Dr. Samuel Gregg is research director at the Acton Institute. He has written and spoken extensively on questions of political economy, economic history, ethics in finance, and natural law theory. He has an MA from the University of Melbourne, and a Doctor of Philosophy degree in moral philosophy and political economy from the University of Oxford. In this wide ranging interview we discuss inflation, the Federal Reserve system and much more.

Hey everybody, Jonathan Doyle with you.

Once again, thanks so much for taking a moment to tune

into the supply side podcast.

I'm really excited about the interview that we're going to

share with you in this episode.

It's one of our absolute best.

My guest.

This time is Dr.

Sam Gregg, who is the research director at the Acton Institute in the United States.

Sam has an incredible background an Oxford PhD.

He studied under the brilliant John Finnis and has written extensively

on political economy, natural law.

And you're going to hear this wisdom, this intellect come through in this discussion.

It's very wide ranging.

We pick up on some of the current themes around inflation.

In the global economy, but we talk very much about the basis of

culture and the kind of society that we would all like to inhabit.

So I really think this is a special interview.

Sam's wisdom his depth of knowledge and his capacity to frame the

complex things that are happening in our world is really impressive.

So I know you're going to get a great deal out of this in terms of

housekeeping, please make sure you've subscribed wherever you're seeing

this, whether it's on YouTube, on the website@supplysidepartners.com, or if

you're listening to an audio version, please make sure you've subscribed.

And we'd love if you could share this with people, of course, as well.

The only other thing is we actually had a power failure about 50 minutes in, so

there's a little bit of editing around that section, which you'll notice, but

otherwise I think this is really one of the best interviews that we've done.

So please sit back, relax.

Enjoy this outstanding interview with Dr.

Sam, Greg from the Acton Institute.

Dr.

Sam, Greg, we've been talking off air, but thanks so much for joining

us on the supply side podcast.

It's great to be with you, Jonathan.

We've been talking a little bit about the the strange world.

We're all inhabiting, but you're in Milwaukee at the moment.

Give us an insight.

So what's the general feel in the United States at the moment?

What are you experiencing?

I think it depends what state you live in, but I, the picture that is

emerging across the United States as the country gradually opens up faster

in some places than others, is that to a certain extent, there's a degree

of normality starting to prevail.

So what I mean by that is that people are walking around not wearing masks.

At least I think it's about half the population is close to

or has been fully vaccinated.

And more than half the population received, at least one shot businesses

are starting to open and you can go into restaurants and cafes and you

see no one wearing masks anymore.

More and more people becoming more and more skeptical, frankly, of the

experts and technocrats and politicians who have been implementing different

policies since March last year.

So in that regard, I think it's quite encouraging.

On the other hand, you look around and lots of small businesses that

have closed and are not coming back.

There's also a lot of people I think, who have been genuinely scared and it's

taking a while for people to adjust.

To living in an environment whereby they don't have to wear masks.

They don't have to constantly be on the lookout for all sorts of different

constrictions and restrictions that apply in different places.

And if you've lived under that type of regime for a while, then you start

to realize, you start to realize how much freedoms you gave up for a short

period of time, or in some cases, a long period of time, and how much

power was given to state governors in particular during the COVID pandemic.

I also think there's a certain sense that people waiting to see what

happens when the weather starts to get cold on later in the year.

And if there's a second wave what's going to happen now, what's

interesting about the United States is that most of these policies.

Implemented and directed by the states rather than the federal government,

which means there's enormous variations between different states.

And even within some states, you can go from county to county and during

some of the worst COVID periods you to count encounter very decent.

Panic, pandemic, regimes, and constraints being in place, but people

I think are wondering what's going to happen when we get to winter.

And if there's a third wave I do think it will be harder for governors to lock

down hard again, because after a year and a half, now we can look and say, okay

very different policies were followed in a state like California compared

to a state like North Dakota or Texas.

And we see that things like infection rates and death rates,

not actually that different.

So it does raise questions about how effective some of these

particular policies have been.

But I do think the vaccines have really changed things dramatically and made

it much harder for political leaders to maintain some of the very strict regimes

that were in place for a long time.

I've been reading your recent pieces.

My, my brains basically exploded.

So what I have here is just for the viewers, I have summaries

of a lot of your recent stuff.

And I came into the studio early and I thought, we'd start with I really want to

talk about, political economy with you.

We want to talk about inflation.

We want to talk about the federal reserve.

I think we're in really remarkable times.

I think we've, we've definitely had, money printing and all sorts

of stuff previously, but the scale that we're seeing things out at

the moment is quite extraordinary.

The first, most important question, and this is going to help me with my

humility, the excellent article you wrote by the French writer, Jack, give

me the clinics, correct pronunciation.

So I've read this.

We're going to talk about Jacques roofs were on inflation.

Because I think you've just raised some brilliant stuff in this

article, but give us your initial take on the inflationary outlook.

What do you think is happening in terms of monetary policy and where it's heading?

Everyone who's, who has this discussion right now starts by saying

it's too early to tell, and it is in some respects too early to tell.

But what we do know is that since last year we have seen the federal

reserve in the United States keep interest rates extraordinarily low.

We've also seen both the Trump administration and the Biden

administration engage in even greater levels of deficit spending.

Then we're done during the second world war.

When, as I recall, America was fighting Nazi Germany and Imperial Japan, which

I don't think we're actually not in a type of wall right now, as far as I know.

But of course, much of this was in response to the pandemic in the sense that

the economy needed to be pumped primed to keep it going during this period of

time, especially when you had so many people losing their jobs and there were

genuine concerns about productivity.

So it's the, it was the standard Keynesian approach to dealing

with these types of situations.

Although I don't think it had ever been tried during a pandemic before.

So what does this mean?

What it means is that for example, the federal reserve has more or less printed

the equivalent of 25% of American GDP.

That's a pretty big boost to the money supply.

All the deficits suspending has also meant that there's a lot of other

sources of capital that have been pumped into the economy and inflation.

One of the ways that inflation curves is when you have too much money and

not enough money being consumed, so to speak, we'll use per pro productively.

So you have this, prices start to increase.

That's how inflation happens.

And we've seen some significant inflationary increases over the past

four months, which should be expected because it's about a year since some of

these measures started to be employed.

