WEBVTT NOTE An Austrian Take on Bernanke and Fed Policy 1 00:00:00.000 --> 00:00:05.000 We're going to talk about Fed policy with Mark Thornton, who is a senior research fellow 2 00:00:05.000 --> 00:00:10.300 with the Mises Institute located at, well, it's actually an adjunct, Auburn University 3 00:00:10.300 --> 00:00:11.640 in Auburn, Alabama. 4 00:00:11.640 --> 00:00:13.960 And Mark, welcome to the program, it's great to have you with us. 5 00:00:13.960 --> 00:00:15.360 It's great to be with you, Mark. 6 00:00:15.360 --> 00:00:20.080 So you guys are down there in Alabama, we've heard about all the terrible storms and everything. 7 00:00:20.080 --> 00:00:22.000 Has Auburn made it through it okay? 8 00:00:22.000 --> 00:00:28.080 Yeah, we've had a couple of big storms, but this past storm we've fared fairly well. 9 00:00:28.080 --> 00:00:33.000 The Tornadoes went to the west and north of us, and apparently over 200 people have been 10 00:00:33.000 --> 00:00:34.000 confirmed dead. 11 00:00:34.000 --> 00:00:35.000 Okay. 12 00:00:35.000 --> 00:00:38.600 If I were to look at a map of Alabama, where is Auburn on the map? 13 00:00:38.600 --> 00:00:46.240 We're in eastern Alabama, about halfway north and south through the state. 14 00:00:46.240 --> 00:00:50.000 We're about 30 miles west of Columbus, Georgia, which is on the Georgia border. 15 00:00:50.000 --> 00:00:51.000 Okay. 16 00:00:51.000 --> 00:00:52.000 So you're right near the border then? 17 00:00:52.000 --> 00:00:53.000 Yes. 18 00:00:53.000 --> 00:00:54.000 Okay. 19 00:00:54.000 --> 00:00:55.000 We're very close to the eastern time zone. 20 00:00:55.000 --> 00:00:56.000 All right. 21 00:00:56.000 --> 00:01:00.720 This institute, which is a free market think tank and also an educational institute there 22 00:01:00.720 --> 00:01:05.000 in Auburn, you guys are doing something exciting and you've got a bunch of high school students 23 00:01:05.000 --> 00:01:06.360 there today for a seminar. 24 00:01:06.360 --> 00:01:07.360 Tell us about that. 25 00:01:07.360 --> 00:01:11.960 Yeah, we've got over 100 students and their parents and chaperones here with us today 26 00:01:11.960 --> 00:01:16.880 and we're going to have a whole day of economic lectures and a tour of the institute to give 27 00:01:16.880 --> 00:01:22.760 these people an understanding of what makes society work and what makes society fail. 28 00:01:22.760 --> 00:01:27.440 and you know this is something that students are now interested in and we've had a series 29 00:01:27.440 --> 00:01:32.200 of these high school seminars here in Auburn and we've also had them sponsored in Nashville, 30 00:01:32.200 --> 00:01:37.400 Tennessee and Chicago, Illinois and other places around the country so it's very exciting. 31 00:01:37.400 --> 00:01:41.840 The students are great, they're interested in economics because it's such an important 32 00:01:41.840 --> 00:01:44.160 part of their lives now. 33 00:01:44.160 --> 00:01:49.240 And these kids are hearing something that quite frankly is heterodox, it is not the 34 00:01:49.240 --> 00:01:54.660 the standard teachings of economics that people get either through the media or they would 35 00:01:54.660 --> 00:01:56.960 get in their public school. 36 00:01:56.960 --> 00:02:00.320 And I just wonder how receptive are they to these ideas? 37 00:02:00.320 --> 00:02:05.760 And Mark, do the kids ever say, I've never, in everything I've studied in my life, I have 38 00:02:05.760 --> 00:02:08.960 never heard this philosophy expressed before? 39 00:02:08.960 --> 00:02:10.160 Oh, absolutely. 40 00:02:10.160 --> 00:02:12.740 Economics is boring the way it's taught everywhere else. 41 00:02:12.740 --> 00:02:17.360 But we emphasize the rationale of why society works. 