War, Gold, and the Fed’s Next Move | Mark Thornton
Summary
Precious Metals Bull Case: The guest argues gold and silver are long-term safe-haven assets amid eroding trust in fiat currencies and rising global debt.
Gold Drivers: Central bank buying, inelastic supply and demand, and potential yield-curve control point to structurally higher gold prices despite short-term volatility.
Silver Overweight: He is more bullish on silver than gold, citing tighter supply-demand dynamics and the potential for outsized upside alongside elevated volatility.
Miners' Fundamentals: Gold and silver miners show significantly improved balance sheets and outlooks, which the guest expects to remain favorable even if spot prices correct further.
Macro Regime Shift: The discussion highlights a durable shift to higher interest rates and a sustained commodity uptrend, with gold and silver initially leading the move.
Geopolitical Risks: Middle East conflict threatens oil, gas, and fertilizer flows, potentially amplifying global inflation pressures and reinforcing the metals thesis.
Liquidity and Credit Stress: Emerging liquidity issues and strains in private credit/equity could trigger further policy responses, weakening the dollar and supporting precious metals.
Transcript
[music] Hello and welcome to another episode of the Minor Issues podcast. I'm Mark Thornton at the Misesus Institute. In this episode, it's very interesting. Going to be replaying uh two short interviews that I've done. The first uh interview took place actually what four weeks ago with the Daniela Cambodi show. And uh so this is before the outbreak of war in the Middle East. And we talked about at the beginning um my uh supply and demand analysis for the market for precious metals and how that can cause really significant uh instability in those markets um both up and down. So volatility up and down in the marketplace and uh and we also talked about the implications of uh inflationary fiat regimes uh which exist around the world and the breakout of hostilities and international conflict. So that was an interview taking place almost four uh weeks ago. Uh and then the second interview was with my friends at Liberty and Finance and that took place only days ago. And uh of course in in this interview uh they wanted to know a lot about the impact of the war and my outlook u in the short medium and longer term um for this kind of conflict and what we've seen so far um in that war. And um most importantly we talked about a traditional issue uh that you might have seen in uh talked about or written about by other Austrian economists where war is used as a diversion for problems that exist on the home front um in the home economy. um as Misesus would talk about, you know, that it was war is an ultimate um concluding phase of the process of progressive uh interventionism. And of course, uh, this ties in nicely with what I've been talking about on the podcast and in other interviews with respect to, uh, financial issues, business cycle type issues, what's being called, uh, by the Fed uh, for example, the liquidity problem. uh when in actual fact it's really a leveraging uh crisis that's impacting uh the American economy and our business cycle uh in areas like private equity, private credit uh eventually things like insurance and pensions and things of that nature. Um and then we also looked at the impact over the last couple of weeks of what the downdraft or crash you could say in precious metal prices uh has been on the psychology of silver stackers and investors in gold and silver. um you know linking that back up to the first section of the interview and then we conclude by looking at and reiterating the longer run trends that have developed in the American economy not just over the last few weeks really but over the last few years many of which are not even really recognized in the mainstream media or in the mainstream financial press and uh those long run trends that have emerged are uh of course the switch over from uh the lower and lower interest rate environment that occurred over many decades into the emerging long run trend of higher and higher interest rates which have emerged during this crisis and were emerging uh prior to this crisis. So that long run trend still seems to be intact. And then of course higher commodity prices that I've talked about uh the change in the long run trend from lower and lower commodity prices on that long run trend over the last several decades. uh and then the emerging new longerrun trend of higher and higher commodity prices which we uh have seen certainly before uh this crisis and it and the crisis the war crisis in the Middle East I'm referring to uh is looking like it's going to only accelerate um the long run uh trend in commodity prices if you look at um the index of commodity prices. There's a couple of uh indexes out there that calculate um uh the price level in commodity prices. Both of them are up sharply in this uh war scenario, but they were already um on a longer trend up. So we have uh higher interest rates, higher commodity prices and as part of the upward trend in commodity prices. Of course, gold and silver initially led though that charge up in higher commodity prices. And I would say that there's nothing uh to suggest even with this crash in precious metal prices that that long run trend um has been somehow switched off or reversed. um but rather the um rather that's a short-term correction that hearkens back to both the liquidity crisis and the unusual supply and demand conditions uh that we've already described and we already knew existed in the market for uh precious metals gold and silver. So, a very interesting contrast to an interview that just came out last week, but it was recorded uh more than four weeks ago and then [clears throat] the Liberty and Finance episode, which was recorded very recently. So, I hope you enjoy this episode of the Minor Issues Podcast. I'm Mark Thornton at the Mises Institute. >> Hi, this is Daniellea Cambone. Welcome back to the Daniela Cambone show. Well, in a world of endless money printing, skyrocketing debt, and eroding trust, and fiat currencies, one signal rings louder than ever. Gold isn't just rising, it's sounding the alarm bell. Joining me today is Austrian economist and Mises Institute senior fellow, Dr. Mark Thortton. He'll break down why gold prices are flashing [music] red warnings for the economy and what it means for your future. Dr. Mark Thorton, so great for you to join us today. >> Oh, it's my pleasure. you know, I've read your work, followed your work, and let's start with your general thesis around the yellow metal and why you are so bullish. >> Well, I've been talking about this for quite some time. I've been on the podcast now for two years and you know, I've seen the United States in particular moving towards a hyperinflation scenario. And of course, gold and silver are international global markets, but the global economy is based on the US dollar. And I make my case that we're on the on ramp to hyperinflation uh because of the concern I have over the value of the US dollar. And that's really both in terms of the demand for the US dollar and the supply of the US dollar. On the demand side, we're seeing a fall off in the demand for the US dollar primarily of course and everybody knows this is in terms of central banks around the world turning away from US treasury bonds and towards gold as a reserve asset. And now gold is now more than 50% of total central bank assets and reserves. And so they their demand is diminishing for dollar denominated assets. Um and then of course uh people all over the world are also concerned about the US uh dollar and you know of course there's huge buying internationally the Indians and the Chinese the Turks um and and other places around the world there's been a spike up in the demand uh on the part of individuals uh in various places around the world and they're moving away from the US dollar. So the demand side does not look good and the supply side of course is even more intense um in the sense that our government the US government and governments around the world are spending money like crazy. They're borrowing money like crazy. So that's national budget deficits and there's an huge accumulation of national debt uh that has occurred and of course that's a very serious and humongous concern. The United States um has $ 38 trillion in national debt and counting and of course the Japanese, the British and many other countries. there was a scare with uh the French debt uh more recently and and so that's a huge burden and threat um on the world economy and of course the marker that we're looking at is in terms of all of that the spending the deficits and the debt is the interest payments that governments have to make um on a regular basis and of course in the United states interest payments on the debt are going exponential uh you know and that's also happening of course in Japan and other countries around the world. So all of the fundamentals um are as you say I mean it's an emergency uh it's it's a flashing red light and uh and no none of these governments are really doing anything about the fundamental problem. So uh unfortunately I mean this is uh you know it's it's good for investors and individuals to know about this you know that gold is the safe haven asset and the and the long-term picture looks very bright for it but more fundamentally it's a real threat to the economy and our standard of living. >> We'll jump right back but this is important. Many of you are asking the question [music] right now, what does all of this mean for my savings and retirement? Because during periods like this, your retirement can rise while the currency underneath it quietly loses purchasing power. Most people track market risk, but almost no one tracks dollar risk. That's exactly why Taylor Kenny here at RTM Trading will be breaking it down in a live webinar called Devalued Overnight: Protecting Your Wealth Through the Reset. It's happening Tuesday, March 17th at 9:30 a.m. Pacific Standard Time. [music] That's 12:30 here on the East Coast. It's free, it's live, and there will be a Q&A. Reserve your seat using the link in the description below. Very well said. And um three key points I want to go back there. I want to go back to one, the central bank buying. Yes, we know it's been fueled by that. Uh the trend has not slowed down yet. I guess the question I have for you, Mark, is one, what happens if we do see a slowdown? I mean, do you think that if the gold price keeps rising, central banks might say, "Okay, well, we we have enough now or or they might wait for a pullback, I mean, does it vote against us, I guess, is what I'm asking." Well, that's a very good question because as I explained early in January, uh especially with silver, but it's also true with gold is that the demand for gold is relatively inelastic. Um and the supply of gold is relatively inelastic. I mean, the there's only so much you can do with recycling and there's very little they can do in the short run in terms of mining. So both the demand and the supply is relatively inelastic and central banks coming into the picture and buying noticeable amounts of gold is really the driver for this higher price uh of gold and so even a small cutback uh could dampen the increase in the price of gold. I think the long run trend is definitely up, but just like any other market and in this market in particular, a slowdown um would be have a noticeable impact on the rise in the in the price of gold. I think that's uh that's going to be the case. But I mean there's other drivers of that and uh you know for example the international conflict that's emerging over the last year or so. I mean we have the United States in conflict with most of the other countries around the world with tariffs uh interventions in Venezuela. um you know posturing towards Greenland um you know posturing against China uh and now of course um you know our military preparedness against Iran all of these that that's a lot of international conflict the world has broken into now all of these blocks these uh mostly trading blocks uh which is not good but you know trading blocks lead to other kinds of conflict and and and it can turn into a military conflict. And so, you know, that kind of conflict is going to offset or maybe even encourage