American Thought Leaders - Mark Skousen: America Has Been in a State of Permanent Inflation Since WWII

Episode Date: June 27, 2024

Sponsor special: Up to $2,500 of FREE silver AND a FREE safe on qualifying orders - Call 855-862-3377 or text “AMERICAN” to 6-5-5-3-2“Within the law, rule of law, and in a robust competitive model, you want to maximize freedom ... Economic freedom, in the context of the rule of law, is the best formula for success and prosperity.”Mark Skousen is said to be one of the top 20 most influential living economists in the world. He’s written over 25 books on personal finance and investing, including two of America’s definitive textbooks on economics.“We have to make the right decisions to encourage, to increase our standard of living. That is the ultimate purpose of economics—to tell us how to do that,” says Mr. Skousen.He’s also the producer of the annual libertarian FreedomFest conference. In anticipation of the event next month, we sat down to discuss some of the major myths and misconceptions about our economy today.“Even the stock market, by the way, is at an all-time high. But in real terms, after inflation, it’s the same [as] it was in 2021,” says Mr. Skousen.He says that since World War II, America has been in a state of permanent inflation, and that returning to the Adam Smith model of economics is the only way to get back to what he calls “enlightened capitalism.”“I judge every economist on whether they are defending and improving upon the Adam Smith model of economic liberty, or are trying to tear it down and build their own system of socialism, Keynesianism, totalitarianism, and so forth,” says Mr. Skousen.Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of The Epoch Times.

Within the rule of law and in a robust competitive model, you want to maximize freedom. Economic freedom in the context of the rule of law is the best formula for success and prosperity. Mark Skousen is said to be one of the top 20 most influential living economists in the world. He's written over 25 books on personal finance and investing, including two of America's definitive textbooks on economics. We have to make the right decisions to increase our standard of living. That is the ultimate purpose of economics, to tell us how to do that. He's also the producer of the annual Libertarian Freedom Fest conference. In anticipation of the event next month, we sat

down to discuss some of the major myths and misconceptions about our economy today. Even the stock market, by the way, is all-time high. But in real terms, after inflation, it's the same it was in 2021. This is American Thought Leaders, and I'm Janja Keller. Before we start, I'd like to take a moment to thank the sponsor of our podcast, American Hartford Gold. As you all know, inflation is getting worse. The Fed raised rates for the fifth time this year.

And Fed Chairman Jerome Powell is telling Americans to brace themselves for potentially more pain ahead. But there is one way to hedge against inflation. American Hartford Gold makes it simple and easy to diversify your savings and retirement accounts with physical gold and silver. With one short phone call, they can have physical gold and silver delivered right to your door or inside your IRA or 401k. American Hartford Gold is one of the highest rated firms in the country, with an A-plus rating with a Better Business Bureau and thousands of satisfied clients. If you call them right now, they'll give you up to $2,500 of free silver and a free safe on qualifying orders. Call 855-862-3377, that's 855-862-3377, or American to 65532. Again, that's 855-862-3377 or text American to 65532. Dr. Mark Skousen, such a pleasure to have you on American Thought Leaders. My pleasure, Sean. It's a real pleasure to be here at Epoch Times, so great. I've heard the most amazing praise about

a book that you wrote in the early 2000s on the history of economic thought, and I've been trying to make sense of what's happening in our economy, frankly, because we have all these economic indicators that are telling us that things are actually pretty good the stock markets high and and certainly there's a lot of rhetoric that things are great and employment level is at its lowest level that kind of thing exactly exactly new job creation but but there's at the same time you know when we go out and we've done this right we go out into the communities across America and everyone tells us things are crazy expensive, right? So how do we actually make sense of what's going on when there's this sort of seeming disparity?

I think one of the problems I'm a professor, part time anyway, in economics at Chapman University. I've taught at Columbia Business School, Rawlins College in Florida, a number of locations. And I think there's a great dearth of sound economics among the general public. A lot of people take courses in economics. I don't think it's taught particularly well because it's taught by academics who haven't had real world experience. So they accept this, the supply and demand curves and aggregate demand and supply and Keynesian economics and so forth. And so they get confused. I think it's very easy to see that. Reality is very different than a lot of the statistics. Just take, for example, job creation. So recently, there was a report that last month, 265,000 new jobs were created and the stock market went up. Well, you actually need 265,000 new jobs created just to keep up with the population growth in the United States.

