More on Quantitative Easing (and Credit Easing)

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Kind: captions
Language: en

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To get a better understanding of quantitative easing

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in the American context, especially the context

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that Ben Bernanke is talking about,

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I want to read this quote from a speech that

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Ben Bernanke gave at the London School of Economics

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on January 13th, 2009. So this is shortly

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after a lot of the craziness of the financial crisis

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was happening but it was still going on.

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And he's saying, "Our approach, which could be described as

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'credit easing' -- resembles quantitative easing in one respect."

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He's saying it's not quite quantitative easing,

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although it really is.

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"It involves an expansion of the central bank's balance sheet."

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So just to understand what he's talking about,

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the central bank, it has liabilities and assets,

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like any corporation, and they have to,

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the liabilities, plus the equity has to match up to the assets.

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Just for simplicity, let's just have the assets and the liabilies

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lining up together. So let's say that this is the central bank's

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balance sheet right over here.

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This is their current assets, and let's say

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that is is their liabilities over here,

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so liabilities, and then this is their equity,

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although the federal reserve's equity is a little bit strange,

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it's not like traditional equity, that they get all the

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excess profits and all of that, all the excess

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profits actually go to the US government.

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But when the fed prints money, what they literally do

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is that they create offsetting liabilities and assets

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So when they print money they'll, so literally

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let's say that they're printing some money right over here,

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so that's money that they're printing,

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so this is literally, it would be federal reserve notes

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being created, so these are notes, which are essentially dollar bills.

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So these are dollar bills right here being printed,

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either physically or electronically.

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And then they have an offsetting liability

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which is just notes outstanding, which is literally saying

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that hey, these are notes that we've created.

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Notes outstanding is the other side of the balance sheet.

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So, just to parse the statement, when he says, "credit easing

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resembles quantitative easing in one respect

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it involves an expansion of the central bank's balance sheet."

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So this is the expansion of the central bank's balance sheet.

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Which is essentially the same thing as printing money.

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And the federal bank will get these notes into

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circulation by going out into the market

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and buying assets.

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Traditionally, when the fed is more focused on

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short-term interest rates,

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on overnight borrowing rates between banks,

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it will use these to buy shorter-term debt

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that increases the amount of currency out there

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the amount of dollars out there, and so it will

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lower the interest rate for people buying

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and selling dollars, or I should say

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borrowing and lending dollars, not buying and selling.

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Borrowing and lending dollars, the overnight rate

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for banks will go down because there's more dollars out there,

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the cost of borrowing them will go down.

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That's normally what the fed is concerned about.

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And they're saying, look, quantitative easing is just

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this idea of expanding that balance sheet.

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Let's keep reading:

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"However, in a pure quantitative easing regime,

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the focus of quality is the quantity of bank reserves,

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which are liabilities of the central bank;

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the composition of loans and securities on the asset side

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of the central bank's balance sheet is incidential."

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So he's saying in traditional quantitative easing,

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the central bank says look, I just care about printing money

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I just care about printing money,

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So their liabilities increase accordingly.

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So this is notes outstanding again,

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And the height here is proportional to how much money

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they print, so maybe this is another trillion

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dollars they're printing.

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But what the federal reserve is saying, in traditional

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quantitative easing, all the central bank cares about

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is printing this money and getting it out there

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into circulation, and they don't really care

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what they're using this money for.

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So whenever they get this money into circulation

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they do go out there and they do buy assets

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usually treasury assets,

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and then they say even, "Indeed, although the

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bank of Japan's policy," -- so he's comparing

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relative to what Japan did when they kind of faced deflationary crisis.

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"Indeed, although the bank of Japan's policy approach

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during the quantitative easing period was quite

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multifaceted, the overall stance of its policy

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was gauged primarily in terms of its target for bank reserves."

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So you're saying look, the Japanese were trying to fight

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a deflationary bank crisis, they kept printing money

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so they kept increasing the liability side of their

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balance sheet, they kept printing money

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and they did use this money for a bunch of stuff,

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they did use that money to go buy a bunch

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of assets, but their focus of their intervention

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was just, how much did they print?

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They didn't really care, they didn't really

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engineer where that money went to.

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They really weren't trying to change what happens

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in the markets that they were participating in.

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Let's keep reading what the fed is saying.

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"In contrast, the Federal Reserve's credit easing

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approach focuses on the mix of loans and securities

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that it holds and on how this composition of assets

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affects credit conditions for households and businesses."

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So what he's saying is that, we are mechanically

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doing the same thing that Japan did,

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we're increasing our balance sheet, which is analogous to printing money

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And we are also buying a bunch of stuff,

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just like Japan did,

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Japan had a multifaceted approach,

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that's how they put the money into circulation,

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but what Bernanke is saying

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is that our approach isn't just focused on the amount

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of cash that we are printing, our focus is

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where are we putting that cash toward,

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how can we use this cash that we printed

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to kind of, provide liquidity, to ease up things

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in certain parts of the economy. To understand

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what he's talking about, let me draw

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a yield curve right over here.

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Let me draw this yield curve right over here,

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so this is maturity on the horizontal axis,

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and this is yield,

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and I'm gonna draw the yield curve for treasuries.

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So let's say the short-term overnight borrowing for,

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let's say, let's do the yield curve for treasuries,

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maybe it looks something like this.

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So short-term interest rates are already

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pretty darn close to zero, and maybe you know

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this is some, I don't know what percentage,

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maybe this is like 4% or something.

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It's not accurate, but just gives you an idea.

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So this is the treasury yield curve.

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Now you could also have a yield curve for other types of

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debt. Maybe you have AAA corporate debt,

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a very safe corporate debt, a perceived safe corporate debt,

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but it's not quite as safe as US treasuries,

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so maybe it's yield curve might look something like this

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and this difference, for any maturities,

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maybe this is a 10 year,

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this is 10 year debt right here.

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This difference between this AAA corporate debt

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and the treasury, that is the yield spread.

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And maybe the fed is able to, through intervention,

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first they're able to print money,

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normally they buy shorter-term debt,

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maybe they start buying longer-term treasury debt,

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and maybe that helps get the yield curve,

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for longer-term treasuries down a little bit.

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Helps bring it down.

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But maybe the AAA corporate debts

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don't react, maybe the spread doesn't stay constant

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maybe the spread widens. Maybe the same thing

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for other types of debt. This is highly rated

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mortgage backed securities, maybe they have a

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slightly higher interest rate.

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And once again, even though the treasury interest rates

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are coming down, while they're intervening

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because of all the craziness that is happening in the economy,

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the spread between treasuries, and AAA mortgage

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backed securities, or the spread between treasuries

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and AAA corporate debt

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that widens, or another way to think about it

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is the treasury interest rates are coming down

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while these things aren't following it,

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so what Ben Bernanke is saying, look we are doing

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quantitative easing, we are printing money

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and we are using that money to go buy things in the economy

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and we're increasing the amount

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of cash that there is in the economy,

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but our point isn't to increase the amount

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of reserves, or increase the amount of cash,

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because it's really not changing the behavior

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of banks. What we are going to do is

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go buy things like highly rated mortgage backed securities,

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or things like commercial paper, AAA corporate debt,

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so that those things, the interest on those things

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goes down. Obviously if someone is willing to pay more

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for a certain amount of debt,

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and I've gone over this in another video,

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maybe it's not so obvious,

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then the interest rates on it will go down.

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And so what they're doing is, what Bernanke is saying,

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is he cares more about what winds up on the

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asset side of the Fed's balance sheet,

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because it takes these dollars that it printed,

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and goes and buys other stuff,

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and it wants to put some mortgage backed securities

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over here, it wants to put some AAA corporate debt

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over here. And maybe it also does some longer term

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treasury securities, or whatever else.


Treasury bond prices and yields

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Kind: captions
Language: en

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When you buy a US
Treasury security,

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you're essentially giving a loan
to the US federal government.

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And just as an example here,
I have a US Treasury security,

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in which it says that the
owner of this piece of paper

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will be paid $1,000 in one year.

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So if you buy this
from the Treasury--

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or maybe you're buying
it from someone else,

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but let's just say that the
government is issuing them

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right now-- let's say
you buy it for $950,

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and the government will give you
this security right over here.

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Now fast forward one year.

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You're holding this
security, and what happens?

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So you know, all that
stuff is written there.

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What happens a year later?

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Well, written on the
security-- and I've

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simplified it just
for this example--

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it says the holder of the
security will get $1,000.

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So at this point,
the US government

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has to give you $1,000.

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So when you look at
just the money flows,

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it's pretty clear that
you just lent them money.

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You gave them $950 now,
and then a year later they

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give you $1,000.

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And if you wanted
to put this in terms

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that you normally associate
with borrowing money,

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in terms of how much
interest did you get?

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Well, you lent $950,
and you got back $1,000.

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So let's think about this way.

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Let's get a calculator out.

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So 1,000 divided by 950 is
equal to 1.05-- and just

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to round it-- 1.053.

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So you got 1.053-- or
105.3%-- of your money back.

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So let me put it this way.

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So this is 105.3% of money
lent, of money given,

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of money given to
the government.

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Or another way to think about
it is, you got a 5.3% interest--

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or you lent your money out at
an annual interest of 5.3%.

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You got your money back, plus
you've got 5.3% after one year.

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So you could imagine, if
all of a sudden many people

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want to buy this
government security,

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and now the price goes up.

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Instead of being $950, let's
imagine that it is now $980.

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What is the implicit yield that
the person would now get on it?

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Well, we get the
calculator back out here.

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So you're going to
get $1,000, and if you

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paid in $980 instead of
$950, then a year later when

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you get the $1,000
back, that will only

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be 102% of your money.

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So in that situation it
would be 102% of your money.

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So with the $950 price,
you're essentially

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lending the government
money at 5.3%, and at $980

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you're lending the
government money at 2%.

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And I'm doing this
to show you a point.

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When the price of
the treasury security

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goes up, as happened in
this case, the yield--

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the interest-- that you're
getting on your loan goes down.

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Because in either
situation you're

00:03:14.200 --> 00:03:16.320
going to just get $1,000 back.

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If you lend $980
and get $1,000 back,

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you're only getting
2% on your money.

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If you lend $950 and get
$1,000 back, you get 5.3%.

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And so this is what
people are talking

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about when they say if
treasury prices go up then

00:03:32.450 --> 00:03:34.870
the yield goes down.

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So if there's more
demand for treasuries

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the interest rate on
treasuries will go down.

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In the next video
we'll talk about how

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this might change for treasuries
of different maturity dates.


Quantitative easing

WEBVTT
Kind: captions
Language: en

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During normal times
in the economy,

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the Fed tries to control the
amount of economic activity

00:00:06.260 --> 00:00:10.830
that's occurring by targeting
the federal funds rate.

