Legendary Economist Dr. Mark Thornton: Fed Cutting Rates to Re-Stimulate the Everything Bubble
Summary
Market Outlook: The guest sees a fragile global economy with financial repression, rate cuts, and ongoing bubbles across assets, cautioning that easy money seeds future busts.
Precious Metals: Bullish on gold and silver as protection against runaway government spending, borrowing, and fiat debasement; notes early-stage bull market dynamics and structural shifts in wholesale markets.
Gold and Silver: Expects further upside with falling gold/silver ratio (from ~100 toward sub-50), cites backwardation, shortages, and potential for broader adoption by individuals and central banks.
AI and Data Centers: Warns that AI-driven data center capex is massive but with uncertain returns, pushing up electricity and chip costs and reflecting bubble-like conditions.
Commercial Real Estate: Flags significant CRE and housing risks, including mortgage stress, shifting from shortages to oversupply, and potential vacancies in new apartments and other space.
Government Debt: Highlights risks in long-term sovereign bonds amid doubts about currencies, with continued issuance and rollover needs raising vulnerability.
Hyperinflation Risk: Views the US and global system on the on-ramp to hyperinflation absent tough policy choices, though a fix is possible with strong leadership and free-market reforms.
Key Companies/Tickers: Nvidia (NVDA) was cited as emblematic of chip makers tied to AI/data centers, mentioned in the context of bubble risks rather than as a long idea.
Bitcoin: Compatible with Austrian principles thematically; could see rotation from crypto into tokenized gold/silver if Bitcoin weakens while precious metals rise.
Transcript
The Fed tells us that they're, you know, watching over us and there to protect us and that they've got this power uh over the economy uh to stimulate economic activity in the form of rate cuts. But it, you know, history has shown it doesn't always work. In fact, those are really the seeds of an of a new business cycle of boom and bust. >> Dr. Mark Thornton, senior fellow at the Mises Institute. It is so wonderful to welcome you to the show. Great to meet you, Dr. Thornton. Really appreciate you taking the time to join me today. >> Thank you. It's great to be here. >> Well, I am absolutely thrilled to have you and I'm thrilled for this audience to get to know you, to learn from you today. So, Dr. Thornton, I'd like to start where I always start with my guest and that is with the big picture macro view. that framework in which you are looking at the world today, the economy, we can throw markets in there and we want to hear what's on your radar, the outlook that you have, and as you know, Dr. Thornton, on this show, you can take all the time you need to set the table when it comes to that big picture macro view. >> Great. Um well you know the a lot of economists are projecting high rates of economic growth and high employment low inflation falling inflation price inflation uh for 2026 but I have a lot of concern uh about the macro economy the global economy I think you know most econ uh most economies right now around the world China Japan uh Europe Europe, uh, Canada, the United States, etc. um are really with the exception of the United States, the rates of economic growth are very low or negative. And uh and so we have a really a global economy that's suffering uh from big government and financial repression um high rates of paper money inflation. And there's a lot of specific things too that we all know about but we aren't really considering in the face of these forecasts. I mean, we have central banks uh printing money up um in at the Japanese uh central bank, uh China, uh euro, everybody's cutting interest rates right now. Um and so there's a lot of uh paper money being introduced into the economy and that's really been the case for many years, including from COVID and precoid times. Um, so we're seeing big bubbles in technology. Uh, we're seeing an ongoing series of uh bubbles in real estate and emerging real estate problems, especially in the United States. And so there's a whole flock of swans out there. Uh, we're just not sure which one of them is the black swan that's going to sort of ignite um a possible crisis. But I think the table has been set. And then when we look at, you know, the trade war that was unleashed by uh President Trump, uh that's supposed to be uh causing increased investment and growth in the United States where he's sort of forced the hands of other uh countries around the world to invest in the United States and also investments from reshoring. But Austrian economists and really any economist recognizes that [clears throat] those forced investments in capital expenditures are not really promoting efficiency and productivity. They're just born out of necessity. Uh but ultimately they result in inefficiencies and um and higher cost in the long run. And then of course we've got a whole legacy of environmental policies around the globe for the last 20 to 25 years where a lot of our investment capital has been put into environmental efforts of electric vehicles and um you know electrification um and that sort of thing. So we have a lot of uh what Austrian economists call male investments or bad investments. Investments that were [snorts] made not out of um economic calculation of profit and loss but from other criteria. And so that's a problem. I mean the accountants and the mainstream economists they just count all that government spending. They count um all of these investments as if they were determined in the market to increase productivity and efficiency. But Austrian economists recognizing that things like, you know, protectionism and the trade war and central bank inducements are really pushing our capital in the wrong direction. in environmental policy. Um particularly in extractive industries that have been starved for capital and all of that capital has gone into alternative energy technologies, electric vehicles, etc. Um and so we have a great imbalance there uh that we're going to have to deal with going forward in the economy. So, you know, the general background of financial repression and inflation and big government is bad enough, but then we have on top of that um you know, central banks. We have uh the the trade war and international conflict that is emerging and we also have this legacy uh problem of environmental policies that we're going to have to deal with and it's not going to be a pretty picture. >> So, it sounds like Dr. Thornton, there's a confluence of concerns out there and it's, as you put it, it's certainly not a pretty picture. Um, you mentioned black swans or a flock of swans rather and I know this is something you've been writing about. Um, are there any obvious ones that stand out to you or any risks that maybe they're maybe they're risks that aren't getting enough attention? Well, yeah, that's really the case with black swans. Um, with the Fed and central banks inflating and manipulating the interest rates, it creates the potential for a vast array of swans out there in the economy. Now the problem with identifying the black swan is really the black swan is just the first one to crack and the first one to really show its hands and to cause imbalances and to cause contagion really um you know something that is denied regularly repeatedly um in the mainstream media that there's any possibility of any kind of contagion out there because it it really sends shivers s uh down, you know, with uh government economists and Wall Street economists, they really don't even want to hear that word. But the ones that I've been looking at uh and others as well, [snorts] uh you have, you know, the the uh commercial real estate mortgage uh market and you know, the Biden administration basically covered up that problem. And we're not sure to the extent that the Trump administration is trying to get those people to roll over the problem into the future. Uh but that's certainly an area of intense concern. Uh now we have um an emerging housing uh real estate market problem where a lot of the you know imbalances in that market which have been really obvious. I mean, all of a sudden, prices of homes are extremely high and there's a tremendous shortage. And now we find uh seemingly just a couple of months later that while we have an over supply of houses and more houses are coming onto the market than ever before and all these apartments uh that are being built uh won't have tenants. And you know it it it goes into warehousing and uh leasing space and you know all the different areas of commercial uh and and private individual real estate. Um and then there's private equity. You know private equity has been a huge um uh new phenomenon. Uh it's not brand new obviously but it's it's become a huge um aspect of the economy where private companies have been or companies have been taken private or started up in the private equity area uh where a lot of capital is flown into those areas uh to either buy out or to expand new companies. Um but that market is you know it doesn't have public marketplaces where the value of those companies is being traded on a daily basis so that everybody sort of has intimate knowledge and a lot of knowledge about the company the numbers uh the sales and so forth everything is revealed to the marketplace and evaluated in the marketplace. So that is certainly a uh a very big concern. And then of course something that is increasingly recognized is these data centers. Uh people wonder about the profitability of artificial intelligence. You know what is it exactly is it going to do? I'm sure it's going to do it's going to benefit you know mankind to a certain extent. Uh but it's not being done in a real free market environment. It's being done um in this uh Fedfueled uh crazy bonanza uh of a situation. And there these companies are spending enormous amounts of money. Uh they're responsible for a huge influx of capital expenditures into the economy right now. uh without any, you know, well-defined output. It's not like they're putting up gas stations all over the place where they know they're going to have a certain number of customers. They're going to have revenues and so forth. All of that is up in the air, so to speak. And uh you know, it's raising electricity prices. It's raising uh the pricing of uh computer technology and chips and all sorts of things. So the and the chip makers, that's another area. uh Nvidia and so forth. Um so the list really goes on and on, not to mention government debt. Uh there's a big concern and and I think this is going to go forward uh with long-term government debt. You know, the governments have already released trillions and trillions of dollars of government debt that has to be constantly rolled over and uh they're they're spending and borrowing even more money now. Uh and so the balloon has to be continually filled. And yet there's a lot of doubt uh right now about the value of currencies that underly these bonds as well as the bonds themselves because people are just very nervous and cautious about inflation and currency depreciation moving forward over the next 10 years or moving forward over the next 30 or 40 years. Um and uh that's one of my uh I guess one of the more recent concerns I've had is you know what happens if the United States with the world's leading economy, the only growing economy and uh what happens if we go into 2026 with a new Fed chairman um and a Fed that's already cutting rates and other central banks are already been cutting rates and what if inflation ticks up as some of my first points um that I raised about the general background of the economy. What if those problems emerge in the form of higher prices um in the economy and people are spooked even further about the value of these longer term bonds? And so, you know, the general problem is uh central banking and fiat money unleashing um male investments widely throughout the economy. The only question we still remaining is the black swan. But there's nothing unique about the black swan except it's the first one to be revealed. Um and it's very hard to identify the first one um when we have so many out there. Now when the housing bubble was around uh 20 years ago, you know, it was it was relatively easy for me. Uh I identified the housing bubble. >> That's right. You were one of the ones who c who called it in 2006. Well, yeah, actually in 2004 I was writing about it, not in detail, but I was naming it the housing bubble and um and I just happened to uh you know that was more on the B I wasn't a housing analyst or anything. I wasn't even a macroeconomist. I was just an individual looking in the marketplace and seeing what was happening to prices and interest rates and psychology. You know, psychology is is a revealing factor when people become uh different psychologically than they were in the past where they don't become good business people um you know and economic calculators. they become uh you know glued to something the way people uh until recently at least were you know sort of glued to the fortunes of cryptocurrencies >> and cryptocurrencies is another one of the black swans potentially. >> Okay, there are a bunch of swans and do you think would you characterize this as an everything bubble then? You just mentioned a bunch of different areas. Um are we living through an everything bubble? Yeah, I think we are because um you know we've had these low interest rates for a very long time and when we came out of the housing bubble uh the central bank uh central banks around the world instead of allowing the market to fix the problem, they just applied, you know, vast amounts of uh subsidies to banks and to the and and and they lowered interest rates uh to near zero. and they engaged in quantitative easing. Uh and they basically put the global economy into an interest rate straight jacket. Uh they loosened up a little bit in the teens in the 20 late teens. Uh but they saw breakages there. A lot of Austrian economists were um worried about the economy enter entering a crisis in 2020 um after we saw some problems in 18 and 19. Um and just as those problems began to emerge, of course hit and uh there was a massive uh in the United States, you know, $5 trillion of Fed money, $5 trillion of government money and the uh business cycle problem went away. But of course, it just extended uh the reality of of an economic crisis uh to this day. And then they, you know, they went back with low interest rates. They raised them a little bit. Uh and then now we're back on the path towards uh lower rates uh once again. And of course, President Trump doesn't want to go back to market determined interest rates. He wants to go back to highly stimulative um interest rates um to restimulate to rekick off uh even more bubble activity. This episode is brought to you by VANX rare earth and strategic metals ETF, ticker symbol REMX. Rareears are the hidden backbone of modern technology and defense, powering everything from smartphones and electric vehicles to fighter jets and wind turbines. Van Ec recognized this early, launching the rare earth and strategic metals ETF, ticker symbol REMX, 15 years ago, well before supply chain security became a global priority. 