From the Easy Chair

Growing Moral & Religious Collapse of the Western World

Professor: Dr. R.J. Rushdoony

Subject: Conversations, Panels and Sermons

Lesson: 210-214

Genre: Speech

Track:

Dictation Name: RR161X44

Year: 1980s and 1990s

Dr. R. J. Rushdoony, RR161X44, Growing Moral & Religious Collapse of the Western World, from the Easy Chair, excellent colloquies on various subjects.

[ Rushdoony ] This is R. J. Rushdoony, Easy Chair number 144, April 16, 1987.

Otto Scott and I have with us here tonight R. E. Mc Master. We have had R. E. with us before and it is a pleasure to have you with us again.

Tonight we would like to go into the matter of the growing moral and religious collapse of the western world, which is, of course, now the world’s civilization. What it is doing to the spheres of economics, politics and more because at the root of the collapse we see on all sides, educational and social is the religious and the moral collapse.

And we are not going to turn the present world around. We are not going to see a recovery in any sphere until we see it first in those two spheres. R. E., you have called attention more than once to the fact that there is an inseparable connection between religion and economics, that economic is religion applied and, hence, it is not understandable apart from a religious faith.

[ Mc Master ] Yes. What I have really come to in terms of looking at collective human action is that government is always religion applied to economics. And the more deeply you dig into it you find there is clear a clear cut differentiation between the Christian world and life view as it affects government, religion and economics and that of all other systems. I am using economics in a general term here meaning human action the way Ludwig von Mises used it in his treatise. But if government is nothing more than an active religious ideas about right and wrong and ethics and those ideas are laws, then, in turn, frame the arena of human action which is what economics is. It is not possible to separate the abstract moral world from the concrete world of economics in day to day life. We see that very clearly. I remember I went through pilot training down in Laredo, Texas. And on the Rio Grande River the differences between the religious systems south of the Rio Grande in Mexico and, of course, the Protestant work ethic which dominated even in Laredo proper and how that affected the different bureaucratic governmental and economic systems. All that separated them was a river. There was no climactic difference. Essentially, because they traded back and forth there would have not have been an economic difference either.

[ Rushdoony ] But the was.

[ Mc Master ] Of course there was. You had very distinct class separations there. In back of walled off streets were the very rich who were less than one percent of the population were separated from the masses who lived in abject poverty in... in Mexico. You had the corruption of the bureaucratic officials, the police particularly, I recall. And then a mile north, across the Rio Grande in Laredo proper, there was the middle class. There was the community in ever sense of the word. And the decentralization factor was ... was in effect. And it seems that cultures more... as they move away from basic Christian principle of humility and the use of the contract and decentralization that that.... that that brings, instead as they move towards, I guess, what I consider the basic mental attitudes, then, of the Bible, the sin of pride, they become status oriented, vertical, bureaucratic in their organizations and appearance oriented. I found it interesting in your discussion several Easy Chairs back where you discussed that we have become basically theatrical in our cultures and so the stage has become reality. I have looked at that and from an economic and social perspective is that we... we put on a face. We are basically status oriented. We are performance oriented or rather appearance oriented rather than performance oriented. And when you become that way basically you have lost the humility and service that is basic to a contractual and centralized society that produces wide spread prosperity.

[ Scott ] Well let me... let me rephrase this {?}. I understand what you are saying. I have always felt that the Catholic cultures never really understood Capitalism. Capitalism was a Protestant step forward where you work for the sake of the future. You, you know, take the profits and plow them back in order to build something eternal, something that will go on for generations with, of course, the old world, as the Catholic world represents to a considerable extent, always had commerce, but it didn’t have Capitalism. And when you talk about Mexico you talk about Latin America.

They don’t understand Capitalism down here in the same what that the Americans do, because we have inherited this from the Reformation. Of course, it is fading here. There is an awful lot of anti capitalist feeling in the United States, that there is something unjust about the accumulation of wealth even if it is put into the service of the future. But is this… is this... am I paralleling what you are saying?

[ Mc Master ] Yes. It seems to me that Latin America had, in terms of its competitive environment with North America had the educational elite had equal to or greater natural resources than we did. But they never had a Protestant Reformation. They never had that... that Puritan work ethic that gave them the ability to move from status, appearance, those vertically established...

[ Scott ] Well...

[ Mc Master ] ... bureaucratic institutions where they could basically work horizontally and... and contractually.

[ Scott ] I... I ... I don’t... I don’t like the phrase work ethic because they work very hard down there. That is not really the point. I remember being on a banana boat for the United Fruit Company many years ago and we were tied up in one of those banana ports, maybe Costa Rica, Honduras. I don’t know. I have forgotten which. And I was on... on the rail. The third mate, you know, is in charge of loading and unloading. And he was... the straight United Fruit Company third mate. He was wearing a white tropical uniform with shoulder boards. And it was in the evening. We had flood lights on and these little brown men with no shirts were carrying stalks of bananas in two... two files and there was one withy a machete in the middle was lopping off the stem as they went by. Great swordsman, really. And then they would put it on the conveyor belt which would take it up and down into the hold and others would stack the bananas there.

Now these are heavy. And they didn’t walk. They ran at a trot and they were covered with sweat. They were gleaming in the light. And I watched this and I said to the mate, “Why do you suppose this country has never prospered?”

He said, “Because they are lazy.”

Now that was the effect of propaganda.

[ Rushdoony ] Yes.

[ Scott ] Which over... over bore all observation and common sense. To attach the work ethic to our system is not really hip. We don’t work that hard. We have got lots of machinery in the United States. And other countries, they work even harder because they work stupider, so to speak. It is the system.

[ Mc Master ] I think it...

[ Rushdoony ] Ah....

[ Mc Master ] It is also leadership.

