 Well thank you all for coming, so we're going to talk about international business cycles a bit. So before we get into anything particularly serious, I want to start with a little joke where I get us into this. So how many Fed economists does it take to change a light bulb? Of course just one, you need Jerome Powell, he holds the light bulb still and the entire world revolves around him. International business cycles. I try to be relevant even with my jokes. Well this is a topic though that I've been thinking about for actually quite a while. I mentioned that I was a fellow here in 2004. The paper that I wrote while I was here, I think you can actually still find it online if you look, was about the international transmission of business cycles. So it's been a while that I've been thinking about this. Although I haven't, I didn't actually publish anything on it until very recently. There was a, I think it was maybe a little over a year ago at the Austrian Economic Research Conference, Drs. Block and Herbner presented a paper is, I'm trying to remember the exact title now, I should know since they brought me in as a co-author. That is, is the virus of macroeconomic intervention contagious? And they're looking into this question, is it possible for a business cycle starting in one place to infect other countries nearby? Okay, my students know that I tend to reveal way too much, like thinking of Wizard of Oz. I'm the wizard that's pulling the curtain back, saying, hey, here's how everything works. So how that paper came about was a great story because it starts at amesis U. So at the end of the week, you may have the opportunity to take the oral exam. If so, congratulations on getting, on passing that bar and qualifying for that, which means you're going to get to be grilled by some set of faculty. And in one of these sessions, Dr. Herbner asked the questions. We'll suppose that you have two countries, one of them has sound money, let's say it's operating on a 100% reserve gold standard. The other though is not on sound money and it starts a credit expansion. So will the credit expansion move right from the country that's expanding credit to the one that has the sound currency? He asked the student this question and the rest of the faculty on the panel thought, oh, that's an interesting question. So he asked him afterward. We said, so Jeff, we are on a first name basis with each other usually. So what's the answer to the question? And he said, I don't know. So yes, when we ask you the question, we might not know the answer. Show us your reasoning. That's the idea. So there's a hint for those that are taking that exam later on. So he got thinking about this question in Walter Block as well. Got thinking about this question. They presented this paper. I approached them after this conference and said, oh, you know, I wrote about this 14 years ago when I was a fellow. So they brought me in and I added a little bit to the paper, not necessarily anything of substance. But I at least know what the paper says. So a lot of this is based on that paper. So you can look at that for more detail. I see that I think Dr. Herbner is not in the room. So if I wildly misrepresent something, you're going to have to tell them what I said first to double check that I'm not getting it wrong. So my basic idea, so why are we talking about international business cycles? It's not just that international business cycles are a real thing that may actually have importance in themselves. But it's that I believe that thinking about the international transmission of business cycles, how it is a business cycle can move from country A to country B, tells us something about the transmission of business cycles inside of any particular country. So why is it that I have to suffer when I'm not the one that's out there borrowing money during the credit expansion? I'm not the one that's getting involved with building houses during this housing boom. Yet nonetheless, I'm now facing consequences when the economy falls apart. How did that connection happen? Where I was not involved directly with the cluster of heirs, but nonetheless I'm affected by it. So we can learn something about domestic business cycle transmission by looking at these international business cycles as well. So I want to start though by looking at the data. Is it a good Austrian economist? So here we go. See if this works, yes. I do not expect you to actually read this, just look at the colors. So what I have here, this is a table of, I believe it's 20 fairly large economies. We're looking at anything from the United States, Argentinas in there, South Africa as well. I think that's basically the range you get. So these fairly developed economies for the most part. So, and what this is showing is the correlations in their business cycles, that's the deviation in their GDP from its underlying trend. So it gets some sense of what the business cycle is like, and the correlation of that between countries. So up here, anything that you see in green is a fairly strong correlation. For those who have taken statistics, it's a value of at least 0.5, 0.5 was the cutoff. So there's a reasonably strong connection between these countries' business cycles. Then anything in white is positive, so it's greater than zero, but it