Printability Matters | Mark Thornton

[music] >> Hello and welcome to another episode of the Mises Issues Podcast. I'm Mark Thornton at the Mises Institute. Well, I'm sure that most of the discussions in the closed-door meetings at the Fed's Jackson Hole Symposium will center around the problem of printability. They certainly won't be part of the paper presentations or the press conferences. The US is spending like a teenager with an unlimited credit card that they don't ever have to pay off. The Fed doesn't have a monetary policy in any sense. It's been playing games for more than a quarter of a century. And really ever since 1971 and even earlier going back to its very beginning. These games center on the problem of printability. The Fed's mandate is not CPI inflation rate or the unemployment rate target of the natural rate of unemployment. That's all a tall tale to gain public acceptance and gain credibility for itself. Their real mandate is also twofold. It's to service the interest of the big banks and to service the interest of the state. Especially to facilitate budget deficits and the national debt. The only role that the working class plays in all this is a byproduct of the real mandates. If some families temporarily benefit from Fed activities, so be it. It's especially Uh, it has a political role to fool voters around election time. That's why politicians are so concerned right now with things like beef prices and diesel fuel prices and mortgage interest rates. Their real concern is to get reelected and to stay in power. That is where printability comes into play. With the central bank, the Fed, all the problems of government and society can seemingly be addressed with the Fed printing more money. New spending programs, new wars, new benefits, etc. are all made possible with a few keyboard entries on a computer at the New York Fed. The price inflation only comes later as the money makes its way through the hands of the banks, the government, to businesses that end up driving up resource costs and prices, and eventually in the end with higher prices for consumers, and later in the form of higher wages, and then unemployment and bankruptcy, and the cycle begins anew. Few people figure out the Fed's game as it once again comes to the rescue with lower interest rates during the crisis. The biggest problem with printability is how it affects political behavior and social social ideology. People assume that the government can solve all our problems at no cost, and politicians, who are very short-term oriented, spend without constraint. They vote for everything. They go along with stupid wars and stupid policies. They pass budgets with huge deficits and they go unconcerned with the national debt. Americans and their governments are now completely dependent on keeping the monetary spigot open ever wider. This cycle is of a historically long duration thanks to the appearance of the COVID situation and the Feds and the governments $10 trillion bailout in 2020. Then, when CPI inflation skyrocketed, they had to cut back a little. They started through the back door uh releasing their hoard of repurchase agreements through the banks and the stock market took off. Despite this uh apparent uh sobriety of spending and money printing. Now, we broke that story on repurchase agreements in early 2024, but it never made the headlines. And the link to the February 3rd, 2024 episode, which was really the first anniversary episode of this podcast, will be in the description of this episode. And please do go back and check out all the past episodes, even if you just read the titles. So, that was uh between 2022 and 2024, that was um $2.5 trillion uh dollars um virtually swamping the lie that the Fed was quantitative tightening or reducing their balance sheets. And of course, in 2023, stocks started shooting ever higher. As the repurchase agreements ran out and fracture fracturing started happening specifically in the private credit and private banking sector, the Fed quietly announced a change of direction at Jackson Hole Symposium last year. An end to quantitative tightening and they started a new liquidity injection program called reserve management purchases. And of course, they denied that it was quantitative easing. Uh but this was an admission of business cycle cracks in the economy and they addressed with with some quantitative easing or printing. Now, CPI inflation remains 70% above the Fed's own target rate. And at that government determined rate of inflation, all of your money, your bonds, your wages, your life insurance, etc. will lose 10% in less than 3 years time. And that's actually the less least painful aspect of monetary inflation. In any case, you can see that the Fed's policy is reactive to the negative consequences of its past policy. And those policies all boil down to the printability problem, the power to print money. And now, of course, the Jackson Hole Symposium looms. And Kevin Walsh is trying to establish his credibility as an inflation hawk, but price inflation is still high, interest rates have been rising, and the petrodollar scheme is sinking in the Persian Gulf. So, what's a guy to do? Well, enter US Secretary of the Treasury Scott Bessent. He's been busy lately. One, he sold euros euro dollars to buy Japanese yen. And you say, "Well, what the heck is that?" And he did this so that the Japanese central banks did not have to sell US