 This is Mises Weekends with your host, Jeff Deist. All right, ladies and gentlemen, it is time once again for Mises Weekends. Very pleased to be joined by a friend of ours, Professor Steve Hankey. A lot of you will know he teaches at Johns Hopkins, Frequent Writer for Forbes Magazine, but for our purposes today, he is involved with actually heads up the Troubled Currencies Project at the Cato Insuit, which is very interesting, giving what's going on in Turkey and Venezuela. So, Professor, great to see you, thank you. Jeff, great to be with you. Well, I'd like to start off with a little bit of background. I know from speaking to you that you knew Hayek, you knew Milton Friedman, you knew Murray Rothbard, you know Ron Paul. Give us a little background on how you came to be involved in economics and Austrian thought. Well, I was involved really from almost the time I could walk in markets because I grew up, I'm an Iowa farm boy and as an Iowa farm boy, you listen with your grandparents, your grandfathers in particular to two radio reports every day. One is the weather report and you listen to the weather report because that influences the quantity of grain that you're going to produce. And you also listen to the price reports and the stock reports from, especially from Chicago and Omaha because that will determine the prices you're gonna receive for the quantities you produce. So supply and demand, you get onto that pretty quickly. And then in addition to that, I became actually fairly sophisticated with derivatives at about age 10 because I was helping one of my grandfathers hedge eggs. He had in those days, he had a big egg operation and they would go around and collect the eggs every day on egg routes from farm wives, would be raising the chickens, collecting the eggs and we'd go around and collect them and then we'd bring them in. And what they do is candle them, you put them under a light, see if the egg is any good or not, you grade the egg, clean the egg and then you put them in cold storage. Well, the cold storage, they stay there for a while before you ship them back to New York from Iowa. And in that time interval, they're price risk. And so what we would do, depending on where we thought the markets were going, we would sell eggs forward with an egg contract that was on the Chicago Mercantile Exchange at the time. This is 65 years ago. So at 65, I was trading derivatives and learned how to hedge with my grandfather. And then by the time I was 14, that was 61 years ago, I had my own trading account, especially soybeans. So all of that would be, plus I had a million jobs and everything else, all that would be illegal today, child labor laws, you couldn't work and obviously couldn't open account and be speculating in soybeans. At any rate, that's the market thing. So markets were just natural. I understood markets, we would take livestock, especially to Omaha, and you'd watch the auctions and you even knew how the auctions worked and so forth and so on. Then I entered university at the University of Colorado in 1960. And the first course I took in economics, the first formal course was taught by Rage El Malak. And it was on European economic history, but he was a great devotee of Schumpeter. So he would trump at Schumpeter literally every lecture. And so technically that's the first time I came in contact with an Austrian economist was in El Malak's course. Then by the time I entered graduate school, I started graduate studies, one of my professors was Fred Glehi, who you know, I'm, he's a friend of Mises Institute and has written several books on Hayek and Austrian economics. So Fred was teaching theory at the time as well as econometrics and I had Fred and he was one of my dissertation advisors actually. So that was a little, also some Austrian and then the other one at the University of Colorado was Ken Bolding was one of my professors and of course Bolding was very, he wasn't an Austrian but he was very familiar and very friendly to Austrian economics. Then if we jump after I received my PhD in 1969, I was actually doing very applied micro systems analysis, doing things like designing water systems and basically figuring out how big the pipe should be for an optimal system or that sort of thing. It's super micro and I had an appointment in the late 1970s at the International Institute for Applied Systems Analysis. And that's located at a Schloss outside of Vienna and Mrs. Hankey and I actually lived and bought in by Veen for about a year. And just being in the environment was the clincher for me. I mean, that was it. And at about that same time, of course, Hayek received his Nobel and I remember we, I don't exactly know how this was arranged but we had the good fortune to have a private dinner at the Maison Blanche Restaurant in Washington, which was a great restaurant at the time. This was about, I think, 1980. And so Hayek got in a very deep conversation of a psychology