WEBVTT NOTE The Monetary Writings of Carl Menger 1 00:00:00.000 --> 00:00:11.000 Thank you. After such an introduction, I myself wonder what I'm going to say. 2 00:00:11.000 --> 00:00:15.000 I'm very happy to be here, and I'm very happy that you are here. 3 00:00:15.000 --> 00:00:19.000 Because after all, there's nothing else on the program. 4 00:00:19.000 --> 00:00:23.000 Therefore, I assume that you're here to hear me. 5 00:00:23.000 --> 00:00:26.000 That's remarkable. I appreciate this. 6 00:00:26.000 --> 00:00:35.440 I'm very happy to see so many young economists are really impressed about the level of knowledge 7 00:00:35.440 --> 00:00:38.560 you have seen here today and yesterday. 8 00:00:38.560 --> 00:00:42.520 Now, which speaks more for the future of the Austrian School? 9 00:00:42.520 --> 00:00:48.680 As a matter of fact, if you compare the number of young economists with the old-timers, then 10 00:00:48.680 --> 00:00:55.360 you see that the number of younger economists is far greater than the older generation, 11 00:00:55.360 --> 00:01:00.920 Which is an indication of things to come, of the future of the Austrian School and the 12 00:01:00.920 --> 00:01:05.160 future of economic knowledge in the United States. 13 00:01:05.160 --> 00:01:09.120 You see the future right here, and I appreciate it. 14 00:01:09.120 --> 00:01:15.240 I think it's very proper that at a meeting, at a convention like this, that one should 15 00:01:15.240 --> 00:01:22.760 talk about the founder of the Austrian School, about Carl Menger. 16 00:01:22.760 --> 00:01:37.320 After all, it all began more than 100 years ago with Carl Menger, who in 1871 published a brilliant book, a very thin one, about the principles of economics. 17 00:01:37.320 --> 00:01:46.520 And in this thin book of some eight chapters, he laid the foundation of a new school of economics 18 00:01:46.520 --> 00:01:54.920 that emerged from the classical economics, laying the foundation for subjective, for the subjective value theory, 19 00:01:54.920 --> 00:02:02.680 and at the same time also presenting a theory of the origin of money. 20 00:02:02.680 --> 00:02:10.760 We became famous, not so much because it was a bestseller immediately, it did not, it was not a bestseller, 21 00:02:10.760 --> 00:02:26.100 But immediately knowledgeable people's colors saw its importance and began to use the ideas and the principles, and thus made him eminent, famous, in short order. 22 00:02:26.100 --> 00:02:39.500 But this was not just 12 years later, in 1883, he came out with a publication, it was called The Enquiries about the Method of Knowledge, 23 00:02:39.500 --> 00:02:50.360 Method of Economics and Political Science in particular, which in English was translated to the problems of economics and sociology, 24 00:02:50.360 --> 00:03:02.160 in which he attacked the German historical school, in which he raised the question of the method of knowledge, how do we know? 25 00:03:02.160 --> 00:03:11.860 which then launched the debate, the argument of the century, the mid-tirden-strike, the argument about method, 26 00:03:11.860 --> 00:03:22.660 waiting war, declaring war on the German historical school and the method of knowledge which it comprised. 27 00:03:22.660 --> 00:03:27.160 He became famous amongst the leading Austrian economists. 28 00:03:27.160 --> 00:03:35.260 I should also say that at that time, or shortly before, he had earned a full professorship at the University of Vienna, 29 00:03:35.260 --> 00:03:47.660 and at one time for some two years he had been the tutor of the Crown Prince of Austria, Rudolf, who later, unfortunately, committed suicide. 30 00:03:47.660 --> 00:03:56.560 Well, the world knows all this about the two tremendous contributions made by Menger to economic knowledge. 31 00:03:56.560 --> 00:04:10.400 At first, the principles of economics, and later, 12 years later, his presentation of a new, of a method of economics. 32 00:04:10.400 --> 00:04:17.800 The deductive theoretical approach to economic knowledge. 33 00:04:17.800 --> 00:04:25.900 But very little is known of his monetary writings, because a few years later, beginning in 1889, 34 00:04:25.900 --> 00:04:34.860 He came out with a number with some seven major essays dealing with monetary thought. 35 00:04:34.860 --> 00:04:51.340 Very little is known of this monetary thought by Carl Menger, although in his monetary writings he too laid the foundation for the monetary writings and the development of modern monetary thought to come. 36 00:04:51.340 --> 00:05:05.340 Especially a few years later in 1904 with Wiese, eminent Austrian economist, and then 1912 in the publication by Ludwig von Mises. 37 00:05:05.340 --> 00:05:17.340 But these monetary writings later were overshadowed by these other economists, but nevertheless they laid the foundation for monetary thought to come. 38 00:05:17.340 --> 00:05:22.780 As a matter of fact, I am fully convinced that in the coming years, perhaps in a decade, 39 00:05:22.780 --> 00:05:29.420 his writings will become all the more important. It's unfortunate that they're only available in 40 00:05:29.420 --> 00:05:35.340 German. They've never been translated. I think in the coming years they will become more important 41 00:05:35.340 --> 00:05:41.420 than ever because they are not just laying the foundation for some monetary thought and the 42 00:05:41.420 --> 00:05:48.380 is a foundation for monetary theory, but at the same time we're dealing with an important issue. 43 00:05:49.740 --> 00:05:56.620 That probably was the reason for his feverish writing, the preparation of those monetary essays, 44 00:05:56.620 --> 00:06:07.100 and this issue was the forthcoming currency reform. In 1892, Austria-Hungary conducted a currency reform. 45 00:06:07.100 --> 00:06:19.100 Carl Menger saw this opportunity and he became the prime mover of this reform, bringing forth, introducing the gold standard. 46 00:06:19.100 --> 00:06:25.100 That's very meaningful for us and may become very meaningful for us in the future. 47 00:06:25.100 --> 00:06:31.100 And he saw this opportunity beginning in 1889 and thus there was a rash of writings. 48 00:06:31.100 --> 00:06:38.100 Beginning in 1889, the currency reform was conducted in August of 1892. 49 00:06:38.100 --> 00:06:46.100 After that time, he was pushing for the currency reform, the adoption, the introduction of the gold standard. 50 00:06:46.100 --> 00:07:00.100 And thereafter, about a year later, in 1893, there was this last monetary riot, criticizing the blunders, the mistakes made in the currency reform. 51 00:07:00.100 --> 00:07:07.060 These are most valuable writings dealing with currency reform. 52 00:07:07.060 --> 00:07:12.260 That's why I'm saying that perhaps in the coming years the Menger writings on currency 53 00:07:12.260 --> 00:07:20.980 reform, introduction of the gold standard, may become important for us in the coming 54 00:07:20.980 --> 00:07:21.980 years. 