of how much regulation or how much intervention

the government should have in markets,

in capitalism generally,

I think it's interesting to take a look

at the various cycles that have happened

in the United States,

both from an economic point of view

and also from a regulatory point of view.

If we start in the late 1800s,

in the late 1800s so we've had the Civil War,

we've had Reconstruction.

You actually have a crisis,

kind of a depression after the Civil War,

but then after that depression,

at the end of the 1800s,

the United States comes roaring back.

It becomes a major industrialized nation.

And part of that industrializing process,

you have some gentlemen who become

very, very, very wealthy.

You have Cornelius Vanderbilt.

His wealth was in the rail and in the steamboats.

John D. Rockefeller known by some people

as the wealthiest man in history.

That may or may not be the case,

but he was definitely the wealthiest man

in American history.

If you inflation-adjust so some accounts will say

he had 1.5 billion dollars.

You might say, "Wait, I know of people

"who have more than 1.5 billion dollars."

If you inflation-adjust the amount of money

that John D. Rockefeller had at the turn

of the century it comes out to 400 billion

to 600 billion dollars.

This is a lot more than anyone that we know

of in present times.

You have Andrew Carnegie in the steel business.

His net worth, if you look at it in a present value basis,

is approximately 300 billion.

You have people like JP Morgan.

Although is net worth also huge, huge amount,

but where his power was really ....

Since he was in control of the financial world at that time,

his financial power was tremendous.

Maybe more than the type of power that these gentleman could wield.

The amount of power that him and his associates

controlled through their various holdings,

some have said amounted to the amount of wealth

in all of the United States West of the Mississippi.

These are hugely powerful, hugely wealthy men.

The type of power and wealth that we

actually have not seen since.

You can decide what you think of these people.

On some level all of these people,

I'm sure they were good entrepreneurs.

I'm sure they were hard working,

I'm sure they innovated

in their own way but they were also known

for back then that this might be why it

would have given fuel to someone like Marx

who would look at people like this and say,

"Look, these people have so much power.

"Labor has no power compared to them.

"Some of the employees in some of these

"companies, it's hard to really say that they are

"independent human beings.

"They're almost like slave labor.

"They live on the campus. They have no rights.

"People are dying while they're working

"for some of these organizations."

So you can decide where you will,

but the reality is that these people

were hugely, hugely, hugely wealthy, hugely powerful.

Now you fast forward to the early 1900s

and you start having a little bit of a backlash

against these ... I guess the system in which

these type of people can thrive.

You have Teddy Roosevelt comes to power in 1901.

One of the things ... He's famous for many things,

but one of the things he's famous for is being

a trust buster.

When he talks about trust,

a trust is really just a large corporation.

The idea is, is that, "Look Standard Oil,

"you have essentially taken control of the

"refining and the oil industry in America.

"You have become a monopolist.

"You need to be broken up."

This is anti-competitive.

Remember, capitalism for the capitalist sake, for capitalism sake

is maybe not that good of an idea.

What we want is competition.

What we want is innovation.

What we want is incentives.

If you control everything and no one can compete

that's not helping anyone.

So Teddy Roosevelt, it didn't happen during his administration

but he kind of started the trust busting process,

and in the next administration,

in Taft's administration,

you actually have Standard Oil being broken up.

Just to get an idea of how big Standard Oil was,

if you take Exxon Mobil, Chevron, Conoco,

and pretty much every other major US oil company,

put them together.

I'm not saying it's the equivalent of Standard Oil.

That's actually what standard oil was.

When Standard Oil was broken up during Taft's administration,

it was actually broken up into all of these corporations.

You can look into it more.

You could imagine how much power someone like that would hold.

So the pendulum swung in one extreme at the end of the 1800s.

Roosevelt comes in, once again Republican President,

Very strong President.

But he said, "Look, enough is enough.

"This is too much.

"This is not in the best interest of the American people.

"We need competition."

Then you fast forward even more.

In the 20s you have this huge boom.

Things are looking well.

Whenever there is a boom, people look the other way.

People think, "Oh we don't need much regulation.

"We don't need much government intervention."

But then booms, many times, almost always lead to busts.

Then you have the Great Crash of 29,

leads into the Great Depression.

