It helps to think
Printing Presses are evil
Gold is Real Money
An overview study of the effects of the Federal
Reserve and Modern Implications
Animal Spirits
Ben “Helicopter”
Bernanke
In the long run, we are not all dead- we live in the meantime
After 15 million human beings had perished in the war, the foremost statesmen of the world were assembled to give mankind a new international order and lasting peace . . . and the British Empires financial expert [Keynes] was amused by the rustic style of the French Prime Minister’s footwear.

Mises
 Built upon
 Smith
 Say
 Important People
 Carl Menger
 Ludwig von Mises -
Quotes
 Murray Rothbard
 Fredrick Hayek –
Nobel Prize Winner
Rothbard
Lenin’s ideal was to build a nations production effort according to the model of the post office.

 Business Fluctuations
 Entrepreneurs forecast
 Predict consumer demand
 They try hard, but fail often
 Not a problem – even a “farm depression”
 Business Cycle
 General decline in business activity
He who proclaims the godliness of the State and the infallibility of its priests, the bureaucrats, is considered as an impartial student of the social sciences.

 Some businesses are always failing
 Why are there a cluster of errors at the same time??
 Good Businessmen are good at forecasting
 Why did they fail all at once?
This is an important question!!!
A most popular doctrines is crystallized in the phrase: A public debt is no burden because we owe it to ourselves. If this were true, then the wholesale obliteration of the public debt would be an innocuous operation, a mere act of bookkeeping and accountancy.

 Originally:
 Deposit money with goldsmith for safe keeping
 A fee would be paid for this service
 The depositor would receive a certificate
(claim check)
 The certificate traded on par or even a premium to physical gold
Interventionism begets economic nationalism. It thus kindles the antagonism resulting in war. An abandonment of economic nationalism is not feasible if nations cling to interference with business. Free trade in international relations requires domestic free trade

 Passed December 23, 1913
 Centralized Banking
 Monopoly on note issue
 Compelled banks to join
 Fixed minimum reserve ratios
 Inherently inflationary
The assertion that there is irrational action is always rooted in an evaluation of a scale of values different from our own. Whoever says that irrationality plays a role in human action is merely saying that his fellow men behave in a way that he does not consider correct.

 You go to PNC and deposit your paycheck as a demand deposit
 A credit is made to your account
 About 90% is loaned out
 Two entities have title to the same money
 The bank can not guarantee your deposit
 IT IS BANKRUPT
It is not in the power of the government to make everybody more prosperous.

 Pretend there is $X
 $Y will be spent on consumption
 $X-Y will be saved
 This is the time preference
 Prefer future goods with interest to present goods
 Lower time preference


More investment vs consumption
“Lengthening of the structure of production”
 Converse is true for high time preference
"inflation is always and everywhere a monetary phenomenon." – Milton Friedman

 Aggregate time preference value scale
 Supply and Demand
 Entrepreneurial Risk
 Expected change in purchasing power
 NOT FISHER EFFECT
The factory owners did not have the power to compel anybody to take a factory job. They could only hire people who were ready to work for the wages offered to them…. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation.

 Banks create money
 Modern day “open market operations”
 Fractional Reserve Banking
 New money lowers the rate of interest
 Appears that the supply of investment funds increased
 People are saving (deferring current consumption)
Mahatma Gandhi expresses a loathing for the devices of the petty West and of devilish capitalism. But he travels by railroad or by motor car and, when ill, goes for treatment to a hospital equipped with the most refined instruments of Western surgery.

 Businessmen lengthen the capital structure
 Laymen’s terms: THEY INVEST
 Prices of capital goods increase
 Shifts investment toward higher ordered capital goods
 Farther from consumer goods
 New funds flow around economy
 Increase in wages, prices, rents (INFLATION)
How pale is the art of sorcerers, witches, and conjurors when compared with that of the government's Treasury Department!

 People return to their old ways
 There was no real demand for new capital goods

Demand for CG’s declines
 CG industries must liquidate
“malinvestments”
To assign to everybody his proper place in society is the task of the consumers. Their buying and abstention from buying is instrumental in determining each individuals social position.

 Here comes the crisis
 Finally the end of distortions
 Comes when banks curtail credit expansion
 Depression
 Liquidates malinvestments
 Reestablishes efficient service of genuine consumer desires
 Is needed to realign the economy
 “Soft Landing” just tries to prevent the inevitable
We owe the origin and development of human society and, consequently, of culture and civilization, to the fact that work performed under the division of labor is more productive than when performed in isolation.

 Interest rate must go up
 Fall in the price of goods
 Especially higher ordered CG
 Realignment of labor force
 There will be unemployment
 The quicker the realignment
 Quicker to prosperity
Assistance granted to the unemployed does not dispose of unemployment.
It makes it easier for the unemployed to remain idle.

 The market adjusts itself
 DON’T INTERFERE - IT ONLY MAKES IT WORSE
 Government can:
 Prevent or delay liquidation
 Inflate Further
 Minimum Wage
 Maintain Prices
 Stimulate Consumption
 Discourage Saving
 Subsidize Unemployment
Those politicians, professors and union bosses who curse big business are fighting for a lower standard of living.

 Deflation speeds adjustment
 Increases reserve ratios
 Increases confidence in money (gold)


Bank runs are good
 Liquidate bankrupt banks
 Banks are inherently bankrupt under Fractional Reserve
Banking
Gov’t should reduce taxes and spending
 Encourage proper savings and investment
If one rejects laissez faire on account of mans fallibility and moral weakness, one must for the same reason also reject every kind of government action.

 Economic desires are always unfulfilled

“Surplus” stock can always be sold at a lower price
 Entrepreneurs made poor forecasts
 Why?
 Answered by the Austrian theory
Even the manifest futility of the International Monetary Fund does not deter authors from indulging in dreams about a world bank fertilizing mankind with floods of cheap credit.

 Somehow consumer demand becomes insufficient during boom
 There will always be consumer demand i.e.. Food
 Prices will change- Supply=Demand
 Entrepreneurs predict demand
 Others?
If a man drinks wine and not water I cannot say he is acting irrationally. At most I can say that in his place I would not do so. But his pursuit of happiness is his own business, not mine.

 Government intervention in the market place:
 Creates intertemporal misallocations of capital
 Misallocations must be liquidated
 Causes the business cycle
The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration.

A BANK HAS LESS THAN 10% OF YOUR DEPOSITS!!!!!!!!!!!!

 Expect the USD to weaken significantly
 Expect the value of real money (gold) to go up
 Expect many bank failures
Keynes did not add any new idea to the body of inflationist fallacies, a thousand times refuted by economists… He merely knew how to cloak the plea for inflation and credit expansion in the sophisticated terminology of mathematical economics.

 This presentation was adapted from
America’s Great Depression by Murray
Rothbard
 All charts can be found in the online version
 www.mises.org
 Quotes are from Ludwig von Mises
 The Quotable Mises