WEBVTT NOTE Introduction to Economics: Part 7 1 00:00:00.000 --> 00:00:10.720 And the deficit is equal to the expenditure minus income, expenditure minus taxes, revenue. 2 00:00:10.720 --> 00:00:14.800 So the government can't, if you want a deficit of 100 billion, the government can do it two ways, 3 00:00:14.800 --> 00:00:17.080 two polar opposites, two polar methods of doing it. 4 00:00:17.080 --> 00:00:23.960 Either spend 100 billion dollars more, or take in 100 billion dollars less. 5 00:00:23.960 --> 00:00:29.840 In other words, if the budget is, if now expenditures are 600 billion, 6 00:00:29.840 --> 00:00:39.840 So let's say, and tax revenue is $600 billion, if you want a $100 billion deficit, you can either increase this to $700, or you can cut this to $500. 7 00:00:39.840 --> 00:00:42.840 This brings a political element to the picture. 8 00:00:42.840 --> 00:00:47.840 Left-wing Canadians tend to always be in favor of increasing government expenditure anyway. 9 00:00:47.840 --> 00:00:53.840 So they do it now on the cover of helping the economy, increasing spending, lifting the thing up to the employment line. 10 00:00:53.840 --> 00:00:59.840 So that's what you can do with Opsfor. Let's take a little grid here. 11 00:00:59.840 --> 00:01:13.840 Keynesians, liberals, and servalers. During depressions, liberals may favor increasing government spending. 12 00:01:13.840 --> 00:01:18.840 Servers will tend to be in favor of tax cuts. 13 00:01:18.840 --> 00:01:20.840 So you're leaving more money for people and so forth. 14 00:01:20.840 --> 00:01:24.880 Some of us cut taxes. 15 00:01:24.880 --> 00:01:30.640 During inflationary periods, if you want a surplus of $100 billion, 16 00:01:30.640 --> 00:01:37.800 or now, of course, a lesser deficit, if you're up here now, 17 00:01:37.800 --> 00:01:41.480 if you want a surplus of $100 billion, you can either increase taxes 18 00:01:41.480 --> 00:01:47.480 The way you can cut expenditure is to 500 billion. 19 00:01:47.480 --> 00:01:52.480 Conservatives tend to favor cutting expenditures during inflation. 20 00:01:52.480 --> 00:01:59.480 And liberals of course favor tax increases, if you are anyway. 21 00:01:59.480 --> 00:02:08.480 So, if you had really heroic, extreme free market, or whatever you want to call it, Keynesians, 22 00:02:08.480 --> 00:02:21.480 And they were in power, they would then cut taxes, during the pressures they would cut taxes very heavily and then during inflation they cut spending very heavily and you get that eventually as sort of a zero budget, sort of by accident. 23 00:02:21.480 --> 00:02:25.480 This of course never happens, there are no conservative Keynesians who hold this view. 24 00:02:25.480 --> 00:02:37.480 Liberal Keynesians tend to sort of ride, you know, tend to sort of be dominant, so you have spending going up in the depression, matched by taxes going up in inflation, which means that government spending is always going up relative to the private sector, not by accident. 25 00:02:37.480 --> 00:02:48.480 So, in the course of what you have is, you have conservative, you have liberal, you have moderates. The moderates, in fact, are a little mix of both. 26 00:02:48.480 --> 00:02:52.480 Cut a little, increase a little spending, cut a little taxes, or whatever. 27 00:02:52.480 --> 00:02:57.480 Nobody ever cuts government spending, ever. I mean, it hasn't been done, in America, it hasn't been done since the first two years of the 28 00:02:57.480 --> 00:03:04.480 Eisenhower administration. Ever since then. Nobody even talks about cutting government spending. Reagan, when he talked about cutting government spending, 29 00:03:04.480 --> 00:03:09.480 and what it really meant was cutting the rate of growth of government spending, a very different concept. 30 00:03:09.480 --> 00:03:13.480 So this is out, this is now for Boehm, I'm sick of it. 31 00:03:13.480 --> 00:03:19.480 So now we have, now the question is how do you maneuver if you have a depression? 32 00:03:19.480 --> 00:03:21.480 So they're moderates, you do a little mix of both. 33 00:03:21.480 --> 00:03:25.480 So the conservative came to people who want to have a little bit more of a tax cut 34 00:03:25.480 --> 00:03:28.480 compared to a little bit more of a spending increase. 