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Glenn Beck
Straight Answers to Tough Questions on the Economy
Aired October 06, 2008 - 19:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
GLENN BECK, HOST (voice-over): Our economy is in crisis. And nobody is giving you the straight answers to the tough questions. That changes tonight. We`re live. Your calls, your questions on the economy next.
(END VIDEOTAPE)
BECK: Hello, America. It was another record-setting day for the stock market, and not really in a good way. At one point the Dow was down 800 points. Looks like Washington fixed it. The largest point loss ever. And it closes over 300 points down.
Our economy is in the worse shape it has been in decades, and at this rate, we are rapidly approaching something as bad, if not worse, than what we saw during the Great Depression. But I don`t need to tell you that. I`ve been telling you that for the last couple of years.
We`ve been talking about this for two years now, and people said we were crazy. We`re not. I don`t need to tell you that, because if you`ve been watching this show, you know. I don`t need to tell you that, because if you pay your bills, you know. You`ve been trying to make ends meet. You`ve been playing by the rules. Who the hell is talking about your financial crisis in a way that you can even understand? What is coming our way and what do you do?
We`re trying to change that tonight. Tonight we`re going to answer all of your questions on the phone. You can get in on the discussion. You ask the question you want somebody to answer. The number is 877-SAY-BECK. That is 877-729-2325. Keep in mind, we can`t answer any specific questions about specific stocks or what to do with your money specifically, mostly because I can`t even really make change for a $10 bill. Everything else is fair game tonight.
Joining me now is Peter Schiff, president of Euro Pacific Capital and author of "Crash Proof: How to Profit from the Coming Economic Collapse." Ali Velshi is CNN -- CNN senior business correspondent. And Stephen Moore is the economics editorial writer for "The Wall Street Journal" and co- author of "The End of Prosperity."
OK. When I said just a minute ago that we are facing something akin to or worse than the Great Depression, Ali, I saw you nodding your head. That spooks the crap out of me.
ALI VELSHI, CNN CORRESPONDENT: Yes. I think there are things that won`t happen that were as bad as the Great Depression because we do have some back stops, including the fact the government is insuring your bank deposits, which didn`t happen back then. So you won`t see the bank failures that you saw back then.
BECK: Right.
VELSHI: We`ve seen 15 as opposed to 1,400.
There`s also the ability for businesses to understand it`s coming and buy less stuff so they don`t get saddled with it, which allows them to bounce back. But the bottom line is, we are pushing up on those unemployment numbers, and that is the most serious of all these issues.
BECK: OK. Let me give you something that was in "The Telegraph." It came out today here. Germany takes hot seat as Europe falls into the abyss. We face extreme danger unless there`s immediate intervention on every front by all the major powers in the world acting in concert. We risk a disintegration of the global finance market within days. No one will be spared unless they own gold bars. We are approaching the point of no return. The only way out of this calamitous descent is shock and awe on a global scale, and even that may not be good enough.
Peter, I mean, this should scare you.
PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: Yes. But what`s scarier is that the government might actually act on that.
You know, one of the things Ali said, all these backstops, they`re actually going to make it worse. The government is going to turn what would have been a very severe recession into an inflationary depression. They`re trying to pretend that there`s a problem on Wall Street, and they`re trying to prevent it from getting to Main Street.
It`s Main Street that has the problem. Wall Street is in trouble because Main Street is broke. We borrowed too much money, and we can`t pay it back so the lenders are feeling it first. But it`s the fundamental flaws in our economy. That`s the problem.
BECK: OK. Real quick, let me go to Stephen Moore. Stephen, what is -- what is the world going to look like in a year from now, if these things come true? What should people know and look for and say, "This is what my life is going to be like"?
STEPHEN MOORE, ECONOMICS EDITORIAL WRITER, "WALL STREET JOURNAL": Glenn, I guess I`m the optimist here, because I think we`re headed toward a 1970s style recession. And don`t put me in the depression column just yet, but `70s style recession is pretty bad anyway.
I mean, I grew up in Illinois in 1982 the unemployment rate hit 12 percent, twice of what it is today. Don`t forget, by the way, Glenn, in 1934 or so, the unemployment rate hit 25 percent, so at least we`re a long way from that.
But I agree with Peter. Washington, not just Wall Street, Washington is the problem. Where are they getting this money? We`ve talked about this for months on your show. Too much debt, too much government spending. So how are they going to fix the crisis? More debt, more government spending.
BECK: All right. Let me go to Dave in Nebraska now with the first question on the program.
Dave, go ahead.
CALLER: Good evening, Glenn. The question that I have, I`ve moved my money out of the stock market, and I`ve got it in stable funds. And we`ve been stocking up on food. But what good is it going to do to buy gold if nobody has any money that`s worth anything? I would think I would be better to buy perishable items than go into gold.
SCHIFF: Well, gold is money. Gold has intrinsic value. The problem with the dollar is it has no intrinsic value. And if the Federal Reserve is going to spend trillions of them to buy up all these bad mortgages and all other kinds of bad debt, the dollar is going to lose all of its value. Gold will store its value, and you`ll always be able to buy more food with your gold.
BECK: Ali, I`ve been saying on the air, for people who just don`t have money, I mean, an ounce of gold is, what, $860 to $70 today. For people who don`t have a lot of money, I`ve been saying, "Look, the best thing you can do is don`t buy things that you know you`re going to have to buy because inflation alone" -- if you can buy -- you see a sale going on for coats or suits...
