Mike Maloney on the Hidden Secrets of Money, Libertarianism, and Austrian Economics
Articles,  Blog

Mike Maloney on the Hidden Secrets of Money, Libertarianism, and Austrian Economics


Today’s episode of Hidden Forces is made possible
by listeners like you. For more information about this week’s episode
or for easy access to related programming, visit our website at hiddenforces.io and subscribe
to our free email list. If you listen to the show on your Apple podcast
app, remember you can give us a review. Each review helps more people find the show,
and join our amazing community. With that, please enjoy this week’s episode. What’s up everybody? My episode today is with a dear old friend,
who many of you already know from his Hidden Secrets of Money documentaries, which have
graced the internet with millions and millions of views each, and in which I’ve actually
made a few appearances in episodes two and eight. There are actually 10 installments so far. It’s really an ongoing series, so I’m sure
at some point there’ll be an episode 11, probably a 12 and so on. This really is a unique kind of episode because
Mike, as I said, is a very good friend and someone I have a lot of history with, both
personally and professionally as well as with his producer, editor, director Dan Roebuck,
who actually started the YouTube channel for Mike on a handshake and pretty much worked
with him on a handshake for the first few years, which tells you a lot about how Mike
does business. It’s really one of the things I love most
about him. So I actually wanted to use this as an opportunity
for listeners who may already be familiar with Mike, to learn about parts of his life,
specifically his childhood, his struggles with dyslexia. Most people don’t know that Mike hasn’t completed
high school, that he actually left after the ninth grade and eventually became a traveling
salesman driving all over the Southwest and as far North as Oregon with a van full of
samples and catalogs of automotive parts and accessories. Then he started a company that manufactured
high-end stereo equipment. Again, even fewer people know this, but one
of Mike’s own designs is on permanent display at the Victoria and Albert Museum in London. I’ve actually provided a link to the pictures
of those designs in the description. So that’s just the first chapter of his life. He is the archetypal American entrepreneur
and that’s reflected in his management style and I think in his approach to economics,
which we also discuss. Mike is a libertarian, an advocate of sound
money. So that part of the conversation focuses on
his immersion in Austrian economics, why he got into it and stuff like that. I don’t want to say too much. It’s a great conversation, so please enjoy. Mr. Mike Maloney, welcome to Hidden Forces. Thank you very much. It’s great to be here. This is your inaugural Hidden Forces episode. Yes, but we’ve known each other for several
years now. Yes, a long time. So Mike, do you have your phone turned off
by the way? I didn’t ask you. This is going to be super informal, which
I think is actually part of what’s going to be fun about it. It’s going to be unusual in that way. I haven’t even prepared a rundown for our
conversation, because I thought this is like two old friends getting together. We have known each other for going back to,
is it 2011 or beginning of 2012? It’s right around that time frame. How did we first meet? Do you remember? Capital Account. For sure, but do you remember if it was me
just reaching out to you? Yes. I think it was, yeah. Yeah. I was like, “You’re the guy with millions
of views online.” I remember the first interview you did with
us was remotely from the LA studio. It was from RT’s LA studio for sure. I remember because I had that beautiful background. Ramon used to- Yeah, I flew into Washington though once or
twice. You did, the second time. The second time. Maybe twice, but I remember for sure you came
in once where you gave Lauren and I giant silver coins. Yeah, so that would have been probably in
2013. Yeah, that might’ve been in New York, because
we’ve known each other for a while. New York, I’m sorry. Yeah. It’s why I consider you a good friend. The first time I was there, I was in Washington. Are you sure about that? I don’t think so. I think, well we’ll see. You didn’t do it from Washington? I’m sorry. No, we did. No, no, no. The Capital Account was from Washington. That was where our studio was, but we had
our remote studio in LA and the first time we had you on the program, I’m pretty sure
it was from the LA studio. In any case, yes, you were definitely in Washington,
D.C. We probably went for drinks me, you and Lauren
down to the Brazilian place downstairs probably. Yes, and it seemed like everybody in the place
was in politics, or they were a lobbyist or something. There wasn’t anybody in there walking past
any table that you didn’t hear them talking about politics. You noticed that. Your kind of place. Yes. So Mike, to give the audience a sense of what
we’re going to discuss, I told you that I’d like to try and explore your background to
the extent that we can and give people a more intimate sense of who you are. Then there are of course really interesting
things that we’ll be able to discuss. Obviously we’ll discuss economics in the markets. I think from a economic, political philosophy
standpoint, we might have a very interesting conversation because I think that, you have
a very clear set of ideas there and you’ve done a lot of work in that area. I know you’re working on a book, you can’t
talk too much about it, but we’ll see what we can pry out of you. Also we’ll talk about Tesla, because you’re
a dear friend who owns many Teslas. In fact, Tesla has saved your life, if I remember
correctly and you have taken some issue with some of the coverage that we’ve done. So I look forward to giving our audience the
views of someone who is an owner, and someone who I deeply respect. Mike, a lot of people know you online. Maybe you can give, for those who don’t know
you, maybe you can give us a sense of what you’re best known for and what you do now. Then maybe we can try to unpack your career
and life, because it’s so interesting. So maybe you could start us off there. Well, I was born in Salem, Oregon. Moved to California when I was four years
old, and had a lot of trouble with school and was always lagging behind. After a while, I was in all of the remedial
classes and my teachers would say things like, “You’re the smartest kid in the class. Why can’t you learn anything?” Then another- How old? How old were you when this started? That started when I was like seven, eight,
nine. Other teachers would actually tell me that
I was dumb. They actually did say that? Yeah, yeah. One teacher said that to my face, that I was
stupid. Really? Yeah. Wow. How did that make you feel? Pretty bad, but what was going on was I was
dyslexic and they just couldn’t teach me in a method where I could learn. So they were wasting my time, I was wasting
theirs. This was before scientists already knew what
dyslexia was, but teachers were not trained to look for it. What time frame are we talking about here? What years? This would have been back in the 60s. In the 60s. Then the early 70s. Then so third month of 10th grade I left school,
and I’ve never been back. So I’m pretty much self-educated. Most school teaches you stuff that you don’t
use during your lifetime anyway. Well have you seen Father Guido skit on SNL? No, I haven’t. I’m not gonna be able to do it justice, but
he has a five minute thing for the all you learn in high school. It’s a funny thing, and he has a bit there
in economics about supply equals demand or something like that. Is it on a YouTube? I’ll have to look it up. Yeah, I’ll show it to you afterwards. It’s super funny. If I remember, I’ll put a link in the description
for our listeners, but obviously it was a different time then, right? I mean people- It was. It was a different time. What part of California was it? Well, I lived in Los Angeles right near the
Coast, near where Los Angeles airport is. Playa del Rey, Culver city, Santa Monica. Then the last three years I lived there was
in the Malibu mountains, and that was just beautiful. Wow. Yeah. That’s not far from where you used to live. Right. I took you through there when I flew you out
there to drive my Tesla. Yeah, yeah. High tech, exactly. Absolutely. Yeah, that’s a whole nother story. We should probably get into that one. That’s also great, but before we do, two questions
I came up while you were talking I don’t want to forget them. One is, did you have a conversation with your
parents about leaving school? I mean, what was that like? I imagine there must’ve been some friction
there. Then also, what is it like to have dyslexia? Well, it’s a curse and a gift. Both. The curse part of it came with trying to get
through school where when teachers would say, “Open up your books to page so-and-so and
read from page this to page that, and then we’ll have a test at the end.” I was just an F student for those teachers. You just couldn’t read? Then I would… Well, words get scrambled and then the more
pressure you’re under reading out loud was the most embarrassing thing, because my mind
will actually make up a sentence that makes sense the way it works for me in my head,
but it’s actually not on the page. I’ll go along and read and get through a couple
of sentences. Then the first word that I would misinterpret,
the class would laugh. From then on, it was just like a total train
wreck. So it was pretty embarrassing. I pick up things very quickly when I got a
teacher that just lectured all the time. In seventh grade I had this teacher, Mr. McCormick
that had been around the world seven times. He was fascinating, and he would just lecture
all the time. I suddenly went from a D and F student to
the top scoring kid in seven periods of 45 students per class. I was the top scoring and because- This was in high school? I just listened and then he read all of the
questions, and back then we had these computer cards with these little bubbles that you’d
fill in with a pencil that had some real lead in the pencil lead. Then they’d scan them and it would go into