[ Scott ] Well, same thing.

[ Mc Master ] Agricultural leader. The elite have to ... have to lead by example, financial educated, intellectual elite in my... and my recollection of working in Guatemala was that they did not lead by example. They enjoyed inciting envy from the lower...

[ Scott ] Well, they are parasitic, yes. We know that. They are... they are... they are {?} is there. Their landlords and usurers and...

[ Mc Master ] And the were certain labor that was beneath them.

[ Scott ] And you can never say anything too bad about the Latin American elite as far as I am concerned.

[ Rushdoony ] You, perhaps, don’t know, R. E., that Otto is part Hispanic and Indian.

[ Mc Master ] Oh, I see it in his temper.

[ Rushdoony ] Well, if I may throw something in, background to this, because I think it ties in with our subject. A very brilliant medieval scholar, Lynn White pointed out that the early and high Middle Ages had a great deal of Capitalism. He dealt with the Cistercian monasteries and their relationship to the rise of Capitalism and the work ethic. What you had was that the old Catholic culture was replaced with an elitist, monarchistic culture. As a result, there was a different attitude towards work.

Now that same switch away from a respect for work and a readiness to work has been taking place in this country. Not too many years ago, within the past 15 years one scholar called attention to the fact that in India they can work very hard all day, but in terms of productivity, it is equivalent to 45 minutes of an American worker’s time, because it is inefficient. It is because it is loaded with all kinds of ideas about avoiding machinery inherited from Gandhi and so on so that hard work can be found all over the world, but productivity will vary dramatically from culture to culture. And an elitist culture will despise work and relegate it to the lower classes, in which case you separated intelligence, the intellectuals from work. And, therefore, work becomes less productive because work is despised. Intelligence is associated with things like...

[ Scott ] With getting out of work.

[ Rushdoony ] Yes. Making others do the work for you, living off of them.

[ Mc Master ] Let the goals lead you rather than productivity.

[ Rushdoony ] Yes. And this is a goal that is coming into this country.

[ Mc Master ] Well, that is a goal anywhere where you will have a long term view.

[ Scott ] Well, also that is probably the fact that because of our peculiar economic situation right now you can make more money with money than you can by working.

[ Rushdoony ] Yes.

[ Scott ] If you have a corporation you cannot get the kind of yield that you can from the financial markets. So on the... on the... across the board in the United States finance has replaced work. And one of the results of this has been the downfall in productivity.

[ Mc Master ] That is not only true in ... in... in business, but also that is the standard that is taught in the major business schools and at the major universities, Harvard, MIT, Wharton. In fact, on some days now in the international currency market, only five percent of the currency transactions which take place are involved in legitimate commerce.

[ Scott ] And the rest are simply...

[ Mc Master ] The other 70 nine, five percent are ... are effectively speculations.

[ Scott ] Speculation.

[ Mc Master ] And banks have departments, numerous employees that are hired to do nothing more than speculate with the banks’ money in international currency arbitrage.

[ Scott ] So what... you know, if... if one country did this, that would be one thing. If England did it or we did it France. But the entire West is caught up in this poker game.

[ Mc Master ] It is global. It is global.

[ Scott ] And there is a gambling mania. And it... it is spread now into other areas. The size of the contracts that are 39 million dollars for a mediocre picture by Van Gogh who never really painted anything else, 39 million dollars for a hunt flower.

[ Mc Master ] Five to seven times conservative valuations if it weren’t for that.

[ Rushdoony ] And God makes them more attractive more cheaply.

[ Mc Master ] Well, inflation has been in financial assets, stocks, real estate, selected real estate in cities and in art, scarce art.

[ Scott ] Well, they idea here is that art is a speculation, but I remember interviewing Bill Freeman who was the banker who took care of the remains of the info empire and the stock holders who stock with him got back all their money plus because he did put it all together eventually. Old Mr. {?} although he was harassed and persecuted was really an honest financier and hadn't done anything dishonest. But at any rate, at the time that Freeman took it over in the heart... the depths of the Depression he see... he called it the fire. He said when the... when the fire starts cash gets the bargain. And I remember the Depression and I remember how many people tried to sell oil paintings. And I will tell you, you couldn’t get a bowl of soup for them.

[ Rushdoony ] Yes.

[ Mc Master ] I want to add a footnote to my currency comments. If I find a currency markets at a critical time, as I do presently, I will arise at six in the morning and check the openings in New York, 6:15, watch the market, 6:30. Follow them through to the close, 4:30 that afternoon I will call international overseas markets to find out what is happening in the Far East, in Australia, Singapore, Hong Kong. 2 AM the next day I will check with Switzerland and then we are back to the U S market. So it is now literally a global, 24 hour Las Vegas type crap shoot.

[ Scott ] That is it. It never stops. That is right.

[ Mc Master ] Well...

[ Rushdoony ] What do you use in the near future, the next five years or so in terms of the economy?

[ Scott ] Don’t you think five years is a long time?

[ Mc Master ] In... in this existentialist world it is. It is a long term deal.

[ Scott ] You know, when you say in the near term it used to be true.

[ Rushdoony ] Yes.

[ Scott ] That five years was the near term. But we are living in a period where I really think five years is the long term.

[ Rushdoony ] You are right. I have been told that 30 and 60 days is long term.

[ Scott ] I haven’t reached that stage yet.

[ Mc Master ] Still commodity traders, though, have historically been seen as short term traders. Well, the vast majority of commodity traders now are day traders some of whom may trade in and out of a market...

[ Scott ] In one day.

[ Mc Master ] Oh, five, 10, 15, 20 times in one day.

[ Scott ] Go in in the morning and come out again and go back and so forth.’

[ Mc Master ] That is short term.

[ Scott ] And take a point or two each time?

