Can I Sign Mississippi Banking Form

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hi everybody my name is Paul Beijing and it's a great honor and to have on the show today my old friend Alistair McLeod from the UK hi yes sir hello Paul it's very nice to speak to you again yeah how have you been well been fine we're in lockdown Gold is running what's not to like except the economy's absolutely trashed but you know that's small detail we can live with yeah at least the top side is then that gold is going up nets or something you've been talking about for all these years of course maybe to start off with you are on record to have said that you don't like big government and you ideally don't want government expenses to be more than 20% of GDP given your state of mind how would you have dealt with the economic effects of Corona if you were let's say Boris Johnson well I think Boris has probably done as much as he can the problem is that he's inherited a system which was really not fit for purpose I mean this country is meant to have done pandemic planning it's always had you know within the system the idea that we've got to plan for pandemics and we've got to be ready but of course nobody bother to do it and the other problem is that you can think in terms of flu influenza or something like that but this is something which is completely different it's completely unknown so how do you respond to it so in a sense not only have we not planned for it but we were not ready to understand it we couldn't understand it and I think under those circumstances it was a bit of a baptism of fire for Boris and of course he caught it which was really a very sobering thing I mean you know he very nearly died from it and I think that actually did shake up people's view on this quite a lot because until then everybody was saying loss of freedom how dare the government tell us to do this they'll you know and people weren't social distancing but once bar has got it I mean that really was I think a wake-up call for everybody now but of course now people talk more about how to open up again the economy and the focus has shifted a bit from from health to more like the economy and the health of the economy and the people that lose their jobs and all that given that you're an Austrian and that you don't like much government intervention how would you if you were given the role of running the country how would you felt with it then because a lot of money printing is going on you're against that a lot of people are being kept at work and employers are being compensated with subsidies and all of that which you have just not done all of that would you would you have let the economy crash basically well I think no I think we must draw a distinction between economic theory and political reality the two things are actually very very different I mean there is absolutely no way this country which is completely Keynesian would accept Austrian economic theory as the driving force for the economy I think there might come a time when it happens but the only time when that will happen is when we have a real crisis and everybody stares into the downside and doesn't like what they see at that point a statesman like leader who understands economics could then steer this country your country any country out of this sort of if you like the drive towards increasing inflation which is really financing welfare you know government responsibilities are increasing the whole time and that has got to be reversed and there's got to be an understanding that the role of government is just to do very very simple things ensure that there are practical laws in place to govern how we relate to each other and particularly in the form of contracts and those have got to be as clear as possible Beyond and also to defend the country in the case of attack but other than that there really is no sensible economic role for the government so that's what I refer to when I say that you know if we were going to get the stability that we need in the future there are conditions that have to go into place the stability can only come through monetary stability but the other side of that is you can't have monetary stability let's say an operating gold standard of some sort with the government being 4045 percent of GDP I mean it just does not work because government cannot cover those liabilities when it cannot print money so you know so there's like a long term vision you have but in order to get there society first need to go through rehab or something and you need to slowly yes that's a good way of putting it but of course whether whether that'll happen immediately or simply out of this crisis it's another question when history has shown I mean if you look at Germany for example after her grace inflation in the early 1920s that led to Hitler and that led into Second World War so the idea that we can just demolish the current situation do away with the welfare state do away with government responsibility for all our actions and then expect you know the sort of the economy to just progress and we will have live happily ever after well it's a big ask and it you know it really does need I think the right sort of leadership to steer us away from the extremes that are likely to come out of big political changes now I see you you want to avoid some vacuums here to arise where the wrong people take control it just like happened in Germany yeah and last week I spoke to Steve keen and if he's more is more of a big government a kind of guy and he says that looking at the way the government's in Asia have managed to Christ in order and emic is actually an argument in favor of more government instead of less government because the more liberal countries in the West have been dealing with the crisis in the less efficient less effective way for it you can argue against that so this could also be a victory for for more state controls economies what what