 About 25 years ago, I published several articles, and one of them was in the International Review of Law and Economics. It was on the origins of antitrust. And because in the theme of it was that the Chicago school economists, who were big critics of antitrust regulation, were reformers. Their take was that, well, yes, for the past 100 years, the government has screwed up. It actually made markets more monopolistic with antitrust regulation than what it's supposed to do, make it more competitive. But if you put smart guys and gals like us from the University of Chicago in charge of antitrust, we'll change it. Whereas a lot of the Austrians were more like abolitionists. Not all of us, but a lot of us were abolitionists on the antitrust issues because we believed it was inherently incompatible with competition. And the other area of monetary policy is pretty much the same way. The Rothbardians have always been in favor of getting rid of the Fed, of having a free market in money, not central planning in money. But the famous Milton Friedman became famous for his monetary rule, where he spent much of his career arguing that if you could somehow magically have some omniscient and benevolent bureaucrats who would allow the money supply to grow at only 4% a year, then everything would be peachy with the economy. That's pretty much what Milton Friedman will always be known for forever in terms of economics as his monetary rule. But although I think Friedman actually gave up on that late in his life, but that's still what he was known for. But it's still sort of the same idea that, well, if we get smart people like us from Chicago running the Fed, we'll do it better. Because the Rothbardians, who Joe is going to talk about in his next talk, were among the abolitionists of central banking, that version of central planning. And so my early article that I mentioned on antitrust, I argued that antitrust was rotten from the start. And I quoted a famous Chicago school law professor, now a judge, Richard Posner, as calling the Sherman Antitrust Act, the Magna Carta of Free Enterprise. We had this law in 1890 that without that law, he said, we wouldn't have free enterprise. That's the Magna Carta of Free Enterprise. And so a lot of Chicago schoolers and others consider the Fed to be sort of the Magna Carta of Prosperity. And when Doug just explained to us why, if you're a Wall Streeter, well, yeah, it's the Magna Carta of Prosperity because of the Cantillon effect. But so what I'm going to have to say in my time here is that I'm going to tell a similar story about the origins of central banking. Just like I told the story about the origins of antitrust being an inherently a special interest racket that created protectionism for over 100 years now. The same thing is true of the origins of central banking in America. It always was a corrupt racket. And Doug did a very good job just now of explaining some of the types of corruption. And so I'm arguing that monetary policy can't be reformed any more than you could reform Kudzu. Being in Louisiana, a lot of people probably know what Kudzu is. You can't get rid of it. You can't trim it. You can't have a gardener come in and clip it around the edges and make it look nice. It'll still take over the entire pine forest in the neighborhood. You have to pull it out by the roots and then burn the roots is the only possible way of getting rid of this stuff. And that's the same way with the Fed and antitrust, as far as I'm concerned. And of course, Murray Rothbard spotted this a long time ago when he studied the very beginnings, very origins of the idea of central banking. And think about this, at the very beginning of the American founding, you had people like Alexander Hamilton saying, here's an idea. Let's have a bank run by politicians out of the nation's capital. Well, what do you think of that? And of course, the Jeffersonians were horrified at this because they knew that that, well, that's what the Bank of England was. And they just fought a revolution against this kind of crooked system. It was the engine of British mercantilism. But of course, Hamilton and his fellow federalists, who are also known as the nationalists, they took the attack that Mel Brooks took in the movie History of the World Part II, where Mel Brooks played the king of France. And he kept saying over and over again, a laugh line, it's good to be the king. And so Hamilton and the nationalists thought, well, it's bad to be on the paying end of a mercantilist empire. But if you're on the collecting end, it's a good gig to be on the payee rather than the payer. So they wanted to run the bank. And here's what Murray Rothbard said about this in his book, The Mystery of Banking. He knew that one of the wealthiest men in America at the time was Robert Morris and his compatriot, his political compatriot was Alexander Hamilton. And here's what they were up to at the very beginning of the American Republic. He says Morris and his compatriots wanted to reimpose in the new United States a system of mercantilism and big government similar to that in Great Britain against which the colonists had rebelled. The object was to have a strong central government, particularly a strong president or king, as chief executive, built up by high taxes and heavy public debt. The