Opposing Views on the Role of Government and the Essence of Money (w/Michael Green & Peter Schiff)

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Correct title: Peter Schiff educates Michael Green on economics.

👍︎︎ 3 👤︎︎ u/Crypto__Maniac5 📅︎︎ May 11 2021 🗫︎ replies
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ASH BENNINGTON: Welcome to Real Vision. I'm Ash Bennington. Today, we're very excited to host this important debate about the nature of money. We're going to touch on Austrian economics modern monetary theory. This is going to be the Thrilla in Manila for macro. I feel incredibly fortunate to be hosting this conversation. It takes me back to my days running Nouriel Roubini's macroeconomics [?], we have to absolutely fantastic guests, Mike Green, Chief Strategist and Portfolio Manager at Simplify Asset Management, and Peter Schiff, Chief Economist and Market Strategist at Euro Pacific Capital. Welcome to you both. PETER SCHIFF: Well, thanks for hosting this debate. Happy to take part. MIKE GREEN: Thanks, Ash. Always a pleasure to be here. ASH BENNINGTON: Before we get started, I need to do a quick shout out to one of our subscribers, Liam Cosgrave at Citywide Property Management in the Bay Area, that's San Francisco for international viewers. Liam was interested in this topic and reached out to both of you and he set up this conversation. We're very happy to have you here on Real Vision having this, and thank you very much, Liam Cosgrave. PETER SCHIFF: Yeah, persistence pays off for that guy. ASH BENNINGTON: Absolutely. By the way, as a note to our subscribers, we'd love to hear from you. We love to have these conversations. Jump in if you have some ideas. If you have someone you know that you'd like to get on Real Vision, reach out to us, we'd love to chat about it. Mike, to exactly that point, the nature of money, are you an MMT guy? MIKE GREEN: I define MMT as what I call descriptive and not proscriptive. It is an accurate description of the way the monetary system works today, and it doesn't tell us what to do but it tells us how the system works. From my perspective, to ignore how the system works is foolish. We accept it, and then we decide what the best way to use it is. From my perspective, the underlying character that we are in today, we have a social good in the form of money that is primarily designed for one purpose and one purpose only, to cancel obligations, whether those are taxes, or private liabilities between two counterparties, where that's governed and administered by the state and the legal system, that's what money is, is that which cancels debt. ASH BENNINGTON: A very crisp description there, Mike. Peter, over to you. I know your background, very different, obviously, coming from the Austrian side. Most people identify you with gold, tell us about what your definition of money is and why it's so significant in your worldview. PETER SCHIFF: Yeah, well, first of all, I might agree that the way the system is currently operating is what is making MMT popular. The problem is the system is not working. It's working for the government, but it's not working for the economy. It's not working for the people. That's the problem that Austrian economists understand and just to give you a cliff notes of what Austrian School is versus other schools of economic thought, Keynesianism being probably the most popular right now, but Austrians put the emphasis for economic growth on savings and production, not spending and consumption. They look at all fiscal and monetary policy that is trying to stimulate demand as being misguided, and actually counterproductive, because they put the cart before the horse. Now, a lot of that stimulus comes in the form of money. Hey, let's just print up money so that people can spend it and that's going to grow the economy. The Austrians don't see any value added by just printing fiat currency. Because when you print money, you don't increase the supply of goods and services to buy with that money. All that really you have is inflation, you just have more money chasing whatever supply of goods --- JASON ZIEMIANSKI: What we're showing you here on our YouTube channel is just the tip of the iceberg. No matter where you are in your financial journey, whether you're a beginner just looking to break into the market or a financial professional looking to up your game, Real Vision has something for everyone. Every day, our team of expert journalists provides in-depth analysis, written reports, access to live streams, and access to our community, The Exchange, where you can interact with people just like you from all over the world. For just $1, you can unlock all of this and more at realvision.com. Try our Essential tier. If you like what you see, it's only $20 a month thereafter. So click on the link in the description, go to realvision.com, and see what you think. We look forward to seeing you there. PETER SCHIFF: increase the supply of goods and services to buy with that money. All that really you have is inflation, you just have more money chasing whatever supply of goods and services exists and so prices go up. What money really is, is a way to facilitate trade. It is that improvement on barter, so before money was invented, if you were a chair maker and you wanted a pair of shoes, you had to find a guy that made shoes that you liked, who also wanted your chairs. It was a very inefficient way to transact business. When somebody realized, hey, wait a minute gold is a very good commodity that we can trade in because it's easily divisible, it's portable, it's value is stored, all gold is the same. You don't have to worry about your chair being different or your shoes being different. Every ounce of gold is exactly the same, and even if you yourself don't need the gold because you're not a jeweler, you're not making anything with gold, somebody will. Of course, gold was a luxury good. Most people like to have things made out of gold, whether it was jewelry, or other ways they were adorning their houses with it, or whatever they had, gold was inlaid in a lot of goods. Everybody would want gold, whether you needed or not. Using money, as opposed to barter was a big improvement and of course, since Austrians look at economic growth as a function of capital investment, which is only financed out of savings, you want to have money that you can save, and it will store its value. When you're using gold as money, it's an ideal mechanism for saving and so if you have more savings in an economy, you have more capital investment, and then you have more economic growth. ASH BENNINGTON: Mike, it's interesting, because you guys both framed this in very different ways. I didn't hear any direct disagreement. In terms of Peter's view about the supply side and production, rather than something that comes from the demand side and consumption, what are your thoughts about that? MIKE GREEN: I think part of the challenge, and again, it goes back to how does the system actually work and what are the complaints? We can spend our time worrying that the current system does not place appropriate limits on what the government does to stimulate. By the way, I actually agree that the way the government spends money or the manner in which stimulus is provided can have a huge impact but the idea that somehow or another, we need to go back to a system that derives the value of money as a commodity or a barter or that the limitation needs to be the physical dynamics, in my opinion, actually hurts our process. It requires us to move backwards to an extraordinary degree in a manner that is unproductive. The way I would ultimately-- where I would significantly disagree with Peter is I do think that governments can actually positively influence outcomes. We've seen this in areas that have good governance, like Singapore. We've seen this in areas that have bad governance, many emerging markets that have failed to emerge, point to Zimbabwe for example. Those poor decisions in terms of how to spend the resources of the state or how to allocate the resources of the state in support of the private sector are really what the complaints are on. The rise of the Austrian School was largely a byproduct of the work of Karl Menger in 1871 and the incipient collapse of the Austrian economy following the Founders crash in 1871. It was built on the idea the government had overreached and that the money had been spent in the wrong way. I don't necessarily disagree that sometimes governments will improperly spend money, but I don't think the limitation is some commodity function. PETER SCHIFF: Yeah, well, a couple of points I want to make. First of all, on Singapore, there's an old saying, I don't know if it's an old saying, I think it was Thomas Jefferson, maybe I'm wrong but the government that governs best governs least. That's pretty much the success of Singapore, or any country that has limited government is the less involvement the government has in the economy, the more prosperity the economy enjoys. That is the secret of places like Singapore, or like Hong Kong in that government was small. That was also a reason that the US prospered during the 19th century. In fact, and this is a point where I take exception, I think that you can't even argue, but I think the most prosperous period in US history where living standards for the average American rose the most was probably the period between the end of the Civil War, and let's say, the beginning of the First World War, around that time period, and during that time period, you had phenomenal economic growth, you have the whole transformation of the US economy through the Industrial Revolution from a largely farm-based economy, but manufacturing economy. You have the invention of all sorts of goods that previously never even existed. People's lives really got transformed, and their living standards. That was also the purest gold standard up until the beginning of the Federal Reserve. That was the purest gold standard the US ever enjoyed and that was the most prosperous period in US history. Having gold as money was not an impediment to economic growth. In fact, it helped foster economic growth. Despite all that rapid economic growth, and also at the same time, America was absorbing millions and millions of immigrants including all four of my grandparents who came to America during that period from Eastern Europe, lots of people were coming here and the gold standard worked beautifully. More people coming, more goods and services being produced, and consumer prices declined during that period. With all that economic growth, we didn't see consumer prices going up, we saw consumer prices going down, we saw the value of savings going up. I don't see how you can say that it would be a step backwards to return to a monetary system that enjoyed so much success compared to what we have now. The complete collapse and we go from boom to bust to boom to bust, but we've basically hollowed out the entire US economy. Under this fiat system, we've gotten from the world's biggest creditor to the world's biggest debtor. The standard of living of average Americans has been destroyed by government. Now, a middle class family, you have two people barely making a living. Whereas prior to that, one person could have a job and support an entire family and have savings. I think that it's not a step backwards, it's progress to go back to what used to work rather than continue what's failed. MIKE GREEN: Unfortunately, I'm going to have to point out that that's coincidence as compared to causative so the same time period that you were referring from roughly 1870 until 1920, it was also the invention of modern sanitization. We decided that we were going to start boiling instruments the doctors used to facilitate giving birth, we decided to introduce antibiotic, not antibiotics, the antiviral components under Louis Pasteur and so bacteria was identified. That time period is the same time period that's described so eloquently in Upton Sinclair's work highlighting how challenging that was for the average American that they were stuck in the emerging factories and slaving away as compared to having the idea of independent freedom. PETER SCHIFF: Remember, they weren't stuck in those factories, they took those jobs voluntarily, because they were better than the alternatives, which was working on the farm. A lot of people came here from Europe to take those jobs. What you're describing was a worldwide phenomenon. The thing is, why did America succeed so much more than the rest of the world? It was because we succeeded in limiting government, we had more economic freedom in the United States. That's why people came here. It was to escape bigger governments in their own countries to enjoy the freedom and the prosperity that went along with it here in the United States. MIKE GREEN: Peter, I'm sorry, but that's just historically inaccurate. You're absolutely correct that there was a large scale immigration from Europe and elsewhere into the United