The Hard Money Issue in American Political History

0:00In listening to Elizabeth Currier's proposal about a musical about John Law, I was a bit put off simply because if it were made by Broadway or Hollywood, I fear it would be in the same vein as there are many movies, including those to which we were subjected during World War II, about the glories of the Soviet system. I fear that the picture would come out something like an intrepid, heroic, business-exposing reporter, preferably a woman for the Mercury de France, would be following John Law around and showing how this new banking system was all part of the capitalist plot against the working class.

0:51I suppose Jane Fonda could play that role. That is, if she were willing to wear a long dress rather than slack, so that may be the one thing that would prevent it. In discussing the constituencies for hard money, I think I can do no better than begin at the point at which Elizabeth Currier ended her presentation. Because it's important for us to realize that for the American Founding Fathers in the 18th century And for our forefathers in the 19th century, the story of John Law and the story of the Mississippi bubble were in their direct consciousness.

1:49This was something they were very, very familiar with. In other words, it's impossible to really have a picture like 1776 without having a picture about John Law, because one can't understand what the founding fathers were were doing in Philadelphia in 1776 or in 1787 when they framed the Constitution, unless one understands that they and the people who elected them were very, very aware of the Mississippi bubble and of John Law's theory and totally repudiated them. Just as those same people in the 18th and 19th century were totally aware of Roman in History and the Role of Inflation, the Role of Taxation in Destroying the Great Cultural Achievements of the Ancient World.

2:46So that what we have heard today is exactly what the Founding Fathers were aware of, but which few people outside this room have any awareness of. Now when John Moore finally was pulled down partly by the heroic speculations of Richard Cantillon, he was replaced, he and the government of the regent were replaced by a new government, The young king, Louis XV, the great-grandson of Louis XIV, turned to his tutor, the Abbé Fleury, to replace law and the regent in control of the government.

3:43And the Abbé Fleury, who was not a young man, took control and, being Prime Minister Professor of France was raised from being an abbey to being a cardinal, so he was like so many of the cardinals who come to high office in the Catholic Church only when they're in their 70s and seem to live on to their 90s, and perhaps that explains why the institution has lasted 2,000 years. There's nothing impetuous, only caution and good sense. Now the Cardinal Fleury saw the causes of the inflation that John Law instituted. That is, the previous high degree of government indebtedness which drove the government to try and find some way to get out of the government debt, and the solution to them was the inflation that he proposed.

4:44It's important for us to realize that at the very same time John Law was carrying out the Mississippi Bubble. In England, similar financiers were carrying out the so-called South Sea Bubble. And the American Founding Fathers and our forefathers in the 19th century were very familiar with the Mississippi Bubble and the South Sea Bubble. The South Sea Bubble had the same causes as the Mississippi Bubble, that is, large indebtedness. How did that indebtedness occur? In other words, we're dealing with something unique in modern history, the beginning of our own experience.

5:34This is the first of many occasions, and what was the cause of it? The cause was the first world war with a small f, the first time there was a world war. It lasted roughly from 1689 to 1713, almost 25 years, and to fight that war, both England and France went into immense indebtedness. But to be able to do that required something new. In England, lenders were familiar with the government. A few people lent money to the government, and whenever the king was short of money, he just repudiated the previous loans. So people were not anxious to lend money to the king or to the government.

6:23And so something new had to be invented. Why? Because the public didn't want to pay for the war. The war was being carried on. It was protracted. People did not want to pay taxes, and yet the government wanted to continue the war. It wanted to borrow. The only way it could do that was to develop something entirely new. That is, the central bank. And so in order to fight the war, the Bank of England was created in order to begin to finance the war through public borrowing, to create something else that was new, the national debt. No one trusted the government. But if key financiers would guarantee the debt, people would lend to them, and then they would in turn, through the Bank of England, lend to the government.