VELSHI: You have kids, you know they`re going to grow. You know they`re going to need coats. I don`t think it`s stupid. I don`t think the stock market will be the failure that everybody thinks it is. I think we go lower from where we are today.
BECK: Didn`t you just think that it was going to be akin to the Great Depression?
VELSHI: No, I`m saying that there are things about it that will be very tragic, but I don`t think we`re going to -- I think we have enough backstops to stop us from going into that kind of a situation. The No. 1 problem is how many jobs we keep and lose.
But the stock market will be the last man standing. Bottom line is they can make money out of anything. People can sell goods, including perishable items that you want. For someone to make money out of that...
SCHIFF: One of the things that has to happen, we have to lose a lot of these non-productive service-sector jobs. We need real jobs where we actually make stuff. And the government is preventing this transition from happening because it won`t allow the free market to function.
VELSHI: The free market function will put five million people out of a job.
SCHIFF: Temporarily. Temporarily.
MOORE: No, it will put them out of a job permanently.
BECK: OK. Stephen, real quickly. Next question. Go ahead, Stephen.
MOORE: Glenn, I was just going to say, you know, I don`t know if it`s a joke or not, but the line on Washington now is this is a time to be in cash, scotch and fetal, as in fetal position. So I mean, there`s a lot of fear out there.
But I`m going to agree with -- I think actually stocks, if they fall much more, Glenn, if you look at the fundamental earnings of these companies, the P/E ratios are pretty good. If the stock market falls a little bit more, I`m going to get back in this. I`m going to ride the wave.
(CROSSTALK)
BECK: Ali, let me tell you something, America, buckle up. It`s going to be a very bumpy ride.
Rick in Virginia. Hello, Rick.
CALLER: Glenn, thank you for taking my telephone call.
BECK: You bet.
CALLER: Listen, I am a scared fellow. I am terrified of what`s happening to the market. And I don`t have a lot of money to invest. And I`m just wondering what exactly should I do with what little bit of money I have?
VELSHI: All right. There are very careful places you can invest your money, everything from a CD to a mutual fund, a money market mutual fund to cash goes in a bank. Peter is nodding his head. The bottom line, it is safe. The government will pay those bills. And when they don`t, we`ll be on this show to tell you they won`t get paid. You`re nodding your head, too.
BECK: You know what? I`ve got to tell you. First of all, I don`t know how much money is very little money, but I don`t believe -- honestly, at this point, I don`t believe in anything. I mean...
SCHIFF: If you don`t have a lot of money, just stock up. You know, there`s a lot of food that you can buy that doesn`t spoil. You can buy toiletries that you might need, razor blades, shaving cream, all sorts of stuff. Even if you don`t smoke, you can always exchange them later on for things that you need.
BECK: Can I tell you something? I`ve got -- I`m an alcoholic Mormon. I`ve got booze stashed all over the country.
VELSHI: Not to trade but to sell. You can trade. But that does underscore the point. The point is no matter what happens in the economy, people buy food and they buy drinks. They buy cigarettes. They buy things. And the stock market is simply a way for you to buy those. You don`t have to be invested in everything.
Lee Iacocca`s father made money during the depression selling hot dogs. People do buy stuff.
SCHIFF: Your stocks will be a buy one date. Not now. They`re going a lot lower, especially if you adjust for inflation.
BECK: Real quick, just give me a number. Where do you think stocks are going to?
SCHIFF: The number I got, the Dow Jones is going to be worth one ounce of gold. Not in six months but maybe some time in the next five to ten years. Right now the Dow Jones is worth, what, 10,000, gold is 850. At some point they`re going to meet. They`re both going to be the same number, whether it`s 5,000 Dow, 5,000 gold, 10,000 Dow, 10,000 gold. It`s happening.
VELSHI: Peter should be cloned, because you can`t make that stuff up.
SCHIFF: It happened twice in the last century.
BECK: Give me a number. Give me a number, Stephen.
MOORE: Well, I think I`m still kind of bullish on the market. I think in a couple years` time when we finally climb out of this, I think the Dow is going to go up to 15,000. I`m still bullish.
BECK: Yes. All right, all right, all right. Let me go to Judy in New York. Hello, Judy.
CALLER: Hi, how are you doing?
BECK: Very good.
CALLER: Thanks for taking my call.
BECK: You bet.
CALLER: We are retirees with no investments other than CDs and bank accounts, several bank accounts, one in the federal credit union. And my concern is how secure is the money in the federal credit union, you know, insured by the NUCA?
SCHIFF: I don`t think it`s secure at all. I mean, even if the credit union doesn`t fail and you get all your money back, the problem is, when you go to spend it you`re not going to be able to buy very much. I mean, most Americans are not going to retire on dollars...
VELSHI: That wasn`t her question. You money`s absolutely safe. NCUA is a national credit union administration. They work just like the FDIC, but we have reports that they don`t pay out as quickly as the FDIC does, which will be two days if your bank fails. Ninety-eight percent of credit unions are covered by the NCUA, which means you need to check that yours is. If it`s covered it`s safe.
Now, Peter`s discussion whether your money is worth anything, but it will be there.
SCHIFF: How is it -- what good is having -- how can it be safe --
VELSHI: That`s a question about inflation. Bottom line, she puts $100,000, it will be there. You`re just saying that`s not a good place.
SCHIFF: She takes the $100,000, she buys a tank of gas, big deal.
BECK: All right. He`s an optimist. More of your calls in just a second. And what the heck, are you ever going to be able to sell your house? Coming up.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
JIM CRAMER, MOST, CNBC`S "MAD MONEY": Whatever money you may need for the next five years, please, take it out of the stock market right now, this week. I do not believe that you should risk those assets in the stock market.