and philosophy with Mrs. Hankey and finally he stopped and he said you're French but you seem to have kind of a German accent. He said, do you? And she said, well, I suppose I do because half of the family is from Vienna. So he asked the maiden name and Hayek asked if Mrs. Hankey knew so-and-so. And she said, yes, that's my great aunt. And Hayek said the most beautiful and intelligent woman in Vienna. And one of my great flames and apparently the flame was extinguished when he came to the United States on a Rockefeller Foundation Fellowship and when he went back, the aunt was married to actually a judge in Vienna and that was the end of that chapter. But we had a great meal. They finally threw us out at midnight from the Maison Blanche. We took Hayek back to the hotel, accompanied him up to his room to make certain everything was okay. He had a little bottle of schnapps next to his bed. He said he always had a shot of schnapps for medicinal purposes before he went to bed. And he did so and we said goodbye. And so we stayed in very good contact obviously ever since then. And then later than that, the last couple of years of his life, the great Austrian economist Habler lived in Washington and Mrs. Hanke and I would always go down at least once a week in FT with him and make certain he was okay. He was in his 90s. Austrians tend to live as you know, pretty long. So fortunately for us, they usually go into their 90s. Well, it's all that hiking and mountaineer I think, but... Well, a schnapps is okay too. Yeah, and the schnapps. Now, lately you've been really all over the financial talking head shows, talking about hyperinflation. How did you become involved in studying currencies and in particular studying hyperinflation? And had this become a niche for you? Well, this became a niche because in 1985, this is an Austrian connection. I've been a professor here at Johns Hopkins for almost 50 years. And I'm proud to say I was the fastest one to ever be promoted from PhD to full professor. And under the old regime, the old German regime we had at the time. And that is that the only way you could get tenure at Johns Hopkins was to be a full professor or as they used to say, a full bull. So in any case, 1985, I got a call from Dr. Albert Friedberg who you know at the Mises Institute. He's been involved in helping the Mises Institute. Friedberg said he was a very known commodity and currency trader in Toronto and a very Austrian in his orientation. And he'd read a few things that I'd written in barons at the time. And he said, could you come and have lunch in Toronto? And I said, fine, went up and saw him. And by the end of the lunch, I was a chief economist at Friedberg Commodity Management in Toronto and we were trading commodities which was fine. The first big trade we had by the way that I was involved in, I did kind of a plain vanilla analysis and modeling of the oil market and concluded that OPEC would collapse and oil would go below $10 a barrel. So we put every kind of short position on we possibly could, including shorting the Saudi Rial and the Kuwait Dinar. And as you know, OPEC did collapse in 1986 so oil prices actually did go below $10 a barrel. All of our ships came in and I thought, gee, this is easy. This is great. And our positions actually ex post facto we found out were just huge. We had 70% of all a short interest in the gas oil contract in London. So we were really very big players and that gets into the currency. So then we had other big trades which I don't have to bore everyone with it, trade by trade. But in 1995, I was the president of one of our units, Toronto Trust, Argentina and Buenos Aires and that was the best performing fund in the world in 1995. We were up 79 and a quarter percent what was in effect a currency trade because we had one position. This idea of diversifying portfolios is of course completely silly. You can diversify and you have a lot of holes in your basket as they say, but if you know what you're doing you get one big position and you stay with it. Our position was Argentine bonds denominated pesos, 1995, the tequila crisis, everyone said Argentina would collapse and they had a convertibility system that we thought we understood the currency system and so we put everything in that basket and it turned out to be a good one. So that's the start. Now fast forward to the, so I've been trading currencies for, well really since 1985. And still I'm trading currencies actively, but the hyperinflation thing comes into the picture because it is related to currencies because if a currency collapses inflation sores and there have been 58 hyperinflations in world history and all of those involve currency meltdowns become complete destruction of the currency and then the hyperinflation takes off and you say well, how does all this happen? I mean, you know, and it happens very simply as Friedman taught us of course, that everywhere and every place inflation is