 So I want to start by speculating a little bit about kind of the audience that I'm talking to because I know, right, you had a choice, right? You chose to come to this talk rather than the more interesting talk on oil downstairs. So I figure you must fall into one of a few different categories. It might be that you're here to hear my garden update, in which case I'm going to have to disappoint you. I couldn't figure out how to work it in, but if you want to talk to me afterward, that's perfectly fine. I can give the update. A second reason, though, that I'm not giving it is that my garden actually went fairly well this year, so it's not nearly as funny as it normally is. It's true. But a second type of student that I think would probably be in this room would be the type of a student who has already attended lectures on money, on banking, on Austrian business cycle theory, on the Rothbardians versus the Free Bankers, on Austrian versus Monetaryist and Keynesian macroeconomics, and is planning to attend lectures on modern monetary theory and the gold standard versus fiat money and so on. So this naturally fits in. They're the kind of student that really just wants to get as much money as possible in the theoretical sense. And I can appreciate that because I became an economist because I'd rather study money than have any. So we're two of a kind, I suppose. All right. Let's go ahead and hop in. So the topic here is monetary policy. Looking at discretion rules and markets is being three different possible approaches. Now before we get into this, let's talk about first, why do we bother thinking about monetary policy, policy there, and secondly, what do we mean by monetary policy? So first, I want to lay out two different problems that I think commonly economists would agree these are connected with the way that money is working in the economy. So the first problem would be business cycles. I think generally speaking, certainly we as Austrians would say, money is kind of at the root of the business cycle going wrong, right? It's money coming in through credit markets, credit expansion, and all of that. So money plays a role in business cycles. We don't particularly like business cycles. We do theoretically. I love business cycle theory, but experiencing the business cycle is not something I enjoy, right? So I like studying it so that I can make people's lives better. If we can have better monetary policy, we may have fewer or less severe business cycles, people will suffer less, right? Since I'm not a horrible human being, less human suffering sounds good to me, right? A second issue, though, that is very connected with the monetary system is that of hyperinflation. So I want to talk a little bit about the hyperinflation process and the way that it has tended to work historically. When we see these hyperinflationary episodes, whether it be in I'm Germany or whether it be in Zimbabwe or more recently say we see something very similar happening in Venezuela. Whenever we see these happen, at the root of it is something happening on the monetary side of the economy, right? Typically what happens is we have a government that has decided it wants to spend a bunch of money on various programs, but it wants to spend more than it can reasonably collect in taxes, right? Taxes are not popular. If you want to stay in power, you don't want to raise taxes too much, but they also want to spend more than they can reasonably borrow because, again, you have to convince somebody to lend to you. If you're already spending a lot of money, you're not really looking like a great risk for me to lend to you, right? So what do we do instead? Let's just print the difference, right? So we print money and then we spend it, right? Naturally, this means there's an increase in the supply of money, as Dr. Klein explained earlier, right? When you increase the supply of something, right, its value falls and the supply is to money, right? So the purchasing power of money declines, right? You need more money to buy any particular thing, right? Now, where hyperinflation comes in is when people begin to realize, right, that their money is regularly declining in value, right? And they realize then it doesn't really make sense, right, to hold a lot of money, like, because normally I want to hold some money because I never know and I might want to, I don't know, buy a soft drink or something like that from the vending machine, sure. So I hold some money for these unexpected purchases, right? But when I realize that that money is losing value regularly and quickly, I don't want to hold onto money. I'll hold something else, right, that is not losing value regularly and quickly, right? So what happens then is we not just have an increase in the supply of money for funding what the government's wanting to do, but we also see a decrease in the demand for money, right? And as Dr. Klein explained earlier, when the demand for something declines, it loses value, right? Same thing applies to money, right? When the demand for money declines, money loses value, the purchasing power of money falls more. You need even more money, right, to buy stuff. In other words, prices are going up very rapidly because we have both things that could potentially lead prices to go up happening at the same time, an increase in the supply and a decrease in the demand for money. And we have realized, and this is true not just amongst Austrian economists, but the mainstream realizes that these hyperinflationary episodes are monetary in nature, right? Inflation is everywhere and always a monetary phenomenon and that's especially true in these hyperinflationary episodes. And we know that when hyperinflation happens, it leads to great suffering because we basically are abandoning the monetary system, right? All of the benefits that come with having this common medium of exchange that everyone accepts, right, that allows us to exchange with each other, even if, say, I want to eat, right, and you are a farmer