Will AI Bonds Doom Humanity?

Hello and welcome to another episode of the Minor Issues Podcast. I'm Mark Thornton at the Mises Institute. Well, are all of these bonds being issued in the pursuit of developing artificial intelligence? Is that unique? Or is it rather just an unrecognized sign that all booms and busts have cycled through over the last century. I'm going to get to that topic today, but first the long promised recap regarding inflation and higher prices. First, I want to go look at our stock market prediction contest. And this year's contest is stocks versus manure, where stocks are represented by the S&P 500, which is up 11% this year, while manure is represented by the ETF MOO, as in the cow moo, and the cow poo. That ETF is up 19% this year. In terms of overall price appreciation or currency devaluation, the consumer price index over the last five years or so um is up 22%. And the Fed has not reached its 2% inflation target for the last 67 months. The producer price index, which is a reflection of wholesale price inflation, is actually up 30%. The Bloomberg commodity index which is a measure of commodity prices like energy prices and metal prices and food prices of the commodity nature. So corn, wheat, soy, soybean, sugar, so forth, that's up about 85%. and the consumer uh excuse me the CRB index of commodities which is an alternative to the Bloomberg index is up 130 to 140%. Now over the last five years the prime interest rate in the economy has risen by about 200%. So more than a doubling uh of the prime interest rate already which is a gets reflected in business loans and mortgages and that kind of thing. Um real earnings on the part of labor in terms of wages and salaries over the last five years. If you looked at the national statistics in the US at earnings adjusted for inflation, they're only up 1% over the last five years. And of course, the higher salaries have increased uh more than that, whereas wage earners uh have actually by and large experienced negative inflationadjusted earnings. The S&P 500 over that same five-year period is up 171%. So that's the environment that we've been looking at in terms of price appreciation or currency depreciation. Uh but the topic today is bubble bonds. Is the cloud coming down to earth? In other words, the cloud is a euphemism uh for technicians and salespeople to tell me what they don't really know uh where my files actually are. The boom in data centers has brought that back down to earth and put it in our backyards because we can see the tangible evidence of what that cloud really looks like and the people who run the cloud or depend upon the cloud are what they call hyperscalers. Now, this is, you know, that cloud technology uh with zillions of servers um that allow for information to be distributed globally rather than at the office, so to speak. It allows scaling of computer power, of computer memory, uh networking, uh and storage of all the data and all the files and for all of that to be on demand. Uh so whereas you know 50 years ago you'd have a computer that was independent, it wasn't connected to anything, it depended upon its own memory, its own storage and so forth and it wasn'tworked. Uh but over time of course computers did becomeworked. They became connected to the worldwide web. uh servers were installed in individual businesses. Um that allowed for you know economies of scale and economies of scope uh with respect to things like storage and software and so forth. and data centers is really uh the next big step in all of that where they're connecting uh you know up to 10,000 uh servers that are connected in a data center. Um and this allows for all sorts of economies um in the usage of things like memory and storage and networking. Uh it allows for scaling so that uh an individual customer can easily you know increase the amount of storage that they're using uh that they can have peaks in the amount of memory uh computer memory that they're using. Um and all this can be customized uh for individual units and artificial intelligence really is just about uh bringing all that together and adding very high performance in terms of computational ability and connectivity um and the sharing of all of these resources. And these hyperscalers um they're familiar to all of us. They include the cloud business, the web-based business services of Amazon, of Microsoft and Google, of Meta and Oracle, as well as uh the Chinese companies Alibaba and 10 cent. Um and this is the uh sort of the latest bubble in the economy. Um and um it's really the talk of the town in in both all of its good uh aspects uh all of its bad aspects um and some of the scary um aspects that um artificial intelligence and data centers uh have brought into our lives. Now the hyperscalers themselves uh the companies that I mentioned they've gone from really cash cow operations uh that were capable of financing self financing billions of dollars of research and development in their companies. Uh so you know every year each individual company uh could finance multi-billions of dollars uh of expansion of research uh and development both in terms of the facilities of the company uh as well is its computing and cloud abilities and so forth. And then all of a sudden these hyperscalers um have had to scrap some of their research projects. Uh they've had to cut employees and cut outlays and now they've been borrowing a lot of big bucks basically to finance this new uh business that they're in. And uh so they went from billions of dollars of cash on their balance sheets and you know famous uh you know companies like Apple and uh and uh and Amazon would have hundreds of billions of dollars uh on their balance sheet and very little debt. uh from 2022 to 2024, we're talking only about $30 billion a year uh that these companies, these massive companies were issuing in debt. And they were almost like uh they were only issuing debt for internal financial reasons uh to take advantage of ultra low interest rates. for example, uh during COVID, uh they could essentially borrow money uh for free. And uh then, you know, so you've gone from sort of this optimistic small-time borrowing to borrowing at a level of roughly 30 B billion dollars a year on average as a group. uh to 2025 uh to the present where there was kind of a