Welcome to Era of Permanent Inflation – New Fed Chair Warsh Can’t Stop It, Warns Mark Skousen

[00:00:00]Hi everyone, welcome back to the Daniellea Kon Show. Today we have the privilege of welcoming a true titan in economics and investing. A man known far and wide as America's economist. Dr. Mark Scowzen is a best-selling author of over 25 books and is considered one of the most influential living economists out there. He's the creator of the gross output vital broader measure of the economy that puts business and the supply chain front and center. He founded Freedomfest, the world's premier gathering of free minds. It's a show that takes place every July. And he just launched an exciting new chapter as the macroeconomic strategist over at the Oxford Club with his new monthly newsletter, the Scousin Report. Without further ado, uh please welcome to the show Dr. Mark Scowzen. Mark, so good to see you, my friend.

[00:00:47]>> I think as Ben Franklin would say, it pleases my vanity to hear that that uh bio that you just described. Uh >> I mean that's just a snippet.

[00:00:59]>> Well, it is a pleasure to uh have kind of the glory days back because uh back in 1992 I had 75,000 subscribers to forecast and strategies and then the internet exploded and all this free information and CNBC and KitKo and every what everybody else is doing. and I was down to 7,500 subscribers last year even though I my average uh investment was up 35%. So I I I was beating the market and everything. So I decided it was time for a change. So the Oxford Club has uh with the Space X advertising that I'm doing even on CNBC and so forth, I'm back up to 75,000 subscribers. So the glory >> Look at that. Well, that's what made this week connect.

[00:01:47]>> I saw you on CNBC and said, "Wow, I haven't spoken to Mark in so long." So, do you want to start there? Want to get your thoughts on that SpaceX IPO?

[00:01:56]>> Well, I think it's really re-energized the whole tech sector. Every once in a while, the tech sector seems to fall out of favor, but then it comes back very strongly and SpaceX is the is the u the biggest IPO ever as as everybody has pointed out. than the $1.75 trillion expected uh fund uh funds they're expected to raise at a $135. I mean, I don't know if it's going to go to premium or not. It's it's already gone up quite a bit. Uh people are buying it right and left uh privately. Um and there's a lot of uh there's a lot of people who do not have the lockup period. I mean, Elon Musk is locked up for a year or two before he can sell his position, but a lot of employees can sell their stock right away. Uh, they're probably going to take some profits, but then again, it's supposed to be added to the NASDAQ 100 a week from today, uh, a week from Friday.

[00:02:58]uh it won't be added to the S&P 500 for quite some time because it has to have certain profit levels of profitability and and all that sort of thing. So typical of the S&P uh stocks are not added to the S&P until they've already had a huge runup and at the same token they get rid of stocks that have had a huge falling out.

[00:03:23]So, I don't think uh the S&P 500 is as good as the NASDAQ 100. So, uh we could see a bump. We could see a premium rise uh in expectation that it's going to be added to the NASDAQ 100 a week from this Friday.

[00:03:38]>> Okay, Mark. Uh talk to me about the Yeah. the broader broader economy here.

[00:03:43]Um I've had many experts come on saying it's just AI. I mean, I'm not saying anything new holding up the entire economy, holding up the entire stock market. uh what happens if it all goes to bust? Do you do you agree?

[00:03:56]>> Yeah, I think it's but I still think it's a little bit like the.com boom and uh the artificial I mean these these AI stocks are all selling at extremely high multiples. There's great expectations that it's going to do great things and of course it is doing great things but I think it's bringing in uh earnings of 50 billion dollars and and the market cap is in the trillions. So uh I'm a little bit more cautious right now. I mean I'm using AI in my classroom at Chapman University. Everybody's using it for one thing or another.

[00:04:31]uh it is a great source of information mostly accurate not always but mostly accurate and it's getting better in that respect as well so I do think it's revolutionary so I would I would buy into the bulls and we're recommending a lot of uh AI related investments but it is interesting in the case of SpaceX AAI which is now part of SpaceX lost a billion dollars last year I mean They're losing money. SpaceX has actually lost money last year because he uh uh Elon Musk added XAI to the portfolio. So, there's a there's a lot of we're spending a lot of money on AI, but the question is, are we going to be able to bring in that revenue uh from from AI?

