Jeff Deist, President of the Mises Institute rejoins me to talk about Bitcoin, Central Banking, Corona virus, libertarianism and acting locally:

• Mises Institute and Bitcoin
• Hypocritical fund managers
• UBI and MMT becoming popular
• Smaller is better
• Better, not perfect

Jeff Deist links:

• Twitter: @jeffdeist
• Mises: www.mises.org 
• Human Action Podcast: HA Podcast

Prior appearance: SLP45

Sponsor links:

• Kraken
• Unchained Capital
• SwanBitcoin

Stephan Livera links:

• Show notes and website
• Follow me on twitter @stephanlivera
• Subscribe to the podcast
• Patreon @stephanlivera

Podcast Transcript:

Stephan Livera:

Jeff, welcome back to the show.

Jeff Deist:

Hey. Stephan, it is great to talk to you again after awhile.

Stephan Livera:

Yeah. So look, Jeff, you were recently on the show, well it was about a year ago now and I think it’d be great to get an update from you on where your head is at in terms of Bitcoin and thinking about, you know, the impact that Bitcoin will have on society. So where would you say your head is at on Bitcoin?

Jeff Deist:

Well, interesting question. And I know even today there’s a lot of Bitcoin communities, they’re not all the same. Some of them are pretty rabid. And even today the Mises Institute still gets grief for like, you guys aren’t pro Bitcoin enough, you didn’t adopt it early enough or promote it. And I look back at it and I think no, we were exactly right.

Jeff Deist:

In other words, we’ve always advocated for the private provision of money and what form that takes was not necessarily for us to say or any Bitcoiner to say, it’s for the market to say. And the truth of the matter is, is that Bitcoin, like any asset, you might expect in it’s first let’s say 10 years of existence has had a pretty volatile rollercoaster price level relative to the dollar or other currencies. That’s just a fact. And so if, you know, the Mises Institute has a certain image or reputation, whatever, and if we’d been out there all these years saying, Oh yeah, Bitcoin’s the greatest thing since sliced bread we would have had some Mises Institute fans going all in, maybe, you know, putting money they shouldn’t put into it when they’ve got families or something. So I have no regrets about that or so I don’t take any grief about that.

Jeff Deist:

I would say that my own thinking has changed in a couple of ways and it’s embarrassing now when I think back of it. And a lot of it’s due to Saifedean’s book. You know, early on I had this goofy mentality that Bitcoin, we want private provision of money, just like we want private provision of let’s say automobiles. We don’t want the state to provide them. But Bitcoin’s just a brand like Honda. And so we don’t promote or I shouldn’t necessarily support one brand over another because we don’t yet know whether Honda will win the day or like early on AOL versus Netscape, or you know, some of those companies aren’t even around anymore. And looking back on that now, I think that that was wrong and cringe-worthy and that Bitcoin really is, you know, crypto and vice versa that I don’t really want to hear about.

Jeff Deist:

You know, I don’t really have time to investigate other coins and two, I would say I was naive in the sense that I, saw Bitcoin is maybe this frictionless global payment system, banking for the unbanked anywhere. You could have a mobile device and internet access, you know, some remote tradesman in a non developed part of Africa, let’s say, was suddenly going to be able to make change for his small business or something like that. And, you know, now that I think about that, now I’ve read Saifedean’s book. There’s just no reason to have you know, every time you buy a sandwich at Starbucks for that to be recorded on a ledger somewhere or something and taking up space, you know, that probably doesn’t make a lot of sense. But I do view it as an investment.

Jeff Deist:

I’m a sort of a monthly buyer and I look at it this way. Let’s say over a course of many years, you put something, not a life changing amount of money. Let’s say you put $10,000 U.S. into Bitcoin over a period of 10 years. So it’s a very minor amount, you know, if that goes to zero, which I don’t believe it will, it could. Stranger things have happened. Okay. That’s you know, you’ve lost $10,000. But if you put $10,000 early on into Google or Amazon or a lot of tech companies, you know, you have millions and millions of dollars now. So that’s sort of the way I’m looking at it. I don’t think the average person, especially a person with responsibilities, if you’re a single man, knock yourself out. If you have responsibilities to other humans in your life, I think you know, you have to have a balance in your life. But that’s, look, I’m an older guy compared to most of your audience and I’m also, you have, I’m at a different spot in life that it’s young people who do go all in on all kinds of things. Who make the changes and the differences in this world.

Stephan Livera:

Yeah, really interesting insights there, Jeff. And also curious if, if you’ve got any thing to share in terms of some of the associated, scholars of the Mises Institute and others who’ve also perhaps they’ve shifted some of their thinking on Bitcoin as well. I know Dr. Salerno has commented highly on Saifedean’s book and I know Per Bylund also recently got a copy of Saifedean’s book as well. Is there anything you can share in terms of other other scholars of the Mises Institute?

Jeff Deist:

I think it’s the nature almost of academia or academic professors to lag behind on things. I think that’s just the nature of it because there’s almost a rationale for that. Knowledge is something that we advance, I think painstakingly and not willy nilly. And that we should never have this sort of hubris towards all past knowledge. I don’t like people to say, Oh gosh, you know, the U.S. Dollar and gold are just forever obsolete the minute Bitcoin was invented, all that stuff should just be thrown in the dust. That’s not how civilization advances and nobody alive today is so much friggin’ smarter than our parents and grandparents. So I, you know, I get that sort of cautious, you know, advancing knowledge. What, what is money what’s, what’s the role of money? How does it arise? How does it evolve? Who should be in charge of it?

Jeff Deist:

How does it add value? All those things are great questions that ought to be thought through. And there is a place in this world, I think for just all in energetic practitioners. And there’s a place in this world for you know, slower on the uptake thinkers to be there, maybe throwing out warning flags or something like that. So you know, Bob Murphy actually wrote a book on Bitcoin pretty early on, like I want to say 13 or 14, somewhere in there, which is interesting. Of course, it reads a little dated now. And there’s been a lot of people who are in our circles who are out there, who are Bitcoin pioneers like Caitlin Long, who’s creating a full reserve bank that will work with crypto in Wyoming. And that’s requiring some changes to banking and regulatory laws.

Jeff Deist:

So there’s, there’s stuff going on out there and, but what people don’t understand is that a decade’s nothing, there’s, you know, people want things to happen so quickly in this revolution. But if you look back to the early stages of the automobile, which is at least as much of a disruption as Bitcoin, if you look at the early stages of the internet, the early stages of electricity, hugely disruptive. The early stages of airplane travel you know, the early stages of radio communication, we always have this, romantic idea that we live in this incredible age of change. But you could argue that someone like Mises, born in the 1880s, died in the 1970s. You could argue that he saw greater changes than we’ve seen. All the things I just mentioned and you know, Peter Thiel argues this, that most of our innovation right now is in software.

