All right, y'all, welcome to the Scott Horton Show.
I'm the Director of the Libertarian Institute, Editorial Director of Antiwar.com, author of the book Fool's Errand, Time to End the War in Afghanistan, and the brand new Enough Already, Time to End the War on Terrorism, and I've recorded more than 5,500 interviews since 2003, almost all on foreign policy, and all available for you at scotthorton.org.
You can sign up for the podcast feed there, and the full interview archive is also available at youtube.com slash scotthortonshow.
All right, guys, it's Mike Swanson, sponsor of this show, but that ain't what this is about.
This is just honest talk, but for you Patreon supporters, I won't charge you for it.
Mike Swanson, he's at wallstreetwindow.com, and he wrote these great books, The War State, which I have read, and is a masterpiece, and Why the Vietnam War, which I'm certain is a masterpiece, even though I haven't had a chance to crack it open yet.
I've been really busy.
But I can't wait to read it, Why the Vietnam War.
But that's not what we're talking about today.
We're talking about the goddang economy, which is as scary as war, anyway, these days, I think.
Welcome back to the show, Mike.
How you doing, sir?
Oh, I'm doing good.
Good to talk with you.
Very happy to have you back on the show here.
So in the little chat we had right before we went on air, you're like, oh, why do you want to talk about the economy?
Is that something people are bringing up a lot?
And yeah, the answer is, I think everybody is completely freaked out about what's going on with the economy, and mostly as the consequence of the lockdowns and all of that.
But there's just so many different forces at play going on, and it's all very confusing.
But I know, for my own sake, that when I go outside, I never seen so many homeless people in Austin, Texas, in all my life.
And I know that they changed the rules and allowed camping, and now they're banning it again and this kind of deal.
But still, there has never been a demand for so much space on sidewalks in my hometown ever, ever, ever, ever, by a thousand percent.
It's totally out of control.
And of course, because the price of housing is absolutely skyrocketing.
Part of that is because of Californians, but part of that is because of cheap money, cheap credit for hedge funds, buying up hundreds and thousands of houses at a time in Austin in order to rent them out and, you know, gentrifying the whole damn city of people who are from here and all this thing, everything.
It's totally crazy.
And how's a homeless guy ever supposed to afford rent again?
I have no idea.
I can barely afford mine.
So that's just one aspect of it.
But it all, you know, I guess for people on the bubble end of that who already own a bunch of property, they're essentially on welfare.
So they're pleased.
And so they don't know that there's a crisis.
Is that it?
I don't even know what my first question is.
How about this?
On the scale of things, where are we in the bubble, right?
I feel like we're in the year 2009, right?
We just had a massive crash.
And now we're just starting the inflationary bubble again.
The next major crash will be in 10 years or something when all this comes due.
And then we'll all go all the way to hell or something, probably.
Well, if we think about it with that analogy, I'd say yes and no.
I mean, first, I'm going to admit, I don't, as far as the economy goes, I mean, there's not, I live in a much smaller area than you do, a city of 35,000 people in it.
But I do see more homeless people than I ever have before in the past 12 months.
There's a neighboring county that's across the border in North Carolina that's highly depressed, I would call it, and their real estate prices have gone up like 15% in the past 12 months.
At the same time, the restrictions and the lockdowns are going away week by week throughout the country.
I saw South Carolina is lifting their mask mandate, for instance, and I took a, but it's very difficult to know, you know, the virus cases are dropping, things are going to improve.
It really looks like it's going to be pretty much gone in the next six weeks in the United States.
But it's, so obviously, you know, there's a stimulus of activity in the first half of this year because of that.
But it's tricky to know what, how sustainable it is, or how big the boom is, there's a lot of conflicting data.
Last week, there was unemployment numbers that came out from the government that they're expected to show a million jobs created last month, and they only made about 600,000.
I personally took a trip to Las Vegas two weeks ago, and what I saw was flying there, there's no one using the airport.
You know, I flew out of Raleigh-Durham, and the airport was empty, it was like 20% of the flights as usual, half the stores or more were closed.
When I get to Las Vegas, you know, the airport there is pretty much empty, and it looks like, and I was told this would be the case before I got there, but most of the people going there, driving there from LA, and they're younger people, they're not, and they're taking, or they're people of families, they're not, you know, they're not having the conventions there yet, they're not having really the gamblers that tend to be over 50, at least the ones spending most of the money.
So, and they, but, you know, they, at the same time, I listened to a conference call on these casinos last week, and the guy is, for Caesars, making it sound like he's, the biggest boom there's ever been is right around the corner.
There's lots of conflicting things, but what you said about this being like 2009, the way I agree it is, is that there is an inflationary trend happening.
