WEBVTT NOTE The Free Market Society 1 00:00:00.000 --> 00:00:14.400 Our society is a society on account of the fact that the various members, the various individuals 2 00:00:14.400 --> 00:00:26.600 are not living their own lives without any reference and without any connection with the lives of other individuals, 3 00:00:26.600 --> 00:00:50.600 that thanks to the division of labor, we are connected by working for others and receiving and consuming what others have produced for us. 4 00:00:50.600 --> 00:01:03.600 We have an exchange economy. We have an economy that consists in the cooperation of the individuals. 5 00:01:03.600 --> 00:01:17.600 Everybody produces not only for himself, but for other people in the expectation that these other people will produce for him. 6 00:01:17.600 --> 00:01:41.600 This system requires acts of exchange, and these acts of exchange must be such that everybody receives and gives at the same time. 7 00:01:41.600 --> 00:01:52.400 And as the value, the meaning of the things which are given away and which are received are not as equal, 8 00:01:52.400 --> 00:01:59.100 it is necessary, I can only sketch it in a very short way, 9 00:01:59.100 --> 00:02:03.800 it is necessary to have what is called indirect exchange. 10 00:02:03.800 --> 00:02:11.100 That means that people are producing something for other people 11 00:02:11.100 --> 00:02:16.100 and exchanging it at something which they have to get from other people. 12 00:02:16.100 --> 00:02:26.100 But as the quantity and the value of the things given and the things received does not coincide, 13 00:02:26.100 --> 00:02:34.100 it is necessary to use for this purpose a medium of exchange. 14 00:02:34.100 --> 00:02:38.100 I assume that you are all familiar with the fact 15 00:02:38.100 --> 00:02:47.100 I think that it would be impossible to produce for other people 16 00:02:47.100 --> 00:02:52.100 and to expect to consume what other people have produced 17 00:02:52.100 --> 00:02:56.100 in exchange for the things which we are giving to them 18 00:02:56.100 --> 00:03:04.100 if the quantities given away and received 19 00:03:04.100 --> 00:03:19.100 their identity in not only in size, but what's more important in the period in which this exchange has to be done. 20 00:03:19.100 --> 00:03:33.540 Therefore, the production and the exchange of the produced things against other things 21 00:03:33.540 --> 00:03:42.820 requires a medium of exchange, something which is not received and not given away for direct 22 00:03:42.820 --> 00:03:53.820 in Consumption, but for indirect consumption, that means for giving it to other people in order to receive from other people. 23 00:03:53.820 --> 00:04:04.820 We have therefore, leaving aside all details, we have therefore a money economy. 24 00:04:04.820 --> 00:04:14.420 We have media of exchange, we have something which is received and given away, 25 00:04:14.420 --> 00:04:20.420 not for the purpose of consumption, but for the purpose of being exchanged 26 00:04:20.420 --> 00:04:24.420 in a later act of exchange against something else, 27 00:04:24.420 --> 00:04:37.420 and finally only to bring to the originator of the exchange act full satisfactions, 28 00:04:37.420 --> 00:04:41.420 that means those things which he himself wants to consume. 29 00:04:41.420 --> 00:04:56.420 As a medium of exchange, there were used various advocates and various commodities. 30 00:04:56.420 --> 00:05:07.420 But finally, in the course of the centuries, they developed what we call today money and money exchange. 31 00:05:07.420 --> 00:05:36.420 In the historical development of the exchange function and the exchange acts, finally there was a restriction of the number of commodities 32 00:05:36.420 --> 00:05:45.340 were used as media of exchange, not acquired for the purpose of being consumed, but only 33 00:05:45.340 --> 00:05:54.820 acquired with the purpose of being used in a further act of exchange as payment for something 34 00:05:54.820 --> 00:06:01.220 else which one expected to receive. 35 00:06:01.220 --> 00:06:13.220 We have to say, in the course of the historic revolution, about which we cannot say more in such a lecture, 36 00:06:13.220 --> 00:06:23.220 there are developed finally a few articles which were used as media of exchange, 37 00:06:23.220 --> 00:06:35.220 and leaving aside all historical details, for our time there developed only one such thing and this was the metal gold. 38 00:06:36.220 --> 00:06:50.220 People have criticized this from various points of view and they have made jokes about the uselessness of gold 39 00:06:50.220 --> 00:07:05.220 And you know all the stories people were using about the uselessness of gold for direct consumption and similar things. 40 00:07:05.220 --> 00:07:14.220 But this is all of inferior or, let us say, of very small importance. 41 00:07:14.220 --> 00:07:41.220 The most important thing is that without any interference on the part of a central authority, people developed an exchange system, a system of indirect exchange in which the precious metals, gold and silver, were used as media of exchange. 