All Episodes
Previous Next
Jan. 11, 2024 - Ron Paul Liberty Report
24:55
Inflation? Deflation? Recession? The Economic Train Wreck, With Guest Phillip Patrick

New jobs numbers are out...and they're not what the Biden Administration wants us to believe. Economic contagion is spreading worldwide...as is a growing populist response. What kind of recession are we going to have? Birch Gold's Phillip Patrick joins today's Liberty Report with his insights.

|

Time Text
Why People Get Misled About Stagflation 00:08:30
Hello everybody and thank you for tuning in to the Liberty Report.
With us today is Daniel McAdams, our co-host, Daniel.
Welcome to the program.
Happy Friday, Dr. Paul.
Very good.
It's Friday and we generally talk a bit about economics.
But you're an expert in economics and how it affects foreign policy or foreign policy affects economics.
But one thing for sure, as the years went by in Washington, I found out the two go together.
Very much involved when it comes to how do these things get financed?
Oh, you mean the Fed has something to do with this, the monetary system?
Well, we have a special guest who's been on before from Birch Gold, and that is Philip Patrick.
He's a precious metal specialist and keeps an eye on the economy because he has to talk to a lot of people who are interested in investment and how to understand what's going on.
Now, that's a job and a half, especially when you have people that depend on this information.
But this is tough, of course.
This is what our program has been about generally, whether it's COVID or the Federal Reserve or interest rates, or really the big picture that we're interested in is the cause of liberty because we think that if that's properly handled, you know, the COVID problems and the monetary problems and personal liberty problems, they all disappear.
So we have Philip with us again today.
Philip, welcome to the program.
Thank you for having me, Dr. Paul.
It's an honor.
Very good.
Why don't I start off with asking a very generalized question because it's constantly in the news because it affects what the government's going to do.
Should they spend more money or less money?
Oh, no, they never spend less money.
They always spend more.
How much more money should they spend?
And they also have a big talk about the degree of the problems that we have in the economy.
We wonder what the Fed's going to do because they're the managers, they're the economic planners.
Are they going to raise interest rates or should they lower interest rates?
What should they do?
Should they put on wage and price controls and on and on?
But then they start talking about, well, there is a recession or not.
The one thing about Austrian economics that I believe to be a true fact is that the Austrian school understands that when they start talking about, will there be inflation, we always say, well, maybe we should look and see if there is inflation.
And of course, since we look to the money supply, there is inflation.
But then there's also consequences, and that's what I want to ask you about.
The consequences of what the Fed does.
You know, it can cause, it contributes, if it doesn't have a complete cause of the business cycle.
And right now, there's a lot of anxious people because we've gone through not only the Federal Reserve manipulation of money supply and interest rates, but also the crazy stuff that went on along with COVID.
So now, right now, people are anticipating and they're starting to recognize that maybe indeed the Austrian economists have been right.
There will be a recession.
But tell me what you think.
Is there a recession?
You know, there's a consensus.
One group out there that's in the ordinary media, they say, well, we're already there.
We're going to get started.
Oh, it doesn't matter much because we know how to have a soft landing.
What do you think the status is in the big picture of our economy?
And what do you think the Fed's going to do?
Well, look, I think the soft landing, if you will, is going to be very difficult, if not impossible, to achieve.
Technically, I believe we already entered recession as of June 30th.
We had negative GDP for the first quarter of this year.
Currently, the Atlanta Fed's GDP prediction estimates negative 2.1 for the second quarter.
Powell said recently that the Fed are not trying to induce a recession.
But as you implied, I don't think there's any way to get inflation under control without tightening monetary policy significantly.
So I think the Fed will likely tolerate a recession if that's what it takes to get inflation under control.
And they're almost telling us as much, right?
In his last FOMC meeting, Powell said to the public, he said, look, inflation is far, far too high.
Americans have to expect pain in combating inflation.
And for me, pain means recession.
I think he's willing to sacrifice the stock market and the housing market to try and get inflation under control.
But even that's going to be difficult.
So I think the soft landing is proverbial.
I think it'll be very difficult to achieve.
Very, very good.
And, you know, and most people think in more simple terms about what's happening because they think that, well, if you have a recession, prices are going to come down.
And sometimes you need a recession and you need the Federal Reserve to raise interest rates.
Then their big argument comes, as you indicate, that you really don't know exactly where to go or what they're going to do.
But in the 70s, I was fascinated with the economy, got interested in the monetary system then the first time I ran for Congress.
And that was when the economists were astounded.
The prices are going up.
There's inflation.
That's good.
That's good for the economy because that's a sign of strength, which is a bunch of nonsense.