Jeff Deist:

It’s in information technology. But the other things, you know, you’re right building Hoover dams and the San Francisco Bay bridges, and Sydney Opera Houses, you know that we’re not being as innovative in lots of other areas of life. We’re actually somewhat stagnant from Thiel’s perspective. And I kind of agree with that. I mean, why, why does air travel suck so bad still? You know, there’s all kinds of things. So it isn’t everything and a software isn’t everything, but Bitcoin’s exciting, it remains exciting and I certainly hope that it’s going to create a nice little nest egg for my kids.

Stephan Livera:

Well, yeah, I think that’s a totally fair perspective to take. And you mentioned the stagnation in society and is it fair to say that much of that is a result of government regulation preventing innovation in certain areas and that, you know, sometimes some of these things are almost like a regulatory arbitrage. Things like the Uber’s of the world that perhaps got popular enough that they could sort of change the rules a little bit before they were able to, before they were fully shut down.

Jeff Deist:

Yes. I think that’s true. A regulatory arbitrage is a thing. And Uber, the brilliance of Uber was that it took a lot of unused capacity. Most people’s cars just sit there and then you use it for 20 minutes back and forth to work each day and then it sits in your garage, you know? And then every additional person goes out and buys another car. That’s kind of stupid. And then we, on top of that, we’ve got all these cab driver out with these crazy medallion rules in places like New York city. So Uber was brilliant in that sense. And it exposed a lot of problems in, the regulatory landscape because it was so obviously superior. You can, you can be sitting at a bar in the, where there’s no taxi traffic, you’re not on some busy street and you can hail an Uber and you can see where it is and you could sit in the bar until it gets there.

Jeff Deist:

I mean, that’s just so clearly superior in every way that people immediately gravitated towards it. Adopted it. And the regulatory landscape tried to catch up a little bit afterwards and they couldn’t quite do it because once, once you got a critical mass of users, it’s hard for a mayor, let’s say, of a city to ban it because there’s some, there’s some political pressure not to. So it was brilliant in that sense, in that they didn’t ask permission. They just did it. And there’s an analogy there to Bitcoin. But yeah, I think that there is a lot of stagnation in the world. I think a lot of it’s caused by central banking as much as the regulatory regime, because when money’s too cheap or cheaper than it otherwise would be, you know, it flows into financial assets. It flows, you know, it flows into goofy stuff.

Jeff Deist:

Rather than, we think of the real inventor or the real entrepreneur in a garage. How much of it flows into just the next iteration of tech, let’s say as opposed to something that’s really outside the box. And here’s the thing, Stephan, you can’t calculate it. It’s incalculable. It’s unknowable. So it’s the seen and the unseen for inaudible. And that’s what makes our job so tough is we go around telling people, Hey, wait, if it wasn’t for central banks, there’d be all this great stuff that you just don’t know about yet. Okay, well, because of central banks, we just built this gigantic skyscraper. It’s right here in front of us. And we did it with 1%, you know, 2% interest rates and it’s tangible and you can touch it. So you know, you get the challenge in front of us.

Stephan Livera:

And absolutely it benefits those people who are closer to the monetary spigot or, so typically, you know, if you’re a property developer or if you work in a bank, you’ll see your salary will typically be higher than people in some other industry. And I think also I really enjoyed your commentary on some of these rich fund manager, billionaire types, like the Ray Dalio’s of the world who essentially had benefited from this extremely strong tailwind and then turn around and lecture us on the limits of central banking. So what were your thoughts on some of the people who were kind of coming, turning around and giving us that kind of viewpoint?

Jeff Deist:

Yeah, Ray Dalio is a good example of that. Obviously very brilliant guy, but anybody with investors, any fund manager, you know, they have a boss at the end of the day. And so they have to say sort of politically correct things. They don’t want to, even a Mark Spitznagel doesn’t want to be out there saying too much, let’s say on the financial talking head shows and drawing attention to his, let’s say his Anti-Fed sentiments because he has investors who might say, look, I’m in your fund. Why are you out there making waves? Just make money and keep quiet. And that’s what I would say to Ray Dalio, just make money and keep quiet. I mean, here’s a guy who’s clearly brilliant and, and so when he comes out, kind of like Warren Buffett, let’s say with this lament, Oh my gosh, the financialization of the economy’s too much and it’s unfair it yields, unjust results inequality.

Jeff Deist:

And here’s what central banks had to do. Here’s what here’s how we had to change our tax code, et cetera. It’s like, well okay let’s think about that for a second. First of all, most fund managers, most private equity managers, their entire model, since at least the Greenspan era, but especially since the Greenspan or in the Bernanke era has been based on leverage. Money has been very, very cheap. So as a result, it makes more sense to do M&A deals using lots and lots of bank financing and not too much equity. So often times an M&A deal, just the, the various funds involved might represent, you know, 20, 30% of the acquisition price and 70% of it’s credit. And that 70% might be sliced up into tranches so that no one lender bears all the risk.

Jeff Deist:

And same with the equity. The 30% equity might be sliced up into tranches between the funds. So you know, when you’re gambling in effect, because that’s what M&A deals are, it’s the idea is you buy a company you fix it. Often times that involves layoffs and new management and you sort of strip it of assets and you laden it up with debt and you sell it three to five years later at a capital gain and the debt that you laid in it that you, impose upon in the meantime, of course is tax deductible, the interest on it. Whereas paying dividends, which nobody wants to do anymore, isn’t tax deductible. So that creates an incentive to finance companies and balance sheets or, you know, have the capital structure of companies be more weighted towards debt. So someone like a Ray Dalio, this has been his life’s blood for many decades now, is skillfully putting together deals.

Jeff Deist:

And if you look at M&A and a volume activity compared to 40 years ago or something, I mean, deals were not happening like this at the 50, 60, 70’s, even the 80’s. I mean, it’s exploded. And the reason it’s exploded is because the central banks have made it in a sense, rational. So here’s a guy who gets very, very rich off the financialization of the economy primarily aided and abetted by the Fed. And, and what I would, in my opinion, what I would term artificially low interest rates. And on top of that as he’s going along, you know, first he’s a millionaire, then he’s a deca millionaire, then a centi millionaire then a billionaire then a multibillionaire all, you know, all the while he’s going along. What they call carried interest in which is the tax treatment of fund manager compensation under the U.S. Tax code carried interest is given capital gains tax treatment, capital gains are taxed at a lower rate, generally 15 or 20% in the U.S. So he’s getting carried interest treatment which is treating really his work more like an investment.

Jeff Deist:

Okay. And he’s not complaining about that mind you add more. Moreover, because of that tax treatment and because of interest rates being low at the Fed, he is accumulating capital and, more and able to do more and more and more deals. So, you know, if taxes had been higher this whole time, he now calls for higher taxes. If interest rates had been higher this whole time, he may never have gotten to that critical mass of capital where of all the sudden, you know, even at low interest rates, things become exponential and you get a lot richer, a lot quicker. And of course, low interest rates also prop up equity markets, to the extent, that he’s a shareholder in public companies are investing in public companies that increases his net worth just like Jeff Bezos at Amazon. So, you know, here’s someone like Ray Dalio who you know, if you applied his prescription for the illness today and you went back and applied it to him early on in his career, he may never have gotten nearly as rich as he is.

