EXCLUSIVE INTERVIEW
Dr. Mark Skousen on Honest Money, Austrian Economics and the Future of Free Markets
By Anthony Wile - January 24, 2010

Introduction: Dr. Skousen was an adjunct professor at Columbia University's Graduate School of Business in 2004. In 2001- 02, he was president of the Foundation of 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. 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 FreedomFest, an annual gathering of the freedom movement from around the world, held every May in Las Vegas.

Daily Bell: Thanks for joining us.

Mark Skousen: Happy to be here.

Daily Bell: Give us some background as to how you became an Austrian economist? How did you discover them and when?

Mark Skousen: My father, Leroy Skousen, was like his brother Cleon, involved in the conservative anti-communist movement in the 1950s and 1960s, and he had copies of books such as Human Action, by Ludwig von Mises on his shelf in our home in Portland, Oregon. I also read regularly National Review and The Freeman that referred to the writings of Austrian economists such as Mises and Friedrich Hayek. I read Milton Friedman's Capitalism and Freedom, which whetted my appetite for more. But it wasn't until I discovered the writings of Murray Rothbard that I became enamored with Austrian economics, especially his books America's Great Depression and What Has the Government Done to Our Money? By the early 1970s, I was hooked, and even took Rothbard's magnum opus, Man, Economy, and State on my honeymoon. Admittedly, I didn't get much reading done.

Daily Bell: When did you know that elaborating on free-market economics was going to be your life's work?

Mark Skousen: I took a course in economics in high school, and found it so poorly taught that I figured I could do better. By the time I went to college in the mid-1960s, I decided economics would be my major because it involved so many facets that interested me – politics, history, money, mathematics, and journalism. I wanted to major in something that was diverse and not too specialized, since I was interested in so many things in life. So I ended up getting a B. A. in economics, an M. S. in economics, and a Ph.D. in economics! (And surprisingly, I was able to do all this without ever taking a class in accounting or finance.)

Daily Bell: You worked for the CIA early in your career, Do you think the war on terror is real or made up?

Mark Skousen: Oh, the enemies of liberty are real all right. I think even Ron Paul would agree that there are forces out there hell bent on destroying us. Some of it is our fault, the blowback from our ill-conceived policies. But the CIA is a government bureaucracy, and they blundered repeatedly in its history. Read the book Legacy of Ashes.

Daily Bell: Does the CIA brain trust believe in free-market economics? Wouldn't it be helpful if they did?

Mark Skousen: I was in the CIA for only 2-3 years in the 1970s, working on the Brazil desk and the energy crisis, and never really got to know the brain trust, the higher ups, such as Richard Helms, Bill Casey, or George Bush Sr. They gave lip service to the free markets, but the CIA's mission was and is largely to collect intelligence for the White House and the State Department on the political, economic and military conditions of potentially dangerous places around the world.

Daily Bell: Are you suspicious about the current story regarding 9/11 itself?

Mark Skousen: I've read a great deal on the 9/11 conspiracy theories, but only as a bystander without any expertise. So I have reserved judgment on these issues. There are legitimate issues out there, raised recently by Jesse Ventura's TV show and my brother Joel in his World Affairs Brief, but I also think that there's a lot of misinformation and disinformation out there on the Internet that will make it impossible to know for sure what all happened on and before 9/11. Most importantly, we have to avoid looking kooky or foolish.

Daily Bell: Tell us about your stint as President of the Foundation for Economic Education (FEE). Did you enjoy it?

Mark Skousen: I was president from 2001 until late 2002. We arrived in New York one week before the 9/11 attacks, so it was quite a shock. Having never run a think tank before, I'm sure I made some mistakes, such as not paying enough attention to the FEE board, who were quite demanding. They were largely businessmen who wanted results – that is, they figured that because I came from Wall Street and the financial world, I should be able to raise a ton of money fast and build up FEE's financial condition. But fundraising turned out to be a tough thing for me. I just hated the idea of constantly asking my friends, even wealthy friends, for money. Running a think tank is personally overwhelming. I was thinking about FEE all the time, 24/7. My daughter complained about it. So I take my hat off to people who can run think tanks effectively.

Daily Bell: Tell us about the controversy regarding the FEE presidency. Do you think you handled it well? Do you think FEE did?

