If I break into song during my lecture, you'll have to forgive me for being giddy.
I'm really Walter Block and my topic really is gold is free enterprise money.
But I'd like to just say two things that I wish I had said last night when I won this medal.
One was, in one of the Godfather movies, when the Godfather died, one of the local mafiosos said,
well, you know, we lost half our power because the Godfather was so powerful.
He knew everyone. He was the smartest, whatever.
Well, I feel when we lost Murray, the Austro-libertarian movement really lost half its power, even though there are hundreds, thousands of us now, that one man meant so much.
And the other thing I wanted to say is, another of Murray's famous quips or sayings was, when we were in the living room crowd, he said, you know, we kept looking for the in place to be, we kept looking for the in crowd, and finally we realized we were it.
We're really the in-crowd and someone was telling me,
Floyd was telling me about this wonderful show that she saw last night
and I was thinking, well, yeah, that's important, that's good,
but this is really the in-crowd.
We are on the cutting edge.
We are the man, as they say in certain neighborhoods.
Okay, with that introduction, let me launch into my bit on gold.
Mises and Rothbard were gold standard advocates
and I think it's important to reiterate the importance of the gold standard
because there are so many people, say people like Milton Friedman who were seen as free enterprises
who yet derisively dismissed the gold standard as a, I don't know, Keynes said it was a barbarous relic
and Friedman is always calling us gold bugs and he means this in a very derisive way.
So I think it's important to review and reiterate why gold.
And the way I've chosen to illustrate this is through a fairy tale.
Once upon a time and a long, long ago in a faraway place, all fairy tales have to start that way.
How are we doing? Is this better? Okay, great. So, in this faraway, long-ago place, there was no trade. People consumed only what they produced.
They had to produce everything for themselves. They had to produce food, clothing, shelter,
entertainment, repair, shoes, shoelaces, whatever it was. There was no outsourcing.
There was self-sufficiency. This is what the economic nationalists and the anti-globalists
whack so eloquent about. It was as if there was a tariff wall around each individual of 100%
and no one could trade with anyone else. Naturally, everyone was poor.
was poor. How can you be rich when you're a jack-of-all-trades?
Then some genius, some Ludwig von Mises, some Murray Rothbard, some Henry Hazlitt of his day, had a great idea.
He would specialize in the production of one or very few things. He would learn more about the task, he would be able to innovate,
he would engage in the division of labor, he would perfect his skills. You know, there's a joke in New York City, you ask a cab driver,
So how do you get to Carnegie Hall?
And the answer is practice, you know, not go up Broadway or something like that.
Well, the way to get good at stuff is to practice at it.
And if you're a jack of all trades and you're doing 50, 100 different things, you can't practice any one of them.
You can't be good at any one of them.
The only way to be good and efficient at anything is to practice, is to do it and, excuse me, pretty much it alone.
Unless you practice your craft and practice all day long, you're not going to be very good at it.
The only counterexample or the only exception to this rule is the Harvard Crips.
These are Harvard professors who engage in critical legal studies, which is sort of applying Marxism to the law,
saying that, you know, property is a tool of the ruling class.
And they once had this idea that it's too, I don't know, it wasn't good that they specialize in that
and it's unfair that the people who sweep the halls in Harvard had to just keep sweeping the halls
and what they would do is they would advocate switching jobs and there I agree.
The Harvard crits did not specialize in law, they should be doing some mopping also.
Okay, there's only one problem in this idol, this new thing where people engage in specialization,
and that is that if you specialize in any one thing and there's no trade,
then you'll pile up mountains of shoes or mountains of frisbees or mountains of corn,
and you can't live on any one of these things alone.
So trade is imperative.
If we're going to have specialization in division of labor and getting good at things and becoming efficient,
you absolutely have to have trade but trade direct trade is very hard it's
very difficult imagine that you're a you own a chicken and you want a pickle
you're a chicken owning pickle-warter and you have to find a pickle owning
chicken-warter do you know the odds of that the odds of rather the odds against
the odds against doing that it's it's very difficult or take another example
you have a skill as a computer operator you move to a new city you want to find
and a landlord who will rent you a suitable apartment who needs computer services.
So again, you're a computer-owning apartment-warner and you have to find an apartment-owning computer-warner.
And the odds of that are very, very small.
So it was found by these geniuses that the way to overcome the difficulty of direct trade is to do indirect trade.
In other words, instead of trying to go in one fell swoop from the chicken to the pickle,
you go from the chicken to something and then you go from something to the pickle.
So you trade your chicken for something, say salt,
which everyone wants and everyone will accept.
And then you take the salt and you go
and you buy the pickle with that.
So it was sort of salt was a medium of exchange.
It was facilitating exchange,
in addition to having its own intrinsic values.
Well, as salt began to be used for this purpose,
the demand for salt increased.
One, there was the demand,
the good old fashioned demand for salt
in order to make your food more tasty.
And now, there was this new demand for salt in order to facilitate trade.
Notice that the reason that you would use salt is that you knew that everyone else would accept salt.
In other words, suppose you own the salt and some guy came to you and said,
here's a chicken for the salt, or rather the opposite way around, taking the salt.
