Question and Answer Period

0:00We've got about 35 minutes to do a little Q&A and I've been, I had a question raised to me that maybe each one on the panel could go into, but relating their talk today, how How could you relate what you talked about today to what's going on in America right now so that people could take something away from what they've heard today? All right. It's called Russian luck.

0:52Well, I would say that David is very sad to see how people are giving up their freedom for promises of I don't know what. The only thing I'm watching actually is Netflix. I unsubscribe from all cable or whatever or dishes. My life expectancy is dropping like a rock when I'm watching this. But the last thing I watched, I think was maybe half a year ago, there was a people supporting Rod Blagojevich. You remember Crook, who was a governor of Illinois and what not, and there was a demonstration in support of him when he was in court. And they're asking an elderly gentleman who looked very nice and they said, why do you support Governor Blagojevich?

1:39And he said, he gave me a free bus ticket. I'm not making it up. He gave free bus rides to Seniors. So you can buy a person for a bus ticket. Moreover, these people don't realize that the buses would not come. In the Soviet Union, all these freebies were phony. They have free healthcare. Seventy-eight percent of AIDS victims got AIDS because of dirty needles and tainted blood in the state-run hospitals. This is free healthcare for you. The people, I was kind of, when Gorbachev was elected, well, by 11 people in Politburo, right, then I was for some reason elected a local councilman. And one of my functions was to see how people live. And you wouldn't believe it. They had almost free rental, I mean, almost free apartments. Housing was almost free, just a little bit. I was paying for my big apartment less than I was paying for my magazine subscriptions.

2:44And I was inspecting this housing, complaints. And just one thing and I will pass. I visited an apartment, six families sharing one bathroom, sharing one kitchen. Eleven, the people who complained, they lived, eleven of them in the room, probably the size of this stage, the size of the stage. With one babushka, already she couldn't contain her whatever. So it was an awful stench. The head of the family, 45 years old, he said, in winter, he said, I cannot take my wife to bushes. Can you imagine? You have 11 kids, 11 people from anywhere from 90 years old to six years old in one apartment.

3:32Can you imagine how, and he after that, So he would take his wife to the bushes, usually, but in the Russian winter, can you imagine? And the last thing he said, but I am so thankful to the party and government that I am not paying much for this. Can you imagine? And I am very much afraid that this kind of, this is seducing, this is what corrupts people. He just said what I was going to say, so … Wasn't that funny, was it? I'd say one thing the current financial crisis shows is the phoniness of the idea The idea that tax increases can reduce budget deficits because the bubble that was created by the Fed didn't create just a real estate bubble, it created a bubble in state and local government.

4:32One of my articles, I think on Mises.org a few years ago, it had a title something like the real price gougers because all these governments had property taxes set in stone and when property values skyrocketed, they just automatically took in loads and loads of property tax revenue and so it really was taxation without representation and what governments always do when they get more revenue is they start up new programs and buying more votes with more tax dollars. That's what governments do and then when the bubble bursts, the rug is pulled out from all these new programs and so it doesn't matter whether the tax revenues come from a real estate bubble that allows them to get more real estate tax revenue or if they actually And they raise taxes. The effect is the same.

5:18They use the tax money to start up new programs, which is another way of saying buying more votes with your money to keep me in my job. And so now we have, you know, every state in the country just about with some sort of catastrophic deficit problem, but that's – but it's really the Fed is the root of all of it. The Fed that created the bubble is the root of this whole problem. And I don't know if we can explain this to people because they'll still repeat the mantra that we need to close the budget gap by a combination of tax increases and so forth. But Ron Paul was right. When Ron Paul was first running for president a few years ago, part of his platform was that if we eliminate the income tax and replace it with nothing, the federal government could still spend what it was spending in 1997 and it was still grotesquely over bloated and unconstitutional back then and so that's really the only real answer is to gut the

6:16government and that's why I'm kind of enjoying seeing all these screaming bureaucrats on television. So, you know, support yourself on Martini and watch CNN later on. Concerning the Fed and its consequences, I'm sure you've all noticed recently when you go to the grocery store that prices are skyrocketing. For the first time in my lifetime, inflation has been ticking along at three and four, five percent for as long as I can remember. It's not enough to send anybody into a panic. We're sort of used to it, a little bit of dollar depreciation. We can live with that and go along with it. But you know what? Things These are changing and you have noticed it too. Something is different this time. For the first time, really, since I think the late 70s, there is a fire underneath the prices.

