Property and Freedom Podcast, Episode 075.
This panel discussion is from the 2011 meeting of the Property and Freedom Society: Hans-Hermann Hoppe (Germany/Turkey), Mateusz Machaj (Poland), Philipp Bagus (Spain), Doug French (USA), Thomas DiLorenzo (USA), Nikolay Gertchev (France), Discussion, Q&A. PFS 2011 Playlist. Transcript below.
Transcript (youtube/Grok):
Introductory Announcements
0:02
Yes we want to be done by 5:15. If we finish earlier then again keep in mind that you round up your troops because at 6:30 we want to load the buses to go to the fishing village.
Audience Question to Philipp Bagus on Future Book
0:42
Andy Duncan from the Department Centre in the UK: I’d like to ask Professor Bagus, this morning particularly the second half I thought was fantastic. Is that lecture going to be the basis of your next new book called Banksters? And if not, why not?
1:00
[Music]
Philipp Bagus Response
1:08
So my speech today was for some part based on this maybe not the standard analysis of the extent of the mainstream comparison of possible future research. Why not would be always of course always a time factor many things many things to do but it’s not impossible.
Unknown speaker Question on Economic Growth Despite Monetary Issues
1:44
This is actually addressed to everyone who carries this question. I listened this morning with attention to Professor Hoppe and Professor Bagus and some of the others who are talking about the worthlessness of the currency, the government monopoly of the currency, various dubious banking practices. I found myself agreed with everything that I heard. On the other hand I’m also trying to account for the fact that the United States in the 20th century saw an enormous increase in living even from the 1950s into the last decades of the 20th century. Disposable income rose specifically and so forth but still the disposable income does rise consequently this period of time.
The United States has made one of the highest standards of living in the world and it continues to happen despite the fact that the dollar has run into problems that has become increasingly devalued. It would seem to me that given the economic problems that were pointed out the United States has done very very well. It helped to explain the successes of the American economy given the fact that hampered by a bad government and by increasingly devalued money and questionable banking practices.
Hans-Hermann Hoppe Response
I think this is an example of a postponement of fallacy. What first of all the same sort of banking practices are in place in almost all countries not just in the United States and Germany forth. Second it is something like this we can say look in the 19th century standards of living were significantly lower in the entire western world as compared to what they are today. At the same time we have seen a growth of government also throughout the entire western world from the 19th century up to this day. So does it follow that because the growth of government societies in western Europe grew obviously they grew we are richer?
Was the fact that government grew the cause for the fact that we are richer? The answer is no. Despite the fact that we had all these monetary mismanagements we didn’t grow we would be infinitely richer if it were not for the fact that these types of policies had been implemented and are still being conducted day in and day out. So it is just the illusion he sees two things going down to see that one is the cause.
I agree with him many many times but I’m still astonished by the success the resilience of the American economy given the incompetence and dishonesty of the government. The way to describe despite this fact you know we have not been like Egypt like other countries we have done enormously well with what seems to be incompetent and in many ways. Western Europe the United States have a bright population even up to this they have a pretty good work ethic still the Germans continue to work very hard despite the fact that muscles of money is siphoned off by countries like Greece and Spain. So it is an expression of the ingenuity of German businessmen of American businessmen of Dutch businessmen and businessmen and many many other countries that have made these things possible.
Markets do miracles they find a way around all sorts of obstacles that are put in their place nonetheless those are obstacles. Without them of course the performance would have been even much better.
I’m inclined to believe basically in the thesis that Richard didn’t put up this this has something to do so to speak with the intellectual capacities and capabilities of various populations. We are lucky that we still have this type of population unfortunately the performance in these areas is also on the decline.
I just want to have one interesting thing as a side note even in the mainstream literature it’s recognized that the gold standard the classical gold standard even though it was not a perfect system or it was not the best system possible in the 19th century. The growth and at the end of 19th century growth in the United States was actually higher than it was in the 20th century. You can even read it in Simon Kuznets the Keynesian inventor of GDP and then Milton Friedman’s history of monetarist United States. So two classical mainstream economists demonstrating that actually growth in the 19th century was higher under the classical gold standard. Those economists or other economists using data they say that it was less stable environment but still they have admitted.
