Saifedean Ammous hosts the podcast The Bitcoin Standard where he discusses bitcoin and economics from the Austrian school perspective. He is the author of several books, including The Bitcoin Standard, The Age of Cryptocurrency, and The Fiat Standard.
Saifedean Ammous: We have lots to talk about. First, I’ll begin by saying the Mises Institute is a place to which I owe an enormous debt of gratitude. I was one of the people who stumbled upon this blog, this seemingly innocent blog, in 2007–08 and then just kept digging into the massive, astonishingly large archive of books and articles that are available there and have not stopped digging since then. That has been absolutely life changing.
I was a PhD student at Columbia University learning regular, mainstream economics, none of which made any sense, and then I start hearing about Ron Paul, making all these crazy speeches that make a lot of sense in a world of politics, where politicians are not supposed to make sense. And so, I start digging into this guy and coming across this incredible website where all these economists make sense. Why would an economist make sense? Economists are supposed to write arcane, esoteric math and pretend they’re engaged in some centuries-long struggle to understand the mathematical foundations of how reality works. But the Mises Institute gave me the idea that economics can make sense, economics can actually be something that is helpful to understanding the world. The point of economics, and this is really the culture shock you get from reading mises.org, is that when you’re studying mainstream economics, the point of learning economics is in trying to understand what these economists are saying, and then when you understand what they’re saying, you don’t learn anything useful for the real world. You just learn what those people are saying and then you pass your test and get your degree and get a job. But with the Mises Institute economists, and the economists of the Austrian school, you use the work of the economists in order to understand the world. So, thank you very much for everything that you do with the Mises Institute. Could you tell us a little bit more about the Institute, its history and your role and the milestones in this development over the years?
Jeff Deist: Over the last year in particular, economists and other social scientists have done a very poor job of helping us understand the world, in particular the unseen. The fallout from covid policies is going to be the real story over the next five or ten or twenty years, the alcoholism, the depression, the weight gain, the drug and alcohol abuse. It’s going to be incredible. Social scientists are supposed to help us understand the human world, just as natural or physical scientists are supposed to help us understand that world. Most economists are failing us. They’re stuck in mathematical modeling and statistics, in data. They don’t consider a proper praxeological approach.
But today the Austrian school has a lot of new applications. It has a lot of new proponents and adherents. I think people understand that economics as a profession doesn’t work. It doesn’t really help society. It doesn’t help us understand the world. It doesn’t make us happier or healthier or wealthier. It just does dumb things like failing to predict the housing crash of 2007, for example, and it gives us central banking and minimum wage and nonsensical narratives about inequality. It provides an intellectual veneer and cover for the political class. This gives the Left ammunition to claim economics is merely a pseudoscience. It just provides intellectual support for capital, for the wealthy. It isn’t a real science. And I understand that critique. I think economists have to bear some responsibility for that.
I hope the Mises Institute provides a counter to all that. We are a free school for anybody who wants to avail themselves of it—maybe a little, maybe a lot. Some people only want to consume the occasional tweet or the odd article to improve their understanding. Some people want to really delve in and read nine-hundred-page books and make Austrian economics part of their life. We want to be a full-service organization for both kinds of people. Saif, you know we live in a high–time preference society that’s been created by the political and banking classes. It’s very easy to look at the landscape and say, “Jeff, this is not the time for nine-hundred-page books written by guys from the 1800s. It’s time for activism.” I understand that. But the flipside is: What matters, what lasts, what is timeless, what is true across time and space?
So yes, fewer and fewer people are willing or capable of sitting down and reading those nine-hundred-page books. Will those people matter more or less in the future? I think they will matter more. Because the Mises Institute is not here so we can plant a flag on top of a pile of rubble, some kind of Mad Max scenario years from now, and say, “See? We were right!” That’s not the point or the goal. The goal is to help people learn and reach what Albert Jay Nock called the Remnant—people who are interested in building a world, a civilization, a society that’s real. One with a foundation. That means capital accumulation. There is no other way. And increasingly, in my opinion, we should talk about separation. About finding the Remnant. If you spend time on social media, you know people have gotten a lot crazier. Maybe they were always crazy and now we just know about it because they can spout off on social media all day. I don’t know which is the case, but it’s clear a significant number of people in the West believe enormously illiberal crazy things.
SA: Yes.
JD: And since we have limited time and resources, since scarcity is a fact, how do we spend our time and energy? Do we try to reach everyone? Do we try to win national elections? Do we wonder why “classical liberalism” seems helpless against progressivism? Or do we try to identify and begin to separate ourselves? That can take place in a variety of ways. That doesn’t necessarily mean geographic secession or even geographic concentration of like-minded people. But it does mean separating in a business sense, in a capital sense, in a political sense, in an economic sense. We have to understand we’re trying to build a world, or improve the world, for people who can be reached. That’s not everyone. I think when we jettison the idea of political universalism, political globalism, it’s really very liberating.
I hope the Mises Institute helps people. I know it does on an individual level. It’s much harder to affect things on a societal level. It’s a very anti-intellectual age in which we find ourselves. But we want to be the biggest and best online school that’s free, that’s digital, that’s available instantaneously for anybody. And increasingly we want mises.org to be a gigantic free library. We’re buying up rights to all kinds of books for which we don’t own the copyright and we’re trying to improve our library function. So, a free school is my idea of what the Mises Institute is.