is less than 0.5. And then the red means that it was less than zero. So the lesson I want you to get from this is that there's a lot more green than red. And certainly if we take green and white together, so that where there's any kind of positive correlation, leaning that direction, that vastly outnumbers the red that's there. So it does look like international business cycles seem to be a thing, that is we generally, though not always, tend to experience booms and busts together. So that's something we need to think about as to why that may happen. So, but then we need to think about, so we have this thing that seems to be a relatively common experience, but what is special and also what is not special about this international nature of things? In my mind, there's really nothing magical about a border that we would expect on one side of a line or the economy is going to operate vastly differently than on the other side of a particular line. So I think of, say the US and Canada or rather the US and the 51st state. We wouldn't think this line really matters that much. We're both very similar economies in many ways. Yeah, okay, they have socialized healthcare where we don't quite, we just have highly interventionist healthcare instead. But for the most part, these economies look very similar. One would think that they would act somewhat similarly. So there's nothing particularly magical about borders, but what does matter is the fact that we have different legal institutions. And among these legal institutions is money. Canada uses the Canadian dollar, we use the American dollar. And that can create differences potentially between these economies and the way the economies work in terms of the business cycle. As you know, and as has been emphasized all the way through from Dr. Klein's first talk on money all the way down, money has an impact when we talk about business cycles. Different monies may mean different business cycles. And so that's why borders would matter because they matter because of this legal basis that then changes the way the monetary system works. So now let's get into international business cycle transmission. So I first want to lay out kind of the traditional story at which played a big role as Mises was putting together his own business cycle theory. It's the species flow mechanism. As the basic idea here is that we have two countries, so these two countries here, they operate on the same commodity reserve. So say they both have a gold-based money, right? But they have different paper monies permitted on top of this, right? So both of these are operating potentially, I guess we'd say not very well, creating more paper money than they actually have gold to back it. And so what then happens? Well, suppose that we have these two different countries, one of them is, say, being relatively well-behaved at the moment, the other one is being less well-behaved and is increasing the amount of paper currency out there. So we have an increase in the amount of fiduciary media in, say, let's just call it country A. So what happens? Well, we know that some of this money is going to be used in trade. We would start buying more goods from the country next door. As our paper currency flows over to the country next door to country B, they don't really want paper from country A. They take that paper, they redeem it for gold. So gold flows from the more inflationary country to the less inflationary country, which means now that country A is in a more precarious position. They've printed a bunch of paper, now their gold that was backing it is leaving. This is potentially going to be a problem, right? Seeing this, they cut back on how much money they're producing and this would then create a cyclical effect in that economy as we see through, say Austrian business cycle theory would explain this. Increase the amount of money, people are at their spending more, piece of credit markets, we get these distortions, stop this increase, interest rates go back up, everything has to correct. All right, so that would be where this comes from and this is kind of the original, part of the original inspiration for Mises. Mises taking this idea of the species flow mechanism, saying this applies not just internationally, but also to different banks, as they're operating within a particular country, we'd have the same kind of effects potentially and that would then lead to these problems with the capital structure and so Mises made that connection as well. So bring it domestic first and then also connecting with the capital structure. Okay, so then what do Block Herbner and Engelhardt bring then to the table? What exactly did we do? Well, the question goes back to Dr. Herbner's question. Suppose that we have these two nations again, but the one is actually doing things totally right, right? Holding to that gold back currency, maintaining that 100% ratio so they're not worried about this. Would we still see a transmission of business cycles between these two countries? Well, we point to four different effects that could potentially lead to this transmission, that could lead to these green spots that we see on my heat map there. So the first effect is an interest rate effect. Well, it turns out interest rates in one country could affect interest rates in