The Monetary Writings of Carl Menger

0:00Thank you. After such an introduction, I myself wonder what I'm going to say. I'm very happy to be here, and I'm very happy that you are here. Because after all, there's nothing else on the program. Therefore, I assume that you're here to hear me. That's remarkable. I appreciate this. I'm very happy to see so many young economists are really impressed about the level of knowledge you have seen here today and yesterday. Now, which speaks more for the future of the Austrian School? As a matter of fact, if you compare the number of young economists with the old-timers, then you see that the number of younger economists is far greater than the older generation, Which is an indication of things to come, of the future of the Austrian School and the future of economic knowledge in the United States.

1:05You see the future right here, and I appreciate it. I think it's very proper that at a meeting, at a convention like this, that one should talk about the founder of the Austrian School, about Carl Menger. After all, it all began more than 100 years ago with Carl Menger, who in 1871 published a brilliant book, a very thin one, about the principles of economics. And in this thin book of some eight chapters, he laid the foundation of a new school of economics that emerged from the classical economics, laying the foundation for subjective, for the subjective value theory, and at the same time also presenting a theory of the origin of money.

2:02We became famous, not so much because it was a bestseller immediately, it did not, it was not a bestseller, But immediately knowledgeable people's colors saw its importance and began to use the ideas and the principles, and thus made him eminent, famous, in short order. But this was not just 12 years later, in 1883, he came out with a publication, it was called The Enquiries about the Method of Knowledge, Method of Economics and Political Science in particular, which in English was translated to the problems of economics and sociology, in which he attacked the German historical school, in which he raised the question of the method of knowledge, how do we know?

3:02which then launched the debate, the argument of the century, the mid-tirden-strike, the argument about method, waiting war, declaring war on the German historical school and the method of knowledge which it comprised. He became famous amongst the leading Austrian economists. I should also say that at that time, or shortly before, he had earned a full professorship at the University of Vienna, and at one time for some two years he had been the tutor of the Crown Prince of Austria, Rudolf, who later, unfortunately, committed suicide.

3:47Well, the world knows all this about the two tremendous contributions made by Menger to economic knowledge. At first, the principles of economics, and later, 12 years later, his presentation of a new, of a method of economics. The deductive theoretical approach to economic knowledge. But very little is known of his monetary writings, because a few years later, beginning in 1889, He came out with a number with some seven major essays dealing with monetary thought.

4:34Very little is known of this monetary thought by Carl Menger, although in his monetary writings he too laid the foundation for the monetary writings and the development of modern monetary thought to come. Especially a few years later in 1904 with Wiese, eminent Austrian economist, and then 1912 in the publication by Ludwig von Mises. But these monetary writings later were overshadowed by these other economists, but nevertheless they laid the foundation for monetary thought to come. As a matter of fact, I am fully convinced that in the coming years, perhaps in a decade, his writings will become all the more important. It's unfortunate that they're only available in German. They've never been translated. I think in the coming years they will become more important than ever because they are not just laying the foundation for some monetary thought and the is a foundation for monetary theory, but at the same time we're dealing with an important issue.

5:49That probably was the reason for his feverish writing, the preparation of those monetary essays, and this issue was the forthcoming currency reform. In 1892, Austria-Hungary conducted a currency reform. Carl Menger saw this opportunity and he became the prime mover of this reform, bringing forth, introducing the gold standard. That's very meaningful for us and may become very meaningful for us in the future. And he saw this opportunity beginning in 1889 and thus there was a rash of writings. Beginning in 1889, the currency reform was conducted in August of 1892.

6:38After that time, he was pushing for the currency reform, the adoption, the introduction of the gold standard. And thereafter, about a year later, in 1893, there was this last monetary riot, criticizing the blunders, the mistakes made in the currency reform. These are most valuable writings dealing with currency reform. That's why I'm saying that perhaps in the coming years the Menger writings on currency reform, introduction of the gold standard, may become important for us in the coming years. At that time, Austria was on the silver standard. Menger called it the limping silver standard.

