 I don't know what the faculty is doing here. You already know everything I'm going to say. You should all go socialize somewhere. I learned this all from you, so I'm just repeating it back. OK? Here we go. All right. This topic, of course, could go on forever, of the Austrian school versus the conventional wisdom. That's why I came up with it. I thought I could repeat this every year with new material. So I've chosen a number of topics to hit, some briefly, some more in depth. But so that I can get to the most material, I actually prepared a, I do this a lot, I prepared a page on my site where I'm linking you to resources for further reading on these different topics. So there'll be some things that I've said a lot on YouTube and I'm a little creeped out by how many people have apparently watched every YouTube video I've ever made. So they've already heard all this and I want to bore them. So in cases like that, I may just refer you to that page. So the page is tomwoods.com slash conventional. Never had that page before on my site. So tomwoods.com slash conventional is where the links related to this talk can be found. But don't go there because that'll give away all the topics I'm covering. That would just spoil all the fun. So don't do that. All right. Instead, let's just dive right in blind. When I first, when I was in junior high school, I would say the topic that most persuaded me that a laissez-faire economy was a bad antisocial idea was the idea of monopoly. There were allegedly antisocial monopolies out there that were exploitative and that did damage to, well, laborers, the environment, consumer welfare, you name it. And we saw these terrible photographs or depictions of people working in terrible conditions and children working. And I could not imagine how anyone could support a system like that. So certainly, I wasn't a commie, but I thought, come on. We've got to be reasonable here. You have to have some regulation or otherwise you get that. So I didn't, unfortunately, on my resource page put anything about child labor. So I guess I can't defer to that. I think I will have to say a brief word about it, having said something about that. I will just say very quickly on the question of child labor, my teacher, of course, never gave us the idea there was another way to think about this. It was always moralizing. Look at these photographs. That was the entirety of the argument. So I thought, well, yeah, I mean, look at this. You've seen the photographs? And they are terrible. And I don't want to make light of that because I certainly wouldn't want to have been in a position where my kids had to work. But see, now you're getting a bit to a clue of what was really going on there. A lot of times when even to this day there is moral outrage on Facebook about some company and child labor or some country and child labor. You never get them asking, man, what are these parents thinking? It's always the company. Like the company somehow kidnapped these children and that's how they started working there. Nobody ever asked about the parents. The parents just somehow just get a pass. But I kind of want to know, well, what is the deal with the parents? Why are these parents letting these children do this? And the answer, of course, is the reason that child labor existed since the beginning of time, which was there are finite resources in the world. Most people in history have been desperately poor and more or less one bad harvest away from starvation. So they don't have the luxury of saying, well, of course my child is gonna go to kindergarten through 12th grade and learn and read Shakespeare and so on. They're barely able to survive. And in fact, even global institutions like World Health and International Labor Organization have more or less conceded that the reason that you have child labor is not that in some countries, everybody by a bizarre coincidence just all happened to be evil. And just in that one arbitrarily drawn boundary that all these just happen to be evil, wouldn't that be an amazing coincidence? Or the worst parents in the world are in like five countries, they're all there? How did they get there? Isn't that a weird coincidence? Why would they all be there? Well, instead, the reason is if the children don't work, the family starves. That's the situation. So it's not that we like child labor, but that's what happened. In my book, The Church and the Market, I have a probably like a five page overview with footnotes about justifying what I'm saying, but this is more or less conceited by a lot of economists left or right, that that's the reason. So that when you simply say, well, we'll just abolish it, we'll just get rid of it. So what happens then? So that means starvation now doesn't occur because you passed a law, the anti-starvation law. The thing you were trying to do to avert starvation is now banned. That ought to get rid of starvation. Well, of course, what happens is the kids wind up going into prostitution or flat out starving to death, which has indeed happened in multiple cases when guilt-ridden Westerners think that this is the correct approach. Well, it's not. Likewise, of course, the working conditions people endure. This is because this is extremely impoverished societies. And if you had more capital accumulation, you would have a situation where people would have the option to opt for better working conditions. That's ultimately what happens. And that's how child labor has gotten rid of, not because we passed some law. By the time we get around to passing some law, most of child labor has already disappeared anyway because of the