From the Easy Chair

The Oil Situation

Professor: Dr. R.J. Rushdoony

Subject: Conversations, Panels and Sermons

Lesson: 199-214

Genre: Speech

Track:

Dictation Name: RR161S33

Year: 1980s and 1990s

Dr. R. J. Rushdoony, RR161S33, The Oil Situation, from the Easy Chair, excellent colloquies on various subjects.

[ Rushdoony ] This is R. J. Rushdoony, Easy Chair number 122 and this is April the 12th, 1986.

This evening I have Otto Scott with me of our Chalcedon staff. I think some of you know that in Otto’s background is some years of experience with the oil industry as editor of the oil world. And also as one of the top executives of an oil company.

We have today a very interesting situation in the world of oil in that whereas less than 10 years ago we had an ostensible shortage of oil, lines at the gas stations, a rising price for gasoline. Now we have a declining price. We have an oil glut the world over and yet we have oil companies, for example, paying more and better dividends than IBM for example. And also the oil shares, although depressed, being regarded by some as particularly choice items.

Otto, what is your general outlook on the world of oil? And then we will get into specifics.

[ Scott ] Well, the... we have to go back a ways. The United States, of course, dominated the international petroleum industry for quite a while. We lost that dominant position when... in the early 70s when OPEC got together and created a cartel. Shortly after that the majors realized that they had lost the control of the crude oil market. So they made a deal with the Arab crude oil producers to go in as partners on oil refining, to produce gasoline and all the other products from crude oil. Some of these partnerships were open and some were silent. Some of the larger refiners that have been created have been created in the Middle East, in the Arab countries, some in Europe so that the whole situation shifted from emphasis on crude oil to emphasis on product. And that is only one of the shifts that has taken place.

The other shift that took place, of course, was the discovery of new crude oil reserves in other parts of the world other than Saudi Arabia and Arabia itself, the North Sea oil discoveries, for instance, discovery of {?} immense amounts of crude oil in the north slope of Alaska. The rediscovery you might say or the... or the recollection of the large crude oil reserves of Mexico which have never been properly tapped. And, over all, the whole question of crude oil is that if every continent were explored as diligently as the North American continent, for instance, there is no doubt or very little doubt that we could be swimming in crude oil. So it is really a marketing situation. And what is happening to the crude... to the product market is that an increasing amount of product is being shipped in to the United States from overseas, gasoline, diesel fuel, jet fuel, all the many, many other products possible. And this has gradually put the small companies, the independent companies in the petroleum industry I the United States up against the wall. In fact, for the last year, year and a half, they have been closing down at the rate of one every three weeks.

Now these small refineries, of course, don’t produce as efficiently as a very large modern refinery. But each one served a... an area. It served a small market area around its own distribution pattern. And for a long time the oil industry or the petroleum industry operated a system where if you made a sale in somebody else’s territory they would deliver it for you and if they made a sale in yours, you would deliver it for them, because that would keep the price down and you wouldn’t have to charge the consumer for transportation.

Because, believe it or not, the oil industry has treated the American people very well. Our great industrial productivity really has its origin and was maintained and grew and developed because of the cheap fuel, because it was provided with oil and oil products cheaper here in this country than anywhere else in the world in the developed world, much cheaper than Europe, much cheaper than any other area.

The American public has never realized what it owes the American petroleum industry. But to go back to the effect of the importation of petroleum product on the smaller independents, to close them down means that in any future period the cost of these products has got to increase because of transportation costs will be increased., because you will have to go over larger territories. Now this independence, of course, protects it against this trend. And the majors went to Washington and spread out the map of the country and said, “Look at all the refining capacity we have and our great big refineries here. The independents are crying wolf. There is nothing to worry about.”

At the same time a concurrent development, of course, has been the inability of OPEC which fundamentally means Venezuela and Saudi Arabia to keep the other oil producers in line, especially Nigeria, which needs money very badly and other areas like Mexico. Mexico refuses to keep any sort of an agreement with anybody. It is against the Mexican psyche to keep an agreement. Nobody knows why.

So OPEC began to fall apart in terms of the crude oil price and one of the reasons was also that the Arab producing nations no longer care about the crude oil price, because they are moving into the refining and marketing end of the business. So there are two things underway. One is the decline in the price of crude oil so that imported crude oil is moving into the country in enormous quantities and at very low prices. The prices are lower than any domestic producer can match. He can’t pay an American wage and meet the price level of Saudi Arabian wells where the cost of a barrel of oil is about 10 cents.

