Precious Metals: Extensive discussion on gold and silver as hedges against monetary inflation and geopolitical risk, with near-term sensitivity to interest rate expectations.
Rate Dynamics: Rising oil prices lift CPI, limiting central bank rate cuts and pressuring gold in the short term despite long-run bullish drivers.
Commodities Rotation: Traders shifting from gold into oil and other metals during inflationary periods highlights broader commodity opportunities.
Emerging Markets: Long-term shift away from long-dated government bonds toward emerging markets in Africa, South America, and Asia due to growth and resource exposure.
Risk-Return in EM: Political and jurisdictional risks in EMs (e.g., Africa, Brazil) can be high, but potential returns are commensurately attractive; ETF access can be limited in some regions.
Market Valuation: U.S. equity valuations flagged as stretched with high concentration in mega-cap tech, implying potential correction risk.
Policy Backdrop: Central bank liquidity, fiscal dominance, and financial repression continue to buoy assets while exacerbating inequality.
Practical Approach: Advocates “stacking” gold and silver and focusing on commodities and emerging markets rather than specific stock picks.
Transcript
[music] >> Hi, I'm Mark Thornton at the Mises Institute. Welcome to the next episode of the Mises Issues podcast. Predicting recession or crisis in the economy is both very uncommon and fraught with difficulties. [music] Most Most predictions are wrong or badly misplaced in time. Government economists and academic economists seldom even make such predictions. Likewise, in the mainstream media, you can hear plenty of calls of recession and economic crisis in the non-mainstream media, but they are under competitive pressures to draw attention to themselves and generate clicks. They are under the same dilemma as everybody else. You cannot predict the timing and magnitude of a recession in a scientific way. If someone could do it, then everybody would eventually catch on, and that would move the needle forward in time and reduce the magnitude, therefore killing the correct prediction. Of course, someone will get all calls right, but that is only a matter of so many people making so many predictions, and someone statistically getting it right rather than a matter of pure science. In addition to not being able to make correct scientific predictions about the future, there's also the problem of the intervening actions that would otherwise subvert such predictions. A war might break out. A new discovery extending lifespan may be discovered. Or we could even suffer an invasion by the Martians. When Austrian economists look at the economy and the data being generated, they might say that a recession or an economic crisis is now possible or likely if there's been a huge increase in credit in the money supply and an abnormal increase in asset prices coupled with an apparent abnormal change in the distribution of income favoring the wealthy and disadvantaging the working class. They would be following the implications of the Austrian business cycle theory. And I explained the synthetic nature of the current uh cycle uh in a past episode. I myself have gotten two recent suggestions wrong. My book The Skyscraper Curse and other popular writings had me predicting an economic crisis in 2020. The dating was based on the Skyscraper Curse index as well as government policies and market data we saw in the late 2010s. Uh that did not come to pass because A, the construction on the Jeddah Tower was canceled. B, the COVID fiasco involving trillions of dollars of government spending was injected into the economy at that time. And C, the Federal Reserve injected trillions of dollars into the credit sector. We did have a short recession, but nothing approaching the status of a true economic crisis. I also felt strongly that there would be at least a significant recession in the early 2020s. With the Fed and the Treasury cutting back on the flood of money they were injecting in order to fight inflation, it seemed reasonable to be economically cautious. As a recession or economic crisis was now a possibility. The US did not go into recession, but the stock market did decline by more than 1/3 of its value. I only learned after the fact that the Fed was not being stingy with its policy rate. It was covertly opening the floodgates of credit through a covert door. And I reported on this on this podcast in early 2024. Now, in addition to issuing statements suggesting that a recession or an economic crisis was possible possibly in the works, I also began focusing on topics such as financial repression and fiscal dominance. Issues particularly where the Fed seemed to be following a path of goosing stock markets and padding the fortunes of the rich without any regard for what they are doing to the people in the working class income category. I of course had been writing and speaking about this aspect of the Austrian business cycle theory and Cantillon effects for many years. But after the term the K-shaped economy emerged to characterize the weird trends post COVID, and that became a dominant theme of the economy after 2024, my explanation of the K-shaped economy became very well received, especially on the podcast circuit, where hosts were all too aware that no one had really adequately provided a convincing reason why it was occurring. I also made it part of my lectures for Mises University, for example. It does seem that this aspect of the Austrian business cycle theory is more impactful than ever before. So, where are we right now? Well, stock markets are continuing to soar upward to new all-time highs. The unemployment rate is below the so-called natural rate of unemployment. And credit is flowing into the economy thanks to the Fed's new liquidity program at a rate of up to $40 billion a dollars a month, as well as very optimistic levels of bank lending and private credit issuance. The fiscal spigot is also open full bore, thanks to deficit spending at World War II levels. According to my search, valuation measures of major US stock markets are significantly higher than their long-term historical averages, indicating strong overvaluations. For example, the Shiller CAPE ratio has only been higher than than it is now, than the current level, once in the last 150 years. The Buffett indicator, Warren Buffett, is above 230% or roughly two and a half standard deviations above the historical trend. And therefore, Berkshire Hathaway is holding enormous amounts of cash. The PE ratios of US stock markets are very high compared to their long-term averages. Market concentrations is at an all-time highs. So, that if you are investing in the S&P 500 index of the 500 largest companies, 40% of your investment is in just the 10 largest companies by value. Mostly the so-called Magnificent Seven tech companies. If we take some historical snapshots of 10 years ago, 20, 30 years ago, the weight of the top 10 stocks was less than 20% of the index. 40 years ago, on the cusp of the 1987 stock market crash, it was 25% and 50 years ago, it was 30%. So, currently we are well above all of those snapshots uh from decades in the past. 50 years ago, in 1976, there was a strong rebound in the stock market after a long bear market. Nominal values were continually eat being eaten away by inflation, and there was a significant turnover of stocks that were included in the S&P 500 index that year. And again, the market declined significantly in 1977. Current valuation trends, of course, can't continue. And as a matter of fact, they aren't expected to continue on Wall Street with almost no one on Wall Street expecting anything more than a correction, and most people remaining outwardly very bullish. On side B of this episode is an interview I did about 3 weeks ago with Kaneki Kojo, and I think you're going to enjoy it and find it a lot of fun, as well as being very important and very informative. What's good, Kanekis? Welcome back to the channel. I hope you're all doing well. I'm joined today by a very, very special guest. It is Dr. Mark Thornton from the Mises Institute. He's a senior fellow there, and he also has a podcast that he does called Minor Issues. He has featured on a number of very popular mainstream outlets, such as Bloomberg, The Economist, Wall Street Journal, and Forbes. And he is joining us today, giving us the an hour of his time to shed some light on geopolitics and the current economy. So, Dr. Mark Thornton, thank you very much for joining us today. Kojo, I'm very happy to be here with you this morning, and your audience, too, of course. Yeah, we're really honored. To start us off, I think it'll be very useful if you could give the audience an overview of the Mises Institute and what it stands for. Well, you know, I work at the Mises Institute in Auburn, and I've been with them almost from the very beginning. So, I'm very old. And the Mises >> [laughter] >> The Mises Institute is a nonprofit organization, and it's an educational organization named after the great Austrian economist Ludwig von Mises, and of course the main purpose is to um educate people about Austrian economics and that great tradition of you know, Mises and F.A. Hayek and Murray Rothbard, all of the new uh newer Austrian economists and the up-and-coming Austrian economist and really get the word out about uh the Austrian school. So, we're not a political organization, we're not a lobbying group, um you know, so there's a lot of things that we're not. And uh but our mission is uh to teach and to preserve the Austrian school and to extend the Austrian school in new directions. And I'm very excited about, you know, the influence that we've had in terms of getting into people's minds, uh important people, young people especially. I think we're having a a great impact on younger adults who are, let's say, smarter than average and they're more um aggressive uh in terms of what they want to do with their lives and be entrepreneurs and and things of that nature. Uh and I get to see that in all of our programs cuz we're not just, you know, an internet organization with four or five podcasts. I mean, we have academic journals, we have events here um at the Mises Institute and other places around the world. Um and the influence that we've had is, you know, at one point it was just really in the United States, but um, the interest um, on the part of younger people, especially, uh, from other places around the globe has just been fantastic. So, um, and and Austrian economics is is very, uh, you know, it's a minority. It's a It's a very teeny minority of the economics profession and you know, Wall Street economist and, uh, government economist, academia, that kind of thing, but Yeah. Uh, we're growing very fast and we're we're very very popular online, um, with, um, you know, in social media and that sort of thing. You know, I mean, you say it's it's aimed to influence young people. I'm I'm 26 and I've been influenced by your work and the Mises Institute. I mean, I've read books by Murray Rothbard, What Has Government Done to Our Money? Completely completely changed my my view around currencies and, you know, what what fiat fiat currencies are doing to society, which is something we'll touch on, uh, later in in this podcast. Um, speaking of currencies, I wanted to discuss I know gold is gold is money, but I wanted to discuss the price of gold currently because we've seen a crater even though there's an ongoing war in the Middle East, governments are still printing, but it is currently trading as though, you know, the the Federal Reserve is going to hike interest rates, the government's going to stop printing currency. So, do you know why the price has suddenly tumbled so so rapidly even though, you know, the stock market is more or less at all-time highs, the S&P 500 and the Nasdaq? Yeah, I've got a pretty good idea. In general, I say that gold is like a canary in the coal mine, which is an old saying. They used to put canaries down in coal