WEBVTT

NOTE Inflation During the Civil War

1
00:00:00.000 --> 00:00:05.000
This book, which is out relatively recently, January of this year,

2
00:00:05.000 --> 00:00:10.000
Tariffs, Blockades and Inflation, the Economics of the Civil War,

3
00:00:10.000 --> 00:00:19.000
the general theme of the book, although it's not really broadcast hot and heavy throughout the book,

4
00:00:19.000 --> 00:00:33.000
But the underlying theme of the book is that economics ultimately determined both the cause of the war as well as its outcome.

5
00:00:33.000 --> 00:00:47.000
In contrast to historians of the Civil War who generally see the war as a matter of military strategy and the outcome of battles, the strategy of generals,

6
00:00:47.000 --> 00:01:10.000
We see it entirely different. We see a nation divided roughly equally and basically the same types of soldiers, the generals trained at the same West Point Academy, using essentially the same weapons, essentially having similar types of economies.

7
00:01:10.000 --> 00:01:23.000
And most of the battles, especially at the beginning of the war, were toss-ups, stalemates, one side wins one, the next side wins the other.

8
00:01:23.000 --> 00:01:38.000
We think the underlying outcome of the war was determined by economics, where the Confederacy generally pursued poor economic policies

9
00:01:38.000 --> 00:01:46.000
and the Union Government in the North pursued better economic policies and as a result was able to win.

10
00:01:46.000 --> 00:01:55.000
We place a lot of emphasis on blockades but you can't really do a study of the American Civil War

11
00:01:55.000 --> 00:02:02.000
which is really a defining moment in American history.

12
00:02:02.000 --> 00:02:17.000
The Civil War is still the war where the most Americans died and it's still really the only war where the destruction of the war was brought home here to the United States.

13
00:02:17.000 --> 00:02:22.000
So it's a very important issue. We think the historians have gotten it largely all wrong.

14
00:02:22.000 --> 00:02:30.000
They think the South didn't do enough, didn't have enough, the government didn't extract enough resources from the economy to fight the war

15
00:02:30.000 --> 00:02:50.880
This chapter three, Inflation North and South, continues that theme and basically the underlying

16
00:02:50.880 --> 00:02:56.480
theme of this chapter is inflation is bad, monetary inflation is bad, it's pretty much

17
00:02:56.480 --> 00:03:05.480
up front and sort of describes why inflation is bad in the beginning of the chapter.

18
00:03:05.480 --> 00:03:10.480
You know, it's not just rising prices. That's not a problem.

19
00:03:10.480 --> 00:03:17.480
And so the beginning of the chapter explains why inflation is bad, why it harms economic calculation,

20
00:03:17.480 --> 00:03:30.560
Calculation, why it causes income redistribution and economic chaos. Now both sides used monetary

21
00:03:30.560 --> 00:03:37.960
inflation to finance the war and to disguise the costs of the war. So that's going to be

22
00:03:37.960 --> 00:03:42.480
one general argument that we lay out. The second one is that the Confederate government

23
00:03:42.480 --> 00:03:50.680
used inflation to a greater degree than the Union government in the North. Third, the

24
00:03:50.680 --> 00:04:01.040
Southern economy was more adversely affected by this inflation. And fourth, and this is

25
00:04:01.040 --> 00:04:08.080
a very important point, the war had a revolutionary effect on money and banking in the United

26
00:04:08.080 --> 00:04:19.280
I'm going to start with a little description for you of what existed prior to the war in

27
00:04:19.280 --> 00:04:22.920
the United States as far as money and banking goes.

28
00:04:22.920 --> 00:04:29.200
Basically you had two streams of economic thought.

29
00:04:29.200 --> 00:04:37.200
One stream of economic thought is sometimes called southern political economy.

30
00:04:37.200 --> 00:04:46.080
It's associated with the democratic party of the 19th century with the ideas of politicians

31
00:04:46.080 --> 00:04:50.040
such as Thomas Jefferson and Andrew Jackson.

32
00:04:50.040 --> 00:04:57.080
The southern political economy, although there were southern and northern proponents of this,

33
00:04:57.080 --> 00:04:59.200
was the hard money faction.

34
00:04:59.200 --> 00:05:05.400
These are the people who said money should only and everywhere be silver coins and gold

35
00:05:05.400 --> 00:05:13.080
Gold Coins. This tradition was anti-banking. They did not like banking. They were very

36
00:05:13.080 --> 00:05:24.840
suspicious of it. They thought that it surreptitiously redistributed wealth and was fraudulent.

37
00:05:24.840 --> 00:05:32.960
The school of thought was very much anti-government debt, and I associated it with the Austrian

38
00:05:32.960 --> 00:05:34.760
School.

39
00:05:34.760 --> 00:05:43.060
The other, this is associated with the Whig Party of the early 19th century which became

40
00:05:43.060 --> 00:05:53.040
the Republican Party right before the Civil War of Lincoln up to this day.

41
00:05:53.040 --> 00:06:07.000
Their big proponents were Alexander Hamilton and Henry Clay, and of course Lincoln himself.

42
00:06:07.000 --> 00:06:13.960
This was the Easy Money Party, the party of paper money, the party of easy credit, pro-bank,

43
00:06:13.960 --> 00:06:16.640
pro-government debt.

44
00:06:16.640 --> 00:06:21.880
It's hard for some of you probably to imagine that someone could come up with the idea or

45
00:06:21.880 --> 00:06:33.640
and I associate them with the Mercantilist School of Economic Thought.

46
00:06:33.640 --> 00:06:39.800
Now prior to the war the southern political tradition, southern political economy had

47
00:06:39.800 --> 00:06:47.200
the upper hand and America was a great beneficiary as a result.

48
00:06:47.200 --> 00:06:53.600
We had rapid economic growth in the United States from say 1800 or maybe from the founding

49
00:06:53.600 --> 00:07:00.760
of the nation in the 1790s to the Civil War was a period of tremendous economic growth

50
00:07:00.760 --> 00:07:05.000
particularly in the latter half of that period.

51
00:07:05.000 --> 00:07:11.240
Recall that of course the U.S. Constitution does two very important things economically.

52
00:07:11.240 --> 00:07:18.240
It gives the federal government the power to define money and created a monetary union

53
00:07:18.240 --> 00:07:23.160
within the United States and it prevented state governments from issuing paper money

54
00:07:23.160 --> 00:07:26.360
and defining money and that sort of thing.

