Inflation and the Bolsheviks

0:00Well, thank you very much. It's so nice to be here. It's such a breath of fresh air, because I came from the cold socialism of Wisconsin with them, with the people I call sheeple. And we'll talk today about inflation in Bolsheviks, yes. Inflation in Bolsheviks, it's a topic, I would say. It's a fantastic topic these days, especially after hearing Ron Paul talking about Bolsheviks in Washington, D.C., which probably right now outshine Moscow Bolsheviks. And during these two days already of our conference, it was just so delightful to hear speakers here.

0:49It just was wonderful. Yesterday I was listening to Peter Klein and he said he met Greenspan in a pizza parlor. I was thinking he was already serving there. I think that would be a good kind of thing to do. Speaking about Greenspan, about Bolsheviks in Washington D.C. Last week I got a phone call at 3 o'clock in the morning from Moscow. I have a person I know there, he was a former general of Russian Army. Amazingly enough, he was the first and the last Jewish general of the Russian army. And he called me at 3 o'clock in the morning, and I think he was drunk. And he didn't realize that there was a time difference. And so he called me, he said, I'm watching TV, and there is a Jewish interrogator interrogating Greenspan.

1:40And I thought, who's that? Maybe Mr. Waxman. So I said, so what? He said, well, will they shoot this saboteur at the end of the day? Because he said it reminds me of the great terror trials of 1937. And well, what could I say? I said, maybe not at the end of the day, maybe after elections. But definitely, I think with Greenspan, it was just such a travesty in the sense that in the sense that this person really, I think, knew what he was doing, he was not stupid, he was evil. I think I was rereading after he hung up and I couldn't sleep, I was rereading his economic freedom and gold.

2:26And it's wonderful, it's a very well-written essay, very well-written essay in Ayn Rand's Capitalism and Unknown Ideal. So this person was in a clear mind when he was debasing our currency, limiting our freedom, inflating, just absolutely, absolutely unbelievable. And here again, the kind of the funny thing about this, I recollect that John McCain, if you maybe remember, John McCain here, I'm not making it up, Because it looks like I am making it up, but Mr. Greenspan was so popular. He was like a Roman consul in Washington, D.C.

3:11He was just serving with the cult of personalities Stalin would be envious of. And you remember McCain. Yeah, this is a quote from him. He promised that he would be there. Just prop him up and put some dark glasses on him, like that. And even, I would say even Lenin and Stalin never dreamt of any post-mortem appointments. However, I think that, speaking about Lenin, I think he is in a better shape than Sir Alan. so speaking about that's the most amazing thing is that if you will read Lord Keynes that's another sir John right sir Alan you know that Alan was knighted he is a commander of the British Empire he was probably that's why he decided to build a command economy in the United States but but But Lord Keynes also, he wrote things very similar, very similar to Alan Greenspan.

4:29He was saying something, I think, if I, yes. That's what, yeah, and so he knew what he was doing, and then he said, let's do that. Let's do that, let's confiscate secretly, and unobserved, and unobserved. And there was imbeciles, imbeciles after him, that's his best, his best student, his best student. yes who even who even said that what he said Austrian economics he said there's the same there's the same validity as a phlogiston theory of fire that's what his that's I'm not making it up yeah he said that gold bug people meaning all of us are psychologically pathological so it's just exactly like Soviet Soviet Union in the sense that people who would disagree with Communists would be put in mental asylums.

5:26Because they're just crazy people. There was a syndrome number 137 in psychiatry textbook. One psychiatrist showed me. That means the syndrome was negation of obvious achievements of Soviet Union. So you see this, all these achievements, and you negate that. So you're just crazy. Well, returning back to, from Washington, D.C. to Moscow, to Moscow. This is some kind of a, I think, and it's very good that Lew picked up this topic for me, because it kind of attracted my attention to very unknown, and I think I should write about the very unknown period in Russian history and that the history of the First World War because back in Soviet Union and here in the United States that period is usually started as a period of the communist revolution.

6:30Not many people realize that it was the period of inflation of enormous proportions of the collapse of financial system of Tsarist Russia which led to this revolution the same way as a collapse of Weimar Republic led to Nazi governing in Germany. And this history is kind of... I would say, well, unlike, say, a lot of neocons for some reason, they hate Tsar. They're kind of like real Trotskyites. So they hate Tsar, and I would say Tsar was much better than Bolsheviks that came after him. Tsar, well, at least he didn't kill so many people. I looked at the history of murders in Tsarist Russia in the 19th century they put to death 536 people under Stalin they were putting to death 12,000 a day, 12,000 a day, so that's 536 in 100 years, in 100 years, that was the Tsar's record.