and you don't want economics lessons, right? I can still buy food from you because money exists, right? I'll sell my economics lessons to somebody that wants them and then buy the food from you, right? So this is all right, coming out of and repeating to some degree other things that a professor Klein talked about earlier. And so these hyperinflationary episodes, people are abandoning this monetary system. Now we're stuck back in a barter economy. This is not a good thing. We're made much less productive, much more difficult to trade and to survive, even for that matter. All right, so that's a second problem that can arise out of the monetary system. So it seems then that we want to do something, right, to both offset our business cycles, right, to prevent them from happening, to make them less severe, less common, but we also want to avoid the worst case scenario of hyperinflation, which is utterly devastating to the economy, right? So how can we arrange the economic system in such a way that we have money that will not fall into these two potential disasters? I still don't know what is monetary policy, right? So monetary policy would be the set of laws, set of regulations, rules, and so on that are about the value of money and typically will relate to the supply of money, how much is being provided to the economy. Now when you look in the mainstream, the main discussion at the moment is between kind of these two views of how we should do monetary policy. Should we do monetary policy, one basis, right, would be on the basis of discretion, right? So what discretion simply means, right, is that we have a group of people that get together, right? They should be people that might know something about the way the economy works, right, or trained in this, right? Perhaps some have some experience in working in the economy in some fashion, perhaps they're economists, right? Meet together, try to figure out what the optimal money supply is at the moment. Optimal money supply, I feel like that was mentioned previously, oh yeah, it's Dr. Klein again, so, okay. Let's try to figure out what the optimal money supply is at the moment to try to get the economy to do the things we want it to do, have a nice stable economic growth, make sure we don't have hyperinflation. And of course we know this is the way that, say the American system works, we have the Federal Open Market Committee, right, gets together, this combination of the Board of Governors, which by design should be seven people, but in reality the moment is five. We also have a handful of people that are working at the various regional Federal Reserve banks, pick a few of those Presidents, five out of the, I believe, 12, are also serving on this Board, and we all talk about what it looks like the economy is doing, what we should do in response to it. So the big reason for why somebody would advocate this sort of system is that we believe that people can actually exercise judgment in a meaningful way. That is that we can look at data, we can interpret it using our own understanding, and make decisions accordingly, and these will actually be reasonably good decisions. Now on the other hand, some would point out problems with this sort of system. Now probably one of the most famous, at least one of my favorite quotes from Milton Friedman, he says, the problem with the system is that sometimes people make mistakes. This is something I learned as a child because I watched Sesame Street. Everybody makes mistakes, and this is supposed to make us feel somewhat better about the fact that we make mistakes. Everybody makes mistakes. We have to be understanding toward ourselves and toward others when this happens. But Milton Friedman pointed out, when you have a system like, say the Federal Reserve System, with the FOMC running things, if somebody makes a mistake there, it has enormous consequences. He particularly had in mind what happened with the Great Depression in the United States, where in his mind, the Fed totally dropped the ball on that, specifically in that they let the money supply fall rapidly amidst people wanting more money. It's not the way that things should work, and he considered this to be really the reason we had a Great Depression. So the quote from him was that, well, any system where mistakes made by so few can have such bad effects for so many is a bad system. Okay, we agree, right? Discretion is, ideally we like to exercise judgment with things, but if so few people making mistakes lead to outrageously bad consequences for so many people, maybe we need to rethink the system. I would point to another potential problem with the system of discretion, and that is that often there's political pressure that is placed on our deciders to allow a little bit more inflation to be a little bit easier on the economy in order to create an economy that's booming. After all, we know that if the economy is booming, it's gonna be a lot easier to get reelected. So there's some pressure put onto the Federal Reserve, keep interest rates a little bit lower, let's lower them down a little bit more, maybe all the way to zero, I might wanna nominate somebody to the Federal Reserve Board that would do that for me. I guess that's gonna help me get reelected in the future. Now, economists throughout pretty much all of the mainstream realize that this is potentially a problem, and that's why you often will see people advocating for the independence of the central bank, it should not be too closely connected to the political system, or it can fall to these sort of pressures. Although we do know that there are a couple exceptions to that nowadays, one exception being those that like modern monetary theory, I think they say now we need to get rid of this independence that in fact printing money to fund the governments the way to go, I'll talk more about that in my lecture tomorrow afternoon. Also, strangely, Art Laffer came out saying, he doesn't really know why the Federal Reserve is independent