7:33Austria was operating under an old act of 1859, which had established the silver standard. But as you undoubtedly know, in those years, beginning in the 1870s and even earlier, There was a massive mining of silver all over the world especially in the United States and later also in Mexico and as a result of this massive supply of silver coming to the markets, silver was declining relative to other prices and declining especially relative to gold and Austria being on the silver standard. If that had continued under the silver standard, then Austrian prices stated in silver would have risen significantly.

8:23There would have been a silver inflation with all the consequences of inflation. You see, you can have inflation even if you don't have paper money. In this case, there was the beginning of a silver inflation in the early 70s in Austria-Hungary. Thereafter, then in 1879, the Austrian government had decreed the suspension of silver minting, and had closed the mint. And then as a result of his closing the mint in 1879, there had been a very interesting situation. The silver continued to fall to a discount, and the paper money, the gilded, went to a premium.

9:09Why? Because in the meantime, with the given supply, a quantity of paper money, the money-based silver becoming cheaper and cheaper. If there had been a silver standard, then surely through the continuous minting of silver coins, prices, silver prices, what have they, because of the depreciation of the metal value. But because of the suspension of mincing in 1879, the Gilder, the silver Gilder paper money had risen to a premium. As a matter of fact, it had risen to a 20% premium. Now Carl Menger was greatly alarmed about the situation, about the separation of the metal from the currency, from the paper currency, the monetary substitutes.

10:05with the monetary substitutes selling at a 20% premium. This is difficult to imagine for us, surely, normally, it's the paper money that goes to a discount. But there's an example of paper money going to a premium. By the way, it happened again later during World War I, when the paper money in Sweden went to a premium over gold, by the way, Because the gold of Europe at that time was flowing into Sweden, and gold going to a discount, there too, later in World War I, then the Swedish government suspended the minting, the free minting, the redeemability of the currency, and therefore, there too, gold went to a discount, and the paper money of Sweden then went to a premium.

10:57Now this happened now in the 1880s in Austria. Now with silver going to a discount and the paper gilder going to a premium, to a 20% premium. And Carl Menger was greatly alarmed about this because he said at any time there may be a resumption of minting which then will lead to a 20% boost in prices, which then will lead all to the evil effects of inflation, that means the creditors will lose and the debtors will gain and there will be a massive transfer of wealth as a result of this new minting of silver and silver coins and the changing prices. He was greatly alarmed about this, therefore, because of the evils of the silver standard, he was pleading for a gold standard.

11:52Therefore he became the first advocate, the champion of the gold standard, and he published in a number of fast publications beginning in 1889, he wrote an essay on the purchasing power of the Austrian gold, that in 1892 wrote a lengthy essay about money, as I mentioned all these are only available in the German language, now and then he wrote a number of about the introduction of a new currency, or the transition to a gold standard, then another essay about our currency, and finally a year after the currency reform of August of 1892, he published another, the final essay on money, now talking about the gold premium and the present condition, the present state of our currency, after the currency reform.

12:54Well, I would like to, I presented the paper, but here in my presentation, I just would like to concentrate on one particular issue, the issue of the currency reform. As a matter of fact, in Austria in 1892, the Austrian government had convened a currency commission. and in May of 1892 there was a currency commission inquiring about the possibilities of a conversion or of a transition to the gold standard from that limping silver standard and Menger there was the prime witness at that hearing of the gold commission in Austria-Indiana in May of 1892 but in contrast to our hearings last year here you may remember here we had a gold commission now and at which time then the gold commission invited some 24-25 expert witnesses and these 24-25 witnesses here last year now then i think about C of 4 all invited by Congressman Ron Paul, in favor of gold and all others against gold, you must remember this here, but in Austria in 1892, the Commission consisted of a number of bankers, eminent bankers, and some, lots of civil servants.