42 00:02:17.360 --> 00:02:21.120 Why is it that the United States has become so prosperous? 43 00:02:21.120 --> 00:02:23.980 Why is it that we've had these bubbles and these crises? 44 00:02:23.980 --> 00:02:27.280 Why is it that China has risen to become a superpower? 45 00:02:27.280 --> 00:02:31.440 Why is it that Britain lost its status as a world leader? 46 00:02:31.440 --> 00:02:34.720 That's the kind of thing we emphasize, the things that really matter and also the little 47 00:02:34.720 --> 00:02:39.640 things, like why toilets don't flush well anymore and things like that. 48 00:02:39.640 --> 00:02:45.600 So we get into people's daily lives and yet we give them a worldly global perspective 49 00:02:45.600 --> 00:02:48.160 on Things, and that's what turns them on. 50 00:02:48.160 --> 00:02:49.160 That's great. 51 00:02:49.160 --> 00:02:56.340 You know, Charles Alan Coors, who founded FIRE, was at the Foundation for Individual 52 00:02:56.340 --> 00:03:03.480 Rights in Education, and Dr. Coors was talking about the fact that when he started teaching 53 00:03:03.480 --> 00:03:09.640 the freedom philosophy, he would teach this introductory course in history and economics 54 00:03:09.640 --> 00:03:13.760 to students going into the University of Pennsylvania. 55 00:03:13.760 --> 00:03:18.080 And he said, the kids, those that were really interested would come to him and they say, 56 00:03:18.080 --> 00:03:19.080 you know what? 57 00:03:19.080 --> 00:03:23.200 All I've ever studied all my life has been about socialism and communism and why it's 58 00:03:23.200 --> 00:03:24.200 so good. 59 00:03:24.200 --> 00:03:26.400 I never even knew there was a man named Hayek. 60 00:03:26.400 --> 00:03:29.320 I've never heard of anyone named Mises. 61 00:03:29.320 --> 00:03:35.080 And I mean, it kind of illustrates, Mark, that for the vast majority of our young people 62 00:03:35.080 --> 00:03:37.840 out there, they are being sheltered. 63 00:03:37.840 --> 00:03:42.160 It may be so deliberately or just through the way things work, but they are not being 64 00:03:42.160 --> 00:03:45.440 Exposed to the Freedom Philosophy in our Education System. 65 00:03:45.440 --> 00:03:49.440 No, it's not called socialism, it's called Americanism and they're just taught that that's 66 00:03:49.440 --> 00:03:55.520 the way things should be. And, you know, just yesterday there was the debut of the new Hayek 67 00:03:55.520 --> 00:04:00.640 versus Keynes video on the internet. It's called The Fight of the Century and it's really exciting. 68 00:04:00.640 --> 00:04:06.080 The previous Hayek versus Keynes video on the internet has been viewed millions and millions 69 00:04:06.080 --> 00:04:11.680 of times and so we're taking it to the streets, we're taking it to, you know, the regular people 70 00:04:12.160 --> 00:04:17.760 and it's turning them on, it's turning their lives around and it's giving them a whole new perspective. 71 00:04:17.760 --> 00:04:23.460 Well that's great. Hey, is there any possibility that the next time you do one of these seminars for high school students, 72 00:04:23.460 --> 00:04:28.560 you might do one in the Washington D.C. area and invite the Federal Reserve Chairman to sit in as a student? 73 00:04:28.560 --> 00:04:29.960 Yeah, that would be nice. 74 00:04:29.960 --> 00:04:33.960 Because I think he could use some schooling in economics. 