The McAlvany Weekly Commentary
with David McAlvany and Kevin Orrick
Kevin: David, we will have a guest coming up soon today, but I want to address something that we were talking about yesterday. You had just come from a meeting with very professional, highbrow kinds of people in the financial industry. You were frustrated, and one of the things that you are frustrated with right now in politics is that there are politicians who are actually running the show, and I hate to say it, but in the financial industry, it is that brokers and Wall Street are running the show. Why is this a problem, and what is the solution?
David: Kevin, I think this goes back to a conversation we had a few weeks ago about the general assumptions that someone applies to facts that they may be looking at in the present tense, and those general assumptions still have yet to be questioned, at several levels. Politicians think they are doing a great job. Politicians consider this to be a whale of a success, in terms of bringing about recovery, and then, lo and behold, this last Friday something crops up, a small data point that said, “Not all is well.” In fact, unemployment went to 9.2. That is the U3. The U6 is now above 16%, at 16.2.
Kevin: Wait a second. After printing all these hundreds of billions, really, let’s call them trillions, of dollars, infusing them into the economy, our unemployment is still growing.
David: I have seen interesting statistics that the stimulus has cost roughly 254,000 dollars per job created.
Kevin: Oh my.
David: But here’s the thing. They are counting all the jobs that are created. This is really what gets my goat, and again, goes back to “things are not what they seem.” It seems that things are improving, because the Dow-Jones Industrial Average is 12.5, and if the Dow is up, then the economy must be up, as well. Isn’t the Dow a reflection of reality?
Kevin, just going back to the U3 and U6, 9.2 and 16.2, the new numbers, that includes the fabricated 131,000 jobs put into the mix by the birth/death model.
Kevin: Let’s face it, that can be almost a random type of thing. How many people were born, how many people died?
David: And that’s how many jobs were created this month.
Kevin: There you go.
David: Did they actually count them? No. This is a number that is pure fiction. For 2011, the total comes in at 606,000 fictitious jobs generated by the Ministry of Truth.
Kevin: The Ministry of Truth, of course, is the government.
David: And Kevin, this is what is astonishing. That is 59% of all non-farm payroll growth. 59% of all non-farm payroll growth is coming from a model which generates jobs that do not actually exist, for the sake of a statistic that people put faith in, and 9.2% was a disappointment. In other words, if you actually factored out the birth/death models, the U3 is pressing 10%, and the U6 is pressing 17% to 17.5%. This is a problem because people on Wall Street are still considering this to be a full-blown recovery. The economy is in recovery, according to the best and the brightest on Wall Street.
Kevin: This brings us to something else that frustrates you. I have no idea how much we spend on government money for government payrolls to try to figure out how to rework how many other people are unemployed, but I know that they also spend an awful lot of money with mathematicians of high caliber, trying to figure out to tell us how much prices are going up at Walmart.
Now, we see it works with the unemployment numbers, but how about inflation? Are we overstating it? Are we understating it? Didn’t they just mention that maybe they have been overstating the inflation rate?
David: Kevin, this is one of the reasons why we have our guest on today, just to explore the ideas of what kind of political change we might see in the 2012 election, because I think what we are going to experience by the man on the street is a groundswell of discontent, a groundswell of “the status quo no more.” And why? What you just mentioned, Kevin, is a classic case in point.
We are dealing with the budget wrangling and the debt ceiling negotiations back in Washington right now, and one of the solutions being offered, which should not build confidence amongst our listeners when reflecting on the competence of politicians back in D.C. today, but one of the suggestions made is this, and if they are following through with this, we have overstated inflation. We need to recalculate how much inflation is expanding, and that will save us money in terms of the cost of living adjustments and the payouts that we currently have with Medicaid and Social Security.
Kevin: So they are paying the retirees too much money right now? I’m sure if you asked anybody out there, like in Sun City, or other retirees, they would probably say, “Yeah, yeah, we noticed that the checks were really going a whole lot further these days.”
