Kerry Lutz on Money, Markets and the Growth of His Financial Survival Network
The Daily Bell is pleased to present this exclusive interview with Kerry Lutz.
Introduction: Kerry Lutz has been a student of Austrian Economics since 1977. His diverse career has included: running a legal printing company, practicing commercial law and litigation and founding a successful distressed asset investment company. In 2010, Kerry gave up most of his other interests to pursue his long held desire of becoming a radio show host. Thus the Financial Survival Network was born. Its mission is helping you to survive and thrive in the New Economy. He has done hundreds of interviews with such financial luminaries as Peter Schiff, Harry S. Dent, Martin Armstrong and Peter Grandich. Kerry now appears on 1490 WGCH, in Greenwich, CT, every Tuesday from 11am-12pm EST. His new Triple Lutz Report was an instant hit and continues to increase audience share.
Kerry Lutz: I founded the Financial Survival Network to help inform people about what was really going on in the economy and the world. In 2010 I believed that the world had fallen into a perhaps decade long economic depression. We saw rapidly rising rates of unemployment, food stamp use, inflation picking up and a marked decrease in living standards. So I wanted to get the word out to as many people as possible to not believe the propaganda, green shoots, recovery summer and all that. And I've been working at it ever since and we're in the process of picking up other voices who are espousing a similar message.
Daily Bell: Why did you found it?
Kerry Lutz: To get the truth out so that people would understand exactly what was happening with the economy and plan their affairs accordingly. I felt that if you knew how dire the world economy was, you'd be saving money, not consuming as "the powers that be" were trying to get you to do. And perhaps you'd buy gold and silver, as an insurance policy against sovereign default and currency collapse.
Daily Bell: What's your major concern?
Kerry Lutz: That the economic collapse leads to widespread social unrest and eventual anarchy. Anarchy was one of the biggest fears of the Founding Fathers and we're always just a generation away from losing our freedom, as has been said many times in the past.
Daily Bell: How did we get into the fix we're in?
Kerry Lutz: There were many things that brought us here, but to me the three most key, at least in the US, were Prohibition, the 16th Amendment (Income Tax) and the Federal Reserve Act. Prohibition was the beginning of the nanny state and so many efforts by government to get us to do the "right" thing because, of course, government knows what's better for us than we do. Just look at Mayor Michael "Nanny" Bloomberg and his efforts to outlaw tobacco, trans-fats and double gulp drinks in New York City, the veritable bastion of state sponsored Nannyism.
What I learned recently from the hit TV show "Boardwalk Empire" is that prior to Prohibition, the US government's main revenue source was excise taxes on liquor. The Progressives jumped on the Prohibition bandwagon to further their goal of introducing an income tax amendment. The US Supreme Court had struck down income taxes in 1897.
Finally, with the passage of the Federal Reserve Act, the ability of the government to enter into any private area of the economy and to impose its will was firmly cemented in place. It took another 58 years to fully debase the US currency and another 41 years after that to destroy the nation's and the world's economy. Now that's Progressivism!
Daily Bell: Tell us how you became aware of Austrian finance.
Kerry Lutz: I saw a special by Milton and Rose Friedman entitled "Free to Choose" and it made me understand that economic freedom is indispensible to personal freedom. You cannot have one without the other. This led me on a personal intellectual pursuit wherein I read Rothbard, Harry Browne, Ludwig von Mises, Hayek and many others. By the time I was done reading – and I still read current economic treatises even now – I was a dyed in the wool free marketer and Austrian student for life.
Daily Bell: What do you think of Greenbackerism?
Kerry Lutz: The Greenbackers advocated fiat money and that the means of increasing wealth was simply to print money. They emerged right after the Civil War and looking at it from today's vantage point, they won the war. We have fiat money and unlimited production of currency units all over the world.
Daily Bell: Social Credit?
Kerry Lutz: This appears to me to be another scheme to somehow even the playing field and give everyone the full benefits of his or her labor, while they don't invest capital to make the gears turn. There's no free lunch and some state sponsored dividend will wind up killing businesses and making us all poorer.
Daily Bell: If bureaucrats controlled the money supply could things ever get better?
Kerry Lutz: I was under the impression that the bureaucrats do run the money supply. The unholy alliance of the "banksters" and the Federal Government has created the situation we now find ourselves in, where the money is no longer a store of value.