would you say well yeah I would disagree with Steve's conclusion that you know big government is is the only answer I've disagreed very strongly with that because if that was the case then you know let's just go back to the USSR and let's go back to Mao I mean I'm sorry but it just does not work there is no doubt that we are losing freedoms liberal liberal is the wrong word really because liberal basically is liberalism but if you like this sort of mixed economy thing which is essentially socialist with a bit of capitalism on the side mister it's a continual drift away from free markets into a controlled markets regulation markets and so on and the more that happens the more as you know as a society we tend to look to government to provide and so when you get a problem like this virus we immediately expect the government to deal with it not us we expect the government to deal with it we're getting back to sort of question you have asked you know what one would one do now I think having had the shock a sensible government would would take the view that having educated everybody made them aware that this is something that is very different they must continually wash their hands they must social distance they must be careful about where they go and what they do then leave it to people because people aren't stupid what else what also so in the society has small Romans and highly educated well-educated people you know you don't need a lockdown enforced by the government because people would automatically assume that's the right thing to do and would behave accordingly yeah and there's some evidence that this is actually the case in places like Sweden you know which is which has been very successful without a lot done I mean so it sort of raises the question is a lockdown really necessary I mean we don't actually know the answer to that because all the statistics coming out of different countries are themselves you know connected differently so we just don't know the answer but I think that Sweden did indicate that if you you know allow people to make up their own minds to look after look after themselves give them the information about the you know the dangers and then leave it to them I think there's a lot to be said for it now you put great faith in humanity I like it because I'm also an optimistic guy let's move to monitoring matters of course that's that's your your specialty you've been saying a few times now that you expect hyperinflation to happen as a result of all this monetary expansion at the same time after previous crisis we also had a lot of monetary expansion and also a lot of gold bulls were saying we're going to have hyperinflation soon but it didn't happen of course there was inflation and asset prices but not the complete loss of confidence in the currency why do you think this time is different well it takes like this year with what you're saying because we have had inflation ever since 1971 when the Nixon shock ended the Bretton Woods system which was temporary by the way just in case anyone viewing this sort of things that was at the end of a pier apparently temporary anyway I think we can take it as being too permanent but since then the dollar has lost roughly ninety seven and a half percent of its purchasing power the Sterling has lost ninety eight and a half percent of its purchasing power the N was lost about 92 percent of its purchasing power and the euro and if you take the constituents of the euro as calculators you're looking again at a sort of 98 percent loss something like that so monetary inflation has had a really substantial effect on the purchasing power of these currencies I'm measuring them compared with the purchasing power of gold now the purchasing power of gold does tend to rise over time but it's a gentle rise so it probably overstates the situation by one or two percent but no more than that so we've had that sort of long period if you like of drip-feed of loss of purchasing power for paper currencies if you look at the history of collapse of paper currencies you very often get that sort of long run in and then suddenly becomes a point where the public wakes up to what's happening to the money they realize that it's not the prices of the everyday goods rising you know that they buy rising there they begin to think hold on a minute something happening to our money and there's something fascinating in crypto currencies in this respect because if you look at what's happened with particularly with Bitcoin people have now been educated that through the relative pace of the issuance of a crypto currency like Bitcoin which is very very limited compared with what governments do with fiat currencies they're waking up earlier than we might otherwise the thought in history you know as intelligent members of the public you know you've intelligent Chinese intelligent people in California people like you to her say you know you suddenly realize that a hold on a minute its money going down not prices going up so what do I do get rid of the money and when the general public latch on to that there is no hope for currency and that is what I foresee triggered by two things firstly the coronavirus which is the obvious thing but even before the coronavirus came in there was a developing collapse in bank credit the amount of liquidity within the the monetary system I mean we saw back in September mid-september the repo market in New York failed now when we say failed basically what we mean is that the contraction of available bank credit was such that there was suddenly a crisis and the rate jumped from the sort of a one-and-a-half two percent level up to ten percent so the Fed then had to step in because obviously if it didn't step in it was going to lose control over interest rates we have already a crisis without the Quran of our Vera's problem because if banks are restricting their expansion of credit and looking to reduce their balance sheets