Scott Horton Show - Just the Interviews - 5/25/22 Mark Thornton on Paper Money, Housing Bubbles and Free Trade

Episode Date: May 31, 2022

Scott is joined by Mark Thornton, Senior Fellow at the Mises Institute, to discuss an article he wrote recently on the current housing bubble. They begin by discussing the damage that unbacked government-managed paper money does to the United States and the world. They relate that back to our current economic situation where we are feeling the effects of the enormous monetary expansion the Fed unleashed in 2020. Next, they turn to housing where Thornton, who was an early observer of the housing bubble that crashed in 2007, explains how that bubble has evolved into what we have today. Lastly, they discuss the virtues of free trade and the problems with government-run “free trade blocs.”  Discussed on the show: “The Fed's Latest Housing Bubble” (Mises.org) “Housing: Too Good to Be True” (Mises.org) “Biden's Baby Formula Airlift Stunt Should Never Have Been Necessary” (Reason) Secrets of the Temple: How the Federal Reserve Runs the Country by William Greider mises.org/events  Mark Thornton is a senior fellow at the Mises Institute. His most recent book is The Skyscraper Curse: And How Austrian Economists Predicted Every Major Economic Crisis of the Last Century. Follow him on Twitter @DrMarkThornton  This episode of the Scott Horton Show is sponsored by: The War State and Why The Vietnam War?, by Mike Swanson; Tom Woods’ Liberty Classroom; ExpandDesigns.com/Scott; EasyShip; Free Range Feeder; Thc Hemp Spot; Green Mill Supercritical; Bug-A-Salt and Listen and Think Audio. Shop Libertarian Institute merch or donate to the show through Patreon, PayPal or Bitcoin: 1DZBZNJrxUhQhEzgDh7k8JXHXRjYu5tZiG. Learn more about your ad choices. Visit megaphone.fm/adchoices

All right, y'all, welcome to the Scott Horton Show. I'm the director of the Libertarian Institute, editorial director of anti-war.com, author of the book, Fool's Aaron, 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 2004. almost all on foreign policy and all available for you at scothorton dot four you can sign up the podcast feed there and the full interview archive is also available at youtube.com slash scott horton show all right you guys introducing mark thornton senior fellow at the ludwig von mises institute the mesas institute mesas dot org and his latest book is the skyscraper

Welcome back to the show. How are you doing, Mark? I'm doing great, and it's great to be back with you. So much has happened since we last talked, and, you know, unfortunately, the world is a very interesting place, way too interesting than it should be because government, I think, has just gone crazy in every possible direction. It sure does seem like that. All right, now, before we dig too far into this, I want to start with the thing I think I try to always remember to say whenever I interview one of you brilliant Austrian school guys about the boom bus cycle is I say something like this.

I say, hey, listen, you don't have to be a libertarian. Anyone listen to this show who's like just a foreign policy person? Maybe you don't like libertarianism or whatever thing. You have to agree with us about any other thing in the world at all. You could be totally for the welfare state and the regulatory state and even the warfare state, I guess, if you're horrible. but you still, it's just true. The Austrians are the ones who understand why there's the boom bust economy every 10 years the way that it is. And it just ruins everything. And it's what is, I think the number one reason, even if people don't articulate this way, it's the number one

reason why people think that capitalism is just a nightmare and that maybe we should be commies or some other kind of thing because who would organize their society like this. And there's homeless people everywhere. It's just, it's a wreck. And, Nobody's confused about whether it's a wreck or not, but I'm here to tell you, and Mark Thornton's here to tell you about, to clear up, really, the confusion about why it is that the economy booms and busts like this. And frankly, speaking as a person who's never had very much money, when it booms, never even really feels like a boom to me. I mean, maybe I can get a job rather than not be able to get a job. But usually it just means there are rising prices, but not rising prices. and things that I'm owning and selling and making capital gains from or anything like that.

And I think a lot of times when it's the boom, regular people don't even think of it as a boom. They might not even feel the good part of it at all, but boy, we all sure feel the, well, many of us feel the crash when it comes. So what is the key, Mark, now that I set you up as the holder of the key, what is it that people need to understand about why it is, the way it is. Well, Scott, you put it extremely well about the boom bus cycle and it's many, many manifestations and particularly, you know, how it doesn't really help the average Joe out there in the economy. And it really does help the people at the very top. But when you look for the magic ingredient to all of these problems, it's paper money. I mean, I mean, paper money for government politicians and bureaucrats is a great thing.