natural operation of the market, because there's more intense investment in capital goods that make mom and dad more physically productive, so much so that they no longer have to send junior off to the mine or whatever it is. And then you get rid of it because you get rid of the starvation. Anyway, that was the sort of thing that I would look at in my textbook and say, how could you be a Republican? Because I thought Republicans favored a radically laissez faire economy. I was just a kid, you know, what did I know? And I thought, my gosh, how could you be a Republican? So little by little, I made my way to, you know, this, whatever I am now. Okay, so, but anyway, so I haven't even gotten to the monopoly, monopoly, right? So in the 19th century, we've gotten this impression that it was, it's like the guy on the monopoly box cover. He's my avatar for the 19th century monopolist, even though it's a 20th century game. You know, he's got a monocle, I think. And in the game, you actually see images of him, either with his pockets inside out, which means he has no money, or more often, carrying sacks of money with dollar signs on it, just like in the cartoons. And that's the impression. And usually they're about three feet tall, and somehow with all these natural biological disadvantages, they've come to dominate everything. So again, you read about this, and you read about John D. Rockefeller, Andrew Carnegie, and these are all terrible people and what they did. And then you look at it again a second time when you realize that there is another way of looking at it. This is the key thing when it comes to government education. The impression you get is there's, here are some facts, and there's only one way to think about these facts. Or in this case, here are a couple of photographs with some captions, but really no facts to contextualize them, but you go draw your own conclusion. Look at how rich this guy is and how poor that guy is. All right, well, in fact, Ed Tom Di Lorenzo made reference to the great work by Burton Folsom. He is another one, it eventually became called, what the heck is this book I'm trying to think of, Bob? I can't, all right, anyway, Burton Folsom has this, the myth of the robber barons, thank you. See, there's a good thing, the faculty's here after all, right? The Myth of the Robber Barons by Bert Folsom. That combined with Tom Di Lorenzo's own work really helps to smash all this because Tom made reference in one of his talks, but he didn't give himself nearly enough credit, so I'm gonna do that for him. He's not here, so tell him later that I was praising him. He had this article in 1985 when none of you were even born, right? Tom is slaving away, bashing myths while you're just, I don't know, floating around in the ether. That was probably a heresy I just uttered, right? The pre-existence of souls. Anyway, point is he writes this article for the International Review of Law and Economics, and what Tom actually bothers to do, if you can believe this, he actually bothers to go back and look at the data to see what are they telling us about the actual conduct of companies in these various industries where monopoly is alleged to exist. So Tom goes and finds data for 17 industries for which data existed that were accused of being monopolized. And what he found was that in like 15 out of the 17, the exceptions being matches and castor oil, I think people probably got along okay even with this. So 15 of these, what are we finding? That in fact, output is increasing dramatically faster in these industries than the, and then in the rest of the economy, which is contrary to the neoclassical understanding of monopoly. And also prices in these industries are falling faster than they're falling elsewhere in the economy. So some monopoly, so wait a minute, you mean they're actually improving the standard of living of the average person? Or Cornelius Vanderbilt can actually make it possible for you to get in a steamboat and go somewhere for instead of $5.50, or in some cases for nothing. He just hopes he can rope you into buying some food on board. That's amazing, no government program can do that. The government program can take from the rich and give to the poor. Yeah, eventually that doesn't work. I was looking, there are 565 billionaires in the entire country, 565. So you start redistributing, it just doesn't, everybody gets one extra chicken leg and that's the end of it. Because also, everybody just leaves if you were that wealthy and you had all your money taken away. Yeah, everybody gets chicken leg and the next time you try that, you get crickets. Which by the way, people are eating now in case you hadn't heard about that. They actually do eat them. I shouldn't have used that example. So the point is that when you actually read the stories about these people, they're actually quite extraordinary. But the fact that practically speaking, one person reduced the price of steel rails by 90% is rather an interesting thing. And yet you would have no clue about that if you read the typical textbook from the eighth grade, no clue whatsoever. So check that stuff out, I've got links on that at the page I mentioned, tomwuz.com slash conventional. Another one, now you all know the answer to this but you know the answer because of people like Rothbard who went to the trouble to dig up the information. In the 1930s, everybody kind of knew who Herbert Hoover was. And when Franklin Roosevelt was running against him, his vice presidential nominee said, Herbert Hoover is driving us down the road to socialism. Okay, you did not get that in school. I guarantee you did not