Latest / Come Together with Ephraim Herschmann / Economics Series 1: Lawrence White / The Fed, Gold, National Debt

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Economics Series 1: Lawrence White / The Fed, Gold, National Debt · Come Together with Ephraim Herschmann

• 0:01
  Welcome to another episode of Come Together
• 0:15
  and we're LIVE. Professor Larry Lawrence White,
• 0:18
  thank you so much for coming on. I really appreciate it.
• 0:20
  How are you today? I'm fine.
• 0:24
  I'm looking forward to talking to you.
• 0:26
  Yeah. Yeah.
• 0:27
  You know, I'm really excited about this.
• 0:28
  I've been I, I, I, I this podcast I started, I wanted to,
• 0:33
  I had a vision of just having healthy, productive and
• 0:40
  educational content available in a digestible, easy way and kind
• 0:44
  of a form of a conversation. I think that the dynamic of
• 0:46
  conversation helps people kind of stay, you know, focused as
• 0:50
  opposed to, you know, just one of us talking for the entire
• 0:54
  time. And so I think there's going to
• 0:55
  be an awesome method. But you're professor of
• 0:58
  economics at George Mason University, right?
• 1:01
  I just retired on June 1st. Oh, congratulations.
• 1:06
  Professor of economics. Beautiful, beautiful.
• 1:08
  Congratulations on retirement. How does that feel?
• 1:12
  Well, it's been like any other summer, but now that the fall is
• 1:15
  approaching, it does feel a little different because I'm not
• 1:17
  preparing courses and my former colleagues are all doing that.
• 1:23
  I see, I see. And I saw you've been starting
• 1:25
  to write on sub stack a little bit.
• 1:26
  Are you going to keep that up? Oh no, I haven't written on sub
• 1:32
  stack. No.
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  Did I? Was that someone else then?
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  I thought. I thought that was you must
• 1:36
  have. But yeah, yeah, must have been
• 1:38
  someone else. Well, you're going to keep up
• 1:40
  writing or research or what do you, what do you plan on doing?
• 1:43
  Yes, I'm just retiring from teaching and grading exams is
• 1:47
  the way I think of it. So I'm going to spend the fall
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  in London at King's College London, trying to write some
• 1:55
  papers, giving some talks. And so those activities I will
• 1:58
  keep up. That sounds very exciting.
• 2:01
  That's kind of great. Have you, have you spent time
• 2:03
  there? Oh, just weekends.
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  I haven't spent a long time since I worked on my
• 2:09
  dissertation in 1981. I spent a lot of time in the
• 2:14
  Goldsmith's Library in London. That was a long time ago.
• 2:18
  I was about to say, I'm sure a lot's changed between now and
• 2:20
  then, huh? Yeah, all all the things I had
• 2:23
  to go there to read in person are now online.
• 2:26
  Yeah, that's the benefit. That's the benefit, I guess,
• 2:28
  right. So I wanted, so I wanted to kind
• 2:31
  of do a combination of a narrative, but with a lot of
• 2:34
  information, you know, just to, I guess learning information.
• 2:38
  And one of the things that I've noticed that I've heard kind of
• 2:41
  popping up based on the podcast that I've been listening to
• 2:43
  lately is, is a lot of talk about the Federal Reserve.
• 2:49
  And I, I know that when I was trying to talk to my family
• 2:53
  about it or friends about it, very few people seem to have any
• 2:56
  idea as to what its purpose was. They, you know, they kind of
• 2:59
  have an idea as to when it was created.
• 3:02
  But you know, and I know it started, it started, it started
• 3:06
  in 1913 by Woodrow Wilson. What was the purpose of it?
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  What function does it serve and what does it do for us?
• 3:17
  Yeah, well, Congress passed the Federal Reserve Act in 1913, so
• 3:21
  it wasn't Wilson alone. And it got underway in 1914.
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  But the the situation was that the US had just had the panic of
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  19 O 7 and they launched into Congress, launched into studying
• 3:39
  what to do about it. And a popular idea at the time
• 3:43
  was, well, there were two ideas contesting 1 was people looked
• 3:50
  at Canada. Canada had no central bank, had
• 3:53
  a competitive banking system with fewer restrictions on the
• 3:57
  banks than the US had. And some bankers and other
• 4:02
  commentators said we should have a more Canadian style system,
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  and they proposed that. And it didn't go anywhere in
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  Congress, partly because the small banks were against it.
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  The Canadian system then, as it is today, was a system of large
• 4:19
  nationally branched out banks. And the small banks in the US
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  considered that a threat. The other idea was let's emulate
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  what they do in Europe, which is to have a central bank, a
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  government sponsored institution that can pitch in in a panic,
• 4:38
  try to rescue the banks that are worth rescuing, provide more
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  reserves to the banking system, provide what they called at the
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  time an elastic currency, Meaning if people wanted to
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  switch from deposits to paper currency, the system would let
• 4:55
  them do that. Whereas in the US, we were under
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  a set of regulations called the national banking system, and
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  that restricted banks from meeting peak demands for their
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  currency notes because, well, it's a long story, but it was
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  originally passed the national banking Acts as a Civil War
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  financial measure. And the idea was compel the
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  banks to buy federal bonds. But after the Civil War, the
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  quantity of federal bonds was shrinking because they were
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  paying off the debt. And this is a crazy idea they
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  had in the 19th century. If you run up a big debt during
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  a war, when the war ends, you start paying off the debt.
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  Ratio of debt to the GDP was shrinking, but that meant the
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  amount of backing that the banks were required to have, were able
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  to have. They were required to back their
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  banknotes, their currency with these federal bonds.
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  And the quantity of federal bonds was shrinking.
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  And so that especially in seasons of peak demand, that led
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  to very tight financial markets. So they created this federal
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  institution, the Federal Reserve System, to try to provide more
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  currency and seasons when people wanted more currency, more bank
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  reserves when there were runs on banks, Oregon when the reserves
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  were for some other reason flowing out of the banks.
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  So the original mission of the Fed was to just occasionally
• 6:32
  step in when there was a panic on a day-to-day basis.
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  They nationalized the clearing system, the check clearing
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  system, but they didn't do much by the way of monetary policy
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  because the gold standard handled the quantity of money in
• 6:48
  the system. So the Fed originally was just a
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  supplement to pitch in during periods of tight money or, in
• 6:56
  the worst case, panics. So if you were the hypothetical.
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  That was their original mission. OK.
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  So I just want to see if I understand correctly.
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  So if you so hypothetically, if let's say the economy is
• 7:08
  suffering because of war, a lot of you know, a lot of businesses
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  are closed down, a lot of. A lot of people came along just
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  after. Right, right.
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  So they got those are one right and you got people and you got
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  you got people, you know abroad, you got troops being deployed,
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  you got young men and businesses kind of being closed down and
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  the economy needs to be stimulated a little bit because
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  people aren't really spending very much right.
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  So what would happen is the Federal Reserve would make would
• 7:38
  it make purchases on behalf of the government to keep the to
• 7:41
  keep the economy moving, to keep it flowing?
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  Well, that's what they began to do later.
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  But in World War One, we're still on a gold standard, and so
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  the Fed isn't really able to just arbitrarily expand the
• 7:57
  quantity of money in the system. The gold standard governs that
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  and the US actually had an influx of gold.
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  Gold was flowing in from Europe to find a safer haven.
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  So there wasn't any need for the Fed to stimulate the economy.
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  the US economy was doing quite well.
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  And in fact, the Fed was kind of overwhelmed with the amount of
• 8:19
  gold that flowed in. They they had a gold reserve
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  requirement now. They got more than enough gold
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  reserves. They started expanding credit,
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  partly to lend to the US government for the war effort.
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  Defense is not part of the government.
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  Defense can lend money to the government.
• 8:38
  Sorry, Yeah. So they're they're they're
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  lending money to the government and they're still doing that
• 8:43
  today. And the way they do that is a
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  little indirect. The government goes out and
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  sells bonds, sells IOU's in the market, and Federal Reserve buys
• 8:54
  them out of the market. OK.
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  So it's a 2 step procedure. But yeah, essentially the Fed is
• 9:00
  lending to the federal government.
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  But I but I was saying in in the First World War they overdid it.
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  the US had 20% inflation. It's the worst inflation we've
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  had due to the over expansion during the First World War.
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  And how, how does that happen? How does, how does 20% inflation
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  happen over the course of that period of time?
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  Like what what, what happens within the economy that that
• 9:23
  that allows that to occur? So the 20% inflation is possible
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  when there's 20% more spending and no additional supply of
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  goods. And how can you have 20% more
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  spending? Either money turns over more
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  rapidly or what's usually the case, the Fed is expanding the
• 9:44
  supply of money. So in the pandemic a few years
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  ago, the Fed enormously expanded the quantity of money.
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  And it was OK at first because people were hoarding money.
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  So the money, the new money sort of satisfied the demand by the
• 10:02
  public to hold more money. But as things returned to normal
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  and people started spending, the Fed was too slow to pull the
• 10:10
  extra money out and we hit a peak at 9% inflation in 2022
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  before they tightened monetary policy enough to bring inflation
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  back down South. It's basically more money.
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  Chasing the same amount of goods will give you higher prices.
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  That's the main cause of inflation.
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  Is there a relatively simple way to to combat that?
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  But how do you, how do you, what do you do if you post World War
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  One? You're like Oh my God, you have
• 10:41
  20% inflation. Do you make?
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  The Fed needs to control its own balance sheet.
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  It needs to shrink the amount of money that it's injecting into
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  the economy. So this doesn't have much to do
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  with everyday consumers. This has more to do with what
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  the Fed is, what the Fed is putting into the, what the Fed
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  is contributing. Well, in the, at the beginning
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  of the process, if the Fed is expanding, they're buying
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  Treasury bonds in the market. That puts the money, new money
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  in the hands of bond dealers, not the public.
