From the Easy Chair

The Crisis Ahead & Our Christian Responsibility

Professor: Dr. R.J. Rushdoony

Subject: Conversations, Panels and Sermons

Lesson: 183-214

Genre: Speech

Track:

Dictation Name: RR161J17

Year: 1980s and 1990s

Dr. R. J. Rushdoony, RR161J17, The Crisis Ahead & Our Christian Responsibility, from the Easy Chair, excellent colloquies on various subjects.

[ Rushdoony ] This is R. J. Rushdoony, Easy Chair number 65, February the 24th, 1984.

We have had quite a week here with a series of very interesting visitors from South Africa, from the justice department in Washington, from pro life and from other organizations. The climax, of course, is now at the end of the week and we have with us R. E. and Linda Mc Master.

Now there are a great many economists in the United States. Most of them are theoretical. Very, very few of them know how to work in the marketplace and to make money as well as to talk about money. And R. E. Mc Master is one of those few. So when we listen to him we are getting very down to earth practical counsel as well as a mastery of the theoretical.

R. E., it is a pleasure to have you with us again.

[ R. E. Mc Master ] It is a pleasure to leave the snow country for a change.

[ Rushdoony ] We have also with us our own Otto Scott who will sit in to help with the interviewing. R. E, could you give us a general picture of the state of the economy today?

[ R. E. Mc Master ] I think we are seeing a major shift in the economy that occurred at almost simultaneous with President Reagan’s very optimistic state of the union message. I think we have now entered the era of deficits with tiers and that the U S dollar will be under pressure periodically over the next several years determined by the rate of interest which is assessed here in the United States.

[ Rushdoony ] Well, what does this mean practically for people?

[ R. E. Mc Master ] What this means practically is in terms of our central bank, the federal reserve, the are incraeasingly faced with one of two options. Either recession as a means of again fighting inflation which always brings high unemployment or allowing inflation to kick off which means we will have flight capital leaving this country, money that is flown into the... that has... that has flowed in from overseas, foreign investors from the Pacific basin, from Latin America, for the Middle East, from Europe, who have come to invest in this country in our stock market, our bond markets, our U S government securities, because the U S dollar was seen as a haven of safety and also because we have had real high rates of interest which made the dollar an attractive investment.

That is no longer viewed with the ...with the... with a favorable attitude that it was over the previous two years, because the reality of our federal deficits, the reality of the fact that inflation is again heating up in this country has now created a... a crisis for our central bank, our Congress, our... our administration. And so what... what we are faced with at this accelerated point in... in the business cycle is ... is no good options. The only options we have are painful. If they... if the... if the fed lets inflation kick off then what we will see is higher U S interest rates as foreign investors who have financed a third of our deficit leave ... leave our shores in terms of their investment... with their investment capital. If they don’t fight in... if they do fight inflation, then we will also see higher interest rates and ... and a recession. So as... as I see it now and as is a quite troublesome scenario, it looks like we are going to see higher interest rates wether way we go. The only solution to that is to cut the ... to cut the federal budget on both the guns and the... and the butter side of the equation and that is not a likely prospect in an election year.

[ Rushdoony ] Well, it looks like the economy is just one of bad news, then, and would you agree with me that we have a gutless administration and two gutless parties?

[ R. E. Mc Master ] Well, yes, they ... they ... first of all they don’t really understand money and economics. Secondly, they have no will when they do understand to face the issues. Thirdly, though, the fact that it is a political year makes their... their trend towards expediency as opposed to principle even more exaggerated.

[ Scott ] Well, this adds up to a rather grim picture. If the government doesn’t know what to do about it excepting to compound the problem, which is what you are implying, is there any way that the citizenry can protect itself?

[ R. E. Mc Master ] Well, yes. When governments do not anticipate the future, the market will make its decisions for them. In other words, we won’t live in status quo where things move along in a benign way, particularly at this volatile point in the economic cycle. He explosions we have seen in the precious metals in the last few weeks, gold, silver and also now the ... the drop in the U S dollar against the German D mark, specifically indicates that there is a radical shift taking place now which will again cause a political crisis stemming from this economic crisis. I think with regard to individual action it is certainly no time assume debt, because we are now at the ... in the inflationary stage of the business cycle which means we are moving towards the maturity of this business cycle.

[ Scott ] Well, some years ago people were advising everyone to get into debt because we were in an inflationary cycle and you would pay back with less dollars, that is real dollars, than you uborrowed.

[ R. E. Mc Master ] I think the most dangerous thing that has happened that puts us at economic risk now I this country is that the rules of the economic game have ... have ... have changed since 1980.

What we saw in the 1970s was that it made sense to borrow because lenders subsidized those who borrowed money. In other words borrowed money, after inflation, after taxes was subsidized by those who loaned it. But what happened as in all markets, the understanding of the phenomena of inflation became widely manifest. Everyone learned what the time value of money was by late 1979, early 1980. And they have not forgotten that lesson. So what we have spun out into, we have literally flipped into a whole new set of economic rules when the federal reserve savd the dollar in late 79 and early 1980 and interest rates, short term, went over 20 percent. What effectively happened was that no longer were ... was the market place willing to subsidize borrowing. It became expensive and it also became risky to borrow, because the recall rates of interest have now stayed above the rate of inflation and in some cases after taxes as well.