which is now very much the case and you also look at what's been happening on the international trade front because for a good 18 months before that September crisis in the repo market international trade was collapsing and it was collapsing basically because of the the tariff war between America and China there is precedent for this the combination of end of credit cycle and tariffs and that was 1929 October 1929 when the smoot-hawley Tariff Act was passed by Congress on the 30th of October that year that month when the market got if you like began to sort of get nervous about these things that month the Dow Jones fell 30% top to bottom there was then a period of consolidation while there were attempts by Hoover to try and rescue the system you know they tried to inject more money into the system they were doing what the Fed is doing now but on a relatively minor scale and by the middle of 1930 it was beginning to fail Hoover signed smoot-hawley into law I think it was in about May or June 1930 and then Wall Street just slid down and down and down and by the time in unfinished it lost 90% of its value from the top we have exactly the same situation without the coronavirus take that situation put the coronavirus on top you can see the damage that is being done and we're only just beginning to see the start of it it's quite similar to and to the narrative that because I was working for gold mining back in the day as well and I've been in this alternative money sphere for for and for for for god knows how long but after the previous expansion and a lot of people are also exactly drawing historical parallels and saying look this has to end in hype but at least whatever what the central banks did they gave the system another ten twelve years to breathe by saying it's the right thing to do but they were able to extend and pretend why would they not be able to do that again purely because the scale of it I mean I'd remember that time and I remember you and I were talking about it I reckoned that's in the wake of the Lehman crisis the Fed effectively wrote wrote checks totaling about thirteen trillion dollars and because they took in the whole of the mortgage system and so on and that was unprecedented and I think being a purely financial crash which is what it was it was a financial crash we all heaved a sigh of relief and said thank goodness they've saved the banking system this is different this is an industrial problem and by definition where they're talking jobs you know we're talking about increased costs on government from welfare we're talking about throwing money at the underlying economy now if you throw money at the underlying economy then you debase the currency as it is used in the underlying economy and that is one of the two essential differences between the the aftermath of the Lehman crisis and the likely aftermath of this one the other the other one is that the Fed is taking on a far larger problem this time one of the things that's notable about the whole system shutting down is supply chains have been disrupted now the other side of supply chains are payments you know if I don't deliver the part manufactured goods that you turn into something bigger you're not gonna pay me meanwhile I've got wages I've got establishment costs I've got you know all the costs of manufacturing but I can't get it to you either because of transportation problems or I can't complete making my bit because one of my suppliers is not supplying me he's on you know he sees shadows factory always been told to transfer or whatever so really if you look at extent to this you it's not GDP is far larger than GDP you have to look at a statistic called gross output gross output tracks all the payment flows in the different stages of the manufacture of a product growth output in America is in the order of 38 trillion dollars available an IP or something it's more or less doubled yeah yeah not quite double but and it probably doesn't capture at all actually because it's the nature of statistic like that it what we're looking at is probably not supporting 38 trillion dollars worth of supply chain payments but it's a very big figure it can easily be 20 trillion and then there's the overseas side because that is only the payments chain gross output is the only two payments chain within America but you've got goods which were imported into America you know machinery bits of machinery bits of your iPhone whatever it might be I mean it is so vast and to an extent the Fed has dealt with that by increasing swap lines to a number of banks I mean originally there were six banks there were the major banks and now they've added about another I think seven eight nine banks which is sort of if you like second-tier central banks where they have now got these swap lines going notably not with China and so I wonder with you know there is a political element in this which is rather unwelcome but anyway yeah but super lighters are also starting that's right there were there was no hand sanitizer and mask is available a few weeks ago yeah I see everyone they're trying to offer them even with the discount probably because they've too much of stock so supply chains are slowly but surely being restored again and of course you have the old invoices to deal with and the old costs but that's then I guess where the Fed and central banks and governments try to provide a backstop so it can be yeah but I mean don't underestimate the size of this now on top of that they have another thing and that is they've got to fund the government deficit which is just going banana I mean total receipts US government receipts are less than four trillion three point seven trillion or something that is going to collapse obviously because taxes and at the same time the government is you know through the Treasury has been sending out checks to every family you've got I mean the estimates for the government deficit are now rocketing