WEBVTT

NOTE Speakers' Panel

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We'll assemble our panel, and if you can think of some questions, we'll either answer them or we won't, I guess, in case it may be.

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Should we pick on people? You're not going to be the... What's up? Should we start? Yeah, go ahead.

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This man had his hand up first.

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Right, yeah, so we're going to be repeating the questions to make sure the audio catches this.

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So the question is, I said in the talk and other Austrians will say, oh, the Fed causes

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business cycles but yet historically, the Fed was formed in 1913 and you clearly had

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financial panics, depressions with a small d before then, so what's the explanation?

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The quick answer, and I'm actually not an expert on those earlier 19th century panics

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so I can't delve into it too much, but the Austrian answer to that is that it was government

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Favors to the banking sector. So in other words, you would see periods, a lot of times there would be this boom and then crash during a wartime situation when the money supply did increase, money and credit supply did increase, and a lot of times the way that happened is because the government would give special exemptions, allow the banks to suspend what they called specie payment, redeeming the green dollar bills for actual gold and silver. So there were interventions in

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in the financial sector, giving banks these privileges to create money out of thin air

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as it were, and that went hand in hand with the boom-bust cycle.

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But again, I can't give you specifics about each one, if Tom Woods actually knows a lot

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more about that than I do.

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Because the Fed came into existence in 1913, but that doesn't mean we didn't have centralized

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banking, Alexander Hamilton put in place the Bank of the United States in 1781, which was

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The Federal Reserve was a central bank. It was a precursor of the Fed, and it had a 20-year charter, and Andrew Jackson vetoed the bill to re-charter it in, you know, around 1830, around that time, and the Bank of the United States created 70% inflation in its first five years of existence, and then we had a period from about 1840 to 1862 where we didn't have centralized banking, but it was brought back into place

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and the currency acts and the creation of the greenbacks by the Lincoln administration and that was a much more centralized banking.

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It wasn't called the Federal Reserve but it was a government controlled centralized banking system and it generally had much of the same effect of creating boom and bust cycles.

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I think Jeff had his hand up.

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I had a question about, if you watched national television, you mentioned the belief that there is a low rate of universal freedom.

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I was just wondering if there are any sort of natural political constituencies out there for a hybrid.

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The AARP membership, I think. Well, the question was, is there a natural political constituency for higher interest rates?

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Okay, well I think the political problem is a public choice problem in that the lobbies

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for low interest rates and inflationary monetary policy like you said, the housing industry

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and all the related industries.

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But the beneficiaries are very broad and unorganized.

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Retired people who would like to earn more than 1.5% or 1%

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on their CDs, they're unorganized.

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They don't have a lobbying office in Washington, DC.

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They're widely dispersed all over the country.

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And it's the same reason why a lot of government regulation

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benefits the regulated industries

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at the expense of the consumers, because the industries

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The AARP does a lot to organize retired people mostly to get them in the lobby for higher taxes and a bigger welfare state.

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But this is another thing that, if they could get out of the clutches of the AARP, I would think it would be a natural lobby.

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I think it's a natural lobby.

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I think it's a natural lobby.

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I think it's a natural lobby.

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I think if they could get out of the clutches of the AARP, I would think it would be a natural lobbying force if a competing organization wanted to try to organize these people.

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I think, just if I could follow up on that, part of the problem, because you're right, and it doesn't make sense, you know, how come there aren't people, you know, there's winners and losers from everything,

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but I think part of it is just saving almost as a bad word, especially during a downturn, that people think that, oh, the problem is saving,

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And so I think it wouldn't be very, you know, because the lobbyists, they do stuff behind

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the scenes to get what really benefits them, but then they also have to have PR firms that

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come up with catchy slogans.

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And I think it would be, the public is just so convinced that saving is awful, it would

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be hard to have, you know, a 30-second spot during the Super Bowl to, you know, say, hey,

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let's get people to save more, you know, and like to come up with a jingle for that.

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It really, it would be hard for them to publicly, even though it's correct, you know, I mean,

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I mean, I guess they could have us get up there, but we're not too photogenic.

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So, I mean, it's, or at least, I don't speak for Doug French.

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Speak for yourself.

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Yeah.

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So, I think that's part of it too, you know.

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I mean, by the same token, you say, you know, how come there's not somebody, you know, lobbying

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to have, you know, labor camps, you know, they could make a lot of money building labor

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camps.

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And I think just, and maybe they are actually, but you get my point that it's not merely,

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You know, someone getting money, it's also like they have to come up with some public

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spending. And ironically, it's very hard to justify savings right now, which is crazy,

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but I think true.

