Michael Pento, president of Pento Portfolio Strategies talks with the President of The Mises Institute, Jeff Deist about liberty, the economy, and the Trump effect on America.
Deist talks about Austrian Economics, describing it and discussing how it was the mainstream economic model in the late 1800s until the ‘Keynesian revolution’ of the 1930s. He says it was a different way of looking at economics through ‘human action and volition’ and looks at how economics ‘really occurs rather than mathematically’ modeling. He views economics as a social science rather than a hard science ‘rat hole’ of a statistically based mathematic model system.
Regarding Donald Trump, Mr. Deist sees him not as a doctrinarian, but rather a politician. Asked about taxes under Trump, he responds that in general, the way to look at taxes is ‘In total, In sum, how much do they suck out of the legitimate private economy? Beyond that, it just becomes a political fight over who pays.’ He states that anything beyond reducing or eliminating an existing tax has ‘political winners and losers’ and that ‘libertarians should be very careful about supporting’ them. He believes that ‘deductions should be expanded infinitely’ and that congress attempting to simplify the tax code through legislation will be altered by special interests and that it’s a ‘fool’s game for libertarians to get swept up in this.’
Pento discusses the debt and deficits with Deist, stating that under Trump and a Republican congress there appears to be a ‘complete green light’ on defense and infrastructure spending and that through his analysis he believes with the interest on the debt and the proposed infrastructure and defense spending, the 2017 deficit will hover around $1.2T. Pento also states that with a potential overdue recession occurring in 2017 the deficit could jump to closer to $2T. He asks if Deist believes there is any room for any further Keynesian style deficit spending. He responds that the ‘main stream’ economist believe that the ‘debt does not matter’ and that we should ‘open the floodgates’ to spending. Further, the ‘debt does matter’ due to its detrimental affect on the dollar. Pento states that even though the Dollar may rise vs other currencies, could it still lose intrinsic value vs hard currencies. Deist agrees with this perspective and adds that he believes that the US will never pay its debt, the dollar selloff will begin and that it will be an ‘interesting 10-20 years’. Pento believes this selloff has already begun and that the ‘whole house of cards will come down.’
Pento queries if the Mises Institute believes the dollar should be tied to the gold standard. Deist says that though the gold standard is not necessary, they believe it should be ‘de-nationalized and made private.’ and that gold standard does not need to be imposed, but would likely ‘rise naturally because gold has always been used as money’ as it ‘holds its value.’ He believes that ‘other kinds of money would arise as well’ citing crypto-currencies as an example. He believes that alternative competing currencies should be allowed to compete with the dollar as a way for people to diversify and give them an alternative escape route from its plight. He states that ‘no one talks about the quality of the dollar’ as they do with a Honda or other products. Pento believes that the gold standard limits the monetary base and that mining rates roughly equate to growth in the economy (labor force growth plus productivity growth.) He states that though you don’t necessarily need to go on the gold standard, central banks need to behave as if they are. Deist believes that the political reality is that it is just too easy to ‘paper over’ the problem and that no politician wants to be in power when the economy is in a ‘tail spin’ because it is always easier to expand money supply rather than raise taxes or cut spending.
Pento asks if we can return to viable course to prosperity without bursting the current asset bubble and without a significant, painful recession or depression. Deist believes it is not possible, and that the world has ‘far more debt’ than it is able to pay and that we will go one of two ways: a big crash and revert to national currencies, or a big crash and revert to some ‘monster global currency.’ He sees this potential event as a good case for libertarians to choose nationalism over globalism.
Finally, Pento and Deist briefly discuss ‘Fake News’.
For Michael Pento’s website go to www.pentoport.com
For Jeff Deist and The Mises Institute go to: www.mises.org