75 00:04:33.960 --> 00:04:41.160 That would be nice, but you know, he's had all his schooling. He got his PhD based on the idea of what caused the Great Depression 76 00:04:41.160 --> 00:04:47.320 and he came to the conclusion that it was a failure of the federal government to bail out the banks 77 00:04:48.040 --> 00:04:52.280 and that's how he got his PhD, that's how he became a famous academic and that's how he 78 00:04:52.840 --> 00:04:58.360 rose to be chairman of the Federal Reserve with the idea that you have to bail out the banks if 79 00:04:58.360 --> 00:05:04.360 they get in trouble. So naturally he would rise to the top. Yes, and I guess he probably sat there, 80 00:05:04.360 --> 00:05:09.240 you know, and looking back over his dissertation or when he did that and saying to himself, 81 00:05:09.240 --> 00:05:13.400 Boy, if I'm ever in the position to bail out the banks, that's what I'm going to do. 82 00:05:13.400 --> 00:05:14.400 Absolutely. 83 00:05:14.400 --> 00:05:17.240 I mean, you know, that's why he was pushed through the system and pushed all the way 84 00:05:17.240 --> 00:05:18.240 to the top. 85 00:05:18.240 --> 00:05:25.280 It's absolutely a no-brainer in terms of why he is where he is and why we are where we 86 00:05:25.280 --> 00:05:32.480 are right now with the average American in trouble economically and with the megacorporations 87 00:05:32.480 --> 00:05:36.520 in the banks sitting on piles of money and guarantees from the taxpayers. 88 00:05:36.520 --> 00:05:45.520 7.19 is our time. Mark Thornton with the Mises Institute is our guest. We're going to get into some of Bernanke's comments from the other day and get Mark's thoughts on those in just a moment. 89 00:05:47.520 --> 00:05:54.520 The economic conditions are likely to warrant exceptionally low levels for the federal funds rate for an extended period. 90 00:05:54.520 --> 00:06:02.520 Well, that is Ben Bernanke from his news conference just the other day, the first one ever held by a Federal Reserve chair, and we're joined by Mark Thornton from the Mises Institute, 91 00:06:02.520 --> 00:06:10.020 and Austrian think tank, and by the way it is the Austrian School of Economics that they teach at the Mises Institute. 92 00:06:10.020 --> 00:06:21.520 Mark, for those who don't know, what differentiates the Austrian School of Thought from say the Keynesian School of Thought that we are going through right now through official Washington? 93 00:06:21.520 --> 00:06:30.520 Well, the Austrian School is the oldest school of economic thought. It's the smallest group of economists, yet it's the fastest growing school of economics. 94 00:06:30.520 --> 00:06:37.440 And we're more of the traditional approach to economics with logic and theory. 95 00:06:37.440 --> 00:06:42.720 We're not just writing equations and running regressions type of approach. 96 00:06:42.720 --> 00:06:45.120 I encourage everybody to go to our website. 97 00:06:45.120 --> 00:06:47.780 It's the largest economic website in the world. 98 00:06:47.780 --> 00:06:51.680 It's the most trafficked economic website in the world. 99 00:06:51.680 --> 00:06:53.720 It's mises.org. 100 00:06:53.720 --> 00:06:56.420 It's open 24-7, 365. 101 00:06:56.420 --> 00:06:57.420 There's no cost. 102 00:06:57.420 --> 00:07:00.300 There's no registration or fees associated with it. 103 00:07:00.300 --> 00:07:05.740 So everybody needs to go there and get a look at the Austrian School on their own. 104 00:07:05.740 --> 00:07:11.580 And it applies to everybody, kids, adults, seniors, the working class, the entrepreneurs 105 00:07:11.580 --> 00:07:12.580 out there. 106 00:07:12.580 --> 00:07:18.100 I know your audience is working class people and entrepreneurs and we're the school of 107 00:07:18.100 --> 00:07:20.380 entrepreneurship basically. 108 00:07:20.380 --> 00:07:25.720 And would it be fair to say that kind of one of the foundational elements or principles 109 00:07:25.720 --> 00:07:29.860 within the Austrian School is to always keep in mind that incentives matter? 