get that, right? Herbert Hoover driving us down the road to socialism. I thought Herbert Hoover just sat back and did nothing. Wearing his old monocle, he actually didn't have a monocle but just poetic license here. He sits back and does nothing while everybody is starving, right? And he just sits back and does nothing because of his ideological devotion to laissez-faire. But then why would he be accused of leading the country down to socialism or being a big spender which he was accused of being? So I don't know what happened in the country that everybody's brain got fogged or something in the 1940s, 50s, and 60s until finally Rothbard came along and said, hello, the reason they were criticizing Hoover for this was because he did those things, because in four years he spent more on public works than had been spent in the previous 20. How about that? Or because he was trying his best to force wages up in a deflationary period, which is a boon if you still have a job but makes it a little bit more challenging to get one. Or if you could just go down the list of what he did with interventions into agriculture or international trade or short selling or bailouts or also helping to make public works available in the States through loans of various kinds, the guy couldn't stop himself. In fact, in 1921 when he was Commerce Secretary, economic conditions at that time in early 1921 were terrible. So he's got a big long list of things he wants Warren Harding to do and Warren Harding just completely ignores him. Just great, beautiful. He's one of the best ignorers in American history. All kinds of terrible advice swarming around him. He just totally, he's just in a alcohol-induced fog, Warren Harding, good for him. Can't even hear Herbert Hoover telling him to do these things. So the thing is if you've ever read, how many people, there's no shame in saying no, it's glorious that you're new to this. It's glorious and wonderful and a garden of delight awaits you. So I'm not in any way rendering judgment on you. I genuinely wanna know, how many people have had a chance to read Rothbard's book, America's Great Depression? Okay, okay, that's actually a really great, now the faculty are raising their hands. Now stop, stop it. All right, well, the interesting thing about that book is it only goes up through about 1932. It does not continue the story through the rest of the depression through FDR. It starts off with some business cycle theory stuff and then it tells you about Franklin Roosevelt. A bigger part, it tells you about Herbert Hoover and it doesn't include Franklin Roosevelt. Now I do know somebody on the faculty wrote a book that pushes the story up through the rest of the 30s. If only I could remember that guy's name, but I just, I never have any interaction with this guy. So I just, there's no way I could think of, oh it's Bob Murphy, right. He wrote a book called The Politically Incorrect Guide to the Great Depression and the New Deal, which is also linked at that resource page that I mentioned. So all right, so nuts to that with Herbert Hoover. In fact, there's even, when I was doing some digging around about Herbert Hoover, a PBS page came up and it was like a transcript of an interview they had done where they were all conceding that yeah, actually, Herbert Hoover was kind of a progressive. Oh, Rothbard tried to tell you that for years and years if only you'd crack open a book, come on. All right, anyway, so the New Deal. All right, here's another one. This is, we'll just do this one quickly because I want to get to some trickier ones. The New Deal is supposed to have brought about recovery, but when you look at the economic statistics from the 1930s, they're rather grim. The unemployment figures are still quite bad through the 1930s. Up to, you know, 1939, they're still close to 20%. They've gone back up. So this is not really recovery. So some historians have now had to resort to, well, all right, like Doris Kearns Goodwin, more or less admits, okay, granted he did not cure the country of the depression, but he gave people hope. That was the next thing. He gave people hope. Didn't actually give them the thing they were hoping for, but he gave them the hope. All right, so we'll get in a minute to the World War II thing. World War II caused the Great Depression or didn't cure the Great Depression, but the New Deal thing, you can go through the different programs as Tom does, I believe in his book, How Capitalism Saved America. And you can see that none of them is really designed to bring about recovery. I mean, the Agricultural Adjustment Act involves destroying crops and things. So that would make one sector of the economy wealthier, but at the expense of everybody else. It's like they couldn't think of more than one thing at a time. This'll help the farmers. And then we'll do something else that screws the farmers and the farmer thing screws everybody else. We just screw everybody enough. This'll screw our way to recovery. Because if you look at the National Industrial Recovery Act, the whole point of this is to restrain production so as to bring prices up and make businesses more profitable. Now, we see we're against that. We're against that. And that's why somebody like John T. Flynn who had thought of himself as being a left progressive thought, I don't see how this is left progressive. And then as he began to write about it, he kind of moved out of that phase of his life and became more and more of a free market guy. But if you read by the way, if you read Flynn's book, The Roosevelt Myth, he has way too much of a soft spot for Herbert Hoover. If only we