This is even more astonishing given the fact that of course it is easier so to speak for rich countries to save and invest then it is for poor countries to save and invest. So the growth rates were higher despite the fact that it was at that time given that the general population was poorer far more difficult to save and invest. It has become significantly easier now with standards of living being significantly higher despite the fact savings rates and support have actually declined even though it should be easier to save nowadays than it was 100 years ago.
Audience Question to Doug French on Ethics of Walking Away from Mortgages
9:06
I have a question for Dr French and I’m not sure whether correctly what we’re saying about walking away from contract because if the idea is that you can’t simply walk away from the contract my old concept of falls apart. So I would like to understand whether what we’re saying is that people who have borrowed money in order to buy a house or a rotten site and so on walk away because the lenders are banks that are financed by government and guaranteed by government legitimately such as Fannie Mae and Freddie Mac the United States. That is the reason why in this circumstance people can walk away from the contract. Or whether you believe that well I have pledged to refund or repay a certain amount over a certain amount of time but if the collateral that I gave falls in value then I’m not going to be there whoever is the lender.
I think that there is a I I’m not banker and I know nothing about banking but I think that there is a certain class of loans that are made with a mortgage and so on with a no recourse thought. That is painful this is why normal standing that you quote could have a walk away on investigative them because it’s actually not Morgan Stanley involved money but presumably the subsidiary of Morgan Stanley and very active properties and so on that they ran into. The rental income was not sufficient so the subsidiary went lost and there was no recourse on the current company. But a homeowner buys the property that property is not yielding any revenue so there is no way that the person can repay unless the repayment comes from their salary. So it is a salary that is pledged and therefore if you walk away you have actually broken your pledge to take some money out of your salary in order to pay back the bank.
Doug French Response
11:37
Well I would come back with this a number of people are grounded 30-year mortgages when they’re your age or my age. Clearly that borrower wouldn’t have 30 years to repay their loan they’re not going to be here to do that. In my view lenders were playing the market the real estate market just like the borrowers were. So while they want to stand on their high horse and say you need to pay until the very end they’ve taken this loan and sold it often many times. So this isn’t like you borrowed money from your brother-in-law not that anybody should ever do that but who has actually saved money for gone consumption to hand and done without the use of that money to allow you to do something with that money.
This is money that these are loans that originated sold in the secondary market and so and in some states there is not recourse California being one I think Arizona is another. So it varies state by state. There’s also other costs to this I’m not saying that somebody can walk away and not have costs associated with it. You’re going to get chased potentially for decades for the difference between what the lender sells it for in sale and what you owe. So this is not a walk away scot-free and forget about a situation.
The only thing I’m really addressing or trying to address is this morality toward people who in my view are making a reasonable economic decision that is the best for their situation. Most people don’t do this lightly. Most libertarians would not say that it’s ethical to necessarily pay your taxes but you do most people do but most people less than the amount of taxes that they pay. Yet we’re supposed to at the same time because we have this contract on a specific mortgage paid that when it makes no financial sense. So I mean there’s again it’s not to me it’s not an easy decision I wouldn’t tell any individual I wouldn’t advise them whether to do it or not.
But I just think that the moral outrage against these people I believe is misplaced is the point I’m trying to get across here. It is that it’s a perfectly reasonable financial decision. You pay a price in terms of your credit report although that’s been a lesson over time because it’s come out recently there’s been a study done that people who strategically default are actually better credit risks than other people. Because they use credit responsibly they under use their credit cards. They typically the other distinguishing feature about these people is they bought their homes recently and they have no personal attachment to it.
Many people they own their homes because they have a irrational personal attachment to that property. So but again it to me that the reason that I explored the issue is that number one libertarians had a reasonable argument on either side of it. Very vocal especially on the you must stay till the end of time. I was trying to think since I didn’t have a Murray Rothbard down the hall to go talk to about this. I tried to imagine if I went down to Murray and said close this question to him what he would say. That’s what I was trying to come up with.
