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SS 48 – John Horvat of Return to Order

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Episode: 48

Guest: John Horvat

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Introduction

Jason Hartman welcomes author, John Horvat to today’s Solomon Success Show, where they discuss the state of our economy and the fundamental elements needed to fix it. They also talk about intrinsic human failures and their impact on the economy as well as what the Bible says about immigration issues.

Takeaways

03.10 – The economy can’t just be stimulated, regulated or legislated into order. Instead it requires the basic institutions of family, faith and community.

05.30 – We’re currently in a cruise-ship economy, but when the party stops, people are going to start looking for answers.

07.00 – Arguably, the principal reason for the current economic imbalance is due to our desire to have things immediately, coupled with our inability to see past the short-term gain.

13.00 – The Bible says that immigration can be healthy, but it takes time for a people to learn what the country is all about and in order for them to make decisions.

15.35 – With household debt at $13 trillion and government debt at $17 trillion, consumer debt is a huge problem.

17.20 – A conference in July spurred reports that our economy could now be as volatile as it was in the mortgage crisis of 2008.

19.15 – Head to www.ReturntoOrder.org to find out more, read a free chapter of the book and follow John Horvat’s blog.

20.00 – St Thomas Aquinas’s Summa Theologica and the Bible would be some classic but intrinsic resources for those interested in these issues.

 

Tweetables

The problem with our economy is much more of a moral issue than an economic issue – we throw it all out of balance. Tweet this!

The family is not just a social unit, it’s a powerhouse of wealth creation. Tweet this!

Essential to our economy are the Four Cardinal Virtues: Prudence, Justice, Temperance and Fortitude. Tweet this!


Transcript

Introduction:
Welcome to the Solomon Success Show, where we explore the timeless wisdom of King Solomon and the Bible as it relates to business and investing. False profits and get-rich-quick schemes are everywhere; let’s not be distracted by these. Instead, let’s go to the source – the eternal principles that create a life of peace, power and prosperity. Here’s our host, Jason Hartman.

Jason:
Welcome to the Solomon Success Show, this is your host, Jason Hartman, where we talk about biblical principles applied to business and investing, learning from King Solomon of course. We will be back with a fantastic guest for you in just a moment, here, but be sure to visit our website: www.SolomonSuccess.org, or www.SolomonSuccess.com. Take advantage of our extensive blog library and our free content; I think you’ll find some fantastic things there, so be sure to visit us on the web at www.SolomonSuccess.com.

It’s my pleasure to welcome John Horvat to the Show, he is author Return to Order: From a Frenzied Economy to an Organic Christian Society — Where We’ve Been, How We Got Here and Where We Need To Go. John, welcome, how are you?

John:
It’s great to be on your show, Jason.

Jason:
Well, it’s good to have you! Give our listeners a sense of geography and tell us where you’re located.

John:
Okay, I’m just outside of York, Pennsylvania, which is close to Gettysburg. It’s right in that valley there, and that’s pretty much where I am.

Jason:
Tell us a little bit about the book and how you came to write it.

John:
Okay, the book Return to Order is a book of social and economic matters. I’ve been studying these things for about 20 years and I really got concerned after the 2008 sub-prime mortgage crisis, and I said ‘Well, the whole system just about fell apart and we don’t have a Christian response’. I really got busy and over the next 5 years put together the book, Return to Order. 

Jason:
So our response has been Keynesianism.

John:
Right, exactly. More the same, just maybe slow it down a little. Really, the Keynesian is not the way to go.

Jason:
It’s as if a building is burning and what a Keynesian would do is come and throw some gas on the fire.

John:
Exactly. You just say well, it’s really not burning that bad, or just coming up with spinning it in a different way, but you’re going to end up with the same results.

Jason:
Which ultimately will lead to inflation.

John:
Right, inflation and more debts and all the things that really throw economy out of balance.

Jason:
The whole system is built on debt, though. That’s the way fractional reserve banking works. I don’t know if we can ever dismantle this system; it’s so big and omnipresent. Feel free to speak to that, but I want to ask you: you talk about an organic Christian economy – what is that?