People are unhappy with Herbert Hoover.

FDR comes into power in kind of the heart

of the Great Depression.

He stays President until World War 2.

In his attempts to take the country out of the Great Depression,

he has this New Deal set of programs.

Some of the New Deal programs were essentially

to make use of all the labor and industrial

capacity that was going unused during the Great Depression.

It was kind of this Keynesian Philosophy

that if no one else is going to supply

the demand to use all of these factories

and use all of these people, the government will.

There were these huge public works projects

but there was also regulation getting involved

here to kind of stop some of the things that

were perceived caused the boom and the bust.

You have the Glass Steagall Act,

which is most famous for separating investment

banking from depository institutions.

Essentially saying the same people who are taking

your deposits can't on the other side take

your deposits and gamble with them in the stock market.

This is when Social Security passed,

once again providing a safety net,

going slightly in the Socialist direction.

Saying, "Hey look, we can't have, if we're a civilized, rich country,

"we can't have people going hungry in the streets.

"We can't have older people who have done

"their work, who have contributed to society,

"now all of the sudden that we're in the middle

"of a depression, we can't have them starving to death.

"Or not having them at least having a basic

"level of existence."

You have Social Security.

Safety net is coming into play.

You have Fannie Mae being created,

which the Fannie Mae narrative plays

all the way into 2008 and continues to be a part

of the story with the American housing situation.

What this is, is an organization that essentially

can buy mortgages. Buying mortgages is

it's essentially lending money to people for mortgages.

The reason why the government did this,

is the government ... This is a separate organization

that implicitly had the backing of the government,

which says that Fannie Mae can borrow from people

but if for whatever reason one day Fannie Mae

can't pay back its loans, the government will back it up.

It will make good on those loans.

What that allowed Fannie Mae to do is to borrow money

at very low interest rates,

essentially close to the rate that the US government

could borrow at and then loan that money

at very low interest rates to people who want to buy houses.

So essentially subsidized home ownership.

I should say not home ownership.

Subsidized home borrowing.

I want to make that clear because if everyone

now has more borrowing power to buy a home,

then most likely that will just increase

the price of houses.

So it's really not subsidizing home borrowing

but that's a whole other topic.

Once again the government is getting involved.

Here they're trying to do a little bit of engineering.

Once again this goes against letting the market do its thing.

This is a distortion in the market.

It's a distortion because once again

it's anti-competitive.

If someone else wanted to do what Fannie Mae

did but didn't have the backing of the government

it wouldn't be able to compete because it wouldn't

be able to borrow money as cheaply.

You keep fast forwarding.

You get to Lyndon Johnson's Administration.

Obviously there were other people in between.

You get to Lyndon Johnson's administration

and you have the Great Society.

The Great Society, amongst other things,

food stamps, war on poverty, Medicare, Medicaid,

so once again saying, "Hey society needs

"to have some base level of support for people."

I'm not going to take sides one way or the other

but the pendulum was definitely swinging

in the direction of more social safety nets

and more attempts to make kind of a level

playing field and you can debate whether

they were successful or not.

The other thing,

and this is completely unrelated to what this conversation

is about but whenever someone learns about

Teddy Roosevelt and Franklin Roosevelt

in the same video it begs the question,

"Were they related in some way?"

It does turn out they were fifth cousins.

Even more interesting, Eleanor Roosevelt,

who was Franklin Roosevelt's wife,

was Teddy Roosevelt's niece.

There actually was a pretty close relationship

between all of these Roosevelt's.

Another interesting thing,

I just found this on the Internet,

Teddy Roosevelt was also the first President

to ride in the open in an automobile.

It's funny to see the secret service agents

over here riding bicycles to keep up.

Anyway, complete tangent.

So you had, just to review where we are.

End of 1800s you have what some people

have called, if they want to be insulting of these people,

the robber barrons.

They have concentrated a huge amount of wealth.

Then the pendulum starts swinging back

with Teddy Roosevelt, Franklin Roosevelt and then Lyndon Johnson.

Then you fast forward even through the 70s

you still have kind of a fairly heavy

regulation of many industries in the US.

Jimmy Carter, who was considered quite liberal,

you have to give him, if you are anti-regulation,

give him some credit.

He actually deregulated the airline industry