the computer, and you’d get your results. So I didn’t actually have to read anything
or write anything, and suddenly I became the smartest kid instead of the dumbest kid. That should have been a tip off to them that
there was something wrong. Well, I’m curious about that. When did you have Mr. McCormick? Seventh grade. Seventh grade. Yeah. So I mean, wasn’t that something that… First of all, did that inspire you to question
what’s the deal here? Why did I do so well in this class? Well, no, I didn’t really think about it then,
but when I went into 10th grade for the first month, the remedial teacher for Math was out. So we got the teacher that taught calculus
in all the remedial kids. He had a couple of periods that he had free,
and so all of the remedial kids and in his class, and he did the same thing. He just lectured all the time and he taught
us all of these shortcuts and stuff, and suddenly Math went from something that was just excruciating
for me to the most fascinating subject. It was just, and I learned more in that one
month than I had in the other nine years about Math. Did geometry come easier to you than arithmetic? Yes. Yeah, I was always really good at fractions
and things. Okay, so you had a conversation with your
parents. I don’t know how that went. My father was actually quite supportive, because
he only made it to sixth grade, but he was a very successful businessman. So he was supportive, but then when I did
leave school, he said, “Well, you’re not going to sit around here on the couch.” So for my 17th birthday, I got a Chevy van
full of samples and a bunch of catalogs and he said, “Congratulations kid, you’re a traveling
salesman. Hit the road.” Wow. This is where the story begins. That’s really cool. I didn’t know that. Yeah, So I’ve been working since I was 17. Samples of what? I had minibikes and go-kart, and we were a
manufacturer’s representative firm for performance goodies. Your father’s company? Yeah. So all this hot rod equipment and Chrome accessories,
and my job as a 17 year-old kid was to cover all the territories that all of the real salesman
didn’t have, that they didn’t want. So I got all the small towns, but it was great. I drove almost 100,000 miles the first year
that I was driving. Where did you go? I covered California, Nevada, and Arizona. When you got to Santa Barbara, the highway
used to, the freeway used to drop down and you had a series of traffic lights that went
for about a mile and a half, two miles and all of the hitchhikers got dropped off there. I would go through and just clean off the
whole North, whichever direction I was going. Clean off the whole north bound side of the
street. Twice I picked up 13 hitchhikers, and once
I took four of them all the way to Medford, Oregon. Another time, two of them. From California? You took- From Santa Barbara, from Southern California
to Medford, Oregon doing things like… I only got paid like 100 bucks a week. Did you have to cover your own gas? No, I had an expense account. So the first thing I would do is take everybody
out for beer and pizza. It was great. That sounds like so much fun. It was fun. I just had to stop at all small towns, the
motorcycle shops, the auto accessory stores and all of that stuff and give them catalogs. Then I became the one in the company that
when there was a question that any salesman had, I was the guy that everybody asked. If they had an account that was real technical,
they would bring me in to explain all of the performance equipment, how it worked and why
it was better than the competition. So what do you think made you so successful? I mean it’s one thing to understand the equipment,
to understand the technology and it’s another thing to be able to sell it, right? Because of the dyslexia, one of the things
that dyslexia also did for me is I can look at charts and see things in them that everybody
else misses. I also know how it relates to another chart
that I saw three years ago, but it gave me the ability to explain things to people that
are complex subjects in a very simple manner. This training of trying to explain superchargers
and limited slip differentials and things like… We represented Hurst shifters and XL plug
wires and general electric silicons, and just this huge range of products. I had to explain how they worked, why they
were better than the competition and why they should buy them. So how did you go from auto engineering to
audio engineering? Well, the audio engineering was like a hobby. I built a set of speakers when I was about
18, then people would want their car stereos upgraded or for me to build them as a set
of speakers. I really didn’t enjoy doing the manufacturer’s
representative stuff. By that point, I had my own manufacturer’s
representative firm covering California, Nevada, Arizona and I had four other people working
for me. I had offices in Phoenix and San Diego. Did you branch off, or were you still working
under your father’s company? I had branched off. My father had sold his company, and I started
my own in the same sector. I was in my 20s then, and I had been doing
the stereo equipment as a hobby and I ended up starting a legitimate stereo manufacturing
company. I made some designs that when in the, I think
1989, 1990, the curator from the Queen Victoria, Prince Albert Museum in London, which is one
of the finest design museums in the world, saw my amplifiers on the cover of International
Design Magazine and wrote me asking me to donate a pair. I told them, “We’re a tiny little company. I can’t really afford to do that, but they
can have them at cost.” So they bought a set, and they picked five
examples from around the world industrial design, and I was one of the five artists
that they picked for permanent display. My stuff never gets rotated down into the
basement, so it was quite an honor. That’s so amazing. I won a lot of awards- Can people see that online? Yeah. Is there a link to that? I’m going to have to put them on the- Try and find me one, I’ll put one in the description. I’ll put them on the, about me page on the
GoldSilver.com websites. Yeah, I’ll get those pictures up there. Yeah. Yeah. Cool. How did you learn to do that? I just had friends that were into it, and
I had been designing speakers. Like I said, the dyslexia actually helps me. It helps me picture electric… I can visualize electrical flow on a circuit
board, or in a loudspeaker crossover and such. I got really good at doing crossovers on speakers
that have tweeters, mid ranges and woofers, when you want to separate the different frequencies
of sound. I got very intuitive on that. I actually had competitions with friends that
would do them with all the computer programs, and I had just started going and clipping
on coils and capacitors and resistors and come up with something that actually measured
better than what they came out with, and sounded better. So you didn’t stick with that for very long. I mean how long did you stick with that? I did it in the 80s and early 90s, and then
the Consumer Electronics Show in Las Vegas, the CES, some people may know it as. When it came to the high-end audios portion,
which is really what started the Consumer Electronics Show, they were paying less and
less attention to it and it was getting more and more expensive with a lower and lower
level of service. So I started with a competing show called
the Home Entertainment Show, and that was actually more successful than my stereo company. Was it TV? No, this was a trade show in Las Vegas. The same hours as the Consumer Electronics
Show, the same day. Get out of here. I didn’t know that. I started stealing away a whole lot of their
business. How big was that? We had about 300 manufacturers. What I would do is buy an entire hotel for
10 days, and have them remove the beds and some of the furnishings from all the rooms,
and then the rooms were sold as exhibits. Manufacturers would come in from all over
the world and set up their stereo systems, and their home theater systems. In the rooms, because the rooms were replicas
basically of their homes. Yes, and it’s separate. It wasn’t like trying to demonstrate something
on a convention center floor where you’ve got all the noise from all the other booths. Have you seen that done anywhere else, or
you just think- Well, CES had done that for their high-end
audio section, but they had really ignored. It became like an appendage, that something
they really didn’t care about. How long did you do that for? From 1999, and I gave my shares to my business
partner in 2005 when I started up GoldSilver.com, but the show kept on going until, I believe
last year. I think they’ve closed it down now I’m not
sure. That’s fascinating. So you had this whole career. You started as a traveling salesman? Yeah. Traveling salesman, electronics engineer and… When I was doing scientific fidelity, Sci
Fi for short, there I was the engineer, production manager. When you start, I was pretty much- That was the name of the company? Sci Fi was the name of the company? Yeah. Really? Yeah, and you’ve seen my designs. Actually- Your designs are beautiful, that’s why I want
people to see them. That was 1984, and I just won awards all over
the place. I was the very first one to take… We had vacuum tube amplifiers and back then,
high-end audio equipment if it was electronic, it had a rack mount plate on it. You’ve got some rack mount equipment here
in the studio. That system was developed for American Telegraph
company. So this is really for the Telegraph system,
this standardized rack mount system, and it worked its way into the scientific community. One day back in the 40s, somebody took a scientific
amplifier out of the rack, put it on the floor in their living room and hooked it up to a
loud speaker and it sounded good. That became high-end audio. Even today, a whole lot of high-end audio
looks like rack mount equipment. So it was just, people develop a sense of
design. They develop eyes that see things as beautiful,
because they’re used to seeing that for instance, I don’t like Rolex. I think they look industrial. I’ve never liked them. I have this unreasonable hatred of SUVs. Everybody loves SUVs, but I always like to
pretend that I just landed here from another planet and I’m looking at things for the first