So here is the difference. In the 1970s as inflation took off you could borrow and get away with it because it was subsidized. Borrowing was subsidized. In the 1980s now as inflation kicks off already the market place is anticipating that inflation and charging even highe rates of interest.

[ Scott ] And do you see any limit to or... or do you see any estimate of what kind of interest rates if this continues one might expect?

[ R. E. Mc Master ] Well, if the federal reserve allows the money supply to continue to grow and if the velocity or the turnover of money accelerates, those interest rates will move up accordingly and probably in anticipation of that growth in the money supply.

In other words, let me make it simple. If inflation hits 12 percent I think we will very easily see interest rates at 15 to 20 percent. And the danger is because the fear of inflation is so manifest in our economy now due to the expertise of the late 1970s that interest rates, because of the emotion of people will move much higher much faster than took place in the early, mid and even late 1970s.

[ Scott ] So...

[ R. E. Mc Master ] In other words, let me... let me ... let me say it this way. The nature of interest rates which is a governor on inflation is such that as inflation heats up commensurately we will see interest rates move up that will tend to off set that inflation to the extent that it weakens the U S economy.

[ Scott ] Well, if money becomes too expensive to borrow the wheels will stop rolling.

[ R. E. Mc Master ] See. That is... that is my concern right now is that we turn the corner on longer recoveries and shorter recessions in 1980 and what we will see now is shorter economic recoveries and longer and longer recessions as the trend turns down. Why? Because those high interest rates will slow down the economic recovery sooner than most ecoomists expect it and send us into a decline.

Right now, for example, we have consumer savings which is the lowest it has been since 1949 which is exactly the wrong thing at the wrong time for the American consumer with regard to longer recessions and shorter recoveries. Secondly, we are at the point in the economic cycle when business capital spending should increase. Normally businessmen would like to have 100 percent return on whatever the interest rate is in which they borrow money. So if they have to borrow money at 13 percent they would like to have a 26 percent return. Who is going to take those type of risks in this type of environment where interest rates are unstable and ... and lending institutions are pegging interest rates at a variable rate that fluctuates with what the prime rate.

For example, a prime rate of... of 11 and a half percent. It may be paying two percentage points over prime. How can you plan as a business man if you are living in an environment of that... of that volatility. What they do is they cut back their spending. That short circuits the economic recovery and sends us off into a recession.

[ Scott ] What does this mean politically?

[ R. E. Mc Master ] What this means politically is that I think the politicians are ... are going to be held accountable in an election year, which for... from a political perspective is the last thing they really want to see happen, because they then ... the ... the normal political cycle is that you gear up, have a good economy in an election year and then after the election takes place then the economy bears the brunt of all... all the monetary and economic excesses which occurred during the election year. I do not think that will occur this year. I think what we will have is a political crisis this year prior to the election generated by an economic crisis. I expect, if my work is accurate, that following the fourth of July of this year the... the real pain economically with regarded to return of recession, high interest rates and inflation will again become a... a... the primary issue in this political year.

[ Scott ] That doesn't bode well for Mr. Reagan.

[ R. E. Mc Master ] No, it doesn’t bode well for Mr. Reagan. I ... from my perspective was that Reagan’s state of the union message and the peaking the U S dollar was akin to Joe Theisman prior to the Superbowl.

[ Rushdoony ] Last year you went to Guatemala to give economic counsel to President Rios Mott and his cabinet. Before you left you prepared what was virtually a book on the economic implications of debt and its relationship to the biblical laws concerning debt and slavery. Would you like to comment briefly on some of those premises of your perspective?

[ R. E. Mc Master ] Well, basically the root meaning of the word debt is death, D E A T H. And so the wages of sin is death, whether it is the sins that most Christians consider sin such as theft or morality. But also it is death economically. And in ... in reorganizing the work that I did for Guatemala I have now come up with 35 points that to my mind are absolutely devastating in a deathly way of how debt money and ... and debt negatively affect an economic system. You see, we have become accustomed to living with what is know as the business cycle in this country. But the business cycle is nothing more than the expansion and the contraction of the use of debt, the use of credit. In a godly system where you have honest money, not debt money, growth should be linear and consistent without all these oscillations of pain, booms and busts. They wouldn’t exist. They are an unnatural phenomenon in a godly economy. So in this linear cause and effect world economy, in a Christian economy you would be able to plan ahead accurately and lead into what I call a prosperous area of wealth for all.

There are some other things about debt that I... that I have come across. In the... in pagan cultures, among the Aborigines, anthropological studies have shown that the people take their wealth to the pagan priest at what is known as pot lashes and they smash that wealth. It is a sacrifice to the gods. That is no different than what the American people have done as they have taken their money to the international banks who have then loaned it to Communist powers as well as to third world countries who had no intention of ever paying that money back to the tune of 850 billion dollars. Our wealth as pagans has been smashed.

[ Scott ] Those are payments to the gods of Liberalism.

[ R. E. Mc Master ] Right, the gods of Liberalism being the gods of Humanism and of what we have... you know historically in this country we saw the importance of separation of church and state, but it is not often recotnised that not only did we see the early Christian founding fathers see the importance of separation of Church and state, they also saw the separation of Church, state and economics.