7:09At the grocery store the other day, I go like every couple of weeks, whatever. My wife does all the shopping mostly, but it is good since I am not there constantly. I do notice these dramatic changes and I think it has been changing really. I am looking forward to seeing the The CPI numbers from February because things are dramatically changing. Fruit drinks that I used to buy for $2.50 now are like $3.20 and the clerks and historians will tell you that on every aisle, things are going up and for the last year, the size of products have been reduced, producers have been reducing the packaging to kind of sell you less at the same price. Well, the price increases can't be held off for much longer. These are starting to change at that retail level in a big way. Of course, we're seeing it in oil and energy and really across the board. There's only so much manipulation of these numbers that you can do, these index numbers you can do, before it becomes very

8:06obvious that we have a very serious problem developing. The other day, we ran an article by Frank Shostak in which he was forecasting something like 6% or 7% inflation by the end of the year. I wrote him and I said, this is what What's your model show just based on money supply increases and what the mechanism would seem to indicate? But what happens if expectations change? He said, well, if expectations change and people start developing an attitude of frenzy about acquiring real stuff and getting rid of their paper, then all bets are off. We could be facing a hyperinflationary situation in no time. If you look at the potential, it's absolutely terrifying. What the Fed has done over the last two years, what that creates in terms of potential dollar depreciation is frightening.

9:01You add to that the moral hazard that's been built into the system right now as a result of all the bailouts and you have really the perfect storm. It's very scary to me to think What we could be facing in the future because I don't think as a society we're really prepared for difficult economic times anymore. I mean, the debt addiction is still pervasive throughout the culture. Very worrisome is the fact that young people apparently, you know, just don't believe that they have to work at all anymore, ever. And like, I don't know, they think that at the age of 25 or something, something some magical genie comes along and blesses them with a huge paycheck or I don't know what's going on, but you know, youth unemployment is calculated 30%. I think it's probably like closer to 100% because of course these figures don't include those who aren't looking for work and young people for whatever reason are not looking for work. I blame partially parents because for some reason there's an

10:08______ that's developed out there that somehow my child should just really is entitled to a lifetime sitting at a desk learning, you know, what the professor has to tell them rather than to go out and doing anything. And, you know, if I were going to recommend one thing for our families to do as we face difficult economic times ahead, put the kids to work, all right? Just as young as possible, get them a job or tell them to get a job. It means working for free, fine. Give them some experience. Give them some contacts. Give them somebody to recommend them to others. Get them involved in the real world so they can face the tough times that are ahead. That would be my one biggest suggestion for surviving inflation in the future. It seems like maybe there's no relationship. There's a very strong relationship because it's going to be up to the young generation to rebuild this country after the politicians Well, I really thought these guys would burn up everything the rest of the time, but they

11:29But I just wanted to make a point that I think there's two societies out there. And there's people like you who are in this room that are interested and concerned. And there's 42 million people on food stamps out there. That they're not worried about inflation. They're worried about what time does NASCAR start on Sunday and so on and so forth. So, what Snooki is doing on, you know, you probably don't even know who Snooki is, do you? You know, you kind of remind me of Snooki, but anyway. So, I just think that in terms of relating it to what we're talking about today is to echo what everybody has said, is to educate everybody you can and try to help the young people understand that this isn't 1960 anymore.

12:32This is 2011. Things are going to get much worse. Inflation is here. Jeffrey is looking forward to the CPI numbers. Guess what? They're probably going to show that inflation went down. I mean, that's probably what's going to happen, right? is the fruit juice you're talking about got better somehow, you know. They had some kind of, well, it has more electrolytes in it. So the hedonic adjustment to this is that actually even though you're paying more for it, the price of it really went down. I mean, that's the silliness that the government's involved in. So anyway, with that, let's have I would say that today we are bombarded with propaganda that there is a wonderful Swedish model, for example, that our president is very much in sympathy and in love with and whatever.