time, and see whether the design aesthetics- That’s so true by you. Yeah, vacuum tube amps back then were in this
perforated cage of metal, and they had speaker cables connected to the back of them, and
the input cables connected to the front. So you had this thing on the floor that looked
like a heater with cables going to it, and I took the vacuum tubes, which are beautiful
by the way. Vacuum tubes, they’ve got these heaters in
them that glow these orange colors. Then if the tube is slightly gassy, it develops
a corona that sticks to the glass and that corona flickers with the base note. It’ll shrink when there’s a heavy current
draw from the amp. So I took them out of the cage and held them
out like art, and now everybody does that. So I set a standard- An aesthetic, that was an aesthetic decision. An aesthetic design standard back then. You’re making me want to learn about this
stuff and do an episode on it, because I remember growing up that my dad was a huge audio file. I know from him that it was, I believe this
was generally true. It was audio equipment, like you said was
a big deal in the 70s and 80s, but then it began to fall off in the 90s I guess maybe
with home theater systems where everyone started watching big plasma TVs and there was a shift. That’s part of it, and it’s also a shift from- Records? Well, yeah, it’s going from like LPs were
this experience where you’d open up this LP, and there’s all this real estate. They would print the words on it and print
images, and there were booklets in them and stuff, to CDs. Then as we went to iPods and stuff, and ear
phones. Yeah, the Walkman too. It became much less of… When I was a kid, we’d have a party and sit
in the dark and play The Beatles Revolution number 9 Backwards stuff on a turntable, trying
to hear. The Beatles back then buried all these clues. There was this big hoax that Paul was dead. It was a great publicity stuff, because the
stones had become very popular and they did this over a period of years. They planted all these clues, and then people
started discovering them. In the meantime, Paul had married Linda Eastman
and they were living in a castle somewhere. When they discovered that Paul wasn’t dead,
I mean it made the cover of Life Magazine. This would make a really interesting episode. I did one episode early on, episode four on
the history of American television, and the history of America through television. I’m fascinated by this sort of stuff. I mean you’re talking about something where
the experience was communal, the technology was compatible with communal experiences and
then you had the shift to things like the Walkman, where people began to have private
experiences. It’s fascinating to consider how technology
inter-operates with culture, and how it changes society, right? Now we see everyone walking around- Yeah, because music is changing right now
because of Spotify. They’ve got to hook the listener in the first
20 seconds, and then the music has to be a minute and a half to three minutes is what
they’re looking for. So people are like in a competition to try
and get their stuff on Spotify and popular, and so economics has so much to do with our
tastes. Classical music came from an era where a king
of one country was trying to outdo a king of another country, and the symphonies were
basically command performances. They would try and get the best musicians
and the best composers, and they were basically on the payroll of the government. So that’s how you were able to pay 120 musicians. As time progressed, you get into like Big
Band Swing. When Dixie jazz came about, there you’re talking
about a small combo in a bar, but as dance halls developed and you were trying to fill
a place that had 1,000 or 2,000 people, how do you fill that? Well, you have to have five saxophones, four
trombones and five trumpets. The drums are plenty loud, you don’t have
to worry about them. Now you can play chords, so now you get this
richness that goes along with it, but then how many more drinks does a place have to
sell to make the profit, to pay all those musicians? It’s a really tough deal. So then you get the smaller jazz combos and
then rock and roll combos, and it’s much easier for a bar to play a three piece jazz or blues
combo. Then rock and roll came in, and now we have
DJs. So it’s very rare to actually see live music,
and so the economics of the situation, how many more drinks does a place have to sell
to cover the band, is what determines what your taste is going to be. That’s fascinating. That’s a really great point, and that’s actually
something for the television episode we discussed the economics of television, and how the economics
is the reason why there were 30 minute shows because they could go into syndication for
example. The syndication of programming influenced
what type of programming or the dimensions of the program. So how did all this, so here you are, you
were traveling sales… You’re an entrepreneur basically. You’re a guy who- Yeah, I’ve had numerous businesses. You were successful in audio engineering. How did you go from that life to starting
GoldSilver? What was that connection? When my father died, he left an estate that
should have taken care of my mother for the rest of her life, but in 1999, the broker
that my father had always used that we were still with was saying, “I just don’t understand
these markets these days.” Now that made us worry that he didn’t understand
it. In hindsight, I realized the NASDAQ is going
to a blow off top. Everything has gotten crazy. He was saying that nobody is buying- Are you saying I don’t want to buy. Right. PE ratios, all of the things there was no
value. If anything, they were just insane prices
and everything was going north at this incredible rate, and that’s what he didn’t understand. We just took it as he didn’t really understand
what he was doing anymore, and so we found a financial planner and interviewed a whole
bunch of them, like a dozen. Picked the one with the best testimonials
and stuff, gave him control of the estate and he lost more than half of it in the next
couple of years. Every six months we’d have a meeting, and
he’d come smiling over to my mother’s house and say, “Well we did really well. The SNP lost 24% and you only lost 18. Because she was more heavily invested in bonds
because of her age? He had her in these low risk stocks, and so
low beta. Low beta exposure. Yeah, and when he had lost more than half
her portfolio, I ripped the thing away from him. Moved everything to cash and started studying
the markets. You can’t study the markets without studying
the economy, because they affect each other very heavily. When you start studying the economy, you can’t
study the U.S. economy in isolation. You have to study the global economy. When you study the global economy, you find
that there’s a certain crowd out there that’s very concerned with international trade flows
and deficits and so on. That tends to be the hard money advocates,
the precious metals community. When you study the precious metals community,
now you go down this rabbit hole of monetary history and how it all always repeats. I was just absolutely fascinated with this. I would study it every single day after work,
and then all day long on Saturdays and Sundays. I’d just do nothing but. What fascinated you about it? Well when I saw monetary history and how it
repeats, but with little twists, it’s never the same, but it’s- You were reading books on audio book. How were you digesting this material? Well, in about the year 2000 when Steve Jobs
came out with OS 10, built in the operating system was text to speech software. Then a couple of years later, I found out
that they had dictation software built into the operating system also. So the world of books opened up to me suddenly
just when I needed it. Then I would have my assistant or somebody
at the company, I bought a duplexing scanner. I’d buy Milton Friedman’s monetary history
of the United States and have them take it down the bookstore. Slice the binding off, run it through the
duplexing scanner, run it through optical character recognition to text software and
print out PDFs of the book for me so that I could have the Mac reader. Crazy. What books did you read during this time? So you read Friedman and Schwartz. You read what else? Well for instance, there’s like 18 pages of
The Great Depression in my book, The Guide To Investing in Gold and Silver. To write that I read Milton Friedman’s monetary
history of the United States, because he’s a monetarist. I wanted points of view- It’s also a great book. … for each different major sector of economic
thought. So that book, which is like what is that? It’s close to 2,000 pages, isn’t it? I think it’s 1,000 pages. It’s thicker than that Atlas Shrugged. Maybe it’s like 1,200 pages or something like
that. Yeah, actually I think it’s 1,400, but there’s
a lot of citation. Then I read a Murray Rothbard’s America’s
Great Depression. So there you get the Austrian perspective,
which by the way is a great book. Then I read Ben Bernanke’s essays on the Great
Depression, so that I had a Keynesian perspective. So Monetarist, Austrian and Keynesian perspective
and it was fascinating. Ben Bernanke is a really bad author, and just
gives you a headache. So if you ever get the opportunity to read
it, don’t. So what were the three different theses? What was Milton Friedman’s thesis on why we
had the Great Depression, what was- That it was the Federal Reserve’s fault, and
it would have just been nothing but a deep recession that would’ve lasted a year or two
had we let the free market work. What’s really interesting, Milton Friedman,
he was writing the monetary history of the United States, so he covered it all. Murray Rothbard, America’s Great Depression,
he covers the 20s and he goes up to 1930 when the depression starts. Then he builds his case that the depression
was the total result of the Federal Reserve manipulating the free market throughout the
20s, and causing the bubble that then caused the crash. Then Hoover actually started all of the economic
policies that Roosevelt institutionalized that became ingrained in our society, that