And so that is adding fire a funeral, I should say to an

economy that, which in America, at least is starting to roll back.

And so I think there's genuine concerns that we, if we're not careful and if

the federal reserve doesn't change policy in terms of interest rates,

we could find ourselves heading in the direction of 1970s inflation.

And getting out of that was extremely painful.

Are those listeners and viewers who are familiar with economic history

will know that was the inflation stick was broken in the early 1980s

when the federal reserve jacked up interest rates in extraordinary levels.

But that had very negative effects for lots of people who lost

their jobs as the economy became restricted and contracted, et cetera.

The other thing of course is that when you can't keep these things contained

to the United States, because America is the world's biggest economy and when

American dollars get pumped into the American economy, The American dollar

being the world's reserve currency.

That means that the inflationary reflects won't be confined to

the United States then will flow over into the global economy.

If then if this inflationary effects occur, this was the point that

Jack ref was making in the 1960s.

When the American government was spending lots of money, borrowing lots of money.

And you couldn't keep that his point was she can't keep that confined the

United States that has flow on effects because the dollar is voluntary purposes.

The world's reserve currency.

It is still too early to tell.

And who knows, maybe the federal reserve we'll decide, okay, we

need to raise interest rates.

In fact, there'd been some intimations that's what they had in mind and they seem

remarkably sanguine in certain respects about the prospects of inflation, but

some of the early warning signals, I think that started to flash in April and now

are flashing even more brightly right now.

Should at least give monetary policymakers cause for concern and

maybe make them rethink some of the easy money, low interest rate policies

that have been following for some time.

Now I

wanted to ask you there's a great quote you've got here from your wife where you

you're writing here about his work and you say the anger that the effects of

anti inflationary policies generate among voters do not incentivize governments

and central banks to go down this path.

So I've been saying for months, that is it fair to say the system that we're in.

Nobody wants it to collapse on their watch.

So the can is kicked down the road indefinitely.

Here in Australia, we just had a budget that defies, all historical

precedent, really for, the Australian experience and, knowing that the people

making these decisions in four, eight years time, won't be there anymore.

What does that mean for political economy?

For cultural stability?

When decision makers genuinely disincentivized

from making hard decisions.

This is one of the things that goes along with living in democratic systems, right?

It means that political leaders are especially sensitive to

shifts in public opinion.

And that's fine.

That's how it should be.

Politicians should be to a certain extent, attentive to what voters are

experiencing, what their citizens believe is important and not important.

That's part of living in a democracy.

The difficulty is whenever political leaders have to make

hard decisions on monetary policy leaders have to make hard decisions.

They, and if the electoral cycle is a relatively short one, like

in Australia where it's only every three years, which is actually very

short, it comes to electoral cycles.

It means that.

So for example, if you want to implement us to do something about right rising

inflation, Then, if you're a monetary policy maker, then you have to

stop raising interest rates, right?

And that puts pressures on homeowners.

It puts pressure on businesses.

At some point it will cause some businesses to fail some people to default

on loans, because that's how you squeeze inflation out of the economy, right?

You basically reduce the money supply, so to speak.

But when the money supply starts to shrink, it means that there's less

capital to go around, which means that business, some businesses will fail.

Some people won't be able to pay their home loans, et cetera, et cetera.

And people blame.

Whoever is in power for that.

Let's remember that in the early 1980s, when the federal reserve moved

quite aggressively to essentially.

Break the inflation stink that Paul Volcker that's right with Paul Walker.

So remember inflation was, 10, 11, 12%, which is high.

That's basically saying 10% of my, of $1 in terms of its buying potential

purchasing power disappears in a year.

That's like taking a 10% pay cut.

Volcker did this and it was the right thing to do because

inflation was a major burden that the American economy was herring.

But in may Volker and Ronald Reagan extremely unpopular people forget

that in 1982, which is when the, some of these really tough interest

rate policies were in place, Reagan's popularity was extremely low and there

were many people wondering whether he was actually going to get reelected.

So

It.

If there are very few political centers for central banks or presidents or

prime ministers or treasurers or secretaries of finance or whatever,

to go down this particular path.

Now, sometimes they do because they do the right thing and there

they are very good at communicating the reasons for doing this.

And sometimes enough people in the population will understand

why this is necessary.

I remember growing up in Australia in the 1970s, maybe you remember this

as well, but in the 1970s and 1980s, when inflation was a real thing.

And I remember my parents talking about the effects of inflation upon the

economy, and it was made very clear to me.

I don't know about you, but it was made very clear to me that inflation was a

very bad thing and it was cramping growth.

It was distorting prices.

It was reducing purchasing power.

And I think at that point enough, people were willing to say, okay, it's going to,

we're going to have to take some tough medicine for this, which is part of the

story of Australia's economic turnaround in the 1980s, but it was very painful.

And I do wonder how long populations will put up with

that type of pain in the 2020s.

I really do wonder about that type of thing.

So good policy doesn't necessarily get rewarded at the ballot box.

That's I guess one of the one of the lessons and central bankers

don't get rewarded for good policy.

In many cases, island,

I wanted to ask you a question on that as a tangent having I've been reading Jude

when he skis the way the world works.

That kind of is what started my journey into supply side theory.

And one of the things that struck me was he argued.

Really what politicians do.

And you alluded to this a moment ago is they try and read the electorate

and figure out what the electric wants.

And the politician that wins is the one that best serves up to the electorate,

what the electorate actually wants.

Whereas I thought it seemed to me that it was more a case often of

politicians having ideas and then trying to sell them to the electorate.

So I guess what I'm asking you is, if you could sit the population down and

explain to them the kind of things we're talking about, surely they would

eventually say, anti inflationary policies are really important.

What I'm asking you is do you think these policies are inflationary

policies are bad for people.

Why are they, why do they continue it?

But at what point does it have to be enough pain before the

system people finally, vote?

I can't quite pin it down, but why does it continue of it's so harmful?

There's a couple of reasons.

One is remember that some people benefit from inflation.

So the people who benefit are those who understand the financial sector, those

who have liquid investments those who have financial skills that enable them

to maneuver their way through the crisis.