Mark Skousen: I was ambitious in trying to make FEE a household name like Cato or Heritage, and so I tried to expand rapidly by buying Laissez Faire Books, and organizing the first FEE National Convention in Las Vegas. The FEE convention was a huge hit, with over 850 attendees, and the board members seemed to be impressed. Then I decided to invite Rudy Giuliani, "America's Mayor," to address our annual Liberty Dinner in New York City. I rented out the Hilton ballroom, which holds 2000 people, and quickly raised the funds to pay for Giuliani to speak. But some members of the board objected to Giuliani, who wasn't a libertarian. My attitude was, he's "America's Mayor," and by inviting him, I could introduce thousands of people to FEE. Some board members didn't see it that way and a fight ensued, eventually it resulted in my dismissal as the president of FEE.

FEE is a great institution and I still support it financially, and I'm glad I had the experience. In fact, out of the FEE convention came my idea of doing FreedomFest every year in Las Vegas, and FEE is a now regular sponsor of the event along with all the other major think tanks. The Freeman, FEE's flagship monthly, is a great publication and deserves a wider audience, and if I had remained president, I would have worked hard to increase its circulation. Richard Ebeling and Larry Reed, the two presidents who have succeeded me, have done an excellent job in promoting and expanding FEE.

Daily Bell: What do you think of Larry Kudlow? Is he right about supply-side economics?

Mark Skousen: Larry is an excellent spokesman for supply-side economics and Wall Street, and I agree with him on tax cuts, globalization and deregulation, but I'm not too keen on his support of the war in Iraq, and his tendency to favor easy-money policies by the Fed. He spoke last year at FreedomFest, along with other supply siders (Steve Forbes and Steve Moore).

Daily Bell: Should the Federal Reserve be abolished?

Mark Skousen: The Fed has done a lousy job of maintaining a stable monetary policy, either in terms of the natural rate of interest and the money supply. But it's easier to be a critic than to be a creator of an alternative monetary system. I did my Ph.D. dissertation on the classical gold standard, under the influence of Murray Rothbard, and I think the price of gold should play a very strong role in Fed decision making. (The fact that it has doubled in price since Bernanke became Fed chairman is not a good sign.) I think it's still possible to have a set of "rules, not authority" in central banking – a monetarist rule and allowing interest rates to rise and fall naturally in the market place rather than being manipulated by the Fed. But the key indicator of stability is the price of gold. A stable gold price means the Fed is doing the right thing, a sharply higher price suggests otherwise.

Daily Bell: Are you in favor of nationalizing banking as Ellen Brown is?

Mark Skousen: I certainly think we could learn a lot by examining the national banking policies in Canada, Australia, New Zealand, and other countries known for their sound systems. You know, the financial crisis was largely caused by the US, not by foreign banking systems.

Daily Bell: What is the state of education about economics in America and the west in general?

Mark Skousen: Microeconomics is doing pretty well, with popular textbooks by free market economists Robert LeRoy Miller, James Gwartney, and Pete Boetttke, but the biggest problem is in macroeconomics. The Keynesian Aggregate Supply – Aggregate Demand (AS-AD) model is really A SAD model which failed miserably to predict this last financial crisis, and needs to be replaced. (I propose using my the Wicksell-Mises "natural rate of interest" hypothesis plus the Austrian structure of production model I develop more completely in my book The Structure of Production and my textbook Economic Logic.) Economics textbooks also need to move away from their support of the welfare state, progressive taxation, and the idea that "increasing liquidity" is the answer to all crises.

Daily Bell: What is your take on Austrian economics?

Mark Skousen: I thought it was making real progress until I noticed that nobody gave the Austrian school credit for predicting the 2008 financial crisis, even though it was clearly an unsustainable asset bubble, as the Austrians predicted. I guess we didn't have a big name like Mises and Hayek who were out there predicting the crash. Those who did predict the crash included Robert Shiller, a neo-Keynesian, and Nouriel Roubini, an NYU professor not connected with the Austrians. The closest we came was Peter Schiff, but he is a Wall Streeter, not an academic.

Daily Bell: Why is Keynes still popular?

Mark Skousen: Because a vast number of economists, government leaders and media blame the "inherent instability" of free market capitalism for a financial crisis, the basic thesis of Keynes. Plus Keynes is the chief advocate of running deficits and injecting liquidity as the best remedy for a financial collapse. It has great appeal during a crisis. Nobody wants to suffer the full pain of a financial collapse and the massive unemployment accompanying it.

