Dr. Mark Thornton: We're on the Highway to Hyperinflation
Summary
Precious Metals: Strongly bullish on gold and silver reaching new all-time highs, viewing them as both canary-in-the-coal-mine and portfolio insurance against systemic risks.
Commodities: Expects a broad commodity upcycle with multiple metals and resources trending to record levels due to structural forces.
Oil: Sees oil as “next” in line, with eventual much higher prices, while acknowledging near-term volatility driven by Middle East tensions.
De-dollarization: Highlights erosion of the petrodollar, BRICS dynamics, and rising gold reserves at central banks as drivers weakening the U.S. dollar’s dominance.
Hyperinflation Hedge: Warns the U.S. is further along the path toward hyperinflation; advocates stacking gold and silver as a financial fire extinguisher.
Federal Reserve: Notes the Fed’s tough-on-inflation stance and fewer rate-cut expectations, tying oil, CPI, and dollar moves to short-term precious metal price action.
Systemic Risks: Flags potential black swans in AI/data centers and sequestered capital like private equity/credit, with knock-on effects for banks, insurers, and pensions.
No Stock Picks: No specific public company tickers were pitched; the focus remained on macro themes and commodity exposures.
Transcript
I would not be the least bit surprised if we get to new all-time highs in gold and new all-time highs in silver and other commodities too because this is a commodity phenomenon. Gold and silver are just first in line and uh I expect all commodity prices to trend higher for new all-time records this year. >> Dr. Mark Thornton, senior fellow at the Misesus Institute. It is so wonderful to welcome you back to the show. Great to see you, Dr. Thornton. Really appreciate you taking the time. >> It's great to see you, Julie. It's fantastic to be back on the show. >> Well, wonderful to have you back. And I have to say, the last time we had you was back in December. You made your debut on the show. And I always say that we have the nicest people on the internet that watch this show, but wow, we have a lot of fans of yours. And so, I'm thrilled to welcome you back. And that's always great to see because you were recommended by our viewers and they certainly love you and gosh, Dr. Thornton, what a year it's been so far. Um, I believe it feels like time's flying by, but so much has happened. So, since we last spoke in December, um, let's kind of reset the table, if you will, when it comes to the big picture macro view for you, um, now that we're halfway through April here. Um, how are you thinking about things? What's been on your radar of late? What is your outlook? What do you make of where we are when it relates to the economy? Also, markets, especially here domestically in the US, markets continuing to set records. Um, yeah, just kind of what's your thought process? Like what do you make of everything that we've seen transpire? And as you know, Dr. Thornton, you could take all the time you need to set the table. >> Well, thank you very much, Julia. You know, I think we start with, you know, just the the ongoing structural aspects of the economy which we discussed last time that follow the analysis follows from the Austrian business cycle theory and that all looks backward in time to a 16-year period of upward movement in the stock markets. you know, so we've had a extended period of boom uh and higher prices and new records uh especially in the NASDAQ, but in the S&P 500 and you know that tells us that the actions of the Fed, some of them direct and obvious and right in front of us have been to expand money and credit uh in a way that artificially stimulates the economy and keeps interest rates down to a bare minimum or artificially low. And that that sets in motion all sorts of changes uh that we're seeing and that are going to continue to play out despite of course all of the things we've seen the correction in the precious metals, the war, the the uh the increase in oil prices and energy prices. But it's really that structural facets of the economy uh where you know the typical economist you know when the Fed is increasing the supply of money and credit they say well that's going to cause inflation or higher prices or higher CPI but the Austrian business cycle theory says well that's just one feature of what the Fed causes. They also cause a boom in stock markets and asset prices which we've seen. Uh we've seen higher prices and we anticipate even higher prices going forward. And then the third thing is really the clincher I think for most people and that is that this boom that the Fed creates giving the Fed creating all sorts of new credit. Um that uh is a big advantage to the people who already own the most wealth in the economy because they can leverage up all of their um assets, all of their investments. And of course that lower interest rate um increases all asset prices. So the people at the very top are benefited a great deal. And people in the middle and at the bottom people at the bottom don't own any assets. Uh they have net debt in the economy. They don't have any assets. All is they get is higher prices and lower real wage rates. And so of course that phenomenon since really 2021 or 2022 when this new term came in about the Khaped economy where the upper 10% or 15% or 20% are doing extraordinarily well and people uh in the lower ends of the income distribution are actually uh experiencing negative economic conditions. And that's what we're seeing. And that gives me a lot of um uh evidence and a lot of uh not really faith, but um support uh that the Austrian business cycle theory is really what does help explain the modern economy subject to a Federal Reserve that's, you know, trying to artificially uh alter the economy. And so that's the long run trend that we're seeing and ultimately we're going to get uh some sort of crisis. Uh you know Hank Pollson was on the TV uh on Bloomberg this weekend and he even admitted that I mean I I was really surprised that he even admitted that there could possibly be something like an economic crisis. But he did say that. He said, "We don't really know what's going on with this private equity, private credit, and we haven't gone through a full cycle. So, we won't know what to expect until we go through the full cycle." And then he said with an economic crisis. So, that's the end of the story with the Austrian business cycle theory. And but we're somewhere in the middle. we may be closer to the end obviously given that we've been in this boom for 16 years. Um but then it it's at that point that we look at these um shorter term changes, the correction in metals, the boom in oil prices, the war, all of those things have to be taken account of. M. So right now looking at that Austrian business cycle theory somewhere in the middle as you put it headed toward a crisis. We haven't seen a crisis yet but goodness um what are the signposts that are most worrisome to you right now Dr. Thornon? >> Well that's a very good question. I mean we're always looking for the black swan. Where is the black swan going to be in the economy? And the Austrian theory says, well, it's really systemic in the economy. Anywhere there's credit, there's likely to be overinvestment, male investment, uh, investment in advanced technologies, especially just because of the way the financial models work out. When you get artificially low rates, people tend to invest in advanced technology. So, of course, we're looking at artificial intelligence and the data centers just like a lot of other people are looking at. Um, and then of course we're looking at all of the financial sector, the banks, uh, the insurance companies, uh, private equity, private credit, uh, private equity and private credit are of particular interest to me because it's what we call sequestered capital. um in that it's sort of cordoned off and where markets don't have where the information um as some of your guests have pointed out some of the information which I love the show um some of the information about those markets isn't readily available to the public it's not recorded on a day-to-day basis and we very often see those black swans emerge precisely from those areas uh in the economy because they tend not to get observed and so the problems tend to fester and people um get a little corrupt in that they try to cover up uh these problems and and paper them over and uh shuffle the problems around which we are seeing in priv private equity and private credit. So sequestered capital is of particular interest in those high- techch uh investments in advanced technology because that's what the theory points to one of those two things. But of course the banks are all intertwined with this and um and now things like um uh insurance companies um and pension plans because of private equity uh investments in pension plans. So it you know the Austrian theory says that this is ubiquitous across finance. Um it's the artificially low interest rate is sending a false signal to all investors and all entrepreneurs. Um and so the problems are ubiquitous throughout. Uh and the black swan is just the first one to see the light of day. And uh and and so I think the theory is very accurate. It doesn't really help us pinpoint uh where where it's going to come out of because it can come out of anywhere, but certainly uh uh artificial intelligence and private equity are high on my list. >> Hey everyone, I hope you are enjoying this interview. If you can take a quick moment and hit that subscribe button, we are on a mission to hit our next goal of 100,000 subscribers and your support could really help us get there. Thank you so much and enjoy the rest of the interview. Okay, before we go any further or any deeper here, um I didn't ask you this last time, but I certainly wanted to and um we're talking about the Austrian School of Economics and you have been a voice for Austrian economics for decades at the Mises Institute. Um how how did you get drawn into the Austrian School of Economics? Um, and what is it like what is it that keeps you so fired up about it today? Because I imagine Dr. Thornton, um, we have a lot of people who follow it and are fans of it, but I imagine that there's oftentimes push back on this on the space as well. >> Oh yes. I mean, we are a very small group compared to all other economists. Um, we're not in the mainstream of things. We don't really dominate anything uh within mainstream academic um economics or the Fed or the Treasury or government or anything like that because we're seen as sort of the anti-economics, anti-Canzian economics, anti- mainstream economics. um you know we're more of a traditional um you know based on reason and um natural processes uh we're really the inheritors of classical economics of Adam Smith and limited government and all those things whereas you know the mainstream profession has um gets a lot of money from government they