Episode Transcript
Speaker 0 00:00:00 We're going to go ahead and get started, uh, while we wait for more people to join us. Uh, thank you for joining us today. I'm Scott Schiff with the Atlas Society in producing our senior scholar economist, Richard Salzman, who will be discussing why greed reflation isn't a thing. Again, while Richard's offering his thoughts, uh, feel free to raise your hands with questions. We'll bring you up to the stage to ask. Once he's done with his opening, I encourage everyone to share the room. Uh, Richard, thank you for doing this topic. What is G Reflation who came up with it and, and why isn't it a thing?
Speaker 1 00:00:42 Scott? Thank you and thanks, uh, all for joining. Um, this is a, uh, I thought I would address this because this is a, I would say a follow up to two other clubhouses, uh, I did for the Atlas Society. So those of you who want, uh, background to this as, as far back as January, 2022, if you search on clubhouse, you'll see that I had hosted a session titled Our Price Controls Likely. And, um, that was, um, uh, geared off of an essay that got wide acclaim at the time, or, and actually some pushback from a professor at, um, UMass Amherst. You have UMass Amherst, if you know, is known for, uh, left-wing economist. That doesn't mean they're not decent economists, but there was a particular one there, um, Isabelle Weber and, uh, w e b e r, who was advocating price controls, uh, because inflation was starting to pick up in the us It had been 2%, or at least less than 3% for a long time, and then it started going up 4, 5, 6, 7.
Speaker 1 00:01:49 By the time it peaked at 9%, uh, sometime in 2022, it was starting to make the headlines. And so people were coming up with theories about what caused this. And of course, in, in economics, if you have a theory of what causes something, you have the beginnings of a solution. Kinda like what happens in medicine, if you get the diagnosis correct, you should be able to get the treatment right. But of course, if you get the diagnosis wrong, you can make the patient worse or perhaps possibly kill the patient. In this case, we're talking about the economy. Now, another one I did more recently was in September, uh, 2022, where it was just a basic discussion of what inflation is. So I think that was what was called inflation essence cause and cure, because I could see that it was still a headline issue. It was still confusing to some people.
Speaker 1 00:02:39 So I thought I'd go on record saying what it was. Um, and I'll refer to some of that tonight. But, and again, as always, that we just have 60 minutes tonight. So I'm just gonna go on for maybe 20 minutes and then stop and, and take some, uh, comments and questions from, from folks. Uh, last thing I just wanna cite for those of you who want, again, more background, I, I do write essays for, and they're often reprinted by t a s on the website for a group called a ier.org. That's the American Institute for Economic Research. And about two years ago, almost to the day, I wrote something called a Tragic Half Century without Gold Money. Uh, that was August of 2021, marking the 50th anniversary of the US going off the gold standard. And, um, I'm a gold standard guy. I am an advocate of the gold standard.
Speaker 1 00:03:31 I'm a a, a critic of central banking. I don't think we should have central banks. I think the monetary system should be run privately and profitably, but that, uh, essay might be of interest to people on this topic. Again, as background to my view and my take on the history of this since going off the gold standard, uh, under Nixon in August of 1971, the US inflation rate has, uh, gone off the charts, uh, even when it was low inflation, um, of the three to four to 5% variety that was way in excess of what the gold standard delivered. Now, greed, inflation, <laugh>, I, I thought I would discuss this because it's in the headlines, and, and you don't have to do it now, but if you just did a Google search, you would be shocked. I think maybe even amazed if you just put in greed.
Speaker 1 00:04:20 Deflation. There is a, there is a slew of essays and articles about this, both academic, by the way, and popular. And, um, that tells you something. Uh, if you were to chart the references to this phrase or this word, um, it's a hockey stick in the last couple of years or so, corresponding with the rise in the US inflation rate. And on the other hand, it is not new. When I did a look at the first time, the, the, uh, I don't even wanna call it a concept. The construct or the pseudo concept was, uh, invented was, uh, many, many decades ago. And here's the idea though. What do you think is, uh, the general view of greed? It is an evil motive to most people, uh, in the objectivist, uh, ethics, uh, the vernacular, you know, Ayn Rand wrote a book called The Virtue of Selfishness.
Speaker 1 00:05:15 And she says specifically in the opening to that, that you may recoil at this word selfishness. It sounds so, uh, nietzche, it sounds so vicious. Uh, she said, but I'm gonna defend it. And really what she was defending was egoism. And in fact, the subtitle of that book is a new concept of egoism. Now, in philosophy, ethical egoism is a perfectly legitimate ethical doctrine. It's discussed. There are essays about it. There are books about it. It's not the predominant view, but it definitely has a philosophic intellectual defense that's, uh, worthy of being in the debate. And, and that was certainly Rand's view. But now you can interpret greed as an even more, uh, derogatory term than selfishness. So, so if, if on the continuum it was, well, there's ethical egoism or what Adam Smith might call self-interest, then there's selfishness, then there's greed. You get this sense of, um, you know, greater intense, uh, degrees version of this terrible thing.
