 Good morning, ladies and gentlemen. Our subject is The cultural consequences of fiat money It is a subject not very often dealt with in the economic literature more precisely. I think I'm the only economist Who has ever written on the topic? you can find what I've written so far in Chapter 13 of my book the ethics of money production The chapter is has the title the cultural and spiritual consequences of fiat inflation and in chapter I'm hesitate. I think it's chapter 10 of My book my German language book Krise der Inflationskultur With the title well, I'll spare you the German language title But it will be it has already been translated into English and the English edition will appear hopefully very soon Let us start with a few definitions It's certainly unusual that an economist would talk about the culture. Usually we talk about prices and Production quantities that are being produced. We talk about Employment unemployment this structure of production the allocation of scarce resources. We talk about entrepreneurship and then suddenly culture But you will see very soon that there are certain things that economists can't say about the culture and more precisely That economists can say about the transformation of the culture So what is the culture? Of course many definitions around but for us it is not necessary to make things very complicated. We can espouse a very large definition By saying that culture culture is how we do things is the Totality of Human action How we do things how do we we eat for example how we sleep there many different ways or you can eat you can sit at a table You can have snacks on your way Different ways of cooking and so on different ways of preparing food different ways of sharing food Just think the family meal for example is After what I've heard often non-existent anymore in American cultures as a cultural transformation commonly shared fridge and then Everybody asserts himself Individually so the family meal is sometimes reserved To a Sunday and in some families only two great occasions like Christmas and so on then everybody They get us around the table. It was very different 30 years ago. It is still very different in Mediterranean countries in Europe The way we sleep The way we move or we transport the way we worship the way we love The way we produce things How we do things that's the culture of course the culture is Determined by economic aspects because all human action involves the use of scarce Goods of economic goods. So there's always some choice involved because of Matters how we do things as always Some choice and therefore scarcity involved and therefore economics might have to say something about this some economists therefore have started Analyzing the culture from an economic point of view most notably Deirdre McCloskey a couple of books that This economist has written about the culture And one neglected but very important aspect of this inquiry is the culture of Interventionism or more precisely the cultural impact of government interventionism. This is a very interesting subject for Future research as under research very thoroughly under research topic. So for those of you who do not have Consider writing a doctoral dissertation in economics and you have not yet found a suitable topic. This is a very interesting topic government interventionism has been defined By Ludwig van Mises as a single command By virtue of which the government Orders the citizens to use their property differently than they would otherwise have done it So the distinguishing feature of interventionism is that it does not involve the totality of our users, but it's a partial Socialization of private property. So for example, the government tells us well, you may hire whomever you wish But you must pay him if you hire somebody you must pay him at least the minimum wage You may engage in contractual relationship, but be sure not to discriminate against anybody. This is a partial Discrimination was still free to engage in this kind of behavior, but we need to respect Certain regulations so we no longer completely free. This is a partial Socialization of our resources So government interventions do have an impact on the culture and which can be analyzed by economists our subject is The impact of fiat money on the culture and fiat money Is a social institution that comes into existence through government interventionism fiat money cannot spring into existence spontaneously and it needs government support most notably in the form of legal tender laws or of monopoly privileges Historically these were the rules of the roots of fiat money and Our task therefore is to analyze how the existence of fiat money changes the culture I will proceed in two steps I will first discuss some of the direct consequences of fiat money and In a second step discuss some of the indirect consequences most notably those that result from the culture of debt of the debt economy Which is a fruit of fiat money So among the direct consequences We have most notably political centralization and tyrannical government All these seem to be very stark assertions But they follow directly from the very nature of what fiat money is the fact that Monetary interventionism involves tyrannical government or at least paves the way to the tyrannical government is very old it goes back to the scholastic Nicholas or as me in the 14th century and Has not been stressed much in the 20th century But one of the economists who stressed it a lot was Ludwig von Mises and Mises argued as follows It's a very important argument and There's certainly something that you should remember and retain from this lecture Mises argued the following he