35 00:03:28.480 --> 00:03:32.480 And you have a general mishmash, came to you mishmash somewhere in the middle. 36 00:03:32.480 --> 00:03:38.480 This was a picture in the mid-1970s when something cataclysmic happened to the K&K movement. 37 00:03:38.480 --> 00:03:44.480 Namely, remember the old picture, you have a business cycle of inflation and depression, 38 00:03:44.480 --> 00:03:48.480 if it's a depression you pump in spending, if it's an inflation you get spending. 39 00:03:48.480 --> 00:03:50.480 What do you do if you have both at the same time? 40 00:03:50.480 --> 00:03:54.480 What do you do if you have inflation and an depression at the same time? 41 00:03:54.480 --> 00:03:59.480 Now called stagflation, inflationary recession. 42 00:03:59.480 --> 00:04:04.480 This appeared for the first time, well appeared in the 30s but nobody recognized it 43 00:04:04.480 --> 00:04:08.480 because we're in a big depression anyway, there's a big inflation within it 44 00:04:08.480 --> 00:04:12.480 but the first time it appeared in its current phenomenon was a very small amount 45 00:04:12.480 --> 00:04:17.480 I believe the depression in 1957-58 46 00:04:17.480 --> 00:04:22.480 and there was a big depression, there was a big unemployment except for a separate macro season 47 00:04:22.480 --> 00:04:26.480 prices were always going down in all previous depressions 48 00:04:26.480 --> 00:04:34.480 and creeped up a little bit, didn't go up a lot, like in 74, 75, but they crept up, it's very unusual, it's not supposed to happen 49 00:04:34.480 --> 00:04:41.480 and I remember one of my favorite anecdotes about this is that I studied under Arthur Burns, Columbia 50 00:04:41.480 --> 00:04:46.480 Burns is a conservative Keynesian, a moderate conservative Keynesian, that's what he described with me 51 00:04:46.480 --> 00:04:51.480 went to Washington to be head of the Council of Economic Advisors in the Eisenhower administration 52 00:04:51.480 --> 00:04:57.480 and the return of the Florida Nixon to the most inflationary Federal Reserve person in history, I think. 53 00:04:57.480 --> 00:05:03.480 Tolkien constantly attacking inflation all the time he was there, thereby establishing a sound money reputation. 54 00:05:03.480 --> 00:05:10.480 Anyway, he comes back after four years as administration, he gives a Keynesian lecture about what to do with the same stuff I've been telling you here, 55 00:05:10.480 --> 00:05:15.480 except without the attack on it. 56 00:05:15.480 --> 00:05:23.480 So I asked him a question. I said, well, Professor Byrd, there's now a situation where there's unemployment, depression, recession, and yet prices are going up. What do we do about that? 57 00:05:23.480 --> 00:05:30.480 He said, well, it's not going to last long, three months with the over and all, which was true. I said, okay, but what happens if, supposing sometime in the future this happens again? 58 00:05:30.480 --> 00:05:40.480 We have even more stuff. We have a big recession, et cetera, and prices are going up even faster. And he stopped for a while. Have you ever heard him speak? He speaks like W.C. Field without the humor. 59 00:05:40.480 --> 00:05:45.480 And he said, well, in that case, in that case, we'll all have to resign. 60 00:05:45.480 --> 00:05:53.480 Now, it happened in 73, 75, it happened in 79, 81. 61 00:05:53.480 --> 00:05:55.480 Of course, nobody ever resigns. 62 00:05:55.480 --> 00:05:58.480 I mean, he didn't resign, nobody else resigned. 63 00:05:58.480 --> 00:06:05.480 And that's one of my laws, I have a bunch of sociological laws, Rothbard's law, one of which is nobody ever resigns. 64 00:06:05.480 --> 00:06:09.480 And once in a while, of course, the law is broken, but it's not very often. 65 00:06:09.480 --> 00:06:22.480 So, this is increasingly true, and we now have a situation in 1973-75 where we have a big recession and prices were going up by 14% a year or so. 66 00:06:22.480 --> 00:06:36.480 And, what do you do? Well, KZs are a big problem. They don't resign, they don't stop being KZs, they become very low-key about being KZs, they're very confused. 67 00:06:36.480 --> 00:06:51.480 And so what you do is, if you have a situation where you're supposed to put on the accelerator and the pressure and take off and put on a brake, boom, you have both at the same time, you sort of do both, you do both rapidly alternating, hoping something works. 