 Hey guys, this is Stowe Bishop with Radio Rothbard and I wanted to let you know about an exciting event We have coming up on September 23rd in Nashville, Tennessee One of Ron Paul's favorite lines was truth is treason and the Empire of lies Americans around the country are waking up to this reality War across the globe Regulating free speech at home printing trillions of dollars the regime accepts no limits to its power Speaking on this topic. We all have brave truth tellers including Ted Carpenter Michael Rectonwald Jonathan Newman and many more Again, this is on September 23rd and beautiful Nashville, Tennessee You can find more about this event and get your tickets at Mises org slash Nashville 23 Hello and welcome back to radio Rothbard. I'm Ron MacMacon. I'm an executive editor with the Mises Institute and With me as always is my co-host So Bishop my associate editor and also it's been a few weeks since we had Mark Thornton on our senior fellow Who keeps track of all of that economic data? Who knows a whole lot about the Austrian business cycle theory? And we're just gonna look a little bit and really just provide a bit of an update about where are we in the business cycle? How should we be viewing the unemployment numbers that are coming out all the optimistic numbers? We get from the White House Telling us how there's just been massive job creation And how inflation has been solved That's all that's all taken care of don't have to worry about that anymore And really just look at some of the the news of the past couple of weeks that's been coming out as well as some of the larger context And I think just at at the Mises Institute we don't want to Portray ourselves as just being constantly bearish, right? There was no doubt that in 2018 2019 The US was in the midst of a A easy money fueled boom and it was a boom There was no reason to deny that and that that that does exist at times And there was a period of that from about 2015 to 2019 Of course a lot of it was fueled by just massive amounts of monetary stimulus Which now seems small and reasonable almost Compared to what occurred in 2020 2021 and 2022 In terms of new money creation. So then of course there was another monetary inflation fueled boom during that period And so the question is then well When when do these booms end? What are the effects of these booms and really just appreciating that because a point that can't be made enough Is that the mistake that the Fed makes Is in creating the boom not what a lot of wall street analysts would have you have you believe Which is that well the mistake the Fed makes is Allowing interest rates to rise too much Or getting too hawkish about inflation And they say well the Fed could thread that needle and they could They could be a soft landing and everything would be fine No, no the Fed already was making massive mistakes years ago When it's settled on a policy of immense amounts of monetary inflation We lived through the boom period and now We're trying to figure out exactly what's happening with the bust Which is always inevitable And which is actually the economy healing itself If if the the Fed and the central government will allow it to do so the real problem is in the boom Not in the bust And so at this point we're really just trying to observe what is the backside of this boom period that Most people now if you're under 30, that's most of your whole working life now At this point, so let's look into that just a little bit more closely and Just generally mark I want to get your impression of how I mean the the news for the last two weeks has Been at least in the mainstream headlines Overwhelmingly positive for the most part. Oh inflation's down to about three percent So you don't have to worry about inflation anymore. That's no big deal And also the job market is quote unquote tight and job growth continues. So basically It sounds like happy times Are here again. So maybe just start off with the inflation issue then So has inflation been solved mark? Not by a long shot. I mean the inflation statistics Have obviously gone down some but uh, they're far from Being controlled it's you know price inflation is far from being controlled Even according to the fed's own standards And then if you look around the world With the u.s. Dollar is the dominant currency Inflation rates are even higher. So we came out of the covet lockdowns and that enormous 10 trillion dollar stimulus And our price inflation went up quicker and faster And now the euro zone is fully Out of covet china is fully out of covet They're starting to experience the same problems that we did But it's you know, I would say that this is A middle ground a transition period at best. It's not The goldilocks scenario that everybody is talking about On wall street that the fed has successfully brought down price inflation That it hasn't Undermined financial markets very much even though it's brought down three of the largest Banks bank failures in u.s. History And of course, there's no economic growth despite the fact that the labor force According to government statistics is fully Employed and and of course with inflation high that means real wages For the productive classes in the united states is going down And so if you've got lower wages stubborn inflation No economic growth and You know, so we do have to look to