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The fed funds rate.

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And this is the
rate that you always

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hear talked about on the news.

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And it's essentially
a target rate

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that the Fed wants to see
banks lending money-- lending

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cash to each other--
on an overnight basis.

00:00:24.340 --> 00:00:26.030
And we saw already
in the last video,

00:00:26.030 --> 00:00:28.500
if the Fed does not like the
rate that they're borrowing

00:00:28.500 --> 00:00:31.170
to each other, and if even
announcing the federal funds

00:00:31.170 --> 00:00:33.992
rate does not cause
the banks to say, hey,

00:00:33.992 --> 00:00:36.450
the Fed's going to intervene
if we don't lend to each other

00:00:36.450 --> 00:00:38.740
at that rate, the Fed
can actually intervene.

00:00:38.740 --> 00:00:42.480
It can go out there, perform
open market operations,

00:00:42.480 --> 00:00:45.130
and buy, usually
treasury securities,

00:00:45.130 --> 00:00:47.680
out from just the
general market.

00:00:47.680 --> 00:00:50.590
And what that does is it
increases the amount of cash

00:00:50.590 --> 00:00:54.220
that is in circulation, which
decreases the demand for cash,

00:00:54.220 --> 00:00:58.790
increases the supply, and it
should lower the interest rate.

00:00:58.790 --> 00:01:01.940
And the Fed usually cares about
getting that interest rate

00:01:01.940 --> 00:01:05.390
within a certain zone,
around a certain target.

00:01:05.390 --> 00:01:07.790
And the treasuries that
the Fed normally buys

00:01:07.790 --> 00:01:09.660
are short-term treasuries.

00:01:09.660 --> 00:01:11.620
And this is just because
this is less risky,

00:01:11.620 --> 00:01:14.440
and sometimes they'll even make
it on a temporary agreement.

00:01:14.440 --> 00:01:16.320
They'll say, look, we'll
buy it from you now,

00:01:16.320 --> 00:01:19.340
only if you agree to purchase
it at some future date

00:01:19.340 --> 00:01:20.320
at a certain price.

00:01:20.320 --> 00:01:22.710
And that's called a
repurchase agreement.

00:01:22.710 --> 00:01:24.590
I'll do a whole
other video on that.

00:01:24.590 --> 00:01:27.360
But the whole point of
open market operations

00:01:27.360 --> 00:01:30.230
is to set this overnight
borrowing rate.

00:01:30.230 --> 00:01:34.020
But they usually deal with
the short-term treasury debt

00:01:34.020 --> 00:01:35.280
because it's safer.

00:01:35.280 --> 00:01:38.660
It exposes the Fed to
less interest rate risk.

00:01:38.660 --> 00:01:41.780
But you can imagine what
happens if the Fed keeps

00:01:41.780 --> 00:01:44.720
lowering interest rates in
order to prime the pump,

00:01:44.720 --> 00:01:47.740
in order to try to
stimulate the economy.

00:01:47.740 --> 00:01:52.750
So it keeps lowering the federal
funds rate from 4%, down to 3%,

00:01:52.750 --> 00:01:57.580
down to 2%, maybe going all
the way down eventually to 0%.

00:01:57.580 --> 00:02:00.010
And the whole time, it's been
doing that by printing money

00:02:00.010 --> 00:02:02.030
and buying short-term
US securities.

00:02:02.030 --> 00:02:06.180
And maybe at this point, the
yield curve looks like that.

00:02:06.180 --> 00:02:07.560
But maybe that's not enough.

00:02:07.560 --> 00:02:09.020
Maybe the economy's
still tanking.

00:02:09.020 --> 00:02:11.450
Maybe people aren't getting
mortgage loans still.

00:02:11.450 --> 00:02:14.920
So now, the Fed can no longer
do its traditional open market

00:02:14.920 --> 00:02:15.534
operations.

00:02:15.534 --> 00:02:17.950
And it will no longer be focused
on just the federal funds

00:02:17.950 --> 00:02:20.740
rate, because really,
it can't go any lower.

00:02:20.740 --> 00:02:22.410
It already hit zero.

00:02:22.410 --> 00:02:26.870
Short-term overnight borrowing
between banks is already zero.

00:02:26.870 --> 00:02:28.980
But if the Fed wants
to inject more cash,

00:02:28.980 --> 00:02:31.700
it can now buy different
types of securities.

00:02:31.700 --> 00:02:34.470
It can buy treasury
securities that are-- so

00:02:34.470 --> 00:02:36.220
instead of short term
treasury securities,

00:02:36.220 --> 00:02:39.090
maybe it could be longer
term treasury securities.

00:02:39.090 --> 00:02:41.580
So maybe stuff that's one
year out, five years out,

00:02:41.580 --> 00:02:42.660
10 years out.

00:02:42.660 --> 00:02:44.650
And the point here
would be two-fold.

00:02:44.650 --> 00:02:49.080
One, to inject cash
into the system,

00:02:49.080 --> 00:02:50.910
to print cash and put
it out there so it's

00:02:50.910 --> 00:02:53.140
there for people to invest
and for the banking system

00:02:53.140 --> 00:02:54.010
to operate.

00:02:54.010 --> 00:02:57.930
But it might be to explicitly
control the yield curve further

00:02:57.930 --> 00:03:00.670
out so that borrowing
costs for longer debt

00:03:00.670 --> 00:03:03.130
goes down, so that the
yield curve looks something

00:03:03.130 --> 00:03:03.860
like that.

00:03:03.860 --> 00:03:07.530
Because if it's buying
longer maturity treasuries

00:03:07.530 --> 00:03:09.430
that will lower the yield.

00:03:09.430 --> 00:03:12.860
Or they might even start to buy
things that aren't treasuries.

00:03:12.860 --> 00:03:14.860
Maybe they'll buy
mortgage-backed securities.

00:03:14.860 --> 00:03:17.970
So it makes the mortgage
market a little bit looser,

00:03:17.970 --> 00:03:19.500
a little bit more liquid.

00:03:19.500 --> 00:03:21.920
And this non-traditional
type of intervention,

00:03:21.920 --> 00:03:25.220
where the Fed is no longer
concerned about a target rate,

00:03:25.220 --> 00:03:27.210
because the target rate
is already at zero.

00:03:27.210 --> 00:03:30.120
Where the Fed is not
purchasing short-term debt,

00:03:30.120 --> 00:03:32.160
but is starting to
buy longer term debt,

00:03:32.160 --> 00:03:34.041
things further down
the yield curve.

00:03:34.041 --> 00:03:36.040
And maybe things that
aren't treasury securities

00:03:36.040 --> 00:03:36.560
to begin with.

00:03:36.560 --> 00:03:38.434
Maybe they're starting
to buy corporate debt.

00:03:38.434 --> 00:03:42.180
Maybe they're starting to buy
mortgage-backed securities.

00:03:42.180 --> 00:03:44.070
This is called
quantitative easing.

00:03:47.352 --> 00:03:48.810
And there's two
elements to it that

00:03:48.810 --> 00:03:51.990
make it different from
traditional Fed open market

00:03:51.990 --> 00:03:52.860
operations.

00:03:52.860 --> 00:03:55.890
They are now no longer concerned
about the Fed fund rate,

00:03:55.890 --> 00:03:57.730
because it's already at zero.

00:03:57.730 --> 00:04:00.630
The other thing is, is
that they're buying things

00:04:00.630 --> 00:04:02.340
maybe further down
the yield curve.

00:04:02.340 --> 00:04:04.640
So they're trying to control
the yield curve itself.

00:04:04.640 --> 00:04:08.680
And they're maybe buying
less traditional securities,

00:04:08.680 --> 00:04:12.500
with the goal of maybe making
those markets a little bit more

00:04:12.500 --> 00:04:13.873
operational.


Annual Interest Varying with Debt Maturity

WEBVTT
Kind: captions
Language: en

00:00:00.470 --> 00:00:02.470
Let's think about 2 different scenarios

00:00:02.470 --> 00:00:04.402
where I might borrow money from you,

00:00:04.402 --> 00:00:08.521
So this is me over here, and this is you

00:00:08.521 --> 00:00:11.225
in the first scenario, I borrow money from you

00:00:11.225 --> 00:00:13.459
for a relatively short amount of time,

00:00:13.459 --> 00:00:19.474
so I'm gonna borrow $100 from you

00:00:19.474 --> 00:00:25.919
and then in 1 week I will pay that $100 back to you

00:00:25.919 --> 00:00:29.412
I will pay back the $100, and then I will pay

00:00:29.412 --> 00:00:33.979
some interest. And we'll calculate the interest

00:00:33.979 --> 00:00:36.777
on an annual basis, but obviously it will be less than

00:00:36.777 --> 00:00:38.715
a year's interest because I'm only paying for a week

00:00:38.715 --> 00:00:41.102
but we can annualize it, it would give us some

00:00:41.102 --> 00:00:45.835
annual interest. The other scenarios is I borrow for a longer period of time

00:00:45.835 --> 00:00:48.456
So I'll do the other scenario in pink right over here

00:00:48.456 --> 00:00:51.688
So let's say I borrow $100. Instead of paying you back

00:00:51.688 --> 00:00:56.679
in a week, we agree that I can pay you back in 2 years.

00:00:56.679 --> 00:01:04.710
I'm going to pay you back $100 plus some interest.

00:01:04.710 --> 00:01:06.712
And what I want to think about here is there any reason

00:01:06.712 --> 00:01:10.938
why on an annual basis, I should have a different interest rate

00:01:10.938 --> 00:01:14.441
for the short-term borrowing than the long-term borrowing

00:01:14.441 --> 00:01:17.069
You might say, "Look, it's the same guy that's borrowing,

00:01:17.069 --> 00:01:19.869
"...has the same credit rating, has the same kind of legitimacy"

00:01:19.869 --> 00:01:22.761
and all of that, but you would say, "Well look,

00:01:22.761 --> 00:01:26.835
"...over here in 1 week, there's less of a chance of something catastrophic happening"

00:01:26.835 --> 00:01:29.287
There's more predictability here,

00:01:29.287 --> 00:01:33.002
you have a better sense of what the world 1 week from now

00:01:33.002 --> 00:01:34.690
is going to look like, than you do 2 years

00:01:34.690 --> 00:01:37.818
maybe 2 years from now we enter into a hyper-inflationary environment

00:01:37.818 --> 00:01:39.719
maybe I get hit by a truck, maybe I lose a job

00:01:39.719 --> 00:01:43.216
there's a lot more that can happen in 2 years

00:01:43.216 --> 00:01:44.587
than can happen in 1 week.

