The Command Economy: Surging Forward into the Past

0:00We're very, very privileged to have a very special speaker today with us. He was a popular Phoenix radio personality, dubbed America's most independent talk show host. And this little bit of his bio especially tickled me because 25 years ago, he arranged to have, it says, a little-known Texas congressman named Ron Paul as well as, of course, my old teacher, Murray Rothbard, be keynote speakers at monetary conferences he hosted, so this is, our final speaker today is Nadej Johnny, come lately, he has been part of this movement for a long, long time, he's appeared on a number of programs, too many to mention. He's working on a new book that will be released next year, making the case for liberty and prosperity in a new way. But I want to talk a little bit about his, I want to mention at least, New York Times Best Seller, the dollar meltdown, surviving the impending currency crisis with gold, oil and other unconventional investments.

1:26We've talked a lot about the coming economic climate and it hasn't been very pretty. I've read this book, it's a wonderful book and urge you all to buy it. we have it on sale and he is here to not only give us a great talk but autograph those books so take advantage of that please he's speaking about the command economy surging forward into the past the valley of the sun's favorite son of liberty please help me welcome Charles Goyette So, an old grizzled farmer walks into his rural branch of Washington Mutual a couple of years ago and he says you know I'm going to put a little bit of money in this bank How do I know my money is going to be safe? What happens to my money if something goes wrong with Washington Mutual?

2:41And the bank manager said, well, if something were to go wrong with Washington Mutual, then we'd probably be taken over by a bigger bank like Chase Bank. And they'd make sure that everything was okay with you, you know, they'd take your accounts over, and things would be fine. And the farmer said, well, what if there were a problem with Chase Bank? The bank manager said, okay, if there was a problem with Chase Bank, your account's insured by the FDIC. The FDIC would step in and make you hold everything and be fine. The old farmer peered at him and said, yeah, but what if the FDIC ran out of money? The manager said, okay, if the FDIC ran out of money, then the U.S. Treasury would step in, they'd write a check to the FDIC, and the FDIC would write a check to you, and everything would be fine, you'd get your money back.

3:34And the farmer said, yeah, sure, but what if the United States government is bankrupt? and the branch manager said okay if the United States government were bankrupt then the Federal Reserve just print up a whole bunch of new money you get fresh money ink still wet and the farmer said yeah but what if the what if the people catch on and decide to end the Fed the bank manager said oh well if the people decide to end the Fed he said in that case you would lose your money but But wouldn't it be worth it?

4:21It is, ladies and gentlemen, a great pleasure for me to be here today. Good afternoon. I'm so grateful to be a part of this Mises Circle. It's a good name for it, a Mises Circle, because there are a lot of things in the orbit of the Mises Institute that are very, very important in our civic and national life. in fact in my view the scholars here, the books that they write, all the material that the Mises Institute makes available online that I avail myself of all the time and then even beyond that also in the orbit things like Lew Rockwell's wonderful websites that I hit first thing in the morning and then even beyond that I think Ron Paul's visibility now after the campaign I think all these things are in the orbit of the Mises Institute and they have Socrates taught us that philosophy really shouldn't be left to the specialist, that it's the duty of every man and woman to effectively be a philosopher, and I feel the same way about economics.

5:29Every day we're engaged in economic acts and I know that you will agree with me that it is utterly bizarre to look at all of this wealth about us in this country that the people have produced. All of this abundance and prosperity produced by people like us and then to think under the circumstances that there could be a priesthood that emerges from its marble temple cloaked in and Secrecy a couple of times a year and mumbles some strange incantations and we're supposed to leave it at that. The people who are capable of producing all this wealth need no more about the disposition of the wealth or even the monetary matrix in which all of this commercial activity functions.

