WEBVTT NOTE Fiat Money and Collective Corruption 1 00:00:00.000 --> 00:00:06.840 I'd like to introduce our next speaker. He is an honorary professor of economics at the 2 00:00:06.840 --> 00:00:15.560 Frankfurt School of Finance and Management in Frankfurt, Germany. So he came a long ways 3 00:00:15.560 --> 00:00:21.480 to participate in this conference and I'm thrilled to have him. He specializes in Austrian 4 00:00:21.480 --> 00:00:29.520 monetary theory, capital market theory. He is an adjunct scholar with the Mises Institute. 5 00:00:29.520 --> 00:00:37.000 speaking today on Fiat Money and Collective Corruption. Please help me welcome Thornton 6 00:00:37.000 --> 00:00:47.000 Polite. 7 00:00:47.000 --> 00:00:52.120 Ladies and gentlemen, thank you very much for the invitation. I really feel honored 8 00:00:52.120 --> 00:00:58.520 to be here and to be part of today's Mises Circle event in New York City. In fact, I 9 00:00:58.520 --> 00:01:14.520 If you fear that paper currency could be debased and perhaps not only be debased but destroyed, I could imagine that my talk will be of interest for you. 10 00:01:14.520 --> 00:01:20.520 In fact, I will, in my talk, make a journey to the very heart of the problem. 11 00:01:20.520 --> 00:01:39.520 I will present a theoretical explanation based on praxeology, showing why fiat money, as Ludwig von Mises told us, is an experiment that is said to fail, and necessarily so. 12 00:01:39.520 --> 00:01:44.800 So, there is no means of avoiding the final collapse of a boom brought about by, and here 13 00:01:44.800 --> 00:01:51.480 I may add, circulation credit expansion. The alternative is only whether the crisis should 14 00:01:51.480 --> 00:01:59.360 come sooner as a result of a voluntary abandonment of further circulation credit expansion or 15 00:01:59.360 --> 00:02:06.320 later as a final and total catastrophe of the currency system involved. These sentences 16 00:02:06.320 --> 00:02:11.920 These were written by Ludwig von Mises in his magnum opus Human Action. What makes them 17 00:02:11.920 --> 00:02:19.260 really special is the fact that they are logically inferred from the irrefutably true axiom of 18 00:02:19.260 --> 00:02:27.920 human action, an a priori synthetic proposition as the great philosopher Immanuel Kant would 19 00:02:27.920 --> 00:02:35.360 term it. Mises' words must be understood in the following way. If bank credit expansion 20 00:02:35.360 --> 00:02:40.120 is increased further and further and the money stock is increased further and further, then 21 00:02:40.120 --> 00:02:46.640 it is inevitable that the economic and monetary system will eventually collapse. This we can 22 00:02:46.640 --> 00:02:52.860 say is apodictically true. It is logically inferred from the axiom of human action, which 23 00:02:52.860 --> 00:02:59.360 in turn is at the heart of praxeology, the science of the logic of human action. Mises' 24 00:02:59.360 --> 00:03:06.560 This insight is, and especially in view of the so-called credit market crisis, a rather 25 00:03:06.560 --> 00:03:10.300 uncomfortable truth to many. 26 00:03:10.300 --> 00:03:18.980 Austrian economics rests on Mises' praxeology, and it irrefutably shows that the root cause, 27 00:03:18.980 --> 00:03:26.100 the root cause of the worldwide monetary and economic debacle, can be found in fiat money, 28 00:03:26.100 --> 00:03:32.220 A fiduciary medium which is produced through bank circulation credit, credit that is not 29 00:03:32.220 --> 00:03:40.180 backed by real savings. More precisely, the root cause can be found in the fact that governments 30 00:03:40.180 --> 00:03:46.500 have monopolized money production, a system in which government officials, rather than 31 00:03:46.500 --> 00:03:52.740 free markets, produce the money supply. Governments increase through bank circulation credit the 32 00:03:52.740 --> 00:04:06.740 Money supply virtually out of thin air. Bank circulation credit lowers the market interest rate to below the rate level that would prevail if the credit supply was not artificially increased. 33 00:04:06.740 --> 00:04:18.740 This in turn sets into motion an unhealthy economic boom. The economy starts living beyond its means and the saving consumption investment relation moves out of equilibrium. 