WEBVTT NOTE XXXI. Currency and Credit Manipulation 1 00:00:00.000 --> 00:00:07.240 Chapter 31 Currency and Credit Manipulation 1. 2 00:00:07.240 --> 00:00:11.400 The Government and the Currency 3 00:00:11.400 --> 00:00:15.360 Media of exchange and money are market phenomena. 4 00:00:15.360 --> 00:00:20.960 What makes a thing a medium of exchange or money is the conduct of parties to market 5 00:00:20.960 --> 00:00:23.120 transactions. 6 00:00:23.120 --> 00:00:28.560 An occasion for dealing with monetary problems appears to the authorities in the same way 7 00:00:28.560 --> 00:00:34.600 in which they concern themselves with all other objects exchanged, namely, when they 8 00:00:34.600 --> 00:00:40.120 are called upon to decide whether or not the failure of one of the parties to an act of 9 00:00:40.120 --> 00:00:47.800 exchange to comply with his contractual obligations justifies compulsion on the part of the government 10 00:00:47.800 --> 00:00:51.240 apparatus of violent oppression. 11 00:00:51.240 --> 00:00:58.660 If both parties discharge their mutual obligations instantly and synchronously, as a rule no 12 00:00:58.660 --> 00:01:05.420 conflicts arise which would induce one of the parties to apply to the judiciary. 13 00:01:05.420 --> 00:01:12.140 But if one or both parties' obligations are temporally deferred, it may happen that the 14 00:01:12.140 --> 00:01:18.980 courts are called to decide how the terms of the contract are to be complied with. 15 00:01:18.980 --> 00:01:24.420 If payment of a sum of money is involved, this implies the task of determining what 16 00:01:24.420 --> 00:01:30.500 meaning is to be attached to the monetary terms used in the contract. 17 00:01:30.500 --> 00:01:36.460 Thus it devolves upon the laws of the country and upon the courts to define what the parties 18 00:01:36.460 --> 00:01:42.620 to the contract had in mind when speaking of a sum of money, and to establish how the 19 00:01:42.620 --> 00:01:49.960 The obligation to pay such a sum is to be settled in accordance with the terms agreed upon. 20 00:01:49.960 --> 00:01:55.400 They have to determine what is and what is not legal tender. 21 00:01:55.400 --> 00:02:01.460 In attending to this task, the laws and the courts do not create money. 22 00:02:01.460 --> 00:02:07.660 A thing becomes money only by virtue of the fact that those exchanging commodities and 23 00:02:07.660 --> 00:02:12.500 services commonly use it as a medium of exchange. 24 00:02:12.500 --> 00:02:18.020 In the unhampered market economy, the laws and the judges, in attributing legal tender 25 00:02:18.020 --> 00:02:25.060 quality to a certain thing, merely establish what, according to the usages of trade, was 26 00:02:25.060 --> 00:02:31.840 intended by the parties when they referred in their deal to a definite kind of money. 27 00:02:31.840 --> 00:02:37.120 They interpret the customs of the trade in the same way in which they proceed when called 28 00:02:37.120 --> 00:02:43.920 to determine what is the meaning of any other terms used in contracts. 29 00:02:43.920 --> 00:02:48.000 Mintage has long been a prerogative of the rulers of the country. 30 00:02:48.000 --> 00:02:55.040 However, this government activity had originally no objective other than the stamping and certifying 31 00:02:55.040 --> 00:02:57.360 of weights and measures. 32 00:02:57.360 --> 00:03:03.040 The authority's stamp placed upon a piece of metal was supposed to certify its weight 33 00:03:03.040 --> 00:03:05.160 and fineness. 34 00:03:05.160 --> 00:03:10.920 Even later princes resorted to substituting baser and cheaper metals for a part of the 35 00:03:10.920 --> 00:03:16.700 precious metals while retaining the customary face and name of the coins. 36 00:03:16.700 --> 00:03:22.160 They did it furtively, and in full awareness of the fact that they were engaged in a fraudulent 37 00:03:22.160 --> 00:03:25.200 attempt to cheat the public. 38 00:03:25.200 --> 00:03:31.280 As soon as people found out these artifices, the debased coins were dealt with at a discount 39 00:03:31.280 --> 00:03:34.480 as against the old, better ones. 40 00:03:34.480 --> 00:03:39.240 The governments reacted by resorting to compulsion and coercion. 41 00:03:39.240 --> 00:03:44.720 They made it illegal to discriminate in trade and in the settlement of deferred payments 42 00:03:44.720 --> 00:03:52.260 between good money and bad money, and decreed maximum prices in terms of bad money. 43 00:03:52.260 --> 00:03:57.860 However, the result obtained was not that which the governments aimed at. 44 00:03:57.860 --> 00:04:03.860 Their decrees failed to stop the process which adjusted commodity prices in terms of the 45 00:04:03.860 --> 00:04:20.100 The history of government interference with currency is, however, not merely a record 46 00:04:20.100 --> 00:04:28.200 of debasement practices and of abortive attempts to avoid their inescapable catallactic consequences. 47 00:04:28.200 --> 00:04:33.800 There were governments that did not look upon their mintage prerogative as a means of cheating 48 00:04:33.800 --> 00:04:50.920 These governments considered the manufacturing of coins not as a source of surreptitious 49 00:04:50.920 --> 00:04:58.920 fiscal lucre, but as a public service designed to safeguard a smooth functioning of the market. 50 00:04:58.920 --> 00:05:04.680 But even these governments, out of ignorance and dilettantism, often resorted to measures 51 00:05:04.680 --> 00:05:09.760 which were tantamount to interference with the price structure, although they were not 52 00:05:09.760 --> 00:05:13.320 deliberately planned as such. 53 00:05:13.320 --> 00:05:20.040 As two precious metals were used side by side as money, the authorities naively believed 54 00:05:20.040 --> 00:05:26.720 that it was their task to unify the currency system by decreeing a rigid exchange ratio 55 00:05:26.720 --> 00:05:34.480 ratio between gold and silver. The bimetallic system proved a complete failure. It did not 56 00:05:34.480 --> 00:05:41.300 bring about bimetallism, but an alternating standard. That metal which, compared with 57 00:05:41.300 --> 00:05:47.440 the instantaneous state of the fluctuating market exchange rate between gold and silver, 58 00:05:47.440 --> 00:05:54.120 was overvalued in the legally fixed ratio, predominated in domestic circulation, while 59 00:05:54.120 --> 00:05:57.520 How the Other Metal Disappeared 60 00:05:57.520 --> 00:06:03.900 Finally the governments abandoned their vain attempts and acquiesced to mono-metalism. 