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  You're right immediately. But it, it spreads, it diffuses
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  through the economy. More money is lent to
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  businesses. Businesses are spending more on
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  raw materials and on labor. So wage income goes up, salaries
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  go up, and the public gets the extra money with a lag.
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  Right, right. I see.
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  Now when people talk about wanting to abolish the Fed, why
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  would they want to do that? Well, I'd have to know what they
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  want to replace it with before I'm sure exactly what their
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  motive is. But the Fed has been a source of
• 12:06
  inflation and people who want to stop inflation sometimes say
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  they want to end the Fed. If they want to replace it with
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  a gold standard, then that's I can understand that.
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  I mean, that's been Ron Paul's shtick for 30 years, right?
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  He has a book called End the Fed, and what he wants to
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  replace it with is people putting themselves back on the
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  gold standard, or I guess these days he would say, or Bitcoin if
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  they prefer Bitcoin, but let people choose what money they
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  want to use. The research I've done over my
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  career is basically supports the idea that we don't need a
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  central bank when we have a commodity standard.
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  Banking systems where the banks manage their own reserves and
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  international gold flows, regulated the quantity of money
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  in any particular country. It worked pretty well.
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  I mentioned Canada already. That was an example of where the
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  banks were very lightly regulated and there were no
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  banking panics. The system was quite solid and
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  it was quite competitive, so it was good for the public.
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  They got a little more interest on deposits, they paid a little
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  less interest on loans because what the banks charged in the
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  form of the spread between deposit rates and loan rates
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  could be very small. The the example I studied more
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  was the example of banking in Scotland.
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  This kind of system is sometimes called a free banking system.
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  The banks are free to issue their own currency.
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  They don't have reserve requirements, they don't have
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  capital requirements, but competition compels the banks to
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  behave responsibly. It worked quite well in Scotland
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  and there are another I don't know, 50 or so cases of free
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  banking systems with pretty good track records.
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  Right. And do you think that the size
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  of the countries have an impact on whether and how and how well
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  these are implemented or not, meaning Scotland's obviously a
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  much smaller country than the States is.
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  Would that impact, you know, on I guess a bigger scale if that
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  would be the case in the States? I don't see any reason it can't
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  be done on a bigger scale. Canada geographically is bigger
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  than the United States. So it goes population is
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  smaller, right? But the system of nationwide
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  branch banking worked quite well in in Canada, but in the US
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  branch banking was stopped by state governments.
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  And it wasn't until the 1990s that the federal government
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  stepped in and said we're going to have nationwide branch
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  banking and we're finally there. But you know, when I started my
• 14:58
  career in the 1980s, if I went to California with my checking
• 15:05
  account from a bank in New York, I couldn't cash a check in
• 15:09
  California. If I if I wanted cash, I had to
• 15:13
  carry it with me or this really dates me.
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  People used to carry travelers checks from one side of the US
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  to the other. That's how ridiculous our
• 15:23
  banking system was. And at the time, was it known
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  that it was ridiculous? Like, how come we can't just do
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  this? It was just the way that things
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  were. People knew and people saw that
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  nation, really nationwide branch banking was going to come.
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  And not only would it be good for consumers, but it would make
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  the banks stronger because we had some states where each bank
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  was only allowed to have one office that was called unit
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  banking. And a bank with only one office
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  is going to have a hard try hard time diversifying who it lends
• 15:53
  to. Maybe there's only one industry
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  in town. And so those banks that were not
• 16:00
  well diversified, the industry has a problem year the bank
• 16:04
  fails or the banks in that town fail.
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  And so it made the that was the problem in Texas.
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  When the price of oil went down, 2/3 of the banks in Texas
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  failed. So you want to get away from a
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  system like that? Right.
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  And, and the, and the Fed controlling and now just for the
• 16:28
  sake for people to understand this part, the Fed controlling
• 16:30
  interest rates. And you know, you currently
• 16:32
  have, you know, Trump running around saying how in the last
• 16:35
  six months that that the interest rates should be going
• 16:37
  down, should be going down. And he seems to be in a constant
• 16:40
  state of, you know, combat with the head of the Fed.
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  What how does that work? What is that about?
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  Well, the Fed formulates its policy in terms of interest
• 16:53
  rates, but the interest rates are not fixed forever.
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  And it's not that they can keep interest rates low forever.
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  They can only keep interest rates low temporarily if they
• 17:05
  flood the market with so much credit that the price of credit
• 17:09
  goes down. But as the money created spreads
• 17:14
  through the economy, that's going to start to increase
• 17:18
  demand by businesses. They're going to have to borrow
• 17:21
  more as prices start to go up, and that'll drive interest rates
• 17:24
  back up. So what the Fed is really doing
• 17:27
  when it says we're lowering interest rates is it's saying
• 17:32
  we're expanding the quantity of money more rapidly.
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  And that's what Trump wants him to do because he thinks it'll
• 17:38
  stimulate the economy. And he doesn't seem to recognize
• 17:42
  that it's only a temporary effect.
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  And it ends in tears because it ends with higher inflation.
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  And it ends with the businesses that borrowed at low interest
• 17:51
  rates finding out they can't survive when interest rates go
• 17:54
  back up and they have to roll over their debt.
• 17:58
  Right, right, right, right. That's just so that's as you
• 18:00
  were saying that that was going to my head was if, if it becomes
• 18:03
  so much easier to borrow money and is that borrowing money at a
• 18:06
  lower cost? And that would that I, I, I
• 18:08
  figured the next logical step would be that inflation would
• 18:11
  occur again. And I mean, you know, and it
• 18:13
  seems like he's trying to both curb inflation at one time and
• 18:16
  other and on the other hand, trying to make it accessible for
• 18:19
  people to, I guess easier people to listen.
• 18:21
  I, I have a, you know, and I guess it's not crazy relative to
• 18:25
  I, I think my parents were buying their houses in the late
• 18:27
  80s, early 90s. But my mortgage rates like 6.86
• 18:31
  point 9%, you know, and, and my friends just a year earlier that
• 18:35
  bought their houses were a year or two earlier were borrowing at
• 18:38
  2 to 3%, you know, and you know, so I can understand why people
• 18:44
  want both, you know, want the best of both worlds.
• 18:47
  But it doesn't really seem to be able to make sense that you can
• 18:49
  have both at the same time, or at least not for very long,
• 18:52
  right? Yeah, the there were people who
• 18:56
  in the great Depressions said we want cheap money and plenty of
• 19:00
  it. Yeah, yeah, we all feel like.
• 19:06
  Now, if you're in a situation where the economy is depressed
• 19:09
  because there isn't enough money, and that was the
• 19:11
  situation in the depths of the depression because banks were
• 19:16
  collapsing and people were hoarding money and prices were
• 19:20
  falling, then there's a good case for putting more money in
• 19:24
  the economy. And as I said before, in the
• 19:28
  first six or nine months of the pandemic, there was a good case
• 19:32
  for injecting a lot of money, but then you have to take it out
• 19:35
  again when things start to return to normal.
• 19:39
  Right. And how about, I mean, you know,
• 19:41
  and I've been thinking, I mean, I'm a little, I'm more than a
• 19:43
  little concerned. I've been talking to a friend
• 19:46
  and he's been mentioning for years that we're due for some
• 19:48
  kind of crash. And, you know, he's like, we
• 19:52
  keep on propping ourselves up on these bubbles, whether it's
• 19:55
  student loan bubbles, medical bill bubbles, credit card bill
• 19:58
  bubbles, and now these buy now, pay later models that aren't
• 20:02
  even built into our credit, you know, into our credit like that.
• 20:05
  You know, when you're under credit, it doesn't tell you how
• 20:08
  many thousands of dollars you have, you know, racked up on
• 20:11
  DoorDash bills, you know, that you're paying, you know, over
• 20:13
  the course of six years or whatever it is.
• 20:15
  Yeah. Far enough.
• 20:17
  So it's, it seems like something's going to happen
• 20:19
  anyway, and it seems like we're keep on pushing off, you know,
• 20:23
  or borrowing, borrowing, borrowing and then just kicking
• 20:25
  the can down the road. It almost feels like we don't
• 20:28
  have enough money nowadays anyway.
• 20:31
  It's sometimes hard to tell that you're in a bubble when you're
• 20:36
  in a bubble because everything seems to be going along well.
• 20:40
  And it's actually kind of curious that Trump wants to
• 20:44
  stimulate the economy with cheap money because when he's not
• 20:49
  talking about the Fed, he's talking about how great the
• 20:51
  economy is. And in fact, the unemployment
• 20:54
  rate is pretty low. It's around 4%.
• 20:58
  What, a 4.3? The estimates of what sort of
• 21:03
  normal unemployment rate should would be are around 4 1/2%.
• 21:08
  So unemployment's not high, Inflation is slightly above the
• 21:14
  Fed's 2% target. It's been running around two and
• 21:17
  a half, 2.7. So there really isn't a strong
• 21:20
  case for cheap money right now. But the Fed Trump seems to think
• 21:28
  that it's never, you know, too cheap, that the Fed can't be too
• 21:32
  expansionary. Yeah.
• 21:36
  I mean, I guess that's kind of, I imagine that's where the four
• 21:39
  years short term thinking kind of comes in.
• 21:41
  You know where you say, well, I'm in my 80s, Yeah.
• 21:45
  Yeah, the stimulus doesn't even last four years.
• 21:47
  I mean, what Richard Nixon did in 1972 when he was running for
• 21:53
  re election was to call Arthur Burns, the head of the Fed, into
• 21:57
  his office and tell him, Arthur, I've been watching the money
• 22:01
  supply and it's not growing fast enough to reelect me.
• 22:04
  I want you to get it going faster.
• 22:07
  And Burns, who had been appointed by Nixon, even though
• 22:10
  he was the head of a supposedly independent central bank, says,
• 22:14
  yes, Sir. Mr. President, this is this is
• 22:17
  not a conspiracy theory. We have the tapes.
