The David Knight Show - INTERVIEW The Skyscraper Curse

Episode Date: November 16, 2023

What is the "Skyscraper Curse" and what does it portend for our future? Mark Thornton, Senior Fellow at Mises Institute, mises.org, joins to explain and to show how govt uses various economic theories —Keynesian, MMT (Modern Monetary Theory), etc — as ruses to justify its actions.Find out more about the show and where you can watch it at TheDavidKnightShow.comIf you would like to support the show and our family please consider subscribing monthly here: SubscribeStar https://www.subscribestar.com/the-david-knight-showOr you can send a donation throughMail: David Knight POB 994 Kodak, TN 37764Zelle: @[e-mail] App at: $davidknightshowBTC to: bc1qkuec29hkuye4xse9unh7nptvu3y9qmv24vanh7Money is only what YOU hold: Go to DavidKnight.gold for great deals on physical gold/silverFor 10% off Gerald Celente's prescient Trends Journal, go to TrendsJournal.com and enter the code KNIGHTBecome a supporter of this podcast: https://www.spreaker.com/podcast/the-david-knight-show--2653468/support.

All right, welcome back. Joining us now is Mark Thornton. He is the Peterson Luddy Chair in Austrian Economics and a senior fellow at the Mises Institute. And so I want to talk to him a little bit about the Mises Institute. I refer to their articles frequently. And so I'd like to talk a little bit about what do we mean by Austrian economics, who was Ludwig von Mises, and a little bit about the Mises Institute.

But he also wrote a book that is available at their site, Skyscraper Curse. And it looks like with a crash in commercial real estate that we're going to be looking at a skyscraper curse coming back, the return of the curse. But joining us now is Mark Thornton. Thank you for joining us sir david it's great to be on your program but with government solving all the world's problems i'm not sure if we're going to have anything to talk about that's right it just if we got a problem we just have it done by government but especially at the federal government level because that's all the problems need to be solved there tell Tell us a little bit about the Mises Institute. Uh, the Mises Institute is now 40 years old. It was founded by Mr. Lou Rockwell.

Uh, we're right here in Auburn, Alabama, and we're about economic education, really, uh, from the perspective of the Austrian school of economics, Ludwig von Mises, F.A. Hayek, Henry Hazlitt, Ron Paul, and many others were the smallest but fastest growing school of economics. And I think it's the science really behind free markets, and we're trying to get it out to as many people as possible. That's right.

Give us a little bit of an idea of the audience. When we talk about Austrian economics, you know, several of the founders were from Austria, of course. But, you know, what is it that's different about Austrian economics versus what we typically have with our, you know, what people learn in college with macroeconomics or Keynesian economics and things like that? Tell us a little bit about what distinguishes, um, Austrian economics from that. Well, it was founded in Austria by Carl Menger in the 19th century. And one of his primary students was Ludwig von Mises and Ludwig von Mises applied Menger's method,

which is based on deduction and logic and human action, rather than on mathematical models and econometric analysis, plug in the numbers and see what comes out or see what you want to come out. And as a result, you know, the Austrian school was basically able to develop economic principles about the laws of supply and demand, marginal utility, those kind of things, those basic things that you see in an introductory textbook, and everybody can basically agree on them. But most economists, which we call the mainstream, they go off and use their mathematical models and their econometric analysis to come up with anything they want. But with Austrian economics,

you have to stay very close to the logic of human action. And through that method that Mises developed, he was able to develop modern monetary theory in his very first book. He was able to critique socialism in the socialist calculation debate and prove that pure socialism was an economic impossibility. And then of course his magnum opus, Human Action, basically laid out everything from basic economic analysis to things like the business cycle and fiscal policy and everything else that we want to basically talk about today, he was the person who put forward all of those great contributions. And that's why we celebrate him and we try to extend his work and to teach his work here at the Mises Institute. And it's still not, you know, I know when I was in college and I was taking economics