Speaker 1 00:06:24 So that's the first part of greed, inflation. But obviously, what are they? We welding it to inflation. Inflation, inflation meaning what? Uh, higher cost of living. We go out and buy things. We go out and shop for things, and the cost of living is going up. Economists call this inflation. The inflation sounds like a balloon, right? Something expanding. And what they mean by that is a rise in prices or this consumer price index, some basket of representative goods, they go out and measure every month, uh, to see if the prices are going up. And, uh, so now, before I get into the components of this, well, I got into greed a little bit already. Uh, this is just the perfect, uh, uh, combination. The pseudo concept, greed, deflation for literally, uh, saying, well, here's this terrible thing. Inflation caused by a terrible thing. Greed. Uh, the greed is the motive.
Speaker 1 00:07:20 Inflation. Inflation is the result. End of story. Now let's just go find the culprits and punish them accordingly. Control them accordingly, um, Aly, and, uh, it's very clever when you think about it. Now, a couple things, uh, before I go into dismantling greed, deflation, 'cause it's not really a thing, by the way, this is gonna be first in a series of sessions I'm gonna do on blank is not a thing. There's so many concepts out there. There are so many myths and phrases, uh, thrown around and bandied about that. I, I've already accumulated about a dozen of them. And I think, now, what is that? Okay, that's not a thing. So I kind of like that conception. It's not a thing, not a real thing, not a thing. Con, uh, with a reference to reality. Uh, before I say, as I say, before I dismantle reflation, let's say what inflation is, I'm just regurgitating what I said earlier.
Speaker 1 00:08:15 Inflation is a decline in the value of money. Lemme repeat that. And so, 'cause it sounds weird, doesn't it? No one says this anymore. It's the classical economics interpretation of the phenomenon. Inflation is a decline in the value or the purchasing power of money. And economists measure the purchasing power of money, or any particular unit, say a dollar in. How much stuff can it buy? How much real stuff can it buy? Toothpaste, shoes, houses, uh, clothing. Um, and that's what's meant by purchasing power. And if the money being used buys less and less over time, that's an erosion of the purchasing power of money. Now here, the key thing is that prices, which are monetary values attached to things, the only reason those go up, which is what people think of as inflation rising prices, right, is because the value of the unit has gone down.
Speaker 1 00:09:18 You have to offer more dollars to buy, say a fixed loaf of bread one month to the next because worth less. I I don't say, I mean, just worth less than it was the prior. Then you have to ask, why would a monetary unit be worth less over time? Answer. Because too much of it is being created. There's too much supply of that money. It's not too much bread. The bread price is going up. It's the dollar that's going down, or the fra or the yen or the euro, whatever currency unit you wanna mention because it's being produced, supplied, printed, however you wanna put it in excess. And now in excess means more than what people wanna hold as money. And now that's back to just basic economics. If I said, uh, the shoe price was plummeting, and I said, you know, part of it is due to a massive cascade of shoe supply, uh, no one would be surprised.
Speaker 1 00:10:17 They would say, of course, yeah, if you produce more of something, it's gonna be worthless under the gold standard. That doesn't happen. It doesn't happen under the gold standard for reasons I won't go into now, but it's just not true. Under the gold standard operated by a private banking system, that too much money is issued. As with all things economics. Under capitalism, just the right amount is issued, um, of money under capitalism, not so when central banks take over, when central banks take over and go off the gold standard, when central banks are in place, not to ensure the soundness of money, but to finance profligate government, they will issue money without limit. They will respond to what the politicians want in terms of the money they need as nothing to do with the economy. So, uh, so just to draw a line here, inflation in fact, is caused by the issuance of too much money.
Speaker 1 00:11:13 And in a fiat money system, that means the culprit is the central bank. That means the real cause of inflation, the real cause of a decline in the value of money is these monopolist issuers of money. These monetary central planners at the Fed. Now, are they in cohorts with the treasury and Congress, you know, who also issue massive amounts of debt because they're borrowing and then the fed monetizes it? Yeah, we could go into those details, but the point is, I just named, uh, players that are all on the government side. They're not on the corporate side, they're not on the economic side. But greed, deflation insists that the problem with the higher cost of living has nothing to do with the government. That's the point of this pseudo concept. The point of this pseudo concept is to get people to focus on the messengers of the problem, not the cause or the culprits of the problem.