SA: Yes, it’s very much succeeded in that. One of the most common initial criticisms people have about libertarians is that they come at it from the perspective of the political system and then they find out that there’s a libertarian political party that is massively hopeless. Then they think that libertarianism’s clearly hopeless. I think that is completely missing the point because in my mind, a libertarian political party is going to have to be hopeless because it’s like an atheist branch of Catholicism. It’s just not going to make headway in the Vatican if you start off from the premise that there shouldn’t be a Vatican. And this is the contradiction that a lot of the DC libertarians fall into, and this is why in many cases you see their role is to be basically the bastard. They’re there to justify and give excuses to the regime and convince themselves that they are being pragmatic in order to get concessions from the regime. But in reality, they are actually helping the regime further its ends and its goals by convincing young people who have radical ideas about freedom that this is completely unrealistic and you need to get in with the system. You need to fight at the tiny, little margins to get some of these tiny, increasingly inconsequential ideas that people like the Cato Institute fight for.
For instance, my favorite problem with the Cato Institute is their monetary issues. They’re practically indistinguishable now from run-of-the-mill Keynesians and monetarists. They are pretty much monetarists and they view Austrians as too radical, people like Ludwig von Mises and Murray Rothbard as being too radical. That’s why when something like bitcoin comes along, they’re naturally hostile to it. They’ve been enormously hostile because they are conditioned to think of the problem as having to be solved by government and if only we just had the government to put the right people in. If only they would take Cato’s monetary advisors and put them on the Fed, then we’d have a libertarian free market monetary policy, which is an absurd contradiction in terms that’s never going to get anywhere. The whole point of having a Fed is not to have a free market in money, and if you’re trying to push free market ideas within the Fed, you’re not going to get anywhere. All that you do, again, is serve to move people away from promising ideas of change like bitcoin to allying with the regime. This is why there’s a lot of parallels and a lot of confluence between people at the Mises Institute and bitcoiners, that it’s the same approach.
As you said, the best way to have clean water is to separate the clean water pipes from the sewage. You need to make a separate place where we can have these ideas, we can think about them. It’s not about achieving results immediately, it’s about achieving the correct results, no matter how long it takes. There’s always time for nine-hundred-page books and there’s always time to think about these things in the long term. People who are not reading nine-hundred-page books are still reading nine hundred pages of nine hundred different articles in the New York Times repeating the same stupid talking points over and over and over again. So, you could skip these articles and read the nine-hundred-page book and come out with a much better perspective. It’s a multipreference approach.
Coincidentally, within the Mises crowd, there has been some skepticism of bitcoin, but overall, it’s incomparable to the reaction that you get from the DC libertarian think tanks. It’s striking just how reasonable people at the Mises Institute have been. I’ve spoken to Hans Hoppe about it, I’ve spoken to Joe Salerno about it, I’ve spoken to you. I haven’t spoken to David Gordon, but I know Mike Goldstein spoke to him. Most of these people had problems with bitcoin initially. All of us had problems with bitcoin initially. Everybody thinks about it, but then the notion that we’re going to have a money that is separate from the state is something that makes sense. They’re not hostile to it. They might not necessarily get all the technical aspects of it. They might not be enthusiastic about it, but they’re definitely not hostile to the idea that we’re going to separate money from the state and we’re going to have a software program that everybody can audit replace money. And once you go over a few of the technical problems that people have with it, then the reaction is “Yeah, we’ll let the market decide.” Ron Paul, of course, is like that as well. It’s a very different reaction that you get from the regime libertarians, who are coming up with an endless parade of problems that they can’t even defend and state eloquently. They know that it can’t work and it won’t work, and it ultimately comes down to “Well, that’s not politically realistic. We need to aim for something that is politically realistic.”
JD: When you hear someone talking about public policy, so-called, you need to run away from that person. We don’t need public policy. That sounds like a program for cattle. We especially don’t need monetary “policy.” When think tanks talk about this and that monetary policy, how we need some sort of rules-based Fed or some sort of NGDP (nominal gross domestic product) targeting, they are way off base. The minute there’s a crisis or an exigent circumstance, central bankers throw the rules out the window. They don’t follow rules. They’re operating in an ad hoc manner to save their own skins. So much for public policy or monetary policy. Look, the chair of the banking committee (“Financial Services” Committee) in Congress is Maxine Waters. She is a crazy person. The idea that a DC think tank is going to send somebody over to testify before her committee about NGDP targeting is just laughable. She’s just going to say, “Well we need cheaper loans for low-income people.” This is why politics and economics should never mix.
I mentioned nine-hundred-page books, but Mises also wrote Nation, State, and Economy and Liberalism in the interwar years. These were more political tracts about liberalism per se. And people should read these because they are only three hundred pages! For Mises, liberalism meant the wholesale separation of economy and state. Sometimes we lose sight of that. Liberalism, today libertarianism, should not be mistaken for feel-good liberation theology or a rejection of social structures. It’s about the rule of law and property. That’s Mises’s liberalism. It was about a rigid separation of property and state, of economics and state. One paragraph in Liberalism which makes a lot of libertarians squirm distills the entire liberal program—of course, Mises uses “liberal” in the nineteenth-century sense—down to a single word: property. It’s not about living your best life without authority or self-actualization, or accepting a host of left-cultural precepts. All of that is an appendage, with which I don’t particularly agree. I would say people don’t have to agree with this appendage.