binge in borrowing. In n in 2025 uh that industry borrowed uh $120 uh billion dollars. Um and you know that's increased uh significantly more uh in 2026 already. they've gone in excess of $300 billion dollar in new borrowing and um you know and they were issuing like 100year bonds. Uh even though the data centers themselves were only going to last about 20 years and all of the technology inside the data centers uh like the servers uh were going to last maybe five years and the chips that they were borrowing um money for to pay for very expensive uh chips at you know top of the market prices which are expected to only last uh in their own planning for about three years. So borrowing it for 100 years uh to finance something that uh is coming down to 3 to five years of planned usage. Um and also all of this borrowing is coming in the form of you know new construction, new investment. It's not typical corporate financing where they're rolling over existing debt and so it's having a very kind of stimulating effect on the economy and all of this is really classic signs of the Austrian business cycle theory uh where we incorporate technology uh into the business cycle. uh some some uh uh business cycle theories, the real business cycle theories look at technology as an exogenous shock to the system. Whereas Austrian economists view the central bank as exogenous and technological change, rapid significant technological change as endogenous to the process. With low interest rates, artificially low interest rates, it stimulates a more roundabout uh economic production processes. And those more roundabout production processes are by definition changes in technology. uh uh Misa's senior fellow Brendan Brown uh recently labeled or relabeled the Austrian theory of the business cycle uh that of a techno bubble theory of the business cycle because of the inherent uh common feature of significant technological change. And the what I wanted to point out here today is that typical nature also gets translated into these unusual rounds of financing the bubble. So hence you got the bubble bond phenomenon uh that goes back in time and we can certainly look at 1929 where there was kind of a bubble in public utilities. Remember in the 1920s, electricity in your home was a relatively new phenomenon and public utilities used the lowterest financing to greatly expand their networks, their um you know, the fact that they were connected into a a substantially new number of American homes and businesses uh monthto month, year to year. Uh it was a big boom in the economy. Electricity really was going to change uh the human situation, the human household and human productivity forever. Um but that didn't help those bonds that were issued by the public utilities uh which uh ultimately a lot of them could not be paid for. uh a lot of those resulted in defaults and bankruptcies and of course we saw uh something very similar in the tech bubble of the late 1990s. There were many industries involved but the telecom and dotcom um new industries really led the way and uh you know so things like fiber optic cable that we take uh for granted today um was a brand new thing. It allowed for high-speed transmission of information between computers and um and so the telecom industry was converting from one system, one technology uh to another. They raised untold billions of dollars uh in financing to facilitate that transition. And of course these were you know the market was skeptical of uh these bonds and they were typically uh with the telecom they were high yield bonds which investors were uh suspect about and they were convertible bonds uh which you know at certain prices you could convert the bonds into stocks uh in these high-flying telecom companies. So the the bond side of the market was skeptical, but by con by being able to convert the bonds into these high-flying stocks, it sucked in a lot of investors. But of course the telecoms and the dotcoms uh did poorly after the bubble was over or they went bankrupt in the process and uh that all came to not and we had a similar situation of course in the housing bubble you know that was brewing in 2004 to 2006 in real estate uh with uh housing uh prices shooting higher and being financed a lot by banks. Um and uh there there was a lot of suspicion then about the housing bubble on the part of uh financeers. Uh but that was able to be smoothed over with the government's help with these new uh financial instruments. So mortgagebacked securities uh was where you know bad mortgages could be bundled together and you could slice that product into uh lowrisk AAA rated portions and high-risk high yield portions and so banks could buy uh the uh the AAA rated portion of those mortgage backs securities and those collateral collateralized debt obligations. And of course with the saying going around that real estate prices never go down. Uh you can never lose money in real estate. Well, it turns out yes, you can lose money in real estate. And the banks lost money, investors lost money, and the US taxpayer uh unfortunately through no fault of their own lost a bunch of money in that process and in the bailouts that the government offered these people who were inducing people into bad investments. And so this new um artificial intelligence hyperscaler financing um surge where we've gone from almost nothing to 30 billion uh dollars a year to last year at 120 billion and now this year over 300 billion so far this year. It's probably not it's probably going to be more of the same. it's probably going to be related uh to the business cycle and there's a good chance that a lot of people um are going to lose a lot of money um here in the process. So it's not a brand new thing. Uh technology is great but it's very often uh related to these uh financial maneuvers. Uh and of course with the Austrian business cycle theory, one of the biggest problems is it draws in so many um of these new era investors and these new era companies all at the same time. And so the effort becomes not just one company doing it, but a bunch of companies scrambling madly uh to try to accomplish the same thing. uh driving up their costs, driving down future prices for their services, and all the while sucking in uh investors who are really hyped up about the technology uh but unaware