government bonds to prop up its own failing currency, which the yen has been depreciating rapidly lately, along with higher interest rates and um higher CPI inflation in Japan. Essentially, Bessent is trying to keep long-term interest rates down because they have risen already to a recent record level. Number two is Bessent is using his checking account at the Treasury to buy long-term bonds uh to also help keep long-term rates of interest from exploding ever higher. Of course, uh we've talked about the reversal in trend uh away from lowering long-term interest rates towards raising long-term interest rates, and that's a long-run trend as well. Of course, Bessent, he is also had to use every last dime in this checking account to pay for the US budget, which is in a two trillion-dollar deficit. Ultimately, he will have to borrow more in the short-term market to make up for the money he used to buy long-term bonds. More than one person has described this maneuver as using your credit card to pay off to pay your mortgage, which absolutely no financial advisor would ever recommend. But of course, the election looms in November. My bet is that the Fed will try to stay pat in the short run with current policies until they have either created an economic crisis that would provide them with cover for it to re-inflate or until after the election when the political uh scene is clear. That would explain why the Treasury has become more activist and why the president has been hyperactive, really, at the bully pulpit and why he has been willing to empty the strategic petroleum reserves and recently to allow foreign beef into the US market before the US election. So printability is the problem and everything you've been seeing is just a reaction to that problem. >> Welcome back to Wall Street Bully. Our guest today is a friend of ours, Mark Thornton. He's a fellow senior at Mises Institute. Mark, welcome back. >> Ivan, it's great to be here. >> Yeah, it's great to have you on. Thank you so much for taking the time out of your day to speaking to everyone here in the silver and gold community. First, I wanted to get you down. We're recording this as of the 19th of August. You know, I want to talk to you about the moving silver and gold prices. Recently, we used to we're seeing a little bit of a pull upwards higher in in and gold prices. Uh, you know, why do you think that is? Uh, what's happening right now in the precious metals markets? >> Well, of course, it's a big day in the precious metals markets. Uh, you know, bond yields are down and the speculators are flooding into all sorts of things, but in particular gold and silver, which have, you know, taken a hit most of this year. You know, I've been saying steady as it goes with respect to those markets and they've gone down more than I thought that they would. But again, all the my longer-term outlook has been positive uh, for gold and silver and this has been a buying opportunity for those who hadn't gotten into the market. So, we may be off to another big run uh, in those markets given the fiscal and monetary conditions in the world today. >> Mhm. Do you have uh, any type of price point you're thinking silver will get to by 2027? Do you think it'll hit back at to triple digits? Do you think gold will hit that 5500 mark again? Like, what are your thoughts? >> Well, if this is a real takeoff, then I wouldn't be surprised at all uh, that we run up to new highs in in the metals and in commodity prices in general. Um, you know, the uh, the the CRB index and the Goldman Sachs commodity indexes are, you know, flush up towards the the all-time highs in those indexes. So, this is a commodity bull market, but gold and silver are the leaders in those markets. So, uh, again, with a takeoff, you would easily expect uh, new all-time highs in gold and silver either this year or certainly next year um, moving forward. >> Mhm. Now, uh, you guys at Mises had, uh, uh, you know, a conference recently in in Albuquerque. We were talking about that before we started recording. Uh, you know, what are the the main, you know, topics or a lot of questions you were getting about the precious metals market or the markets in general? >> Well, of course, we talked about the long-term outlook [clears throat] in terms of, you know, gold and silver prices on a fiat paper money system and the long-term trend has been up rather consistently for ever since we went off the gold standard. Um, you know, if you look back to 1970, gold uh, has uh, equaled or bettered, uh, the increase in the stock market and over the last 25 years, uh, gold has beaten, uh, the stock market. So, you know, you think, well, the stock market's just booming out of control, but gold's, you know, hanging right in there, uh, with virtually, you know, much less risk, no tax consequences if you're a buy and holder, um, you know, and so, we tried to provide a longer-term uh, perspective and also a shorter-term perspective on the implications of a paper money system, uh, in the short run. We also looked at political developments, uh, on the state level and also on how to uh, how one might look at, um, investment advice, uh, given the, um, the current status status, um, uh, in the world economy right now, where we have, you know, central banks and treasuries around the world grasping at straws trying to, uh, piece together a policy that holds the whole system together. And uh, and so those are the general parameters and we had great discussions individually and as a group. It was a small group conference just for the one day. But it was very uplifting for both the presenters and the audience as well. >> Now I was looking at some some numbers for home ownership costs for the younger generation and it's you know it's astronomical like you know the the purchasing power has been wiped out since 1913 by 97%. You know home ownership is costing lots. Is the youth all going to be renters by 2030 or you know even sooner than that? And how does that you know how does that play out in the future where the younger generations can't afford housing? >> Well the younger generations have all the reasons in the world to be upset about the current economic status. 