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NOTE How Not to Deal with Economic Depression

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I mentioned earlier, reassessing the Presidency, if you sign up today as a member of Mises Institute, want to help us in our endeavors, this is the book I'm talking about and one of the authors, one of the many authors who has an essay in this book, is our next speaker.

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and you know poor Abe Lincoln laid peacefully for 135 years and everybody

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praised him all the great things he did and then our next speaker showed up to

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tell the truth about him. Tom DiLorenzo is economics professor at Loyola College

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in Maryland, senior faculty member of the Ludwig von Mises Institute, holds a PhD

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and Economics from Virginia Tech. He's the author of 10 books, The Real Lincoln, How

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Capitalism Saved America, Lincoln Unmasked, and his latest is Hamilton's Curse, How Jefferson's

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Arch Enemy Betrayed the American Revolution and What It Means for America Today. But today,

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Speaking about how not to deal with economic depression, please help me welcome Tom DiLorenzo.

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Thank you, Doug.

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Thank you very much.

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Thank you all for coming here and for supporting the Mises Institute.

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One correction of something Doug said, I have two chapters in the book, Reassessing the

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Presidency.

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I have the Lincoln chapter and the FDR chapter in that book.

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He obviously has not read the book.

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Speaking of religion, econometric hypothesis testing is the religion of the economics profession.

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What can you say when the Fed, which employs thousands of economists, directly and indirectly,

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either as contract employees or as direct Fed employees, totally failed to predict or

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the depression that we're in.

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Not only did they totally fail to predict it, they caused it.

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And so if you want to know where religion is within the economics profession,

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it's the University of Chicago Positivist School of Economics,

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because they failed to even investigate the Austrian theory.

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It was the Austrians who predicted this.

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Go on YouTube and type in Peter Schiff was right.

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Peter Schiff was all over television using the Austrian Business Cycle Theory

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to predict this years ago, that this was going to happen, and that's not religion.

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The one thing that drew me to the Austrian school as a student, you know,

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back when the dinosaurs roamed the earth, was I started reading von Mises and

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Hayek and these other people, and it struck me that contrary to what I was

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being taught in all my classes, these guys were just totally obsessed with

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with understanding and explaining how the world works as opposed to what I was being

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taught by my mainstream economics professors who were only interested in the consistency

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of their mathematical models and the hell with the world.

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I can even remember a big shot mathematical economist who came to give a seminar when

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I was in graduate school on the economics of the hamburger market and one of my professors

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Professor Gordon Tullock said, but this has nothing to do, this is nothing at all like the real hamburger market.

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And this slick Harvard professor said, I'm not interested in the real hamburger market, I'm interested in my model.

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And that's what mainstream economics is like for those of you who haven't sat through the hell of going to graduate school in economics in recent decades.

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One thing Walter Block said about business failure is it's a good thing. It's a positive aspect of capitalism that businesses that produce things that we don't want or that are produced much better quality and lower cost by somebody else, they go by the wayside and those resources are put to better use.

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I used to have a cartoon, a Gary Larson cartoon on my office door illustrating this, it was sort of a little educational thing on my office door, and it was called Early Business Failures, and there was a picture of a caveman with like a lemonade stand, but he wasn't selling lemonade, the title of the thing that he was selling was Porcupine on a Stick, and there was a picture of a customer walking away with a real painful look on his face, picking quills out of his face,

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and so it's and I thought that was just perfect statement of the virtues of

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business failure you know thank goodness we have shark on a stick now not

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porcupine on a stick so the big improvement you know so well I'm going

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to talk about the current depression and in my take on this is that to

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understand the government's response to the depression which it created is is

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you have to understand the purpose of government first and in my view the

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The purpose of government is for those who run it to plunder those who do not.

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And if you go by that understanding, then it all makes perfect sense.

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Consider, for example, how the Democrats in Congress responded to 9-11.

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The first thing they did was to federalize and unionize all the airport employees.

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Why did they do that?

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Well, this was a great opportunity to solidify their political base.

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They created tens of thousands of new faithful Democrat voters.

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I fly in and out of BWI Airport quite a bit and I remember that the same minimum wage workers

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that I always used to pass at the conveyor belt and all that,

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they were all still there after 9-11, after they had all become Federal employees.

