 Thank you. Thank you all for being here. Thank you for inviting me, and it's always good to be back in Poland. And thank you for tolerating a talk in English. But believe me, it's much better than if I tried it in any other language. So bear with me. Financial markets, financiers, bankers, users. I can't think of a group of businessmen, and for that matter a group of people more hated in history than financiers. Dante has the money lender in the seventh rung of hell with a bag of gold around his neck, and the bag is so heavy that you're dragging him down into the fires. Shakespeare, I don't know if you read Shakespeare in Poland. Shakespeare, one of my favorite plays of Shakespeare is The Motion of Venice. I highly recommend it. And in The Motion of Venice, the Jewish money lender, Shilach, is the villain. And what is it that he's accused of? You know, the Christian money lender accuses him of being a bad person. Why is he a bad person? Because he dares to charge interest on a loan. The Christian says, if you're a good Christian, if you're a good person and somebody needs a loan, you lend him money without charging interest. Shakespeare, every villain, every villain today and for the last 200 years in literature, in movies is almost always a successful businessman. And if he's really evil, he's a successful banker. We despise finance. We live in a culture that despises the idea of making money from money. And as a consequence, we always blame bankers and financiers for every problem that we have. Which economic crisis over the last two thousand years has not been blamed on banks? Great Depression was the stock market. The collapse in the stock market, speculation in the stock market caused the Great Depression. Now no real economist, and I emphasize real, no real economist actually believes that. But it's in the popular culture. Everybody thinks that. You go into high schools or colleges, everybody knows. It's financiers. It's financial speculation. It's stock markets that caused the Great Depression. Who caused the financial crisis? Just the recent one, 2008. Anybody did any analysis on it? But for anybody figured out what was actually going on from an economic perspective, we all knew who caused the financial crisis. It was in the headlines of the New York Times, Washington Post, even the Wall Street Journal. It was Wall Street. It was evil financiers. There was greed on the financial crisis of 2008. Again, no real slash serious economist believes that. Seriously, or significantly in ten years, no economist will believe that. It takes a little while for the truth to get out there and for people to actually recognize the truth. In both the Great Depression and in the case of the financial crisis, the causes of it were central bankers. And if you want more details and those, I'm happy. Happy to talk about it in the Q&A, which we'll try to have. So what is it about finance? What is it about financiers that causes us to hate them and raise them so much? Because we do. We do. I mean, constantly, constantly there's talk. I mean, look at Elizabeth Warren. You know Elizabeth Warren? Unfortunately, you know who she is? She's right now leading or maybe second place in the Democratic primaries in the U.S. Her whole agenda, I mean not the whole agenda, but a big chunk of her agenda is to bring down Wall Street. And people love it. People get excited by it. But it's not like Donald Trump is a huge Wall Street fan either. He constantly goes after, I mean, they're part of the elites. They're part of the people that need to be brought down. So it's left and right, resented Wall Street, regulated Wall Street. And not just Wall Street, but banks. There's no industry in the United States more regulated than banks. And of course, what's the number one way in which we regulate all banks in Poland and Europe in the United States, everywhere? What's the number one way in which we basically control the banking system, the finance system? Yeah, central banks. We take the product that banks are supposed to be responsible for, money, and we monopolize it, and we hand it over to government, and they control it. So what's going on? Why is it that we so, so distrust banking, distrust financial markets, that we regulate them almost to death? We keep them alive just enough so they can somewhat do their function so that the economy doesn't collapse completely. We distrust them in popular culture. We blame every crisis on them. And there are always, always the villains of our stories. What is it about them? Well, I mean, there are two, three possibilities. One is that the critics are right, that finance is just paper shuffling, that they don't do anything productive, that there's no real reason why bankers, financiers get wealthy, that they really are bad guys, that they just redistribute wealth. And a lot of times when you read a textbook on financial markets, they talk about redistribution, and that's what financial markets are responsible for. They take capital in and they figure out somehow who should be the winners and who should be the losers. There's a truth to that, but it's no effort involved. It's just some kind of random allocation, or not random corrupt allocation. So one possibility is they really are just paper shufflers. And the second is that there's something that the culture views as inherently evil in what they do, inherently immoral in what they do. So it could be an economic reason, or it could be an ethical reason, or it could be both. So let's take the economic question first. And look, I've got very limited time to give you an explanation for the economic function of financial markets. So this is going to be very quick and abstract and we're not going to be able to do all the markets. If you want more of an explanation, it's in the book, right? And the book is somewhere here. I don't know where Tomik put it, but it's somewhere here. And I've got a course on financial markets online on YouTube that lasts, I think, eight hours where I describe in much more great detail. But what do banks do? What do banks, what do financial markets generally, stock markets, banks, what do they actually do? What is their function? They provide liquidity to whom? I mean, what does liquidity even mean? To whom do they provide liquidity? What do they do? What is the fundamental function of all financial markets and institutions connecting investors with companies? So on the one side, what financial markets and institutions do is they provide capital to companies. How do they get the capital? How do they get the money? Savings, right? So financial institutions basically do two things. They aggregate savings and they turn them into investments. What financial markets do is they allow us, and this is really important, they allow us, as producers, as individuals, as businesses to save for the future. And they actually provide us a return on that saving, whether it's through a savings account in a bank, whether it's through an investment in a mutual fund or into the stock market or into a private equity fund or into a hedge fund or whatever. The vehicle happens to be we get to invest in the future and get a return on that investment and the more risk we're willing to take, the higher the expected return that we will gain. So you go from anywhere from a bank account to a hedge fund, the risk and return profile is going to be very different. But they allow us to make that kind of investment. What would happen if we didn't have financial institutions? You had some excess money. What would you do in order to gain a return on that money? You could put it in the mattress. You could hold it in the backyard and stuff it down there. Even if you had gold, gold only preserves its value. It's not an investment. Gold is just money. It's not an investable vehicle. So what would you do with whatever money you had? You would have to find a business to invest in. You would have to develop the expertise to be able to evaluate the business. You would have to take on the risk that you would never get a return on that money. You would have to do all that work involved in and you couldn't diversify. Because you're not going to find ten or