Claudio Grass Interviews Dr. Thomas DiLorenzo

Claudio Grass, Managing Director at Global Gold Switzerland, talks to libertarian Dr. Thomas DiLorenzo, an American economist and representative of the Austrian School of Economics, well known for his fierce libertarian approach in criticizing government intervention. This exclusive interview covers central bank monetary policies, Keynesian Economics, the economic ‘recovery’, political correctness, and much more.

 

tom-dilorenzo-smiling  American economist and historian Dr. Thomas DiLorenzo, inter alia author of The Real Lincoln

Photo via mises.org

 

Claudio Grass, Global Gold: Thomas, it is an honor to have this opportunity to talk to you. I am also pleased to announce that you will be delivering the keynote speech at the BFI Inner Circle Wealth Forum in Florida on April the 18th and 19th. Let’s get started! Given the limited impact of loose monetary policy thus far, where do you think we are headed on the central bank front? Do you think it is likely that the Fed moves interest rates into negative territory, like many central banks across the globe have already done? What would the implications of such a step be?

Dr. DiLorenzo: On the central bank front, we are headed where Japan has been over the past twenty years or so: more and more easy money in a quixotic quest to push interest rates into negative territory, a truly crazy idea. The craziness of this stems from the fact that the entire academic economics profession abandoned Keynesianism in the 1970s. Its failure to explain stagflation was considered to be the final nail in the Keynesian coffin. Franco Modigliani’s presidential address to the American Economic Association in the late ’70s was a remarkable white-flag-of-surrender speech by one of the prominent Keynesians. He confessed that Keynesian “stabilization policy” had been a failure.

 

Franco_Modigliani
Nobel laureate Franco Modigliani – his late 1970s address to the American Economic Association seemed to close the lid on Keynesianism’s coffin – but like a zombie, it has returned (and all the nonsense that comes with it, such as the Phillips curve, the notion that consumption produces economic growth and that saving is somehow bad, that the government needs to intervene to “correct market failure” and so forth…the current economic mess is the result).

Photo via quizblogger.de

 

Then, like a bad horror movie, Keynesianism reared its ugly head fifteen or twenty years later as though it had never been discredited. Thus we now have the crazed policy of negative interest rates based on the thoroughly-discredited idea that only “aggregate demand” matters, and if we can just have the central bank push interest rates low enough, people will spend more and businesses will invest more, and all will be good. After the crash of 2008, caused by these same Fed policies, I recall the old Keynesian propagandist/economist Alice Rivlin on TV advising everyone to go out and spend wildly on anything. “It doesn’t matter what you spend it on,” she said, “just spend it.”

In reality, what this new policy, which is the same as the old policy, does is induce businesses to invest more on durable goods like cars and houses, which is why there are new bubbles in these markets, at least in some regions. The price-per-square-foot of Las Vegas real estate, for example, is now higher than it was just before the crash of 2008. There’s also a student debt bubble and a stock market bubble, in my opinion, thanks to the Fed’s single-minded and very simple policy of print, print, and print some more. Rather than reducing some of the wild and reckless speculation on Wall Street, the government bailouts of the speculators created a “moral hazard problem” that will encourage even more reckless speculation. If the speculative investments pay off, they keep the profits; when they go bust, they can count on another round of “too-big-to-fail” bailouts.

 

CB deposit ratesCentral bank deposit rates in Europe – the madness of negative interest rates – click to enlarge.

 

Claudio Grass: The only way it seems feasible to move interest rates substantially into negative territory would be to either ban or at least massively restrict the use of cash. In our view, there is a clear “war on cash” being promoted in the media. Do you have any thoughts on the issue and are we headed towards a cashless society?

Dr. DiLorenzo: Yes, there is a war on cash being promoted by the Fed, in particular, and the government, in general (and its lapdog supporters in the media). The main reason for this is that if people can hold cash, it makes it more difficult for the Fed to centrally plan the economy. Also, Keynesianism has always been at war with savings since its principal tenet is that savings are bad, consumption is good (there you have all of Keynesianism in a nutshell).

This began with the silly theory of the “paradox of thrift” that said that saving is harmful to the economy; therefore, the more we save now, the poorer we will all become, and the less able we will be to save (and consume) in the future. The Keynesian central planning authorities at the Fed and elsewhere would like to see a cashless society because keeping cash can be a form of savings instead of consumption. I think we are headed toward a cashless society, unless the public wakes up and begins to protest this.

 

paradoxThe nonsensical “paradox of thrift” – the notion was thoroughly eviscerated by Hayek in 1928, well before Keynes wrote about it. Although associated with Keynes today, the idea had already been promoted by assorted economic cranks that preceded him, such as e.g. Waddill Catchings and William Truant Foster.