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Because I I take it a lot of this it all stems back to the Federal Reserve and their policies. >> Yes, it all does go back to the Federal Reserve, paper money, artificial interest rates. And you know, President Trump has made his goals and his intentions perfectly clear. He hasn't disclosed who he's going to nominate to be the chairman of the Fed, but he has um you know encouraged the Fed to cut interest rates. He's put a lot of pressure on Chairman Powell who finally relented um and they started cutting interest rates. Um, you know, some of the members of the board of governors have kind of switched at least as far as a dress rehearsal, maybe to be nominated by President Trump. Um and so the the general tenor um has gone from one of trying to normalize interest rates um uh with uh chairman Powell um and to be stingy and to try to get back to that 2% target. Um and now it's just seems to be full steam ahead. Um other countries have already been cutting interest rates. the United States has started uh cutting interest rates and uh you know uh they'll have uh a new chairman in early 2026 uh assuming uh chairman Powell who can continue to sit on the board assuming he's going to um resign and retire uh from that position which will open up another position uh for President Trump to appoint um a member of the board of governors and and so the path seems very clear and typically when uh an economy starts going into a soft spot we've seen the stock market sort of topping off we've seen Bitcoin falling off we've seen increasing uh jitters in credit markets and the Fed is responding but the Fed usually responds with a number of rate cuts. Um, and uh, you know, and it usually doesn't actually work uh, very well. Uh, there's been a lot of cases where as a stock market starts to roll over, uh, the central bank starts cutting uh, interest rates and it really doesn't do anything to stop uh, the decline in markets as far as the stocks are concerned. Um and and so that's the path that I can generally see forward is a much more dovish Fed uh continuation of uh interest rate cuts. Uh the market is projecting at least a few cuts uh one in December and at least a couple in uh 2026. So I think that's ob the sort of the obvious path that we're going to be taking. Um and uh but we'll see. Um, you know, the the Fed tells us that they're, you know, watching over us and, you know, there to protect us and that they've got this power uh over the economy uh to stimulate economic activity in the form of rate cuts, but it it you know, history has shown it doesn't always work. In fact, uh it does stimulate the economy certain at certain points. Um but that is really the those are really the seeds of an of a new business cycle of boom and bust. >> You mentioned the business cycle and I know um business cycle the business cycle is incredibly important to Austrian economics. Where where where are we in this cycle? I guess um I guess on the boom side and where do you see signals that a bust could be coming in? Maybe we should even explain the business cycle theory as well. >> Well, you know, the Austrian business cycle theory, um, Ludri van Mises really started it off, uh, in his, you know, theory of money and credit, which is over a hundred years now. Um, you can download that book on our website as well. Um and the theory only comes at the end of this very long treatise on money and credit [gasps and sighs] and uh of course um uh his student FA Hayek uh did a lot of work expanding that and uh he won the Nobel Prize. Murray Rothbard wrote a great analysis of America's great depression where he applied the theory to America's great depression. Uh but basically it says that if the central bank injects money through interest rate reductions into credit markets, it's going to kick off a boom because lower interest rates encourage borrowing. Uh they discourage savings. So it's encouraging both investment and more consumption at the same time. And usually in a free market, if you if investment goes up, consumption has to temporarily go down. So there's no cycle. But with these artificial interest rates, you do get both more investment and more consumption. So everything is making money, everybody's happy, everybody's got a job, wages are going up. It it's it's a great scenario while it lasts. Uh but ultimately of course all of that faults all those false signals result in higher wages and higher prices. First you get the higher prices in asset markets then you get higher prices in commodity markets and then higher prices for consumer goods. Uh and then you get higher wage rates. So the the people who have access to the capital the money first uh they benefit tremendously as a result but the working class is actually harmed. They get higher prices and only later if at all do they get higher wage rates. So >> it's definitely hurts the working class and it helps the political elites especially and it helps government too because government is the biggest borrower. So lower interest rates helps their case on the front end. And then by depreciating the currency, governments are helped in that they pay back the national debt with depreciating and depreciating and depreciating currency. So you can clearly see the winners and the losers. Um but every time they create a boom in the economy, they're going to they're going to necessarily bring about a bust where there's a cluster of entrepreneurial errors where uh businesses and families go bankrupt in large clusters at certain points in time. Whereas in a free market economy, yes, people go bankrupt. Uh people have foreclosures, but they're spread out. uh they're more or less random. They're more or less individualized. They're not they don't come in big clumps and big groups. Um and so we actually have a theory that explains exactly how the cycle uh turns out and uh how it plays out uh in life. Now actually predicting uh the magnitude and timing of these things is highly problematic. um and you know forecasting when things are going to break um how significantly negative things are going to go. That's really beyond [clears throat] the theory, >> so to speak. And and and what we've had and what a lot of these booms are really like is they're [clears throat] not um uh symmetrical. They they're not uh even. uh there's no standard path um of the cycle. It doesn't look like a textbook case that you might see in a college textbook. Um sometimes the cycles are very short. A lot of times the most noteworthy ones are very long. So [clears throat] the 1920s we had a boom for eight years and uh you know so it was an extended boom. uh in the 1960s we had a boom for almost 10 years. Um and and so these booms can actually be elongated uh significantly uh by the central banks. And in this case, what we saw was that we had um you know the housing bubble and then the Fed injecting a lot of money and trying to back out and it looked like the uh the expansion was coming to an end around 2019 2020 when COVID hit and they reignited the whole thing with $5 trillion uh of new injections and uh and so really you could look back at the stock market and not see uh a tremendous normal contraction in the stock market going back to 2009. And so on with that dating, if we want to look at the S&P 500, uh there's been a 16-year uh boom in the stock market. you know, it hasn't been even and continuous, but we've really had an upward movement of almost 16 years. In fact, I think it's more than 16 years. I just calculated it was 16 years and 6 months already. And uh and so we've had this tremendous um uh bubble in stocks uh with the S&P 500 up 800% in 16 years. uh the NASDAQ is up 20 times uh over that same period. So yes, there's been some fits and starts in between uh but you can also look at it as one elongated uh march upward in in the form of bubble-like activities. >> And does that create a worse bust than when you have it be that elongated? >> Uh yes. um you know it it's you it's not a mechanical process like in physics or construction or engineering. Uh it's not a plumbing problem. Uh but yes, in general, you can think of it is that the more they inflate and the longer they inflate uh the more of our capital is put into uh these male investments uh in the economy and uh and we're wasting resources or we're using them inefficiently at least. um you know so we get more high techch we get more uh biochemistry and pharmaceuticals very long-term type projects um you know things that uh and real estate real estate um is typically has a shelf life of about 25 years and pharmaceuticals are you know similar to that in that it's about a 20-year process to produce them and they're supposed to pay off over the next 10 to 20 years. Uh and so we're sinking a lot of money um into these longer unproven usually uh investment projects and so some of the ones um that have been undertaken uh have already been unwound as well. And this is why you can't look at it like an engineering process. For example, um after COVID, uh we saw a bubble it um in the streaming services, right? So, a lot of that money, that capital that, uh the savings of people, uh billions and billions and billions of dollars went into new streaming services. U and then shortly thereafter, within a couple of years, we saw uh a big correction in that marketplace. And a lot of the players withdrew uh their investments. They lost their money. Um and so some of these male investments get unwound over these long uh bubble expansions. So that makes it even more difficult to say uh you know how much pain is going to come once these things break. But given the length of this uh boom, I would suggest uh and the the dislocations really that have occurred and that are occurring. I would say that the um the pain that's been built up and that is probably yet to come uh is going to be very significant. We don't know how the politics is going to react to this. Are they going to say, "Well, we did this wrong and let's have some free market reforms." Or are they going to say, "Ah, the market caused these problems and we need to have even more government intervention." So that makes it even more difficult because the political response is very important as to how quickly cuz the free market can clean up these problems very quickly uh with a very simple and straightforward policy uh response. But unfortunately in modern times, socialist governments uh in the west uh have not applied uh the age-old um remedies uh to these types of situations. We basically we've had [clears throat] a hundred years now where Keynesian economics and socialist economics now really is um in the lead uh in capitals around the world and in central banks around the world. So if they apply the wrong remedies, uh these problems as the great depression really is an example of that where they you know Roosevelt uh came in and applied the wrong remedies and instead of a one or twoyear period of correction, we ended up with 12 years of stagnation in the United States known as the New Deal. Um and so there's too many variables really to predict the magnitude, the depth and the length uh of what the recovery period is going to look like. But Austrians know we have a a very simple set of re remedies uh that will work and that could very quickly uh restore the economy to prosperity and economic growth. uh President Harding in 1920 um after uh World War I and uh during the economic depression of 1920 he applied those uh remedies and the economy recovered within just a matter of a few months. Uh, of course, Harding is widely hated and berated um because of his outlook on, you know, he was the old-fashioned pro- capitalist. And so the socialist in the media, socialist historians have painted him as the worst president in American history, but he was actually uh one of the best in terms of his economic thinking. >> Hey there. I just want to take a quick moment to thank you for watching this video and I would really love for you to subscribe to this channel if you like this content. Over 70% of our viewers are not yet subscribed and we are on a mission to hit 100,000 subscribers. So, if you could just take a quick moment, hit subscribe. Thank you so much for your support. We appreciate you. And back to the video. I also wonder, Dr. Thornton. The market is so used to just like Fed intervention, money printing. It's I wonder if they almost just expect it. They like it even. >> Oh, absolutely. I mean uh the bankers especially the big bankers that are involved in the process uh well first of all they're part of the power elite and their industry benefits tremendously um uh from this and even the smaller banks obviously benefit a little bit uh from this but the big banks you know that's where the money comes in um that's that's who is responsible