6:19Now what are these monetary cranks these priests have given us for the last ten years, just the last ten years? Well in the last ten years they have given us two stock market crashes, they've given us two recessions, the current one, the worst downturn that we've had in this country since the Great Depression, and of course they've given us the housing bust, but they've given us Ben Bernanke, the Time Magazine Man of the Year, and they've given us Alan Greenspan, who by the way has been on television here the last week telling us all that nobody saw I never saw this downturn coming, nobody saw that, and it astonishes me that they can mumble this strange Keynesian nonsense, and we're told by the media to just mind our betters and shut up about all of it.

7:08I wonder if people in their normal everyday lives would put up with such nonsense if a lady back here in the back of this room were to leave her purse beside her chair and come back a little while later and find out that her purse is gone, she wouldn't likely welcome a lecture about the metaphysics of the insubstantiality of matter. She'd want to know who the hell stole her purse. But we allow them to destroy our currency to steal the public purse and then we're told to mind our betters and just keep our concerns to ourselves. So as a layman, I would like to express my gratitude to the Austrian School economists and the Mises Institute because my expectation of them is that they provide us clear concepts and proven judgments that have demonstrable value in understanding what happened in the past and what is going to happen next

8:35And one must not believe impossible things. And the Red Queen, the symbol of the crazed state, says, well, you certainly can believe impossible things. And she said, I believe them all the time. And some days, I have believed as many as six impossible things before breakfast. So this morning before breakfast, I jotted down six impossible things that we have been persuaded by our education system and by the governing classes and by the priesthood that simply aren't so but are responsible for the best The monetary cranks have taught us that we can spend our way to prosperity. How's that been working out for us? I cite Representative Pete Stark, a California congressman, told an interviewer some years ago. He said, the truth is that in terms of government reckoning, the more debt we have, the richer we are as a nation.

9:28Which is kind of funny because we had half the debt at the time, and the dollar was worth 30 or 40 percent more at the time he gave his interview. Are we richer now? Here, 10 years later. All of this is this Keynesian mumbo jumbo that our prior speakers have talked about. I read something by Keynes the other day, it's actually my favorite one, in which he recommended the way out of our morass, the way to march out of the quagmire. They sold us the map to march us in, right? and they sell us another map to march us out and in which he recommended that the way to do this to spend our way to prosperity would be if we could just get a whole bunch of empty bottles and stuff them with cash and then we'll bury those empty bottles in old abandoned coal mines and then cover it up with refuse and then let word out you know that there's there's cash in them they're gold mines or in those mines and the subsequent economic activity would stimulate us back to our former state of prosperity that people

10:28would buy shovels, they would drive to this place and there would be a whole hubbub of frenzy of activity. Of course, this is the broken window fallacy of Bastiat, you know, the idea that this destructive activity by the Fed, first of all, the cost of the bureaucrats buried the money to begin with, but then you realize that all of this activity in the purchase of the shovels and the transportation and all the work of the people trying to dig up those bottles full of cash is a productive activity that is not creating something of of Genuine Lasting Wealth. It's more make-work. It's stimulating. It's deficit accommodating. And it's tarping. And it's exactly what we get from the Republicans and Democrats alike. Now, there are a lot of great examples of this sort of monetary crank advice. My favorite one though was from Hillary Clinton during the last presidential election. She came out with the idea of giving every newborn in America a baby bond. And they'd get a bond when they

11:28were born, and then, I don't know, when they hit another milestone, the age of 12 or something, get another bond. And then when they grew up, they'd have all this money they could cash in the bonds, and you scratch your head and puzzle, and she thinks, and you wonder, who does she think is going to pay off those bonds? Those poor little babies. So it's the incredible The bread machine, you know, this is money out of thin air. Anyway, that's one of the impossible things that the monetary cranks and the fed priesthood have taught us in the governing classes. How about the one, though, that you can create money out of thin air? Oh, yeah, you can print money and you can create it digitally and so on, but you can't create any wealth that way. And the reason, in my view, that Americans buy this nonsense is that they are so remote from a real understanding of money. It's like, you know, growing up

12:14I don't know if my kids believed it, but I know a lot of kids really believe that milk and eggs come from Safeway. Right? They don't understand the whole messy business about the farm in the background. And Americans have been conditioned to forget the whole business about wealth in the background, because after all it was 1933 when the backing of gold, the dollar backing of gold was removed, was removed and it was 1971 when the dollar exchange standard was eliminated. So people still think these pieces of paper and green ink have value and it's worked out really well to the benefit of the monetary authorities and the governing classes of America. My question though is what they really know. And you look at somebody like Bill Clinton or Barack Obama And you wonder how much do they really understand of any of this and what really gives money its value and if they really think that wealth can be created by a magical act of a wand being waved by a sorcerer at the Federal Reserve.