110 00:07:29.860 --> 00:07:35.780 Oh, absolutely. I mean, that's the whole key is that incentives matter, that it's really important. 111 00:07:36.420 --> 00:07:43.460 The entrepreneur fixes our problems. The entrepreneur creates new things. They serve our 112 00:07:43.460 --> 00:07:50.100 interests. As long as they don't have government protection, government bailouts, government 113 00:07:50.100 --> 00:07:56.820 monopolies, you know, that's the way the system works. And everybody's a part of it. And that's 114 00:07:56.820 --> 00:08:00.980 That's why we're against central planning, we're against socialism, we're against Marxism, 115 00:08:00.980 --> 00:08:06.040 we're against government regulation and control of the economy and the Federal Reserve's control 116 00:08:06.040 --> 00:08:07.560 of the money supply. 117 00:08:07.560 --> 00:08:11.980 We want a gold standard where everybody has their own money that has tangible physical 118 00:08:11.980 --> 00:08:13.260 value. 119 00:08:13.260 --> 00:08:14.660 That's the way the system works. 120 00:08:14.660 --> 00:08:18.340 That's how America became the greatest economy in the world. 121 00:08:18.340 --> 00:08:25.580 The other day, Fed Chair Bernanke, Mark, said that he sees continued moderate economic growth 122 00:08:25.580 --> 00:08:30.540 and Low Inflation for the United States going forward. Do you share his optimism? 123 00:08:30.540 --> 00:08:35.020 That's all a con game. I mean, he's been lying to us from the very beginning. Everything he's 124 00:08:35.020 --> 00:08:40.120 said for the last seven years has been basically a lie. He's been talking about green shoots 125 00:08:40.120 --> 00:08:46.520 in the economy since 2008. In 2007, he said, you know, all these financial products that 126 00:08:46.520 --> 00:08:52.000 were in the economy and the housing market, mortgage-backed securities was a great thing 127 00:08:52.000 --> 00:08:57.000 The Theory of Money and Credit 128 00:08:57.000 --> 00:09:02.000 The Theory of Money and Credit 129 00:09:22.000 --> 00:09:26.600 The housing market is not really improving. All of the main drivers and 130 00:09:26.600 --> 00:09:31.720 entrepreneurs are scared stiff and they are the ones that hire people. They are 131 00:09:31.720 --> 00:09:35.760 the ones that make things work and they are scared stiff about health care, 132 00:09:35.760 --> 00:09:40.160 about rising costs, about inflation, about regulation, about environmental 133 00:09:40.160 --> 00:09:46.840 regulation, about health care regulation. So they're not participating and we need 134 00:09:46.840 --> 00:09:54.040 to free up the system, get those people feeling more secure that they're not going to be threatened 135 00:09:54.040 --> 00:09:58.480 by the government in one way or another, and that's the way the economy is going to improve. 136 00:09:58.480 --> 00:10:03.160 Mark, one of the things that I noticed, and I've always, you know, I've never liked this. 137 00:10:03.160 --> 00:10:07.000 I've always thought it was part of the con game that the government pulls on people and 138 00:10:07.000 --> 00:10:12.320 the big banks participating in this, but, you know, backing out things like food and 139 00:10:12.320 --> 00:10:18.320 from the CPI, from the rate of inflation and like that doesn't matter when, you know, 140 00:10:18.320 --> 00:10:24.320 hey, that's what affects people's budgets. I mean, you know, the average American, once you get past 141 00:10:24.320 --> 00:10:31.320 paying either your rent or your mortgage, the next two biggest expenses in your family budget 142 00:10:31.320 --> 00:10:36.320 are the cost of food to feed your family and the fuel that you put in your vehicle. 