 This weekend, we feature our own senior fellow, Mark Thornton, in an appearance on Paul Malloy's FreedomWorks radio show. Mark is known for his work on the Skyscraper Index model, which can help us understand why booms are followed by busts, why malinvestment is inevitable in an era of artificial interest rates, and how central banks cause so much harm and misery. Building booms, especially in the context of big city skyscrapers, can be clear signs of dangerous bubbles and hubris. It's no coincidence that the Empire State Building was built on the cusp of the Great Depression, and Moscow's new Empty Financial Center is an eerie reminder that phony growth can end very quickly. With huge megatowers planned for China, Korea, Saudi Arabia, United Arab Emirates, and others, the Skyscraper Curse may strike again. We hope you enjoy Mark's great interview with Paul Malloy. Stay tuned. We're delighted to have our old buddy Mark Thornton join us from the terrific Lidwig von Mises Institute in beautiful downtown Auburn, Alabama. And he is brought to my attention something I have never heard of. It's called the Skyscraper Curse. And apparently it's something that's been around for a while. Mark, welcome back and tell me what in heaven's name is the Skyscraper Curse? Hey Paul, it's great to be back out of the air with you. The Skyscraper Curse is something that came to my attention about 15 years ago. And it's basically the unusual correlation between the building of the world's tallest skyscraper and world economic crisis. And I know that seems really farfetched, but I can explain why there it really is a correlation here. And it dates all the way back to 100 years ago with the panic of 1907. And at that time the Singer building was constructed making it the world's tallest skyscraper. And it opened its doors in the aftermath of the panic of 1907. And we've seen this correlation appear over and over again at the height of the biggest bubbles over the last century of time. You know, it's interesting you mentioned the Singer building. I remember from history that the Empire State Building was built in 1930, completed in 1930, one year after the stock market, the great stock market crash. Yes, that's right. There was several large buildings built in New York City, the epicenter of the stock market bubble in the late 20s and early 30s, including the Chrysler building, which set a record prior to the Empire State Building. But the Empire State Building set the record during its construction, almost the same time that the stock market peaked in late 1929. And then of course, there was a tremendous meltdown in the US economy and the world economy really. The America's Great Depression was a worldwide Great Depression. And so when the record is worldwide for the world's tallest building, usually the economic crisis is also worldwide. And of course, the Empire State Building way ahead of its time in terms of the mammoth record. And it held that record until the early 1970s. Right. Now, a lot of people would say this is a non sequitur. There is no correlation between building a tall skyscraper and an economic collapse or an economic crisis. And you would say what? Well, I know there's a lot of indicators out there that are silly, like who wins Superbowl determines how the stock market goes. There's a lot of those silly, just various correlations out there. But there's a reality here behind this connection, behind this correlation because to get a world economic crisis, you have to have a long period of sustained artificially low interest rate, which invigorates the economy and it gets people to start all kinds of construction and all kinds of investment because of those low interest rates. And then you get people exuberant and you get them, you know, being very speculative and you run up the nominal wealth of people. And so if that setting of artificially low interest rates, a boom in the economy, lots of speculation, new investments without track records is when these types of buildings, these types of projects are undertaken. And so there's a precise economic reason why record setting skyscrapers are built. And those same reasons are what causes bubbles in the economy, which inevitably have to bust and cause recessions or depression. Now that is a very, I mean, now as I think about that, that makes a great deal of sense. By the way, we're talking with Mark Thornton of the Great Ludwig von Mises Institute, an economics, Austrian economic think tank out of Auburn, Alabama. And Mark has been with us before many times talking about different things, but this one is really interesting. Now we got a bunch of tall buildings recently constructed, right, Mark? In 2014, I think we may have set a record for some of these skyscrapers that were built. Yes, that's correct. Last year, there was the record number of skyscrapers in process of being built and completed. There was 97 of these buildings that exceeded 200 meters, which is 650, six feet high. That's the minimum. So you got 97 of those. And then you have, which beat the old