Back then, it was a bottom in real estate, and real estate prices went up since then, and the stock market went up since then.
I think the real estate thing is going to keep going up.
I'm not so sure what the stock market's going to really do, but going forward, but the big thing, though, that I think is the most, the biggest factor, I believe, that's happening is inflation.
We're seeing inflation jump up in a way that, I don't know if it's happened in my lifetime, at least in what I can remember.
I was born in 1975, I don't remember the 70s, but there's a CPI report, Consumer Price Inflation Report, that came out yesterday.
It showed that prices went up 4.2% over the last 12 months.
That was the biggest gain since 2008, so there you go, similar to your 2009 analogy.
Of course, some of this rise in prices is happening on an annualized basis because the shutdowns caused a drop in prices.
The oil prices went below $30 a barrel, the oil futures briefly went negative last year, so everything has come back up from those levels, but it's not just the end, and also I should say commodities as a whole.
If you look at the charts of corn, wheat, sugar, along with oil, all these commodities, they made what appear to be secular bottoms last year.
They had peaked out around almost all of them somewhere between 2011 and 2012 and fell until last year, and now they're all rising, appearing to me to have started a bull market that could last a long time.
I don't think it's just simply the 12-month comparison.
Also, this past report shows the prices went up 0.8% for the month, so it's not just annualized.
I attribute it to secular bottoms and commodities and the consequences of all the bailout programs, the stimulus, and all this stuff, and low interest rates that really can only go so much higher than where they are now without bankrupting the entire government.
In the dollar's weaker, I attribute it to all these factors, deficit spending and all this kind of stuff.
The thing is that the Federal Reserve is predicting that it's going to go away by the end of the year or first quarter next year.
The report was, they've been saying this at the past two Federal Reserve meetings, their early statements, the chairman gives speeches, but they were predicting this CPI number would be 2.6%, it was 4.2%, and yesterday, after it came out at 8.30, around 9 o'clock, one of the Federal Reserve governors, he gave a speech and said, oh, he was surprised by the big number, and then repeated the predictions that it's going to go back down, and so we don't have to do anything about it, is what he's implying, the Federal Reserve isn't going to worry about it, because they're predicting it's going to not be a problem.
I don't know how much we can trust that.
Their predictions have been wrong in the past, and I feel like they're forced to say these things, because they can't raise rates in the face of inflation.
The rate of inflation is larger than the yield on a 10-year Treasury bond.
If you buy bonds, you're now losing money, guaranteed, just about.
That's a situation that I think right now, to me, this is the most obvious thing that's happening with long-term consequences, and I don't know the answer to a lot of the- there is a lot of uncertainty, and I don't know what the economy is really going to do over the next couple of years.
It doesn't have to crash or go into some tailspin or something, even if there is inflation.
It can appear to be booming, so to speak, in some ways, so to me, it's not clear where all this is really headed.
Yeah, well, it doesn't sound like they have any idea either, but yeah, they sure seem to always paint us into a corner, and then, you know, by the way, I always forget how old I am and how fast time flies, the older I get and all this stuff, so people might not even know that 2009 stands for the year after the last catastrophe, which hit at the end of 08, when the bottom fell out of everything, and then Obama got inaugurated, and Bush started it all, and Obama got inaugurated, and they created a bunch of money and spent a bunch of stimulus and did all these things to inflate the next bubble, and is this the way you perceive it, too, that essentially we were overdue for a crash, and then Trump and the governors forced one last year in a way almost like Paul Volcker did in the 80s, right, with his high interest rates.
They just did it with the lockdown, so just clamped the economy down, which canceled out a lot of bad debts and even previously good ones, so now essentially, in my mind, that's equivalent to the crash of 08, and now we're starting back at 09 with what's the government going to do to juice the economy to get it going, and this is the result, right?
Yeah, I don't believe they purposely did it, but this is what, in effect, happened.
I mean, the 2008 stock market crash, you know, I trade this stock.
Oh, yeah, I'm sorry, I meant to just say, you know, in effect.
I'm not saying that's why they were doing it was to lick inflation, but I'm just saying we were overdue for a recession, and we sure had one.
It was called the lockdowns, right?
Yeah, yeah, it was going to happen one way or the other eventually, and that triggered it and made it worse than it would have been otherwise, I'm sure, but the other thing about it is the 2008s, you know, people don't know, this is what I do, I trade the markets.
In 2008, the stock market crashed, in March and April it crashed, and then I think the crash March-April of last year, you know, people had forgotten about it because things rebounded so quickly, you know, it only played out over a couple of weeks, but going through both of those events, the one last year was much worse as far as what was going on in the financial markets.