So there really is very little growth there. I think people are concerned about what's happening in the economy, largely because of inflation and a concern that their job isn't particularly secure or the stock market is maybe overvalued. And they live in fear that they're going to lose their job, that their wages are not going to keep up with inflation. And so that's the angst that consumers and workers feel in this market economy. We just went through a treacherous 2020-2021 period of lockdowns and so forth. So nobody really trusts the government that in a crisis situation, they're going to do the right thing. Most people think that what we did with the lockdown was a major mistake. I certainly think so. Maybe we've learned our

lesson. It's really hard to say. So one of the things I've tried to do is I've written two textbooks in economics. One is called Economic Logic. It's a textbook that starts not with supply and demand, but with the profit and loss statement. That's the dynamics of the economy, what we call the P&L statement in accounting. So you look at sales and profits and losses and so forth. That represents the dynamics. I'm the only, Economic Logic is the only textbook that does that. Now, the second one is A History of the Great Economic Thinkers

that you're referring to. And it has caught on as a very popular textbook because it actually has a story to tell. And it has a plot. And it has heroes and enemies. And the hero wins in the end. And this is the story of Adam Smith and the system of natural liberty. Economic freedom in the context of the rule of law is the best formula for success and prosperity. So I make Adam Smith my hero. I have an Adam Smith tie on, Ben Franklin symbol here. They represent entrepreneurship and economic growth and prosperity and economic freedom, liberty, economic liberty. And I judge every economist on whether they are defending and improving upon the Adam

Smith model of economic liberty, or trying to tear it down and build their own system of socialism, Keynesianism, totalitarianism, and so forth. This has been a battle for forever. We ultimately win with the collapse of the Berlin Wall and the Soviet central planning system, and since then, capitalism has essentially won the debate. There are fights over what level of capitalism and regulating, but we don't have a system where, like North Korea, the government owns everything and stuff. Most economists, including socialists

have now, even Bernie Sanders doesn't want to nationalize everything. So that's a victory for the Adam Smith model. And that's what my my book The Making of Modern Economics is all about. When I think of Adam Smith I think of the invisible hand of the market. This is you know ostensibly you're arguing that this model is by far the best model. Does economic thought actually start with Adam Smith? I mean was was Aristotle thinking about economics? You know, we have these great thinkers that, you know, that Western civilizations thought is built on. Where does economics originate? Well, you have to remember that from the very beginning, we live on an earth that has tremendous

potential. So it's land, raw land, it's iron ore, it's copper, it's gold, it's land, raw land. It's iron ore. It's copper. It's gold. It's silver. It's sand. Okay, so but you look at what we have here, the clothing we're wearing, the computer that you're looking at, the books, the cell phone. All of these things were created from these raw commodities. And they went through complex stages of production to produce these finished products,

which by the way, that's what GDP is. It's a measure of how many goods and services we produce on an annual basis. That's gross domestic product, GDP. Now, I also have a gross output statistic that measures all the stages of production to produce the final product called gross output or GO. So that's the top line in national income accounting and GDP is the bottom line. So it's basic economics I'm trying to explain there. And the secret is that you have this tremendous scarcity of usable goods and services. And how do you get these raw commodities to go through these stages of production? What technology do we need to know? I mean, the cell phone, which I have right here, the cell phone didn't exist 30 years ago. All right. So the technology was not there.

The product was there. The raw commodity was there. The glass, the metals, all of that were in natural form. But how do you turn it into something really useful called a cell phone or an iPhone, a smartphone? And the answer is innovation technology it's what's up here that we have developed and trained and these entrepreneurs are made the big difference so capitalism is all about giving the proper incentives I always ask my students so give me one word to describe economics and they can say well scarcity price cost choice there's capital there's lots of terms that can be used but i like the term incentives because we need to provide the proper

incentives to produce products like this or all the other goods and services that we enjoy to have a higher standard of living. Do we want to live a basic crude economy? There's a danger that if we don't produce these products that we're going to fall into a recession or depression and contraction and so forth. And so we have to make the right decisions to encourage to increase our standard of living. That is the ultimate purpose of economics to tell us how to do that. When did we start to think about this? Look, in my history of economics, I have pre-Adamites, pre-Adam Smith. And of course,

