Economics Profession Snubs Hayek, Good News: He’s Back!

“I urge you to be bold, to strike out on your own and not to wait for the ‘old guard’s permission.’” — Friedrich von Hayek (1968, as told to Ed Feulner)

Earlier this year, I proposed a session at the upcoming American Economic Association (AEA) meetings to celebrate the 50th anniversary of Friedrich Hayek’s winning the Nobel Prize — the first free-market economist to do so.

Sadly, we were turned down, even as the AEA approved sessions honoring Keynesian Robert Solow and former Fed chairman Ben Bernanke… and approved 45 sessions on diversity, equity and inclusion (DEI).

The story caught the attention of the Wall Street Journal: The American Economic Association Snubs Hayek – WSJ.

So much for a “non-partisan” academia that promises political diversity.

But you can’t keep a good man down!

Honoring Hayek Yesterday

Yesterday, I decided to strike back and organize my own special one-hour virtual meeting honoring Hayek — 50 years to the exact date that Hayek was informed that he won the Nobel Prize in economics (October 9, 1974).

Our panelists included Prof. Lanny Ebenstein (UC Santa Barbara), author of two biographies of Hayek; Barbara Kolm, president of the Austrian Center in Vienna and a new member of the Austrian parliament; Prof. Tawni Hunt Ferrarini (Florida State University), author of “Common-Sense Economics”; Jim Woods, the Renaissance guru and co-editor of my Fast Money Alert… and a special appearance by Ed Feulner, past president of the Heritage Foundation, who related two fascinating and revealing meetings he arranged between Hayek and President Reagan in the early 1980s. (See photo below.)

Our one-hour discussion was fast-paced and covered a great many subjects:

–Why have Friedrich Hayek and Milton Friedman become the voices of free-market capitalism?

–Why is Hayek considered by many to be the “father of Bitcoin,” and what are the best inflation hedges?

–How the Economic Freedom Index and other sources are used to counter the appeal of socialism.

–Why do socialist experiments always fail and lead to “the road to serfdom”?

–How Hayek’s macro model (now adopted by the federal government) demonstrates that good BUSINESS is the key to prosperity.

–If Hayek were alive today, would he celebrate or worry?

To find the answers to these questions, watch the program here: Celebrating Hayek · A Live Panel Discussion (civl.com).

It Was 50 Years Ago Today…

When Hayek won the Nobel Prize in 1974, the economy was in bad shape, suffering from double-digit-percentage inflation, an energy crisis and a major bear market in stocks and bonds. Gold and silver were rising sharply.

In his acceptance speech in Stockholm, Sweden, Hayek said, “As a profession we have made a mess of things.”

In 1944, Hayek wrote the dystopian book “The Road to Serfdom,” which became a bestseller in America.

He warned of a socialist takeover of the world after World War II.

And he was proven right, at least until the late 1980s. Nation after nation — from Great Britain to India — imitated the Soviet Union by nationalizing heavy industries, confiscating private property, adopting protectionist measures and imposing socialized medicine.

Hayek was a great Nobel Prize economist, financial prophet and “the greatest philosopher of liberty during the 20th century.” (He lived from 1899 to 1992.)

Using his Austrian theory of the business cycle, he predicted the 1929 Stock Market Crash and warned us that socialism would fail and lead us to disaster if we didn’t fight back.

Fortunately, both Margaret Thatcher in the UK and Ronald Reagan in the United States heeded his call and turned their countries around to create a major bull market in stocks and bonds that lasted 40 years.

He lived long enough to see the Berlin Wall come down and the Soviet Union collapse. It was the end of an era.

Meeting Hayek

I met Hayek twice, once in 1985 at his summer home in the Austrian Alps:

He was pleased to learn that I was working on a book, “The Structure of Production,” that aimed to restore his macroeconomic model. Now Hayek’s macro model is a reality. My magnum opus came out in 1990, and then in 2014, my gross output (GO) statistic — a measure of Hayek’s triangles — began being published quarterly by the federal government (the Bureau of Economic Analysis) alongside GDP. See my quarterly press releases at www.grossoutput.com.

I consider GO the greatest advance in macroeconomics since Hayek won the Nobel Prize 50 years ago.

I used Hayek’s model to predict the 1987 crash… and the financial crisis of 2008.

‘Inflation Is Never Neutral’

For investors, one of the most important lessons to be learned from Hayek is that “inflation is never neutral.” Easy money and artificially low interest rates do more than raise prices — they also create a business cycle, an inflationary boom followed by a deflationary bust.

That’s why you see the Federal Reserve constantly switching from “easy money” to “tight money,” cutting interest rates and then raising them.

The Financial Crisis of 2008: A Case of Hayekian Malinvestment

The financial crisis of 2008 is one of the best examples. The Fed feared deflation in the early 2000s after the dot-com bust and started lowering interest rates all the way to zero in 2004.

Then, fearing rising inflation, the Fed started raising rates, causing the boom to turn into a bust. The real estate market collapsed and so did the mortgage securities that Wall Street sold around the world. The real-estate crisis caused major banks like Countrywide, Washington Mutual and Lehman Brothers to go under… and the financial crisis continued to spread until it was bailed out by the Federal Reserve and Congress.

Hayek Would Love This New Trend

Right now if Hayek were alive, he would be thrilled with Wall Street hitting new highs and the great advances in the quantity, quality and variety of goods and services we now enjoy… the new technologies, the higher standard of living and our ability to live to be 80, 90 or 100 years old.