mines, so if there was any dangerous invisible gas that was leaking into the coal mine and kills the canary first, and everybody gets out of the coal mine. Well, you know, that's what's happening to gold. Uh the governments have gotten out of control. They're inflating, they're borrowing, they're spending, they're exploding the government debt markets. So, it's a warning sign. Um and it's also like a a fire extinguisher in the sense that when bad things when the government is doing those kind of bad things, people who own gold uh and silver have a something to protect them selves and to put out their little personal emergencies um with all the chaos that governments creating. And so, you know, in the last several years as we've moved into this protectionist and sort of pre-war scenario around the globe with the US and China and Russia, um all these uh political elite groups warring with each other at different levels, and of course Israel, um you know, uh you know, that's that's a problem, but gold has responded. The price has gone way up uh late last year and early this year, of course, uh the market really got explosive going higher. I mean, it went vertical uh for all intents and purposes, and then that continued through January, and then everything fell apart. Um now, part of that the early downturn in gold, I think was just the result of all the speculation and the traders and the hedge funds, uh the computerized trading uh getting into the market and then leaving the market, and hedge funds and so forth uh getting into the market and then needing liquidity uh for emerging problems in things like private equity, private credit, um you know, and they were they were moving really uh starting to move from things like gold and silver into other commodities, which is very typical in these inflationary trends. They'll move into oil and other metals and you know, trying to sniff out new profit opportunities. So, we got that initial big downturn uh in the economy that coincided with President Trump nominating Kevin Warsh um to the Federal Reserve Chairman, and Warsh had this reputation for being, you know, tough um on interest rates and the money supply. And so, all of that sort of coincided to drive the markets back lower down to the upward trend line that was established in the marketplace. And just as that just as the market got its footing, of course, uh Israel attacked Iran and the United States uh was, quote, forced uh to join in >> [clears throat] >> uh on killing, you know, the Ayatollah and and the leadership of Iran uh when they were supposedly meeting um to work out some peace negotiations. So, um you know, that obviously is going to have a short-term effect on the market. Um isolated wars like this are terrible. You know, it's really bad for the economy, but overall, you know, it may be temporary. Um and it may pass. Hopefully that peace will be restored, markets will be restored. But it's very interesting that you bring up this question because what happens is that when the war over there heats up and the oil industry is under attack and uh commerce is prevented by blocking the Strait of Hormuz, um and oil prices spike higher. Uh you know, everybody was anticipating gold going up much higher as a result of that, but the really important thing because gold prices are driven by monetary inflation, um that higher oil prices mean that the CPI statistic is going to jump higher. And the Fed is supposed to be using uh consumer price index statistics to guide its policy. And so, if that CPI and their other uh proprietary measures of consumer prices spikes higher, that prevents them uh from cutting interest rates. It doesn't Yeah. It just doesn't give them political cover for cutting interest rates. They'll eventually cut interest rates no matter what, but almost overnight we saw the market expecting two or three or more rate cuts um especially before the war nomination uh to all of the sudden with oil prices spiking no rate cuts whatsoever. And in the short run gold and silver depend on low interest rates. Um in the long run it doesn't really matter as much but in the short run uh interest rate direction uh does affect the price of gold and silver because of course gold and silver don't earn anything. So as interest rates go up um the big traders feel like their money is better um earning some kind of interest somewhere in government bonds and so forth. And so we had this dynamic going on when we still do actually that if the war heats up oil prices go up um and gold and silver prices go down but if that really fits the mold everybody is following the Fed's playbook. And and it's not just the Fed too. It's all central banks. This is um All in they're all interconnected. Yeah they're all interconnected and they all um you know said well we can't cut rates now. Um and some central banks actually talked about raising interest rates. Isn't that the Australian central bank I believe it was. Yes that's right. Yeah. Cuz they were already they were already kind of overheating as they say in Fed lingo. >> [laughter] >> I mean what does it even mean of overheating economy? Well you touched on something very interesting about oh if interest rates go higher it's the it's like an opportunity cost. That's what we always say when you hold when you hold gold in such an environment. But, that assumes that people would want to buy the, you know, the bonds and treasuries of this count of these countries because we know they're heavily indebted and they will have to print to make up the difference. So, in in emerging markets, we see that sometimes the interest rates on these currencies can go up, but no one's no one buys them in the end because they don't want it. So, isn't that a fundamental assumption that we're making that people will end up buying the treasuries and the bonds? Because what if they don't? Yeah, I mean, I think people are moving away from government long-term dated government bonds. And I think that trend is is firmly established. So, over the long run, you know, people I've already said, you know, we don't want US government bonds and we don't want other bonds. We don't, you know, the Chinese don't want uh the US government bonds, the Russians, of course, uh and other countries around the world. But, in the short term, all of this big money on Wall Street, I mean, they're flipping that money, you know, from one category to another. So, they can easily move in and out of these assets the way you and I can't. Um so, my long-term view on government bonds is decidedly negative. But, uh the people who, you know, control um vast sums of money and are big players in these government bond markets and all markets, really. Um they're the ones that flooded into gold and silver in November and December, especially after the Fed, you know, they did a uh a a double take where they said, "You know, we're not going to be um quantitative tightening anymore." And then, just a little while later, they said, "Well, we've got to buy government bonds anyways because of liquidity, you know, liquidity." And that really supercharged um gold and silver there in December and January. Mhm. Um but yeah, I mean, the long-term trend is definitely away from uh government bonds. And I And I think um into emerging markets, really. Um I see emerging markets um you know, in uh Africa and uh South America and uh in Asia uh as as the place to go in the future. And you think in what's the kind of What's that? Brazil? Any any of these emerging markets, which countries in particular? I know Brazil is a major one in South America, but I'm wondering about the African ones. Yeah, well, I mean, the um the the Brazilian one is is high on my list. Uh and and all of the commodity um countries, the countries that produce a lot of you know, basic raw materials and commodities, I think are probably the best served along with um developed countries like Australia and Canada that have a lot of commodities. But Brazil is is probably a primary example because it is an emerging market and it has lots of gold and oil and agricultural products. Yeah. >> Um now the African uh access to investment in African investments is is a little more difficult. They don't have a lot of well-developed ETFs. Yeah. There's more political instability. So, you have that to deal with. Um And of course, all emerging markets have political instability including Brazil. Um So, you know, and of course, I'm not an investment advisor or counselor, but um I think that, you know, for a young audience, um you know, commodities and emerging markets, and of course, China is an emerging market as well, but they're they represent they're a commodity consumer, not a producer, net producer. But, they they handle um things in terms of like manufacturing and technology and um higher-order goods like automobiles and electronics. So, there is a wide variety of things uh to choose from within emerging markets and there's a whole risk profile, too. Um you know, I made an investment in um in Africa, you know, and it's commodity investment, not a big one. And uh but there's a lot of political risk, uh jurisdiction risk, uh but of course, there's a trade-off there. So, political risk, if it's high, um the rate of return, of course, is also going to be potentially very high as well. Yeah. Yeah. You know, um Rick Rule, I'm not sure if you're familiar with him. He talks about buying hate and he particularly likes investing in countries where, you know, political instability is factored into the price because he can take advantage of of any discrepancies in price and value. Oh, yeah. I'm I'm very familiar with Mr. Rule and a big fan of his mind. He, um you know, he's one of the great ambassadors for investing in commodities and he's one of the great teachers as well. And if you see enough of his videos, you'll realize that he has a libertarian political philosophy like we do and he'll also, sometimes, if you if you listen to enough of him or if you get a chance to ask him a question, uh Ludwig von Mises' uh um magnum opus or his treatise, Human Action, um a treatise on economics, which was originally published in 1949, Rick Rule will refer to that book as being uh very important in his own outlook on things. So, yes, and I hope to meet him someday as well. Yeah, he's a great character. I I've had him on the channel a few times. Oh, that's great. Just Just an Just an incredible character. Yes, [laughter] he is. Um I mean, you Honestly, you're you're an interviewer's dream because you're touching on lots of points that I I've put down. So, That means you have to That means you have to have me back on at some point. >> Oh, oh, for sure. For sure. >> [laughter] >> So, the next The next point to build on what you talked about, you know, libertarian approaches, this is going to be a good interesting one. How much control over the economy should governments ideally have? you You know, in the economy, society, how much control over our lives should should they have? Well, the the basic question, how much control should the government have over the economy, they should have no control over the economy or certainly as little as possible. And I think that a lot of mainstream uh economists tend to the better mainstream economists tend to agree with the Austrians about that approach is that there shouldn't be, you know, any regulations, there shouldn't be any uh price controls, um that you shouldn't be you shouldn't be taxing productive efforts like labor, investment, um you know, income and that sort of thing. Um so, mainstream economists, the better ones, I mean, the ones that aren't socialists, uh they all agree that, you know, the free market is, you know, a good thing and and that but then they always have but this and but that and, you know, they want to butt in-ski into everything in the economy, it turns out. But we see it as um harmful. All of those interventions are harmful. We have, you know, tons of lectures on all that stuff. But we also see it as completely unnecessary that the