14:27There were about half a dozen expert witnesses of whom Carl Menger was the most important one. And here you can see the currency commission at that time didn't get free hand to the experts. It presented the experts with five questions. Now they all had to address themselves to five questions. The first question presented to the expert, and Menger testified on these questions. The first one, why should there be a gold standard, was the first question. The question of the standards. The second question presented to the commission was the question, well, if it should be the gold standard, should there also be silver coins? Should silver coins be permissible? The third question was, well, and if that should be the gold standard, should there be The Treasury notes, non-legal tender, non-interest-bearing, Treasury notes be circulated with the rest of the currency.

15:36In other words, should the government be free to issue its Treasury note as monetary substitute? Then the fourth question presented to the committee was the one, the most difficult one, the most important one, The question of the exchange rate. What should the rate be? How should we handle the exchange from one currency, the old currency, the silver currency, to the new currency? What should be the exchange rate? And the last question presented to the experts by the currency commission was the question of the unit. What should be the unit, the new unit of our currency?

16:22As far as the first question was concerned about the gold standard, why should we have a gold standard? Carl Menger answered this, he said, well, it's the standard of civilization, the standard of the civilized nations. All industrial nations have it. Those who don't have it, those who have the silver standard are second-class nations. He called Austria a second-class nation. It's the standard of Civilization. Moreover, he said, all the others have it, and if we don't have it, then our dealings with gold standard countries are very difficult, because every transaction becomes a double business, becomes speculative. An Austrian who has to buy something in the world, you know, which on the gold standard, no, he has, it's not just a purchase of a commodity, of an item, but at the same time it becomes also a transaction, a speculative transaction of money.

17:26It's double business, very difficult. Therefore, our prices then tend to be higher, our interest rates tend to be higher as a result of this difficulty of trading with the rest of the world. And moreover, again he pointed at the sharpcomings of the silver standard, the possibility of sudden redemption, the sudden minting of more coins than which will lead to a 20% fall in the purchasing power of the currency, and once again all the other inflationary effects. Therefore, he concluded that we must have the gold standard. The gold standard is the standard of the world.

18:11However, he warned about one aspect of the gold standard, saying, well, if we suddenly, in Austria-Hungary, it's a power, it's an important nation. At that time, Austria-Hungary had a population of 45 million, very similar to the population of Great Britain in Germany. It was a power. If such a power should suddenly adopt the gold standard, This would constitute a huge demand for gold and raise its price, raise its purchasing power in the world markets, which will lead to falling prices all over the gold standard countries, depressing prices, wages everywhere. Therefore, he always warned, he said, this must not happen.

19:01When we convert to gold, we must not depress the world market. We must not depress other countries. Soon, this, our sudden demand, as a matter of fact, it calculates the demand too. We talked about 600,000 kilos of gold needed for Austria. And this sudden demand for gold would raise its value in the purchasing power in the bulk markets of the world. This being money, it would have results, it would have consequences all over the world. Therefore, it was a question of great concern for him to prevent the consequences, such consequences, on the rest of the world.

19:50But nevertheless, he pleaded, remember what I said earlier, he was a prime force for the introduction of the gold standard. As far as the second question was concerned, should there be silver coins under the gold standard? His answer was in the affirmative. As a matter of fact, he said, well, it doesn't make any difference. He said surely he was aware of two principles of money, one is the principle, the Gresham's law, that means if you have two types of money, gold coins and silver coins, according to Gresham's law, then the bad money will drive out the good money if there is a fixed exchange rate.

20:40Now, that's merely an application of the principle of our knowledge of the consequences of price-fixing. Gershins law applied to money, and therefore bad money will drive out good money. But according to Menger, this was not applicable, because there's another principle of the value of money, Two kinds of money, the principle of substitution, that actually as long as silver would be redeemable in gold, it would receive its value from gold. In other words, there's a principle of substitution, which we surely would agree with. Now that as long as it doesn't make any difference, you know, what the material of the monetary substitute may consist of, whether it's paper money or whether it's silver, as long as it is redeemable on demand, it will receive its value from the money proper, in this case from gold.

