WEBVTT NOTE Death Fuel 1 00:00:00.000 --> 00:00:04.640 Thank you ladies and gentlemen for coming out for today's program. 2 00:00:04.640 --> 00:00:11.100 I wondered when I was thinking ahead to this day whether we'd have a crowd because we came 3 00:00:11.100 --> 00:00:17.660 last year and told you about Austrian economics and its application to history and so you've 4 00:00:17.660 --> 00:00:25.760 heard this before, you know, maybe you wouldn't come this year but we live in extraordinarily 5 00:00:25.760 --> 00:00:31.500 Interesting Times, just looking through the Wall Street Journal at breakfast this morning, 6 00:00:31.500 --> 00:00:39.460 I was struck by how many major stories were there. In more normal times, you'd pick up 7 00:00:39.460 --> 00:00:44.560 the morning paper and you'd look and there might be one thing that seemed to have some 8 00:00:44.560 --> 00:00:51.260 importance and then a lot of other material of minor news events, but now it's as if every 9 00:00:51.260 --> 00:01:00.100 Every day, hell breaks loose. What next? It's really too interesting for me. I'm getting 10 00:01:00.100 --> 00:01:09.940 too old to cope with this much excitement. I'd like to see it calm down a little bit, 11 00:01:09.940 --> 00:01:17.940 but I don't think we can expect to see that soon. Unfortunately, one of the things that 12 00:01:17.940 --> 00:01:25.180 What has struck me after spending many years studying what happens during crises of this 13 00:01:25.180 --> 00:01:32.740 sort is that there's a pattern, there's a logic to how they unfold, to how the state 14 00:01:32.740 --> 00:01:46.540 responds to war, to economic collapse, to any kind of major threat, and unfortunately 15 00:01:46.540 --> 00:01:52.420 We are now in the midst of the unfolding of another one of these patterns, and I'm sorry 16 00:01:52.420 --> 00:01:59.780 to report that so far it's going very much according to form. So there's other bad news 17 00:01:59.780 --> 00:02:10.740 that will be coming into play, and I'm praying that it won't be as bad as I fear it will 18 00:02:10.740 --> 00:02:22.740 Now, the title of my talk today, Death Fuel, I can't take credit for, Lew Rockwell, I believe, was the one who selected that title. 19 00:02:22.740 --> 00:02:37.740 I'm not an inflammatory guy. I don't choose flamboyant titles like that. 20 00:02:37.740 --> 00:03:06.740 and I go for the boring and you'll see that soon enough but anyhow, death fuel is an apt title so I didn't object when Lew gave it that title, death and taxes we're told are two unavoidable things and we're in a recession now, 21 00:03:07.740 --> 00:03:14.980 Now times are hard and we're all looking for a bargain so I thought I could offer you two 22 00:03:14.980 --> 00:03:25.780 for one. What a deal. I'll give you death and taxes all rolled into one which is to 23 00:03:25.780 --> 00:03:35.060 say war. War is my subject. You not only get death and taxes together but you get both 24 00:03:35.060 --> 00:03:49.060 both of them in extraordinary amounts. So, such a deal. It's no wonder people keep going back for more time and again. 25 00:03:49.060 --> 00:03:55.060 I've got an old friend, Larry Neal, who taught for many years at the University of Illinois. 26 00:03:55.060 --> 00:04:03.060 He put together, about ten years ago, a documentary collection called War Finance. 27 00:04:03.060 --> 00:04:11.100 and this was published in some obscure collection and I'm sure that no one's 28 00:04:11.100 --> 00:04:15.660 ever looked at it except maybe a few librarians who put it on the shelf but 29 00:04:15.660 --> 00:04:22.540 it's an extremely interesting collection three huge volumes probably 2,500 words 30 00:04:22.540 --> 00:04:44.540 I mean, pages, 2,500 pages, and what Larry did was bring together analyses by historians and economists of how wars have been paid for over the last couple of thousand years or so. 31 00:04:44.540 --> 00:04:51.540 And one of the things that just jumps out at you when you examine these materials is that 32 00:04:51.540 --> 00:04:59.540 The history of war and the history of taxation are virtually one in the same. 33 00:04:59.540 --> 00:05:11.540 I find it hard to think of any innovation in taxation, any new form of taxation, any new way of collecting taxes, 34 00:05:11.540 --> 00:05:19.540 that was not brought into being as part of a government scheme to pay for a war. 35 00:05:19.540 --> 00:05:33.540 Wars put governments to the test, and when governments decide to go to war, unless it's a small war that can be fought out of military inventory, 36 00:05:33.540 --> 00:05:44.540 government is in a position where it has to quite quickly transfer resources from their current uses, 37 00:05:44.540 --> 00:05:49.540 and from the hands of their current possessors and owners 38 00:05:49.540 --> 00:05:56.540 into its own hands for military uses, direct or indirect. 