55
00:07:26.360 --> 00:07:34.780
So it created by default a nation where Americans used silver coins, it was essentially kind

56
00:07:34.780 --> 00:07:38.880
of a private monetary system because the federal government had the power but they never did

57
00:07:38.880 --> 00:07:47.760
The Constitution also established a free trade zone in the United States. Generally we had

58
00:07:47.760 --> 00:07:53.640
free banking laws and during some periods there were bank prohibitions. So states would

59
00:07:53.640 --> 00:08:00.280
pass laws that said there's no banking in this state that we, you know, issuing bank

60
00:08:00.280 --> 00:08:05.880
notes and that kind of thing. So the only two exceptions to this were the first national

61
00:08:05.880 --> 00:08:10.440
Bank of the United States and the Second National Bank of the United States, those were periods

62
00:08:10.440 --> 00:08:15.840
of rapid inflation followed by a crash in the economy and depression.

63
00:08:15.840 --> 00:08:23.920
So Americans prior to the Civil War had it relatively good, it was essentially a private

64
00:08:23.920 --> 00:08:29.000
money and banking system with very little government intervention.

65
00:08:29.000 --> 00:08:37.320
The Civil War is going to change all of that and change it for the worse.

66
00:08:37.320 --> 00:08:42.960
Look at here at this time, inflation and public finance.

67
00:08:42.960 --> 00:08:44.680
Wars are very expensive.

68
00:08:44.680 --> 00:08:50.920
All wars are very expensive and governments have to decide or act in such a way as to

69
00:08:50.920 --> 00:08:53.040
fund wars.

70
00:08:53.040 --> 00:08:56.120
And there are four general ways in which a government can fund war.

71
00:08:56.120 --> 00:09:05.800
They can tax the money from the economy, they can borrow the money by using government debt,

72
00:09:05.800 --> 00:09:16.320
they can resort to inflation, or they can resort to confiscation and conscription.

73
00:09:16.320 --> 00:09:23.520
And Austrians have analyzed all the ways in which government can raise money and find

74
00:09:23.520 --> 00:09:28.520
Taxation is one of the best ways to raise money to fight a war.

75
00:09:28.520 --> 00:09:35.520
It makes the cost of the war explicit and upfront so everybody knows what it's costing.

76
00:09:35.520 --> 00:09:41.520
And it also prevents politicians from over-consuming resources from the economy

77
00:09:41.520 --> 00:09:48.520
so that they have to be allocators of scarce resources in the sense of using taxes

78
00:09:48.520 --> 00:10:11.520
Borrowing is also seen as a good way of fighting a war. If wars have to be fought, the best way to do it is to borrow money outside of the country and buy goods from foreign countries with those proceeds.

79
00:10:11.520 --> 00:10:22.520
Basically the idea here would be to go to Europe, sell bonds to Europeans, and then use the proceeds to buy European goods in order to fight the war.

80
00:10:22.520 --> 00:10:32.520
And this somewhat disguises the cost of war, but it makes it easier to fight the war and puts the cost of paying for the war off into the future.

81
00:10:32.520 --> 00:10:40.520
Conscription and confiscation, not surprisingly those turn out to be very poor ways of fighting a war.

82
00:10:40.520 --> 00:10:50.520
They make the cost of the war almost too explicit. It falls unevenly on those who get their assets confiscated.

83
00:10:50.520 --> 00:10:58.520
It creates opposition to the war, and of course it discourages the private sector even worse than taxes.

84
00:10:58.520 --> 00:11:04.520
Because say, if you're a farmer or a manufacturer, and you're trying to produce for a profit,

85
00:11:04.520 --> 00:11:20.520
What Incentive Do You Have to Produce into the Future?

86
00:11:34.520 --> 00:11:54.520
So if you can conscript soldiers at will, very often governments will acquire too many soldiers, waste them, i.e. kill them in battle, unnecessarily, and of course you're taking them out of the economy, so you're not producing goods, so that's a really bad way.

87
00:11:54.520 --> 00:12:08.520
And then we come to inflation. Inflation is the easiest way to pay for war. Governments have gotten very used to the idea of using inflation, but it's the most damaging way to finance war.

88
00:12:08.520 --> 00:12:16.520
It's the most damaging in terms of the economy. So politically it's very good, economically it's very, very bad.

89
00:12:16.520 --> 00:12:20.520
Politically, you get fewer problems and less opposition.

90
00:12:20.520 --> 00:12:31.520
So in the economic analysis of it, when you look at political interests, what you find is politicians love this because it disguises the cost of the war.

91
00:12:31.520 --> 00:12:36.520
It makes it very easy to raise large funds to spend.

92
00:12:36.520 --> 00:12:39.520
It creates very little opposition to the war.

93
00:12:39.520 --> 00:12:44.520
People see the money being spent, businesses getting more business.

94
00:12:44.520 --> 00:12:51.880
and so they love it and in this way governments disguise the cost of war and

95
00:12:51.880 --> 00:13:01.880
Joseph Salerno has a great article on how war finance through inflation disguises

96
00:13:01.880 --> 00:13:09.760
war and its cost. Of course inflation does a lot of economic things, distorts

97
00:13:09.760 --> 00:13:32.760
Inflation impairs prices in the economy and impairs economic calculation and this was a tremendous problem both north and south during the war and of course because inflation is an easy way to finance war, usually government will take too many resources from the economy and end up wasting them.

98
00:13:32.760 --> 00:13:56.760
So whereas historians said that the governments never had enough resources, they failed to tax the economy, they failed to use inflation, they failed to raise enough resources to conscript enough soldiers, our analysis shows that they really, especially in the South, took too many resources out of the economy.

99
00:14:02.760 --> 00:14:21.760
In the North, when the Union government sat down to figure out how they were going to pay for the war, they said okay, we're going to stick to the gold standard, we're going to tax to pay for the war, to pay for government, we're going to use bonds to pay for the war.

100
00:14:21.760 --> 00:14:38.760
So they were, they set out on a pretty good course. That lasted about a day. And the next day they said, well, we're going to raise $450 million of greenbacks. We're going to issue a new fiat currency, which will eventually redeem.

101
00:14:38.760 --> 00:14:58.760
and so their resolve to stick to the good ways of financing the war didn't last at all and of course we ended up in the north with the fiat currency and Gresham's Law, all the gold disappeared from the economy and they were on a paper standard very quickly.

102
00:14:58.760 --> 00:15:13.760
The value of the greenback versus gold depreciated by two-thirds during the war, so it lost 65% of its value over a four-year period.

103
00:15:13.760 --> 00:15:23.760
In contrast, the value of the U.S. dollar has only fallen about the same amount since we left the gold standard over 30 years ago.

