 My name is Jonathan Newman. I'm a full-time fellow at the Mises Institute. My full title is the Henry Hazlett Research Fellow, and I'm very happy to be there, and very happy to see all of you here. I think it's not really an accident, but it's great the way our topics lined up here, sort of looking at the different aspects of our limitless regime, looking at it from a foreign policy perspective, and I'm going to be looking at it from the money and banking perspective. So I looked at the title for our event against our limitless regime, and I wanted to approach it from the perspective of what enables our limitless regime, like what makes it possible for us to describe it as limitless, and so obviously I'm looking at money and the central bank, the Fed. So the money supply is measured by M2 doubled from 2013 to 2023, and about 60% of that increase happened in the two years after 2020. And if we take a longer view of monetary history, we see that the dollar has lost about 97% of its purchasing power since the Fed was created in 1913, and a lot of that deterioration happened since the closure of the Bretton Woods system in the early 1970s. So it's like a huge, huge increase in the speed at which our dollar is losing value. But since the closure of Bretton Woods, there's no hard constraint on our monetary policy. And if there's no constraint on our monetary policy, it means that there's no constraint on government debt. And if there's no constraint on government debt, then there's no constraint on spending. And so our government can just grow and grow in size and in scope. And really the only thing that's holding it back these days is the unpopularity of price inflation. But even the unpopularity of price inflation isn't much of a constraint when the left has convinced so many people that price inflation is because of greed. And they're right in a sense, but it's not the greed of private business. It's the greed of the bureaucratic state, the military industrial complex, and the politicians who know how to point the money spigot to fill up their own vote buckets. One of Thomas Sowell's most famous quotes is, The first lesson of economics is scarcity. There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics. And Ludwig von Mises concluded his magnum opus, human action, with a warning about disregarding the lessons of economics. He said, quote, The body of economic knowledge is an essential element in the structure of human civilization. And if we ignore it, then we will stamp out society and the human race. So we need to pay attention to what economics says. My goal today is to convince you that no institution ignores the lessons of economics more than the Federal Reserve. We live in a world of limits, like I said, the first lesson of economics. We have limited housing, limited energy, limited food, and limited time. And yet the beauty of the market economy, as explained by Ludwig von Mises and his greatest student, Marie Rothbard, is the way that we make the best use of our limited resources through market prices, profit loss, and entrepreneurship. Only voluntary interaction in markets makes it possible for us to not only allocate scarce resources to their highest value uses, but also relieve that constraint some by expanding production and accumulating capital. It takes raw human ingenuity and cooperation for us to emerge from subsistence and achieve the sort of abundance that would make the kings of old envious today. It requires private property, the division of labor, trust, and the willingness to delay gratification. And if we abandon these, as Mises said, we will definitely see civilization and decline. But the Federal Reserve laughs in the face of scarcity. They think they can overcome scarcity with a limitless supply of green pieces of paper. In good times and in bad times, the answer from the central bank is always more money. And our MMT friends say that limitless money and government debt are a good thing. That the only way for the private economy to grow is for the public sector to become increasingly indebted. And they say that the government's red ink makes our black ink possible. And they come to this conclusion by manipulating accounting truisms and falling back on the line that money is a creation of the state and therefore money cannot constrain the state. To counter this, we only need to look to Carl Manger, the founder of the Austrian School of Economics, who showed that money is not a creation of the state but actually came about organically through the market process. Market participants started using money because it helped them accomplish their own individual goals by cooperating with each other in trading. Manger showed us that the institution of money is a great achievement of the market economy. And with this correct history of the origin of money and view, we can see that throughout history governments have co-opted money. They did not create it. They stole it. They clipped coins, debased the metals, introduced paper promises that were only partially backed by gold and teamed up with banks who were happy to do the same. And the banks were happy to collaborate with the state as long as they were protected from competition and from the consequences of credit expansion. So to take over the institution of money, the state has had to pile on increasing amounts of regulation and institute a central banking system that has grown to gargantuan proportions. And I want to review with you briefly some of the episodes in which the state has... the Federal Reserve has expanded its own power and its own mission. And to show that this is no secret, I've pulled all of this from the Federal Reserve's own website, telling of its own