55 00:07:21.980 --> 00:07:33.780 At that time, Austria was on the silver standard. Menger called it the limping silver standard. 56 00:07:33.780 --> 00:07:41.580 Austria was operating under an old act of 1859, which had established the silver standard. 57 00:07:41.580 --> 00:07:47.780 But as you undoubtedly know, in those years, beginning in the 1870s and even earlier, 58 00:07:47.780 --> 00:08:13.380 There was a massive mining of silver all over the world especially in the United States and later also in Mexico and as a result of this massive supply of silver coming to the markets, silver was declining relative to other prices and declining especially relative to gold and Austria being on the silver standard. 59 00:08:13.380 --> 00:08:23.380 If that had continued under the silver standard, then Austrian prices stated in silver would have risen significantly. 60 00:08:23.380 --> 00:08:28.080 There would have been a silver inflation with all the consequences of inflation. 61 00:08:28.080 --> 00:08:31.880 You see, you can have inflation even if you don't have paper money. 62 00:08:31.880 --> 00:08:39.480 In this case, there was the beginning of a silver inflation in the early 70s in Austria-Hungary. 63 00:08:39.480 --> 00:08:50.360 Thereafter, then in 1879, the Austrian government had decreed the suspension of silver minting, and had closed the mint. 64 00:08:50.360 --> 00:08:57.560 And then as a result of his closing the mint in 1879, there had been a very interesting situation. 65 00:08:57.560 --> 00:09:09.160 The silver continued to fall to a discount, and the paper money, the gilded, went to a premium. 66 00:09:09.160 --> 00:09:20.840 Why? Because in the meantime, with the given supply, a quantity of paper money, the money-based silver becoming cheaper and cheaper. 67 00:09:20.840 --> 00:09:36.120 If there had been a silver standard, then surely through the continuous minting of silver coins, prices, silver prices, what have they, because of the depreciation of the metal value. 68 00:09:36.120 --> 00:09:47.760 But because of the suspension of mincing in 1879, the Gilder, the silver Gilder paper money had risen to a premium. 69 00:09:47.760 --> 00:09:52.040 As a matter of fact, it had risen to a 20% premium. 70 00:09:52.040 --> 00:10:05.280 Now Carl Menger was greatly alarmed about the situation, about the separation of the metal from the currency, from the paper currency, the monetary substitutes. 71 00:10:05.280 --> 00:10:11.280 with the monetary substitutes selling at a 20% premium. 72 00:10:11.280 --> 00:10:18.980 This is difficult to imagine for us, surely, normally, it's the paper money that goes to a discount. 73 00:10:18.980 --> 00:10:23.380 But there's an example of paper money going to a premium. 74 00:10:23.380 --> 00:10:26.880 By the way, it happened again later during World War I, 75 00:10:26.880 --> 00:10:33.380 when the paper money in Sweden went to a premium over gold, by the way, 76 00:10:33.380 --> 00:10:40.380 Because the gold of Europe at that time was flowing into Sweden, and gold going to a discount, 77 00:10:40.380 --> 00:10:49.380 there too, later in World War I, then the Swedish government suspended the minting, the free minting, the redeemability of the currency, 78 00:10:49.380 --> 00:10:57.380 and therefore, there too, gold went to a discount, and the paper money of Sweden then went to a premium. 79 00:10:57.380 --> 00:11:09.940 Now this happened now in the 1880s in Austria. Now with silver going to a discount and the paper gilder going to a premium, to a 20% premium. 80 00:11:09.940 --> 00:11:22.260 And Carl Menger was greatly alarmed about this because he said at any time there may be a resumption of minting which then will lead to a 20% boost in prices, 81 00:11:22.260 --> 00:11:30.860 which then will lead all to the evil effects of inflation, that means the creditors will lose and the debtors will gain 82 00:11:30.860 --> 00:11:41.360 and there will be a massive transfer of wealth as a result of this new minting of silver and silver coins and the changing prices. 83 00:11:41.360 --> 00:11:52.160 He was greatly alarmed about this, therefore, because of the evils of the silver standard, he was pleading for a gold standard. 84 00:11:52.160 --> 00:12:00.520 Therefore he became the first advocate, the champion of the gold standard, and he published 85 00:12:00.520 --> 00:12:06.480 in a number of fast publications beginning in 1889, he wrote an essay on the purchasing 86 00:12:06.480 --> 00:12:16.240 power of the Austrian gold, that in 1892 wrote a lengthy essay about money, as I mentioned 87 00:12:16.240 --> 00:12:21.520 all these are only available in the German language, now and then he wrote a number of 88 00:12:21.520 --> 00:12:49.520 about the introduction of a new currency, or the transition to a gold standard, then another essay about our currency, and finally a year after the currency reform of August of 1892, he published another, the final essay on money, now talking about the gold premium and the present condition, the present state of our currency, 89 00:12:49.520 --> 00:12:54.520 after the currency reform. 90 00:12:54.520 --> 00:12:58.520 Well, I would like to, I presented the paper, 91 00:12:58.520 --> 00:13:04.520 but here in my presentation, I just would like to concentrate on one particular issue, 92 00:13:04.520 --> 00:13:07.520 the issue of the currency reform. 93 00:13:07.520 --> 00:13:15.520 As a matter of fact, in Austria in 1892, the Austrian government had convened a currency commission. 94 00:13:15.520 --> 00:13:22.560 and in May of 1892 there was a currency commission inquiring about the possibilities 95 00:13:23.360 --> 00:13:30.640 of a conversion or of a transition to the gold standard from that limping silver standard 96 00:13:31.520 --> 00:13:41.040 and Menger there was the prime witness at that hearing of the gold commission in Austria-Indiana 97 00:13:41.040 --> 00:13:50.000 in May of 1892 but in contrast to our hearings last year here you may remember here we had a gold 98 00:13:50.000 --> 00:14:00.000 commission now and at which time then the gold commission invited some 24-25 expert witnesses 99 00:14:00.000 --> 00:14:07.360 and these 24-25 witnesses here last year now then i think about C of 4 all invited by 100 00:14:07.360 --> 00:14:27.360 Congressman Ron Paul, in favor of gold and all others against gold, you must remember this here, but in Austria in 1892, the Commission consisted of a number of bankers, eminent bankers, and some, lots of civil servants. 101 00:14:27.360 --> 00:14:35.360 There were about half a dozen expert witnesses of whom Carl Menger was the most important one. 102 00:14:35.360 --> 00:14:43.360 And here you can see the currency commission at that time didn't get free hand to the experts. 103 00:14:43.360 --> 00:14:48.360 It presented the experts with five questions. 