WEBVTT NOTE The Fear of High Prices 1 00:00:00.000 --> 00:00:05.000 The Fear of High Prices 2 00:00:05.000 --> 00:00:27.000 One of the reasons people continue to insist that government ought to intervene in the economy is their fear that if the government did not intervene, prices would simply rise out of sight, and we wouldn't be able to pay them, and consequently, we would all suffer privation and want, as a result of the ability of men in business, 3 00:00:27.000 --> 00:00:31.480 to simply demand and collect any price that they want to ask. 4 00:00:31.480 --> 00:00:39.560 Now, to understand what really happens assuming a free market, we would have to begin by finding 5 00:00:39.560 --> 00:00:48.040 out how prices are established in the first place. Most people assume that the price is established 6 00:00:48.040 --> 00:00:54.920 by the businessman, that he puts the price on the merchandise, and may I confirm that every businessman 7 00:00:54.920 --> 00:01:23.920 But in point of fact, that isn't what establishes the price. The price of any good or service is established as a result of the competing and conflicting forces of supply and demand, and although the businessman may very well physically put a price on a piece of merchandise, that is what is called the asking price, and it has no necessary relevance. 8 00:01:23.920 --> 00:01:32.680 The real price is the exchange price. That may be what the businessman asks, but it may 9 00:01:32.680 --> 00:01:41.100 be a long way away from what he asks, because the businessman does not set prices. He sets 10 00:01:41.100 --> 00:01:50.760 asking prices, and that's all he can do. If he asks a price that is too high, he doesn't 11 00:01:50.760 --> 00:01:57.760 get it, and therefore he hasn't really set a price at all. The only kind of price that 12 00:01:57.780 --> 00:02:04.780 has meaning is a price that will contribute to an exchange. 13 00:02:05.840 --> 00:02:11.600 Now before we go any further in this area, it is important to realize what it is that 14 00:02:11.600 --> 00:02:18.600 causes prices to rise. Prices can rise from three general causes and usually more than 15 00:02:20.760 --> 00:02:29.080 More than one cause is acting at a given moment. We tend to oversimplify here, and we try to 16 00:02:29.080 --> 00:02:35.720 fix the blame for a high price at one point or another, sometimes not recognizing the 17 00:02:35.720 --> 00:02:43.040 other factors that are also influencing the fluctuation of price. 18 00:02:43.040 --> 00:02:50.600 The things that cause prices to rise would be these, one, an increasing demand for a 19 00:02:50.600 --> 00:02:58.160 given good or service. That is, suddenly a particular commodity becomes increasingly 20 00:02:58.160 --> 00:03:06.560 popular. When this happens, more and more buyers appear in the market and they bid against 21 00:03:36.560 --> 00:03:44.560 are more popular than it was before. There is a sudden increased demand and that will cause prices to rise. 22 00:03:44.560 --> 00:03:52.560 Additionally, a decline in the supply of a given commodity will cause prices to rise. 23 00:03:52.560 --> 00:04:00.560 The effect is exactly the same. If there is an item that is in popular demand and suddenly 24 00:04:00.560 --> 00:04:07.800 Only for any reason that item is no longer supplied as plentifully as it had been. 25 00:04:07.800 --> 00:04:14.240 Maybe the components become scarce or something else happens so that it cannot be produced 26 00:04:14.240 --> 00:04:17.280 in the same numbers that it was produced before. 27 00:04:17.280 --> 00:04:25.000 For example, a strike or a war or any kind of a stoppage that prevents production for 28 00:04:25.000 --> 00:04:30.480 continuing at the same level that had been established before will undoubtedly reduce 29 00:04:30.480 --> 00:04:36.880 the numbers of units of that item being available. And this will always tend to cause prices 30 00:04:36.880 --> 00:04:43.460 to rise. So prices will rise when there is an increased demand and also when there is 31 00:04:43.460 --> 00:04:50.680 a decline in supply. You see, supply and demand both influence price. 