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The economics profession has waged war on the idea of savings since the 1930s because

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of the Keynesian paradox of thrift. If you save more, you consume less. That reduces

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aggregate demand and causes a depression, basically. So for God's sake, don't save,

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if you're going to cause a depression, and that's sort of Greenspan's take is sort of

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a variant of that, isn't it? Those damn Asians are saving too much, he said. I don't think

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he's called them the damn Asians, but I think that's basically what he said, though.

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I just wanted to add in that we're all Keynesians now is roughly the mantra of the entire economics

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profession except for the Austrians.

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I don't want to hog the microphone, that sounds like a question for Bob.

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Okay, so the question was the government wants to keep housing prices where they are or prop them up and will they succeed.

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It's hard because I've seen some charts and it's hard to know which metric to look at, but if you look at house prices to rent,

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and of course you're aggregating to draw one line, like what does it mean to say what's the house price in the U.S. right now?

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I mean obviously these things are taken with a lot of grains of salt, but that figure, that ratio, it's sort of like a PE ratio for the housing market, that was way up in 2005 and started coming down, and actually now it's not back to where it was in 97 let's say, but it's actually dropped a lot, so people look at that, but then on the other hand, the problem with that is interest rates should really matter there, and so in a pure present value accounting framework,

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are really low and you expect them to stay low for a while then you know you

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would think that the home price relative to the rental price should be higher so

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it's hard to know exactly what metric to use so I mean I have seen mainstream

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economists thinking that no actually it's it's a lot more in line with

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fundamentals now but on the other hand I mean it's just been so distorted that I

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I don't like if there weren't inflation coming yeah I would probably think it

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real estate would be a bad investment but then on top of all that I think

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I think there's going to be huge price inflation within the next few years and so I do think they will succeed in propping up home prices because they're going to succeed in propping up a lot of stuff in terms of prices.

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And home prices historically have increased faster than most other things during periods of inflation because you can't increase the total supply of housing very much even during a boom compared to the existing stock of housing and so prices are likely to go up?

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Well, they may, but I think in real terms, inflation adjustment adjusted, I don't think they'll go up all that much because there is so much debt that needs to be, you know, they say that all debts are repaid, either by the borrower or the lender, and right now we have the lender, we have the lenders paying off a lot of loans right now, and that's keeping the value of real estate, I think it will keep a lid on it and continue to force it down, and then the next shoot-a-drop will be commercial

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The way I see it, the time preferences of the people is such that they're only willing

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to save for nine bricks, building bricks for buildings. But due to the lower interest rates

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that are artificially created by the central bank or the Fed, entrepreneurs are fooled

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into thinking they're really ten bricks. So if they start building bigger foundations

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than they otherwise would have done had they realized they're only nine bricks

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is forthcoming. So you get half-built places or you get, as Doug was saying, places where

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they wreck their own houses or houses that are unsold. So this creates the big problem

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of overbuilding. And what we need to do, I think, as Bob said, is to get out of the housing

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and we're not. I just wanted to say one more thing about Bob's advice about getting low

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Low Rental Housing. My dissertation was on rent control and my fear, and I'm sure Bob

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would agree that this is a danger, that if people get into housing and the inflation

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comes and they want to raise the price of housing, rent control will be reimposed. Which

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gets back to the point I was making about prediction. Lester Thoreau was famous for

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predicting the rise of the Japanese economy right before the Japanese economy tanked.

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Paul Samuelson used to have this thing in all of his intro books where this would be

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the U.S. economy sort of being flat and this would be the Soviet economy coming up right

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before 1991 when it all went belly up and yet he was a bad predictor. Oh yeah, Tom Drew

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it, I don't know if you can, this is exactly what it happened. If you look back in his

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Previous Textbooks. Every year the USSO was creeping up on the US. So he couldn't predict

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his way out of a paper bag, nor could Lester Thoreau. Irving Fisher predicted great things

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right before the Great Depression. On the other hand, John Maynard Keynes made a lot

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of money in the stock market. So the prediction is, and on the third hand, Mises predicted

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the Great Depression and several Austrians, Erwin Schiff, Frank Shostak, Mark Thornton

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Martin predicted the housing debacle. I reiterate the point I made before that there is such

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a thing as pure theory and that Bob's advice is not as pure theory but rather climology

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or as economic history or he is speaking not as an Austrian economist when he gives that

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advice but I do think that Austrian theory helps you see the world more clearly as it

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is but it's certainly not a praxeological insight.

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I mean, I might say, well, buy gold. Gold is going to rise in price.

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But the point is that FDR seized all the gold.

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And how are we going to know whether Obama is going to seize the gold if you go out and buy gold?