Daily Bell: How have your trading services and newsletters fared in the past two years?

Mark Skousen: Actually, surprisingly well. Circulation is up, and so is revenue, mainly because I recommended a heavy cash and gold position during the financial crisis of 2008, so we minimized the damage. Still, our recommended portfolio lost 25% during this period, but it could have been a lot worse. Then in March, 2009, I said the stock market was a "screaming buy" and predicted that the Dow would make a huge recovery, going to over 10,000, and it proved to be an accurate forecast.

Daily Bell: Did you foresee the crash?

Mark Skousen: I had some deep premonitions of a financial crisis, and warned of serious problems with our monetary system in February, 2007, issue of Forecasts & Strategies. I attended a luncheon talk by Fed chief Ben Bernanke in early January, 2007, and in his lecture, he used the words "panic," "crisis," and "stress" 36 times. I got the impression that a financial crisis was imminent. However, my forebodings were not sufficient for me to recommend getting completely out of the market. But I did recommend investing in some gold and cash. I was better at predicting the bottom of the market in March 2009, than predicting the top in 2007. We did short the market successfully several times in my Hedge Fund Trader, my short-term trading system, and came out unscathed overall. I came in third in the AOL Stock Picking Contest in 2009 for recommending Freeport McMoRan (FCX), up over 200%. This year my stock of the year is Ford Motor Co., a classic turnaround story.

Daily Bell: Can you provide for us a look at where Western economies are headed?

Mark Skousen: While I'm more optimistic in the short run, especially in foreign markets, we clearly face serious economic problems with these monstrous and growing deficits, higher taxes, and more draconian regulations. It can all be reversed, but only with strong leadership, which we don't seem to have right now.

Daily Bell: Give us the background to FreedomFest. How did it get so successful?

Mark Skousen: As noted earlier, FreedomFest got started when I did the first FEE National Convention. I've felt for some time that all of us in the freedom movement, broadly defined, needed to come together in one place each year to learn, strategize, network and celebrate what's left of our liberty. Too often we all go our separate ways, like a herd of cats, and I think we need something to hold us together. I've also always wanted a conference where there are so many choices that no one is ever bored. So we have sessions on geo-politics, investments, history, philosophy and religion, science & technology, art & literature, music and dance, you name it. It's truly a Renaissance gathering of libertarians. And it's working.

We had 1700 people this past July, with over 200 showing up at the door. A couple got married and spent their honeymoon at FreedomFest. Steve Forbes and John Mackey, CEO of Whole Foods Market, make a point of attending all 3 days. They and thousands of others have captured the spirit of FreedomFest: three glorious days of intellectual stimulation in a fun libertarian city, Las Vegas. We're gearing up for a big show this July. For details, just go to our website www.freedomfest.com.

Daily Bell: Who are some of your favorite worldly philosophers?

Mark Skousen: A couple of years ago, I started a website called The Worldly Philosophers, and discussed the ideas of such diverse personalities as Aristotle, Jesus, J. Paul Getty, and Ben Franklin, though I haven't done much on it lately. For more information, visit www.worldlyphilosophers.com.

Daily Bell: What do you think of Ben Franklin?

Mark Skousen: I find him endlessly fascinating as a founding father who had numerous careers and varied interests. He's the one founder I'd love to sit down and have dinner with. On the 300th anniversary of his birth, I published The Completed Autobiography by Benjamin Franklin (Regnery, 2006). You know, he failed to tell the last 30 years of his career in his "Autobiography" and using the Papers of Benjamin Franklin at Yale, I was able to cull together his autobiographical letters and papers and complete his memoir, all in his own words. I think it's one of my most important contributions.

Daily Bell: Do you believe in his idea that the state owned money and should be in charge of its issuance?

Mark Skousen: From my own perspective, I make a big point of circulating American eagle silver dollars by giving them away as tips, gifts, etc. I'd like to see us actually use silver dollars and gold dollars again. So I'm doing my part of going back to a gold standard, even if it's with state-issued money. In this case, it's real money (silver and gold), which I prefer over state-issued paper money.

Daily Bell: Where do you go from here?