So then they decided, well, the economy is still weak and prices are going up.
What is this thing?
Then they all of a sudden came across this term stagflation as this was unique.
But speak a little bit just on that subject, why people get misled to think that stagflation should be so shocking because, of course, you can have depressionary systems with inflation.
That is, places like Zimbabwe and Rhodesia and all the, they have inflation, but also weak economies.
Yeah, you're absolutely right.
Stagflation is a very, very tough climate.
The last time we had it, as you say, 70s to 80s here in the United States.
And what it means, as you know, of course, stunted economic growth coupled with rising inflation, right?
We saw it, and it's a very tough period because essentially what that means, markets are declining at the same time that things are becoming more expensive.
So it's almost a double whammy.
Quite frankly, I see this climate as very, very similar.
As we said, the Federal Reserve at this point, they have to raise rates and sacrifice the housing market and the stock market, right?
So we know that we have, or it's very apparent that we have recession on the horizon.
But the problem is, I'm not sure they can raise rates significantly enough to stop inflation today.
They can curb it, they can slow it, which is what they're trying to do, but I'm not sure that they can kill it.
Let's not forget, you know, Volcker in the 80s had to put interest rates to 15% to curb today's level of inflation.
It's the last time inflation was this high.
We're really going to struggle to get anywhere near that today.
In the 1980s, U.S. national debt was a little over a trillion dollars.
Today, of course, over $30 trillion.
So to put interest rates to 15%, I don't think is feasible.
The debt service would be impossible for the federal government to handle.
So I think we're stuck between a rock and a hard place.
And it's going to be a tough climate.
For me, stagflation is on the horizon, stunted economic growth with inflation burning in the background.
But quite frankly, the alternative is much worse, right?
If the Fed pivot, they lower rates, they continue to pump money through the market, inflation could go out of control here in the United States.
And I think that's a bigger problem.
Philip, Daniel has a question for you.
That's a pretty scary thought, Philip.
I'm glad that you're joining us again.
I don't want to be the skunk at the party here, but my area is a little bit less esoteric than you're in Dr. Paul's.
I like to look at how bad policies affect the world situation.
Dollar's Value in Crisis 00:11:10
And I'm sure you've been watching the Dutch protests, and it seems like a contagion that has spread as quickly as the virus a couple of years ago.
The Dutch farmers, as you know, have been spreading manure on parliament, which is something I think is a very good idea.
They've also been blocking roads.
They've been doing all sorts of protests.
The police have responded in a very shockingly violent manner.
It's not something you usually think of in the Netherlands.
Ava Vlardingerbrüek was on Tucker last night, and you may have seen her on the show when she explained what was going on there, that this is a fake nitrogen crisis.
A lot of it's brought about by the elites that gather at Davos every year, and she calls it a real land grab.
They want to get the land away from the farmers.
And we've talked about this on the show a little bit yesterday, but we see what's happening in Hollandau has expanded.
The Germans and the Dutch farmers met on the border.
You're seeing it in Poland, in Italy, in Spain, in France, and elsewhere.
Do you think there's something really to this?
What do you think it's all about?
And where do you see it heading?
Look, it's a tough climate.
And I think what we're seeing, what we have in front of us today is a global recession, right?
This isn't a U.S. issue.
We're seeing inflation ravaging most of Europe, all across the globe.
And at the end of the day, when people are hurting as they are today, then they come out and they push for change.
So, you know, it's not uncommon in times like this.
Look at what's happening to our politics.
Our politics is moving further to the left, further to the right.
So we're starting to see that.
And I think a lot of this is on the back of the fact that people are just struggling.
They're struggling to feed their families.
When that happens, things change.
And it's spreading across Europe.
We could see similar things here in the United States.
Look, farmers have got a tough time right now.
Inflation is going through the roof.
Things like fertilizer up 20%.
And they're not reaping the benefits of higher prices on the shelves.
So they're the guys getting hit.
And like I said, as long as that continues, I think we'll continue to see things like this.
You know, you have a follow-up on that.
I want to talk a little bit about some international trade issues.
And that is right now, people want to fight inflation.
That's the job, the job of the Fed, everybody else.
Do we need a recession to do that?
That sort of thing.
But there's a suggestion in the Biden administration, which means it deserves scrutiny before it becomes credible.
But their suggestion is, and what they will probably do, is to lower tariffs, you know, and make it easier to bring products in to fight the inflation.
And of course, there's some immediate effects from that.
That is true.
If there are less tariffs, some cheaper products can come in, which will infuriate our people, or our producers.
So there's a question there, but this whole idea that that's going to fight inflation as a real challenge.