Those who who realize, okay, if I take a loan out now and at this level of

interest rate with inflation, that means they're going to be paying back much

less than I otherwise normally would.

So there are some constituencies that.

Inflation's okay.

It's not as big a problem.

Now, if you're on a fixed income, if you're on a state pension that doesn't

change that much or you're on a low wage, then inflation very quickly eats away at

your ability to buy and buy what you need.

So that's one thing.

So I think there are some groups who are significantly able to win

the store much easier and others.

The second is that.

Much of the political classes is more or less insulated from the

effects of their own policies.

I think that's that's true everywhere.

Those people who are in charge are usually not particularly effected

by the policies that they implement.

So they don't feel the heat immediately as personally, as some other people.

Another reason is that something like inflation creeps up, it's not something

that just it doesn't explode overnight.

You don't go from 2% to 20% overnight.

Unless of course you're living in a country like Venezuela or Argentina,

but for the most part, inflation is it's not a gradual process

and people don't really notice.

That's another thing.

People don't notice what's going on for a while, but it's not just in inflation.

It's also things like trying to tackle welfare state spending.

There's lots of constituencies.

That are against any meaningful restriction or restraint,

let alone reduction size of the welfare state, right?

Because there's many politicians.

You alluded to this when you talked about politicians, giving people what

they want, that's how you get elected.

That, what that means is that elections degenerate into bidding wars who can pop,

who can offer the most to the electorate.

And the politician that generally loses is the one who can't or won't

offer as much as the other person, wherever I think of it this way.

Imagine you're a politician.

Are you really going to go to the electric and say, I promise austerity,

or I promise, in fact, I want to tell you this, I cannot solve all your problems.

Yeah.

That is not, that's true politicians and government console, all our

problems or even many of our problems.

But the point is that to say that out loud is not a winning.

Yes.

So let me ask you this.

I'm really interested.

Is this an inherent floor in democracy now in your other article, the great

price of America's a great lockdown.

You talk about millennials have been, exposed now to two major financial crises.

They're getting used to statism and they get, they becoming

somewhat in newer to it.

There's plenty of research that says young people are no longer

seeing democracy as the best system.

Is it an inherent floor in democracy when bread and circuses get people elected?

How do you navigate that?

All sorts of regimes use bread and circuses as much as in democratic systems.

Roman emperor is where, of course the expression comes from Ryan.

They were very good at using bread and circuses to keep

the people are grown, happy.

Authoritarian and totalitarian regimes typically use bread and circuses, but

they also use prison camps as well.

So bread circuses and prison camps in their case.

So this is not necessarily a feature of democracy, per se.

Even an authoritarian ruler has to be attentive to what public opinion wants.

That's why, if you look at most, the history of most authoritarian regimes,

one of the reasons they, the rulers typically pay attention to what the secret

police are telling them is that they want to know what people are thinking and

what they want to know what's going on.

So then they don't people so far that people start to push back.

So I don't think it's a.

A democracy per se issue.

What is I think different about the political economy of tomorrow is this

fact that it encourages bidding wars between politicians now who can give

you the most and you vote for the person who promises to give you the money.

I also think that something that you alluded to before about

expectations, maybe it's the case that we've grown to the point where

we see democracy as being as type of elixir for any number of problems.

And I happen to think, for example, when it comes to political economy,

when it comes to questions of economic growth or decline for that matter,

Rule of law and strong property brides a far more important for economic

growth and prosperity than democracy.

Democracy is not necessarily a problem for these things.

It can be, but it's not necessarily, but if you take away rule of law,

you take away private property rights will significantly compromise either.

But then I sh I can assure you that the type of prosperity that markets

delivers will quickly start to fade away.

There is.

One of the things I think is that has been associated a lot with some forms of

democracy, of course, is this problem.

This problem of crony capitalism, which I think is actually a much bigger problem.

Facing Western democratic societies with more or less market economies.

Then the tone of lots of younger people towards a socialist ideas, for

example, and by currently capitalism, what I mean is you get wealthy by

being close to politicians, you get wealthy by playing political games.

You get wealthy by.

Making sure that you'll your getting some sort of tariff protection or you get

some sort of subsidy from the government.

And so you'll focus is not so much upon what consumers want.

It's much more upon what you can get out of the system.

And so I think you see that as becoming more and more a problem

in many Western countries.

Now that's not a new problem.

Cronyism has been around for a very long time, but one of the things about

free markets is that it does tend, they do tend to reduce the scope for

cronyism because when you have a free market, you have less regulation,

you have less government agencies.

And so the incentives are less to go to the government to try and get a

favor or some sort of privilege from the state, but with the growth of

the state, which we've seen, I think.

Kering in most Western countries, I think over the past 15 years,

especially since the financial crisis, the return of the state of your Mike.

I think that has gone hand in hand with a certain degree of cronyism and cronyism.

Isn't just necessarily about highly placed individuals getting things.

It's also about mass movements or powerful interest groups, getting

what they want out of the system.

And in a democratic system, you have more avenues for doing that.

And again, this is not an argument against democracy per se, but it is

something to think about when we talk about the political economy that goes

hand in hand with democratic systems.

I thought we could just jump in the deep end and I'm interested in.

This dependence that people seem to be having upon the state.

So if you look at someone like a Joseph Ratzinger, he'd argue that the great

crisis in modernity is w is almost what he would say is a lack of a sense of

fatherhood of cosmic fatherhood, so that people no longer feel a strong sense of

protection or their place in the cosmos.

We're jumping in the deep end here, but what is this drive that we're sending

to see where people expect government to provide and government will give

me this government will give me that.

Is this a crisis of virtue?

As I listened to you, I think in my head for years, it's always been on

me like entrepreneurship business.

I don't want.

Government money.

I don't want it in, I just don't like, can you speak to the underlying sort

of philosophical anthropology that, that I'm getting at or what is pushing

people towards this dependence mentality?

There's a philosophical answer to that.

There's an anthropological answer to that.

There's also an economic answer to that.

So let me start with the last I think when the state starts consuming anywhere

between 40 to 50% of the economy in terms of GDP, which is normal in Europe

it, we shouldn't be surprised that people start to look to the state.