market process, you know, people are so worried about, you know, the market run a monk a muck, um you know, without any controls, but basically free markets are very well regulated. They have their own regulatory features uh to them. Competition is the best regulating force uh in the economy, um, you know, consumers and consumer sovereignty over markets is the best check on bad business practices. And, you know, we know that consumers are not dupes. We know that they, you know, they can be taken in by business, but it's usually in those industries that are hyper-regulated where the government says, "We'll take control of this and we'll protect you." Um, like with banking. Uh, banking is one of the biggest, highly regulated industries in the United States and really in the world. You know, where the the federal regulators, the Fed, the Treasury, state regulators, everybody's in there, you know, with their microscopes, um, analyzing what the bankers are doing, and yet still every few years we end up in a crisis where all the regulators didn't catch this or they didn't catch that. >> do enough. You know, and then they needed then they need a whole big commission and, you know, a a book this big of new regulations. And, um, you know, let's face it, they have failed over and over again. Um, and, uh, but competition works extremely well to serve consumers. Consumers, um, are very adept. Uh, they have all sorts of means, especially nowadays. You know, we know that, you know, there's you know, when we go online shopping, there's reviews, there's ratings. Um, you know, and then, of course, there's all sorts of new sorts of scams and we have to adapt, uh, to, you know, various scams that come into the market. Uh, but the government doesn't prevent those either. You know, I you know, the things where they're they're supposed to be like on the telephone uh, on your cell phone, you know, and and that sort of stuff. They're highly they regulate that stuff to death. And yet they can't prevent spam, they can't prevent you know, be you know, manipulation of of customers. Um, you know, so they they they they claim to be protecting people, but they don't actually do it. And they very often they just provide um, sort of a protective cover uh, that makes consumers let their guard down and let these gives a bigger um, a approach for these scammers uh, to get into the marketplace. So, we see um, no need for the government in markets and they you know, they they don't help consumers and uh, all of these government interventions lead to monopoly power in markets because you know, once you start regulating, once you start taxing and every little mom and pop has to comply with all these regulations, it puts the small business at a disadvantage and puts big business at an advantage cuz they've got accountants and lawyers and so on and so forth that mom and pops don't have. And as a result, it's very difficult for new competitors to get into these markets and it allows the existing competitors more power in these markets. And so they're able to raise their prices somewhat. Yeah. They're able to reduce their quality somewhat, reduce their service somewhat. And consumers are less served. Um and then you get the, you know, the incumbent firms lobbying government for even more protection. So, it's a very much a lose, lose, lose proposition in terms of government intervention in the economy. Yeah. And the funny thing is the governments will then say the corporations who have the monopolies are price gouging, and they need to split them up for We know that everything they do more or less has the opposite effects. Like all the acts they have, um the affordability act uh >> [laughter] >> It's like honestly, I can't remember who said it in the podcast, but the person said whatever act the government does, just take the opposite of it because that's what's going to happen. Um in the UK, they Yeah, that's a great That's a great starting point. Yeah. In the UK, they recently had this uh renters renters rights where a renter like you So, in the UK, you could have fixed fixed contracts um agreements with your landlord where the contract wouldn't change for a year, and you could lock in your rent. But now they said, "Nah, that's That's giving the landlords too much power." So, um there's no longer such a thing as fixed fixed rents. You can But the renter can give the landlord a 2-months notice so they can leave at any time. And I thought about it initially. I was like, "You know what? Okay, fine." But then, I knowing what I know about, you know, Austrian economics, I'm like, "Well, wouldn't the landlords just end up increasing the price because they need to cover that risk of the renter and who ends up leaving?" And then, you know, they can't plan for the future because they don't have that fixed income coming every month. Before, you know, they could be they could be surprised one month and hear, "Oh, after 2 months, you'll no longer have this income you've been having. So, it's going to end up, you know, reducing reducing the available rooms for rent. And I'm just I I'm just trying to get people to understand that the governments aren't on our side, even though it might it might seem like they are. Oh, yeah, they give consumers, you know, perceived benefits. Yeah. >> But, you know, things like longer-term contracting give the consumer a way of budgeting, you know, for a longer period of time. And by reducing the risk to landlords, um you know, and entrepreneurs, I mean, they're managing risk. So, the contract allows a reduction in risk. And therefore, what we would expect to see is a a a a somewhat lower price uh for the rent. Whereas, if the landlord, you know, where everybody could come and go as they please, well, how are they supposed to budget? So, you're allowing both sides to budget. You're reducing the risk on both sides of the transaction. And you're reducing uh transactions cost and lowering the prices, um really and increasing the benefits for both sides. And you know, I said, you know, when you said, whatever the government says it is, it's probably the opposite. >> Yeah. >> And you know, and and that's and that's very true. That's a good working assumption. But, what we do here is, you know, we don't we don't we're not just a a cheerleader group that says, government's bad, market's good. We're here to to actually teach how markets work, why markets work, why government doesn't work, why it always fails, why do the worst always get to the top. So, we're you know, we're doing uh teaching the mechanics of these things. And you know, in a lot of our programs, it's not like you're taking a college course, you're just being exposed, you know, and you're not sitting down and memorizing, you know, theories and and and graphs and so forth, but at least you know that there is a mechanism, you know, as to why competition forces up wage rates and uh why competition forces uh prices uh to their most efficient levels. And And those kind of issues that otherwise we're thinking, well, where, you know, how does that work, you know? And so, the socialist use that weakness in our thinking uh to bring up, you know, hypotheticals and then all of a sudden, you know, like we're not sure, we don't know how that works. Um you know, and responding, you know, with a cheerleading phrase, markets work, governments don't, is not going to win the argument. So, we're here to uh show people that there are arguments that you can see, that you you personally can understand and relate to, and if necessary, you can go look them up. Yeah. Yeah, it is all empirical, it's all evidence-based, looking at us what has happened over time. Like I said, just taking people through first principles, cuz it's like people need to understand why things are the way they are, as opposed to just telling them this is it and believe it, which is what tends to happen with, you know, MMT socialists. >> [laughter] >> But, you know, we're we're not calling any names. I mean, to each their own, but it just seems to me like Austrian economics is just about common sense. Just look at what has happened in the past, and then work from there. Um Now, I think the main the main topic that I like to discuss actually, cuz I've talked about it on my channel a few times, but um it's something that's really close to my heart. It's about the effects of fiat currencies on society. In your research, what have you found to be the main effects? How does How How does fiat currencies alter, you know, society's morals and Yeah, just tell us tell us more about that. Well, I mean, yeah, I mean, that's near and dear to my heart. That was near and dear uh to Ludwig von Mises, for sure, and F. A. Hayek, and Murray Rothbard. I mean, they all wrote a great deal um about this, and um I actually did a podcast a couple of months ago, where I looked at the seven deadly economic sins in society. So, I looked at, you know, these seven things, which I think most people agree are the seven worst things that um exist in um our modern economy, and I tie them all to fiat currency. And uh So, you know, paper money, uh the whole purpose of that is to allow the government to debase the paper money. Um you know, I don't care what they say, but, you know, their goal is to be able to print up more money to spend on themselves. Um, but money is so important. It permeates everything in the economy. It's ubiquitous and it has macroeconomic effects. In other words, you know, some uh, dental regulation is going to affect, you know, people's teeth and it's but it's only going to affect a few people uh, in the economy, but money is everywhere. Money is macro. It's ubiquitous. Uh, everybody knows, um, it causes higher prices. Um, but it also causes the business cycle and it also causes a redistribution of wealth and income in society away from the working class to the very wealthy and to government itself. And, um, I, uh, I wrote a whole book on this uh, subject uh, called The Skyscraper Curse and I go through those, uh, particularly the business cycle, but also the the redistribution of income and wealth in society where the working class is made poorer while the uber wealthy, uh, especially the political elites that are connected both to big business and, well, you can kind of think of like what they refer to, uh, what some people refer to today is the Epstein class. Uh, they're made very wealthy as a result of uh, printing money and artificially low interest rates. Um, so it undermines savings and wealth accumulation across society. Um it undermines uh family formation, so people getting together to form families, getting married, uh establishing households. And we all know that now, you know, people get married much, much later or they don't get married at all. They have fewer kids. Um you know, and then there's more divorce and separation. Yeah. And all of that, so it's it's hard to connect, you know, the printing press in Washington, D.C. and its central banks around the world with these social problems, but actually one of our summer uh research fellows, Jeffrey Degner, who's now uh a dean of business where he teaches, uh he did some research here for his Ph.D. And he just published this book, um which addresses exactly uh those issues, inflation and the family. So, um it uh it undermines social institutions. It undermines moral character. Mhm. Um in the sense that, you know, low interest rates and inflation and a lack of savings really warp people's minds away from, you know, personal growth and enrichment and more towards what uh you know, they they have what what we call high time preferences. So, they want everything right now. They want to consume, you know, they want to be satisfied. They want to um satisfy their more basic animalistic wants and desires and they are less interested in long-term human enrichment and development and care personal character and um you know, moral character and all of those kind of things and of course all of that um undermines social stability, you know, with Yeah. because