The Free Market Society

Our society, is a society on account of the fact that the various members, the various individuals are not living their own lives without any reference and without any connection with the lives of other individuals but that thanks to the division of labor, we are connected by working for others and receiving and consuming that others have produced for us. We haven't exchanged economy. We have an economy that consists in the cooperation of the individual, everybody produces, not only for himself, but for other people in the expectation that these other people reproduce for him. This system requires acts of exchange. And this acts of exchange must be a section that everybody receives and gives at the same time and it is the very meaning of the things which are good and evil which are not as equal. It is necessary that only sketch it in a very short way, it is necessary to help what is called indirect exchange. That means that people are producing something for other people and exchanging it at something which they have to get from other people. That as the quantity and the value of the things, the digment of things, the things that are seen, does not coincide. It is necessary to use for this purpose a medium of exchange. I assume that you are all familiar with the fact that it would be impossible to produce for other people and to expect to consume what other people have produced in exchange for the things which we are giving to them. If the quantities give away and receive their identity in not only in size, but what is still more important in the period in which this exchange has to be done. Therefore, and to production and the exchange of the produced things against other things, requires a medium of exchange, something which is not received and not given away for direct consumption, but for indirect consumption, it means for giving it to other people in order to receive from other people. We have therefore, giving the site all details, we have therefore a money economy. We have a medium of exchange, we have something which is received and given away, not for the purpose of consumption, but for the purpose of being exchanged. In a later act of exchange, again, something ends and finally only to bring to the original originator of the exchange act for such a fact, it means those things which is himself wants to control. As a medium of exchange, there is a use, there is a use, advocates and various commodities. But finally, in the course of the centuries, we have what we call today money and money exchange. In the historical development of the exchange function and the exchange act, finally, there was a restriction of the number of commodities which were used as a medium of exchange, not acquired for the purpose of being consumed, but only acquired with the purpose of being used in a further act of exchange as payment for something else which was expected to receive. We have to say in the course of the historical evolution about which we cannot say more in such a lecture, there developed finally a few articles which were used as a medium of exchange and leaving aside all historical details for our time, there developed only one such thing and this was the metal gold. People have criticized this from various points of view and they have made jokes about the uselessness of gold and you know all the stars people were talking about, the uselessness of gold for direct consumption in similar things. But this is all of inferior or let us say, various more important things. The most important thing is that without any interference on the part of a central authority, people developed an exchange system, a system of indirect exchange in which the precious metals, gold and silver were used as a medium of exchange. And finally, in a process that was only, that is very well known to most of our contemporaries because it was only a process of the last century. One commodity remained, one article remained because of general use, medium of exchange, the metal gold. Now you can criticize this from various points of view without any reference to the real problems in life. What we had developed in the 19th century and the 20th century in the civilized countries was a system in which gold, the precious metal gold was used as the medium of exchange. And this system was functioning by and large very well. Or the criticism which were applied in this regard are of very little importance when compared with the problems which are created by the substitution of gold for gold percentage. We may say that it is ridiculous that such a useless metal which can only be used for very important things is serving as a medium of exchange but we could not retain our delight that it functions to some extent satisfactorily in this regard. We could have, we would have today, if one had not interfered with the monetary system, [BLANK_AUDIO] We would have today a market in which gold alone would be used as medium of exchange and the people were to buy and to sell as against the precious metal gold. One can criticize this from the highest point of view, but what could not bring about was a system in which production for india exchange in which such production could be satisfactorily operated in the way in which it could theoretically at least operate with the pure gold standards. If gold is useless, because if you do not impassicate to have usually out of gold is very important, if gold is useless for or is considered useless for all other purposes, it could be very important. And it served very well this morning. But this system, the market operated by indirect exchange between the medium of precious metal, frost of gold and silver and gold alone, was destroyed. It is destroyed again and again, not by something that is inherent in this market system, but precisely by the governments that want to spend more than they could spend in a market which is not operated by the government substitutes for the precious metals. That means we could have a system in which gold alone is or substitutes of gold, that means claims or words which are available which are foreign youth immediately could be used as a medium of exchange. We could have a word standard all over the world. And