and we'd get to macroeconomics and it was like okay forget all the the you know the real physical world of how your budget will work and everything because if we're the government and we make the if we make this thing really really big then none of those rules apply anymore and it's like something about this seems really fishy this is kind of like saying if i get a big enough rock it's going to float up into the sky um and so that's right it's uh it was like that just doesn't make any sense to me and uh you know austrian economics is really as you point out it's more focused on um on human action on reality than on this obfuscation this fiction that that uh this massive debt just doesn't matter. But of course, it's not that I think that Keynesian economics has really been capable of explaining things, because it hasn't,

but it's been a useful crutch for the central planners, hasn't it? Oh, absolutely. You know, we stick with supply and demand in real-world prices for the most part. Keynesian economics, for those who have suffered through it in introductory college courses, God bless you, is more like an exercise in plumbing, where you have a series of pipes and valves and you have leakages and injections and all sorts of plumbing-related problems that seemingly the expert plumber could fix simply by turning a dial or tightening a pipe or soldering something together. And we all know that the real-world economy in the U.S. alone is made up of 330 million

people. The worldwide economy is many billions of people, and they're all doing their own thing. And the Keynesian approach, the Keynesian macroeconomic approach of turning a few dials overlooks all of the basic problems, overlooks the negative effects of taxation, the negative effects of regulation. They just assume that, for example, regulations will fix problems at a zero cost and the world will be happy thereafter, when in reality, it distorts all sorts of decisions on the part of entrepreneurs, on the part of input suppliers, on the part of consumers and laborers, and basically just gums up the work. It works.

And so Austrian economists try to stay very close to the real world and how it actually works. And as a result, we have a general policy outlook where we want to have the government have hands-off as much as possible in every conceivable situation to allow the free actions of individuals that respect property rights and so forth, that that's the way to allow people to achieve their potential. And in achieving their potential, they're really serving other people. And it's really, you know, economics is thought of as, you know, a fierce cutthroat competition thing, but 99.9% of it is cooperation between employer and employee, between the consumer and the supplier, between whole giant worldwide webs of networks of the factors of production coming together in order to produce

the goods that we want to consume. So it's really much more of the idea that the economy is cooperation and competition certainly exists. We all compete on the basis of price, whether it's the price of our products, the price of our labor, the price of the resources that we own, and so forth. We all have to compete at that level, and that profit and loss statements that we all have to measure up to keeps us all, in a sense, honest in this game of competition and cooperation. Yeah. That's a good way of putting it. I especially liked your analogy of it's this complicated plumbing thing. I think of it, maybe they should call it the Rube Goldberg school of economics. Another complicated bag on the side. Oh, this didn't work. Okay. Let's add

this other complication to it. It's highly analytical. It's highly complicated. It doesn't really work very well. I've always thought of this as, I've always thought of the free market versus Keynesian economics as a neural net distributed system versus a centralized computer.

It just seems to me that, you know, even if they think that they are the smartest person in the room, there's no way that they've got sufficient information to be able to do that. That's the, you know, the invisible hand and the open market where everybody is interacting with each other. And that's the one thing that they haven't been able to grasp. When we look at the central bank digital currency and the surveillance aspect and the control aspect of that that they're trying to impose on us, to me it seems like, again, because it's ultimately authoritarian,

it isn't like they're going to look at this and say, well, what would be the most efficient way for us to do this or that? Now we've got more information about what everybody is doing. I think it is simply more of a ham-fisted, authoritarian, centralized approach. It's not really going to be leveraging technology to even get a better view of what is happening so they can run the system. They just want to run the system, whatever happens. They want to make the system run to their advantage, I think, is really what we're looking at. What do you think about this coming central bank digital currency, the efforts to do that?

Are we going into a more centralized control approach in economics? Certainly, that's what the politicians want oh yeah the central bank digital currency uh the only positive is that it's positive for central banks and positive for the government to oversee and be able to check on everything we do yeah there's no positive economic benefits to having that type of system if they really wanted to have a close to ideal monetary system where they didn't need monetary policy at all, where they didn't need the vast bureaucracy, thousands of econometricians, and tens of thousands of bureaucrats to manage the system, then they would go back to a gold standard that we established with this country and silver money and things of that nature.