the result of increases in the money supply. Well, that is true, but there's more to the story and that is well, why does the money supply grow so fast and the money supply grows because in these hyperinflating situations the government spends money. And for one reason or another their financing sources either don't exist or dry up on them and what are the financing sources? You can have taxes and your tax base can dry up on you. For example, when the former Soviet Union collapsed or what happened in the Soviet system there weren't taxes. There was no tax administration at all. And so all these new countries where the government was spending money but they didn't have any tax system. So in the case of Venezuela, the tax system and so you had a lot of hyperinflations around the time the Soviet Union collapsed because no tax revenues. The bond market, there was no bond market in those countries. They didn't have bonds and domestic bonds anyway and international bond market they were cut off from that. They weren't established. So they had no source of revenue there. So you go to the central bank if you're the fiscal authority and you say we've got some great bonds to sell you and the governor of the bank says, yes, I agree. And he basically turns on the printing press literally and you're off to the races. And as you do that as the inflation starts going up the tax base, if you have one starts disappearing in real terms on you because inflation is going up and you have something called the Tansy effect. Vito Tansy is the economist behind the Tansy effect. So the Tansy effect works like this. If inflation is going roaring away and going up and up and into triple digits and your tax bill comes in December but it isn't payable until April by the time the government gets your money it's not worth very much. So the tax base shrinks and the bond market shrinking and you just keep going back to the central bank for more and more and more and the thing takes off. In the meantime, of course, people's expectations people are rational and they expect the currency to collapse because it's losing purchasing power. So they get rid of the local currency and in the case of Venezuela, the boulevard is a hot potato and what do you do? You either buy commodities but of course, Venezuela is fundamentally a socialist operation and there are no commodities to buy because everything's under price controls. So you can't buy many, not much sugar to find the shelves are empty. So you go to the black market and you get dollars as fast as you possibly can and the currency on the black market it's the free market really collapses and you get this vicious circle cycle going on and you're really dead in the water and it just keeps going and going and it can go to extremes. I noticed and observed very carefully the hyperinflation in Yugoslavia because in 1990, I actually was the chief advisor for the new Markovic government that was gonna throw out socialism and reform the economy, it never happened because Milosevic took over the socialist the old communists took back over and what happened hyperinflation and at the end in January of 1994 the hyperinflation had reached 313 million percent in one month, in one month. I mean, this is just unreal. But if you look at the model, of course the money supply was going up but the real engine of the thing was this huge fiscal deficit in which the central bank was supplying 95% of the finance for government expenditures was coming from the central bank. The taxes base was completely gone there was no bond market and so that was a story there and it's a story with every one of these hyperinflations. If there was a hard budget constraint on government expenditures it becomes softer and softer and finally it just completely disappears and there you are, you're kind of in the soup. So that's the long and the short of it. The real innovation, Jeff, that I came across is using purchasing power parity to be able to translate changes in the exchange rate into changes in the inflation rate. And you can measure it once you get into hyperinflation it's just one to one. It's a perfect, absolutely perfect correlation because the economy in a hyperinflating situation like Venezuela, it is dollarized already. The unit of account is the US dollar. Everything in Venezuela is calculated in the dollar. So you get a little movement in the Bolivar dollar exchange rate that's translated right away into the overall inflation. And so that's the kind of insight that I had. It's an old theory purchasing power parity but the way it's usually used is to look at inflation differentials and try to predict what's gonna happen to the exchange rate. Now I've reversed it. I look at what happens in the exchange rate to see what the inflation rate is. And in hyperinflation, actually you can do it and you can measure things very accurately. Now, I should warn the people listening you get lots of stupid things done