21:46Of course, it should be silver coins should be issued, should be circulating in limited qualities. Menger never addressed himself to the question of how large those quantities were supposed to be. He just talked about the reasonable quantity of silver, of silver coins receiving their value, through freedom and redemption, receiving their value from the money proper from the gold coins. Therefore his answer to the second question about silver coins was in the affirmative. And he gave the same answer also to the third question, addressed to him by the currency commission then, and he testifying before the currency commission. Should there be or could Could there be an issue of paper money by the Treasury, by the government Treasury?

22:40Non-interest bearing, freely redeemable Treasury notes? Mises answers, there is no objection to, because there is such an issue of paper money, not when freely redeemable, From a technical point of view, he said, and he emphasized this, from a technical point of view, there would be no objection to some issue of irredeemable treasury notes, fractioning as money. Because we would call this, you know, fiduciary expansion of notes, which would affect the value of money, surely. As a matter of fact, Carl Menger, he said, from a technical point of view, there can There can be no objection to such an issuer of notes and, in fact, he offered to calculate the quantity of treasury notes which the money market could handle, could absorb.

23:38He mentioned, for instance, that the budget of the Federal Government of Hungary and Austria combined was about one billion guilders. He calculated as well, he said, it would be not much of an objection, and the market could handle about 10% of this. That means an annual issue of about 100 million in guilders issued by the Treasury, as I do sharing money, from a technical point of view. He never entered in any other discussion. You know, when you listen to them, when you read this, you see him, he's speaking like a politician. He's trying to make this gold standard, which is urging on these politicians and the members of the gold commission.

24:26No, he's trying to make it palatable. He's trying to sell the gold standard. Therefore, he's trying to say that it can be done. You can use silver money, you can use issued treasury bills, it can be done. It didn't go into the details of the consequences. Murray raised the question of can it be done from a technical point of view, and his answer was yes. And finally the fourth question of course is the most difficult, the difficult one. The fourth question about the exchange rate between the new money and the old money in the moment of currency reform Now, is of course the meat of the reform, the ultimate question of the reform.

25:12What should be the exchange rate between the new currency and the old currency? That's going to be an important question for us someday, later in the 18, in the 1980s, perhaps 1990s. In fact, I sometimes wonder, this happened in 1892, I wonder whether we won't be here and discussing the same in 1992 about the currency reform, the ultimate question of the exchange rate. What should the exchange rate be? And then Menger answered this, which is very remarkable, I thought. He said we must have a just rate, invoking justice, a just rate of exchange, seeking a just rate.

26:03Then he defines this just rate. What is a just rate there? He defines a just rate as the rate in the money markets where people, the free people in the money market could buy for the old money a given quantity of new money. That's just taking the exchange rate from the money markets, which of course raises then a number of questions. Is that the purchasing power? After all, when it comes to money, the ultimate question of the value of money is the objective exchange rate or the purchasing power. Is that an indication of the purchasing power to go to the rates of the money market? That's the question.

26:52As a matter of fact, at this hearing, there was a cross-examination, a tough one, where the commissioners became even personal, and attacked him personally. And on this very point of the just rate of exchange, and he had a hard, Menger had a hard time, because they pointed out some questions and some contradictions. They ask, for instance, well, is that a just rate? How about if there's a difference between the money market rate, let's say, and the purchasing power when it comes for the people? The consumer rate, for instance, the purchasing power of the money for consumers, surely that, isn't that an important consideration?

27:44The commissioners asked him, and there he made concessions. He said, we are considering the future, the future, and there has to be a debt conversion of old debt into new debt at this exchange rate. But the old debt was depreciating based on silver. The new debt based on gold was probably appreciated. Therefore Menger offered to allow for this and correct the exchange rate, which then became very arbitrary, he was on thin ice there. As a matter of fact, when you look at this, and this is the very meat of any currency reform, the question of the exchange rate, the just rate, and I like this idea of a just rate.