You know, the three parts of man’s nature—his spiritual nature, his mental nature, his physical nature—are manifest in the view... in a man’s... in our... in a society’s view of God, man and the law. And the three institutions that are affected are... are constituted by that philosophical religious view are government, religion and economics. And what I have come to in terms of the abstract relationship of those three is that government is religion applied to economics. Because government basically is the applied religion in terms of right and wrong, ethics, morality of the people and those laws then frame human action and human action is the definition of economics, the economic market place.

[ Rushdoony ] Foreign banks have also lent money to all these third world countries. What are the foreign banks doing with their debt now. They are stuck, too.

[ R. E. Mc Master ] Well....

[ Rushdoony ] ... or have been until now.

[ R. E. Mc Master ] Right. There has been a coordinated effort through the international monetary fund, through the bank of international setetlements, through the export import bank and the world bank by which the major western European, Japanese and ... and U S multinational banks have funded and rolled over and continued to fund these ... these worthless loans to third world countries as well as eastern block Communist powers. But the Europeans are... are more shrewd than are the bankers in this country.

For example, the Swiss banks, the big three there only have 10 percent of their loan portfolios in these loans to third world countries and Communist powers. And some of the banks in this country the loans to third world countries exceed by over 100 percent the equity of our multi national banks.

Furthermore, there is another point here that is important is that the European countries have been discounting that worthless third world paper to American banks who have bought it.

[ Scott ] Well, the American banks walked out on this limb because they have guarantees from the American government.

[ R. E. Mc Master ] I think unquestionably that is the case. We saw clearly last... last fall in terms of the 8.4 billion dollar international monetary fund bailout whereby U S tax payers effecitvley guaranteed and... and bailed out the banks of these poor third world loans that our multinational banks like Chase Manhattan, Bank of Ameica, Citicorp, Chemical Bank had been willing to... to make these ... these high interest rates loans for no other reason that they can roll them over and earn the interest on the loans. Why? Because the American tax payers, through their politicians have effectively become guarantors.

[ Scott ] Right.

[ Rushdoony ] So ultimately we will be paying the banks back.

[ R. E. Mc Master ] You know, it is a real insanity. We put our money into the bank to work for us and also as a... as... as a storage depot, a haven of safety. And yet we have to pay to get our own money back out of the bank. I mean the Caribean pirates never had it so good.

[ Rushdoony ] Then what should the Christian do in this situation?

[ R. E. Mc Master ] The... the Christian is in a sense, until we reform a whole ... our entire monetary system trapped because legal tender that which the government defines as the currency of the realm is, in fact, that money. All of our money today is debt money. So we are limited in what we can do in terms of ... of being able to... how pay our taxes and... and carrying on normal business transactions.

My perspective has been that there is some diversity that is advised oveseas if the people have those... those types of assets in terms of Swiss francs. I have favored U S gold coins, pneumismatic coins such as the U S gold double eagles, {?} and liberties. For the smaller investor U S silver coin, pre 1965 commonly known as junk silver. There has... there has been an interesting diversification into gem stones. I like holding some cash, actual green backs for emergencies. I like holding normal business account balances as much as possible in money market mutual funds that invest solely in 90 day U S treasury bills so you have a functional ability to operate in our economy and I like... and I think it is very important to be out of debt, not to be overextended, to invest in areas that... that you are familiar with on a local level and also in terms of... of ... of meeting the needs regarding goods and services of the people on a local level in a way that can be extended to a barter economy during a... a financial break down.

[ Scott ] Would you then include investing in local servce companies and things like that?

[ R. E. Mc Master ] Most definitely. However, I think... I think what is going to happen in the next recession that hits is the only sector of the economy that is... which has... which has not yet been hit hard by a recession has been the service sector which is 60 to 70 percent of our economy now. We have seen the real estate industry hit. We have seen the industrial sector hit hard, steel, automobiles. We have seen the petroleum industry hit and the only thing that is yet not been nailed is the service sector and my guess is the service sector will be hit this next time around. So I... I would be selective in what service sector industries I invested in.

[ Scott ] Well, for instance you could put some money in a local plumbing outfit.

[ R. E. Mc Master ] Well, that... now that.... now that is a service sector investment, repair, repair service sector.

[ Scott ] Right.

[ R. E. Mc Master ] Areas or things I think... I think are very popular. In fact, my work in the study of... study of third world contries and undeveloped countries where there are shortages indicate that those type of businesses always do well because when you can’t get new business services or you can’t afford them, then investing in a service sector repair business, plumbing, TV repair, small appliance repair, things of that nature are always do very, very well because that is a way that people can attempt to maintain their lifesytle at the same time with reduced income.

[ Rushdoony ] How many people have already attempted to protect themselves in this country by going into gold?

[ R. E. Mc Master ] I have been surprised at the movement, the extent of the movement of investment in gold in the past couple of months so early in what appears to be a new bull market. Normally you don’t expect... you don’t see such a wide spread diversification of capital in the.... into the precious metals until the news of a ... of gold is on the headlines of... of the newspapers and widely broadcast in the media as being an excellent investment. But now people have become knowledgeable and I ... I noticed that Friday a week ago there were no U S gold coins in terms of {?} or liberties available either in this country or in Switzerland. The reason being they were expecting the premium to go up again.

Now what that means is the demand has become such that they are again increasing the price of those coins with regard to bullion coins. I think there is only one thing that will... that... that at this point of time that can knock down the price of gold and silver and that is sharply higher U S interest rates coupled with such a severe recession that it sends the economy tumbling into a debt contraction in the private sector.