the future a little bit here to see What that transition is from and what that transition is to And I I really thank you ryan for pointing out that austrians, you know We realized that there was a You know a fed expansion in the teens austrians were expecting At least a contraction in 2020 might skyscraper book in 2018 sort of implied a correction or recession or a crisis In 2020 and then we got 10 trillion dollars of stimulus and then we've gone through this crazy chaotic economy for the last two or three years And you know, some of the statistics have Sort of stabilized To a certain extent But I think it's a transition for more difficult times ahead Despite the fact that if you listen to the mainstream media or the wall street media You get that story that the fed is managing everything correctly and Of course, there's now anticipations that the fed is going to raise rates one more time And then they're going to be getting beginning to cut And you know, some indicators say that the cuts are going to come fast and hard Which Throws people off a little bit But that's the difference between the goldilocks scenario that we hear About a booming economy full employment inflation under control Therefore according to the goldilocks theory the fed can cut rates aggressively and push The economy forward But if you look at more of a Negative perma bear type of outlook on things we got to realize that the economy is not good. It's bad Uh, that there's a lot of chaos in labor markets that real wages are going down that the money supply Um figures that uh, we've been publishing show a tremendous contraction in money and credit Um, and then of course we have a building and and very obvious problem with Commercial real estate in this country and so the perma bear Scenario basically looks at the economy a little different And then it comes to the conclusion that these expectations For fed interest rate cuts are not because everything is great But because there's likely going to be some kind of crisis Um in the next year or so and that the fed is going to have to respond with aggressive rate cuts and I think that's one of the big factors behind Uh, the weakness in the u.s. Dollar right now Yeah, the uh, there is every reason to expect that if as soon as you have any real sign of rising unemployment Which becomes a political problem Then the fed starts to cut rates and get back to easy money That as long as I think you can claim that politically things are fine Then the fed doesn't feel like it's going to have to be activist in that case But it seems that the political response is always going to be easy money So once you can start to make hay of that as a critic Of the administration then all bets are off and you're just back to easy money again. So it would seem that the more Um cynical and I don't mean that in a bad way The more realistic the less naive you is that yeah Once there is an obvious crisis, then you're just back to Cutting rates again, and that's bad for the value of the dollar And so I that probably is on the horizon Then but yes, you you you point out that the growth is bad And the growth rates are bad and we can look also at Really what is the net worth of ordinary americans Right now and and what is happening in terms of of wealth accumulation Uh, because that's really not often discussed in the government Data because they just look at at job numbers at at non-farm job numbers And then they focus even on just the establishment server. They don't even look at Um the number of actual employed persons. They just look at the number of jobs So there's actually if you just move beyond the headline number, you can see that there's a lot more Um, it's a lot more nuanced to the job numbers than just constant crowing about how tight the job market is But looking at that Karen Petru did a lot of work on this over the last decade, right? Just as austrians had predicted with all this constant stimulus Producing more lackluster growth that has in fact been the case in her book engine of inequality Where she looked at what has been the outcome of all of this fed intervention from 2012 and the decade that came after And it has been one in which normal ordinary people have seen their net worth suffer The real estate they own in middle america has not been going through the roof So they haven't even been getting real estate driven Gains in personal growth and wealth And just that a lot of that wealth has been concentrated in certain coastal cities That it's really driven in equality all of this Fed easy money and that it's benefited people who already owned immense amounts of capital And could do a lot with super super cheap loans But for regular people that just hasn't been the case And so you've seen actually a falling behind of regular people And you can see how quickly those people get ignored when depending on how you measure it this time You saw that in the june numbers That for the first time in 27 months That the Average hourly earnings number came in slightly above the inflation number. So it was actually positive real earnings growth for the first time in more than two years And this was immediately reported as well problem solved Now everyone's getting richer again never mind the fact that you've been digging a hole for yourself in terms of negative wage growth For the last two