WEBVTT NOTE On Money 1 00:00:00.000 --> 00:00:12.600 We are used to distinguish between the public sector and the private sector of the economic 2 00:00:12.600 --> 00:00:17.480 system, of the social system, of human cooperation. 3 00:00:17.480 --> 00:00:33.200 But we have to realize that this distinction is not between two groups or two sectors, 4 00:00:33.200 --> 00:00:45.200 two sections that are on the point of view of the importance of human action of the same 5 00:00:45.200 --> 00:01:02.600 and Weight. There is, on the one hand, human cooperation. Human cooperation is different 6 00:01:02.600 --> 00:01:26.120 from the individuality, let us take this word, of the primitive ages, pre-human ages, of the conditions, of the animal kingdom and so on. 7 00:01:26.120 --> 00:01:34.120 What distinguishes men and what brings about all human civilization and everything that 8 00:01:34.120 --> 00:01:46.640 men have produced is cooperation of people. Cooperation, that means that everybody tries 9 00:01:46.640 --> 00:01:59.080 to contribute something to the improvement of human conditions and not only for himself 10 00:01:59.080 --> 00:02:09.400 but also for others at any expectation that these others will do the same thing and will 11 00:02:09.400 --> 00:02:15.840 make it possible for him to enjoy things which they couldn't have enjoyed if they had been 12 00:02:15.840 --> 00:02:34.640 Cooperation of Man is the thing that brings about civilization and all the improvement 13 00:02:34.640 --> 00:02:42.480 of human conditions which we are enjoying in the life of civilization. 14 00:02:42.480 --> 00:02:52.880 And this is the market, that means a state of affairs in which I am giving something 15 00:02:52.880 --> 00:02:58.280 in order to receive something from you. 16 00:02:58.280 --> 00:03:08.160 I don't know how many of you have some inkling or idea of the Latin language, but in Latin 17 00:03:08.160 --> 00:03:18.480 There was already, long ago, the best description of this situation in the words, 18 00:03:18.480 --> 00:03:24.720 Doe would death, I give in order that you should give. 19 00:03:24.720 --> 00:03:32.800 I contribute something in order that you should contribute something else. 20 00:03:32.800 --> 00:03:41.160 This exchange, this cooperation, which is necessarily exchange, 21 00:03:41.160 --> 00:03:48.000 needs, for reasons which it is not necessary to explain, 22 00:03:48.000 --> 00:03:52.640 some medium of exchange. 23 00:03:52.640 --> 00:04:00.480 That means the individual wants to receive something definite 24 00:04:00.480 --> 00:04:07.800 from somebody else may not be able at the instant to receive precisely the thing which he wants, 25 00:04:07.800 --> 00:04:20.680 and so he is satisfied for the time being with the reception of something which he will later use 26 00:04:20.680 --> 00:04:27.920 in order to bring about the acquisition of the thing which he really wants. 27 00:04:27.920 --> 00:04:31.120 A Medium of Exchange 28 00:04:31.120 --> 00:04:40.080 And this medium of exchange is, like all conditions concerning the activities of men, 29 00:04:40.080 --> 00:04:45.360 a product of the individual's actions. 30 00:04:45.360 --> 00:04:54.280 It is not something what can be freely manipulated by the government. 31 00:04:54.280 --> 00:05:15.160 We have the idea that the institutions of man are either the market, the exchange between 32 00:05:15.160 --> 00:05:30.920 or the government, the institution which in the mind of many people is something superior 33 00:05:30.920 --> 00:05:37.000 to the market and that could exist in the absence of the market. 34 00:05:37.000 --> 00:05:46.800 The truth is that the government that is the recourse to violence, necessarily the recourse 35 00:05:46.800 --> 00:05:56.160 to violence, cannot produce anything, everything that is produced is produced by the activities 36 00:05:56.160 --> 00:06:04.440 of the individuals and is used on the market in order to receive something in exchange 37 00:06:04.440 --> 00:06:24.880 Money or the medium of exchange is something that individuals are choosing in order to facilitate 38 00:06:24.880 --> 00:06:30.240 the exchange of commodities. 39 00:06:30.240 --> 00:06:41.640 And the government interference with the market and with the money results only or appears 40 00:06:41.640 --> 00:06:54.160 only in cases in which the individuals are not prepared to do what they have promised 41 00:06:54.160 --> 00:07:11.640 to do voluntarily. People believe or assume that it is the government that has been responsible 42 00:07:11.640 --> 00:07:21.360 for the development of money. In the decades preceding the First World War, when many countries 43 00:07:21.360 --> 00:07:31.680 And especially in Germany, people were producing all the doctrines that finally resulted in 44 00:07:31.680 --> 00:07:39.680 the tremendous catastrophes of the big and great wars, and they acquired the German economist 45 00:07:39.680 --> 00:07:52.200 Great Fame by declaring and teaching again and again, money is a product of the activities 46 00:07:52.200 --> 00:07:57.200 of the government. 47 00:07:57.200 --> 00:08:06.560 I have not the time to deal very much with it, I want only to say this doctrine resulted 48 00:08:06.560 --> 00:08:11.880 in Germany and the complete breakdown of the monetary system. 49 00:08:11.880 --> 00:08:22.800 And this doctrine will always again reside in the same outcome whenever it will be tried. 50 00:08:22.800 --> 00:08:29.360 Money is not something that the government creates. 51 00:08:29.360 --> 00:08:40.080 Money is a medium of exchange, something that people, when they cannot directly attain by 52 00:08:40.080 --> 00:08:49.600 giving away what they have produced in order to receive what they want to consume, accept 53 00:08:49.600 --> 00:08:56.480 for the time being as a medium of exchange with the intention to exchange it at a later 54 00:08:56.480 --> 00:09:17.480 against the thing which you really want. We have the problem that misleads the thinking 55 00:09:17.480 --> 00:09:30.720 of all of many people. But unfortunately also the thinking of those people who are operating 56 00:09:30.720 --> 00:09:40.880 our governmental and political activities. This is the idea that the quantity of money 57 00:09:40.880 --> 00:09:51.520 Money counts. It is for the individual certainly better to have more money than to have less 58 00:09:51.520 --> 00:10:04.040 money. But it is not for the whole economic system. If you increase the quantity of money, 59 00:10:04.040 --> 00:10:16.040 You do not improve the conditions, you only change something in the exchange ratio between 60 00:10:16.040 --> 00:10:27.680 and the individuals evaluation and those of the thing. 