WEBVTT NOTE The Novels of Freedom 1 00:00:00.000 --> 00:00:08.000 Well, it turns out to be a very important time for us, because we're living amidst a full-scale financial meltdown. 2 00:00:08.000 --> 00:00:11.000 I never thought I would ever say those words. 3 00:00:11.000 --> 00:00:21.000 And somebody in Washington had the brilliant idea that the way to stop a financial meltdown is to prevent the market from working altogether, 4 00:00:21.000 --> 00:00:29.000 which is a very silly idea, because what the market specializes in the best is in finding value. 5 00:00:29.000 --> 00:00:36.000 and assessing the social worth of material goods and services. 6 00:00:36.000 --> 00:00:40.000 And it's almost as if, when the market began to collapse, 7 00:00:40.000 --> 00:00:43.000 the regulators in Washington thought, 8 00:00:43.000 --> 00:00:49.000 you know, they're discovering that all these financial instruments are completely worthless. 9 00:00:49.000 --> 00:00:52.000 So we better stop them from finding this out. 10 00:00:52.000 --> 00:00:55.000 So let's interrupt this process altogether. 11 00:00:55.000 --> 00:00:58.000 Among the things they did was abolish short-selling, for example. 12 00:00:58.000 --> 00:01:05.840 Now this is a totalitarian action. It's like abolishing pessimism or something, or saying 13 00:01:05.840 --> 00:01:13.760 nobody is permitted to think a bad thought anymore. And the terrible thing about this is that of course 14 00:01:13.760 --> 00:01:18.720 it prevents people from having, from trading on the expectations of price declines. It also prevents 15 00:01:18.720 --> 00:01:27.920 people from buying undervalued assets and finding value in them. Yes. Well short selling is, well 16 00:01:28.000 --> 00:01:32.760 Well, as I said, it's a trade on the expectation that prices are going to fall and that you 17 00:01:32.760 --> 00:01:40.200 make money from this, from having this expectation. My son has an e-trade account, you know, where 18 00:01:40.200 --> 00:01:44.600 you can go online and trade stocks and I'm always trying to keep him out of the short-selling 19 00:01:44.600 --> 00:01:49.640 section of the other thing because it's very dangerous actually. But the people who do 20 00:01:49.640 --> 00:01:56.120 it are interested in taking those kind of risks and they bring about socially beneficial 21 00:01:56.120 --> 00:02:26.120 results. Precisely because they make a market open up to things that are undervalued so that people can buy them and turn them into valuable resources again. So we can find out the truth, essentially. That's what these markets are for, to tell us what things are really worth from an economic point of view. So the regulators went in and got rid of this market just overnight, completely, pending some deadline. I don't know, somebody said the deadline is in January, I forget, like two days before the inauguration of the 22 00:02:26.120 --> 00:02:33.120 Socialism is an economic system in which the government forcefully prevents any market traders from the discovering the true value of anything. That's really what socialism is. It's a massive system of lies that prevents the truth from being discovered. 23 00:02:56.120 --> 00:03:02.120 and told through the price system because it doesn't allow trading at all in any kind of capital goods. 24 00:03:02.120 --> 00:03:10.120 So in the last two weeks, our own government has taken massive steps towards socializing the markets. 25 00:03:10.120 --> 00:03:20.120 And that doesn't mean that there's been a kind of nationalization like you saw in Nazi Germany or Russia, 26 00:03:20.120 --> 00:03:28.120 But by forcefully preventing trades from taking place, we have a kind of socialism by proxy. 27 00:03:28.120 --> 00:03:32.120 And then we also have these bailouts, which is another interesting thing. 