On Milton Friedman | Murray N. Rothbard

Recorded April 21, 1970. Includes an introduction by Percy Greaves. Special thanks to Bettina Bien Greaves for making this important recording available.

Source: On Milton Friedman | Murray N. Rothbard – YouTube

http://www.readrothbard.com/on-milton-friedman-murray-n-rothbard

TRANSCRIPT
00:01
our speaker really needs no introduction
00:03
we’ve all known him for a good many
00:06
years when I first met him in the Mises
00:12
seminar way back in 1950-51 and so forth
00:15
he was going for his doctorate and he
00:18
was having his troubles up at Columbia
00:19
where he got all three of his degrees
00:21
and finally when Eisenhower was kind
00:25
enough to inflict the burns on us the
00:27
first time Murray was able to get by
00:32
with his thesis the panic of 1819 and he
00:38
had to rewrite it and rewrite it and
00:40
rewrite it because they wouldn’t accept
00:42
the philosophy of Mises and dr. rothbard
00:46
as you all know is quite an
00:47
individualist his course written a
00:50
number of books besides this panic of
00:52
1819 I hope most of you are familiar
00:54
with his man economy in the state and
00:56
America’s Great Depression and his
00:59
little pamphlet on money what has the
01:01
government done to our money Murray is
01:05
an individualist he’s flirted with a new
01:07
laughs but he’s got disenchanted with
01:10
him for a little bit and he asked him to
01:13
rest in peace and now he’s falling in
01:15
the loony Lex in his latest publication
01:19
he’s also editor of this libertarian
01:20
forum which some of you may be familiar
01:23
with and Murray of course has followed
01:26
the economic situation for a good many
01:30
years and he is more or less a
01:31
contemporary of dr. Friedman whom he’s
01:34
going to talk about Milton Friedman who
01:36
has been selected by our opposition as
01:40
our representative of the free market
01:42
but he’s not in a court of course with
01:46
many of our things but this is what dr.
01:49
Murray Rothbard is going to tell us
01:50
about it and it gives me pleasure to
01:52
present dr. Murray Rothbard
01:58
yes sir any way you wish thank you very
02:01
much throw bricks right the pleasure of
02:05
being here again I’m not quite a milton
02:09
friedman’s generation micron there’s a
02:12
sort of petty point on a little bit
02:13
younger than sort that in the record I
02:19
think a lot of us a lot of people seem
02:21
to the scene has been afflicted with an
02:23
excess of Friedman worship so I’m not
02:26
going to stress the the good points the
02:28
Friedman has done the past few years I
02:30
think most people familiar with it I
02:34
might even be so unkind as the
02:37
paraphrase and treatment mental or Henry
02:40
Simons wrote an article about Alvin
02:42
Hansen one time and some English topped
02:45
the left-wing Keynesian the past years
02:48
now I’m more or less retired he wrote an
02:52
article saying he began the article by
02:54
saying I come to bury Hanson not to
02:56
praise Him and I can say the same thing
02:59
about Friedman tonight on first place
03:03
one of the problems with the press in
03:06
general is that the press has a very
03:10
short memory so somebody comes up with
03:11
an idea and nobody set up the last three
03:16
years that’s immediately hailed with a
03:18
great new idea a great new discovery and
03:21
the same thing has happened to Friedman
03:23
almost everything he says is a
03:25
completely incarnation of what for
03:27
example Irving Fisher had said forty
03:29
years ago 30 years ago but it’s just the
03:32
collective memory of the press and even
03:34
the economics profession is very short
03:36
nobody points this out so Friedman
03:39
discovered all sorts of so-called laws
03:41
which are simply rediscoveries or
03:44
restatements and what Fisher had said
03:45
clearer even more in a clearer fashion
03:48
forty years before for example if
03:52
there’s a famous law the freedmen are
03:53
supposed to discovered a year or two ago
03:55
that the interest rate rises during
03:58
inflation especially during the later
03:59
stages of inflation because as prices
04:01
are going up they have a discount
04:03
a positive price discount premium rather
04:07
quite a positive price premium on
04:08
interest rate to account for the price
04:11
is rising so that the the creditor is
04:15
demanding a 6% return for example and
04:18
prices going up 6% a year obviously you
04:20
have to ask a lot more than 6% allure to
04:23
overcome the inflation so Friedman
04:26
supposed to have this great new
04:27
discovery economics professions now sort
04:29
of a tizzy and a fizzy about that of
04:32
course free to Fischer it says it’s not
04:33
exactly the same thing about 40 50 years
04:35
ago and so Mises and so the same thing
04:37
has worked and so forth but they say the
04:40
collective memory of every of the press
04:41
and the economics profession is very
04:43
very short now and this as I will point
04:46
out later on this is true Friedman of
04:48
Fischer’s excuse me Friedman’s general
04:51
theory about money in the business
04:53
cycles essentially Fisher we discovered
04:55
and what a lot of statistics added on to
04:56
it I’m going to talk tonight essentially
05:00
about the political rather than the
05:02
methodological critique of Friedman I
05:04
could say a lot about the methodology
05:05
but I think this sort of gathering I
05:08
think we can stress the political
05:09
economy aspect I just want to say in
05:12
passing the Friedman is the probably the
05:13
outstanding proponent in methodology of
05:17
an extreme variant of logical positivism
05:20
in other words the major major opponent
05:23
of professor Mises was methodology so to
05:25
speak prima is so extreme that he says
05:29
that assumption and a theoretical
05:31
assumption doesn’t have not only doesn’t
05:33
have to be proven it can even be false
05:35
and still be a correct theory doesn’t
05:37
matter if the assumptions of fourth he
05:38
says as long as the predictions are
05:39
correct which are based on these false
05:41
assumptions this is a extreme version of
05:44
a positivist methodology and the thing
05:48
this is the exact counter that
05:49
everything that proxy ology holds dear
05:52
but I said I don’t want to talk about
05:54
methodology tonight
05:56
mention that in passing first and deal
05:59
too much with us either is the whole
06:01
feel of monopoly and competition that’s
06:04
true then in practice
06:06
Freeman has come a long way from the
06:08
original Henry Simon’s position the
06:09
original Henry Simon’s position which is
06:11
written in a really screwball book I
06:13
think in 1934 : positive program plays a
06:16
fair which I recommend everybody read
06:18
because it’s really the it’s really
06:20
Stacey the chicago school position very
06:23
clearly political position in the
06:25
chicago school with great clarity and
06:28
essentially simon said was that every
06:30
corporation above the size of a small
06:32
blacksmith sharp should be broken up we
06:34
trust busted by the government and
06:36
reduce down the blacksmith shop size so
06:40
that we can all have perfect competition
06:41
we can enjoy the benefits of perfection
06:43
and competition and this I say was the
06:46
original Chicago position it come quite
06:48
away from that happily and Friedman
06:51
today doesn’t take this position he says
06:53
well he recognizes the major source of
06:55
monopolies today as government
06:57
privileges government regulation and
06:59
subsidies and so forth but still there’s
07:02
a canker there the theory is the layer
07:04
theory being the Chicago position of
07:06
perfect competition in quotes he’s
07:09
better than imperfect in other words the
07:11
firm of a constant demand curve
07:13
horizontal demand curve is somehow
07:15
better and superior and more pure less a
07:18
more moral than a firm in a state of
07:20
which faces are falling demand curve so
07:23
this idealization of perfect competition
07:25
still remains even though it says it’s
07:27
played down now in practice in the
07:30
Friedman position it’s still layered at
07:32
the play guys in the future because some
07:35
time a future will get we’ll get this
07:36
but again here the crime in Chicago
07:39
school such as such a corporation should
07:41
be broken up because it’s too big and
07:42
it’s facing a falling demand curve and
07:44
so forth we can expect it at any time
07:46
put it that way just as pressor Stiegler
07:50
of Friedman’s most distinguished
07:52
associate said about 15 years ago US
07:55
Steel should be broken up into a statue
07:58
in part because it was monopolistic I
08:01
don’t know if he still says that he’s
08:03
come a long way to from the last time
08:05
but say the theory theoretical structure
08:07
still remains but I don’t want to deal
08:09
too much with monopoly competition
08:10
either because this is again a more of
08:12
theoretical than political position at
08:14
the present time let’s get to the
08:16
Friedman’s big argument for government
08:18
intervention in general which is the so
08:19
called neighborhood effect and it’s
08:23
particularly I want to talk about the
08:24
external benefit part of neighborhood
08:26
effect in other words the idea that if
08:30
two or three people are doing something
08:31
which another set of people who are
08:33
benefiting from but aren’t paying for
08:34
this is a terrible terrible thing these
08:36
people should be forced to pay for it
08:37
this is one version of it now in
08:40
practice again if practice treatment
08:42
isn’t push this to a great extent and
08:43
essentially says well this is really
08:45
limited we limit the application of this
08:47
to urban parks Central Park and so it
08:51
should be governmental because you can
08:53
watch the park you not pay for it and
08:54
therefore the terrible things should be
08:56
forced to pay for it and also education
08:58
which is another big of course is very
08:59
big in the item he’s in favor of
09:02
government being up to its neck in the
09:04
same thing for the same reason but in
09:07
general he respects it more or less of
09:08
those areas but my contention is that it
09:11
can be used the same argument can be
09:13
used for almost anything to justify
09:14
almost any act of government
09:15
intervention whatsoever but FEMA is
09:17
really unjustly limiting it once you
09:19
accept the argument for example if one
09:23
of my favorite examples which I always
09:25
use in class is that if people are
09:28
people are enjoying for example men are
09:30
enjoying particular the sign of girls
09:32
watching mini wearing miniskirts and of
09:34
course this is on the way a policy this
09:36
is an up till now they’ve been enjoying
09:38
the fight of girls wearing miniskirts
09:39
and they’ve been enjoying it without
09:42
paying for it
09:42