32 00:04:50.680 --> 00:04:56.520 Now there is a third area that will cause prices to rise. And this is the area that 33 00:04:56.520 --> 00:05:05.120 that we refer to popularly as inflation. Technically speaking, inflation is nothing more than the 34 00:05:05.120 --> 00:05:11.520 increase in the amount of money or credit in circulation. And when the amount of money 35 00:05:11.520 --> 00:05:20.120 or credit increases, then prices will tend to rise. Now many persons, because of the 36 00:05:20.120 --> 00:05:29.120 have confused inflation with any price rise, and every time they see a price going up, 37 00:05:29.120 --> 00:05:33.880 they say, well there you are, that's inflation. No, it may not be inflation at all. You could 38 00:05:33.880 --> 00:05:39.600 have a price rise as a result of a scarcity of supply, or as a result of an increase in 39 00:05:39.600 --> 00:05:45.640 demand, or as a result of an increase in the supply of money. All of those factors could 40 00:05:45.640 --> 00:05:53.000 would cause prices to rise. Now the interesting thing is that inflation by itself might not 41 00:05:53.000 --> 00:05:59.200 cause a price to rise. And of course you can get price rises without inflation. An example 42 00:05:59.200 --> 00:06:05.400 of the former condition occurred during World War II. In World War II the government rapidly 43 00:06:05.400 --> 00:06:11.800 expanded the amount of money and credit in circulation. And it did so at the same time 44 00:06:11.800 --> 00:06:18.200 claimed that it passed laws regulating the prices so that prices were frozen and could 45 00:06:18.200 --> 00:06:27.240 not be raised. But the result was inflation. It was a kind of inflation that was not automatized 46 00:06:27.240 --> 00:06:35.240 in terms of a higher price. It's still inflation. Because it was simply the increase in the amount 47 00:06:35.240 --> 00:06:42.320 of Money and Credit Available, people tended to devalue their money and yet they couldn't 48 00:06:42.320 --> 00:06:47.080 exchange it for very much in the market because everything in the market was being regulated 49 00:06:47.080 --> 00:06:55.000 and the result was simply a devaluing of money even though prices remained the same. 50 00:06:55.000 --> 00:07:02.520 So there is a case where you have an inflation occurring without a price rise and of course 51 00:07:02.520 --> 00:07:10.260 You can, and often do, have price rises occurring when the money supply and the credit supply 52 00:07:10.260 --> 00:07:17.760 is relatively stable. A case in point is one that has occurred during the last months of 53 00:07:17.760 --> 00:07:27.880 1969 and the first months of 1970 where our president, Mr. Nixon, accepted the idea that 54 00:07:27.880 --> 00:07:34.440 The reason for the rise in prices in this country was entirely related to the inflationary 55 00:07:34.440 --> 00:07:35.960 policies of the government. 56 00:07:35.960 --> 00:07:41.260 The government had been for many years going on with the idea of increasing the amount 57 00:07:41.260 --> 00:07:49.740 of credit and currency in circulation somewhere between 3% and maybe 4% per year. 58 00:07:49.740 --> 00:07:56.720 And so we had had a constantly administered inflationary policy and we have had constantly 59 00:07:56.720 --> 00:08:05.040 Rising Prices. So economists advised Mr. Nixon that if he stopped increasing the money supply, 60 00:08:05.040 --> 00:08:11.320 the result would be that prices would stop rising. And so Mr. Nixon did this. He acted 61 00:08:11.320 --> 00:08:17.340 upon the advice of his economists and for about seven or eight months the federal government 62 00:08:17.340 --> 00:08:24.940 did not create more currency and circulation and it actually reversed itself on credit 63 00:08:24.940 --> 00:08:31.500 and Titan Credit so that the tendency was somewhat deflationary rather than inflationary. 64 00:08:31.500 --> 00:08:33.300 And what was the result? 65 00:08:33.300 --> 00:08:34.940 Prices kept going up anyway. 66 00:08:34.940 --> 00:08:42.220 Well, you see, the prices were rising in part because of inflation, but in part because 67 00:08:42.220 --> 00:08:44.820 of other factors as well. 68 00:08:44.820 --> 00:08:52.700 It's always dangerous in making market forecasts to try to indicate that a particular result 69 00:08:52.700 --> 00:09:01.140 is coming from one specified cause. Once you begin peeling back the various layers, like 70 00:09:01.140 --> 00:09:07.600 an onion, these things occur in the market, you peel back the various layers that cause 71 00:09:07.600 --> 00:09:14.780 something to occur. You may find that although inflation will definitely help to boost prices, 72 00:09:14.780 --> 00:09:19.800 other factors remaining the same, other factors don't necessarily remain the same. And you 73 00:09:19.800 --> 00:09:25.560 You may have other things in there that are also affecting price rises. 