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It's not part of economic theory.

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People will be trading more and more in barter, so if you try to become a middle man in the barter economy,

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that would be my advice.

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Get somebody from the back of the room there. How about the lady here in the middle?

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Yeah?

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I don't think we should repeat that question.

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Alright, so the question was, you know, didn't these people know, you know, Greenspan Bernanke and these other wizards, didn't they know this stuff?

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And so, and yeah, I do think it's, how can I put it, the people in Washington, they're not stupid, right?

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Right? I mean, they're evil, many of them, but they're not stupid.

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And so it's, I mean, and I know that I'm not just speaking, you know, completely

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from the hip here, that I work for a think tank that's based in D.C.

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And, you know, so I deal with, you know, I've actually, you know, met politicians and things and so forth.

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And I talk to their staffers and the way they think, it's not so much that they know the theory.

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It's not like they're experts in Hayekian business cycle theory and they choose not to believe it.

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it's more that that's irrelevant to them you know so like this the stimulus package people said man

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i can't believe obama's so stupid he thinks this is going to help and if he really believed that

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why isn't he spending the money earlier and like Tom DiLorenzo was saying it's because that's

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that's not what's motivating him he you know it's not so much that he cares in Keynesian economics

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or not it's just well no it i believe and if i give this much money to this group they're

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going to bring out the vote when i'm coming up for re-election and if i give this hand out to

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to this person. You see what I'm saying? And those are good theories. Those are very good theories, right? So they're good at getting re-elected. That's what their job is. And they're very good at it. And so it's, I think it's wrong to even like argue with some of these people and just say, man, they're just not getting it is because it's, they're not trying to get it. That's not what they're doing. All of government is based on shortsightedness. Every congressman person runs for re-election every two years, six years for senator, four years for president. And they all

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People know that the average voter forgets most of everything that they did, except for

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what they did in the last three to six months, maybe.

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And so the incentive is always to spend now and tax later.

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That's why everybody is in favor of these gigantic deficits.

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And that's really what drives Washington, in my view, the short-sightedness.

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And they also know that the government has such a gigantic propaganda apparatus.

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All the state universities in America are essentially the PR arm of the state, that they can blame

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it all on capitalism and greed when the stuff hits the fan, which is the way your husband

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would probably put it, I assume, on there.

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So they're all arrogant and cocky about this, and all that matters is their own power and

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own reelection, and that's what motivates them all.

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Greenspan, I'm sure, loved being called the maestro and being interviewed by the Washington

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and Post Style Magazine and have his wife go on television and give us the image of

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him sitting in a bathtub reading farm reports.

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I don't know if you ever saw that on 60 Minutes, but good for you if you didn't.

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But they love that.

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But of course, ever since the Greenspan Depression, Greenspan himself, sometimes I think he must

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be hiding in the same cave that Bin Laden is hiding in.

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Where's he been?

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You know, I haven't seen him.

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I wanted to disagree with Bob Murphy. He said that they were evil but not stupid. I think

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they're stupid also. And my big source on this is none other than Bob Murphy, who's

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done yeoman work in fighting all of their stupidity and their misconstruals of Austrian

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business cycle theory. For example, that it's like a hangover theory. That was one of the

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The things that Bob was active in overcoming. I guess I would agree that they're more evil

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than stupid, but they're stupid also. They refuse to read the stuff. The woman says they

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just don't want to hear. They just don't want to hear. They'd rather call Austrianism a

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religion or something. I remember when I first started making speeches on rent control, and

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I was ready. I was ready to rumble. I had all the statistics, all the theory, and you

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Do you know what the questions were from the journalists?

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Am I a landlord?

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Do I know any landlords?

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Have I ever seen a landlord?

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I mean, you know, they weren't interested in the theory.

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They were interested in saying, aha, he's really not a theoretician or not an economist.

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He's just speaking for money or something.

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Am I in the pay of landlords?

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Things like that.

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How about the man here in the blue, he has something to say.

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And not only that, it could probably be that you do that, you do critical work, that you do financial control and set up a crew on the crush of the living mass.

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in response to your question of is it hopeless because the public has been thoroughly convinced

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that markets are evil and government is the answer, well I think the problem is we're

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too used to looking at this whole thing horizontally like we might have good guys over here who

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are the limited government people and the bad guys over here are the statists and if

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we can only get more of the good guys in we'll change things, well that hasn't really worked

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out too well for 200 and some years, but there's another way of thinking about this is devolving

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power away from Washington D.C., think of it vertically, and you have this 10th Amendment

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movement going on in the United States where something like 40 state legislatures have

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at least talked about it, issued resolutions saying we're not going to enforce what we

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think is unconstitutional laws, and then I think what's ultimately necessary is secession.