7:29Tsars were inflationists. Why they were inflationists? Because they were all engaged in wars. In the 18th century, out of 100 years, Russia was in wars for 58 years. In the 19th century, for 44 years. So to fund all these wars, and in Russia there was the tax system, because the country was so poor, And especially the peasants, especially the South Russia and Siberia, were pretty independent people and they were kind of a very nice tax evaders and so it was very difficult to collect taxes. Not many people realized that Russian Tsars, they didn't know how to collect taxes and they would put taxes, for example, on beers or on windows.

8:20That's a progressive tax. Can you imagine? Siberia, you have tax on windows. That means if you have windows in Siberia, you're a rich person. You can pay a lot for even more than Wisconsin Energy is taxing us. And so the taxmen would just go collect taxes, and if not, they'd just throw the bricks into the windows. And that was then, however, Russian government, the Tsar's government, they established in 1861, And they established that it kind of was a bad year for everybody. And they established the Central Bank, Central State Bank of Russian Empire, of Russian Empire in St. Petersburg.

9:06And this bank began to inflate right away, right away. What they did, Russia was on the gold standard. But then they were all the time printing more and more paper, as they called it, ambassadors of gold. So there were so many ambassadors representing so little that they had a great Russian writer, Saltykov Shchedrin, he was like H. L. Menken of Russia in the 19th century. He wrote that now they're giving half, I mean for paper money, for paper giving half. Tomorrow I think they will give us the middle finger. So that was, and so Russia was in this kind of inflating state, Russian ruble.

9:53There's a lot of people who idealize Southeast Russia and saying that, well, the currency was very stable, the golden currency was not. Yes, they made the coin golden coins. However, these coins immediately disappeared because of Gresham law. People ended up with paper currency because all golden coins before even this, The First World War went into the treasure, went into the, you know, that gold is performing the function of the store of value perfectly. So immediately gold disappeared, people ended up with paper money, paper money was losing its value. Then came the war of 1904-1905, the Russian-Japanese War. It was amazing that Russia had a revolution at that time.

10:38And the Prime Minister, Sergei Vite, he came to the Emperor and said, Emperor, look, we have revolution in our hands, what should we do? And he said, declare the war on Japan. And that's exactly, I think, what our people in Washington know how to do well. That if you have one type of crisis, you create another one, even a bigger crisis. I think Dr. Paul was absolutely right when he said that government is creating crisis, and the crisis would increase the power of government, whether, I think Heinlein said, whether this crisis is real, fabricated or imaginary.

11:23We have right now multiple crises, imaginary, fabricated, real, piling on one another, looking for more government. Mr. Greenspan, when attacked by Waxman, he said I was wrong. He said 40 years, he was in his tender age of 82, he admitted that all his life was failure. He said that 40 years I was on the wrong impression that laissez-faire can be a good policy. I don't know how he was under this impression because he never practiced this policy. But from another hand, from another hand, that was his, he admitted that the market model, he said, that was adherent to, again, I made it up, because people just would think I'm making it all up, but, yes, he said, he said, I found a flaw, I don't know how significant or permanent it is, but I've been very distressed by that fact, you can imagine, it's, again, an 82nd year, A year of his life. I think he thought he was on Lubyanka already and would need to trash everything.

12:39So Russia began to inflate in 1904-1905 to pay for the Russian-Japanese war. Russia lost this war and ended up with a huge national debt, mostly to France. France was bankrolling Russia, Russian Tsars, and Russia was also, they were just selling this Russian national debt in France, in Germany, in Britain, and the whole world was holding this Russian national debt so Russia could fight Japan. So Russia lost the war to Japan, they had a revolution, under this revolution they immediately again expanded the power of government, And Mr. Stolypin, the new prime minister who came to power because of this revolution, he immediately had beaten all the records in killing people.

13:27They killed 564 people in the 19th century, they killed 12,000 right away. And so I think they prepared by doing that, they prepared the first world war, first world war, and besides that they prepared, they think that they were digging the grave they ended up in, I never definitely would wish for Nicholas II, and especially for his seven children, to be murdered that way, as they were slaughtered like animals, and he was killed last, so he saw all his children to perish first. but definitely economic policies of Nicholas II and they played a pivotal role in bringing Bolsheviks to power.