That is the ideal monetary system for a human economy. And the idea that, you know, well, you can have digital currency, you can have digital money, but there's no benefit that they can describe that isn't just solely a benefit to the central bank and the government itself. for the economy, it would hurt a lot of people. There's memes going around on social media of all the harms it would do to certain groups. In particular, as is typical with policy, it would hurt the most disadvantaged groups in society, from the paupers and the poor people, the beggars,

to people who live hand-in-mouth, to the people who don't have bank accounts, what are those people supposed to make of this central bank digital currency? They're completely shut out. All sorts of transactions that we make on, well, in the fringes of society to the streets of Manhattan, cash transactions are absolutely necessary and required. It's really the only way to conduct business of any sort for those particular groups. And of course, it helps large corporations.

It helps the government. It helps the taxing authorities. Um, it helps the central bank. Um, I think they're probably going to lure those people. I, I see. I think they're probably going to lure those people in with a lure of welfare payments and healthcare things.

Cause that's what they've already done in India. You know, here, take the number and you get this stuff because it's all about dependency. That really is a key way that they want to pull people in. I think they'll use that dependency to rope in the poorest people and to get them to take the ID, to take the central bank digital currency. I think that's – you're right. They're going to victimize them. They'll be the first ones inside the open-air prison being surveilled and controlled with everything.

They could make the argument that, hey, we'll be able to have more visibility about the metrics of the economy. We'll be able to fine-tune it and do that better. They may make that case, but that's not why they're doing it. They're just doing it simply for control, right? Yes, and I anticipate that they're going to cause some crash of the system where people are going to lose access to their money and lose access to their accounts and won't be able to transfer money. And whether or not the government can solve it immediately with central bank digital currencies, they will implement a central bank digital currency or they will attempt to implement a central bank digital

currency as a consequence of them crashing the system in some way. And we're already seeing little hints of this where transactions between banks and settlements between banks are getting gummed up at various points in the system and i think that a a comprehensive crash of the system would it you know would scare people into accepting this idea of a central bank digital currency. And that's something that they could pull off really at any time. And even if they didn't do that of their own volition, of course, we are talking about government and they have screwed up everything else. And so they can certainly manage to do something like that as well. Oh,

I agree. Absolutely. By accident. Yeah, I agree. I got a comment here from guard Goldsmith who has a Liberty, uh, conspiracy.

Uh, and, he says, uh, when I was teaching Austrian economics here in New Hampshire, it was great to see how many students got it and then continued their education by watching Mises media and getting Mises Institute documents. Uh, that's good.

And of course, I want to talk about that as well. And I want to talk about your book, which is available for free, right, at the Mises.org. Of course, people can also get an audio book. There's a fee for the audio book, but you have it in various PDF and e-book and things like that for free. And I want to talk about how that really seems to be folding into another big problem that's come into the economy. But before we get into that, Gard also commented about Lugwig. And he says Mises almost didn't make it out of Nazi territory.

He and his wife were trying to make it to France, I believe, and almost were arrested by the SS. Richard Ebeling did great work in the 1990s and saving a lot of his work that the soviets had stolen at the close of world war ii amazing stories related to his work and life and his economics that's interesting you know uh i i wonder why these uh centrally controlled economies like nazi germany and the soviet union would want to have his works except perhaps to destroy them, right? Yes, when the Nazis invaded Austria, one of the first things they did was send a crack troop of intelligence officers to Mises' apartment to get him and his papers and so forth. But he had already left the country.

Wow. They took his papers, they took his furniture and everything, and brought it back to an intelligence lab in Germany. And we thought the papers were lost, but Richard Albelin and others found the papers in an intelligence warehouse in the Soviet Union. So when the Soviet Union invaded Germanyany they took all of mises materials thinking because mises had discovered that pure socialism which both the nazis and the commies both advocate that's right uh you know the nazis are the national socialists yeah the nazis are the national socialists that's right yes so So they both wanted this complete totalitarian socialism.

