WEBVTT NOTE Money, Banking and the Current Mess 1 00:00:00.000 --> 00:00:06.000 This talk will be going to cool it down a little bit, Norma. 2 00:00:06.000 --> 00:00:09.000 Yeah, thanks. Good idea. 3 00:00:09.000 --> 00:00:11.000 Hopefully you're not too cold out there. 4 00:00:11.000 --> 00:00:14.000 If anybody gets too cold, I'm going to have you come up and give a speech. 5 00:00:14.000 --> 00:00:17.000 That will warm you up right away. 6 00:00:17.000 --> 00:00:20.000 But this will be a tad more focused. 7 00:00:20.000 --> 00:00:22.000 I'm going to talk about money. 8 00:00:22.000 --> 00:00:26.000 I know the title was Money, Banking and the Current Mass. 9 00:00:26.000 --> 00:00:34.040 But I don't think I'll get beyond money today, and certainly won't get to the current mess. 10 00:00:34.040 --> 00:00:39.600 But when we talk about money, the first thing we need to talk about is how money originated, 11 00:00:39.600 --> 00:00:45.960 and money did not originate by order of the state. 12 00:00:45.960 --> 00:00:48.900 Eventually you're going to go to college and you're going to learn that that's what happened, 13 00:00:48.900 --> 00:00:51.360 but that is not the case. 14 00:00:51.360 --> 00:00:58.000 Money originated in the free market, and it originates in barter. 15 00:00:58.000 --> 00:01:04.000 Goods are produced by those that are good at it, and those who are good at producing 16 00:01:04.000 --> 00:01:08.640 a particular good, they will have surplus of these goods. 17 00:01:08.640 --> 00:01:13.040 When they have surplus of these goods, they will trade those goods for other goods that 18 00:01:13.040 --> 00:01:18.920 they don't, that they don't produce, they'll trade with someone who is good at producing 19 00:01:18.920 --> 00:01:19.920 those goods. 20 00:01:19.920 --> 00:01:47.920 I always like to use the log man and the egg lady when I'm talking about this, and if you were the log man and you had a grove of trees and you would have extra firewood, and down the road there would be a lady with extra, she has chickens, and the chickens are laying eggs, and certainly more eggs than she can eat. 21 00:01:47.920 --> 00:01:56.200 So, there's the immediate potential for these two folks to trade. 22 00:01:56.200 --> 00:01:59.840 The egg lady is going to need to get rid of some eggs, and she's going to need some firewood 23 00:01:59.840 --> 00:02:02.060 to keep her warm. 24 00:02:02.060 --> 00:02:07.640 The log man is going to have extra logs, and he's going to need something to eat, so he's 25 00:02:07.640 --> 00:02:11.640 going to want to trade logs for eggs. 26 00:02:11.640 --> 00:02:16.080 And eventually there would be some sort of exchange would happen. 27 00:02:16.080 --> 00:02:21.440 You might have an egg equal to a medium-sized log. 28 00:02:21.440 --> 00:02:29.840 So the egg lady would trade one egg for a medium-sized log, but, you know, those terms 29 00:02:29.840 --> 00:02:39.160 of exchange could change depending on supply factors of logs or supply factors of chickens. 30 00:02:39.160 --> 00:02:44.440 Let's say some of the chickens died, and if some of the chickens died, the egg lady would 31 00:02:44.440 --> 00:03:03.440 She would have fewer eggs to trade with, and so she would need to use a certain number of those eggs to eat, so she'd be less likely to trade eggs, and she would demand maybe two logs for each one of the eggs that she wanted to trade for. 32 00:03:03.440 --> 00:03:17.440 Conversely, if there was a fire and the log man's trees burned down, he'd probably want maybe two logs for every egg. 33 00:03:17.440 --> 00:03:23.440 So you can see how these exchange rates would change, even in barter. 34 00:03:23.440 --> 00:03:32.440 Now the main problem with barter immediately comes up and that is what's called the double coincidence of wants. 35 00:03:32.440 --> 00:03:41.440 If you're bartering with somebody, you need to, number one, find someone who wants what you have, right? 36 00:03:41.440 --> 00:03:48.440 And they have to want what you have, and that's the double coincidence of wants. 