SA: It’s tangential at best.
JD: It’s tangential, but more importantly, high–time preference societies tend to devolve very quickly. We want less external governance, but also no internal governance—which strikes me as a crazy proposition. In other words, we ought to support all the intermediary institutions that stand between the individual and the state.
That’s a bit of a detour from your question, but I do think when bitcoin came along, it posed a serious challenge to Austrians and libertarians. My own thinking on it has evolved a lot, albeit gradually, starting with Bob Murphy and then Caitlin Long and then your book. Certainly we support the idea of denationalization of money. We love the idea of competing currencies, but is bitcoin just a particular brand among many? If so, we shouldn’t advocate one brand over another, like Toyota over Honda. That was my facile thinking before reading your book The Bitcoin Standard. I’ve changed my thoughts since then. In Austrian economics circles there has been resistance to bitcoin, certainly. Gold was the ideal alternative to government fiat for so many decades. And to be fair to gold bugs, bitcoin was promoted and sold as a high-tech solution to problems with fiat rather than as a commodity. But algorithms aren’t high-tech per se. They can be very, very complex, but the computing power to solve them isn’t complicated. The image of bitcoin was futuristic money for perpetual travelers who live on islands off Singapore somewhere. I think it should have been sold as a digital commodity. It should have been promoted as a savings vehicle for people worried about inflation. So I don’t want the Mises Institute to be a bitcoin promoter. I don’t view that as our role. But I don’t want us to be a bitcoin antagonist either. So that’s my weaselly answer, Saif.
SA: No, I agree with you. I don’t think it’s a weaselly answer because you do quite a bit of work to educate about bitcoin. But yes, I think you’re absolutely correct in that this is the Mises Institute, it’s not a bitcoin institute. We have the Satoshi Nakamoto Institute, which focuses on promoting the works of Satoshi and on bitcoin, but the Mises Institute is the work of Mises and it has a wider rim, and as powerful as bitcoin is, I think it would be distracting from the overall mission. I know a lot of bitcoiners give me and give you trouble for that, but I don’t particularly see a problem with it. I think your approach has been quite reasonable about it and you’re absolutely correct. For many years I heard about bitcoin and I just dismissed it because I did not think that it had the properties that would make it really replace gold, get us rid of gold. Initially, again, it was promoted as just a faster, cheaper PayPal, that was the main idea. I would say around 2014, ’15, ’16 it becomes clear that this is a pretty powerful monster that is not out there competing with PayPal. This is monetary policy that is set in stone. Nobody can change this, nobody can edit it, and once you start thinking of it this way, then yes, it begins to make sense and that this is going to be a very big deal. That’s the conclusion that you arrive at from this.
Back to the Mises Institute. Tell me more about the history of the Institute. How was it started and what was its initial mission? I know Murray Rothbard played a role in that and Lew Rockwell. Can you tell us a bit more about this?
JD: Well, the Cato Institute was going to be home to Rothbard, and Rothbard intended to create a real viable Austrian outpost there. People don’t know this. The Cato Institute started in San Francisco. Murray Rothbard was out there before it moved to Washington. The idea was to Austrianize free market economics, which was mired in Milton Friedman and monetarism. It was mired in supply-side thinking in the early Reagan years. That was the goal, but Rothbard had a falling-out with the Cato Institute. He felt they were moving away from hard-core or pure Austrian economics. As a result of that, Lew Rockwell got involved and connected with Mises’s widow, Margit. Lew had met Margit and Ludwig von Mises during his days at Arlington House Publishing. Lew and Murray knew Auburn University had a friendly trustee on the board. Auburn also had some friendly professors in the economics department in the early 1980s. So Lew came down to Alabama, and in hindsight that was a stroke of luck. DC think tanks are so bad, and so corrupted, and we need to turn our backs on the whole thing. We need to turn our backs on Washington, and Brussels, and the UN and the IMF (International Monetary Fund), and all of these organizations. So in hindsight, we benefitted enormously from being located outside the Beltway.
Initially, we were involved with the Auburn University economics department. I’d like to point out we actually paid rent to Auburn University. And then Lew started raising some money on his own and we were able to build a building across the street. We’ve expanded that building a couple times since. Over the years we’ve tried to be a place where Austrian economics could be explored in full. Contrary to some of our critics, we are not simply about Mises and Rothbard and Hoppe. You can go through our archives and find vast volumes of work by Carl Menger and Eugen von Böhm-Bawerk and Friedrich von Wieser and lots of other economists in the tradition.
We certainly claim the Misesian strand of pure praxeology, which Rothbard improved upon, and we don’t shy away from the implications of that. Plus Mises and Rothbard wrote about everything. Mises was intimately involved in the Viennese chamber of commerce. We’ve never shied away from considering the full implications of pure praxeology, of pure theory.
We’ve never shied away from considering the implications, as Mises did in Liberalism and Nation, State, and Economy, of secession and breakaway movements and radical decentralization. We’ve never been afraid of the secession word. We’ve never been afraid of openly discussing and considering the ramifications of pure anarcho-capitalism, of statelessness—of how defense, police, and courts could be provided on the marketplace. Do we really need minimal government? We’ve never been afraid to discuss whether democracy is a good thing or whether it’s a bad thing. Is it really the only way to organize society? Is social democracy the final and fullest expression of political organization in the twenty-first-century West? Is it the enlightened end point of liberalism? Well, no, clearly not. Democracy in the West produced several disasters in the twentieth century. So I’d like to think we’ve been uncompromising. I’d like to think we’ve carried on the intransigence, or better yet the courage, of Mises and Rothbard.