[ Mc Master ] There are seminars being held how to day trade the market intraday. And those are the most profitable seminars being held today.

[ Scott ] Now that you have real time computers...

[ Mc Master ] They are on line.

[ Scott ] They are on line.

[ Mc Master ] So we are short term oriented. And ... and looking at... at your work, Rush, and flipping all the... the clear biblical law that you have pointed out, help me understand into the realm of time. I found it seems like every single Christian principle to be {?} successfully in terms of God’s commandment as well as for man’s good does require a long term view. Short term pain for long term gain, what historically was the American cultural norm.

[ Scott ] Well, this is true. Every immigrant group came into the country. The original immigrants worked hard and did without in order that their children would have a better chance.

[ Mc Master ] It is just the reverse today. It is not the long term view. It is get what you can short term and don’t worry about the long term.

[ Rushdoony ] In terms of that, Otto, I recall 40 or more years ago spending about at the labor temple in New York City. It was in the heart of the immigrant district and at that time the staff there at the labor temple told me that the entire neighborhood changed its complexion every five years. The shops, the language of the streets would go from one language to another because in terms of the opportunities in this country—and this goes back to the Depression.

[ Scott ] This is still true.

[ Rushdoony ] The people would advance themselves. But what has happened since then is that the people who worked in places like that are finding that government intervention in the form of Welfarism freezes the people in such a neighborhood.

[ Scott ] Well, yes, I don’t think they are as free as they were. I notice ever time I go to New York there is as new crop of cab drivers. And I have lived through Israelis and I don’t know who ... what the present crop is. In Washington, DC, African tribesmen with scars and so forth. And... and you really ... you... I... they... they have pushed out the Arabs. There are Arabs in Washington, DC.

[ Mc Master ] Now they are Ethiopians.

[ Scott ] About five or six years ago. So this is true. I mean, the cab drivers is one of the ways that a man without any other skill can move on and you can do it at odd hours. It is not like London where they have to have an examination and they have to memorize the major arteries of metropolitan London and prove it before they get a license. In New York and Washington, DC all they have to do, I think, is have the money. And that is it.

[ Rushdoony ] That is really true, Otto, and I have to tell something on myself. I picked up a cab once at a hotel to get to get to the airport in a hurry and it was someone who looked like someone fresh out of the African jungle.

[ Scott ] And it probably was.

[ Rushdoony ] And I wasn’t sure he would understand English. So that is beyond national airport or something like that. And I forget what started the... a conversation, but to my amazement he was a very devout Christian, probably more so than some of his fellow blacks there in Washington.

[ Scott ] Did he...

[ Rushdoony ] It was very surprising.

[ Scott ] Well, I got a ... a hotel room during Reagan’s first inauguration when there were no rooms into be obtained from an Arab cab driver who had a friend who was the assistant manager of one of the Hiltons.

[ Rushdoony ] Well, we have today a leadership in the media and in politics who believe that things are frozen, that if you are at the bottom you are never going to rise and they are running the government on that basis. And with their taxation and various economic practices, they are trying to reduce it.

[ Scott ] Well, that...

[ Rushdoony ] .... they are frozen statists.

[ Scott ] That was the old Democratic party and the old economic theory in the 30s. If you recall, the idea was that the frontier was all gone and we had reached our limit and now all we had to do was to share the pie equally. Well, of course, since then we have had the greatest boom in history.

[ Rushdoony ] But Gary Hart just this past week has been talking the old way.

[ Scott ] Well, Gary Hart sort of lost me on the curve when he went to get Gorbachev’s approval for his candidacy for President of the United States.

[ Rushdoony ] Yes.

[ Mc Master ] You have to understand. He needs the sanction of the ... the positive sanction of the other side of the U S / U S S R trade and economic council.

[ Scott ] Yes, I think so. That is an interesting group, by the way.

[ Rushdoony ] Yes.

[ Scott ] It is very interesting to bring that up.

[ Mc Master ] We let our farmers go bankrupt and subsidize the 400 business organizations that deal with slave labor in the Soviet Union.

[ Rushdoony ] Yes. Slave labor products are supposed to be illegal in the United States. But they are brought in without question from the Soviet Union.

[ Mc Master ] A great deal of our exports to the Soviet union are... are channeled through Austria if they are on the prohibited export list, just as much of what Cuba receives from us is funneled through Canada.

[ Scott ] Canada has never broken diplomatic relations with...

[ Mc Master ] No.

[ Scott ] ...Castro.

[ Mc Master ] No.

[ Scott ] It is part of their independence of the United States that they take a contrary foreign policy.

[ Rushdoony ] We have been talking a great deal about the trade imbalance with Japan who is one of our two best customers. Where is the real trade imbalance? What country ...

[ Mc Master ] It has always been with Canada. It has always been with Canada. I found interesting that there weren’t any... any serious discussions about that in the recent Mulroney, Regan conference.

[ Rushdoony ] No.

[ Scott ] Well, look at... look at the participants. How would you expect a serious discussion?

[ Mc Master ] Right. It was a big... a big theatrical performance.

[ Rushdoony ] After Kennedy...

[ Scott ] They are both good looking men.

[ Rushdoony ] It is western Europe, but we don’t land about western Europe the way that we do about Japan.

[ Scott ] Japan, I understand ... I haven’t been over to Japan since the end of World War II. But my understanding is that when you go over there you see all sorts of American products. You see American goods everywhere.

[ Rushdoony ] Yes. They are a very important customer. We do more trade in the Pacific by far than in the Atlantic. And it is interesting, I found out the weekend before last, that American companies have large holdings in Japan. Ford owns 20 percent of Mazda.

[ Scott ] We have got lots of money in all of these places.