39 00:05:56.540 --> 00:06:06.540 So war requires an abrupt seizure, if you like, of resources by the state. 40 00:06:06.540 --> 00:06:09.540 And that always creates a problem. 41 00:06:09.540 --> 00:06:20.540 The problem, even if the public is generally inclined to favor the war du jour, nonetheless, 42 00:06:20.540 --> 00:06:30.700 each individual tends to disfavor the seizure of his own property. And the more that's seized, 43 00:06:30.700 --> 00:06:38.340 the more people dislike it. Now, governments will always raise regular taxes when they 44 00:06:38.340 --> 00:06:43.660 They go to war in a variety of ways, in major wars. 45 00:06:43.660 --> 00:06:50.020 They will raise old tax rates, adopt new forms of taxation. 46 00:06:50.020 --> 00:06:58.340 But whenever they do that, they're always, as it were, creating tension or having to 47 00:06:58.340 --> 00:07:06.260 deal with the tension that exists between they being the taker and someone else suffering 48 00:07:06.260 --> 00:07:17.960 by being the takee. So there's a kind of a conflict built into every episode of war and its financed by the state. 49 00:07:17.960 --> 00:07:35.960 And the government must find ways to overcome that resistance and proceed if it's going to undertake the war it intends to undertake. 50 00:07:35.960 --> 00:07:45.760 I'm going to focus today on what has been the most common way for government to deal 51 00:07:45.760 --> 00:07:52.360 with this problem or situation it confronts when it goes to war. 52 00:07:52.360 --> 00:08:01.180 And that is to not only create new taxes and raise old tax rates, but to employ the most 53 00:08:01.180 --> 00:08:07.660 Most insidious of all forms of taxation, which is the inflation tax. 54 00:08:07.660 --> 00:08:14.240 So when we look at the history of inflation, again, it's the history of war. 55 00:08:14.240 --> 00:08:21.580 If you looked at a long graph of the general level of prices in the United States over 56 00:08:21.580 --> 00:08:34.380 Over the last 250 years, you'd see, well, for a long time, basically a straight line 57 00:08:34.380 --> 00:08:44.840 with slow ups and downs, and then in the 20th century, a fairly smooth upward sloping line 58 00:08:44.840 --> 00:08:53.360 as the dollar has been progressively diminished in purchasing power, but imposed on those 59 00:08:53.360 --> 00:09:01.360 smooth long-term lines, you would see spikes from time to time. 60 00:09:01.360 --> 00:09:05.220 Every one of those spikes is war. 61 00:09:05.220 --> 00:09:06.220 Every one of them. 62 00:09:06.220 --> 00:09:17.220 It's never been a major inflation comparable to the wartime spikes at any other time in our history. 63 00:09:17.220 --> 00:09:27.220 So we know that death and taxes go together, which means war and inflation go together. 64 00:09:27.220 --> 00:09:34.220 I'm going to show you some of the evidence. 65 00:09:34.220 --> 00:09:49.220 I accumulated on this subject with regard to the two most outstanding episodes in American history, the World Wars. 66 00:09:49.220 --> 00:09:59.220 They were both large-scale affairs in terms of the resources the government seized to carry out the war. 67 00:09:59.220 --> 00:10:07.220 World War I, of course, was by far the smaller of the two, but it was a big deal at the time. 68 00:10:07.220 --> 00:10:16.220 There's a kind of simple rule of thumb, if you want to remember it, about the costs of war in our history. 69 00:10:16.220 --> 00:10:24.220 Go back to the war between the states, which cost something in the neighborhood of $3 billion, 70 00:10:24.220 --> 00:10:32.100 and that was an enormous undertaking at the time and and is still the greatest 71 00:10:32.100 --> 00:10:37.260 war in all of our history in terms of the number of deaths occasioned because 72 00:10:37.260 --> 00:10:44.140 there were more than 600,000 deaths on the two sides in that war and that's a 73 00:10:44.140 --> 00:10:48.740 greater number of deaths than in any of the other US wars but in terms of 74 00:10:48.740 --> 00:10:55.220 of Finances, about three billion dollars for the Civil War, and then just multiply that 75 00:10:55.220 --> 00:11:01.580 by ten, and you get in the neighborhood of thirty billion dollars, that's roughly the 76 00:11:01.580 --> 00:11:08.340 cost of World War I, actually it's a little more, about thirty-three, and then you go 77 00:11:08.340 --> 00:11:14.060 to World War II, multiply it by ten again, so that you get somewhere in the neighborhood 78 00:11:14.060 --> 00:11:29.060 $300 billion for World War II. So it's as if there's an exponential function at work here as we move from one major war to the next that you can multiply the cost by a factor of 10. 