Economics Series 1: Lawrence White / The Fed, Gold, National Debt

0:01 Welcome to another episode of Come Together and we're LIVE. Professor Larry Lawrence White, thank you so much for coming on. I really appreciate it. How are you today? I'm fine. I'm looking forward to talking to you. Yeah. Yeah. You know, I'm really excited about this. I've been I, I, I, I this podcast I started, I wanted to, I had a vision of just having healthy, productive and educational content available in a digestible, easy way and kind of a form of a conversation. I think that the dynamic of conversation helps people kind of stay, you know, focused as opposed to, you know, just one of us talking for the entire time. And so I think there's going to be an awesome method. But you're professor of economics at George Mason University, right?

1:01 I just retired on June 1st. Oh, congratulations. Professor of economics. Beautiful, beautiful. Congratulations on retirement. How does that feel? Well, it's been like any other summer, but now that the fall is approaching, it does feel a little different because I'm not preparing courses and my former colleagues are all doing that. I see, I see. And I saw you've been starting to write on sub stack a little bit. Are you going to keep that up? Oh no, I haven't written on sub stack. No. Did I? Was that someone else then? I thought. I thought that was you must have. But yeah, yeah, must have been someone else. Well, you're going to keep up writing or research or what do you, what do you plan on doing?

1:43 Yes, I'm just retiring from teaching and grading exams is the way I think of it. So I'm going to spend the fall in London at King's College London, trying to write some papers, giving some talks. And so those activities I will keep up. That sounds very exciting. That's kind of great. Have you, have you spent time there? Oh, just weekends. I haven't spent a long time since I worked on my dissertation in 1981. I spent a lot of time in the Goldsmith's Library in London. That was a long time ago. I was about to say, I'm sure a lot's changed between now and then, huh? Yeah, all all the things I had to go there to read in person are now online.

2:26 Yeah, that's the benefit. That's the benefit, I guess, right. So I wanted, so I wanted to kind of do a combination of a narrative, but with a lot of information, you know, just to, I guess learning information. And one of the things that I've noticed that I've heard kind of popping up based on the podcast that I've been listening to lately is, is a lot of talk about the Federal Reserve. And I, I know that when I was trying to talk to my family about it or friends about it, very few people seem to have any idea as to what its purpose was. They, you know, they kind of have an idea as to when it was created. But you know, and I know it started, it started, it started in 1913 by Woodrow Wilson. What was the purpose of it?

3:11 What function does it serve and what does it do for us? Yeah, well, Congress passed the Federal Reserve Act in 1913, so it wasn't Wilson alone. And it got underway in 1914. But the the situation was that the US had just had the panic of 19 O 7 and they launched into Congress, launched into studying what to do about it. And a popular idea at the time was, well, there were two ideas contesting 1 was people looked at Canada. Canada had no central bank, had a competitive banking system with fewer restrictions on the banks than the US had. And some bankers and other commentators said we should have a more Canadian style system, and they proposed that. And it didn't go anywhere in Congress, partly because the small banks were against it.

4:15 The Canadian system then, as it is today, was a system of large nationally branched out banks. And the small banks in the US considered that a threat. The other idea was let's emulate what they do in Europe, which is to have a central bank, a government sponsored institution that can pitch in in a panic, try to rescue the banks that are worth rescuing, provide more reserves to the banking system, provide what they called at the time an elastic currency, Meaning if people wanted to switch from deposits to paper currency, the system would let them do that. Whereas in the US, we were under a set of regulations called the national banking system, and that restricted banks from meeting peak demands for their currency notes because, well, it's a long story, but it was originally passed the national banking Acts as a Civil War financial measure. And the idea was compel the banks to buy federal bonds. But after the Civil War, the quantity of federal bonds was shrinking because they were paying off the debt. And this is a crazy idea they had in the 19th century. If you run up a big debt during a war, when the war ends, you start paying off the debt.

5:42 Ratio of debt to the GDP was shrinking, but that meant the amount of backing that the banks were required to have, were able to have. They were required to back their banknotes, their currency with these federal bonds. And the quantity of federal bonds was shrinking. And so that especially in seasons of peak demand, that led to very tight financial markets. So they created this federal institution, the Federal Reserve System, to try to provide more currency and seasons when people wanted more currency, more bank reserves when there were runs on banks, Oregon when the reserves were for some other reason flowing out of the banks.

6:28 So the original mission of the Fed was to just occasionally step in when there was a panic on a day-to-day basis. They nationalized the clearing system, the check clearing system, but they didn't do much by the way of monetary policy because the gold standard handled the quantity of money in the system. So the Fed originally was just a supplement to pitch in during periods of tight money or, in the worst case, panics. So if you were the hypothetical. That was their original mission. OK. So I just want to see if I understand correctly. So if you so hypothetically, if let's say the economy is suffering because of war, a lot of you know, a lot of businesses are closed down, a lot of. A lot of people came along just after. Right, right.

7:15 So they got those are one right and you got people and you got you got people, you know abroad, you got troops being deployed, you got young men and businesses kind of being closed down and the economy needs to be stimulated a little bit because people aren't really spending very much right. So what would happen is the Federal Reserve would make would it make purchases on behalf of the government to keep the to keep the economy moving, to keep it flowing? Well, that's what they began to do later. But in World War One, we're still on a gold standard, and so the Fed isn't really able to just arbitrarily expand the quantity of money in the system. The gold standard governs that and the US actually had an influx of gold.

8:04 Gold was flowing in from Europe to find a safer haven. So there wasn't any need for the Fed to stimulate the economy. the US economy was doing quite well. And in fact, the Fed was kind of overwhelmed with the amount of gold that flowed in. They they had a gold reserve requirement now. They got more than enough gold reserves. They started expanding credit, partly to lend to the US government for the war effort. Defense is not part of the government. Defense can lend money to the government. Sorry, Yeah. So they're they're they're lending money to the government and they're still doing that today. And the way they do that is a little indirect. The government goes out and sells bonds, sells IOU's in the market, and Federal Reserve buys them out of the market. OK.

8:57 So it's a 2 step procedure. But yeah, essentially the Fed is lending to the federal government. But I but I was saying in in the First World War they overdid it. the US had 20% inflation. It's the worst inflation we've had due to the over expansion during the First World War. And how, how does that happen? How does, how does 20% inflation happen over the course of that period of time? Like what what, what happens within the economy that that that allows that to occur? So the 20% inflation is possible when there's 20% more spending and no additional supply of goods. And how can you have 20% more spending? Either money turns over more rapidly or what's usually the case, the Fed is expanding the supply of money. So in the pandemic a few years ago, the Fed enormously expanded the quantity of money.