[ Mc Master ] Look... look where Japan was in the end of World War II. They were a devastated economy. We have never asked the question, publicly, who financed, who rebuilt them? Well, American capital financed them. American banks refinanced them with American worker’s money. So basically what... what has happened is that, you know, a lot of wealthy Americans have benefited from the... the Japanese industrial boom and in a sense American workers have financed their own unemployment.

[ Scott ] Well, let’s put it another way. I agree with what you say. What happened here is that the American financiers have done what English financiers did earlier in the 19th century. The United States was built on English money. English money put together the transcontinental railroad. It... it... it created the branching industry. We have got the methods from the Spaniards, but we got the land and everything else from the... though the English capitalists. London financed the industrial rise of the United States at the expense of the poor little fellow who was living in England.

[ Rushdoony ] And there are societies in England still trying to collect money their great grandparents lent...

[ Scott ] Well...

[ Rushdoony ] ... to the United States.

[ Scott ] ... they can’t because Woodrow Wilson and Franklin Roosevelt both forced these people to sell out at bargain prices in order to help them in World War I and II. So when it comes to this, I would say the United States played a much worse game.

[ Mc Master ] You know, it would... at the base problem here is that we have lost our perspective in terms of honest money in Capitalism, which was rooted in Christian economics, because what we have today is a perverted form of evolutionary debt Capitalism and, of course, debt is borrowing from the future by mortgaging the past to consume in the present and Capitalism is saving from the past and the present for investment in the future. So you put debt and Capitalism together it is like putting ... putting the words mercy killing together.

[ Rushdoony ] Well....

[ Scott ] Well...

[ Mc Master ] It is antithetical.

[ Scott ] I think that is a... a fascinating, fascinating definition, but I would like to get back to the business of the English lending money to the Americans. They got money for it, of course, they made a profit. Then the Americans lending money to the third world countries in Asia and other third... other countries in Latin America, Brazil, for instance.

Now understand, first of all, Japan has one edge on us. It doesn’t have any military. Therefore it can take all its money and put it into consumer markets. After the Japanese did well with the steel industry the Koreans displaced them and now I understand Brazil has displaced Korea as the exporter of... of steel products. So what is happening here is that we are seeing, as England saw, other countries beginning to take the same industrial pattern. Maybe the whole world will be industrialized and it will equalize out. I don’t know, but everybody can’t live by ...

[ Mc Master ] Well, with Mexican... yeah....

[ Scott ] Oh... oh... oh... the old pattern. In other words, if England could only be preeminent for a while, Japan only for a while, Korea only of a while and so forth, what happens when all these countries get equal productivity?

[ Mc Master ] You have a glut.

[ Scott ] You have a glut.

[ Mc Master ] And that is what the creation of credit does in a fractional reserve banking system is encourage over production of even capital good during inflationary times so that when that debt pyramid contracts you have excessive competition, first shrinking markets. We see that in agriculture, for example.

How do we complete where AMC takes American worker’s money through multinational banks and builds a Jeep factory in China where they pay the Chinese 60 cents a day to work. Mexican workers, we are seeing or secretary of commerce encourage American manufacturers to invest the south of Rio Grande where they pay Mexican workers 24 dollars a week.

[ Scott ] I understand they have got factories all along ...

[ Mc Master ] ... all along.

[ Scott ] ... all along the southern end of the border.

[ Mc Master ] Go down to El Paso and... and...

[ multiple voices ]

[ Scott ] And fabricating factories all the way, big industrial sector because of the low wage.

[ Mc Master ] One... one of the keys that I have come to is not only honest money, but also I think it is... it is as important for an individual to husband his money and his capital as it is for a husband in the family, a husband and a wife, because if you lose control of your capital you lose control of your financial destiny, the debt capitalistic system long term.

[ Scott ] I would... I... I... I would look at it in a similar fashion from another angle. As far as I am concerned it means that the governing class of the United States has lost its sense of responsibility to the people of this country, that they are willing to make a profit at the expense of their own people. And I think that is about the worst thing that can be said....

[ Mc Master ] Ok.

[ Scott ] ... about any governing....

[ Mc Master ] But see, that is what Latinization of our culture. We are... we have come back full circle for where we started off is the... is the governing class, intellectually, in terms of money...

[ multiple voices ]

[ Scott ] Only don’t... don’t blame the Latins for the corruption of these characters.

[ Mc Master ] No, but ... ok, but there is a similarity that we have assimilated from Latin American culture and from old England.

[ Scott ] No. No, we... we got it from straight developing a progressive... just as the Puritans, the first generation worked hard, the second generation prospered. The third generation... by the third generation according to Perry Miller, the Puritans of Massachusetts were already being corrupted. This is a simple corruption and Latins have nothing to do with it.

[ Rushdoony ] It is a decline of faith and morals.

[ Scott ] Exactly, exactly.

[ Rushdoony ] What is our problem? In every culture you have a particular form of decline. But it is always when the faith in the morality of a people decline in every sphere they are going to go down hill.

[ Mc Master ] On this decline of the culture, Otto, you took the linear, human action progression and Rush took a theological perspective. And I think there is... I think there is validity to both of those. For example, in a... in a credit economy, it takes about 50 years to move from depression to depression and the human action sequences Lord Overstone pointed out and it has been seen by economists at the department of commerce named Funk in 1931 is that if you ...is as a result of a depression people become very conservative and very thrifty to save their capital. Well, after while that gets old. They save their capital, that they develop a sense of confidence. Confidence leads then to some investment. Investment leads to business activity and business activity picks up and it becomes prosperity. By this time they started to lose the lessons of the Depression. Prosperity leads to the use of credit. The use of credit is followed by the abuse of credit. Then you are into the inflationary era where things are over priced and that leads to a dropping off of confidence and high level of speculation and then at some point in time fear and panic and you are back to stage one in the depression.

