WEBVTT

NOTE Bad News for Our Money

1
00:00:00.000 --> 00:00:22.640
I'd like to welcome you, Thorsten Palait, to our Humble Studio. And it's a pleasure

2
00:00:22.640 --> 00:00:26.680
to have you here from Frankfurt, right? Thank you very much, Mr. Tucker. That's right. I

3
00:00:26.680 --> 00:00:33.280
Come from Frankfurt, it's a great opportunity to be here and enjoy myself greatly.

4
00:00:33.280 --> 00:00:39.080
I should clarify, you're here at the Austrian Scholars Conference, so you get to be around all your friends, your fans, your colleagues.

5
00:00:39.080 --> 00:00:45.480
Yeah, it's good to come together with like-minded people, you know, once in a while to exchange ideas and having a good time.

6
00:00:45.480 --> 00:00:48.880
I think the Mises Institute is doing a fantastic job.

7
00:00:48.880 --> 00:00:53.880
You know, I really enjoy being here and I think it's very much shared by others.

8
00:00:53.880 --> 00:00:57.320
So in Frankfurt, you're not surrounded by colleagues?

9
00:00:57.320 --> 00:01:01.360
Well, I think this is a completely different platform over here.

10
00:01:01.360 --> 00:01:07.840
I mean, this is the epicenter of Austrian economics, people coming from all over the world.

11
00:01:07.840 --> 00:01:08.840
Yeah.

12
00:01:08.840 --> 00:01:11.160
And so it makes it really special to be here.

13
00:01:11.160 --> 00:01:17.800
In Frankfurt, libertarian-minded economists are pretty rare.

14
00:01:17.800 --> 00:01:23.840
So there's still a lot of things to do to win people over.

15
00:01:23.840 --> 00:01:30.040
Now, you both teach at the university, but also work in private consulting as a bank,

16
00:01:30.040 --> 00:01:31.040
as I recall.

17
00:01:31.040 --> 00:01:32.040
That's right.

18
00:01:32.040 --> 00:01:33.040
Yeah.

19
00:01:33.040 --> 00:01:36.360
I work as a bank economist, you know, doing…

20
00:01:36.360 --> 00:01:37.840
Fractional reserve bank, no doubt.

21
00:01:37.840 --> 00:01:38.840
Absolutely.

22
00:01:38.840 --> 00:01:43.520
You see, the problem with the monetary system you're referring to is that it's not only

23
00:01:43.520 --> 00:01:48.960
with banks, it's all over the place because even the vendor next door is dealing with

24
00:01:48.960 --> 00:01:56.320
with fiat money and exchanging goods and services against this paper currency and so the problem

25
00:01:56.320 --> 00:02:01.640
that comes with fiat money is not only with banks or bankers and indeed I try as best

26
00:02:01.640 --> 00:02:09.060
as I can, you know, looking at data, trying to make sense of what's unfolding and coming

27
00:02:09.060 --> 00:02:16.520
forward with hopefully good advice for institutional investors like pension funds, insurance companies,

28
00:02:16.520 --> 00:02:17.520
etc.

29
00:02:17.520 --> 00:02:21.680
Your articles on Mises or do have this nice combination, and this is why I'm always drawn

30
00:02:21.680 --> 00:02:22.680
to them.

31
00:02:22.680 --> 00:02:27.840
I mean, you're a star in any case, but I like the way you integrate high theory, you know,

32
00:02:27.840 --> 00:02:31.520
drawn from all times with current events.

33
00:02:31.520 --> 00:02:35.520
And it's a nice integration, it's seamless really in the way you write and in your work.

34
00:02:35.520 --> 00:02:38.520
Oh, that's very generous.