9:52 And it was OK at first because people were hoarding money. So the money, the new money sort of satisfied the demand by the public to hold more money. But as things returned to normal and people started spending, the Fed was too slow to pull the extra money out and we hit a peak at 9% inflation in 2022 before they tightened monetary policy enough to bring inflation back down South. It's basically more money. Chasing the same amount of goods will give you higher prices. That's the main cause of inflation. Is there a relatively simple way to to combat that?

10:37 But how do you, how do you, what do you do if you post World War One? You're like Oh my God, you have 20% inflation. Do you make? The Fed needs to control its own balance sheet. It needs to shrink the amount of money that it's injecting into the economy. So this doesn't have much to do with everyday consumers. This has more to do with what the Fed is, what the Fed is putting into the, what the Fed is contributing. Well, in the, at the beginning of the process, if the Fed is expanding, they're buying Treasury bonds in the market. That puts the money, new money in the hands of bond dealers, not the public.

11:17 You're right immediately. But it, it spreads, it diffuses through the economy. More money is lent to businesses. Businesses are spending more on raw materials and on labor. So wage income goes up, salaries go up, and the public gets the extra money with a lag. Right, right. I see. Now when people talk about wanting to abolish the Fed, why would they want to do that? Well, I'd have to know what they want to replace it with before I'm sure exactly what their motive is. But the Fed has been a source of inflation and people who want to stop inflation sometimes say they want to end the Fed. If they want to replace it with a gold standard, then that's I can understand that.

12:19 I mean, that's been Ron Paul's shtick for 30 years, right? He has a book called End the Fed, and what he wants to replace it with is people putting themselves back on the gold standard, or I guess these days he would say, or Bitcoin if they prefer Bitcoin, but let people choose what money they want to use. The research I've done over my career is basically supports the idea that we don't need a central bank when we have a commodity standard. Banking systems where the banks manage their own reserves and international gold flows, regulated the quantity of money in any particular country. It worked pretty well.

13:06 I mentioned Canada already. That was an example of where the banks were very lightly regulated and there were no banking panics. The system was quite solid and it was quite competitive, so it was good for the public. They got a little more interest on deposits, they paid a little less interest on loans because what the banks charged in the form of the spread between deposit rates and loan rates could be very small. The the example I studied more was the example of banking in Scotland. This kind of system is sometimes called a free banking system.

13:47 The banks are free to issue their own currency. They don't have reserve requirements, they don't have capital requirements, but competition compels the banks to behave responsibly. It worked quite well in Scotland and there are another I don't know, 50 or so cases of free banking systems with pretty good track records. Right. And do you think that the size of the countries have an impact on whether and how and how well these are implemented or not, meaning Scotland's obviously a much smaller country than the States is. Would that impact, you know, on I guess a bigger scale if that would be the case in the States? I don't see any reason it can't be done on a bigger scale. Canada geographically is bigger than the United States. So it goes population is smaller, right? But the system of nationwide branch banking worked quite well in in Canada, but in the US branch banking was stopped by state governments.

14:47 And it wasn't until the 1990s that the federal government stepped in and said we're going to have nationwide branch banking and we're finally there. But you know, when I started my career in the 1980s, if I went to California with my checking account from a bank in New York, I couldn't cash a check in California. If I if I wanted cash, I had to carry it with me or this really dates me. People used to carry travelers checks from one side of the US to the other. That's how ridiculous our banking system was. And at the time, was it known that it was ridiculous? Like, how come we can't just do this? It was just the way that things were. People knew and people saw that nation, really nationwide branch banking was going to come.

15:37 And not only would it be good for consumers, but it would make the banks stronger because we had some states where each bank was only allowed to have one office that was called unit banking. And a bank with only one office is going to have a hard try hard time diversifying who it lends to. Maybe there's only one industry in town. And so those banks that were not well diversified, the industry has a problem year the bank fails or the banks in that town fail. And so it made the that was the problem in Texas. When the price of oil went down, 2/3 of the banks in Texas failed. So you want to get away from a system like that? Right.

16:23 And, and the, and the Fed controlling and now just for the sake for people to understand this part, the Fed controlling interest rates. And you know, you currently have, you know, Trump running around saying how in the last six months that that the interest rates should be going down, should be going down. And he seems to be in a constant state of, you know, combat with the head of the Fed. What how does that work? What is that about? Well, the Fed formulates its policy in terms of interest rates, but the interest rates are not fixed forever. And it's not that they can keep interest rates low forever. They can only keep interest rates low temporarily if they flood the market with so much credit that the price of credit goes down. But as the money created spreads through the economy, that's going to start to increase demand by businesses. They're going to have to borrow more as prices start to go up, and that'll drive interest rates back up. So what the Fed is really doing when it says we're lowering interest rates is it's saying we're expanding the quantity of money more rapidly.

17:36 And that's what Trump wants him to do because he thinks it'll stimulate the economy. And he doesn't seem to recognize that it's only a temporary effect. And it ends in tears because it ends with higher inflation. And it ends with the businesses that borrowed at low interest rates finding out they can't survive when interest rates go back up and they have to roll over their debt. Right, right, right, right. That's just so that's as you were saying that that was going to my head was if, if it becomes so much easier to borrow money and is that borrowing money at a lower cost? And that would that I, I, I figured the next logical step would be that inflation would occur again. And I mean, you know, and it seems like he's trying to both curb inflation at one time and other and on the other hand, trying to make it accessible for people to, I guess easier people to listen.

18:21 I, I have a, you know, and I guess it's not crazy relative to I, I think my parents were buying their houses in the late 80s, early 90s. But my mortgage rates like 6.86 point 9%, you know, and, and my friends just a year earlier that bought their houses were a year or two earlier were borrowing at 2 to 3%, you know, and you know, so I can understand why people want both, you know, want the best of both worlds. But it doesn't really seem to be able to make sense that you can have both at the same time, or at least not for very long, right? Yeah, the there were people who in the great Depressions said we want cheap money and plenty of it. Yeah, yeah, we all feel like.

19:06 Now, if you're in a situation where the economy is depressed because there isn't enough money, and that was the situation in the depths of the depression because banks were collapsing and people were hoarding money and prices were falling, then there's a good case for putting more money in the economy. And as I said before, in the first six or nine months of the pandemic, there was a good case for injecting a lot of money, but then you have to take it out again when things start to return to normal. Right. And how about, I mean, you know, and I've been thinking, I mean, I'm a little, I'm more than a little concerned. I've been talking to a friend and he's been mentioning for years that we're due for some kind of crash. And, you know, he's like, we keep on propping ourselves up on these bubbles, whether it's student loan bubbles, medical bill bubbles, credit card bill bubbles, and now these buy now, pay later models that aren't even built into our credit, you know, into our credit like that.