a hundred or a thousand businesses to invest in. You could do one, two, three. It would take a huge amount of work. And how many of us would know what the hell we're looking at? What we even... 99.9% of people have no idea how to invest their money in a particular specific company. It's difficult. It's complicated. Venture capitalists. Venture capitalists when they invest in startups. How many of them, for every ten investments they make, how many of them go bankrupt? Well, not 90%. But about five, six. Five, six, they basically get no return on. Then one or two, they get a decent return on. And then one, and if they're really, really, really good or lucky two, or what we call home runs. You know, they get a huge return on. And that return justifies everything else. But that takes unbelievably skill to get one home run out of ten. Most of us don't have that skill. So with our financial institutions, we couldn't save. Ability to save. Ability to plan for the future. Ability to get the benefits of compounded interest where savings grow over time. It's a consequence of the existence of financial markets and institutions. And it's a crucial, crucial function within a society that we have that if we're going to grow the economy. How does that affect growth? Well, because of what they do with our savings. What do financial markets and institutions do with our savings? They make the choices. They use their own expertise to choose who to invest in. And they allocate capital that way. So obviously, if you invest in a venture capital firm, they make the decisions about which startups to invest in. If you invest in a bank, they make the choices on who to lend money to. It's not easy. Maybe in the world today where the government guarantees everything, it's easy. But in the proper free market world, it's not easy. It's very difficult. Figure out who's going to be able to pay back and who's not going to be able to pay back. And not take a lot of risk because they are not charging you, they're not giving you a lot of money on your checking counts because you're not willing to take on a lot of risk. So they can't take on a lot of risk. So they have to make safe investments. And then a stock market. How does a stock market allocate capital? Properly functioning stock market in a free market chooses who to take public and who not to take public, who therefore is good enough to raise capital on the market and who is not. And then once we start trading in the stocks, what does it mean if a stock price is coming down? We don't think the company's doing well. We don't think the company has a future. And what do we mean when a stock price comes up? We do believe in the future that we believe they are succeeding and will succeed in the future. How does that affect how the company functions? Well, if the stock price is going up, are they going to be able to raise more capital and grow easier or harder? It's going up much easier. If the stock price is coming down, will the company be able to raise capital easier or harder? Much harder. So by buying or selling stocks, we're basically ultimately determining whether the company is going to grow in the future, be able to access capital, be able to grow their functions, or if it's going to die, because it can grow. Take when automobiles were introduced, long, long time ago, in the stock market. At the time, there were a lot of companies that made buggies, there were a lot of things behind the horses, really, really good buggies. They're for cheap ones to really fancy expensive ones. And probably the buggy makers were making a lot of money. They were doing really well. And they didn't see the automobile industry because that was like Silicon Valley way, way far away. It was Detroit. Detroit was the Silicon Valley of America in the late 19th century, early 20th century. But the stock price starts plummeting. Why? Because investors in the stock market, what they're doing are always looking. They're always evaluating industries, entrepreneurs, who's doing what. And they saw Detroit, they saw the auto industry. And what did they do? They bought stocks of autos and sold stocks of buggies. So the buggy industry was declining. The managers didn't even know why. And could the buggies raise money, get a bank loan to grow? No, because people said, look, the stock price is going down. We don't know exactly why, but it's a bad sign. So that industry shrunk. And that capital went to the auto industry, which expanded. And you could see that in America in the 1980s. A lot of what today Donald Trump and a lot of people, you know, we lost manufacturing jobs. Yeah, we lost all the crappy jobs, all the terrible jobs that we weren't making any money at. We shut down factories, we closed them down, we took that capital, and we did what with it? Because capital doesn't just disappear. What happened to that capital? It was invested where? The Silicon Valley. It's no accident that with a decline of what's called the Rust Belt was also the same time as the rise of Silicon Valley. The 1980s saw a decline in old manufacturing jobs where America was inefficient at, was not productive at, where labor costs were too high, and where people were not going to use the stuff anyway anymore. I don't know, like telephone cables. Don't use telephone cables anymore. And all that capital, all that money, all that value that was in that plant and equipment and in the labor shifted to Silicon Valley and created the explosion of growth that happened in the 1980s from Apple to Cisco to Sun Microsystems to Intel to all the other companies that we know just blew up in the 1980s. Where did that capital come from? It came from more efficient use in manufacturing. That's what finance did. Nobody, no central planner decided that. Imagine a bureaucrat going, oh yeah, Silicon Valley, that's where we should put the money. No bureaucrat has ever done that. Can do it. Central planners for reasons and Mises discusses extensively in his writings cannot make those kind of predictions. A really terrible edit. Even industrial planning at the scale of the Japanese or now China is really, really bad at it. But markets, financial markets, the allocators of capital throughout our economy are brilliant at it. So no, finance is not about paper shuffling. Finance in a sense is the most crucial activity in a capitalist economy. There is no more crucial activity in capitalism, in free markets than the allocation of capital. There's a reason why bankers make a lot of money. Now put aside the cronyism and put aside all that. But in capitalism, the J.P. Mogan's of the world in the days where there was a lot less cronyism, they make a lot of money because what they do is the most value-adding activity in all of capitalism. Libertarians love to hate financiers like everybody else. But that is a massive error that you guys make. Because this is how markets, free markets allocate capital. This is a free market that allows us to save and then decide who the winners and losers are going to be. But how do they decide who the winners and losers are going to be? Based on greed. This is great motivation. They decide who the winners and losers are going to be based on who is going to provide the highest profit long-term. Based on money. Making money. And this is fantastic. Because this is the only incentive that really matters in a market. And where, who is going to produce the most profits long-term? The people who are going to be most productive long-term. The people who are going to enhance our standard of living, our quality of life. Most long-term. The people, the entrepreneurs who are going to contribute most to the economy long-term. They are the ones who are going to get the capital because they are the ones who are going to maximize the profits over the long-term. So from an economic perspective, bankers, stock markets, hedge funds, private equity funds and all the rest of the financial institutions and markets, bond markets, are crucial, crucial to a functioning economy. And it's why they get compensated as much as they do. And even in our mixed economy today, even in the mixed economy today with all the chromism and with the central