This is a rush transcript from "Glenn Beck," June 22, 2010. This copy may not be in its final form and may be updated.

GLENN BECK, HOST: Our government continues to cripple the economy. And I told you what they were doing to energy. Now, I want to talk to you a little bit about the future and a little bit of everything. We continue to go down this road. We're heading towards Europe, or I don't — I don't even know. Now, look how Europe is turning out — not real good.

Niall Ferguson is a professor at Harvard Business School, author of a brand-new book, "High Financier: The Lives and Time of Siegmund Warburg." I want to get to that here in a second. It's a — I mean, no offense. I love geek books. It sounds like it's geek city, is it?

NIALL FERGUSON, AUTHOR, "HIGH FINANCIER: THE LIVES AND TIME OF SIEGMUND
WARBURG":
Well, not quite in the sense that financial history shouldn't just be for geeks. We made the mistake of not learning from financial history in the last few years and look where it got us.

BECK: Right. I mean this in the best way. A good history book is a geek book to me. It is a — there was a — what was it? There's a book out about year-and-a-half — maybe two years ago about all the guys that helped finance World War I. Do you remember? Did you read the book by any chance? It is fantastic. Fantastic. Learned more from that than I think —

FERGUSON: So name Warburg is famous for that reason alone.

BECK: Yes.

FERGUSON: Siegmund Warburg came from the Warburg — Warburg Bank dynasty. And they were hugely important in imperial Germany and then, of course, had to flee when Hitler came to power. And Warburg started over in London.

The reason London is a major financial center, which it certainly wasn't at the end of the World War II, is largely down to Siegmund Warburg. And you know, the problem, Glenn is that historians tend to write books about generals, presidents and kings.

You and I know that bankers are, in fact, just as important and interesting. And I wanted to write a book about the banker who, in fact, wasn't just in it for the money, but had a moral sense —

BECK: Is there — is there lesson in — think about this, because I want to go to — I think we are repeating a lot of the problems that he saw in Weimar Germany. So is there a lesson in the book to learn from the path and be able to say — I had a guy. I call him my Deep Throat. He was very high up in this whole thing.

He was there at all the meetings and he called me one time and he said, "Study Weimar." He thought at the time, and I do, that we are headed for that, if we don't turn this ship around. Would you agree with that?

FERGUSON: Yes. I think Siegmund Warburg spent his life learning the lessons of the Weimar Republic. Lesson number one, if you run enormous deficits year after year, you will end up ultimately with inflation and hyperinflation. If you do that to the middle class, don't be surprised if they swing to the far right.

And if that happens, don't be surprised if your democracy itself is called into question. That is the essence of the Weimar story. And although it seems farfetched right now, it's not the beyond the bounds of possibility that we go down that road because our fiscal policy at this point looks completely out of control.

BECK: Do you see us headed for hyperinflation or a great deflation first and then —

FERGUSON: Well, part of the history of Weimar is, of course, that they had both. And the question is the order in which you get them. The Germans — it's hyperinflation first and then hyperdeflation. I think we may do it the other way around in the sense that we're looking at the moment of deflation.

The latest inflation numbers are practically zero. We could go further then. I don't know if you are a monetarist, if you track monetary aggregates, but they are in the freefall right now, Glenn. And you should look closely at them. They don't publish M3 anymore. That's the broad measure of money —

(CROSS TALK)

BECK: I didn't know that you call them, what, monetary aggregates. Yes, I do.

FERGUSON: It’s the money supply.

BECK: Yes.

FERGUSON: They don't tell you anymore what the broad money is doing in the U.S. because it's really too scary. But right now, it contracts at the rate of more than five percent a year. So I think, at the moment, the big risk is deflation. And that is scary for such a highly indebted economy.

BECK: So this week — so you know, America, we're doing, I think — what is it, Tiffany? Is it Wednesday? Is it tomorrow? We're doing the unions — history of the unions tomorrow and then history of communism on Thursday, and they are very related.

The last time I spoke to you, I was in Los Angeles. And we were talking about what is coming in Greece, what was coming in Europe. And I remember everybody at that time. Oh, that's crazy, talking about — here it comes. Here it comes.