[ Scott ] Well, you ... you omitted the government.

[ Mc Master ] I am talking about a classic credit creation. Now the... the truth of the matter is... is that we he the government involved in the economy to the extent it is today. Then you have a compounding of problems because you can also have a credit contraction and an inflationary economy at the same time or at least an inflation in the... in the... in the worthlessness of the money.

[ Scott ] Well...

[ Mc Master ] So you can have the worst of both worlds, an inflationary recession or worse.

[ Scott ] You really... you really do. I think...

[ Mc Master ] Latin America, again...

[ Scott ] I say Murray Rothbart described it fairly well. He said, “Productivity drops but the amount of money that is being pumped into the economy remains constant or even increases, so there you have the paradox of unemployment, drop in productivity and an increase in prices, which is what we have been seeing.

[ Mc Master ] And the nuisance index of ... of basics that people buy. It has increased at a 28 percent rate, recently documented But it is a... that is a far cry from the four percent inflation rate that the government tells us exists...

[ Scott ] This is on the ... on the question of simply the... I believe somebody took a study of the prices.

[ Mc Master ] One of the...

[ Scott ] ... that they have said they have gone up 28 percent.

[ Mc Master ] Kellner, I believe.

[ Scott ] Is this... count... 28 percent a year?

[ Mc Master ] It was either... it was either over a two year period or a one year period.

[ Scott ] Probably a two year period.

[ Mc Master ] My... my recollection we were really experiencing now a real inflation rate of about 12 percent per hear.

[ Scott ] I think so. And I think this has been constant since Reagan got in office, for instance, in 1980. And they began to tell us that inflation had dropped down to four percent. You can’t buy anything for what you could buy it for in 1982.

[ Mc Master ] I think what is important right now is the week of March 23rd was decisively the end of the eye of the hurricane as far as Reaganomics is concerned. The... any illusions that the markets had with regard to a carry over of good times were dissipated that week, because what happened that week was that we saw the bond market quaver and the bond market is four to vie times larger than our stock market, much more significant.

As a result of bonds falling, the stock market had a significant correction and also coupled with those corrections in those main institutional financial market we saw gold and silver prices increase substantially. That is the first time since interest rates rose significantly, up to 22 percent when Volker stepped on the brakes back in 1980. That is the first time we have seen rates go higher and also inflationary indicators such as in primary commodities in crease as well. Heretofore over the past six years and now in the seventh year we have seen where rates have gone up. It is… it is also pressure to depressed commodity prices. This time that was no longer true.

[ Scott ] So do you...

[ Mc Master ] So... so significant change.

[ Scott ] Do you think that the Iran gate business which was, in effect, a torpedoing of the Reagan administration, you know that up until... up until this Iranian {?} Reagan had created or benefited from, however you want to put it, an atmosphere of confidence. The people were feeling as they did under Eisenhower that, after all, things are pretty good. Even when things are not pretty good, even thought there is a depression in 30 states, the general impression was that the country was in good shape. Internationally the country had attained a certain amount of confidence that the right things were being said. The Soviets were being faced and confronted and this and that and so on even though there wasn’t much real solid solidity to this. Now the Reagan... now the Reagan presidency is badly shaken. Confidence overseas is reflected by the falling dollar. And the United States is beginning to reap the rewards of having a cat fight at home and exhibiting, once again, to the world that we have in positions of great power and authority idiots.

[ Mc Master ] Attorneys or are the terms synonymous, I guess, at least when they are political.

[ Scott ] Well, we... it is... it is... it is hard to say, but I guess you are right. I notice that it... the... Secretary Shultz went over to speak to Gorbachev and that the Speaker of the House Wright and a bunch of Democratic congressmen went over also and held separate meetings with Gorbachev at the same time.

[ Mc Master ] Well, it was July two years ago that they effectively agreed to... and I think it was in Geneva. Reagan is meeting with Gorbachev in Geneva. They agreed to a ... a cultural, educational media and arts exchange with the Soviet Union.

[ Scott ] I read that with horror.

[ Rushdoony ] What amazes me is that they talk about the change in the Soviet Union, the new direction, the openness and so on. I am amazed that they have the nerve to talk that way, because I am old enough to remember when Lenin’s new economic policy was being talked of as the end of Communism.

[ Scott ] Yes.

[ Rushdoony ] And the new order.

[ Scott ] Yes. Yes, they were... they were...

[ Rushdoony ] Then when Stalin triumphed over Trotsky it was the death of Communism. And Stalin was even referred to as feeling his way, perhaps, towards Capitalism. When he died it was a new order. Melenkoff and then, especially with Khrushchev, with Brezhnev we had the same kind of talk and each of his successors. And now Gorbachev. The same old stale...

[ Scott ] They never...

[ Rushdoony ] talk.

[ Scott ] They never stop.

[ Rushdoony ] No. And yet people go on believing it.

[ Mc Master ] Rush, we have no sense of history in this country collective. The average American spends 15 years of his life watching television. When he watches television he is watching an illusion of an illusion.

[ Scott ] And so...

[ Mc Master ] So he is already two... two steps removed from reality.

[ Scott ] If that is true, they must really love advertising.

[ Mc Master ] Three years of his life watching advertising now.

Back to your question on the dollar. It has been my contention for the past several years there have been three things that have supported the strength in the U S dollar. One was confidence in ... in President Reagan, which is, as you correctly pointed out, now gone. Two, was the statesmanship in international banking, circles of Paul Volker who may not be with the federal reserve come this August, may not be reappointed. And, thirdly, we are high real rates of interest which supported the U S dollar... the higher rates, higher than the rate of inflation and the U S dollar as opposed to those that were available overseas.