20:05 You know, when you're under credit, it doesn't tell you how many thousands of dollars you have, you know, racked up on DoorDash bills, you know, that you're paying, you know, over the course of six years or whatever it is. Yeah. Far enough. So it's, it seems like something's going to happen anyway, and it seems like we're keep on pushing off, you know, or borrowing, borrowing, borrowing and then just kicking the can down the road. It almost feels like we don't have enough money nowadays anyway. It's sometimes hard to tell that you're in a bubble when you're in a bubble because everything seems to be going along well. And it's actually kind of curious that Trump wants to stimulate the economy with cheap money because when he's not talking about the Fed, he's talking about how great the economy is. And in fact, the unemployment rate is pretty low. It's around 4%.

20:58 What, a 4.3? The estimates of what sort of normal unemployment rate should would be are around 4 1/2%. So unemployment's not high, Inflation is slightly above the Fed's 2% target. It's been running around two and a half, 2.7. So there really isn't a strong case for cheap money right now. But the Fed Trump seems to think that it's never, you know, too cheap, that the Fed can't be too expansionary. Yeah. I mean, I guess that's kind of, I imagine that's where the four years short term thinking kind of comes in.

21:41 You know where you say, well, I'm in my 80s, Yeah. Yeah, the stimulus doesn't even last four years. I mean, what Richard Nixon did in 1972 when he was running for re election was to call Arthur Burns, the head of the Fed, into his office and tell him, Arthur, I've been watching the money supply and it's not growing fast enough to reelect me. I want you to get it going faster. And Burns, who had been appointed by Nixon, even though he was the head of a supposedly independent central bank, says, yes, Sir. Mr. President, this is this is not a conspiracy theory. We have the tapes. We have the. Transcripts of this conversation between Nixon and Burns. The Fed has been a little more insistent on its independence since then, so Trump is not calling Jerome Powell into the office.

22:39 They're not good buddies the way Nixon and Burns were, but he's trying to pressure him through the media. Yeah. I mean, I've been seeing, you've been seeing a lot of that, right? You can, you can hardly miss that if you watch, if you watch the news at all. So, so all this starts in, in, in around 1913 and we're still on the gold, we're still on the gold standard over there, which means that that our money is being backed by actual, you know, some, you know, some there are collections of gold that we are that we're keeping. And then in in 71, you know, Nixon does away with the gold standard. Well, there's, there's a, there's an important step before 71, which is in the Great Depression, Roosevelt devalued the dollar and with the approval of Congress, made it illegal for U.S. citizens to own gold coins.

23:31 So everybody had to turn in their gold coins to their banks. Then their banks had to turn it into the Fed. And the idea was to give the Fed more gold reserves so it could be more expansionary. So gold ownership was illegal from I think 33 up until 74. I think Congress repealed that provision and let people own gold coins again after after the gold was no longer playing any monetary role, which as you said, happened in 71 when Nixon stopped redeeming dollars for this on behalf of or for the benefit of foreign central banks. So U.S. citizens couldn't redeem their dollars, but foreign central banks still could under the Bretton Woods system. And what's that system?

24:25 So that was established at the end of World War 2IN in order to economize on the amount of gold that central banks needed, they said, OK, the US will hold the gold and the rest of us will make our currencies, the British pound, the Deutsche mark, the lira, redeemable for U.S. dollars. So we'll have fixed exchange rates with the dollar, and the dollar will be fixed to gold at $35.00 an ounce. OK, that's what it was. Yeah. OK. There were lots of devaluations by countries that were inflating faster than the dollar. There were some revaluations upward by the Swiss franc, the German mark, who were inflating less than the dollar.

25:09 But finally the dollar broke the link to gold because we had been printing more dollars than were consistent with gaming them at $35.00 an ounce. And Nixon in 71, faced with the choice between tightening monetary policy to make it feasible to maintain the peg and closing the gold window, said I'm running for re election, I don't want tight money. Let's close the gold window. So let's say he wasn't running for re election or he didn't really care about the next, you know, four years or whatever. It was someone that was, I guess, more economically driven as opposed to potentially politically driven. Have made that decision, you think? Somebody who believed in the gold standard would have appointed a Fed chair who made it possible to stay on the gold standard.

26:02 But that's not what happened. Like like Trump today, Nixon wanted a Fed chair who would pump up the economy. Right, right, right, right. This is also interesting to, to think about and, and instead, I guess the way that you pitch it to the, to, you know, the American people would be that you're investing in your government, you're investing in yourselves, you're investing in the nation. Is that, is that, is that the pitch to get off the gold standard that or what? What's the what's the selling point? Well, the selling point in the 30s was we're in a depression. We need more spending. We're going to go off the gold standard so we can generate print more dollars and have more spending in 71.

26:51 Nixon did not blame the need to do to close the gold window on previous monetary policy, which had inflated the dollar too much. He blamed foreign speculators for attacking the dollar, but of course they were just reflecting the reality, which was there were more dollars out there than were consistent with maintaining the peg at $35.00 an ounce. Which just means you spend too much money. So Nixon was saying, you know, this won't really affect you, the household. This is just a technical thing. Don't worry about it. Right, OK, I see of. Course, of course, it opens the door even wider to rapid money printing and high inflation, which we got in the late 70s, early 80s. We had double digit inflation in the US. And that's why interest rates were so high when at that point, when you were.

27:46 Yeah. That's crazy, that's crazy. I can't even, I can't even think about that. You know, I was just just a year or two ago, I was trying to sell my house and it's crazy because I, I live in South Florida. I was, I lived in, I moved into a townhouse that, you know, I bought for $300,000, right? And a year later it was worth about 4:20 for about 3 months, right? And then the interest rates went up and I could, and I was going to, and I put my house on the market at that point and I could not get a buyer because in those two or three months, interest rates went from 3% all the way up to seven, you know, 6 or 7. And all the people that are looking to buy three $400,000 houses can't afford to, you know, 8% interest on, on that, on that home. You know you're counting on the fact that your rent is going to be two grand a month at $1500 a month, not 44 grand. So house prices have to fall when interest rates go up. If you don't price, you're not going to sell. And that makes rental market stronger, I imagine. Relative to sales, yeah, I mean the the selling market will adjust eventually, but people are reluctant to cut the asking price and so they they would rather watch the house sit on the market unsolved.

29:03 It seems, yeah. And I guess that goes more about, that goes more into human nature and decision making than it does about the actual, you know, hard economics of what's the, what's the right thing to do or not. Well, having a central bank that can manipulate interest rates makes it these decisions hard because you have to forecast where is the interest rate going to go? How long is it going to stay high? Should I hold out until the interest rate comes back down or do I need to adjust the price? Right, so. We businesses face these problems. Yeah, I mean, I've noticed. I mean, you know, I've noticed that a lot of my friends that are in the mortgage world or money lending world, you know, things are moving a lot slower for them than they were before. And even, excuse me, even in terms of, you know, for example, I sell medical equipment and that's a really interesting market because, for example, it's refurbished equipment. So new machine can go for $100,000 if it's taken out-of-the-box and demoed, you know, by a doctor, it's worth 50, it's used for six months, it's worth 25, right. So, so I, so you know, so I have customers that will come to me and say I want a refurbished machine, you know, and it's 10 grand or 15 grand or 20 grand.