Mises said, no, that's impossible. You have to have property rights, you have to have prices, you have to have money, you know, wage rates and all those kind of things determined in marketplaces. And so the Nazis thought that Mises had held back some secret of how you solve the problem of socialism. And then the Russians, the Soviets also thought that Mises had hidden that problem. And of course, there was no solution. Mises didn't have the solution to socialism except to get rid of it to abandon it and of course the world has seen not only was mises right about the fallibility of any kind of socialism but they've also seen that

throwing off the socialist yoke in eastern europe and this the former soviet, and to a large extent in communist China, once you throw off this yoke of complete totalitarian socialism, production starts happening. People are better off. People live longer. People are happier. And all of these things that Mises predicted about the economic system came true. And we could do that here in the United States. You can do that anywhere in the world. Just reduce the amount of socialism and government in your economy,

and you'll get the benefits of the free market economy. Yes, yes. And, of course, this isn't a theory. We've had massive experiments to prove it. Just take a look at East versus West Germany or North versus South Korea. The same people, you know, exactly identical. And what you do is you cut the country in half

and you have half of them living under a centrally planned economy. The other half have a freer economy, if not a very free economy. See the same thing with communist China versus Hong Kong. And, of course, Milton Friedman did a long series, Free to Choose, where he spent a lot of time talking about Hong Kong and how things at that time were very free in Hong Kong. So we've had the experience, and we know exactly what this looks like over and over again. If you had a satellite picture, I've seen this over and over again, a satellite picture of South Korea at night and it's all lit up and North Korea, it's all dark

because there's nothing there. And they just completely destroy everything with their economic system. There was something that was, I can't remember the name of it. I'm trying to think of the name of it as we started the interview here. It came to mind. The economic theory that's being put out by the Biden administration and these other people, it was really kind of the basis of their so-called Inflation Reduction Act. There was a woman who came up with this, and she kind of rejected the technical aspects of Keynesian economics.

Uh, she kind of simplified it and, and everything, but it's still, uh, just an excuse for the government to do whatever they wish. I, maybe you remember the name of it. I can't remember what modern monetary theory is. Modern monetary theory. I MMT and I used to always call it the, the, the magic money tree, you know, that's what it really stands for. So yeah, modern monetary theory. Uh, tell us a little bit about that.

Yeah. That's a long established fable that goes back, uh, for centuries really. Um, and is it, it is the basis really of our monetary policy, the idea that you can print up pieces of paper to create economic prosperity, that you can take ink and paper that are very well and good and productive, put them together in the form of a dollar bill or a million dollar bill or a trillion dollar bill, and somehow or another, that's going to create more resources. that's going to create more resources it's going to create more workers it's going to create more energy and more productivity and more products goods and services

it's always been thought of as a fable by economists except now that we get to more recent times where economists are so unhinged from reality that they believe, well, maybe this does have something to it. Maybe we can just print up money and put unemployed resources to work. And so modern monetary theory basically says that you can borrow, you can print, and you can just make up by borrowing and printing money and then having the government spend it but actually you know right now I think is a good case in point because right now the government statistics tell us that GDP is growing at a fairly brisk pace. And yet, when you look around the country, and I'm sure many people in your audience right now are suffering from inflation and lower wages and things of that nature, why all the economic suffering in an economy that's growing at a brisk

pace? Well, the problem is that they've been printing up money, they've been borrowing money, and the government has been spending it on programs and subsidies that don't make sense in the family budget. It's not food, clothing, shelter, electricity that they're producing. They're actually doing things that actually undermine the production of that disconnect, that modern monetary theory disconnect, we're seeing that in real life today. Yes, the government is borrowing, the government is spending, the government is printing up money to pay for the whole thing, but what happens in the real world is that we're not getting the things that we actually need. We're just getting entries in national statistical accounts that don't put bread on the table.