68 00:06:51.480 --> 00:06:55.480 And close your eyes when something works. 69 00:06:55.480 --> 00:07:04.480 So, the result is that Keynesians are in a total state of confusion and they don't know what to do at this point. 70 00:07:04.480 --> 00:07:10.480 At this point, we have a big deficit, that's supposed to be inflationary. On the other hand, we just had a recession. 71 00:07:10.480 --> 00:07:19.480 And, well, should we do that? On the other hand, we have inflation, we don't want to heat that up. Total chaos, intellectual chaos in Keynesians. 72 00:07:19.480 --> 00:07:28.480 So that's, I haven't really, okay, I really should stop talking at this point, but that's really, I haven't explained the Federal Recession yet. 73 00:07:28.480 --> 00:07:39.480 I'll do that when the book clears up. Anybody have any comments on this? Any questions, comments? Any converted Keynesians that come out and confess? 74 00:07:39.480 --> 00:07:47.480 I thought James Watson, there weren't any Democrats and Republicans, they were just liberals and they weren't Americans. 75 00:07:49.480 --> 00:07:51.480 Do you think he's going to resign, James Watson? 76 00:07:51.480 --> 00:07:53.480 I have no idea. 77 00:07:53.480 --> 00:07:55.480 Did he get the shot in the foot award? 78 00:07:55.480 --> 00:07:59.480 I think it was very funny, I thought it was hilarious. 79 00:07:59.480 --> 00:08:05.480 I read this article and in fact there was a picture of Secretary Shultz going, 80 00:08:05.480 --> 00:08:10.080 Do you really say that beside the army general that said we're sending in war troops into Vietnam? 81 00:08:10.080 --> 00:08:18.080 Oh, let him know. But there's something about James Watt who said, I guess in my administration we have equal opportunity employment. 82 00:08:18.080 --> 00:08:21.080 We've got a few Italians, we've got a few Jews, a few cripples. 83 00:08:21.080 --> 00:08:23.080 That was, I thought it was Butz, wasn't it? 84 00:08:23.080 --> 00:08:25.080 No, that was Watt. 85 00:08:25.080 --> 00:08:26.080 It was Watt. 86 00:08:26.080 --> 00:08:27.080 It was Watt? 87 00:08:27.080 --> 00:08:29.080 He was a Jewish guy, he went and paralyzed a lot of people. 88 00:08:29.080 --> 00:08:31.080 Yeah, yeah, yeah, no, no, no. 89 00:08:31.080 --> 00:08:34.080 By the way, excuse me, we're looking for a Jew with a paralyzed arm. 90 00:08:34.080 --> 00:09:03.080 The way he said it, my wife saw him on television, I was teaching that day, Watts said it, the way he said it was very funny, he was speaking for the Chamber of Commerce or something, he said, he had his new commission on coal leasing on an onset, he said, it's very balanced, we've got three Democrats and two Republicans, one black, one woman, two Jews and a cripple, cutting it off, I said, hilarious. 91 00:09:03.080 --> 00:09:11.800 Are you going to be talking about the banks and the equity crisis and that sort of thing? 92 00:09:11.800 --> 00:09:12.800 Equity crisis? 93 00:09:12.800 --> 00:09:13.800 Or the debt crisis? 94 00:09:13.800 --> 00:09:14.800 Oh, God. 95 00:09:14.800 --> 00:09:15.800 I don't know how you're going to stop. 96 00:09:15.800 --> 00:09:16.800 I'll take this time for a minute. 97 00:09:16.800 --> 00:09:17.800 There's actually one more question. 98 00:09:17.800 --> 00:09:18.800 You know how a bank can keep a certain amount of its cash in order to loan a rest out? 99 00:09:18.800 --> 00:09:19.800 And by doing a plan of bookkeeping, it manages to multiply the money by the fact of wherever 100 00:09:19.800 --> 00:09:20.800 it wants. 101 00:09:20.800 --> 00:09:27.800 You know how a bank can keep a certain amount of its cash to reserve and loan the rest out? 102 00:09:27.800 --> 00:09:32.800 And by doing a clever bookkeeping, it manages to multiply the money by the fact of wherever it wants. 103 00:09:32.800 --> 00:09:37.800 So like 20% reserve and it multiplies it by 5. 104 00:09:37.800 --> 00:09:41.800 Shouldn't that cost a 500% increase in the money supply? 105 00:09:41.800 --> 00:09:44.800 How come physicals run away from inflation? 