strong government was to impose high tariffs to subsidize domestic manufacturers, develop a big navy to open up and subsidize foreign markets for American exports, and launch a massive system of internal public works. In short, the United States was to have a British system without Great Britain. That's Murray Rothbard. And of course, this is all true. This all came into being eventually. But at the time, there were some people like Thomas Jefferson in particular, who said, wait a minute, this sounds like a bad idea. We just fought a revolution against this idea. Rothbard goes on to say that an important part of the Morris scheme, and those of you who knew Murray Rothbard, you could just hear him saying the words, the Morris scheme, he said was to organize and head a central bank to provide cheap credit and expanded money for himself and his allies. The Bank of North America, that was the first one. The Bank of North America was deliberately modeled after the Bank of England. And so it was, but it only lasted about a year. Its currency became so unreliable and so suspect that it was privatized after only one year. But this political cabal centered in New York and Philadelphia and Boston, they never gave up. I mean, to this day, they pretty much control the financial markets, but their political descendants do. But they never gave up. So what they did was Morris recruited to whom Rothbard called his young disciple, Alexander Hamilton, who had no experience or education in financial economics at all. He had a lot of experience in something else, I don't know what you would call it, kissing up I think would be the word. He was a very young man, he was George Washington's assistant, for example. And if you read the big Pulitzer Prize winning biography of Hamilton, you'll read of how he got the job as Treasury Secretary. Robert Morris, the richest man in America who had also made a lot of money as a defense contractor. Maybe he was probably the founding father of defense contractors, Robert Morris. He got Hamilton a job, Hamilton knew nothing about finance. And here's what Ron Cherno, the biographer of Hamilton, who won the Pulitzer Prize for his biography said happened. He said at the end of the American Revolution, and at the very end of the war, he says this, quote, Hamilton brushed up on monetary matters, because he knew nothing about monetary matters. And he had Colonel Timothy Pickering send him some primers, David Hume's political discourses, tracks written by the English clergyman and polemicist Richard Price and his all-purpose crib, Postal Weights Universal Dictionary of Trade and Commerce. So Hamilton knew nothing about trade and commerce, so he wrote a dictionary. Then he goes on to say Hamilton sent a marathon letter to Morris that set forth a full-fledged system for shoring up American credit and creating a national bank. And, of course, Hamilton knew that this is what Morris wanted. He wanted the Bank of North America was Morris's bank. He wanted a bank run by politicians that would provide cheap credit to him and his business partners. And so here's the kiss-up, Alexander Hamilton writing a letter. He's works for the most famous and powerful man in America, George Washington, as his assistant during the Revolutionary War. The war's almost over and Hamilton's wondering, what do I do next? So he writes a letter to the richest man in America with the help of people who actually knew something about finance and says, I think your ideas for the economic policy after the war are perfect right on. And so it's quite the kiss-up letter. And then in Cherno's book, he says that when Hamilton, when George Washington learned that Robert Morris was recommending Hamilton to be the first Treasury Secretary, George Washington turned Alexander Hamilton and said, I didn't know you knew anything about finance. We never talked about it. But if Robert Morris wants you in the job, I'll put you in the job. So he was essentially Morris's puppet and not just Morris, but other people. He was sort of the chairman of Goldman Sachs of the day, sort of put in as Treasury Secretary. And some things never change, do they? Maybe he was sort of the core sign of his day, I guess. He was Goldman Sachs chairman also. And so he wrote this big long, it was a 30-page letter he wrote to Morris. And so Hamilton began championing the creation of an American version of the Bank of England. And here's one of the things he wrote, making the case for a bank run by politicians out of the nation's capital. What a great idea. He says, and I'm quoting Hamilton, Great Britain is indebted for the immense efforts she has been able to make in so many illustrious and successful wars. Now there's a case for a new bank. He says, because of the existence of the Bank of England, he spoke of what he called, quote, imperial glory. We can have more imperial glory if we have a bank run by politicians. And then he says this, the tendency of a national bank is to increase public and private credit. And the former gives power to the state for the protection of its rights and interests, power to the state. So the whole purpose of the central bank, of course, was to give power to the state. And of course, Hamilton, he was constantly badgering George Washington as Treasury Secretary saying, we need a