Dr. Mark Skousen’s Five Questions for President Obama and How Free-Market Thinking Can Build a Better Future
The Daily Bell is pleased to publish an exclusive interview with the distinguished free-market scholar and economist Dr. Mark Skousen
Introduction: Dr. Skousen taught economics at Columbia University’s Graduate School of Business in 2004. In 2001- 02, he was president of the Foundation for Economic Education (FEE) in New York. Since 1980, Dr. Skousen has been editor in chief of Forecasts & Strategies, a popular award-winning investment newsletter published by Eagle Publishing in Washington, D.C.
Mark Skousen: He is also editor of his own website, www.mskousen.com, and editor of three trading services, Skousen Hedge Fund Trader, Skousen High Income Alert and Skousen Turnaround Trader. He earned his Ph.D. in economics and monetary history from George Washington University in 1977. Since then he has written over 20 books, including Economics on Trial (McGraw Hill, 1991), Puzzles and Paradoxes in Economics (Edward Elgar Publishers, 1997), and The Making of Modern Economics (M. E. Sharpe, 2001). Dr. Skousen is the creator and producer of Freedom Fest, an annual gathering of the freedom movement from around the world, held every July in Las Vegas (www.freedomfest.com). Mark Skousen was interviewed on Board the Ship Veendam, in Port Montt, Chile. This is his second interview with the Bell. The first can be seen here.
Daily Bell: Thanks for joining us again.
Mark Skousen: Happy to be here.
Daily Bell: You wanted to interview President Obama. Here’s you chance, before we move into more general questions.
Mark Skousen: I came up with five questions. They are what I call hardball questions. If he does not answer, I will answer for him.
Daily Bell: Sounds like you may have to.
Mark Skousen: Mr. President, do you support the repeal of the invasive requirement that all business report a 1099 of all sales of goods, services or assets of $600 or more during the calendar year?
President Obama does not answer …
Mark Skousen: All right, then. You say all the time that you are pro business, pro-small business, but how could you possibly support this part. It was added on at the last minute to what is now called the ObamaCare bill. It’s another example of pushing through legislation that nobody has read. It’s going to have a terribly retardant effect on the economy.
Daily Bell: Maybe you will have more luck with number two.
Mark Skousen: Another government agency that has run amuck is the TSA. Do you support their decision to install full body scanners and full pat downs for travelers that refuse to subject themselves to nude photographs of their body?
President Obama does not answer …
Mark Skousen: Has America come to the point where the US government is officially sanctioning sexual harassment? That question has been asked in a softball way….”well what do you think President Obama, what do you think of these scanners?” You defended it by saying that this was the only way they could capture somebody like the Christmas day bomber who had a bomb in his underpants and so now we have to subject ourselves to this kind of indignity. At what point is this going to end.
Another point is the aggressive nature of the TSA. There must be something like Murphy’s Law when it comes to government agencies that inevitably they go over board and no longer fulfill their basic function. I really feel that this is a travesty of the worst kind. I am really glad to see there is a group that’s forming a kind of Tea Party protest for this decision. It is on the web called, www.wewontfly.com, and I recommend that everybody go to that, wewontfly.com.
This is an egregious example of government run amuck and it reminds me of in the 80s when the Federal transportation agency, in order to encourage seat belt wearing, actually required a new device to be attached to the ignition of all new cars. You had to have your seat belt on before the car would start. Americans were so incensed by this, there were protests and they stopped buying cars and they started finding ways around the device and eventually the government backed off.
I am very hopeful that this will be the case but as Doug Casey says, American’s today are spineless, they are whipped dogs as he says and there are only a small minority of libertarians protesting this. I think it’s a sad. Apparently 80% of Americans supported full body scanners, it’s just a total invasion of privacy. Of course, I have been at the forefront of this battle all my life having written a book called; The Complete Guide to Financial Privacy in the early 80s.
