Monetary Lessons from America's Past

0:00I'd like to acknowledge Mr. Jeremy Davis for his generosity in putting on this event for us. Wow, it really is packed in here. I don't anymore feel guilty saying to people, no, we really can't fit you in. We really can't fit you in, actually. Well, that's a great sign because I understand there's a competing event going on today as well involving Ron Paul's campaign for liberty. So the fact that we've got an overflow crowd here, we had to turn people away, means that there are a lot of good a lot of people interested in this stuff. In fact, I was speaking just this morning to a gentleman from France who said I would never have expected that I would come to Houston and there would be so many people interested in these things and I said well you know it is still a small percentage and he said I don't know if you had an event like this in Paris I don't think you'd get a room full so he was very impressed by you Houstonians. Let me start by saying a little something about what I have been up

0:56to I'm I'm not going to tell you how many books there's no way to say that without sounding vain so you can do some investigative work on your own on that but I do have a the numbers nine says Lou thank you but that includes a book that it's not out yet it's coming out February 9th and it's called and I'm not responsible for this title but I think the marketing department of the publisher I understand what they're going for with the title but the title is meltdown so So it's one of these one word titles like Ann Coulter has, you know, guilty, treason, you know, whatever. Well, so Meltdown is the one word title, but that always means that the subtitle is going to be a paragraph long. You know, you have to turn to page three to finish the subtitle.

1:42But the subtitle is, what's that subtitle again? No, it's a free market look. And see, there's the marketing department. I want people to understand this is sort of the free market take on this. A free market look at why the stock market collapsed, the economy tanked and government bailouts will make things worse. So I wrote this in great haste and it's surprising given how slowly publishing tends to move that I'm able to produce a book that comes out February 9th that in effect describes events through December 2008. talks about the Fed funds rate being targeted between a quarter of a percent and zero. I mean, so I'm able to get all that because I have a publisher, Regnery, that can pretty much, you know, you send them your manuscript and somehow, you know, just later in the afternoon, you're in Barnes and Noble and there it is, you know.

2:38So I'm very grateful to have their help and I hope you like it because I, as I said, I had to do it in great haste. This is the only time that I actually remember several nights in which I actually fell asleep in front of the computer. That's not because the book is a bore, by the way, because I was working so hard. But because I thought that, you know, given this catastrophe that we're facing, and it's a catastrophe in large part because of what the blockheads are about to do to us, because, you know, in their way of fixing things, I thought it was important for the Austrian perspective to get out there in in book form to help get a little more attention for just to make it marginally more difficult for basically the left and right Keynesians in the media to pretend that this is the free market's fault to have the sort of counter narrative that explains what really happened.

3:34Now in that book, even though it discusses current events at great length, it also has a historical angle because it does actually go back into other business cycles in American in History to try to explain what the causes were to show this is not the first time this has happened. Now the title of my talk today is Monetary Lessons from America's Past. You notice lessons in the plural. It's actually really only one lesson I want to teach, but since each succeeding business cycle features economists who act as if there never was any other business cycle, this one has no cause just like any previous one. So it's like you're teaching a new lesson each time, like each panic, each depression, each recession has a new lesson to teach, but it's not really new, it's the same old lesson that if anyone had been paying attention or listening to sound economists, would have grasped.

4:30Now at the same time I realized that that title doesn't exactly grab you, doesn't jump off the page like a title like Death Fuel does, I'd actually just like to go and listen I do just want to say one little thing because I brought a book up here that I wanted to promote and I find it's almost all sold out anyway. I thought, I didn't know people were aware of it actually, but one of the big applause lines I got in a speech I gave in the fall was I said that if you're an opponent of war and you're an opponent of the war machine, And you're not going to get anywhere unless you go after the money machine. There is a connection between the Fed, the central bank, and war.