Yes, yes. Yeah, we've never had a more centrally planned economy where they're planning to shut down our energy infrastructure, change all of our transportation system, and they don't have anything that works to take its place. It's all just, uh, rewarding their friends. And when I look at this modern, modern monetary theory, like you point out, it's just taxes and printing money and you can't replace supply and demand with taxes and printing, but that seems to be what they think they can do. And you look at the, the, um, uh uh the inflation reduction uh tax act or whatever they called it you know they they decided that you know they give all this when they

print this money up they give it to their friends and if things get out of control they raise taxes on their enemies you know it's really kind of the way this thing works in practice uh and so it's just another excuse again for for what it is that they want to do. And so they use these economic theories as kind of their court gestures to do whatever they want. But if we get back to the real world, you know, when we look at Austrian economics, it looks, you know, in the real world, it's got to follow the same examples that you have if you're running a business or you're running a household or something like that. And so with that in mind, let's talk about the, uh, your book, uh, 2018, the skyscraper curse and how Austrian economists predicted every major economic crisis of the last century. Now that's pretty, pretty large, but, uh, you know, we, we've got this developing commercial real estate problem that seems to have been kicked off by the lockdown and people working from home and

the vacancy rates and everything. And, and even in a booming area like Shanghai, uh, because, um, the Chinese communist wanted to, uh, show their power, I think was perhaps their motivation. I'm kind of reading into what their motivation is, but it seemed to me like it was a power play kind of like Mao's cultural revolution or the great leap forward he decided that he was going to lock down Shanghai and and show his authority there because maybe they're getting a little bit too much freedom and a little bit too much independence and now you see there and in Guangzhou and so many other places that were bustling and unbelievably crowded when I was there now they're ghost towns that are happening. And there's a

concern that even though it's not at the same dire straits that Shanghai is in, New York City's got vacancy rates of about 40%. And you've got a lot of people holding these high interest rates that are variable, that are just collapsing and turning them back in. How does that current phenomenon, how does that fall back into what you were talking about back in 2018? Well, the skyscraper curse is just really an illustration of the Austrian business cycle theory. And the Austrian business cycle theory turns on artificially low interest rates. That artificially low interest rates now cause entrepreneurs to make bad investments, investments that won't pay off in the future when interest rates rise. And so, of course, we had more than a dozen years of artificially low interest rates because of quantitative easing, because of zero interest rate policy, all sorts of Fed mechanisms to reduce interest rates to spur on the economy. They wanted to turn the dial down in order to increase investment and increase

employment during a slow time in the economy. But of course, it was slow because of the housing bubble, the previous housing bubble. And things started to look really bad after I published my book in 2018. In 2019, the economy was going down the tubes and it was essentially saved by COVID and the COVID rescue package, which sent interest rates back down to zero. And the Fed soaked up trillions of dollars of government bonds and mortgage securities. So for those couple of years, you could borrow money essentially worldwide at almost no interest at all. And so we had a big boom of additional spending, investment spending in commercial real estate

on top of all of the real estate that had been built over the previous decade. And so we have a massive overhang of real estate, commercial real estate, office buildings, houses, you name it. We overbuilt it. And now that inflation has forced the feds hand and forced them to raise interest rates to try to squelch the price inflation that they in effect caused now we're seeing the initial signs of breakage in commercial real estate skyscrapers big and small are failing they're going into bankruptcy they're being resold at a small fraction of what they originally cost to build or what they might have been sold for a few years ago now they're selling for pennies on the dollar or quarters on the dollar. And I expect to see much more of that going forward with the Fed holding interest rates

higher and possibly inflation remaining much higher, much longer than anyone in Washington, D.C. cares to admit. Wow. Yeah, that's an interesting way to look at it. I thought about it as you were talking about it. I never really, you know, we talk about the stimulus checks, you know, that they tried to appease people, that they locked down and put out of business and put out of work. Now, here's your little stimulus check.