To solve lots of their problems after all the state controls this amount of

the economy, shouldn't it surely with all that, all those resources, it should have

the capacity to fix all these things.

So why shouldn't I look to the state to fix all these things because they're

consuming half the economy anyway.

So that's there's an economic side and that skews incentive skews that

incentives towards securing my livelihood via the state, rather than through

individual responsibility, hard work, being entrepreneurial, et cetera.

So that's one philosophically of course, I think there's also a dimension to this

insofar as the state tends to feel gaps.

And one of the gaps that I think missing in many Western countries now, are you

talked about it in terms of fatherhood or what Jess talks about in terms of

cosmic fatherhood in some respects.

The state has supplanted the place of God and God, the father in many societies

in the sense that it's literally seen in very paternalistic way, which is

what, that's what parents are, they're paternalistic towards their children.

And when we S we kick God out of the picture or we keep religion out of the

picture, or we reduce religion to being.

It's what I like to call the mildly religious arm of the German welfare state.

We shouldn't be surprised that people start to look at the

state in this particular way.

So I think that's part of it.

I think another thing in terms of anthropology is that it reflects also a

shift away from the individual dimension of the human person towards the social.

Now as human beings, we are individual and we are social, we are free, but

we're also dependent in different ways.

We have reason and we have free will, but we're also fallible, right?

So there's all these different aspects of who we are as persons which counteract

each other balance each other off.

So for example, the fact that we have reasoned in free will is fantastic,

but the fact that we have fallible also reminds us that our reason and

our will is not to be acquainted.

That of God, or then a powerful creativity.

Isn't deep, powerful, but we're not the create tall.

So we are co-creators if you like, but we're not the creator.

So when any of these things get out of balance, you see particularly

dysfunctionalities emerging.

So when you see the individual dimension of human life and human beings played down

in favor of the social side, then that can very easily shift in the direction

of a type of collectivism of the group, collectivism of the tribe, collectivism.

Politics collectivism of the state.

You go the other way as well.

So if you so emphasize the individuality human beings at the expense of the

fact that we are also social creatures, then you end up with a type of

utilitarian radical individualism that sees us as having no responsibilities

whatsoever towards other people.

And I think at the moment, we're very much in at least in many Western countries,

when I hear people talk about radical individuals and my response is actually,

I think that radical individualism that exists is actually a reflection

of the deep collectivization of.

The way we think about the world, the way that politics increasingly operates.

And even in some of the ways that economic policy is pursued and articulated.

So all those things that you can, NAMEC dimension to this, the philosophical

dimension to this and the deep anthropological dimension to this, all

of these things, point to the state playing a bigger role in our lives.

And when that occurs, we shouldn't be surprised that more and more people

look to the state to take care of them, for them to become dependent

upon the state rather than their own efforts, their own families and

the broader civil society that, that surrounds us in most Western countries.

So when you see those things.

I don't think it's a surprise that we end up with this type of dependency mentality.

Of course COVID has exhausted this, right?

Because the state has taken such enormous role that normally we would

never allow the state to do in times of non-emergency, but one of the by

effect by results, I think about the side effects, I should say all about

COVID and the state's response is.

Getting the state out of all sorts of skills of life is going to be a lot

harder in the wake of COVID because when the state goes down a path of

taking over a different aspects of people's lives and invading more and

more of the social sphere, it's really hard to get the state to retract.

That's why it's always worrisome.

When you set up a new government department and you government bureaucracy,

or create new regulations the odds of retrenching, those let alone

getting rid of them altogether are

extremely.

When you said something here, and this is from your articles, the great

price of America's great lockdown.

You said retracting government into interventions is unlikely.

As government intervention is seen as normative and many millennials have now

lived through two major crises and see government intervention as normative.

So as I was listening to you, it's like when my kids were a little bit

younger and they'd stick plight, I will plus the sign into the carpet.

You can't get that stuff out once it's in there.

It's very hard to unpick.

A couple of quick thoughts on what you've been saying.

I want to talk you used the word fallible and I want to talk about.

You mentioned something in your other article here, reflections on the

present conservative discontented markets you talked about at the

core of markets at the core of arguments for markets are two things.

The first one you mentioned is a humility about what we can know.

I think that's very important because the masters of the universe

mentality of a lot of, central bankers and politicians is problematic.

I'm pretty sure.

And I've said this on several podcasts, the fed system in the

U S across the different feds has somewhere between 1300 to 1500 PhDs

on staff across the fed system.

So you would think with that collective intellectual power,

we wouldn't have had 2008.

We wouldn't have had a bunch of other things.

So I want to talk a little bit about the humility that we need

to navigate difficult times.

So if you can hold that in your head, but the other part was, if we got a paradigm.

In what you were just talking about, the atomization of cultures.

So the I phone mint era where people are highly focused on individual outcomes,

but at the same time, we're seeing the collectivism of politics of BLM movements.

Can you speak to that again?

W how do we get a simultaneous atomization of culture, the collapsing

into the individual, but at the same time, is it a tribalism where we're

reconnecting to a kind of tribalism?

I think in many respects what we've seen throughout much of the world,

not just with the black lives matter movement, but also the outbreak of

identity politics, the emergence of new forms of nationalism, et cetera.

These are they're expressions of many things, right?

But they, at some level an expression of the design.

To answer the question, who am I, and where do I come from now?

Economics, doesn't provide you with answers to those questions.

But there are political movements, political ideology, but also facts

that tell us these sorts of things.

I think that increasingly politics is driven today by people giving different

answers to the question who am I, and that becomes more important answers to that

question become more important than things like Liberty and personal responsibility

and the obligation we have to.

Use our minds will talents, et cetera, to forge a path forward.

Instead, we find increasingly people talking more and more about identity.

That seems that's part of the reason for Brexit.

That's part of the reason for the election of Donald Trump in 2016.

I think it's part of the reason for what we see happening in China.

And remember this radical return.

Chinese nationalism.

I think it's also explains a lot of skepticism about the European union,

which skepticism I share, although we'll be at four off in different

reasons and say nationalists.

So all this identity stuff is swirling around and people are

finding meaning in that type of thing.

And that's partly, I think because of the just dislocation that's

occurred is the consequences of living in a market economy.

Now I'm a big defender of markets.