61 00:10:27.680 --> 00:10:44.440 I want to make this more clear by pointing out to a very simple case taking out of our 62 00:10:44.440 --> 00:11:02.920 Daily Affairs. The government wants to improve the conditions of some of its employees. It 63 00:11:02.920 --> 00:11:12.200 wants to pay higher salaries to its employees. As the government itself does not produce 64 00:11:12.200 --> 00:11:30.200 The only method for the government, which could result in success, is to tax the people, to take away from one group of people and to give it to the government employees. 65 00:11:30.200 --> 00:11:37.200 There is no other method, as the government does not produce anything directly. 66 00:11:37.200 --> 00:11:43.960 Everything that is produced and everything therefore that is consumed is produced out 67 00:11:43.960 --> 00:11:48.960 by the activities of the individuals. 68 00:11:48.960 --> 00:11:53.360 Now there is for the government only one method available. 69 00:11:53.360 --> 00:12:00.560 It has to take away from one group of the people and to give it to the other group of 70 00:12:00.560 --> 00:12:01.560 the people. 71 00:12:01.560 --> 00:12:20.560 There's no possibility for the government to improve the conditions of the government and produce in another way than in taking away from the rest of the population and therefore impairing their conditions. 72 00:12:20.560 --> 00:12:28.560 Then what happens is that the prices, there's no reason for changing the prices. 73 00:12:28.560 --> 00:12:40.060 One, if the government takes away something, taxes away, then the taxpayer is forced to 74 00:12:40.060 --> 00:12:47.640 restrict his expenditure and those people to whom the government gives the higher salaries 75 00:12:47.640 --> 00:12:56.080 are now in a position to buy what these other people lose to buy and can no longer buy because 76 00:12:56.080 --> 00:13:15.920 This would be the method that government can resort to if it wants to change the situation 77 00:13:15.920 --> 00:13:29.760 on the market, but there is another way, another method, and the government uses this method. 78 00:13:29.760 --> 00:13:35.240 The government increases the quantity of money. 79 00:13:35.240 --> 00:13:44.120 All the evils under which we are suffering in our market conditions every day are due 80 00:13:44.120 --> 00:13:58.920 Listen to the fact that the government's belief that it is very permissible and natural way 81 00:13:58.920 --> 00:14:06.760 to increase the power of the government to spend to produce the money. 82 00:14:06.760 --> 00:14:16.240 In order to spend more, the government practically have nothing else to do than to give an order 83 00:14:16.240 --> 00:14:25.560 to a printing office, print the quantity of money and give it to us. 84 00:14:25.560 --> 00:14:29.880 If private citizens do this, the government doesn't like it. 85 00:14:29.880 --> 00:14:39.880 The government doesn't like it if every individual would print the money he needs, but the government doesn't. 86 00:14:39.880 --> 00:14:46.880 And this is the monetary problem. 87 00:14:46.880 --> 00:14:54.880 We have the increase in the quantity of money. 88 00:14:54.880 --> 00:15:00.880 The increase in the medium of exchange, the quantity of the medium of exchange, cannot 89 00:15:00.880 --> 00:15:10.920 improve conditions, cannot change conditions otherwise than by making it possible for some 90 00:15:10.920 --> 00:15:19.880 people to pay higher prices and to buy more, therefore, at the expense of other people 91 00:15:19.880 --> 00:15:26.840 who are forced to restrict their spending and to buy less. 92 00:15:26.840 --> 00:15:33.600 And this is, I would say, this is the whole situation and the whole problem. 93 00:15:33.600 --> 00:15:44.000 The governments have some wonderful terms introduced in order to explain this. 94 00:15:44.000 --> 00:15:48.280 They call it, for instance, deficit spending. 95 00:15:48.280 --> 00:15:57.560 The government taxes and, let us say, we are talking about fantastic small country in which 96 00:15:57.560 --> 00:16:10.520 the total amount of government revenue, let us say, is, by taxes, one million of something. 97 00:16:10.520 --> 00:16:18.040 Yes, but the government wants to spend two millions. 98 00:16:18.040 --> 00:16:29.560 The government adds to the million of units it has taxed away from the citizens, 99 00:16:29.560 --> 00:16:38.800 a second million which it has printed especially for this purpose. 100 00:16:38.800 --> 00:16:51.800 And then the result is that an increased quantity of money on the market is exchanged against 101 00:16:51.800 --> 00:17:00.360 a not increased quantity of real goods, of consumers' goods and so on. 102 00:17:00.360 --> 00:17:17.360 And this means that the prices are most necessary for a government that has a group of learned men 103 00:17:17.360 --> 00:17:32.600 try to conceal this very simple relation in using terms that sometimes mean nothing and 104 00:17:32.600 --> 00:17:41.920 sometimes mean precisely the opposite of what is really going on in the economic system. 105 00:17:41.920 --> 00:17:53.480 If we are talking about inflation, what we mean is that the government increases the quantity 106 00:17:53.480 --> 00:18:06.360 of money in order to spend more than it has collected in taxes from the citizens. 107 00:18:06.360 --> 00:18:14.560 The government appears on the market with an additional quantity of money and this, offering 108 00:18:14.560 --> 00:18:23.640 this additional quantity of money in exchange for the various commodities and services which 109 00:18:23.640 --> 00:18:32.440 it wants to buy, brings about a general tendency toward higher prices or what is to say, toward 110 00:18:32.440 --> 00:18:44.440 and a lower purchasing power of the individual monetary unit. 111 00:18:44.440 --> 00:18:50.440 Now the governments have great power. 