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The only difference was it was the same faces, the same people.

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The only difference was they were now making two and a half times what they made last month.

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And so that was that was the initial response by the Democrats of 9-11, the initial response of the Republicans was to realize that this was a dream come true, that ever since the collapse of the Cold War, the Republican Party was in a panic over how to keep the military-industrial-congressional complex going when there was no more Cold War

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They didn't know what to do. Bill Krestel is sort of the ideological godfather, self-imposed, of the Republican Party.

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He wrote an essay in the Wall Street Journal in 1996, defining what he called national greatness conservatism.

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And he said, well, now that the Cold War is over, what are we going to do with all this money we've got?

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All this excess money that we're not spending on the Cold War.

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And he recommended that we do something really, really big, like build a tunnel under the Atlantic Ocean to Europe.

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I'll give you the reference if you want it. It's a 1996 Wall Street Journal article.

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You can just Google Bill Kristol and David Brooks on national greatness conservatism in the Wall Street Journal in 1996.

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I doubt he would be in favor of this now, because all those Islamo-fascists would be running through that tunnel to get here if we were to build that tunnel.

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But this was, you know, there's the Republicans, what are we going to do to keep our power and perks and our pork barrel spending?

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And so 9-11 was a dream coming true, and of course the first thing they did was lie us into war in Iraq.

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And so, and so why? Well again, it was all about them and their power. It was all about keeping their power and keeping the old coalition

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of the defense contractors and everybody else who supported the Republican Party during the Cold War together, keeping that together.

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and so how has the government now responded to the current depression which it has created primarily

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through the Fed but also with a lot of help from various government agencies from HUD to the

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Community Reinvestment Act and others to force mortgage lenders to make hundreds of billions

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of dollars in bad loans to unqualified borrowers. That was part of government policy for 30 years

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and it was really stepped up a lot in the 1990s when the Community Reinvestment Act was was revised

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and so this was you know the government's creation and so what they did was basically to follow

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the Herbert Hoover model in response to the problem that they created

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and it didn't really work out for Herbert Hoover but FDR pretty much copied what Herbert Hoover

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Hoover had started, and it did work out for him politically, as far as that goes.

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And let me, I'll quote myself here, in my book, How Capitalism Saved America, I wrote

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about Hoover, a chapter on Hoover, that in 1929, Hoover devoted 13 percent of the total

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budget to public work spending and pressured state and local governments to increase their

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own public work spending, 13 percent of the federal budget, that's much more than the

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and the Obama stimulus package, as they call it, stimulus package.

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And so, it obviously didn't work for Herbert Hoover, and the basic economic reason it doesn't

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work is that, well, government spending, all it does is divert resources from the private

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sector to the government.

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Every billion dollars the government spends is a billion dollars that is not spent by

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business people, consumers, entrepreneurs, and so forth, and so it's just a diversion

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of Resources. FDR had some 10 million people employed in government make-work jobs by the

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end of the 1930s, and the unemployment rate was still 14.6% in 1940. In 1929, the unemployment

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rate was about 2.9%. The unemployment rate was still about five times higher than the

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and the normal rates by the end of the 1930s.

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FDR had never got us out of the Depression

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despite all the spending that went on.

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And nor did World War II.

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World War II didn't get us out of the Great Depression

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because you don't return to a normal economy

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by conscripting 11 million men

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and sending them out of the country.

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Yes, you can reduce unemployment like that.

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So if we were to round up all the unemployed people today,

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10% of the labor force, according to the government, and send them all to Afghanistan, the government

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could declare, we have eliminated unemployment, the depression is over.

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But of course that's preposterous nonsense.

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There's a bit of a difference, I would argue, of having some guy standing out in the desert

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in Afghanistan being shot at by the Taliban, versus having this person have a job, come

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home at night, have dinner with his family, and so forth.

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There's a tiny bit of difference between those two lifestyles. I would argue anyway, it's just me.

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But that's what the Keynesians argue, that there is no difference when they say World War II ended the Great Depression.

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Nonsense. What ended the Great Depression was the great demobilization of government after World War II.

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The government's budget fell from $95 billion to $35 billion from 1945 to 1947.