SA: I think, obviously, the critics will take any deviation from government propaganda as a sign of “You’re inflexible and you’re dogmatic,” and, of course, that’s all projection. If you don’t agree with the Overton window of DC accepted debate, then you’re considered a dogmatic fanatic. But in reality, the intellectual width of debate within the Mises Institute itself is far wider than the entire politically correct space of everyone in DC. That’s astonishing. Within the Mises Institute, as you said, secession and democracy, these are topics that are discussed, and there are people that are in favor of them and there are people that are opposed to them. And they get together in the meetings and they discuss them, and it’s usually pretty cordial and respectful and intellectual. This is much more than can be said about the broader debate in the general public arena, where there’s a clear idea of what is considered acceptable and it’s a very narrow range between the Republicans and the Democrats.
Immigration is another issue. Within the Mises Institute, there’s a lot of debate on that topic. The topic of immigration makes some people uncomfortable, but the Institute is a place where you get to hear the different perspectives on this issue and how it should be tackled. And the role of the police and the role of the military and the role of the government in terms of national defense. There’s a huge variety of perspectives within the Mises Institute, which you don’t find within general debate. In my mind, it’s just like with economics: the government perspective, the government propaganda perspective, is absolutely limiting and suffocating.
And as you were saying earlier, you’re not sure if people have gotten crazier or the internet has made us realize that people are crazier. People have definitely gotten crazier, particularly in the last twenty months or so, since the whole coronavirus situation started. The world has truly, truly gone mad. Even the most fanatic, hysterical people today, who are still calling for shutdowns and lockdowns, even those people, if you spoke to them in 2019 and you asked them, “Your political opponent wants to do this. What do you think about it?” They would have said, “This is crazy.” And yet a year later they were calling for just that from all across the political spectrum. It’s deeply illiberal in a way that was unimaginable in the vast majority of the world, not just in Western liberal democracy.
It’s all over the world, in Latin American countries, in Asian countries, the idea that your movement from your home needs the permission of your local health czar, and your ability to open your business, and how many people can you accommodate in that business, and what hours you operate. All of that has become the purview of somebody who is unelected and whose only credential is the fact that they have been brought up by the global public health mafia.
All the public health people before 2020, they discussed the possibilities of different pandemics and even in the cases where things were far deadlier than this, this was never a strategy. A total lockdown of the population was never considered a viable strategy. They knew it would be ineffective, and it is ineffective, and it has proven ineffective. They knew that it would be massively destructive in a way that would cause far more harm than whatever the disease can do, and this is exactly what we’re seeing.
It’s to your great credit that from day one, the Mises Institute was very clear on this. You are not taking Bill Gates’s money and not taking the World Health Organization’s money. Everywhere else is being funded by these criminal organizations, and then suddenly, they were getting their marching orders in sync. One day you wake up and everybody wants you to stay home, and then the next day everybody wants you to wear a diaper on your face, and then the next day everybody wants you to not take medicines which are proven to be effective because the science says that we shouldn’t take them and they’re not effective. Everybody’s singing to the same tune. And yet the Mises Institute from day one said, “No, the shutdowns are insane. People can make their own decisions.”
It’s amazing, this basis in the liberal tradition, the old liberal tradition, nineteenth-century liberalism. It’s like a vaccination against brain damage from the media. It doesn’t matter how insane the propaganda gets, it doesn’t matter how many videos of people falling over in China you see on TV. You’ve taken your Mises shots. You’ve read the nine-hundred-page books and it’s not going to fly. And bitcoiners, I should say, bitcoiners from early on were some of the very few people who were calling this out. I personally got abuse from a lot of idiots and I’m very happy about it now because I’ve managed to eliminate an enormous number of deadweight and idiots from my life because of this. But back in March 2020, it was extremely rare for anybody to say, “Nope, I don’t think you should force people to stay home.”
JD: Looking back on March 2020, it reminds me of the period right after 9/11 in America. There was this sinking feeling in our stomachs, but it wasn’t about the virus—it was about what our government might do in response to the virus. And so that was very similar to 9/11. Looking back, I think covid may be worse than the Bush-Cheney- Ashcroft “global war on terror.” Government responses to covid were nearly universal across the globe, so that was unprecedented. We didn’t have that with the Spanish flu, we didn’t have it with two world wars—people in London still went to work during the Blitz! Everything is global now, led by the West. We really should view it as neocolonialism, where the West makes decisions and the rest of the world follows suit. This is not a healthy situation. It is political imperialism. We have some two hundred countries on this planet. They all should exercise internal sovereign decision-making, as far as I’m concerned. I’d like to see a thousand countries or ten thousand countries. Then maybe we would have some alternative approaches to covid.
Covid has been a very scary time. I’m as cynical as anybody with respect to politics and the managerial state, which neither Trump nor Biden managed to control. But the managers have kept the narrative going this long: two weeks to flatten the curve, vaccinations will make life normal again, get your third booster. But in March 2020, everyone thought it would all be over by the end of summer. Surely, we’ll be back to normal by fall. But that didn’t happen. It’s breathtaking, it’s pretty scary.