30:11 And they'll, and they'll apply for financing and I'll tell them you're better off getting a 0% APR credit card for the first year and paying, you know, and putting it on there and paying it back then paying 10, you know, 1015% on your, you know, $10,000 loan. You get a new card. They're hoping you can get a new card, right? And that and that and, and, and it seems that the people that have, that are trying to take out the loans on 1015 grand have credit. You know, usually below 650 is what, you know, certainly below 700 is, is what I've found anecdotally within, you know, among my customers, you know, the people, you know, the people that are looking for, I guess 30, forty, $50,000 of credit, they tend to have better credit scores, I've noticed. And I don't know if there's any kind of, you know, reason behind that court, you know, behind that anecdote, but it seems interesting to me.

31:01 Well, if you have a lousy credit score, you're never going to be able to borrow large sums. You're just going to be turned down. But even small sums, but it shows how they kind of get to that position where, you know, they'll be where they'll be, you know, taking out a loan without even thinking about what the potential consequences are on a small on a small number, on a small machine like that or a small, relatively small loan. And without real consideration for what the consequences could be, which would impact their credit score and then make even harder in the future. Right, there's a high probability they're going to default at some point. Yeah, yeah. And that's, that's it makes it a really interesting market. But so, So what do you believe? Do you believe in the value of buying gold and investing in gold or keeping gold?

31:46 Oh well, I've been talking about gold as a monetary standard. Gold today, which is demonetized, is a different, completely different story. But how? Does that story shift? Well, so whether or not gold would be a good monetary standard and whether you should invest in gold now are two different questions. That's that's what I'm saying. But to answer your question, I have a little bit of gold in my retirement portfolio. It's good just for diversification. We have a little bit of Bitcoin, same reason I wouldn't. I'm not a registered investment advisor, so this is not investment advice, but I wouldn't recommend to anybody that they make that gold or Bitcoin more than 5% of their retirement portfolio. And why is that?

32:37 Because it's very volatile, both because they're very volatile. Right. And they're useful as hedges against unusual events. But most of the time you're going to earn a better return investing in diversified portfolio of stocks. And that's because that's going along with the pulse of the, the pulse of the nation, I guess. Yeah. And the track record indicates that that's better than You earn a higher return for a given level of risk than investing in debt instruments or commodities.

33:26 OK, I see. And I mean I want to talk, I want to I want to get to Bitcoin in a few minutes. I'm still thinking about gold. I'm just just to understand, I guess it's it's place. So it used so, so when we got off the gold standard, it was so essentially because we were over leveraging the amount of gold that we had. I heard a story, I forgot what I forgot where I heard it from about the French, that the French decided we were asking about their goals. And he basically said we don't have it or you know, you know, we can't give it to you. And they came and they tried to take it and they did take it themselves successfully. Do you remember? Do you know the story? A few years ago, Germany asked to repatriate their gold that was being stored in the Federal Reserve Bank of New York. So the gold I mentioned before that came from Europe during the First World War.

34:11 And during the Second World War, a lot of it ended up in the Federal Reserve Bank of New York, including official gold from the Bundesbank and the Bank of France. And a few years ago, the Bundesbank asked for their gold back. They wanted to ship it back to Europe. And for some reason, it's a little puzzling. I've never seen a good explanation. The New York Fed said, well, that'll take us a while to organize. Although if you take a tour of the gold vault at the New York Fed, they show you the gold bullion sitting there in stacks and they point this is the German stack and this is the French stack and so on. So. You can go visit. There was a problem.

34:51 You can go visit it. You can go see. It. Yeah, yeah. You have to, you know, you have to get invited to a tour. They, I don't know how often they give these tours anymore, but when I taught at New York University, they invited all the money and banking teachers in the metropolitan area to come to a seminar where they taught you the New York Fed's view of the world. And then, as a kind of sweetener, they took you on a tour of the gold ball. That's cool. What were they? What were they trying to? What were they trying to educate the educators about? Oh, they had a particular view of monetary policy. I would describe it as Keynesian. OK, meaning?

35:38 Meaning they believed in the system of Fiat money and interest rate policy and, you know, changing it in order to try to stabilize the economy. The objective being to, you know, flatten business cycles. That was the theory. And that's what they thought, and that's. And they were trying to convince the guys that this was going to be the case. Yeah, I see. Oh, and if you have money, they even. Published their own textbook. They did. Which is a little odd, yeah. And is it taught? Is it circulate? Is it in circulation?

36:19 It was. I don't know whether they're bringing out new editions, but. Back in the. 80s they had one. That's really interesting. And Fiat money, I had to look up that term this morning. Is is is, trust me, by the government money essentially right? That's right. It's unbacked money. It's money that's just issued on the basis of a decree. So the a Fiat is a fancy word for a decree by the government. But when I taught money in banking, I would show the students a picture of an old Federal Reserve note that said redeemable on demand in gold coin.

36:59 That was a gold standard $100 bill. And then the Fiat $100 bill doesn't say we'll pay the bear on demand. It just says ribbon, ribbon, ribbon ribbon $100. This is $100 because we say so. And of course there's there is the legal ease in one corner of the bill that says this note is legal tender for all debts, public and private, which means that if you have $100 debt and you pay this $100 bill to the creditor, the creditor has been paid. He can't go to court and say no, no, I wanted gold. That's. Oh, interesting. And is it was it is it man?

37:40 I heard also that it was considered is it illegal to not accept cash or is that something that used to be the case? It's legal tender for debts, but in a spot transaction you can refuse Cash Cash. So it's perfectly legal for a a gas station to say we don't take $100 bills or for a cabbie to say I don't take cash. You guys have a car? Fascinating. That's really, really interesting. I see. And what other countries use Fiat methods? Is it, is it, Is it popular around the world or just US? Yeah, yeah, yeah. There are no no countries where the money is redeemable for gold or silver anymore.

38:21 Wow, so everyone so everyone runs. On that, in some countries the money is redeemable for U.S. dollars. Right, right, right, right. And what what's and what do you, what do you know about Argentina and this gentleman, President Malay? Yeah. Yeah, what? What's he? Doing how does that, how does that happen? Because I, I apparently, he's, apparently he's doing a great job allegedly, but I really don't know what that means or you know, any of the details. So he ran on a platform of I'm not one of these insiders. I'm not trying like they have been to manipulate and regulate and tax and spend. I'm going to free up the economy. And he's been doing it.

39:06 There was one promise he made that I'm disappointed he hasn't followed through on, which is when he was running, he said, I'm going to shut down the Argentine central bank and replace it with what? Replace it with U.S. dollars. We're going to officially dollarize the country. Cool. And that would have been a good idea. He has brought inflation down without doing that, but I'm not sure why he hasn't followed through on that. But other than that, he's been reducing government spending quite dramatically and reducing regulation quite dramatically. And the economy's been responding positively. Growth is up, inflation is down. It's. Fascinating.

