 Our next speaker is Dr. Patrick Newman, and I mentioned earlier how much of an honor it is to work at the Institute. One of the most rewarding aspects of it is seeing, you know, not only being able to have the opportunity to learn from great scholars like Dr. Salerno and Dr. Bellarezzo, but seeing the new generation of Austrian scholars rise. We have tremendous talents really all around the world now that have gone through our academic programs, and Dr. Patrick Newman is certainly one of them. He is a fellow of the Mises Institute, an assistant teaching professor of economics at the University of Tampa. He is the editor of Murray Rothbard's Conceived in Liberty, the New Republic, 1784 to 1791. He was able to interpret all of Rothbard's writings, which, if you haven't been to the Institute and seen the archives and seen some of those notes, will give you a great appreciation for the size of that task. He is also an editor of the Progressive Era. In his own work, he is the author of Chronyism, Liberty vs. Power in Early America, 1607 to 1849, and he is working on a sequel to that, dealing with liberty and power in the rise of the corporate estate. So our next speaker, Dr. Patrick Newman. Hello, everyone. It's great to be here. I'm so glad you're here. I want to thank the Schrader family for hosting this event, because it's so great to have events in Tampa and in the greater Tampa Bay area, and it's so great to see so many people here at these events, to see people supporting the Mises Institute, to see people who wake up and they say, it's Saturday morning. I'm going to a conference on monetary policy. That's how we really know we're a special group here, so it's a bravo to everyone. So the title of my talk is the redistributive effects of monetary policy, and this is what I want to discuss, especially in reference to over the past couple of years. So I want to start with an opening quote by Murray Rothbard from, what has government done to our money? Inflation confers no general social benefit. Instead, it redistributes the wealth in favor of the first comers and at the expense of the laggards in the race. Inflation is, in effect, a race, to see who can get the new money earliest. I think this is a great quote, and this is really what I want to emphasize today. Inflation traditionally is defined as an increase in prices. Rothbard defines inflation, in my opinion, correctly as an increase in the money supply that causes the rise in prices. And unfortunately, Austrians have lost that definitional battle, so this is why sometimes we talk about monetary inflation, in-price inflation, but we can't lose sight of this fact. To be fair, not all increases in prices are caused by increases in the money supply. You can get decreases in the supply of goods, and this is of course what a lot of people spoke about in COVID, but no one really talks about the money supply. Yeah, there are some monetarists, but it's really the Austrians who only still talk about the money supply, and no one really blames the Federal Reserve for inflation. Inflation is always something that the Fed has to combat. It's always this independent entity that the Federal Reserve has to tackle. It's never something that the Federal Reserve directly causes. So today I want to talk about why inflation is a hidden tax that redistributes wealth from the late receivers of the money to the early receivers of the money. And I also want to talk about who have been some of these real-world winners and losers from the Fed's massive money printing during and after COVID. So just to go through some basic statistics that we'll get into more. From the end of 2019, the before times, hopefully we all remember those days, to mid-2022, the Fed increased the money supply by $6 trillion. The Fed in the banking system that it controls increased the money supply by $6 trillion. That's about 40%. It's a 40% increase in the money spites, massive. Huge increase over the past two, you know, during those two years roughly. And this increased the demand for goods and services overall spending by 17%. In prices of consumer goods and services rose by 14% during this time period. And it hasn't ended. The money supply has declined. But people are still spending away their enormous excess cash balances. Just this Tuesday, the Consumer Price Index, the CPI, came in hotter than expected at 3.1% year over year. So we're not back to the highly-vaunted at 2% inflation target, not just yet, at least according to the CPI. In the spooked markets, since 2019, up till the present day, consumer prices have risen by 20%. Another way of putting it is your life is now 20% more expensive, right? Some prices have risen more. Some prices have risen less. Food costs are up 26%. That includes food at the grocery store. That includes food at restaurants. Housing costs are up 22%. Okay, so new homeowners, they've of course had to postpone their purchases. Utilities are up 31%. Gas prices are starting to increase again. Car prices have increased 26%. Now according to Paul Krugman, food, gas, cars, rent, none