All three of those areas of support are on the wane. And when we see the bond market drop nine to 10 points, as we have very quickly over a period of a few trading sessions, high interest rates in an old economic recovery, a recovery that is now over 15 months old, basically are ... are water on the fire, so to speak. And so the fed is, in a sense, trapped. If interest... the market dictates higher interest it slows down the economy and at the same time if they push interest rates lower you have... you have inflation taking...t taking off and then bond prices are greater anyway.

[ Scott ] All right.

[ Mc Master ] It is a catch 22.

[ Scott ] But R. E., you say this is the oldest boom we have had for a long time, maybe forever. But in the last few years there has been a deinstrustrialization. I was in Salt Lake City not too long ago and saw {?} great mine up there close down, the greatest open copper mine in the world. And everywhere that I have been now in blue collar areas there is great unemployment, there is considerable distress and it carries me back to the 20s. I remember the 20s, as you do, very vividly and it was a terrible period for working people. It was a hard period...

[ Rushdoony ] Yes.

[ Scott ] ... for working people. It was a great period for certain speculative industries, real estate, advertising, bootlegging if you wanted to say it.

[ Mc Master ] Drugs today.

[ Scott ] It was a big industry in those days, underground, but nevertheless alive. And the stock market was booming and so forth. The bond market. I don’t know about the bond market, but the stock market definitely.

[ Rushdoony ] Well the farmers had their crash in 21.

[ Scott ] Yes and they never fully recovered.

[ Rushdoony ] Never.

[ Scott ] Their prices never came back. A half a million of them lost their farms. What would you suppose would happen now if a half a million farmers lost their farms in one year as they did from 21 to 22? Look at the difference in the expectations of the people.

[ Mc Master ] We have... it is... it is not a like, by analogy, a family that ... that has lost its job, but had some savings and it is living off its capital until it is depleted, because what we have done is basically destroy our agricultural industry, our petroleum oil complex, our manufacturing capability. And with 70 percent of our jobs created today in the service sector, the only way that we have been able to maintain the illusion of an ongoing vital economy has been by debt. There are... therefore our trade imbalance.

[ Scott ] Credit.

[ Mc Master ] Credit.

[ Scott ] Credit.

[ Mc Master ] So you have basically got 70 percent of the country... of the jobs created in the last decade have been in the service sector. The service sector spending is now two thirds of our GNP. So if you have one or two things happen, one recession in the service sector, or, two a fall in single family home prices, the two things that are closest in heart to the American consumer and then you could see a panic. But until that point in time, what we are doing is lending the illusion, brought on by debt and our trade deficit, that have kept this economy going.

[ Scott ] Well, panic isn’t quite the word for it. I am coming around to the idea that the United States to a considerable extent resembles the Weimar Republic. And there weren’t... There wasn’t a panic in the Weimar Republic when the Depression hit, when the banks collapsed. What there was, was the organization of seditious minorities. And all the elements for such organizational efforts exist here. I can’t get out of my mind these bus loads of people that go down to Washington to demonstrate and always the question that always comes into my mind as an old fashioned reported, which I never hear answered by TV or the newspapers, is: Who hired the buses? Who paid for the hotel rooms? Who is buying the food? How did all these people manage to make the trip? Where are the organizers? Who are the financiers of these demonstrations? What is going on? So I would expect that if things really fell apart or got very difficult, that we would see some very strange new groups or even some old groups suddenly get many more members and start storming Congress for extreme action.

[ Mc Master ] But I think for that to happen you will have to have the American consumer hurt in the service sector and also see a sharp follow in single family home prices, because that is where he is borrowing presently, called home equity loans.

[ Scott ] They are borrowing {?} on their house.

[ Mc Master ] {?}

[ Scott ] Well, then, of course...

[ Mc Master ] ...effectively called HELS, H E L S, home equity loans.

[ Scott ] That is... I didn’t realize that.

[ Mc Master ] By the way, there is one other factor I wanted to bring into. I think in the play here is that ... that Iran gate, Contra... I think it was time released, because at that point of time there were considerable Pentagon efforts underway for a naval blockade and an invasion of Nicaragua and the Iran gate, Contra affair...

[ Scott ] Diverted that.

[ Mc Master ] Put that on the back burner immediately.

[ Scott ] Well, the... the... the Kremlin should coin some medals, some special medals, maybe with a diamond embedded in the middle of a medal of gold for some of our congressmen for the help that they have provided to the Soviet Union.

[ Rushdoony ] Yes. I read a book this past week. I forget the title. It was one of several that I read that made a point in passing that you made, fist of all, Otto, in your article for our business journal on the oil crisis. And the author saw the beginning of the end in 1973. And he said it was then that the integrity of contracts was destroyed. And he said after that what is there left?

[ Scott ] That was exactly. The United States state department said the contract didn’t matter, that a nation could sell its oil and still remain the proprietor of it.

[ Mc Master ] Well, we will see come 1990 when we import 50 percent of our oil.

[ Scott ] Well, you know that a great many of us have talked to people in Washington and it is an amazing experience to talk to somebody in Washington about the oil situation and about the fact that the Arabs are in bed with the majors and they are importing gasoline and jet fuel and diesel fuel and our refineries are closing down and our drilling has stopped, et cetera, and have them agree with us, agree and then say, “But we can’t do anything about this.

[ Rushdoony ] Yes.

[ Scott ] ... because, you know, free trade is our religion.

[ Rushdoony ] Their religion is staying in power.

[ Scott ] Oh, I stand corrected and I think you are absolutely right. That is absolutely right.

[ Mc Master ] In 1985 U S multinational investment in OPEC produced a return of 24.7 percent.

[ Scott ] Yes. That is the majors.

[ Mc Master ] That is the majors.

[ Scott ] That is the majors. It makes it very difficult to sympathize with Texaco even though I think they are in the terrible position.