said The economic foundation for the political rule by the people That is for democratic government as he called it Is that the government is dependent on The citizens is financially dependent on the citizens The fundamental political problem as soon as you have something like government is always how to control those people once They have come into office or whatever way By elections for example So they show up every four years and sometimes every two years they stand up for election They make a lot of promises and Then once they are in office they turn around and they very often do different things Different things from those that they have announced previously Different things from those that you would think that follow quite naturally from the mandate namely to act in the interest of the common good in the interest of the people Especially of their constituency So how do you make sure that these people? that act in the interest of The population as a very old problem right so Plato Caught this a problem in the translation. I could study it custodious who Guards the guardsmen Who watches the night watch watch man? Okay, so it's a big problem. So Mises says The way we control the government is through the budget It's necessary in a free society if it has government, of course you can argue well government in the sense of A government that that chooses the law and it makes the law is never An element of a free society. That's a different issue So Mises did not believe in what we call today anarcho-capitalism So he believed that there was a role for coercive government for social apparatus of violence and coercion But he says so the way we prevent that this gets out of hand is through the budget so we mandate the government we elect certain people to government and It's not necessarily that we elect them on the basis of Certain mandate of certain objectives certain role that they will wish to fulfill. We must also Decide at the same time the budget the amount of resources that they may use To give you an example. It would not be sufficient to say well We will have a minimum government that just provides security Services so minimum government is we will just provide police forces and we'll have courts And an army and we'll just protect private property rights This by itself, right? So this is the minimum minimal Mission, but the mission by itself does not determine the size of the government The government may pursue this minimal program With very few resources, let's say one police officer per thousand inhabitants or with more resources one police officer per 100 inhabitants one police officer per 10 inhabitants or a personal bodyguard for everybody The policeman may be armed with just a stick may as it was the case in in in England until very recently Maybe armed with us with a stick and a gun. They have machine gun may have a tank He may have a tank and a fighter jet and so on and so on. I just see the point right so the mission itself does not by itself Determine the amount of resources that are absorbed in the fulfillment of this mission So it is necessary not only to define the mission there. So that's the electoral platform In a democracy, but it's also necessary to define at the same time the amount of resources that the government may use And the population controls the government makes sure that the government remains the agent of the population by controlling the budget So if the government wants to extend its activities It needs to be authorized by the citizens according to this Liberal vision of the political process needs to be authorized by the citizens in the elections who vote for the party Who calls for an increase of taxes for example? Now that's of course very unpleasant especially for present-day Politicians women say yeah if but this things had to go this way Then we would never have an increase of government activities where people hate taxes that we they would never vote for a tax increase Quite possibly so right, but that's precisely the point and that's precisely the point All right, the government could increase it its activities only if it's validated if it's mandated by popular scrutiny So by the general election now as soon as the government gets around this and We deviate from a rule by the people and we move ever more to a rule by the elites That are not endorsed and not supported by the electorate The first way the government can do this is by just going into debt That's an easy route, right you you just Go into debt you go obtain more money through the financial market and of course the resistance there is much weaker Respectively does not exist at all If the government namely if the government promises not only to restitute the money It has loaned out but also to pay an interest on it So you have voluntary cooperation with people who finance you and who hope that the government will eventually pay back out of tax proceeds So it is clear that already here at the democratic principle the control of the government by the people is weakened And the government it stands Its activities beyond the scope that would have been possible by taxation alone therefore some Social philosophers have always called for The evolution of the possibility of public debt immanuel kahn was notably called for The suppression of public debt government should have no right to to go into debt, but unfortunately he Called for this only in the specific case of war finance. Of course that is Immanuel kahn could have needed some economics class and because if you just specify while we rule it out for this Activity that's not sufficient because the government might finance this out of tax proceeds and