06/24/13 – Mark Thornton – The Scott Horton Show

Over at AIPAC, the leaders of the Israel Lobby in Washington, D.C., they're constantly proclaiming unrivaled influence on Capitol Hill.
And they should be proud.
The NRA and AARP's efforts make them look like puppy dogs in comparison to the campaigns of intimidation regularly run by the neoconservatives and Israel-firsters against their political enemies.
But the Israel Lobby does not remain unopposed.
At the Council for the National Interest, they put America first, insisting on an end to the Empire's unjustified support for Israel's aggression against its neighbors.and those whose land it occupies, and pushing back against the Lobby's determined campaign in favor of U.S. attacks against Israel's enemies.
CNI also does groundbreaking work on the trouble with evangelical Christian Zionism and neocon-engineered Islamophobia and drumming up support for this costly and counterproductive policy.
Please help support the efforts of the Council for the National Interest to create a peaceful, pro-American foreign policy.
Just go to councilforthenationalinterest.org and click Donate under About Us at the top of the page.
And thanks.
That's mises.org and also check out the Bastiat blog, bastiat.mises.org.
Welcome back to the show, Mark.
How are you doing?
Hey, Scott.
It's great to be with you here where the market's rocking and rolling.
Yeah, boy, they're going up and down all over the dang place.
Tell me this.
Actually, before we get to that, tell me this about Mises Goes Global.
Almost 30 Mises Institutes and over 30 Misesian-leaning organizations in all across the planet Earth right now.
Is that really true?
It's amazing.
And that's just in, what, the last five years or something?
Yes, it's sending shivers down my body right now just thinking about it, that this Misesian movement that Lou Rockwell started 30 years ago is just in full bloom right now.
And there are Mises Institutes popping up all over the globe, Eastern Europe, Western Europe, now South Africa, South America.
Brazil has a wonderful institute, Japan, China.
It's really amazing.
And I just came across the Mises Institute of Missouri.
So people are actually going down to the state level now and starting up their own organizations.
And they have their web pages.
And some of the foreign Mises Institutes do translations from our material into their languages as well as developing their own programs and conferences and republishing books in other languages.
We're so excited to see the great works of Austrian economics being translated into Chinese and Russian.
And Guido Holzmann's book, Mises, The Last Night of Liberalism, was just translated into Russian.
So it's just an amazing movement.
And most of the people who are watching the mainstream media and aren't listening to your show or going to mises.org, they're completely clueless of this revolutionary movement, an ideological revolution that's occurring under their feet.
And it's the intellectual, scientific cutting edge of a revolution that's occurring everywhere around the world where Snowden is uncovering the NSA and there are riots and protests in Turkey and in Brazil and Argentina.
And people just got to wake up and get away from the mainstream media and get other alternative sources of information because the world as we know it is changing.
I think it's changing for the much, much better that we're finally throwing off the yoke of statism and coming to our senses and trying to get back to the free society that our founding fathers established.
Well, look, I mean, this is the whole thing about it.
For the people who don't understand about the Austrian school, it's not that the country of Austria ever had an awesome free market system.
That's not what it's about.
It's just that the school of economics was founded by some Austrians, including Ludwig von Mises, of course.
But the point being that if you take, just very generally speaking, I mean, even just your regular air conditioner repairman driving around out there, he's heard of the Keynesians.
He knows that's basically the Democrats, right?
And he knows about the monetarists, the Chicago school.
Those are the Reaganites, the supply-siders, the trickle-down economics guys.
And then classical kind of capitalist economics from pre-20th century.
They know that that kind of stuff exists, Adam Smith and whatever.
But they figure, yeah, well, we've all moved on since then.
They might not know about the Austrians.
The Austrians, you, Mark, you guys are the ones who are the real free market guys.
You guys make Milton Friedman look like a pink-coat commie or maybe a brown-shirt fascist.
Yes, well, we took up the mantle.
Karl Menger and Lombovic and Wieser and Mises and Hayek took up the mantle of classical economics and set about fixing some of the problems in their system.
Like they had a labor theory of value, and we fixed that with a subjective theory of value.
We fixed the supply and demand model with marginal utility and opportunity cost.
And so we fixed the classical paradigm of Adam Smith and David Hume and Ricardo.
They went down the wrong path on a lot of issues that the socialists and Marx, Karl Marx, took advantage of.
And so we fixed those things.
And so people who are interested in liberty, they're interested in freedom.
They don't like the police state.
They don't like Big Brother breathing down their necks, reading their emails, and monitoring their phone calls.