42 00:07:41.220 --> 00:08:09.220 And finally, in a process that is very well known to most of our contemporaries, because it was only a process of the last century, one article remained as a general use medium of exchange, the metal gold. 43 00:08:09.220 --> 00:08:20.220 Now you can criticize this from various points of view, without any reference to the real problems implied. 44 00:08:20.220 --> 00:08:35.220 What we had developed in the 19th century and in the 20th century in the civilized countries 45 00:08:35.220 --> 00:08:47.220 was a system in which the precious metal gold was used as the medium of exchange. 46 00:08:47.220 --> 00:08:53.220 And this system was functioning by and large very well. 47 00:08:53.220 --> 00:08:59.220 All the criticisms which were applied in this regard 48 00:08:59.220 --> 00:09:17.220 are of very little importance when compared with the problems which are created by the substitution of gold, for gold, by something else. 49 00:09:17.220 --> 00:09:39.220 We may say that it is ridiculous that such a useless metal, which can only be used for very unimportant things, is serving as a medium of exchange. 50 00:09:39.220 --> 00:09:49.220 But we could not, we cannot deny that it functions to some extent satisfactorily in this regard. 51 00:09:49.220 --> 00:09:59.220 We could have, we would have today, if one had not interfered with the monetary system, 52 00:09:59.220 --> 00:10:08.220 we would have today a market in which gold alone would be used as medium of exchange 53 00:10:08.220 --> 00:10:21.220 and the people were to buy and to sell as against the precious metal and gold. 54 00:10:21.220 --> 00:10:34.220 One can criticize this from various point of view, but what one could not bring about was a system in which 55 00:10:34.220 --> 00:10:52.220 in which such production could be satisfactorily operated in the way in which it could theoretically 56 00:10:52.220 --> 00:10:57.220 at least operate with the pure gold standard. 57 00:10:57.220 --> 00:11:08.860 If gold is useless, because if you do not think that to have jewelry out of gold is very important, 58 00:11:08.860 --> 00:11:22.500 if gold is considered as useless for all other purposes, it could and did serve very well as money. 59 00:11:22.500 --> 00:11:45.500 But, this system, the market operated by indirect exchange between the mediary of a precious metal, first of gold and silver and then of gold alone, was destroyed. 60 00:11:45.500 --> 00:12:02.500 It is destroyed again and again, not by something that is inherent in this market system, but 61 00:12:02.500 --> 00:12:19.120 precisely by the governments that want to spend more than they could spend in a market 62 00:12:19.120 --> 00:12:29.220 which is not operated by the government substitutes for the precious metals. 63 00:12:29.220 --> 00:12:46.500 That means we could have a system in which gold alone is for substitutes of gold. 64 00:12:46.500 --> 00:13:05.500 That means claims for gold which are available, which are falling due, immediately could be used as a medium of exchange. 65 00:13:05.500 --> 00:13:09.500 We could have a gold standard all over the world. 66 00:13:09.500 --> 00:13:34.500 If we had such a gold standard all over the world, then gold or some claims against the quantity of gold falling due immediately could be used as money. 67 00:13:34.500 --> 00:13:42.500 It would be a system that could operate to some extent very satisfactorily. 68 00:13:45.500 --> 00:13:56.500 But the government of some countries, and following the example of these governments, 69 00:13:56.500 --> 00:14:06.500 Governments, even the governments of most or perfectly of all other countries, have destroyed this system. 70 00:14:06.500 --> 00:14:36.300 have destroyed this system by declaring that something else is also gold, in value, and could substitute gold in all respects in which it is necessary, 71 00:14:36.500 --> 00:15:01.500 We could have a system in which gold alone and, of course, claims against gold due immediately could be served as money. 72 00:15:01.500 --> 00:15:22.500 But this would be a system in which everybody could exchange what he wants to give away against gold 73 00:15:22.500 --> 00:15:35.500 and then use or against the claims for gold due immediately and it would operate to a certain extent. 74 00:15:36.500 --> 00:15:42.500 But what we have is something very different. 75 00:15:42.500 --> 00:16:10.500 And it developed out of the fact that if there emerges a conflict of opinions and a conflict of interest between people concerning the problem, whether they have to pay something or not, 76 00:16:10.500 --> 00:16:19.500 that such conflicts can only be settled by the government. 