of that matters. But for your average person, they certainly feel the pinch of inflation. And everywhere we see, prices keep going up, up, up, up through hidden fees, smaller product sizes, higher insurance costs, you have to pay more to get the same quality at a restaurant. We've all seen this. This is the hidden stealth inflation. Now you might say, well, has an inflation, at least judging by the CPI gone down from it's high of 9% in mid 2022? And we haven't entered a recession yet. We can talk about some factors that the economy's deteriorating, but still there's no recession aren't we headed for a soft landing? Plenty of people are working and so on. So why are people complaining? Consumer sentiment's low. People still have on average a sour view of the economy and of their own living situation. And this is a surprise pundits who, you know, they talk about the end of inflation and why inflation isn't that big of a deal. The reality is it's people are complaining because we all know that a big redistribution has happened. Nominal values have gone up. Nominal wages have gone up. Nominal incomes have gone up. Nominal salaries have gone up, but prices have also gone up and it hasn't been equal. Some of us are richer while others of us are poorer. For the Austrian economists, inflation, this monetary expansion causes short term and long term adjustments. Money is never neutral, as Ludwig von Mises always emphasized again and again. For many mainstream economists, money is not neutral in the short run, but in the long run everything's fine. But for the Austrian economists, it's short term disruptions and long term disruptions. And that's because only Austrian economists really analyze this monetary adjustment process in a step-by-step fashion, tracing out how an increase in the money supply affects prices, wages, incomes, and profits unevenly. So let's return to our opening quote by Murray Rothbard. Why does money printing redistribute income and why is it a race to get the new money first? Because those are the people who benefit. When the government increases the money supply, say through a central bank that engages in credit expansion, it engages in open market purchases, buys bonds, and so on, not everybody gets the new money at the same time. Instead, it's injected into a particular sector of the economy first. When the Fed buys government bonds from a bond dealer, the bond dealers get the new money first. When a bank makes loans to a borrower, those borrowers get the new money first. So those are the individuals who benefit. These individuals, those businesses, and so on, they get to live it up. Their income has gone up, and so will their spending. An individual will take out a loan to buy a new house, or a car manufacturer will take out a loan to expand their production facilities, and so on. As they spend the new money on goods, the demand for those goods increases, and that pushes prices up. The money is injected in one sector of the economy first. So the incomes of the early receivers increase more than the rise in prices, or the initial rise in prices. They're pushing up prices, but it's not enough, or it's less than the rise in their income. So we say as Austrian economists that their real income, their income adjusted for the rise in prices, goes up. So these are the individuals who benefit. But the story doesn't end there. The money keeps filtering, it keeps getting spent, it percolates throughout the economy, from the early receivers to the middle receivers. Today maybe the workers who are building the new house, or a rubber company that the car company is now buying more tires from, or something like that, they get more income for their products, and so they are also going to increase the demand for the goods and services that they desire. And this increases overall demand for goods and services further, and that drives up prices. And overall, we could say that the incomes of the middle receivers increase roughly the same as how much prices have been rising. So their real income remains the same, it's a wash. The early receivers are benefiting, the middle receivers, they kind of break even. So who suffers? Well, it's the late receivers, the people who get the money last. And they've had to pay higher prices during all this time. They might not get a raise for several years, but they still have to go to the grocery store, pay a higher price. They have to pay higher prices at the gas station. They have to pay higher utility prices, higher rent, and so on. We can think of this generally as teachers, the elderly, the homeless, others on fixed incomes, and so on. Their incomes increase less than the rising prices. So who are the winners? Well, the winners are those people who receive the new money first, as Murray Rothbard mentioned. And as well as the people who are now producing the goods that society is spending more of their money on. We can think of this as the banks and the bond dealers that work with the Fed. These are generally the politically connected financial elites. We