UNIDENTIFIED FEMALE: Even...
(END VIDEO CLIP)
BECK: That was Jim Cramer today on "The Today Show." We`re taking your questions on the economy live. Call us at 877-SAY-BECK. That`s 877- 729-2325. Peter Schiff is with us, president of Euro Pacific Capital, author of "Crash Proof: How to Profit from the Coming Economic Collapse." Ali Velshi is a senior business correspondent for CNN. And Stephen Moore is economics editorial writer for the "Wall Street Journal," co-author of the book "The End of Prosperity."
Stephen, let me -- let me come to you. Remember in Independence Day when they used the nuke, and it was like, "Let`s just nuke them," and then it didn`t work? Did that come to mind today at all when you saw the stock market?
MOORE: Boy, did it. You know, I feel embarrassed. The last week I think I tepidly endorsed this plan. I want to apologize to you about that, because...
BECK: You didn`t think it would work, did you?
MOORE: Well, I was -- you know, I was drinking the Kool-Aid in Washington. Everybody was saying, remember a week ago -- everybody said, the market is down 700 points, because we didn`t pass this -- this rescue plan. So here we are a week ago. The market`s down 900 points, and we passed the rescue plan.
BECK: Right. And it`s got a lot more to go.
Let`s go to Dawn in Michigan. Hello, Dawn.
Dawn, are you there?
Let`s go to Dallas in California. Or maybe California in Dallas. I`m not sure. Dallas, are you there?
Who do we have on the line here, gang? Nobody? OK.
Let me -- let me go to Ali on -- everybody seems to have a -- you know, an account -- or I mean, economics degree, and they all say, "Well, this is fantastic. You know, we`ve got all these fail proof. All of this is going to stop everything else."
As a guy who just has my grandfather`s common sense, he was a berry farmer. You know what I mean? He was a machinist and a berry farmer. That`s what he did. I look at this stuff and I say, there`s no way that this stuff doesn`t fail, only because the government is out of money already, and they just -- now they`re saying we need another stimulus package. From whom?
VELSHI: We don`t have the money. That is this discussion that is not extended all the way over to the American people. And that is we are so severely in debt. I know you have had this conversation and, Peter, you have had this conversation. We are so seriously in debt that somebody has got to pay for this.
When you keep on printing money and put it into the system, it devalues the money we have. Which is why we have a cheaper dollar, which is why you say that keeping money in the bank is nuts.
SCHIFF: Exactly. But the government needs to level with us. You`ve got the president and all the congressmen coming on television saying we need these bailouts so that Americans can go borrow more money and buy new cars. We`ve got plenty of cars. We can`t even afford to play for the cars we already own.
What we need to be telling American citizens is we`re broke. We`ve got to start saving. We don`t need to go deeper into debt.
MOORE: The problem is, too, Glenn, we talk about that $700 billion rescue plan that so far ain`t working too good, but you know what? In Washington there`s no Plan B. There`s no Plan B.
BECK: Yes, there is. They`re going to bail it out, bail it out and bail it out. All of them are saying this is only the beginning.
Let me go to Dallas in California. Hi, Dallas. Are you there now?
CALLER: Yes, I am here.
BECK: Yes, sir.
CALLER: Love your show, Glenn. Twenty-four years old, just bought a house in May. And 30-year fixed loan. I got in on the 97 percent financing. And, you know, we had the money to put down but, you know, we got a 6 percent interest rate, 30-year fixed, 6 percent and the payment is only 1,500 bucks. It`s only $300 than it costs to rent an apartment in this state.
You know, I`m really worried, you know, about -- you know, it`s my first place. My wife and I have been married for a couple of years. And you know, I just don`t want to lose everything we worked so hard to get. And we`ve only been in the house for six months. What do you do?
SCHIFF: I don`t know why you didn`t just rent. I mean, why take out all that responsibility?
BECK: Here. Let me try this on for size, because that`s, you know, going back to the past. I mean, you sound like a responsible guy. Let me ask this. Ali, what stops somebody from, when everybody figures out, "Wait a minute, everybody is being bailed out except me. I`ve been responsible..."
VELSHI: What stops you...
BECK: What stops you from just saying, "I ain`t making this payment"?
VELSHI: Yes. And that`s the danger of this. That is exactly the danger of any kind of bailout, is it does reward behavior that wasn`t responsible. Now Conrad -- or Dallas is making the right decision. But the point is we have fed this American dream which might not be the American dream. Peter did say why don`t you just rent, because we`re supposed to own, because it goes up in value. And it`s getting better.
SCHIFF: Have we learned nothing? This guy just took out a mortgage with 3 percent down.
VELSHI: Tell us about what he did was right.
SCHIFF: I know. But the lenders -- the lenders -- the lenders should not be letting somebody borrow -- buy a house and only put 3 percent down. We`ve learned nothing. We`re repeating our mistakes.
BECK: Conrad -- go ahead, Stephen.
MOORE: Glenn, I want to make a point. Do you remember those olden days, 20 percent down? Whatever happened to that?
BECK: I just said that.
MOORE: The idea of 2 and 3 percent down is crazy...
VELSHI: The parties where people paid up their mortgage? Yes.
BECK: I just said this on -- I just said this on the radio today. I remember -- and what`s so wrong with this? I remember when you had to save and save and save, and you were 30. You know, 35 years old before you could afford to buy a house. You had to have 20 percent down, and that`s the way it was.