Jeff Deist:

Now he’s obviously a brilliant guy, take nothing away from him. And I’m sure he would’ve gotten rich under any circumstances, but that’s what central banks do, is they create a big question mark is, would you be as rich? You know, would a guy sells his company for $100 million? Maybe it would’ve been 10. You know, we can’t know. Again, it’s unknowable. So it creates so much moral hazard and so much questioning in society that it gives the left a lot of valid ammunition to say, you know, gee whiz, there’s kind of this class of unjust, rich people in America. That’s true. That particular left criticism is correct. There really is an unjustly rich class in America, really in all Western countries. So that’s an uncomfortable thing for libertarians because we want to blame it on the ills of regulated money and not on the ills of markets.

Jeff Deist:

So, you know, I’m not really so sure. I want to hear from Warren Buffett or Ray Dalio about what we ought to do now that they’re rich, because that has kind of a ‘Katy bar the door’ element to it. And remember, if you’re a billionaire, let’s say you just have a measly 1 billion, not 40, not 40, or let’s just say you have a measly 1 billion. And let’s say we enter into a period of draconian, authoritarian, progressive government, and that government comes along and institutes a confiscatory wealth tax of 90%. Okay? And that means you’re down to $100 million. 90% of your billion is taken from you by the government. There’s some new left-wing Bernie Sanders government and you know, given to all the poor kids in your country, which of course it never would be. You know, and then you’re still an elite in society because of the marginal value of each additional dollar.

Speaker 1:

You know, because of this, of the marginal utility of money, 100 million still makes you elite in society. And your first million, it means a lot more to you than your 99th million because with just 1 million, that probably means you and your family have a roof over your head. It’s food. But with, 100 million, you’ve got a lot more than that. So you can take away 90% of an elites wealth and they’re still elite. You take an orthodontist who makes 250 grand US a year, lives pretty well, has a pretty nice house, is able to send his kids to private schools, maybe has a, you know, a decent vacations every year and you think, okay, that’s a good upper middle class person, take away 90 per, and he’s got $1 million net worth or $2 million net worth. You take away 90% of that and, and all of a sudden that person is really treading water. And so that’s the difference is, you know, wealth scales in a weird way. And so the, there really, really is a relative aspect to it. So you could take away 90% of what Ray Dalio and Warren Buffett had and they’d still be Uber elites. You take away 90% of what average people have and they’re dead in the water.

Stephan Livera:

Yup. And I think you also make a good point. It’s almost like someone’s climbing up the ladder and then now that they’re at the top, they’re just kicking away the ladder to stop some other person climbing that ladder.

Jeff Deist:

Oh, absolutely. There’s no question about it. The people who got wealthy in the financial sector since about the 80’s have basically had the most favorable conditions in US history both in terms of, and I’m sorry to be so US-centric, but both in terms of the tax treatment of the money they were making as they made it and the access to easy credit courtesy of the central bank

Jeff Deist:

And also that this is becoming very politically dominant as a narrative is this whole idea of “Oh look, these CEOs, they did all these buybacks to pump their own stock price”, which in turn pumps there, it gives them the often their compensation is determined based on the stock price of the company. But it is also an interesting point because at the same time there were, there is kind of that interesting question of, well, if the company pays it out as Dividend vs. Stock buyback and the tax treatment difference for the end investor, but at the end of the day it’s driving this funny behavior where companies will do Stock buybacks and not have very much of a cash balance left. And then now they’re coming to the government with their hand out asking for the bailout. Is this the sort of behavior that we should expect in a Keynesian and you know, government monetary interventionist world?

Jeff Deist:

Well, we certainly found out in the last couple of months what the term ‘satisfaction for money held’ means because you know, the, the left has always criticized the idea of just holding large cash balances. It doesn’t do anything. It’s society. It’s that out there slashing about and creating momentum and changing hands. And we shouldn’t allow companies to have, to have all this excess cash, but we find out that they’re actually prudent to do so. And that it’s going to, it may well be the difference between companies that survive and don’t over the next six months. Companies that held a healthy cash balance sheet continue to operate to make payroll, that sort of thing is going to be very, very important and you never know when you might need it. So cash is a great asset right now. So, you know it is interesting that cash is punished in our society.

Jeff Deist:

You can’t make much money off of it if you’re lucky you make 1 or 2% in a CD or something, one and a half percent. And that’s about it. So it hasn’t been economic for companies to hold cash. It’s been more economic for them to go buy back stock or something. And I read something the other day defending Stock buyback saying, well that’s, you know, you’re returning capital to an investor, but that’s not really true. You’re just swapping one kind of capital for another. I mean, which, you know, whether the stock or the cash is worth more depends on how the stock and the value of the cash perform after that transaction. So any company that engaged, that spent cash and especially if they borrowed to spend cash on stock buybacks in the last five years should be absolutely barred from any public stimulus bail out you know, virtually zero interest Fed or central bank loan. I think that should be an absolute policy.

Stephan Livera:

Yup. And it’s also worthwhile pointing out that there’s such a hidden tax element here as well, right. Because there’s capital gains tax in many countries around this world, and at the same time, the fiat inflation has been pushing up the price and it may well be the case that you bought an asset at a certain real purchasing price. Inflation has pushed it up, but in real terms, you’re not actually better off. But then the government comes in and stings you with the capital gains tax. Is that not a essentially that is a stealth wealth tax?

Jeff Deist:

Oh yeah. There’s no question about it. You buy a stock at a 100, it takes 10 years to go to 200. You know, you’ve got a 100 capital gain, 20% on that 20, but you’re using the you know, today’s 20 not 10 years ago’s 20 to pay that capital gains tax. So that’s, that’s the rub. And of course look at Bitcoin. Bitcoin’s a lot like gold in that for most people anyway. There’s some people who are really into transacting with it, buying Lamborghini’s or something. That was a few years ago. But for, for most people it’s a buy and hold item and you know, it’s not doing anything. It’s not fluctuating. You’ve got the same number of Satoshis you had before. It’s just the dollars going up and down and, you know, don’t kid yourself

Jeff Deist:

Western politicians are going to go get further and further down the path of wealth taxes, which means just a balance sheet tax as your money just sits there. You don’t have to buy or sell anything. You don’t have to even earn any income, interest, capital gains, dividends, whatever it might be. You just happen to be sitting there. Let’s say you’re an older person who was successful with some small businesses and you have a net worth of $10 million and you’re 70 years old and you’re just sitting there not making any money. I’m not sure how much longer Western governments are just going to say “We’re okay with letting that pot of money sit there untouched”. Elizabeth Warren certainly made that a mainstay of her campaign. She’s not going to be president in the United States apparently, but you know, there, there are a lot of European countries who have flirted with a wealth tax.

