’ve always sort of considered it inevitable that sooner or later –

Aaron Brabham:         Somebody’s gonna come knocking on your door with some suits on.

Porter Stansberry:       Sooner or later, the FBI or the Secret Service or perhaps even the local PD would come for me. So, no, I’m not gonna come out guns blazing. I don’t really think that makes sense in a civil society, even though I’m completely for personal gun rights. I’m completely for protecting your own home. I’m for all those things. I just don’t think encouraging a shooting war with the police is smart.

Aaron Brabham:         I’ll watch and see how it plays out. One more you can’t make this stuff up. High end real estate prices in Miami are breaking records. You believed this would happen, so much so that you bought a property on the canal in South Beach a few years ago. One of the reasons Miami real estate is hot is due to rich families from Brazil, Argentina, Venezuela, and Russia buying property. The buying frenzy is partly due to threats to foreigners’ wealth from their home countries. Ironically, that’s exactly what’s happening in our country, because one of the things we say go buy foreign real estate. That’s’ one of your tax savings.

Porter Stansberry:       Yeah. Well, that applies also to foreigners. I think it’s a good idea to spread your assets globally if you have let’s say beyond a certain threshold. Let’s say if you’re worth more than – I don’t know – maybe $5 million?  I think you absolutely have to have a couple million dollars outside the U.S. in order, in my opinion, in order to sleep well at night.

And I want to be real clear about this. People try to paint me in the corner that I’m some kind of extremist, that I don’t – that I hate America. That I’m not – I personally am optimistic. I think we’re gonna find a way to solve these problems, and I think the way we’re gonna solve them is with inflation. And I think there’s simple things you can do to protect yourself from that, and actually you can do pretty well in inflationary period.

So I don’t want people to think that I’m some kinda radical guy that’s telling you to move to Uruguay and live in a cave. I’m not saying that. I’m just saying that it’s a fact that foreign real estate is one of the very few assets you do not have to report to the government that you can legally hold title to outside the U.S. That in the event of some extended crisis could offer you the potential for liquidity or income outside the U.S.

Aaron Brabham:         And I’d say if you’re considering that, do it sooner than later, ‘cause that could change at any time.

Porter Stansberry:       I think if you’re considering doing that, you absolutely have to do it before 2013, because at that point, it’s gonna get a lot more difficult to wire money out of the country. And I personally think – my prediction is that we are heading for a period of very tight foreign exchange controls. Because the Europe is going to crash – Europe is crashing, and they’re gonna try to keep the capital from flowing into the U.S. or flowing into Switzerland, and these rules will end up being implemented globally by all the different central banks.

Aaron Brabham:         All right. Time for the mailbag. Then we’ll wrap the show. Andrew, fire up the one call we had that we’re gonna play today.

Male:                           Why is it that you do not believe the Federal Reserve and for $16 trillion in debt, why do you not think they would write off a huge amount of that debt to the United States government or maybe match the payback, dollar for dollar, one time basis?  And the reason why I ask, okay, so I’ve read something. I don’t know if see somewhere, okay, so China, they use the house deal, okay?  If there’s ten houses on a block and China owns five, you don’t want all five to go on sale. That’s depressing. The other – you sell.

Okay. So that’s why they’re not gonna dump a huge amount of dollars onto the international market. So thus their reserves would go down in value. Okay. So here’s my question. If the Federal Reserve, their value’s what?  The dollar. Okay?  If all of a sudden the United States had half of the debt and began paying on the other half, what would happen to the value of the dollar?  Shoot through the roof.

Porter Stansberry:       [Laughter]

Male:                           Why would the Fed not want that to happen?

Porter Stansberry:       [Laughter]

Male:                           If they’re talking about value and profit, why would they care about the interest they’ve lost on $8 trillion if the value of the currency went through the roof?

Porter Stansberry:       Oh, boy. Where should I start?  So the caller’s suggestion was that we repudiate half of the federal debt. He forgets that the total debt in the country is about $55 trillion. So the federal part of that is only about $16 trillion, and that’s just the part that we are paying interest on today. So the problem with repudiating half the debt, there’s a few likely problems that would prevent that from happening. Simply just not refusing to pay it.

The number one problem is that you’ve got all kinds of credit default swaps that have been written against these debts. So if you simply refuse to pay them, the losses to our banks would be horrendous, enormous. That’s one small problem.

Another problem is that when you refuse to pay a debt, you have to go through a process of bankruptcy. So that would call for the bankruptcy of the entire federal government, and that would probably be a bad thing. I mean, I think it would be great. I would love to see the federal government stop operating. But I think it would bad for most people.

In particular, about 42 percent of all of our debt is held by foreigners. So these people would actually have claims to our property and assets, and you think, what are you talking about?  How could they get ahold of it?  Well, we have a lot of property and assets overseas. So they might decide they’re gonna take Guam, for example, because we owe them a billion dollars. Or the equivalent of that, in terms of our embassies and our assets overseas.