Daily Bell: Is the Federal Reserve private or does it gain credibility by being associated with government?
Kerry Lutz: The stock in the Fed is private. The president appoints that various leaders, including the Chairman, currently Ben Bernanke. While initially this arrangement may have had benefits, as people's perception of the government was much more positive, it's having the opposite effect now. No one seriously trusts government or the Fed other than some congressmen, who don't really understand economics or what it's like to meet a payroll anyway.
Daily Bell: What do you think of Ron Paul?
Kerry Lutz: He's been speaking the truth for over 30 years. Finally, people are beginning to hear it. He's more of an educator than a politician, which is why he's unelectable.
Daily Bell: Does Ron Paul work for Bilderberg as some have suggested?
Kerry Lutz: I think that's preposterous. He's been a lifelong advocate of the gold standard and non-interventionism by the governmental powers. These policies are anathema to such groups as the Bilderbergs.
Daily Bell: What do you think of Rand Paul?
Kerry Lutz: Seems to mostly be a chip off the old block, which is good.
Daily Bell: Was it a mistake for him to endorse Romney?
Kerry Lutz: I'm not sure. I think the nation is heading so quickly towards totalitarianism and fascism that removing the current occupant from White House became the overriding concern. Not that it will make much difference in the long run, but we can always hope.
Daily Bell: What's going on in Europe? Where are we headed?
Kerry Lutz: Europe's implosion gathers steam each day. The Euro was an ill-conceived notion and Milton Friedman was spot on when he gave it ten years. Allowing members to borrow off the books and then effectively create money has much to do with the current situation. The EU will no doubt dissolve at some point and from that point it's anyone's guess.
Daily Bell: How about South America and China?
Kerry Lutz: All nations will be and are being affected by the current economic calamity. China will eventually be hit as badly or worse than the US, as they have no formal means of political dissension. There's no "soap box" for the people to get up on and express their grievances. In addition, they're trying to restrict freedoms, both economic and personal, in response to worsening conditions. And being export based and mercantilist is not going to play in their favor. They're a direct beneficiary of the inflationary dollar and they collapse when it collapses, regardless of how much gold they acquire.
South America is probably better situated, as they aren't as far removed from the agricultural economy as the US and Western Europe. And while they have an emerging middle class, they haven't had the wealth to embrace consumerism like many other parts of the world. But there will be no shortage of suffering in most parts of the world.
Daily Bell: Is the world headed into a worldwide depression?
Kerry Lutz: We're in it and have been in it since 2008. The powers-that-be refuse to accept that reality in hopes that they can keep things going by keeping citizens in the dark about the truth. Somehow a meme has been created that perception is reality and that if you control the populace's perception you control reality. That belief is coming quickly to an end.
Daily Bell: What do people need to do?
Kerry Lutz: Hope for the best and prepare for the worst. Purchase precious metals and other things that you wouldn't want to be without in a short period of societal breakdown.
Daily Bell: Are we going back to a gold standard?
Kerry Lutz: We're on it already. It's just that government refuses to acknowledge or admit anything that interferes with their control.
Daily Bell: How about a private gold and silver standard?
Kerry Lutz: Under an ideal economic system, where there was no government control or attempted control of the monetary system or interest rates or so many other areas into which modern government has injected itself, people and businesses would be free to decide between themselves what would constitute money. That's what happened in the early history of the US.
However, expecting the conditions to be ripe for a return to consensual money probably isn't realistic. The government is going to be involved in this process, so the best we can hope for is a transparent system that minimizes their ability to commit mayhem and cheat on how much gold backing actually exists for the currency.
Daily Bell: Are we seeing inflation or deflation?
Kerry Lutz: We're actually seeing both. When it comes to things that you want, prices on houses, autos, computers and such are coming down in both real and nominal terms. For commodities, energy, food, etc., prices have been gyrating wildly but the trend is up. In terms of purchasing power of gold and silver the trend is most decidedly up with, of course, major fluctuations due to the inability to fix a value on any currency unit, due to major currency inflation. Under the classical term of inflation being an increase in the money supply and deflation being a decrease, we're seeing inflation. But eventually all depressions or credit busts result in deflations. It's just a question of how much inflation, whether it will be hyper and what we will experience before that time. And if a "too big to Fail" financial institution collapses and is not bailed out, then we'll see the money supply evaporate in a matter of weeks, as there would be cascading bank failures around the globe.