history. The website's name is FederalReserveHistory.org or something like that, but you can access it through a link from the FederalReserve.gov. So I'm not pulling this stuff from Murray Rothbard's history of money and banking in the United States. So the Fed began with an austere mandate. Quote, founded by an act of Congress in 1913, the Federal Reserve's primary purpose was to enhance the stability of the American banking system. And I'll let you judge if they've accomplished that goal. Though the next main event in their history sort of gives it away. Around the time of the 1929 market crash and the Great Depression, they decided that, quote, the central bank should issue money when production and commerce expanded and contract the supply of currency and credit when economic activity contracted. And of course we know from Austrian business cycle theory that oftentimes the causation goes the other way, that when the Fed is printing up money then they can blow up bubbles and start artificial booms and when they let up on that then they cause the contraction or they cause the artificial boom to turn to bust. But notice that in just a few years the scope of the Federal Reserve expanded from enhancing the stability of the banking system to trying to steer all economic activity by manipulating the money supply. So let's fast forward to World War II. Quote from the website, when the United States entered the war the Board of Governors issued a statement indicating that the Federal Reserve system was prepared to use its powers to assure at all times an ample supply of funds for financing the war effort. Financing the war was the focus of the Federal Reserve's wartime mission and this mission differed, this is still a quote from the website, this mission differed from the mission of the system before and after the war, end quote. So they've explicitly admitted that their mission has changed. In World War II they realized that they could not tax the American people enough to pay for the war and so they resorted to the inflation tax. This is visible and unpopular but inflation is subtle and I think it's this observation that led Ron Paul to say that it's no coincidence that the Century of Total War coincided with the Century of Central Banking. So at the end of World War II the Bretton Wood system was implemented which constituted a promise by the US government to redeem dollars for gold so that countries around the world would feel confident in holding green pieces of paper as a reserve currency instead of gold. And this system worked for a little while but of course the government couldn't constrain itself and when it noticed that it couldn't finance its spending without causing gold to drain from the US it expanded the Fed's mission again. So during Bretton Woods quote from the website the Treasury and the Fed combined forces to maintain a cautious monetary policy heedful of international payments and balances so if we could do like a little mid stock taking here so far their mission has expanded from stabilizing the banking system, steering all economic activity with an elastic money supply, financing war spending and now trying to maintain the dollar's dominant status in international trade. And of course like I said the Bretton Woods system couldn't be maintained it proved impossible for the government to spend and inflate as much as it wanted and keep its promise to redeem dollars for gold. The Fed's own telling of its history continues quote they would tolerate an employment rate of up to four and a half percent but by the end of the 1969-1970 recession the unemployment rate had climbed to six percent and inflation as measured by the consumer price index was five point four percent. So in the 70s they got caught in the bind and so the Fed's new mission was now to try to balance the unemployment rate and price inflation and that's where the dual mandate came into play. So now the Fed is tasked with balancing these big macroeconomic aggregates but we've already seen that the Fed had been given or had assumed many other missions and tasks and in 1977 they added another mandate to the so-called dual mandate and that was to have moderate long-term interest rates and then in the 80s we had two big to fail come on the scene and so another quote from the website the run on one of the banks stopped when the FDIC Federal Reserve and the Office of the Comptroller of the Currency after vigorous internal debate about a range of possible options announced a temporary assistance program but of course there's nothing so permanent as a temporary government program. Well all of the other episodes that we've covered so far all these other episodes of Mission Creep involved the Fed taking on additional roles in managing the economy in general this one represents a special kind of new power. With too big to fail now the Fed could identify specific institutions and bail them out if they deemed them as systematically important and remember what I said about the importance of profit and loss earlier. Well if you play the Fed's rigged game well enough and cozy up to them when times are tough they will point the money printer in your direction and you never need to worry about the market test again. Then in the 90s we had the Graham Leach Bliley which was a law that gave the Fed the role of umbrella supervisor. This role was seen as necessary because these large and complex financial institutions had risk spread across their subsidiaries but managed it as a consolidated entity. Someone, and of course the Fed would volunteer for this had to oversee the operation of all of the moving parts. And what did the Fed do with all this accumulated power? Well when the .com bubble