37 00:03:48.440 --> 00:03:55.440 So if you're the log man and you have to find somebody who has eggs, if that's what you want, 38 00:03:55.440 --> 00:04:02.880 and also the egg lady has to want logs and that's pretty tough to do you can 39 00:04:02.880 --> 00:04:10.800 see that an economy that's driven by barter or uses a barter system it limits 40 00:04:10.800 --> 00:04:18.960 trade tremendously second problem with barter is indivisibility I mean you can 41 00:04:18.960 --> 00:04:26.960 You can cut logs in little pieces and trade with those logs, but eggs don't divide very well. 42 00:04:26.960 --> 00:04:32.960 Try to cut an egg in half and it doesn't work necessarily very well. 43 00:04:32.960 --> 00:04:38.960 So, indivisibility is a problem. The other problem is business calculation. 44 00:04:38.960 --> 00:04:47.960 Now, if you've got a grove of trees and you sell logs, but you trade logs for any number of things, 45 00:04:47.960 --> 00:04:53.960 How can you determine whether you're having a profit or whether you're having a loss? 46 00:04:53.960 --> 00:05:01.960 It's impossible if you're trading for eggs or shoes or any number of different things that you may be trading for. 47 00:05:01.960 --> 00:05:14.960 So these are the problems with barter and thus the need for a medium of exchange. 48 00:05:14.960 --> 00:05:29.960 And that's what develops when you have a good that trades not just for its usefulness, an egg for what you would eat, but maybe an egg that you may want to trade for. 49 00:05:29.960 --> 00:05:34.960 And that's what becomes money, is this medium exchange. 50 00:05:34.960 --> 00:05:44.320 and actually this is explained very well by mr. Jeffrey Tucker who you will hear 51 00:05:44.320 --> 00:05:49.840 from later in a piece recently wrote for I guess he wrote it a long time ago but 52 00:05:49.840 --> 00:05:55.480 we continue to reprint it over and over and over again Halloween and its candy 53 00:05:55.480 --> 00:06:03.160 economy so I don't know if I don't know if you guys still trick-or-treat a couple 54 00:06:03.160 --> 00:06:29.160 If you do trick-or-treat, you know how it works. You go from door to door, you have a big bag, and you're kind of at the whim of the mean folks at each stop in terms of what they're going to give you. 55 00:06:29.160 --> 00:06:44.160 And at the end of the night you end up with a big bag of various candy and other things that these people give you. 56 00:06:44.160 --> 00:06:50.160 I know in my day we hated to get like apples and anything healthy like that. 57 00:06:50.160 --> 00:06:59.920 It's just that Halloween is not for health, it's for chocolate and gooey stuff and things 58 00:06:59.920 --> 00:07:04.920 like that, but occasionally you get the mean old lady down the street who insists on giving 59 00:07:04.920 --> 00:07:08.840 you an apple and of course then you start hearing about razor blades and apples and 60 00:07:08.840 --> 00:07:17.920 crazy stuff like that, but anyway in Jeff's piece he talks about how a medium of exchange 61 00:07:17.920 --> 00:07:27.180 appears in candy on Halloween night. He has a big family and he lives in a very prosperous 62 00:07:27.180 --> 00:07:35.060 neighborhood here in Auburn. So the kids all came over to his house and they dump out their 63 00:07:35.060 --> 00:07:43.200 bags of candy. There's trading, right? You've got so many reeses and you've got so many 64 00:07:43.200 --> 00:07:47.600 Money Snickers and you got some popcorn balls and you got some blow pops and you got all 65 00:07:47.600 --> 00:07:53.800 this stuff and people started trading because you don't like all this stuff. 66 00:07:53.800 --> 00:08:03.000 And there's these various transactions going on but eventually what happens is that one 67 00:08:03.000 --> 00:08:07.760 of the candies becomes the medium of exchange. 68 00:08:07.760 --> 00:08:17.200 It's the candy that kids would trade for because they knew, not that they wanted to eat it 69 00:08:17.200 --> 00:08:21.680 or to consume it, but they knew that they could trade it for something else. 70 00:08:21.680 --> 00:08:29.960 And in this case, it turned out to be the micro-sized Three Musketeers bar. 71 00:08:29.960 --> 00:08:32.780 And that's because everybody knew what it was. 72 00:08:32.780 --> 00:08:39.860 It was small in bite size, and it worked very well for this exchange. 