34 00:04:18.740 --> 00:04:30.740 Sooner or later, however, market agents try to move back their desired consumption-investment-saving relations back towards equilibrium. 35 00:04:30.740 --> 00:04:44.740 The market interest rate is driven back from its artificially reduced level towards society's true time preference rate, thereby revealing that the boom has caused malinvestment on a grand scale. 36 00:04:44.740 --> 00:04:55.740 The boom has turned into bust. Investment projects and jobs, which were created as a result of injecting additional credit and money, become unprofitable. 37 00:04:55.740 --> 00:05:04.740 Malinvestment is liquidated, a process in which some firms and even banks default. Output falls and employment goes up. 38 00:05:04.740 --> 00:05:10.740 The ensuing recession brings the economy back towards equilibrium. 39 00:05:10.740 --> 00:05:17.440 However, governments don't allow this to happen, and in an effort to fight the recession, 40 00:05:17.440 --> 00:05:23.240 central banks lower the interest rate further via bank circulation credit expansion, and 41 00:05:23.240 --> 00:05:29.580 the boom and the bust is turned into another boom, causing an even greater distortion of 42 00:05:29.580 --> 00:05:32.780 the economy's production structure. 43 00:05:32.780 --> 00:05:40.340 This is a destructive policy, as the inevitable correction of the economic and monetary disequilibria 44 00:05:40.340 --> 00:05:46.460 will be postponed and not only that. The final recession will be the more severe the longer 45 00:05:46.460 --> 00:05:52.440 the correction had been prevented by further and further increases in circulation, bank 46 00:05:52.440 --> 00:05:59.500 credit and money expansion. In fact, data can be used to illustrate the Austrian business 47 00:05:59.500 --> 00:06:08.500 cycle quite nicely. This chart shows from the period 1960 to the end of 2009 total debt 48 00:06:08.500 --> 00:06:22.500 in the United States of America, which rose from around 140% at the beginning of this chart towards more than 370% of GDP. 49 00:06:22.500 --> 00:06:31.500 The rising trend of the total debt to GDP ratio started around the early 1980s, as you can see over here. 50 00:06:31.500 --> 00:06:39.500 A development which was accompanied by a trend decline in the Federal Reserve fund rate. 51 00:06:39.500 --> 00:06:44.500 In fact, this is a textbook illustration of the Austrian business cycle theory. 52 00:06:44.500 --> 00:06:53.500 The central bank lowers interest rates further and further and the overall debt burden rises to higher and higher levels relative to income. 53 00:06:53.500 --> 00:06:58.500 In fact, such a policy does not only prevent the liquidation of malinvestment, 54 00:06:58.500 --> 00:07:06.500 It also induces additional credit finance investments which are provoked by artificially lowered interest rates. 55 00:07:06.500 --> 00:07:14.500 And that might explain why over time the overall debt burden of the economies goes up under such a policy. 56 00:07:14.500 --> 00:07:22.500 And I may add this is just a representation of the textbook example as outlined by the Austrian business cycle theory. 57 00:07:22.500 --> 00:07:26.500 It can be illustrated in many other countries in the same way. 58 00:07:26.500 --> 00:07:41.500 And because I'm from Europe, you may be interested to hear that the debt situation in Europe is not better than in the United States. In fact, it is worse. 59 00:07:41.500 --> 00:07:53.500 If I would put together total debt outstanding, we would reach a level in Europe or the euro area which would exceed the 370% of GDP I showed you on this chart. 60 00:07:53.500 --> 00:08:04.500 It needs to be emphasized here that under a government controlled fiat money regime, interest rates will be artificially suppressed and logically so. 61 00:08:04.500 --> 00:08:10.500 They will necessarily be lower than the rate that would prevail in an unhampered market. 