I write about markets all the time, but one of the things that

markets do is they introduce the forces of creative destruction.

They introduce a certain degree of instability and that's the price

you pay for more Liberty, right?

You accept that with more Liberty comes along.

So more uncertainty and a fair amount, the reaction against that now, and

people, some people are even saying an American I'm willing to trade off

less economic growth in return for.

Making sure that there's more solidity and more certainty and things like

employment to which my response was okay, you can do that, but let me tell

you that growth is really difficult to achieve in the first place.

And it shouldn't be so sanguine about losing one or 2% growth,

but also that's also a recipe in the longterm for stagnation.

You do not want you to know it's technician.

That is one of the worst things you could want.

So I think and of course, with getting to the question of the individualization

and the atomization, along with the state, I think when the state crowds

things out, when the state grows bigger, when it essentially absorbs or

crushes or neutralizes civil society, then people don't have other forms of

association, which they can turn to.

When it comes to living out of social lives.

So this is why you have this sort of animalization of society on the one

hand, but also collectivization going on on, in the other, because you don't

have this rich network of civil society that exists between these things and

allows us to express associativity without that becoming political.

But what also enables us to remain as individuals and avoid being dissolved by

the all massive old conquering, more power spent turning to the fallibility issue.

I do think that this is a major problem that is facing the conduct of economic

policy today, but it's been going on for a long time because the type of

let's call it Keynesian, Neo Keynesian, thinking that emerged in the 1930s

and really took off in the 1940s.

And for all the advances and shift back towards markets has never really

lost its grip on a lot of the economics profession or economic policy makers

or the people working in treasuries and ministries of finance, et cetera.

There's a type of fatal floor to that and the fatal flaw, and this was identified

by the Austrian economist Friedrich Hayak when he talked about the knowledge

problem and the knowledge problem is this that it's impossible for anyone.

You may a government central bank.

A group of planners, a cabinet is a department of finance to know

everything that we would need to know if we were going to successfully plan.

Economic development.

We can't know because all the information that we would need

to know is constantly shifting.

Whether it's in terms of consumer wants and needs in terms of what is going

on in the production side and what producers can produce and how they

produce it, how efficiently and how they do it in competition with others.

We can't know all the information that we would need to know.

Now we certainly can't know no, all that same information tomorrow, a

week from today, a year from today.

And yet a lot of government economic policy in a lot of central

banking assumes that we can, right?

So when central bankers engage in the fixing of interest rates, they're

looking ahead and saying, okay, we think that in a year's time, the

economy is going to be at this point, and this will be the optimal interest

rate for the economy at this point.

They really are shooting in the dark because they.

They can make educated guesses and maybe that's the way they

should frame these things.

But if you don't acknowledge that there are limits to the human mind's ability

to comprehend all this information, then you can end up making false

promises, shaming that institutions can do things that they can't.

And you also end up making a lot of mistakes, right?

Because if you assume that you know everything, when in fact your daughter,

you are bound to make some serious errors.

And in fact, there's a lot of empirical work that's being done now on the

way that central banking, in terms of trying to optimize what is the best

interest rate in 9, 10, 11 months.

Has ended up making some colossal mistakes, which were paid a big price.

So for example, interest rates were kept too low in the United

States between 2001 and 2005.

No one really saw the housing crisis.

So there's plenty of instances where we see this knowledge

problem manifest itself.

And then the cure for that is knowing that we can't know everything.

And that also means accepting this is the hard part that there are limits to

what governments and central banks can do when it comes to managing an economy

and the phase shouldn't, they can do things that they can't, that is a recipe

for serious economic mistakes being made at the fiscal or monetary level.

I when you were talking, then I was thinking, we used to spend a fair bit

of time in Manhattan every year or so with the family traveling and were

staying on the upper east side once.

And I remember walking into this supermarket and it

was almost below ground.

You went down and escalate a walked in.

Look here in Australia, we've got everything we live really

well, but I walked into this supermarket and I was just stunned

at the complexity, the variety.

And when you're talking about that, that information theory of capitalism,

because I've been reading George Gilda's knowledge and power, which I think is

his exploration of of Hayek's thinking.

And I was stunned.

I was just like, wow, the coordination of this, the vast number of

inputs to create what's here.

And for it to operate seamlessly was quite extraordinary.

The other thing you talk about is at the core of markets is this

this humility tasks, but that you say you can never give too much

attention to historical experience.

And this seems to be where the hubris comes in because the number

of bank failures the 2008 crisis, the lessons of history, I interviewed

Dan Oliver from merkin capital.

Who's riding on the some great stuff.

Yeah.

And he's interviewed him and his stuff on the on the on France was just brilliant.

And there seems to be this masters of the universe mentality isn't

there that, but not going to.

That history happened.

We're going to get it right this time.

Do you think, having read Roth Bard's case against the fed and I read

the creature from Jekyll island and you go back to the establishment of

the fed, not in 14, JP Morgan had enormous reasons to make it happen.

Do you see a case for central banks?

Do you see a viable, important role for them?

I think it's fair to say that central banking has a mixed record, right?

Many of the things that I, and I'm thinking really in a sort of post 1918,

or actually post 1914 year, right?

So between the, from the end of the I guess the last 30 years of the 19th

century, up until 1914, you had the gold standard more or less calibrated interest

rates around the world automatically.

It was what central banks just followed what was going on when

it came to currency shifts or they thought was happening in the economy.

And a lot of this was mediated through the means of the gold standard.

And there's all sorts of reasons why it was.

It also had the merit of putting a lot of monetary policy beyond the

power of policymakers, which maybe one of the reasons why it worked

and it, it was a discipline imposed from the outside, if you like.

And then after 1914 with world war one and the breakdown of the international

economy, the breakdown of the gold standard it's not central banks tuned a

much bigger role in managing economies.

And I think it's fair to say that their record in doing so has been mixed.

Sometimes they get it right.

Sometimes they get it wrong.

Sometimes they make errors, which they then find themselves

fixing 8, 10, 12 years ago.

It seems to me that central banks that operated with a light touch, I think

are usually the ones that tend to be the more responsible Others would

say that central banking is the last vestiges of central planning, right?