nowadays anyway, which I don't know what reading he's been doing recently, it's clearly not about mainstream economists talking about the Federal Reserve or central banking, because they generally would favor independence if we're going to have a central bank that's just operating on the basis of discretion. So discretion is the one possibility. The other possibility that is often discussed in the mainstream would be having some kind of rule. So we realize that any system where so few people making mistakes can have such outrageously bad consequences for so many people is a bad system. So let's make it so that we don't have people making mistakes. How do you avoid that? Well, we don't have people making decisions. If you don't make a decision, you're not going to make a mistake, right? So we implement some kind of rule. Famously, Friedman was one that advocated for what has been, I'm known as the Friedman rule. It's really quite, quite simple. It's so simple that a calculator can do it. We don't even need people, right? So we could end the Fed, replace the Fed with a calculator. That's perfectly fine as far as Friedman is concerned. Just increase the money supplied by a constant percentage each year, right? So he normally advocated somewhere between three and 5% being reasonable. He thought that typically the economy would grow roughly three to 5% per year. So roughly three to 5% more money in the economy will keep prices roughly stable on average. So let's just do that, right? It's much, much simpler. We're not going to make outrageously bad mistakes. Of course, other rules have come along, right? We have the Taylor rule, which is probably one of my favorites if we're going to pick a rule. John Taylor suggests that we should have a rule that's a little bit more complicated than the Friedman rule and have it respond to what the economy's doing, right? So if the economy's booming, interest rates will rise. If the economy's doing poorly, interest rates will fall. If inflation goes up, interest rates will rise. Inflation is down, interest rates will fall. Which anybody who's taken any kind of macroeconomics class where they talk about monetary policy is typically what the advice is that is given, right? Higher interest, higher inflation, we should increase interest rates to offset it. It's just kind of standard. But he has put all of this in a nice little, very simple mathematical formula for how we can figure out what the interest rate should be, that would then regulate the economy very, very simply, and so on. There are other possibilities out there. Inflation targeting is another one you hear. The idea of inflation targeting is the central bank will pick an explicit inflation target and say, well, we want prices to go up, let's say between 2% and 3%, on average, over the next five years, and they're going to act in such a way to try to make that happen. So that's another possibility that's out there. And a few countries have tried this and have actually seemed to hit these inflation targets reasonably well. Another, which is probably more common amongst those that are, say, Austrians or closer to the Austrians, would be NGDP targeting. I said it's nominal GDP targeting. So this was very strongly favored by Scott Sumner. It's kind of the big advocate of this. But also there's some Austrians that Horwitz and Luther would be a couple that have written a couple of papers related to this. Consider this to be a reasonable way to do monetary policy. So the idea here, nominal GDP, is basically adding up all of the spending that's happening in the economy. So we try to stabilize that. Perhaps have it grow at some moderate level, or perhaps have it be totally stable. Doesn't really make a whole lot of difference, but this is the way we should do monetary policy. Try to stabilize that nominal GDP. So rather than go through these rules one by one and try to critique, well, here's the problem with Friedman. Here's the problem with Taylor and so on. I want to deal with the idea of rules first. So first, why would we bother having a rule? This relates to Friedman's critique from before. We're removing human judgment, which can sometimes be erroneous. We're replacing with rules. So no longer will we have people making mistakes. Also, it will be the case, and as far as errors and expectations are creating economic problems, if you have a very nice predictable rule, then you're not going to have errors and expectations. So if I as a business owner, when I'm making decisions, I say, gee, I really think that my decision depends on the rate of growth in the money supply. One, I've not met this business owner, but if that happens to be you and you're in a system of discretion, well, you really can't predict very far out what the money supply is going to look like. On the other hand, if Friedman gets his way, you can predict forever what the money supply is going to be as long as people continue to follow this rule. So we're following a Friedman rule of 3% a year. I can tell you what the money supply will be 300 years from now. As long as I know it now, and as long as I can use a calculator, I can predict the money supply. So any errors related to me getting the money supply wrong, we would avoid. All right. On the other hand, we have a few problems with rules in general. One would be that very much like there might be political pressure put on the Federal Reserve, for example, to play with interest rates a specific way, we could also see political power over these rules, who, after all, is setting the rule in the first place. Well, I suspect it's probably the same organization that created the Federal Reserve that would be Congress passing a law, President signing it, and that puts things into place. Well, who's putting in place the rule? Similarly, I suspect it would be Congress passing some legislation that gets signed, which means at any point Congress could pass different legislation amending what that rule is, how it works, what that percentage