years before that So one one quarter of wage or one month of wage growth and we're supposed to declare problem solved now everybody's fine But the fact is everyone was actually falling behind in terms of real wages And we saw that then in massive increases in credit card debt We're still in a country where people Were more than half the population Really considerably more than half Tells us that they don't have even 500 dollars for any sort of emergency like a car breaking down that sort of thing Um and not to mention just ongoing price increases where we're not getting back any of that lost value of the dollar that we lost over the last three years Just because the increase has for now slowed to 4.3 percent in the core cpi Wow That comes after a year of 40 year highs In inflation, so it's really just interesting to see the way this is being spun By the administration you're supposed to think that everything's fine But people have been trained just to look at the unemployment rate. So That that just enables the administration to To say everything Is great But again just as austrians were always just encountering the issue of timing right mark because If now I haven't found it all that confusing right if you look At the actual historical data and you look at g when did the when does the yield curve turn negative? And then how much longer does it take for there to be some sort of? recessionary Impact it's often a year to 18 months if not sometimes longer And what I've seen then is that people who are trying to convince us that everything is fine. They'll say well There's no sign of the long predicted recession But the thing is people haven't been predicting recessions necessarily for early this year anything like that Even the real mainstream people are saying Or even real the bears are saying well. Yeah later in 2023 Um And and so I I think it's just a it's a war of words and rhetoric to portray People who are looking at all these obviously bad numbers in terms of temporary unemployment or temporary employment jobs, which is way down looking at home price declines looking at decelerating money supply The yield curve and all of that and then saying oh, yeah, this this all points toward Recession, but then people claim that we had said that a recession was going to happen Five days later and then when it didn't somehow. Oh, yeah, look, they were wrong and now everything's great And so it just seems that We just in addition to just really analyzing the numbers we have to constantly fight this rhetoric war where people are just trying to to To defend the administration by saying That well everything's fine because there hasn't been a full-blown financial crisis in the last year so They must be wrong and and everything's great just like back in the late 1990s when people were in the pages of the wall street journal legit saying that the The money or that the uh business cycle had ceased to exist that the problem had been solved altogether So there's always I think this effort to just Again say this time is different And I guess we're just looking at various variations of that now so So what do you think is like? I mean, what is the political situation here in that from what I can see The economy seems to be something of a non-issue in terms of I just don't see much talk about it at all From either side, I mean Biden says everything's fine, but I don't see any of his critics willing to say much about the economy Uh at all is just because they don't they don't understand it or this just doesn't seem like a sexy enough issue Well the approval rating of of biden is obviously very low by historical measures Um, you know, there there is I did the focus on the culture war I think has really captured a lot of the campaign cycle at least from the republican side Um, some of it you also have just the the trump shadow over everything Where you have continuing indictments rolling out which ends up creating this dynamic where you know It becomes you know, who can speak out most like most loudly against the fbi against various agencies Which is which is not a bad thing, but you're right. There is a I think that the communication on the economic side of it It's it's also made a little bit more difficult with some heightened anti-market skepticism within certain sectors of the intellectual right Where you have, you know, sort of this conversation about, you know, they're re-litigating um, you know isolationist protectionist policies when it comes to trade and some very You know with the rise of people like jd vance and the senate and things like that The message on the right even in terms of superficial political rhetoric is becoming a bit more muddied to to say to put it lightly Um, obviously there's no one that's interested in dealing with a lot of the main drivers in terms of entitlement reform Spending etc. We saw a complete lack of political will to hold out when you had the recent debt ceiling dynamic Um, but I do think that there is a political cost to the economic issues that we have right now Um, ej or ej etony Who is a colleague of a friend of ours peter sanange with heritage? He had a study a few months ago where he tried to Quantify, you know, what is the the real light the real world costs of the inflationary environment that we're living in looking at Not just simply cpi broadly Applied