WEBVTT NOTE Easy Money, Easy Morals 1 00:00:00.000 --> 00:00:05.400 It has been said by the enemies of capitalism that money is the root of all evil. 2 00:00:05.400 --> 00:00:09.800 Now, this statement as it stands is completely false. 3 00:00:09.800 --> 00:00:15.700 In fact, money is the basis of human civilization, as I'll argue in a little while. 4 00:00:15.700 --> 00:00:26.600 However, it is true that unsound or loose money is the cause of a great deal of economic and moral evil. 5 00:00:26.600 --> 00:00:32.080 In fact, this would be easily understandable, and I wouldn't have to be up here 6 00:00:32.080 --> 00:00:40.280 belaboring the point today, if the concept of inflation was properly defined. 7 00:00:40.280 --> 00:00:46.160 The proper definition, the old definition, the definition that the sound classical economists accepted 8 00:00:46.160 --> 00:00:54.080 and the Austrian economists accepted, was that inflation was an increase in the quantity of money by the state, 9 00:00:54.080 --> 00:00:57.120 and not by the money, not by the market, rather. 10 00:00:57.200 --> 00:01:02.320 That is, an increase in gold was a natural market phenomenon, 11 00:01:02.400 --> 00:01:04.920 and it was not to be seen as inflationary. 12 00:01:05.000 --> 00:01:09.920 However, the printing up of paper dollars or other currencies 13 00:01:10.000 --> 00:01:13.920 out of thin air was, in fact, inflationary, 14 00:01:14.000 --> 00:01:17.320 and moreover, inherently immoral. 15 00:01:17.400 --> 00:01:21.880 Now, the modern definition is that inflation is merely a rise in prices, 16 00:01:21.880 --> 00:01:26.480 And the rise in prices can be caused by bad weather, right? Price of food goes up. 17 00:01:26.480 --> 00:01:34.480 It can be caused by evil OPEC sheiks that make oil scarce, more scarce, and drive the price up. 18 00:01:34.480 --> 00:01:38.380 It can be caused by greedy businesses or greedy labor unions. 19 00:01:38.380 --> 00:01:44.380 And of course then, the government is cast in the role of the great inflation fighter. 20 00:01:44.380 --> 00:01:51.480 But once you understand that in fact inflation is merely the printing up or counterfeiting of money out of thin air, 21 00:01:51.480 --> 00:01:55.000 Then you realize Alan Greenspan is an inflation fighter. 22 00:01:55.000 --> 00:01:58.600 He is the root cause of inflation, okay? 23 00:01:58.600 --> 00:02:01.320 Now this was clearly understood by two great economists, 24 00:02:01.320 --> 00:02:03.760 Henry Hazlitt and Ludwig von Mises. 25 00:02:03.760 --> 00:02:06.000 Let me tell you what they said 26 00:02:06.000 --> 00:02:07.760 about the definition of inflation 27 00:02:07.760 --> 00:02:10.720 and how important they thought that a clear 28 00:02:10.720 --> 00:02:13.000 and a proper definition was. 29 00:02:13.000 --> 00:02:15.080 Hazlitt wrote that the word inflation 30 00:02:15.080 --> 00:02:18.080 originally applied solely to the quantity of money. 31 00:02:18.080 --> 00:02:20.160 It meant that the volume of money was inflated 32 00:02:20.160 --> 00:02:22.880 or blown up, overextended. 33 00:02:22.880 --> 00:02:25.000 It is not mere pedantry 34 00:02:25.000 --> 00:02:26.640 to insist that the word should be used 35 00:02:26.640 --> 00:02:28.520 only in its original meaning. 36 00:02:28.520 --> 00:02:30.760 To use it to mean a rise in prices 37 00:02:30.760 --> 00:02:32.320 is to deflect attention away 38 00:02:32.320 --> 00:02:35.200 from the real cause of inflation, 39 00:02:35.200 --> 00:02:37.200 and the real cure for it. 40 00:02:37.200 --> 00:02:40.840 As we'll see, the abolition of the central bank, 41 00:02:40.840 --> 00:02:43.360 the so-called inflation fighter. 42 00:02:43.360 --> 00:02:45.680 And Mises said, inflation, as this term, 43 00:02:45.680 --> 00:02:47.840 was always used everywhere, 44 00:02:47.840 --> 00:02:50.000 and especially also in this country, 45 00:02:50.000 --> 00:02:56.080 meaning the United States, means increasing the quantity of money and bank notes in circulation 46 00:02:56.080 --> 00:02:59.320 and the bank deposit subject to check. 47 00:02:59.320 --> 00:03:03.720 But people today call inflation the phenomenon that is the inevitable consequence of inflation, 48 00:03:03.720 --> 00:03:05.760 that is an increase in prices. 49 00:03:05.760 --> 00:03:11.800 The result of this deplorable confusion is that there is no term left to signify the 50 00:03:11.800 --> 00:03:14.880 cause of this rise in prices and wages. 51 00:03:14.880 --> 00:03:19.980 There is no longer any word available to signify the phenomenon that has up to now been called 52 00:03:19.980 --> 00:03:26.980 is called inflation. There is no name for the increase in the quantity of money, the printing up of money. 53 00:03:26.980 --> 00:03:32.980 Now, a name has come into use after World War II in particular. It's a very benevolent sounding name. 54 00:03:32.980 --> 00:03:39.980 It's called money management. Money has to be managed or monetary policy. We have to have a policy regarding money. 55 00:03:39.980 --> 00:03:59.980 So now inflation means something that used to be the result of inflation and the term money management now means the fighting of this phenomenon, which is visited on the economy from above, it's not caused by really anything, it's caused by many things. 56 00:03:59.980 --> 00:04:05.180 Having said that, let me go on to the essential nature of inflation. 57 00:04:05.180 --> 00:04:09.980 As I said before, I refer to inflation as essentially a counterfeiting process. 