was here we have this aesthetic benefit
09:45
or psychic benefit they’re not being
09:47
forced to pay for and so therefore the
09:49
femini argument should be that we should
09:51
all be taxed the paid girls to wear
09:53
miniskirts and this would this is iron
09:55
out the external benefits and smooth out
09:57
the neighborhood effects and and
10:01
similarly this goes for homes than
10:02
anything else if one of us for example
10:04
becomes a wiser person by reading a
10:06
great book or something I’m reading
10:07
Socrates or whatever and he becomes
10:09
wiser by this wisdom he benefits other
10:11
people along the way and therefore they
10:12
should be taxed at subsidizing meeting
10:14
Socrates and so forth
10:15
so on it’s almost an infinite and this
10:19
whole approach seems to me to be young
10:22
they’re very peculiar at first place it
10:25
really means we should we should all
10:26
wear sackcloth and ashes because we’re
10:28
all free riders this is really attack on
10:30
the free rider but we’re all three
10:32
riders on the the discoveries of the
10:34
past the writings are the paths of
10:36
technical inventions a capital
10:38
investment of everybody is gone before
10:40
us werewolf we were all getting the
10:41
benefits of this without paying for it
10:43
in a sense and you know does that mean
10:46
we should be we should be our breasts
10:47
and tear our hair and be taxed by
10:50
somebody in order to somehow pay for
10:52
this you know to suffer for these
10:54
benefits that we’re enjoying it’s very
10:56
peculiar kind of theory so I’m really
10:58
saying is the free writing which
10:59
Friedman is trying to attack here with
11:01
neighborhood effects is really an
11:03
essential part of civilization and
11:04
altogether if we want to if we want to
11:07
abandon free riding we really have to
11:08
abandon the fruits of civilization now
11:12
when I’ve talked to Chicago lights the
11:13
Freeman writes about the miniskirt
11:14
analogy by the way they admit that this
11:16
is correct but they say they wouldn’t
11:17
put it a theory that farm huh you know
11:18
why not then this is of course again
11:21
rest though can we talk about the rule
11:23
of logic and political policy of course
11:26
those are some favor of logic I think I
11:28
have a point there
11:31
there’s another part of the theory that
11:33
if you’re sort of like the other side of
11:36
a coin of the free rider is that if you
11:39
can do something which will benefit
11:40
other people you know and you’re not
11:41
doing it they should be able to force
11:43
you to do it if you’re not conserving
11:46
copper or something like that sort is
11:48
this conservation will help people you
11:49
should be fooled and be able to be
11:51
forced to do it
11:51
my favorite analogy there is a case of
11:53
three to four guys three guys or or
11:56
playing a spring court tech as a four
11:58
thousand who can could play the cello
12:00
but it sort of recalculating doesn’t
12:01
want to do it and the theory then should
12:03
say they should be able to force him to
12:04
play the cello because this will benefit
12:06
all three of them and this again is part
12:09
of the neighbor
12:09
I’m not saying Friedman says this what
12:11
I’m saying is he should be saying as the
12:12
work assistant neighborhood effect
12:15
theorist so there’s so much I think for
12:19
neighborhood effects what I’m saying
12:20
this is Freeman’s major argument for
12:22
government intervention in almost any
12:24
area that he thinks is you know the
12:26
argument implies such as you
12:28
uh-uh okay now to get to a point which I
12:35
think is the most is probably this is
12:37
course a value judgment I think so
12:38
probably the single most disastrous
12:39
economic idea ever invented to the idea
12:43
of the negative income tax or the
12:44
guaranteed annual income and of course
12:48
here again is an interesting situation
12:50
Friedman coined the idea of a negative
12:51
income tax in other words they a minute
12:54
and a guaranteed minimum income floor
12:56
for everybody this became the
12:58
inspiration for more more radical
13:00
schemes such as Robert Theobald and the
13:03
ad hoc committee of the triple
13:04
revolution and so forth so on and almost
13:06
of course for Nixon’s current welfare
13:08
program the problem of the National
13:12
negative income tax is it it provides an
13:15
income floor by a right in other words
13:17
as a cousin as a rightful claim as an
13:20
automatic claim upon production and no
13:22
longer becomes a sort of thing we have
13:23
to go to the welfare department it’s
13:24
sort of hat in hand and fill out forms
13:27
and say you really deserve it and they
13:28
don’t think you’re doing you have to
13:29
argue about it which is sort of the
13:31
grading thing now it becomes automatic
13:33
you fill out your income tax form you
13:35
say you’ve gotten less than the
13:36
prescribed floor and you get the money
13:38
in a couple of weeks now this I’m saying
13:42
here is that the present welfare system
13:44
as crummy as it is as bad as it is as as
13:47
inept in is an inefficient Bureau
13:49
crackers it is it’s precisely saved from
13:51
disaster by the very ineptness that’s
13:53
very bureaucracy and very inefficiency
13:55
because it means that the whole system
13:57
of going out welfare first place is
13:58
chaotic so it’s not an automatic second
14:01
place it’s unpleasant you have to go
14:03
through all these burek these tinhorn
14:04
bureaucrats to justify being on welfare
14:07
and get inspected and so forth and this
14:09
very unpleasant let’s provide the
14:11
extremely necessary disincentive effect
14:13
to prevent people from going on welfare
14:14
this is the incident lately the original
14:17
only ol nineteenth-century lays a fair
14:18
liberal position if you have to have
14:20
welfare at all it should be very very
14:22
unpleasant
14:23
so as the discourage people from going
14:25
on it and the Freeman theory and in the
14:29
name of efficiency and simplicity an
14:31
automatic and automaticity and so forth
14:33
eliminates this very essential
14:35
unpleasant feature makes the thing as a
14:37
saint what a matter
14:39
but we have to realize is that there was
14:41
a supply function or a supply curve
14:43
going on welfare and the very spiritual
14:46
studies of things shown the quantitative
14:48
importance of this supply function is
14:51
essentially this it’s inversely
14:52
proportional one to the difference
14:55
between the prevailing wage rate in the
14:56
area and the welfare level in other
14:58
words if a prevailing wage rate remains
15:01
Li so it’s a welfare level remains the
15:03
same and prevailing wage rate in the
15:04
area Rises
15:05
people thought leaving welfare and going
15:07
on to you know start working because the
15:09
difference between the money they can
15:10
get from working and the money to get
15:12
some welfare increases this gap goes up
15:14
so they go off welfare and onto the
15:16
payroll if on the other hand the welfare
15:20
level goes up the prevailing wage
15:22
remains the same then they start going
15:23
on welfare because the amount of money
15:24
you can get from working which is
15:25
generally a pain in the neck as you know
15:29
decreases so the incentive to go on
15:31
welfare increases so this means that
15:34
being on welfare is not somehow the vine
15:36
act in other words it isn’t it doesn’t
15:38
come from outside the system being on
15:40
welfare is a supply function and in
15:42
response the different incentives and
15:43
disincentives and one of the incentives
15:45
is the prevailing wage rate as compared
15:47
to the welfare rate welfare payment rate
15:50
and it’s also the supply function of
15:53
going on welfare is inversely
15:54
proportional to the cultural
15:56
disincentive we put it in other words of
15:59
the storm of a cultural aversion
16:00
cultural resistance to being on welfare
16:03
the less that people will tend to be on
16:05
it this accounts for example for the
16:08
reason why I rule the rural poor the
16:11
much less rural poor going on welfare
16:13
than urban poor even though rural poor
16:15
justice poor but even more so but in the
16:18
rural areas as a stigma a general social
16:20
stigma in a neighborhood for going on
16:22
welfare is generally imposed and
16:23
bitterly so especially but people who
16:25
are paying for it none was the local
16:27
focal working and paying taxes for it
16:29
and so that because of the stigma that
16:31
far fewer people go on it in the urban
16:33
area is the stigma has to be lost and
16:35
everybody sort of bounces you don’t know
16:37
your neighbor and so forth and this
16:39
cultural disincentive then
16:40
was removed also there was a great
16:43
charming article a couple of weeks ago
16:45
in New York Times I know if you how many
16:47
of you have seen it on the Albanians in
16:49
New York I mean II just had the first
16:51
Church in the world for some vania
16:54
Catholic Church in the world there’s a
16:55
whole discussion of the Albanian
16:56
Albanian community
16:58
apparently the Obey nians in New York
17:00
are invariably very poor there will slum
17:03
dwellers none of them are on welfare a
17:05
simple reason as when Albanian leader
17:08
put it Albania American leader put it
17:10
quote Albanians do not beg and to
17:12
Albanians taking low fares like begging
17:13
on the street period so since the
17:15
Albanian the you know welfare is like
17:17
begging in the street I just know I’m
17:18
not on welfare even though their income
17:20
level was much lower than the average
17:22
population same goes for the Chinese
17:25
Americans were generally poor Rome was
17:28
not on welfare I’ll get back to the
17:30
whole welfare question a little bit
17:32
later at any rate the negative income
17:37
tax by making a dull automatic my
17:40
content opens the floodgates to an
17:42
enormous increase to North Accession
17:45
people living on production and here I
17:47
recommend Henry Hazlitt a critique of I
17:50
could have income tax in the three min
17:51
event I think four years ago July 66 in
17:56
the first place well obviously is going
17:57
to happen it’s a negative income taxes
17:58
put in is it the floor which is which
18:01
Friedman sets that it’s essentially
18:03
$1,500 a years it’s it’s 3,000 with 50%
18:07
off those massive 1,500 a year this
18:10
floor obviously look saw increasing at
18:12
the beat the ban and a very rapid rate
18:14
because the first thing people say as
18:16
well $3,000 is officially considered by
18:18
the government of the poverty level or
18:19
family of four and therefore you can’t
18:22
subsidize people we can’t have a
18:23
guaranteed income below the poverty
18:25
level and so therefore we have to raise
18:26
them immediately the 3,000 for 1500 I’ll
18:29
be the first outcry secondly of course
18:32