112 00:18:50.440 --> 00:19:00.440 They use this power in order to conceal this. 113 00:19:00.440 --> 00:19:16.000 Means, there are people who are teaching, writing, talking about somebody else's responsibility 114 00:19:16.000 --> 00:19:22.760 for the increase in prices, for the upward movement of prices. 115 00:19:22.760 --> 00:19:41.760 They are very bad people. Various names are given to them. I don't want to repeat these names. You know them, also, without my proclaiming. 116 00:19:41.760 --> 00:19:58.400 Now, we have to realize historically that people lose everywhere at the beginning, as a medium 117 00:19:58.400 --> 00:20:03.400 of exchange, a definite grind to product. 118 00:20:03.400 --> 00:20:32.400 In books about the conditions in various countries in the past, you find mention what kind of goods and commodities were used in different countries at different ages as a general medium of exchange. 119 00:20:33.400 --> 00:20:47.720 Finally, there remained only the precious metals, gold and silver, and leaving aside 120 00:20:47.720 --> 00:20:59.440 silver that also disappeared as a medium of exchange in the last centuries, the fact that 121 00:20:59.440 --> 00:21:11.440 The main was, there was the commodity gold which was used for as a medium of exchange. 122 00:21:11.440 --> 00:21:26.440 And it, the function of the government consisted in producing small pieces of this medium of exchange 123 00:21:26.440 --> 00:21:41.440 of which the weight and the content was determined by the government offices and acknowledged by the laws and by the courts. 124 00:21:41.440 --> 00:21:47.440 I cannot enter into the whole history of money. 125 00:21:47.440 --> 00:21:52.440 What resulted was the gold standard. 126 00:21:52.440 --> 00:22:01.440 That means that the metal gold was used as a medium of exchange. 127 00:22:04.440 --> 00:22:12.440 The advantage of this system is, of course, is of every system of a not governmental money, 128 00:22:12.440 --> 00:22:21.440 that an increase in the quantity of money did not depend on the decisions of the government. 129 00:22:22.440 --> 00:22:34.200 The advantage of the gold standard is that the quantity of gold available is independent 130 00:22:34.200 --> 00:22:43.080 on the actions and the wishes and the projects and, I would say, the crimes of the various 131 00:22:43.080 --> 00:22:51.040 governments. 132 00:22:51.040 --> 00:22:59.680 Not because gold is yellow and shiny and heavy and so on, but on account of the fact that 133 00:22:59.680 --> 00:23:11.400 the production of gold as the production of everything depends on factors which cannot 134 00:23:11.400 --> 00:23:18.200 be manipulated by the government in the way in which the government can manipulate the 135 00:23:18.200 --> 00:23:24.920 The production of government paper money, for instance. 136 00:23:24.920 --> 00:23:35.000 It does not cost the government to print upon a piece of paper one hundred more than it 137 00:23:35.000 --> 00:23:43.120 costs to print ten or one on this piece of paper. 138 00:23:43.120 --> 00:23:54.600 And the situation of the market, the situation of all human exchanges, the whole economic 139 00:23:54.600 --> 00:24:08.200 system is undermined, is destroyed by the government when they consider it as advisable 140 00:24:08.200 --> 00:24:17.160 to increase the quantity of money by increasing the quantity of government money, this is the whole thing. 141 00:24:17.160 --> 00:24:33.320 The government, in doing this, refers to certain aspects 142 00:24:33.320 --> 00:24:41.320 which are certainly correct from merely a theoretical point of view, 143 00:24:41.320 --> 00:24:51.320 but have nothing at all to do with the problem with which we are operating. 144 00:24:51.320 --> 00:25:00.320 We had by and large, again and again, 145 00:25:00.320 --> 00:25:28.320 attained a situation in which the medium of exchange was something that the government or nobody else could increase at limit, as it wanted, and again and again the government tried to destroy this. 146 00:25:28.320 --> 00:25:48.920 If we are talking, if one is talking about money, one is talking about a field in which the governments were doing the worst things that can be done, 147 00:25:48.920 --> 00:25:56.000 in which the government were doing things, destroying the market, destroying human cooperation, 148 00:25:56.000 --> 00:26:02.440 destroying all peaceful relations between men. 149 00:26:02.440 --> 00:26:15.160 And what we have to realize is this, every kind of human arrangements is in some way 150 00:26:15.160 --> 00:26:27.920 or other connected with money payments and therefore if you destroy the monetary system 151 00:26:27.920 --> 00:26:39.320 of a country or of the whole world, you are destroyed much more than simply one aspect 152 00:26:39.320 --> 00:26:51.320 When you are destroying, in some regard, the basis of all inter-human relations, when you are destroying the momentary system. 153 00:26:52.320 --> 00:26:57.320 We have, for instance, let us talk about the constitutional system. 154 00:26:57.320 --> 00:27:12.320 One of the fundamental institutions of human cooperation 155 00:27:12.320 --> 00:27:25.320 is the system of limiting the expenditures of the government 156 00:27:25.320 --> 00:27:35.320 to the amount adopted by the representatives of the people. 157 00:27:35.320 --> 00:27:42.880 We have the government. 158 00:27:42.880 --> 00:27:50.000 The government needs money for everything that it wants to spend. 159 00:27:50.000 --> 00:27:56.600 And the quantity of money, as the government does not produce anything, 160 00:27:56.600 --> 00:28:05.760 This quantity of money has to be collected by the government by taxes. 161 00:28:05.760 --> 00:28:12.120 The quantity of taxes that the government is permitted to collect is determined in the 162 00:28:12.120 --> 00:28:15.480 constitutional countries by the constitution. 