if we had such a gold standard all over the world, then world or claims against a quantity of gold for you immediately could be used as money. It would be a system that could operate to some extent as a disheartening. But the government of some countries and following the example of these governments and the governments of most or perfectly of all other countries have destroyed the system. And the strides system by declaring that something else is also gold in value and could substitute gold in all aspects in which it is necessary to pay for gold. We could have a system in which gold alone and of course claims against gold you immediately could be self as money. In which everybody could exchange what he wants to give away against gold and then use all the claims of gold you immediately and it would operate to a certain extent. But what we have is something very different. And it developed out of the fact that if there is a conflict of opinions and the conflict of interest between people, concerning the problem, whether they have to pay some things or not, that such conflicts can only be settled by the government. That means we could reason why the governments have to interfere and do interfere with the problem of the market exchange. And the reason is that people sometimes do not pay what they are according to the opinion of other people bound to pay. So there are differences concerning the problem with that you have to pay between dukes or not. And there are differences in society in which peace among the members of society is the primary requirement of an organized state of affairs. In such a society it is the judge, the government that has to determine whether you are, whether you have to do something, whether you have to pay something and what to have to pay. And the governments interfere practically in declaring this man is bound according to an agreement which he has made with other people to pay ten dukes. A duke at means it is shorting peace, it is shorting quantity of gold. But with the government we have to declare this and we declare it must not precisely be gold. If you take a piece of paper and stamp of it then dukes this is also the payment. And this is the problem. The problem is that the government as the government alone has two prevent conflicts, aren't conflicts between individuals by executing the decisions of courts concerning the obligation of a man to pay or not to pay. The governments have also the power to write to declare what is humanity. These people have made a contract in which they clearly set the judge, a certain role to be played by a definite quantity of gold. And the government says yes, this quantity of gold can also be a printed piece of paper on which I, the government, have printed ten dukes, or ten thousand dukes. Because it doesn't cost me more, it doesn't cost me more. war to print the figure 10, the figure 1. The market, the people on the market, the people in organizing the division of labor, in bringing about a system in which one man produces shoes and the other man produces coats. They have brought about a system in which coats can be a change against shoes, but only practically an account of the difference of the importance of the radio and with the intermediary of money. Because this, the government interferes in this intermediary, in this medium of exchange. People have made an exchange, and under the assumption that one man has to pay to the other man five dukes. The government says, and what they had in mind was the duke, the certain piece of work, except in one duty of the government. And the government interferes in this piece of paper is always. I empty the government, and I have to write, I have to power. The opportunity to declare that you have said you want to receive, you have made an agreement according to which you are entitled to receive the certain quantity of work. This is meant, and they say, two dukes. And the government says, yes, but two dukes, you know, will be a printed piece of paper on which I, the government, have printed the words to dukes. And unfortunately, it doesn't cost the government more to print. Two dukes, sent to print one duke. And here you have the problem. The monetary problem, and this is the fundamental problem, because it's the exchange economy. The monetary role played by the monetary issues is decisive. That one government, all government, is practically all governments. There are some virtuous governments who abstain from it, that you see, this is the peculiar situation that they want to such problems. The bad, the bad ideas of governments who said, well, shouldn't duke at RSB, the piece of paper on which I have printed the words to them, five dukes. And this is six, made to go. What we have today is this precisely, and in the whole world, it's precisely the situation. There are some governments who are better than other governments. They are only slowly and with some letters, so bad feelings for themselves, you realize it very well, because something which has some differences, which are not considered beneficial, are effective. If the factors, if the growing, if the system in which the growing, are supposed to spend only what they have collected as taxes from the citizens. And this collecting of taxes makes a government not very popular, because people don't like to give away money, especially if they say for somebody who spends it like the taxes are spent for six, which of which we do not agree. And then the government, because they don't want to restrict their expenditures, the governments declare what I have printed in my printing office. My government printing office and called dukes. This is the same as for two months. And this is six started in the way that the private banks, to which the government gave privileges and so on. The whole story is very interesting, and you know it because you find it in every textbook. The problem, the problems it exists today is specific. The government as far as the government, as a constitutional government, collects in a taxes only what the citizens are prepared to pay, or which the government can consider as such, because the piousment, the representatives of the people have accepted these payments, everything