74 00:09:25.560 --> 00:09:30.280 One of the things that we have had, and we do have, although it's hard for people in 75 00:09:30.280 --> 00:09:34.480 this country to believe it, we have shortages. 76 00:09:34.480 --> 00:09:36.840 We have scarcities. 77 00:09:36.840 --> 00:09:42.800 And that is one of the reasons our prices continue to go up, because there just aren't 78 00:09:42.800 --> 00:09:50.160 There are enough goods and services being mass-produced rapidly enough to lower the 79 00:09:50.160 --> 00:09:52.400 prices to where they could be. 80 00:09:52.400 --> 00:09:58.600 We are producing limited supplies, often under government recommendation. 81 00:09:58.600 --> 00:10:03.720 In very few cases does the government actually limit the amount of production, but by virtue 82 00:10:03.720 --> 00:10:08.860 of manipulating money and credit, which they're in a position to do, and in making recommendations 83 00:10:08.860 --> 00:10:15.300 The government influences this very profoundly and actually the government has been cooperating 84 00:10:15.300 --> 00:10:23.640 with businessmen through its antitrust operations in helping to maintain high prices and in 85 00:10:23.640 --> 00:10:28.940 helping to create an economy of scarcity although the men in government would probably deny 86 00:10:28.940 --> 00:10:31.700 that and aren't really aware that they've been doing it. 87 00:10:31.700 --> 00:10:37.260 They really don't intend to do that but their actions end up creating this effect in the 88 00:10:37.260 --> 00:10:42.900 in the market. And if they understood it well enough, perhaps they'd see that. So keep 89 00:10:42.900 --> 00:10:50.940 in mind that prices can rise from three sources, increasing demand, declining supply, or an 90 00:10:50.940 --> 00:10:58.140 increase in the supply of money. All of these things can affect a price rise. Given a free 91 00:10:58.140 --> 00:11:04.260 market, any of those factors could occur in a free market. 92 00:11:04.260 --> 00:11:09.100 Now, you have to realize that we do not have a free market at this time. 93 00:11:09.100 --> 00:11:12.520 We haven't had a free market in this country for a very long time. 94 00:11:12.520 --> 00:11:19.060 And so the pure actions of a free market, you are not going to see. 95 00:11:19.060 --> 00:11:25.420 So when something happens in our existing economy, don't think that what has happened 96 00:11:25.420 --> 00:11:28.660 would happen in a free market. 97 00:11:28.660 --> 00:11:34.980 You have to use your brain, you have to use logic here to figure out what would happen 98 00:11:34.980 --> 00:11:40.420 given a free market because we are operating today in something other than a free market. 99 00:11:40.420 --> 00:11:45.800 So you have to visualize this and see what would have to happen if things were free. 100 00:11:45.800 --> 00:11:52.140 Don't take what we're talking about and what we have today as being evidence of a free 101 00:11:52.140 --> 00:11:53.700 market. 102 00:11:53.700 --> 00:12:02.600 Now, to see how prices are arrived at in a free market, we have to create a situation 103 00:12:02.600 --> 00:12:09.760 that illustrates this. As I've already indicated, prices are not set by the businessman, although 104 00:12:09.760 --> 00:12:16.320 he'd probably like to. All he does is establish the asking price. Possibly the best illustration 105 00:12:16.320 --> 00:12:24.320 The first question we could find of how prices are established would be to describe the actions of an auction. 106 00:12:24.320 --> 00:12:35.320 Actually, the general marketplace is always an auction anyway, but at an auction house where auctions occur, you see everything. 107 00:12:35.320 --> 00:12:43.320 In the general market of this country, for instance, it's so big that you don't see everything, but exactly the same things are occurring. 108 00:12:43.320 --> 00:12:57.520 People are bidding for goods and services, and the forces that are in play in the whole country can be condensed and observed in a given auction situation. 