Jeff Deist:

Some of them have dropped it, found it counterproductive, found that it chased away capital. And you know, the world is still mobile. There’s still electronic transfer of cash, we don’t have total capital controls yet. And that’s why Bitcoin is so important because it represents a potential escape valve for people. You know, I’ve taken your advice and steered clear of exchanges and, you know, you need a hardware wallet or whatever you need, but that might be the great underground railway of the 21st century is getting money out of the grasping hands of these murderous criminal politicians. You know, that could be an absolutely heroic function of Bitcoin maybe someday.

Stephan Livera:

Wow. Yeah. I think you’re absolutely right to point out that wealth taxes are becoming more popularm, even here in Australia with superannuation. So I guess the equivalent is sort of like 401k for the U.S. listeners. It’s like the government is increasingly sort of making overtures about, Oh, we’re in this big crisis and we need a way to pay for it. Maybe we should redirect the superannuation pot of funds towards pandemic response or recovery or, and is that a trend that you see happening around the world?

Jeff Deist:

Yeah, I think there’s a huge pot of money sitting there in retirement accounts and different countries have different mechanisms for how they tax retirement accounts in the United States generally you can begin taking money out at age 59 and a half, and you’re required to start taking money out. I believe it’s 70 and a half. And so the idea was always that when you get older, you might be at a lower tax bracket, so it’ll be good for you in the long term. And of course it’s tax growth in the interim, but I think they’re going to go after retirement funds in the United States because there’s trillions of dollars just sitting there. Imagine sort of a pile of money or gold. And when the world war II generation, which is almost all gone now, you know, they’re the youngest ones are, well, in their eighties now as that generation has, has died off, it left a stupendous sum of money to the Baby boomer generation.

Jeff Deist:

And a lot of it was never subject to estate tax. Thank God. Because, you know, over the years, depending on when it was, there’s been for a long time, there was a 1.2 million exemption. Now it’s up to I believe, 5 million per individual, 10 million per married couple. So a lot of that intergenerational wealth although it was taxed many times over as it was developed, you know, as it was accumulated you know, via income and savings. Nonetheless it, transferred from one generation to the next relatively unmolested. I don’t think the powers that be are going to let that happen again. In other words, from the Baby boomer generation to Gen Xers like myself, I don’t think they’re going to let that happen. It’s too, too big of an enchilada just sitting there right in front of them. And you know, personally, I’m getting out of my 401k and I’m very, very concerned about that because you know, after these last few weeks, especially a lot of people’s retirements are in big trouble, if that’s what they were counting on, you know, it’s down 30%, 40%, whatever it is. So, you know, frightening times and what this crisis, what this virus and the financial crisis that governments caused is really giving folks on the left, I think an opportunity to say, okay, we need a major reset. We need to rethink everything, how we tax people, how we regulate people, how people work. Rethink things like a universal basic income, rethink things like free government healthcare. And so, you know, the, all that stuff’s coming in, it’s our job to resist it.

Stephan Livera:

And you mentioned the generational conflict as well. I think it might also be fair to point out too, that older generations have more of a concept of the evils and danger of communism and socialism. Whereas perhaps it’s fair to point out that a lot of Zoomer and Millennial types don’t necessarily feel that fear because they weren’t around in that time. Do you have any reflections on that?

Jeff Deist:

Yeah, it’s absolutely true. So I’m kind of a child of the 80’s, so I at least was with steeped in that kind of Reagan, Thatcher era, cold war you know, the Soviets, so I’m old enough to have that as part part of shaping my worldview. But somebody who’s 25 now didn’t have that. So the term socialism has a different connotation. It, tends to conjure up Scandinavia or something like that. And the also the rise in tech has given a lot of people thoughts about singularity that we have reached some point of super abundance that a lot of the knowledge problems that Hayek talked about or the distribution problems that exist in the analog physical world will be done away with in the digital world. And so there’s no reason for people to be working just so that they could have a basic apartment or food and healthcare and that sort of thing. And that’s, that’s a dangerous attitude for a couple reasons.

Jeff Deist:

I mean, first and foremost it’s because people do need to work. We do need to produce. The wealth that’s around us could go away very easily. And people who think that capital and restaurants and energy and roads and shopping, you know grocery stores full of 10 million kinds of toothpaste just are just going to happen regardless of incentives are crazy and naive. So, you know, we do still need to work, but even beyond that work is tied to a human flourishing. Now that that doesn’t mean that we want people working 18 hours in a coal mine and wrecking their bodies with dust and, you know, ruining their backs. Of course there was there were great advancements moving from the agricultural period of the industrial age and now into the information age that’s given us huge, huge advancements in health.

Jeff Deist:

And it’s freed us set up to do more cerebral work and more interesting work maybe, but work is still part of the human psyche. I mean, being productive is just hardwired in us. And so this is disturbing to me, the idea that we’ve reached a singularity because all you have to do is, you know, take, pluck a feudal peasant from the middle ages and put him in 1900 and they would say, Oh my gosh, you’ve solved scarcity. Look around you. There’s, this is unbelievable. There’s, horses just pulling everybody around and look at these beautiful gas lamps and, you know, and then take somebody from 1900 and transport them into 2020 and they’d probably say the same thing. There’s no more scarcity. You guys have everything. This is how could there possibly be more? But of course, there’s always scarcity because, you know, human beings want stuff.

Jeff Deist:

You don’t have to make us want stuff. We want stuff that there’s no need to stimulate demand, attention fed attention a government, we don’t need any stimulus. What we need is productivity and capacity and production. So I don’t believe in singularity. I don’t believe in transhumanism. I don’t believe in a deterministic arc to history. Mises warned against that. Sometimes societies go sideways and sometimes they go backwards. You know, technologically, economically, sometimes barbarity ensues. We had two horrific World Wars just in the last century. This isn’t ancient history. So you know, we’ve got to work at this, we got to make sure that we don’t screw the pooch and mess up all this, all this wealth and prosperity around us cause it’s not guaranteed.

Stephan Livera:

Excellent way of articulating that. And I think there’s a lot of strong rhetoric emerging in these days around UBI, universal basic income and potentially ideas such as MMT, modern monetary theory, so to speak. What are your thoughts on whether MMT becomes popular as a way of funding these kind of crazy authoritarian schemes?