They never have to take a budget cut. There's always more money next year. And if not, we can just borrow because we can always pay it back because it's paper money. And, you know, it's paper money that allows the Fed to set any old interest rate it wants. And that's really the mechanism of the boom bus cycle that if they, you know, if they want to flood the market and lower the interest rate and make credit widely available typically to, you know, big corporations and the government itself, well, it's just paper money. They don't have to, they don't actually have to make a sacrifice. And so, you know, by forcing more and more paper money in the economy, they create a temporary boom with investment. But now we're seeing the cost of that as high prices in the stock market are now translating down to Main Street with high prices at the grocery store and all other stores, really.

You know, it's amazing to me, you know, you go to stores and the shelves are not properly stocked. Things are on back order. Prices are much, much higher than the last time I went into the store. And so it's all filtering down, coming home to roost with 8% official inflation. And ultimately, and Scott, I hope you talk about this every week or at least mention it, is that the paper money system, I'll try to put this as simply as possible, the paper money system allows politicians to go to war without having to bring the taxpayer the bill directly. So, you know, when we go spend $40 billion in the Ukraine or, you know, half a trillion dollars in Vietnam, it's not like at a restaurant where the waiter brings you a bill. You know, the American taxpayers didn't have to decide as taxpayers on this type of giveaway legislation because they were going to rely on debt and then the Federal Reserve financing that increase in national debt with paper money.

So it allows them to pay for unnecessary wars. The taxpayer and the voter don't find out about it until it's way too late. for the political process to reverse course. You know, what are the chances of somehow or another that the U.S. decides, well, we're not really going to give that money or those weapons to the Ukrainians. Well, that's water under the bridge right now. So even more and, you know, some great minds, much smarter than my own, have thought that The reason the 20th century was the century of war and millions of people dying throughout that period across the globe was because that was the century in which the whole world switched over to central banking and then to paper money.

so it's it it affects excuse me it infects um our lives from top to bottom yeah absolutely you know i had a lot of fun on the kennedy nation show a few weeks back where i got to say i forgot exactly the setup but i'm like that's why we need a gold standard so that we can't have these imperial wars anymore and then you know i can't even see kennedy much less the other I'm just looking into the camera when I'm on there. But then I watched the replay later and the Democrat lady's face is just twisted in knots.

Like the right winger's like, oh, yeah, because he's a little bit of an America first guy. So he's like, hey, that makes sense. I could see the consistency there. It kind of appealed to him. But the Democrat lady's like, what? He's for a gold standard so we can't have wars anymore.

And just, yeah. Hey, you read the Nash Review? I think it was even Milton Friedman said, well, that's why we can have a gold standard. What if we want to have a war? yeah well that's exactly my point from the other point of view is all um but now yeah and congratulations for that appearance on kennedy that was uh widely and positively noted oh really many people yeah oh that's great yeah no anytime oh because what it was was she gave me a chance to

talk about oh well where would somebody learn about these austrian uh economics and i said listen i have my own little old libertarian institute but you got to go to mises these are the guys who Of course, because you guys are my heroes. So, yeah, that was great. So I'm glad you guys got to pass that around. I meant every word of that. And I say, any chance I'd get. Which is why I got you on here.

And I just trade off. You know, sometimes I interview Bob or whatever. I don't really know Mark Salerno. But anyway, you guys right. And talk with, you know, Jeff Dyson, Tom Woods, and, of course, you know, all of my guys. But so now, this whole boom-bust thing, obviously printing money is easier than raising taxes for a war and all that. But if I'm brand new at this, explain to me how this causes the artificial boom and then tell me what causes the very real bust because we all feel that.

Well, I mean, you know, we were talking about that at lunch today. You know, it wasn't just not even a year ago when mortgage rates were at all time lows. and, you know, I looked at the chart and the chart goes back into the 50s and mortgages were never that low at 3% for 30-year fixed mortgage. Give me a break. But that's the way things were for a very long time in the U.S. economy where home buyers could borrow at 3%, which is basically back then it was just the inflation rate. So everybody was borrowing.

And, of course, the same thing affects corporations in their investment plans and, you know, how many new drugs they're going to develop or how many new computer chips or video games or whatever. It was a lot of, it was a lot easier to sink money into those kind of projects and into all of these companies, all the new streaming services that came. on. I mean, CNN pulled their plug on their streaming service last month. I wrote about that on misis.org, but, you know, there was six, seven, eight brand new streaming services launched in a very short period of time. You know, corporations didn't think anything of it. They plan to spend billions of dollars rolling those things out because, well, just because, money was so easily available. It was so cheap for them. And, you know, and so that created an investment boom, really in technology and, you know, in streaming services and in housing.