So they are, at this point, practically speaking putting the American native producers of oil, the drillers and so forth out of business, the same as they are putting the refiners out of business because I have just recently went through parts of Colorado, northern Colorado and Utah. The Colorado area there are several big fields. And I noticed almost all the wells were capped. It is no longer worthwhile to try to brig them to market at the present prices because at 15 dollars a barrel, for instance, oil is actually cheaper now than it was before OPEC began to quadruple the price in 1972 and three because of the inflationary factor.

Now to put the oil producers out of business and the oil refiners out of business is, of course, to reduce the giant petroleum industry, the largest industry in the United States is to put it in a very perilous position. The majors are doing very well. They like it. They think it is just great. The majors and their Arab partners are seeing some of their independent competitors being wiped out, but the long... the overall trend, outside of the enormous numbers of people that are losing their jobs and their business and their dividends and so forth, the overall trend is very ominous for us.

[ Rushdoony ] We have seen for two reasons—and correct me if I am wrong—a decline in refineries in this country. One, the environmentalists and, two, the foreign competition. I... don’t that pose a threat for us in the military sense?

[ Scott ] Well, it does. Our reserves are probably at the lowest point they have ever been as a nation, because under the ... under the competitive pressures of imported petroleum product and imported crude, most of the oil companies are drawing upon their inventories and selling their inventories out because they have... they have filled their inventories up when the price of oil is higher. And as the price of oil drops they want to get rid of those inventories and get hold of some oil that doesn’t cost as much. In the meantime, however, the inventories were collateral for loans. The oil reserves are collateral for large loans that the banks have given. As the value of the collateral diminishes, the chances of those loans being called increases. So we have an internal financial economic problem confronting the industry of great proportions. Overall, of course, we are facing a serious security problem, a problem which I think is what you had in mind, the problem of national security because oil is what, of course, the most essential of all modern commodities.

[ Rushdoony ] Now assuming we have a crisis next year, an international military crisis and we suddenly find ourselves desperately in need of much more gasoline, how quickly can we reactivate the closed refineries when we are no longer able to get it from abroad?

[ Scott ] No way, because the refinery once closed down turns into a mass of rust. It cannot be reactivated.

[ Rushdoony ] And that means that a large number of American refineries are now finished.

[ Scott ] That is right. Absolutely finished. Many representations have been made to Washington without avail. Washington is hung up. It is hoisted on its own semantic petard in a way. As you know, the American Academy and the majority of American economists and the majority of educated Americans and the majority of our governing class and our group in Washington, believe in free trade. They don’t believe in very many things, but apparently they have a really religious belief in free trade. But free trade is like unilateral disarmament. It is wonderful in a world where no one else has any guns, but free trade in a world where everyone else practices mercantilism is suicidal.

[ Rushdoony ] Well, in the past when we have advocated free trade we have said all the same for reasons of military security certain things are exempt from these provisions. Why have we suddenly abandoned this with respect to things that are so vital to national security?

[ Scott ] That is a terribly good question and I addressed it at the CMR ... say CMRE meeting in the Arden House a couple of months ago to one of the men on the one of the boards of the commission that keeps track of our international trade. He couldn’t answer the question.

Now we have the same sort of a confrontation regarding oil and cheap oil before OPEC came together, before OPEC became effective I the 50s. And at that time the national security argument prevailed. So a quota was established where only a certain percentage of foreign oil could come into the United States and that, of course, meant that the price of crude oil in the United States was artificially lifted. There were all kinds of bellows of complaint from Jack Anderson, the great industrialist, you know, the columnist was an expert on all things. And various and sundry others who said that this program was at the expense of the American consumer. And to that extent, to the extent of the consumer had to pay more for gasoline and oil, it was true. But don’t forget that before OPEC that the oil only cost us about three dollars or four dollars a barrel. And gasoline and petroleum product were correspondingly low.

So they were hollering about products that were really quite cheap, but it did save the domestic industry. It did save the domestic refining industry and the... and the independent producers.