28:32But then what is a just rate? There's not only the rate, the exchange rate of the money markets, but then there's the exchange rate, let's say, of the consumer market. What is the value of the purchasing power of the old money in the consumer market? In the free market price? If there's a difference between the money rates and the consumer rates, where is it? As a matter of fact, when you look at the consumer rate, the purchasing power in consumer prices is reflected in consumer prices. There are many parts of the economy where you don't have free prices. And I'm thinking of public utilities and other industries suffering from government intervention, from government regulation of rates and prices, which are not part of the free market rates.

29:23Therefore, which do you take? Do you allow for that part of the economy where there is no free market? How do you allow for this? And finally, you may have black market rates in the years to come. You may have underground economy rates and prices. Where do you take, from what market do you take your change rate? What is a just rate of reform? I finally came to the conclusion that it can't be done. There is no such just rate. I don't think it can be found anywhere. Therefore, if that's true, that there's none, it cannot be a just rate ever. No, then I think such a legislated currency reform can never be just. It cannot be done.

30:17Therefore, there can only be other reforms. After all, what are the ways of currency reform in the past? You know, we can think of three types of currency reform, lists in the past. There's one based on freedom leading to a parallel standard of different types of money. Parallel standard. Pure freedom leading to a parallel standard, three standards of different types of money. are being used freely, side by side, without any legal exchange rates. That's a parallel standard. There's one way. Now another way in the past, and how great nations in the past got to the gold standard, was mostly through the bimetallic standard. What's the bimetallic standard? If the United States began In 1792, with the bimetallic standard, as you know, that's the stipulation that both gold and silver constitute money.

31:20And government then fixed the rates of the two, it's a kind of a price-fixing. Of course the price of the bimetallic standard never works, because it's based on price-fixing. Now in 1792, the rate was fixed at 15 to 1, and very soon, as you know, it led to a de facto silver standard. The biometallic standard always fails through that fixing the rates, which then always leads to the disappearance of the undervalued currency, and it leads to the operation of Gershins' Law. Thus, until the 1830s, the United States had a silver standard, as you know. Later on, then, by legislation in 1834, this rate was changed, the value of the silver dollar was reduced, which then in time led to the gold standard, the de facto gold standard.

32:14Legally, the United States still had been on the bimetallic standard. I'm trying to say that the great nations, by the way, Great Britain too, got to the gold standard via the failure of the bimetallic standard, a hundred years earlier, surely, but it was the failure of the bimetallic standard, the fixing of rates between one and the other, and then leading to the de facto gold standard or the silver standard. There was one method or one approach to the gold standard, and finally there are three ways, you know, one is just the substitution, the legislation, which Hoppe embarked upon in 1792. I call it the catch-up method. Later on, the National Act of Germany too, in 1875, have just legislated a gold standard, conducting a currency reform.

33:14Now, and thus wanting to replace or legislating the replacement of silver, silver coins, that's the gold coin. Now, while looking at these possibilities of reform, I think, I've come to the conclusion that it's only in freedom, only through the parallel standard, can there be ever a just currency reform introducing a new currency.

33:53The question of just rate is the meat of a currency reform, therefore we have to address ourselves, And I'm trying to say here that if that ever should, if we ever should have to cope with this question in these halls in the years to come, we better study what Menger had to say. We may not base our conclusions on Menger, we may not come to the same conclusions, but I do believe that Menger laid the foundation for any inter-intelligent discussion of currency reform. And finally, let me come to the fifth question put to the expert witnesses, the question of unit.

34:42What should the unit of currency be? Well, as Menger said, well, that's a very simple question. It should not, the unit should not be too large, it should not be too small, it should be determined by the markets. The people will determine the size of the most convenient size of the unit of currency. Then, as a matter of fact, he said, well, our gilder is not bad, however, we probably should have half a gilder, slightly on the large size of our unit of currency. Let's have half a gilder, perhaps we can call it the cone. As a matter of fact, then, according to the current reform of August of 1892, then, the government introduced a half, cut the basic unit in half, and introduced a new unit, the Crown, which, by the way, became a very famous unit, it was called Coronet.