7:13And in return, they got monopoly concessions from the government. And this persisted. And finally, after more than 15 years of war, even the Bank of England said, well, we're not going to lend more money. The government created a new company called the South Sea Company. Now, if you think the Mississippi area was obscure to people at that time, the South Seas, that is, the Pacific, was unknown. Therefore, people were willing to risk even more money into the South Sea Company than in the Mississippi Company. Who knew what cities of gold existed in the islands of the South Seas? Somewhere near Antarctica, there might be just wealth to be made hand over fist.

8:00So investments were put into this. The government then started borrowing from the South Sea Company. And the same speculation that went on in France went on in England. And at the same time, the floor fell out of the South Sea Company, as it did the Mississippi Company. Both bubbles broke. And just as in France, in England, a new administration came in under Sir Robert Walpole and his associates, Henry Pelham, his chief aide at the Treasury, Pelham's brother, the Duke of Newcastle, who became Secretary of State for 40 years, and the Lord Chancellor Philip York.

8:45And they recognized that the cause of this inflation had been the prolonged war. And so they came to an agreement with Cardinal Fleury that they would not pursue a strong military policy. Each country would reduce their military strength because that was the only way of cutting taxes. And so the English administration drastically cut taxes, French administration did also, and the result was a miracle. Because with those cuts in taxes, with a hard money policy, Englishmen accumulated the capital that was available for the Industrial Revolution.

9:37Without this policy of low taxation, without this policy of reducing the national debt, without a hard money policy, there wouldn't have been the savings available to invest in the Industrial Revolution. And so our whole history was changed by the recognition of these men, of the fundamentals of economic ideas. And they stayed in power, as I indicated, Walpole for almost 25 years and Newcastle for even longer. They pursued a policy of deregulation. That is, they didn't repeal any laws, they just didn't enforce them. They appointed lots of friends to offices as tax collectors and other positions, and none of them did their jobs.

10:25And they didn't get fired. They were kept on for life. They all sat in coffee houses, drinking coffee, while all the goods of Europe came flooding in through the channel ports, along the channel coast. A policy which the French superintendent of commerce coined the phrase laissez-faire to describe. American historians describe this period because Americans were affected as part of the British Empire by this as the period of salutary neglect. For the first time, government was neglecting the people.

11:16No government official did any of their jobs, and it was in this period that America flourished. Before this period, America and colonies were few huddled people along the coast. It was during this period that America filled up with population. Immigrants came from England, from Scotland, from Ireland, from Germany. They filled America and pushed over across the Appalachians. The population increased by something of perhaps 10 times during this period. Without that huge population increase, it would have been impossible to even think of being independent of England.

12:07Unfortunately, the successors of Walpole and the successors of Fleury started fighting again. And in that war, England was completely successful. England defeated France and Spain. It conquered Havana and Manila, the West Indies, the East Indies, West Africa, Quebec and the Mississippi Valley. England achieved total domination, including in India, but at the price of the biggest national debt in the history of the world. And as soon as the war was over, they said, well, we're not going to pay this ourselves. You Americans are going to have to pay for this national debt. And if you don't, then we're going to quarter troops in your cities and collect the taxes.

13:01And that led to the Declaration of Independence, and to the War of Independence. Now when the war started, the great disciple of Cantillon and Gournay, the man who developed The idea of laissez-faire happened to be the Finance Minister of France, Turgot, the greatest French economist in the 18th century, and he told the king that the Americans would probably win the revolution on their own, but it would take a long time, and the longer it took, the more it would exhaust England, and the more England was exhausted, the better and the way they're all France would be, and therefore the king shouldn't interfere.

13:56But unfortunately, the foreign ministry and the defense ministry said, we can't let England be defeated without France looking like it did it. Otherwise, it's sort of second rate gain and balance of power. We have to jump in. So, Turgot was thrown out, a new finance minister brought in, who said, oh, I know how to do it. will increase the government debt and so France shared in the victory of the American Revolution and was rewarded with the French Revolution because the French Revolution was the attempt of the French government to solve the immense debt caused by joining in the American Revolution.