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I think the United States would be broken up into 10 or 12 different republics.

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Thomas Jefferson thought, in his time, it should happen.

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The founding fathers were terrified that the tiny little country they were in charge of

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at the time would be unworkable with democracy, even if it was limited by the Constitution.

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And so a country of 300 million, it's preposterous to think that it could be anything but a tyranny

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by Majority Rule. And so the only answer in my book is secession.

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I'd like to add to that. I'm usually not into questions of the case for hopelessness,

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is it hopeless or not, because I will do the same thing, whether it's hopeless or not.

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I have so much fun tweaking noses and telling the truth and writing and, you know, exposing

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I think that there is a case for hopelessness, and that is, why is it that every freshman

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class I get, they're all a bunch of commies? I mean, what's going on here? Is it biological?

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Well, I think there is a case for sociobiology, that we're hardwired to be socialists, and

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it's only through learning economics that we can transcend it. I started out as a socialist.

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I mean, I'm a Brooklyn Jew. That's redundancy for socialism.

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And the reason, the reason for that, the reason I think we're hardwired for it is

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sociobiology says that the reason we are the way we are now

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depended upon what it took to survive a million years ago.

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And a million years ago, you had to do explicit cooperation.

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I helped you this week when you're sick. You helped me next week.

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And if we didn't do that, if we didn't have benevolence, we wouldn't have survived.

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But we had no markets then, so we weren't hardwired for markets. That's, I think, the reason that was like the rock of Sisyphus.

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On the other hand, the case for optimism is, look at the USSR right before 1991, or look at Germany, East Germany before 89, a week before the Berlin Wall fell.

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I'm sure if they were having conversations, they would say, oh, it's hopeless, it'll never happen, yack, yack, yack, and then all of a sudden it happened.

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And two more cases for optimism, and one is Ron Paul.

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Ron Paul is coming to speak at Loyola University this Wednesday, and the biggest problem we're having is finding a big room to get all the people in.

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I mean, he comes and he gets 15,000 people. It's just phenomenal.

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And the other case for optimism is the Mises Institute.

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It reverberates, it blasts forth the Ron Paul message.

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So there is a case for optimism, there is a case for pessimism,

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but I think all the people in this room are going to do the same thing we're going to do anyway,

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namely try to promote liberty.

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So it really doesn't matter that much whether the case for optimism or pessimism is true,

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because we're going to do the same thing.

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I'll add a footnote to what Walter said, that Mises.org is the eighth most heavily trafficked economics website in the world.

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This is a little bit out of topic, but I just wanted you to comment on Obama's health care program and what it might be for health care in America.

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you can go ahead and read and read this stuff and see for yourself I mean it's

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just setting up various it's basically just again complete takeover getting

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more power in the hands of the government and again I mean it's just

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isn't it just ironic that every time you know the government wants to help us it

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just so happens that the way it does it is by getting more money more power more

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decisions flowing through Washington bureaucrats so I mean that's the health

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care legislation is like that and I mean that I agree with this you know the

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I think that this topic deserves a whole panel or a whole discussion on its own, so I can only talk for 30 seconds on it, but let me just say that the whole problem started with guess which institution? You'll never guess in a million years. Yes, government.

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What happened was they had maximum wage control, and not minimum wage, minimum wage is above.

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They kept wages down, and when wages were down, entrepreneurs had to compete for workers,

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because there was a shortage of workers, and how did they compete for workers?

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Well, they offered them health care. I mean, why is health care connected with wages?

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Why not car care or food care or anything else? They just happened to pick health care.

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So that tie is a problem. The other problem is that medicine costs so bloody much. I mean, we don't have 43 million people not being insured against not having bubble gum, because bubble gum is cheap, so it's no problem. And there is no insurance anyway for it. And one of the reasons that healthcare is so expensive is because of the AMA. The AMA precludes entry of doctors. Doctors' salaries are triple what they would be under a free enterprise system.

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System, we had not licensure but certification. So I think this whole problem is caused by

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government and government is moving in the opposite direction. The correct direction

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to move is toward free enterprise, which is a shocking thing for me to say. I appreciate

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that.

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Government regulates and controls every aspect of health care in a thousand different ways,

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including health insurance. In my state of Maryland, if you're going to offer health

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A Catastrophic Insurance Policy, just that. You can't sell it for a couple thousand bucks.

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You have to cover all 31 things, and every single state is like that.

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And so government has been doing this, and then it puts price controls on Medicare and Medicare recipients

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that doesn't allow hospitals to recover the full cost of care.