39:49 Poverty rate has gone down quite a bit. Really. Yeah. Is that an indication of what could happen? Is that like a microcosm of you think with the potential of what can occur if more countries decided to be a little bit less regulated, including our own? I think so, yeah. So then why do? OK, so maybe and maybe you could clarify if I'm misunderstanding this, why, you know, when Elon is, I guess, told to come in and help make everything more efficient and cut, you know, excessive spending and stuff like that. Was that is that not an attempt to kind of do that on AI Guess a relatively slower scale than, you know, Malay did it. And I don't know because I know that this stuff kind of gets distorted into political understandings or misunderstandings of like what everyone's intention. Is there anything but just like, you know, bare bones, the go the purpose of it?

40:45 I think Musk's heart was in the right place, but his team approached things from the wrong end. So they came in and tried to cut the number of employees without cutting the mission of any of the agencies. And that's not going to work. You're just going to have, you know, these agencies, the few people who are left working there swamped with complaints and phone calls, and they're not going to be able to answer people's phone calls. You need to go back to Congress and say, we want to reduce the scope of things that this agency is regulating so that we can lay people off and still have enough people to do what we're still doing. That's the way Malay's been doing it, and that's not the way Musk tried to do it.

41:40 So would So would a hypothetical do? You think that half the employees in Washington just sit around playing games on their computers all day? Yeah, actually most of them are busy regulating. Are busy regulating yeah so with it so so to so to more effectively make that shift, you'd have to change the mission statements and the purpose of a lot of these government organizations and say, listen, we really appreciate that what you're trying to do. The private sector is going to step up for this particular case right now and you know, and we recommend that you take the skills that you've developed and apply it in a private sense rather than a government funded organization. Right.

42:26 So let me give you an example from banking. It used to be that bank capital was regulated by the clearing houses, which were member institutions and run by the banks themselves. And so the clearinghouse employees that audited the bank's balance sheets were employees of the clearinghouse. Now it's all done by the federal government, and it's quite possible that, you know, there are more employees that are necessary. I don't know, but that's an example of regulation that moved from the private sector into the public sector.

43:09 It would be possible to move it back. Yeah, I think there's a lot of them. I imagine. I think that it's just a matter of cutting the cord and, and there's going to be a painful, I guess it would be a painful transition from being government back to having to navigate the, you know, I guess you could call it the, the, you know, what's happening with the world. The public is going to have to do more diligence and news media are going to have to do more, you know, to expose frauds and that sort of thing. Yeah, Yeah, that'd be nice, right? That wouldn't that be nice?

43:51 So, so now, so now we and you mentioned briefly earlier that you know, we got off the standard and part of the way that the Paul's the Paul family have you know, recommended this is either getting back on the gold standard or you mentioned potentially using Bitcoin or some kind of cryptocurrency as as another standard, a commodity. A commodity standard just means that the that the country owns X amount of commodity that equals the amount of money that is capable of spending, right? I wouldn't quite put it that way. I mean, it means that the money that people use every day is they're not going to carry around a lot of gold coins on a gold standard.

44:36 They didn't anyway. What they carry around are claims on banks, checking account balances and banknotes. Paper currency. It's kind of like the paper currency we use today, except that you could go to the bank and redeem it for a gold coin or a silver coin if you wanted to. Mostly people didn't want to, but that option meant that the bank couldn't over issue its liabilities. Couldn't just, you know, unlimitedly lend people money without being prepared to back it up. So that constrained the quantity of money. And so to get, let's say to get the, the, the US government to use Bitcoin as, as its backing, as, as the commodity that backs the government, What would that, what would that mean?

45:24 How would that happen? And what would that mean in I guess relevant applicable, you know like day-to-day application? Well, I wouldn't recommend Bitcoin as backing because it's very volatile. It's not so volatile, right? Yeah, it goes up and down, you know, 7% a day. It it, if you look at its price in dollars, it's much more volatile than the, it's about twice as volatile as the price of gold and like 4 times more volatile than the exchange rate with the euro. It's more volatile than even the S&P 500.

46:04 And. That's due to the way it's designed. We can get into that if you want to. But how would you go? How would you go on a Bitcoin standard? Well, you could either do it from the bottom up, just let people who want to use Bitcoin use Bitcoin. But if you wanted to convert the dollar to a Bitcoin standard, I guess the Fed would have to sell its treasury bills and buy Bitcoin and then they would have a Bitcoin reserve or Bitcoin denominated assets at the Fed. Hard to imagine. It sounds hard to imagine, but then what?

46:44 So then what would, what would banking day-to-day be like? It's going to be based on the commodities, based on this volatile electric, you know, electronic, you know, currency. Well, the hope would be that once it's used as money and once prices are denominated in Bitcoin instead of in dollars, it wouldn't be so volatile day-to-day life would be would continue the way it is now. The thing about Bitcoin though, is that you can't manipulate the quantity. It's all predetermined by the program that validates transactions and rewards the validators with new Bitcoin.

47:33 The expansion and the quantity of Bitcoin is all in the program. It's predetermined. So there wouldn't be any possibility of running a monetary policy. And in a growing economy, if you have a fixed money supply, you would expect falling prices. And the closest approximation would be in the late 19th century when the US was on a gold standard and output was growing more rapidly than the world's stock of gold. We had gently falling prices. There was, you know, like 3% real growth in output and 2% growth in the quantity of gold.

48:17 Then you'd have prices falling at 1% with with the quantity of Bitcoin being growing slower than that. You would have more deflation. You'd have prices falling a little more rapidly than that. So that would be good, hypothetically. If it doesn't go too far to the point where interest rates are at zero and unable to, therefore unable to adjust downward when necessary. OK, falling prices, falling prices when it's due to growing output, that's great. Is that hard to maintain for an extended period of time? How?

49:01 I mean, if all this sounds relatively simple, I mean that you and I are talking about this, then you know, what's, what's the, what's the challenge in making this a concept action? Well, the challenge is the status quo is, is pretty, you know, locked in what what did Milton Friedman called it? The tyranny of the status quo. People at the Federal Reserve are going to, you know, resist, are going to argue against this. People who want the Federal Reserve to be more ambitious and who think it can successfully run a counter cyclical policy, they're going to be against it. And whenever returning to the gold standard has come up and and taken seriously, critics have kind of come out of the woodwork and said, including many mainstream economists who I think under appreciate the track record of the gold standard have come out and say, no, no, you can't do that. That's nutty really, because it's not, it's not what we're used to.