but looking at specific sort of average household items And their measure came to um that the effect of impact on american family budgets was north of seven thousand dollars per household right now And I think that that is a hit And again, I think it plays out more in terms of the overwhelming Optimism or lack thereof about the direction that the country is heading the the unpopularity of biden Um, the the the issue is though is that you know, who do you trust politically within this environment? Do you see that a little bit in terms of? You know, maybe the way that people are are moving to certain environments, right, you know, florida's economy Um, you know, it's performing better than most the nation you have a lot of people moving in there But then I guess then you get to the other side of it where if you move to florida You're dealing with very very high real estate prices in a way that you're not going to get in other parts of the country So it's it's this aspect where do you go to a hot economic environment? Well, you're gonna You're you're going to have that priced in with the cost of your house If you go to another area You're not seeing the gains there and so it's a very difficult situation And I think there's a larger aspect where specific industries Are feeling the squeeze, you know as as we've had this Pivot in terms of interest rates and things like that, you know, we've already seen it within the tech sector Um, we've seen it in aspects of again housing markets in Areas of the country that are cooling off Um labor squeezes in areas where it's not But I think even you could look at something like the the actor strike going on in hollywood right now Where you have, you know various aspects that go into production of tv and movies Where the the the change with which consumers are consuming this sort of content You know, we think about all the streaming apps that have popped up in the last 10 years part of that You know as a byproduct of the the larger Uh, you know interest rate economy the rise of all these different technological changes and the like You're having members of that specific industry now, obviously there's there's very much a union component to it That kind of makes it a lot more complicated Um, then in some others areas of the economy, but we're seeing it with with big tech We're seeing it with Entertainment services We're seeing it within some of these areas that benefited tremendously from The the low interest rate years during the obama and trump administration that even they are now kind of I think at the tip of the spear in terms of dealing with some of the real disruptive aspects there And I think so looking at that industry by industry breakdown Um, it's very interesting. I think it's a sign of things to come Um, you know when kind of the the chickens come home to roost Yeah, well that actually leads you to a question and Mark, I don't know if you've had any thoughts on this, right when we look at Recessions of the last three or four cycles There's often one particular industry that seems to be sort of the the the tip of the spear on that In terms of what seems to be the most in trouble Um, it was of course housing and 07, uh, then of course before that it was the famous dot-com bust um Where in this cycle are should people be looking to see some of the The most disruptions Um And maybe some of the biggest changes that might maybe help us understand a little bit about what's going on in the economy right now Like what what industries seem to be? The most affected, uh, and might just go Have the most weird things that That require extra explanation and some real analysis Well, I think the biggest industry right now on the agenda is the commercial real estate industry Uh, that really has been blown up over a Long period of time Uh, there's tremendous excess capacity Uh for office space Uh for business hotels, uh skyscrapers Retail, you know the list just goes on and on um where The occupancy Leasing rates, uh, just don't add up to the point where Uh the project People who started these projects Where they can pay the Bankers back for the money that they borrowed. So I think that's going to be Uh front and center. I've also looked at You know on the mesis wire, I've looked at the streaming services. I've looked at technology and apple The financial industry I think this is going to be a broad based crisis and I think uh though is right about uh the political ideology That is most worrisome. I think to the productive classes Is that you know our choices right now at least at the national level though doubt with the state level But at the national level we have biden We have uh probably trump Jerome powell in the board of governors As far as sound money is concerned, they're all dovish. They're all pro inflation. They're all for Fed stimulation Um and that goes beyond the leaders of those parties and the leader of the fed Down to the staff level so and then if you look at you know balancing budgets peace You know all of the major issues that form the ideological bulk work of The economy they're all very very weak right now. It's very very troublesome and before I Look into the future. I think ryan's point about credit card debt Is worth further exploration because credit card debt if you know the economy is good Why are people going further into