not gonna be of course the living
18:33
increases every year there will be
18:34
inflation every year this will add on to
18:36
the floor and thirdly of course the
18:39
welfare client organizations are already
18:41
demanding they’re so cool right to a
18:43
guaranteed $6,000 a year income and this
18:46
you know so this is so the hopped up
18:48
pressure – they’re raising the floor
18:51
almost indefinitely he’s already on
18:52
their way
18:53
see even before the thing is begun so
18:55
it’s pretty obvious that this floor
18:57
starting a fairly reasonable looking
18:58
1500 is gonna skyrocket very quickly but
19:02
there’s another point that’s a fairly
19:03
obvious point the other point is it who
19:05
will continue working you know which
19:07
person who gets below the floor cuz I’m
19:08
gonna keep working I’m making very few
19:10
people otherwise if the floor is 3,000 a
19:13
year be very very few people keep
19:16
working at 2,500 a year but I can just
19:18
simply quit work zero hours a week sit
19:21
on the porch and get 3,000 from the
19:22
government instead of getting 500 from
19:24
the government so when I contend is that
19:27
well what happens is the current you see
19:29
if you if you see the dirt the current
19:30
estimates about the costs of a
19:31
guaranteed annual income the course will
19:33
look fairly reasonable five billion a
19:35
year ten billion fifteen billion doesn’t
19:37
look catastrophic however these costs
19:39
are all is based on the assumption that
19:41
everybody will continue working in the
19:43
same way they’re working now the
19:44
disincentive effect
19:46
excuse me will be catastrophic in the
19:48
sort of thing or not I’m not taking into
19:50
account so the fact that you have the
19:53
guys every that before three thousand I
19:55
can tell everybody below 3,000 will quit
19:56
pretty quickly if they don’t quit the
19:58
pretty screwy they’ll quick person
20:02
getting 3000 will quit how about people
20:04
getting a bus 3,000 well they messed up
20:05
they’re not quick to make because if
20:07
you’re getting say thirty five hundred a
20:09
year me you’re working forty hours a
20:11
week in order to get five hundred
20:12
dollars a year that’s not very much so I
20:15
think people will quit on mass up till
20:17
at least four thousand maybe five
20:18
thousand a year something like that as
20:20
they quit this means they have enormous
20:22
number of people flooding onto the dole
20:23
somebody’s got to pay for this and press
20:25
the person place for the taxpayer this
20:28
means taxes hasn’t have to be increased
20:29
very sharply on the guys was still
20:31
working means the guys getting above
20:32
five thousand a year and as the taxes
20:35
are increased on them their after-tax
20:37
income goes down maybe to four thousand
20:39
three facets they start quitting so what
20:42
yeah and they start quitting this this
20:45
is you know this floods the roll some
20:47
more than they have increasing taxes on
20:48
those continuing to work
20:49
maybe those about six thousand they
20:51
start quitting so I’m saying is I
20:53
envision will
20:54
become a vicious spiral upward or
20:56
downward elaborate and we wind up with
20:57
nobody everybody on the dole Oh nobody
20:59
working it even the Keynesian can’t
21:02
really cope with that kind of assistance
21:05
I just foresee the total of a stir this
21:08
thing coming to an effect also just as
21:13
another extra sort of tidbit on this is
21:16
it the Friedman though along an edition
21:18
of the present one but the FEMEN dollars
21:19
automatic increases the subsidy per kid
21:24
per for a welfare kid and was a family
21:26
of eight people six kids of something
21:29
kids whatever gets a lot more
21:30
unfortunately than person with two kids
21:32
if you’re paying people per kid and
21:34
these are subsidizes the kid population
21:36
in other words especially subsidizes a
21:38
kid population among the poor the right
21:39
people whom you who should have less
21:41
kids if not more and I don’t buy the
21:44
whole thing about the whole current
21:45
hysteria about the population bomb and
21:47
the population explosion everybody
21:48
should we should all you know commit
21:49
suicide in order to stop air pollution
21:51
and what sort of I don’t go along with
21:53
that but surely we shouldn’t be
21:55
deliberately subsidizing more kids among
21:57
poor people tease me a very peculiar
21:59
kind of system but here again the
22:01
Friedman’s negative income tax would do
22:02
this as an automatic right don’t forget
22:07
in other words he couldn’t talk to the
22:09
person saying maybe you should have a
22:09
few less kids or something like that to
22:11
be considered you know and it would be
22:13
in fact an intrusion on their privacy so
22:19
therefore I’m saying is it’s not true
22:21
that the Friedman plan as many
22:22
conservatives say would be would be
22:23
better at least in the current system
22:25
although not ideal I’m saying is be a
22:27
lot much much worse than the current
22:28
system it’s nicely because it would be
22:30
efficient in quotes an automatic and a
22:32
guaranteed sort of thing and this
22:35
incidentally is an example it seems to
22:36
me Friedman’s general general pong Shaw
22:39
from making the existing system more
22:40
efficient and by doing it making it much
22:42
worse since I think there’s one example
22:43
of this also of course another point
22:49
does it in practice and Friedman wants a
22:51
negative income tax replace all current
22:53
welfare system you abolish the entire
22:55
patchwork of welfare programs and
22:57
substitute the negative income tax and
22:59
practice what’s going to happens we see
23:01
is already happening the Nixon program
23:02
is with the guaranteed annual income
23:04
be added on top of the current warfare
23:06
stuff well Pete what we place anything
23:08
nobody’s gonna get litter get rid of
23:10
free lunches for four blind mothers and
23:12
the sort of thing nobody all that’s
23:14
gonna stay on top of that we may get the
23:16
we’re gonna get the like at the
23:18
guaranteed annual income for example the
23:21
when the Social Security proposal first
23:23
came in the big talking point one of the
23:26
big talking points in Social Security
23:27
proposal in the thirties was well well
23:29
here we have a patchwork of existing
23:32
hodgepodge of inefficient state old-age
23:34
relief programs different states paying
23:36
different amounts and so very peculiar
23:38
and bureaucratic why don’t we have a
23:40
great efficient Social Security system
23:41
the federal level they make each person
23:43
pay for his old age relief and that’s it
23:45
and we can abolish old-age relief thing
23:48
will really be less costly of the
23:49
taxpayer than before that was the that
23:51
was the big economic talking point but
23:53
for us what happened in practice was of
23:55
the not only the Social Security costs
23:57
continue to rise astronomically but
23:59
old-age relief itself was much higher
24:00
now it wasn’t in 1930s there was nobody
24:03
abolished state wage relief we simply
24:05
added the Social Security on top of the
24:07
old programs this is obviously what’s
24:10
going to happen with a negative income
24:11
tax also of course I think that it’s
24:16
pretty clear the so-called requirement
24:18
of the Nixon program this is just
24:20
there’s nothing no nothing deal with
24:21
freedom at this point but simply the
24:22
treatment in action is what the night
24:24
Nixon program really is the conservative
24:28
requirement and quotes that all able
24:29
able body who is sipping so that thing
24:31
have to go to work and have to get a job
24:32
it’s obviously a phony nobody’s going to
24:34
enforce it it’s only just as enforceable
24:36
as the current I mean nowadays in order
24:38
to get unemployment insurance relief
24:40
unemployment benefits he’s supposed to
24:42
have to work at whatever the employment
24:45
service sends you to of course it’s
24:46
obviously phony I don’t know any case of
24:48
anybody really the forced to work on
24:50
this basis because the requirement of
24:53
course is you have to work at a suitable
24:54
job or job that you consider suitable
24:56
work yeah you don’t consider any job
24:58
suitable that’s that I think it’s fairly
25:01
simple so I know this whole thing is
25:03
obviously just a soft the Conservatives
25:05
that the whole work requirement that to
25:07
sugarcoat the gara the annual income
25:09
program and also is another point about
25:13
the handicapped people
25:14
lawfare and that is that this reduces
25:17
the the the innocence some Chicago
25:19
people have done some good work in I
25:21
must say the idea of the of welfare
25:25
automatic welfare dole reduces the
25:28
marginal incentive for handicapped
25:29
personal investment is only vocational
25:30
rehabilitation because it means that
25:32
they then that economic return he gets
25:34
from being rehabilitated is much less he
25:36
might even disappear altogether if you
25:38
you know put him on a guaranteed income
25:41
as a result of that
25:43
– tell James has nothing pretty good
25:45
work on that the quantitative importance
25:47
of this policy as a result of that the
25:50
welfare program an and negative income
25:52
tax program tends to keep people
25:53
handicapped know where the tends to the
25:55
subsidizes of them to being to continue
25:57
to be handicapped instead of being
25:58
rehabilitated and as a matter of fact in
26:02
general the whole problem of welfare
26:03
dependency will be aggravated by the
26:05
Friedman plan because once again I’ll
26:07
consider this now an automatic right
26:08
instead of simply you know something to
26:10
which they might get him might not get
26:13
the proper solution seems to me to the
26:16
whole welfare crushed question is what
26:17
the libertarian solution which is
26:19
voluntary welfare rather than
26:21
governmental welfare altogether the key
26:24
here is to promote the idea which of
26:26
course almost inevitably has to
26:28
accompany voluntary charity because his
26:30
voluntary charity has a limited budget
26:31
they have to start pushing the idea of
26:34
encouraging self-help in other words
26:36
among the recipients in other words
26:37
helping people the idea of help them
26:38
becomes helping people to help
26:39
themselves to get them on their feet so
26:41
they can become productive and awfully
26:42
off the charity roll this principle was
26:45
the principle of a famous charity
26:47
organization Society in 19th century
26:48
England which was extremely effective
26:50
I was the famous lazy a fair principal
26:53
at the time and again the the are the
26:58
points I make Arendt may raise about the
27:00
Albania is in the Chinese or going to
27:01
come in here because the point is that
27:03
if people begin to adopt the values of
27:05