• 22:20
  We have the. Transcripts of this conversation
• 22:23
  between Nixon and Burns. The Fed has been a little more
• 22:29
  insistent on its independence since then, so Trump is not
• 22:35
  calling Jerome Powell into the office.
• 22:39
  They're not good buddies the way Nixon and Burns were, but he's
• 22:43
  trying to pressure him through the media.
• 22:47
  Yeah. I mean, I've been seeing, you've
• 22:48
  been seeing a lot of that, right?
• 22:49
  You can, you can hardly miss that if you watch, if you watch
• 22:51
  the news at all. So, so all this starts in, in,
• 22:54
  in around 1913 and we're still on the gold, we're still on the
• 22:58
  gold standard over there, which means that that our money is
• 23:01
  being backed by actual, you know, some, you know, some there
• 23:05
  are collections of gold that we are that we're keeping.
• 23:08
  And then in in 71, you know, Nixon does away with the gold
• 23:12
  standard. Well, there's, there's a,
• 23:15
  there's an important step before 71, which is in the Great
• 23:19
  Depression, Roosevelt devalued the dollar and with the approval
• 23:26
  of Congress, made it illegal for U.S. citizens to own gold coins.
• 23:31
  So everybody had to turn in their gold coins to their banks.
• 23:35
  Then their banks had to turn it into the Fed.
• 23:38
  And the idea was to give the Fed more gold reserves so it could
• 23:41
  be more expansionary. So gold ownership was illegal
• 23:46
  from I think 33 up until 74. I think Congress repealed that
• 23:55
  provision and let people own gold coins again after after the
• 24:00
  gold was no longer playing any monetary role, which as you
• 24:03
  said, happened in 71 when Nixon stopped redeeming dollars for
• 24:08
  this on behalf of or for the benefit of foreign central
• 24:13
  banks. So U.S. citizens couldn't redeem
• 24:16
  their dollars, but foreign central banks still could under
• 24:21
  the Bretton Woods system. And what's that system?
• 24:25
  So that was established at the end of World War 2IN in order to
• 24:30
  economize on the amount of gold that central banks needed, they
• 24:34
  said, OK, the US will hold the gold and the rest of us will
• 24:37
  make our currencies, the British pound, the Deutsche mark, the
• 24:41
  lira, redeemable for U.S. dollars.
• 24:45
  So we'll have fixed exchange rates with the dollar, and the
• 24:47
  dollar will be fixed to gold at $35.00 an ounce.
• 24:51
  OK, that's what it was. Yeah.
• 24:53
  OK. There were lots of devaluations
• 24:57
  by countries that were inflating faster than the dollar.
• 25:00
  There were some revaluations upward by the Swiss franc, the
• 25:05
  German mark, who were inflating less than the dollar.
• 25:09
  But finally the dollar broke the link to gold because we had been
• 25:14
  printing more dollars than were consistent with gaming them at
• 25:18
  $35.00 an ounce. And Nixon in 71, faced with the
• 25:22
  choice between tightening monetary policy to make it
• 25:25
  feasible to maintain the peg and closing the gold window, said
• 25:30
  I'm running for re election, I don't want tight money.
• 25:34
  Let's close the gold window. So let's say he wasn't running
• 25:38
  for re election or he didn't really care about the next, you
• 25:40
  know, four years or whatever. It was someone that was, I
• 25:45
  guess, more economically driven as opposed to potentially
• 25:47
  politically driven. Have made that decision, you
• 25:49
  think? Somebody who believed in the
• 25:52
  gold standard would have appointed a Fed chair who made
• 25:59
  it possible to stay on the gold standard.
• 26:02
  But that's not what happened. Like like Trump today, Nixon
• 26:07
  wanted a Fed chair who would pump up the economy.
• 26:12
  Right, right, right, right. This is also interesting to, to
• 26:17
  think about and, and instead, I guess the way that you pitch it
• 26:20
  to the, to, you know, the American people would be that
• 26:23
  you're investing in your government, you're investing in
• 26:25
  yourselves, you're investing in the nation.
• 26:26
  Is that, is that, is that the pitch to get off the gold
• 26:29
  standard that or what? What's the what's the selling
• 26:31
  point? Well, the selling point in the
• 26:34
  30s was we're in a depression. We need more spending.
• 26:41
  We're going to go off the gold standard so we can generate
• 26:45
  print more dollars and have more spending in 71.
• 26:51
  Nixon did not blame the need to do to close the gold window on
• 26:58
  previous monetary policy, which had inflated the dollar too
• 27:02
  much. He blamed foreign speculators
• 27:06
  for attacking the dollar, but of course they were just reflecting
• 27:10
  the reality, which was there were more dollars out there than
• 27:13
  were consistent with maintaining the peg at $35.00 an ounce.
• 27:18
  Which just means you spend too much money.
• 27:20
  So Nixon was saying, you know, this won't really affect you,
• 27:24
  the household. This is just a technical thing.
• 27:26
  Don't worry about it. Right, OK, I see of.
• 27:29
  Course, of course, it opens the door even wider to rapid money
• 27:34
  printing and high inflation, which we got in the late 70s,
• 27:38
  early 80s. We had double digit inflation in
• 27:40
  the US. And that's why interest rates
• 27:42
  were so high when at that point, when you were.
• 27:46
  Yeah. That's crazy, that's crazy.
• 27:49
  I can't even, I can't even think about that.
• 27:51
  You know, I was just just a year or two ago, I was trying to sell
• 27:54
  my house and it's crazy because I, I live in South Florida.
• 27:57
  I was, I lived in, I moved into a townhouse that, you know, I
• 28:00
  bought for $300,000, right? And a year later it was worth
• 28:07
  about 4:20 for about 3 months, right?
• 28:11
  And then the interest rates went up and I could, and I was going
• 28:13
  to, and I put my house on the market at that point and I could
• 28:15
  not get a buyer because in those two or three months, interest
• 28:19
  rates went from 3% all the way up to seven, you know, 6 or 7.
• 28:23
  And all the people that are looking to buy three $400,000
• 28:25
  houses can't afford to, you know, 8% interest on, on that,
• 28:29
  on that home. You know you're counting on the
• 28:31
  fact that your rent is going to be two grand a month at $1500 a
• 28:33
  month, not 44 grand. So house prices have to fall
• 28:37
  when interest rates go up. If you don't price, you're not
• 28:41
  going to sell. And that makes rental market
• 28:45
  stronger, I imagine. Relative to sales, yeah, I mean
• 28:51
  the the selling market will adjust eventually, but people
• 28:55
  are reluctant to cut the asking price and so they they would
• 28:59
  rather watch the house sit on the market unsolved.
• 29:03
  It seems, yeah. And I guess that goes more
• 29:05
  about, that goes more into human nature and decision making than
• 29:08
  it does about the actual, you know, hard economics of what's
• 29:11
  the, what's the right thing to do or not.
• 29:13
  Well, having a central bank that can manipulate interest rates
• 29:15
  makes it these decisions hard because you have to forecast
• 29:19
  where is the interest rate going to go?
• 29:21
  How long is it going to stay high?
• 29:23
  Should I hold out until the interest rate comes back down or
• 29:27
  do I need to adjust the price? Right, so.
• 29:31
  We businesses face these problems.
• 29:34
  Yeah, I mean, I've noticed. I mean, you know, I've noticed
• 29:37
  that a lot of my friends that are in the mortgage world or
• 29:40
  money lending world, you know, things are moving a lot slower
• 29:42
  for them than they were before. And even, excuse me, even in
• 29:46
  terms of, you know, for example, I sell medical equipment and
• 29:48
  that's a really interesting market because, for example,
• 29:51
  it's refurbished equipment. So new machine can go for
• 29:53
  $100,000 if it's taken out-of-the-box and demoed, you
• 29:57
  know, by a doctor, it's worth 50, it's used for six months,
• 30:00
  it's worth 25, right. So, so I, so you know, so I have
• 30:05
  customers that will come to me and say I want a refurbished
• 30:07
  machine, you know, and it's 10 grand or 15 grand or 20 grand.
• 30:11
  And they'll, and they'll apply for financing and I'll tell them
• 30:16
  you're better off getting a 0% APR credit card for the first
• 30:19
  year and paying, you know, and putting it on there and paying
• 30:23
  it back then paying 10, you know, 1015% on your, you know,
• 30:27
  $10,000 loan. You get a new card.
• 30:30
  They're hoping you can get a new card, right?
• 30:31
  And that and that and, and, and it seems that the people that
• 30:34
  have, that are trying to take out the loans on 1015 grand have
• 30:37
  credit. You know, usually below 650 is
• 30:40
  what, you know, certainly below 700 is, is what I've found
• 30:44
  anecdotally within, you know, among my customers, you know,
• 30:46
  the people, you know, the people that are looking for, I guess
• 30:49
  30, forty, $50,000 of credit, they tend to have better credit
• 30:52
  scores, I've noticed. And I don't know if there's any
• 30:54
  kind of, you know, reason behind that court, you know, behind
• 30:57
  that anecdote, but it seems interesting to me.
• 31:01
  Well, if you have a lousy credit score, you're never going to be
• 31:04
  able to borrow large sums. You're just going to be turned
• 31:07
  down. But even small sums, but it
• 31:09
  shows how they kind of get to that position where, you know,
• 31:12
  they'll be where they'll be, you know, taking out a loan without
• 31:15
  even thinking about what the potential consequences are on a
• 31:17
  small on a small number, on a small machine like that or a
• 31:20
  small, relatively small loan. And without real consideration
• 31:23
  for what the consequences could be, which would impact their
• 31:26
  credit score and then make even harder in the future.
• 31:29
  Right, there's a high probability they're going to
• 31:30
  default at some point. Yeah, yeah.
• 31:33
  And that's, that's it makes it a really interesting market.
