 When we talk about money, you hear all the time that there's certain amount of money that's needed in the economy They need to expand the money supply. They need to keep interest rates low and we've seen a lot of this in the last few years since the meltdown on Wall Street and That's really what I want to talk about today. How well that's worked out or not worked out as the case but The first thing I want to talk about is used to be money wasn't you know the kind of paper that we see Printed today or digits that we see on a screen used to be mined Used to be silver and it used to be gold and it used to be very Substantial looks used to look something like this that I have in my hand. This is an ounce of gold American Eagle And I'm sure you've all held little gold in your hand, right? everybody has Anybody has it? No, you all have it's very heavy and You know modern coins When you drop them don't sound like that. Do they they sound like you're dropping one a button or a piece of plastic or something like that As you can tell just by when I drop this That it takes considerable resources to create this right it takes moving tons and tons and tons of dirt and And then a refining process and a minting process and by the time you make One of these coins you have considerable resources in it. So you wouldn't make money By mining gold unless it was worthwhile to do so the cost of the mining would Would have to be less than the actual value of the coin on the on the marketplace and so that's You know, that's the advantage of gold and gold and silver being on the marketplace now If you're going to counterfeit If you want to get into the counterfeiting business you would try to recreate this But using lesser materials, right? You try to give it a gold finish and Maybe put I don't know some lead or something heavy because the gold coins heavy Doesn't look like it should be but it's it's got some some weight and some density to it and so That's that's what you would do if you were going to counterfeit but of course counterfeit is fraud If you tried to pass off a gold coin, but you made it with brass or you made it with copper you made it with lead that would be fraud and counterfeiting is Exactly is that is exactly that? well And if you want to go to jail for sure, I mean you just absolutely are just dying to go to jail You should get into counterfeiting business Because the government will apprehend Counterfeiters and they will bring you to justice and why is that well, they don't like competition because Government is the biggest counterfeiter that we have Now I wanted to point out that on this coin this one ounce coin. It says fifty dollars I Would tell you to If you can buy this for fifty dollars anywhere, please do Please buy all the one ounce eagles for fifty bucks that you can't This says a hundred dollars Which do you think costs more to produce now this says a hundred and this says fifty bucks is it a trick question? Nobody has an answer The coin costs more. Yeah, which would you rather have? Oh, thank you. All right. We're we're on the we're on the right track Government can create these for somewhere around four or five cents in Fact last year they made more of these than they made one dollar bills It's one of the biggest export products that the United States have Because a lot of hundred dollar bills get sent overseas So if you can make these for four or five cents get a hundred dollars worth of product That's a good business to be in and I would urge all of you to get in that business if you possibly could But you won't probably won't won't be able to do that now But what I wanted to talk to you about today is when Created by the government. It's not done by way of just You know they increase the money supply. They don't they don't print up a bunch of these You know hundred dollar bills make bales of them put them out at the corner here of Magnolia and Donahue and Let people come and get them, you know first come first serve Ben Bernanke the chairman of the Federal Reserve does not fly over with a helicopter and Let them sprinkle it down so that if you are in the right place at the right time You could grab as much money as they're creating. That's not the way money is created in in modern Banking modern central banking. It is created through the commercial banking system Through the loan market and it's created primarily on on Wall Street, and that's a fairly complicated sort of process That I don't want to go into today But if you do want to learn about that Murray Rothbard has written a wonderful book called the mystery of banking where he explains it very clearly that how money is created through the commercial banking system and And But the point is through the commercial banking system with the help of the Federal Reserve It's not banks by themselves that can do this. They need the help of the Federal Reserve But because that's the way money is created. It's not sprinkled from the sky like a snowstorm Because it is created through the banking system. Some people get the money first and Some people get it last and in fact, that's how Murray Rothbard explained Inflation he said it's a race to get the money first as opposed to getting less last because Because counterfeiters benefit first and Who is the number one counterfeiter? The government yes, so they benefit first and who who is the who are the big losers in this well The big losers are of course the people on normal people people that work on a salary for instance people who draw a pension People who have entry-level jobs Anybody on some kind of government assistance are typically losers in this process but the winners