families, everybody agrees um even the socialists sometimes agree that you know, the family is the source of social stability. If you undermine the family and this is where the Marxist of course, they actively want to undermine the family and increase uh social instability so that the state becomes more powerful in society and more in control and can manipulate people's minds And state schools and Yeah, oh well, yeah, and state schools feeds into that. So you know, this printing press you know, where a lot of you know, people are obviously concerned with higher prices. Uh and that's the most visible and direct effect. But it really permeates society by raising people's time preferences wanting things now and not concerned about the future. And that leads to really a degeneration of the individual and society. You know, I believe and I've been talking about this a lot because it makes sense to everybody and that is that all good things in this world come from the bottom up. That the individual the family, the household, small businesses, community, and you know, a lot of people agree with that. And nothing good comes from the top >> [laughter] >> Cuz then it's being it's being imposed on you as opposed to it coming from among you and around you. That's right. Yeah, it's being imposed and it's one size fits all. You know, the the top-down solution is always one size fits all, never works out. Um and it usually is very disruptive or maybe even destructive. So, that's where I go with you know, I I take that fiat money and uh I've learned of course all of this from other writers, you know, going back into antiquity. Uh but certainly all modern um Austrian economists are very interested in this and most mainstream economists just stick with money seems to raise higher prices. But not what prices or who who benefits and who loses, uh they just look at the consumer price index and assume that all everything else is um a wash and it it doesn't have any distributive effects or destructive effects, but the Austrians uh don't believe that. We believe that it does um have disruptive effects and destructive effects. And and Jeff Deist has you know, shown that I think very clearly drawing on these lessons and modern statistics. You know, you've touched on everything of I wanted to talk about it regarding the harmful effects, especially the family family create formation. There's this chart There's this website called WTF happened in 1971. I don't know if you've seen that website. I don't think I have. Oh, it's a website of lots of charts that talk about what happened to society in 1971. You know, when Nixon deep act the dollar from gold. And you see these sudden changes in the price of a house, divorce rates, education levels, so maths and science scores plummeting since 1971, school shootings increasing massively since 1971. It This just is I it Once you see it, you can't unsee it. >> [laughter] >> The the correlation is just too close. It's too close to not be, you know, be rooted in that. And one of the things you didn't mention though was wars. Ongoing wars because, like you said, they printed again and again and again. Um ad infinitum. And we're seeing these forever wars now. The Ukraine-Russia war, it hasn't ended yet. Uh Venezuela, that was a quick one. But now we're seeing the Middle East again. And in the I mean in the past when it was tied to gold, the wars only lasted as long as the Treasury had gold. But now because they can print it forever, I mean, they have no reason not to to keep it going because the more it keeps going, they get a cut cut of it. And it just incentivizes more killing, more wars. And it is it's a thing that really gets to me. It really really does get to me. Um so it's why I I advocate for sound money just so we can see an end to all the mass killing. Yeah, Mises um argued that sound money was important as a check on war, big government, and um outrageous new government programs. Um, so we, you know, we we realize that the gold standard is, um, a check on really bad government behavior including war, especially. And I think what we see through history >> [snorts] >> is that various forms of socialism, um, and decline in free market liberalism at the end of the 20th, um, century and the beginning of the 21st century, um, you know, the breakdown of that old free market liberal, um, regime that brought us massive increases in the standard of living and population and, uh, you know, just the world, oh, the industrial revolution. Um, and then socialism, Marxism, fascism, all of that came into play and we had World War I and World War II when all of the major countries, um, were either fascist, communist, or socialist. And, um, and then, you know, after World War I and World War II, we had the Cold War, uh, which was a non-active war, but government was able to extract so much money and power from it that they didn't need to be actively, uh, killing so many people. Uh, and but more recently, you know, there's been a rise of protectionism, a rise of trading block countries, and and a lack or destruction of international cooperation, and it's not political cooperation, but it's the breakdown of cooperation between countries which really was quite good. And extensive after World War II, you know, there was more trade. The US dollar, you know, was relatively stable and served as a trading currency and a reserve currency, you know, and up until 1971, everything kind of mimicked the gold standard. Um, and so there was less much less fighting. But unfortunately, I think we've we've we're we're on an upward trajectory of more socialism, more protectionism, more less cooperation, and more antagonism between politically between countries. Very, very concerned about that. >> [clears throat] >> You know, Mises and the Austrians have been very explicit that war is always and everywhere bad for the economy. It's bad for the standard of living. There's no, you know, World War II Yeah, World War II did not get us out of the Great Depression, guys. >> [laughter] >> You know, and Um, so I'm very, very concerned. Uh, and but I'm also very hopeful. Um, because in general, people are much less patriotic in the sense of, you know, supporting their governments. They're much more anti-war. Um, you know, the opinion polls right now in the United States are decidedly against uh, President Trump intervening in the Middle East. They're decidedly against Israel in general for genocide and, you know, attacking Iran and, you know, those are just the politic, you know, the public opinion. Um, whereas if you go back 20 years, you know, most Americans had a favorable view of Israel. And there was a peace process in the Middle East. And now, Israel has really thrown that out. And they've embarked, um, on this treacherous, uh, campaign, uh, to disrupt and destroy and kill, you know, their neighbors and, uh, they have the very unfortunate support of the United States government and its military apparatus and, you know, the military-industrial complex and the neoconservatives. Uh, it's all very, very unfortunate and it's very, very dangerous. Right now, the war is is rather isolated, but this could quickly, uh, get out of control and get China actively involved, Russia actively involved the Middle Eastern states um and the surrounding states in the region. Uh this drags in a lot of Asian economies, which are dependent upon Middle Eastern oil. And uh and of course the Europeans are lost in the wilderness uh right now, as usual. But it's really it's really an awful thing that needs to be stopped. Well, well, I mean Do you know Do you know Gerald Celente? He's another popular >> of him, yes. Yeah, so he has this very popular quote when all else fails they take you to war. And we've seen the general slow down in the economy. We know that governments, you know, they they they they they love the GDP as a metric. Um so when they go to war and increase governments have to increase spending, so GDP is artificially inflated. So we're seeing that by their own metrics they they believe war is good. You know, they're incentivized to go to war. So I'm just wondering what we as individuals can do to play a part in you know, bringing bringing the gold standard back. How how can we bring that about to to hopefully bring an end to all this all this chaos? Well, your podcast is doing it. Uh everybody can get on their own personal precious metals gold standards um by simply stacking you know, regularly small amounts of gold and silver as they you know, their budget permits. Yeah. Um and you know, be an advocate uh for that kind of thing within your own social groups. Uh, learn more about it. Um, you know, we I I can send you a link so that everybody, um, that listens to your podcast can get a copy of Murray Rothbard's What Has Government Done to Our Money and also we're we're giving away free copies of Hayek's uh, greatest hits book. Uh, some of the greatest uh, essays are in here. Um, Why the worst get to the top. Uh, his essay which, um, was a inspiration for cryptocurrencies and Bitcoin. Uh, the famous essay on the use of knowledge in society, which I gave to one of my students here at Auburn University and he used that as an inspiration to create the online encyclopedia Wikipedia. So, you know, there's a lot of great, um, knowledge here uh, that you that everybody can learn and start transmitting to your little world around you and over your lifetime it's going to have a big effect. And it it means you're doing something, uh, by, you know, getting on your own personal goal standard, getting more knowledgeable, being able to make effective arguments for the free society. Um, all this kind of stuff. It changes your mindset, but allows you to change other people's mindset. So, I can send you the link so that, you know, all of your listeners can get uh, free copies. Um, I don't know if we have any free copies of Rothbard's What Has Government Done to Our Money, But We Do Have a Link Where You Can Download an Electronic Copy, and of course the Hayek book we do have that's our campaign right now to give away those books and it's really really an electric dynamic collection of Hayek's most worthwhile and insightful articles, you know, that um Well, his Nobel Prize-winning lectures in there and just you know, just phenomenal stuff. Yeah. You know, I read his article Why the West Got to the Top after your recent interview, the one you posted on Minor Issues and honestly blown away cuz I I was reading 1984 at the same time. I finished it yesterday and it was it was like I was just reading the book again cuz it was literally the same thing. Now, once again, principles first principles you can see it over and over again. It doesn't matter what medium it is. You just see the principle once the logic is there. It's universal. It really is. Dr. Thornton, I will have to have you back because there are other things that were on my list that we didn't get round to, but please could you tell the audience where they can find you? Well, I encourage everybody go to our webpage which is mises.org m i s e s dot o r g and my personal economic podcast is called Minor Issues m i n o r. We talk a lot about mining companies, but this is this is different. This is this is about issues that aren't covered in the mainstream or they're they're aspects of issues which aren't mentioned in the mainstream media. And so I try to bring them out and show the Austrian take on these things. And that podcast along with other podcasts are available on our webpage and you can subscribe and or it's on you they're all on YouTube as well and all the podcast platforms. Um And but there's really just an unlimited um supply of lectures and conferences and events and academic type stuff and just daily articles that tell you how Austrians and libertarians think about particular issues. So [music] yeah, that's the best thing you can do um to make things happen. Excellent. Excellent. That's the plan then. Thank you very much for your time. It is much appreciated. It's been a blast.