79 00:11:29.060 --> 00:11:54.060 And even recently with the relatively small-scale US warfare in Iraq and Afghanistan, the costs have been enormous, considering that the number of men and the amount of material and so forth is nothing like the scale of World War II, 80 00:11:54.060 --> 00:12:07.420 that the government has managed to spend in the neighborhood of a trillion dollars already 81 00:12:07.420 --> 00:12:13.700 with no end in sight and according to some estimates considerably more than that because 82 00:12:13.700 --> 00:12:19.420 some of the costs are, if you put them in present value terms for costs the government 83 00:12:19.420 --> 00:12:21.160 the 84 00:12:21.160 --> 00:12:28.160 future, particularly caring for wounded personnel, then they bulk up very, very large indeed. 85 00:12:30.580 --> 00:12:35.340 But at all events, World War I, which I'll start with, was a big deal at the time. Now 86 00:12:35.340 --> 00:12:39.760 what you can see in this series of numbers, and if you can't see them easily in the back 87 00:12:39.760 --> 00:12:46.760 of the room, I'll tell you what I want you to get from them. First of all, you say that 88 00:12:46.760 --> 00:13:03.760 First of all, you see that the federal outlays in that second column, the federal government before World War I never spent, except during the war between the states, never spent more than a billion dollars. 89 00:13:03.760 --> 00:13:10.480 and so these these figures are in millions of dollars or I'm sorry billions 90 00:13:10.480 --> 00:13:19.080 of dollars here and so you see back here kind of a small-scale federal 91 00:13:19.080 --> 00:13:24.040 government in those days federal spending amounted to something like two 92 00:13:24.040 --> 00:13:53.040 2-3% of the gross domestic product. Now when the U.S. begins to engage in the war, 1917 is an active belligerent, the spending rises hugely, very abruptly, and as you can see, the big year is 1919 when the war is over, because a lot of the costs the government undertook, 93 00:13:54.040 --> 00:14:04.160 to say, purchase ships, airplanes and other things, involve projects that were not complete 94 00:14:04.160 --> 00:14:10.060 at the time the war ended in November 1918 and so the government carried over a lot of 95 00:14:10.060 --> 00:14:14.400 purchases into the following year before it began to cut back. 96 00:14:14.400 --> 00:14:20.880 You'll also notice that when it did cut back, the level of government outlays in the 1920s 97 00:14:20.880 --> 00:14:29.480 was in the neighborhood of around three billion dollars a year then and so it's 98 00:14:29.480 --> 00:14:34.440 roughly three times what it was before the war that's what I call the ratchet 99 00:14:34.440 --> 00:14:41.280 effect or one illustration of the ratchet effect so that even after the 100 00:14:41.280 --> 00:14:45.520 influence of the war had come and gone the government ended up much bigger than 101 00:14:45.520 --> 00:14:53.620 was before and similarly with the level of taxation as you see but if you look 102 00:14:53.620 --> 00:15:01.120 here the government is going to have to get more than 20 times bigger here in a 103 00:15:01.120 --> 00:15:08.480 period of two to three years how does it do that well it raised taxes you can see 104 00:15:08.480 --> 00:15:20.480 The federal taxes went up a great deal. They're, what, six, seven times higher here by the time the war is over than they were before the war. 105 00:15:20.480 --> 00:15:27.480 So there was no doubt the government raised a lot of tax revenue. It did that in a variety of ways. 106 00:15:27.480 --> 00:15:38.760 The Federal Income Tax, you'll remember, was just put into operation in 1913 after ratification of the 16th Amendment. 107 00:15:38.760 --> 00:15:51.360 And so the Income Tax was available now, and when the tax was first discussed before the law was passed in 1913, 108 00:15:51.360 --> 00:15:56.960 Of course, people worried, you know, they said, this is going to turn out to be a way 109 00:15:56.960 --> 00:16:01.420 the government confiscates a lot of income, but its supporters said, no, no, no, not to 110 00:16:01.420 --> 00:16:02.420 worry. 