Because it does involve discerning what the interest rate is going to be for the

entire thrive, a $21 trillion economy.

That's I don't think you can really do that in any meaningful

way beyond just guessing.

Now of course, the problem is what's the alternative and that's where

I think it gets harder, right?

Because there are alternative schemes to central banking, gold

standard, gold exchange standard.

Some someone like Hayak, he got so frustrated with monetary policy, you

need to conduct a monetary policy that he argued for the privatization

of money saying that, money's important, but we should let the market

determine what counts as money and.

So there are alternatives out there.

I don't know.

I think the political climate is ready for that.

I'm not sure it will be in many respects.

But I think that having more modest expectations of what some of these

policymakers can do at the level of fiscal policy and monetary policy would

go some way to resolving some of these issues because we tend to look, for

example, at the fed, as the fed will solve this, the fed will manage the economy.

The fed will keep monetary policy in the right place so that we'll

get through all these things.

Having some rather lower expectations of central banks, I think is I think healthy.

Another way of dealing with this has been proposed more recently is

to really bind central banks with laws and rules that don't change.

So that an example would be no bail.

It doesn't matter how big the bank is.

It doesn't matter how big the company is.

There will be no bail period, no matter how big, the consequences

of that, of doing that.

Some people were saying we're at the point now where maybe we need

to start considering this because central banks basically operate

according to the principle of what's called constrained discretion right

now, what this means is that they aim at a sort of price stability.

But with the discretion to respond, this as is needed to unexpended,

crises are unexpected and unforeseen.

The problem is that gives central banks leeway to do pretty much whatever

they want this in Europe, the European central bank, they've been invoking

these sort of extraordinary measures things for since 2008 for today.

Departing from their own their own principle outlined in the treaty of

the European union, which basically says that their job is price stability.

In the United States, the chatter of the federal reserve is written in such a way.

Then it's two responsibilities at one price stability, but also quote unquote

maintaining a low level of unemployment.

That means that simple banks can appeal to one or either, or both of those ratings

to do whatever they want in respects.

So if there is a case, if we're thinking about realistic ways of

dealing with some of these issues, there is a case for saying that we're

going to bind central banks with some very strict rules that they con break.

The argument is that when you do that, then people's expectations will change

because If you know that the central bank cannot bail you out because

it is forbidden for bi-lingual out, according to law, then my guess is

that bank or business will take fewer risks than it might otherwise do.

So if you say you, if you go into business, you're a big bank and Deutsche

bank like Morgan Stanley or whatever.

And you know that if you take a risk that doesn't pay off and it's going

to result in your bankruptcy and you know that the feds or the European

central bank or the reserve bank of Australia is not going to bail you out.

It's probably going to change.

So we must be in a situation of moral hazard, right?

Where central banks create moral hazard by that was very mindset

that you can make all sorts of profit decisions as a big corporate,

knowing that you're too big to fail.

Sorry.

We know that a lot of big corporates in the 2007, 2008 prices and leading up to

that's exactly what they were thinking.

And we know that because we've seen books come out, emails be late where these

people are actually saying things like it's okay, the fed will bail us out.

If this goes south, the bank of England is going to bail us out.

We're too big to

fail.

I don't know if you've heard of any of Jeff's Jeff Schneider's

work at Alhambra partners.

He does a podcast with a male colonoscopy and they go deep.

It's deep on the shadow banking, but the Jeff is brilliant and

yesterday's podcast was they titled it.

The fed is a janitor and the argument was that the fed doesn't actually

control or direct anything anymore.

All it does is come in and on the repo markets and just,

and clean up the message time.

It was it was quite, and it's a brilliant podcast.

If you haven't heard, I'm gonna link to that in all the notes here.

But I was quite struck by that idea.

It was like, it's like letting kids play in the sandpit and we'll

come in and clean up the mess.

When they're all finished,

that when they clean up, they genuinely generally create problems

that will manifest themselves.

At a future date, right?

So here's an example dot com bubble bust blows up in 1999, the fed

dramatically lowers interest rates.

Okay.

That's the response to prevent the economy from going too deeply into recession.

The difficulty of course, is that they kept interest rates too long, too low, too

long, which gave us the housing crisis.

One of the reasons that we had the housing crisis in 2008, and I think

this is also I think, more or less empirically established now that when

central banks respond to crises in this way, precisely because they can't know

everything precisely because there's no such thing as the optimal response that

will resolve all problems, precisely because there are unintended consequences.

There's going to be another problem in whatever number of

years, sometime down the track.

On what you were saying with, putting in some iron clad legal frameworks

that reserve banks can only do X can you genuinely imagine the

political will required for that?

If the political class is profiting off it, if big corporates profiting

off the existing system, where would the political will come from to

actually enforce that sort of stuff.

And also you look at the U S debt ceiling, it's always like we

promise this time we won't raise it.

We promise you can trust us in the government.

So where do we, where would we have to have enormous suffering,

great depression style suffering to get that kind of political will?

The American former mayor of Chicago, who was also a Congressman, the

democratic congressmen, and also president Obama's first chief of staff.

The man named Rahm Emanuel.

I don't know.

Anyway, he's one of the most famous things he's known for saying

is never let a crisis go away.

So how did the United States get Obamacare because of the 20 2008 financial crisis?

It opened up the door for, to elect the president and a Congress in the Senate

that were disposed to pass a major healthcare bill that changed the delivery

of healthcare in the United States.

Would that have happened without the financial crisis?

Probably not.

Even if president Obama had been elected, I doubt that would

have been the opportunity for him to do something like that.

The scale of the financial crisis and the subsequent great recession.

I'm inclined to say in these instances that whether it's something like trying

to get in place a legal framework, even a constitutional framework, because I

sometimes think central banks are likely the fourth branch of government, which

we never talked about them that way, but I think they effectively are, but to put

some sort of very strong, constitutional restraints around them, I tend to think

that the only circumstances in that will happen is in the conditions of a severe

crisis where it's either so obvious.

This has been caused by bad monetary policy, that the population willing

to do this and the political class really have no choice or whether

there's some sort of economic crisis of such a scale that a group of clear

thinking, principled policymakers actually get that use of crisis.

It's an opportunity for doing something like that in normal times,

shall we say normally it won't make times that's tends not to happen.