by the IMF. Of course, we all know that but one thing they're doing they're claiming that they can forecast where hyperinflation is going to be at the end of the year. Well, you can't forecast the course and duration of a hyperinflation. It's totally impossible. So they have no forecasting model. It's absolutely a sham but you see it in the newspapers all the time because this is a big international government sponsored organization and they have credibility. So the reporters are like stenographers. They report whatever the IMF says, they report it and you will find that now about Manzawa all the time. And actually I can tell you today the inflation rate is 65,320%. Wow. I measure it every day and I know exactly what it is. And that, by the way, is a basket of everything. It's just not consumer goods but all consumer goods, all services, all assets, anything that moves is included in my agriculture basket. Well, one thing I'd like to mention about Turkey and we see this all the time I wouldn't really call Turkey an emerging country with 70 or 80 million people but nonetheless, we see this time and time again in that the Turkish government borrows in dollars and euro and it can only produce lira to pay against that borrowing. So there's sort of a whipsaw effect there. They owe money in a currency they can't print. Yes, that's the knob of the problem. And that's fine if your currency was stable. Let's say that's fine for some place like Bulgaria where I put a currency board in in 1997 to stop, by the way, hyperinflation. Now, that's a good example, Jeff, of a hyperinflation eyewitness because I was president Stoyanov's advisor in 1997 and hyperinflation was running at 242% per month, per month, not per year, per month. And so the question is, what do you do? And I said, you make the lev, which was the currency, a clone of the Deutschmark. Now, how do you do that? What's that? How's that trick work? You do a currency board operation. You set up a currency board law and that means you can issue the lav, but the lav have to be back to 100% with Deutschmark reserves and the lav has to trade at an absolutely fixed exchange rate with the Deutschmark. So a lot of Austrians get this completely mixed up. They think, oh, a fixed exchange rate. That's like price controls. That's a disaster, that's a bad thing. No, it isn't at all. The supply curve under that arrangement with the lav is the lav is completely elastic in the old days at a fixed exchange rate with the Deutschmark. Since then, of course, it's with the Euro. So you have a completely elastic horizontal supply curve and the demand curve moves. The demand curve is the demand curve for lav. So the quantity of lav in circulation is dependent on the demand for lav at that fixed price and it's freely convertible, totally free market. And what happened? We put that in in July 1, 1997, hyperinflation was crushed within hours. And of course, when you start out, the interest rate in lav-denominated assets is a lot higher than Deutschmark assets. So the demand for lav does what? It explodes. Everyone wants lav. So they take their marks in an exchange room for lav to arbitrage and go from a low interest rate yielding currency into a high one and eventually what happens? Of course, the interest rates in Germany and Bulgaria on a risk-adjusted basis come down and are about the same. Now, it's back to Jeff's question, which is a critical one. Bulgaria can borrow in euros without any of this kind of risk. They don't, by the way, because they have a very hard budget constraint. They can't go to the central bank and say, turn on the printing press. The only way they could do that is if they took euro reserves in there to exchange for a lav, you see. So there's a totally hard budget constraint. The deficit, the fiscal deficit is very small. They don't borrow very much. The debt's very small and so forth. But if they did, they wouldn't have any problems. They wouldn't run this currency risk that you're alluding to, Jeff, because the lav is a clone of the euro. Well, the lira is not a clone of anything. It's not attached to anything and it's completely disintegrated in 1994. It completely disintegrated in 2000. It is essentially completely, almost completely disintegrated in 2018. And under that situation, if your revenue and funding sources are in lira and your liabilities are all in dollars, the mountain of debt is in the financing obligations are huge on you. And so this crush will come into play and there will be many firms and organizations in Turkey that go to the wall because of the debt and because of the government's mismanage of the currency. So I've recommended all the time that the, and most recently, I've recommended mainly for political reasons, they should have a gold-backed currency board system. So should Iran, so should Russia. They should all introduce, they should keep their local currencies for nationalistic reasons. They wanna do