popped they worked on blowing up a housing bubble which as we all know ended in disaster a disaster that gave the Fed another opportunity to expand. And so in the 2007-2008 crisis they quote lowered short-term interest rates to nearly 0% took additional steps to lower longer-term interest rates and stimulate economic activity and this included buying large quantities of long-term treasury bonds and mortgage-backed securities that funded prime mortgages. The Federal Reserve committed itself to purchasing long-term securities until the job market substantially improved into keeping short-term interest rates low until unemployment levels declined and now they have a built-in moving goalpost. We've come a long way from the Fed's original mission to stabilize the banking system. Now the Fed can buy whatever it wants and whatever quantity it wants for any reason that it says. They haven't updated their website to include what happened since 2020 but thankfully their friends at the Brookings Institution have what we're looking for. So in this article where they're explaining what the Fed has done since 2020 in a huge article but they say the Federal Reserve stepped in with a broad array of actions to keep credit flowing to limit the economic damage from the pandemic. These included large purchases of U.S. governments and mortgage-backed securities and lending to support household employers and financial market participants and state and local governments. And in 2020 Jerome Powell, a Fed chair, said we are deploying these lending powers to an unprecedented extent and will continue to use these powers forcefully, proactively, and aggressively until we are confident that we are solidly on the road to recovery. And really the... I will share the website with you if you're interested but there's just heading after heading of all of the different new things, unprecedented things that the Fed did just in the past three years with direct lending to corporate employers, the commercial paper funding facility, the term asset-backed securities loan facility, direct lending to local governments, another dose of quantitative easing. It's just a huge list. But they summed it up nicely at the end of the article. The Fed supplied unlimited liquidity to financial institutions so they could meet credit drawdowns and make new loans to businesses and households feeling financial strains, unlimited liquidity. So let's take stock. So just a brief review of what the Fed has done throughout its history. We've got 10 missions that they've accumulated over time. Stabilizing the banking system, steering all economic activity with an elastic money supply, financing war spending and government spending in general, maintaining the dollar status in international trade, balancing price inflation and unemployment, that's the famous one that they call the dual mandate, maintaining moderate long-term interest rates, bailing out too big to fail financial institutions, regulating not just banks but all financial institutions and uses balance sheet to buy any kind of distressed asset and finally supply unlimited money to financial markets and distress. This is a huge undertaking and it's no surprise that the Fed has ballooned in size. So since 2008, its balance sheet is like eight times what it was. And it's not just the size of its balance sheet that's important here. It's also the variety of things that they're purchasing and the variety of new missions and goals that they've adopted. So it's not just a quantitative thing but a qualitative thing. Even if you're unfamiliar with the Fed's history, you've probably seen the Fed grow in importance over the past few decades. There used to be someone in the background, there was just another boring government agency doing boring things. People didn't really pay attention. But now all eyes are on the Fed when it makes its announcements. The entire financial sector is enthralled by FOMC meetings when they occur. Everyone watches the Fed chair as he simply reads the transcript that was published online. Financial news media post moment-by-moment commentary on minutiae like small textual changes in the tone of Jerome Powell's voice. Fed watching has become a sport with cheerleaders, teams, the bulls versus the bears, live commentary and an unhealthy amount of gambling. And unlike the NFL, Fed watching has actually grown in popularity in the past few years. But Fed watching isn't just a game. There are real stakes and broad repercussions for correctly guessing whether Jay Powell will see his shadow when he emerges from the FOMC gym. Roger Koppel commented on the way the Fed has become a big player. He's got a book called Big Players. The Fed has become a big player in financial markets. He said, quote, the market would reward entrepreneurs who could correctly anticipate the actions of the big player resulting in a reallocation of resources toward Fed watching. Now we realize that the cost of a gargantuan central bank are even bigger than the inflation and business cycles they generate. Every Econ 101 student learns that we incur opportunity costs when we use scarce resources. And one of those scarce resources is our own attention. Entrepreneurs are forced by the very nature of the Fed's rigged game to pay attention to how much Jay Powell's brow glistens when he announces updated projections of core PCE inflation. And this attention comes at the expense of what entrepreneurs would be focused on, satisfying consumer desires. If there wasn't a big money printer circus coming into town on a regular basis. So when we think about the Fed, we often think about it in quantitative terms, like the amount of money it creates. But as we've seen in our brief