bank and the massive regulations and controls and limitations that exist out there on these institutions and markets, they still do a pretty damn good job allocating capital to where it's most needed. In allowing the shutting down of some industries to allow for growth of other industries to bring capital to where entrepreneurs are. Without these markets they are no entrepreneurs. And for the Marxists, I know there are no Marxists in this room, without entrepreneurs there's no labor. Labor is a consequence of capital. Labor comes after the capital. Somebody has to invest the money, buy the equipment, organize the company, figure out who does what and only then do you hire people. And then the people, the workers don't, you know, they get paid. The capital doesn't get paid until the company's profitable. Which in the case, for example, the biotech can be never or 10, 15 years later. And then people complain drug prices are high. People are making a lot of money. Yeah, they put their money at risk for 15 years. Now finally they're getting a little bit of return. You know, there is no reason to despise financial markets and institutions for economic reasons. Because they're unbelievably productive. They are crucial to everything that we do. So what is it that drives this hatred? Not partially it's ignorance. People don't understand economics. People don't understand where what it is the finance does that makes it possible. Think about the fact that somebody like Bill Gates or Steve Jobs can say, look, I gave you this. So I made a few billions of dollars. Would you have got this? The trade, the win-win trade relationship is more obvious. It's more perceptual. The financier says, what? You can't see what I gave you. I made this possible. But yeah, right. Steve Jobs when he was a little hippie with long hair and never took a shower. I don't know if you've seen the stories about Steve Jobs. He stunk. And he took a meeting with venture capitalists and he still wrote him a check. Wow, that takes a lot of guts to invest in a hippie. Right? But without those funds he says this wouldn't exist. But that's an abstraction. That's hard to see. You don't have a product in front of you. Finance doesn't provide you with a thing in front of your eyes. The entrepreneur can hide behind and say, see, I made it good for you. So part of the reason we hate finance is we can't see what they do and we have to have a certain understanding of what they do. And here I blame economists and intellectuals who shouldn't know what finance do. Who should understand finance and still condemn them in spite of that. So that most of the people are ignorant now for their own fault. Who are not ignorant, who are just bad people. Teach them this stuff. But that's a deeper issue and it's the same issue that I've often talked about in terms of capitalism or broadly. There's something about finance that morally offends. And something about capitalism that morally offends, but in finance I think it's even more there. What if finance is, what is their goal? What are they trying to do? What if a person walks up in the morning? No stock broker, no CEO of a bank or CEO of a Wall Street firm wakes up in the morning and says I want to make sure capital is allocated efficiently throughout the US economy. What do people who go to Wall Street want to do on a day-to-day basis? What motivates them? What are they about? Profit, making money. They're about making money. You know when the financial crisis happened a lot of people said it's greed on Wall Street. That caused the financial crisis and a friend of mine, John Allison who was a CEO of a bank said, that's right in 2007 there was greed on Wall Street. No greed on 2006 or 2005 or 1992 or whatever. It was a new phenomena. There's always greed on Wall Street. That's a job to make money. Greed here meaning a single-minded a Wall Street it's not about a product it's not about a particular service what you're trying to do is make money and it's naked you can't hide behind the product you can't hide behind anything else now by making money what are you doing? You're efficiently allocating capital throughout the economy by making money what are you doing? You're providing saving, a return on investment to anybody who saves anybody who puts some money inside anybody who invests in a mutual fund anybody who buys an index fund anybody who puts money in a bank so by trying to make money you're making the entire economy better off but you as an individual as an institution you are single-mindedly focused on making money and we don't like people who make money not who are obsessed about it that's what they want to do making money making money is self-interested it's greedy, it's selfish, it's bad and we condemn people like that morally, throughout history we've condemned people who believe that it's okay to pursue money as an end finance isn't just one species of all these people one type of a self-interested human being but they're the most because it's most naked you can see it on them you can see it in their activity and they make a lot of money they justify our distrust right? it's getting hot up here calm down and of course we live in a society that distrusts self-interest we don't like people who benefit the world by making themselves better we like people who in terms of morality, in terms of ethics nobility, virtue we like people who are what? who help the world by making themselves worse by sacrificing we love sacrifice now, again, maybe nobody in this room loves sacrifice and maybe nobody actually wants the sacrifice even out there but it's not what we actually want for ourselves, it's what we believe is good and noble, most people don't live the life that they think is good and noble they live a compromise most of the time they're out for themselves, most of the time they're trying to make money and doing business and trading and win-win relationships and all of that and then once in a while they think about and say, well I feel a little guilty because I should have been Mother Teresa that's what real nobility is, that's what real goodness is and that's a split within the soul of most people that is very hard and that's what leads them to often say yeah, yeah, I'm bad raise my taxes, it's okay, raise my taxes because I didn't help the poor enough okay, go after those financiers yes they're behaving just like me but yeah, with them it's obvious so go after them and I know lots of businessmen who say yeah, regulate me not just because they're trying to capture the rents but also because they feel guilty and they think they will cut corners and self-interest, it's not good so yeah give me a certain benchmark to start off with I'm convinced that Zuckerberg wants regulations not because right now, not because he wants a competitive advantage even though would give him a huge one, regulations would entrench him but partially because he doesn't want to worry about all this stuff it's complicated privacy is complicated on the internet all this stuff is complicated somebody can come and just give him a standard makes it much easier for him and he feels a little bit better, doesn't have to take the responsibility and people will view him better he thinks won't help him, he's too rich too successful nobody's going to like him nobody likes rich and successful people too much even when they start giving their money away we don't like them too much unless you're Warren Buffett I don't know if you know Warren Buffett he's kind of a he talks simple he's kind of a common man he plays to the people so we have this attitude to our self-interest bankers are clearly and financiers are clearly self-interested, they make money so we despise them you know, take central banks why is it that we trust Bernanke we trust, who's the guy now we don't trust Powell that much because because Donald Trump doesn't like him but we trust central bankers as a culture I mean, Bernanke is the hero of the financial crisis, he saved us I mean, I don't think history is going to be that kind to him but people think he was great and look how much power we've given central bankers I mean no financier in all of history has had as much