Money Is Work

0:00You may have noticed that the title of my talk is, Money is Work. And you're probably wondering, well, what's he mean by that? What's money is work mean? Well, it comes from this little book called Farmer Boy. Anybody read it? Hey, cool. A couple of people, three people have read this book. And it was written by Laura Engel Wilder, but probably, although she's listed as the author, she probably didn't write it. This woman probably wrote it, Rose Wilder Lane, who was her daughter. And I'm going to give away a copy of this later.

0:46But Rose Wilder Lane wrote this wonderful book called The Discovery of Freedom that was published first in in 1943 but she's one of the great ladies of Liberty along with Ayn Rand and Isabel Patterson who all hit the scene about the same time in the mid-40s. So Farmer Boy comes from the ideas of Rose, probably Rose Wilder Lane. We also we like Rose Wilder Lane so much around here we've put her on a t-shirt and I'll be giving one of these away. Now I only have smalls and that means that well I'm hoping I pick the right card when I give this away. So I've got my fingers crossed but we've got other we've got other giveaways to talk about but anyway we'll do that later but as far as my talk goes again it comes from this wonderful book called Farmer Boy and in Farmer Boy we have this our main character is Al Monzo as you remember and which you know I'm tempted to call him Al but I guess

1:56he's Al Monzo and in the book he's going on 10 years old and around the middle of the book the whole family goes to they go to town which is a very special event because most the time they're spending time on the farm and in the fields and all that but they go to town for the Fourth of July ceremony and Almanzo stops to get a drink at the town pump and you probably don't remember town pumps but you did actually have to pump them and you know you get a cup and or put your face under there and get a drink of water and some of the town kids were hanging Well, there's this kid named Frank, and you're led to believe he's kind of an obnoxious sort.

2:48And Frank has a nickel, and he goes ahead and goes to the lemonade stand, and he buys himself a glass of pink lemonade. And Frank buys the lemonade, and he smacks his lips, and he taunts Almanzo, mmm, boy, this is great. You should buy some. Well, Almanzo had never seen a nickel, never seen a nickel in his life. The only money he'd ever seen was a penny that his father would give him on Sunday at church to put in the collection plate. Now, as you can tell, money bought a lot more in those days. I don't think any of you are putting a penny in the collection plate at church. I don't go very often, so when I do, I put a lot more in opinion, because I figure I got to make up for the times I haven't gone.

3:41But anyway, so that's the only money that Almanzo had ever seen. And he had never had a nickel, never seen a nickel, and he wondered how a kid like Frank could get ahold of a nickel. So, Frank told Almanzo, he says, that his father had given him the nickel. And of course, he was challenged on this by Almanzo, but Frank says, oh, my dad gives me a nickel any time I want a nickel. If I ask for it, he gives it to me. And so, Almanzo, being a 10-year-old boy, felt, feels a little challenged. He's very proud of his dad, and he says, well, my father would give me a nickel if I asked for it.

4:27And the city kid, Frank, doesn't believe that. He doesn't believe the tightwad farmer would give his son a nickel anytime he wanted it. So he says, hey, why don't you ask him? Why don't you ask your dad if you can have a nickel? Well, Monza wasn't sure. He got challenged. He's not sure if his dad would give him a nickel or not. And if you read the story up to that point, which, like I say, is in the middle of the book, The Book is a celebration of hard work, frugality. There is no time to waste in work or play. All they do in Farmer Boy is do chores, learn new jobs, and boy, do they eat.

5:19I mean breakfast is oatmeal followed by pancakes followed by boy it just goes on and on these guys eat and eat and eat and they work and work and work and sleep so you don't think there's any way that Almanzo's father is going to give him the snickle and by the way Almanzo loves work I mean he loves to learn new things and that's really one of the central

6:16Frank says, I dare you. I dare you to ask him. And Almanzo says, well, I'd ask him if I wanted to, but I don't really want to, so I'm not going to. So Frank says, oh, you're scared. And you know what's coming next? He's already dared him. So he's got to double dare him. I double dare you. So if you're 10 years old and you've been double dared, you know what you have to do. If you double-dared, you know what you have to do, you have to go ask your father for a nickel. There's no way out, his pride won't let him not ask for that nickel. So Almanzo walks slowly down the street to where his dad is standing talking to the wagon maker, Mr. Paddock, and the closer he gets, the more he dreads asking his father for the nickel Because he doesn't think his dad's going to give it to him.