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1946 was the largest one-year increase in GDP in American history, and it was right in the middle of the demobilization, where there was a two-thirds absolute reduction in the federal budget.

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That's what finally ended the Great Depression, and also the fact that we no longer had the Roosevelt administration bad-mouthing, smearing, denigrating capitalism day in and day out,

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and therefore creating tremendous uncertainty in the minds of capitalists over the future

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of their investment prospects. They never knew when the next regulation or tax was going to be

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imposed on them by the government, and so that had a very bad negative effect on business investment

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all during the 1930s. And so we're following this model. So FDR never did

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get us out of the depression government spending could never get us out of the

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depression if it could as Walter said you know the Soviet Union the 98% of the

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economy was government and they and they never were very very vigorous I asked an

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MBA class of mine once if if they could think of any one product but the Soviets

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ever marketed internationally there was a successful product and one guy who was

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in the Army, said AK-47s, and that's one thing. But even that, we have no way of knowing if, say, I don't know what an AK-47 costs, but let's say you can buy one for $500. We have no way of knowing that it might have cost the Russians $5 million to produce that $500 gun, because there were no market prices in the Soviet Union back in those days, so who knows how much it cost to produce that product.

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Not only did FDR fail to get us out of the depression, but as anyone who understands political economy would expect,

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the money that was spent was primarily spent according to political criteria, not economic criteria.

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Sort of the implicit assumption in all the news media behind all this talk about stimulus bills and stimulus spending,

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and all the happy talk about green shoots and all this,

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It sort of goes by the assumption that politicians are benevolent angels who are omniscient and know what our needs are and will target their dollars, their spending, you know, specifically to maximize the social welfare or the public good.

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If you believe that, I've got some oceanfront property in Colorado I'd like to sell you later on.

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Milton Friedman used to call this kind of thinking that politicians will ignore politics,

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the barking dog, barking cat syndrome. It's as likely to see politicians who don't pay attention

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to politics in their spending decisions as seeing a cat that barks like a dog. It's just not real.

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It just doesn't happen that way. And there's been quite a bit of research on how

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New Deal Spending was conducted. And even there's a great book, one of the first books criticizing

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Roosevelt was called The Roosevelt Myth by John T. Flynn. And he cites a 1938 report of the United

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States Senate on New Deal spending. And one of the things that they found is that in almost every

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state, the New Deal people went out and told people who had these jobs, the make work jobs,

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Government make-work jobs. If you want to keep this job, you have to re-register as a Democrat if you're a Republican.

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And so the first thing they did was just simply solidify the power base of the Democratic Party.

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And also economists have studied in much more detail than this how the New Deal spinning went about.

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There's one economist named Gavin Wright. He's an economic historian.

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and he wrote an article in one of the top economics journals, it's called the Review of Economics and Statistics and he studied works progress administration spending and here's what he said, he said WPA employment, that is the number of jobs created by the government spending reached its peaks in the fall of election years, imagine that and the pattern is most pronounced when employment is measured relative to indices of

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and so I think this is and we're doing the same thing today I forget what the

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exact percentage is but the news reports I've read about the Obama stimulus bill

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is that most of the spending will take place next year which of course is an

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election year even though we're supposedly in a state of emergency

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unemployment is over 10% there was a Fed bureaucrat last week who came out and

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said he thinks the real unemployment rate is more like 16% not 10% but still

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Since people have short memories, and they will remember their member of Congress, what he or she did for them, maybe three months before the election, much better than what he or she did for them a year and a half before the election.

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This is all scheduled to take place next year, the election year. So we're doing sort of the same thing.

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There are two other economists, Jim Couch and Bill Shugart, and Bill is an old friend of mine.

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They wrote a book called The Political Economy of the New Deal.

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And what they found is that the lion's share, the majority of New Deal spending,

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did not go to the most economically depressed areas of the country, like the Mississippi Delta,

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which was absolutely the worst off of anywhere in the United States.

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of States, but it went to places like California because Roosevelt had a hard time getting

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elected in California. And so the lion's share of the money during the New Deal went to buy

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votes to help get FDR re-elected regardless of what the economic need was or what the unemployment

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rate was and so forth. And Jim Couch and Bill Shugart come with a number of conclusions

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and one of them is, states with healthier economies received proportionally more federal aid during the New Deal that they were not expected to repay, just gifts, while repayable loans, some of the spending was repayable loans, were directed in slightly greater amounts to their harder hit sister states.

