{ "rec_id": "media-austrian-scholars-conference-2011-authors-forum-money-sound-and-unsound", "course": "austrian-scholars-conference-2011", "title": "Authors Forum: Money, Sound and Unsound", "speaker": "Joseph T. Salerno", "source_file": "media/Austrian Scholars Conference 2011/Authors Forum Money, Sound and Unsound Joseph T Salerno.mp3", "model": "medium", "language": "en", "language_probability": 1, "duration_s": 637.8, "generated": "2026-08-03T18:31:01Z", "generator": "scripts/transcribe_lectures.py (faster-whisper)", "machine_generated": true, "warnings": [], "text": "Well, I guess I drew the short straw. I have to follow Tom Woods. So I'm tempted to channel Charlie Sheen and simply hold the book up and say, Winning! But you trolls wouldn't understand that. Not really. I mean, I'm still channeling Sheen there. Okay, this book actually began a long time ago when I was a junior in college. I was a free marketeer. I was an economics major, but I had heard nothing about the Austrian School, despite the fact that I had taken a number of courses in my major, including intermediate macroeconomics, intermediate microeconomics, which were just dull, dreary affairs. Well, I belonged to the Young Americans for Freedom as a sort of a libertarian deviant, and they put up with me, and so I was giving them some arguments, and someone said, well, you sound like an Austrian, and I didn't know what he was talking about, so he handed me a little pamphlet by Murray Rothbard called Depressions, Cause and Cure, it was a little mini-book. And so that summer, I was determined to read more about the Austrian School, and I had History of Thought course in the meantime and there was a Jesuit professor there, I went to Boston College, a Jesuit school, who had talked about the early Austrian school and told us how this was sort of one of the few times intellectual history that a group of great minds actually worked together to develop an intellectual position and he was referring to the original Austrians Menger, Boehm-Bawerk and Wieser. So that piqued my interest also. So that summer The first two I read were Mises' Theory of Money and Credit and Rothbard's America's Great Depression. Mises and Rothbard and Hayek also were first and foremost monetary economists. That's what struck me first and has really stuck with me through my academic career. So when I began to write articles, I began naturally to gravitate towards the Austrian monetary theory. And so my purpose initially was simply to fill in the gaps. It's a great theory, but there were very few Austrians working on it, especially when I was going through graduate school, really Murray Rothbard was alive and Hans Sendholtz. And so there were a few people that were working on monetary theory. So I began to write essays on monetary theory. Theory. This book is a collection of essays going back 25 years. So it's what I've written over the last 25 years. And it's for many different audiences, from academic to popular. However, it is, I must say, with all due modesty, written in clear English, pretty clear English. So anyone can understand it. I suggest that, it's in five parts, that for those who know less Less about Austrian monetary theory, you read the book backwards, meaning that you read part five, which is commentaries on Alan Greenspan and the debate between the Austrians on the one hand and monetarists and Keynesians on the other hand, part four on applications and so on, and then you work back to the more technical essays. The more technical essays come at the beginning of the book. The first section is on foundations of monetary theory. Let me just say a few words about some of the essays though and what I was trying to do in those essays. One essay that has sort of gotten some traction among sort of mainstream financial commentators is the true money supply. I noticed that Mises and Rothbard both held the concept of money as the general medium of exchange. Whatever else money does, permits permits us to store value over time, permits us to engage in accounting and economic calculation. All of those functions follow from the primary function of a general medium of exchange. So Mises initially came out with a definition of the money supply that Rothbard later showed was overly narrow. Really, if you're going to define money as a general medium of exchange, You should include all items which are immediately spendable. So Rothbard touches on this in a few of his works. So in my essay, The True Money Supply, A Measure of the Supply of the Medium of Exchange in the U.S. economy, I tried to update Rothbard's work and extend it a little bit. And so I wrote this article, I think, in 1986, and I included, besides the currency everyone carries around and their checking account deposits, I