5:19And I'm sort of assuming that's what Bob will be driving at. But I have this book that just came out the end of last year called We Who Dared to Say No to War. It's a collection of anti-war writings from across the spectrum, and I'm very happy to have done it. There's almost nothing of me in it other than the selection process and some of the introductions of some of these pieces. But it was very satisfying because I did this project with somebody on the left who, as the project went on, grew more radical. I watched this guy get more radical because it started off with him saying, well, you know, maybe a couple of these wars are okay. And you know, we'll just put a disclaimer saying one of the editors supports a couple of the wars.

6:04And by the end he was saying, out of heck with all this, it's all propaganda, forget it. So anyway, I wanted to point that out to you before I... Because once this book comes out February 9th, I'll never have time to promote this one ever again. So I hope you won't think this is too intolerable that I would mention it to you today. Now recently, the December 2008 issue of the quarterly journal of Austrian Economics came out. I had my first article in there ever, and it's called, What Austrian Economics Can Teach Historians? because what I want to suggest today is that a historian with some background in Austrian economics is unusually well equipped to understand the phenomena of the past. Now it happens to be the case that most historians don't really have much background in economics and I'm sorry to be the bearer of bad news, but yes it's true, most of them don't really understand much about the subject.

7:00So you have a sort of almost an unfair advantage as a historian because for example you have the benefit of knowing Austrian business cycle theory and so therefore when you see a system wide bust such as we're living through today and as we've lived through in the past you more or less know where to look and you know what to look for and it isn't that history can in effect teach us economic laws or we can derive such laws from history because history in and of itself is really just a sequence of events, it cannot on its own prove correlation, that A cause B, it can prove that B followed A in temporal sequence, but it can't prove that A causes B, for that we need economic theory, and that is what Austrian Economics gives us.

7:51Now, some of you may have seen an article by a guy named David Sirota online for Slate. Now, this fellow is a progressive and, gosh, I don't know why that word is attached to the people it's attached to. I mean, really, every single thing they want to propose for the economy, if consistently followed, would gradually return us to the Stone Age. So I don't see why they get the word progressive, and I don't know what word we get, but it sure isn't nice sounding like progressive. But Sirota wrote this piece absolutely shocked that there could be anyone out there claiming that Franklin Roosevelt's New Deal was not a smashing success.

8:36I mean, he'd never heard this before. And so he wrote this article saying that, you know, well, most economists will say so and so. And most historians, he said, in fact, you know, you really won't find any respectable historians who would argue that Franklin Roosevelt's New Deal didn't help the economy, didn't increase employment, and so on. Well, I've restrained myself. I was going to write a smashing response, and I thought, I'm going to keep these smashes for when my book comes out, I can plug it and drive Sirota crazy at his expense. I'll be promoting my own stuff. But the obvious sort of reply, at least one obvious reply, is that this is not a strictly historical question anyway.

9:21It doesn't matter to me that a bunch of historians who know... I'm telling you. I mean, you get to know them. They may be wonderful, delightful people with many, many fine qualities. But they don't know a thing about economics. The question of whether a certain policy was good or bad for the economy cannot simply be answered by looking at statistics. Before we did it, the unemployment rate was thus and so. After we did it, it was thus and so. Therefore, it helped or hindered. That kind of question can be answered, again, only with the benefit of theory, because, of course, unemployment may, in fact, go down.

10:11That could be the result of the natural working of the marketplace, in effect, operating in spite of government restrictions on its free operation. How can we ever know whether various trends in employment are attributable to government programs, or whether, in fact, these happy outcomes occurred in spite of these programs? How can you know that in the absence of economic theory? And this is something most historians aren't equipped with. So it's not a historical question. It's where would the economy have been in the absence of these programs? That's the question we need to look at. So these are not, by and large, historical questions, but we are relying on historians without an economic background to answer them. Now, I'm going to sort of take for granted that most people in the room know Austrian business cycle theory.