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Also, New Dealers allocated more funds, significantly more funds, to states where the nation's most valuable farms were located.

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Little money went to the poor sharecroppers.

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So the large corporate farms got bigger subsidies as they do today under farm programs

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than the poor sharecroppers in Mississippi and places like that.

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States where blacks accounted for larger percentage of the farm population received fewer New Deal dollars

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The states that gave Franklin Roosevelt larger percentages of the popular vote in 1932 were also rewarded with significantly more federal aid than less supportive constituencies.

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So it was one big vote-buying scheme, and of course it works, and they conclude by saying the distribution of the billions of dollars appropriated by the Congress to prime the economic pump was guided less by considerations of economic need than by the forces of ordinary politics.

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And so, in other words, Couch and Shugart found no barking cats in their study and this was a doctoral dissertation at the University of Mississippi that was turned into a book, The Political Economy of the New Deal.

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And that's exactly what's happening here. I'm quoting from an article that I wrote on lewrockwell.com entitled Obama's Political Pork Barrel Infrastructure.

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Structure. And it was clear to me as can be when this was first announced that this is just a carbon copy of what FDR did. They saw the Depression as a golden opportunity to really have a great excuse to spend hundreds of billions of dollars on pork barrel vote buying opportunities. And that's exactly what's going on today. And of course, if you understand economics, you'll understand that this could never ever

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to stimulate the economy, it's robbing Peter to pay Paul, it's diverting massive resources out of the private sector, no matter how it's funded, taxes, borrowing, money creation, it's all going to divert resources from the domain of the private sector to the political sector, and of course that's the whole purpose of the whole thing.

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And we're also following the FDR model, really to a T almost, and ignoring the fact that FDR failed.

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FDR failed. In fact, not only did he fail, but he made the Great Depression much worse and longer lasting than it would otherwise have been.

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Our friends Richard Vedder and Lowell Galloway wrote a book called Out of Work. It's a History of Unemployment in America as a subtitle.

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title, and they document this very nicely with all sorts of statistics that almost everything

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FDR did made the depression longer lasting and worse.

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There was even an article in the Journal of Political Economy, it was one of the top one

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or two economics journals about four or five years ago, that finally caught on to this.

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This was 15 years after veteran Galloway wrote their book that recognized this, that a lot

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of what the New Deal was about was paying farmers to not grow crops.

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Also the National Recovery Act tried to set prices, there's price codes, above market

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clearing prices, price supports, above market clearing prices.

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In other words, they tried to cartelize the entire economy.

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They tried to create cartels in agriculture and manufacturing

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because of the dumb theory that the cause of the Great Depression was low prices.

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And if only the government could prop up prices, the Depression would go away.

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That was basically the bottom line of Roosevelt's theory of the cause

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of the Great Depression and what to do about it. And of course, this didn't work.

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And these two economists writing in the Journal of Political Economy

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Must have had a light bulb going off in a head moment where, wait a minute, we've been

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teaching microeconomics all our careers, and what do we teach about cartels and monopolies?

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Well, the mainstream teaching is that they reduce production, that's how they prop up

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prices.

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And if you reduce production, you reduce employment, too.

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Aha!

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So they remembered sort of basic freshman level economics and got it published in the

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top economics journal in the world, whereas the Austrians had never had to indulge in

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such foolishness, they always understood that this never worked from the time of the 1930s.

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So another book I recommend is by our friend Jim Powell and the book is titled FDR's Folly

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and it was published a few years ago and Jim summarized the last 50 years of academic research

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on the Effects of the New Deal, on the Economy, and did a pretty good job of summarizing it

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in plain English with minimal economic jargon and so forth that almost anybody can read it.

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And the last chapter of that book is sort of a summary of lessons we should learn from the

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mistakes of the New Deal years. And if you look at these lessons, the current government,

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under Bush and under Obama is proving that they have learned absolutely nothing from this.

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And, you know, as an economist like myself and Walter and the other speakers here who know this literature,

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it's just mind-boggling that the government in Washington, even people like Ben Bernanke,

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who was the chairman of the Princeton University Economics Department, totally ignores it.