get a lot of jobs all of the highpaying paying jobs at the Fed and and in government. Um, you know, they don't want to see us walking through the door. They want uh people who are adept at selling the idea that the government must control various things and must regulate various things um and must uh solve problems in the free market economy. Whereas the Austrians view the free market economy as the source of our standard of living and of increasing wealth and uh innovation uh of new technology of you know all of the benefits of course uh come from uh entrepreneurs and savers and the market economy and competition. And almost all economist except for the old school uh economists, maybe some Chicago economists and and you know that sort of thing. Uh they all adhere to this big government uh Keynesian approach in the economy. So, we're not really appreciated by uh all of those groups and uh and they dominate the profession uh and they dominate all of the government positions and all of the uh main uh academic journals and that sort of thing. So um now I think what attracted me to it um it was probably part natural but you know I um from a very young age I was familiar with business and earning money and collecting coins and um you know and I wasn't around um when they stopped I was I was very young when they stopped stop minning silver coins, but I knew that all my relatives were collecting all the silver coins and you know and I didn't have any and they stopped redeeming silver certificates and then in 1971 they went off the gold standard >> and I thought well that seems like a really big deal. Um, and then of course growing up in the 1970s with uh going off of the gold standard, the Vietnam War, the oil uh shortages and the you know the uh all of that that was going on and high inflation and high unemployment. And so when I went to college, I wanted to learn more about that. And so I became an economics major and I realized that mainstream textbook analysis really did not have a worthwhile explanation of these phenomenon. And I started looking around and I just was lucky, very very lucky to have found um an entree uh into the the world of Austrian economics and libertarianism and that kind of thing. And uh because I graduated during the depression of uh 1982 uh and there were no jobs, I decided to go to graduate school and I went to the only place really where you could learn in the United States more about Austrian economics. And I just happened to go to Auburn University in Alabama. And then the next year, the Misesus Institute moved its operations to Auburn. >> Wow. >> And so I that's why I've been >> it was meant to be >> that's why I've been the face of this thing for so very very long is because of those uh fantastic happen stance and circumstances. And you know when I got into it there were no academically active PhD Austrian economist and I was told that the Austrian school was dead and that it was a thing of the past and that it was never going to be resurrected and fortunately Lou Rockwell and the Mises Institute have given uh a home for Austrian economics and it's really experienc experience to rebirth. There are lots of places now where you can study Austrian economics and it's the favorite brand of economics. It's the favorite school of economics uh for aspiring young adults and of course that's where a lot of our programs are directed to. But uh a lot of very bright go-getter young adults uh from the United States and around the world are involved in our programs. And so I think there's really been a rebirth of of Austrian economics. And as bad as I think things are going to get in the economy um and with money specifically uh potentially with war um I have a very optimistic view of the future that we can really do something about these awful trends that had the state has put in place and is disrupting and destroying people's lives. um and that the uh the Austrian school lessons and their message are resonating very strongly across uh society and you know it's my job to see that more people get a chance to at least learn about it because they you won't learn about it um typically in in high school or college or anything like that. So that's what we're here for. Well, you can come to this channel and uh listen to folks such as yourself. Okay, let's dive further in some of these concerning trends because you mentioned the K-shaped economy. This is a topic that has come up time and time again on this channel. A lot of our viewers, they intuit it. Now, you've also written about the cantillian effect, the idea that whoever gets new money first wins and everyone else absorbs the pain later. So, I would love for you to tie that idea back to the K-shaped economy that we've discussed and many have heard about. How does the Contilian effect explain the K-shaped economy more precisely than what we hear in the mainstream, if you will? >> Yeah, it's they're very very much related. Um, Richard Cantion was an Irish economist in the early 1700s during uh, John Law's money bubble, the South Sea bubble, the Mississippi bubble. He ended up making a ton of money off of it. And after being a very wealthy person, he sat down and wrote a book about the whole thing. And he explained economics for the first time. And the main thing he was trying to explain was the phenomenon of money and the business cycle and how it um elevated the uh crony capitalists and the political elites which he he was a banker for these people. So he knew them well and how it impoverished everybody else. And he he presented uh in his book a little model, you know, of of an economy at the time where somebody discovers a gold mine and of course the mine owner and the mine workers are the beneficiary of finding all of that gold and they go out and buy luxury items. Uh they drink wine instead of beer. They eat meat instead of bread and they raise the price of of u of wine and uh and of meat and they reduce the supply of beer and bread and so they you know there's less to go around for everybody else. And so he explains this phenomenon through the book with these simple theoretical conceptual models of how the world works in a small setting. Um and so it's it's actually very difficult to see the canteening effect in the large scale. It doesn't show up in the data really all that well. Um but um it's a persistent effect. And so and and I I go back and I look at um in my book, The Skyscraper Curse, I go back and look at um the various economic crises of the past. And we see the same sort of pattern of, you know, a period of low interest rates and money supply growth and u a a dispersion in the distribution of income where the uber wealthy are getting much much wealthier and the working class is losing ground because their the prices are going up but their wage rates are staying relatively constant. So their purchasing power is being diminished. And of course we see that in, you know, in its full glory right now. Every conversation I have, um, you know, people are complaining about increases in prices, but nobody's getting increases in wages. And meanwhile, you know, uh, stock prices are are at an all-time high. And uh that phenomenon goes back in time even before the great depression. Um but it also happened in the 1960s uh when the we had very low interest rates. It was the go- go 60s. Um people were making lots of money. There was lots of new technology just like in the 1920s. Um but the working class was feeling more and more disadvantaged. um as a result and of course everything fell apart uh during the 1970s. And these cycles, not only do they repeat, not only do they have the same sort of economic phenomenon attached to them, but I tie that all in with this skyscraper index, which is the very unlikely historical correlation between the building of a record setting high skyscraper and an imminent economic crisis. And I take the the existing data set back into the 19th century uh to when they first uh invented the um elevator. Okay? So before the elevator, they could really only build three or four stories. People didn't want to walk any higher. But once they built the elevator and they had structural steel, um engineers and architects could build ever higher. And when you went through these bubble processes uh from central banks um and and monetary policy uh what you would see is that as with an extended period of monetary expansion that people would uh embark on these record setting skyscrapers. Stock markets would boom. speculation would increase um and you'd get, you know, these um uh sort of crazy stories about how wealthy people um became during the bubbles. In Kantion's time, it was like he was one of the first ever millionaires. And of course we've gone through, you know, in mo more modern times where people have amassed fortunes of a hundred million dollars and uh a billion dollars and billions of dollars and now we're at the point where individuals uh have amassed trillion dollar fortunes. Now some of that is in inflationary terms. I mean the dollar has depreciated a lot. uh and we've just moved in a lot of zeros but it's the same sort of phenomenon and the Austrian theory pro uh provides I think a very good uh analysis and uh story of how and why these cycles occur. Business cycles are not an inherent feature of the market economy. Business cycles are an inherent feature of monetary policy. >> An inherent feature of monetary policy. Um well, speaking of monetary policy, the Federal Reserve, um what is your outlook as it relates to the Fed. Would love to just get an update from you since we last spoke. Um yeah, what's your up what's your update there? Well, I think that the uh the market's perception with higher higher oil prices and higher CPI reports coming in is that they've taken all of the anticipated rate cuts off of the board at least in, you know, for the rest of the year. Um, and even with Kevin Walsh being nominated to the board, anticipating following uh President Trump's demands for interest rate cuts. Um, you know, the whole Fed structure is is trying to gear up for the idea that they're going to be tough on inflation. You know, the American people are definitely suffering. I mean, if you go out there in the streets, in the ditches, um, you know, the American people are definitely definitely suffering. And so, they've got to put the message out that the Fed um is inflating and that they're not bailing out the big wigs and the banks and all that kind of stuff and they're not bailing out the stock market. So, right now, the whole messaging is no cuts. uh be tough on inflation. Kevin Walsh's uh leaked >> Yeah. >> uh test testimony uh you know tries to paint himself as somebody who's going to you know be tough on inflation and that kind of thing. >> Yeah. He said inflation is a choice and the Fed must take responsibility for it. >> Oh yeah. I mean I just saw um a Fed speaker on Friday and he said the same thing. So it's already it's