 Hey, good afternoon, everyone. I'm Jeff Dice, the Mises Institute, and I want to welcome you to our private seminar. Wish all of you a happy Friday afternoon. And first and foremost, thank those of you who are donors to the Mises Institute for the first time. That was sort of the impetus behind this private seminar was that we wanted to offer a kind of inside baseball reward to some of our new donors who participated in our fall campaign, which we do every September. Around Mises' birthday. And we'd also like to welcome and thank all of you who are longtime donors who know about today's stream. And for starters, I want to introduce my friend and colleague, Dr. Bob Murphy, who's joining us today from his home in Massachusetts. So hi, Bob. How are you doing? Hi, Jeff. Doing well. How are you? Well, so I want to give a little bit of background for those who were part of the fundraiser. You'll know that this book, The Middle of the Road Leads to Socialism, is headed your way as a small thank you token of appreciation for participating. This is actually a pamphlet. It consists of a talk which Mises gave in 1950, called, of course, The Middle of the Road Leads to Socialism, and its topic is interventionism, which we will discuss with Bob as sort of a third way kind of thinking between pure capitalism and pure socialism. Now, as a little background, he gave this talk at the University Club in New York City. Those of you who are familiar, this is just a little bit south of the park. The Mises Institute has been fortunate enough to hold some events there. We have some members who are members of that club as well. Judge Napolitano is a member of that club. And we've had events there, I believe with David Stockman, for example. I was able to have lunch there a couple of years ago with the judge. One of the fascinating things about the club is that there are plaques, large plaques on the wall in the lobby dedicated to members of the club who were killed in what was then known as the Great War. What we now call World War I, of course, they didn't know World War II was coming. So if you look at these plaques, you'll notice that almost by definition, if you were a member of the University Club in the World War I era, you were probably from a wealthy family. You were probably almost certainly an upper-class kid. And so the soldiers who were commemorated, it gives their names. It says Princeton, Harvard, Yale. So these were clearly members of the officer class. But what was so interesting to me and what I mentioned to Judge Nap is that, you know, back then in World War I, the children of rich men and women went off to war. They may have been officers, but they went off and they got killed. And I was asking him, I wonder how many current members of the University Club are veterans of Iraq or Afghanistan. And I think we both agree that the answer was not many. So that's just a little background regarding the University Club. Now, in terms of this book, the reason we thought it would be such a great premium for the fundraiser was that it reads absolutely accurately today. It's incredibly prescient. Mises identifies interventionism as a third way again between pure socialism and pure capitalism. And really, this is the dominant thinking today. If you read this booklet, you're going to understand essentially what we're up against today across the West. And what I mean by that is that when we think of dominant social economic political paradigms of today, like social democracy, especially in Europe, like neoliberalism, which sounds like a very vague term, sometimes used almost as a slur, but it really does, I think in a sense, accurately define the elite political view of the West, which is that, yes, we have some degree of perhaps grudging respect for capitalism and private property and markets because we see that they work better. But we also have a very robust social safety net. We have egalitarian ends. We have, you know, social democratic goals. So in other words, socialist ends capitalist means. And I think that pretty accurately describes the state of the West today. And that's basically the thinking of our political class here in America, whether that's Mitt Romney or Liz Cheney or Hillary Clinton or Joe Biden. So there's a lot to be had from reading this short essay. You're going to be able to read it in about 20 or 30 minutes. And I think you're going to really enjoy it. And it's always fun. I think it's always worthwhile on a weekend or otherwise. Give yourself a little bit of time to get inside the mind of Mises, because you will come away refreshed. You'll come away better for it. So all that said, Bob, I want to start with you and I just want to bring up this idea of a third way. You and I are old enough that when we were back in school taking political science classes, they used to have this term mixed economy. And I don't know if anybody still uses that term anymore. So give us sort of your overarching thought on this speech of Mises. Right. Like you said, Jeff, it really is amazing that you can imagine some things would be pretty dated. But yeah, Mises, this reads fresh is relevant today. If, you know, if somebody gave this speech today, it would it would work except for a few of the references to, you know, when he's talking about the war. You know, there need to be more context there. But other than that, yes, it reads perfectly. And he what he was pointing out then is we like you say, Jeff, what they say today is that he everybody agrees pure capitalism doesn't work, but they also agree that oh, socialism pure social doesn't work. And so that's why all reasonable people, you know, must advance this this third way that like you said what's in the textbooks, we know we learned is the mixed economy, where there's heavy government intervention but it's, you know, to ensure that the outcomes aren't too extreme or too radical, you know, to soften the edges of capitalism is one way that I've heard it. And so, yes, that's that's what it needs to be or that's, you know, where the conversation is. And also, I think you're right, Jeff, to link it. Obviously, we are in tune with a lot of people who are worried about nefarious influences people trying to undermine you know what the US stands for or originally stood for. And there's different enemies let's say, and I think sometimes people lump them together and assume like the Davos crowd are a bunch of Marxists and no they're really not because like the people that run central banks when they actually they know pure socialism doesn't work like for them, you know, it's means to an end they don't believe in natural rights or anything. But they, they understand if you're going to try to run the world, you need it to work you need the planes to fly you don't you don't want to have just shortages people starving to death unless you know you want to do that intentionally. So it's, they don't believe in pure socialism they understand markets work but they want to still be in charge. And so that you know that to understand the problems with the mixed economy is perhaps even more important than just being anti socialist and that's one of the things to the Mises stresses in this essay is it's not enough just to be anti communist or anti socialist that we need to explain to people why a market economy works and why it's, you know, noble. Well, a lot of people of our stripe of course are starting to wonder you know what makes an economy socialist at what point do you say a country is capitalist or socialist and I want to just refer people to a conversation that Murray Rothbard had with Mises. He asked him you know what what's your take what how would you judge a capitalist economy versus socialist one and for Mises the existence of a functioning stock market was the hallmark of a capitalist society even with a big regulatory or tax landscape and if you have a private stock exchange where ownership in capital companies was freely traded at market prices or relatively market prices you know that indicated that this was a capitalist economy. And of course Rothbard a little more trenchant sometimes there's a variety of places where he wrote that look you know when we talk about the private