 I recently joined my good friend Jay Taylor, who's the host of a radio show called Turning Hard Times into Good Times, to discuss the extent to which central banks and central bankers themselves are in uncharted waters these days. They really don't know how to create economic growth using monetary policy. They don't know how to fight their great boogeyman deflation, and they don't know how or if or whether they'll ever be able to return to a time of so-called normal monetary policy. So really we see that the central bankers pretense of knowledge of being able to effectively control whole currencies for billions of people is coming to an end. But it's not just an academic issue. All of us as individuals are affected by the possibility of negative interest rates, prohibitions on cash, and bank bail ins. Will you be able to get your cash out of a bank or money market account if the economy suffers another crash like 2008? Will governments force us into cashless, digital-only payment systems tracking our every purchase and creating black markets in the process? Will you have to pay your bank in the form of negative interest rates for the privilege of holding your money and will your deposits take a haircut if your bank suffers losses from its bad loans? So as I mentioned, I recently joined my friend Jay on his radio show to discuss how both central banks and commercial banks are poised to change our lives in some very unpleasant ways. Stay tuned. Let's get on to this idea of negative interest rates. Japan has now gone to negative rates in a couple of European countries as well. How likely do you think it is that the US is going to go in that direction as well? Because I'm hearing different ideas from the mainstream. Some are saying, yes, we need to do it. Larry Summers, for example. And then there was another gentleman that I just saw the other day from BlackRock that was saying, oh, what a bad idea it is. So, you know, these are two people from the mainstream that seem to have different ideas. But what do you think? Do you think it's likely we're going to head into negative interest rate territory in the US? I would have to say no, certainly not impossible. But I don't think it's likely, at least not imminently likely. You know, if you go back and recall that during the period of the late bubble and then the crash of 08, Congress passed an emergency stabilization bill. I love this, right? It sounds like something out of an Iran novel. And one of the things that bill did was it permitted, in fact, authorize the Federal Reserve to pay Fed member banks interest on their excess reserves held at the Fed. And Ben Bernanke's urging effective data that legislation was pushed up to 2008. So, as of about 2008, banks have been getting interest payments of a quarter point on their excess reserves held with the Fed. So, the effect of all this has been to prevent the federal funds rate from becoming negative, right? The overnight rate at which banks lend money to each other basically cannot become negative when they can just park their reserves and get a quarter point from the Fed. So, as a result of that, as long as that remains in place, it's unlikely that commercial banks would turn around and offer or demand negative interest rates from their, let's say, prime borrowers or prime depositors. So, as long as that remains in place, I think it's unlikely. But there's no reason that that cannot be removed legislatively. And also, the bill that was passed by Congress didn't mandate this on the Fed. It authorized and permitted it. So, I think the Fed, internally, through its own policies, could change this rule without Congress acting. So, that's something interesting to keep your eye on if you want to have maybe a bellwether. Well, it's interesting, Jeff, you mentioned a quarter percent. I know it was a quarter percent, but it's my understanding, and maybe you can correct me if I'm wrong, but it's my understanding today. When the Fed increased the interest rates recently, they actually increased that to one-half of a percent to the member bank. So, I may be wrong about that, but that's my understanding. So, it would seem as though the Fed is moving in the opposite direction of negative rates, or at least wanting us to think they are. Well, it's a very un-American concept, isn't it? Negative interest rates. So, perhaps we're not quite yet as malleable as the Japanese and European citizenries. At least, I hope that's the case. Yeah, well, we can hope, because I just can't imagine. A negative interest rate just seems so absurd. It just doesn't make any sense at all. You know, in the Austrians, at least of all, maybe I'm just too much schooled in the Austrian economic theory, and maybe, as you say, Americans are just too logical yet about how the world really works, in spite of all of the propaganda we get day in and day out from the folks like Larry Summers and Paul Krugman and the like that think we should go to negative rates now to spur the demand side of borrowing. Interestingly enough, one of the people that I listened to recently was saying, well, Larry doesn't understand that, in fact, what he's talking about only is the demand side of borrowing. What about the lenders? And what you're doing is essentially crimping the margins that banks get when they lend money, and so going to negative interest is just not gonna work because banks won't be willing to lend. People might be willing to borrow, but banks won't be willing to lend. But in any event, talk to us a little bit, Jeff, about the, the Austrians have a view that I think is absolutely right about interest rates. Their understanding of interest and why it's necessary to let the markets prevail and why you have to have positive interest rates always. Well, conceptually, it is very important to understand that interest rates represent human action. They represent time preferences amongst human actors and more than anything, interest rates are prices. If we think of interest rates as prices, just like we think the price of milk, then it's perhaps more conceptually clear that the government ought to leave those prices alone and not manipulate them. Basically, the price of borrowing money depends