61 00:06:03.900 --> 00:06:09.520 The present silver purchase policy of the American government is not seriously a device 62 00:06:09.520 --> 00:06:11.900 of monetary policy. 63 00:06:11.900 --> 00:06:17.320 It is merely a device for raising the price of silver for the benefit of the owners of 64 00:06:17.320 --> 00:06:24.800 of Silver Mines, Their Employees and the States within whose boundaries the mines are located. 65 00:06:24.800 --> 00:06:27.960 It is a hardly disguised subsidy. 66 00:06:27.960 --> 00:06:34.000 Its monetary significance consists exclusively in the fact that it is financed by issuing 67 00:06:34.000 --> 00:06:39.960 additional dollar notes whose legal tender quality does not differ essentially from that 68 00:06:39.960 --> 00:06:46.060 of the Federal Reserve notes, although they bear the practically meaningless imprint, 69 00:06:46.060 --> 00:06:52.080 Certificate Yet economic history also provides instances 70 00:06:52.080 --> 00:06:59.080 of well-designed and successful monetary policies on the part of governments whose only intention 71 00:06:59.080 --> 00:07:05.300 was to equip their countries with a smoothly working currency system. 72 00:07:05.300 --> 00:07:11.040 Laissez-faire liberalism did not abolish the traditional government prerogative of mintage. 73 00:07:11.040 --> 00:07:16.560 But in the hands of the liberal governments, the character of this state monopoly was completely 74 00:07:16.560 --> 00:07:17.840 altered. 75 00:07:17.840 --> 00:07:24.280 The ideas which considered it an instrument of interventionist policies were discarded. 76 00:07:24.280 --> 00:07:29.820 No longer was it used for fiscal purposes, or for favoring some groups of the people 77 00:07:29.820 --> 00:07:32.600 at the expense of other groups. 78 00:07:32.600 --> 00:07:38.980 The government's monetary activities aimed at one objective only, to facilitate and to 79 00:07:38.980 --> 00:07:45.220 To Simplify the Use of the Medium of Exchange Which the Conduct of the People Had Made Money 80 00:07:45.220 --> 00:07:51.220 A nation's currency system, it was agreed, should be sound. 81 00:07:51.220 --> 00:07:57.260 The principle of soundness meant that the standard coins, that is, those to which unlimited 82 00:07:57.260 --> 00:08:03.980 legal tender power was assigned by the laws, should be properly assayed and stamped bars 83 00:08:03.980 --> 00:08:10.980 and the use of bullion, coined in such a way as to make the detection of clipping, abrasion and counterfeiting easy. 84 00:08:10.980 --> 00:08:19.980 To the government stamp, no function was attributed other than to certify the weight and the fineness of the metal contained. 85 00:08:19.980 --> 00:08:31.980 Pieces worn by usage, or in any other way reduced in weight beyond the very narrow limits of tolerated allowance, lost their legal tender quality. 86 00:08:31.980 --> 00:08:39.580 The authorities themselves withdrew such pieces from circulation and reminted them. 87 00:08:39.580 --> 00:08:45.260 For the receiver of an undefaced coin, there was no need to resort to the scales and to 88 00:08:45.260 --> 00:08:49.700 the melting pot in order to know its weight and content. 89 00:08:49.700 --> 00:08:55.220 On the other hand, individuals were entitled to bring bullion to the mint and to have it 90 00:08:55.220 --> 00:09:01.580 transformed into standard coins, either free of charge, or against payment of a senior 91 00:09:01.580 --> 00:09:07.820 age, generally not surpassing the actual expenses of the process. 92 00:09:07.820 --> 00:09:14.300 Thus the various national currencies became genuine gold currencies. 93 00:09:14.300 --> 00:09:19.420 Stability in the exchange ratio between the domestic legal tender and that of all other 94 00:09:19.420 --> 00:09:24.440 Other countries which had adopted the same principles of sound money was thus brought 95 00:09:24.440 --> 00:09:25.860 about. 96 00:09:25.860 --> 00:09:31.980 The international gold standard came into being without intergovernmental treaties and 97 00:09:31.980 --> 00:09:34.620 institutions. 98 00:09:34.620 --> 00:09:39.580 In many countries, the emergence of the gold standard was affected by the operation of 99 00:09:39.580 --> 00:09:41.580 Gresham's Law. 100 00:09:41.580 --> 00:09:47.020 The role that government policies played in the process in Great Britain consisted merely 101 00:09:47.020 --> 00:09:52.880 in ratifying the results brought about by the operation of Gresham's Law. 102 00:09:52.880 --> 00:09:58.420 It transformed a de facto state of affairs into a legal state. 103 00:09:58.420 --> 00:10:04.320 In other countries, the governments deliberately abandoned bimetalism just at the moment when 104 00:10:04.320 --> 00:10:10.720 the change in the market ratio between gold and silver would have brought about a substitution 105 00:10:10.720 --> 00:10:17.500 of a de facto silver currency for the then prevailing de facto gold currency. 106 00:10:17.500 --> 00:10:23.640 With all these nations, the formal adoption of the gold standard required no other contribution 107 00:10:23.640 --> 00:10:30.160 on the part of the administration and the legislature than the enactment of laws. 108 00:10:30.160 --> 00:10:35.200 It was different in those countries which wanted to substitute the gold standard for 109 00:10:35.200 --> 00:10:40.840 or a de facto or de jure silver or paper currency. 110 00:10:40.840 --> 00:10:46.880 When the German Reich in the 70s of the 19th century wanted to adopt the gold standard, 111 00:10:46.880 --> 00:10:49.680 the nation's currency was silver. 112 00:10:49.680 --> 00:10:55.640 It could not realize its plan by simply imitating the procedure of those countries in which 113 00:10:55.640 --> 00:11:02.520 the enactment of the gold standard was merely a ratification of the actual state of affairs. 114 00:11:02.520 --> 00:11:09.860 It had to exchange the silver standard coins in the hands of the public against gold coins. 115 00:11:09.860 --> 00:11:15.820 This was a time-absorbing and complicated financial operation involving vast government 116 00:11:15.820 --> 00:11:20.360 purchases of gold and sales of silver. 