[ Rushdoony ] About how many Americans have already gone into gold would you guess?

[ R. E. Mc Master ] The numbers I have seen on that in terms of actual ucommitment into precious metals is approximately six million, certainly less than 10 million, which is a very insignificant figure, three to four percent of our population of 234 million people. However, there are surveys that show that approximately 35 to 40 percent of the American public has... has at some time considered and will consider in the future investing in the precious metals.

So what is the point? If that projection or that intention becomes manifest, if we move from three to four percent of the population which invests in gold now to 35 to 40 percent then we could see an absolute rush in gold that could send it over 1000 dollars an ounce almost over night. If five percent of the institutions who manage investment portfolios in ... in stocks and bonds, if those institutions put five perscent of their funds into metal we would see a rush into it. We would see 850, new highs, a thousand dollar an ounce gold very quickly.

[ Scott ] Well, assuming that this scenario works out at... at even roughly, what you are really saying is that we are going to go into a recession this year which will lead to a Democratic victory at the polls and next year will be probably worse. What would you imagine the Democrats would do?

[ R. E. Mc Master ] Well, first in all the ... the statistics I have is that 60 percent of the voters will swing either to... from Republicans to Democrats or vice versa based on economic factors.

[ Scott ] Yes.

[ R. E. Mc Master ] I think what will happen this year is that the central bank, the federal reserve will be forced with the decision of saving the system, saving the U S dollar by sending interest rates higher and the U S into a sever recession or letting the dollar slide in gold and silver go through the roof. I think it will be a very critical choice. I do not think we have anything other than those two very severe either or options this year. If they decide to save the system and let interest rates skyrocket and the U S economy plummet that in my opinion now is only a short term solution because if we have a Democratic adminsiration in 85 we will have increased federal spending. We will have capital from this country flow off shore which will tend to send interest rates even higher and with every one percent increase in unemployment the federal deficit increases by 28 billion dollars. So a recession at this point at time compounds the deficit problems. There are no good answers aside from major slashes in... in the federal budget.

[ Scott ] Do you think it is conceivable that the Democrats would repeat Mr. Roosevelt’s approach and declare a state of national emergency?

[ R. E. Mc Master ] I think ... I think that is a very real possibility. Certainly preceded by exchange controls for international currency exchange controls.

[ Scott ] I would expect that would be part of the emergency reaction.

[ R. E. Mc Master ] Well, normally they will do things piecemeal. I know it would be curious for me ... it is curious for me. I am... I am willing to watch very carefully, because if these things become manifest prior to the election, how much ... how much action in these areas, with regard to limitation of economic freedom will the current administration implement priori to the election this fall. So there is a certain amount of checkmate built into the system in terms of... in terms of political strategy versus economic reality as it occurs between now and election this fall.

[ Rushdoony ] You know some years ago in the 20s, a German novelist wrote a book entitled The Sleepwalkers. Do you recall that, Otto?

[ Scott ] I don’t recall that. No.

[ Rushdoony ] A very grim account of what was happening to Germany and a prophetic one, because he saw the people as stupidly and blindly, politicians and the people in the streets walking to destruction. And it would appear that we are sleepwalkers now and that both parties are made up of sleep walkers who have no awareness of the precipice that is ahead.

It requires some real stupidity to be in politics on the national level today and go on presenting a brave front about solving problems by getting election.

[ Scott ] Well, culturally speaking the parallels with the Weimar Republic become more and more pertinent every year with the growth, expansion of pornography and so on we are like Berlin in 1929. If we have Berlin’s experience of an economic debacle effecting the currency and all the rest of it, all the banks in German at that time had to close their doors. That led to dictatorship.

Now the only people that I can think of in the United States that would favor such a system would be the Marxists.

[ R. E. Mc Master ] You know, Otto, that is interesting that you... that you bring us back to the German example, because increasingly in terms of my studies and... and my work, that is the closest example that I find that we are paralleling, that we are emoving toward. It is the... is the German type of dictatorship where humanistic law is carried to its... to its logical conclusion.

[ Scott ] Well, there was a Washington attorney, a woman, who wrote a book a number of years back called Our Emerging Fascist Economy.

[ Rushdoony ] Yes.

[ Scott ] And she analyzed Fascism as the façade of Capitalism in which the disparity of incomes is retained. But all the basic priorities of management are leeched away and held by the government.

[ R. E. Mc Master ] Well, the madness of the American consumer is demonstrated by his willingness to borrow for consumption rather than even investment, but it shows me that in consumer spending is two thirds of our GNP, our gross national product. This illustrates to me... it demonstrates very clearly the American consumer has no understanding basically of economics and finance in any rudimentary sense of the word and they expect that government to solve all those problems.

So when the hue and cry of economic pain becomes manifest in late 84 of 85, I do expect to see government come riding out on its white horse and ... and control people which is one of the most insidious ways they can be controlled and that is economically.

[ Scott ] Oh, this is what John Adams called the old trick. I am not quite positive how he put it, but I will paraphrase it. He called it the old trick of using every emergency as an excuse for an expansion of authority.

