atmosphere around the queen and the way that her household has changed from the days it was run entirely by aristocratic man. as i stood in the lobby of her total in trinidad, her master of the household pointed to a half-dozen footmen one of whom was a dressed in navy blue suits. see senate over there? he has a master's degree in paleontology. it was a far ry from the stereotype abby. ..

by the -- fed a lot of these crazy.com stocks. we have a phony economy based on that stock market wealthy. that bubble burst and it was replaced by a larger bunl in real estate. we expanded the economy based on the false real estate wealth. people were spending money they didn't have. we had a lot of consumption and employment that was a function of that phoney wealth.

that bubble burst and now the cheap money the fed is creating is going to the government through the bond market. they are able to borrow enormous amount of money at low interest rates and now we have an economy that is dependent on the excess money. you can see the wobble. the bubble like the two prior bubbles is going to burst. unfortunately when it does, the consequences for the economy are going worst than they were when either the real estate bubble burst or the stock market bubble. >> again, the two first bubbles, the so-called private sector bubbles, what was the federal government's role in your view in creating those? >> they did create them. they supplied automatic the air that plew them up. for the stock market bubble, if you remember the 1990 when greene span was fed chairman. every time there was a problem in the world, asian debt crisis,

russia debt crisis, bankruptcy of orange county, long-term capital management, y2k there were all sorts of things that came around. the market got nervous and stocked start to fall. the fed came to the rescue by printing money. it was that cheap money, by keeping rates too low during the '90s. they were locker than the market would set them. you had the bubble, the same bad monetary policy inflated the stock market bubble, the real estate bubble, that one was worse not only did the government and the fed supply the cheap funding that made all the adjustable rate mortgages they were a function of med monetary policy. you compounded the government era when you had things like fannie mae, freddie mac the fha

putting guarantees on the mortgages that would not have been originated during a free market. they woulded have been worried about not getting paid back. they told the bangs you can lend money to people even though they won't pay you back. the taxpayer will. we had the hazard and it butter. bust. at love people like to blame the market for that. they like to blame wall street's fault. i'm not saying they're innocent. they drunk a lot of the alcohol that the fed was pour and acted irresponsible belie under the influence that have. you have to look to the source. why were so many people so foolish? simultaneously, not just on wall street, plenty of people on main street were lying about the income and buys housing they nude -- knew they couldn't afford. they were drunk on the cheap money. they kept repeating them instead of learning them. the bad monetary policy we have

under bernanke are worse than green span. we have 0% interest rates. that's doing more damage than the 1% we got at the lows under green span and the government bubble is enormous. when it pops, automatic the banks that we bailed out in tarp, they're going to fail again, only the losses will be bibigger and the depositors are going to lose too. not just bond bondholders. the government itself might have to default and restructure the dead and not pay 100 centers on the dollar on treasury prices. real estates have got a long way to fall when the government bubble pops. the scary part is, the government bubble is so enormous, the government might try to prevent it from popping as long as possible. we have massive inflation before it happens and if the government -- fed never pricks that bubble we destroy the dollar and have a currency crisis that will be far

worse than the financial crisis based on government default. >> politically, can you is foresee the government not popping that bunl that you see? >> hopefully they will pop it because not popping it is worse. if you try to inflate it, as big as it can, it's the dollar that collapses. what the government wants to do right now is avert losses. the government doesn't want -- let's say bondholders to lose the mono. money. they don't want depositive it -- they can't stop the losses. right now what they're doing is changing it to purchasing power. they're creating inflation so you don't lose your money but your money loses the value instead. in order to do this,ed at some point the money has to lose so much value we be better off with restructuring. i'd rather get 50 crrnts on the dollar than be paid in full than

have 10 centers or 5 cents of purchasing power. walk us through the time frame how you see it bursts and exactly what's going to happen. >> it's slr to the government bubbles that are bursting now. in greece. it's maybe bursting in spain or other countries in europe. we think back two or three years ago, italy was as broke as it is today. they were able to borrow money. they paid record low interest rates and everything fine. it wasn't fine. it's just a bondholders were aslope. they were oblivious to the financial circumstances of greece. eventedly they woke up and demanded a higher rate of interest to compensate for the risk of holding that paper. now the greek government can't afford the higher interest rates and people realize that. they want their money back. there's a crisis now. the only reason that we can service our debts is because the rates are so low. i mean we can't repay our debt.