58 00:04:09.980 --> 00:04:16.380 It's no more and no less than swindling, a nice old word that we don't hear much of anymore. 59 00:04:16.380 --> 00:04:24.380 But it is swindling. When the new money is printed up, let's assume that there are counterfeiters in New Jersey, 60 00:04:24.380 --> 00:04:32.180 living near me, with Italian surnames, but not related to me. 61 00:04:32.180 --> 00:04:35.100 In any case, what do they do? They print up a quantity of money. 62 00:04:35.100 --> 00:04:40.900 It looks just like the other Federal Reserve notes that we use in our exchanges. 63 00:04:40.900 --> 00:04:43.380 They go out and they purchase goods and services. 64 00:04:43.380 --> 00:04:47.900 They purchase jewelry, they purchase wine, they purchase new automobiles. 65 00:04:47.900 --> 00:04:50.740 Now, on the one hand, they're all beneficiaries, right? 66 00:04:50.740 --> 00:04:53.180 The automobile dealers now make more money. 67 00:04:53.180 --> 00:04:56.540 They now put on more salespeople in their showrooms. 68 00:04:56.620 --> 00:05:00.740 The people who sell wine make more money, okay? 69 00:05:00.820 --> 00:05:04.060 They give greater orders to the California vineyards 70 00:05:04.140 --> 00:05:05.820 from which they purchase their wine. 71 00:05:05.900 --> 00:05:07.860 There are more jobs in that industry. 72 00:05:07.940 --> 00:05:09.940 So it seems as if this is a benevolent process. 73 00:05:10.020 --> 00:05:12.260 But of course now, remember what happened. 74 00:05:12.340 --> 00:05:14.940 You and I, who do not work in these industries, 75 00:05:15.020 --> 00:05:16.660 and most people do not, 76 00:05:16.740 --> 00:05:19.700 find that we suddenly have to pay more money for our wine, 77 00:05:19.780 --> 00:05:22.860 we have to pay more money for our automobiles, and so on. 78 00:05:22.860 --> 00:05:28.860 But it doesn't stop there. But remember, that is a step in the reduction of our real wages and income. 79 00:05:28.860 --> 00:05:30.860 We now have to pay higher prices. 80 00:05:30.860 --> 00:05:37.860 So real wealth is surreptitiously, secretly being redistributed away from the producers, you and I who work hard for money, 81 00:05:37.860 --> 00:05:42.860 to the counterfeiters and to those groups that they've first spent the money on. 82 00:05:42.860 --> 00:05:47.860 Now the counterfeiters then get these people on their side. They want more loose money or easy money. 83 00:05:47.860 --> 00:05:54.860 But these people then, the people who own the vineyards, the people who produce automobiles and the workers, have more money. 84 00:05:54.860 --> 00:05:57.860 They have this new money, and they spend it on other things. 85 00:05:57.860 --> 00:06:03.860 They spend it on steak dinners, they spend it on beer, on entertainment, and prices creep up further. 86 00:06:03.860 --> 00:06:07.860 And you and I have to pay higher prices for more goods. 87 00:06:07.860 --> 00:06:11.860 So step by step we are swindled by the counterfeiters. 88 00:06:11.860 --> 00:06:24.860 Now, there's no difference between what the counterfeiters do and the economic effects of their activity and what is done, in fact, by the people who run monetary policy. 89 00:06:24.860 --> 00:06:31.860 They print up new money, they spend it on more computers for defense, they spend it on farm subsidies. 90 00:06:31.860 --> 00:06:36.860 In that way, they buy votes, right? They get the supports of these groups. 91 00:06:36.860 --> 00:06:43.860 These groups in turn spend that money on other things and prices rise throughout the nation. 92 00:06:43.860 --> 00:06:48.860 The prices of bread and meat and so on. Now I'm in New York. I'm a professor of economics. 93 00:06:48.860 --> 00:06:55.860 There's been no increase in the demand for the education that I help bring about. 94 00:06:55.860 --> 00:06:59.860 I teach MBA students at Pace University. 95 00:06:59.860 --> 00:07:05.860 But after maybe 12 months or 18 months, the new money percolates into New York. 96 00:07:05.860 --> 00:07:11.380 people invest more in the financial district people more tourists who have 97 00:07:11.380 --> 00:07:14.860 some of this new money come to New York City and spend on entertainment so 98 00:07:14.860 --> 00:07:19.140 eventually salaries and wages begin to rise in New York 12 months 18 months 99 00:07:19.140 --> 00:07:24.340 later in the meantime I've paid higher prices for all of these months at last 100 00:07:24.340 --> 00:07:28.620 there's an increase in on the part of people let's say who work in the 101 00:07:28.620 --> 00:07:33.820 financial industry in getting in demand rather for a Pace University education 102 00:07:33.820 --> 00:07:39.820 Okay, that is, they want to get their MBAs. So, maybe 24 months later, my dean gives me a raise. 103 00:07:39.820 --> 00:07:45.820 Okay, so I finally get some of that new money, but in the meantime, my real income, let's say prices have gone up by 5%, 104 00:07:45.820 --> 00:07:51.820 my real income has been reduced by 5%, and that happens throughout the nation. Okay. 105 00:07:51.820 --> 00:07:57.820 So, counterfeiting, rather, inflation is counterfeiting, okay, it is swindling, alright. 106 00:07:57.820 --> 00:08:02.820 And you can see this with the origins of inflation. Where did inflation originate? 107 00:08:02.820 --> 00:08:15.820 It originated among the kings, now the kings originally took over the mints in order to make sure that the coins that were being fabricated or manufactured were sound. 108 00:08:15.820 --> 00:08:20.820 Now when they did this, they began to charge monopoly prices for minting the coins. 