actually extended the cause of the great recession to become the great depression by redistributing
wealth. My favorite hotel in the world probably is
the Timberline Lodge up on Mount Hood, Oregon. This lodge that was built by one of the programs
that Roosevelt started in the great depression, and the WPA or whatever it is. Roosevelt was there to inaugurate it, and
what they did was they’re taxing productive businesses and then they take a bunch of,
basically they called them hobos then, but homeless people off the streets, put them
up on this mountain up at 5,000 feet, 6,000 feet up, and they’re doing things like weaving
their own cloth, hand pounding their own nails, and they build this beautiful thing with all
these carvings in it and say it’s just a wonderful place. But they’re taxing a business that makes nails
efficiently to pay somebody that makes nails inefficiently, just to give them a job and
some of those businesses that they taxed ended up going out of business. I took these three books, put them in a timeline,
but what’s interesting is Murray Rothbard proved his case that this is what caused the
Great Depression. Ben Bernanke ignores all of that, and starts
his book in the midst of The Great Depression in 1930 and goes on from there. He doesn’t deal with any of what caused it
to happen in the first place, and this is his big thesis that got him nominated for
the chairman of the Federal Reserve. Well, one of the common views that emerged
from the end of the Great Depression was that it was a crisis of demand. That there was insufficient demand, and the
theories were that the government needed to enact fiscal spending in order to generate
the demand required to get the economy restarted again. Right, but the government doesn’t produce
anything, so you have to take it from somewhere else in the real economy, run it through the
government, which is frictional because you’ve got a bunch of government employees that need
to be paid, and then you put it back into the economy, but you’re always putting less
into the economy than you took out. No matter what you do, there is no way that
you can look at it. It’s not a perpetual motion machine. Yeah. Well, I don’t remember what the theory was
exactly. Now I’m blanking on it, that we were taught
in school, but it wasn’t focused on the textbooks that we had, that we used to learn economics
in college. None of them talked about the Great Depression
in terms of debt. In fact, liabilities, monetary policy, money,
credit, that was totally absent from my macro economic courses. The Great Depression was explained simply
in terms of this paradox of thrift. That was the term. It was the paradox of thrift. It was that all of a sudden the economy tips
into a place where everyone wants to save, no one wants to spend. So the government has to step in, in order
to be the spender of last resort. It misses this whole other part of the equation,
which of course Rothbard talked about, and which Friedman was dealing with to some degree
with his point around monetary policy. So you read these three books and- Well these three books, when you stack them
up there, it’s about six inches I guess. It’s like three- That became 18 pages of my book. So I suppose when it comes to economics, I’ve
read a stack of books that’s at least four feet high. The first book you wrote was what? Was that the- Guide to Investing in Gold and Silver, the
Rich Dad Book. Right. When did that come out? That was actually in July of 2008 that it
hit Amazon. So you started buying gold and silver, precious
metals when? It predicted the crisis of 2008 in the book,
which happened just like a couple of months after the book was available. If you were reading Austrian… I mean, I think our views, well I’m not sure,
maybe our views are very closely aligned. I think they may diverge a little bit in that. I definitely think Austrian theory is invaluable,
as I’m about to explain, but I think I have a more nuanced view than I used to have. I used to have a much more total view. A purist view. More macro view. Purist view. No purist view on everything and I can explain,
because I see things now with more of a political lens. I mean anyone that was studying Austrian theory
during that period, would have been able to foresee the credit crisis. Not all the specifics of it, but on the macro
level they’d been able to, and I think that was a big reason for the popularity of Austrian
economics coming out of the crisis. So many of the Austrians got that part of
it right. Now a lot of them got a big part of it wrong,
which was the hyperinflation. That is really where Keynesian economics was
launched in the midst of the Great Depression. John Maynard Keynes’ great paper, was it 32
or 34 that he wrote? Well, I think though… So why I was saying that during the financial
crisis of 2008 after that, a lot of these Austrian theory has got a lot of popularity. What- Yes, I’m sorry. 2008, okay. I would suggest though that I think there
is, this brings it to the nuance. I think that there was a political crisis
in the country during the 1930s, and I think that a lot of times Austrians when they think
about things purely in terms of what is the most efficient way to get from point A to
point B, which is let’s say have a liquidation, have a full liquidation, let the market clear
and then start anew. I think that what’s often missed in those
types of situations is the political instability that that can generate, and that can be overall
detrimental to the economy more so than the inefficiencies that are born out of trying
to manage the deflation, trying to manage the contraction, right? A managed de-leveraging. Do you ever think about that? Like the political consequences? Whenever we’ve let them manage it though,
they cause a bubble that then pops and we have this sudden at least it’s trying to deflate
the economy is. You mentioned people getting scared and pulling
back on spending. That cycle is the velocity of currency. The how many times a unit of currency changes
hands in a year, and that’s always going to be with us. I call it cycle-logical. It happens in waves and cycles, and it’s logical
that it does this. People get scared, they start some event,
trigger event will cause people to spend less and then suddenly the economy takes a downturn. If you leave it alone, it comes back and then
these cycles used to happen on a very regular basis, and they weren’t as deep as they are
now. Now we have the Federal Reserve comes to the
rescue and their manipulations that they create set us up for the next big crash, and the
more they manipulate, the bigger the crash gets. That’s what we’ve been seeing, especially
this century. Alan Greenspan manipulated things. He was afraid of the Y2K bug. Remember that? He added a bunch of liquidity to the market,
and coincidentally the NASDAQ went vertical those same months that he was adding all that
liquidity. Then when they pulled out that liquidity,
the markets crashed and then he lowers interest rates down to 1% to levitate the markets again
and off to the side, out of his peripheral vision, he didn’t see it, but he created this
giant real estate bubble. Well, how much do you think is the actual
open market operations, and the liquidity that’s created by purchasing securities in
the open market by the Fed? How much of it is all the other factors, including
the way in which central bankers try and manage confidence? So you’re talking about the 2001 period. There was also the Bush administration coming
out and saying, “Go ahead and spend, everything’s going to be okay.” The same thing also, I think with with forward
guidance today how much of it is the psychological management that Central Banks do? I think it used to be that recessions would
happen about every four years, and it’s better to have a small recession every four years
than this giant crisis every 10, because with the smaller recessions, people just go, they
know that we’re going to come out of it. They remember one just a few years back, but
when you have these giant economic crisis, they want somebody to do something about it. The next crisis that we have is going to be
their Bernanke burst. It will be something that is direct result
of the energy that is stored by Ben Bernanke warping the economy, when he took interest
rates down to zero and- Central Bank around the world too, yeah. We went from 0.83 trillion, 830 billion to
4.4 trillion was where base currency picked at. Yeah, that was crazy. Right. So we’re talking about- That’s actually one of the scariest graphs
in the world when you look at base money. It is. Now most of that is sitting on banks’ balance
sheets as excess reserves, but here’s something, people are screaming about wealth, income
inequality, wealth disparity. These are the big words of the day. When I look at it, what I see as I did a study
on this and it’s in my upcoming book. I can disclose it because I’ve already shown
this to people many times in videos and stuff. I’ve been showing it actually since shortly
after QE1. So it goes back to 2009, 2010 I think, that
I’ve been showing the correlation between the growth of the base currency supply and
the value of the stock market. The Wilshire 5000 Total Market Cap Index. From December of 2008 to December of 2015,
there is a 0.976 correlation. That means that it was uncorrelated only 2.4,
so it’s a 97.6% probability that these two are connected somehow, that the growth of
base currency caused the stock market to rise. 2.4% probability that it’s an accident, that
it’s just a coincidence. Now, let me finish this though. If you tax people or indebt them in the future
by issuing bonds, and the Federal Reserve buys them to create currency and they buy
them from the big brokerage houses, that’s the primary dealers. They get to show up at the treasury auctions
that are sitting on bonds. The Fed never buys them directly from the
treasury. They buy them from the primary dealers. So it’s Merrill Lynch and Goldman Sachs and
entities like that, that end up with this brand new currency that was just created to
purchase that asset. So that goes on their books as excess reserves,
and there’s a direct correlation to how much currency the Federal Reserve creates and gives