I was actually scared, I only lost 10% of my money as it was dropping, but I wasn't scared because of that, because of what was happening.
The bond market froze up, it was scarier than what happened in 2008, is what I'm trying to say.
I mean, I was so scared, I was having nightmares or not being able to sleep, you know, for three weeks as the virus situation was exploding and the market was crashing, and that's something I never had done in my life, I had nightmares about the news or something.
Yeah, this was my big mistake, was I thought, look, the lockdown can't possibly last more than a couple of weeks because business won't have it.
At the end of the day, business is broadly defined, that's the interest group that rules America overall, and they're just not going to accept an ongoing lockdown.
I mean, that's just crazy, this is America, you can't do that.
But then my own stupid brain, the other part of it should have said, yeah, but you're underestimating the unlimited amount of new money that they will create to make big business whole, why everyone else suffers.
And so I don't know about all these stats for real, I should have a twin brother who keeps track of M3 for me and all this stuff.
But I saw at least one statistic, is this correct that approximately a third of all of the US dollars ever created were created last year?
And this is the part that, no one ever explains this part specifically, and I don't know if this is your speciality or what, but Congress always spends $1 trillion here, $2 trillion there, that kind of thing.
But then we always kind of hear tell that the Federal Reserve created a lot more than that.
But by what mechanism did they do that and hand it off to which banks and businesses to protect them in the way that they did?
That part is always opaque.
Well, I'm looking at this stat, I found at least an article that says 20% of the US dollars were created in 2020.
This was done in October, so it probably is around 30%, at least up until now.
That's important, right?
Oh my God.
Yeah, yeah.
I mean, I've seen the money supply sort of charts that you talk about, and it's just straight up, right?
I mean, it was straight up in 2008, and back in, you know, you can see the same thing those years, but now it makes that look like nothing.
And by the way, so what's the total on that?
Do you know, can you give us like a ballpark of like X many trillion dollars was created?
And what exactly does that mean?
They bought US treasuries with new money?
That's what they did.
Three trillion, three trillion.
So but the mechanism of this is that, and I guess I could try to say one way I think all this is going, is that the Treasury Department issues treasury bonds, and the Federal Reserve, normally you sell these treasury bonds to anybody, right?
We could buy them, you can buy them, or a listener.
But the debt's gotten so big that in the past couple of years, the Fed has been one of the biggest buyers of these bonds.
They call that quantitative easing.
And what that means is the Federal Reserve prints money, and then uses that money to buy bonds from the Treasury.
Those proceeds go to the federal government, and then are spent by Congress, right, to whatever their projects are.
However, last year, they also, I forget the name of the mechanism, but the Treasury Department also created its own sort of like a bank that they were also giving the money to, and then giving that, no, I take that back.
They were giving funds straight to banks.
They were going to create their own bank, but they didn't, and they gave it to other banks, like these PPP programs and so forth, letting banks lend money that way as a way to create more money in the economy and bail people out.
And they were guaranteeing the loans.
They tell the bank, okay, do these special loans to help keep the real estate people afloat or small business people afloat, and we'll guarantee the loans.
So that's basically how they were bailing people out last year.
But the thing is that the deficit is so big that these quantitative easing programs of printing money to pay for it are here for the foreseeable future.
And a problem is that this, if inflation continues to pick up in the economy and the dollar weakens, then the United States can become, inflation, these two trends will just worsen, and people experience more inflation.
I'm not saying we're going to become like Zimbabwe or something, but you can get like the 1970s, 5% inflation a year, maybe a year higher than that.
This is what's been going on in Turkey, for instance.
Happens in third world countries like Argentina multiple times in the past 20 years.
So I think that's where this is ultimately going.
And the thing is, in that scenario, the Federal Reserve will actually have to increase these bond buying operations because the debt will get bigger and bigger.
And just that fact alone, I think, could make it where the Congress will just create more and more stimulus programs just to spend this extra money.
So I think we're kind of in a trap that's similar to the 1970s, that it will end one day by them raising rates and ending this.
But that's years away, five years away, 10 years away.
I think this is the year comparison to 2009, and that's the bottom, and we're re-inflating.
I think this is the main mechanism of re-inflating it and everything that's going to continue.
People so much think about the stock market, at least, I guess maybe, certainly I think that because that's what I do and hear about it all the time.
But I think the stock market's really not that important going forward.
Generally, it's reflecting anything that has to do with the economy, and I think it's likely to do what happened in the 1970s also, which is go sideways, but really eventually lose value against the dollar going down.
Hey y'all, Scott here.
If you want a real education in history and economics, you should check out Tom Woods' Liberty Classroom.