David: This is what is insane. We have talked about the models that they used in the 1980s, we have talked about the models that they substituted for in the 1990s, and then the newest model, so instead of today’s inflation rate of 3 and change, it would have been 6 and change, and before that it would have been almost 11%. And now they are saying that the 3 and change is not a real number, it is actually quite a bit lower than that, we have over-estimated inflation. Conveniently, why are they suggesting this? So they don’t have to pay out as much. And this is their best solution for cutting deficit spending? We have a big problem, Kevin, we have a very big problem.
Kevin: It seems that the rest of the world actually doesn’t appreciate our lying on the inflation numbers. They seem to know something that we don’t, because gold, in European terms – didn’t it just break into a new high?
David: It did, yes. Let’s talk about Europe a little bit, because clearly, we have a breakdown in competence there, as well, and now in confidence, and one precedes the other. We have a breakdown in competence here in the United States and we will see the same breaking in confidence on a lagged basis, so maybe that is 6 months from now, maybe that is 18 months from now, but we should learn as much as we can from the European experience, because it is coming to a theater near you.
Gold, in euro terms, just broke to all-time highs. It has been in a consolidation phase for the better part of nine months and has now technically broken out above all the old highs. This is very significant.
Kevin: Now, would you say that is possibly because of flight capital coming out of the situation with Italy, now showing its face, and Spain, and of course, Greece, Portugal, Ireland? Is that why you think gold right now is looking so strong?
David: Sure. There is some traffic going into German bonds. There is some traffic going into U.S. Treasuries, but it is interesting that there is an equal amount of traffic coming into the gold market as a risk-off trade. In other words, gold, yet again, is not being viewed as a commodity, one in which you speculate on the basis of future growth and gains, but it is being treated as a currency, and the currency of choice in the context of European insolvency, which people are now recognizing beyond the shadow of a doubt.
Kevin: You are talking about insuring against risk. David, you have talked about credit default swaps, and with the debt that is starting to look like it is definitely going to fail at some point in Europe, the credit default swap price is a good way of monitoring just how scared people are.
David: This is not a Greek issue. This is not an Irish issue. This is not a Portuguese issue. This is a European issue.
Kevin: Which makes it a worldwide issue, because the credit default swaps are not only just out of Europe, but aren’t they out of London, and New York? Even Asia has some risk.
David: And now we are talking about the larger European countries. We are talking about cross-contagion into the European financials. The example I will give is the French banks, which hold 472 billion dollars in Italian paper – that’s going to be a bit of an issue, or it could be – and 175 billion in Spanish paper. Problems in any one of these countries can spell bank insolvency in the other. That is why this is so much bigger than the Lehman crisis in the fall of 2008.
Kevin: The thing that is amazing, too, is that it compounds on itself. Italian yields – the interest rates are another way of just judging how much a person has to pay to get you to buy their debt.
David: Italian yields are the highest they have been in ten years, along with the Spanish and Portuguese debt. Here is the problem: You mention the increase in the cost to service that debt. The Italian government has to roll over 96 billion dollars-worth of Italian government debt in the months of August and September, alone. And then if you are stretching that out, go out to the end of 2013, and you are talking about 700 billion dollars in Italian debt to be rolled over. That is one country alone, and we are talking the interest component rising, creating even more of a burden. All this does is multiply the problems that they have on a fiscal and monetary level.
Kevin: Yes, but there is a European rescue fund. They have come out and said, they made that commitment last year that there is a rescue fund. They made another commitment just last week.
David: I know, the last European rescue fund was just for Ireland, and for Greece, and for Portugal, three of the smallest countries in the EU, and the shock and awe fund was a 1 trillion dollar fund. Just to accommodate Italy, if you threw Italy into the mix for the bailout fund, you would have to double the size of the fund – just to accommodate one more country, because Italy is so much bigger, relative to those three smaller countries.
Kevin: Is that the reason the European leadership is actually starting to talk about what you and I have talked about over the last few weeks – the potential of actually letting Greece default? Why is that all of a sudden coming up, and they are saying, “Well, maybe we do let Greece default.”