Speaker 1 00:12:12 Messengers, I mean by those who at the grocery store, at the gas pump elsewhere, are raising their prices because the value of the money they're receiving is less. And though that is much more visible, isn't it? When you go to, uh, shop, it is much more visible that someone is setting a price that you must pay. The chairman of the Federal Reserve is not at the checkout counter. The grocer is the gas station attendant. Um, and so they get the brunt of the blame, especially when economists and other lackies of the government are claiming and saying that these are the culprits. So that, that's what greed, deflation attempts to do. That's just as a beginning introduction. Now, couple of things. Uh, the critics of capitalism, as you know, say one of the problem morally is that it's based on greed. And one of the great things about objectiveism is it says, thank you very much.
Speaker 1 00:13:10 I'm glad it's based on greed. Greed is self-interest. Self-interest is the moral thing to do. <laugh> self-interest is, if it's rationally geared, is the proper human approach to life. Not self-sacrifice, not harming others, not either sacrificing yourself or sacrificing others to yourself. But mutual gain to mutual advantage. Win-win situations, not zero sum, not exploitation, not win-lose not lose win, okay? So that's 0.1 that, um, greed is not, uh, a vice, but a virtue under objectivism, first of all. But secondly, even the critics would say if greed is a vice, it's ubiquitous. They, they don't really have a theory of, you know, some capitalists are greedy and some aren't. Some are philanthropists and altruists and don't care to jack up their prices and others do. The problem with the greed inflation people is you say to them, well, isn't everybody always greedy? According to your theory, not, not ours.
Speaker 1 00:14:10 Some people might make the mistake of not being sufficiently self-interested, and they would say yes, they would say yes. Then you say, well, then it's not an explanation of anything, because if greed is constant, the greed is always there. Why would you get any fluctuations in inflation? You can't just trott out greed. In other words, when inflation's going up and say, ah, ah, people are greedy, there's that charitable greed thing. 'cause you'd have to answer, well, what happens when inflation comes down as it is? By the way, in the last eight months or so, is that now what? People are less greedy? They, we have cycles of more or less greed. And what about deflation? What about when prices are coming down? Apparently price setters are engaged in some kind of self-sacrificing bloodbath of giving away stuff or less, and that it doesn't make any sense, right?
Speaker 1 00:14:58 On the grounds of if you really believe greed drives capitalism, you can't trot it out selectively to try to quote, prove or explain the things to be explained. Now, if you dig deep in the reflation, um, story, you'll find that they do have an answer for this. They'll say, uh, we grant that people are always greedy. And the best example I heard of this was someone who said, you know, it's like a murder trial where you look for means, motive and opportunity. And, uh, those of you who watch, uh, trials or Perry Mason or these other, you know that that's true. You do have to come up with the culprit having both the mean, uh, having the means, the motive, and the opportunity to commit the crime. In this case, the crime is a rising, rising prices. Okay? So they'll say, well, the motive is greed.
Speaker 1 00:15:50 And they'll say, yes, that's, uh, ubiquitous. Uh, we're not saying that that fluctuates. And here's, here's where they come in with the Marxist critique. They'll say, okay, but now that's the motive of what's the means. The means is, uh, concentration of corporate power, monopolistic power to set prices, uh, regardless of market conditions. And they measure concentration various ways. You know, there's only five car companies and they control X amount of market share. And bottom line is in the perfect competition model, which they have in academia, perfect competition's supposed to be, there aren't any big companies, there aren't any big companies with any big market share there, there aren't any that have pricing power, as it's called, the ability to set prices, uh, regardless of what consumers will pay. They're price takers, they're called, right? Well, then they'll say, we don't have perfect competition. These aren't, even Marxists will say this, even Neoclassical economists will say this.
Speaker 1 00:16:52 They'll say, well, the problem in the economy today is we have big, big corporations. Big has to go in front of all this, by the way. So if meat prices go up, Biden will say, big meat did it. And if tampon prices go up, they'll say, big tampon did it. So the big has to be you find a bunch of big companies and they somehow just jacked up prices for no reason whatsoever. Um, so, but at least you see there's the, um, the, the, the means, so to speak. The the method by which, okay, so that has to come together, but then opportunity, the opportunity there has to be like some special circumstance, something that doesn't happen every day, and they just seize this opportunity and they price gouge you. So what would be some examples? Opec, uh, stop sending us oil in the seventies, the OPEC oil embargo, and the oil price goes up.
Speaker 1 00:17:41 And these greedy oil producers are price gouging us. They, they say that contributes to inflation, they say, or there's covid uh, shutdowns more recent and more recent example. Well, there were covid shutdowns, right? And there were supply chain, uh, disruptions and things like that, right? And, and those, and yeah, yeah. And the problem is then companies took advantage of that, and they looked at their shortages and they looked at their, uh, cost of goods sold going up, and, and they, uh, raised prices, but not just that, they raised prices more than normal, and that caused inflation. So, so you see here, the culprit in this theory is the price setters and the cost associated with their businesses. And, and by the way, what is one of the biggest costs associated with business labor wages? So when necessary, this is not something the left-leaning would do, but the right-leaning, might they blame greedy wage earners?