13:38And I remember back in Moscow, we had a meeting and Gorbachev was chairing it. And he said, and we had the biggest economy, my boss was the biggest economist in the world, Abel Agan Begyan, father of Perestroika Ecology. He was bigger than me even. And he said, what we need, Michail Sergeyevich, speaking to Gorbachev, what we need is to implement a The Swedish Model. And even Gorbachev understood. He looked at him. He said, Abel, we'll get all the Swedes. But today, if you will look at the Swedish Model, the Swedish Model should be a shining kind of building on the top of the hill, because the Swedish Model is a model of privatization, wholesale privatization. They privatized everything. They're afraid of what privatization called individualization or personalization of social security, for example, because it happened everywhere. In all Europe, what they did, even before us, they introduced social security because people are stupid, they would not save for their retirement and they would squander the money. So they forced them to pay social security

14:54taxes, they built social security funds and then they squandered that for the people, the governments did. So now they personalize that. In Sweden, you can open anyone short of Certified Pedophiles, anyone can open a school and then they would get for them the number of children in that schools. They have an explosion in this new school market, in the new school market. Then also it's amazingly now the school market is not only public funds but private funds, the parents are paying for that. So if you will go to Sweden, if If you go to Finland, if you go to Estonia, you will see people even more free than what we are.

15:39So we are losing on that. Because there is another European model which is called pigs. That's how lovingly they call Portugal, Ireland, Greece and Spain. And what the pigs are doing, they are doing exactly what our pigs are doing. They are borrowing and spending because at the expense of the future generations who who would never vote for them, or foreigners who would never vote for them. So that's easy to borrow and spend. However, you can see in Europe, they still have a limit. For example, in Greece, that was all the time. All these 55 years old retirees would demand more and more and more, and then the government would print more and more and more. Now they're members of the European Union, so the printing press is there in Frankfurt, Germany, not in Greece anymore, so they cannot print more, so they are in the same situation as say California or Illinois in the United States. But our beloved government, I think they would do

16:38whatever it needs to print as much as possible to bail out California, to bail out Puerto Rico, to bail out Illinois, to bail out whoever it is. So that's the... And if you look at the statistics, there is lies, big lies in statistics. I absolutely agree with Doug with However, even if fake government statistics of Greece is very similar to what in the United States we have, more or less the same percentages of budget deficits, the same percentage of national debt as a ratio to the GDP. The questions about inflation and market Makers, Driving Up Prices, and would you say market makers like speculators and leverage moving up prices along with just fed printing, is that kind of the thrust of the question?

18:09Well, I can quickly say I probably don't have an opinion, which is the safest way to go on this, but the only thing we can say about fed printing is that it creates distortions and we don't know where that money goes. Prices. So as much as Fed printing has tried to force money into housing and cars and jobs, it's going into commodities. And what percentage of that then it makes up the huge increases we've seen in commodity prices, I don't really know, beyond then what speculators take from there in terms of their expectations of future prices. But I would… Right. Yes, I think that I would agree with you that it's part of this commodity price rise. It's just the fall of the dollar. I mean, that's it's not the prices went.

19:12But however, on the price maker side, I think we see this price of this market makers right now. Hopefully one will be short very soon. Mr. Gaddafi, he is a market maker on oil. I think we see a lot of supply side problems as well. Yeah, in a sense that look what's is happening in Middle East, so that drives prices higher, definitely. However, quantitative easing is a wonderful YouTube movie about it. Yes, and that's another kind of... Inflation is inflation. There's a wonderful book for sale there by Adam Ferguson, When Money Dies. It's an excellent explanation of all this, what you talked about. Plus, it tells us that Inflation is not only that, it's depriving people of their past, of the fruits of their labor, it's depriving of people in the confidence in tomorrow, in their security, in everything.