record by a tremendous amount. And the number of skyscrapers in existence is now approaching 1000 of these whopping tall buildings. And so the number that have been built over the last 10 to 15 years has been enormous. And, you know, they're not necessarily in Tampa, but if you go to New York City, they've been building a bunch of them. You go to China, especially that's where most of the beats are taking place. China is set to open its tallest building, the Shanghai Tower, in a few months. And that would be the third tallest building in the world. And also in Asia and also in the Middle East, they've built a number of super tall buildings in Moscow. And the Shard building in London, which opened a few years ago, set the European record and then ushered in the European economic crisis. And so this, you know, the building of super tall buildings has really picked up its pace. And now in Saudi Arabia, they're set to build a building that is one kilometer high. I don't know how many stories it's going to be, but it's going to easily surpass the old record that was occurred in Dubai in mid 2007. And of course, that ushered in the housing crash and the worldwide financial crisis. Wow. Okay. Well, let's go back to that. Now when Dubai built that skyscraper, the Burj Khalifa, I believe it is, and that was back in 2007. So that was about a little less than eight years ago, maybe. Did something happen after that or around that time? Oh, yes. It set the record on July 21, 2007, which was the top in the housing market. And if you go back and look at the Philly housing index, that's when it peaked, was in July and August of 2007. And as a matter of fact, aside from the skyscraper thing, I have a blog post on lurockwell.com in August of 2007, showing the Philly housing index topping out and starting to crash. And so this, the skyscraper curse indicator had me glued into the situation. Really? You were actually on the lookout when you, you were on the lookout for something like this back then? Oh, yes. I had about the housing bubble in 2004, 2005, and 2006. And I've been doing speaking arrangements, engagements, excuse me, during that period of time. And I was a very disliked person for what I had to say back then. Were they throwing tomatoes and stuff at you, as you told them, that this kind of thing is indicative of economic trouble on the horizon? Yeah, I didn't give any talks during tomato season at all. But I had some angry audiences. I can tell you that for sure. Oh, yes. Well, Mark, so we have all of these skyscrapers built last year. Does that mean we're in for a depression? I mean, is it all relative? You know, the more skyscrapers, the worse things they're going to be. I mean, so they've been borrowing, so these obviously, let's go to this 2014, all these people building these big buildings because there's easy money, right? There's easy money out there. And so everything's going to kind of come down to a crashing halt here this year. Or what do you, what do you project? Well, the skyscraper index curse indicates that the Chinese economy should be contracting in a significant way this year. And then next year, late next year, the project in Saudi Arabia should be about setting the new record mid 2016. I believe if the construction stays on track, which it doesn't necessarily, that would indicate a worldwide collapse. But the Shanghai tower in Shanghai, which would be the Chinese record, is an indicator that China should be having significant economic problems. And of course, I don't have any eyes on the ground in China. And the statistics are kind of difficult to interpret because they're all doneied up by the government and the state banks. But the statistics that I have seen are not indicating a positive economy in China. It's contracting, growth is missing its target, and the price of oil, which the Chinese economy had been stimulating, of course, has come down and is projected by me to come down significantly more, which is good news for your audience, but not necessarily a good indicator for the Chinese economy or the worldwide economy. And I don't know if you've heard of this, but there's an index of shipping cost called the Baltic Dry Shipping Index. And that's an indicator of the price of how much it costs to ship goods across the oceans and through the Panama Canal and through the Suez Canal. And that index has been as high as $11,500. And right now, it's sitting at about $525. Really? So that indicates to me that while the amount of ships in existence has increased, that the demand for those ships is shrinking significantly. And so that's an indicator that the worldwide economy is contracting at this point, but not necessarily crashing at this point. Wow. Now, these ships are not, obviously, there's not as much cargo as what you're saying, being transported. Is it mostly oil that has gone down, or what? Well, no, it's not oil, because this is the Baltic Dry Shipping Index. So this is the type of ships where they put those big containers on. Okay. And so it's all things that are in containers. And it