50:17 It's not what we're trained to think about. That's a shame. That's the reason. I mean, I guess it's the reason why IA lot of you know, regulations still exist the way they do. A lot of you know, a lot of people think the way they do, you know, it's just by default. I see so. A case has to be made and people have to be persuaded before it becomes politically possible. So who's who's who's who are some of those voices other than the Paul family is, you know, like a guy like Thomas Massie, one of those voices, what's his, you know, you know, thinking. Probably the only one in Congress right now, yes, who has supported a return to the gold standard. So there's two people in Congress that support it. Yeah, basically.

51:04 So I mean, a glimpse into the opposition you saw a couple of years ago when in in his first term, Trump nominated a woman named Judy Shelton to the Federal Reserve Board. And Shelton was known as a defender of the gold standard. And even some Republicans said, no, no, that's that's too far out for us. And her nomination never got to the floor of the Senate because the Republicans who controlled the committee said, we don't want to vote on this. They can't even get someone even on the committee. Right. Yikes. Yeah, that kind of puts you in a tough spot I guess, huh?

51:47 Yeah, so I I don't expect these reforms in my lifetime, but it's important to keep the ideas alive and get people to discuss them so they understand exactly what choices they're making and don't just default to the status quo all the time. Yeah. So what? So when you're when you're teaching, what do you find to be some of the most misunderstood economic concepts that that you know, the students coming through the classes, you know, perceive but don't understand entirely stuff you know, what are some examples of stuff like that? Oh well, if they've taken AUS history course they've probably been taught that the Great Depression was due to some internal collapse of capitalism, or it was due to the distribution of wealth being out of whack.

52:43 Neither of which are good theories. It's not accurate. No, not accurate. What was the? Cause. Well, there was a boom in the 1920s due to cheap money, and that would have been followed by a kind of ordinary recession, except that the US banking system collapsed. And so the the correction became much deeper than necessary because the money supply shrank dramatically from 1930 to 1933. And so everybody's trying to build up their money balances. That means everybody's trying to sell and nobody's trying to buy goods. And so the economy was deeply depressed. That's the reason.

53:29 Not a failure of capitalism, Not a you know. Failure of monetary policy. Failure of monetary policy. If you want to read more about that, read Milton Friedman and Anna Schwartz. OK, Monetary History in the United States. I've heard about that book more than once. Actually, I've heard about that book a bunch of times. I have to I guess. Now I really have to get it. On on the boom of the 20s and why it collapsed, I would recommend Lionel Robbins The Great Depression. Lionel Robbins. Yeah, he was a British economist. I see cool. And, and So what I know that the, that, the, that and, and people talk about this too.

54:15 And I don't really think that people know what that means, but that the libertarians of the world refer to the Austrian School of Economics. What's what's, what in particular is special about the Austrian school as opposed to anyone else? Or what do they, what do they point at that makes it so so so so much better? Let me recommend one more myth busting book which just came out, which is George Selgin's book False Dawn. It's about the New Deal and how it didn't really help the economy to recover, right. It's, it's a common view that it was due to Roosevelt's and the New Deal that the economy recovered from the Great Depression. But in fact, the economy didn't recover and back to normal until the middle of the 1940s. And by which point the New Deal had been at least the original New Deal had been abandoned because it wasn't helping. But you asked about Austrian economics. So it's a school of thought in economics who whose founder was literally an Austrian economist.

55:21 He he taught at the University of Vienna named Karl Menger. And it's hard to, you know, put into a nutshell, but it's associated with the idea that values the the prices are determined by the interaction of demanders. And So what gives rise to market value is people's views and subjective valuations and opinions about goods and services. Sure. It's associated with a a certain view of the productive structure of the economy that we need to think about how production takes time and therefore investments have to be made with an eye to the future and with an eye to the cost of financing.

56:20 Whereas some textbooks give you a kind of very static, just at the current moment picture of production. Production is goods, inputs currently going into factories and out and goods coming out. And the limit on the amount of output in, in the Keynesian view, which I referred to earlier, is only how much demand is being made by the public, rather than concentrating on how much was put in the pipeline to begin with, how much is produced, how much the economy has in productive capacity, and not just physical capacity, but labor skills. That's going to determine how much the economy can produce. And by producing, people are enabled to purchase what's been produced.

57:16 So when people suppose somebody is producing hats, the reason he's producing hats is in order to demand other goods, he expects to sell the hats and use the proceeds to buy food and rent and so on. So we don't have to worry about goods in general being overproduced, but we do have to worry about the structure of production being distorted by interest rate policy that drives the market rate away from the rate that will coordinate investment plans with savings plans. So in that kind of sense, there could be direct conflict between, you know, I guess this quote UN quote natural progression of like what you could, what you could, you know, foresee production being that could get you get a monkey wrench thrown into that if interest rates are played with, you know, in an unexpected kind of way. That's right.

58:17 So interest rates that are artificially low can mislead investors into over investing, and investing in projects that are more roundabout take longer to come to fruition than is really warranted by the willingness of consumers to wait. And if I guess interest rates are too high, then does it become unprofitable? Yeah, right, right, right. So that's, I mean that sounds, this sounds right, doesn't it? I mean, what would be what's to argue with that? I guess what's the opposing, what's the steel man on the other side or what do people oppose about that perspective? Well, the, the Keynesians and the the modern Keynesians worry about prices being sticky and so not adjusting rapidly enough to clear the market.

59:16 And there is some truth to that. So you want a monetary policy that doesn't put more burden on prices to adjust than necessary. But it I think what that really calls for the problem of sticky prices is a predictable monetary policy. What they think it calls for is an activist monetary policy, a Fed that's always leaning against the wind. And is what? What do they say? At the Fed, we're data-driven. We decide next month's policy based on the data we saw last month. Well, it ought to be more predictable than that. Having an inflation target, which the Fed nominally has at 2% is a step in the right direction.

1:00:04 But it they haven't lived up to the 2% target. That's one problem. The other problem is it would be a better to have a target for total spending in the economy. You want to allow prices to adjust if there's abundant output. You can have less than 2% inflation, it's fine. And if there's a supply shock or a pandemic, it's OK to have a temporary rise in prices in order to incentivize people to produce more for the future. So AGDP target or a nominal GDP target would be less damaging than an inflation target, and then you'd have the problem of getting the central bank to stick to its targets.

1:01:00 That's the other problem. When there's when there's political pressure on them to do other things. I see and the and and by so, so the issue hypothetically it's an issue the way that you're, I think you're presenting it is that by focusing on inflation, it causes a lot of hand holding and artificial influence, I guess in the market from the Fed. And if they were just focused on GDP and what we're spending as society, then it might, there might be some more dramatic short term, I guess, volatility because prices could go a little higher, a little lower, more dramatically, But they tend to even out after a short period of time. And I guess where the political pressure would come in would be like, hey, we can't have people complaining about $8 eggs or $10 eggs for more than a couple of months. You can't afford to ride that out, right? I guess that would be the response. Yeah, Yeah.