Mark Skousen: I really think some great things are going to come out of our once a year gathering in Las Vegas. All the free-market think tanks are coming there now, that was a breakthrough. Some day I envision 50,000 people showing up at FreedomFest to express their unified demands for life, liberty and the pursuit of happiness. It could make a difference. As Ben Franklin said, "We must all hang together, or else we shall all hang separately."

Daily Bell: What are some books you are especially proud of?

Mark Skousen: Among books, my three favorites are The Making of Modern Economics (ME Sharpe Publishers, 2009, 2nd edition), my story of the great economic thinkers that just won the Choice Book Award for Outstanding Academic Title for 2009; it's an entertaining read and some people like John Mackey have read it three times. Second, my "no compromise" free market textbook in Austrian economics called Economic Logic (Capital Press, 2010, 3rd ed.), where I use the profit-and-loss income statement to introduce microeconomics, and a four-stages-of-production model to introduce macro. Then there's my most academic work, The Structure of Production (NY Press, 1990, 2007), my magnum opus on my creation of an updated Austrian macro model.

Daily Bell: What are some articles you are especially proud of?

Mark Skousen: Among my articles (available at www.mskousen.com), my favorites are: 1. My pamphlet, Persuasion vs. Force, 2. Easy Living: My Two Years in the Bahamas, 3. My Friendly Fights with Dr. Friedman, about my relationship with Milton Friedman; and 4. The Art of Letting Go, about the libertarian Chinese-American philosopher Lin Yutang.

Daily Bell: Thanks for you time. It was great to speak with you.

Mark Skousen: My pleasure.

After Thoughts

We certainly respect and admire Dr. Mark Skousen's contributions to freedom and his ability to build an entrepreneurial publishing business, as well as the increasingly successful FreedomFest. We're fans of his brother, Joel Skousen, too, who is a trail-blazing alternative-press writer on numerous fronts. But when it comes to the issues that Dr. Skousen touches on in his informative interview, above, we confess we tend to be a tad more didactic.

We don't think, for example, that the Federal Reserve can be reformed. Even nationalization in our opinion, will only make matters worse, ultimately. It needs to be done away with so a market-based money system can expand into the space – free-banking in our opinion, which is what the United States tried at its inception. Let the market stimulate money competition – especially between fiat currencies, fractional and full banking, honest money and gold and silver. We think we know what will win out.

Dr. Skousen's views are those of a thoughtful and experienced free-market theoretician and investor. But interestingly we can see a day coming when the marketplace will enter into an increasingly vigorous mainstream debate over all these views and more. The Daily Bell, for instance, has offered readers a number of article on the impact of the Tea Party movement on politics. Yet the Tea Party movement is only one aspect of anti-government sentiments percolating in America and perhaps throughout the West.

The power elite itself has had pretty much a free-hand when it comes to creating big-government solutions in the past century. But it too has been forced to react to the increasingly broad-based free-market conversation taking place on the Internet. Mainstream media, which we believe is pretty much constrained by a power-elite agenda has been forced to respond. And it seems to us that it has, especially in America.

So here is the problem: How long before people stop compartmentalizing free-market issues? Sarah Palin, for instance, is a firebrand when it comes to less regulation and smaller government, and yet her world-view also supports a military-industrial complex fighting wars around the world and draining the US Treasury of trillions to do so. FOX's libertarian-oriented host Glenn Beck is vehement about the destructive influence of the progressive movement on American free-markets, but we think he is probably less apt to investigate the full impact of America's 16 spy agencies and sprawling domestic security apparatus on the animal spirits of American entrepreneurship and innovation.

Yes, the elite, in our opinion, will tolerate any amount of talk at this point about lower taxes and less regulation to keep certain mainstream press enterprises credible and mercantilism unchallenged. But it is only storing up problems. Eventually the free-market conversation will burst its boundaries. It will refuse to remain compartmentalized. Conversations inevitably evolve. Federal Reserve Chairman Ben Bernanke (along with other central bankers in both America and Europe) is facing the kind of criticism central bankers have rarely been exposed to in the recent past. That's just one example among many.

In fact, our conversation, above, with Dr. Skousen might have surprised readers a decade ago. Today, Dr. Skousen's considered perspective, in our opinion, verges on a certain kind of mainstream view in some aspects. That doesn't make it in any sense less logical or well-thought out, but it does show how the free-market dialogue is evolving. What was once known to only a few, is now broadcast to millions. What was once considered outlandish is common knowledge. There is more to come.

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