12/10/15 – Mark Thornton – The Scott Horton Show

Hey, all, Scott here.
If you're like me, you need coffee.
Lots of it.
And you probably prefer it tastes good, too.
Well, let me tell you about Darren's Coffee, company at darrenscoffee.com.
Darren Marion is a natural entrepreneur who decided to leave his corporate job and strike out on his own, making great coffee.
And Darren's Coffee is now delivering right to your door.
Darren gets his beans direct from farmers around the world, all specialty, premium grade, with no filler.
Hey, the man just wants everyone to have a chance to taste this great coffee.
Darrenscoffee.com.
Use promo code Scott and you get free shipping.
Darrenscoffee.com.
All right, you guys, welcome back.
It's my show, the Scott Horton Show.
On the line, I got the great Mark Thornton from the Mises Institute, where he is a senior fellow.
The Ludwig von Mises Institute at mises.org.
He is the book review editor of the Quarterly Journal of Austrian Economics, and is the author of The Economics of Prohibition, Tariffs, Blockades, and Inflation, The Economics of the Civil War, The Quotable Mises, The Bastiat Collection, An Essay on Economic Theory, and The Bastiat Reader, as well.
And it goes on and on from there.
Welcome back to the show.
How are you doing, Mark?
Hello, Scott.
I'm doing fine.
Season's greetings from the Mises Institute.
Very happy to have you here.
Hey, so, check it out.
If I was a government, say the U.S. government, and I wanted to have a war, how might I go about paying for that?
Well, that's a very good question.
People are against war in general, but they certainly don't want to have to pay for war.
War is very expensive.
In the modern day, it costs literally trillions of dollars.
And if politicians were to raise our taxes to pay for that war, there would be a general uprising amongst the population, and all of the incumbent politicians would be voted out of office.
And so politicians love the fact that they can resort to borrowing the money from financial markets, or simply just printing up money electronically via the central bank or the Federal Reserve.
And so for the last hundred years, from World War I to the present, we've been financing these very, very expensive wars with borrowing, now close to $20 trillion in national debt, and inflation, where they've increased the money supply to such an extent that the old U.S. dollar is worth less than a penny in the purchasing power before the Federal Reserve.
Well, what a great system.
I mean, come on.
I mean, that's a hundred years ago.
So as long as the price of a dollar is more or less the same from day to day, that's what really counts.
And think of all the great defense of America's freedom that has been done on the cheap.
My only question is, how come they don't just create enough money or borrow enough money to buy everybody a house and something to eat?
That's a great question.
That's the beauty of the central bank and fiat money, is the population doesn't know what's going on.
They don't know that they're slowly being fleeced day after day, year after year, to do the dirty work of war.
You know, these wars, they cost a lot of money, but they do so much damage in terms of killing and maiming soldiers, killing civilians, and then just simply destroying things.
If you get the pictures of the war in Afghanistan, Iraq, and Syria and so forth, you see that we're destroying homes, that we're killing civilians, that we're undermining infrastructure in terms of roads and all the networks and so forth.
It's just a terrible, unbelievable mess over there in the Middle East, thanks almost entirely to the U.S. foreign policy.
All right, now, so, sorry for being so cheap and sarcastic.
I'm trying to think of it from the point of view of the government here.
It really does seem like a great system for them that, you know, say, for example, that they are really sure that we need to have some wars now.
It makes it very easy for them to do so, as you said, without having to deal with even the possibility that the American people are a line in the sand at an increase in their tax rates.
But so, really, what's the problem?
Other than, like you're saying, if you start from the premise of, I'm anti-war and I don't want them to have any wars, but if you start from the premise of, oh, yeah, got to have some wars, because, you know, whatever X, Y reasons, they'll never run out of them.
Why we got to have them?
Then, you know, everything is great.
In fact, Bob Murphy one time jokingly corrected me and said, you know, everybody is not a libertarian.
The fact that inflation is a great way to pay for war is an argument for central banking.
They say, what if we need to have a war?
We have to have a central bank.
Or else, otherwise, you know, we might have to raise taxes and the people might not let us and then we might lose.
So they don't even think of that as a reason to oppose central banking.
They think of that as one of the primary reasons why we definitely need to have one.