This world had enough problems with money and entitlements and war prior to covid policies. What’s so remarkable is that economists and social scientists should have been sounding the alarm. Just because someone’s a public health expert, so-called, just because someone’s a doctor, that does not mean they’re equipped to make cost-benefit decisions for society as a whole. That’s crazy. We don’t just allow scientists to run our lives. You know, during the Blitz in London people went to work. During the Spanish flu people went to work, so the idea that we drop everything like children and abdicate our personal decision-making to these medical doctors is unprecedented. Doctors don’t get to decide whether we have restaurants open, or whether we can get on an airplane, or whether our kids stay home from school. Economists were supposed to be out there helping us see the unseen.
What’s the unseen? The unseen is the opportunity cost, the tradeoffs, all the harms which will wash over our society and our economy over the next ten or twenty or thirty years as a result of these lockdowns. Teenagers lost a year and a half … so far. Developing infants see these masked faces. What is that going to mean for early childhood development? How many people gained twenty or thirty pounds, and how do you measure that across an economy, across time, in terms of diabetes, early death, and all the things that come with obesity, all of these unseen things which are very hard to measure? Fauci insinuated there might be millions of deaths—which was not true—but even if it had been true, we still needed to consider tradeoffs. This is where economists failed us. Economists should have been asserting themselves two years ago, saying, “Hold on, we need to talk about the unseen.”
SA: We’ve had one economist from the London School of Economics on our podcast The Bitcoin Standard, Paul Frijters. He’s an empirical economist and very not Austrian, all about numbers. He was shocked that he was an exception. I went to the LSE, to Columbia University, and I studied a lot of empirical economics with a lot of empirical economists, and I know that these people will try and calculate and measure the most obscure and arcane little details and consequences of things. For example, they get hundreds of thousands of dollars to study what is the impact of giving one African village a little bit of extra food for one-year-olds? And then they’ll follow these one-year-olds ten, twenty years down the line and quantify the impact on their income and on their IQ and on their height and on their everything.
There’s an enormous industry of empirical economists out there measuring the impact of all kinds of things. You and I have our problems with that because, ultimately, without theory, this doesn’t tell you anything, and of course, this can be utilized and abused in all kinds of different ways. I still expected that you’d get these stat nerds to speak up and say, “Well, you know, if we’re going to shut down the world for two weeks,” which is what it was initially, “this is the impact. This is how many people are going to die from unemployment and how many people are going to die from poverty. This is how many cancer diagnoses are going to be missed, this is how many malaria cases are going to die, this is how many tuberculosis patients are going to be dying because they won’t be getting their treatment, AIDS patients, etc., etc.” And yet all of these empirical economists, regime bootlickers, they were just trotting out the same propaganda that was being put out by the World Health Organization and all the other organizations. It’s just “Oh, well, yeah, we need to do this because otherwise millions of people would die, according to the model.” And suddenly, these models, these completely nonsensical models of millions of people dying, were just counted as if they were reality. Then the empirical economists went to measuring how many lives we saved based on comparing it to the model. And, of course, ignoring the glaring cases of Sweden and Belarus, which never implemented lockdowns and didn’t see any of this mass devastation and death that everybody else was mentioning.
As I said earlier, it’s a great credit to the Mises Institute and to Austrian economists for being some of the very few economists to speak out against this, without needing to do sophisticated math. I think it’s a damning indictment of this sophisticated math because, even for all of my appreciation of what Paul Frijters has done, this clearly shows that numbers without theory, numbers without a guiding framework, numbers without a praxeological basis, are just basically prostitutes that can say whatever you want. You just focus your analysis on one part of the story and you can make those lockdowns look great, or you focus your analysis on something else and you can make the lockdowns look bad. And that’s why these empirical economists are so easy to manipulate, why they talk nonsense, because you just fund the questions that you want. You fund them to look into the numbers that you want to look at. You make assumptions about how much staying at home has saved lives and then they can go and spend another two years running regression analyses to tell you how many lives were saved. They don’t have to look at the unseen. So, just simply conceptualizing the unseen without any numbers is far more powerful and far more useful than all of the sophisticated mathematics that you could deploy when you are funded to ignore the unseen.
JD: You bring up Africa. There’s this idea in the West that we’re simply rich forever, that this material wealth surrounding us will organize itself regardless of what we do—regardless of incentives. We don’t have to worry about it. So we can shut down big parts of the supply chain for a year or two and tell people they don’t have to work. We can give employers PPP (Paycheck Protection Program) loans to make payroll without producing the goods or services they normally produce. We can tell people they don’t have to pay their rent. These things are just costless. I think the average American at this point thinks these actions are costless because government has the money. The federal government has the unlimited power to issue its sovereign currency as needed, this is what MMT (modern monetary theory) argues. And it’s trickled down to the politicians. We can just create money forever and ever.
Imagine going to a financial planner in your twenties instead of your thirties or forties. If you saved money younger, at least back when we had interest rates, the cumulative effect of compounding interest made you much better off. So when we give up two years of economic output, what does that mean for the world a few decades from now? What does that mean for capital accumulation and future prosperity? How do we measure that over time? We’ll never know, I suppose, but what strikes me is this acceptance by people in the West. The Left loves it because now everyone working those low-wage tough jobs at Subway for eight to ten bucks an hour have newfound bargaining power in the labor-management relationship. Maybe they will never go back to those jobs. The Left loves this idea of a Great Reset, because they think wealth exists perpetually in the West and simply needs to be doled out more equitably. Never mind that billions of people need to get up and produce wealth every day. They think electricity and hot and cold running water, and a Starbucks on every corner, and cars and planes will just materialize without respect to incentives. That is the dangerous mythology behind covid shutdowns: production is assumed.