then it takes out A loan to finance all other spending that the similarity goes on right so you cannot limit the rule out government debt this way Now of course fiat money Allows the government to take out loans to an unlimited extent and because fiat money by definition can be produced without limitation without commercial limitation without technological limitation can produce as much of it as you wish and as a consequence Government that benefits from the support of a central bank Of course a central bank has in its best interest to support the government because itself depends on the legal framework Upheld by the government namely legal tender laws and monopoly privileges So it just would be ill advised not to support the government on whom it relies So as long as the government can rely on the on its central bank, which it always can it can Take out virtually any Volume of loans any debt is completely out of proportion with with its current tax revenues And that is indeed what we observe and what we have observed in the past 40 years, especially since the abandonment of the Bretton Wood system so the last link to to gold as we had the establishment of pure fiat Currencies since then right public debt has exploded and is typically also increased not only at a rhythm That was much stronger than the growth of the real economy, but also much stronger than the growth of tax proceeds so tax revenue for the government So it is clear then that fiat money allows for an extension of government activities that is completely out of tune with Effective public support as demonstrated in the elections and as demonstrated by the willingness of the population to vote for tax increases or certain any volume of taxes So what does this mean that it means that to this extent then government becomes tyrannical. It's no longer government By the people for the people as you have heard it from Abraham Lincoln the famous adage Fine, but it becomes government By the elites and for the elites by the false is no longer really they're not no longer really elected right because they maintain themselves at power and maintain their activities at a level that is not validated by Public consent but by their possibility to access the printing press so government turns tyrannical for the same reason as a second consequence For the same reason there is under fiat money regime Tendency toward the centralization of government Those governments who can benefit from a printing press That's not the only condition that is necessary, but it's an essential condition have always a competitive edge In comparison to other governments that cannot so rely on this source of financing This was a very important factor in the political centralization of Western Europe and centralization for example within Great Britain around the the king and so The king had always a competitive edge in his conflicts with the with the local princes and the local dukes and so on Same thing in Germany only much later because the Germany was politically united. So had a common monetary Framework and a common fiat money only much later Then Great Britain but as soon as it came into being it gave a political Advantage to the central government at the expense of all local governments Same thing again in the United States What is the role of states? In American politics well, it's still there's still much more powerful than Regional governments in Europe right but their relative power has greatly diminished in the past hundred years That's the least thing we can say and so the main player has become the federal government Of course, there are juridical aspects to this and there's Commerce clause and so on but the main or one of the main factors is that fear money gives Competitive edge to the federal government in all of its conflicts with state governments So we have political centralization a Third consequence is and then there are various related Direct consequence so the government because it can extend its activities May engage for example in to a greater extent and for a longer period in its preferred activities first among which is Waging war and so this is much more important in the US than in Europe And so thanks to the printing press thanks to the unlimited possibilities of financing military adventures The federal government can engage in wars that are lengthier and more violent more intensive Then it would have been possible if Spending would be based exclusively on tax revenue As many economists have argued most recently Joe Solerno Fiat money regimes were the main factor in extending World War one and World War two So without fiat money regimes World War one would probably have been over by 1960 Maybe early 1917 At the beginning there was great enthusiasm in all nations. Everybody was running to the front and yeah we'll beat the frogs said the Germans and and the French said yeah, we'll beat the Bosch. That's how they call them. That's why we will beat the Bosch and That's who they were in the war frenzy was often the case When you did not have a major war for long many long years, which is not the case of the United States It was the case of Germany at the time was the case of France at the time So they were really rushing through the front was a war frenzy. So they would have agreed to pay a higher taxes Have lower net revenues for themselves for a certain while, but then Your cousin dies Your son dies your brother dies if yourself die. Well, but if you survive, I mean you you very soon you Become tired of the war. It's just a very nasty business And plus I mean they got stuck at the front It was not the kind of war that they had imagined where they gloriously