increases for Friedman, or whatever it happens to be. A second problem, which doesn't rely on this political issue, would be economic measurement errors. This is not so much a problem for Friedman, but it is potentially a very big problem for people like Taylor. For me to be able to say, here's what the economy is doing in terms of real GDP, and here is what inflation is doing in terms of prices, I have to have data on these things that is actually reliable so that I can make decisions in the moment what I should do with monetary policy. But if you actually pay attention to, say, GDP and how these releases work, one is that they're very slow. You don't find out what GDP was in, say, March and April. It doesn't happen quite that fast. Secondly, it's not just that they're slow, but they're always revised. You typically will get, say, GDP calculations three different times. So first, here's our preliminary numbers. OK, well, that was based on preliminary data, but that wasn't totally correct. So here's some additional numbers. So here's the official number that you're getting now a month later. But then we've got some additional data. So here's the revised number. So we don't actually know where we are economically at any particular point in time for any of the data that would go into something like a Taylor rule. These economic measurement errors can mean that, in fact, the rule is making mistakes, even on its own terms, just because the data going into it isn't very good. A third issue, which I think is Austrian's we should take with us, is that all of these have underlying them this assumption that the economy is some kind of static thing or that it operates like a machine. If you always do the same input, you always get the same output out of it. So we follow this rule. It's something that's very regular and static and so on. Stick the same input in. We should get the same output out. But of course, we know that the economy is composed of actual people, and people change their minds. There are no constants in human action. And so there are issues when we look at rules. So now I want to look and I would point out that a lot of these critiques that I've given to this point are things that are not specifically Austrian. You find these same critiques inside the mainstream that people that like discretion are saying these things to the people like rules. People like rules are saying these things to the people like discretion. So I want to take a little bit more of what I consider to be an Austrian approach with this next set of comments. So let's think by analogy. Why don't we produce shoes by a rule? So think about that for a moment. Why is it that economists that would typically accept that the way we do shoe production works reasonably well would turn around, here I have in mind people like Friedman, would turn around and say, well, we really need to produce money by a rule. Well, what is so radically different? Well, I would suggest that the reason we don't produce shoes by a rule is that we do recognize that leaving some room for entrepreneurial judgment actually makes sense. Even though we know that today, the way that modern corporations work is that they do actually look at big data. It's the age of big data. So you gather all kinds of data about what, how many shoe sales, demographics, and what have you. We calculate all of this, try to figure out how many of various types of shoes people would like. We do this, but in the end, it is the entrepreneur making the choice, deciding what to do or not. How much do they trust the results that the big data is giving them? How do they weight that result versus their own ideas of what should happen? And I think we recognize this is actually the right way to do it. There is something in that human understanding that cannot quite be captured by the statistics, so they may be helpful in informing that understanding. So this would suggest that if we believe that entrepreneurial judgment is useful, then something like discretion does sound good. I would suggest just thinking more about this idea of a shoe rule. The more I think about it, the more it seems, would it make sense or not? I'm not quite sure. After all, population is somewhat predictable. It grows somewhat predictably. Certainly, after any particular cohort is born, watching demographics over age is fairly simple. So right now we're doing predictions regarding how much demand there will be for higher education over the next 18 years, and we can have a reasonably good approximation. So maybe we could do actually something like a shoe rule. Seems possible. But yet we come back to that question of shoes are not that simple. It's not a matter of producing the right number of shoes. You have to produce the right style and all of that. Get them to the right place, the right time, and so on. So entrepreneurial judgment again comes in because there is complication when you're dealing with human beings. Now I would also suggest that the Friedman critique is extremely important, in that it points out something very specific about the way the monetary system works that is very different from something like shoe production. So remember, go back to Friedman, this great quote. Any system where mistakes made by so few have such bad effects for so many is a bad system. Now let's think about this with shoes. What happens if, say, Adidas does something absolutely stupid? They decide, well, all we're going to produce, we think that really there's gonna be a lot of demand for size 14 hot pink sneakers. And that's all we're going to produce. Producing a bunch of hot pink size 14s. What happens? Well, I think we agree that they probably don't sell very well. We have lots of hot pink shoes that are being produced that people don't particularly want to buy, either because they don't like hot pink or because that's not the right size. So we end up with lots of shoes. Now, is this a waste for society? Well, yes, it is. Lots of resources. We just went