States, but that was simply because the United States had far greater land per capita available. The resources that exists in the United States, having not been populated from time immemorial, or more accurately depopulated by smallpox, freed up resources that allowed the capital labor ratio in the United States to be far greater than anywhere else in the world. PETER SCHIFF: Well, they had plenty of land, and like Russia. Look, it wasn't the land. It was the combination of limited government. If you have big government, it doesn't matter how much land you have. You need freedom. Freedom is the key ingredient. That's what people wanted. That was a source of our prosperity. We didn't have taxes back then. We didn't have income taxes. We didn't have Social Security taxes, we didn't have a Federal Reserve, we didn't have minimum wage, we didn't have any of the labor laws. We had a free economy, and that's what produced our prosperity, not the fact that we had land, there's land all over the world. MIKE GREEN: It's just historically inaccurate, but-- PETER SCHIFF: Well, it's not inaccurate but anyway, let's disagree to disagree and go to a different topic. ASH BENNINGTON: I'm curious, with the past as prologue here, I'm very curious to hear how each of you define the real world problems that we're experiencing right now. One of the most extraordinary things to me about the time that we live in is the incredible agreement we see on the political left and on the political right, whether you listen to AOC and the squad on the one hand, or Steve Bannon and Breitbart on the other, there's this extraordinary agreement about how American workers right now are really suffering the hollowing out of the industrial base, the extraordinary inflation in education and health care costs, and of course, in inequality across the board. Many will point to Central Bank policy and the absolute tear that US equity markets have been on while workers have just not participated in that. How do you each define the problems that we see right now? PETER SCHIFF: Well, it's ironic that you have people like AOC and the left complaining about the problems that they themselves created. College tuition would not be so expensive, but for government aid to education both subsidized guaranteed student loans and direct student loans, that's why the prices have gone up. The same thing with health care. The free market would bring healthcare costs down. It's government involvement. That is the reason health care so expensive. The biggest problem with the US economy is all of the malinvestment, which is a Keynesian term, but it's the result of the artificial suppression of interest rates that has screwed up our capital structure to the point where the US is not really manufacturing, because we don't have the savings and investment to sustain that. Of course, we have excess regulation that helps make our manufacturing less competitive, but these artificial interest rates and government spending have created a bubble economy that is based on consumption and spending. In order to run a consumption based economy, somebody has to produce all the goods that we're consuming, and that is falling largely on the rest of the world, a lot of emerging market economies like China. We run these enormous trade deficits so that we can consume things that we did not produce and everybody has the service sector jobs, and we have this enormous government and it's this giant bubble economy that's sustained by the artificial suppression of interest rates which continues to exacerbate these underlying economic imbalances that ultimately are going to need to be corrected with a major economic collapse. Part of the Austrian School is understanding that a lot of these economic booms are the problem. They are created by government. When they bust, that is the free market trying to fix the problems that were created during the artificial booms but then the government steps up and tries to mitigate the recessions even though the recession is the cure that we need but we never really cure the problems because we get government intervention to try to make the problems worse. We've been doing that for so long that the problems are now so big, that I think the next downturn from a monetary perspective could be a fatal one and we end up with a hyperinflation situation, which will be catastrophic. ASH BENNINGTON: Mike, I want to give you a chance to respond directly to Peter, of course, but also, if you'd like to take this opportunity to talk about how you see the problems that are facing the country and the global economy right now, I'd really be curious to hear you sketch that out from your perspective as well. MIKE GREEN: I think that there's a lot of similarities in the way that we would diagnose the problem. I agree that we have an intervention as the Federal Reserve that has decided that they cannot allow a financial crisis to emerge. They have become progressively more aggressive in terms of their reaction function, rapidly cutting interest rates supporting through QE or other processes. Whether that is what's the cause of our current boom, and I would broadly look at the environment and say, as you know, I have very different views of what's causing much higher equity prices, for example, what's causing asset prices, by and large to respond. I think the Fed's reaction function of providing a bond that rises in price when disaster occurs, so lowering interest rates in response to financial crises, creates a diversifying asset that actually hedges your portfolio with positive returns encourages leverage in the system. That will come to an end. I think Peter and I are in agreement on that. In terms of the underlying characterization that today's world is that much worse than times in the past, I just don't actually agree with that. I think, understandably, many people are frustrated by their inability to participate in the economic system to the extent to which their parents did, etc., but I would largely tie that back to the fundamental mistakes that we're making in terms of the treatment of capital in our society. Again, going back to the 19th century, the critical input was not actually whether we had minimal amounts of government or maximum amounts of government. The critical input was that the United States attracted extraordinary amounts of human capital in the form of Peter's grandparents, or half of my grandparents, individuals who chose to be here and chose to work and put their resources to use. Raising that human capital component is what we need to do. Unfortunately, I think that the government can play a role in that. We can choose to stop subsidizing retirement and protecting the financial assets, as we have done and instead choose to devote those resources to educating our children and encouraging household formation so that people can get busy in the economy creating value. PETER SCHIFF: Right, but remember, those things will happen on their own. When my parents' grandparents came here, they didn't speak English, but nobody educated them. They educated themselves. There was no welfare. There were no caseworkers. Nobody helped them. They had to help themselves to the extent that they could rely on other family members who had moved here before them. Yes, you had that, but everybody was self-reliant. We were a nation of rugged individuals, and that's why we succeeded and prospered. We need to recreate that environment again. The problem today with immigration isn't that immigrants are coming, it's why they're coming. A lot of them are coming to be on welfare, to get government benefits, take away those benefits, let people come here to work and have opportunity and we want all the people we can. The problem is now that we've become a welfare state, instead of getting people coming here that want to work, sometimes we're getting people here that just want to be on the dole, although I don't want to belittle the fact that there are a lot of people who are coming here who are actually working, and they're taking jobs that Americans won't take, because they get a better deal for the government to not work, and they work illegally and they do a lot of the things that we take for granted. MIKE GREEN: I just fundamentally would highlight that, yes, you are correct. The US was built in the 19th century and rugged individualists who are willing to pick up and separate themselves from familial ties for the opportunity of a better life in a different place. We can't recreate that. That's one of the challenges that we face. We have expanded within our borders, we have filled out most of the land that is available, we are in a situation in which the growth in the United States via immigration is a fraction of the levels that it's been historically. Clearly, they're not being attracted here by the desire to live off the dole, because lots and lots of people would have the interest in doing that. What we actually are creating is a situation in which it is increasingly difficult for a family to choose to have children, to have adequate housing, to educate those children properly, etc. I agree that many of the interactions that we have with the government harm us in that process, but the least of the concerns that I have in that is whether the dollar is backed by gold. PETER SCHIFF: Well, one of the reasons the government has been able to so undermine our productivity and lower our standard of living was because we haven't been on a gold standard, because the gold standard imposes discipline on the government, because in order for the government to spend money, it must first collect the gold, it has to have gold. If the people have it, it has to raise taxes, but once you go to this fiat based system, and the government could just print whatever it wants and spend that, now the government is free to interfere to a much greater degree in the economy. Now, it's not that we get all that government for free, because they print money. No, they're stealing our purchasing power. It's called inflation, the cost of living is going up because the government is making everything more expensive by printing money. It doesn't necessarily mean that prices went up because a lot of times, they're simply negating prices that would have gone down. Because before we had all this fiat money, when we had real money, prices went down every year. Things got cheaper. The cost of living went down and that's a great thing, because that meant people had higher living standards. When you go to a fiat system, and the government keeps printing money, the average American is robbed of the benefit of a reduction in his cost of living. You don't have a higher standard of living. If we could reimpose monetary and fiscal discipline on the US government, then the government would stay smaller, and the economy could grow larger. MIKE GREEN: Yeah, again, I think we're just at an impasse here, because I don't think we're operating off of the same sets of facts. If I compare living standards today to living standards in 1973, one, I can't do an accurate comparison, in part because the goods, the purchasing good basket is very different today than it was in 1973, and radically different than it was in 1870. When I'm actually saying that the standard of living is "lower" today versus sometime in the past, we live longer, in general, we're healthier, our children survived to maturity in a way they never did before. There's no way you can turn around and telling me that living standards were dramatically better in the 19th century. PETER SCHIFF: I'm not making that argument, because I'm not going to deny the progress that we've had from technology and all that. What I would point out is that had we maintained the same degree of economic th th freedom in the 20 century that we enjoyed in the 19 , we would have a far higher standard of living than we do today. Because you have to look at the trajectory and extrapolate where we would be. I wonder how many products didn't get invented because government regulation interfered with it. We would be a much more prosperous society. What I want to go back, let's say to the 19th century, I don't want to give up 21st century technology or innovation, I just want to go back to the 19th century freedom. I want to shrink government back down to the size it was back then. It's not a big interference in the economy. I want to unchain people from government. I don't want people that have to pay income taxes. I don't want people to keep books and records. I don't want people have to pay Social Security taxes. I want to free people up to save for their own retirement, not rely on a government Ponzi scheme. If we could go back to 19th century freedom, and still maintain 21st century ingenuity or whatever the progress was, then we will have a much more prosperous society and a lot of the problems that people have now are going to go away because capitalism will solve those problems. Capitalism can't solve them now because government is in the way. ASH BENNINGTON: Talking about solving those problems, now that we've mapped out in detail what both of you see as the challenges that we face, what would the solution set that each of you think about specifically look like? PETER SCHIFF: Well, to me, the solution is to stop centrally planning interest rates, the Federal Reserve needs to let the market set interest rates just like the market sets the price of everything. The market should set the price of money, not a group of individuals in Washington, DC. It's like a Soviet Politburo deciding how much bread should cost. Well, if the government just price fixes something, it's not going to get the right price, and there's going to be a shortage, there's going to be a surplus and so we have to store the economy. Because interest is so low, nobody saves. Because interest is so low, you have all this debt. We don't have enough savings, we have too much borrowing. That's the big problem in the US economy. Interest rates have to be allowed to rise and now people will save more and borrow less. But when interest rates rise, asset prices are going to have to fall and we're going to have to deal with the consequences of falling asset prices and a lot of the bankruptcies that that's going to entail because a lot of people have levered up to the hilt, thanks to artificially low interest rates. When interest rates are allowed to rise, they're going to be defaulting, lenders are going to lose them, and we're going to have to go through a protracted period of downtime to correct all these imbalances. Then we need the government to free up resources back to the private sector, we need massive cuts in government spending so that those resources can be freed up to the private sector to be used more productively. There are free market solutions, but we can't get to where we want to be from where we are now without going through some problems. Just like if you're high on drugs, and you want to be sober, you're going to have to kick the habit and go through withdrawal. That period of time isn't pleasant but it's worth it based on what awaits you on the other side. I'm willing to go through a tough economic downturn knowing what awaits us on the other side of the downturn once we can restore a balance to it and have a healthy economy, but we're not doing that. To bring it to the MMT, the problem is, you've got all these people now, who believe that, hey, it doesn't matter, deficits don't matter, we can have whatever we want, all we have to do is print money. As long as we borrow in our own currency, we never have to default because we can always print. If we continue to go in that direction and instead of going back to sound money, we just print even more funny money, and we keep interest rates depressed indefinitely because we're afraid of economic reality, that's what leads to a hyperinflationary nightmare. That is what the people in MMT overlook, is that, yes, a central bank can print all the money it wants, but it can't give that money purchasing power. At the end of the day, it's not how much money you have, but what you can buy with it. If you print too much money, you can't buy anything with it, because nobody will accept it. MIKE GREEN: I just have to push there for a second. Peter, you highlight the idea that we're going to liberate interest rates, and theoretically, they're going to rise in response to the reduction of the artificial downward pressure, that's going to lead to corporate bankruptcies, personal bankruptcies, etc. What happens to those individuals? PETER SCHIFF: Well, it's better than having hyperinflation but in most cases, let's say, I took out a loan from the bank to buy a house, and interest rates go up and real estate prices crash, well, is the bank really going to foreclose? What do they want with the house? Everybody else is in the same boat that I'm in. What would most likely happen is the banks are going to write down the mortgage and you don't necessarily have to leave or even if you had to leave, you can rent the place. MIKE GREEN: In order to rent a place, I need to actually have a credit report that says I'm not a bad credit. PETER SCHIFF: No, no. Well, look, but if a lot of other people have are in the same situation, I'm a landlord, if all my potential tenants have just gone through the same downturn, well, who am I going to rent to? Like my father lived through and he's telling me stories about the Great Depression. You have to hear from the people who experienced it, but the free market, people work things out. If they didn't have money to shop, it was like, okay, pay me when you have it. The landlord, I can't pay the rent. Okay, well, let me know when you got it, because it was like so many people were in the same problem that if, well, I'm going to kick out my current tenant, well, who am I going to replace him with? The free market has a way of sorting a lot of this stuff out. We would have been much better off had the US government stayed out of the housing bust of 2008. Of course, they caused the crisis by keeping interest rates artificially low and subsidizing mortgages but even though they caused the crisis, they could have let the free market sort it out, rather than inflate a bigger bubble. The idea that we can't face economic reality because it's too painful, and so we're going to keep on printing money to delay the day of reckoning, at the end of the day, what ends up happening is far worse than what would have happened if we just bit the bullet sooner and dealt with it. To delay it and only exacerbate the problem, that's the worst thing. That's what we've been doing. That's why the crisis that we're headed for is now going to be so much worse than the one we would have experienced it had we experienced it sooner. ASH BENNINGTON: Mike, let me ask you this. How do we know that Peter is not right about this? Obviously, it's an unpopular message. It gets into the Andrew Mellon quote from the Hoover administration, liquidate labor, liquidate stocks, liquidate the farmers, it's never a popular message. How do we know that there's not some kernel of truth in this, this idea that you effectively have an economy that is running on Federal Reserve policy that's been goosed by the Central Bank, you have bad debts that never get written off, and the system never has the opportunity to purge it. Not saying I agree, but how do we know that that's not the case? It's a counterfactual, how can we know that that's not true? MIKE GREEN: Well, one, it is a counterfactual. The second component is like everything, it has any well- established meme, it has a kernel of truth to it. We are misallocating resources. There are better ways to do what we're doing. What I would argue that Peter is missing in that transition is he and I are both wealthy. We have resources and reserves that we can rely on in that period of transition and like many plutocrats throughout history, we will take advantage of that opportunity to cheaply snap up properties as I did in the aftermath of 2008. I'm sure Peter did as well. Alright, so we will become more powerful because of that relative dynamic. I'm actually speaking against my own interest and saying, no, part of the reason why you kick the can down the road is because you're actually waiting for the fundamental innovation that can occur if you continue to employ individuals, if you continue to give them the opportunity to participate economically in a system that they could be randomly ejected from in the chaos that Peter is highlighting. PETER SCHIFF: To me, that's more like the Bernie Madoff style of just, hey, if I do it long enough, maybe a miracle will happen. Eventually, I'll somehow be able to pay everybody. The longer you run a Ponzi scheme, it doesn't come closer to working, it just becomes a bigger and bigger loss for all the participants involved. I think people are being enriched now. The monetary policies that are being used to delay the day of reckoning are enriching a lot of people as they're impoverishing others, and we're about to see a very substantial increase in the cost of living in the United States. Consumer prices are going to rise in the years ahead in an order of magnitude that we've never experienced in the United States. These higher prices are going to impact the middle class and the poor far more than they impact the rich. If we allowed for a deflation, that would benefit the lower class, and that would actually hurt a lot of the rich who were overleveraged in assets. We need to let these asset prices go down and you have a lot of poor people that don't own any assets at all. In fact, they want to buy assets. The best way for them to buy assets is to let the price come down. Now, those assets will become affordable. ASH BENNINGTON: Peter, to argue that the converse of the point I just made, the reason that we have Keynesian economics in the first place is the view of the total failure of some of the things that happened in the Great Depression when you have systems that simply failed to be able to restart themselves. There's hysteresis in the system, you have productive labor, you have productive capital, you have productive equipment and machinery that just gets taken off the table. The system breaks down. There are failures in free markets as there are failures in government. What do you say to this notion that the reason that we developed Keynesian economics in the first place for all its imperfections was because of the failures of free markets to address precisely the problems that you described? PETER SCHIFF: Well, that's just a common misperception of history. You see what happened during the 1930s is we didn't allow capitalism to work. What happened was when the Federal Reserve inflated the stock market bubble in the latter part of the 1920s, and they did that by artificially suppressing interest rates to try to help the British pound, which was losing value against the dollar, and so we suppressed interest rates and we already had a booming stock market, real estate market, and the Fed basically threw some gasoline on that fire with rate cuts that really sent asset prices into bubble territory. When that bubble popped in 1929, the Hoover administration did not want to liquidate the farmer, liquidate the banker. That was advice that he rejected, and Hoover became a very interventionist president trying to stimulate the economy, mitigate the downturn. That was a sharp departure from what had happened in the Depression that started in 1920. Nobody knows about that Depression, because it was over very quickly but it began with an even sharper economic downturn than the Great Depression. Because then, the Federal Reserve printed a lot of money during World War I and they had a turn off the presses and tighten policy, that sparked a big downturn in 1920 but the government in that case, did nothing to stimulate the economy. In fact, the government actually cut spending during that massive economic downturn, and it was over very quickly and then we had the roaring 20s, but Hoover did not do what Coolidge did. Hoover interfered in the economy, and he prevented a recovery from happening. Interestingly enough, when Roosevelt ran, he pointed out those problems. He actually ran to say, hey, I'm going to balance the budget. Look at these big deficits that Hoover is running, we're going to balance the budget. He actually ran against the intervention as policies of Hoover and then all he did when he got elected was expand those policies into the New Deal. The reason we had a Great Depression was because we did not allow the free market to work. It's because of Keynesian economic policies that we had the Depression. We didn't actually get out of the Great Depression until we ended the Second World War and we finally started to reduce government spending, although it is certainly was a lot bigger than when the Depression started. Everybody who looks back at the Great Depression, and says, hey, that's a failure of capitalism. That's why we need Keynesianism. No. The Great Depression only happened because of Keynesianism. Had we had a capitalist free market approach to that Depression, it would have been over as quickly as the Depression of 1920. Again, by the way, the Federal Reserve started in 1913, so we had that Great Depression with the Federal Reserve. Prior to the Federal Reserve, we didn't have anything like that as far as severity. The Federal Reserve helped exacerbate the problem as well. MIKE GREEN: There's an element of truth to what Peter's saying. There is no question that Hoover was an intervention as president who tried to stop many of the activities that we're broadly referring to here, the dynamic in terms of the collapse, but the fundamental change that it continued to occur throughout the 1920s and 1930s, it's not that the Federal Reserve cut interest rates and caused a bubble. It was exactly as we're seeing today, we had financial innovation in the form of unit investment trusts that deployed leverage to the purchase of equity prices and drove