ownership of the means of production versus the public or governmental ownership. You know what ownership means is control and direction. So in a pure laissez-faire and let's say an anarchist community ownership is absolute. You have a piece of property let's say that's land or a company you can do whatever you want with it you can buy it sell it you can borrow against it you can do anything on that piece of land or with that business. And so when government comes along not in a socialist country but an ostensibly capitalist country like the United States and says well that's fine you own your company you own your land but we're going to impose some regulations on you whether that's land use whether that's minimum wage whether that's requiring you to pay taxes on some of the income you make from that business whether you need to have a wheelchair ramp to satisfy the ADA. So all of these things represent in the Rothbardian view a loss of control full control by the owner to the use and enjoyment of this property. So if real ownership is it's not whose name is on the title right it's who actually controls something a property then every time government imposes a tax or a regulation or a rule or a mandate or restriction on property your ownership shrinks your control shrinks. So in effect, government becomes a part owner of your private property so called because it is in at least partial control of that piece of private property so I think Mises and Rothbard are you know there's a bit of a chasm here between the two on what constitutes a capitalist economy. It's interesting and yeah I'm again for the people at home in case they missed it that what what I remember Rothbard writing was he one time asked me says, you know, clearly there's the pure capitalism there's really that stuff doesn't exist today. There's governments intervene more or less and then there's outright socialist places. Is there a dividing line or is it just kind of and Rothbard says that he, he kind of expected me says not to give a crisp answer and was pleasantly surprised. And Mises said yeah it's, if they have a stock market then you know it's capitalist with heavy intervention if they don't even allow that then it's socialism. Well what's funny, Jeff is this very essay and I was just scrolling through to try to find it so it's like it's section five for those of you, following along at home, and it's. I speak German but it's the van der Schaft type of socialism. Okay, it starts with a Z. And in that whole section, Mises is saying in contrast to like the Soviet Union model. You have this separate model of socialism, where he says that, you know this type preserve some of the labels and the outward appearance of capitalism and maintain seemingly not only private ownership. But, you know it's heavily interventionist that the government sets prices and wages and interest rates, the government determines each citizen's income that that that it is the van der Schaft of Hitler's German Reich, and the planned economy of Great Britain. So, I'm not sure. I mean, I don't think Jeff that they got rid of the stock market in Great Britain after World War two right so. So I mean so it's interesting that it looks like in Mises writings he you know he's agreeing with you and with Rothbard that. Yes, you will be there's there's a point at which government mandates and regulations and whatnot are so overwhelming that it's it's silly to speak of it as a capitalist that you know that it's socialism and central planning. And yet, you know, they in the example the historical example he's giving their they still maintain the stock market so I it would be interesting if we could ask Mises to reconcile you know his writing with with the answer he gave to Rothbard so. Well, we can't ask him Bob. I think we can ask Murray Murray still writing stuff but. So what struck me is that was pretty harsh I thought because he's giving this talk in 1950 World War two is still fresh. I mean there is still real privations in Great Britain and in Germany at that time so to compare Hitler's German Reich and the planned economy of Great Britain I thought that was you know as as we think of Rothbard is to Mises. Mises in his radicalism was to let's say his Mao Pelerin associates. I mean that's I think there's not too many economists who would have said that 1950 would have compared those two countries because one of them's the one of them's the Axis power. But also he brings up in in chapter four he brings up the price controls which Great Britain imposed during World War two. And he says you know I'm sorry in part six he says when the war came to an end Great Britain was a socialist commonwealth. So that's really something and a lot of it goes to this theme which he has which namely Bob that there are two roads to socialism. There's the revolution of Marx and Engels and then there's the incrementalism which they later came to embrace and I think that's the perfect word for what's happened throughout the last hundred years in America. Right and there's been you know lots of people like James Lindsay and Jordan Peterson and so forth that some of the listeners may be familiar with who have gone through and you know what's sometimes called cultural Marxism and you know some of the Marxist who realized the conventional way wasn't working and so they first had to capture the social institution so that's really a hot topic among certain people lately like we're like sort of right wing podcasters and so forth but yeah Mises anticipates all that stuff in this speech in the 50s. Also to your Jeff just to go along with what you were saying, you're right it was brave of Mises to be talking like that. Five years after the war ends, and also to he said is in this that it's not worth it to remember that British socialism was not an achievement of Mr. Atley's Labor government but of the war cabinet of Mr. Winston Churchill. So he's also saying that yeah the reason there's socialism and Great Britain is because of Churchill and you know the war efforts so again you would that that's a strong thing to be saying a brave thing to be saying at any point but let alone at this time so. And just for the historical recognition of this fact that then you know Mises was warning that his for those at home who don't know. Mises in several places, the fundamental reason he says that interventionism, or what's sometimes called the mixed economy or the middle of the road is is not stable it isn't an alternative you got to choose capitalism or socialism is that piecemeal interventions don't achieve their goals you put a price control on milk to try to make it affordable for poor mothers to feed their babies and it just leads to shortages so then you got to expand it to the inputs. And so you know dairy production to keep those prices down, and then that doesn't work that causes shortages there and so you got to either just abandon the price controls or just keep expanding the net. And I always thought that was more of a theoretical thing that Mises was walking through but he's saying no that's literally what happened in Great Britain. During the war that initially they weren't setting out to socialize the economy they were really just trying to ensure adequate material for the war effort. But the price controls you know had the obvious textbook effects so so I that's some interesting things that I must have read this essay before this speech before but I had forgotten that detail. Well getting back to interventionism and really the core of this talk in section two he's talking about the fundamental distinction here is between socialism capitalism so he embraces Marxist term a lot of people today say we should I love the term capitalism because it conjures up private capital which conjures up property so I embrace the term I don't think we should get rid of it but he's basically saying first of all he gives a nod to the socialist here where he says you know the question is between capitalism socialism which is conducive to the better attainment of those ends which all people consider as the ultimate aim of activities commonly called economic all people. The best possible supply of useful commodities and services I'm