Audience Question on Happiness Research
16:22
I think we should take this work on happiness rather more seriously than it was argued in your presentation. Please have this questionnaire of the general format would you consider yourself to be very happy very happy not very happy unhappy and that seems a very straightforward question I don’t think any of us here would have difficulty in answering questions like that and getting a score. Furthermore the validity of these studies is shown by the results which are that people who requires happy learners are less happy and the unemployed are particularly unhappy all that seems very sensible to me I think we should take it on board. I think a way to deal with this problem is to consider the implications of this we see where all this is leading to it’s leading to the conclusion that we should tax high earners more and distribute the proceeds to the poor and the unemployed. And is the indication of this work and that is not a not an implication which is particularly congenial to people like ourselves nevertheless I think the way to handle it is to point to adverse effects of a high tax high redistribution policy for instance such equality encourages high earners to immigrate to tax havens and such a policy giving greater welfare benefits now implied encourages them to remain unemployed.
So I think we should combat this position by drawing attention to the adverse effects of these forces rather than simply dismissing it all as having no validity.
Response (likely Nikolay Gertchev or Philipp Bagus)
18:55
Utility is cardinal and measurable which is not and then therefore you can make interpersonal utility comparisons so I think we have to argue with that also because that’s the main claim that they’re making. And I didn’t mention the effects of the welfare state which they tend to ignore in this literature so I would agree with you that that’s one way of doing it but I think it’s also important to park you against these the use the way they use these questionnaires to proclaim that social welfare and maximization is a real thing social welfare functions exist which they know. And Rothbard’s criticisms of people who answer questionnaires I think are still valid today so you have to take them with a big grain of salt. And I also believe you’re ridiculing stupid ideas too.
Unknown speaker Ridiculing Happiness Research
20:04
All incomes above 73 thousand dollars seven seven six thousand dollars would no longer make people happy now it every person who just gets a job offer for 74 would just decline it because this additional thousand dollars does not make me any happier anymore. And it’s an easy way to repeat this this whole concept I have not seen anyone who has done anything whatever somebody wants to offer me more for me a bigger donation I will not decline it because it will make me less happy than I was before their real nation every dollar or fighting I take it in my case this whole thing does not apply.
Unknown speaker on Relative Status and Happiness
21:25
Who wrote this but it was a similar survey of happiness in Mogadishu and they brought up them in particular they particularly mentioned a couple of butchers and these guys that basically chop up meat all day and they’re incredibly happy they’re poor they’re dead but they’re relatively very happy because their relative perception of social status is okay. And if you go to every other country it looks like there’s a higher correlation between the position of social status than the absolute number of the dollars so I’m just wondering if there’s anything on the social status perception versus just dollars.
Response (likely on Inequality Research)
22:01
Well the research that I reviewed for this talk was mostly on material inequality and there’s a lot more you know you can’t say much in a half hour but even the whole issue of inequality and use of these statistics is it’s very shady. For example in the USA we have I know some studies were done by some Fed economist actually looked at if you look at statistics on inequality by you know income distribution by the quintile of the distribution it looks flat for 100 years it hasn’t changed but it’s not the same people. The individuals who are in the lowest quintile in 1980 are not the same individuals over there in the year 2000 because there’s a lot of mobility and there’s a Fed study that showed that for example in a very high percentage it was over 70 of the people who were in the lowest quintile in 1970 were in the either the top quintile or the top two quintiles by 1994 so they weren’t the same individuals.
So there’s a lot of mobility and at least in the US economy and all of that is lost and when we just look at these statistics on income inequality in an aggregate sense these researchers were going to do this. Because the University of Wisconsin for about 40 years now has been tracking individuals and paying them to give them information on income and so forth and so they’re able to actually see the actual ability of real people and how they’ve done it’s a very big sample of thousands it’s socioeconomically diverse and so and that’s a much better way of looking at income inequality than just these raw statistics. And I doubt that the happiness researchers would do that because they wouldn’t get the same double core correlation coefficients that they do with their research they’ve got now.
Audience Question to Nikolay Gertchev and Thomas DiLorenzo on Pressure on Bad Ideas
24:05
Primarily for Nikolay Gertchev and Professor DiLorenzo I’m always surprised by the prominence of the bad ideas like the ones we were discussing is there any evidence that they’re the proponents of these ideas are feeling pressure from what seems to me like the growing influence of the Austrian school.