117 00:11:20.360 --> 00:11:24.860 Conditions were similar in those countries which aimed at the substitution of gold for 118 00:11:24.860 --> 00:11:28.320 credit money or fiat money. 119 00:11:28.320 --> 00:11:33.860 It is important to realize these facts because they illustrate the difference between conditions 120 00:11:33.860 --> 00:11:42.860 as they prevailed in the liberal age and those prevailing today in the age of interventionism. 121 00:11:42.860 --> 00:11:44.940 2. 122 00:11:44.940 --> 00:11:50.300 The Interventionist Aspect of Legal Tender Legislation 123 00:11:50.300 --> 00:11:56.380 The simplest and oldest variety of monetary interventionism is debasement of coins or 124 00:11:56.380 --> 00:12:01.820 For the sake of debt abatement. 125 00:12:01.820 --> 00:12:07.820 The authority assigns to the cheaper currency full legal tender power. 126 00:12:07.820 --> 00:12:13.780 All deferred payments can be legally discharged by payment of the amount due in the meaner 127 00:12:13.780 --> 00:12:17.580 coins according to their face value. 128 00:12:17.580 --> 00:12:21.140 Debtors are favored at the expense of creditors. 129 00:12:21.140 --> 00:12:27.540 But at the same time, future credit transactions are made more onerous for debtors. 130 00:12:27.540 --> 00:12:34.580 A tendency for gross market rates of interest to rise ensues as the parties take into account 131 00:12:34.580 --> 00:12:39.620 the chances for a repetition of such measures of debt abatement. 132 00:12:39.620 --> 00:12:44.780 While debt abatement improves the conditions of those who were already indebted at the 133 00:12:44.780 --> 00:12:52.860 at the moment, it impairs the position of those eager or obliged to contract new debts. 134 00:12:52.860 --> 00:13:00.180 The anti-type of debt abatement, debt aggravation through monetary measures, has also been practiced, 135 00:13:00.180 --> 00:13:06.820 though rarely. However, it has never deliberately been planned as a device to favor the creditors 136 00:13:06.820 --> 00:13:13.500 at the expense of the debtors. Whenever it came to pass, it was the unintentional effect 137 00:13:13.500 --> 00:13:19.740 of Monetary Changes Considered as Peremptory from Other Points of View. 138 00:13:19.740 --> 00:13:26.340 In resorting to such monetary changes, governments put up with their effects upon deferred payments 139 00:13:26.340 --> 00:13:32.420 either because they considered the measures unavoidable or because they assumed that creditors 140 00:13:32.420 --> 00:13:39.140 and debtors, in determining the terms of the contract, had already foreseen these changes 141 00:13:39.140 --> 00:13:42.620 and duly taken them into account. 142 00:13:42.620 --> 00:13:48.540 The best examples are provided by British events after the Napoleonic Wars and again 143 00:13:48.540 --> 00:13:51.140 after the First World War. 144 00:13:51.140 --> 00:13:57.380 In both instances, Great Britain sometime after the end of hostilities returned by means 145 00:13:57.380 --> 00:14:04.020 of a deflationary policy to the pre-war gold parity of the pound sterling. 146 00:14:04.020 --> 00:14:09.780 The idea of engineering the substitution of the gold standard for the wartime credit money 147 00:14:09.780 --> 00:14:15.860 Standard by acquiescing in the change in the market exchange ratio between the pound 148 00:14:15.860 --> 00:14:23.280 and gold which had already taken place, and of adopting this ratio as the new legal parity 149 00:14:23.280 --> 00:14:25.460 was rejected. 150 00:14:25.460 --> 00:14:32.020 This second alternative was scorned as a kind of national bankruptcy, as a partial repudiation 151 00:14:32.020 --> 00:14:38.400 of the public debt, and as a malicious infringement upon the rights of all those whose claims 152 00:14:38.400 --> 00:14:44.140 had originated in the period preceding the suspension of the unconditional convertibility 153 00:14:44.140 --> 00:14:47.720 of the banknotes of the Bank of England. 154 00:14:47.720 --> 00:14:53.120 People labored under the delusion that the evils caused by inflation could be cured by 155 00:14:53.120 --> 00:14:55.800 a subsequent deflation. 156 00:14:55.800 --> 00:15:01.640 Yet the return to the pre-war gold parity could not indemnify the creditors for the 157 00:15:01.640 --> 00:15:07.880 damage they had suffered as far as the debtors had repaid their old debts during the period 158 00:15:07.880 --> 00:15:09.880 of Money Depreciation. 159 00:15:09.880 --> 00:15:16.880 Moreover, it was a boon to all those who had lent during this period, and a blow to all 160 00:15:16.880 --> 00:15:19.040 those who had borrowed. 161 00:15:19.040 --> 00:15:24.120 But the statesmen who were responsible for the deflationary policy were not aware of 162 00:15:24.120 --> 00:15:26.520 the import of their action. 163 00:15:26.520 --> 00:15:32.760 They failed to see consequences which were, even in their eyes, undesirable, and if they 164 00:15:32.760 --> 00:15:38.480 They had recognized them in time, they would not have known how to avoid them. 165 00:15:38.480 --> 00:15:44.840 Their conduct of affairs really favored the creditors at the expense of the debtors, especially 166 00:15:44.840 --> 00:15:50.040 the holders of the government bonds at the expense of the taxpayers. 167 00:15:50.040 --> 00:15:56.800 In the 20s of the 19th century, it aggravated seriously the distress of British agriculture 168 00:15:56.800 --> 00:16:00.920 and a hundred years later the plight of British export trade. 169 00:16:00.920 --> 00:16:12.920 Nonetheless, it would be a mistake to call these two British monetary reforms the consummation of an interventionism intentionally aiming at debt aggravation. 170 00:16:12.920 --> 00:16:20.920 Debt aggravation was merely an attending phenomenon of a policy aiming at other ends. 171 00:16:20.920 --> 00:16:27.920 Whenever debt abatement is resorted to, its authors protest that the measure will never be repeated. 172 00:16:27.920 --> 00:16:43.920 They emphasize that extraordinary conditions, which will never again present themselves, have created an emergency, which makes indispensable recourse to noxious devices, absolutely reprehensible under any other circumstances. 173 00:16:43.920 --> 00:16:47.920 Once and never again, they declare. 174 00:16:47.920 --> 00:16:55.920 It is easy to conceive why the authors and supporters of debt abatement are compelled to make such promises. 