And then they come across this scientifically sound Austrian school of economics.
And all of a sudden they realize that it's not just their view or their opinion that freedom works.
It actually works on a scientific basis.
And so that's what all the excitement is about with regard to the Austrian school of economics and the Ludwig von Mises Institute.
We've been – we're the oldest continuously existing school of economics.
And we're currently the smallest school of economics.
And as a matter of fact, we almost became extinct in the early 80s and 70s.
But we're now the fastest growing school of economics, and that's true.
It's true in academia, and it's true not just in the U.S., and it's true in business, entrepreneurs.
It's true with high school and college students.
It's the hottest thing.
It's now the coolest thing in academia to be.
It's not – Marxism isn't cool.
Keynesianism isn't cool.
None of these other intellectual movements are cool at all.
They're seen as old school.
They're seen as crony capitalism.
And it's the Austrian school.
It's Ron Paul.
It's the freedom movement that is really the cool thing nowadays.
As a matter of fact, Scott, you're going to find this funny, but we sell T-shirts at the Mises Institute and on our bookstore at mises.org.
Oh, yeah, I'm a proud owner of the Enemy of the State with Murray Rothbard on it.
Yeah, you know, and actually I asked the bookstore manager if that was our most popular shirt, and he said no.
It's probably the second most popular shirt, but the most popular one is the one with the triangle of the Austrian business cycle theory with the stages of production and all the equations underneath it.
Because that's seen as – if you're wearing something like that, that is – apparently on campus, that is academically very cool.
That's great.
I thought that was funny.
I mean, look, Austrian school economics is a big complicated thing and covers a lot of ground, as you mentioned.
But that's the thing.
That's why the Austrian school of economics is such a big deal right now is because you guys were right during the last decade's giant housing bubble, and you were right about the terrible popping and the terrible effect that was to come, and especially in the name – in the person of Dr. Ron Paul, who you mentioned, who's been calling out the housing bubble on the floor of the House of Representatives since at least the year 2000.
And when he ran for president in 2007 and 2008, and then, of course, again in 2011 and 2012, but in 2007 and 2008, the YouTubes of him explaining why not to build up a big housing bubble because you're just putting off the consequences we're due and you're going to make matters worse here coming a few years from now, those YouTubes just caught fire.
I mean, they were more popular even than him warning against – quite correctly warning why not to invade Iraq.
And people just went, wow, whatever it is this guy's reading, I want to hit.
Oh, yeah.
That's the great beauty of Austrian economics.
It's holistic, and it's not like you have to know every nook and cranny of Austrian economic theory.
If you have a general understanding of Austrian economics and you're getting information written by Austrian economists on a regular basis, you have a very well-formed worldview, a very well-formed understanding of how the world operates.
And as a consequence, you can get understanding about the consequences of foreign policy, and you know the consequences in advance of monetary policy and taxation policy and the size of government.
And all these phenomenon that infect our world, you can understand those phenomenon, where they come from, what their effects are, and ultimately what problems they cause in our society in advance.
And so that puts you at a much better perspective in terms of understanding the world and being comfortable with the world around you, where you're not being fooled.
You're not being taken advantage of.
You're not being just told one story after the next, like we need $10 billion of national security agency to spy on our phone calls and our emails to protect us from terrorism.
A lot of people – some people will actually buy that story, but the Austrian economists are not going to buy that story.
They just see that as an invasion of privacy and a waste of money.
And that's ultimately the way things will – they'll be eventually revealed to people.
But people who have an understanding of Austrian economics, such as yourself and myself, we're not fooled by the events in this world.
And as a consequence, it's a much nicer perspective and worldview to come from.
It's kind of irritating that there are all these problems and there are bad people out there in the world, but it's more comforting to know what's coming than to not know and be blindsided one time after the next.
Right.
All right, well, so let's talk about what's coming or what's going on today here.
The markets seem to be taking a big hit, but – well, and we talked about this with Alan Butler a little bit on the show last week too.
Alan said that Greenspan's speech was, don't worry, I'm going to keep inflating.
But everybody took it as though what he said was, I'm going to have to stop inflating here pretty soon.
And they all panicked, and now they're all freaking out.
Well, you know, central bankers are basically liars.
So you never know exactly what they mean and if they mean what they say and say what they mean.
You know, this downturn in the marketplace, in the stock market as well as the gold and commodity markets is not a big surprise to me.
Actually, the only thing that really surprised me is that – how Bernanke was able to actually pump up these markets to such high levels.
And to – I was fooled in this case because he went beyond the normal tools of monetary policy.