163 00:28:15.480 --> 00:28:24.720 It is the voters, it is the people who declare the government has the right to collect the 164 00:28:24.720 --> 00:28:42.720 and the Definite Quantity of Taxes. This right is not only a right but it is also a duty of the government and to use these taxes according to the purposes determined by the representatives of the people. 165 00:28:42.720 --> 00:28:59.000 All our constitutional laws, all our system of government is based upon this fact that 166 00:28:59.000 --> 00:29:13.240 that a government is not permitted to do something that disagrees with a system of laws that 167 00:29:13.240 --> 00:29:27.320 are representing the moral and the factual ideas and philosophies of our people. 168 00:29:27.320 --> 00:29:40.960 If the government is in a position to increase the quantity of money, all these provisions 169 00:29:40.960 --> 00:29:44.640 become absolutely meaningless and useless. 170 00:29:44.640 --> 00:30:08.640 If it is said that the government is entitled to spend a definite amount of money for keeping people in prisons, 171 00:30:08.640 --> 00:30:31.640 This means something. There is a definite reason for it. All our legal provisions are to some extent, more or less, influenced by the fact that this is the amount of money which is given to the government for this purpose. 172 00:30:31.640 --> 00:30:39.280 But if the government is in a position to increase the quantity of money, then all these 173 00:30:39.280 --> 00:30:52.560 things become merely a theoretical expression of something which has practically no meaning 174 00:30:52.560 --> 00:30:55.560 at all. 175 00:30:55.560 --> 00:31:10.360 The difference between, let us say, the conditions of England in the 18th century and the conditions 176 00:31:10.360 --> 00:31:19.280 of other countries, let us say, for instance, Russia in the 18th century, the difference 177 00:31:19.280 --> 00:31:25.400 This consisted in the fact that while the Russian government was free to take away from 178 00:31:25.400 --> 00:31:36.600 its subjects what it wanted, the British government had to comply with the provisions of a set 179 00:31:36.600 --> 00:31:46.800 of laws that limited the amount of money that the government had the right to collect from 180 00:31:46.800 --> 00:31:47.800 its citizens. 181 00:31:47.800 --> 00:31:53.800 and we have to spend this money precisely according to the wishes of the people. 182 00:31:56.800 --> 00:32:14.800 Now, the situation, all our, the situation of the political aspect of this, 183 00:32:14.800 --> 00:32:33.080 It means all our laws, all our provisions concerning inter-human relations and the relations between 184 00:32:33.080 --> 00:32:43.120 those parts of the population that has the right to interfere by force with the conditions 185 00:32:43.120 --> 00:32:55.520 Provisions of Other People. All these provisions are based upon monetary determinants. And if 186 00:32:55.520 --> 00:33:02.800 you undermine these monetary determinants, you undermine the whole social structure, 187 00:33:02.800 --> 00:33:16.200 Nothing is left than conditions which have not been approved by anybody, by any group 188 00:33:16.200 --> 00:33:29.960 of the population or by any reasonable taking into account the conditions and the future 189 00:33:29.960 --> 00:33:36.680 of Inter-Human Relations. 190 00:33:36.680 --> 00:33:53.080 It is absolutely that you can protect yourself 191 00:33:53.080 --> 00:34:10.680 against the factors that bring about out of this inflationary conditions destruction of the social system. 192 00:34:10.680 --> 00:34:25.280 I want to point out how this really works in some definite cases. 193 00:34:25.280 --> 00:34:50.280 People think that, after all, changes in the purchasing power of the monetary unit are beneficial to some people, or to other people, or to all people. 194 00:34:50.280 --> 00:34:52.280 We may see how it is. 195 00:34:55.280 --> 00:35:08.080 The government inflates. The government brings about an increase in the quantity of money 196 00:35:08.080 --> 00:35:17.480 in the way which I pointed out before. And this brings about a tendency toward higher 197 00:35:17.480 --> 00:35:36.920 What is the result? What does this mean? That there are higher prices. Everybody realizes 198 00:35:36.920 --> 00:35:46.840 that this means different things for different groups of people. It means that some people 199 00:35:46.840 --> 00:36:00.720 People as the prices of the things which they are buying are going up earlier than the prices 200 00:36:00.720 --> 00:36:07.160 of those things which they are selling, that some people are suffering for some time, but 201 00:36:07.160 --> 00:36:10.040 after some time they sell. 202 00:36:10.040 --> 00:36:21.680 It means, I would say this, when there is inflation in a country, the government increases 203 00:36:21.680 --> 00:36:32.240 the quantity of money, then there are sufferings from various people according to the instance 204 00:36:32.240 --> 00:36:41.680 in which the higher the prices of those things which they are buying are changing as against 205 00:36:41.680 --> 00:36:45.080 the prices of those things which they are selling. 206 00:36:45.080 --> 00:37:00.540 Let us say this, that the prices of certain things are going up sooner, the prices of 207 00:37:00.540 --> 00:37:27.540 and other things later, and it can happen that therefore, it happens continuously, that therefore for some time certain groups are suffering and that only after some time they are too losing this disadvantage by getting higher prices for the things which they are selling. 208 00:37:27.540 --> 00:37:47.420 But money has also other functions, let us point out the following conditions. 209 00:37:47.420 --> 00:38:04.700 In a country like the United States, people are saving in the years in which they are 210 00:38:04.700 --> 00:38:22.700 in full vigor and can earn money. They are saving not only in order to meet some unexpected conditions which could develop one day, 211 00:38:22.700 --> 00:38:40.780 They are saving systematically to enjoy in their old age income without working any longer. 