104 00:14:48.360 --> 00:14:51.360 Now they all had to address themselves to five questions. 105 00:14:51.360 --> 00:14:58.360 The first question presented to the expert, and Menger testified on these questions. 106 00:14:58.360 --> 00:15:04.360 The first one, why should there be a gold standard, was the first question. 107 00:15:04.360 --> 00:15:10.920 The question of the standards. The second question presented to the commission was the question, 108 00:15:10.920 --> 00:15:17.960 well, if it should be the gold standard, should there also be silver coins? Should silver coins be 109 00:15:17.960 --> 00:15:24.760 permissible? The third question was, well, and if that should be the gold standard, should there be 110 00:15:24.760 --> 00:15:36.260 The Treasury notes, non-legal tender, non-interest-bearing, Treasury notes be circulated with the rest of the currency. 111 00:15:36.260 --> 00:15:44.260 In other words, should the government be free to issue its Treasury note as monetary substitute? 112 00:15:44.260 --> 00:15:52.760 Then the fourth question presented to the committee was the one, the most difficult one, the most important one, 113 00:15:52.760 --> 00:16:08.200 The question of the exchange rate. What should the rate be? How should we handle the exchange from one currency, the old currency, the silver currency, to the new currency? What should be the exchange rate? 114 00:16:08.200 --> 00:16:22.740 And the last question presented to the experts by the currency commission was the question of the unit. What should be the unit, the new unit of our currency? 115 00:16:22.740 --> 00:16:28.660 As far as the first question was concerned about the gold standard, why should we have a gold standard? 116 00:16:28.660 --> 00:16:35.940 Carl Menger answered this, he said, well, it's the standard of civilization, the standard of the 117 00:16:35.940 --> 00:16:43.060 civilized nations. All industrial nations have it. Those who don't have it, those who have the silver 118 00:16:43.060 --> 00:16:51.300 standard are second-class nations. He called Austria a second-class nation. It's the standard 119 00:16:51.300 --> 00:16:58.980 of Civilization. Moreover, he said, all the others have it, and if we don't have it, then our 120 00:16:59.540 --> 00:17:06.020 dealings with gold standard countries are very difficult, because every transaction becomes a 121 00:17:06.580 --> 00:17:13.060 double business, becomes speculative. An Austrian who has to buy something in the world, you know, 122 00:17:13.060 --> 00:17:19.620 which on the gold standard, no, he has, it's not just a purchase of a commodity, of an item, 123 00:17:19.620 --> 00:17:26.340 but at the same time it becomes also a transaction, a speculative transaction of money. 124 00:17:26.340 --> 00:17:29.700 It's double business, very difficult. 125 00:17:29.700 --> 00:17:35.700 Therefore, our prices then tend to be higher, our interest rates tend to be higher 126 00:17:35.700 --> 00:17:41.460 as a result of this difficulty of trading with the rest of the world. 127 00:17:41.460 --> 00:17:52.660 And moreover, again he pointed at the sharpcomings of the silver standard, the possibility of sudden redemption, 128 00:17:52.660 --> 00:18:00.980 the sudden minting of more coins than which will lead to a 20% fall in the purchasing power of the currency, 129 00:18:00.980 --> 00:18:04.180 and once again all the other inflationary effects. 130 00:18:04.180 --> 00:18:08.820 Therefore, he concluded that we must have the gold standard. 131 00:18:08.820 --> 00:18:11.860 The gold standard is the standard of the world. 132 00:18:11.860 --> 00:18:17.940 However, he warned about one aspect of the gold standard, saying, 133 00:18:17.940 --> 00:18:23.540 well, if we suddenly, in Austria-Hungary, it's a power, it's an important nation. 134 00:18:23.540 --> 00:18:28.100 At that time, Austria-Hungary had a population of 45 million, 135 00:18:28.100 --> 00:18:32.260 very similar to the population of Great Britain in Germany. 136 00:18:32.260 --> 00:18:38.500 It was a power. If such a power should suddenly adopt the gold standard, 137 00:18:38.500 --> 00:18:45.780 This would constitute a huge demand for gold and raise its price, raise its purchasing power 138 00:18:45.780 --> 00:18:53.540 in the world markets, which will lead to falling prices all over the gold standard countries, 139 00:18:53.540 --> 00:19:01.860 depressing prices, wages everywhere. Therefore, he always warned, he said, this must not happen. 140 00:19:01.860 --> 00:19:11.860 When we convert to gold, we must not depress the world market. We must not depress other countries. 141 00:19:11.860 --> 00:19:17.860 Soon, this, our sudden demand, as a matter of fact, it calculates the demand too. 142 00:19:17.860 --> 00:19:23.860 We talked about 600,000 kilos of gold needed for Austria. 143 00:19:23.860 --> 00:19:31.860 And this sudden demand for gold would raise its value in the purchasing power in the bulk markets of the world. 144 00:19:31.860 --> 00:19:37.860 This being money, it would have results, it would have consequences all over the world. 145 00:19:37.860 --> 00:19:50.860 Therefore, it was a question of great concern for him to prevent the consequences, such consequences, on the rest of the world. 146 00:19:50.860 --> 00:20:00.860 But nevertheless, he pleaded, remember what I said earlier, he was a prime force for the introduction of the gold standard. 147 00:20:00.860 --> 00:20:07.860 As far as the second question was concerned, should there be silver coins under the gold standard? 148 00:20:07.860 --> 00:20:15.860 His answer was in the affirmative. As a matter of fact, he said, well, it doesn't make any difference. 149 00:20:15.860 --> 00:20:24.660 He said surely he was aware of two principles of money, one is the principle, the Gresham's law, 150 00:20:24.660 --> 00:20:32.020 that means if you have two types of money, gold coins and silver coins, according to Gresham's law, 151 00:20:32.020 --> 00:20:40.020 then the bad money will drive out the good money if there is a fixed exchange rate. 152 00:20:40.020 --> 00:20:47.820 Now, that's merely an application of the principle of our knowledge of the consequences of price-fixing. 153 00:20:47.820 --> 00:20:53.820 Gershins law applied to money, and therefore bad money will drive out good money. 154 00:20:53.820 --> 00:21:01.220 But according to Menger, this was not applicable, because there's another principle of the value of money, 155 00:21:01.220 --> 00:21:16.220 Two kinds of money, the principle of substitution, that actually as long as silver would be redeemable in gold, it would receive its value from gold. 156 00:21:16.220 --> 00:21:23.220 In other words, there's a principle of substitution, which we surely would agree with. 157 00:21:23.220 --> 00:21:33.220 Now that as long as it doesn't make any difference, you know, what the material of the monetary substitute may consist of, 158 00:21:33.220 --> 00:21:39.220 whether it's paper money or whether it's silver, as long as it is redeemable on demand, 159 00:21:39.220 --> 00:21:46.220 it will receive its value from the money proper, in this case from gold. 160 00:21:46.220 --> 00:21:54.220 Of course, it should be silver coins should be issued, should be circulating in limited qualities. 