debt? Well sometimes Uh a very good economy can encourage people to go into debt You know if you're expecting to get a better job higher real wages You might use your credit cards and and other loan facilities to Get better living quarters get better furniture electronics automobiles so on and so forth so Uh a very good economy can drive up uh consumer credit but A very bad economy can also drive up consumer credit and we have American workers Yes, there are plenty of job opportunities or job openings at least out there Uh, but real wages have been going down And people have been using up the savings from the stimulus covid stimulus And they've been running up their credit cards and I think that that's a very negative Sign so when we look at this kind of balanced picture that the mainstream media wants to tell us about Or even a very bullish scenario about the current situation Uh, you know the same thing, uh, but I think the credit card Uh situation and the increase in debt there is indicative Of the real story about this Transition period that I've been speaking of and then going back to the inverted yield curve You know, it's fascinating you look at this inversion Of interest rates where short-term interest rates rise above Long-term interest rates and the differential can fall to zero or it can actually go negative Now if you look back at the at the time series data Of the yield curve, what you'll find is that very often The yield curve will fall to zero or maybe a little bit negative for a short period of time And then yes, we'll have a recession six, 12, 18 months Into the future Sometimes it works sometimes it doesn't depending upon What long-term rates and what short-term rates you're using But also if you look at the inversion of the yield curve The examples of that where the inversion Was very deep or very negative where short-term rates Uh were much higher by percent or two Above long-term rates, which is unusual So if you get deep inversions that last a long period of time, that's very rare Okay, that's only happened a couple of times in the 20th century The great depression was one and then There was a series of inversions in the late 70s and early 80s And of course that was one of the most horrific economic times In us history and certainly during my lifetime And what we have right now And I pointed this out in the minor issues podcast is that The inversion occurred Several months ago it continues to be inverted And the inversion is quite deep. It's uh roughly three quarters to one percent inversion And so that's lasted And so what's happened when you get these deep and long-lasting inversions is A real economic crisis rather than just an ordinary Average recession correction And that's one of the main reasons why I have confidence That you know economic crises are not they don't come along very often Maybe once or twice in a person's lifetime But the inverted yield curve right now is signaling Not just a recession But a severe economic contraction or crisis Yeah, I I I would definitely encourage people to check out a look at At the graph at the yield curve time series if you haven't I'll post an updated version of it on mesas.org this week and You can see just how how far down that's come Yeah, this is not like one of those things where it's it's hovering around zero for a little while I went slightly negative. That's not what we're looking at right now. So Yeah, it's an unusual thing Now as a last question for you mark The on the issue of the dollar on your last Minor issues podcast you which the one was titled the dollar is down We did look you looked a little bit at the dollar index and now it's fallen 12 percent since last october And we touched on this at the at the beginning of the episode a little bit about How they're expecting easy money again as soon as there's signs of economic trouble Now we add we editors at the mesas who we've also tried to avoid a situation where people are constantly predicting the doom Of the dollar and we've even had to reject some articles because every time there's Some little news about bricks or some country decides says it's going to back its Money with gold or something like that You get you get people writing articles about how the dollar is going to Completely implode within the next 90 days so we we try to keep A lid on people going completely overboard predicting the imminent demise of the dollar however touching on What you had said earlier about yeah, everybody expects a whole lot more money printing say a year from now or less If the unemployment rate surges That that clearly is going to make people bearish about the dollar the question is then though from the larger geopolitical side of things is If the dollar is going to go down, what about all those other major Currencies are they all going to go down to is this a global situation Just to wrap up Let's let's take a little bit of a peek beyond the us here and see what you think in terms of other currencies and other economies Very good question and Interest rate differentials really drive the short term Changes in the relative value of one currency versus another The dollar the euro the yen The british pound et cetera the swiss franc um, and so interest rate differentials matter and So I think that is a driver a potential strong driver for a lower dollar relative