that. So you'd still have a ruble, a lira and a reale, but all those would be backed 100% with gold. They traded a fixed exchange rate with gold. They'd be freely convertible into gold and you'd have a gold block of Turkey, Iran and Russia. I've just written about this. I think it's the only way for them to good is to stabilize their currencies. All those currencies have been half-baked, never attached to anything historically. Oddly enough, in Russia, they actually have had a currency board before and it was introduced in 1918 and who designed it, John Maynard Keynes, actually. And so Keynes was a treasury official at the time. No one knew that Kurt Schuler and I dug this thing up. It isn't even in any of Keynes's works, but we found in the archives, he is the guy who did it. And the white Russians at the time wanted to stable ruble or about 2,000 rubles circulating at that time in the Civil War issued by various entities, all private as well as a government. They weren't worth much. They weren't backed by anything. They weren't redeemable into anything. So Keynes said, we'll set up a ruble currency board in North Russia and the North Russian currency board, ruble will be redeemable into pound sterling and back 100% with pound sterling reserves. The thing worked beautifully. The war ended and they still were redeeming in London those rubles, everyone got paid. The ruble was as good as sterling and what I'm suggesting for Iran, Turkey and Russia, they should make their currencies as good as gold and we should have a gold block again and in short, they should go on the gold standard. Why do you think someone like an Erdogan or a Maduro is it simply hubris and ego that prevents them from doing this? Is it a lack of historical knowledge? Is it something darker? I think it's, well, I think it's a lack of historical knowledge for one thing, there probably is some hubris and I think, I can't speak about Russia exactly right now but I know in Iran and I know Venezuela very well because I was President Caldera's advisor in 1995 and 1996 the incompetence is just beyond belief. So there's a lot of just pure ignorance. They don't actually know about how they would do one of these things and when you look at someplace like Bulgaria, I mean, I can tell you, I fixed the thing in hours. We're talking about hours, we're not talking about even weeks because people are rational and people change their expectations almost instantly. If you come up with a credible system that they can understand and you can understand something like a currency board system. But when we look at Turkey, we see a lot of foreign bank debt just as we did in Greece a few years ago just as we did in Iceland. Should those foreign banks be prepared to take a haircut? Isn't that the proper resolution to their loaning money to what appears to be a profligate government in Turkey? Oh, that's what's going to happen. I mean, whenever you get into these unsustainable debt burden situations, Jeff, and many people don't realize this or maybe they realize it, just don't say it, you're bound to be talking about haircuts. I mean, there are gonna be losses involved. And if there aren't losses involved, you'll be struggling under a mountain of old debt that they keep you buried forever and you'll never recover. That's why, by the way, in Greece, they really haven't taken sufficient haircuts. Point number one, point number two, the property rights system and judicial system is a complete disaster in Greece. And until they learn that the magic of private property rights, they are never gonna recover. Most people don't realize that Greece is a Balkan country. It's in Europe, but it's in the Balkans. And this is Balkan history. So you really have to know your history. I mean, any Austrian would know this because of course the Balkans were part of the empire for a while or at least part of them. We're talking about Austria and Turkey. The Balkans were part of either the Austrian empire or the Ottoman Empire. So that history is relevant. And if you read Mises, by the way, he has a lot of interesting things to say about the Balkans in terms of cultural history and things like that, as well as economics, of course. Speaking of debt, let's talk about the dollar a little bit. What, I know you really look at dollar euro and I know you really look at dollar gold. What worries you about the dollar? What keeps you up at night? Well, not the same things. I don't think that a lot of my Austrian friends are kind of the apocalypse coming down the road or the chicken little types. But if you look at that, I'm not that type of Austrian. When it comes to the US dollar, when it comes to a lot of these half big emerging market country currencies, yes, it's fairly clear. But the US dollar, I'm not quite there and many Austrians, for example, were fanning this story that we would have hyperinflation in the United States as the Fed exploded its balance sheet after the