1:02:06 I would say either kind of target, either a price level target or a GDP target helps to insulate the Fed from political pressure. They can say, as Jerome Powell likes to say, look, we can't just lower interest rates arbitrarily because that would be inconsistent with keeping inflation down and we're committed to keeping inflation down. And he would having a GDP target would do the same thing. The the reason I prefer the GDP target to the inflation target is that there are circumstances where the two of them point in different directions, namely when you have a supply shock, either positive or negative.

1:02:52 So suppose the economy is hit with high tariffs. Just suppose they arise out of the blue and that reduces the potential output of the economy. That's going to raise prices. If the Fed is trying to stabilize the price level or keep it, keep inflation to 2%, they're going to want to tighten monetary policy in order to offset the effect of the tariffs. And that's giving the economy a double whammy. We got this real shock and now you're tightening money on top of that. It would be better to just say, look, because of the tariffs we're going to have higher prices, but we don't want to make it harder for people to repay their debts by reducing their incomes. So better to have high prices when you have reduced output of goods and service.

1:03:46 Right. That makes sense to me. That makes a lot of sense to me actually. OK. I'm trying to figure out from here whether we should go to how Bitcoin works, which I'm really interested about. And the impact, let me say let. Me say one more thing about Austrian economics. Please please. So by comparison with the sort of mainstream textbook economics, the Austrian economist, and I have in mind, particularly an economist named Israel Kerzner, put a lot of emphasis on entrepreneurship and the dynamics of the market process. So competition becomes a process of entrepreneurs trying to outdo each other, whereas in the textbooks, perfect competition is where nobody's doing anything to outdo anyone else because they're all doing the same thing.

1:04:39 The products are perfectly uniform, everybody charges the same price, and so on. So I think that kind of misconceives what it is that makes a market economy really run. The entrepreneur is the sort of motivating force and so they're, the Austrians put a lot of emphasis on that, the role of the entrepreneur and the importance of understanding market adjustments and then in a longer frame, understanding the evolution of economic institutions, not just taking them for granted. So one of the things Carl Menger, the founder of the school, is famous for is his theory of the origin of money.

1:05:21 Why people in a pre monetary economy, a barter economy, would want to, instead of trying to trade directly for the things they want to consume, what they produce for what they consume would find it advantageous to trade for something that is more widely saleable and and so likely to be accepted in payment by the person selling the good they want to sell. So people switched indirect exchange, and then there's an incentive to take into account what other people are accepting as payment, and then you accept that too. Through that process, it becomes commonly accepted, and that gives you a money without anybody imposing it from on top, but through people in the marketplace coordinating their behavior with one another spontaneously.

1:06:16 So other theories of economic institutions along those lines, understanding them as the outcome of, you know, betterment projects by decentralized individuals, you can have orderly arrangements that are not imposed from the top down. So that probably the most famous Austrian economist is Friedrich Hayek, who got the Nobel Prize in Economics in 1974. And his most famous article in economics is called The Use of Knowledge in Society and discusses how dynamically markets make use of the information given by prices.

1:07:00 So each of us can Orient ourselves by paying attention to price, prices at which we can buy and sell. There doesn't have to be any czar who brings about order in the marketplace. Adjustment of buyers and sellers will do that. What what, what immediately pops into my head is I was just reading my, my grandfather wrote a little, you know, self published biography from his. He was in the Soviet labor camps in World War 2. His, him and his family. And one of the things, yeah. And one of the things that he talks a lot about was the families desperate need. And it's fascinating to read from that lens in terms of money and in terms of like being able to survive in a livelihood. They would carry on them what would be considered monetarily or, you know, I guess as widely, you know, necessary products as they needed.

1:07:55 So sugar was very valuable, tobacco was very valuable. Clothes were very valuable. Obviously jewelry at that point was already kind of, you know, at that point was already not, you know, out of the picture. Everything was, yeah, I've been confiscated or already bartered away almost immediately. You know, I mean, jewelry was for like, big deal, like trying to get, you know, out of the country or something like that. But day-to-day, you know, and it's funny because my grandfather had, you know, from a Jewish perspective was, was saved essentially by a Zionist camp, but his parents were Orthodox. And, and he saw throughout the entire war that they were, you know, using sugar to pay for him to have a teacher come to the house and teach him biblical, you know, studies. And he felt this, you know, massive tension in his life that like they, you know, they put so much value on it that potential food or clothes for, you know, him and his siblings were going to this guy to, you know, that it was going the sugar was going to this teacher instead of, you know, the the worker that lets him stay home from school for a day or something. Calories.

1:08:58 Or that, yeah, you know, and, and so, so I, you know, especially I guess he could kind of see when everything is stripped away and there's no regulations and what people kind of refer to, to survive and defer to to survive. That system work seems to work perfectly, as you know. I think that's the most primal human system that works the most rationally. Yeah, there's a famous article about how in prisoner of war camps during the Second World War, cigarettes enraged as the common medium of exchange because of these prisoners were getting the packs from the Red Cross that can contend cigarettes. So even the people who didn't smoke would accept payment in cigarettes because they knew they could trade somebody else and. That's where money essentially comes from. That's a physical representation. So historically you, you got, you got shells being used as money in some places, but gold and silver in in the most advanced economies that had the high value transactions and when they came in contact with other economies. So I used to tell my students about in Sweden, they had a copper standard and you can go to museums in Sweden and see these huge slabs of copper that they used to pay each other, but you'd rather have a silver coin than a huge slab of copper. So silver and gold had the properties that people want in a hand to hand medium of exchange.

1:10:26 And so they kind of survived the, the competition among commodity monies, right? So it's a it's what Hyatt calls a spontaneous order. Yeah, yeah. And I guess I could see how how he got to that term too. How do I get to that phrase? I want to wrap up with the conversation a little bit about the national debt and I because I think that's also another enormous issue that I don't think, again, people quite know what the impact could be in what it means. So I think we just approached $37 trillion in national debt recently.

1:11:08 I did see that Thomas Nancy has like his famous little invention that tracks real time the, you know, the, the national debt. Every day he wears around, he wears on his belt, which is cute and funny, but also important, I guess so. So what is that? What, what's the national debt? What does it mean to everyday people? And what does it mean when we're spending? So when you know when our output or I guess when we're spending as much as we are, what does that mean for us? Yeah. The important thing is the ratio of the debt to future tax revenue, which is for which the best proxy we have is GDP. So it's the debt to GDP ratio that economists worry about, and that's gone above 100%, which means that it's more than a year's income now.

1:12:00 The last time it was that high was coming out of World War 2, and the US eventually paid it down through a combination of growing output and small to negative budget deficits and got it down to about 40% before it started growing again. Is that through policy? But yes, partly through monetary policy and partly through fiscal policy, OK, If if you run a deficit that's 1% of GDP and the GDP itself grows by two percentage points, then you've reduced the ratio of debt to GDP because GDP is growing faster, right?