central banks to add to their gold holdings. >> So, it's a it's a question of certainly of risk and uh it and and the uh the roll out of events, so to speak. uh in in the world economy >> and Mark, you know, and we're looking at other aspects influencing the gold price. Any insights or do you think it could also be a part of the Bitcoin crowd? Uh perhaps fed up with the with the pressure on Bitcoin, perhaps requesting their position in Bitcoin. Are we seeing that money flow into gold? Any insights there? >> Yes. I mean, I think one of the reasons it took so long for gold and gold was really depressed uh at depressed price levels if you look back five years or so. Um and I think a lot of that was people looking for an alternative to the US dollar. uh especially initially they were looking for you know an international currency uh a stable currency with a stable privately generated supply of money and so I think a lot of young people uh really went into cryptocurrencies rather than gold and now that cryptocurrencies have semi crashed and are not looking all that strong right now uh I'm not making any predictions there but I think that the crypto crowd is exactly the type I mean they're first mover type individuals. They're smart, they're young, they're risktakers and they they're following gold. Even if they hadn't invested in gold, they're following gold and silver. And I think that they're na that's that there's a natural inclination there to diversify over into the precious metals on the part of that group in particular especially in the United States where uh gold and silver holdings by the average individual investor is really teeny in comparison to China and India and Turkey and other places around the globe. The other point just to look at the economy in general and I'm happy you brought up the debt because I often have experts on the flip side saying you know we've been hearing about the debt the debt's not a problem as long as we're servicing the debt and that's what we have been doing the US won't be in trouble. What do you say to the naysayers or folks that brush off the trillions we've accumulated in debt? Well, when you're the world's largest economy and you know, if you look back decades and the national debt was only 30% of gross domestic product, the overall size of the economy, that's not too bad. But now it's over 100%. And growing very rapidly and that 100% has been indicated by long historical studies as a point of no return. And that's when I started looking into this issue as a threat of hyperinflation. And now if you took in all of the US government debts in you combined them all, it's 120% of gross domestic product. So it is a very serious concern at this point. And you know just if the audience wants to pull up, you know, Google interest payments by the US government. Yeah. uh and look at it in any terms, nominal terms, real terms, inflation adjusted terms as a percent of GDP as a percent of the budget. I mean interest payments now um are projected to go over you know all defense spending or all discretionary spending um in the next you know eight years. So, uh, it it's really, uh, a dramatic and that's all, of course, according to the Congressional Budget Office and if everything goes according to plan, if we get normal growth and normal inflation and and things of that nature, and I'm really concerned right now, yeah, >> that interest rates uh, could rise. I think we've entered in terms of the global economy, I think we've entered an uptrend in long-term interest rates in the global economy and it's very difficult for any single central bank to fight. I mean, they control the short-term interest rates, but they have a very difficult time controlling longerterm interest rates, which is the 30-year and 20-year US government bonds. uh controlling those things is a shockwave uh symbol uh to the world economy that you know don't trust the US government debt >> unless you print print print print. >> Well, that's right. If you print print print um you know that's what you would have to do. you know, the the appointed new chairman of the Federal Reserve has always has expressed um sympathy for the idea of yield curve control, you know, where you're sort of controlling all lengths of US government debt, the short-term Treasury bills, the long-term 30-year US government bonds. But of course, if you do that uh and you're not on a gold standard, then the value of the US dollar is going to plummet. And as it plummets, of course, we're going to see uh a like rise in oil prices and international goods coming into the United States. Uh and of course, gold will react first and foremost. That's the thing about gold is everything in the world economy affects the price of gold. Uh the price of gold is a global econ is a global commodity and it takes into consideration all this. So we would expect gold to lead um in that reaction to yield curved control. >> I think you're right on track there. And if I could just take it one step further. I think with the appointment of WSH coupled with uh Benton there in the administration we know their their heavy gold past right uh do you think that there is some sort of plan tied to gold that we're headed towards? >> You mean in terms of revaluing it and all of that? Um well that's a little bit um you know I love good conspiracy theories and I think government is nothing but really if you break it down a conspiracy uh particularly on the part of the power elites out there that really control the system and I think it's really important for your audience to to realize that is that the average American voter doesn't control this monster that the class of power elites that we really don't know that have only come to light really with the EP Epstein files and things of that nature. Do we really have a grasp >> on who's controlling our Congress and and Senate and and >> uh unfortunately the president and you know what they have hatched and uh but of course you know they're uh you know they're the ones that are engineering people like Worsh coming in into uh the Fed and Bessette coming into as secretary of the Treasury. So, I'm aware of this um and I am keeping an eye on it, but it's hard to for an economist to analyze that particular type of thing. And you know, it I think most commentators just say, well, they're going to revalue gold uh at a certain price, but I'm not sure what that actually means. If they just want to revalue the US gold holdings, well, that's one thing. That's an imaginary figure. If they're not going to buy or sell uh from the US gold stock, then it's irrelevant. And you know, and if they want to set the world price at some level, well, that means they're going to have to buy and sell. And I don't think anybody is currently contemplating the idea of the US selling off its gold hordes uh into the marketplace. Um, I ne I wouldn't necessarily be opposed to that and it would temporarily uh suppress uh the price of gold on the on the world markets, but it would also of course undermine the value of the dollar. >> Interesting. You would not >> and I think that's what they're looking for. >> Opposed to that. You wouldn't be opposed to the US selling part of their gold a portion. Well, I guess I hadn't really thought about it all that much, but um I I'm just, you know, here to analyze it and um you know, if they did do something like that, it would temporarily uh you know, s suffice some of the demand for gold. Uh but in the longer run, of course, people believe in the US dollar because they know the US has this huge pile of gold that it collected during World War I and World War II. So, uh you know, that's been a big backing for the value of the US dollar. And it it would seem I wouldn't put it past the globalists and the power elites to want to drive down the the value of the US dollar. President Trump has spoken in favor of driving down the value of the US dollar supposedly with the idea of making uh American industries more competitive on international markets. But of course, uh, a lower value of the dollar would dramatically increase price inflation in the economy. >> Okay. Um, I'm loving this conversation. Let's talk about something that is truly not conspiracy theory and it's the how- employment is decoupling from economic growth. Um, so January of this year, 108,000 layoffs. It's the highest since ' 09. That's three 3,500 people losing their jobs every single day. Um, Amazon cuts 16,000. UPS, we know, slashing 30,000. These layoffs are occurring while GDP continues to grow at approximately 4%. Um, let's get your general thoughts on the economy. I mean, is this part of your thesis of why you think gold is flashing a major red signal here about the economy? >> Yes. But, um, in terms of analysis, it fits in extremely well with what's called the Austrian business cycle theory. The business cycle theory of Ludwig van Mises and he was, you know, this was a hundred years ago when he published a book on this topic. And basically it's when central banks increase the money supply as they have been doing for years and artificially suppressing interest rates as they have been doing for many years. Um you know that stimulates the economy and it raises prices in the long run and a lot of economists agree with that. But the Austrian business cycle theory explains that a lot of that new investment goes into capital inensive industries with advanced technology like artificial intelligence is just a good example of a current case. uh and it stretches out the structure of production in the overall economy and it has a tremendous first round effect of helping people that have a lot of wealth and that are in control of these particular industries, technology industries. But it also has a suppressing effect on the overall economy and in particular on the working class uh in the economy. People without a lot of wealth that don't benefit from the lower interest rates the same way that stockholders and owners of advanced technology companies can benefit from those low interest rates. So the Austrian business cycle theory explains perfectly not just the business cycle and not just higher prices in the long run but also the K-shaped economy. the fact that it's not just a long-term trend when they do this kind of thing, but there's a separation in the economy where the wealthy individuals owning the technology industries go way up and the people without wealth that can't take advantage of the low interest rates. they see their wage rates um stagnant or declining, their their employment opportunities stagnant or declining and their real incomes, their real standards of living declining as a result of this. So, it's not just that there's more money being injected into the economy, but it's who's getting that money really, right? And you know, what prices are they driving up? Well, they're, you know, they're driving up stock prices, they're driving up bond prices, they're driving up land and real estate, uh, over the, you know, over the intermediate time frame. But the people who don't have real access to this low interest rates, they're dependent on wages. Well, their jobs are not receiving uh, you know, the the rank and file working class. There's not a lot of investment in their industries and as a result their industries like manufacturing, construction and so forth are not necessarily improving and their real wages because eventually these prices hit everybody. But of course uh the median income family uh those higher prices do a lot more damage. They don't have a huge portfolio. they don't have a lot of investments that benefited. They're only getting the long-term price increases and so they're uh their labor market is stagnant and their standard of living, their inflation adjusted incomes are declining as a result. >> Dr. Mark Thoron, just want to get a question in before we wrap on silver. Thoughts on silver? Are you as bullish silver as gold? No, I'm much more bullish on silver. That's why I wore this T. >> Wow. I >> that's why I wore this T. >> Okay. >> Yeah. And I had an uh an episode of my podcast, Minor issues. It's the first episode of this year and it was all about why these this market is so dynamic and uh you know and in both directions. Um, you know, we're given the inelastic supply and inelastic demand. Uh, you know, I can't give investment advice, so I I can't come right out and say