109 00:08:20.820 --> 00:08:29.620 Anyone else who tried to mint coins was then thrown in jail, prosecuted for violating this prerogative of the king. 110 00:08:29.620 --> 00:08:33.620 However, that revenue was not enough for the king, so what did he do? 111 00:08:33.620 --> 00:08:40.620 To add from the revenues, he began to secretly take the coins that he was minting for the people, the public that was bringing it in, 112 00:08:40.620 --> 00:08:48.620 and clip it, reduce some of the gold and silver content, and mix it with base metal like copper. 113 00:08:48.620 --> 00:08:55.620 So he secretly clipped the coins, reduced their weight, and then pocketed the gold and silver. 114 00:08:55.620 --> 00:09:00.820 When he did that, he then made new coins and spent them, okay? 115 00:09:00.820 --> 00:09:03.620 The result was rising prices throughout the kingdom. 116 00:09:03.620 --> 00:09:08.420 He also took, called back the coins that were being worn out. 117 00:09:08.420 --> 00:09:13.420 Gold and silver coins tend to wear out when you circulate them, okay? 118 00:09:13.420 --> 00:09:19.420 When you pay them to people for goods and services and they're re-exchanged. 119 00:09:19.420 --> 00:09:22.420 And what he did was he called these back and he made them lighter, okay? 120 00:09:22.420 --> 00:09:27.860 Okay, let's say his name was King Knitwick, and he put his own image and a name called 121 00:09:27.860 --> 00:09:32.460 the Knit, one Knit, on a gold coin, and that was equal to one ounce of gold. 122 00:09:32.460 --> 00:09:38.600 Well he revalued the coin, he took one half of an ounce of gold, put his picture on it 123 00:09:38.600 --> 00:09:43.840 and one Knit, and then took the rest of the gold and coined it on his own account and 124 00:09:43.840 --> 00:09:50.140 bought the things that he and his family and courtiers and so on desired. 125 00:09:50.140 --> 00:09:52.060 That drove prices up throughout the kingdom. 126 00:09:52.060 --> 00:09:54.460 and that was simply fraud. 127 00:09:54.460 --> 00:09:59.180 The other origin of inflation was in banking and I don't want to go into this in too much 128 00:09:59.180 --> 00:10:07.240 detail but banking originated in the English speaking world in the 1600s in England when 129 00:10:07.240 --> 00:10:11.000 people began to deposit their gold with the goldsmiths. 130 00:10:11.000 --> 00:10:15.620 Now what they did was they deposited their gold for safekeeping and in exchange they 131 00:10:15.620 --> 00:10:22.460 They received warehouse receipts, they received pieces of paper that would affect titles, 132 00:10:22.460 --> 00:10:26.620 represented their titles to the ownership of the gold that was deposited. 133 00:10:26.620 --> 00:10:30.980 Because they trusted the goldsmith, they began to exchange these titles, they were called 134 00:10:30.980 --> 00:10:35.620 money substitutes and they were bank notes, they came to be known as bank notes. 135 00:10:35.620 --> 00:10:38.780 People accepted them because, the sellers that is, accepted them in exchange for the 136 00:10:38.780 --> 00:10:44.500 things they were selling, because they had full confidence that in fact the goldsmiths 137 00:10:44.500 --> 00:10:47.780 would pay off on these ownership titles. 138 00:10:47.780 --> 00:10:51.380 But that very act of confidence in the goldsmiths 139 00:10:51.380 --> 00:10:53.180 meant that the goldsmiths realized 140 00:10:53.180 --> 00:10:56.200 that this gold stayed with them for a long period of time. 141 00:10:56.200 --> 00:11:00.320 And that on any given day, very little was redeemed, 142 00:11:00.320 --> 00:11:03.420 which in turn meant that they had the ability 143 00:11:03.420 --> 00:11:07.040 to loan out maybe 50% of it or 25% of it at interest. 144 00:11:07.040 --> 00:11:10.620 So they not only were earning the fees for storage, 145 00:11:10.620 --> 00:11:15.020 They were earning interest on fraudulent loans. 146 00:11:15.020 --> 00:11:20.220 Later on, when some of them were found out and went bankrupt as people rushed to get their gold out, 147 00:11:20.220 --> 00:11:24.120 they kept all the gold and they did something that was even more sneaky. 148 00:11:24.120 --> 00:11:27.620 They simply printed up more of these ownership titles. 149 00:11:27.620 --> 00:11:30.820 Now, these ownership titles represented a claim to nothing, 150 00:11:30.820 --> 00:11:34.320 but since they looked like the other ownership titles, the legitimate ownership titles, 151 00:11:34.320 --> 00:11:39.420 they passed them out and they were accepted in exchange and they increased prices. 152 00:11:39.420 --> 00:11:50.420 So, every increase in money on the part of kings, on the part of banks that were given special privileges by the kings and the state, originated in fraud and in swindling. 153 00:11:50.420 --> 00:11:53.420 And that was where the original term inflation came from. 154 00:11:53.420 --> 00:12:00.420 And having said that, let's just jump ahead a little bit to the modern era. 155 00:12:00.420 --> 00:12:06.820 This inflation caused increases in prices, but not just an increase in all prices, 156 00:12:06.820 --> 00:12:15.620 increases in certain prices, for example, a fall in interest rates, which drives up the prices of capital goods. 157 00:12:15.620 --> 00:12:20.420 This inflationary boom brought about what we might call a distortion. 158 00:12:20.420 --> 00:12:27.420 There were too many capital goods being purchased, rather demanded and purchased, 159 00:12:27.420 --> 00:12:30.420 because the borrowers were predominantly businesses. 