is alright. The government wants to pay for use, and this policeman has to get salaries, they have to leave, they need various things for doing all the things they have to do, and the government collects these things by taxing the citizens, the citizens pay the taxes, and the government spends the taxes, the money received the taxes. But the problem is that the government says this is not enough. They don't say it's a thing, they don't. It's the only thing which the government can think of. We need more. The simplest way to get more is to print it. It's forbidden to do the citizens. The government is used to very simple description, the government prints things, things, things, prints, pieces of paper which is declared to be in purchasing power to pieces of work. And if you do not obey, then you have the problem that the government wants you to do. Now the situation is this. We had a monetary system, a system of precious metals, gold and silver, and you would have not to enter into this system. The government interfered by declaring that these pieces of paper which the government has printed have to see purchasing power, the same value on the market as the pieces of work. And if the government says this, then it increases the quantity of money. Wonderful. But what is the fact? If the government wants to buy the money, then it's not enough. to higher additional servants, governance servants, because this is for something for some purpose which is good or bad is another question. We are not interested in it. And as they do not have enough money, gold or silver, they print an additional quantity of money. The increased quantity of money. And what does this mean? This means that somebody who was yesterday in Norway connected with the government's actions now hired by the government as an additional policeman. And he gets a salary. He makes a living from spending the salary. And this salary consists in the creation of an additional quantity of money. Now, this man who got this additional quantity of money, this newly created quantity of money, appears on the market with money that didn't exist yesterday. And the quantity of commodities did not increase. Nothing changed with the commodities. Commodities are, you see, there was the only change. It's a trend from yesterday. Well, it's now an additional quantity of money. And this additional quantity of money is spent for the same quantity of consumers goods and producers goods which existed yesterday. That means that this man who comes with this additional quantity has in order to get something to offer a higher price for the things which yesterday people used to pay the smaller price. Prices are growing up. Prices are growing up because there's an additional quantity of money. Asking, searching for a non-inclused quantity of commodities. And this means the prices are growing up. And the newspapers are to do this called this inflation. It's no money brought into the market, and this new money inflates prices. The government says, what happened? The government is very innocent. It doesn't know what happened to you. It didn't because it happened in another department of the government. How should one man know? How should I, the men in the department of finance know that this additional money is really spent and that this spending is must raise prices because the quantity of goods did not increase. Now we have this before. We have to win the government. When the government wants to pay more for some purpose. Let me say, if the government wants to raise the salaries of some government employees and collect this money by taxes from the citizens, the citizens who have paid taxes have to restrict their expenditures to the same extent to which the receivers of this money are now in a position to increase their expenditures. But this is not the case here. These people, nobody suffers because the government does not tax. There's no correct more taxes. There are now people who find in the morning in their pockets more money. This is very good. The government has finally raised the money. It would be perfectly correct or if the sinks, if the government has collected this money from somebody else. Then somebody Mr. A would have been forced to restrict his expenditures because Mr. B is now in a position to spend his expenses. Now you have the inflation problem. And the governments try to find out somebody who is responsible. They consider it responsible to make who asks higher for higher prices. But you best ask for higher prices because there are now more people there. There are 100 units to sell. And there are now people to sell each at five pieces of money. And now there are counter people. They have not 500 but 600 pieces of money in their pockets. And they must therefore in order to prevent the other men from getting to sink. They must be higher prices. Now we have to increase. And there was once in the past, there were innocent people who discovered this wonderful sink. This wonderful sink for a government to increase the quantity of money and therefore to appear as benefactors of the market. How wonderful. There is a, there is a, I do not criticize the purposes for which the government uses the money. The process doesn't make any difference. But the government uses it for the conduct of a law for destroying cities, for killing people or so on. How a way that the government uses it for giving better food to innocent children, it doesn't make any difference. It doesn't make any difference with regard to the problem of the purchasing power of the monetary world. The main thing with regard to money is the question how to restrict its quantity, how not to increase its quantity. The question won't do that interesting quantity. There happened, you know, women, we had the world standards into, to some extent, in the world it happened that one discovered new opportunities for the production of the world. And then as the quantity of the world increased, people could spend more and prices went up. But this was limited. It was limited because these opportunities are thanks to the geological constitution of our planet, limited. It could happen, we could imagine, you know, if we have people who have a great, a lot of