You know, and so the housing market became red hot. And the supply of homes for sale was at record lows. And the ones that did come on to the market were snapped up in a matter of hours, usually priced out at above what the asking price was. So you don't have to go back too further in time to get into that boom phase where interest rates were mightily low. And banks and credit institutions were, you know, granting large loans to corporations and real estate developers and all the rest and new companies as well, brand new companies. And so you get the, you know, it's a temporary effect of injecting all of this new cash and capital into the market. But it definitely creates a boom phase where everybody can get a job and everybody's making money and housing prices

and stock prices. Everything's going up. And so, you know, people's minds get detached from the economy and they just think that everything's great and nothing could ever go wrong. And so we've been through that boom phase and it was all led by an unprecedented low interest of rate environment from the Fed. And then, of course, under cover of COVID, the Fed unleashed an even more bizarro flood of money and credit. You know, they were supposed to be in a tightening phase when COVID hit. And when COVID hit, they said all bets are off. We're going to go right back to printing money, pumping up the money supply as much as we can. And, you know, if you go back and look at any chart of stocks or commodity prices or

whatever, anything you want, and they all turn down right there in March of 2020. And then everything explodes upwards, catching the way. wave, the monetary wave from the Federal Reserve. Right. All right. Now, bear with me here because I'm just a dummy and I can just kind of think in historical analogies here from the relatively recent past, though, and just try to make the comparisons. I don't understand all these curves and stuff, but, you know, in the 1990s we had,

or at the very end of the 1990s, we had the dot-com crash and the NASDAQ and the stock market too. But as Ron Paul warned, they're still inflating the housing bubble. And so there was a bit of a crash, but, and in fact, then September 11th came and hit the financial district in Manhattan, and then Bush and Greenspan put the pedal to the medal and lowered interest rates way, way, way down. And that helped, you know, as you were talking about there, helped to bet the whole terror war and expanding the war to bonus wars, like Iraq War II and whatever else they wanted during that period. But that ended up coming due, I think, you know, carmically and, and justice. while Bush was still in the chair right he just had a couple of months left

but he wasn't able to blame it all on the next guy I did still you know the crash came on his watch now then you had this huge bubble ever since then and and all you Austrians are screaming about all the quantitative easing and the amount of monetary inflation and everything they were doing to try to

correct from the last crash that was the result of their last bubble there in 08 and then but that bubble my understanding really sustained itself that, you know, whatever, some real prosperity and much artificial prosperity, that lasted through Obama and through all of Trump. And that was what

Trump was terrified of the most, was that they were going to start raising interest rates too high and the crash was going to come before he got a chance to get reelected. So this was the Trump economy. He called it a bubble under Obama, but once it was his, he was like, look how great my economy is. And he was and, but the point being that we were due for a crash, because it was in large part, a big fake bubble. But then what happened was two things. The lockdowns were sort of like Paul Volcker coming and crushing the economy with high interest rates. In other words, it was forcing a great depression, forcing businesses to stop taking loans and multiplying the money

supply and doing business and all of those things. But then, so it was almost like 08 again. Only it was government force they forced the crash of 20 but then as you're saying then they made up for that by printing so much money do i understand you right that it just makes oh nine and 10 absolutely pale in comparison so that now we have a much shortened boom bus cycle we had this massive headlock of a crazy forced great depression from the lockdowns combined with this huge injection of monetary inflation to make it seem okay. Certainly protected the big guys for a while. But now the pain is already come and do from that. Now we're already at the crash phase, although not yet in real estate, if I understand right, but the stock market and obviously crypto and I think used

cars and a lot of the bubble markets right now are way on the down swing, right? So do I understand that right? And then can you explain it's just because they started raising interest rates a little bit the federal funds rate and everybody got spooked and so it's just the same boom bus cycle again only now on this incredibly shortened kind of two year cycle is that right that's basically correct um you know there's a lot of things going on it's hard to disentangle them all but basically um you know in 2019 i was at least expecting you know a recessionary environment to emerge And it was starting, but when, you know, when COVID came along, all bets were off and any excuse related to COVID would be, you know, great to explain away any economic bad news. So, you know, it was a period of economic bad news, of a real strangle hold on the economy.

And in addition to what the Fed was doing, of course, the Treasury and the government were basically giving away unprecedented amounts of money in terms of various subsidies and government checks, extended unemployment benefits, you know, loans and grants to businesses, you know, so the the money was still flowing even though they were locking down the economy and keeping and really keeping the productive people from their jobs is essentially what they were doing. And so, you know, the tightening cycle that should have begun in 2019 or earlier has only just started. And basically the Fed and its officials have been talking about the fact that they are going to fight inflation. And every day, there's a new Fed government, governor talking about why they think price inflation is job number one. But they're very late in the process. They

had this delay and it's very much a delayed process and they haven't really done much in terms of policy. They've increased interest rates just once off historically very low levels and they've only just initiated their program of selling back mortgages into the market. Mortgages, that they bought during the crisis to help facilitate the housing bubble by keeping mortgage rates even below 3%. And so, you know, they really haven't, they've been talking, but they haven't been acting. And yet the market is still showing signs of tremendous pain. Stock markets, you know, If you were invested in streaming services or technology or Bitcoin, you know, all of our investments in those areas are hurting big time, down by 50% or more.