Speaker 1 00:18:41 They, they blame unions, although the unions aren't as important anymore. But, but if, if it's cost push inflation, as they call it, prices that have to be raised because my cost of doing business is going up, therefore I have to raise prices, they'll blame that on labor. They'll call it wage inflation. So if you look it up, they'll say, now there's wage inflation. There used to be greed inflation. There used to be profit oriented inflation. But in every case, notice the private sector is blamed. The private sector is blamed for a rising cost of living, not the issuers of money, not the monopoly government issuers of money are blamed. So it's a, it's a tactic, it's a clever tactic of deflecting attention. That would be one way of looking at it. But also it reflects, I think, the, the, um, complete breakdown of theory, uh, in economics, and not just in this particular field.
Speaker 1 00:19:37 This, this is broad based, but it's really tragic, the inability of trained econom, and maybe because they're trained to look at, uh, very minute minutiae and not be able to see the big picture. That inflation is a macroeconomic phenomenon in the sense of it's caused by whoever's dickering with the money itself, which is, you know, half of every transaction in the economy. But what happens when you see any inflation report, they'll say, you know, prices in the country went up 10%. What's the first thing economists do? They start looking at individual prices. Well, oil went up a lot and housing went up a lot. So let's look at what happened to oil, and let's tell an oex story or housing, you know, there was a shortage last month. You get into the weeds, you say, of, well, I'm gonna analyze every little price change and attribute it to that.
Speaker 1 00:20:27 But again, uh, broad price changes are just the summation of all the individual price changes so that the individual price changes aren't the cause of the broader change. Uh, those are what's called micro factors. So, uh, you know, if there's a crop failure, okay, there's a crop failure and wheat prices skyrocket. Okay? That's not inflation. Inflation is a broad base depreciation in the value of money, which causes all prices, uh, to go up, which the cause, the cost of living broadly to go up, not always at the same rate within, but that's the issuer, that's the essence of it. So, um, this idea of minutely inspecting every price that is incorporated in the consumer price index, and there's hundreds of them, that's easy to do. But then also this very, what I call this bottom up approach that says, well, every price a company charges, and even if you ask the c e o and the C F O and say, tell me what determines your prices, he won't probably say the Federal Reserve in some respect.
Speaker 1 00:21:29 He's so focused on his business. He'll say something like, well, the cost of my materials and the cost of, uh, hiring labor and the profit margin I need, uh, you know, to stay in business. And the economists will walk away saying, oh, so let me just add all those up. And my explanation for whatever prices you charge will be based on your profit motive, your profit margin, your workers, your wages, your, uh, particular materials, <laugh>, you see how it works, and you get lost in the weeds, you get lost in the details of it, and you do not see what causes inflation. Now I think I'll just, uh, finish with this couple more minutes. I think some of this problem has to do with economists who can't think broadly and conceptually, so they can't quite get the concept itself of inflation, right? But beyond that, they can't, uh, look at the broad, vast details of what's going on in the economy and essentialize it down to key causal factors that that's one thing.
Speaker 1 00:22:35 But I think even among the smarter ones who can do that, who can discern what's going on, some of them are just so wedded to statism. They're so, uh, they have such animosity toward the free market that they're willing to use their enormous, uh, intellectual credentials and otherwise analytic skills to blame markets, to fool people, to, to help deflect attention away from the public finance aspects of this, namely the profligate government that borrows an excess because it's spending in excess, because otherwise it would be thrown out of office if it fully taxed people for what it's spending. And then finally, turning to their favorite pet bank, the Central bank, and saying, please print money when we need it. And if the effect of this is that prices broadly, wages broadly go up, and people complain about it, at least they're complaining to the messengers. They're not complaining to the, to the culprits in Washington. So I'll leave it at that. There's much more to say about this, but I want to hear from you guys, um, about this issue and questions you might have about it, or pushback as to what I'm saying. Thanks, Scott.
Speaker 0 00:23:49 Great. Uh, great opening, Richard. Again, I wanna encourage people to share the room and to raise your hand if you have questions. Uh, I have some myself, but, uh, for now, let's go to Brian. Brian, thanks for joining.
Speaker 2 00:24:05 Hey, thank y'all. Thank you, Richard, for that explanation. Uh, my, my question is, um, infl inflation seems to happen a little differently in different industries. You know, like the, the, the cost of, of one product or good or service, whatever, might go up at a different rate than some other, uh, products or, or service. So is inflation, uh, as you define it. And I agree with, you know, the, the, the loss or the, the, the decrease in purchasing power, by definition, that seems to affect money itself. And so therefore it would have some, um, impact across the board. So when we see prices go up in one industry, um, it, it seems like it's affecting one industry more than another. How, how can we make sense of that?