Thomas DiLorenzo Response
24:26
I will say this against Professor happiness is clearly making progress in the broadcast what has been become clear in the last two years since the financial crisis is that economists in mainstream economics has been increasingly more concerned with the real issues about public economics about economic policy impact growth what’s the business cycle so happiness research and psychology these areas are receiving less attention by economists within the mainstream themselves. I can say from this point of view maybe there is a link to make Austrian school because the Austrians were very strong explaining that the real world and the real phenomenon which we have been concerned for years. And I think it was one of the major American news magazines Newsweek and one of them had a cover story it says something like the failure of the economics profession I said something along those lines of course it didn’t mean the Austrians the Austrians were included in that but but the fact that they were totally clueless about the causes of the of the crash and then had nothing to say that was good about you know what to do about the crash but the Austrians did the Austrians and the other ones who predicted that the bubble especially the people associated with the Mises Institute like Mark and then of course what to do about it.
And so the mainstream people have paid a lot more attention to the Austrians and meanwhile interest in Austrian economics is booming you the Mises University which we hold last year had the highest attendance ever turned a lot of students back even though Doug had knocked down walls literally and they leased the student building to make room for more for more people. And the Mises.org website is the seventh or eighth most heavily trafficked economics website in the world even more it’s even busier than whitehouse.gov and in the Wall Street Journal as far as a number of people to read it. And so the obstacles are going in the opposite direction of the mainstream but mainstream is sort of always all these tenured professors who don’t really care they’re going to keep on writing the same articles to and of course it was the purpose of these two speeches to put pressure on these people you see the University of Zurich will now do after these two speeches.
Audience Question on Happiness Research as Psychology
27:19
Are quite important but the problem seems to be a kind of misleading fraudulent interdisciplinarity where psychology is mistaken for economics but if those researchers actually confined their work to psychology and stop claiming to be economists would you then consider this kind of psychology as valuable would it teach any valuable lessons about human nature. Because I find it quite possible that there are certain voluntary decisions which decrease reported happiness it shouldn’t be relevant politically but from a philosophical point of view might be quite interesting relevant to society’s phenomena.
Response (likely Hoppe or Bagus)
27:58
Well yeah utility is not measurable you can’t put a brain measuring machine on somebody’s head and then feed them a piece of candy and see how many noodles are listed on the side of this shoe that’s sort of the implication of the whole idea that utility is cardinal and measurable sort of a Frankenstein monster kind of machine but our brains do that as long as you understand that. I was just talking to one of the physicians in the group earlier about how he questioned his patients on how much pain are you experiencing on the scale you know one of my doctors does the same thing in a biology doctor and I just as long as you understand that this is not really that scientific I suppose it could be useful but it’s subjective. And you know there might be one culture where people are sort of not inclined to say I’m unhappy about anything there might be another culture and somewhere else in the world would be just the opposite they pretend that they’re always happy despite being unhappy.
And so that’s what Ron Paul meant but he said you can’t really rely on a truthfulness of questionnaires you have to observe people’s actual behavior as long as you understand those things that think of a great assault somehow it might be more or less entertaining to know what these people think about that issue. So if you find out that unemployed people tend to be less happy than employed people it’s not exactly a surprising result here’s the Austrians that unemployed people are actually far happier than people who make a billion dollars that would surprise me but then they have quite a few surprising results. Yeah but again if you take it just as an information of what they have said to a certain question but the entire purpose of this having this research is of course to find excuses for economic intervention and ultimately gives you destruction of all private property rights.
I think your point that it would make sense to have this entire psychology and economics field reviewed by psychologists also my feeling there is that psychologists will also find it quite doubtful psychology is not necessarily accepting also this viruses and positivistic approach so that will be already a first draw problem and then in interdisciplinary indeed it would make sense that only if the different disciplines are properly acknowledged it doesn’t make sense if you meld two disciplines into a single one losing what the goal of your research is. By the way even in the Property and Freedom Society statement first it is not said that the goal is multi-disciplinary service translational research fully acknowledging the status of different sentences different social sciences.