into producing size 14 hot pink shoes. We are, in fact, made worse off because of this. But where does the burden of that mistake fall? It falls primarily on Adidas. They're the ones that paid a whole bunch of costs. And now we're not receiving that money back. So the shareholders that did not immediately kick people out of positions in upper leadership, they're going to be paying quite a bit because of this as their corporation is taking losses. But so mostly when they're making the mistake, the burden is falling primarily on the one making the mistake. In this case, on the corporation, making this totally stupid choice regarding the shoes they're creating. Now, what about the consumers? Now, we are made somewhat worse off. Less choice involved. But the way we get around that is that I suspect these shoes will end up being very, very cheap. It's not worth zero maybe, selling for a couple dollars a piece, that kind of thing. So the effect on consumers is basically minimal. We have a few less of the other shoes we might actually want, but the shoes we got are really cheap. The burden, again, falls primarily on Adidas. What happens though when the Federal Reserve makes a mistake and the economy goes through a recession? Yeah, I'm pretty sure that's it. Federal Reserve does not suffer because of this. Now, it might be the leadership we don't like as well, but on the other hand, because of independence, they're not so easy to remove. So they're still there for quite a while. Does the Federal Reserve take losses? No, typically not. In fact, profit and loss as an incentive is shut down for the system. As Dr. Haddon described earlier, the way the Federal Reserve system works, the way it raises money is it buys up these government bonds and receives interest, uses these interests to pay expenses, and there's a bunch of money left over at tens of billions of dollars. This does not go right to all the shareholders of the Federal Reserve system, and if there's a mistake they pay for it, no, it goes back to the Treasury. So the Fed doesn't suffer from its own mistakes. This is a failure, or rather, better put, a lack of profit and loss. The typical way that the economy works. If people make mistakes when they're running their businesses, then they end up taking losses, and if they do this enough, over time, they'll find that they just don't have the resources left to continue in business. We're reallocating resources away from those making mistakes toward those that are making profits. How do you make a profit? You find resources that people don't really have much use for and are therefore relatively cheap. You make something people really are willing to pay for. You sell it. You make that difference between the two. That's an entrepreneurial profit based on the judgment that you have made. And what happens over time? You earn these profits, you can reinvest them in your business. The good decision makers are the ones that can continue to grow their businesses and have a larger and larger effect on how resources are used. Not so with the Federal Reserve system. If they make profits, it doesn't actually make any difference. It goes back to the Treasury. If they don't make profits again, it doesn't actually make any difference. The Treasury just gets slightly less. We don't have any kind of profit or loss calculation here or any kind of motive here that could possibly be driving the Federal Reserve when it's making these choices. Now, the second problem though, is that another thing that was pointed out is not just try that we have this profit and loss missing, but there's a lack of alternatives. When we look at the American system, can I really easily say, oh, I'm just going to abandon Federal Reserve nodes and start using something else? I could try and say, well, I'm just going to operate in Bitcoin from now on. Unfortunately, I very much doubt that Kent State University will pay me in Bitcoin. So I'm going to have to change my employer to somebody that's going to pay me in Bitcoin. Perhaps I'll go work for Overstock or something like that. And I'm only going to buy from places that will sell to me in Bitcoin. Now, I will note that I did pick the right state to live in because Ohio has recently said that it will accept Bitcoin and payment of taxes. Okay, so I will be able to pay my taxes at least to the state illegally. That's fine. But I'm going to have to really change the way I live my life. If I try to find an alternative to using Federal Reserve nodes or dollars more broadly, there's a lack of alternatives. And that's a big part of the problem. Whereas this is not so much the case with things like shoes. If Adidas does something stupid, I can buy Nike, I can buy Reebok or what have you. There are other options out there. You might see where I'm going with some of this potentially. But if not, we'll get there directly right now. All right, so how then should our monetary system operate from an accession standpoint? Now, we'll say, Mises lays out, this is all from the theory of money and credit. You can buy copies downstairs. I would suggest that if you do decide you want to read the theory of money and credit, it's, I'd say it's a book of its time in many ways. So a lot of it, he's dealing with debates that are happening in the early 1900s. He's using terms in a way that are different than what we would use them today if, say, you take Econ 101, that kind of thing. So I would strongly advise, have somebody to guide you through it. One option would be Dr. Murphy's study guide to the theory of money and credit. I should start getting commission from selling these things. I have not asked for it yet. All right, so in that book, right, Mises lays out there are two sides to what he considers to be an ideal monetary policy. The first is a positive affirmation of the market's choice of money. That is that legally we should recognize what the market has chosen as a money. Secondly, there should be some form of obstruction that will prevent