28 00:03:32.120 --> 00:03:40.120 It shows that the government is even more pessimistic about the value of assets than Wall Street was. 29 00:03:40.120 --> 00:03:47.120 To me that's very interesting to think of this, that our regulators, the central bankers and the treasury officials 30 00:03:47.120 --> 00:04:17.120 In any case, they're going to use something on the level of $700 billion in taxpayer money. It's probably going to be triple, double-triple that by the time they're finished to do this. I don't know about you, but I can't even in my own mind imagine what those figures really are. We're talking about the fact that the world is going to fall apart. I don't know about you, but I can't even in my own mind imagine what those figures really are. I don't know about you, but I can't even in my own mind imagine what those figures really are. 31 00:04:17.120 --> 00:04:19.320 at the dinner table the other night 32 00:04:20.440 --> 00:04:23.600 about how much money we can imagine, you know. 33 00:04:23.600 --> 00:04:27.000 Well, we can imagine $10 and $100 and even $1,000 34 00:04:27.000 --> 00:04:29.420 and even a million dollars we can sort of imagine 35 00:04:29.420 --> 00:04:32.420 up to a certain point, but we start to get into billions, 36 00:04:32.420 --> 00:04:35.880 the figures become just completely abstract. 37 00:04:35.880 --> 00:04:40.100 And then you're talking about hundreds of billions. 38 00:04:40.100 --> 00:04:41.280 It's perfectly absurd. 39 00:04:41.280 --> 00:04:44.900 And of course trillions at that point are just words really. 40 00:04:44.900 --> 00:04:47.580 So these numbers are incomprehensible. 41 00:04:47.580 --> 00:04:50.120 And where do they get the money? 42 00:04:50.120 --> 00:04:52.260 This is the great mystery. 43 00:04:52.260 --> 00:04:55.940 It turns out that the government has no magic machine 44 00:04:55.940 --> 00:05:00.600 that creates money, that creates value out of thin air. 45 00:05:01.980 --> 00:05:04.260 I think in medieval lore, 46 00:05:04.260 --> 00:05:06.820 there was, or maybe it goes back to the ancient world, 47 00:05:06.820 --> 00:05:11.340 there's always been a search for some way to create gold 48 00:05:12.260 --> 00:05:14.080 through magic potions. 49 00:05:14.900 --> 00:05:16.820 is called alchemy, right? 50 00:05:16.820 --> 00:05:18.580 And alchemy has always been linked 51 00:05:18.580 --> 00:05:21.020 with various mystical properties 52 00:05:21.020 --> 00:05:25.340 and dangerous religious ideas and things like this. 53 00:05:26.900 --> 00:05:29.900 Well, in effect, what the Federal Reserve is doing 54 00:05:29.900 --> 00:05:32.940 is attempting a kind of form of alchemy 55 00:05:32.940 --> 00:05:37.360 to create gold out of absolutely nothing 56 00:05:37.360 --> 00:05:39.460 or something of value out of nothing. 57 00:05:39.460 --> 00:05:42.940 Of course, the way they do this is by printing paper. 58 00:05:42.940 --> 00:05:49.540 But every bit of paper you print diminishes the value of existing dollars. 59 00:05:49.540 --> 00:05:56.240 You know, the other day I was mowing the lawn and I mowed over a quarter and it destroyed it. 60 00:05:56.240 --> 00:05:59.740 And it split it into two parts and it was torn. 61 00:05:59.740 --> 00:06:05.240 But I told the kids that actually I was doing society a favor and having mowed over that quarter 62 00:06:05.240 --> 00:06:10.240 because you increase the value in a relative sense of all existing quarters. 63 00:06:10.240 --> 00:06:29.240 So I did my part to stop inflation with that action. So the government's in the activity of doing exactly the opposite of just creating endless amounts of money that's going to reduce the purchasing power of our existing money. 64 00:06:29.240 --> 00:06:35.240 I'm sure you all undoubtedly realize what's happening to the prices today is they're going increasingly higher and higher and higher. 65 00:06:35.240 --> 00:06:42.500 and I think it's entirely possible that sometime in the future we are going to see price and 66 00:06:42.500 --> 00:06:49.960 wage controls because what they've done to us in the last two weeks is not all that different 67 00:06:49.960 --> 00:06:54.840 from doing something as draconian as what Nixon did in the early 1970s by imposing wage 68 00:06:54.840 --> 00:06:59.120 and price controls. They've already shown that they're completely capable of this. If 69 00:06:59.120 --> 00:07:10.120 If they can give it a short selling and take over whole companies overnight, they could easily engage in wage and price controls, which is only going to increase the chaos. 70 00:07:10.120 --> 00:07:19.120 The great tragedy of the last two weeks is that everything that they've done to us is going to make our economic conditions worse rather than better. 