Tom and a really great group of professors and experts have put together an entire education of everything they didn't teach you in school, but should have.
Follow through from the link in the margin at scottwharton.org for Tom Woods' Liberty Classroom.
Look here, you and I both know that what you need is some Libertarian Institute things, like shirts and sweatshirts and mugs and stickers to put on the back of your truck, and to give to your friends, too, that say Libertarian Institute on them so that everyone will know the origins of your oppositional defiant disorder and where they can listen to all the best podcasts.
So here's what you do.
Go to libertasbella.com and look at all the great Libertarian Institute stuff they've got going there.
Find the ad in the right-hand margin at libertarianinstitute.org, libertasbella.com.
I think what you're talking about here, if I have you right, is what they called stagflation, which was supposed to be impossible, right, where so much of the economy is failing to recover and is still in a recession, and yet there's still all this upward pressure on everything, because the way they have it—and this always makes me mad.
Ever since I was really young, I noticed how wrong this was, even from my public school understanding of what inflation is, even, you know, high school or junior high even kind of stuff—is that they always blame rising wages for hourly workers for causing inflation.
Yeah, there's upward pressure on wages, and that's causing inflation, when just obviously on the face of it, if you want to be fair about it, if you're not a business owner at war with your employees, you want to be fair about it.
What's actually happened is the businesses, led by the banks and the government, of course, have created all this new money, leading to, you know, monetary inflation, which has led to the price inflation, and therefore the pressure on wages to go up, because the cost of living is going up.
And so even if people—if you have a larger-than-usual percentage of people unemployed, you still have the people who are employed saying, man, I need a raise.
And then they go, yeah, it's your fault that prices are going up.
Yeah, sure it is.
You know, it's such an obvious ploy.
I remember seeing Alan Greenspan testify to the Congress.
Yeah, you know, that's the problem, is this pressure on wages could cause inflation.
And then nobody burned him at the stake or anything.
He was just allowed to pretend to say that and believe that.
His wife still says the news in the afternoon on MSNBC every day.
Yeah, I agree 100 percent what you're saying.
In fact, I mean, if you think about recent years, unemployment reached a low before the lockdowns.
You know, in 2019, unemployment was the lowest in our lifetime, and there was no inflation, you know, like there is now.
So if tight job markets are the cause of inflation, it would have happened two years ago.
Instead, there's still lots of unemployment, and there's—now we've got the inflation.
Yeah, exactly.
Right, right.
Yeah, and like the 70s, you know, there was less inflation in the 70s and high unemployment.
And I—but the thing—I was reading some stuff about the 70s, and one interesting thing is there was, you know, there was inflation in the 60s, too.
The budget really started to become unbalanced around 1967 as a result of Lyndon Johnson's Vietnam War and the Great Society, and inflation actually was picking up going into the 1970s.
That's why Richard Nixon took the dollar off the gold standard, because there was a balance of payments problem, you know, as a result of the 60s.
And what's—one of the interesting things is that Nixon did that in August 1961, and the U.S. dollar declined from that point on, and inflation—there was inflation that year and the year after, but as a political and social issue, it wasn't really until 1973 that it became a—you know, everyone kind of panicked.
All of a sudden, the prices started to go up in a way that, you know, blew people away.
Meat prices were doubling in a month, for instance, and grocery store prices exploding, you know, in 1973.
So people were living with 3 to 5 percent—2 to 5 percent inflation a year and dealing with it, and then it just really went wild for a couple months.
So I think that could be something that happens, too, that the inflation isn't crazy, you know, this year.
I mean, people—I'm telling you, the numbers are big, but I don't really think—you know, the only time I saw people really panic or be stressed, I guess, by inflation that I saw in my—you know, that I can remember is the summer of 2008.
Oil prices went to like 150, and people would talk about, you know, I can't— Well, but like where we started, it's all in housing right now, too, as we've seen before.
Yeah, yeah, it is.
You're right.
It is.
You know, it always goes to certain sectors.
You know, this is a new term I learned, the K-shaped recovery.
It means every time there's a crash, everybody at the top gets a bailout, and all the people at the bottom don't.
And I remember this from the 1990s, that when they were saying, even, you know, when Ron Paul was warning, it's a bubble, and it's an artificial period of boom and prosperity, but we're going to have a crash real soon, which of course came true in 99 and 2000 with the dot-com crash, that at that time, I knew that, wait, we had record bankruptcies last year.
And it was because of problems.
It wasn't just because, oh, there's so many new startups.
It was because there were real problems in the economy for people, and that there were a lot of people who thought we were still in the recession of the early Clinton years or whatever and didn't even know.