62 00:08:10.500 --> 00:08:19.500 The expansion of bank circulation credit means pushing market interest rates to below the societal time preference rate. 63 00:08:19.500 --> 00:08:25.500 And this in turn induces the boom period which I just referred to. 64 00:08:25.500 --> 00:08:30.500 But now let us come to basically the core message of my talk. 65 00:08:30.500 --> 00:08:35.500 As you know, fiat money regimes have been established the world over, 66 00:08:35.500 --> 00:08:41.500 be it the US, Europe, Japan, even China, it is all fiat money. 67 00:08:41.500 --> 00:08:47.500 And this finding provokes the question, why did this happen, especially in Western Europe? 68 00:08:47.500 --> 00:08:55.900 Well, from an so-called a priori theory viewpoint an exact answer can be given. And the answer 69 00:08:55.900 --> 00:09:04.620 is the adoption of fiat money is the logical outcome of public ownership of government. 70 00:09:04.620 --> 00:09:11.540 So you may ask what is government? And I would like to share a definition given by Hans-Hermann 71 00:09:11.540 --> 00:09:23.940 Hoppe notes, quote, a government is a territorial monopolist of compulsion, an agency which 72 00:09:23.940 --> 00:09:31.860 may engage in continual institutionalized property rights violations and exploitation 73 00:09:31.860 --> 00:09:39.860 in the form of expropriation, taxation and regulation of private property owners. 74 00:09:39.860 --> 00:09:46.180 The defining characteristic of public ownership of government is therefore that the monopoly 75 00:09:46.180 --> 00:09:52.940 privilege of expropriation is collectively owned and in practice the coercive capacity 76 00:09:52.940 --> 00:10:01.280 is in the hands of the caretakers of public ownership of government, namely elected politicians. 77 00:10:01.280 --> 00:10:07.800 The most prominent form of public ownership of government is democracy, republicanism, 78 00:10:07.800 --> 00:10:12.640 In sharp contrast I may add that at this juncture to private ownership of government which is 79 00:10:12.640 --> 00:10:19.760 represented by for instance feudalism or monarchy. The caretakers of public ownership of government 80 00:10:19.760 --> 00:10:25.480 do not personally own the expropriation power of government but they can take advantage 81 00:10:25.480 --> 00:10:31.640 of the income it yields. Now public ownership of government encourages, and this is important 82 00:10:31.640 --> 00:10:41.640 Narrow Group Interest 83 00:11:01.640 --> 00:11:30.640 The voters have every economic incentive to do so. The caretakers of public ownership of government in an attempt to secure the majority of the voters have a strong economic incentive in expanding policies of expropriating the typically few high productive income earners to the benefit of the typically large group of the less productive income earners. 84 00:11:30.640 --> 00:11:39.640 In other words, public ownership of government will undermine people's encompassing interest in the market economy. 85 00:11:39.640 --> 00:11:52.640 Public ownership of government reduces the economic incentive for the caretakers of coercive capacity to limit their aggression against individuals' private property. 86 00:11:52.640 --> 00:12:19.640 A regime of public ownership of government raises people's interest in transfer incomes and increases society's time preference, compared with, for instance, private ownership of government or a libertarian societal order, which is characterized by the principle of non-aggression against private property. 87 00:12:19.640 --> 00:12:27.640 Public ownership of government necessarily reduces savings and investment and thus weakens the economic progress. 88 00:12:27.640 --> 00:12:38.640 And it is also a necessary development that under public ownership of government, commodity money, so gold or silver or copper money, 89 00:12:38.640 --> 00:12:44.640 was, and we know from Murray Rothbard, in a very prolonged effort replaced by fiat money. 90 00:12:44.640 --> 00:12:50.640 In fact, this development can be explained, as I noted earlier, by logical reasoning. 91 00:12:50.640 --> 00:13:01.640 To start with, it should be noted that government acquires its revenues in a way that is diametrically opposed to the free market. 92 00:13:01.640 --> 00:13:07.640 In a free market, people acquire goods and services through mutually beneficial transactions. 93 00:13:07.640 --> 00:13:12.640 Government, however, means expropriating resources from the ruled. 