just run over the other country I mean they really got stuck and then all the the killing took place and it nothing moved and was just killing and killing It cost and cost you grow tired of this very very soon So if this had to be financed out of tax revenue, the world would have been over very fast It was not over very fast because there was a printing press So the government could go on and suck ever more resources indirectly out of the economy to finance the war effort And this calls especially terrible if we consider that most of the killing occurred in the Last years of the war and especially in the last months So many many millions of people could have survived had it not been for the printing press same thing in World War two another Pet scheme of governments that hitherto has been more important in Europe than in the United States But it's becoming now more important in the United States as well is the welfare state So clearly without fiat money and the possibility of financing government activities the welfare state would not go very far I it would exist But it would be rather limited because few people would be ready to pay much higher taxes to Finance welfare handouts, which is only one thing, but especially the Apparatus the bureaucratic apparatus that is the intermediary of those handouts, right? So few people would be willing to finance the welfare industry and another direct consequence more or less direct consequence of The fiat money is of course a tendency for the price level to be higher than it otherwise it would have been and this means in Practice that the price level becomes permanently that we permanently have positive inflation rates Okay, it's the direct consequence of a fiat money regime In a pure market economy, which we only had natural monies like gold and silver There would be a natural tendency for the price level to diminish we would have what is called deflationary growth Because the money supply money production tends to lag In the in the economy based on very strong capital accumulation and technological progress It tends to lag behind the growth rates of the real Economy this of the production of goods and services Therefore the prevails a tendency for prices to drop This is what we had until World War one By and large in all European countries So you can look at the the standard Textbooks and economic history in the 19th century and you will find that while the price level Diminishes in Great Britain by and large throughout all the 19th century. It diminishes in France By and large throughout all of the 19th century. So I mean with the exception of the Napoleonic Wars, right? So let's say from 1815 to 1914 by and large there is no such thing as inflationary growth that is Growing economy in the context of an environment in which prices rise in which the price level rises virtually never happens What you do have is growth with either with a stable price level or with a shrinking price level Same thing in Germany. Same thing in the United States Some of the I believe that the highest growth rates in American history Were realized see a Chinese growth rates right in the Last third of the 19th century and most of this was deflationary growth So this is a natural element of Free economy Fiat money allows the government of course to to create more money than what otherwise have been created So the price level is always higher does not mean that it becomes positive might the deflation might just be lower than it otherwise would have been and so rather than having The price level diminished 5% it only diminishes 2% that's possible But in actual practice the production of fiat money is always pushed to the point where it creates positive inflation rates and This is no accident is actually something that has been wished for By monetary authorities out of considerations that we would call Keynesian Okay, which are much older than Keynesian economics as that we know from the 1930s And there's a very old idea that the more money you spend the better it is for the economy And it is a very old idea that it should be an objective of monetary policy to discourage the hoarding of money So people are likely to hoard money if the price level shrinks if the price level shrinks by 5% per year Then you can earn a return on five percent on your savings by just holding money But just holding gold coins or silver coins in your pocket So there's a strong incentive to build up savings in the form of cash holding So according to very old ideas, this this would be very very bad This is the vampire economy you suck the blood out of the economy and You paralyze everything right so therefore we should discourage this And money cranks of the 19th century they they've argued well We should create money of a sort that the price level always rises or maybe we should start clipping money And pay a tax on banknotes so every every month or so The the value of the banknote is being reduced so that people have an incentive to spend it as fast as possible The clipping was somewhat technically difficult to realize it's difficult also to sell a banknote to anybody if he has He knows that it will be clipped at the end of the month or something like this So the the best way technically to do this was to create so much money fiat money That the price level would always rise positively in which represents some sort of a taxation on the purchasing power of money So the price level Rises 2% every year or 3% every year Then it is as if somebody had clipped To a 3% out of your coin every year so you have an incentive not to save in the form of cash, but to spend it Sooner rather than later. So that was not an