 

Claudio Grass: What do you think the implications of a cashless society are when we combine this with other legislation like the PATRIOT Act? Do you think we are headed towards a totalitarian state in the U.S., where private property rights will no longer be protected?

Dr. DiLorenzo: An important reason why the state would like to see a cashless society is that it would make it easier to seize our wealth electronically. It would be a modern-day version of FDR’s confiscation of privately-held gold in the 1930s. The state will make more and more use of “threats of terrorism” to seize financial assets. It is already talking about expanding the definition of “terrorist threat” to include critics of government like myself.

The American state already confiscates financial assets under the protection of various guises such as the PATRIOT Act. I first realized this years ago when I paid for a new car with a personal check that bounced. The car dealer informed me that the IRS had, without my knowledge, taken 20% of the funds that I had transferred from a mutual fund to my bank account in order to buy the car. The IRS told me that it was doing this to deter terrorism, and that I could count it toward next year’s tax bill.

 

americardUnless you have something to hide, why would you need cash, citizen?

 

Property rights in the U.S. have been under assault for a very long time and the assault is proceeding at an accelerated rate with such monstrosities as “Obamacare,” which forces Americans to buy government-prescribed “health insurance,” and all the Soviet-style regulation and regimentation of financial markets in the wake of the government-created Great Recession of 2008.

Claudio Grass: We believe that history doesn’t repeat itself, but rather rhymes (Mark Twain). Do you think there are historical parallels to be found in U.S. history to the current situation (economic socialism, restrictions on private gun ownership, etc.)?

Dr. DiLorenzo: I don’t know if history rhymes, but there are some things that are true of all governments at all times. One thing is a deep distrust, resentment, or even hatred of Adam Smith’s “invisible hand”: the idea that individuals, in pursuing their self-interest in the free market, coincidentally benefit the rest of society in most instances without any “czar” or central planning authority involved.

Peaceful, voluntary trade leaves little room for politicians to plan everyone’s life and make themselves rich and famous through plunder. Thus, they are eternal enemies of free enterprise in particular, and freedom in general, with very few modern-day exceptions, such as former Congressman Ron Paul. So despite hundreds of years of miserable failures of socialism and government “planning” of every other kind, governments ignore this history because it is in their self-interest to do so.

 

dependencyThe planners like their sheep docile…

 

With regards to gun ownership, all governments have promoted, to some degree, the idea that only the government’s police and military should have guns. This policy has been less successful in America than in any other country, thank God. The main reason for the Second Amendment’s right to bear arms in the U.S. Constitution, according to the “father of the Constitution” James Madison, was so that an armed population could defend itself from a future government that wanted to enslave them.

Claudio Grass: Why do you believe the economic recovery has been so weak? What impact do you think this will have on precious metals and other assets with real value?

Dr. DiLorenzo: The recovery has been so weak because of 1) Fed policy and 2) most other government policies. The bright side to any recession is that businesses are finally forced to liquidate bad investments and do everything they can to become more profitable. The Fed delayed and interfered with this process by continuing the same easy-money policies that caused the recession in the first place. This resulted in significantly more bad investments and the creation of another bubble economy.

Much of the rest of government policy has created tremendous uncertainty, what economist Robert Higgs calls “regime uncertainty.” Businesses still have only a vague idea of what Obamacare will cost them, for example. A high degree of uncertainty makes it difficult, if not impossible, to plan for the future so many businesses simply stay where they are until the government steps back.

 

robert higgsRobert Higgs, who coined the term “regime uncertainty” – which is precisely what bedevils the economy nowadays.

Photo via mises.org

 

This is what happened after FDR’s death. There were no longer constant threats of new taxes, regulations, or confiscations of gold and other assets, and so capital investment finally began to increase after being negative throughout the 1930s. In this atmosphere, which I don’t see as changing very significantly, smart investors will include more gold and precious metals in their portfolios.

Claudio Grass: You often talk about the dangers of political correctness (PC) in your articles. We believe that under the guise of PC, free speech as we know it is being limited and PC is being used to try to implement a sort of “thought control”. Would you share your views on the topic?

Dr. DiLorenzo: Most Americans do not realize that the academic elite at most universities are what are known as “cultural Marxists.” After the worldwide collapse of socialism in the late ‘80s and early ‘90s, the academic Marxists redefined themselves. They largely abandoned the old “class struggle” rhetoric involving the capitalist and worker “classes” and replaced them with an oppressor and an oppressed class.

 

thought policeThe Marxist notions of polylogism and class war inexorably result in attempts to control thought itself.

 

The oppressed includes women, minorities, LGBT, and several other mascot categories. The oppressor class consists of white heterosexual males who are not ideological Marxists like them. Another branch of the Marxist Left decided to continue promoting socialism under the guise of “saving the planet.” I call these people “watermelons” — green on the outside, red on the inside.