I talk about Aristotle and Aristotle, the Greek philosophers, and then you move on to all the other different philosophers, Thomas Aquinas, and so forth. But it wasn't until Adam Smith actually wrote a big fat book called The Wealth of Nations, where economics came into its own as a science. And studying how you get out of scarcity, out of limited resources and unlimited demand, how you get progress, how you increase your standard of living. And that's Adam Smith. And you'll notice the title of his book the wealth of nations how to create and improve upon the wealth of nations or he has a whole section on government policy what

government policy is ideal to increase the wealth of nations and to improve the standard of living of individuals or what government does that destroys and hurts our economic growth and actually retards economic growth. So the focus is all on wealth and standard of living. And he was the first economist to really put it all together. And what I liked about Adam Smith, you mentioned the invisible hand. Well, the invisible hand are what private individuals do without the TV cameras, working on a day-to-day basis to improve their standard of living. As Adam Smith says, every person always tries to improve their lot in life,

and for themselves, and for their children and grandchildren and their families and so forth. And we all have that innately in us and so economics is trying to help us to explain how that happens. You make Adam Smith out to be the hero of this and that vision to be the hero of the story but there's all these other systems that seem to take things in a different direction. Yeah. I'll just give you an example. I do this with my students. So I write up on the board from each according to his abilities to each according to their needs. I don't say where it's from, but I say, students, how many think this represents the ideal society? And you get 60% or 70 or 80% saying, yeah, you

work hard, you get what you need. Isn't that what it's all about? And I say, so students, put your economics hat on. And I say, students, let's analyze that statement. What do you need to live on? Of course, in Michigan, they say $35,000 a year. That's all I need to live on. California, it's $100,000 or more. One student said, I need a quarter of a million dollars to live comfortably. And I said, so let's just say $100,000 for your California students. Well, what if you earn more than that? Where does that money go? Do you get to keep that money under this system? You get what you need, but anything beyond that, it goes into the community pot. What for? To help those who don't make $100,000, who maybe only make $30,000.

And they get to move up to their needs. Everybody gets what they need. I said, so what is the marginal tax rate under this system? So, John, what do you think it is? The marginal tax rate of, like, all of it? 100%. So, in other words, there's no incentive. The marginal tax rate of like all of it? A hundred percent. So in other words, there's no incentive.

There's no incentive to earn more than $100,000. Now, maybe out of the goodness of your heart, you earn more than $100,000. And there are some communitarian societies that are based on that. But the point is that you're greatly discouraged from earning more than $100,000. And then I said, so what about those who make $30,000? Do they have any incentive to earn more? And the answer is no, because they get $100,000 whether they work hard or not. So this is why socialist systems never work, because they don't have the proper incentives to work hard and to earn more money. I mean, this is a great exercise. And then after it's through, I say, now who said this?

Karl Marx. And so then I say, now how does the capitalist system work? And I call it enlightened capitalism, not exploitive. Enlightened capitalism is they develop their skills and they produce productively, and they can earn way more than $100,000. And what do they do with that money?

That's where charity institutions, volunteer organizations help those who are less fortunate. And that's a voluntary society. It works beautifully if you have an enlightened capitalist. And I use the Henry Ford $5 a day story in 1914, where he shared for the first time, a capitalist shared his wealth with his workers who were only earning $2 a day and he more than double their wages. Why? Because he made record profits, but he shared the wealth. This was a revolutionary change and he destroyed the Marxist argument of exploitation in one day in 1914 by saying, we're going to take this money, all these profits, and we're going to share it with

our workers. And for the first time, the workers could afford to buy the car they were making, the Model T. Marxists today hate Ford. They call it Fordism. So there is an alternative to the socialist model, and it's called the democratic capitalist model, or what John Mackey of Whole Foods calls conscious capitalism. And that's the new model today, the stakeholder philosophy, everybody benefiting in the capitalist system. You know the question that comes up of course is the question of fairness. Mm-hmm and I'm very

concerned about, I think that's a legitimate concern, is the system fair? You don't want to destroy the initiative of hard work by imposing such high taxes to make it all fair that you destroy the golden goose. You pluck the golden goose and there's nothing left. I always tell socialism is sharing the poverty. Capitalism is sharing the wealth. But it's democratic capitalism, which means profit sharing. It means stock options for your workers. It means higher wages if you, and that only comes with the Ford model of more profits. A company has higher profit margins. They pay their workers more. Studies show this over and over again. So we need to encourage corporations to lose money. It's a

little bit of a trickle-down type of economics, but it's also an MBA-style program of teaching the stakeholder philosophy. So I use the A&W principle, and I have a drink of A&W root beer that I hand out to all the students after I give this exercise. So what is the A&W principle? A stands for accountability. If you go into the store and you buy something, you pay for it. The user pay, that's accountability so that you know what costs are. You shop around. You have to work hard. That's an accountability principle. But the W is the welfare principle. This is where the fairness comes in. You need to help those who need help. But part of the welfare principle is that you don't help those who don't need help.

