 I just want to say first it's such an honor and a privilege for me to be here and get to speak to you all today, especially about such an important topic as money. I'm going to go ahead and disappoint a big portion of you. I don't have the Lucas Engelhardt garden update in my lecture, but Lucas is back there. I have one small pot on my back patio of cherry tomatoes that are, they always look thirsty. So there's my garden update. Okay, so money, such an important topic. And Austrian economics is known even for people who don't know a lot about Austrian economics. They know us for our unique business cycle theory, and you can't really understand Austrian business cycle theory without knowing how we regard money. So if this was, so it's important for us to start off and have this on the first day. If this was a mainstream economics conference, week-long conferences, does that even happen? Do we have, that's surely there's not those kinds of nerds doing that. Anyway, if there was a mainstream economics conference, a week-long thing, they would have micro separated from micro. Micro would be in the beginning of the week and macro would be at the end of the week. And, you know, money, if it's treated at all, would be relegated somewhere to the end of the week. But Austrians have micro and macro completely integrated, and our analysis is done with money prices. So money is central. It's not a veil, like Milton Friedman said, claiming that money was neutral. That's not going to be that way here this week, right? So we have macro and micro completely integrated, and money is a central theme. So also a lot of our greatest contributions have been in money. So Carl Minger's theory, the origins of money published in 1892, one of his greatest contributions and just really a fascinating read and so straightforward and so obvious once you hear it and we'll talk a lot about what he said today. Twenty years later, Minger's first book, The Theory of Money and Credit, where Minger's expanded on Minger's approach and went on to develop the regression theorem. So other great contributions, of course Murray Rothbard, my favorite is the mystery of banking, but also what has government done to our money. So if not for the Austrians and the Austrian schools work in money, we might still have the state theory of money where we think that the money is just whatever the state says it is by some authoritarian decree. The currency just has value because we say so. So that's why it's important to go ahead and talk about money today. So who needs money? Okay, not a rhetorical question, but who actually, when do we actually have a need for money? Well, Robinson Crusoe, you heard a lot this morning about him from Dr. Herbner. Robinson Crusoe would really have no need for money at all, right? I mean, he has no shopping malls, no place to go spend money. He can't eat money. So Robinson Crusoe has no need for money at all. And even when he meets Friday, there's no need to bother with money. When they're just exchanging fish and berries, they can do that just based on subjective values, again from Dr. Herbner's lecture this morning. But when society expands beyond a few families, then the stage is really set for the emergence of money. Okay, so I want to remind us something. Here are some things we also, we just heard from Dr. Rittenauer that we're all gifted differently. We all have different skills, abilities, and not just us, but also resources, land. All of these are differently suited for different types of production, and we specialize where we're most efficient, and we produce goods not only for our consumption, but also to exchange. We find that we are better off, a lot better off by producing a limited number of goods, specializing and relying on exchange for getting most of what we consume, as opposed to getting what most of what we consume from exchange, rather than remaining self-sufficient where we all produce everything that we consume and nearly starving in doing so. So we have a higher standard of living through specialization exchange, but let's look at this exchange. When we have exchange where it's direct exchange that is goods for goods, or barter, direct exchange or barter, it's hardly any better than remaining self-sufficient. We don't have much higher standard of living. Rothbard pointed out that not much production would even go on under direct exchange. He said, if you wanted to build a house and you're going to hire some workers to help you build the house, what are you going to pay them with? Are you just going to give them a room in your house once you've built the house? Now you have these employees living with you, you're going to pay them with leftover building materials, and why did you even make extra building materials having a leftover? So barter has basically, well, has a lot of problems, but here's two main ones, indivisibilities of goods and then also double coincidence of wants requirements. So let's start with the indivisibilities. Let's say that I have some things that I want to get today. Let's say I want a cupcake, I want some eggs, and I want a pearl necklace. So these are three things I want, a cupcake, some eggs, and a pearl necklace. To buy those, I'm under barter, so to buy those, let's say what I have is my bicycle to offer an exchange. It's a cute bicycle, has a basket on the front, a little bell ring ring. But I have a problem. I have a problem if I have a bicycle and those are the things I want. Let's say I stop off at the bakery first to get my