212 00:38:40.780 --> 00:39:07.540 People are, for instance, taking out life insurance policies, they are accumulating savings deposits 213 00:39:07.540 --> 00:39:17.300 in order to help. And they are making agreements with their employers according to which the 214 00:39:17.300 --> 00:39:34.900 employers are bound to pay them later definite amounts as pensioners. When there is now an 215 00:39:34.900 --> 00:40:00.900 When inflation is going on, all these people are suffering. Suffering because they are losing continually with the progress of inflation, because the progress of inflation means that the purchasing power of the monetary unit decreases. 216 00:40:04.900 --> 00:40:19.540 All debtors are winning at the expense of the creditors. 217 00:40:19.540 --> 00:40:33.420 Now people may say, of course, the creditors, the rich, are losing on account of the inflation. 218 00:40:33.420 --> 00:40:40.820 The debtors, the poor, are winning. It's not so bad, they say. 219 00:40:40.820 --> 00:40:48.580 From this point of view, they may say the inflation is not bad. 220 00:40:48.580 --> 00:41:03.380 The poor debtors are seeing that their debts become smaller every day in real values, 221 00:41:03.380 --> 00:41:16.380 And the creditors, or the creditors, the rich, if they are losing a little bit because the prices are going up, this does not make so much. 222 00:41:18.380 --> 00:41:31.380 Wonderful. But who are in our economic system the creditors and who are the debtors? 223 00:41:31.380 --> 00:41:46.060 We have still, we are still thinking of conditions as they were 2000 years ago in the Rome, in 224 00:41:46.060 --> 00:41:54.700 the Republic of Rome, in the days of the Grach brothers, or we are thinking of the conditions 225 00:41:54.700 --> 00:42:01.100 The Federal Reserve prevailed in the Middle Ages or until the 19th century, even in other 226 00:42:01.100 --> 00:42:07.340 parts, in all parts of the world. 227 00:42:07.340 --> 00:42:15.340 We think the debtor is the poor man because he has debts. 228 00:42:15.340 --> 00:42:34.860 The creditor is the rich man. He doesn't mean very much of things. Unfortunately, the conditions 229 00:42:34.860 --> 00:42:40.260 in the capitalistic country, in the capitalistic world of today, are precisely the opposite 230 00:42:40.260 --> 00:42:50.260 Who are the creditors and who are the debtors? The creditors, say the people, the creditors 231 00:42:50.260 --> 00:43:09.260 are the rich. But, in our system, the big enterprises is borrowed from the banks and 232 00:43:09.260 --> 00:43:21.500 banks and via the banks from the masses. And who are the creditors in this case? The creditors 233 00:43:21.500 --> 00:43:31.220 are the people who have savings deposits in the banks. The creditors are the people who 234 00:43:31.220 --> 00:43:44.220 who are not familiar with big business, who do not know what kind of stock, of common stock of corporations to buy, 235 00:43:44.220 --> 00:43:55.220 who prefer to buy bonds, government bonds and bonds of corporations, or should be corporations, 236 00:43:55.220 --> 00:44:17.220 And these people precisely because they are foreign to the conditions of the market, foreign to the conditions of the stock exchange, they are the medium classes. 237 00:44:17.220 --> 00:44:41.220 When in the days of Solon in ancient Athens, or in the days of the Grakha brothers in ancient Rome, or even in the 18th century or early 19th century, people were talking about creditors and debtors. 238 00:44:41.220 --> 00:44:56.420 They were justified to consider the creditor as the wealthier and the debtor as the poorer. 239 00:44:56.420 --> 00:45:05.940 And therefore from this point of view one could say after all what does inflation bring about, 240 00:45:05.940 --> 00:45:12.420 improves the conditions of the poor and impairs the conditions of the richer people, but this 241 00:45:12.420 --> 00:45:17.140 is no longer true for the capitalistic system of our day. 242 00:45:17.140 --> 00:45:27.140 In our day, the capitalistic system, the creditors are the masses, the people who have savings 243 00:45:27.140 --> 00:45:36.980 deposits, who have insurance policies, who have the right to collect later when they retire 244 00:45:36.980 --> 00:45:46.780 a pension and so on. All these people are creditors and are therefore interested in the preservation 245 00:45:46.780 --> 00:45:58.820 of the Purchasing Power of the Monetary Unit and the richer people who own the common stock 246 00:45:58.820 --> 00:46:14.660 of corporations, who own whole enterprises who are not yet being transformed into corporations 247 00:46:14.660 --> 00:46:30.740 and so on, these people have normally borrowed money which is also working in their enterprises. 248 00:46:30.740 --> 00:46:45.060 Therefore, it is not correct to assume that the fact that conditions between creditors 249 00:46:45.060 --> 00:46:53.100 and debitors are changed, that this fact brings about today the same effects which it used 250 00:46:53.100 --> 00:46:56.100 is to bring about in pre-capitalistic ages. 251 00:46:58.100 --> 00:47:04.100 Therefore, to give you an example, I will tell you a story. 252 00:47:05.100 --> 00:47:19.100 There was in Austria, once the inflation went up to the end practically, 253 00:47:19.100 --> 00:47:32.100 The monetary unit lost ninety-five or ninety-nine percent of its purchasing power. 254 00:47:32.100 --> 00:47:46.100 A man, a very successful man, who was the manager of one of the biggest enterprises in the country, told me the story. 255 00:47:46.100 --> 00:47:53.100 When I was a young man, he said, when I was in the twenties, I took out an insurance policy, 256 00:47:53.100 --> 00:47:55.100 a life insurance policy. 257 00:47:55.100 --> 00:48:04.100 I had a job in which I earned very much, much more than I needed. 