power as the chairman of the Federal Reserve House today I mean, he can basically dictate the entire economy he has control over the most important price in the entire economy what's that price? price of money, price of time interest rates the quantity of money which is hugely crucial to every business decision in the entire economy, every savings decision everything everything is dependent on this quantity and the price of money which is controlled centrally by a central government and we trust them completely why? we trust them much more than we trusted J.P. Morgan a banker, an American banker who saved the US economy in 1907 and we hated him why? because Alan Greenspan and Bernanke and Powell and all these and whoever you knew what's her name, Lagrange the new European Central Bank they're all what is their motivation? what is the motivation of a central banker? it's a motivation of a central banker I mean not the real motivation what is the motivation presented to the world of a central banker? they're there for what? fairness fairness the common good the public interest they don't get a bonus they don't make money they don't get a percentage of the profits of the Federal Reserve which makes a lot of money by the way they don't make money what motivates them? oh, we just want to make the economy good we want to make sure capital is allocated we're good central planners we just want to make everybody happy we're there for the public interest, the common good and as soon as they say that we go okay, they might make mistakes they might do things wrong but their motivation is good their motivation is positive they're not in it for themselves that makes us feel nice warm and fuzzy makes us feel good about them those bankers though, they were all about making money they were all about greed they were all about themselves we don't trust them when J.P. Morgan saved the U.S. economy in 1907 five years later he was born in front of congress and the congress basically says how dare you make money while saving the U.S. economy you should have just done it from the goodness of your heart who gave you so much power as to be in a position to save the U.S. economy? I mean, he gave himself the power by being a really good banker no we're going to take this away from you we don't want private bankers to make these kind of decisions we don't want private bankers to be in a position where they have that much power we want to create a bureaucracy that has 100 times more power but is there for the common good and the public interest and therefore it's okay it's not about power it's about motivation self-interested motivation, bad public interest, good the general principle should be this anytime you hear people talking about the public interest and the common good run get as far away as you can I get greed I get self-interest I get people who want to make money I understand how you do that I know how to deal with them trade, offer them something they'll offer you something the only way they can make money is by offering me a value they don't offer me a value I don't give them their money I don't give them my money public interest, I don't know what that is I don't even know what the interest of this group in this room is do we aggregate it? how do we measure these things each one of us has a different interest do we have some common utility function up here? I mean we don't even have an individual utility function that you can measure how do we measure the common good the public interest, there is no such thing all it means is they're going to sacrifice me that's all I know when I hear public interest the common good, they're after me they're going to sacrifice me or anybody successful they're going to sacrifice the successful to the unsuccessful, that's what the common good interest is or they're going to manipulate things to help the group that helps them politically that's what it means so, to summarize finance is the most productive, the most important function within a free market it's despised and hated because it's nakedly self-interested unless we change our attitude towards self-interest and this is one of the many great contributions Ayn Rand makes to this whole debate about capitalism, about freedom about individualism unless we change our attitude towards self-interest unless we develop a positive moral attitude a positive moral view of self-interest financiers will always be hated financial markets will always be regulated and we will never ever ever have capitalism free market, let's say free market that I think most of us in this room believe in at the end of the day the battle that we all face is a moral battle it's a battle for a new morality a morality that it respects a morality that's focused on self on the individual on the individual's moral right to pursue his own happiness which in many cases means to pursue his own wealth thank you do you have some technical questions would you like to answer some questions particularly from Poles they always challenge thank you thank you so much for your talk I'm actually a banker on Wall Street so thank you so much for defending us I think it's incredible my question is where do you see the regulation going for Wall Street and overall financial markets after MIFFID and after all the regulation has been growing like I can see in my own bank the compliance team has been constantly growing and where do you see that regulation going you think there's going to be a cap where people realize that it's counterproductive in finance globally going I think it gets worse before it gets better it might get better at some point but for that you would need kind of a Reagan Thatcher kind of moment where some people who have some respect for free markets and understand the incredible damage in regulations due to markets you'd have to have them become popular and get into positions of power and I don't see that happening anytime soon in America and wouldn't even wouldn't be elected president today wouldn't win the Republican nomination I don't think he would even run because he was so hopeless right now I mean Reagan's attitude towards America, towards immigration towards regulation, towards generally the economy is so far into republicans today it's a completely different political party that I just don't see that coming on the other hand if you look at even Trump he has Mnuchin as treasury secretary Mnuchin is you know a heavy heavy hand at the treasury so if of all the regulations that everybody says Trump has reduced regulations the one area where they really haven't or they've done very little is in finance because they came in and said we're going to undo Dodd-Frank with this big regulatory bill after financial crisis they barely touched it a little bit for small banks nothing for Wall Street Mnuchin is a central planner he's a former chairman of Goldman Sachs regulations help Goldman Sachs there's no incentive for them to actually reduce regulations and this administration is not going to do it in the financial markets plus they fear the risks so the funny thing is that when the financial crisis happened and I often debated this I would say to people name what was deregulated I want a list of the things that were deregulated and they can't come up with anything because nothing under Bush one thing that can come up with there was this deregulation of Glass-Steagall under Bill Clinton not even under Bush and then I say show me one bank that was affected by Glass-Steagall that got into trouble during the financial crisis it turns out there's only one called Citibank but Citibank always gets into trouble so it's the most terrible bank in all of US history they can't make the connection but in people's minds deregulation of banks caused the financial crisis and therefore everybody's afraid to deregulate because they'll be blamed for the next crisis so I don't know when the day will come when they deregulate all over the world deregulation in England regulations were fairly good I mean relatively good relative to America before the financial crisis are much worse today in Europe your banks, I mean Western Europe banks are basically bankrupt I mean Deutsche