But they wrote a really big, gigantic stimulus check to all the big guys, the big players, the big banks, the Wall Street people and everything, gave them a massive stimulus check to all the big guys, the big players, the big banks, the Wall Street people and everything gave them a massive stimulus check to keep this thing going. And it seems like, you know, the first bubble when they created the real estate bubble, the residential real estate bubble, low interest rates, they kept them down for a very long time. You look at that one point, the Federal Reserve just starts raising it, you you know like every every month or whatever a quarter of a percent you know 25 basis points and and uh then they just um whenever that and until everything popped and it crashed and then they started doing the same thing again but even bigger and and then as you point out you got the stimulus check that's written with a low

zero interest rates to all these uh bankers and and businesses and everything uh as part of covid and then they start the the whole cycle has been started all over again since the real estate market crash as you point out with all the um the um the the the quantitative easing as well as interest rates and everything. They created it and did it even bigger this time. And then they started, when it came time for them to burst it, they started jumping it about three or four times as much as they did the first time and created massive disruption with this. So as you're looking at this, you're thinking that we're going to continue on with inflation quite some time.

Do you think it's going to go into a hyperinflation type of scenario like we've seen in Argentina or Venezuela or some other place, Zimbabwe or something? Are we going to go into really, really high hyperinflation? How do you see this? Well, I mean, I'm worried about that because it's not just real estate that's been borrowing money but the federal government has been borrowing you know trillions of dollars of new money trillions of dollars rolling over of the national debt and remember they were borrowing you know 10-year government bonds for less than two percent many governments around the world were borrowing money at less than two percent for 10 years and now they're having to start rolling over that stuff and so interest payments on government

debt is rising uh because everybody's upside down on their portfolios and as a consequence the interest payments on the national debt have risen very sharply uh from a half a trillion to near a trillion dollars now in a very short period of time and we're adding a trillion dollars of national debt uh it seems like every few months and uh you know we're we're on pace to be borrowing uh trillions more over the next fiscal year with that interest payment on national debt increasing over time. And so, and the Fed itself is upside down on its portfolio. So it is losing money now for the very first time. It's lost $100 dollars in the last year it's

probably projected to be losing 200 billion dollars and that's added into the government's debt and so everything is going in the wrong direction and the only thing that has continued to hold up is uh well the seven technology companies in the s p 500 if you take them out uh the stock market is either flat or falling and has been if not for those seven giant tech companies um you know so that's that's just uh uh that's just not a good sign. And the other thing that's been holding up is the U.S. dollar. The value of the U.S. dollar has been holding up. that people are sending more and more of their money to be invested in the United States as the least worst currency in the world. So that's been holding up. But once that starts deteriorating

and that starts fueling oil prices directly, for example, yes, I mean, we're on the path to hyperinflation. We're early enough now that we could do something about it. But, you know, there's no stomach in Washington, D.C. to make the kinds of changes, slashing government spending, cutting taxes on workers and investors, rolling out or rolling under vast swaths of government bureaucracy, returning those resources to the productive side of the economy. That's what we really need. And there's no stomach in Washington, D.C. for that. There's no stomach for reducing welfare payments and curbing entitlement programs. All of those things seem to be

off the table generally. And those are exactly the types of things that need to be on the table generally and those are exactly the types of things that need to be on the table immediately so that we can get off the road not only to hyperinflation but of course hyperinflation uh is just one step short of the road to totalitarianism and dictatorship so this this you know it's not just that prices go up and everybody has more money in their pockets and so forth. This is the road ultimately to the destruction of the economy and the destruction of the American way of life. And the takeover by totalitarian government, we're all, you know, everybody recognizes that that's the direction we've been going with the COVID lockdowns and so forth.

That's the direction that our politicians have us in the direction of. I agree. Yeah. They want us on the road to serfdom because they'll be the feudal overlords that are going to be running this. I mean, you know, we look at this like, no, we don't want to go to the roads, but they do, and that's one of the reasons why I think this appears to be really kind of a deliberate takedown.

You know, I think it was last week. I think they did hit a trillion dollars in terms of just the interest payment on the debt. I think I reported that last week. It did hit finally a trillion dollars because I was like, wow, it's amazing. But as you point out, they keep going further and further into debt and the interest rates keep going higher. So, of course, that's going to happen. And the famous saying, the road to serfdom, was actually the famous book by F.A. Hayek, who was a student of Ludwig von Mises.