175 00:16:55.920 --> 00:17:04.920 If total or partial nullification of the creditor's claims becomes a regular policy, lending of money will stop altogether. 176 00:17:04.920 --> 00:17:13.920 The stipulation of deferred payments depends on the expectation that no such nullification will be decreed. 177 00:17:13.920 --> 00:17:19.680 It is therefore not permissible to look upon debt abatement as a device of a system of 178 00:17:19.680 --> 00:17:26.600 economic policies which could be considered as an alternative to any other system of society's 179 00:17:26.600 --> 00:17:29.040 permanent economic organization. 180 00:17:29.040 --> 00:17:33.920 It is by no means a tool of constructive action. 181 00:17:33.920 --> 00:17:39.480 It is a bomb that destroys and can do nothing but destroy. 182 00:17:39.480 --> 00:17:46.640 If it is applied only once, a reconstruction of the shattered credit system is still possible. 183 00:17:46.640 --> 00:17:51.900 But if the blows are repeated, total destruction results. 184 00:17:51.900 --> 00:17:58.020 It is not correct to look upon inflation and deflation exclusively from the point of view 185 00:17:58.020 --> 00:18:01.560 of their effects upon deferred payments. 186 00:18:01.560 --> 00:18:07.740 It has been shown that cash-induced changes in purchasing power do not affect the prices 187 00:18:07.740 --> 00:18:12.020 Newspapers of the Various Commodities and Services at the Same Time 188 00:18:12.020 --> 00:18:18.440 and to the Same Extent, and what role this unevenness plays in the Market. 189 00:18:18.440 --> 00:18:23.540 But if one regards inflation and deflation as means of rearranging the 190 00:18:23.540 --> 00:18:30.000 relations between creditors and debtors, one cannot fail to realize that the ends 191 00:18:30.000 --> 00:18:35.820 sought by the Government resorting to them are attained only in a very imperfect 192 00:18:35.820 --> 00:18:42.360 degree, and that, besides, consequences appear which, from the government's point of view, 193 00:18:42.360 --> 00:18:45.420 are highly unsatisfactory. 194 00:18:45.420 --> 00:18:51.080 As is the case with every other variety of government interference with the price structure, 195 00:18:51.080 --> 00:18:57.300 the results obtained not only are contrary to the intentions of the government, but produce 196 00:18:57.300 --> 00:19:03.780 a state of affairs which, in the opinion of the government, is more undesirable than conditions 197 00:19:03.780 --> 00:19:06.880 on the Unhampered Market. 198 00:19:06.880 --> 00:19:12.300 As far as a government resorts to inflation in order to favor the debtors at the expense 199 00:19:12.300 --> 00:19:19.300 of the creditors, it succeeds only with regard to those deferred payments which were stipulated 200 00:19:19.300 --> 00:19:21.440 before. 201 00:19:21.440 --> 00:19:25.380 Inflation does not make it cheaper to contract new loans. 202 00:19:25.380 --> 00:19:32.620 It makes it, on the contrary, more expensive by the appearance of a positive price premium. 203 00:19:32.620 --> 00:19:39.180 If inflation is pushed to its ultimate consequences, it makes any stipulation of deferred payments 204 00:19:39.180 --> 00:19:44.820 in terms of the inflated currency cease altogether. 205 00:19:44.820 --> 00:19:47.780 3. 206 00:19:47.780 --> 00:19:53.100 The Evolution of Modern Methods of Currency Manipulation 207 00:19:53.100 --> 00:19:58.320 A metallic currency is not subject to government manipulation. 208 00:19:58.320 --> 00:20:04.320 Of course, the government has the power to enact legal tender laws, but then the operation 209 00:20:04.320 --> 00:20:11.560 of Gresham's law brings about results which may frustrate the aims sought by the government. 210 00:20:11.560 --> 00:20:17.360 Seen from this point of view, a metallic standard appears as an obstacle to all attempts to 211 00:20:17.360 --> 00:20:22.820 interfere with the market phenomena by monetary policies. 212 00:20:22.820 --> 00:20:28.740 In examining the evolution which gave governments the power to manipulate their national currency 213 00:20:28.740 --> 00:20:34.380 systems, we must begin by mentioning one of the most serious shortcomings of the classical 214 00:20:34.380 --> 00:20:36.460 economists. 215 00:20:36.460 --> 00:20:42.500 Both Adam Smith and David Ricardo looked upon the costs involved in the preservation of 216 00:20:42.500 --> 00:20:45.880 a metallic currency as a waste. 217 00:20:45.880 --> 00:20:51.620 As they saw it, the substitution of paper money for metallic money would make it possible 218 00:20:51.620 --> 00:20:58.160 to Employ Capital and Labor Required for the Production of the Quantity of Gold and Silver 219 00:20:58.160 --> 00:21:04.880 Needed for Monetary Purposes for the Production of Goods Which Could Directly Satisfy Human 220 00:21:04.880 --> 00:21:06.240 Wants. 221 00:21:06.240 --> 00:21:12.320 Starting from this assumption, Ricardo elaborated his famous Proposals for an Economical and 222 00:21:12.320 --> 00:21:17.880 Secure Currency, first published in 1816. 223 00:21:17.880 --> 00:21:20.600 Ricardo's plan fell into oblivion. 224 00:21:20.600 --> 00:21:26.760 It was not until many decades after his death that several countries adopted its basic principles 225 00:21:26.760 --> 00:21:33.280 under the label gold exchange standard in order to reduce the alleged waste involved 226 00:21:33.280 --> 00:21:41.040 in the operation of the gold standard nowadays decried as classical or orthodox. 227 00:21:41.040 --> 00:21:46.600 Under the classical gold standard, a part of the cash holdings of individuals consists 228 00:21:46.600 --> 00:21:49.000 in gold coins. 229 00:21:49.000 --> 00:21:54.520 Under the gold exchange standard, the cash holdings of individuals consist entirely in 230 00:21:54.520 --> 00:21:57.040 money substitutes. 231 00:21:57.040 --> 00:22:03.280 These money substitutes are redeemable at the legal par in gold or foreign exchange of 232 00:22:03.280 --> 00:22:08.540 countries under the gold standard or the gold exchange standard. 233 00:22:08.540 --> 00:22:14.240 But the arrangement of monetary and banking institutions aims at preventing the public 234 00:22:14.240 --> 00:22:19.920 from withdrawing gold from the central bank for domestic cash holdings. 235 00:22:19.920 --> 00:22:26.920 The first objective of redemption is to secure the stability of foreign exchange rates. 