David: Two weeks ago this wasn’t on the table. Two weeks ago, between the French banks and the ECB, they had concluded this is how we are going to create a voluntary structure that will allow us to take current debts and extend the terms 30 years, which will take away the immediate pressure of rolling over into a higher yield paper. This was the solution two weeks ago, and now the EU leadership is at odds with the ECB.
Kevin: Right. So the central bankers still don’t want to see a default?
David: No. The central bankers still care about bank stability, whereas politicians and political appointees are looking at the fastest way to regain popularity. These are signs of the times. What we are talking about is political instability, which has been wrought out of financial and economic instability, a theme that we have had in place for the last three years in our conversations, but now you have these divergent opinions – the EU leadership versus the ECB.
Kevin: What about the private sector, because they have said they were looking for some private sector help here. Is that real? Are there people out there who are insane enough to actually throw money at this horrible issue?
David: That’s where two weeks ago it was concluded that this was the best way forward. “We’ll just have the private sector get on board with a voluntary measure to take a haircut or extend terms and this is how it’s going to work,” and they wrote it out on paper. This is what lawyers do best – create something that is elegant on paper. Whether it is workable in the real world is very, very secondary. “Let’s get this to where it looks good, and then get everyone to sign on.”
The problem is, they’ve had a hard time getting the private sector to sign on. They want a private sector contribution to the Greek bailout, and this is what they are having a hard time coaxing. This is the key word, Kevin, because what they are trying to avoid is a technical default in the credit default swap market.
Kevin: They have to keep the word failure from being used. It cannot be called a default. It cannot be called a failure to pay.
David: And so any changes that occur have to be done on a voluntary basis. The critical word of the day is voluntary. The private sector has to do this voluntarily. But the private sector is saying, “Why would we do that? That doesn’t make sense. That’s insane.”
Kevin: That’s because you wrote a CDS on this default and you are going to have to pay up anyway.
David: That is, again, where the word voluntary is so critical, and yet the private sector doesn’t want to play.
Kevin: David, the theme over the last couple of years is that we have not seen the bailout money trickle down to the little guy. What we have seen is the elites bailed out.
David: Let me state that differently, because we have seen the funds flow to the little guy. Kevin, if you look at the two extremes in terms of the socio-economic spectrum, we have had the super-rich see their assets re-inflated through the money that has been created – the liquidity created by the Fed and the Treasury pumped into the financial system. Again, we made that distinction earlier. There is a difference between the money that goes into the financial system and benefits the Dow, versus the economy, because we have not seen the money flow into the economy.
Kevin: But you can be a banker and be okay and your bonus is back.
David: So that extreme of the socio-economic scale has been rebuilt. On the other extreme, nothing really has changed. Section 8 housing – nothing has changed. WIC – nothing has changed. Food stamps – nothing has changed, except those on the roll have gone from 22 million to 46 million, so that has changed. But again, as long as you are getting your government cheese there is no reason to complain. The only people who are complaining are smack dab in the middle of the socio-economic spectrum.
Kevin: The people who are productive, and the people who are paying taxes – the merchants and the middle class.
David: These, by the way, are the taxpayers in the crosshairs because you will remember that if you are receiving government cheese, you are a part of the 47% of the population that doesn’t pay taxes at all.
Kevin: Yes, David, but those people who are productive and paying taxes in this country may actually be outnumbered by those who are on entitlement types of programs. Now, Obama announced, pretty boldly, that they have a billion-dollar war chest for this next election. So even though this is plain as day to the people paying taxes, is it possible that the people paying taxes are outnumbered?
David: I think this is what makes 2012 a critical election. 2012 ends up being a critical election because for the first time in a long time, we have people who are generally asleep at the wheel – the middle class – who are happy being busy on the weekend, driving their ATVs and going camping and doing things that are perfectly fine, but are not really engaged in what is happening in terms of world politics and economics. For the first time, they care. They have a lot at stake. They realize that 2013 could see yet one more increase in taxes, and as far as they are concerned, they are the ones who are going to shoulder the increase. They are not hiring. They are not the ones hiring, and yet 70-80% of new jobs come from this middle and merchant class.