of the dangers that they face. It seems like the economy and the global financial system are under unparalleled amounts of pressure currently. I mean, we've seen diesel prices skyrocket to all-time highs, hitting the wallets of consumers directly, but also indirectly, and we've seen the US Treasury rates 10 year and 30 year as an example, form almost perfect hockey stick style charts. Now, where does that leave the state of the economy today? How close are we truly to a financial calamity? And should we be concerned of the health of the US Treasury market? >> I think we are close. I think that the uh worldwide economy is suffering from financial distress throughout the economy. And I think the important starting point to remember is that most of the world's economies are being run by socialists of one branch of that party or another really around the globe. And there's very few uh that don't have that ideological mindset. And so they're quite naturally pressing their budgets uh to the extreme and their ability to borrow money to the extreme and the they're running the printing presses as fast as they think they can get away with it. And of course, we also have a trade war going on uh primarily thanks to President Trump of the United States, but of course there's a lot of participation in all that. I mean the Europeans are protectionists. Uh the Canadians and the you know some of the Asian economies. Um mercantalism is a branch of socialism. So we do have that trade war and we do have uh real wartime situations uh breaking out in certainly in the Ukraine between the Ukraines and and uh and Russia and of course the Iranian situation uh in the Persian Gulf uh but we also have the participation of many of the leading military uh economies with the United States and of course China's keeping an uh close eye on all this. Um, you know, and so it's a it's really a global phenomenon. People focus have tend to focus just on the United States, which is a prime mover in all this. Uh but it's really a worldwide phenomenon and that socialist mindset always presses the button for more government involvement, more printing, more debt, more spending, more military intervention, more protectionism. Um and so this is really really hurting the economy worldwide and and even the countries that are not involved in this whatsoever as you pointed out the the uh situation with diesel fuel which stems uh from the Persian Gulf situation as well as the Ukrainian situation where a lot of diesel production or the crude oil production has been taken offline and more importantly the refining uh aspect of diesel fuel and jet fuel um have been taken offline and so this is really a direct result not at all of the market economy but of government in action and they continue to press no one's talking about peace no one's talking about free trade and no one's talking about balanced budgets so I'm afraid all of these things are in play moving forward word uh impacting markets throughout the globe. >> No one is talking about balance but that that's for sure and it seems last week we've we've taken a step away further from that and a step further on the escalation ladder of the war in the Middle East that we have been seeing of course the uh strikes and damages to the east west pipeline in Saudi Arabia. It also seems like the Houthis have gained a significant piece of land around the PEP oneps trade. Of course, this has multiple implications for energy markets and oil specifically and perhaps we can talk about those multiple implications this does have. First off, the access to oil being limited significantly like you outlined earlier also on the refining side in the Middle East, but also in the Ukraine war. How are we going to feel that pinch over the next couple of months? Oh, I think it's going to be very significant. Um and of course uh what you have going on here is that uh the prominent players particularly the United States um our population doesn't have really the information is being blocked and they don't realize that Iran is in the situation um in a position of strategic dominance in that region in the sense that the United States and Israel can't inflict any significant uh turning of the tide type damage on Iran. But Iran can and has been inflicting that kind of damage on the United States which has really been forced to withdraw from the actual region itself in terms of its bases and its navy and and that sort of thing. And that's not really going to go away. And uh I believe that the Iranians have a a position that they've been taking advantage of for a very long period of time. And so they're not going to back down. And it doesn't appear that uh the United States President Trump uh is willing to back down. And certainly Israel is um under its current leadership uh is in no mood to back down and make concessions and meet demands. Uh of course I think they would. I think Iran would if the United States would meet all of their obligations under the uh memo of understanding that President Trump signed. uh but that doesn't you know that appears to be just another empty broken promise um on the part of the United States. So um I think that uh the cut off of uh oil uh from the Middle East along with natural gas and along with a lot of the chemicals that come out of uh the Middle East um sulfur which is in sulfuric acid which is used for mining. It's going to put a pinch on the mining industry because of the sulfuric acid and the diesel power. It's putting a pinch on agriculture in terms of the vast the incredible amount of diesel fuel that agriculture uses along with the uh chemical fertilizers primarily nitrogen but other um aspects of fertilizer that haven't been going into the ground uh to grow our crops for this coming year or next year. um you know meaning lower uh crop yields um for the global economy and so you know higher fuel prices, higher food prices um and uh higher costs for businesses really globally. Everything is transported on these ships which the rate on shipping has gone way up. um you know getting goods from one country to another and then domestic shipping uh I know particularly here in the United States that so much of it is dependent on diesel. So we're going to be facing and I think a lot of c countries are going to be facing fuel sir charges