104
00:15:23.760 --> 00:15:30.760
So we've had, you know, a pretty good clip of inflation over the last 30 odd years here in the United States.

105
00:15:30.760 --> 00:15:34.760
They had that much inflation in four years.

106
00:15:34.760 --> 00:15:43.760
People felt, politicians argued, that the reason prices were going up, price inflation, was speculators.

107
00:15:43.760 --> 00:15:53.760
that businessmen were creating unnecessary profits and driving up prices through devious means.

108
00:15:59.760 --> 00:16:07.760
In the northern economy, not surprisingly, there was a lot of chaos with respect to economic calculation

109
00:16:07.760 --> 00:16:22.760
And a lot of things noted by historians were common throughout the United States, especially in the eastern seaboard cities where a lot of the manufacturing and trade occurred.

110
00:16:22.760 --> 00:16:32.760
There was the illusion of prosperity. All this new money going into the economy, all these new war contracts created the illusion of prosperity in the north.

111
00:16:32.760 --> 00:16:46.760
Property values increased with the monetary inflation and there were widespread observations of extravagant living and luxury spending.

112
00:16:46.760 --> 00:16:57.760
So even though the economy was at war, the monetary injections were able to create the illusion of prosperity and even extravagance of luxury.

113
00:16:57.760 --> 00:17:04.760
All the while, in the rest of the population, real wages were declining.

114
00:17:04.760 --> 00:17:12.760
So prices were increasing faster than wages, and the vast majority of the population, even though their wages were going up,

115
00:17:12.760 --> 00:17:22.760
their real income in terms of the purchasing power that they were able to exert in the economy was falling much faster.

116
00:17:22.760 --> 00:17:44.760
are faster and as the war progressed entrepreneurs started to realize that all the profits that they thought that they were going to make on these contracts and so forth were disappearing so they would start projects with the idea that profits were going to be great but by the end of the war they realized that they actually were worse off as a result.

117
00:17:44.760 --> 00:17:53.600
There's an interesting debate in the economics profession about what causes higher prices.

118
00:17:53.600 --> 00:17:56.960
What causes price inflation?

119
00:17:56.960 --> 00:18:03.560
And we sort of stumbled through this debate in preparing this chapter and I think it provides

120
00:18:03.560 --> 00:18:06.120
an interesting contrast.

121
00:18:06.120 --> 00:18:11.440
For the monetarists, what causes higher prices in the economy?

122
00:18:11.440 --> 00:18:17.840
They think it's always and everywhere a monetary phenomenon.

123
00:18:17.840 --> 00:18:24.360
So all changes in prices are the result of monetary factors.

124
00:18:24.360 --> 00:18:34.400
The Keynesians believe that changes in prices are always the result of real factors.

125
00:18:34.400 --> 00:18:40.800
So prices went up for the Keynesians because of real factors in the economy, destroying

126
00:18:40.800 --> 00:18:45.800
production, things of that nature, the war effort and so on.

127
00:18:45.800 --> 00:18:50.640
When we looked at that, we think, well, you know, that's just kind of a strange debate.

128
00:18:50.640 --> 00:18:59.200
I think for Austrians, of course, we make the distinction between monetary inflation

129
00:18:59.200 --> 00:19:03.680
as the cause and price inflation or higher prices, lower purchasing power of the dollar

130
00:19:03.680 --> 00:19:06.600
as the effect.

131
00:19:06.600 --> 00:19:16.000
What actually causes changes in prices, price levels, purchasing powers, is actually both

132
00:19:16.000 --> 00:19:22.120
factors, that you have both the monetary factors and the real factors so that you can look

133
00:19:22.120 --> 00:19:29.600
at both the change in the quantity of money as well as the real impact of the war, the

134
00:19:29.600 --> 00:19:35.480
destruction of capital, the destruction of labor, the diversion of resources from private

135
00:19:35.480 --> 00:19:46.040
Economy to the Army, as well as anticipations about redemption of paper money.

136
00:19:46.040 --> 00:19:52.400
We concluded that the Civil War demonstrates that neither one of the extreme views is really

137
00:19:52.400 --> 00:19:56.400
very helpful.

138
00:19:56.400 --> 00:19:57.400
Inflation in the South.

139
00:19:57.400 --> 00:20:04.240
Well, if you're from the South, you no doubt know that there was a big inflation during

140
00:20:04.240 --> 00:20:15.400
in the Civil War in the South. Prices of commodities in the South have been estimated to have risen

141
00:20:15.400 --> 00:20:27.640
by more than 1000 percent, whereas in the North they went up an estimated 250 percent.

142
00:20:27.640 --> 00:20:33.000
The increase in prices in the South was much greater than the change in the quantity of

143
00:20:33.000 --> 00:20:41.840
Money. There were some quote-unquote real factors in the South such as the diversion

144
00:20:41.840 --> 00:20:48.480
of resources to the military and the blockade. The blockade, which we discussed early in

145
00:20:48.480 --> 00:20:54.820
the book, was a major disadvantage, but the South did, the Confederate government did

146
00:20:54.820 --> 00:21:23.820
There was nothing really to stop, but the South was an economy that was highly dependent upon exports and imports, it thrived as a result, and the Union put a ship blockade around the coast of the Confederacy, and the Confederate government did little or nothing to stop it, so trade in the South came to almost to an end.

147
00:21:23.820 --> 00:21:44.820
And then of course you have subjective factors determining the value of the confederate currency such as military defeats and people's expectations regarding ultimately losing the war and the confederate currency having no value whatsoever.

148
00:21:44.820 --> 00:21:52.820
Like in the North, the higher prices were blamed on the speculators and the blockade runners.

149
00:21:52.820 --> 00:22:01.820
This is an age-old problem where government inflates the monetary, the money supply, grabs a bunch of resources.

150
00:22:01.820 --> 00:22:14.100
Ultimately, prices rise and somehow the burden or the blame for that activity is pointed

151
00:22:14.100 --> 00:22:25.140
in the direction of business people, speculators, middlemen, blockade runners in this case.

152
00:22:25.140 --> 00:22:32.600
Of course, the labor force in the South also experiences declines in real income during

153
00:22:32.600 --> 00:22:37.860
the Civil War to a greater extent than in the North.

154
00:22:37.860 --> 00:22:43.380
And then there's a massive disruption of economic calculation, far worse than the North.