cupcake, and to pay for the cupcake I have to break up my bicycle. Now I have just destroyed quite a bit of the value that I had for exchange later. So unless somebody has all three of those things, I'm going to be pretty sad not able to get all those, or have a very difficult time getting those. So indivisibility of goods, when we break up these goods, a lot of times we destroy the value of those goods, like my taken apart bike. So even though, even when some goods in the goods are divisible, even if we have goods that we can break into smaller units, say like we've got chickens and we're going to sell the eggs. We can sell those twosies, threesies, foursies, or a dozen, whatever. Still, it's nearly impossible for two exchangers to find each other at the same time. In a barter, a double coincidence, what we call a double coincidence of wants, is required for exchange to take place. I have to have what you want to exchange, and you have to have what I want to exchange. We both have to have what each other wants, double coincidence of wants in order for exchange to take place. If I have some blueberries, and you have some roller blades, and we both want to trade, but what I want is a shovel. We don't have the double coincidence of wants to trade is not going to take place. And a little bit closer to home, this is actually Rothbard's example. Think of the economics professor who wants to eat, and who wants to eat in order to do so, we have to find a chef or a farmer who's willing to trade the food, to trade a meal for some economics lessons. So y'all, I can't believe I was able to get this, but I do have, and I'm going to share with y'all, an actual photo of some of our Mises Yu faculty when they were living under conditions or a double coincidence of wants. See, now, they were really soldiering on. They were trying, but they were really suffering under this double coincidence of wants selling their economics lessons for food. So one other problem of barter is, because each good can trade against all other goods, each good is going to have to have a whole array of prices. In a barter economy with only 1,000 goods, there's going to be 499,500 prices. So almost a half a million prices for only 1,000 goods. And you think, well, you know, I could live on 1,000 goods. That's not that bad. Until you think about, you know, I go to Walmart, and Walmart, an average Walmart store carries over 120,000 goods. Mises said, money becomes more necessary as the division of labor increases and wants become more refined. So I don't know if Walmart was the refined wants that he was talking about. He was probably talking about like Viennese opera or something like that. But as division of labor becomes, as division of labor spreads and we have the growth of the economy, money is going to be even more needed. So it's clear just from these few examples that any sort of really civilized society is really not possible. It's not going to develop. It's not going to come about under conditions of direct exchange or barter. Okay. So for indirect exchange, how does this actually come about? And this is where you have from Minger's theory, the origins of money says under indirect exchange, you take your product to market what you have produced, whether it's your mangoes or your beef or your what was it on the pig pork tongue. You take this to market without the saliva glands. You take this to market and you trade it not for the good that you want directly, but you trade it for some other good that you can then in turn trade for the good that you actually want. Okay. At first you think, well, this seems clumsy. You're just adding an extra step. You're making it more difficult by having this extra step of this extra trade in here. It seems like it would be better to just do, you know, my berries for your fish, right? That seems easier, but actually it's just the opposite. That money is an incredible instrument that allows civilization to develop. Okay. It allows us to expand. It allows us to have much higher standards of living. So imagine under barter, we're all bringing our goods to a meeting place, to a marketplace to meet to exchange our goods. Okay. You can imagine that these goods would have different degrees of saleability or marketability. They have different degrees of, you know, different levels of, you know, how much they are wanted by other people in the market so that you have opportunities to trade them. How many trading partners you're going to have is affected by how saleable your good is. Okay. The more saleable a good, the more easily an owner could exchange its goods for another thing at a particular price. Okay. Somebody selling flour has an advantage over me selling my bicycle parts, right? I've got my broken up bicycle and I'm going around trying to sell the parts from a bicycle that's not as saleable as the one selling flour. I'm going to have a more difficult time finding trading partners. Now, of course, it's not impossible. I can still find trading partners, but I may have to be willing to accept a very low price for my less saleable goods, for my bicycle parts instead of having flour that is more saleable. Okay. Owners of relatively less saleable goods will exchange their products not only for the goods that I directly wish to consume, that I really want to take home with me that day, but also I'll trade them for goods that I don't directly want. And I'll do that as long as the goods that I receive are more saleable than the goods that I'm giving up. Okay. So I'm kind of