Great Recession started in 2009. I knew this was just utter nonsense and they didn't understand what they were talking about because what happened after the crisis, without going into a lot of detail, you had the Dodd-Frank and regulation of banks and you have to look for economic activity as driven by the quantity of broad money in the economy that's circulating. Money dominates and broad money is what you wanna measure. So the best measure is I think the DeVizia M4 measure that's put out by the Center for Financial Stability in New York, Professor Barnett is the guru on this and does all the calculations and so forth. So DeVizia M4, you wanna keep looking at that and the big contributors to DeVizia M4, the elephant in the room, it's commercial banks. Private banks create most of the money in the United States. The Fed is peanuts and at the time the crisis started, the Fed was producing about 10% of DeVizia M4. So they weren't producing very much and then you had Dodd-Frank and all the, the Basel three capital requirements being increased and that really put a squeeze on private banks and private credit and the private credit and private money contribution actually started declining. It was going down. So if the Fed hadn't have come in with QE, with quantitative easing, we would have had another great depression in the United States. So the step is the first thing that happened that was very pro cyclical, just what you shouldn't have done, they laid all kinds of bank regulations and capital requirements on private banks and commercial banks. So 90% of our money supply, the contribution to our money supply was under massive pressure with all these bank regulations and so forth. So the Fed in fact did the right thing. They came in with quantitative easing and if they hadn't come in, we would have been absolutely buried in a huge, great depression. Now, many Austrians interpreted it. They looked only at the Fed, only at the Fed. The Fed are the bad guys of course, but the Fed are the bad guys. They are the bad guys, but in this case, they looked at the Fed balance sheet and they said, we are going to have hyperinflation and we didn't have, we had deflationary environment. We're still in a deflationary environment in the United States, prices aren't going up. We've never had hyperinflation. The reason why bank money, by the way, in 1930, the best book Keynes ever wrote was the treatise at least according to Milton Friedman and according to me and many others. And in the treatise, Keynes separated bank money and state money and state money is produced by central banks and bank money is produced by commercial banks. And state money is always tiny and bank money is always huge. Bank money was 90% of the money supply in 2009. And now, bank money accounts for 80%, meaning that the state money is grown as a proportion from 10% to about 20% now due to QE. But at any rate, QE basically saved us. It creates all kinds of distortions and all kinds of other problems are associated with it. But that's more or less the story up to today. Right, but I mean, just on a tangent here, we look at QE, we look at the Fed's balance sheet and it takes almost 100 years to get to 800 billion then it goes from 800 billion to 4 trillion in less than a decade. And I think people look at that and say, what does that all do? It's just sitting there parked as bank reserves and now it's slowly being bled off through tapering. But what does it mean? Where does it go? What is its effect? Let's get to today then. So I had to take many of the doomsters and my Austrian friends to the woodshed, which I just did. But let's not go to today. You said, we started Jeff by allowing me to go off in this tangent, which I appreciate that. Keeping me on a long leash today. You said, well, what worries you about the dollar today? And here's what worries me. And here's the problem you create. It's a cascade of government created problems. The first thing that kicked it off, of course, was we had a great recession. That was actually caused by the Fed, which we don't have to go back and revisit that. That was caused by a mistake at the Fed. Okay, then we have the great recession start. Then bank regulations. That's something caused by the government. That causes a problem. It's very pro cyclical. And any principles of economic student knows you wanna be counter cyclical if you do anything. You don't wanna be pro cyclical. So then the Fed comes in and they try to mitigate the damage that the bank regulations are doing and they put on QE. And then now, today, as you said, they're unwinding this massive balance sheet. And this is a tricky situation. And as a result, we have very tight monetary policy right now. And we know it's tight because the Vizia M4 is only growing at about 4.7% per year, which it isn't super slow, it's modest though. That's nominal growth, nominal growth. So let's say the economy is growing at 4%. If the economy is growing at 4%, you subtract the four from the 4.7 and you've got inflation of less than 1%. You got very low inflation. So that's one signal. That's looking at quantities. That's a Milton Friedman kind of, let's look at our cues, the quantities of money. 