73 00:08:39.860 --> 00:08:44.260 And so you can see how this would happen. 74 00:08:44.260 --> 00:08:51.020 Over time, kids would think beyond just consuming their candy. 75 00:08:51.020 --> 00:08:59.500 They started trading for these bite-size three musketeers, and they even started hoarding 76 00:08:59.500 --> 00:09:14.500 and saving them, thinking that they would make a better deal as the night went on, and ultimately the three musketeers served to facilitate other exchanges. 77 00:09:14.500 --> 00:09:23.500 So it's a very good piece to read, and something that you can see very quickly in how a money develops, 78 00:09:23.500 --> 00:09:28.500 a medium of exchange develops even in Halloween candy. 79 00:09:29.940 --> 00:09:33.220 And at the end of the night, everybody was happier. 80 00:09:33.220 --> 00:09:35.260 That's the key to the story. 81 00:09:35.260 --> 00:09:38.980 Some kids had less, some kids had more, 82 00:09:38.980 --> 00:09:41.180 but through this medium of exchange, 83 00:09:41.180 --> 00:09:44.540 they were able to make trades that made them better off 84 00:09:44.540 --> 00:09:47.980 and everybody was happier than they were 85 00:09:47.980 --> 00:09:50.300 when they just showed up with this big bag of candy 86 00:09:50.300 --> 00:09:51.780 that some of it they liked 87 00:09:51.780 --> 00:09:54.460 and some of it they didn't like, et cetera. 88 00:09:56.060 --> 00:09:59.220 Now, you can see that money is, 89 00:09:59.220 --> 00:10:02.860 it's a huge leap forward in the history of civilization. 90 00:10:02.860 --> 00:10:06.720 If we were all bartering, we couldn't trade for, 91 00:10:06.720 --> 00:10:09.300 you wouldn't be able to trade your time and talent 92 00:10:11.460 --> 00:10:13.760 for money and then go buy what you want. 93 00:10:13.760 --> 00:10:15.940 You would, again, you'd be trapped 94 00:10:15.940 --> 00:10:18.740 by this double coincidence of wants. 95 00:10:18.740 --> 00:10:31.900 So money has has served to to really civilize the world and businesses are now able to calculate whether they're making money or whether they're losing money. 96 00:10:31.900 --> 00:10:38.500 All goods can be priced in money or the commodity that is in money. 97 00:10:38.500 --> 00:10:45.720 Now, a number of things have been money over the years. Salt, sugar, cattle, iron hoes, 98 00:10:45.720 --> 00:10:54.460 tea, calorie shells, and even, in a very famous case, cigarettes in prison camps have developed 99 00:10:54.460 --> 00:11:02.460 as money. And in fact, I think cigarettes are probably still used as money in prisons. 100 00:11:02.460 --> 00:11:10.460 So what kind of goods are picked as money? Well, it's a commodity that number one is 101 00:11:10.460 --> 00:11:18.780 generally marketable, which means it has to have a high non-monetary demand. Just in the 102 00:11:18.780 --> 00:11:25.420 case of the Three Musketeers bar, it was good not only as a medium of exchange, but it was 103 00:11:25.420 --> 00:11:32.620 Money should be generally marketable. 104 00:11:32.620 --> 00:11:35.580 Number two, it should be divisible. 105 00:11:35.580 --> 00:11:39.140 Those are the problems with our egg problem that we had earlier. 106 00:11:39.140 --> 00:11:44.860 It's hard to divide up an egg unless you scramble it. 107 00:11:44.860 --> 00:11:53.340 Chopping up eggs doesn't work very well, so you need goods that are divisible. 108 00:11:53.340 --> 00:11:59.700 You need to have a high value per unit weight, that means it's portable. 109 00:11:59.700 --> 00:12:05.860 So in the past, cattle have been money, but cattle are pretty hard to carry around with 110 00:12:05.860 --> 00:12:12.580 you, so they don't make particularly good money, so a high value per unit weight is 111 00:12:12.580 --> 00:12:13.580 important. 