They are the ones who are concerned, they are the ones who are getting squeezed, they are the ones who are seeing their critical assets, specifically their homes, diminish in value in front of their eyes, and they are not encouraged. Why that matters is that 2012 will be the first time that this section of society has spoken with a very loud voice. That means anyone could be elected. Anyone. And we don’t know who is going to run and who is going to get the nominations for specific political parties.
Kevin: Something that is ironic: In The Chicago Tribune, Obama’s back yard, John Kass, in his column, said, “U.S. Democrats make their fortunes running big government. Republicans make their fortunes pretending to fight them.” Are we at a different crossroads at this point? We have the Tea Party, we have this movement coming out and saying, “We don’t like Democrats, we don’t like Republicans, we don’t like politicians.” Could we need somebody who has actually had business experience to come in and turn this thing around?
David: That is why it is not enough to massage numbers. It is not enough to play games with statistics. It is not enough to cut the budget via claiming an overstatement of CPI. Again, this is politicians on both sides of the aisle structuring their positions to avert blame from themselves, and to attribute blame to the people who are running against them. They are not seeking solutions. They are deflecting, they are deferring. So yes, it becomes a critical issue in 2012. Will we, the public, call curtains on this joke of a performance that we have called the political game?
Kevin: Speaking of the political game, as we have in the past, we have talked to various people who are running for political office who we do not necessarily say that this program endorses or does not endorse. We are just throwing the dialogue out there.
David: I think that is a key point. Nobody here has decided who they are going to be voting for in 2012. What we do want to entertain is the idea that politicians and lawyers have had their day in the sun, and now it is time for the average American to step up and serve his country, one way or another. I don’t know what that looks like, but it does mean that we have to get off our duffs and either volunteer or run for office, but we cannot leave the outcomes to politicians and lawyers.
Kevin: If you think about it, each person has a particular gift. Some people have the gift of going into a horrible situation and making it better. Herman Cain – in the early 1990s, Godfather’s Pizza was going under big-time.
David: And before that, he ran 400 branches of Burger King and brought them from losing money to making money in a very short period of time. Pillsbury recognized his acumen for turn-around and put him in charge of Godfather Pizza, a division of Pillsbury, and he did the same thing in turn-around fashion, taking a company that was losing money and turning it into something that was profitable in a very short period of time.
Kevin: So they didn’t hire a lawyer or a politician to fix the problem. They hired a businessman, a turn-around artist.
David: That is exactly right. The challenges of running a business and making payroll – reflecting on this, Mr. Cain, you would be one of the few successful businesspersons to ever be in the White House. What is the difference in perspective that brings to the office of president?
Herman Cain: My background as a businessman would mean that I would be taking proven business problem-solving skills to the White House. The fact that my career is distinguished with climbing the corporate ladder at the Pillsbury Company to become a vice-president, also climbing the ladder at Burger King to become a vice-president, which is very different from the responsibilities I had at Pillsbury, then to take over Godfather’s Pizza, then to run the National Restaurant Association as its president and CEO – problem solving skills transcend the situation.
That is what I believe is badly needed in the White House, in the most powerful position in the world, in the one leadership position that can fundamentally change Washington, D.C. The short answer is, most of my other opponents for the Republican nomination are more politicians, in terms of their careers, and I am more of a problem solver, because of my background and my career.
David: The problem with politics today is not policy, really, but politicians themselves, the ones responsible for feeding the leviathan. The U.S. brand is a very strong one. There has been deterioration within this “business.” Let’s pretend that the U.S. is a company and not a country. We are going to draw on your business experience. Let’s assume that as president you are running a business that needs to be turned around, instead of a country. By the time you take the helm as this turn-around specialist, you have an over-leveraged balance sheet to address, most of your assets are illiquid, the company has been running in the red for 7 to 10 years, and your bank and vendor relations are beginning to deteriorate. You come in and see that upper management is concerned more about its own well-being than the long-term viability of the firm. You have political territorialism – self-interest.