And yet I have so often said on this program that so many of our problems, whether it's the war issues or the monetary issue and debt issues, that it's always essentially bipartisan except for the few.
And so when they made this, when the Democrats made this suggestion, well, why don't we lower the sanctions and barriers with China?
Oh, hysteria broke out among a lot of Democrats, but a lot of Republicans too.
So what do you think will happen on that?
Do you think they're going to do this?
And what would happen if they did remove the sanctions and lower the tariffs?
I don't see it happening.
Like you said, people were furious on both sides of the fence.
Will it have an effect on inflation?
Will it lower prices shorter term?
Yes, of course.
But there are other effects.
You mentioned domestic farmers here in the United States suffering on the back of that.
Look, I don't think it's a real solution, right?
The real solution needs to be fiscal sanity, right?
We need an administration in the White House that understands that a large part of the reason that we're here is on the back of spending, right?
The Fed, they only control half of the puzzle, right?
They control monetary policy.
They can raise rates, slow inflation, which, as we know, is going to be difficult.
It's the Biden regime that controls fiscal policy, how much money we spend.
And my concern is that their solution to almost everything, when you scratch beneath it, is just spending more money, right?
Their solution to lower gas prices is a gas tax holiday, right?
It would save individuals 18.4 cents a gallon, and it's better than their previous plan, by the way, which was to try and tax gas companies, which was nonsensical.
But it still increases the budget deficit at a time when every single dollar counts.
Look at their inflation-fighting proposal from a couple of months back, right?
They wanted to invest in infrastructure, lower the cost of childcare, pass clean energy tax credits.
All of these things are massively expensive and ultimately massively inflationary, right?
So I think what we're doing is we're focusing on the small issues and ignoring the elephant in the room, and that is that massive government spending has got us to where we are in large part.
So I don't see this as a solution to really deal with the issue.
All right.
Daniel?
Well, I know, Philip, you're a gold expert, and this is a pretty good time to be holding a bunch of gold.
I'll tell you what.
So I hate to get us back off track.
But, you know, I know you watch the market as a whole, and I'm just fascinated by this proposal to put a cap on oil prices, a global cap on oil prices.
To me, it seems like the equivalent of a no-fly zone that they wanted to do over Ukraine a while ago.
And there's a good piece on Zero Hedge.
I think it was from an oil expert.
But I just wanted to get your take on what you think about this, because it seems like one of the craziest ideas, and if you think about it, capping oil right now would require Russia to agree to supply oil at a lower price.
OPEC Plus must agree themselves.
They're making great money right now, great profits.
They've got to agree to say, hey, you know what, we don't want this much money, right?
It's just too much.
And then you have to have China and India agree to be part of this deal when they've already made a lot of political and other sacrifices to go ahead and buy this.
So what do you think about this proposal?
Is it DOA?
It seems to keep sort of coming back up for a breath of fresh air.
Look, you know, in theory, it's a great idea if they can control gas prices.
But like you said, I think it's, for me, dead on arrival.
It's going to involve, you know, Saudi Arabia, Russia, Iran, countries like this coming together, like you said, limiting profit, you know, working with strategic enemies to get this done.
And it's just not going to happen.
And I would say less so in today's geopolitical climate than any other that I can remember.
So for me, it is DOA.
I do not see it happening at all, at all.
You know, the other thing that's pretty important when you talk about international trade and balance of payments and all will be the perceived value of the currency.
And right now, internationally, the dollar is perceived to be pretty strong and it's doing okay.
So I get the question sometimes because I've said you keep printing the money, the money's going to be debased and the value is going to go down and you're going to have rising prices.
They say, well, yeah, but the dollar is very, very strong now.
It's really hurting us.
So we can buy stuff cheaper, but nobody's buying stuff from us because of our strong dollar.
But, you know, couldn't that be partially answered or explained that maybe the measurement of the dollar compared to a bunch of other fiat currencies is not as crucial as it might have been when there was sort of a definition of the monetary system, say under Bretton Woods, there was a little bit of control.
But what they will say, what I suggest to them, I said the value of the dollar, maybe it should be how the housewife and the other people who buy their groceries and then their gasoline, how are they responding?
You can't say, well, it's a strong dollar and that'll do certain things.
At the time, though, I say it's a weak dollar that makes our prices go up.
It's exactly correct.
You know, the dollar right now is being strengthened, as you said, by proxy, right?
It's the fact that other currencies are weaker, right?
But that doesn't mean anything to us here in the United States.
What the dollar is doing now, in my mind, is failing to deliver on one of the primary characteristics that defines money.
It's no longer a reliable store of value.
Let's understand the dollar has lost 10% of its purchasing power in the last two years.