It was a bestseller and sold over half a million copies, kind of an underground best seller. It wouldn’t make sense that it would make the New York Times list considering the topic is privacy but I feel this is very sad. We never lose our freedoms all at once, we lose them gradually. It’s like the frog in the warm water – we turn the heat up and eventually he croaks.
Daily Bell: Onto number three.
Mark Skousen: Given that you are deeply concerned about the high level of unemployment, would you favor elimination or at least reduction of the minimum wage law in order to boost employment among black male and teenagers in general?
President Obama does not answer …
Mark Skousen: Many economists believe there is a strong correlation between the rise in the federal minimum wage and teenage and minority unemployment rate in the United States. Are you aware that when the new minimum wage was imposed in the summer of 2009 during the first year of your administration, there was a significant increase of joblessness among teenage male blacks. Do you think there is any correlation? Can you deny it?
Daily Bell: The silence is deafening.
Mark Skousen: Was it really necessary to take 2,000 government employees on your recent trip to India and around the world costing tax payers millions of dollars? Is this appropriate at a time when there are record deficits and Americans suffering financial stress? Isn’t this an example of the Imperial Presidency?
President Obama does not answer …
Mark Skousen: This is how you get an image problem. You begin to be perceived as an imperial president, like one of these famous dictators, a Caesar type of person. What we need right now – in terms of attitude anyway – is a Jimmy Carter type. Carter may have been a failed president, but he understood something about humility. That seems totally lacking in your administration. It’s like the First Lady going on that expensive trip to Spain, going to all these ritzy places. It would be nice to see a president who maintained a low profile. It’s just a question of sending the wrong message at a time when Americans in general are struggling.
Daily Bell: Your points seem to be falling on the proverbial deaf ears.
Mark Skousen: We’ll give him another chance. Is it really necessary Mr. President to run a 1.3 trillion dollar deficit and threaten the bankruptcy of the United States and our AAA rating? Can’t you admit all this “stimulating” is ending up in bankruptcy rather than a healthy economy?
President Obama does not answer …
Mark Skousen: Since you went to the Chicago law school, certainly you were exposed to the great Chicago School of Economics and the free market economic perspectives of Milton Friedman, George Stigler and so forth. Are you aware Mr. President, that Friedman’s study of the Keynesian spending multiplier, in other words, the positive impact of federal deficit spending, is bound to have a multiplier of zero, in other words, no positive impact what so ever? The trillion or so you have spent on “stimulus” has been wasted. There are no shovel-ready projects, and if there were, they wouldn’t add net jobs.
Daily Bell: He’s ignoring you. Good to remind him about the Friedman study, though.
Mark Skousen: Last one. If Europe recovers with their low deficits and an expansionary monetary policy, will this not disprove the Keynesian model?
President Obama does not answer …
Mark Skousen: Europe is cutting back on government spending while engaged in monetary expansion. Here we will have a perfect natural test to see if the Friedman results will be reconfirmed. Of course, libertarians do not believe in managing the economy through central banking, but we are stuck with the system we have. Within the parameters of this system, monetary expansion is likely to be more effective than government spending, which just aggravates the problem. Don’t you understand that now after two years of failed economic policies?
Daily Bell: You were obviously over-optimistic in expecting responses.
Mark Skousen: (laughing). Somehow even if he were here, I don’t think we would have gotten any straight answers. But those are the questions he should be asked, among many others. Maybe one day at a town meeting, someone will get to ask them.
Daily Bell: OK, we’ve had our President Obama interview. Let’s turn the tables and ask you a few general questions. Quite a lot has happened since our last interview with you over a year ago. One of the most puzzling occurrences is the return in the US of discredited Keynesian economic policy – and with a vengeance. How did that happen?