prices dramatically higher. It was not a story of the Federal Reserve stepping in, we had a housing collapse in 1925, 1927, they started the process of rotating people into financial assets, away from real asset speculation in the rest of the economy, the farming community had already begun to collapse in the 1920s. This was not a time period where the Federal Reserve created a boom by trying to defend the-- PETER SCHIFF: Remember, even Alan Greenspan and in fact, a lot of my original understanding of the Depression came from reading Alan Greenspan and Alan Greenspan was the longest serving chairman of the Federal Reserve and he blamed the stock market bubble of the 1920s on the Fed policy, it specifically blames the Fed and says that their policies spilled over into asset bubbles in stocks and real estate. Here you have somebody who chairs the Federal Reserve blaming that institution for that bubble and for the crash that resulted, but Greenspan didn't think the mistake that the Fed made was raising interest rates, it was cutting them too much in the first place. Then of course, ironically, he made the same mistakes when he was Fed Chairman. ASH BENNINGTON: I think both Chairs Bernanke and Greenspan agreed, though, that the failure to act in the 1930s to cut rates farther and increased liquidity, in their view, was an exacerbating factor for the continuation of the Great Depression, particularly after 1937. PETER SCHIFF: Well, Greenspan certainly didn't think that. Bernanke probably does, but not Greenspan. When he was Fed Chairman, he conveniently got amnesia about a lot of stuff. Once he left his position, he started to remember a lot of what he pretends that he forgot, but he is an Austrian. He was an Ayn Rand free market guy and so, I think that if you had a private conversation with Greenspan about the Great Depression and even about the Financial Crisis, there would be very little where his opinion would differ from mine. ASH BENNINGTON: They actually knew each other quite well. PETER SCHIFF: Yeah, they did. MIKE GREEN: We're talking Greenspan and Ayn Rand? PETER SCHIFF: Ayn Rand, yeah. MIKE GREEN: Look, I would just highlight that Peter is relying on the analysis by a Federal Reserve Chairman that he thinks are not worth anything today, to highlight that that's the cause of what happened that they've appropriately identified. I don't think that's true. I just don't think that's true. I think financial "innovation", and I use air quotes around that, was the primary driver of the dynamics of the 1920s and the 1930s. PETER SCHIFF: Innovation is not a bad thing. Innovation is not a problem. MIKE GREEN: I can innovate by going out and saying, hey, guess what, I'm going to offer 100% returns on investment vehicles. That's called fraud. ASH BENNINGTON: You can also innovate by introducing 100 to one leverage in a system that-- PETER SCHIFF: A lot of that is impossible, but for the Fed backstopping the market, there's a lot more reckless risk taking. Why do you think-- look, all the banks now, the deposits are guaranteed, so nobody gives a damn what the bank does with their money because the government has guaranteed all the deposits. If we didn't have government guaranteed bank deposits, then people would be more cautious about which financial institution they deposit their money in. If the financial institutions would have competitive pressures to not speculate, but when no one gives a damn about risk, then everybody just goes for return and we have all this leverage now unprecedented because of all the government guarantees and backstops and subsidies, we had some of that, but to a much lesser degree. If you look at all of the money that was lost in all of the banks that failed during the Great Depression, without any FDIC insurance, I think the total amount of bank deposits that was lost throughout the Great Depression was less than 2%. Americans are going to lose more than 2% of their bank deposits this year through inflation. Because remember, during the 1930s, the money that was in the bank gain value. We had big reductions in prices during the 1930s, so money gained purchasing power. Right now, our money's purchasing power is being destroyed. You get no interest on your bank deposits while inflation is eroding away their purchasing power every year. ASH BENNINGTON: Peter, I'm curious what your thoughts are about the Hyman Minsky model that talks about debt deflation, and the risks that occur when debts begin to rise faster than earning power. PETER SCHIFF: Well, obviously, if the reason that-- or one of the reasons that the Federal Reserve is artificially depressing interest rates is because it recognizes the enormity of the debt that everybody is carrying. The individuals, corporations, the US government, the only reason a lot of debtors can continue to service the debt is because the payments are so low. We found out during the housing crisis, when you take out a teaser rate on your mortgage, when the teaser rate matures, a lot of people can't pay the mortgage, but a lot of people didn't care because they figured, well, the house price is going to go up and so I'll refinance or I'll sell at a profit. When you have a lot of debt, the interest rate is very important but even to the point where if the debt gets so large, that even at such low interest rates, you can't afford to make the payments. During the housing bubble, a lot of people would point out all this home equity because I kept saying we have too much debt. They would say, yes, but look at all the home equity and I would always come back and say, well, the home equity is temporary, the debt is permanent until it's defaulted on. You may have a lot of equity in your house, but what happens if the market price of your house goes down, all that equity is gone, but the debt is still there. What the Fed is trying to do is keep us from insolvency by artificially suppressing rates, but by artificially suppressing rates, they allow the insolvent to go even deeper into debt. Ultimately, when they do go bankrupt because it's going to happen just by the law of numbers, when we all do go broke, it's a much bigger crisis because we've accumulated far more debt. ASH BENNINGTON: Mike, I want you to have an opportunity to debate here on the affirmative. You've been very descriptive in your analysis of the historical function of the way markets have worked. I'm curious if we were to see someday Chairman Green at the Fed, what's your prescriptive analysis for what this economy needs? MIKE GREEN: Ironically, this is where I think that the frustration comes because I agree with some of what Peter is saying. It is very clear that the Fed has been captured by the need to protect asset prices. But that's a very different statement than saying that the Fed is artificially suppressing interest rates and driving all the behavior that we're seeing. We have fundamental problems in the setup of our society right now, where we have actually chosen to abrogate our responsibilities to many of the individuals in our society. I would suggest Peter's suggestion that we just allow ourselves to liquidate stocks, liquidate labor, liquidate the farmers, etc. as the right prescription is just a further abrogation of that. The elites, unfortunately, of which I happen to be one, Peter is one as well, have by and large checked out of the system and their need to actually contribute back into it. We've chosen to create conditions, and it's interesting to see the Biden administration begin to move in the direction of saying we need to normalize tax rates so that corporations are not able to shop their tax rates all over the world. We are creating conditions in the United States where we are choosing to apply debt structures to decisions like student loans, or student education that is just fundamentally a mistake. That's an investment in human capital that should be treated as equity at the societal level. We can choose how we decide to allocate that and reward it but ultimately, we need to encourage the free market and this is, again, to Peter's point, to provide us with those solutions. Allow private sector individuals to subsidize and pay for colleges and differentiate between somebody who's getting an engineering degree and somebody who's doing an underwater basket weaving degree from East Bumblefuck University. The underlying characteristic is to allow the return of the private sector, but to cushion that process and to encourage the fundamental investment and innovation of the human capital and more importantly, actually, I would argue at the energy level, that increases the resources that are available. That's what you need to do. It's a labor capital ratio, you can do one of two things, you can increase the quantity of capital that is ultimately available, and that can be in the form of better health, better human capital in the form of education, it can be in the form of improved infrastructure, etc., that facilitates the creation of the opportunities that allow us to get out of this. PETER SCHIFF: Yes, I 100% agree, but the best way, or probably the only way to achieve that is through a free market. The government just has to get out of the way to allow all that to happen. The free market allocates capital. It allocates labor. The government can't do it because there is no profit motive to guide it. There is no pricing structure. The government has no way of knowing if what it's doing is adding value or subtracting value, but the free market does, individuals will pursue their own self-interest in a free market and people will get the education that they need. Entrepreneurs will find ways of providing it for a fee in competition with other entrepreneurs, but right now, we have the government erecting all sorts of barriers to the things that you want. What we just need is to take down those barriers so that the free market could do what the free market does best. What the government is supposed to do is simply protect our lives, liberty and property. That's what it's supposed to do. It's not supposed to interfere to try to improve our lives. It's simply supposed to protect our rights. MIKE GREEN: Unfortunately, I think that's-- again, we agree in a broader prescription but the mechanics of what you're describing, Peter, are really, really hard to achieve. Does the government protect me against Google? Does the government action against Google? PETER SCHIFF: Google can't force you to use their search engine. How's Google going to hurt you? MIKE GREEN: Peter, that is simply not true. That is simply not true. The world that we inhabit, in order for me to be a productive member of our society, I have to use these services. I have to use electricity for my local utility, I have to access the internet. I have to use searching. PETER SCHIFF: Right, but to worry about Google and say, hey, we need this big, strong, powerful government to protect me from Google, the big threat to your liberty and freedom is the government, not Google. If we had less government, we probably have more search engines. If we had fewer barriers to entry, if we had no corporate income tax at all, if we got rid of a lot of these rules or regulations, we'd have a much more competitive free market and you would probably have more search engines. Now, of course, there are other ones, you don't have to search with Google. There are other ones that you can use. Maybe you think Google is the best one, and so that's why you use it, but Google doesn't even charge you. It's free. How are you complaining about something you're getting for free? ASH BENNINGTON: Well, Peter, one of the questions that occurs is the formation of monopolies in free markets. You could imagine, for example, a system where you have to apply to a job through LinkedIn. If LinkedIn becomes the de facto monopoly, is there a role, hypothetically, for government to play in regulating that market so there is competition? PETER SCHIFF: History shows that generally when there's a monopoly, it's because the government grants it. The same thing for cartels. Governments are great at selling monopolies and then punishing people who compete with the entity to which they granted that privileged position. To the extent that somebody achieves a monopoly without any government protection, if somebody achieves a monopoly, maybe go back to John D. Rockefeller, Standard Oil, to the extent that somebody achieves a monopoly by just providing the best product at such a cheap price that nobody can compete, there's nothing wrong with that. If you go back to the breakup of Standard Oil, it wasn't Standard Oil's customers that were complaining, it was the competitors that couldn't do as good a job. They were the ones that were complaining so we busted up Standard Oil not to benefit the consumers, but to benefit their less efficient competitors. No, I would have put my faith in a free market to regulate competition, because whenever the government gets involved, it screws things up. ASH BENNINGTON: So, you think that