And the Fed hasn't really even started the tightening. And, of course, they're very cautious because we're in the political season. and they don't want to get involved in politics, at least that's what they say. And so all of the policy changes that they've been talking about haven't even occurred yet. And we've seen mortgage rates, of course, go up, jump up with inflation. You know, inflation is forcing the market higher. And so now, you know, mortgage rates have gone from three to five something. percent. And, you know, that's really increased the mortgage payment that new home owners

are going to have to pay. So, you know, Austrians have been saying, don't subsidize housing. Don't subsidize mortgages because there's so many young people, 18 into your 30s or even older, who haven't been able to afford the idea of owning a home just because their entire lives, homes have been too expensive. And so, you know, but the Fed hasn't listened. And now the average home sale in the United States, not just San Francisco and not just New York City, but the average is now $500,000.

And of course, that's just ridiculous. And it's all mostly due. I mean, people are building better houses now, but in more technologically savvy houses, but it's not enough to increase the housing. Hey, listen, I can tell you, I'm living in Austin, Texas right now. It's my hometown. I'm from here. And $300,000 houses are $600,000 right now. And that's, you know, over the space of just the last two years. And a lot of that has to do with a massive increase of demand because the liberals fleeing their own policies in California and things like that. And they're coming here and driving up massive demand. But they're buying houses. They were buying houses with essentially free money. And so, you know, they've essentially gentrously.

All the Austinites right out of town. It's all Californians live in the city limits now. All the Osnites of all colors have been gentrified out of there. And if you drive... And there are homeless people everywhere, man. Everywhere. And they're not all a bunch of losers and bums and addicts and scumbags. They just can't afford a place to live because they can't afford a place to live.

Yeah, you've got your own little piece of California there. But, you know, if you drive 100 miles outside of Austin, they'll tell you the same thing. about housing prices and land prices. You know, it's not like that those people are immune to it. I mean, I go out to the back country of Alabama and the panhandle of Florida, and people are saying the same thing, you know, that pieces of property that people don't even know about are selling for 50 or 100% more than they thought they were worth. So it shows up, you know, in Austin and.

and San Francisco and New York City and Miami, Florida, and Phoenix, Arizona in statistics. But it really infects the entire economy. Yeah. Hang on just one second. Hey, y'all, the audiobook of my book, Enough Already. Timed and the War on Terrorism is finally done. Yes, of course, read by me. It's available at Audible, Amazon, Apple Books, and soon on Google Play and whatever other options there are out there. It's my history of America's War on Terrorism from 1979 through today.

Give it a listen and see if you agree. It's time to just come home. Enough already. Time to end the War on Terrorism, the audiobook. Hey guys, I've had a lot of great webmasters over the years, but the team at Expanddesigns.com have by far been the most competent and reliable. Harley Abbott and his team have made great sites for the show and the Institute, and they keep them running well, suggesting and making improvements all along. Make a deal with expanddesigns.com for your new business or news site. They will take care of you. Use the promo code Scott and save $500. That's expanddesigns.com. Hey guys, Scott Horton here for Listen and Think Libertarian audiobooks. As you may know, the audio book of my new book, enough already. Time to end

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That's listen and think.com. Well, I don't know, man. Just personally, I don't own a house, and I might be able to get one. I'm finally trying to get out from under the IRS here. Of course, they're the worst terrorists in America. Everybody knows that. But if I can finally get out from under them, then maybe I could buy a house, but I think I need a massive Great Depression to come and destroy this artificially high cost of housing first.

But I'm afraid that it's 1999 and not 2008. And that despite the crashes and everything else, as you're saying, they're barely even raising interest rates at all. This is almost just kind of a slight correction based on a little bit of panic. But they're still expanding the money supply like crazy, I guess, if I understand you, right? And you think that no matter the skyscrapers, they're going to keep building at least for another little while, huh? Yeah, I mean, the housing bubble's not technically over. Now that the reports recently have not been great. or positive, but it takes a while for even for people to recognize a bubble and then to

even admit the possibility of a crash. There was a Federal Reserve official on Bloomberg just a couple days ago, and the announcer said something about, couldn't you do something to bring housing prices down? And of course, that's the last thing they want to. to do. And the guy jumped in and said, oh, no, the Federal Reserve never wants to see housing prices go down. But they will come down. And, you know, the article that I just wrote about the latest housing bubble, someone reminded me that my article about the first housing bubble was almost two years before anybody admitted that there was a bubble and a crash. It was about two years before the crash came, right?