John:
Well it’s based on the idea that economy is not just numbers and formulae, it’s based upon the idea that economy needs certain human institutions to keep it in balance. You can’t stimulate, regulate or legislate an economy into order. You need to use those basic institutions of family, faith and community that naturally keep economy in order. An organic Christian society is exactly that. It’s a society that supports an economy based on those institutions, and especially these institutions of natural leadership, communities – things that put the human element back inside economy.

Jason:
What will that do for us if we have that?

John:
It has a stabilizing influence; it brings a certain temperance to society. It still makes the society prosperous and still allows for plenty of growth, but it keeps it from just going out of balance where you have to have everything – the latest this, the latest that – and those movements inside modern economy that often lead to disaster and to boom-and-bust cycles.

Jason:
So the consumerism of wanting the latest this and that – is that the core of the problem?

John:
Not so much the consumerism. I don’t like to use the word ‘consumerism’ because it has so many connotations, you really can’t get a definition, but I think the problem with our economy is much more a moral problem than an economic problem. We have a robust economy that’s proof in itself – it produces a lot, but we have certain elements, certain parts of our economy that just throw it out of balance. That’s the thing, I think, that’s the most dangerous part.

Jason:
Well, we probably agree. You mentioned earlier than you can’t legislate some things, and we probably agree that we can’t legislate the morality. But then how do we get it? These are interesting ideas, but what would cause them to come about?

John:
I think we are headed towards a crisis in our economy and that crisis will, in itself, bring about people looking for answers, as I was looking for answers when I saw this 2008 mortgage crisis. The image I use in the introduction to my book is a cruise ship. It’s like we’re on a cruise ship economy where everything seems like a party, but once the party stops, I think people will start looking in the direction of an organic Christian society, and that’s why I wrote the book. I want people to see this as an option and to put it on the table, because it’s not on the table now.

Jason:
Well that’s for sure. Wall Street really could be considered guilty, at least to a large extent, in my opinion, of bringing down the world economy. It’s amazing how far-reaching the subprime crisis was – bankrupting the whole country of Iceland, for God’s sake, unloading these disgusting, toxic assets that these greedy people created.

John:
Right, and I would also extent that to the initiation of those mortgages to people who knew they couldn’t pay for the mortgages. People who are flipping houses back and forth and trying to make money off of it and taking advantage of that system. It is something that I think extended from top to bottom, but as you say, the top certainly had a lot more at stake and was dealing with a lot more money than those at the bottom.

Jason:
Yeah, that’s for sure. And they had a lot more control over things. Okay, so what do you see as the principal economic factor leading to the frenzied imbalance that we now see in the modern economy, and maybe you’ve addressed that already. I think you alluded to it but I want to just drill down a little bit more.

John:
Right, it’s something I call frenetic intemperance. That is this desire to have everything instantly, regardless of the consequence. It’s the desire to push the envelope, to go beyond what is normal in an economy. You see this in speculation, you see it in consumerism, you can see it all inside society and it largely takes place because there is no influence of natural regulating and faith in community has diminished, so people just don’t think in the long-term anymore. They only think in the short-term, and they lose touch with the real reality of what an economy should be.

Jason:
It’s interesting that you mentioned regulation. Most people, when they think of regulation, think of the government instituting regulations, but you alluded to the idea of personal regulation where we should all regulate ourselves individually, and I think that’s a good idea. On the subject of government regulation, the typical belief is that this whole thing spiralled out of control because we need more regulation. My belief, which is somewhat counter-intuitive to most, is that the reason we have this problem in the first place is because of regulation that allowed these companies to become too big to fail. It’s just funny to me, John, that you see these various businesses leaders constantly grousing and complaining about government regulation, yet if they’re the big Wall Street banks, they actually secretly love that regulation. It keeps new entrants out. It makes their environment less competitive and more monopolistic. Too big to fail is a huge problem, isn’t it?

John:
Oh yeah. They are in cohoots: the government, big business, the academy – and they keep going from one to the other. It’s the same people and they just switch and play musical chairs a lot of the time and it’s like it’s a game. We don’t need more regulation. Dodd Frank, the bill that was supposed to solve the problem –

Jason:
The bill nobody understands, but yeah, go ahead.

