How Is Fiat Money Possible?

0:00My topic is, how is fiat money possible? Let me start out by explaining briefly what fiat money is. Fiat money is irredeemable paper money, that is money which is neither usable for any industrial purposes, Nor money that represents a claim or a title to a specified commodity. With respect to the question, is such a thing possible? We all know, of course, the answer. That is, yes, obviously fiat money is possible.

0:45As a matter of fact, since 1971, we have for the first time in world history a situation where the entire world is on a fiat money standard. There is no currency in the world that is redeemable into anything except the same thing that you turn in. My question is not is it possible but how, in which way can fiat money come into existence? Can it come into existence as the outcome of the interactions of self-interested individuals and in particular can it come into existence without violating in any way principles of justice or introducing or by introducing economic inefficiencies into the system and the answer that I will try to explain is it cannot, that is fiat money cannot arise in a just and economically in an efficient way.

2:04The purpose of my speech is generally systematic, but given the fact that the thesis that I try to defend here has been frequently disputed, I want to examine and critically analyze a a number of counter arguments to the thesis that I will advance here along the way. In particular, I want to analyze arguments advanced by the monetarist school of economics, especially by Milton Friedman, also by Irving Fisher, and the arguments that have been advanced by some Austrian renegades, Larry White and George Selgin.

2:58There are considerable differences between the monetarists and these Austrian renegades. Nonetheless, despite these differences, they hold in common the view that either a total or a partial fiat money is just and efficient and would spontaneously emerge on the market. I will try to point out various flaws in these arguments and along the way also try to clear up a number of errors and nonsensical statements that otherwise have been made in contemporary monetary theory.

3:44Let me begin by briefly recapitulating the basic insights of the Austrian School with respect to the origin of money first. Given that people have a certain amount of, a certain to demand for leisure, in general people prefer more exchange goods over less exchange goods. And because of this people prefer division of labor as being more productive over self-sufficiency. Money arises for the same selfish reasons, so to speak. People in a barter economy produce for exchange and it can happen that the supply of goods offered for exchange is mismatched with a demand for goods. It can happen in barter that a double coincidence of wants is absent. It is that I have what you want but you do not want what I have. In such a situation where we find that the supply of exchange goods is mismatched with the demand for these Goods, self-interested individuals can still improve their situation if they exchange a

5:31less marketable good or if they succeed in exchanging a less marketable good for a more marketable good. If they succeed in doing this and acquire a more marketable good for a less marketable good, then an additional demand component is added to this particular good that was traded for the fact that it was more marketable. An additional demand component is added to This is a pre-existing barter demand for this good. This additional demand component enhances the marketability of this particular good even further.

6:20This is noticed by other individuals that this good has increased marketability and Other people will now, for the same reason of covering their losses, so to speak, from oversupplies, also demand this particular good. Goods that are acquired not for the purpose of using them for any direct purpose, but using them in order to resell them, in order to acquire what people really want. Such goods are called the media of exchange and the definition of money is to be a medium of exchange.

7:07Money is the most easily resaleable good and the most generally accepted good. In the course of inter-regional trade, which also takes place because people, again, want to participate in the advantages offered by division of labor. In the course of the expansion of inter-regional trade, different types of money compete against each other, and there is a tendency in the market that one money will outcompete another money, such that at the end of the process, so to speak, only a single money commodity that is in worldwide use will emerge.

7:58Historically, this has been gold, of course. This is essentially, in very brief form, the tradition of Turgol, Menger, Mises and Rothbard of monetary thought, Joseph Salerno talked about that yesterday. According to this tradition, money has one single function, that is, to serve as a medium of exchange, to be a facilitator of exchange, and money must, under all circumstances, arise as a commodity money. It must arise as a commodity money because something can be demanded as a medium of exchange only if it has already a pre-existing barter demand.

8:55As a matter of fact, money is that commodity that had a very high degree of marketability under barter conditions. At this moment now let me just make a few remarks regarding some alternative or rival theories of money. What about the idea of commodity reserve money? Money being backed by a bundle of Goods has been frequently proposed as an alternative to something like a gold standard.

9:41Can titles to bundles of good become money? The answer is no such a thing is absolutely impossible because bundles of goods are by definition less easily saleable than the most is easily saleable of the components of this bundle of goods and because of this, commodity reserve money is uniquely unsuited to become generally accepted as money. What about the idea of national monies? You notice that I emphasize the idea that money has a tendency to become an international, internationally used money. The idea of national money is of course an idea of Milton Friedman's.