77 00:16:19.500 --> 00:16:33.500 That means we could, the reason why the governments have to interfere and do interfere with the problem of the market exchange, 78 00:16:33.500 --> 00:16:52.500 The reason is that people sometimes do not pay what they are, according to the opinion of other people, bound to pay. 79 00:16:52.500 --> 00:17:01.500 That there are differences concerning the problem whether you have to pay me ten ducats or not. 80 00:17:01.500 --> 00:17:16.140 Therefore, in society in which peace among the members of the society is the primary 81 00:17:16.140 --> 00:17:26.980 requirement of an organized state of affairs, in such a society it is the judge, the government 82 00:17:26.980 --> 00:17:39.780 that has to determine whether you are, whether you have to do something, whether you have to pay something, and what you have to pay. 83 00:17:39.780 --> 00:18:00.180 And the government interfered, practically, in declaring this man is bound, according to an agreement which he has made with other people, to pay ten due cuts. 84 00:18:00.180 --> 00:18:08.180 A due cut means a certain piece, a certain quantity of gold. 85 00:18:08.180 --> 00:18:20.680 But we, the government, we have to declare this, and we declare it must not precisely be gold. 86 00:18:20.680 --> 00:18:31.180 If you take a piece of paper and stamp of it Tanducats, this is also a payment. 87 00:18:31.180 --> 00:19:01.100 And this is the problem. The problem is that the government, as the government alone, has to prevent conflicts, armed conflicts, between individuals, by executing the decisions. 88 00:19:01.180 --> 00:19:07.180 Of course, concerning the obligation of a man to pay or not to pay, 89 00:19:07.180 --> 00:19:20.180 the governments have also the power, the right to declare what is money. 90 00:19:20.180 --> 00:19:36.180 These people have made a contract in which they clearly said that there is a certain role to be played by a definite quantity of gold. 91 00:19:37.180 --> 00:19:48.180 And the government says yes, but this quantity of gold can also be a printed piece of paper 92 00:19:48.180 --> 00:19:55.180 on which I, the government, have printed 10 ducats or 100 ducats or 10,000 ducats 93 00:19:55.180 --> 00:20:07.180 because it doesn't cost me more, it doesn't cost the government more to print the figure 10 than the figure 1. 94 00:20:07.180 --> 00:20:19.500 The market, the people on the market, the people in organizing the division of labor, 95 00:20:19.500 --> 00:20:28.780 in bringing about a system in which one man produces shoes and the other man produces coats, 96 00:20:28.780 --> 00:20:36.460 they have brought about a system in which coats can be a change against shoes, 97 00:20:36.460 --> 00:20:44.460 but only practically in account of the difference of the importance and the value 98 00:20:44.460 --> 00:20:48.460 and with the intermediary of money. 99 00:20:48.460 --> 00:20:57.460 But this, but the government interferes in this intermediary, in this medium of exchange. 100 00:20:57.460 --> 00:21:09.460 People have made an exchange under the assumption that one man has to pay to the other man five ducats. 101 00:21:10.460 --> 00:21:20.460 The government says, and what they had in mind was a ducat, a certain piece of gold, a certain quantity of gold. 102 00:21:20.460 --> 00:21:42.460 And the government interferes and says, this piece of paper is all yours, I am the government, and I have the right, I have the power, and this is the problem. 103 00:21:42.460 --> 00:22:04.460 That the government has, in fact, the opportunity to declare that you have said you want to receive, 104 00:22:04.460 --> 00:22:13.460 You have made an agreement according to which you are entitled to receive a certain quantity of gold. 105 00:22:13.460 --> 00:22:19.460 This is meant, when they say, to do cuts. 106 00:22:19.460 --> 00:22:28.460 And the government says, yes, but to do cuts can also be a printed piece of paper 107 00:22:28.460 --> 00:22:34.460 from which I, the government, have printed the words to do cuts. 108 00:22:35.460 --> 00:22:42.460 And unfortunately, it doesn't cost the government more to print two do cuts than to print one do cut. 109 00:22:44.460 --> 00:22:46.460 And here you have the problem. 110 00:22:48.460 --> 00:22:52.460 The monetary problem, and this is the fundamental problem, 111 00:22:52.460 --> 00:23:04.460 The exchange economy, the monetary, the role played by the monetary issues is decisive. 112 00:23:04.460 --> 00:23:12.460 This government, not one government, all governments, practically all governments, 113 00:23:12.460 --> 00:23:17.460 there were some virtuous governments who abstained from it, but you see, 114 00:23:17.460 --> 00:23:46.460 This is a very peculiar situation with regard to such problems, the bad ideas of governments who said that the Ducat should always be a piece of paper in which I have printed the words to the five Ducats. 115 00:23:46.460 --> 00:23:50.460 and these things made popular. 116 00:23:50.460 --> 00:23:56.460 What we have today is precisely, and in the whole world, is precisely the situation. 117 00:23:56.460 --> 00:24:03.460 There are some governments who are better than other governments, 118 00:24:03.460 --> 00:24:18.460 who are only slowly and with some, let us say, bad feelings for themselves, 119 00:24:18.460 --> 00:24:26.460 realizing very well that they are doing something which has some consequences 120 00:24:26.460 --> 00:24:41.460 which I'm not considering as beneficial, except for these things, if the fact is that we have 121 00:24:41.460 --> 00:24:54.980 a system in which the governments are supposed to spend only what they have collected as 122 00:24:54.980 --> 00:25:00.980 taxes from the citizens. 