71 00:07:19.120 --> 00:07:39.120 is going to prolong the day when the true value of these loans that are being held as assets by various financial companies when they're going to, when we're going to find out the true value and my guess is that we're going into this very severe recession. 72 00:07:39.120 --> 00:07:46.140 It's sort of like plunging directly into, plunging into socialism one step at a time. 73 00:07:46.140 --> 00:07:49.300 And this is, I guess my talk is called The Novels of Freedom. 74 00:07:49.300 --> 00:07:53.220 I believe I've talked about these books the last time you came, so, but I just want to 75 00:07:53.220 --> 00:08:00.200 mention again that this wonderful book, Time Will Run Back, is sort of a novel about a 76 00:08:00.200 --> 00:08:03.860 society that is going the opposite direction. 77 00:08:03.860 --> 00:08:09.520 The book starts in a completely socialist economy where everything is totally controlled and 78 00:08:09.520 --> 00:08:16.740 a new dictator takes over and begins to wonder about the value of things because without 79 00:08:16.740 --> 00:08:21.700 prices you really don't know how much things are worth. So he begins to ask whether or 80 00:08:21.700 --> 00:08:25.820 not the economy is performing well and nobody really has an answer for them because there 81 00:08:25.820 --> 00:08:31.500 are no measurements to discover whether there is any productivity at all under socialism. 82 00:08:31.500 --> 00:08:39.460 So in an effort to discover whether the economy is doing poorly or doing well, he permits 83 00:08:39.460 --> 00:08:49.540 a slow step-by-step decontrol of prices and permits private property ownership, working 84 00:08:49.540 --> 00:08:54.300 under the advice of some of his underlings and things, and slowly and systematically 85 00:08:54.300 --> 00:08:59.100 they roll back from socialism towards a market economy and they see things improve and improve 86 00:08:59.100 --> 00:09:07.100 The more trading you permit, the better off society is allowed to be. 87 00:09:07.100 --> 00:09:13.100 It's a story about the unraveling of socialism under one regime. 88 00:09:13.100 --> 00:09:19.100 We can hope that in the future we'll have something like a government that will unravel 89 00:09:19.100 --> 00:09:25.100 the socialism of the Bush administration, and actually in fact every administration 90 00:09:25.100 --> 00:09:30.300 in the Last Hundred Years, which seems to be giving us ever more of this. 91 00:09:30.300 --> 00:09:36.140 The other book that I brought in here with me is The Cinder Buggy, which is the story 92 00:09:36.140 --> 00:09:46.140 of how the age of iron was changed into the age of steel in the second half of the 19th 93 00:09:46.140 --> 00:09:53.100 century, which is a tremendously dramatic story of how economic change makes such a 94 00:09:53.100 --> 00:10:01.100 There's such a difference in our lives, and leads to wonderful social upheavals of the kind that we should favor. 95 00:10:01.100 --> 00:10:08.100 Upheavals of the sort that we're getting under the government today aren't going to make us any better off. 96 00:10:08.100 --> 00:10:18.100 There are some kinds of social upheavals that are things we should actually look for and want, such as that brought by technological change that serves society. 97 00:10:18.100 --> 00:10:28.100 It's a good example that the digital revolution is a good example of that, a technological change that has transformed our lives and has taken a lot of adjustment, but overall we're better off. 98 00:10:28.100 --> 00:10:46.100 It expands the division of labor and expands prosperity, and it was similar with the change from the age of iron to the age of steel, and the Cinder Buggy chronicles this story, and it's something I think that would be suitable for any high school age child. 99 00:10:46.100 --> 00:11:02.100 You know, economics is an interesting subject because it requires a lot of abstract thinking, and in fact, the process of thinking through economics is actually too challenging for children under a certain age. 100 00:11:02.100 --> 00:11:12.100 I think Mark's going to be talking a little bit about Henry Housel's book, Economics in One Lesson. If you're too young, that book doesn't make a lot of sense. 