He didn't just cut interest rates in the economy.
He went well beyond the normal bounds of a central banker.
And he's changed the rules of the game, and he's engaged in this quantitative easing infinite, basically, and was able to pump up markets to restart the housing bubble.
And things that we would have never thought of because if he had stayed within the normal bounds of monetary policy, this wouldn't have gotten so far out of control.
And markets would not have been blown up so high.
He was under the – he's under the impression as well as Krugman and Greenspan that if you pump up the stock market, that that will give people confidence because central banking is a con game, essentially.
And so they build up your confidence.
So you feel free to not be prudent and save your money and invest your money properly, but to become imprudent and to spend all of your money and to invest your money into very risky markets and risky assets and investments.
And so people who are – say, for example, who are retired and they normally keep most of their money in fixed income investments and bonds and things of that nature.
They've been pulled out of the safer investments because there's no return, and they've been putting their money into riskier investments with the idea that they can make dividends and make capital gains in stocks.
And so that's Bernanke's game plan is to make people feel confident, get them to invest in riskier things, and therefore somehow to jumpstart the economy in that way to make them spend more and to put their money in bad investments.
And so that's not the Austrian playbook at all.
I mean we believe in sound money, no inflation, the gold standard, not intervening in marketplaces like that, but to allow market price signals to determine investments and whether to spend or to save.
And we think that saving money is actually the key ingredient to economic growth because when money is saved and not consumed, that frees up resources such as land, labor, and capital to go into sound investments in the future of the economy.
And so their playbook is a confidence game or a con game.
Ours is the ageless wisdom of saving and investing in sound projects for future growth in the economy.
And I'm afraid that – it's hard to imagine the negative consequences of the path that Bernanke et al. has taken us down.
Well, so if we can put it in a little more personal terms, not necessarily to impugn the people in charge because I kind of think they believe their own stupid things.
They think they believe up there and that kind of deal, Bernanke and his acolytes.
So not to make it like conspiracy mongering or whatever, but just to drive the point home about what is being done to who, right?
If we – for their benefit, we assume their stupidity and ineptitude here.
What they're really doing is they're holding a gun to grandma's head and they're saying, you cannot have a savings account, lady.
Close it down.
Put your money in the stock market and basically fill up the bag and then we'll take all the money out of the bag and leave you holding the bag.
That's what's happening right now is all the regular people who are not stock market investor types, who aren't savvy, who don't know about this stuff, who ought to have a bank account down at their local thrift, they can't.
They're being forced to speculate because of the low interest rate.
They're being forced to prop up this giant bubble and then all the Goldman guys, everybody in downtown New York who actually knows what the hell they're doing here, they run away with all the freaking money.
And then as – and now here it is collapsing.
Yeah, I mean that's unfortunately – very unfortunate, but that's exactly the case, Scott, that that's exactly what's going on here.
Marxists would even have a point here that this is kind of class war in it.
This is the billionaires deliberately using the state against the regular people.
Or are they – do we really give them the benefit of the doubt that they believe in this Friedmanite commie nonsense?
I cannot give them the benefit of the doubt, Scott.
We're not in a free market society here.
We're in a crony capitalist society where the crony capitalists basically control the government and they basically control the Federal Reserve.
They control the regulators over financial markets.
Goldman Sachs has people that are highly placed people in the government, Geithner and Bernanke and Paulson.
These are the people who were managing the crisis, and they managed it quite well for Goldman Sachs who didn't take a hit, got full money from their investment in AIG back.
And so if you've got people working for Goldman Sachs who then take over important government offices and then hand over basically money to the government – or Warren Buffett, for example.
I mean he had huge investments in the big banks, and then he comes out before the central bank makes an announcement and says he fully expects the central bank, the Federal Reserve to do such and such.
Or if they don't, then he expects a panic.
So of course the Fed goes along with what Warren Buffett says and bails out the banks, and that ends up generating billions and billions of dollars for Warren Buffett and his Berkshire Hathaway Corporation to his benefit.
And then he turns around and he says we really need to soak it to the little guy, the small-time entrepreneur who doesn't have any connection with Washington, D.C., and make them pay higher taxes.
And so I think it's just – it's an outrage, and to the extent that these people know – they must know what they're doing.
They're having direct government control, direct control over government policy, and they're very influential throughout the Congress as well, of course.
Most of the Congress receives large donations from all the various financial firms, and so you've got to wonder who's running the government and who are they running it for?
Well, from my view, this is a confidence game over the American public, and that our economy and our government policy is controlled by crony capitalism.
And there's really no other way of looking at it.