109 00:12:57.520 --> 00:13:07.320 So let's imagine an auction situation and find out just exactly how prices are established given a free market. 110 00:13:07.320 --> 00:13:13.880 Now, in the illustration I'll describe, let's imagine a given product, and I'll make this 111 00:13:13.880 --> 00:13:14.880 the widget. 112 00:13:14.880 --> 00:13:18.880 This is the famous household item that everybody would like to have. 113 00:13:18.880 --> 00:13:24.760 It's a handy-dandy thing that everybody would like, and whatever it is, you guess, because 114 00:13:24.760 --> 00:13:26.260 it doesn't make any difference. 115 00:13:26.260 --> 00:13:33.180 So we're now manufacturing a widget, and in terms of my illustration, I will assume 116 00:13:33.180 --> 00:13:40.540 that there will be five widget makers, and that each of these widget makers, see, what 117 00:13:40.540 --> 00:13:44.820 we're going to examine now is just one factor. We're going to examine the pricing factor. 118 00:13:44.820 --> 00:13:50.040 That's all. So we freeze all the other factors and leave this one alone so we can examine 119 00:13:50.040 --> 00:13:55.600 what would happen in that area alone. So we'll assume that all of these widget makers make 120 00:13:55.600 --> 00:14:01.500 the same quality of widget, and they all make the same amount of widgets, and they all come 121 00:14:01.500 --> 00:14:14.000 So, the prices are going to fluctuate here, but nothing else will fluctuate. And we'll 122 00:14:14.000 --> 00:14:22.780 assume that what we have are five suppliers. We'll call them Mr. 1, 2, 3, 4 and 5. That's 123 00:14:22.780 --> 00:14:28.580 easy to keep in mind. And their prices will range, let us suppose, the price to them will 124 00:14:28.580 --> 00:14:36.180 in the range $0.70, $0.60, $0.50, $0.40, and $0.30. Now that's relatively easy to keep in mind. 125 00:14:36.180 --> 00:14:44.020 We've got five sellers who have produced widgets and everything is identical about them excepting 126 00:14:44.020 --> 00:14:52.860 the factor of price which fluctuates from $0.70 to $0.30 with $0.10 intervals. Now that's 127 00:14:52.860 --> 00:14:55.300 the condition of the sellers. 128 00:14:55.300 --> 00:15:00.940 And now to make my illustration, let's suppose that we have just five widget buyers and they 129 00:15:00.940 --> 00:15:05.980 come in to the market and they want to buy the exact number of widgets that the sellers 130 00:15:05.980 --> 00:15:13.060 want to sell. And their situation is identical to the sellers in all respects, that is everything 131 00:15:13.060 --> 00:15:19.220 is frozen except one thing and that is what they'll pay. And we'll assume here that we 132 00:15:19.220 --> 00:15:28.220 We have A, B, C, D, and E. We've got five buyers that are alphabetically designated. 133 00:15:28.220 --> 00:15:36.020 And Mr. A will pay 60 cents. And he will pay more than anybody else. And they will buy 134 00:15:36.020 --> 00:15:43.900 60, 50, 40, 30, and 20. And you'll notice that I've deliberately created a 10-cent gap 135 00:15:43.900 --> 00:15:50.440 App here, both at the top and at the bottom of the market. In other words, Mr. One will 136 00:15:50.440 --> 00:15:59.140 sell for 70 cents, but Mr. A, who is in the top position as a buyer, will only pay 60. 137 00:15:59.140 --> 00:16:04.500 And at the bottom of the buyers I've got Mr. E, who will only pay 20, but at the bottom 138 00:16:04.500 --> 00:16:10.620 of the sellers I've got Mr. Five, who will not take 20. He's got to get at least 30. 139 00:16:10.620 --> 00:16:16.020 Now, that's going to be your condition in the market. Now we come to a very important 140 00:16:16.020 --> 00:16:25.020 factor relating to all market transactions, and that is this. No market transaction occurs 141 00:16:25.020 --> 00:16:33.620 because of the wish of a buyer exclusively. No market transaction occurs until something 142 00:16:33.620 --> 00:16:39.460 has been created that can be sold. The fact that people want to buy something doesn't 143 00:16:39.460 --> 00:16:47.360 can do a thing. Lots of people want everything, but they can't get it. Demand is not the 144 00:16:47.360 --> 00:16:53.420 motivational factor in the market that many people think it is. If it were, then the most 145 00:16:53.420 --> 00:16:58.380 prosperous place in the world would be the place where the biggest