[00:05:21]>> You know, I thought of you. I watched the Harvard uh graduation uh ceremony and I don't remember the actor's name who gave the the the the the speech but basically he was anti anti- AI saying your job is actually to kill AI within the next decade. He was telling graduates and I and I sort of agreed with him on this point actually I do agree with him on this point 100% is that we've lost the art of creating like the creativity is the part of the process we should want to be part of it instead of just saying you know create script for me create dialogue for me do you not agree with that Mark >> it does make it easy the other day I said >> it does make it easy but >> that's where The beauty lied before, right, was the creation process.

[00:06:14]>> Well, that's true. You know, the it's funny because uh I said create a four stanza rhyming poem uh to invite people who are very busy to come to Freedom Fest in July in Las Vegas.

[00:06:29]>> And it came up instantly within 10 seconds. It had four or five different stanzas and all rhyming encouraging people to come to Freedom Fest. And I thought to myself, wow, that's uh I mean, how did they how does that happen?

[00:06:46]That's really So why even bother writing rhyme poetry? If you wanted to, Danielle, if you wanted to write something to your husband and uh >> deeply romantic, >> very romantic, you just whip it out with AI and you your husband will be so blown away that uh you know it'll be >> just remember just remember to delete the footnotes that they add. You know, would you like me to add more? Would you like me to expand? Yeah, >> need to remember that. I'll tell you one other thing that's interesting is that you know this jobs market came out and of course AI is supposed to be destroying all kinds of jobs and there are layoffs that are related to the AI but uh I find it interesting there's there's a dichotomy there's a split in the economy it's it's a mixed economy because you are seeing some positive signs with the stock market near all-time highs and and uh job market is coming back and so forth But I can tell you my graduates at Chapman University out in California are really struggling to find jobs. It's really difficult. And people who have been laid off, they're having a hard time finding jobs. Small business is struggling. The big companies seem to be surviving and prospering. But small business, which is the backbone of our economy, is u is lagging. And uh on top of it gross my gross output statistic is growing at a slower rate than GDP. GDP is growing at I think the last figure was 0.5% increase. And we actually had a gross output statistic in real terms that was negative and B2B spending has been in a recession a minor minor recession admittedly but it's been slowing down and been negative for the last year. I think it's related to the Trump tariffs.

[00:08:39]I think his anti-globalization America first policy is is a a gradual disaster. It's it's kind of like there's a Ernest Hemingway part in the sun also rises where uh the guys asked well how did you sir how did you go bankrupt and he said >> gradually and then suddenly.

[00:09:03]>> Yep. And so, uh, I I do think there are some concerns out there that we're moving in the wrong direction, but you wouldn't know it by looking at the stock market. That's for sure.

[00:09:15]>> Well, that's why it's all an illusion.

[00:09:17]And you I mean, you've been warning about are we talking stagflation, Mark?

[00:09:23]That's what you've been warning about.

[00:09:25]>> Yeah. I think it's a slow growth stagflation, if you will. I'm not saying it's a serious recession. it doesn't seem to be uh serious. Uh but I do think we're we're entering a period where we're just not growing at those 3 to 4% rates. Doesn't matter whether it's Europe, it's China, uh Latin America, I don't know any any area of the world which is just booming right now. There are sectors in the economy that are booming. No question about that. But I am concerned about uh and you know the in the inflation problem. We have entered I make this point over and over again at all my conferences. We are entering an era of permanent inflation.

[00:10:10]>> The the Federal Reserve doesn't even wait for the uh the rates the inflation rate to come down to that 2% target before they start cutting rates. They're so anxious to cut rates. So that means more inflation. Uh the money supply is is moving up. We're we're an easy money policy. It didn't used to be that way, but after World War II, we've had a permanent inflation policy. And it's 2 to 3% a year. It's 4%, it's 5%, but it's never gets down to 0%. Price stability, which is what the Fed is supposed to be doing. That's one of their goals. Full employment. Okay, we got full employment, but we're supposed to have price stability. That's that's not 2%, that's not 3%, that's 0%. And Paul Vulker actually advocated 0%. It was only when Ben Bernani came along that said, "Well, let's start with 2%. We think that's the that's the goal." And of course, they never reach that. You don't even reach that goal. So, uh uh I I do think I'm not selling my gold anytime soon.