think of Wall Street and their various clientele and so on. And so who are the winners? I mean, we just went through the winners. Who are the losers? Well, the losers are the people who receive the new money last, and those people who are producing the goods that society now values last, and they're spending their money less on. And generally, this is the middle class and the poor. So now we see why people don't like inflation. And that's because inflation is a hidden tax. Rather than the government just raising taxes, they printed money. The effects, though, a redistribution of resources and incomes and so on, it's still the same. People know they've been fleeced, but they just don't know the specific process. You have to take an economics course for that and really you have to take a good economics course for that. And those are in short supply, unfortunately. So there's a great quote by a former Fed chairman way back in the day, William McChesney-Martin, and he said that inflation is a thief in the night. It's a great quote. It's a thief in the night. You wake up in the morning and you see your TV's been stolen. You know something's been stolen from you, but you don't know who did it. Now, I think a more accurate quote is the Federal Reserve is the thief in the night. But it still captures the fact that there's been this redistribution. People are poorer because of inflation. So these are the so-called canteon effects, as Professor De Lorenzo had mentioned, our earlier speaker. These are the relative changes in prices and production, and it benefits the early receivers at the expense of the late receivers. This is the tax that everybody knows exists, but no one really knows how it works. So now what I want to do is I want to show this empirically. Having these redistributive changes can be tough because most of the government's statistics are highly aggregated, and that you might say is by design or by the macroeconomic theories. Frederick Hayek, F.A. Hayek, in a scathing review of a Keynes book, he once said, Mr. Keynes' aggregates conceal the most fundamental mechanisms of change. It's a very Austrian, it's a hard-hitting quote. It's a very Austrian point. The aggregates often conceal the relative price in production adjustments, right? All the various changes going on, especially looking at credit expansion and so on. It doesn't make sense to just look at the price level, so to speak, or just look at aggregate incomes, so on. And the government really doesn't keep a lot of the, quote, Austrian statistics, such as how changes in the money supply move from one group to another. Maybe it's because they don't want to implicate themselves, but we'll give them a more charitable interpretation. All right, so with that being said, let's try to look at how the monetary expansion and the resultant rise in prices has redistributed income post-COVID, right? So remember, from 2019 to 2022, the Federal Reserve and the banking system increased the money to buy by $6 trillion. There's going to be a quiz on this at the end, so hopefully everyone's taking notes, right? So who got that $6 trillion? It wasn't me. I don't have anywhere near $6 trillion. And where that $6 trillion end up, right? Well, one recipient, and this might come as a shock to my current audience, one recipient was Uncle Sam. The federal government got a large portion of that new money, right? Uncle Sam's cash balance at the Federal Reserve increased by $1.5 trillion through the first quarter of 2021, all right, $1.5 trillion. Up to that time, that was roughly 40% of the increase in the money supply, right? Now, it can get a little bit hazy because the government has sort of clouded how exactly I got that money, then how it spent it. But we all know that during this time period, the government was, there were multiple stimulus checks, certain individuals could get more than $3,000. There was the Paycheck Protection Program to make loans to struggling small businesses that really just went to large corporations and very wealthy partnerships of doctors and lawyers and so on. And everything else that the government spends their money on, right? Now, why do I mention the first quarter of 2021? Well, unfortunately, as Joe Salerno has pointed out in a January 2021 Mises Wire article, the government stopped tracking the federal government's cash balance at the Federal Reserve. The last date was the first quarter of 2021. And a couple of economists wrote that they said, well, this might give the impression that the Federal Reserve is financing the government's deficit. OK, all right, maybe there is a connection there, right? So fortunately, there's other data. As Jonathan Newman, so another fellow at the Institute, we're not related, but we are intellectually, right? In a February 2024 Mises Wire article, so this is relatively brand new, he looked at the relationship between the money supply in the net worth of the wealthiest, right? And in saying that historically, over at least 30 years, there's been a relationship to this. So I found this was