for dealing the government debt. And so big banks are really a creature of government, big government uh borrowing and printing. They um are sustained and thrive as a result of this whole process and of course they get the money first. This would be like um being in the being a bakery um where the government um gives out free uh flour and free eggs. You know, if if your industry were to be given free inputs, um then yeah, it would be great for you. Uh it it would uh very much increase your the profitability of a bakery if they got free flour and free eggs and free sugar. Um it would be great and and that's really uh the way bankers and Wall Street too. I mean um you know Wall Street u the uh this whole process helps the largest corporations who really can access those very low interest rates on similar terms to the government itself. And so it encourages these mega corporations um who get access to this money and it disadvantages small independent businesses, small entrepreneurs, startups and so forth. Uh they don't have access to any of this stuff. Um their access to credit is is very much uh contingent on real factors and uh and so it creates winners and losers. And if you ask Wall Street and if you ask the big banks in New York, um the big law firms that [clears throat] do corporate law in New York and Washington, you know, if do you like the Fed and do you like low interest rates, they're going to say yes. But, you know, that leaves out not just small businesses, but it leaves out most of the population who don't access credit and who save money. They would like to save money um and earn interest and build up their own personal capital. They, you know, their house and their family, their independent business, uh their retirement savings, their college savings, uh and these low ultra low interest rates with a depreciating currency makes saving almost impossible. Um and the idea you know of even uh a savings account which was a standard when I was born you know a thousand years ago a savings account was a standard practice for uh most people in the economy. You'd have maybe a checking account and uh a Christmas club account and a savings account. But now nobody has savings accounts anymore because it doesn't earn interest. Um and you know so that really uh you know makes it difficult. It makes it so difficult uh for the working class in America to get ahead. And um but it it it's to the great advantage of New York, of Washington, the big banks, of Wall Street and you know private equity and so on and so forth there. you know, it's attracted um this this Fed process has attracted uh a much larger financial sector. Financial repression of the general population has created a much larger industry. So before the the gold standard was abandoned uh you know the fin banking and finance represented about 4% of the overall economy and there was plenty of slack uh in the industry in this in the sense that they could actually serve many many more clients uh with existing resources. And nowadays, well, I guess the last time I did my study was several years ago, uh, the financial sector had risen to 8% of GDP. So, the financial sector had doubled in size. Um, and you know, it's it's increased even further since then. I mean, this was almost before private equity had become a big deal the way it is today. So we know that the financial sector has increased and basically finance and banking are very important in capitalism. I mean it's really uh the heartbeat of capitalism but you don't need a huge financial sector uh when you're on a gold standard uh and you you don't have a Fed manipulating everything and you can just put appreciating money in a savings account. So it even if you just held it in your pocket, it would appreciate in value and you would in earn you would earn interest. So it doesn't take, you know, computers and experts and MBAs to uh tell you what to do with your money. It's pretty simple and pretty straightforward. You just don't consume. You put your money in the bank, you earn interest, the money appreciates over time uh and you build up your wealth. Uh nowadays you you uh you you have to hire experts uh for very simple things and uh that just speaks to the how another way actually it's another way in which the Fed has warped uh the modern economy. >> Yeah. I think a lot of folks who watch this channel, they intuitit this like everything that you're saying and also kind of makes you almost just like want to roll your eyes when you hear for the benefit of the American people and they talk about the dual mandate um stable prices, maximum employment, but I've had folks on this channel who said, you know, that's not really the mandate. >> No, that's BS. Uh that's total BS. Uh the mandate is pretty simple and straightforward. They're serving the political elites uh who make up the finance ind the top of the finance industry uh who make up the top of the political class. Uh you know that's who it's serving and and of course you know economists mainstream economists are part of the problem too. I mean they'll they go along with this story uh hook line and sinker. And if you know one of the big dividing lines I think which really shows your audience the difference is that you know Austrian economists we like deflation of prices. We like Walmart. We like putting things on sale. We like flat screen TVs which get cheaper and cheaper over time. And we hate inflation. >> Uh we hate be and the problems. I mean, I just did an article on the seven deadly economic sins, uh, that all come from monetary inflation, but if you look at mainstream economists, and I have a article on this where I, you know, quote a lot of mainstream economists, they have a phobia, a downright phobia about deflation of prices. uh they can point to just one case in all of history which is the great depression where prices fell in unison with the economy and the stock market but there's really no other evidence uh that deflation might cause these kind of problems. Um in Austrian theory we show why you see uh deflating asset prices in an economic crisis. Um, but so the mainstream economists, they have a phobic reaction against any decline in prices. You see this in Japan all the time. You see this in China right now, they're really worried about deflation. But if you look at consumers, consumers love deflation. They love falling prices. Um, but you know, mainstream economists are deathly afraid of it. And the basic reason that some of them might give if they were being honest is the federal government has $ 38 trillion in national debt. We have to inflate the currency so that the government gets to pay that money back in depreciated dollars. We can't have an appreciating money uh because then the government couldn't pay back the national debt. And so they're serving the interest of this political elite, the bankers and the political elites. Um and uh that all hinges on this process >> of you know low interest rate by the Fed, stimulating banking and so on and so forth. Uh then it causes price inflation uh and it helps pay the government pay back their national debt. >> Yeah. Dr. Thornon. Um, I want to ask you about this stuff. It's really popular on this channel. We have to talk about the precious metals. I'm looking at the prices of gold. It's 42. It's north of 4200 this morning. Silver is at 58.98. Um, what do you think? What do you think gold and silver are sniffing out? Well, I I actually just did a study on that and I I've I've looked at this issue in the past and uh basically if you do an analysis a theoretical analysis of gold and its purchasing power in a real free market um as a precious metal that doesn't get consumed and uh has industrial uses, jewelry so on and so forth. So it has multiple markets um and everything is recycled. Uh it has a very very stable purchasing power. It doesn't change over time. And that that's going to hold vaguely true in a big government interventionist market as well. But what the lesson is is that when we see unstable fiat prices of gold and silver, what we're really seeing is the impact of government into the economy. And I think, you know, it's pretty clear today that uh gold and silver are responding to runaway government spending, runaway government borrowing. And this is true really um you know nations governments around the globe are spending as much money as they possibly can. They're borrowing as much money as they possibly can. They built up huge uh national debts as much as they can get away with really. Uh and they're printing up money uh as much as they possibly can. uh and they're expanding and feathering their own nests everywhere around the globe. Uh and then they're, you know, going off on these crackpot things like trade wars and environmental policy, international conflict, you know, uh just a bunch of stuff. uh and this is a threat to productive people uh all over the globe in in in the global economy and they want to protect themselves against this. I mean even central banks don't trust other central banks nowadays, you know. So, it's really it's gotten to that point where politicians uh who are al are all basically of a socialist mindset. Um you know, they um they don't want to cut back on spending. They don't want to cut back on their programs. If you look at the UK and France and Japan and a lot of other countries around the world, they've had this turnover of governments because the replacement politicians all want to do the same thing. They want to spend more, they want to tax more, they want to print more, they want to borrow more. Uh and so they replace the government. the new government comes in with the exact same uh proposals and of course they're rejected by the market economy. So this we have a bad ideological framework out there around the globe and a lot of smart people uh realize that and uh you know they realize they're not trusting currencies, they're not trusting uh long-term government debt. You know if they have cash they have it. um in short-term government debt and uh but you know, precious metals provides uh an independent uh store of value uh for people that are realizing and not many people actually do realize it yet. I mean, um, it's it's certainly catching on, um, a little bit in the United States, um, a little bit in Canada and, uh, in China, uh, Japan, India, you know, there are, uh, certainly a lot of people who have recognized this and central bankers have recognized this. Um, and, uh, and they're they're buying gold uh, and now they're buying silver. I mean it was just recently uh when the price started heading up to the oldtime record um that we really uh in the silver market experience growing pains um for the first time in in a very very long time and we've seen a lot of chaotic activity um in that market in the wholesale market and uh and all the related um you know and all the related markets to that and uh I've uh been thinking well you know the old wholesale market which was tightly controlled by you know the bullion bankers and that kind of thing um you know it was their own purview uh the London dealers it was really their own control but I think you know as I look out into the future I I see a different format um for that particular market emerging uh certainly China and the BRICS countries uh want to move in that direction. So I think we should anticipate uh the market at the wholesale level being changed significantly and there could be a lot of chaos along the way u even in the near term. You know, we've seen in the silver market, we've seen [snorts] relatively chaotic uh conditions with the backwardation uh where the spot prices were higher than the for than the future prices, which is very unusual. Um you know, we've seen shortages um being regular phenomenon. We've seen wholesale markets being depleted uh and exposed um during this this period of growing pain. So when I say growing pains, I don't mean, you know, just teenagers um you know, having small problems. I'm talking about the world market for precious metals. Uh and I'm also talking about, you know, that in the future we should not be surprised if the wholesale markets look very different than they do today. >> So I take it growing pains, but it's still very early then. Is this just a mark? How do you see this, I guess, playing out? Is this a march toward sound money? Um, is there more room for these uh precious metals to run here? I don't know. I don't think I don't want to make you into a price target or anything, but just yeah, elaborate a bit more. What do you mean by it's going to look a lot different? >> I think we are pretty early on um in the bull market for precious metals. Um, you know, I think the um, uh, going over $50 in silver is maybe the end of the beginning is probably the best way to put it. Um, in the spring, um, I did a piece on the gold silver ratio being at 104. Uh, and I actually did a transaction when it was at 100 to explain to my listeners how that all worked out when gold was 100 times the price um of an ounce of silver and it very quickly came down into the 80s and I think today it's down around 75. Um and a lot of people gauge the length of uh bull market expansions in precious metals by this gold to silver ratio. Um and um I easily see the gold silver ratio falling uh pretty quickly in 2026. uh the rest of this year in 2026 um you know it's already down to 75 and I would not be surprised to see it in a year or so down below 50. Um and you know I also see uh elements of society returning to the gold standard as we speak and uh I think that's a great sign and I think we are going to end up uh returning to the gold standard or something like that. Maybe not with the word standard in it but with a market-based monetary system. uh you know I've already mentioned that central banks themselves uh are buying gold uh they're holding reserves now gold is the number one um reserve asset of central banks and that practice has um you know a lot of central banks are doing that and uh you know in China people have been able to move their