112 00:12:13.580 --> 00:12:21.440 Fairly stable value, money should retain its value over time. 113 00:12:21.440 --> 00:12:29.240 Number five, it should be durable. Again, that's a problem with tea, possibly with the 114 00:12:29.240 --> 00:12:35.220 cigarettes I've mentioned. Some of the other things that have been money in the past is 115 00:12:35.220 --> 00:12:42.100 that they're not necessarily terribly durable. Number six, recognizable. Everybody should 116 00:12:42.100 --> 00:12:49.880 recognize the value of what money will be. Certainly in the case at the Tucker residence 117 00:12:49.880 --> 00:13:01.600 On Halloween, everyone recognized that three Musketeers bars were a good that everybody 118 00:13:01.600 --> 00:13:04.400 recognized the value of. 119 00:13:04.400 --> 00:13:07.360 And they should be homogeneous. 120 00:13:07.360 --> 00:13:12.120 That's the other problem with the candy is that there's various types of candy. 121 00:13:12.120 --> 00:13:19.600 And so a money should be the same when we talked about the logs. 122 00:13:19.600 --> 00:13:22.480 Not all logs are congregated equal. 123 00:13:22.480 --> 00:13:30.800 And so the perfect money, monies that will truly last throughout history, will be homogenous. 124 00:13:30.800 --> 00:13:33.320 They'll be roughly the same. 125 00:13:33.320 --> 00:13:40.560 And as you might expect, over time, two commodities have been dominant to compete as money. 126 00:13:40.560 --> 00:13:57.360 That is gold and silver, and gold used to be money, if you can see that, hopefully. 127 00:13:57.360 --> 00:14:04.200 That is an 1895, $20 gold piece. 128 00:14:04.200 --> 00:14:14.240 And that's what used to be, that's what used to be money, here in the United States. 129 00:14:14.240 --> 00:14:21.480 And for good reason, gold has always been highly priced for its luster and for its ornamental 130 00:14:21.480 --> 00:14:26.880 value, don't pay any attention to this white that's around it, it's in plastic, it's gonna 131 00:14:26.880 --> 00:14:33.960 stay in plastic, it's also not gonna get passed around, so don't ask me to do that, stay right 132 00:14:33.960 --> 00:14:48.760 up here. Come to me individually, no problem. So, gold and silver have always served this 133 00:14:48.760 --> 00:14:57.940 role as money. It's relatively scarce, has a high value per unit weight. It's very portable. 134 00:14:57.940 --> 00:15:04.860 It's divisible and in fact we just had a conference last weekend in Newport Beach and we were 135 00:15:04.860 --> 00:15:08.020 talking about gold and how divisible it is. 136 00:15:08.020 --> 00:15:12.660 We were talking about if anybody's familiar with the Golden Dome at Notre Dame and that 137 00:15:12.660 --> 00:15:19.280 is actually in gold flake, done that in gold flake and the question was how much gold did 138 00:15:19.280 --> 00:15:22.340 it take to cover the Golden Dome at Notre Dame? 139 00:15:22.340 --> 00:15:26.440 It's less than half an ounce of gold. 140 00:15:26.440 --> 00:15:36.440 And gold can be spread very thin and thus is very highly divisible. 141 00:15:36.440 --> 00:15:38.440 It's also highly durable. 142 00:15:38.440 --> 00:15:42.440 Again, that's a coin from 1895. 143 00:15:42.440 --> 00:15:47.440 Occasionally you will hear stories of shipwrecks at the bottom of the sea. 144 00:15:47.440 --> 00:15:55.440 They'll pull gold up and it has the same luster that it had when the coins were newly minted. 145 00:15:55.440 --> 00:15:59.440 So, what should be the supply of money? I mean, we get this question all the time. 146 00:15:59.440 --> 00:16:05.440 If you watch any of the financial news, they'll ask about money supply, what should the money supply be? 147 00:16:05.440 --> 00:16:10.440 We never talk about that in terms of other things like biscuits or shoes. 148 00:16:10.440 --> 00:16:15.440 Nobody ever sits around and goes, oh my gosh, how many biscuits should we have? 149 00:16:15.440 --> 00:16:19.440 How many shoes should we have? We let the market determine that, right? 150 00:16:19.440 --> 00:16:28.440 But somehow now it's thought that somehow the government should determine how much money we should have. 151 00:16:28.440 --> 00:16:42.440 But the difference between other goods and money, the difference between biscuits and money are that we're all better off if there are more biscuits. 152 00:16:42.440 --> 00:16:46.440 More biscuits are better than less biscuits. 