10:58and if you don't, that's too bad, you should learn about it. And I actually don't mean that to sound snooty, I think it is arguably the most significant contribution the Austrian School has made. But I will sort of try and give my two minute exposition of it, because then I'm going to try to apply it to various episodes in American history. According to Austrian business cycle theory, when the central bank, or Really, it doesn't even have to be a central bank. It can be a, by and large, decentralized type of banking system as existed from the 1860s to the end of the 1870s that had government-granted money-creation powers. But we'll say for shorthand, when the central bank increases the money supply and artificially forces interest rates down, it provokes unsustainable investment booms in particular sectors.

11:51These are unsustainable because, for one thing, the general public has not shown any particular desire to postpone its consumption and wait to consume in the future, to defer its consumption for the future. So here we have investment projects whose fruits will be born only in the distant future, but people, in fact, if anything, are increasing their consumption in the present. But secondly, this is also an unsustainable boom because if the lower interest rates had been the result of increased saving by the public, this increase in saved funds would provide the material wherewithal to see all the additional investment projects through to completion. But if the interest rates are low artificially, simply because they've been forced down, then the amount of saved resources in the economy has not increased.

12:42And so all these additional investments have to take place under the constraints of an unchanged pool of real savings. And so they can't all be completed. And so it's not even so much that there's a quantitative increase in investment in the so-called higher order stages of production, capital goods. and Capital Goods, although there often is, but there's also a qualitative change in the kind of investment that takes place. And Mises, as Bob Murphy recently reminds us, gives us a very useful example in human action. I recently re-read Mises' own exposition of the theory, and I've just came to the conclusion there has not been an improvement on Mises' exposition as important as some developments have been.

13:28Mises uses the great example of a master builder who's building a house, but he's under the false impression that he has, let's say, 20% more bricks than he actually has. Now, let's suppose for the sake of argument he can't buy any more bricks. What kind of house is he going to build? He might not simply build a larger house, although that alone would cause damage. He might, in fact, build a different kind of house. The style might be different. And so, as he's laying the bricks, he's obviously engaged in an unsustainable enterprise Because there aren't enough bricks, there aren't enough resources available to him to complete this particular project. Now which is better? Is it better that he find out his error sooner or later? Obviously the sooner he finds out, the fewer resources he's going to squander. If he just has to, in effect, demolish two rows of bricks, well, you know, too bad for him, but much better than that he get to the very last brick he has and then realize,

14:22whoa, whoa, wait a minute, I have to demolish the whole thing. But that's in effect what we're doing every time the Fed says the solution to our problems is more artificial money creation because in effect what you're saying is the solution to the builder's problem is just keep getting him drunk so that he doesn't notice that dwindling supply of bricks. That ought to solve the problem, but that's what the Austrian School means when it says that all you're doing is setting the economy up for a worse bust in the future because you're perpetuating It's movement down this unsustainable trajectory. It's better that it be cleaned out sooner rather than later, and the present bust is arguably the best example in American history of this principle, that if, for example, the dot-com bust, now the dot-coms by and large went bust, but there were other sectors of the economy that ought to have been cleaned out a little better than they were and were allowed to persist. And as Mark Thornton has pointed out, it's interesting to note

15:23The recession that we saw in 2000, going into 2001, was the first one on record for which new housing starts did not decline. So it seemed to people that, and here's how we get all these myths of the housing bubble, that, well, you know, everything else may go down, but apparently housing never does. Housing was just always going to go up. The prices will get higher, it's the best investment you can make, you can flip houses for a living. Recently, somebody arguing that Home and Garden channel, HGTV, is partly responsible for the housing boom, right? Because you watch this thing and you think, I must be the world's biggest sucker if I'm... because you get people who can barely form a coherent sentence saying, well, we liked that $700,000 house, but where was the gazebo? And so you think, Man, I must be such a chump, you know, or, or, hey, look, I bought this house for $15,000.