123 00:25:00.980 --> 00:25:06.460 And this collecting of taxes makes the government not very popular 124 00:25:06.460 --> 00:25:09.580 because people don't like to give away money, 125 00:25:09.580 --> 00:25:15.100 especially if, say, for somebody who spends it like the taxes are spent 126 00:25:15.100 --> 00:25:20.780 for things of which we do not agree. 127 00:25:20.780 --> 00:25:37.660 And then the government, because they don't want to restrict their expenditures, 128 00:25:37.660 --> 00:25:43.620 the governments declare what I have printed in my printing office, 129 00:25:43.620 --> 00:25:49.420 in my government printing office, and call it due cuts. 130 00:25:49.420 --> 00:25:53.420 That's all I want to talk about. This is the same as before, you know. 131 00:25:55.420 --> 00:26:04.420 These things started in the way that there were private banks to which the government gave privileges and so on. 132 00:26:05.420 --> 00:26:11.420 The whole story is very interesting and you know it because you find it in every textbook. 133 00:26:12.420 --> 00:26:17.420 But the problem that exists today is precisely this. 134 00:26:17.420 --> 00:26:34.420 The government, as far as the government, as a constitutional government, collects in its taxes only what the citizens are prepared to pay. 135 00:26:34.420 --> 00:26:52.420 or which the government can consider as such, because the parliament, the representatives of the people have accepted these payments, everything is alright. 136 00:26:52.420 --> 00:27:12.420 The government wants to pay policemen. These policemen have to get salaries, they have to live, they need various things for doing all the things which they have to do. 137 00:27:12.420 --> 00:27:26.420 And the government collects these things by taxing the citizens, the citizens pay the taxes and the government spends the taxes, the money received in taxes. 138 00:27:26.420 --> 00:27:39.420 But the problem is that the government say, this is not enough. They don't say it, they think it only, you know. It's the only thing which the government can think of. 139 00:27:39.420 --> 00:27:51.420 We need more. And the simplest way to get more is to print it. 140 00:27:51.420 --> 00:28:03.420 This is forbidden to the citizens. If you have a citizen there to do it, then the story would look in a very different way. 141 00:28:03.420 --> 00:28:16.620 But the government is reduced to a very simple description. 142 00:28:16.620 --> 00:28:32.620 The government prints, sinks, prints pieces of paper which it declares to be equal in 143 00:28:32.620 --> 00:28:38.620 and practicing power to pieces of gold. 144 00:28:39.620 --> 00:28:48.620 And if you do not obey, then you have the problem that the government will force you to do. 145 00:28:51.620 --> 00:28:55.620 Now, the situation is this. 146 00:28:55.620 --> 00:29:13.620 We had a monetary system consisting of precious metals, gold and silver, and you have not to enter into this details. 147 00:29:13.620 --> 00:29:42.620 And the government interfered by declaring that these pieces of paper which the government has printed have the same purchasing power, the same value on the market as the pieces of gold. 148 00:29:43.620 --> 00:29:53.620 And if the government says this, then it increases the quantity of money. Wonderful. But what is the fact? 149 00:29:53.620 --> 00:30:12.620 If the government wants to hire additional servants, government servants, because this is for something, for some purpose which is good or bad is another question. 150 00:30:12.620 --> 00:30:26.620 And as they do not have enough money, gold or silver, they print an additional quantity of money. 151 00:30:26.620 --> 00:30:33.620 They increase the quantity of money. And what does this mean? 152 00:30:33.620 --> 00:30:55.620 This means that somebody who was yesterday in no way connected with the government's actions is now hired by the government as a policeman, as an additional policeman. 153 00:30:55.620 --> 00:31:03.620 And he gets a salary. He makes a living from spending this salary. 154 00:31:04.620 --> 00:31:15.620 And this salary consists in the creation of an additional quantity of money. 155 00:31:15.620 --> 00:31:30.180 Now, this man who got this additional quantity of money, this newly created quantity of money, 156 00:31:30.180 --> 00:31:39.180 appears on the market with money that didn't exist yesterday. 157 00:31:39.180 --> 00:31:52.180 And the quantity of commodities did not increase. Nothing changed with the commodities. 158 00:31:52.180 --> 00:32:02.180 Commodities, there was the only change that happened from yesterday was that there is now an additional quantity of money. 159 00:32:02.180 --> 00:32:16.180 And this additional quantity of money is spent for the same quantity of consumer's goods and producer's goods which existed yesterday. 160 00:32:16.180 --> 00:32:38.180 That means, that this man who comes with this additional quantity has, in order to get something, to offer a higher price for the things for which yesterday people used to pay a smaller price. 161 00:32:38.180 --> 00:32:55.180 Prices are going up. Prices are going up because there is an additional quantity of money, asking, searching for a non-increased quantity of commodities. 