[ R. E. Mc Master ] The way to escape that... I don’t... I don't think any of us escape the collective sin... judgment of sin in a society. I think one of the ways to minimize it, though is by living in small towns, being out of debt, staying self sufficient, being a member of a community, being a member involved in a local church, having things such as a garden, milk goats, things of that nature so ... so you are not in an area where you are dependent upon governmental services. Where... my study of economic times of crisis showed that the cities bear the... the brunt of the distress during the hard times just as they reap the best of the good times economically. And... and the very nature of government control is where you have cocentrations of people they are more easy to... to... to manipulate and ... and ... and to take away their freedom.

[ Scott ] Well, of course, when you have a population and you ... and a government which both agree that the government is responsible for the quality of everyone’s life there is no way around the expansion of authority in terms of emergency. The people will demand those chains.

[ R. E. Mc Master ] Yes. See, we live with the illusion that government is god. But that is the ultimate distortion of ... of reality particularly in the economic realm because government is an economic parasite dependent upon the tax intake, the revenues from the people. And so what we are seeing is literally an approaching time when government the parasite, the economic parasite consumes the host, which is the productive element of the economy. That is what created the problems in Germany.

[ Rushdoony ] I don’t see any prospect of getting out of this impasse and this disaster except a Christian community awakening, recognizing that what is happening and what will happen is the just judgment of God, biting the bullet and being ready to say, “Let’s rebuild from the ground up.”

I don’t believe that any country of any consequence is going not survive this century and the disaster ahead. Would you care to comment on that?

[ R. E. Mc Master ] No. And I don’t... well I agree with that and particularly since the U S dollar is the world’s reserve currency, all the countries of our... our globe are impacted by what occurs in this... in this country by means of our currency and also by way of the fact that we have the largest economy globally. But what we are seeing in terms of the theological battle as it is fought in the economic... on the economic front is a confrontation between men creating something out of nothing, playing God, fiat currency, fiat the U S dollars backed by nothing, created out of thin air as debt versus real money which is linked, ultimately to some commodity such as gold, wheat silver or whatever. And we are seeing even now and this is interesting. Presently, now 25 percent of world trade internationally occurs through barter, which means real money, real commodities are the basis of exchange again and between east and west countries, 50 percent occurs through barter. So we are seeing, as this old system dies, this illusionary currency system that we have now and credit system dies, we are already seeing that vacuum starting to be... starting to be filled in international trade by a godly perspective tied to reality meaning real money being manifest in terms of commodity exchanges.

[ Scott ] Well, you have in this Soviet country a nation that is operating without money. They have a local scrip they call rubles. But you can’t use those rubles if you are a citizen to buy something without a special permit from the Communist party which allows you into the top stores. Without that, with just the rubles you can’t buy anything.

So money in the western sense has been disposed of in the Totalitarian societies of China, Russia, Cambodia and so on. In other words, it is conceivable that money, if it proves to be worthless will collapse in the west and the west would swing toward a totalitarian system where you would have national... what you have now. You have national currencies which are of very little value internationally.

[ Rushdoony ] Could I change the direction of our thinking? Because there is something important I feel should be introduced here. In your newsletter The Reaper you have done something over the years that is unusual. First unlike most economists you have seen the relationship of the land, of the earth to economics, not just the marketplace. And in connection with that you have seen the relationship of weather to economics and the marketplace so that you uahv commented on the weather. You have had reports not the weather.

Would you like to develop the relationship of what is going to happen weather wise to the economic crisis that is facing us?

[ R. E. Mc Master ] All right. Economists tend to be trendy, caught up by their culture and the myopic perspective of... of their culture. 80 percent of our people in this country live in the city so we have primarily an urban economics, an economics that focuses just on the labor side of the economic equation. Well, that is only half of the economic equation. Even though man is either the ultimate the predator or the ultimate resource, there are two factors in the economic equation. One half is land, one half is labor. The study of... of land with particularly as it is impacted by climatalogical changes such as the distresses we have seen in this country in the... in the recent years, floods, droughts, tornadoes, severe winters. Every time in history when those type of major changes occur in the land side of the economic equation in order for people to maintain their lifestyles and to get along they are no longer tolerant or willing to put up with the obese, inefficient over bearing burearcracies which have ruled over them during good economic times. So the whole Reconstruction movement has the forces of climactic change on its side, because without exception, historically during these times of climactic changes and disruptions what you have is people becoming more religious, more conservative, more independent and increasingly responsible.

I was visiting with a friend of mine who is a consistent evolutionist. So in the terms of our presuppositions we differ. But in terms of our conclusions that we have drawn from the evidence concerning the climactic changes and their impact on the U S economy and the U S govenremtn in the 1988 to 1992 time period, what we came to is that both of us think that western debt Capitalism and the United States federal government as it now exists and operates will meet its major time of crisis during that era, the 1988 to 1992 time period. Why? Because the nature of tidal forces, high tidal forces during that time period triggered by planetary alignments will, if past history holds true, increase earthquake and volcanic activity which will lead to more dust in the atmosphere, a cooler planet which makes the weather more variable and more harsh, thus, leading to economic distress resulting in political changes.

[ Rushdoony ] What will happen to grain production if those things happen?

[ R. E. Mc Master ] Well, the conclusions of... are... the... the evidence suggests at this point that the correct conclusions to be drawn is that Canada will lose its grain growing areas and will revert to hay production as will the northern tier of states such as North Dakota, South Dakota and Washington state which are primary wheat growing areas now, that they will become hay producing areas and that the grain growing areas will shift further south or we will lose a good portion of our, so called bread basket.