16:22Then I flipped it, I put in new carpeting, I sold it for 150 grand. You think, oh man, so I mean, obviously, in the absence of a continuous increase in the supply of artificial credit, you can't keep these things going, so we can't just blame that one network, but boy, what an obvious symptom of the insanity that was going on. So if there had been a full correction at that time, we might have been able to arrest this crazy bubble that we have, that we're dealing with now. Okay, so here's the basic lesson. Artificial credit creation produces unsustainable booms. This is not that hard to get. I mean, I think it has incredible explanatory power. And what I find is that critics of the theory almost always are simply misstating the theory.

17:13So it's like Keynes argued that he had refuted Say's Law. Well, here's how he refutes it. He misstates it sort of stupidly, like he gives you a dumb guy version of Say's Law, and then refutes his own misstatement. Well, that's what Paul Krugman does with Austrian Business Cycle Theory. I can't be bothered to read anything, because, hey, didn't you So here, I'm Paul Krugman. I don't need to read it. But as I say, I'm calling these monetary lessons because, again, it's as if these things never occurred. And when you read, in effect, contemporaries, you read people in the 19th century, like William Graham Sumner, they are all aghast that the same symptoms are manifesting themselves in these busts, The same boom-bust cycle, the same causes, and just when people maybe start putting two and two together, then they get enticed to start the whole thing up again.

18:13And some just can't believe this. Why are people not getting it? So when you look through the history of American panics, we've got panics going from 1819 all the way to 1907. Then the economy was made panic-proof by basically not using the word panic anymore.

18:38That's what they do, by the way, when the kids are doing worse and worse on the SATs, they just recalibrate the numbers. The kids are doing great on the SATs. Let me share with you a statement by a Republican senator from New York, Ella Hugh Root, who He served in TR's cabinet and was a sort of a long time member of the establishment. But here's what he had to say about the Federal Reserve Act. The statement he makes is deeply historical. He says, little by little, business is enlarged with easy money. With the exhaustless reservoir of the government of the United States furnishing easy money, the sales increase, the businesses enlarge, more new enterprises are started, Bankers started, the spirit of optimism pervades the community.

19:27Bankers are not free from it. They are human. The members of the Federal Reserve Board will not be free of it. You're not kidding. They are human. Everyone is making money. Everyone is growing rich. It goes up and up. The margin between costs and sales continually growing

20:18This is what happened to greater or less degree before the panic of 1837, of 1857, of 1873, of 1893, and of 1907. The precise formula which the students of economic movements have evolved to describe the reason for the crash following the universal process is that when credit exceeds the legitimate demands of the country, the currency becomes suspected and gold leaves the country. Apart from a few phrases that maybe I might not have used, he still has hit upon an important constant factor in every one of these downturns. And yet, when you talk about Austrian business cycle theory, when you can get someone who's reasonably intelligent, who hears you out, oftentimes the response is, okay, well then what do you say about panics and depressions that occurred before the Fed?

21:08Well, it's the same basic ingredient in every single one. Now, some of you may know that Murray Rothbard did his PhD dissertation at Columbia University on the Panic of 1819, and his book on this subject was published by Columbia University Press in the early 60s, and this book on that panic was extremely well received in the scholarly community. It got excellent reviews in all the major journals, and I remember being in graduate school, in fact it might even have been an undergraduate at the time, and I had I had to read a book on Jacksonian America and in the bibliographical essay I remember this author who was just a mainstream middle-of-the-road historian saying, you know, talking about what you should read on economic history of this period and he said Murray Rothbard's book, The Panic of 1819, is unlikely to be superseded and I remember having just such a sense of satisfaction, this just matter-of-fact mainstream acknowledgement In this panic of 1819, what do you see happening? We have, first of all, the Second Bank of the United States, chartered in 1816, becoming an engine of inflation.

22:22Big surprise there. Supposedly, the Second Bank of the United States was supposed to restrain the inflationary moves of state banks and banks across the country. But as critics noted at the time, what's much more likely to happen than that this will be a restraining force is that it'll be just another crummy inflationary bank. So the solution to a bunch of little ones is to have one big giant one. And in fact, that's what it wound up doing. And in fact, Senator William Wells of Delaware had warned that exactly this would happen. He said that if you think you're going to get relief from inflation, in effect, by creating a giant national bank with government monopoly privileges, that's like hiding in the water for fear of the rain.