111 00:16:02.420 --> 00:16:08.040 This is just a way of making sure that the rich pay their fair share. 112 00:16:08.040 --> 00:16:18.180 So in fact, the first income tax law in 1913, 14, 15 had rates that ran from 1% of taxable 113 00:16:18.180 --> 00:16:29.420 Income, up to a maximum of 7%. And 7%. Well, maybe if you were J.P. Morgan or Rockefeller, 114 00:16:29.420 --> 00:16:34.260 that was something you didn't sneeze at, but you almost had to be Rockefeller before you 115 00:16:34.260 --> 00:16:46.440 were subject to 7% tax rate for the federal income tax in 1913. And about 98% of the people 116 00:16:46.440 --> 00:17:16.440 The people of the country didn't have to pay any federal income tax. So, it did look like a tax on the rich. But, once the government got into the war, the income tax was pushed down so that it applied to people with much lower incomes and the rates were raised. In fact, they were raised so much that the top rate was pushed from 7% to 77%. 117 00:17:16.440 --> 00:17:25.560 Feller, you took notice. It was nothing to sneeze at, but as you'll see, despite this 118 00:17:25.560 --> 00:17:33.760 substantial increase in federal receipts, which brought in about an additional three billion 119 00:17:33.760 --> 00:17:44.720 a year or more, the government didn't come close to meeting the increase in its outlays. 120 00:17:44.720 --> 00:17:52.880 So it had to borrow a huge amount of money. Now, if you want to go into the bond market 121 00:17:52.880 --> 00:18:03.920 and sell $20 billion worth of debt in 1917-18, you're going to drive the bond price down 122 00:18:03.920 --> 00:18:08.740 real low and the interest rate way up. It's going to cost you a great deal to finance 123 00:18:08.740 --> 00:18:18.140 since that war. So it behooves you to find a way to ease credit conditions. And that's 124 00:18:18.140 --> 00:18:24.860 where the new Federal Reserve system came into play. Also created in 1913, that most 125 00:18:24.860 --> 00:18:32.820 auspicious year, ratification of the 16th Amendment, first federal income tax law of 126 00:18:32.820 --> 00:18:43.820 of the Modern Era, there was a brief one in the Civil War era, and the creation of the Federal Reserve System in December 1913. 127 00:18:43.820 --> 00:18:52.820 So you've got two institutions there without which our history in the past almost 100 years would be unthinkable. 128 00:18:52.820 --> 00:19:03.820 No income tax, no Fed, cannot imagine our history without those two crucial state institutions. 129 00:19:03.820 --> 00:19:15.820 So we've got to ease credit and the way it was done was that the rules were changed for the Fed and the banks. 130 00:19:15.820 --> 00:19:20.820 When the Fed was created, a bank that wanted to borrow from the Fed had to have collateral 131 00:19:20.820 --> 00:19:34.820 And it had to have commercial paper, basically. It had to have some business IOU, short term, usually 90 days or less, a very low risk form of commercial obligation. 132 00:19:34.820 --> 00:19:41.820 And it could put that stuff up and borrow temporary reserves from the Federal Reserve Bank. 133 00:19:41.820 --> 00:19:49.820 But during the war, the government changed the rules so that the banks could use US government bonds. 134 00:19:49.820 --> 00:20:19.820 as Collateral. Well that was handy because the government was trying to sell a lot of U.S. government bonds and so by that measure and by others including by reducing the interest rate, the Federal Reserve Bank's charge to commercial bank borrowers, credit was made very easy and a lot of that new credit that was infused into 135 00:20:19.820 --> 00:20:25.540 to the banking system spilled over into the form of demand for U.S. government debt, 136 00:20:25.540 --> 00:20:33.700 allowing the government to finance its expenditures with much lower interest rates than it would 137 00:20:33.700 --> 00:20:36.100 have otherwise had to pay. 138 00:20:36.100 --> 00:20:45.660 Now the upshot of this is of course that the amount of banking reserves is rising and that 139 00:20:45.660 --> 00:21:10.660 is allowing the banking system to create a greater volume of money and they're doing it and you see that here in this column where the money stock increases between 1915 and 1920 by exactly 100% or almost exactly, close enough for government work. 140 00:21:10.660 --> 00:21:25.960 And when you increase the money stock abruptly like that, you can expect that the general level of prices will be driven up in roughly equal proportion. 