It was Robert Blumen and yourself, that was an early 05 at Mises, right? Yeah, well, mine was mid-2004, and Robert had been writing about similar things, and Chris Meyer on our website, you know, related to that. But Peter Schiff hadn't even, you know, been invited to see. NBC yet. And, you know, and Bernanke said, no, there's no such thing as a housing bubble. So it was almost two years before everybody, everybody realized what was going on. I mean, Mark, I was just driving a cab parroting Ron Paul, but I was telling everybody it was a housing bubble in 2000 and 2001. When the dot-com bubble crashed, I remember I had some real estate

ladies in my cab, and they were like, ha-ha, we said always all along, forget the dot-com stuff. that's all a scam uh warren buffett says the real money is in real estate and then i says to them yeah but that's all a bubble too don't you listen to ron paul the congressman from the gulf coast there man it's all a big big thing and then but the point is that the crashing come for another eight years so there was no point in me being right then i should have been buying property that was at the bottom of the bubble relatively speaking you know yes and that and that's that fact right there was key to realizing the first housing bubble because in that recession that followed the tech stock bubble crash in 2000, 2001, real estate prices did not go down. And so that was a telling

signal that the next bubble would be housing related because there was no correction from that housing bubble that had started in the late 90s, it was clear that it had already started, but it never broke down. There was never any wiggle in the statistical line, and it just continued to go up and up and up. And it was fed by other government policies, Community Reinvestment Act and loan regulations and so on and so forth. But yeah, I mean, that was that was a, a very unusual economic sign that real estate did not go down during that phase. And frankly, you know, if this phase, if the inflation gets any worse, you know, housing prices can be maintained with price inflation if people think that it's a store of value.

And also, there are many, many more people who got burned last time with variable interest rate mortgages so that now most people have fixed rate mortgages. So a couple of the variables in the housing bubble equation are different this time. Yeah, in other words, and seem like they're going to prolong it and keep the comeuppance from coming sooner, which is just going to make it worse when it does come, I guess. Correct. Yeah, just too bad. It's too late for, I mean, I guess what I was counting on was there'd be a giant Great Depression and housing coming and it would at least bring the prices down by a good double digit percentage or, you know, something significant. And then it would be like 09 and they would lower the interest rate again and start all over again. And that's when I would buy a house is when they put the interest rate back down to nothing again.

But I guess you're telling me that's not happening. No, I think that that's a good possibility that it may be several years away. I see. Yeah. Well, you know, I know a guy who, and, you know, I think Austin is maybe different than some places, as I was saying, that there's so much, you know, new demand here. But I know a guy who owned property who, when the crash came in 08, the value of his house went down by, I think he said 10%. And that meant he got a pretty good cut on his property taxes for a couple years. And then the price went right back up again. And then so, you know, he didn't lose anything. He only would have lost anything if he'd sold his house. But otherwise, it was fine. Not that big of a deal there, you know.

I guess you just got to time those kinds of things, right, if you can. Well, and, you know, housing is a personal decision. You know, so when I wrote that article in 2004, I must have talked to, you know, a hundred or several hundred people about, you know, they wanted to know what they should do about buying a house. or finding a place to live. And it's a hard question to answer because, you know, you don't know where you are in the process

or how far it's going to go up or down. And so if you're planning on, you know, living someplace for the next 20 years and you think, you know, it's going to continue to inflate, you know, it may not be terrible. You know, if you don't lose your job, you know,

there's a lot of ifs, but if it's the right if, you know, you might muddle through if it's the wrong if you may end up bankrupt. So that's why we hate the Federal Reserve. It's why we hate paper money. It's not just war that we're concerned about. We're concerned about the battle of life day to day for every single person out there. Yeah, well, listen, I think one of the major problems as I think I said at the beginning was people are moving further and further to the socialist left and for that matter further and further

to the more populist and nationalist right and a lot of times blaming libertarianism for somehow being in control of policy all this time. This emphasis on market capitalism that's gotten us screwed and ruined everything so badly as you remember after W. Bush

and everything went wrong, they pretended that Ron Paul had been in power all along. Mr. laissez-faire, not Mr. Ted Kennedy's partner, the center-left rhino, but that had been a libertarian administration somehow. And every time this happens, people get more and more radicalized against just the idea of, you know, I don't know, because people define capitalism very different, right? Capitalism to a leftist, emphasis on the ism. In other words, the richest people control the state. Well, that's different than what we mean when we say it, which is private property and voluntary exchange between people and this and that, you know what I mean? So people misunderstand each other a lot,

but what we have is both of those things. And the first part where the capitalists control the state, they don't do a very good job. Our society is falling apart right now, mostly due to their corruption, right? Due to the corruption and the conflict of interest in the way Wall Street is run and our military industries. That's what's brought us to this, Mark. There's no question about that. You know, Austrian economists, we love markets. We love market money. We love competition. We love property rights. But never in that description of our market and what we think are the keys to civilization. is state-sponsored entities or public-private partnerships or munitions manufacturers for the state