106 00:09:44.800 --> 00:09:56.800 Well, because of the inflation, the question of how much is done, you know, hasn't been done enough to run away yet, except in places where there have been no inflation, Germany, Hungary and so forth and so on. 107 00:09:56.800 --> 00:10:00.800 They're a lot, it's a, you know, we stop when? 108 00:10:00.800 --> 00:10:04.800 Well, I think, actually, just about any topic could take all night. 109 00:10:04.800 --> 00:10:06.800 Yeah, okay, shut up. 110 00:10:06.800 --> 00:10:13.800 If you can answer, generally, some questions and then refer them to reading materials, that's fine. 111 00:10:13.800 --> 00:10:15.800 So the mystery of banking solves the whole banking question. 112 00:10:15.800 --> 00:10:19.800 It explains it, actually it's the first one that really explains it, but what happens is 113 00:10:19.800 --> 00:10:23.800 money and banking textbooks will explain it, except they have the wrong point of view on it. 114 00:10:23.800 --> 00:10:28.800 My only little pamphlet, most hard money people have the right point of view, they don't explain it in detail. 115 00:10:28.800 --> 00:10:33.800 I combine explaining in detail with our money analysis. 116 00:10:33.800 --> 00:10:41.800 Basically it's that, it functions something like warehouse receipts. 117 00:11:11.800 --> 00:11:18.800 For some obscure reason, common law or statute law warehousing was mixed up. 118 00:11:18.800 --> 00:11:26.800 For example, until 10 years ago, Chicago grain elevators, which are the grain warehouses for wheat and so forth, 119 00:11:26.800 --> 00:11:36.800 people deposit grain in the warehouses and leave it for a while and so on and pick it up. 120 00:11:36.800 --> 00:11:43.300 And the grain warehouses began to speculate in the depositors' customers' wheat. 121 00:11:43.300 --> 00:11:49.300 It's very much as if you're depositing something in a warehouse and somebody takes it out and lends it out, 122 00:11:49.300 --> 00:11:52.800 expecting you won't pick it up for a while. 123 00:11:52.800 --> 00:11:58.800 And they were doing this systematically. They were making money and the other guys, they were charging the grains, the wheat people, 124 00:11:58.800 --> 00:12:02.300 money for depositing, and then they'd take it out and lend it out. 125 00:12:02.300 --> 00:12:07.300 And it was not illegal, they found it was maybe illegal, it's called imbezzlement, I think it is. 126 00:12:07.300 --> 00:12:12.300 And then it became a no-no and that was the end of that. 127 00:12:12.300 --> 00:12:17.300 However, the case of banks, which were originally money warehouses where people put gold on the deposit 128 00:12:17.300 --> 00:12:20.300 and left it there, so the banks began to do the same thing. 129 00:12:20.300 --> 00:12:27.300 And the case came up, early 19th century England, a classic case about 130 00:12:27.300 --> 00:12:32.300 If you deposit something, is it a debt or is it a bailment? 131 00:12:32.300 --> 00:12:35.300 Bailment being a legal term for... 132 00:12:35.300 --> 00:12:40.300 For example, if I leave something at some point, a safety deposit box would be a bailment. 133 00:12:40.300 --> 00:12:43.300 I leave it there, it's supposed to be there, damn it, it's not there on it. 134 00:12:43.300 --> 00:12:47.300 I come for it, somebody has to pay, somebody's a crook. 135 00:12:47.300 --> 00:12:53.300 So is a bank deposit a bailment or is it a loan? 136 00:12:53.300 --> 00:12:57.300 and he was argued about it for it, the judge unfortunately ruled it was a loan. 137 00:12:57.300 --> 00:13:02.300 Although he admitted, this is truly a legal situation ever since, so it's a peculiar kind of loan 138 00:13:02.300 --> 00:13:08.300 because you have to sort of keep it on hand and you're not really paying the guy and he thinks it's there all the time 139 00:13:08.300 --> 00:13:12.300 so it's a very confused decision of the judge. 140 00:13:12.300 --> 00:13:20.300 Ever since that fractional reserve banking has been legal, where you can issue warehouse receipts to non-existent money, 141 00:13:20.300 --> 00:13:24.300 And I just go and lend them out, and hope that you won't get caught, 142 00:13:24.300 --> 00:13:28.300 or hope that people won't call for redemption, in which case you go back, 143 00:13:28.300 --> 00:13:31.300 you don't go to jail, you only go back from it. 144 00:13:31.300 --> 00:13:34.300 So that was a key legal difference. 