self-help and independence they will get
27:07
off the welfare rolls also this is a
27:09
tremendous reinforcement of this and we
27:11
reinforce these particular values by
27:13
abandoning government programs and
27:14
encouraging voluntary programs for
27:17
example the Mormon Church I understand
27:18
and very successful no Mormons go on
27:21
welfare either the Mormon Church has a
27:22
very successful voluntary welfare
27:23
program which which gives people give
27:25
them
27:26
for their members which gives members
27:27
help in order to get them on their feet
27:29
and apparently they very very successful
27:30
doing this okay I just want to also want
27:36
to say in passing about the negative
27:38
income tax the whole idea of it the
27:40
reason why Friedman Falls for it in
27:43
essence is because it stems from the old
27:45
Chicago position of consider of first of
27:47
all being in favor of compulsory
27:49
egalitarianism or equalization of
27:51
incomes you know this is again the
27:53
Simon’s positions more or less in favor
27:55
smashing all you know taxing everybody
27:57
above a certain level and paying
27:58
everybody below that level a Friedman
28:00
doesn’t go that far but the point is
28:02
that the the this still is hanging over
28:04
a remnant of that tradition and saying
28:06
that in separating the micro and the
28:07
macro in other words the idea is you
28:08
have the micro out here this is offered
28:10
Marshall a 19th century England and so
28:12
forth position the general
28:14
anglo-american tradition he got the
28:16
micro over here where individual prices
28:18
are determined by individual supply and
28:20
demand that’s one one sphere then you
28:22
have the macro sphere over here where
28:23
total prices price level is determined
28:26
by the money supply so you have and
28:28
these two things are never really meet
28:29
you have a macro out there you have a
28:31
micro out there and that’s it there’s no
28:32
there’s no integration and so that
28:35
really the real the real hidden
28:36
assumption here the Friedman position is
28:38
that you can tax people really as much
28:40
as you want it doesn’t interfere their
28:41
incentives because their acceptance is
28:43
determined by marginal productivity and
28:44
it’s a different sphere out there and
28:46
I’m gonna get back to this whole
28:48
separation thing later when I get to
28:49
money okay that’s the negative income
28:52
tax now we come to a a crucial area I
28:58
think where I differ with Friedman the
29:00
whole area of money and business cycles
29:01
which is it’s an at leas Friedman’s
29:03
major topic of interest that’s the area
29:05
where he’s worst on it’s also his major
29:07
topic of interest this isn’t at least
29:09
he’s the vehicle
29:09
sort of a it happens often in the
29:12
history of social thought and economic
29:14
thought and everything else the area
29:15
where the particular person happens to
29:16
be worst on he’s certainly sort of
29:17
pushes for his whole life and this is a
29:20
unfortunate development any rate here
29:24
again FEMA is essentially almost
29:25
completely a reversion Irving Fisher who
29:27
wrote in Cinelli from around 1890s and
29:30
1920s
29:32
Friedman’s whole monetary approach Amy
29:35
Fisher to me Fisher’s whole monetary
29:36
approach and his hold
29:37
cycle of attrition very very closely
29:39
linked was basically ganas marshalling
29:42
and anglo-american dichotomy between the
29:44
micro and the macro micro is out here
29:45
the mic was out there he have individual
29:47
prices or to determine my supply in the
29:49
man you let those let those that term be
29:51
determined by the free market there’s a
29:52
heroic concession of a big market you
29:54
let that that individual prices be
29:56
determined by the free market and then
29:58
over there is the macro level macro
30:00
level he have this price level a
30:02
microsphere you have the price level
30:04
which is determined by the money supply
30:05
and velocity and there this is a
30:09
different situation he have this a
30:10
situation right for government
30:11
intervention going to the Fisher
30:12
Friedman position so the idea is you
30:15
keep you have a free market in this in a
30:17
micro level and you have you know the
30:19
government up towards hilltop to its
30:20
neck in a macro level and you think that
30:23
the two of them will never meet now this
30:26
this whole approach this separation it’s
30:28
artificial separation of the micro on
30:29
the macro is of course an exquisite
30:32
contrast the professor Mises Mises his
30:34
great achievement and the theory of
30:35
money and credit which he began in the
30:37
theory nineteen credit which is an
30:39
achievement which is still not been
30:40
incorporated though into anglo-america
30:41
economics and almost any sense of
30:44
integrating the monetary and the real
30:46
spheres other words the monetary sphere
30:48
on the micro sphere I think integrating
30:50
them into one system so for example
30:53
Fisher wrote a famous article in the
30:54
1920s which is recently favorably cited
30:57
by Friedman well the business cycle has
30:59
advanced of the dollar it’s a very
31:00
interesting article I recommend you’re
31:02
reading it because I’ll give you a clue
31:04
to the whole Friedman high position and
31:07
which set the model for the whole
31:08
Chicago business cycle analysis hmm
31:11
and and you know in harbors book for
31:14
example he says Italy the founder of the
31:15
purely the the purely monetary theory of
31:17
the business cycle route Portrush
31:20
economists which is true but everything
31:22
Fisher is just as influential probably
31:23
more so in the United States and this
31:27
theory the business cycle then becomes
31:29
advanced
31:29
almost literally it becomes a kind of a
31:31
random uncoordinated uncle an uncaused
31:34
kind of fluctuation of the price level
31:38
and so the key to the whole thing is the
31:40
price level is somehow moving around
31:41
this is a defect of the free market
31:43
because the free market allows the price
31:45
level to keep changing in this kind of
31:46
peculiar fancy type manner
31:48
and the QR then for the business cycles
31:50
for the government to step in to take
31:52
measures to stabilize the price level in
31:55
other words the system
31:55
iron iron out the fluctuation the price
31:57
level to keep the price level of
31:59
constant and their life of course curing
32:01
the business cycle because the business
32:02
cycle is supposed to be a pure creature
32:04
of these changes in the price level and
32:11
this really remains today despite
32:12
modifications which I’ll mention later
32:14
this remains Friedman’s position as well
32:16
or FEMA is looking for some gimmick some
32:19
method of stabilizing the price level
32:22
for this idea of stabilizing the price
32:24
level which are keeping us price level
32:26
constant is again linked to Fisher’s the
32:28
cue your view of money if you have the
32:30
dollar and the franc of a pound of the
32:31
whole monetary is whole monetary
32:32
philosophy according to Fisher the true
32:35
role of money’s the measure of values
32:37
the ideas the money is supposed to be a
32:39
measuring stick some sort and the price
32:42
level is supposed to be the measure of
32:43
the thing being measured so therefore
32:45
the price level has to be constant
32:46
according to Fisher in order to fulfill
32:48
monies true function now we have week we
32:51
know right now I get into the idea why
32:52
you can’t measure a value isn’t all the
32:54
rest of it I just want to point that out
32:55
is it they’re very different from the
32:56
Austrian and 19th century position now
33:00
this goal is ideas somehow this moral
33:02
ideal of a stable price level is in
33:05
total contrast of the 19th century
33:07
approach and the Austrian approach of
33:09
saying well the of Hayling essentially
33:12
awarding and results of the unhampered
33:13
free market which that usually almost
33:16
almost a variably least will falling
33:17
price level because usually what happens
33:19
on the free market is a productivity
33:21
increases the supply of goods increases
33:22
and the price level falls just like just
33:25
like TV sets of fall and price from
33:26
$2,000 to $60 or only years this usually
33:30
happens for all goods or most goods and
33:32
services so so Fisher is really standing
33:36
there in opposition to the to the to the
33:38
system of unhampered free market in the
33:41
macro sense know the idea of permitting
33:43
a flowing price off no no it’s a
33:44
terrible thing it’s immoral it doesn’t
33:46
measure you have to have a stable price
33:47
level
33:48
okay now this it was was Irving Fisher
33:52
and Irving Fisher was extremely
33:53
influential by the way and politically
33:55
and economically it was his theories and
33:57
his influence which really provided the
33:58
main ideological support for the record
34:01
the grizzly rock
34:02
Percy Graves mentioned last meeting
34:04
about the inflation and the Federal
34:07
service system during 1920s Benjamin
34:09
strong who was a the head of the fellow
34:11
treszura back in New York and the main
34:13
leader of this Federal service system in
34:15
the 20s was guided by Fisher and for
34:17
tree is wholly economic theory he’s a
34:19
member of fishers nefarious stable money
34:22
Association which was pushing the idea
34:23
of the stable price level and and so the
34:28
idea was they looked at the price levels
34:29
and the price level was represented by
34:30
wholesale prices the wholesale prices
34:32
were either constant during the twenties
34:33
or they were falling a little bit
34:35
because of the increased productivity of
34:36
the economy and so they said there
34:39
wasn’t any inflation why are all these
34:40
people worrying about inflation there’s
34:41
no such thing because if you’re looking
34:42
at the price level and falling that’s it
34:44
as a matter of fact they were advocating
34:45
more inflation and they wanted he said
34:47
it’s a terrible thing price a little
34:48
sagging a little bit therefore we have
34:50
to put more money into the system to
34:52
raise it this was the this was the
34:54
Fisher right what’s a toxicity position
34:56
what’s autopsy economics when I put it
34:57
that way your establishment economics
34:58
school during the 1920s so when people
35:02
are like professor Mises and a couple of
35:03
other people warned about the dangers
35:06
ahead of a recession and economic crisis
35:09
due to the inflation of bank credit they
35:11
said that has no inflation we’re looking
35:12
at the price level in phytolith flowing
35:13
that’s it
35:16
even in 1930 everything Fisher refused
35:18
to recognize than any any depression
35:20
really existed he said no i was a little
35:21
temporary pepper a jolt in the stock
35:23
