Welcome to Keith's night. Don't tread on anyone and the libertarian Institute. This is why the state demands the control of money by Hans Hermann APA. Imagine you are in command of the state defined as an institution, that possesses a territorial Monopoly of ultimate decision-making. In every case of conflict, including conflicts involving the state, and its agents itself. And by implication, the right to tax IE to unilaterally, determine the price.
That your subjects must pay for you to perform the task of ultimate decision-making to act under these constraints or rather. Lack of constraints is what constitutes politics, and political action. And it should be clear from the outset that politics then by its
very nature. Always means Mischief, not from your point of view, of course, but Mischief from the point of view of those subject to your role as ultimate judge, predictably, you will use your position to Rich yourself at other peoples expense more specifically. We can predict in particular with your attitude and policy, vis-à-vis money. And banking will be assumed that you rule over our territory that has developed beyond the stage
of a primitive barter economy. And we're a common medium of exchange. Iea money is in. Use first off, it is easy to see why you would be particularly interested in money and monetary Affairs as State ruler, you can in principle confiscate whatever you want and provide yourself with an unearned income but rather than confiscating various producer or non consumer goods, you will naturally prefer to confiscate money because money as the most easily and widely
saleable and acceptable. Good of all allows you the greatest freedom to spend your income as you like on the greatest variety of goods. First and foremost, then the taxes you impose on. Will be money taxes, whether our own property or income. You will want to maximize your money tax revenues in this attempt.
However, you will quickly encounter some rather intractable difficulties, eventually your attempts to further, increase your tax income, will encounter resistance in that higher tax rates will not lead to higher, but lower tax, revenue your income your spending money declines because producers burdened with increasingly higher. Or tax rates simply produce less
in this situation. You only have one other option to further increase or at least maintain your current level of spending by borrowing such funds. And for you, you must go to Banks. And hence, your special interest also in Banks and the banking industry. If you borrow money from banks, these banks will automatically take an active interest in your
future well-being. They will want you to stay in business, IE. They The state to go on its exploitation business and since Banks tend to be major players in society, such support is certainly beneficial to you. On the other hand, as a -, if you borrow money from Banks, you are not only expected to pay your loan back, but to pay
interest on top. The question then that arises for you as the ruler is, how can I free myself of these two constraints IE of tax resistance in the form of falling tax revenue and of the need to borrow from and pay interest to Banks. It is not too difficult to see what the ultimate solution to your problem is. You can reach the desired, independence of taxpayers, and tax payment and of banks, if only you establish yourself. First, as a territorial monopolist of the production of
money on your territory. Only you are permitted to produce money, but this is not sufficient, because as long as money is a regular good, that must be expensively produced, there is nothing in it for you except expenses, more importantly, then you must use your Monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold, or silver, you must see to it.
That worthless pieces of paper can be produced at practically zero cost will become money. Normally no one would accept worthless pieces of paper as payment for anything pieces of paper are acceptable as payment only insofar as they are titles to something else. IE property titles. In other words, then you must replace pieces of paper that were titles, too. Running with pieces of paper that are titles to nothing under competitive conditions, IE.
If everyone were free to produce money, a money that can be produced at almost zero costs would be produced up to a quantity Where marginal revenue equals marginal cost and because marginal cost is zero. The marginal revenue, IE, the purchasing power of this money would be zero as well. Hence, the necessity to monopolize the production of
paper money. So as to restrict its Supply in order to avoid hyper inflationary conditions and The Disappearance of money from the market altogether and a flight into real values and the more, so the cheaper, the money commodity in a way, you have this accomplished would all Alchemists and their sponsors wanted to achieve, you have produced something valuable money with purchasing power out of something practically worthless. What? Achievement it costs.
You practically nothing. And you can turn around and buy yourself, something really valuable such as a house or a Mercedes, and you can achieve these wonders. Not just for yourself, but also for your friends and acquaintances of which you discover that you have all of a sudden far more than you used to have, including many economists, who explain, why your Monopoly is really good for everyone. What are the effects first and foremost more paper?