trading up my bicycle parts for more saleable goods that I think I will have better luck walking around finding a trading partner to get the goods that I want. So over time, Minger argued, the most saleable goods were desired more and more because of this advantage, this characteristic of being more saleable. The demand for this good then becomes... the demand for this good becomes not just for its use in consumption, right? We don't demand it just for that, but now we demand these goods because they are more saleable. So this was another component of the demand for this good, and this is when this good becomes what we call a medium of exchange. We use it to facilitate exchange. So the choice of goods as a medium of exchange is a gradual, self-reinforcing process. So let's think if something becomes more saleable and you're hearing the buzz in the market that it's easier for me to trade my flour or my wheat or whatever. Hey, if I have wheat, I can go around, I can get pretty much anything. What happens now to the demand for wheat? A lot more people want it, right? Because of this more saleable characteristic. So once the good is recognized as more saleable, it becomes even more saleable. Okay, so what makes a good more likely to become a medium of exchange? Well, it would be one that is divisible, so not bicycles. It would be one that is durable, that we can trade, it can be transferred from one person to another over time and not break down. It'd be one that's transportable, right? So probably not iron, right? Not something that's very heavy but low value. It's going to be fungible, so that one unit is just as good as another and it's also going to be scarce, right? We want to have, so that has more value per unit. So eventually one or two commodities are used as the generally accepted, and this is kind of key words here, the generally accepted medium of exchange. That is in almost all exchanges, then once this medium of exchange is generally accepted, then we say it's money. Okay, so that's kind of your definition of money. So historically here are some goods that have been used as, that have served as money. So we've got some beads, some wheat, some shells, some nails, but through the centuries there are two commodities, gold and silver, that have displaced these other commodities because they fit those characteristics we just went through, easily divisible, durable, blah, blah, blah, blah, blah. All of those things, those qualities of gold and silver, gold and silver have displaced other media of exchange. So a lot of people will criticize Austrians and other hard money types and they'll say, people are so weird about gold, right? You're gold bugs and you just, you just like it. They say we just like it because it's pretty, right? They say we've got some kind of obsession with gold, like where this guy, do you remember gold memory says, I love gold. I love this look to taste the smell of it, right? So no, that's not it at all. Gold just happens to be the commodity the market has chosen the most often, right? And we'd be just as happy with some other commodity if the market chose something else, right? But it seems that gold and silver, those commodities have been, have served as the, have been the market's choice because they do so well as money. So Carl Minger pointed out it's not necessary or even conceivable for money to be established at some authoritarian decree or some kind of explicit contract among the citizens. In fact, there's no historical record of this ever happening. Now you can't find any case in history where just the king said, this is money, right? So it's more plausible that it originates spontaneously because the medius and obvious benefit of using the more marketable good as medium of exchange, okay? The people involved, the people involved in trading immediately see I am better off in doing this. They recognize this is for my own good that I trade for something I don't want because it's gonna help me to easily get what I do want. So it's hard to imagine anybody actually conceiving of money without actually experiencing it. How would somebody have this thought? How would money occur to them if they had never had money before if they'd always lived in barter? So a quote from Minger here, he says, hence it's also clear that nothing may have been so favorable to the genesis or the beginning of a medium of exchange as the acceptance on the part of the most discerning and capable economic subjects for their own economic gain and over considerable period of time of eminently saleable goods and preference to all others. Okay, he makes it just seem so obvious, right? Which way that money would emerge. Money is unlikely to have originated any other way because embedded in the demand for money, and we're gonna talk about demand for money just a little bit, embedded in the demand for money is the knowledge of the money prices in the past. Okay, in the immediate past. What were the prices yesterday? So we have an idea of what does this money, what are these units of money exchanged for? Okay, unlike consumption goods, the goods that we're gonna have for just to eat a hamburger for lunch today, unlike those kinds of goods, money has to have some preexisting prices for us to be able to have something to ground our demand for money on. Okay, so Mises' regression theorem says that can only happen by beginning with a subjectively useful commodity, under barter, and then through this recognition of the more saleable, the more saleability of that commodity, we