155
00:22:43.380 --> 00:22:52.240
Business people basically can't make any sustainable contracts, develop any large-scale

156
00:22:52.240 --> 00:22:57.760
Business Operations, because they can't really determine what their wages are going to have

157
00:22:57.760 --> 00:23:04.480
to pay, the prices of materials, and what the ultimate value of their products are going

158
00:23:04.480 --> 00:23:13.000
to be, because the monetary disruption is so significant that they can't possibly make

159
00:23:13.000 --> 00:23:20.680
reliable estimates of future prices, or reliable estimates for the purchasing power of the

160
00:23:20.680 --> 00:23:27.520
and Confederate Currency. So very often, in order to overcome that problem, the Confederate

161
00:23:27.520 --> 00:23:32.720
government actually gets into the business of manufacturing weapons, clothing, all sorts

162
00:23:32.720 --> 00:23:49.720
of things. So we see, if we look both in North and South, that they're both using paper money

163
00:23:49.720 --> 00:24:16.720
that they're both taking massive amounts of resources out of the economy and into the military but the South does it to a much greater degree than the North and we think that this is a contributing factor, probably the most important factor in why the Confederate government lost.

164
00:24:19.720 --> 00:24:39.720
We see the fall in real incomes, disruption of economic calculation, the consumption of capital in both north or south, but the evidence that we found was that all of those things occur to a far greater degree in the southern economy than in the northern economy.

165
00:24:39.720 --> 00:24:50.720
And I want to go back to the points that I mentioned at the beginning of the lecture with respect to how does a government finance a war.

166
00:24:50.720 --> 00:25:03.720
Well, I've got some numbers on the board here, and these represent percentages of how various governments finance the war.

167
00:25:03.720 --> 00:25:11.720
So if we want to look at the total cost of government during these four governments at war,

168
00:25:11.720 --> 00:25:30.720
basically we're talking about 100% of the cost of the war, and that's going to be divided up into loans or borrowing the money to pay for the war,

169
00:25:30.720 --> 00:25:44.720
Taxes on the Economy to Pay for the War, Inflation, and Other Ways.

170
00:25:44.720 --> 00:25:55.720
And this basically looks at things like confiscation of property, not conscription, but confiscation, and other revenue means.

171
00:25:55.720 --> 00:26:22.720
Now, the four episodes here, the first one is the Confederate government, the second one is the Union government, the third column is going to be the United States during the American Revolution, and the fourth column is the United States during the War of 1812.

172
00:26:22.720 --> 00:26:40.500
Now, notice that in terms of the Confederate government, they have the lowest amount of

173
00:26:40.500 --> 00:26:41.500
loans.

174
00:26:41.500 --> 00:26:49.320
And this is something that, for example, von Mises and I think Schumpeter both say that

175
00:26:49.320 --> 00:27:03.320
The war is bad, obviously, but the best way to fight it is to try to get loans from foreign countries or in foreign economies, buy their resources and ultimately pay the war off later on.

176
00:27:03.320 --> 00:27:12.320
So they were very unsuccessful in terms of getting loans.

177
00:27:12.320 --> 00:27:39.320
They also had the lowest amount of, or almost the lowest amount of taxes, except for the American Revolution, basically a very low level relying on taxes, which is also considered a good way to pay for war, and they relied the highest in the two worst categories.

178
00:27:42.320 --> 00:27:55.560
So in terms of their overall public finance strategy, the economic analysis that Austrians

179
00:27:55.560 --> 00:28:05.960
have offered suggests that their public finance, their mix of financing was the worst possible

180
00:28:05.960 --> 00:28:12.240
way of going about it, providing additional evidence for the fact that economics is the

181
00:28:12.240 --> 00:28:19.240
determining factor, not military strategy or who's got the biggest barrel, cannon, and

182
00:28:19.240 --> 00:28:26.760
that kind of thing.

183
00:28:26.760 --> 00:28:33.400
So essentially we're trying to, this is a book for historians and a book for students

184
00:28:33.400 --> 00:28:39.520
of History and Graduate Students in History, and the idea here is to, you know, it's fine

185
00:28:39.520 --> 00:28:46.520
to study battles, it's fine to study the lives of generals in specific battles but in terms

186
00:28:46.520 --> 00:28:53.240
of understanding the war and in this case its outcome, you have to remember that economic

187
00:28:53.240 --> 00:28:59.360
factors are paramount.

188
00:28:59.360 --> 00:29:05.240
One of the most important things, I think, for us, is the monetary legacy of the Civil

189
00:29:05.240 --> 00:29:06.240
War.

190
00:29:06.240 --> 00:29:15.900
It really creates a sea change in monetary policy, or revolutionary change in monetary

191
00:29:15.900 --> 00:29:17.900
policy.

192
00:29:17.900 --> 00:29:26.860
As I laid out earlier, the situation in the United States prior to the war was one where

193
00:29:26.860 --> 00:29:32.660
where the hard money advocates had the upper hand, where they had demonstrated and defeated

194
00:29:32.660 --> 00:29:38.900
the idea of a national bank, of paper currencies, where they had extinguished on a couple of

195
00:29:38.900 --> 00:29:45.220
occasions the national debt, where states had enacted bank prohibition laws against

196
00:29:45.220 --> 00:29:53.020
the use of unbacked paper banknotes, where gold and silver coins from around the world

197
00:29:53.020 --> 00:30:00.500
circulated as mediums of exchange.

198
00:30:00.500 --> 00:30:07.740
Most states in the United States had free banking laws which kept the government from

199
00:30:07.740 --> 00:30:12.740
heavily regulating banks or backing them up.

200
00:30:12.740 --> 00:30:20.820
And what we saw was banks not with 100% reserve requirements but banks with high capital ratios

201
00:30:20.820 --> 00:30:27.540
and High Reserve Ratios. They knew that they didn't have any support from the state or

202
00:30:27.540 --> 00:30:38.540
federal governments and as a result they were following prudent conservative banking policies.

203
00:30:38.540 --> 00:30:47.380
Now after the war everything changes. We no longer have private currencies, gold and silver

204
00:30:47.380 --> 00:30:55.300
For coins, we have the greenback era with a national currency.

205
00:30:55.300 --> 00:31:00.940
We no longer have state regulation or reduced state regulation.

206
00:31:00.940 --> 00:31:07.020
We have federal control of banking through the National Banking Act, which was enacted

207
00:31:07.020 --> 00:31:15.380
during the war as part of the issuing of greenback currencies.

208
00:31:15.380 --> 00:31:22.380
After the war, and there were certainly bank panics and business cycles before the war,

209
00:31:22.980 --> 00:31:29.980
but after the war there was a series of banking panics, business cycles and economic depressions.