uh going forward. And then another aspect of all this of course is that China and Japan and the United States and other countries have been wearing down their strategic reserves of energy. And so, uh, you know, particularly in the United States, I know that our, uh, strategic oil supplies have been basically drained of its capacity. We're down to a level where if they use any more, it's going to be very dirty and it's going to threaten uh the carrying capacity and the structural uh safety of those uh containers that the oil is in. So, uh, we've kept oil prices down using up these strategic reserves and, um, kind of influencing market prices, uh, in the futures markets and, you know, our government, other governments are playing games uh, in the commodity markets uh, to influence us politically and uh, and so going forward, we don't we won't have those strategic reserves. uh and Iran is cutting off along with its allies, it's cutting off uh more sources of oil. And you know, the Saudis say, "Well, we can fix that pipeline in in two weeks." Uh the experts say it's going to be more like uh 8 weeks uh to fix all of the holes that have been put into the pipeline. And of course, Iran and the Houthu government in Yemen uh can easily breach more holes in that um uh that pipeline. It's a sitting duck out in the middle of uh the Arabian desert um stretching hundreds and hundreds of miles uh easily broken at multiple points at any time that they wish. So, um, you know, the the, uh, Iran effectively has, uh, its hand on the spot of letting oil out or in. And, uh, of course, the United States can add to the, uh, the the fact that oil can't get out, but it can't force oil out against the wishes of the Iranians. So, and oil is the master ingredient along with natural gas. uh that runs the world economy. We can't really prosper at it all without that. And the the less we have, the less prosperous we'll be. And I think, you know, along with food uh and energy, higher prices in the economy, it it it looks for um uh for very negative economic conditions uh moving forward. And I think a lot of uh upset people uh here in the United States and around the world, I mean, they're not to blame uh for all of this, but they're suffering the consequences of all of this. What around the uh food supply? Of course, you mentioned agriculture is a huge consumer of diesel and we've seen, you know, less fertilizers move out of the Middle East. We've already seen some harvest for example the um grains harvest disappoint in the US um a few percentage points. How concerned should we be of access to agricultural products not just for the food supply but also for energy productions etc? Well, yes. I mean, you know, in the United States and elsewhere, uh, corn and sugar are used to produce gasoline. Uh, and so there's a feedback mechanism with respect to that. And you can kind of see, uh, it's sort of the lifeblood of a market economy that you need uh, fuel for machines, electricity, oil, uh, and that sort of thing, natural gas. Uh and you need fuel for people which is food. Uh and the primary food of people is various grain uh rice, corn, soybeans, wheat, uh potatoes etc. And that's all dependent upon uh the yield on all those crops is dependent upon of course the weather but also chemical fertilizers. Uh and then every all of that has to be transported uh from mark from one market to another. You know, potatoes that are grown in Idaho uh don't magically appear as McDonald's French fries in Florida without a lot of processing and without a lot of transportation from one coast of the United States to another. uh and you know you can't just add in costs without companies suffering and having to raise their prices um or and some companies are going to go out of business. Some farmers are going to go out of business um in this whole process. So, uh the uh elasticity of supply and demand in these products uh if they're all being impacted simultaneously uh is a very serious issue. In other words, if the corn harvest were to fail uh and production of corn around the world were to drop uh significantly, that would not be a total disaster because we could rely on, you know, things like soybeans and wheat and rice to fill up the calorie uh deficit. But if all these grain products are uh suffering from a deficit and the deficit is not just weather in the United States, but it's a global phenomenon, you know, impacting all countries, well, the market economy and the human diet uh have a much harder time, you know, adjusting to that kind of thing. And you know, don't just say, "Well, I'm a carnivore or I'm on this kind of animal diet." Because of course, it's the animals who are eating, you know, corn and hay and and all of these other grain products. And so, you know, the main input into things like cattle and milk and cheese and uh you know, all chickens uh is grain and diesel fuel. So, you're not going to be able to escape um the shortfall of food or the higher food prices just because you have a unique diet or something like that. or if you're in a nono producing country or if you are in an oil producing country or if you're not in an area that uh refineses diesel fuel or if you are in an area that refineses diesel fuel. This is a global phenomenon. It's impacting the structural foundations of the economy and of our diet. And if that all comes to pass, which is in the works right now, um it means economic hardship and economic suffering for people around the globe. That's a very unfortunate picture and that illusticity or inelasticity I suppose um of of food. I would like to take that concept a bit further into oil as well. We often times hear this concept of demand destruction that we have already seen that at these price levels and that explains a you know lessening of demand meeting supply and that's why we haven't seen oil prices skyrocket through the roof thus far. Is it truly the case that people will change their habits if the oil prices rise from this point onwards? I mean if you look at it inflation adjusted and especially we we can get into that discussion if you don't believe the CPI numbers and you start to adjust for the M2 money supply oil is just absolutely dirt cheap and even petroleum based products are still historically very affordable. So have we we been seeing