By definition, it is failing.
The fact that it's stronger than the Euro currently than it has been in a while doesn't really help individuals here in the United States.
Like you said, it makes our imports a little bit cheaper, but we need to be producing.
We need to go back to what made us who we are today.
It's outside of that, though.
I'm concerned with a lot of sort of foreign policy.
I think there's a couple of things that are making the dollar less attractive.
Number one, domestic policy.
We have a federal government that have printed the dollar into oblivion, which causes a problem.
The other side of things is the political side, right?
Look at what we did to Russia.
We sanctioned Russia.
We weaponized our U.S. dollar.
The thing is, like a one shot, right?
We fired that bullet.
It went out.
The problem was Russia were fairly prepared, right?
They pegged their currency to the value of gold.
They reduced debt to almost zero and they managed to stabilize the ruble.
What it's done for me, though, is alerted a bigger economic problem for us, which is China as to the issue.
What did China do?
They had aspirations for Taiwan.
Governments Looking to Come Back 00:03:58
I think they slowed that down.
Now they're looking to diversify out of a dollar-based system, immediately went to Saudi Arabia to try and negotiate oil sales outside of U.S. dollars.
They've been meeting now with other BRICS nations to talk about a rival global reserve.
Is it going to happen tomorrow?
Absolutely not, right?
Central governments move at a glacial pace, so it's slow, but it tends to have an unstoppable momentum.
And it's things like this that concern me more than recession, right?
Markets are cycle, cyclical, rather.
They'll come back eventually.
We can get through that.
Changes at a governmental level, at a global level, those things we don't come back from.
So it's this stuff that I'm worried about longer term.
It's my biggest concern.
Oh, very, very good.
I want to get a couple of comments from you about the Federal Reserve.
My history of thinking about and dealing with the Federal Reserve really was a dramatic dramatic example of what happened because the prediction was there that the Bretton Woods system would collapse.
And I remember so clearly August 15th of 71 when it did and ushered in this age of constant inflation and business cycle.
So the Fed, the Fed is important because so many of us see this as the engine.
There's a lot of reasons why there's an incentive for the Fed to do what they do.
But if the Fed didn't exist, they couldn't do it.
And there have to be some other ways to finance these deficits.
So yes, to say the deficits are bad, we know that.
But it's also the collusion between big government proponents.
And they're on all sides of the aisle, up and down.
Everybody has a reason why they need more money.
So I want to see if you can give me a suggestion on which way you think we ought to be going.
You know, I've in the past supported an audit of the Fed.
I've also thought that there could be some minor reforms that could be helpful.
And it's maybe a mini step in the right direction.
And competition, you know, changing maybe the monopoly law rules on the currency might help.
And of course, that applies.
I use that in the argument about why people might argue the case for a new currency and cryptocurrency.
And on that issue, I say it should be legal.
People should be able to compete with it.
And then there's others, and I think it would include a few of our viewers.
Why do we have it?
Why don't we really be serious about just getting rid of a system that hasn't done us well over the years?
It has produced runaway spending, welfarism, and warfarism.
So what do you suggest that we do now?
And maybe what can we do in the long run?
That's a tough question to answer.
Look, I agree with you.
We need to create more competition.
I don't think that's a bad thing.
I think the trajectory we're heading is to move to some form of digital currency.
I see governments ultimately adopting.
It makes sense, right?
Look at the Biden administration.
They're trying to track down every $600 payment.
They're massively beefing up the IRS.
So I think for governments like the one that we have today, increased control is what they're looking for.
And I think a new system that allows for that more easily will suit them.
I'm not sure it's the right thing for individuals.
I think our freedoms are slowly being taken away.
So for me, small government has always made more sense.
Government Control Increasing? 00:01:15
I don't see it today.
When it comes to the Federal Reserve, look, in my mind, I think they need to be kept a little bit more accountable, right?
They work under the shadows.
Should they be audited?
Absolutely.
They have huge control over monetary policy here in the United States.
It's very important that they become transparent.
So, look, I think the system we have has serious holes in it.
I think we're going through a period of transition.
Where we end up, I think, will be interesting.
Yeah, some form of a digital currency at some point in the near future, government-controlled, feels like a natural progression.
It does.
Very good.
I'm going to wind this down now by first thanking you very much for joining us.
And most people do know by now that you work with Birch Gold, the same company that I work with and promote.
And I'm sure we'll be hearing from you again.
And you're the precious metal specialist that works with Birch Gold.
But I want to thank you very much for being with us today.
And I hope we have you back again.
Thank you for having me, Dr. Paul.
Thank you so much, guys.
And I want to thank our viewers for tuning in today.
Export Selection