210
00:31:31.260 --> 00:31:38.260
The contagion within the system actually increased. The national banking law was supposed to reduce

211
00:31:38.260 --> 00:31:46.260
was supposed to reduce this contagion effect amongst banks through federal regulation.

212
00:31:46.260 --> 00:31:49.260
What it actually did was to increase it.

213
00:31:49.260 --> 00:32:06.260
After the war, there was a lot of organized opposition to federal tyranny in money and banking.

214
00:32:06.260 --> 00:32:16.260
There was a free silver movement which sought to have the federal government start coining

215
00:32:16.260 --> 00:32:18.100
silver coins again.

216
00:32:18.100 --> 00:32:32.460
There was a shortage of gold coins and money after the Civil War as part of the process

217
00:32:32.460 --> 00:32:43.460
There was a process of organized deflation on the part of the federal government in terms of redeeming the Greenbacks without replacing them in any way.

218
00:32:43.460 --> 00:32:49.460
There was the Greenback political party, which was organized around monetary issues.

219
00:32:49.460 --> 00:33:13.460
The Democratic Party, which was so strong, hard money before the war, fell into the hands more of populists and progressives, ultimately progressives, William Jennings Bryant and so on, that started to change the character of the Democratic Party and its position on money.

220
00:33:13.460 --> 00:33:21.940
As a matter of fact, they became sort of so pro-money in the sense of increasing the money

221
00:33:21.940 --> 00:33:29.960
supply and they had some reason for that, that the Republicans who were the easy money

222
00:33:29.960 --> 00:33:37.340
policy actually became known as the advocates for sound money and the gold standard.

223
00:33:37.340 --> 00:33:50.180
I want to give you a quote with respect to the National Banking Act, what it was supposed

224
00:33:50.180 --> 00:33:58.860
to do and what it actually ultimately ended up doing in the United States and the after-effect

225
00:33:58.860 --> 00:33:59.860
of the war.

226
00:33:59.860 --> 00:34:07.780
We've got three reputable mainstream monetary economists, Michael Bordeaux, Peter Rappaport

227
00:34:07.780 --> 00:34:15.260
and Anna Schwartz, who studied the National Banking Act, who studied the money and banking

228
00:34:15.260 --> 00:34:24.200
system in the United States in the 19th century after the Civil War, and they found that any

229
00:34:24.200 --> 00:34:30.440
Any rationale for this system based on the public interest just could not be sustained,

230
00:34:30.440 --> 00:34:40.480
that there must have been private interests that supported and had the act put into place.

231
00:34:40.480 --> 00:34:46.600
And I quote on their conclusion that this system was a colossal failure.

232
00:34:46.600 --> 00:34:52.800
The provisions of the Acts of 1863 and 1865 that established the national banking system

233
00:34:52.800 --> 00:34:59.880
System were designed to remedy two perceived defects of the antebellum state banking system.

234
00:34:59.880 --> 00:35:07.140
One was the circulation of a wide variety of state bank notes, often at a discount,

235
00:35:07.140 --> 00:35:10.840
which made for an inefficient payment system.

236
00:35:10.840 --> 00:35:19.640
The second defect was instability of the note issue, marked by overissue bank runs and failures

237
00:35:19.640 --> 00:35:24.280
and Periodic Suspension of Convertibility into Species.

238
00:35:24.280 --> 00:35:33.280
To remedy the first defect, national bank issues of U.S. bond-secured currency replaced

239
00:35:33.280 --> 00:35:35.040
state bank notes.

240
00:35:35.040 --> 00:35:42.140
To remedy the second defect, stringent reserve and capital requirements, oversight and regulation

241
00:35:42.140 --> 00:35:47.880
by the Comptroller of the Currency were conditions for national bank charters.

242
00:35:47.880 --> 00:35:53.880
Unfortunately, the remedies did not work as intended by the architects of the national banking system.

243
00:35:53.880 --> 00:35:58.880
Instead, the system was characterized by monetary and cyclical instability,

244
00:35:58.880 --> 00:36:06.880
poor bank panics, frequent stock market crashes, and other financial disturbances.

245
00:36:06.880 --> 00:36:13.880
In other words, this revolutionary impact of the Civil War on American money and banking

246
00:36:13.880 --> 00:36:22.880
that was supposed to cure the defects of the antebellum money and banking system actually made things much worse.

247
00:36:28.880 --> 00:36:32.880
The only other thing that I think is, there's a couple of interesting points I guess I'll bring up here

248
00:36:35.880 --> 00:36:42.880
that you need to look for if you actually get a copy of the book and read the chapter

249
00:36:43.880 --> 00:37:04.880
There's some discussion about where the term Dixieland came from. This is Dixie, especially for you foreigners, the land of Dixie, and it was a popular song before the Civil War, but nobody knows where it came from.

250
00:37:04.880 --> 00:37:20.880
And my research indicates, and other people have indicated this as well, that the origin of this was a $10 banknote issued by the Citizens Bank of Louisiana.

251
00:37:20.880 --> 00:37:26.880
The states around Louisiana were no banking states where banking was prohibited.

252
00:37:26.880 --> 00:37:34.880
So, New Orleans was the only source of banking. It was a major source of commerce and international trade before the war.

253
00:37:34.880 --> 00:37:44.880
So that Louisiana banknotes circulated in Alabama, Mississippi, Texas, Arkansas and on up the Ohio River.

254
00:37:44.880 --> 00:37:54.880
And one of the banknotes that circulated was this $10 French banknote from New Orleans.

255
00:37:54.880 --> 00:38:03.280
and of course the word 10 in French is D-I-X and so these banknotes were

256
00:38:03.280 --> 00:38:11.240
referred to Dixie as Dixies and so that's the we think that the origin of

257
00:38:11.240 --> 00:38:16.480
the term and the origin of the song was based on this particular banknote which

258
00:38:16.480 --> 00:38:22.040
is widely circulated now why would it be widely circulated when most banknotes

259
00:38:22.040 --> 00:38:28.480
Banknotes were not trusted all that much. Well in Louisiana they passed a law that required

260
00:38:28.480 --> 00:38:35.480
all banknotes to be backed by 33% reserves in gold and the rest were to be backed by

261
00:38:39.000 --> 00:38:46.000
short term securities. In other words commercial paper that could only be for 90 days. So basically

262
00:38:46.000 --> 00:39:06.000
could only be for 90 days. So basically, it was loan contracts or loan agreements for the exchange of commodities, cotton and sugar, which had relatively stable value, instead of property.

263
00:39:06.000 --> 00:39:16.000
You couldn't use this money to give mortgages on farms and things like that, which could possibly go bankrupt and not pay off the loans.