government and Those who get cheap money very quickly and that's That's really what I wanted to talk about today, but it's interesting that you know we hear all about this Occupy Wall Street Movement you've probably seen the you know some of the tape on TV down on The park there in New York and around the country where we've got a you know these people who are You know protesting. I'm we're not sure what they're protesting really Used to be we had protests about you know that protesters wanted peace on earth and things like that well it seems like Now these these folks are just protesting either to protest or that they'd all like an iPad or something like that They'd all they'd all like to You know get theirs they they went to college and they racked up a bunch of student debt and Now they can't get a job and they think that's unfair and that's really What to occupy Wall Street's all about I'll tell you how confused it was I saw a little tape of it yesterday where Because what's interesting is the Occupy Wall Street movement has split into two camps and You have one camp with the poor people You know the poor rung of people who are protesting and then you have the other camp that is the you know The college educated and supposedly wealthier part and they've actually split into two camps They're not all one big happy family the rich guys don't want to go down With the poor guys and the poor guys don't want to go up where the rich guys are So I asked one of the rich guys who was holding his iPad to and they said Listen, are you willing to share your iPad? with the guys down at the poorer end of the park and he goes well no But I think everyone in the country and Everyone who's protesting should have access to technology. They should all have access And so the interviewer says well, but you don't want to let them use your technology. He goes no No, this is mine. This is personal property. I'm against private property, but this is my personal property So, you know if you're wondering about the confusion Out there about what is being talked about or what is being protested in the Occupy Wall Street movement I don't think that Illustrates it any better although I guess in some kind of Marxian theory private property refers to the means of production and there's a distinction between that which the Marxians hate and actual personal property which is you're like your stuff and that's okay, but I Digress what I wanted to talk about is what happened since 2008 and who gets the money first Because you remember in 2008 the financial markets were imploding everybody thought it was going to be the end of the world You know Lehman Brothers filed for bankruptcy Meryl Lynch they used to be bullish on America. You remember if you're old enough to see those commercials They fell into the hands of Bank of America AIG which was a big insurance company They had to take their tin cup to Over to the Treasury and asked for 40 billion dollars to to be bailed out and so at that point it was I Want our money supply our M2 money supply was an unadjusted 7.8 trillion dollars with the T and that's when Ben Bernanke and Tim Geithner and Henry Paulson, they were all working weekends this been portrayed in a couple of movies to patch up their friends on on Wall Street and But you know Main Street wasn't that bad at the time if you remember Unemployment was 6.1 percent. Of course, that means you believe the government when they tell you these things Even though there have been a lot of jobs lost their Unemployment wasn't too bad home values that only fall on about 7% But very few were under water so things weren't too bad But the Fed wasn't worried about Main Street worried about their friends on Wall Street and so the Fed's balance sheet went from 927 billion with a B on October 1st or that was at September 10th and 20 days later it had grown to 1.5 trillion dollars and if you remember as I started this money is created with the help of the Federal Reserve and Federal Reserve the bigger their balance sheet the more money they can create the more money They can create and I'm out of nowhere the more of these they can create very quickly They can't create these they can create the paper variety So 1.5 trillion on October 1st by New Year's Eve they had grown their balance sheet to 2.2 trillion This was all so that you and I could go to an ATM machine and be Sure that art we could put in our card and get out our money That's what they told us in fact it worked out so well that Ben Bernanke Everybody know who Ben Bernanke is. Yes, everybody's nodding. He's still doodling The Ben Bernanke was named times person of the year It was person of the year for providing the creative leadership that helped insured that 2009 was a period of weak recovery rather than catastrophic depression so here we are two years later and we still have weakness that He gave us and it will continue indefinitely it appears So I'm not sure what time was wishing for but they're certainly getting the weakness that That Bernanke created. So anyway, what's happened to money supply since those dark days of 2008? They are now 9.2 trillion. You remember we started just three years earlier at 7.8 and and so it's grown a tremendous amount and Essentially 1.6 trillion somewhere in that range 1.6 1.7 trillion and the money aggregates are now at growing at 20% So we have this huge huge Increase in the money supply. In fact, if you want to think of it a different way Because when when I say well it went from 7.8 to 9.2 you kind of go well, that's that's kind of a big change but Think of it this way the total money supply in 1981 September 1981 was the difference