94 00:13:12.640 --> 00:13:16.640 Such a seizure is called taxation. 95 00:13:16.640 --> 00:13:20.640 Taxing people tends to be politically unfavorable. 96 00:13:20.640 --> 00:13:25.640 Well, governments do it, but it's still politically relatively unfavorable. 97 00:13:25.640 --> 00:13:30.640 For the caretakers of government it is, economically speaking, much more convenient 98 00:13:30.640 --> 00:13:33.640 if they can increase the money stock out of thin air. 99 00:13:33.640 --> 00:13:41.480 By doing so they can acquire resources slightly and almost unnoticed provided the effects 100 00:13:41.480 --> 00:13:46.140 of the issuance of the new money do not become too obvious. 101 00:13:46.140 --> 00:13:51.200 So for instance if we just look at consumer price inflation because people tell us this 102 00:13:51.200 --> 00:13:58.120 is inflation and we disregard the economic insight that inflation is a rise in the money 103 00:13:58.120 --> 00:14:03.720 Money supply and necessarily so, then of course the government or its central bank can increase 104 00:14:03.720 --> 00:14:11.120 the money stock and finance basically its outlays. The control over the money supply 105 00:14:11.120 --> 00:14:17.120 actually increases the scope of government and gradisement and the financial benefits 106 00:14:17.120 --> 00:14:23.180 for government collaborators well beyond the boundaries set under the free market. And 107 00:14:23.180 --> 00:14:29.060 And free market money, I may add here, is necessarily commodity money. That is money, 108 00:14:29.060 --> 00:14:35.660 of course, which cannot be expanded according to political expediency. Fiat money makes 109 00:14:35.660 --> 00:14:41.340 it easy for the government to issue debt, through which resources can be transferred 110 00:14:41.340 --> 00:14:47.420 from the private sector to the caretakers of government and its prodigies. If the rise 111 00:14:47.420 --> 00:14:55.300 If this in the money supply is accompanied by the increase in government debt, the market 112 00:14:55.300 --> 00:15:01.620 interest rate can be held low, at a lower level compared to a situation in which government 113 00:15:01.620 --> 00:15:05.420 debt increases and the money stock remains unchanged. 114 00:15:05.420 --> 00:15:13.060 As you know, the last remnants of commodity-based money were abolished when in August 1971, 115 00:15:13.060 --> 00:15:19.660 US President Richard Nixon suspended the gold convertibility of the US dollar as a decision 116 00:15:19.660 --> 00:15:26.660 which de facto brought the world an unfettered fiat money regime. Now, it would be premature, 117 00:15:27.020 --> 00:15:33.060 however, to draw the conclusion that fiat money, once established, would be upheld solely 118 00:15:33.060 --> 00:15:40.060 because of the economic interest of the ruling class or government and at the expense of 119 00:15:40.060 --> 00:15:47.220 of the Class of the Ruled. In fact fiat money once established increasingly finds its supporters 120 00:15:47.220 --> 00:15:58.220 among the electorate. Mises held public opinion responsible for repeated increases in the bank 121 00:15:58.220 --> 00:16:05.020 circulation credit supply, especially so in times when the harmful effects of fiat money 122 00:16:05.020 --> 00:16:11.340 come to the surface. He wrote, I quote, in the opinion of the public, more inflation 123 00:16:11.340 --> 00:16:17.740 and more credit expansion are the only remedy against the evils which inflation and credit 124 00:16:17.740 --> 00:16:26.740 expansion have brought about. However, why is public opinion in favor of inflation in 125 00:16:26.740 --> 00:16:34.480 the first place? Mises' answer was, quote, that public opinion could favor spurious ideologies 126 00:16:34.480 --> 00:16:41.480 whose realization would harm welfare and well-being and disintegrate social cooperation. 127 00:16:41.480 --> 00:16:48.480 So, to Mises, false economic theories are at the heart of the recurrence of boom and bust 128 00:16:48.480 --> 00:16:52.480 and the ultimate collapse of the fiat money system. 129 00:16:52.480 --> 00:17:03.480 Here, however, I would like to add that individuals' economic incentives can also be identified 130 00:17:03.480 --> 00:17:11.480 to be at the heart of the malaise. In fact, one could argue that fiat money leads to collective corruption. 