them as far as the rise of the stock market. This is 97.6% correlation. Now, if you cause the stock markets to rise
and it’s the big tech stocks and some of the FANGs, Facebook, Amazon, Google, Netflix,
Apple that have had most of the rise in the stock market. So Jeff Bezos, who has 16% of Amazon, goes
from having $50 billion to having $130 billion. So it’s a direct gift of taxing Main Street,
it’s a reverse Robin Hood. The Federal Reserve is taxing Main Street
and bestowing that wealth on the richest people on the planet, and now everybody’s up in arms
against this wealth disparity, and they don’t realize it’s not capitalism that’s causing
it. It’s not the free market that’s causing it. It’s this manipulation by the Federal Reserve
doing this reverse Robin Hood, stealing from the poor and giving to the rich. Then it’s also cronyism in Washington. All of the lobbyists being able to get special
laws passed for their industries that they’re protected. It’s a lot of things though, Mike. I mean, definitely the monetary policy is
a huge part of it, but so for example is globalization, and so is the information revolution. The fact that companies like Instagram get
bought out for X number of billions, the same year that Kodak goes bankrupt. Kodak had way many more employees than Instagram
had, right? Yeah, it’s unbelievable, isn’t it? Yeah, it is, but it’s the nature of the system. Are you familiar with a book called The Storm
Before the Storm? No. I’m reading it now on someone’s recommendation,
and it is really fascinating. It’s a history of the Roman Republic before
the official period where the Republic began to fall. It was the Republic, not the empire. It’s the Republic. So it’s the early days of Rome, yeah. The subtitle I think is the beginning of the
Fall of the Roman Republic. I’m just early on in reading the book, but
it’s really fascinating because you can see so many parallels. I think one of the big parallel is this phenomenon
where, and part of this is also because of how we measure success in America in particular. America’s particularly prone to this. We measure it in terms of gross domestic product,
right? We measure it in terms of GDP primarily, but
what that doesn’t capture among other things is it doesn’t capture the gross structural
inequalities of wealth distribution, and how does that impact politics, right? Our democratic Republic is set up, it’s a
democracy, right? So if the- Well, we’re supposed to have a- It’s a representative democracy, right. What I’m saying is though there is a place
for the- For the public, yeah. Right, but there is a place for the demos,
and the demos is becoming increasingly disenfranchised, and I think it’s not a coincidence that you’re
seeing a rise of populism, because populism is basically, what is it? It’s when politicians appeal directly to the
masses, right? I think the masses in this case are increasingly
disenfranchised. This is what scares me, because the masses
aren’t analyzing the economics of the situation, and politicians will always promise more free
stuff than their competitor. How do we deal with this thing though? There’s a real problem here, because let’s
say guys like you and me work honestly, we work hard and we’ve played by the rules and
we’ve earned according to the rules what we are owed. How do we disentangle the fact that there
are folks like you and me, but then there are lots of other people that have made billions
of dollars and benefited from these programs and everything else from regulations or whatever
else. How do we fix this problem of inequality,
which in my contingent is it’s unworkable? We’re going to hit a wall. How do we fix that with doing the minimum
amount of damage to people that have worked and play by the rules, and then those who
have basically stolen, whether directly or indirectly, or benefited from lobbyists and
regulations that that work in their favor from decades of accumulating billions of dollars? I mean nowhere was this more obvious than
on Wall Street, where so much of it was extractive. How do you disentangle that? I feel like there’s no clear way to do it
and there are going to be so many people, let’s say, who get punished, who don’t deserve
to get punished and so many people that get away with it. I think there’s two ways of doing it. One is not going to happen, and that is to
start dismantling laws and regulations one after another as quickly as possible and doing
away. One of the things that causes the big wealth
disparity is fractional reserve lending and central banking. Creating currency from nothing is one of the
methods of transferring wealth from one group of people to another, and it’s almost invisible. It’s very difficult. The average person… One of the things that we do with our video
series, Hidden Secrets Of Money, which is free on YouTube. There’s 10 of them now, is to try and explain
complex economic processes with animations, and make it so that people can understand
it. By the way, episodes nine and 10 were all
shot in Rome, and they’re all the parallels of the Roman Republic and the Roman Empire
to the United States today. It is fascinating. So if you haven’t seen that one yet, those
two episodes, I’ve got two animators and these guys worked for probably a year and a half
on- Aden is one of them, right? Aden and Lincoln, yeah and Dan is the producer,
director. He does the scoring and the sound and lighting
and everything basically. He even does some of the storyline, but that
one is worth big screen TV and a bowl of popcorn. You were going onto the politics, how do we
unwind? You can get rid of regulation or the other
one, it goes the direction it goes- That’s not going to solve the… What I’m saying though, Mike, is- It will eventually solve, but if you don’t
have these wealth transfers, you won’t have the income inequality that you have to the
extremes that it exists today. Right, but what I’m saying is that for the
foreseeable future, it’s not going to resolve the problem, right? Like this is a long- It’s not going to happen. We’re just not going to vote for that. What do you mean? You’re saying politically it’s not palpable. Politically, it’s not palpable. So what’s going to happen is it goes on the
course that it’s on until things… You do have a reset eventually. The USSR collapsed, it reset and it came out
of it a much more free market capitalist society, even though they do have, it’s all being run
in- It’s super corrupt, it’s super corrupt. It’s super corrupt, but if you’re there talking,
it’s like in China. That’s also corrupt, but if you’re there talking
to a small businessman, that is the Wild, Wild West of capitalism in China. Okay, but I would say that anecdotes of I’m
thinking of this woman named Svetlana Alexievich. I read pieces of a book that she wrote, which
was an oral history of people living in the post USSR. I’ve read some stuff by Andrew Solomon as
well about his time in the Soviet Union during Glasnost and during the collapse, where he
was spending a lot of time with local artists. It was a really fascinating story, because
the Soviet artists were somewhat shocked by the pricing of their art. Where the works in certain instances of artists
who were revered sold for practically nothing, while what were essentially decorative paintings
by okay artists reached astronomical prices. So they were in effect traumatized by the
pricing of their art. They had never had their art priced before. It’s fascinating, because in America, and
there’s another for listeners, there’s a really great documentary on this called The Price
of Everything, which is- Right, where under the communist system, the
government was their only customer. Well no, they had, I don’t know exactly how
it worked exactly, but the point is that there was a different system by which art was valued. It may not even have been bit about pricing. It might not have even been about like governments
or sales or anything. It’s just that they had a different way of
valuing it. I think the USSR, the collapse of the USSR
and I’m not the best to speak about this, is an interesting place to study. What happens when a country goes from being
highly repressed, it’s economy repressed and with a very authoritarian government, to basically
having those walls just torn down and having markets introduced rather violently into the
country. I think that was this- It’s going to happen in Venezuela very soon
too. Anytime a government promises to take care
of every need of everybody, the end result is a lot of poverty and death and then a revolution. The whole thing falls apart. What is your view about the role of government? What do you think the ideal government would
be? Well Milton Friedman said it, the government’s
job is basically to protect us and set a fair set of playing rules for the game. So you can prove with data, if you go to the
Fraser Institute in Canada, there’s other think tanks that come to the same conclusions. I don’t like to use them, because they tend
to be U.S. conservative think tanks. If I say their name, then people, “Well that’s
just a conservative.” Cato Institute. Yeah, Cato Heritage Foundation and stuff like
that. If you use Fraser Institute up in Canada,
and now you’re talking about a moderate Canadian thing, but they have the freedom of the world
report annually. They’ve been auditing any country that produces
reliable economic data since I believe 1966. It started out with 16 or 18 countries, but
now it’s 157 countries that they collect data on. They’re measuring things like the size of
the government compared to the GDP, the levels of the taxation, the court system, the lack
of corruption and the amount of property rights. Do they have really strong property rights? That’s a key factor in prosperity in a country. The soundness of their currency, do they debase
the currency or do they keep it sound? The economic freedom, the ability to go anywhere
in the world, import, export, buy, sell, invest in and bring home the proceeds of anything
without the government charging big duties or putting in trade barriers or things like
this. Then regulation of the financial markets,
the labor markets, but especially small business. If you over-regulate small business, you just