[ Rushdoony ] What will this do the Soviet Union?

[ R. E. Mc Master ] The Soviet Union will be devastated. I ... I... I frankly do not see in terms of... in terms of economic reality, their centralization of planning with regard to economic policy, the growth of their Moslem population. I don’t see how the Soviet Union can survive by the year 2000. I doubt if they can survive through the year 1992.

[ Rushdoony ] I am inclined to believe very strongly.

[ Scott ] Oh, Louis Tongs doesn’t agree. He is an abassador to a Latin American country now, Colombia. And he has made a study of the Mongolian methods of war, which are not based upon a sound economic system. That this the least of their concerns. They ... they are predators. And they exist on tribute. The Soviet Union is existing now on tribute both from eastern Europe and from the United States and from the West. This is a disguised form of tribute, but we are paying tribute just as definitely as the ancient Chinese paid tribute to the Mogolains.

[ R. E. Mc Master ] Yes. the number one recipient of foreign aid in this ... in this century has been the Soviet Union.

[ Scott ] So economically the Soviet Union is an impossible case, but it isn’t ... I don’t think basing its future destiny on economics. It is basing its destiny on the fact that it will defeat us, not necessarily in war, but put us in the situation of Finland. And they will then live off our products.

[ R. E. Mc Master ] Well, the most dangerous time to confront a bear, in this case a Russian bear, is when it is wounded. And that... and that is the dark side of... of the prospect is that as an empire, any empire, Russian or ... or the U S empire becomes threatened with its own extinction, it becomes far more dangerous because it moves out in a violent and aggressive way. And I think that is... see, that also confirms my work with regard to the U S war clock shows... that projects that the greatest time that we face with regard to a military confrontation with the Soviet Union is also this 1988 to 1992 time era.

[ Scott ] That would be assuming that we would be isolated as Central America would be lost.

[ R. E. Mc Master ] Yes, but in... in terms of a Soviet military policy that.... that... there is a considerable debate there with regard to... of course, they spend a greater percentage of their GNP on their military budget than we do, but their GNP is much smaller than ours. And because of the bureaucracy as all bureaucracies are they are inefficient. Look how poorly they performed in ... in Afghanistan. The morale is so low. The drug abuse and alcoholism among ... among Soviet troops is... is very high. And one... one... one wonders if we are not looking at two empires in terms of western debt Capitalism as well as the Soviet empire both of which are collapsing and one wonders which will collapse verse. It... it may be both the fact... like maybe like both fightres on the canvas and whoever happens to struggle to his feet for the final count of 10 wins.

[ Scott ] Well the difference is that they have a coherent strategy and we don’t.

[ R. E. Mc Master ] Well, you... you had some comments on that the other evening, Rush.

[ Rushdoony ] Yes.

[ R. E. Mc Master ] As far as {?}

[ Rushdoony ] I find it hard to believe that they can be efficient in any area and their coherent strategy probably presupposes that we will go on producing as we are. But supposing the grain production of Canada and the United States collapses. What then will they do? They are so thoroughly dependent on our grain.

Some have theorized that they are seriously considering moving southward into Iran and adjacent areas so that they have a good climate for the production of grain. I am sure they are planning that because they are trying to cover all bases. But the disaster that is coming is going to knock their propos out from under them and we are the props.

[ R. E. Mc Master ] Yes. Ninety five percent of the technology the Soviet Union has has either been given to them or they have stolen from us. The loans of western debt Capitalism is what has kept that empire surviving. A good example is Poland. Conclusivley the American people want the Polish people to be free. And yet it is our government which has backed our banks who have continued to roll over the 28 billion dollars of loans that we have made to Poland with American ... American workres’ money that has supported that govenremtn.

[ Scott ] Well, that is where the incoherent strategy comes in.

[ R. E. Mc Master ] Yes. Well, you know, we... we support... we support our enemy economically and yet build up the industrial military complex to fight him.

[ Scott ] And that is not hard... that is hardly a strategy.

[ R. E. Mc Master ] That is no strategy it is... it is... it is a conflict between the expediency of greed in both the military industrial complex and in terms of international trade.

[ Scott ] Right.

[ Rushdoony ] Well, of course, I don’t like the term military industrial complex because my feeling is the military wants peace. They are the ones who are out in front. I think our administrations, Republican and Democrat and our bankers and our industrialists are the ones who with greed are pushing us into a crisis situation, but I think we have a different temper in the military.

[ R. E. Mc Master ] When I speak of the military industrial complex I am not talking about the ... the patriots who are in the forces as... as such, but rather the ... the complex of... of ordering machinery and material...

[ Rushdoony ] Yes.

[ R. E. Mc Master ] ...by which a cotter key that we can buy of 12 cents at a hard ware store the American tax payer pays 13 dollars for or {?} that costs a thousand dollars to build... build... we get billed 35,000 dollars for. Or a couple of wrenches that we can buy of under nine dollars end up costing many hundreds of dollars. That is the excess.

[ Rushdoony ] Yes.

[ R. E. Mc Master ] I am speaking of.

[ Rushdoony ] Well, I would agree emphatically there. Well, we are facing, then, crises on the political, on the military, on the economic and also on the climate fronts.