Daily Bell: Where do they come from?
Kerry Lutz: Inflations and deflations in the strictest sense of the words are always and everywhere monetary phenomena, to poorly quote the late Milton Friedman
Daily Bell: What are ways to build wealth in this day and age?
Kerry Lutz: Gold, silver and resources. We're returning to an earlier time in history where the majority of wealth will come out of the ground, not out of a securities issuance from some financial concern that only wants to take your money and provide nothing in return. For company stocks to have value, they will almost certainly need to pay out dividends or have a cure to cancer. The growth stock meme is falling by the wayside.
Daily Bell: Where is the US headed? Toward more authoritarianism?
Kerry Lutz: Every day we lose more and more of our freedoms here. The latest Obamacare affirmance by the Supreme Court is just another step on the road to complete totalitarianism. And the present occupant of the White House has already demonstrated a complete disregard for any law but his own. And if circumstances come about that would necessitate doing away with elections, his control group wouldn't hesitate for a moment to assume ultimate control.
Daily Bell: What is driving the current troubles?
Kerry Lutz: Statism, which is the belief, held by all too many that the state has your best interests at heart, which of course it doesn't. But this is an old story and the lessons need to be re-learned by every generation.
Daily Bell: Is there an elite that seeks a one-world government?
Kerry Lutz: We could go back and forth on this one but yes, there is. But if the Euro can't work in Europe, who's going to believe one will work for the world?
Daily Bell: Are they trying to create a depression so as to generate one-world currency?
Kerry Lutz: It may have started that way but they lost control long ago and there's really no one left manning the rudder. This collapse is bigger than any person and any one group. It's bigger than any government, as well.
Daily Bell: Should people immigrate to places where they will be safer? Where would that be?
Kerry Lutz: A personal decision, which I've thought about for a long time. The answer is that unless you have a definite family connection to the place you're thinking about moving to, stay where you are. Perhaps going from the US to Canada or Australia might be okay. Going to foreign cultures and expecting to be provided for or not persecuted for being a foreigner is unlikely. Bill Holter moved to Costa Rica six years ago, in anticipation of the collapse. He returned one year ago, believing that he and his family wouldn't be safe after global monetary collapse.
Daily Bell: Is the US dollar collapsing?
Kerry Lutz: Yes. No question about it. It's only the sick Euro that makes the dollar look safe. Purchasing power continues to erode with no end in sight but for a collapse.
Daily Bell: Is US society collapsing?
Kerry Lutz: In certain places more so than others, yes. In Detroit, Cleveland, Buffalo, Chicago and many other cities there's rampant violence and a complete breakdown in the social order. If they're fighting over $20 mixers in Wal-Mart what will they do if they can't get food to feed their families? We can only imagine.
Daily Bell: Where is the US headed?
Kerry Lutz: If it keeps up the way it's going, the US will be a banana republic in a matter of years. If there's a new cultural revolution and a return to basics of family, community and true values, we could see a renaissance that eclipses the golden ages of the late 1800s and early 1900s, pre-World War I.
Daily Bell: What's next for the world?
Kerry Lutz: Probably a global monetary crisis where the truth is unveiled for all those who care to see it. There is still hope. There's the possibility of an awakening of global consciousness and personal empowerment that makes people reject the statist paradigm. I believe that it has to come about because all governments are losing their ability to control events and perceptions.
Daily Bell: Any other points you want to make?
Kerry Lutz: The free market has proven over and over again that there is only one way to satisfy the maximum number of human wants and desires in the most efficient manner. Anything else that has been tried has always resulted in failure and calamity. Look at the communist experiment of the 1900s: more death, lower standards of living and inhumanity and immorality on a scale that was almost unfathomable. But the lesson needs to be relearned at regular intervals. The only thing we learn from history is that we don't learn from history.
Daily Bell: Further books and media you wish to recommend?
Kerry Lutz: Human Action by Mises, Rothbard's complete works and Fr. Robert A. Sirico's Defending the Free Market: A Moral Case for a Free Economy. And, of course, The Daily Bell – must reading for freedom-loving individuals.
Daily Bell: Thanks again for sitting down with us.