10:37And what of the idea of optimal currency areas? Both ideas are obviously closely related. I would think that such an idea as national money or an optimal currency area seems to be entirely absurd except as an intermediate step, so to speak, in the development of money towards the ultimate goal of a one world type money. There are no more optimal currency areas than there are optimal trading areas. I have not encountered anybody who thinks that there are optimal trading areas. Everybody seems to think the optimal trading area is the world market.

11:23And the same, as far as I can see, applies also to money. It is, in a way, implied in the concept of a medium of exchange that it has a tendency towards becoming one and universal. I have been criticized with respect to this argument that I am confusing process and end state analysis, emphasizing the idea that there is an end state that money can possibly reach. This criticism has probably been inspired by Hayek who makes this distinction between process and end-state analysis.

12:17As far as I can see, again, this criticism is entirely unjustified. Actions are always goal-directed processes. Otherwise, if we have a process without a goal, what type of process would that be? That seems to be just random or noise. That a more widely or easily saleable medium of exchange is preferred to a less easily and less widely saleable one is as certain as that a more productive machine outcompetes a less productive one. A single and universally acceptable medium of exchange is as good as money can possibly get. What about the idea of separating money from the medium of exchange, From the Unit of Account, thesis like this have been advanced by Jaeger and Fama and Hall and Greenfield, various other authors. As far as I can see, this thesis is complete nonsense. In search of profit maximization, exchange producers will want to account in in terms of the most easily saleable and most generally acceptable commodity of all.

13:53By buying and selling, buying and selling markets are, if we have one world commodity money, buying and selling markets are thereby made the widest possible and a medium of exchange and the unit of account function are necessarily tied together. You cannot separate one from the other. What about other functions that are attributed to money? Frequently it is mentioned that money is a store of value. In this argument we would have to say, yes of course money is a store of value, But that is not the function of money.

14:44There are all sorts of goods that are stores of value, and there might well be goods that are better as a store of value than money is. And if we would discover that there are other goods that serve better as a store of value than money, that would certainly not be a sufficient argument to criticize money for not being as good a Store of Value as Other Goods. It is also the case that money is used generally as a standard of deferred payment, but again, other things might well also be used as a standard of deferred payment. That is not necessarily implied in the function of money. Nor, and And I want to emphasize this in particular, nor is money a measure of value.

15:43This is one of the ideas that had great attraction up to this day in the monetarist tradition of economic thought. They hold up to this day that money has the function of serving as some measure of value. Now, why are these arguments pointing out that money's function is to be a measure of value wrong? Let me give you some counter-arguments here. For, if you compare, say, a ruler being the measure of space, What is the demand for a measuring instrument like a ruler at any given point in time for a single person? We can say the demand for rulers at any given point in time and space is one. We only need one ruler and with one ruler we can measure all of space. We do not need thousands of rulers to make spatial measurements, one single one would do it all. And obviously there is a demand for money that is higher than just one unit of it. Secondly, a ruler or any other measuring instrument scales. A ruler is not being exchanged in the course

17:17of Making the Measurement. On the other hand, money obviously is being exchanged in the course of allegedly measuring value. But if that is the case and money is an exchange good, then it seems to follow that the marginal utility of money continuously changes with each exchange of money. If my supply of money goes down as a force of spending it, the marginal utility of money increases. If my money supply increases, then the marginal utility decreases.

18:05If money, however, is an exchange good, contrary to rulers and scales, then nobody would want that money should be stable valued. Instead, as for all other goods, everybody would prefer that the value of this good increases over time. People do not want stable money, they would prefer a money that increases in purchasing power. Lastly, what about the thesis that the demand for money as non-interest-bearing cash would disappear if there existed no legal restrictions in the securities markets?

18:59Such a thesis has been advanced by Pharma in a slightly different version by Neil Wallace from the Rational Expectations School. They claim that absence of any legal restrictions, only interest paying titles to either debt or equity portfolios such as money market funds would remain in existence and all non-interest-bearing cash would disappear entirely. The first problem with this thesis is if there is no interest-bearing cash anymore in circulation, What would then be the unit of denomination that is used for all of these securities?