Audience Question to Doug French on Ethics and Non-Recourse Mortgages
31:27
My question is for French do you think whether he has nothing to do with whether he is moral or not for a person choosing to walk away from the platform from a loan but rather he just choose to consume now versus getting easier credit in the future and so my next question is about the non-recourse nature of mortgage in the U.S because I don’t know whether I’m right or not but I think it’s quite unique for the U.S that the mortgages are non-recourse then whereas in other jurisdictions like for example like Hong Kong we cannot just walk away from the loan because you need to sign a personal guarantee when you buy a flat something like that so what do you think is the cause of that non-recourse nature. What was the first question again well because you said the ethics of default but is it is there anything to do with ethics because it’s just a person I mean you choose if I walk away from the door but I don’t have any consequence so of course I would walk away from that like for example if I’m 18 years old and I walk away from home no problem but if I were 20 years old I walked away from a loan then I you know the rest of my life maybe I am very difficult to get credit so yeah just my question is whether it’s an ethical issue or not.
Doug French Response
33:16
Well I framed it in that context are certainly certainly the person who gave you the title of speech did but I’m gonna put it more as his individual business decision and you’re right if you’re a young person who’s concerned about future credit and how this will weigh on on your credit report your future job prospects those kind of things where possibly a strategic default will have a detrimental effect on your future then maybe that decision certainly is going to be different. But if you’re 200 200 000 underwater and you’re paying four thousand dollar house payments and the house will never recapture that negative equity and you can have the same house same neighborhood and either rent or buy and have a payment of fifteen hundred dollars I mean we’re talking about significant numbers we’ve talked about significant lifetime style choices here nobody’s gonna walk away for 200 bucks 300 bucks 400 bucks. What I’m talking about here is something very significant where people are weighing okay my credit report I’ve got perfect credit at 720 beacon I’m going to go down to 530 which is going to be very incredibly it may take me seven years to get back Fannie Mae is not going to do another mortgage if they’ve determined a strategic default for seven years so there’s a heavy price to pay.
But potentially a lot of people probably need to get out of the home ownership mythology that you buy a home it automatically goes up in value every year you can use it as a cash ATM to create money and that you will live happily ever after this buy your own home program was instituted in say 1918 by Herbert Hoover before he was even president. They created this whole idea that if we can get Americans trapped in their neighborhoods they will be more protective of their property more interested in local politics more interested in national politics so I would contend didn’t talk about it today talk about a lot in the book that government has fostered this idea that homeownership is it’s not only a good financial decision but it’s good for your country. And that’s why every president certainly every modern president George W Bush George H.W Bush Clinton you name it they all had this idea that everybody needs to own their own home and so I think everyone has fostered this idea of trapping people in this situation for many years.
Second question the non-recourse nature of the housing the mortgage in the United States why would that happen because other jurisdictions cannot why would somebody walk away if it is non-recourse is that the question because lenders if they don’t think they’ll have much to get from your other assets may make the business decision not to chase you for your additional assets and so that is a chance you’re taking so you’re gonna have a deficiency so you have a deficiency of fifty thousand hundred thousand when you walk away they’re gonna probably hang a judgment on you for that amount and big banks are not all that good. And every incentive if you’re creating money out of nowhere to do as much of it as possible and not necessarily be as careful as you should when you’re lending that money so on the collection side they may if they determine that okay it’s going to take me 50 000 to collect this if I’m chasing a hundred thousand and I think the guy’s got a boat and I think the guys I think his wife has jewelry et cetera et cetera then they may have something to chase if everything is tied up in a person’s home they may walk away. But the other issue is they may sell that judgment so anybody who does this has to be aware anything of the judgment love stupid bank may not be chasing them some very enterprising judgment buyer who bought the 50 000 judgment for a thousand dollars may pop up somewhere in there later in their life later saying you know let’s make a deal and they may be very nimble and very aggressive.
But for non-recourse states it’s a much easier decision recourse states it’s a much trickier prospect and that’s why I say walking away from people you don’t walk away free there’s threats there.
Audience Objection to Doug French
39:12
I’m still not persuaded with your remarks and I think you are perfectly right when you are describing from positive perspective how people behave and why can they behave this way not another way but you jumped into ethics very easily and you justified some of these behavior important patterns and I was saying that you know I’m afraid that you’re opening Pandora’s box and like lots of what in the basement during springs or maybe the plumbing system doesn’t work properly and he may say just walk away because it doesn’t it’s not as good as he supposed to be. And I think it’s not a reasonable reason actually to walk away from contract to justify it and if we go further you know of course from a positive point of view if you find a bicycle in the street nobody sees it you may take a bicycle and this would be a decision but it doesn’t mean that we have to justify this this kind of business decision it’s a simply completely different area. And I think that in comparison to taxation or social welfare and social security is not correct actually because in case of banks you sign a contract in case of taxation you need contract is not existing against social security as well and in fact if you look to the practicalities in many cases it’s a person who applies for credit to buy a house it’s not a bank who forces it.