Mark Skousen: Somehow President Obama chose the same policies that didn’t work in the 1930s and didn’t work in the 1970s. The United States has decided to spend its way out of recession and has adopted this typical Keynesian policy of running huge deficits. Europe is rejecting this sort of policy outright. Germany, and even the UK in its post-Brown recovery, are rejecting this notion and cutting back. My best example is Canada. In 1995, Canada had a fiscal crisis, runaway government spending of 53% of the economy and the Canadian dollar was collapsing. The Liberal Party of Canada, which got them into trouble in the first place, said enough is enough. There was a general consensus that Canada was moving in the wrong direction.
They fired a bunch of federal workers, and in two years eliminated the deficit, so the Canadian debt started declining. Then, even better, they had 11 straight years of surpluses. They also started cutting taxes; and they’ve had some pretty good success with their economy, even during a tough time worldwide. They still have some problems with their medical, single payer system but, overall, a supply side approach has proven successful in Canada. I would like to think that there are countries that are rejecting the standard Keynesian model. It’s hasn’t happened in the US, but I am hopeful that we will learn examples abroad.
Daily Bell: Let’s move to central banking and fiat money. Do you think we will ever return to a gold standard?
Mark Skousen: I have written a book called The Economics of a Pure Gold Standard. It was actually my dissertation of my PhD at George Washington University in 1977 and I was heavily under the influence of Murray Rothbard who favored a return to the gold standard.
Since then, I have argued that once you have gone off the gold standard it is very difficult to go back on it because it would cause a major redistribution of wealth to the gold holders who tend to be speculators and wealthier individuals. So there would be this redistribution problem that could be pretty serious, especially if gold has to go to $20,000 an ounce in order to really cover that.
I have often said the only way to return to a gold standard is with a major financial crisis, so you we are basically forced to do it. We may be headed in that direction but I think if we automatically did it that would create problems in itself. I like the idea of using gold as a tool. Supply-siders like using gold as an indicator of inflation; if we can control inflation and stabilize our inflation, the price of gold will come back down and that will be the best indicator that we can use. It is interesting that central bankers are net buyers of gold now rather than net sellers like they were. They are holding on because they know it’s the only asset that has any real value.
Daily Bell: What about the EU? Is it going to survive?
Mark Skousen: Robert Mundell, the free market economist, the father of the Euro, has made the case for its survival. I know there are a lot of skeptics out there but who wants to go back to all these individual currencies. It was madness and extremely inefficient when you moved from one country to another, losing money on every currency exchange. The euro has two great benefits: It encourages the free movement of goods and services and it increases competition. You can price everything in the euro and you can see what’s expensive and what’s not; that makes competition much more effective. You also have labour mobility you did not have before; you don’t require work permits, so you can work anywhere inside the EU.
England now has much better restaurants, as the French and Germans have moved there and brought palatable cuisine. You can move investments around as well. So I like the one currency, a United States of Europe concept if you like and from an economic point of view I think it is very good. It also, eventually, acts as a brake on these profligate governments. Yes, there are some problems with it right now but it’s basically sending a very strong message, you’ve got to get your act together because you are going to pay a heavy price. You can’t simply default; you are part of the European system so you can’t engage in these irresponsible spending, tax policies.
Daily Bell: Do you foresee a 3rd party in the United States ever?
Mark Skousen: A third party has never been effective in the United States. I think it is much smarter to work within the Democratic or the Republican Party to make change. All the laws favor the two party systems in the United States. They make it much more difficult for third parties to get on the ballot and really have any influence. Traditionally, third-parties have only been beneficial as a protest and forcing the major parties to make changes. If you go back to the Civil War era, the South was all Democratic because they hated the Republicans so much. Later on, that totally reversed itself; the electorate is fungible. Times change and so do opinions. I think Libertarians should infiltrate both political parties, not just the Republicans or the Tea Party.
Daily Bell: Do you think the US’s police and military will ever be turned against the people? In the current environment that is being suggested as a possibility.