not sure that that's true I'm not sure that I would consider all people today interested in that like the climate change warriors for example. I think there's plenty of people in the West today he would be OK with a far lower standard of living provided it was more egalitarian in their eyes somehow they're always running the show so this egalitarianism never applies to them. So that I thought was an interesting nod by me says because he you find this thread in a lot of his work saying you know you should attack the other side's motivations this is this is an exercise in rationality and persuasion to show them you know means and ends cause and effect and if we can just make them understand. And now we've got a hundred odd years of that of the left and our friends to ponder that but then you know a little bit farther on here in this chapter this section on interventionism he says you know the conflict between these two principles being socialism capitalism irreconcilable and does not allow for any compromise. So they preclude each other he says so interventionism is not a golden mean between capitalism socialism. So you know on the one hand he has to recognize because that's the world he was living in the world we live in that it's possible. I mean interventionism is a possible means of organizing society but he seems to be insisting that it's not tenable in the long run. Right so you made some great points there and yes it's it as of the time he gave this speech yet it does seem like he he was saying everybody agrees that you know what the economy is supposed to do is just produce more and better goods and services for the people. And it's just a question of how do we organize it and you're right that modern day environmentalist for example wouldn't wouldn't agree with that even that premise. And so that's true and then you're right it also jumped out at me to Jeff that he he would say things like you know the the price control you know which is the aim is to provide more milk to the you know mothers or whatever the government is frustrated in its efforts and it doesn't achieve the end sought and I was thinking that no I'm not sure that I mean maybe it was true in the war effort that they really were doing that because they wanted to maximize the war effort. But you know in general like for example. I do not believe that the members of Congress when they vote to raise the minimum wage are doing that because they think they're helping workers or that they have never heard the idea that maybe that's going to cause unemployment you know they have. I believe economists on their staffs, like they know those textbook arguments about raising the minimum wage and this was even before the revisionist literature I'm saying back when every economist agreed raising the minimum wage was going to cause unemployment for teenagers. And so I don't think the people in Congress were unaware of that I think it was because they wanted to support the labor unions. So they went out and lied about what their motivation was don't get me wrong but in terms of why were they doing it and so they weren't frustrated by the high unemployment for teenagers that actually wasn't their goal was to help teenagers it was to help labor unions and they succeeded in that. This is right so so I think you're right Jeff that. Mises at times or whether he's doing it just to be more gentlemanly and to keep things above the fray and just to make it you know a logical rational argument. You know maybe it was more rhetorical or whether he really believed that I don't know but I know Rothbard. I'm not sure if you would agree with me on this Jeff but I'm pretty sure that Rothbard at times you know said I don't know that we should concede that the interventionist actually have just the best of motives and we're just disagreeing about the means to achieve an end. Well price controls is a great example of this he has a section on how price controls lead leads to socialism so price control would be a typical kind of interventionism. He brings up the fact that price controls were used in Great Britain during World War two and to an extent at least rationing which is a form of a price control in a sense or a supply control which was using the United States with respect to things like the days you could buy gasoline how often you could buy tires you know this is part of the war effort. So he has this section section four in the essay how price controls lead to socialism and someone asked I'd forgotten but I'm about to link to the online version of the essay here in the chat so let me just do that real quick for people who want to check it out but we're going to send donors to our fall campaign a physical copy of this so you're going to enjoy getting that. But you know he points out hey maybe well meaning interventionists who think milk is too expensive and we want young mothers who don't have much money to be able to buy milk for their young children so we'll put a price control a ceiling on how much you charge for milk. It seems like a simple enough example but then Mises teases it out I think beautifully here he says well okay but unless all the factors of production which go into creating milk which is you know buying dairy cows and having trucks to take the milk around and gasoline to drive the trucks and all the other factors which go into producing drinkable milk unless you put price controls on those the dairy farmers not going to be able to afford to put out as much milk as he did before he might not be able to afford to put out any depending on where you set the price control it might be at a price which is below his profitability. So he may he or she may stop being a dairy farmer at all. So as a result you know this filters through the economy and the central planners the well meaning intervenors find themselves having to place price controls on all of the earlier factors of production that lead to milk. So he has this great sentence here he says no branch of industry can be emitted from this all around fixing of prices and wages. Let's not forget about wages to the dairy farmer has to pay his workers from this obligation to produce those quantities which the government wants to see produced. So it really is a nasty nasty thing you do to an economy and I think Mises is couple of pages here deal with it as well or maybe even better than the short chapter by Henry has an economics in one lesson. So that was fascinating to me and you know Bob so supposedly someone was explaining the idea of a tax loophole in the American tax code one time. And this term or this concept didn't exist to him coming over here as a sort of an Austro German. And so he's like what is this loophole and somebody explained to it and he said his response to something like oh so that's when they get to keep part of their money. So I wonder if that was the context for this part 12 loopholes capitalism. Right yeah I was wondering that to it did seem like a like for us today that like that phrase I mean we talk about tax loopholes but I don't hear about tax loophole capitalism or anything so yeah I was wondering that to if that was something that was more popular at the time or like you say it might just be that he wasn't familiar with the term and so it stuck out to him even though it wasn't like a very popular thing to say. I think Rothbard to doesn't Rothbard say something like he favors loopholes in the tax hold loopholes so big you can drive a Mack truck through them or something like that. I think that was in like making economic sense something along those lines for people at home, because some economists, they don't like loophole right in other words, there's a theory by which oh really you know get rid of all the loopholes and have a flat tax that's the lowest possible rate on the widest base. And so like there's like Scott Sumner, some of you may know him. He was outraged that they did that the, the Trump administration repealed the the Cadillac tax. On luxury cars Obama had put put no it's for health health insurance. Oh, right. So they called the Cadillac tax because it's like the extra tax on high insurance, high premium health policies from employer, the theory being that that