4.7% growth. If you look at Bob Mandel and the supply ciders, which I tend to pay a lot of attention to, if you look at prices, and you look first at the most important price in the world is the dollar euro rate. And my comfort zone for that is about 120 to 140. And now it's about 116. It's the dollar is very strong. It's outside the zone, dollar strength. Then you look at another very important international prices, gold. And my comfort zone is about 1200 to $1,400 an ounce. And it's trading now. It's been a little below 1200. It's just popped $20 this morning and it's over $1,200 an ounce right now. So that also suggests tightness. Everything is very tight. And then you throw in your thing with the, well, what's happening in emerging market countries. You've had a lot of these currencies. All the capital is coming out of the emerging market countries now because when the dollar gets very strong, the emerging market currencies tend to get very weak and capital flows come out of those emerging market countries. So we have a very destabilized kind of situation. It looks kind of calm on the surface. And we got a big bull market and the US stock market and et cetera, but there are things going on. We've had the Argentine peso lose 38% of its value this year. Turkish lira lost 38% of its value. Iranian real and of course there's a junk piece of currency anyway. Chile has even lost a lot of value. So all these places where you're losing value, you've got this exposure that you've alluded to and that is a mountain of debt. Debt denominated in dollars, but you have to generate first the Chilean pesos and then exchange those for dollars at a bad exchange rate to pay off the debt that you accumulated in dollars. So I'm a little bit nervous about the markets right now. Are you nervous about interest rates? Historically, Fed funds rate has been more in the five to 10% range. You think we'll ever see that? And again, and what would it mean? Well, it would mean that the emerging market countries are not the place to be. That's one thing. Because when we had QE on and interest rates were essentially zero in the United States, everyone was chasing yield. And you see Roger Garrison's work fits into all of this. What happens when you have QE? Of course, it mitigates having a great depression but it creates all kinds of distortions. And one is the interest rate is almost zero. So everyone wants to chase yield. You're trying to find yield and you're leveraging, you're doing massive leverage and the combination of those things, you get a lot of over-investment. So you look at Garrison's books and you can figure this out, his stuff's, I think the clearest thing on these issues. So you start over-investing. You over-invest in long-term capital kind of projects and you go into risky and markets. You go into emerging markets, you put a risk on. It's risk on, they call it. And now with the dollar getting stronger and the interest rates going up in the US, you get everyone unwinding the carry trade, everyone starting to deleverage and risk off is what you're seeing. And so risk off, you get into less risky assets. So all these distortions, and this is of course a beauty of Austrian economics, the emphasis is on these distortions. I just wish younger Austrians as well as older ones for that matter would pay actually more attention to actual real markets because it's all in the markets and if you're trading the markets, it's just so natural Austrian that you don't even think about it. I mean, you don't go to a big Austrian textbook or treat us. You just know it. And if you do go to the treat us, you will find it. Run out of time, gotta ask you a final question that relates to all of this and certainly relates to the dollar. Give us your thoughts about US debt and entitlements in the future. What does that mean? Certainly the dollar's very strong right now looking strong as other currencies wobble. But should we worry about the debt? Should we worry about deficits? Should we worry about Trump? And most of all, should we worry about entitlement promises for the future? Well, I don't stay up too late at night worrying about that. I mean, it's coming. If you're trading, that's another thing. I mean, you do have a time horizon and it's not 30 years. Now, I realize expectations come into play and can make 30 years come back to haunt you today if you're trading in a market and something is happening to you with unfunded liabilities coming up. So overall, not too much worried. Entitlement's totally worried. All these things are bankrupt and will never be paid. So just forget entitlements. I mean, they're all broke and everyone knows they're insolvent. So they'll play all