• 31:37
  But so, So what do you believe? Do you believe in the value of
• 31:42
  buying gold and investing in gold or keeping gold?
• 31:46
  Oh well, I've been talking about gold as a monetary standard.
• 31:49
  Gold today, which is demonetized, is a different,
• 31:54
  completely different story. But how?
• 31:57
  Does that story shift? Well, so whether or not gold
• 32:04
  would be a good monetary standard and whether you should
• 32:07
  invest in gold now are two different questions.
• 32:09
  That's that's what I'm saying. But to answer your question, I
• 32:13
  have a little bit of gold in my retirement portfolio.
• 32:16
  It's good just for diversification.
• 32:19
  We have a little bit of Bitcoin, same reason I wouldn't.
• 32:23
  I'm not a registered investment advisor, so this is not
• 32:26
  investment advice, but I wouldn't recommend to anybody
• 32:28
  that they make that gold or Bitcoin more than 5% of their
• 32:33
  retirement portfolio. And why is that?
• 32:37
  Because it's very volatile, both because they're very volatile.
• 32:43
  Right. And they're useful as hedges
• 32:50
  against unusual events. But most of the time you're
• 32:54
  going to earn a better return investing in diversified
• 32:58
  portfolio of stocks. And that's because that's going
• 33:02
  along with the pulse of the, the pulse of the nation, I guess.
• 33:07
  Yeah. And the track record indicates
• 33:10
  that that's better than You earn a higher return for a given
• 33:20
  level of risk than investing in debt instruments or commodities.
• 33:26
  OK, I see. And I mean I want to talk, I
• 33:29
  want to I want to get to Bitcoin in a few minutes.
• 33:31
  I'm still thinking about gold. I'm just just to understand, I
• 33:35
  guess it's it's place. So it used so, so when we got
• 33:39
  off the gold standard, it was so essentially because we were over
• 33:44
  leveraging the amount of gold that we had.
• 33:45
  I heard a story, I forgot what I forgot where I heard it from
• 33:47
  about the French, that the French decided we were asking
• 33:50
  about their goals. And he basically said we don't
• 33:53
  have it or you know, you know, we can't give it to you.
• 33:55
  And they came and they tried to take it and they did take it
• 33:57
  themselves successfully. Do you remember?
• 33:58
  Do you know the story? A few years ago, Germany asked
• 34:03
  to repatriate their gold that was being stored in the Federal
• 34:06
  Reserve Bank of New York. So the gold I mentioned before
• 34:09
  that came from Europe during the First World War.
• 34:11
  And during the Second World War, a lot of it ended up in the
• 34:14
  Federal Reserve Bank of New York, including official gold
• 34:18
  from the Bundesbank and the Bank of France.
• 34:21
  And a few years ago, the Bundesbank asked for their gold
• 34:26
  back. They wanted to ship it back to
• 34:28
  Europe. And for some reason, it's a
• 34:31
  little puzzling. I've never seen a good
• 34:33
  explanation. The New York Fed said, well,
• 34:35
  that'll take us a while to organize.
• 34:38
  Although if you take a tour of the gold vault at the New York
• 34:41
  Fed, they show you the gold bullion sitting there in stacks
• 34:45
  and they point this is the German stack and this is the
• 34:47
  French stack and so on. So.
• 34:49
  You can go visit. There was a problem.
• 34:51
  You can go visit it. You can go see.
• 34:53
  It. Yeah, yeah.
• 34:55
  You have to, you know, you have to get invited to a tour.
• 35:00
  They, I don't know how often they give these tours anymore,
• 35:04
  but when I taught at New York University, they invited all the
• 35:08
  money and banking teachers in the metropolitan area to come to
• 35:12
  a seminar where they taught you the New York Fed's view of the
• 35:15
  world. And then, as a kind of
• 35:18
  sweetener, they took you on a tour of the gold ball.
• 35:20
  That's cool. What were they?
• 35:21
  What were they trying to? What were they trying to educate
• 35:24
  the educators about? Oh, they had a particular view
• 35:28
  of monetary policy. I would describe it as
• 35:35
  Keynesian. OK, meaning?
• 35:38
  Meaning they believed in the system of Fiat money and
• 35:44
  interest rate policy and, you know, changing it in order to
• 35:49
  try to stabilize the economy. The objective being to, you
• 35:54
  know, flatten business cycles. That was the theory.
• 36:00
  And that's what they thought, and that's.
• 36:01
  And they were trying to convince the guys that this was going to
• 36:06
  be the case. Yeah, I see.
• 36:07
  Oh, and if you have money, they even.
• 36:09
  Published their own textbook. They did.
• 36:12
  Which is a little odd, yeah. And is it taught?
• 36:15
  Is it circulate? Is it in circulation?
• 36:19
  It was. I don't know whether they're
• 36:21
  bringing out new editions, but. Back in the. 80s they had one.
• 36:25
  That's really interesting. And Fiat money, I had to look up
• 36:28
  that term this morning. Is is is, trust me, by the
• 36:32
  government money essentially right?
• 36:34
  That's right. It's unbacked money.
• 36:36
  It's money that's just issued on the basis of a decree.
• 36:41
  So the a Fiat is a fancy word for a decree by the government.
• 36:49
  But when I taught money in banking, I would show the
• 36:51
  students a picture of an old Federal Reserve note that said
• 36:55
  redeemable on demand in gold coin.
• 36:59
  That was a gold standard $100 bill.
• 37:03
  And then the Fiat $100 bill doesn't say we'll pay the bear
• 37:07
  on demand. It just says ribbon, ribbon,
• 37:09
  ribbon ribbon $100. This is $100 because we say so.
• 37:14
  And of course there's there is the legal ease in one corner of
• 37:19
  the bill that says this note is legal tender for all debts,
• 37:23
  public and private, which means that if you have $100 debt and
• 37:27
  you pay this $100 bill to the creditor, the creditor has been
• 37:31
  paid. He can't go to court and say no,
• 37:33
  no, I wanted gold. That's.
• 37:36
  Oh, interesting. And is it was it is it man?
• 37:40
  I heard also that it was considered is it illegal to not
• 37:44
  accept cash or is that something that used to be the case?
• 37:48
  It's legal tender for debts, but in a spot transaction you can
• 37:53
  refuse Cash Cash. So it's perfectly legal for a a
• 37:58
  gas station to say we don't take $100 bills or for a cabbie to
• 38:02
  say I don't take cash. You guys have a car?
• 38:05
  Fascinating. That's really, really
• 38:07
  interesting. I see.
• 38:08
  And what other countries use Fiat methods?
• 38:12
  Is it, is it, Is it popular around the world or just US?
• 38:14
  Yeah, yeah, yeah. There are no no countries where
• 38:17
  the money is redeemable for gold or silver anymore.
• 38:21
  Wow, so everyone so everyone runs.
• 38:24
  On that, in some countries the money is redeemable for U.S.
• 38:27
  dollars. Right, right, right, right.
• 38:30
  And what what's and what do you, what do you know about Argentina
• 38:33
  and this gentleman, President Malay?
• 38:36
  Yeah. Yeah, what?
• 38:39
  What's he? Doing how does that, how does
• 38:40
  that happen? Because I, I apparently, he's,
• 38:42
  apparently he's doing a great job allegedly, but I really
• 38:45
  don't know what that means or you know, any of the details.
• 38:49
  So he ran on a platform of I'm not one of these insiders.
• 38:56
  I'm not trying like they have been to manipulate and regulate
• 39:00
  and tax and spend. I'm going to free up the
• 39:03
  economy. And he's been doing it.
• 39:06
  There was one promise he made that I'm disappointed he hasn't
• 39:10
  followed through on, which is when he was running, he said,
• 39:13
  I'm going to shut down the Argentine central bank and
• 39:17
  replace it with what? Replace it with U.S. dollars.
• 39:20
  We're going to officially dollarize the country.
• 39:22
  Cool. And that would have been a good
• 39:25
  idea. He has brought inflation down
• 39:28
  without doing that, but I'm not sure why he hasn't followed
• 39:32
  through on that. But other than that, he's been
• 39:36
  reducing government spending quite dramatically and reducing
• 39:40
  regulation quite dramatically. And the economy's been
• 39:43
  responding positively. Growth is up, inflation is down.
• 39:46
  It's. Fascinating.
• 39:49
  Poverty rate has gone down quite a bit.
• 39:51
  Really. Yeah.
• 39:56
  Is that an indication of what could happen?
• 39:58
  Is that like a microcosm of you think with the potential of what
• 40:01
  can occur if more countries decided to be a little bit less
• 40:04
  regulated, including our own? I think so, yeah.
• 40:09
  So then why do? OK, so maybe and maybe you could
• 40:13
  clarify if I'm misunderstanding this, why, you know, when Elon
• 40:17
  is, I guess, told to come in and help make everything more
• 40:21
  efficient and cut, you know, excessive spending and stuff
• 40:24
  like that. Was that is that not an attempt
• 40:26
  to kind of do that on AI Guess a relatively slower scale than,
• 40:30
  you know, Malay did it. And I don't know because I know
• 40:34
  that this stuff kind of gets distorted into political
• 40:38
  understandings or misunderstandings of like what
• 40:40
  everyone's intention. Is there anything but just like,
• 40:42
  you know, bare bones, the go the purpose of it?
• 40:45
  I think Musk's heart was in the right place, but his team
• 40:50
  approached things from the wrong end.
• 40:52
  So they came in and tried to cut the number of employees without
• 40:56
  cutting the mission of any of the agencies.
• 41:03
  And that's not going to work. You're just going to have, you
• 41:05
  know, these agencies, the few people who are left working
• 41:08
  there swamped with complaints and phone calls, and they're not
• 41:11
  going to be able to answer people's phone calls.
• 41:17
  You need to go back to Congress and say, we want to reduce the
• 41:22
  scope of things that this agency is regulating so that we can lay
• 41:28
  people off and still have enough people to do what we're still
• 41:31
  doing. That's the way Malay's been
• 41:34
  doing it, and that's not the way Musk tried to do it.