Money does not in the slightest effect, the quantity or quality of all other non-monetary Goods there exists. Just as many other Goods around as before this immediately refutes the notion apparently held by most if not all mainstream economists, that more money can somehow increase, social wealth to believe this as everyone proposing, a so-called easy money policy as an efficient. And socially responsible way out of economic troubles.
Apparently does is to believe in magic that stones or rather paper can be turned into bread. Rather what the additional money you printed will affect is twofold on one hand. Money prices will be higher than they would otherwise be and the purchasing power per unit of money will be lower in a word.
The result will be inflation more importantly, however, /. All the while the greater amount of money does not increase or decrease, the total amount of precisely existing social wealth, the total quantity of all goods and Society.
It redistributes the existing wealth in favor of you and your friends and acquaintances, IE those who get your money first, you and your friends are relatively enriched on a larger part of the total social wealth at the expense of impoverishing others who as Result on less the problem for you and your friends with this institutional setup. It's not that it doesn't work. It works perfectly. Always to your own and your friends advantage and always at the expense of others.
All you have to do is to avoid hyperinflation for, in that case, people would avoid using money and flee into real values. Thus robbing you of your magic wand.
The problem with your paper money Monopoly, if there is one at all is only Lie that this fact will be immediately noticed also by others and recognized as a big criminal, rip off that it indeed is. But this problem can be overcome to if in addition to monopolizing the production of money, you also set yourself up as a banker and enter the banking business with the establishment of a central bank because you can create paper money out of thin air.
You can also create credit out of thin air. In fact. Because you can create credit out of nothing, without any savings on your part. You can offer loans at cheaper rates than anyone else. Even at an interest rate as low as zero, or even a negative rate. With this ability. Not only is your former dependency on Banks and the
banking industry eliminated. You can moreover make Banks dependent on you and you can forge a permanent Alliance and complicity between Banks. And state, you don't even have to become involved in the business of investing. The credit yourself that task and the risk involved in it. You can safely leave it to commercial Banks.
What you your Central Bank need to do is only this you create credit and of thin air and then loan this money at below Market interest rates to commercial Banks, instead of you paying interest to the Banks Banks, now pay interest to you and the bank. Intern loan, out your newly created easy credit to their business friends at somewhat higher but still sub Market interest rates to earn from the interest differential. In addition to make the banks, especially keen on working with you.
You may permit the banks to create a certain amount of their own new credits of checkbook money in addition. And on top of the credit that you have created fractional Reserve banking. What are the consequences of this monetary policy to a large extent? They are the same as with an easy money policy. First and easy credit policy is also, inflationary. More money is brought into circulation and prices will be higher and the purchasing power of money lower than would have
been the case. Otherwise s, the credit expansion to has no effect on the quantity or quality of all Goods. Currently in existence. It neither increases. Nor decreases their amount. More money is just this more paper. It does not and cannot increase social wealth one. Iota, third easy credit. Also in dangers, a systematic
redistribution of social wealth. In favor of you, the central bank and the commercial Banks within your cartel, you receive an interest return on money that you have created at practically. Zero cost out of thin air instead of on money costly saved
out of an existing income. And so do the banks who earn additional interest on your Costless money loans, but you and your Banker friends there by appropriate and unearned income you and the banks are enriched at the expense of all real money, savers who receive a lower interest return than they otherwise would IE without the injection of your, and the
bank's cheap credit. And to the credit Market, on the other hand, there also exists a fundamental difference between easy, print and spend money policy and an easy print and Loan credit policy. First off, an easy credit policy changes, the production structure, what is produced? And by whom in a highly significant way, you the chief of the central bank can create credit out of thin air. You do not have to first save money out of your money income.