236 00:22:26.920 --> 00:22:32.880 In dealing with the problems of the gold exchange standard, all economists, including the author 237 00:22:32.880 --> 00:22:38.820 of this book, failed to realize the fact that it places in the hands of governments the 238 00:22:38.820 --> 00:22:44.160 power to manipulate their nation's currency easily. 239 00:22:44.160 --> 00:22:49.880 Scientists blithely assumed that no government of a civilized nation would use the gold exchange 240 00:22:49.880 --> 00:22:55.320 standard intentionally as an instrument of inflationary policy. 241 00:22:55.320 --> 00:23:00.440 Of course, one must not exaggerate the role that the gold exchange standard played in 242 00:23:00.440 --> 00:23:04.120 the inflationary ventures of the last decades. 243 00:23:04.120 --> 00:23:08.840 The main factor was the pro-inflationary ideology. 244 00:23:08.840 --> 00:23:14.080 The gold exchange standard was merely a convenient vehicle for the realization of the 245 00:23:14.080 --> 00:23:44.080 Inflationary Plans. Its absence did not hinder the adoption of inflationary measures. The United States was in 1933 by and large still under the classical gold standard. This fact did not stop the New Deal's inflationism. The United States at one stroke by confiscating its citizens' gold holdings abolished the classical gold standard and devalued the dollar against gold. 246 00:23:44.080 --> 00:23:51.000 The new variety of the gold exchange standard, as it developed in the years between the First 247 00:23:51.000 --> 00:23:57.960 and Second World Wars, may be called the flexible gold exchange standard, or, for the sake of 248 00:23:57.960 --> 00:24:01.400 simplicity, the flexible standard. 249 00:24:01.400 --> 00:24:06.800 Under this system, the central bank, or the foreign exchange equalization account, or 250 00:24:06.800 --> 00:24:13.220 whatever the name of the equivalent governmental institution may be, freely exchanges the money 251 00:24:13.220 --> 00:24:19.620 Many substitutes which are the country's national legal tender, either against gold or against 252 00:24:19.620 --> 00:24:23.140 foreign exchange, and vice versa. 253 00:24:23.140 --> 00:24:29.980 The ratio at which these exchange deals are transacted is not invariably fixed, but subject 254 00:24:29.980 --> 00:24:31.720 to changes. 255 00:24:31.720 --> 00:24:35.700 The parity is flexible, as people say. 256 00:24:35.700 --> 00:24:41.620 This flexibility, however, is practically always a downward flexibility. 257 00:24:41.620 --> 00:24:46.940 The authorities used their power to lower the equivalence of the national currency in 258 00:24:46.940 --> 00:24:54.240 terms of gold and of those foreign currencies whose equivalence against gold did not drop. 259 00:24:54.240 --> 00:24:57.380 They never ventured to raise it. 260 00:24:57.380 --> 00:25:03.820 If the parity against another nation's currency was raised, the change was only the consummation 261 00:25:03.820 --> 00:25:09.840 of a drop that had occurred in that other currency's equivalence in terms of gold or 262 00:25:39.840 --> 00:25:44.240 in the International Appraisal of the Currency Concerned. 263 00:25:44.240 --> 00:25:50.400 In both cases, it is usual to refer to the event by declaring that the country concerned 264 00:25:50.400 --> 00:25:53.600 has raised the price of gold. 265 00:25:53.600 --> 00:25:59.000 The characterization of the flexible standard from the catallactic point of view must not 266 00:25:59.000 --> 00:26:03.900 be confused with its description from the legal point of view. 267 00:26:03.900 --> 00:26:09.800 The catallactic aspects of the issue are not affected by the constitutional problems involved. 268 00:26:09.800 --> 00:26:16.280 It is immaterial whether the power to alter the parity is vested in the legislative or 269 00:26:16.280 --> 00:26:19.400 in the administrative branch of the government. 270 00:26:19.400 --> 00:26:25.260 It is immaterial whether the authorization given to the administration is unlimited or, 271 00:26:25.260 --> 00:26:31.080 as was the case in the United States under New Deal legislation, limited by a terminal 272 00:26:31.080 --> 00:26:36.960 point beyond which the officers are not free to devalue further. 273 00:26:36.960 --> 00:26:42.640 What counts alone for the economic treatment of the matter is that the principle of flexible 274 00:26:42.640 --> 00:26:48.760 parities has been substituted for the principle of the rigid parity. 275 00:26:48.760 --> 00:26:55.540 Whatever the constitutional state of affairs may be, no government could embark upon raising 276 00:26:55.540 --> 00:27:02.120 the price of gold if public opinion were opposed to such a manipulation. 277 00:27:02.120 --> 00:27:08.120 If, on the other hand, public opinion favors such a step, no legal technicalities could 278 00:27:08.120 --> 00:27:12.780 check it altogether or even delay it for a short time. 279 00:27:12.780 --> 00:27:19.920 What happened in Great Britain in 1931, in the United States in 1933, and in France and 280 00:27:19.920 --> 00:27:26.940 Switzerland in 1936, clearly shows that the apparatus of representative government is 281 00:27:26.940 --> 00:27:47.980 One of the main objectives of currency devaluation, whether large-scale or small-scale, is, as 282 00:27:47.980 --> 00:27:53.980 will be shown in the next section, to rearrange foreign trade conditions. 283 00:27:53.980 --> 00:28:00.020 These effects upon foreign trade make it impossible for a small nation to take its own course 284 00:28:00.020 --> 00:28:05.800 in currency manipulation, irrespective of what those countries are doing with whom its 285 00:28:05.800 --> 00:28:08.940 trade relations are closest. 286 00:28:08.940 --> 00:28:14.980 Such nations are forced to follow in the wake of a foreign country's monetary policies. 287 00:28:14.980 --> 00:28:21.160 As far as monetary policy is concerned, they voluntarily become satellites of a foreign 288 00:28:21.160 --> 00:28:22.800 power. 289 00:28:22.800 --> 00:28:28.840 By keeping their own country's currency rigidly at par against the currency of a monetary 290 00:28:28.840 --> 00:28:35.680 suzerain country, they follow all the alterations which the suzerain brings about in its own 291 00:28:35.680 --> 00:28:41.380 currency's parity against gold and the other nation's currencies. 