another country, simply through arbitrage. The fact that when I'm investing, I'm not stuck investing in the United States. We live in this international world. If I see good investments in Canada, then I'm going to invest in Canada. So what happens when we have this increase in the money supply, say in the United States? We know interest rates are falling here. That means that if I'm doing things like buying bonds, for example, not looking as good in the United States, relatively now looking better everywhere else. So we'll see this investment flow out of the inflationary country and into these other countries. And they will also see very similar interest rate effects there as there's now a new supply of credit being provided ultimately by that inflationary country. Bump up our money supply, interest rates fall. So investors start investing elsewhere. So this would be the interest rate effect. Now, to give some evidence that this may actually matter, right? So here I have, first, these are the countries that have the closest correlation with the American economy. I think a lot of them would not be that surprising, in particular the top two, the UK and Canada, we have very close connections with them in terms of our business cycles. Taiwan, I was a little bit surprised that one was quite so high up. We trade a lot with them. And Australia and the Netherlands are somewhat weaker, but still relatively strong with the United States. Now let's look at where we have the heaviest investment flow linkages. So here we're looking at investment flowing either from the US to this country or vice versa. So we have that path that we just described. Investors taking money either from here or from there and then passing the other way. Or this would tend to make our interest rates have to move the same direction. So these are the five that have the heaviest investment flow linkages with the United States. And we see top two, should feel familiar, exact top two that we saw before. Okay, so it looks like this connection is actually something that we do see and very well may be and logically would lead to this type of connection we see. Of the other three, these numbers are here, those would be the correlations between business cycles. So when we look at Germany, Luxembourg and France, these are all fairly closely connected. They don't quite hit that point five with the exception of Luxembourg, but still fairly closely connected, certainly positively connected with the American economy. So there may be other things offsetting. All right, so interest rate effects would be the first one. I would suggest this is also something that we can certainly apply inside the economy. And in fact, this is, I would suggest, the way that we believe that modern monetary policy actually works. The Fed, after all, is not providing money for mortgages most of the time, yet when they're pumping money into the federal funds market, which you think about it, it's kind of weird that the overnight loan market would be what they're worried about. Overnight lending between banks or worried about that interest rate, that's the important one. Yet nonetheless, we know when they affect that, that affects everything else. So down goes the target interest rate, then down go mortgage rates, up goes the target interest rate, up go mortgage rates. Well, why does this happen? It's because of these different investments we can look at. One of them looks relatively bad. We start investing in other things. That's true internationally, it's also true domestically. And this is how we can tie different interest rates together even within an economy. So that's the first effect. Second effect, income and wealth effects. So one thing that we know would happen is when we have a boom in a country, people tend to feel wealthier during that boom. So housing market's going crazy here in 2006. I'm feeling great, so what do I wanna do? I'm going to go out and I'm gonna buy more stuff. Perhaps even I'll take out a second mortgage so I can buy that stuff, maybe. Just a great idea. But nowadays, the stock market's doing so great. So I feel really good about that. So I'm gonna go out and I'm gonna buy more stuff that I otherwise may not have bought. Well, when we buy that stuff, some of it's going to be from abroad. So I buy this other stuff, some of this will be imported from, say, Canada, China, Mexico, the UK, or Japan, in the United States case. These would be our five heaviest trading partners. So as we buy this stuff, what happens? When I always see an increase in demand for these goods that we're selling to the Americans that are increasing their money supply, that leads then to a boom in the exporting countries in those exporting industries as they're then selling to us. When things then reverse here at home, the stock market crashes, housing market crashes, and so on, we don't buy as much stuff, demand for their goods falls, and then they would experience the negative effect right along with us. So here we have those heaviest trading partners. Again, we see Canada and the UK are on that list as well. Fairly strong connections here. Interesting to me though, is that when you look at the other three, the correlations between us and them in terms of the correlation of the business cycle is not as strong as