35
00:02:38.520 --> 00:02:45.480
I think indeed it's a good way of basically conveying the message of the Austrian School

36
00:02:45.480 --> 00:02:51.800
of Economics. If you can tie it in in day-to-day events, if you can make sense out of what's

37
00:02:51.800 --> 00:02:57.880
happening in globalized financial markets, and putting in a chart can be quite helpful

38
00:02:57.880 --> 00:03:03.560
for getting across the message. And you do more than just put in a few charts. I mean,

39
00:03:03.560 --> 00:03:06.840
you're really analyzing very closely what's happening. You follow markets very carefully.

40
00:03:06.840 --> 00:03:11.640
In fact, you arrived here yesterday with a bit of news, actually, and you announced this

41
00:03:11.640 --> 00:03:17.320
This is a bit of news to me. I knew it, but I didn't. What was that again? It was something

42
00:03:17.320 --> 00:03:20.280
about a bond fund failing or something?

43
00:03:20.280 --> 00:03:29.400
Oh, yeah. There was a news saying that one of the largest American bond portfolio managers

44
00:03:29.400 --> 00:03:31.360
would no longer buy U.S. Treasuries.

45
00:03:31.360 --> 00:03:35.260
Yeah, that's right. There was a business page there. I don't even need to read the business

46
00:03:35.260 --> 00:03:38.720
page. I should just get you on Skype and you can tell me.

47
00:03:38.720 --> 00:03:47.880
But later I learned that that was made public, but they have already started dumping treasury

48
00:03:47.880 --> 00:03:51.640
bonds since February, I learned.

49
00:03:51.640 --> 00:03:59.360
But I think it's important to analyze and follow what's really unfolding in the financial

50
00:03:59.360 --> 00:04:06.760
sector, in the real economy these days, because it helps to put to work the splendid ideas

51
00:04:06.760 --> 00:04:08.360
of the Austrian School of Economics.

52
00:04:08.360 --> 00:04:15.640
Well, so you see people leaving the dollar, leaving the U.S. government debt, but where

53
00:04:15.640 --> 00:04:16.640
to go?

54
00:04:16.640 --> 00:04:17.640
I mean, what's left?

55
00:04:17.640 --> 00:04:20.920
I mean, you've got the, you know, as well as anybody about the problems in Europe.

56
00:04:20.920 --> 00:04:25.040
Well, I would say at the moment, we haven't reached a situation where people are really

57
00:04:25.040 --> 00:04:32.440
fleeing out of fiat currencies, be that the dollar, be that the euro or Japanese yen.

58
00:04:32.440 --> 00:04:40.120
But what can be observed is that there are growing signs of people becoming increasingly

59
00:04:40.120 --> 00:04:45.360
concerned about the value of their lifetime savings, of their currencies.

60
00:04:45.360 --> 00:04:54.760
And so, from my point of view, it's really what Hayek and Ludwig von Mises told us about

61
00:04:54.760 --> 00:05:02.240
the fiat currency system, namely that it is not a sustainable economic monetary order,

62
00:05:02.240 --> 00:05:07.840
so to speak, and I think we are at an early stage where the first signs of its...

63
00:05:07.840 --> 00:05:13.480
Well, fiat currencies as we know them have only existed since about 1973, so it's fairly...

64
00:05:13.480 --> 00:05:20.360
Yeah, fairly new, and it's really a great experiment for many mainstream economists,

65
00:05:20.360 --> 00:05:27.520
like Milton Friedman, you know, told us that this is an unheard of monetary experiment,

66
00:05:27.520 --> 00:05:41.520
as he put it. And the Austrians, of course, have a much stronger message to say about fiat currency, namely that it is really an unsustainable monetary arrangement.

67
00:05:41.520 --> 00:05:43.520
How closely do you follow Fed policy?

68
00:05:43.520 --> 00:05:53.520
Very closely. I mean, central bank policies, of course, the Fed is the most important central bank on the world.

69
00:05:53.520 --> 00:05:54.520
World.

70
00:05:54.520 --> 00:05:59.280
And central banks still have a great impact on the price action in the financial markets,

71
00:05:59.280 --> 00:06:06.520
be that in the money market, be that at the long term, at the long end of the yield curve,

72
00:06:06.520 --> 00:06:11.460
their actions affect stock pricing and derivative pricing.