it, but if you watch that episode, you would be very lery of what might happen in the first part of this year as far as silver is concerned. Now, I would note that gold and silver are still up 20% year to date. Okay. So, uh yes, volatility, maybe even more volatility, but volatility works in both directions. So, you have to have the stomach >> for this kind of thing. Uh but you know going back to the hyperinflation being on the on ramp of the hyperinflation and concerned about the US dollar. Well if you own real money actual money that was decided in the marketplace pure and simple that's gold and that's silver. I mean the American money used to be silver coins. The trading money the investment money used to be gold. And so if you can get yourself out of, you know, the currency of the US government, yes, which is in doubt and it's at risk, >> uh, and move it into real money, >> gold and silver, then you can insulate yourself, uh, from some of those problems. But I I I'm I must point out that just owning gold and silver is not going to make the world a safer place. And it's not going to do away with these problems of inflation and the Austrian business cycle theory problems that I just had the great opportunity to explain. So, you know, it's not a cure all. We have to fix the monetary system. And that's, you know, not going to be done by the Fed. I can guarantee you that. It's not going to be the power elites are not going to say, "Oh, we look at what we've been doing to the American working class all these years. We need to reform ourselves and take away, you know, this this uh tool that we've been using to enrich ourselves. The American people have to take it back themselves." But when there's no end to the criminality, I I think the only thing we can do, and you're right, it it doesn't solve all problems, but I feel it at least gives you some power back. And I think sooner we can, you know, educate, especially if you're a parent, educate our children. I mean, that's what I'm trying to do. At least I took my kids down to Stacks Powers the other. >> Well, and that's and that's what we do at the Mises Institute. We uh try to explain how the market works. Not just that it works and just accept it. We we explain how the market works and why government always creates more problems. Why it's systemically problematic for the economy and our standard of living. And we do that, you know, for children in high school, college. >> Great. >> Uh professors, the general public. We have conferences. We publish books. >> That's awesome. Uh, we have the greatest web page in the world. >> I love that. Well, thank you uh for all the work you're doing and you really surprised me with your silver answer. I didn't know you were more bullish silver than gold. I mean uh I'm not sure if you're familiar with Michael Oliver's work. I think he's the most bullish I've heard thus far. He's calling he says he wouldn't be surprised to see silver prices anywhere between 3 to 500 um by summer of this year. >> Yeah, I I know Michael very well. He's spoken at our conferences before and uh he has a background in Austrian economics. If you know Austrian economics, uh you'll see him refer to the Misesus Institute, u Austrian economics, the business cycle theory, you know, and he'll make corrections. when when he says inflation, he's usually talking about monetary inflation and distinguished from price inflation. So, you know, the framework is important. Now, Michael's work is based entirely on technical analysis. So, it's not straightforward Austrian economics. You're getting >> the flip I'm giving you the flip side of Michael's coin essentially. Um, and it it's it's a reinforcing supply and demand dynamic. >> So when you hear those numbers, it doesn't shock you, Michael's numbers. >> No. >> Enough said. Um, I love this conversation. Please come back soon, Dr. Mark Thoron. >> I'd love to. Thank you. >> I have so many more questions for you, so we got to get you back on. and thank you for working with me through this snowmageddon today, but we got it done. >> Welcome back to Liberty and Finance. We're delighted to welcome back Mark Thornton, a member of the Misesus Institute. Mark, today being Tuesday, March 17th, 2026, thank you for coming back on Liberty and Finance. >> It's great to be with you, Donigan. Happy St. Patrick's Day. >> And happy St. Patrick's Day to you and to all those out there. We wanted to talk with you about the uh importance of the Mises Institute. Not only for what it tells us about the importance of real things, real money, real economics and freedom and free markets, but how how areas of concern right now where we've detached from those realities and are heading off for the benefit of a few and to the detriment of the many. And right now we've got some major geopolitical strife that is uh burning up a lot of economic resources and throwing off uh a lot of our financial stability, sending signals that are very difficult for both individuals and businesses to respond to. Can you talk to us about some of this geopolitical turmoil and the impact that it's having on our monetary and financial world? >> Yes, Donigan. Uh, Lri Van Misus wrote about and I've been speaking about for many years the problems of interventionism of government in the economy and protectionism and how that leads to international conflict between nations and eventually can result in war. And that's precisely what we've seen over the last several presidential administrations going back to Barack Obama, Trump one, Biden, Trump too. And it's coming forth with more protectionism, more international conflict, and now we find ourselves in this turmoil and this quagmire in the Persian Gulf. um a conflict seemingly between Israel and Iran with the United States uh caught in that trap and now the whole world is at risk because of the flow of oil and natural gas and all the related chemicals and most especially fertilizer uh from the Middle East. So people, you know, they associate oil with gas in their gas tank, but it really affects the household budget tremendously in many, many different ways. It affects American business in terms of chemicals. It affects agriculture, in terms of fertilizer. It affects our electric bill. uh it affects transportation of everything back and forth and we're just apparently getting started with this conflict. The rise in oil prices has been sharp. But I would caution that if this is to continue um and the straight of hormones is uh continues to be shut and oil uh you know the price of oil could go dramatically higher. the price of natural gas could go dramatically higher. And the fact that the US um currently produces enough for its consumption would not isolate us or insulate us from those negative effects. All of these markets along with gold and silver, these are world markets and they achieve world prices and Americans and Westerners are certainly not going to be isolated from this. And of course, uh, right now there seems to be a stalemate. Um, generally speaking, there's not an allout confrontation there. But if there's heavy destruction of the Iranian oil uh industry and also Saudi Arabia and the other Arab countries in the region if their facilities uh for producing oil uh processing oil and natural gas and transmitting oil and natural gas uh were to expand then the impact might not just be significant uh in terms of much much higher prices but the effects could last for years and years and years. Currently the world um economy is in a precarious position prior to this war breaking out in terms of our business cycle and our economy. And uh this could really be uh quite dangerous if not catastrophic uh to people's standard of living around the world. In addition to standard of living impacts as we saw for example during the covid lockdowns which pretty much enveloped the entire world. Uh the global international supply chain proved how fragile it was in our just in time notion that everything will show up when it needs to. that the interdependencies between different countries for essential goods and essential materials be was brought into stark relief during those disruptions to the the long uh international supply chains. As you point out, even when we say, "Oh, we've got our own strategic domestic supply of petroleum and natural gas, for example, but a lot of those materials that are manufactured goods from overseas that are brought into our country uh would not be benefiting necessarily from the fact that we have domestic uh petroleum resources here within within the walls of the United States. any further comments from you on the likely or potential far-flung aspects of supply chain disruptions to the global economy that could impact not only other countries but also the US. Well, in the previous case, with the exception of the Russia um situation, oil and natural gas flowed fairly uh seamlessly uh in the economy and oil and natural gas is the master ingredient. Um energy is the master ingredient in all of our economic processes. uh it's the beginning uh of the whole supply chain um in all various directions you know and as I pointed out it's fertilizers for agriculture there's nothing more primary than that and it's also oil is responsible for all of the plastics uh so your plastic bags your plastic trash bags um everything that that's plastic. Um you know it all sorts of hospital and medical equipment. I mean the list really goes on and on. It's don't think of it just in terms of the gasoline in your car. Um and of course that also affects electric vehicles. So nobody is really immune to the greater problems uh that are involved here and you know so you start at ground zero. Uh things could be catastrophic there in terms of the destruction of the oil facilities but of course those uh countries at war always do crazy things. There's no easy stopping points. uh people become ruthless in and anti-unhuman creatures in war. If they were to launch uh weapons against the desalination plants uh throughout the Middle East, you could have 100 120 million people uh without access to drinking water in that entire area. And uh and of course the airports uh the ones that we control, the ones that Israel controls and other countries, they're already being attacked. So um you know it's um the Middle East is important in that respect and um and it and catastrophe there is going to emanate outward in all directions and I don't think uh any of this was really thought through uh prior to the attack. Um, and I think that uh the United States government of course is trying to suppress the initial reaction in terms of uh oil prices. Uh we've released a large amount of our strategic reserves to try to contain uh the oil price in the oil price market. And there are indications that the American government is trying to suppress the increase in prices by manipulating the futures market in this respect. Uh trying to cover up uh with current inventories which don't last very long at all. uh the longrun problem uh that's going to emerge uh throughout the world you know imported oil from the Middle East is vital uh to certainly to Pakistan, India, China, Southeast Asia, Japan, South Korea um all of those countries are going to be paralyzed um without exports of oil and natural gas and uh But as I said before, these are world markets with world prices. So the ultimate effect is going to spread around the world and nobody is going to be immune to it. Whether it's you or your customers, um whether you're globalist or anti-globalist, everybody is going to be affected by this. There's no way around that. And we can only hope that this um clear heads are going to prevail, that peaceful minds are going to step forward and put an end uh to this insanity um in the Persian Gulf area, bring this to a close before we have uh a catastrophic inhumane problem in the Middle East and uh that's going to spread out. And it's really, you know, if if fertilizer prices goes up, that means food prod production is going to go down. And it's not like we have years and years and years of excess food supply just sitting around. So people are going to have a diminished diet. Um, without question, you know, the planting season is upon us. Um and uh that means people are going to starve you know potentially um as a result of this and uh you know through no fault of their own. I mean these people are going