already hard copy in the playbook of the Fed right now. So I can tell you right off that that is part of the standard operating procedure at the Fed as of this week. I mean it's clear that that what they have to do. That's not their mandate. The American people are not their mandate. That's it's a misleading that uh the Fed's dual mandate is unemployment and inflation. Uh their real mandate, the one they don't talk about is what they're what they were created to do was to finance government debt. You know, to take care of the government debt market on the one hand and if necessary take care of banks and financial institutions on the other hand. Um, and so I think markets are actually accurately reflecting this because when we see oil prices go up and gold prices go down, it's because oil prices are a threat to raise CPI and dampen any expectations of Fed rate cuts. And in the absence of the war and this debacle in the Persian Gulf, of course, oil prices would still be rising, but they would be like in the $60 a barrel range, not in the $90 uh in the barrel range. Eventually, oil prices are going to go much much higher, but not right now. And uh but in the absence of the war um you know there would be this tremendous uh anticipation for rate cuts because of cracks in the financial system. Um and kind of weaknesses in the labor market. Um the and then of course all of the problems with government debt trying to turn over $10 trillion of government debt. So that's what they would be fixated on and the stock market would love that of getting rate cuts but gold would also like that too. M um and so when it looks like the war is dissipating um then it gets a little bit brighter uh at least temporarily for more rate cuts and so gold goes up because you know things like um uh interest rates, things like uh the value of the dollar and things like oil prices all filter into gold and silver prices in the short run. Um, and they kind of act as steering currents in the short run, but the long run, um, gold and silver prices are tied to, uh, money printing most directly, but then behind that is government debt and interest on the debt, government spending, which eventually requires more money printing. And so the long run trend I think is very bright there because uh you know if government doesn't change its ways there's going to have to be substantial amount of printing over the long run. And that's what you know as the war diminishes you find yourself uh the market finds itself paying attention more to those long run trends and gold and silver recover on a temporary basis. And it's kind of chaotic cuz every day you never know uh what's going on in the world over in the Middle East because of uh our propaganda and Iranian and Israeli propaganda uh and blackouts and and so the news feed is is very very poor, but you kind of get a very accurate idea of what's going on over there just by looking at gold prices and oil prices. >> Yeah. Um I I think you've described precious metals as both a financial fire extinguisher and also a canary in the coal mine. Can you can you explain the distinction and are they warning us right now? >> Oh yes. I mean, um, the canary in the coal mine is idea is, of course, they used to put, uh, canaries down in in coal mines and, uh, with the idea that if the chemical leakages from the rock bed uh, of dangerous gases were such that the canaries would die before the people got sick. And so they would keep them down there um as a an alert uh for danger. And in a free market economy, in a completely free market economy on a gold standard or let's not even say gold standard, but let let's say a market determined monetary policy. um the price of gold, you know, as it was in the 19th century, uh and going back hundreds of years and even up until 1971, uh the price of gold remains very very constant. The purchasing power of gold and silver remained very very constant um over very very long periods of time. That's the nature. The market chose gold and silver because of their constant purchasing power and why they didn't choose something that had a highly variable uh purchasing power uh like the price of salmon or something like that. Um and so um you know if the price of gold goes up uh that is an alert to everybody that the government is doing something. It's overspending. It's over borrowing. It's engaging in um uh foreign interventionism uh war or you know doing crazy things which government is apt to do. And so, you know, in that sense, it sends us alarm. If we see the price of gold goes up going up as it has the last few years, we know without looking at any of the other statistics or what government is actually doing that they're doing something wrong and they're doing something that's harmful to the market economy, undermining the monetary system for consumers and investors and uh and the higher prices symptomatic of all of those bad actions. So it it it it is an alert and uh to us. Now, the reason it's a fire extinguisher is because people who own gold and silver, who are silver stackers, who take a small percentage of their income on a regular basis and save it in the form of gold and silver and they stack that money over time. you know, assuming that we're not on a gold and silver monetary system where all of our money is gold and silver. Um, so when you're on fiat money, uh, it's a it's a fire extinguisher in the sense that if you stack, you know, part of your savings in there, it's always available to put out your personal fires. Uh, loss of jobs, uh, a big medical bills uh or an an opportunity to buy a new house or whatever it happens to be. Uh you have um and most importantly uh when the government does get out of control and is inflating the money supply, well your uh gold and silver is going to appreciate in price. And so what the government is doing wrong is going to have at least in this respect have a positive effect on you. So it's sort of offsetting what the the bad things that the government is doing. um and acting as kind of a shock absorber. Uh now, of course, I am always um very prompt to point out that it really doesn't matter how much gold and silver we all stack. Um you know, if we allow this uh process of central banks and government spending and debt to continue on, it's going to end badly for everybody. But if you've been stacking um you're going to be in a better position uh when um the problems actually start emerging. Um and of course the the much higher prices of gold and silver. We've got record high price in gold. We've got record high prices in silver. um you know shortages um of uh especially of silver. Um so I think that's you know those are things that everybody should know. >> So I take it on the gold and silver front we're going a lot higher from here. >> Yes. I mean I would think so. Now I I know um you know there are some technical analysts that I know and I know their work and I appreciate their work. I respect their work who they think um were due for another down leg in gold and silver prices and the charts are very difficult to analyze right now. They're not straightforward. So I can't say that things are going to go immediately higher. But it certainly seems to me that excuse me that they're definitely going higher in the long run. And I would not be the least bit surprised um if we get to new all-time highs in gold and new all-time highs in silver and other commodities too because this is a commodity phenomenon. Gold and silver are just first in line. Oil's next. Um platinum, palladium, it's a structural phenomenon. Um and uh I expect you know all commodity prices to trend higher and uh for for new all-time records this year. >> Let's talk about the state of the economy and markets like when you see markets touching new historic records. Um do you think that a lot of folks I imagine a lot of people just probably feel like things are good um or might seem good. Does that create a more dangerous situation then? Um, like if there's this perception of everything's fine because I'm just looking I look on this channel just looking like our debts north of 39 trillion. Like the problems aren't here yet or they haven't been felt yet. So I'm just curious. Um, I'm not really exactly sure how to ask the question, but seems like things are fine. >> Oh yes. I mean they things seem to be fine for sure and we're all creatures of habit and when stocks have been going up for 16 years and the last real crisis um was the financial crisis. I mean we the COVID crisis was a big-time crisis but it would as far as the recession was very short uh the pullback in stocks was very short duration. Um, so it goes back a long time and we're creatures of habit and people are not really concerned or even looking at uh their portfolios or their investments because it's just been on autopilot and um and that is dangerous where you know people don't know the status. So stocks ever higher um and uh unemployment you know is very low but of course we've cut off immigration and there's been a lot of retirements so the labor market is um labor supply is shrinking greatly and so the unemployment rate is going to look good for sure. The last time you and I spoke, you outlined your concerns around hyperinflation and that we're on a path toward hyperinflation. >> Does that thesis still stand for you today? Is that still like the big worry? >> Oh, yes. actually um we've taken another step >> on the highway to hyperinflation um because of this war um because it's revealed uh that the petro dollar is no longer a strong phenomenon um that the US cannot defend our allies around the Persian Gulf. Um, and Iran has um really smacked the United States and it smacked Israel down completely and also the the local regimes. it's threatened them and it's basically um you know part of bricks um and it wants to sell its oil and other currencies most specifically uh the Chinese one which uh the Iranians and the Chinese have been exchanging with one another and they they want that to continue and so they're requesting that oil sales in the Persian Gulf to get through the straight of Hermuz um is to be done in Chinese Juan. So that's a direct threat to the petro dollar which was supposedly a pillar of the value of the US dollar and why foreigners um had to hold and use US dollars. And so that is another step on the road to the hyperinflation of the dollar. And you know because the US dollar it's always depended upon being able to print and having foreigners hold US dollars. um you know in other countries uh holding treasury bonds uh holding US cash in the underground economy dollarized um economies around the world. So um yeah, so that's a big threat and as the demand to hold US dollars go down at the same time that the supply is expected to increase greatly it's going to lower the value of the dollar and you know eventually this the hyperinflation is a steamrolling of the process where it's not mechanical really it's just