The reason you would hold the salt is that you knew that you could get rid of the salt
Now, there are various things that were used to intermediate trade, salt, cigarettes in prisoner of war camps, sugar, tobacco, fish hooks, cows, metal, brass, copper, silver, gold, but notice one thing, all of these intermediaries of trade were commodities, they all had intrinsic value, now look, I'm not a Marxist, I don't believe in intrinsic value, it all comes from evaluate whores as an Austrian,
But the point is that these things had some value in and of themselves over and above their ability to transact or to intermediate trade.
That's a necessary condition, otherwise why would people accept them?
It didn't start, it couldn't have started with pieces of paper or entities in a ledger.
Because suppose I said, okay, look, I'm going to print up on this sheet of paper, I'll print up a hundred Walters.
And now, give me your code or give me your car or something. You wouldn't do it.
Now, Murray Rothbard used to say, suppose I printed up a thing that said 10,000 Rothbards, who would give me anything for it?
And he was trying to prove the point that I'm now making, and I would always raise my hand and say, oh, Murray, that's an exception.
I'll take some Rothbards, you know, just for the sheer pleasure of having a Rothbard. But that's an exception.
And ordinarily, no one is going to take a piece of paper with some print on it and give good things.
The only thing that you'll give in return is something that you know that someone else will accept, such as salt or fish hooks or whatever.
So the key to being a money or an intermediary of exchange is knowing that others would later accept the thing that you're holding,
so you wouldn't hold the bag and you wouldn't be giving up some real resources and having this thing and no one will take it.
will take it and then you would just lose. So it had to be valuable commodities, salt,
sugar, iron, whatever. There was a very small or zero risk of later rejection. So
then there came in this fairy tale a competitive struggle over which
commodity would be the money. Would it be salt? Would it be sugar? Would it be
tobacco? Would it be gold? Would it be diamonds? What would it be? Everywhere in
In a civilized world where free competition between monetary intermediaries was allowed,
gold won out. Silver for minor exchanges and in some countries, but gold was the king-kong
of money. So free enterprises such as myself favor the gold standard, not because we have
any fetish for gold. One of my favorite storybook characters was Scrooge McDuck. Remember good
Old Scrooge who'd go into the money bin and he'd sort of throw the money and it
would get down on him and he'd go ooh and you know he sort of got off on that.
Now maybe some of us are gold perverts I don't know I don't speak for everyone
here some perverts out there but the the the idea of gold there's no fetish about
gold it really should be called free enterprise money it shouldn't be called
the gold standard or gold it just so happens as a historical accident that
that whenever there was a free competition between these intermediary monies, gold was picked.
So as a shorthand, we say that we're advocates of the gold standard, but what we really mean
is that we're advocates of free enterprise or economic freedom.
Because if platinum had won or diamonds had won, then we'd be platinum or diamond advocates.
And again, we'd have no particular connection with those particular things.
It would be rather that they won out in the competitive struggle.
Well, why did gold win?
What are its advantages compared to other things?
Well, it's malleable.
You can break it apart pretty easily,
whereas to break up a diamond is very hard,
break up platinum is harder.
It's cheaply divisible.
If you break up a diamond in two halves,
the value of the two small diamonds is worth,
I think, one-eighth of what the big diamond was worth,
Whereas if you break up gold into two parts, the two parts are worth as much as the one bigger piece of gold.
It has low cost transit. That's why cement or steel couldn't be a good money because it would just take too long, too hard to transport the stuff around.
It had a high value per volume and a high value per weight. That is the gold in.
So this is why gold won out and this is why we need a money to facilitate exchange and the reason we want to facilitate exchange is that we want to engage in a division of labor and specialization and the reason we want to do that is so that we can live.
Because if we couldn't, if we had this 100% tariff around all of us and we couldn't trade, 99% of us would die.
It would be way worse than decimating us.
It would be way worse than AIDS or the bubonic plague
or any of these other things.
We, 99% of us or 97% of us, owe our very lives
to the fact that we can be efficient through trade.
If we couldn't trade, if we had to minister to ourselves
in every way, if we had to be our own dentists
and our own doctors and our own farmers
and our own whatevers, most of us would die.
So this is crucial that we have a money to facilitate exchange, to enable us to specialize and to become competent in things and thus to live.
Okay. Having made the case for gold, let's now talk a little bit about the bad guys, the other guys.
Government. Government has three ways to raise money.
One, they tax. The problem with taxing is that everyone knows who's doing it.
I mean, they can't say that, you know, it's really private enterprise that's raising taxes.
Much as they'd like to, they can't. The second way is to borrow.
And again, everyone knows who's borrowing and who is crowding out other investments.
The third way is to inflate. And this is a lot better from their point of view,
because it's hard to know who is causing inflation.
You know, people say, well, it's greedy businessmen, or it's profiteers, or it's people demanding high wages, unions.
Now, look, I'm not in favor of unions, but I don't want to blame unions for what they're not responsible for,
and they're not responsible for inflation, or it's greedy people who raise the price of oil.