savings account money from renimi into gold for 15 years. And so the Chinese population uh are now substantial gold and silver holders. And of course, India is the same way. They have a history of knowing their government is just a an inflationary maniac. Uh it spread to Japan as well. Uh where the Japanese are buying a lot of gold. Um, and in the United States, I think it's actually we're we're not the leaders in this. Um, and it's been we've had a slow uptake in the American and Canadian populations uh moving towards their own personal gold standard. And obviously we're going to be using dollars to make transactions uh for quite some time, but you can move all or a lot of your cash uh from uh cash and bank deposits into gold and silver holdings of various sorts uh if you want to. Mhm. >> And uh and that way it protects, you know, your cash holdings, you know, or say you just put half of your cash monies into gold and silver uh as a buffer against price inflation and currency depreciation. We just experienced a 10% decline this year um in the uh dollar index. Um and people are anticipating that, you know, we've had a little bit of recovery here, but people are anticipating that we could uh see another leg down there. So uh people um and and central banks and financial institutions uh you know are even now recommending instead of the old 6040 uh some of the financial leading uh financial institutions are recommending once again uh that individuals hold gold. And when I was a kid, of course, we had just gone off the gold standard and financial institutions recommended that individuals hold five or 10 or 15% of their their wealth in precious metals. Uh so we're going back to that and uh so people are moving towards the gold standard and now there's crypto cryptonized gold that you can hold um and ETFs and a lot of other um alternatives um and of course if we get into a very hyperinflationary period where prices are going up very very rapidly and currency is depreciating very rapidly uh we might even see the gold silver ratio, you know, as as you approach hyperinflation, that's going to get down into, you know, the 25, 20, or 15 uh gold, silver. >> Wow. What What price would silver be at if we got to that sort of ratio? >> Well, yeah, I know. >> I'm trying to even Yeah. Wow. Huh. >> Uh but that's a that's a hyperinflation where people are desperate. You know, they've got lots of cash. uh and and and they they have to get rid of it some way. So, you might actually end up buying um lumber and tires, you know, extra sets of tires, lumber for a future project, roof shingles for future roofing projects. You know, this is what happens in third world countries uh where they don't have access to this is that they'll buy just any kind of raw material to avoid depreciating currencies. interesting. >> Um, and so, you know, I think that's the general tendency. I think you might you're going to see people increasingly use barter exchange using constitutional junk silver coins uh to make transactions. There's a few, you know, pockets of that out there in the world right now, but that would probably continue to spread. So, that's everything is going in this direction. um in you know a Fed and central banks that were um you know didn't inflate uh we probably wouldn't be in this >> uh situation. And uh but then of course you know when with the inflationary lure is just too much for politicians uh to ignore and they so they start spending they start borrowing and they start putting pressure on the Fed like President Trump is doing right now and we end up uh in an inflationary spiral. >> Dr. Thornton, can can I sneak in two more questions or do you have a hard stop? >> No, go please go ahead. You mentioned hyperinflation and that got my attention. Is that the path that we're on? How how realistic is that in your view um as a risk? And yeah, is that the path we're on? And if we are on that path, where are we on that trajectory? >> Well, yeah, it seems absurd that the United >> scary. I mean, it could happen, I guess, but yeah. Well, uh, and it has happened in the past. Uh, it happened in France. It happened in Germany. It's not just a third world problem. Um, and it's very socially destructive. It really undermines people economically, psychologically, it distorts their whole life um, beyond repair. But um you know hyperinflations um they generally are born out of a lot of government debt of one form or another and nobody intends to take an economy onto hyperinflation. Um and it really um takes on a life of its own uh where politicians and central bankers don't feel like they have any alternative uh but to print. Of course, they can always stop the printing presses uh but they feel like they don't have any alternative uh but to print more and more money. And uh you know at once you get into the hyperinflationary spiral uh you know it's hurting the real economy. It's not just the a numbers game. It it's really hurting the economy. It it makes the marketplace more difficult. It makes running government much more difficult. Uh you know in a hyperinflation well all of a sudden you got to pay the government employees more. uh or you got to lay them off or and then they're on welfare and you know how do you support everything? Well, that's the problem and I think we're on the on-ramp uh to hyperinflation which is an exploding national debt and a Fed that is willingly accommodating and it's not just the Fed, it's central banks around the globe. They're willing to accommodate the political process. Um and you know they they're increasing uh the money supply around the planet and uh and yet right now we're not experiencing extremely high rates of price inflation. Um and that but that's not a mechanical process. You know in the 1970s they thought they'd had in price inflation under control and then all of a sudden we got another big bout of it. Uh, fortunately for my generation, uh, Jimmy Carter did the right thing, Paul Vulkar did the right thing. Uh, and they they basically bit the bullet. They raised interest rates to 18% which some like in Brazil is doing the same thing right now. Uh, you know, it's very very painful. uh but they did the right thing uh back then and the United States uh came out of that in the early 1980s and we reemerged um as as a viable economic superpower. So um and the the recovery was very very painful. Uh but it was very very quick. Uh it was almost magical. Um but I I'm afraid that um politicians don't have the backbone uh in both parties certainly and there's no politicians that I can see that have the backbone to stand up to ridiculous policies that they've enacted and ridiculous levels of spending that they've done and and the national debt. I mean this takes um people um who are intellectually capable and intellectually honest and moral. Um and I don't see anybody um like that in the American political class right now. And my sense is that it doesn't exist in Europe certainly um and it doesn't exist in Japan um and a few other places that I you know have knowledge about. So that's why I say we're we are on the on-ramp uh to hyperinflation right now. >> But we could fix it if you had the leadership to do so to make these hard decisions. It even at 38.35 trillion is where our national debt stands right now. Just check the US debt clock. There could be a path to fix it. We're not totally past the point of no return. >> Yes. >> Mhm. >> Absolutely. the likelihood of it happening is >> well no absolutely it's it's fixable. Um it uh first of all you have to have the intellectual case of how to fix it and why fixing it is a good thing. You know here at the Mises Institute we don't preach advocacy of the free market. We teach how the free market works, what how government works and how to reform government in order to promote the free market economy and why that's good for the standard of living and why that's good for the fabric of society. And so we have pretty well-developed ideas as to exactly how you um fix these problems. But you you have to have a you can't just advocate for a free market. You have to know um you know that these government programs are actually hurting the population and uh that getting rid of them may have some transitional issues but in the longer run it's really good for society uh to get rid of all these problems and you know you end up solving a lot of the problems uh that for example President Trump is trying to deal with using tariffs uh which every economist knows, even stupid economist knows that tariffs are a bad idea. [laughter] U and he's got the worst uh economist advocating or um I I wouldn't say, you know, uh consult uh counseling him about tariffs because I think President Trump is his own man, his own guy, but he's got some pretty lightweights uh working for him on the tariff issue. All right, let me see if I can squeeze one more question, then we have to go. Bitcoin. I'm looking at the Bitcoin price. Let's see. It's down. Uh 84 84 thou 84,873 today? Because we talked about precious metals. Does Bitcoin does is Bitcoin compatible with the Austrian School of Economics? Does it fit in? >> Yes, it it does in the sense that Bitcoin tried to mimic the gold standard. it, you know, using real resources to extract bitcoins is kind of similar thematically to digging gold up out of the ground in comparison to just printing money on a printing press. Um, it all it's also market-based. It's also private. Uh, and so it has some of the same themes as precious metals. Now of course uh it has no intrinsic value um you know to it and um so consequently it's it it is a different animal but thematically it was born out of the uh financial crisis and it was constructed electronically along the lines of what Austrians would sort of generally recommend in terms of a commodity money that required real resources was limited in supply was incredibly divisible, you know. So, it was some, you know, computer geek genius uh who must have read Austrian economics and was upset about all the bailouts and, you know, all the foreclosures and stuff that happened back then. Um, but it is different. I mean it doesn't have any uh foundational intrinsic value to it. So it's going to be a lot more clunky. Um and you know so I've seen it as as a good sign. Um now of course it's diverted the young generation uh away from gold and silver at least temporarily um towards Bitcoin as a way of avoiding government money. uh if Bitcoin were to melt down significantly in the face of ever rising gold and silver prices, I think that younger generation is going to flip from things like Bitcoin um and all of the other uh cryptocurrencies into cryptonized gold and silver where you have the same electronic transmission benefits of crypto, but you have the fundamental values of gold and silver backing it up. Theoretically, you could have any commodity uh being kryptonized um using using that technology. >> Dr. Thornton, I have to say I've really enjoyed our conversation. I've learned so much from you. I feel like I got a wonderful lesson in economics. Before I let you go, let folks know where they can find you, where they can learn more about the work that you're doing at the Mises Institute, how they can support that work, and any parting thoughts, anything that you would like to leave this audience to think about. It could be something that we discussed earlier that you want to emphasize, or maybe it's something that we didn't bring up in this conversation. The floor is all yours. >> Well, the Mises Institute, where I work, uh, is the home of Austrian economics. It was named after Ludwig van Misus, the great Austrian economist from Europe and uh were the prime opponents of big government, socialism and so forth. Uh certainly paper money uh Misesus was the primary opponent of all those things uh in Europe and we have mises.org ORG is one of the world's largest and most trafficked economic web pages in the world and it's written so that everybody can uh read it and learn from it. We've got written materials, academic materials, audio, video. Uh you can download most of the books, the great books in Austrian economics. As a matter of fact, we have a program right now because most of our emphasis is on students and teaching them the science of why free markets work and why government doesn't work. But Misesus' student FA Hayek, we put together a uh greatest hits uh book collection of his articles and we're giving away copies uh of this book for free. So, put a comment uh >> that they will love that. Yes. And you can actually request more than one copy uh because we want to widely distribute these uh to as many people as possible. And Hayek won the Nobel Prize in economics for his work extending Misesus' theory uh of the business cycle. But we're here for students, for the general public, for young academics trying to find a foundation uh for their uh for their career. So, it's a very exciting place to work. Um, uh, it's not noisy, but it's very exciting for me. And uh and I think it's a great place for everybody to go because I know you feel um isolated and I I know a lot of people feel like uh that it's futile out there to do anything about it, but um I'm actually very excited because I got into this a long time ago when things were really really bleak and where nobody had even heard of Austrian economics or Ludwig von Mises or FA Hayek or anything like that. Now millions of people uh around the world have heard of Austrian economics. The new president of Argentina is a big fan of Austrian economics. And so, uh, I I have a lot of optimism and I think if you can come and learn on your own on the web page or at our events, uh, and become a participant in what we do, invest in what we do. I think you'll feel a lot better about yourself and a lot better about the movement and about the future of the world. >> Dr. Mark Thornton, senior fellow at the Misesus Institute. Thank you so much for being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. I really appreciate you taking the time today. >> You're very welcome.