I mean the faces are all there.
The checks are all there.
The policies are all there, and the lineup of Goldman Sachs employees and other companies – I mean Citibank and so forth.
You know what the problem is, though, is your argument – and it's mine too, of course – is take the government away from these guys, force them to compete in the market, and we'll see the comeuppance they've deserved all this time.
But what that sounds like to everyone who doesn't already agree with it is you're saying turn the entire economy over to these same horrible bankers who've corrupted our government so bad.
And you know what I mean?
Rather than making them half it with the state, where at least we can vote for a Democrat and try to make things fair.
Well, the larger point is not who controls government, but how much government controls.
How much spending power does the government have?
How much money do they take in in taxes and other revenues as well as borrowing?
And so it's not so much the people who are in charge.
It's what they're in charge of.
And the government has got too many resources and too much power at its control.
And this is precisely why these guys want in on the control of all this money, because it's to their benefit to do so.
So the most important lesson to be learned is that we need to reduce the size and scope and power of government.
All right, now, when I talked with Alan Butler last week, he was saying, you know, all this talk about, yeah, yeah, China buys all our debt, Korea buys all our debt.
Uh-uh, they're all selling more debt than they're buying.
And the Fed is the only net buyer of American government debt at this point.
And that means we are just completely screwed.
I don't know when the real pain kicks in, if you're not already feeling it.
But he was saying that this is just, this is one of the last signposts on the way to the crack-up boom here.
Oh, yeah.
Alan's a smart guy, and he knows, you know, but it's not known on the street very well.
But China has stopped purchasing on net U.S. government debt for quite some time.
And they've been adding to their gold reserves in China to a very large extent.
I mean, they've, in recent months, their purchases have more than doubled their traditional level of purchases of gold.
They've been adding to their gold holdings at their central bank, trying to diversify away from the U.S. dollar.
So as the dollar depreciates, their gold holdings will appreciate.
And so they'll be in a more balanced position.
And it's not just China, of course.
Korea is doing it.
Brazil is doing it.
Germany has asked for its gold to be returned from the United States.
And so central banks around the world are on net purchasers of gold.
They're adding to their gold reserves.
And with this recent decline in the price of gold, we've seen gold shops and gold markets around the world being flooded with new retail customers.
And so while there was a fallout in the international markets for gold and the big gold holders and the liquidation of the GLD ETF, that lower price has encouraged retail consumers to go out and buy bullion, to go out and buy gold coins and silver, junk silver, gold jewelry.
India has been adding to its gold holdings as well.
I should point that out.
And so there's a mad rush into gold.
And I've been kind of expecting the price of gold to come down somewhere to $1,200 or maybe below that.
You know, just as the way the market works is it's never in a straight line.
It's never as fast as people think.
It's never as stable as people think.
There's a lot of volatility in these markets, partly because of the uncertainty with respect to the value of the dollar.
But if you go out and you look at gold markets right now, you're going to see a lot of activity.
There were some photos coming back from China of a gold market in China of a city that I'd never heard of.
And there were 10,000 people at this gold market in line, pushing and shoving to try to get the opportunity to buy gold bullion, gold coins, silver, and gold jewelry as well, which is very popular in Asia, throughout Asia.
And so that's a very interesting sign that the average people around the world are buying gold and are upset at their governments and their policies.
Yeah.
So not that this is an investment advice show, but in other words, good times.
There's been a big correction in the price of gold.
Buy now, because it's going to keep going back up.
Because, again, Bernanke, good motives are bad.
He didn't know what to do except keep creating more and more bank credit, right?
I mean, he's just going to inflate until the day he retires or gets kicked out of there.
Yeah, well, Austrian economics is not exactly an investment advice vehicle.
We cannot say anything in Austrian economics about the timing of something or its magnitude.
How high is it going to go?
How low is it going to go?
When is it going to go high?
When is it going to go low?
But, of course, I mean, the age-old advice of buy low and sell high always does apply.
It's just a matter of how you implement that and how you maybe get yourself into markets slowly over time so that you're not putting all your money in one investment at one point in time, which gives you a psychological burn effect if you're wrong in your timing or you're wrong at the market that you're investing in.
Or you're wrong at the price level that you're buying in.
But ever since I was a teenager, I've encouraged people to invest some money in gold and silver.
It's kind of the equivalent of a fire extinguisher.
And every prudent homeowner has at least one fire extinguisher.
Every prudent boat owner has at least one fire extinguisher on board, and not with the idea that they ever want to use it.