I tend to think that economic change at the policy level generally only

happens in a very substantive deep way.

It's very difficult to change.

In the context of significant economic crisis, bit of

recession or a great depression.

Now, of course, no one wants a recession.

No one, certainly no one wants a depression.

But if those things happen, that's when I think there's an opportunity to do things.

I think I often think of Australia in this for that.

I can't help, but think that if it hadn't been for the very clear evidence

by the early 1980s, that the country could not keep going the way it was, it

could not keep going with high tariffs.

It could not keep going with his heavy reliance upon industrial policy.

It couldn't, there was enough awareness among the political class on the right

and on the left, but also substantative body of opinion, among opinion makers,

policy makers, but also a significant number of Australians themselves.

The old Australia had to go and something else had to be put in place.

Otherwise the country would have added net.

It ended up as well.

banana Republic.

Oh, Lee Kwan use the white trash of Southeast Asia.

Or in prison when Margaret factual was elected, would she have been able to do

what she did without the backdrop of the British economy, being a folding into

deep recession and the shame of Britain having to go to the IMF for a bile out.

I think if there's a no.

There's enough conditions in place that make it possible for this type of change.

All right, saying welcome back after our power failure, we were just talking

about the hard decisions that often the political and corporate costs

struggled to make you are talking about the Australian experience back

in the 1980s the whole Keating era.

But I, I feel that history seems to judge kindly those that make the tough

decisions sometimes because we look back at Hawke and Keating is one of our

beta prime ministerial treasury teams.

Yes, I think that's right.

In retrospect when you look back and you think, okay, that government or.

That central bank or that central banker made the right decision, despite the fact

that it made them extremely unpopular.

And no one was particularly pleased with them at the time.

A very good example of that of course, is Paul Volcker who was head of the federal

reserve towards the end of the Carter presidency and into the Reagan presidency.

Raising interest rates to 20%, I'm sure did not make him very popular

with American homeowners or American businesses at the time, but it was

certainly the right thing to do.

And as a consequence of that, America enjoyed low inflation up until I

guess last month, more or less.

So yes, I think the reformers who make the right decisions in terms of sound monetary

policy, Or who are very proficient and effective in moving fiscal policy in the

right direction, in the long-term, they're the ones who remembered as successful.

Everyone else.

I think it's more or less a consigned to a type of blur or while

they're just like everyone else.

So if central bankers and politicians are interested in being states,

statesmen or stateswomen, or if they're interested in prosperity, I

should say, they're interested in how the history books will judge them.

Then they'll probably make the right decisions.

And this goes to the question I want to ask you at the very end.

It strikes me as very much a question about virtue and so much of what we've

talked about is if individuals striving in all their imperfection to be virtuous.

Virtuous cultures over time.

Listen, I'm being respectful of time.

I've got three quick questions.

We'll see what we can get to.

I've been reading Stephanie Kelton's MMT Bible, the deficit myth.

And I did that because I wanted to just try and fully understand

what MMT people actually think.

And I've been doing a series of videos on that, but I'm going

to ask you the broadest question that I ask most guests MMT as Jim

Rogers calls it more money today.

What is the inherent floor?

Elton says you can print forever.

The only constraint is inflation.

And that's why I'm doing this forensic type work through

working through the book.

Give us the inherent floor with MMT, despite apart from the obvious

it defies every lore of, reality.

Well, a couple of things, one, I think is that.

When you pumped purchasing power into the economy, it has to go somewhere.

It has to go somewhere and to my mind it makes if the equilibrium between

purchasing power and what's actually going on in the economy gets out of sync, then

you end up with significant inflation.

I don't see how you can avoid that.

So that's the first thing.

Second thing I think the other floor is that it makes the state makes the

central bank, the sort of the locus and the focus of economic activity.

I happen to think that central banking, monetary policy exists in order to

provide a framework for sound money in a given economy and by sound money.

Price, stability.

In the sense of.

That it accurately reflects supply and demand all those sorts of things.

So it's a place of, it's an ancillary role.

It plays a supportive role.

It's not meant to be the driving force of the economy.

The driving force of any economy should be considered the consumer.

It was Adam Smith who said that the purpose of the economy is

to meet and meet in an efficient and effective way as possible.

Consumer wants and needs.

That's where economic growth comes from.

When producers are able to do that.

When producers provide consumers with what they want in a competitive

atmosphere that encourages productivity, efficiency, and effectiveness to, to put

the printing of money at the center place of everything I think is to really make.

Miss miss locate where the center of economic activity should be.

It shouldn't be with printing money.

It should be with consumers and it should be with as well as consumers.

It also should be with entrepreneurs.

Entrepreneurs are the people who create wealth, not central banks.

There's a reading her book.

There's a constant use of a very nebulous term, which I came across as an

undergrad many years ago, she constantly references creating a more human economy.

We need to use MMT to create a more human society and a more human.

And I kept thinking, what does that actually mean?

There's a nebulous sense of, we can just print and we're going to head to this.

There's quite a utopianism to it.

There's a strong sense of we're going to be able to create this perfect society,

but our listening to you again, it's almost as if your point about placing the

reserve, the central bank at the center of culture goes back to that paternalism.

Again, it goes back to that.

We need this overarching entity to do for us, what we cannot

reasonably do for ourselves.

Last couple of questions.

Can you see a return to a gold standard?

The only correct answer is yes.

But

I think I haven't seen the gold standard work extremely well, but it wasn't

a certain time in a certain place.

And it was when money was understood and having certain characteristics, et cetera.

So whether one could replicate that today.

I don't know.

I do think that our current, the current way in which we do

monetary policy is very flawed.

And I don't think we should be closed in at least intellectually and on the

level of possible past policy to other possibilities that might be out there

for doing what monetary policy should do.

And it's the overall main goal of monetary policy is price, stability, and.

There are alternative ways of achieving that without some of the

dysfunctionality associated with contemporary central banking, I think

we should be willing to consider them.

Yeah.

And you

mentioned that in your ruin article where you made the crucial point that,

that we've picked up was that you wrote he also emerged as an advocate of a

return to the classic gold standard as a way to inhibit governments from

using monetary manipulation to avoid making the hard fiscal decisions.