145 00:13:34.300 --> 00:13:37.300 Did it happen before then with the creation of the Bank of England? 146 00:13:37.300 --> 00:13:41.300 Well, the Bank of England did it on a massive scale, but there weren't that many other banks for that. 147 00:13:41.300 --> 00:13:43.300 So it was the Bank of England that started it? 148 00:13:43.300 --> 00:13:44.300 That's right. 149 00:13:44.300 --> 00:13:46.300 So it was before that decision? 150 00:13:46.300 --> 00:13:48.100 Yeah, the decision came much later. 151 00:13:48.100 --> 00:13:50.300 For some reason, nobody really, 152 00:13:50.300 --> 00:13:51.940 it didn't go to the courts until, 153 00:13:51.940 --> 00:13:54.260 until early 1915 or something. 154 00:13:54.260 --> 00:13:55.100 I don't know why. 155 00:13:55.100 --> 00:13:56.900 Why didn't it take it to the courts? 156 00:13:56.900 --> 00:13:58.860 Probably because there were no bankruptcies. 157 00:13:58.860 --> 00:13:59.700 Oh. 158 00:13:59.700 --> 00:14:00.540 Yeah. 159 00:14:00.540 --> 00:14:02.060 If there weren't any bankruptcies, 160 00:14:02.060 --> 00:14:03.340 why would anyone complain? 161 00:14:03.340 --> 00:14:04.540 Well, the Bank of England went bankrupt 162 00:14:04.540 --> 00:14:05.380 at the very beginning. 163 00:14:05.380 --> 00:14:07.260 Bank of England went bankrupt about two years after 164 00:14:07.260 --> 00:14:08.940 they got started, and the government then stepped in 165 00:14:08.940 --> 00:14:11.540 and said, you can suspend species payments. 166 00:14:11.540 --> 00:14:13.300 You don't have to pay your debt, 167 00:14:13.300 --> 00:14:15.220 or you're, you can continue, 168 00:14:15.220 --> 00:14:20.220 You can enforce the debts on your debts and your debtors, but you don't have to pay the debt. 169 00:14:20.220 --> 00:14:24.220 They did this several times, systematically, every time a bank went out in the hawk. 170 00:14:24.220 --> 00:14:30.220 So finally they confirmed monopoly of the bank, only the bank issued bank notes, 171 00:14:30.220 --> 00:14:33.220 50 mile radius of London, stuff like that. 172 00:14:33.220 --> 00:14:38.220 Anyway, the thing is, the fractional reserve banking doesn't last very long if it's a free banking system. 173 00:14:38.220 --> 00:14:43.220 If you have a real free market of banking, you can't do very much, even with this legal problem. 174 00:14:43.220 --> 00:14:52.220 Say I set up a Rothbard bank, and I start issuing fake warehouse receipts, why not, and lend them out. Who will buy them? 175 00:14:52.220 --> 00:15:00.220 Also, if I have a couple of clients and I lend them this money, Rothbard dollar notes or something, the deal in gold, 176 00:15:00.220 --> 00:15:07.220 pretty soon my borrower is going to spend his money on something else and give the notes to somebody else to buy something with, 177 00:15:07.220 --> 00:15:11.220 and the other guy is not going to be a Rothbard bank client, he'll be a client of some other bank. 178 00:15:11.220 --> 00:15:14.920 The other bank pulls upon me for redemption, I ain't got the money, I'm gonna go bankrupt. 179 00:15:14.920 --> 00:15:18.920 This check, this free market check on fractional reserve banking is pretty powerful. 180 00:15:18.920 --> 00:15:23.020 So the fractional reserve banking never really got started in a real inflationary manner 181 00:15:23.020 --> 00:15:27.520 until the central bank comes in, the bank of England, the Federal Reserve Bank, bank of France, etc. 182 00:15:27.520 --> 00:15:32.320 and generates, pops up the whole system, it's like a government cartel, it's like a compulsory cartel. 183 00:15:32.320 --> 00:15:34.220 It is a compulsory cartel. 184 00:15:34.220 --> 00:15:39.420 Allowing the banks to inflate uniformly so no one bank gets in the public. 185 00:15:39.420 --> 00:15:46.420 And, so anyway, the racketeering part of this is that the Federal Reserve System, for example, 186 00:15:46.420 --> 00:15:52.420 was sold to the United States on the basis of checking the excessive tendency of private banks to inflate. 187 00:15:52.420 --> 00:15:59.420 Actually, the reason is just the opposite. The private banks that couldn't inflate got together and got the government to pass this law 188 00:15:59.420 --> 00:16:04.420 so the Federal Reserve Bank could engage in a carnalized inflation. 