could get back to the great principles of Herbert Hoover. No, how could you write this beautiful book and keep saying that? I don't know. But look, it's better than anybody else was doing in the 40s writing about this stuff. He was doing the best of anybody. He and Garrett Garrett were doing the best of anybody. But in particular though, what you could also supplement our analysis of the New Deal with is the analysis of Robert Higgs. If you haven't read his article on regime uncertainty, I highly recommend it because what he does is he goes back and he uses a couple of different kinds of empirical evidence to justify his claim that the reason the recovery was so sluggish and so prolonged was that there was a dramatic level of uncertainty among investors. Because there's always uncertainty about the future. But this is like exceptionally exponential uncertainty. And we see that reflected in the abnormal rate premium in longer term investments and debt instruments. Now obviously, you always have to pay a little extra for something that's longer lived. But this was way, way, way more than you would think because nobody really wanted to gamble on the future because nobody knows what this regime is going to do. And that turned out to be a problem. So that's a way, because how would we know there was regime uncertainty? Well, this exceptionally substantial premium on the future means there's uncertainty about what's going to happen. So that's one way we can pinpoint it. But another way is the extremely straightforward way of public opinion surveys and opinion polls which really only came into existence in the United States in the late 1930s just in time to try to validate the Higgs thesis. And they would ask questions of businessmen about whether or not they are withholding from investment because of uncertainty about the intentions of the regime. And the numbers are extremely revealing. So it's a beautiful thing about this world. You can just type in Robert Higgs and regime uncertainty and boom, anywhere in the world you are, you can have access to that. But all right Woods, maybe it's true that the presidents did not give us relief from the Great Depression, but thank goodness world catastrophe occurred and then we got relief from it, right? All right, now I mean, I don't want to make light of it. I mean, I'm sure these people would have preferred a situation without 50 million deaths. So I'm not saying that they are gleeful about it, but I am saying that there are people who believe that well, you know, like to look for a silver lining to things. And so we, at least we had economic prosperity as a result. Now I've talked about this. I gave a talk in the previous Mises use years ago when you guys were learning to ride your bike probably, previous ones, when I talked about, I wrote, I actually ended up writing this up for the quarterly journal of Austrian economics. I have an article in there called, what Austrian economics can teach historians? I'm a historian, I've learned from Austrian economics. So what could other historians stand to learn? And I did use the World War II example as a case study of how somebody who's not looking carefully at the data can be misled or who's not really versed in sound economic theory can be misled. Cause right off the bat, something should be fishing to you about this, that bombing and destroying things or conscripting 11 million people and taking them, the most skilled people in the labor force, removing them from the labor force, that made us recover. So maybe if years ago we had thought, all right, if you have any skill whatsoever and you are a man between the ages of 18 and 40, line up against the wall, we are carting you away and that would have restored the economy? Well, obviously not. So why are we thinking that because it's a war, this is some magic word that means we can just drop our rational faculties. Of course, this is not making us more prosperous. In fact, I have to again tip my hat to Bob Higgs because he wrote the article that should have changed everybody's minds on this. And it did change some minds because he did do an article, scholarly article called wartime prosperity and it was with a question mark and then it's a reassessment of the economy of the 1940s. And he goes back and he shows what's wrong with the national income accounting figures of those years. And he says, I was, well, I'm kind of paraphrasing here, but he was first tipped off to the idea there might be something wrong with the national income accounting figures that are showing dramatic GDP growth during these years when he says, well, wait a minute, hold on a minute. This is at a time when the economy is being subject to abrupt and extreme resource constraints. Your best workers are being drafted away and who are they being replaced by? By older men who aren't as physically productive and by young people and women who have never been in the labor force before who have almost no experience. In some cases, no experience. And you're gonna say these are the conditions in which the economy grew at record levels, levels never before seen and never seen since. You're gonna tell me that seems normal to you? It shouldn't. So then he went and showed that the main problem with the numbers is that they're all infected by the overwhelming government and war spending at that time, which gets counted, of course. And then there are spillover effects because the war spending affected all different sorts of aspects of the economy. So what's being reflected in those figures are not the voluntary purchases of consumers according to their individual preferences, but