141 00:21:25.960 --> 00:21:35.360 And in this case, we have a textbook illustration of the quantity theory of money, because if you look at the GDP deflator, 142 00:21:35.360 --> 00:21:40.600 which is the most general price index, it's the price index for all goods and services 143 00:21:40.600 --> 00:21:56.360 being newly produced. What you see between 1915 and 1920 is precisely 100% increase in 144 00:21:56.360 --> 00:22:02.560 the level of prices. So it's just a perfect fit for the quantity theory of money here 145 00:22:02.560 --> 00:22:14.080 in World War I. You double the money, you double the price level. This is a consumer 146 00:22:14.080 --> 00:22:22.680 price index charted here and what you see is this wartime increase showing up in the 147 00:22:22.680 --> 00:22:28.600 chart here is a doubling of the consumer price level and a little more. And then you see 148 00:22:28.600 --> 00:22:58.600 World War II was a much bigger economic event. There have been some increase in federal receipts and outlays by the time we get to the 149 00:22:58.600 --> 00:23:11.600 The 1940 period, that was the New Deal showing up there, but the New Deal was small potatoes compared to World War II. 150 00:23:11.600 --> 00:23:22.600 And so what the government did here is move its outlays up by a factor of about a hundred in five years' time. 151 00:23:22.600 --> 00:23:33.600 Can you imagine that? Imagine if the government did that today, increased its outlays by a factor of 105 years. Can you imagine that? It's unthinkable. 152 00:23:33.600 --> 00:23:43.600 Well, it was sort of unthinkable then, too. It was hard for people to swallow that that was even possible. But you have to remember what was being done. 153 00:23:43.600 --> 00:23:55.600 The Armed Forces of the United States in 1940, only about 300,000 men, and five years later there's more than 12 million in uniform, 154 00:23:55.600 --> 00:24:04.600 and a larger number than that employed either as civilians by the armed forces or working in war supply industries. 155 00:24:04.600 --> 00:24:14.600 So you reallocated approximately 40% of the entire labor force to war uses in five years' time. 156 00:24:14.600 --> 00:24:22.600 Unbelievable, a huge shift in the use of resources in the American economy. 157 00:24:22.600 --> 00:24:25.600 Never anything like it before or since. 158 00:24:25.600 --> 00:24:27.600 But how do you pay for this? 159 00:24:27.600 --> 00:24:28.600 How do you pay for this? 160 00:24:28.600 --> 00:24:31.600 Well, once again, taxes. 161 00:24:31.600 --> 00:24:38.540 You can raise the tax rates across the board. This time the top individual federal income 162 00:24:38.540 --> 00:24:51.540 tax rate went up to 95%. It makes a millionaire not want to work that last day, doesn't it? 163 00:24:51.540 --> 00:25:00.260 You're going to give 95% of that last million to the state. It takes a lot of the incentive 164 00:25:00.260 --> 00:25:10.860 out of it. So taxes went up enormously. In 1943 the government put into effect the withholding 165 00:25:10.860 --> 00:25:19.100 system to make sure that it got money before people took it home and might not feel like 166 00:25:19.100 --> 00:25:23.980 handing it back to the government later. And that's something we've had ever since is the 167 00:25:23.980 --> 00:25:31.420 the withholding system, another aspect of the ratchet effect, the institutional ratchets 168 00:25:31.420 --> 00:25:41.540 are often more important than the fiscal ratchets by the way, but once again the government 169 00:25:41.540 --> 00:25:48.860 finds that despite enormously increased taxation, its expenditures have gone up much more and 170 00:25:48.860 --> 00:25:53.980 And it has to pay for most of the war cost by borrowing. How is it going to do that without 171 00:25:53.980 --> 00:26:00.220 raising interest rates sky high? And the answer is again, it's going to use the Federal Reserve 172 00:26:00.220 --> 00:26:08.940 system to create expansive credit conditions. And in this case, it not only used the Fed 173 00:26:08.940 --> 00:26:16.260 to lend to the banks and make money so easy that the banking system itself absorbed a 174 00:26:16.260 --> 00:26:35.260 and a huge amount of federal debt, but the Fed directly bought something like $20 billion worth of U.S. government bonds and that's in effect just printing money without even the formality of going through the banking system. 