These are the things, Mr. Cain, that you stepped into, to some degree, in a turn-around situation, with both Burger King and the franchises that you were responsible for, and at Godfather’s, as well, turning franchises that were upside-down and losing money into profitable businesses. Let’s assume that you are in your first 60 days of this turn-around. What are the necessary actions to take? Creditors are about to start getting nasty.
Herman: There are some guiding principles that I would use as president. Number one: Make sure we are working on the right problem. Too often, the president gets caught up in the presidency, not making sure that we are working on the right problems.
First, I happen to believe that this nation has become a nation of crises, and I will communicate that to the people, as I am doing now on this presidential journey that I am on. We have an economic crisis. We have an entitlement spending crisis. We have an energy crisis. We have an immigration crisis. We have a moral crisis, to some degree. We have a foggy foreign policy crisis. But the biggest crisis we have is a crisis of deficiency of leadership. The first thing that I would do, for every one of those problem areas, would be to identify the right problem. What are the right problems we ought to be working on?
Secondly, are we assigning the right priorities to those problems?
Thirdly, I will surround myself with good people, unlike the current administration, to help me put together the right plan in order to be able to address those problems.
Here is another of my guiding principles: People closest to the problem are the ones best able to help you figure out a solution to the problem. When I went to Godfather’s Pizza when it was supposed to go bankrupt, I didn’t call a meeting of my top executives and say, “What is the strategy for turning the company around?” I went into the restaurant and I talked to customers directly, I talked to restaurant managers, I talked to crew members that were working in the restaurant, whether they were full-time or part-time. They told me in their own words, which became the strategy for the turn-around of Godfather’s, that Godfather’s was trying to do too much, with too little, too fast.
Doesn’t that sound like this country? We have a 14 trillion dollar national debt, so we need to do several things: In the first 60 days I am going to ask Congress to send me legislation that will lower the top corporate and personal tax rate to a maximum of 25%. Secondly, in the same legislation, take the capital gains tax rate to zero. Thirdly, suspend taxes on repatriated profits. Don’t give companies, multinational corporations, a reason to leave money off-shore. Give them a reason to bring it back home. Then, the fourth, most important thing, is to make those rates permanent. That is one of the first things I am going to tee up.
I know that the liberals are going to be screaming, “He’s helping the rich, here we go again.” No. The American people have been lied to long enough about what drives this economy. The business sector drives this economy. I will take that message to the American people so most of them will understand that this is what we have to do. That is phase I. We have to get this economy growing at its capacity, which is 5-6% GDP growth compounded. I firmly believe that, along with some of my economic advisors that I am already working with. We know that we can get up to that kind of a growth rate.
The second thing that I would do is an across-the-board cut in federal spending relative to every agency, and then do a deep dive into each agency to determine outdated, inefficient programs that we need to eliminate. Much of this work has already started. The Government Accounting Office periodically identifies programs that are overlapping, or programs that are ineffective, but nothing ever gets done with it. Within my first 60 days I will focus on, in addition to national security, obviously, getting Congress to send me legislation that is going to boost this economy using some of the measures that I outlined, and secondly, as the Chief Executive of the nation, I will be able to do some serious cutting, starting with the federal agencies.
David: Inflation is now an issue. Many would argue that the CPI understates inflation via hedonics and other adjustments. If inflation is understated, then first quarter GDP growth is obviously overstated. In other words, it is less than the 1.8% reported. Look at GDP and consider how much of it is propped up by government deficit spending and it seems like GDP would, in fact, be deeply negative, if not for the Fed and Treasury intervention, to the tune of about 10% of GDP.
The question is this: Would you agree that inflation is an issue, and as a man with monetary policy experience, what needs to be done now?
Herman: Yes, I would agree that inflation is a big issue, and it is being fueled by the actions of the Federal Reserve. Why? Because when the Treasury cannot sell notes fast enough, the Federal Reserve is propping it up by buying some of our own debt. When I was on the Federal Reserve Board back in the 1990s and Alan Greenspan was the Chairman of the Board of Governors, we never even considered doing anything like that. Why? Because we didn’t have a 14 trillion dollar deficit that we were trying to disguise and prop up.