Speaker 1 00:25:01 Well, pre great question, Brian, precisely for the reason I named earlier, that there are always in, in fact, the way you just defined it, an industry or even a company or even a product that in economics is called micro. And the reason they call it micro instead of macro, macro, as you would imagine is the big picture. Business cycles, inflation purchasing power, interest rates, micro pertains to particular industries. Now, going on your example, suppose there's an industry A and whatever it's selling, um, I'll just use as an example, it's prices are going up 10%, and in industry B, they're only going up 5%. And what you're saying is, well, what's this got to do with inflation or non inflation? The, the inflation idea is that every industry is affected equally by inflation to the extent they use the money. And, you know, most of them are using the money to more or less degree.
Speaker 1 00:25:58 The difference though, would be totally micro. So for example, if the 10% rise was in agriculture because they had a bad crop, you, and, but the inflation broadly was 5%, you could say, well, half of it is due to this local product based reason. You know, there's less wheat, but that industry is still gonna be affected by prices rising. 'cause the money itself spent on wheat goes down in value. So now Brian, if you ask economists, are you guys good at discerning the difference between the two in every industry? Most of them don't actually do that. But one of the reasons they develop things like c P I, the reason we hear about these in the headlines, why do they have something like the C P I or the P p I? The c P I stands for the consumer price index, and the P P I is the producer price index, but they also have the G D P deflator, if, you know.
Speaker 1 00:26:56 So there there are dozens of measures economists trying to come up with of what they think is inflation, meaning a broad-based increase in the pr, meaning they suspect that there's something more broad going on other than industry by industry, by industry effects, if you, if you know what I mean. And so that's why they come up with these indices. But instead of, instead of just concluding that, wow, inflation broadly measured, you know, was 10% last year, and that's due to the Federal Reserve in, instead of going there, they go into the weeds of how that index is put together. They go into the specific industries and products and start, uh, discussing what amount to mostly micro factors, and then lead people to believe that it's all these dispersed, you know, dozens of reasons why there's inflation and having nothing to do with this broad-based decline in the value of money. But you're absolutely right, right, Brian, to notice, well, inflation, if it's 10%, it's not like every product goes up 10%. You're absolutely right. But the difference is because there are micro factors within the industry that help, or you wanna
Speaker 2 00:28:12 Yeah, perfect follow up.
Speaker 1 00:28:13 Yep,
Speaker 2 00:28:13 That makes sense. So if, if we were to, let's say, rank order, uh, the primary causes of inflation and assign some ballpark, you know, proportional amount to that, what would be in, in your mind the top three drivers contributing factors,
Speaker 1 00:28:32 Um, excess creation of money by the Fed and behind that, you always have to ask, well, why would they do that? The Federal Reserve puts itself up as being a protector and guardian of the currency, uh, because there's a fiscal connection, fiscal meaning they have a Congress pushing them to help keep interest rates low, to help finance the deficit. So the secondary issue I would say is fiscal pressure coming from the treasury, literally treasury. And, and in every country, a treasury or the finance ministry talks closely with central banks to, uh, help them finance, government. Uh, now most economists will not say central banks, uh, are there by primarily to finance government, but they are, and, and the sad thing about it is the history shows that the more reckless the central bank is, it's reckless because the government is reckless, reckless in the sense of the government is spending, uh, way beyond what it does in, in tax revenues.
Speaker 1 00:29:35 But, um, Brian, I I would put it this way, if, if it's always dicey to come up with a broad base measure of inflation like C P I or elsewhere, but if you, if you chart them, you'll say they track closely. I would say something like, if you see that inflation a price, I always call it price inflation, distinguish it from the monetary cause, uh, say it's going 10%, then if you find the price of something else going 20%, you'd say, well, some of it is micro one, a perfectly legitimate micro reason for prices going up in that area. Say microchips or something like that are going up 'cause there's a shortage. And, but then, but then 10% of it is due to the money supply, uh, problem. But likewise, if a com, if a company is only raising in, uh, prices 2%, you know, in an, in a world where inflation is 10%, uh, it's for some reason they cannot raise prices in that industry and they're really suffering because all around them prices are going up and they have to absorb those costs.
Speaker 1 00:30:37 Um, so I hope that answers your question. Another thing, by the way, for people to keep in mind, to keep all this straight, when a company sees that its costs are going up, I mentioned this earlier, it's, it can either be wages, those are costs or, uh, raw materials that they use, uh, selling into, you know, marketing expenses. All those are costs of doing business. If, you know, costs are prices, costs are just another word for prices. They're the prices that companies pay <laugh>, you know, to get the stuff they need to make stuff. So anytime you hear an economist say, well, inflation is a cost push phenomenon, that's like saying price inflation is a price inflation phenomenon. They're repeating themselves. They, they, you need a deeper explanation for, well, why are costs going up? Um, if the money is sound, and this was true under the gold standard, you don't see costs or prices going to up over time.
