 After the break, what better thing to do than to talk about monks and Spanish scholars and their vindication of freedom. One of the most interesting things about the Salamanca school was how incredibly anti-mainstream and anti-consensus it was for the time. Let's think for a second, because we often hear that history doesn't repeat itself. We're in the 16th century, there's this huge empire that used to get a lot of gold from the conquered nations and is starting to see the flow of gold diminishing and it decides obviously in order to continue paying for the salaries and the subsidies of different sectors to do what? Print money and print money massively as well as resort to intervention. One of the surprising things you would imagine considering what we have learned from history is that a very large empire that prided itself on the fact that the sun didn't set on any of the parts of the empire at some point in the day was at the same time claiming that the reason why prices were rising was because of traders, was because of evil foreign nations, was because obviously, because the different businesses were colliding to increase prices. It was a very difficult time and not unlike what we are living today, a time in which was not particularly compelling and certainly not lucrative to have a different position than what the mainstream was building. What the mainstream was building was a view that it was the king obviously and its very well versed advisors who knew which were the prices of each and every good and service. It was also a time in which the basic levels of freedom were not particularly recognized depending on where you were born even in such a vast empire. So what the school of Salamanca started to do was something that is unique and that resonates significantly with all of us that follow the Austrian school of economics which is to understand the importance of human action and freedom as basic principles of prosperity and growth. It's quite amazing to think that in such a period of time things like trade were viewed at the same time as positive and negative depending on what the king or the government decided. So on the one hand the empire was monstrously protectionist and at the same time it seeked the increase in trade via cooperation with other nations from a position of strength. The position of the school of Salamanca was a moral one to start with. It was about understanding the basic principles of the law of nature is that all human beings are equal not only in the basic rights but also in things as important as property. And it was precisely a group of scholars coming from an area that is usually very close to government or a part of government like the church that started to make it very clear how important it is to understand that property and the rights to conserve and increase wealth are an integral part of progress. It was basically a school in which a number of people actually did not join the school as something that they shared common values or they had the same ideas. But they had a core level of principles that they maintained throughout the whole part of their written analysis and all of the different aspects. Some of them were more interested in the morality of power. The most important part being the risk that once the morality decides that the king is the one that decides what is good and what is bad, certainly corruption is created throughout the entire system and it generates a higher problem than what is supposed to benefit. If we look at, for example, the words of Juan de Mariana, one of the scholars of the school of Salamanca about tyranny, it's very interesting to see what he was saying that the tyrant appropriates the goods of individuals and always waste them, possessed as he is by the ignoble vices of avarice, cruelty and fraud. And this is something that was absolutely revolutionary at the time. He goes on to say, quote, the tyrants indeed seek to harm and ruin everyone, but they direct their attack especially against the rich and honest men throughout the kingdom. They consider the good more suspect than the bad and the virtue they lack is more formidable. And this is very important. Why? Because one of the things that we're seeing today in the debates in economics and in politics is precisely this is the advent of tyranny through the creation of an onerous and aggressive enemy that is always an external and fungible type of enemy that is usually directed at those that are productive to society. It is very interesting to see that in Schumpeter in his history of economic analysis simulated the study of the scholastic doctrine in general and the Spanish doctrine in particular, alluding to the high level of Spanish economic thought of the 16th century. And why is this? It is precisely because what they were seeing was that every measure implemented by the kingdom to prevent free trade was generating an equally aggressive and negative impact on progress and the welfare of the poorest. In his own words, also, Frédéric von Hayek recognized the contribution of the School of Salamanca by saying that the theoretical principles of the market economy and the basic elements of economic liberalism were not designed, as we believe, by Calvinists and Cotys Protestants, but by the Jesuits and members of the School of Salamanca during the Spanish Golden Age. It's not just about economy. It's mostly about the position of government within the economy. One of the things that, for example, Francisco de Vitellaria said, something very interesting is that government price fixing is always a mistake. When goods are plentiful, there is no need for a maximum set price. When they are not, price controls do more harm than good. Not just that, but in one of his lectures, he said, he was the first to fully state the quantity of money as a main influence in determining the purchasing power of a currency. Are the things being equal, he said. In countries where there is a great scarcity of money or other saleable goods and even the hands and labor of men are given for less money than when where it's abundant. It's interesting this because he understood that limiting trade and even speculating on currency were actually larger problems than the collapse of the currency. So what they basically thought was that those things that were being negatively viewed by government, like, for example, trading on currency were actually not that bad, were actually much better and much better for the progress of everyone than what one would have imagined in a period in which everybody is trying to blame somebody else for a problem that is created by a government and an empire that was basically extractive and confiscatory. So it was basically just taking wealth from other nations and redistributing them to the crony parts of the economy according to the level of support to the kingdom. Ultimately, what we see is what this school is trying to do is to place a more important role on human action and the development of the economy based on what the small but thriving trading and we could call it middle class was actually doing for the economy rather than the crony sectors, the exporting sectors, those that actually were close to government. And it's actually that in the pricing of goods and services, one of the things that they mentioned was that it did not make any sense to believe that the price increases seen throughout an empire as vast as the one that they were talking about were going to be created simply by the collision and the collusion of all of the traders in the different aspects, in the different areas of the economy. One of the things that, for example, Luz de Molina said was, quote, he said that goods are not valued according to their nobility or perfection. Why was this? Because at the time it was perceived as evil to raise the prices of medicine. At the time it was perceived that it was sinful according to the Catholic Church to increase the prices of medicines because if prices of medicines were rising and the poor and it was more difficult to get access to medicine, then what those that sold those medicines were doing was actually negative for the society. And what Luz