you know it's official because the tax code has incentives and so you overpay and that's why healthcare costs are so high. But the point being that you know there's a libertarian, you know, who has a large following was really with all the things going on today you know that he was really upset that they had they had effectively gotten rid of a tax loophole. And so you know I just thought that was funny. So that's that's the context was that's why Rothbard and Mises I think are pointing this stuff out is there are market favoring economists who think that tax loopholes are bad, because oh it causes distortions and you could have a different tax code with lower rates and with no deductions or exemptions. But their point is yeah but it's the people's money you know it's kind of odd to be clamoring for the government to take more people's money. Well the question for Rothbard is where do the interventions end? In other words once you justify one it's you know an extra tax on Cadillac healthcare plans it's awfully hard not to justify two, three and four more. And if you read Rothbard in the Betrayal of the American Right he talks about his sort of crystallizing moment becoming an anarchist was when he was defending limited government which you know provides national defense, courts, police services. He was defending this to some of his friends his anarchist friends in the 60s and they were saying well okay but you pay taxes for that and then you know as long as we can all get together and agree to pay taxes for national defense and courts and police services. You know what in principle stops us from also getting together and agreeing to pay taxes for public housing or free milk for women and children. You know in other words that was sort of his aha moment and you know Bob we'll wrap up our review of this book with you know the last section, section 12, the coming of socialism is not inevitable. I mean I just want to stress to people that the academic climate today we think of universities as so left wing and so hopeless and these nurseries of socialism. In many ways for for liberty minded people the academic environment is far better today than it was in the 30s and 40s and 50s when Mises is writing this. You know socialism was considered inevitable. It was taught as scientific as inexorable and the next coming thing it was like technology almost for an economy. So and if you look at the dominant thinkers of that period I mean you didn't have places like you know you didn't have all these free market centers at universities. You didn't have organizations like the Mises Institute. You didn't have all these free market writers who would come along later like Milton Friedman. I mean it was actually from a purely intellectual point in economics. It was a very dark time and and so Mises was was writing against a tough backdrop where most of his peers really believed you know in Keynes certainly but perhaps Marx as well. And so when I think it's important to note when he says it's not inevitable and this quote wow on the last page of this essay I'll ask you which which political party in the U.S. today does this sound like. They quote they are always in retreat. They put up today with with measures which will only 10 or 20 years ago they would have considered as undiscussable. They will in a few years acquiesce in other measures which they today consider as simply out of the question. What can prevent the coming of totalitarian socialism is only through a change in ideologies. So I thought that wow you could have written that today Bob. Yeah that I had also highlighted that passage as well Jeff I thought that was really impressive that he said that and so again just for more of the context there for those who haven't read this yet. He he's he's objecting and saying it's not enough you the parties of the right they can't just be against pure socialism and just oh we're anti social hey socialist doesn't work and it's tyrannical and you know the individual isn't free. Because if you try to adopt a middle ground because that just leaves the field open for those who say oh yeah yeah we're not socialist we're not actually marks we're just you know we don't want there to be too many homeless people or you know mother struggling to you know poor mother struggling to give milk to their kids that's you know that's all we're doing here we know that there needs to be private property and incentives and blah blah innovation we know all that. It's amiss is saying that you're just throwing in the towel when you do that because it's for the for the reason the technical reasons he cites in the essay that for because you know you learn economics. Since the first round of interventions, don't achieve their desired goals or at least the goals that the public is supporting them for whether it's the actual goal of the policy maker. Then it's just going to lead to more and more until eventually you get de facto socialism, even if it's still labeled as a private market economy so yeah I thought that was great. And what's also interesting too though is that he said that the outcome is not inevitable, because I've heard some people Jeff criticize his thesis they're saying middle of the road leads to socialism by saying what are you talking about me says there's, there's plenty of countries around the world that you know have had middle of the road stance for many decades at this point and you know we would agree they're not yet socialists so what you know how long do we got to wait for the for your theory to come true. And I think you know he's he's acknowledging that, yes, this isn't inevitable, it's not, you know, like like Marx was saying an inevitable law of nature that socialism has to come so I you know he misses wasn't actually predicting. It wasn't a pessimistic essay in other words where you just take it literally. Mises would have to be predicting that all the world's going to go socialist because there was no pure laissez faire economy at the point he gave this talk. So that's not what Mrs was saying obviously he wasn't just thrown in the towel. Well, I want to turn to some of our questions here for maybe next 20 minutes or so. And I want to thank everybody for tuning in I want to thank everybody for donating. If you didn't get a chance to donate but you're a free writer on today's YouTube link somehow. Just go to mises.org slash middle, and you can donate as little as $5 to just become a supporting donor of the Institute for $60 year you can become a member. We're going to send you a really great one ounce silver coin with either Mises or Rothbard your choice on that. And you'll be a member a sustaining member of really what is probably the most radical pro property pro freedom pro peace organization in the world. And I think we all realize that these are dark times and we need voices like the Mises Institute to put it mildly. But I want to start with a good question for Bob we've gotten Mises's take on what constitutes a capitalist economy we've got Rothbard's but what's Bob's in other words what would Bob call today's economy other than mixed. In the United States you're saying in the United States. Oh yeah, yes. Yeah, I guess I would. I guess I would I would call it interventionist is maybe as we go as we go off a better label comes to mind but yeah I haven't really thought much about that I had no reason to search for a different one but yeah I would I would say it's a highly interventionist system right now so I don't think it's outright. Well, it's funny with with the stuff that happened in 2020. Somebody could make a case, you know that they did things there that I, not just in terms of business enterprises but just telling people, like, you know how many people you can have over your own private residents I mean that I still can't believe that happened right. But I mean here we are in a system where money is basically centrally planned. The foods military courts police are all literally centrally planned but then you have ostensibly private industries banking insurance health care education, which are largely centrally planned, although they have a private cronious element to them so at some point I think it's you're not