13:19And so I brought you this example from the last time we had a serious inflationary problem in this country was in the 1970s. Things were so bad that President Carter appointed a chief inflation fighter, which you would think that's, now we've got somebody who's going to roll up his sleeves and get down to business. It was Professor Alfred Kahn. And one day, Professor Kahn appeared on Meet the Press on NBC. You may remember the economics correspondent back in those days was Irving R. Levine, wore a little bow tie like Jeffrey Tucker. He said to Professor Kahn now in his Irving R. Levine said, now, in order to cure any illness, one has to diagnose the cause.

14:06What do you see as the principal cause of inflation? Professor Kahn, I'm going to evade that question because I don't know what the principal cause of inflation is. The essence I think that the problem of inflation is so deep rooted in Western society and can be attributed to such broad social causes that I think, for example, the inflation that we're experiencing in the United States today is in some important way related to the fact that I see people throw papers on the sidewalk of Pennsylvania Avenue when I walk to the subway, and it distresses me.

14:55or I see them walk on the grass. It has something to do with the sense of being members of a single society rather than as I have put it, and forgive me for repeating myself, 200 to 225 million people at perpetual war with one another. Now, what the hell does that mean? But you wonder, you know, you wonder about some of these people if they really understand, you know, the bamboozle job that they're embarked on or whether they're just, you know, serving the power that appointed them to represent the interests of the power. You kind of wonder, but I have an incident from you. As bad as the chief inflation fighter under Carter was, under Ford it was even a little more silly.

15:45Because Ford came on TV, I watched him as a young man in college, came on TV and said, we've got a problem with inflation, but here's the solution. First of all, clean your dinner plates. The mothers of America are going to have to teach those children of theirs to lick their dinner plates clean. And besides that, you can send off to Washington for one of these. A whip inflation now button. And I've treasured this all these years. And help us whip inflation now. So, anyway, at the time, Alan Greenspan, later to be the Fed chairman, was, I think he was the chairman of President Ford's Council of Economic Advisers. and after he left the Fed he said that win thing he said I thought that was the stupidest thing I've ever heard but you know he didn't say anything at the time right so you wonder about these guys you wonder about the exercises of printing money and what they really know and who knows better because there are students here I like to do this sometimes so I brought a bunch of German currency from the Weimar Republic inflation that our other speakers have talked about I like to show this to you first

16:53First of all, in 1920, at the beginning of the inflationary period, a mark was worth, I don't remember, about 22 cents or something like that, you could buy a loaf of bread with a mark, and this was a German mark, a nice piece of paper, it's engraved and scroll work, and it's a nice piece of linen stock, and so this is a one mark piece, so as the inflation goes on a little bit, and people would carry a couple of these around, you know, if they wanted to go to a motion picture or have a drink, get a cup of coffee, they'd have these in their pockets, a couple of years later, moving down the road, all of a sudden this was the coin of the realm, so to speak, this is a 20,000 Mark piece, which people carried around. It's still a nice piece of linen paper, a big, huge piece of paper. Well, things were getting a little bit more serious later in 1922. This is a 50,000 mark note, so if you needed a cup of coffee, you'd be fortunate to have one of these to pay for it.