So it has to be the right balance. So I say the and w principle they're a tension there's a tension between the two but you don't want to overdo it because if you give people food and medical services and education then why should they work so it's an a balance it's a balanced approach to this fairness type of system and let me me also mention the Economic Freedom Index. This is a really important index. It's done by the Fraser Institute in Canada and the Heritage Foundation in the United States. And it shows that those citizens that live in countries that have the highest level of economic freedom have the highest standard of living, and those with very little economic freedom have very poor standards of living. So this was the Adam Smith model. Within the rule of law and in a robust competitive model,

you want to maximize freedom. What is freedom? Freedom to choose what you want to buy, who you want to hire, what business people will engage in questionable, deceptive business activities and you want to moderate it. You can't eliminate it under any system. There's always going to be some form of corruption. But if you can develop a system to moderate the passions, this is what the Adam Smith model is all about. That's what I talk about in my Making a Modern Economics textbook. When you really push hard for that fairness, you end up lowering everybody's standard of living on average.

Look, I'm going to a memorial service for Tom Phillips, my original publisher, who was very generous. He was very successful as a newsletter publisher and also published human events and so forth. But he's very good to his employees. I was one of them. I had a very successful newsletter through him. He kept most of the profits, but he paid me generously, paid his employees generously. But he also gave a lot of money to nonprofit organizations, to volunteer organizations, to political causes, and so forth. And where did that money come from? It came from a successful business. So business is really the key to success.

You don't want to kill the golden goose, which is business and entrepreneurship and innovation and technological advances. Marxist thought was not something that anyone cared very much about until after the Bolsheviks won in Russia. And they started pushing the propaganda that this is the great system, this is the dictatorship of the proletariat, the success of the proletariat over the bourgeoisie and so forth. And it's astonishing knowing that it was thoroughly discredited, say, by 1900 in terms of its economic thought, for example. Maybe you can explain that to me a little bit. A lot of times new theories do take a while to develop. And the Marxist concept of materialism and economic determinism and so forth,

which are some of the ideas that he developed, it took a while to catch on. And, of course, in this case it was 1917 when the Bolshevik Revolution occurred and they introduced Marx as one of their heroes. Lenin certainly was a big factor in that and they actually smuggled the Das Kapital in German and had it translated into Russian. The censors in Russia accepted it because it was a book about making money and they thought that would be okay. They didn't really read Das Kapital, which by the way is one of the books of headaches in economics. If you've ever read it, it's really difficult to figure out what everything is all about.

To me, that's almost immaterial that it was discovered. What we need to look at today is why is Marxism so appealing, and why is it in so many disciplines? I mean, it's not just economics. And in fact, in economics, it hasn't had much influence. But in political science, in history, in literature, literary theory, in anthropology, there's lots of discussion, and particularly in sociology, the doctrine of the bourgeois way of thinking, that you'll have an argument with a Marxist and say, well, I know why you're thinking that, because you're a bourgeois, and that's the way you think, and there's no way you can change your way of thinking. It's like you're seeing this today where you're saying, because you're white, you are therefore a racist, and there's no way you can change your way of thinking. It's like you're seeing this today where you're

saying, because you're white, you are therefore a racist, and there's nothing you can do about it. That's Marxism. And that's basically so frustrating to think, well, you're in a box, and there's no way you can get out of it. Listen, I've lived long enough to know what racism was like in the South and places like that. You really had serious racism. And today, they kind of bend over backwards to help people out in making sure that racism does not exist. I mean, it's always going to be there to some extent. Again, the Marxists and the socialists have really lost this battle in economics because

the standard of living is clearly more in the capitalist models and the capitalist countries than in the socialist countries. The Economic Freedom Index demonstrates that pretty clearly. If I can jump in, and the Marxists say, well, that's because of the exploitative nature of capitalism or the Adam Smith model. In fact, they're just stealing our stuff. That's why. Yeah, you do get that. In fact, even Pope Francis made some comment about if you don't voluntarily give to the people who need it. You're stealing. So there is that type of thinking among a lot of Marxist-oriented thought. And what they don't understand is that everybody can benefit from the capitalist system.