that people wake up and say you know I'm not holding dollars anymore. more. Um, and that's when the system unravels and you see uh the let's say the you what you see is the price of gold goes hyperbolic um relative to the fiat currency um you know as it did as it's done in other um hyperinflations where people just lose faith in the local paper currency and they Um, you know, Mises called it the crackup boom phenomenon where people just try to dump the local currency in favor of any tangible goods. Um, and that's, you know, that really distinguishes a regular normal inflation that we're all used to. Um, and a hyperinflationary event which nobody is used to really. um they've occurred in the third world and the second world uh in recent years, but it's it's very isolated. If it happens to the US dollar, of course, it's going to be a big global uh event and we will lose our monopoly status um to some of the brick currencies and the euro um and uh possibly cryptocurrencies um and uh other new things that might emerge >> like that would be the end of our reserve status. Well, nobody's nobody's really um anticipating the end um of the reserve status. Um 15 years ago, I reviewed a book about all this and the guy said, "Well, nothing's going to happen forever because nobody can imagine anything ever being different." Well, things have become different. I mean, there's the crypto, there's which is an affront to fiat money. Uh there's the brick currencies which is an affront to fiat money, the dollar in particular, and now gold is now making up more than 50% of all central bank reserves. So yes, I mean the US dollar had a near monopoly as a reserve currency, dollars and treasury bonds as central bank reserves and a near monopoly in international trade making exchanges on international markets. Everything was bought and sold on international markets in terms of US dollars. And uh both of those two uh factors which have created the almighty dollar um are unraveling slowly but surely. And of course, you know, there's other there's other things like the underground economy and black markets where the US dollar has been so dominant um for so many years that could very quickly uh come undone too with uh either cryptocurrencies or precious metals um you know and other other new competitors into the marketplace. So, it's really hard to tell and determine because it's it's really a mental phenomenon where people eventually have enough of suffering from inflation and seeing the real value of their assets being undermined um and they just give up and say, "I want something real. I want something tangible. I want something different. I've got to make a new choice." And people are making new choices. I mean um people can put their money away um in other foreign currencies for example right now you know banks offer the ability to invest in other currencies uh cryptocurrency um you know in in other countries you could put your um your pensions your retirements and your savings into gold and silver. So, um, it's definitely moving a pace and I think the pace has increased in recent years and I think this mad adventure in the Persian Gulf um is really going to accelerate um this whole phenomena because it's going to kick out um this whole idea of the petro dollar status uh for the US dollar and um so we'll have to see what happens um on the other side. And I'm just hoping and praying that that situation does get completely unwound as quickly as possible with as little death and injuries in all of those various countries as well as the destruction of capital. I've made a big um issue on my podcast and other podcasts about, you know, that people just don't understand um what the Middle East does for the rest of the world. They just think of it in terms of how much is it going to cost me to fill up my gas tank in my car or my truck. Uh but that is really just the beginning of it. Um and it's really important. uh they produce a lot of industrial goods uh industrial inputs um you know that affect a a wide variety of of industries and you know the only good thing I can say about it is about the trade war and this war in the Middle East is it's making people realize that the economy is a lot more complicated than they ever thought. you know that the price of their helium balloons in the grocery store is going to go up because of the war in the Middle East. I mean, they wouldn't possibly imagine those interconnections. Um, but that's really how things actually work in the real world. Every time you see a massive amount of exchanges taking place between, you know, two groups, um those raw materials can uh factor into the production of many many goods and each one of those goods can be inputs into a wide variety of other goods and it all permeates throughout the world economy. So that you know even if things get fixed in the Middle East, food production is going to fall and people are going to go hungry. People are probably going to starve as a result of what's going on over there in the Middle East because not enough fertilizer is being produced. Not enough fertilizer is being distributed and used in farms for this crop season. crop yields are in all likelihood going to go lower and prices are going to go higher. um into a world in which the average person's budget is already stretched too thin. And uh and so it's going to be really h um hard times especially when you get into uh lesser developed countries and third world nations where they're barely eatking by in the first place and where fertilizer has be has been one of the major boons uh to their standard of living. and all of a sudden, you know, they get cut off because of course their low um status um on the distribution chain. So um you know, that's not much of a consolation prize that people are learning how complicated the world of economics is. Um but you know, hopefully policymakers and I don't even think economists understand this. Uh, by and large, most economists are, you know, um, I was going to say chalkboard economists, but we don't use chalkboards anymore. Uh, um, but they they they don't really understand the real intricacies of business. Um, and that's really, you know, as a kid, >> I worked in my father's business when I was a young boy. I had a paper route. I had my own uh business cutting grass uh shoveling snow and you know I was involved in that from a very early age and I realized you know it's really hard and complicated to make money um and that and those were all the simplest things in life and I've learned um throughout my career that things are extremely complicated way beyond any one person knowing um how the economy works precisely and that's what you know FA Hayek Mises's graduate student he won a Nobel Prize um he's very famous for the article about the use of knowledge in society and what that what he did was he showed that the the market system the price system was this um early uh networking system where everybody could know the basics of what they needed to know about the relative scarcity of all inputs and raw materials um and labor and so forth in the economy so that they could make their decisions about consumption and production. Um, and Hayek framed all that as kind of like a um a precomputer uh device that economized on the use of knowledge um about all of these complicated situations in the real world. >> Well, Dr. Mark Thornton, it is always a pleasure having you on the show. Before I let you go, let folks know where they can find and support and learn more about the work that you're doing at the Mises Institute and let's leave this audience with some parting thoughts. I know we we didn't get to solutions in this episode, but give them something to think about before we have you on again. The floor is all yours. >> Well, thank you very much, Julia. Um, we're in Auburn, Alabama, but our website is mises.org. og named after the great Austrian economist Ludwig van Mises. Um we have all kinds of publications, podcast, lectures, books, um newsletters, uh we have programs here at the institute and around the country. Um we started a um a book reading clubs around the country and around the world. Uh there's always new and and great things um at the institute where we're trying to bring the world of Austrian economics to everybody out there, not just students, not just professors, but everybody out there. All of our stuff is really written uh and digestible for um the a very general public audience. And um it's a great story. We're all optimistic because we've seen so much progress with respect to the Austrian school uh with respect to people's mindsets. You know, we're not the majority opinion, but the number of people who know of us, like us, support us, are interested in what we have to say, think we have the right solutions is growing by leaps and bounds. And you don't need a majority to make social change. You just need um to have all of the leaders and shakers thinking about fixing the world, improving the world. Um and a lot of those people have adopted uh a mindset based on Austrian economics that the world works best when solutions come from the bottom up. Where individuals build them in themselves and their households up from the bottom where businesses build themselves up from the bottom. entrepreneurship where communities build themselves up from the bottom. Small businesses becoming larger businesses, hiring more people, inventing new ways of doing things, inventing new products. Everything works better from the bottom up. And really, nothing works well when the solutions come from the top down. And that's really what we teach. We teach, we don't tell people you must support the market economy and you must think the that freedom is great. We show people how markets work and why markets always work. Why free markets work so well and why government, even well-intentioned government, just simply does not work. It always fails. It tends to make the problems worse over time. And that's really resonating and that's why I'm so very optimistic moving forward that we really can I know things are dark right now but um you know people are coming to our point of view at such a rapid rate even this terrible tragedy in in the Middle East and the Persian Gulf is exposing the this obvious um bad top-down approach, you know, of that the political elites uh in society that can really control things and control our politicians even uh that they're in it for themselves and you know their their role is really being exposed because of this whole Epstein file fiasco thing uh which is telling that story. it fits right into the K-shaped economy, the canion effects, uh what we're seeing in in today's economy and um so again, I am very very optimistic and very grateful to be on your show to be able to share that optimism. >> Dr. Mark Thornton, senior fellow at the Mises 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. Really, really appreciate you. Thank you, Julia.