17:39But things got even more serious than that as we started getting near 1923. This is a one million mark note. But that was nothing. Here's the 2 million mark note and here's the 10 million mark note. Now, the Germans were renowned for their efficiency, right? Here's the 50,000 mark note. Big piece of linen stock. It's carefully printed, multicolored, four-color printing. Nice piece of linen. You can feel it has substance like it must be real money, right? By the time they got to these, this 10 million mark note, it was half the size. So they could turn it out. They literally had dozens of printing presses working 24-7. and so this was half the, by the way, they took to more efficiently only printed it on one side so you could turn it out twice as fast and of course this is what we would think of today is photocopier paper instead of instead of nice linen stock. Well one of the other one of the other things that the the

18:34priesthood has taught us to believe unquestioningly is that is that you can't no I'll put let me put it to you this way if I were a 12 year old when I was a If I was a 12-year-old kid, if I took my bicycle to the Texaco station to inflate the back tire, right, and I put too much air in and the thing popped, the thing blew up, I would not have thought at the age of 12, not for a second, that I could fix it by pumping more air into it. Isn't that what they've tried to tell us about re-inflating the last bubble, that they're going to do it all over again? I mean, you know, Japan hasn't been able to do it with their real estate market for 20 years. You have, I mean, if you could reinflate the last bubble, the Nasdaq stock index would be at 5,000, right? Tulip bulbs would still be millions of dollars.

19:20But, of course, it all turned out as was so well described for us as, it's really been a wealth transfer scheme and a vote buying scheme and so on and so forth. But people believe these things when they're told it sagely on the national news. How about this one? Number four, we, some of the richest people in the world, can continue forever to borrow from some of the poorest people in the world. Now that really took a monetary crank to come out with that. But the monetary cranks were actually worse a couple of years ago because they used to say, oh, the debt, the debt, the debt doesn't matter. We owe it to ourselves. They can't get away with that anymore, right? So, and the rest of the world has caught on to the game. I mean, it was in November, seminal event, mark this event. It was in November that the Central Bank of India, these central banks, they've been persuaded under the terms of the Bretton Woods Agreement to hold dollars in their central bank as reserves, against which they issued their own currencies, much as we used to hold gold and issue our currency redeemable in gold and so on. And they did gold as well. And now they've been persuaded, they were persuaded to hold dollars. The jig is up, ladies and gentlemen. In November, the Central

20:33Central Bank of India looked okay, you got billions of U.S. dollars in our central bank with billions, pile of gold bullion. Billions, billions of paper dollars created at virtually no cost and without any restraint, pile of gold bullion. And like that they took down 200 metric tons of gold for central bank reserves disposing of dollars at the same time. Look, the rest of the world knows it and the American people don't understand the problem with with the United States dollar. It's like there's a Zen story about you take the fish out of the water and you say the fish, describe water to me. What's water all about? And the fish goes, water? What are you talking about? I don't know. They don't distinguish water. It's ubiquitous. It's around them all the time. Americans are like that with the US dollar. But Tim Geithner goes to China last summer and he makes assurances to students at Beijing University about the safety of their American investments in the solvency of the United States government.

21:33and they laughed at him. I mean they're polite but it still provoked laughter. So a couple of weeks ago you saw Moody's Investment Services, Moody's, they're the last ones to catch on. By the time Moody's knows it, you know it's really late in the game. So Moody's says, you know going forward there could be a problem with the credit rating of the United States government, Moody's. And so I see Tim Geithner on ABC the next Sunday and he goes,

22:33The monetary and fiscal authorities of this country have no contingency whatsoever, no plan at all, other than inflation, to make up the difference when foreign buyers of American debt begin to back away from the table. Which brings me to number five, six impossible things that you could believe before breakfast and that is that the government debt will ever be repaid. Bush presided over seven increases in the national debt ceiling during his eight years. In his first year, Obama presided over two. I did a chart for one of the websites, an article in a chart saying you can use the increases in the national debt ceiling as a leading indicator of the gold price over the last eight or ten years. You know about the visible debt, $12.8 trillion, $168,000 for a family of four, and then there's the unfunded debt of over $100 trillion now. It's something like $1.4 million for a family of four. Where do you get your share?