7:14And then if he doesn't, if his dad doesn't give him the nickel, then he's going to look stupid in front of Frank and all these city kids that he hardly ever sees and be terribly embarrassed. So, he finally reaches his father, he's dreading this whole thing, and he waits for his father I wanted to stop talking to Mr. Paddock, and Almanzo looked up at him, and his dad said, what is it, son? Almanzo stammers a bit. His dad says, well, what is it? Father, would you give me a nickel? His father looks down at him, and the wagon maker, Mr. Paddock, looks down at him, and they didn't say anything.

8:01and, of course, at that moment, Almanzo just wants to run away. He's just, he wished this never even happened. Finally, his father says, what for? Almanzo muttered something like, well, Frank had a nickel and he bought pink lemonade. So, Almanzo's father misunderstood, started to pull out his wallet. He said, well, it's only right if Frank treated you to lemonade, we should treat him. So he looked at Almanzo and he said, did Frank treat you to lemonade? Almanzo waited and he squirmed and he finally said, no, father, he didn't. Almanzo's dad looked at him, seemed like forever, and then he took his wallet out and he opened it up and he pulled out, if I can find it, he pulled out a big half dollar, big half silver dollar.

8:57and it'd be something like this Laura Wilder wrote this book in in 1933 this is a 1936 half dollar made of silver and Frenchie used to collect those Frenchie being my dad and so I have this nice collection of halves that I wouldn't have had, except my dad believed in saving coins. So he pulled out this big silver half-dollar and asked his son, do you know what this is? And Almanza says, well, it's half a dollar. Yes, but do you know what half a dollar is? And Almanza didn't really know what he meant.

9:43He didn't know what he meant by the question. And his dad said, it's work son, that's what money is, it's hard work. Now about this time the wagon maker, Mr. Paddock, chimes in and he says, the boy's too young, you can't make a youngster understand that. And of course Almanzo's dad says, no, Almanzo's smarter than you think. And of course Almanzo during this, he wants to go, he wants to run off and hide, forget the whole thing, forget the nickel the whole bit. But at this point, Paddock, the wagon maker, is looking at Almanzo's dad with that look at, like, he's double-daring him. And his father said his boy was smart, so now he's got to prove it.

10:30Got a lot of guys, young guys, old guys, proving they're smart, you know, taking dares. So his father says, do you know how to raise potatoes? So Manzo says, yeah, say you have a seed potato in the spring, what do you do with it? Well, you cut it up and he says, go on, son, what do you do after that? Well, you harrow. First you manure the field and you plow it and then you harrow and you mark the ground and you plant the potatoes and you plow them and you hoe them and you plow them and hoe them twice. That's right, son, and then what do you do? Then, of course months later, you dig them up and you put them down in the cellar. Yes, son, you pick them and then you pick them over all the winter and you throw out the little ones, you throw out the rotten ones, and come spring you load them up and you haul them to town and you sell them.

11:34And if you get a good price, how much do you get to show for all that work? How much do you get for half a bushel of potatoes? Well, if you've read the book, you know that earlier in the book, Almanzo's dad had sold potatoes at a dollar a bushel. So the answer, of course, was for half a bushel of potatoes, you get a half a dollar. And that's what's in this half a dollar. The work that raised half a bushel of potatoes. Now, I don't know, maybe you've seen a bushel basket. You don't see them as much anymore. They're this big around and they're about that deep, so half of them would be something like that. It's a lot of potatoes. It's a lot of work. It's not only work, it's time.