Dr. Mark Thornton: We're on the Highway to Hyperinflation
Summary
Transcript
I would not be the least bit surprised if we get to new all-time highs in gold and new all-time highs in silver and other commodities too because this is a commodity phenomenon. Gold and silver are just first in line and uh I expect all commodity prices to trend higher for new all-time records this year. >> Dr. Mark Thornton, senior fellow at the Misesus Institute. It is so wonderful to welcome you back to the show. Great to see you, Dr. Thornton. Really appreciate you taking the time. >> It's great to see you, Julie. It's fantastic to be back on the show. >> Well, wonderful to have you back. And I have to say, the last time we had you was back in December. You made your debut on the show. And I always say that we have the nicest people on the internet that watch this show, but wow, we have a lot of fans of yours. And so, I'm thrilled to welcome you back. And that's always great to see because you were recommended by our viewers and they certainly love you and gosh, Dr. Thornton, what a year it's been so far. Um, I believe it feels like time's flying by, but so much has happened. So, since we last spoke in December, um, let's kind of reset the table, if you will, when it comes to the big picture macro view for you, um, now that we're halfway through April here. Um, how are you thinking about things? What's been on your radar of late? What is your outlook? What do you make of where we are when it relates to the economy? Also, markets, especially here domestically in the US, markets continuing to set records. Um, yeah, just kind of what's your thought process? Like what do you make of everything that we've seen transpire? And as you know, Dr. Thornton, you could take all the time you need to set the table. >> Well, thank you very much, Julia. You know, I think we start with, you know, just the the ongoing structural aspects of the economy which we discussed last time that follow the analysis follows from the Austrian business cycle theory and that all looks backward in time to a 16-year period of upward movement in the stock markets. you know, so we've had a extended period of boom uh and higher prices and new records uh especially in the NASDAQ, but in the S&P 500 and you know that tells us that the actions of the Fed, some of them direct and obvious and right in front of us have been to expand money and credit uh in a way that artificially stimulates the economy and keeps interest rates down to a bare minimum or artificially low. And that that sets in motion all sorts of changes uh that we're seeing and that are going to continue to play out despite of course all of the things we've seen the correction in the precious metals, the war, the the uh the increase in oil prices and energy prices. But it's really that structural facets of the economy uh where you know the typical economist you know when the Fed is increasing the supply of money and credit they say well that's going to cause inflation or higher prices or higher CPI but the Austrian business cycle theory says well that's just one feature of what the Fed causes. They also cause a boom in stock markets and asset prices which we've seen. Uh we've seen higher prices and we anticipate even higher prices going forward. And then the third thing is really the clincher I think for most people and that is that this boom that the Fed creates giving the Fed creating all sorts of new credit. Um that uh is a big advantage to the people who already own the most wealth in the economy because they can leverage up all of their um assets, all of their investments. And of course that lower interest rate um increases all asset prices. So the people at the very top are benefited a great deal. And people in the middle and at the bottom people at the bottom don't own any assets. Uh they have net debt in the economy. They don't have any assets. All is they get is higher prices and lower real wage rates. And so of course that phenomenon since really 2021 or 2022 when this new term came in about the Khaped economy where the upper 10% or 15% or 20% are doing extraordinarily well and people uh in the lower ends of the income distribution are actually uh experiencing negative economic conditions. And that's what we're seeing. And that gives me a lot of um uh evidence and a lot of uh not really faith, but um support uh that the Austrian business cycle theory is really what does help explain the modern economy subject to a Federal Reserve that's, you know, trying to artificially uh alter the economy. And so that's the long run trend that we're seeing and ultimately we're going to get uh some sort of crisis. Uh you know Hank Pollson was on the TV uh on Bloomberg this weekend and he even admitted that I mean I I was really surprised that he even admitted that there could possibly be something like an economic crisis. But he did say that. He said, "We don't really know what's going on with this private equity, private credit, and we haven't gone through a full cycle. So, we won't know what to expect until we go through the full cycle." And then he said with an economic crisis. So, that's the end of the story with the Austrian business cycle theory. And but we're somewhere in the middle. we may be closer to the end obviously given that we've been in this boom for 16 years. Um but then it it's at that point that we look at these um shorter term changes, the correction in metals, the boom in oil prices, the war, all of those things have to be taken account of. M. So right now looking at that Austrian business cycle theory somewhere in the middle as you put it headed toward a crisis. We haven't seen a crisis yet but goodness um what are the signposts that are most worrisome to you right now Dr. Thornon? >> Well that's a very good question. I mean we're always looking for the black swan. Where is the black swan going to be in the economy? And the Austrian theory says, well, it's really systemic in the economy. Anywhere there's credit, there's likely to be overinvestment, male investment, uh, investment in advanced technologies, especially just because of the way the financial models work out. When you get artificially low rates, people tend to invest in advanced technology. So, of course, we're looking at artificial intelligence and the data centers just like a lot of other people are looking at. Um, and then of course we're looking at all of the financial sector, the banks, uh, the insurance companies, uh, private equity, private credit, uh, private equity and private credit are of particular interest to me because it's what we call sequestered capital. um in that it's sort of cordoned off and where markets don't have where the information um as some of your guests have pointed out some of the information which I love the show um some of the information about those markets isn't readily available to the public it's not recorded on a day-to-day basis and we very often see those black swans emerge precisely from those areas uh in the economy because they tend not to get observed and so the problems tend to fester and people um get a little corrupt in that they try to cover up uh these problems and and paper them over and uh shuffle the problems around which we are seeing in priv private equity and private credit. So sequestered capital is of particular interest in those high- techch uh investments in advanced technology because that's what the theory points to one of those two things. But of course the banks are all intertwined with this and um and now things like um uh insurance companies um and pension plans because of private equity uh investments in pension plans. So it you know the Austrian theory says that this is ubiquitous across finance. Um it's the artificially low interest rate is sending a false signal to all investors and all entrepreneurs. Um and so the problems are ubiquitous throughout. Uh and the black swan is just the first one to see the light of day. And uh and and so I think the theory is very accurate. It doesn't really help us pinpoint uh where where it's going to come out of because it can come out of anywhere, but certainly uh uh artificial intelligence and private equity are high on my list. >> Hey everyone, I hope you are enjoying this interview. If you can take a quick moment and hit that subscribe button, we are on a mission to hit our next goal of 100,000 subscribers and your support could really help us get there. Thank you so much and enjoy the rest of the interview. Okay, before we go any further or any deeper here, um I didn't ask you this last time, but I certainly wanted to and um we're talking about the Austrian School of Economics and you have been a voice for Austrian economics for decades at the Mises Institute. Um how how did you get drawn into the Austrian School of Economics? Um, and what is it like what is it that keeps you so fired up about it today? Because I imagine Dr. Thornton, um, we have a lot of people who follow it and are fans of it, but I imagine that there's oftentimes push back on this on the space as well. >> Oh yes. I mean, we are a very small group compared to all other economists. Um, we're not in the mainstream of things. We don't really dominate anything uh within mainstream academic um economics or the Fed or the Treasury or government or anything like that because we're seen as sort of the anti-economics, anti-Canzian economics, anti- mainstream economics. um you know we're more of a traditional um you know based on reason and um natural processes uh we're really the inheritors of classical economics of Adam Smith and limited government and all those things whereas you know the mainstream profession has um gets a lot of money from government they get a lot of jobs all of the highpaying paying jobs at the Fed and and in government. Um, you know, they don't want to see us walking through the door. They want uh people who are adept at selling the idea that the government must control various things and must regulate various things um and must uh solve problems in the free market economy. Whereas the Austrians view the free market economy as the source of our standard of living and of increasing wealth and uh innovation uh of new technology of you know all of the benefits of course uh come from uh entrepreneurs and savers and the market economy and competition. And almost all economist except for the old school uh economists, maybe some Chicago economists and and you know that sort of thing. Uh they all adhere to this big government uh Keynesian approach in the economy. So, we're not really appreciated by uh all of those groups and uh and they dominate the