23:29and then well in fact let me let me cut to some of the obligations William Isaac was the chairman of the FDIC during the Reagan administration and one day he wrote up a piece he allowed me to reprint in the dollar meltdown he wrote up a piece about his experience at the time he looked at the FDIC's balance with the United States Treasury of 11 billion dollars. So he called up Treasury Secretary Donald Regan, remember him? Called up Regan and said, you know, Don, I'd like to come over and take a look at the money. Here's the transcript. Regan, what money? Isaac. Well, you know, the 11 billion dollars that the FDIC has in the vault at the Treasury.

24:19Regan Well, Bill, you see, that's a little bit of a problem. Regan goes, look, that's okay, it's, you know, I know you're busy, it doesn't have to be right now. Regan goes, well, it's not a question of the timing. He says, I don't know quite how to put this to you, but we don't have the money. Isaac goes, right, haha, right. And Regan says, no, really. He said, the banks have been paying money to the FDIC, and the FDIC has been turning and the Treasury has been spending it on missiles and school lunches and water projects and things like that, and the money's gone. And Isaac said, yeah, but it says right here on this financial statement, it says that we have $11 billion at the Treasury. And Regan said, well, yeah, in a sense you do. He says, if we owe money to the FDIC, then we'll pay interest on it. But Isaac said, yeah, I know, but this sounds pretty far-fetched, but what

25:16What if there were problems with some of the banks? What would happen if we needed a few billion dollars to handle a problem? And Regan said, well, that's easy. We'd go right out and we'd borrow it for you. And you'd have the money in no time, same day service most days. So Isaac says, okay, let me see if I have this straight. Here's the head of the FDIC. Okay, let me process this. The money that the banks thought that they were storing Banking up for the past half century, sort of like saving for a rainy day, is gone, and if a storm begins to brew and we need the money, the Treasury is going to have to go out and borrow it. Is that about right? And Regan goes, yep. And Isaac said, okay, well, just one more thing. While I've got you on the line, why do we bother to pretend that there's a fund? And Regan said, well, I'm sorry, Bill, but the President's on the other

26:12The money is not there and that makes number six impossible things that you can believe before breakfast the most incredible astonishing one of all because the money is not there how about a health care bill that wants the federal government to take over and administer 17% of the United States economy add 32 million more insured it will reduce the deficit and it will pay for itself How exactly does that work? I mean, when they came out with Medicare, in 1965, they said, okay, Medicare, okay, let's look 25 years into the future, let's look to 1990 and see how much this program is going to cost. So way back in 1965, when they created Medicare, they said, okay, in 1990, Medicare is going to cost $9 billion. Well, 1990 long since Now, I am developing a thesis. I don't know if it will prove to be true, and I don't know what I'll do with it if it does, but it is my view that the severity of the crisis upon us will be directly proportional to the obliviousness of the governing classes of this country about the size and scope of the problem that we're facing.

27:26will be directly proportional to the obliviousness of the governing classes of this country about the size and scope of the problem that we have. In other words, and it's not just the Democrats who watched the Republicans during this debate about socializing medicine further, there was, but for Ron Paul, except for Ron Paul, by the way, when I went to the garage this morning to dig out that old wind button, Dr. Ron Paul for Congress, back in the 1970s, in the same old box of memorabilia. Except for Ron Paul, we won't count him in this, none of the Republicans were able to articulate an argument for a free market healthcare system.

28:17I mean, and they're talking points where, well, we want a responsible plan, we want a bipartisan plan. At the end, late in the campaign, the RNC started running ads. Well, we just want to start over. But it was never about keeping the government the heck out. So, in my view, the depth of the crisis under the circumstances will be very, very severe and the universe has a very unfeeling way of dealing with people who persist in believing things that are impossible, such as the six I described to you. Now, in the dollar meltdown, I talk about where we are in terms of the debt and the crisis and so on, how we got here, a little bit of the history of money, What happens next? And then what to do about it? You know, classes of investments that typically do well in the kind of period that we're entering.