160 00:12:30.420 --> 00:12:33.420 On the other hand, when the new money got to the workers, 161 00:12:33.420 --> 00:12:35.420 when they finally were paid the new money, 162 00:12:35.420 --> 00:12:38.420 they rushed out and spent it on consumers' goods. 163 00:12:38.420 --> 00:12:41.420 Eventually what happened was that we had a recession. 164 00:12:41.420 --> 00:12:44.420 Many of the firms producing these capital goods went out of business, 165 00:12:44.420 --> 00:12:48.420 could not repay their loans and do runs on the banks. 166 00:12:48.420 --> 00:12:52.420 To keep this prosperity, this illusion of prosperity going, 167 00:12:52.420 --> 00:12:54.420 the banks turned to the government. 168 00:12:54.420 --> 00:12:57.620 and eventually they lobby the government for a central bank. 169 00:12:57.620 --> 00:13:01.420 And this is where the idea of managed money came in, okay? 170 00:13:01.420 --> 00:13:03.820 Especially in the 19th century in the United States, 171 00:13:03.820 --> 00:13:08.520 the late 19th century, we had pressure for a central bank building up. 172 00:13:08.520 --> 00:13:10.820 We finally had the central bank. 173 00:13:10.820 --> 00:13:13.620 After we got a central bank, 174 00:13:13.620 --> 00:13:17.220 the central bank began to issue its own money, okay? 175 00:13:17.220 --> 00:13:20.520 Its own claims to gold, okay? There was still a gold standard. 176 00:13:20.520 --> 00:13:26.800 But now the central bank was putting its own imprimatur on paper money. 177 00:13:26.800 --> 00:13:31.800 So paper money became completely acceptable to everyone in their daily lives. 178 00:13:31.800 --> 00:13:34.040 And this is where managed money comes in. 179 00:13:34.040 --> 00:13:37.880 When the central bank inflated and allowed the banks to inflate, 180 00:13:37.880 --> 00:13:40.920 and we had recessions, which is always a result, 181 00:13:40.920 --> 00:13:47.280 we had a situation in which you then had the banks under tremendous pressure. 182 00:13:47.280 --> 00:13:55.680 And it was at that point that it was realized that this inflation would drive the banks all into bankruptcy. 183 00:13:55.680 --> 00:14:01.100 And in fact, in the United States from 1931 to 1933, half the banks in the country collapsed. 184 00:14:01.100 --> 00:14:04.980 People's checking accounts disappeared into thin air. 185 00:14:04.980 --> 00:14:08.840 Well, the United States went off the gold standard. That was part of managed money. 186 00:14:08.840 --> 00:14:14.220 Going off the gold standard meant simply you told people that had entrusted their property with you, 187 00:14:14.220 --> 00:14:19.940 American citizens that they could no longer take those ownership titles and get that gold out, okay? 188 00:14:19.940 --> 00:14:25.060 You reneged on a solemn pledge. You attacked their property rights. So in 1933, 189 00:14:26.060 --> 00:14:29.100 Americans were no longer permitted to convert their dollars into gold, 190 00:14:29.940 --> 00:14:31.940 and the, 191 00:14:32.020 --> 00:14:38.300 in fact, Americans weren't allowed to own gold. It was against the law unless you were a dentist or a jeweler to own gold from 192 00:14:38.500 --> 00:14:42.260 1933 to 1976. And again, this was money management. 193 00:14:42.260 --> 00:14:51.260 Now, in 1946, we went back to a gold standard. The world found that monies without gold were chaotic. 194 00:14:51.260 --> 00:15:02.260 However, only the United States dollar was convertible into gold, and it was only convertible for the people who, foreign official institutions. 195 00:15:02.260 --> 00:15:05.260 Well, there were problems with this system. It was known as the Bretton Woods system. 196 00:15:05.260 --> 00:15:10.260 And this involved what we might call, or what is again, swindling. 197 00:15:10.260 --> 00:15:24.260 For example, the British government promised solemnly in 1948 or 1946 to make sure that the British dollar or the British pound, excuse me, was always equal to $4.03 basically. 198 00:15:24.260 --> 00:15:33.260 So it always could exchange for $4.03. So the British public then had to write the claim dollars and then exchange the dollars for gold. 199 00:15:33.260 --> 00:15:35.260 They could still own gold in Great Britain. 200 00:15:35.260 --> 00:15:39.660 Now, what was happening, of course, was that there was a lot of inflation, the British 201 00:15:39.660 --> 00:15:44.220 government didn't have enough dollars to honor this promise, so they engaged in money management. 202 00:15:44.220 --> 00:15:51.220 And the money management involved the following, the Chancellor of the Exchequer in Great Britain 203 00:15:51.220 --> 00:15:54.660 made the following promises, okay, 12 different times. 204 00:15:54.660 --> 00:15:59.920 He said in January 26, no alteration in the value of sterling is contemplated by the British 205 00:15:59.920 --> 00:16:03.520 government following the devaluation of the franc. 206 00:16:03.520 --> 00:16:08.220 In March 4th, he said, a reported plan to devalue the pound is complete nonsense. 207 00:16:08.220 --> 00:16:11.500 On May 6th, 1948, he said, the government has no intention of embarking on a program 208 00:16:11.500 --> 00:16:17.220 to devalue the pound, and so on and so on, denying that they would devalue the pound. 209 00:16:17.220 --> 00:16:20.380 And finally, on September 6th, he said, I will stick to the statement I made in the 210 00:16:20.380 --> 00:16:26.420 House of Commons that Sterling will not be devalued, and of course, 13 days later, he 211 00:16:26.420 --> 00:16:27.420 devalued the pound. 