14:20First World War was, as Hans Hoppe rightly wrote, that was the end of civilization as we knew it, the end of 19th century classical liberalism, was the end of freedom in Europe, The end of freedom in Europe. Europe, the empires, now we demonize these empires, but look at the Austro-Hungarian Empire. Austro-Hungarian Empire, father of Ludwig von Mises, a Jewish engineer and merchant, was knighted. Can you imagine that that would happen in Austria under Nazis? No, he would be sent to Auschwitz. or can imagine Soviet Union under Stalin, he would be sent to Siberia for all his entrepreneurship and love of freedom.

15:08So Austro-Hungarian Empire, which brought us Austrian School of Economics, which brought us the best music, the best literature, the best ballet in the world in the 19th century, that empire collapsed. Ottoman Empire, again, Ottoman Empire is being blamed for being, Ottoman Empire had way more religious freedom than all of these countries which are, which were kind of, it was amazing that the Minister of Finance usually would be Jewish, Minister of Foreign Affairs, usually would be Christian, orthodox Christian. So that was the empire which was maybe as bad as it was, but it was way better than what we got at the end of that.

15:54If you will look what happened even to Turkey itself. Turkey itself, there is a wonderful Austrian economist there, and Dr. Ayala, maybe you heard of him. and Dr. Ayala, yes, he is speaking on the TV, he can compare Ataturk to Stalin and one said that he didn't kill so many people as Stalin because Stalin kind of is a champion, I think he killed more than everybody else combined and by then he was thrown out of everywhere and he was sentenced for one year of jail, for one year of jail Well, unfortunately, it was suspended sentence, but still, that's the Turkey today, so then we had the German Empire.

16:43German Empire, German Empire, if you would go to former German colonies like today's Namibia or Tanzania, you would see that everything worth of looking at was built by Germans. So they ended up with the German Empire, they ended up with the Bolshevik revolution in Munich. That was the Bavarian Soviet Socialist Republic, not many people realized that. But it was communism in Germany with a lot of murders, a lot of murders. Fortunately for German people, they kind of arrested that revolt pretty soon, so they couldn't kill so many. So they left these people to be killed by Nazis, another form of communism, another form of socialism and totalitarian state, totalitarian state. So Russia in the war lost two and a half million people on the front, on the front, then mortality inside Russia increased greatly as well, there was a mass starvation of people, inflation roared during the First World War, retail prices in Moscow doubled in the first two years of the war, and then were accelerating exponentially in 1916 and early 1917, they more than trebled, by the end of summer

17:57In the year of 1917 already, inflation hit the mark of 15,000% according to the British Consul in St. Petersburg. Russian indebtedness mostly to France and Britain grew fivefold since 1914. So Bolsheviks when they came to power, what they did, they immediately repudiated these debts. They said, well, what we owe you, we forgive you. that was that was what what Lenin said that was not me yeah so that's them I think they they should have been doing that when so communism collapsed and I was one of the proponents of that and I was I was working as one of economic advisors to Gorbachev's government I wasn't the advisor I wouldn't take the I don't blame, but I was an advisor, nobody listened to me, and look what happened.

18:55But one of the points we were trying to make, the group of reformist people in the government at that time, we were trying to persuade the government to forgive the debts again. Because it was a Soviet Union debt, and who was investing in the Soviet Union? Union. That people, even if you invest in a bad, well, today it doesn't mean anything. Today, no matter where you invest, the government would bail you out. But at that time, even I would say, even I'm in the United States 19 years, and the country changed so much, I mean changed drastically, drastically. I think that this kind of bailout even 19 years ago would be unimaginable, unimaginable. But at that time, at that time, I think that the The logical thing would be not to pay the debts which were made by Rockefellers and other establishments on the Wall Street who were heavily investing in the regime which was murdering its people left and right, mostly left definitely.

19:59Well, Russia went out of the war in 1921 only. In 1921, they signed a treaty in Brest-Litovsk with Germany in 1918, so the war with Germany ended up in 1918. However, there was still a civil war. During that civil war, Lenin decided to experiment with currency as much as he possibly could because according to delusions of this person, of Karl Marx, money should be abolished because money is nothing but exploitation, exploitation, the point was that they need to demonetize gold, to dethrone gold, as Marx and especially Lenin, Lenin came up with this with this unbelievable idea that we should build toilet commodes out of gold.

20:59He went on and on and on, he went into detail saying that gold can be dethroned only if we would put inside of the urinals. He probably felt himself as another Joe the plumber. And so his point was that that's what we should do. And amazingly enough, it's only capitalism that made it happen. The Chinese guy who was a student of Lenin and he became very rich, he defected to Hong Kong, is where I've abandoned his idiotic views except this delusion that to build a toilet out of gold, this is six million dollars toilet, can you imagine?