crush prosperity. They put all these things in a spreadsheet. Now some of them are subjective where you
have to sort of give it a rating, but when you’re measuring 157 countries, it’s pretty
easy to say, “Well, this one’s a six out of 10, this one’s an eight out of 10. North Korea is zero out of 10.” You can give those a rating. Others, it’s really hard data. You put these things into a spreadsheet and
you hit sort, and an amazing thing happens. The countries that go to the top of the list,
the people live almost 20 years longer. They’re happier. They live in cleaner environments. There’s no pollution or child labor laws,
child labor problems. It just goes on and on and on. They have better lives, the freer that they
are. Then the more vehemently the court system
protects their property rights, but without the government guaranteeing that we’re going
to take care of everybody, and they just have to make everything fair. Then once they’ve made it fair and they’ve
said, “We’re going to protect you from bodily harm with the police, we’re going to protect
you from foreign invasion with the armed forces, and we’re going to protect you from fraud
and other things with the court system.” Once they do that and then they just say,
“Okay, have at it. You can all compete.” Then you end up with the society that is the
most prosperous. When you look at this, Hong Kong and Singapore
have been at the top of the list for many years. We hit number two, the United States, I believe
back in 2000 and then we passed the Patriot Act and started falling very rapidly, which
is very concerning because the lower down in this list, the chances are that you’re
not going to live as long and your children definitely won’t live as long. So if you want your children to have longer,
happier lives, what you want is maximum freedom and the fairest playing field. The fairest set of laws. Singapore is not a very free country, but
before you even comment on that- Economically, they’re the most free now. They have more millionaires per capita adjusted
for purchasing power parity than any other society on the planet. Yeah, so let me play devil’s advocate on the
regulatory front, specifically with pollution. You said pollution goes down, but you could
argue that the late 1800s were a much freer periods in America, I mean in that case we
didn’t have any type of environmental regulations. How was the market supposed to regulate economic
externalities, or the let’s say it is in the economic interest of a company to pollute
an estuary. It’s in its own personal self interest, it’s
in the self-interest of every single company to do that. How do you prevent that from happening without
regulation? I don’t have all of the answers for everything. I don’t pretend to, and I don’t want to be
the one to try and come up with solutions. Do you think there is nuance there? Well, I do think that today with social media
and stuff, if a company is found to be a bad citizen and it gets publicized, people avoid
their products. It doesn’t require the government nearly as
much to punish a company. I mean when I do a search for restaurants
on just Google maps, I do restaurants and upcoming restaurants in my area and you click
on them and you see what their star rating is. That’s a perfect example though, because these
are highly manipulated. Google and Yelp, highly manipulate the curation
of ratings. Okay, well that’s one of the things that blockchain… Do you know much about EOS? No, I don’t. Dan keeps telling me about it. Okay, well they’re launching things like Voice,
which will be a direct competition to YouTube, Facebook. And as blockchain starts taking over this
space and we end up with alternatives to Google and Facebook, that can’t be manipulated. It’s an algorithm that is controlled by the
users. So this is all going to happen within the
next few years. You’ve been doing episodes on Hashgraph. Hashgraph and EOS have the possibility of
becoming the rails of the internet. The thing that the internet runs on. These are the only two cryptos that I’ve seen
that could actually do things like run the power grid, run the traffic light system. To time things and get traffic moving better,
run all of the power plants, the dams and do things like secure email and all of your
interactions with websites and so on. So I think we’ve got a good future coming
that way. Getting back to the question, the problem
of the commons has always been the tragedy of the commons where when you’ve got something
that everybody can use, people will try and use as much of it as they can, and not take
care of it and maintain it in a sustainable way. That can be solved by all of the end users,
the people that get to do ratings and be able to write articles and say things about the
company swaying people’s opinions. I don’t know about you, but advertising doesn’t
hold much sway for me anymore. It’s reviews and YouTube and- See the thing though, I think just generally
speaking, I think I have a more nuanced view of this and it’s evolved over the years. After the 2008 crisis, I became a strident. I mean I was already radicalizing before the
crisis. I’ve talked about this often. There was one Austrian in particular, Kurt
Richebäche, Agora Financial used to publish his newsletters and I learned so much from
reading him. Then when the crisis happened and seeing how
the government basically just used that as an opportunity to raid the treasury and redistribute
wealth, it radicalized- That’s what happened. So that’s super true, and that’s just the
reality. It radicalized me, and as was on full display
with Capital Account. I think the way that we approached the subject,
we really skewered a lot of the bankers by name. In some cases we were very critical of Central
Banks. I had even brought on the vice chairman of
the Fed, Alan Blinder under Greenspan and among other things asked him point blank,
why do we need a Central Bank? In fact, I asked this question of Claudio
Borio recently, the Head of the Monetary and Economic Department of the BIS. I got a similarly unsatisfying answer to that
question. I think the reason, although he was more direct
in his response than Alan Blinder was. Alan Blinder said that you guys said, why
can’t we have what we had during the free banking era? He said, “Well, it was called Wildcat banking
because wild cats are wild.” That was his answer stuck with me always,
but- That doesn’t say much. No, it doesn’t say much. Borio’s response was, “It’s largely conventional.” I think that that’s a much more honest, fair
response, but my views have become more- What does that mean? It’s largely conventional. I think what it means is- It’s just is, so it is. Exactly. I think there’s a convention of policy makers,
of technocrats, of people who have high degrees and have studied this stuff. We know what’s best, and it’s safer to let
us- Right, as if they know how to run your life
better than you do. Yeah, well that’s a different story, but in
terms of setting monetary policy, I happen to think, Mike, that there is a case to be
made for having Central Banks managing periods of seasonal illiquidity and acting as a backstop. Granted, we can debate that because there
are inherent risks to that. The point about setting the price of money
has never made sense to me, and I think that was my question to Claudio. In any case, I think my larger point here
is that I have a more nuanced view of this stuff today than I did, but just to bring
it back to something you were saying about blockchain and Hashgraph. Again, even there I think when the internet
began, the visions of it were very utopian, but the societies evolve. The economy has changed. Things that we couldn’t foresee occur and
the internet has centralized. It’s centralized primarily on the software
side. Net neutrality is an attempt to address what’s
going on on the telecommunications layer, but the actual software is a place where there’s
been tremendous amounts of centralization. So companies like Google have a huge amount
of power, right? So here we have the government, and we’re
used to thinking about the government as being a source of evil, which is enshrined in our
constitution. It was the subject of the Federalist papers
of the back and forth between the founding fathers and the conversations they had, but
they could not have foreseen where we are today. I think that corporations, these enormous
multinational corporations represent just as serious of a threat to liberty as the government
does. Absolutely. Okay. So here’s a question for you. The world that I think you and I would like
to live in, is a libertarian utopia that maybe was possible during the late 1700s, early
1800s. Since we’ve gone through multiple industrial
revolutions, there’s way more population, technology has empowered the individual to
such an extent that an individual terrorist acting alone can attack a hospital, which
has very shitty, crappy security and kill people. Increasingly, there are people that could
argue that we could get to a place where a handful of engineers could create artificial
intelligence that could destroy the world. So how do we manage that reality? We live in a new world where individuals that
are so powerful, that allowing for the kind of individual liberties that I know that you
and I both value can lead to the destruction of the human race. I don’t know if you even agree with that,
so I’m putting it out. I absolutely do. Since 2009, I’ve been giving presentations
of the death of the global dollar standard. The world has had a new monetary system every
so often. I mean before World War I, we had the classical
gold standard. Then we had the gold exchange standard between
the wars, and then the Bretton Woods system from 44 to 71. This is the most poorly designed system that
we’re on right now, the global dollar standard, and it’s the longest lived of these systems. I was showing the cracks that were developing
in the global dollar standard, and it began with Saddam Hussein selling oil in euros,
but it’s speeding up and speeding up and speeding up. When I saw the announcement of Libra on Facebook,
now there is like a plot to rule the world by one guy. If you have about half the world’s population
as customers, the U.S. has 330 million people, and here you’re talking about 3.3 billion