Predicting Recession | Mark Thornton
Summary
Transcript
[music] >> Hi, I'm Mark Thornton at the Mises Institute. Welcome to the next episode of the Mises Issues podcast. Predicting recession or crisis in the economy is both very uncommon and fraught with difficulties. [music] Most Most predictions are wrong or badly misplaced in time. Government economists and academic economists seldom even make such predictions. Likewise, in the mainstream media, you can hear plenty of calls of recession and economic crisis in the non-mainstream media, but they are under competitive pressures to draw attention to themselves and generate clicks. They are under the same dilemma as everybody else. You cannot predict the timing and magnitude of a recession in a scientific way. If someone could do it, then everybody would eventually catch on, and that would move the needle forward in time and reduce the magnitude, therefore killing the correct prediction. Of course, someone will get all calls right, but that is only a matter of so many people making so many predictions, and someone statistically getting it right rather than a matter of pure science. In addition to not being able to make correct scientific predictions about the future, there's also the problem of the intervening actions that would otherwise subvert such predictions. A war might break out. A new discovery extending lifespan may be discovered. Or we could even suffer an invasion by the Martians. When Austrian economists look at the economy and the data being generated, they might say that a recession or an economic crisis is now possible or likely if there's been a huge increase in credit in the money supply and an abnormal increase in asset prices coupled with an apparent abnormal change in the distribution of income favoring the wealthy and disadvantaging the working class. They would be following the implications of the Austrian business cycle theory. And I explained the synthetic nature of the current uh cycle uh in a past episode. I myself have gotten two recent suggestions wrong. My book The Skyscraper Curse and other popular writings had me predicting an economic crisis in 2020. The dating was based on the Skyscraper Curse index as well as government policies and market data we saw in the late 2010s. Uh that did not come to pass because A, the construction on the Jeddah Tower was canceled. B, the COVID fiasco involving trillions of dollars of government spending was injected into the economy at that time. And C, the Federal Reserve injected trillions of dollars into the credit sector. We did have a short recession, but nothing approaching the status of a true economic crisis. I also felt strongly that there would be at least a significant recession in the early 2020s. With the Fed and the Treasury cutting back on the flood of money they were injecting in order to fight inflation, it seemed reasonable to be economically cautious. As a recession or economic crisis was now a possibility. The US did not go into recession, but the stock market did decline by more than 1/3 of its value. I only learned after the fact that the Fed was not being stingy with its policy rate. It was covertly opening the floodgates of credit through a covert door. And I reported on this on this podcast in early 2024. Now, in addition to issuing statements suggesting that a recession or an economic crisis was possible possibly in the works, I also began focusing on topics such as financial repression and fiscal dominance. Issues particularly where the Fed seemed to be following a path of goosing stock markets and padding the fortunes of the rich without any regard for what they are doing to the people in the working class income category. I of course had been writing and speaking about this aspect of the Austrian business cycle theory and Cantillon effects for many years. But after the term the K-shaped economy emerged to characterize the weird trends post COVID, and that became a dominant theme of the economy after 2024, my explanation of the K-shaped economy became very well received, especially on the podcast circuit, where hosts were all too aware that no one had really adequately provided a convincing reason why it was occurring. I also made it part of my lectures for Mises University, for example. It does seem that this aspect of the Austrian business cycle theory is more impactful than ever before. So, where are we right now? Well, stock markets are continuing to soar upward to new all-time highs. The unemployment rate is below the so-called natural rate of unemployment. And credit is flowing into the economy thanks to the Fed's new liquidity program at a rate of up to $40 billion a dollars a month, as well as very optimistic levels of bank lending and private credit issuance. The fiscal spigot is also open full bore, thanks to deficit spending at World War II levels. According to my search, valuation measures of major US stock markets are significantly higher than their long-term historical averages, indicating strong overvaluations. For example, the Shiller CAPE ratio has only been higher than than it is now, than the current level, once in the last 150 years. The Buffett indicator, Warren Buffett, is above 230% or roughly two and a half standard deviations above the historical trend. And therefore, Berkshire Hathaway is holding enormous amounts of cash. The PE ratios of US stock markets are very high compared to their long-term averages. Market concentrations is at an all-time highs. So, that if you are investing in the S&P 500 index of the 500 largest companies, 40% of your investment is in just the 10 largest companies by value. Mostly the so-called Magnificent Seven tech companies. If we take some historical snapshots of 10 years ago, 20, 30 years ago, the weight of the top 10 stocks was less than 20% of the index. 40 years ago, on the cusp of the 1987 stock market crash, it was 25% and 50 years ago, it was 30%. So, currently we are well above all of those snapshots uh from decades in the past. 50 years ago, in 1976, there was a strong rebound in the stock market after a long bear market. Nominal values were continually eat being eaten away by inflation, and there was a significant turnover of stocks that were included in the S&P 500 index that year. And again, the market declined significantly in 1977. Current valuation trends, of course, can't continue. And as a matter of fact, they aren't expected to continue on Wall Street with almost no one on Wall Street expecting anything more than a correction, and most people remaining outwardly very bullish. On side B of this episode is an interview I did about 3 weeks ago with Kaneki Kojo, and I think you're going to enjoy it and find it a lot of fun, as well as being very important and very informative. What's good, Kanekis? Welcome back to the channel. I hope you're all doing well. I'm joined today by a very, very special guest. It is Dr. Mark Thornton from the Mises Institute. He's a senior fellow there, and he also has a podcast that he does called Minor Issues. He has featured on a number of very popular mainstream outlets, such as Bloomberg, The Economist, Wall Street Journal, and Forbes. And he is joining us today, giving us the an hour of his time to shed some light on geopolitics and the current economy. So, Dr. Mark Thornton, thank you very much for joining us today. Kojo, I'm very happy to be here with you this morning, and your audience, too, of course. Yeah, we're really honored. To start us off, I think it'll be very useful if you could give the audience an overview of the Mises Institute and what it stands for. Well, you know, I work at the Mises Institute in Auburn, and I've been with them almost from the very beginning. So, I'm very old. And the Mises >> [laughter] >> The Mises Institute is a nonprofit organization, and it's an educational organization named after the great Austrian economist Ludwig von Mises, and of course the main purpose is to um educate people about Austrian economics and that great tradition of you know, Mises and F.A. Hayek and Murray Rothbard, all of the new uh newer Austrian economists and the up-and-coming Austrian economist and really get the word out about uh the Austrian school. So, we're not a political organization, we're not a lobbying group, um you know, so there's a lot of things that we're not. And uh but our mission is uh to teach and to preserve the Austrian school and to extend the Austrian school in new directions. And I'm very excited about, you know, the influence that we've had in terms of getting into people's minds, uh important people, young people especially. I think we're having a a great impact on younger adults who are, let's say, smarter than average and they're more um aggressive uh in terms of what they want to do with their lives and be entrepreneurs and and things of that nature. Uh and I get to see that in all of our programs cuz we're not just, you know, an internet organization with four or five podcasts. I mean, we have academic journals, we have events here um at the Mises Institute and other places around the world. Um and the influence that we've had is, you know, at one point it was just really in the United States, but um, the interest um, on the part of younger people, especially, uh, from other places around the globe has just been fantastic. So, um, and and Austrian economics is is very, uh, you know, it's a minority. It's a It's a very teeny minority of the economics profession and you know, Wall Street economist and, uh, government economist, academia, that kind of thing, but Yeah. Uh, we're growing very fast and we're we're very very popular online, um, with, um, you know, in social media and that sort of thing. You know, I mean, you say it's it's aimed to influence young people. I'm I'm 26 and I've been influenced by your work and the Mises Institute. I mean, I've read books by Murray Rothbard, What Has Government Done to Our Money? Completely completely changed my my view around currencies and, you know, what what fiat fiat currencies are doing to society, which is something we'll touch on, uh, later in in this podcast. Um, speaking of currencies, I wanted to discuss I know gold is gold is money, but I wanted to discuss the price of gold currently because we've seen a crater even though there's an ongoing war in the Middle East, governments are still printing, but it is currently trading as though, you know, the the Federal Reserve is going to hike interest rates, the government's going to stop printing currency. So, do you know why the price has suddenly tumbled so so rapidly even though, you know, the stock market is more or less at all-time highs, the S&P 500 and the Nasdaq? Yeah, I've got a pretty good idea. In general, I say that gold is like a canary in the coal mine, which is an old saying. They used to put canaries down in coal mines, so if there was any dangerous invisible gas that was leaking into the coal mine and kills the canary first, and everybody gets out of the coal mine. Well, you know, that's what's happening to gold. Uh the governments have gotten out of control. They're inflating, they're borrowing, they're spending, they're exploding the government debt markets. So, it's a warning sign. Um and it's also like a a fire extinguisher in the sense that when bad things when the government is doing those kind of bad things, people who own gold uh and silver have a something to protect them selves and to put out their little personal emergencies um with all the chaos that governments creating. And so, you know, in the last several years as we've moved into this protectionist and sort of pre-war scenario around the globe with the US and China and Russia, um all these uh political elite groups warring with