264
00:39:16.000 --> 00:39:22.000
But those short-term securities were almost as good as gold.

265
00:39:22.000 --> 00:39:29.000
The other thing that has sort of a social tinge to it is the movie The Wizard of Oz.

266
00:39:29.000 --> 00:39:40.000
You all have seen the movie The Wizard of Oz. It's a very famous movie by Walt Disney

267
00:39:40.000 --> 00:39:49.220
based on a very famous book written in 1900 by Frank Baum. Historians have come to realize

268
00:39:49.220 --> 00:39:56.320
that this book and this movie were actually written about the monetary disruptions and

269
00:39:56.320 --> 00:40:02.640
and the monetary political opposition in the aftermath of the Civil War.

270
00:40:02.640 --> 00:40:08.560
So if you've seen the movie or read the book, they talk about the Emerald City, which is

271
00:40:08.560 --> 00:40:17.560
sort of the city on the hill, and that refers to greenbacks from Washington D.C.

272
00:40:17.560 --> 00:40:21.280
The yellow brick road, follow the yellow brick road, follow the yellow brick road and you'll

273
00:40:21.280 --> 00:40:31.280
The Cure-all for everything in society, the cure for what the actors are trying to achieve turns out to be the silver shoes, which is the silver movement, the free silver movement, and each of the characters in the movie, the tin man, the scarecrow, the cowardly lion, all represent interest groups in society, farmers, manufacturers,

274
00:40:51.280 --> 00:40:57.000
and so on and even there's even four characters there's two good witches and

275
00:40:57.000 --> 00:41:03.320
two bad witches in the movie and that turns out to be the the wicked witch of

276
00:41:03.320 --> 00:41:08.080
the West and the wicked witch of the East those are the bad regions controlled

277
00:41:08.080 --> 00:41:14.320
by the federal government and the big city banks and the good witch of the

278
00:41:14.320 --> 00:41:19.200
north and the good witch of the south those are the areas that are being

279
00:41:19.200 --> 00:41:48.200
are being taken advantage of under the National Banking Act where they don't have banks and they have shortages of money and so it's kind of interesting how the monetary problems in the aftermath as well as the monetary successes in the antebellum economy get sort of surreptitiously integrated into society's culture and I just thought I'd bring those up as well.

280
00:41:49.200 --> 00:42:16.200
How would the distribution between loans, taxes and invoices matter? How is that being done today with our directorial work?

281
00:42:19.200 --> 00:42:36.200
There are no special taxes. There are no special bonds. They haven't resorted to conscription of American soldiers yet, although they are preparing for that.

282
00:42:36.200 --> 00:42:48.200
They seem to me to be preparing for fairly long engagement over there, so all of this is subject to change.

283
00:42:48.200 --> 00:42:56.200
and whether or not they're actually confiscating Iraqi assets is something I can't really speak to.

284
00:42:56.200 --> 00:43:09.200
So basically I would say that they're financing the war through paper and probably to a lesser degree on borrowing.

285
00:43:09.200 --> 00:43:17.200
To what extent the national debt is increasing or the deficit is increasing

286
00:43:17.200 --> 00:43:41.200
It's kind of hard to say because we were already in a deficit and it was growing and the war made that much worse, so it's, we can't even really tell at this point what the breakdown is, but it's definitely in terms of inflation and borrowing.

287
00:43:44.200 --> 00:43:45.200
Yes?

288
00:43:45.200 --> 00:44:01.200
Can you sort of avoid having to pay the piper, so to speak, by the fact that a lot of those greenbacks were circulating in the war, and wasn't there a bust in, what, 1875 in that item?

289
00:44:01.200 --> 00:44:02.200
Yeah, 1873?

290
00:44:02.200 --> 00:44:10.200
Yeah, 1873, when all the greenbacks started coming back in and they had to default on all the lines, isn't that right?

291
00:44:10.200 --> 00:44:18.520
Well, both currencies, North and South, were going to be redeemable at some point in the

292
00:44:18.520 --> 00:44:27.920
future, a certain number of years after the war ended.

293
00:44:27.920 --> 00:44:33.760
So you could almost look at the currencies in terms of a loan.

294
00:44:33.760 --> 00:44:40.840
The Southern currency, of course, is worthless at the end of the war, although we point out

295
00:44:40.840 --> 00:44:47.720
in the beginning with a quote from another author that the Confederate currency has actually

296
00:44:47.720 --> 00:45:00.340
been appreciating since the Civil War and is now worth eight times the value of the

297
00:45:00.340 --> 00:45:07.900
Greenback. But after the war to 1873, they're in the process of redemption, they're in the

298
00:45:07.900 --> 00:45:15.580
process of trying to finance a return to the gold standard. And so as you move closer and

299
00:45:15.580 --> 00:45:25.700
closer to 1873, they're in a sense taking currency out of circulation and the economy

300
00:45:25.700 --> 00:45:32.820
is experiencing price deflation along with monetary deflation. As a result, a lot of

301
00:45:32.820 --> 00:45:41.820
the plans that had developed over that period, you know, the stringency, especially at the

302
00:45:41.820 --> 00:45:52.940
ultimate date of redemption, is what helps bring on the Panic of 1873. That whole period

303
00:45:52.940 --> 00:45:55.940
was kind of speckled with bank panics.

304
00:46:22.940 --> 00:46:31.940
The Mining System, so the also start of the...

305
00:46:31.940 --> 00:46:32.940
That's correct.

306
00:46:32.940 --> 00:46:37.940
...the mining crisis.

307
00:46:37.940 --> 00:46:38.940
That's correct.

308
00:46:38.940 --> 00:46:48.780
The crime of 1873, that's when they stopped minting silver coins and they moved completely

309
00:46:48.780 --> 00:46:49.780
to the gold standard.

310
00:46:49.780 --> 00:47:02.980
Well, you were telling Chase, as Secretary of Treasury, issued these things, and later

311
00:47:02.980 --> 00:47:07.980
as the Supreme Court noticed this, he says we were wrong, and in fact, he makes the decision

312
00:47:07.980 --> 00:47:12.980
to issue your videos, what he had himself done earlier, but the details don't come out

313
00:47:12.980 --> 00:47:14.980
to mind, do you have any comment on that?

314
00:47:19.780 --> 00:47:33.780
The gold standard, he was a hard money man. We're sticking with the gold standard. The current taxes that we have will pay for the government that we already have, and the war effort will be paid through borrowing.