a great article and I wanted to look at the data a little bit more. So the Federal Reserve does release quarterly distributional financial accounts. Again, there's going to be a quiz on this, hopefully everyone's going to know. And it shows changes in the balance sheets of America's ultra-wealthiest, wealthy middle class and poor, right? So the richest 1%, right, in terms of either income or wealth, how they break it down into both, then the next 10%, right? Then you get the middle class, then you got the bottom 50% and so on. And just as Austrian economists and just also general economic knowledge, we know that there's a lot of flaws with income statistics, right? There's income mobility is really more important. Do people move from the brackets from poor to rich? And we also know that the rich getting more wealth or more relative wealth isn't per se a bad thing, right? You can make a lot of money by producing goods and services that people value, right? We would say that those individuals should get relatively more money. And there are a lot of hardworking, high earning individuals and families, right, that are producing goods that society values tremendously, right? So driven by the market, these changes are good. But of course, what we want to look at is driven by the government. Are individuals getting special privileges or certain groups getting subsidies? We could say in this, in our case study right now, from the Federal Reserve's credit expansion. Something that is also very interesting digging through this data, the distributional financial accounts shows changes in the relative shares of money in checking deposits, right? Because that's an asset. People can store their wealth in the form of a checking deposit. It's not a perfect way to measure the distribution of the money supply because of course, people could be selling stocks for money and so on. But I think it's good enough for our purposes, right? And so what do they show? Well, the share of checkable deposits and currency, really checkable deposits of the top 1% wealthiest families increased from 19% of all checking deposits at the end of 2019 to 31% in the first quarter of 2022. Roughly right before the Fed started, you know, stop printing the money, so to speak. So their share of the checking deposits went up by a significant amount, right? On the other hand, the share of the bottom 50% decreased during this time from 10% to 6%. And you might be thinking, well, wait a second, didn't a lot of poor people get stimulus checks and so on? And that is true. But there was also quantitative easing, right? Which generally benefits the wealthiest businesses, the wealthiest banks, the wealthiest individuals, and so on. And that really swamped the getting a $3,000 stimulus check, might be a lot of you aggregated for all of these people. But it's even more money when the Federal Reserve is buying bonds and everything under the sun from all sorts of banks and businesses and so on, right? And so we can see that while at least judging from this, the early recipients were the very wealthy, which generally we can imagine is the politically connected wealthy and elites and so on, right? So then, all right, we can go through the spending process and seeing, you know, how those individuals spent the money. And this is where it gets harder to look at the data because the government doesn't really keep track of this. But we can at least look at how it affected wealth, or sort of our measure of the long term. And once again, there's statistics, you know, there's more than going on than just in the distributional financial accounts. So there's, you know, there's not just monetary policy. But here's a recent article from December 2023 from USA Today that is using these distributional financial accounts. Here's the title, right? The top 1% of American earners now own more wealth than the entire middle class. And this is a switch that happened during COVID. The top 1% of American earners now own more wealth than the entire middle class, right? So from 2018 to 2023, the share of the middle class wealth, right? So it's above the 20th percent quintile, so not the bottom 20% earners, and then it's below the 80th percent. So it's kind of like the middle, right? The middle of the pack, individuals in terms of how much wealth they have relative to others. Their share of the wealth, the overall net worth, decreased from 26.5% to 25.8%, right? So about a percentage point, and the 1%'s wealth rose from 24.4% to 26.5%. So there's been some changes in the other brackets, but really it's been this flip where the middle class now own relatively less than the top 1%, okay? So from 26.5% to 25.8%, right? A little bit less than a percentage point, the 1%, right? They got that, 24.4% to 26.5%. I thought that's very revealing actually, right? So prices have gone up, incomes have gone up, wages have gone up, wages have gone up for entry level jobs and so on. But it looks as though the change spending patterns in income reallocation as a result of this massive expansion of the