This gets back to my earlier answer about getting serious about cutting costs. In addition to the across-the-board cuts and the deep-dive cuts that I would do in every agency, I would also put the federal government on a path to spending within our means, pass a fiscal year budget before the fiscal year starts, rather than in the middle of the fiscal year, and go through every area possible in order to figure out how we get spending under control. But as I said, at the same time, we have to have the national debt coming down, we have to start passing annual budgets within our means, and then, we will have revenue going in the right direction, and costs going in the right direction, and that will help strengthen the dollar.
David: Let’s talk about the Fed. The dual mandates of price stability, number one, and maximum employment, number two, going back to the 1977 Federal Reserve reform act. That second one seems to compromise political independence. There is also the parallel that you just mentioned, the issue of the combined efforts of the Fed and Treasury. When the Treasury cannot fund itself, the Fed steps in, picks up the tab, allowing the Treasury to perpetuate Washington’s profligate spending. What is the solution? We have Robert Zoellick at the World Bank who suggested the partial remonetization of gold, and the point is really this: What other disciplines could realistically be imposed on monetary policy to buttress the credibility of the creators of money? There is a lot at stake in losing reserve currency status.
Herman: I would ask the Congress to change the ’77 Federal Reserve Reform Act, because we are asking the Fed to hit two targets with one arrow. It doesn’t work. I think that the Federal Reserve should focus on just price stability, and not maximum employment. This is why they get into the conundrum that they are in. I happen to believe that if we do that, they will then be able to carry out the mission that they were originally chartered with, back in 1913. I do agree that we should work toward a gold standard. We won’t be able to get there overnight, but the best way for us to get on the road to some sort of standard, and I would support a gold standard, would be to bring down the debt. We should remove this dual mandate from the Federal Reserve, and have them focus on price stability.
David: Let’s discuss that again, the current monetary policies as they pertain to the Fed’s second mandate. It would be a great solution if we could eliminate the second mandate. With unemployment stubbornly high – we have U3 over 9%, 9.2 as of this most recent report, U6 over 15% – it seems more than just a theoretical possibility that the stimulus measures via our current zero interest rate policy, or ZIRP, as they call it, may cause a great degree of inflation. We have Bernanke, who is trying to keep liquidity measures available. Will he keep them there too long? How would you address the excess liquidity in the market?
Herman: The first thing is, as I mentioned, and it appears that every one of these issues still gets back to the excessive spending that we have, the excessive national debt, so when we get serious about that, and at the same time, boost the economy, then in order to keep it from overheating, which I believe would be a concern that we would have to address, then the Fed would get off of this zero interest rate that they are now sitting on, because I think that, as you have indicated, it contributes to the inflation. The way I would address this excess liquidity in the markets is to bring down the debt, boost the economy, and then also remove this dual mandate from the Federal Reserve.
David: It sounds like you are hitting the target when you talk about 25% corporate personal maximum rate, the capital gains rate being dropped to zero, the suspension of the tax hurdle, if you will, for multinationals, and allowing them to bring their funds home again, and also, to a large degree, preventing an arbitrage between tax regimes. This is the issue. The only real source of job growth in the last 10-15 years has been government and health-care related. Is this a key pillar on the tax side, as to how you would stimulate growth in the private sector, or are there other ways that you would also stimulate growth in the private sector?
Herman: The first phase of the measures that you identify, and as I mentioned, making them permanent is one of the biggest things that we could do that would inspire businesses to either start new businesses or grow their current businesses – right now we don’t know what the tax rates are going to be January 1, 2013. Businesses don’t plan that way. So that, in itself, is one of the biggest problems.
Phase II of my economic growth plan is to totally replace the tax code. Many people have been talking about that for years. I plan to get it done, because I am going to get the American people to understand it and they will demand it. I want to replace the tax code with a national sales tax, which is already in the form of legislation HR25, which is the Fair Tax. The reason that I believe that the American people are ready for this is because they know that the current tax code allows the politicians to pick winners and losers. That is why we have all the distorted, perverted rules in the tax code.