instead you're seeing a gigantic phony number that doesn't tell you anything. And it misleads people into thinking, wow, this was the richest time ever. And then meanwhile, everybody's suffering under rationing. You can't get a new appliance. They're giving you chocolate bars that are smaller than they were before and they're pretending everything's fine. It's like 1984. We've increased the chocolate ration when they actually dropped it by five ounces. So the same sort of thing, people are getting, they're wearing crap clothing that basically falls off when they put it on. And we're supposed to think this was the wealthiest time we've ever had. So ain't no such thing. No, this was not a good time. The depression ended after all this when more or less all these grandiose schemes, whether domestic or foreign, finally came to an end and you could have normal investment, normal economic activity again. All right, how about this one? How about this one? This one for a claim. How about the Fed is a malign institution? How about that? I don't know, I'm gonna say that. Now that's a little bit unusual. That's an unusual claim because normally, you know that's an unusual claim, right? No one says that. In fact, here we are, we Austrians have to suffer through the following. There'll be some economic disaster, the economy be in the tank and we have to endure this. Well, what should we do now? Print a lot more money or just borrow a lot more money? We just sit there like, why me? Why is this happening to me? That I have to be involved in this conversation. Those are the choices I'm being given and it's like the foreign policy choice. Well, the moderates just wanna starve those people to death and the extremists wanna bomb them and then we have this debate about, well should we, starvation has its merits on the other hand, but bombing ain't nothing like that. Hey, it got us out of the depression. Ang, yay, all right. So the Fed has now ever since the crisis of 2008 has been front and center in people's minds. The Fed had been very much in the background pretty much for its entire existence. Nobody talked about the Fed. You look at, well, think about the election of 1956, Eisenhower versus Adlai Stevenson. How many times has the Fed mentioned? It doesn't even come up. It's there in the background, but now people are very interested in it and people now that it's front and center either are highly skeptical of it or they attribute to it just almost bizarre degrees of power and capabilities. So our understanding then is that basically is as follows that until we had the Fed, there were terrible times of economic instability and turmoil and then we got the Fed and it's been smoothed out because of scientific management of the economy. And a lot of your friends you talked to about this probably believe the Fed was created after the Great Depression. So you tell them that actually the Fed was in existence during the Great Depression and pretty much the best they can come up with as George Selgen puts it as well, that was just practice. Ever since then, it's been really great. Well, actually the statistics on this are not so favorable to the Fed, especially when you look at more recent, more reliable data. And these are conclusions that have been drawn by relatively, if we might say, middle of the road scholars, even Christina Romer has been willing to take a second look at some of these figures. So it turns out that the Fed has not in fact given us fewer or shallower recessions than we had before. It turns out that when we look at the 19th century, these various panics, well, there's virtually always some kind of credit expansion that precedes them. I mean, 1873, this was a time when there was a terrible Lincolnian monetary system in place. So you can always find a monetary cause here. And then also there is, that might be reflected in the data, instability that comes from agricultural economies and the various swings that can occur there. So it's hard to compare the pre-fed economy to today. But nevertheless, the pre-fed economy actually comes out looking reasonably good in more recent studies. So for example, a study out of the University of California at Berkeley concluded that contrary to the conventional wisdom, there is no evidence of a decline in the frequency of panics during the first 15 years of the existence of the Federal Reserve. In a book called Banking Panics of the Gilded Age from the year 2000, Elmas Wicker writes, there were no more than three major banking panics between 1873 and 1907 inclusive and two incipient banking panics in 1884 and 1890. 12 years elapsed between the panic of 1861 and the panic of 1873, 20 years between the panics of 1873 and 1893 and 14 years between 1893 and 1907. So three banking panics in half a century and in only one of the three, 1893, did the number of bank suspensions match those of the Great Depression. By contrast, there were five separate bank panics in the first three years of the Great Depression alone. And when we look at these pre-fed panics, we find that the very worst one was 1893 and in 1893 in terms of depositor losses and depositor losses in the panic of 1893 amounted to 0.1% of GDP. That was the worst one. But by contrast, over the course of the past 30 or so years of in the regime of central banking, the world has seen 20 banking crises that led to depositor losses in excess of 10% of GDP and half of those 20%. So the claims for the Fed are overblown. And of course, I guess the housing bubble was also practiced, but I'll come back, I'll come to the housing bubble if I have time, but if not, there's a book by a