So assume that I assume that.
And tell me what else is the problem, if there is one.
Oh, the problem is much, much deeper than that.
And it's only with the existence of the central bank that makes it so easy to go to war and to raise these resources secretly through the economy.
In the absence of that, politicians have to have a foreign policy that is anti-war and anti-destructive and pro-taxpayer, pro-citizen.
And so in the absence of the central bank fiat monetary system, when you're on a gold standard and you don't have a central bank to finance these wars, what you have is usually an era of peace.
And so we don't need these wars.
The justification for these wars, as you know, is ridiculous.
But we can do without the wars if we had a gold standard and if we eliminated the central bank.
And that's the U.S. experience going back in history from the point of the Federal Reserve, backwards in history.
We had very few international conflicts, and those international conflicts were quite limited.
So we had a war with Mexico.
It was over with very quickly.
We stole some of their land.
We didn't even have to raise a big standing army.
We just used our existing army.
And the Spanish War, that was over with very quickly, thanks mostly to our navy, our existing navy.
And so if you look at the hundred years prior to that, there was no building up of mass armies to go into international conflicts.
And there were conflicts, but politicians were forced to find a cost-effective way to resolve those conflicts, whether it was negotiations, treaties, or limited wars such as the War of Mexico and the war with Spain.
It was funny.
I was having an argument with a leftist friend of mine, and he just, ah, God, just even the word gold means some rich conservative billionaire person, you know, on a gold standard.
They, the people that he identifies with the least in this world, they'll have all the power, just like it is now, only even worse.
And just the word gold itself, it sounds so elitist.
Everybody knows that not everybody is going to have a bunch of gold.
So if it's a gold standard, then he who has the gold makes the rules and all these things.
And it sounds, even though everyone agrees that the current system is a disaster, they think, you know, we just couldn't go back to that.
And I'm saying, like, hey, all the wars and all the torture and all the things that you hate the most, none of them are affordable if we're on a gold standard.
And his attitude basically is just to fold his arms and say, no, still.
So, I mean, but so are you to that, that it still is something that would mean no power for him or anybody like him?
No, that's completely wrong, Scott.
The gold standard is actually for, it has a beneficial effect on the average American.
And it, going off of gold and onto fiat money, hurts the average American and helps the financial elite.
So when you're on a gold standard, and your pay is coming in gold and silver coins, maybe copper coins as well, the value of that gold and that silver and that copper increases over time.
So your wages actually end up being worth more and more and more over time.
And so, you know, and then when you go to a fiat money where financial markets can be manipulated, that's what helps the financial elites gain so much wealth.
The only reason we have this enormous amount of super wealthy people is because we have a financial system that can be rigged and can be manufactured in their favor.
So I just...
Go ahead, wrap up real quick.
If you look at the gold standard era, it was an era of increasing equality in America.
And then if you look at the period after the gold standard was over, that's where you see the rise of super inequality in America.
All right, hold it right there.
We'll be right back, everybody, with the great Mark Thornton from Mises.org.
M-I-S-E-S, Mises.org, the Austrian School Economist.
Hey, y'all, Scott Horton here for WallStreetWindow.com.
Mike Swanson knows his stuff.
He made a killing running his own hedge fund and always gets out of the stock market before the government generated bubbles pop, which is, by the way, what he's doing right now, selling all his stocks and betting on gold and commodities.
Sign up at WallStreetWindow.com and get real-time updates from Mike on all his market moves.
It's hard to know how to protect your savings and earn a good return in an economy like this.
Mike Swanson can help.
Follow along on paper and see for yourself.
WallStreetWindow.com.
You hate government?
One of them libertarian types?
Maybe you just can't stand the president, gun grabbers, or warmongers.
Me too.
That's why I invented LibertyStickers.com.
Well, Rick owns it now, and I didn't make up all of them, but still.
If you're driving around and want to tell everyone else how wrong their politics are, there's only one place to go.
LibertyStickers.com has got your bumper covered.
Left, right, libertarian, empire, police, state, founders, quote, central banking.
Yes, bumper stickers about central banking.
Lots of them.
And, well, everything that matters.
LibertyStickers.com.
Everyone else's stickers suck.
All right, guys, welcome back to the show here.
I'm Scott Horton.