demand is. And that 146 00:16:58.380 --> 00:17:04.540 would have to be in China and India, where you have people simply clamoring for the bare 147 00:17:04.540 --> 00:17:11.900 Necessities, which they can't get. It's obviously not one of the most prosperous places there is. 148 00:17:11.900 --> 00:17:17.580 It's one of the least prosperous places, and yet the demand is there. What is it that creates 149 00:17:17.580 --> 00:17:24.140 prosperity? It comes on the other side. It's the people that produce and offer something for sale. 150 00:17:24.700 --> 00:17:31.500 So the impetus, the initiation of a market action, always begins from the point of investment, 151 00:17:31.500 --> 00:17:36.060 the point of production. These are the things that cause things to happen. 152 00:17:36.700 --> 00:17:44.140 So the result of that is that you have a fellow named a salesman. And he is the key factor 153 00:17:44.140 --> 00:17:53.740 in all market exchanges. He is a key factor because he has knowledge. And what the auctioneer has, 154 00:17:53.740 --> 00:17:58.780 and that's a particular type of salesman in my illustration, the auctioneer has knowledge 155 00:17:58.780 --> 00:18:05.220 of what the sellers will do and he is absolutely ignorant of what the buyers 156 00:18:05.220 --> 00:18:10.180 will do when the market opens. That's why you have the market. The market is 157 00:18:10.180 --> 00:18:15.980 arranged to find out what buyers will do. The salesman knows what the sellers will 158 00:18:15.980 --> 00:18:21.800 do. They've told him. In fact, he can't operate until he knows because he's 159 00:18:21.800 --> 00:18:26.740 going to get a commission and he can't get paid unless he gets the price that 160 00:18:26.740 --> 00:18:35.740 Now, of course, he knows that all of these sellers who are offering widgets would be happy to take more than they're asking. 161 00:18:35.740 --> 00:18:39.740 The lowest one he's got is 30 cents, the highest one is 70. 162 00:18:39.740 --> 00:18:47.740 But if by some fluke he could get a dollar apiece for his widgets, he could sell all the widgets and everybody would be delighted. 163 00:18:47.740 --> 00:18:50.740 And he doesn't know maybe the buyers will pay a dollar. 164 00:18:50.740 --> 00:18:53.740 Maybe they'll pay two dollars. He doesn't know what they'll pay. 165 00:18:53.740 --> 00:18:58.620 He doesn't know what they'll pay. He's completely ignorant as to what's in their minds, but 166 00:18:58.620 --> 00:19:04.220 he has knowledge as to what's in the minds of the sellers. So he has to work on that 167 00:19:04.220 --> 00:19:11.220 basis. Now keep in mind that here are the conflicting forces of supply and demand, and 168 00:19:11.220 --> 00:19:18.060 they operate everywhere, in every market. When the seller goes into the market, he has 169 00:19:18.060 --> 00:19:27.920 a floor in mind. He will take all he can get, but he'll come down only so far. Below that 170 00:19:27.920 --> 00:19:34.160 he can't go, because if he goes below that he's out of business. So every seller enters 171 00:19:34.160 --> 00:19:42.360 the market with the idea, I will get all I can get, but I can come down to such and such 172 00:19:42.360 --> 00:19:47.580 a position. And in my illustration we now know what that floor position is for each 173 00:19:47.580 --> 00:19:57.300 of Our Sellers, Mr. 1, 2, 3, 4, and 5 respectively hold to floor prices of 70, 60, 50, 40, and 174 00:19:57.300 --> 00:19:59.300 30 cents respectively. 175 00:19:59.300 --> 00:20:00.660 Fine. 176 00:20:00.660 --> 00:20:02.780 Now we still don't know what the buyers are going to do. 177 00:20:02.780 --> 00:20:04.500 We haven't any idea. 178 00:20:04.500 --> 00:20:11.300 So keep in mind, when a buyer comes into the market, his point of view is the reverse of 179 00:20:11.300 --> 00:20:13.060 the seller's. 180 00:20:13.060 --> 00:20:18.360 When the buyer comes in, he doesn't have a floor in mind, he has a ceiling in mind. 181 00:20:18.360 --> 00:20:25.940 Every buyer enters the market saying to himself, I could go up to Y position, but I can't go 182 00:20:25.940 --> 00:20:27.140 above it. 183 00:20:27.140 --> 00:20:32.100 In other words, I could pay so many dollars, but I can't go higher than that. 184 00:20:32.100 --> 00:20:37.700 So the view of the buyers is exactly the opposite of the view of the sellers. 