00:01:44.587 --> 00:01:48.689
And so you say, "Look, I think that this loan right here is riskier"

00:01:48.689 --> 00:01:51.584
and it's not always the case that this would happen

00:01:51.584 --> 00:01:54.472
but many times you'd say look, if lending it for longer it's riskier

00:01:54.472 --> 00:01:58.518
there's more uncertainty, so on an annual basis

00:01:58.518 --> 00:02:07.855
I would charge higher interest, on an annual basis.

00:02:07.855 --> 00:02:10.460
Maybe in this scenario up here, you say

00:02:10.460 --> 00:02:15.019
"Look, I'll charge you 5% per year interest"

00:02:15.019 --> 00:02:16.950
So obviously the interest I would pay after a week

00:02:16.950 --> 00:02:21.697
would be some fraction of this, some small fraction of $5 or 5%

00:02:21.697 --> 00:02:25.517
and over here, since there's more risk, more uncertainty over 2 years

00:02:25.517 --> 00:02:31.690
I will charge you, or you will charge me I should say, 10% per year.

00:02:31.690 --> 00:02:35.714
And it's not always the case, that the longer maturity debt

00:02:35.714 --> 00:02:37.658
is going to have a higher interest,

00:02:37.658 --> 00:02:39.554
although it tends to be the case. If it goes lower

00:02:39.554 --> 00:02:41.654
we'll talk about it in a future video, it actually shows

00:02:41.654 --> 00:02:43.758
that something bad might be happening in the economy

00:02:43.758 --> 00:02:47.305
or we might somehow be entering into a deflationary period

00:02:47.305 --> 00:02:49.327
But the whole point of this video is to show you that

00:02:49.327 --> 00:02:52.623
depending upon how long someone borrows money from someone else,

00:02:52.623 --> 00:02:56.707
they might want to charge a different amount of interest per year

00:02:56.707 --> 00:02:59.271
depending on perceived risk,

00:02:59.271 --> 00:03:03.246
the same thing is true when people lend to corporations

00:03:03.246 --> 00:03:05.054
or to the Federal Government.

00:03:05.054 --> 99:59:59.999
What we're going to see in the next video is how that plays out in the yield curve.


Fed Open Market Operations

WEBVTT
Kind: captions
Language: en

00:00:00.435 --> 00:00:05.402
Let's say we have two
banks, bank A and bank B,

00:00:05.402 --> 00:00:08.208
and you might already know
that banks, all banks,

00:00:08.208 --> 00:00:11.188
lend out the great
majority of the money that

00:00:11.188 --> 00:00:13.680
they get in as deposits,
but they keep some of

00:00:13.680 --> 00:00:15.469
the money as reserves.

00:00:15.469 --> 00:00:17.554
One, just in case their
depositor comes and hey,

00:00:17.554 --> 00:00:20.177
can I have some of my
money back and two because

00:00:20.177 --> 00:00:22.349
the central bank, the Federal Reserve,

00:00:22.349 --> 00:00:24.935
says you have to keep a certain amount of

00:00:24.935 --> 00:00:26.720
your deposits in reserve.

00:00:26.720 --> 00:00:29.441
There is a reserve requirement,
but you can imagine

00:00:29.441 --> 00:00:31.736
over the course of doing transactions,

00:00:31.736 --> 00:00:35.068
thousands of transactions
a day, millions maybe,

00:00:35.068 --> 00:00:37.411
maybe bank B more of
its depositors come by

00:00:37.411 --> 00:00:40.277
and say hey, give me
some of my deposits back.

00:00:40.277 --> 00:00:42.473
Obviously he's lent out a
lot of that money and so

00:00:42.473 --> 00:00:44.886
he starts running low on reserves.

00:00:44.886 --> 00:00:46.769
Maybe bank A, the depositors haven't asked

00:00:46.769 --> 00:00:48.763
for the money or for
whatever reason Bank A is

00:00:48.763 --> 00:00:50.532
sitting on a lot of cash.

00:00:50.532 --> 00:00:52.463
In this situation, what
you're going to have

00:00:52.463 --> 00:00:55.744
happen is bank A is going
to lend some reserves,

00:00:55.744 --> 00:00:59.388
is going to lend some cash to bank B.

00:00:59.388 --> 00:01:02.246
This is lending some
cash and they'll charge

00:01:02.246 --> 00:01:04.416
an interest rate for lending that cash.

00:01:04.416 --> 00:01:08.410
Maybe it will be 5%
interest and that won't be

00:01:08.410 --> 00:01:11.600
5% per day and usually
these loans are on a

00:01:11.600 --> 00:01:13.825
per day basis and then
the next day it'll be

00:01:13.825 --> 00:01:16.079
renegotiated on a per
day basis, but it's not

00:01:16.079 --> 00:01:17.537
5% per day.

00:01:17.537 --> 00:01:21.333
It'll be 5% per year, so
it will be a much smaller

00:01:21.333 --> 00:01:24.080
fraction, but usually as
I mentioned this lending

00:01:24.080 --> 00:01:25.534
takes place on a per day basis.

00:01:25.534 --> 00:01:28.803
We'll say hey, this is
your cash for just tonight.

00:01:28.803 --> 00:01:31.271
If you need it for the
next night, we'll talk

00:01:31.271 --> 00:01:33.464
again and maybe it will
be another 5% or maybe

00:01:33.464 --> 00:01:36.016
the interest rate can change again.

00:01:36.016 --> 00:01:38.770
Let's say the Federal
Reserve is sitting over here

00:01:38.770 --> 00:01:40.870
and for whatever reason wants to stimulate

00:01:40.870 --> 00:01:42.005
the economy.

00:01:42.005 --> 00:01:44.804
This is the Fed and they want to stimulate

00:01:44.804 --> 00:01:47.957
the economy so they start
printing some money.

00:01:47.957 --> 00:01:49.941
I should do money in green.

00:01:49.941 --> 00:01:53.283
The Federal Reserve
here, they're starting to

00:01:53.283 --> 00:01:55.403
print some money and they
want to do two things.

00:01:55.403 --> 00:01:58.199
They want to inject this money into the

00:01:58.199 --> 00:02:00.060
banking system which
essentially, hopefully,

00:02:00.060 --> 00:02:03.292
will find its way into
the economy and they also

00:02:03.292 --> 00:02:05.616
want to lower the
interest rate, especially

00:02:05.616 --> 00:02:07.266
the short term interest rate.

00:02:07.266 --> 00:02:09.178
This overnight borrowing.

00:02:09.178 --> 00:02:11.034
Remember this is the annual interest rate,

00:02:11.034 --> 00:02:13.532
but this is an overnight loan.

00:02:13.532 --> 00:02:17.035
Overnight loan.

00:02:17.035 --> 00:02:19.256
When I talk about the
short term interest rate,

00:02:19.256 --> 00:02:21.367
I'm talking about the
interest rate on loans

00:02:21.367 --> 00:02:24.403
that are made over very
short periods of time.

00:02:24.403 --> 00:02:26.471
What the Federal Reserve
will do is what's called

00:02:26.471 --> 00:02:28.428
open market operations.

00:02:28.428 --> 00:02:30.870
They will go to the market and maybe

00:02:30.870 --> 00:02:32.731
directly to these banks
or some other banks

00:02:32.731 --> 00:02:34.867
and they will buy treasuries.

00:02:34.867 --> 00:02:37.027
They will give this
money to the market and

00:02:37.027 --> 00:02:39.364
in exchange, they will
usually buy treasury

00:02:39.364 --> 00:02:40.401
securities.

00:02:40.401 --> 00:02:42.201
Sometimes something
slightly different, but

00:02:42.201 --> 00:02:43.855
usually very safe
securities and maybe it's

00:02:43.855 --> 00:02:45.357
temporarily buy.

00:02:45.357 --> 00:02:47.535
I'll take about repurchase
agreements in the future.

00:02:47.535 --> 00:02:50.383
What happens is that this
cash goes in the hands

00:02:50.383 --> 00:02:52.334
of the people who just sold the treasury

00:02:52.334 --> 00:02:56.071
securities and they have
to deposit it in banks.

00:02:56.071 --> 00:02:58.032
They might deposit it
in this bank over here.

00:02:58.032 --> 00:03:00.111
They might deposit it
in this bank over here

00:03:00.111 --> 00:03:02.608
or other banks, but the
net-net effect is that there's

00:03:02.608 --> 00:03:04.613
more cash now in the banking system.

00:03:04.613 --> 00:03:06.830
If there's more cash
in the banking system,

00:03:06.830 --> 00:03:10.268
this guy right over here needs less.

00:03:10.268 --> 00:03:14.467
This guy needs less cash,
so it lowers demand.

00:03:14.467 --> 00:03:16.802
It lowers the demand for
cash and then this guy

00:03:16.802 --> 00:03:19.867
has more to give, so it raises supply.

00:03:19.867 --> 00:03:22.802
Raises the supply
because some people maybe

00:03:22.802 --> 00:03:24.194
just took some of this cash and deposited

00:03:24.194 --> 00:03:25.154
with them.

00:03:25.154 --> 00:03:27.360
If it raises the supply
of cash and this guy

00:03:27.360 --> 00:03:30.622
needs it less, then the
rate to borrow this cash

00:03:30.622 --> 00:03:32.948
is going to go down.

00:03:32.948 --> 00:03:37.416
Maybe instead of 5%, it's goes down to 4%.

00:03:37.416 --> 00:03:39.447
What that would do is it would lower the

00:03:39.447 --> 00:03:41.944
short term of the yield
curve, the short end

00:03:41.944 --> 00:03:42.803
of the yield curve.

00:03:42.803 --> 00:03:46.466
Let me draw a yield curve right over here.

00:03:46.466 --> 00:03:51.333
This is maturity on
this axis, maturity, and

00:03:51.333 --> 00:03:52.871
this is yield.

00:03:52.871 --> 00:03:56.532
Let's say the yield curve
before looked like this.

00:03:56.532 --> 00:03:58.284
Let's say it looked like this where this

00:03:58.284 --> 00:04:03.300
right over here is 5% and this overnight.

00:04:03.300 --> 00:04:04.618
Overnight.

00:04:04.618 --> 00:04:08.017
This might be yield on, I
don't know, one year debt.

00:04:08.017 --> 00:04:10.270
This might be yield on, I don't know,

00:04:10.270 --> 00:04:12.006
maybe it's five year debt.

00:04:12.006 --> 00:04:14.538
Whatever, I could keep
going, but by doing this

00:04:14.538 --> 00:04:16.402
open market operation,
the Fed was able to do

00:04:16.402 --> 00:04:17.729
both of its goals.

00:04:17.729 --> 00:04:20.811
It was able to inject
cash, printed cash, into

00:04:20.811 --> 00:04:23.037
the economy and it's also able to lower

00:04:23.037 --> 00:04:24.466
the interest rate.

