Breaking Bread with Bahnsen

David Bahnsen, managing partner and chief investment officer at the Bahnsen Group, is back on ...

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David Bahnsen, managing partner and chief investment officer at the Bahnsen Group, is back on The Remnant to explain why there really is no such thing as a free lunch, and to explore why some on the right now think we’d all be better off as serfs. With shameless book-plugging, David and Jonah also discuss the moral case for capitalism, the differences between cost-push and demand-pull inflation, and why the Japanification of the American economy won’t bode well for anyone. Zombie Reagan urges you to tune in!

Show Notes:

– David’s new book, There’s No Free Lunch

– David’s previous Remnant appearance

– David: “Sound Economics Enables Human Flourishing”

– The (still underrated) Tyranny of Clichés

– Robert Nisbet’s Prejudices

– Hayek’s “The Use of Knowledge in Society”

– Yuval Levin’s case for capitalism

– J.D. Vance’s serious nonsense

– Tucker Carlson debates Ben Shapiro on free markets

– The algebra of inflation

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Comments (124)
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  1. DJ

    Finally listened to this today. I like David's theses overall, but don't really buy his argument that GDP growth slowed after the GFC because of government spending/debt. It slowed because there was a long and painful period of deleveraging by consumers. More stimulus spending would have helped, but McConnell wouldn't allow it.

    It was only seven years before that Alan Greenspan went before Congress and made the absurd argument that the Bush tax cuts were necessary because otherwise the government would pay down the debt *too fast.*

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    Terry Comer

    I really like Bahnsen when he is on your podcast. He has great ideas that make a lot of sense and I basically get what he is saying. Johah's questions are the oned I would ask and it is helpful and clarifying when he kind of repeats back what he thinks Bahnsen just said. But, for some reason, I can't take listening to Bahnsen's podcast... maybe I just caught some bad ones.

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  3. Richard Fulmer

    I think that Mr. Bahnsen is right that velocity is down. Banks are keeping trillions of dollars of their reserves deposited with the Fed, and that's keeping a lid on inflation. But what Mr. Bahnsen hasn't addressed is the question: What happens when that changes? Presumably, we want the U.S. economy to begin to grow again. We saw a glimmer of that pre-Covid when Trump's lower corporate taxes and his deregulation sparked significant growth.

    If we return to pro-business government policies (or at least end Biden's actively anti-business policies) and as Covid recedes, investment opportunities will increase and banks will start lending their funds rather than just parking them at the Fed. As velocity increases and that massive amount of currency enters the economy, prices are going to rise and rise sharply.

    Are we faced with either the status quo of low growth / low velocity / low inflation, or high growth / high velocity / high inflation?

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      Narwhal

      You wrote, “I think that Mr. Bahnsen is right that velocity is down. Banks are keeping trillions of dollars of their reserves deposited with the Fed, and that's keeping a lid on inflation.“

      You may find this link useful. And banks aren’t the sole reason that velocity is at or near a historic low at present.

      https://fred.stlouisfed.org/series/M2V

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      1. Richard Fulmer

        Absolutely. COVID is certainly playing a huge role in keeping velocity down. As Jonah often points out, complex phenomena rarely have just a single cause. Thanks for the link.

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          Narwhal

          *Not just COVID and the banks. But, those two aren’t insignificant factors.

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    C C Writer

    Hey Jonah! Hope you are getting plenty of R&R in lieu of G-files and Ruminants. I've been appreciating the dog-road-trip material on Twitter (which I'm not on myself, but I check your page every day.) They seem to be having the time of their lives. What could possibly be better, if you’re a pair of good dogs, than a road trip adventure with Dad, getting more undivided attention than usual, and stopping to run around and play at every single awesome place there is from coast to coast?(Thanksgiving table tidbits and cousins are taken for granted.)

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    Ben Jones

    Great discussion. Half way through David’s book. But all of this begs for a direct and clear response to MMT and their apostles. I appreciate that money is not created until it’s spent, but MMT has a different view. Why are they wrong?

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    Christopher Hall

    The example of "helicopter money" was relatively complex and seemed to ignore a more basic example, unless I'm mistaken. Isn't raising the minimum wage an example of helicopter money?

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    CynthiaW

    Great chat. I really like Mr. Bahnsen.

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    Sad Trombone

    Put aside JD Vance's bombast - don't you see any merit in the argument for defunding the left, especially the radical chic trustafarians that have taken over endowments and foundations like Ford? I'm sure if Steve Bannon and Stephen Millar hijacked the endowment of the Immigrant Aid Society and was using it's resources to finance the Proud Boys beating illegal aliens there would be some pushback.

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    1. Richard Fulmer

      I definitely think that the government should stop funding the left - and, if it does it at all, the right. Obama, for example, channeled corporate fines, that otherwise would have gone to the U.S. Treasury, into leftwing organizations. Using government funds to fund specific ideologies is immoral. As Thomas Jefferson wrote, "To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors is sinful and tyrannical."

      On the other hand, to prevent individuals from contributing to leftwing/rightwing organizations or to confiscate money from leftwing/rightwing organizations is equally sinful and tyrannical.

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        Sad Trombone

        I have no issue with people donating their own funds. If you reread my entry I was complaining about the cliques of ideologs that have hijacked funding sources meant for other purposes, e.g. The Ford Foundation.