It's my show, The Scott Horton Show.
Liberty Radio Network.
ScottHorton.org.
4,000 interviews now at ScottHorton.org.
Check it out.
This one here is with Mark Thornton from the Mises Institute.
And at the break, Mark, we were talking about the gold standard and how it's actually the inflationary system that leads to all this inequality, even though they always sell it.
And I learned this in junior college that, hey, during inflation, you get to borrow in dollars and pay back in dimes, right?
Somebody fixes an interest rate, a real low interest rate on a 30-year mortgage, and then there's a lot of inflation that takes place.
By the, say, second half of their mortgage, they're basically getting a discount on the price of their house as they're paying a locked-in price for the principal and a locked-in low interest rate.
And so they use an example like that and say, no, see, inflation is bad for the evil bankers.
And that's why the government does it all the time is to benefit us at the expense of the rich.
Otherwise, the rich would get it all.
So the government kind of inflates to spread that wealth out to the rest of us.
And you're saying, no, it's just the other way around.
Oh, yeah, absolutely, Scott.
I mean, there are winners and losers from inflation, borrowers who can borrow long term at low interest rates.
And then you see the inflation.
Yes, they do get to pay back their debts with devalued dollars.
But, of course, the federal government is the white elephant in the room.
They're the biggest borrower.
They've borrowed $20 trillion, and they borrow it using 30-year government bonds in many cases.
And so they're the biggest beneficiary of that long-term inflation eroding the value of the dollar.
So they're the big white elephant in the room as far as that goes.
But I would like to reiterate that previous point about gold.
Because if you go to Socialist Economist, the bestselling book by Thomas Piketty about inequality in the 21st century, and you look at his charts, what they show is that when we were on the gold standard, that economic inequality was falling, which means that the poor people were benefiting more relative to the wealthy people over time.
And so you see this decline in economic inequality on the gold standard.
And then right there in 1971, when Nixon took us off the last vestige of the gold standard, you see economic inequality at its lowest level in American history.
And then after that, there's a sharp, significant rise in economic inequality over the next 40 years.
It was persistently becoming more unequal once we left the gold standard.
So his own evidence shows that gold was a big part of declining economic inequality to 1971, and then fast-rising economic inequality after 1971 to the present.
And now, is that what Austrian School economics and economists were predicting before this happened?
And what's the explanation behind it, other than just, hey, look at the chart?
Because a lot of other things happened in the world, too, so who knows, right?
Well, that's right.
Who knows?
Except Austrian economists such as Ludwig von Mises, Murray Rothbard, and especially Henry Hazlitt, who was writing a weekly column for various important publications in the 1960s, he was warning throughout the latter half of the 1960s the U.S. policy in terms of what we were spending and the fact that we were eroding the Brentwood system and the gold-backed system that was the Brentwood system.
They were warning that because of what it would do to the dollar and what that would mean for all sorts of problems, including an explosion in the national debt and greater amounts of economic inequality.
And the theory behind that is, of course, is that the average ordinary person is looking at their wages, their salary, so on and so forth, as their main thing for sustaining them economically.
But as those dollars are devalued over time, that erodes away the purchasing power of wages, while at the same time it makes it easier for the financial elite to borrow and to leverage their assets and to take advantage of advancing capital in asset markets, stock markets, and things like that.
And, of course, the lower the wage earner, the longer it takes, or the lower on the chain of events they are, to finally get a raise for the cost of living increase.
And then, as soon as they do, then the bastards with all the power say, look, the lowest-level wage earners are getting the slightest bit of a 15-cent raise, and that is causing upward pressure on prices.
They are the cause of inflation, the poor bastards.
Oh yeah, it's just sinful the way the labor class is being treated in the United States, where all of the cost of the government and all of its negative effects from government are felt by the laboring class in particular in the United States.
Now I know there are a lot of wealthy people that are also forced to pay a lot of taxes as well, but the overall negative effect of these policies is being felt by the middle class, by the low-income class, and by the labor class.
Their standards of living have been declining now for many years, basically.
The American dream of being able to do better than your parents and to have a career, these are things that are being destroyed by federal policy of war, inflation, taxation, and national debt.
Well, and here's the thing, too, and this is what you're best on.