market things will bounce up again any
35:24
minute and now in his his well-known
35:30
history of his long known book the
35:32
monetary history United States which
35:33
Friedman wrote a few years ago warts
35:36
imposes his whole Fisher een theories
35:39
hopefully in views upon the American
35:40
past if you look at the Friedman’s
35:43
position on the 20s he’s he said he
35:45
thinks strong Benjamin strong as well
35:46
the greatest people are who live a great
35:48
great you know big price stabilizer
35:50
tremendous and things began to go wrong
35:52
only after strong died minutes policies
35:55
were none were put into effect and so
35:57
Friedman at tribbey is the 1929
35:58
depression not the excess inflation
36:00
which brings about recession etcetera
36:02
quite the contrary he pretties it the
36:04
insufficient inflation attributed to the
36:06
Federal service not inflating enough in
36:08
the late in 1928-29
36:09
and not a fighting enough surely after
36:11
1930 after 1929
36:14
in other words during the recession they
36:16
should have invaded much more I only
36:17
played a little bit and they sure
36:19
inflate a tremendous amount and it would
36:21
have solved the whole problem so so the
36:25
while it is true that we have to be
36:27
monetary malinvestment people I have to
36:30
Hale the fact that Friedman has brought
36:31
money into the discussion once it lasts
36:33
after 30 years of being ignored by the
36:35
Keynesian to talk only in terms of
36:37
expenditure government expenditure and
36:40
so forth
36:41
after hailing this and after saying yeah
36:43
it’s a great thing that money is now
36:44
backing in style so they come back in
36:46
fashion we don’t have to record the fact
36:48
that Freeman has the exact opposite of
36:49
the correct theory on money is it’s it’s
36:51
true he talks about money a lot this
36:53
theory is the reverse of the correct one
36:55
because as I say he holds a simulation
36:58
of the price level is the goal of macro
37:00
policy and therefore strong was right
37:02
and as successes were wrong for not
37:04
inflating enough during the 1930s after
37:07
the Depression hit the Fisher view in
37:10
the Chicago position the night and
37:12
Simons and all these people in mercy
37:13
Chicago took the position of the price
37:15
the way to cure love the depression was
37:18
to reefs like quote Leafly unquote the
37:20
price level up to back up the 1920s
37:22
levels in other words somehow keeping
37:24
the price level custom is lower than
37:25
enough he had to raise the price I will
37:27
back to the 1920s and doing it in two
37:30
ways one by the Pharaohs our system
37:32
expanding the money supply through the
37:33
usual methods and to buy government
37:35
deficits and Public Works programs
37:37
expanded Public Works program so in
37:39
other words during the early 1930s if
37:41
you read the literature in the early
37:42
1930s Fischer and the Chicago people
37:44
might party Simons and so forth were
37:47
considered pretty leftish they’re
37:49
considered sort of socialistic there
37:50
they were in favor of big government
37:52
deficits inflationary program
37:55
Public Works and so forth and indeed
37:57
they were short during their early 30s
38:01
Fischer and the Chicago School were pre
38:03
Keynesian Keynesian having the entire
38:05
Keynesian position with a became xian’s
38:07
theory behind it they had another theory
38:09
behind but they had a good political
38:10
program was virtually the same so what
38:13
happened was is some Journal article
38:15
recently wrote recently said the reason
38:17
why the chicago school was immune to the
38:19
Keynesian revolution when it finally hit
38:21
the chicago people work and ian’s anyway
38:23
they weren’t that wasn’t a big thing
38:25
fighting the money supply expanding
38:27
deficits and so forth so they didn’t buy
38:29
the whole Keynesian theoretical
38:30
apparatus as the other people did
38:32
because they already were Keynesian
38:33
politically they favor the compensatory
38:36
monetary and fiscal policy and so forth
38:38
and so on although they always stress
38:40
money is more important than fiscal but
38:42
they have both really is both arms of it
38:47
so the we know of course about
38:49
Friedman’s famous position of coin for a
38:53
continuing study expansion of the money
38:55
supply by three to four percent a year
38:57
he changes the percentages every once in
38:58
a while it’s a little vague about what
39:00
percentage each mean he really wants
39:02
somewhere between three or four percent
39:04
per year to be expanded by the Federal
39:05
Reserve System we know that is his
39:07
position but but we don’t realize many
39:09
of us is this this is simply a
39:10
continuation of this older Fisher
39:12
Chicago policy with a modification
39:15
modification whether you realize the
39:16
older policy didn’t work very well in
39:18
practice in other words he said Friedman
39:21
now says well compensatory fiscal policy
39:23
doesn’t work too well and compensatory
39:24
monetary policy doesn’t work too well
39:26
because it suffers from these inevitable
39:28
timelines you know you look at the
39:30
statistics you see is a recession in
39:31
January let’s say so first of all it
39:34
takes about 3-4 months flow statistics
39:35
would come in you don’t know what’s
39:36
going on until four months later then it
39:39
takes about six months on the side I
39:40
want to do an a see that’s all I have to
39:43
do it takes about six seven months
39:44
before the effect takes place on the
39:46
economic system so it’s about a year a
39:47
year and a half between of time you
39:49
start doing right the Tiny’s time
39:51
between the time you see a crisis
39:52
developed and between and the time when
39:54
the actual policy to counteract the
39:56
crisis really takes effect by that time
39:58
usually in a different phase of the
39:59
business cycle so you’re trying to pump
40:01
in money the contractor recession you
40:03
wind up pumping in money to aggravate a
40:04
boom and vice versa
40:07
quite well in the short run we can’t
40:09
have a fine tuning of the system but we
40:11
what he wants to do that has to
40:12
stabilize the price level in the long
40:14
run in other words over the long period
40:15
the supply of goods and services goes up
40:18
something like two to three percent per
40:19
year therefore we pumping the money
40:21
supply
40:21
pumping an increase in money supply by
40:23
two three percent per year and we’ll get
40:25
in the long run of stable price levels
40:26
it’s great Isis glorious ideal they will
40:29
price off will be fulfilling long-run so
40:32
therefore Friedman is really plainly and
40:35
simply to put it very plainly simply an
40:37
inflation that’s a little more
40:38
inflation of McKenzie certainly concede
40:41
him that now in the current period
40:43
period the Nixon administration people
40:45
has played a very pernicious role
40:46
because what happened was it well I
40:52
should I should say a little bit about
40:53
the Austrian theory business side well
40:55
I’ll get back to that what happened was
40:58
it finally by June after the Nixon
41:00
administration fumble around for quite a
41:02
while by June of 69 they finally stopped
41:04
increasing the money supply happy day
41:05
finally arrived the first time I got
41:08
those how many years money supply is no
41:11
longer being increased as soon as that
41:13
happened almost almost was a minute
41:15
three minute has disciples immediately
41:17
watching a star ball campaign attacking
41:18
this I no no it’s a terrible thing we’ll
41:20
get a recession you don’t increase uh my
41:21
supply immediately you know increase it
41:23
by three to four percent per year
41:25
don’t don’t keep it constant and so
41:27
forth so on and finally after a month of
41:28
this around February I’m afraid Siemens
41:31
campaign war fruit and we’ve begun to
41:33
loosen up the money supply once more
41:34
even though prices are still going up at
41:36
about an annual rate of about five
41:38
percent so it’s hardly it’s hardly saw
41:40
many things and because of Friedman’s
41:42
happier role in the situation of
41:44
inflation once again so what what
41:50
Freeman doesn’t understand and the same
41:52
thing that Fischer didn’t understand
41:53
forty years ago this is so far the same
41:54
struggle but he does another stand at
41:57
the inside the present Mises so-called
41:59
Austrian business cycle theory provided
42:01
and the insight was that least I which
42:03
finally integrated the monetary sphere
42:05
in the real sphere and instead of
42:07
following this and very simply but he
42:11
doesn’t understand Italy as when you
42:12
expand credit this distorts the
42:14
structure of production in other words
42:15
it distorts relative prices distorts
42:17
production the least of over investment
42:19
in the higher orders of production of
42:21
the capital goods fear and under
42:23
investment of consumer goods therefore
42:26
and the Friedman people along with the
42:29
whole angle-angle American tradition
42:31
think that inflation doesn’t cause any
42:33
an email adjustment of that type it
42:34
simply raises prices period simply
42:36
raises the price level however since we
42:39
know a lot of austrians we know that
42:41
distorts the price level least the
42:44
wasteful malinvestments over invest on
42:46
the capital and goods sphere this means
42:48
that the corn as Mises and Hayek have
42:50
shown this means that the MAL invest
42:52
generated by the boom has to be
42:53
liquidated it must be liquidated and
42:55
once the boom and it’s wasteful
42:56
investments have been launched the
42:58
recession becomes the only not only
43:00
inevitable but a healthy performs a very
43:03
healthy role performing the function of
43:04
cleansing the economy of this wasteful
43:06
malinvestment and getting us back to
43:08
free market production so therefore
43:11
according the Austrian theory recession
43:13
is a healthy consequence of the evils
43:16
and evil malinvestment so to speak
43:18
generated by the inflationary boom and
43:20
so that what the government policy
43:22
should be is not to do anything
43:23
otherwise allow the recession first of
43:24
all stop the inflation if you’re
43:26
inflating here and if you’re in a
43:27
recession allow the recession to run its
43:29
course as quickly as possible because of
43:31
you
43:32
well the more quickly it runs its course
43:33
that sooner we get back to a healthy
43:35
economic situation so this means that
43:38
the Austrian prescription is the exact
43:40
opposite of both the Keynesian and the
43:41
Freedman prescription for recession not
43:43
the one plate more not to keep inflating
43:45
its peak 3 or 4 percent per year but to
43:47
stop inflating period keeps stopping it
43:50
now the problem is here again the
43:54