153 00:16:46.440 --> 00:16:52.440 But having more money as opposed to less money, we're not any better off. 154 00:16:52.440 --> 00:16:59.440 In fact, if we doubled the amount of money overnight, none of us would be any better off, 155 00:16:59.440 --> 00:17:02.440 because goods and services haven't changed. 156 00:17:02.440 --> 00:17:13.440 It makes our lives worth living and the things that we use every day are the labor and capital and goods 157 00:17:13.440 --> 00:17:17.480 and the amount of money doesn't really play into that. 158 00:17:17.480 --> 00:17:23.320 So it's, if society is better off with goods and services, 159 00:17:23.320 --> 00:17:27.280 but not necessarily with more money, 160 00:17:27.280 --> 00:17:33.120 if the amount of money was doubled overnight, prices would just go up. 161 00:17:33.120 --> 00:17:35.280 Prices would roughly double. 162 00:17:35.280 --> 00:17:37.920 It wouldn't double overnight, some stuff, 163 00:17:37.920 --> 00:17:41.200 some goods and services would go up quicker than others, 164 00:17:41.200 --> 00:17:49.200 but society as a whole would not be better off with more money. 165 00:17:49.200 --> 00:17:55.200 So the market's perfectly capable of deciding what its own money supply should be 166 00:17:55.200 --> 00:18:06.200 but unfortunately the government has gotten involved in this over centuries and centuries 167 00:18:06.200 --> 00:18:36.200 and which leads us to the discussion of counterfeiting now when you counterfeit gold is very hard to counterfeit when you hold an ounce of gold you immediately know by weight what it is it's very easy to determine gold and whether it's really gold or something else but if you were to counterfeit try to counterfeit gold you actually are 168 00:18:36.200 --> 00:18:47.200 You're harming everyone. You're harming everyone who all the other legitimate money holders are harmed when you create money out of nowhere. 169 00:18:47.200 --> 00:18:59.200 And of course, as you can imagine, counterfeiters benefit first. If you can't make money, if you were able to create gold and be able to pass it off as gold, 170 00:18:59.200 --> 00:19:16.000 gold, say you made it out of brass or something else, you would benefit by being able to use that as money, trade it for goods and services at the expense of all other money holders. 171 00:19:16.000 --> 00:19:27.760 And if you want to guarantee a spot in jail, counterfeit, get into the counterfeiting business because the government is the counterfeiter 172 00:19:27.760 --> 00:19:30.160 and they do not like competition. 173 00:19:30.160 --> 00:19:40.560 So, like I say, if you absolutely positively want to go to prison, get into the counterfeiting business. 174 00:19:40.560 --> 00:19:46.960 Now, counterfeiting took a big leap forward when government got in the money business, 175 00:19:46.960 --> 00:19:52.560 or the paper money business, and that's what this is. 176 00:19:52.560 --> 00:19:54.960 This is what passes for 20 bucks today. 177 00:19:54.960 --> 00:20:02.720 Today, again, I go back to 1895. It was this. Now that's 20 bucks. Is that right there? 178 00:20:02.720 --> 00:20:13.840 And government is able to insist that people trade with that money, with that paper money, 179 00:20:13.840 --> 00:20:19.720 through legal tender laws. In other words, in the United States, you couldn't decide 180 00:20:19.720 --> 00:20:24.880 that this red, blue and black pen are legal tender. You couldn't trade for those. You 181 00:20:24.880 --> 00:20:31.200 You can create contracts. You can't create a contract in gold, per se. The government 182 00:20:31.200 --> 00:20:39.480 prohibits that. The United States government insists that you take poor old Andy Jackson 183 00:20:39.480 --> 00:20:49.320 there as legal tender. Now originally, governments went to pay for money, but it was backed by 184 00:20:49.320 --> 00:20:58.320 So you might have had the $20 bills circulating, but at least there was gold backing them up. 185 00:20:58.320 --> 00:21:13.320 Eventually over time, that goes away. The last bit of tying of gold to paper was in 71 and Richard Nixon undid that last tie. 186 