How concerned are you with what is happening right now in Europe? Everybody seems to believe that this is going to go away and this is going to get better. I don't believe that for a second.

FERGUSON: Oh, that's a relatively early phase in the crisis where a whole bunch of southern European economies are essentially on the edge or the precipice where, in the case of Greece, already over it.

And the problem has partly to do with banks being insolvent. And it has partly to do with the fact that there is no money to bail out governments anymore. I mean, we're borrowing more in order to borrow more. And it's not sustainable strategy.

The unions play a part in this, Glenn, since you mentioned them, because one of the biggest problems if you’re trying to stabilize public finance in Europe is public sector pay and public sector pensions.

And it's the public sector where the unions are strongest these days. They were pretty run out of town in the private sector except for Scandinavia. But guess what? Even as the union membership contracts in the private sector here as well as in Europe —

BECK: Yes.

FERGUSON: It grows in the public sector. And the one thing that is really lethal right now, whether you're in California or Greece, is this enormous public sector pension liability, and it's monstrous. You know, some people say in California, it's a $500 billion liability.

BECK: Hold on just a second, because I want to show you something. Can we show this now or do we need to take a break? We'll show it after the break. I'm going to show you some numbers that I don't think has been seen yet on TV of pensions and how out-of-whack this is. It's breathtaking. Next.

(COMMERCIAL BREAK)

BECK: America, we're back with Niall Ferguson. He is the author of the new book, "High Financier: The Lives and Time of Siegmund Warburg." He is also with Harvard University and one of the most honest guys on the economy I think I have heard ever on television. And I appreciate your honesty and your candor.

We were just talking in the break about the pensions. And this is — if you were going to destroy America, you would unleash the unions. You would cut off our oil capabilities. You'd spend like crazy and you would do nothing about these pensions.

And you'd tell everybody — this is what's going to happen. They're going to tell you that they're going to fire teachers and firemen. Let me show you here — if you would explain it, let me show you the pension fund — this is just in Illinois — how much they owe teachers and people on the Board of Ed in just Illinois.

These are the people that they owe. The liability is $887 million. Now, if you look at this line by line, you can see who is getting the money. Here is years experience after, I think, 35 or whatever. You can retire after 35 years. You can retire.

These people are retiring. This person is retiring with $10 million, $10 million, $10 million, $26 million, $11 million, $10 million,
$11 million, $9 million.

FERGUSON: And this is assuming that they have maybe, I forget now, how many years in the —

BECK: Yes. I think it's —

FERGUSON: Undefined —

BECK: It's 34 years.

FERGUSON: Right.

BECK: And you can retire at age of 56.

FERGUSON: And you assume that people live for a good long time after that.

BECK: Twenty-nine-year life expectancy.

FERGUSON: Twenty-nine-year life expectancy. Now, the interesting thing about these deals is that these are defined benefit contributions. Now, if you have a private pension that you pay into because you are self- employed, you define the contribution you make. But the thing that defines your benefit is how successfully you invest that money.

BECK: Right.

FERGUSON: I know this because I do it myself.

BECK: Right.

FERGUSON: If I was a public sector employee and had been in a public sector job for the last 20 to 30 years, I wouldn't need to have that worry because the guarantee is there. It's the benefit that's defined. And it's defined really at a high percentage of your final salary.

Now, all over the western world, in Europe and in the United States, this is on a big different time bomb. We know about the unfunded liabilities of Medicare and social security. But we hear much less about these huge unfunded liabilities of, say, the Californian pension schemes. They are absolutely mind-blowing.

BECK: And when they say this — when they say this, the idea — all they ever say is they're going to have to fire teachers. They're going to have to fire — well, yes, either that or people are going to have to work until 65 and not get this pension. Is there any way — this is the state of Illinois — any way to pay just the first page of this pension?

FERGUSON: It's pretty implausible. And Illinois, along with New Jersey and California, is one of the states with the biggest fiscal crises in returns. Now, interesting thing, Glenn, is the way the fiscal crisis spreads across the Atlantic. It spreads into the states first before it hits the federal government. But it's starting happen in these states that impossible choices are being made.

BECK: How much time do we have?