accident. It was and it the result of Planned intervention in the economy now something happened that was only anticipated by a few people what was also anticipated at least by some people and and so willed namely an encouragement of the credit market is of Tendency toward the debt economy or throughout the 20th century. There's a tendency for the credit market to grow Governments firms and households Started taking out more and more loans Ah Credit for households was virtually unknown before the 20th century All right only very poor households needed loans regular households that could live off of the yearly income so never had any loans that had any debt I was also a cultural factor as a prevalence of Christian views on on a just Economy and orderly conduct and so on created this results firms were eventually were essentially Financed out of equity as the owners capital that was being used There was virtually no credit to two firms maybe a little commercial credit right in your relationships with Customers and with suppliers. So you supply Merchandise and you're being paid two months thereafter. So credit existed to that extent, but not to finance any fixed investment or so Governments, of course, it always credit all governments were always into into debt since time immemorial So if you have a fiat money system Which allows us to create a positive price inflation, then of course they exist very strong incentives to go into debt For all sectors Let us first consider a Household because this is the experience that is universally shared by all of us And some of you guys are young So you don't have yet revenue is still in school and so on But I promise one of the first things that you will do once you get out of school is to take out a Loan take out a mortgage and to buy an apartment or a house Have you ever wondered why why you do this and why you do not first accumulate money? And then buy the house well, I've already given you the answer implicitly Well, yeah today would make no more sense to just accumulate to stack cash For let's say 10 years and then buy the house I mean you would lose a lot of money in those 10 years and that's why we buy first the house And then we can actually eventually even profit from this credit and I say you take a loan As high as you can serve with your service with your present income Let's say you have annual income the first year after you get out of college of $50,000 and you take out a loan On which you pay let's say $15,000 per year or is it $12,000 per year $1,000 per month And which would be in the order of what about $200,000 and then you buy a nice house a nice apartment or something like this Now what happens in an inflationary economy is that eventually your revenue will increase Of course, it also increases because you become ever smarter you become more experienced right and so on for this reason to you The value of your your work increases, but let's say if you stay even as dumb as you are now As all prices progress So will your revenue More money will be used within the economy so Companies will compete for the existing factors of production among which is your labor force By spending more and more money, so your revenue will increase Now that means that if you get into debt at a fixed interest rate That servicing this debt will become ever lighter Like an ever lighter burden on your on your budget So as you go along right the first five years or so are difficult and at ten years It's much easier than the first five years at 20 years and your revenue is almost doubled And in monetary terms and your debt is still or the debt services at the level as it was in the first year So it's a great advantage right to go into debt and To pay present expenditure by by debt rather than by first accumulating savings. That's why we do it Okay, now the same incentive exists for firms exists in fact for all market participants I'd affirm has a strong incentive to finance fixed investment machines Real estate and so on that it needs equipment with a credit and if this is a long-term investment right so For 10 years or 20 years or whatever Because it can expect that it's revenue if it stays in business right it can expect its revenues to increase under the impact of the general price inflation So what is burden some at first becomes ever lighter? subsequently and The same incentive finally also exists for governments and because governments due to the progression of prices Can expect an increase of tax revenue in the future. So they too have an incentive to go into debt Even if they did not have this wish in the first place, which of course they usually have So a fiat money system there for me might say creates a generalized rush into leverage less and less Spending is financed out of equity out of your own money and more and more is financed out of the credit market Now you might say where does this money on the credit market come from? Everybody has an interest to take out loans, but who provides the loans well in a fiat money system people have a very strong incentive also to invest in a credit Market-related financial instruments Because how do you save right? It's no longer worthwhile to keep your money in cash because then you lose So you need to choose forms of savings that will compensate you for the loss of purchasing power of the money unit So you need to buy something that increases in monetary value with the general price inflation such as real estate such as stocks So shares in companies or you need to buy something that maybe that nominally stays at the same value, but is linked to a Revenue that compensates you for the loss in purchasing power and that is Typically