35:46I don't know if you're aware of this, you know that even today you can buy gold coins, coronas, you know they are little gold coins, re-strikes issued by Austria and Hungary about the size of a dime, the favorite gold coin today for the investor. As a matter of fact here at Gold City In college, my colleagues over the years, over the last 10 years, probably bought hundreds, if not thousands of these little gold coins called coronas. Used to buy them, the economics department buys them in the capsules, a hundred at a time.

36:33And that's a very excellent coin for poor college professors. When I listen to you talking about South African coins, Kugelwands, one ounce of gold, you're in a different class from us here. At my college, the professors buy one-tenth of an ounce of gold, and that's an Austrian Corona. And as a matter of fact, this Austrian Corona was recommended by Menger. I don't doubt that anyone at my college, except the economics department, is aware of the fact that this was a product, the creation of the mind of this genius Carl Menger. But today, that's our favorite investment at my college, the Austrian Corona.

37:24In the beginning of our income, a professor of economics may buy a hundred, then go to the coffee table, then sell. He can sell one tenth of an ounce, a corona. That's one tenth of an ounce. He used to sell them for ten dollars, twelve dollars, fifteen dollars. Of course today, with gold at three hundred eighty dollars an ounce, or four hundred dollars an ounce, the corona is selling about forty dollars an ounce. But at $40 an ounce, the professor of economics can make a sale of a gold coin, probably earning $0.50, you know, get buying in quantity, and putting the gold coins in a plastic cover, marketing at the coffee table, marketing the colonists, for $40, probably earning $0.50 on the sale of a gold coin.

38:14A point I am trying to make is that this was the creation of Carl Menger from way back, you know, his contribution to thought and policy in 1892. Well, a year later, the currency reform was conducted in August of 1892, and about a year later, Carl Menger presented his last monetary essay, reviewing the reform, stating its disappointment and the blunders committed during the reform, legislation of reform action. And what was the complaint? Said, well, at the very beginning, after August of 1892, no, at the very beginning, after the legislation, everything was excellent and gold was rushing in.

39:06More than half the gold coming into Austria after the coincidental reform of August of 1892. More than half the gold came from the United States, consisting of American eagles. I should add, and perhaps I should go back to the United States and look at conditions here. You know, in 1890 there had been the Silver Purchase Act, Sherman's Silver Purchase Act, forcing the US Treasury to mint lots of silver dollars or issue legal tender silver certificates. Months after months, there was heavy minting of silver and issue of paper on silver certificates. After July of 1890, the passage of the Sherman Silver Purchase Act, leading to the silver inflation, to the operation of Gresham's law, gold relieving the United States fast and appearing in Austria which in 92 had conducted the reform.

40:15More than half, let me repeat here, more than half of the gold arriving in Austria was consisted of American double eagles. While Austria tried to get to the gold standard, attract gold coins, attract gold, the United States was pushing it out through the Silver Purchase Act, the Sherman Silver Purchase Act. And somewhat, I think it's a kind of an irony nowadays, you know, thinking back, you know, it supports another economic principle, another statement pertaining to gold, that gold is never lost, it merely changes forms throughout the centuries and thousands of years, it merely changes form.

41:06In 1890s, the double eagles became coronas in Austria, and two generations later, the professors in Grove City College are buying Austrian coronas, coming back to the United States. I'm not implying that we are getting the eagles back, but perhaps some eagles returning to the United States of Eagles dug these gold, the ten dollar gold coins, I'm talking about the eagles. Plus, after 1890, perhaps some of those may have returned to gold city, or perhaps to Europe, gold holdings. But, the currency reform of 1892, according to Menger, was badly bungled.

41:58What happened soon after, a few months after the reform, the Austrian government, So being mindful of the consequences of its reform on the price of gold in the world markets, trying to be mindful and considerate of the world markets, it raised in need of gold in order to convert, in order to make gold payments after the reform, but it was announced that The full redemption should take place in 1896, January 1st, 1896 and 1897, but in preparation for this, Austria needed gold. And so what did the government do? And the central bank bought gold in the domestic markets, practically in the domestic markets only.