people that could adopt the Libra currency and then you’ve got control over that currency. This is one of the… I just don’t like Fiat currencies because
it does give governments control over us. Also in this case, a government isn’t the
only one that theoretically could issue a Fiat currency. Obviously the whole, traditionally it is a
government, but is that where you’re going? You’re saying that Libra would be a Fiat currency,
because it wouldn’t be a cryptocurrency. At least not at the beginning. I don’t know, I didn’t read their whole paper. They didn’t really have, doesn’t sound like- What I read was the senates request for them
to have a more auditorium on development, because the U.S. government is for the first
time shaking in their boots over a privately developed currency. I didn’t know what the death of the global
dollar standard would look like, but we’ve been weaponizing the dollar and using it to
bash other countries over the head with. I mean to use it against North Korea or one
country or another, that’s okay, but when you start doing this on a regular basis, then
other countries want to abandon the dollar. Now we’ve got Europe being able to deal directly
with, they’ve developed a payment system for the Euro that bypasses Swift, which uses U.S.
dollars so they can deal directly with Iran if they want to. Russia has developed a payment system with
China and there’s now futures for yuan and rubles in China and Russia. So you can hedge contracts, and be able to
make a purchase today of something that you won’t have to pay for, for six months and
know what the price is going to be by neutralizing the exchange rates. So one after another after another, and today
the nails in the coffin are coming at the rate of several per week. It used to be that there’d be something and
I would comment on it, and then six months later there would be something else, but now
it’s like I read the news and I go, “Oh my God. People just don’t realize how quickly this
is falling apart.” With the next crisis, the next crisis should
be something absolutely enormous, because one of the things, there’s a term that I helped
to spread initially where I called this the everything bubble. That’s actually incorrect. We’re not in the everything bubble. In my new book, I call it the almost everything
bubble. Bubble is when something runs ahead of the
rest of the economy, and the economy becomes warped. If the entire economy is growing at the same
pace, nothing is in a bubble. It’s all balanced. If wages and real estate and asset prices
and the price of food and gasoline and everything goes up at the same rate, that’s just the
value of the currency going down. Well that’s hyperinflation. That’s what you’re describing. Well, no, not necessarily. Whenever an economy grows, things growing
at the same rate. When it’s growth that introduces instability,
that’s one sector growing faster than the others. It’s warped and that sector, the stock market
or real estate, usually it’s an asset where if you lower interest rates real low, you
push real estate into an asset because it’s a real estate, interest rate sensitive. If you create a bunch of currency and give
it to the big brokerage houses like Ben Bernanke did, you create a stock market bubble. When something grows a whole lot faster than
the economy over a period of time, now you’ve got a warped economy where once in the market
is always trying to set these things in balance. So sometime or another, some event will cause
this thing to break. They say that it’s a crisis, that the free
market isn’t working. No, the free market is working. It’s overwhelming their manipulations, and
the greatest manipulations in history took place with the crisis of 2008. Now we’re still pushing on this string trying
to get the economy to go, and we’re starting to cut interest rates ahead of a crisis here
and stave it off. We started this administration with tax cuts
at the end of the longest economic expansion now in history. We’re doing tax cuts when there’s something
inevitable, which means you have less emo once it does happen. So I think we’re in for one huge crisis here. It’s going to be bigger than 2008, because
the greater the manipulation, the greater the release of energy when the crisis finally
arrives. So this isn’t the everything bubble, it’s
the almost everything bubble, because they have pushed stocks back into a huge bubble. They’ve pushed real estate into a bubble only
in the areas that are effected by those stocks. When they raised the stock market and caused
this wealth transfer to the FANG stocks, Seattle real estate, where Amazon is and all of Silicon
Valley. Any area that is heavily affected by the stock
market is where the real estate bubbles are. So that’s going to be crashing, and so will
bonds because we’re in the longest bull market in history with bonds, and they’ve pushed
that into a bubble by cutting rates down. That’s a manipulated bubble- So we do live, there’s no- By the way, doesn’t 0% interest rates and
negative interest rates something that was not a concept until 2008? Negative interest rates weren’t a concept,
and we’ve had them now since 2008. Doesn’t that say to you that the emergency
never ended? You’re saying we have them in the United States
in real terms? In real terms, but in Europe. About a quarter of all the world’s sovereign
debt is negative right now. So doesn’t that say that if any country anywhere
on the planet is still issuing negative yielding bonds, doesn’t that say to you that there’s
still an emergency? I think first of all, I don’t know what it
says to me anymore. The real answer is I don’t know anymore. I’ve lost my compass. I think — I think all of it is caused by the Keynesians
though. If the market was doing this, the market could
never set a negative interest rate, it just won’t happen. Right. Well, I mean I think for example, the point
about negative interest rates also though reflects this gross wealth distribution, because
you’ve got a very small number of people that own a huge amount of the liabilities. So for them to get a return on their investment,
first of all, they’re out competing each other. So they’re driving yields down, and also yield
need to be low enough to maintain the crop yield. In other words, to maintain the crop. In other words, my point is that they’ve managed
this enormous wealth transfer in part by generating so much debt, and the accommodative monetary
policy is part of that process. So I guess what I’m trying to come back to
again is that I don’t view it as just an issue of monetary policy like I used to. I don’t see it as simply monetary policy. I see it as part of much larger story, and
I think what’s at the center of it is the private sector debt and the private sector
debt as a mechanism for transferring wealth. That’s not sustainable, that we don’t have
an ownership economy anymore. There there’s a huge chunk of America that
doesn’t have a piece of the country, and how is that supposed to work basically? I mean, you grew up in a different world. The world that you grew up in, there was a
middle-class. There is not a middle-class today, and I just
think we’ve gotten so used to it that we don’t- I think we do have a middle class, but the
most of the middle class has a negative net worth. When I walk the streets of New York here,
I see a whole lot of people driving BMWs and Mercedes, and they’re on their cell phones
and all that kind of stuff. It’s interesting people talk about the poor
and that when anybody says the rich get richer and the poor get poorer, that’s not true. Around the world, people are coming out of
poverty quicker than at anytime in history, and this is just data. When you adjust things for inflation, the
people that living on a dollar a day for instance, or $10 a day, there’s fewer and fewer of those
people every year at a rate that has, we’re reducing poverty around the world. A poor person today is poor, but they have
cable TV and a cell phone, possibly an iPad. We’re running up against the hour, Mike. I want to shift and make sure we get to cover
Tesla, because I know that you and I don’t share the same views on Tesla or Elon, and
this would be a good opportunity for listeners to get an alternate take. We’re going to move it now to the overtime
for regular listeners, you know the drill. If you’re new to the program or if you haven’t
subscribed yet to one of our three Patreon subscriptions, you can do so now by going
into the description section of this podcast, and clicking on the Patreon link which will
send you to patreon.com/hiddenforces, where you can sign up to one of our three subscription
tiers. The audio file gives you access to the overtime,
every overtime we’ve ever done as well as a RSS link that you can include in your favorite
podcasting application, so you can hear the overtime just like you hear the regular podcast. Autodidact subscribers get access to that,
plus all of our transcripts going back to episode one. And super nerd subscribers get access to our
rundowns, which are these multi-page beautiful documents, full of links, pictures and reference
material that I use in preparation for the episode. This week’s episode doesn’t have a rundown,
but all our prior episodes do. You can sign up to that again at patreon.com/hidden
forces. Mike, stick around. We’ll be right back. Today’s episode of Hidden Forces was recorded
at Creative Media Design Studio in New York city. For more information about this week’s episode,
or if you want easy access to related programming, visit our website at hiddenforces.io and subscribe
to our free email list. If you want access to overtime segments, episode
transcripts, and show rundowns full of links and detailed information related to each and
every episode, check out our premium subscription available through the Hidden Forces website,
or through our Patreon page at patreon.com/hidden forces. Today’s episode was produced by me, and edited
by Stylianos Nicolaou. For more episodes, you can check out our website
at hiddenforces.io. Join the conversation at Facebook, Twitter,
and Instagram at @HiddenForcesPod, or send me an email. As always, thanks for listening. We’ll see you next week.