the case with credit market instruments And so you buy a life insurance you put money on the savings account I said bank promises you well will pay you one and a half percent. That's great Of course one and a half percent today is less than the price inflation rate So you still lose but you lose less than you would have lost if you had kept your money in cash So in a fiat money system in which the central bank creates a positive price inflation rate Both the demand for credit increases and the supply of Credits also increases and there's a huge boon for the credit market And of course it is therefore also a huge boon for financial intermediaries such as banks commercial banks and insurance companies and also investment funds That is the reason ladies and gentlemen why financial markets had such a Spectacular growth spurt in the past 100 years As a well-known fact among historians that was first firmly established at the end of the 1960s By a British statistician of the name of Raymond Goldsmith So Goldsmith had a look at all major Western countries and you found it well I mean the financial markets grow more rapidly than the real economy It's amazing. So how does this come? And this tendency has actually increased in the past 40 years And the growth of the financial sector is much more rapid Than the growth of the real economy and this ladies and gentlemen is of course a cultural feature of our time And lots of well-paid people on Wall Street and so on all the bonuses and so on That make the news and the envy of the other citizens sometimes But it's the direct consequence of a fiat money system Now there are other cultural features Directly related to this debt economy into this financialized economy. I Will highlight four of them here discussed others in my book Four things that can be relatively easily explained the first consequence is a tendency to Encourage in our decision-making a short-term perspective or in other words a certain haste We need to hurry up to take out credits as soon as possible We need to hurry up to to gain revenue as soon as possible You need constantly to have revenue Because you cannot sit on your on your savings the savings lose their value If you just hold them in cash, so you need to have constantly revenue You need to take out loans as quickly as possible so that the burden then becomes lighter Relatively soon This is of course something that characterizes financial markets is an extreme short-term orientation most of the money managers that we call investors So really just paid intermediaries have an extremely short-term orientation Which results from this? But it would be bad just to pinpoint the evil guys on Wall Street and so on if if you consider carefully your your own behavior And I do this with my own behavior as well and compare this to What you've seen in your grandparents and what you've learned about people living in the 19th century You'll see that we are moving at an incredible speed. Of course, you can look at this positively say yes I mean we were so much faster today and so on and so on but the this haze this this lacking calm lacking serenity and so on Results to some extent from the fact that they're very strong material rewards That are associated with getting into that soon and then making sure you can always Bring in revenue to service the debt So there are two Related consequences that immediately spring from it. One is increasing materialism So we come in a fiat money system out of self interest more materialistic Then we would have been under a natural monetary system. We need to watch our investments We cannot just sit on cash. We need to watch our investments constantly Even if you're a dentist or your carpenter and so on you need to know something about the stock market because Well, your insurance market something because part of your savings are invested with these guys In a natural monetary order, you could just sit on cash Well, you could be robbed not be a riskless, but right you wouldn't have to worry about other people Now suddenly you have to worry about other people become mid materialistic Especially also since it is so much more difficult to recover from a loss of Of wealth once you've lost it's very difficult to to catch up another related cultural consequence is Insatiability I need again to start first with a more natural monetary system then compare our behavior and a fiat money system and a natural monetary system Investments that we make underlie while decreasing returns and we cannot accumulate ever more capital, but we cannot invest That capital these savings we cannot invest them always at the same returns as before and we're constantly by Increasing our savings. We're constantly increasing the supply on the capital market now capital market in the Austrian sense And as a consequence the return that the the earnings that you can derive from such investments invariably diminish So that means then that in a free society There are There's an inbuilt break in The accumulation of capital and especially in the investment of capital in order to earn revenue out of it At some point the the returns become so low That this is no longer an incentive for savings So the savings that then occur have other purposes, right? They finance our personal projects which are not associated with a monetary return They finance philanthropic activities church activities and so on which are not associated with monetary return Okay, so that's the natural tendency in a free society In this is if you look at what happened in the 19th century especially in the US. That's exactly what happened Things change under a fiat money system. It was under a fiat