add that portion of the demand to the demand for the good that we would have just for using the good. Okay, so the regression theorem, we understand what, we have a demand for money today because we know what the money traded for yesterday and we know what it traded for before that. The person trading 10 years ago can say, we know what the price was, we know what the money traded for years before that and so that's how we can have an idea, how much cash balances do I need to carry around? How much money, what is my money demand? We can only do that if we have an idea for what it's going to trade for. Okay, so we're not walking around now with, we're not walking around with gold coins now, we have paper money, how do we make this transition from gold money to paper currency? Especially when paper, you know, if you have a spare piece of paper, if you're ever just cleaning up your place and you see a spare piece of paper and it's on the floor and it's a little bit dirty, what do we do with it? Just throw it away, right? Money doesn't have a lot of, I mean, sorry, not money. Paper doesn't have a lot of intrinsic value. So it doesn't make sense that people would be willing to surrender real goods and services or your time and labor. It doesn't make sense that we'd be willing to surrender goods and services or our labor in exchange for worthless pieces of paper, right? That just doesn't make sense. So how do we go from being paid in commodity money to being paid with paper? We probably notice gold is heavier than paper, right? It's heavier, so that's a little bit harder to carry around. Also, it's dangerous to carry it around. If you've got all your money jingling, jangling in your pockets, you know, and somebody comes along with a rock and hits you in the head, then you've lost your... then you've lost your wealth. So people started putting their gold coins in secure warehouses and they had paper claims. Here's...you've put in 20 ounces of gold. Here's a slip of paper for this year's receipt, 20 ounces of gold. So now I can...I have the option. I want to go shopping. I can either go and get my ounces of gold out of there, turn in my receipt, turning my paper claim, and get my gold and go take it to the seller of the goods that I want to consume. Or for convenience, because, again, it's for my own benefit, for convenience, what I could do is I could just take my paper claim to the seller and put my autograph on there, Sandra Klein. I could pass this off, and so... for convenience instead of having to move the gold from place to place. So this is what happened, and eventually the paper claims to the gold commodity became the generally accepted medium of exchange. Now, I'm not going to say a lot about these. The very next talk is Dave Howden is going to be talking to us about banking, and so you'll hear more about that next. Okay, so I've gone this far to my lecture. What time is it? 225, and I still haven't mentioned Bitcoin. Calm down, because here's what I'm going to say about it. Here's what I'm going to say about it. Here's what I'm going to say about Bitcoin. Definition of money. What is definition of money? Well, it's generally or commonly accepted medium of exchange. Okay, the word generally, what does that mean? Is that very specific? That is, no, that's open to interpretation, right? Generally accepted, but we're going to say that it's going to happen in most transactions. It's going to be accepted in most transactions at least. So by that definition, cryptocurrency is not money. Okay, sorry. Okay, maybe someday it will be, but it's not yet. Okay, so am I for it or against it? I'm not taking a stand. But anyway, I'm hoping by saying that, all of you who are planning to come and argue with me all the benefits and the merits of cryptocurrency, I'm hoping this kind of dampens out a little honey bit. Okay, all right. So once we're out of barter and we have money, we immediately are going to recognize lots of benefits. First of all, all the problems of barter are gone. Now we don't have to worry about indivisibility of goods. I can go and trade my bike intact with the basket and the bell ring ring. The whole thing for money, now go trade it to get my cupcake and my necklace and I can't remember the eggs. Okay, so all the problems of barter are gone. You don't have to worry about indivisibilities. I don't have to look for somebody who wants my bike and has a cupcake, eggs and necklace. I don't have to do that anymore, right? Now double coincidence of wants is, the double coincidence of wants requirement is gone. Also, there's reduction in the number of prices. Not a reduction in prices, but a reduction in the number of prices, right? So now 1,000 goods, all of them are trading against money. So we just have to have them in one, we just have to have one price for each goods. 