19:56And the second and more important argument against this is the following. People who assume that money could entirely disappear from circulation must make the assumption We are in equilibrium. A single person might have no demand for money. It can happen that the person is simply cashless. But the demand for money generally can only disappear if people would have perfect foresight with respect to the future conditions of markets because in such a situation with perfect foresight all exchanges including credit transactions can be arranged in the form of direct exchanges without the interposition of money, but obviously this is entirely inapplicable to the real world where there exists uncertainty or else Money could disappear only, and this is what Neil Wallace, for instance, assumes, and that is in line with the general egalitarianism of the Chicago school, that all goods are equally marketable. If all goods are equally marketable, then by definition there exists

21:37is no difference with respect to the saleability of cash and any type of securities. But in this situation, obviously, equal saleability is only possible if all goods are perfectly identical to each other. If all goods are perfectly identical to each other, we can can, however, not even explain why people even engage in division of labor and exchange. This idea of all goods have equal salability is in a way the complement to the Chicago view, which Gary Becker is a typical example, that all individuals are also the same.

22:32All individuals are the same, and all capital goods are the same, according to Chicago economists. Capital is just a homogeneous blob, and if it is a homogeneous blob, then every good is equally saleable to any other. In the absence of these absurd assumptions, we have to come come up with the conclusion that the demand for money cannot possibly disappear. Now back to the question if money originates as a commodity money, how can it become fiat money? The Turgot-Rothbard tradition of monetary thought answers this question by saying it can come into existence via money substitutes, that is checks and banknotes, but it can come into existence only in a fraudulent manner, by unilateral expropriation and only at the price of introducing all sorts of economic inefficiencies.

23:46Now why is this? Let's assume a developed monetary economy where we have money proper, commodity money, and money substitutes as claims to money. This fact that we have money proper and money substitutes has no impact on the total money Money Supply, it only changes the composition of the supply of money. Both types of money allegedly trade at par, and there is no savings involved here since there exists a one-to-one correspondence between paper tickets and species.

24:39But there is of course an added convenience that results from the fact that people can hold money proper and money substitutes. This is a way how paper tickets can acquire purchasing power. that is they can acquire purchasing power riding piggyback on a commodity money such as gold. These tickets can only free float from now on if redeemability into the species that originally made it possible that these tickets could acquire purchasing power, if redeemability is suddenly suspended but this obviously requires that the money owners are being expropriated through the bank and obviously no one would agree to this except of course the bank.

25:49With respect to fractional reserve banking, that is a partial fiat money, we likewise come come up with the conclusion that such a development would have to be classified as fraudulent and economically inefficient. Again, assume a single loan and deposit bank. As far as the loan banking function is concerned, we have savers depositing money in the bank and they enter a time contract. They engage in a temporary property transfer and extend a commodity credit. This commodity credit then becomes embodied in some illiquid productive assets, and because of this savers are capable of receiving an interest payment. As far as As far as the loan banking function is concerned, the banks make the profit through the interest differential, the interest that they pay to the depositors versus the interest that they charge the borrowers.

27:10As far as the deposit function is concerned, deposit banks engage in 100% reserves. Every deposit note is backed 100% by specie. No interest is being paid on deposit notes. Instead, We have to pay a warehousing fee. These notes then are redeemable at par against the specie. And the profit, as far as the deposit banking function is concerned, consists of the fee paid to the bank for its safeguarding of money. Both the loan and the deposit banks would would be able to earn a normal rate of profit in the deposit and the loan business.

28:10Fractional reserve banking is banking where the savings and deposit functions are, so to speak, confused. That is, savers are given withdrawal rights, instant withdrawal rights, and depositors receive interest on their deposits. Technically, fractional reserve banking is done by loaning out excess reserves that the bank possesses. They loan them out into time contracts and receive interest for it. The legal consequence of this, and that shows the absurdity of the whole thing, the legal consequence of this is the following. For some time now, the depositor and the borrower are entitled to exclusive control over the same commodity. Obviously, Such a thing is absurd. There cannot be two exclusive owners of the same commodity during the same time span. It is fraudulent on the part of the bank even if it would not be uncovered, even if it is not discovered that such a thing goes on. Because it affects also third parties, because of the inflationary impact that results from issuing uncovered notes.

29:52It is also economically absurd because the depositor allegedly owns homogeneous money, but in fact the borrower has taken the money and has invested it in non-homogeneous capital and when the underlying time preference rate, the degree to which people prefer present goods over future goods, reestablishes itself, then this has to resolve in some sort of business cycle. That is, the liquidation of these invested funds implies losses both for the borrower as well as for the depositor.