14:41And the French did that, 1789, very years that the new American government was being established. It was right after Washington was inaugurated as president, it was right after the new Congress was called that the French Revolution was beginning. Thomas Jefferson was ambassador of France during this period. He came back to Washington but kept constant touch with France. He knew day to day what was happening in France, and this very much affected his thinking and therefore the thinking of 19th century American politics. The French sought to solve the financial problem of the national debt by seizing all the church They were in search of properties and issuing bonds called Asenyats against them, 5% bonds.

15:43But month after month they issued more and more and more bonds, so that there were eventually 45 million Leroy of these bonds out. The inflation rate was incredible. In order to deal with that the French government instituted the so-called terror, Institute at Price and Wage Controls, anyone who would not accept the Asen Yachts, which was everybody, was subject to death penalties. It became so bad that finally Robespierre had to be overthrown and an attempt made to stabilize to some degree. They didn't succeed. They issued more and more. And the final result of that was a totally new government came in, that is Napoleon Bonaparte.

16:30He knew why the previous governments had failed due to inflation and so he put in a gold standard and France from that time until after World War. Everyone had a relatively stable monetary and political system. In fact, during the 20th century, some of the brighter economic political commentators have said, well, oh, poor France, it's so backward, because the majority of the population is still enthralled with gold. It's such a sad situation.

17:23But because of that, because of the peasants and the ordinary people being more conscious of gold than any other of the major Western democracies, America or England, this has has meant much more stability in France than would have been expected. And the French continued to look to gold as an important solution to the craziness of political spending. Jacques Rouef, Ludwig von Mises' renowned colleague, was an advisor to the French government when Juan Carrey, the former president, returned in 1925 as prime minister, as the head of the Blanc National, to throw out the left cartel de gauche and to install the gold standard.

18:25And France survived the Great Depression much better than any other country because it did not go off the gold standard. And when World War II ended, and temporarily due to the advice of the Americans, France had the benefit of a tripartite government that is the moderates, the socialists and the communists, and ran up huge debts as you can imagine. Finally, the people throughout, the ones that the Americans preferred and put in the ones As the Americans didn't prefer the extreme right, that is hard money people, in 1951, Antoine Pinet, the famous mayor of a city near Lyon, which is the center of the tanning industry, he himself, a man operating a tannery, became prime minister, and immediately put in gold-backed bonds and immediately the financial stability of France returned and the government was able to shift to a growth situation from the previous no-growth post-war situation.

19:50And when General de Gaulle came to power in 1958, he appointed Antoine Pinet as his finance The United States Minister with Jacques Rouef as his advisor, as Rouef had been in 1951, and they pushed the gold standard, just as de Gaulle continued to do as the American inflation began to burn and destroy the currencies of other parts of the world during the 60s. This week, President Mitterrand, who as you know came to Silicon Valley in March to find out how to have a growth economy, for some reason he stayed the entire time on the campus of Stanford University and never once went to one of the businesses in the area.

20:48He was surrounded by the National Bureau of Economic Research, econometricians, and I'm sure France will not challenge the United States if he's using those people as his advisors. This week, Mitterrand has declared that he will not abide by the bonds issued in 1974 which were gold-backed. In 1974, the French government, after de Gaulle left power, in order to try and stabilize the finances, issued gold backbonds. Mitterand is saying they're too much of a channeling effect, they're too constraining for the government, which wants to do so much for the people by increasing the circulation through the bloodstream, as John Law indicated, by pumping as much new money into circulation.