being a chicken little. If you're saying that you know America's it's pretty statist in our economy is not nearly as free as we think it is so you know you knew these questions were coming. How far are we from a crack up boom what me says called a catastrophic house catastrophic you know the Germans like to add a lot of syllables to things. You know where do you think we are in terms of some sort of really nasty fiscal shock. Well, it's, I think, and I'm curious what your thoughts to our guest so as some may know, I was very concerned with the rounds of QE after 2008. And I thought we were going to see significant price inflation and yes, I know the government fudges the numbers and whatever but I, I thought gasoline was going to be more expensive than it was, say the year 2011 than it you know and so, and they can't really hide how you know gallon of gas is in terms of dollars. And, but now we really are seeing that and I think anybody who goes to the grocery store, or fills up that you know you can see that things really are getting very expensive and despite the tricks that they're doing at the retail level with you know putting less food in the packaging is thinner and things like that. You know that doesn't mean we're going to have a crack up boom right now but I do think these massive amounts of just the Fed just pumping in trillions of dollars now whenever there's a crisis or oh there's a problem in the, you know reverse repo will just flood the market I mean, it's, there's, there's no principled constraint now and what the Fed does, it's all just a matter of, you know, oh, expediency, you know that anything is on the table at this point if they if they could spin it as, you know, this is going to be good for the economy or the sectors in trouble so now the fed's going to come in nobody would object, you know, I'm going to qualitative terms and just say you don't have the authority to do that it would just be a matter of is this going to help her. So, so since that sort of Pandora's box has been open I, I think unfortunately how's this for an answer that it's when the crash happens it's going to be quick like people won't realize when it's going to come and then it's going to happen fast so definitely they can no longer get away with just pumping money in with no no ill effects because I think like I say consumers finally are really feeling that the tightening whereas that wasn't as evident back in 2011 2012. So we have a question about the quantity theory of money. Dave Howden many of you know also a fellow at the Mises Institute he tweeted something the other day to the effect that if you if you just had supply chain issues, you know, and you had restricted supply for certain goods the price would rise for those particular goods but because people were paying more money for those they would have less money and therefore demand would fall and prices would fall for other goods. He said but when you have prices rising generally across, you know, all or most sectors of the economy that represents what you and I or what Austrians would say is is real inflation which is, you know, monetary phenomenon. So what do you think is going on is with inflation today is this supply chain stuff from COVID or is it is it all the money and credit creation over the last 18 months. Right that's that's a good point David makes and that's like I've seen Austrians historically have mentioned that like in the 70s a lot of people would blame the price inflation like oh that's because of the OPEC embargo. And so the standard sort of quantity theory approach or explanation or response to that would be to say well no. In fact restricts the amount of oil coming in yes the price of oil goes up, but people don't have more dollars total to spend just because of that that so that means they have less to spend somewhere else and so it that wouldn't cause a general rise in prices just in certain areas. And so yeah that sound I didn't see Dave's tweet but it sounds like that's the point he was making that particular supply chain issues. Yeah can can make prices rise in certain sectors but you wouldn't see this general overall rise necessarily so it's. I mean, I guess, if it's a completely widespread supply chain problems put it this way, a standard definition of price inflation is too much money chasing too few goods. So if the total quantity of output drops 10% because of widespread supply chain issues, even with the same stock of money technically that could rise, you know, raise the unit price all around on average. I think it's likely a combination of both but more I would say Jeff on the, how much money they pumped in it as you know that with the understanding money mechanics book that we've got coming out soon. You know I have some of the charts in there for people who don't know this, the amount of money that the Fed pumped in in 2020 dwarfs what they even did after the financial crisis. So, whether you're looking at the base or M one or M two. So, they really did I think it was masked for a bit because people were panicked. So the demand to hold cash went up. And so they kind of just soaked it up. But now that, and you couldn't go to the store and spend it so that might have hidden it for a while too but now that you know people are able to spend more. I think you're really seeing it so I took for me, mostly it's because they pumped in so much money. And I have a question from Lucas, just in ski says could Mises is most important contribution be considered demonstrating the interventionism is a dynamic process. Health care is a good example. What does Lucas mean here what does Mises mean about interventionism as a dynamic process. Okay, so he, and I don't know, I would have to say what probably what Mises means by calculation is his most important contribution but yes certainly the dynamic process of intervention is important so it's, it just the elaboration of the specific example Jeff about the price controls just to say that, when you know you do a first round of intervention, and it leads to what's often called unintended consequences. It doesn't achieve the official stated goal of the intervention and so then you got to keep doing more and more. And that's, you know, like what what happens with with Obamacare for example. That's why even the proponents like guys like Paul Krugman admitted you had to have the bad stuff in order to get the so called good stuff that you couldn't just say hey insurance companies have to cover everybody regardless of their health because if you just said that, then I said okay if you have brain cancer will give you a policy but we'll charge you, you know, $100,000 a month in premium. So that wouldn't work. And so then they had to say okay you got to have a total you know universal coverage and the premiums can't be too much higher based on your health history blah blah blah. But you couldn't do that because then the insurance companies just wouldn't you know they would just go out of business so that wouldn't work. You know, and so they had everything that you know all the stuff and then the reason you need to mandate was if they if you just had that, then healthy people just wouldn't buy insurance, and the only people left in the pool would be the ones with, you know, serious conditions and so the premiums would have to be really high. So that wouldn't work. So that's why you had to have the mandate right so that's like the very structure of Obamacare, you know the affordable care act legislation itself even listening to the people explain why they did it just epitomized you know Mises dynamic that he talked about the you know one interventions not going to work, and it's just going to pave the way for more and ironically in practice what happens is the government intervenes screws things up and then people point to the screw up and say that's laissez-faire capitalism for you we need more government intervention. Right. Can I ask you just elaborate on the quantity theory of money we get that from John Locke and others. Mises and Rothbard had criticisms of it as you know facile. So you know what's the quantity theory of money and what are the, what's Mises is objection to the quantity theory of