to be located maybe a thousand miles away uh from the war zone uh completely without any direct connection to the course of these events. and yet they are going to experience extremely uh negative consequences as a result. >> It's been said that all wars are bankers wars. You've talked about the K-shaped recovery, if you could call it one that's been evident in our rec in our economy where it seems that the few are benefiting greatly and the many are are getting farther and farther behind. Can you talk to us about the monetary impact of hostilities like this? And in terms of cooler heads prevailing, we just heard the news come out that it looks like the administration has set its sights on on Cuba next uh as another target just just today. So uh any thoughts from you on the monetary impacts in ordinary people's lives of uh the kinds of things we've seen before in these times of volatility and hostility? Yeah, the K-shaped economy uh which has come into our vernacular over the last couple of years is explained in the Austrian theory of the business cycle and inflation and basically um when a government inflates its paper money money supply it reduces interest rates it's a huge advantage to the wealthy the people who have access to the banking system at a very high level and they can leverage up their uh wealth in terms of stocks and bonds and land ownership and real estate ownership. So they with those low interest rates and leveraging up their assets, they make out like bandits and they they become super super duper uh wealthy. But that money doesn't isn't accessed by the working class generally. And the working class only receives higher prices as that money filters its way through the economy. They pay higher prices. And so that explains why the upper income and wealthier classes they see a continuation of economic growth and prosperity whereas the working class is dragged downward along the K um and doesn't benefit but and and and has to struggle really to maintain itself and is you know against running against the tide. So um this is a very very unfortunate uh situation. It's a very unfair situation. But the Austrian theory also explains that this phenomenon cannot continue. that we have these business cycles where once that inflation works its way in, the central banks are forced to cut back, where credit is um much more difficult to find, especially if governments are in the markets soaking up a lot of this credit. Um, and a liquidity crisis ensues. And that's essentially what we're seeing right now that's starting to emerge. The Fed, you know, addressed the liquidity situation uh after Thanksgiving last year. They've been injecting uh large amounts of money to solve the so-called liquidity crisis. But what we know from following markets is that this is ended up precisely in an area that has uh benefited the wealthy Wall Street class and uh it it most importantly in the area of private credit, private equity, private banking, all of those areas, those new areas, uh it's very similar to the junk bond phenomenon um of a previous generation and now that area is being revealed um as untenable uh as the Austrian business cycle theory says that eventually you're going to have these black swans emerge and private credit private loan um uh private equity is emerging as a problem. They're not uh people can't withdraw their money. Black Rockck and so forth are uh discouraging people from withdrawing their money and it's a really emerging as a big problem. And of course, who's holding the bag there? It's life insurance companies, pension plans, you know, things that are supposed to uh benefit the rank and file working class. um you know is left holding the bag here uh and uh you know the profits have already been made, the commissions have already been earned uh by the Wall Street class over the last several years as a result of this phenomenon of living um kind of like Count Dracula draining the blood uh the lifeblood from the economy and now all of that is coming home to roost. Uh at the same time as this terrible situation of war in the the Persian Gulf area uh has commenced. Mises talked about uh free markets. We've just talked about why these are not free markets. He also talked about real money and you've talked about just now the flooding of liquidity of currency, fiat currency, which is the farthest you can get from real money. Uh can you explain for all of us what you see as the likely near and midterm impact of that flood of liquidity that's likely to to be continuing it sounds like in your view uh versus real uh sound money such as silver and gold? Well, it almost seems as if this war was initiated to cover up, you know, the cocom coming sort of day num moa um in the American economy and um as a way of you know diverting attention and covering things up and and uh shifting the blame uh from the Fed and the US government uh which is spending and borrowing and inflating like crazy and has been for years. And now that the problem is starting to emerge, all of a sudden we've got this diversion over in the Persian Gulf that they can shift the blame from themselves uh to some foreign land and some Ayatollah and all of that kind of uh nonsense. But if the life insurance and insurance companies um go under, if the pension plans go under, um if all of these private equity firms and all of the the things that they've created, these entities that they've created, if that all starts to go sour, well, of course, uh and as a matter of fact, we could see very soon the Fed is not supposed to cut interest rates at the next meeting. But if they do cut the rates, even though they have this liquidity facility that they've already put in place, but if they cut interest rates, um that's a sure sign of uh of course their mentality that they'll bail out, you know, the situation politically with a flood of new money from the Fed. Um, and of course that's the idea there is to solve the problem politically. The government's doing something about it and also just to to to cover it up and to initiate the process the that inflationary process that got us into the situation to begin with setting the stage for even higher prices in the future. So what role do you see gold and silver playing for ordinary people and for uh sovereign states through this next phase of history? >> Well, you know, I know that a lot of silver stackers have been really psychologically harmed by the runup and the rundown in prices that has occurred uh since the end of Jan. Well, all of January up and then all of February down. and uh you know so they've been greatly discouraged but they've I think they've uh given up on the strategy and philosophy of stacking which means you spend the same money stacking on a regular basis no matter what. and um you know so we had that big run up we've had that big run down we're getting close um to the long run trend upward in gold and silver prices and we may overshoot that to the downside but the fact that we're close to that longun trend in in metals prices um means that uh in stock market terms I were near a bottom and um you know and so um I that's harder to tell in the metals themselves but I think with the miners the people who the companies that are actively producing and selling gold and silver um I know that their balance sheets have looked um much much better over the last couple of quarters is they've been selling um gold and silver um at $50 an ounce or $5,000 an ounce for gold, their balance sheets have improved tremendously. their outlook has improved uh tremendously and that's going to continue even if um we stay here uh in metals [clears throat] prices or even if we overshoot those trends and go even lower those companies are still going to look better and I think that along with the manipulation of oil markets uh of course we've we've also you know these markets in in particular particular people have suggested that they have also uh been manipulated in some form. Beyond the fact that um you know a new class of speculative investors came into the market at the end of last year at the beginning of this year and now they um you know sort of scadaddled out of this market as the need for liquidity started to emerge in earnest at the end of January of this year. So there's been, you know, that initial move away from gold and silver was is now seen as a move towards liquidity. And what we've seen in these first couple of weeks um of this war in the Persian Gulf area is a move towards liquidity. And people have been selling um gold and silver, they've been selling stocks, they've been selling bonds. You know, usually the dollar has moved up, which also kind of is a shortterm suppressant for gold and silver. Um but people have not been moving into US government bonds, which is a traditional safe haven. uh which means that that liquidity problem has been pretty severe. Um but these are all the shortterm uh fluctuations that we see around the longer term trend in gold and silver prices which continues I think to remain up in a world in which uh the supply of US government bonds is going to continue to expand and this war is going to expand it even more. Um and uh in a world where interest rates um has established a new trend upward in interest rates and where commodity prices have also seems to have experienced a shift in trend from downward commodity prices to upward commodity prices. And all of those are long-term trends or long-term trend changes that we've seen just in the last couple of years. Which means that if that's the case, those are things that will be in place um over a long period of time of many years. Uh and we will see short-term deviations. I mean that's the meaning of a trend that markets move around uh up and down above and below what the trend is an arithmetic average of those changes. But uh in terms of the supply of government bonds uh the upward trend in in commodity uh prices uh and the upward trend in precious metal prices those appear to be long-term upward shifts uh in the trend line. Mark, for those who want to find out more about the um Austrian economics and all the educational institute uh that educational resources that are available, misuses.org is on your banner behind you. MIS.org is where they should go. >> Absolutely. It's free. It's open. There's no registration. It's one of the largest economic web pages in the world. And it's written for everyday people. We do have academic books and academic journals, but we have many uh daily articles on every topic imaginable, including a lot that we've discussed here today. And we also have several podcasts that come out on a weekly basis on economics, economic theory, uh policy, uh and just a whole variety, uh of topics. So I think it's very important because you know just being for free markets um is really not good enough in today's world. We all have to really understand some of the basics about and we have a whole series of video lectures on the very basics right on the top of our of our homepage. But everybody we teach why markets work. you know, the the nuts and bolts of why markets work to students, the layman, professors, graduate students, college students, um why markets work, how markets work, and how and why governments always fail um in promoting human society and why they always are drags on or lead to the destruction of our standard of living. So, I encourage everybody to do that. And we still have a a book giveaway of FA Hayek's greatest hits articles. Uh happy to send you a free copy of this and uh some of the um essays that Hayek wrote and he was a Nobel Prize winner in economics. He was Ludwig von Misus' student and uh he was the intellectual backbone for Margaret Thatcher and Ronald Reagan in the 1970s and 80s uh which saw us come off of the horrific results of going off of the gold standard and making some reforms that improve the uh American and world economy um up until the present anyway. way. So, uh, you know, there's some great essays in here, including, uh, I think is very important, why the worst always get on top. >> Mark, we're always grateful for your presence here on Liberty and Finance, and this is a very good example of that. Thank you for [music] joining us on behalf of all of our viewers and subscribers. And folks, check out misuses.org, miss.org. Thank you, Mark. >> Oh, you're very welcome, Don. Again, great to be with you.