258 00:48:04.100 --> 00:48:13.100 And so I took out an insurance policy, a life insurance, in order to make provision for 259 00:48:13.100 --> 00:48:26.700 And now, I expected at this time that this would make me a well-to-do borrower when I 260 00:48:26.700 --> 00:48:36.660 will have reached my 60th anniversary, when the life insurance policy would be ready for 261 00:48:36.660 --> 00:48:55.940 And now, what happened? As the prices went up and the monetary quantity remained the same, 262 00:48:55.940 --> 00:49:07.620 I have in fact made for many, many decades savings for whom? 263 00:49:07.620 --> 00:49:17.540 For the government to spend and to devastate it and I have nothing else than a quantity of money 264 00:49:17.540 --> 00:49:30.660 which just is sufficient to cover my expenses for one week or something like that. 265 00:49:30.660 --> 00:49:50.820 We must realize that we in the market economy, in the capitalistic system, have all inter-human 266 00:49:50.820 --> 00:49:59.260 All inter-personal relations that are not simply personal and intimate, all inter-personal 267 00:49:59.260 --> 00:50:17.020 relations are expressed, made, commented in money terms, and that the change in the purchasing 268 00:50:17.020 --> 00:50:35.680 The power of money affects everybody and not in such a way that you could say it is good if the purchasing power of the money is going up or is going down. 269 00:50:35.680 --> 00:50:53.680 All our relations, the relations between individuals and the state and the individuals and other individuals are based on money. 270 00:50:53.680 --> 00:51:08.200 One uses it to typically, and this is not only true for the capitalistic countries, this is true for all kinds of conditions. 271 00:51:08.200 --> 00:51:25.720 For instance, one of the predominantly agricultural countries in which the small or medium size farm prevails, 272 00:51:25.720 --> 00:51:37.080 it is usual, necessarily usual, that at the death of the owner of such a farm, 273 00:51:37.080 --> 00:51:55.200 One of his children only takes over the farm, and the other children, the brothers and sisters, are inheriting only an ideal part of the farm. 274 00:51:55.200 --> 00:52:19.200 And the man who gets the fund has to pay out in the course of his life, step by step, the share of the inheritance which is theirs. 275 00:52:19.200 --> 00:52:32.200 That means that the man who hides the fund gets not more and not less than the other members of the family. 276 00:52:32.200 --> 00:52:43.200 But when this is made and arranged by transferring the property to this one heir 277 00:52:43.200 --> 00:52:54.040 and giving to the others claims in money terms against this air, claims that have to be settled 278 00:52:54.040 --> 00:52:56.320 in the course of the years. 279 00:52:56.320 --> 00:53:05.520 Now if there is an inflationary progress this means that every day these shares of the other 280 00:53:05.520 --> 00:53:17.120 The brothers and sisters are shrinking, and the share of the men who got the farm is increasing. 281 00:53:17.120 --> 00:53:30.200 And in the same way you have everywhere changes in the relations of various individuals with 282 00:53:30.200 --> 00:53:37.160 with other individuals, various enterprises with other enterprises and so on, that are 283 00:53:37.160 --> 00:53:46.440 affected by something which couldn't be anticipated in its quantity, which couldn't be anticipated 284 00:53:46.440 --> 00:53:50.320 at all and so on. 285 00:53:50.320 --> 00:53:56.760 The whole economic system, everything, every relation between individuals in the capitalistic 286 00:53:56.760 --> 00:54:05.880 Society is based upon the assumption that the purchasing power of the monetary unit will 287 00:54:05.880 --> 00:54:14.960 not change considerably, will almost by and large remain the same. 288 00:54:14.960 --> 00:54:32.200 And this, if into such a system enters a revolutionary change in the purchasing power of the individual 289 00:54:32.200 --> 00:54:40.160 money, all human relations become distorted. 290 00:54:40.160 --> 00:54:58.160 Everything, every relation depends, every inter-human relation depends as far as it is not purely personal, 291 00:54:58.160 --> 00:55:09.160 it depends on the purchasing power of the monetary unit and on the assumption that this purchasing power will not use considerably. 292 00:55:10.160 --> 00:55:15.160 What these things brought about, I will give you another thing. 293 00:55:15.160 --> 00:55:18.160 There was another example. 294 00:55:18.160 --> 00:55:24.160 There was in a European country, 295 00:55:24.160 --> 00:55:34.160 there was a poor boy, educated in an asylum for orphans, 296 00:55:34.160 --> 00:55:39.160 very well educated because when he had finished his school 297 00:55:39.160 --> 00:56:07.160 in school and his life in the orphanage, he emigrated to the United States and in the United States, in the course of a long life, he accumulated a considerable fortune by selling, producing and selling something which was very successful in America. 298 00:56:09.160 --> 00:56:21.160 When he, after 45 years of living in the United States, he died, he left a considerable fortune. 299 00:56:22.160 --> 00:56:28.160 It was certainly exceptional that everybody left such a fortune of 2 million dollars. 300 00:56:28.160 --> 00:56:55.160 And this man made a will according to which these 2 million dollars had to be given, had to be sent back to Europe in order to establish another kind of such an orphan asylum in which this man had been educated and so on. 301 00:56:55.160 --> 00:57:09.520 It was done, the money was sent back to Europe and according to the usages had to be invested 302 00:57:09.520 --> 00:57:21.760 in bonds of the government of this country and the interest should be paid every year 303 00:57:21.760 --> 00:57:35.320 in order to upkeep this asylum, but the inflation came and the inflation is made out of this 304 00:57:35.320 --> 00:57:46.640 fortune of 2 million dollars invested in European marks or something like that, 0, simply 0. 305 00:57:46.640 --> 00:57:54.640 Did you have the same thing? There were in the European universities, for instance, that existed already for centuries. 306 00:57:54.640 --> 00:58:12.640 There were lots of foundations which were made in the course of the centuries by people who wanted to make it possible for other poor boys to study at the university 307 00:58:12.640 --> 00:58:22.640 and to achieve the same things which they had achieved on account of the good education which they had got at these universities. 308 00:58:22.640 --> 00:58:26.640 And what happened to all these things? 