money. There's different versions historically and so some versions Mises would have been somewhat okay with the other ones you would clearly would have rejected so the quantity theory just saying that, you know the prices respond proportionally to how much you know the stock of money if they double the quantity of money then you expect prices to go up and that is there's like an equation that people may have seen it so what is it. There's different versions like MV equals PQ you know so so the M is the money you know the number of dollars let's say V is the velocity of circulation so like how many times per year on average is a dollar change hands. And so M times V is like the total spending in the time period and then the P is the price level and Q is the level of output and so the price per unit of good and then times the output is how much so those two things have to be the same. And then and so people can take that so it's an identity like you know if you agree with in Rothbard has some good criticisms to show some of the terms of that thing they don't really mean anything you know nobody conducts business on the basis of the velocity of circulation of money in the economy that doesn't you know you don't care about that but if you accept what those terms are defined as then yet the equation has to be true, but it doesn't follow that if you double the quantity of money that means prices have to rise, you know, V could shrink, you know, or quantity could go up right so that so there's different things. And Mises, beyond just, you know, using in a crude fashion Mises rejected the whole notion, because there that's like looking at the economy the way like an engineer would model water moving through a pipe. And Mises, you know, there's no subjective valuation there that that's not how economics works to explain anything else. And what Mises did and his, what we translate as the theory of money and credit is is he took the standard tools of subjective marginal analysis and money and then as well like instead of just doing a barter economy which most economists have done Mises explained money and money prices using you know individual marginal analysis not looking at the economy as a whole with just dollars floating around the system like you know I say water going through a pipe or something. Would natural deflation be a would that demonstrate the problem with the quantity theory of money in other words in 1990. There were far fewer dollars than today but a DVD player cost $500 or something and now if anybody even wants to buy one it's $40. So we would consider that a happy technological version of inflation and obviously demand is dropped but does that is deflation price deflation a refutation of the quantity theory of money if assuming the quantities increasing. That's a good question I'm trying to think like so for examples like that I would they explain that. I guess they would say that yeah they would say the technical technology improved like we're able to make a DVD player with fewer inputs were before. Right. So I guess the way they would handle that is like total output would go up. Okay, in the equation and read the equation right I think that's how they would handle that right. All right so I want to get back to some of these questions and we're rolling where we're working Bob hard here on a Friday afternoon he's he's he's hanging in there. But you know these economists you can't you can't let them get away with anything. This is an interesting question because there's a lot of bad things governments do and probably worse among them is war. They murder people they use tanks and guns and planes to murder people so that I would say that's the worst interventionism. Not at all but this question is are the feds artificially low and falling interest rates. The most deleterious intervention governments can do. Well they're arguably one of the most insidious at least if we're restricting the analysis to, you know, economic interventions, you know as opposed to like messing with school curricula or something like that which you could argue be more long term. Yeah, and I'm assuming what the what the question or where he or she is coming from is that if the government just spends a billion dollars on some boondoggle project, you know building a highway somewhere where it's not really value but you needed that much. Okay, sure they pay the pockets of the local construction labor unions and things like that but the public can see what it is and it's kind of straightforward yet they spent a billion dollars on that when you know maybe a private contract or could have done it for 300 million or something like that so people kind of see the waste and understand it. But when the government through the central bank typically in modern times pushes down interest rates artificially low levels by injecting monetary inflation in the credit markets. And that sets up the boom bus cycle. And so that that's really so it's not just you know, the problem isn't confined merely to the recipients of the artificial credit, who now have an advantage vis-a-vis those who didn't get the artificial credit and they can kind of command more resources and it's not merely the redistribution of real wealth. This is a related question to an earlier one about supply chain and prices. This is from Michael O'Neill. He asks, Okay, great question. So the quick answer is, you know, I, I haven't done enough quantitative analysis, even if I had two years to do it, it's not that I would be you know, you can't centrally plan. But I'm saying I haven't even done enough of the back of the envelope to give you like a strong judgment one way or the other. But let me just remind people of some facts that the yield curve inverted in the, let's see, August of I'm getting my 2019. Okay, and so I based on like the amount of inflation with the rounds of QE and so forth. So I was on record predicting that there was going to be a bad recession in 2020 and 2020. And so I, based on like the amount of inflation with the rounds of QE and so forth. So I was on record predicting that there was going to be a bad recession in 2020 and 2020. And there was and then some people could say, Well, you got lucky because COVID hit and it was the, you know, it was the lockdown. You know, who can say we don't know because we don't see the alternative timeline in which they didn't have the lockdowns. But, you know, so I will say that even and that's not merely an Austrian thing like I'm sure many of the viewers know that an inverted yield curve has predicted an inverted yield curve has predicted a coming recession, I think without fail since World War Two, at least, so or right after World War Two. So, so I think, you know, there would have been a bad recession anyway, and then like, like, you're saying Jeff, the, with all the lockdowns and things you might remember I was writing about that in the summer of 2020 warning that if I use the term supply chain disruption but that was the concept that was getting at saying just really real quickly I'll reiterate that even though the unemployment rate hadn't gotten as high as it had been, you know, and previous times, in terms of breaking all time records or anything like that it wasn't as high as it had been during the Great Depression. I was pointing out there's a difference though with the lockdowns and the unemployment that that caused. It wasn't that people just scaled back where they wanted to like if you were told, you had to cut your spending by 10% you would cut back in those areas where that you could, you know, that were the least essential to you, whereas with the unemployment that was no lockdowns it was bureaucrats who were determining what was essential and not and so the unemployment number there I thought meant more in terms of the harm it was going to cause and so there's that issue and then the last thing is, yeah, part of what's going on in the markets is the unemployment benefits and for those who don't know I mean it's it's not exaggeration on the part of Ben Shapiro or something when the, with the federal amounts. There were some people that really were getting paid a lot more to stay home than they had been making it