or any of those other hybrid-type situations where the power of the government is sewed together with competitive profit-seeking capitalists, basically. The same thing that Marx described, you know, so in a sense, Austrians are a little bit Marxist in the sense that we also agree that the political process and the elites in the military, they can all get together and do some really, really rotten, some of the most dangerous things in modern times. The slave companies, the British and French slave companies, were essentially public-private partnerships with both commercial aspects and military aspects. So we definitely want to make a strong, strict dividing line between those two things. And, you know, the progressives and the status, they're falling head over heels with themselves about, you know, extending power and extending influence and helping us solve our problems when really the only thing, you know, in history proves this, the only thing that humans need is for the state and the powerful and the organized. crime elements of government to disappear. And, you know, the more we get that, the more we're going to have human progress in flourishing. All right. Now, here's the controversial one

about trade. There's a narrative, it must be something to it, that a willingness to have essentially a no terrorist or very little tariffs on a country like China, which is a desperately poor in a country with a huge population there that there's this race to the bottom in labor where and they still have tariffs on us so even the stuff we're manufacturing here we can't sell it all there they can sell all their stuff here and as ross pro said that it means this there's this giant sucking sound of american middle class jobs going to places like mexico and uh china and this is something that trump ran on and that burney ran on was we want to and free trade because free trade hurts working people. And what we need is protectionism to protect

them. Hell of a lot of people believe that anyway. What do you think? Well, you know, even our fellow economists, mainstream economists agree that free trade is obviously something that is one of the most valuable aspects of the increase in human standards of living over the last 250 years. So there's really no question that free trade is the policy to use. The only question is what does free trade really mean? And for most of our fellow economists, they don't have any problem with trade agreements and trading free trade zones, trading blocks, you know,

all sorts of international meddling, essentially, on the part of states, usually with a foreign policy aspect attached. Like right now, Biden is desperately seeking to unite South Korea, Taiwan, Japan, the Philippines, Australia, etc., into a more cohesive trading block against China. And so, you know, that really rings to me more concerned with a foreign and military thing than it does would trade. And, you know, if we go back to the beginning with Ludwig von Mises, you know, and other classical economists of the 19th century, they would argue against the,

these trading blocks, and they would argue against them vociferously, but of course, those kind of block, nation block behavior is what started, was the fuel to the fire of World War I, which turned the 20th century or helped start the 20th century onto a century of warfare. And so, you know, because these trading blocks, even if they're free trade trading blocks, and even if they're not initially for purposes of foreign policy and more, they get turned into that. They will eventually get turned into that. Right now, Biden and other war mongers are out there trying to turn the G7 and the G20, let's kick out Russia, let's you know, stop trade with Russia or whatever it happens to be. But they're taking that

organization, which meant, which was at least said to be for freer trade and more trade and protection of property rights and all these good things is how they sold it. but now they're using it as a foreign policy weapon in a war. And so that's why you have to be very careful in Austrian free trade policy and trade policy in general is that a nation should go down a path of free trade, of unilateral free trade, that it sets its laws not with respect to other countries, but with respect to all countries and it doesn't matter if it's a if it's a Mexican car or a Canadian car or Canadian lumber or Mexican lumber or Chinese lumber or whatever it happens

to be it crosses the border in an anonymous and unbiased fashion it doesn't get taxed, it doesn't get counted, it doesn't get inspected, did none of that, okay? So that's real free trade. It doesn't take a bureaucracy to manage free trade. It's free. You eliminate government from it on all sides, and it therefore can't be used for purposes of foreign policy or military policy. And it maximizes the pace of human progress, at least in economics. Yeah. Hang on just one second. Hey, y'all, they've got great deals on weed at the hempspot.com.

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That's freerangefeeder.com slash Scott. Well, I mean, I can see why people would say, if they lose a middle class, job, but then they save some on tube socks or lumber or whatever that maybe there's not an exact balance there. But it sure makes more sense than letting government try to centrally plan what those prices should be and how much tariffs should be and what's the proper number of shoes or boards to import rather than manufactured domestically or anything like that. And I guess the reality is before the free trade regimes of the 90s, it was a very protectionist economy. A lot of that Rust Belt was built up on, you know, made out of factories that were built by the government

during World War II or something like that. And then we're, you know, heavily invested in by, you know, government-connected industries. Of course, financed with inflationary money all along, where you don't know where that money would have gone in a free market, right? And so it's kind of distortions all around. Yeah. And look at, and that's a great point. Look at what's going on in, you know, with tariffs right now. Trump put tariffs on China and, you know, some other things, and he canceled the Pacific treaty. And now Biden said, well, we want to get rid of tariffs. And then they said, well, no, now we don't want to get rid of tariffs. And but now he's got inflation. And his

advisors say, well, if you can cut tariffs, you'll reduce the consumer price index by 1%. but then he doesn't want to do that because he wants to win the state of Pennsylvania and maybe Ohio and they like the tariffs, you know, and so they're getting caught up in their own web of deceit, really, about, you know, how they feel about China and how they feel about Asian trade and how they feel about the steel industry. And then, of course, you know, the Austrians and mainstream economists have shown that, you know, if we put tariffs on steel and lumber coming into the country, well, you know, we protect, you know, our domestic suppliers.