to considerably more than their total receipts I mean you know so instead of it being a balancing figure you know you've got sort of income an output sorry income and expenses and the expenses are less than the income or the expenses are slightly more than Inc like a trillion dollars or something we're now looking at the expenses are you know they just draw off the income the income sort of you know basically being wiped out but the expenses that the government's are incurring are absolutely an almost greater than their you know the previous if you like total figures so you've got that and importantly the other thing is that the approach of the Fed is to try and preserve the you know sort of personal wealth if you like but the wealth effect try and keep the show on the road if people feel wealthy and happy then everything will be alright is the sort of mantra this has been the case actually ever since Greenspan but now they have got to support the whole of the internet domestic and international financial markets and make sure that they don't go down why because the one thing they can't afford to see is the cost of funding for the US government to rise now the last time we actually had this situation where the whole thing worked on basically keeping the financial markets highly valued was drawn law three hundred years ago in France he had only two things to keep puffed up one was his bunk Royale which was his money machine like the Fed if you like in the finish on was with the Mississippi adventure and around about number 1719 the scheme of puffing up the Mississippi venture shares by issuing Libra on back currency was beginning to sort of run into difficulties the the bonk Royale and the Mississippi venture were meant to be merged on the 28th of February 1721 thing that actually didn't help was that King Louie decided that he wanted to take some some of the profits out of the system so he took something like I think it was about a billion libre of stuff out so that didn't actually have to help if I didn't help because I don't know I had to run find someone to buy it anyway it was absorbed guess how printing money and this sounds familiar perhaps so anyway maybe it's named for John Wall who works in this year and remember that's inflates his balance sheets yeah absolutely but what happened was that bah I did the September of 1720 there was nationally a value for the Mississippi venture it had fallen from 12,000 livre down to about 1000 Libre but guess what the value of the lid of the livre was zero it just completely destroyed itself and so going back to what I was saying about there comes a time when people begin to realize what's happening to their money this seems to me the effort to try and keep financial markets overvalued if it fails and it will fail in a similar fashion to John Laws experiment then I would think by the end of this year there's a strong possibility that fiat currency won't exist anymore and do you believe then that indeed like you said the american people wake up and April the bloggers foreign creditors pull the blog because they don't trust a dollar anymore that's very good question because you've highlighted the two ways in which this happens the first thing that will happen is foreign creditors a foreign creditors I mean you know that we we see a lot written about how in crisis people need dollars no that's not true they need Donna liquidity and the point behind this is that foreign creditors already own something like 25 trillion dollars worth of securities short term instruments and also bank deposits so they've already got the dollars it's just a question of liquidity so they will sell down their US Treasuries that I have no doubt they will reduce their portfolios in dollars why because they need the money back at home I mean if you got a problem you know if you're let's say a British company and you've got a whole load of dollars over there and you've got trouble back here what do you do you sell your dollars because you gotta pay your bills in pounds so I can see that the first thing will be a run against the dollar will develop and the effect on domestic prices is likely to hit particularly hard through food we've already got supply disruptions in the essentials if you like I mean you you refer to only hamburgers like hand sanitizer and so on several yeah and burger is probably more important to the Americans but you can see that food prices are already rising because of disruption in the supply chains as much as anything and the other thing about it is that once the dollar starts going there in the international price for basic foodstuffs will go up in dollar terms and that will then put an extra twist on it now if I can just go back to John law the real problem that rarely surfaced in France at that time which made it politically very difficult for him to continue with this scheme was that as people were taking money out of his financial system they were spending it in the real economy and driving up prices which meant that the poor who basically lived on as a subsistence level I mean everybody lived a subsistence level until the Industrial Revolution if they start and when you get that you then get the guiness revolution you know you get all those social strains which which threatened to overturn the status quo completely and it's the people that get the money first they are able to profit from it and in the end when it comes to people for example like you just described to poor people they only get the new money when already the prices are going up and it will be then the the waking up moment for for ordinary people that's the currency has being debased yeah exactly that yes I mean it's always yeah the rich get it first and it trickles down and you know by the time the poor get it they're not earning anymore all they see is food prices go up and think about pensioners living on Fitz pensions you know they suffer as well so you've