The cultural Marxists have adopted the advice of the philosopher Herbert Marcuse, who is really the “godfather” of cultural Marxism. He preached that free speech is really a tool of oppression because it leads to critiques of “utopia,” by which he meant communism. This is where all the vicious crackdowns on campus free speech come from: the cultural Marxists will say that they are doing the morally-correct thing to censor speech by conservatives or libertarians, for such speech may be critical of their ideology.

 

herbert-marcuse“Frankfurt School” philosopher Herbert Marcuse, the godfather of cultural Marxism

Photo via cronachelodigiane.net

 

They are totalitarian-minded, fascist thought control police and dominate almost all university administrations in the U.S. It is creating a real dumbing down of American youth, for much of their university education is now indoctrinated in left-wing platitudes rather than the development of critical thinking. The big exceptions, however, are the students who stick to studying business, economics, engineering, math, etc. and largely ignore the PC circus.

 

You can't say that! Political Correctness must stopSo-called “political correctness” is increasingly stifling free speech

 

Claudio Grass: Now to the presidential elections in the U.S. Who do you think will be the likely winner of this race? It is believed that if Trump wins the elections that the U.S. will move towards a more isolationist foreign and economic policy. What are your thoughts on Trump?

Dr. DiLorenzo: Right now my money is on Donald Trump being the next president. If that happens, there will be a less “isolationist” foreign policy, for Trump does not want to risk starting World War III, unlike all of the “neoconservatives” who run both of the main political parties. That is why he is so hated and despised by the Republican Party establishment.

He would like to do more business with countries like Russia rather than start a nuclear war with the Russians. They, on the other hand, want to see endless military aggression in the Middle East and elsewhere. This is why they will do everything possible to defeat Trump, including putting all of their Big Money behind Hillary Clinton or whomever the Democrat Party nominee is. If I were Donald Trump I would also double or triple my personal security detail.

 

trumpDonald Trump: the man the neoconservatives love to hate. Evidently, he must be doing something right.

Photo credit: Mandel Ngan — AFP / Getty Images

 

As for economic policy, Trump could hardly be worse than Obama or his predecessor. He has said that he hates taxes and does everything in his power to minimize his own tax burden, which is certainly a good instinct. Since he’s a billionaire, he can’t be bought off on any policy, which is really the main reason why the GOP oligarchs hate him with a red-hot passion. But if he wins and becomes a politician, there is always the chance that he will succumb to a more interventionist economic policy so that the media will say nicer things about him. Vanity seems to be one of the man’s hallmarks.
Thomas James DiLorenzo is an American economist and representative of the Austrian School of Economics. He is well known for his fierce libertarian approach in criticizing government intervention, whether domestically or abroad. Along with his current teaching position at Loyola University Maryland, he is a member of the senior faculty at the Ludwig von Mises Institute, a research fellow at the Independent Institute, as well as an active member of several other organizations.

 

Charts by: Pictet, economicsdiscussion.net

 

Chart and image captions by PT

 

About the author: Claudio Grass is a passionate advocate of free-market thinking and libertarian philosophy. Following the teachings of the Austrian School of Economics he is convinced that sound money and human freedom are inextricably linked to each other.

 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Thomas DiLorenzo on the Economy, the War on Cash, Political Correctness and the Election”

  • SavvyGuy:

    Nobody talks about this, but most Central Banks have very thin equity cushions to support their bond-buying QE sprees. Since they plan to hold bonds to maturity until they “roll off” their balance sheets, Central Banks can effectively be bankrupted by a rise in interest rates caused, for example, by a poor bond auction.

    My sense is that negative interest rate regimes are increasingly being put into place worldwide so that Central Banks can buttress their equity cushions by helping themselves to our money, obviously without our consent!

