The Biggest Lie in Economics | Peter St Onge

Peter St Onge (0:02)

I mean, the first problem is that they cause the recessions, right? So they manipulate interest rates down, that causes a tissue fire boom.

Tissue fire boom leads to inflation because it's being driven by money printing. At that point, they jam on the brakes. So you get this, you know, go fast, slam on the brakes, go fast, slam on the brakes, which we call the business cycle. Now, if we do get one, you know, of course, the sort of prime suspect is going to be AI. And I thought we would never ever see anything like that again. Like the Internet, the degree that it changed the world, the amount of money that went into it, the amount of money that was made out of it. I didn't think we'd see any of that for a century, never mind my life, my kid's life, my grandkid's life. So I am shocked at AI. It's literally, it's 5X what the Internet was in every way.

Danny Knowles (0:49)

All right. The Prof, Peter St Onge, welcome to the show. This is the first time you've been on since I've taken over, and you were always one of my favorite guests on the show, so welcome back.

Peter St Onge (0:59)

Well, thanks for having me back, Danny, and congratulations on the show.

Danny Knowles (1:02)

Thank you. So I think, like I said, this is the first time you've been on the show since I've taken over, and I've got a lot of stuff I want to throw at you today, because I do a ton of macro shows, and rarely is it from a very pure Austrian viewpoint, and that's obviously your background. So I want to get into that, but we should start off by talking about where you've come from, because you have a PhD in economics.

Tell everyone about that and then how you found out about the world of Austrian school economics.

Peter St Onge (1:30)

Yeah, so I did my undergrad in economics, and that was at McGill University in Canada, and it was a very mainstream program. So it was Keynesian economics.

And I actually, during the entire degree, so this is an elite school in Canada, during the entire degree, I never even heard of Austrian economics. I don't think any of my professors knew anything about Austrian economics. And I was, after I graduated years later, I was roaming a bookstore in Japan, and there weren't that many books.

So I was digging through all bookstores, and there was a book by Rothbard. No, I'm sorry, Skousen, who's also not an Austrian economist, but he has a book where he basically compares different schools of economics. So it's called Making, I think it's the Making of Modern Economics. And he had Marxism, Keynesian, and Austrian. And so I was reading through, wow, and then he had, I think he called him Freedman Economics, like free market economics. And so I was looking through the Austrian stuff, and I was like, wow, this stuff makes a lot of sense. And so went out, found Rothbard. Rothbard is kind of the gateway drug. The Case Against the Fed. Anybody who's not familiar with Austrian economics, that's a very good book to start.

Ron Paul's book and the Fed is kind of a popularization of Rothbard's book. And then Rothbard led to Mises and all these other Austrians. But yeah, it was striking. Like, I had to find it on my own. You know, the academic establishment teaches nothing about Austrian, which is fascinating in retrospect because Austrian economics is simply classical economics. Like, it's not a fringe thing. It is simply the continuation of what economics was before government bought its way into the field and morphed it into so-called Keynesian economics, which is really just pro-government economics. So essentially, the 500-plus-year history of economics is hidden in even an elite university degree.

Danny Knowles (3:43)

Why do you think that is? Is it because they're preparing you to go out and get a job? And if you go out and work for, I don't know, the Fed, for example, you're not going to need it?

Peter St Onge (3:53)

Yeah, there's a certain amount of network effects essentially. So the individual professors are not, they don't see themselves as foot soldiers of the socialist revolution.

They just think they're teaching economics. And as you say, if you go out into the world, everybody else, every other economics person you're communicating with is going to be trained in Keynesian economics. And so if you're not trained in that, then you guys are not even going to know what you're talking about. So business economists, Wall Street economists, of course, government economists, academic economists, all of these standardize on Keynesianism. So it's a little bit like the QWERTY keyboard. It's not logical, but everybody else uses it, and so you have to use it. And so you've got a network effect, I think, from the individual professor's point of view. Now the deeper question is, why was economics corrupt in the first place? I think the answer there is just that it is far too useful.