treatment just as Fischer did four years
43:56
ago really has no business cycle theory
43:58
have no no conception of why a boom
44:00
leads to a bust it’s also a random
44:03
fluctuation random dance of a dollar and
44:06
therefore no conception of the healthy
44:08
function of the recession’s
44:09
perform and so he simply says why was a
44:12
recession you put money in in essence as
44:16
if there’s a too much of inflation you
44:18
stop pumping money in very simplistic
44:19
view of a business cycle uh and so
44:24
incidentally I should also say here that
44:25
the first amazes theory is the only
44:29
theory I think has ever been finer has
44:31
ever been coined
44:32
which explains this phenomenon which
44:34
we’ve got in our last couple of years
44:35
which has really hit us during this
44:37
recession the phenomenon of prices going
44:40
up consumer goods prices going up at the
44:42
same time we have recession and
44:43
unemployment this is the famous scissors
44:46
effect and this phenomenon of course
44:50
puts the establishment economist in a
44:51
real bind because the only establishment
44:53
knows whether its monetary establishment
44:55
of fiscal establishment only
44:56
the recession you pump money in and
44:58
spend more if there’s an inflation you
45:00
stop pumping money and take some money
45:02
out what do you do if both are happening
45:04
at the same time what’d he do price
45:05
consumer goods prices going up the same
45:07
time as business failures and you know
45:09
unemployment all the rest of it and one
45:11
time that during 1958 recession I had
45:13
the occasion to be a attend a lecture
45:15
professor burns or those days was a head
45:17
of a Council of Economic Advisers and I
45:20
asked him this question wasn’t that at
45:21
that time that this phenomena has appear
45:23
already but so I asked him this question
45:26
I said what would you do what would you
45:27
recommend doing in a situation he said
45:28
Wow don’t worry about it because uh
45:30
we’re getting out of a session very
45:31
quickly in a couple of months I’ll be
45:32
over okay I can see that what happens is
45:35
yeah so future time we don’t get out of
45:37
a great quickly I don’t want and what he
45:40
said that I thought you know I stayed
45:42
with me ever since he says in that case
45:43
we all have to resign I’m fully
45:50
appointed and the rest of the people of
45:51
they’re up there in Washington to resign
45:53
the Phyllis role resign posthaste
45:59
actually of course consumer goods prices
46:02
always did arrive during recession you
46:03
know the only thing is none of us knew
46:05
about it no one was really cared because
46:08
all prices prices in general were
46:10
falling because there was a monetary
46:11
deflation every other every pre-war
46:13
recession P World War two recession the
46:16
money supply would fall and prices with
46:17
for consumer goods prices would fall as
46:19
much as the other prices this would form
46:21
the same function the same role of the
46:23
tumor goes prices other words would rise
46:24
relative to other prices but nobody
46:26
worried about it obviously nowadays of
46:28
course with it with our new modern
46:30
developed scientific system they don’t
46:32
have any deflation anymore is it an
46:34
impossible government has arranged the
46:36
banking system in such a way that the
46:37
money supply can never ever fall and so
46:40
we don’t have prices flowing anymore and
46:42
so we have a phenomenon in recession
46:43
consumer goods prices starkly going up
46:45
and as course upsets everybody as well
46:48
it might now the reason for the reason
46:50
why consumer those prices go up during
46:53
or during recession again has been
46:54
explained by the Austrian for some Mises
46:56
theory which is that during a recession
46:58
resources have to shift from capital
47:00
goods to consumer goods and in doing
47:02
that reflecting this higher consumption
47:04
investment ratio then that had been
47:06
actually the economy
47:08
working on and in doing that as
47:10
resources shift from capitalist consumer
47:12
goods consumer those prices go up and
47:13
chemicals prices go down reflecting this
47:16
different shift of the man’s supply so
47:19
this is I say has always been taking
47:20
place it’s only now that’s been starkly
47:22
revealed how we even saved from the
47:24
affliction
47:24
let’s talk we revealed we get the worst
47:26
of both worlds now in our current so I
47:29
typically organized recession because
47:30
they have prices going up an
47:32
unemployment of course another thing is
47:36
that Friedman again really and again is
47:37
very mechanical kind of mathematical
47:39
statistical approach tends to ignore the
47:42
fact that the man for money is not
47:43
really stable it it varies it varies
47:46
really in accordance of expectations of
47:48
prices going up and people now come
47:50
finally come to inclusion you know we’re
47:51
now a custom Mises to talk about the
47:53
various stages of inflation the first
47:55
stage and people think that prices will
47:57
go back to normal pretty soon that’s
47:59
literally it’s the old naive days prices
48:02
going up lost purely wartime or
48:03
something will go back so we’ve
48:05
abandoned that not only public has now
48:07
begun to realize the prices will keep
48:09
going up forever you know every every
48:10
year we have a 5% increase or something
48:12
once they begin to realize that the
48:14
demand for money Falls drastically and
48:16
prices really begin to skyrocket and
48:18
we’re just the man at that point just
48:19
about reaching phase two whatever the of
48:22
this inflation airy process and this is
48:24
something if Friedman really doesn’t
48:25
take into account he doesn’t take
48:27
subjective expectations very much new
48:29
account it’s all kind of a mechanical
48:30
theory of functions you have statistics
48:32
and it’s all correlated in that and
48:34
that’s that okay now to get to the last
48:38
big part here of the again on my parry
48:41
policy triad versus commodity money
48:44
another criticism I have of a Friedman
48:47
position one of the reasons the Fischer
48:49
and the Chicago School in the 30s were
48:51
considered to be radical was because
48:53
they always were against the gold
48:54
standard always chafing of the
48:55
restraints of the gold standard
48:57
treatment of course frankly muscle
48:59
abolished go altogether as a monetary
49:01
commodity and replace it with totally
49:03
fight currencies dollar will be totally
49:06
fine at the franc on the mark and so on
49:09
and so on and all of these currencies is
49:10
supposed to fluctuate freely in relation
49:12
to each other
49:13
now this change would again see the
49:17
this would be more efficient in the
49:18
present system you won’t have to worry
49:19
about the balance of payments loyal
49:20
India a pound crisis every two years and
49:23
all the rest of it it’ll be more
49:25
efficient and senseless the the exchange
49:26
rates would then fluctuate in accordance
49:28
with the monetary issue each currency
49:32
however even though it’d be more
49:36
efficient with it would be a lot worse
49:37
one thing it would cut completely every
49:39
title goal every title commodity money
49:41
we have now as weak as the Thai is and
49:44
for one thing at least now we have this
49:47
check on the government that they can
49:48
apply too much because the balance of
49:49
payments will be pretty embarrassing
49:52
Gold will keep flowing out it’s kind of
49:53
embarrassing situation so at least this
49:55
is provided a fairly good check on the
49:57
government last few years inflation
49:59
because one thing that the Fremen of
50:05
course doesn’t realize is that the
50:07
government is there’s not sort of a
50:09
neutral agency you’re not sort of a
50:10
neutral instrument for social social
50:13
action as essentially a Chicago position
50:15
sometimes they’re efficient somehow
50:16
they’re inefficient you sort of take the
50:18
thing on an ad-hoc basis the government
50:20
is essentially inherently inflationary
50:22
instrument in other words my contention
50:25
is the inherent tendency of the state is
50:27
inflation if you if you give to the
50:29
state you’ll without any check at all at
50:31
the gold standard check the total power
50:33
I get from the government the total
50:34
power to inflate money at well they’re
50:36
gonna do it they’re gonna use it
50:37
reasons all the say in a minute so what
50:42
Freeman done advocates is to leave the
50:43
total absolute dictatorial control the
50:45
money supply in the hands of the central
50:46
government without any cheque without
50:47
any commodity money cheque without any
50:49
international money at all placing all
50:52
power on the hands of the government and
50:53
then trusting the government urging it
50:55
to bind itself by these 3% rules yeah
50:57
before percent per year rule they’re not
50:58
gonna do it means it’s just it’s just
51:00
utopian unrealistic and kooky
51:02
to expect that the federal government’s
51:04
gonna do this it’s gonna first get total
51:06
power and then hardly use it and we I
51:09
think we know about power about this
51:10
time with 20th century you know this is
51:12
these these sort of thing isn’t done the
51:17
great thing the main the major point is
51:19
the great thing about the gold standing
51:20
of the critics of the gold standard all
51:21
say that those of us are in favor of
51:23
those standard sort of you know gold
51:24
fetishist we like to run we’d like to
51:26
stay there in the closet
51:27
you know at night and longhand saw gold
51:29
coins ah go it’s not a nonsense
51:34
unfortunately never seen a gold coin I
51:36
like to the reason why was the main
51:41
reason why we favor the gold standard
51:42
because goal is a commodity money it’s
51:44
in order to get it it’s costly to get it
51:46
you have to dig it out of the ground I
51:47
cost a lot you have to produce it sell
51:50
it and so forth this is all course
51:52
leader to discover in mine it and it
51:55
creates a this market check automatic
51:57
market check on government Tennessee
51:58
toward inflation whereas Fayette paper
52:00
government paper doesn’t have this this
52:02
check of a high course and so forth it’s
52:05
very easy to it’s almost cost less to
52:07
print money also another point is that I
52:11
think very important one is the money is
52:12
really a key command post of the entire
52:13
economic system the money of course is
52:16
using every exchange every transaction
52:17
as money as one part of it so money is
52:20
the most important single commodity he
52:22
who controls the money supply I think
52:23
there’s a long way to controlling the
52:24
whole economic system regardless of
52:26
whether you say well yes we’re a favor
52:27
of the free market we’re against any
52:28
intervention except and money but if you