189 00:16:04.420 --> 00:16:09.420 It's just like an antitrust law, the same sort of stuff all over again. 190 00:16:09.420 --> 00:16:15.420 And the Federal Reserve in the United States and the Bank of Canada here or whatever, it essentially puts money in a different sophisticated way. 191 00:16:15.420 --> 00:16:22.420 And actually, plain simple fact, it puts the money, and the whole money supply pyramid is upward. 192 00:16:22.420 --> 00:16:27.420 And it's still doing it, despite a little talk about checking inflation and that sort of stuff. 193 00:16:27.420 --> 00:16:31.900 But in fact that business about banks going bankrupt, there was one in Britain that 194 00:16:31.900 --> 00:16:37.260 brings in a lot of money and went under. And the other banks bailed it out because they 195 00:16:37.260 --> 00:16:39.260 needed people. When was that? 196 00:16:39.260 --> 00:16:43.340 Well once in a while, in the United States too, there were really crooked, crooked, crooked 197 00:16:43.340 --> 00:16:49.580 banks. I mean they just walk off the assets, okay. Or they lend money, very unsound loans, 198 00:16:49.580 --> 00:16:52.940 they lend money to people who go bankrupt or something like that. They can go under and 199 00:16:52.940 --> 00:16:58.440 and they're big on lap of the Federal Reserve or the Federal Deposit Insurance and all that, but it's very isolated. 200 00:16:58.440 --> 00:17:02.940 And what I'm talking about is a real bank run where everybody says, in other words, I'd be interested in this sort of thing. 201 00:17:02.940 --> 00:17:09.440 People were talking to Paul the other day about private action, sort of like agorac action. 202 00:17:09.440 --> 00:17:12.440 One agorac action I'd like to see is a mass run of banks. 203 00:17:12.440 --> 00:17:17.940 Everybody cashes in, okay, we don't like banks anymore, we insist on cash. 204 00:17:17.940 --> 00:17:18.940 This requires a lot of headaches. 205 00:17:18.940 --> 00:17:32.940 They could get around it, but there are a lot of original turmoils, they have to adjust, I mean, the Federal Reserve and the House and the House will just print the money and give it to the banks, but they have a lot of institutional problems with it, they have to act fast, they have a lot of headaches. 206 00:17:32.940 --> 00:17:44.940 What they do in cases like that though is declare a bank hold of these one way, but they simply, the government simply locks the doors on that bank and won't allow people to take money. 207 00:17:44.940 --> 00:17:52.620 which is partially what happened with the trust company, yeah, the Rosenbergs. 208 00:17:52.620 --> 00:17:54.860 When the depository wanted the money, the government just said, 209 00:17:54.860 --> 00:17:56.860 I'm sorry, you can't get it for any amount of time. 210 00:17:56.860 --> 00:18:00.700 In fact, certain people who wanted to get their money out 211 00:18:00.700 --> 00:18:02.460 were not allowed to do it at all. 212 00:18:02.460 --> 00:18:06.060 There would have been different associates of the previous owners. 213 00:18:06.060 --> 00:18:07.260 So it's like suspicious species. 214 00:18:07.260 --> 00:18:11.180 Yeah, I mean, the banks are legalized thieves, 215 00:18:11.180 --> 00:18:14.380 just as governments are legalized thieves. 216 00:18:14.380 --> 00:18:20.380 and government simply comes in and says, I'm sorry, you can't take your money back from the thief. 217 00:18:20.380 --> 00:18:28.880 There's also an interesting law which was passed during 1932, the last free banking, before the federal deposit insurance came in, so it locked the whole thing up. 218 00:18:28.880 --> 00:18:34.380 A lot of bank failures, runs on banks. The Republican administration personally blamed it on the communists. 219 00:18:34.380 --> 00:18:39.880 It's because the communists are out there on Bolsheviks, they're undermining the silence of the banking system. 220 00:18:39.880 --> 00:18:43.880 Injecting fear and suspicion in the hearts of the public and the banks. 221 00:18:43.880 --> 00:18:47.880 They didn't need communists to inject fear and suspicion in the banks for collapsing all over the place. 222 00:18:47.880 --> 00:18:55.880 Second of all, they said that it passed a law making it illegal to spread rumors that a bank is unsound. 