[laughs]

Uh, this is, uh, something that I've, I've been interested in for a while now, uh, really starting with, uh, a piece I wrote, uh, I think it's a couple years ago now, uh, where I was looking at the Treasury-Fed Accord of 1951.

Uh, and of course, the, the official narrative is that that's the event that got the Fed's independence started.

That's, that's where the Fed finally broke free of the Treasury and they were able to do what they wanted to with the money supply and interest rates.

So the Treasury and the, uh, administration, they wanted lower interest rates, and the Fed was like, "No, we can't do that because inflation's too high.

We want interest rates higher." Um, and so they, they met, uh, the Treasury officials and Fed officials met, and they decided that they were going to, you know, shake hands and allow the Fed to be independent.

So that's the official story.

I think most of our viewers and listeners are familiar with the term, but maybe a little definition before we jump into your book.

we're at as libertarians.

Yeah, really the basic fundamental idea behind libertarianism is what you just said.

It's that people should be free to make their own choices.

And of course, the limitation on that is other people's rights.

So it's a rights-based framework.

We have property rights, and we own our own bodies.

That's really the fundamental starting point.

But the reality is, as you just pointed out, this happened a long time ago.

[laughs]

... that I want in the socialist utopia.

And so who would have an incentive to, to learn to be a brain surgeon, or who would take out the trash? Who would do those sorts of jobs? And that's, that's a fair critique.

It makes a lot of sense.

It, it sort of hits us on a, on a fundamental level.

We can understand that, hey, in order for us to, uh, provide for one another in a market economy, we need to have an incentive.

Uh, we need to be paid more, uh, to, to justify you going to school longer or to do risky jobs, something like that.

People are canceling vacations because, "I can't do it this year." Uh, you know, "I'm, I'm hoping the economy turns, but right now I can't afford something like this." And you know that people would like to blame Trump, people would like to blame Biden, but the reality is, as you just pointed out, this happened a h- long time ago.

But what would you say to this idea that rising yields, rising interest rates in the marketplace is suggesting to the Fed that the natural interest rate is going up? Is there something to that? Is that a useful way of looking at it? What do you think?

Yeah, so people who are interested in this should check out a talk that Jeff Herbiner gave at a supporters summit a couple of years ago on the neutral interest rate.

Now, I know you referred to it as the natural interest rate, but to avoid confusion, Herbiner referred to it as the neutral interest rate.

In the mainstream literature, they refer to or they use both terms, but both of them are they expressed the same idea, which is this mythical interest rate that would perfectly balance both sides of the Fed's dual mandate, an interest rate that wouldn't cause too much price inflation, but it also wouldn't result in increases in unemployment.

So that's what the mainstream is thinking about when they talk about the neutral interest rate or the natural interest rate.

Now, there's a potential area of confusion for some of our listeners, because if you've read Rothbard, especially Man, Economy, and State, he refers to the natural interest rate, and there he's referring to the price spreads, the rate of return in production.

So the price spreads between different stages of production.

Are we just gonna keep hearing that Biden caused it right up until the next 2028 election? I don't know.

that? I'll add that to Jonathan, he loves the topic.

Well, you're right, Ian, and those standards or the lack of complete standards do pose a barrier.

If you think as an example about telemetry, about how airlines will be able to manage the performance of different vendors in one ecosystem, there's no industry governed way for an airline to be able to do that today.

So that's a huge barrier.

Especially when you're talking not just now about innovative new systems that sit on top of a PSS, but you're talking about core systems that require six, nine sort of uptime in order to serve the airline's customers.

So we've worked very clearly with all of the other major vendors in the industry as part of our ongoing implementations and integrations with airlines, depending on scale and very different scales and sizes, whether that's American Airlines as 200 million, pb a year airline through to air link at five or six million pbs a year both with very different uh ecosystems and and what we've been able to do with with with with this experience in integration um is we've been able to abstract a lot of these integrations and we've been mapping these abstracted integrations to uh to the future to modern to modern airline retailing And this is now, from Excelia's perspective, this is becoming a standard.

And it's one of the things that we're really hoping that the industry will get behind and be able to invest more time and effort in taking, whether it's these Accelia virtual interfaces or others, and start to build a comprehensive way for airlines to be able to take advantage of one of those initial tenants of modern airline retailing, which is modularity.

What are the key things they should be thinking about as they contemplate that transformation?

So, you know, what, what, what is it that, that, that Austrian economics gets so right, and, and why is it so good at seeing what basically nobody else can?

Yeah, you're absolutely right.

Uh, the 2008 crisis and the ensuing recession caught a lot of people off guard.

But if you look at what Austrian economists were saying in the lead-up to that crisis, uh, es- especially my, uh, my colleague who's, uh, in the office right next to me, his name is Mark Thornton.

He was, he was writing about, uh...

And it, it was almost prophetic the way that he was describing exactly what was going on in the housing market, how the Federal Reserve was fueling this, this bubble in the housing market.

And we had, uh, m- mortgages being sliced and diced and combined, and there was a bunch of government involvement through Fannie Mae and Freddie Mac.

Okay

I'll shut

up.

Oh, yeah.

Just to reiterate, the two different ideas that you see in the monetary disequilibrium theory literature is that sticky prices cause markets to not clear.

And so I address that problem with the plain state of rest.