Legendary Economist Dr. Mark Thornton: Fed Cutting Rates to Re-Stimulate the Everything Bubble
Summary
Transcript
The Fed tells us that they're, you know, watching over us and there to protect us and that they've got this power uh over the economy uh to stimulate economic activity in the form of rate cuts. But it, you know, history has shown it doesn't always work. In fact, those are really the seeds of an of a new business cycle of boom and bust. >> Dr. Mark Thornton, senior fellow at the Mises Institute. It is so wonderful to welcome you to the show. Great to meet you, Dr. Thornton. Really appreciate you taking the time to join me today. >> Thank you. It's great to be here. >> Well, I am absolutely thrilled to have you and I'm thrilled for this audience to get to know you, to learn from you today. So, Dr. Thornton, I'd like to start where I always start with my guest and that is with the big picture macro view. that framework in which you are looking at the world today, the economy, we can throw markets in there and we want to hear what's on your radar, the outlook that you have, and as you know, Dr. Thornton, on this show, you can take all the time you need to set the table when it comes to that big picture macro view. >> Great. Um well you know the a lot of economists are projecting high rates of economic growth and high employment low inflation falling inflation price inflation uh for 2026 but I have a lot of concern uh about the macro economy the global economy I think you know most econ uh most economies right now around the world China Japan uh Europe Europe, uh, Canada, the United States, etc. um are really with the exception of the United States, the rates of economic growth are very low or negative. And uh and so we have a really a global economy that's suffering uh from big government and financial repression um high rates of paper money inflation. And there's a lot of specific things too that we all know about but we aren't really considering in the face of these forecasts. I mean, we have central banks uh printing money up um in at the Japanese uh central bank, uh China, uh euro, everybody's cutting interest rates right now. Um and so there's a lot of uh paper money being introduced into the economy and that's really been the case for many years, including from COVID and precoid times. Um, so we're seeing big bubbles in technology. Uh, we're seeing an ongoing series of uh bubbles in real estate and emerging real estate problems, especially in the United States. And so there's a whole flock of swans out there. Uh, we're just not sure which one of them is the black swan that's going to sort of ignite um a possible crisis. But I think the table has been set. And then when we look at, you know, the trade war that was unleashed by uh President Trump, uh that's supposed to be uh causing increased investment and growth in the United States where he's sort of forced the hands of other uh countries around the world to invest in the United States and also investments from reshoring. But Austrian economists and really any economist recognizes that [clears throat] those forced investments in capital expenditures are not really promoting efficiency and productivity. They're just born out of necessity. Uh but ultimately they result in inefficiencies and um and higher cost in the long run. And then of course we've got a whole legacy of environmental policies around the globe for the last 20 to 25 years where a lot of our investment capital has been put into environmental efforts of electric vehicles and um you know electrification um and that sort of thing. So we have a lot of uh what Austrian economists call male investments or bad investments. Investments that were [snorts] made not out of um economic calculation of profit and loss but from other criteria. And so that's a problem. I mean the accountants and the mainstream economists they just count all that government spending. They count um all of these investments as if they were determined in the market to increase productivity and efficiency. But Austrian economists recognizing that things like, you know, protectionism and the trade war and central bank inducements are really pushing our capital in the wrong direction. in environmental policy. Um particularly in extractive industries that have been starved for capital and all of that capital has gone into alternative energy technologies, electric vehicles, etc. Um and so we have a great imbalance there uh that we're going to have to deal with going forward in the economy. So, you know, the general background of financial repression and inflation and big government is bad enough, but then we have on top of that um you know, central banks. We have uh the the trade war and international conflict that is emerging and we also have this legacy uh problem of environmental policies that we're going to have to deal with and it's not going to be a pretty picture. >> So, it sounds like Dr. Thornton, there's a confluence of concerns out there and it's, as you put it, it's certainly not a pretty picture. Um, you mentioned black swans or a flock of swans rather and I know this is something you've been writing about. Um, are there any obvious ones that stand out to you or any risks that maybe they're maybe they're risks that aren't getting enough attention? Well, yeah, that's really the case with black swans. Um, with the Fed and central banks inflating and manipulating the interest rates, it creates the potential for a vast array of swans out there in the economy. Now the problem with identifying the black swan is really the black swan is just the first one to crack and the first one to really show its hands and to cause imbalances and to cause contagion really um you know something that is denied regularly repeatedly um in the mainstream media that there's any possibility of any kind of contagion out there because it it really sends shivers s uh down, you know, with uh government economists and Wall Street economists, they really don't even want to hear that word. But the ones that I've been looking at uh and others as well, [snorts] uh you have, you know, the the uh commercial real estate mortgage uh market and you know, the Biden administration basically covered up that problem. And we're not sure to the extent that the Trump administration is trying to get those people to roll over the problem into the future. Uh but that's certainly an area of intense concern. Uh now we have um an emerging housing uh real estate market problem where a lot of the you know imbalances in that market which have been really obvious. I mean, all of a sudden, prices of homes are extremely high and there's a tremendous shortage. And now we find uh seemingly just a couple of months later that while we have an over supply of houses and more houses are coming onto the market than ever before and all these apartments uh that are being built uh won't have tenants. And you know it it it goes into warehousing and uh leasing space and you know all the different areas of commercial uh and and private individual real estate. Um and then there's private equity. You know private equity has been a huge um uh new phenomenon. Uh it's not brand new obviously but it's it's become a huge um aspect of the economy where private companies have been or companies have been taken private or started up in the private equity area uh where a lot of capital is flown into those areas uh to either buy out or to expand new companies. Um but that market is you know it doesn't have public marketplaces where the value of those companies is being traded on a daily basis so that everybody sort of has intimate knowledge and a lot of knowledge about the company the numbers uh the sales and so forth everything is revealed to the marketplace and evaluated in the marketplace. So that is certainly a uh a very big concern. And then of course something that is increasingly recognized is these data centers. Uh people wonder about the profitability of artificial intelligence. You know what is it exactly is it going to do? I'm sure it's going to do it's going to benefit you know mankind to a certain extent. Uh but it's not being done in a real free market environment. It's being done um in this uh Fedfueled uh crazy bonanza uh of a situation. And there these companies are spending enormous amounts of money. Uh they're responsible for a huge influx of capital expenditures into the economy right now. uh without any, you know, well-defined output. It's not like they're putting up gas stations all over the place where they know they're going to have a certain number of customers. They're going to have revenues and so forth. All of that is up in the air, so to speak. And uh you know, it's raising electricity prices. It's raising uh the pricing of uh computer technology and chips and all sorts of things. So the and the chip makers, that's another area. uh Nvidia and so forth. Um so the list really goes on and on, not to mention government debt. Uh there's a big concern and and I think this is going to go forward uh with long-term government debt. You know, the governments have already released trillions and trillions of dollars of government debt that has to be constantly rolled over and uh they're they're spending and borrowing even more money now. Uh and so the balloon has to be continually filled. And yet there's a lot of doubt uh right now about the value of currencies that underly these bonds as well as the bonds themselves because people are just very nervous and cautious about inflation and currency depreciation moving forward over the next 10 years or moving forward over the next 30 or 40 years. Um and uh that's one of my uh I guess one of the more recent concerns I've had is you know what happens if the United States with the world's leading economy, the only growing economy and uh what happens if we go into 2026 with a new Fed chairman um and a Fed that's already cutting rates and other central banks are already been cutting rates and what if inflation ticks up as some of my first points um that I raised about the general background of the economy. What if those problems emerge in the form of higher prices um in the economy and people are spooked even further about the value of these longer term bonds? And so, you know, the general problem is uh central banking and fiat money unleashing um male investments widely throughout the economy. The only question we still remaining is the black swan. But there's nothing unique about the black swan except it's the first one to be revealed. Um and it's very hard to identify the first one um when we have so many out there. Now when the housing bubble was around uh 20 years ago, you know, it was it was relatively easy for me. Uh I identified the housing bubble. >> That's right. You were one of the ones who c who called it in 2006. Well, yeah, actually in 2004 I was writing about it, not in detail, but I was naming it the housing bubble and um and I just happened to uh you know that was more on the B I wasn't a housing analyst or anything. I wasn't even a macroeconomist. I was just an individual looking in the marketplace and seeing what was happening to prices and interest rates and psychology. You know, psychology is is a revealing factor when people become uh different psychologically than they were in the past where they don't become good business people um you know and economic calculators. they become uh you know glued to something the way people uh until recently at least were you know sort of glued to the fortunes of cryptocurrencies >> and cryptocurrencies is another one of the black swans potentially. >> Okay, there are a bunch of swans and do you think would you characterize this as an everything bubble then? You just mentioned a bunch of different areas. Um are we living through an everything bubble? Yeah, I think we are because um you know we've had these low interest rates for a very long time and when we came out of the housing bubble uh the central bank uh central banks around the world instead of allowing the market to fix the problem, they just applied, you know, vast amounts of uh subsidies to banks and to the and and and they lowered interest rates uh to near zero. and they engaged in quantitative easing. Uh and they basically put the global economy into an interest rate straight jacket. Uh they loosened up a little bit in the teens in the 20 late teens. Uh but they saw breakages there. A lot of Austrian economists were um worried about the economy enter entering a crisis in 2020 um after we saw some problems in 18 and 19. Um and just as those problems began to emerge, of course hit and uh there was a massive uh in the United States, you know, $5 trillion of Fed money, $5 trillion of government money and the uh business cycle problem went away. But of course, it just extended uh the reality of of an economic crisis uh to this day. And then they, you know, they went back with low interest rates. They raised them a little bit. Uh and then now we're back on the path towards uh lower rates uh once again. And of course, President Trump doesn't want to go back to market determined interest rates. He wants to go back to highly stimulative um interest rates um to restimulate to rekick off uh even more bubble activity. This episode is brought to you by VANX rare earth and strategic metals ETF, ticker symbol REMX. Rareears are the hidden backbone of modern technology and defense, powering everything from smartphones and electric vehicles to fighter jets and wind turbines. Van Ec recognized this early, launching the rare earth and strategic metals ETF, ticker symbol REMX, 15 years ago, well before supply chain security became a global priority. Today, China dominates the production and refining capacity of rare earths, creating real challenges for global supply chain security as these materials are essential for technological innovation, clean