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Lesson number one in Jim Powell's book is that the basic problem with the central banks

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is that like socialist economic planners, they can never have more than a fraction of the

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vast knowledge needed to make a society work, knowledge that is dispersed in the minds of

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millions of people.

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In addition, when central bankers make mistakes, as they inevitably will, since they're human

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beings, these mistakes harm not just the economy in a city or a region, but the entire country."

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End quote.

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That's Jim Powell.

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And he's talking about the Hayekian or Friedrich Hayek's knowledge problem that Walter Block

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alluded to.

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Hayek himself called this the pretense of knowledge, the idea that some really smart guy or gal,

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or even a group of guys or gals could possess all the information that is in the minds of the million participants in markets

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and somehow do a better job of using that information.

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That's why socialism failed, said Hayek, this pretense, pretense of knowledge.

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But that's the whole basis of central banking, this whole idea that Ben Bernanke is sort of like the Wizard of Oz,

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you know, his big head in the sky, pushing buttons and pulling levers and making the economy work.

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and that's sort of their model and so in fact not only has the Fed not recognized that but they have argued from the very beginning of this crisis which they, the Greenspan Depression is what it ought to be called, that they should be given more power, more power and I've written a couple of articles on a few websites recently when I'm on a mailing list of various branches of the Federal Reserve and in the last several months every time I get one of their reports

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The Analysis of Depressions, it seems like, by the Fed, and they're taking the Greenspan line, Alan Greenspan has been trying to cover his behind pretty assiduously, you know, wouldn't you, if you caused the Great Depression, and so his theory of the cause of all this is that people in Asia save too much of their money,

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and Bob Murphy has written extensively on this on the Mises.org website but that's

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basically his line that it drove down the world interest rates so much that

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that's the cause of it the Fed had nothing to do with it and it caused all

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this excessive risk-taking and therefore the solution is to give the Fed more

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power to regulate risk what it's called what it calls systemic risk which of

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And of course, the truth is that the Fed's own policies is what created this systemic risk-taking by lowering interest rates down to zero, essentially.

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But that's lesson number one. We're doing the opposite.

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Lesson number two, according to Jim Powell, is that deposit insurance must be priced to reflect the risks of the banks that buy it.

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Having the federal government provide deposit insurance inevitably introduced political pressures to offer deposit insurance at the same price for all banks, regardless of risk, which meant subsidized banks engaged in risky practices and contributed to the instability of the banking system.

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And this reminds me of the SNL crisis of the 1980s when they called it deregulation when the Congress increased the amount of coverage of deposit insurance from $40,000 per account to $100,000 per account.

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Now at the time, some of you might remember this regulation called Regulation Q that put price controls on interest rates.

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and S&Ls could only offer, say, 5% interest. And so there was a massive amount of money was flowing out of the S&Ls and into mutual funds and elsewhere.

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And so to help the S&Ls, the government said, we'll increase deposit insurance from $40,000 per account to $100,000 per account.

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And so that induced a lot of the savings and loans to take on extraordinary risk in housing developments in Arizona,

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in the middle of the desert that they were hoping retirees would come and fill up and buy and make them profitable because of course with higher risk they could earn higher returns they thought charge higher interest on the loans because they were risky and of course all this a lot of this blew up in their faces and and this was a great example perfect example of moral hazard supposedly in an attempt to take the risk out of being a savings and loan the government made being a savings and loan extraordinarily more risky

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and a losing proposition and of course there was a 500 billion dollar bailout eventually

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of the savings and loans and so what have we done today well one of the first things

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they did was to increase the rate of deposit insurance about a year ago now that they did

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that so we did the same mistake that we did in the 1980s and the same mistake that was

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created in the 1930s and during the Great Depression.

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Question number three, according to Jim Powell, especially because taxes are the biggest burden

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millions of people face today, it's crucial to cut taxes.

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Tax cuts mean expanding economic liberty.

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Everything I see is just the opposite.

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They're talking about a value-added tax, they're talking about increasing the income tax on

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the most productive people in the country, they're talking about taxing just about everything.