00:04:24.466 --> 00:04:27.996
It took it from being 5% to down to 4%.

00:04:27.996 --> 00:04:31.502
Now because of this open market operation,

00:04:31.502 --> 00:04:34.073
the Fed, the yield curve
might start to look

00:04:34.073 --> 00:04:37.000
something like that.


The yield curve

WEBVTT
Kind: captions
Language: en

00:00:00.660 --> 00:00:03.604
If you were to borrow money
for different amounts of time,

00:00:03.604 --> 00:00:05.270
you could imagine the
person lending you

00:00:05.270 --> 00:00:07.780
the money might charge you
a different annual interest

00:00:07.780 --> 00:00:10.840
rate depending on the
perceived risk of having

00:00:10.840 --> 00:00:13.310
the money out there for
that amount of time.

00:00:13.310 --> 00:00:15.430
And the same thing is true
when people lend money

00:00:15.430 --> 00:00:17.120
to the federal government.

00:00:17.120 --> 00:00:19.672
So when you think about US
treasuries, and US treasuries

00:00:19.672 --> 00:00:20.880
that have different maturity.

00:00:20.880 --> 00:00:24.050
And maturity just means when is
the government going to pay you

00:00:24.050 --> 00:00:26.430
back, you could imagine that
there are different interest

00:00:26.430 --> 00:00:27.970
rates, or there's
different yields

00:00:27.970 --> 00:00:30.390
to maturity on that debt.

00:00:30.390 --> 00:00:32.371
So if we were to plot
it-- so let's say that,

00:00:32.371 --> 00:00:33.870
and I'm just going
to simplify here.

00:00:33.870 --> 00:00:35.370
Let's say that
there's some treasury

00:00:35.370 --> 00:00:37.709
debt that's maturing
in one month.

00:00:37.709 --> 00:00:39.250
And if you look at
the price that you

00:00:39.250 --> 00:00:42.900
would have to pay for that
debt versus the amount of money

00:00:42.900 --> 00:00:46.190
that the treasury is going
to pay you when it matures,

00:00:46.190 --> 00:00:50.070
you see that the yield there
is, let's say it is 1%.

00:00:50.070 --> 00:00:52.770
Let's say for treasuries
that are maturing

00:00:52.770 --> 00:00:59.210
in three months
the yield is 1.5%.

00:00:59.210 --> 00:01:02.140
Let's say the treasuries
that are maturing in,

00:01:02.140 --> 00:01:04.340
I'll just pick some
maturity dates here,

00:01:04.340 --> 00:01:08.530
let's say in one
year the yield is 3%.

00:01:11.080 --> 00:01:12.050
Let's do a couple more.

00:01:12.050 --> 00:01:17.620
Let's say in 10 years-- you're
essentially lending money

00:01:17.620 --> 00:01:20.370
to the treasury for 10 years
now-- the annual interest

00:01:20.370 --> 00:01:22.900
rate on that, let's
say it's, I don't know,

00:01:22.900 --> 00:01:25.520
let's say it's 3.5%.

00:01:25.520 --> 00:01:27.410
And let's throw
one more up here.

00:01:27.410 --> 00:01:30.820
Let's say if you were to lend
money to the US government

00:01:30.820 --> 00:01:36.150
for 30 years the yield is
running at, let's say it's 4%.

00:01:36.150 --> 00:01:38.760
So here we have different
yields for different maturities.

00:01:38.760 --> 00:01:40.870
And if we essentially
plot this on a graph,

00:01:40.870 --> 00:01:43.164
we get ourselves a yield curve.

00:01:43.164 --> 00:01:44.830
And it's usually
called The Yield Curve.

00:01:44.830 --> 00:01:46.550
When people talk
about The Yield Curve

00:01:46.550 --> 00:01:49.610
they're talking about the
plot for the US Treasury

00:01:49.610 --> 00:01:52.276
in dollars, US Treasury
bills and bonds.

00:01:52.276 --> 00:01:53.650
You can have a
yield curve really

00:01:53.650 --> 00:01:57.880
for any debt instrument, for
any corporate bonds, or even

00:01:57.880 --> 00:01:59.870
government securities
or corporate securities

00:01:59.870 --> 00:02:00.945
of other countries.

00:02:00.945 --> 00:02:03.070
But in general, when they
talk but The Yield Curve,

00:02:03.070 --> 00:02:05.390
they're talking
about US treasuries.

00:02:05.390 --> 00:02:08.580
So let me draw a yield
curve right over here.

00:02:08.580 --> 00:02:11.030
So on this axis I
will put maturity.

00:02:11.030 --> 00:02:15.627
Let me scroll down a
little bit, so maturity.

00:02:15.627 --> 00:02:17.460
And we have a bunch of
different maturities.

00:02:17.460 --> 00:02:18.750
We have one month.

00:02:18.750 --> 00:02:20.550
Let's squeeze it, one month.

00:02:20.550 --> 00:02:22.099
We have three months.

00:02:22.099 --> 00:02:23.640
And this will be
completely to scale.

00:02:23.640 --> 00:02:26.140
Then we have one year,
actually one and three month,

00:02:26.140 --> 00:02:28.140
let's just put one month
right at the beginning.

00:02:28.140 --> 00:02:31.320
So one month then three months
is a little bit further out.

00:02:31.320 --> 00:02:34.970
One year would be right
over here one a year.

00:02:34.970 --> 00:02:36.890
Five years would be like there.

00:02:39.410 --> 00:02:41.530
I don't have five years,
let's do a 10 years.

00:02:41.530 --> 00:02:44.190
So I'll extend my line over.

00:02:44.190 --> 00:02:48.436
So one year, maybe 10 years
is over here, 10 years.

00:02:48.436 --> 00:02:49.560
And then you have 30 years.

00:02:49.560 --> 00:02:51.760
And I'll just draw 30
years as far as I can.

00:02:51.760 --> 00:02:54.730
It's not completely to
scale, but it's my best shot.

00:02:54.730 --> 00:02:58.010
And then we plot the yield for
those different maturities.

00:02:58.010 --> 00:02:59.919
So in one month,
you have a 1% yield.

00:02:59.919 --> 00:03:01.460
So let me do up the
percentages here.

00:03:01.460 --> 00:03:05.980
So this is 1%, 2%, 3%, 4%.

00:03:05.980 --> 00:03:10.350
So on one month maturity
the yield is 1%.

00:03:10.350 --> 00:03:13.730
On three month maturity
the yield is and 1/2%.

00:03:13.730 --> 00:03:16.810
So maybe it'll be
like right over there.

00:03:16.810 --> 00:03:20.130
On one year maturity
the yield is 3%.

00:03:20.130 --> 00:03:22.690
So you plot one
year, this is 3%.

00:03:22.690 --> 00:03:26.160
Let me write it, this
is 3% right over here.

00:03:26.160 --> 00:03:29.920
This is 1.5% right over there.

00:03:29.920 --> 00:03:32.660
And the first one right
over there was 1%.

00:03:32.660 --> 00:03:35.290
And then at 10 years
it's 3 and 1/2%.

00:03:35.290 --> 00:03:38.110
So 3 and 1/2% is
right over here.

00:03:38.110 --> 00:03:40.240
And we want that to be 10 years.

00:03:40.240 --> 00:03:42.010
So I'm just plotting that point.

00:03:42.010 --> 00:03:44.310
And then that 30 years, it's 4%.

00:03:44.310 --> 00:03:48.490
So 4% is what we
get at 30 years.

00:03:48.490 --> 00:03:51.200
And if we connect the
dots and draw a curve

00:03:51.200 --> 00:03:53.425
we are giving ourselves
The Yield Curve.

00:03:57.396 --> 00:03:59.020
I don't want to make
it look like-- let

00:03:59.020 --> 00:04:01.070
me see how well I can draw it.

00:04:01.070 --> 00:04:03.980
You have a curve that might
look something like that.

00:04:03.980 --> 00:04:05.480
Just by looking at
this yield curve,

00:04:05.480 --> 00:04:09.757
you see that when you lend money
to the treasury for a longer

00:04:09.757 --> 00:04:12.340
period of time, you're going to
get a higher interest than you

00:04:12.340 --> 00:04:15.460
would for a shorter
period of time.


Allende and Pinochet in Chile

WEBVTT
Kind: captions
Language: en

00:00:01.014 --> 00:00:02.270
Male: What I'm going to
talk about in this video

00:00:02.270 --> 00:00:04.401
is one of the darker
periods in Chilean history

00:00:04.401 --> 00:00:05.668
and depending on your point of view,

00:00:05.668 --> 00:00:08.539
also one of the darker
periods in American history.

00:00:08.539 --> 00:00:11.353
What I want to make clear in this video,

00:00:11.353 --> 00:00:13.348
and it applies to every
video I'll make in history,

00:00:13.348 --> 00:00:15.202
is be skeptical of everything
that I'm telling you.

00:00:15.202 --> 00:00:18.268
I'm going to do my best
attempt to give a reasonably

00:00:18.268 --> 00:00:22.067
accurate series of events
and draw connections

00:00:22.067 --> 00:00:24.016
when they're clear and
also make it clear where

00:00:24.016 --> 00:00:26.599
there might be connections
and no one is sure.

00:00:26.599 --> 00:00:28.681
But you should be skeptical
and frankly you should

00:00:28.681 --> 00:00:30.473
be skeptical of anything
anyone is telling you.

00:00:30.473 --> 00:00:32.803
I encourage y'all to kind
of use this as a scaffold

00:00:32.803 --> 00:00:34.850
for your own research, for you to look up

00:00:34.850 --> 00:00:36.934
these names and these
events and figure out

00:00:36.934 --> 00:00:38.433
what actually happened.

00:00:38.433 --> 00:00:42.096
Now, with that said,
let's rewind back to 1970

00:00:42.096 --> 00:00:45.403
when Chile was having an
election for president.

00:00:45.403 --> 00:00:47.269
And they have their
election and it's considered

00:00:47.269 --> 00:00:50.351
a fairly free and fair election,

00:00:50.351 --> 00:00:51.872
and one of the candidates in that election

00:00:51.872 --> 00:00:53.203
was this gentleman over here,

00:00:53.203 --> 00:00:57.267
Salvadore Allende, who
was a known Marxist.

00:00:57.267 --> 00:00:59.680
A known Marxist.

00:00:59.680 --> 00:01:04.334
He has communist ideologies here.

00:01:04.334 --> 00:01:07.204
He's known to be sympathetic to what has

00:01:07.204 --> 00:01:10.801
happened in Cuba,
sympathetic to the Soviets.

00:01:10.801 --> 00:01:16.127
So you can imagine in this
context America is concerned.