1,000 goods has 1,000 prices. Okay, now we've already seen that without money, there can't be any real specialization. We can't have the division of labor that Dr. Rittenauer talked about. So before without money, there is no advancement of the economy beyond a really primitive level. But with money, we can have an elaborate structure of production that forms. And so land labor services, capital goods are cooperating in production at each stage of production, early stages all the way through to final consumer goods. And all of them are receiving payment in money. So only with the establishment of money can we have rational economic calculation, right? Now businessmen can calculate. They can determine I'm earning a profit or I'm earning a loss, right? Because both my revenues and my costs are in the same units, right? I'm not saying, well, I built a house with this many units of this many tons of brick and this much drywall, this many nails. And then I got back these, you know, chickens and fish. Now I'm comparing dollars to dollars in the simple math so we can have rational economic calculation. And not just businessmen, but also people are able to make easy comparisons of value. Okay, so I looked up what an ounce of gold is trading for and it's about the same as an iPhone. You say XS or XS. I don't know, I don't have one yet. But iPhone XS Max is about one ounce of gold. That's what you all are carrying around in your pocket. Okay, now a new Nissan Leaf costs about 30 ounces of gold. Okay, so if you want a new Nissan Leaf that's going to be about 30 iPhones, 30 of the latest iPhones. Okay, so we can do this only because they are all these prices are denominated in the same thing, right? We can compare apples with apples. Okay, so most physical goods are sold or traded in units of weight. Okay, tons, pounds, ounces, grams. Okay, most of them are traded or sold in units of weight. Okay, and gold is going to text back saying, right? Gold is also no exception. The size of the unit that we have the currency in ultimately makes no difference because all the units of weight are convertible into each other, right? This is such a simple thing that we have so much confusion around this. There's a lot of misinformation, misunderstanding on this. But one pound equals 16 ounces. How much is one ounce in grams? 28.35 grams, okay? If gold is chosen as the commodity money, the size of the unit, whether it's an ounce or half pound or whatever, it doesn't matter. The size of the currency doesn't matter because they can just, these are weights that can be translated easily converted one to another. So I can sell something in the United States for one ounce of gold or I can go to France and I can sell it for 28.35 grams. Where do I get the better deal? That's what I want to know. Well, they're the same, right? Both prices are identical. So this all seems obvious when we put it up here like this, right? It seems obvious. But because people forget the simple truth, there's a lot of confusion. Nearly everybody thinks of money as some abstract units of something. And even when we were on the gold standard, people thought in terms like this, American money was dollars. French money was France. German money was Marx, et cetera. But all of these currencies were tied to gold. But because we had these other names for them, people thought, oh, this is the German money. This is the French money. So it was easy. They thought it became easy for these people or these countries to go off the gold standard because we just thought of them as sovereign, independent monies. But all of these dollars, francs, Marx, pounds, all of them were tied to weights of gold or silver. This seems so obvious, but a British pound sterling, can we guess what that was? It was a pound of sterling silver. The word dollar was actually just a name. It dates back to the 16th century. That was given for a particular weight of a commodity money. It was one ounce of silver. So before government fiat money, the various names of units were just simple names. Like my name is Sandy. My husband's name is Peter. There were just names for units of weight. The gold standard before 1933, people would say the price of gold is fixed at $20 per ounce of gold as if we could fix the price of gold. A better way of looking at that, at the money would be to say the dollar is defined as the name for approximately one-twentieth an ounce of gold. That's a more correct angle to see it from. But because of this misunderstanding, the money is being named by the monies having these different names instead of just calling it ounce of gold. It's misleading to talk about exchange rates of one country's currency for another. Right now we get to the border of our country with another country, and we don't have the same monies or kind of almost back to double-climbing, saying, hey, do you want some dollars? Do you want some American dollars for your Canadian dollars? But it's really pretty simple when we have these exchange rates. We just remember their weights. The pound sterling did not really exchange for five dollars. That was not the correct way of looking at it. The dollar at the time was defined as one-twentieth of an ounce of gold, and the pound sterling at that time was named for one-quarter of an ounce of gold. So if we can go back to elementary school math, one-fourth of an ounce is the same as five-twentieths of an ounce. So there's where you have one pound equals five dollars. So that's just really simple elementary school level math. I think you can go back to the fourth grade to review your fractions. Okay, so what about the specific value of money? What exactly is the price of money? Okay, how much is money worth? Let's start with something other than money. Let's just start with my laptop. So if I take my laptop to the market to sell, how much money can I command in the market for my laptop? Or how much money can my laptop command in the market? Let's say, let's pick, I don't know if this is an accurate price or not. Let's pick $150. If my laptop could sell for $150, that is the price of the laptop, we would say the purchasing power of my laptop is $150. I can buy this money, I can buy money with my laptop. I can buy $150. Or the