SA: Yes, I think it’s the Left, but it’s also the fiat world. This is fiat par excellence. This is the world of people who just think that government can dictate those things. The reason we have all of these things working, the reason you walk into a house that is protected from the elements and that has electricity and has all of these amazing devices is because the government passed a law and said houses should be like that. They don’t understand the amount of work that went into it, and for me, the crowning glory of this kind of mental dysfunction is when people tell you, “Well, now what do you bitcoiners suggest to do if we have an economy that was running on bitcoin? How would you shut down the world on a bitcoin economy if you couldn’t print money and hand it out to people?” And “Checkmate, bitcoiners.” As if the fiat allows you to suspend the rules of economics and now the government just hands out money and then we create prosperity. Uber Eats still shows up outside your door and you still keep getting the food, and your economy will continue to work and hum along seamlessly for the next decade because the government is printing money while you’re protected.
Well, in a cruel, hard-money economy, if you had gold or bitcoin and you had those evil Austrian economists in charge, then the government couldn’t protect you by printing money and you’d have to go out and actually work in order to produce those things. It’s such an insane way of looking at the world, but it really is the fiat viewpoint. It’s something I discuss in detail in The Fiat Standard because it’s exactly what fiat allows people to think, because you look around and the government is constantly able to give things for free, take things for free, make things for free. It’s always the case that we can get whatever we want. Do we want to make Afghanistan into a modern democracy? Just print a bunch of money and go to Afghanistan. Do you want to make Iraq into a modern democracy? Same thing. Whatever it is that you want, you can just print money and get it and the only limit, the only restraint is getting the political will to do it. And that’s MMT. This is now a school of thought with a growing number of people, particularly young people, because the younger you are, the more you’ve lived in this clown fiat world where economic reality is dictated from above, rather than a result of work.
It’s easy to poke fun at the Left, of course, and I’m always up for poking fun at the Left, but what’s really amazing is how many people in finance think like that. How many people who work in fiat finance think like this? One of the most remarkable is Nassim Taleb, who’s completely lost his mind on this issue and has absolutely no conception of how an economy works. With this new omicron hysteria, his buddy in the World Economic Forum, Yaneer Bar-Yam, was saying, “Oh, well, new variant means new epidemic. We need all the restrictions reinstated from day one.” And Nassim was retweeting him, saying, “Yup, we’ve learned nothing.” He’s learned nothing from the last two years. We need to go and implement all of this because in his world, and in the world of a lot of people who work in finance, money is just numbers on your Bloomberg terminal. The economy is just you sitting there and gambling on whether you’re going to get a green candle or a red candle, and you make money on that. And of course, in Nassim’s case, he doesn’t even trade; he simply writes books about trading and pretends to be trading and never shows what he does. It’s just a game. It’s like a video game. There’s no actual resources, there’s no capital.
Nobody discusses this issue that you have pointed out, which is the impact on capital accumulation. What’s the world going to look like in five years’ time when the things that we count on today needed to have been invested in today in order for them to serve us in five years’ time? The grids and the airplanes and the transportation and infrastructure, all of those things that we will need five, ten, fifteen years from now needed to have been invested in today, but who’s investing in them today? We are shortening the cycle of production and production is becoming more and more instantaneous, and investment is becoming more and more short term because of inflation and because of the disincentives for work and production.
JD: Inflation means hypothetical little old ladies have to go out and chase yield instead of getting paid 5 percent or 7 percent on savings after a lifetime of thrift. I think the search for yield props up tech stocks to an extent. Yes, there are certainly people in finance (including people on the right) who think economies can just be commanded or engineered. Goods and services can be summoned or legislated into existence. At some point, I don’t know what to say to people who don’t understand that more money and credit does not equal more goods and services and society. At some point it becomes tedious to repeat that production has to precede consumption.
Covid, much like any other natural disaster, a terrorist event like 9/11, or a war breaking out, should have a deflationary effect. Yet in every crisis fiscal and monetary policy immediately shifts into fighting human nature by creating inflation. In your new book (The Fiat Standard) you point out an article from William Hutt called “The Yield from Money Held.” What does it mean when people “hoard” money, when they start holding more cash than usual? Because they always do just that in uncertain times. There was tremendous uncertainty in the world during March of 2020. People didn’t know if they were going to lose their jobs. People didn’t know if millions of people were going to die. People didn’t know what covid really was. Under that kind of uncertainty people immediately begin increasing their cash balances, because cash is the best thing to have during times of trouble relative to less liquid wealth like real estate or stocks.