work so of course, and I just anecdotally I don't know if this is like this down in Auburn, but just driving around there's plenty of like what when I was I was recently on the interstate, in a lot of the like Starbucks and Dunkin Donuts they were like some of them were just literally closed because they had staffing shortages, you know, and you would have thought that that would have been over by now so it's really is amazing to see some of these problems these bottlenecks. Yeah, it really is something. It says Bob, when do you think central banks could ever raise interest rates again in the current context of trillions of excess liquidity parked by commercial banks with them. And I think that the questioner is it is alluding to the interest on excess reserves which our Fed pays. But also Bob related that is is Congress has to pay for interest on the national debt on Treasury debt every year. So those two things a lot of people say well the Fed can never raise rates again. Right so if you have you run the numbers. I don't have like a soundbite to give you because I haven't done a calculation recently but yeah they they have added. If you the figure if you use the public debt that the you know the US federal government has a lot of times they'll say held by the public and they'll exclude like this but just the standard public like the outstanding Treasury whether it's in the trust fund or something like 126% of GDP right now. Right and it was it was not. I think it was in the 60s, like in 2007 or so the 60% so I mean that has really skyrocketed just to give people an idea of how much debt they piled on, you know, after the financial crisis and then, you know, because of the you be to be able to point to that and all the measures that all the spending that involved was involved that it but it's not as painful as it normally would have been to add all that debt because interest rates on treasuries have been so low. And so they sort of in a sense have had a margin of error or as the calm before the storm so yeah they they really can't. If they were just to allow Treasury yields to rise by a few percentage points I mean that would translate into many hundreds of billions of dollars of extra interest expense and that's partly why in the CBO is analysis of the long term budget forecast. And the debt is a share of GDP is kind of flat for a little bit in the 20 for the rest of the 2020s, but then by it starts rising again and then by I think it's 2031 they've got it passing the all time peak that was set right after World War two. And that's because of demographics with Medicare and you know with with Social Security people getting older, but it's also rising interest rates just and not. And that's not even like a spike because of a crisis that's just interest rate gently rising a bit back towards more historical levels that that's going to just really wreck the budget. Right and of course historical leg levels for Treasury debt is somewhere between 5 and 8%. There's actually a website you can go to that gives you the range of interest payments on Fed on Treasury debt right now and for Congress is paying something below 2% average across all awaited outstanding Treasury debt some of its five year 10 year some of its current year. But you know they wait how much is of each particular type Treasury bills and Treasury bonds and so this is less than 2%. So if if interest rates were to go to historical average of 5 to 8%, that 350 to 400 billion annual line item in Congress's budget to pay interest would quickly go to a trillion or more. And that would be that would be the single biggest item in the federal budget that would be more than so-called national defense would be more than Social Security more than Medicare. So that would be a very untenable political situation for Congress and a brutal one. So I wanted to get to a question this is from Bruce Corbery says what's the relation between World Reserve currency which we all know is our exorbitant privilege here in America and the scheme to globally control the economy. Okay, so it's the exorbitant privilege for people who don't know that term it's so after World War two there was the so-called Bretton Woods arrangement where the idea was that you know historically all the major governments had had gold in their vaults and that was what was backing up their currencies. And then so after World War two they the British pound was originally involved too but then they kind of fell on the wayside so it is ultimately the US dollar so that the other major central banks would basically stockpile dollars as their reserves and then the Fed stood ready to convert dollars into gold at the rate of $35 an ounce. And then that's that's what Nixon famously ended in 1971. When he closed you know we recently had the was at the 50th anniversary of that. And so, so that that's the exorbitant privilege, just to finish that train of thought was meaning. So, if the other central banks are accumulating dollar reserves, well how do they get more of those they got to send the Americans real goods and services right if we're going to send them $100 billion in actual we send necessarily pieces of paper with Ben Franklin on them but you know electronic what have you. But if we're going to send those to them, or treasuries, then they need to send us something exchange as a given that for free. And so the rest of the world is sending cars and sweaters and other goodies that Americans get to consume in exchange for sending up those those dollar stockpiles that they're, they're building up and so that's what the exorbitant privilege was that it's, you know, it's good to be the king it's good to be the, the central banker of the world it's good to be the issue where the world is the currency. And, and so that, you know, gives you a lot of leverage around the world and you know ability to lean on other people. So that is connected with a lot of people who, you know, view central banker types with nefarious, you know, think that they they're up to no good. And I don't know exactly if this is what the question is getting at but there's part of that narrative or what goes along with that perspective is to say, a lot of that just rests on confidence. And so right now, you know, it's still the case even though Bretton Woods is ended in the US isn't redeeming it for gold. A lot of countries either explicitly or implicitly are pegging their own dollars or their own currency to the dollar. But that rests on sort of faith and that you know if China were to come out next week and say you know what we no longer have faith in the Federal Reserve it's just been printing money like crazy. So we're going to get rid of half of our dollar denominated assets, that would probably cause the dollar to crash. And so the, the thinking goes that you know there's there's people and I. Why is it that US foreign policy targets some dictators but not others because it's clearly not that they're all the CIA sitting around saying we really don't like mean people let's just do we can to get rid of that. That's not what happens sometimes a dictator will be on good graces with the US government one day, and then the next day he's the next Hitler that needs to be taken out. So, there's a plausible case to be made that anytime somebody starts talking about you know I'm going to get my country away from the US dollar and let's let's use something else that all of a sudden that regime goes down so again I haven't done enough research to know how accurate that is but that's part of the narrative of that to say that's partly how the US government has maintained dollar hegemony. Well I would only add to Bruce's question that we've never had a currency crisis with a world's reserve currency like gold was the world's reserve currency so we've had localize regionalize currency crisis throughout history. But we haven't had that with the world's reserve currency so a lot of people like Pap you can and say well if the dollar ever gets in trouble. That will usher in an era where under the auspices of something like International Monetary Fund, the IMF you know swoops in and says look we can't have all these countries just issuing their own currency and