demand destruction at a large scale and will we see so until we see significantly higher energy prices? Absolutely. And I've seen it already in in in action in my daily life where I've seen, you know, friends or or uh families that I know where they're not using their diesel vehicle nearly as much and they're using uh the vehicle that gets a better gas mileage and uses regular gasoline rather than the diesel fuel, which is now so much more expensive. I think diesel fuel in my area is now more than $2 a gallon higher priced um than regular fuel. Uh yeah, due compared to regular gasoline and uh and of course uh in these cases the cars actually get more miles to the gallon as well. The American budget and I'm sure this is impacting people around the globe as well. The American budget is in general being strapped by the fact that their in people's incomes, people's wages and salaries may be increasing a little bit uh but not very much. In the United States over the last five years, the total increase in inflationadjusted um income for salaries and hourly wages is only 1%. And almost all of that is in the higher salaried uh jobs. In other words, almost all Americans who are hourly workers are experiencing a decline in their inflationadjusted wages. And I think that that is probably something that's very common um around the world, whether you're in uh Europe or Asia or Africa or South America. Uh this is a again it's a global phenomenon. Central banks are printing as much as they think they can politically get away with. Um and wages are not keeping up. And so uh you know that really puts the break um on the uh consumer in the economy and we haven't heard much from this lately. uh but if you go back a decade and then many decades before Keynesian economists uh would always say that the consumer is twothirds of of the economy but now that the socialist inflationary schemes and government spending schemes are draining the economic vitality from the labor force. Uh we don't really hear that now. What we hear is things about well art AI and data center building and the uh consumption on the part of the wealthy is keeping the economy going. But this is precisely what you would expect when the Austrian business cycle theory that was uh discovered by Ludwig van Mises more than a century ago that when the government is in the business of printing and keeping interest rates low that the wealthy really benefit because their asset prices are going up. But the working class is harmed uh systematically because their wages are not keeping up with inflation. And so the consumer is really in the United States and again many other countries is strapped. They've been building credit card balances uh with interest rates 25 to 30% on balances uh and they're not keeping up. And we have this phenomenon where you can, you know, order a pizza or some uh hot chicken wings delivered to your house uh and put it on a payment plan. Um okay. So that that's that that's a sure fire um symbol of uh what's going on in the economy and what harm all of this is doing uh to the average consumer. Um, and it doesn't really uh bode well uh because you're you're talking about an economy based on financial repression and uh systematically stimulating uh the investment end of things. Um and of course now we have this uh bubble in u artificial intelligence stocks and hyperscalers and all of that kind of thing. uh where the 1% or the top 10% are are doing very well, but there's even signs there that um they're uh a bit concerned as well. It's um good list of problems. So on the one hand, we have the consumer being squeezed. On the other hand, we now have a sort of inflationary cycle that we see in the commodities for fundamental reasons. On the other hand, a bubble in AI like you described it. And it also seems like we have some sort of bubble on the sovereign sides but unprecedentedly high uh government debt to GDP ratios. Now is there a era in history from which we can draw parallels and perhaps perhaps also glimpse how the future might look? Well, um, in terms of government bonds, the bubble in government bonds where, um, governments have become highly indebted. The United States just crossed the $40 trillion, uh, limit. Uh, Japan, its national debt is 200% of its gross domestic product. And so economists have studied that phenomenon in particular uh down through many centuries actually uh and have gone back and they found based on their calculations that whenever government debt uh exceeds 100% of gross domestic product or the overall production in an economy that that you cross some barrier at that point some financial barrier where the economy has become dependent on adding to the debt. The government has become dependent upon adding more debt. Uh and the economy itself is growing slower and less able to be taxed to pay down the debt. And so um the ultimate consequences uh of that type of behavior is that in general there's either a crack up in the economy uh where the economy goes into a sort of deflationary depression or where as a result of government debt and obligations the economy um becomes exposed to higher and higher rates of inflation. or even hyperinflation in the economy when uh participants all become generally aware of the fact that the government's never going to pay it back and it can't sustain uh its political obligations uh without the without the help of ever more increasing amounts of debt. So this is uh a general phenomenon. it it can run in a couple of different directions. Usually on the if a economy is on a gold standard, it falls off into a deflationary crackup um uh depression type situation where the debt um is um uh where they they simply just don't pay down. they don't pay back the debt and the finan financial structure of the economy craters. Um or if on a government paper money system uh there's a tendency uh for them to just print the money in order to pay. And of course, you know, you even hear on the mainstream media, you don't have to worry about the US debt or the Japanese debt or the UK debt because they can always print money uh to pay off the debt. Uh that's an admission that the current system is more likely headed for the hyperinflationary type scenario which until recently was limited to third world countries uh Zimbabwe and and and those