War, Gold, and the Fed’s Next Move | Mark Thornton
Summary
Transcript
[music] Hello and welcome to another episode of the Minor Issues podcast. I'm Mark Thornton at the Misesus Institute. In this episode, it's very interesting. Going to be replaying uh two short interviews that I've done. The first uh interview took place actually what four weeks ago with the Daniela Cambodi show. And uh so this is before the outbreak of war in the Middle East. And we talked about at the beginning um my uh supply and demand analysis for the market for precious metals and how that can cause really significant uh instability in those markets um both up and down. So volatility up and down in the marketplace and uh and we also talked about the implications of uh inflationary fiat regimes uh which exist around the world and the breakout of hostilities and international conflict. So that was an interview taking place almost four uh weeks ago. Uh and then the second interview was with my friends at Liberty and Finance and that took place only days ago. And uh of course in in this interview uh they wanted to know a lot about the impact of the war and my outlook u in the short medium and longer term um for this kind of conflict and what we've seen so far um in that war. And um most importantly we talked about a traditional issue uh that you might have seen in uh talked about or written about by other Austrian economists where war is used as a diversion for problems that exist on the home front um in the home economy. um as Misesus would talk about, you know, that it was war is an ultimate um concluding phase of the process of progressive uh interventionism. And of course, uh, this ties in nicely with what I've been talking about on the podcast and in other interviews with respect to, uh, financial issues, business cycle type issues, what's being called, uh, by the Fed uh, for example, the liquidity problem. uh when in actual fact it's really a leveraging uh crisis that's impacting uh the American economy and our business cycle uh in areas like private equity, private credit uh eventually things like insurance and pensions and things of that nature. Um and then we also looked at the impact over the last couple of weeks of what the downdraft or crash you could say in precious metal prices uh has been on the psychology of silver stackers and investors in gold and silver. um you know linking that back up to the first section of the interview and then we conclude by looking at and reiterating the longer run trends that have developed in the American economy not just over the last few weeks really but over the last few years many of which are not even really recognized in the mainstream media or in the mainstream financial press and uh those long run trends that have emerged are uh of course the switch over from uh the lower and lower interest rate environment that occurred over many decades into the emerging long run trend of higher and higher interest rates which have emerged during this crisis and were emerging uh prior to this crisis. So that long run trend still seems to be intact. And then of course higher commodity prices that I've talked about uh the change in the long run trend from lower and lower commodity prices on that long run trend over the last several decades. uh and then the emerging new longerrun trend of higher and higher commodity prices which we uh have seen certainly before uh this crisis and it and the crisis the war crisis in the Middle East I'm referring to uh is looking like it's going to only accelerate um the long run uh trend in commodity prices if you look at um the index of commodity prices. There's a couple of uh indexes out there that calculate um uh the price level in commodity prices. Both of them are up sharply in this uh war scenario, but they were already um on a longer trend up. So we have uh higher interest rates, higher commodity prices and as part of the upward trend in commodity prices. Of course, gold and silver initially led though that charge up in higher commodity prices. And I would say that there's nothing uh to suggest even with this crash in precious metal prices that that long run trend um has been somehow switched off or reversed. um but rather the um rather that's a short-term correction that hearkens back to both the liquidity crisis and the unusual supply and demand conditions uh that we've already described and we already knew existed in the market for uh precious metals gold and silver. So, a very interesting contrast to an interview that just came out last week, but it was recorded uh more than four weeks ago and then [clears throat] the Liberty and Finance episode, which was recorded very recently. So, I hope you enjoy this episode of the Minor Issues Podcast. I'm Mark Thornton at the Mises Institute. >> Hi, this is Daniellea Cambone. Welcome back to the Daniela Cambone show. Well, in a world of endless money printing, skyrocketing debt, and eroding trust, and fiat currencies, one signal rings louder than ever. Gold isn't just rising, it's sounding the alarm bell. Joining me today is Austrian economist and Mises Institute senior fellow, Dr. Mark Thortton. He'll break down why gold prices are flashing [music] red warnings for the economy and what it means for your future. Dr. Mark Thorton, so great for you to join us today. >> Oh, it's my pleasure. you know, I've read your work, followed your work, and let's start with your general thesis around the yellow metal and why you are so bullish. >> Well, I've been talking about this for quite some time. I've been on the podcast now for two years and you know, I've seen the United States in particular moving towards a hyperinflation scenario. And of course, gold and silver are international global markets, but the global economy is based on the US dollar. And I make my case that we're on the on ramp to hyperinflation uh because of the concern I have over the value of the US dollar. And that's really both in terms of the demand for the US dollar and the supply of the US dollar. On the demand side, we're seeing a fall off in the demand for the US dollar primarily of course and everybody knows this is in terms of central banks around the world turning away from US treasury bonds and towards gold as a reserve asset. And now gold is now more than 50% of total central bank assets and reserves. And so they their demand is diminishing for dollar denominated assets. Um and then of course uh people all over the world are also concerned about the US uh dollar and you know of course there's huge buying internationally the Indians and the Chinese the Turks um and and other places around the world there's been a spike up in the demand uh on the part of individuals uh in various places around the world and they're moving away from the US dollar. So the demand side does not look good and the supply side of course is even more intense um in the sense that our government the US government and governments around the world are spending money like crazy. They're borrowing money like crazy. So that's national budget deficits and there's an huge accumulation of national debt uh that has occurred and of course that's a very serious and humongous concern. The United States um has $ 38 trillion in national debt and counting and of course the Japanese, the British and many other countries. there was a scare with uh the French debt uh more recently and and so that's a huge burden and threat um on the world economy and of course the marker that we're looking at is in terms of all of that the spending the deficits and the debt is the interest payments that governments have to make um on a regular basis and of course in the United states interest payments on the debt are going exponential uh you know and that's also happening of course in Japan and other countries around the world. So all of the fundamentals um are as you say I mean it's an emergency uh it's it's a flashing red light and uh and no none of these governments are really doing anything about the fundamental problem. So uh unfortunately I mean this is uh you know it's it's good for investors and individuals to know about this you know that gold is the safe haven asset and the and the long-term picture looks very bright for it but more fundamentally it's a real threat to the economy and our standard of living. >> We'll jump right back but this is important. Many of you are asking the question [music] right now, what does all of this mean for my savings and retirement? Because during periods like this, your retirement can rise while the currency underneath it quietly loses purchasing power. Most people track market risk, but almost no one tracks dollar risk. That's exactly why Taylor Kenny here at RTM Trading will be breaking it down in a live webinar called Devalued Overnight: Protecting Your Wealth Through the Reset. It's happening Tuesday, March 17th at 9:30 a.m. Pacific Standard Time. [music] That's 12:30 here on the East Coast. It's free, it's live, and there will be a Q&A. Reserve your seat using the link in the description below. Very well said. And um three key points I want to go back there. I want to go back to one, the central bank buying. Yes, we know it's been fueled by that. Uh the trend has not slowed down yet. I guess the question I have for you, Mark, is one, what happens if we do see a slowdown? I mean, do you think that if the gold price keeps rising, central banks might say, "Okay, well, we we have enough now or or they might wait for a pullback, I mean, does it vote against us, I guess, is what I'm asking." Well, that's a very good question because as I explained early in January, uh especially with silver, but it's also true with gold is that the demand for gold is relatively inelastic. Um and the supply of gold is relatively inelastic. I mean, the there's only so much you can do with recycling and there's very little they can do in the short run in terms of mining. So both the demand and the supply is relatively inelastic and central banks coming into the picture and buying noticeable amounts of gold is really the driver for this higher price uh of gold and so even a small cutback uh could dampen the increase in the price of gold. I think the long run trend is definitely up, but just like any other market and in this market in particular, a slowdown um would be have a noticeable impact on the rise in the in the price of gold. I think that's uh that's going to be the case. But I mean there's other drivers of that and uh you know for example the international conflict that's emerging over the last year or so. I mean we have the United States in conflict with most of the other countries around the world with tariffs uh interventions in Venezuela. um you know posturing towards Greenland um you know posturing against China uh and now of course um you know our military preparedness against Iran all of these that that's a lot of international conflict the world has broken into now all of these blocks these uh mostly trading blocks uh which is not good but you know trading blocks lead to other kinds of conflict and and and it can turn into a military conflict. And so, you know, that kind of conflict is going to offset or maybe even encourage central banks to add to their gold holdings. >> So, it's a it's a question of certainly of risk and uh it and and the uh the roll out of events, so to speak. uh in in the world economy >> and Mark, you know, and we're looking at other aspects influencing the gold price. Any insights or do you think it could also be a part of the Bitcoin crowd? Uh perhaps fed up with the with the pressure on Bitcoin, perhaps requesting their position in Bitcoin. Are we seeing that money flow into gold? Any insights there? >> Yes. I mean, I think one of the reasons it took so long for gold and gold was really depressed uh at depressed price levels if you look back five years or so. Um and I think a lot of that was people looking for an alternative to the US dollar. uh especially initially they were looking for you know an international currency uh a stable currency with a stable privately generated supply