Now the majors couldn’t have cared less. The majors didn’t like the program because the majors had their tie in with the Arab countries and were getting all the oil they wanted. So, of course, it was oil that the majors were shipping in that was put under a quota. And they spent a great deal of money trying to destroy that program which was identified as a pork barrel or an oil barrel or whatever you want to call it. And at the same time that they were complaining about this, if you recall, Rush, the gasoline companies or the oil companies or the producing branded gasolines in their own names were having price wars all over the country. They were putting out free dishes and all kinds of premiums and at the same time that they were being accused of being monopolies robbing the... the... the ... the consumer.

[ Rushdoony ] Yes. We haven’t finished using, that is, breaking all the glasses we acquired during the give away program.

The last two or three days—and I won’t ask you to talk about matters that were confidential—you were called in by a major oil company to consult with them. Just a general question. Do you feel these oil companies are aware of the implications of what is happening, its threat to the future of this country or are they thinking simply in terms of the annual report?

[ Scott ] Well, the independents are very much aware of the threat. And so, for instance, are the Israelis. Israel has been watching this with considerable disquietude and there have been... there was even an American Jewish group formed to do something about the situation. So both the American Jewish community and the Israeli community is very much aware of the fact that what is going on is not very good.

[ Rushdoony ] It will put the whole world virtually at the mercy of the Arabs and one or two other counties.

[ Scott ] Well, yes. And, of course, we always have hanging over the situation the temporary nature of the regimes in the Middle East.

[ Rushdoony ] Yes.

[ Scott ] The... the... the Soviets are in Afghanistan. Afghanistan is next to Pakistan. It is very close. It... it... it is contiguous with Iran. The vetting is that when Khomeini dies the Iranian situation will more or less fall apart. The mad mullahs will not be able to continue for any long period of time because they are operating in an empirical fashion. They have no pattern. They don’t fit the common accepted idea of a governmental operatus. The Soviets can move in there at almost any time. They have north Yemen. They have Ethiopia. They have Libya which has the largest air base in the Middle East which we constructed and turned over to Khadafy. And that brings up the whole Khadafy thing in a way, if you don’t mind.

[ Rushdoony ] Yes.

[ Scott ] I ... I was with Ashland when we had a ... Ashland had a concession in Libya in the late 60s and in the fall of 69, autumn of 69 King Idris, a strong ally of the United States, a spiritual as well as the King of Libya, a spiritual leader, had to go to Italy for some medical treatment. Khadafy and some other officers launched a coup de tat and took the radio station and palace and a few other unprotected places. We recognized him within a week. We abandoned our ally Idris in a week. And in the second week Khadafy demanded that the United States pull its forces out of Libya and we did and turned over the {?} air base to him without a word of protest.

And so this all strikes me as... the... the fulminations now from the state department and the White House about Khadafy strike me as being somewhat ironic. Easily, he is a man we made. We created him.

[ Rushdoony ] Yes and the state department has learned anything from its previous errors, because it is repeating them all over the world currently.

[ Scott ] Well, if we look down the lie at the Philippine situation where Madam Aquino strikes me as being a wonderfully tender morsel for the Communists that attend her matron. They will take her like an h’orderve. And if the Philippines fall under the control of the Kremlin or its puppets, Japan will be cut off from its oil. Japan would cease to exist as an industrial power. We don’t have ... we don’t have very large forces in Japan. We have forces there. We are as responsible of her defense. But I don’t know that we are in a military position not transport much to Japan, especially not past the Philippines. So you can see when you look at the Pacific situation and the Middle Eastern situation, the outlines of a noose, because the Middle East is most important to Europe. Europe has about 90 days supply of oil and petroleum products. We have a bit more. We could run maybe 100 days.

When we set up the oil reserves there was a great many protests about that. That was considered redundant and unnecessary and so forth. And the idea was of the American government to put reserves of oil into caverns. They put them into caverns and it was many months while they were still pumping oil in there that they realized that they had no means of extracting the oil from the caverns.

[ Rushdoony ] That sounds like a federal project.

[ Scott ] Well, one of the reasons for these sort of things is that they will not take people from the industry now and give them governmental jobs overlooking the industry because they claim that that would be a conflict of interest. That means, then, that the government has created its own experts and outside the relative industries and where men from the industry go to Washington to talk to the agencies about these matters they are regarded as special pleaders.

Now if a man doesn’t have any interest in the cause that he is representing, you would wonder why he would represent the cause. But in Washington the reverse is held to be true and that is that if you were involved in that particular industry, what you say cannot be trusted.