fellow you may know called Meltdown that deals with that particular one. That wasn't Murphy, that one was me. All right, let's talk about, I wanna talk about a particular episode in economic history that I've become especially fond of and there has been more work done on it since I did my little thing. I wrote an article for a periodical called The Intercollegiate Review on the forgotten depression of 1920 to 21. Now there was some pushback against that, but are people pushed back like with machine guns? We pushed back against the pushbackers and they haven't been heard from since. So one of the pushbackers is Patrick Newman, I don't think is here right now, but he is awesome. You are the best pushbacker I have ever seen because Patrick wrote an article also linked at my resource page answering the answerers because some of us like Bob and Jim Powell and people had talked about this and then we got attacked by the answerers and then the anti-answerers were led by Patrick. Well anyway, the argument runs like this, that in the 1920 to 21 depression you had double-digit unemployment, nearly 12%, a jumping from 4% to 12%, you have a very substantial GNP decline. And again, this is the time when Herbert Hoover is begging Warren Harding to do something. By the time it even occurs to him to try, the thing is over. By the late summer of 1921, we already had signs of recovery visible and the unemployment rate starts to come down. Now it's interesting to note that Japan also experienced rather grim economic times in 1920 and they responded exactly the opposite way from the US because what I'm gonna suggest to you is that the US government responded altogether correctly. And I almost can't even, it's bizarre that somewhere in the ether is my voice saying those words that the US government responded correctly as opposed to the Japanese. This is Benjamin Anderson who is a great economist by the way, mid 20th century writes, the great banks, the concentrated industries and the government got together, that is in Japan, destroyed the freedom of the market. So in other words, this is how they responded to their problems, arrested the decline in commodity prices and held the Japanese price level high above the receding world level for seven years. During these years, Japan endured chronic industrial stagnation and at the end in 1927, she had a banking crisis of such severity that many great branch bank systems went down as well as many industries. It was a stupid policy in the effort to avert losses on inventory representing one year's production, Japan lost seven years. By contrast, says Anderson, in 1920 to 21 we took our losses, we readjusted our financial structure, we endured our depression and in August 1921, we started up again. The rally in business production and employment that started in August 1921 was soundly based on a drastic cleaning up of credit weakness, a drastic reduction in the costs of production and on the free play of private enterprise. It was not based on governmental policy designed to make business good. How about that? The Keynesian economist Robert Gordon later said, government policy to moderate the depression and speed recovery was minimal. Hmm, the Federal Reserve authorities were largely passive, how about that? Despite the absence of a stimulative government policy, however, recovery was not long delayed. Now of course he's a Keynesian, so he's gotta say despite the absence of stimulus, we got out of this. And then he goes right on instead of saying, you know, this has created a crisis of conscience for me. How could this have occurred? Now he's on to the next thing as always happens. Like when Peter Schiff was right that there was gonna be a financial crisis and all these boneheads laughed at him, then there's a financial crisis. They're still blabbing, right? Not one of them says maybe I should shut up for a while, you know, retire to a monastery and meditate and think about the direction of my life. Nope, blah, blah, blah, they just keep on going. Except Ben Stein, by the way, the one honorable guy said, nope, I was wrong and Peter was right, one decent guy. And he's not always decent, so don't go cheering for him. But on this case, this case, he was pretty cheery. And it really is true that when you look at the situation, the federal government and the Fed did indeed take a more or less hands-off position. Joseph Schumpeter said that the 1921 case shows better than any theory could how the system pulls itself out of troughs under its own steam and how it succeeds in doing so while the price level is falling. And now I wanna quote another faculty member here, our old friend, Jeff Herbiner. And he's gonna have so much fun tonight because we're taking him to an escape room and he's agreed to do it and it's gonna be so much fun. He hasn't agreed to do it, but if I shame him enough in front of the crowd, I'm thinking I'll weaken him and he'll do it. Anyway, the real reason I'm quoting him has nothing whatsoever to do with that. Instead, he wrote a little something in the forums of one of my websites about the Fed's policy. He says, the monetary contraction starting in 1921 was the intentional sell-off of bills discounted by the Fed which completely overwhelmed the Coincident Gold inflows. The Fed's balance sheet didn't stop falling until 1922, well after the recovery had begun and plateaued for the next two years as the recovery proceeded at pace. In other words, Fed policy was decidedly contractionary during the early recovery from 1921 to 1922 and significantly contractionary during the entire recovery from 1921 to 1924. And yet there you have