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I've blogged an article a couple of days ago about the part of the environmental movement

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loves depressions because part of their ideology is that zero economic growth is good for the

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environment and they're just giddy with the prospect that they think now it'll create

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a good political environment to do things like put taxes on plastic bags and yippee

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hooray we're going to tax plastic bags now and so everything coming out of Washington

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and we're related to taxation is to increase taxes.

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In Maryland where I live yesterday in the Baltimore sun,

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there was a front page article

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and the sun is really probably like most newspapers

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in America, it's just the propaganda rag

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of the state democratic party.

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There are a few papers that don't qualify for that

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but everywhere I travel,

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that's pretty much what the local newspapers are

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and they praise the governor of Maryland

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for having the courage to have raised the state sales tax last year and he'll probably give him the John F. Kennedy Profiles and Courage Award next year for that, for having the courage to raise taxes in a recession.

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And of course the opposite is what we need to do, but we're not moving in that direction either.

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Lesson number four that we should have learned according to Powell,

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Quote, efforts to soak the rich will backfire because the investments of the rich are needed

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to create jobs.

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Well that's what Barack Obama is all about.

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That's what he's been all about his entire life, if you know anything about him.

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You read his biography and you look, you know, what did he do when he got a Harvard law degree?

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He went to work for Acorn and Acorn is one of the most radical socialist organizations

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in America.

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Read their handbook.

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Before the election, the week before the election, I wrote an article, it's just a tiny bit

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Cynical. It was entitled, Fascism or Socialism, Take Your Pick, about McCain and Obama. McCain's

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campaign theme was country first, and that was essentially a statement of the ideology of

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fascism, was that the common good comes before private interests, was the ideology, the collectivist

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ideology behind fascism. And then Obama, you know, what did he do? Like I said, he went to work for

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for Acorn. And so, what does that say about a man with a Harvard Law degree who decides

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to do this, to be the lawyer for Acorn? Well, what did he hope to achieve? And Acorn, you

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just read their own handbooks and manuals, what are they for? They're for massive redistribution

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of wealth, they're for nationalized health insurance, they want to nationalize the electric

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power industry, they want to tax everything that can possibly be taxed, they're socialists,

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Lesson number five, according to Powell, public works and other jobs programs must be avoided because they increase the cost and burden of government, making it more difficult for the rich to get a job.

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So-called for the private sector to function, end quote.

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Of course, every highway in America is about to be torn up when this stimulus bill, so-called,

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comes into effect next year and they start spending a trillion dollars in an election

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year on so-called public works.

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That's just the opposite.

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As I said, it didn't work for Roosevelt.

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All it does is transfer resources from the private to the government sector.

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And this is the lesson of Friedrich Bastiat's famous essay, What is Seen Versus What is

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Not Seen.

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You see all the make-work jobs.

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You can see all the people out there standing around leaning on shovels and getting paid

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for it.

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But what you don't see is all the jobs that are destroyed by all the taxes that are required

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to pay for all these jobs.

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We'll probably build another public works museum in Baltimore where I live.

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I used to live about two blocks away from the Baltimore Public Works Museum.

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And there's a big sign out front that said, please visit the surprisingly interesting

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public works museum.

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And it's prime real estate, I mean it's waterfront real estate on the East Coast, and there's

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this big giant ugly building that nobody ever goes into.

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And I never got in there, but I imagine there are like marble statues of five guys leaning

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Lesson number six, from the Great Depression. Especially during a recession or depression, the government must not enact laws preventing prices from adjusting.

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Lesson number six, from the Great Depression. Especially during a recession or depression, the government must not enact laws preventing prices from adjusting to circumstances.

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Especially during a recession or depression, the government must not enact laws preventing

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prices from adjusting to circumstances.

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Prices are vital signals that help people decide what to produce and consume."

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Well, the whole purpose of the Fed pouring trillions of dollars of new currency into

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the banks is to try to prop up prices.

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They try to prop up real estate prices.

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Everything the government has been doing has been trying to delay or prohibit the necessary

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Adjustment and the liquidation of all this malinvestment that has taken place.

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So again, we're doing exactly the opposite of what we should have learned.

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Lesson number seven, government must not enact laws preventing wages from adjusting to circumstances.

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While the empowerment of the labor unions is taking place, re-empowerment, how successful

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it will be, I don't know.