government from meddling in the currency. So he realizes there are these potential for political pressures. There should be some kind of barriers, but in place, to prevent government from stepping in. So practically, how do we do this? So I'm gonna lay out two different approaches that different Austrians have suggested. I will be somewhat agnostic myself between these approaches and saying, whichever one that we can actually manage to convince somebody to do, I will not complain about. So the first one is to revive the gold dollar. So this is the approach that both Mises and Rothbard have suggested, and now their approaches are slightly different from each other. But at heart, the idea is that we already have a bunch of dollars being used here in the United States. Let's reconnect that dollar back with gold. We know it was connected with gold originally. It just, that connection was broken right through the course of the 30s and 70s. So let's reestablish that connection. So the Misesian approach, what Mises lays out in the theory of money and credit when he's looking at monetary reconstruction is a few steps. So first, he says we should stop issuing additional paper dollars. He's not saying we need to burn all the ones that are out there, just don't issue anymore at this point. Now after we do that, we also want to make sure there are no gold sales by the Fed or by the Treasury. And so we don't want anything messing with what's happening in the gold market. And he suggests that if we do this, these two things, first stop issuing paper dollars. Secondly, don't allow any gold sales from the authorities. The price of gold will stabilize. He says when that happens, then we'll establish parity at whatever that price happens to be. So if it just so happens that after we make these announcements, we're not going to issue no more paper dollars, we're not going to sell any gold at this point, we just want to see where the price is going to stabilize. Maybe it stabilizes at, say, $2,500 an ounce. Once we see that stability, he says, okay. Then we can step in, say, now a gold in $2,500. Those are just equivalent to each other. $2,500 is the name for an ounce of gold. It's simply, by definition, the same thing. If you have $2,500 and you want to hand them into the Federal Reserve, we'll give you that ounce gold coin, or vice versa, you have an ounce of gold, or you want the $2,500 paper dollars, you can do that. We can establish parity at that level. So he says we create this conversion agency that is going to then just handle these transactions as people want to either use the physical gold or use the paper equivalent. But note, this idea of a conversion agency, this is not something that is totally foreign to our experience, not so much recently with gold, but we do have, say, some countries that have pegged their currencies to, say, the dollar, that established currency boards to do this. So the currency board is then in charge of ensuring that if anybody brings in a certain number of dollars, then they receive whatever the legal equivalent is in their home currency and vice versa. So that's the same idea here applied, though, to a conversion agency. He also suggests, here you can tell the time he was writing, he says we need to eliminate all large bills, though, as time goes on. He says anything $5 and up. Yeah, $5 may have been a large bill around 1920. It's not really a large bill today. But the idea is that when we have these large enough bills, maybe in today's, he might say something like $100 and up might be about right, proportionally. So no bills for $100 and up there, instead you use gold coins. So then people get used to, at least for large transactions, actually using the physical gold, thinking of gold as being the actual money rather than only thinking about papers being money, which made breaking the connection much easier than it otherwise would have been. And so this is the necessity and approach. Rothbard takes a somewhat different approach, one that I think could probably be established much, much faster as far as that goes. So Rothbard would say, well, we have measures of the money supply. We also have some sense, assuming they're not lying to us, of how much gold holdings we have right in the Fed and the Treasury. So why don't we just immediately establish what the ratio is between the two? So I did some calculations. Personally, I like M2. It's the kind of thing that happens when you're an economist. You have a favorite money supply measure. So if I'm not allowed to choose the true money supply or the Austrian money supply, which Dr. Newman talked about, I'll choose M2. These tend to be reasonably close together. So last I checked it was $14.7 trillion, okay? When it comes to how much gold is being held by the government, you have to do some research to figure this out. But what I found, based on, this is from, first, the Federal Reserve, their balance sheet says that they have a certain dollar amount of gold. I think it's like $11 billion, right? But that amount, strangely, you'll notice, if you look over time, that $11 billion doesn't change despite the fact that the price of gold changes. That's one reason people argue against a gold standard is the price of gold changes. How is it that your asset is changing in value but the asset is not changing in value on your balance sheet? Well, it's because it's on there on a legal basis. There's a specific price that it was at. I think it's around $40 or so an ounce, drastically underpriced as an asset at this point. So doing the math is okay. I found that would be roughly 261 million ounces, right? That are owned by the Federal Reserve or the Treasury. Exactly the legal standing there is a little bit fuzzy too. This combination of roughly 261 million ounces, it's not that hard to do the division, right? So 14.7 trillion divided by 261 million. I'll give you a couple seconds to work that out. That's right, it's roughly $56,000 per ounce. So what Rothbard would say is, well, we