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Perfect-InvestmentInsanity, Oddities and Dark Clouds in Credit-Land
      Insanity Rules Bond markets are certainly displaying a lot of enthusiasm at the moment – and it doesn't matter which bonds one looks at, as the famous “hunt for yield” continues to obliterate interest returns across the board like a steamroller. Corporate and government debt have been soaring for years, but investor appetite for such debt has evidently grown even more.   The perfect investment for modern times: interest-free risk! Illuustration by Howard...
  • Factories, new vs oldUS Economy – Something is not Right
      Another Strong Payrolls Report – is it Meaningful? This morning the punters in the casino were cheered up by yet another strong payrolls report, the second in a row. Leaving aside the fact that it will be revised out of all recognition when all is said and done, does it actually mean the economy is strong?   Quo vadis, economy? Image credit: Paul Raphaelson   As we usually point out at this juncture: apart from the problem that US labor force participation has...
  • TurmoilInvesting in Gold in 2016: Global Paradigm Shifts in Politics and Markets
      Crumbling Stability In the past few months, we have witnessed a series of defining events in modern political history, with Britain’s vote to exit the EU, (several) terror attacks in France and Germany, as well as the recent attempted military coup in Europe’s backyard, Turkey.   Global stability continues to be undermined   Uncertainty over Europe’s political stability and the future of the EU keeps growing. These worries are quite valid, as geopolitical...
  • CorporateMediacontrolTrump's Tax Plan, Clinton Corruption and Mainstream Media Propaganda
      Fake Money, Fake Capital OUZILLY, France – Little change in the markets on Monday. We are in the middle of vacation season. Who wants to think too much about the stock market? Not us! Yesterday, Republican presidential candidate Donald Trump promised to reform the U.S. tax system.   This should actually even appeal to supporters of Bernie Sanders: the lowest income groups will be completely exempt from income and capital gains taxes under Trump's plan. We expect to hear...
  • mania1The Great Stock Market Swindle
      Short Circuited Feedback Loops Finding and filling gaps in the market is one avenue for entrepreneurial success.  Obviously, the first to tap into an unmet consumer demand can unlock massive profits.  But unless there’s some comparative advantage, competition will quickly commoditize the market and profit margins will decline to just above breakeven.   Example of a “commoditized” market – hard-drive storage costs per GB. This is actually the essence of economic...
  • Mark Carney starts work as Bank of England governor in Dave Simonds cartoonBank of England QE and the Imaginary “Brexit Shock”
      Mark Carney, Wrecking Ball For reasons we cannot even begin to fathom, Mark Carney is considered a “superstar” among central bankers. Presumably this was one of the reasons why the British government helped him to execute a well-timed exit from the Bank of Canada by hiring him to head the Bank of England (well-timed because he disappeared from Canada with its bubble economy seemingly still intact, leaving his successor to take the blame).   This is how Mark Carney is seen by...
  • kids-2Why Americans Get Poorer
      Secular Stagnation OUZILLY, France – Both our daughters have now arrived at our place in the French countryside. One brought a grandson, James, now 14 months old. He walks along unsteadily, big blue eyes studying everything around him.   Put to sleep by monetary lullaby! This is what children look like approximately five minutes into a rant on the Fed's policy mistakes. It never fails! Photo credit: Jack Weid   He adjusted quickly to the change in time zones. And...
  • old friendsAn Old Friend Returns
      A Rare Apparition An old friend suddenly showed up out of the blue yesterday and I’m not talking about a contributor who had washed out and, after years of ‘working for the man’, decided to return for another whack at beating the market. Instead I am delighted to report that I am looking at a bona fide confirmed VIX sell signal which we haven’t seen for ages here.   Hello, old friend. Professor X and Magneto staring each other down in the plastic...
  • tortoiseThe Fabian Society and the Gradual Rise of Statist Socialism
      The “Third Way”   “Stealth, intrigue, subversion, and the deception of never calling socialism by its right name” – George Bernard Shaw   An emblem of the Fabian Society: a wolf in sheep's clothing   The Brexit referendum has revealed the existence of a deep polarization in British politics. Apart from the public faces of the opposing campaigns, there were however also undisclosed parties with a vested interest which few people have heard about. And...
  • storming the storeRetail Snails
      Second Half Recovery Dented by “Resurgent Consumer” We normally don't comment in real time on individual economic data releases. Generally we believe it makes more sense to occasionally look at a bigger picture overview, once at least some of the inevitable revisions have been made. The update we posted last week (“US Economy, Something is Not Right”) is an example.   Eager consumers storming a store Photo credit: Daniel Acker / Bloomberg   We'll make an...
  • The CongressThe Fed’s “Waterloo” Moment
      Corrupt and Unsustainable James has been a big help. Trying to get him to sleep at night, we have been telling him fantastic and unbelievable bedtime stories – full of grotesque monsters... evil maniacs... and events that couldn’t possibly be true (catch up here and here).   He turned his head until his gaze came to rest on the barred windows of the main building. Finally, he spoke; as far as I was aware these were the first words he had uttered in more than five years....
  • Zimbabwe_$100_trillion_2009_ObverseGood Money and Bad Money
      Confidence Gets a Boost OUZILLY, France – Last week’s U.S. jobs report came in better than expected. Stocks rose to new records. As we laid out recently, a better jobs picture should lead the Fed to raise rates. This should cause canny investors to dump stocks.   Canny investors at work (an old, but good one...) Cartoon via Pension Pulse   But the stock market paid no attention. It follows logic of its own. Headlines told us that last Friday’s report “boosted...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com