we saw for the financial linkages. So that would suggest to me that here I'm trying to use empirics the way that I think Austrians should. So let me comment on that. So why do we look at the data at all? It's not to do theory. I think it establishes a couple of things. One would be, why do I bother showing you this first thing? This proves it's a question worth asking. If this entire thing were read, that would be really weird. That might require an explanation, but saying, oh, we need to explain why we have business cycles together would be the wrong question, because we don't, right? Yeah, it reminds me of, I think it was last year at Amisa's U, somebody asked a question in one of the panel sessions. Dr. Gordon gave one of my favorite answers I've ever heard to a question. He said, I'd think more about that question if it were worth thinking about. Which is just a great answer, right? So this is to prove, this is a question worth thinking about. So I think that is one point where we could actually use data validly. This is something that actually happens, we might want to possibly explain it. Or here, sometimes we have more than one explanation. We're not quite sure which one is the stronger one. In that case, the data can help sort this out. The logic tells us the connection would be there. How important the connection is, the logic doesn't necessarily tell us that. All right, so that's where I'm using the data here. All right, but don't worry, this is the last one. All right, so we do see there is some kind of connection. This is generally positive, though not necessarily as strong as the financial linkages. We'll get to some reasons why that might be the case here in a second. All right, so first, interest rate effects. Second, income and wealth effects. Now, do income and wealth effects also affect us domestically? Yes, it's fairly obvious. Like me as a college professor, although I'm affected a little bit differently than most industries, generally speaking, colleges often counter cyclical, right? So what happened, at least in our area where I live, said, okay, we have this big construction boom. Suddenly nobody wants to go to college. You can earn more, right? But I get a job now without having to pay you for four years and taking lower paying jobs that I actually have time to go to school and this kind of stuff. Eventually you'll get paid more is not a very strong argument, right? But then when the economy collapses and people don't have anything else to do, they want to go back to college, hey. And because I work at a state university at one of their branch campuses, we can say we give a cheap education. So it doesn't matter that you're unemployed, it's cheap, right? So there we go. And yeah, it's true. We hit like all kinds of enrollment records, right? As the recession was really bad and unemployment was high. Now as things are correcting and now we're really worried about enrollment. All right, but I'm not worried. I keep telling all my colleagues, give it till the end of the year. Things will be better in 2020 most likely. For us, which that means something else for the rest of you. But these income wealth effects do, of course, happen, right? And they do affect not just those of us that are weird and counter cyclical, but the rest of you too. After all, when there's this construction boom, it's not just that we have, on the one hand, people's houses are worth more, they're gonna spend more on everything. I don't know, they'll buy more swimming pools or what have you, right? So that industry has helped and so on. But we also have the people that are working in those booming industries that now have a lot more demand or earning a lot more doing it. So the construction workers, for example, are earning a lot more, they're spending a lot more, and that's trickling out through the economy. Yeah, you kind of hate saying that because it makes you sound like a Keynesian, but ripple effects happen, okay? All right, it's not totally wrong all the time, I suppose. All right, so these wealth and income effects, we see it both domestically and also internationally, okay? Now, another effect, and this one is much more specifically international, and that is exchange rate effects, okay? So, suppose you have a monetary expansion here in the United States, hypothetically, okay? What does that do then to the value of the dollar versus other currencies? Now, I know me, I always found exchange rates outrageously confusing as a student because it's something where you can't say, does the exchange rate go up or down, right? Okay, in what terms? We're talking about dollars per peso or pesos per dollar, they're going to move in opposite directions. I don't know which way you're stating the thing, so up and down, either one could be right or wrong, or maybe they're both right, depending on which of these you're talking about, so it's very confusing. So I think value of the dollar, all right, that's what we have in mind, so that should pin it down. So what happens to the value of the dollar if we print a lot more dollars? It's naturally going to decline. If the rest of the country is not doing that and the rest of the countries are not doing this, then they will see relatively at the value of their currency's increase. So what does this do then