review of its history, the qualitative aspects of the Fed are just as limitless as the money supply under its control. In every crisis, the Fed seems to grow, not just in its balance sheet and money printing, but in its power and mission. I wonder if all of the changes to its mission are because it's so obviously failed on its accumulated goals with each crisis. Each crisis highlights that fact. What this means is that we can predict what might happen when, not if, the next crisis occurs. We should never let the Fed convince us that they've solved the business cycle problem or the bank run problem. They sometimes say this, usually not the Fed's here, but other Fed officials will come up and say, yeah, we've learned our lesson. We know how to stop the business cycle now. We know how to prevent financial crises in the future. Don't believe them when they say that. So when the next crisis comes, expect more expansion of power and control. Personally, I think that they've been priming the pump for a CBDC and we'll roll it out soon when everybody is distracted by some crisis. A central bank digital currency would be the coup de gras for sound money. While the ending of Bretton Woods removed the gold constraints on the dollar, going purely digital would remove even the cash constraint on the dollar. Under Bretton Woods, remember, they couldn't inflate as much as they wanted because if they did, it caused gold to drain out of U.S. reserves to other countries that were holding our paper. It's weaker today, but the threat of depositors pulling cash out of the banking system poses a similar threat. If cash is outlawed or effectively replaced by a digital dollar, there would be no physical constraint at all on inflation. Of course, another serious issue with the CBDC is that it would mean zero privacy and with the political and cultural battles being waged today, this is extremely important. Imagine not being able to spend your own income on items the government deems dangerous, which is a list that grows daily. Imagine the tax and redistribution implications. Imagine the ease of imposing negative interest rates, a dream of central banks, but never realizable due to the permanent nominal face value of cash. Of course, they view all these things as benefits. These are state-of-the-art sophisticated monetary policy tools and mechanisms. You can see them salivating over the tyrannical opportunities, especially at the World Economic Forum events. At one in China this year, Eswar Prasad said this, if you think about the benefits of digital money, there are huge potential gains. It's not just about digital forms of physical currency. You can have programmability, units of central bank currency with expiry dates. You could have a potentially better or some might say darker world where the government decides that units of central bank money can be used to purchase some things, but not other things it deems less desirable. And he said that is very powerful in terms of the use of a CBDC. So we see the direction they've gone or they've come and we see that they're giving us a preview of the direction that they're going. And the direction that they're going is complete control over money, complete control over your income, complete control over your saving and complete control over your spending. Our only hope for sound money is in the idea of limits and constraint. Precious metals like gold and silver have natural and built-in limits and market-based limits as well. And that's a good thing. Bitcoin and other cryptocurrencies also have built-in limits. Economic starts and ends with human action in a world of scarcity. And entrepreneurs are very clued into that fact. They're faced with constraints every day and they have to face the market test every day. But central banks cannot be trusted to restrain themselves. It's in their nature to expand, expand the money supply, expand credit, expand their own power. This is why I'm dissatisfied with any attempt at reforming the Fed and the only solution is to end it. Thank you. So, you want to do some Q&A? Yeah. We have a couple minutes for Q&A. There's a microphone coming around. Okay, this is kind of a softball question, but if the Fed is so powerful and they just become more and more powerful, then you see CBDCs as kind of the next thing. Well, what's to stop them from the idea of floating? Oh, let's just do away with all taxation and spend, I mean, pay for everything with the money crank. Yeah, that's a good question. So, I mentioned the MMT crowd in my talk. And I think that's something that they've discussed. And they said that, well, if the government does not constrain by money, then we can just do that. If the government does not constrain by money, then we can just use the printing press to fund all spending. And we'll use taxation as a separate policy lever, basically to control price inflation. So, I mean, they're already talking about that sort of prospect. In terms of the hope or any source of optimism in this, I think there's a chance for the implementation of a CBDC to be another instance of the state overplaying its hand, which I was discussing at our table. I think the state has done that in the past three years as evidenced by all of the distrust in the media, the distrust for the establishment. And I think there's enough distrust of the idea of a CBDC that if implemented, and they start using that for funding all of their spending, just pure inflation to do that, then I think that'd be another instance of that. Thank you, Dr. Newman. Given the last 111 years of monetary history, most Austrians would assume the dollar would die from heart disease. But looking at the rise of potentially a BRICS currency, Saudi