government of more energy, government of more power. He thought the Constitution was far too weak, far too limited. And he devoted the rest of his life to doing everything he could to undermine the Constitution. It was Hamilton who invented the idea of implied powers of the Constitution, for example, when he made his case for the constitutionality of the Bank of the United States. That's where this idea came from, that clever lawyers like himself could somehow reinterpret the Constitution on their own and invent new powers. That was Hamilton's legacy. And so that was the purpose of the first bank. And Hamilton did succeed. They brought, we had the Bank of the United States as the successor of the failed Bank of North America. And it's well known, if anyone ever studied Hamilton, that he was quite the Machiavellian in politics. He was very brilliant, and he was a workaholic also. And so that can be a great combination. Steve Jobs was brilliant and a workaholic. So was Bill Gates. But if you have somebody who's a brilliant workaholic in politics, that can be very dangerous. And Hamilton is known for championing a large public debt for the sake of having a large public debt, because his reasoning was that it would be the wealthier people of the country who would own the government bonds, and they would therefore form a permanent lobbying group for bigger government and higher taxes forever, because they would want to make sure there's enough money in the treasury to pay off the principal and interest on their debt. And so that was his reason for a big public debt. It wasn't necessarily to finance anything, but just to become an engine of governmental growth. And so one of his first gambits in trying to do this was the Bank of the United States. There was one of the editions of the Federalist Papers was edited by Douglas Adair in the foreword. Douglas Adair wrote this about what Hamilton did as Treasury Secretary with the help of his party. He said this, with devious brilliance, Hamilton set out by a program of class legislation to unite the property interests of the Eastern Seaboard into a cohesive administration party. Well, at the same time, he attempted to make the executive dominant over the Congress by lavish use of the spoil system, handing out goodies to politicians and government jobs. In carrying out this scheme, Hamilton transformed every financial transaction of the Treasury Department into an orgy of speculation and graft in which selected senators, congressmen, and certain of their richer constituents throughout the nation participated. So graft paying off politicians to support his big government agenda is how we ran the Treasury Department. And one of the biggest gambits that he undertook, he, with the help of his political cronies, was one of the really first big political insider trading schemes where the government agreed to, the government was about to nationalize the debt of the states. And the government was going to buy up this debt at face value. And at the time, some of these bonds that had been in the pockets of revolutionary war veterans who were paid partly in bonds and not currency were trading between 2% and 10% of value, of face value. And so the insiders, members of Congress, the political insiders, people who are closely associated with the Federalist Party, they knew this. They knew the government was going to buy up these bonds at 100% of face value. And so they went on a wild spending binge, going up and down the eastern seaboard, buying up all these bonds from the revolutionary war veterans and whoever else owned them, because they knew that in the near future, they could sell them at 100%, buy them at 2% and sell them at 100%. And there's a biography of Hamilton and Jefferson by Claude Bowers. The book is called Hamilton and Jefferson. It's a famous old 1920s-era biography. And here's how he explained what happened. He says this quote, imagine this going on. Imagine members of Congress literally, members of Congress hiring people to drive stagecoaches to North Carolina and all over the place to buy up these bonds. He says, expresses, by which he meant stagecoaches, with very large sums of money loaded with cash or on their way to North Carolina for purposes of speculation and certificates splashed and bumped over a wretched winter roads, two fast-selling vessels chartered by a member of Congress who had been an officer in the war were plowing the waters toward Southward on a similar mission. And so they wanted a mad dash, and they bought up all these bonds, and they made a pretty good profit on it. Robert Morris made at least $18 million in this. Governor George Clinton made $5 million. Hamilton himself bought the bonds, but quote through buying agents in Philadelphia and New York, and although Cherno in his biography of Hamilton claims that, well, yeah, Hamilton participated in this personally, but the money that he made, he gave to his brother-in-law as a gift. He says that. When you read some of these biographies, you'll get a lot of good belly laughs out of it. In the same biography, by the way, Ron Cherno says that, well, yes, Hamilton purchased six slaves at a slave auction once, but they were for his brother-in-law. He must have really loved his brother-in-law, as a dear beloved relative. He bought slaves