Hoppe wrote an article called “The Yield from Money Held Reconsidered,” which is about Hutt’s article. Hoppe presents all the socially beneficial things that happen when people hoard money. And a lot of free market economists disagree with this. They think money has to circulate endlessly, we have to worry about velocity. Money needs to move around like a pinball game. Well, no. When people hold more money, it gives them flexibility and options. Maybe they will need to move for a new job or survive without a paycheck for a while. That’s why they naturally spend less and increase cash holdings in a crisis. This increases everybody else’s purchasing power by lowering demand and taking some money out of the purchasing economy, at least temporarily. This is deflationary, and beneficial both for the individual and for society. We want to see prices fall when production falls and savings increase. And yet, everything our politicians do, everything our central bankers do, is designed to fight this natural tendency. We need to stimulate, stimulate, stimulate. We need to create demand. Everything’s about demand and consumption, and so we need to create more money and credit on the monetary side. On the fiscal side we need to flood people with stimulus—so they can pay their rent or pay their employees or go buy a new car. We all need to get brand-new $50,000 Ford F-150s. But if you might lose your job due to covid, it may not be smart to go buy that F-150, worse yet if you have to make payments on it. Your every inclination should be to stop spending and hunker down. But our crazy system encouraged spending in 2020, and so auto dealers in the US had their worst and best sales months on record in the same year. That’s a clown-world example of what happens when you distort the economy and go against people’s natural inclinations during a crisis.
SA: Yes, it’s remarkable. People will say, “Well, the government won’t be printing money in a hard-money economy.” Well, yes. If there is a massive natural disaster or a world war or whatever, yes, a lot of economic destruction will happen. Free markets obviously can’t protect you from earthquakes, but they can ameliorate that because people are going to stop spending money on useless stuff and things that they don’t need. So, if you were planning on buying a new car this year, you won’t do it. You’re going to save your money because who knows, maybe you’ll lose your job. So what happens is that the price of cars falls. What you want to buy, the only thing that you do want to buy, is money. You want to hold on to your money, so the price of money basically rises, so you don’t need the government to print money and hand it to everybody. Everybody’s cash balances appreciate in real terms because everybody’s holding on to their money. At that point, goods become cheaper, and that’s the way in which we ration those goods. Goods become cheaper because there’s no new demand for them, the new cars that have been made already will only go to the people that really, really need them. Everybody else is going to save their money and everybody’s money is going to appreciate, so they can buy more, and that’s how you weather the storm. That’s what you do. It applies on a personal level; it applies on a national level. If you’re in trouble, you stop spending on frivolous stuff and you save. But the fiat world just flips all of this on its head. It’s remarkable.
JD: I think your new book The Fiat Standard is an important one. In many ways it elaborates on themes that Guido Hülsmann presents in his book The Ethics of Money Production. Monetary debasement leads to cultural debasement. Political control of money, political money, serves political interests. That creates high time preference in society, which affects families, work, even one’s own personal integrity and morality. Your book really fleshes that out by going into particular industries like food. It’s a fascinating topic, the cultural implications of monetary policy, and not too many people talk about it. We think of monetary policy as a technocratic set of dials and knobs to be fine-tuned to get optimal production from the barnyard animals. We don’t think of it in cultural terms.
SA: Yes, it’s clearly hitting a nerve for people who can see this clearly. The kind of money that you use in every single trade with the rest of the world and with yourself is going to have an effect. Nobody wants to talk about it among the economists except basically Hülsmann and me and a few other Austrians, which is great because it just means more sales for my books. So, I encourage all other economists to continue to stick to their NGDP targeting models. That’ll surely work out one day when the Fed appoints you and you get to show us how you are actually right with all these equations.
JD: Yes, if we just get the right Federal Reserve chair! This is what Washington, DC, gives us. It gives us this idea we fix things politically. But that’s too far gone now. The money’s too far gone, the politics are too far gone, the entitlements are too far gone. We’re in a car going too fast and there’s a sharp curve ahead with a steep cliff beyond. At some point no amount of braking or countersteering can save you from going over the cliff. I think our focus ought to be on building things rather than trying to save things.
SA: It’s not even that you can actually be the right person in the Fed. There is no right person in that job. The right person in that job is no person in that job. Recently, you and I were both commenting on the St. Louis Fed taking on the role of Betty Crocker and giving the world dietary advice about how to handle their Thanksgiving. This was amazing because it came exactly in the week in which I published my book. There’s a huge chapter on fiat food in the book and how government intervention in the food market has resulted in the degradation of the dietary experience of the average person in the world today and a shift in the Overton window of what is considered food. It’s allowed the inclusion of all kinds of industrial waste into our food supply, pushed and promoted by governments because this helps hide inflation.
I’ve said before, that my North Star in life is the jeering of idiots: when idiots start jeering me, I know I’m on to something important. It happened with coronavirus. It happened with bitcoin. It happened with this discussion of fiat food. When I started talking about this, a lot of people were laughing, “Ah, this is ridiculous. He likes his meat and he’s trying to pass off his diet as being something more profound than just him liking steaks.” I wrote a whole chapter about it, maybe ten thousand words in The Fiat Standard. Then the Federal Reserve chose to give me this amazing gift during the week of its publication. They proclaimed, Instead of eating an actual turkey, make your turkey out of soy. You’ll get more protein per dollar.
It’s amazing. There was a very astute comment about this, which is the more central planning happens in the monetary realm, the more we will inevitably have the central bank have to intervene in all aspects of life.