IE cut your own expenses and thus abstain from buying certain non money Goods as every normal person must if he extends credit to someone, you only have to turn on the printing press and can thus undercut any interest rate. Demanded of borrowers, by Savers elsewhere in the market granting credit does not involve any sacrifice on your part, which is why this Institution is so nice. If things then go. Well, you will be paid a positive interest return on your
paper investment. And if they don't go well, well as the Monopoly producer of money, you can always make up the losses more easily than anyone else by covering your losses with even more printed paper. Without costs and no genuine personal risk of losses.
Then you can grant credit essentially indiscriminately to everyone and for any purpose without concern for the credit worthiness of the debtor or the soundness of his business plan because of your easy credit certain people in particular investment bankers who otherwise would not be deemed sufficiently creditworthy and certain projects in particular of Banks and their main clients. That would not be considered profitable. But wasteful or too risky instead do get credit, and get funded.
Essentially the same applies to the commercial Banks within your banking cartel because of their special relationship to you. As the first recipients of your Costless low-interest paper, money credit, the banks to can offer loans to prospective lenders at interest rates below, Market interest rates. And if things go well for them, they go.
Well. And if they don't, they can rely on you as the monopolistic producer of money to bail them out in the same way as you bailed yourself, out of any financial trouble by more paper money accordingly. The banks to will be less discriminating in the selection of their clients and their business plans and more prone to funding the wrong people and the wrong projects.
And there is a second significant difference between a print and spend and a print and loan policy and this difference explains why the income and wealth redistribution in your and your Bankers friends favor that is set in motion by easy credit takes these specific form of a temporal boom-bust cycle. IE of an initial phase of seeming General prosperity of expected increases in future incomes and wealth.
Followed by a phase of widespread impoverishment when the prosperity of the boom, period is revealed as a widespread illusion. This boom-bust feature is the logical and physically, necessary consequence of credit created out of thin air of credit on backed by Savings of fiduciary credit or however else, you may call it. And of the fact that every investment takes time and only shows later on at some time in the future. ER, whether it's successful or not.
The reason for the business cycle is as Elementary as it is fundamental Robinson, Caruso can give a loan of fish, which he has not consumed to Friday. Friday, can convert these savings into a fishing net. He can eat the fish while constructing the net, and with the help of the net, then Friday in principle is capable of Paying his loan to Robinson plus interest, and still can earn a profit of additional fish for himself. But this is physically
impossible. If Robinson's loan is only a paper, note denominated in fish, but unbanked by real fish savings. IE, if Robinson has no fish because he has consumed them all, then, and necessarily. So Friday must fail in his investment. Endeavor in a simple barter. Our economy, of course, this
becomes immediately apparent. Friday will not accept Robinson's paper Credit in the first place, but only real commodity credit and because of this, the boom-bust cycle will not get started but in a complex monetary economy, the fact that credit was created out of thin air is not noticeable. Every credit note looks like any other and because of this the notes are accepted by the takers of credit.
This does not change. The fundamental fact of reality that nothing can be produced out of nothing and that investment projects undertaken without any real funding whatsoever by savings must fail, but it explains why a boom, an increase in level of investment accompanied by the expectation of higher future income and wealth can get started. Friday does except the note instead of immediately refusing it and it explains. Why?
Then takes a while until the physical reality reasserts itself and reveals such expectations as illusory. But what's a little crisis to you? Even if your path to riches is through repeated, crises brought about by your paper money regime and Central Bank policies from your point of view from the Viewpoint as the head of state, and chief of Central Bank. This form of print and Loan wealth, redistribution in your own and your Banker friends
favor. Well, Less immediate than that achieved with a simple print and spend policy is still much preferable because it is far more difficult to see through and recognized for what it is rather than coming across as a plane's Roddenberry site in pursuing an easy credit policy. You can even pretend that you are engaged in the selfless task of investing in the future. Rather than spending, on present for evil, T's, and healing economic. Crises rather than causing them. What a world.
We live in. Thank you for watching Keith Knight. Don't tread on anyone in the libertarian Institute.