on two things. It depends on the lender's willingness to not buy stuff today, but rather to give you the money in exchange for some interest payments and a little more money down the road, but with some risk that you might default. And then the borrower's preference to say, I want to consume something, maybe that's a new car, so badly today without waiting and saving up for it that I'm willing to pay a premium in the form of interest to have it today. So the lender prefers to give you some money today in exchange for more money down the road. The borrower prefers the opposite and the point at which their relative time preferences of the borrower and the lender come together is what we ought to call the price or the interest rate. Unfortunately, central banks come along and interfere in this relationship, but it's so important for us to understand it conceptually first to then understand what's wrong with what central banks are doing. So interest rates are just prices and they represent a supply and demand and a meeting of the minds between the borrower and the lender just like the price of anything else. And so savings really do represent capital, doesn't it, Jeff? I mean, we have the notion here of the capital that can be created out of thin air. We capitalize, recapitalize the banks by printing enormous amounts of money and then directing that money into the banking system, partly by that positive interest rate that was paid to the banks for just keeping their money there. But it seems to me, as you point out that if you agree that savings is really what are true, honest, legitimate capital, it's what is not consumed, savings, then the price of those savings are not allowed to be discovered, right? That's what's happening when you suppress the interest rate. You're not allowing that price of capital to be discovered and if you can't allow capital to be, the price of capital to be discovered, how can you have capitalism? Can it survive in that environment? Well, you really don't have capitalism. You have a mixed economy and of course price discovery is so important because without that, we don't really know what consumer preferences are and we don't really know what capital accumulation or savings rates would be, but you're right. Capital accumulation, which occurs when individuals or businesses bring in more money than they spend, is absolutely at the heart of a productive economy. Now, what we might call neocansianism that rules today focuses only and ever and always on consumption. The whole concept of GDP is spending, it's all consumption and so they have this monomaniacal idea that we have to create constantly demand for people to buy stuff. And when in fact, demand is inherent in human nature, we all want more stuff, we all want a more comfortable life, but what's not inherent in human nature is whether or not we're productive enough to pay for it to afford the stuff. And so what the Fed does is it distorts that and makes us feel like we're richer than we are. And unfortunately, from the Austrian perspective, the boom is artificial and the bust is deeper and more painful than it would be under natural cycles that might occur absent a central bank or a federal government intervening in the whole process. Well, getting back to this negative interest rate thing, it seems to me, I mean, it's being tried now in Japan, it's being tried, I think, is it in Switzerland, maybe one of the Nordic countries or two, a couple of them. And I don't see any reason why people wouldn't take their money out of the banks, Jeff. Why would they not take their money out of the banks if that's the case? Well, of course they would, it would cause bank runs in a rational world. And that's the last thing that central bankers want because they fear and hate and fight deflation. So that would be a deflationary event, right? Cash would literally, cash would be taken out of circulation, no one in their right mind would put $1,000 in the bank today in exchange for $900 a year or two from now, in any rational world. The only reason that this is even possible is because if you have some sort of fixed rate of loss, negative interest from the bank or from a bond, let's say a coupon bond, you might say, well, it's an insurance policy, right? The world's going to hell, but at least this way, I know that my nominal 1,000 will be nominal 900 when I get it back as opposed to nominal 800 or 700. So you almost have to view negative interest rates as kind of an insurance policy against greater loss. Let's say the next step then to avoid or keep people from taking money out that's being proposed, it seems, at least it's being proposed in Europe. I think somebody's proposing to take the 500-year-old note out of circulation and Larry Summers, I think it would get, as Mr. Summers is suggesting, we get rid of the $100 bills in the United States, seems to be a step in that direction of wanting to go towards total digital money away from cash in your pockets. I mean, do you see that as a possibility sometime down the road? If you go negative interest rates, it could be a possibility or if people are just frightened about the solvency of the banks in which they put their money and they might also, if they're fearing bail ins, for example, people might wanna start taking their money out of banks and putting it under the mattress or perhaps buying gold at gold money or a bit gold or someplace like that. Well, there's no question about it. Larry Summers is not, in today's world, he's not considered some outside the mainstream God. He's a former treasury secretary. So if they do move towards negative interest rates and towards bail ins, there's no question that people would want to get as much cash out of the bank as they could. So they would have to simultaneously move us towards more of a cashless system. We already see the people who have sort of early forewarning in this are out there busy buying safes and putting physical cash in them. We've seen this in Japan. So I think the future will hold an intensifying war on cash and this proposal by Summers to eliminate the $100 note and above, there used to be $1,000 and $5,000 US bank notes back when those were worth a lot