00:01:16.127 --> 00:01:17.401
It's in the middle of the cold war.

00:01:17.401 --> 00:01:19.401
You have Richard Nixon President.

00:01:19.401 --> 00:01:22.810
You have Henry Kissinger
is his Secretary of State.

00:01:22.810 --> 00:01:25.410
They're actively watching this election.

00:01:25.410 --> 00:01:27.127
They clearly do not want Salvadore Allende

00:01:27.127 --> 00:01:28.579
to become president.

00:01:28.579 --> 00:01:31.915
All of a sudden a major
country in Latin America

00:01:31.915 --> 00:01:34.318
being controlled by a Marxist.

00:01:34.318 --> 00:01:37.253
Unlucky for them, Salvadore
Allende actually does

00:01:37.253 --> 00:01:39.383
get more votes than everyone else.

00:01:39.383 --> 00:01:44.210
He gets 36% of the votes,
which is a plurality.

00:01:44.210 --> 00:01:46.250
Just so you know what
plurality means, it means

00:01:46.250 --> 00:01:48.034
that you got more of the
votes than anyone else

00:01:48.034 --> 00:01:50.986
but not necessarily the
majority of the votes.

00:01:50.986 --> 00:01:53.913
If he'd gotten 51% of the
votes that would be a majority.

00:01:53.913 --> 00:01:55.517
In this case, he didn't get a majority

00:01:55.517 --> 00:01:58.516
and the standard
procedure in Chile is that

00:01:58.516 --> 00:02:00.990
if no one gets a majority
it goes to Congress

00:02:00.990 --> 00:02:03.034
and Congress picks who's president.

00:02:03.034 --> 00:02:06.333
The usual thing that they
would do is they would

00:02:06.333 --> 00:02:08.530
pick whoever has the
largest amount of votes.

00:02:08.530 --> 00:02:10.201
They normally didn't do a runoff.

00:02:10.201 --> 00:02:13.116
So, you can imagine Nixon and
Kissinger they're worried.

00:02:13.116 --> 00:02:16.717
So they kind of get into
let's mess with what's going

00:02:16.717 --> 00:02:18.180
on in Chile mode.

00:02:18.180 --> 00:02:19.717
And this part is well
established that they had this

00:02:19.717 --> 00:02:21.948
what they called a track one strategy

00:02:21.948 --> 00:02:24.784
of actually trying to
get the Chilean congress

00:02:24.784 --> 00:02:28.638
to not do what they normally
do, to not pick the guy

00:02:28.638 --> 00:02:31.109
with the largest number of votes.

00:02:31.109 --> 00:02:32.116
So, they were trying to
mess there, didn't seem

00:02:32.116 --> 00:02:33.983
like something they would
be able to pull off.

00:02:33.983 --> 00:02:36.839
The other thing that it
looks like they started

00:02:36.839 --> 00:02:41.183
to kind of get involved
with through the CIA

00:02:41.183 --> 00:02:46.336
is they started to at least
interface, it's not clear

00:02:46.336 --> 00:02:49.084
how much they actually
supported, they actually

00:02:49.084 --> 00:02:52.719
started to talk to people
in the military and see

00:02:52.719 --> 00:02:55.250
how likely is a coup to happen.

00:02:55.250 --> 00:02:58.083
How likely is Allende to be overthrown

00:02:58.083 --> 00:02:59.515
if he becomes president?

00:02:59.515 --> 00:03:02.853
They were looking for
people who could I guess

00:03:02.853 --> 00:03:07.666
keep this known Marxist
from becoming president.

00:03:07.666 --> 00:03:11.782
And the number one problem
was this guy right over here,

00:03:11.782 --> 00:03:14.753
the number one problem was
this guy right over here.

00:03:14.753 --> 00:03:17.748
In this whole video I would
say that Rene Schneider

00:03:17.748 --> 00:03:21.084
was the only unambiguously
good guy in this video.

00:03:21.084 --> 00:03:24.588
He was the commander in chief
of the Chilean military.

00:03:24.588 --> 00:03:29.315
He said, "Look, I don't
care who becomes president.

00:03:29.315 --> 00:03:31.586
I don't care how much I disagree with him.

00:03:31.586 --> 00:03:33.654
I don't care how much
pressure the Americans

00:03:33.654 --> 00:03:35.407
put on me or how much
pressure the rest of the

00:03:35.407 --> 00:03:39.115
military puts on me, the
role of the Chilean military

00:03:39.115 --> 00:03:42.050
is not to mess with politics."

00:03:42.050 --> 00:03:44.452
The called him the constitutionalist.

00:03:44.452 --> 00:03:47.068
"The role of the Chilean
military is not to overthrow

00:03:47.068 --> 00:03:49.153
people when we don't like them.

00:03:49.153 --> 00:03:52.517
The role of the Chilean military
is only to defend Chile.

00:03:52.517 --> 00:03:54.323
It's only to literally do ..."

00:03:54.323 --> 00:03:55.824
I guess you know what
militaries are supposed to do

00:03:55.824 --> 00:03:59.583
what constitutions say the
military is supposed to do.

00:03:59.583 --> 00:04:02.850
So, you can imagine that
the people who wanted

00:04:02.850 --> 00:04:06.818
to overthrow Allende, now that it looks

00:04:06.818 --> 00:04:08.114
like he's coming to power.

00:04:08.114 --> 00:04:11.323
They said this guy is not a
convenient guy to have in power.

00:04:11.323 --> 00:04:13.114
He doesn't like to play the way we play,

00:04:13.114 --> 00:04:16.522
even though maybe there
were other elements

00:04:16.522 --> 00:04:17.849
in the military that did want to do that.

00:04:17.849 --> 00:04:19.989
So, this is what's a little bit unclear.

00:04:19.989 --> 00:04:22.588
You have this former general
in the Chilean military

00:04:22.588 --> 00:04:27.153
who is clearly anti Allende, and he's also

00:04:27.153 --> 00:04:29.380
anti Schneider because this guy right here

00:04:29.380 --> 00:04:32.585
Roberto Viaux, he thinks
that the military should be

00:04:32.585 --> 00:04:35.652
I guess actively overthrowing dictators

00:04:35.652 --> 00:04:39.655
and so there is some
contact between him and

00:04:39.655 --> 00:04:41.121
the CIA.

00:04:41.121 --> 00:04:43.584
It seems like the CIA
may have supplied some

00:04:43.584 --> 00:04:45.987
support to him and then
maybe got a little bit

00:04:45.987 --> 00:04:47.123
freaked out that ...

00:04:47.123 --> 00:04:48.917
At least Kissinger might
have gotten a little bit

00:04:48.917 --> 00:04:52.454
freaked out that this guy
seemed a little bit extreme.

00:04:52.454 --> 00:04:54.916
But remember we're in
this period where Allende

00:04:54.916 --> 00:04:58.252
was, he got 36% of the votes, Congress is

00:04:58.252 --> 00:05:00.183
trying to figure out what they do about it

00:05:00.183 --> 00:05:02.657
and during this period there
are some people who say

00:05:02.657 --> 00:05:05.111
Well look, if Rene Schneider
is not going to do,

00:05:05.111 --> 00:05:08.455
what's in their mind, the right thing

00:05:08.455 --> 00:05:12.511
and depose the eventual
Allende then we'll have to

00:05:12.511 --> 00:05:14.114
depose Rene Schneider.

00:05:14.114 --> 00:05:16.328
So, you have this plot that's worked up by

00:05:16.328 --> 00:05:20.492
Roberto Viaux to essentially
kidnap Rene Schneider.

00:05:20.492 --> 00:05:23.248
And that would essentially
depose him from being

00:05:23.248 --> 00:05:24.915
head of the military
and maybe they could put

00:05:24.915 --> 00:05:28.112
somebody in his place who
is more likely to have

00:05:28.112 --> 00:05:32.186
a coup, more likely to
want to overthrow Allende.

00:05:32.186 --> 00:05:37.741
Unfortunately, when this
guy's people tried to kidnap

00:05:37.741 --> 00:05:41.850
Schneider, Schneider
he's got a gun, he sees

00:05:41.850 --> 00:05:43.568
these guys kidnapping,
he takes out the gun

00:05:43.568 --> 00:05:46.318
and then the kidnappers
shoot him several times

00:05:46.318 --> 00:05:48.185
and he eventually dies.

00:05:48.185 --> 00:05:53.488
So, this kidnapping turns into
an assasination of Rene Schneider

00:05:53.488 --> 00:05:58.184
and they wanted to kill him
or remove him or whatever

00:05:58.184 --> 00:06:00.782
just because he essentially
wanted to do his job.

00:06:00.782 --> 00:06:02.645
So he's the only person
in this whole narrative

00:06:02.645 --> 00:06:08.186
where I'll say he was
an unambiguous good guy.

00:06:08.186 --> 00:06:12.069
Now, what's not clear is how
much involvement the Americans

00:06:12.069 --> 00:06:17.056
or the CIA had in supporting
this kind of assassination

00:06:17.056 --> 00:06:19.283
or this kidnapping of Scheider.

00:06:19.316 --> 00:06:21.919
It does look like they kind of
knew that something was going on.

00:06:21.919 --> 00:06:23.387
This is a quote from Kissinger.

00:06:23.387 --> 00:06:25.111
Seems pretty well substantiated.

00:06:25.111 --> 00:06:29.132
Where he told Nixon a
few days before Schneider

00:06:29.132 --> 00:06:30.921
was assassinated when
Nixon said hey what's

00:06:30.921 --> 00:06:32.138
going on in Chile?

00:06:32.138 --> 00:06:35.467
Are we working on any
ways through the military

00:06:35.467 --> 00:06:37.316
and are we doing anything
about potentially

00:06:37.316 --> 00:06:41.182
maybe about Schneider. I don't
know look that up for yourself.

00:06:41.182 --> 00:06:43.723
I don't know how much Nixon
may or may not have known.

00:06:43.723 --> 00:06:47.584
Kissinger told Nixon, "This
looks hopeless. I turned

00:06:47.584 --> 00:06:51.249
it off. Nothing could be
worse than an aborted coup."

00:06:51.249 --> 00:06:54.648
So this quote is interesting
because it looks like

00:06:54.648 --> 00:06:55.800
they thought about it.

00:06:55.800 --> 00:06:56.782
I turned it off.

00:06:56.782 --> 00:06:59.390
Which implies that at one
point he had it turned on.

00:06:59.390 --> 00:07:00.982
So at one point they
were actively thinking

00:07:00.982 --> 00:07:04.391
about working with Roberto
Viaux maybe to kidnap

00:07:04.391 --> 00:07:09.473
Schneider, maybe to orchestrate
a coup against Allende,

00:07:09.473 --> 00:07:10.648
but they turned it off.