other way around, my dollars, I could say $1 buys one one hundred and fiftieth of a laptop. So it's the same thing with money. So let's look at this with money. If I sell my money, I've got my money, I'm going to trade it in the market, just like I took my laptop and I wanted to sell that. I'm taking my money, I want to exchange that for goods and services in the market. Now remember, the laptop just traded for money, right? The laptop only had one price. But my money though is going to trade against everything else. So what is the price of purchasing power of money? Well, we have to list all the possibilities for what a dollar trades for. So I've got just three examples here. One one-fiftieth of a laptop, which is said, $1 could buy me one pack of gum. $1 could buy me one very small thirty thousandth of a car. So I have to, to get the purchasing power of money then, it's the alternative quantities of all these other goods and services that the money commands in the market. So it's really an array of other goods. So the purchasing power of the dollar then is going to be the inverse or the reciprocal of the overall price level, right? It's going to be the inverse or the reciprocal of the overall price level. So if the overall price level of all goods in the, if all goods in the economy double, if that happens, then what happens to the purchasing power of money? The purchasing power of money has now just been cut in half, right? If all the prices have doubled. Now I can buy half as much as what I could before if I have the same amount of money. So instead of buying one one-fiftieth of a laptop, I can now only buy one three hundredth of a laptop. Okay, so the purchasing power of money can be thought of as the price of money. Where do we get prices, right? We have prices are going to be determined by supply and demand. Same for money as it is for other goods and services that we get in the market, okay? So just with any other good, if we have an increase in supply of money, now that good money is less scarce. When something is less scarce, the price of it, what, falls, price falls when something is less scarce. The price, I'm sorry, the value of the money in exchange falls. The price level, price level is rising, okay? If there's a decrease in supply, it's more scarce now, it's a value in exchange, it's a value in exchange rises, okay? It can buy more, and the price level is falling. Okay, so let me say something about demand for money. When you think, what is my demand for money? You think, oh, I want it all. Just keep, I'm never turning down money. Just keep on bringing it. Y'all afterwards, you like my talk, you come up here and you're just bringing money, and I'm not telling anybody no, right? I'll accept any of it. But the way we're talking about demand for money here, it's not exactly like that. This is our demand for money, demand for what we wish to hold and cash balances, right? And so that's really determined by how much you're willing to sell, including your own labor. If you have an increased demand for labor, an increased demand for money, you're going to go work more, right? That's how you're going to get more money. So if there's an increased demand for money, like there's an increased demand for anything else, then it's going to be more valuable in exchange, okay? And if there's a decrease in demand for money, we don't want to hold as much. We're spending a lot more than the value of money. It's value in exchange falls and prices are rising. So what we have here is the price level is adjusting. Each time we have a change in the supply or demand for money, the price level just adjusts so that it finances all of the transactions, okay? So what is the optimal supply of money? What is the optimal supply of money? So we always hear about the Federal Reserve's increase in my supply or tightening the money supply. It always sounds painful. But what should the optimal supply of money be? Is there an optimal amount, okay? Is there an optimal amount of money? And is that fluid or is that fixed? Is that changing when the Federal Reserve is about to meet, when the Open Market Committee, when they're about to have their meetings? Is the optimal supply, is it some target that's moving around? Rothbard points out, this is really a silly question. This is really ridiculous. It's the only thing wherever here people are talking about was the optimal supply. You don't hear that about pizzas. You don't hear that about Nike tennis shoes, right? We're not talking about that. How do we let that be decided just by profitability, right? So this is really a silly question. So it was the optimal supply of money. We need to make a distinction that money is different from other consumer and producer goods. Those are used up and they're worn out through use, right? So an increase in consumer or producer goods does actually make us better off because we are satisfying more of our wants. More of our wants are being satisfied. We have more consumer or producer goods. But medium of exchange though, remember we said it's durable. It's going to last a long period of time. That's not used up, but it's just transferred from one party to another every time we make a transaction. So that's why any money supply, any amount of money is just as good as any other in performing this medium of exchange function. An increase in the money supply confers no social benefit. No social benefit. The purchasing power of money is just going to adjust through those changes we talked about with supply and demand