[ Rushdoony ] You know that goes back some years, Otto, that attitude, because I remember when I was in the Indian reservation during the war a rancher was denied the right to sell all his steers which were ready for the market on the grounds that he should keep some for breeding purposes.

[ Scott ] Well...

[ Rushdoony ] And in case our... any of our listeners are city people and don’t know what a steer is...

[ Scott ] Can’t top that.

[ Rushdoony ] A steer is an emasculated bull and is worthless for breeding purposes. But that is your bureaucracy. They have no knowledge of what they are dealing with. But they have all the power.

[ Scott ] Well, they have the power and so far they have decided not to do anything about the oil situation. In fact, they are jubilant because they think that the drop in crude oil prices is a drop in inflation, which, of course, is a contradiction in terms. Inflation is quite simply the degradation of a currency.

[ Rushdoony ] Yes.

[ Scott ] And the drop in crude oil prices does not make our currency any better than it was before. So this is another... another non sequitor.

[ Rushdoony ] Yes, that is a very itnertsting point, Otto. And perhaps a little more should be said on that, because people could keep looking or the federal bureaus keep telling us that they have got inflation licked because prices are not going up or at least that is what they say. And they do not tell us that the money supply has been increasing.

[ Scott ] At the rate of 12 percent a year.

[ Rushdoony ] Yes.

[ Scott ] Now it is estimated that it takes about 18 months for this to boomerang on the market, but Mr. Reagan was inaugurated the first time in 1980 and prices have gone up about 35 to 40 percent since 1980. You can’t buy a car of the price you could buy it in 1980. You can’t buy a suit or a necktie or anything else. So who licked what inflation where?

[ Rushdoony ] Yes. It is an amazing bit of propaganda that people are ready to swallow.

[ Scott ] Well, let’s look at this. I picked this up from Business Week. Not my favorite magazine, but they were talking about the impact of this ... or these drops in prices. They are really not even smart enough to talk about the import problem, but they are talking about the effect on the prices. What it has meant for the... to the independent oil companies, Philips Petroleum, for instance, Tenneco and others is that they are slashing their payrolls by 15 to 20 percent. They are knocking out tens of thousands of jobs. They have cut their company’s budgets, their expenditures down by 30 percent, 26 percent, 35 percent and so forth. They have stopped sending out teams to produce. Data resources figures that 48,000 oil wells will be completed this year. That is down 40 percent form last year. And last year, by the way, was down from the year before and also from the year before that.

Now when you start ... when you start tracing the impact economically into, first of all, the oil company’s loss in the financial markets, you mentioned that they pay better dividends than IBM. They do. They paid probably overly high dividends, although you must recall that it is a governmental policy that you should pay dividends if you possibly can, because the government doesn’t like to see you put cash reserves to one side. It wants you to spend or pay taxes. So you either have to pay dividends or pay taxes. And the dividend checks will undoubtedly be cut in the... I the near future because if the banks call upon these men and they, you know the banks don’t call you officially. They call you unofficially first. They... suddenly they invite you to lunch. They want you to come in and see them and they give you a nice lunch in their board room and then the put the screws to you very nicely. They are very polite about it in the beginning. They get worse as time goes by.

So dividends will be cut before the bankers will relent. And then as these wells are capped the owners of the properties upon which the wells are drilling will stop getting their... their monthly checks and that is an awful lot of widows and orphans involved there, because, believe it or not, most of the oil industry is owned by small people. And when we talk about stocks and dividends and so forth we are talking about tens of thousands of hundreds of thousands of small people.’

Then we are talking about jobs and we are talking about equipment which is not used. We are talking about plants that are closed down. We are talking about capital budgets that re cut back I the biggest industry we have. Next to Detroit... Detroit looks bigger, but oil is bigger. And the biggest industry, so you put together the ... a crunch in energy and you have really got a... a massive, massive problem.

If we were to put up an import wall against the importation of foreign crude and foreign product, then the oil industries would be back where they were when OPEC got tough. The... the OPEC embargo was a good thing for the oil industry. The average man was right on that, because it forced us to drill. It forced them to expand their refineries. It forced a lot of things.

[ Rushdoony ] Well, there is so much here to cover here, Otto, but start off looking at oil shares. Two things, contradictory, perhaps, pop into my mind. First while the prices are depressed, they are not the best investment given this future you talked about and, second, the disposal value of most of these oil companies now is sometimes far greater than the total value of the shares.