185 00:20:37.700 --> 00:20:40.740 And in this case, as we know, we've got some discrepancies here. 186 00:20:40.740 --> 00:20:46.980 The buyers don't think as highly of the widgets as a group, as the widget sellers think of 187 00:20:46.980 --> 00:20:52.300 their own widgets. And I might add that that's more or less a natural situation. 188 00:20:52.300 --> 00:20:57.300 Now the bidding opens. Remember, the auctioneer or the salesman, whatever kind of a salesman 189 00:20:57.300 --> 00:21:03.060 he is, has knowledge on the selling side and he has no knowledge on the other. What he's 190 00:21:03.060 --> 00:21:08.180 trying to get is that knowledge. So he says, I've got these wonderful widgets and he gives 191 00:21:08.180 --> 00:21:13.580 a big spiel about how great they are and hopefully they've got some quality to them and then 192 00:21:13.580 --> 00:21:20.660 he says, how much am I going to get for them? And he tries to get a bid. Now in an auction 193 00:21:20.660 --> 00:21:27.460 he'll get what we call an opening bid. That means that the sale can start. And it doesn't 194 00:21:27.460 --> 00:21:33.060 make any difference where that bid occurs. The very next thing he will try to do is to 195 00:21:33.060 --> 00:21:38.140 put the price up. It doesn't make any difference. Now we do know where the bid is going to come 196 00:21:38.140 --> 00:21:43.140 We know that in terms of what the buyers know, so you and I have inside information here, 197 00:21:43.140 --> 00:21:48.140 we know that the buyers are going to bid somewhere between zero and sixty cents. 198 00:21:48.140 --> 00:21:57.140 The chances are rather good that the buyers will start in the lower brackets, possibly around twenty or thirty cents. 199 00:21:57.140 --> 00:22:03.140 They might start at ten cents. They'd all be willing to pay ten cents for widgets. 200 00:22:03.140 --> 00:22:09.580 One fellow will drop out if he has to pay more than 20 cents. Another fellow will drop 201 00:22:09.580 --> 00:22:13.660 out if he has to pay more than 30 cents, and so on up the line. So they'll probably start 202 00:22:13.660 --> 00:22:20.140 low. It doesn't make any difference where they start. The auctioneer will try to maximize 203 00:22:20.140 --> 00:22:26.660 the price. He will definitely try to put it up. And so he will do so. He will say, okay, 204 00:22:26.660 --> 00:22:32.100 now let's get some bidding here. And he gets the buyers bidding against each other and 205 00:22:32.100 --> 00:22:36.740 And they force the price up. And this is exactly what happens in a general market. It's the 206 00:22:36.740 --> 00:22:42.380 same way. We don't see it happening in an auction house. You see it happening and the 207 00:22:42.380 --> 00:22:48.520 price goes up. How high will it go? It can't go higher than 60 cents because we've only 208 00:22:48.520 --> 00:22:55.140 got one fellow that'll pay that high. It will get to that position. And then when the auctioneer 209 00:22:55.140 --> 00:23:01.540 finds out that nobody will go above that, then he's going to sell a lot of widgets 210 00:23:01.540 --> 00:23:10.820 at that price. Now which lot of widgets will he sell? He will sell Mr. Two's widgets. 211 00:23:10.820 --> 00:23:17.040 He can't sell one. One is priced his at 70 cents and won't take less. So one is priced 212 00:23:17.040 --> 00:23:24.260 off the market. Two wants 60 cents and that's the load that he's going to now deliver. Of 213 00:23:24.260 --> 00:23:29.340 course all of the other sellers would be happy to take 60 cents too. But why will he sell 214 00:23:29.340 --> 00:23:59.340 Mr. Two's. He will sell Mr. Two's because he is not certain that he will ever again have a price as high as that. So he matches buyers with sellers. He finds a seller that will pay sixty cents to a buyer who will take no less than sixty cents, and that's the transaction he makes. And so, during the auction, what will happen is Mr. A will buy Mr. Two's widgets 215 00:23:59.340 --> 00:24:12.900 C will buy threes, C will buy fours, and D will buy fives, but E won't buy anything 216 00:24:12.900 --> 00:24:19.540 because he won't bid into the market. So you've got Mr. E coming out of the auction 217 00:24:19.540 --> 00:24:24.740 disappointed he didn't buy anything. The prices were too high for him to meet. And you have 218 00:24:24.740 --> 00:24:29.480 Mr. One coming out of the market disappointed because he priced himself out of the market 219 00:24:29.480 --> 00:24:35.740 to begin with. Now there is a lesson that has been learned. And it has been learned 220 00:24:35.740 --> 00:24:42.580 by both buyers and sellers once the market has been opened. And this happens in an auction 221 00:24:42.580 --> 00:24:50.020 and it happens anywhere around the country. And the lesson is this, that there is a fellow 222 00:24:50.020 --> 00:24:55.560 Making widgets who can sell them and will sell them for 30 cents. 