uh type of economies or war torn economies like Yugoslavia back in the 90s um where the economy couldn't generate enough taxes to keep the debt going, the government resorts to paper printing and you end up in a hyperinflation. So it can go a couple of different routes but you know the the the main problem is reaching the point of no return uh where the uh the consequence is is uh can be catastrophic can be a calamity essentially. When would we tip over into this hyperinflationary um trap that that you outlined earlier? Would it be when the US Treasury is is no longer finding enough demand for its bonds and it has to step into its own own bond market? >> Well, yes, that that's a clear sign. Um when the government borrows so much money uh that the interest rate on government debt is increasing uh the value of the dollar in this case would be falling and um and as a result um in order to squeeze that back together again in order to bring down those interest rates the central bank would be purchasing more and more of the treasury debt in directly uh or indirectly in the secondary market uh sort of sapping up the excess supply in order to try to keep down those rates. The problem they face in a fiat paper money regime is that if the Fed is buying up the government debt, it's simultaneously injecting new money uh into the economy uh and then market participants can have the expectations that that new money that the Fed gives the banks for the bonds that they're that the banks are selling to the Fed. um that all of that new money is going to result in higher prices in the economy and also a lower value of the dollar. So, it's not a stable system. Uh and that's why you've seen uh Federal Reserve Chairman Worsh uh and Secretary of the Treasurer uh Basset um acting, you know, tough in the marketplace. uh you know making hawkish statements uh on the part of the Fed chairman and making these um braggadocious type statements from the secretary of the treasury where he's in charge. He's in control. He's going to buy uh he's going to use his money to buy up the long bond. Um you know to suppress those 30-year yields. Um, and you know, you don't want to you don't want to bet against the secretary of the treasurer because he's got inside information. He's the house. Um, you know, somehow insinuating that the secretary has just all this money sitting on the sideline when that's just not true. He's um, yes, he is buying a very small amount of 30-year US government bonds. Uh but ultimately he's going to have to go in and borrow uh the money to make up for that. So he'll probably borrow um just that much money much more money uh on the short end of the curve. Uh but he, you know, he doesn't have any magic checkbook where he can um write checks to buy government bonds. He's the one that's issuing the government bonds. He's not spending the money. he's paying the bills and having to raise the money. Uh but you know, he he doesn't have any magic um out there. And so when he says he's the house um you know, that's that's really um really a longshot type of statement. It's really just trying to intimidate market participants in the short run. And of course, you know, the the the chairman and the secretary um have do have a short run. Uh they're supposed to be, you know, stabilizing markets in the short run and then they have their boss's short run uh and their political parties short run. The Republicans, you know, the midterm elections are coming up. uh things don't look very good for them and um so they need to make the economy appear as well as they can possibly uh bring it before November 3rd uh to try to get their boss and his political party uh reelected essentially. And uh and so they're using moral persuasion. They're using statements and small policies to try to uh rig up the markets just as they've been uh no doubt been playing around in futures markets uh to keep the lid on things like uh oil prices and gold and silver prices and uh and other things in the economy. But we're going to reach a breaking point and they but they're probably want that breaking point to occur after the election. Why can't we thread the needle kind of like the United States did right after the uh Second World War when it was also at around 125% that GDP and it grew its way out of the debt. Of course, there's also been quite a bit of inflation when you look backwards. You don't really see that in the charts, but sure there has been. Why can't we thread the needle again, use AI, technologically advancements to try to grow ourselves out of this this pickle as well? >> Well, there is a um a lesson to be learned there. Um at the end of World War II, the United States had a national debt equal to 130% of gross domestic product. And this is um you know when I spoke about the economic historians in their research this is an example uh a contrary example because the United States passed that magic 100% and they uh over a period of time they were able to pay down the national debt into the into a level in the 20%. So they wiped out effectively, you know, 100% of debt to GDP um off of the financial books, but the conditions were entirely uh different. Uh they were uh de demobilizing uh as a result of the war and so the federal budget uh collapsed in terms of the amount of spending involved. uh they kept a lot of the taxes and they only cut the taxes uh over time and so the whole financial structure in the United States was geared towards bringing in um more revenue than expenditures. Um and they also uh there was a surplus of savings. So interest rates uh were very low um after World War II because Americans were by and large not in the direct conflict the way the European theater in the Asian theater uh experienced horrific human loss and horrific uh losses to uh productive capital and government in infrastructure. All of these countries uh were wiped out um essentially across the European continent and England uh into Russia um and into Japan and China. Uh they suffered horrific losses. The United States didn't. we had to go to from demobilization uh to restructuring the the economy along private sector demand. And um and the and so uh we were the uh producers of goods and services and agricultural products for the world after World War II uh while everybody else was rebuilding