73
00:06:11.460 --> 00:06:14.680
So I try to follow very closely what they do.

74
00:06:14.680 --> 00:06:19.680
What is your sense of, I think Bernanke recently announced that he was going to keep rates

75
00:06:19.680 --> 00:06:28.960
at practically zero because he fears that raising rates would somehow harm the supposed

76
00:06:28.960 --> 00:06:29.960
recovery.

77
00:06:29.960 --> 00:06:31.560
So what's your analysis of that?

78
00:06:31.560 --> 00:06:39.640
Well, I think it's first of all based on a kind of Keynesian thinking where the interest

79
00:06:39.640 --> 00:06:45.780
rate is basically a policy instrument variable which has to be lower to the lowest level

80
00:06:45.780 --> 00:06:52.460
possible in order to stimulate consumption and investment.

81
00:06:52.460 --> 00:06:58.380
And I would say in this context, his assessment is basically shared by most central bankers

82
00:06:58.380 --> 00:06:59.860
around the world.

83
00:06:59.860 --> 00:07:04.920
Of course, from the viewpoint of the Austrian School of Economics, you would clearly see

84
00:07:04.920 --> 00:07:12.980
that this is really the wrong policy because it's a policy against the corrective forces

85
00:07:12.980 --> 00:07:14.780
of the free market.

86
00:07:14.780 --> 00:07:22.020
The economy cannot really get rid of all the malinvestment under a policy which keeps the

87
00:07:22.020 --> 00:07:26.020
interest rates at artificially lowered interest levels.

88
00:07:26.020 --> 00:07:33.140
Artificially, but I mean, is it your sense that if central bankers suddenly began to

89
00:07:33.140 --> 00:07:37.380
treat interest, the interest rate, as just a pure free market price, that we would see

90
00:07:37.380 --> 00:07:42.220
rates skyrocket, or does more have to be done?

91
00:07:42.220 --> 00:07:45.940
For example, the moral hazard built into the system lowers rates lower than they would

92
00:07:45.940 --> 00:07:47.940
otherwise be, right?

93
00:07:47.940 --> 00:07:53.260
In a fiat money system where money is produced through bank circulation credit, as Mises

94
00:07:53.260 --> 00:08:01.380
put it, the market interest rate is necessarily below the level that would prevail under a

95
00:08:01.380 --> 00:08:03.500
commodity money system.

96
00:08:03.500 --> 00:08:11.260
So, by definition, our system suffers from a distorted interest rate level and that causes

97
00:08:41.260 --> 00:08:53.180
And yet, low rates have punished savers.

98
00:08:53.180 --> 00:08:54.180
Absolutely.

99
00:08:54.180 --> 00:08:55.180
Absolutely.

100
00:08:55.180 --> 00:08:58.060
I mean, you're absolutely right.

101
00:08:58.060 --> 00:09:02.620
The interest rate is a free market phenomenon, theoretically speaking.

102
00:09:02.620 --> 00:09:08.520
It's expressive of societal time preference.

103
00:09:08.520 --> 00:09:15.980
It's actually a guide which tells us how to save and how to consume out of current income

104
00:09:15.980 --> 00:09:23.280
in order to accumulate capital, in order to improve the future consumption possibilities.

105
00:09:23.280 --> 00:09:32.040
We have a monetary system which basically distorts this important guide stick, you know?

106
00:09:32.040 --> 00:09:38.000
That causes all these boom and bust cycles, the malinvestment.

107
00:09:38.000 --> 00:09:46.000
I think, yeah, the economist Eugen von Boehm-Bawerk, you know, he, back at the early 20th century,

108
00:09:46.000 --> 00:09:52.480
basically, he expressed concern that the interest rate wouldn't get rid of its, as they call

109
00:09:52.480 --> 00:09:55.040
it, moral shade, you know.