for the United States? Okay, so if the dollar is worth substantially less than it used to be internationally, that means if I buy something from another country, it just got a lot more expensive because if the dollar's not worth as much, I need more of them to buy the same thing as before. And this is happening through exchange rates adjusting. So my dollar's not worth as many Canadian dollars as it used to be, now I need more American dollars to buy anything from Canada, forget it, I'm not gonna buy as much from Canada. Ah, now we're explaining this 0.18, 0.39, 0.24 being relatively low, right? Because we have a couple effects happening at the same time. One would be, right, say focus on China. So here in the US, we have this boom, right, so we want to buy more stuff, right? This includes stuff from China. On the other hand, right, we have this boom and our currency is losing value relative to the Chinese currency, assuming that they let that happen, right? Well, that means all these Chinese goods are looking more expensive, so we don't want to buy as much from China. It's these two effects, right, work against each other, when we look at the international transmission of business cycles. So this exchange rate effect actually goes in many ways the opposite direction. It would actually help explain negative correlations, right? Rather than positive ones, right? Okay, so we're not going to import as much, that's going to hurt other countries, right? So our benefit would be their loss and as far as that is a strong effect. How strong is the effect? Generally not the dominant one, okay? But this would, I think, help explain why we see so much white here, right? All right, yeah, I really would encourage you at some point to pull up something like this data and look at the negative ones because some of them are really interesting and some of them are really puzzling, right? So just to list one that I can see from here, Mexico and Brazil, right, are one of the red combinations. Try to imagine why that would be the case, right? When Mexico's doing well, Brazil's doing poorly and vice versa. I don't have a good story for that, but it's an interesting thing to think about. Maybe a question I should ask in the oral exam. So, okay, all right, I see these exchange rate effects will work against the income and wealth effects, which I think is part of why we see, right, the relatively weak connections if we're really just looking at trade partners. A fourth channel would be the credit channel. So what happens here, this actually goes back in some ways, but not quite, but is similar to the species flow mechanism, except it operates differently under the system we have. I suppose now that we have an expansion here in the United States and there are other countries that use the dollar as a basis for their reserves, right, for their banking system. This would be, say, the way the Bretton Woods system worked. It's in that case, we expand credit. These dollars flow abroad. Rather than them flowing back, though, now they serve as the basis of reserve currency as reserves for these foreign currencies, which then allows more credit to be created in these other countries. So we're piling up additional credit there as well. So this credit channel is another way that we can see a connection between countries and as far as other countries rely on that expanding country's currency as a basis for reserves, but perhaps they use it themselves. I think of, for example, Ecuador as this dollarized economy. They use the American dollar there. If we expand dollars here, some of them flow to Ecuador. They experience the boom as well, just because they're using our currency. This would be another case where borders may not matter all the time. What matters is the money side of it. You've adopted our money side. You're basically in our borders as far as monetary disturbances will go. All right, so this would be a final channel. Now I do want to comment. Okay, is that one that would operate inside of, say, the United States? Well, sure, and as far as our banking system uses common reserves, which we know it does. So this is something that would operate inside of an economy. So pretty much we have three out of the four operate not just internationally, but also domestically. The exchange rate effect really doesn't work domestically because we use the same currency, no exchange rate effect. So I think those are really the four channels for international transmission of business cycles, but I want to talk about one more experience that we've had. That is balance of payments crises. I find these really fascinating because they pull in so many of these insights that we can get from thinking of things in an Austrian way and looking at how intervention can really distort how things work and create just total disasters. So the way balance of payments crisis typically will play out. I'll look at the 1990s Asian crisis as an example. Is that we have some other country is tying or pegging their currency to a different country. And something goes wrong where that's not the right exchange rate and we have to do something to try to fix it. So let's look at, for example, the Asian crisis. At this point in time, in order to aid trade with, say, the United States specifically, a lot of