 This weekend we're back with part two of an interview with Patrick Barron on the very important topic of monetary imperialism. Patrick and I delved deeper into US dollar supremacy and how it might come to an end with a whimper instead of a bang, how the Bundesbank is a potential savior for the world monetary order, while the IMF is a paper tiger, how elites will have an increasingly hard time denying gold its role in the global monetary system and how America's fiat dollar corrupts cultures as well as economies. Stay tuned. Ladies and gentlemen, welcome once again to Mises Weekends. I'm your host, Jeff Deist, and thanks to Patrick Barron for returning for week two of a very interesting interview on the topic of monetary imperialism. Patrick, you were just talking off-mic, and I want to continue that thread of thought. Now, we both know that the rest of the world has to understand that the United States is never going to get its fiscal house in order. So does this mean, in your view, that the rest of the world understands that it's basically US military might serving as the implicit backstop for the US dollar? Well, and I think our military might is being called into question because our military might is dependent upon the strength of our economy and our economy is being weakened. I'm not very happy with our military might. I think that our military might is being used up in all these wars. Again, I've got a pretty good authority because I'm an old Air Force guy myself that our Air Force is not as strong as people would like or we would like to have others believe it is. We're using up our Air Force men, we're using up our airplanes, we're not replacing them. They're in effect, they're just being worn out, they're being spread in all over the world. It just sort of, I don't know, to me, it reminds me of what I read about the British Empire at the beginning of the end of the British Empire. They supposedly controlled 40% of the Earth's surface with very small military forces and when someone kind of, you know, pricked that balloon, it all collapsed, it was shown that they just, they couldn't defend it. I just wonder if we're not doing the same thing. In fact, I think we probably are. Well, I'd like to talk to you about how this process might occur. In other words, slowly or rapidly as a result of certain shocks, you know, Papu Cannon wrote something to the effect that a collapse of a major fiat currency like the dollar or the euro will result in one of two things. Either one, a rapid return and all out return to local sovereign currencies of yesteryear or perhaps the imposition of some sort of monster global currency imposed by the IMF or the UN. So I'd like your thoughts on that. Well, if we, if there's some kind of a shock and it could be something that we don't really think is all that important at the time, but it turns out to be just whatever breaks the confidence in the monetary order, then it could, it could result in an attempt at sort of financial fascism and that the IMF would order us around and the Fed and the Bank of England and the European Central Bank, et cetera, would go along with this. But it would, that would not really be an answer. It might, you know, it might push us down the road even further, but it would not really solve any fundamental problems. It would just mean that we push the whole inflation problem from a handful of central banks that are inflating their own currencies to one international central bank that engages in, in complete worldwide monetary inflation. That's not an answer. That is just continuing the same rot. I don't think that will solve anything, but it could happen that that would be the next step instead of a step of returning to a more liberal and with a small L order of sound money, sound national currencies that are exchanged for gold and or silver. That to me is the answer. That is the solution, which of course people in government don't like that solution because that means that they can't spend, their governments can't spend whatever they want. They, that means their governments have to be responsible to the people because they have to either tax the people or go to the people honestly and ask for honest loans. Well, they don't want to ask for honest loans and they, you know, because they would rather just print the currencies. So I don't really know if we can predict which of these, which of these things would happen. I, you know, I'm kind of pessimistic in that whenever there's some kind of anymore, whenever there's any kind of problem in society, no matter what it is, everybody looks to the government to cure it for them rather than to look to themselves or to say, well, what, you know, what is the, what is the market solution? What do people really want to do? So I think if there are a problem with, you know, the international financial system, we would probably see, you know, some giant meeting of the G 20 that would get together someplace and come up with some huge supposedly solution that might be worse than what we had, but it might live along for a few more years like that. I hope not. I would hope that we by that time, you know, that people would have listened to people like Ron Paul, who was telling us all along that, you know, we're going down the wrong path and we've got to return to sound money because it's only sound money that can allow us to have a sound economy. And that's what we all want is, you know, peace and prosperity, and we can't have peace and prosperity if we don't have sound money. I think that's what we're seeing right now. Well, you mentioned that a shock could occur that we don't really recognize as necessarily a hugely important event at the time. I'd like to get your thoughts on this idea of the collapse or potential collapse of the dollar in this sense. We have historical