But then I use the same concept, the Misesian plain state of rest, to also address the contention that decentralized markets cause the price level itself, or its inverse, the purchasing power of money, to be slow to adjust to achieve a monetary equilibrium.

So like I said before, it's easy to see that in individual goods markets, non-money goods markets, it's easy to see that those markets can clear.

Go ahead.

But right now, we physically painted ourselves into a corner.

Yeah, at risk of inundating our listeners with too many analogies.

You can never have too many analogies, Scott.

They're great.

They're great for teaching.

In the past, when I've presented Austrian business cycle theory, I've used this analogy of Crusoe.

So going back to Crusoe.

And now what do you say to that?

The banks aren't generating that themselves.

Right, right.

So if that's as far as you take it, then there's no money supply growth.

It's literally just a transfer of money from one person through the intermediary to the borrower.

Now, the second theory that he talks about is he calls it the fractional reserve theory, and this is where he brings up the money multiplier.

So once you start with that financial intermediation theory, and then you think about what do the borrowers do with the money after they receive it as a loan, And so they'll spend it.

They'll use it to build a house.

No, they don't.

And so what the heck is it?

Yeah, I mean, it is a good question.

And it's one that I recently had a chance of thinking about and writing about.

It was on what should economists do? In fact, I have it right here in front of me.

There's this book by James Buchanan on what should economists do? And that's a collection of essays.

And the first one, he's trying to answer that question.

And if I remember correctly, his claim is that we shouldn't just look at resource allocation problems like the solvable mathematical problems, but we should focus on on civilization and the interactions and cooperation in markets that happen between people.

Can you maybe touch on that?

And even on a product-by-product basis, what's being ignored here is the decision of the consumer, isn't it?

it?Yeah, you're, you're exactly right.

And you brought up a- an excellent point about how, uh, how countries like to protect certain industries.

Uh, one very common argument for tariffs that I hear is the national security argument, that i- if we're gonna be, uh, if it's likely that we're gonna go to war, um, and that another country will be our enemy in this war, uh, we don't wanna be dependent on them, um, to produce weapons or to produce food or pharmaceuticals or other things that we need, uh, essential things, especially in, in a wartime where we have these, you know, giant international conflicts.

And I, I s- I understand where that argument is coming from, and it, and it makes sense just on, at, uh, face, uh, value that you're right, we don't wanna be dependent on an enemy to provide the things that we would need to fight a war.

Uh, but I think that e- even in this case, there are other things that we can do to make sure that we're producing the things that we want here domestically, even, even if you grant the argument that there's going to be this war with the other country.

And specifically, the tool that I would recommend, I'm, I'm not a fan of subsidies, but I think that a subsidy would work better in that regard as opposed to a tariff.

How do we train young economists so they don't fall into some kind of, uh, fuzzy thinking like modern monetary theory or something? [laughs]

He's not doing it on a product by product basis, and even on a product by product basis, uh, what's being ignored here is the decision of the consumer, isn't it?

it?Yeah, you're, you're exactly right.

And y- you brought up a- an excellent point about how, uh, how countries like to protect certain industries.

Uh, one very common argument for tariffs that I hear is the national security argument, that i- if we're gonna be, uh, if it's likely that we're gonna go to war, um, and that another country will be our enemy in this war, uh, we don't wanna be dependent on them, um, to produce weapons or to produce food or pharmaceuticals or other things that we need, uh, essential things especially in, in a war time where we have these, you know, giant international conflicts.

And I, I s- I understand where that argument is coming from, a- a- and it makes sense just on, at, uh, face, uh, value that, you're right, we don't want to be dependent on an enemy to provide the things that we would need to fight a war.

Uh, but I think that e- even in this case, there are other things that we can do to make sure that we're producing the things that we want here domestically, even, even if you grant the argument that there's going to be this war with the other country.

And specifically, the tool that I would recommend...

How do we train young economists so they don't fall into some kind of, uh, fuzzy thinking like modern monetary theory or something? (laughs)

You know, like, maybe, but anyway...

Well, yeah, it's interesting because there's actually two different stories.

As soon as you bring up silver, it's almost like they grant you, yeah, yeah, silver was money, but it had to originate by the power of the state.

But what's interesting is if you look at Ray and Ennis, they don't say that silver was money.

They say that the clay tablets – in fact, they say that they circulated, they were exchanged, right? So there's like, there's two stories here.

Um, and it's, it's just one way that the MMT years are sort of squirmy.

Um, But yeah, in my research, I'm basically just making the case that the historical evidence totally vindicates Menger.

It's way more consistent with the Austrian story than with the MMT story.

And it's particularly appropriate that Jonathan is the guy doing this because he is organizing a collection of, mmt essays for the upcoming um scholars conference that you're going to collect into a book so jonathan maybe do you guys explain what that project is and then we'll launch into the clips you've selected from uh the debate i just had

sure yeah so it's an anti-mmt book not just collecting some mmt essays but uh just trying to uh get some scholars on board who have already done some, some of whom have already done some pretty good critiques of MMT in different works.

And so the goal here is to collect some essays from them just to present to both lay readers and academics What do Austrians say about MMT? What are the Austrian critiques of the MMT worldview, MMT framework? So, yeah, I'm looking forward to that.

A few of the contributors will be presenting at AERC this year.

So looking forward to seeing their presentations.

But, yeah, I enjoyed your debate with Nathan Takeness on the zero hedge debate.

I picked out a few clips for us to look at.

So let me let you respond.