223 00:24:55.560 --> 00:25:02.560 From that time on, every seller of widgets will attempt to meet that price because he 224 00:25:02.560 --> 00:25:06.600 knows that he's got a competitor at that level. 225 00:25:06.600 --> 00:25:12.060 And if he can't meet that level, he's going to have to get out of the widget business. 226 00:25:12.060 --> 00:25:19.740 In other words, the seller who can sell at 30 cents, which is the rock bottom price, 227 00:25:19.740 --> 00:25:25.340 now realize that he is, quote, in on the ground floor. This is what this is called. He's on 228 00:25:25.340 --> 00:25:31.660 the base. And he will expand production because he knows he can maximize sales. People who 229 00:25:31.660 --> 00:25:37.140 charge more than he will have to get down and compete with him at that level, somewhere 230 00:26:07.140 --> 00:26:22.100 And so, given a free market, in spite of the fact that businessmen would like to charge 231 00:26:22.100 --> 00:26:29.820 high prices, they can't. Given a free market, the factors of competition enter, and prices 232 00:26:29.820 --> 00:26:37.180 These are driven down to the lowest possible level and this is recognized on both sides 233 00:26:37.180 --> 00:26:38.660 of the market. 234 00:26:38.660 --> 00:26:43.900 And if you've taken any time to examine what actually happens, in fact, you'll see that 235 00:26:43.900 --> 00:26:46.300 that is true. 236 00:26:46.300 --> 00:26:52.980 I remember when the ice cream cone was invented. 237 00:26:52.980 --> 00:26:56.500 You probably can't imagine that there ever was a time in this country when we didn't 238 00:26:56.500 --> 00:27:00.960 We didn't have ice cream cones, but I can assure you there was a time when we didn't. 239 00:27:00.960 --> 00:27:05.500 We used to buy ice cream in an ice cream parlor and you got it in a dish. 240 00:27:05.500 --> 00:27:10.500 And one day when I was a little tyke, my dad saw an ad in the paper and he read it to us 241 00:27:10.500 --> 00:27:16.640 at home in which it described the actions of this entrepreneur who had come up with 242 00:27:16.640 --> 00:27:23.840 a wild idea that you could buy ice cream in a dish and when you were through eating the 243 00:27:23.840 --> 00:27:30.960 The ice cream, you ate the dish. Fantastic. Well, I at once wanted one, but my dad wouldn't 244 00:27:30.960 --> 00:27:35.800 buy me one because he said the price was too high. And I remember very much what the price 245 00:27:35.800 --> 00:27:43.040 was. It was 25 cents. And at that time, 25 cent pieces were pretty hard to come by. And 246 00:27:43.040 --> 00:27:48.160 my dad said, you're just not going to get an ice cream cone that costs that much. Well, 247 00:27:48.160 --> 00:27:54.760 When time passed and what do you think happened? The price of ice cream cones came down because 248 00:27:54.760 --> 00:27:59.000 there were too many people like my dad that wouldn't buy it. And there were a lot of 249 00:27:59.000 --> 00:28:04.340 people who began to see that they could get into this area profitably for something less 250 00:28:04.340 --> 00:28:11.100 than 25 cents. And the price came down to 20, 15, 10. Incidentally, at 10 cents I got 251 00:28:11.100 --> 00:28:16.620 my first ice cream cone. And then they dropped to five. Then you got two scoops on a cone 252 00:28:46.620 --> 00:28:54.620 in the free market, in ice cream cones, and when we did, the prices went down and more and more people got the benefit. 253 00:28:54.620 --> 00:29:00.620 But when the government got in to protect everybody, the prices went up and that's where we are now. 254 00:29:00.620 --> 00:29:07.620 And this is not only true with ice cream and ice cream cones, it's true in virtually every product you can think of. 255 00:29:07.620 --> 00:29:09.620 Thanks very much.