Are there any other areas where we are facing a crisis?

[ R. E. Mc Master ] Yeah, well, any... you see, crises, as I see it will... will become manifest unavoidably wherever men become irresponsible and refuse to... to take care of thing as much as possible on the local level. Let’s make that easy. The three largest items in the federal budget are our welfare spending, the military budget and interest. Well usury interest, which is the third largest item in the budget now, 100 billion dollars a year and compounding at exorbitant rates, if we had an honest money system and a biblical basis then we would not even have a federal debt, we wouldn’t.... much less interest on the federal debt. So that would be eliminated. If we moved into a responsible military posture much in terms of defense much like Switzerland has where we have local militias, people are trained. We have civil defense systems, procurement is handed on an ethical and a cost effective basis, then we would not have need for the miltiary budget. 60 percent of our military budget is present overseas. It is not spent through to defend this country whatsoever. So we have huge savings that are potential there. Thirdly, if the Church did its job with regard to the health, education and welfare needs of the people then on the local level would not have the spending that takes place in the... in the butter side of the federal budget either.

Interesting that in terms of safety nets, safety nets, if you took the bottom 10 percent of the people in this country in terms of poverty and distributed money to them directly the families would receive an annual income of 48,000 dollars a year. That is how much money is wasted in the bureaucracy.

[ Scott ] And so...

[ R. E. Mc Master ] It is the bureaucracy that chews up the welfare money.

[ Rushdoony ] Yes.

[ Scott ] Think of all the jobs it provides for those who dispense our charity.

[ R. E. Mc Master ] You see, that is what happens. Is what bureaucracies do is fill the vacuum of personal Christian irresponsibility and what happens is people get paid to perform no productive good or service in an economy which leads to poverty. That is why the growth of bureaucracy is directly correlated with increasing poverty in any society and ultimately tied to irresponsibility.

[ Rushdoony ] What you have been saying, of course, implies that the basic crisis is a crisis of personal responsilbigty.

[ R. E. Mc Master ] Yes.

[ Rushdoony ] A religious fact. So there has to be a religious answer to that.

[ R. E. Mc Master ] Let me tie that together. Man is made in the image of God formed from the dust of the earth which speaks of both his spiritual and his economic nature. Man is the only one of God’s creatures that has economic or financial worries which tells us it has to be a spiritual concern. The whole nature, the basic nature of Christianity is based upon covenant and contract. Christ’s work here on the earth provided restitiution for man which was a contractual action by which imperfect man could begin to have fellowship with a perfect God. That was a moral act.

The nature of business, the nature of free economics that always leads to prosperity is based upon the ability of men to covenant or contrast horizontally with each other, to be indepdenet. Any time a businessman contracts or... or a buyer and seller contract, what they have consummated is a moral act by which each agrees to be responsible for what ... whatever they contracted for. Each is ,thus, accountable and so we see morality accountability, responsibility and ultimately prosperity as well as freedom all linked together in covenant and contract, whether it is on the spiritual realm and with regard to Christians obeying and keeping God’s law as a part of his covenant or is in the business realm by which all of us by and sell in the market place on a day to day basis. His creation is a reflection of his theology and it is based upon covenant and contracts.

And they are inescapable. And where we lose our Christian basis, we will ultimately lose our prosperity. Whether we are looking at Deuteronomy, whether we are looking at Proverbs, whether we are looking at whether we look at 3 John two, old or New Testament, clearly shows us that Christian fidelity to God’s principles results in prosperity and on the other hand where ewe become negligent and we ... and we either commit sins or we have the sins of omission the... the result of that is poverty. And I think what this country is seeing is escapist Christianity.

[ Rushdoony ] Yes.

[ R. E. Mc Master ] We will no longer be able to live with the illusions of its false theology, which are not tied to the real world where God has made us responsible.

[ Rushdoony ] Yes, I wrote a while back, you will remember, a position paper on Bond’s theology.

[ R. E. Mc Master ] Yes.

[ Rushdoony ] The perspective that limits the realm of Christian faith to a little corner and leaves the whole world to the devil or to the state and nowadays there isn’t much difference between the two. But it is that perspective that has destroyed us. So feel the churches have a major share of the blame for the situation we are in today. When you realize what has happened in the past few years churches financing terrorists in Africa and elsewhere, churches opening their doors to the hippies, homosexual festivals in cathedrals. All kinds of obscenities taking places in the churches, Catholic and Proterstant and both equally guilty before God. It is a frightening thing because we are told in the Bible that judgment begins at the house of God, that where there is the greatest accountability there is also the greatest responsibility and judgment.

So I do believe that unless the Church repents and makes the faith again relevant to all of life we are going to see a frightful judgment from God upon the Church.

[ R. E. Mc Master ] To... Go ahead.

[ Scott ] What you are really talking about is the collapse of leadership. Clericla leadership.

[ Rushdoony ] Yes.

[ Scott ] As well as sectarian leadership. And as I understand this sort of a sequnce, what happens is a wiping away or wiping out of that false leadership and its replacement by better leaders.

[ R. E. Mc Master ] People will tend to continue to follow their habit patterns even when they are wrong until they fail. And what we are looking at is basically a breaking down of all of the false habit patterns which have gripped us for the better part of this century and out of that twill come a recosntrucdtion. I think probably unlike that that we have seen this country since early Chrfistain America, 1740, the era of Jonathan Edwards.