131 00:17:11.480 --> 00:17:20.480 Well, corruption can be understood as an invasion of an individual's property rights by deliberate action of others, 132 00:17:20.480 --> 00:17:24.480 thereby impairing people's virtues and moral principles. 133 00:17:24.480 --> 00:17:30.480 It is easy to see, in fact, that fiat money, once established, leads to collective corruption. 134 00:17:30.480 --> 00:17:43.480 Just to give you an example, let me start by saying that people embark upon careers in industries which are artificially boosted or even created through fiat money expansion. 135 00:17:43.480 --> 00:17:57.480 And so income earners develop a vital economic interest in a policy that keeps the artificial boom going, otherwise they would lose their jobs or even experience a devaluation of their human capital. 136 00:17:57.480 --> 00:18:09.480 People invest their savings in bank and corporate bonds, bonds that were issued for financing investment projects provoked by an increase in fiat money. 137 00:18:09.480 --> 00:18:16.480 And so investors will develop a vital interest in keeping the artificial fiat money-fueled boom going. 138 00:18:16.480 --> 00:18:23.480 Otherwise they would run the risk of their investment decision taking a bad turn. 139 00:18:23.480 --> 00:18:34.480 Government revenues and handouts to government prodigies become dependent on ever greater amounts of fiat money, through which incomes and as a result tax revenues are stimulated. 140 00:18:34.480 --> 00:18:43.480 And the greater the number of people benefiting from government and the fiat money system, the stronger will be the public support of upholding such a system. 141 00:18:43.480 --> 00:18:57.480 It therefore becomes clear that once people have developed economic stakes in an economy which has become increasingly deformed by fiat money, collective corruption will be the inevitable result. 142 00:18:57.480 --> 00:19:04.480 People will develop a growing vital interest in upholding the fiat money system, virtually at all costs. 143 00:19:04.480 --> 00:19:26.480 From an individual's viewpoint, the hope for economic benefits of adhering to the fiat money boom can easily exceed the perceived costs of such a preference in the form of inflation, distortion of market price, malinvestment and undermining people's integrity and moral values. 144 00:19:26.480 --> 00:19:40.480 In other words, fiat money fuels collective corruption and it creates resistance against correcting the economically and socially highly destructive effects resulting from fiat money. 145 00:19:40.480 --> 00:19:52.480 Collective corruption may explain why a reform of the fiat monetary order, once put into place, faces such high, perhaps insurmountable hurdles. 146 00:19:52.480 --> 00:19:56.480 Collective corruption results from interventionism. 147 00:19:56.480 --> 00:20:03.480 Interventionism means that the government interferes with the workings of the free market. 148 00:20:03.480 --> 00:20:07.480 Under interventionism, government, I quote Mises, 149 00:20:07.480 --> 00:20:11.480 forces the entrepreneur and the owner of the means of production 150 00:20:11.480 --> 00:20:17.480 to use the means in a way different from what they would do under the pressure of the market. 151 00:20:17.480 --> 00:20:26.480 In his book Interventionism, Mises explained that market interventionism is not a lasting system of economic organization. 152 00:20:26.480 --> 00:20:32.480 He wrote, quote, If governments do not give them up and return to the unhampered market economy, 153 00:20:32.480 --> 00:20:43.480 if they stubbornly persist in the attempt to compensate by further and further interventions for the shortcomings of earlier interventions, 154 00:20:43.480 --> 00:21:13.480 Interventions, they will find eventually that they have adopted socialism. The curse of interventionism is that once the undesirable effect of interventionism come to the fore, such as recession, unemployment, stock market crashes, etc., more of the same follows, quoting Mises, popular opinion ascribes all these evils to the capitalistic system as a remedy for the undesirable effects of 155 00:21:13.480 --> 00:21:26.480 In the effects of interventionism, they ask for still more interventionism. They blame capitalism for the effects of actions of government which pursue an anti-capitalistic policy. 