• 41:40
  So would So would a hypothetical do?
• 41:42
  You think that half the employees in Washington just sit
• 41:47
  around playing games on their computers all day?
• 41:51
  Yeah, actually most of them are busy regulating.
• 41:55
  Are busy regulating yeah so with it so so to so to more
• 42:01
  effectively make that shift, you'd have to change the mission
• 42:04
  statements and the purpose of a lot of these government
• 42:07
  organizations and say, listen, we really appreciate that what
• 42:10
  you're trying to do. The private sector is going to
• 42:13
  step up for this particular case right now and you know, and we
• 42:16
  recommend that you take the skills that you've developed and
• 42:18
  apply it in a private sense rather than a government funded
• 42:23
  organization. Right.
• 42:26
  So let me give you an example from banking.
• 42:30
  It used to be that bank capital was regulated by the clearing
• 42:33
  houses, which were member institutions and run by the
• 42:38
  banks themselves. And so the clearinghouse
• 42:40
  employees that audited the bank's balance sheets were
• 42:47
  employees of the clearinghouse. Now it's all done by the federal
• 42:53
  government, and it's quite possible that, you know, there
• 42:59
  are more employees that are necessary.
• 43:02
  I don't know, but that's an example of regulation that moved
• 43:06
  from the private sector into the public sector.
• 43:09
  It would be possible to move it back.
• 43:12
  Yeah, I think there's a lot of them.
• 43:13
  I imagine. I think that it's just a matter
• 43:16
  of cutting the cord and, and there's going to be a painful, I
• 43:22
  guess it would be a painful transition from being government
• 43:24
  back to having to navigate the, you know, I guess you could call
• 43:28
  it the, the, you know, what's happening with the world.
• 43:33
  The public is going to have to do more diligence and news media
• 43:38
  are going to have to do more, you know, to expose frauds and
• 43:43
  that sort of thing. Yeah, Yeah, that'd be nice,
• 43:47
  right? That wouldn't that be nice?
• 43:51
  So, so now, so now we and you mentioned briefly earlier that
• 43:58
  you know, we got off the standard and part of the way
• 44:01
  that the Paul's the Paul family have you know, recommended this
• 44:06
  is either getting back on the gold standard or you mentioned
• 44:08
  potentially using Bitcoin or some kind of cryptocurrency as
• 44:12
  as another standard, a commodity.
• 44:14
  A commodity standard just means that the that the country owns X
• 44:18
  amount of commodity that equals the amount of money that is
• 44:23
  capable of spending, right? I wouldn't quite put it that
• 44:27
  way. I mean, it means that the money
• 44:30
  that people use every day is they're not going to carry
• 44:33
  around a lot of gold coins on a gold standard.
• 44:36
  They didn't anyway. What they carry around are
• 44:39
  claims on banks, checking account balances and banknotes.
• 44:44
  Paper currency. It's kind of like the paper
• 44:47
  currency we use today, except that you could go to the bank
• 44:50
  and redeem it for a gold coin or a silver coin if you wanted to.
• 44:54
  Mostly people didn't want to, but that option meant that the
• 44:57
  bank couldn't over issue its liabilities.
• 45:00
  Couldn't just, you know, unlimitedly lend people money
• 45:05
  without being prepared to back it up.
• 45:07
  So that constrained the quantity of money.
• 45:11
  And so to get, let's say to get the, the, the US government to
• 45:17
  use Bitcoin as, as its backing, as, as the commodity that backs
• 45:21
  the government, What would that, what would that mean?
• 45:24
  How would that happen? And what would that mean in I
• 45:26
  guess relevant applicable, you know like day-to-day
• 45:30
  application? Well, I wouldn't recommend
• 45:35
  Bitcoin as backing because it's very volatile.
• 45:38
  It's not so volatile, right? Yeah, it goes up and down, you
• 45:43
  know, 7% a day. It it, if you look at its price
• 45:50
  in dollars, it's much more volatile than the, it's about
• 45:52
  twice as volatile as the price of gold and like 4 times more
• 45:57
  volatile than the exchange rate with the euro.
• 46:01
  It's more volatile than even the S&P 500.
• 46:04
  And. That's due to the way it's
• 46:08
  designed. We can get into that if you want
• 46:10
  to. But how would you go?
• 46:12
  How would you go on a Bitcoin standard?
• 46:14
  Well, you could either do it from the bottom up, just let
• 46:17
  people who want to use Bitcoin use Bitcoin.
• 46:20
  But if you wanted to convert the dollar to a Bitcoin standard, I
• 46:25
  guess the Fed would have to sell its treasury bills and buy
• 46:30
  Bitcoin and then they would have a Bitcoin reserve or Bitcoin
• 46:36
  denominated assets at the Fed. Hard to imagine.
• 46:42
  It sounds hard to imagine, but then what?
• 46:44
  So then what would, what would banking day-to-day be like?
• 46:47
  It's going to be based on the commodities, based on this
• 46:50
  volatile electric, you know, electronic, you know, currency.
• 46:58
  Well, the hope would be that once it's used as money and once
• 47:03
  prices are denominated in Bitcoin instead of in dollars,
• 47:08
  it wouldn't be so volatile day-to-day life would be would
• 47:13
  continue the way it is now. The thing about Bitcoin though,
• 47:20
  is that you can't manipulate the quantity.
• 47:22
  It's all predetermined by the program that validates
• 47:27
  transactions and rewards the validators with new Bitcoin.
• 47:33
  The expansion and the quantity of Bitcoin is all in the
• 47:36
  program. It's predetermined.
• 47:40
  So there wouldn't be any possibility of running a
• 47:43
  monetary policy. And in a growing economy, if you
• 47:47
  have a fixed money supply, you would expect falling prices.
• 47:52
  And the closest approximation would be in the late 19th
• 47:56
  century when the US was on a gold standard and output was
• 47:59
  growing more rapidly than the world's stock of gold.
• 48:04
  We had gently falling prices. There was, you know, like 3%
• 48:11
  real growth in output and 2% growth in the quantity of gold.
• 48:17
  Then you'd have prices falling at 1% with with the quantity of
• 48:23
  Bitcoin being growing slower than that.
• 48:27
  You would have more deflation. You'd have prices falling a
• 48:32
  little more rapidly than that. So that would be good,
• 48:35
  hypothetically. If it doesn't go too far to the
• 48:38
  point where interest rates are at zero and unable to, therefore
• 48:45
  unable to adjust downward when necessary.
• 48:52
  OK, falling prices, falling prices when it's due to growing
• 48:55
  output, that's great. Is that hard to maintain for an
• 49:00
  extended period of time? How?
• 49:01
  I mean, if all this sounds relatively simple, I mean that
• 49:05
  you and I are talking about this, then you know, what's,
• 49:09
  what's the, what's the challenge in making this a concept action?
• 49:16
  Well, the challenge is the status quo is, is pretty, you
• 49:23
  know, locked in what what did Milton Friedman called it?
• 49:27
  The tyranny of the status quo. People at the Federal Reserve
• 49:34
  are going to, you know, resist, are going to argue against this.
• 49:40
  People who want the Federal Reserve to be more ambitious and
• 49:44
  who think it can successfully run a counter cyclical policy,
• 49:50
  they're going to be against it. And whenever returning to the
• 49:54
  gold standard has come up and and taken seriously, critics
• 49:58
  have kind of come out of the woodwork and said, including
• 50:02
  many mainstream economists who I think under appreciate the track
• 50:07
  record of the gold standard have come out and say, no, no, you
• 50:11
  can't do that. That's nutty really, because
• 50:14
  it's not, it's not what we're used to.
• 50:17
  It's not what we're trained to think about.
• 50:20
  That's a shame. That's the reason.
• 50:23
  I mean, I guess it's the reason why IA lot of you know,
• 50:26
  regulations still exist the way they do.
• 50:27
  A lot of you know, a lot of people think the way they do,
• 50:30
  you know, it's just by default. I see so.
• 50:35
  A case has to be made and people have to be persuaded before it
• 50:38
  becomes politically possible. So who's who's who's who are
• 50:43
  some of those voices other than the Paul family is, you know,
• 50:45
  like a guy like Thomas Massie, one of those voices, what's his,
• 50:48
  you know, you know, thinking. Probably the only one in
• 50:51
  Congress right now, yes, who has supported a return to the gold
• 50:56
  standard. So there's two people in
• 50:58
  Congress that support it. Yeah, basically.
• 51:04
  So I mean, a glimpse into the opposition you saw a couple of
• 51:09
  years ago when in in his first term, Trump nominated a woman
• 51:13
  named Judy Shelton to the Federal Reserve Board.
• 51:17
  And Shelton was known as a defender of the gold standard.
• 51:20
  And even some Republicans said, no, no, that's that's too far
• 51:24
  out for us. And her nomination never got to
• 51:27
  the floor of the Senate because the Republicans who controlled
• 51:30
  the committee said, we don't want to vote on this.
• 51:34
  They can't even get someone even on the committee.
• 51:38
  Right. Yikes.
• 51:42
  Yeah, that kind of puts you in a tough spot I guess, huh?
• 51:47
  Yeah, so I I don't expect these reforms in my lifetime, but it's
• 51:52
  important to keep the ideas alive and get people to discuss
• 51:56
  them so they understand exactly what choices they're making and
• 52:00
  don't just default to the status quo all the time.
• 52:04
  Yeah. So what?
• 52:05
  So when you're when you're teaching, what do you find to be
• 52:08
  some of the most misunderstood economic concepts that that you
• 52:12
  know, the students coming through the classes, you know,
• 52:16
  perceive but don't understand entirely stuff you know, what
• 52:19
  are some examples of stuff like that?