But guess what? Cars and houses become a lot more expensive because the steel that our car covers, you know, our car companies and home builders, the wood our home builders have to buy is now higher priced. And so consumers actually are feeling the cost of all of that. And it just, well, it underlines the fact that tariffs are a tax on the American consumer. And free trade is what opens up discounts for consumers on a whole host of things, some of which are not on the consumer shelf right now. We saw what would happen with the baby formula and the fact that we weren't allowed to import infant formula from countries that had a lower infant mortality rate

than us. And so babies have to go hungry because of stupid things that's, the government does and stupid trade restrictions that they do that have existed for a long time and we haven't known about, you know, what they're, what they, really the true cost of the nonsense that goes on in Washington, D.C. Yeah. You know, Reeson had a couple of really great pieces about the infant formula stuff and the massive, I guess when they renegotiated and NAFTA, whatever it's called now, they increase the tariffs from, on formula from Canada to prohibitively, you know, high amounts. Then you have the FDA bans all the importing from Europe because they don't have the correct

nutrition labels on the side of the thing or whatever it is, even though it's the same stuff that you'd sell wherever. And they could probably just negotiate and work that out. I don't know what their problem is there. And I can't remember that, I'm sorry, off the top of my head, but there were three or four more interventions that the government was doing to, you know, prevent competition here. And, you know, oh, and then, of course, they shut down the factory, and I don't know exactly what happened, but it looks like that was an accident, that the bacteria that had killed

these babies was mistakenly connected to this factory when there was actually, it turns out, no real reason to think so. And the government took the whole thing offline. And so anyway, go on and on. It's a mixed economy, Mark, and it's pretty messed up. Yeah, it's messed up. And I hope everybody out there in your audience knows enough to realize that they should be pointing, you know, their finger at the Fed and the federal government. It's not your consumer, you know, information service at a company or it's not your help desk at a company. It's not the cashier's fault that labor markets are so screwed up. It's not, you know, our supply chain people that mess this up. It's the government that messed this up in a massive way that's so much messed up that, you know,

it's hard to keep track of all the missing pieces. We've known about those regulations on baby formula for a long time, but of course, they would never do anything about it. But the idea that the FDA can walk in and shut down 40% of the infant formula marketplace on the supply side without any plan B just goes to show you where their thought processes are going. And the only things that are of any concern to most of these people in Washington are, you know, fake. problems like global warming or even if it's not fake, even if it is true. And I believe there's something to that. Their solutions are at the very least not well thought out.

And most of the ones that I actually know of and have done any kind of research on are are largely backfiring on their own mission and their own analysis. And so we need to get, you know, I would like to get rid of the government, but if we have to have a government, we have to have people with a better mindset. You know, between the government and the bureaucracy and the media right now, they have just basically a progressive mindset out, just right out of the playbook of Carl Marx and Frederick Engel's Communist Manifesto in the 10-point program that it lists out there, and they just can't see anything else. At least the leaders of these groups, that's their

mindset, and frankly, they don't care. who they hurt or how they hurt them. Yeah, well, a lot of times they take it as a measure of their valor, of how much pain they're willing to inflict for the greater good and that kind of thing. That's how they know they're doing the right thing more than before. Thank you for pointing that out to me. I need to write that down. Yeah.

Hey, listen, you know, it's in that book, and all Austrians should read, Secrets of the Temple by William Greider, the Washington Post version of Jekyll Island, basically. And it's all about Volker and how under Volker it was murder. How he forced a depression on the American people, which he did. It was the only way to defeat inflation, which his predecessors had caused. And now here he came in to lick inflation. But that did mean bankruptcies all across the land by people who weren't guilty of nothing,

but who just got caught up in the monetary policy of their overlords, might as well be a million miles away. And they kept statistics of how many bankruptcies, you know, personal and business, how many divorces, how much foster care, how much, whatever statistics that you can measure, you know, church attendance or whatever, however you measure social crises, they measure it at the Fed. They count those beans. And then they would say, you know, good for you, Jenkins, that you're willing to hang tough on this policy for another little. a little while longer. Now, I know that, you know, you and I look at that as worth a soda

straw in a way that, you know, because it is, it's the Fed, it's the boom and the bust. What are you going to do? You can't just be mad about the bust. You've got to be mad about the fake boom first, or at least, but they really did have a point there. That was, you know, how they measured their valor was that we are willing to inflict this on the people because we know what's good for them. You know? Same as anything else. I guess, you know. Yeah, that it, I can tell you one thing for sure is that inflation of the 70s was awful. You know, just as bad as it is, it is today.