to all these other currencies and You know, you're right. I mean the dollar Is uh, the best Of a lot of really bad currencies We have a military And you know just all sorts of resources so that if anybody does peep up and say i'm gonna back my currency with gold Somehow or another that seems to get snuffed out But they cannot forestall forever You know the Absolute decline in the value of the dollar and its purchasing power And that's been gradual. It's been sustained um, when does a Dollar collapse is very difficult Impossible really to predict because it's going to take Uh, you know things like a rise of an alternative such as a brick currency Or a situation in which the united states is particularly Disadvantaged in terms of its government finances so, um, you know a breakout of Worldwide has has still hostilities in the ukraine russia situation Would certainly be a driver of that or the establishment of an actual brick Brazil russia india china in south africa and other allied countries Forming their own currency their own banking institution Uh developing an alternative to the dollar as a reserve currency and as an international transaction currency We've been anticipating this for now over a decade. And so You know it's slow steady decline But that will be punctuated By events and if we take one look back at the british pound which dominated everything just like the u.s. Dollar World war one came around and the british economy collapsed And the british pound lost its standing as the number one currency in the world And it was You know devastated by the after effects of World war one and the great depression so Events are happening. They're slow insurer the more the u.s. Abuses it standing With respect to the u.s. Dollar and the national debt and international affairs The quicker that's going to come and then we're going to see Discrete changes like the brick currency And and other events that are going to have a precipitous You know if if the bricks countries do set up a bank and do issue a trading currency or a reserve currency You know that's that's when the fireworks start All right, well, I think that's a great place to end this episode of radio roth bard Thank you mark for joining us Giving us another update and yeah, I don't know We'll see what happens at this next fed meeting what they do with the the interest rate at that one and with their portfolio if anything And we'll follow up with you again in another several weeks And of course, thanks to though my co-host For this episode of radio roth bard and we'll be back again next week with another one So we'll see you next time Hey guys, it's stovish with radio roth bard and if you've enjoyed this episode I hope you'll check out mark thorton's podcast minor issues Minor issues provides succinct economic commentary a few times a week by dr. Mark thorton and we've got a special treat for you This is the episode mentioned on this podcast the dollar is down So check it out. You can find minor issues with mark thorton at mesas.org slash minor issues or wherever you get your podcasts Well, hello and welcome to another episode of the minor issues podcast Well, all signs look clear and positive according to the mainstream media Inflation is lower and predicted to head even lower It seems now that there is no need for the fed to continue to raise rates So we may only get one symbolic increase in rates And then jobs jobs Still seem to be plentiful and the unemployment rate is near historic lows And the debt ceiling issue has been taken care of The university of michigan consumer sentiment index is now at the highest level since september 2021 So what's not to love about the economy? well Here's a little cold water in this episode Just a minor issue about all the dollars that you use Including the dollars and your salaries and your wages and your pensions and your benefits your life insurance policy Bonds everything that's dollar denominated is subject to the effect of the influence of the value of the dollar If we look at the dollar we see a downward path Going back to when the stock market turned around in early october of 2022 The dollar index was in almost 114 And the nasdaq had fallen to 10,320 today In early july of 2023 the dollar index is at 100 Falling 14 points and the nasdaq is up over 14,000 So while the nasdaq stock market is up almost 40 38 percent the dollar index has lost 12 percent over that same time If you look at other stock markets because the nasdaq is really the leader in a bubble Both up and down The dow jones industrial average over that same period is up 16 and a half percent And the s and p 500 is up 26.1 percent All of that has to take into consideration the fact that the dollar has lost 12 percent of its value Over that time period and of course bonds have also lost at least a little bit of money over that time And of course most of our wealth and our money is tied up in dollar denominated assets and stocks and real estate are two non dollar denominated assets The cold water the minor issue this week is that while stock markets are up the dollar is down And we don't forecast the value of the dollar or all of the various effects that change the value Of the dollar but we do know that a decrease in the value of the dollar means higher prices And if that trend continues that means more inflation ahead