And Mises and Hayek both wrote books in 1944. Hayek wrote The Road to Serfdom. Mises wrote the book Bureaucracy, where an omnipotent government as well, Mises wrote. that the tendency in American government that far ago was that we were going in this direction where we just felt good about having more government programs, but ultimately you would get to a point where the people no longer had control over their own very government. That's right. Yeah, that's the path that it always takes. You know, when you talked about the fact that the dollar is doing well, because we have the least worst of the central banks, it reminds me of, um, you know, we've got, I think it's this weekend, there's

going to be the election in Argentina with Javier Malai, who is a free market economist. I don't know if, if, uh, you know him or if he's connected, uh, uh, with you, but that's one of the things he was saying. We got to get rid of the, uh, uh of the Argentine, I think it's peso, and we've got to replace it with the U.S. dollar. He says, I think all central banks are awful, but he said exactly the same thing. He said, you know, they're not as bad as our central bank. Do you know anything about Javier Malai and what is happening there? Has there been any correspondence with the Mises Institute and him? Well, he's not affiliated with us at this point, but we've written about him on our

webpage several times, and we're following him very carefully. He considers himself an Austrian school economist and a student of Murray Rothbard, who was really the great modern Austrian economist and our first vice president for academic affairs. So he's very much in our camp. He's a very obviously intelligent person, and he's got the right instincts with respect to policy. And he doesn't want to make the U.s dollar the currency of argentina that's just

a transition policy away from uh their hyperinflationary tendencies down in argentina they've tried these kind of measures in the past and ultimately they've come back to fail. That's why he views dollarization as a temporary transition policy back to a sound monetary system of gold and silver, where everybody out there in the economy, their money is gold and silver coins, something the central bank can't do anything about, something the government can't do anything about something the government can't do anything about. If we hold money that has an intrinsic value and cannot be printed at the whim of a central banker or at the whim of some economist or a politician, yeah, so he's definitely from the Austrian school. We have very high hopes that he'll do well and he'll be able to implement a lot of his reforms. But basically, he wants to cut a lot of government spending down there. I mean, they have a bloated government sector down there, which forces the current government to print money to pay for it. If you cut the government sector significantly enough and you open up the free market economy,

then you simply don't need the printing press. And sound money is really a prerequisite for sound government that's a point that mises may made a long time ago is that he was considered a medalist because he believed in gold and silver coins in the hands of individuals as the the the most significant guardian of the free market society that prevented government from, in effect, taxing the population through the printing press. Yes. And so we wish him the best of luck. That's right.

The American founders experienced that. That's why they say it's going to be gold and silver. It's going to be minted because they'd lived through a continental dollar, that was just a worthless piece of paper, uh, worth less than a, you know, not worth a continental. And so, uh, they wanted the same type of thing. He's living through 150% inflation. It was interesting. I, I, uh, found a, a book, um, that was done by Axel Kaiser called Street Economics,

very much like what you're talking about that Mises did, taking practical examples out of everyday life and saying, you know, this is how the world works and this is why we need to organize ourselves this way economically and so forth, as opposed to, you know, the Keynesian abstraction and saying, you know, no, everything works differently when the government is doing it. That's become a very, very popular book in South America. He knows Javier Millay, and he just recently got it translated into English. But, yeah, it is interesting to see whether they're going to come back to their senses or not.

It seems like the biggest obstacle to him coming back is they're trying to throw taylor swift against him uh i mean she's got a big popular following there and right before they're going to have the election she's going to be there for the opening concert and and she and the lefties that are following her are already starting to make noise about javier malai so we'll see if he can beat taylor swift and and all this but let's get back to your book here the skyscraper curse that's an interesting title explain to us what that means well it's just that um there's a long history dating back about 150 years now where uh whenever a world record-setting skyscraper is built and completed, right in the aftermath of that is a world economic crisis. artificially lower interest rates for a very long time that eventually somebody comes up with the