energy, and national security. That's why countries all around the world are racing to build their own supply chains and [music] reduce reliance on China. As this global shift continues, investment in the rare earth ecosystem is growing rapidly. [music] From mining to advanced manufacturing, investors can gain access to this powerful trend through REMX. Visit vanc.com/remxjiulia to learn more. Okay, let's talk about the Federal Reserve um and looking ahead to 2026. Um what moves do you anticipate from the Fed under, you know, new leadership? if you have thoughts on new leadership. I think uh most folks now they expect Kevin Hasset. That's what the betting markets are showing. Um what risk do you think we could see because of the Fed's moves? Because I I take it a lot of this it all stems back to the Federal Reserve and their policies. >> Yes, it all does go back to the Federal Reserve, paper money, artificial interest rates. And you know, President Trump has made his goals and his intentions perfectly clear. He hasn't disclosed who he's going to nominate to be the chairman of the Fed, but he has um you know encouraged the Fed to cut interest rates. He's put a lot of pressure on Chairman Powell who finally relented um and they started cutting interest rates. Um, you know, some of the members of the board of governors have kind of switched at least as far as a dress rehearsal, maybe to be nominated by President Trump. Um and so the the general tenor um has gone from one of trying to normalize interest rates um uh with uh chairman Powell um and to be stingy and to try to get back to that 2% target. Um and now it's just seems to be full steam ahead. Um other countries have already been cutting interest rates. the United States has started uh cutting interest rates and uh you know uh they'll have uh a new chairman in early 2026 uh assuming uh chairman Powell who can continue to sit on the board assuming he's going to um resign and retire uh from that position which will open up another position uh for President Trump to appoint um a member of the board of governors and and so the path seems very clear and typically when uh an economy starts going into a soft spot we've seen the stock market sort of topping off we've seen Bitcoin falling off we've seen increasing uh jitters in credit markets and the Fed is responding but the Fed usually responds with a number of rate cuts. Um, and uh, you know, and it usually doesn't actually work uh, very well. Uh, there's been a lot of cases where as a stock market starts to roll over, uh, the central bank starts cutting uh, interest rates and it really doesn't do anything to stop uh, the decline in markets as far as the stocks are concerned. Um and and so that's the path that I can generally see forward is a much more dovish Fed uh continuation of uh interest rate cuts. Uh the market is projecting at least a few cuts uh one in December and at least a couple in uh 2026. So I think that's ob the sort of the obvious path that we're going to be taking. Um and uh but we'll see. Um, you know, the the Fed tells us that they're, you know, watching over us and, you know, there to protect us and that they've got this power uh over the economy uh to stimulate economic activity in the form of rate cuts, but it it you know, history has shown it doesn't always work. In fact, uh it does stimulate the economy certain at certain points. Um but that is really the those are really the seeds of an of a new business cycle of boom and bust. >> You mentioned the business cycle and I know um business cycle the business cycle is incredibly important to Austrian economics. Where where where are we in this cycle? I guess um I guess on the boom side and where do you see signals that a bust could be coming in? Maybe we should even explain the business cycle theory as well. >> Well, you know, the Austrian business cycle theory, um, Ludri van Mises really started it off, uh, in his, you know, theory of money and credit, which is over a hundred years now. Um, you can download that book on our website as well. Um and the theory only comes at the end of this very long treatise on money and credit [gasps and sighs] and uh of course um uh his student FA Hayek uh did a lot of work expanding that and uh he won the Nobel Prize. Murray Rothbard wrote a great analysis of America's great depression where he applied the theory to America's great depression. Uh but basically it says that if the central bank injects money through interest rate reductions into credit markets, it's going to kick off a boom because lower interest rates encourage borrowing. Uh they discourage savings. So it's encouraging both investment and more consumption at the same time. And usually in a free market, if you if investment goes up, consumption has to temporarily go down. So there's no cycle. But with these artificial interest rates, you do get both more investment and more consumption. So everything is making money, everybody's happy, everybody's got a job, wages are going up. It it's it's a great scenario while it lasts. Uh but ultimately of course all of that faults all those false signals result in higher wages and higher prices. First you get the higher prices in asset markets then you get higher prices in commodity markets and then higher prices for consumer goods. Uh and then you get higher wage rates. So the the people who have access to the capital the money first uh they benefit tremendously as a result but the working class is actually harmed. They get higher prices and only later if at all do they get higher wage rates. So >> it's definitely hurts the working class and it helps the political elites especially and it helps government too because government is the biggest borrower. So lower interest rates helps their case on the front end. And then by depreciating the currency, governments are helped in that they pay back the national debt with depreciating and depreciating and depreciating currency. So you can clearly see the winners and the losers. Um but every time they create a boom in the economy, they're going to they're going to necessarily bring about a bust where there's a cluster of entrepreneurial errors where uh businesses and families go bankrupt in large clusters at certain points in time. Whereas in a free market economy, yes, people go bankrupt. Uh people have foreclosures, but they're spread out. uh they're more or less random. They're more or less individualized. They're not they don't come in big clumps and big groups. Um and so we actually have a theory that explains exactly how the cycle uh turns out and uh how it plays out uh in life. Now actually predicting uh the magnitude and timing of these things is highly problematic. um and you know forecasting when things are going to break um how significantly negative things are going to go. That's really beyond [clears throat] the theory, >> so to speak. And and and what we've had and what a lot of these booms are really like is they're [clears throat] not um uh symmetrical. They they're not uh even. uh there's no standard path um of the cycle. It doesn't look like a textbook case that you might see in a college textbook. Um sometimes the cycles are very short. A lot of times the most noteworthy ones are very long. So [clears throat] the 1920s we had a boom for eight years and uh you know so it was an extended boom. uh in the 1960s we had a boom for almost 10 years. Um and and so these booms can actually be elongated uh significantly uh by the central banks. And in this case, what we saw was that we had um you know the housing bubble and then the Fed injecting a lot of money and trying to back out and it looked like the uh the expansion was coming to an end around 2019 2020 when COVID hit and they reignited the whole thing with $5 trillion uh of new injections and uh and so really you could look back at the stock market and not see uh a tremendous normal contraction in the stock market going back to 2009. And so on with that dating, if we want to look at the S&P 500, uh there's been a 16-year uh boom in the stock market. you know, it hasn't been even and continuous, but we've really had an upward movement of almost 16 years. In fact, I think it's more than 16 years. I just calculated it was 16 years and 6 months already. And uh and so we've had this tremendous um uh bubble in stocks uh with the S&P 500 up 800% in 16 years. uh the NASDAQ is up 20 times uh over that same period. So yes, there's been some fits and starts in between uh but you can also look at it as one elongated uh march upward in in the form of bubble-like activities. >> And does that create a worse bust than when you have it be that elongated? >> Uh yes. um you know it it's you it's not a mechanical process like in physics or construction or engineering. Uh it's not a plumbing problem. Uh but yes, in general, you can think of it is that the more they inflate and the longer they inflate uh the more of our capital is put into uh these male investments uh in the economy and uh and we're wasting resources or we're using them inefficiently at least. um you know so we get more high techch we get more uh biochemistry and pharmaceuticals very long-term type projects um you know things that uh and real estate real estate um is typically has a shelf life of about 25 years and pharmaceuticals are you know similar to that in that it's about a 20-year process to produce them and they're supposed to pay off over the next 10 to 20 years. Uh and so we're sinking a lot of money um into these longer unproven usually uh investment projects and so some of the ones um that have been undertaken uh have already been unwound as well. And this is why you can't look at it like an engineering process. For example, um after COVID, uh we saw a bubble it um in the streaming services, right? So, a lot of that money, that capital that, uh the savings of people, uh billions and billions and billions of dollars went into new streaming services. U and then shortly thereafter, within a couple of years, we saw uh a big correction in that marketplace. And a lot of the players withdrew uh their investments. They lost their money. Um and so some of these male investments get unwound over these long uh bubble expansions. So that makes it even more difficult to say uh you know how much pain is going to come once these things break. But given the length of this uh boom, I would suggest uh and the the dislocations really that have occurred and that are occurring. I would say that the um the pain that's been built up and that is probably yet to come uh is going to be very significant. We don't know how the politics is going to react to this. Are they going to say, "Well, we did this wrong and let's have some free market reforms." Or are they going to say, "Ah, the market caused these problems and we need to have even more government intervention." So that makes it even more difficult because the political response is very important as to how quickly cuz the free market can clean up these problems very quickly uh with a very simple and straightforward policy uh response. But unfortunately in modern times, socialist governments uh in the west uh have not applied uh the age-old um remedies uh to these types of situations. We basically we've had [clears throat] a hundred years now where Keynesian economics and socialist economics now really is um in the lead uh in capitals around the world and in central banks around the world. So if they apply the wrong remedies, uh these problems as the great depression really is an example of that where they you know Roosevelt uh came in and applied the wrong remedies and instead of a one or twoyear period of correction, we ended up with 12 years of stagnation in the United States known as the New Deal. Um and so there's too many variables really to predict the magnitude, the depth and the length uh of what the recovery period is going to look like. But Austrians know we have a a very simple set of re remedies uh that will work and that could very quickly uh restore the economy to prosperity and economic growth. uh President Harding in 1920 um after uh World War I and uh during the economic depression of 1920 he applied those uh remedies and the economy recovered within just a matter of a few months. Uh, of course, Harding is widely hated and berated um because of his outlook on, you know, he was the old-fashioned pro- capitalist. And so the socialist in the media, socialist historians have painted him as the worst president in American history, but he was actually uh one of the best in terms of his economic thinking. >> Hey there. I just want to take a quick moment to thank you for watching this video and I would really love for you to subscribe to this channel if you like this content. Over 70% of our viewers are not yet subscribed and we are on a mission to hit 100,000 subscribers. So, if you could just take a quick moment, hit subscribe. Thank you so much for your support. We appreciate you. And back to the video. I also wonder, Dr. Thornton. The market is so used to just like Fed intervention, money printing. It's I wonder if they almost just expect it. They like it even. >> Oh, absolutely. I mean uh the bankers especially the big bankers that are involved in the process uh well first of all they're part of the power elite and their industry benefits tremendously um uh from this and even the smaller banks obviously benefit a little bit uh from this but the big banks you know that's where the money comes in um that's that's who is responsible for dealing the government debt. And so big banks are really a creature of government, big government uh borrowing and printing. They um are sustained and thrive as a result of this whole process and of course they get the money first. This would be like um being in the being a bakery um where the government um gives out free uh flour and free eggs. You know, if if your industry