20:05It creates completely different world when people are pitted against each other. It creates a lot of problems in family, everywhere. And that's why I think people like Keynes and other socialists, they love it. They love it because that's, and then you're naked before the state. If you don't have, you don't have church, you don't have family, you don't You don't have money, you don't have anything, you're naked before the big government.

20:54The question is, could the subsidies to ethanol be phased out 30% a year for several years? Well, that's the old problem of concentrated political benefits and diffused costs. We all feel the pinch just in a little bit with higher gas prices and things like that, but there are a couple of hundred farmers who make many millions of dollars and they hire expensive lobbyists to make sure that the racket keeps going, and so that's probably are not a priority in Congress, especially with the Obama administration just encouraging wild spending beyond belief.

21:58One comment I make about commodity prices is when I testified at this hearing, Ron Paul's Fed hearing a couple of weeks ago, the Democrats in the committee, the one who made the biggest fool of himself, his name is Clay from Missouri, his opening statement, the first thing he The second thing he said was no matter how much money the Fed puts in circulation it cannot possibly ever have any negative effect on the value of the dollar. That's exactly what he said. It's on video. You can see it on the internet. And the second thing he said was Austrian economics is illegitimate because it uses deductive logic. And of course all of mathematical science is based on deductive logic. And so that's – and then their witness, their star witness was there to say the same thing.

22:45He said there's no indication of any kind whatsoever that there's any inflation out there. And so in this guy, Clay, I looked up his Federal Election Commission record and all of his financial supporters are – in addition to public sector unions, they're all banks. They're all – Warren Buffett gives them loads of money, Bank of America. So he's there to support inflation, the banks and automobile dealers and real estate agents. That's who supports his career and that's who the man is, who's the point man to deflect any criticism of the Fed on the House Financial Services Committee. So these people see it as sort of a fight to the death because they're also, the Fed is financing the 42% on food stamps that Doug mentioned.

23:31That's their voters, that's who keeps them in their jobs. So we can't predict this. How about over here? He asked me if I think states will simultaneously raise tax rates, and I think that's going He asked me if I think states will simultaneously raise tax rates so that there's no choice. You can't vote with your feet. No, I don't think that will happen. I think the Fed will print more money and bail out the states is what's going to happen because the whole idea of, you know, Nixon started this business of revenue sharing.

24:21It really is a cartel arrangement because if Florida doubles or adopts an income tax, it will become much less competitive economically, for example. So that's a bad idea. In other states, it's the same with other states. If they unilaterally raise their tax rates, they know that they become less competitive for population and business. But if they can get the federal government to tax everybody in all 50 states and then send some of the money back in the form of grants, it works that way. So that's sort of a cartel arrangement where the federal government is the cartel manager and the price fixer. So I think that's what's going to happen. I will announce a new round of quantitative easing to, and I invite everybody to go online on YouTube and watch Quantitative Easing Explained, if you haven't seen it.

25:10It's dead-on accurate and very funny.

25:30So it's time to sell. Every inflation is characterized by waves of speculative frenzy that land in sectors of the economy that just happen to be fashionable at the time. One thing we need to remember about a free market with sound money is that it's usually characterized by a gently falling price level. It always has been, which is to say that the value of the dollar or the and the value of the monetary unit should always be increasing relative to goods and services.

26:32That's what would happen in a free market economy. It's what we saw during the whole of the Gilded Age. And interestingly, it's what we've seen in technology over the last 20 years. I mean, you follow the prices of hardware and software. Everything's been dramatically collapsing. And following all this time, it doesn't mean it's unprofitable. It just means is that it's growing and it's doing well. So in some ways we experience price inflation to the extent that we see prices not gently falling or the value of the dollar not constantly rising all the time. That's the natural state of the free market. And in an inflationary future we're going to see these kind of successive rounds of bubbles appearing in individual commodities and in individual sectors. And it's just going to continue because all the The money that the Fed has created and that the banking system is creating now is going to land somewhere.

27:25And if you're good at it, you know, if you're a good speculator, you can make a lot of money. I mean, there were a lot of people who made a lot of money during the Weimar inflation, actually, in fact. That's not a game for me, but, you know, some people may like it.