profession uh and they dominate all of the government positions and all of the uh main uh academic journals and that sort of thing. So um now I think what attracted me to it um it was probably part natural but you know I um from a very young age I was familiar with business and earning money and collecting coins and um you know and I wasn't around um when they stopped I was I was very young when they stopped stop minning silver coins, but I knew that all my relatives were collecting all the silver coins and you know and I didn't have any and they stopped redeeming silver certificates and then in 1971 they went off the gold standard >> and I thought well that seems like a really big deal. Um, and then of course growing up in the 1970s with uh going off of the gold standard, the Vietnam War, the oil uh shortages and the you know the uh all of that that was going on and high inflation and high unemployment. And so when I went to college, I wanted to learn more about that. And so I became an economics major and I realized that mainstream textbook analysis really did not have a worthwhile explanation of these phenomenon. And I started looking around and I just was lucky, very very lucky to have found um an entree uh into the the world of Austrian economics and libertarianism and that kind of thing. And uh because I graduated during the depression of uh 1982 uh and there were no jobs, I decided to go to graduate school and I went to the only place really where you could learn in the United States more about Austrian economics. And I just happened to go to Auburn University in Alabama. And then the next year, the Misesus Institute moved its operations to Auburn. >> Wow. >> And so I that's why I've been >> it was meant to be >> that's why I've been the face of this thing for so very very long is because of those uh fantastic happen stance and circumstances. And you know when I got into it there were no academically active PhD Austrian economist and I was told that the Austrian school was dead and that it was a thing of the past and that it was never going to be resurrected and fortunately Lou Rockwell and the Mises Institute have given uh a home for Austrian economics and it's really experienc experience to rebirth. There are lots of places now where you can study Austrian economics and it's the favorite brand of economics. It's the favorite school of economics uh for aspiring young adults and of course that's where a lot of our programs are directed to. But uh a lot of very bright go-getter young adults uh from the United States and around the world are involved in our programs. And so I think there's really been a rebirth of of Austrian economics. And as bad as I think things are going to get in the economy um and with money specifically uh potentially with war um I have a very optimistic view of the future that we can really do something about these awful trends that had the state has put in place and is disrupting and destroying people's lives. um and that the uh the Austrian school lessons and their message are resonating very strongly across uh society and you know it's my job to see that more people get a chance to at least learn about it because they you won't learn about it um typically in in high school or college or anything like that. So that's what we're here for. Well, you can come to this channel and uh listen to folks such as yourself. Okay, let's dive further in some of these concerning trends because you mentioned the K-shaped economy. This is a topic that has come up time and time again on this channel. A lot of our viewers, they intuit it. Now, you've also written about the cantillian effect, the idea that whoever gets new money first wins and everyone else absorbs the pain later. So, I would love for you to tie that idea back to the K-shaped economy that we've discussed and many have heard about. How does the Contilian effect explain the K-shaped economy more precisely than what we hear in the mainstream, if you will? >> Yeah, it's they're very very much related. Um, Richard Cantion was an Irish economist in the early 1700s during uh, John Law's money bubble, the South Sea bubble, the Mississippi bubble. He ended up making a ton of money off of it. And after being a very wealthy person, he sat down and wrote a book about the whole thing. And he explained economics for the first time. And the main thing he was trying to explain was the phenomenon of money and the business cycle and how it um elevated the uh crony capitalists and the political elites which he he was a banker for these people. So he knew them well and how it impoverished everybody else. And he he presented uh in his book a little model, you know, of of an economy at the time where somebody discovers a gold mine and of course the mine owner and the mine workers are the beneficiary of finding all of that gold and they go out and buy luxury items. Uh they drink wine instead of beer. They eat meat instead of bread and they raise the price of of u of wine and uh and of meat and they reduce the supply of beer and bread and so they you know there's less to go around for everybody else. And so he explains this phenomenon through the book with these simple theoretical conceptual models of how the world works in a small setting. Um and so it's it's actually very difficult to see the canteening effect in the large scale. It doesn't show up in the data really all that well. Um but um it's a persistent effect. And so and and I I go back and I look at um in my book, The Skyscraper Curse, I go back and look at um the various economic crises of the past. And we see the same sort of pattern of, you know, a period of low interest rates and money supply growth and u a a dispersion in the distribution of income where the uber wealthy are getting much much wealthier and the working class is losing ground because their the prices are going up but their wage rates are staying relatively constant. So their purchasing power is being diminished. And of course we see that in, you know, in its full glory right now. Every conversation I have, um, you know, people are complaining about increases in prices, but nobody's getting increases in wages. And meanwhile, you know, uh, stock prices are are at an all-time high. And uh that phenomenon goes back in time even before the great depression. Um but it also happened in the 1960s uh when the we had very low interest rates. It was the go- go 60s. Um people were making lots of money. There was lots of new technology just like in the 1920s. Um but the working class was feeling more and more disadvantaged. um as a result and of course everything fell apart uh during the 1970s. And these cycles, not only do they repeat, not only do they have the same sort of economic phenomenon attached to them, but I tie that all in with this skyscraper index, which is the very unlikely historical correlation between the building of a record setting high skyscraper and an imminent economic crisis. And I take the the existing data set back into the 19th century uh to when they first uh invented the um elevator. Okay? So before the elevator, they could really only build three or four stories. People didn't want to walk any higher. But once they built the elevator and they had structural steel, um engineers and architects could build ever higher. And when you went through these bubble processes uh from central banks um and and monetary policy uh what you would see is that as with an extended period of monetary expansion that people would uh embark on these record setting skyscrapers. Stock markets would boom. speculation would increase um and you'd get, you know, these um uh sort of crazy stories about how wealthy people um became during the bubbles. In Kantion's time, it was like he was one of the first ever millionaires. And of course we've gone through, you know, in mo more modern times where people have amassed fortunes of a hundred million dollars and uh a billion dollars and billions of dollars and now we're at the point where individuals uh have amassed trillion dollar fortunes. Now some of that is in inflationary terms. I mean the dollar has depreciated a lot. uh and we've just moved in a lot of zeros but it's the same sort of phenomenon and the Austrian theory pro uh provides I think a very good uh analysis and uh story of how and why these cycles occur. Business cycles are not an inherent feature of the market economy. Business cycles are an inherent feature of monetary policy. >> An inherent feature of monetary policy. Um well, speaking of monetary policy, the Federal Reserve, um what is your outlook as it relates to the Fed. Would love to just get an update from you since we last spoke. Um yeah, what's your up what's your update there? Well, I think that the uh the market's perception with higher higher oil prices and higher CPI reports coming in is that they've taken all of the anticipated rate cuts off of the board at least in, you know, for the rest of the year. Um, and even with Kevin Walsh being nominated to the board, anticipating following uh President Trump's demands for interest rate cuts. Um, you know, the whole Fed structure is is trying to gear up for the idea that they're going to be tough on inflation. You know, the American people are definitely suffering. I mean, if you go out there in the streets, in the ditches, um, you know, the American people are definitely definitely suffering. And so, they've got to put the message out that the Fed um is inflating and that they're not bailing out the big wigs and the banks and all that kind of stuff and they're not bailing out the stock market. So, right now, the whole messaging is no cuts. uh be tough on inflation. Kevin Walsh's uh leaked >> Yeah. >> uh test testimony uh you know tries to paint himself as somebody who's going to you know be tough on inflation and that kind of thing. >> Yeah. He said inflation is a choice and the Fed must take responsibility for it. >> Oh yeah. I mean I just saw um a Fed speaker on Friday and he said the same thing. So it's already it's already hard copy in the playbook of the Fed right now. So I can tell you right off that that is part of the standard operating procedure at the Fed as of this week. I mean it's clear that that what they have to do. That's not their mandate. The American people are not their mandate. That's it's a misleading that uh the Fed's dual mandate is unemployment and inflation. Uh their real mandate, the one they don't talk about is what they're what they were created to do was to finance government debt. You know, to take care of the government debt market on the one hand and if necessary take care of banks and