Well, it turns out to be a very important time for us, because we're living amidst a full-scale financial meltdown.
I never thought I would ever say those words.
And somebody in Washington had the brilliant idea that the way to stop a financial meltdown is to prevent the market from working altogether,
which is a very silly idea, because what the market specializes in the best is in finding value.
and assessing the social worth of material goods and services.
And it's almost as if, when the market began to collapse,
the regulators in Washington thought,
you know, they're discovering that all these financial instruments are completely worthless.
So we better stop them from finding this out.
So let's interrupt this process altogether.
Among the things they did was abolish short-selling, for example.
Now this is a totalitarian action. It's like abolishing pessimism or something, or saying
nobody is permitted to think a bad thought anymore. And the terrible thing about this is that of course
it prevents people from having, from trading on the expectations of price declines. It also prevents
people from buying undervalued assets and finding value in them. Yes. Well short selling is, well
Well, as I said, it's a trade on the expectation that prices are going to fall and that you
make money from this, from having this expectation. My son has an e-trade account, you know, where
you can go online and trade stocks and I'm always trying to keep him out of the short-selling
section of the other thing because it's very dangerous actually. But the people who do
it are interested in taking those kind of risks and they bring about socially beneficial
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
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.
and told through the price system because it doesn't allow trading at all in any kind of capital goods.
So in the last two weeks, our own government has taken massive steps towards socializing the markets.
And that doesn't mean that there's been a kind of nationalization like you saw in Nazi Germany or Russia,
But by forcefully preventing trades from taking place, we have a kind of socialism by proxy.
And then we also have these bailouts, which is another interesting thing.
It shows that the government is even more pessimistic about the value of assets than Wall Street was.
To me that's very interesting to think of this, that our regulators, the central bankers and the treasury officials
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.
at the dinner table the other night
about how much money we can imagine, you know.
Well, we can imagine $10 and $100 and even $1,000
and even a million dollars we can sort of imagine
up to a certain point, but we start to get into billions,
the figures become just completely abstract.
And then you're talking about hundreds of billions.
It's perfectly absurd.
And of course trillions at that point are just words really.
So these numbers are incomprehensible.
And where do they get the money?
This is the great mystery.
It turns out that the government has no magic machine
that creates money, that creates value out of thin air.
I think in medieval lore,
there was, or maybe it goes back to the ancient world,
there's always been a search for some way to create gold
through magic potions.
is called alchemy, right?
And alchemy has always been linked
with various mystical properties
and dangerous religious ideas and things like this.
Well, in effect, what the Federal Reserve is doing
is attempting a kind of form of alchemy
to create gold out of absolutely nothing
or something of value out of nothing.
Of course, the way they do this is by printing paper.
But every bit of paper you print diminishes the value of existing dollars.
You know, the other day I was mowing the lawn and I mowed over a quarter and it destroyed it.
And it split it into two parts and it was torn.
But I told the kids that actually I was doing society a favor and having mowed over that quarter
because you increase the value in a relative sense of all existing quarters.
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.
I'm sure you all undoubtedly realize what's happening to the prices today is they're going increasingly higher and higher and higher.
and I think it's entirely possible that sometime in the future we are going to see price and
wage controls because what they've done to us in the last two weeks is not all that different
from doing something as draconian as what Nixon did in the early 1970s by imposing wage
and price controls. They've already shown that they're completely capable of this. If
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.
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.
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.
It's sort of like plunging directly into, plunging into socialism one step at a time.
And this is, I guess my talk is called The Novels of Freedom.
I believe I've talked about these books the last time you came, so, but I just want to
mention again that this wonderful book, Time Will Run Back, is sort of a novel about a
society that is going the opposite direction.
The book starts in a completely socialist economy where everything is totally controlled and
a new dictator takes over and begins to wonder about the value of things because without
prices you really don't know how much things are worth. So he begins to ask whether or
not the economy is performing well and nobody really has an answer for them because there
are no measurements to discover whether there is any productivity at all under socialism.
So in an effort to discover whether the economy is doing poorly or doing well, he permits
a slow step-by-step decontrol of prices and permits private property ownership, working
under the advice of some of his underlings and things, and slowly and systematically
they roll back from socialism towards a market economy and they see things improve and improve
The more trading you permit, the better off society is allowed to be.
It's a story about the unraveling of socialism under one regime.
We can hope that in the future we'll have something like a government that will unravel
the socialism of the Bush administration, and actually in fact every administration
in the Last Hundred Years, which seems to be giving us ever more of this.
The other book that I brought in here with me is The Cinder Buggy, which is the story
of how the age of iron was changed into the age of steel in the second half of the 19th
century, which is a tremendously dramatic story of how economic change makes such a
There's such a difference in our lives, and leads to wonderful social upheavals of the kind that we should favor.
Upheavals of the sort that we're getting under the government today aren't going to make us any better off.
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.
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.
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.
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.
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.
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.
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
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.
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,
What is the cause of the Great Depression? I had to get out of them.
Books by Hayek, books by Rothbard, on all these topics.
And we've done this for many years, and lots of people have said,
we are crazy, that there's really essentially nothing wrong
with the monetary system as it is, and you people have some sort of obsession.
And I must say, it's not quite satisfying, but it is
interesting to point to the fact that in the last month,
We've seen all of our work for the last 26 years vindicated so many times over.
And now we see economists from all over the world looking to the Mises Institute for this important research
and buying these books that we've worked so hard to keep into print and get into print.
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
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.
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.
That's not human nature. People wait until a crisis to focus the mind and think through
what kind of fundamental changes. Unfortunately, usually at that point it's too late. So let's
hope it's not too late for us. We can make a change in the way our financial system works
and the way our money system works. And if it's a change for the good, I think we can
and say with confidence that it will be because of the work of the Mises Institute, because
we have been truly alone in the English speaking world, right here in Auburn, and pointing
to this research and pointing to the way out of the current crisis.
In any case, Mark, that's all the marks I have for right now, and I'm so glad you came,
and I'll be glad to give this talk again when the others arrive.