Speaker 1 00:31:37 You see them largely going down. And you might think, how could I possibly make money as a profit seeking business? Carnegie Mellon, others Ford in the pre, uh, federal Reserve era, pre 1913, how did they make money when the prices of their stuff was going down because the costs were going down faster. So, so the cost of living to people buying all this stuff was going down, down, down every year. Can you imagine every time you go out to shop, things are cheaper, not more expensive, they're cheaper, and yet the companies are making money because the money, the profit is the difference between the price you charge and the cost you incur. And, and as long as both of those are going down in some way, notice how you could still make money. You could still make a profit.
Speaker 0 00:32:26 I great. Um, well, I did, uh, Google it and, uh, the first thing that came up for Reflation was passing on higher prices simply to boost profit margins rather than because they face higher prices. But I mean, we all face higher prices. Is are, are they really just saying that, that businesses are greedy for not eating that and, and, and accepting lower profit margins?
Speaker 1 00:32:54 Yes. Very good, Scott. That's exactly right. Yes. Their view would be the philanthropic thing to do, uh, would be to not raise your price even though your costs are going up. I saw an article about this, I think from, um, on Waffle House. Uh, you may not know if you're in the rest of the country, but where I am in the south, uh, east Waffle House is a breakfast place. Sure. And during the, um, last couple of years, apparently egg prices skyrocketed and Waffle House, <laugh> Waffle House was found to not be increasing its omelet prices or its waffle prices, even though, even though egg prices were skyrocketing. So now if you ask that, they went and asked the waffle management, now how come you guys aren't raising price? And they said, well, we're trying to just limit. We think this is temporary, and we're just trying to limit the effect on our customers to hold our customers.
Speaker 1 00:33:50 And, uh, we hope this doesn't last more than six months or so, but in the meantime, we are making less money. Yeah, but I, you know, but their profit motive was still there, Scott, you know, it wasn't like they were saying, well, woe is us. Well, let's give this stuff away for nothing. They were hoping to retain customer loyalty and things like that. Well, these are some of the wonderful things companies do while trying to absorb the damage of government policies, you know, but it doesn't, it's not really an argument. Um, you know, that the greed, deflation people can, can use, they're largely focused on those businesses who just raised prices, uh, when they see their costs going up. But yet, the, the bottom line, Scott, is, um, the pro, and this is true in a sense when you think about it, the profit motive, I would put it this way, is the commercial manifestation of rational self-interest.
Speaker 1 00:34:41 So in philosophy, uh, rational self-interest is the moral thing to do. You know, both personally and throughout your life, you know, even in issues of love and friendship, rational self-interest all the way through. And it's a fact that most economists almost don't admit that the, the commercial, what I call the commercial manifestation of that is the profit motive. They actually call it the motive. Where the motive is gain. The, the motive is not to lose money, but to make money. And, um, as so long as in ethics, rational self-interest is considered immoral, then the profit motive will be considered immoral. And, and as occurs in philosophy, they'll use that motive to explain any bad thing they see. Um, you see this all the time, you know, if you see some ax murderer who kills 12 people, what will they say? He was selfish. He was a loner. Uh, you know, he didn't care about other people. They, they begin with the premise that self-interest is bad. Therefore, every bad result, say including a higher cost of living, including inflation, must be due to greed. Hence greed, inflation must be due to the profit motive. That's really the, the kind of dynamic that's going on. I,
Speaker 0 00:35:58 Well, I just, you know, I don't understand it. On Wall Street, uh, Paul Donovan, uh, chief Economist at U B s wrote about profit led inflation episodes occur when consumers are told the story about why price increases are necessary. Consumer's willingness to believe the story allows some companies to sneak in a profit margin increase.
Speaker 1 00:36:23 Yeah,
Speaker 0 00:36:24 I, I mean, you know, he <laugh> he's saying that the companies he covers are are morally culpable.
Speaker 1 00:36:31 Yeah, <laugh>. So there's a couple things in there. The, the, the dastardly premise that comes in at the end, uh, take advantage of, or whatever word you used. Yeah. But, but the phenomenon you name of, well, these are Wall Street analysts and strategists, and they meet with CEOs and their clients are CFOs and, and they seem to <laugh> and they seem to be, uh, you know, morally condemning their clients. Yes. That happens all the time. It's, uh, it's amazing. And, uh, the, the standard, uh, assumption I think in the country is that Wall Street is pro capitalist. That Wall Street is pro profit. I mean, the analysts and stuff do want to see a profit making company. The stock is gonna do better if profits come out higher, not lower than last quarter, but philosophically, uh, I've worked on, on Wall Street for years, and I could see this philosophically, they are not sure, and many of them doubt that profit is earned.