that it's just grown in the last three years Total money supply was just equal to the increase. We've had in the last three years That's how much money has been created in the last three years and when that money is created the money in all of your pockets Has become worth less That is counterfeiting counterfeiting on stilts Now who benefits from this? Why is it? There's no outrage. There's no marching in the streets We've already talked about Occupy Wall Street Occupy Wall Street isn't terribly worried about the money supply Why aren't people This seems like universally almost everybody is harmed by this But there's a certain group of people that benefit by who gets the money first And we've already talked that government benefits for sure because they can pay for the things that they want to do Whether it's wars around the world or whether it's programs here that they don't have to overtly tax you for They can just create money and pay for this. It's silent tax if you will but Jim Grant who writes a wonderful publication called Grant's interest rate observer. It's very expensive, but it's It's quite worth it if you can afford it But he wrote recently actually told the Wall Street Journal recently said that fiat dollar is an elite system And Wall Street is its supporting interest group those nimble market savvy plugged in folks Note how to shuffle assets and exploit cheap funding from the Fed to lever up their profits and soften the downside So while government benefits at the same time Wall Street benefits And you can see it in stock prices in March of 2009 the S&P hit a low as 666 And it's more than doubled since that time So the new money came rushing in and it came into stock prices In fact Wall Street loves inflation Wall Street paid out two points or 27.6 billion in bonuses and oh nine 20.8 billion last year Mergers and acquisitions are on fire In fact the demand for trophy office buildings is very strong The Market for farmland in Iowa is very strong So we can always say that Real estate investors stock investors Wall Street always like Like inflation in fact this goes back for many many years many many centuries Mark Thornton mentioned an economist named Richard Cantion. Well, he wasn't just an economist He was actually a speculator and during John Law's Mississippi bubble, which occurred 1718 to 1720 John Law was a Keynesian before Keynes was even born He had the idea that France's economy could be fixed If you just print more money And it's an idea that's As held on for centuries and centuries So John Law created all this money and then he also created shares of a company called the Mississippi Company speculators like Richard Cantion Knew that all this money would probably go into shares of the Mississippi Company and Those shares did rise 20 fold 20 fold and Then they crashed well Cantion was able to cash out He's one of the first to cash out before they crash So Cantion was not only a smart economist Good writer. He was a great speculator and that's who wins In Inflations like this at the same time what were happening to the French people well price inflation was rampant Prices went up 25 times just in a few months and in fact the price of food items like bread Went up as much as three or four hundred percent So while Cantion John Law and the King of France were getting rich the average peace average people were Suffering under inflation of higher prices price inflation World War one after World War one. There's a period in Germany called Weemer Germany And they had a terrible inflation also and One of the writers about Weemer Germany Author called Wettig Bernig Wettig Wrote that all those in debt all those who knew how to speculate in a stock exchange and all those who possessed foreign Currency could transfer money into material assets and had a good chance of profiting by inflation That's who made out during the inflation in Weemer Germany. In fact the German stock market stood at 97 in January of 1990 1919 and by December of 1922 three years later it was 89 81 That means the stock market in Germany during this hyperinflation went up 89 times Now you might think well that was a pretty good place to be Well You're a better off moving your money from marks To dollars because the dollar index went up 1525 times or you're a better in putting your money in coal Which went up 1250 times But who benefited? Who benefited in Weemer Germany? What was the government? The government's debt Which was huge at that time virtually was wiped out through the inflation all those people that bought those German bonds were left with getting essentially nothing after that inflation they were the biggest biggest winners in that inflation now there were a few big businessmen in Germany who also benefited Because little firms got in trouble big firms were able to get cheap money and buy them out and they also benefited At the same time same thing happened in Zimbabwe Zimbabwe is fairly recent in Phenomenon this had happened in late 90s to early 2000 mid 2000s And you know they created Huge amounts of money in that country and in fact First they had to come up with this bill. That's a 50 trillion dollars. It's a 50 trillion dollar bill Very attractive bill And says I promise to pay the bear on demand 50 trillion dollars Now this is 50 trillion, which would you rather have? All right Okay, thank you Eventually 50 trillion wasn't enough and they started printing hundred trillion dollar notes Which we had the overhead working but then again, and this is an attractive we have three rocks that are balanced here and picture of a Oxen Victoria Falls very attractive bill and again, I promise to pay on