161 00:21:54.220 --> 00:22:01.220 Menger never addressed himself to the question of how large those quantities were supposed to be. 162 00:22:01.220 --> 00:22:09.220 He just talked about the reasonable quantity of silver, of silver coins receiving their value, 163 00:22:09.220 --> 00:22:15.300 through freedom and redemption, receiving their value from the money proper from the gold coins. 164 00:22:16.820 --> 00:22:22.100 Therefore his answer to the second question about silver coins was in the affirmative. 165 00:22:22.100 --> 00:22:28.180 And he gave the same answer also to the third question, addressed to him by the currency 166 00:22:28.180 --> 00:22:34.260 commission then, and he testifying before the currency commission. Should there be or could 167 00:22:34.260 --> 00:22:40.260 Could there be an issue of paper money by the Treasury, by the government Treasury? 168 00:22:40.260 --> 00:22:49.260 Non-interest bearing, freely redeemable Treasury notes? 169 00:22:49.260 --> 00:22:58.260 Mises answers, there is no objection to, because there is such an issue of paper money, not when freely redeemable, 170 00:22:58.260 --> 00:23:03.700 From a technical point of view, he said, and he emphasized this, from a technical point 171 00:23:03.700 --> 00:23:11.460 of view, there would be no objection to some issue of irredeemable treasury notes, fractioning 172 00:23:11.460 --> 00:23:12.460 as money. 173 00:23:12.460 --> 00:23:18.020 Because we would call this, you know, fiduciary expansion of notes, which would affect the 174 00:23:18.020 --> 00:23:19.460 value of money, surely. 175 00:23:19.460 --> 00:23:23.980 As a matter of fact, Carl Menger, he said, from a technical point of view, there can 176 00:23:23.980 --> 00:23:38.980 There can be no objection to such an issuer of notes and, in fact, he offered to calculate the quantity of treasury notes which the money market could handle, could absorb. 177 00:23:38.980 --> 00:23:48.980 He mentioned, for instance, that the budget of the Federal Government of Hungary and Austria combined was about one billion guilders. 178 00:23:48.980 --> 00:23:57.620 He calculated as well, he said, it would be not much of an objection, and the market could handle about 10% of this. 179 00:23:57.620 --> 00:24:09.300 That means an annual issue of about 100 million in guilders issued by the Treasury, as I do sharing money, from a technical point of view. 180 00:24:09.300 --> 00:24:12.580 He never entered in any other discussion. 181 00:24:12.580 --> 00:24:18.180 You know, when you listen to them, when you read this, you see him, he's speaking like a politician. 182 00:24:18.180 --> 00:24:26.180 He's trying to make this gold standard, which is urging on these politicians and the members of the gold commission. 183 00:24:26.180 --> 00:24:31.180 No, he's trying to make it palatable. He's trying to sell the gold standard. 184 00:24:31.180 --> 00:24:39.180 Therefore, he's trying to say that it can be done. You can use silver money, you can use issued treasury bills, it can be done. 185 00:24:39.180 --> 00:24:42.180 It didn't go into the details of the consequences. 186 00:24:42.180 --> 00:24:50.180 Murray raised the question of can it be done from a technical point of view, and his answer was yes. 187 00:24:50.180 --> 00:24:56.180 And finally the fourth question of course is the most difficult, the difficult one. 188 00:24:56.180 --> 00:25:05.180 The fourth question about the exchange rate between the new money and the old money in the moment of currency reform 189 00:25:05.180 --> 00:25:12.580 Now, is of course the meat of the reform, the ultimate question of the reform. 190 00:25:12.580 --> 00:25:18.620 What should be the exchange rate between the new currency and the old currency? 191 00:25:18.620 --> 00:25:24.540 That's going to be an important question for us someday, later in the 18, in the 1980s, 192 00:25:24.540 --> 00:25:25.540 perhaps 1990s. 193 00:25:25.540 --> 00:25:33.340 In fact, I sometimes wonder, this happened in 1892, I wonder whether we won't be here 194 00:25:33.340 --> 00:25:43.020 and discussing the same in 1992 about the currency reform, the ultimate question of the exchange rate. 195 00:25:43.020 --> 00:25:51.180 What should the exchange rate be? And then Menger answered this, which is very remarkable, I thought. 196 00:25:51.180 --> 00:26:02.780 He said we must have a just rate, invoking justice, a just rate of exchange, seeking a just rate. 197 00:26:03.340 --> 00:26:08.340 Then he defines this just rate. What is a just rate there? 198 00:26:08.340 --> 00:26:22.340 He defines a just rate as the rate in the money markets where people, the free people in the money market could buy for the old money a given quantity of new money. 199 00:26:22.340 --> 00:26:32.340 That's just taking the exchange rate from the money markets, which of course raises then a number of questions. 200 00:26:32.340 --> 00:26:43.340 Is that the purchasing power? After all, when it comes to money, the ultimate question of the value of money is the objective exchange rate or the purchasing power. 201 00:26:43.340 --> 00:26:52.340 Is that an indication of the purchasing power to go to the rates of the money market? That's the question. 202 00:26:52.340 --> 00:27:05.340 As a matter of fact, at this hearing, there was a cross-examination, a tough one, where the commissioners became even personal, and attacked him personally. 203 00:27:05.340 --> 00:27:21.340 And on this very point of the just rate of exchange, and he had a hard, Menger had a hard time, because they pointed out some questions and some contradictions. 204 00:27:21.340 --> 00:27:32.340 They ask, for instance, well, is that a just rate? How about if there's a difference between the money market rate, let's say, and the purchasing power when it comes for the people? 205 00:27:32.340 --> 00:27:44.340 The consumer rate, for instance, the purchasing power of the money for consumers, surely that, isn't that an important consideration? 206 00:27:44.340 --> 00:27:59.340 The commissioners asked him, and there he made concessions. He said, we are considering the future, the future, and there has to be a debt conversion of old debt into new debt at this exchange rate. 207 00:27:59.340 --> 00:28:08.340 But the old debt was depreciating based on silver. The new debt based on gold was probably appreciated. 208 00:28:08.340 --> 00:28:20.340 Therefore Menger offered to allow for this and correct the exchange rate, which then became very arbitrary, he was on thin ice there. 