financial institutions on the other hand. Um, and so I think markets are actually accurately reflecting this because when we see oil prices go up and gold prices go down, it's because oil prices are a threat to raise CPI and dampen any expectations of Fed rate cuts. And in the absence of the war and this debacle in the Persian Gulf, of course, oil prices would still be rising, but they would be like in the $60 a barrel range, not in the $90 uh in the barrel range. Eventually, oil prices are going to go much much higher, but not right now. And uh but in the absence of the war um you know there would be this tremendous uh anticipation for rate cuts because of cracks in the financial system. Um and kind of weaknesses in the labor market. Um the and then of course all of the problems with government debt trying to turn over $10 trillion of government debt. So that's what they would be fixated on and the stock market would love that of getting rate cuts but gold would also like that too. M um and so when it looks like the war is dissipating um then it gets a little bit brighter uh at least temporarily for more rate cuts and so gold goes up because you know things like um uh interest rates, things like uh the value of the dollar and things like oil prices all filter into gold and silver prices in the short run. Um, and they kind of act as steering currents in the short run, but the long run, um, gold and silver prices are tied to, uh, money printing most directly, but then behind that is government debt and interest on the debt, government spending, which eventually requires more money printing. And so the long run trend I think is very bright there because uh you know if government doesn't change its ways there's going to have to be substantial amount of printing over the long run. And that's what you know as the war diminishes you find yourself uh the market finds itself paying attention more to those long run trends and gold and silver recover on a temporary basis. And it's kind of chaotic cuz every day you never know uh what's going on in the world over in the Middle East because of uh our propaganda and Iranian and Israeli propaganda uh and blackouts and and so the news feed is is very very poor, but you kind of get a very accurate idea of what's going on over there just by looking at gold prices and oil prices. >> Yeah. Um I I think you've described precious metals as both a financial fire extinguisher and also a canary in the coal mine. Can you can you explain the distinction and are they warning us right now? >> Oh yes. I mean, um, the canary in the coal mine is idea is, of course, they used to put, uh, canaries down in in coal mines and, uh, with the idea that if the chemical leakages from the rock bed uh, of dangerous gases were such that the canaries would die before the people got sick. And so they would keep them down there um as a an alert uh for danger. And in a free market economy, in a completely free market economy on a gold standard or let's not even say gold standard, but let let's say a market determined monetary policy. um the price of gold, you know, as it was in the 19th century, uh and going back hundreds of years and even up until 1971, uh the price of gold remains very very constant. The purchasing power of gold and silver remained very very constant um over very very long periods of time. That's the nature. The market chose gold and silver because of their constant purchasing power and why they didn't choose something that had a highly variable uh purchasing power uh like the price of salmon or something like that. Um and so um you know if the price of gold goes up uh that is an alert to everybody that the government is doing something. It's overspending. It's over borrowing. It's engaging in um uh foreign interventionism uh war or you know doing crazy things which government is apt to do. And so, you know, in that sense, it sends us alarm. If we see the price of gold goes up going up as it has the last few years, we know without looking at any of the other statistics or what government is actually doing that they're doing something wrong and they're doing something that's harmful to the market economy, undermining the monetary system for consumers and investors and uh and the higher prices symptomatic of all of those bad actions. So it it it it is an alert and uh to us. Now, the reason it's a fire extinguisher is because people who own gold and silver, who are silver stackers, who take a small percentage of their income on a regular basis and save it in the form of gold and silver and they stack that money over time. you know, assuming that we're not on a gold and silver monetary system where all of our money is gold and silver. Um, so when you're on fiat money, uh, it's a it's a fire extinguisher in the sense that if you stack, you know, part of your savings in there, it's always available to put out your personal fires. Uh, loss of jobs, uh, a big medical bills uh or an an opportunity to buy a new house or whatever it happens to be. Uh you have um and most importantly uh when the government does get out of control and is inflating the money supply, well your uh gold and silver is going to appreciate in price. And so what the government is doing wrong is going to have at least in this respect have a positive effect on you. So it's sort of offsetting what the the bad things that the government is doing. um and acting as kind of a shock absorber. Uh now, of course, I am always um very prompt to point out that it really doesn't matter how much gold and silver we all stack. Um you know, if we allow this uh process of central banks and government spending and debt to continue on, it's going to end badly for everybody. But if you've been stacking um you're going to be in a better position uh when um the problems actually start emerging. Um and of course the the much higher prices of gold and silver. We've got record high price in gold. We've got record high prices in silver. um you know shortages um of uh especially of silver. Um so I think that's you know those are things that everybody should know. >> So I take it on the gold and silver front we're going a lot higher from here. >> Yes. I mean I would think so. Now I I know um you know there are some technical analysts that I know and I know their work and I appreciate their work. I respect their work who they think um were due for another down leg in gold and silver prices and the charts are very difficult to analyze right now. They're not straightforward. So I can't say that things are going to go immediately higher. But it certainly seems to me that excuse me that they're definitely going higher in the long run. And I would not be the least bit surprised um if we get to new all-time highs in gold and new all-time highs in silver and other commodities too because this is a commodity phenomenon. Gold and silver are just first in line. Oil's next. Um platinum, palladium, it's a structural phenomenon. Um and uh I expect you know all commodity prices to trend higher and uh for for new all-time records this year. >> Let's talk about the state of the economy and markets like when you see markets touching new historic records. Um do you think that a lot of folks I imagine a lot of people just probably feel like things are good um or might seem good. Does that create a more dangerous situation then? Um, like if there's this perception of everything's fine because I'm just looking I look on this channel just looking like our debts north of 39 trillion. Like the problems aren't here yet or they haven't been felt yet. So I'm just curious. Um, I'm not really exactly sure how to ask the question, but seems like things are fine. >> Oh yes. I mean they things seem to be fine for sure and we're all creatures of habit and when stocks have been going up for 16 years and the last real crisis um was the financial crisis. I mean we the COVID crisis was a big-time crisis but it would as far as the recession was very short uh the pullback in stocks was very short duration. Um, so it goes back a long time and we're creatures of habit and people are not really concerned or even looking at uh their portfolios or their investments because it's just been on autopilot and um and that is dangerous where you know people don't know the status. So stocks ever higher um and uh unemployment you know is very low but of course we've cut off immigration and there's been a lot of retirements so the labor market is um labor supply is shrinking greatly and so the unemployment rate is going to look good for sure. The last time you and I spoke, you outlined your concerns around hyperinflation and that we're on a path toward hyperinflation. >> Does that thesis still stand for you today? Is that still like the big worry? >> Oh, yes. actually um we've taken another step >> on the highway to hyperinflation um because of this war um because it's revealed uh that the petro dollar is no longer a strong phenomenon um that the US cannot defend our allies around the Persian Gulf. Um, and Iran has um really smacked the United States and it smacked Israel down completely and also the the local regimes. it's threatened them and it's basically um you know part of bricks um and it wants to sell its oil and other currencies most specifically uh the Chinese one which uh the Iranians and the Chinese have been exchanging with one another and they they want that to continue and so they're requesting that oil sales in the Persian Gulf to get through the straight of Hermuz um is to be done in Chinese Juan. So that's a direct threat to the petro dollar which was supposedly a pillar of the value of the US dollar and why foreigners um had to hold and use US dollars. And so that is another step on the road to the hyperinflation of the dollar. And you know because the US dollar it's always depended upon being able to print and having foreigners hold US dollars. um you know in other countries uh holding treasury bonds uh holding US cash in the underground economy dollarized um economies around the world. So um yeah, so that's a big threat and as the demand to hold US dollars go down at the same time that the supply is expected to increase greatly it's going to lower the value of the dollar and you know eventually this the hyperinflation is a steamrolling of the process where it's not mechanical really it's just that people wake up and say you know I'm not holding dollars anymore. more. Um, and that's when the system unravels and you see uh the let's say the you what you see is the price of gold goes hyperbolic um relative to the fiat currency um you know as it did as it's done in other um hyperinflations where