223 00:18:55.880 --> 00:18:57.880 Or a bank must. 224 00:18:57.880 --> 00:18:59.880 Yeah, except it's on the books. 225 00:18:59.880 --> 00:19:01.880 Oh my god. 226 00:19:01.880 --> 00:19:03.880 They like them apples. 227 00:19:03.880 --> 00:19:19.880 The Canadian government did something similar, Trudeau passed an order, when there was a cartel about the uranium price, cartels were illegal in Canada, so Trudeau passed an order in council making it illegal to talk about the illegal activities of the Canadian government. 228 00:19:19.880 --> 00:19:32.880 In 1977, he passed an order in council that was illegal for any Canadian to talk about the uranium cartel, which was illegal at the time. 229 00:19:32.880 --> 00:19:34.880 That's still in existence. 230 00:19:34.880 --> 00:19:36.880 I don't know if that's still in existence. 231 00:19:36.880 --> 00:19:38.880 Tell me what law is there. 232 00:19:38.880 --> 00:19:40.880 Turn that man in. 233 00:19:40.880 --> 00:19:42.880 He's illegal. 234 00:19:42.880 --> 00:19:46.880 I'm not going to sit in the same room as a film criminal. 235 00:19:46.880 --> 00:19:52.880 The standard conservative doctrine is, if it's on the books, you've got to enforce it. 236 00:19:52.880 --> 00:19:56.880 It might not like the law, but you have to enforce it to the health if it's on the books, right? 237 00:19:56.880 --> 00:20:01.880 So that man is there to protect the public. 238 00:20:01.880 --> 00:20:09.880 I mean, what would we think if all these people went around talking about the fact that the government can do things right? 239 00:20:09.880 --> 00:20:37.880 I should, I should, why, I mean, this is like a two-minute series of sum up a whole bunch of literature, of what the Austrian business cycle theory is, and what the explanation of all this, of what your intercession is, that's a one-minute statement, you can read it in my American Great Depression, or in Hayek's Arthurian Trade Cycle, Human Action. 240 00:20:37.880 --> 00:20:47.880 Basically it is, this is one of the things wrong with the Feminites, the Feminites say, yes, yes, excessive banking expansion, money supply causes inflation. 241 00:20:47.880 --> 00:20:52.880 They don't see any other problems with inflation, it's only the prices go up and down and people can't calculate as well. 242 00:20:52.880 --> 00:20:58.880 Actually what happens with inflation through the banking system is that it messes up the whole production structure. 243 00:20:58.880 --> 00:21:04.880 Interest rates are distorted, production is distorted, and what you have is an excessive investment in capital goods, 244 00:21:04.880 --> 00:21:11.880 and of course things called higher orders of production, machine tools, construction, cement, things like that. 245 00:21:11.880 --> 00:21:17.880 And not enough of investment in consumer goods. You have a distortion of this production structure. 246 00:21:17.880 --> 00:21:22.880 Usually there's a lattice where everything clears and clicks and so forth. 247 00:21:22.880 --> 00:21:27.880 Because the government inflates, lends money and the banks inflate the rest of the government, 248 00:21:27.880 --> 00:21:32.880 lend money to businessmen, businessmen then expand unnecessarily, as if there were a lot of savings to invest in. 249 00:21:32.880 --> 00:21:55.880 And as soon as the inflation stops, as soon as the monetary inflation stops, this is revealed by processes I can't go into, as soon as you stop pumping in more money, these construction companies, capital industries start making severe losses, they know their over expansions are revealed. 250 00:21:55.880 --> 00:22:00.880 The recession then becomes necessary and healthy in order to wash out these malinvestments, 251 00:22:00.880 --> 00:22:03.880 to liquidate these unsound investments and get back in a proper proportion. 252 00:22:03.880 --> 00:22:10.880 So the resources are shifted back to consumer goods unless the excess amount of investment goods are eliminated. 253 00:22:10.880 --> 00:22:16.880 So recession then becomes the inevitable, unfortunate, but necessary and inevitable consequence of the boom, 254 00:22:16.880 --> 00:22:18.880 and a healthy consequence of the boom. 255 00:22:18.880 --> 00:22:21.880 The boom is the problem, the recession is the correction. 