Mark Skousen: It’s already happening. You have the FBI, a federal police force, virtually everywhere. It is just a monstrous agency and I speak for having been the son of an FBI Agent and the nephew of an FBI Agent; both my father and uncle were top FBI people. My father shot one of the top-ten most wanted men back in 1950. But that was back when the FBI had extremely limited roles to play. The FBI is involved with bank fraud and with almost everything else. You name it; it’s classic mission creep. It amazes me. It’s not just kidnapping and stuff like that.
And of course there is the army and now the army can come in whenever there is a natural disaster. The National Guard is called in as well. There’s so much power available, and the powers-that-be are increasingly showing a willingness to use it. It’s definitely something to be concerned about. Just take a look at the vast power the TSA has over travel. It’s beyond belief! The other thing I fear is the movement away from the fourth amendment of unreasonable searches. They have these roadblocks that they keep justifying. Every car that goes by, they can stop at these random checkpoints. They can literally just pull you over for no good reason. National ID cards are constantly being pushed as well. There are many examples of “real time” threats to the freedoms of American citizens these days.
Daily Bell: What about the US and China? Military issues in the future?
Mark Skousen: The Chinese are currently building up a huge military complex; I think they have 3 million troops or something. It’s a huge number; we’ll never know the exact number. But, certainly, they are increasing their technology capability and they are going to flex their muscles, much more so than North Korea or Iran. I think China is the elephant in the room as far as the military is concerned. They haven’t really gone after Taiwan, yet. It’s all saber rattling but that doesn’t mean it can’t turn into something more.
Have you ever seen the picture of how much water is surrounding the China sea and how much they consider is theirs? It’s not 200 miles – it just keeps going and going. I think there is some imperialism there. I think, in fact, it’s a very dangerous situation. The industrial sector has grown and it’s allowing them to spend more and more on their military objectives. There’s the potential for real conflict there.
Daily Bell: Strange times. What advice would you offer for the people to protect themselves financially?
Mark Skousen: I do think we should play the trends and when the market recovers we should take full advantage of that, I certainly have. In my newsletter I have taken advantage of the good times, the recovery that you see from time to time. A lot of the doomsday, gold bugs completely missed their recovery in the stock market. I like to play that because a lot of investors feel more comfortable with stocks I don’t recommend investing too much in commodities, which is a non-traditional investment area.
So my subscribers tend to be more traditional investors. What I try to do is introduce to them investing in commodities, gold and silver and so on, but only a 10% position, it’s an insurance policy against bad times, so that includes gold and silver. So I am always educating people that way. I encourage them to buy gold and silver coins and to aware of the bad news that can come down the road. But the majority of my investments are in foreign markets or in US markets and in dividend paying stocks and income producing investments and so forth.
We have had a very good track record the last few years with beating the market and doing well for them. But the tide can change and right now we are seeing a lot of problems developing. It’s funny how everybody feared that September and October which are traditionally tough months in the market and those did really well and now we are heading into December and now seeing all kinds of problems surface – the Irish debt situation, China raising interest rates, the North Koreans fighting the South Koreans; there’s a lot of geo-political events which are keeping the markets from going higher, despite the Federal Reserve’s efforts to inject all this liquidity.
So, I have always believed in that old biblical refrain: know the signs of the times. I’ve tried to follow that advice in my newsletter called “Forecasts and Strategies.” My philosophy basically is that problems come and go, but I have always been more of an optimist rather than not. There is an old saying on Wall Street: “bears make headlines and bulls make money.” The majority of time Americans are problem solvers; the sun eventually comes out again. Traditional bond and stock markets perform better. It would be sad commentary if we didn’t have that kind of situation. It would be like being a millionaire on a sinking ship. Who wants to be a millionaire on the Titanic? So, I am optimistic that we will get new leadership, reasonable policies and sound economics. It has happened in the past, as I mentioned. Canada is the most recent example and I would hope that it can happen again.
Daily Bell: That sounds like your book Econopower, do you want to talk about it?