And just for the final remark it’s a favorite example from UK there was a case with a lady who pursued a bank because she told the bank actually by offering extended credits and actually the offer was made exactly on the day when she lost her job and of course the offer was put in a very nice manner like please go and spend all of it and actually she did during next week and then after having no money to pay back credit she sued the bank for because and actually.
Doug French Response
41:54
Well this is what makes for a good Q&A I suppose but no in terms of the taxation you decided that you would pay income tax right yes is it ethical for you not to pay taxes sure and is it ethical and if I mean when you say that while we get taxed and that’s not equivalent to a mortgage because you voluntarily got into a mortgage when you voluntarily sign a mortgage income tax and you got a job and you make income you voluntarily you voluntarily sign on to pay property taxes when you own property you voluntarily sign on to pay sales tax when you buy things okay sit over there in the ivory tower if you want to I’m talking about the real world here and what I’m trying to talk about is the real world versus this libertarian purism. Yeah I just wanted to add that well in principle you are right a contract is a contract but it’s not always that easy to just say that the contract is a contract a few years ago I had an exchange in Phillip we were talking about possible monetary deflation in the current monetary system so let’s suppose that like holes of the banks they collapse and nominally your debt goes like 1000 up if all most of the banks fail so under the circumstances well we need a sort of arrangement for the whole country to reorganize the debt structure right but then from your perspective you could just say oh you took the credit is your risk you’re supposed to just pay but you hold that to me right way to the bank and the current legal system actually benefits the banks hugely.
So it’s like let’s say in 1991 when you had one company providing telephone services okay so let’s say the telephone service the company comes in in 1991 offers you a contract silent or otherwise you’re not gonna have a call okay and you sign a contract saying okay I will be your customer for the next hundred years or until I die and then in 15 years suddenly you have market economy developed you have competition between different companies so you can choose a different company but then you’re not allowed to because you have a sort of contract right it’s like the state would show up with your door and say you want to pay the taxes right no but sign a contract now no I will not okay so you’re not allowed on a public street and die in your home right and then they could defend themselves by saying therefore the state is a voluntary institution contract now didn’t you right and you would have to sign the contract under the circumstances right and admit that you would right wouldn’t you set the contract you would die about 100 but the situation is completely different I know it sounds completely it is different you’re all right it’s different but it’s not completely different it’s the question of continuum right when do you draw the borderline right and that’s after the debate and I think that was what was created it was very important that you look at each specific case so to speak.
Let’s say I go to Bernanke and he gives me a huge number not as a private person but there’s a heck the central bank do I then have the obligation to repay the loan where can I default on the loan and walk away would he be treated in the legal system in the same way as if I received the loan from you personally and yeah I would say of course if I default on Bernanke that is perfectly all right after all he is ahead of a criminal organization I have no moral obligation whatsoever to pay anything back.
Audience Question on Central Bank Balance Sheets and Losses
47:23
Carrying on with central bank balance sheets and this is for Philipp and Mateusz this is not an ethical question it’s just about history or about the future you can take it out of your way so central bank balance sheets something that’s fairly likely to happen in the next few years is that the measured core consumer inflation will eventually start to pick up like our headline inflation measured consumer inflation has already picked up dramatically when this happens the Fed will probably start doing a tightening and that tightening may very well include kind of a reverse QE2 where they take their balance sheet and squeeze it down now if they do this in a undoubtedly higher interest rate environment they’re going to take huge losses on that balance sheet they’re going to be selling treasuries and mortgage backs it may be an environment in which the average interest rate on the treasury curve is six rather than two or three my question to you is well it’s a bunch of questions about does it matter ultimately do you know of historical cases or cases right now where central bank losses potential losses are already constraining so-called independent monetary policy where the central bankers are trying to protect their own institutions because even though they’re really part of the state they also have their own personal agendas and if they lose a ton of money they’ve got to go do they have to go to the Treasury and get a recapitalization or can they just bury it with good old cost accounting or they just but they can’t bury it right because they’re selling bonds if they actually sell the bonds to contract the base they’re going to actually have to record losses so you can approach this from either a historical like has central banks been constrained by their own P&L or in the future will be constrained is China being constrained we have a lot of central banks now with huge balance sheets with tremendous potential losses.