idea that they're going to build a record-setting skyscraper. It's very difficult technologically, not just the money, but every time you build taller, you've got to come up with completely different and new ways of building a building, designing a building, all of the elevators and the water system, sewage, air conditioning. Everything about it has to change a little bit in order to make a record possible and so you can go back into the 19th century and every time you see these low interest rate periods a record-setting skyscraper and then a big economic crisis and so the skyscraper is really just an illustration of what's going on throughout the economy everybody's you know with the new interest these new low interest rates everybody's implementing new technologies stuff that is future related technologies when we're seeing

that today with artificial intelligence, for example, that probably wouldn't have come about for several years, but because Google and some of these other companies have just tons of money sitting around, they were able to finance those kind of research efforts and bring them online before their time. But the skyscraper, again, is just an illustration of what goes on in the economy, except for maybe mom and pop grocery stores and restaurants, where everybody's adopting new technologies before their time, they're changing their structure of production that's not really in sync with the true interest of consumers. And as a consequence,

once interest rates start to rise, all of these investments, all of these investments in technology and future technology really break and it brings the economy into an economic crisis. We're barking up the wrong tree, essentially, and the skyscraper is just a really good illustration of how the economy develops naturally in terms of implementing new technologies and new production techniques and new structures of production in the economy. So there's a natural way to do this, and there's an artificial way to do this, and the artificial way leads to economic crisis that's interesting that's very interesting as you're talking about this i'm thinking how the you know they as they build these skyscrapers and they're pushing everything to an all-new level

gonna do this uh in a way that's never been done before i'm thinking maybe it's a tower of babel curse that's that's going on there or the Titanic, right? We got this new ship and it's unsinkable. Because at the heart of it is really kind of a lot of pride that goes before these falls. But it is interesting to see that happening as a phenomenon. And as you're talking about this and skyscraper curse, you know, one of the things in the commercial real estate, as it's starting to become a real issue, they have these things called mezzanine loans. Maybe you know what it is, but I'd never seen that before.

For the people who aren't in the business, they said, you know, it's called a mezzanine loan because people do this high-risk loan because they're not at the top of the capital stack. And so they're further down if the skyscraper gets cursed and it collapses. They're a few floors down, and they don't get paid right away. And so it's much riskier, and they get a higher loan in it. But after the 2008 crash, the government prohibited that for the big

banks that they bailed out, they said, because it's riskier. So you're going to do safer things. They said, but that's another level of risk that the small and medium-sized banks assumed in the interim, which is going to be another thing that's going to wipe them out perhaps because now these mezzanine loans are really um you know they're collapsing left and right yeah i mean the idea that the government bureaucrats can regulate financing of investments is just ludicrous um you know and they they they themselves opened up this opportunity by not allowing certain banks to be involved and then

yet making funds available in the economy for one or two percent so naturally somebody is going to come along somebody is going to be willing to borrow money at two percent in order to lend it making these mezzanine loans for financing large construction projects and earning 10 or 12 percent somebody somebody's going to do that even though they don't yeah they don't yeah that's right they take the bait even though they don't have collateral in the building um and even though it's maybe not as long a term loan um as the initial investors the people who are covered with the collateral and so forth um you know somebody's going to be willing to take that bait and uh you know and i i don't know what the overall figure is uh but of course the the the market as a whole um with commercial real estate is trillions of dollars and we're starting to see the cracks in those markets uh you know where

projects are failing right and it's going to affect everybody because it's going to be a massive curse for the entire banking industry, and that is going to filter out and affect everybody. It absolutely is. It's been great talking to you. Thank you for coming on. Mark Thornton, and he is a senior fellow at the Mises Institute. You can find his book that we've been talking about.

There's a lot in there. You can see that for free as a PDF or an e-book. They have an audio book that they do sell. But you can find other information, very useful information at mises.org. That's M-I-S-E-S.org. Thank you so much for joining us, sir. Thank you, David. It was my pleasure. Thank you. And thank you, everyone, for joining us. And thank you, Dougalug. I appreciate the tip. Thank you very much. have a good day everybody the common man they created common core and dumbed down our children. They created Common Past to track and control us.

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