175 00:26:35.260 --> 00:26:42.700 so the Fed enormously increased the money stock if you look over here you see 176 00:26:42.700 --> 00:26:55.220 what happens here by 1945 money stock has gone up by about a hundred excuse me by 177 00:26:55.220 --> 00:27:04.540 about what's it 75 billion dollars so huge increase now you'll notice here in 178 00:27:04.540 --> 00:27:09.220 And the price level I put up, because there was a lot of inflation as a result of this 179 00:27:09.220 --> 00:27:17.960 increase in money, I've left most of these blank. And that's because any prices you purport 180 00:27:17.960 --> 00:27:22.860 to give for the war period are contaminated by the fact that the government put into effect 181 00:27:22.860 --> 00:27:29.900 comprehensive price controls. Now when it did that, of course, it meant that it was 182 00:27:29.900 --> 00:27:51.900 is creating prices so low in almost every market that there was excess demand for these goods and they were no longer being rationed by the market price, they had to be rationed some other way and so the government put into effect a rationing system. 183 00:27:51.900 --> 00:28:00.260 Now I brought with me today a ration book. This one is called Book Four. These are blue 184 00:28:00.260 --> 00:28:07.020 colored ration coupons. You had to have a certain stipulated number of these, plus the 185 00:28:07.020 --> 00:28:13.860 money price when you bought any of the rationed goods. And I have these because I think we 186 00:28:13.860 --> 00:28:35.700 I'm running out of time, but I want to show you just one more display. 187 00:28:35.700 --> 00:28:43.580 This is not, by the way, my creation here, so don't blame this sentence up here on me. 188 00:28:43.580 --> 00:28:53.580 This tells you the items that were rationed in general terms and when they were rationed. 189 00:28:53.580 --> 00:29:06.580 There were a lot of variations and what you'll see is that the rationing system was generally discontinued in 1945 for most of these goods after the war ended. 190 00:29:06.580 --> 00:29:35.580 But the price controls persisted, and they were taken off for a short while in the middle of 1946, put back on again, and then finally after much hemming and hawing and politicking, removed for good, except for a few like rent controls in some cities and price control on sugar, but they lasted for the better part of the war. 191 00:29:35.580 --> 00:29:40.820 of War. They made life very difficult for consumers, by the way, because every time 192 00:29:40.820 --> 00:29:45.700 you had to go to the store, you had to calculate whether you had the right number of ration 193 00:29:45.700 --> 00:29:51.260 coupons and whether you could afford to spend that number at the same time you were calculating 194 00:29:51.260 --> 00:29:56.440 the price and whether you could spend the money price and so forth. So this is just 195 00:29:56.440 --> 00:30:00.720 one of the difficulties. There's a myth that things were great during the war on the home 196 00:30:00.720 --> 00:30:25.720 It's a myth and one of the reasons it's a myth is that this rationing system and the price control system made life very difficult along with many other changes that affected civilians and consumers when the government sucked more than 40% of the national income into making war. 197 00:30:25.720 --> 00:30:33.720 So you don't get something for nothing. The Keynesians have told us that World War II illustrated the Keynesian miracle. 198 00:30:33.720 --> 00:30:42.720 That's baloney. It did nothing of the sort. And the best way to see that is to look at what happened when the government cut back at the end of the war. 199 00:30:42.720 --> 00:30:48.720 The government dropped its expenditures enormously in 1946 and 47. 200 00:30:48.720 --> 00:30:53.720 Every Keynesian theory predicted that would cause a relapse into the Great Depression. 201 00:30:53.720 --> 00:31:01.720 It did nothing of the sort. That should have discredited Keynesian macroeconomics once and for all. 202 00:31:01.720 --> 00:31:06.720 By the very standard of mainstream economics. 203 00:31:06.720 --> 00:31:11.720 Empirical test. There was never a better test of Keynesian theory than that. 204 00:31:11.720 --> 00:31:17.720 It failed and it went on living in academia right up to the present time. 205 00:31:17.720 --> 00:31:22.720 As a very sad commentary on the intellectual honesty of mainstream economics. 206 00:31:22.720 --> 00:31:24.720 and Comics. Thank you very much.