Bank is a disaster the French banks are a disaster you bailed out Greece in order to bail out Deutsche Bank because Deutsche Bank owned all the Greek bonds but partially Deutsche Bank owned all the Greek bonds the governments wanted I mean one of the things that governments do with banks is they have this deal where you better buy our bonds and we'll count them as zero risk by the way, you don't have to hold any capital against them and so that whole convoluted system I just don't see it getting cleaned up anytime soon I don't see a political movement I don't see a political leader I generally don't see real movement towards free markets certainly not in financial I'm a tax advisor so I know very few trades hate it almost as much as people working in financial markets not really, not if you help me reduce my taxes the only thing I would tell you is unless if you're capitalism you wouldn't have a job so we can talk later but I find your speech quite pessimistic actually because I understand that the tendency of hating people working in financial markets basically people who want to make money dates back very very long time Shakespeare times and you say that we should counteract it but how I cannot see any way of changing people's attitude towards such people as such activity my talk is very pessimistic in my talks generally are quite pessimistic in that sense that to change the world is going to require much more than we are doing right now and to change the world means to change the world for lots of fear capitalism means to change our ethical code to change the way we view morality and I know because I've been here in Poland before that you guys resist this and people do all over the world I think we have to turn away from 2,000 years of our particular moral code which is inherently anti-finance and inherently anti-markets and inherently anti-capitals which is a moral code of sacrifice a moral code that views the good as that which causes us pain and suffering versus the good as brings us wealth and prosperity and happiness so as long as we hold an altruistic morality a morality of sacrifice we will not have freedom yes start with Ayn Rand start with Ayn Rand because she is the only thinker the only author that has presented us since our start that has presented us with a moral code that replaces the conventional moral code and unless we are willing to do that then forget it and in my view the biggest tragedy of the liberty movement for the last 100 years has been that they have not taken Ayn Rand seriously enough particularly in her morality not in energised around capitalism and so on you've got great economists to deal with capitalism but philosophically and without taking her moral view seriously in terms of self-interest we will not change the world out there it will always, it will go like this but it will always rebound against us because people will always feel the guilt they will always resent success they will always resent the self-interest of capitalists and financiers and business people so you need, you know I've got a book somebody has it here called Free Market Revolution in my view the revolution is not an economics revolution we've had great economists nobody's done a better job explaining free market economics than the people that we have already I mean it's not, we've explained it we need to do more, granted we need to get to more people but we've got, that's not the challenge what we need is a moral revolution and that's only Ayn Rand can get us and that's why there's Atlas Shrugged in the back there by Ayn Rand look, I don't know if it's in Polish is it in Polish? yes, read virtue of selfishness that's the moral revolution right there and unless we're willing to embrace that we lose so as I understand regulations will collapse actually in somehow the market, I mean financial market so less and less money will stay there and money usually they want to be invested in places where they feel good and can multiply so in this moment as we're collapsing for example Wall Street where those money will go how do you think? well, I mean that's the big question where does the money go and right now if you look at what the politics of it is where the money wants to go where the politicians want the money to go is to Washington you know, government it's to the growth of the U.S. government I mean Elizabeth Wan, Alexandria Ocasio-Cortez the Democratic Party generally has plans to spend, to consume government spending is consumption it's not investment, it's consumption they want to consume trillions and trillions of dollars well in healthcare on a green new deal on all kinds of stuff they have great plans to take all their money through a wealth tax and by the way what does a wealth tax do it reduces the amount of money that goes into financial markets because who puts money in financial markets? the rich because the rich don't consume they save so they want to reduce saving and increase government consumption so the money is likely to flow to government the other thing you're seeing I think globally one of the reasons interest rates are so low in the world today I mean put aside central bank manipulation because that's part of it but there's also another aspect for why interest rates are so low that is in my view because the investment opportunities there's a shortage in good investment opportunity there's a shortage in entrepreneurs and if you're in Silicon Valley today it's relatively easy if you have a good idea to raise capital the challenges are not enough people with good ideas there's more capital than there are good ideas so now that I think is a consequence of statism of you know people being trained not to be entrepreneurs not to innovate not to think for themselves it's a consequence of bad education you know it's a consequence of the fact that there's still parts of the world that are very very very authoritarian but right now we have a shortage of I think we still have a shortage of good investment and that is only going to get worse because as government grows they're going to suck out people are going to have less ideas the other thing the regulation does one of the things the regulation does I'll give you an example I'm a strong believer that if we didn't have regulation on biotech for example we would have today technologies that would extend life significantly that we would be living well into our hundreds today if not for the FDA the Food and Drug Administration in the United States so the FDA has basically said they will not approve drugs that extend life so if you're a venture capitalist and I have a great idea for a drug to extend life are you going to give me money? No, because it's never going to be approved I'll make it in Mexico well but the risk has gone up dramatically and I'm going to give you less money because in America you won't be able to sell it so what regulation does is it limits the amount of investments we can do like Elon Musk has this drilling machine have you seen this drilling machine that builds these tunnels it's really amazing and it builds tunnels really really cheaply but who are the only people who build tunnels who are allowed to build tunnels we think of building tunnels governments but imagine if that was all private and suddenly you had an investment boom into building tunnels but you're not going to get that so regulation limits the possibilities of investment and therefore I think today there's a shortage of investable opportunities that's why not only are the government controlled by the interest rates low but generally the yield curve is flat there's very little competition for the dollars that are available to invest and in this curve I understand that we're going down but in some other because it's still so what will happen when it all collapses? no all savings which will not because as a smart people smart people will not invest in economies which will collapse so they have to invest somewhere else or just bury it in the backyard which a lot of people are doing and I think when the collapse happens that's the first instinct is to hold because you don't know what's coming and gold is a nice way to hold because it has