[ Scott ] Well, that is due to inflation. For the last 15 years almost every major company has been worth more dead than alive, because you cannot replace the physical equipment of these firms at... for any price. Inflation makes replacement so expensive that you an buy what they have got in terms of physical assets and do better. You could sell. You could break them up and just sell, for instance, Ashland’s oil, Ashland’s trucks, its barges, its ships, its planes, its refineries and so forth amount to more in terms of market value than the value of the paper... company’s paper. And that is true of every company. This is one of the reasons why the takeovers because to take over a company is to get something cheaper than you can build and certainly quicker. And the whole takeover phenomenon is... doesn’t add a single job to the American economy. In fact, it reduces jobs because most of the takeover people, if they do succeed, will then take a big axe and go through the company chopping off heads, getting rid of everybody and looting the cash reserves of the firm. So this is a ... it is almost like seeing a whole industrial sector being burned up by the pawn brokers.

[ Rushdoony ] Isn’t this going to do a lot of damage to the banks, too, that are involved?

[ Scott ] Oh, indeed. The banks have over extended. They wouldn’t have over extended if the government hadn’t guaranteed their overseas loans. But you remember that interview that I had some time ago with Hamilton Fish, a marvelous old man. And his question about how come you said there is no congressional investigation of these massive loans from our private banks to foreign governments? He said, “You know, somebody usually gets a commission on these teachings. Don’t you think the banker’s nephews got a commission when hundreds of billions of dollars is being handed around?” And it is a very good question.

I said, “Maybe it was a congressmen’s nephews. Maybe that is the reason that there is no inquiry.”

[ Rushdoony ] Well, with regard to the ... the oil companies it appears that they are facing the same problem the American farmer has been facing.

[ Scott ] All industry is facing. It is not just the farmer. It is not just the agricultural belt, not just the oil. It is not just automobiles. Our whole industrial sector is melting before our eyes.

[ Rushdoony ] I am told by one of our supporters, Dan Maxell, in fact, that mines are being shut down in this country because they cannot compete with foreign companies which are getting the contracts and the equipment sometimes virtually new is being pulled out and sold for 10 cents on the dollar by order of the banks. This is creating crisis for us with regard to our mineral resources. So, as you say, this is something that extends to more than the agricultural and the oil communities.

What do you foresee in the near future with regard to the oil scene and what the oil companies are trying to do about it?

[ Scott ] Well, the majors are going to survive under the present circumstances, but theirs is a survival based on the assumption that the world is going to be at peace forever, that there is not going to be a major confrontation between the United States and the USSR. Now I don’t happen to believe in the possibility of nuclear war. I don’t think that there is ever going to be one. I don’t think there ever was going to be one after we lost the monopoly. I do think, though, that the Soviet Union may very well conquer us by the ancient Chinese method of war in which they have us in, by gradual stages put us into an untenable situation. If we lose access to the trace minerals of South Africa, for instance, we will no longer be able to operate high technology.

Now I read... I just reads I Fortune magazine a log article. “Is it time to get out of South Africa?” In which the editors had a box and in the box they said, “Don’t worry about the minerals,” because they said in this box, “We can find substitutes and we can live without the minerals of southern Africa.” Now this is a direct contradiction to the office of strategic resources which tells us just the opposite. So who do we believe? Do we believe the television? Do we believe Fortune magazine? Do we believe editors or do we believe industrial experts? I ... I would say that we are going to have a financial crisis of great proportions, much worse than the 30s, because in the 30s we were law abiding docile. There were outbreaks of violence. I recall—and I am sure you do, too—where the farmers dumped milk on the highway and where they hanged a couple of sheriffs and that... that stopped foreclosures for quite a while in... in a few counties. And generally they... they... but generally then there was a bonus march, if you recall that. And they didn’t threaten anybody. Now we have large groups of people who feel that they are entitled to be taken care of that if there is any reduction in their rations they will threaten violence. So if we have a continuing unemployment problem, which we have now, and a continuing closure of plants and factories and a decline in production... I was in Utah and Colorado, as I said, both of these areas have blue collar depressions right now. We know that the ... the sun belt is suffering. All the oil states are suffering, Louisiana, Texas, Oklahoma. All the banks in those areas are suffering. Everyone, of course, isn’t suffering, because everyone doesn’t always know... at no time is it universal. It all... at all times there are people who seem to make money no matter how things are going. But unless the government stops, unless the government, our government acknowledges these declines in these problems there is no way that we can get out of them. We will have to say we have been misled. We have misread history.