Jeff Deist:

I think it will be popular and you know, MMT has some sort of specific technical requirements and jargon, but it’s based on the same theory, the same underlying theory. I would argue anyway, of let’s say a Paul Krugman, Neo Keynesian, which is that government is sovereign. As a result, government can issue currency at will to pay its debts. It will never run out of money. And in fact it need not even pay those debts. And Krugman just said this recently, there was an article that he had cited approvingly on his Twitter feed and he said, this article does a good job of explaining that we don’t need to worry about debt because we won’t pay it back. Just like we didn’t pay back world war II debt, you know. So what he’s basically saying is that we can have something for nothing and that governments collectively can do something that none of us can do individually, which is simply live today at, at the expense of tomorrow by borrowing forever and ever without a downside.

Jeff Deist:

And you know, if you look at the last 30 years or so, if you look at some of the calls that people in our camp have been making since really the 71 since, gold convertability was completely eliminated. Krugman’s kind of been right in a sense. The dollar has been the world’s reserve currency. Interest rates have managed to stay, especially in the last 20 years, quite low. And people have continued to buy our treasury debt, although I would argue only because there’s the implicit backstocp of the fed that they can always dump them on the fed. If another crash happens, the fed will engage in QE, which of course is doing it once again. And so there’s people I think in the back of their minds say that this is a safe asset because they’ll always be a ready market in the form of the US central bank itself if no one else.

Jeff Deist:

So I’m not going to be left holding the bag. And as a result of all that, we kind of have, broadly speaking, we kind of have done MMT as our monetary policy for many years now because a significant portion of the federal budget each year in the United States is funded by debt. And so Congress spends more than it takes in, let’s say it takes in 3 trillion and it spends 4, there’s $1 trillion spending deficit. No problem. You know, the treasury is out there issuing bond debt and that bond debt is being sold. Sometimes there is less enthusiasm at treasury auctions and sometimes there’s more. But nonetheless it is being sold. And you know, when uncle Sam is a profligate drunken crazed spender who will never get his fiscal house in order and wants you to loan him money for 10 years at less than 1%, you might think that sounds crazy.

Jeff Deist:

Why would anyone loan money to the US government at anything less than junk bond rates? Well, one reason, this is because other sovereign bond debt like Eurobonds and some European government bonds is even less, it’s negative. So that creates sorta in a sense an artificial market for us treasury debt, cause at least it’s paying something, at least it’s, you know, that your rate of loss is slower. So when government for year after year after year spends more than it takes in, in taxes and effectively monetizes the difference. Albeit in a round about way because first that treasury debt goes out into markets for it and then ultimately is potentially purchased by the Fed that’s akin to, I won’t say it’s the same thing, but it’s akin to a form of modern monetary theory.

Jeff Deist:

It’s just being done purely on the monetary side rather than the fiscal and tax side, which is the mechanism by which MMT operates, which is just say, you know, the treasury bedroom basically prints as much money as we need. We keep an eye on the economy and if inflation heats up too much, we raise taxes. If the economy slows down or becomes deflationary, we lower taxes and that’s the mechanism as opposed to right now we have kind of a Fed mechanism using interest rates. So, but they’re very, very similar. So you know, the MMT’ers, I hate to say it, but I think they’re gaining traction. I think a lot of people look at that and say, “Well, you know you debt hawks had been talking about the deficit for the last 30 years nothing bad ever seems to happen even though it goes up and up and up. So let’s just keep spending.” I mean, you can understand the allure of that argument.

Stephan Livera:

Right? And at some point these politicians believe that they’re getting something for nothing. And so then they’ll just keep, they’ll keep winding that up. And you mentioned as well around how a lot of bonds, sovereign bonds are effectively returning negative in real terms because they’re giving a very small percentage in nominal terms, but then accounting for inflation, they’re negative. So is it also a factor there that some of the regulation that’s out there, some of it’s like Basel capital requirement, regulation and so on that forces some of these companies and maybe big insurers and so on to hold these government bonds even though they are taking a loss. And that kind of is difficult. Again, if you’re trying to explain to people what is the impact of that on society? We’re kind of, it’s like a forgone benefit. How do you articulate that to people that society could have been richer, but we’ve been forced into this kind of subsidization of the government?

Jeff Deist:

Well, it’s true. There is an artificial market, for example, for US treasury debt around the world because certain pension funds are required to hold it a certain amount or certain percentage, certain institutional investors. And you mentioned the Basel 3 requirements. So there is, people have always thought the U S treasury debt was basically the safest investment. It was as good as cash, basically almost as liquid as cash. And so there’s a lot of historical baggage there that creates some inertia and makes people think, you know, and as you say, of course US treasury debt is negative in real returns also, relative to inflation. So you say, why does anybody want to hold this stuff? Part of it is just for the certainty. I mean you lock in, this is how much money I’m going to lose over the next 10 years, you know, and I know what my loss is.

Jeff Deist:

And of course you might, you know, if your bond is negative 1% and rates go even lower and you know, you’ve got it locked in at -1% and rates go down to -3%, you know, you have an asset you can sell. So there’s not just the loss of income, it’s not just the interest. You know, you’ve got the underlying assets. So you might sell it for a capital gain even though you’re losing money on the interest side. So that’s sort of two separate questions. And so, a lot of it is just that people believe that the US Economy is the biggest and baddest economy in the world that the US dollars, the biggest and baddest currency. And implicitly, I hate to say it, that the US military is the biggest and baddest nuclear bomb, you know, a thug. And so, you know, if we have to be somewhere the flight to safety counsels us to be in dollars or to be in treasuries.

Jeff Deist:

And that’s why I would suspect that if we go into a deep global worldwide recession as a result of the shutdown or, worse yet a real depression, I think that’ll probably be good for the dollar in the short term. I don’t know where else people are going to put money because you know, in depressions, cash is the best thing to have and treasuries are the nearest thing to cash. But cash is increasingly hard to have. You’d say, well, why would anyone except negative interest rates when they could just hold the cash literally under their mattress or something for a few years until rates went positive again or something. And then they wouldn’t be having a loss at all. Well, because it’s hard to get cash. You know, go to your local bank branch in the United States and say, I want $10,000.

Jeff Deist:

First they’ll say, well, why? Then you’d say, what do you mean why? It’s none of your business but it is their business because we have what’s called know your customer rules here. And we have what are called SARs suspicious activity reports, which not just banks but also car dealers, jewelry dealers, pawn shops, other places are required to file on certain transactions. So that’s a little spooky, but you know, you just, it’s very, very difficult to get cash. They’re more and more pulling hundred dollar bills out of circulation and just replacing with twenties. And so, you know, the idea that you might have, pull $1 million out of the system to protect yourself from loss against negative interest rates, really hard, really difficult. And then you have the security question, where do you put it? You don’t want to be in a safe deposit box in the bank because banks can have a bank holidays or shutdowns, which means you got to have some sort of private vaulting or storage at home or something, which is its own issue. So you know, for a lot of people as you know, who aren’t as apocalyptic, maybe as us, they look at a treasury and say, eh, you know, least dirty shirt in the laundry.

Stephan Livera:

Yeah, that’s a good way to put it. And so in terms of political activism and what can be done about it, I know you’ve also expressed some skepticism about political activism. Why is that?