Asian countries are pegging their currencies to the dollar. Why does that make trade easier? Well, if I'm going to have a long-term contract then I know how much I have to pay in dollars for whatever I'm buying from you. You can keep using your home currency, we can use the dollar. We don't have to worry about this uncertainty that maybe the value between the two is going to change. So this helps with things like trade. It also, and very importantly for Asia's case, helps with things like investment. I don't have to worry about the fact that, say, when I make this investment in your country or when I build a factory, say, or when I buy stocks in Singapore or what have you, I don't have to worry about the fact that maybe your currency is going to lose a bunch of value. So I'm making a mistake in investing in your country where it would have been safer at home. So, peg everything to the dollar, America's really important, so that's what we want to do. And what happened? Well, it started out this way. A bunch of money then moved from America right into, especially Southeast Asia, saw a lot of this, but also stretching up through Korea. We're very excited about the Asian tigers and all the growth that we saw happening in these economies. This looks like a great opportunity, and this happened during the 1990s when interest rates had gotten fairly low at the time, the time basically historical lows. So if money has to flow abroad, because that's where the high return is, right? Investing domestically does not look like it's a great opportunity. So money is flowing abroad. And these Asian economies very happily accepted it. I see lots of money flowing into them, lots of growth happening in terms of investment in capital and so on. But then what happened? Well, it turns out like pretty much every economy on the planet, right? These economies had fractional reserve banking systems. They also had very close connections. I know this is going to be a shock to you. There was a close connection between the political system and the banking system. You almost never see this. That was a lie, right? You basically always see this, right? But you especially saw this here. You had things like, oh yeah, my cousin is the legislator and I'm the one running this bank, right? So there was an expectation, right, that if things went wrong at these banks that there would be bailouts coming. I don't know, that would certainly would not be the case in the United States. We don't bail out our banks. That's a lie, right? We do it on a regular basis, okay? Anytime we have a chance, we bail out a bank, right? Except Lehman Brothers, it's the one exception that I can think of, right? So there's this expectation of bailouts what happens, right? If I'm expecting to be bailed out, right? I'm gonna make all kinds of risky investments, right? After all, if things go well, I keep the money. If things go poorly, I get money from my friend in the legislature. Doesn't really matter, right? So this would be the case of if my rich uncle decides that he's going to front all the money for me to go to Vegas, right? Now I'll cover your losses, all right. I'm gonna spend a lot of time at the craps tables, right? It doesn't matter that the odds are against me. I know the odds are against me is they built that casino somehow, right? But there are people that win and maybe it's me, right? Okay, that's all it takes, right? Covering the losses by somebody else, right? I have the opportunity to gain. So we make all kinds of risky bets and it turns out risky bets often don't pay off. In fact, on average, they don't pay off. That's the way casinos work and it turns out what happened here. And we can explain that, right? Through Austrian business cycle theory, right? We know that when interest rates fall, we're going to make all of these various investments that won't make sense when interest rates rise again. And that is exactly what happened, right? As interest rates start rising, right? In the United States, interestingly, where the money came from, right? Money starts flowing out of these economies, right? Which is creating serious problems in their banking systems, right? As these banks start to go belly up, right? Suddenly, American investors are becoming more and more nervous about the state of things, right? Throughout Southeast Asia and because Americans are notoriously bad at geography, right, we don't realize that, say, Thailand and Indonesia are totally different countries. So, okay, Thailand is having problems, right? We're pulling money out of there. Oh, we also need to pull out of Indonesia and out of Korea and so on. These are all Asian countries. They're basically the same. At the time, this actually reminds me of a quote from Ronald Reagan back during the Latin American crisis, which played out somewhat similarly. He was watching, are these countries falling and investors pulling out? And he said, but they're all different countries. I think it's very confused about the fact, right? That they were being treated the same way by international investors. But we saw this happen again, right, in the 1990s with the Asian crisis. Of course, as money leaves, right? Now the banking system is even in more trouble, okay? But let's compound that with something else happening and here we get