Philipp Bagus Response
50:32
Here you arrive at the fact at least okay of course don’t cannot be used to solve it in the pay steps because it can just reduce dollars to pay its debts but it’s to have a negative capital on the balance sheet would be problematic for the confidence in the currency we would have losses that would make would be obvious that there are not many real assets left to defense accounts in case of problems or for monetary reform for that matter however because when they sell assets losses it becomes obvious that there was nothing or there’s nothing left with monetary reform or to intervene on the one exchange market to defend the currency etc so it might have an important effect on the confidence and people might have started to sell the currency or their dollars and you see it also that it matters for the ECB because easy dollars can also create printed zeros however in December they increase their capital why because they are of course expecting losses from their adventures in club land and they don’t want to have negative capital so and this has cost for them because it reduces their profits and they pay back less profits to governments due to this capital increase so they care they actually care for their balance sheet and of course their cases of central banks or the central bank of Iceland for example it pays but of course for foreign ECB and the Fed is not so much further because they don’t have so many foreign denominated debts.
Mateusz Machaj Response
52:55
I would say that it doesn’t really capital or matter they the central banks could easily do what they’re doing still even if they would have even if they had a negative capital the guess would be well the economist would extra money the government would have to buy money in the financial market they will issue new debt to recapitalize the central bank and then that extra that will be bought again by the central bank or something like that so what they would have to do which is increase public debt but this of course doesn’t matter under the circumstances because the public debt and we just rolled over as fully demonstrated so I don’t think there is any problem with negative capital for smaller foreign but not for ECB or the federal reserve system I didn’t see any problem coming here and apart from that I think also that the balance sheet per se is that important for the strength of the currency I think other factors are more important the investors are not really paying attention to capitalization of the central bank the value of currency depends on the on the quality of the relationship and this is not the result of an economic protective activity so it’s very easy for government to recapitalize the central bank the central bank just buys treasuries and the government does not spend the money but put into this special account called capital reserves in the central bank so this can be a cashless operation the recapitalization of central banks to any given level is purely cashless but your question has a particular relevance for the euro area and written in the following any profits from the monetary operations that very detailed are redistributed but any losses are kept on the specific central bank which provided emergency liquidity assistance now we are having this issue currently because Irish banks are borrowing almost as much as they borrow from the regular operations directly from the central bank with emergency loans and whatever losses could be realized on these emergency loans would go directly from the states that of course this would increase the cost of borrowing of the other state alone and so there is a kind of socialization of profits within the member states of the euro area that there is individual internalization of possible losses and this would in just just one example imagine that the Fed gets negative capital because they do an organ and they find there’s no body so it takes a loss there’s no gold in the Fed okay negative capital or you do the recapitalization which is.
Audience Question on Strategy Against Parasitic States (and Closing Remarks)
57:30
The journalists that will go along with them and create these stupid theories that rob more people more of their property from a competitive position of the lovers of liberty what is the strategy to benefit from this I mean if we are trying to compete against them and create something as an alternative all these values are actually goals in terms of creating something alternative that will attract some of the people that don’t want to be voluntary servants anymore so my I guess my the first part of the question is why doesn’t anything like this happen here the whole world is dominated by this parasite nation states and secondly what can we do about it to make it less likely to continue like this in the future state employees many countries we have already 50 of parasites and then we have democracy and these 50 of parasites they love parasitism I’m personally I’m not very hopeful that liberty is just around the corner I frequently think that for the time that we have left for ourselves we should just almost enjoy this seat of crazy thing going on as long as they do not really personally grab us and kill us and incarcerate us I must say I frequently I read the paper and I find all of these particular things just funny and hopefully nobody will grab me personally and hope for the best but then to be personalistic I have not really seen any major progress in terms of liberties I think people in the 19th century of course have far more personal liberties and they have they have currently maybe somebody has to say something more optimistic but I’m not one of those that has great optimism this is why I think this is also a song to join each person’s company and laugh about the foolishness of the saying in America that you cannot fight city hall city hall will do whatever it wants to you but Gary North says but you can pee on the front steps and run away just to say that there are four that we’ve had I’d like to