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        1. Richard Fulmer

          Gotcha

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        Narwhal

        You wrote, “Obama, for example, channeled corporate fines, that otherwise would have gone to the U.S. Treasury, into leftwing organizations.”

        Can you please provide credible sourcing for that claim. Also, based on your comment I’m inferring that this happened multiple times so please don’t only cite once example.

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        1. Richard Fulmer

          Here's a 2017 story from the "Los Angeles Times" lamenting the end of Obama's policy of requiring "banks or others accused of fraud to pay groups that weren’t a party to the litigation."
          https://www.latimes.com/politics/la-na-pol-settlements-doj-20170606-story.html

          The author states that, "The decision is another sign of the continuing rightward shift of the Justice Department under Sessions" and worries that the decision could "dry up a source of funds for community organizations."

          What he neglects to mention is the type of "community organizations" Obama was funding. Needless to say, it wasn't the Rotary Club.

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            Narwhal

            From the article, “Under the Obama administration, some of the billions of dollars that big banks paid in penalties after the 2008 financial crisis were doled out to help legal aid and housing organizations that were working to stave off foreclosures in hard-hit communities.

            But the practice was harshly criticized by some Republicans and conservative legal scholars who said the Justice Department was essentially handing out money to Obama administration political allies without going through Congress.”

            Again, the best course may be to simply reimburse those people who can prove they were negatively impacted. However, doing so for those people isn’t so simple or without a cost in time and money for them.

            And again, non-profits which already existed and have a proven track record of helping people impacted by the actions from the likes of CITI that resulted in the settlements.

            As far as I know the Rotary Club isn’t such an organization. There is no reason they would be a preferable recipient. https://www.rotary.org/en

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            Narwhal

            An organization that focuses on helping those directly impacted by the actions of those involved in the settlements isnt a smoking gun. Now, maybe they aren’t the right choice and maybe there were better options, including directly reimbursing individuals. And I don’t entirely rule out the possibility that political and personal connections played a factor in which organizations were put at the top of the list and which ones weren’t.

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        2. Richard Fulmer

          https://capitalresearch.org/article/obama-justice-departments-liberal-slush-fund-exposed/

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            Narwhal

            Thank you for the link.

            First of all, it is clearly partisan and frequently uses language which exposes a bias. Maybe a reasonable one, but a clear bias nonetheless.

            Second, this sentence from your link: “The plan is exposed in a 2016 report by the nonpartisan Government Accountability Institute (read it here).” The link does not exist. There is nothing there. And claiming the GAI is non-partisan is not a credible claim. It was founded in 2012 by Steve Bannon among others. In fact the entire GAI website doesn’t seem to exist any longer.

            Third, the article cites one example where CITI wasn’t allowed to donate to one non-profit. Given the reason for the settlements CITI and others others were required to pay this isn’t surprising. The non-profit wasn’t doing any work to help people impacted by what CITI and others did.

            Fourth, the article you linked is from 2017. So, has there been a lawsuit(s) and what was the outcome from it(them)?

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      Narwhal

      So, you want less economic freedom but only for people you don’t like or with whom you disagree with politically and you are willing to create new laws which would grant the federal government more power to see this achieved?

      What could go wrong?

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    Ben Connelly

    I may have to buy David’s book! This was an awesome discussion. He’s one of my favorite guests.

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      C C Writer

      This book sounds like at least part of the answer to something I've been saying for a while: We fell down on the job of passing along so much of what we understood about how free-market economics works and why, and we need to go back almost to square one. I'm hoping this might be the playbook. Also I could probably stand a refresher course myself.

      I loved what Bahnsen said about Milton Friedman writing the list of principles on the blackboard, then keeping it so he could say "but what you're suggesting goes against one of the principles we already agreed on." I don't think the principles will have changed, even if the situations may be different.

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        CynthiaW

        I requested the book from the library, but they don't have it in stock yet. Maybe it's the supply chain ...

        I own Thomas Sowell's books, "Basic Economics" and "Applied Economics".

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          Ben Connelly

          Or a plot by the collectivists to keep it off the shelves… just kidding.

          I still need to get copies of Jonah’s books too.

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            CynthiaW

            My local library eventually gets most of the books I want.

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        Ben Connelly

        Yes. Most people my age honestly don’t value the free market at all. It’s sad. I’m trying to learn as much as I can do I can make a better defense of it.

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  10. Eric Swenson

    I'm still stuck on some of this monetary stuff.
    The QE, I think, makes sense. Bank borrows from Treasury, Bank sells to Fed, Fed has debt to itself, Bank has liquid capital to hopefully loan to capital growth, capital growth leads to revenue to pay back Treasury.
    The helicopter money I get stuck on. If the Fed says they will not pay back the Treasury, that leaves the Fed with money, it leaves the bank with money, but where do I see more in my pocket?

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    1. Richard Fulmer

      I think that what Mr. Bahnsen was saying is that, no matter how new money gets injected into the economy, sooner or later it ends up in a bank. And right now, banks can get a 1.5% return on money they deposit at the Federal Reserve Bank. That's a riskless return with little or no transaction cost as opposed to lending it to a business at a slightly higher return but with a lot of transaction costs (lots of research into the business and papers to process) and a higher level of risk. As a result, banks are choosing, by and large, to keep their money with the Fed. The money isn't circulating in the economy and so, even though there are trillions of dollars involved, they're not creating any inflationary pressures - that is, no one is using the money to buy goods and, thereby, compete for and bid up the prices of those goods.

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