And yeah, by the way, we do that to people when they default on us. So the Argentinians defaulted in 2001, for example, and we seized all of their bank accounts all around the world until they paid back the U.S. and the Italian creditors they owed. And they weren’t able to pay them back dollar on dollar, but they had to pay them something.

So you can’t just walk away from an obligation. That’s technically why you can’t do it. There are also, of course, a lot of moral problems with this. The government represents the interest of its people, and we as Americans should not be in the favor of repudiating our debts. That’s not at all the way you should treat your creditors or your trading partners. It’s not the example you should want to set for your children. So it would be a stain on our national honor, and we should never, ever consider it.

And then there’s one other really good reason not to do it, and that is that right now we’re borrowing 43 cents on every dollar that we spend at the federal level. So if we didn’t pay back our existing debts, we would have no capability to borrow the money we need to pay our future obligations either. So I think these are really bad ideas, and that’s why I’m convinced that there will no overt repudiation of the debt. Instead what we’re gonna do is take advantage of our reserve currency and print as much money as we need to pay back our dumb creditors.

Aaron Brabham:         All right. Wayne says since you’re not religious and display so much ignorance when you speak about it, you would be much better off sticking to finance where you have some expertise and credibility.

We get some of those.

Porter Stansberry:       Yeah. We get lots of those. I’m not surprised. But I think that if you want to get to know – I think it’s important that people – how can I say this?  They’re – I wouldn’t trust a guy to advise me on financial matters if I knew that he was gonna go home that night and sacrifice a chicken in a Haitian voodoo ritual. And I wouldn’t trust him to give me financial advice if he was gonna go home and sacrifice a chicken in a Haitian voodoo ritual because I consider that nonsense. And if he believes in that, who knows what he’s gonna believe in with financial, the financial voodoo he might believe in.

So I think it’s important that people have an idea about the fact that we are intellectually consistent across all of our activities, and that we at Stansberry Research try to be agnostic, and try to seek the truth in whatever form we can prove it. So we’re empiricists, and that makes us by nature reluctant to accept anything on faith, and that makes us better financial analysts.

Aaron Brabham:         Joe wrote in and said I’ve noticed in several of your podcasts and newsletters that you have made negative comments about the black or African-American wing of the Democrat Party. You’re much too smart and well-educated to be a racist, but these comments sound like you’re blaming black people in general for the problems the Detroit-Baltimore-Philly public schools. Blaming a race of people for the myriad problems around the country seriously undermines your otherwise well-reasoned arguments. It will immediately anger any black person reading what you write and probably make them tune out for the rest of your thoughtful comments.

We’re not racist.

Porter Stansberry:       No. I disagree with that guy, of course, and absolutely. What I am criticizing is not the color of their skin. What I am criticizing is the leader, the leaders they have chosen and the policies those leaders have embraced. And those policies are unique. There is a huge difference between a blue dog Democrat from Kentucky and the kind of Democrat we find here in the inner city of Baltimore. And the differences are one, one’s white and one’s black. And I think it’s fair to say that, because it’s simply a fact.

And the other thing is that one’s constituents want the guy to get the government off their back, and the other constituents want the government to provide them with constant increasing benefits. And of course you know the history of this, that there are huge constituents of people in the United States, huge entire communities that have become dependent upon government handouts. And that makes these elections silly. They’re – what is it?  It’s an advanced auction of stolen goods. I mean, that’s the way they see the government.

And I think that’s terrible for these communities. I think it’s essentially enslaving them to an economic system that they’re unlikely to escape. It’s bad governance. It’s bad politics. And I don’t think there’s anything wrong with drawing attention to it or saying the facts, which is that this is a largely black inner city problem.

Aaron Brabham:         Facts. Last one. Tom, a farmer respondent to your take on GMOs and Monsanto. I must be your first farmer who doesn’t like Monsanto. To praise Monsanto is dangerous. I believe they may be the one company which could steal control of the world’s food supplies from the five big grain families some day in the future. I don’t believe that would be good for all of us growers, not to mention the world’s consumers. Remember what colonized the world. Wheat. And thus bread. Entire civilizations have been controlled by the availability of just wheat. What could happen if one company controls the price and availability of wheat, soy, corn, alfalfa, et cetera?  That kind of power is not good when it’s all located in one place.

Porter Stansberry:       He raises some good points.

Aaron Brabham:         Yeah. Most farmers do agree, but that was the one.

Keep sending us your national scumbag nominees. We’d like to hear any personal stories you have. That’s our show today. Again, we want to thank Chris Hayes for joining us, and we want to thank all of your for listening and sending in your feedback. Add us on Facebook, Twitter, @Stansberry Radio. Check out our YouTube channel, Stansberry Media, and e-mail us or call us at 855-727-2346. We’ll talk to you next week.

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