If you're in the dot-com bubble, great.
If you're not, you don't know the first thing about this so-called recovery.
Then the crash comes.
You didn't even know you were in an artificial boom.
Maybe that's why working and poorer people don't understand the boom in the bus cycle.
They don't ever see the boom side of it.
And then the flip side of that is all the people at the top side of the K, they never really see the crash.
Their stocks go down for a little while, something like that, and then they get a bunch more money shoveled right into all of their accounts, and they don't ever see the downside.
And I should have mentioned, the same thing in 08.
There are a lot of people who'd never recovered from 2000's crash by the time the thing crashed again in 08, and now the same thing again with this one.
And so maybe this explains not just that they're psychopaths, but maybe this helps to explain why the financial elite in America are so out of touch with the suffering of the American people in so many ways, is because they're just not exposed to it at all.
The worst the crash ever hits them is never that bad.
Not anymore.
Well, that's one thing about, yeah, I mean, that's certainly the case, you know, the past year, the difference between someone who's lost their job during the lockdowns and someone who hasn't, you know, that is able to work in an office.
I mean, that's one difference, but I mean, what about someone who owns a restaurant that has to shut down, and then Amazon, you know, I mean, so forth.
But the thing about inflation is there's two troubling things that happen.
One, and I'm thinking, there's only a few books.
It's a funny topic.
There's not a lot of good books about it.
There was one I found once written in 1980, and it talked about great inflations, and, you know, the famous example is what happened in Germany in the 20s.
But there was one in the United States around the time of the Civil War, too.
And before that, I think around the American Revolution.
Right, there was the famous phrase, not worth a continental, because they printed so many continental scripts.
And one thing that happens during these times is that people connected to the government are often able to benefit from the inflation because they get loans cheaper than other people are getting, you know, even zero interest loans or practically zero interest.
I mean, if you get a 5% loan in the Weimar Republic and inflation is 1,000%, you're just getting free money.
And that's what a lot of the industrialists were doing in 1920s Germany.
And people in the United States were doing that, a similar sort of thing, during the American Civil War.
So I don't know how that was, what was going on in the 70s and that alike.
But certainly there were people making money off real estate in the 70s.
Real estate prices went up and beat the rate of inflation.
So there are people getting rich in real estate.
So what I'm trying to suggest is that that's the K-shaped recovery going forward.
People connected to the government are wealthy people getting loans that maybe other people can't, especially if the inflation picks up even greater than it is now.
The other problem that's really troubling, what I found reading about these things in the past, is that often it seems like people have no idea what's causing it.
You know, in the 20s in Germany, inflation had really started during World War I.
And they were blaming it on the blockade, they're blaming it on foreigners, blaming it on farmers claiming they're hoarding food, blaming it on the Jewish people when the 20s came around, and just blaming anything except the real cause, which was that they're printing more money.
It's like they didn't have any real understanding of what was going on.
And even now that can easily happen, because I can see a situation where the Democrats could say, Trump, this is the legacy of Trump's tariffs.
Well, and of course, it's the evil capitalists, the greedy capitalists exploiting everyone by raising their prices.
Yeah, yeah.
We're the prowl scougers, right?
And of course, it is the wage earners who get the increase last.
So it's kind of true, even though most business owners don't know the first thing about how this works either.
But there's something to the point that, you know, how come the people at the short end of the stick always stay there?
This is part of it.
Yeah, yeah.
So it creates a confusing situation.
But I don't know.
You know, we're not at the 70s level yet.
It's not become exploded as a social issue or even political issue yet.
But it easily could by the end of the year, next year.
Man.
All right.
I'm sorry.
I'm over time and I got to go.
But thanks so much for coming on the show.
Everybody, read wallstreetwindow.com.
Mike is he just tells you all day, this is what I'm doing with my money and this is how I'm approaching it and thinking about it and how I recommend you do too.
And I get his email every morning.
It's brilliant stuff.
And I know you'll always learn a lot.
It's wallstreetwindow.com.
And again, wait, I got to click on the right tab here.
The War State by Mike Swanson.
And that is the origins, the Cold War origins of the military industrial complex and the power elite 45 through 63.
And why the Vietnam War brand new out guys.
Why the Vietnam War nuclear bombs and nation building in Southeast Asia, 1945 through 61.
Very good.
Very interesting.
I promise I'm going to get to that soon.
All of you and especially you, Mike.
Thank you, sir.
Oh, thank you.
Great talking with you.
The Scott Horton Show, Anti-War Radio, can be heard on KPFK 90.7 FM in LA, APSradio.com, antiwar.com, scotthorton.org, and libertarianinstitute.org.