And this is why I call it democratic or conscious capitalism. I'll give you an example. Microsoft. Bill Gates, from the very beginning, gave stock options to his employees. Not just the executives, but all employees qualified. And even with their lower salaries, they got stock options. So today, Microsoft employees are multimillionaires because they were given stock options. So they got to participate in the capitalist

system. And this has destroyed the revolutionary zeal of the workers. This is why workers have rejected Marxism now and communism is because they're participating not only in 401k plans, but stock options, partnerships, higher wages, retirement, paid vacations, insurance, all medical expenses paid for. I mean, there's all kinds of benefits. Peter Drucker, the great management guru, once said, what is the ideal social institution to provide for our basic needs? Is it government? Do they do a good job with Social Security and Medicare and stuff like that? Probably not. Are the churches? The churches used to provide, and some do, provide some kind of welfare and helping people out and so on. But no, it's business. Profitable, big business that has an enlightened capitalist view that provides all of

these benefits and these services. That's what we need to encourage and develop is this proper business philosophy. You know one of the courses that's taught in college is the role of business in society and that's the kind of course that I teach. What is the best role of business? Because the business is the key. You can't have big charities, you can't even have PACs, political PACs, you can't have NGOs without successful businesses that are funding those things. It's really business now that dominates our culture. You know I think that's true and we've also seen kind of problems with that model,

especially when business, you know, gets into business of promoting certain types of ideology, for example. I'll give you my bias here to be fully transparent. This is something I've observed from very early years when I was a biologist, watching nonprofits function in this space, my observation was, this just dawned on me one day, is the larger it was, the less it seemed to be fulfilling its mission. Rockefeller would be a classic example. Back of napkin sort of thing, right? And that stuck with me because I've seen that.

Of course, we have our confirmation bias, but I've kind of seen that manifest in different ways, that sort of small entities to be very mission-oriented, very trying hard to make the thing happen. I'm talking about nonprofits here, not exactly business. But there's something that happens somewhere along the way where the organizational, the institutional need to survive and be successful itself takes on a life of its own. Big business putting its finger on the scale to push things in a particular direction. This is what this town is full of lobbyists. Yeah. Adam Smith was actually not particularly favorable toward business people per se. He liked the commercial

society as long as you had a robust competitive model so that business people were forced to do the right thing. And we see lots of failure in that. But money is power. And so politics and money go hand in hand. And we've seen this with the big tech companies, the social media, the Facebook. Mark Zuckerberg is an example, George Soros and what he does. But you have counterexamples like Elon Musk and Charles Koch and so forth, and even the Epoch Times. And all of this, by the way, couldn't have happened without successful business, right? And that's really a key factor. But I do think that education is extremely important. I'll go back to something Milton Friedman once said, the great free market economist from University of Chicago.

I once asked him, I said, so what do you think about all this divisiveness and so forth? He said, Mark, I think that if people were taught sound economics and sound philosophy of life, 90% of us would agree on pretty much everything. And so I try to stay away from left-right and liberal-conservative and so on and look for best solutions as our problem. You know, we do a conference called Freedom Fest every year, and it's called The Largest Gathering of Free Minds, so we want people to come there with an open mind, civil debate, formal debate, so that you're not yelling at each other and talking over

each other. And so that's a unique contribution that I have made to try to develop a more cooperative group. Even though people disagree, we all listen to each other, and maybe we can learn from each other. I say Freedom Fest is all about learning from each other, networking, socializing, and celebrating liberty. It's the idea. Well of course and we've loved coming to Freedom Fest for the past. You know I remember actually I think the first time I went was in South Dakota. Oh yeah. When it was sort of you know running away from the shelter-in-place policies. Your uncle was Cleone Skousen. Correct. I mean that some people may not remember his name but the

book that he wrote, the famous book The The Naked Communist. Yeah, that's what put him on the map across the country. And it was actually an underground bestseller, sold two to three million copies. The publisher went to China to get it printed, and it was prohibited from being printed in China because of the strong language that my uncle used in describing communism and Marxism as the greatest threat to our liberty today. And I think that's still true, even though communism has failed in a lot of ways. There's still some major countries, China being the principal one that still has official communist doctrine. So Cleone was a former FBI agent under J. Edgar Hoover, special agent and special assistant to J. Edgar Hoover,

and then moved to LA and was assigned to the Organized Crime Unit and also Hollywood. So that was a pretty interesting story. But he was a big defender of the Constitution. He's very pro-Israel, by the way, that comes out in the book. What my wife and I did as we compiled and edited his private journals, so that's what the book is all about, is a truncated version. It's 500 pages. It would have been 1,500 pages if we had included all of his private journals, but they're really quite revealing in his life as an FBI agent and as a professor of religion at BYU, 20 or 30 tours of the Holy Land. And then he had his constitutional seminars through the Freeman Institute. So he was quite active until his passing in 2006.