209 00:28:20.340 --> 00:28:32.340 As a matter of fact, when you look at this, and this is the very meat of any currency reform, the question of the exchange rate, the just rate, and I like this idea of a just rate. 210 00:28:32.340 --> 00:28:43.840 But then what is a just rate? There's not only the rate, the exchange rate of the money markets, but then there's the exchange rate, let's say, of the consumer market. 211 00:28:43.840 --> 00:28:51.840 What is the value of the purchasing power of the old money in the consumer market? In the free market price? 212 00:28:51.840 --> 00:28:56.840 If there's a difference between the money rates and the consumer rates, where is it? 213 00:28:56.840 --> 00:29:05.840 As a matter of fact, when you look at the consumer rate, the purchasing power in consumer prices is reflected in consumer prices. 214 00:29:05.840 --> 00:29:10.840 There are many parts of the economy where you don't have free prices. 215 00:29:10.840 --> 00:29:17.840 And I'm thinking of public utilities and other industries suffering from government intervention, 216 00:29:17.840 --> 00:29:23.840 from government regulation of rates and prices, which are not part of the free market rates. 217 00:29:23.840 --> 00:29:25.840 Therefore, which do you take? 218 00:29:25.840 --> 00:29:32.840 Do you allow for that part of the economy where there is no free market? How do you allow for this? 219 00:29:32.840 --> 00:29:41.840 And finally, you may have black market rates in the years to come. You may have underground economy rates and prices. 220 00:29:41.840 --> 00:29:52.840 Where do you take, from what market do you take your change rate? What is a just rate of reform? 221 00:29:52.840 --> 00:30:02.840 I finally came to the conclusion that it can't be done. There is no such just rate. I don't think it can be found anywhere. 222 00:30:02.840 --> 00:30:07.840 Therefore, if that's true, that there's none, it cannot be a just rate ever. 223 00:30:07.840 --> 00:30:17.840 No, then I think such a legislated currency reform can never be just. It cannot be done. 224 00:30:17.840 --> 00:30:25.340 Therefore, there can only be other reforms. After all, what are the ways of currency reform in the past? 225 00:30:25.340 --> 00:30:31.540 You know, we can think of three types of currency reform, lists in the past. 226 00:30:31.540 --> 00:30:37.440 There's one based on freedom leading to a parallel standard of different types of money. 227 00:30:37.440 --> 00:30:47.240 Parallel standard. Pure freedom leading to a parallel standard, three standards of different types of money. 228 00:30:47.240 --> 00:30:55.240 are being used freely, side by side, without any legal exchange rates. That's a parallel standard. 229 00:30:56.040 --> 00:31:03.000 There's one way. Now another way in the past, and how great nations in the past got to the gold standard, 230 00:31:03.000 --> 00:31:10.760 was mostly through the bimetallic standard. What's the bimetallic standard? If the United States began 231 00:31:10.760 --> 00:31:20.760 In 1792, with the bimetallic standard, as you know, that's the stipulation that both gold and silver constitute money. 232 00:31:20.760 --> 00:31:24.760 And government then fixed the rates of the two, it's a kind of a price-fixing. 233 00:31:24.760 --> 00:31:30.760 Of course the price of the bimetallic standard never works, because it's based on price-fixing. 234 00:31:30.760 --> 00:31:40.760 Now in 1792, the rate was fixed at 15 to 1, and very soon, as you know, it led to a de facto silver standard. 235 00:31:40.760 --> 00:31:55.760 The biometallic standard always fails through that fixing the rates, which then always leads to the disappearance of the undervalued currency, and it leads to the operation of Gershins' Law. 236 00:31:55.760 --> 00:32:01.440 Thus, until the 1830s, the United States had a silver standard, as you know. 237 00:32:01.440 --> 00:32:08.880 Later on, then, by legislation in 1834, this rate was changed, the value of the silver dollar was reduced, 238 00:32:08.880 --> 00:32:14.880 which then in time led to the gold standard, the de facto gold standard. 239 00:32:14.880 --> 00:32:19.360 Legally, the United States still had been on the bimetallic standard. 240 00:32:19.360 --> 00:32:29.820 I'm trying to say that the great nations, by the way, Great Britain too, got to the gold standard via the failure of the bimetallic standard, 241 00:32:29.820 --> 00:32:38.800 a hundred years earlier, surely, but it was the failure of the bimetallic standard, the fixing of rates between one and the other, 242 00:32:38.800 --> 00:32:44.240 and then leading to the de facto gold standard or the silver standard. 243 00:32:44.240 --> 00:32:58.480 There was one method or one approach to the gold standard, and finally there are three ways, you know, one is just the substitution, the legislation, 244 00:32:58.480 --> 00:33:08.240 which Hoppe embarked upon in 1792. I call it the catch-up method. Later on, the National Act of Germany too, in 1875, 245 00:33:08.240 --> 00:33:14.240 have just legislated a gold standard, conducting a currency reform. 246 00:33:14.240 --> 00:33:24.240 Now, and thus wanting to replace or legislating the replacement of silver, silver coins, that's the gold coin. 247 00:33:24.240 --> 00:33:37.240 Now, while looking at these possibilities of reform, I think, I've come to the conclusion 248 00:33:37.240 --> 00:33:50.760 that it's only in freedom, only through the parallel standard, can there be ever a just currency reform introducing a new currency. 249 00:33:53.960 --> 00:34:02.200 The question of just rate is the meat of a currency reform, therefore we have to address ourselves, 250 00:34:02.200 --> 00:34:16.440 And I'm trying to say here that if that ever should, if we ever should have to cope with this question in these halls in the years to come, we better study what Menger had to say. 251 00:34:16.440 --> 00:34:32.120 We may not base our conclusions on Menger, we may not come to the same conclusions, but I do believe that Menger laid the foundation for any inter-intelligent discussion of currency reform. 252 00:34:32.120 --> 00:34:42.360 And finally, let me come to the fifth question put to the expert witnesses, the question of unit. 253 00:34:42.360 --> 00:34:46.360 What should the unit of currency be? 254 00:34:46.360 --> 00:34:49.480 Well, as Menger said, well, that's a very simple question. 255 00:34:49.480 --> 00:34:58.520 It should not, the unit should not be too large, it should not be too small, it should be determined by the markets. 256 00:34:58.520 --> 00:35:06.680 The people will determine the size of the most convenient size of the unit of currency. 257 00:35:06.680 --> 00:35:15.320 Then, as a matter of fact, he said, well, our gilder is not bad, however, we probably should have half a gilder, 258 00:35:15.320 --> 00:35:18.920 slightly on the large size of our unit of currency. 