legislation, Sherman Antitrust Act, Clayton Antitrust Act, things you do not agree with? PETER SCHIFF: Right. I think both acts should be repealed. The trust busting all that stuff, Teddy Roosevelt, I think it was all a mistake, it was part of that whole populace movement that was a step backwards for the United States. We lost freedom and it set us on the wrong path. You think about all these businesses like an example, I remember when Hollywood video I think in Blockbuster or something like that, these two video stores and a lot of people watching this probably don't even know what a video store is, because they never had to go to the store or rent a video. The US government blocked this merger, because they said, well, you're going to have a monopoly in VCR rental. We can't allow you guys to monopolize, and both companies, they ended up going bankrupt, because they were so struggling to survive but they were trying to merge to get some economies of scale, but the government is worried that somebody is going to monopolize an industry that a decade later didn't even exist, because it got put out of business by Netflix or the internet. You have all this, at one time, the government tried to break up General Motors. Oh, GM, you're going to have a monopoly on cars. Think about all the automobile companies in the world, and they wanted to break up General Motors? General Motors barely survived all this competition, competition from Japan. This is all a farce, and it simply runs up the cost. We should get rid of all this antitrust department, we don't even need it. Companies want to merge, let them merge. Freedom is the best thing that we have, and it leads to the highest living standards. If two companies want to combine because they're going to be more efficient, let them combine. If they try to jack their prices up, well, somebody is going to come in and compete. That's the beauty of capitalism. If somebody is earning an unwarranted monopoly property for profit, well, money is going to be raised competitors are going to be there, and those monopoly profits will be competed away. It's only when the government erect barriers to entry that the monopolist can maintain those excess profits. MIKE GREEN: That's again, you're now hearing the idea that's effectively saying, hey, if we just create a free for all system, it's going to work out great. I would highlight in the 1930s that Alcoa which at the time was controlled by the DuPont family had the global monopoly on aluminum production. Faced with the risks of World War II and the clear rearmament of Germany, the United States went to Alcoa and said, you need to build factories in the United States, you need to increase the capacity of aluminum because we critically see this as a critical raw material that's going to be used in any future conflict. The response from the private sector was get stuffed. Alcoa said we're not going to do it. We have plenty of capacity. We don't want to give up our additional production capacity, and we have factories in Germany of all places that can serve the global demand for aluminum. PETER SCHIFF: Well, I remember. I read the Alcoa case years and years ago, but one of the things that I remember when the government went against Alcoa, again, it was their competitors that were so upset at how low their prices were, like how good they were and how cheap they were. They said nobody can possibly compete with them, because they're just too good. We need to break them up because they're so efficient, we can't possibly compete. To say that back then, America was a manufacturing powerhouse. We flooded the world with low cost, high quality manufactured goods. With all this antitrust and all the labor unions and all the regulation, look at us now. Everything we used to make, we now import. Entire industries that we invented, consumer electronics, all that stuff, we used to make all the cameras, we used to make all the television sets in America. No, they didn't make them in Japan, they didn't make them in Korea. We made everything here. Now, we don't make anything anymore. Back then, before they broke up Alcoa, so to say, oh, they were moving stuff abroad, we had huge productive facilities here. Again, it's all these politicians, they want to pretend that they're there to benefit the public, oh, we're going to do this. You're going to end up with lower aluminum prices or lower telephone prices, we got to break up AT&T or whatever we're breaking up. At the end of the day, it's the free market that delivers low prices, the government delivers high prices. As I said, look at education, look at health care, look at the areas of the economy where the US government is most involved and that's where you see the greatest increase in cost. If you look at areas of the economy where the government has limited involvement, that's where you see improvements in quality and reductions in price. ASH BENNINGTON: Mike, I want to give you a chance to respond but also, as part of that, in the context of what we're talking about, we've obviously gone a little bit to a different direction here with the broader role of government about intervention, about what is optimal for creating markets and economies that are most efficient, but you mentioned and you touched on Google. I'm curious about as you think about this in the context of a very much 21st century digital economy, what is the role of government, if any, in mediating these markets and creating level playing fields and intervening is in your view? MIKE GREEN: Well, from my standpoint, part of the underlying dynamic is that there have been a number of rulings along the way that have given late 19th century, for example, the granting of corporate personhood, which has been expanded dramatically. That creates the potential and the clear opportunity for the regulatory capture that is really what Peter is describing. The current situation as it exists is it becomes impossible. The reason why the competitors were the ones complaining in the anti-monopoly cases, is because the risk for somebody trying to create an aluminum facility, which requires a large upfront capital expenditure and an expectation of some ability to maintain supply contracts was simply that the DuPont family or Alcoa was going to cut prices. They react to it by cutting prices? Are customers going to complain? No. Does the competitor go out of business? Are they incapable of receiving funding in the face of that type of competition? Absolutely. Is there a role to think about it beyond just the single period dynamic? I absolutely think that is the case. People tend to think about evolution, and I've said this elsewhere, people tend to think about evolution as progress. That's not correct. That's not what it is. Evolution is fitness within a regime. Large entities have the capacity to capture regulators and capture a system and preserve a regime to which they are best suited preventing a competition from coming in. PETER SCHIFF: Absolutely. Look, I'm in the brokerage industry, where we're regulated by FINRA, and there's so much barriers to entry. In fact, many brokerage firms were driven out of business, small ones, because they couldn't afford to stay in business. I ultimately had to sell my broker dealer in part because I wasn't big enough to cover the much higher economies of scale needed to cover my regulatory bill on an annual basis. The government drove a lot of people out of the business. All this licensing for occupations, it's all designed to limit the supply of a particular profession, thereby driving up its price. If we didn't have governments requiring people to join particular organizations or to possess particular licenses, we'd have far more competition and consumers would have a lot more choice. You'd have lower prices. One of the reasons to that a company like Google can be so powerful is because its stock price is so high. Why is its stock price so high? Because interest rates are so low? Why is it harder for small companies to compete? Because there's no money for them to get from the banking system because they can't sell bonds into the bond market. There's no real savings to finance smaller startups, the money has to come from these VCs who get all this money from debt. When you have a company like Google that can buy up its competitors with its inflated stock prices, that's one of the reasons it gets bigger and bigger. You introduce sound money, you let interest rates go up, and then you see those stock prices come crashing down then you're going to have more competition in the market, and maybe there'll be more search engines for you to choose from. MIKE GREEN: Again, this is part of the challenge is that Peter and I just have a different diagnosis of what's underpinning the much higher stock prices for companies like Google, etc. From my standpoint, it is very similar to the 1920s that is ultimately tied to a "financial innovation" that we are seeing the dynamics that I've articulated and have used to accurately forecast many of these phenomenon for years. We're seeing that play out in markets, and the pushback-- PETER SCHIFF: You think interest rates have nothing to do with it? You think, let's say if the Fed Funds Rate was 8% now, instead of 25 basis point, you think the price of Google would be the same as it is right now? MIKE GREEN: Well, first of all, I think if the Fed Funds Rate were at 8%, that would have been set by politicians as compared to regulators as compared to-- PETER SCHIFF: No, no, a free market. If you take the Federal-- MIKE GREEN: Let's just clarify, the Fed Funds Rate is not a market determined measure and never will be a market determined measure. It is specifically the price that the Fed is actually setting for-- PETER SCHIFF: Right, but if the Fed stops setting it and allowed the market to discover it, the Fed doesn't have to expand its balance sheet. If the Fed had maintained its balance sheet at the same level it was before COVID, wherever we had gotten it down to, maybe it was 3.5 trillion. Now, it's 8 trillion. Had the Fed not expanded his balance sheet and not bought any US Treasurys, any mortgage backed securities, where do you think interest rates would be right now? MIKE GREEN: Probably negative. PETER SCHIFF: How could they be negative? The Fed was loaning all that money. The loans would have had to originate from the private sector. You had the federal government interfering in the bond market, buying up bonds to suppress yields to artificially prop up bond prices. If you think about interest rates as a price, a borrowed money. Price is determined by supply and demand. If you have a country where hardly anybody is saving, and everybody is borrowing, you should have high interest rates. Low interest rates should come about when you have a lot of savings, but not a lot of people borrowing. That's a free market. What we have in America, nobody's saving and everybody borrowing, interest rates need to be high. Of course, when you look at the government, when the government had a $1 trillion debt versus now that it's 30 trillion, as you have more debt, you are a greater credit risk. If you have more debt, there is a greater likelihood that you won't repay or in the case of the government, that you will inflate instead of repaying but in either case, as governments have more debt, the market demands a higher rate of interest to loan that government money. Given all of the debt that we have, and the dearth of savings, we should have very high interest rates. We should have historically high interest rates. Instead, we have the lowest interest rates in the history of the world. That is not a free market. That is all the result of government intervention. You have to know as a portfolio manager that a stock represents the discounted value of its future earnings and the discount is a function of the interest rate. By definition, the higher interest rates are, the lower the present value of those future earnings becomes. The reason stocks are so expensive is because interest rates are so low. You let interest rates go up, and stocks have to go down. MIKE GREEN: Let's be very careful here in defining what we mean by interest rates. You referred earlier to the Fed Funds Rate, which is the cost of borrowing for the US government. PETER SCHIFF: Well, that's influencing the cost that corporations are paying. You look at the rates-- MIKE GREEN: It influences it, Peter, but it is not the determinant. There's also a credit spread. PETER SCHIFF: Yes, and those spreads are historically low. Look at the [?]