So it's yeah, it's w when I think that's a crucial point.

And the last thing I wanted to ask you is I know this is a great focus of both

acting and yourself, the role of virtue.

I mentioned it a moment ago, but so much of what we've talked about

today seems to be around questions of what it means to be human.

Talk to us a little bit about the role of virtue in the way forward from here.

Can we reclaim it?

W what is the role of virtual?

What we've talked about today?

I happen to think that people making choices for the gore and against table

is crucial for any civilized society.

And that includes the economy, because if people don't choose to be prudent, to

be courageous, to be temporary to be just in the way they treat other people in

the way they view themselves in the world and they choose not to do those things.

Then they're going to choose not to do those things.

And you can't, which means they cheat, which means they will steal, which

means they will engage in fraud, which means they'll treat their customers

and employees and their bosses badly that they'll behave imprudently, that

when they take risks, that either be so low as to be ridiculous or so

big as to be extremely dangerous.

So in other words, I think that there are certain habits of action.

That are essential.

If you're going to have a market economy in which the government does certain

things, but certainly not everything.

I don't think it's a coincidence when Adam Smith added the six parts six to

his theory of moral sentiments, it was around about 1790 that he did this.

I don't think it's a coincidence that he did this because he wrote

the wealth of nations in 1776.

He wrote the first edition of theory of moral sentiments in 1759.

And my guess is I'm speculating here that by the end of his life, he realized

that commercial society, which is for the most part, what we live in

today, if they're not undergirded by a certain types of virtues, whether

they're commercial virtues, whether they're classical virtues, as we would

associate with a lot of Greece and Rome or whether they are theological

virtues, all these things matter.

If you're going to have a commercial society.

That is free, but also won people strive to live up to very high standards

of morality, despite the fact that they are in perfect do make mistakes.

And they often do so deliberately and with intent.

So I think because the alternative is simply to have the state try

and deal with all those problems and stay calm to all those problems

without becoming overweening.

So that's not a utilitarian argument for commercial for the importance of

virtue in a market or the importance of virtue in a commercial society.

Because I think virtue of cost is its own reward.

The virtue, when you live the life of the virtues and you try to, you engage

in a type of human flourishing, whatever the circumstance it's just in which

you live, but it happens that those virtues are very important for you.

Greasing the wheels of comments for making sure that the state doesn't become

too big for making sure that people behave, honestly, in the marketplace,

whatever function they play in terms of their occupation or where wherever

they are in town was supply chain or whether they are acting as a consumer

or a producer at a given point.

Yeah.

If virtue is not part of the picture, I think not only will life become very

utilitarian effectively, it will become very authoritarian as well, because the

only alternative if you have a society in which virtue is pretty much marginalized

or pushed to the outskirts of society, the only alternative is to use solve extensive

use of law and the extensive use of force.

Yeah, and that is generally not compatible with a market economy in a

flourishing commercial sector.

That's a brilliant summary.

I know, going back to Joseph Ratzinger and we made the point that for several

hundred years, European governments have been trying to figure out how

to make people be good without God.

And you've got de ontology, right?

You've got the science of duty of trying to construct a quasi humanist

ideal of we should behave this way.

But without that ultimate ontological framework of what it is to be human and

this, the people watching this would have a diverse range of, spiritual backgrounds.

But yeah, I think there's a sense of if we cooperate with the structure of reality,

of how, of these great themes of good and evil, then we get a particular kind of

cultures, a particular kind of society.

So we're almost out of time, but I wanted to ask you to

supplementary question bonus round.

I always like asking people this one.

So imagine that you get a phone call this afternoon.

From from president Biden's office and they say look, Dr.

Greg, we just saw this video with you and Jonathan Doyle was excellent.

We'd like to give you the keys to the car.

We'd like you to, we're going to give you everything you want or need to

rescue the U S and global economy.

Just tell us what you want us to do.

What would you say?

I would argue for a pretty radical deregulation of the economy.

I would say I would argue for dispensing with protectionist delusions.

I would argue for reducing industrial policy to a minimum,

if not anything at all.

And asking ourselves this question, what is it that the state.

Must do what must the state do in an economy?

Because that's a very useful way of clarifying what's essential for the

state to do what is this, what the state really shouldn't be doing.

And I happen to think that in those instances, what you'd

find is that you'd end up with.

It will be very limited government, but the government would focus on

the things that it's supposed to do in the economy and trying, instead

of trying to do all sorts of things that it has no possibility of doing.

So that's general strategy in terms of very specific things.

I would say stop using monetary policy.

To compensate for your unwillingness to make hard fiscal decisions.

That's

brilliant.

I have about another 12 hours worth of questions here.

So we're going to have to do this again.

We've survived power outages and a whole bunch of technical problems,

but I've had an absolute ball.

I got up at 4:00 AM to do this one and absolutely no regret.

So I'm going to put a bunch of links in for people to follow your work at act

and other places that you're riding.

Hopefully one day, we'll get you back here in Australia.

We can do this over some good whiskey and a good pipe, but I

want to thank you for your time.

I want to thank you for all the years of hard work.

You've put into thinking through these issues and sharing your

wisdom with other people.

Dr.

Sam, Greg, thanks so much for joining us on the supply side

podcast.

Thanks Jonathan.

And I look forward to that single mold sometime and somewhere in Australia.

Thank you so much.

Hey everybody, Jonathan Doyle, back with you again, listen, I

really hoped you enjoyed that.

It's one of those interviews that I'm going to be listening to multiple times.

So please make sure you've subscribed wherever you're hearing this.

I'm going to be bringing you some fantastic guests in the weeks ahead.

So if you come across to supply side partners.com, you can find plenty

of signup boxes there on any page so that we can get you this stuff.

As soon as it comes out, if you're listening on YouTube,

please police make sure you've subscribed or any podcast player.

That would be great.

I'm going to link out to the Acton Institute and to

some of Sam's publications.

So wherever you're seeing this or hearing it, there'll be show notes

where you can follow more closely.

Some of the insights that Sam is bringing to us through his

research at the Acton Institute.

All right, that's it for another week.

Thanks so much for joining us.

Please make sure you've subscribed and I'll see you on the next