FERGUSON: We have very little time, actually, because I think, in the next year or so, this problem becomes a problem for the federal government because the feds will be asked to bail out these states, at which point the deficit goes from 10 percent of GDP to, what? Twelve percent? Thirteen percent?

BECK: He's harshing my mellow. When we come back, I want to talk about this book and what lessons we learn from the past for tomorrow and America. Back in a second.

(COMMERCIAL BREAK)

BECK: I'm with Niall Ferguson. He is the author of "High Financier: The Lives and Time of Siegmund Warburg," who — this guy is — well, his family is conspiracy central, right?

FERGUSON: Along with the Rothschilds.

BECK: Yes. He is not the guy who came up with the Fed.

FERGUSON: No, that was Paul, his uncle.

BECK: His uncle?

FERGUSON: They were very close — who actually moved to the United States before World War I and came up with the idea of giving the United States a central bank. As soon as he even left Germany in the '30s to flee Hitler and set up a bank in London, started from scratch — S.G. Warburg.

You know, when I was a young man back in '80s, it was the dominant player in the city of London. Siegmund pretty much reinvented London as a financial center. He was also a very key figure in the history of European integration. He invented the Euro bond market. And his great view was that you could bring Europe together much more successfully through finance than through politics.

BECK: I have to tell you, Niall, this sounds like everything I'm against. This sounds like — because this sounds like — I mean, this is — this is what they are doing now.

I mean, are you familiar with mutually-assured economic destruction of "Tragedy and Hope" with Carol Quigley, where we'll just tie all the economies together and then nobody can really get out of line.

FERGUSON: Part of the point of writing a book like this, the same was true with the history of the Rothschild family, to try to detangle the myth, the conspiracy theory, from the historical reality.

Because it's absolutely clear that from the vantage point of somebody Warburg who lived through the Weimar Republic, who had seen the rise of Hitler, that there was a certain nervousness about what democracy could do. In his experience, the democracy had gone totally insane —

BECK: Sure.

FERGUSON: And they elected Hitler. And the conclusion he came to is that, really, capitalism needs to be protected in some measure from the great tides of political (UNINTELLIGIBLE).

(CROSS TALK)

BECK: Isn't that what we — isn't that what we have now? I mean, I have to tell you, I think the Fed created this problem. They created it. By protecting us from bubble crashes, they just kept making a bigger bubble and a bigger bubble and bigger bubble. And it's about to pop.

FERGUSON: I think what is interesting about a figure like Siegmund Warburg is that he observes this great monetary miscalculations being made, not only in the '20s and '30s but right the way through in the 1970s, for example.

We're sometimes told that this was a great era of regulated finance and everything was great until the dreadful deregulation of the 1980s. You have heard the story time without number from Paul Krugman.

Go back and look at Warburg's experience in '70s. It was far from being stable. It was a highly regulated market in which inflation was running amok mainly because the Fed and its counterpart in Europe were printing money and applying the principle of John Maynard Keynes.

So this is an absolutely fascinating life because it illustrates how, in reality, finance and politics interact. How do financial institutions really wield power? I think if you go onto Internet and you look at some of the conspiracy sites, people have an intuition that they are powerful.

And my part is — yes, they are powerful, but let's look at how they really operate. Let's look at the documents. Let's go through the archive. Let's carefully look at the letters they wrote.

Let's look at the meetings that actually happened between someone like Siegmund Warburg and Howard Wilson, the British prime minister, Richard Nixon. Let's look at the meetings that happened with Sadat, the Egyptian prime minister. We can document the story and I think we can therefore understand it much better.

BECK: Last week — we only have 30 seconds. Last week — "Road to Serfdom." We talked about "Road to Serfdom." It became hugely popular. Anti-“Road to Serfdom” or pro or in the middle?

FERGUSON: I think ambivalent. I mean, the only way to sum it up — sum up somebody like Warburg was that he had seen what could go wrong and this made him hugely cautious.

BECK: You address Weimar in here?

FERGUSON: Absolutely, which is where he was forged.

BECK: "High Financier: The Lives and Time of Siegmund Warburg" — Niall Ferguson, extraordinarily bright man. Trustworthy man. Read the book.

Learn more about High Financier: The Lives and Time of Siegmund Warburg at Amazon.com

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