of money and so I think a lot of young people uh really went into cryptocurrencies rather than gold and now that cryptocurrencies have semi crashed and are not looking all that strong right now uh I'm not making any predictions there but I think that the crypto crowd is exactly the type I mean they're first mover type individuals. They're smart, they're young, they're risktakers and they they're following gold. Even if they hadn't invested in gold, they're following gold and silver. And I think that they're na that's that there's a natural inclination there to diversify over into the precious metals on the part of that group in particular especially in the United States where uh gold and silver holdings by the average individual investor is really teeny in comparison to China and India and Turkey and other places around the globe. The other point just to look at the economy in general and I'm happy you brought up the debt because I often have experts on the flip side saying you know we've been hearing about the debt the debt's not a problem as long as we're servicing the debt and that's what we have been doing the US won't be in trouble. What do you say to the naysayers or folks that brush off the trillions we've accumulated in debt? Well, when you're the world's largest economy and you know, if you look back decades and the national debt was only 30% of gross domestic product, the overall size of the economy, that's not too bad. But now it's over 100%. And growing very rapidly and that 100% has been indicated by long historical studies as a point of no return. And that's when I started looking into this issue as a threat of hyperinflation. And now if you took in all of the US government debts in you combined them all, it's 120% of gross domestic product. So it is a very serious concern at this point. And you know just if the audience wants to pull up, you know, Google interest payments by the US government. Yeah. uh and look at it in any terms, nominal terms, real terms, inflation adjusted terms as a percent of GDP as a percent of the budget. I mean interest payments now um are projected to go over you know all defense spending or all discretionary spending um in the next you know eight years. So, uh, it it's really, uh, a dramatic and that's all, of course, according to the Congressional Budget Office and if everything goes according to plan, if we get normal growth and normal inflation and and things of that nature, and I'm really concerned right now, yeah, >> that interest rates uh, could rise. I think we've entered in terms of the global economy, I think we've entered an uptrend in long-term interest rates in the global economy and it's very difficult for any single central bank to fight. I mean, they control the short-term interest rates, but they have a very difficult time controlling longerterm interest rates, which is the 30-year and 20-year US government bonds. uh controlling those things is a shockwave uh symbol uh to the world economy that you know don't trust the US government debt >> unless you print print print print. >> Well, that's right. If you print print print um you know that's what you would have to do. you know, the the appointed new chairman of the Federal Reserve has always has expressed um sympathy for the idea of yield curve control, you know, where you're sort of controlling all lengths of US government debt, the short-term Treasury bills, the long-term 30-year US government bonds. But of course, if you do that uh and you're not on a gold standard, then the value of the US dollar is going to plummet. And as it plummets, of course, we're going to see uh a like rise in oil prices and international goods coming into the United States. Uh and of course, gold will react first and foremost. That's the thing about gold is everything in the world economy affects the price of gold. Uh the price of gold is a global econ is a global commodity and it takes into consideration all this. So we would expect gold to lead um in that reaction to yield curved control. >> I think you're right on track there. And if I could just take it one step further. I think with the appointment of WSH coupled with uh Benton there in the administration we know their their heavy gold past right uh do you think that there is some sort of plan tied to gold that we're headed towards? >> You mean in terms of revaluing it and all of that? Um well that's a little bit um you know I love good conspiracy theories and I think government is nothing but really if you break it down a conspiracy uh particularly on the part of the power elites out there that really control the system and I think it's really important for your audience to to realize that is that the average American voter doesn't control this monster that the class of power elites that we really don't know that have only come to light really with the EP Epstein files and things of that nature. Do we really have a grasp >> on who's controlling our Congress and and Senate and and >> uh unfortunately the president and you know what they have hatched and uh but of course you know they're uh you know they're the ones that are engineering people like Worsh coming in into uh the Fed and Bessette coming into as secretary of the Treasury. So, I'm aware of this um and I am keeping an eye on it, but it's hard to for an economist to analyze that particular type of thing. And you know, it I think most commentators just say, well, they're going to revalue gold uh at a certain price, but I'm not sure what that actually means. If they just want to revalue the US gold holdings, well, that's one thing. That's an imaginary figure. If they're not going to buy or sell uh from the US gold stock, then it's irrelevant. And you know, and if they want to set the world price at some level, well, that means they're going to have to buy and sell. And I don't think anybody is currently contemplating the idea of the US selling off its gold hordes uh into the marketplace. Um, I ne I wouldn't necessarily be opposed to that and it would temporarily uh suppress uh the price of gold on the on the world markets, but it would also of course undermine the value of the dollar. >> Interesting. You would not >> and I think that's what they're looking for. >> Opposed to that. You wouldn't be opposed to the US selling part of their gold a portion. Well, I guess I hadn't really thought about it all that much, but um I I'm just, you know, here to analyze it and um you know, if they did do something like that, it would temporarily uh you know, s suffice some of the demand for gold. Uh but in the longer run, of course, people believe in the US dollar because they know the US has this huge pile of gold that it collected during World War I and World War II. So, uh you know, that's been a big backing for the value of the US dollar. And it it would seem I wouldn't put it past the globalists and the power elites to want to drive down the the value of the US dollar. President Trump has spoken in favor of driving down the value of the US dollar supposedly with the idea of making uh American industries more competitive on international markets. But of course, uh, a lower value of the dollar would dramatically increase price inflation in the economy. >> Okay. Um, I'm loving this conversation. Let's talk about something that is truly not conspiracy theory and it's the how- employment is decoupling from economic growth. Um, so January of this year, 108,000 layoffs. It's the highest since ' 09. That's three 3,500 people losing their jobs every single day. Um, Amazon cuts 16,000. UPS, we know, slashing 30,000. These layoffs are occurring while GDP continues to grow at approximately 4%. Um, let's get your general thoughts on the economy. I mean, is this part of your thesis of why you think gold is flashing a major red signal here about the economy? >> Yes. But, um, in terms of analysis, it fits in extremely well with what's called the Austrian business cycle theory. The business cycle theory of Ludwig van Mises and he was, you know, this was a hundred years ago when he published a book on this topic. And basically it's when central banks increase the money supply as they have been doing for years and artificially suppressing interest rates as they have been doing for many years. Um you know that stimulates the economy and it raises prices in the long run and a lot of economists agree with that. But the Austrian business cycle theory explains that a lot of that new investment goes into capital inensive industries with advanced technology like artificial intelligence is just a good example of a current case. uh and it stretches out the structure of production in the overall economy and it has a tremendous first round effect of helping people that have a lot of wealth and that are in control of these particular industries, technology industries. But it also has a suppressing effect on the overall economy and in particular on the working class uh in the economy. People without a lot of wealth that don't benefit from the lower interest rates the same way that stockholders and owners of advanced technology companies can benefit from those low interest rates. So the Austrian business cycle theory explains perfectly not just the business cycle and not just higher prices in the long run but also the K-shaped economy. the fact that it's not just a long-term trend when they do this kind of thing, but there's a separation in the economy where the wealthy individuals owning the technology industries go way up and the people without wealth that can't take advantage of the low interest rates. they see their wage rates um stagnant or declining, their their employment opportunities stagnant or declining and their real incomes, their real standards of living declining as a result of this. So, it's not just that there's more money being injected into the economy, but it's who's getting that money really, right? And you know, what prices are they driving up? Well, they're, you know, they're driving up stock prices, they're driving up bond prices, they're driving up land and real estate, uh, over the, you know, over the intermediate time frame. But the people who don't have real access to this low interest rates, they're dependent on wages. Well, their jobs are not receiving uh, you know, the the rank and file working class. There's not a lot of investment in their industries and as a result their industries like manufacturing, construction and so forth are not necessarily improving and their real wages because eventually these prices hit everybody. But of course uh the median income family uh those higher prices do a lot more damage. They don't have a huge portfolio. they don't have a lot of investments that benefited. They're only getting the long-term price increases and so they're uh their labor market is stagnant and their standard of living, their inflation adjusted incomes are declining as a result. >> Dr. Mark Thoron, just want to get a question in before we wrap on silver. Thoughts on silver? Are you as bullish silver as gold? No, I'm much more bullish on silver. That's why I wore this T. >> Wow. I >> that's why I wore this T. >> Okay. >> Yeah. And I had an uh an episode of my podcast, Minor issues. It's the first episode of this year and it was all about why these this market is so dynamic and uh you know and in both directions. Um, you know, we're given the inelastic supply and inelastic demand. Uh, you know, I can't give investment advice, so I I can't come right out and say it, but if you watch that episode, you would be very lery of what might happen in the first part of this year as far as silver is concerned. Now, I would note that gold and silver are still up 20% year to date. Okay. So, uh yes, volatility, maybe even more volatility, but volatility works in both directions. So, you have to have the stomach >> for this kind of thing. Uh but you know going back to the hyperinflation being on the on ramp of the hyperinflation and concerned about the US dollar. Well if you own real money actual money that was decided in the marketplace pure and simple that's gold