fantasies, if they imagine that one day people rediscover a method to increase the quantity of money in such a simple way in which we can increase today the quantity of, like I said, paper. I don't know whether this will happen, nobody knows whether it will happen, and nobody has to give an answer today to the problem, what will people do at the same time? They will have to solve a new problem, because this will happen or will not happen if it will be a new problem and then they will have to do it. But in the future, we will have to solve the problem. But as far as we see the conditions today, the increase in the quantity of production of gold is so limited that it makes the use of the precious metal of gold as money possible. People say idiotic. Why gold? Why is this useless metal? Because it is yellow. I hate the color. I hate everything. You can say this, but it is a solution. We have it. But we don't know what really happens this way. And now we have the relevantments and the relevantments are extremely nice. This is not the only point in which I am saying. Many other things. The relevant philosophy is not always very trustworthy. But we have not to deal with these problems. We have to deal with the problem. Is that the governments, trade or many governments, bad governments that say that many good governments don't know where they are. And that is, certainly they are in theory that the governments are in a position to destroy the monetary system as it exists. If they go away from the fact, from the situation in which the increase in the quantity of monetary units is strictly limited. And now you may write volumes over volumes on books on money and monetary problems. And if you look in this book, you don't find it simple too. The increase in the quantity of money is the problem. The quantity of money must be restricted in some way or so. People say that this is not from the theoretical point of view. This is not a satisfactory solution. The problem in world history and in human affairs is not that a sin is satisfactory from the point of view of a definite theory. It is not the theory of the world, but it is the situation, the sincs which determine the effects which are according to the laws of the theorism as a result. And this is the situation. What we can do is, in this regard, is to realize that the increase in the quantity of money must be strictly limited. That it is impossible to have a system in which you can increase the quantity of money. I do not want to omit the fact that there can emerge for a certain government and for certain conditions, situations in which the problem is much more complicated. There are not some states in the South of the States. If you were in the States, then in the South of the States, there was already approaching to the field. And somebody would have told you, you know that printing money, banknotes, more and more dollar bills of the Southern, will destroy this system. This certain statesmen would have answered. What? You are talking about money and now the problem is with our system that is more important than every sinc into the Southern state should survive or not. And so he printed, and it is more and more, and it is a real zero. There are other governments who did the same thing. You know, you see, you had to, if you studied, very interesting to read about it, it was not so interesting to live in under these conditions, but reading about the bed in the night, there is maybe for some people very nice. These governments printed as much money until the prices went up and up to a point about which they couldn't go higher. The history of modern paper money, we have several instances of money that went to the zero point of purchasing power. What we have to realize therefore is that when we want to have a system of money that works and operates, one must not increase the quantity without realizing at every step that one is approaching a very dangerous point, the point of which the whole thing breaks down. You will say, but this is something very general and what reference does it have to the problems of daily policies, monetary policies? It has a very important reference. The reference is that when you are operating with something that can be, if you must not always be, that can be deadly poison, you must be very careful. You must be very careful not to reach, not to work with a certain point. You will say, what still use, if you don't give me a certain point. But this is the whole thinking life. This is also something in which I want to say the problem of all these things is that influence the nerves and the mind of people, or just medicine and so on. The doctor saves the lives of some people by giving some things in a quantity which he precisely determines and knows. And if the quantity there increases up to a certain point, then the same thing will be a deadly poison. We have therefore, it is impossible to answer the question, where does inflation start and where does it end? It starts, it starts as soon as you increase the quantity of money. And that danger point begins. This is another problem. The people must realize that you cannot give a statement, advise, this is the point. After this point, you may go and beyond this point you may not hold. Life is not a simple issue. But what would have to realize, and what we have to know when we are dealing with money and monetary problems is always the same. We have to realize that the increase in the quantity of money, that the increase of those things which have the power to be used as a monetary purpose, that this must be a state that is very important. And we have now a solution. We have to extract the solution from the right to the point of view the question cannot be answered, approved or rejected or so on. We have the practical solution that as long as we are using as the medium of exchange, the precious metal gold, we have under present day conditions no special problems to have this. As soon as we are increasing this quantity, as soon as we say a little bit more, a dozen metals on, then we are entering a field in which the problems become very different. We can have today, rather, satisfactory system of monetary payments when we accept the idea that