29:12And everybody, so help me, they all go to the fourth section about what do you do about it, what classes of investments do well, and so on and so forth. But so help me, the most important part is what happens next, how this command economy unfolds. And it's easy to tell a little bit about the general direction. There's kind of an archetype that these things follow because this isn't our first monetary crisis rodeo. We've been down this road before. We have experience to judge by. And I like to describe the likelihood or the template in this way. First of all, you get the printing of money, the creating of purchasing media, expansion of money and credit by the monetary authorities, The people of the country, the husbands and wives, mothers and fathers, the working people, they go to the grocery store, two years ago they go to the gas station, $4, I can't make the household budget work, and they begin to cry out for somebody to do something about it.

30:15Well, somebody already did do something. They inflated the money supply and caused the rise in prices that they're bemoaning, but they insist that somebody does something about it. And it works like this. A lifelong broadcaster, I can guarantee you, this is exactly how it works. You turn on ABC, CBS, NBC, and there's a standup reporter at some random person's household or by the gas pump talking to this person, no, I can't make the household budget work. We don't know what we're going to do. And the guy wraps up his package, his standup Report saying it's just typical of another American family and so far the government has not done anything about it. I'm Dale Davidson reporting from Chicago. Well you moron Dale Davidson, the government did do something about it. They caused the problem in the first place right? So the government is quick to ride to the rescue of the people because so So far the government has done nothing about it, so they make the problem worse by typically

31:12instituting price caps, wage and price controls, and of course even a guy like Nixon, now I asked you a few minutes earlier, how much do these guys really know, do they know what they're doing? The White House tapes show us that Nixon knew of the destruction that he would unleash on the economy by his imposition of wage and price controls, but he did it anyway because there was another election coming up and he thought it had seen through the 72 election. So you wonder how much, so they institute wage and price controls and of course you know the stories of the way that the wage and price controls create shortages throughout the economy. I remember these vividly from the 70s. I mean there were there were chicken farmers, chicken ranchers, shown on It was on television drowning their little baby chicks by the thousands.

32:02They could not afford the cost of feed to raise them and take them to the market. It was a money-losing proposition under the fixed prices of Nixon's wage and price controls. Oh, do you know who the two bureaucrats were that were in charge of Nixon's wage and price control program? Donald Rumsfeld and Dick Cheney. Good conservatives. So anyway, there were cattle ranchers, it was the same thing, and they'd let the cattle die. They couldn't afford to raise them, to feed them, to fatten them, and take them to the market. And I tell the story in the Dollar Meltdown about one lady, walks into the grocery store, goes back to the butcher counter, and she says, what are you doing charging 99 cents a pound for this particular cut of meat? She said, don't you know the law says that that cut of meat is 89 cents a pound? And she said, besides that, it's 89 cents a pound at the

33:25In any event, under the circumstances of shortages then, in this typical scenario, under that circumstance, the people cry out for the government to do something. Here we go again. The guy stands up on TV and he goes, and look at these store shelves, there are no goods there. I mean, you know, back in the 70s, the price of shirts was fixed by law. Price of cotton wasn't fixed. The price of cotton would go up, but the shirt makers' prices were locked in so they couldn't afford to make any shirts, so there were no shirts.

34:12So Dale Davidson stands up there in Chicago and says, and look at this, there are no shirts in the store, and there's no eggs, and there's no beef, and there's no food. Look at all these shorties. And so far, the government has not done anything. I'm Dale Davidson signing off. Dale, you moron! The government did do something. They created the shortages with their rationing and their price controls, and they created their apparent need for those things by their inflation of the supply of money and credit. So in the rationing environment, then things start to I want to share with you a story of one of the classic inflations from the French Reign of Terror, 1789 to 1795.