315
00:47:33.780 --> 00:47:41.580
and you know that basically didn't work and the bonds that he was trying to

316
00:47:41.580 --> 00:47:49.820
float could not be sold or at least sold in sufficient amounts and so he had to

317
00:47:49.820 --> 00:47:59.300
back down he was never he was he was a pro gold guy and a hard money man and I

318
00:47:59.300 --> 00:48:12.300
I don't remember exactly what he said as a Supreme Court justice, but he was always against the idea of resorting to the greenbacks.

319
00:48:12.300 --> 00:48:19.300
He was very much opposed to that. I'm not surprised because it wasn't his idea. He was forced into it.

320
00:48:19.300 --> 00:48:34.300
Now, two critical questions about this. I've been also intrigued about this question for quite a while, and I looked at it in the case of World War I, when the German government,

321
00:48:34.300 --> 00:48:49.300
The German government was much more conservative of the Austrian government than of the other government, even from the Austrian people, one or more.

322
00:48:49.300 --> 00:49:08.300
Also, if we look back in history, the English were usually much more ruthless in facing the money supply for war crimes, starting from the 18th century onwards, also late 17th century, than the French, for example, and they usually won on the wars.

323
00:49:08.300 --> 00:49:25.300
Now, I mean, there's certainly one thing that we do know from the theory of inflation is that it benefits the inflation, so certainly a government, at least in the short run, can benefit its position, neither the other competing governments, especially in the war situation.

324
00:49:25.300 --> 00:49:54.300
The long run, the opening where it's on, for what it takes 10 years, 20 years for the final inflation, well then of course the long run damages might be there and it's just undermining the position, but if they sort of say they can win, quickly enough, quickly enough, these I put on the tab, it could be one year, or four years, or five years, then inflation might actually give them the competitive edge.

325
00:49:54.300 --> 00:50:04.300
So I mean, that would just be the one technical difficulty here, and the other one, the other three issues.

326
00:50:04.300 --> 00:50:14.300
Our southern economy was heavily based on slave labor, so here the division of labor was not based on monetary exchanges.

327
00:50:14.300 --> 00:50:19.300
So doesn't this undermine your views that, I mean, that's not all of your views, right?

328
00:50:19.300 --> 00:50:41.300
But I think the other point is, of course, that's a crucial one, that is that they get actually resources from outside to find the oil, that seems to be, I think that's a major consideration, not quite control on inflation, because also in the southern economy, how could it have hurt them so much, since it wasn't based on slavery, they thought quite essentially?

329
00:50:49.300 --> 00:51:19.300
The issue just as much as any other form of labor, slaves were bought and sold at market prices, at auction prices, and they were rented out or leased out to all manner of work, including to the government for fortifications, but also to railroads, manufacturing plants, and all that had to be based on, you know, you could hire for the day, you could hire for the week,

330
00:51:19.300 --> 00:51:23.300
How important was that money? I mean, as a percentage of all states?

331
00:51:49.300 --> 00:52:19.300
industrial occupations and then as the agricultural economy got hot they would move back to the plantation and there so there were cycles of that and there were also cycles throughout the year where slaves would work on the plantation during the growing season and be leased out to the government for road building, railroad companies for laying track and repairing,

332
00:52:19.300 --> 00:52:49.300
you know things of that nature during the war there was a pretty sizable movement of slaves from the plantation working on agriculture into manufacturing so it was all the value of slave labor was all market determined and there was a pretty good flow of the slave labor into

333
00:52:49.300 --> 00:53:00.300
and out of agriculture and manufacturing, government, private sector or even the military, they work for the military too.

334
00:53:00.300 --> 00:53:16.300
So the manufacturing people still had the problem of whether they hired free labor or slave labor

335
00:53:16.300 --> 00:53:22.300
as to how the wagers or lease contracts would fit into their economic calculation.

336
00:53:23.300 --> 00:53:41.300
Now, the issue of inflation in war finance, you bring up a good point because you could, in many instances,

337
00:53:41.300 --> 00:53:51.300
I think you probably could win a war in the short run following any kind of financial arrangement.

338
00:53:51.300 --> 00:54:00.300
And it's been tried before. Of course the Germans tried that. That was their whole idea in World War I.

339
00:54:00.300 --> 00:54:12.340
and I suppose World War II was that they were going to strike quickly and effectively what

340
00:54:12.340 --> 00:54:27.140
otherwise was a formidable opponent and it usually doesn't work that sort of quick strike

341
00:54:27.140 --> 00:54:36.500
tactic ultimately doesn't work very well, although I would say that if the Germans did

342
00:54:36.500 --> 00:54:44.740
pursue a good financial package during World War I, I think that that would hold up in

343
00:54:44.740 --> 00:54:56.820
the analysis because I think they proved to be a very formidable army during that war

344
00:54:56.820 --> 00:55:07.820
with fairly weak allies against a much larger opponent with more advanced economies.

345
00:55:07.820 --> 00:55:21.820
In other words, France, England, and the United States were more economically advanced than Austria and Turkey.

346
00:55:21.820 --> 00:55:29.820
And so Germany was really carrying the whole war effort for that side, I guess.

347
00:55:29.820 --> 00:55:33.820
But I think in that particular case, your argument would still work, right?

348
00:55:33.820 --> 00:55:38.820
Because the war, war on traditionally a long time, it exhausted the forces.

349
00:55:38.820 --> 00:55:44.820
If they had wreaked the country additionally with emulation, it might have exhausted an extreme force.

350
00:55:44.820 --> 00:55:58.420
In that case, I would say that the Germans could have stood longer than they would have been able to with the use of inflation to a higher degree.

351
00:55:58.420 --> 00:56:07.060
But in fact, they find that most of the war effort was a relatively tiny bit of inflation, of course, a major inflation risk,

352
00:56:07.060 --> 00:56:19.060
But nothing compared to those two risks that were almost doubled or something, even in the case of France, much more efficient than in Germany.

353
00:56:19.060 --> 00:56:22.060
Yes, so they couldn't attract any resources from outside.

354
00:56:37.060 --> 00:56:38.060
We'll pay you back later.

355
00:57:07.060 --> 00:57:09.060
and the possibility of a kind of death is possible.

356
00:57:09.060 --> 00:57:12.060
You eat yourself and you have to imagine the short life.

357
00:57:12.060 --> 00:57:17.060
And if you manage to finish a war quickly enough, that was it.

358
00:57:17.060 --> 00:57:27.060
And one aspect that comes into play or I come to play is that the British actually always try to finish wars quickly.

359
00:57:27.060 --> 00:57:30.060
They always avoided long-wearing entanglements.

360
00:57:30.060 --> 00:57:35.060
The only major exception was the Bolognese wars.

