During his speech Johnson took a couple of detours from what Ron Paul likely would be in favor of. Johnson said that he believed that global warming was occurring and that it was man made. He said he was for The Fair Tax (a kind of national sales tax) to replace the income tax. He said he was for the legalization of marijuana, but didn’t mention other drugs. He did say that after legalizing marijuana he would want to control and tax it. He did say with a straight face that the sun was growing and that in billions of years the sun would encompass the earth and implied that things needed to be done. The moderator looked as confused as the rest of us.
Unlike Ron Paul, Johnson is not in favor of a default by the Treasury. He said that if he were dictator, he would pay Treasury interest and debt obligations.
He said he wasn’t focused on ending the Fed because he said if the Fed were closed down it would just result in the Treasury printing money.
He spent a lot of time discussing the debt and how dangerous it is going to become when the Fed has to buy all the debt. He predicted a bond market collapse, but did not mention at all the distortions in the business cycle that are caused by the Fed.
After his speech, I got in a couple of quick questions to see how hard core he is compared to Ron Paul. I asked him if he was in favor of a gold standard. He said. “Yes.”
I asked him if he was in favor of the legalization of heroin, which of course Ron Paul is. He said, “No,” that “marijuana is a big enough step.”
Then came the biggie. During his speech, he talked about the debt and the Federal Reserve’s role in buying the debt, but not once did Johnson mention the role the Fed has in causing the business cycle, so I threw him a curve ball question about the business cycle to see how familiar he was with Austrian Business Cycle Theory. I asked him, “How do you think the Fed is most dangerous, simply by the amount of debt they buy or because of the business cycle and malinvestments they create?”
Now anyone familiar with Austrian theory is going to jump at the word malinvestments, the way a dog is going to jump at meat on a bone. It is insider talk that tells the knowing you are talking about Austrian Business Cycle Theory. But Johnson missed it completely. He stopped for a second and knew something was up with my use of the term “malinvestments.” He repeated the word outloud, but had no idea it had anything to do with the causation of the business cycle.
He started to talk about how we needed more transparency as to where the Fed invests and he thereby failed the test as to whether he understood business cycle theory. He doesn’t.