110
00:09:55.040 --> 00:09:59.760
People would prefer a low interest rate over a higher interest rate.

111
00:09:59.760 --> 00:10:06.520
And that is, of course, conducive for policymakers implementing policies for pushing down the

112
00:10:06.520 --> 00:10:07.520
and the interest rate.

113
00:10:07.520 --> 00:10:11.120
But it's a problem for investors, isn't it?

114
00:10:11.120 --> 00:10:18.400
I mean, risk-averse investors, once were able to know exactly what to do with their money.

115
00:10:18.400 --> 00:10:21.640
You deposit it and let it earn a nice rate of return now.

116
00:10:21.640 --> 00:10:22.640
Yeah.

117
00:10:22.640 --> 00:10:23.640
What do you do?

118
00:10:23.640 --> 00:10:27.320
Is it a problem for you as an advisor to money funds?

119
00:10:27.320 --> 00:10:30.480
What do you do with your money under these policies?

120
00:10:30.480 --> 00:10:37.880
On the one hand, of course, low interest rates artificially harm savers.

121
00:10:37.880 --> 00:10:42.800
And I may add, we have reached a situation where short-term interest rates are not only

122
00:10:42.800 --> 00:10:47.360
low, but they have become negative in real terms.

123
00:10:47.360 --> 00:10:50.840
People lose money by holding time and saving deposits.

124
00:10:50.840 --> 00:10:53.880
They're getting punished for saving.

125
00:10:53.880 --> 00:11:01.400
And of course, that is benefiting borrowers, you know, because that real debt burden is

126
00:11:01.400 --> 00:11:06.240
getting diminished by this low interest rate effect.

127
00:11:06.240 --> 00:11:10.160
But borrowers benefit from low interest rates, but lenders don't.

128
00:11:10.160 --> 00:11:11.160
Right?

129
00:11:11.160 --> 00:11:17.040
I mean, it's a problem because the low rates have discouraged lending, so you've got a

130
00:11:17.040 --> 00:11:18.360
kind of a stalemate.

131
00:11:18.360 --> 00:11:26.000
I mean, monetary policy, as it is structured today with the government-sponsored central

132
00:11:26.000 --> 00:11:35.740
bank, leads, of course, to a situation in which some benefit and some have to basically

133
00:11:35.740 --> 00:11:40.520
shoulder the cost burden.

134
00:11:40.520 --> 00:11:48.160
We are indeed in a situation at the moment where funding costs are getting lowered through

135
00:11:48.160 --> 00:11:53.800
through central bank policies but to a very low level and that makes, of course, it more

136
00:11:53.800 --> 00:12:01.200
difficult for, let's say, lenders, you know, to provide adequate credit to many businesses.

137
00:12:01.200 --> 00:12:07.760
So you have basically created two problems, on one hand for savers and on the other hand

138
00:12:07.760 --> 00:12:08.760
for the lending industry.

139
00:12:08.760 --> 00:12:09.760
Yeah.

140
00:12:09.760 --> 00:12:10.760
They can't make any money at this racket.

141
00:12:10.760 --> 00:12:13.640
I mean, it's crazy.

142
00:12:13.640 --> 00:12:19.240
That is, now you've explained in many of your articles that we have a kind of that fiat

143
00:12:19.240 --> 00:12:26.580
money inflation and credit addiction. It's like a global disease, right? Do you expect

144
00:12:26.580 --> 00:12:32.680
a conventional response to QE1 and QE2 and all the efforts of quantitative easing? Do

145
00:12:32.680 --> 00:12:39.080
you expect inflation pressures to continue to rise over the next few years or what do

146
00:12:39.080 --> 00:12:45.880
What do you think about it? Apparently, the central banks only have so much power to unleash

147
00:12:45.880 --> 00:12:50.600
a torrent of paper, right? That requires the cooperation of the banking industry. The banking

148
00:12:50.600 --> 00:12:53.720
industry isn't cooperating entirely.