He would be thrilled with the increase in the world Economic Freedom Index, hitting new highs, at least until the Covid pandemic. (See chart below.)

Unfortunately, economic freedom has corrected downward after the 2020 Covid pandemic. The fall in economic freedom has been particularly bad for the United States, which is now ranked #25 in the world. It used to be #3. Maybe America can turn things around on Nov. 5.

Is Another Financial Hurricane Coming Our Way?

Today, we are suffering from another bout of inflation and the inflation hedges are doing well again, as they did in the 1970s.

Are we headed for a financial hurricane soon due to out-of-control debt and deficits?

In my lifetime, I’ve witnessed my share of financial hurricanes, such as the 1987 stock market crash… the 2000-2002 dot-com collapse… the financial crisis of 2008… and the 2020 Covid pandemic.

Could it happen again?

The Next Crisis: Debt Explosion!

There is a fundamental threat that requires our attention. By next year, 2025, the interest on the national debt will exceed $1 trillion for the first time, over 20% of the federal budget. By then, it will be the biggest item on the federal budget, more than defense or welfare spending.

Hayek, like other classical economists from Adam Smith to Milton Friedman, would also be worried about the national debt and running deficits during the good times. Not a good sign!

A crisis and bear market are coming. Be prepared, the good times won’t last forever.

The Austrian School Has the Answer!

I devote a whole chapter of my book, “A Viennese Waltz Down Wall Street” to “The 2008 Financial Crisis,” and why the most recent crisis won’t be the last. See chapter 8, p. 67-78.

The book is a 256-page quality paperback with chapters on each of the great Austrian economists, including Carl Menger, Ludwig von Mises, Friedrich Hayek, Joseph Schumpeter and Murray Rothbard.

In addition to my chapter on the Chicago School and the financial crisis of 2008, it has important chapters on Keynes as a speculator, economists who predicted the 1929 crash and the benefits of investing in gold and silver (chapter 17, “A Tale of Two Dollars”).

The price of the “Vienna Waltz” book is only $21. To order, go to www.skousenbooks.com. I autograph each copy. Postage is free if mailed inside the United States. I will do the same for my other books, such as “The Maxims of Wall Street,” “Economic Logic” and “The Making of Modern Economics.”

Dr. Lawrence Hayek, son of Friedrich Hayek, wrote, “Skousen is the only economist I know who I can understand. He writes for the common man!” See for yourself.

The ‘Hat Birthday Party’ at the Orlando MoneyShow!

Hurricane Milton went through Florida yesterday and today. Now it’s rebounding.

I’ve been told the Orlando MoneyShow, scheduled for Oct. 17-19 at the ChampionsGate Resort, is still on! Since Oct. 19 is my birthday, Kim Githler, president of the MoneyShow, has decided to do a “hat party” in my honor on Friday, Oct. 18. Come join me for the fun, where we will award the top three attendees wearing the best hats! My daughter Hayley, her husband Pablo and their band will be there to perform.

On Thursday morning, Oct. 17, I’m also going to debate Mike Turner on “Buy and Hold or Market Timing: Which Has a Better Chance of Beating the Market?” Don’t miss it, the sparks will fly.

Other speakers include Keith Fitz-Gerald, Steve Moore, Charles Payne, Louie Navallier, Kelly Wright, Peter Schiff, George Gilder, Adrian Day, Brien Lundin and Ed Yardini. To learn more and register, click here. Sign up soon, before the $149 registration price rises. Use promo code 063467 for the discount.

Good investing, AEIOU,

Mark Skousen

You Nailed it!

Nevada Governor Joe Lombardo — A Breath of Fresh Air

By Mark Skousen

At this year’s FreedomFest in Las Vegas, I met Governor Joe Lombardo. In our 14 years of producing FreedomFest in Las Vegas, he’s the first Nevada governor to officially welcome us to Las Vegas.

He is a unique governor. He has vetoed more bills than any other governor in Nevada history. He faces a supermajority in both houses of the Nevada legislature.

He supports voter ID laws. As Nevada commentator and friend Chuck Muth wrote:

“In his State of State Address in January 2023, Gov. Lombardo noted that ‘there are certain election reforms that are just common sense.’ One of those common-sense reforms, he declared, was requiring photo ID to vote.

“‘We require people to have a valid form of identification to get on a plane, to operate a motor vehicle or to purchase alcohol or cigarettes,’ Lombardo noted, ‘but not to cast a vote in an election. That is illogical.’

“He then proceeded to throw down the gauntlet…

“‘Mark my words,’ he warned. ‘If the Legislature can’t make meaningful progress in this critical area, these reforms should be placed before the voters during the next election.’

“Well, during the 2023 session of the Legislature, the Democrat majority in both houses told the governor to stick it where they sun don’t shine.

“They wouldn’t even allow his election reform proposals to have a hearing, let alone a vote.

“So Dave Gibbs and George Harris launched ‘Repair the Vote’ and began the process of qualifying photo IDs for the November election.

“Getting a question on the ballot is extremely difficult and expensive, especially when the other side ties you up in knots and legal fees in court. And after finally winning the court challenge, time was NOT on Repair the Vote’s side.

“The ONLY way to gather enough signatures in time to meet the deadline for submission was to hire professional signature gatherers. And the price tab was steep: $1.5 MILLION!

“When Gov. Lombardo learned about the need for major funding to bring the ballot question home, he picked up the phone and raised the money. All $1.5 million of it.

Now it’s up to Nevada’s voters.”

I admire his courage; a politician who is a statesman.