259 00:35:18.920 --> 00:35:24.040 Let's have half a gilder, perhaps we can call it the cone. 260 00:35:24.040 --> 00:35:46.680 As a matter of fact, then, according to the current reform of August of 1892, then, the government introduced a half, cut the basic unit in half, and introduced a new unit, the Crown, which, by the way, became a very famous unit, it was called Coronet. 261 00:35:46.680 --> 00:35:56.360 I don't know if you're aware of this, you know that even today you can buy gold coins, coronas, 262 00:35:57.400 --> 00:36:05.080 you know they are little gold coins, re-strikes issued by Austria and Hungary about the size of 263 00:36:05.080 --> 00:36:12.520 a dime, the favorite gold coin today for the investor. As a matter of fact here at Gold City 264 00:36:12.520 --> 00:36:28.520 In college, my colleagues over the years, over the last 10 years, probably bought hundreds, if not thousands of these little gold coins called coronas. 265 00:36:28.520 --> 00:36:33.520 Used to buy them, the economics department buys them in the capsules, a hundred at a time. 266 00:36:33.520 --> 00:36:38.520 And that's a very excellent coin for poor college professors. 267 00:36:38.520 --> 00:36:49.520 When I listen to you talking about South African coins, Kugelwands, one ounce of gold, you're in a different class from us here. 268 00:36:49.520 --> 00:36:58.520 At my college, the professors buy one-tenth of an ounce of gold, and that's an Austrian Corona. 269 00:36:58.520 --> 00:37:06.520 And as a matter of fact, this Austrian Corona was recommended by Menger. 270 00:37:06.520 --> 00:37:17.520 I don't doubt that anyone at my college, except the economics department, is aware of the fact that this was a product, the creation of the mind of this genius Carl Menger. 271 00:37:17.520 --> 00:37:24.520 But today, that's our favorite investment at my college, the Austrian Corona. 272 00:37:24.520 --> 00:37:32.520 In the beginning of our income, a professor of economics may buy a hundred, then go to the coffee table, then sell. 273 00:37:33.520 --> 00:37:38.520 He can sell one tenth of an ounce, a corona. That's one tenth of an ounce. 274 00:37:39.520 --> 00:37:42.520 He used to sell them for ten dollars, twelve dollars, fifteen dollars. 275 00:37:43.520 --> 00:37:50.520 Of course today, with gold at three hundred eighty dollars an ounce, or four hundred dollars an ounce, the corona is selling about forty dollars an ounce. 276 00:37:50.520 --> 00:38:14.520 But at $40 an ounce, the professor of economics can make a sale of a gold coin, probably earning $0.50, you know, get buying in quantity, and putting the gold coins in a plastic cover, marketing at the coffee table, marketing the colonists, for $40, probably earning $0.50 on the sale of a gold coin. 277 00:38:14.520 --> 00:38:21.520 A point I am trying to make is that this was the creation of Carl Menger from way back, 278 00:38:21.520 --> 00:38:26.520 you know, his contribution to thought and policy in 1892. 279 00:38:26.520 --> 00:38:35.520 Well, a year later, the currency reform was conducted in August of 1892, and about a year later, 280 00:38:35.520 --> 00:38:42.520 Carl Menger presented his last monetary essay, reviewing the reform, 281 00:38:42.520 --> 00:38:51.520 stating its disappointment and the blunders committed during the reform, legislation of reform action. 282 00:38:51.520 --> 00:38:53.520 And what was the complaint? 283 00:38:53.520 --> 00:39:06.520 Said, well, at the very beginning, after August of 1892, no, at the very beginning, after the legislation, everything was excellent and gold was rushing in. 284 00:39:06.520 --> 00:39:14.880 More than half the gold coming into Austria after the coincidental reform of August of 1892. 285 00:39:14.880 --> 00:39:22.920 More than half the gold came from the United States, consisting of American eagles. 286 00:39:22.920 --> 00:39:29.000 I should add, and perhaps I should go back to the United States and look at conditions here. 287 00:39:29.000 --> 00:39:35.720 You know, in 1890 there had been the Silver Purchase Act, Sherman's Silver Purchase Act, 288 00:39:35.720 --> 00:39:43.240 forcing the US Treasury to mint lots of silver dollars or issue legal tender silver certificates. 289 00:39:43.240 --> 00:39:50.520 Months after months, there was heavy minting of silver and issue of paper on silver certificates. 290 00:39:50.520 --> 00:40:01.400 After July of 1890, the passage of the Sherman Silver Purchase Act, leading to the silver inflation, 291 00:40:01.400 --> 00:40:15.400 to the operation of Gresham's law, gold relieving the United States fast and appearing in Austria which in 92 had conducted the reform. 292 00:40:15.400 --> 00:40:27.400 More than half, let me repeat here, more than half of the gold arriving in Austria was consisted of American double eagles. 293 00:40:27.400 --> 00:40:42.400 While Austria tried to get to the gold standard, attract gold coins, attract gold, the United States was pushing it out through the Silver Purchase Act, the Sherman Silver Purchase Act. 294 00:40:42.400 --> 00:41:06.400 And somewhat, I think it's a kind of an irony nowadays, you know, thinking back, you know, it supports another economic principle, another statement pertaining to gold, that gold is never lost, it merely changes forms throughout the centuries and thousands of years, it merely changes form. 295 00:41:06.400 --> 00:41:25.400 In 1890s, the double eagles became coronas in Austria, and two generations later, the professors in Grove City College are buying Austrian coronas, coming back to the United States. 296 00:41:25.400 --> 00:41:41.400 I'm not implying that we are getting the eagles back, but perhaps some eagles returning to the United States of Eagles dug these gold, the ten dollar gold coins, I'm talking about the eagles. 297 00:41:41.400 --> 00:41:50.400 Plus, after 1890, perhaps some of those may have returned to gold city, or perhaps to Europe, gold holdings. 298 00:41:50.400 --> 00:41:58.400 But, the currency reform of 1892, according to Menger, was badly bungled. 299 00:41:58.400 --> 00:42:05.400 What happened soon after, a few months after the reform, the Austrian government, 300 00:42:05.400 --> 00:42:14.040 So being mindful of the consequences of its reform on the price of gold in the world markets, 301 00:42:14.040 --> 00:42:21.320 trying to be mindful and considerate of the world markets, it raised in need of gold in 302 00:42:21.320 --> 00:42:27.000 order to convert, in order to make gold payments after the reform, but it was announced that 303 00:42:27.000 --> 00:42:39.000 The full redemption should take place in 1896, January 1st, 1896 and 1897, but in preparation for this, Austria needed gold. 304 00:42:39.000 --> 00:42:51.000 And so what did the government do? And the central bank bought gold in the domestic markets, practically in the domestic markets only. 305 00:42:51.000 --> 00:42:57.960 Surely, a small few, a small quantities were raised also in Belgium and France and England and some other countries, 306 00:42:57.960 --> 00:43:07.400 but most of it was taken from the domestic markets, and according to Menger, very soon this was the domestic 307 00:43:07.400 --> 00:43:15.480 markets were pumped dry, he used the term pumping dry, of gold and foreign exchange, cabling gold. 308 00:43:15.480 --> 00:43:25.400 Moreover, the central bank got into action and buying up gold from the domestic market, 309 00:43:25.400 --> 00:43:33.040 which today we would call open market purchases, and in the case of open market purchases, 310 00:43:33.040 --> 00:43:39.760 in this case buying up the gold and releasing cash, it was flooding the money market with 311 00:43:39.760 --> 00:43:48.280 cash with paper money, expanding money, paper money and credit inflating, so to speak, which 312 00:43:48.280 --> 00:43:56.480 by the beginning of 1993, 1893, was frightening all international markets. 