[00:11:16]>> Well, we're going to get to gold, but I was going to say so much for Adam Smith's uh invisible hand model, Mark.

[00:11:22]Right. Well, it's becoming more and more the iron fist and the visible hand of government, unfortunately. Now, granted, in this AI sphere in technology, Elon Musk still has a pretty uh o open opportunity to do what he wants.

[00:11:42]And if you've read his biography by Walder Isacson, he ignores a lot of rules and regulations uh that uh that are out there and he just says why why should we bother with this regulation? I kind of like his lazy fairy.

[00:11:58]>> I know. I know. I was going to say you love that.

[00:12:01]>> Yeah. No, that's very libertarian. He's very libertarian in that regard.

[00:12:05]>> Well, if um inflation, you know, we're stuck with inflation. We're headed towards I'm gonna say it QE maybe not even headed towards it. Maybe we've just always been in it. You can make that argument. Um let's talk about gold and are you bullish the yellow metal?

[00:12:23]Well shortterm it hit below its 200 day moving average which is a bearish technically. Uh so we're I mean look, gold has had a huge run up until 2025 and especially the gold stocks, the mining companies finally came alive over the last three two or three years. There there was a 10-year period where mining shares were really not doing anything as you know and but that they've come alive and and I mean Kin Ross Gold, which is my favorite mining company, uh was up 262% last year. I mean, it was a triple gain, which is my first triple gain that I've had in who knows how long. And um but you know, it's down this year, and it makes sense. I mean, if you're going to have a run up by that much percent, you're going to have a pullback. Uh and that's to be expected, but the profit margins are there are very strong. And uh the you're making more money than the cost of gold and cost of uh the mining per ounce. uh the cash flow looks really positive in that respect. So uh I'm willing to hold on to those gold positions. Uh but it may take a while. I mean there have been periods of 10 years or longer where where gold didn't go anywhere. So but in today's environment it seems like the uh the um it's premature to say gold is topped out and is is going to stay down.

[00:13:56]and and definitely you want to own physical gold Mark.

[00:13:59]>> Well, let me let me mention one other thing that is a factor that we should consider and that is Kevin Walsh as the new Fed chairman. He's actually a inflation hawk >> and he was opposed to the quantitative easing. That's why he left the Fed. He did not agree with Ben Bernani and now he's the new Fed chairman. And it's it did kind of surprise me that Donald Trump chose him. He should have known that this guy is serious about knocking inflation down. So, he could be another Paul Verer. And if that's the case, gold is going to stay down. Silver is going to stay down. And thank goodness, you know, I've got in my pocket my my silver dollar, which I always carry with me, Harry. I I have it here, right here, my silver dollar. Do you know how many of these were minted last year? 50 million.

[00:14:53]And and where are they? Where are they?

[00:14:55]They're not circulating, right?

[00:14:57]Gresham's law, as it plays, bad money drives out good. So, this this coin is put in your pocket while the uh the greenbacks are spent, right? Bad money drives out good. So, these are all in safety deposit boxes, these beautiful coins. But I'll tell you, I I'm furious.

[00:15:18]I have a bittersweet feeling regarding the price of silver because every year, you know, these silver dollars have the year that they're minted. So, I would give these to each one of my students who took my course at Chapman University, and we go out in front of the Adam Smith U statue, and I would present them with this coin. But at $100 a coin, you think I'm going to give 53 students this summer?

[00:15:49]>> We love them, but not that much.

[00:15:51]>> That's over $5,000.

[00:15:53]That's That's hardly enough to to pay.

[00:15:56]>> But didn't you think I mean, there's experts that are calling for $300 silver.

[00:16:01]>> Yeah, that's crazy. That's crazy. That kind of reminds me when people were predicting $200 oil and of course it moved in the opposite direction. People thought a $100 silver was crazy talk.

[00:16:13]>> Yeah. And I still think it's crazy. So, what is it now? 80 bucks. I can't remember. 70.

[00:16:19]>> Well, goodness. It's come down a little bit, but it needs to come down to 20 and 30 bucks like what I used to be able to buy these for.

[00:16:26]>> Um, >> it's not going to happen, but it would be nice.

[00:16:29]>> Getting back to your point about Kevin, and I'll challenge the hawkish because do you really think Donald Trump would tap someone Hey, >> I mean, sure, they're independent.