that's not possible. all we can do is service the cet. but of course once our creditors realize we can't service debt. they're going want the money back. we can't pay it back. we can print it, but then it's not going to be worth very much. the key is going to be when are the creditors going to wake up and demand a rate of return on dollars? right now rates are 0. and because there a lot of demand for dollars right now as a safe haven even though the dollar is not a safe haven. it's in worse shape than europe collectively. the 50 u.s. states are in worst state collective and the federal government than the yiewns economy. we might not be in worse shape than greece, but you take greece, germany and everybody else we are in worse shape. we get the benefit of the doubt. we're the safe haven and people think that everything is okay was they know we're not going to default. we can print money. when they realize printing is

worse than defaults for the potential for loss is greater. we see a big spike in interest rates. we have the crisis. because either the fed allows rates to go up, and who knows how high they might have to go. let's say 10% in order to stop the implosion of the dollar and put it an end to inflation. if we have a $20 trillion national credit when it happens it would require us to shell out $2 trillion per year. that's all of the tax revenue. >> you mention the creditors. who are the creditors that -- especially for the united states right now? >> some are the creditors who are other americans that own treasures. and there are insurance company and banks in america that treasury. the federal reserve own treasury. even though we're not buying them as federal tax pay perhaps the fed is the largest treasury right now. banks all around the world.

china is a huge creditor. we owe them and japan. governments are holding on to this debt. there was a story, i forget where it was run that mentioned that from the peek of the housing publ until how -- it was down about ho%. it it's actually down a lot more than that. when you factor in each household share of the new debt that's been accumulated in their name by the federal government. americans are basically already broke. i'm saying that, you know, we have just admit we're insole vent. american families can't repay the money that's been borrowed in money. >> we admit it. >> once you admit you are structure. just like greece. initially greece imposed a haircut of 50% oned bondholders. we have to do something similar. we have to lengthen the maturity. we have to tell people one year treasury bills we can't pay

you. we can't pay the money. it's not just our creditors. america has to tell people who are collecting social security. right now we're expecting to collect it they're not going to get as much money as they were promised. maybe we means test it. we have to layoff the government workers we had have to cut the pension. the alternative is not that everybody gets paid. but they get paid money of minimal value. and then we got look at the reasons the economy got screwed up in the first place. we have to restructure and reform. we need to stop the federal reserve from artificially e sphim late the economy. interest rates are too low. they have to be higher so we have savings. no one is going to save if the return is zero. if there's no savings there's no capital investment. we can't grow a economy, raise our living standards and provide

productive employment when i have have to savings. we need to let the chips fall where they may. we need to let institutions fail. we need to let people lose money enrestructure. we need shrink the government, get rid of the government spending and departments, eliminate a lot of. recreate the free market economy that was original source of our wealth. >> one of the sub chapters in your book, the "real crash" is how to end bailouts. >> first you have to stop bailing part-time out. and you have to remove the implicit or explicit guarantee that some constitution is too bill to fail. capitalism doesn't work if you take the risk out. people have to be accountable for their actions. people have to weigh risk and reward. if you privatetize the prost profit -- profit use get a disaster. we need to that once and for

all. including of governments. if you loan money to an institution, an individual, or a sovereign government, if they can't pay you back, they're going default and you won't get your money. we have to price risk in the loans. if you're a risky borrow you have to face a high rate of interest. doesn't just come to banks. we have to end the subsidizes for students who are borrowing money to go to college and individuals boying a house. if you want to buy a house, there should be not government guarantee no bailout from the bank you don't pay the mortgage. the banking already screwed when they make a loan, they'll make sure the person puts adequate down payment has the income to repay the loan. you have the moral hazard and what about with wangs? i don't want the government bailing out a bank account. i don't want a government insured bank account. you better make sure the bank is safe. don't look to the tax payer to bail you out.

once the ng bays know the depos or its are going to be concerned they're going to act more responsibly right now. they are reckless because the government told them to be reckless they eliminated all the free market regulation that would have prevented them from being reckless and force them not to be responsible. >> go you think monetary policy and the lingo around it is too complicated for most americans to get excited about? >> it's complicated so you don't understand it. all right, the government doesn't want people to know what they're doing. they came up with the worded quantitative. it's inflation. it's printing money. monotizing debt, that's what it is. but they don't want us to know that. so it's all they complicated it up so we don't understand it. inflation is what happens when the government expands the money supply. basically that's all we're doing. we're creating inflation and we

need to stop doing that. monetary policy is the source of the booms and bust. it is a function of the bad monetary policy, manipulation we need to be on a gold standard. we or a gold standard we would have displin and intrinsic value and macroeconomic balance. we wouldn't have the debt. thigh couldn't run up the debt if they had to pay in gold. it would be smaller. the to tickses -- they want to grow and gold stands in the way. it protects individuals from government from the growth of government. so government's always want to get rid of gold. the founding fathers put us on a gold standard. they knew it would protect the liberties and prevent government from you supering power. >> you mentioned the federal reserve a couple of times in stimulating the economies for interest rates. isn't our entire economy based on consumer spending? >> not really.