256 00:22:21.880 --> 00:22:25.880 This is, of course, totally post-Lakhanian doctrine, which you have to, and Friedman 257 00:22:25.880 --> 00:22:29.880 doctrine, you have to pump in, do something in a correct recession. 258 00:22:29.880 --> 00:22:36.880 So, this means that the Austrian policy conclusion provided from that is, if there's an inflation, 259 00:22:36.880 --> 00:22:38.880 stop inflating, there will be a recession. 260 00:22:38.880 --> 00:22:42.880 The thing about recession, let the recession do its healthy work fast and get it over with, 261 00:22:42.880 --> 00:22:43.880 so we can have a recovery. 262 00:22:43.880 --> 00:22:47.880 Let these resources shift back to the proper free market level. 263 00:22:47.880 --> 00:22:50.880 The more you try to hold up the recession and delay it, the more you try to interfere 264 00:22:50.880 --> 00:22:55.680 The fear whether to keep wage rates up, bail out, unsound companies and so forth, the more 265 00:22:55.680 --> 00:23:00.120 you prolong the recession, you're converting it into a chronic depression, the more you're 266 00:23:00.120 --> 00:23:01.120 delaying the recovery. 267 00:23:01.120 --> 00:23:06.760 So the choice then becomes, after the inflation boom, the choice becomes a quick, sharp, sort 268 00:23:06.760 --> 00:23:12.760 of surgical cut, and the recovery is on, or a chronic depression continues on and on. 269 00:23:12.760 --> 00:23:17.200 And what happened in the 1930s is Herbert Hoover, far from being a great apostle of 270 00:23:17.200 --> 00:23:19.000 laissez-faire, was the first big new dealer. 271 00:23:19.000 --> 00:23:23.000 He was the same. His policy was the same as Roosevelt's, except a lower degree. 272 00:23:23.000 --> 00:23:29.000 So as soon as the recession hit, the stock market crash hit, he immediately intervened in all these new deal legislations. 273 00:23:29.000 --> 00:23:35.000 Bailing out bankrupt firms, keeping wage rates up, keeping prices up, et cetera, et cetera. 274 00:23:35.000 --> 00:23:41.000 Pumping in more credit, lowering interest rates, the whole business, public works projects. 275 00:23:41.000 --> 00:23:46.000 What this did was it delayed the recession, prolonged it, and Roosevelt of course intensified it. 276 00:23:46.000 --> 00:23:51.000 You have a 11-year depression. So something which would have been like a nine-month recession 277 00:23:51.000 --> 00:23:57.000 has been converted into a chronic, seemingly permanent depression. And capitalism, the free market, gets the blame for it. 278 00:23:57.000 --> 00:24:05.000 Instead of the government intervention which creates it, it's the free market which is, of course, loving the blame. 279 00:24:05.000 --> 00:24:10.000 And those conservatives still keep maintaining, despite all the evidence, Hoover was a very laissez-faire person, of course, 280 00:24:10.000 --> 00:24:15.000 digging their own grave on this because they're holding up somebody that everybody else thinks belongs in pressure. 281 00:24:15.000 --> 00:24:24.000 The difference between recession and depression is simply in how long it lasts. 282 00:24:24.000 --> 00:24:29.000 Yeah, it's no longer how intense it is. It's big. It's a depression. It's more mild to recession. 283 00:24:29.000 --> 00:24:34.000 Actually, the word depression has now been outlawed by economists. They don't use it. It's too depressing. 284 00:24:34.000 --> 00:24:40.000 In the old days, people didn't talk about depression. They talked about mild depression and severe depression. 285 00:24:40.000 --> 00:24:49.000 And then the pressure stopped being used as a bad PR, so now it's recession, a big recession, you know, since it's full of semantics. 286 00:24:49.000 --> 00:24:51.000 It's become a correction. 287 00:24:51.000 --> 00:25:01.000 Correct, yeah. Sometimes, back in the 60s, they started talking about, they started saying, maybe there are no recessions anymore either, maybe they're just sideways corrections, or whatever. 288 00:25:01.000 --> 00:25:04.000 That was too euphemistic. 289 00:25:04.000 --> 00:25:08.000 What do you call that technical direction? Technical direction, right? 290 00:25:11.000 --> 00:25:13.000 Well, this is the... That's it? 291 00:25:13.000 --> 00:25:17.000 Should we have a general evaluation by people on my page?