149
00:12:53.720 --> 00:13:01.320
You know, I come from a country where we learned our lesson very well in terms of increasing

150
00:13:01.320 --> 00:13:07.560
the paper money supply. As you know, in the 1920s, 1923, the Reichsmark was destroyed

151
00:13:07.560 --> 00:13:14.200
through hyperinflation, and maybe that is because Germans are still traumatized by inflation

152
00:13:14.200 --> 00:13:15.200
and hyperinflation.

153
00:13:15.200 --> 00:13:19.380
Whereas the Americans, I think, got traumatized by the Great Depression, you know, you guys

154
00:13:19.380 --> 00:13:20.380
are afraid of deflation.

155
00:13:20.380 --> 00:13:23.780
And that's a good way to look at it, yeah.

156
00:13:23.780 --> 00:13:29.740
But having said that, our monetary system is such that the central bank can increase

157
00:13:29.740 --> 00:13:34.880
the money supply at any point in time in any quantity desired.

158
00:13:34.880 --> 00:13:40.760
You wouldn't need the cooperation of the commercial banking industry for doing that.

159
00:13:40.760 --> 00:13:46.080
And what I'm trying to say is, if there's a political willingness to increase the money

160
00:13:46.080 --> 00:13:51.440
supply and increase inflation, you get more money and more inflation.

161
00:13:51.440 --> 00:13:58.340
A central bank can, for instance, start buying bonds against issuing new money.

162
00:13:58.340 --> 00:14:04.840
It can buy bonds from banks, from insurance companies, or even from private individuals.

163
00:14:04.840 --> 00:14:09.440
They could even buy other assets against issuing new money.

164
00:14:09.440 --> 00:14:15.880
So the system is really one in which the money supply can be increased and inflation can

165
00:14:15.880 --> 00:14:20.500
be orchestrated if there's a political willingness to do it.

166
00:14:20.500 --> 00:14:25.720
And also, I mean, that I think is the greatest danger if there is false economic theory which

167
00:14:25.720 --> 00:14:32.200
promises that increasing the money supply is going to improve jobs and output, the risk

168
00:14:32.200 --> 00:14:37.360
is clearly greatly increased that policy makers would reduce to such a policy.

169
00:14:37.360 --> 00:14:43.160
Bernanke thinks that he can just turn it off if it gets to be a problem.

170
00:14:43.160 --> 00:14:48.200
I mean, technically speaking, of course, the central bank has a monopoly in this fiat money

171
00:14:48.200 --> 00:14:52.160
regime to increase the money supply, to determine the money supply.

172
00:14:52.160 --> 00:14:57.600
And of course, they could drain in any kind of money issued.

173
00:14:57.600 --> 00:15:06.120
But of course, as you know, once the money has been expanded, has been provided to the

174
00:15:06.120 --> 00:15:12.320
economy, it will hurt people once it is redeemed.

175
00:15:12.320 --> 00:15:18.200
And for political reasons, and when you look at monetary history, it becomes obvious that

176
00:15:18.200 --> 00:15:23.640
mostly once the money supply has been increased, it's never getting reduced.

177
00:15:23.640 --> 00:15:27.320
It's worked out through higher prices, so to speak.

178
00:15:27.320 --> 00:15:31.320
Right. I can't think of a single case where a central bank has ever deliberately deflated

179
00:15:31.320 --> 00:15:32.320
maybe in...

180
00:15:32.320 --> 00:15:38.520
No. Certainly not because they were created for increases in money supply.

181
00:15:38.520 --> 00:15:42.920
You studied Weimar and the hyperinflation at length, right? In fact, you have some family

182
00:15:42.920 --> 00:15:50.600
stories about this. So you have a family memory even. Wasn't it rather sudden? I mean, there

183
00:15:50.600 --> 00:15:54.960
wasn't a whole lot of warning going into that hyperinflation, was there?