kinds of games, band-aids here, band-aids there and so forth. But the reality is none of it's ever going to be paid. And the only way to solve the biggest entitlement are one of them. Now there are others that have gotten huge. Social security, really, you have to have a private social security system. If you look, for example, it is mandated but the social security system in Chile, of course, is the model. I mean, that is a real private social security system that has done extremely well. Designed by our friend Jose Panera and does beautifully. There's another one that is interesting and that is after Singapore became independent in 1965, Lee Kuan Yew, they put in a, it is a private end quotes system. It's a self-financed system. You're mandated to put so much money in but you own the money that's in there and their returns. And actually that fund and the wealth fund that they have in Singapore, it's one of the biggest sources of revenue for the government. It finances government expenditures. So we have to get away from these pay-as-you-go kind of systems that everyone knows they're phony and they're bound to break the bank. And this is one reason, by the way, that a lot of the left-wing politicians want open borders with massive uncontrolled immigration is to finance these systems as a popular, as the demographics naturally are tilting towards older and older, more aged populations. It puts tremendous strain on these pay-as-you-go systems because they don't have enough young serfs working the system to pay for them. I mean, it is a form of serfdom actually but they want to import serfs and they don't want any control over the borders and they just want warm bodies to generate as much as many contributions to these unfunded liability programs that the government has. So that gets into a whole nother set of discussions that we might have but you did mention the word Trump in that laundry list of things of what are you worried about? And Trump, I'm very worried about Trump because he's got two things that he's doing. He's blasting off sanctions as if they're misguided or unguided missiles every day. Now, this is a potential vulnerability spot for the US dollar because the US dollar, all commodities are priced in dollars internationally, all payment systems are running dollars or dollar denominated. But what happens if people lose confidence in using the dollar and the dollar payment systems because their financial sanctions being imposed on God only knows who tomorrow. So sanctions are equivalent to tariffs. There are interferences with voluntary exchange and Trump is very keen on both sanctions and tariffs and a whole array of protectionist kind of trade policies. This is, we could do another whole show on this, but this is very, very worrying actually. This is an immediate worry. The unfunded liabilities are an intermediate worry. The overall aggregate debt is kind of way off in the future, not worrying me very much. I mean, I don't like it but because it's a form of a lying price. You see, if you don't charge somebody now for what you're giving them or what they're consuming or what they're demanding for you and you're requiring yourself to go into debt to be able to finance whatever you're giving them, you're giving them a lying price. That's why I like balanced budgets. If the government wants to spend, fine, force them to balance a budget and force them to go to the people and say, oh, if you want this, we're gonna increase your taxes to pay for it. And we don't do that now, we just go into debt. So everything supplied by the government is kind of a lying price. We think we're getting something at a fairly low price but the government's not telling, oh, we've had to have a huge accumulation of debt to finance what we're giving you today. So I'm very much against lying prices and I suppose I can revise somewhat what I just told you and that is that, yeah, I am worried about the debt but it isn't like it's gonna be apocalypse tomorrow kind of thing which some people get so worked up about it they give a huge percentage and say, I'm gonna wake up tomorrow and the whole place is gonna explode on me. It's not gonna happen tomorrow but it's a sickness in the system, these lying prices. Governments, if they wanna do things, they should charge full price, full cost upfront and let people decide then. And my view is people will decide to put a thumbs down on a lot of government activity if that was the case. Well, amen to that. Ladies and gentlemen, if you wanna know more about Professor Steve Hankey, you can find him on Twitter. He's got 80,000 Twitter followers and a very active Twitter account. He's on a lot of the talking head shows. You can follow him at Steve underscore Hankey, H-A-N-K-E. Professor, thanks so much for your time. Great talking to you. Yeah, great talking to you. Yeah. Subscribe to Mises Weekends via iTunes U, Stitcher and SoundCloud or listen on Mises.org and YouTube.