313 00:43:56.480 --> 00:44:04.680 Before you know it, the gilder, the paper money, fell to a discount of some 3%, which 314 00:44:04.680 --> 00:44:10.680 which according to Menger was the ultimate disaster of currency reform. 315 00:44:10.680 --> 00:44:17.680 Having embarked upon a reform, trying to exchange new money for old money, 316 00:44:17.680 --> 00:44:23.680 trying to establish the given market rate, finding the market rate, the just rate, 317 00:44:23.680 --> 00:44:31.680 and then wanting to resume, commence gold payments for redemption, 318 00:44:31.680 --> 00:44:47.200 He finds that in short order, there's distrust, fear, the Austrian paper money went to a discount and that's, that was his last contribution to knowledge. 319 00:44:47.200 --> 00:45:00.080 He's in the last essay, published in the summer of 1893, despairing about his country, he says there can, there's not any reform, there can be no continuation of this. 320 00:45:00.080 --> 00:45:10.080 We declare a gold standard, try to adopt a gold standard, and within a few months our paper money is going to a discount. 321 00:45:10.080 --> 00:45:13.080 There's no way we can resume payments. 322 00:45:13.080 --> 00:45:23.080 There cannot be any gold payment with paper money at a discount or gold at a premium, at a 3% premium. 323 00:45:23.080 --> 00:45:32.080 In other words, he didn't describe this expansion of fiduciary credit the way Mises would have done many years later, 324 00:45:32.080 --> 00:45:39.080 but he just talked about this drying up the absorption of funds, of gold funds, from the Viennese market, 325 00:45:39.080 --> 00:45:45.080 and lead into a discount of paper money. 326 00:45:45.080 --> 00:45:53.080 An excellent brilliant discussion which led him to despair about his country and his countrymen. 327 00:45:53.080 --> 00:46:01.080 And in this particular respect I think Mises, Professor Mises was totally different from Menger. 328 00:46:01.080 --> 00:46:07.080 Surely when you search for the beginning of knowledge, Austrian knowledge you have to go to Menger. 329 00:46:07.080 --> 00:46:12.080 When you search for the beginning of monetary knowledge, 330 00:46:12.080 --> 00:46:21.080 And especially the knowledge of currency reform under difficult conditions, you have to go to Carl Menger. 331 00:46:21.080 --> 00:46:34.080 But when it comes to attitude, the philosophy of life, we may not want to imitate Carl Menger. 332 00:46:34.080 --> 00:46:55.580 Because Carl Menger soon after this currency reform conducted in 1993, there was practically this Ludwig's Monetary Essay of 1993 about the premium of gold and the state of currency in Austria-Hungary that was practically his last scholarly publication. 333 00:46:55.580 --> 00:47:08.460 Surely thereafter, he wrote, he published a number of book reviews, and then there were other new editions of old essays about one of the famous essays on money. 334 00:47:08.460 --> 00:47:13.580 There were two more editions, but the last one in 1910, surely. 335 00:47:13.580 --> 00:47:34.420 But thereafter, practically after 1893, Carl Menger withdrew in this field, clearly seeing the future of his beloved Austria and the future of Europe, the decline of what he called, the decline of European civilization. 336 00:47:34.420 --> 00:47:40.260 He withdrew in this sphere and withdrew from active life. 337 00:47:40.260 --> 00:47:45.860 He retired early at that time in 1993, 1893, he was just 53 years old. 338 00:47:45.860 --> 00:47:51.300 He served a few more years as a professor of economics at the University of Vienna, 339 00:47:51.300 --> 00:47:53.940 but then he retired early. 340 00:47:53.940 --> 00:48:03.060 Now, and after this, he lived, after 1893, lived more than 30 years, but he did not continue. 341 00:48:03.060 --> 00:48:08.980 He despaired about the future of Austria, and despaired about the future of society, 342 00:48:09.620 --> 00:48:17.140 and then withdrew from life and productivity. In this respect, I think Professor Mises was 343 00:48:17.140 --> 00:48:24.740 entirely different. Mises being desperate to and despairing about mankind at times, 344 00:48:24.740 --> 00:48:31.140 but his material and his principle was always to continue and to fight as long as he lived, 345 00:48:31.140 --> 00:48:41.300 to uphold the principle and uphold the light even in the darkest moment of contemporary economic life 346 00:48:41.860 --> 00:48:51.700 and policy. Mises was the champion, the fighter to the last day of his life. And there I think we can 347 00:48:51.700 --> 00:48:57.460 learn from Mises. That must be our goal and our dedication. Therefore I'm very happy that this 348 00:48:57.460 --> 00:49:15.460 This is a middle society, it's not a middle society, because many of us grew from life, despairing about life, this is a middle society, a mind after a great champion of freedom and a free society. 349 00:49:15.460 --> 00:49:17.460 Thank you very much. 350 00:49:27.460 --> 00:49:35.460 We now have ten minutes for questions, and then we will end at precisely 5.30. 351 00:49:36.460 --> 00:49:39.460 According to my watch, we have five minutes. 352 00:49:39.460 --> 00:49:54.460 The Mises School kind of gets together with the Henry George School. I don't know how to tell you what is going on within the U.S. 353 00:50:09.460 --> 00:50:13.460 Therefore, I think that question is not pertinent, is it? 354 00:50:14.460 --> 00:50:22.460 He put me on the spot. I do think that within the narrow confines of this conference, that the question is gold standard. 355 00:50:22.460 --> 00:50:29.460 But in a broader sense, it's a question of free markets. Gold is only one vestige of free markets. 356 00:50:29.460 --> 00:50:36.460 While it might be fruitful to get together Misesians and Georges, I think that's an agenda for another conference. 357 00:50:36.460 --> 00:50:46.460 I would like to recognize only questions about my presentation here. Carl Menger, please. Not Henry George. 358 00:50:46.460 --> 00:50:50.460 You mentioned the presentation through the English translation. 