more, of course. If you just got rid of $100 bills and left us with 20s and below, first of all, you'd eliminate something like 60% of all cash and circulation face value and you would just make it so much harder for people to forecast. So it's a very scary proposition and this is how government does things. It issues these trial balloons and it kind of tests public opinion like when Summers said this the other day and then it ratchets it back. But what seems outrageous today might not seem so outrageous a year from now or five years now. So I suspect that this is coming and I suspect that wise people will take steps now to ensure that they have some cash or physical gold or physical silver outside of the banking system altogether to protect themselves. Well, exactly, Jeff. And I would, you know, the one main reason that the establishment has always said you don't want to own gold is because it gives you no interest rates. You get no return on it. Well, heck, now you're getting less than any return. You're getting no return for your bank deposits. Why keep your money? Why keep the dollar? Of course, you can argue as long as gold is going down against the world's reserve currency you're still better off owning dollars than gold. Although recently so far this year that hasn't been the case. In almost every currency around the world gold has appreciated last year except the dollar and maybe one or two others. So I can't think of any reason why people shouldn't be thinking in those terms now, Jeff, before it's too late because as you say, they send out these trial balloons. There's a bit of a gasp on the part of logical reasonable people. They pull it back and then sometime in the future when there's another tragedy, something comes along that's really frightening then they do it to us probably. I mean, I can't imagine that the whole idea of the tremendous amount of the things that the policies that were put into place after 2008, 2009 were unbelievable whether you were almost unimaginable before that. So I don't know, I think you're right. Well, in terms of looking forward here, Jeff, with about seven or eight minutes left, looking at presidential politics now and the election politics that are going on. I mean, some people have really talked about it being more of a circus or bread and circus than anything else. But the press is asking the question, can Trump be stopped? Why should that question even be asked? I mean, aren't we supposed to be a country by the people and for the people? Why should they even be asking and who's behind that question? Why should Trump be stopped? That's interesting. It makes me laugh how many $40,000 a year journalists are so slavishly beholden to people who don't care about them but who manipulate and control public opinion. It really is a sort of, we could spend a whole day on that topic sometime. But yes, I think that he can be stopped and I suspect that he will. You'll notice just the other day, let's say a week ago now, salon.com had an article about how Hillary is gonna lose the whole thing and she's so vulnerable and there's never been a successful nominee who was under serious investigation by the FBI and she's unlikable and she has health problems and blah, blah, blah. So a few days later, Hillary prevails in the Nevada Democratic primary. Now, if you believe Roger Stone or some other people, she prevailed in an unholy manner, but nonetheless, she prevailed. And all of a sudden, just less than a week later, we're back to this narrative of Hillary's inevitability. So in just a week's time, there's such a need to sell clicks and eyeballs and get people to headlines that you can't trust what you read week to week. So if someone is saying can Trump be stopped, the implicit assumption is that he somehow seems unstoppable and that's very much a week to week primary to primary thing. He could absolutely be stopped in this upcoming Super Tuesday or SCC primary in the South. So there's nothing inevitable about Trump. Yeah, well, interesting. You mentioned Roger Stone because there's an excellent interview that I know that Lou Rockwell did with him recently and that he was laying out the possibilities or the likelihood of a brokered convention in Cleveland and noting that there was actually a law put in, a rule put in by the Republicans, I think that was really meant to stop your former boss, Ron Paul, from making any great progress that essentially makes it almost impossible unless you are a dominant front runner and you win a certain number of not just plurality but a majority of voters in various states. And it was according to Stone, it was put in place by the Romney people to make sure Ron Paul didn't get any kind of traction or have any possibility of being, he wasn't even nominated. So in order to be nominated, they're making the hurdle so high that they can basically control it. And the idea that Stone has is that we'll go into Cleveland on a brokered convention and then the power brokers behind the scene will decide who they want to be president and he's suggesting it could even be another Bush. What are your thoughts? Well, first, it'd be lovely, wouldn't it? If this rule that the GOP established put into place to hurt Ron Paul in 2012 comes back to bite them and actually favors Trump because let's say Rubio or Cruz don't win eight states outright and thus none of their supporters can make a motion from the floor that they be the nominee. So I would love to see that scenario play out. But I don't think they're gonna bring back Jeb. At the end of the day, I would say most establishment Republicans are perfectly comfortable with a Hillary Clinton president. Her tenor might be different, but her domestic policies are gonna be largely indistinguishable from a Rubio or a Kasich. And her foreign policy is gonna be the same as a Rubio or a Kasich, but perhaps more bloodthirsty because as the first woman, she wants to prove her toughness or something God help us. So, you know, we have to understand that it's not Democrats versus Republicans as so much as it is sort of inside the Beltway versus outside. So they can live with Hillary and they certainly will and they'd much rather have Hillary than Trump.