to the international side of it even more. What's happening in exchange rate markets? We're trying to peg things to the dollar. Now, when there are a bunch of dollars flowing in, what does that do, right? There's an increased demand for our home currencies, that's going to tend to push up their value, right? Well, we don't want that to happen. We want this to stay steady. Turns out it's very easy if you're producing a paper currency to drop its value, you print more, right? Create more of the thing, right? Increase the supply, right? The value's going to fall, right? So it wasn't a problem when investors are trying to throw a bunch of money into these Southeast Asian countries. Just increase the money supply, right? And that will keep the exchange rate pegged. It becomes much more of a problem when it goes the other direction, right? So now money is being pulled out, right? People are selling off all of these home currencies to get back into dollars. Propping up the value of the currency is very difficult. So they found that they couldn't do it, right? So we had to swallow very hard and accept that the value of these currencies was going to fall. As an investor, how does that make you feel? Things get faster and faster, right? So we have these crises that happen internationally, in part because we have these paper currencies we're trying to peg together to actually different currencies, trying to treat them as if they're equivalent to each other when they're not. And that created additional issues, right? In the case of the Asian crisis, you can also look back in the 1980s of the Latin American crisis, we saw a very similar story play out. And so we have these issues that show up time and time again where there are these international connections that create the transmission of business cycles. And sometimes when we make particularly bad policy moves, actually lead to these things getting even worse, right, than the other ones may have been. So is there something we can do, right? So back to that question, right? Is the virus of macroeconomic interventionism contagious? We've just answered yes, right? We have a few ways that it will be. But is there some way we can inoculate ourselves, right? Is there some kind of vaccine we can take that will protect us, right, from these viruses that are around us, right? Well, it turns out the answer is also yes, right? Now in the extreme case, right? We cut off all economic connections with anybody else. If I don't want to experience America's business cycle anymore, I run off into the woods, right? Build myself a little shack and try to live off of the land, right? So that means for at least five or six days, I will not experience the American business cycle and then I'll die. But I will not experience the business cycle in that time. Now, this might be more possible and our president certainly hopes that it's possible. Say you have a whole country that's doing this, just cutting off our connections to the outside world in terms of trade, in terms of investment, right? So say we do this in the form of capital controls, right? So we do not allow outside investment in, do not allow Americans to invest abroad, right? Cut off that credit connection, which we know is very important, right? We can also cut off the trade connection, right? And so it's not that hard to set a quota of zero for any kind of imports, right? So we don't import, we also won't export because that also makes us vulnerable, right? So just no trade outside of our country, no investment outside of our country, that will insulate us, right? From all of these effects. I hope you'll know I'm not advocating that. There are negative effects from this as well as we know that trade is actually beneficial, right? Like, there's a reason that I live in society and even though, yes, I could get fired by my university if they decide that tenure isn't good enough, I don't want to get rid of me anyway. Yes, I'm vulnerable to this, but at the same time, I'm gonna be a lot better off, right? Trying to interact with the rest of society than isolating myself just to avoid a business cycle. So cutting off all economic connections feels like it would be a bit much. So then we then lead to the ultimate conclusion of our paper, that is, does domestic discipline help at the very least? Like, if we are, right, that country be in the hypothetical scenario where we're holding to sound money, we're not inflating the currency, we're not expanding credit domestically, right? Like, we'll still experience some of these effects. But what we suggest, let's block her and I, is that all of these effects will be dampened, right, to some degree, or in some cases shut off entirely, right? So for example, let's do the easy one, the credit channel, remember the credit channel said that if, say, if I have, if I'm producing a currency that's your reserve currency or we're connected in this reserve currency sort of way, right, then we can end up with credit expansion. Well, in this case, if we're not expanding credit in the first place, it doesn't matter how much reserve we have, it doesn't really matter, right? Like, plus, if we're on a gold standard, we're not using your currency as a reserve either, right? So both ways, this is not going to create a connection. So the