156 00:21:26.480 --> 00:21:38.480 And so Mises concluded, quote, mankind has a choice only between the unhampered market economy, democracy and freedom on the one side and socialism and dictatorship on the other side. 157 00:21:38.480 --> 00:21:43.480 A third alternative, an interventionist compromise, is not feasible. 158 00:21:43.480 --> 00:21:47.480 Ladies and gentlemen, now we have come full circle. 159 00:21:47.480 --> 00:21:52.480 It should be clear by now that collective corruption is a result of interventionism 160 00:21:52.480 --> 00:21:58.480 and that today's fiat money regimes are manifestations of interventionism in monetary affairs 161 00:21:58.480 --> 00:22:06.480 caused by public ownership of government with far-reaching destructive effects on the free market society. 162 00:22:06.480 --> 00:22:14.480 The current so-called credit market crisis is an illustration of Mises' conclusion based on praxeology, 163 00:22:14.480 --> 00:22:22.480 so strong epistemological foundation, that a government fiat money regime must fail. 164 00:22:22.480 --> 00:22:32.480 And it is fair to say that it is the collective corruption factor that has so far prevented the system from collapsing. 165 00:22:32.480 --> 00:22:41.480 Governments in a desperate effort to prop up the financial industry have guaranteed bank liabilities to restore and strengthen investor confidence. 166 00:22:41.480 --> 00:22:53.480 Central banks have lowered interest rates to record lows and have started to provide banks with ever greater amounts of central bank money, of course in an effort to restore financial institutions back to health. 167 00:22:53.480 --> 00:23:11.480 More recently, however, and especially in Europe, it is government credit itself, the very last pillar on which investor confidence rests, that has become subject to investor scrutiny, and it is here that things could take a new turn. 168 00:23:11.480 --> 00:23:26.480 As soon as governments, which chronically rely on issuing ever-great amounts of debt, can no longer get funds in the free capital markets or borrowing rates are too high, central banks are most likely to step in. 169 00:23:26.480 --> 00:23:37.480 Central banks will either loan directly to governments or start purchasing government bonds in the free market, that is, in the primary market or in secondary market. 170 00:23:37.480 --> 00:23:43.480 Whatever it takes, central banks will presumably provide governments with the amount of credit and money needed. 171 00:23:43.480 --> 00:23:53.480 And this in turn includes keeping the commercial banking system afloat by purchasing troubled assets or extending new central bank money loans to them. 172 00:23:53.480 --> 00:24:03.480 But sooner or later, such a monetary policy will lead to a fixing of government bond and bank debaucher prices in the free market. 173 00:24:03.480 --> 00:24:16.480 A policy of price fixing, implying that central banks will buy any amount of bonds necessary to keep interest rates at periodically politically desired levels, and that is artificially low levels. 174 00:24:16.480 --> 00:24:30.480 And by the way, such a period could already be observed. In the period 1942 until 1951, the Federal Reserve pursued a kind of policy called fixing the long-term interest rate. 175 00:24:30.480 --> 00:24:41.480 The Federal Reserve basically kept the 10-year treasury yield between 2.5% and 3% by purchasing any amount necessary to achieve that goal. 176 00:24:41.480 --> 00:24:48.480 And the consequence was that market interest rates remained at fairly suppressed levels, 177 00:24:48.480 --> 00:24:55.480 but the money supply increased strongly because the Fed bought the bonds by issuing new money, 178 00:24:55.480 --> 00:25:07.480 and consumer prices sooner or later went up and that caused investors to accept substantially high levels of negative interest rates. 179 00:25:07.480 --> 00:25:17.480 Of course, all such measures won't solve the underlying problem. In fact, such policies lead to impoverishment and they are capital consumption. 