got a if you like a very explosive mixture building I think once that happens and then the second stage once that's gone down and the foreign exchanges the second stage is the people begin to wake up to what's happening to their money or their government's money and they then begin to realize that it's the money going down not prices going up what they should do is just get rid of the money as quickly as possible I mean in Germany in 1919 20s that period took roughly six months six or seven months from about May to November when the bar became completely worthless john rawls time tibur months on it I mean you know there is we have form if you like that suggests that once this process starts there is not very much time left for the currency involved the good also know there is a way out and there is a way out of it Paul yeah there is a way out of it and that is introduced gold backing proper believable go backing for the currency so the currency acts as a girl's substitute but in order to do that you need to fundamentally change the role of government within society society has to look after itself you have to go back to free markets government must cut itself back all the way to my guess is less than 20% and if you get it well under 20% so much the better any more than that and nothing is sustainable now but if we arrive and free markets and of course people can choose their own money's there is also a chance that especially the younger generation would prefer a bit going over gold so it will then be a battle between different entities and it's not certain that gold will win that fight well no it is certain because look at it this way if paper currencies go what are you going to price your Bitcoin in you've got a price it in gold then you can also say you have the bracelet the golden bits going the same dancing the other way rods because if you look at the volatility the volatility for Bitcoin is far greater than the price of gold you gold is will be the stable currency Bitcoin then unfortunately in those circumstances it loses its reason for is to existing so bitcoins life I believe is tied if you just sort of think through the monetary or theoretical aspects of it bitcoins life is tied to the life of paper currencies once they go the whole rationale for a Bitcoin or something like that goes a bit apart from anything else you're going to need speculative demand to drive it and in the circumstances we're talking about speculators have probably wiped out you know but a gold price will also be very volatile as soon as paper currencies gold and of course gold will appreciate but it's a scenario an albeit of course everyone always says it's the same amount of gold to buy a suit in roman times as it is to buy a suit right now but if gold becomes dominance money worldwide again prices measured in gold you'll have to pay if you have to spend less gold to bag that same suit if if gold becomes dominant money isn't that true well their work I mean if you're looking at if you're looking at that sort of collapse situation there is no doubt that the purchasing power of gold will rise in its own right quite significantly what you can't untie is the element which comes from the collapse in consumer demand or demand for consumer goods from the actual increase in the purchasing power of gold in its own right there two elements to this if you like but gold is a far more stable entity than Bitcoin ever is I mean I ran a chart of Bitcoin priced in gold and it's just I mean okay Bitcoin goes up lovely but it is incredibly volatile now I know you are a great follower Bitcoin but you must admit by far the more volatile of the two is Bitcoin it is not suitable for transactional money going in and gold I follow everything as you know and absolutely and of course there are there things to say about volatility but there are so many different aspects of good money a for example a Bitcoin is much more difficult to confiscate and yesterday I saw an interesting show on Netflix called the Outer Banks where a bunch of young kids found a lost treasure of gold or 400 million and they tried to to sell that for cash and they started with one bar and it was just such a difficult and such a pain and he has to to get rid of the gold and of course bitcoin is much easier to sell with all these exchanges worldwide so there's there's so many different aspects to money but for me I'm very open-minded and I and I look forward to to seeing different alternatives competing against each other in order for the market to choose the right money out that that's my that's my well I hear what you're saying I hear what you're saying poor but I think what people do not do is they don't imagine the world after after fiat currency is gone it's going to be a completely different environment and then you have to model is this the wrong word I don't like modeling anything but if you have to think through the roles are the relationships of everything without fiat currency think think it through properly and then you'll come up with some support some maybe surprising answers great and one more question I had like what I what I see know that there's a lot of inequality in the world that is also partly the raziel of government policies such as QE and bailouts and all of that do you how do you want to address that or is there a way to reverse them because I understand why people call for example for people's QE to instead of saving the corporates and the banks this time to save the the citizens and of course maybe that's not sustainable trajectory because it could lead to hyperinflation and complete collapse of the currency but I I understand the sentiment behind injecting money base money in the bullets of households and consumers also in order to offset some of the awful things that have been done to them over the past ten years or so worth or longer what is your point of view there well the injustice is against people okay if