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And as a result, they pass it on to the rest of us in terms of health insurance premiums, ultimately.

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Ultimately, so government, as Walter said, is totally involved in regulating and controlling

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healthcare and is totally screwed it up.

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Ninety percent of the hospitals in the U.S. are government-run hospitals and even the

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non-profits are government-funded to some extent and therefore controlled and regulated.

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And so they've created the problem and what government always does is in response to problems

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it creates, like the depression we're in right now, is to give itself even more power.

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And anyone who thinks a government-run monopoly is a good idea just has lost too many brain

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cells.

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I mean, we even have these great examples.

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Last week there was an article in the Vancouver Sun about what happens when you tell people

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healthcare has zero price, it's free, so-called, they're not really free, it's paid for taxes.

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You have an explosion of demand and that drives up costs through the ceiling.

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And so governments, what do they do? They put price controls on to try to control the cost, and price controls cause shortages.

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So in Vancouver, they just announced that they are going to cancel 6,000 medically necessary surgeries, including neurosurgery and things like that.

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Not nose jobs and boob jobs and stuff like that, but medically necessary, life-saving surgery as a form of rationing.

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and it was in Vancouver Sun I blogged it on Lew Rockwell but I don't think anybody else has picked it up but that's that I know of but that's the sort of thing that will happen it's inevitable you have massive shortages in England they have shortages that cause such things as if you PBS had a show on a few years ago of a man with a hernia and he looked like a pregnant woman the hernia was so bad and he was standing he was saying if I lived in that neighborhood over there and he pointed across town I could have my

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I have to wait for my operation tomorrow because there's a short line over there, but I'm assigned by the government to this hospital here and there's a three-year waiting list.

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So I have to wait three more years with this big belly and this horrible hernia.

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And that's what Americans have to look forward to if we have nationalized healthcare.

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And our friend Yuri Maltsev wrote an interesting article on Mises.org on how it was in the USSR with single-payer healthcare.

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He grew up in the USSR.

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We have time for only one more question.

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I'm the picker?

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No, you're the decider.

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I'm the decider in chief.

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Where are all the women with their hands up?

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We've got all these guys.

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Okay, the lady up here.

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I would like to know, you were then the universal minister, do you think that things will be handled the same way as housing has been?

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Whether I thought the commercial real estate problem, coming problem, as I put it, would be handled the way the residential is, there are attempts to get public money into, to prop up those mortgages, to provide additional financing.

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I think there's two trillion dollars worth of commercial real estate paper coming due

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in the next three to four years, and at this point, most of those properties are underwater

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in terms of loan value, and so it would be highly difficult for them to get financing.

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I don't think the outcry from the public will be quite as strenuous as it would be for housing,

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to help people in housing, helping your average real estate developer satisfy his problems

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is probably not going to have as much political traction.

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So I think you'll have a lot of commercial real estate go bust and we'll prolong what

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we've been talking about today for a long, long time.

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But money talks and the commercial developers have a lot of money, so votes are one thing

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in Politics, but money also counts, so I'm not so sure we won't see a bailout, maybe

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disguised in the next surface mining bill or something like that, because they aren't

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going to say we're going to, although they did say we're going to bail out our rich

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friends at Goldman Sachs, so why wouldn't they say we're going to bail out our rich

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friends at the commercial real estate development company?

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Have anything more, Walter? Robert?

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Alright, well that's the conclusion of our Mises Circle here in San Francisco.

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I want to thank all of you for attending.

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I want to mention Mark Hart III again, who was our sponsor.

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Mark is a businessman in Fort Worth, Texas. He came to our Mises Circle in January in Houston, was terribly energized and sponsored an event like this in Fort Worth earlier this year.

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He sponsored this one today, so we owe him a great debt of gratitude.

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Institute. I want to mention our cards again if you want to join the army, the growing

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army of Mises supporters and get a free copy of, what's the name of the book? Re-Assessing

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the Presidency. That'd be a wonderful thing. I want to mention the staff because these

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things don't come together all by themselves. Christy, who you met when you checked in,

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Still, Chad, James, they all do a wonderful job of putting these things together.

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I want to thank our speakers for a fine day of talks.

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And I want to leave you with something from Ludwig von Mises.

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He said, everyone carries a part of society on his shoulders.

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No one is relieved of his share of the responsibility by others,

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And no one can find a safe way for himself if society is sweeping towards destruction.

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Therefore everyone in his own interest must thrust himself vigorously into the intellectual

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battle.

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I want to thank you for thrusting yourself into that intellectual battle today.

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Good afternoon.