At some points worse and certainly the, you know, 80, 81, 82 were just extremely difficult and extremely bad times for Americans across the board. I mean, I don't think, you know, anybody really escaped that period of economic downturn. And, you know, it's just now. You know, I haven't heard the word stagflation in decades. Now we're back. It's only been in the last few weeks that that term has been

resurrected they might as well go ahead and get it over with and just cause the depression now and then inflate another giant fake bubble starting in a few months yeah why prolong it at this point you know yeah i mean you have to solve the problem uh the important thing in the vexing problem is it's hard to explain to people why the boom times when everything seems so good, are really the problem. That's really the start of all of the pain. You know, those booms are going to turn to busts, and all of the profits and stock prices and homeownership and stuff,

it goes away. And people suffer and people lose money and people make bad decisions. So hopefully we'll get it right. I think there are more people right now who distrust their government than ever in American history. And I think there's more people who are willing to listen to arguments about gold, especially the people who have looked into cryptocurrencies and those types of things. And, you know, why did Bitcoin emerge when it did? Why did it do what it did? Why is it produced in the way it is?

Well, it's mimicking the gold standard. So we've got millions and millions and millions and millions of younger people who have been exposed to crypto. And they're probably the fertile ground for a sound monetary system going forward, one that does. doesn't create the boom bus cycle the way the Fed can. Yeah, and everybody thinks it's Bitcoin that's so unstable. But no, it's because of the dollar that causes Bitcoin to do what it does. But anyway, we're almost out of time here. I want to give you a chance to talk about MESA summer coming up here, Mark.

Well, the summer is the exciting time at the Mises Institute. We just finished up our Austrian Research Scholars Conference, which was great. Some of the lectures are online at M-I-S-E-S-O-R-G. The summer research fellows are arriving right now from around the country and around the world, too, for that matter. And we're very excited about their research and their new careers as academic or even not academic researchers. And then, of course, we have the Rothbard Graduate Seminar, which is really, key for people learning the nuts and bolts of Austrian economics. So we'll double our size of scholars at that point. And then we get ready for Mises University, where we bring in college

students from all around North America and elsewhere in the world as well. And then, of course, in the fall, we'll be heading, I guess I'll be heading through Austin to, Phoenix for our 40th anniversary conference. So the Mises Institute is in the process of celebrating our 40th year. And nobody thought we'd last this long or that we would have this big of an audience or that there would be 20 other Mises institutes around the world. I mean, and, you know, and it's not just that, but it's people's mindset has changed. I mean, Mark, come on. The Mises Institute. is the most important libertarian institution in the world. There's no question about that. Everybody knows that. I think, yes, I think that way, you think that way, a lot of the people in the know think that way.

And, you know, and I think everybody else is, there are some that hope that isn't the case. Because we are, you know, on the far end, a little more extreme than other Austrians, people say, but I think we're also have a record of being right and a record of being a builder of intellectual capital in terms of hardcore research and library and free books on the internet and conferences all over the world. Changing minds, Europe is in good shape right now with Austrians teaching in most countries and, you know, things are much better here in the

United States. But we have a very, very long ways to go. And the academy, of course, universities and colleges are heading in the other direction, much more towards Marxism and progressivism, economics, which is not only economically discharges, destructive. But it's also discriminatory against minorities and poor countries and poor individuals. And despite whatever they say, they have a very bad record of like Marxist countries, killing their own people en masse. And so once more people hear the real story, I think, mutual progress is assured but we also have to remember that there's we've created a lot of enemies in the process so we can't be too surprised when the IRS knocks at our door yeah well

don't get me started on the stormtroopers of death i got to go but thank you so much you're the best of the best mark thank you scott you're doing great work um holy work and i wish you all the best. Great. All right, everybody, that is Mark Thornton. The skyscraper Curse is his latest book, and he's written a bunch of articles like that, skyscrapers and business cycles and these kinds of things. And his latest piece at Mises is called the Fed's latest housing bubble. And it's really thorough and informative. You guys will really get something out of it. Check that out at meases.org. The Scott Horton Show, anti-war radio, can be heard on KPFK, 90.7 FM in L.A. APSRadio.com, anti-war.com,

Scott Horton.org, and Libertarian Institute.org.