[ Rushdoony ] Well, they are all going to pay for their sins and Texaco is ... it is a tremendous injustice that has been done to them, but not many people are going to cry for them.

[ Scott ] No. It is very difficult to cry of them. The ... well, of course, the difference in doing business in a corporate level in the United States and in other places is really considerable. Every three months as major public corporation has to issue a report and he has to... it has to show a profit. If it doesn’t, if it shows a loss or even a drop in profits, the stock value goes down, the share holders complain. All kinds of things happen to shake the managers.

Now I talked to Bob Black years ago who was running or rather Robert Applebee who was running Black and Decker in Britain. And they don’t pay their taxes over there, corporate taxes, until the end of the year. They don’t pay quarterly taxes and they don’t pay them in advance, either. And I said, “Well, what happens if you have a tax problem?” Well, he said, “If there is a tax problem, I call up the appropriate fellow in the government and talk to him. And he will say, ‘Well, if it is that difficult, Robert, we will give you an extension or we will do this’” This is for a corporation. And here we are getting to be like... I don’t know whether it is a canard or whether it is true or this is the way the Germans are reputed to be, the way that, I think, the Soviets commissars really are, that the rule applies no matter who it kills.

[ Mc Master ] You know, you look back at ... at the feudal economy of the Middle Ages, Rush, and even the kings and the landlords and the serfs had mutual duties and responsibilities to each other...

[ Rushdoony ] Yes.

[ Mc Master ] ... or the right to revolt was reserved to the serfs. Today we have a government bureaucracy who... which is accountable to no one.

[ Scott ] So...

[ Mc Master ] So there is reciprocal benefit whatsoever.

[ Rushdoony ] And what Otto referred to, these quarterly reports and taxes and so on, do you remember when Gene Neumann was here? He reported on the fact that some owners at companies that had gone public were buying back the shares now because while they had additional capital by going public, they had lost the ability...

[ Scott ] To run the company.

[ Rushdoony ] ...to run the company and have long range planning.

[ Scott ] You can’t make long range plans when you have a public company, because you cannot horde your profits. You ... do you realize that under the Roosevelt administration, they put a ceiling on profits to being with. They said you have to either share it with the shareholders or pay it in taxes, but you cannot as in the old days take in all the profit that you have actually earned. You have got to distribute it. It is unfair to keep the money that you have made.

And now the corporations wanted to keep the money in order to make long range plans, but since you have to disburse the money to the shareholders, how... how long range can you get? Well, you have to go into debt. This is where your... your thesis is right on target.

[ Rushdoony ] Yes.

[ Scott ] Because then everybody is in debt eight feet over their head.

[ Rushdoony ] Yes.

[ Mc Master ] Well, of course, in ... the incentives are not there in the tax system to accumulate capital long term, because you have, of course, the dividends that you have to pay, double taxation. You have retained earnings problems. You have the investor mindset which basically demands dividends paid whether the company made a profit or not.

[ Scott ] Oh, absolutely. You can be losing money and they will say, “Well, are you going to raise the dividend this year or not?”

[ Mc Master ] And if you are too prosperous you get taken over by corporate raiders with junk bonds.

[ Scott ] Well, that is something else.

[ Rushdoony ] One of the first essays I wrote a good many years ago was on Assyria and debt.

[ Scott ] Is that so?

[ Rushdoony ] The Assyrians ...

[ Scott ] The Assyrians...

[ Rushdoony ] The ancient Assyrians had a policy. We remember them for their campaigns of total terror.

[ Scott ] Yes.

[ Rushdoony ] But before they ever moved against a country they first sent in ... the Babylonians used the same method. State subsidized merchants offering easy credit. After they had a country head over heels in debt and becoming very prosperous with all these luxury items, then they moved against them, because they knew that a debt ridden people are not a free people and have lost a great deal of their moral fiber. And that was the strategy that Assyria devised to destroy nations.

Now we have done that to ourselves.

[ Scott ] I have seen this on a very minor level. I have listened to executives saying, well, how many children does he have? And a fellow says he has two kids. He said, “All right. That is fine. He has got two kids. Has he... has he got a house? Has he got a mortgage? Yes, he has got a mortgage. Fine. Let’s put him on,” because if he hasn’t got a mortgage they will lend him the money to put down for a house and now he has got a lifetime contract. He has got a good long view.

[ Mc Master ] That is a standing philosophy among insurance companies in terms of the way that they want their insurance salesmen positioned in their private lives, because as long as they are heavily mortgaged or in debt they know they have to work long hours to sell policies in order to meet their debt service.

[ Scott ] And let’s...

[ Mc Master ] It is more productive.

[ Scott ] This has a tremendous...

[ Mc Master ] ... to the benefit of the company, not to the benefit of the individual.

[ Scott ] It has a tremendous effect on how an executive stands up inside the company.

[ Rushdoony ] Yes.

[ Scott ] You are not going to get into too many fights if you are totally dependent.

[ Rushdoony ] There is another aspect. There is not only this factor of debt demoralize people. First it is immoral, this long term debt. Second, it has a psychological effect. As Solomon said, “The borrower is slave to the lender.”

[ Mc Master ] Exactly. Debt is a form of slavery.

[ Rushdoony ] But there is another aspect. Taxation has become a form of continual debt.

[ Scott ] Oh, you are never out. You owe money every day to the government.

[ Rushdoony ] Yes. When I was a boy though the Depression years the farmers here in California, family farms, 10 dollars a year. If you had hard times, I mean, if you lost your entire crop through frost or freezes you could hole up. You could plant a garden. You had your cow and your chickens. You rode it out.

[ Scott ] Yeah.

[ Rushdoony ] But now those same farms the annual taxes are thousands of dollars and they cannot survive.

[ Scott ] It is...