We spend 430 billion dollars a year, it is estimated, just trying to comply with the rules so we can stay out of jail and fill out all of the forms, and this sort of thing. The American people are ready for something better than that, and I happen to believe that they will be receptive to someone who can explain the advantages of switching to another approach, even though it is going to be a total paradigm shift.
David: It seems there is some sensitivity there to the impact of policies. You mentioned 2013 and some changes with taxes then. We have FATCA which is on the table, the Foreign Account Transaction Compliance Act, and that is essentially extending the tax franchise internationally. The U.S. Treasury now would have tentacles into foreign financial institutions required to report, for withholding purposes, any holdings of U.S. equities or bonds.
The initial feedback that we have gotten from foreign financial institutions throughout Europe and Asia is that they would rather not facilitate business at all for Americans, or even hold those positions – we are talking U.S. bonds, corporate and Treasury bonds, as well as U.S. equities – in response to this. Otherwise, it is going to cost them hundreds of millions, even billions, of dollars, for them, overseas, to comply with our U.S. Treasury Department.
Tell us you are going to replace the tax code. Tell us you are going to simplify. Tell us you are going to do something that makes sense to us in the general public who are just saying, “Can’t we bring common sense back into politics?” It seems to me that that is impossible as long as you have politicians in politics. The voice of freshness that we hear from you, Herman, is this: You are not a lawyer, and you are not a career politician, and that is refreshing. (laughter) Where have you been?
Herman: (laughter) I have been pursuing my American dream, and I have lived my American dream, and now that I have achieved my American dream, I want to make it possible for our next generations to be able to have the same type of opportunities that we have had.
This is how I am going to get many of these ideas passed. It gets back to the American people. When the people understand it, they will support it and they will demand it. The late Senator Everett Dirksen popularized the quote, “When they feel the heat, they will see the light.” I am going to have the people as my partners in getting change in Washington, D.C.
One of the advantages of the presidency is that it is the one office that can fundamentally change Washington, D.C. The bad news is, if the president is trying to change it for the worse, like this current president, that is not a good thing. I am going to change it for the better. I am not going to have some of the ideas that we have talked about hidden from the American public. I believe when the people understand it, and you use the power of the presidency to make sure that the people understand what you are trying to do, they will put the necessary pressure on Congress in order to do it.
Let me give you an example of how this has worked in the past. Congress passed ObamaCare. I call it Health Care Deform Legislation, because reform is supposed to make things better, and it has made the system worse. After they passed that, and nobody knew what was in it, even many of the members of Congress had not read it, then they passed Cap and Trade and Tax and Kill. Well, it went through the House of Representatives so fast, because of the Democrats’ agenda, that they didn’t send it to the Senate, even though they would have been able to pass it in the Senate, because as representative Michelle Bachman said in an interview on Sean Hannity, when he asked her why they put it on the back burner, it was because the phone lines melted with voices coming back from the people.
Responses coming from the people work, and I am going to mobilize the people’s voice on everything that I try to get done in Washington, D.C., and that is how we are going to get some of these things done. It is common sense, it’s not rocket science. It is common sense, and we don’t have a shortage of good ideas about how to fix some of the major issues we face – we have a shortage of leadership and a shortage of the will to get them done.
David: As a leader, you have taken that role in corporate America. You have taken that role in the monetary circles in our culture. You have defined issues. You have to be able to do that, and you have to be able to find the way forward. Your guiding principle is working on the right problems to begin with. You are talking about diagnosis. Make sure you have the problem understood, and then the adequate prescription – you have to also have the right prescription. How do we partner with you? How do listeners partner with you? What do you need in order to succeed in becoming president of the United States?
Herman: Here is what I need in order to become President of the United States: I need the American people to help me change the mindset of this nation from an entitlement society to an empowerment society. If they look at my common sense solutions, which they can find at hermancain.com, they will see the common sense approaches that I lay out for most of the crises that we face.