42:51Surely, a small few, a small quantities were raised also in Belgium and France and England and some other countries, but most of it was taken from the domestic markets, and according to Menger, very soon this was the domestic markets were pumped dry, he used the term pumping dry, of gold and foreign exchange, cabling gold. Moreover, the central bank got into action and buying up gold from the domestic market, which today we would call open market purchases, and in the case of open market purchases, in this case buying up the gold and releasing cash, it was flooding the money market with cash with paper money, expanding money, paper money and credit inflating, so to speak, which by the beginning of 1993, 1893, was frightening all international markets.

43:56Before you know it, the gilder, the paper money, fell to a discount of some 3%, which which according to Menger was the ultimate disaster of currency reform. Having embarked upon a reform, trying to exchange new money for old money, trying to establish the given market rate, finding the market rate, the just rate, and then wanting to resume, commence gold payments for redemption, He finds that in short order, there's distrust, fear, the Austrian paper money went to a discount and that's, that was his last contribution to knowledge.

44:47He's in the last essay, published in the summer of 1893, despairing about his country, he says there can, there's not any reform, there can be no continuation of this. We declare a gold standard, try to adopt a gold standard, and within a few months our paper money is going to a discount. There's no way we can resume payments. There cannot be any gold payment with paper money at a discount or gold at a premium, at a 3% premium. In other words, he didn't describe this expansion of fiduciary credit the way Mises would have done many years later, but he just talked about this drying up the absorption of funds, of gold funds, from the Viennese market, and lead into a discount of paper money.

45:45An excellent brilliant discussion which led him to despair about his country and his countrymen. And in this particular respect I think Mises, Professor Mises was totally different from Menger. Surely when you search for the beginning of knowledge, Austrian knowledge you have to go to Menger. When you search for the beginning of monetary knowledge, And especially the knowledge of currency reform under difficult conditions, you have to go to Carl Menger. But when it comes to attitude, the philosophy of life, we may not want to imitate Carl Menger.

46:34Because Carl Menger soon after this currency reform conducted in 1993, there was practically this Ludwig's Monetary Essay of 1993 about the premium of gold and the state of currency in Austria-Hungary that was practically his last scholarly publication. Surely thereafter, he wrote, he published a number of book reviews, and then there were other new editions of old essays about one of the famous essays on money. There were two more editions, but the last one in 1910, surely. But thereafter, practically after 1893, Carl Menger withdrew in this field, clearly seeing the future of his beloved Austria and the future of Europe, the decline of what he called, the decline of European civilization.

47:34He withdrew in this sphere and withdrew from active life. He retired early at that time in 1993, 1893, he was just 53 years old. He served a few more years as a professor of economics at the University of Vienna, but then he retired early. Now, and after this, he lived, after 1893, lived more than 30 years, but he did not continue. He despaired about the future of Austria, and despaired about the future of society, and then withdrew from life and productivity. In this respect, I think Professor Mises was entirely different. Mises being desperate to and despairing about mankind at times, but his material and his principle was always to continue and to fight as long as he lived, to uphold the principle and uphold the light even in the darkest moment of contemporary economic life and policy. Mises was the champion, the fighter to the last day of his life. And there I think we can learn from Mises. That must be our goal and our dedication. Therefore I'm very happy that this

48:57This is a middle society, it's not a middle society, because many of us grew from life, despairing about life, this is a middle society, a mind after a great champion of freedom and a free society. Thank you very much.

49:27We now have ten minutes for questions, and then we will end at precisely 5.30. According to my watch, we have five minutes. The Mises School kind of gets together with the Henry George School. I don't know how to tell you what is going on within the U.S.

50:09Therefore, I think that question is not pertinent, is it? He put me on the spot. I do think that within the narrow confines of this conference, that the question is gold standard. But in a broader sense, it's a question of free markets. Gold is only one vestige of free markets. While it might be fruitful to get together Misesians and Georges, I think that's an agenda for another conference. I would like to recognize only questions about my presentation here. Carl Menger, please. Not Henry George. You mentioned the presentation through the English translation. Not that I know. Of these monetary writings, the two other works, the principles, of course, have been translated in dozens of languages.