359 00:50:50.460 --> 00:51:00.460 Not that I know. Of these monetary writings, the two other works, the principles, of course, have been translated in dozens of languages. 360 00:51:00.460 --> 00:51:07.100 and his Methodenstreit, you know, his fight about method, you know, is known all over the world. 361 00:51:07.100 --> 00:51:17.740 It's still being fought today and many of you here, the younger economists, are sometimes preoccupied with the Methodenstreit of the 1880s, I think. 362 00:51:17.740 --> 00:51:24.940 So that's well known. But his monetary writings, I've never seen any references to his monetary writings, 363 00:51:24.940 --> 00:51:31.980 I doubt it because they were overshadowed by Mises and Mises. That's my explanation. 364 00:51:33.980 --> 00:51:43.340 No, no, why not a younger here, you know, some unemployed, younger economist. No, no, not, no. I have other things to do. 365 00:51:43.340 --> 00:51:51.500 Did Menger despair because he couldn't find another disciple within time to encourage him to go on? 366 00:51:51.980 --> 00:51:55.780 Oh, I doubt that he despaired about the lack of disciples. 367 00:51:55.780 --> 00:51:58.860 He probably had more disciples than anyone else, you know. 368 00:51:58.860 --> 00:52:03.280 That's how, after all, that's how he became the famous menger. 369 00:52:03.280 --> 00:52:10.540 Sue his disciples. His own work, the principle didn't, the principles didn't become a best-seller. 370 00:52:10.540 --> 00:52:30.540 It's only through his disciples that he became the founder of the Austrian School, but I think he saw the future of mankind, you saw the inflation, you saw the wars, by the way there's an excellent discussion of Menger in Mises' memoirs. 371 00:52:30.540 --> 00:52:38.540 You find there's a chapter on Austrian economics in Mises' notes and recollections, that's his memoirs. 372 00:52:38.540 --> 00:52:42.540 You find an excellent discussion on Menger here. 373 00:52:42.540 --> 00:52:53.540 I'm not a contemporary of Menger, you know, so I have to dig out information from other writers. 374 00:52:53.540 --> 00:53:05.540 Although I was around when Menger was an old man, but at that time I wasn't studying economics. I never met him. Yes sir, yes sir. 375 00:53:05.540 --> 00:53:35.540 We go to a standard, a gold standard, I think we have a problem, we try to make a gold standard for our present, things called the dollar, we have no idea what it is, it seems to me we're going to have to call something else in the notes, a rate, call it a move down or something, because I can see great problems, people sitting down trying to figure out how many steps we go, whether it's 376 00:53:35.540 --> 00:53:48.540 I tried to say that, and I tried to say too, that Menger had a hard time with the exchange rate. 377 00:53:48.540 --> 00:53:53.540 I came to the conclusion there cannot be, what is the just exchange rate? 378 00:53:53.540 --> 00:54:00.540 There are half a dozen possibilities, and finally you have to correct the exchange rate, you have to compromise somewhere, 379 00:54:00.540 --> 00:54:03.540 and I finally concluded that it can't be done. 380 00:54:03.540 --> 00:54:19.540 The only way to establish an exchange rate would be through total freedom, what I call the parallel standard, you know, between paper money and gold, or freedom, you know, abolition of the legal tender laws and free money markets. 381 00:54:19.540 --> 00:54:44.340 What is the market? Is it the money market, the bond market, is it the consumer's market, or is it the control market, is it the black market, is it the underground market? No, what is it? 382 00:54:44.340 --> 00:54:47.620 That's the question of the exchange rate. Which one? 383 00:54:47.620 --> 00:54:54.980 It will never have, you will never, I think, will never have complete freedom there. 384 00:54:54.980 --> 00:55:01.780 By the way, surely we should, that's how Menger started out, searching for just rate, 385 00:55:01.780 --> 00:55:07.860 taking it from the money market of the present, of the moment. 386 00:55:07.860 --> 00:55:12.820 He wanted to go to the Viennese money market of the moment, of the day of reform, 387 00:55:12.820 --> 00:55:21.140 and accept the exchange rate of the money market and then having some doubts about the the future 388 00:55:21.140 --> 00:55:28.500 of the medium of exchange gold versus silver in the past then he wanted to allow for some correction 389 00:55:29.540 --> 00:55:36.260 deviating from the money market rate of the day of currency reform and then he wanted to 390 00:55:36.260 --> 00:55:43.780 to change a little and talk about a slightly lighter gilded. In other words, became rather 391 00:55:43.780 --> 00:55:51.540 arbitrary there, and got, I thought, got stuck there in something that couldn't be solved, sure. 392 00:55:52.420 --> 00:55:59.780 And therefore, I concluded any legislative reform will always be arbitrary, will never be just. 393 00:55:59.780 --> 00:56:07.780 It probably may happen. It only may happen sometime in the future. Legislators reform 394 00:56:07.780 --> 00:56:13.780 in exchange of bluebacks for greenbacks or redbacks for greenbacks. It may happen sometime. 395 00:56:13.780 --> 00:56:17.780 We have time for one last quick question. Yes sir, the last question. 396 00:56:17.780 --> 00:56:21.780 In the free market, can't there only be one value? 397 00:56:21.780 --> 00:56:29.280 In other words, you can't have a bottom market in the free market, because since money has been really exchanged, there's no need for a bottom market. 398 00:56:29.280 --> 00:56:31.780 It wouldn't have been true even in the money market. 399 00:56:31.780 --> 00:56:35.780 The money market, you don't need it in the bank. You've got to have it since June, right? 400 00:56:35.780 --> 00:56:41.280 I agree. I agree. In the ideal world, you're surely right, but ours is not the ideal world. 401 00:56:41.280 --> 00:56:46.780 In our world, you do have confiscatory taxation, you have force, you have coercion in the money markets, 402 00:56:46.780 --> 00:56:53.780 The markets and the banking systems, the financial institutions are not free, therefore you do have an underground economy. 403 00:56:53.780 --> 00:57:02.780 Therefore you do have different exchange rates and different objectives, exchange rates and purchasing power of the money in the underground economy. 404 00:57:02.780 --> 00:57:11.780 And moreover you're in the underground, then you have to, you know, you can't look at the underground exchange rate even because if there were freedom now, 405 00:57:11.780 --> 00:57:29.780 Now, then the underground economy purchasing power, the free purchasing power would be different in the, no, let me, there would be a difference once again, no, from the underground economy versus then the free economy there. 406 00:57:29.780 --> 00:57:36.780 Thank you, Professor Sennolds. Thank you all for attending.