it, it recovers. Now let me just say because I don't want this to look like a bizarre curiosity, right? Maybe this is just a fluke. Maybe normally economies don't recover this way. So at a time like this it's important to try to think through why would this have happened or how would this have happened? And to do that, let me just say just a quick thing about Austrian business cycle theory. I know you've had plenty of exposure to it but let me say a quick thing about it because it does help us understand what not to do about a recession and then it can help you understand why when we didn't do the things not to do things turned out all right. So one of the things that helped me to understand the Austrian business cycle theory better was as follows and to see how it actually integrates with the Austrian understanding of capital and stages of production and so on. It basically goes like this that if the, in our case the Federal Reserve pushes interest rates artificially low, I mean you've already heard all this. I mean the interest rate gets pushed artificially low, the economy gets on an unsustainable path but what do we mean by an unsustainable path? What would that look like? And so what's actually happening is, let's first think about a normal economy where interest rates fall. Interest rates fall, we all save more, tends to push interest rates down and what that means is when we save more it means we're not consuming as much. We're not gonna run out and blow our entire paychecks, we're gonna save some of it. So consumer goods industries will have a relative contraction because we don't buy as much consumer good stuff. So there's a relative contraction there. But what that also means is that the productive resources that might have been used to ship clothing to and from different JC penny locations is now available for higher order stages to have make use of. Because the higher order stages can also use trucking services. So when we stop buying so many new shirts at JC penny, well they don't need as many trucks to ship new shirts in. So the trucking services now become available for the higher order stages which are stimulated by the lower interest rates. Okay, but now suppose that it turns out that these low interest rates are created artificially by the Fed. Well then in that case, we're not consuming less than before. We might even be consuming more. So we're not actually releasing resources in the lower order stages. But meanwhile, there are projects begun in the higher order stages. And it turns out that the resources for them to complete their projects have not been made available by us by our consumption decisions. And so now the trucking services, just to use a stylized example, are not as available as these investors might have anticipated. They carry a higher price because the lower order stages are bidding them back. And so there winds up being a tug of war over resources. Instead of the resources flowing naturally from some lower stages to the higher ones, there's a tug of war between demand at the different ends of the structure. And given that the higher order stages are more or less being sustained through artificial monetary means, we know who's gonna win that tug of war and it's not these new investments. And so that's where this is all gonna wind up with that's what we mean by the economies on an unsustainable path. You're trying to do things that cannot be simultaneously done. And that will come out as losses for a lot of these new projects. So then now that we get what happened, what's the natural next thing to do? Is it to make interest rates even lower than they were before? Well, obviously what would that do? That would just perpetuate the problem. And then the crash becomes more severe. Well, indeed they did that under Allen Greenspan. We had the dot com boom. And then we had in 2001, we had something like 18 rate, 14, 18 rate reductions. And we didn't really get the cleansing that was necessary. What instead we got was everybody concluding, wow, even a recession can't stop housing prices from rising. And so you get all these crazy decision on the part of consumers too, who looked at the situation and thought they were wealthier than they were. So therefore we can more or less conclude on the basis of my brief overview that monetary stimulus is simply gonna give you more of the same. And what it will give you is still get a crash, but it'll be worse because you will have prolonged the misallocation even longer. So there'll be more liquidation that has to occur. So you don't want that. All right, well, how about borrowing money and blowing it on bridges or whatever, some bridge to some congressman's house or whatever. I used to teach at a college that had three campuses. The third campus was out on Eastern Long Island where there about 10 people and some pigeons basically. There's nobody out there. And it was because some congressman just thought it would be neat to have a campus near his house. And so they're crazy allocation decisions that get made. But the argument tends to be, but you know what, when push comes to shove, you know, if you make me a Keynesian drunk, I will say that spending on anything is better than no spending. So, you know, we'll take that crazy campus that nobody wants, at least it's something. It'll stimulate activity. But of course, this leads to a, this kind of gets us a little bit too far ahead because, well, why isn't there activity now should be the question instead of saying, well, you know, there's a lot of slack here, a lot of idle resources. Let's just stimulate them into activity. Let's pour some