212 00:16:27.420 --> 00:16:31.880 Now, this even upset Winston Churchill, okay? 213 00:16:31.880 --> 00:16:36.320 So as Henry Hazard points out, this is the essence of monetary management. 214 00:16:36.320 --> 00:16:39.920 And of course, President Nixon did the same thing in 1971. 215 00:16:39.920 --> 00:16:45.600 After solemn pledges to the rest of the world to make sure that, or to guarantee that the 216 00:16:45.600 --> 00:16:56.480 dollar would be convertible into gold at the fixed price of $35 per ounce, Nixon closed 217 00:16:56.480 --> 00:16:57.480 the gold window. 218 00:16:57.480 --> 00:17:11.480 That was the harmless phrase that was used, the euphemism that was used, but of course what he did was he reneged on a solemn promise of the United States government to all the other governments of the world to convert the dollar into gold. 219 00:17:11.480 --> 00:17:20.480 So inflation itself is inherently immoral. Today, since 1971 of course, the dollar is convertible into nothing. 220 00:17:20.480 --> 00:17:28.480 and nothing. So the government, the U.S. government, through the Federal Reserve system, can and does inflate ad libidum, meaning at will. 221 00:17:28.480 --> 00:17:36.480 It can print up new dollars and it does so out of thin air, setting into motion the counterfeiting process I talked about. 222 00:17:36.480 --> 00:17:44.480 Now the second part of this talk I want to direct towards the morality, the implications for social morality of this. 223 00:17:44.480 --> 00:17:57.980 Let me just say a few words about the German hyperinflation, because this is the culmination of the swindling process of inflation. 224 00:17:57.980 --> 00:18:04.480 And you can see the effects on social morals and mores operating. 225 00:18:04.480 --> 00:18:11.980 To give you an idea of the extent to which this inflation went, in January of 1921, 226 00:18:11.980 --> 00:18:18.380 You could buy a German newspaper for about three-tenths of a mark, that's January of 1921. 227 00:18:18.380 --> 00:18:29.700 By October of 1923, it cost 2,000 marks, as if a candy bar that cost us 30 cents today in two years' time cost us $2,000. 228 00:18:29.700 --> 00:18:31.500 But it continued to go on from there. 229 00:18:31.500 --> 00:18:40.940 By October 29th of that same year, it was up to one million marks. 230 00:18:40.940 --> 00:18:52.440 And by November 17th, it cost 70 million marks to buy German newspapers as if a candy bar then, in two years, two and a half years' time, was 70 million dollars. 231 00:18:52.440 --> 00:19:02.740 The German government had 2,000 printing presses, had taken over all the printing presses in the country and was printing up money as fast as it could in order to keep up with the rise in prices. 232 00:19:02.740 --> 00:19:07.140 At some point, people lose confidence in the money, in the value of the money. 233 00:19:07.140 --> 00:19:13.700 The price continues to rise at ever-rapid rates, even more quickly than the government can print money out. 234 00:19:13.700 --> 00:19:18.940 So even in the middle of this massive inflation, people experience a shortage of money. 235 00:19:18.940 --> 00:19:24.740 They didn't have enough money. As much as they had, they didn't have enough money to buy goods and services. 236 00:19:24.740 --> 00:19:30.980 Let me give you some of the social consequences, then we'll talk a little bit about the morality of it or the immorality of it. 237 00:19:30.980 --> 00:19:33.980 It destroyed people's bank deposits and pensions. 238 00:19:33.980 --> 00:19:39.980 If someone had a pre-war pension of 200 marks per month, which was very comfortable, 239 00:19:39.980 --> 00:19:44.980 they couldn't even buy a meal by 1920, so it destroys your savings. 240 00:19:44.980 --> 00:19:49.980 Someone, for example, a man who thought he had a small fortune in a bank, 241 00:19:49.980 --> 00:19:56.980 68,000 marks before the war, received a letter after the hyperinflation started, 242 00:19:56.980 --> 00:20:01.980 telling him that the bank deeply regrets that it can no longer administer your deposit of 68,000 marks 243 00:20:01.980 --> 00:20:04.980 since the costs are all out of proportion to the capital. 244 00:20:04.980 --> 00:20:07.980 We are therefore taking liberty of returning a capital. 245 00:20:07.980 --> 00:20:12.980 Since we have no bank notes, small enough and small of a denomination at our disposal, 246 00:20:12.980 --> 00:20:19.980 the government had stopped printing new money, just printed 1 million, 1 billion marks on the existing mark notes. 247 00:20:19.980 --> 00:20:22.980 So there was no note for less than a million. 248 00:20:22.980 --> 00:20:25.980 Since we have no bank notes and small of a denomination at our disposal, 249 00:20:25.980 --> 00:20:28.980 We have rounded out the sum to one million marks. 250 00:20:28.980 --> 00:20:33.980 We're going to send him back one million marks, even though he only has 68,000 marks. 251 00:20:33.980 --> 00:20:41.980 The stamp, the canceled stamp on the letter that he got cost five million marks. 252 00:20:41.980 --> 00:20:45.980 So he couldn't even buy a stamp. 253 00:20:45.980 --> 00:20:53.980 Workers didn't want to hold money for a week, so they began to demand to get paid three times a week, and then every day, and then three times a day. 254 00:20:53.980 --> 00:20:57.040 had their fiancés and wives at the factory gates, 255 00:20:57.040 --> 00:20:58.980 got the new money, rushed out to buy things 256 00:20:58.980 --> 00:21:01.660 as quickly as possible, okay? 257 00:21:01.660 --> 00:21:04.940 Teachers and professors who were traditionally paid 258 00:21:04.940 --> 00:21:06.860 monthly in Germany quit their jobs 259 00:21:06.860 --> 00:21:09.020 because you held money for a month. 