themselves. In other words, the US uh due to the big cut back in government and the fact that we weren't destroyed and that we were helping everybody else get back on their feet meant that the money was rolling in and we were able to pay down the debt. Now, that easy scenario is no longer in front of us. Uh we have the massive debt uh but it would require and this would work. uh it would require the same type of uh restructuring of the government budget where you would have to do the equivalent of getting rid of all overseas operations of the US military. You'd have to get rid of the social security programs and uh and and most of the uh social spending programs and the regulatory programs uh of the federal government and then eventually cut taxes so that enough revenues came in uh to start to pay down to balance the budget and pay down the debt. So, it's still possible. It just seems so much more unlikely compared to the most much more obvious scenario of winning a war and demobilization. Of course, the Keynesian economist in the United States argued against demobilization. They wanted to keep the military uh and keep it overseas. find somebody like Russia or somebody to fight to continue the fight to keep up aggregate demand uh because they feared the economy would go into another depression and instead through demobilization paying down the debt getting back on the gold standard America was able to enter a a period of uh historic economic prosperity. So it is possible but with socialist in charge in the United States and elsewhere it just seems so uh very very unlikely. All right. Well understood. I would love to bring the color of your tie into discussion on gold. Now of course we we talked about the hyperinflationary spiral that we could be tipping intowards as one of the possible scenarios you outlined earlier. gold would tremendously benefit from that scenario. However, in recent years, we have been seen central banks add significantly to their holdings which to a certain extent has perhaps also rerated gold in in real terms, not just nominal. Now, I'm wondering how you're thinking about that driver behind this bull market in gold as well as general investor demand. Is there still an opportunity for gold not just to keep up with this this debasement trend that we're talking about, but also potentially significantly gain in value as more investors clue into the metal? Oh yes, I'm very constructive on the precious metals and you know I actually have a ray of hope uh in me that central bank purchases uh may be the springboard for the world economy to get back on some some kind of gold standard. Um so I I think that's great in the fact that uh there are millions of new people who are become stackers uh around the world but it's mostly not in the United States in Europe but it's mostly in Asia and India and China and Asian economies and Turkey Poland and places like that. Um, I'd love to see it spread um everywhere around the world. Um, but there's a lot of good reasons to be constructive. I think, you know, there's this fundamental um case that we've been talking about socialist governments spending money, borrowing money, and printing money. That creates a down an upward trend uh on the gold price and the silver price. uh because gold and silver prices are going to at least keep up with the underlying inflationary um uh system that the globe is dependent upon. And you really have to when you're talking about global prices like oil and and and gold, you really have to look at policy around the globe rather than a single country. uh the technical charts uh you know of course they those can be scary and they're subject to interpretation um but I think that they're reasonably uh constructive in the sense that the the severe downturn that we've seen in gold and silver prices um this year is something that is to be expected and is something that previous bull markets did you know experience so it's it's not automatically a negative for the market and I think you know when you look at um the industry itself uh there's a lot of I think positive um aspects um that the industry you know has uh been facing negative fundamentals essentially a lack of investment um in gold and silver mining. Uh which means the supply is restricted. Um and supply in gold and silver mining is very often a multi-deade phenomenon. You can't just uh there's no turnkey operations or there's very few turnkey operations. Uh there actually is. Uh there are existing mines uh where big companies uh can buy out small companies and bring the capital um which the industry has been lacking. It's been lacking capital. But now the big companies, they have much better balance sheets than they've had in decades. They're making money. They're paying down debt. Um and so I think the fundamental financial structure is right. Um and you know that's a big part of why things um uh are where they are right now is that the industry has been underinvested. But there's certainly, you know, in terms of the price of these things, um, and the policy scenario that the market finds itself in, I think that, um, you know, there's, um, good reasons to suspect that because central banks have been buying gold, continue to buy gold, uh, there doesn't seem to be any uh, and because it's multi-nations, I mean, China's been buying buying a lot of gold. Uh but a lot of countries, their central banks have also been buying gold and a lot of countries wish that they had been buying gold. So I don't think there's any um you know there's no breakdown in that story of central banks buying gold and I don't think there's any breakdown in the industrial demand for silver as well. um you know even if the economy were to suffer um you know a downturn in the economy and stock markets silver has become uh a vital economic material for all of the leading industries and while AI and data centers could crash and burn temporarily uh it's not going away uh that this is going to be part of uh our economy uh moving uh into the future. Just as uh personal computers and cell phones and the worldwide web, you know, they all came online, they blew up all those markets uh you know, into bubbles and then they all crashed. But we're still using all of that and we're going to continue to do so. So there's no breakdown in the industrial