money system You can always increase the return on your own money By leveraging your investment and this called the leverage effect It's difficult to explain this in a few sentences for for the non experts But so you look this up right on the internet maybe to give you one example. Let's say you have an investment in a firm That requires one hundred units of money one hundred thousand dollars I say one hundred units of money and it gives you a return of ten percent. Let's say you produce pens But producing the pens you earn ten percent return Now if you finance this all of this with your own money, then what you will earn is ten percent But you might if you can obtain a credit at a lower interest rate than the return that you earn by Producing pens, for example, you can if you can obtain a credit at five percent from a bank Then you can leverage the return on your own investment if you finance 90 units of Your investment with a loan of five percent and only ten units with your own money Then what will be the return on your own money? Okay, you still earn ten units of money through the investment And now out of this revenue you have to pay your creditor And so you pay him five percent on ninety units of money. So four point point five 4.5 units of money So your net revenue is no longer ten units of money. It's Ten minus four point five so five point five Now these five point five is the return on your personal investment of ten You have invested only ten units of money of your own money and you earned five point five now how much of a return is this? In percent is not five point five 55 it's 55 right you've invested ten and you earn five point five fifty five percent return Okay, that's the leverage effect The leverage effect results when you can take out loans at a lower rate then The rate that you realize that the yield that you realize through your investment It's a risky undertaking. Okay, that's the thing you can do So you see in a fiat money system which the credit market develops so well As we've seen they're very strong incentives for people to rush into leverage and so they can always By going into more leverage to become if they become more daring or if they are sufficiently daring They can always always a possibility for them to increase the return on their investment So the saturation point that would obtain in a natural economy No longer exists if only you are sufficiently Risk-friendly Okay, and there's another related aspect to this namely that of us Going into debt taking out additional loans is easier if you are already very rich Because if you already very rich your own houses and apartments and so on then you can offer this as a collateral Right as a security to back up the loan. It's not possible for people who are not yet rich So the perverse consequence then in a fiat money system is that the richer the richer you are The stronger is your so incentive to keep to remain fully invested Under natural monetary system rich persons at some point where I say okay the return on my investment diminishes on and on There's no more point Becomes pointless to to seek other investments. Well now I will just become more philanthropic in our system This is reversed the richer you are the greater are the incentives to remain fully invested and to neglect philanthropic Activities except to the extent that it's necessary to keep a good public image All right With the rest of the citizens so that they do not torpedo your activities through the political process and so genuine philanthropy disappears and Is being replaced by fake philanthropy and which in any case is at a lower level than it would be in a natural economic order a third major consequence is Increase dependence on other persons and again if your savings are in cash You do not depend on anybody you have gold coins or silver coins in a hole deep into your garden or under your pillow Okay, they can be taken away. They can be robbed. So it's not riskless But their value does not depend on what other persons do It's different if you give a credit to somebody or if you buy a share in the company Then you become dependent on the good behavior of those other persons on their faithful Accomplishment of their of their mission a good friend of mine in in in France As not professor emeritus he always stressed that this is was wonderful because it created greater social interdependence We care more for others and so on and so he says there was a positive side to this process and Well, I have difficulties Finding much joy myself by considering this right because again, it is not a genuine interest for others. It's a very interested selfish Concern that we have fathers we have become interested in what others do because their behavior will have negative repercussions on us not because we are genuinely interested in that person because we love this person and want that it Well develops according to the best of his abilities become selfish in our concern for others And what we have here is not a genuine integration of voluntary Integration, but what will am Robkir once called a forced integration It's not right Integration is not an increase of the division of labor is not always beneficial Both from it from an economic point of view and from a political point of view can also be forced All right, so they can be excessive That is certainly something that results necessarily in a fiat money system and Related aspect of this is the increasing politicization of Society and because we have increasing more concerns for others in a in a debt-ridden economy a debt-ridden economy is fragile If one we know this In because in present-day financial jargon, that's