money supply have benefited the richest the most, right? And it's especially more skewed for the 0.1%. So the richest of the rich, the crème de la crème, right? The wealthiest of the individuals, right? Okay, so then what's been going on with the poorest Americans? The Americans who live paycheck to paycheck, right? How have they been dealing with the inflation over the past couple years? So I use an article from the Federal Reserve, the Federal Reserve Bank of Dallas, January 2023, some economists at the Federal Reserve wrote one of the good articles, right? And this is quote, high inflation disproportionately hurts low income households, right? That was the title of the article, high inflation disproportionately hurts low income households. And, you know, the article goes through this, it doesn't talk about canteon effects or any of that, but they mentioned things that are true. These families spend more on necessities, so it's harder for them to switch to cheaper substitutes. They're generally already on the cheapest substitute, the cheapest toilet paper, the cheapest chicken, the cheapest, you know, gasoline in town and so on. And nor can they buy in bulk. They often don't have the space at house, you know, in their house to go to Costco and to buy things at big, you know, big, you know, big discounts and so on. And so the higher prices of groceries, toiletries, rent and so on tends to hurt them the most, right? And so this article looks at the Census Bureau's, what's called the Household Pulse Survey, which is a survey of various households according to income and asked them various questions. And one of the questions it asked them was, how stressed are you feeling about inflation? This was in January of 2023. And it said, at least 50% of income earners that earned under $75,000 were feeling stressed by inflation. They were feeling a sense of anxiety about having to pay higher prices, mounting bill payments. And we've seen this in the headlines. We see that credit card debt has gone up, auto loan delinquencies have gone up, and some of that's caused by interest rates, but also a lot of it's just higher prices. Things have gotten more expensive, right? So they're feeling stressed, but the article mentions that just 17% of those who earn $250,000 or more a year are feeling stressed, right? So it seems as though that the poor were feeling much more stressed about their finances as a result of inflation than were the wealthiest America. All right. The study concludes, quote, although low wage earners are currently experiencing higher wage growth than middle and higher wage and salary earners, the household pulse survey results clearly indicate this has not been sufficient to offset the impact of high inflation. And then it has another quote. This is a great quote. The survey results do not support the recent suggestion of Nobel laureate economist Paul Krugman, that low income families, quote, have actually been hurt less by inflation than families with high incomes because the wages of the low income households rose faster, right? At least asking the families, they seem to be more stressed about inflation than what some of these aggregate statistics will point out, right? So we can clearly see that inflation affects not everyone equally, that inflation is a little bit more of a thief in the night for some individuals in groups than others, right? So what have we learned today? One, we've learned that mainstream economists don't discuss price inflation correctly, right? They often downplay how price inflation is a result of the Fed's money printing, right? That's the first thing. The second thing is we've learned that mainstream economists fail to analyze how changes in the money supply affect different individuals and businesses. First, both temporarily and permanently altering spending patterns, right? Inflation really does create winners and losers. And those who receive the new money first are the winners, and those who receive the new money last are the losers. Inflation really is the hidden tax, right? And the third thing we've learned is that the Fed's money printing during COVID has definitely created those winners and losers. The most well-off, at least it appears, have gotten most of the new money, or at least the most connected, the politically connected well-off, financially connected. Well, the middle class and the poor are the ones who have gotten relatively poor, especially those who didn't benefit from the government's fiscal policies, right? But we see that there's clearly been this redistribution, and this explains why there's a lot of people still upset at inflation. Their cost of living's gone up 20%, and more people are feeling the pinch than others. So to reiterate what Rothbard said to conclude, just to reemphasize this quote from what his government done her money, inflation confers no general social benefit. Instead, it redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race, to see who can get the new money earlier. So I think with that, I will conclude. Thank you so much.