21:47And this is going to create a new constitutional crisis in France, very similar to the one that went on in the spring and that he pulled back from, which was his attempt to destroy the private schools. Now this history, as I indicated, was very familiar to the American Founding Fathers. It was equally familiar to the writers on whom the Founding Fathers and their successors depended for economic ideas. That is, due to Thomas Jefferson, the two leading French economists of the beginning In the beginning of the 19th century, Bastute de Tracy and Jean-Baptiste Say were translated into English and published in Georgetown on the Potomac, and were used as the major textbooks in American colleges for economics until the end of the 19th century.

22:49And these were much more hard money than the English economists. and therefore American economic thinking was better even than the English economics thinking of the 19th century due to the two treatises by one by Destut de Tracy and one by Jean-Baptiste Say, both of which were translated through the efforts and probably by Jefferson himself. Probably that was the greatest legacy among many great legacies that Jefferson left to the American People. It was with these ideas in mind that Jefferson's successors, his disciples, especially those associated with Andrew Jackson and Martin Van Buren, that is the Democratic Party, so-called Second Democratic Party that came into existence in the 1820s, who centered their attention on destroying the monopoly of the Second Bank of the United States, the great monster as they called it, the great monopoly, in order to permit freedom of banking.

24:13It was the work of Say and destitute Tracy, it was the experience of the French Revolution, it was the experience of John Law, the Mississippi bubble on the one hand, and the experience of the great growth coming out of Walpole's salutary neglect, the Industrial Revolution in England and the huge agricultural growth in the American colonies. It was that background that made them recognize the dangers of a central bank and the great Contest that occurred about the bank, a contest that had huge popular support.

25:07Jackson and his policies were strongly supported by his followers, and the supporters of the bank were strongly supported. because these economic ideas were very closely connected to the more basic religious ideas of the period. Murray Rothbard has asked, how was it that while he can't get his students in class who have to pass exams to understand the importance of the debates on the tariff or the debates on money and banking.

25:54And yet, ordinary people in the 19th century would come out and march around the city for a whole afternoon or attend meetings all day to attack central banking, to attack the tariff, to support free trade. And he explains that the reason was that these people knew the connection between these more elevated issues and those more basic to themselves, namely sets of political issues coming out of their own cultural, moral and religious situations. Because the Jacksonian Democrats were opposing the Whigs and later the early Republicans, the Abraham Lincoln Republicans, who stood for a different set of values than did the Jacksonians and their supporters.

26:55What you had was a conflict between the Puritan ethic on the one hand, and those who were not of the Puritan ethic. Now this is a different Puritan ethic than we associate with John Calvin. In fact, the strict Calvinists in this period sided with the anti-Puritans. The reason was that this was a period when Puritanism had experienced a radical change from 16th, 17th and 18th century Calvinism. It was replaced by a more, a less traditional form of religious expression, emphasizing the idea of rebirth of some of the similar ideas that we've associated in the past with President Carter's religious ideas.

28:08Fine for those who held them. The problem was they quickly shifted from these as personal religious ideas and turned them into political ideas. They were not satisfied with their own salvation, but they were going to impose salvation on the rest of the population. And so whatever the value of their particular individual religious ideas when they became Part of a political framework were very much transformed, because just as they felt that a individual rebirth in Christianity would bring out a new man in a purely religious and moral sense, when they shifted from this as individual religion to political religion, They then said that in the same way you could create the new man who wasn't bound by traditional natural law, traditional human nature.

29:12You can see how different that is than traditional Calvinism. And so they felt just as the new man was not bound by previous restraints, the new man wouldn't be bound by things like the law of supply and demand. The new man, in a social-political context, would not be bound by this petty interest in hard money. Therefore, why not do, as John Law said, pump in something new into the economy? Let's have fiat money, because we're not bound by the old restraints that the rest of mankind had been bound by. Let's pump in government intervention in the form of tariffs, because we will protect the American economy and America will thrive because we're not bound by the laws of supply and demand. We are a new civilization. We've gone beyond that. You can see how much it's similar to, say, the French Revolution and Jacobin ideas.