SCHIFF: Why do you buy a house when you just get out of college?
VELSHI: It`s the wrong dream that we`ve been pushing, and it`s the same that causes you to open up bank accounts, credit cards and store cards.
BECK: Let me ask you guys, who here actually believes that the politicians get it? Because they`re not saying it`s a dream anymore. Now it`s a promise. Now this is America`s promise.
MOORE: It`s an entitlement. It`s an entitlement.
SCHIFF: The promise wasn`t just own a home. It was own a home and get rich as it appreciates.
BECK: Right.
SCHIFF: You don`t have to save because your house is going to save for you. And you can buy everything by constantly pulling equity out of your -- out of your house piggy bank. Your ATM machine.
VELSHI: That is what killed us. I can`t believe how much I`m agreeing with you two.
BECK: Here`s the thing, America. I just hope that we all look at these politicians and realize both parties, they`re both involved in this, and they`re both feeding you -- they`re feeding you lies right now. They`re still telling you that you`re going to get Social Security. You`re going to get this. We`re going to get health care. None of that is going to happen at this point.
MOORE: And I love this lie -- I love this lie, Glenn, that -- thank God we didn`t privatize Social Security. As if Social Security is such a great idea.
BECK: I know. I know.
MOORE: Trillions (ph) of dollars in debt.
SCHIFF: The guy steering the Titanic is telling us the ship is sound. Don`t worry. Go back to bed.
BECK: Let me go to Conrad in Canada.
Hello, Conrad.
CALLER: Hi, guys. Great show.
BECK: Thank you.
CALLER: I just want to tell you that these problems you`re experiencing in the United States aren`t certainly only United States. We got some of the same problems in Canada.
For example, I`ve been reading, and I found firsthand, how difficult it is to buy a U.S. one dollar gold coin, whether it be the eagle or the royal Canadian maple leaf in Canada. I just wanted your comments on that, please.
SCHIFF: I think they`re running low on supplies, because people are wising up and they`re buying them. But you, America...
BECK: Why isn`t -- why isn`t gold shooting through the roof?
SCHIFF: It will. I mean, don`t try to figure out why it hasn`t. Just buy it before it does. You know, in the short run, markets are irrational. Look, the U.S. dollar is rising right now. It should be collapsing.
BECK: What do you think about buying silver, because a lot of people can`t afford gold?
VELSHI: I think there`s a portion of your portfolio that should northbound precious metals all the time.
BECK: Just talk to me. I`m a guy -- I`m a guy who lives, you know, in a very modest home, working-class family. We didn`t have gold. We didn`t have a portfolio.
VELSHI: They behave in similar ways. Silver is actually used in industry, so it has more applications than gold.
SCHIFF: Hang onto your copper pennies, the ones that were minted before 1981. They`re worth two or three cents.
MOORE: But Glenn -- Glenn, I can tell you why the dollar is rallying in the last couple of weeks.
BECK: Real quick.
MOORE: Because Europe and Japan are even in worse shape than we are.
(CROSSTALK)
BECK: Hang on, guys. We have to take a break. Back with more questions, more of your calls in a minute.
(COMMERCIAL BREAK)
BECK: It`s your economy and your questions. The number is 1-877-SAY- BECK. That`s 877-729-2325. I`m with Peter Schiff, Ali Velshi and Stephen Moore, and we are taking your -- your phone calls.
You know, I want to -- I want to ask you guys a question. I really truly think that right now, the American people, you could make the case, instead of -- you know, it`s 9/11, go out and spend money. You could make the case right now and say, "America, these are the things we have to do. We`re going to have to cut our budget like crazy. We are going to slash, slash, slash. We`re going to lose an awful lot of things right now, but you know what? We`re going to cut them. And when we cut them, we`re going to come to you and ask -- we`re going to ask you for higher taxes."
And I think you would actually have a shot at winning today, because Americans know in their gut that they`re not going to give this country another dime unless they start slashing these budgets.
VELSHI: I hope you`re right and I wish they would, because that`s the reality.
BECK: Last week was the reality.
VELSHI: They could have done it but they haven`t done it. The presidential candidates are still talking about the cuts they`re going to make. The math doesn`t add up.
SCHIFF: They still -- look, they still want to try to resurrect the phony economy we had. They won`t let us reconstruct a sound economy based on savings and reductions. Somebody could just level with the American public and let them know that we have to suffer through this recession, because if we don`t, we`re going to get something much worse if the government tries to keep us borrowing and spending.
BECK: Stephen?
MOORE: One of the big jokes of the presidential campaign, Barack Obama keeps talking about the, quote, "investment deficit." He`s saying government isn`t spending enough. The budget is up, Glenn, from $2 trillion to $3 trillion in seven years.
BECK: We -- we...
MOORE: Where is the investment deficit? All we`ve been doing is spending more money.
BECK: We lost 156,000 jobs, 156,000 jobs. The government grew 9,000 jobs.
MOORE: It`s unbelievable. The only sector of the economy that`s been growing jobs...
SCHIFF: They don`t produce anything. We have to support them. They`re a drain.
BECK: Let me go -- let me go to Maryland. She`s in North Carolina. Hello, Marilyn.
CALLER: Hi. I know everyone has been talking about the crisis. And my -- my concern is I`m a disabled veteran. What`s going to happen to individuals like myself that rely on that government pension to survive?
SCHIFF: You`re going to have a tough time because the value of that pension is going to erode through inflation. You`re going to see your cost of living go higher and higher and higher. And unfortunately, it`s going to be really very difficult for you, and I really feel for people in your situation. The government is shooting at you.