know how much money is out there and what we would generally consider money. We know how much gold there is. Let's just establish parity immediately. $56,000 per ounce will do it and then we don't have any problems of, oh, maybe we'll run out of gold if people decide they really don't want paper dollars or what have you. So in that case, everybody could take all of their savings accounts, all their checking accounts, all the paper dollars you actually have in your pocket. We could all rush to the Fed, right? Hand them in and they'd say $56,000 per ounce. We hand you the gold and there's no problem except that it's a long line, right? That said, no issue of like, oh, we don't have enough gold to back every dollar if that's the ratio we choose. And naturally there will be a certain amount of adjustment in this change in the value of gold from, what is it recently? Something a little under $2,000 an ounce. It's been bouncing between like $1,502,000 as long as I've been watching it, I think, at least recently. And so, what's the idea here? I suspect we'll find ways to economize on the use of gold, right, which I might want to try to convince my wife that it's not so important that I wear this anymore. I suspect I will not succeed. But anyway, we could pay off a good part of the house right here. Anyway, so that's one option, right? Let's bring back the gold dollar by reconnecting gold with the dollar that we have. Now, one thing that is very good about this system is that it realizes that there is a certain amount of momentum when it comes to money. Getting people to switch from one money to another is a difficult thing to do, right? So, we're letting people, they can keep using the dollars they're used to, just now it is actually connected to gold, right? Okay, that's nice. So, a second option though is currency competition. This is something that was suggested in at least in a particular form by Friedrich Hayek and his denationalization of money. Also by Hans Sennholz in a slightly different form in money and freedom. Both of these books are downstairs in the bookstore. I will particularly say I really liked money and freedom when I read it. Hans Sennholz taught at Grove City College. He was gone before I was a student there. I kind of feel like there's a legacy there that I need to carry on or something like that. Okay, so the basic idea of currency in competition, and here I'm going to pull more from the Sennholz version, is that we allow people to use whatever currency you want. So, if you want to use dollars, because you like dollars, you're used to dollars, that's fine. If you decide for some reason you prefer euros, okay, go ahead, it doesn't matter that we're not in Europe, you're gonna go ahead and use them. If you'd rather use British pounds, fine. Bitcoin, fine. If you want to use gold coins, fine. If you want to use Liberty dollars, which the government stomped down on a few years ago, go ahead and do that silver-based currency. It doesn't really, like legally, you're not going to run into any issues. Now, in order to make that happen, what that requires is that we eliminate legal tender laws. Legal tender laws, what they do, you can see this if you pull out, right, any say, American money, it says on there. This is legal tender for all debts, public and private. What that means is that if you owe someone a debt, they're legally required to accept dollars in payment for that debt. That's really all it means, is that everybody has to accept dollars under our system. So by eliminating legal tender, what does that mean? It means that I can write a debt contract where I require payment in something else and I do not accept dollars in exchange. So I could say, okay, I will sell you this house in exchange, there's this debt, you have to pay me back an ounce of gold per year over the next 30 years, that kind of thing. And if you come to me and say, I don't have an ounce of gold, I say you better get one or I'll take the house back. Oh, but I have some dollars. No, no, the contract says gold, it's going to be gold. Nowadays, you can't do this. Legally, I have to accept gold in some ratio. All right, so eliminate legal tender loss. No, that doesn't mean you can't make contracts on the basis of dollars, you can certainly, just you're not required to. It also, another point of currency competition under the St. Holtz version would be free entry in currency. So anybody who wants to start producing currencies is allowed to. So if I wanted to start producing Inglehart dollars, see, people learn by experience better than by words. There we go. That's one Inglehart dollar right there, wonderful. So I could start producing these, and then I could offer, I just had somebody rebuild my deck. I could offer, oh, you accept Inglehart dollars. You'd say no, but free entry does not guarantee that the thing is accepted, so okay. If people want to start trying to produce their own currencies to compete with the dollar, they're allowed to. I would note this is not allowed under our current legal system. That's what got the Liberty dollar in trouble was that it was perceived that they were trying to compete with the American dollar. Of course they actually were, but legally they weren't allowed to do this. So allow free competition, allow people to actually enter and start producing their own currency. They may or may not succeed and let them. Succeed or not, as the case may be. A fourth point which St. Holtz would point out is it's amazing to me when you say something like, oh, I want to market-based money, people act like you're being totally radical. But a lot of these steps that we're talking about to get to currency competition are extremely small. They don't necessarily require changes in behavior by anyone other than the government that's enforcing this legislation. So the last one then would be honesty and minting. We know the treasury mints a lot of coins. And if you have, say, a silver dollar, so by the ounce of pure silver, roughly 