it's based on the production that's going on in other countries. you can only buy something that's been produced. so you to produce it be it can be consumed. the economy is based on production, sum my that comes from under consumption savings and investment and what's keeping our phony economy afloat is the rest of the world is lending us money and supplies us with merchandise and resources. and this can't last indefinite nately. it's a ponzi scheme. we can't pay back the money we borrowed. our foreign suppliers an creditors are going figure it out and cut off us. we will implode. if we don't have anything, you can show up at the walmart with the paper money you want, but if the shelves are empty, you're going to go home with what you brought. so this is where we're heading in a -- yes, we have built up the phoney economy based on the mit that demand that spending

drives an economy. it doesn't. that's the caboose. the engine is savings and production and that's what we're not doing enough of. we have to go back to that. >> peter schiff of the author of the real crash. how to save yourself and the country. he's ceo and chief global strategy at europe owe specific capital? >> any brock ranch firm. we're an asset company. if they want to use me as a broker. we special lose in international investment and precious met dahls. we do domestic as well. we can manage your money on discretionary basis in a separate account. i also have a precious metals company in the u.s., europe for people who want physical deliver i are of bollon. we do that as well. >> he is also a radio talk show host. schiff radio.com is the website that are if and the author of two other books.

"crash proof" and crash proof 2.." >> how an economy grows and why it crashes. it's one of the best books to start with. it's a table. you can read it in two to three hours. it's funny. it breaks down economics if in to the simplist form. it's a good primmer to understand the problem. children can understand the book. i wrote it for the level of child so congressman can understand it. >> you ran for office. >> i ran for senate but didn't win. i didn't make it out of the republican primary. i did respectable for the first-time candidate. >> would you run again as a republican. >> i might. i have no plans to the immediate future to run for anything. but, you know, i certainly might. >> we're here at freedom fest in

las vegas. a libertarian leading gathering. and this is a theme we have heard from a lot of the authors we've spoken to. you used the word moral three or four times. >> which one? >> moral. >> moral. >> moral. moral markets, et. cetera. what do you mean by that? >> moral meaning honest, you know, principle, fair, i mean, you know, i mean, what would be immoral. theft would be immoral, for example. if the government is going to force me, right. to subsidize somebody's loan, bail somebody out. that's not moral. i mean, you know, things need to be above board and honest. i have to -- i don't want to be obligated to something unless i voluntarily choose to do it. it's not fair, you know, if the government does, you know, it's we all know individually that if i take money from you against your will, it's immoral. theft is immoral. but if we involve a third party like government, and i can

convince somebody i vote for somebody to take your money and give it to me, how does that not make it theft in? you don't want, you you're not favor of it. you're taking money against your. if you don't give it to me, they're going put you jail. that's not morm. capitalism is a moral sense of government. it's based on voluntary exchange. people trade with one another without any coerce from a third party. what we have now involves coerce. it's immoferl system. >> before we get to the conclusion. i want to ask you about one other thing you wrote in the book. americans spent too much time and money on college fewer kids should go to college. >> absolutely. i mean, we have probably the highest percentage of americans with college degrees that we ever had. unfortunately a lot of people with college degrees are waiting tables, driving fax seis, works as janitors, maids, not everybody needs to go to college. i mean, number one, we know

that. and there are colleges that are teaching remedial math and reading. if you can't read and do math by the time you graduate high school, you're wasting your time going to college. do something real. i mean, the best skills that people acquire are on the job. you can learn from somebody who is doing something. if you can be an apprentice, get a lower paying job and acquire skills on the job. right now we have a bubble. we talk about bubble. we have a bubble in education. because the government sub decideses student loans. students are able to borrow tremendous amount of money and the colleges can keep jacking up tuition every year because they know the kids will get the money from the government. unfortunately we with have destroyed a generation of americans because we made them borrow a tremendous amount of money. they're going to struggle to repay to get liberal arts degree that have no real relevance in the employment world and they're broke. they are learned nothing. they have squandered five or six of their lives that could have

been used productively to earn money and acquire skills that would have provided them with a comfortable living. it you want to be a doctor, there are thing threatens that going to college makes a lot of sense. you need go to college. the vast majority of college graduates do jobs that people that drop out of high school can do. it's a mit that everybody has to go to college. the solution is to spend more money. it's a mit. it -- the universities and everybody associated with if. but the wiggest losers are the kids who scrawnder their youth and don't acquire real skills. they acquire mortgages but no house and society society is poorer because we're wasting all the the resources. what are the reasons that college graduates graduate in to an economy with no jobs is because the capital that would have gone to businesses to employ them was directed to universities to educate them instead.