30:17It's no longer anything we would recognize as a religious point of view. It's been totally secularized and became a secular religion. And one of the main vehicles for achieving this goal was to be the public school system. The public school system was invented in order since the existing adults who didn't agree were hopeless. They were benighted and couldn't be changed. But if we could get a hold of their children and mold them into seeing the value of central Financial Banking, seeing the value of government intervention, tariffs, government subsidies, how a whole new economy could be created, a vast flowering of the economy. And so the great issue for the individual people was the public school system, for example.

31:08Those who did not want to have their children forced into government schools also were against government tariffs, government banks, government money while those who wanted the public school system wanted other forms of control over the population the government control over money, fiat money, central banking, tariffs, subsidies and so you had a great civil war in the 19th century Unlike today, 85% to 95% of eligible voters voted because they were great issues at stake, whether or not the government was going to get control of your children, whether it was going to teach them a religion different than the one you wanted them to learn.

32:03And so, throughout the 19th century, there is an endless battle in this regard. Now, during the 19th century, insofar within the states, most of these battles occurred in the North, because southern states, the southern constituencies, totally rejected the puritan, secular puritan view. They were totally laissez-faire, totally Jeffersonian, totally influenced by the history of England and France and America in the 18th century. Unfortunately, the American South was defeated and occupied by the Puritan forces, and immediately the great benefits of government intervention were introduced.

32:51The public school was fastened on the southern states. Railroad subsidies, banking privileges, and in these reconstruction governments the end result was a astronomical debt for each southern state which held the south down until the 20th century. So the south during this period was a is a great center of support for laissez-faire, for liberty against government intervention. Unfortunately, bearing the burden of this immense debt, southern politics polarized.

33:44were some of the best, most hard-money people in the country were the so-called Southern Bourbon politicians, the great laissez-faire leaders of the post-Reconstruction period. But the debt was monstrous and heavy on the South, and so the South became one of the great centers of support for inflation. Having unfairly been, had this debt imposed on them, they were seeking another form of government intervention, inflation, to escape the burden of this immense debt which was breaking the back of the southern economy. And so, the end of the 19th century, the great debates about government intervention became More intense, in 1890, the Congress passed three major bills.

34:49One was the McKinley Tariff, which created extremely high tariffs obstructing free trade and Goods, and that created such a massive dislocation in the American economy that America suffered very much from a major depression. This was further intensified by the other acts that were passed. One was, since the main argument against the tariffs was that the tariffs would create Monopoly Companies Behind the Tariff Walls, which everyone recognized was true, Congress passed the Sherman Antitrust Act in order to try to keep down the growth of monopolies that would obviously grow behind the tariff walls.

35:42In addition, Sherman brought in the Silver Purchase Act, which mandated that the government issue four and a half million ounces of silver coin a month, which was a major inflationary measure and which contributed to the intensification of the depression that occurred. And so what was the answer? The answer was because the President of Cleveland, who was one of the most laissez-faire presidents and the most hard-money presidents, kept warning, this is a great danger, this is a great danger. He was repudiated and they said, the problem is we didn't inflate high enough, four and a half million ounces of silver a month wasn't enough.

36:31That was the problem. We have to have complete coinage of silver and repudiation of gold. And so the Democratic Party repudiated its hard money position, its anti-government intervention in position and put in William Jennings Bryan as the presidential candidate. He had swept the convention with his speech declaring that mankind would no longer be crucified on the cross of gold, forgetting the whole experience that Americans had known that mankind is crucified on the cross of paper money and saved through gold. And so his nomination totally reconstituted politics in America from then on.

37:26McKinley himself was nominated through the efforts of Mark Hanna to be presidential candidate, and Hanna arranged for the elimination from the Republican Party of all of the Puritanist leaders who were not able to get popular support, those who wanted to fasten the public school system on the population. He got them out of the party, the extreme Puritanists, and said, we have to have a Republican party in which those issues are not involved. We can't be involved in that because that will make us a minority party. What we want to do is to be open to all the people who are against Brian.