-- MIKE GREEN: Correct. The corporate credit spread, the private sector credit spread is low because of the Fed intervention. That's not the question that you asked, you asked me what interest rates would be doing. The question of interest rates refers to risk free government bonds. PETER SCHIFF: Well, I mean a price occurs for everybody. MIKE GREEN: No, I understand what you're saying, Peter, but that's actually exactly the point. Had the Fed not intervened, what would the demand be for riskless assets or safe assets relative to speculative assets? The demand would be extraordinarily high because so many businesses had failed, the supply of debt would effectively become nonexistent because the government wouldn't have stepped in to support the private sector with the large issuance of increased debt or increased deficit spending. The supply of bonds would be lower, the demand would be dramatically higher and interest rates would be lower for the government. They'd be dramatically higher for the private sector, and you'd have tons of businesses that failed, you'd have tons of individuals that were incapable-- PETER SCHIFF: Right, and stock prices would be lower. MIKE GREEN: And stock prices would be lower, but the interest rate, the Federal Reserve's interest rate would be lower, possibly negative. PETER SCHIFF: Well, I don't mean to say that it would be negative, I don't see how it goes there unless you have the artificially suppress-- MIKE GREEN: Enough demand relative to supply. PETER SCHIFF: Personally, I don't think so because what I think would have happened is we would have had a far more protracted recession and the US government would have had been in an even worse fiscal position that it's in now and it may have started defaulting on its debts, and probably defaults on US Treasurys, because absent the Fed, the US government probably would have defaulted. I don't think that would necessarily argue for lower interest rates as people now are trying to unload what they thought was a risk free asset, but now is not a risk free asset, because the government can't pay its interest, because the only reason it could pay its interest is because the Federal Reserve is supplying the money. Without the Federal Reserve, they couldn't do it. But of course, our policies, the policies that we pursued in the aftermath of COVID-19 was the opposite of what Austrian economics would have called for. Because during COVID, people stopped working, people stopped producing, so we made less stuff. The proper monetary policy was to contract the money supply, so that the money supply would go down along with the production of goods and services. In fact, that is exactly why the Federal Reserve was created to provide an elastic money supply, which meant when the economy was expanding, the money supply expanded, and when the economy was contracting, the money supply contracted. What we did is in the face of a contracting economy, we massively expanded the money supply. There's no way the Federal Reserve ever would have been created if anybody realized that's such a harebrained scheme would ever be tried. We are now going to experience the consequences in that in soaring consumer prices, because we basically increased demand as supply was going down and so now, we're going to have this huge imbalance. We have all this money, but nothing to buy, and prices are going to go ballistic. MIKE GREEN: I think that's going to be interesting to see. The same forecasts were made in the aftermath of the Global Financial Crisis, we certainly did not see that. PETER SCHIFF: I know, I made them, I made them, and I agree that I was premature. Some events transpired that I didn't forecast but I don't think I was wrong. I think we're going to experience that inflation in a much worse way now that we're going to have to include this new round. I think that did lull policymakers into a false sense of complacency that, hey, we got away with it before, we printed all this money, and we didn't have massive price inflation. That means we can print even more money now, and we're going to have the same benign result. I think they're completely wrong and I'm already experiencing that just in my personal life, and I get emails all the time about prices just going ballistic, and you can't get stuff. There's so many things that I've ordered that I'm waiting for, waiting months and months and months, and I can't get stuff because there's nothing there. Because the supply isn't there. People are experiencing this all over the country. It's not just a supply of goods that isn't there, the supply of labor isn't there, either. With all these unemployed workers, businesses can't even hire people because they don't want the jobs, because the government made them a better deal. Stay home, and we're going to give you more money than you'll get if you return to work. MIKE GREEN: Is that your forecast then that this time, we will see soaring prices? PETER SCHIFF: Yes, we will. I think that last time, the government probably mitigated a healthy decline in prices. Following the 2008 financial crisis, prices may have declined, but for all the inflation that the government created, but part of the inflationary forces were held at bay by our trade deficits, and because the dollar actually rose. Something that I was not expecting, although the dollar was at an all-time record low in 2008. We did get a big rise in the dollar, and that helped mitigate the diminishment of its purchasing power, even though we printed more of them. I think we're headed for a dollar collapse, and that's going to exacerbate the problem. Then ultimately, a lot of the inflation that we exported is going to come back to us as a lot of our trading partners try to cash in their US Treasurys to buy real goods and services in the United States. Not only are we going to be dealing with all the money the Fed is printing, but we're going to be dealing with all the money that we exported that's now going to come back to America bidding up the same goods and services. Yes, I think we're going to see an incredible-- the Fed is there saying that what we're seeing now is transitory. This reminds me of the mortgage crisis in the early days when I was short subprime and we saw these subprime problems and Ben Bernanke said don't worry about subprime, it's contained. Well, yeah. Like it was contained to the planet. All the mortgages were infected, but the Fed pretended that we had nothing to worry about because it was contained. Well, now they're saying, don't worry about these price increases you're seeing in producer goods, in consumer goods, in imports, in exports, because it's transitory. We don't have to worry about it. Well, we do have to worry about it. It's just as transitory as the subprime problem was contained. MIKE GREEN: I would just highlight that they said the same thing to us about price increases in commodities in 2008, and they were correct. PETER SCHIFF: Well, in 2008, remember, when the Financial Crisis started, commodity prices were at record highs. Remember, oil was $140 a barrel of oil back in 2008. When the crisis happened, commodities went down, the dollar went up. Gold was at an all-time record high, it had gone up from $270 an ounce to $1000, and the emerging markets, if you look at where the emerging markets were in 2008, they were on a tear. They killed the US market from 2000 to 2008. We're going into this crisis, or we'd started it, it's the mirror image. To me, the markets heading into the current environment look a lot more like they did in 2000 at the peak of the dot-com bubble than they did at the peak of the housing bubble. That ushered in a period the declining dollar, rising commodity prices, and an outperformance of emerging markets over developed, foreign markets over domestic. I think that the US economy today is in far worse shape than it was in the year 2000. The imbalances are much bigger, the deaths are much bigger, and so I think the dollar decline that we had from 2000 to 2008, which took the dollar index down to about 70 to an all-time record low. I think this is going to be a much bigger decline, and we're not going to be saved by another financial crisis. The next crisis is going to be a US dollar crisis and a sovereign debt crisis. The dollar is going to be the epicenter of the crisis that's coming, and that's going to exacerbate the pressure on consumer prices. ASH BENNINGTON: We should probably also mention that we have far greater intervention now than we did in 2008-2009 vintage. We obviously have the 13(3) programs, we have the Fed buying ETFs, corporate debt, and in addition to that, a significant fiscal stimulus. Mike, how do you bake that into the equation in addition to what's happened to the Federal Funds Rate remaining incredibly accommodative for many years? MIKE GREEN: Again, I would highlight that when you talk about the Federal Funds Rate remaining incredibly accommodative, it becomes relative to what? Alright, we are one of the few developed nations around the world that actually has positive interest rates as compared to negative interest rates. I tend to think that the negative interest rates are not stimulative, that they're actually contractionary. They're a form of-- PETER SCHIFF: But they're not positive in a real sense. It's only a nominal sense. Real rates are negative. MIKE GREEN: Yeah, so this is part of where we just disagree. I don't think that real versus nominal matters in the way that you think it does. PETER SCHIFF: Of course, it does. MIKE GREEN: No, it doesn't. PETER SCHIFF: Are you saying it's irrelevant how much inflation there is? ASH BENNINGTON: Let's explain to people what that means, just so they understand the context. MIKE GREEN: The difference between real and nominal rates as people respond to it or report it is the dynamic of what is your inflation rate? So, typically using the reported CPI or the PCE. The difference between the interest rate that you have minus that inflation rate is what gives you the "real rate". That inflation level is an abstraction. It's an approximation. It is the estimated inflation rate for wage earners in the United States, if you're using the CPI, it is the deflationary or the inflationary measure for the entire economy if you're using the PCE on the household side. There's a lot of disputes and debates around what's the correct way to calculate it but what I can assure you is that Peter's inflation rate is different than my inflation rate, which is different than my children's inflation rate. Every single one of us experiences a different "real rate" relative to standard nominal rate. PETER SCHIFF: What you're really talking, though, is not our individual inflation rates, but our individual cost of living, because inflation by definition is the expansion of the money supply. The Fed is expanding the money supply, the Fed is inflating at the same rate for everybody. It's just how that inflation affects individuals is going to be different. Another aspect of these government measures is I don't think they adequately reflect the true increase in the cost of living for anybody. I think they've been deliberately designed to understate how high or how much prices are rising. As a lender, it makes a big difference to me. If I'm going to loan you money, let's say I'm going to loan somebody $1,000 and if they're going to pay me back in a year, and I think that $1,000 is going to buy me $900 worth of goods and services, I'm not going to loan that, I'm not going to make that loan unless the interest rate is over 10% because I'm not making a loan to lose purchasing power. I have to charge the borrower a high enough rate of interest to compensate me for how much purchasing power my money loses between the time I make the loan and the time I get paid back. It doesn't even matter what the government claims my cost of living is, what matters is what it actually is, and am I going to make a loan given those dynamics? If I'm not going to get paid back more than I loaned in real terms, I'm not going to make the loan. There's another point I forgot to make that I want to make about the difference between now and 2000. In 2000, we had the Chinese lending us a lot of money. We had the Russians, we had the Japanese, we had the whole world willing to loan us money. The world doesn't want to loan us any money anymore, they actually want to get paid back on the loans they've already made. In addition, back in 2000, Social Security still had a surplus. The US government was able to borrow from the so-called Social Security trust funds. Right now, Social Security is in a huge deficit. Social Security is competing with the US Treasury at selling US Treasurys. There are no buyers anymore. There's only sellers, the only buyer is the Federal Reserve, so the amount of inflation, debt money printing, in order to monetize all these debts is much greater now than it was back then. That's another reason that we're going to get a collapse in the dollar this time, and we're going to see the big increases in consumer prices that eluded us the last time. MIKE GREEN: Again, we're talking what's going to happen into the future. My view is much more sanguine than Peter's. I think that the description of inflation as the inflation of the money supply presumes that the velocity of money stays constant. That's not the definition of inflation, the definition of inflation is a rise in the general price level. PETER SCHIFF: Well, that's the definition now because