and they're not educated. they're more indoctorated or they party. money went to universities or businesses they graduate and can't get a job. we from broke right now as a nation. we have to recognize we're broke and stop wasting the money. we have to get rid of the student government guaranteed loan. force colleges to compete in a free market. they have to put the price down and comprise -- prices will collapse and people who can benefit and choose majors that are more likely to enhance the earning power because maybe, you know, if you want to major in engineering it might be easier for you to get a loan in the private sector. they know you'll be able to pay it back. you go a bank and say comparative philosophy, good luck getting a loan. we need real market discipline coming in to education. and we need to free up the resources. we spend too much in education. we spend too much through health care too much on housing, we spent too much money on the

things that the government subsidizes and not enough money on the things the government taxes. >> america's coming bankruptcy the front of your book says. is there a way to prevent it? >> we're already broke. it's a question of acknowledging it and how we deal with it. i lie out a plan for dealing with it as productively as possible. it's not painless. all right. we're sing. we need this medicine. it doesn't taste good. it will cure us. because it tastes bad, we refuse to swallow it. we are going sicker. we have to swallow it enit's going taste worse. we waited so long. we allowed the underlying illness to get worse. it we never do the right thing it's going to be a complete financial meltdown a currency crisis, a bond crisis, and it's going to make 2008 look like a boom the sunday school picnic if you we don't get our arms around the verity of the problem and

recognize that it's not capitalism that cause. it's a lack of capitalism tbheepped to get government out of the economy. they have screwed it up immeasurably. we need free market forces back in. are in a huge hole. we have to get out of the hole. we're not going get out with government. the only way we get out of it is a free market capitalism. will say fair. we need to change the government. enforce the powers and make of the government as small as possible and unleash the entrepreneurial spirit that i know is there because we have seen work before in america. we're seeing it in other countries. we can unleash that and create a prosperous economy. the government is not going to give it to us. we have to give it to ourself. >> we have been talking with peter schiff. "the real crash" is the name of the book. you're watching booktv on c-span2. >> coming up next edward griffin

speaks of freedom fest. the annual ibertarian conference held in las vegas. he talks about the book "the creature from jekyll island." this is over fifteen minutes. >> the book on your screen was first written in 1994, but it is currently in the 32nd printing. this is the fifth edition. and the author is g edward griffin. he's joining us on booktv on c-span2 in laughings. who is the creature from jekyll island? what is the creature. >> what is the creature. yeah. i thought if anybody saw they might think it was a se sequel to the jurassic park. the creature is the federal reserve system. the reason for the jekyll connection is one of the most interesting things about the federal reserve it was created

on jekyll island. it's a real island. off the coast of georgia. and it was on that island back in 1910 that a small group of men gathered and it was their mission to draft what became the federal reserve act. and you're going show the pictures. those are the guys, and the funny thing about the piece of history is that the federal reserve bill was being sold to the american people as a piece of legislation that control the bad, big bankers. what they didn't realize are the bankers are there great power center ofbacking. they were the ones busy bringing the bill that was supposed to control. >> who are the six gentleman? >> well, they are represents. >> you can walk us through. >> primarily. senator old ridge is the only one that wasn't the banker. -the politician. he was spearheading the

political side. >> father-in-law also to john rockefeller. >> yes. he was tied in closely with the banking and the industrial complex. a wealthy guy in his own right. probably the most important political figure in the united states short of the president who was wood row wilson in the days. the guys are bankers. they represent the din cities that jpmorgan and william and the rockefeller dynasty. they had connections to companies that means they were connected to the roth child in england and france. he had connections to the brother max who was the head of the banking consortium in germany and the netherlands. we have an international group here, really. renting international finance. if there was anything that was the bad bankers. these were quites.

what happened there, they knew there was going to be some kind of a move to control banking. they knew that congress was going to pass a law to regulate banking. and so instead of being stupid and saying i hope they don't do bad. they decided to take the lead. they said we'll write the bill. we'll make sure it's to our liking and that's what it's all about. they went to jekyll island. knob knew they were going. they had a meeting that was in great deal of secrecy. they denied they went for many years thereafter, you know, but they actually drafted the federal reserve act on jekyll island in 1910, and the next three years, it took that much time to promote it and get through congress. >> william howard after it was president? >> yes. >> and the six gentleman who were there, nelson, a republican in the senate, henry davis and senior partner of jpmorgan, assist