expanded it, as Rothbard had done and a few other sorts of monetary instruments that I believed should be part of the money supply. Well, two years later, the Fed began to calculate something called MZM, the money of zero maturity, Meaning that money that was immediately spendable because in a lot of the Fed money supply aggregates they include things like certificates of deposit, which are not immediately withdrawable, okay, without penalty. In any case, it was written by someone who was, the concept was developed by someone who is now the president of one of the regional Feds, Robert Poole, I believe. In any case, the Salerno-Rothbard theory of the money supply, which is very like this MZM, though they include things that we don't, such as money market funds, actually came out a few years before. It has been tracked on the internet now, this money supply figure. The other article in that first chapter that I want to draw attention to is an article called Two Traditions of Monetary Theory. And what it does is it really shows that modern monetary theory goes back to monetary crank, okay? It has its seeds in the writings of John Law, the first central banker, and possibly coincidentally, a gambler and a convicted murderer. But that's that homonym, so we won't go there. But it shows that his beliefs are actually reflected was reflected in sort of the theory that is espoused today by Bernanke and Krugman and other mainstream economists basically that spending cures all ills. Spending is a panacea, okay? And that was rejected. In fact, all of 18th century monetary theory after John Law wrote was a reaction to Law's writings and to his destruction of the French currency in the early 18th century. And so I pick out one particular writer who has a very complete theory of money that's very pre-Austrian, a French writer, A.R.J. Turgeau. And I also want to just draw attention to a few other articles, one of which is an Austrian taxonomy of deflation, Deflation, and there I have coined the term deflation phobia, which applies really to the Fed. What is the reason why they're pumping all this money into the economy? What is the reason for QE1, QE2? And I show there it's false beliefs about deflation and its welfare implications. So I show that most kinds of deflation are really good for the and our welfare enhancing and enhance our prosperity and standard of living. Part three is on the gold standard. There's a number of articles on the gold standard, both defending the gold standard and also criticizing different proposals that are really proposals for a Watertown version of the gold standard, particularly one that keeps coming back like a zombie, and that is the Bretton Woods system. That's called a gold price rule in which the government or the Fed is supposed to target Well, that's a phony gold standard. It existed from 1946 to 1971, and it collapsed in 1971 when President Nixon ignominiously declared bankruptcy and closed the gold window in the U.S. And as I said, there are other articles in that section that will fortify you with good arguments to defend the gold standard. to defend against criticisms of the gold standard. The last two sections I'll just mention on applications and commentary are more popular oriented, easier to read, but one in particular before I close I want to mention is one called Inflation and Money Reply to Timberlake and one of the criticisms of Rothbard and his view of the Great Depression was that he ignored the fact that there was a massive deflation as Banks Collapse from 1931 to 1933 and what I show is that in fact it's the and also by the way that the 1920s was not an inflationary decade that's an argument used against Rothbard well I show that in fact the 1920s was an inflationary decade and it's just a matter of how you define inflation and that there was true deflation in the US economy that is a reduction in the money supply for only a year a year and a half and that after After that, the money supply is being pumped up for almost the entire 1930s, and so I defend Rothbard's position on the Great Depression. And that, by the way, I'll close with this, really has parallels with today. We're still mired in this financial crisis or the after effects of the financial crisis, the recession, despite the fact that we've had this tremendous quantitative easing, two rounds of quantitative easing, which are failing abysmally. Thank you very much.", "segments": [ { "start": 0.0, "end": 4.16, "text": "Well, I guess I drew the short straw. I have to follow Tom Woods.", "logprob": -0.23 }, { "start": 4.16, "end": 8.08, "text": "So I'm tempted to channel Charlie Sheen and simply hold the book up and say,", "logprob": -0.23 }, { "start": 8.08, "end": 12.6, "text": "Winning!", "logprob": -0.23 }, { "start": 12.6, "end": 17.04, "text": "But you trolls wouldn't understand that.", "logprob": -0.23 }, { "start": 17.04, "end": 21.16, "text": "Not really. I mean, I'm still channeling Sheen there.", "logprob": -0.23 }, { "start": 21.16, "end": 25.32, "text": "Okay, this book actually began a long time ago", "logprob": -0.23 }, { "start": 25.32, "end": 29.0, "text": "when I was a junior in college.", "logprob": -0.23 }, { "start": 29.0, "end": 49.0, "text": "I was a free marketeer. I was an economics major, but I had heard nothing about the Austrian School, despite the fact that I had taken a number of courses in my major, including intermediate macroeconomics, intermediate microeconomics, which were just dull, dreary affairs.", "logprob": -0.19 }, { "start": 49.0, "end": 56.6, "text": "Well, I belonged to the Young Americans for Freedom as a sort of a libertarian deviant,", "logprob": -0.19 }, { "start": 56.6, "end": 60.8, "text": "and they put up with me, and so I was giving them some arguments, and someone said, well,", "logprob": -0.19 }, { "start": 60.8, "end": 65.08, "text": "you sound like an Austrian, and I didn't know what he was talking about, so he handed me", "logprob": -0.19 }, { "start": 65.08, "end": 70.28, "text": "a little pamphlet by Murray Rothbard called Depressions, Cause and Cure, it was a little", "logprob": -0.19 }, { "start": 70.28, "end": 72.48, "text": "mini-book.", "logprob": -0.19 }, { "start": 72.48, "end": 77.88, "text": "And so that summer, I was determined to read more about the Austrian School, and I had", "logprob": -0.19 }, { "start": 77.88, "end": 107.88, "text": "History of Thought course in the meantime and there was a Jesuit professor there, I went to Boston College, a Jesuit school, who had talked about the early Austrian school and told us how this was sort of one of the few times intellectual history that a group of great minds actually worked together to develop an intellectual position and he was referring to the original Austrians Menger, Boehm-Bawerk and Wieser. So that piqued my interest also. So that summer", "logprob": -0.18 }, { "start": 107.88, "end": 119.88, "text": "The first two I read were Mises' Theory of Money and Credit and Rothbard's America's Great Depression.", "logprob": -0.27 }, { "start": 119.88, "end": 125.88, "text": "Mises and Rothbard and Hayek also were first and foremost monetary economists.", "logprob": -0.27 }, { "start": 125.88, "end": 132.88, "text": "That's what struck me first and has really stuck with me through my academic career.", "logprob": -0.27 }, { "start": 132.88, "end": 140.88, "text": "So when I began to write articles, I began naturally to gravitate towards the Austrian monetary theory.", "logprob": -0.15 }, { "start": 140.88, "end": 145.88, "text": "And so my purpose initially was simply to fill in the gaps.", "logprob": -0.15 }, { "start": 145.88, "end": 150.88, "text": "It's a great theory, but there were very few Austrians working on it,", "logprob": -0.15 }, { "start": 150.88, "end": 156.88, "text": "especially when I was going through graduate school, really Murray Rothbard was alive and Hans Sendholtz.", "logprob": -0.15 }, { "start": 156.88, "end": 159.88, "text": "And so there were a few people that were working on monetary theory.", "logprob": -0.15 }, { "start": 159.88, "end": 161.88, "text": "So I began to write essays on monetary theory.", "logprob": -0.15 }, { "start": 161.88, "end": 191.88, "text": "Theory. This book is a collection of essays going back 25 years. So it's what I've written over the last 25 years. And it's for many different audiences, from academic to popular. However, it is, I must say, with all due modesty, written in clear English, pretty clear English. So anyone can understand it. I suggest that, it's in five parts, that for those who know less", "logprob": -0.17 }, { "start": 191.88, "end": 198.16, "text": "Less about Austrian monetary theory, you read the book backwards, meaning that you read", "logprob": -0.18 }, { "start": 198.16, "end": 204.46, "text": "part five, which is commentaries on Alan Greenspan and the debate between the Austrians on the", "logprob": -0.18 }, { "start": 204.46, "end": 208.92, "text": "one hand and monetarists and Keynesians on the other hand, part four on applications", "logprob": -0.18 }, { "start": 208.92, "end": 214.4, "text": "and so on, and then you work back to the more technical essays. The more technical essays", "logprob": -0.18 }, { "start": 214.4, "end": 220.4, "text": "come at the beginning of the book. The first section is on foundations of monetary theory.", "logprob": -0.18 }, { "start": 220.4, "end": 224.34, "text": "Let me just say a few words about some of the essays though and what I was trying to", "logprob": -0.15 }, { "start": 224.34, "end": 