292 00:28:41.380 --> 00:28:48.120 They join a monetary block and integrate their country into a monetary area. 293 00:28:48.120 --> 00:28:54.680 The most talked about block or area is the sterling block or area. 294 00:28:54.680 --> 00:28:59.640 The flexible standard must not be confused with conditions in those countries in which 295 00:28:59.640 --> 00:29:06.340 the government has merely proclaimed an official parity of its domestic currency against gold 296 00:29:06.340 --> 00:29:11.720 and foreign exchange without making this parity effective. 297 00:29:11.720 --> 00:29:17.300 The characteristic feature of the flexible standard is that any amount of domestic money 298 00:29:17.300 --> 00:29:24.460 Many substitutes can, in fact, be freely exchanged at the parity chosen against gold or foreign 299 00:29:24.460 --> 00:29:27.580 exchange and vice versa. 300 00:29:27.580 --> 00:29:33.440 At this parity, the central bank, or whatever the name of the government agency entrusted 301 00:29:33.440 --> 00:29:40.660 with the task may be, freely buys and sells any amount of domestic currency and of foreign 302 00:29:40.660 --> 00:29:46.300 currency of at least one of those countries which themselves are either under the gold 303 00:29:46.300 --> 00:29:54.180 Standard or under the Flexible Standard. The domestic banknotes are really redeemable. 304 00:29:54.180 --> 00:29:59.820 In the absence of this essential feature of the Flexible Standard, decrees proclaiming 305 00:29:59.820 --> 00:30:07.660 a definite parity have a quite different meaning and bring about quite different effects. 306 00:30:07.660 --> 00:30:15.020 4. The Objectives of Currency Devaluation 307 00:30:15.020 --> 00:30:20.020 The flexible standard is an instrument for the engineering of inflation. 308 00:30:20.020 --> 00:30:25.780 The only reason for its acceptance was to make reiterated inflationary moves technically 309 00:30:25.780 --> 00:30:30.280 as simple as possible for the authorities. 310 00:30:30.280 --> 00:30:37.340 In the boom period that ended in 1929, labor unions had succeeded in almost all countries 311 00:30:37.340 --> 00:30:43.900 in enforcing wage rates higher than those which the market, if manipulated only by migration 312 00:30:43.900 --> 00:30:51.460 Barriers would have determined. These wage rates already produced in many countries institutional 313 00:30:51.460 --> 00:30:57.460 unemployment of a considerable amount, while credit expansion was still going on at an 314 00:30:57.460 --> 00:31:04.940 accelerated pace. When finally the inescapable depression came and commodity prices began 315 00:31:04.940 --> 00:31:11.460 to drop, the labor unions, firmly supported by the governments, even by those disparaged 316 00:31:11.460 --> 00:31:19.460 as anti-labor clung stubbornly to their high-wages policy. They either flatly denied permission 317 00:31:19.460 --> 00:31:27.220 for any cut in nominal wage rates or conceded only in sufficient cuts. The result was a 318 00:31:27.220 --> 00:31:34.420 tremendous increase in institutional unemployment. On the other hand, those workers who retained 319 00:31:34.420 --> 00:31:41.300 their jobs improved their standard of living as their hourly real wages went up. 320 00:31:41.300 --> 00:31:45.220 The burden of unemployment doles became unbearable. 321 00:31:45.220 --> 00:31:50.260 The millions of unemployed were a serious menace to domestic peace. 322 00:31:50.260 --> 00:31:54.980 The industrial countries were haunted by the specter of revolution. 323 00:31:54.980 --> 00:32:00.460 But union leaders were intractable, and no statesmen had the courage to challenge them 324 00:32:00.460 --> 00:32:02.220 openly. 325 00:32:02.220 --> 00:32:08.100 In this plight, the frightened rulers bethought themselves of a makeshift long since recommended 326 00:32:08.100 --> 00:32:11.240 by inflationist doctrinaires. 327 00:32:11.240 --> 00:32:16.640 As unions objected to an adjustment of wages to the state of the money relation and commodity 328 00:32:16.640 --> 00:32:23.440 prices, they chose to adjust the money relation and commodity prices to the height of wage 329 00:32:23.440 --> 00:32:24.920 rates. 330 00:32:24.920 --> 00:32:29.160 As they saw it, it was not wage rates that were too high. 331 00:32:29.160 --> 00:32:35.560 Their own nation's monetary unit was overvalued in terms of gold and foreign exchange and 332 00:32:35.560 --> 00:32:37.880 had to be readjusted. 333 00:32:37.880 --> 00:32:41.760 devaluation was the panacea. 334 00:32:41.760 --> 00:32:48.320 The objectives of devaluation were, one, to preserve the height of nominal wage rates 335 00:32:48.320 --> 00:32:54.060 or even to create the conditions required for their further increase, while real wage 336 00:32:54.060 --> 00:32:56.680 rates should rather sink. 337 00:32:56.680 --> 00:33:03.760 Two, to make commodity prices, especially the prices of farm products, rise in terms 338 00:33:03.760 --> 00:33:12.160 of Domestic Money, or at least to check their further drop, to favor the debtors at the 339 00:33:12.160 --> 00:33:22.960 expense of the creditors, to encourage exports and to reduce imports, to attract more foreign 340 00:33:22.960 --> 00:33:28.560 tourists and to make it more expensive in terms of domestic money for the country's 341 00:33:58.560 --> 00:34:22.560 They spoke of the necessity of lowering domestic costs of production, but they were anxious not to mention that one of the two cost items they expected to lower by devaluation was real wage rates, the other being interest stipulated on long-term business debts and the principle of such debts. 342 00:34:22.560 --> 00:34:29.160 It is impossible to take seriously the arguments advanced in favor of devaluation. 343 00:34:29.160 --> 00:34:32.680 They were utterly confused and contradictory. 344 00:34:32.680 --> 00:34:39.720 For devaluation was not a policy that originated from a cool weighing of the pros and cons. 345 00:34:39.720 --> 00:34:46.160 It was a capitulation of governments to union leaders who did not want to lose face by admitting 346 00:34:46.160 --> 00:34:51.720 In justifying that their wage policy had failed and had produced institutional unemployment 347 00:34:51.720 --> 00:34:58.720 on an unprecedented scale, it was a desperate makeshift of weak and inept statesmen who 348 00:34:58.720 --> 00:35:03.720 were motivated by their wish to prolong their tenure of office. 