184
00:15:54.960 --> 00:16:01.600
Well, I think, you know, that was the period of great revolution, you know, after the end

185
00:16:01.600 --> 00:16:09.760
of World War I. Basically, America brought democracy to continental Europe, the monarchy,

186
00:16:09.760 --> 00:16:10.760
you know.

187
00:16:10.760 --> 00:16:11.760
I expect a thank you.

188
00:16:11.760 --> 00:16:18.520
Well, let's leave it open at this juncture.

189
00:16:18.520 --> 00:16:27.480
So, there were many problems with the larger consequences of the war period and Germany

190
00:16:27.480 --> 00:16:37.880
had to pay reparations through the Allied, made Germany to hand over industries and gold

191
00:16:37.880 --> 00:16:41.040
and other stuff.

192
00:16:41.040 --> 00:16:52.040
In late 1922, early 1923, there was the occupation of the Ruhrgebiet, the industrial area of

193
00:16:52.040 --> 00:16:55.240
Germany through French and Belgian troops.

194
00:16:55.240 --> 00:17:00.840
And the former chancellor, the German Chancellor Wilhelm Kuno, calls for passive resistance.

195
00:17:00.840 --> 00:17:06.600
He basically called upon all civil servants and industrial workers to go home to prevent

196
00:17:06.600 --> 00:17:13.920
the Belgian and French troops to obtain any any goods and you know any any real

197
00:17:13.920 --> 00:17:20.420
stuff and he promised to pay the wages with newly created money and there the

198
00:17:20.420 --> 00:17:25.920
problem started people people I mean it was politically orchestrated inflationary

199
00:17:25.920 --> 00:17:30.120
process which then got out of hand because prices started rising and so

200
00:17:30.120 --> 00:17:33.680
people were talking economists were talking there were too few money around

201
00:17:33.680 --> 00:17:38.680
This is the shortage of money. It's very strange, isn't it?

202
00:17:38.680 --> 00:17:45.680
These days, I think they call it Hafenstein momentum, because Rudolf Hafenstein, that was the Reichsmark president,

203
00:17:45.680 --> 00:17:53.680
and it led to this catastrophic collapse and complete destruction of the Reichsmark.

204
00:17:53.680 --> 00:17:57.680
What percent inflation? Do we have figures on this?

205
00:17:57.680 --> 00:18:07.640
It's astronomical. I mean, it became scrap money. And I think Mises was really referring

206
00:18:07.640 --> 00:18:14.480
to this episode when he wrote about the cracker boom. Because at the end of that period, as

207
00:18:14.480 --> 00:18:20.080
from late summer 1923 until November, things span out of control.

208
00:18:20.080 --> 00:18:25.400
Right. And that's precisely the point, that it's out of control, right? And so you can

209
00:18:25.400 --> 00:18:30.040
People can have every intention of trying to prevent such a calamity, but at some point

210
00:18:30.040 --> 00:18:32.960
inflation expectations kick in.

211
00:18:32.960 --> 00:18:33.960
Exactly.

212
00:18:33.960 --> 00:18:36.880
Then the money demand breaks down.

213
00:18:36.880 --> 00:18:43.920
People try to exchange their paper notes or their money against real assets, and that

214
00:18:43.920 --> 00:18:46.940
is what Mises called the crack-up boom.

215
00:18:46.940 --> 00:18:53.600
So it's a very interesting thing to read about because, wow, one can't entirely rule out

216
00:18:53.600 --> 00:18:55.760
such a future for the dollar?

217
00:18:55.760 --> 00:19:00.960
I mean, in a sense, the German hyperinflation was special.

218
00:19:00.960 --> 00:19:08.360
First of all, it led to a complete destruction of the Reichsmark.

219
00:19:08.360 --> 00:19:11.800
The money was really dead and had to be replaced by new currency.

220
00:19:11.800 --> 00:19:12.800
Right.

