 Manual. Hey, Ron, and incidentally, Jonathan, I really enjoyed your episode on AR, the Ardnan Center in the UK. Hearing about your background and the careers was really interesting. Hopefully, you'll hear more about it. Thank you very much. Thank you. Not to get on your own show and compliment you, but. Oh, that's fine. That's fine. Thank you. Ron, something I've been wrestling with for a long time. And you mentioned it on a few episodes of the long-term implications of massive government spending. It's challenging to communicate, or even to understand really what those impacts are. The day of reckoning of inflation really has not happened. You mentioned things like that sort of spending has destructive, really harmful economic impacts. And I'd love to hear more about your thoughts on how to measure, how to identify. You mentioned, too, that the Fed does all sorts of things to distort and hide impacts of inflation. But I'd love to hear your thoughts on how we better measure and understand the harmful impact. The tragic fact is that it's very, very difficult, maybe impossible, to actually measure it, right? Because we don't have an alternative universe in which the Fed didn't do what it did, it's hard to tell what would have happened. And so because the effects of the Fed's behavior much more have to do with what investments happen versus what investments don't happen. Have to do with the fact that the economy grows slowly because so much money is spent on consumption rather than investment. It has to do with the fact that a lot of companies that should go bankrupt and free up their capital and reallocate it and stop wasting our time, in a sense, by selling us products, time and money and effort are still in business. I mean, this crisis, the number of zombie companies today that are in existence because the Fed has bailed them out repeatedly really since 2008 is stunning. So how do you measure the dragon economic growth of companies that should not exist, right? The companies that are running are barely paying off their debt, only can pay off their debt because interest rates are so low and during 2020 could only pay off their debt because the Fed basically bought their debt, bailed them out to a large extent. What are called zombie companies? I don't know how many they are. There's probably hedge funds that should be shorting them, but also probably afraid to short them because they won't go bust as long as the Fed bailed them out. So it distorts things in so many ways. It's so difficult to tell what could have and would have happened, but that's the main thing. So it doesn't pop out for another example, right? Without the Fed, I believe that prices would be dramatically lower today in almost everything that we buy. So the purchasing power of your dollar would be significantly higher, particularly things that are imported, particularly things that, but generally things that are in the marketplace. So our standard of living would be higher, but again, how do you measure that versus what? Because our standard of living is still increasing. It's just not increasing very fast. And I'm saying it would increase really fast and people go, yeah, but how do you know that? That doesn't, right? So there's no measure of it. And that's partially how they get away with it, right? Because if people could actually, if they had a mirror that showed them what the world could be like, they at least some of them would desire that world and would fight against it. Yeah, that's a really helpful way of thinking about it. I guess even on a simpler, and that all makes a ton of sense as well, even on a simpler not, I mean, CPI, if the quantity of money is increased, chasing the same number of goods, you would expect to see price inflation increase. I mean, so all the economic effects you're describing make a ton of sense, but why is it that is CPI not a good measure of price inflation or are there other? Well, first of all, if short of the fat increasing the money supply, prices would drop, then the increase in the money supply might be just raising prices enough to keep them stable. So why is CPI zero the ideal? CPI is consumer price index, right? And there are lots of other measures, that's just one measure, but you can measure inflation, you know, PCE, which is the something cost, anyway, I can't remember, but there are lots of these measures, but if those were gonna drop and you're increasing money, then maybe they're stable because, and I believe that given China's entry into the world economy in the 80s, 90s and 2000s, that prices should have dropped dramatically because productivity, global productivity, which is what matters in a globalized economy, global productivity went up dramatically. And in a world in which the dollars, the reserve currency, you can print a lot of dollars as global productivity is going up significantly and not having not dry prices up because productivity is driving prices down faster. So the fact that it's flat is one. Second, since the financial crisis at least, people have not really been engaged, the velocity of money has been low. Most of the money sits in bank accounts, most of that at the Fed. So a lot of the money the Fed so-called created just sits in reserves, it never entered. So you've got, so now I think it's gonna be different because, so here's a thought which comes out of modern monetary theory, which I, and I hate to give them credit for this, but there is a certain truth to it, right? I'm speculating here, but see if this makes sense, right? In a world where interest rates are close to zero, I'm most interested in what Jonathan thinks of this. In a world that where interest rates are close to zero, bonds are money, they become money in a sense money because you can easily monetize them because there's government bonds, right? Because there's no risk and no