we decided to change it. If you go back to a Webster's dictionary, even as late as the 1970s, early 1980s, and you look up the word inflation, and it will say to expand, i.e., money supply, that's what it was. Early definitions didn't even mention prices. Eventually, they started to define inflation as an expansion of the money supply that leads to an increase in prices. If you look at the word inflate, it literally means to expand. You cannot expand prices. Prices go up, they go down. What you're expanding is money supply, that's what's being inflated. Deflation is a contraction. Balloons expand when you fill them with air. What expands? Money supply expands and contracts, prices rise and fall, so price is going up but not inflation. Of course, the reason the government tried to redefine inflation as rising prices is because during the 1970s, when we had a lot of inflation and prices were going up, the government wanted to blame the public for the inflation. They wanted to blame greedy businessmen, they wanted to blame OPEC, they wanted to blame unions. They wanted to redefine inflation is rising prices, because the government's not rising the prices, it's the private sector that's making prices go up. Gerald Ford comes up with a whip inflation now button, as if the people have control over inflation. The Federal Reserve creates the inflation, not the public. The public simply responds to that inflation. If money loses value, then prices have to go up in order to receive the same monetary purchasing power in exchange for goods and services. ASH BENNINGTON: This is Milton Friedman's famous quote, inflation is everywhere and always a monetary phenomenon. MIKE GREEN: That's not actually his quote. That's part of the problem is that he doesn't actually say that inflation is always and everywhere a monetary phenomenon. He says that inflation is always and everywhere a monetary phenomenon, in the sense that, and there's an entire part of that sentence that everybody forgets, because it's not as pithy and it's not as catchy. If you expand the money supply in the context of an economy that is up against constraints, yes, you will end up with inflation. If you decide to subsidize purchasing power because there is a shortage of currency, you will absolutely get inflation. This is what happens in Zimbabwe. This is what happens in Venezuela. You see a collapse in the supply, and you'll see a dramatic expansion in the consumption in nominal terms. I'm not disagreeing with that dynamic. The question is, are we facing that world today? Has the government actually stepped in and smoothed to the process to minimize the disruption to human capital? PETER SCHIFF: This is what people overlook. Let's assume there is a lot of this excess capacity that we have, let's assume there is unemployment and unutilized resources. That's the environment where people say, oh, we can print money, now we're not going to have inflation. Oh, yes, we are because the printing of money is the inflation, but prices might not rise during that environment, but what the government is doing is preventing prices from falling. Because if there is excess capacity, the best solution is to let prices fall. That's what the government is preventing. If the government prints more money, creates inflation, and the result of that is that prices are higher than they otherwise would have been absent that inflation, then it's the same effect. The government is distorting the price structure. They are in creating inflation, and the result is higher prices than what those prices would have been absent that inflation. If the government prevents prices from falling when they shouldn't be falling, they're doing damage. ASH BENNINGTON: Well, important context from both of you, and it is never as simple as a pithy quote, but one of the great things about markets about economics is there's a scoreboard here. As we come closer to the end of this conversation, I'm curious to get a view from each of you to give us a little bit of a context for what it would look like if the thesis that you're propounding right now is correct. In other words, what do you expect to happen? What should we be looking for in order to understand if the thesis that you've presented is fulfilled? PETER SCHIFF: Well, for me, I think if you're looking at the markets, you need to really look at the foreign exchange markets, look at the bond markets, and look at gold. I think when you start to see long term interest rates rising, at the same time, you see the dollar falling and gold going up. When we break from this idea that rising bond yields are good for the dollar and bad for gold, when you start to see bonds falling as a reflection of a need to get rid of dollars, and to get out of US dollar assets because of the inflation that is now a building and being recognized by the markets, I think that's the beginning of the end. The problem is things are going to unravel very quickly, and so that's my advice to people. What I've already done is that, look, this is going to be a huge collapse of the value of the dollar. A lot of people are going to lose a tremendous amount of wealth as a result of this. There's going to be people that are going to be enriched by this. Since we have no ability to stop this from happening, we just want to position ourselves as best we can personally, individually to be on the receiving end of the transfer, rather than the losing it. That's why I own a lot of foreign assets, I own a lot of equities in foreign countries that pay good dividends in currencies that I think are going to appreciate. I have money invested in the emerging markets that I think will benefit from a weak dollar, as they consume more of what they produce, rather than exporting it to the United States. I have a lot of investments that are resource related, whether it's metals, precious, or industrial, agriculture, energy. I think the emerging world is going to need a lot more resources, and they're going to be rich enough to afford them. I think you're going to see a big change. I think the US dollar is going to cease to be the world's reserve currency. I think the American standard of living is going to move down appreciably, it's going to look very different here in the United States. There are a lot of wildcards politically on how much worse we may make it. By how much further down the Road to Serfdom we travel with this big move left. Certainly, a worst case scenario is hyperinflation and where we completely destroy the value of the dollar. I certainly hope we don't end up there, but that's the road that we're on unless we take a detour. People need to be very cautious, and they need to have a portfolio that really reflects the way the world is going to look and not the way it has been looking. ASH BENNINGTON: That's a very clear scenario, rising rates, depreciating dollar, rising gold prices, and bullish EM. Mike, as you think about this from your side, what does the world look like if your thesis continues to unfold? MIKE GREEN: The core of my thesis plays back to some of the very simple dynamics we have in components of demographics, etc. We've seen global population growth, particularly for the developed world, but increasingly for the developing world. The emerging markets all over the planet are actually seeing their population growth collapse. They're seeing their birth rates fall. They're seeing their populations, in most cases, contract. That's not a world that's bullish for commodities, just simply is not. It could lead to the scenario that Peter is talking about that you have continued activist governments to try to keep prices from falling too much, but a world of population declines is not one that sees rising prices in terms of commodities, certainly not on a relative basis. Again, I've brought up the point that in the past to Real Vision viewers that the right way to think about commodity prices as relative to gold, I would anticipate that if I'm looking out five years from now, that oil prices are lower in gold terms, that the price of the vast majority of goods are lower in gold terms. Do I know what's going to happen to their nominal price? Do I know what's going to happen to the gold price? That's a harder one to know. There's risks to gold itself that it faces demonetization and loss of that traditional protection that may prevent it from providing the protection that Peter thinks it does. As I look at the emerging markets, emerging markets, we go back to the to the tail end of the time period that Peter highlighted, the period right before World War I, among the wealthiest countries in the world were those in the emerging markets, the Argentinas and Venezuelas, etc. Periods of disruption in which the developed world comes under pressure are not good for emerging markets. They tend to give rise to even worse forms of government. I would suggest we're seeing that. We're seeing fleeing from Venezuela. We're seeing fleeing from Argentina, etc. These are not stable regimes, and I would extend that into many of the areas in Asia that have "flourished". We've just seen a coup in Myanmar, etc. Africa is facing extraordinary challenges for a variety of reasons as well. Can that change? Could we have fundamental innovation that changes these characteristics? Possibly. I don't see the world that Peter see is I actually see a world in which, yes, things could get bad for a variety of reasons but the US is relatively well positioned in that scenario. PETER SCHIFF: I think we're extremely poorly positioned, but I do agree, I do anticipate that prices will fall in terms of gold. I think capital prices, stocks, real estate will fall more in terms of gold than commodity prices. Yes, I expect all prices, I expect a big deflation of this big bubble, but measured against gold. Now, in terms of other fiat currencies, I think prices are going to go up for pretty much everything, maybe even stocks and real estate will continue to go up. If we destroy the dollar completely, of course, prices are going to go up. The reason that I think that you're going to see this dynamic in commodities is I think that the purchasing power is going to be transferred. I think Americans in the future are going to consume a lot less, and a lot of the emerging market consumers are going to be consuming a lot more. Now, if you look at the basket of goods that they're likely to consume, I think there's going to be more resource intensive consumption going on in those markets than in the United States. I think that they're going to be buying more of those things. Let's say all of a sudden, there's a lot more demand for cars in places like China, well, you need a lot of raw material. Americans, we scrap a car to get another car, everybody already has two cars but you got people in China that have no cars, they got bicycles. There's a lot of raw materials that are going to be used that now a lot of Chinese are going to are going to have cars that don't have cars today. I think that the way the world is going to look in the future, there will be more demand for commodities from populations that are not demanding as many. America right now is a very huge slice of global consumption, but a much smaller slice of global production. When American consumption is brought back in line with its production, that's going to free up a lot of resources for the rest of the world, and they're going to consume those resources and so you're going to see different relative price structures. Yeah, in terms of gold, I expect prices to come down. That's why I own a lot of gold in particular, that's why I own a lot of gold stocks, because I think those stocks are going to become very valuable, because I think ultimately, the cost of the gold that they're mining is going to-- or the gold rather that they're mining is going to go up in price faster than the cost of mining it. The raw materials, the labor, the energy costs that go into bringing gold out of the ground. I think a lot of these gold companies where you have a lot of resources in the ground that the market currently values at zero because they think it's too expensive to extract them, I think relatively soon, all of those resources are going to have tremendous value. When you buy these gold mining stocks right now, you're getting those resources for free. ASH BENNINGTON: I have to say, amid you guys agreeing on a number of issues, and obviously some significant disagreements as well, but some interesting context for agreement. I have to ask, I'd be remiss if I didn't and I get yelled at on Twitter if I didn't, because on the RV Crypto guy, we've had this tremendous debate. I'm curious because you are probably two of the three most prominent cryptocurrency Bitcoin skeptics in the world right now. If we had Nouriel Roubini here, we'd have all three of you on screen at the same time. I'm curious you guys have a broad agreement about this skepticism around Bitcoin and cryptocurrency. What are your thoughts there? PETER SCHIFF: Well, I'm not even skeptical. I