162 00:32:59.180 --> 00:33:01.180 And this means that prices are going up. 163 00:33:01.180 --> 00:33:26.180 And the newspapers or the theorists call this inflation. Inflation is new money into the market and this new money inflates prices. 164 00:33:26.180 --> 00:33:38.180 The government says, what happened? The government is very innocent. It doesn't know what happened. 165 00:33:38.180 --> 00:33:44.180 It didn't, because this happened in another department of the government. 166 00:33:44.180 --> 00:34:06.180 How should one man know, how should I, the man in the department of finance, know that this additional money is really spent and that the spending must raise prices because the quantity of goods did not increase. 167 00:34:06.180 --> 00:34:08.180 Now we have this problem. 168 00:34:10.180 --> 00:34:19.180 We have, you know, when the government wants to pay more for some purpose, 169 00:34:19.180 --> 00:34:26.180 let us say, if the government wants to raise the salaries of some government employees 170 00:34:26.180 --> 00:34:31.180 and collect this money by taxes from the citizens, 171 00:34:31.180 --> 00:34:49.180 The citizens who have paid taxes have to restrict their expenditures to the same extent to which the receivers of this money are now in a position to increase their expenditures. 172 00:34:49.180 --> 00:35:06.980 But this is not the case here. These people, nobody suffers, because the government does not tax more, does not collect more taxes. 173 00:35:06.980 --> 00:35:17.340 But there are now people who find in the morning in their pockets more money. 174 00:35:17.340 --> 00:35:21.340 He says it's very good. The government has finally raised the money, you know. 175 00:35:21.340 --> 00:35:30.340 It would be perfectly correct, all these things, if the government has collected this money from somebody else. 176 00:35:30.340 --> 00:35:42.340 Then somebody, Mr. A, would have been forced to restrict his expenditures because Mr. B is now in a position to spend these things. 177 00:35:42.340 --> 00:35:45.340 Now you have the inflation problem. 178 00:35:45.340 --> 00:36:01.340 And the governments try to find out somebody who is responsible, but not in the government. 179 00:36:01.340 --> 00:36:08.340 They consider as responsible the man who asks for higher prices. 180 00:36:08.340 --> 00:36:13.340 But he best ask for higher prices because there are now more people there. 181 00:36:13.340 --> 00:36:24.340 He has 100 units to sell, and there are now people to sell each at 5 pieces of money. 182 00:36:24.340 --> 00:36:34.340 And now there are Comte people, they have not 500 but 600 pieces of money in their pockets. 183 00:36:34.340 --> 00:36:46.340 And they must therefore in order to prevent the other men from getting to think they must be higher prices. 184 00:36:46.340 --> 00:36:49.340 Now we have the inflation. 185 00:36:49.340 --> 00:37:03.340 And there was once in the past, indeed, there were innocent people who discovered this wonderful thing. 186 00:37:03.340 --> 00:37:22.340 This wonderful thing for a government to increase the quantity of money and therefore to appear as benefactors on the market. How wonderful. 187 00:37:22.340 --> 00:37:52.240 I do not criticize the purposes for which the government uses the money, because this doesn't make any difference, whether the government uses it for the conduct of a war, for destroying cities, for killing people, or so on, or whether the government uses it for giving better food to innocent children, it doesn't make any difference. 188 00:37:52.340 --> 00:38:00.340 It doesn't make any difference with regard to the problem of the purchasing power of the monetary unit. 189 00:38:01.340 --> 00:38:17.340 The main thing with regard to money is the question how to restrict its quantity, how not to increase its quantity. 190 00:38:17.340 --> 00:38:23.340 The question is, gold too can increase in quantity. 191 00:38:23.340 --> 00:38:29.340 There happened, you know, we had the gold standards to some extent in the world. 192 00:38:29.340 --> 00:38:39.340 It happened that one discovered new opportunities for the production of gold. 193 00:38:39.340 --> 00:38:51.340 And then, as the quantity of world increased, people could spend more and prices went up. 194 00:38:51.340 --> 00:39:05.340 But this was limited. It was limited because these opportunities are, thanks to the geological constitution of our planet, limited. 195 00:39:05.340 --> 00:39:30.340 It could happen, we could imagine, you know, if we have people who have a great, a lot of fantasy, can imagine that one day people will discover a method to increase the quantity of money in such a simple way in which we can increase today the quantity of, let us say, paper. 196 00:39:30.340 --> 00:39:45.340 I don't know whether this will happen, nobody knows whether it will happen, and nobody has to tell today, has to give an answer today to the problem, what will people do at the time? 197 00:39:45.340 --> 00:39:57.340 They will have to solve a new problem. Whether this will happen or will not happen, it will be a new problem and then they will have to do it. 198 00:39:57.340 --> 00:40:22.340 But as far as we see the conditions today, the increase in the quantity of production of gold is so limited that it makes the use of the precious metal of gold as money possible. 