JD: It’s pretty scary to see the new woke language at the Fed and central banks in general. You pointed out earlier that younger economists at central banks may well be brilliant in terms of pure IQ and mental horsepower. They went to Wharton, they went to Harvard, they went to Stanford. But they’ve never seen a bear market and they’ve never seen real positive interest rates. They really have no conception of the history of economic thought. So they don’t know much about Marx and Keynes and Samuelson, much less the Austrians or Adam Smith or the Spanish Scholastics. It’s very dangerous because these young brilliant people think they can engineer outcomes and make humans respond in the ways they want. That’s what scares me. Now we add the social justice push to the agenda. The Fed needs to fight sexism, to fight racism, to help us achieve justice in society. They need to help us overcome this amorphous idea of climate change. That’s a real shift. That would shock the ghost of Paul Volcker. It’s part and parcel of the world we live in now, where everything has been so politicized they’re able to make this stuff seem nonpolitical. Fighting climate change is just what all good people do to leave the earth intact for future generations. Well, we already had that. Teddy Roosevelt had that. It was called conservation. We don’t need central bankers from Wharton to tell us this. When central banks get overtly political, watch out.
SA: It’s amazing because the statistics constantly show that there is no problem of inflation. All right, there’s a little bit of transitory inflation, maybe, here and there, and it’s because of supply chain issues and the climate crisis and this and that, but it’s reached Soviet levels of propaganda now. People are visibly suffering. Prices are massively going up, supply chains are disrupted because nobody’s working because everybody’s getting paid to sit at home. Economic production is being destroyed, money is being printed and handed out like confetti, and economic production is essentially falling apart. They’re covering it up with their amazing empirical magical statistics. And then, they believe their own bullshit, in the sense that “Well, look, we can manage the pandemic. We’ve saved the world from the virus, we’ve printed all this money and we didn’t cause inflation, so what else can we fix?” This mentality leads them to say, “Well, let’s fix people’s diets by feeding them soy and let’s fix the climate by stopping the production of cows and replacing cows with soy, because grazing animals are ruining the planet and monocropping is destroying the soil. That’s how we take care of the planet.” It’s Soviet levels of delusion and propaganda. And they believe their own nonsense about it being successful and so there’s no limit to how far this is going to go, and I think you’re absolutely correct on the climate change.
There’s another thing that I keep harping on, and people mock me and laugh at me and tell me, “You’re being crazy.” But carbon dioxide is an essential component of every living organism on earth. There are no living things that don’t contain carbon dioxide, and so if you’re able to control carbon dioxide under whatever stupid pretense you come up with, you’re able to control all of life. This is an enormous, enormous step forward for central planners around the world. I think it’s absolutely mind boggling to imagine that they want to control how much carbon dioxide is being emitted all over the world. It’s insane.
To go back to The Fiat Standard, I spent part of the book talking about fiat life. I talk about energy and I talk about food, and I discuss how in the 1970s the central bank’s monetary policy, which led to inflation, also led to central banks and the governments all over the world trying to promote these alternative sources of nutrition and energy because they were cheaper. They were very happy to support and subsidize and promote all kinds of idiotic pseudoscience that tells you meat is bad for you and you should eat soy because that’s how you stay healthy. And that meat is bad for the planet and fossil fuels are bad for the planet and that the future is to eat soy and rely on wind and solar energy. If you do that, there’s no inflation because these things are far cheaper to produce, but of course, they’re far inferior. If you live off solar and wind, you live like your ancestors lived five hundred years ago. It definitely keeps the CPI (Consumer Price Index) down but also makes surviving the winter much harder, and it also means no motor transportation, and it also means you’re going to have to live in a much tinier house to be able to keep it warm. I think we’re witnessing the world heading toward that now.
We’re seeing a revival of these 1970s memes. They never really left us because inflation never left us. But now we are seeing it being pushed aggressively. When you add in the prospect of central bank digital currencies, central banks will have complete control over every dollar of spending and social credit scores. We’re already seeing this with the vax passport. It is a prelude to total centralization. There’s a reason why all of the people who are hysterically afraid of the virus are also hysterically afraid of climate change and also believe that inflation is not a problem.
Inflation is not going to be a problem if you have a social credit score system and a central bank digital currency that limits you to fifty grams of beef a week and three hundred milligrams of gasoline a month or whatever it is. You’re going to have rationing Soviet style done through your iPhone, and you’re entirely dependent on delivery to your house, and you’re not going to be able to afford a big house. Everybody’s going to move into these tiny, little bug pods where they’re going to stay home all the time with Mark Zuckerberg’s headset on their face and experience life through the headset. You’re going to eat the soy, and you’re going to live in the pod, and you’re going to not move, and you’re going to stay cold, and there will be no inflation.
One other thing I want to talk to you about is your Human Action Podcast. I listen to that quite a bit and I really enjoy it. You host Austrian economists, and others, to talk about the great books. Make the pitch for people who haven’t dug into the nine-hundred-page tomes. Why are those books great and why should people read them?
JD: Well, I thought there were too many podcasts. What could I do different to provide value? So we decided to focus on books and use the show to help explain economic theory while promoting some of the great literature of the Austrian school. Sometimes we get into political science, sometimes we get into philosophy, occasionally even fiction or antiwar history, but for the most part we focus on economic theory. Some people do listen pretty religiously. My pitch is this: if you’re not going to read that book, the podcast is the CliffsNotes. It’s like watching the movie instead of reading the book. And it might inspire you to actually go out and read it. For long books we have multiple episodes, so we don’t rush through things. I hope five or ten years from now the old shows will still have value, which I think is not true of a lot of current events podcasts. I always try to ask myself—What has value and what lasts? These books will still be here years from now, and our explanations or elucidations of them will still be here.