30:42The liquidation would only not imply any losses if capital would indeed be a homogeneous blob, Now, let me make these points in a slightly different and more elaborated way and ask the question, why is it impossible to achieve some sort of unanimous agreement to abolish commodity money and substitute fiat money for it. What I want to show is that there simply exists no motive why people would ever want to do anything like this.

31:34Friedman holds the opposite view. Friedman contends that a pure commodity money standard such as gold tends to break down because it is economically inefficient and similar, similarly to Friedman George Selgin for instance, thinks that fractional reserve banking is a natural and more efficient outgrowth out of a system that started out with 100% reserve bank. Assume again one bank and money proper and notes in circulation.

32:22The first problem that we would encounter is would people voluntarily want to give up using what is nowadays called outside money, that is money proper, and substitute what What is called inside money, bank notes and checks for it. As long as people would not give up using outside money in circulation, money proper in circulation, it seems to be clear that they demonstrate that they prefer outside money over inside money or at least Now, would people want to substitute inside money for outside money completely?

33:24With respect to this problem, I think even the tradition of Turgot to Rothbard has been too generous in admitting the assumption that such a substitution can take place. I want to explain why such a substitution of inside money for outside money, paper money for genuine commodity money is to happen only to a very limited extent. Money substitutes, needs to be recalled, money substitutes are just that, substitutes. And they have one permanent and decisive disadvantage as compared to money proper. And because of this, the public would never want to make a complete substitution of inside money for outside money. Now what is this permanent disadvantage that substitute money has as compared with commodity money.

34:30The reason is this, notes, paper notes, can be redeemable at par only if and to the extent that a deposit fee has been paid to the bank. But deposit fees are of course not paid for an indefinite period of time, they are only paid for a certain period of time. If the notes are redeemed after the date up to which a depositing fee has been paid, then redeemability charges must be made by the bank. The bank must ask the person who wants to redeem the note to pay up the depositing fee that has not been paid yet.

35:24And notes then must trade at a discount against money proper. Only genuine money, commodity money, is always and indefinitely accepted at par. And notes are only temporarily accepted at par. It is a mistake to think that notes trade at a premium over money, it is sometimes thought to be this way because people think there is a money price being paid for note acquisition. But fundamentally, the thing is just the other way around.

36:12Notes trade at a permanent discount, and the price paid, so to speak, for the acquisition of notes is not the price paid for notes, it is the price paid for guarded money. Now, as long as the demand for outside money is in existence, and my argument tried to make the point that the demand for outside money could never possibly disappear, as long as there is a demand for outside money, the argument that monetarists make, we should substitute fiat money for commodity money in order to save is obviously, obviously absurd.

37:06People demonstrate through their own actions that they are not interested in doing this type of saving. Now assume nonetheless that exclusive, for the sake of argument, that exclusively notes circulate and the commodity money is all in the banks. Would there then be a savings motive as the Chicago School assumes? That is, wouldn't it then be a waste to guard all the money in the bank and shouldn't this money go all to non-monetary uses and instead a free-floating paper currency be established?

37:55I want to show that the answer is no, and why this argument is fallacious. First, this argument can certainly not mean that the bank would get now all the money that is deposited in it. Who would agree to such a savings? That is, you keep the note, and the bank keeps It's all the genuine money deposited in the bank. That seems to be a funny type of savings. Instead, in order to make any sense out of this argument, in order to get the savings, we want to, each depositor would of course insist, I want to get my money back first.

38:46And then we would have a situation where either the bank gets the tickets back, the notes In any case, the bank would now be empty. Then the problem arises. Now the production

39:14costs of these tickets, which was formerly the cost of attracting gold depositors, now has fallen almost or practically to zero. The production cost of the tickets was under a gold standard not zero because the production cost involves attract gold depositors to come to me and then they get a ticket. Now, however, there's no depositing anymore. Paper floats around freely. Production costs are practically zero. The notes had earlier on acquired purchasing power, writing piggyback on commodity money, but how can the bank or the public, whoever now owns the tickets, sell these tickets to anyone, or how would anybody want to accept these tickets?

40:14Would these tickets be bought or sold for non-money goods at the old exchange ratios that were established while the commodity money standard was still in existence? And the answer seems to be obvious, no such a thing is absolutely impossible, at least as long as there exists free entry into the note production business. If the price paid for the tickets exceeded their cost of production, people would immediately print additional notes up and we would have hyperinflation. And certainly no one would buy notes for more than it would cost him himself to print up these tickets.