BECK: We already have. I mean, this is a real sad thing. Social Security. I mean, gang, come on. Nobody believes you`re going to get Social Security. You`re not going to get it. Period. You`re not going to get it.
For those who are on Social Security right now, you`re in a real problem and a real bind because inflation...
VELSHI: By definition, it is the most fixed income and, as Peter says, we have seen this problem. We`ve been eating away at our ability for a dollar to buy what it did a year ago, whether it`s energy prices or food. And nobody thinks that`s going to stop. We`re celebrating that oil is a little under $90 a barrel.
BECK: Stephen or anybody -- do you guys at all think -- I`ve been talking about the perfect storm. It`s not just the economy, which is different than it was in 1933 or 1929. It`s different. The fundamentals aren`t there. We don`t have the steel industry, et cetera, et cetera.
But you also have England now on critical alert. You`ve got enemies all over the country that are coming at us. You`ve got -- you don`t have cheap energy anymore. You`ve got Russia and Iran and everything else that want to be able to push us over the edge. How do you -- how do you not...
VELSHI: It is dangerous for a country of this size and important to be economically vulnerable.
MOORE: Because you know what happens, Glenn? I`m the optimist here. I`m not one of the four horsemen of the apocalypse. I think that our country, we always come to the right solution. We always do all the wrong things first, but ultimately, we come up with the right plan. It may take a couple of years.
BECK: We`ll be back. Back in just a minute.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
SEN. BARACK OBAMA, (D) PRESIDENTIAL NOMINEE: The fundamentals of the economy aren`t sound, and we`re going to have to do a lot of work moving forward. So if we can stop the bleeding with this package, implement it effectively and then move forward to deal with the broader problems on Main Street, then hopefully we can start getting our economy back on track.
(END VIDEO CLIP)
GLENN BECK, HEADLINES NEWS ANCHOR: We are facing the worst economic crisis ever, and these guys are in fairy land. The DOW has suffered its biggest single day point loss in history; that`s the second time in two weeks that we`ve re-set that record.
Everybody is talking about this mess and nobody is talking about it and I think with any kind of credibility, the same experts that were doing all the talking are the same guys that have been calling me crazy for the last year and a half.
Plus, if you`re a hedge fund manager, and maybe you understand all the financial lingo, but I don`t. I`m a big, fat dummy. I spent two years trying to figure out what the hell all of this means. And you know what, the minute you start getting into all of this financial talk, you`re talking nothing but mumbo and jumbo to most people, right? And people have no idea what you`re talking about and you`re not making common sense at all.
Who`s saying things in a way that we can understand? Tonight we`re trying to do that. We`re trying to answer your calls and your questions live. The number is 877 sayBeck to 877-729-2325.
With me tonight, Peter Schiff, president of Euro Pacific Capital and author of "Crash Proof, How to Profit from the Coming Economic Collapse." When did you write that book Peter?
PETER SCHIFF, PRESIDENT, EURO PACIFIC CAPITAL: Three years ago, it`s been out two years ago.
BECK: Stephen Moore, economics editorial writer for "The Wall Street Journal." And he`s Mr. Happy Pants today, although he doesn`t look it. Well, he`s the co-author of "The End of Prosperity." It doesn`t sound real awful.
STEPHEN MOORE, ECONOMICS EDITORIAL WRITER, "THE WALL STREET JOURNAL: I just wrote it.
BECK: And joining me now is Bob O`Brien, stocks editor for Barrons online.
Let me go take a phone call here quick, let`s go to Lyn in North Carolina. Hello Lyn.
LYN OF NORTH CAROLINA: Hi a big fan.
BECK: Thank you.
LYN: I have a question and this is just for people like me Joe Schmoe working part-time at a grocery store trying to make ends meet. When they talk about this bailout and they say that the government is going to take on all this bad debt -- and I know that`s not just asset-related debt. There are a lot of signature loans, credit card debt, that kind of thing.
If and when they do this, they take it over from these big banks like Bank of America, Wells Fargo, things like that, how is that going to affect, say, the people like me on my end who are getting these mortgage calls and the credit calls? Is that going to go away or are we going to start getting calls from the government?
BECK: Stephen.
MOORE: The hope is that this will stop the bleeding. That these banks won`t -- there`s a fear there`s a domino effect and you`ll have one bank after another fail. So the idea here is to stop that bleeding by getting rid of their bad assets.
But guess who is taking them over, Glenn, the taxpayers. And I guarantee you the taxpayers are going to overpay for these assets. We`re going to be taking on the most toxic assets. The banks are going to get rid of the worse ones, throw them in the taxpayers laps. How does that make any of us most on the left.
BECK: I saw something in "The New York Times" that said the Treasury now is trying to decide how to not overpay for those assets that are truly worthless.
MOORE: Why are we paying anything for them?
SCHIFF: The whole point of the bailout is to overpay. If they don`t know who`ll pay they`re going to bankrupt the entities that are selling but the answer --
MOORE: But you know what there are still people in Washington saying this is going to be a bargain for the taxpayers; it`s crazy.
SCHIFF: The answer to the caller`s question, the way she`s going to get hit, is because in order to buy all this bad debt, the government has to print money. So they have to debase your wages and they have to drive up the cost of living for average Americans so they can bail out these lenders.
BECK: Make no mistake, America, and let me tell you something, Washington has sold you down the river, sold all of us down the river and they`ve done it for power. Both sides have done it for power. They wanted to make sure the American dream was alive and well. They knew this wasn`t coming. You couldn`t not see this tragedy coming.