Mark Skousen: Yes, the Korean edition. They paid me $100,000 in advance for Econopower. That book was about solving problems. Whatever problems are out there, economists can add to the solution. The South Koreans are very strong on economics and how to use them to their advantage. I have a chapter in the back that Robert Shiller of Yale University really liked and it’s called “Is US Economy Depression Proof?” I wrote this right before the financial crisis of 2008, in which I argued that it’s not depression proof and that we are vulnerable. We have a monetary system that is broken and it’s not really a good one and it needs to be fixed. Sure enough we had a financial crisis and the whole system came close to collapsing. The only thing that kept it from total collapse was massive government intervention again. The establishment had always argued that we were depression proof; that the system was the best of all worlds. Doesn’t seem to be the case, obviously.
Daily Bell: What else have you written lately?
Mark Skousen: I’ve written a textbook called Economic Logic. It’s always my hope that the US will get leaders with an understanding of real economics. President Obama needs a course on free market economics. Economic Logic takes a logical approach; it mixes business with economics. It starts with an income statement, a profit and loss statement, and then develops into supply and demand analysis.
I use the best of Austrian and Chicago economics and now it’s being used in a number of colleges and universities around the country. It’s encouraging. You will not change the politicians until you educate the people who elect them. It’s kind of my anti-Samuelson textbook. Samuelson was this Keynesian economist at MIT, who at the end of WWII wrote his economic text book that introduced Keynesian economics and this anti-savings mentality – this pro big government, welfare state, pro-progressive taxation kind of zeitgeist from which we still suffer. So we need a new textbook for the 21st century to reverse that trend and get us back to sound economics. The reality is free-market economics is not taught to children or even to older students. We need to start somewhere.
Daily Bell: What is out there for students who want to get a general idea about economics besides college text books?
Mark Skousen: There is a website run by Steve Marriotti called Network for Teaching Entrepreneurship (NFTE). They teach entrepreneurship and how to create your own businesses and business models. They have a text book that’s geared toward minorities. It’s a great program. I am hoping this can be another area where we can spread the word to students.
Daily Bell: Closing words?
Mark Skousen: Do not despair. Do not think that our current mess is irreversible, that our economy is headed for total destruction, which is a constant message from gold bugs and doomsayers. I am trying to counter that view and I am trying to do something through education. As you know, we have created FreedomFest and it’s not my conference alone, though I created it. It’s the “movement’s” conference. You bring together all the best and the brightest in Las Vegas, the world’s greatest libertarian city. We have this great celebration and learn from each other; we celebrate liberty; we warn each other about the dangers to liberty and we do business and make deals and walk away and say WOW, we can make a difference. So, come on down! It’s an open forum. We like new people and new speakers. We have Steve Forbes (Forbes Magazine) and John Mackey (CEO of Whole Foods) who both work tirelessly to spread the word. It’s a great opportunity to meet and greet and there are others out there who feel the same. So, go to www.FreedomFest.com and learn more. Hope to see you there.
Daily Bell: On that note, now would be an appropriate time to announce our first conference, scheduled for the last weekend in April in the Appenzell region of Switzerland. The conference is the being hosted by The Foundation for the Advancement of Free-Market Thinking and has several Platinum level sponsors, of which Appenzeller Business Press AG (publisher of the Daily Bell) is one. It will be a great European-based opportunity to provide similar opportunities for like-minded folks to gather with a view to seeking private solutions to the more egregious public problems facing us all. To date, several top thinkers have committed to speaking and we would like to include you in that group. Can we count on your support with our conference efforts and would you travel to Switzerland to share your views at the event?
Mark Skousen: I would be pleased to support your efforts and you can pencil me in to speak at your conference. Thank you for considering me.
Daily Bell: Thank you Mark, it has been a pleasure as always and we look forward to seeing you in April.
Mark Skousen: Thanks, same here.
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