and that's silver. I mean the American money used to be silver coins. The trading money the investment money used to be gold. And so if you can get yourself out of, you know, the currency of the US government, yes, which is in doubt and it's at risk, >> uh, and move it into real money, >> gold and silver, then you can insulate yourself, uh, from some of those problems. But I I I'm I must point out that just owning gold and silver is not going to make the world a safer place. And it's not going to do away with these problems of inflation and the Austrian business cycle theory problems that I just had the great opportunity to explain. So, you know, it's not a cure all. We have to fix the monetary system. And that's, you know, not going to be done by the Fed. I can guarantee you that. It's not going to be the power elites are not going to say, "Oh, we look at what we've been doing to the American working class all these years. We need to reform ourselves and take away, you know, this this uh tool that we've been using to enrich ourselves. The American people have to take it back themselves." But when there's no end to the criminality, I I think the only thing we can do, and you're right, it it doesn't solve all problems, but I feel it at least gives you some power back. And I think sooner we can, you know, educate, especially if you're a parent, educate our children. I mean, that's what I'm trying to do. At least I took my kids down to Stacks Powers the other. >> Well, and that's and that's what we do at the Mises Institute. We uh try to explain how the market works. Not just that it works and just accept it. We we explain how the market works and why government always creates more problems. Why it's systemically problematic for the economy and our standard of living. And we do that, you know, for children in high school, college. >> Great. >> Uh professors, the general public. We have conferences. We publish books. >> That's awesome. Uh, we have the greatest web page in the world. >> I love that. Well, thank you uh for all the work you're doing and you really surprised me with your silver answer. I didn't know you were more bullish silver than gold. I mean uh I'm not sure if you're familiar with Michael Oliver's work. I think he's the most bullish I've heard thus far. He's calling he says he wouldn't be surprised to see silver prices anywhere between 3 to 500 um by summer of this year. >> Yeah, I I know Michael very well. He's spoken at our conferences before and uh he has a background in Austrian economics. If you know Austrian economics, uh you'll see him refer to the Misesus Institute, u Austrian economics, the business cycle theory, you know, and he'll make corrections. when when he says inflation, he's usually talking about monetary inflation and distinguished from price inflation. So, you know, the framework is important. Now, Michael's work is based entirely on technical analysis. So, it's not straightforward Austrian economics. You're getting >> the flip I'm giving you the flip side of Michael's coin essentially. Um, and it it's it's a reinforcing supply and demand dynamic. >> So when you hear those numbers, it doesn't shock you, Michael's numbers. >> No. >> Enough said. Um, I love this conversation. Please come back soon, Dr. Mark Thoron. >> I'd love to. Thank you. >> I have so many more questions for you, so we got to get you back on. and thank you for working with me through this snowmageddon today, but we got it done. >> Welcome back to Liberty and Finance. We're delighted to welcome back Mark Thornton, a member of the Misesus Institute. Mark, today being Tuesday, March 17th, 2026, thank you for coming back on Liberty and Finance. >> It's great to be with you, Donigan. Happy St. Patrick's Day. >> And happy St. Patrick's Day to you and to all those out there. We wanted to talk with you about the uh importance of the Mises Institute. Not only for what it tells us about the importance of real things, real money, real economics and freedom and free markets, but how how areas of concern right now where we've detached from those realities and are heading off for the benefit of a few and to the detriment of the many. And right now we've got some major geopolitical strife that is uh burning up a lot of economic resources and throwing off uh a lot of our financial stability, sending signals that are very difficult for both individuals and businesses to respond to. Can you talk to us about some of this geopolitical turmoil and the impact that it's having on our monetary and financial world? >> Yes, Donigan. Uh, Lri Van Misus wrote about and I've been speaking about for many years the problems of interventionism of government in the economy and protectionism and how that leads to international conflict between nations and eventually can result in war. And that's precisely what we've seen over the last several presidential administrations going back to Barack Obama, Trump one, Biden, Trump too. And it's coming forth with more protectionism, more international conflict, and now we find ourselves in this turmoil and this quagmire in the Persian Gulf. um a conflict seemingly between Israel and Iran with the United States uh caught in that trap and now the whole world is at risk because of the flow of oil and natural gas and all the related chemicals and most especially fertilizer uh from the Middle East. So people, you know, they associate oil with gas in their gas tank, but it really affects the household budget tremendously in many, many different ways. It affects American business in terms of chemicals. It affects agriculture, in terms of fertilizer. It affects our electric bill. uh it affects transportation of everything back and forth and we're just apparently getting started with this conflict. The rise in oil prices has been sharp. But I would caution that if this is to continue um and the straight of hormones is uh continues to be shut and oil uh you know the price of oil could go dramatically higher. the price of natural gas could go dramatically higher. And the fact that the US um currently produces enough for its consumption would not isolate us or insulate us from those negative effects. All of these markets along with gold and silver, these are world markets and they achieve world prices and Americans and Westerners are certainly not going to be isolated from this. And of course, uh, right now there seems to be a stalemate. Um, generally speaking, there's not an allout confrontation there. But if there's heavy destruction of the Iranian oil uh industry and also Saudi Arabia and the other Arab countries in the region if their facilities uh for producing oil uh processing oil and natural gas and transmitting oil and natural gas uh were to expand then the impact might not just be significant uh in terms of much much higher prices but the effects could last for years and years and years. Currently the world um economy is in a precarious position prior to this war breaking out in terms of our business cycle and our economy. And uh this could really be uh quite dangerous if not catastrophic uh to people's standard of living around the world. In addition to standard of living impacts as we saw for example during the covid lockdowns which pretty much enveloped the entire world. Uh the global international supply chain proved how fragile it was in our just in time notion that everything will show up when it needs to. that the interdependencies between different countries for essential goods and essential materials be was brought into stark relief during those disruptions to the the long uh international supply chains. As you point out, even when we say, "Oh, we've got our own strategic domestic supply of petroleum and natural gas, for example, but a lot of those materials that are manufactured goods from overseas that are brought into our country uh would not be benefiting necessarily from the fact that we have domestic uh petroleum resources here within within the walls of the United States. any further comments from you on the likely or potential far-flung aspects of supply chain disruptions to the global economy that could impact not only other countries but also the US. Well, in the previous case, with the exception of the Russia um situation, oil and natural gas flowed fairly uh seamlessly uh in the economy and oil and natural gas is the master ingredient. Um energy is the master ingredient in all of our economic processes. uh it's the beginning uh of the whole supply chain um in all various directions you know and as I pointed out it's fertilizers for agriculture there's nothing more primary than that and it's also oil is responsible for all of the plastics uh so your plastic bags your plastic trash bags um everything that that's plastic. Um you know it all sorts of hospital and medical equipment. I mean the list really goes on and on. It's don't think of it just in terms of the gasoline in your car. Um and of course that also affects electric vehicles. So nobody is really immune to the greater problems uh that are involved here and you know so you start at ground zero. Uh things could be catastrophic there in terms of the destruction of the oil facilities but of course those uh countries at war always do crazy things. There's no easy stopping points. uh people become ruthless in and anti-unhuman creatures in war. If they were to launch uh weapons against the desalination plants uh throughout the Middle East, you could have 100 120 million people uh without access to drinking water in that entire area. And uh and of course the airports uh the ones that we control, the ones that Israel controls and other countries, they're already being attacked. So um you know it's um the Middle East is important in that respect and um and it and catastrophe there is going to emanate outward in all directions and I don't think uh any of this was really thought through uh prior to the attack. Um, and I think that uh the United States government of course is trying to suppress the initial reaction in terms of uh oil prices. Uh we've released a large amount of our strategic reserves to try to contain uh the oil price in the oil price market. And there are indications that the American government is trying to suppress the increase in prices by manipulating the futures market in this respect. Uh trying to cover up uh with current inventories which don't last very long at all. uh the longrun problem uh that's going to emerge uh throughout the world you know imported oil from the Middle East is vital uh to certainly to Pakistan, India, China, Southeast Asia, Japan, South Korea um all of those countries are going to be paralyzed um without exports of oil and natural gas and uh But as I said before, these are world markets with world prices. So the ultimate effect is going to spread around the world and nobody is going to be immune to it. Whether it's you or your customers, um whether you're globalist or anti-globalist, everybody is going to be affected by this. There's no way around that. And we can only hope that this um clear heads are going to prevail, that peaceful minds are going to step forward and put an end uh to this insanity um in the Persian Gulf area, bring this to a close before we have uh a catastrophic inhumane problem in the Middle East and uh that's going to spread out. And it's really, you know, if if fertilizer prices goes up, that means food prod production is going to go down. And it's not like we have years and years and years of excess food supply just sitting around. So people are going to have a diminished diet. Um, without question, you know, the planting season is upon us. Um and uh that means people are going to starve you know potentially um as a result of this and uh you know through no fault of their own. I mean these people are going to be located maybe a thousand miles away uh from the war zone uh completely without any direct connection to the course of these events. and yet they are going to experience extremely uh negative consequences as a result. >> It's been said that all wars are bankers wars. You've talked about the