Arabia, you know, cell-noiled in Juan, is it possible that there's international competition that might cause the death of the dollar's reserve status? I don't think so. I don't think because the BRICS nations, they've come up with proposals and they've tried to... I think it's mainly just sort of a PR stunt each time they do that. They're just trying to, you know, chip away at the reputation. But I mean, so far, none of it has been successful. I'm doubtful that the current iteration of this would be successful. I think, I mean, despite how inflationary our central bank is, I do think there's something to the fact that other major central banks are more inflationary than even our central bank, which means that the dollar has at least that much going for it. Thanks for your talk, Dr. Newman. This may be naive, but I have doubts that they can actually implement CBDC because I guess I just don't understand how it would work. Like, who's going to take money in payment for goods or services that expires? You know, like, won't it just cause massive capital flight into other instruments, you know, like paper dollars, gold, Bitcoin? Can they really do that without collapsing the entire system? That's what I wonder. Well, I think they wouldn't start off with that. I think they would start off with little bite-sized rewards. So, like, maybe just a small interest rate if you convert your bank account over to this new specified type. And it could be something that's actually, that we don't even see, that we're not even aware of when it happens. So they could do it without us noticing, but also they, I don't think they would start off with the negative interest rates. Yeah, it's something that they would pull out when there's a crisis. And the reason why people would still accept it if there's expiry dates is they would have to have the anticipation that they would be able to spend it before the currency unit expires. But I agree. It's almost, it's so outlandish to even to think about. Excuse me. Do you think that the funds that they sent out to everybody is checking account during the COVID crisis in the government-lemonary to this? A test? They got everybody's bank account number now? I think so. I think that's one way that they've been priming the pump, but also you see the Federal Reserve is writing papers talking about, and they call it the pros and cons of CBDCs or the risks and the potential benefits. And so, yeah, I think basically anything that involves the central bank is they're just sort of paving the way, they're just getting ready to implement the new expansion of their own power. I think any, it's not just the checks that you mentioned, but the fact that all of our bank accounts are with banks that are members of the Federal Reserve system, it means that they're ready. They have everything that they need to put it in place. Everything except for just majority consent. Hi. Can you give me your thoughts on this new, I can't remember, it's the orb coin, this eyeball thing that's going around the world now taking people's eye details but giving them $49 as a reward because it's a new world token? I'm not familiar with that, but I don't like it. Those are my thoughts. Hi, so speaking as a mother of young children, what can we do to protect ourselves, our assets, our families from the inevitable here? What's your recommendation? So I also have small children. It's tough because it is very, so far there's been a lot of pessimism today and it doesn't look like the world is going in a great direction. But I think there's hope in establishing strong communities. So I think the extent to which you can connect with your neighbors, like real people next door to you in your neighborhoods, I think that that's probably the best thing that you could be working on now. Not necessarily like getting into this asset versus that asset, but the softer things that we don't emphasize. I mean, obviously saving is better than not saving. Obviously getting into precious metals is a good idea if you're expecting a collapse or depending on what your own expectations are. But I think the softer things that we don't necessarily think of first, I think we need to emphasize those things. I think we need to focus on our community and also I think just education. So I hear so many sad stories of parents talking about how their kids went to college and they came back totally brainwashed. And so I think when it comes to kids and families, I think making sure that we're, I mean indoctrination is a bad word, but it's not bad if the doctrines are good, right? So teach them while they're impressionable and while you have that chance to do that. Next question. Yes. Name's Shad. How are you doing, sir? So I wanted to kind of piggyback on the other questions. I want to ask what if things don't work out? You know, Argentina could he let the libertarian president? Do you think moving over there might be an option to, in case things just go buck wild crazy here? Well, I think each person, each family is going to adopt a different strategy that works for them. I'm personally not going to do that sort of thing, but I do know that there are other families and other people who have expatriated and they're living very happy lives. And I'm happy for them. But my own personal strategy doesn't include that. I like my neighborhood. I like being around my grandparents and my kids' grandparents. So I'm personally, like I said with the previous question, I'm going to work on strengthening my own surroundings, my own community and neighborhood. Alright, thanks everyone. We're going to switch over to lunch. And so the buffet table I think is ready for us just outside in the hallway. Thank you very much.