For instance, on the free trade argument England was the country that introduced free trade after 200 years of conquest. For 200 years they invaded and they occupied and they shot people in order to get markets for their goods. And after they had all the markets they declared free trade in the places they didn’t control. But they always had empire preference in their colonies.

At any rater they... they ... they lowered the corn laws as we are always told in school. And cheap American wheat and cheap Argentine beef began to pour into England and by 1890 they could no longer feed themselves for the first time in the history of their nation. That is what made them vulnerable in World I and II. And the decline of their agriculture was paralleled by their decline in their heavy industry and a decline in their overseas trade. While the Germans put up a tariff, the Americans put up a tariff, both of them stole their technology from Britain and innovated their own and invaded the world international market. Now we are doing what England did in the 1870s, 1880s, 1890s. We are going down hill. We still live like rich people. We still look great, but practically everything that I wear now comes from Korea or Taiwan or some other place. And I had a manufacturer recently that I talked to who said, “How can I compete with a Chinese factory that pays 15 cents an hour wages?”

So you get into this question that Disraeli brought up. He said, “Free trade is a very nice principle, but it is not a religion.”

If we want to feed the world we can only manage to do it for a while. After we run out of that capacity we will simply fall to an incredibly low standard of living. Right now England’s standard of living is below Italy’s. This is the decline of a great power in our own lifetime.

[ Rushdoony ] You spoke of certain sections of our country being very depressed now. Before that was in the papers we felt it here in Chalcedon because we would get letters from people I certain sections saying, “This is the last check I can send for a while, because I am out of work.”

I had a call from one pastor in an oil state saying that the Christian school of 650 that they had at the church was going to shut down. No one had money for tuition. They had no money for salaries. It was a one industry area, oil and oil related. And a large congregation now had—whether they were on the working level or executive level—no income. And so the pastor was 30,000 dollars in arrears because he had no pay.

Now that is the kind of thing that is happening. And we don’t read very much about it, only get little hints here and there as we see bank failures increase I a particular area.

[ Scott ] Well, I got a call from a retired investment banker in San Diego about two weeks ago who said that they had changed the rules for the bank examiners. The bank examiners no longer have to close a bank down when they fid it is in a perilous situation, because so many are in a perilous situation that they don’t want to start any stampede.

Now it may all be very nice, you know, to... to get cheap shirts from Taiwan, but there is a German economist talked about that named Litz. He said, “What use is it to give me a cheaper shirt if I have to lose an arm?”

[ Rushdoony ] What we are seeing is somewhat different from anything the world has experienced before, at least on this scale. We have inflation, as you pointed out earlier. And I am inclined to believe we will have it much more dramatically by the end of next year. But at the same time we have a very depressed economy. So it is, you might say, inflation with a depression.

[ Scott ] Well, it is an inflation with ... it is... it is a depression with money. It is ... it is wild, but there are a lot of parallels with the late 20s. We have a credit expansion and most of the credit cards, all of the credit cards that I have, come to think of it, were sent in to me without my asking for them. And it is hard to turn them down, because this credit is credit. A lot of people use them and use them all and get into trouble. But we have where a great inflation of credit all the way across the board. The stock exchange, despite the fact that the figures are actually higher than they have ever been, is actually lower when you discount the inflation factor. Our productivity is going down. Our unemployment is going up. The banks are reaching the limit of credit. The credit reporting agencies have got almost everybody below the high levels that they used to have them.

Now what this going to happen with all of this? The chances are that it is r ace. I think it is a race between an international crisis and a domestic crisis. And ... and the rules are different now than they were, let us say, in the late 30s. We don’t have England. We don’t have France. We don’t have the great, rich, powerful allies of the western Atlantic nations that used to exist. We have pushed those people back off the world stage. In our haste to make a wonderful world we got rid of the colonial power and the colonial system and now Britain, France, Holland, Belgium, Spain, Portugal, what not, are in the situation that they were in in the early 17th century. It could be objected they are still rich and they still have trade, but they had trade then all over the world. We are, practically speaking, alone. And we are confronting the most implacable, the best educated, the most serious international power in our history. It is patient. It is deadly. It is at war and we are asleep.