38:12We shouldn't stand for positive things, we shouldn't try to propose new things. We will defend the gold standard and otherwise let the Democrats propose new taxes, inflation, public schools, whatever, and all the rest of the population will find a haven in the Republican Party and form a majority. And that's exactly what happened. Now contemporary American historians, like most contemporary American scholars, are very and they look at the Brian election and say here is Brian who had the most left-wing program in American campaigns, at least in the 19th century. How is it he didn't get any working-class vote? Here he is calling for inflation, calling for government subsidies, all of the things that supposedly the working class wants.

39:05And yet, there's a mystery that he didn't get any of these votes. It must have been the capitalists secretly threatened the workers that they'd be fired if they were caught voting for Brian. That must be the reason, because we don't have any... There's no rational explanation, since workers must hate hard money. And of course, the explanation is workers love hard money. The working class flocked to the Republican Party, totally abandoned the Democratic Party, The Democratic Party swept the Republican Party into power, which it held really until 1932. And it was because the Republican Party stood for hard money, it was because the workers, more than anyone else, have to have a sound monetary system.

39:54They have to have their standard of living based on hard money. They became the base constituency as they had been really throughout the 19th century. But then as supporters of the laissez-faire democratic party, they shifted en masse in 1896 in reaction to William Jennings Bryan and the inflation campaign. The Republicans continued to be helped by being open to all those frightened by the Democratic Party and not proposing anything themselves to frighten these voters from themselves by the fact that the Democrats nominated William Jennings Bryan three times for president.

40:45So these voters got so used to voting Republican to keep Bryan out of power that it fastened the Republican control on the Congress and on the country until 1932. Wilson was only able to be elected in 1912 because there were two Republican presidential candidates, President William Howard Taft and former president Theodore Roosevelt. They split the Republican vote and Wilson came in. In 1916, Wilson was re-elected only because the former Republican vice presidential candidate, the candidate on Theodore Roosevelt's ticket, Senator Hiram Johnson of California, told all of his supporters, don't vote for Charles Evans Hughes, cut the national ticket, and California, which hadn't gone Democrat, I think since it had been admitted in 1850, in 1916 went for Wilson and that's what elected him but so the Republicans in essence kept control until 1932 because of this hard-money constituency among the working class and I might as an aside mention that this hard-money Any working class constituency is, to some degree, paralleled by what is called the Tory

42:14working class in England. About 25% of the working class in England votes conservative, ordinarily. But if the working class, 30%, votes conservative, it means the conservatives will win. If less than 30, then it's a very close call. Margaret Thatcher has been getting 40 percent of working class vote, because the working class is the one most hurt by inflation. They don't have all of the gimmicks to escape that other people have, and so they are very, very sensitive to the inflation issue and very much supporters of hard money. Now, that support of the Republicans was destroyed in the 1920s when the Republicans became the main supporters of Prohibition, because Prohibition was a government intrusion that the working class did not like.

43:21And so they increasingly abandoned the Republican Party and created the base for the New Deal and the Federal Coalition of the 1930s and 40s. But if we look at the period since World War II, if we look at the nine elections for president that occurred from World War II until 1980, or the tenth one coming up, of those nine, the Republicans have won five and the Democrats four. In other words, the Republicans have controlled the White House more often than the Democrats. They haven't controlled Congress, but they've controlled the White House.

44:10And up until now, if you add those total votes from those nine elections, the Republicans have about a 25 million vote majority over the Democrats, because the Republicans have have tended to win big, and the Democrats have won narrow victories. Now the reason for that difference between the White House and Congress is that Democrats tend to choose presidential candidates against whom the massive people want to vote. And they tend to choose Republican presidential candidates who are not offensive to them, So they're willing to vote for the Republicans in order to keep out the Stevensons, the Humphreys, the McGoverns, Carter and Mondale, whereas quite often the Republican and Democratic Congressional candidates are not in the same situation.