you have free markets then the king is the consumer if you don't respond to what the consumer demand is going to be if you don't anticipate correctly what tomorrow's consumers demand is going to be you're out of business the consumer is king that's free markets yeah there's a future we don't have free markets we have yeah well it's been a past day too I mean if you look at Britain the success of Britain really was from particularly from about the 1840s onwards once they got rid of price you know price controls over over over wheat the abolition of the Corn Laws which then went into complete abolition of all tariffs and Britain then became from that the most wealthy nation on earth with dominions colonies such as have never been seen before and that was really destroyed when we went off sound money and we moved towards a larger government I mean if the socialist movements which really sort of sprung up around of time of the First World War so we have had this before we can see it's not just theory we can see how it works in practice but ever ever since Keynes came in and over turn says law which he did actually by sleight of hand rather than proving that says law didn't you know was was a non sector he created a role for government so we now have economies which are increasingly driven by government and that introduced in the relationships between business and the consumer this third party called government so if you're a big business you go and Lobby government to get what you want rather than the consumer being king anymore it's far easier for it for a big government you know for a big company to do that so you get crony capitalism that is the situation we have we don't have a proper capitalistic economy anymore it is basically government's cajoling being controlled by big business to do what big business wants and so the consumer gets left out in the cold yeah the increased financialization of our economies particularly since the 1980s when you had Big Bang and the end of the glass-steagall Act basically means that banks instead of lending money to businesses started using the expansion of bank credit for their own for their own books they're running their own books so you have the complete financialization of particularly the American and the UK economy the effect of that basically is that you see bankers making a hell of a lot of money for apparently doing nothing under that does not go down well with a consumer who's not being served that well by his government or by the crony capitalists but who does he listen to he listens to the politicians because there's nobody else talking to him so you could see how the whole system has become corrupted exactly without you we cannot address we can get company how to compensate citizens and or the the the errors of the past and all the damages that they've incurred because if we trends if we if we go to a new system for example sound money sys em then then all the companies and people that have been receiving the money or have been profiting from the system have a very good starting position also in the new system unless you start with come up with some sort of compensation to compensate for all the or the or the errors in past well well I I did you know while I fully understand the non inflation environment and what is required I don't see us getting there without an awful lot of pain and the pain is likely to come in crisis first solution second it may not even be as easy as that it could be crisis first another crisis another crisis another crisis then solution but just bear in mind that before the 1930s in the previous slump which was nineteen twenty twenty-one I mean it was a very deep slump and but very very quickly we got out of it had we got out of it basically because government took the view it stand back you know let people sort it out but then along comes President Hoover followed by FDR with his New Deal and really from about late 1929 all the way through to the start of World War two the America the American economy and also the rest of the world was basically in a prolonged slump why because government was interfering with everything if government if we looked government to resolve our problems then we sit back and we wait for the solution to come from government if we understand that government isn't going to resolve our problems then we get on with it and that is the difference if you like and I think it's but is the complete white house of paper currency fiat currency is the government then has no alternative it actually has to get out of the way because it cannot fun itself it might try to struggle on and make lives all our lives unpleasant as a result but without a currency can't really go for very long I mean you end up with absolute Anarchy I mean you know you find that the police aren't getting paid so how are they going to make a living basically they make a living by bribery and extortion on all arrested I mean I've seen this I've seen that in Africa we left as a country we left some very good police forces in Africa they turned into a very oppressive nasty government force against the people anyway yeah well it's scenario we hopefully are going to avoid thanks so much as they're for your insights was great to have a conversation with you in an open and honest way and if anything's you want to close the conversation with well the only way I think you can protect yourself against this increasingly inevitable outcome is to ensure that you've got some money which will see you firstly through it and then afterwards now sing it through it obviously gold silver and you know if you're a fan of cryptocurrencies get get a proper one which is which has a distributed ledger which ledger which government can't get hold of such as Bitcoin for afterwards then you've got to have gold or silver because that will come back as a stabilizing factor okay things else there stay safe and talk to you again in the future