180 00:25:17.480 --> 00:25:30.480 They make things worse and as was said earlier, it is not possible to create something by increasing the credit and money supply or redistributing wealth among the people. 181 00:25:30.480 --> 00:25:38.480 Such policies will ultimately lead to high inflation and I brought a graph with me which some of you may like. 182 00:25:38.480 --> 00:25:47.480 It shows the price of one ounce of gold in national paper currencies starting in the early 1970s. 183 00:25:47.480 --> 00:26:00.480 And as you can see, for instance over here, I put all the series to 100, so the series were indexed to January 1971. 184 00:26:00.480 --> 00:26:23.480 So in 1971 we had to give 100 units of the US dollar for 1 ounce of gold and that price went up to close to 1800 in the early 1980s and nowadays you pay an equivalent of more than 3000 units of the US dollar. 185 00:26:23.480 --> 00:26:37.480 What this graph shows you is the underlying trend you can observe in global financial markets is all fiat currencies are in the process of getting devaluated against the ultimate means of payment. 186 00:26:37.480 --> 00:26:48.480 And by the way, this process hasn't started with the subprime crisis, around about 2007, 2008. It has started with the bursting of the new economy boom. 187 00:26:48.480 --> 00:27:03.480 You remember at the beginning of 2001, round about, the Federal Reserve and other central banks started cutting interest rates basically to unprecedented low levels and that policy was basically adopted all over the globe. 188 00:27:03.480 --> 00:27:22.480 In view of the gigantic debt burdens in many countries, various currency will presumably not only be debased but perhaps completely destroyed, severely eroding of what little is left of the free market societal order. 189 00:27:22.480 --> 00:27:45.480 The global financial debacle is a testimony to what Mises and his followers have stated on the basis of praxeology, namely the failure of government controlled fiat money and it is high time to seek a fundamental monetary reform, the return to free market money, the privatization of the production of money. 190 00:27:45.480 --> 00:27:53.160 For this to happen, however, false economic theories have to be exploded, as Mises knew. 191 00:27:53.160 --> 00:28:01.120 And that is quoted from a piece he basically finalized in January 1923, basically a couple 192 00:28:01.120 --> 00:28:04.520 of months before the German hyperinflation took off. 193 00:28:04.520 --> 00:28:10.360 The German hyperinflation basically took off around about June, July 1923 and it ended 194 00:28:10.360 --> 00:28:14.160 in November the same year, so it was basically a very short period. 195 00:28:14.160 --> 00:28:20.560 And Mises came forward with this piece in January of that same year, quite remarkable. 196 00:28:20.560 --> 00:28:29.560 He wrote, the belief that a sound monetary system can once again be attained without 197 00:28:29.560 --> 00:28:36.820 making the adequate changes in the mindset of the people is implausible. 198 00:28:36.820 --> 00:28:44.120 So Mises knew that a change in the monetary order would require the abandonment of inflationary 199 00:28:44.120 --> 00:28:50.400 policies, inflationary teachings, otherwise the chance of getting back to a solid and 200 00:28:50.400 --> 00:28:57.400 sound monetary system would be rather low. Of course, from a praxeological viewpoint, 201 00:28:58.520 --> 00:29:05.080 there's hardly any chance that today's fiat monies will escape a severe debasement of 202 00:29:05.080 --> 00:29:12.080 their purchasing power and one cannot exclude that some of them will basically get destroyed 203 00:29:12.080 --> 00:29:19.040 destroyed in the process. The hope is, however, that the teachings of sound economics, and 204 00:29:19.040 --> 00:29:26.160 that is Austrian economics, that people will understand why today's fiat moneys have failed 205 00:29:26.160 --> 00:29:32.640 so that governments won't succeed in erecting new fiat moneys on the ruins of failed fiat 206 00:29:32.640 --> 00:29:35.080 moneys. Thank you very much for your attention. 207 00:29:42.080 --> 00:29:44.080 Thank you very much.