51:00and his Methodenstreit, you know, his fight about method, you know, is known all over the world. It's still being fought today and many of you here, the younger economists, are sometimes preoccupied with the Methodenstreit of the 1880s, I think. So that's well known. But his monetary writings, I've never seen any references to his monetary writings, I doubt it because they were overshadowed by Mises and Mises. That's my explanation. No, no, why not a younger here, you know, some unemployed, younger economist. No, no, not, no. I have other things to do. Did Menger despair because he couldn't find another disciple within time to encourage him to go on?

51:51Oh, I doubt that he despaired about the lack of disciples. He probably had more disciples than anyone else, you know. That's how, after all, that's how he became the famous menger. Sue his disciples. His own work, the principle didn't, the principles didn't become a best-seller. It's only through his disciples that he became the founder of the Austrian School, but I think he saw the future of mankind, you saw the inflation, you saw the wars, by the way there's an excellent discussion of Menger in Mises' memoirs. You find there's a chapter on Austrian economics in Mises' notes and recollections, that's his memoirs.

52:38You find an excellent discussion on Menger here. I'm not a contemporary of Menger, you know, so I have to dig out information from other writers. Although I was around when Menger was an old man, but at that time I wasn't studying economics. I never met him. Yes sir, yes sir. We go to a standard, a gold standard, I think we have a problem, we try to make a gold standard for our present, things called the dollar, we have no idea what it is, it seems to me we're going to have to call something else in the notes, a rate, call it a move down or something, because I can see great problems, people sitting down trying to figure out how many steps we go, whether it's I tried to say that, and I tried to say too, that Menger had a hard time with the exchange rate.

53:48I came to the conclusion there cannot be, what is the just exchange rate? There are half a dozen possibilities, and finally you have to correct the exchange rate, you have to compromise somewhere, and I finally concluded that it can't be done. The only way to establish an exchange rate would be through total freedom, what I call the parallel standard, you know, between paper money and gold, or freedom, you know, abolition of the legal tender laws and free money markets. What is the market? Is it the money market, the bond market, is it the consumer's market, or is it the control market, is it the black market, is it the underground market? No, what is it?

54:44That's the question of the exchange rate. Which one? It will never have, you will never, I think, will never have complete freedom there. By the way, surely we should, that's how Menger started out, searching for just rate, taking it from the money market of the present, of the moment. He wanted to go to the Viennese money market of the moment, of the day of reform, and accept the exchange rate of the money market and then having some doubts about the the future of the medium of exchange gold versus silver in the past then he wanted to allow for some correction deviating from the money market rate of the day of currency reform and then he wanted to to change a little and talk about a slightly lighter gilded. In other words, became rather arbitrary there, and got, I thought, got stuck there in something that couldn't be solved, sure.

55:52And therefore, I concluded any legislative reform will always be arbitrary, will never be just. It probably may happen. It only may happen sometime in the future. Legislators reform in exchange of bluebacks for greenbacks or redbacks for greenbacks. It may happen sometime. We have time for one last quick question. Yes sir, the last question. In the free market, can't there only be one value? In other words, you can't have a bottom market in the free market, because since money has been really exchanged, there's no need for a bottom market. It wouldn't have been true even in the money market. The money market, you don't need it in the bank. You've got to have it since June, right? I agree. I agree. In the ideal world, you're surely right, but ours is not the ideal world.

56:41In our world, you do have confiscatory taxation, you have force, you have coercion in the money markets, The markets and the banking systems, the financial institutions are not free, therefore you do have an underground economy. Therefore you do have different exchange rates and different objectives, exchange rates and purchasing power of the money in the underground economy. And moreover you're in the underground, then you have to, you know, you can't look at the underground exchange rate even because if there were freedom now, Now, then the underground economy purchasing power, the free purchasing power would be different in the, no, let me, there would be a difference once again, no, from the underground economy versus then the free economy there.

57:29Thank you, Professor Sennolds. Thank you all for attending.