That's all nonsense because if the price of oil rises and there's no more money around,
the price of everything else has to fall, and you can't get a generalized price inflation
because some guy raises the price of oil.
The real cause of this is government inflation
of the money supply.
And the real reason they don't want to have gold
is they can't inflate gold.
If they have paper, they can add a few more zeros.
If they have checkbook money,
they can through open market operations
and the discount rate raise the money supply.
But you can't do it with gold.
That's why they don't like the gold standard.
That's why they want to take over gold.
That's why they think that only government can run money.
And the reason for that is to protect them
in raising money in a hidden way.
Now, this is very hard to see.
It's very difficult to see because the relationship
between money supply and the price level is not...
Five minutes?
Oh, Lord.
Wow.
Time goes by when you're having fun and being giddy.
let me skip ahead because I had I had some real good stuff I want you know no
no speech would be good if you don't attack anyone I mean you know so far I'm
just sort of talking I mean any any so-called free enterprise so far I've
been attacking his government and that's no fun so what I want to do and in the
longer version of this I attack four people Milton Friedman, Friedrich Hayek,
Robert Mundell and Alan Greenspan for for see it doesn't bother me when a
commie is a commie at least you know they're a commie that they have a red
flag or a black flag or whatever it's fine what really bugs the hell out of me
is when so-called free enterprises say yes they're for free enterprise and
they're not sort of a product differentiation you know those of you in
marketing will know that you know you have to keep the product distinct so
what I want to do in the last few minutes I've got is to viciously attack
Jack Milton Friedman and Alan Greenspan.
Now, what Milton Friedman says, here's a quote from him.
He is suspicious of assigning to government any functions that can be performed through the market,
both because this substitutes coercion for voluntary cooperation in the area in question,
and because by giving government an increased role, it threatens freedom in other areas.
Control over monetary and banking arrangement is a particularly dangerous power to entrust the government
because of its far-reaching effects on economic activity at large,
as numerous episodes from ancient times to the present
and over the whole course of the globe tragically demonstrate.
Well, what's going on here? I said I was going to attack him.
This is pretty good stuff. This is very good stuff.
I mean, if this is what he really stood for, we could enroll him in the Mises Institute.
However, here's another quote from the same guy, sort of Jekyll and Hyde.
The fundamental defect of a commodity standard, that is a gold standard, or any other commodity standard,
the gold standard is the main commodity standard, from the point of view of society as a whole,
well, society as a whole is sort of an indication, you know, only individuals act,
is that it requires the use of real resources to add to the stock of money.
People must work hard to dig gold out of the ground in South Africa in order to rebury it in Fort Knox or some similar place.
Necessity of using real resource for the operation of commodity standards establishes a strong incentive for people,
that's an excuse for government to do this, to find ways to achieve the same result without employing these resources,
that is without employing gold or any commodity.
If people will accept this money, pieces of paper on which it is printed, I promise to pay X units,
these pieces of paper can perform the same function as the physical pieces of gold or silver,
and they require very much less in the form of resources to conduct.
So he begins his analysis on a very high note, but then in the event we're very disappointed,
because his argument amounts to this, freedom costs real resources, therefore don't do it.
What about a ringing declaration for freedom?
You know, it costs money, instead it costs money, so let's forget all about it, let's have coercion.
doesn't follow. You can't logically deduce one from the other.
What about just as though the heavens fall? Our lives, our fortunes, our sacred honors,
millions for defense, not a penny for tribute.
How about kick butt? How about something like that? No, we don't get that from Milton Friedman.
What we get from him is, it'll save money, therefore let's not have a gold standard.
Let's let the government do it.
Well, it's not true, first of all, that it costs real resources. Digging in South Africa
and burying in Fort Knox or somewhere else will occur anyway,
Because, remember, gold has a monetary value,
rather has a commodity value for teeth and industrial purposes and whatever.
Maybe a little bit more gold would be dug out because if gold is, in addition,
has a monetary value, the demand for gold will shift to the right.
But still, there'll be plenty of gold being dug up all over the place anyway,
so it's not going to save all of that.
But suppose it did cost resources.
Does it follow that we shouldn't do it? No.
The question is, is it worth the resources?
The point is that just because something costs resources doesn't mean you shouldn't do it.
The whole question is, should you do it, is it worth it, and who should choose?
And why should we choose gold?
The reason we should choose gold is because to save us from monetary inflation,
to save us from, dare I say it, the Hitler episode,
because that came about because of the hyperinflation in Germany in 1923,
or at least some economist, historians attributed that.
Let me spend the last 30 seconds on Alan Greenspan.
I've got a whole bunch of quotes here
from the Alan Greenspan of the 60s and 70s
where he starts talking about how great gold is
and how wonderful gold is
and how the opponents of gold are evil
and they're an abomination.
And the only question I would ask you is,
if such a person took over the Fed,
wouldn't you expect that the next day
he would try to disband the Fed?
But no, he's been in with the Fed for lowly as many years.
He doesn't talk about gold anymore,
or he talks about it on some sort of high philosophical level,
but when push comes to shove, we have to jettison gold,
which means we have to jettison economic freedom,
which means he's not really a free enterprise person.
Thanks for your attention.