demand for silver, but potentially I think um I think maybe by the time we next talk we're going to see more stories and more hints of a monetary demand for silver as well. And I think that's when you know an economy, an economic downturn and um people rethinking uh about silver in terms of its monetary role and of its anti-inflationary role. I think you start to get both of those markets rolling. And you know so I think um you know we've suffered from this severe correction in the markets. Uh the markets have all stabilized. um the big gold and silver companies are almost back up to their old highs and so I think the outlook in the in these areas is very strong and it's really just a matter of I think waiting for the speculators in these markets to pick up the baton once again and the speculators they are um focused not really what gold and silver investors are focused in on, but they're focused on shortterm things like they like low interest rates, they like falling dollars, they like this and they like that. They like risk in the economy, you know, so they're looking at these short-term factors like, you know, what's going on in the Persian Gulf? Well, oil prices are up, so gold prices are going down because of the speculators. But once these speculators see the signs, their signs, and they start picking back up in precious metals and in gold and silver mining stocks, uh then I I I can see the whole market uh rising together. Gold and silver prices, gold and silver miners, uh and the precious metal complex following um that, you know, we don't really know. um you know when these things happen uh we're not even sure why they're happening but I in my mind it's you know you have these fundamental investors out there that are concerned with the things we've been talking about but once the speculators get involved then there's a big push upward and all of all markets whether it's a bubble or not uh whether it's gold or oil or corn all markets go in a cyclical fashion. So you get big moves up and then they pull back and then they move back up again. And I think a lot of um gold and silver investors uh again the the stackers who are uh concerned with these issues about fiat money and socialism uh you know they see everything in a straight line and they get very worried about when markets act the way markets act. Um and uh you know so in my mind I'm waiting for the speculators to get back involved in gold and silver and uh and less so in things like uh the energy complex. >> Some very interesting thoughts on on gold, silver and the miners for sure. Now I would love to put this idea in front of you that that vill um shared with us a few weeks ago. Are we seeing a controlled rise by the US government of gold? I mean when you look at their balance sheet of course they hold a significant amount of gold billion supposedly at least. um if they were to revalue that at for example a $10,000 u per ounce handle that could be a handful of trillions that would clean up their balance sheet significantly. Are we seeing some kind of soft monetary reset happening right in front of our very eyes? Well, you know, that um veers away from the economic and into the political, and I don't really trust my judgment entirely, but I see from an economic fundamental uh position that that's what they're working forward. And I see politically, you know, what President Trump has been doing, uh, what Secretary um, Bent and Chairman Walsh are doing. Um, and you know, they they seem to be in the business of trying to rig markets uh, and trying to influence markets. That's not their job. Uh, that's not what they should are supposed to be doing. And the fact that they are doing it means that I do not put it past them whatsoever to try to revalue gold uh in order to you know accomplish some sort of economic goal or political goal get reelected or you know have a uh better rating on US government bonds uh that sort of thing. You know, when I saw the chairman Walsh at his press conference in Jackson Hole, um when he started to talk about at length hikes, um that you know, uh Chairman Bernani was taking around Jackson Hole and hikes that he was taking and you know, he kept on referring to hikes and where you're walking up in the mountain type hikes. Um, and then I realized, well, he was trying to influence the algorithms and the artificial intelligence monitors uh on markets to try to now the rest of his talk was also very hawkish. So, these the these silly statements about hiking in the mountains uh were just the icing on the cake in terms of his propaganda efforts. But if we have our central bankers and our national financeier and the president trying to manipulate markets with these silly tactics and all these games that they've been playing, I would not put it past them whatsoever uh to pull out this and play this card of revaluing uh the gold supplies. I don't think it really um will solve any long-term problems. Um psychologically and and as a news item, it's going to carry a lot of weight in the short run though, for sure. >> Mark, this discussion has been truly incredible. Is there anywhere you would like to direct the viewers today? Yeah, I'd like everybody to come to uh the Misesus Institute web page. Uh you can see the uh the address in the background, mises.org, and you can go to the top of our web page and order a free copy. We have a new free book every month. And this this month is Murray Rothbard's very small pamphlet. It's called economic depressions, their cause and cure. And you can see it's very very small. Uh but it's the best explanation for the business cycle and some of the things that we've been talking about uh here this morning. And you can get a free copy or free multiple copies. Uh, and we've been doing that all year round to try to, you know, because education, uh, like you're doing and with your program, uh, is really so vital to help clear up people's minds about what's going on, uh, around the world. And, you know, you do have to have a few touches of economic theory, um, as a guideline to your understanding of the the events in the world. >> For sure. Well, uh, a great incentive. We'll put the links in the description. Dr. Mark Thton, thank you very much for your time and especially insights today. Tremendously appreciate it. Thank you, Stein.