230.36, "text": "do in those essays. One essay that has sort of gotten some traction among sort of mainstream", "logprob": -0.15 }, { "start": 230.36, "end": 238.08, "text": "financial commentators is the true money supply. I noticed that Mises and Rothbard both held", "logprob": -0.15 }, { "start": 238.08, "end": 245.8, "text": "the concept of money as the general medium of exchange. Whatever else money does, permits", "logprob": -0.15 }, { "start": 245.8, "end": 254.56, "text": "permits us to store value over time, permits us to engage in accounting and economic calculation.", "logprob": -0.16 }, { "start": 254.56, "end": 259.72, "text": "All of those functions follow from the primary function of a general medium of exchange.", "logprob": -0.16 }, { "start": 259.72, "end": 266.72, "text": "So Mises initially came out with a definition of the money supply that Rothbard later showed", "logprob": -0.16 }, { "start": 266.72, "end": 273.32, "text": "was overly narrow. Really, if you're going to define money as a general medium of exchange,", "logprob": -0.16 }, { "start": 273.32, "end": 278.6, "text": "You should include all items which are immediately spendable.", "logprob": -0.16 }, { "start": 278.6, "end": 282.52, "text": "So Rothbard touches on this in a few of his works.", "logprob": -0.16 }, { "start": 282.52, "end": 286.24, "text": "So in my essay, The True Money Supply, A Measure of the Supply of the Medium of Exchange in", "logprob": -0.16 }, { "start": 286.24, "end": 291.76, "text": "the U.S. economy, I tried to update Rothbard's work and extend it a little bit.", "logprob": -0.16 }, { "start": 291.76, "end": 297.82, "text": "And so I wrote this article, I think, in 1986, and I included, besides the currency everyone", "logprob": -0.16 }, { "start": 297.82, "end": 303.16, "text": "carries around and their checking account deposits, I expanded it, as Rothbard had done", "logprob": -0.16 }, { "start": 303.16, "end": 320.08, "text": "and a few other sorts of monetary instruments that I believed should be part of the money", "logprob": -0.3 }, { "start": 320.08, "end": 321.08, "text": "supply.", "logprob": -0.3 }, { "start": 321.08, "end": 331.72, "text": "Well, two years later, the Fed began to calculate something called MZM, the money of zero maturity,", "logprob": -0.3 }, { "start": 331.72, "end": 337.48, "text": "Meaning that money that was immediately spendable because in a lot of the Fed money supply aggregates", "logprob": -0.27 }, { "start": 337.48, "end": 343.64, "text": "they include things like certificates of deposit, which are not immediately withdrawable, okay,", "logprob": -0.27 }, { "start": 343.64, "end": 344.64, "text": "without penalty.", "logprob": -0.27 }, { "start": 344.64, "end": 349.84, "text": "In any case, it was written by someone who was, the concept was developed by someone", "logprob": -0.27 }, { "start": 349.84, "end": 357.48, "text": "who is now the president of one of the regional Feds, Robert Poole, I believe.", "logprob": -0.27 }, { "start": 357.48, "end": 364.24, "text": "In any case, the Salerno-Rothbard theory of the money supply, which is very like this", "logprob": -0.15 }, { "start": 364.24, "end": 369.56, "text": "MZM, though they include things that we don't, such as money market funds, actually came", "logprob": -0.15 }, { "start": 369.56, "end": 379.12, "text": "out a few years before. It has been tracked on the internet now, this money supply figure.", "logprob": -0.15 }, { "start": 379.12, "end": 386.24, "text": "The other article in that first chapter that I want to draw attention to is an article", "logprob": -0.15 }, { "start": 386.24, "end": 388.0, "text": "called Two Traditions of Monetary Theory.", "logprob": -0.21 }, { "start": 388.0, "end": 389.44, "text": "And what it does is it really shows", "logprob": -0.21 }, { "start": 389.44, "end": 393.24, "text": "that modern monetary theory goes back to monetary crank, okay?", "logprob": -0.21 }, { "start": 393.24, "end": 396.68, "text": "It has its seeds in the writings of John Law,", "logprob": -0.21 }, { "start": 396.68, "end": 400.84, "text": "the first central banker, and possibly coincidentally,", "logprob": -0.21 }, { "start": 400.84, "end": 403.56, "text": "a gambler and a convicted murderer.", "logprob": -0.21 }, { "start": 403.56, "end": 408.56, "text": "But that's that homonym, so we won't go there.", "logprob": -0.21 }, { "start": 409.34, "end": 414.34, "text": "But it shows that his beliefs are actually reflected", "logprob": -0.21 }, { "start": 414.34, "end": 426.34, "text": "was reflected in sort of the theory that is espoused today by Bernanke and Krugman and other mainstream economists basically that spending cures all ills.", "logprob": -0.21 }, { "start": 426.34, "end": 441.34, "text": "Spending is