know it's not going to work. If I was skeptical, there'd be some doubt in my mind. Maybe it'll work, maybe it won't. Look, Bitcoin is a fad. Bitcoin, they call them a cryptocurrency, but it's not a currency. It's not money and it's not even a currency. The dollar is a fiat currency. It's not money. Gold was money. The dollar is a fiat currency. It used to be a legitimate currency when it was backed by real money, gold, but now it's backed by nothing, but it's a fiat currency but at least it's a currency. Bitcoin is not a currency it's not used as a medium of exchange really or a unit of account. It's just used for speculation, but it's not an investment asset like real estate, doesn't pay rent, it's not a stock, it doesn't pay dividends, it's not a bond, it doesn't pay interest. It's not even a commodity, because you can't use it for anything. What it really is, is a collectible token. Right now, you have a bunch of people collecting Bitcoin. Why are they collecting Bitcoin? Well, for the same reason that people collected Beanie Babies, because the price was going up, and they thought the price would keep going up. But you know what, there's 21 million Bitcoins, and they're all exactly the same. To me, they don't seem very scarce, they seem very abundant. I don't think these Bitcoin collections are going to be worth anything when the music stops. People had told me that when the bubble burst in Beanie Babies, they were able to use the beanie babies to insulate their homes. They can shove them in there between the walls, and they made good insulation. You can't do anything with a Bitcoin. Once nobody wants your Bitcoin, it's completely worthless. Intrinsically, it's worthless right now, but there's a market value because there's some fool willing to buy it. Why is a fool willing to buy Bitcoin? Because he assumes there's a greater fool who's going to pay even more money in the future, whether he understands that dynamic or not, that is exactly what's going on. I personally think the Bitcoin bubble will pop before the dollar bubble. We may have a cryptocurrency crisis before we have dollar crisis. MIKE GREEN: Again, areas of agreement and disagreement. I'm not particularly negative on cryptography and the development of digital forms of currency, I think it's inevitable. I tend to lean towards the dynamic that we will see CBDCs emerge as compared to private sector solutions, but we will see some of the innovation that's occurring in the crypto space, for example, tokenization of securities is, in my opinion, ultimately inevitable. The ability to embed a much more complex and a much more robust feature set than can happen with an electronic CUSIP, for example, is something people have heard me talk about over and over again. My problem is very specifically as it relates to Bitcoin in the speculation in the asset class that it is some form of a store of value that will preserve itself for an extended period of time. I think it's being misrepresented to the public. I think that the deregulation or the lack of regulation in the space is leading to the type of speculation that's the opposite of what Peter has hypothesized, you see constant claims for 100% APR, or APYs that people assume are actually the equivalent of interest rates. They're not. They're effectively short volatility speculative positions that involve the sale of options. Volatility is something I tend to know a little bit about, so these are not yields in the classic sense. They're not a central entity that is paying you a fixed rate of interest as people tend to think it is. It is a true risk position in a speculative asset that, in my opinion, is being misrepresented to you. PETER SCHIFF: Yeah, I agree with you completely on the fact that there may well be some very practical applications to cryptography, to digitizing and using the blockchain to represent ownership of real assets and make it more convenient to have title and to transfer that. That's all great, but that's got nothing to do with Bitcoin. Bitcoin is belief that that particular digital token is going to be worth millions of dollars someday. I know, people, it's like a religion. My son's been indoctrinated into the cult. He's completely delusional. Now, he's got an excuse. He's only 18, but you've got a lot of older people that don't really have an excuse. Although some of the people that are out there to me, they're just pumping and dumping. This has been a huge marketing success for the people who got in early and who continue to pump this thing so that they can get out and cash out and make a bunch of money selling what amounts to digital snake oil. MIKE GREEN: Yeah, I tend to agree on the marketing aspect of Bitcoin and the prospects for Bitcoin itself. I understand the motivation. One of them is what Peter just referred to, that the older generation doesn't have it and the younger generation does, and so it is perceived that this is one of the ways to effectuate a wealth transfer that needs to occur. I think it's unlikely to be successful. I can't express the same surety that Peter has, but from the standpoint of a market participant, it's not an area that I think is worthy of speculation in the way it's being pursued today. ASH BENNINGTON: Forget this. Bitcoin bringing us together, Mike Green and Peter Schiff having a passionate agreement. Gentlemen, this has been a very long, detailed debate. We've touched on a lot of different areas, we've gone deep into them, explain the context, the philosophy, the pragmatic implications, the history, the data, it's been an incredibly rich debate and conversation. How would you like to leave this with our audience? What final thoughts would you like to leave them with? Peter, first to you. PETER SCHIFF: Again, if you focus on where we agree, at least as far as building an investment thesis, we both agree that the price of gold is going to go up, and so owning gold makes a lot of sense. If you are somebody who is worried about fiat currencies, like a lot of people in the crypto community are, that is part of the motivation of getting into them is escaping inflation, having an inflation hedge and a store of value. To the extent that you really want that, you don't have to reinvent the wheel. You can actually buy real money if you don't like government fiat, and that is gold. As an investor, if we both agree that the price of gold is going to rise relative to other commodities, such as energy, oil is one of the important cost factors other than labor, mining is very energy intensive. To the extent that gold becomes more valuable rather than the energy required to get it out of the ground, all that flows through to the bottom line profits of gold mining companies. I think we can probably all agree that gold mining stocks look like goodbyes at this level, they pay very good dividends right now in the majors, more than you can get certainly from the US government or from most stocks in the S&P 500, and you've got a lot of earnings growth there. I think people can take away from this, regardless of where you come down, hey, maybe we should buy some gold stocks. I would suggest people do that. By the way, I do manage a gold fund. The Euro Pacific Capital Gold Fund. In fact, I don't manage it myself. It's managed by Adrian Day is the portfolio manager. I own the fund through Euro Pacific Asset Management, people can buy the fund at any of the discount brokerage houses out there, no load, or they can work directly with one of my representatives at Euro Pacific Asset Management or Euro Pacific Capital. ASH BENNINGTON: Mike, final thoughts from you. What would you like to leave the viewers with after this very detailed conversation? MIKE GREEN: We have had a very long, very detailed conversation. Unfortunately, I do have to clarify that last point. I think that gold will rise relative to commodities, I'm not as convinced that it is a no-brainer to rise against the US dollar, at least not over an interim period. There is a fantastic monetary premium that is embedded in gold, you can see this simply by looking at the price of gold relative to silver, for example, which historically, and in terms of presence in the Earth's crust has a ratio of about 17 to one. That's where we got the initial monetization under the bimetallic standard, is their representation in nature. We've demonetized silver. Today, that ratio is around 67, down from north of 100 a year ago. That component, I just would caveat that you want to be careful in thinking about gold, because there's a very real risk that it continues to retreat in terms of importance. PETER SCHIFF: Or the price of silver could rise, which I'm more bullish on silver than I am on gold. Maybe silver stocks is where we agree. MIKE GREEN: The point that I would continue to highlight to people is that when you look into the past, you're going to get the answers from the past. If we look forward in terms of what's happening, I would actually say the opposite. I think that humanity is going to continue to flourish, I think that we're going to continue to have innovation, and that we should make the investments in human capital. That includes investments in yourself to understand these dynamics, so that you're better positioned to go forward. What does that translate to in terms of your immediate investment opportunities? Look, I've talked endlessly about the dynamics of the influence of financial innovation, things like passive investing, and how that impacts markets. I agree that we will eventually have significant financial stress associated with the terrible choices that we're making, and we are making some really bad choices, but the answer to that is not to abandon the system. I would just encourage people to think for yourself, take the opportunity to digest the information that we've shared, and position yourself appropriately. PETER SCHIFF: Again, this system I want to abandon is the one we have now. I want to reembrace capitalism, which is a system that we're supposed to have, but we've infected it with socialism. I agree, we need to make these investments. Capital investments, investments in human capital, but the government is incapable of making them. It is a free market, the private sector that makes those investments and we're not making those investments now because the government has crowded then out. The government is depriving the free market of too many resources, whether it does it directly through taxation, or indirectly through borrowing and inflation. We need to shrink the government, free up those resources, liberate them back to the private sector, so we can make those investments that we both agreed need to be made. MIKE GREEN: Yeah, I think we have to be very careful in defining government. At this point in the United States government is of the people and "for the people". That doesn't have to be the case. We see different systems in different places. Protecting that democracy, protecting that government that is designed to facilitate the pursuit of life, liberty, and happiness is something that I think we should take very, very seriously. Unfortunately, I think if Peter's prescriptions were followed, that you would ultimately end up with totalitarian systems far faster than the current structure we have. PETER SCHIFF: I hope not, or I don't think so, but I'm not really concerned about protecting democracy. I want to restore the Republic. It's democracy that's been a big threat to the Republic. It's the constant need to buy votes that is what's driving and motivating politicians to screw up the economy. If we had less democracy, we have more freedom, that's what the founding fathers understood. That's why they established America as a Republic. They built in a lot of constitutional safeguards against what they regarded as the tyranny of the majority, of mobacracy. The problem is, over time, those safeguards have been torn down and so the protections that the founding fathers put in place are no longer there, and we need to resurrect them. We need to have a court that's willing to enforce the constitution rather than ignore it. MIKE GREEN: And now, we do end on a point of agreement. ASH BENNINGTON: Well, we came for a great debate, and did we ever get one or two very different views of the world, philosophical, technocratic, and mechanic. Just a wonderful conversation all around. Thank you both so very much for joining us today.
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Channel: Real Vision Finance
Views: 208,775
Rating: 4.8457909 out of 5
Keywords: Finance, Markets, Economy, Stock Market, Investing, Trading, Education, Financial Literacy, Recession, Interview, Conversation, Strategy, Insight, Analysis, Facts, Data, Fraud, Entertainment, Thesis, Short Seller, Real Vision, Equities, ash bennington, peter schiff, mike green, roles, government, money
Id: 1BK9UPKD934
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Length: 103min 35sec (6215 seconds)
Published: Mon May 10 2021
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