Economic war is being waged against us and we have failed to represent it. Just this last week I read where the Soviet has floated a new loan from western banks. The banks of the West are falling all over themselves to lend money to the Soviet. The Soviet is pouring all kinds of oil onto the market. They... well, the official excuse, of course, is that they need hard money. But why now? Why now when our oil industry is already staggering? Well, of course, if they can keep dumping on to us, they will put our oil industry right up against the wall. The majors may benefit for a while, but if there is any interference in the international marine traffic, if the tankers can’t get in here, that is, of course, the end of the majors, too. And you can’t crank these industries up again in a hurry.

We did marvels in World War II. Do you remember?

[ Rushdoony ] Yes.

[ Scott ] ...when they bought out a liberty ship or its equivalent in every... every couple of days or whatever it was.

[ Rushdoony ] Yes.

[ Scott ] Well, but we had weeks and months in which we were still safe from anything that Hitler or Japan could do. And that situation will never recur. So when we talk about national security today, we are talking about the fact that it isn’t whether or to we have manganese in the hills of the United States when we don’t have the trained miners or the railroads or the railroad cars or the equipment or we are not taking the manganese out. Potential mining properties don’t mean anything to us in an emergency. And potential oil ... we... we can’t create refineries overnight.

[ Rushdoony ] Well, we are more dependent than ever before on foreign materials, raw materials. And yet at the same time we have in very recent years cut our navy by 50 percent while the Soviets have vastly increased theirs.

[ Scott ] Well, every time Mr. Reagan has a press conference there are angry questions about why we are not sitting down and negotiating with, A) Danny Ortega and B) Gorbachev.

[ Rushdoony ] Well, our press does credit to the Soviet Union.

[ Scott ] Yet, you know, if... if.... we could change around. If we were to... if we were to press Washington and say, “We cannot any longer serve as the international bazaar of the world because all of our industries are up against state controlled and state financed ventures. We are up... they are up against sovereign powers who can sell at a loss, who can sell indefinitely and so on. If we were to alter that situation we could begin to recover and yet we... I... I... I will never forget in the 30s when we had this Great Depression that my seniors, the adults at that time were cursing the bankers. They were cursing the businessmen as though the businessmen had plunged themselves into bankruptcy just to make things uncomfortable for everybody.

[ Rushdoony ] One of the very important men in Washington who is very familiar with all of these thing and with the threats we face from the Soviet Union said he sees only one hope for the future, the Christian community, in particular those who are concerned with Christian Reconstruction, because it isn’t merely a matter of knowledge. It is a matter of also of moral courage, of being ready to say that... What is it? By God’s grace and help we must fight and win. But nothing else he feels can turn this country around.

[ Scott ] Well, look at the early Christians. They were sitting in the middle of a great empire that had absolutely lost the power to reason. They had run away inflation. They find... they had food rationings. They had wage and price controls. They had unemployment. They had decayed monuments all around. The machinery of Rome was falling around their ears. And the worst happened. Rome fell. And... and Christianity rose up. And I... I agree. I... I don't see any way that we could foresee whether next Thursday... but with the help of God we could survive whatever comes along.

[ Rushdoony ] Well, this places a very heavy responsibility on Christians, because to be a non Christian in every sense of the word is to have no future in this world or in the world to come. And we, as the people of the future, in the world to come must create a godly future here because that is our responsibility under God.

[ Scott ] Well, of course, you brought up the question of courage which is allied with faith. Without faith how can anybody have courage? My dad was always fond of telling me about eh president of Uruguay when he was surrounded by the army in his palace and the general put the gun on his desk and said, “You know what to do.” And the president said, “Yes. Picked up the gun and shot the general dead,” went out on the balcony and said, “Go back to the barracks. The general is dead.” And the following day the Uruguayan congress eliminated, dissolved its army. They have never had an army since. And that is how they did. That is why they did it. There was a fellow who knew what to do.

[ Rushdoony ] Yes.

[ Scott ] And I... I do think that people change history.

[ Rushdoony ] Yes.

[ Scott ] And that one can never overlook the impact of the individual on events.

[ Rushdoony ] Yes. What was that president’s name?

[ Scott ] I ... I don’t recall. I mean, dad knew him but I ... I ... I have forgotten the name.

[ Rushdoony ] He is a man who needs to be talked about in our day, a man after my own heart.