John:
It’s 30,000 pages of regulation, and nobody can deal with that except the big firms.

Jason:
We thought Obamacare was bad!

John:
Exactly! I think that was only 20,000, but still, these things are just so inhuman, they’re mechanistic and they’re not organic. Organic things deal with human things, they don’t just throw us into a machine where we become numbers.

Jason:
Any more thought on the regulation issue and helping perpetuate these big monopolies?

John:
I think definitely regulations, as you say, they don’t work. When you regulate something and try to regulate it into order, they just find a way around it and create something even worse. That was pretty much what happened in the banking crisis in the 1990s. They put in all these regulations and you have the shadow banking system that went outside the regulations and became almost as big as the banking establishment. You have to deal with the issue of that frenetic intemperance, those human desires and the moral issue, if you’re really going to resolve the economic one.

Jason:
Where does that start? I just don’t see how that can really change. Getting someone off of the idea of this instant gratification society that we’ve all become accustomed to, and Madison Avenue has done such a great job of promoting (especially in the US, but worldwide too), it’s like getting a drug addict off the drug. How would anyone see any benefit to coming off of it?

John:
Right. As long as the party’s going, people want to stay in the party, but a lot of people are being mugged by reality. It’s not huge numbers; it’s not a majority, but there are significant minorities of people who are taking notice and saying ‘Well, we have to take steps. We have to look for ways around this whole question.’ I see that there are these minorities in the United States and across the world, and they’re certainly a beginning.

Jason:
I like how you talk about family community and faith as natural distributors of wealth. Can you elaborate on that?

John:
Absolutely. The family is not just a social unit, it’s a basic economic unit. It’s a powerhouse of wealth creation. The funny thing about it is that many times the things that are done inside the family are not paid. No-one pays a mother to be a mother or for the childcare, or for the father to mow the lawn. Those are things that are done gratuitously for the common good of the family so the family is just an enormous powerhouse of wealth creation. These are just so essential and they are put outside the formulas and numbers that are in most macroeconomic theory.

Jason:
What about immigration? Give us the tie-in with immigration in biblical times and what makes sense for our problems today?

John:
I just did a piece on what the Bible says about immigration, and the Bible does deal with it, and they talk about how you need to make distinctions between hostile and friendly; you need to distinguish between pilgrims who are just passing through and those who want to stay, but the Bible is very common sensical in that regard. It says that there is such a thing as a healthy immigration, where it contributes to the common good, but at the same time, it takes time. You can’t just automatically put a person in the driver’s seat of the country, or in a position to influence the country when he doesn’t know about the country. So the Bible says that, ‘Yes, we can have immigration, but it needs some time to develop so that people who are going to be voting and going to be making decisions about the country have the elements to really deal with it.’ Now the Bible says about two or three generations. I think that’s a bit much in our vast times, but some time is necessary so people can have an idea of what the country’s all about.

Jason:
What other principles can people learn? Either Biblical principles or principles that you’ve elaborated on in the book? Things that people should know about.

John:
One of the things I believe is that an economy should be based on what is called the ‘Four Cardinal Virtues’. These are justice, prudence, temperance and fortitude. Those are the four cardinal virtues, and those are the virtues that all other virtues are linked to, and these are virtues that deal with each other and the goods of others. Justice deals with the relationship between what is due to one in transactions, prudence deals with the wisdom involved in making decisions, fortitude is about persevering in our industry and in our way of doing things and finally temperance is about controlling our desires when they are beyond our means. These four cardinal virtues are essential for any type of economy and I deal with them a lot in the book. There are chapters dealing with those four cardinal virtues.

Jason:
You talk a little bit about debt and the issue of debt and what it means biblically. You’ve got Dave Ramsay out there saying ‘No debt’, and I think that is generally a good idea, as long as you’re not talking about investment debt. So where do you come down on the debt issue?