221
00:19:12.800 --> 00:19:17.720
Whereas when you look at, for instance, Latin America, they had hyperinflations in the early

222
00:19:17.720 --> 00:19:24.520
The currencies were greatly debased, but they were still used as money.

223
00:19:24.520 --> 00:19:26.920
So in a way, the German hyperinflation was special.

224
00:19:26.920 --> 00:19:31.960
It was a perfect destruction, basically, of the currency.

225
00:19:31.960 --> 00:19:32.960
Yeah.

226
00:19:32.960 --> 00:19:33.960
Yeah.

227
00:19:33.960 --> 00:19:40.680
You are a little bit unusual as a monetary thinker and economist in the sense that I

228
00:19:40.680 --> 00:19:45.000
get the sense that your true heart is with Mises' gold standard.

229
00:19:45.000 --> 00:20:03.720
Let me start by saying there are certain physical properties a medium has to fulfill, certain

230
00:20:03.720 --> 00:20:10.000
requirements have to be met by a certain medium for serving as money, and gold and silver and

231
00:20:10.000 --> 00:20:20.000
Obviously, they lend themselves very... It's homogenous, it's scarce, it can be minted,

232
00:20:20.000 --> 00:20:29.440
transported. Having said that, I think precious metals can do a great job as far as the money

233
00:20:29.440 --> 00:20:37.680
function is concerned. When it comes to the gold standard, personally, I would think privatization

234
00:20:37.680 --> 00:20:40.800
of Money Production would be the way forward.

235
00:20:40.800 --> 00:20:49.440
And I could imagine that this is something Mises, which is in the Misesian tradition.

236
00:20:49.440 --> 00:20:55.920
Going for a gold standard would actually imply that you impose a certain medium, namely gold,

237
00:20:55.920 --> 00:20:56.920
as money.

238
00:20:56.920 --> 00:21:00.840
Or just convert the currency and define it in some way.

239
00:21:00.840 --> 00:21:09.720
And but you wouldn't allow the free market forces to decide which kind of medium should

240
00:21:09.720 --> 00:21:13.520
serve them as money, should serve people as money.

241
00:21:13.520 --> 00:21:19.280
So I think the way forward would really be the privatization of money production and

242
00:21:19.280 --> 00:21:24.520
let the free market forces to decide which money they would like to use or which monies

243
00:21:24.520 --> 00:21:25.520
they would like to use.

244
00:21:25.520 --> 00:21:29.640
There's also the sheer implausibility of having enlightened rulers that would suddenly go,

245
00:21:29.640 --> 00:21:34.520
Oh, the problem is, we've got this paper money, we need to change the dollar to be in gold.

246
00:21:34.520 --> 00:21:35.880
I mean, that's not going to happen.

247
00:21:35.880 --> 00:21:44.480
I mean, the prominent role of the gold standard can maybe be explained by the fact that, at

248
00:21:44.480 --> 00:21:53.520
least until the early 1970s of the last century, the US dollar was still defined in gold and

249
00:21:53.520 --> 00:21:59.600
that was considered as a kind of natural monetary order and therefore many writers, including

250
00:21:59.600 --> 00:22:04.800
Ludwig von Mises and Murray Rothbard always kept referring to the gold standard.

251
00:22:04.800 --> 00:22:10.820
But I would say complete privatization of money production would do the trick.

252
00:22:10.820 --> 00:22:15.560
And I could imagine once there's this kind of freedom in the choice of currency, people

253
00:22:15.560 --> 00:22:22.680
would decide, well, let's go for gold or silver or copper, whatever, as the ultimate means

254
00:22:22.680 --> 00:22:23.680
of payment.

255
00:22:23.680 --> 00:22:27.840
And with digital communication and the globalization of commerce, it seems like it's a much easier

256
00:22:27.840 --> 00:22:28.840
undertaking.

257
00:22:28.840 --> 00:22:36.280
to have private currencies and it might have been even in the 19th century or 10 years ago, you know?