52:30
allow intervention of money it really
52:32
got the whole system in your hands
52:33
anyway now as I say freedom will not
52:36
only leave this power in the hands of
52:37
the state he welcomes that he favored
52:38
robbery he sort of would shove the power
52:40
in the hands of the state it’s unlimited
52:42
power to print money the state printing
52:45
of money and of course it was a bank
52:48
credit based on the whole banking of the
52:49
controlled banking system which is
52:51
really a government operation by this
52:52
time this whole system is really nothing
52:55
more nor less I think very bluntly
52:56
simply legalized counterfeiting now
52:58
reason why I think the inherent
53:00
Tennessee and the state is inflation is
53:01
simply this if you or I or any one of us
53:04
or any group of us were given an
53:06
absolute power you know somebody came to
53:08
us and handed us the printing presses
53:09
and said okay you guys from now on I
53:11
have a complete control of the printing
53:12
press you have a compulsory monopoly the
53:15
printing presses you can print whatever
53:17
you want whatever money you want you can
53:18
use it for any purpose as you want
53:20
anybody else the Princeton gets shot I
53:21
guess thirty years in jail
53:23
and yeah then it’s handed to her what
53:25
will we do or that we print it we use it
53:28
I think it’s anyhow it’s inevitable and
53:30
this is what happens with a government
53:31
the government is allocated to itself
53:32
and areata to itself the compulsory
53:34
monopoly the use of the printing press
53:36
and so they use it things simple a
53:38
little whack and
53:39
more and more and race it’s very easy if
53:42
you don’t have to work you make money
53:44
without working for it we’re not even
53:45
taxing for it taxes are kind of working
53:47
as a pain in the neck and taxing is kind
53:48
of on our us it’s the pain of other
53:49
people it’s not going they start
53:50
complaining print money is very simple
53:53
no nobody knows about that sort of done
53:54
on the dark of night nobody understands
53:56
money and I was very theory anyway
53:59
we understand taxes they don’t
54:00
understand my three theory and so it’s a
54:03
very easy you know very easy ready thing
54:06
to do and then after when the state
54:08
inflates the money supply and then six
54:10
months later a year later prices start
54:12
going up the state can always blame
54:14
other people everybody else gets blamed
54:15
for its this is person characteristic
54:17
speculators get blamed businessmen
54:19
unions consumers in general we all know
54:22
of course about these these monsters
54:24
commercials about don’t be piggy you
54:25
know patients for all of us are evil
54:28
because we’re piggy me what we like to
54:29
eat everybody is to blame everybody
54:33
under the Sun has been blamed out in the
54:35
past years except the government itself
54:37
of course doughnuts governors the
54:38
shining Knight an armored Manning the
54:41
ramparts always checking inflation and
54:43
so forth so on actually for the other
54:45
ones who are doing it the other ones
54:46
were inflating uh dole also provides a
54:51
yeah an international money another I
54:53
think important point provides a money
54:55
for a world market which we hope some
54:57
day at least will be and being a world
54:59
of vision of labor free trade and so
55:01
forth really the basis of it if you have
55:04
the Friedman ideas each government
55:07
prints its own money without any kind of
55:09
balint world balancing on him the world
55:11
money the logic of it see it doesn’t
55:14
look so absurd if you look at it just as
55:16
80 100 countries whatever that each one
55:18
puts its own money 100 country isn’t so
55:19
bad
55:20
what happens if you pursue the logic out
55:22
a little bit further what happens if
55:23
every province produce its own money
55:24
every state every county every borough
55:27
hurry
55:28
you know municipality every little
55:30
village president’s own money its own
55:32
currency that I mean you know it just
55:33
has a printing press it means that the
55:35
means of the village of plaintiff of the
55:37
town of city of plain theo prince plain
55:39
feel the pain feel Deana notes so
55:40
whatever right now Plainfield well they
55:43
print eight plain fields or a week or
55:45
something like that
55:47
only on each block from the printers on
55:49
one each house each person even every I
55:51
print ten Rothbart’s and yeah showing it
55:55
right working much and the point is if
56:00
you have this kind of situation this is
56:02
really chaos maybe people accuse the
56:04
market of being chaos this would really
56:05
be can you have you have millions of
56:07
exchange rates all over the place you
56:08
have to consider let’s see what would
56:09
ten more to be worth in terms of eighty
56:11
plain fields and sort of thing an
56:13
addition to kind of run a price system
56:15
etc so what you really have this kind of
56:18
system there’s a breaking up of money as
56:20
a general medium of exchange which is
56:21
what money is supposed to be supposed to
56:23
be a commodity which everybody uses in
56:25
exchange instead of that you have every
56:27
every every little open little locality
56:30
printing its own money and so forth you
56:32
have the breaking up of a price system a
56:34
cripple price system and really a
56:35
chaotic situation other things any
56:37
question of that and the Friedman plan
56:40
is logically similar though not quite as
56:42
absurd because it’s quantitatively on
56:43
his back and we dealing with a hundred
56:44
and twenty government’s or something
56:46
instead of two million that the
56:47
principle is still the same you’re still
56:48
breaking up the world market it’s still
56:50
ending the the days when you had one
56:53
commodity or two commodities gold or
56:55
silver being used by every country which
56:57
provided a world money for everybody
56:59
you’re busting up a international
57:01
division of labor and so forth uh and
57:06
again I think Friedman arrived at this
57:08
idea a fluctuating client money is
57:10
because he just like Fischer fifty years
57:12
ago 40 years ago doesn’t understand the
57:14
true nature of money they think that
57:16
money is simply a name the name is there
57:18
the money is the dollar on the franc or
57:19
whatever they don’t understand that
57:21
money is simply is really basically a
57:23
commodity or unit these currencies are
57:25
units of weight of gold or silver sand
57:27
how all these all these names originated
57:29
and where the names come from me people
57:31
enough people didn’t sit down on one day
57:33
in 1790 and say okay from now on the
57:35
core money dollars and we start printing
57:37
them dollars were units of weight have
57:39
gold or silver and so we’re francs and
57:41
so we’re pounds and so forth as a matter
57:43
of fact even now even even this the
57:44
knighted Age if you look at the statutes
57:47
of the United States and see what dollar
57:50
is defined as the dollar says the dollar
57:52
of the fine as being as being 135th of
57:55
proximately of a goal
57:57
where that is the definition in the
57:58
dollars even now or if for whom the true
58:02
gold standard still at least currencies
58:05
are the fine in terms of units of weight
58:07
of gold as matter of fact it was
58:09
characteristic it was Fisher’s beloved
58:12
colleague Jay shield Nicholson Singlish
58:14
economist to wrote a book where he said
58:16
the money is essentially like dodo bones
58:17
was he trying to pick the most useless
58:19
commodity useless thing you can think of
58:21
dodo bones and why money’s like Gautama
58:22
is really useless just a name and so
58:25
forth Friedman is carrying on a
58:26
tradition ah
58:29
now whether or not I admit that there’s
58:32
not an economic theory doesn’t decreed
58:34
of certain given commodity must be money
58:36
it could be gold could be silver it
58:37
could be platinum it could be something
58:39
else
58:39
the point is we were now in a specific
58:41
historical situation the goal was on
58:43
money before 1933 and then was seized
58:45
from us it was confiscated I keep
58:47
mentioning this nobody seems to be even
58:49
you know even heard about this point
58:50
it’s me a rather important one we were
58:54
using gold coins for 1933 the government
58:56
confiscated the coins on the guise of
58:58
this being necessary to save the banks
59:00
during this special crisis and the
59:02
depression emergency well the question
59:04
emergencies been over for at least
59:05
thirty years maybe thirty eight or
59:06
something think about what we’re talking
59:08
about here and nothing has been done not
59:10
one step has been made to return the
59:12
gold to US now that emergency is over
59:15
it’s of course characteristic of
59:17
governments to pass emergency
59:18
legislation that lingers on forever as
59:20
part of the American tradition but you
59:23
know where is our gold the banks have
59:25
been safe to the pressure emergency is
59:26
over asset around gold continues the
59:28
hands of the government it seems to me
59:29
the libertarian monetary policy must be
59:31
in addition to not inflating it separate
59:34
during inflation and recession must be
59:36
first and foremost to get the gold back
59:37
to us make the government disgorge the
59:40
goal which is stole from us and return
59:42
it to us as simple as all that in
59:45
exchange for the paper they unloaded
59:47
upon us and what the gold back
59:50
so the libertarian seems to me must cool
59:52
not like Friedman does for the cutting
59:54
lives totally from gold but the
59:56
restoration goal to us as the pre-market
59:58
money or the people’s money whatever you
60:00
want to call whatever slogan you wanna
60:01
bring to it and so in conclusion on some
60:05
of them on some of the most vital
60:06
economic issues of our day
60:08
Lewton femen stands in flagrant
60:10
opposition to economic freedom his
60:12
neighborhood effect makes a crucial
60:14
concession which in other hands can and
60:16
does justify almost any type of
60:18
government intervention in the market
60:19
economy his negative income tax proposal
60:22
has in the name of efficiency pave the
60:24
way for a disastrous measure guaranteed
60:26
annual income AB it’s fair to wreck our
60:28
entire economic system his monetary view
60:30
seemingly close to ours actually
60:32
provides a rationale for an open
60:34
invitation to inflation as well as an
60:36
apologia for total governmental control
60:38
of the money supply
60:39
finally Milton Friedman stands a four
60:41
dollar path walking us when we call
60:43
frustration with old money of the stolen
60:45
frogs and the depression emergency in
60:47
all these future cases Friedman stands
60:50
in direct opposition to the libertarian
60:51