of money. It's going to adjust to permit all the exchanges to occur that people want to make. So a money supply of $20 billion is able to finance the same number of transactions as a money supply of $200 billion. The smaller money supply, prices are going to be lower. The higher money supply, prices are going to be higher. Same number of goods are bought. So we can see the effects of an increase in money supply with the Angel Gabriel model. Angel Gabriel model. I'm sorry, in this model, Angel Gabriel is this benevolent, sweet angel that's really kind, but doesn't have a lot of economic sense and wants to come down and benefit people and does this by descending to Earth and doubling everybody's cash balances overnight. Then the next morning, people wake up and they say, oh, I've got twice the money I had yesterday. Everybody rushes out and buys a lot more stuff. They rush out to buy stuff, but what happens when we all rush out to buy stuff, that's an increase in demand for goods and what happens when we have an increase in demand for anything? The prices rise. So at the end of the day, then we had double the money, we're able to buy the exact same number of goods because now we have double money, we have double the prices. So society is no better off and no additional human wants are satisfied because all these goods and services, the levels of those have all remained the same and we just have paid higher prices for them with our higher cash balances. But if we look at this a little bit more closely, what Angel Gabriel did, if we look a little bit more closely, we see that some people actually benefited at the expense of some other people. Even though everybody received the same proportional increase in their cash balances, the early birds, or I call them freaks, the early birds, people got up really early that morning and saw it first, they rushed out and they spent it all before the prices rose. Those who slept late or who were more prudent and thought about how they wanted to spend this extra new money, they waited and they spent their money after the prices have risen. They cannot buy any more than they could before. So the increase in the money supply didn't confer any benefit to society as a whole, but early spenders were the ones who benefited at the expense of the late ones. Now, I want to talk a little bit about under the gold standard, the only way to increase, the only way to increase the money supply is through mining gold. And this is going to be determined by profitability of mining. What determines profitability of mining? Well, profit is revenues minus cost, so we've got to consider what are the costs of mining and it takes scarce resources to get gold out of the ground. So the profitability of mining then is going to be affected by the price level, right? When the cost of mining rise, we'll see the mining will decrease or maybe even stop altogether. If the price level falls, then we'll see more, the cost of mining falls and we'll see more mining of gold happening. Now, I should make note that under commodity money like gold or silver, increase in the amount of gold and silver does confer a benefit because not all of it is necessarily going to go into commodity money, but some of it might be in use, consumption or industrial production. So we have more goods and, sorry, we have more wants being satisfied. Okay, now another way to fraudulently get money is to, shouldn't have done quotes there, another way to fraudulently get gold is to counterfeit it, right? You could, if we have some bad guys who go in their basement and they mint some gold coins but really they're fakes and they're made of brass, then these brass coins are really good and they go indetectable when the bad guys go shopping, then they can go out and shop and spend the gold coins undetected and that's an increase in demand for those goods where the bad guys shop and then they, then those prices rise and then that money gets re-spent. Okay, so similar effect to the Angel Gabriel model so far, the difference here is that we have the bad guys' gold coins or, sorry, brass fake coins are being injected at a specific point, right? And so they get to benefit first and as that money is spent and re-spent throughout the economy and prices are rising, the bad guys are benefiting, they're transferring wealth to them from the people who receive the money late in the process or not at all, like people on fixed incomes. So we see, looking at this, the counterfeiters, we see a little, get a little insight into the inflation process which you're going to learn a little bit more. One thing I'm going to say is we would not expect money to be paper because it has no intrinsic value. We would not expect it to be national because then we're back to the whole double coincidence of wants at the border and we would not expect to be under the control of any entity, right? Because any money supply is just as good as any other, right? They're both going to finance the same amount of transactions. So why do we have money that is national, paper, and under the control of the Federal Reserve? Well, because we saw the counterfeiters issuing money, being the one that is the issuer, it is an easy way to transfer wealth to yourself. If you are the one who is the issuer, then you can transfer wealth to yourself. So a monopoly in the provision of money turns out to be really the most desirable tool of all tools for the state. So you're going to learn about central banks and freshwater reserve banking next. Thank you.