35:08Fiat Money, Inflation in France, So a couple of points from Andrew Dixon White's account of the period. The first issuance of this new currency, the assignats, the first issuance of this was based on church property. The revolutionaries expropriated the property of the church and they issued this currency against that church property. But once the underlying property was sold, the currency remained in circulation. So it was, of course, backed by nothing and it soon became very It was very evident to them how easy this was to do, so they started to issue more and more and more.

36:10As you would understand from Gresham's Law, right, bad money drives out good. The paper money succeeded in driving gold and silver, even copper coinage out of circulation. That began to disappear. The majority of the French people were enthusiasts of this new paper money scheme. They equated it with prosperity. But White writes as the new issuances of new floods of paper money came faster and faster, the periods of feeling good became shorter and shorter in between. So the belief became widespread among the people in France that the problem with the new money, the new money could function if only enough people were hanged. There were those who opposed the ruination of France with paper money and they were hounded out of Public Life. Occasionally, some of the people that actually knew better said, well, once we get through this new wave of money, then that'll be enough and that'll lift France out of its problems and then we won't do it anymore. But of course, they did

37:10it again and again and again. And like in Germany, the engravers and predators couldn't keep up with the demand by government spending for new currency, the mobs began to demand laws that made the paper money equivalent to gold. And so, matter of fact, they passed They passed a law that if a merchant were to ask you before a transaction was concluded, when you asked them what the price was, what you're intending to pay in, this new worthless paper money or some real form of commodity money, you got the death penalty for it. They took you to the guillotine. It was a capital offense to ask what form of money the buyer intended to pay in. Law of the Maximum in 1793. In 1793, price controls, they were expanded, first foodstuffs and beyond foodstuffs to all kinds of life necessities, and they fixed how they decided to do this, I, so help me.

38:03They fixed the prices in 1793 at the prices that had prevailed in 1790, plus I think 30% more, and they just locked them in there. So in the meantime, the Institute of Currency Controls, just like the kinds that are emerging Here in America today, do you see the jobs bill that Obama signed about three weeks ago? A little currency control provision slipped in there, foreign institutions have to withhold on Americans and report to the IRS and the US Treasury about foreign accounts and so on. That was a jobs bill. So currency controls, for Frenchmen who left the country, their property was confiscated. So manufacturing shut down and speculation became the order of the day, thrift and savings were obliterated, police state spread through every corner of life, the penalties became increasingly severe for farmers and other people who were suspected of reluctance to deliver their goods to market, their valuable goods in exchange for increasingly worthless paper. Soldiers were sent out into the countryside to arrest farmers and to seize their crops. The guillotine

39:15was put to work, thousands put to death, public executions in the afternoon were a form of entertainment, in other cases mobs beat people to death. So the monetary authorities came out with one scheme after another. It was currency conversion schemes and exchange schemes and new currency issue and maybe a currency for bonds issue and so on. And in the midst of all of this despair, there was suddenly a revival of business conditions. Sales suddenly became brisk in any

40:13The labor classes, salaried people and those of no means and on fixed incomes were forced to subsist on rations of government bread that was often unfit to eat, with long lines of men and women and children forced to wait from dawn until dusk. The country was of course at war everywhere, demanding more and more paper money to pay for the hostilities. White says all that saved thousands of laborers from starvation was that they were first drafted into the army and then they could be killed on foreign battlefields. So 600 paper francs to equal one franc of gold from before the period. Rich and poor alike plunged into absolute financial ruin and of course it paved the way for the rise of Napoleon. 17 years of war and empire and bankruptcy and the death of millions and it would be 40 years before Our economic conditions in France returned 40 years before the level of credit, the level of commerce, the industry and the capital returned to the level at which we had begun.