solution and a libertarian policy no
60:53
Milton Friedman is not our leader
61:04
that was brilliant Murray and I think
61:07
you buried him only I’m afraid it won’t
61:08
be in the front pages of the papers and
61:12
it’s probably announcing his death in
61:14
advance
61:16
unfortunately we do have time for a few
61:20
questions
61:21
the evening is late and of course we
61:24
could discuss this for a whole semester
61:26
as you covered so many things so well
61:29
but we’ll entertain a few questions yes
61:56
the money
62:01
with that find acceptance and would be
62:04
gradually
62:07
one week left side where you were
62:10
necessarily
62:16
I think it might be true of a zillion
62:18
but certainly wouldn’t be true of local
62:19
governments that sort of thing anywheres
62:21
the New York City public she was
62:24
throwing money I think I carry off a
62:26
long time I think you of me true local
62:29
governments
62:29
I mean how Oakland government bonds
62:34
subway told yeah well an actual limit
62:40
would only be the fluctuating exchange
62:41
rates that would be the only limit there
62:43
was the sense that the New York City
62:45
inflated New York City money great
62:48
extent on this change rate was full I
62:50
should others cities and states and
62:52
something that would be that would be
62:54
check on it but it wasn’t a thorough
62:56
check my hope so
63:04
all the problems of free banking yeah
63:07
yes something very unrealistic that the
63:13
government accepts Friedman’s ideas and
63:16
inflates the money supply at a given
63:19
point every year that is I say three
63:21
percent and sticks to that and that in
63:25
other words it takes them literally and
63:26
doesn’t go beyond that something
63:27
unrealistic ice you what and everybody
63:31
knows this and anticipates that this
63:34
will happen from year to year because it
63:36
does happen that the anticipation proves
63:37
correct what is the consequence on the
63:42
economy of that kind of continued
63:45
situation assuming it went to be able it
63:48
was
63:49
or very singing everybody knew this yeah
63:51
well people get to know everybody knows
63:53
is the policy of the government always
63:55
to increase the money supply by a given
63:57
percentage every year announces that and
63:59
assume that the government sticks to
64:01
that I say it’s unrealistic but just for
64:04
the sake of argument what what kind of
64:06
what is the effective that the very
64:08
least you have this in fact you have a
64:09
you have the business cycle would be at
64:11
work again and once you have the credit
64:12
expansion over investment and the higher
64:16
orders of production capital is and
64:18
recession because of it now the you know
64:21
I what the government would then do
64:23
after recession hits mm-hmm your
64:25
interest rate would be discarded
64:26
permanently it certainly be that in
64:30
other words wouldn’t the roses either
64:32
because it would still be his business
64:34
cycle effect as there wasn’t 1920 really
64:37
when price just think of what happened
64:39
to 100-year bonds such as enjoy there’s
64:44
a question over here
65:04
I understand he does I didn’t read the
65:06
article but I think I think what he does
65:09
I’m just sort of quoting from reviews
65:11
that he he can season in theory might be
65:13
better to have a price level is all you
65:16
miss kind of curious that the saving a
65:18
resources that we tied up in cash
65:20
holdings I think I think that was the
65:23
argument it’s no no argument – all right
65:25
mean if he wants to care if he wants to
65:26
accept that policy okay but then he says
65:28
of course and politically it’s not
65:29
practical when he goes back to this
65:30
before percent that’s true I think you
65:32
seem to Reese receipt is there who knows
65:35
maybe in another 15 years and I accept
65:36
the whole idea for my supple yes
65:59
practicum the plastic coins are there’s
66:01
main like the I mean so yeah might even
66:05
see what happened silver certificates a
66:06
the last bit of hard money in the cinema
66:09
currency systems women paper tickets
66:29
what a rough part so they are they I
66:32
wouldn’t have a money to have metal its
66:34
paper tickets
66:36
yes sir mister hurt
66:40
bison were continued at a steady annual
66:43
rate you have something a matter of fact
66:45
that you have right now which is a
66:47
recession with rising price now and that
66:50
if you continue the inflation now at the
66:52
same rate as before the recession
66:54
wouldn’t go back to a bull nuisance that
66:57
simply has a long range continuing
67:00
recession so in this sense addictive
67:03
effect the inflationary policy we’ve had
67:06
up till now which requires which causes
67:09
the government to have to continue to
67:11
expand the inflation and then a greater
67:13
greater return on gold that’s right
67:16
another point in period three percent
67:18
per annum wouldn’t accomplish the
67:20
purpose of eliminating or flattening out
67:22
the business cycle the only way you can
67:24
do it considering the malinvestment
67:25
problem is to increase the rate of
67:27
inflation year by year now but
67:29
eventually it reaches a point where it’s
67:30
10 15 20 30 40 50 percent and where the
67:33
interest rate eventually disappears
67:35
where people just don’t even have a you
67:37
that’s a very good point show that I
67:39
shouldn’t mention that but Li you have
67:40
to keep accelerating the rate of
67:41
inflation in order to keep it at the
67:42
same level it’s like a treadmill you
67:44
he’s going faster faster
67:45
keep on the same pace what these fellas
67:50
don’t recognize is the one time that
67:53
they came nearest to achieving their
67:56
goal was the period 1927 1928 and hits
68:01
what brought on 29 so that if they
68:03
achieved what they’re seeking to achieve
68:04
they would blow the room let’s try this
68:08
gentlemen
68:17
and increasing you can you usually have
68:25
a 5 goal keeps going up a little bit you
68:28
know over the years but usually the
68:30
increase in the supply of other goods is
68:33
much greater than the increase in supply
68:34
of gold so that the yeah yeah Ifrah goal
68:40
this has been mine and so forth you know
68:42
you know find out many new sources we
68:59
don’t need the market takes care of all
69:00
that and was at the market fine mark ii
69:02
mean and market this the market invented
69:04
the market that came the gold and silver
69:05
as the best money’s because gold and
69:07
silver had all these various qualities
69:09
of the visible and there were a bowl and
69:11
they were they were more stable and
69:13
supply and all our goods in a higher
69:14
demand for a higher value per unit
69:16
weight and all the rest of it and so ya
69:18
go look we suddenly had how come this
69:20
suddenly discovered a way to increase in
69:22
supply and gold by a million times it
69:23
shipped us a mother the mother of metal
69:25
market conditions more you just way
69:27
you’d have a change on commodity right
69:29
oh yeah take another question here
69:40
we might have a defining waist up along
69:42
with
69:47
huge
69:49
I’m not sure if semen is in favor of
69:51
antitrust work the Union you might think
69:53
but I saw I doubt it Yeah right I mean
70:03
we have to just repeal the Wagner Act an
70:04
Oscar party act and that was suddenly a
70:07
question Thank You mr. Johansson order
70:20
to get back to those fan yeah I think it
70:23
seems to me the portable way of doing in
70:24
other words to get back to the gold
70:25
standard you either have to in this
70:27
situation you either have to deflate
70:29
strongly or go back and go gold at a
70:32
higher price and have a price no such
70:39
thing as a price you have me see you
70:45
have to set the definition of a dollar
70:48
or a rupture right whatever you unless
70:50
you used you started pricing in
70:52
quantities of gold this is where the
70:54
half ounce ago all right so the first
70:56
step has to be a sort of arbitrary you
70:58
can sort of pick your own definition
70:59
what follow what missus recommends and
71:02
that’s one way and get a market or you
71:06
could simply make it $100 an ounce or
71:07
something like that but that would will
71:09
have very long would last ten years you
71:10
see jack just where you were like you
71:11
went to a market system oh wow yeah that
71:14
would be an addition at least we got the
71:16
gold back all right mr. Hertz will make
71:22
this the last one
71:27
we the people in this room as we are now
71:30
in 1929 would a continued expanding
71:35
inflation of the part of the Federal
71:37
Reserve System have prevented the
71:40
depression and put us into a long range
71:43
rising inflation instead something like
71:46
Germany had a there have been things I’m
71:52
willing to fight the heavily then it’s
71:54
possible it’s very difficult in now I
71:55
think one thing is we were we were
71:57
hindered by the fact we were on the gold
71:58
standard and gold was flowing out pretty
72:01
rapidly then you have to do it and banks
72:04
were collapsing don’t forget in those
72:05
days banks were part of a market system
72:07
for the banks folded pretty often I
72:09
think there was before the days of the
72:11
bank deposit insurance which
72:12
incidentally Speedman loves the greatest
72:14
single innovation of banking system I
72:16
shouldn’t mention that there’s monstrous
72:18
system bank deposit insurance which
72:20
means gives the bank’s Corp launched the
72:21
government under rights every deposit up
72:23
to ten thousand fifteen thousand dollars
72:24
now so nobody thinks the backs are
72:26
unsafe and that’s it actually given the
72:28
you know blank cheque in those days
72:29
banks were collapsing pretty pretty
72:31
quickly it could have been plated more
72:32
but you would have had any control well
72:34
I mean those young if the people were
72:36
cooling in the bank composites people
72:38
would line up in the morning you know at
72:40
6:00 in the morning or something if I
72:41
get their money out before the banks
72:43
with the collapse and the specific
72:45
headed bank runs he would have had to go
72:47
off a go don’t do it was about that go
72:49
off the gold standard
72:49
impose Bank of housing insurance I was
72:52
completely renovate and state IVA
72:53
banking system before he didn’t have
72:56
this permanent way sure on the day
72:58
before Roosevelt took office I was in
73:00
the Bowery Savings Bank and people were
73:01
all lined up on all the windows right
73:03
after the street taking their money out
73:05
and their gold certificates and putting
73:08
it down in the safe-deposit vault where
73:09
they thought it was safe this is a good
73:11
old days yeah well I think we’re close
73:13
now Murray we’re all indebted to you I
73:15
wish we could have had more

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