309 00:58:26.640 --> 00:58:39.640 At the University of Vienna in the year 1900, one in the following years, one said the government or the universities decided 310 00:58:39.640 --> 00:58:46.760 and they will reorganize all this. There were hundreds of such small foundations, which 311 00:58:46.760 --> 00:58:57.760 have very small yearly revenue, which were practically not of any value for students 312 00:58:57.760 --> 00:59:07.040 who wanted to study. One made mergers of dozens of such things and had, therefore, about the 313 00:59:07.040 --> 00:59:26.040 In the year 1910 or 1950, one had again a smaller number, but a number of foundations which could make some sense and use for students. 314 00:59:26.040 --> 00:59:32.040 And what happened? Then came all these countries, in Germany, in France, in Austria, in Italy, 315 00:59:32.040 --> 00:59:38.040 The Great Inflations and this inflation destroyed again these investments. 316 00:59:38.040 --> 00:59:41.040 For whose benefit? 317 00:59:41.040 --> 00:59:45.040 For the benefit, of course, of the government, you could say. 318 00:59:45.040 --> 00:59:49.040 But what did the government do with it? 319 00:59:49.040 --> 00:59:58.040 It spent it. It threw it away. It was throwing it away. 320 00:59:58.040 --> 01:00:27.040 We must realize that money can operate, can work only if we have a system in which there is a prevention of the government to manipulate the value of the money. 321 01:00:28.040 --> 01:00:38.680 We have not to ask whether it is better to have a kind of money that has a higher or 322 01:00:38.680 --> 01:00:42.360 a smaller purchasing power per unit. 323 01:00:42.360 --> 01:00:51.000 What we have to realize is that we don't ought to have a system of money in which the value 324 01:00:51.000 --> 01:01:10.000 The value of the monetary unit is in the hands of the government and the government can operate, manipulate the money market in a way in which it wants it to. 325 01:01:10.000 --> 01:01:19.000 Government is the most important institution, you may say. 326 01:01:19.000 --> 01:01:25.000 Government is very important in many regards. 327 01:01:25.000 --> 01:01:29.000 Perhaps one overrates the importance of the government, 328 01:01:29.000 --> 01:01:36.000 but one does not overrate the importance of good government. 329 01:01:36.000 --> 01:01:55.000 But if the government destroys the monetary system, it destroys one, perhaps the most important foundation of inter-human economic cooperation. 330 01:01:55.000 --> 01:02:10.800 And therefore what we have to avoid is that the government should be able, should be permitted 331 01:02:10.800 --> 01:02:17.040 to increase the quantity of money as it wants. 332 01:02:17.040 --> 01:02:23.800 You will ask why should I not say to decrease it because there is no government, there is 333 01:02:23.800 --> 01:02:29.560 There is no danger that it should be done, but of course it means also that it shouldn't 334 01:02:29.560 --> 01:02:30.560 decrease. 335 01:02:30.560 --> 01:02:49.160 It is necessary to prevent people from destroying the monetary system and therefore the quantities. 336 01:02:49.160 --> 01:02:58.080 What we have to do is that the quantity of money shouldn't be manipulated by the government 337 01:02:58.080 --> 01:03:11.340 according to the wishes of those people who want to sacrifice a few minutes or a few hours 338 01:03:11.340 --> 01:03:26.340 or Days or Weeks of Good Life to Conditions of a Very Long Disastrous State of Affairs. 339 01:03:26.340 --> 01:03:50.740 If you print something on a piece of paper, nobody cares, nobody will say it means something. 340 01:03:50.740 --> 01:04:17.740 The inflation consists in the fact that the government changes a law, saying if you have to pay one dollar, the following government has the right to do it according to its own wishes. 341 01:04:20.740 --> 01:04:35.840 If a growing free market economy were on a gold system, the price of gold would constantly 342 01:04:35.840 --> 01:04:38.940 rise since its supply is relatively limited. 343 01:04:38.940 --> 01:04:49.940 How does or how has, what, how would the market deal with this constant deflation? 344 01:04:49.940 --> 01:05:06.900 There is no danger of deflation in this case. The quantity of gold is sufficient because 345 01:05:06.900 --> 01:05:21.380 Suppose we have such arrangements that does it make possible to operate with the quantity 346 01:05:21.380 --> 01:05:40.980 of World Existence. In the practical, there is not the problem of the rising purchasing 347 01:05:40.980 --> 01:05:48.680 power of the monetary union, but the opposite problem. 348 01:05:48.680 --> 01:05:53.200 Could you explain how governmental expansion of the money supply generates the business 349 01:05:53.200 --> 01:05:55.240 cycle? 350 01:05:55.240 --> 01:06:06.720 Can an autonomous expansion of the gold supply in a free market generate a business cycle? 351 01:06:06.720 --> 01:06:14.440 You know, the difficulty in giving a lecture for one hour or less and one problem is that 352 01:06:14.440 --> 01:06:26.000 People are sometimes asking all questions which cannot be pressed into one hour. 353 01:06:26.000 --> 01:06:41.040 The business cycle has some aspects which are very closely connected with the problem which we are discussing here, but it is something else. 354 01:06:41.040 --> 01:07:02.240 The business cycle is developing out of the intention of people to find some monetary solution 355 01:07:02.240 --> 01:07:12.920 of the problem that commodities are not available without any limitations, that we have only 356 01:07:12.920 --> 01:07:16.440 limited quantities of everything. 357 01:07:16.440 --> 01:07:25.640 This is the connection, but everything else makes it some, leads us into some other field 358 01:07:25.640 --> 01:07:32.280 which I wouldn't be possible to deal with. 359 01:07:32.280 --> 01:07:42.200 I realize very well that the connection is very close, 360 01:07:42.200 --> 01:07:47.160 is that the business cycle develops also out of the fact 361 01:07:47.160 --> 01:07:53.600 that people think that it is possible to improve 362 01:07:53.600 --> 01:07:59.320 Conditions of the Supply of Commodities and Services 363 01:07:59.320 --> 01:08:09.880 by changing something in the books, 364 01:08:09.880 --> 01:08:19.160 by changing the rights of different people to get something 365 01:08:19.160 --> 01:08:36.480 and by changing, making changes in the books but not in the real world among the real agents. 