• 52:23
  Oh well, if they've taken AUS history course they've probably
• 52:31
  been taught that the Great Depression was due to some
• 52:35
  internal collapse of capitalism, or it was due to the
• 52:40
  distribution of wealth being out of whack.
• 52:43
  Neither of which are good theories.
• 52:46
  It's not accurate. No, not accurate.
• 52:50
  What was the? Cause.
• 52:53
  Well, there was a boom in the 1920s due to cheap money, and
• 52:58
  that would have been followed by a kind of ordinary recession,
• 53:02
  except that the US banking system collapsed.
• 53:05
  And so the the correction became much deeper than necessary
• 53:12
  because the money supply shrank dramatically from 1930 to 1933.
• 53:17
  And so everybody's trying to build up their money balances.
• 53:21
  That means everybody's trying to sell and nobody's trying to buy
• 53:23
  goods. And so the economy was deeply
• 53:27
  depressed. That's the reason.
• 53:29
  Not a failure of capitalism, Not a you know.
• 53:32
  Failure of monetary policy. Failure of monetary policy.
• 53:37
  If you want to read more about that, read Milton Friedman and
• 53:40
  Anna Schwartz. OK, Monetary History in the
• 53:43
  United States. I've heard about that book more
• 53:46
  than once. Actually, I've heard about that
• 53:49
  book a bunch of times. I have to I guess.
• 53:53
  Now I really have to get it. On on the boom of the 20s and
• 53:56
  why it collapsed, I would recommend Lionel Robbins The
• 54:00
  Great Depression. Lionel Robbins.
• 54:04
  Yeah, he was a British economist.
• 54:08
  I see cool. And, and So what I know that
• 54:12
  the, that, the, that and, and people talk about this too.
• 54:15
  And I don't really think that people know what that means, but
• 54:18
  that the libertarians of the world refer to the Austrian
• 54:21
  School of Economics. What's what's, what in
• 54:23
  particular is special about the Austrian school as opposed to
• 54:26
  anyone else? Or what do they, what do they
• 54:28
  point at that makes it so so so so much better?
• 54:33
  Let me recommend one more myth busting book which just came
• 54:37
  out, which is George Selgin's book False Dawn.
• 54:42
  It's about the New Deal and how it didn't really help the
• 54:46
  economy to recover, right. It's, it's a common view that it
• 54:50
  was due to Roosevelt's and the New Deal that the economy
• 54:54
  recovered from the Great Depression.
• 54:55
  But in fact, the economy didn't recover and back to normal until
• 55:01
  the middle of the 1940s. And by which point the New Deal
• 55:05
  had been at least the original New Deal had been abandoned
• 55:08
  because it wasn't helping. But you asked about Austrian
• 55:11
  economics. So it's a school of thought in
• 55:15
  economics who whose founder was literally an Austrian economist.
• 55:21
  He he taught at the University of Vienna named Karl Menger.
• 55:29
  And it's hard to, you know, put into a nutshell, but it's
• 55:33
  associated with the idea that values the the prices are
• 55:39
  determined by the interaction of demanders.
• 55:43
  And So what gives rise to market value is people's views and
• 55:50
  subjective valuations and opinions about goods and
• 55:54
  services. Sure.
• 55:58
  It's associated with a a certain view of the productive structure
• 56:04
  of the economy that we need to think about how production takes
• 56:09
  time and therefore investments have to be made with an eye to
• 56:14
  the future and with an eye to the cost of financing.
• 56:20
  Whereas some textbooks give you a kind of very static, just at
• 56:26
  the current moment picture of production.
• 56:29
  Production is goods, inputs currently going into factories
• 56:33
  and out and goods coming out. And the limit on the amount of
• 56:38
  output in, in the Keynesian view, which I referred to
• 56:42
  earlier, is only how much demand is being made by the public,
• 56:48
  rather than concentrating on how much was put in the pipeline to
• 56:54
  begin with, how much is produced, how much the economy
• 56:59
  has in productive capacity, and not just physical capacity, but
• 57:04
  labor skills. That's going to determine how
• 57:07
  much the economy can produce. And by producing, people are
• 57:13
  enabled to purchase what's been produced.
• 57:16
  So when people suppose somebody is producing hats, the reason
• 57:25
  he's producing hats is in order to demand other goods, he
• 57:29
  expects to sell the hats and use the proceeds to buy food and
• 57:33
  rent and so on. So we don't have to worry about
• 57:38
  goods in general being overproduced, but we do have to
• 57:43
  worry about the structure of production being distorted by
• 57:48
  interest rate policy that drives the market rate away from the
• 57:52
  rate that will coordinate investment plans with savings
• 57:56
  plans. So in that kind of sense, there
• 57:59
  could be direct conflict between, you know, I guess this
• 58:03
  quote UN quote natural progression of like what you
• 58:05
  could, what you could, you know, foresee production being that
• 58:09
  could get you get a monkey wrench thrown into that if
• 58:12
  interest rates are played with, you know, in an unexpected kind
• 58:15
  of way. That's right.
• 58:17
  So interest rates that are artificially low can mislead
• 58:21
  investors into over investing, and investing in projects that
• 58:25
  are more roundabout take longer to come to fruition than is
• 58:30
  really warranted by the willingness of consumers to
• 58:34
  wait. And if I guess interest rates
• 58:38
  are too high, then does it become unprofitable?
• 58:44
  Yeah, right, right, right. So that's, I mean that sounds,
• 58:48
  this sounds right, doesn't it? I mean, what would be what's to
• 58:53
  argue with that? I guess what's the opposing,
• 58:56
  what's the steel man on the other side or what do people
• 58:58
  oppose about that perspective? Well, the, the Keynesians and
• 59:05
  the the modern Keynesians worry about prices being sticky and so
• 59:12
  not adjusting rapidly enough to clear the market.
• 59:16
  And there is some truth to that. So you want a monetary policy
• 59:21
  that doesn't put more burden on prices to adjust than necessary.
• 59:28
  But it I think what that really calls for the problem of sticky
• 59:32
  prices is a predictable monetary policy.
• 59:35
  What they think it calls for is an activist monetary policy, a
• 59:40
  Fed that's always leaning against the wind.
• 59:44
  And is what? What do they say?
• 59:46
  At the Fed, we're data-driven. We decide next month's policy
• 59:50
  based on the data we saw last month.
• 59:52
  Well, it ought to be more predictable than that.
• 59:56
  Having an inflation target, which the Fed nominally has at
• 1:00:00
  2% is a step in the right direction.
• 1:00:04
  But it they haven't lived up to the 2% target.
• 1:00:08
  That's one problem. The other problem is it would be
• 1:00:11
  a better to have a target for total spending in the economy.
• 1:00:15
  You want to allow prices to adjust if there's abundant
• 1:00:19
  output. You can have less than 2%
• 1:00:23
  inflation, it's fine. And if there's a supply shock or
• 1:00:26
  a pandemic, it's OK to have a temporary rise in prices in
• 1:00:35
  order to incentivize people to produce more for the future.
• 1:00:44
  So AGDP target or a nominal GDP target would be less damaging
• 1:00:51
  than an inflation target, and then you'd have the problem of
• 1:00:57
  getting the central bank to stick to its targets.
• 1:01:00
  That's the other problem. When there's when there's
• 1:01:05
  political pressure on them to do other things.
• 1:01:08
  I see and the and and by so, so the issue hypothetically it's an
• 1:01:12
  issue the way that you're, I think you're presenting it is
• 1:01:16
  that by focusing on inflation, it causes a lot of hand holding
• 1:01:21
  and artificial influence, I guess in the market from the
• 1:01:27
  Fed. And if they were just focused on
• 1:01:29
  GDP and what we're spending as society, then it might, there
• 1:01:34
  might be some more dramatic short term, I guess, volatility
• 1:01:40
  because prices could go a little higher, a little lower, more
• 1:01:44
  dramatically, But they tend to even out after a short period of
• 1:01:48
  time. And I guess where the political
• 1:01:51
  pressure would come in would be like, hey, we can't have people
• 1:01:54
  complaining about $8 eggs or $10 eggs for more than a couple of
• 1:01:57
  months. You can't afford to ride that
• 1:01:58
  out, right? I guess that would be the
• 1:02:01
  response. Yeah, Yeah.
• 1:02:06
  I would say either kind of target, either a price level
• 1:02:10
  target or a GDP target helps to insulate the Fed from political
• 1:02:17
  pressure. They can say, as Jerome Powell
• 1:02:19
  likes to say, look, we can't just lower interest rates
• 1:02:24
  arbitrarily because that would be inconsistent with keeping
• 1:02:29
  inflation down and we're committed to keeping inflation
• 1:02:31
  down. And he would having a GDP target
• 1:02:35
  would do the same thing. The the reason I prefer the GDP
• 1:02:40
  target to the inflation target is that there are circumstances
• 1:02:44
  where the two of them point in different directions, namely
• 1:02:47
  when you have a supply shock, either positive or negative.
• 1:02:52
  So suppose the economy is hit with high tariffs.
• 1:02:57
  Just suppose they arise out of the blue and that reduces the
• 1:03:02
  potential output of the economy. That's going to raise prices.
• 1:03:07
  If the Fed is trying to stabilize the price level or
• 1:03:11
  keep it, keep inflation to 2%, they're going to want to tighten
• 1:03:16
  monetary policy in order to offset the effect of the
• 1:03:19
  tariffs. And that's giving the economy a
• 1:03:22
  double whammy. We got this real shock and now
• 1:03:24
  you're tightening money on top of that.
• 1:03:27
  It would be better to just say, look, because of the tariffs
• 1:03:31
  we're going to have higher prices, but we don't want to
• 1:03:34
  make it harder for people to repay their debts by reducing
• 1:03:37
  their incomes. So better to have high prices
• 1:03:41
  when you have reduced output of goods and service.
• 1:03:46
  Right. That makes sense to me.
• 1:03:49
  That makes a lot of sense to me actually.