Speaker 1 00:37:30 And so they'll report on profits and they'll recognize the empirical connection between a company making money and the stock price appreciating, you know, versus a company that's delivering less profit every year or, or losing money, it's stock price is gonna plunge. That doesn't mean they're morally, uh, okay with it. And, uh, so, uh, notice by the way, uh, you've cited him as saying profit led inflation. So know what the, notice what the theory is, profit causes inflation. The Fed doesn't cause inflation in his view. Profit does. Or, or as the recent, uh, I saw a Wall Street Journal in last July. The, the headline was, as greed, deflation starts to fade, wage creeps in unquote <laugh>. So here we go. Right? It, oh, uh, there seems to be less profit margins, so we're need to drop that one. And greed, deflation will fade, and now it's wage inflation. So it's time to blame labor, right? So the, so they shift from blaming corporate executives who are trying to maximize profits. Now they're gonna blame wage earners for wa for wanting wages that grow more than in both cases, they will not blame the perpetrator, which is the government. And this is coming outta the Wall Street Journal. This is not the New York Times or elsewhere where it's even worse.
Speaker 0 00:38:48 Amazing. Uh, Gudo, thank you for joining us. I hope I'm pronouncing that right.
Speaker 3 00:38:55 Hi, thank you so much. Um, yeah, the name is Gada, but it's okay. It's a difficult one. Um, I just have a question to, uh, for Richard. Um, since we, you were speaking about, um, uh, gold standard and curr currency based on gold standard as being superior for, um, many reasons, um, I was wondering if you have heard about the bricks, uh, countries trying to, to come up with a, um, a new currency based on gold, uh, backed by gold, um, and, um, I think they're having a summit, um, next week actually, uh, to probably finalize that. Um, and yeah, so I was thinking if you have heard about it and what is your opinion on, on this endeavor? And if they do go through, uh, through with it, um, how will that affect the dollar and the lives of Americans?
Speaker 1 00:39:53 A very good question, Gura, by the way, is this the same gura who I talked to at the Gold?
Speaker 3 00:39:58 Yes. <laugh>? Yes.
Speaker 1 00:40:00 One of my favorite conversations. <laugh>, I remember you all. We had fun, we arguing about. That was great. I'm so glad you came up to me. Your questions were so great. And anyway, okay. I thought I recognized you, <laugh>. Thanks for thanks, thanks for calling in. Of course. Um, yeah, this is a really good insight. Gua, um, the, for those who don't know, she mentioned the bricks. The, the, the brick is an acronym. Acronym Brix means Brazil, Russia, India, China, and I think they've added South Africa, South Africa, South Africa, South Africa, Africa, Africa, South Africa. Right? Someone used, someone made up that acronym many years ago, but it's a group of countries that align on certain things. But the particular one that Gu is naming absolutely true is they are toying with the idea of this is unbelievable actually in today's context of all going on the gold standard.
Speaker 1 00:40:54 Now, the reason this is interesting is, um, none of these, well, some of these countries historically, some of them were on the gold standard, but they're not really known for being gold standard countries. It was Britain, the uk, Western Europe, and others that were on the gold standard until 1971. But, um, in answer to your question, briefly, Gura, um, I think, um, I'm rooting for this to happen. I, I can't say I love the politics of every country in that list, especially Brazil going left wing recently. But the fact that they seem to recognize that they would benefit economically, and they would by going on the gold standard and really distinguishing themselves from monetary systems elsewhere, to me is very encouraging. And, um, anyone who, any country that goes on the gold standard is also basically sending the message that we are not gonna use our central bank in a, in a reckless, irresponsible way to print money wherever we need it. And so, I hope this happens. And your question was how it'll affect the dollar. It would hurt the dollar, right? Uh, only because it would offer a better, so you agree with that gura? That it would offer a better
Speaker 3 00:42:00 Yeah, better alternative. So it's, it's a kind of, it's an interesting situation because yeah. Um, if there is a currency, uh, backed by gold, that's an awesome, that's a great thing. Yeah. But then that's probably going to ruin lives for us, especially with, um, uh, our government printing so much money and what are they gonna do with it now that they can't sell it to, to anybody else.
Speaker 1 00:42:21 Now, on the other hand, Guda, you could say that this might induce the US to behave itself monetarily mm-hmm. <affirmative> and fiscal. I'm not all that sure that that would happen, but, but if we say in any field, there's gonna be competition and it's gonna be a better product. And there are these huge company, I mean, the bricks, if you look at G D P, the bricks rep, India, China, Russia, they represent a huge part of, uh, the global G D P. So, um, it's below the radar now, as you know, but if this were to happen and then it were to be announced, it would be discussed everywhere. And in Washington circles, it would be discussed as, oh my gosh, what are we gonna do? We look pretty pathetic here with our fiat paper money dollar issued without limit, with the, you know, modern monetary theorists telling us we could issue even more without limit. And, uh, it might make the US and other fiat money regimes behave better and consider, uh, just out of competitive advantage of anchoring their own currencies. It's a long shot. It's a long shot gu, but I, I like that the fact that these countries are doing it, by the way, after the Ukraine invasion by Russia, when it faced, um, embargoes mm-hmm. <affirmative> from the US and elsewhere, I don't know if you know this, but they put the ruble on the gold standard already.