00:07:10.648 --> 00:07:14.316
So, they're not morally above
doing this kind of thing,

00:07:14.316 --> 00:07:16.449
but they decided that this
guy was a little bit ...

00:07:16.449 --> 00:07:19.554
Was not as competent as
maybe they thought he should,

00:07:19.554 --> 00:07:21.051
and at least according
to Kissinger he's saying

00:07:21.051 --> 00:07:23.057
we turned it off because
nothing could be worse

00:07:23.057 --> 00:07:25.057
than an abortive coup.

00:07:25.057 --> 00:07:26.782
It turned out that's exactly what happened

00:07:26.782 --> 00:07:29.636
because as soon as this
guy got killed everyone

00:07:29.636 --> 00:07:31.516
was like oh my God you have
all these shady elements

00:07:31.516 --> 00:07:35.715
who are trying to overthrow
democracy and that

00:07:35.715 --> 00:07:37.919
actually put more pressure
on Congress to say

00:07:37.919 --> 00:07:40.980
hey we have to let
Allende become president.

00:07:40.980 --> 00:07:43.724
So, in November he gets
inaugurated president.

00:07:43.724 --> 00:07:49.124
November Allende becomes president.

00:07:49.124 --> 00:07:53.877
There's a bunch of
different stories here how

00:07:53.877 --> 00:07:54.888
much the CIA was involved.

00:07:54.888 --> 00:07:57.223
The counter argument is
look the CIA would not

00:07:57.223 --> 00:08:00.991
have wanted to assassinate
Schneider because this

00:08:00.991 --> 00:08:03.382
would have only made Allende
all the more popular.

00:08:03.382 --> 00:08:06.653
They would have only
maybe wanted to remove him

00:08:06.653 --> 00:08:09.715
and put someone else
there who was more likely

00:08:09.715 --> 00:08:11.651
to have a coup against Allende later.

00:08:11.651 --> 00:08:12.782
Who knows.

00:08:12.782 --> 00:08:14.725
If you believe Kissinger's
words here it looks

00:08:14.725 --> 00:08:17.719
like maybe they provided
some initial support to Viaux

00:08:17.719 --> 00:08:19.448
and then they backed off a little bit.

00:08:19.448 --> 00:08:20.516
Who knows.

00:08:20.516 --> 00:08:24.200
Well, regardless to say by
November of 1970 Salvadore Allende

00:08:24.200 --> 00:08:26.715
became president, and
he started implementing

00:08:26.715 --> 00:08:32.382
his kind of Marxist ideology
and it didn't go that well.

00:08:32.382 --> 00:08:35.383
Chile's economy especially
if you fast forward

00:08:35.383 --> 00:08:38.910
to 1972, 1973, not doing so well.

00:08:38.910 --> 00:08:40.455
He started price-fixing.

00:08:40.455 --> 00:08:43.792
He tried to do the
fairly naive approach of

00:08:43.792 --> 00:08:46.254
raising salaries while
keeping prices fixed,

00:08:46.254 --> 00:08:48.382
which will obviously lead to shortages.

00:08:48.382 --> 00:08:51.650
So, all around he wasn't
the most popular president.

00:08:51.650 --> 00:08:53.873
It didn't look like it,
especially his economic policies

00:08:53.873 --> 00:08:55.313
wereworking out that well.

00:08:55.313 --> 00:08:57.116
People who were pro
Allende would say well look

00:08:57.116 --> 00:08:59.599
just like what the
United States did to Cuba

00:08:59.599 --> 00:09:01.594
they started doing to
Chile as soon as they had

00:09:01.594 --> 00:09:03.717
a Marxist in charge,
someone they didn't like.

00:09:03.717 --> 00:09:06.929
The United States
started swinging its huge

00:09:06.929 --> 00:09:10.677
economic power around to
kind of hurt the Chilean

00:09:10.677 --> 00:09:13.016
economy so that this guy
would come out of power.

00:09:13.016 --> 00:09:15.119
I'll let you decide that.

00:09:15.119 --> 00:09:19.677
You fastforward all the
way to 1973 so now Allende

00:09:19.677 --> 00:09:21.978
has been in power for about three years,

00:09:21.978 --> 00:09:23.783
things are not going well for him.

00:09:23.783 --> 00:09:25.786
There are strikes going on.

00:09:25.786 --> 00:09:28.183
He tries to clamp down on the media a bit.

00:09:28.183 --> 00:09:31.181
There is unrest.

00:09:31.181 --> 00:09:33.592
There are people who definitely don't want

00:09:33.592 --> 00:09:38.516
him to be president
anymore, and the people who

00:09:38.516 --> 00:09:40.119
don't think much of the
United States will say

00:09:40.119 --> 00:09:41.854
hey but the United
States the whole time was

00:09:41.854 --> 00:09:44.927
kind of actively undermining
Allende and that's probably true.

00:09:44.927 --> 00:09:46.646
The United States will
say no look we were trying

00:09:46.646 --> 00:09:48.183
to keep the press free.

00:09:48.183 --> 00:09:49.847
This guy was clamping down on free press.

00:09:49.847 --> 00:09:52.597
We were trying to keep
things so that there will

00:09:52.597 --> 00:09:54.648
be another election so that this guy won't

00:09:54.648 --> 00:09:56.787
turn into another Fidel
Castro and essentially

00:09:56.787 --> 00:10:01.519
just turn Chile into a
totalitarian communist regime.

00:10:01.519 --> 00:10:06.259
Regardless of which side you
take, on September 11, 1973,

00:10:06.259 --> 00:10:08.267
Allende is deposed.

00:10:08.267 --> 00:10:12.385
The military surrounds
the presidential palace

00:10:12.385 --> 00:10:17.452
and it is said that he commits "suicide."

00:10:17.452 --> 00:10:18.717
I put that in quotes
because once again some

00:10:18.717 --> 00:10:21.115
people believe that he
really did commit suicide.

00:10:21.115 --> 00:10:23.775
Some people believe that
he was assassinated,

00:10:23.775 --> 00:10:26.118
and some accounts say
that he committed suicide

00:10:26.118 --> 00:10:28.182
with an automatic weapon and well I guess

00:10:28.182 --> 00:10:30.099
you could commit suicide
with an automatic weapon

00:10:30.099 --> 00:10:32.011
but it doesn't seem like
the weapon of choice

00:10:32.011 --> 00:10:34.785
for many peoples, but
I'll leave that once again

00:10:34.785 --> 00:10:36.101
for you to decide.

00:10:36.101 --> 00:10:40.180
Whether or not he committed
suicide or whether he was killed,

00:10:40.180 --> 00:10:43.515
but regardless to say September 11 he gets

00:10:43.515 --> 00:10:45.852
thrown out of power and
once again it's not clear

00:10:45.852 --> 00:10:50.051
what role the CIA played.

00:10:50.051 --> 00:10:52.115
They clearly were
sympathetic to the people

00:10:52.115 --> 00:10:53.452
that wanted to overthrow him.

00:10:53.452 --> 00:10:57.261
Clearly were providing
indirect support throughout

00:10:57.261 --> 00:10:59.648
Allende's regime to all
of the people who were

00:10:59.648 --> 00:11:01.519
anti Allende, and you can look up.

00:11:01.519 --> 00:11:03.786
There actually are some
declassified documents

00:11:03.786 --> 00:11:06.674
that hint at what the
level of CIA involvement

00:11:06.674 --> 00:11:08.049
might have been.

00:11:08.049 --> 00:11:12.386
Regardless to say, Allende
deposed and this gentleman,

00:11:12.386 --> 00:11:18.119
this gentleman comes to power
right over here, Augusto Pinochet.

00:11:18.119 --> 00:11:21.979
And he comes to power and he says look

00:11:21.979 --> 00:11:24.925
you know this democracy thing is silly.

00:11:24.925 --> 00:11:26.677
I am the president.

00:11:26.677 --> 00:11:28.431
I am the commander in chief.

00:11:28.431 --> 00:11:32.425
Chile will be run by military junta.

00:11:32.425 --> 00:11:35.116
Let me write that down.

00:11:35.116 --> 00:11:37.115
Chile will be run by a junta.

00:11:37.115 --> 00:11:40.009
A junta just means a government that's run

00:11:40.009 --> 00:11:41.182
by the military.

00:11:41.182 --> 00:11:43.684
It's a military dictatorship.

00:11:43.684 --> 00:11:45.782
The military is now in charge of Chile.

00:11:45.782 --> 00:11:49.935
We don't need people to do silly
things like voting anymore.

00:11:49.935 --> 00:11:52.849
And you can imagine
Nixon didn't care so much

00:11:52.849 --> 00:11:54.925
that this guy didn't like
democracy but he was happy.

00:11:54.925 --> 00:11:57.519
Let me see if I can put
a smile on his face.

00:11:57.519 --> 00:12:01.514
He was happy that at least
Pinochet was not a Marxist,

00:12:01.514 --> 00:12:05.051
that at least we had stopped the spread

00:12:05.051 --> 00:12:08.843
of communism in Latin America.

00:12:08.843 --> 00:12:11.517
And Nixon, with that said,
and this is explicit,

00:12:11.517 --> 00:12:14.453
he wanted everything in his power to make

00:12:14.453 --> 00:12:17.428
Augusto Pinochet successful especially

00:12:17.428 --> 00:12:19.056
from an economic point of view.

00:12:19.056 --> 00:12:25.373
So, the United States does
start supporting Pinochet.

00:12:25.373 --> 00:12:27.722
He's viewed as kind of an American friend.

00:12:27.722 --> 00:12:30.247
Unfortunately for America
and unfortunately for Chile,

00:12:30.247 --> 00:12:34.518
this guy is one of those
big time tyrants in history.

00:12:34.518 --> 00:12:36.759
So, he is a tyrant.

00:12:36.759 --> 00:12:38.453
He starts rounding up people.

00:12:38.453 --> 00:12:40.265
He starts killing people.

00:12:40.265 --> 00:12:42.584
He's one of those people that anything

00:12:42.584 --> 00:12:45.117
anyone...there was a whiff
of communism, a whiff

00:12:45.117 --> 00:12:47.650
of political opposition
he would round them up,

00:12:47.650 --> 00:12:49.056
he would round their family up.

00:12:49.056 --> 00:12:52.715
He would torture people, and
just to kind of put some ...

00:12:52.715 --> 00:12:54.515
This is another picture
of him when he's older.

00:12:54.515 --> 00:12:57.765
It's amazing how gentle
some fairly evil people

00:12:57.765 --> 00:12:59.851
can look in the world.

00:12:59.851 --> 00:13:03.012
So I'll put some unambiguous horns on him.

00:13:03.012 --> 00:13:07.250
He killed many, many people and many, many

00:13:07.250 --> 00:13:08.325
people disappeared.