260 00:21:09.020 --> 00:21:10.460 Okay, if you had to wait a month for your income, 261 00:21:10.460 --> 00:21:12.660 that income was worth one millionth 262 00:21:12.660 --> 00:21:14.780 of what it was worth prior money. 263 00:21:14.780 --> 00:21:17.740 So they quit their jobs and became taxi drivers and waiters. 264 00:21:17.740 --> 00:21:20.580 Farmers refused to pay you, to sell you an egg, 265 00:21:20.580 --> 00:21:23.580 even for a whole wheelbarrow full of marks. 266 00:21:23.580 --> 00:21:29.580 Thieves, when women went to the grocery store with their laundry baskets filled with marks, 267 00:21:29.580 --> 00:21:33.580 and they left them outside because there was no room for people carrying around laundry baskets, 268 00:21:33.580 --> 00:21:36.580 thieves would come by, dump the marks out, 269 00:21:36.580 --> 00:21:39.580 and just grab the laundry baskets because they were worth so much more, 270 00:21:39.580 --> 00:21:42.580 and they could make a quicker getaway. 271 00:21:42.580 --> 00:21:47.580 Now, let me quickly mention the effects of this. 272 00:21:47.580 --> 00:21:54.580 Those people that were able to get the new marks as they were printed up by the banks were the ones that benefited. 273 00:21:54.580 --> 00:22:00.580 They got it before the prices rose. And they spent it. They bought up hotels, they bought up land. 274 00:22:00.580 --> 00:22:07.580 You had so-called joint ventures in Germany, which put together calls, banks, hotels, electricity. 275 00:22:07.580 --> 00:22:15.580 Hugo Stinnis was a great industrialist who came up with all these great ventures, which were not very productive. 276 00:22:15.580 --> 00:22:31.580 and in fact collapsed. They were put together by paper money. On the other hand, this was based on the looting of the savings of the people on pensions who had no access to this new money right away and to the middle class who were getting paid every two weeks or every month. 277 00:22:31.580 --> 00:22:37.940 So you had this nouveau riche, these newly rich, that began to rush out and spend the new money, 278 00:22:37.940 --> 00:22:48.940 because they knew it was going to depreciate, on ostentatious examples of conspicuous consumption. 279 00:22:48.940 --> 00:22:53.540 Who were the victims? The middle class, the small businesses, the pensioners, they were all wiped out. 280 00:22:53.540 --> 00:22:55.640 Now what about the effects on moral values? 281 00:22:55.640 --> 00:23:01.500 Obviously, it no longer paid to be thrifty and to save your own future and your child's future. 282 00:23:01.500 --> 00:23:08.500 So thrift, such an important value in the economy, in the capitalist economy, went by the board. 283 00:23:08.500 --> 00:23:14.500 People no longer carefully planned their investments. They simply bought anything because they felt that the price was going to go up the next day or the next two days. 284 00:23:14.500 --> 00:23:23.700 So people no longer looked to the future. They suddenly became very interested in immediate gratification, to get anything and get it now. 285 00:23:23.700 --> 00:23:31.140 Productive work was discouraged because most people, towards the end, left the factories and spent all their time hunting for bargains, 286 00:23:31.140 --> 00:23:33.780 trying to get rid of their marks, okay? 287 00:23:33.780 --> 00:23:35.480 Even sexual morals changed. 288 00:23:35.480 --> 00:23:37.180 Women's dowries were wiped out. 289 00:23:37.180 --> 00:23:39.140 Now you laugh about that, but dowries 290 00:23:39.140 --> 00:23:41.740 had a very important function in the old culture. 291 00:23:41.740 --> 00:23:45.720 And it was a way of signaling to a prospective suitor 292 00:23:45.720 --> 00:23:49.180 that the woman's family was virtuous, 293 00:23:49.180 --> 00:23:51.580 had thrift, and they worked hard, 294 00:23:51.580 --> 00:23:54.060 and they had family commitments to one another. 295 00:23:54.060 --> 00:23:55.580 Now the women became discouraged 296 00:23:55.580 --> 00:23:57.380 of ever accumulating dowries in the future 297 00:23:57.380 --> 00:23:59.060 and ran off with their boyfriends. 298 00:23:59.060 --> 00:24:04.260 Now, the term boyfriend was not used in polite society in Germany in the 1920s, okay? 299 00:24:04.260 --> 00:24:14.060 Prior to the hyperinflation, it was a scandal for an unmarried middle-class girl to have a boyfriend, quote-unquote, okay? 300 00:24:14.060 --> 00:24:24.560 Everybody sought after this ostentatious luxury, and that replaced the goal of having a good and solid family name, okay? 301 00:24:24.560 --> 00:24:27.560 Of being sober and so on in your investments. 302 00:24:27.560 --> 00:24:45.420 And finally, the people who were looked up on were the unscrupulous gamblers and profiteers who now got to the top of the social structure where the old families and the old wealthy who worked hard and so on and were good examples to the rest of the populace were now at the bottom. 303 00:24:45.420 --> 00:24:51.900 Now, there is a direct link between inflation and the breakdown of morality, an even more direct link. 304 00:24:51.900 --> 00:24:57.000 Think of it, let me just explain it in the following way. 305 00:24:57.000 --> 00:25:03.000 By bringing about a thoroughgoing social revolution, it really does destroy the middle class and the productive rich. 306 00:25:03.000 --> 00:25:08.000 But by destroying money itself, it destroys everyone's ability to plan for the future, 307 00:25:08.000 --> 00:25:14.000 and leaves them no recourse but to seek after immediate gratification. 