Secondly, obviously, we need to raise funds. Many people have donated online. The thing about my campaign is, I don’t believe we have to raise the greatest amount of money. When President Obama announced that he was going to raise a billion dollars, he really was trying to scare people off from getting into the race. It did not work. The fact that many of my Republican opponents have war chests that they can roll over into their presidential bids didn’t scare me off either, because something is happening here that money won’t buy, and it is called, the Will of the People. The sleeping giant called We the People has awakened, and I don’t think it is going back to sleep.
People can help me by becoming a volunteer, at hermancain.com, and they can also help me by making a contribution, modest as it may be. All of it helps. We just reported that my campaign raised nearly 2.5 million dollars in the first reporting period, and here is the best news: No debt. I am building and running my campaign like a business. What a novel idea! We have no debt and we still have some cash on hand.
That being said, the beauty of the 27 thousand contributors that we have is that 75% of the contributions were 100 dollars or less. In other words, the people are providing the inspiration and a lot of the energy that we are getting in this campaign, and I think that is what is going to continue. What your listeners can do is go to hermancain.com, take a look at some of my messages, take a look at the common sense solutions, and then take a look at what you would like to do in order to help me become the People’s President, not another politician.
David: We look forward to seeing you this next week in Las Vegas, and perhaps spending a few minutes visiting with you at that point. As the energy builds around your campaign, you are appealing to something that is basic in all of us, and that is a desire for simplicity, and a desire for no shenanigans – “Just tell me like it is. I want the whole truth, and nothing but the truth. That’s it! Don’t polish it, don’t present it, I don’t want to hear it like a politician, I certainly don’t want to hear it like a trial lawyer. (laughter) Let’s just get down to brass tacks, we have work to be done, and in this case, we are talking about a turn-around situation in our country, and it needs the right leadership. It needs the right turn-around specialist. We want to know if you are the man.”
Herman: At Freedom Fest next week, I am going to talk about some of the common sense ideas for the economy, entitlement spending, as well as energy and immigration and some of these other issues. I look forward to sharing those ideas with a lot of people who are going to be in attendance.
David: We will look forward to it, Mr. Cain. Thank you for joining us.
Herman: Thank you. It has been my pleasure.
Kevin: David, what a fascinating guy. Again, we are not trying to sway people as to who to vote for, but we are trying to keep the dialogue in the forefront. The thing that is interesting about him is that he doesn’t even talk about his background with the navy. He was a ballistics mathematician in the navy, as well as working with the Board of Directors of the Federal Reserve in Kansas City.
David: You are right, Kevin – undergraduate and graduate degrees in mathematics. He was calculating ballistics for the navy, a corporate career spanning several different companies – Coca Cola, Pillsbury, the posts that we mentioned, both with Burger King, a subsidiary, and Godfather’s Pizza. And then as a business specialist, he was brought in as Chairman of the Kansas City Fed, one of the more inflation-aware Fed banks.
He has a fascinating history, Kevin, and I think someone who is sensitive to a number of issues – what it takes to run a business, what it takes to look at the monetary engine that we have, whether we like it or not, as a part of our system. It is interesting that he should suggest a gradual shift toward a gold standard. Yes, we need a discipline, we have talked about that with Giulio Gallarotti, who didn’t think that a gold standard was possible, but perhaps a discipline mimicking it was certainly necessary, and doable at some point.
We aren’t trying to create a dream ticket for our listeners, we are just suggesting that Americans need to be more invested in America than they ever have before. In essence, they need to be less myopic – focused on themselves, and more focused on the big picture, the big picture in which we live.
Kevin: And I think they should probably also consider electing someone, whether it is Herman Cain or someone else, who actually has been a productive, tax-paying member of the business community that is the backbone of this country, instead of a politician or a lawyer.
David: And I can tell you, at a gut level, it feels good to look at someone and say, “I’m not sure he sounds presidential, and that is refreshing.” He sounds like me, the average American, and I think I have a lot more trust and confidence in that than the snake oil salesman who puts himself up as the guy who is going to solve every problem and is going to do it very easily because he is just that bright.
We don’t have many average Americans in Washington, Kevin, and I think that is what we need to return to a government of the people, by the people, for the people.