00:13:08.325 --> 00:13:11.721
Just to give an idea, these
are some of the people

00:13:11.721 --> 00:13:13.116
who disappeared.

00:13:13.116 --> 00:13:15.185
It was anyone from people
who were critical of him,

00:13:15.185 --> 00:13:18.452
people who were perceived
to be left-leaning,

00:13:18.452 --> 00:13:19.312
whatever it was.

00:13:19.312 --> 00:13:23.516
He tortured including women
and children and all the rest.

00:13:23.516 --> 00:13:25.850
So, all around bad guy.

00:13:25.850 --> 00:13:29.384
He stuck around in Chile
as president until 1990.

00:13:29.384 --> 00:13:30.852
So, that's 17 years, and he really stayed

00:13:30.852 --> 00:13:33.786
in power until 1998 where
he was commander and chief

00:13:33.786 --> 00:13:34.784
of the army.

00:13:34.784 --> 00:13:36.453
You can imagine if the
military is in control

00:13:36.453 --> 00:13:39.013
President isn't that important of a title.

00:13:39.013 --> 00:13:40.718
Commander and chief is.

00:13:40.718 --> 00:13:44.514
So for 25 years he hung around Chile and

00:13:44.514 --> 00:13:48.315
continued to be this totalitarian guy,

00:13:48.315 --> 00:13:51.115
although he liked free markets.

00:13:51.115 --> 00:13:53.516
He was a capitalist in
the traditional sense

00:13:53.516 --> 00:13:58.098
and the one I guess silver lining if you

00:13:58.098 --> 00:14:00.680
had to throw a silver
lining on Pinochet's regime

00:14:00.680 --> 00:14:03.580
was that the Chilean
economy actually did well

00:14:03.580 --> 00:14:05.172
during his regime.

00:14:05.172 --> 00:14:08.121
Chile is considered one
of the success stories

00:14:08.121 --> 00:14:10.449
economically over that time period.

00:14:10.449 --> 00:14:13.255
So, I'll let you decide,
and some people would

00:14:13.255 --> 00:14:16.453
say oh that's because
Pinochet understood economics,

00:14:16.453 --> 00:14:18.786
he didn't try to do all
this price fixing stuff that

00:14:18.786 --> 00:14:20.107
Allende tried to do.

00:14:20.107 --> 00:14:22.582
Regardless of the fact
that he was a tyrant,

00:14:22.582 --> 00:14:26.118
at least the economy was doing well.

00:14:26.118 --> 00:14:28.430
The other side of the
equation would be well look

00:14:28.430 --> 00:14:30.180
of course the economy
did well, now you had

00:14:30.180 --> 00:14:33.849
the United States doing
everything in its power,

00:14:33.849 --> 00:14:35.980
this huge the largest
economy in the world,

00:14:35.980 --> 00:14:38.452
doing everything in its power to make sure

00:14:38.452 --> 00:14:41.090
that Chile's economy
thrives while one of its

00:14:41.090 --> 00:14:42.514
buddies are in power.

00:14:42.514 --> 00:14:44.982
So, I'll let you decide
who's right, who's wrong,

00:14:44.982 --> 00:14:48.676
what was the actual involvement of the CIA

00:14:48.676 --> 00:14:52.044
and Nixon and Kissinger and
all of this mess over here.

00:14:52.044 --> 00:14:54.264
But I think needless
to say that this was a

00:14:54.264 --> 00:14:59.408
not so pleasant chapter
in I guess world history.


Pattern of US Cold War interventions

WEBVTT
Kind: captions
Language: en

00:00:00.710 --> 00:00:03.040
Now that we've done
a series of videos

00:00:03.040 --> 00:00:05.640
on America's interventions
during the Cold War

00:00:05.640 --> 00:00:11.300
in Korea, and Cuba,
and Vietnam, I

00:00:11.300 --> 00:00:14.290
thought it would be fun
just to think a little bit

00:00:14.290 --> 00:00:16.079
about whether there
are any patterns here.

00:00:16.079 --> 00:00:17.570
And once again, in all
of these history videos,

00:00:17.570 --> 00:00:18.960
you have to take
anything I say--

00:00:18.960 --> 00:00:21.380
or really anything anyone
says about history--

00:00:21.380 --> 00:00:23.994
with a grain of salt even
when it comes to the facts.

00:00:23.994 --> 00:00:25.660
Obviously, the facts
can only be written

00:00:25.660 --> 00:00:27.500
by the people who survive.

00:00:27.500 --> 00:00:30.400
Who knows what might have gone
on behind scenes that never

00:00:30.400 --> 00:00:32.184
got documented by
the historians.

00:00:32.184 --> 00:00:34.350
So you have to take everything
with a grain of salt.

00:00:34.350 --> 00:00:37.490
And even in this
video, I'll talk about,

00:00:37.490 --> 00:00:40.140
maybe, some patterns, or
some themes, that I've seen,

00:00:40.140 --> 00:00:42.306
don't take that
as just the truth.

00:00:42.306 --> 00:00:44.930
Think about it for yourself, if
it makes sense, it makes sense.

00:00:44.930 --> 00:00:46.984
If it doesn't, try
to look into it more,

00:00:46.984 --> 00:00:49.400
and try to come up with your
own themes, or your patterns,

00:00:49.400 --> 00:00:51.330
or things that you
can learn from.

00:00:51.330 --> 00:00:53.720
So the general pattern
across all of these,

00:00:53.720 --> 00:00:56.700
is that before the
US got involved,

00:00:56.700 --> 00:01:01.930
and before a communist-leaning
regime got involved,

00:01:01.930 --> 00:01:05.230
these were all, in some
ways, subjugated populations.

00:01:05.230 --> 00:01:10.310
In Korea, it was
subjugated by the Japanese.

00:01:10.310 --> 00:01:12.160
It was a Japanese colony.

00:01:12.160 --> 00:01:16.850
In Cuba, it was subjugated
by the Batista government.

00:01:16.850 --> 00:01:19.665
And this was a dictatorship,
a corrupt dictatorship,

00:01:19.665 --> 00:01:21.790
and it was heavily influenced
by the United States.

00:01:21.790 --> 00:01:24.800
You could almost view it
as United States influence,

00:01:24.800 --> 00:01:28.370
a United States colony, they had
so much influence with Batista.

00:01:28.370 --> 00:01:33.060
And in the case of Vietnam,
it was a French colony.

00:01:33.060 --> 00:01:35.340
So you can imagine, in
all of these situations

00:01:35.340 --> 00:01:38.060
the existing rulers
were not that popular.

00:01:38.060 --> 00:01:41.680
People were looking for
rulers who could liberate them

00:01:41.680 --> 00:01:44.269
from the messes they
were in inside of that.

00:01:44.269 --> 00:01:46.560
On top of that-- and this
comes to the whole discussion

00:01:46.560 --> 00:01:48.260
of capitalism versus
communism-- you

00:01:48.260 --> 00:01:50.950
can imagine that when
you are colonized,

00:01:50.950 --> 00:01:53.320
or when you are in
a corrupt regime,

00:01:53.320 --> 00:01:56.240
you do have people
accruing wealth.

00:01:56.240 --> 00:01:58.710
So there are people accruing
wealth, some of whom

00:01:58.710 --> 00:02:03.110
will get it without
being that legitimate.

00:02:03.110 --> 00:02:05.010
And so these
circles are the size

00:02:05.010 --> 00:02:06.240
of different people's wealth.

00:02:06.240 --> 00:02:10.286
So you can imagine, in
Korea under Japanese rule,

00:02:10.286 --> 00:02:11.660
maybe there were
a few people who

00:02:11.660 --> 00:02:14.109
were successful by being
legitimate entrepreneurs,

00:02:14.109 --> 00:02:15.650
but there were
probably a whole bunch

00:02:15.650 --> 00:02:18.300
of people who were
successful by just, kind of,

00:02:18.300 --> 00:02:20.430
sucking up to the
colonial powers,

00:02:20.430 --> 00:02:23.270
in the case of a corrupt
regime, doing things

00:02:23.270 --> 00:02:25.270
that were corrupt
with the regime,

00:02:25.270 --> 00:02:28.650
using the regime it to get
undue power in a certain market,

00:02:28.650 --> 00:02:29.930
and it's always a combination.

00:02:29.930 --> 00:02:32.250
In any of these countries,
there were probably

00:02:32.250 --> 00:02:34.610
some entrepreneurs
and some other people

00:02:34.610 --> 00:02:37.290
who got wealth, maybe,
with good means,

00:02:37.290 --> 00:02:39.890
and then some other people,
who under these regimes

00:02:39.890 --> 00:02:42.710
got wealth under
questionable means,

00:02:42.710 --> 00:02:44.990
maybe because they sucked
up to the corrupt regime.

00:02:44.990 --> 00:02:47.627
Or maybe, they even did
outright criminal activity,

00:02:47.627 --> 00:02:49.710
which was probably the
case in the Batista regime.

00:02:49.710 --> 00:02:51.480
You probably did have
people who were just

00:02:51.480 --> 00:02:54.500
outright criminals doing
very well for themselves.

00:02:54.500 --> 00:02:57.690
Same thing in Vietnam.

00:02:57.690 --> 00:03:01.220
Some of the Vietnamese
who really were aligned

00:03:01.220 --> 00:03:03.260
with the French, probably
got extra favors,

00:03:03.260 --> 00:03:06.590
and so their wealth wasn't
necessarily due to innovation

00:03:06.590 --> 00:03:08.380
or competence, but
really just where

00:03:08.380 --> 00:03:09.810
they fit into the
political order.

00:03:09.810 --> 00:03:13.620
Maybe some other people
did have legitimate wealth.

00:03:13.620 --> 00:03:16.270
So you imagine, when any
of these type of situations

00:03:16.270 --> 00:03:19.990
start to emerge from
subjugation-- so you start

00:03:19.990 --> 00:03:26.090
having independence movements
in all of these situations.

00:03:26.090 --> 00:03:29.730
You could imagine it's a very
popular notion to run on,

00:03:29.730 --> 00:03:31.112
and depending on how true it is.

00:03:31.112 --> 00:03:32.820
But it's a very popular
notion to run on,

00:03:32.820 --> 00:03:36.397
to tell people, look, you've
seen all of these people who've

00:03:36.397 --> 00:03:37.980
gotten questionable
wealth, and maybe,

00:03:37.980 --> 00:03:40.640
some of these people who got
questionable wealth got it

00:03:40.640 --> 00:03:43.690
by being aligned with our
subjugators, by being,

00:03:43.690 --> 00:03:46.039
to some degree,
traitors to our people.