199 00:40:22.340 --> 00:40:32.340 People say, idiotic. Why gold? Why is this useless metal? Because it is yellow. I hate the color. I hate everything. 200 00:40:32.340 --> 00:40:38.340 You can say this, but it is a solution. We have it. 201 00:40:38.340 --> 00:40:46.340 But we don't know what is really happening this way. 202 00:40:46.340 --> 00:40:53.140 And now we have the governments, and the governments are extremely naive. 203 00:40:53.140 --> 00:40:56.440 This is not the only point in which they are naive. 204 00:40:56.440 --> 00:40:59.040 There are many other things. 205 00:40:59.040 --> 00:41:03.840 Government philosophy is not always very first class. 206 00:41:03.840 --> 00:41:08.440 But we have not to deal with these problems. 207 00:41:08.440 --> 00:41:19.440 We have to deal with the problem that the governments try, or many governments, bad governments, 208 00:41:19.440 --> 00:41:25.440 let us say there are many good governments, I don't know where they are, but certainly 209 00:41:25.440 --> 00:41:37.440 they are in theory, that the governments are in a position to destroy the monetary system 210 00:41:37.440 --> 00:41:59.440 as it exists, if they go away from the fact, let us say, from the situation in which the increase in the quantity of monetary units is strictly limited. 211 00:41:59.440 --> 00:42:10.440 And now, you may write volumes over volumes on books on money and monetary problems, and so on. 212 00:42:12.440 --> 00:42:19.440 And, if you look in these books, you don't find the simple truth. 213 00:42:19.440 --> 00:42:25.440 That the increase in the quantity of money is a problem. 214 00:42:25.440 --> 00:42:33.200 That the quantity of money must be restricted in some way or other. 215 00:42:33.200 --> 00:42:41.200 It is not, people say that this is not from the theoretical point of view, this is not a satisfactory solution. 216 00:42:41.200 --> 00:42:55.200 The problem in world history and in human affairs is not, as I said, is satisfactory from the point of view of a definite theory. 217 00:42:55.200 --> 00:43:11.200 This is not the theory that rules the world, but it is the situation, the things which determine the effects which according to the laws of the theory must result. 218 00:43:11.200 --> 00:43:32.200 And this is the situation. What we can do is, in this regard, is to realize that the increase in the quantity of money must be strictly limited. 219 00:43:32.200 --> 00:43:41.200 That it is impossible to have a system in which you can increase the quantity of money. 220 00:43:41.200 --> 00:43:59.200 I do not want to omit the fact that there can emerge for certain governments and for certain conditions, situations 221 00:43:59.200 --> 00:44:09.200 in which the problem is much more complicated, you know, the northern states and the southern states. 222 00:44:09.200 --> 00:44:21.200 And if you were a statesman in the southern state, and there was already approaching to defeat, 223 00:44:21.200 --> 00:44:46.200 And somebody would have told you, don't you know that printing money, banknotes, more and more dollar bills of the subtle equality will destroy the system? 224 00:44:46.200 --> 00:44:52.200 This certain statesman would have answered, 225 00:44:52.200 --> 00:44:59.200 what? You are talking about money and now the problem is with our system, 226 00:44:59.200 --> 00:45:03.200 which is more important than everything in the world, 227 00:45:03.200 --> 00:45:09.200 this certain state should survive or not. 228 00:45:09.200 --> 00:45:14.200 And so he printed, you know, it's more and more. 229 00:45:14.200 --> 00:45:16.700 and until they were zero. 230 00:45:17.700 --> 00:45:22.200 There were other governments who did the same thing, you know. 231 00:45:28.200 --> 00:45:33.200 If you study, it's very interesting to read about it, 232 00:45:33.200 --> 00:45:38.200 it was not so interesting to live under these conditions, 233 00:45:38.200 --> 00:45:43.200 but reading about them in bed in the night, 234 00:45:44.200 --> 00:46:07.200 This may be for some people very nice, these governments printed as much money until the prices went up and up to a point about which they couldn't go higher. 235 00:46:07.200 --> 00:46:28.200 We have in the history of modern paper money, we have several instances of money that went to the zero point of purchasing power. 236 00:46:28.200 --> 00:46:44.200 What we have to realize, therefore, is that when we want to have a system of money that works and operates, 237 00:46:44.200 --> 00:47:02.700 One must not increase the quantity without realizing at every step that one is approaching a very dangerous point, 238 00:47:02.700 --> 00:47:06.700 the point at which the whole thing breaks down. 239 00:47:06.700 --> 00:47:28.700 You will say that this is something very general and what reference does it have to the problems of daily policies, monetary policies, it has a very important reference. 240 00:47:28.700 --> 00:47:45.700 The reference is that when you are operating with something that can be deadly poison, 241 00:47:45.700 --> 00:47:54.700 you must be very careful. You must be very careful not to reach, not to go to a certain point. 