John:
That’s a very good question because this distinction was often made in the whole of Western history from the Middle Ages on about debt – it’s important to make the distinction between investment debt and consumer debt. The big problem was consumer debt because people really got into debt and when they do that, many times they don’t have the means to repay, whereas investor debt was something that was always encouraged and should be encouraged to the extent that it’s needed. You need certain capital to play with, so to speak, and to take risks because you have the means to pay for it. I don’t have any problem with that. I do have a problem when you have this consumer debt. Household debt is now at $13 trillion, and government debt is at $17 trillion.

Jason:
It’s mind boggling with those numbers. What’s happened here is that Wall Street and the banksters have been allowed to create debt in so many strange and odd ways. I was just talking about it from the personal investor standpoint, like if someone wants to buy a house or an apartment complex and rent it out to people and get a 30-year long-term fixed-rate debt on a property that has positive cash flow, that seems like a pretty darn prudent thing to me. Especially if we’re going to have inflation in the future, which basically pays that debt off, in addition to the tenants paying it off for you. Now when it comes to the home-flippers and the speculators, that’s where it gets dangerous, and obviously we saw that the last time around. They’re gambling.

John:
That is very much the frenetic intemperance I’m talking about – this gambling, this casino economy that just throws money around and it usually doesn’t work.

Jason:
Where do you see us going? Any thoughts or predictions on the future in terms of the economy? I am surprised interests aren’t higher, I’m surprised inflation isn’t higher than it is. I think we’re kind of defying gravity with our reserve currency status, but I don’t know how long that’s going to last. I don’t think it can last forever.

John:
I don’t have dates, it’s very hard to predict things like that, but recently at the conference in Switzerland – I forget the name – the central bankers got together in July and they just issued a report. They say our economy now is as volatile as it was in 2008. These are people who know about what’s happening in our economy.

Jason:
Yeah.

John:
And they’re worried about low interest rates, which allows people to take risks that they normally wouldn’t take, cause asset bubbles, all sorts of problems that are lurking in the sidelines, but that we really don’t see right now.

Jason:
I would agree. I think there’s another shoe that’s going to drop, and I think it’s probably going to be the inflationary shoe, but we will see. You mentioned central banks, and I just thought I’d ask you before we wrap up here: central banks cannot be okay, Biblically, I assume. I mean, I think they’re just a total scam. It’s amazing that we have to think people rather than market should run the world – a small group of people. It’s just very authoritarian.

John:
Well, people always say ‘Well, what do you think about the Fed? Should we just suppress it?’ and my take on it is we have the economic system that we deserve. We have this system which is frenetically intemperate and the Fed really just does a good job of creating money and monetary expansion and it just does what it’s supposed to be doing, but obviously with bad effects. If we suppress the Fed, in a couple of years you’d probably have another institution just like it. We need to really get back to the moral aspect of it, which as you said, would not support something like a central bank model.

Jason:
The central bank model is not ethical, in my humble opinion. Very interesting. John, give out your website and tell people where they can find you.

John:
Okay, the website is www.ReturntoOrder.org. And I have a blog there that deals with a lot of these issues, and you can get a free chapter, you can download some resources that are on the site, and of course you can buy the book.

Jason:
Fantastic, and the book has tremendous reviews – a lot of reviews too: 106 reviews, 4.5 stars on Amazon, so keep up the good word there. It’s very inexpensive on Kindle. Take a look at that, folks. Final question for you: In addition to your own work, which is fantastic, is there any other resource you’d like to recommend of any kind, whether it be a book, a website, an application for your smartphone, anything?

John:
Well I don’t have anything specifically, but of course I would put the Bible there right on top.

Jason:
That’s a good one!

John:
Being Catholic, I’d say St. Thomas Aquinas his Summa Theologica – they did a lot of work in this area way way back when, and they formed the foundation for modern economic there called the Scholastics. They were a group of people in Salamanca, Spain in the 15th and 16th Century that really gave the foundation for what today is modern economics.

Jason:
Excellent, good stuff. Well John Horvat, thank you so much for joining us today.

Jason:
It’s been great.

Outro:
This show is produced by the Hartman Media Company, all rights reserved. For distribution or publication rights and media interviews, please visit www.HartmanMedia.com or email [email protected] Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network Inc. exclusively.