258
00:22:36.280 --> 00:22:44.120
Yeah, I mean, the technological progress really would argue in that direction.

259
00:22:44.120 --> 00:22:49.800
And you can see all over the world, I mean, the holdings of gold and silver are increasing, you know,

260
00:22:49.800 --> 00:22:55.400
be that in physical terms or be that through exchange traded funds or other investment vehicles.

261
00:22:55.400 --> 00:23:08.640
In the United States, the government is quite frequently clamping down on digital currencies,

262
00:23:08.640 --> 00:23:09.640
for example.

263
00:23:09.640 --> 00:23:14.080
A new business will start while we're holding your gold, and it starts to flourish, and

264
00:23:14.080 --> 00:23:17.880
as soon as it starts to flourish, the place gets raided by the Justice Department.

265
00:23:17.880 --> 00:23:22.120
I think that maybe there's a half a dozen cases of this just in the last few years.

266
00:23:22.120 --> 00:23:30.120
I mean, at the end of the day, governments want to have control of the money supply, you know,

267
00:23:30.120 --> 00:23:39.120
and it's not easy to basically forecast a situation in which you would have, on the one hand,

268
00:23:39.120 --> 00:23:48.120
a government-controlled fiat money competing against, let's say, free market chosen currencies.

269
00:23:48.120 --> 00:23:55.560
The government will always try to dominate in the field of money, as long as people

270
00:23:55.560 --> 00:24:01.000
ascribe to that kind of monetary order. Once people, and that is something which Mises always pointed

271
00:24:01.000 --> 00:24:08.040
out, at the end of the day it's all about public opinion. Once people want something different,

272
00:24:09.240 --> 00:24:15.800
that is basically the leverage for change. Yes. In fact, just last week I think we saw

273
00:24:15.800 --> 00:24:20.880
It's the news that a particular state, Utah, the United States, is legalizing the production

274
00:24:20.880 --> 00:24:23.240
of gold and silver as legal tender.

275
00:24:23.240 --> 00:24:28.120
I'm not sure what it all means, but it's very interesting.

276
00:24:28.120 --> 00:24:37.320
When you look at monetary history again, there were so many experiments with money, but let's

277
00:24:37.320 --> 00:24:44.120
I would say the underlying trend development was, or from my point of view is, that sooner

278
00:24:44.120 --> 00:24:50.320
or later people come back to the ultimate means of payment and that is called Ensilver.

279
00:24:50.320 --> 00:24:52.600
Now you have a book out in German, right?

280
00:24:52.600 --> 00:24:59.720
Yeah, it's called Geldreform, in English it would be kind of currency or monetary reform.

281
00:24:59.720 --> 00:25:04.320
Okay, well that's a very start of a good translation, we've got the title so far.

282
00:25:04.320 --> 00:25:11.520
Well, I must say, I set to work already, so let's see what comes out of it.

283
00:25:11.520 --> 00:25:13.280
Is it a big book?

284
00:25:13.280 --> 00:25:18.680
It's just 200 pages in German, and we try to keep it as short as possible because it

285
00:25:18.680 --> 00:25:24.720
should reach many people, also laymen and not only economists.

286
00:25:24.720 --> 00:25:30.440
Well, as you translate, remember to turn every one sentence into three.

287
00:25:30.440 --> 00:25:31.440
Just for Americans.

288
00:25:31.440 --> 00:25:32.440
Yeah.

289
00:25:32.440 --> 00:25:33.440
Okay.

290
00:25:33.440 --> 00:25:43.440
If it becomes a blockbuster, I'll certainly make use of your advice.

291
00:25:43.440 --> 00:25:49.440
Thorsten Pellay, thank you so much for visiting with me today and thank you for coming all the way to Auburn.

292
00:25:49.440 --> 00:25:52.440
Thank you very much, Mr. Tack, for the invitation. It was my pleasure.

293
00:26:03.440 --> 00:26:05.440
www.fieggen.org