40 trillion dollars of government debt that they are expected to pay. Social Security bleeding red ink. And the government pushing programs like AI and data centers that are going to put a lot of people out of work. And so and then of course health insurance is out of control. The government spends 70 cents out of every dollar on health care you know of the health care industry. And and then the cost of higher education. So everywhere you look the government is driving up the cost of production. It's inflating the money supply and it's not even being a good steward over all the programs that it said was going to help everybody. Well the the current generation looks at that and saying you know basically we're getting taken for a ride on all that. That's why a good part of them are thinking like socialists. And then others are thinking more like free market economists. Knowing both groups knowing that they've been put into a very bad situation and that the current political class is offering them nothing in the way of solutions as to how they're going to extricate themselves from this mess that my generation has created. >> Hello my fellow silver and gold stackers. Please hit the like and subscribe button. It will really help the silver and gold community grow. It'll help this channel grow and I'd really appreciate it. Back to the video. >> Mhm. I want to ask you too, Mark. Um you know, I know it's it's inevitable that we're going to see higher inflation. They're going to print more money. But what happens when hyperinflation hits America and it hits it quick? You know, what would what what what should everyone do? What would be the first stages someone does? Obviously, you can protect yourself with silver and gold. But what's the aftermath of you know, hyperinflation hitting America? Will it be the end of the US dollar? What's like what's what's the lifeline looking like? >> Well, a true hyperinflation, that's when you have you know, fiat paper money and you have a government out of control spending and debt and interest burden, which is exactly what we have right now. And it's something you never want to get into because it really destroys the social fabric of society. Whole professions you know, go out of existence because their pay is overwhelmed by the the cost of inflation. You know, the the ownership of of everything starts to change hands very quickly. A lot of goods in the economy uh become unavailable and people really um are getting to the business of spending every piece of paper that they have as quickly as possible. So, it's very destructive to the social fabric. It undermines society and civilization and it deprives uh people of all the things that they're used to. So, we need to prevent all of that. Uh and you can you can protect yourself a little bit by you know, staying out of short-term debt and uh um uh and also gold and silver, being independent, being locked in with your friends, your neighbors, uh local businesses, uh and and start of course, you know, ultimately the breakdown of the fiat currency uh new ways of making exchanges take place. So, you have alternate currencies. That might be uh silver coins and Bitcoin and that sort of thing, which would be uh either unaffected or benefited by the hyperinflation. Uh but you have to get used to that you're no longer going to be able to uh deal in your day-to-day life um the way you used to. And so, it's very upsetting. It's very destructive and it really requires the individual to take on a bottoms-up approach. >> Mhm. >> Where you rely uh more on your friends, neighbors, and your the city that you live in. Um because the it causes a breakdown um in the whole uh integrated economy in that that whole system that we've grown a used to and that it benefits us a great deal. I mean, it benefits us a great deal that we can buy goods and services, parts, and raw materials from all around the world. But, in a hyperinflation, those things it takes so long to get from point A to point B as we've found in the case of oil that it takes weeks and weeks and weeks to get from point A to point B. And what does hyperinflation do to the whole pricing system under those conditions? So, again, look for bottom-up solutions, apply them to your personal situation, and prepare yourself as best you can on that local bottom-up approach. >> Mhm. Now, you know, if the Federal Reserve can control how much liquidity is being pumped into the market or into the economy, and they can control, you know, turning off that tap and turning off the printing, is it is it uh you know, is every recession or depression manufactured by the Fed or by central