includes things like coal, it includes things like iron ore, things that the Chinese economy had been importing vast amounts of. And so this is an indicator that there's less economic activity in the world, and that there's less trade in the world, and that the countries that export and the countries that import are having a difficult time. And I can tell you that, for example, the Brazilian economy, which exports a lot of minerals and sugar and things of that nature, that's in a contraction for sure. The Russian economy is in a contraction for sure. The Chinese economy is missing its targets and contracting. And so these are big players in the world economy, and players that were accounting for a lot of economic growth in the world economy. And so in fact, the US economy is not contracting, but expanding at a very disappointing level. And of course, the latest GDP reports will revise downward. So I'm very concerned about the worldwide economy at this point. Yes, the stock market's near and all time high. I mean, all of the indicators that you're kind of talking about, kind of like what happened back in 1929, too, just before the crash. And, you know, the artificial levels and interest rates are low artificially. So are you predicting from all of this and taking into account all the skyscrapers, are you predicting that we may fall into either a very another recession or even a depression? Yes, you are. Oh, I am. Gary, the stock market has been engineered by the central bank. It's clear. I mean, the interest rates have been artificially low near zero for seven years. And much of that has been also several years of quantitative easing. And those interest rates, if you ask your financial advisor, those things translate immediately into higher asset prices. So stock prices are artificially high, bond prices are artificially high, and real estate prices are artificially high. And, you know, I just don't know how long the central bank, the Federal Reserve can maintain zero interest rates in an economy. This is very unusual. This is, I mean, it's time to wake up and smell the roses basically here. This is a very unusual. It's never been done in the history of man where central banks around the world are suppressing interest rates. And now fall, since we last talked, governments are able to sell government bonds in many countries around the world at negative interest rates. Really? So people, yeah, people are in Germany and in Switzerland are paying that money in exchange for bonds that are going to result in a negative return. And primarily, this is people with lots of money who don't want to hold the money in banks because of the legislation that's been passed and the rules that have been made that where bank deposits and the bank deposits in major banks can be converted into shares in the banks. If the bank gets into a crisis situation, the rules now state that basically those large depositors can have their deposits in currency converted into shares in the banks. And so people don't want that. And so they're willing to buy government bonds with negative interest rates on them, which is unheard of. I mean, it's never heard of it. It's in a normal economy that an impossibility, but in this rigged economy, apparently anything goes. Wow. Well, Mark, I mean, I hate to leave it on such a sour note, but I'm very, very concerned. And I guess we just hope and pray that somehow, at some point, they start to uncap or release interest rates, slowly bring them up or whatever. I don't know if they'd want to do it, all fell swoop one time. And then slowly allow them to rise. Do you think that we might be able to do that? Do you think there's a possibility they'll do that? I think, you know, if they set a major economic reform package into motion, which tells people that interest rates are going to be normalized, that government budgets are going to be balanced, and that the impact of government on the economy is going to be reduced. Yes, I think that that would be very settling and stabilizing. And these are some of the things we're going to be talking about next week at the Austrian Economic Research Conference here in Auburn, Thursday, Friday, and Saturday. And your audience can tune into the major lectures on Mises.org. They'll be live for the major lectures, not for the breakout sessions, but for the major lectures. And tune in live and see what Austrian economists are from around the world are what we're up to nowadays. Although I think actually the side conversations are going to be the most interesting. I bet they are. But let's repeat that. Go to Mises.org, Thursday, Friday, and Saturday of next week and tune in and find out what these Austrian economic leaders are talking about at the Ludwig von Mises Institute, right? Absolutely, Bob. Terrific. Well, again, as always, Mark, it's always so interesting to talk with you because you bring a perspective that a lot of people don't even think about bringing. So very interesting conversation. And I thank you as always, and we'll talk soon. Thank you, Bob. I enjoyed it.