each other at different levels, and of course Israel, um you know, uh you know, that's that's a problem, but gold has responded. The price has gone way up uh late last year and early this year, of course, uh the market really got explosive going higher. I mean, it went vertical uh for all intents and purposes, and then that continued through January, and then everything fell apart. Um now, part of that the early downturn in gold, I think was just the result of all the speculation and the traders and the hedge funds, uh the computerized trading uh getting into the market and then leaving the market, and hedge funds and so forth uh getting into the market and then needing liquidity uh for emerging problems in things like private equity, private credit, um you know, and they were they were moving really uh starting to move from things like gold and silver into other commodities, which is very typical in these inflationary trends. They'll move into oil and other metals and you know, trying to sniff out new profit opportunities. So, we got that initial big downturn uh in the economy that coincided with President Trump nominating Kevin Warsh um to the Federal Reserve Chairman, and Warsh had this reputation for being, you know, tough um on interest rates and the money supply. And so, all of that sort of coincided to drive the markets back lower down to the upward trend line that was established in the marketplace. And just as that just as the market got its footing, of course, uh Israel attacked Iran and the United States uh was, quote, forced uh to join in >> [clears throat] >> uh on killing, you know, the Ayatollah and and the leadership of Iran uh when they were supposedly meeting um to work out some peace negotiations. So, um you know, that obviously is going to have a short-term effect on the market. Um isolated wars like this are terrible. You know, it's really bad for the economy, but overall, you know, it may be temporary. Um and it may pass. Hopefully that peace will be restored, markets will be restored. But it's very interesting that you bring up this question because what happens is that when the war over there heats up and the oil industry is under attack and uh commerce is prevented by blocking the Strait of Hormuz, um and oil prices spike higher. Uh you know, everybody was anticipating gold going up much higher as a result of that, but the really important thing because gold prices are driven by monetary inflation, um that higher oil prices mean that the CPI statistic is going to jump higher. And the Fed is supposed to be using uh consumer price index statistics to guide its policy. And so, if that CPI and their other uh proprietary measures of consumer prices spikes higher, that prevents them uh from cutting interest rates. It doesn't Yeah. It just doesn't give them political cover for cutting interest rates. They'll eventually cut interest rates no matter what, but almost overnight we saw the market expecting two or three or more rate cuts um especially before the war nomination uh to all of the sudden with oil prices spiking no rate cuts whatsoever. And in the short run gold and silver depend on low interest rates. Um in the long run it doesn't really matter as much but in the short run uh interest rate direction uh does affect the price of gold and silver because of course gold and silver don't earn anything. So as interest rates go up um the big traders feel like their money is better um earning some kind of interest somewhere in government bonds and so forth. And so we had this dynamic going on when we still do actually that if the war heats up oil prices go up um and gold and silver prices go down but if that really fits the mold everybody is following the Fed's playbook. And and it's not just the Fed too. It's all central banks. This is um All in they're all interconnected. Yeah they're all interconnected and they all um you know said well we can't cut rates now. Um and some central banks actually talked about raising interest rates. Isn't that the Australian central bank I believe it was. Yes that's right. Yeah. Cuz they were already they were already kind of overheating as they say in Fed lingo. >> [laughter] >> I mean what does it even mean of overheating economy? Well you touched on something very interesting about oh if interest rates go higher it's the it's like an opportunity cost. That's what we always say when you hold when you hold gold in such an environment. But, that assumes that people would want to buy the, you know, the bonds and treasuries of this count of these countries because we know they're heavily indebted and they will have to print to make up the difference. So, in in emerging markets, we see that sometimes the interest rates on these currencies can go up, but no one's no one buys them in the end because they don't want it. So, isn't that a fundamental assumption that we're making that people will end up buying the treasuries and the bonds? Because what if they don't? Yeah, I mean, I think people are moving away from government long-term dated government bonds. And I think that trend is is firmly established. So, over the long run, you know, people I've already said, you know, we don't want US government bonds and we don't want other bonds. We don't, you know, the Chinese don't want uh the US government bonds, the Russians, of course, uh and other countries around the world. But, in the short term, all of this big money on Wall Street, I mean, they're flipping that money, you know, from one category to another. So, they can easily move in and out of these assets the way you and I can't. Um so, my long-term view on government bonds is decidedly negative. But, uh the people who, you know, control um vast sums of money and are big players in these government bond markets and all markets, really. Um they're the ones that flooded into gold and silver in November and December, especially after the Fed, you know, they did a uh a a double take where they said, "You know, we're not going to be um quantitative tightening anymore." And then, just a little while later, they said, "Well, we've got to buy government bonds anyways because of liquidity, you know, liquidity." And that really supercharged um gold and silver there in December and January. Mhm. Um but yeah, I mean, the long-term trend is definitely away from uh government bonds. And I And I think um into emerging markets, really. Um I see emerging markets um you know, in uh Africa and uh South America and uh in Asia uh as as the place to go in the future. And you think in what's the kind of What's that? Brazil? Any any of these emerging markets, which countries in particular? I know Brazil is a major one in South America, but I'm wondering about the African ones. Yeah, well, I mean, the um the the Brazilian one is is high on my list. Uh and and all of the commodity um countries, the countries that produce a lot of you know, basic raw materials and commodities, I think are probably the best served along with um developed countries like Australia and Canada that have a lot of commodities. But Brazil is is probably a primary example because it is an emerging market and it has lots of gold and oil and agricultural products. Yeah. >> Um now the African uh access to investment in African investments is is a little more difficult. They don't have a lot of well-developed ETFs. Yeah. There's more political instability. So, you have that to deal with. Um And of course, all emerging markets have political instability including Brazil. Um So, you know, and of course, I'm not an investment advisor or counselor, but um I think that, you know, for a young audience, um you know, commodities and emerging markets, and of course, China is an emerging market as well, but they're they represent they're a commodity consumer, not a producer, net producer. But, they they handle um things in terms of like manufacturing and technology and um higher-order goods like automobiles and electronics. So, there is a wide variety of things uh to choose from within emerging markets and there's a whole risk profile, too. Um you know, I made an investment in um in Africa, you know, and it's commodity investment, not a big one. And uh but there's a lot of political risk, uh jurisdiction risk, uh but of course, there's a trade-off there. So, political risk, if it's high, um the rate of return, of course, is also going to be potentially very high as well. Yeah. Yeah. You know, um Rick Rule, I'm not sure if you're familiar with him. He talks about buying hate and he particularly likes investing in countries where, you know, political instability is factored into the price because he can take advantage of of any discrepancies in price and value. Oh, yeah. I'm I'm very familiar with Mr. Rule and a big fan of his mind. He, um you know, he's one of the great ambassadors for investing in commodities and he's one of the great teachers as well. And if you see enough of his videos, you'll realize that he has a libertarian political philosophy like we do and he'll also, sometimes, if you if you listen to enough of him or if you get a chance to ask him a question, uh Ludwig von Mises' uh um magnum opus or his treatise, Human Action, um a treatise on economics, which was originally published in 1949, Rick Rule will refer to that book as being uh very important in his own outlook on things. So, yes, and I hope to meet him someday as well. Yeah, he's a great character. I I've had him on the channel a few times. Oh, that's great. Just Just an Just an incredible character. Yes, [laughter] he is. Um I mean, you Honestly, you're you're an interviewer's dream because you're touching on lots of points that I I've put down. So, That means you have to That means you have to have me back on at some point. >> Oh, oh, for sure. For sure. >> [laughter] >> So, the next The next point to build on what you talked about, you know, libertarian approaches, this is going to be a good interesting one. How much control over the economy should governments ideally have? you You know, in the economy, society, how much control over our lives should should they have? Well, the the basic question, how much control should the government have over the economy, they should have no control over the economy or certainly as little as possible. And I think that a lot of mainstream uh economists tend to the better mainstream economists tend to agree with the Austrians about that approach is that there shouldn't be, you know, any regulations, there shouldn't be any uh price controls, um that you shouldn't be you shouldn't be taxing productive efforts like labor, investment, um you know, income and that sort of thing. Um so, mainstream economists, the better ones, I mean, the ones that aren't socialists, uh they all agree that, you know, the free market is, you know, a good thing and and that but then they always have but this and but that and, you know, they want to butt in-ski into everything in the economy, it turns out. But we see it as um harmful. All of those interventions are harmful. We have, you know, tons of lectures on all that stuff. But we also see it as completely unnecessary that the market process, you know, people are so worried about, you know, the market run a monk a muck, um you know, without any controls, but basically free markets are very well regulated. They have their own regulatory features uh to them. Competition is the best regulating force uh in the economy, um, you know, consumers and consumer sovereignty over markets is the best check on bad business practices. And, you know, we know that consumers are not dupes. We know that they, you know, they can be taken in by business, but it's usually in those industries that are hyper-regulated where the government