inflation and no, there's no interest rate risk because they just treat this as close to zero as possible. So they are almost money substitutes. So is it inflationary if the Fed buys bonds? You could argue that by buying bonds that you're placing one form of money with another form of money and that the real inflation is caused when the government runs deficits and creates the bonds, not when the Fed is buying. So in a sense QE by the Fed just buying up a bunch of bonds already in distribution didn't increase the money supply in a traditional sense because they were just replacing our money substitute for money. Now if bonds are trading at 10% interest rate, then they're not money, they're not money substitutes because they've got risk, there's inflation and they're getting income. But when they're trading it below 1%, right? Which are treasuries are, right? What's the difference, right? I could go to the casino and hand in a gamma treasury and get cash and get chips and reverse. And people do that all the time. They use their bond portfolios, collateral for all kinds of investments and stuff. So the money's there already. What is really increases the quantity of money is massive bond printing and bond issuance. And while the government has been running deficits over the last decade, those deficits have been nothing as compared to what it's just done over the last year. Isn't this essentially- I would say the current stimulus, the four trillion maybe going on five, maybe going on six, we'll see if what Biden gets. This is truly inflationary, not what the Fed is doing but what the central bank is doing because it's creating new money by creating these new bonds. Some of which are being bought by the Fed and being turned into cash. But most of which staying bonds but with interest rates close to zero which the Fed again is doing, they're basically money. And that I believe is going to be inflationary. That's why I think this time you are gonna see a spike in prices. Global productivity also is not increasing at the same rates it was in the 80s, 90s, 2000 or even over the last 10 years because China's slowing and Africa hasn't picked up yet although some increasing productivity yet and there was some increasing productivity in Asia but it's just not on the same scale as it was. So if I had to bet right now, I think this time it will be inflationary. How bad, hard to tell partially because you have to factor in increased productivity in all these other countries which I don't think most economists do. I'm sorry, are you gonna say something? Oh, yeah, sorry, I kept interrupting you. I'm reminded a little bit of what I've learned recently about the Social Security Lockbox works. Tax dollars come in, Social Security Trust Fund literally uses them to buy bonds which then pays the treasury cash which it can then spend on whatever and all they have is this bond equivalent. Which means all they have is IOUs. So the lock box at Social Security has IOUs in the federal government. Now the IOUs are good because the federal government can print as many as they want but at some point there has to be a point where the government is gonna have to face the federal government will have to face this dilemma. Either we have hyperinflation because we print huge amount of money or we default on the debt. Now it's true that these bonds at 0% interest rates are money already. But if interest rates have gone up which you'd expect them to go up as it's pouring in more and more money and Social Security is broken, everything like that. Then interest rates are high. Now you're issuing money to pay back to buy the bonds. Now you're creating a ton of new money. Now it's hyperinflationary. And would the federal government default on its obligations? And while MMT claims governments that have printing presses don't have to ever default. That's true. But hyperinflation is arguably worse than defaulting. So at some point that happens you can't tax your way out of this. So Daniel says hyperinflation default or tax you cannot tax your way out of it. The amount of debt they're taking on is so large that who are you gonna take the money from? There's just not enough people to take the money from. You could tax all the rich at 100%. You wouldn't get the money you need to pay off the debt. So and once you start taxing the middle class I mean, basically you're giving the middle class money, right? That's what Social Security Medicare is. The middle class, the entitlements are middle class redistribution of the wealth. The redistribution of the wealth towards the middle class. So that's why they're untouchables, right? If these were for the poor, they would be touchables. If these were for the rich, certainly they would be touchables. That's why the Democrats are very smart. Anything you do to the middle class you can never touch again. So if you want a social program that you want forever, so the government has control forever, you do it for the middle class whether it's a tax cut, they always tax cut taxes to the middle class. They don't care about the poor. They care about their voters and their voters are middle class. What we need today, what I call the new intellectual would be any man or woman who is willing to think. Meaning any man or woman who knows that man's life must be guided by reason, by the intellect, not by feelings, wishes, wins, or mystic revelations. Any man or woman who values his life and who does not want to give in to today's cult of despair, cynicism, and impotence and does not intend to give up the world to the dark ages and to the role of the collectivist brought. All right, before we go on, reminder, please like the show. We've got 163 live listeners right now. 30 likes, that should be at least 100. I figure at least 100 of you actually like the show. 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