some inflation protection but that's the real dangers is people stop savings but that's a doom and gloom but I think you're seeing more of that you're seeing more people looking for safety or you will see that when the collapse happens which means bad for investment and entrepreneurship I've got a question why do you think so many Austrian economists past and present who should be advocates for freedom and capitalism are so adverse to fractional reserve lending by banks? because they don't understand finance I think it's a mistake to be adverse to fractional reserve banking again as long as it's not fraud it's told when you deposit the money that there's a possibility that under some things you won't be able to get the money back it's a contract there's no fraud involved yes there's some economic argument that fractional reserve banking gets the growth and the contraction of the money supply is out of our control it multiplies okay but that's what markets are they're not in your control and Seljina White have done some good analysis to show that that is not a threat that it's stable over time that it doesn't create kind of the business cycle as described you know I think I would say personally I think that some of them I think that generally in Austrian economics in the modern Austrian economics I don't think this is certainly not true of the original Austrians and all the way to Mises but I think in the more modern Austrian economics there isn't disdain a certain mistrust of finance and a certain lack of understanding of finance I mean one of the things I find frustrating is that Austrians don't talk about finance but finance is crucial to economics and to understand economics I mean we talk about interest rates in economics an interest rate the interest rate is going to be this or the interest rate is going to be that but in finance I'm a finance guy right there is no interest rate there are many interest rates especially if you're talking about the short-term rate or the long-term rate the risk-free rate or the risky rate and what you know all of that needs to be adjusted you can't just use one interest rate now in economics we have to abstract a little bit because we're dealing with big concepts but I think there's a certain mistrust of finance I think there's an ignorance of finance and I think there's even at the moral level there's a certain about finance among some Austrians now I'm a huge admirer of many Austrian economists not all of them so I think they make other mistakes as well some of them right but no, a fraction of reserve banking is fine it's morally fine because it's voluntary it's a transaction, you know exactly what you're doing even today when you go to the bank and open a bank account in America it says there's certain circumstances where you do not get your money back okay I'm taking a risk so what, if I know it it's not fraud and if it's not fraud it's an economist to tell the government to ban a certain activity I thought that's what we were against I thought we were for freedom so if I want to give a bank money and take the risk of not getting it back if there's a run on the bank then it's my business it's not your business it's not the central it's not the government's business so there's no issue of fraud yes oh that way I wanted to ask you about what do you think the causal relationship between bad business practices and the regulation is are bad business practices a result of regulation or is it vice versa I think it's both so there's no question that sometimes businesses behave badly I mean sometimes we behave badly as individuals sometimes businesses behave badly politicians then use the bad behavior of businessmen to regulate them the regulations now create all kind of weird incentives that often lead to bad behavior that then is not blamed on the regulation but we've behaved on the behavior which leads to more regulation which then continues to circle so I'll give you an example most when you look at in the late 1990s the early 2000s there was a lot of fraud in certain businesses in the United States I don't know if you guys are young but there was Enron and WorldCom and Enron was very very famous but there was like five or six big businesses that had committed accounting fraud all pretty much at the same time it was like see this is what happens and they were all in industries that were so called deregulated they all happened to be in the same basic set of industries that were not dealt with telecommunications or energy but they were all very heavily regulated but the perception was they'd be deregulated and one of the things that if you really study these companies you discover is that the skill set because they're so heavily regulated the skill set of a CEO changes in a regulated industry versus a non-regulated industry the primary skill of a CEO let's say in Silicon Valley which is a relatively low regulation place what is the skill set of a technology CEO what is the most important thing that he'd be able to do innovate run a company run a technology company figure out ways to make money manage people well so his whole orientation of a CEO in a company in a free market business, profits managing a company long-term well what is the orientation of a CEO in a regulated industry meet the legal requirements or change the legal requirements that is capture the legal requirements manipulate the politicians in your favor what happens is the kind of CEO is a different kind of person the kind of person who runs a company well in a free market is not the same person who runs a company well in a regulated market in a regulated market you need to be a politician you need to be able to schmooze with politicians you need to be able to manipulate politicians you need to be able to be nice to politicians you need to be a schmoozer a social animal that villains in Iron Rans out the shrugged they're the kind of CEOs who run regulated businesses they run them quote well in the sense that they capture rents in the sense that they make the politicians leave them alone so if you look at Enron for example Enron was fascinating because Enron during the 90s if you just follow the stories of the Enron CEO chairman of the board they were huge friends of the Bushes they were all the best parties they were in Washington DC often or in the state house in Texas often they spent more time schmoozing politicians than running the business and they got they developed a certain arrogance around that so you know we fudge their counting numbers a little bit but we know important people so everything will be fine and so many of these companies that was the tendency even some entrepreneurs who in the beginning of their career were real entrepreneurs got to a point where they had to deal with Washington every single day because that was their business got corrupted by that fact and whereas during this period no companies in Silicon Valley committed fraud except for one I think but there was almost nothing going on there it was all in these heavily regulated industries because that supports it so it goes both ways it's usually an excuse the food was not healthy or whatever right the meat had bacteria in it so we regulate the meat but now that you regulated first of all you're looking for loopholes secondly you become the kind of company that I just described so it's a self-fulfilling kind of circular process somebody have a microphone hi Roman Wozarski thank you for your lecture very interesting things you said there especially about the the worship of the sacrifice and we sacrifice ourselves for somebody else gain nothing and we worship that that's definitely wrong but I don't consider sacrifice itself as something wrong because definitely to make money to become a capitalist to succeed in anything you have to you have to sacrifice only you sacrifice in an individual dimension right obey certain order and etc etc and my question is basically on something else but can I answer that question before you get to that because I disagree with you so one of the ways in which they get us to embrace this morality of sacrifice is by diluting the word is by changing its meaning what you do in a