12:20Potatoes don't produce themselves overnight. So Almanzo looked at the coin and it looked small compared to all that work, this coin. And his dad said something unusual. I mean, it's something completely unexpected. He said, you can have it, you can have that coin. And if you're a ten-year-old boy, this coin feels fairly heavy in your hand. He said, it's yours. And he told him, you can, you've got choices what you can do with this money, with this half a dollar. You could go buy a piglet with it. I've changed some of the language, by the way, for those who have read the book. You could go buy a piglet with it, you could raise that pig, and that pig could have other pigs, which might be worth four or five dollars a piece someday.

13:10Or, you can trade that half dollar for lemonade and drink it up. You do as you want, it's your money. I mean, Almanzo couldn't believe it. He had a half dollar. He'd never, before that time, he had never seen money before except a penny. and he had one of those. So he put it in his pocket, he went over to the lemonade stand where Frank and the boys were standing. And the lemonade vendor was calling out, step right up, ice cold lemonade, five cents a glass, pink lemonade. And Frank asked, where's the nickel? He didn't give me a nickel. Yeah, I knew it. I told you he wouldn't give you a nickel. No, he gave me a half a dollar. And of course he had to prove it. None of The city kids would believe him, so he pulled it out and he showed them.

13:58They crowded around him, and then at that point they waited for him to spend it, because they're right there in front of the lemonade stand. So do you think he spends it? Those of you who have read the book, you're not to answer. Does he spend the half a dollar on lemonade? No. He puts it in his pocket, he says, I'm going to look around and buy me a good little piglet. So, with all the hard work that goes into money, in a free economy, you would only trade your hard work for something solid, something that you could see the value in, something that you could feel it. I don't want to break the glass here. And that's what this represents, is this work.

14:46Now, Carl Menger explained, and by the way, the Austrian School of Economics started with with Carl Menger, and he explained that it's not government edicts that create money. It's the market that creates money. Individuals decide what is the most marketable good that they're going to trade as a medium of fixed change. Man himself is the beginning and the end of every economy, Menger, and so it is with deciding what money is. And it was Menger who developed this whole social theory of social institutions which which rise as humans interact, each with his own subjective values. You all have your own values and experiences, and you bring this spontaneous evolution of these actions to create institutions where individuals discover how to make their lives better, how to attain their goals more efficiently.

15:42Nothing is more central to this evolution than the creation of money. It makes the division of labor possible and the satisfaction of wants attainable. Now, Murray Rothbard wrote that learning that money is a commodity is one of the most important tasks in the world. He said so often people have talked about money as something more than what it is or less than this. He said money is not an abstract unit of account, divorcible from a concrete good, it's not not a useless token, only good for exchanging, it's not a claim on society, it is not a guarantee of a fixed price level, it is simply a commodity.

16:29It differs from other commodities in being demanded mainly as a medium of exchange, but like all commodities it has an existing stock, it has a demand and supply for it. It has a price in terms of other goods. People buy money by selling their goods and services for it. When you go out, if you mow somebody's lawn or clean somebody's closet, you're buying their money and you're selling your goods and services to get it. Just as they sell money when they buy goods and services. If you take that money and you go to the store, you're selling your money in exchange for for those goods and services.

17:16So what makes a good money? What is the perfect money? Well, Rothbard wrote, it needed to be portable, that's portable, durable, things been around since 1936, and I'll probably die with it, somebody will be looking around trying to find out where it is, divisible, cut up gold and silver into very, very tiny pieces, highly Are you recognizable? You guys probably haven't dealt in a lot of silver, but you probably have the feeling that that might be worth something. I know you might think this might be worth something. That ounce of gold right there, you may have heard what that's bringing these days in paper dollars. So you recognize that. It's highly marketable, it's homogeneous, and it's stable in its supply. Stable in its supply.