examples for instance, Germany, Argentina, where national currencies contained in a geographic area, let's say, have collapsed. But we've never had an instance in history where a worldwide reserve currency collapsed. What do you think it might look like, at least in the short term? Well, I think I think what might happen is that it would result in a huge inflation in the United States because a likely scenario would be that China decides it just is not going to, not going to hold dollars anymore. It's not going to, and again, I want to make sure everybody understands it's not really actually holding dollars or holding treasury bills. We're not going to hold treasury bills anymore that we buy with our excess dollars that we get from our, from our export economy. We're going to start phasing out of those. And we're going to, so they say we're no longer than when we, we're no longer going to take these dollars. And by treasury bills, we're going to take these dollars that we're getting and we're going to buy American goods. People may say, well, that's great, buy American goods. Well, we're not really at any given point in time. America is only producing so much. So if this flood of dollars, so if the Chinese say, well, we're not going to, we're not going to roll over our treasury bills, we want dollars that we can spend, then the United States government would have two options at that point. They could say, well, we can print money, just print dollars for the treasury bills and give it to the Chinese. And then the Chinese will spend those dollars in the United States and cause a great inflation in the US because it would be a great increase in our supply, or we can allow interest rates to rise so that Americans will start buying more treasury bills voluntarily. Interest rates will rise with, which will throw the United States into a recession. I think what they were probably just print money because that's what they've done all along. So I think a very likely scenario, as likely as any, is that central banks of the world decide to get the heck out of dollars, just like the central banks in the world over a period of about four or five years from the late 60s into the early 70s, decided that they wanted to trade in their dollars for gold at the Fed and that drove America off the gold standard. The same kind of thing could happen with central banks deciding they did not want to hold American treasury bills, which represent dollars as a reserve currency anymore, because they just don't trust it. That could cause a gathering, kind of a gathering storm, so to speak, of like-minded central banks. All of a sudden there is a run to get rid of your dollars and buy something of real value, farmland in America, American stocks and bonds, goods and services, and just cause, in effect, a great inflation in the United States. I think this is a likely scenario, and I wish it wouldn't happen that way, but unless we suddenly get monetary religion and get our budget in order, stop fighting all these wars and stop borrowing so much money and loosen up the American economy, get all of our alphabet industry, alphabet agencies of the government that are stifling American industry, unless we start abolishing those or rein them in, I think it's very likely to happen that way. But you talk about the tremendous dollar holdings of the Chinese, for example, it seems that many people who bemoan US trade deficits, they don't understand that we have needed this huge outflow of dollars decade after decade. That's what a reserve currency requires, right, is an outflow of US dollars so that the rest of the world has dollars to use to buy oil, to settle international payments, whatever it might be. Well, I'm not sure that they actually need those dollars. They have used the dollars as a proxy for gold, but they can use other currencies. It's just whichever, so far, you know, when we look around the world at, well, what currency do you trust? You have to admit that, well, you know, these currencies are not all that trustworthy. I guess the US dollars is trustworthy as any. I mean, I would trust the US dollar over the Chinese Yuan, for example. I don't know what the Chinese are going to do with Yuan. I'm not even sure I trust their statistics over there. I'm not sure I would trust, you know, any kind of currency that the Russians would come up with. They would have a hard time, these countries would have a hard time gaining the confidence of the market. So this is one thing that keeps the dollar financial monetary imperialism going, is that there's no one else who has really stepped forward that is more trustworthy. But I get back to the country that I think is very trustworthy is Germany. The German bankers, if you recall, German bankers keep saying, they're central bankers, they are not in favor of inflating the euro. They want to, they want to sound hard money. They want honesty in banking. And frankly, I would trust the Bundesbank more than I would trust the Fed. And I would love to, right now there's kind of a, there's sort of an unofficial war going on in Europe between the Bundesbank and the European central bank over whether the European central bank is going to be allowed to continue to inflate the euro at a higher and higher rate. And the Bundesbank is getting very nervous about this and doesn't want that to happen. My prediction is that the Bundesbank will win that war. I don't think they're going to allow the European central bank to inflate the euro. And because if the, but it looks like the European central bank may, may just go ahead and do it anyway. And at that point, Germany, if they're smart, would leave the euro, which would be a good thing for them. It would be a good thing for Europe and it would be a good thing for the United States to be a good thing for the world because