349 00:35:03.720 --> 00:35:09.520 In justifying their policy, these demagogues did not bother about contradictions. 350 00:35:09.520 --> 00:35:14.880 They promised the processing industries and the farmers that devaluation would make prices 351 00:35:14.880 --> 00:35:21.700 rise, but at the same time they promised the consumers that rigid price control would prevent 352 00:35:21.700 --> 00:35:25.240 any increase in the cost of living. 353 00:35:25.240 --> 00:35:30.720 After all, the governments could still excuse their conduct by referring to the fact that 354 00:35:30.720 --> 00:35:36.920 under the given state of public opinion, entirely under the sway of the doctrinal fallacies 355 00:35:36.920 --> 00:35:42.620 of labor unionism, no other policy could be resorted to. 356 00:35:42.620 --> 00:35:48.740 No such excuse can be advanced for those authors who hailed the flexibility of foreign exchange 357 00:35:48.740 --> 00:35:53.900 rates as the perfect and most desirable monetary system. 358 00:35:53.900 --> 00:35:59.940 While governments were still anxious to emphasize that devaluation was an emergency measure 359 00:35:59.940 --> 00:36:06.620 not to be repeated again, these authors proclaimed the flexible standard as the most appropriate 360 00:36:06.620 --> 00:36:12.840 Monetary System, and were eager to demonstrate the alleged evils inherent in stability of 361 00:36:12.840 --> 00:36:15.500 foreign exchange rates. 362 00:36:15.500 --> 00:36:21.140 In their blind zeal to please the governments and the powerful pressure groups of unionized 363 00:36:21.140 --> 00:36:27.960 labor and farming, they overstated tremendously the case of flexible parities. 364 00:36:27.960 --> 00:36:33.420 But the drawbacks of standard flexibility became manifest very soon. 365 00:36:33.420 --> 00:36:37.880 The enthusiasm for devaluation vanished quickly. 366 00:36:37.880 --> 00:36:43.180 In the years of the Second World War, hardly more than a decade after the day when Great 367 00:36:43.180 --> 00:36:49.320 Britain had set the pattern for the flexible standard, even Lord Keynes and his adepts 368 00:36:49.320 --> 00:36:54.880 discovered that stability of foreign exchange rates has its merits. 369 00:36:54.880 --> 00:37:00.940 One of the avowed objectives of the International Monetary Fund is to stabilize foreign exchange 370 00:37:00.940 --> 00:37:02.860 rates. 371 00:37:02.860 --> 00:37:09.620 If one looks at devaluation not with the eyes of an apologist of government and union policies, 372 00:37:09.620 --> 00:37:15.100 but with the eyes of an economist, one must first of all stress the point that all its 373 00:37:15.100 --> 00:37:18.500 alleged blessings are temporary only. 374 00:37:18.500 --> 00:37:24.860 Moreover, they depend on the condition that only one country devalues, while the other 375 00:37:24.860 --> 00:37:29.660 countries abstain from devaluing their own currencies. 376 00:37:29.660 --> 00:37:36.060 If the other countries devalue in the same proportion, no changes in foreign trade appear. 377 00:37:36.060 --> 00:37:42.620 If they devalue to a greater extent, all these transitory blessings, whatever they may be, 378 00:37:42.620 --> 00:37:45.340 favor them exclusively. 379 00:37:45.340 --> 00:37:50.980 A general acceptance of the principles of the flexible standard must therefore result 380 00:37:50.980 --> 00:37:54.820 in a mutual overbidding between the nations. 381 00:37:54.820 --> 00:38:01.820 At the end of this race is the complete destruction of all nations monetary systems. 382 00:38:01.820 --> 00:38:09.180 The much talked about advantages which devaluation secures in foreign trade and tourism are entirely 383 00:38:09.180 --> 00:38:15.340 due to the fact that the adjustment of domestic prices and wage rates to the state of affairs 384 00:38:15.340 --> 00:38:20.340 created by devaluation requires some time. 385 00:38:20.340 --> 00:38:26.540 As long as this adjustment process is not yet completed, exporting is encouraged and 386 00:38:26.540 --> 00:38:28.780 importing is discouraged. 387 00:38:28.780 --> 00:38:35.140 However, this merely means that in this interval the citizens of the devaluing country are 388 00:38:35.140 --> 00:38:42.380 getting less for what they are selling abroad and paying more for what they are buying abroad. 389 00:38:42.380 --> 00:38:47.020 Concomitantly they must restrict their consumption. 390 00:38:47.020 --> 00:38:52.700 This effect may appear as a boon in the opinion of those for whom the balance of trade is 391 00:38:52.700 --> 00:38:55.800 the yardstick of a nation's welfare. 392 00:38:55.800 --> 00:38:59.680 In plain language, it is to be described in this way. 393 00:38:59.680 --> 00:39:05.980 The British citizen must export more British goods in order to buy that quantity of tea 394 00:39:05.980 --> 00:39:13.880 which he received before the devaluation for a smaller quantity of exported British goods. 395 00:39:13.880 --> 00:39:19.040 The devaluation, say its champions, reduces the burden of debts. 396 00:39:19.040 --> 00:39:20.860 This is certainly true. 397 00:39:20.860 --> 00:39:24.660 It favors debtors at the expense of creditors. 398 00:39:24.660 --> 00:39:30.120 In the eyes of those who still have not learned that under modern conditions the creditors 399 00:39:30.120 --> 00:39:37.720 must not be identified with the rich, nor the debtors with the poor, this is beneficial. 400 00:39:37.720 --> 00:39:43.980 The actual effect is that the indebted owners of real estate and farmland and the shareholders 401 00:39:43.980 --> 00:39:50.160 of indebted corporations are helped to the disadvantage of the enormous majority whose 402 00:39:50.160 --> 00:39:58.080 savings are invested in bonds, debentures, saving bank deposits and insurance policies. 403 00:39:58.080 --> 00:40:01.580 There are also foreign loans to be considered. 404 00:40:01.580 --> 00:40:07.280 When Great Britain, the United States, France, Switzerland and some other European creditor 405 00:40:07.280 --> 00:40:14.120 Under countries devalued their currencies, they made a gift to their foreign debtors. 406 00:40:14.120 --> 00:40:19.400 One of the main arguments advanced in favor of the flexible standard is that it lowers 407 00:40:19.400 --> 00:40:23.480 the rate of interest on the domestic money market. 