• 1:03:53
  OK. I'm trying to figure out from
• 1:03:55
  here whether we should go to how Bitcoin works, which I'm really
• 1:03:59
  interested about. And the impact, let me say let.
• 1:04:02
  Me say one more thing about Austrian economics.
• 1:04:04
  Please please. So by comparison with the sort
• 1:04:09
  of mainstream textbook economics, the Austrian
• 1:04:13
  economist, and I have in mind, particularly an economist named
• 1:04:16
  Israel Kerzner, put a lot of emphasis on entrepreneurship and
• 1:04:21
  the dynamics of the market process.
• 1:04:25
  So competition becomes a process of entrepreneurs trying to outdo
• 1:04:29
  each other, whereas in the textbooks, perfect competition
• 1:04:33
  is where nobody's doing anything to outdo anyone else because
• 1:04:37
  they're all doing the same thing.
• 1:04:39
  The products are perfectly uniform, everybody charges the
• 1:04:42
  same price, and so on. So I think that kind of
• 1:04:46
  misconceives what it is that makes a market economy really
• 1:04:51
  run. The entrepreneur is the sort of
• 1:04:54
  motivating force and so they're, the Austrians put a lot of
• 1:04:58
  emphasis on that, the role of the entrepreneur and the
• 1:05:01
  importance of understanding market adjustments and then in a
• 1:05:06
  longer frame, understanding the evolution of economic
• 1:05:10
  institutions, not just taking them for granted.
• 1:05:13
  So one of the things Carl Menger, the founder of the
• 1:05:16
  school, is famous for is his theory of the origin of money.
• 1:05:21
  Why people in a pre monetary economy, a barter economy, would
• 1:05:28
  want to, instead of trying to trade directly for the things
• 1:05:32
  they want to consume, what they produce for what they consume
• 1:05:37
  would find it advantageous to trade for something that is more
• 1:05:40
  widely saleable and and so likely to be accepted in payment
• 1:05:46
  by the person selling the good they want to sell.
• 1:05:49
  So people switched indirect exchange, and then there's an
• 1:05:54
  incentive to take into account what other people are accepting
• 1:05:57
  as payment, and then you accept that too.
• 1:06:00
  Through that process, it becomes commonly accepted, and that
• 1:06:04
  gives you a money without anybody imposing it from on top,
• 1:06:08
  but through people in the marketplace coordinating their
• 1:06:13
  behavior with one another spontaneously.
• 1:06:16
  So other theories of economic institutions along those lines,
• 1:06:21
  understanding them as the outcome of, you know, betterment
• 1:06:26
  projects by decentralized individuals, you can have
• 1:06:32
  orderly arrangements that are not imposed from the top down.
• 1:06:36
  So that probably the most famous Austrian economist is Friedrich
• 1:06:40
  Hayek, who got the Nobel Prize in Economics in 1974.
• 1:06:47
  And his most famous article in economics is called The Use of
• 1:06:51
  Knowledge in Society and discusses how dynamically
• 1:06:55
  markets make use of the information given by prices.
• 1:07:00
  So each of us can Orient ourselves by paying attention to
• 1:07:04
  price, prices at which we can buy and sell.
• 1:07:08
  There doesn't have to be any czar who brings about order in
• 1:07:14
  the marketplace. Adjustment of buyers and sellers
• 1:07:18
  will do that. What what, what immediately pops
• 1:07:22
  into my head is I was just reading my, my grandfather wrote
• 1:07:25
  a little, you know, self published biography from his.
• 1:07:28
  He was in the Soviet labor camps in World War 2.
• 1:07:32
  His, him and his family. And one of the things, yeah.
• 1:07:34
  And one of the things that he talks a lot about was the
• 1:07:38
  families desperate need. And it's fascinating to read
• 1:07:42
  from that lens in terms of money and in terms of like being able
• 1:07:45
  to survive in a livelihood. They would carry on them what
• 1:07:48
  would be considered monetarily or, you know, I guess as widely,
• 1:07:53
  you know, necessary products as they needed.
• 1:07:55
  So sugar was very valuable, tobacco was very valuable.
• 1:07:58
  Clothes were very valuable. Obviously jewelry at that point
• 1:08:01
  was already kind of, you know, at that point was already not,
• 1:08:05
  you know, out of the picture. Everything was, yeah, I've been
• 1:08:08
  confiscated or already bartered away almost immediately.
• 1:08:11
  You know, I mean, jewelry was for like, big deal, like trying
• 1:08:14
  to get, you know, out of the country or something like that.
• 1:08:16
  But day-to-day, you know, and it's funny because my
• 1:08:19
  grandfather had, you know, from a Jewish perspective was, was
• 1:08:24
  saved essentially by a Zionist camp, but his parents were
• 1:08:28
  Orthodox. And, and he saw throughout the
• 1:08:30
  entire war that they were, you know, using sugar to pay for him
• 1:08:34
  to have a teacher come to the house and teach him biblical,
• 1:08:37
  you know, studies. And he felt this, you know,
• 1:08:40
  massive tension in his life that like they, you know, they put so
• 1:08:43
  much value on it that potential food or clothes for, you know,
• 1:08:46
  him and his siblings were going to this guy to, you know, that
• 1:08:49
  it was going the sugar was going to this teacher instead of, you
• 1:08:53
  know, the the worker that lets him stay home from school for a
• 1:08:56
  day or something. Calories.
• 1:08:58
  Or that, yeah, you know, and, and so, so I, you know,
• 1:09:02
  especially I guess he could kind of see when everything is
• 1:09:05
  stripped away and there's no regulations and what people kind
• 1:09:07
  of refer to, to survive and defer to to survive.
• 1:09:12
  That system work seems to work perfectly, as you know.
• 1:09:14
  I think that's the most primal human system that works the most
• 1:09:17
  rationally. Yeah, there's a famous article
• 1:09:22
  about how in prisoner of war camps during the Second World
• 1:09:25
  War, cigarettes enraged as the common medium of exchange
• 1:09:30
  because of these prisoners were getting the packs from the Red
• 1:09:33
  Cross that can contend cigarettes.
• 1:09:36
  So even the people who didn't smoke would accept payment in
• 1:09:38
  cigarettes because they knew they could trade somebody else
• 1:09:42
  and. That's where money essentially
• 1:09:46
  comes from. That's a physical
• 1:09:48
  representation. So historically you, you got,
• 1:09:52
  you got shells being used as money in some places, but gold
• 1:09:56
  and silver in in the most advanced economies that had the
• 1:09:59
  high value transactions and when they came in contact with other
• 1:10:03
  economies. So I used to tell my students
• 1:10:07
  about in Sweden, they had a copper standard and you can go
• 1:10:11
  to museums in Sweden and see these huge slabs of copper that
• 1:10:14
  they used to pay each other, but you'd rather have a silver coin
• 1:10:18
  than a huge slab of copper. So silver and gold had the
• 1:10:22
  properties that people want in a hand to hand medium of exchange.
• 1:10:26
  And so they kind of survived the, the competition among
• 1:10:31
  commodity monies, right? So it's a it's what Hyatt calls
• 1:10:36
  a spontaneous order. Yeah, yeah.
• 1:10:40
  And I guess I could see how how he got to that term too.
• 1:10:42
  How do I get to that phrase? I want to wrap up with the
• 1:10:47
  conversation a little bit about the national debt and I because
• 1:10:53
  I think that's also another enormous issue that I don't
• 1:10:57
  think, again, people quite know what the impact could be in what
• 1:11:02
  it means. So I think we just approached
• 1:11:05
  $37 trillion in national debt recently.
• 1:11:08
  I did see that Thomas Nancy has like his famous little invention
• 1:11:11
  that tracks real time the, you know, the, the national debt.
• 1:11:15
  Every day he wears around, he wears on his belt, which is cute
• 1:11:19
  and funny, but also important, I guess so.
• 1:11:22
  So what is that? What, what's the national debt?
• 1:11:24
  What does it mean to everyday people?
• 1:11:27
  And what does it mean when we're spending?
• 1:11:29
  So when you know when our output or I guess when we're spending
• 1:11:32
  as much as we are, what does that mean for us?
• 1:11:36
  Yeah. The important thing is the ratio
• 1:11:39
  of the debt to future tax revenue, which is for which the
• 1:11:45
  best proxy we have is GDP. So it's the debt to GDP ratio
• 1:11:50
  that economists worry about, and that's gone above 100%, which
• 1:11:56
  means that it's more than a year's income now.
• 1:12:00
  The last time it was that high was coming out of World War 2,
• 1:12:04
  and the US eventually paid it down through a combination of
• 1:12:10
  growing output and small to negative budget deficits and got
• 1:12:19
  it down to about 40% before it started growing again.
• 1:12:23
  Is that through policy? But yes, partly through monetary
• 1:12:29
  policy and partly through fiscal policy, OK, If if you run a
• 1:12:34
  deficit that's 1% of GDP and the GDP itself grows by two
• 1:12:40
  percentage points, then you've reduced the ratio of debt to GDP
• 1:12:44
  because GDP is growing faster, right?
• 1:12:47
  So you don't have to run surpluses to get the ratio to
• 1:12:52
  shrink. But you can't do what we've been
• 1:12:55
  doing lately, which is running budget deficits of seven, 810%
• 1:13:00
  of GDP, because GDP is not growing that fast.
• 1:13:04
  You need to get it down to 2%, which is about what our average
• 1:13:09
  growth rate of GDP in real terms has been.
• 1:13:14
  So what it means when the debt is piling up is that the debt
• 1:13:17
  service is rising and the debt service, that is the amount of
• 1:13:21
  interest the Treasury has to pay out every year.
• 1:13:23
  Which is what percent? Or does that change?
• 1:13:26
  That means people either have to pay more in taxes or they have
• 1:13:30
  to receive less in services it it comes out of the government
• 1:13:33
  budget. Right.