143 00:10:36.320 --> 00:10:42.720 To say that those things don't matter in calculating inflation is a lie. 144 00:10:42.720 --> 00:10:48.480 Oh yeah, and you know, oil feeds into the price of everything else as well. 145 00:10:48.480 --> 00:10:51.960 It's like they ignore the fact that there's a Kantian effect in inflation. 146 00:10:51.960 --> 00:10:55.320 Wow, Kantian effect on the air, that's great. 147 00:10:55.320 --> 00:11:01.260 Hey, you know, when they say that the Fed has nothing to do with oil prices, just go 148 00:11:01.260 --> 00:11:06.440 So if you go to the Federal Reserve data page at St. Louis, just Google FRED, F-R-E-D as 149 00:11:06.440 --> 00:11:11.640 in Fred Flintstone, and put in oil, and look at the price of oil, and look at where the 150 00:11:11.640 --> 00:11:13.200 recessions occur. 151 00:11:13.200 --> 00:11:18.860 And basically what happens is the Fed creates easy money, the price of oil rises, and then 152 00:11:18.860 --> 00:11:20.440 we hit a recession. 153 00:11:20.440 --> 00:11:26.080 And so that's basically been the historical case time after time after time, and the Fed 154 00:11:26.080 --> 00:11:27.080 is what's responsible. 155 00:11:27.080 --> 00:11:29.280 I mean, there's other things with the price of oil. 156 00:11:29.280 --> 00:11:33.040 Oil. I mean, there's a lot of taxes in there. There's a lot of government regulation on 157 00:11:33.040 --> 00:11:39.540 supply. But basically, in terms of demand, central banks are what drive the price of 158 00:11:39.540 --> 00:11:45.480 oil higher. Of course, in the Middle East crisis and things like that do matter. But 159 00:11:45.480 --> 00:11:50.880 in the big picture of things, it's the Federal Reserve pumping in money, pushing the global 160 00:11:50.880 --> 00:11:56.360 price of oil much, much higher. It's happened many, many times, and your listeners can go 161 00:11:56.360 --> 00:11:58.480 to Fred and see for themselves. 162 00:11:58.480 --> 00:12:03.560 So as we see this going higher, if we're going to head deeper, back deeper into this recession 163 00:12:03.560 --> 00:12:08.640 that we're in, it is going to be, quite frankly, due to the rising price of oil, which we were 164 00:12:08.640 --> 00:12:10.920 heading into a recession in 2008. 165 00:12:10.920 --> 00:12:15.560 And I believe that those very high oil prices that summer hastened the arrival of the recession. 166 00:12:15.560 --> 00:12:18.760 Maybe it brought it on three to six months earlier than we otherwise would have seen 167 00:12:18.760 --> 00:12:19.760 it. 168 00:12:19.760 --> 00:12:20.760 Well, Mark, it's all just part of the process. 169 00:12:20.760 --> 00:12:25.620 I mean, you pump the money in, you create the male investments, but those male investments 170 00:12:25.620 --> 00:12:40.900 Mark Thornton I have to wrap it up here but I want to thank you very much for joining 171 00:12:40.900 --> 00:12:45.340 us and for those who are interested in more information on the Austrian School of Economics 172 00:12:45.340 --> 00:12:51.300 check out the website mises.org Mark I want to talk to you again sometime when we can 173 00:12:51.300 --> 00:12:56.820 and discuss things like the skyscraper index and how the real damage to the economy is 174 00:12:56.820 --> 00:12:58.100 done during a boom. 175 00:12:58.100 --> 00:12:59.100 I'd love to, Mark. 176 00:12:59.100 --> 00:13:00.100 All right. 177 00:13:00.100 --> 00:13:01.100 We'll do that in the future. 178 00:13:01.100 --> 00:13:02.100 Thank you very much for your time this morning. 179 00:13:02.100 --> 00:13:03.100 Have a great weekend. 180 00:13:03.100 --> 00:13:04.100 Take care. 181 00:13:04.100 --> 00:13:04.120 You too.