23:13This is not going to solve your problem. He said, this bill came out of the hands of the administration ostensibly for the purpose of curtailing the over-issue of bank paper and yet it came prepared to inflict upon us the same evil, being itself nothing more than simply a paper-making machine. Well, in the wake of the bust that took place, Murray points out in his book that a great many American writers came to the conclusion that in order to promote stability in the banking system, What you needed in effect was a system of 100% reserve banking, or at the very least, a system in which the banks are not bailed out if they cannot satisfy their depositors' claims. Which in fact they consistently throughout the 19th century and into the 20th were allowed to do.

24:01Up through the panic of 1907, they were allowed to simply say to their depositors, Well, tough luck, you know, it's going to take us a while to get your money if we ever get it. Interestingly though, there's also some acknowledgement that the way to restore the country to prosperity is to, in effect, let all this phony baloney credit and all the malinvestment, let it all shake itself out and let the economy build itself up again from a sound foundation. The New York Evening Post, for example, wrote, Time and the laws of trade will restore things to an equilibrium if legislatures do not rationally interfere in the natural course of events. Well, there it is. There's the best advice you could imagine. That's from 190 years ago.

24:49Also, a number of voices, even again in 1819, came to the conclusion That in fact, banks through artificial credit creation can start the economy on booms that in effect sow the seeds of their own destruction and reversal. And they in effect had this rudimentary understanding that the banks sort of create more paper money than they have gold to back it. They push up prices at home. These higher prices at home encourage Americans to buy more goods from anywhere but home, from abroad. and likewise it discourages foreigners from buying American goods. Foreigners in turn pile up all these bank notes from America because Americans are buying more foreign goods and so they turn around and demand gold for these bank notes and so the banks then in order to satisfy these claims have to reverse the inflationary process and it all comes to an end. So there was a basic sort of understanding that you cannot create prosperity by printing up little pieces of paper. Prosperity has to be created through saving and production that there is no substitute.

25:53Now, of course, there is also introduced into the system so-called moral hazard, which refers to the phenomenon by which you tend to engage in more risky behavior if you know the consequences will be borne not by you in particular, but will be socialized across a broad group of the population. And so if the banks know that the government will in effect pass laws to bail them out and to allow them to get away with more or less swindling their customers, well they're going to do more of it. It makes sense that they'll take, they'll do riskier things. Now in the 1830s, 1837, panic of 1837, what's been going on in the 1830s? Again, massive increase in the money supply and credit and again an unsustainable investment boom.

26:38A contemporary of that episode, William Leggett, the New York editorial writer, describes the situation in words that are eerily reminiscent of Austrian theory. He said, What has been, whatever must be, the consequences of such a sudden and prodigious inflation of the currency? Business stimulated to the most unhealthy activity, a vast amount of overproduction in the mechanic arts, a vast amount of speculation in property of every kind and name at fictitious values, and finally a vast and terrific crash when the treacherous and unsustainable basis crumples beneath the stupendous fabric of credit And the structure falls to the ground, burying in its ruins thousands who exalted in the fancied security of their elevation.

27:27Men nowadays go to bed deeming themselves rich, and wake in the morning to find themselves stripped of even the little they really had. Isn't that home equity in a nutshell? They count deluded creatures on the continued liberality of the banks, whose persuasive entreaties seduce them into the slippery paths of speculation. Again, home and garden, that sort of thing. But they have now to learn that the banks cannot help them if they would and would not if they could. They were free enough to lend their aid when assistance is not needed, but now, when it is indispensable to carry out the projects which would not have been undertaken, but for the temptations they held forth, no further resources can be supplied. Leggett at the end of 1837 said, Any person who has soberly observed the course of events for the last three years must have foreseen the very state of things which now exists.