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You might have read that just last week, the new head of the New York Fed is a union guy,

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an AFL-CIO guy, and also, of course, the General Motors was given to the United Auto Workers

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by the administration, and you can expect labor laws to be changed too, such as the

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The law no longer requiring secret elections for union representation elections so that

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the unions can intimidate the no voters out there.

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I expect to see more of that and of course the basic economics of this is this is one

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of the ways in which FDR increased unemployment.

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All the labor legislation was passed in the 1930s that empowered unions actually enabled

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and wages to go up in the year 1937 by about 15 percent.

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And so when you're in a depression, if you want to keep your job, sometimes your only

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hope is to take a temporary pay cut.

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But if the government forces up your wage and tells your employer you have to pay these

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people 15 or 20 percent more, it makes it just uneconomical, just not profitable to

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hire these people.

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It's the same effect as the minimum wage law.

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Lesson 8. Only if investors feel private property is secure will they be willing to make long-term financial commitments needed to spur recovery and boost unemployment.

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Well, it's not a good sign that the government today is actually talking about charging businesses

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that have simply gone bankrupt with crimes.

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They're investigating all sorts of large corporations now who have gone bankrupt with criminal behavior,

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not just bad business decision making, but criminal behavior.

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The price controls and executive pay, increasing the taxation of investment with higher capital

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and of course in general demonizing the whole capitalist system as Walter Block said these ridiculous assertions that this is a failure of capitalism and laissez-faire and Walter read you chapter and verse from the New York Times and elsewhere and so and they're just lying through their teeth about that especially Ben Bernanke you know I can see some some political hack who works for a congressman who writes a speech about capitalism

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about the failures of laissez-faire, but not the former chairman of the economics department at Princeton.

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He knows better. He knows better about regulation.

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And when they argue for more regulation of financial markets, which Ben Bernanke has done,

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and all the other Fed bureaucrats have done too, these reports that I've mentioned that I've been reading from the Fed,

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they all have the theme that regulation has been too timid.

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But just to give you one example, Walter mentioned that we have 73,000 pages of regulations in

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the Federal Register. Well, that's just the Federal Register. We've got cabinet departments

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too that have their hand in regulation of commerce a lot. We've got state and local governments

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that regulate everything from the color you can paint the fence in your yard,

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to how much water goes through your toilets, and so forth. In my state of Maryland,

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The environmentalists who sort of run the state legislature along with the unions, they're trying to have laws passed requiring even lower flow toilets in the state of Maryland.

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What kind of person devotes their life to being a low-flow toilet lobbyist in a state legislature?

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But there's a Fed publication entitled, The Federal Reserve System, Purposes and Functions, that lists some of the things the Fed does.

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Now keep in mind this is when you have Ben Bernanke himself out there saying that the lack of regulation is a problem.

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I'll read some of the things that the Fed regulates in addition to its monetary policy.

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It regulates bank holding companies, state chartered banks, foreign branches of member banks,

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edge and agreement corporations, state licensed branches, agencies and representative offices of foreign banks,

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for Foreign Banks, Non-Banking Activities of Foreign Banks, National Banks, Savings Banks, Non-Bank Subsidiaries of Bank Holding Companies, Thrift Holding Companies, Financial Reporting Procedures, Accounting Policies of Banks, Business Continuity in case of Emergencies, Consumer Protection Laws, Securities Dealings, Information Technology, Foreign Investment, and that's about one-third of the list I have. These are all the things that the Fed regulates in addition to controlling the money supply to the extent that it does. And so the idea that there's no regulation of financial markets

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is preposterous and it's alive but that's the world we're living into and that's one of the reasons why people like myself and Walter Block and Bob Murphy and what's his name the president of the Mises Institute and Doug French do the things that we do in addition to teaching Austrian economics which as I said the reason I got into it as a young student was I was interested in economics and it

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It was the only school of thought that I was exposed to that really focused on explaining

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and understanding how the world works, as opposed to how the mathematical models work,

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which is like playing with Tinker toys, but with mathematics is the way I thought of it.

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And so we're still at this and we're trying to sort of break through some of the lies

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and I guess my time is about up and Doug French will come back up here and give you further

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instructions.

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Thank you very much.