people just lose faith in the local paper currency and they Um, you know, Mises called it the crackup boom phenomenon where people just try to dump the local currency in favor of any tangible goods. Um, and that's, you know, that really distinguishes a regular normal inflation that we're all used to. Um, and a hyperinflationary event which nobody is used to really. um they've occurred in the third world and the second world uh in recent years, but it's it's very isolated. If it happens to the US dollar, of course, it's going to be a big global uh event and we will lose our monopoly status um to some of the brick currencies and the euro um and uh possibly cryptocurrencies um and uh other new things that might emerge >> like that would be the end of our reserve status. Well, nobody's nobody's really um anticipating the end um of the reserve status. Um 15 years ago, I reviewed a book about all this and the guy said, "Well, nothing's going to happen forever because nobody can imagine anything ever being different." Well, things have become different. I mean, there's the crypto, there's which is an affront to fiat money. Uh there's the brick currencies which is an affront to fiat money, the dollar in particular, and now gold is now making up more than 50% of all central bank reserves. So yes, I mean the US dollar had a near monopoly as a reserve currency, dollars and treasury bonds as central bank reserves and a near monopoly in international trade making exchanges on international markets. Everything was bought and sold on international markets in terms of US dollars. And uh both of those two uh factors which have created the almighty dollar um are unraveling slowly but surely. And of course, you know, there's other there's other things like the underground economy and black markets where the US dollar has been so dominant um for so many years that could very quickly uh come undone too with uh either cryptocurrencies or precious metals um you know and other other new competitors into the marketplace. So, it's really hard to tell and determine because it's it's really a mental phenomenon where people eventually have enough of suffering from inflation and seeing the real value of their assets being undermined um and they just give up and say, "I want something real. I want something tangible. I want something different. I've got to make a new choice." And people are making new choices. I mean um people can put their money away um in other foreign currencies for example right now you know banks offer the ability to invest in other currencies uh cryptocurrency um you know in in other countries you could put your um your pensions your retirements and your savings into gold and silver. So, um, it's definitely moving a pace and I think the pace has increased in recent years and I think this mad adventure in the Persian Gulf um is really going to accelerate um this whole phenomena because it's going to kick out um this whole idea of the petro dollar status uh for the US dollar and um so we'll have to see what happens um on the other side. And I'm just hoping and praying that that situation does get completely unwound as quickly as possible with as little death and injuries in all of those various countries as well as the destruction of capital. I've made a big um issue on my podcast and other podcasts about, you know, that people just don't understand um what the Middle East does for the rest of the world. They just think of it in terms of how much is it going to cost me to fill up my gas tank in my car or my truck. Uh but that is really just the beginning of it. Um and it's really important. uh they produce a lot of industrial goods uh industrial inputs um you know that affect a a wide variety of of industries and you know the only good thing I can say about it is about the trade war and this war in the Middle East is it's making people realize that the economy is a lot more complicated than they ever thought. you know that the price of their helium balloons in the grocery store is going to go up because of the war in the Middle East. I mean, they wouldn't possibly imagine those interconnections. Um, but that's really how things actually work in the real world. Every time you see a massive amount of exchanges taking place between, you know, two groups, um those raw materials can uh factor into the production of many many goods and each one of those goods can be inputs into a wide variety of other goods and it all permeates throughout the world economy. So that you know even if things get fixed in the Middle East, food production is going to fall and people are going to go hungry. People are probably going to starve as a result of what's going on over there in the Middle East because not enough fertilizer is being produced. Not enough fertilizer is being distributed and used in farms for this crop season. crop yields are in all likelihood going to go lower and prices are going to go higher. um into a world in which the average person's budget is already stretched too thin. And uh and so it's going to be really h um hard times especially when you get into uh lesser developed countries and third world nations where they're barely eatking by in the first place and where fertilizer has be has been one of the major boons uh to their standard of living. and all of a sudden, you know, they get cut off because of course their low um status um on the distribution chain. So um you know, that's not much of a consolation prize that people are learning how complicated the world of economics is. Um but you know, hopefully policymakers and I don't even think economists understand this. Uh, by and large, most economists are, you know, um, I was going to say chalkboard economists, but we don't use chalkboards anymore. Uh, um, but they they they don't really understand the real intricacies of business. Um, and that's really, you know, as a kid, >> I worked in my father's business when I was a young boy. I had a paper route. I had my own uh business cutting grass uh shoveling snow and you know I was involved in that from a very early age and I realized you know it's really hard and complicated to make money um and that and those were all the simplest things in life and I've learned um throughout my career that things are extremely complicated way beyond any one person knowing um how the economy works precisely and that's what you know FA Hayek Mises's graduate student he won a Nobel Prize um he's very famous for the article about the use of knowledge in society and what that what he did was he showed that the the market system the price system was this um early uh networking system where everybody could know the basics of what they needed to know about the relative scarcity of all inputs and raw materials um and labor and so forth in the economy so that they could make their decisions about consumption and production. Um, and Hayek framed all that as kind of like a um a precomputer uh device that economized on the use of knowledge um about all of these complicated situations in the real world. >> Well, Dr. Mark Thornton, it is always a pleasure having you on the show. Before I let you go, let folks know where they can find and support and learn more about the work that you're doing at the Mises Institute and let's leave this audience with some parting thoughts. I know we we didn't get to solutions in this episode, but give them something to think about before we have you on again. The floor is all yours. >> Well, thank you very much, Julia. Um, we're in Auburn, Alabama, but our website is mises.org. og named after the great Austrian economist Ludwig van Mises. Um we have all kinds of publications, podcast, lectures, books, um newsletters, uh we have programs here at the institute and around the country. Um we started a um a book reading clubs around the country and around the world. Uh there's always new and and great things um at the institute where we're trying to bring the world of Austrian economics to everybody out there, not just students, not just professors, but everybody out there. All of our stuff is really written uh and digestible for um the a very general public audience. And um it's a great story. We're all optimistic because we've seen so much progress with respect to the Austrian school uh with respect to people's mindsets. You know, we're not the majority opinion, but the number of people who know of us, like us, support us, are interested in what we have to say, think we have the right solutions is growing by leaps and bounds. And you don't need a majority to make social change. You just need um to have all of the leaders and shakers thinking about fixing the world, improving the world. Um and a lot of those people have adopted uh a mindset based on Austrian economics that the world works best when solutions come from the bottom up. Where individuals build them in themselves and their households up from the bottom where businesses build themselves up from the bottom. entrepreneurship where communities build themselves up from the bottom. Small businesses becoming larger businesses, hiring more people, inventing new ways of doing things, inventing new products. Everything works better from the bottom up. And really, nothing works well when the solutions come from the top down. And that's really what we teach. We teach, we don't tell people you must support the market economy and you must think the that freedom is great. We show people how markets work and why markets always work. Why free markets work so well and why government, even well-intentioned government, just simply does not work. It always fails. It tends to make the problems worse over time. And that's really resonating and that's why I'm so very optimistic moving forward that we really can I know things are dark right now but um you know people are coming to our point of view at such a rapid rate even this terrible tragedy in in the Middle East and the Persian Gulf is exposing the this obvious um bad top-down approach, you know, of that the political elites uh in society that can really control things and control our politicians even uh that they're in it for themselves and you know their their role is really being exposed because of this whole Epstein file fiasco thing uh which is telling that story. it fits right into the K-shaped economy, the canion effects, uh what we're seeing in in today's economy and um so again, I am very very optimistic and very grateful to be on your show to be able to share that optimism. >> Dr. Mark Thornton, senior fellow at the Mises 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. Really, really appreciate you. Thank you, Julia.