says, "We'll take control of this and we'll protect you." Um, like with banking. Uh, banking is one of the biggest, highly regulated industries in the United States and really in the world. You know, where the the federal regulators, the Fed, the Treasury, state regulators, everybody's in there, you know, with their microscopes, um, analyzing what the bankers are doing, and yet still every few years we end up in a crisis where all the regulators didn't catch this or they didn't catch that. >> do enough. You know, and then they needed then they need a whole big commission and, you know, a a book this big of new regulations. And, um, you know, let's face it, they have failed over and over again. Um, and, uh, but competition works extremely well to serve consumers. Consumers, um, are very adept. Uh, they have all sorts of means, especially nowadays. You know, we know that, you know, there's you know, when we go online shopping, there's reviews, there's ratings. Um, you know, and then, of course, there's all sorts of new sorts of scams and we have to adapt, uh, to, you know, various scams that come into the market. Uh, but the government doesn't prevent those either. You know, I you know, the things where they're they're supposed to be like on the telephone uh, on your cell phone, you know, and and that sort of stuff. They're highly they regulate that stuff to death. And yet they can't prevent spam, they can't prevent you know, be you know, manipulation of of customers. Um, you know, so they they they they claim to be protecting people, but they don't actually do it. And they very often they just provide um, sort of a protective cover uh, that makes consumers let their guard down and let these gives a bigger um, a approach for these scammers uh, to get into the marketplace. So, we see um, no need for the government in markets and they you know, they they don't help consumers and uh, all of these government interventions lead to monopoly power in markets because you know, once you start regulating, once you start taxing and every little mom and pop has to comply with all these regulations, it puts the small business at a disadvantage and puts big business at an advantage cuz they've got accountants and lawyers and so on and so forth that mom and pops don't have. And as a result, it's very difficult for new competitors to get into these markets and it allows the existing competitors more power in these markets. And so they're able to raise their prices somewhat. Yeah. They're able to reduce their quality somewhat, reduce their service somewhat. And consumers are less served. Um and then you get the, you know, the incumbent firms lobbying government for even more protection. So, it's a very much a lose, lose, lose proposition in terms of government intervention in the economy. Yeah. And the funny thing is the governments will then say the corporations who have the monopolies are price gouging, and they need to split them up for We know that everything they do more or less has the opposite effects. Like all the acts they have, um the affordability act uh >> [laughter] >> It's like honestly, I can't remember who said it in the podcast, but the person said whatever act the government does, just take the opposite of it because that's what's going to happen. Um in the UK, they Yeah, that's a great That's a great starting point. Yeah. In the UK, they recently had this uh renters renters rights where a renter like you So, in the UK, you could have fixed fixed contracts um agreements with your landlord where the contract wouldn't change for a year, and you could lock in your rent. But now they said, "Nah, that's That's giving the landlords too much power." So, um there's no longer such a thing as fixed fixed rents. You can But the renter can give the landlord a 2-months notice so they can leave at any time. And I thought about it initially. I was like, "You know what? Okay, fine." But then, I knowing what I know about, you know, Austrian economics, I'm like, "Well, wouldn't the landlords just end up increasing the price because they need to cover that risk of the renter and who ends up leaving?" And then, you know, they can't plan for the future because they don't have that fixed income coming every month. Before, you know, they could be they could be surprised one month and hear, "Oh, after 2 months, you'll no longer have this income you've been having. So, it's going to end up, you know, reducing reducing the available rooms for rent. And I'm just I I'm just trying to get people to understand that the governments aren't on our side, even though it might it might seem like they are. Oh, yeah, they give consumers, you know, perceived benefits. Yeah. >> But, you know, things like longer-term contracting give the consumer a way of budgeting, you know, for a longer period of time. And by reducing the risk to landlords, um you know, and entrepreneurs, I mean, they're managing risk. So, the contract allows a reduction in risk. And therefore, what we would expect to see is a a a a somewhat lower price uh for the rent. Whereas, if the landlord, you know, where everybody could come and go as they please, well, how are they supposed to budget? So, you're allowing both sides to budget. You're reducing the risk on both sides of the transaction. And you're reducing uh transactions cost and lowering the prices, um really and increasing the benefits for both sides. And you know, I said, you know, when you said, whatever the government says it is, it's probably the opposite. >> Yeah. >> And you know, and and that's and that's very true. That's a good working assumption. But, what we do here is, you know, we don't we don't we're not just a a cheerleader group that says, government's bad, market's good. We're here to to actually teach how markets work, why markets work, why government doesn't work, why it always fails, why do the worst always get to the top. So, we're you know, we're doing uh teaching the mechanics of these things. And you know, in a lot of our programs, it's not like you're taking a college course, you're just being exposed, you know, and you're not sitting down and memorizing, you know, theories and and and graphs and so forth, but at least you know that there is a mechanism, you know, as to why competition forces up wage rates and uh why competition forces uh prices uh to their most efficient levels. And And those kind of issues that otherwise we're thinking, well, where, you know, how does that work, you know? And so, the socialist use that weakness in our thinking uh to bring up, you know, hypotheticals and then all of a sudden, you know, like we're not sure, we don't know how that works. Um you know, and responding, you know, with a cheerleading phrase, markets work, governments don't, is not going to win the argument. So, we're here to uh show people that there are arguments that you can see, that you you personally can understand and relate to, and if necessary, you can go look them up. Yeah. Yeah, it is all empirical, it's all evidence-based, looking at us what has happened over time. Like I said, just taking people through first principles, cuz it's like people need to understand why things are the way they are, as opposed to just telling them this is it and believe it, which is what tends to happen with, you know, MMT socialists. >> [laughter] >> But, you know, we're we're not calling any names. I mean, to each their own, but it just seems to me like Austrian economics is just about common sense. Just look at what has happened in the past, and then work from there. Um Now, I think the main the main topic that I like to discuss actually, cuz I've talked about it on my channel a few times, but um it's something that's really close to my heart. It's about the effects of fiat currencies on society. In your research, what have you found to be the main effects? How does How How does fiat currencies alter, you know, society's morals and Yeah, just tell us tell us more about that. Well, I mean, yeah, I mean, that's near and dear to my heart. That was near and dear uh to Ludwig von Mises, for sure, and F. A. Hayek, and Murray Rothbard. I mean, they all wrote a great deal um about this, and um I actually did a podcast a couple of months ago, where I looked at the seven deadly economic sins in society. So, I looked at, you know, these seven things, which I think most people agree are the seven worst things that um exist in um our modern economy, and I tie them all to fiat currency. And uh So, you know, paper money, uh the whole purpose of that is to allow the government to debase the paper money. Um you know, I don't care what they say, but, you know, their goal is to be able to print up more money to spend on themselves. Um, but money is so important. It permeates everything in the economy. It's ubiquitous and it has macroeconomic effects. In other words, you know, some uh, dental regulation is going to affect, you know, people's teeth and it's but it's only going to affect a few people uh, in the economy, but money is everywhere. Money is macro. It's ubiquitous. Uh, everybody knows, um, it causes higher prices. Um, but it also causes the business cycle and it also causes a redistribution of wealth and income in society away from the working class to the very wealthy and to government itself. And, um, I, uh, I wrote a whole book on this uh, subject uh, called The Skyscraper Curse and I go through those, uh, particularly the business cycle, but also the the redistribution of income and wealth in society where the working class is made poorer while the uber wealthy, uh, especially the political elites that are connected both to big business and, well, you can kind of think of like what they refer to, uh, what some people refer to today is the Epstein class. Uh, they're made very wealthy as a result of uh, printing money and artificially low interest rates. Um, so it undermines savings and wealth accumulation across society. Um it undermines uh family formation, so people getting together to form families, getting married, uh establishing households. And we all know that now, you know, people get married much, much later or they don't get married at all. They have fewer kids. Um you know, and then there's more divorce and separation. Yeah. And all of that, so it's it's hard to connect, you know, the printing press in Washington, D.C. and its central banks around the world with these social problems, but actually one of our summer uh research fellows, Jeffrey Degner, who's now uh a dean of business where he teaches, uh he did some research here for his Ph.D. And he just published this book, um which addresses exactly uh those issues, inflation and the family. So, um it uh it undermines social institutions. It undermines moral character. Mhm. Um in the sense that, you know, low interest rates and inflation and a lack of savings really warp people's minds away from, you know, personal growth and enrichment and more towards what uh you know, they they have what what we call high time preferences. So, they want everything right now. They want to consume, you know, they want to be satisfied. They want to um satisfy their more basic animalistic wants and desires and they are less interested in long-term human enrichment and development and care personal character and um you know, moral character and all of those kind of things and of course all of that um undermines social stability, you know, with Yeah. because families, everybody agrees um even the socialists sometimes agree that you know, the family is the source of social stability. If you undermine the family and this is where the Marxist of course, they actively want to undermine the family and increase uh social instability so that the state becomes more