00:21:13.320 --> 00:21:22.500 and he said we're all Keynesians now and at that point government then is is not 187 00:21:22.500 --> 00:21:26.840 constricted by the supply of gold can create all the paper that it wants and 188 00:21:26.840 --> 00:21:32.600 as my old teacher Murray Rothbard used to say the government at that point is 189 00:21:32.600 --> 00:21:39.780 now in seventh heaven they can they can create all the paper they want to pay 190 00:21:39.780 --> 00:21:47.140 for what they want to pay for, various government programs, you know, health care, it's being 191 00:21:47.140 --> 00:21:53.940 talked about, wars in various places around the globe, etc., etc., and then gold is derided 192 00:21:53.940 --> 00:22:02.700 as a barbaric relic, you know, people who have gold are viewed with suspicion, and the 193 00:22:02.700 --> 00:22:11.700 and the fact that I have some of the yellow metal makes me immediately suspect with some people. 194 00:22:11.700 --> 00:22:24.700 And so paper money is the hip thing to have and that's what everybody trades with. 195 00:22:24.700 --> 00:22:31.700 Now just a bit about the demand for money, you know we've talked a little bit about the supply of money. 196 00:22:31.700 --> 00:22:38.100 When you have the demand for money, you know, goods and services are increasing every year. 197 00:22:38.100 --> 00:22:43.060 So if you had the supply of money was relatively static, then the price of those goods and 198 00:22:43.060 --> 00:22:45.500 services would fall. 199 00:22:45.500 --> 00:22:53.020 And in fact, prices did fall from mid-18th century until roughly about 1940, unless there 200 00:22:53.020 --> 00:22:55.900 was the war years. 201 00:22:55.900 --> 00:22:57.020 Prices did fall. 202 00:22:57.020 --> 00:23:03.260 So instead of this continual price increases that we've had in recent years, especially 203 00:23:03.260 --> 00:23:09.380 since 1971, prices would fall because as more and more goods and services are produced, 204 00:23:09.380 --> 00:23:16.180 the amount of money was held somewhat the same or static, then prices of goods and services 205 00:23:16.180 --> 00:23:17.580 would fall. 206 00:23:17.580 --> 00:23:21.260 But of course that hasn't been the case. 207 00:23:21.260 --> 00:23:39.900 The money supply since 1980 has grown, I believe, by 460% and thus we have a lot of money floating around. 208 00:23:39.900 --> 00:23:51.100 Eventually the government, when they print money and they need money, it used to be that when they needed to inflate 209 00:23:51.100 --> 00:23:56.640 gold coins, they would just shave a little bit off of them and they would take the shavings 210 00:23:56.640 --> 00:24:02.020 and bundle them up and make new coins and pay for their programs. That was back in the 211 00:24:02.020 --> 00:24:08.400 ancient times. Of course, with the printing press, it's very easy. You can just put bigger 212 00:24:08.400 --> 00:24:18.180 numbers on them. And this is a 10,000 denar note from the Bank of Iraq. I picked this 213 00:24:18.180 --> 00:24:26.180 I looked this up this morning. I was down at my friendly Bank of Iraq branch here in Auburn. 214 00:24:26.180 --> 00:24:29.180 It's amazing what people give you on the road these days. 215 00:24:29.180 --> 00:24:32.180 I had a guy trying to buy me lunch one day with this. 216 00:24:32.180 --> 00:24:37.180 Anyway, you can see there's a very handsome guy on there. 217 00:24:37.180 --> 00:24:43.180 He still has his head in that picture. 218 00:24:43.180 --> 00:24:48.500 I looked up the initial, now 10,000 dinars sounds like a lot, right? 219 00:24:48.500 --> 00:25:00.220 I looked up the official on the internet exchange and that's worth about eight bucks, U.S. today. 220 00:25:00.220 --> 00:25:09.380 But as governments need to pay for more and more of their programs, they just add zeroes 221 00:25:09.380 --> 00:25:11.940 and they add zeroes and they add zeroes. 222 00:25:11.940 --> 00:25:19.300 And then ultimately what happens is what's happened in, I mean you want to see a big 223 00:25:19.300 --> 00:25:30.900 note, yeah, this is a hundred trillion dollars, yeah, a hundred trillion dollars, Reserve 224 00:25:30.900 --> 00:25:35.060 Bank of Zimbabwe. 