45:08Local Democrats tend to choose people not much at odds with the local population and Republicans locally don't seem to know what they're doing. And so the result is that the presidential elections reflect something very different than the congressional elections. Also, many more people vote for president than for Congress because they feel they can understand that debate and choose between the candidates, and they don't know what the congressional candidates are saying, and so they keep out if they don't vote. They skip that line. But if you look at that election, those elections since World War II, you find that the first major Republican victory, that is 1952, by Eisenhower, came in the wake of both World War II and especially Korean War inflation.

46:04And Eisenhower was elected by a very strong support among workers who had experienced the burdens of inflation during the Korean War. And Eisenhower's government was a model for future voting in favor of the Republican Party because Eisenhower had very limited inflation during his presidency. Taxes were low. People continue to look back to the Eisenhower years as a golden age of laissez-faire, low taxes and low inflation and so many of these people voting Republican are continuing to see well maybe we can get another era like that perhaps we can get because under the Democrats it's a disaster and then the Republicans come in and they try to solve it and they make a mess of it trying to solve it there's a constant looking back to that period and to certain a large degree I think Reagan's image is much that he reflects for them the Eisenhower period of low taxes, low inflation, and low government intervention.

47:16And the question is whether that will continue into the future. Republican Party, up until 1980, among the under 40 generation, had only about 12% party recognition. Under 40, 50% of the people were independents. They didn't have party affiliation. Today we're seeing a massive expression of younger voters under 40 supporting Reagan over Mondale. Can that be translated into strength for the Republican Party for the long run? We don't know. These are people who are even more sensitive to the issues of inflation, and maybe even more hard money than previous generations because they've gone through this recent Carter inflation.

48:13And that's when they began to look around the world and understand politics and the first thing they encountered was the Carter inflation and the destruction of the American dollar, the great national shame of a low-value dollar. So they admire Reagan because he's made the dollar very strong, he's gotten rid of inflation. If the Republicans can continue to do that and otherwise not turn off these voters with extraneous issues, then they will be Republicans for the rest of their lives. But if the Republicans do not keep to a low inflation and low tax policy, or if they bring Thank you very much, Leonard.

49:21We just have a few brief minutes for questions and answers. Lew Rockwell, the executive director of the Mises Institute, would like to make a few closing remarks. So let's just take a couple of minutes now. Anyone has a question or comment for Leonard? Would you please use the microphone? I think there's a danger in your last comments that as this occurs, there's the potential Well, for a tremendous polarization in our society, as inflation goes rampant, the danger is not to the people in this room. Many of the people in this room are smart enough to use inflation to their advantage if that's the way the game has to be played.

50:09But as the Democratic Party becomes the party of the poor and the minority and the Republican Party becomes the party of the rich and the middle class, then I think that could lead Well, from the description that you've just presented, what you're describing is an overwhelmingly republican majority, the middle class being an overwhelming majority, and a very small democratic party, because the middle class is the largest, the working class, which is the main part of the middle class, is moving very strongly into the republican party. So what you're describing is something that if the Republicans keep to their principles could make them the dominant party for years and the Democrats are not going to have any important impact because they're going to represent such a small chunk of the population.

51:06Don't you think that will lead to a very frustrated 25% of this country? No I think, no I mean that what you're describing is really what the history of the world has has been for 10,000 years and I think the answer is that unlike other countries, the United States in the past and under Reagan currently is solving that by providing opportunity, by permitting saving, permitting investment, creating new jobs. More jobs have been created in 18 months, last 18 months in the U.S. than were created in Europe in the last 20 years. So I think the solution, it's because we don't live in a static society. The economics is never static, politics, to the extent that politics intrudes, then politics creates locks in conditions and creates, and it's only like an earthquake, it's only when the earth doesn't move that you have earthquakes because it builds up and builds up the tensions.