for him. He gave him millions of dollars. Well, what a lucky man to have a brother-in-law like Alexander Hamilton. But it was Thomas Jefferson who smoked out these people. He understood what was going on. February 4, 1818 essay. This is long after Hamilton died. Hamilton died in 1804 in the famous duel with Aaron Burr. And my old friend, Gary North, started up a Aaron Burr society. And their logo was not soon enough. It was not the Aaron Burr society. Maybe the Mises Institute would be selling t-shirts with that mugshot of Hamilton and not soon enough on there. But here's what Jefferson is up to. He wrote in his letter, Hamilton's financial system had two objects, first as a puzzle to exclude popular understanding. That is, he made it really confusing sounding. So the average member of Congress even could not understand what the heck he's up to. And secondly, as a machine for the corruption of the legislature. So Jefferson observed all of this, the arbitrage, the patronage jobs, the big spoil system that Hamilton and the federalists had created to buy the votes of members of Congress to expand government beyond what the Constitution would allow for. But they had a problem. The federalists faced the problem. And here's the root of the problem. Jefferson is describing Hamilton's view of government. He says this. Jefferson said that Hamilton avowed that the opinion that man could be governed by one of two motives only, force or self-interest. Force, he observed in this country, was out of the question. And the interest, therefore, of the members of Congress must be laid hold of to keep the legislature in unison with the executive branch. And with grief and shame, it must be acknowledged that this machine was not without effect. That even in this, the birth of our government, some members were found sorted enough to bend their duty to their interests and to look after personal rather than the public good. And he goes on, Jefferson went on to say that men, thus enriched by the dexterity of a leader, would follow, of course, the chief who was leading them to fortune and thus become the zealous instruments of all his enterprises. So Thomas Jefferson is saying that, well, yeah, Jefferson or Hamilton made these people rich with this arbitrage scheme and other means. So of course, they're gonna follow him and vote his way. But the big problem is that this arbitrage where they nationalize the debt was a one-time deal. And so as soon as these men who benefited from it retired or died off, then they would no longer have the votes to keep this engine running, to keep the engine of big government running. So Jefferson says this, some engine of influence more permanent must be contrived. Something more permanent, a permanent engine of corruption. And what do you suppose he was referring to? Who would like to take a guess? A bank, yeah, his next words are, this engine was the bank of the United States. And so once you establish a bank run by these politicians or heavily influenced by these politicians, that would be a permanent engine of corruption. And so that is the purpose that Jefferson said was the purpose of a central bank, a permanent engine of corruption that would fuel the growth of the state by buying off the political support, not just of members of Congress, but also the wealthier people of the country who as Doug mentioned are always the first, among the first to benefit from monetary expansion. Today, it's the Wall Street crowd primarily. And so of course, Jefferson famously said that Hamilton was not, quote, not only a monarchist, but for a monarchy bottomed on corruption. And that's very true, at the Constitutional Convention Hamilton proposed a permanent president, monarchy, but it had to have corruption too. As long as we have a legislature, we had to corrupt the legislature to get our big government agenda in. And then the final thing I'm gonna say about Jefferson here is that he also wrote about a famous dinner he had, a dinner conversation with the Secretary of War, Henry Knox, John Adams, President John Adams, and U.S. Attorney General Edmund Randolph, and Hamilton, okay? And so, and Jefferson recalled how John Adams was talking about the British Constitution at this dinner party. And here's what Adams said. He says, purge that Constitution of its corruption and give to its popular branch, that is the legislative branch, equality of representation, and it would be the most perfect Constitution ever devised by the wood of man. And so Hamilton responded to this, and Hamilton said this, purge it of its corruption and give to its popular branch equality of representation, and it would become an impracticable government. As it stands at present with all its supposed defects, it is the most perfect government which ever existed. So he's praising the corruption. He's saying that the corruption is an important ingredient of the British system. And so Jefferson concluded from this that he says that Hamilton was so bewitched and perverted by the British example as to be under thorough conviction that corruption was essential to the government of a nation. And of course, he was right. That's exactly what Hamilton was up to. And so, of course, there was a famous debate between Hamilton and Jefferson over the constitutionality of the bank, and we did