41:16Now, I had to give you an idea of what wonderful resource the Mises Institute is. I had heard of the economist William Ripka and had not ever read anything by him. and I won't tell you it's a delightful story because of time I won't tell you about his his influence in the German economic miracle but someday if you get a chance look it up and all this kind of materials available from the Mises Institute but after my book came out in the section about the command economy somebody sent me this from William Repka from a book that was available PDF from the Mises Institute from Repka 63 book economics of a free society and I want I want to share this with you even if it takes a minute or two because I have an idea that this begins to presage or is a harbinger of the way things could go here in the United States. He talks about not the 1920 Weimar Republic German inflation, but the German

42:10inflation during the period of World War II under Hitler. And he says the German inflation of the years 1920 to 23 will always remain as a horrible example of what happens when and the government attempts to cover its budget deficits by resorting to a deceitful printing of money. But the inflationary creation of money caused by the budget deficits of the government need not necessarily lead to the economic and social disorders attendant on an open inflation in the way that followed World War I. Beginning in 1933, the National Socialist Germany demonstrated that a determined government can change an open into a repressed inflation by placing the country in economic straitjackets under a command economy. Rationing, the imposition of stringent controls on wages, consumption, capital investment, rates of interest, similar measures restrict the free use of money.

43:03Hitler has shown how far and how long a government can neutralize an inflation by means of a command economy. The greater the inflationary pressure, the stronger will be the counter pressure of the command economy needed to repress it. repressed it, by the same token the command economy must resort to ever more comprehensive and ruthless controls if it is to be effective in containing the mounting forces of inflation. This leads logically to the question of whether such a command economy is possible without totalitarian slavery. Repressed inflation, it's Wilhelm Repke. Well, I think I ought I've got to wrap up at that point, except to say that the theme of this conference was the inflationary path to despotism.

43:52And in this age in which we've seen the nationalization of finance and automobiles and real estate lending and health care and so on, or even beyond that, the government tells you what kind of toilet you must have, the vitamins that you can take, the light bulbs that you need to use, and now the latest, whether a young student seeking to get a foothold in life can work in an unpaid internship. Under those circumstances, not just the concomitance of high prices, but the spreading of the national police state that we've seen under the prior administration and extended in this administration suggest to me that the period that we may see ahead is very, very ripe for what Repka describes in his work on the command economy. Mises says that a crisis like this is a really wonderful opportunity on the other side, when interventionism fails, to institute broad new reforms and make an advance in freedom.

44:47None of us really know. It's simply not given to us to know how these events turn out. The monetary crisis revolutions less often go the way of the American Revolution, ending in a liberal, open society. They more often go the way of the French Revolution. We don't know in advance, but if you would like to have an impact on it, you cannot have any more of an impact on it than, of course, perfecting your own knowledge in this area, familiarizing yourself with the conditions that are likely to happen and what the monetary and governing authorities are doing as each day unfolds. And you can find information about that every day from the Mises Institute. And so you'll be a better spokesman or able to enlighten your neighbors and so on when the opportunity arises.

45:35You cannot have more reach more effectively. The central organizing force for freedom in America, the preservation or the perpetuation of or reclamation of freedom in America is in my view all these activities in the orbit around the Mises Institute. You cannot have more impact than to support this very, very important organization. Thank you, ladies and gentlemen, very much.

46:09Thank you so much, Charles. Of course, I think all of us are here because of one man, Mr. Jim Rodney. I'd like to thank him again for his support. I'd like to thank all of our speakers, and by the way, if you missed anything, it is all of these speeches, in fact, the first four are already on iTunes, at iTunes U, they are already on Mises.org, and Charles' speech will be up momentarily, so things do not take long. Your support of the Institute, Bob Murphy is a perfect example.

46:57He went to Mises University in 2000 and 2001, and he's an example of the kind of scholars that we're putting out at the Mises Institute. There's a reason these events go off without a hitch, and it's because of the staff, my and my fabulous road crew, Christy Holmes out front, Will Seitz at the cell in the books and of course, Chad Parrish behind the camera. So I want to thank them for their fine work today. You know, Mises said that everyone is called upon to familiarize themselves with the teaching of economics. That is, in our age, the primary civic duty, he said.

47:46It concerns everyone and it belongs to all. It is the main and proper study of every citizen. I want to thank all of you for coming out and doing your civic duty this Saturday.