I mean, I don't think it's really that dated even. I'd have to think back. It's still in print. It is dated in the sense that the last edition, I think, was in the 60s. But it does have one thing that everybody really focuses on, and that is like 50 communist goals that are listed. And this is still making the rounds on the internet. And of course, it includes public education, taking over public education, and lots of things. And like half of them have already been achieved as communist goals. They have an agenda. They're not interested in objective

economics. And we're seeing this in modern monetary theory. You heard about the modern monetary theory. And I confronted these Marxists who were writing modern monetary theory, who basically say you can print as much money as you want as long as you're printing your own currency. You can never go bankrupt. Like they've never heard of hyperinflation and what that does to an economy. So I was talking to them at an AEA, American Economic Association meeting. I can't quite remember where it was. And they had written a book on economic growth and macroeconomics. And I said, you've written an entire book on macroeconomics and you have nothing on economic growth theory. That doesn't make any sense at all. And it was really fun to confront them on their sins of

omission in their textbook. And I said, look, there's lots of countries that have done better because they lived within their budget. And you started talking today about some of the things that we suffer from. Well, one of the things we suffer from is Keynesian economics. And we've gone off the gold standard. And as a result, we have serious deficit spending on a regular basis in the fiscal policy. We have out-of-control government spending. It's becoming a monster, and we can't seem to get rid of it. And then in monetary policy, we have the Federal Reserve that oscillates between tight money and easy money, but they have an actual

policy of inflation. Their goal is 2% inflation a year, but the fact is that since World War II, we have entered an era of permanent inflation. And there's a really good chart that I show in one of my articles that I have, Economics of Life Made Simple, that article that I showed you, that has that graph where inflation just goes up and comes back down. But in World War II, it just rises permanently. So we have entered an era of permanent inflation. And people need to do whatever they can to protect themselves against an inflationary environment. And it's not easy. You have to take risks. You have to invest in stock market. You

have to invest in gold and silver. You might buy Bitcoin, anything to protect yourself and your assets from runaway inflation, which is a serious danger in this world of Keynesian economics. One of the things that I often hear, right, we're talking about Marxist economics, you talked about that having failed. In China, they're not really practicing communism anymore, clearly, because they allow people to make money, right? This is not controlled by the iron fist of the economy. There's, of course, a high level of control. Communism, it's like, in some ways, it's an ideological system masquerading as an economic system. Of course, I mean, we all know that it's an ideological system, obviously, right? But often I hear people imagining that if you're not doing

the economic part of communism anymore, it's not communism. And I say, no, no, the other part is the really important part of communism. And what do you have any thoughts on that? Well, I think the Chinese communists were much smarter than the Russian communists. The Russian system collapsed. Why? Because they refused to adopt any kind of a capitalist system. You know, socialism is spreading the poverty among each other instead of the wealth. And so the Chinese communists, after Mao, Mao was a disaster in every way, economically especially, and also politically and religiously.

Then Hsiao Ping came up with the idea that to be rich is beautiful. Glorious. Glorious, that's right. And so he adopted what we call state capitalism, and I think that's the model they're really trying to portray, is the state allowing a lot more economic freedom. It used to be 80 percent government control and 20 percent free enterprise, and now it's probably the opposite. There's a lot of free enterprise that is allowed to go on. But only in the surface of the state.

You hear about industrial policy, right? So everything is in its kind of functions over there like as an type of industrial policy yes well and and so what you have there is definitely an opening up and allowing of entrepreneurship and the jack maws and people like that were able to to create become billionaires and create new products and increase the standard of living. And a lot of it was our foreign investment of U.S. companies going over there, like Apple and so forth, and producing those kinds of products. I mean, the iPhones are made in China. They're put together in China in most cases. So they have really made tremendous improvement in their standard of living. There's no question about that. But the reason I say they were smarter than the Russians is that they knew that by creating wealth,

then they could maintain their political control. And they've been able to do that so far under a state capitalism model. The problem is that once these entrepreneurs become wealthy, they want political power. And so now President Xi knows that there are competitors, and those competitors are the Jack Ma's and people like that. And that's why he's going after those people and squelching them. Who's Jimmy Lai is a classic example of a billionaire who's in prison for the rest of his life because he spoke out in Hong Kong. You know there's a ton of rhetoric out there. Okay the economy is fantastic. There's these indicators that would are supposed to tell us that it's good and there's other people that are saying