monster drinks down the collective throat of the economy, get things going. Well, maybe the problem is the current configuration isn't workable. We don't want to restart this thing. Well, we don't want it to be restarted. We want resources to shift around, to go to new places, not to restart the zombies we have now, we want to go to different, where they belong. The economy, people in the economy are finally figuring out, we've been on this crazy bizarre journey for a number of years. The Fed has taken us on. And there are some things we started that we shouldn't have started. And maybe we got to reallocate resources, whether it's labor or whatever, different types of capital, whatever. That needs to get done. And that needs to get done without any white noise coming from government. And one way that can come is through so-called fiscal stimulus. We'll build bridges and we'll build these sorts of things. And one of the important contributions that Bob has made to all this is asking the question, does depression economics change the rules? Do we say that, well, when the economy is really depressed, we don't have to worry about the broken window fallacy anymore. You know, the broken window, we break a window and we're trying to lecture people, but this doesn't make you richer because now you're just taking resources to go fix the window. But the argument is, but see during a depression, the window guy is unemployed anyway. So you're not really taking him away for anything. You're not bothering him. He's just watching game shows all day. So there's no problem for him to go fix the window. It's not really losing any wealth. So what are you complaining about? But as Bob points out, for one thing, what is the likelihood that the government's crazy project is going to consist of precisely the kind of labor that is presently unemployed and precisely the kinds of materials that are currently unemployed so that it all flows beautifully with no disruption. Of course, that's a fantasy. Of course, you're gonna be drawing resources away from the productive private sector that is trying its best to recover after the Fed screwed it up all those years. So stop doing that. That doesn't help. So XNA to the Iskall Stimulus Fae, right? None of that. All right, and then finally, the last one I could cover is the 2008 financial crisis was not caused by deregulation. Not all your Facebook friends will agree with that statement. I recently released an e-book called Your Facebook Friends Are Wrong About Healthcare, because they are. They're wonderful, but you have lovely people as your Facebook friends, but man, are they clueless on healthcare. So one of my friends, Ben Settle, who's a great email marketing expert, he said, you could do a whole series called Your Facebook Friends Are Wrong About XYZ. And I thought, man, yeah, what an empire I could have because your Facebook friends are so wrong. That's unbelievable. Well, anyway, on the deregulation front, we'll just simply point out this. No, it wasn't deregulation because what deregulation occurred that had any relevance whatsoever to the financial crisis? What was the financial, what happened? Banks made a lot of terrible loans. Yeah, they've always been allowed to make terrible loans. There was no phantom repealed regulation that prevented them from making terrible loans. They were always allowed to do this. So there must have been some systemic thing causing it. Secondly, it's not that spending on financial regulation fell. It tripled in real terms since 1980. In real terms, adjusting for inflation. I had a Facebook guy try to say, oh, you're not adjusting for inflation. Yes, I am. So now what's your argument? They'll come up with something else. But so he admitted that that sounded bad for his side. So there's plenty. And then SEC regulation spending that went way up. So it's not that. Well, it was the partial repeal of Glass-Steagall. This thing. This thing is not real. I have a book called, I don't have it with me. It's called Roll Back. I'll never make another cent of royalty on this. So I'm just saying this, not to earn money, not there's anything wrong with that. But just to tell you where to find out more about this, it's on my resource page as well. But in there, I go into this whole deregulation thing, particularly this repeal of Glass-Steagall. The long of the shirt is Glass-Steagall divided investment in commercial banking and did some other things to it. They prohibited banks from dealing in security. So they can hold them as an investment, but they can't deal in them. So that's what banks were doing. They weren't doing anything they weren't allowed to do. And the only thing, the only part of this that was repealed in 1999 was that now the same holding company could be in control of a commercial bank and an investment bank. Now there's no other country. And I realized that in a fiat weirdo banking system, it's hard to know whether regulation or deregulation is even the right thing. I'll grant you that. There's no other place in the world that's dividing this type of banking. And they seem to be doing okay. But also, when we look at what were the institutions that failed, well, there were plenty of standalone investment banks that failed and standalone commercial banks that failed. So this thing is a total red herring. And I think the only reason they advance it is that it's the only deregulation that has like the word bank in it that even sorta sounds like it could remotely be relevant. But it's not. They're missing the elephant in the room, which is the Federal Reserve. It's in my book Meltdown, and thanks for listening.