[ Rushdoony ] I agree. One of the things that I feel that Christians need to do is to recognize that this crisis is a judgment from God. And if we don’t walk in God’s judgments we are going to be under them. We have to see them as his justice in operation and an opportunity for us to rebuild.

[ R. E. Mc Master ] That is the nature of investment. With every risk there is an opportunity and I view this time as a time of short term pain that will be necessary to break the illusions that we operate under presently so that we can more fully manifest the godly system in time longer term.

Two points I wan to tie in to your comments on the Church. The Church is responsible for the spiritual edification of man which gives him that ability to take God’s long term view. It gives him the rules of human conduct by which cooperation is manifest and cooperation is the basis of economic prosperity. It also gives him the wilingnes to assume short term pain of that long term gain, both spiritually and economically.

Well, it has only been because our Christian... early Christian America built this economic base that has allowed the Church to live with that illusion of box theology. So the box theology is, by definition only a short term phenomenon, because it inevitably as time moves on confronts the reality of its error in the physical universe of economics and that is what we are seeing right now. That is why we are seeing increasingly the escapist Christians looking more and more as with disgust at the post... post millennial perspective. Why? Because they are having to confront the reality of pain in the real world in terms of how humans have to live.

[ Rushdoony ] We have just a few minutes left and before I give you a chance for a final word, R. E., could you tell our listeners about The Reaper, how they can subscribe to it and how much it costs and the address?

[ R. E. Mc Master ] Ok. The Reaper is an... an almost weekly economic financial advisory letter. It comes out 44 times a year. It is priced at 195 dollars for a year, for all 44 issues. And I have a toll free 800 number they can phone, 800 528 0599 and our Phoenix office will handle any and all inquiries concerning The Reaper.

[ Rushdoony ] Thank you. Now, Otto, is there something you would like to say by way of conclusion?

[ Scott ] No. I think that it has been one of the most sweeping discussions I have ever...

[ Rushdoony ] Yes.

[ Scott ] ...partaken in. But I do find on... I am ... I am very pleased to hear at the very end of your comments a note of hope.

[ R. E. Mc Master ] Oh, I am very optimistic long term. You see, the nature of twin changes is that just when things look the darkest as the... as the market starts to bottom, it is just prior to its turning up. You know, you hear the old cliché, it is always darkest before the dawn.

[ Scott ] Right.

[ R. E. Mc Master ] So is true in... in the swings of economics and swings of markets. What everyone is increasingly bearish as a market declines and news is pessimistic is when I begin to light up because I know we are very close to a trend change. So, too, and with regard to the death of Humanism in the western civilization now. So I am short term pessimistic, but I look that as... as ... as ... as... as that as a necessary break down in order to provide the working earth from which the new trend of Christian Reconstruction can arise.

[ Scott ] Well, you know that not too long ago one theologian from a main line church said he thought it was possible a Calivinist that appeared on the world stage before their proper time and that this might be their proper time. I am inclined to agree with that.

[ Rushdoony ] I am, too.

[ R. E. Mc Master ] It is interesting that truth is continually popping up in all areas of life now, medical, economic, monetary, theological, social, in terms of family structure. And that truth is having trouble coming ... coming to bear in terms of its fruition in society at large because of the institutional rigidity that exists today. It is the nature of these massive changes and breaks and break downs that will... that... that really dissolve this institutional rigidity that allow this truth to really grow and flourish. And I think we are going to see an explosion of... of ... of prosperity in...in... in the next, past the year 2000 as are result of the changes that are taking place now. Already in terms of what I am seeing by way of technological break throughs in the scientific realm done by... as we discussed, Christian men, suggests that we have a glorious era head of us, literally a millennial era.

[ Scott ] Yes.

[ Rushdoony ] Yes.

[ R. E. Mc Master ] ...in terms... in terms of ... of real human fulfillment and blessing as a by product of the theological base which proceeds that blessing.

[ Scott ] Oh, that is...

[ R. E. Mc Master ] Which is Christian Reconstruction.

[ Scott ] Marvelous words.

[ Rushdoony ] I couldn’t agree more. Well, our time is virtually over, but I would suggest that all of those... all those of you who are listening to this play it twice, because this has been a particularly meaty and condensed discussion and I think there is a great deal that has been said that you need to listen to twice, because your future depends on understanding what is ahead.

It is important for those of us who are christains to be ready, to be prepared because we are the people God is telling that we have a duty to occupy and to conquer in his name.

[ R. E. Mc Master ] And without a vision the people perish.

[ Rushdoony ] Yes.

[ R. E. Mc Master ] And you don’t have a vision with regard to the future that is accurate unless you are in touch with reality. And being in touch with reality assumes both correct religious principles and the correct interpretation of the facts in terms of those religious principles so that you can project the future accurately.

[ Rushdoony ] Yes, I couldn’t agree more. Otto, do you have the last word?

[ Scott ] Oh, no, indeed.

[ Rushdoony ] Well, our time is about up. Thank you all for listening and thank you, R. E. It is always a pleasure to be with you and we do appreciate the time you have given us.

[ R. E. Mc Master ] I have enjoyed being here again.

[ Rushdoony ] Well, thank you. It has been our pleasure, too.

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