308 00:25:14.000 --> 00:25:23.000 Moreover, whether we like it or not, men and women live in a world where they cannot live or flourish physically and spiritually without property. 309 00:25:23.000 --> 00:25:27.500 But remember, property is not merely a collection of material things. 310 00:25:27.500 --> 00:25:35.500 It refers to those things that are judged valuable in serving human wants and desires. 311 00:25:35.500 --> 00:25:41.700 But in the modern world, you can never know what the value of property is in a specialized economy of mass production, 312 00:25:41.700 --> 00:25:44.100 unless you know its money value. 313 00:25:44.100 --> 00:25:50.900 So in a real sense, valuable property is an extension and a definition of an individual's very personality. 314 00:25:50.900 --> 00:25:57.900 Let me give you an example. One is not really a doctor, a carpenter or an auto manufacturer unless his business has a monetary value. 315 00:25:57.900 --> 00:26:02.900 If he doesn't know the monetary value of his skills and of his business, then he's just playing games. 316 00:26:02.900 --> 00:26:07.900 He's not serving anyone. He's not providing a valuable service to anyone. He isn't truly a doctor. 317 00:26:07.900 --> 00:26:15.900 One does not know his family and his own and his family's position in a social order or the degree of success 318 00:26:15.900 --> 00:26:19.900 unless he can calculate the value of his possessions. 319 00:26:19.900 --> 00:26:23.900 And finally, people do not even know what or who they will be in the future 320 00:26:23.900 --> 00:26:27.900 without their knowing the monetary value of their savings, 321 00:26:27.900 --> 00:26:29.900 which is lost under inflation. 322 00:26:29.900 --> 00:26:32.900 So money is an essential, without exaggerating, you know, 323 00:26:32.900 --> 00:26:38.900 I'll end with a very insightful statement by a German sociologist and historian. 324 00:26:38.900 --> 00:26:45.900 Without exaggerating, money is an essential element of human becoming and being, okay? 325 00:26:45.900 --> 00:26:48.900 We're not really truly human. We cannot really plan. 326 00:26:48.900 --> 00:26:54.900 We cannot really have an idea of who we are without sound money in society, okay? 327 00:26:55.900 --> 00:26:59.900 When we get on sound money, the human personality shrivels and human society decays. 328 00:27:00.900 --> 00:27:08.900 Now, the German sociologist and historian, Konrad Heiden, a very insightful observer of the German hyperinflation, wrote the following way. 329 00:27:08.900 --> 00:27:18.900 The German people was one of the first to witness the decay of those material values, which a whole century had taken as the highest of all values. 330 00:27:18.900 --> 00:27:28.900 The German nation was one of the first to experience the death of the unlimited private property, which had lent such a royal pride to modern humanity. 331 00:27:28.900 --> 00:27:32.900 Money had lost its value. What then could have any value? 332 00:27:32.900 --> 00:27:38.100 Of course, many were accustomed to having no money, but that even with money you had nothing. 333 00:27:38.100 --> 00:27:44.100 That was truly the twilight of the gods, as horrible as anything Wagner could have foreseen. 334 00:27:44.100 --> 00:27:47.200 A cynical frivolity penetrated men's souls. 335 00:27:47.200 --> 00:27:52.000 No one knew what he really possessed, and some men wondered what they really were. 336 00:27:52.000 --> 00:27:56.600 Man had measured himself by money. His worth had been measured by money. 337 00:27:56.600 --> 00:28:00.300 Through money he was someone, or at least hoped to become someone. 338 00:28:00.300 --> 00:28:06.300 Men had come and gone, risen and fallen, but money had been permanent and immortal. 339 00:28:06.300 --> 00:28:09.300 Now the state had managed to kill the immortal thing. 340 00:28:09.300 --> 00:28:15.300 The state was a conqueror and successor of money, and thus the state was everything. 341 00:28:15.300 --> 00:28:19.300 Man looked down at himself and saw that he was nothing. 342 00:28:19.300 --> 00:28:23.300 Now a shrewd and cunning German politician, Adolf Hitler, 343 00:28:23.300 --> 00:28:29.300 understood the nature of inflation as a gigantic material and spiritual swindle 344 00:28:29.300 --> 00:28:35.020 and perceived the transformation of the German soul and German souls and personalities. 345 00:28:35.020 --> 00:28:43.420 He both taunted the German people for acquiescing in it and promised them material relief and spiritual salvation in the state, 346 00:28:43.420 --> 00:28:48.940 which he saw and he made sure they knew was a successor of money. 347 00:28:48.940 --> 00:28:54.220 Let me just end by just a few statements from Hitler. It's really chilling. 348 00:28:54.220 --> 00:28:58.220 In 1923, Hitler told the following story, and I'm quoting. 349 00:28:58.220 --> 00:29:01.380 We have just had a big gymnastic festival in Munich. 350 00:29:01.380 --> 00:29:05.180 300,000 athletes from all over the country assembled here. 351 00:29:05.180 --> 00:29:08.220 That must have brought our city lots of business, you think. 352 00:29:08.220 --> 00:29:09.180 Now listen to this. 353 00:29:09.180 --> 00:29:11.820 There was an old woman who sold picture postcards. 