devaluing them or having currency wars between them we have to have an overarching global currency system because now look even the US dollar has crashed and that's which that in fact of course would harm pretty much the whole world. So you know you don't have to believe in any sort of nefarious intent to say that it's a little precarious to have so much of the world's economy hinging on the dollar. We're just going to do a couple more quick ones here. I thought this was a great question from Sammy Cartagena. Someone I know personally Sammy says what are some tangible short term consequences of central banks keeping interest rates negative in real terms. And of course in Europe sometimes they're negative in nominal terms. I imagine what the question is getting at is the idea that hey you know in the Austrian tradition time preference is supposed to be positive and so isn't there something screwy with, you know, what does it mean if real interest rates are negative. I'm not sure that anything magical happen like in other words if, if this because a central bank manipulation, suppose the interest rate, the real interest rate supposed to be 3%, and then they push it down to 0.1. I don't know that the difference between that versus negative 0.1 is some huge qualitative, you know, difference that I think just in general. Yes, if central banks, I mean, the fact that they're negative that should jump out at us that something is screwy and this is unnatural right so that to me that would be the most significant element of that. But again, it's interest rates serve a function and a market economy there are price and they help in the Austrian view that you know they help allocate the intertemporal coordination. There's the length of production plans and so forth with consumers desires to have more goods and bear than fewer but also to get them sooner rather than later in the trade offs there that's partly what the interest rate helps regulate if you want to use that word. And so when they make it artificially low that causes an unsustainable production structure. Should the Federal Reserve Bank be considered interventionism is that what Mises is talking about here is it is even having a fed a form of interventionism. Oh, absolutely. You know what imagine and any other context you know we don't have a central board of you know setting the price of wheat and having a bunch of wheat governors getting together every every once in a while to determine you know how many bushels should be produced and what should be the price per commercial. We would all clearly call that you know fascism or social or something. And so yeah that they shouldn't be involved with that and also it does fit I would say his dynamic of interventionism. You look at us history. There are various interventions in money and banking, and then they cause, you know, various panics and so forth. And then that gave rise to, you know, demands for oh well we you know we can't have this anarchy of Wildcat free banking so we need to have more And so yes I would say that that that fits the pattern nicely I don't know off the top of my head. If Mises himself ever used central banking is an example or an illustration of his principle of interventionism but I think it fits quite well. And certainly he would agree that a central bank is not a feature of a market economy. But doesn't the Bank of England predates marks is use of the term capital. I don't know offhand if communist manifesto or dust capital mentioned the Bank of England or not. I wonder, wonder what Marx thinks about central centrally planned money he probably views probably views central banks as a tool of capital of elites. I want to say it's been a while since I've read the communist manifesto I think they're in the bullet points, maybe like pushing down interest rates is in there so I mean, I think he does say something about what we nowadays call monetary policy but I don't remember You know, you don't have the communist manifesto at your bedside at night. We do know that Marx says interest rates are a form of exploitation. It's bad enough that the capitalist steals some of the workers output and only pages pays him wages and but takes poor skims profit off that but then he turns around and takes that profit and loans it back to him and charges the poor guy interest. So it's exploitative in that sense. All right, we got what time for one more. I'm going to answer this one it says does this is from Mark Collins says that Mises Institute hodl Bitcoin in their treasury. The short answer is yes. Obviously we get Bitcoin donations from time to time we don't sell it we keep it. So but but now I want to go to the last question again from Benjamin he had a question earlier but and this is this is important because I'm hearing lots of people on the right in libertarian circles who are otherwise sensible people making all kinds of hey about China China China China China. So Benjamin NATO seen asked is China's economy a paper tiger, or are they proof that the middle of the road works. So that's that's a hell of a question. So it's my thoughts on China so I do. I read some things that yeah I think that they probably are going to have what we would call a crash. At some point in other words I think that they have a lot of things that were male investments in a reasonable sense of that term. But it's on the other hand I think partly what's going on with China or at least historically is you know they had really extreme top down central planning, you know under Mao, and then they started pulling back from that and you know so there was various amounts of liberalization and like maybe like 10 or 15 years ago and I know some guys that like we're doing consulting and whatnot, or guys who write like financial newsletters and they would go visit China and give feedback to their clients and so forth. And so they, again, it was it was sort of like you were saying Jeff with the neoliberal program like their. The sense I got was that they weren't so much ideological they just wanted to see what worked. And so they could look around and say oh you know so that's not that they became believers in laissez-faire capitalism but they could recognize. Oh, if we allow, you know the peasants to own a little bit of farmland that's one thing if we allowed them to pull them together into units that were 10 times the size and they could bring in an outside tractor. If that works huh okay maybe we should let them do that on a limited piecemeal basis over in this province and see how that see how that goes and then maybe we'll let the other province. So I got the sense that they're more like trial and error, just pragmatic. And so, you know, I don't know if that upsets me this thesis or if it's like the thesis in reverse. So I think we got to end it there. It's a little after four central. Again, I want to thank everybody who joined us today and who participated in our fall fundraising campaign last week. You're going to receive this in the mail. The middle of the road leads to socialism. Great little essay. You can read it in about 20 minutes or so. And you know you can't understand anything we're talking about today whether that's China or supply chain or interest rates or shipping or you know you can't understand anything without the theory behind it. I'm reminded of Rothbard's taking a what if you brought a Martian in and had him watch people running around Grand Central Station that Martian wouldn't understand that they were all rushing to go to work or go home or catch a subway. So this stuff is going to help you understand the world and I really want to ask all of you to continue supporting the Mises Institute. The best way you can do that is just to share everything on our site to sign up for our daily emails to follow us on Twitter to subscribe to our YouTube channel and basically just help us in every way possible to get the word out to people who are really questioning what's going on and worrying about the U.S. It probably in ways that they've never worried about it before. So I want to thank my friend Dr. Bob Murphy. I want to thank all of you for joining us and we hope you have a great weekend. See you Bob. Thanks everyone.