[ Mc Master ] Well, economics comes down to land and labor. So we have got our property tax on one hand and an income tax on the other. You have got them going and coming.

[ Scott ] You sure do. You sure do. And it is interesting that as time has passed more and more Americans have traveled farther and farther around the world and take jet planes to London and Rome and so forth and so on. Yet it seems to me that the American people are more provincial now than they were when I was a kid, because thy no longer look at other cultures seriously. They no longer believe that there is anything to learn from the rest of the world.

[ Mc Master ] They haven’t been taught how to think or to look. I think one of the most telling arguments along that line came from Dr. Thomas Soles at Stanford now, a black economist who is now free market in his... oriented in his perspective, formerly a Marxist.

And he said he hated students coming out of the public schools because all they knew how do was memorize. They did not know how to think critically or how to observe.’

[ Rushdoony ] They can’t even memorize now.

[ Mc Master ] Well... we have approaching, I guess 60 million illiterate Americans out of a total population of 240 million.

[ Scott ] Well...

[ Mc Master ] It is... it is not good.

[ Scott ] Well, it takes some strange forms. I was invited recently to speak at a.... at a businessman’s club here in California. And these things are amusing because, first of all, the fellow called me up and asked me if I would be willing to speak of them and I said yes and now the next thing staged in the... in the process was that somebody had to screen me. And he called me or they didn't say it, but that, of course, was what it amounted to and … and he called me up and he wanted to talk about South Africa. And I said, “Well, I understand you have been... you have... you have got a copy of my book on the subject.” Well, he said, “I have been too busy to read it.” So he asked me a few questions about it. I started to answer them and he corrected me. And I thought, you know, this is very typical, very typical. The newspapers have told him all he needs to know.

[ Rushdoony ] Yes. And it isn’t knowledge that counts... the most common remarks in the modern era I think or I feel, not what God says, not what the truth about a particular episode or part of history is, it is I think, I feel. That is the end result of Humanism and it is the death of any sensible perspective.

[ Scott ] And an opinion without information is pretty exasperating.

[ Rushdoony ] Yes.

[ Mc Master ] That humanistic perspective is really taking its three fold application. People will say I believe, a religious perspective. I think, supposedly rational. And then I feel, emotional. And you see which perspective of Humanism they are coming from whether or not they use the word belief, think or feel.

[ Scott ] Well, I bring this business of looking outside the country up deliberately because inflation is one of the oldest of governmental crimes. It was so well known that when I was in the sixth grade they taught me about coin clipping. And we have had a front row seat. We have watched inflation in Bolivia. We have watched inflation in central Europe, the greatest inflation of all, I guess, in Hungary in 1946 and 47, inflation in Great Britain and inflation at home.

[ Mc Master ] What we haven’t experienced is an inflationary recession in the true sense of the word where it is ongoing and there don’t seem to be any answers, as we have seen down in Latin America.

[ Scott ] It hasn’t hit the shoot yet.

[ Mc Master ] That is right. When that hits, then we will start to see the group radicalization, I think, you are... you are referring to. By the way, an interesting side light is that Americans have in times of ... of financial concern moved into U S treasury bills short term treasury instruments of safety. Well, the Soviet Union will be offering is own treasury bills now in Europe this summer. So we now can invest in Soviet treasury bills.

[ Rushdoony ] Oh that will be interesting to see how many suckers there are.

[ Scott ] Well, I wonder if women’s strike for peace will buy Soviet bonds.

[ Mc Master ] We will be... actually, I guess, t-bills.

[ Rushdoony ] Dr. Spock.

[ Scott ] Dr. Spock...

[ Rushdoony ] Yes.

[ Scott ] ... puts them in the millions that he got, yes.

[ Mc Master ] The body of freedom and we have talked a lot about slavery tonight. The body of freedom stands on the legs of ... of law and economics. In terms of honest money, equity capitalism, Christian economies and biblical law, because as you and I discussed on the way here, Rush, there is no real equality among men unless all men are equal under God’s law, because when a man makes a law he is by definition unequal over the man he governs. And yet what we have done in this country in economics we have grant... we know the least consumer satisfaction comes any time there is a government granted monopoly in any particular area. That is classic economics. There is a government granted monopoly, consumer satisfaction is minimized. And yet we see that in terms of money and economics where basically the federal reserve is granted a monopoly on the issuance of money and credit. We have seen it in the area of law with the American Bar Association rules. We see it in the education with the public school system runs things. So the people have limited information. And we see it also in our health, in terms of the American Medical Association where the World Health Organization now ranks us in the 40th percentile.

[ Scott ] The 40th.

[ Mc Master ] So in terms of... of... of money, law, education and health, four critical areas to the health and well being of any society or any individual, we now have government sanctioned monopolies.

[ Scott ] Do you think that the Christian community has any grasp of the economic situation?

[ Mc Master ] In terms ... the way I view the Christian community is based... is ...

[ Rushdoony ] Go ahead. We have just about a minute left.

[ Mc Master ] All right.

[ Rushdoony ] R. E., so...

[ Mc Master ] The Christian community basically is monastic today. It sees itself in terms of its ... of its church, its local family and ...and now because of the abortion factor has taken the... an overview with regard to taking a position with regard to politics and it has not looked at economics. It has not grown beyond individual Christianity and the Church. It is just stepping out in terms of the challenges that it faces in the political economic arena. And, no, we haven’t addressed those. We are just on the forefront of those today.

[ Rushdoony ] Well, I think we are going to have to wind it up now. It has been a delight, R. E. I am sorry you can’t come more often. And congratulations on the soon to arrive sixth child.

[ Mc Master ] Thank you.

[ Rushdoony ] We will be in prayer for Linda as she delivers this child. We do appreciate you. We enjoy every opportunity we have to be together. So thank you very, very much.

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