28:19and does anybody have any advice on how to prepare for it? And if I can follow up, introduce you to the circles. Probably involves vodka, but go ahead. I wish that would be too easy, so it's so easy is that, yes. But what, by the way, was also, I think I should write an article about it, that drunkenness is a form of social protest under socialism, yeah, because that's what it is. I mean, you cannot do anything else, that's people sit around and drink and tell political jokes to each other. That's, yes, it was a wonderful, Vladimir Bukovsky, great dissident, he spent 15 years in Gulag, and he wrote in a book that the bear would catch ants and put them in a jar, They were trying to get out and he would shake the jar on the bottom and they were doing that on and on and on and then they decided to sit on the bottom telling political jokes to each other and that's exactly what people now are talking about that but not as active

29:27and I would say that definitely young people should be more active and I am so happy to see very many young people in the audience and I think that Mises Institute is doing I'm doing a great job by having this wonderful, wonderful, I would say, library, wonderful blogs, wonderful discussion forums at the Von Mises site. I think that for me, for example, as a teacher of economics, it's such a wonderful resource that I can refer my students to do that. And I think this is one step, then, when the young people would think how absurd is the System, which is pitting everybody against everybody else, taxpayers against tax eaters, pitting young people against old people, old people against everybody else. It is just amazing. And we are destroying this mechanism because this is very unnatural. It is natural for people to think about their retirement, I think. However, the welfare state is destroyed.

30:25For people to think about food, no, you have food stamps. And then Mr. Obama, he wrote this book, Dreams of My Father. So I looked up his father. His father was a Kenyan economist, and in this African Economic Journal in 1966 he wrote that I think that the best system would be when taxes would be 100% of income, but the government would provide people with everything. How does this, I think that's called slavery, isn't it, right? that you don't get anything right, if people forgot that health care was free under slavery, housing was free under slavery, food was free under slavery, this is I think that's what we should keep in mind definitely.

31:11We've had your hand up a long time, you in the blue shirt.

31:41Well, I think Tom mentioned that his view is that the Fed will print and all the states will get bailed out. But again, then we weave ourselves very quickly back into this us against them sort of social conflict that we're going to have. The taxpayers versus the tax eaters, the young people versus the old people. And so I don't think it's a smooth transition where you print money, bail out the state of California, bail out the state of Illinois or the county of Cook in Illinois or the county of Clark in Nevada or whatever it may be.

32:29So I don't know how these things all sort out, but I guess the point of my talk today Today was that there have been tax resistance in the past. I think that we've seen it with Prop 19 in California or Prop, what was it, Prop 13 in California. And I think we'll see more of those types of people are protesting their current assessments, their properties going down faster than the government says. And even when they assess it further down and the government's trying to jack up the mill rate. So I think this ongoing conflict with government's going to continue to take place and how it ultimately works itself out, I don't really know, but I just think it's going to be a very tumultuous time.

33:21And the government is going to try to fix it with more money. They're going to try to fix it with more printing, which is going to lead to more bubbles, which Which is going to lead to more inflation. So when you ask about, well, where am I going to put my money? Well, it makes it very, very difficult to know what to do because that money will flow into commodities at one day. It's not going to flow into real estate for a while, but it's hard to know where the money is going to flow. It's an awful society to live in. I think the next big bubble is government and then higher education. And so, you know, we're used to talking about solutions in terms of how to influence the central government. But the central government is totally out of control now. The constitution hasn't been enforced in generations.

34:10There was not one single federal law ruled unconstitutional between 1937 and 1995. So the constitution is a dead letter. Five years ago, Ron Paul invited me to give a talk to him and a group of about a dozen Congressman in his office in DC and they were all bemoaning the fact that you cannot make constitutional arguments against government programs anymore in Congress, you get laughed out. And so once that's gone and then the printing press is just running wild, the only alternative is to turn – in my views, turn back to what people like Thomas Jefferson began talking About, and they understood that this would happen, that the tax eaters would eventually overwhelm the taxpayers and that's why they advocated – Jefferson spoke very kindly and very favorably of such a thing as the United States being broken up into seven or eight different republics where one of them could be like a new Estonia and say, keep your Fed, keep your Medicare, keep your Medicaid, we want an empire of liberty here in the state