K-shaped recovery, if you could call it one that's been evident in our rec in our economy where it seems that the few are benefiting greatly and the many are are getting farther and farther behind. Can you talk to us about the monetary impact of hostilities like this? And in terms of cooler heads prevailing, we just heard the news come out that it looks like the administration has set its sights on on Cuba next uh as another target just just today. So uh any thoughts from you on the monetary impacts in ordinary people's lives of uh the kinds of things we've seen before in these times of volatility and hostility? Yeah, the K-shaped economy uh which has come into our vernacular over the last couple of years is explained in the Austrian theory of the business cycle and inflation and basically um when a government inflates its paper money money supply it reduces interest rates it's a huge advantage to the wealthy the people who have access to the banking system at a very high level and they can leverage up their uh wealth in terms of stocks and bonds and land ownership and real estate ownership. So they with those low interest rates and leveraging up their assets, they make out like bandits and they they become super super duper uh wealthy. But that money doesn't isn't accessed by the working class generally. And the working class only receives higher prices as that money filters its way through the economy. They pay higher prices. And so that explains why the upper income and wealthier classes they see a continuation of economic growth and prosperity whereas the working class is dragged downward along the K um and doesn't benefit but and and and has to struggle really to maintain itself and is you know against running against the tide. So um this is a very very unfortunate uh situation. It's a very unfair situation. But the Austrian theory also explains that this phenomenon cannot continue. that we have these business cycles where once that inflation works its way in, the central banks are forced to cut back, where credit is um much more difficult to find, especially if governments are in the markets soaking up a lot of this credit. Um, and a liquidity crisis ensues. And that's essentially what we're seeing right now that's starting to emerge. The Fed, you know, addressed the liquidity situation uh after Thanksgiving last year. They've been injecting uh large amounts of money to solve the so-called liquidity crisis. But what we know from following markets is that this is ended up precisely in an area that has uh benefited the wealthy Wall Street class and uh it it most importantly in the area of private credit, private equity, private banking, all of those areas, those new areas, uh it's very similar to the junk bond phenomenon um of a previous generation and now that area is being revealed um as untenable uh as the Austrian business cycle theory says that eventually you're going to have these black swans emerge and private credit private loan um uh private equity is emerging as a problem. They're not uh people can't withdraw their money. Black Rockck and so forth are uh discouraging people from withdrawing their money and it's a really emerging as a big problem. And of course, who's holding the bag there? It's life insurance companies, pension plans, you know, things that are supposed to uh benefit the rank and file working class. um you know is left holding the bag here uh and uh you know the profits have already been made, the commissions have already been earned uh by the Wall Street class over the last several years as a result of this phenomenon of living um kind of like Count Dracula draining the blood uh the lifeblood from the economy and now all of that is coming home to roost. Uh at the same time as this terrible situation of war in the the Persian Gulf area uh has commenced. Mises talked about uh free markets. We've just talked about why these are not free markets. He also talked about real money and you've talked about just now the flooding of liquidity of currency, fiat currency, which is the farthest you can get from real money. Uh can you explain for all of us what you see as the likely near and midterm impact of that flood of liquidity that's likely to to be continuing it sounds like in your view uh versus real uh sound money such as silver and gold? Well, it almost seems as if this war was initiated to cover up, you know, the cocom coming sort of day num moa um in the American economy and um as a way of you know diverting attention and covering things up and and uh shifting the blame uh from the Fed and the US government uh which is spending and borrowing and inflating like crazy and has been for years. And now that the problem is starting to emerge, all of a sudden we've got this diversion over in the Persian Gulf that they can shift the blame from themselves uh to some foreign land and some Ayatollah and all of that kind of uh nonsense. But if the life insurance and insurance companies um go under, if the pension plans go under, um if all of these private equity firms and all of the the things that they've created, these entities that they've created, if that all starts to go sour, well, of course, uh and as a matter of fact, we could see very soon the Fed is not supposed to cut interest rates at the next meeting. But if they do cut the rates, even though they have this liquidity facility that they've already put in place, but if they cut interest rates, um that's a sure sign of uh of course their mentality that they'll bail out, you know, the situation politically with a flood of new money from the Fed. Um, and of course that's the idea there is to solve the problem politically. The government's doing something about it and also just to to to cover it up and to initiate the process the that inflationary process that got us into the situation to begin with setting the stage for even higher prices in the future. So what role do you see gold and silver playing for ordinary people and for uh sovereign states through this next phase of history? >> Well, you know, I know that a lot of silver stackers have been really psychologically harmed by the runup and the rundown in prices that has occurred uh since the end of Jan. Well, all of January up and then all of February down. and uh you know so they've been greatly discouraged but they've I think they've uh given up on the strategy and philosophy of stacking which means you spend the same money stacking on a regular basis no matter what. and um you know so we had that big run up we've had that big run down we're getting close um to the long run trend upward in gold and silver prices and we may overshoot that to the downside but the fact that we're close to that longun trend in in metals prices um means that uh in stock market terms I were near a bottom and um you know and so um I that's harder to tell in the metals themselves but I think with the miners the people who the companies that are actively producing and selling gold and silver um I know that their balance sheets have looked um much much better over the last couple of quarters is they've been selling um gold and silver um at $50 an ounce or $5,000 an ounce for gold, their balance sheets have improved tremendously. their outlook has improved uh tremendously and that's going to continue even if um we stay here uh in metals [clears throat] prices or even if we overshoot those trends and go even lower those companies are still going to look better and I think that along with the manipulation of oil markets uh of course we've we've also you know these markets in in particular particular people have suggested that they have also uh been manipulated in some form. Beyond the fact that um you know a new class of speculative investors came into the market at the end of last year at the beginning of this year and now they um you know sort of scadaddled out of this market as the need for liquidity started to emerge in earnest at the end of January of this year. So there's been, you know, that initial move away from gold and silver was is now seen as a move towards liquidity. And what we've seen in these first couple of weeks um of this war in the Persian Gulf area is a move towards liquidity. And people have been selling um gold and silver, they've been selling stocks, they've been selling bonds. You know, usually the dollar has moved up, which also kind of is a shortterm suppressant for gold and silver. Um but people have not been moving into US government bonds, which is a traditional safe haven. uh which means that that liquidity problem has been pretty severe. Um but these are all the shortterm uh fluctuations that we see around the longer term trend in gold and silver prices which continues I think to remain up in a world in which uh the supply of US government bonds is going to continue to expand and this war is going to expand it even more. Um and uh in a world where interest rates um has established a new trend upward in interest rates and where commodity prices have also seems to have experienced a shift in trend from downward commodity prices to upward commodity prices. And all of those are long-term trends or long-term trend changes that we've seen just in the last couple of years. Which means that if that's the case, those are things that will be in place um over a long period of time of many years. Uh and we will see short-term deviations. I mean that's the meaning of a trend that markets move around uh up and down above and below what the trend is an arithmetic average of those changes. But uh in terms of the supply of government bonds uh the upward trend in in commodity uh prices uh and the upward trend in precious metal prices those appear to be long-term upward shifts uh in the trend line. Mark, for those who want to find out more about the um Austrian economics and all the educational institute uh that educational resources that are available, misuses.org is on your banner behind you. MIS.org is where they should go. >> Absolutely. It's free. It's open. There's no registration. It's one of the largest economic web pages in the world. And it's written for everyday people. We do have academic books and academic journals, but we have many uh daily articles on every topic imaginable, including a lot that we've discussed here today. And we also have several podcasts that come out on a weekly basis on economics, economic theory, uh policy, uh and just a whole variety, uh of topics. So I think it's very important because you know just being for free markets um is really not good enough in today's world. We all have to really understand some of the basics about and we have a whole series of video lectures on the very basics right on the top of our of our homepage. But everybody we teach why markets work. you know, the the nuts and bolts of why markets work to students, the layman, professors, graduate students, college students, um why markets work, how markets work, and how and why governments always fail um in promoting human society and why they always are drags on or lead to the destruction of our standard of living. So, I encourage everybody to do that. And we still have a a book giveaway of FA Hayek's greatest hits articles. Uh happy to send you a free copy of this and uh some of the um essays that Hayek wrote and he was a Nobel Prize winner in economics. He was Ludwig von Misus' student and uh he was the intellectual backbone for Margaret Thatcher and Ronald Reagan in the 1970s and 80s uh which saw us come off of the horrific results of going off of the gold standard and making some reforms that improve the uh American and world economy um up until the present anyway. way. So, uh, you know, there's some great essays in here, including, uh, I think is very important, why the worst always get on top. >> Mark, we're always grateful for your presence here on Liberty and Finance, and this is a very good example of that. Thank you for [music] joining us on behalf of all of our viewers and subscribers. And folks, check out misuses.org, miss.org. Thank you, Mark. >> Oh, you're very welcome, Don. Again, great to be with you.