Jeff Deist:

Yeah, I’m bad at this. You know, we have a mission at the Mises Institute to try to promote the Austrian perspective because we think that it’s absolutely critical to civilization. I don’t want to sound grandiose or something, but to civilization to have real money. And I think that central banks have become the most dangerous institutions on earth, save for maybe people who have access to nuclear weapons. So I think there’s nothing more important for the future, our grandchildren and for, you know, bringing, you know, to people’s minds, educating people about money. I think there’s nothing more important in the purely educational realm. That said, I don’t begrudge anyone political activism. It’s not my thing. Very, very tough environment in America because it’s so polarized and people are so tribal red team, blue team. And I mean look at the polarization in the UK over Brexit, really ugly.

Jeff Deist:

It breaks down over urban versus rural. It breaks down older versus younger. It breaks down over black folks and white folks, you know, it’s just endless. And politics doesn’t make that better. It doesn’t create some happy compromise down the middle. It intensifies it almost by design. And so we don’t have this pretense anymore that somebody who runs for office is gonna represent everyone if they win. It’s more like I’m gonna win. And then the people on the other side deserve to be vanquished. You know, that’s what democracy is yielding us in America with 320 million people. Very, very unsatisfactory results. So you know, I don’t necessarily have the answer to how you win over a 60 or 70 million people in America to vote for some presidential candidate of your choice or something. That’s a lot of people. And I think we’re a long ways away from that.

Jeff Deist:

So I like the idea of acting locally. And I like the idea of acting entrepreneurially. We earlier mentioned you know, Bitcoin’s role in this Uber’s role in this. There’s a lot of other entrepreneurial ventures that do what they can or do what they must to circumvent the state to work around it because you don’t, you know, it’s kind of like aikido that martial art where you try to redirect energy. The state is not something you want to take head on, in most cases. And in the United States, especially if you’re an average person, if the U S federal government comes and screws with you, your remedy for that is to sue them in federal court in their own court. Unless you have, you know, a couple of million dollars for legal fees and 10 years, that’s an illusory remedy for the vast majority of people.

Jeff Deist:

So, I think the goal for me personally is to bring, or try to bring Austrian economics to wider and higher audiences and then to hope that we help. Obviously we’re just a very minor organization in a big world, but hope to plant some seeds or to spark some sparks because in every human society, really, there’s about maybe 5% or 10% of people who are drivers or Vanguard, and that’s just the way it is. And most people will sort of go along to get along and, you know, in less than, until things get really bad, they probably won’t agitate for huge changes. That’s just human nature. And there’s nothing wrong with that per se. It’s probably good that we aren’t pulling out pitchforks every day, but we’re getting pretty close to that pPitchfork stage as far as I’m concerned.

Stephan Livera:

Yes. And you also have spoken on this topic and I like the way you reflected this, was this idea of smaller is better, right? So it’s this idea that, look, even maybe it’s good, it’s a good thing that people can just recognize that maybe we’re not all going to agree and come under one banner. And maybe it would be better to have smaller towns and have a more of a secessionist approach to things. What are your thoughts on the hope of that kind of movement and that kind of idea?

Jeff Deist:

Well, I hate the resistance to it because it’s clearly humane. It’s the way forward without civil war, without having to politically vanquish people. And when you start to get into big countries with big populations that doesn’t, you know, United States of course, but also China and India, former Soviet union, I mean, it’s very difficult to run the lives of that many people centrally. Even, you know, a country like Germany, 80 million people you know, having a highly centralized government is just a recipe for cultural division, for strife for dissent, for hatred. And, you know, we see this all the time. And if you look at Switzerland, if you look at their website, there subsidiarity principles, one of the things they say very plainly is that we move every decision down to the most local level possible.

Jeff Deist:

And we do this on the grounds of social cohesion. And I think that’s a beautiful thing. I think smaller is better because if you have a bad government, it’s a little more isolated. It’s not as weaponized across as many people. It claims dominion over fewer people. It is less likely to be able to have an imperialistic presence. You know, Lichtenstein is not going to roll tanks into Poland anytime soon. Right? I think we can all agree on that. And that’s because Lichtenstein’s small and worried about making money and being rich. So the problem with whether you want to call it federalism or subsidiary or even outright secession, the notion of politically unyoking ourselves from each other in lieu of some sort of cold or God forbid, hot civil war. The problem is that a lot of people are so convinced of the moral certainty of their program that it must be for everyone.

Jeff Deist:

And so there’s a lot of people on the left who, if they were more open to secession today, or at least a huge, a much larger degree of subsidiary could have virtually everything they want right now in blue States. If we just would agree that abortion and gun control and taxes and climate change and all these other things don’t have to be decided centrally for all 50 American States in Washington, they can have a lot more of what they want right here today. But the problem is, they would say, well, you know, and I would say to them, you know, you don’t like these red States. Why do you want to be politically yoked to them? I think they would answer, with kind of a savior complex. They’d say yes, but there’s some, you know, good people in those States.

Jeff Deist:

Some minority folks or some you know, blue state folks just like us. And we’re not going to throw them over. We’re not gonna let you dominate them. We need to protect everyone. You know, I think you’d get sort of that mentality. And you know, there’s just been, this idea of manifest destiny in the United States where we, the United States started out in the colonies and moved westward into the Midwest and Ohio and they had the Louisiana purchase and then had some wars with Mexico and then ultimately ended up all the way out, getting California and then Hawaii and Alaska state. So 50 is this nice round number. And I think in a lot of people’s minds we could never undo that. That’s just unthinkable. But it’s getting more thinkable. You know, governor Gavin Newsom of California starting to refer to California a nation state pushing back against Trump. And so these interesting times that people are starting to get very frustrated with the limitations of a far away government. I think that’s a healthy thing and I’m all for it.

Stephan Livera:

Right? Yeah. And so we’re even potentially seeing some different US States thinking of banding together in there in terms of their response against coronavirus. So is that another vector by which we might start to see this smaller is better idea play out?

Jeff Deist:

Well, look at Australia. I mean there are parts of Australia which have extremely low population density and there’s no reason anyone who lives in those parts of Australia should be doing anything but their normal day to day. Right? I mean, they should be out and about. And United States is much the same way in our mountain West. You know, we have vastly unpopulated States like Wyoming and Montana and South Dakota. And then we have densely populated parts of Manhattan and all that. And so the idea that there needs to be one coronavirus rule for the whole country is obviously just goofy and it makes no sense. And it’s been interesting that we’ve had this sort of laboratory of States we’ve had, not just within the U.S. 50 States, but all around the world. We’ve had some very interesting experiments in Taiwan. We’ve had some very interesting experiments.