Well, we are facing, some people say, a major breakdown in the market within the next few weeks.

[ Scott ] Oh.

[ Rushdoony ] As much as 500 points. With some of these things...

[ Scott ] Well, we had a big break in the market a few years back and because the press didn’t understand it, it didn’t create any panic. It was a very, very severe decline over a period of weeks. And nobody gave the newspapermen a release explaining it so therefore they never discovered the story. They only discover stories now that are handed to them, you know, complete with conclusions and so forth. But I do think the market has... has gotten a ... a little bit crazy and I do think that if you were to buy it on the short side, you would probably make some money. But I hope no panic. That this what really turns it into a fire. When men lose their nerve they do crazy things.

[ Rushdoony ] Yes. And one of the problems of our time is that men have been refusing to face up to the situation domestically and internationally. They have been running away from reality. And I believe it is people who do not face up to things who are the most ready to panic when finally things fall in on them.

[ Scott ] Well, look at the recent both anti contra vote in congress. There is absolutely no excuse to get upset about Libya when you are not going to get upset about a billion dollars in Soviet arms, North Korean, East German, Arabian, PLO, Russian, Cuban and Central American troops creating the largest army in all Latin America right at our doorstep. There is absolutely no excuse for Tip O’Neill and his cohorts to be allowed to walk around. Nobody should ever shake hands with those people again.

[ Rushdoony ] And when a priest in Nicaragua describes some of the things that were happening there to two American journalists, they went to Ortega’s men and reported the priest.

[ Scott ] Well, that... that... that should get the coward award for the year. And that is a hard award to get I the United States these days.

[ Rushdoony ] Yes. But that is the kid of thing that is happening and the misrepresentation of the situation in Nicaragua.

[ Scott ] Well, of course, if you want to get right down to it, the whole world is afraid of the Soviet Union. And we have joined Europe in that particular posture.

[ Rushdoony ] Yes.

[ Scott ] Yet I don't think they would ever come to a fighting war with us. They are so convinced that they can out wait us. The United States is a country of quick enthusiasm, a country with very little patience, a country—I hate to say this—without an intellectual class. We have intellectual {?}. We have people who have read everything. They can quote everybody and who haven’t got an idea of their own. And...

[ Rushdoony ] Present company excepted, though.

[ Scott ] Well, I... I... I don’t know. You know, I suppose. But really outside of the Christian community I... I can... we can get the basics of it... when I meet a fellow Christian I can get to basic and serious topics without ay problem. And even though we don't’ always agree, we can always discuss. But that is not true elsewhere.

[ Rushdoony ] Well, we have just a couple of minutes or so, Otto. Are there anything you would like to add to what you said thus far, either to sum up or to supplement?

[ Scott ] Well, I could only repeat that we should really talk to our representatives in more serious terms than we have so far. Oil spills notwithstanding, we cannot live without oil.

[ Rushdoony ] Yes.

[ Scott ] And if we are going to live upon the mercy of the world, it is a mighty dangerous, unfriendly world we are going to rely on.

[ Rushdoony ] Yes. We were discussing at our staff breakfast the other day how everything is becoming electrified. There are no longer making the manual typewriters and when my hand power lawn mower quit on me recently, I had to search all over the county before I found a man who was ready to fix it, because they are all gasoline powered now.

Well, we have made ourselves so vulnerable. Even in the lest things.

[ Scott ] Well, look at our downtown cities. They look like greenhouses upended. Glass hung sky scrapers everywhere. We really... we really believe like the butterfly or the grass hopper that it is going to be summer forever.

[ Rushdoony ] And when an earthquake hits and the whole world is earthquake prone, some areas less frequently than others, those glass buildings really shatter and are a menace to those in the streets.

[ Scott ] We are going to have to figure out something more ... a little more pleasant, Rush. We are going from one terrible precipice to another.

[ Rushdoony ] Well, I will tell you the marvelous thing in all of this is God is on the throne and he is laughing at these idiots ho are turning the world into a hell as they try to make it humanistic heaven. And he has a better plan for us and we had better pay attention to him.

[ Scott ] Now amen to that.

[ Rushdoony ] Well, our time is up. Thank you all for listening and...

[ Voice ] Authorized by the Chalcedon Foundation. Archived by the Mount Olive Tape Library. Digitized by ChristRules.com.