You and Robert Blumen, of course, way out ahead of the curve on the entire planet Earth in terms of identifying the housing bubble and in all the derivatives markets and the rest of it, too, back in 2005, and this is the thing that hurts the most.
It's not just the inflation, but it's the destabilization and the dislocation of the society.
It's like a giant earthquake hits America every eight years or so, ten years, something like that, and the rug just gets pulled out from under everybody.
We talked about this before where it's in Secrets of the Temple, the William Grider book about the Federal Reserve, where they keep track of the suicide rates.
They know that what they do causes men to blow their brains out because they blame themselves for the Federal Reserve's failures.
Oh, absolutely.
The Austrians were the only ones, really, to talk about and to write about the housing bubble as it was forming, and while we were writing about the negative aspects of the housing bubble, mainstream economists and Federal Reserve economists were saying everything was great.
As a matter of fact, I wrote a paper about what the Federal Reserve was saying in 2007, and they said everything is perfect, everything is great, we're in charge, we'll take care of everything.
These new financial products that some people are scared about, mortgage-backed securities, they said those are great innovations in the marketplace.
So they were being told, you know, 99% of the American public was being told everything was great, and this housing bubble, don't worry about it, it doesn't really exist.
And so when the bubble bursts, every time the bubble bursts, you have people who become very despondent, very depressed.
They thought everything was going great, and they thought it was because of their own actions, and then everything is knocked out from underneath them.
They lose their job, they lose their assets, they lose their house, their family is under strain, psychological damage, and it's just a terrible thing, and it comes ultimately from the Federal Reserve.
So while the Austrians do point out the basic problems of price inflation, we're more concerned about the problem of the business cycle that the Federal Reserve causes through its monetary policy of manipulating fiat currencies and interest rates, real economic factors, not just psychological animal spirits, real economic factors that they're manipulating, they're causing these business cycles, and it's the business cycle where a lot of resources are wasted in the boom, and then a lot of people's lives are destroyed in the bust.
And so we've got to bring the central bank to its knees.
We've got to restore a gold standard.
That was the number one issue with Lou Rockwell founding the Mises Institute in 1982, and it's still our main issue today is getting back free market money and eliminating central banking.
There you have it.
That is the great Mark Thornton.
He is Senior Fellow at the Ludwig von Mises Institute.
That's mises.org.
I'm telling you, man, this is the eureka issue right there.
You've got to learn, no matter what your politics or economics are, you've got to learn what the Austrians say about the boom and the bust.
You just have to.
It's the great Mark Thornton at Mises.
Thank you, Mark.
Thank you, Scott.
We'll be right back, y'all.
Hey, I'm Scott Horton here to tell you about this great new book by Michael Swanson, The War State.
In The War State, Swanson examines how Presidents Truman, Eisenhower, and Kennedy both expanded and fought to limit the rise of the new national security state after World War II.
If this nation is ever to live up to its creed of liberty and prosperity for everyone, we are going to have to abolish the empire.
Know your enemy.
Get The War State by Michael Swanson.
It's available at your local bookstore or at Amazon.com in Kindle or in paperback.
Just click the book in the right margin at ScottHorton.org or TheWarState.com.
Hey, I'm Scott Horton here to tell you about this great new e-book by longtime future freedom author Scott McPherson, Freedom and Security, The Second Amendment and the Right to Keep and Bear Arms.
This is the definitive principled case in favor of gun rights and against gun control.
America is exceptional.
Here the people come first, and we refuse to allow the state a monopoly on firearms.
Our liberty depends on it.
Get Scott McPherson's Freedom and Security, The Second Amendment and the Right to Keep and Bear Arms on Kindle at Amazon.com today.
Finally, I'll check out the audio book of Lew Rockwell's Fascism vs.
Capitalism, narrated by me, Scott Horton, at Audible.com.
It's a great collection of his essays and speeches on the important tradition of liberty.
From medieval history to the Ron Paul revolution, Rockwell blasts our state as enemies, profiles our greatest libertarian heroes, and prescribes the path forward in the battle against Leviathan.
Fascism vs.
Capitalism by Lew Rockwell for audio book.
Find it at Audible, Amazon, iTunes, or just click in the right margin of my website at scotthorton.org.