35:16of Florida or wherever. I'm known for writing about this, secession and I'm very proud of the fact that I made Paul Krugman sound even dumber than he usually sounds when he – holy cow, this guy writes about secession but I see that as the only way out because the government has been totally out of control for years now, many years and we're just whistling in the wind, spinning in the Ocean, whatever you want to say, talking about what we can do. That's something we can do, leave, walk away and have competing republics under a system of true federalism would be a first step. But of course, those ideas were discredited a long time ago. But Tom Woods' book Nullification has been pretty popular and there are some state legislatures who are at least talking seriously about giving the big middle finger to the federal government on Obamacare and other things, and that's at least encouraging to me anyway.

36:16I don't see any upside to any violence. They have nukes. You know, let me just say something that elaborates on Tom's point here. You know, in a digital age, there's absolutely no point to the nation-state at all. I mean, the nation-state is a preposterous anachronism. It serves no purpose, and secession is brilliant, and it's great, but we have to remember we don't need geographic secession anymore. You can have non-contiguous governments of every kind that are global in nature.

37:04This is an improvement over the Middle Ages, which is great enough because we had small city-states. You live in one place, you hate the king, you hate the prince, hate the baron. You move next door, get a new kind of system. That's the system of the built the West, right? I mean, it's competing governments, small little tiny places. That's great. But it's even better now because we don't have to worry about time and space anymore. In a digital age, anybody can associate with anybody on any terms they want to, anywhere in the world. So we have a possibility now, I mean it's right before us, of creating a new world of global freedom, of these tiny microcosms of every form of government that the human imagination can possibly conjure up. That is right there, ready to reach out, it's ready for us.

37:51The same thing with digital currencies, digital legal systems, everything is right there. The only thing standing in the way is this rotten, stinking corpse called the nation-state. It's got to be crushed, and it's going to be in time. In time. It's going to go away. I hope it's sooner rather than later. On that note, the panel, I want to thank the panel for their fine work and their talks today. Jeffrey, you have a shuttle to catch, so don't let me hold you up. So a big round of applause for Jeffrey Tucker.

38:42The nation state is going away. He said so. Set your clock. Tom DiLorenzo, of course, Yuri Maltsev, I want to thank my road crew that makes all this happen, beginning with Christy Holmes and Chad Parrish, Will, out selling books, James Fogel. I want to thank, of course, our sponsors, our anonymous donor, Avery Knapp, Steven Monica Hillis. They're the reason we're here. And anything that the Mises Institute does is supported by donors. If you get to hear us talk, it's because a generous donor has made it happen and that's who's made it happen today.

39:30If you spend your winters in Florida and you go north in the spring, we will be in Chicago on April 9th. in the Chicago area, check us out. We will be in Indianapolis in the middle of May. On the 14th, we will be in Las Vegas for Freedom Fest, the middle of July, and there's nothing like a middle of July in Vegas. You know, we've had a lot of, speaking of Chicago, we're doing a high school event. The day before that, we are having typically 180, 200, 300 students come to these high school events. If you're interested in sponsoring a high school event, please see James Fogle afterwards.

40:20This has been a terribly successful program that we've instituted and gets a lot of young people very, very interested in this. And really, that's what we're all about. That's what the Mises Institute is all about. It's taking economics out of the classroom, out of the statistical boards, as Mises said, and out to everyday people, because everyday people need to understand economics. And I thank you for helping us do that today. By the way, buy some books, okay? But the books that are left over, if you're a student, we have a generous donor who heard my message that I didn't want to ship any back.

41:12So whatever remains, we're going to give to the students that are here, all right? So that's wonderful, so again, we've had a donor who's come forward with that message and that's wonderful, I want to thank all of you for coming today, there's a lot of things you can do on an 80 degree day in South Florida to come and listen to us talk about Economics. Well, hey, I'm glad it was first on your list. Thank you so much for coming. Thank you for supporting us.