28:24He will see that the banks have been striving with all their might, each emulating the other, to force their issues into circulation and flood the land with their wretched substitute for money. He will see that they have used every art of cajolery and allurement to entice men to accept their proverred aid, that in this way they gradually excited a thirst for speculation and by the way, it's not that speculation is a bad thing in and of itself but these artificial booms encourage people to think that everybody can be a speculator or everybody can invest in the stock market, anybody can, and if you're not, you're a sucker which they sedulously stimulated until it increased to a delirious fever and men in the epidemic frenzy of the hour wildly rushed upon all sorts of desperate adventures They dug canals where no commerce asked for the means of transportation.

29:12They opened roads where no travelers desired to penetrate. And they built cities where there were none to inhabit. Now, the panic of 1857, what's going on there? A five-year inflationary boom, very substantial credit expansion. Not surprisingly, what are the hardest hit industries? Well, the industries that expanded the most during the boom, the most capital-intensive, Railroad Construction and Mining Companies. President James Buchanan, and I almost, again, I always regret citing any politician for economic wisdom, it just seems wrong to me, but it is interesting because we're never going to experience this again, but a century and a half ago in his first annual message, James Buchanan said, it is apparent that our existing misfortunes have proceeded solely from our extravagant and vicious system of paper money and bank credits.

30:08And he said that as long as, he said this later, as long as banks were permitted to expand credit beyond the level of deposits they had on reserve, he said, quote, these revulsions must continue to occur at regular intervals. Panic of 1873, again, this is a very inflationary environment, it's the era of the greenbacks, and what's the result? Well, we see, again, a boom in railroad building, and similarly to today, where we saw a boom in housing, the boom is encouraged largely by the artificial credit expansion, but is also sustained by regulatory and legal benefits. So, for instance, the railroads were getting subsidized loans, they're getting land grants, in the same way that today, housing, in addition to the credit spigot being unleashed, We also had Fannie and Freddie, we had various other stimulus to home purchasing and construction.

31:02So again, we see a boom bust more or less along the Austrian line. And Murray Rothbard points out that if you actually look at the decade of the 1870s, this is supposed to be an example of how terrible it is before you have a Federal Reserve system. First of all, you can't blame the 1870s on gold anyway, because the gold standard was only reestablished in 1879. But here supposedly, you know, is the worst or one of the worst downturns in the era before the Fed. It's still not as bad as the Great Depression. But interestingly enough, if you actually look at the economic indicators of the 1870s, we see 6.8% real national product growth per annum, 4.5% average annual increase in real product per capita. But what kind of depression is this?

31:49We see manufacturing employment increasing, agricultural employment increasing, And what Rothbard points out is that a lot of historians have been inclined to call this a period of depression because prices were falling so dramatically every year, 3.8% per annum. So that must have been a depression. They know that. They've heard this repeated over and over. Falling prices is the worst thing that can happen. Well, if that were the case, why is the economy exploding in productive capacity is sort of an interesting question. and even Milton Friedman and Anna Schwartz acknowledge this, that this very much should cause us to reassess our understanding of the effects of price deflation. All right, given the time constraints, we'll just zip along. It's worth noting, by the way, that even though it's not legitimate to try to prove an economic law through history, History. Nevertheless, what we do is we use the tools the Austrian School gives us to understand history better, to account for what's going on. But all the same, it is interesting

32:50to note that in the 1870s, prices and wages were both rising. In the 1880s, the first decade after gold had been, in effect, reinstituted, what do we see? Wages still rising, but prices falling. In fact, wages rose 23% during that decade, which may be the best decade for wages in American History. Now suppose it had been reversed. Suppose the gold decade had been the one with rising prices and wages and the fiat money decade had been the one with rising real wages for workers. We'd never hear the end of that, right? That just proves gold stinks and nobody wants it and it's terrible. Whereas when it's reversed, what do we ever hear about the 1880s, right? Nothing, like crickets. You don't hear any response about So, I mean, those who live by these historical, empirical examples should also perish by them, so you might as well throw the 1880s at them.