41:00Now it is interesting that Friedman realizes this. Friedman realizes, it is also disputed by some people but I think he is correct in this, Friedman realizes that a pure fiat money requires a monopoly bank and a monopoly note issuer. Under competitive conditions, a fiat money regime would immediately lead to hyperinflation and then to a breakdown of the monetary system and then to a re-emergence of a commodity money, which according to Friedman is wasteful. So the solution to this is there must be a restriction to free entry into the note production business.

41:49There must be a monopoly. The monopolist can of course also cause hyperinflation, but since he is not operating in a competitive environment, He must not cause hyperinflation. He can restrict the production of paper tickets and indeed he must restrict the production of paper tickets if he wants to stay in business at all. The bank now takes in notes, either in the form of time contracts to be loaned out and earning interest or in the form of deposit in exchange for the issuance of substitutes of substitutes and against a depositing fee.

42:40And the social savings now would be the difference, so to speak, between the guarding cost for commodity money versus the guarding cost necessary in order to guard money substitutes. But now there are two problems that arise. The first one is, who should own such a bank? And the second one is, what should be the principles of operation for this bank? And the problem is, we have to explain, can there be agreement? Can people pursuing their selfish Let me first consider the ownership problem. Just as people would want to get their genuine money back in order to profit from the savings themselves and not let the banks do all the savings, and they do all the losing. If a specific individual or group of individuals would become the owner of this bank, no agreement would be possible because this monopolist would have been capitalized in the form of having inflated assets. That is, the owner would gain from the fact of being a monopolist and the general public would get nothing of

44:14the social savings, so to speak. What people would want to insist on is a real part of the social savings that result from and the substitution of fiat money for commodity money, and not just a specific owner. The bank must be owned by everyone, everybody must be a co-owner of the bank. But to say this does not answer the question, at least not to the degree of precision that is actually needed for the following reason, should only be money owners or also money less people become the owner of the bank?

45:10Only the clients of the bank or also the non-clients of the bank? And what about the ownership and profit shares that each individual should get? Should the share of ownership and profits depend on each individual's initial money Endowment or should it depend on the size of the deposit that various people hold in the bank? But such things, the initial money endowment and the amount of money being deposited in banks changes of course all the time. Should everybody own the same share and get the same amount of profits redistributed to him, but then we would have the problem that large money holders would of course want to get a larger share of the profits than people who hold no money at all or very small deposits.

46:20It seems to be clear that here it is absolutely impossible to achieve an agreement of how the ownership question with respect to this bank should be resolved if the ownership of If the ownership problem cannot be resolved, then it also seems to follow that this substituting and saving is something that people would not deliberately ever want to have happen. The second problem is a problem of how should this bank operate. Regardless of how this ownership problem is resolved, a monopolist, because he is shielded from Competition will tend to be inefficient. He will tend to operate at higher than the minimum cost.

47:12Actually, the cost of a monopolist might be higher than the cost of competitively guarding genuine gold money. And who will then supervise and guard against abuse of the bank's power? All of these public choice considerations are completely absent, at least from Milton Friedman's earlier writings on these issues. In addition, assume that the bank engages in loan and deposit banks. Both functions are strictly separated. It makes a profit on interest differential as far as loan banking is concerned and on the depositing fees as far as deposit banking is concerned.

48:08But a fiat money bank must also now assume the function of replacing the worn out notes, even the worn out notes of non-clients of this bank. Otherwise, people would not want to replace a permanent commodity money by a perishable fiat money. Under the gold standard, under the commodity money standard, where there practically exists no perishability of money, every individual money holder assumes this risk himself, and the risk is absolutely very, very limited, that indeed there is a certain amount of perishing going on.