really the opposite. Explain to me, what is the reality of our current economy? I think this is where country-to-country comparisons are really helpful. So I was in Singapore a couple months ago, and they have a balanced budget. They have very little inflation. They have very low unemployment. They encourage entrepreneurship, foreign investment. They have one of the highest standards of living in the world. And they're doing a lot of really

good things. Now, they do have some government intervention, for sure. They have some forms of state capitalism. There's no question about that. But overall, they really have their act together, and you don't have that angst that you see other than fear of China maybe militarily taking action against Singapore. But other than that, you have a stable environment. You don't have a huge debt problem and stuff like that. But look at the United States. We don't even have an official budget that Congress actually passes every year. They have continuing resolutions and they have this debt ceiling debate and closing down the government and so on. This is not the stable environment you want for people to

not worry about government and just enjoy life and pursue their own interests. So we have serious problems that are growing, and I think people are bothered by that, that the government's not living within its budget, and who's going to pay for it? Who's going to pay for the $100,000 average debt for every citizen that we face with a $35 trillion deficit or national debt. The Federal Reserve has $4 trillion of government securities and mortgages that are probably, how are you going to pay those?

They tried to reduce the quantitative easing a little bit. Just explain very briefly what that means. They tried to reduce the quantitative easing. What does that mean? Well, what happened in 2008 and 2009, the crisis was so bad that the government started buying directly government securities and putting it on their balance sheet, and also mortgage securities and putting it on their balance sheet. trillion dollars. So they have those debts that they have to pay down at some point, and they're having difficulty doing that. So it suggests to me that inflation is their only solution, is to constantly print more money to pay the interest and so forth that the government is raising. So there is a sense that a crisis is coming and nobody seems to care about it. The key here is the interest on the debt. The interest on the national debt is now like $400 billion. And they're starting to get worried about that, that at some point,

the crisis is going to come home to bite them. And they need to be able, what can we do to control this and get our budget in balance and cut government spending? Because right now, government is just spending money like water, the Biden administration. And I'm not sure Trump was really that good in that way. He was good in deregulation, no question, and tax cuts, corporate tax cut reduction. That was a good move. But we're not living within our means at all. And I think this bothers people.

They're paycheck to paycheck. Most Americans don't have more than $1,000 or $2,000 in savings to draw upon if they lose their job. So there is concern there. Plus, wages are rising, but they're not they're being left behind. And how many people can afford to buy a new home? You can't even afford to sell your home and buy a new one because you're going to be paying The mortgage rate is going to be twice as much so all of that is feeding into this feeling of uncertainty and nervousness that financially they're struggling. That's the problem. And that's why I think that Donald Trump is likely to win reelection, even from jail. Even the stock market, by the way, is all time high. But in real terms, after inflation,

it's the same it was in 2021. That was another question that I have, actually, because there seems to be a lot of focus on the stock market being up as an indicator of success. Right and low unemployment but remember on low unemployment that a lot of people have dropped out of the workforce. The employment involvement in the community that's near an all-time low about 60 percent of able-bodied Americans, the employment participation rate is quite low compared to what it was 20 or 30 years ago. So a lot of people are dependent on other forms of income or they're living at home and they're

they're giving up and they're living on welfare and so forth. The welfare system has blossomed. I mean, the people on food stamps and on Medicaid are at record levels. We need to go back to the 1996-97 Welfare Reform Act, which said after five years, if you're able-bodied, your Section 8 housing and your food stamps and Medicaid will be cut off. And that worked for a while. The number of people actually declined on the use of food stamps and so forth in the 20s, in the 2000s. And then the 2008 crisis came, and then Obama was elected, and he discontinued the Welfare Reform Act.

So there are solutions to our problems. We're just not facing them. At some point, there's going to be a crisis. And so what does that look like? Well, it's going to be interest rates rising to pay for the national debt. It's printing of more money. So there's going to be more inflation as a result. The deficits are going to get worse because we're going to have another 2008 type of financial crisis. At some point, that's going to happen. And we got bailed out at the last minute by the Fed and by TARP.

But we paid it back, some of it. The TARP money was paid back, but not the quantitative easing hasn't been paid back. So we're in worse shape than we were financially. And even the rating agencies have now knocked down. They used to have triple A rating for treasury securities. Now I think it's double A. So there's been a slight decline, and it may decline even further where it becomes below investment grade.