00:03:46.039 --> 00:03:48.080
And once again, maybe not
all the people, but you

00:03:48.080 --> 00:03:51.050
could see how it's a popular
line for someone coming

00:03:51.050 --> 00:03:53.310
to power when you're
emerging from independent--

00:03:53.310 --> 00:03:56.230
or emerging into independence--
to say, why don't we

00:03:56.230 --> 00:03:57.980
redistribute wealth?

00:03:57.980 --> 00:04:00.640
Why don't we take the
wealth from this person

00:04:00.640 --> 00:04:02.750
right here, who got it
in questionable means,

00:04:02.750 --> 00:04:06.590
and redistribute it to
the rest of the society?

00:04:06.590 --> 00:04:09.270
Why don't we take it from
this person over here

00:04:09.270 --> 00:04:11.870
and redistribute it to
the rest of society?

00:04:11.870 --> 00:04:13.550
Why don't we do that
with this person

00:04:13.550 --> 00:04:17.040
here and redistribute that
wealth to the rest of society?

00:04:17.040 --> 00:04:21.570
And if you're looking for
a political ideology that

00:04:21.570 --> 00:04:26.470
seems to fit with this idea of
trying to correct things that

00:04:26.470 --> 00:04:28.910
maybe looked wrong
during the colonial

00:04:28.910 --> 00:04:31.970
or the subjugated rule,
communism seems to fit that.

00:04:31.970 --> 00:04:34.720
It's kind of a
redistributing of wealth,

00:04:34.720 --> 00:04:36.430
or maybe the state
takes over all wealth,

00:04:36.430 --> 00:04:38.922
or maybe it's something in
between where it's socialist,

00:04:38.922 --> 00:04:40.880
where the state is
redistributing wealth fairly

00:04:40.880 --> 00:04:43.050
aggressively, but
you still have,

00:04:43.050 --> 00:04:46.140
kind of, the underpinnings
of capitalism.

00:04:46.140 --> 00:04:49.230
And so you could imagine
that communism-- especially

00:04:49.230 --> 00:04:53.860
to a population where you have
many, many, many poor people,

00:04:53.860 --> 00:04:56.635
the wealth concentrated in a
few people, many of them who

00:04:56.635 --> 00:04:59.470
are aligned with the old
regimes-- communism at least

00:04:59.470 --> 00:05:01.810
seems like a popular notion.

00:05:01.810 --> 00:05:05.600
And you have people who ride
this nationalistic communistic

00:05:05.600 --> 00:05:06.270
feeling.

00:05:06.270 --> 00:05:09.985
In the case of Cuba, you have
people like Fidel Castro.

00:05:13.900 --> 00:05:16.270
In Vietnam you have
people like Ho Chi Minh.

00:05:18.910 --> 00:05:20.690
And then Korea is a
little bit different,

00:05:20.690 --> 00:05:23.740
because you did have a communist
nationalist independence

00:05:23.740 --> 00:05:27.810
movement, but Kim Il-Sung
wasn't necessarily

00:05:27.810 --> 00:05:29.330
the leader of that movement.

00:05:29.330 --> 00:05:32.060
The Soviets actually didn't want
any of those people in charge,

00:05:32.060 --> 00:05:33.949
any of the nationalist
communists,

00:05:33.949 --> 00:05:35.240
the leaders of those movements.

00:05:35.240 --> 00:05:38.242
They kind of marginalized
them, and installed Kim Il-Sung

00:05:38.242 --> 00:05:40.200
probably because he was
more aligned with them,

00:05:40.200 --> 00:05:41.075
but he was communist.

00:05:44.380 --> 00:05:46.760
Now the reality is,
these guys come in

00:05:46.760 --> 00:05:50.280
under these very egalitarian,
equality for all,

00:05:50.280 --> 00:05:52.260
let's get retribution
for the wrongs that

00:05:52.260 --> 00:05:55.140
were done to us before,
but probably all of them

00:05:55.140 --> 00:05:57.499
start to not just redistribute
wealth from people

00:05:57.499 --> 00:05:59.040
who might have gotten
it in bad ways,

00:05:59.040 --> 00:06:00.831
but they're also just
redistributing wealth

00:06:00.831 --> 00:06:04.560
generally, maybe because it's
just a popular thing to do,

00:06:04.560 --> 00:06:06.670
or maybe because these
people didn't give them

00:06:06.670 --> 00:06:07.590
proper support.

00:06:07.590 --> 00:06:10.130
So they're getting retribution
on their political enemies,

00:06:10.130 --> 00:06:15.590
as opposed to just kind of
doing it for social good.

00:06:15.590 --> 00:06:18.550
So they might do it from people
who have legitimate wealth,

00:06:18.550 --> 00:06:21.000
and so those people
aren't too happy about it.

00:06:21.000 --> 00:06:24.660
And they ride this kind of
communist egalitarian movement

00:06:24.660 --> 00:06:25.939
to install themselves.

00:06:25.939 --> 00:06:27.980
And instead of just being
a purely Marxist state,

00:06:27.980 --> 00:06:29.830
they want to be more
Marxist-Leninist,

00:06:29.830 --> 00:06:31.496
where you have this
Communist Party that

00:06:31.496 --> 00:06:33.320
has this continuous
revolution, which

00:06:33.320 --> 00:06:37.100
is a justification for them
to never hold real elections

00:06:37.100 --> 00:06:38.890
and always stay in power.

00:06:38.890 --> 00:06:41.620
So by no means is
this a rationale

00:06:41.620 --> 00:06:44.010
why these people are legitimate.

00:06:44.010 --> 00:06:46.700
But what happened in
every one of these cases

00:06:46.700 --> 00:06:49.920
is that the United States was
in the middle of the Cold War,

00:06:49.920 --> 00:06:51.750
they feared the
spread of communism.

00:06:51.750 --> 00:06:55.440
Communism tended to correlate
with a non-free state.

00:06:55.440 --> 00:06:57.966
It doesn't have to be that
way, but every time communism

00:06:57.966 --> 00:06:59.590
was implemented, it
also was these kind

00:06:59.590 --> 00:07:01.855
of authoritarian
rule, no democracy.

00:07:01.855 --> 00:07:03.230
And you could also
imagine, there

00:07:03.230 --> 00:07:05.188
were many capitalists in
the United States, who

00:07:05.188 --> 00:07:07.530
for their own selfish reasons,
were afraid of capitalism

00:07:07.530 --> 00:07:09.946
spreading to the United States,
because maybe their wealth

00:07:09.946 --> 00:07:11.230
would be redistributed.

00:07:11.230 --> 00:07:13.605
But regardless of what the
justification, whether it

00:07:13.605 --> 00:07:18.057
was a more noble wanting people
to have freedom of expression,

00:07:18.057 --> 00:07:19.640
freedom to own
property, or whether it

00:07:19.640 --> 00:07:21.056
was the more
selfish, that hey, we

00:07:21.056 --> 00:07:24.170
don't want our own wealth
to be somehow taken away,

00:07:24.170 --> 00:07:26.590
or it just might have
been a balance of power

00:07:26.590 --> 00:07:28.570
between the US and
the Soviet Union,

00:07:28.570 --> 00:07:31.480
that every time a country
fell to communism it's somehow

00:07:31.480 --> 00:07:34.960
the US losing some
power in the world.

00:07:34.960 --> 00:07:36.350
Regardless of the
US's rationale,

00:07:36.350 --> 00:07:39.020
they always say, OK,
these guys are communist,

00:07:39.020 --> 00:07:41.330
we're going to take the
other side of the equation.

00:07:41.330 --> 00:07:47.600
So the US ends up
supporting Syngman Rhee

00:07:47.600 --> 00:07:50.310
in South Korea,
who we know was not

00:07:50.310 --> 00:07:52.060
the best character in the world.

00:07:52.060 --> 00:07:57.190
They end up supporting Diem
in South Vietnam, who we also

00:07:57.190 --> 00:08:00.390
know was not
necessarily the most

00:08:00.390 --> 00:08:01.560
savory person in the world.

00:08:01.560 --> 00:08:04.120
In the case of Cuba,
the US, at least-- they

00:08:04.120 --> 00:08:05.931
did support Batista
while he was in power,

00:08:05.931 --> 00:08:07.930
but we saw in that video
that Kennedy later came

00:08:07.930 --> 00:08:09.890
out and said, you know
Batista was a pretty bad dude,

00:08:09.890 --> 00:08:11.723
and it was probably a
big mistake for the US

00:08:11.723 --> 00:08:12.360
to support him.

00:08:12.360 --> 00:08:13.776
But the US goes
on the other side,

00:08:13.776 --> 00:08:16.420
and they support the exiles
against Fidel Castro.

00:08:16.420 --> 00:08:21.115
And here, the Cuban
exiles they're not-- they

00:08:21.115 --> 00:08:23.405
are definitely not in the
category of Syngman Rhee

00:08:23.405 --> 00:08:25.880
or Diem, and they
probably favor democracy,

00:08:25.880 --> 00:08:27.170
and overall, good people.

00:08:27.170 --> 00:08:29.490
But what they probably
did feed Kennedy

00:08:29.490 --> 00:08:33.000
is a story that Fidel
Castro wasn't as popular

00:08:33.000 --> 00:08:34.480
as he actually was.

00:08:34.480 --> 00:08:36.480
And he probably was
more popular especially

00:08:36.480 --> 00:08:39.880
after the revolution, because
he had this egalitarian-- people

00:08:39.880 --> 00:08:42.610
were getting over Batista,
anybody but Batista they

00:08:42.610 --> 00:08:43.730
would be happy about.

00:08:43.730 --> 00:08:45.780
Fidel Castro was this
charismatic leader

00:08:45.780 --> 00:08:47.884
who was kind of
working for the poor,

00:08:47.884 --> 00:08:50.050
at least it looked like he
was working for the poor.

00:08:50.050 --> 00:08:54.230
So at least in the get
go, especially the Kennedy

00:08:54.230 --> 00:08:55.730
administration
might have been fed

00:08:55.730 --> 00:08:57.810
an overly optimistic
view that got

00:08:57.810 --> 00:09:00.241
them involved in the Bay of
Pigs Invasion and all of that.

00:09:00.241 --> 00:09:01.740
But this is just
the general pattern

00:09:01.740 --> 00:09:02.781
that happened every time.

00:09:02.781 --> 00:09:06.500
And every time, it ended
up in either a US defeat

00:09:06.500 --> 00:09:08.680
or a stalemate.

00:09:08.680 --> 00:09:10.787
Take whatever lessons
there are from this,

00:09:10.787 --> 00:09:12.745
but it is a kind of an
interesting pattern that

00:09:12.745 --> 00:09:15.700
had happened multiple times,
pretty much every engagement

00:09:15.700 --> 00:09:18.980
that we had during the Cold War.