de Molina, for example, said was actually there was the opposite, that the pricing of goods and services has to be done according to the ability to serve human utility. Valuation is done by individuals, he says, and we can conclude that the just price for a pearl or a medicine depends on the fact that some men wanted to granted value as an object of decoration or as something that heals. Absolutely, what he was trying to say is that the price of a pearl or the price of medicine is not something that somebody is going to dictate for the common good in a way that generates a better use afterwards. Molina understood that the crucial importance of free floating prices and the relationship to enterprise, this was due to his extensive travels and his interview with merchants of all sorts. He said, when a good is sold in a certain regional place at a certain price, so long as it is, and this is key, quote, without fraud or monopoly or any foul play, then quote, that price should be held as a rule and measure to judge the just price of said good in that region or place. If the government tries to set a price that is higher or lower, then it would not just be unjust, it would be immoral. This is utterly groundbreaking for what we imagine today and what we have to think of what was society at the time. So much that it also, many of these messages that the school of Salamanca promoted were actually viewed as negative even by the church authorities, which were defending opposite views like, for example, implementing maximum prices on essential goods and services in a period of inflation or implementing protectionist measures to support local businesses. One of the things that they mentioned all the time was quantity of money and the idea that prices do not rise in unison just because everybody gets together and decides to raise prices is that the quantity of money is larger and therefore it is creating a problem of inflation. This, it was very difficult to understand at the time because many people believed that generating higher quantities of money and producing more quantities of currency was actually not just a way to support the vast bureaucracy and administration of the empire but also a very social policy. The generally perceived way of doing things was okay, if we are not receiving the amount of gold that we are receiving today, what do we need to do? What we need to do is to pay more units of currency to people in order to go through the period and therefore the economy will get stronger, more units of currency will generate more wealth and with that wealth we will trade more and the economy will be even stronger and the empire will be cementing its position all over the world. It was actually the opposite. It was actually the opposite. The confidence in the currency is one of the things that they attach to morality is that they place currency as the utmost element of what is moral and what is positive and what is defendable about a government. It is in essence, currency is in essence, as Juan de Mariana used to say, like the presenting card, not card obviously, like the presenting feature of a nation. One of the things that is very interesting about this is that when they say just as the abundance of goods causes prices to fall, so too does an abundance of money causing prices to rise. The general view in the entire, in the entire academia close to government and close to the mainstream at the time was actually the opposite. It was actually that the way to combat inflation was to generate more units of currency and therefore with that force the rest of the nations to use the currency created by the empire in order to maintain the monstrous bureaucracy and the enormous amount of spending that the empire required. So one of the things that they talked about quite in length was about interest rates and the importance of interest rate not as a measure of greed or not as a measure of being evil and avaricious, but as a measure of risk. In one of the elements of the writings, one of the things that they were saying was that I quote Juan de Mariana, any loan involving an investment of capital requires an interest in order to set itself apart from all others that are either less risky or less interesting for society. Think about this, what they're actually saying is that interest rates are a way of setting morally what is the best way to put capital to work. The best way to put capital to work is actually to make it worthwhile for those who lend to provide that money to those that are actually going to return it in the safest, quickest and more productive way. It's not just about investing in the economy, the so-called productive economy. One of the things that was widely viewed at the time was that speculators, bankers and that financial, the financial sector in general, were only there to make money out of the productive sectors and make it worse for the economy to work. What the scholars in the School of Salamanca said was actually the opposite, was that speculation was actually a very important way of improving the possibilities of traders and the productive sector to grow. Because, as they said, there were only two ways at the time of putting an investment to generate growth and to generate productive activities, which were one, to get a subsidy from the government, which they considered to be immoral because it was politically directed, or to get a loan with an interest that analyzed the risk involved in the transaction. Thinking about that process, Juan de Mariana himself mentioned that what they were doing actually is taking away the sins of the king from the decisions of investment in capital. Think about this. What they understand is that the higher level of power that an empire provides does not give the government more understanding or better understanding about what is good for the economy, but that malinvestment is a crucial feature of a very large government. These things might be today something that we consider that is part of the debate, but unfortunately these things were not just not mainstream at the time, they're not mainstream today. So think about this. All of these people were not particularly libertarian, they were not against the empire, they were certainly not against the church, and they were certainly not against some very vast powers in government, but what they did understand was that with big government comes big corruption, and what they did understand is that in the analysis of a process that was viewed as positive, was viewed as positive because many of these scholars, one of them in particular, Domingo de Soto, was Dominican. He gained his knowledge from the universities and from all of the things that the empire brought to Latin America. Yes, so they did see a positive in the way in which society was at the time, but what they definitely understood was that massive creation of money and the artificial use of currency as a means of transferring wealth from the productive sector to those that are close to government or to government itself were the beginning of an immoral process of government becoming tyrant, and that was very evident because they had already a wealth of years of understanding what was happening in that empire. On one thing, on the one side, they saw some level of positive elements, but on the other side, they were seeing all of the negatives that were coming from an increasingly tyrannical type of government. Things would get a lot worse, things would get a lot worse. In the subsequent years, these scholars obviously were criticized, they were left behind, they lost a lot of influence in society. However, what they created was a very interesting but growing number of people that followed them because what they talked about at the end was not something that was groundbreaking because they thought about it. It's because what they were talking about was logic. What they were talking about is what the Austrian School of Economics picked up afterwards, which is the understanding human action and the impossibility of creating just activities from the accumulation of power and government intervention. Thank you very much. Thank you very much.