21:48But still this toilet is much better investment than made by all governments all over the world, all over the world. At that time Bolshevik revolution, especially with this bold attitudes toward gold, It attracted a lot of sympathy in the west. Ludwig von Mises was, I think, the only one who in 1918, not 1920, 1918, he wrote this short essay, Economic Calculation on the Socialist Commonwealth. This is a wonderful piece which, and he predicted, and he was a lone warrior at that time, saying that communism would not work because it cannot work. It would work only unless they would shoot people.

22:37So they shot enough, I think. Not many people realize the true story of communism. As the countries, many countries, devastated completely. Baltic states. Every third person disappeared between 1940 and 1952. In Russia itself, 42 million perished under Stalin, 18 million under Lenin. Nobody knows about that. People were starved to death, treated like pigs. It just was unbelievable. However, they didn't stop on that. Yes, and I'm saying that. And this was, at that time, another economist who is considered to be the greatest economist of the 20th century. He was writing to his mom, who was, if you remember, she was a mayor, first female mayor in the United Kingdom.

23:26She was mayor of township of Cambridge. And her son, her beloved son, was John Maynard Keynes. He wrote to his mother, Well, the only course open to me is to be biantly Bolshevik. And as I lie in bed in the morning, I reflect with a good deal of satisfaction that because our rulers are as incompetent as they are mad and wicked, one particular era of particular kind of civilization is very nearly over. And that was Lord Keynes. That was Lord Keynes. It's called savior of capitalism, savior of capitalism. So then communists, definitely Bolsheviks, when they debased the currency, well, they returned back to the gold standard window from when the people began to die like flies, When they abolished money whatsoever, can you imagine, the huge country went into barter.

24:19Workers were paid with the fruits of their labor, so nothing. And people, 18 million people perished. Even Lenin, in 1923, on a deathbed, he realized that this disaster can end up in total disappearance of Russia from the map of the world. And so he declared new economic policies, new economic policies. Stalin was in charge of this new economic policy in 1929. From 1924, they had a window of gold standard in Russia. And sure enough, they immediately returned back. They revitalized the economy, the economy which was completely disrupted, completely destroyed.

25:05By 1928, this economy was already twice larger than the economy under Tsars in 1913, before the war, before the war. And so, sure enough, in 1929, Stalin already felt confident enough to begin killing people again and seizing their property and whatnot. And I think that Stalin, from the very beginning, he was evil enough to have this kind of plot, that people would make money, would show this money, and then all these hundreds of flowers would bloom so you can go and pick them up. And that's what exactly they did. Well, I know that time is running out, but just kind of like the stages of the demise.

25:52Well, the Soviet Union, the worst kind of inflation was during the Second World War. Inflation under communism does not take the sort of prices rising. price already high, as Russians would say, we don't have inflation, we just have high prices, so they have high prices, but because if that's controlled prices, then you see shortages of everything, if you have inflation, which is suppressed inflation by price controls, you have the disappearance of almost everything, so they have mesmerizing shortages of everything, in 1947 they wiped out the all their currency all together, and everybody's savings as well, and just printed new rubles.

26:42These rubles, suppressed inflation, increased tenfold to 1961. At that time, Mr. Khrushchev was in France, waiting for President Eisenhower to meet with him. At that time, Soviets, they shut down U-2 plane, maybe you remember, with Harry Powers, a pilot, and Khrushchev decided not to meet with Eisenhower. However, in France at the same time was a monetary reform in 1960. They just moved the decimal point two zeros to the left. And Khrushchev, immediately upon return, he gave his finance ministry two months to do the same. They literally ran out of paper and ink printing new money.

27:30And then they moved this decimal point to the left, to two points. And then after that, the first thing Khrushchev said, we have the same money as was in 1920s. We have the price level is exactly the same. So that means that they practically wiped away 1,000% inflations in 1920. Yes, that's what it is. And they were saying there's no inflation under socialism. Look, the prices right now are exactly like they were in 1925, in 1925. So that's the end. Well, I know that my time is over, but on the good side, I think, well, Russians wouldn't say that's a good side for things.

28:17They would say pessimists usually is a better-informed optimist. And on this cheerful note, I would like to, But I think there's another Russian saying we should keep in mind, it's a perfectly American saying also, that the only lesson of history is that it does not teach us anything.