I.O.U.S.A - Addison Wiggin [53]
Q: Why you were drawn to economics and why do you enjoy it?
Bill Bonner : I was never really drawn to economics. I didn ’ t like economics, and when I studied it I found it very boring. But as I began to read and pay attention to what people were actually doing in life and how economies worked, gradually I became aware that I had become an economist. I was not studying the economy or economics in the way that it ’ s traditionally taught or studied. I was trying to understand why people did what they do.
And that, as I found out later, really is classical economics.
Q: In Empire of Debt, you say that the American empire of debt rests on 10 delusions. Why is it that people believe things that history has proven are not worthy of belief? Do you believe that these delusions are dangerous?
Bill Bonner : People cling to delusions because life can be extremely complicated, and delusions can be a source of comfort.
Since the book came out, I ’ ve done a lot more thinking about why people do what they do. People prefer delusions because the truth itself is just too complicated. That ’ s true when you ’ re talking about economic truth; for example, if you ask why the price of gold is going up or down, the answer is infi nitely complicated. You can ’ t reduce it to a formula or a simple logical expression. All of life is that way. When you have a political campaign, for example, the most complex issues get reduced to a single phrase, like “ protect 111
c08.indd 111
8/26/08 6:58:59 PM
112 The
Interviews
freedom. ” People need those kinds of things in order to be able to operate. Otherwise it ’ s just much, much too complicated to try to fi gure out how things actually work. And so they end up believing what they want to believe, but what they believe is so far removed from the facts that it ’ s a delusion.
Q: What are some of these delusions?
Bill Bonner : People always want to believe that their houses are always going up in price. They want to believe that they ’ re going to earn more money next year. They want to believe that their investments will go up. And they want to believe that they can get away with spending more money than they actually earn, and they do that in America now because credit is readily available.
These delusions don ’ t all happen in the same way. They ’ re episodic and cyclical. In one generation, over a period of time, a delusion builds up; it builds up like debt, in fact, until it ’ s crushed by events. The way our parents and grandparents looked at things is very different from the way we look at them. They had delusions of their own, of course, but their delusions were very, very different. Our parents did not think that they could live on credit and borrow their way to prosperity; they believed that if they borrowed some money they ’ d have to pay it back.
I remember how happy my own parents were when they paid off the mortgage. The mortgage they had taken out on our house in the late ‘ 50s was something like $ 5,000, with a 5 percent interest rate. And when they paid that mortgage off, they were delighted.
But today, people would be delighted to have that mortgage. My parents were children of the Great Depression and didn ’ t have the delusion that you can get away with spending more money than you earn. They thought that not spending too much was the way to go, and they thought that savings were important. The delusion of debt had been crushed out of people in the United States in the Great Depression, but gradually it took hold again. And we who grew up after the ‘ 50s and ‘ 60s never had that experience. So here we are in the twenty - fi rst century. We ’ ve never suffered from a real debt defl ation and we don ’ t know what it ’ s like. I think we ’ re going to fi nd out, but it ’ s not going to be pretty.
c08.indd