225 00:25:35.060 --> 00:25:44.580 Now imagine you saved your entire life, and you worked hard, and you put money away, and 226 00:25:44.580 --> 00:25:50.860 you saved up a hundred trillion, and you thought, you know, I've got a comfortable retirement 227 00:25:50.860 --> 00:25:53.860 because I've got a hundred trillion. 228 00:25:53.860 --> 00:26:01.820 Well, online yesterday, this is worth about the amount of a happy meal down the street 229 00:26:01.820 --> 00:26:03.780 at McDonald's. 230 00:26:03.780 --> 00:26:11.680 I actually think it's probably worth less than that in U.S. dollars, but just to show 231 00:26:11.680 --> 00:26:17.300 you that I'm not poor, I've actually got two of them. 232 00:26:17.300 --> 00:26:23.560 But this is what can happen when government gets a hold of the printing press, they want 233 00:26:23.560 --> 00:26:33.200 to create money out of nowhere to pay for their misdeeds. 234 00:26:33.200 --> 00:26:45.680 So this has happened numerous times, not just in Zimbabwe, various countries in South America 235 00:26:45.680 --> 00:26:58.280 and of course the famous Weimar Germany in 1923 and in fact of course hyperinflations 236 00:26:58.280 --> 00:27:03.500 Prices don't happen all at once, they happen in stages. 237 00:27:03.500 --> 00:27:11.720 And Ludwig von Mises explained that initially in phase one prices, they don't rise as much 238 00:27:11.720 --> 00:27:16.980 as the money supply because the public still has deflationary expectations. 239 00:27:16.980 --> 00:27:22.760 Your expectations of prices are really based on your most recent past. 240 00:27:22.760 --> 00:27:25.540 So right now you don't think prices are going up. 241 00:27:25.540 --> 00:27:30.540 If you've got money, you wouldn't necessarily immediately run out and spend it. 242 00:27:30.540 --> 00:27:39.540 In phase two, instead of rising demand for money, moderating price increases, falling demand for money will intensify price inflation. 243 00:27:39.540 --> 00:27:48.540 And what falling demand for money will mean is that as soon as people get money, they have no demand to hold that money. 244 00:27:48.540 --> 00:27:52.540 They're going to turn around and spend it on anything as quickly as they can. 245 00:27:52.540 --> 00:28:22.540 And of course in phase three, as Mises explained, prices go up faster than money supply. There's a shortage of money and money's disappearing and in the German hyperinflation, workers were paid twice a day and housewives would stand at the gate with a wheelbarrow and their husband would run out to the gate and throw the money they had been paid into the wheelbarrow. The wives would go to the store and they would buy anything. 246 00:28:22.540 --> 00:28:27.460 anything they could get their hands on and of course ultimately this collapses 247 00:28:27.460 --> 00:28:32.500 there's no goods to buy that's the situation in Zimbabwe Zimbabwe used to 248 00:28:32.500 --> 00:28:38.700 be a very prosperous country used to be the breadbasket of Africa and through 249 00:28:38.700 --> 00:28:43.860 printing money they've essentially just completely destroyed that economy but in 250 00:28:43.860 --> 00:28:51.700 the case of the German German mark in 1914 one mark equaled 25 cents or a 251 00:28:51.700 --> 00:29:09.700 By October of 23, it took 25.3 billion marks for a dollar, and a month later it took 4.2 trillion marks to equal a dollar. 252 00:29:09.700 --> 00:29:13.700 So you can see how quickly this happens in a hyperinflation. 253 00:29:13.700 --> 00:29:19.700 Certainly not predicting that as I stand here today, but just to give you an idea of what can happen. 254 00:29:19.700 --> 00:29:27.140 as we go from what the market considers money going from barter to gold and 255 00:29:27.140 --> 00:29:34.260 silver but when it turns into paper it can be something that is very deadly so 256 00:29:34.260 --> 00:29:40.180 with that since I put you in a good mood it's time for a break so you have 15 257 00:29:40.180 --> 00:29:47.620 minutes and then it's back for mr. Jeffrey Tucker 258 00:29:49.700 --> 00:29:51.700 Thank you very much.