Ginger in Wisconsin, go ahead.
GINGER IN WISCONSIN: Yes, I`d like to know what is the difference between a recession and a depression?
MOORE: Yes, well, you know a recession is when your neighbor is out of a job and a depression is when you`re out of a job. And remember when Ronald Reagan said, when recovery was when Jimmy Carter is out of a job. So maybe it`s when Congress is out of a job.
BECK: I think we`re all about to find out the difference. I think a depression is just a very severe, long, deep recession that doesn`t go for quarters but goes for years. And I think at the end of the Barack Obama administration we`ll still be in this thing it`s going to be worst.
BECK: You say what you said off the air. You said that you thought that there was a possibility that we don`t survive the next four years.
SCHIFF: Well, I mean, the dollar. I think we have a major crisis in the dollar. There`s going to be -- you know the dollar will collapse and that will send long term interest rates and consumer prices much higher. So the problem, Barack is right that the fundamentals of the economy are not sound but he`s going to make them less sound.
MOORE: Right.
SCHIFF: He wants to put the economy back on track. The problem is that`s leading to a brick wall.
BECK: You know what, we use to as John McCain is saying anything else I mean, they`re both saying the same damn thing.
MOORE: And the question about a depression versus a recession, if you think about what happened in the 1930s, 25 to 30 percent unemployment, that`s five times worse than what we`ve got now. If you`re bemoaning 150,000 jobs lost, imagine how you`re going to feel when we start to talk about 450,000 jobs lost any period.
SCHIFF: But these are all phony. Unemployment is probably a lot higher than that as is inflation. It`s not as bad -- unemployment is not as bad as it was during in the `30s. But we`ll see -- we might get there and remember, this is just the beginning. It wasn`t that bad in 1929 and 1930. We`re at the early stages of this. We`ll see how it is in three or four years.
MOORE: And don`t forget what made it so much worse Glenn. You`ve read Amity Shlae`s book and she talks about how everything the government tried to do under Franklin Roosevelt and under Herbert Hoover made the crisis worse.
BECK: Oh yes.
MOORE: That`s what worries me the most.
BECK: Oh yes, Barney Frank said that as soon as the election is over, they`re going in for major surgery on this. I mean why would you invest in it, here I mean the hedge funds --
SCHIFF: Who needs major surgery?
BECK: I don`t want to sound like CNBC here, gang, but a lot of your retirement funds are in these hedge funds. How do you keep these things stable when people are investing in there because there`s no regulation and then you have governments coming in saying we`re going to start regulating. People are going to pull those -- that money out of there.
SCHIFF: You can ban the short selling, but does it stop the market from going down? One of the unintended consequences of the short selling - - one reasons that these declines are so violent now, is because the shorts are not there to cover.
MOORE: Right.
SCHIFF: They took away the buyers.
BECK: Let me go to Greg in North Carolina. Hi Greg.
GREG OF NORTH CAROLINA: Hey good evening Glenn
Hey so my one comment here before my question is that capitalism is built on these moral pillars and I think today part of our struggle is that we have moral relativism and this is the consequence of it.
MOORE: Right.
BECK: And capitalism can heal itself if you let greed -- when greed takes us over, it collapses on itself. You let it collapse and punish the people.
SCHIFF: Greed is normally balanced by fear.
BECK: Right.
SCHIFF: But the government took the fear out of the equation by guaranteeing everything, by letting everybody think there was no consequences and no risk. That`s what killed it.
BECK: Greg, go ahead, what`s your question.
GREG: So my question is tonight what is the -- how are we going to see inflation, stagflation, deflation -- I mean, how is it going to take?
Glenn, you talked on your show the last couple of weeks about -- we could have just rampant out of control inflation and I think guess that`s counter intuitive to what we think of in a recession in terms of deflation.
SCHIFF: Well, because we`re coming on this period with fiat currency. During the 1930s we had real money, we`re all in the gold standard, we`re on a gold standard for 200 years until 1971.
But now we have fiat money; the government just created money out of thin air it has no value. And the way that they`re going to pay for all this bailouts is by printing money. And that`s inflation.
The result of inflation is that prices go up. But the real crisis is when all the people around the world, in Japan and China, and the Saudi Arabia, don`t want to hold our dollars anymore and then the dollar really goes down and prices just go through the roof.
BECK: Ok, Stephen let me and Bob maybe you can answer this -- as I`ve understood it, the Fed only has a few things that they can do. They can open up the valves and they can make money shoot out.
O`BRIEN: Right.
BECK: But at some point -- and we passed this point -- you got to shut those valves off. Otherwise, you can no longer control up and down.
O`BRIEN: Right.
BECK: You can no longer control the value. Once you try to turn those valves off, if you could still control it, which they can`t, you close those valves. You have to close them as much as you opened them to balance. So, in other words, as low as we have put forced interest rates down, we have to go that amount of time higher.
O`BRIEN: Right.
We should be raising now. But we`re not going to, with the next move on the part of rate-setters not just here but around the globe, there`s going to be a coordinated global effort by central banks -- Bank of England, bank of the European central bank, Bank of Tokyo all going to --
SCHIFF: If what we need is more savings, and how do we get more savings when we punish savers and encourage borrowers?
MOORE: That`s the problem and we`re really much in a 1970s styles economy where the unemployment rate goes up, so they print more money to put more people to work, that causes more inflation --
BECK: I only have one minute to break.
MOORE: Yes.