52:06And so, the more freedom, the less tensions, and if the Republicans hold to their current policies in terms of freeing up the economy in a radical way, then that won't happen. Did you want to follow up? Yes. I want to ask you the same question I asked earlier this morning about policy recommendations, about what kinds of things would you like to see, or what transition steps need to happen to get back to hard money? And I want to ask two related questions to go a little further. One is, do you see what proposals you're going to make? Do you see some of those being politically feasible in a kind of a subcategory, that is, with today's inflation being lower than it is, is it going to be tougher to get hard money through than it has been in the past?

52:51Well, insofar as you're asking for any technical response, we have better experts on that like Murray Rothbard to answer that. But in terms of the political implications, I would say that the problem is the political system, that there's no way to translate easily the wishes of the majority through our political system. The problem is that you have two political systems. You have the formal constitutional political system of Congress and presidency in the Supreme Court.

53:37But you have what's grown up for almost 200 years next to that and implementing that is the party system. And the problem is that you have the present two-party system in no way reflects what people's real views are. In other words, the party system is extra-constitutional. And most people don't vote in the primaries, for instance. So come November when they vote, which is what they're supposed to do under the Constitution, they are given two choices who don't represent them at all. So then what are they trying to do? They're trying to keep Mondale from being elected, so they have to vote for Reagan to keep him out. And since Reagan doesn't seem very threatening, they're willing to do that.

54:23But the problem is the party system, that there's no way for people to vote for people who really represent them because they participate in the official constitutional structure which is the November vote. They don't participate in the non-official, almost private, the two parties are really private organizations who happen to have a monopoly of the ballot. And so people who don't agree with that, who would stand for other issues, don't have any way of getting presented to the public. So the crisis is in that room. Further questions? Ken Leonard, thank you very much.

55:16Just a couple of brief items. First I've been asked to announce that Jim Turney has audio and video tapes for sale of the entire day seminar proceedings, either individually or in sets of the entire day. The audio tapes are already available for take-home. The video ones can be ordered. Jim has a sales table right outside the door. And finally, on a personal note, let me thank you for your attentiveness and the vigor you have brought to this seminar. I know a number of people today have raised the question of, well, what can be done, either from a public policy perspective or some other type of framework to institute some changes. And I don't pretend obviously to have any answers. I don't think any of us do.

56:06But perhaps at least a partial answer is to be found somewhat surprisingly in John Maynard Kane's general theory. Kane's toward the end of the book stated something that I think is worth thinking about. He said, the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Keynes went on to say that practical men, who believe themselves exempt from any intellectual influences, are usually the slave of some defunct economist. Mad men in authority, who hear voices in the air, are distilling the frenzy of some academic scribbler of a few years back.

56:54So I think in large part the battle is an intellectual one. That is the first step indeed. And just like all of us here share a vision of the world, there are those who do not share this vision, who are just as firmly convinced that their view is the so-called true one. So an intellectual debate must occur, and the opposing parties must meet head-on and thrash out the visions not on the basis of polemics, but on the basis of rigorous logic and the weight of empirical evidence. We must go into that with the confidence that the rigor of our logic in the way of the historical evidence will confirm our views. Thank you very much for attending today. Let me give you Lew Rockwell.

57:44Thank you, Stephen. I want to thank all our very eloquent speakers and, of course, thank all of you for coming. I'm glad Steve mentioned Keynes. I finally realized today during Joe Peden's talk what Keynes was talking about about when he kept calling gold a barbarous relic. It was because, of course, all those barbarians wanted gold instead of Roman funny money back in the days, the last days of the empire. As you all know, or as I hope you all know, we're gonna have a dinner tonight honoring Ron Paul. And as a matter of fact, to answer one of the questions that someone asked, he's gonna be talking among other things about how we do get to a gold standard, what steps we might take to not to go back to a gold standard.