Jeff Deist:

I’m speaking about coronavirus, in South Korea. We have a very experienced interesting experiment happening in Sweden. So we’re going to see, we’re going to have a scoreboard of sorts, as gruesome as that sounds, to see whether social distancing really works, what the story is with her to immunity. But from my perspective, Stephan and the even slightly risking great depression part 2 for 50 or a 100 thousand deaths in the U.S. I think is absolutely crazy. I think that is sheer insanity. I think it’s a wild overreaction and we have to remember there’s death when you’re in the ground and then there’s sort of partial death where your lifespan is shortened or your quality of life has reduced because of alcoholism or depression and mental illness or because of a lower standard of living and a worse diet or because you have you know, worse schools, a worse apartment or house.

Jeff Deist:

I mean, there’s all kinds of ways to shrink life that, you know, you don’t have to be dead in the ground to suffer a diminution in your life. And that’s what is so tough to argue with the lockdown folks right now. And I’m an anti lockdown person, 100%. I think we should lift it today or what is it, April 20th or thereabouts. I would have never instituted the lockdown. And when someone says to me, well, how many lives would it take? Or you don’t value life or something like that.I would simply answer that the economics and life are not so neatly severable. They’re part of the same thing. And we’ve had viruses before. Markets can help us take care of viruses and we’ve had all kinds of, you know, we had the Spanish flu in around 1918 in the United States, which killed 600, some thousand people out of a much smaller population back then. And during that, everybody went to work. Everybody kept moving forward. Look, people went to work in London during the blitz. You know, I don’t know what to say. It’s just a fundamentally different worldview between myself and people who think we should just shut down and hunker at home. And again, I don’t want to hate people who have that worldview. I don’t want to impose myself on people who have that worldview. I want to separate myself politically from them.

Stephan Livera:

Yeah. And I think the other point that we as libertarians make is this idea that the world is way more interconnected than the central planners understand. They may think, okay, I’ll decide this industry is essential and that is not essential. But the lesson that we can draw from say essays such as I, Pencil, that no one person knows how to make a pencil. How do you try to communicate that point to people who are sort of naively fixated only on coronavirus deaths to the exclusion of all those other things that we miss out on?

Jeff Deist:

Well, if we keep this up, they’re going to find out because Americans have not experienced real hardship, economic hardship in a long, long time. And there’s a lot of younger people alive today who are, you know, they don’t know what it’s like to go to Walmart and not have 50 jillion kinds of toothpaste and deodorant and all this stuff is just going to be there and pretty soon it’s not. Because if you think just organizing, forget a pencil, try organizing a Walmart centrally, try to plan all those prices and all those items and how much of each and when to reorder and when to restock. I mean a Walmart is a vast, a single Walmart is a vast enterprise unto itself. And if we think that food production won’t be effected that we’re going to be able to sit at home for three months or six months and then all of a sudden reopen and have this V-shaped recovery.

Jeff Deist:

I think that’s just sheer economic ignorance. People don’t understand the fragility, the interconnectedness of the world. And they also don’t understand division of labor and specialization. You know there’s a reason why things are inexpensive at Walmart and that is because Walmart sells a lot stuff at very low margin. That’s how they make money. They make a couple pennies off each item that’s going through that scanner. They don’t make a dollar off of $3 pair of you know, socks. So a lot of that is specialization and international trade. A $3 pair of socks can be produced in China and shipped all the way to America, a long way on a boat for often times less than they can be made in the United States. There’s a lot of reasons for that. You know, libertarians have their opinions about those reasons, but that’s just a fact right now.

Jeff Deist:

And if people want to think that they can just sort of, wow, we don’t need all this Chinese stuff. Okay, that’s a nice, that’s a tough guy thing to say on Facebook. But you know, your income’s not necessarily going to go up and that $5 t-shirts going to be $10 bucks. So, and you multiply that over a year. Let’s say you’re a frequent Walmart shopper, you know, this is not negligible. This would be a real impact on your material standard of living. And I all, I’ll believe it when I see it, when Americans say, you know, I don’t mind, I’ll accept you know, a lesser material standard of living to be free of Chinese input or something like that. I’ll believe that when I see it, because that’s, that’s easy to say. It’s not so easy to do. And, let’s also remember a lot of people around the world, make a living off of importing stuff to America. So if we’re not buying stuff or as much from around the world, there are going to be a lot of people in less affluent countries who are hurting very badly. Countries with lower per capita income, with worst public health systems. So, you know, it’s the ripple in a pond from throwing a pebble. Except this wasn’t a pebble. This was a giant rock.

Stephan Livera:

Yup. And I think another point that anarcho-capitalist libertarians get accused of is that, “Oh, you guys are too Utopian”. Why are you thinking you want, where I think a very strong counter that I’ve seen you articulate is this idea of better, not perfect. So what’s that all about?

Jeff Deist:

Yeah, we’re the Utopians except when there’s a crisis. The first thing they do is start cutting FDA regulations on drugs and saying that medical doctors and nurses can practice across state lines. We’re not going to uphold the licensing requirements. We’re going to strip away all the FDA regulations are testing ventilators. And you know, Dyson fan company can just create a bunch of ventilators real quick and we’ll let hospitals use them without the normal regulatory process. So it’s interesting that we’re the utopians, but I, there is a trap out there for libertarians, which is that we have to explain everything perfectly well what, what would this look like if we didn’t have any government? And the short answer is sometimes we don’t know. But what we do know is that people spend their own money more efficiently than they do other people’s money.

Jeff Deist:

And that skin in the game and incentives matter a whole lot and government doesn’t have either of those things. And so what we think of as markets is really just another word for human beings muddling through doing their best, coming up with solutions as they always have decade after decade, century after century. And so I like the, the odds on human beings working cooperatively in the market over top-down, centralized bureaucratic control by people who, if they’re wrong, unlike private business owners are never punished for it. Obviously there’s moral hazard with the Fed and investment banks in wall street. We don’t need to get into that. But you know, my point bureaucrats not only are not punished for failure, oftentimes they’re rewarded a bigger budget. You know, FEMA needs more money, the FDA needs more money. So there’s something very perverse about, you know the accusation that libertarians are utopianist because to me it’s the most pragmatic bottom up approach to organizing society of all.

Jeff Deist:

It’s just you it’s your family. It’s your you know, your neighborhood, your local businesses. That’s, that’s all markets are. It’s not some nefarious system. I don’t even consider libertarianism an ideology per see. I consider it more you know, what happens when you leave people alone. And there’s a lot of creative and technical genius in this country and the idea that we can’t handle the virus without this crazed centralized response from Washington, it is very, very frightening to me. So yes, I think better, not perfect ought to be our mantra and we ought to push back against the notion that we have to have a perfect solution to every human problem because those human problems exist under the statist system we have now.

Stephan Livera:

Yeah, that’s a really excellent point. And I think for the last question let’s talk about your outlook over the next, let’s say five years from an economic point of view. And I know we touched on some of that and also, I guess in terms of Bitcoin, what’s your thought on how things progress over the next five years?