it would start this, this cycle, this virtuous cycle of, of other central banks being forced to strengthen their currency because a major world nation, a major trading nation in the world has its own currency and is not going to depreciate its currency as much as the rest of the world. And so gradually people would want to use Deutsche March to settle their trades instead of dollars, instead of yuan, instead of euros. So I think that is a likely scenario that could happen. And that's what I keep hoping will happen. And I'm seeing some encouraging signs out of Europe now that, that the Germans just are not backing down over this issue. Patrick, I'd like to get your thoughts on how elites view this issue and how the IMF might play a role. So the IMF issue, special drawing rights, SDRs, which really just represent an exchange claim for currency among IMF member countries. But just as the dollar once represented a claim to money and it wasn't considered money itself, could SDRs morph into an actual global currencies, at least if the elites had their way? Well, I don't think, I don't think so. This, it could be something that is attempted in the Pat Buchanan thing where he said, you know, there might be a, there, the IMF might try to impose a world currency that would be a special drawing right and a read denomination, you know, redeeming it and redefinition. I, as I said before, this is not a real answer. I don't think that it would, I don't think it would be accepted by the world. I, the IMF is an anachronism. People probably don't realize the start of the IMF, but the IMF was also formed at the Bretton Woods Agreement or it was, it was voted to decide that the IMF would be formed at the Bretton Woods Agreement. And the purpose of the IMF was to make sure that the United States did not inflate its currency. Right. So the IMF failed from day one. The US just inflated its currency anyway. So the IMF has been searching for some kind of role ever since. And, and so again, you know, we should just shut down the IMF. It's just meddling in world affairs, giving bad advice to developing countries that they should not listen to. Right. I just, I don't put a lot of credence in the special drawing rights are going to become the next world currency. Well, that's encouraging. But, you know, it's interesting to note that the left uses the term monetary imperialism as well. Often when we're talking about the IMF, the left means in the context that, that richer countries, economically richer countries are pushing huge levels of indebtedness on third world countries in effect. Well, again, the third world countries are following the wrong economic model themselves. No country can really force a bad economic policy on another country against its will. It's just that the other countries elite find that it's good for them to inflate their currencies or to go along with the monetary imperialist. They don't have to do that and they shouldn't do that. But there, so there is a Philip Bogus who wrote the tragedy of the Euro about, he wrote about four, four years ago, and he updated the book a couple of years ago. Philip Bogus made the point that there is more in common among the elite internationally than there are, than the, than these elite have with their own people. For example, French bankers have more in common with the Italian bankers than French bankers have in common with their own French people. In other words, there is an international elite that are all living well, hold a lot of power, hold similar fallacious economic goods, they all are economic ideas. They all went to the same colleges and universities and were instilled with the wrong ideas. So they are a very tight elite all over the world and they don't really have a lot in common with their own people and they're supposed to be representing their own people. And I think that that this is a problem. So I'm not surprised at all that the elite of the world, you know, they all would probably think that, you know, having a one world currency is a great thing. But I don't think it would be good for their people. And I think they're completely out of touch with their, with their own people when they, when they recommend these things. Well, Patrick, we've got the upcoming Swiss gold referendum. We know that Asian central banks, even Asian households are buying huge amounts of gold. Do you think the elite will ever be forced to accept a role for gold in the international monetary system? Well, I think they they could be forced by by political forces. Yeah. And this could be that there are probably a lot of maybe some of our listeners who really have, aren't aware that the there is a referendum in Switzerland. It's going to take place at the end of in November, November 30th, where the Swiss will vote on whether their central bank, the Swiss central national bank should repatriate all of its gold that is being supposedly held in central banks around the world. And I say supposedly because no one will allow an audit. The word is exactly there, but let's assume that it is there. I think that this is the kind of this referendum is the kind of thing where the people are going to have their say. And I cannot imagine a Swiss government that would ignore this referendum is if the Swiss people voted to in favor of this referendum. I can't imagine that a Swiss government would last very long and said, well, we're just going to ignore that referendum. I think that they would probably do it, that have to do it. And this maybe this is the is the international incident that triggers the whole thing. That triggers the whole sort of collapse of the monetary imperialism of the dollar in this and the inflation of the euro and the yuan and all the other currencies. And this might be something that would force the central banks to start looking