354 00:29:11.820 --> 00:29:15.660 She was glad because the festival would bring her plenty of customers. 355 00:29:15.660 --> 00:29:20.220 She was beside herself with joy when sales far exceeded her expectations. 356 00:29:20.220 --> 00:29:23.140 Business really had been good, or so she thought. 357 00:29:23.140 --> 00:29:27.300 But now the old woman is sitting in front of an empty shop, crying her eyes out. 358 00:29:27.300 --> 00:29:34.100 For with the miserable paper money she took in for her cards, she can't buy a hundredth of her old stock, her old inventory. 359 00:29:34.100 --> 00:29:41.180 Her business is ruined, her livelihood absolutely destroyed, she can go begging, and the same despair is seizing the whole people. 360 00:29:41.180 --> 00:29:44.980 We are facing a revolution. He went on in another speech. 361 00:29:44.980 --> 00:29:51.540 The government calmly goes on printing these scraps because if it stopped, that would mean the end of the government. 362 00:29:51.540 --> 00:29:56.240 Because once the printing presses stopped, and that is a prerequisite for the stabilization of the mark, 363 00:29:56.240 --> 00:30:02.240 this is Hitler talking, he saw that, that's how you stop inflation, okay, he knew the Austrian lesson. 364 00:30:02.240 --> 00:30:10.880 The swindle would at once be brought to light, for then the worker would realize that he is only making a third of what he made in peacetime, 365 00:30:10.880 --> 00:30:14.580 because two-thirds of his labor go as tribute to the enemy. 366 00:30:14.580 --> 00:30:20.340 Believe me, our misery will increase, the scoundrel will get by, but the decent solid businessman, 367 00:30:20.340 --> 00:30:23.240 who doesn't speculate will be utterly crushed. 368 00:30:23.240 --> 00:30:25.060 First, little fellow on the bottom, 369 00:30:25.060 --> 00:30:27.520 but in the end, the big fellow on top, too. 370 00:30:27.520 --> 00:30:29.020 But the scoundrel and the swindler 371 00:30:29.020 --> 00:30:30.700 will remain top and bottom. 372 00:30:30.700 --> 00:30:31.700 The reason? 373 00:30:31.700 --> 00:30:33.540 Because the state itself has become 374 00:30:33.540 --> 00:30:36.200 the biggest swindler and crook, a robber's state. 375 00:30:37.680 --> 00:30:39.160 Soon you will starve completely 376 00:30:39.160 --> 00:30:40.680 unless you blindly follow me. 377 00:30:41.580 --> 00:30:43.460 Citizens reckoning in billions, 378 00:30:43.460 --> 00:30:45.900 okay, you know, there's no mark notes 379 00:30:45.900 --> 00:30:47.260 less than one million, 380 00:30:47.260 --> 00:30:50.100 so people are regularly reckoning in billions of marks, 381 00:30:50.100 --> 00:30:55.860 will die of hunger because the farmer will stop selling his grain or butter for the worthless billions, 382 00:30:55.860 --> 00:30:59.420 with which he can paper his outhouse or his manure heap. 383 00:30:59.420 --> 00:31:02.420 And don't go complaining, how mean of the farmer. 384 00:31:02.420 --> 00:31:08.380 Will one of you step forward and say he is willing to give away his work of many months for nothing? 385 00:31:08.380 --> 00:31:12.700 The money you offer the farmer is no longer a note on work done. 386 00:31:12.700 --> 00:31:16.420 It is a note on a swindling regime and that means hunger. 387 00:31:16.420 --> 00:31:21.340 If the horrified people notice that they can starve on billions, they must arrive at this conclusion. 388 00:31:21.340 --> 00:31:26.500 We will no longer submit to a state which is built on the swindling idea of the majority. 389 00:31:26.500 --> 00:31:28.700 We want dictatorship. 390 00:31:28.700 --> 00:31:33.940 The German people are children, for only a childish people would accept million-mark bills. 391 00:31:33.940 --> 00:31:40.180 And so, now Hitler's going on saying that, making the connection between majority rule and inflation 392 00:31:40.180 --> 00:31:46.380 and dictatorship as sort of a spiritual salvation from this inflation. 393 00:31:46.380 --> 00:31:50.740 and he finishes it off with a call for dictatorship. He says something like, 394 00:31:50.740 --> 00:31:56.940 or he says exactly, true strength is the quality of a few men or else we would not have the word hero. 395 00:31:56.940 --> 00:32:00.340 The masses consist of average men, Democrats. 396 00:32:00.340 --> 00:32:05.060 Cowardly men choose the most cowardly as their leaders so that they won't have to show courage. 397 00:32:05.060 --> 00:32:10.700 And they choose the stupidest among the stupid so that everyone can have the feeling that he's a little better than the leader. 398 00:32:10.700 --> 00:32:14.340 People subjected to the decision of the majority is on the road to ruin. 399 00:32:14.340 --> 00:32:17.420 And then he goes on and talks about how cowardly the German people have become 400 00:32:17.420 --> 00:32:20.420 because they've swallowed the democratic poison. 401 00:32:20.420 --> 00:32:22.580 It's penetrated everywhere, okay? 402 00:32:22.580 --> 00:32:27.340 Nations that have lost their character and honor deserve no good fortune, no happy life. 403 00:32:27.340 --> 00:32:31.300 The German people is going the same way that the ancient peoples went. 404 00:32:31.300 --> 00:32:34.700 It is a people passing little by little into decay. 405 00:32:34.700 --> 00:32:43.620 So, Alain, in conclusion, really to secure the future of human liberty and society 406 00:32:43.620 --> 00:32:51.620 And really, of human personality itself, we must smash the swindling status, 407 00:32:51.620 --> 00:32:55.620 soul-destroying creators of paper money, and return to the gold standard.