a panacea, okay? And that was rejected. In fact, all of 18th century monetary theory after John Law wrote was a reaction to Law's writings and to his destruction of the French currency in the early 18th century.", "logprob": -0.21 }, { "start": 441.34, "end": 453.34, "text": "And so I pick out one particular writer who has a very complete theory of money that's very pre-Austrian, a French writer, A.R.J. Turgeau.", "logprob": -0.21 }, { "start": 453.34, "end": 463.34, "text": "And I also want to just draw attention to a few other articles, one of which is an Austrian taxonomy of deflation,", "logprob": -0.21 }, { "start": 463.34, "end": 472.9, "text": "Deflation, and there I have coined the term deflation phobia, which applies really to", "logprob": -0.19 }, { "start": 472.9, "end": 476.5, "text": "the Fed. What is the reason why they're pumping all this money into the economy? What", "logprob": -0.19 }, { "start": 476.5, "end": 484.6, "text": "is the reason for QE1, QE2? And I show there it's false beliefs about deflation and its", "logprob": -0.19 }, { "start": 484.6, "end": 488.9, "text": "welfare implications. So I show that most kinds of deflation are really good for the", "logprob": -0.19 }, { "start": 488.9, "end": 493.9, "text": "and our welfare enhancing and enhance our prosperity and standard of living.", "logprob": -0.19 }, { "start": 493.9, "end": 495.9, "text": "Part three is on the gold standard.", "logprob": -0.19 }, { "start": 495.9, "end": 499.9, "text": "There's a number of articles on the gold standard, both defending the gold standard", "logprob": -0.19 }, { "start": 499.9, "end": 505.9, "text": "and also criticizing different proposals that are really proposals for a Watertown version of the gold standard,", "logprob": -0.19 }, { "start": 505.9, "end": 511.9, "text": "particularly one that keeps coming back like a zombie, and that is the Bretton Woods system.", "logprob": -0.19 }, { "start": 511.9, "end": 516.9, "text": "That's called a gold price rule in which the government or the Fed is supposed to target", "logprob": -0.19 }, { "start": 516.9, "end": 537.9, "text": "Well, that's a phony gold standard. It existed from 1946 to 1971, and it collapsed in 1971 when President Nixon ignominiously declared bankruptcy and closed the gold window in the U.S.", "logprob": -0.3 }, { "start": 537.9, "end": 545.9, "text": "And as I said, there are other articles in that section that will fortify you with good arguments to defend the gold standard.", "logprob": -0.3 }, { "start": 545.9, "end": 548.9, "text": "to defend against criticisms of the gold standard.", "logprob": -0.14 }, { "start": 548.9, "end": 552.9, "text": "The last two sections I'll just mention on applications and commentary", "logprob": -0.14 }, { "start": 552.9, "end": 556.9, "text": "are more popular oriented, easier to read,", "logprob": -0.14 }, { "start": 556.9, "end": 560.9, "text": "but one in particular before I close I want to mention is", "logprob": -0.14 }, { "start": 560.9, "end": 563.9, "text": "one called Inflation and Money Reply to Timberlake", "logprob": -0.14 }, { "start": 563.9, "end": 567.9, "text": "and one of the criticisms of Rothbard and his view of the Great Depression", "logprob": -0.14 }, { "start": 567.9, "end": 571.9, "text": "was that he ignored the fact that there was a massive deflation", "logprob": -0.14 }, { "start": 571.9, "end": 601.9, "text": "as Banks Collapse from 1931 to 1933 and what I show is that in fact it's the and also by the way that the 1920s was not an inflationary decade that's an argument used against Rothbard well I show that in fact the 1920s was an inflationary decade and it's just a matter of how you define inflation and that there was true deflation in the US economy that is a reduction in the money supply for only a year a year and a half and that after", "logprob": -0.21 }, { "start": 601.9, "end": 607.82, "text": "After that, the money supply is being pumped up for almost the entire 1930s, and so I", "logprob": -0.19 }, { "start": 607.82, "end": 611.9, "text": "defend Rothbard's position on the Great Depression.", "logprob": -0.19 }, { "start": 611.9, "end": 616.46, "text": "And that, by the way, I'll close with this, really has parallels with today.", "logprob": -0.19 }, { "start": 616.46, "end": 621.02, "text": "We're still mired in this financial crisis or the after effects of the financial crisis,", "logprob": -0.19 }, { "start": 621.02, "end": 625.46, "text": "the recession, despite the fact that we've had this tremendous quantitative easing, two", "logprob": -0.19 }, { "start": 625.46, "end": 629.62, "text": "rounds of quantitative easing, which are failing abysmally.", "logprob": -0.19 }, { "start": 630.62, "end": 632.62, "text": "Thank you very much.", "logprob": -0.79 } ] }