1:12:47 So you don't have to run surpluses to get the ratio to shrink. But you can't do what we've been doing lately, which is running budget deficits of seven, 810% of GDP, because GDP is not growing that fast. You need to get it down to 2%, which is about what our average growth rate of GDP in real terms has been. So what it means when the debt is piling up is that the debt service is rising and the debt service, that is the amount of interest the Treasury has to pay out every year. Which is what percent? Or does that change? That means people either have to pay more in taxes or they have to receive less in services it it comes out of the government budget. Right.

1:13:36 The We can look at what happened in Europe after the Greek fiscal crisis, interest rates on debt. In other European countries that were in similar situations, like Spain and Italy and Ireland, those interest rates went up. And in Spain, for example, just paying interest on the debt became 1/3 of the national budget, which crowds out everything else. And you either have to cut spending or raise taxes or some combination of the two. So that's the worry. So we're burdening future our our children and our grandchildren with higher taxes and.

1:14:20 Right. So how, how quickly, how quickly does do the higher taxes have to have to how quickly do the higher taxes kick in or these or the holding holding back to services? Well, right now we've got more debt service, but we're basically just rolling it all over. So tax revenues haven't been increased. I know there's some talk about revenue from tariffs, but that's really a tiny drop in the bucket. And plus, Trump is promising to rebate it all to US consumers. So, which wouldn't really help have. No impact on the debt.

1:15:03 It wouldn't help the debt at all that at that point if it was rebated, right? That's right. This is looks good because we've been getting taxes. I mean, if, if, if, if what that means if what you're saying, if that means if, if the policy has been that we're spending all this money that that we and our kids and our grandkids are going to be paying back later. Giving everyone a $300, a $500 rebate is not going to make the, you know, my kid feel any better in 20 years from now when he's paying 10% higher taxes or he's getting 10% less services from the government or whatever it is, right? That's right. There was a famous economist named David Ricardo, and he said, you know, at a 5% interest rate, it doesn't really matter whether I give you $1000 today or if I give you $50 a year forever. Those are equivalent in market value. But if people are just myopic, they're going to grab onto the $1000 and you could similarly say if I give you $1000 and then charge you $50 a year to pay for it, and if you think that's a good deal, then you're being myopic. So there is a a built in tendency, though, of course, for congressman to want to take credit for low taxes and high spending today and just kick the can down the road. It's somebody else's problem

1:16:35 sometime in the future. But a lot of people are sounding the alarm. The taxpayers have to hold them to the fire. Right. And that's what we got to do. We have to hold people accountable for financial decisions. And I don't think it's any coincidence that that all this stuff happens post wars because because government funding ramps up big time during war, right? And if we just came out of a 2025 year, you know, period of constant war, then that means that we've been spending for the last 20 years and telling everyone, well, you'll pay some time down the line. If if you look at the size of the federal budget over time, as as you described, it goes up in wartime and then it comes back down when the war ends, like the First World War or the Second World War, but not to the old level to somewhere in between.

1:17:29 So there's what an economist named Robert Higgs called a ratchet effect. It keeps ratcheting up. It doesn't go all the way back. So before the First World War, the federal government was 5% of GDP, and today it's spending close to 25% of GDP. Whoa. On top of that, you on top of that you add state and local. Wow. Do you does? Is that a what, what do we, what do you do about that? What do we do about that? What do we, you know, what do we as individuals do? Can we do we save? Do we prepare? Do we do we try to push politics? What, what do you, what do you, what do people like myself do you know, 30 year olds with couple of kids and trying to pay my bills?

1:18:17 What do we do about that? Well, if you want, if you want your kids to be able to pay their tax bills, you have to save and pass that on to them. But politically, there needs to be a stronger coalition of people who understand the problem and are willing to, you know, make the difficult decisions about taxes and spending. And the what seems to be the hardest thing is to cut spending because every spending program has recipients and they're going to fight to maintain their benefits even if they're a small fraction of the public. The rest of the public, you know, just overlooks what's the programs that have concentrated benefits and the costs are diffused over everyone else.

1:19:12 So it it takes educational campaign to get people concerned and it will take some kind of coalition of people who are all willing to give up their small benefits in exchange for making it possible to reduce the debt generally. Do do movements like the health movement, the modern day, like I said, health movement that, you know, I think that a lot of people pretty much across the aisle have been getting on, you know, in terms of like noticing the obesity or, you know, high rates of diabetes and everything. And and there's been a push to kind of clean out the food a little bit. And that would kind of that was on full national political display.

1:19:55 Like that was that was that was like a movement, right? That RFK started that that melded from, but was it was it was a legit issue. Does that kind of give you hope that someone else could take a topic like this and kind of turn a not spoken, not typically spoken about topic into something more more mainstream and more, you know, a little bit more part of the zeitgeist? Well, I, I guess what gives me most optimism is other countries have done this. They've, they've woken up to the problem that high debt is, you know, parasitizing the, the budget.

1:20:36 So Canada back in the 1980s made a big cut in spending programs and we're able to bring down their budget deficit, turn it into a surplus and bring down the the public debt as a share of GDP pretty dramatically. Some other countries have been able to do that to through a combination of spending cuts and and tax increases. I we haven't seen that coalition in the US, though. When Democrats are in office, they want to increase spending, and when Republicans are in office they also want to increase and cut taxes.

1:21:22 And so everything is paid for with debt. Yeah, we're going to have to figure something out, I guess, huh? Yeah. I mean, there's, there's not going to be money to pay all the Social Security and Medicare benefits that have been promised if something isn't done on the side of other spending. That's which is what I would prefer. Or on the side of taxes. I see. OK. I think we'll I think we'll call it there. Professor, thank you so much, really for the time, for getting back to me so quickly. This is really, this is educational. This is fun and you're giving me a lot to think about.

1:22:05 You're giving me even better a couple of books to read, which I'm really excited about. So really. Thank you so much, let me plug my own book. Please. Oh yes, please. I'm so sorry. Let. Me plug my own book before we leave. Yes, I I published a book two years ago called Better Money Gold, Fiat or Bitcoin, where I do a head to head comparison between our current Fiat money standard, the gold standard as it worked historically, and the possibility of a Bitcoin standard. So which one would provide a more stable, a more reliable monetary system? What do you what's what's what do you conclude?

1:22:47 Is there a spoiler? At this well, I'm I'm pretty, I'm pretty favourable toward the gold standard. I see. OK, well I'm going to put the link. I'll put the link to the book in the. I'll put the link to the book in. The front burner. Yes, definitely. I'll put a link to the book in the description. And I, I wish, I really wish you best of luck out there in England. I hope you have a lot of fun this semester and I really appreciate the time. Hopefully we'll be able to do this again sometime, OK. Thanks, it was great. All right. Take care, professor. Thank you. Bye. Bye. OK. Thank you.