242 00:47:54.700 --> 00:48:22.700 This is also something in which I want to say that the problem of all these things that influence the nerves and the mind of people, all these medicines and so on. 243 00:48:22.700 --> 00:48:36.460 The doctor saves the lives of some people by giving them something in a quantity 244 00:48:36.460 --> 00:48:48.220 which he precisely determines and knows, and if the quantity were increased up to a certain point, 245 00:48:48.220 --> 00:49:10.220 It is impossible to answer the question, where does inflation start and where does it end? 246 00:49:10.220 --> 00:49:20.220 It starts as soon as you increase the quantity of money. 247 00:49:20.220 --> 00:49:27.220 And where the danger point begins, this is another problem. 248 00:49:27.220 --> 00:49:51.220 The people must realize that you cannot give a statesman advice. 249 00:49:51.220 --> 00:49:55.220 This is the point. 250 00:49:55.220 --> 00:50:01.220 Up to this point you may go and up beyond this point you may not go and so on. 251 00:50:01.220 --> 00:50:06.220 Life is not as simple as this, you know, but what we have to realize 252 00:50:06.220 --> 00:50:12.220 and what we have to know when we are dealing with money and monetary problems 253 00:50:12.220 --> 00:50:14.220 is always the same. 254 00:50:14.220 --> 00:50:20.220 We have to realize that the increase in the quantity of money, 255 00:50:20.220 --> 00:50:32.220 In the case of those things which have the power to be used for monetary purposes, 256 00:50:32.220 --> 00:50:38.220 this must be restricted very correctly. 257 00:50:38.220 --> 00:50:42.220 And we have now a solution. 258 00:50:42.220 --> 00:50:48.220 We have the practical solution from the theoretical point of view, 259 00:50:48.220 --> 00:51:10.220 The question cannot be answered, approved or rejected or drawn. We have the practical solution that as long as we are using as the medium of exchange the precious metal gold, we have under present day conditions no special problems to realize. 260 00:51:10.220 --> 00:51:22.220 But as soon as we are increasing this quantity, as soon as we say a little bit more, it doesn't matter and so on, 261 00:51:22.220 --> 00:51:38.220 then we are entering a field in which the problems become very different. 262 00:51:38.220 --> 00:51:51.220 We can have today a rather satisfactory system of monetary payments 263 00:51:51.220 --> 00:52:01.220 when we accept the idea that gold can be used as a medium of exchange 264 00:52:01.220 --> 00:52:05.220 without any restrictions today. 265 00:52:05.220 --> 00:52:21.620 And we may say, theoretically, from the point of view of clear, fine theories, this is not very satisfactory, perhaps. 266 00:52:21.620 --> 00:52:29.340 But it is very satisfactory from the point of view of the operation of a monetary system and a market. 267 00:52:29.340 --> 00:52:31.340 And this is what counts. 268 00:52:35.220 --> 00:52:46.220 Thank you, Professor Mises. Now I'd like to collect those questions that we talked about earlier. 269 00:52:59.220 --> 00:53:04.220 When you are choosing, I think you have at least ten questions already. 270 00:53:04.220 --> 00:53:33.220 In a free society, to whom should the coining of money be delegated? 271 00:53:33.220 --> 00:53:48.100 The coining of money could also be done by private citizens or corporations if the moral 272 00:53:48.100 --> 00:53:58.420 standards of this country give us the expectation that they will not misuse the situation. 273 00:53:58.420 --> 00:54:16.420 We have this situation with regard, for instance, with regard to deadly poisons, we have, we assume this, that the pharmacies will not misuse it, because there is no reason for the pharmacy, no to misuse it. 274 00:54:16.420 --> 00:54:39.380 In an economy based on the gold standard, as the quantity of commodities increases, should 275 00:54:39.380 --> 00:54:44.540 the quantity of money be increased, or should prices be allowed to drop? 276 00:54:44.540 --> 00:54:57.540 There is no reason why a definite height of prices, as if one existed, should be retained for all the future. 277 00:54:57.540 --> 00:55:03.540 Prices must drop and prices must go up because this is what the market means. 278 00:55:03.540 --> 00:55:15.540 The market can only function if it adjusts prices to those problems which consumption and production require. 279 00:55:17.540 --> 00:55:20.540 This is something related to that last question. 280 00:55:20.540 --> 00:55:25.540 With the very limited amount of gold, is it practical to use the medal itself, 281 00:55:25.540 --> 00:55:32.540 or would gold notes be used, or would letters of credit be used as restricted currency? 282 00:55:32.540 --> 00:55:44.040 If the letter of credit or the notes are redeemable in the world, then there is no difference. 283 00:55:44.040 --> 00:55:46.040 Really redeemable. 284 00:55:46.040 --> 00:55:51.040 But if you make a difference, this is precisely what we did. 285 00:55:51.040 --> 00:56:00.040 We started, one started into history in issuing banknotes that were redeemable immediately 286 00:56:00.040 --> 00:56:10.040 For everybody, at every instant in gold, this would work in the same way as the pure gold standard. 