So you invest in gold and silver not because it earns a dividend or not because you're going to become fabulously wealthy, but it's a protection advice if something goes wrong with the economy.
So it's the equivalent of the economy catching on fire.
Gold and silver are sort of your fire extinguisher to help you out at tough times.
You know, we're all out of time for this one, but at some point I'd like to talk with you about some of these other alternative currencies, the cryptocurrencies and stuff like that, see what you think of that.
Would that be all right?
I'd be happy to do that, Scott.
Okay, good.
I think that would be a hell of an interesting conversation.
Everybody, this is the great Mark Thornton from the Ludwig von Mises Institute, and he wrote The Economics of Prohibition, Tariffs, Blockades, and Inflation, The Economics of the Civil War, The Quotable Mises, The Bastiat Collection, and an essay on economic theory.
Obviously, he edited a couple of those, didn't write them.
Thanks very much for your time, Mark.
Great to talk to you.
M-I-S-E-S dot O-R-G.
Thank you very much, Scott.
Thanks.
Oh, man, I'm late.
Sure hope I can make my flight.
Stand there.
Me?
I am standing here.
Come here.
Oh, okay.
Hands up.
Turn around.
Whoa, easy.
Into the scanner.
Ooh, what's this in your pants?
Hey, slow down.
It's just my...
Hold it right there.
Your wallet has tripped the metal detector.
What's this?
The Bill of Rights.
That's right.
It's just a harmless, stainless steel business card-sized copy of the Bill of Rights from securityedition.com.
There for exposing the TSA as a bunch of liberty-destroying goons who've never protected anyone from anything.
Sir, now give me back my wallet and get out of my way.
Got a plane to catch.
Have a nice day.
Play a leading role in the security theater with the Bill of Rights Security Edition from securityedition.com.
It's the size of a business card, so it fits right in your wallet, and it's guaranteed to trip the metal detectors wherever the police state goes.
That's securityedition.com.
And don't forget their great Fourth Amendment socks.
Hey, guys, I got his laptop.
Hey, y'all.
Scott Wharton here for The Future of Freedom, the journal of the Future of Freedom Foundation.
Every month, Plum Line individualist editor Sheldon Richman brings you important news and opinions on policy by heroic FFF President Jacob Hornberger, hard-hitting journalist columnist James Bovard, and others from the best of the libertarian movement.
The Future of Freedom tackles the most important issues facing our country, from the bankrupt and insane welfare and regulatory states, to foreign wars and empire, the dismal state of our economy, and ongoing assaults on civil liberties.
This society needs peace and freedom for prosperity to prevail.
Subscribe to The Future of Freedom in print for just $25 a year, or online for $15 a year at fff.org/subscribe.
And hurry up, because this summer they'll be running my articles about the wars in Libya, Syria, and Somalia in The Future of Freedom, too.
That's fff.org/subscribe for The Future of Freedom.
And tell them Scott sent you.
Hey, y'all, Scott here.
First of all, thanks to the show's sponsors and donors who make it possible for me to do this.
Secondly, I need more sponsors and more donors if the show is to continue.
ScottWharton.org/donate has all the links to use PayPal, Give.org, Google Wallet, WePay.com, and even Bitcoins to make a donation in any amount.
You can also sign up for monthly donations of small and medium-sized amounts through PayPal and Give.org.
Again, that's ScottWharton.org/donate for all the links.
To advertise on the site or the show, email me, scott at scottwharton.org.
And thanks.
Hey, y'all, Scott Wharton here for WallStreetWindow.com.
Mike Swanson is a successful former hedge fund manager whose site is unique on the web.
Subscribers are allowed a window into Mike's very real main account and receive announcements and explanations for all his market moves.
The Federal Reserve has been inflating the money supply to finance the bank bailouts and terror war overseas.
So Mike's betting on commodities, mining stocks, European markets, and other hedges against a depreciating dollar.
Play along on paper or with real money and be your own judge of Mike's investment strategies.
See what happens at WallStreetWindow.com.
Admit it, our public debate has been reduced to reading each other's bumper stickers.
Scott Wharton here for LibertyStickers.com.
I made up most of them and most of those when I was mad as hell about something.
So if you hate war, empire, central banking, cops, Republicans, Democrats, gun grabbers, and status of all stripes, go to LibertyStickers.com and there's a good chance you'll find just what you need for the back of your truck.
Own a bookstore?
Sell guns at the show?
Get the wholesaler's deal.
Buy any hundred stickers and they drop down in price to a dollar apiece.
You can spread the contempt and make a little money, too.
That's LibertyStickers.com.
Everyone else's stickers suck.