26 Comments

  • Damien Wright

    The Austrian theory view post 08 of hyperinflation is right , the effects of QE haven't or are just about to be reviled .
    Interesting so many unicorn money loosing companies are creating deflation in price to consumers because of inflation investment , its distorting capital of smaller companies , but when these unicorns collapse inflation reflected in price will no longer be repressed .

  • John Smith

    Mike Maloney, the dumbass, spoke out of his ass regarding Venezuela.
    There should be a rule that prohibits these smug over-intellectualizers from expressing their worthless opinions on matters that they are morally unqualified to talk about.

  • Hidden Forces

    Hidden Forces is listener funded. We rely on you to help us keep the program free of corporate advertising. You can help us do that by subscribing to one of our three content tiers through the Hidden Forces Patreon Page. All subscribers also gain access to our overtime feed, which can be easily be added to your favorite podcast application. Your support is deeply appreciated. Subscribe to Hidden Force here: http://bit.ly/HF-Patreon

  • Bangkokdude Phuket

    What was the name of the high end audio manufacturer? Would really like to know.
    Audiophile and Tesla owner myself.

  • GoldSilver (w/ Mike Maloney)

    Thanks for having me on your show Demetri, this was great fun. To any of my audience who have come here to listen to the whole interview – please subscribe to Demetri's channel, and sub to his podcast on iTunes etc. He has some of the best content on the internet. Enjoy, M.

  • Michael Noeldner

    You helped open up the financial system to me in 2010, been following you and other's since. I believe you changed my family's future and absolutely gave us the confidence to invest in ourselves to prepare for what's coming. Forever great full and Thank You. Mike Maloney.

  • John Smith

    With the advent of high-frequency trading and supercomputers. Who's to say that this crisis won't drag out for the next 100 200 300 years? Look at all the old Europe countries where they been a slow decline for centuries . There's no guarantee that we're gonna have a crash like 29 or the .com crash or 08 . Although it would be a healthy thing I'm just saying we have technology now that was never available in previous economic comparison

  • jackgoldman1

    Libra is dead. No one cooperates. It's been repudiated. What we are going backwards to is each bank issues it's own currency, backed by gold, just like 1850. Everyone is issuing their own credit card, their own crypto. We are devolving.

  • hooverdog1957

    Of course Mike doesn't have the answers. That's what the free market provides rather naturally. No one can predict in advance what new innovations are on the horizon. Yes, the state is just friction to these innovations happening more quickly and with better efficiency and less corruptly and more ethically. The real point to all this mess is either you are free or you are not free. What happens without freedom does not justify the ends. Mike understands this concept and the problem like he said in politics is that people vote for free things not freedom. Hats off to you Mike. I've been a follower of your channel for several years and saw you at Anarchapulco and wish I would have had a chance to have a few friendly words with you. Maybe we will cross paths again and I'll take the initiative and start a conversation.

  • lrevengek

    The host pretends to be an Austrian and libertarian, but continuously pushes some liberal ideas of regulation and the likes. When you are not guided by principles you will get lost.

    He did defend at some point the central banks, talked about managing(regulating) private businesses and a few minutes later complained about the powerful corporations. You can't argue both. You either defend free market or you don't. You cannot defend regulations and then argue against big corporations.

    It's the regulations that kill the small business. It is the small business that is the natural predator for the large corporations.

  • El Sols

    No offense to the host, because I don’t listen to this channel and therefore do not know his background or style.. but he spends a lot of time talking over his guest instead of listening.. and then making assumptions about what he thinks he knows concerning the subject matter.

  • abeoist

    41:13 Correlation is not a measure of the probability of a connection between two variables. It shows how well you can describe 1 variable with another. So in our case, a 97,6% correlation between the base monetary supply and wilshire 5000 means that 97,6% of any change in the monetary supply will be reflected in the wilshire index. And there's close to 0% probability of it being an accident.

  • Markus7 - Gold & Gold Backed Cryptos

    Loved Mike, hated the interviewer…constantly interrupted, talked over Mike and was arguementitive in parts. I wanted to listen to Mike not the interviewer…

  • Hoof Grip Weightlifting

    I love Mike. He’s one of the good guys. I just wish he didn’t support cryptos. Call me traditionalist as far as being gold and silver big. Call me cynical. But I don’t trust cryptos. Regardless, i will continue to listen to Mike. I listen to all but I follow none.

  • Wendy Bevan

    1. Guest's conflict of interest as a trader/ seller of au & ag but not platinum?
    2. TESLA'S impending competition from latest electric vehicles manufacturers?

Leave a Reply

Your email address will not be published. Required fields are marked *