BECK: So let`s just quick get a roundtable. Are people going to be able to get a loan for student loans in the next 12 months?
MOORE: No.
BECK: No, you won`t be able, so what happens to college tuitions? Are they going to plummet?
O`BRIEN: They have to.
BECK: In the next 12 months.
O`BRIEN: A longer than that but it`s going to happen with 1824.
BECK: Ok, all right, let me ask you this. Are you going to be able to sell your house? I lose my job. Am I going to sell my house?
O`BRIEN: Not at the price you want.
MOOR: Not at your current price.
BECK: Ok, let`s say I have 15 percent now. Let`s say people are crazy, let`s say I have 10 percent in it, am I going to be able to get my price?
SCHIFF: I doubt it. The only way you can sell your house is dramatically lower your price. The government keeps claiming that all these mortgages are illiquid. They`re not illiquid, if people would lower their prices there would be buyers.
BECK: Right.
SCHIFF: They`re only illiquid if you stubbornly refuse to sell it at real estate price.
BECK: That`s because everybody borrowed that much money.
SCHIFF: But it doesn`t matter, that`s irrelevant. That was a bubble. You can`t get bubble valuation for tech stocks anymore or Internet stocks. Most of them are worthless.
The real estate bubble is just as big.
O`BRIEN: Even that the vintage that you know the 2005-2006 vintage mortgages, yes, those are trouble. But you tell me somebody who has been sitting on 15 years of a 30-year mortgage, is still demanding. I want --
BECK: Got to go we got more of your calls and your questions coming up next.
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP)
SEN. JOHN MCCAIN, (R) PRESIDENTIAL NOMINEE: The action Congress took today is a tourniquet. It`s not a permanent solution. Our economy is still hurting and hurting badly. Further action is needed, and it shouldn`t take a crisis to get this country to act and this Congress to act in a bipartisan fashion.
(END VIDEO CLIP)
BECK: You know, let me go to Stephen Moore on this one. And by the way, a full night of questions on the economy, you can get in on the discussion 877-say beck, it`s 877-729-2325.
Stephen, I think John McCain made the biggest error any politician has ever made by not coming out and saying not -- at least not with all of this pork. It`s not working. It`s clearly not going to work.
MOORE: Yes, I think he`s going to pay a high price Glenn, for not coming out against this bailout proposal. Not just because of the $700 billion price tag, which a lot of American taxpayers are scratching their heads wondering where that money is going to come from. But also as you just said all the pork that was added to this bill in the last few days to win those last votes that they needed was a fiscal disgrace.
I mean, you talked about the bicycle pads and the money for the rum runners and all of this stuff. I think it makes American too sick about politics. And that`s what John McCain is supposed to be running against.
BECK: What kills me and I`d love to hear from you guys on this is -- anybody who says right now, oh, well, I`m going to take care of that, Social Security and we`ve got more health care coming, where are they going to get the money?
O`BRIEN: You basically hand it and bootstrap yourself for, what, the first four years of the next administration? I mean, put a time frame on $700 billion.
The problem with this deal is nobody knows what we`re buying here, because we`ve never done this before. $700 billion still don`t know where that figure came from.
SCHIFF: McCain is right. The economy is down on the ground, flat on its back. But what this bill does is it kicks it in the groin. I mean this is ridiculous.
I mean, he missed an opportunity to blame these problems on government, to blame it on the Federal Reserve, to put the blame where it really belongs and then differentiate himself from Obama and then talk about real change, changing this monetary and fiscal policy that created this mess, not buying into the liberal agenda that it`s the greed on Wall Street that`s the problem, that big government is the solution because he loses that battle.
BECK: Well, I can`t believe that nobody is talking about this. Do we have the clip by any chance of Alec Baldwin on Bill Maher this last weekend? You`ve got to see this. We`ll play it for you when we can.
Yes, it`s unbelievable.
Alec Baldwin is saying, you know, guys, the Democrats had a lot to do with it. I mean, America understands somewhat what`s going on here and, yet, it seems like the politicians haven`t caught on.
Let me go to California, speaking of politicians that haven`t caught on yet, Susan in California. What`s your question, Susan? Susan, are you there?
All right, let me go to Irene, who is also in California. Hello, Irene. Ok. Obviously, the problem is with the phones in California.
MOORE: First indication, the telephones are breaking down.
BECK: I mean Stephen, you`ve just written a piece in the "Wall Street Journal" about California.
MOORE: Yes.
BECK: Tell me what California has done in the last three weeks, before they asked us for this bailout.
MOORE: Well, this was an amazing little story.
Arnold Schwarzenegger signed a Democratic budget that they knew was $7 billion in debt. This is a state that is supposed to be living under a balanced budget requirement, Glenn, and he signed the budget with all the excess spending.
And guess what Arnold did last Friday. He wrote a note to Hank Paulson saying, congratulations on this big bailout package, then he held out his tin cup and said, by the way, can we have $7 billion of that to pay our budget?
And now you`ve got a number of governors who are coming to Washington same way saying give us some of those free money.
BECK: But we don`t have any money, we`re broke, here`s the thing. California does have money. California has oil.
I introduced today on my radio program the Glenn beck go to hell California Act of 2008. Here it is.
When you get your budget under control and you start drilling for oil so you can make some royalties on that, then we`ll sit down and talk.
MOORE: Glenn, even the city council in Santa Barbara, one of the most liberal places in America, wants to drill. They`re finally waking up if they want us to fund these programs they`re going to have to drill some oil.