And if that happens, interest rates are going to spike again. So we need a white knight, somebody coming along and saying, hey, we have to become financially, fiscally sound. We need a Ben Franklin type of person which would focus on controlling. He said there's no revenue sufficient without economy. We need economy across the board, and we can't just grow ourselves out of the economy. This is what the supply side of it is. Well, we'll cut taxes, and we'll grow out of this problem.

Well, if you grow out of it, that means you increase revenues because the economy is doing well. And the government says, hey, we have more money, let's spend more. So you have to have a deficit. You have to have a balanced budget amendment. And you have to have control on the size of your tax increases. And this is difficult because what I'm imagining is that the type of policy which would be required to get to what you're suggesting is something where you know

people would have to suffer a little bit more or yeah there's such a thing as shock therapy that's what Malay is doing in Argentina and who knows if that's going to be successful or not and it was done in Russia and Eastern European countries with mixed results. But normally when you can privatize a lot of companies, there are ways to create jobs and so forth and keep the economy going, even as you try to control your expenditures. But I'm a firm believer in the supply side arguments of stimulating production and entrepreneurship, tax cuts and deregulation, and stable monetary policy. I agree with all of that. But you have to have a balanced budget on top of it. You need two limitations. You need the balanced budget

amendment and tax limitation amendment. And by doing that, then you can adopt a kind of a Singapore model. And we have to reform Social Security and Medicare and so forth. These are out of control programs that should not be as generous as they've been in the past. We need to depend more on the private sector. And Singapore does that with their Medisave program. Well, and the generous part is really interesting, too, because it strikes me just from reading, for example, some of Dr. Marty McCary's books about corporate corruption in the medical systems. Generosity is too much going out to people, but also too much going out to the providers.

Mm-hmm. I.e., it's sort of there's lots of middlemen, there's the let's over bloat it, you know, there's the whole thing is... Well, Medicare is definitely a problem, United, and all of these different companies that insurance, the medical insurance policies are just way out of balance. And again, Singapore has solved this problem with their Medisave plan because they have health savings accounts. Every individual has health savings accounts,

and they do shop around, and they also have transparency so you know exactly how much every surgery is costing and visits of doctors and stuff like that. And we don't have that in the United States. So Sean Flynn at Claremont has written a book on the MediSave program. The Cure That Works is the name of his book. And we could learn a lot. I guess if you wanted to sum up, economists have really solved all of these problems. It's just we don't have the courage to adopt them. And sometimes it's difficult to adopt them because we're so used to having the inflationary environment,

the spending and so forth that we don't control. Well, and just we're afraid that it will be politically unpopular because it will cause some hardship. As I said, on the population you may get voted out. But I go back to the Argentina example. They ruined their country so badly that finally the young people said, is this the future we want? So they voted for this radical libertarian Malay who is now trying to get through Congress. You campaign in poetry and you rule in prose. I don't know if you've heard that term before.

Yes, of course. But it definitely applies to what's happening there. And he may not be successful, just like Schwarzenegger tried to make changes in California and he finally gave up. He got re-elected, but only because he dropped his agenda of controlling California. And that could be happening to Malay right now.

And I mean, hopefully, this country doesn't need the lesson of Argentina. Or Venezuela, even worse. Or even worse, Venezuela, exactly. And Venezuela, by the way, that's one of the great tragedies of this century, because here is a country that has the richest oil deposits in the world, even more than Saudi Arabia. It's the wealthiest country in terms of natural resources of any South American country. And now it's a basket case. It's going from richest to poorest because of the socialist Marxist doctrines. And the danger is

the government under, I'm trying to think of the name of the man who took over initially, but... Chavez. Yeah, Chavez. So Chavez came from the military and he learned from Pinochet, make sure that you control the military because otherwise the military will come in and create a coup and remove you from office so he took over the military he learned from the Chilean model and so that's why Venezuela is a basket case today I mean it's just what a tragedy Mark again fascinating conversation any final thoughts as? Well, I do think I want to suggest there is optimism despite all of the problems that we face,

that economists like Milton Friedman, Friedrich Hayek, and others, my own books, the works that we're trying to do, we do have the solutions. It's just do we have the courage to follow them is the real question. And Americans have always been problem solvers. So we need to solve these problems. Well, Dr. Mark Skousen, it's such a pleasure to have had you on. My pleasure. Thank you, John. Thank you all for joining Dr. Mark Skousen and me on this episode of American Thought Leaders.

I'm your host, Jan Jekielek.