were to be given free inputs, um then yeah, it would be great for you. Uh it it would uh very much increase your the profitability of a bakery if they got free flour and free eggs and free sugar. Um it would be great and and that's really uh the way bankers and Wall Street too. I mean um you know Wall Street u the uh this whole process helps the largest corporations who really can access those very low interest rates on similar terms to the government itself. And so it encourages these mega corporations um who get access to this money and it disadvantages small independent businesses, small entrepreneurs, startups and so forth. Uh they don't have access to any of this stuff. Um their access to credit is is very much uh contingent on real factors and uh and so it creates winners and losers. And if you ask Wall Street and if you ask the big banks in New York, um the big law firms that [clears throat] do corporate law in New York and Washington, you know, if do you like the Fed and do you like low interest rates, they're going to say yes. But, you know, that leaves out not just small businesses, but it leaves out most of the population who don't access credit and who save money. They would like to save money um and earn interest and build up their own personal capital. They, you know, their house and their family, their independent business, uh their retirement savings, their college savings, uh and these low ultra low interest rates with a depreciating currency makes saving almost impossible. Um and the idea you know of even uh a savings account which was a standard when I was born you know a thousand years ago a savings account was a standard practice for uh most people in the economy. You'd have maybe a checking account and uh a Christmas club account and a savings account. But now nobody has savings accounts anymore because it doesn't earn interest. Um and you know so that really uh you know makes it difficult. It makes it so difficult uh for the working class in America to get ahead. And um but it it it's to the great advantage of New York, of Washington, the big banks, of Wall Street and you know private equity and so on and so forth there. you know, it's attracted um this this Fed process has attracted uh a much larger financial sector. Financial repression of the general population has created a much larger industry. So before the the gold standard was abandoned uh you know the fin banking and finance represented about 4% of the overall economy and there was plenty of slack uh in the industry in this in the sense that they could actually serve many many more clients uh with existing resources. And nowadays, well, I guess the last time I did my study was several years ago, uh, the financial sector had risen to 8% of GDP. So, the financial sector had doubled in size. Um, and you know, it's it's increased even further since then. I mean, this was almost before private equity had become a big deal the way it is today. So we know that the financial sector has increased and basically finance and banking are very important in capitalism. I mean it's really uh the heartbeat of capitalism but you don't need a huge financial sector uh when you're on a gold standard uh and you you don't have a Fed manipulating everything and you can just put appreciating money in a savings account. So it even if you just held it in your pocket, it would appreciate in value and you would in earn you would earn interest. So it doesn't take, you know, computers and experts and MBAs to uh tell you what to do with your money. It's pretty simple and pretty straightforward. You just don't consume. You put your money in the bank, you earn interest, the money appreciates over time uh and you build up your wealth. Uh nowadays you you uh you you have to hire experts uh for very simple things and uh that just speaks to the how another way actually it's another way in which the Fed has warped uh the modern economy. >> Yeah. I think a lot of folks who watch this channel, they intuitit this like everything that you're saying and also kind of makes you almost just like want to roll your eyes when you hear for the benefit of the American people and they talk about the dual mandate um stable prices, maximum employment, but I've had folks on this channel who said, you know, that's not really the mandate. >> No, that's BS. Uh that's total BS. Uh the mandate is pretty simple and straightforward. They're serving the political elites uh who make up the finance ind the top of the finance industry uh who make up the top of the political class. Uh you know that's who it's serving and and of course you know economists mainstream economists are part of the problem too. I mean they'll they go along with this story uh hook line and sinker. And if you know one of the big dividing lines I think which really shows your audience the difference is that you know Austrian economists we like deflation of prices. We like Walmart. We like putting things on sale. We like flat screen TVs which get cheaper and cheaper over time. And we hate inflation. >> Uh we hate be and the problems. I mean, I just did an article on the seven deadly economic sins, uh, that all come from monetary inflation, but if you look at mainstream economists, and I have a article on this where I, you know, quote a lot of mainstream economists, they have a phobia, a downright phobia about deflation of prices. uh they can point to just one case in all of history which is the great depression where prices fell in unison with the economy and the stock market but there's really no other evidence uh that deflation might cause these kind of problems. Um in Austrian theory we show why you see uh deflating asset prices in an economic crisis. Um, but so the mainstream economists, they have a phobic reaction against any decline in prices. You see this in Japan all the time. You see this in China right now, they're really worried about deflation. But if you look at consumers, consumers love deflation. They love falling prices. Um, but you know, mainstream economists are deathly afraid of it. And the basic reason that some of them might give if they were being honest is the federal government has $ 38 trillion in national debt. We have to inflate the currency so that the government gets to pay that money back in depreciated dollars. We can't have an appreciating money uh because then the government couldn't pay back the national debt. And so they're serving the interest of this political elite, the bankers and the political elites. Um and uh that all hinges on this process >> of you know low interest rate by the Fed, stimulating banking and so on and so forth. Uh then it causes price inflation uh and it helps pay the government pay back their national debt. >> Yeah. Dr. Thornon. Um, I want to ask you about this stuff. It's really popular on this channel. We have to talk about the precious metals. I'm looking at the prices of gold. It's 42. It's north of 4200 this morning. Silver is at 58.98. Um, what do you think? What do you think gold and silver are sniffing out? Well, I I actually just did a study on that and I I've I've looked at this issue in the past and uh basically if you do an analysis a theoretical analysis of gold and its purchasing power in a real free market um as a precious metal that doesn't get consumed and uh has industrial uses, jewelry so on and so forth. So it has multiple markets um and everything is recycled. Uh it has a very very stable purchasing power. It doesn't change over time. And that that's going to hold vaguely true in a big government interventionist market as well. But what the lesson is is that when we see unstable fiat prices of gold and silver, what we're really seeing is the impact of government into the economy. And I think, you know, it's pretty clear today that uh gold and silver are responding to runaway government spending, runaway government borrowing. And this is true really um you know nations governments around the globe are spending as much money as they possibly can. They're borrowing as much money as they possibly can. They built up huge uh national debts as much as they can get away with really. Uh and they're printing up money uh as much as they possibly can. uh and they're expanding and feathering their own nests everywhere around the globe. Uh and then they're, you know, going off on these crackpot things like trade wars and environmental policy, international conflict, you know, uh just a bunch of stuff. uh and this is a threat to productive people uh all over the globe in in in the global economy and they want to protect themselves against this. I mean even central banks don't trust other central banks nowadays, you know. So, it's really it's gotten to that point where politicians uh who are al are all basically of a socialist mindset. Um you know, they um they don't want to cut back on spending. They don't want to cut back on their programs. If you look at the UK and France and Japan and a lot of other countries around the world, they've had this turnover of governments because the replacement politicians all want to do the same thing. They want to spend more, they want to tax more, they want to print more, they want to borrow more. Uh and so they replace the government. the new government comes in with the exact same uh proposals and of course they're rejected by the market economy. So this we have a bad ideological framework out there around the globe and a lot of smart people uh realize that and uh you know they realize they're not trusting currencies, they're not trusting uh long-term government debt. You know if they have cash they have it. um in short-term government debt and uh but you know, precious metals provides uh an independent uh store of value uh for people that are realizing and not many people actually do realize it yet. I mean, um, it's it's certainly catching on, um, a little bit in the United States, um, a little bit in Canada and, uh, in China, uh, Japan, India, you know, there are, uh, certainly a lot of people who have recognized this and central bankers have recognized this. Um, and, uh, and they're they're buying gold uh, and now they're buying silver. I mean it was just recently uh when the price started heading up to the oldtime record um that we really uh in the silver market experience growing pains um for the first time in in a very very long time and we've seen a lot of chaotic activity um in that market in the wholesale market and uh and all the related um you know and all the related markets to that and uh I've uh been thinking well you know the old wholesale market which was tightly controlled by you know the bullion bankers and that kind of thing um you know it was their own purview uh the London dealers it was really their own control but I think you know as I look out into the future I I see a different format um for that particular market emerging uh certainly China and the BRICS countries uh want to move in that direction. So I think we should anticipate uh the market at the wholesale level being changed significantly and there could be a lot of chaos along the way u even in the near term. You know, we've seen in the silver market, we've seen [snorts] relatively chaotic uh conditions with the backwardation uh where the spot prices were higher than the for than the future prices, which is very unusual. Um you know, we've seen shortages um being regular phenomenon. We've seen wholesale markets being depleted uh and exposed um during this this period of growing pain. So when I say growing pains, I don't mean, you know, just teenagers um you know, having small problems. I'm talking about the world market for precious metals. Uh and I'm also talking about, you know, that in the future we should not be surprised if the wholesale markets look very different than they do today. >> So I take it growing pains, but it's still very early then. Is this just a mark? How do you see this, I guess, playing out? Is this a march toward sound money? Um, is there more room for these uh precious metals to run here? I don't know. I don't think I don't want to make you into a price target or anything, but just yeah, elaborate a bit more. What do you mean by it's going to look a lot different? >> I think we are pretty early on um in the bull market for precious metals. Um, you know, I think the um, uh, going over $50 in silver is maybe the end of the beginning is probably the best way to put it. Um, in the spring, um, I did a piece on the gold silver ratio being at 104. Uh, and I actually did a transaction when it was at 100 to explain to my listeners how that all worked out when gold was 100 times the price um of an ounce of silver and it very quickly came down into the 80s and I think today it's down around 75. Um and a lot of people gauge the length of uh bull market expansions in precious metals by this gold to silver ratio. Um and um I easily see the gold silver ratio falling uh pretty quickly in 2026. uh the rest of this year in 2026 um you know it's already down to 75 and I would not be surprised to see it in a year or so down below 50. Um and you know I also see uh elements of society returning to the gold standard as we speak and uh I think that's a great sign and I think we are going to end up uh returning to the gold standard or something like that. Maybe not with the word standard in it but with a market-based monetary system. uh you know I've already mentioned that central banks themselves uh are buying gold uh they're holding reserves now gold is the number one um reserve asset of central banks and that practice has um you know a lot of central banks are doing that and uh you know in China people have been able to move their savings account money from renimi into gold for 15 years. And so the Chinese population uh are now substantial gold and silver holders. And of course, India is the same way. They have a history of knowing their government