366 01:08:36.480 --> 01:08:49.000 How does the free market and money system keep the supply of money proportional to the supply of goods and services? 367 01:08:49.000 --> 01:09:02.000 There is no proportionality that you know. It is not true that the quantity of commodities, 368 01:09:02.000 --> 01:09:08.000 the increase in the quantity of commodities, the increase in wealth and so on requires an 369 01:09:08.000 --> 01:09:12.000 increase in the quantity of money too. 370 01:09:12.000 --> 01:09:25.000 The man who owns more money, does not need more money in the pocket. 371 01:09:25.000 --> 01:09:33.000 The quantity of money of cash holdings does not increase. 372 01:09:33.000 --> 01:09:41.000 On the contrary, it sometimes decreases with the improvement and the progress of wealth. 373 01:09:41.000 --> 01:09:55.000 Therefore, it is not true. We are today, let us say, 100,000 times in better conditions than people were in the Middle Ages. 374 01:09:55.000 --> 01:10:01.000 But we do not need 100,000 times more money. On the contrary. 375 01:10:01.000 --> 01:10:19.000 Comparatively, compared with the purchasing power of the various assets and commodities and services we have, we need less money and not more. 376 01:10:20.000 --> 01:10:30.000 On a free market, if you had a gold money, would there be an inducement to increase the production of gold, the mining of gold? 377 01:10:31.000 --> 01:10:37.000 Wouldn't prices, wouldn't people mine gold if it was profitable? 378 01:10:37.000 --> 01:10:57.000 You see, you are forgetting that the need for real gold, you know, 379 01:10:57.000 --> 01:11:10.000 does not depend on the quantity of our wealth, but on the organization of the monetary problems. 380 01:11:10.000 --> 01:11:18.000 That means, I can only give you in order to direct your attention to a definite point, 381 01:11:18.000 --> 01:11:32.400 It means that comparatively in the countries in which there was less development of transportation 382 01:11:32.400 --> 01:11:41.960 and of business interactions, comparatively the quantity of money was much greater. 383 01:11:41.960 --> 01:11:52.040 That means in Turkey, in the European parts of Turkey, let us say, of a country like Bulgaria, 384 01:11:52.040 --> 01:11:58.240 that until the middle of the 19th century was included in the most backward part of 385 01:11:58.240 --> 01:12:07.440 Europe, in every regard, comparatively with the wealth which in such Bulgaria existed 386 01:12:07.440 --> 01:12:30.440 At that time, there was the quantity of money in circulation, much, much greater than it was in Western Europe, where already there were these conditions that made simple payments possible without the use of gold. 387 01:12:37.440 --> 01:12:49.440 in electronic industries. And since gold is also increasingly being consumed in aerospace research and in electronics and computers, is there any other possible basis for the money system? 388 01:12:49.440 --> 01:13:06.440 Previously, gold and silver were stored in the form of jewelry or artifacts, but now, for the first time, these precious metals are being consumed in irrecoverable uses and convertible. 389 01:13:06.440 --> 01:13:19.440 That means, gold is also used in metals for other purposes, but it could be, the danger is not that there will be a scarcity of gold. 390 01:13:19.440 --> 01:13:30.440 The real problem is that perhaps, we don't know it, perhaps one day one would discover a system 391 01:13:30.440 --> 01:13:42.440 of increasing the quantity of gold available in such an easy way in which one can increase today the quantity of paper. 392 01:13:43.440 --> 01:13:45.440 Perhaps this will work. 393 01:13:46.440 --> 01:13:52.440 And then we will have these generations, we have to solve another problem. 394 01:13:52.440 --> 01:13:59.920 But we can't tell them today what they will have to do, because we don't know the conditions 395 01:13:59.920 --> 01:14:03.320 under which these things will be desirable. 396 01:14:03.320 --> 01:14:10.280 I am pointing out in my theory of money, especially this, perhaps it will be possible. 397 01:14:10.280 --> 01:14:27.880 Say, we will have one day in such a situation, also physicists, the night today, if it is possible, but this we don't want to enter into this problem. 398 01:14:27.880 --> 01:14:40.280 How can we make plans for a state of affairs whose various conditions we do not know? 399 01:14:40.280 --> 01:14:49.760 We assume only that one condition will prevail, but we don't know anything else. 400 01:14:49.760 --> 01:14:51.520 One more question. 401 01:14:51.520 --> 01:14:54.480 This is the $64,000 question. 402 01:14:54.480 --> 01:14:58.160 How can we get the United States back on the gold standard? 403 01:15:01.960 --> 01:15:09.080 This is a very important thing, and it needs only one thing. 404 01:15:09.080 --> 01:15:18.960 It doesn't need anything else than a change in the public opinion. 405 01:15:18.960 --> 01:15:24.040 If today public opinion takes it for simply for granted, 406 01:15:24.040 --> 01:15:29.320 If the government doesn't have enough money, then it prints it. 407 01:15:29.320 --> 01:15:34.120 We are talking about the deficits 408 01:15:34.120 --> 01:15:37.600 which are covered by additional money. 409 01:15:37.600 --> 01:15:41.760 If this were something quite natural, 410 01:15:41.760 --> 01:15:47.680 why is it we are making a great difference 411 01:15:47.680 --> 01:15:53.080 between a government that prints an additional quantity of money 412 01:15:53.080 --> 01:16:01.920 and Parliamentary Institutions that permit this 413 01:16:01.920 --> 01:16:14.520 and the case of an individual that makes the same things. 414 01:16:14.520 --> 01:16:18.160 Why is it possible, why is it permitted, 415 01:16:18.160 --> 01:16:21.960 why is it permissible to a government 416 01:16:21.960 --> 01:16:25.240 to increase the quantity of money. 417 01:16:25.240 --> 01:16:35.240 There are many other things that governments are not permitted to do. 418 01:16:35.240 --> 01:16:45.640 The main thing is that we have to realize that 419 01:16:45.640 --> 01:16:57.240 Government, too, must be subject to definite rules of what is permitted and what is not permitted.