demand 100 trillion dollars and This is from this is from 2008 eventually the The Zimbabwe dollar crashed Wasn't worth anything but I think you can buy these now for as a Just as a curiosity for five or ten dollars on eBay actually but in 2007 as inflation roared ahead in Zimbabwe The Zimbabwe stock exchange Was the best performing stock exchange in the world The key Zimbabwe industrial index was up 595 percent just in the beginning at first part of the the year and actually At a point in 2007 for the previous 12 months the Zimbabwe stock exchange was up 12,000 percent This jump in the share prices is far in excess of the increases in consumer prices While the country is crumbling the Zimbabwe stock Speculator is keeping up much better than the typical Zimbabwe and on the street. So again in the case of the hyperinflation in Zimbabwe Stock speculators got the money first got the money first and they speculated with it But it was all closed down Gideon Gono was the essentially the Ben Bernanke of Zimbabwe if you will he ran their central bank and He shut down Stock exchange He said unless there is more discipline and honor the exchange will stay closed He actually had a study done of the Zimbabwe stock exchange and the study found That the stock market has been traditionally one of the drivers behind Zimbabwe's hyperinflation so forget about money printing forget about all that the cause of The Zimbabwe hyperinflation was the stock market and of course he had it exactly backwards of course the money was flowing into the stock market because of the inflation but Not Not the other way around Now here in America right now. We've had all this money created And Where is it going? Is it going to if you got a small business? Can you go to the bank right now and easily get a loan? No pretty tough to get a loan right now But the government is borrowing all kinds of money And in fact the banks can't get enough of government paper. They're buying $500 billion worth of treasuries in the last couple of years. That's what banks are taking deposits and doing there They're buying government debt. They're not They're not They're not giving loans to business and what are prices doing? Well, the government says there's no inflation Very little according to government numbers But if you look to a guy that I do named John Williams at shadow stats calm he According to his figures and he tracks inflation the way they used to do it And he says the prices are increasing it over 10% a year So what normal people are doing getting through all this money is not any benefit But just higher prices and of course is all this money creating any jobs supposedly been Bernanke says We need to lower rates. We need to increase the money supply So that people will start being hired. Well, they're not being hired at all. In fact The government's number says that unemployment is 9% if they expand that to include people who've dropped out of the water force and Are only working part-time who would rather have full-time work It's 16% and if you track unemployment the way John Williams does again the way it used to be It's over 20% so nearly one in four Americans are out of work Also You have 46 million people on food stamps. That's one in every 15 people in America is on food stamps The percentage of very poor rose in 300 out of the 360 largest metropolitan areas in 2010 Last year 2.6 million more Americans descended into poverty People who are actually who are just considered poor and not necessarily in poverty Has increased 15% Poverty rate of children has gone up Number of people on food stamps again has increased 74 percent since 2007 so we have this huge Dicotomy we've got two economies that have been created in the United States We've got Washington DC and we have Wall Street and then we have What's going on on Main Street? It was no different in Weemer Germany Blue and white color workers lost a third or two-thirds of their income between 1913 and 1922 and The biggest losers in the Weemer inflation were those who had saved money and those who depended on The state for their subsistence because the state Says they'll take care of you with welfare benefits or certain kind of benefits, but they never Increase them with the rate of inflation and the same things happening today after two years of No adjustments for inflation For social security recipients finally next year So security recipients will get a bump of a whopping 3.6 percent in their social security checks Well, that's at the same time if you believe John Williams the prices are going up 10 percent. So it's people that are on the lower run of Either skill level or of society depending on government benefits who get Get hurt the most so my message today is this I Don't want you to ever think That you ever can depend on the government to feed you Put a roof over your head Take care of you Because they can't do it by printing money. In fact, they're gonna make you worse off by printing money They're not going to create a job By just printing printing money. We can see it today. There's no there's no jobs being created They're doing just the opposite So what they're doing is making a very small portion of the country richer Is in government those on Wall Street those are close to the Federal Reserve those people are getting richer the rest of us are Getting poorer so and you need to you need to have you need to plan ahead You need to save and when we say save not necessarily say these but maybe save these and Have a skill level to keep up with inflation and never think that the government is gonna take care of you Because they're gonna do just the opposite. Thank you