• 1:13:36
  The We can look at what happened in Europe after the Greek fiscal
• 1:13:42
  crisis, interest rates on debt. In other European countries that
• 1:13:47
  were in similar situations, like Spain and Italy and Ireland,
• 1:13:52
  those interest rates went up. And in Spain, for example, just
• 1:13:57
  paying interest on the debt became 1/3 of the national
• 1:14:00
  budget, which crowds out everything else.
• 1:14:04
  And you either have to cut spending or raise taxes or some
• 1:14:08
  combination of the two. So that's the worry.
• 1:14:12
  So we're burdening future our our children and our
• 1:14:16
  grandchildren with higher taxes and.
• 1:14:20
  Right. So how, how quickly, how quickly
• 1:14:22
  does do the higher taxes have to have to how quickly do the
• 1:14:26
  higher taxes kick in or these or the holding holding back to
• 1:14:29
  services? Well, right now we've got more
• 1:14:35
  debt service, but we're basically just rolling it all
• 1:14:38
  over. So tax revenues haven't been
• 1:14:44
  increased. I know there's some talk about
• 1:14:48
  revenue from tariffs, but that's really a tiny drop in the
• 1:14:52
  bucket. And plus, Trump is promising to
• 1:14:56
  rebate it all to US consumers. So, which wouldn't really help
• 1:15:00
  have. No impact on the debt.
• 1:15:03
  It wouldn't help the debt at all that at that point if it was
• 1:15:05
  rebated, right? That's right.
• 1:15:09
  This is looks good because we've been getting taxes.
• 1:15:12
  I mean, if, if, if, if what that means if what you're saying, if
• 1:15:16
  that means if, if the policy has been that we're spending all
• 1:15:21
  this money that that we and our kids and our grandkids are going
• 1:15:24
  to be paying back later. Giving everyone a $300, a $500
• 1:15:28
  rebate is not going to make the, you know, my kid feel any better
• 1:15:32
  in 20 years from now when he's paying 10% higher taxes or he's
• 1:15:35
  getting 10% less services from the government or whatever it
• 1:15:38
  is, right? That's right.
• 1:15:42
  There was a famous economist named David Ricardo, and he
• 1:15:46
  said, you know, at a 5% interest rate, it doesn't really matter
• 1:15:50
  whether I give you $1000 today or if I give you $50 a year
• 1:15:56
  forever. Those are equivalent in market
• 1:15:59
  value. But if people are just myopic,
• 1:16:05
  they're going to grab onto the $1000 and you could similarly
• 1:16:09
  say if I give you $1000 and then charge you $50 a year to pay for
• 1:16:16
  it, and if you think that's a good deal, then you're being
• 1:16:19
  myopic. So there is a a built in
• 1:16:23
  tendency, though, of course, for congressman to want to take
• 1:16:27
  credit for low taxes and high spending today and just kick the
• 1:16:32
  can down the road. It's somebody else's problem
• 1:16:35
  sometime in the future. But a lot of people are sounding
• 1:16:40
  the alarm. The taxpayers have to hold them
• 1:16:43
  to the fire. Right.
• 1:16:45
  And that's what we got to do. We have to hold people
• 1:16:47
  accountable for financial decisions.
• 1:16:49
  And I don't think it's any coincidence that that all this
• 1:16:53
  stuff happens post wars because because government funding ramps
• 1:16:58
  up big time during war, right? And if we just came out of a
• 1:17:01
  2025 year, you know, period of constant war, then that means
• 1:17:06
  that we've been spending for the last 20 years and telling
• 1:17:10
  everyone, well, you'll pay some time down the line.
• 1:17:14
  If if you look at the size of the federal budget over time, as
• 1:17:19
  as you described, it goes up in wartime and then it comes back
• 1:17:22
  down when the war ends, like the First World War or the Second
• 1:17:25
  World War, but not to the old level to somewhere in between.
• 1:17:29
  So there's what an economist named Robert Higgs called a
• 1:17:32
  ratchet effect. It keeps ratcheting up.
• 1:17:35
  It doesn't go all the way back. So before the First World War,
• 1:17:40
  the federal government was 5% of GDP, and today it's spending
• 1:17:45
  close to 25% of GDP. Whoa.
• 1:17:49
  On top of that, you on top of that you add state and local.
• 1:17:55
  Wow. Do you does?
• 1:17:59
  Is that a what, what do we, what do you do about that?
• 1:18:02
  What do we do about that? What do we, you know, what do we
• 1:18:04
  as individuals do? Can we do we save?
• 1:18:07
  Do we prepare? Do we do we try to push
• 1:18:10
  politics? What, what do you, what do you,
• 1:18:11
  what do people like myself do you know, 30 year olds with
• 1:18:14
  couple of kids and trying to pay my bills?
• 1:18:17
  What do we do about that? Well, if you want, if you want
• 1:18:20
  your kids to be able to pay their tax bills, you have to
• 1:18:23
  save and pass that on to them. But politically, there needs to
• 1:18:31
  be a stronger coalition of people who understand the
• 1:18:35
  problem and are willing to, you know, make the difficult
• 1:18:39
  decisions about taxes and spending.
• 1:18:44
  And the what seems to be the hardest thing is to cut spending
• 1:18:49
  because every spending program has recipients and they're going
• 1:18:53
  to fight to maintain their benefits even if they're a small
• 1:18:59
  fraction of the public. The rest of the public, you
• 1:19:02
  know, just overlooks what's the programs that have concentrated
• 1:19:08
  benefits and the costs are diffused over everyone else.
• 1:19:12
  So it it takes educational campaign to get people concerned
• 1:19:17
  and it will take some kind of coalition of people who are all
• 1:19:21
  willing to give up their small benefits in exchange for making
• 1:19:26
  it possible to reduce the debt generally.
• 1:19:30
  Do do movements like the health movement, the modern day, like I
• 1:19:35
  said, health movement that, you know, I think that a lot of
• 1:19:38
  people pretty much across the aisle have been getting on, you
• 1:19:40
  know, in terms of like noticing the obesity or, you know, high
• 1:19:45
  rates of diabetes and everything.
• 1:19:46
  And and there's been a push to kind of clean out the food a
• 1:19:50
  little bit. And that would kind of that was
• 1:19:52
  on full national political display.
• 1:19:55
  Like that was that was that was like a movement, right?
• 1:19:58
  That RFK started that that melded from, but was it was it
• 1:20:03
  was a legit issue. Does that kind of give you hope
• 1:20:06
  that someone else could take a topic like this and kind of turn
• 1:20:09
  a not spoken, not typically spoken about topic into
• 1:20:12
  something more more mainstream and more, you know, a little bit
• 1:20:16
  more part of the zeitgeist? Well, I, I guess what gives me
• 1:20:22
  most optimism is other countries have done this.
• 1:20:25
  They've, they've woken up to the problem that high debt is, you
• 1:20:30
  know, parasitizing the, the budget.
• 1:20:36
  So Canada back in the 1980s made a big cut in spending programs
• 1:20:43
  and we're able to bring down their budget deficit, turn it
• 1:20:49
  into a surplus and bring down the the public debt as a share
• 1:20:53
  of GDP pretty dramatically. Some other countries have been
• 1:20:59
  able to do that to through a combination of spending cuts and
• 1:21:02
  and tax increases. I we haven't seen that coalition
• 1:21:10
  in the US, though. When Democrats are in office,
• 1:21:13
  they want to increase spending, and when Republicans are in
• 1:21:16
  office they also want to increase and cut taxes.
• 1:21:22
  And so everything is paid for with debt.
• 1:21:27
  Yeah, we're going to have to figure something out, I guess,
• 1:21:29
  huh? Yeah.
• 1:21:32
  I mean, there's, there's not going to be money to pay all the
• 1:21:36
  Social Security and Medicare benefits that have been promised
• 1:21:42
  if something isn't done on the side of other spending.
• 1:21:47
  That's which is what I would prefer.
• 1:21:49
  Or on the side of taxes. I see.
• 1:21:53
  OK. I think we'll I think we'll call
• 1:21:55
  it there. Professor, thank you so much,
• 1:21:58
  really for the time, for getting back to me so quickly.
• 1:22:00
  This is really, this is educational.
• 1:22:02
  This is fun and you're giving me a lot to think about.
• 1:22:05
  You're giving me even better a couple of books to read, which
• 1:22:07
  I'm really excited about. So really.
• 1:22:11
  Thank you so much, let me plug my own book.
• 1:22:13
  Please. Oh yes, please.
• 1:22:14
  I'm so sorry. Let.
• 1:22:15
  Me plug my own book before we leave.
• 1:22:17
  Yes, I I published a book two years ago called Better Money
• 1:22:21
  Gold, Fiat or Bitcoin, where I do a head to head comparison
• 1:22:25
  between our current Fiat money standard, the gold standard as
• 1:22:29
  it worked historically, and the possibility of a Bitcoin
• 1:22:33
  standard. So which one would provide a
• 1:22:36
  more stable, a more reliable monetary system?
• 1:22:42
  What do you what's what's what do you conclude?
• 1:22:47
  Is there a spoiler? At this well, I'm I'm pretty,
• 1:22:52
  I'm pretty favourable toward the gold standard.
• 1:22:55
  I see. OK, well I'm going to put the
• 1:22:57
  link. I'll put the link to the book in
• 1:22:59
  the. I'll put the link to the book
• 1:23:00
  in. The front burner.
• 1:23:02
  Yes, definitely. I'll put a link to the book in
• 1:23:05
  the description. And I, I wish, I really wish you
• 1:23:10
  best of luck out there in England.
• 1:23:12
  I hope you have a lot of fun this semester and I really
• 1:23:16
  appreciate the time. Hopefully we'll be able to do
• 1:23:17
  this again sometime, OK. Thanks, it was great.
• 1:23:22
  All right. Take care, professor.
• 1:23:23
  Thank you. Bye.
• 1:23:23
  Bye. OK.
• 1:23:27
  Thank you.