49:00But who would agree to assume the risk of losing all purchasing power once a note has been worn out or has been torn apart? Obviously people would only agree to a substitution of a fiat money for a commodity money if there is a guarantee that if a note is worn out However, as long as there are any operating costs connecting with this function of replacing worn-out notes by new ones, and as long as this bank would follow, for instance, the later Friedman's recommendation of a frozen monetary base, that is, we have paper money in existence and we never increase the paper money in existence. As long as they would follow the frozen monetary base rule and replace old notes one to one by new ones and free of charge, this part of the bank would have to make permanent losses. In order to be profitable, The bank must be allowed the power to create new money. It must be able to do something like the early Friedman thought that follow a three or five percent growth rule. It might

50:36not be three or five percent, but in any case it must be able to just create additional supplies of money. Yet as soon as the bank starts inflating, that is bringing more notes into circulation. It doesn't matter how big the amount of inflation is. Redistributive effects must resolve. The new money will not reach every person at the same point in time. Some people will get the money earlier and some people will get it later. Some people are made richer and others are made poorer. And because of this, because of these redistributive Effects. There cannot possibly be any agreement on an inflationary policy of the bank, but the bank must engage in inflationary policies in order not to incur any loss. Even the fact that people might get the bank profits paid out to them would be no consolation for the and the fact that these profits are complemented by unequal losses of various individuals.

51:55The later Friedman realizes this too. Friedman, an article a few years ago, comes to the conclusion And his earlier argument that fiat money represents a social savings is actually quite false. He realizes, for instance, that the cost of, that this article is called, the cost of irredeemable paper money, he realizes, for instance, that the cost of irredeemable paper money are first Inflationary tendencies have drastically increased as compared with what inflationary tendencies there were under a commodity money standard.

52:49He has realized that the predictability of future market conditions has become lower than it was under a commodity money standard. He has realized that long-term investment plans, long-term investment projects have been decreased as compared to what they were under a more stable commodity money standard. He realizes that the number of investment and hard money advisors, who all of course use some resources as well has drastically increased since we have a pure fiat money standard as compared with what it was under a commodity money standard. Friedman thinks that gold production actually increased since we are off the gold standard because people Friedman believes that money market funds would likely not have developed at all if we would have stayed on a commodity money standard. Friedman realizes that currency The future markets would also not likely have developed if we would have stayed on a commodity money standard.

54:26And all of this obviously involves waste, waste created by the existence of fiat money which Friedman originally advocated. Now you would think a person who realizes all of this should come up with the conclusion I think we should just go back to a commodity money standard, however Friedman dogmatically clings to the view that despite the refutation of his own thesis, that is, fiat money represents a savings over a commodity money, despite the obvious refutation, he still thinks that The gold standard is absolutely ridiculous and the fiat money standard should still be continued.

55:14Despite his own positivist methodology that says economics is prediction, he predicted that we would save, he found out that we didn't, but he still didn't accept the conclusion that unfortunately I was wrong. There can be no monopoly agreement, that was one thing that I pointed out, and there can also be no agreement on a frozen monetary base, because a frozen monetary base would so to speak a losing proposition. Fiat money does not naturally replace commodity money as a more efficient money, but commodity Money is deliberately destroyed at all money holder's expense.

56:12I'm not quite sure about the time. Okay, now then briefly, why is fractional reserve banking impossible? Impossible. And let me only make one little argument that deals with arguments that were advanced by George Selgin and Larry White. They make the point, doesn't freedom of contract No, the mistake in that argument is simply that freedom of contract exists only with respect to the properties of the contracting parties.

57:14People are free to make any contract with respect to things that they own, but people are not free to make contracts with respect to properties owned by others. This is precisely what goes on in fractional reserve banking. So much about that argument. I want a brief, another brief remark on the idea that we can have option clauses, saying, putting on the note a remark that in case we can't pay up, we have to wait for some time. When such notes that have an option clause become money, Larry White for instance claims that that is possible and I want to give you an argument that shows that it is not possible.

58:09Money notes with an option clause printed on top are clearly only tradable at a discount against notes that have no option clause attached to it. And not only that, what is more decisive in order to refute the idea that money or notes with an option clause can be the most easily resaleable good is simply this. Notes with an optional clause printed on top of it only confer a conditional property title to people. But anything that is a conditional property title is by definition less easily and saleable and less generally acceptable than an unconditional property title to some extent.

59:03The illustration is, let me just give one example for this. If you buy airline tickets, these guys frequently draw analogies between airline tickets and notes. Let's say you have an airline ticket that has all sorts of conditions attached to it. You can only fly thirsty and whatever it is and only out of this airport and you have an unconditional airline ticket. You can anytime you can just come and go. Now when it comes to the resaleability at par value of an optional airline ticket or a conditional airline ticket versus an unconditional airline ticket, which one will be more generally acceptable at par, the conditional one or the unconditional one? The answer should be obvious. Thank you.