put just make a few assertions that critical to the question I would observe that the lifetime tax rate in the 19th century was approximately 20 lifetime tax rate defined as what fraction of your life did you have to give up to the state before your your children receive what the fruits of your life in 20th century election tax rate has been about 90 percent I’m talking primarily from an American perspective of other analogies in many other western countries and then the 19th century a lack fair 20 lifetime tax rate we had the gold standard we’ve had monetary stability the 20th century we’ve had Vietnam you know 98 in some countries much more than 98 of our destroyed by the welfare warfare state so the question is would you like to watch the light how much better off we would have been if we had the same conditions from a tax monetary standpoint in the 20th century as we had in the 19th century what is the magnitude of how much better off it would have been we’ve had laissez faire gold standard under accenture in the last century I think this would be a question for an but of course it would be I think that would be a little bit wealthier and you would be a little bit wealthier too as I said you know I’m not the kind of person who does these calculations I’m sure that there are some people who calculate these sorts of things I have never thought about it and I wouldn’t even know how to do the characteristics I have a question for professor is there any study regarding the level of taxes and tax inflation people pay around the world and can we compare that to the level of taxes that the slaves and servants used to pay and something else I have a comment on the ethics of walking away from the contract I’m typically professional kids around that and the classroom libertarian legal theory and he has a case that breaking a contract is not a violation of the libertarian code probably that’s a misconception that he’s going is any study regarding the level of taxes and tax inflation people pay around the world like I can only answer the question is it is a taxation nowadays higher than what the taxation was it was because of private slaves I would say yes it is higher than what was involved in imposed on private slaves again I’m sure there is empirical studies about not an expert on this I only really remember having wet comparisons of current tax rates and the degree of exploitation that the slaves were subject to the amount of taxes that was being extracted from the slave was low as compared to what is expected from I remember reading something by Paul Craig Roberts he said medieval serfs paid something like 40 percent and in the US anyway if you if you were to get statistics on tax revenues and from all levels of government and divide by national income you’d get over 40 but that doesn’t count the inflation tax or how regulation causes the price of business services to go up and all the other effects of them without that if you include the retirement funds that you have to pay before you tax your income because apparently these are not taxes according to modern status I think this question might be done now Doug I thought you answered the question which was there’s a difference between loaning and speculating and so I don’t think it’s an ethical question it’s only an ethical question there’s asymmetry in the speculation so if I think I’m giving you a loan and you think you’re speculating that’s a problem but if we both know that we’re speculating which I think you were trying to make the case for it’s not a medical question it’s just what we’ll speculate on over the last two years the development particularly in the northern states in Malaysia where the gold dinar and the silver money that they durham there and the recent decision in Utah to allow gold to circulate as money in defiance of the U.S laws I also know that the commodity the CME the commodity exchange in Chicago as well as JP Morgan in the course of the last couple of years have allowed gold to be used in the same way as cash because treasures are for collateral for marginal purposes these are indications to mean of an erosion of the legal tender laws and a great practice point for us to know my question for the panel is actually for the panel in general I’m very interested in looking for other signs of relaxation of legal tender laws not enforcement of the legal tender laws either from the historical perspective or from your various studies that you have seen or that you might want to see so we shouldn’t acknowledge them because then we would have anything to do itself I mean I don’t know of historical examples where legal tender was removed who accept commodity meaning probably we are not there yet but what we are still seeing is that some foreign central banks are increasingly buying gold and more and more skeptical about western American public debt instruments as investment opportunities but I think that the United States right now are not really essential or really important I think they are very important the moment you go off for example gold standard is so big and for Texas indeed so it might be important the opposition of torpedoes and those might actually be important if you also introduce competition in the banking industry right then it would have a tremendous effect actually if the banks would sponsor even in the alternate credit cards if you just leave the central banking system with currently existing fiat monies and licensing of the banks for this particular currency even if you need this because if you introduce competition completely free competition nobody will trust the tax anymore they will collapse but even if you left that system at alone and then abolish the legal tender laws and introduce a form of competition in other currencies and freedom of banking services in other currencies I would think it would make a huge difference it could make a huge difference okay with that I thank you all and again keep in mind so please you.
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