287 00:56:10.040 --> 00:56:25.040 But as soon as you begin to say that there should be a difference with regard to the redemption of these notes, then you begin to inflate. 288 00:56:25.040 --> 00:56:40.040 This is close to that too. What would be wrong with a system using paper money not backed by gold and which inflation was not employed? 289 00:56:40.040 --> 00:56:45.040 How much should the quantity be? The question is the quantity. 290 00:56:45.040 --> 00:56:55.040 When we say gold, we say all the quantity that you can produce and you can have. 291 00:56:55.040 --> 00:57:04.040 There is no serious problem for the present-day gold standard 292 00:57:04.040 --> 00:57:14.040 if some increase or decrease in the yearly production of gold results. 293 00:57:14.040 --> 00:57:23.840 Results, then there will be some smaller things. But if one enters the field of government 294 00:57:23.840 --> 00:57:38.720 produced also on paper money, then all these limits are useless. 295 00:57:38.720 --> 00:57:43.720 Is it possible to forecast the fate of the US monetary system at this time? 296 00:57:43.720 --> 00:57:46.720 Have we reached the point of no return? 297 00:57:46.720 --> 00:57:49.720 Is a crack-up inevitable? 298 00:57:49.720 --> 00:57:51.720 No. 299 00:57:51.720 --> 00:58:03.720 You see, it depends on who the people will be, what the people will decide in voting in the future. 300 00:58:03.720 --> 00:58:18.720 The great danger is that people will succeed in making inflationary spending popular. 301 00:58:18.720 --> 00:58:20.720 It could happen. 302 00:58:20.720 --> 00:58:26.720 But this is the reason why we have to talk about these things, why we have to study these things, 303 00:58:26.720 --> 00:58:29.720 why we have never to forget these things. 304 00:58:29.720 --> 00:58:42.020 The monetary system is not something that drops from heaven and can be simply used. 305 00:58:42.020 --> 00:58:51.720 It depends on the wise policy of the government and of the individuals. 306 00:58:51.720 --> 00:58:55.220 And therefore the danger is very great 307 00:58:55.220 --> 00:59:18.220 that a government that suppresses every manifestation of opinion on the part of the citizens, such a government will very easily end in inflationary measures. 308 00:59:18.220 --> 00:59:39.220 And this is the reason why I would not be prepared to recommend as an investment Russian rubles, for instance, or some other such monetary things. 309 00:59:39.220 --> 00:59:52.220 I would say the gold standard may, from the theoretical point of view, look as rather funny. 310 00:59:54.220 --> 01:00:07.220 But from the practical point of view, it is today, and as far as we can see, for still very, very long ages to come, no other solution. 311 01:00:09.220 --> 01:00:12.420 Well, that's the last of the questions that people have handed up. 312 01:00:12.420 --> 01:00:18.420 I'm sure Dr. Mises would be glad to sign, autograph any of his books that you folks might have. 313 01:00:18.420 --> 01:00:20.420 I'd like to ask one question. 314 01:00:20.420 --> 01:00:26.420 You could talk for a semester or a year on it, I'm sure, 315 01:00:26.420 --> 01:00:30.420 but you've been talking about an increase in the money supply by the government. 316 01:00:30.420 --> 01:00:36.420 How about the effects of expansion of credit through bank loans and through the banking system? 317 01:00:36.420 --> 01:00:38.420 Does that have similar effects? 318 01:00:38.420 --> 01:01:07.420 When it's only the banking system, then you are free to get your claim, paid by the banks, private banks, private institutions, cannot force you to accept this. 319 01:01:07.420 --> 01:01:34.420 What is the characteristic of the monetary system is that if you have made an agreement to sell something and the payment is postponed, you have to receive it later, then nobody can interfere but the government. 320 01:01:34.420 --> 01:01:39.420 and the government interferes in favor of its own situation. 321 01:01:41.420 --> 01:01:55.420 Governments believe that they have the right to take away everything else from the market, from the citizens. 322 01:01:56.420 --> 01:01:58.420 We have another question coming up here. 323 01:02:04.420 --> 01:02:24.420 I can ask many questions because I have preferred to explain the problems in a simple way than to enter into analysis of the various details which are of smaller importance. 324 01:02:24.420 --> 01:02:30.420 The most important problem is do not increase the quantity of money. 325 01:02:30.420 --> 01:02:35.420 Is there any way to control the issue of money by the Federal Reserve Bank? 326 01:02:37.420 --> 01:02:42.420 The Federal Reserve Bank is an institution of the American government. 327 01:02:42.420 --> 01:02:49.420 And every institution of the American government can operate by the American government. 328 01:02:49.420 --> 01:02:55.420 And therefore, as you don't know, what the people who are forming the government will see tomorrow, 329 01:02:55.420 --> 01:03:15.420 Well, I guess we'll call it a day and Dr. Mises will be willing to autograph books if you want in the library or probably in the library.