18:10That's a key. Please remember that. So that's why centuries for centuries, gold and silver have been money. Not because one person decided, Murray Rothbard didn't decide, Ludwig von Mises didn't decide, Carl Menger didn't decide, and more importantly, no committee in Washington, D.C. decided that. The market decided that. People traded their hard work for what they believed had value, for something they knew that they could trade for other goods that they needed. And over time, it became gold and silver. See, money helps us get around this knotty problem of a double coincidence of wants. In other words, if you want to barter with somebody that aren't highly marketable, it's hard to find a person that wants what you have.

19:00And more importantly, to find the person that not only wants what you have, but that you You want what they have. I mean, that's a pretty hard needle to thread most of the time. And that's why money is used. But then government gets involved. They take over the creation of money, and they take it out of the public hands, even though this gold and silver were minted by the government before that. When it started, gold and silver coins weren't. The government began printing paper money that was exchangeable for gold and silver, and then of course they just forgot about the gold and silver.

19:48So then they just started printing money. And they forced us to take it through legal tender laws. Now some of you are going to go to college, and you're going to take economics courses, And there's going to be economics textbooks that you're going to open to the money section. And you may remember this long, long story I told you about Almonzo, or not, may have forgotten it by then. But you may read something like Paul Samuelson, who wrote many, many editions to his book called Economics, his use of textbook, I learned from it as an undergraduate myself. And in his eleventh edition of his textbook, he wrote, Most kinds of money tended to be of some value or use for their own sake.

20:43So far, so good. Thus, even wampum had decorative uses. Wampum is what Indians traded. And paper money began as a warehouse or mint receipt for such metal. That's what I just spoke about. But the intrinsic usefulness of money medium is now the least important thing about it, he says. He says, money as money is wanted not for its own sake, but for what it will buy. We wish to use money by getting rid of it, he says. Money is an artificial social convention. Now remember what I just said Rothbard wrote. This is completely contradictory of that. He says, the paradox is that money is accepted because it is accepted.

21:31That's not terribly satisfying, but that's what you're going to get in economics textbooks. Now, this is where the real howlers begin. By the printing of more or fewer zeros on the face value of a bill, a great or small Small amount of value can be embodied in a light, transformable medium of little bulk. That means that what he's saying is governments can create paper money with value and they can just put more zeros on them, like say this $10,000 or $10,000 dinar from the Bank of Iraq. Of course, this was the Bank of Iraq, where that handsome gentleman still had his head.

22:22But when they were printing money, they just created zeros. And in Samuelson's view, that created value. He envisioned a day when anything so crude as a poker chip, a coin, or a bill will be be dispensed with in favor of records that just automatically balance out people's in-payments, out-payments over the course of their lifetime. So what Samuelson envisioned was really no money at all. But then he says, by careful engraving, the value of money can be protected from counterfeiting and adulteration. The fact that private individuals, you and I, cannot create it at will in unlimited amounts keeps it scarce, i.e. an economic and not a free good.

23:18So governments, in Samuelson's view, who's written more economics textbooks than anyone, they are preserving the value of money because they control it. They control the number of zeros that are placed. So this is the Reserve Bank of Zimbabwe. And if you think this happened in some old time where, boy, you can't remember that, that bill is from 2008. And the Bank of Zimbabwe got to the point that is a $50 trillion Zimbabwe note. Well, of course, that wasn't enough. They had to keep printing. And, of course, as Samuelson says, this is an economic good. That right there, economic good because the government's in charge of it. A hundred trillion dollar Zimbabwe note. We'll move this all up. Now, you might ask, what did a hundred trillion Zimbabwe dollars buy? It must have So no matter what Mr. Samuelson says, ultimately if governments keep printing, signs like this They disappear at a toilet in Zimbabwe.

24:57They said, toilet paper only to be used in this toilet, no cardboard, no cloth, no Zim dollars. They didn't want you using this in this. It's not exactly an economic good. Now let's look at America, you know, this is crazy, Zimbabwe, you know, they're over there. So let's look at Paul Samuelson. He was born in 1915, he died in the end of 2009, and when he was born, the money supply in the United States was $18 billion. Remember, this was $50 trillion, this was $100 trillion, $15 billion when he was born.