powerful in society and more in control and can manipulate people's minds And state schools and Yeah, oh well, yeah, and state schools feeds into that. So you know, this printing press you know, where a lot of you know, people are obviously concerned with higher prices. Uh and that's the most visible and direct effect. But it really permeates society by raising people's time preferences wanting things now and not concerned about the future. And that leads to really a degeneration of the individual and society. You know, I believe and I've been talking about this a lot because it makes sense to everybody and that is that all good things in this world come from the bottom up. That the individual the family, the household, small businesses, community, and you know, a lot of people agree with that. And nothing good comes from the top >> [laughter] >> Cuz then it's being it's being imposed on you as opposed to it coming from among you and around you. That's right. Yeah, it's being imposed and it's one size fits all. You know, the the top-down solution is always one size fits all, never works out. Um and it usually is very disruptive or maybe even destructive. So, that's where I go with you know, I I take that fiat money and uh I've learned of course all of this from other writers, you know, going back into antiquity. Uh but certainly all modern um Austrian economists are very interested in this and most mainstream economists just stick with money seems to raise higher prices. But not what prices or who who benefits and who loses, uh they just look at the consumer price index and assume that all everything else is um a wash and it it doesn't have any distributive effects or destructive effects, but the Austrians uh don't believe that. We believe that it does um have disruptive effects and destructive effects. And and Jeff Deist has you know, shown that I think very clearly drawing on these lessons and modern statistics. You know, you've touched on everything of I wanted to talk about it regarding the harmful effects, especially the family family create formation. There's this chart There's this website called WTF happened in 1971. I don't know if you've seen that website. I don't think I have. Oh, it's a website of lots of charts that talk about what happened to society in 1971. You know, when Nixon deep act the dollar from gold. And you see these sudden changes in the price of a house, divorce rates, education levels, so maths and science scores plummeting since 1971, school shootings increasing massively since 1971. It This just is I it Once you see it, you can't unsee it. >> [laughter] >> The the correlation is just too close. It's too close to not be, you know, be rooted in that. And one of the things you didn't mention though was wars. Ongoing wars because, like you said, they printed again and again and again. Um ad infinitum. And we're seeing these forever wars now. The Ukraine-Russia war, it hasn't ended yet. Uh Venezuela, that was a quick one. But now we're seeing the Middle East again. And in the I mean in the past when it was tied to gold, the wars only lasted as long as the Treasury had gold. But now because they can print it forever, I mean, they have no reason not to to keep it going because the more it keeps going, they get a cut cut of it. And it just incentivizes more killing, more wars. And it is it's a thing that really gets to me. It really really does get to me. Um so it's why I I advocate for sound money just so we can see an end to all the mass killing. Yeah, Mises um argued that sound money was important as a check on war, big government, and um outrageous new government programs. Um, so we, you know, we we realize that the gold standard is, um, a check on really bad government behavior including war, especially. And I think what we see through history >> [snorts] >> is that various forms of socialism, um, and decline in free market liberalism at the end of the 20th, um, century and the beginning of the 21st century, um, you know, the breakdown of that old free market liberal, um, regime that brought us massive increases in the standard of living and population and, uh, you know, just the world, oh, the industrial revolution. Um, and then socialism, Marxism, fascism, all of that came into play and we had World War I and World War II when all of the major countries, um, were either fascist, communist, or socialist. And, um, and then, you know, after World War I and World War II, we had the Cold War, uh, which was a non-active war, but government was able to extract so much money and power from it that they didn't need to be actively, uh, killing so many people. Uh, and but more recently, you know, there's been a rise of protectionism, a rise of trading block countries, and and a lack or destruction of international cooperation, and it's not political cooperation, but it's the breakdown of cooperation between countries which really was quite good. And extensive after World War II, you know, there was more trade. The US dollar, you know, was relatively stable and served as a trading currency and a reserve currency, you know, and up until 1971, everything kind of mimicked the gold standard. Um, and so there was less much less fighting. But unfortunately, I think we've we've we're we're on an upward trajectory of more socialism, more protectionism, more less cooperation, and more antagonism between politically between countries. Very, very concerned about that. >> [clears throat] >> You know, Mises and the Austrians have been very explicit that war is always and everywhere bad for the economy. It's bad for the standard of living. There's no, you know, World War II Yeah, World War II did not get us out of the Great Depression, guys. >> [laughter] >> You know, and Um, so I'm very, very concerned. Uh, and but I'm also very hopeful. Um, because in general, people are much less patriotic in the sense of, you know, supporting their governments. They're much more anti-war. Um, you know, the opinion polls right now in the United States are decidedly against uh, President Trump intervening in the Middle East. They're decidedly against Israel in general for genocide and, you know, attacking Iran and, you know, those are just the politic, you know, the public opinion. Um, whereas if you go back 20 years, you know, most Americans had a favorable view of Israel. And there was a peace process in the Middle East. And now, Israel has really thrown that out. And they've embarked, um, on this treacherous, uh, campaign, uh, to disrupt and destroy and kill, you know, their neighbors and, uh, they have the very unfortunate support of the United States government and its military apparatus and, you know, the military-industrial complex and the neoconservatives. Uh, it's all very, very unfortunate and it's very, very dangerous. Right now, the war is is rather isolated, but this could quickly, uh, get out of control and get China actively involved, Russia actively involved the Middle Eastern states um and the surrounding states in the region. Uh this drags in a lot of Asian economies, which are dependent upon Middle Eastern oil. And uh and of course the Europeans are lost in the wilderness uh right now, as usual. But it's really it's really an awful thing that needs to be stopped. Well, well, I mean Do you know Do you know Gerald Celente? He's another popular >> of him, yes. Yeah, so he has this very popular quote when all else fails they take you to war. And we've seen the general slow down in the economy. We know that governments, you know, they they they they they love the GDP as a metric. Um so when they go to war and increase governments have to increase spending, so GDP is artificially inflated. So we're seeing that by their own metrics they they believe war is good. You know, they're incentivized to go to war. So I'm just wondering what we as individuals can do to play a part in you know, bringing bringing the gold standard back. How how can we bring that about to to hopefully bring an end to all this all this chaos? Well, your podcast is doing it. Uh everybody can get on their own personal precious metals gold standards um by simply stacking you know, regularly small amounts of gold and silver as they you know, their budget permits. Yeah. Um and you know, be an advocate uh for that kind of thing within your own social groups. Uh, learn more about it. Um, you know, we I I can send you a link so that everybody, um, that listens to your podcast can get a copy of Murray Rothbard's What Has Government Done to Our Money and also we're we're giving away free copies of Hayek's uh, greatest hits book. Uh, some of the greatest uh, essays are in here. Um, Why the worst get to the top. Uh, his essay which, um, was a inspiration for cryptocurrencies and Bitcoin. Uh, the famous essay on the use of knowledge in society, which I gave to one of my students here at Auburn University and he used that as an inspiration to create the online encyclopedia Wikipedia. So, you know, there's a lot of great, um, knowledge here uh, that you that everybody can learn and start transmitting to your little world around you and over your lifetime it's going to have a big effect. And it it means you're doing something, uh, by, you know, getting on your own personal goal standard, getting more knowledgeable, being able to make effective arguments for the free society. Um, all this kind of stuff. It changes your mindset, but allows you to change other people's mindset. So, I can send you the link so that, you know, all of your listeners can get uh, free copies. Um, I don't know if we have any free copies of Rothbard's What Has Government Done to Our Money, But We Do Have a Link Where You Can Download an Electronic Copy, and of course the Hayek book we do have that's our campaign right now to give away those books and it's really really an electric dynamic collection of Hayek's most worthwhile and insightful articles, you know, that um Well, his Nobel Prize-winning lectures in there and just you know, just phenomenal stuff. Yeah. You know, I read his article Why the West Got to the Top after your recent interview, the one you posted on Minor Issues and honestly blown away cuz I I was reading 1984 at the same time. I finished it yesterday and it was it was like I was just reading the book again cuz it was literally the same thing. Now, once again, principles first principles you can see it over and over again. It doesn't matter what medium it is. You just see the principle once the logic is there. It's universal. It really is. Dr. Thornton, I will have to have you back because there are other things that were on my list that we didn't get round to, but please could you tell the audience where they can find you? Well, I encourage everybody go to our webpage which is mises.org m i s e s dot o r g and my personal economic podcast is called Minor Issues m i n o r. We talk a lot about mining companies, but this is this is different. This is this is about issues that aren't covered in the mainstream or they're they're aspects of issues which aren't mentioned in the mainstream media. And so I try to bring them out and show the Austrian take on these things. And that podcast along with other podcasts are available on our webpage and you can subscribe and or it's on you they're all on YouTube as well and all the podcast platforms. Um And but there's really just an unlimited um supply of lectures and conferences and events and academic type stuff and just daily articles that tell you how Austrians and libertarians think about particular issues. So [music] yeah, that's the best thing you can do um to make things happen. Excellent. Excellent. That's the plan then. Thank you very much for your time. It is much appreciated. It's been a blast.