credit channel is totally shut off. Yeah. Now the authors though, could still be there to some degree. However, we pointed out a few issues, right? One being if we're not expanding credit as well, right, that's going to tend to dampen any potential interest rate effects, right? Like, it's only going to be the money coming from abroad that is going to create any interest rate effect at all. We're not piling on top of that, right? And then we have these income and wealth effects and exchange rate effects that these tend to offset each other to some degree, right? So those will naturally, right, tend to dampen. As we've dampened the big effects, right? And then the others tend to naturally seem to dampen each other to some degree at the very least. We pointed to another effect, right? That we think would be beneficial, right? And that is that if we know that we are well disciplined, right? Then the exchange rate starts to provide more information than it does under our current system in the world we live in, right? Because it allows us to identify, right, where the distortions are coming from, right? In a way that's very difficult to do, say, domestically. Like, it's obvious to me, say, as a business cycle theorist, obviously we must be living in some kind of boom economy that's going to fall apart, probably, I suspect, right, within a year, right? Where's the boom? I honestly don't know, I'm not sure. It's hard for me to identify, right? Because at the same time, it might be that some industries are just genuinely doing well as others are being artificially inflated. I can't really tell the difference. But what exchange rates then allow us to do, we can look around the world, right? If we can trust the value of our money because it is sound, because we're not inflating, because we're not expanding our credit, right? We can trust that value. So when we watch, say, oh, this country over here, country A, it suddenly saw a big drop in the value of its currency. We can identify if they must be inflating, right? And we can take this into account as, say, entrepreneurs in our country are making decisions, right? So, like, do I want to get involved in an industry that's exporting a bunch to country A? Well, they want to import a lot from me, but I will take into account, maybe I will anyway, right? But I'll know that this is a temporary thing, right? They have created an artificial boom. If I'm hopping in to export to them, I am also unborrowed time, right? Maybe I decide it's worth it, right? But I can make that judgment and make it much more in an informed way, right? I know exactly where the distortions are coming from. And we suggest that in this way, entrepreneurs will make better decisions, right? So if we think of Austrian business cycle theory, as Dr. Hauden described, as really being about a cluster of errors, okay? Better information, allowing us to identify where things are coming from, allowing us to plan accordingly, we'll tend to see fewer errors than made by our entrepreneurs as we've provided them with good information they can then use. And so we suggest that for those reasons, like one being just dampening the effects, the other being this informational role, right? That is new if we have an actually well-behaved country. Because of those two things, we do think that we can perhaps not inoculate ourselves, but there's a sort of domestic medicine we're providing, right, that will help protect us from some of the worst effects that could potentially happen. Okay, so we can finish up then with just what I hope are the key takeaways. Now first, that is that business cycles transmit, right, through these four effects, that is interest rate effects, wealth effects in the credit channel, and then we have these exchange rate effects offsetting. Now when we're going across currency areas is where we see that. Now the first three effects though, that is interest rate, wealth and credit channel, these are things that operate not just internationally, but also domestically. They add to our understanding of how our domestic economy works. But a second point, which I didn't emphasize much, but I think it's worth pointing out, is that in the world as it exists today, right, identifying the source of a crisis is not easy. If there's international transmission, it might be that things are bad in the U.S. not because we inflated, but because Europe did. And actually I'm one, I think that there is some evidence that when you look at a lot of the housing boom and what central banks are doing at the time, it appears at least to me that the European Central Bank was being significantly more inflationary than the Federal Reserve was. So there might be some degree to which we're victims of what's happening elsewhere. But it's hard to tell that when everybody's inflating just to different degrees at the same time. So the source of the crisis could be from anywhere potentially. And that makes it difficult and gives us some room to do some analysis. And the final point would be the same proposals that we as Austrians would hold for domestic monetary policy, would also help to contribute to international stability. It's not just the domestic disturbances that we're avoiding, we're also dampening these international as well. In my case, thank you very much.