the concept of a bank that is too big to fail TBTF So big too big to fail market participant if this bank Let's say if Goldman Sachs goes bankrupt. Well, then the entire financial market will melt down Because if a Goldman Sachs is no longer able to pay back its loans its credits All right, then that this means that other people other market participants who have loaned to find in to Goldman Sachs We'll see their assets melt in the Sun So they will not be able to to pay back their creditors and so on as we have get a chain reaction So the stronger is the level of debt in any economy the stronger is therefore the selfish Concerned for the others the strongest our incentive to try through the political process to control the behavior of others So fiat money creates a tendency to what the politicization of Society a fourth and last consequence that I should like to point out is What my German colleague Torsten polite has called? Collective corruption So he has an article out on the subject in the quarterly journal of Austrian economics I think of 2012 very good article I commend all of you to read this So what he points out is that in a fiat money system? No individual market participant no household no firm certainly not the government has an interest in Abolishing the system or in discouraging the foundations of the system. Nobody's an interest to abolish the fiat money system and Put in its place A gold standard a silver standard or currency competition anything that would limit the amount of money that can be produced because as soon as this happens and You get a collapse of the financial industries and in case right credit becomes much less readily available It would be necessary to completely change The way we do things that is to change our culture we could no longer rely that much on debt We would have to rely more on our own means would have to say first I need a frugal life and then eventually pay our way out of our own savings So nobody in even though one might consider yet that the overall consequences both economic and cultural are terrible of the system It is a nobody's material interest in the short run to abolish the system Because everybody stands to lose in the short run. So even though We might especially if we learn a little bit of ocean economics We see right that the perverse working of the system from an overall point of view from our own short run material materialistic Interest it is in all it we wish to keep it up wish not to abolish it. That's collective corruption okay in Economic theory is called a rationality trap and There's a difference between An overall point of view and the individual point of view and Rationality trap is the typical consequence of government interventionism. You see this in many places You see he is a very dramatic example, but you see it also elsewhere. For example a higher education. That's the government Subsidizes higher education. So higher education comes at a lower cost than it would be on the on the market It allows you individually to gain a competitive edge As compared to all the other evil guys who want to have the same jobs That you aim for So you you're interested in doing this, but of course if everybody Right takes out the these diplomas their value is diminished And so the same types of activities that in former times were Being pursued by by employees without a university diploma without no graduates Or just had barely a high school diploma are today being carried out by people with master's degrees and PhDs All right, there's another typical example of a rationality trap All right, it's in each each one's individual interest to maintain the system and tame easy access to higher education But from an overall point of view is probably an enormous waste of resources Both time and material resources So rationality traps Collective corruption a typical consequence of government interventionism that makes by the way for It's a nice subject if you want to analyze this in different areas how government intervention creates rationality traps And it's a nice area for Papers turn papers that you write or maybe a master's thesis or something like this In conclusion then so I've Demonstrated That we can apply economic analysis to Explain cultural transformations and That a particularly important example is the case of fiat money fiat money has a very profound impact on Our culture is difficult to see it unless you step back and you consider the evolution of a long time If you just consider economic history of the past ten years it would escape your notice Because you are yourself part of that culture So you're only being awestruck if you compare to previous times and then wonder what explains these changes in our behavior This this change in the way how we do things as compared to how they were being handled by our interest us Of course, there are many other factors that also come into play, but fiat money is a major source and probably This this phenomenon of collective corruption explains why it is so difficult I to To change the monetary system to change also the political system and because everybody stands to lose in the short run not only materially But also because such a change would defy would challenge would overthrow Our traditional way of life to which we have become a castle. We are culturally unfit in a way for a natural economy That doesn't mean that we shouldn't dare to bring it about and was ultimately it's a question of courage and of insight And of the will the will can change under the impact of prudence and of insight And I hope that I've provided today one little element to encourage you in this way. Thank you for your attention