SCHIFF: The problem is that the federal government is the only one with the printing press. So everybody is says what you`re printing up all this money, print up a little extra. All of these states are going to be in trouble. They all have bloated bureaucracies from the phony prosperity of the bubble years and they don`t want to lay off government employees.
They`re not going to get the tax revenue and they can`t even borrow because the Chinese and the Japanese and the Saudis don`t want to loan to California. All they want to buy is federally-insured paper.
BECK: All right, let me go to -- let me see Irene, are you there now in California?
IRENE IN CALIFORNIA: Yes. Hi, Glenn.
BECK: How are you?
IRENE: I`m doing just fine.
BECK: We were just saying very nice things about your state.
IRENE: By the way we`re supposed to vote on something in California, to blow almost $10 billion on a new train system.
SCHIFF: Oh my God.
BECK: Good luck on that one. Anyway, what`s your question?
IRENE: My question is I`m concerned about the safety of the big mutual fund houses like Vanguard or Fidelity. A lot of folks have their retirement funds there.
SCHIFF: Well, I mean, more important than the safety of the funds is the safety of the investments the funds have made. I mean, even if the funds don`t go out of business, what about all the stocks, the overpriced stocks and bonds that they`ve invested your money in. And that`s what you should be concerned about and then the value of the dollar.
O`BRIEN: Well, I think most people are probably concerned are these going to go away the way Bear Stearns went away, the way AIG went away. And if there`s some comfort to be taken from this is that your mutual fund is not going to evaporate overnight. You`re not going to wake up some Monday morning and find out that the government has taken over Fidelity or something wacky like that. But as Peter said chances are pretty good you`re about 30 percent less rich than you were in October of last year.
BECK: All right, let me go to Susan in California. Hello, Susan.
SUSAN IN CALIFORNIA: Hello there. Got a comment for Glenn. Husband and I love your show.
BECK: Thank you.
SUSAN: We both spent combined more than 40 years in the service, retired. When we were still active duty we saved our money. We saved our money.
BECK: Moved to California.
SUSAN: I moved to California, bought a house, didn`t use it like an ATM, and now we`re just losing money from our savings. So we`re like many other people. Who`s going to help us?
BECK: Right. Well, no one`s going to help the average person.
SCHIFF: Unfortunately you`re the people who are going to get caught. You`re going to get slaughtered as the value of your savings is going to be wiped away to inflation as the government tries to help out everybody else who leveraged themselves up to the hilt, who bought their houses with little or nothing down, who refinanced two or three times to take vacations they couldn`t afford, buy cars they couldn`t afford, who are up to their eyeballs in credit card debt and auto loans.
Those are the people the government is trying to help. But in helping them, they bankrupt everybody else. And ultimately, it`s going to hurt everybody because our entire economy is going to collapse.
BECK: Steven, hang on, I`ve got to get your comment here.
We`ll be right back in just a second.
(COMMERCIAL BREAK)
BECK: All right. We`re wrapping up our calls tonight, and with your questions on the economy, with Peter Schiff, Steven Moore, and Bob O`Brien.
Steven before we went into the break you were going to say what?
MOORE: I was talking about this woman who called in from California. The problem is what we do in Washington is we reward vice and we punish virtue. So the people who played by the rules, Glenn, the people who paid their mortgages on time, paid their taxes, didn`t get up to their eyebrows in debt; they`re the ones who are now suffering the consequences. They`re going to have to fight this -- there`s no fairness in this. That`s the point I`m trying to make.
BECK: Right. And that`s the biggest problem.
We already have disenfranchisement in this country where people are pissed off. They feel alienated. They feel like nobody`s listening to them.
When you have Barack Obama -- Steven, correct me if I`m wrong -- Barack Obama is saying that he`s going to give tax cuts to 95 percent; 45 percent of the people that are going to get a tax cut don`t even pay taxes. They`re going to get a check generated from Barack Obama and sent to them. They don`t even pay taxes.
SCHIFF: The truth of the matter is that no one`s going get a tax cut under Obama.
We`re spending trillions, where is that money going to come from? Everybody`s going to see the cost of food go up, they`re going to see the value of their wages debased because of all the inflation that the Fed is going to have to create to fund all this Obama spending.
O`BRIEN: Ok. That`s a question I wondered for quite a while now. We`ve seen energy prices in the crude market come down 40 percent. Why has it been so slow to work its way to the retail level? Are you paying 40 percent less? Are you paying half as much for cornflakes?
SCHIFF: But you know what? But those prices aren`t going stay down. This is a function of liquidity right now. Oil prices are going a lot higher, this is temporary.
BECK: Let me tell you something. Oil prices are going to go a lot higher, gang, because Russia can`t afford to have oil prices this low. I think you are looking at, again, the perfect storm. You have people that need that oil price coming up. I think the whole world is going to be destabilized for that very reason.
SCHIFF: Especially when the Chinese -- look, when the Chinese finally come to their senses and revalue the yuan higher, all of a sudden you`re going to see an explosion in demand for energy out of China and those prices are going to go ballistic.
BECK: We`re coming back later and, of course, we`re going to cover everything on politics, and the debate and everything tomorrow night, along with the economy.
And then later on this week we`re also going to be covering how the hell did we get here? Who the heck put us in this situation? You know what? Everybody has blood on their hands.
Don`t listen to any of these politicians who say, oh, it`s that guy, we didn`t have anything to do with it. Yes, they did. Both sides did, and we also have to take the blame. The question is, are we going to start being responsible Americans? The answer better by yes.
From New York, the financial crisis capital of the world, good night.
END