gold can be used as a medium of exchange without any restrictions today. And we may say theoretically from the point of view of clear, fine, theories, this is not very satisfactory, perhaps, but it is very satisfactory from the point of view of the operation of a monetary system and a market. This is what counts. Thank you for your question. I would like to collect those questions. I want to remind you, I know, that, that, I, the T-NR, I like you. When you assume that you think you have at least ten questions, and if you assume that for the answering for questions, and you spend minutes in a museum, you read a hundred minutes, and this means one hour and four minutes. It's long to teach you to ask for our information. And a phrase of society to whom should the coining of money be delegated? The coining of money could also be done by private citizens or corporations if the moral standards of this country give us the expectation that they will not misuse the situation. We have this situation with regard, for instance, with regard to deadly poisons. We have, we assume, this, that the pharmacist will not misuse it because there is no reason for the pharmacy, nor to misuse it. And it will be because this is not, this is situation is for a government that returns regard to money. I don't want to be an officer. And an economy based on the gold standard, as the quantity of commodities increases, should the quantity of money be increased, or should prices be allowed to drop? There is no reason why a definite height of prices, as if one existed, should be retained for all the future. Prices must drop and prices must go up because this is what the market means. The market can only function if it adjusts prices to those problems which consumption and production require. This is something related to that last question. With the very limited amount of gold, is it practical to use the medal itself, or would gold notes be used, or would letters of credit be used as restricted currency? If the letter of credit or the notes are redeemable in gold, then there is no difference. Really redeemable. But if you make a difference, this is precisely what we did. We started, once started in the history in issuing banknotes that were redeemable immediately for everybody at every instant in gold. This would work in the same way as the pure gold standard. But as soon as you begin to say that there should be a difference with regard to the redemption of these notes, then you begin to inflate. This is close to that too. What would be wrong with a system using paper money not backed by gold and which inflation was not employed? How much is the quantity? The threshold is the quantity. When we say gold, we say all the quantity that you can produce and you can have. There is no serious problem for the present day gold standard if some increase or decrease in the yearly production of gold results. Then there will be some smaller things. But if an interest defeat of government produced or so-called paper money, then all these limits are useless. Is it possible to forecast the fate of the US monetary system at this time that we reach the point of no return? Is it crack up and inevitable? No. You see, it depends on who the people will be, what the people will decide in voting in the future. The great danger is that people will succeed in making inflationary spending popular. It could happen. This is the reason why we have to talk about these things, why we have to study these things, why we have never to forget these things. It is not something the monetary system is not something that drops from heaven and can be simply used. It depends on the vice-policy of the government and of the individuals. Therefore, the danger is very great that the government suppresses every manifestation of opinion on the part of the citizens. The Church of government will get very easily ent in inflationary measures. This is the reason why I would not be prepared to recommend an investment, Russian rubles for instance, or some other research for such monetary reasons. I would say the gold standard may, from the theoretical point of view, look as rather funny. But from the practical point of view, it is today and as far as we can. can see for still a very, very long ages to come, no other solution. Well, that's the last of the questions that people have handed up. I'm sure Dr. Mises would be glad to sign autographed any of his books that you folks might have. I'd like to ask one question. If it-- just-- if you could talk for a semester or a year on it, I'm sure. But you've been talking about an increase in the money supplied by the government. How about the effects of expansion of credit through bank loans and through the banking system? Does that have similar-- I'm going to say that it's only the banking system. Then you can-- you are free to get your-- your claim paid by the bank. Banks, private banks, private institutions, cannot force you to accept this. What is-- what is the characteristic of the monetary system is that if you have made an agreement to sell something, and the payment is postponed, you have to receive it later, then nobody can interfere that the government, and the government interferes in favor of its own situation. The government's belief-- I think I'll write it down-- since they have the right to take away everything else from the market, from the citizens. We have another question coming up here. You can ask many questions because I have preferred to explain the problems in a simple way than to enter into analysis of the various details which are of smaller importance. The most important problem is, do not increase the quantity of money. Is there any way to control the issue of money by the Federal Reserve Bank? The Federal Reserve Bank is an institution of the American government, and any institution of the American government can operate by the American government. And therefore, as you don't know, what the people who are following the government received tomorrow, today, after tomorrow, in five years or in thousands years, you cannot be sure of it. Well, I guess we'll call it a day, and Dr. Mises will be willing to autograph books if you want in the library, or in the library.