is just a an inflationary maniac. Uh it spread to Japan as well. Uh where the Japanese are buying a lot of gold. Um, and in the United States, I think it's actually we're we're not the leaders in this. Um, and it's been we've had a slow uptake in the American and Canadian populations uh moving towards their own personal gold standard. And obviously we're going to be using dollars to make transactions uh for quite some time, but you can move all or a lot of your cash uh from uh cash and bank deposits into gold and silver holdings of various sorts uh if you want to. Mhm. >> And uh and that way it protects, you know, your cash holdings, you know, or say you just put half of your cash monies into gold and silver uh as a buffer against price inflation and currency depreciation. We just experienced a 10% decline this year um in the uh dollar index. Um and people are anticipating that, you know, we've had a little bit of recovery here, but people are anticipating that we could uh see another leg down there. So uh people um and and central banks and financial institutions uh you know are even now recommending instead of the old 6040 uh some of the financial leading uh financial institutions are recommending once again uh that individuals hold gold. And when I was a kid, of course, we had just gone off the gold standard and financial institutions recommended that individuals hold five or 10 or 15% of their their wealth in precious metals. Uh so we're going back to that and uh so people are moving towards the gold standard and now there's crypto cryptonized gold that you can hold um and ETFs and a lot of other um alternatives um and of course if we get into a very hyperinflationary period where prices are going up very very rapidly and currency is depreciating very rapidly uh we might even see the gold silver ratio, you know, as as you approach hyperinflation, that's going to get down into, you know, the 25, 20, or 15 uh gold, silver. >> Wow. What What price would silver be at if we got to that sort of ratio? >> Well, yeah, I know. >> I'm trying to even Yeah. Wow. Huh. >> Uh but that's a that's a hyperinflation where people are desperate. You know, they've got lots of cash. uh and and and they they have to get rid of it some way. So, you might actually end up buying um lumber and tires, you know, extra sets of tires, lumber for a future project, roof shingles for future roofing projects. You know, this is what happens in third world countries uh where they don't have access to this is that they'll buy just any kind of raw material to avoid depreciating currencies. interesting. >> Um, and so, you know, I think that's the general tendency. I think you might you're going to see people increasingly use barter exchange using constitutional junk silver coins uh to make transactions. There's a few, you know, pockets of that out there in the world right now, but that would probably continue to spread. So, that's everything is going in this direction. um in you know a Fed and central banks that were um you know didn't inflate uh we probably wouldn't be in this >> uh situation. And uh but then of course you know when with the inflationary lure is just too much for politicians uh to ignore and they so they start spending they start borrowing and they start putting pressure on the Fed like President Trump is doing right now and we end up uh in an inflationary spiral. >> Dr. Thornton, can can I sneak in two more questions or do you have a hard stop? >> No, go please go ahead. You mentioned hyperinflation and that got my attention. Is that the path that we're on? How how realistic is that in your view um as a risk? And yeah, is that the path we're on? And if we are on that path, where are we on that trajectory? >> Well, yeah, it seems absurd that the United >> scary. I mean, it could happen, I guess, but yeah. Well, uh, and it has happened in the past. Uh, it happened in France. It happened in Germany. It's not just a third world problem. Um, and it's very socially destructive. It really undermines people economically, psychologically, it distorts their whole life um, beyond repair. But um you know hyperinflations um they generally are born out of a lot of government debt of one form or another and nobody intends to take an economy onto hyperinflation. Um and it really um takes on a life of its own uh where politicians and central bankers don't feel like they have any alternative uh but to print. Of course, they can always stop the printing presses uh but they feel like they don't have any alternative uh but to print more and more money. And uh you know at once you get into the hyperinflationary spiral uh you know it's hurting the real economy. It's not just the a numbers game. It it's really hurting the economy. It it makes the marketplace more difficult. It makes running government much more difficult. Uh you know in a hyperinflation well all of a sudden you got to pay the government employees more. uh or you got to lay them off or and then they're on welfare and you know how do you support everything? Well, that's the problem and I think we're on the on-ramp uh to hyperinflation which is an exploding national debt and a Fed that is willingly accommodating and it's not just the Fed, it's central banks around the globe. They're willing to accommodate the political process. Um and you know they they're increasing uh the money supply around the planet and uh and yet right now we're not experiencing extremely high rates of price inflation. Um and that but that's not a mechanical process. You know in the 1970s they thought they'd had in price inflation under control and then all of a sudden we got another big bout of it. Uh, fortunately for my generation, uh, Jimmy Carter did the right thing, Paul Vulkar did the right thing. Uh, and they they basically bit the bullet. They raised interest rates to 18% which some like in Brazil is doing the same thing right now. Uh, you know, it's very very painful. uh but they did the right thing uh back then and the United States uh came out of that in the early 1980s and we reemerged um as as a viable economic superpower. So um and the the recovery was very very painful. Uh but it was very very quick. Uh it was almost magical. Um but I I'm afraid that um politicians don't have the backbone uh in both parties certainly and there's no politicians that I can see that have the backbone to stand up to ridiculous policies that they've enacted and ridiculous levels of spending that they've done and and the national debt. I mean this takes um people um who are intellectually capable and intellectually honest and moral. Um and I don't see anybody um like that in the American political class right now. And my sense is that it doesn't exist in Europe certainly um and it doesn't exist in Japan um and a few other places that I you know have knowledge about. So that's why I say we're we are on the on-ramp uh to hyperinflation right now. >> But we could fix it if you had the leadership to do so to make these hard decisions. It even at 38.35 trillion is where our national debt stands right now. Just check the US debt clock. There could be a path to fix it. We're not totally past the point of no return. >> Yes. >> Mhm. >> Absolutely. the likelihood of it happening is >> well no absolutely it's it's fixable. Um it uh first of all you have to have the intellectual case of how to fix it and why fixing it is a good thing. You know here at the Mises Institute we don't preach advocacy of the free market. We teach how the free market works, what how government works and how to reform government in order to promote the free market economy and why that's good for the standard of living and why that's good for the fabric of society. And so we have pretty well-developed ideas as to exactly how you um fix these problems. But you you have to have a you can't just advocate for a free market. You have to know um you know that these government programs are actually hurting the population and uh that getting rid of them may have some transitional issues but in the longer run it's really good for society uh to get rid of all these problems and you know you end up solving a lot of the problems uh that for example President Trump is trying to deal with using tariffs uh which every economist knows, even stupid economist knows that tariffs are a bad idea. [laughter] U and he's got the worst uh economist advocating or um I I wouldn't say, you know, uh consult uh counseling him about tariffs because I think President Trump is his own man, his own guy, but he's got some pretty lightweights uh working for him on the tariff issue. All right, let me see if I can squeeze one more question, then we have to go. Bitcoin. I'm looking at the Bitcoin price. Let's see. It's down. Uh 84 84 thou 84,873 today? Because we talked about precious metals. Does Bitcoin does is Bitcoin compatible with the Austrian School of Economics? Does it fit in? >> Yes, it it does in the sense that Bitcoin tried to mimic the gold standard. it, you know, using real resources to extract bitcoins is kind of similar thematically to digging gold up out of the ground in comparison to just printing money on a printing press. Um, it all it's also market-based. It's also private. Uh, and so it has some of the same themes as precious metals. Now of course uh it has no intrinsic value um you know to it and um so consequently it's it it is a different animal but thematically it was born out of the uh financial crisis and it was constructed electronically along the lines of what Austrians would sort of generally recommend in terms of a commodity money that required real resources was limited in supply was incredibly divisible, you know. So, it was some, you know, computer geek genius uh who must have read Austrian economics and was upset about all the bailouts and, you know, all the foreclosures and stuff that happened back then. Um, but it is different. I mean it doesn't have any uh foundational intrinsic value to it. So it's going to be a lot more clunky. Um and you know so I've seen it as as a good sign. Um now of course it's diverted the young generation uh away from gold and silver at least temporarily um towards Bitcoin as a way of avoiding government money. uh if Bitcoin were to melt down significantly in the face of ever rising gold and silver prices, I think that younger generation is going to flip from things like Bitcoin um and all of the other uh cryptocurrencies into cryptonized gold and silver where you have the same electronic transmission benefits of crypto, but you have the fundamental values of gold and silver backing it up. Theoretically, you could have any commodity uh being kryptonized um using using that technology. >> Dr. Thornton, I have to say I've really enjoyed our conversation. I've learned so much from you. I feel like I got a wonderful lesson in economics. Before I let you go, let folks know where they can find you, where they can learn more about the work that you're doing at the Mises Institute, how they can support that work, and any parting thoughts, anything that you would like to leave this audience to think about. It could be something that we discussed earlier that you want to emphasize, or maybe it's something that we didn't bring up in this conversation. The floor is all yours. >> Well, the Mises Institute, where I work, uh, is the home of Austrian economics. It was named after Ludwig van Misus, the great Austrian economist from Europe and uh were the prime opponents of big government, socialism and so forth. Uh certainly paper money uh Misesus was the primary opponent of all those things uh in Europe and we have mises.org ORG is one of the world's largest and most trafficked economic web pages in the world and it's written so that everybody can uh read it and learn from it. We've got written materials, academic materials, audio, video. Uh you can download most of the books, the great books in Austrian economics. As a matter of fact, we have a program right now because most of our emphasis is on students and teaching them the science of why free markets work and why government doesn't work. But Misesus' student FA Hayek, we put together a uh greatest hits uh book collection of his articles and we're giving away copies uh of this book for free. So, put a comment uh >> that they will love that. Yes. And you can actually request more than one copy uh because we want to widely distribute these uh to as many people as possible. And Hayek won the Nobel Prize in economics for his work extending Misesus' theory uh of the business cycle. But we're here for students, for the general public, for young academics trying to find a foundation uh for their uh for their career. So, it's a very exciting place to work. Um, uh, it's not noisy, but it's very exciting for me. And uh and I think it's a great place for everybody to go because I know you feel um isolated and I I know a lot of people feel like uh that it's futile out there to do anything about it, but um I'm actually very excited because I got into this a long time ago when things were really really bleak and where nobody had even heard of Austrian economics or Ludwig von Mises or FA Hayek or anything like that. Now millions of people uh around the world have heard of Austrian economics. The new president of Argentina is a big fan of Austrian economics. And so, uh, I I have a lot of optimism and I think if you can come and learn on your own on the web page or at our events, uh, and become a participant in what we do, invest in what we do. I think you'll feel a lot better about yourself and a lot better about the movement and about the future of the world. >> Dr. Mark Thornton, senior fellow at the Misesus Institute. Thank you so much for being so generous with your time, all of your knowledge, your wisdom, helping us all learn and get better. I really appreciate you taking the time today. >> You're very welcome.