408 00:40:23.480 --> 00:40:28.640 Under the classical gold standard and the rigid gold exchange standard, it is said, 409 00:40:28.640 --> 00:40:34.120 a country must adjust the domestic rate of interest to conditions on the international 410 00:40:34.120 --> 00:40:35.980 money market. 411 00:40:35.980 --> 00:40:41.340 Under the flexible standard, it is free to follow in the determination of interest rates, 412 00:40:41.340 --> 00:40:48.180 a policy exclusively guided by considerations of its own domestic welfare. 413 00:40:48.180 --> 00:40:53.940 The argument is obviously untenable with regard to those countries in which the total amount 414 00:40:53.940 --> 00:41:01.740 of debts to foreign countries exceeds the total amount of loans granted to foreign countries. 415 00:41:01.740 --> 00:41:07.060 In the course of the 19th century, some of these debtor nations adopted a sound money 416 00:41:07.060 --> 00:41:08.340 policy. 417 00:41:08.340 --> 00:41:15.020 Their firms and citizens could contract foreign debts in terms of their national currency. 418 00:41:15.020 --> 00:41:21.580 This opportunity disappeared altogether with the change in these countries' monetary policies. 419 00:41:21.580 --> 00:41:28.060 No American banker would contract a loan in Italian lira or try to float an issue of lira 420 00:41:28.060 --> 00:41:29.780 bonds. 421 00:41:29.780 --> 00:41:35.580 As far as foreign credits are concerned, no change in a debtor country's domestic currency 422 00:41:35.580 --> 00:41:39.060 conditions can be of any avail. 423 00:41:39.060 --> 00:41:45.700 As far as domestic credits are concerned, devaluation abates only the already previously 424 00:41:45.700 --> 00:41:47.960 contracted debts. 425 00:41:47.960 --> 00:41:53.740 It enhances the gross market rate of interest of new debts as it makes a positive price 426 00:41:53.740 --> 00:41:56.300 premium appear. 427 00:41:56.300 --> 00:42:01.900 This is valid also with regard to interest rate conditions in the creditor nations. 428 00:42:01.900 --> 00:42:08.620 There is no need to add anything to the demonstration that interest is not a monetary phenomenon 429 00:42:08.620 --> 00:42:14.180 and cannot in the long run be affected by monetary measures. 430 00:42:14.180 --> 00:42:19.900 It is true that the devaluations which were resorted to by various governments between 431 00:42:19.900 --> 00:42:28.420 1931 and 1938 made real wage rates drop in some countries and thus reduced the amount 432 00:42:28.420 --> 00:42:31.400 of institutional unemployment. 433 00:42:31.400 --> 00:42:37.740 The historian in dealing with these devaluations may therefore say that they were a success 434 00:42:37.740 --> 00:42:44.220 as they prevented a revolutionary upheaval of the daily increasing masses of unemployed 435 00:42:44.220 --> 00:42:51.300 and as, under the prevailing ideological conditions, no other means could be resorted to in this 436 00:42:51.300 --> 00:42:53.700 critical situation. 437 00:42:53.700 --> 00:43:00.660 But the historian will no less have to add that the remedy did not affect the root causes 438 00:43:00.660 --> 00:43:06.940 of institutional unemployment, the faulty tenets of labor unionism. 439 00:43:06.940 --> 00:43:13.180 Devaluation was a cunning device to elude the sway of the union doctrine. 440 00:43:13.180 --> 00:43:18.340 worked because it did not impair the prestige of unionism. 441 00:43:18.340 --> 00:43:24.660 But precisely because it left the popularity of unionism untouched, it could work only 442 00:43:24.660 --> 00:43:27.240 for a short time. 443 00:43:27.240 --> 00:43:33.100 Union leaders learned to distinguish between nominal wage rates and real wage rates. 444 00:43:33.100 --> 00:43:38.220 Today, their policy aims at raising real wage rates. 445 00:43:38.220 --> 00:43:43.900 They can no longer be cheated by a drop in the monetary unit's purchasing power. 446 00:43:43.900 --> 00:43:51.900 Devaluation has worn out its usefulness as a device for reducing institutional unemployment. 447 00:43:51.900 --> 00:43:57.600 Cognizance of these facts provides a key for a correct appraisal of the role which Lord 448 00:43:57.600 --> 00:44:03.740 Keynes' doctrines played in the years between the First and Second World Wars. 449 00:44:03.740 --> 00:44:09.780 Mises did not add any new idea to the body of inflationist fallacies, a thousand times 450 00:44:09.780 --> 00:44:12.460 refuted by economists. 451 00:44:12.460 --> 00:44:18.260 His teachings were even more contradictory and inconsistent than those of his predecessors, 452 00:44:18.260 --> 00:44:23.300 who like Silvio Gassel, were dismissed as monetary cranks. 453 00:44:23.300 --> 00:44:29.500 He merely knew how to cloak the plea for inflation and credit expansion in the sophisticated 454 00:44:29.500 --> 00:44:33.120 terminology of mathematical economics. 455 00:44:33.120 --> 00:44:38.680 The interventionist writers were at a loss to advance plausible arguments in favor of 456 00:44:38.680 --> 00:44:41.280 the policy of reckless spending. 457 00:44:41.280 --> 00:44:47.240 They simply could not find a case against the economic theorem concerning institutional 458 00:44:47.240 --> 00:44:49.040 unemployment. 459 00:44:49.040 --> 00:44:54.400 In this juncture, they greeted the Keynesian Revolution with the verses of Wordsworth. 460 00:44:54.400 --> 00:45:01.360 Bliss was it in that dawn to be alive, but to be young was very heaven. 461 00:45:01.360 --> 00:45:04.960 It was, however, a short run heaven only. 462 00:45:04.960 --> 00:45:11.020 We may admit that for the British and American governments in the 30s, no way was left other 463 00:45:11.020 --> 00:45:17.840 than that of currency devaluation, inflation and credit expansion, unbalanced budgets and 464 00:45:17.840 --> 00:45:20.380 deficit spending. 465 00:45:20.380 --> 00:45:24.740 Governments cannot free themselves from the pressure of public opinion. 466 00:45:24.740 --> 00:45:32.240 They cannot rebel against the preponderance of generally accepted ideologies, however fallacious. 467 00:45:32.240 --> 00:45:38.580 But this does not excuse the officeholders who could resign rather than carry out policies 468 00:45:38.580 --> 00:45:41.460 disastrous for the country. 469 00:45:41.460 --> 00:45:47.900 Still less does it excuse authors who tried to provide a would-be scientific justification 470 00:45:47.900 --> 00:45:53.180 for the crudest of all popular fallacies, namely inflationism.