to their gold reserves. And if because it looks to me it's referendums like these that tell me that there is a great well of knowledge embodied in the people that know that something is not right. And they know that gold is gold and they know that papers paper and they would rather have the gold. The Indians certainly understand that. The Chinese understand that. And I think Americans and Europeans understand that despite all the propaganda from the elite and in America and in Europe that you know gold is the you know what is that the relic or something that should be a barbarous. Barbarous relic became sensitive. Well it's no such thing. It is not a barbarous relic. Gold is gold and papers paper. And I think that perhaps this upcoming Swiss referendum could be the trigger. So I hope the readers pay attention to that and we'll see what develops. Well one thing we know about gold apart from its exchange value at any point in time or history is that for many centuries it has always been accepted as a form of payment across cultures across countries and across time. Right. Yeah. From time immemorial gold has been has been used as as money. It's accepted anywhere. It's we are not used to dealing in gold physical gold but we did up until the mid 20 or early 20th century anyway. And people knew gold when they saw it they knew what it felt like they knew what its weight was they knew what it sounded like you know we see you know we'll see maybe in some old cowboy movie in America that you know somebody throws over a ten dollar gold piece to somebody and he takes and he bites it you know. Well that's what used to happen is you know it has a certain feel to it or they would stomp it on it when they wouldn't counter it had a certain sound to it to know that it was really gold and not something not some base metal. And gold has you know has other uses you know it's not only decorative uses it has the industrial uses. So there are you know gold there's only a certain amount of gold it's in the world that is extent right now. It's it gold is mined every year but in a very small amount because it's not a people think that there's a big vein of gold like there's a vein of coal in the Appalachians or something but that's not really what it is gold is small little particles that are in tons of earth and it takes a lot of processing to get a little bit of gold out and it's actually a cost to doing that. So when the you know when the cost rises too much then gold production slows down. So it's not something that can be manufactured easily. And that's this is why you know gold over the over the millennium has been accepted as a unit of exchange because it retains it retains its luster the only way to destroy gold apparently is to burn it and all the gold that's ever been mined in the world that has not been burned or lost at sea at the bottom of the sea some Spanish galleon is still still in use and even when they find a Spanish galleon that's been lost for several hundred years and they find the gold at the bottom of the sea they pull the gold up and it is just as good as it was then it doesn't tarnish even if it's been in the in seawater for several hundred years. So I mean this is this is the perfect unit of exchange that all societies have recognized from time and memorial and you know why we this is what we really need to return to is probably is a gold standard. Well say we need to return to that nothing we wouldn't I do not recommend that governments impose the gold standards or but that if there were a free market and money production that the people would would recognize gold at least as one of the major currencies gold and silver would would undoubtedly be used as two of the units of exchange that would be accepted voluntarily by all the people of the world. Patrick I would like to leave you with just one last question today we've been speaking a lot about Germans today in German economists I'd like to bring up another one Guido Hulsman he's written quite a bit about the cultural consequences of a fiat U.S. dollar for example changing time preferences discouraging thrift even somewhat interfering with the family structure. So as we finish up this discussion let me just ask you is the U.S. dollar also a cultural weapon of sorts that in effect Americanizes the world. Well yeah and I agree completely with with Professor Hulsman in this and that it's used to corrupt people it's used to corrupt Americans it's used to and Americans use the dollar to corrupt the rest of the world. The dollar is used to corrupt Americans by our welfare system. We it's just terrible what we've done in America by trapping several generations of people in the welfare system that is that is a that is possible only because of this the printing of the dollar in massive amounts. So it does it has ruined its ruined families in America and I'm sure that you know as the dollar is used overseas as a reserve currency head it has the same pernicious effect all over the world but I know I think we have to look at where America's sort of cultural decline began and it began you know with Lyndon Johnson's great society programs in the 60s that were made possible only because we went off the gold standard in 1971 and could be continued and expanded and that is where America's cultural decline started and we're seeing the the results of that today. So yes I think that the printing of any fiat currency in massive amounts allows the government to spend money on to buy votes that has a terrible effect upon the cultural structure of the nation and we're seeing that in America. That's a very good point that Professor Holson makes. Pat Barron, thanks so much for coming back and joining us that was a fascinating interview. We hope to have you on again in the very near future. Ladies and gentlemen, have a great weekend.