get the first bank in the United States. And as Rothbard wrote, it promptly created 72% price inflation in its first year, first five years rather, first five years, it corrupted politics. It had a 20-year charter, and Congress did not renew the 20-year charter because it created boom and busts, it created price inflation, and it corrupted politics. Just exactly what the Jeffersonians knew a central banking had done in England all that time. That's why they were opposed to it. And then, of course, it was resurrected after the War of 1812 because the excuse of monetizing the war debt was used to bring back the Bank of the United States. So we got the second Bank of the United States, and it went back into business in January of 1817. And then, who knows the title of Murray Rothbard's dissertation at Columbia University? What's that? The Panic of 1819. Yeah, so the central bank comes back into being in 1817, and then we have the Panic of 1819, which Rothbard points out, it was the first time ever where Americans saw large-scale unemployment in the cities. I think he said unemployment in Philadelphia went from something like 9,300 people employed to 2,300 people employed, something along those lines. Pretty big drop in employment. And so Andrew Jackson really knew what he was talking about when, if you fast forward to the 1830s, early 1830s, when he vetoed the rechartering of this bank over the same reasons, economic instability, but especially corruption. And so, and when Jackson did this, in his actual statement, veto statement, he vetoed the rechartering and Congress was unable to overturn the veto. So the second Bank of the United States eventually went out of business. He said this, he said, he called it subversive of the rights of the states and dangerous to the liberties of the people. He said, every monopoly and all exclusive privileges are granted at the expense of the public and the many millions which this act, that is the rechartering of the Bank of the United States, proposes to bestow on the stockholders of the existing bank must come directly or indirectly out of the earnings of the American people. And so he had, he was a good Jeffersonian on the banking issue, he understood this. And of course, as I said earlier, some things never change, do they? These forever, as soon as the discussion of the central bank started, there was one side that said, it's gonna create economic instability, it's gonna corrupt politics. And of course, Jefferson himself was very well educated on the economics of his day. If you were to walk into Monticello tomorrow, Jefferson's home in Charlottesville and walk in the front door and you turn around like this, you'll see a statue of Terjeaux, the French finance minister who was a precursor of the Austrian school. He had read Adam Smith and Ricardo and Terjeaux and people of that eventually, by the time he died, he certainly knew of all of these people whereas Hamilton didn't. I don't think he ever read The Wealth of Nations and he read sort of political tracks by British mercantilists who made the case for protectionism and things like that. And so the people who understood economics and how markets work, they were dead set against the central bank, they were the Jeffersonians. And this battle persists to this day, I guess some of the people in this room were the political heirs of the original anti-central bank, Jeffersonians, whereas the John Corzines of the day are the political heirs of the Hamiltonian side of the bank because they understood fully well the criticisms and they knew the criticisms were correct that the central bank would be an engine of corruption. And but they said their take has always been but it's good to be the king, you know? After all, when we have corruption it's because somebody benefits from corruption. And so the people who benefit corruption always want an engine of corruption. Of course they do. And so there you have all the defenders of the Fed. And then I guess the other category of people who are the defenders of the Fed are the naive and uneducated economics professors who get paid by the Fed. So I think it was our friend Larry White did a study once and published in an academic journal that I think he said 80% of all the economists who write scholarly articles about the Fed are paid somehow by the Fed. Either as consultants or a research contract or something like that. And so that's a part of today's engine of corruption. And so the moral of my story is that just as with anti-trust which I wrote about 25 years ago as being inherently incompatible with free market competition, I think the whole idea of a central bank was always intended to be inherently incompatible with economic stability but also inherently compatible with a permanent regime of corrupt government. And I don't think I have to convince too many people in this room that that is certainly what we have today with the Fed and its bailouts and its cozy relationship with Wall Street. And I guess my time is about up. Thank you all for coming and thank you for supporting the Mises Institute. We'll all be glad to sign all these books and you will not be allowed to leave the room until you buy one of my Hamilton books here. That's, you all signed on agreement of that when you signed up for the conference. Thank you.