business is not a sacrifice you do not sacrifice sacrifice in a startup you do not sacrifice your money when you invest it or save it that is not a sacrifice because what are you pursuing when you're pursuing when you work really really hard in a startup and you stay up really really late and you never see your family and you're really working hard why are you doing that because it's the most important thing to you it is otherwise you wouldn't do it it's the most important thing to you so you're not giving up sacrifice the meaning of a sacrifice giving up something really really important for something less or nothing if I you know if I buy an iPhone for a thousand dollars I'm not sacrificing a thousand dollars to get an iPhone that's a distortion of the word because I'm getting something in return of higher value than what I gave up you're giving up by working in your startup you're giving up something really important let's say but you know what the reason you're doing it is because at that point in time your work is more important to you than your family and if it's not stop doing it go back to your family but you recognize that long term you will be able to take care of your family you will be able to take care of yourself and your joy and your happiness are dependent on you working hard really right now and that is not a sacrifice when a basketball player doesn't take the shot because another player has a better shot than he's not sacrificing he's winning he's engaging in activity that leads to him winning because he values the team win over his personal statistics because at the end of the day he's going to be judged about whether he's a winner or a loser and passing the ball so it's not being selfish to take a stupid shot when you're not going to make it I know you guys watch basketball when you're not going to make when you're going to make the shot that's not selfish, that's stupid the selfish thing is to pass the ball so you can win and that's not a sacrifice so we use the term wrongly sacrifice is giving up something really important to you for nothing or for something less important that's a self-sacrifice what you do at work that's not a sacrifice not really it's the delusion of the term in order to make the real sacrifice palatable to you alright thank you another question is about money the value of the money because I'm looking for these factors that stand nowadays behind the value of money what in your opinion is the main factor deciding on money value or is it pure power now or what is it well once you have fiat money and once you have government what stands behind the value of money is the government the fact that the government takes it in as taxes is willing to accept it as taxes and the fact that legal tender laws make it the way in which you pay your debts you pay your debts in dollars or your local currency because the government says so right and at the end of the day the value of the money which means what you can buy for it the value of money is what you can buy for supply and demand for that money by what we want to do with money and by what the federal reserve the central bank is doing the more it prints the less valuable it becomes right and the more it constrains the amount of money the more valuable it becomes because the more stuff it can buy the more demand there is for it so it's basically a very complex story about supply and demand both our demand to consume to invest our demand to save but also the supply that the federal reserve provides and the price at which it is willing to provide but in terms of what gives value to this five euro piece of paper I mean the governments that stand behind it and because it's governments to some extent what this is worth is random it's dependent on the whim and that's the sad state in which we live you know in a large effect capitalist world money would have to be backed by something real and would be issued by banks or by anybody I know it doesn't matter that it would have to be backed by something and this would be you could take this and exchange it for the thing that represents money traditionally usually gold but that's real money this is we call this fiat money because it's kind of not really real it's pretend money but it functions as money because it's all we have because the governments have given us no choice I can't see if anybody has a microphone Tomasz Wastczyk thank you for a great talk and I would like to ask from the CFA point of view ask what? I'm sorry CFA they send the information that the area of low interest rates will continue in long term what do you think about the interest rate within 10 years whether they are going to rise or not maybe 20 years maybe 20 years maybe 20 years within 20 years 20 years wow I mean I don't know what interest rate is going to be tomorrow never mind in 20 years but look negative interest rates is the dumbest policy in human history no marketplace would ever create negative interest rates yeah but I agree but from the point of view of central banks it's good when they are low well it's not clear that it's good because it has to lead to disaster it can't every action has a consequence and when you do an action that is so perverse and anti-markets and the opposite of what a market demands when you are creating a crisis down the road and the negative interest rates are going to result in some massive financial crisis down the road I don't know when if I did I'd make a lot of money I don't know exactly how it's going to manifest itself but the fact is if you're paying people to borrow money the crisis is going to happen right here when I fall off the stage if you're paying people to borrow money what are they going to do and you're seeing that primarily governments are borrowing huge quantities of money to some extent corporations are borrowing large amounts of money and individuals are borrowing large amounts of money at some point they won't be able to pay it off and then you'll get a ripple effect so because at some point interest rates will come up because otherwise you'll get inflation and it looks like while central banks love 2% inflation this magical number of 2% that they worship you know they will have to raise rates if inflation gets higher than that but again I don't know how I mean one of the things about the financial world right now in terms of interest rates and so on is they created such a distorted perverted complicated world that it's very hard to untangle everything that's going to happen I mean the new central bank of European central bank that's coming in she wants to do helicopter money you know what helicopter money is the problem with the way money is distributed today into the system is it goes through the banks into the financial markets drives up the value of financial assets and all the inflation is manifest in assets and the underlying inflation which they think should grow at 2% doesn't budge so she says the way to get inflation up the way to get the way to reduce the quality to get economic activity going to get consumption going they worship consumption that's the other thing they worship consumption they think consumption drives the economy again the opposite of the Austrians right they think consumption drives the economy is to get the money into the hands of consumers instead of into the hands of banks so the way to do that is you know to drop money from helicopters now they won't literally drop money from helicopters but imagine you know UBI would do this or something like a universal thinker imagine they just send everybody a check for a thousand euro every everybody in Europe gets a check for a thousand euro okay so you have mentioned about the UBI so I need to to ask last question yeah and do you think what do you think about the idea that the low interest rates are just tool to powerize people massively worldwide and do what to people to maximize to make them poor yeah so once more time thank you for a great talk so interest rates you mean negative interest rates so negative interest rates are means to turn people poor now I don't believe that I believe that negative interest rates are tool to facilitate more power in the hands