0.999 pure or something like that ounce of silver, it has stamped on it $1, which is its legal tender value. Now the silver inside of that coin is worth substantially more than a dollar. But if I go to the grocery store and I try to use the silver coin to buy my groceries, they're gonna say, well, it has a dollar stamped on it. Pick the pack of gum you want. It would be crazy for me to try to use these treasury stamped coins in exchange the way that it is now. So what Zendal suggests is that we do something very simple and that is to stop putting dollar values on these coins. It's an ounce, 0.999% pure, or 0.999 pure. And then it can trade whatever the ratio happens to be. So it might be worth roughly, I think at the moment, something in the neighborhood of $15, $20. In exchange, if I can convince somebody that a silver coin is what they want to take instead of paper dollars. So that's it, four very simple things. Allow people to use whatever currency they like. Free entry and currency, which would require legal change. Eliminate legal tender laws, also a legal change, but these are not outrageous things that require people to change their behavior. And honest minting by weight, it's actually simplifying what the treasury is doing in terms of its minting process. That's it. That's all it would really take to get currency competition started. Then let the market decide. Back to the first Missessian point. Let's positively affirm whatever the market chooses. It might be that the dollar, the paper dollar can hang on for a while. It's been reasonably well managed compared to many currencies. It might be that it loses out to something like Bitcoin. It might be that it loses out to something like gold or silver. Like, I don't know, I'm an awful entrepreneur. I hope that you don't have to be a good entrepreneur to be a good economist or I'm in trouble. I'm an awful entrepreneur. I don't know what the market's gonna do. I say, let it do it. That's the key. So how would the system then work if we have these private producers of money? Dr. Klein did talk about this a little bit in her talk, but I think it bears repeating. So let's say that we move to something like a gold-based system. Now I would note, if we do have a gold-based system, that doesn't mean that there's a single producer of gold that might make mistakes the way the Fed might in our current system. It is possible if we have, say, a gold-based money, there could be lots of miners of gold because there are currently lots of miners of gold and there's no necessary reason that would change. There might be lots of mentors of gold because right now there are lots of mentors of gold and there's no necessary reason that would change. So that means then, mistakes are less serious. So let's suppose that we do have these entrepreneurs trying to make decisions about how much gold they want to mine and mint and so on to bring into monetary uses. How do you make the choice? So on the basis of any other business, like shoes, profit and loss. Now, when you're dealing with money, things are kind of funny and that an ounce of gold is an ounce of gold. This is being used as money that hasn't changed. But what does change is your cost of production. So if gold is becoming more valuable, people want more of it, then that means it takes less gold for me to pay my workers, for me to pay for electricity, for me to pay the various costs involved. So now it's more profitable for me to produce more gold. So it makes sense, I'm going to ramp up production. Perhaps there'll be new entrants coming in, starting to mine gold that didn't think about doing it before, but now it's more profitable to do it. So they start producing more gold. So let's put this together. So suppose there's an increase in the demand for this gold money, in that case, it gains value. Because of that, it's now more profitable for us to produce gold and people produce more of it. This is the way we want the economy to work. When people want more of the thing, we produce more of it. And it could go the other way around. Everyone might be, maybe people say, I don't actually want more gold, I'm okay as it is. In which case demand falls, the value of gold would fall as a result, which means then I have to pay my workers more to convince them to actually work. I have to pay more for electricity and so on. I'm taking losses. So we start cutting back production, which is exactly what we want the economy to do. If people want less of the thing, we produce less of the thing. So that's exactly the way we would like this to work. Okay, now I would note, I just want to say a very quick comment about Bitcoin here. One of the criticisms of Bitcoin that I've heard from Dr. Herbner, and I think he's basically right, is that that doesn't operate the way that we just described. If you want to know how many bitcoins are going to exist at any point in time, we know that now. It's actually closer to a Friedman rule, but not a constant percentage each year. It's totally predictable what the quantity of Bitcoin is going to be at every single year or date, even for that matter. And so it doesn't respond in quite the same way. Now, does that mean that people won't pick it? I don't know, I'm a terrible entrepreneur, okay. I suspect that if Bitcoin had to actually fight a fair fight with something like a more commodity-backed money, that it probably wouldn't win. Might it win against paper dollars? Time may tell, right. So I just want to finish up then with a quote. I mentioned Sennlitz's Money and Freedom, which I do really enjoy, and I think this quote just sums it up very well. That is, sound money and free banking are not impossible. They're merely illegal. This is why money must be deregulated. In freedom, the money and banking industry can create sound and honest currencies, just as other free industries can produce efficient and reliable products. Freedom of money and freedom of banking. These are the principles that must guide our steps. Thank you.