Jeff Deist:

Well, I’m frightened because I don’t think there’s going to be a V Shaped recovery to this economic debacle, which we are just getting into. We don’t know how deep and severe it’s going to be, but I don’t think the recovery is going to look like, 08, let’s say 2008 to 2011 in there. Because the, one of the big differences here is that you’ve got a lot more fiscal stimulus that’s not central banks. That’s just Western governments spending money, giving people money, paying them unemployment, giving them food stamps, giving them just stimulus checks, whatever it might be. And that is all money that’s going directly into the economy. That’s not being parked as bank reserves somewhere. I mean, that is money that is being put in people’s bank accounts and spent. So the idea that you can just create trillions of dollars out of thin air, not pay for it via taxes and put that, you know, liquid into the economy with no adverse price inflation, I think is, is very, very, very, very unlikely.

Jeff Deist:

So that’s a big difference between now and 08. The second big difference is that on the monetary policy side, not the fiscal policy side, but on the monetary side. In ’08, what basically happened was the fed went into hyperdrive and pushing interest rates down, which caused a lot of problems but buying assets in the form of treasury debt and mortgage backed securities from commercial banks, now there was a lot of moral hazard in that because they were buying these especially the mortgage backed stuff at face value when if you had marked to market, it would have been worth far less. So it was a moral hazard and a bailout and basically a free recapitalization of bank balance sheets. However, that money was basically parked at the fed as reserves. So banks were able to build back up and there were still reserve requirements and there aren’t anymore.

Jeff Deist:

So banks were able to build up big reserves and they were still very, very, very reticent to lend even flush with reserves, even with very low interest rates because obviously they don’t lend out reserves, reserves are reserves. So banks were very much capital constrained as we, as we found out, despite all this seeming new liquidity. And they also didn’t find as many credit worthy borrowers as uncle Sam hoped they would. Cause the idea was to get the banks back on their feet, recapitalize them, and then they’d go out there and lend. And that would prop up housing once again, prop up the economy hiring jobs, et cetera. And, but basically all it did was prop up the stock market and most of those newly created base money reserves stayed just that, stayed as reserves. So this time they’re buying assets, another round of QE, but they’re also injecting a lot of money directly into the economy through lending facilities.

Jeff Deist:

And you know, whatever we say today about what the Fed is doing in America, it’s going to be obsolete in a week because it seems like every few days they announce a new lending facility. They’re going to be lending against assets that are backed by student loans, assets that are backed by credit card debt, assets that are, you know, municipal bonds, corporate bonds, through ETFs. So they are increasingly becoming a player more and more in the market. And I’m absolutely convinced that within a few years, the Fed, like other central banks would just simply be buying US stocks outright. The bank of Japan does that. Swiss national bank does that. You know, so I don’t think that that’s off the table. Yellen was talking about that a couple of years ago, but clearly that then the, the incentive for that or the motivation for that is now intensified with this stock market crash.

Jeff Deist:

So you put all that in a blender and to me anyway, it looks like a very different animal from 2008 because most of what happened in ’08 was a stock market crash. Now that bled over into a, obviously a recession in the general economy and to lay offs and people losing jobs, don’t get me wrong, but most of the pain was in the stock market itself. And that was rectified through a crazy program of quantitative easing. And that worked in the sense that at least nominally it reinflated that market and blew it up. But this time around, the pain is small businesses. The pain is mom and pop. The pain is restaurants. The pain is retailers of all stripes because you know, when you’re literally telling people to stay home, forcing them to and they’ve only got maybe a couple months worth of payroll or rent on, you know, that’s hugely deflationary.

Jeff Deist:

So what individuals businesses want to do, what markets want is deflation. They want to shed debt and buy less stuff. That’s deflation because that’s, that’s the incentive right now for businesses and individuals. So the whole job of central banks is to thwart the market and produce as much credit and liquidity to have an offsetting inflationary pressure to kill that deflation that the market really wants. And you and I know that that deflation is actually part of the cure. It’s something that needs to happen. There needs to be a lot of liquidation of companies, there needs to be bankruptcy and insolvency and there needs to be new ownership. And that’s just the way it is. As sad as that is. And if there’s going to be bailouts, if there’s going to be stimulus or there’s going to be central bank monkeying around for the love of God, it ought to be at the individual level.

Jeff Deist:

I mean, in terms of moral hazard, I’d rather that the Fed was just paying Joe Sixpack’s mortgage or you know, given money to Joe Sixpack rather than giving it through SBA or whatever. You know, most of the stimulus that, that the US government has passed is going to go into the financial sector as usual. So it’s, once again, money’s never neutral. But if we’re going to have a bunch of helicopter money, I sure wish it was done at the most granular level, and we’re not seeing that. So you know, unlike 08 we’re going to see an awful lot of little moms and pops and go out of business probably. It’s heartbreaking. And I don’t want to say this, believe me, I got a couple of teenagers, I do not want to say this, but I, my overall sense is that it’s worse than 08, but not as bad as the Great Depression.

Jeff Deist:

You know, Bob Higgs points out, Robert Higgs, the great economist, he points out that, you know, the thing is America has a lot of capital that no matter what government is central banks, it doesn’t just go away. There’s factories, there’s roads, there’s distribution networks, there’s tech, there’s physical buildings and power plants and facilities, you know, and all that, you know, doesn’t just, can’t just vanish because government’s doing goofy things. So that’s, that’s kind of our, you know, the, the beauty of living in a, in a relatively modern or advanced economy. And that’s what the West has going for it. But man, we’re doing our best to, to to destroy it and capital’s not forever capital can be destroyed just as surely as it can be accumulated and destroyed a lot easier and faster. So man, I hope we don’t have a war or something to get really crazy.

Stephan Livera:

There’s a lot of things that can be concerning for us. But we will have to see how it all plays out hey. But thank you very much for joining me, Jeff. I really enjoyed chatting with you and I’m a big fan of the Mises Institute and I’m also a listener of the Human Action podcast. For my listeners, make sure you go and follow Jeff, check out the Human Action podcast and go to https://mises.org is there anything else where is there anywhere else that you would like my listeners to find you, Jeff?

Jeff Deist:

Now, just @jeffdeist on Twitter. But I think your listeners are, you know, they’re going to know what sound money means and how important it is, and your listeners are hopefully getting into Bitcoin and they’re going to be fine down the road. And I would just leave you with this. We can’t be children. We can’t stomp our feet and wish things were different. We have to have a longterm view. Nothing we go through will be as tough as our great grandparents. And so we ought to suck it up and get busy, you know, and take on life with a smile. I’m not going to be despondent about this, but we shouldn’t hesitate to point out the sons of bitches for what they are and let them wreck the world.

Stephan Livera:

Thank you for joining me, Jeff.

Jeff Deist:

All right. Thank you. It’s great to talk to you.