[00:16:43]>> He tapped he tapped Jay Powell. He didn't end up not liking him. So Kevin refused to cut interest rates. He's not cutting interest rates, right?

[00:16:56]>> Let's Let's see. Let's I don't know, Mark.

[00:17:00]>> I think if he cuts interest rates, >> I think we're going to get lower rates.

[00:17:03]I think we're we're going to be forced to get lower rates here.

[00:17:07]Well, the mar the bond market tells you where interest rates are headed, right?

[00:17:11]And what is that? What are what are interest rates doing? They're going up, folks. They're going up. So, how can the Fed cut interest rates? They only can cut short-term rates anyway. He's going to look like an idiot if he cuts interest rates. The market's not going to buy it. You have to face reality. And the bond market carries the tune these days. The bond market hates inflation.

[00:17:35]The stock market hates inflation and every time look at 2022. Why did why did stocks drop? Because inflation flared up. Inflation is flaring up now. And so the stock market struggling. And by the way, the second year of the presidential cycle tends to be very iffy in the stock market. We had a very good year the first year uh under Trump, but the second year with these midterms coming up and so on, there's a great deal of uncertainty. I'd just be surprised to see the stock market uh move substantially higher one way or another.

[00:18:13]I think it's just going to be a sluggish and difficult year.

[00:18:17]>> All right, Mark Scousin, good recap.

[00:18:19]Good touching base with you. I wish you luck on the upcoming Freedom Fest. I missed attending those shows. I have to tell you the last time I was there you had the late great George Foreman. I mean that you have such an eclectic mix of people and I have to tell share this story. I don't think I ever told you. Uh I think my dad's proudest moment of all my interviews of every single interview probably over 10,000 of them was when I interviewed Don King.

[00:18:49]Let me tell you, you couldn't get Don King off the uh off the podium. He we had to yank him off eventually and he he was there to introduce George Foreman, but if you have a minute, let me tell you my favorite George Foreman story at Freedom Fest. Uh he got up and said, "Mark, uh I'm a I am a motivational speaker. I don't get into politics, so please no questions about politics."

[00:19:10]>> So he gets up and give a great speech, standing ovation, talks about what it was like fighting Muhammad Ali, starting his new grill business. He was a preacher for a while. He's an entrepreneur. And then comes the Q&A and everybody asked,"What was it like to be knocked out by Muhammad Ali? What was it like to become a millionaire, as an entrepreneur, as a preacher?" And the final question was from a woman who says, "Uh, Mr. Foreman, what's your opinion of Black Lives Matter?"

[00:19:40]Obviously, a very political question.

[00:19:43]And Foreman hesitates for a while. And then he says, "Well, I'll tell you what.

[00:19:47]I grew up dirt poor in Houston, Texas and became the heavyweight champion of the world twice.

[00:19:56]Does that answer your question?

[00:20:00]>> Wow. Another standing ovation from George Foreman. And we've had some big names and we >> Yeah, that's what I'm saying. You've had huge names. But that Don King moment when I interviewed him, my dad called every relative in Italy. I'm like, really, Dad? Like I love Don King and it was great.

[00:20:19]>> You know, he had lawsuits with almost every boxer. Did you know that?

[00:20:24]>> I did. I did. But he was a hoot. Yeah.

[00:20:27]He loves gold.

[00:20:28]>> For people who still would like to come to Freedomfest, go to freedomfest.com July 8th through the 11th in Vegas. It's going to be fun.

[00:20:35]>> And I was going to say Oxford Economics was was very smart to scoop you up. And you can't create that on AI yet, Mark.

[00:20:45]Well, they may try, >> but they can't.

[00:20:50]>> Well, this has been great.

[00:20:51]>> What's the saying? Often duplicated, never replicated.

[00:20:56]>> Oh, very nice line. Yes. Let's hope so.

[00:20:59]My kids are waiting in in the wings.

[00:21:06]>> You You can't go anywhere yet. Yeah.

[00:21:08]>> Um I look forward to seeing you in person. I need to get back to Freerfest.

[00:21:11]Mark Scowzen, America's economist.

[00:21:13]Everyone loves him. Um, go to his show if you can and we'll see you soon. All right.

[00:21:19]>> Okay, Daniel, thank you very much. Take care.

[00:21:22]>> Thank you all for watching. We'll have more great content. Stay tuned.