361
00:57:35.060 --> 00:57:43.060
Here one could argue well that the Brits would have stayed out of the mess if the whole area had not kept on fighting back.

362
00:58:05.060 --> 00:58:12.020
I don't think that that's really the case, because they relied so much on the central

363
00:58:12.020 --> 00:58:18.860
government, which was so new and disorganized. They already had pre-existing state governments

364
00:58:18.860 --> 00:58:24.940
that already had pre-existing militias that were well organized and armed. I think that

365
00:58:24.940 --> 00:58:34.300
if they had resorted to using the state government apparatus and military, it would have been

366
00:58:34.300 --> 00:58:41.860
and a better, it would have resulted in a better military strategy as well as a better economic

367
00:58:41.860 --> 00:58:49.000
strategy because they wouldn't have tried to extract so many resources and to keep so

368
00:58:49.000 --> 00:58:52.300
many resources out of the economy.

369
00:58:52.300 --> 00:59:00.420
I think that they should have gone after European resources with bonds, with bonds backed up

370
00:59:00.420 --> 00:59:01.420
by land.

371
00:59:01.420 --> 00:59:29.420
Well, and then they had to, that's the one thing that they should have done something about, was the blockade, and the initial plan was that they were going to do that with a Navy, a naval fleet, a small naval fleet, and blockade runners, privateers, letters of marquee and reprisal, you know, all the private sorts of things.

372
00:59:29.420 --> 00:59:54.420
Well, Stephen is apparently trying to argue that in 1861 the Confederate government should

373
00:59:54.420 --> 01:00:03.420
The Federal Government should somehow inquire and make a check of the common crop, issue 7% bonds against it, and get it on boats as fast as they could.

374
01:00:03.420 --> 01:00:16.420
But more of the other blockade was effective, and gotten this easy loans order that you're talking about are just simple cash sales, which would have been gone to buying more converse records and so on.

375
01:00:16.420 --> 01:00:23.420
So once you got H. Stevens, slightly ahead of the day business of these guys.

376
01:00:24.420 --> 01:00:29.820
That would have been the thing to do, but everybody was dead set against it.

377
01:00:29.820 --> 01:00:38.260
They wanted to keep the cotton here in the southern economy and try to get the Europeans

378
01:00:38.260 --> 01:00:47.620
to come get it and to intervene on behalf of the Confederate government, but they never

379
01:00:47.620 --> 01:00:51.620
really gave them an economic rationale to do that.

380
01:00:51.620 --> 01:00:53.620
I think Stevens was right.

381
01:00:53.620 --> 01:00:59.620
When was the US Navy located before the Civil War?

382
01:00:59.620 --> 01:01:03.620
Why didn't the Union have the control of the Navy?

383
01:01:23.620 --> 01:01:36.580
Boston, all of those cities had navies, and the Union either controlled or attacked most

384
01:01:36.580 --> 01:01:40.860
of the Federal installations in the South.

385
01:01:40.860 --> 01:01:43.220
So they always controlled Pensacola, for example.

386
01:01:43.220 --> 01:01:51.740
They always controlled Key West, and Jacksonville, yeah, that wasn't much of a...

387
01:01:51.740 --> 01:02:05.740
There's something to do with the fact that they got their revenue typically through tariffs, an offer of revenue for the tariffs at the time, so they were loyal agents in these ports.

388
01:02:21.740 --> 01:02:28.740
were Navy personnel, but they were paid on the basis of how much they captured.

389
01:02:28.740 --> 01:02:35.740
And so they were essentially privateers out there, and they didn't want to sink any of these boats,

390
01:02:35.740 --> 01:02:37.740
because they were also profit motivated.

391
01:02:37.740 --> 01:02:46.740
But the Union made a very smart move by saying, whatever you capture, you get to keep,

392
01:02:46.740 --> 01:02:50.740
including the value of the boats and all the cargo.

393
01:02:50.740 --> 01:03:01.740
and whereas the Confederate government was constantly putting regulations and restrictions on these blockade runners.

394
01:03:01.740 --> 01:03:12.740
They were taxing the cotton going out. They were requiring the ships to transport materials for the government.

395
01:03:12.740 --> 01:03:16.740
They were restricting the types of things that they could bring in.

396
01:03:16.740 --> 01:03:26.740
And so, where the Union government was just, you know, get whatever you can, boys. It's, you know, it's whatever you want.

397
01:03:26.740 --> 01:03:32.740
The Confederate government was actually hindering the efforts of the blockade runners.

398
01:03:32.740 --> 01:03:42.740
And in some places and times they were considered, the blockade runners were considered to be

399
01:03:42.740 --> 01:03:48.540
working for the opposition or to be undermining the war effort in what they were doing. So

400
01:03:48.540 --> 01:03:55.660
they were like in Gone with the Wind. And of course, Rhett Butler is a blockade runner

401
01:03:55.660 --> 01:04:05.140
and he's considered kind of tinged with the sort of the bad influence of being a blockade

402
01:04:05.140 --> 01:04:09.340
runner and making speculative profits and all this stuff.

403
01:04:09.340 --> 01:04:14.700
So it was the anti-capitalist mentality of the Confederacy which really hurt it in a

404
01:04:14.700 --> 01:04:15.700
number of different ways.

405
01:04:15.700 --> 01:04:33.700
In a previous video concluding remark about the Wizard of Oz, one great summary of the highlanders is that at the end all figures get what they had from the first place.

406
01:04:33.700 --> 01:04:58.700
For example, the girl, she wants to get home to campus, so she had to wear the shoes of the evil witch of Israel, so she couldn't, but she didn't have to get to the green bag, right?

407
01:04:58.700 --> 01:05:05.700
And all others also similarly have already what they needed to succeed to a thing that...

408
01:05:05.700 --> 01:05:08.700
Yeah, they're given placebo-type cures.

409
01:05:08.700 --> 01:05:09.700
Placebo-type of thing?

410
01:05:09.700 --> 01:05:10.700
Yeah.

411
01:05:10.700 --> 01:05:16.700
So it's exactly what's going on, of course, with the paper money thing, but also placebo.

412
01:05:16.700 --> 01:05:17.700
The illusion.

413
01:05:17.700 --> 01:05:18.700
Yeah.

414
01:05:18.700 --> 01:05:19.700
Good.

415
01:05:19.700 --> 01:05:20.700
Okay.

416
01:05:20.700 --> 01:05:21.700
Thank you very much.

417
01:05:21.700 --> 01:05:22.700
Great.

418
01:05:23.700 --> 01:05:25.700
Thank you very much.