banks? >> Well, you know, yes, the the expansion part is directly mechanized by the Fed. And [clears throat] the the Fed's actions are amplified through the banking system. So, the banks get more reserves, and then they use those reserves in a multiplicative fashion to make loans, and that's the stimulative effect. But, of course, it also causes a lot of bad investment choices to be made. And then there's an eventual uh you know, situation a couple of years down the road where, of course, all of those investments are going to be um not all of those investments are going to be profitable, and a great deal of of are going to be unprofitable and so that puts the the borrowers at risk. That puts the banks at risk risk and therefore the economy is at risk and facing higher price inflation, not monetary inflation but price inflation. And so if it's a mild boom bust cycle, the Fed can cut the flow of money by raising interest rates and that's going to cause you know, unemployment and bankruptcy you know, to to come in the in the downturn or correction phase. But they've been inflating at such a high rate for so many years and >> [clears throat and cough] >> the government has borrowed so much money as well that a lot [clears throat] of those policy choices are no longer available to the Fed because this is not a mild boom bust cycle. This is a secular boom that's lasting since the great financial crisis. So you're talking about investments and stock prices that have been going up for 16, 17 years. >> Right. [snorts] >> And so it really opens up a very open-ended problem for the Fed to deal with at this point. >> Hello everyone. Hope you're doing well. If you can please click the link in the description below and just follow us on Instagram and follow us on X. It'll be much appreciated. We're putting out new content every single day. We're doing financial content, silver and gold and political content. Just please take a second, click the description below of the of this YouTube video, follow us on X and follow us on Instagram. Thank you so much. >> Yeah, absolutely. Now you really explained that perfectly and I really appreciate that. I'm sure everyone here appreciates that. Now Mark, you know, before you go, what would be your piece of guidance whether it's, you know, there the youth or whether it's a middle-aged person, you know, starting to get into their investing you know, cycle or they just want to preserve their wealth, what would be your guidance going into the the latter half of 2026 for them? >> Well, I think we're so close to a top in the stock market. I know I've said that before, but I would emphasize, you know, staying out of short-term debt and having cash an emergency fund of cash, and then of course gold is a major standard of value over time as well as silver which also benefits from the industrial uses, but in all cases, it's really a bottom-up approach. Start with your own financial situation as I've just outlined and then work from there. And in an inflationary or even in a hyperinflationary scenario that real assets like commodities are are going to benefit from higher prices and [clears throat] um and then also any kind of dollar denominated assets other than your emergency fund should be avoided. So, you know, we're in a long we've switched from a long-term secular boom market in bonds and we've switched in the last couple of years to a bear market in bonds. And so, I would tend to shy away from like bonds and life insurance, everything that has an actual dollar value written on it >> Right. >> would do very poorly um these new market conditions. >> Mhm. Yeah, that's uh perfectly said. Now, Mark, before you leave, where can they follow your work? Do you have a personal social media? Is it just the Mises Institute they can follow? Where can they find your work? >> Yes. Yeah, go to the Mises webpage, mises.org. At the top, we're always giving away a free book, and it's usually on money, Rothbard's case for the 100% gold dollar. I think puts everything in perspective for your listeners. And and also [clears throat] I have a personal podcast called Minor Issues. It's m i n o r. And and then of course my work appears on mises.org on a regular basis, but it's a it's one of the largest economic pages, and it's dedicated to educating the general public about the foundations of all of these problems and solutions to all of these problems, and we're going to need to solve the problem, especially if we get into the hyperinflationary trap. And of course I'm on Twitter at Dr. Mark Thornton, and and I'm I'm on a lot of different podcasts, so yeah, please do stay tuned to my work, but check out the Mises Institute in general, cuz we have three other podcasts that tackle different aspects from theory to policy to politics and libertarian slants on all the issues, so it's a great resource for everybody. >> Yeah, I highly recommend everyone, please go check out mises.org. I'll put the the the links in the description for your social media in the link below. But you know, Mark, thank you so much for taking the time out of your day. I genuinely appreciate it. It's such a wealth of knowledge that you give to us and it's it's very like [music] very clear to understand. So, thank you. But as markets develop as always we'd love to have you back on in the near future. >> I'd love to. Alvin, you're doing great work. >> Oh, thank you so much. Talk to you soon, Mark.