33:421890s is a similar thing. There's a panic largely because people were losing confidence in the U.S. gold standard, because there was a suspicion that there was going to be a move toward an inflationary kind of silver standard, and in fact, then there was a suspicion that the banks were unsound, so there was a run on some banks, and then they had the usual allowance of these banks to suspend species payment, as usually happens. In 1907, we have the panic of 1907, what happens there? Well, again, we've got banks that can't meet their obligations to depositors. So, October 21st, 1907, there's a run on the Knickerbocker Trust Company in New York and that bank failed. Three days later, the second largest trust company also had a run.

34:28And then, because of this, people around the city and around the country began demanding money from the banks and the banks couldn't produce and many of them went under. Now, historians look at this episode and conclude this shows we need a central bank to be a lender of last resort, to bail out banks that can't meet their depositors' demands. Now, why historians are making this ethical judgment is a good question. question why don't historians instead say man these were really crummy banks and it's a good thing they went out of business and if we bail them out all we're doing is propping up in the same way that sending foreign aid is it to Zimbabwe props up crazy lunatics who eat people at this in the same way propping up propping up banks like this props up bank management that you know that either they don't know what they're doing or they're dishonest is this are these people we want to reward and I don't want to mention his name here I

35:22I mention him in my book. That's bad enough. So I don't want to mention him here. Because he is a decent economist in some ways. He wrote a very good history of American economic history in the 20th century. But this particular historian wrote a book on the Great Depression. He's more of an economic historian, but one who actually knows about economics. And here he is, a guy who's free market on everything. But he said that the panic of 1907, he said that in this panic there was no lender of last resort or banker's bank in the United States that could make loans to the banks themselves when banks required additional currency. They just required it. I wonder why. And by the early 20th century there began to be a need for such an institution.

36:13So you notice how entrenched the bailout mentality is. It never even occurs to a free market economist that no, maybe you don't need some government established central bank to bail out this institution any more than you need a lender of last resort for the shellfish industry or for the personal computer industry. Why should there be an exception for this? Well, in Colorado Springs, I'm talking about, I have a topic called, in April, Why You've Never Heard of the Great Depression of 1920, so I won't say much about that one, especially since I've only got a couple minutes left anyway. But I will at least point out that it's fun to read Keynesian economic historians, such as they are, reflecting on that episode, because there's a downturn, the first year of which was worse than the first year of the Great Depression, The Federal Reserve, fiat money, fractional reserve banking, Human Action and State, The Theory of Money and Credit

37:31I have the privilege, basically, of having been able to learn from the giants of the Austrian School, that I'm able to see history more clearly. It isn't because of any particular talent of mine, or I've got some crystal ball that works in reverse, where you can understand the past better. It's because I enjoy the tools that geniuses before me fashioned for us. And that's very important. It's a very important benefit. But today, now, as I say, we're living through more or less a repeat of what we've lived through in the past. And just as in the past, particularly in the Great Depression, you will find cranks who say the solution to our problems is the repetition of the problems themselves. So the solution is the same thing that got us into the mess in the first place.

38:19The problem is, today, the cranks are in the government and they're in the New York Times. In the old days, Henry Hazlitt wrote for the New York Times. Can you imagine a world like that? Where Henry Hazlitt wrote for the New York Times? Well, one of the quotations I use in my book from Hazlitt involves a reflection on this very thing. He says, you know, it's bad enough that these artificial booms and busts occur, and they cause all this pain throughout society. But it's even worse that the bust is inevitably and stupidly blamed on capitalism. He wrote that about 40 years ago. So thanks to the Mises Institute and Ron Paul and all the things that all you good folks are doing trying to get the word out, there is at least a chance that this time they won't be able to get away with that.

39:13So thank you very much.

39:21Thank you very much.