25:48Born. When he published his first textbook in 1948, the money supply was $148 billion. When he died, the M2 money supply in the United States was $8.5 trillion. Sounds like a bunch of money. It is a bunch of money out of nowhere. $8.5 trillion pales in the amount on this single Bill of $100 trillion dollars. So you wonder, you must be wondering, what's government, if they're printing money like this, who wants to work for it? Why not just drink the lemonade? Be like Frank. Why forgo consumption and buy the piglet?

26:37Because you may raise the piglets and they're just increasing the money supply anyway and The Piglets won't be worth that much. In fact, I wrote a piece recently on Misesorg, and I talked about depression babies saving for a rainy day. This came from the farm culture. And you save for a rainy day because when it rains, it's too wet to plow. And when it's too wet to plow, the farmer doesn't make enough money, doesn't make any money and certainly the higher-end hens don't. Now I remember my grandfather, who was a very diligent sort, and he would use those rainy days to do maintenance on his implements in the barn. And of course he would say, he would talk down his nose about the farmers who spent their rainy days in the bar in town, drinking something stronger than lemonade.

27:36And he said that when they got back in the fields, instead of having maintained equipment, their equipment would break down when they should be making hay. And I pointed out in a blog post recently that, and I highlighted the advice of a life coach and author who is selling books, a guy named John Stralecki, who advises people if they're getting money back from the IRS, they should just spend it on having a good Experience. They should just drink lemonade, in other words. He says, you know, you get a hundred, a few hundred bucks back, a few thousand bucks back, it doesn't really matter. You should spend it on a vacation, something you'll remember for, you know, the rest of your life.

28:25Why spend a few bucks, save a few bucks? It doesn't matter. He says, live your life for today. Of course, I posted this on Mises.org pointing out how ludicrous this advice is, but what do you think the comments were from people who read our site, people who know all about this? Guy wrote in, he says, I think his advice is spot on, at least given the constraints of the times in which we live. What's the point in saving if inflation will ravage whatever you manage to accumulate? To play by the rules of the game, another wrote, your savings will be puny due to pathetic interest rates, erased by inflation, confiscated by the state, so go ahead, enjoy the money now while it still has some value.

29:13Finally at the end, somebody wrote, gotta agree with all the comments, maybe not the trips or other experiences, but I gotta feel safer with stuff than I do with Federal Reserve notes. Listen, these are followers of the Mises Institute. Now, I'm reminded of a piece that Paul Cantor wrote. He wrote an article about hyperinflation and hyperreality, man's disorder and early sorrow, which is a fictional story told in the backdrop of Weimar Germany. And he quoted, he said, money is the central source of stability, continuity, coherence in any community, hence to tamper with the basic money supplies, to tamper with the community sense of value.

30:03The social order is upended in man's story as people, instead of saving, become speculators. And of course, that's what we have today. Instead of people saving, we have people speculating, and we have people blowing their money on good times. Cantor points out that man's portrayal of hyperinflation and covers, quote, something psychologically more debilitating happening to the older generation. Impetuous high-time preference behavior displayed by young people appears rational in an inflationary period, while prudence and conservatism appear to not only be quaint, but just downright silly.

30:51So as man described so long ago, the world of inflation is this illusion of wealth. This illusion, look at that, a hundred trillion dollars, I mean, you've got to be wealthy if you're carrying one of those bills created by the government printing press. But it distorts everything we see, it perverts our judgment. So what I urge all of you to do is not to fall into that trap. Remember that money is work. It's hard work, and it's not to be squandered, it's to be careful with. And always remember what money has been for centuries. There is no more Zimbabwe, Reserve Bank of Zimbabwe. It crashed. It's over with.

31:36These bills? Nothing. Buy them on eBay as a curiosity. Paper money doesn't last. This lasts forever. This is the real money. Thank you very much.