of the people who want power primarily central bankers and central governments I think negative interest rates are a symptom of the sheer ignorance of most economists in the world today who have no idea what's going on I think negative interest rates are an act of desperation on the hands of central bankers who fear the thing they fear most than anything else is a recession and a recession would actually be good because recessions clear out the garbage and one of the big problems of the last few recessions is we've not allowed the garbage you know all banks will bail out in America instead of letting them go some of them go bankrupt auto companies in America will bail out many industries will bail out Greece was bailed out so the thing they they resist is the market mechanism which is a recession to clear out the malinvestment to clear out the garbage to clear out the bad investment and negative interest rates facilitate more bad investments and the continuation of bad investments so I think it's a sign of how bankrupt and incompetent and stupid and power-lusting they are because the more power they give to the market the weaker they are this is a way to limit the market's power you know Japan in I think it was 1991 Japan had a big stock market drop and really has never recovered has been stagnating since then they've had stagnation and I'd say the biggest reason why the Japanese economy never recovers because it doesn't allow bankruptcies it doesn't allow people to go out of business it doesn't allow companies to fire workers so it's stuck at the 1991 level of employment of companies and it's all locked into that and you don't get what Shumtetsu called the creative destruction that comes from some companies going on a business and new companies being born and capital flowing from the bad what I said about the 80s where capital went from the West Belt to Silicon Valley that can't happen in Japan it's all just static Europe is becoming more like that and America America is becoming more like that yes America wants to be Japan and Europe wants to be Japan and now it looks like China wants to be Japan so yes the Japanese model is dominant partially because people think oh it's stable and partially because people don't get it people don't they don't want uncertainty involved in bankruptcy in capital being reallocated in people laid off they don't want the social upheaval of people losing their jobs what they want more than anything is stability and safety and it's not just the politicians unfortunately it's us it's the people we want stability and safety and if you want stability and safety what are you giving up wealth, prosperity, progress and happiness you can't be happy with safety and stability so you're giving up all the good stuff and that's what I think central banks are trying to achieve so it's not like the rich people get together in some castle somewhere in Europe and say oh we want to make the world poor so let's raise interest rates no it's much more incompetent than that I mean I don't think conspiracy theories work because I don't think the people who hey I don't think people are that quite that evil but also because they're not that competent central planning doesn't work conspiracy theories are massive central plans which don't work so it's more incompetent it's more preserving power and doing what short term will preserve power than it is trying to make the world poor on purpose ok last question here hello I'm Maxim Kowarski and I have a question I hope you agree it's easier to change a person's mind on economics than on the subjective fundamental values therefore if we try to change a person's mind on their values and try to make them egoist and then promote capitalism I think we're scaring them away and I agree that capitalism is inherently egoist as egoism is a self preserving behavior but shouldn't we present capitalism as a means to come on good so as a means to more wealth wouldn't that be a better way of achieving our goal so free market capitalism thank you no and that's how we'd be doing it that's how everybody does it except me everybody does it that way everybody presents capitalism as good for the common good for the public interest it's all utilitarianism from the Austrians to all the great economists that presented this over and over again and it is in the common good and it's obvious that it's in the common good in the sense that common means good for individuals that make up the common and all the evidence in the world is out there that it's good economically it creates wealth, it creates prosperity much better I mean everybody can see it North Korea, South Korea, we've all done the example Poland under communism Poland today it creates enormous amounts of wealth we all know that everybody on planet earth knows it deep down in some way they know because if not they're the biggest liars in the world and they're lying to themselves they know even Elizabeth Warren knows more than anybody maybe Bernie Sanders, all these people know that if you want wealth if you want quote the common good that's the best way to do it they don't care they don't care morality trumps economics every single time and it's true you can convince some young people and I've seen this the liberty movement is dominantly young people and you can convince young people of economics and then they go off and they leave their students for liberty or they leave their things and they go off into the real world and they have a family and the morality kicks in later they're all kind of middle of the road centrist or maybe even socialist because people are not driven by economics you're not going to change their mind over you'll change their mind for a little while but not over lifetime but if you can get them on the morality the economics is easy and if you can get them on the morality they're probably yours for the long run and the economics is I mean again I don't think it's hard oh you have to have his eyes go to Hong Kong I mean Hong Kong a few months ago I mean it's tragic does anybody everybody knows why Hong Kong is rich everybody knows why Hong Kong is rich no natural resources there are no excuses why a status would justify the wealth of Hong Kong like America they say oh we exploited people in America we had natural resources to rich country bullshit but ok Hong Kong has nothing except freedom and it became the richest I mean on a per capita basis richer than America with nothing except freedom so all you need is eyes and a bit of a mind and look around the world and see what works and what doesn't and you should be a capitalist that hasn't worked and it won't work and it can't work because as long as you're pulled in another direction as long as you say yes they made money but it's evil inequality is high who the hell cares about inequality but everybody cares now about inequality so inequality is more important than the common good wealth creation freedom all of that why is inequality more important because the needy are needy and you have to sacrifice for them that's what the morality demands and who are you going to sacrifice well the people who have to the people who have not and that's what every status does the people who have sacrificed to the people who have not or sacrifice the people who are not like us to the people who are like us the racist version or the class version is the people in the upper class to the people in the working class it's always sacrificing some to others and you can't get out of that because it's a moral argument there is, I mean let me end with this there is no economic argument for statism there is no economic argument for statism or Krogman is not a real economist Stiglitz deep down is not an economist Thomas Piketty is a lying deceiving something but not an economist there is no economic theory in Dutch capital for the 21st century there is data data that when people look very careful at it was manipulative was not clean was not right, was not good these people are not honest because there is no economic theory for statism we won that argument Mises won the argument it's over so where is the problem it's not an economist somewhere else, thank you