101 00:11:12.100 --> 00:11:34.100 So the best kinds of things for kids to read I would say in junior high and even in high school are things like novels because they tell about economics in the form of a story that you can grasp and actually as an adult I like to read novels too. I think it's a wonderful way to gain a picture of how the economy works. 102 00:11:34.100 --> 00:12:04.100 Works. Let me say something about the Mises Institute's work in general. We've been at this for 25 years, 26 years. We were founded in 1982. One of the very first conferences we held was on the need for a gold standard as the backing for our monetary system. And that was in a time when we were just coming off a great inflation, but prices were stabilizing. And people all said, well, the gold standard 103 00:12:04.100 --> 00:12:20.100 That's a very silly idea. It's really not necessary. And in fact, your whole obsession that you have with this topic of money and its quality is really dated and irrelevant. 104 00:12:20.100 --> 00:12:50.100 But we kept at it. We've had conference after conference after conference all of these years on the topic of money and its value and the need for monetary reform and the need to get rid of the central bank and have a free market money system and all along we've been bringing back books from the past written in the interwar period about this important topic, bringing back Mises's writings on the business cycle theory, what causes the business cycle theory, 105 00:12:50.100 --> 00:12:53.100 What is the cause of the Great Depression? I had to get out of them. 106 00:12:53.100 --> 00:12:56.900 Books by Hayek, books by Rothbard, on all these topics. 107 00:12:56.900 --> 00:13:00.700 And we've done this for many years, and lots of people have said, 108 00:13:00.700 --> 00:13:04.500 we are crazy, that there's really essentially nothing wrong 109 00:13:04.500 --> 00:13:09.700 with the monetary system as it is, and you people have some sort of obsession. 110 00:13:09.700 --> 00:13:15.200 And I must say, it's not quite satisfying, but it is 111 00:13:15.200 --> 00:13:18.600 interesting to point to the fact that in the last month, 112 00:13:18.600 --> 00:13:25.720 We've seen all of our work for the last 26 years vindicated so many times over. 113 00:13:25.720 --> 00:13:35.440 And now we see economists from all over the world looking to the Mises Institute for this important research 114 00:13:35.440 --> 00:13:40.960 and buying these books that we've worked so hard to keep into print and get into print. 115 00:13:40.960 --> 00:14:10.960 and just in the last four days we've sold something on the order of a thousand, a thousand different people have ordered books from us just in the last few days and we've seen a rush on our warehouses like we've never seen before and the traffic on the Mises org website is skyrocketing. It's completely out of control. It's a wonderful thing. Yeah, it's a wonderful thing. I'm sorry to report that it has to come 116 00:14:10.960 --> 00:14:22.960 When it comes to this, you know, the time to reform a society, the time to reform an economy is when prosperity is there, when peace, when there's peaceful conditions and we have stability. 117 00:14:22.960 --> 00:14:31.960 That's the time when it's the best time to do dramatic economic changes like reform the money, get rid of our paper money system and free up the market. 118 00:14:31.960 --> 00:14:39.880 That's not human nature. People wait until a crisis to focus the mind and think through 119 00:14:39.880 --> 00:14:46.280 what kind of fundamental changes. Unfortunately, usually at that point it's too late. So let's 120 00:14:46.280 --> 00:14:53.960 hope it's not too late for us. We can make a change in the way our financial system works 121 00:14:53.960 --> 00:14:59.480 and the way our money system works. And if it's a change for the good, I think we can 122 00:14:59.480 --> 00:15:04.480 and say with confidence that it will be because of the work of the Mises Institute, because 123 00:15:04.480 --> 00:15:11.480 we have been truly alone in the English speaking world, right here in Auburn, and pointing 124 00:15:11.480 --> 00:15:16.280 to this research and pointing to the way out of the current crisis. 125 00:15:16.280 --> 00:15:22.120 In any case, Mark, that's all the marks I have for right now, and I'm so glad you came, 126 00:15:22.120 --> 00:15:24.560 and I'll be glad to give this talk again when the others arrive.