Speaker 3 00:43:41 Oh, really? No, I did not know that.
Speaker 1 00:43:43 It's on a semi, it's not a perfect system, but it's on a semi gold standard. Oh, wow. Uh, because the <laugh> get this. Now, the Russian Central Bank afterwards was worried that the embargoes, uh, the, you know, the US not taking their oil and stuff mm-hmm. <affirmative> would lower the value of the ruble. And, and, um, and it, it did run that risk. And, and it was invertible like every other currency. And, but Russia has more than enough gold, and so,
Speaker 3 00:44:09 Right. I think they've been buying up gold actually. They have all the Yes. Since, um,
Speaker 1 00:44:14 As has China
Speaker 3 00:44:15 Couple years ago, as as China,
Speaker 1 00:44:18 You have Russia and China, which are not, I I would say, you know, they're not as bad as they were under Mao and Stalin, obviously. Mm-hmm. <affirmative>, and they're not fully capitalists now, but they do have some recognition that to gain credibility in international markets, they better put their currencies, both the Juan and the ruble on some kind of gold standard. It's quite a recognition of the reality of the history of the value of the gold standard. It's really amazing. Anyway, that's why they did it in Russia. They were worried that being isolated after the Ukraine invasion would lower the value of the ruble, and they would not be able to buy stuff. And so they put it on the gold standard. And then interestingly, they also said, for all those countries abroad who won't take our oil, uh, we demand <laugh>, we demand that anything we sell you, you must pay us in gold. Hmm. Isn't that interesting? So they, uh, there's lots of things in Europe and elsewhere they want to get from Russia, including grains, and they have to, they have to pay Russia gold Now, <laugh>,
Speaker 3 00:45:16 That's, that's
Speaker 1 00:45:17 Incredible. Anyway, what a great question. Gura, are you an economics major?
Speaker 3 00:45:22 Uh, no, actually I was studying international relations in college.
Speaker 1 00:45:27 My gosh. How did you know this stuff about the Brix? Uh, amazing. I
Speaker 3 00:45:31 I tried to, I I feel like I'm learning more after college <laugh> than in
Speaker 1 00:45:34 College. Oh, right. Yeah.
Speaker 3 00:45:35 Yeah. I think it's, it's important to kind of like, uh, you know, look into these things yourself. Uh, yeah. And I think, um, economics is one of the most important, uh, fields. And I think a lot of people, especially people my age, younger generations, are highly lacking in that. And I almost feel like there is some kind of, um, effort by whoever to keep people ignorant of economics. Hmm. Um, because, you know, you create a society where it, it, it, it, they make it more difficult than it needs to be economics, I think. And if, if people don't understand it, they just look to the government to solve all their problems. That's kind of how I feel about it. <laugh>.
Speaker 1 00:46:21 Yeah. Thank you, Guana. That was a great question. Thank you. Hope to talk to you again.
Speaker 0 00:46:25 Yeah. Great. Thanks, Guana. Um, and, and again, we wanna encourage people to raise your hand if you have questions. You know, how how much of this is related, uh, to this stakeholder theory that corporations are not just for the owners, but the entire global community they touch. So, you know, they should have to carry inflation on their shoulders, like Atlas.
Speaker 1 00:46:52 Good question, Scott. I think that's, uh, that might be part of that. I haven't thought of that connection. It's a really good integration. I think the shareholder model, I long said, the shareholder model is the capitalist model where the shareholders are actually the owners. And that the stakeholder model, which is going on 50 years old now, but is getting greater credence in woke America, woke corporate America, is the idea that the corporations that serve not just, uh, owners, but uh, those who were affected by the corporation, so employees and, uh, vendors and local communities and things like that. Um, but, but this particular greed, deflation charge. Um, yeah. I don't really find within this group an argument that says, um, well, but I think it's implied by your argument, namely, don't be greedy. D dear greed, deflationists <laugh>, please, please, um, abate your, uh, desire to raise prices.
Speaker 1 00:47:55 See, but they're not gonna say, just because the Fed caused it, they're not gonna do that. You know, they wouldn't say something like, please bail out the government. Uh, so it's not seen as the perpetrator, you know, by keeping a lid on your prices or by, by keeping a lid on your wages, in fact. But it's a good point, uh, Scott, that it could be, uh, extended out that way to this model of the corporations should serve society, not its greedy owners, <laugh>, not its greedy owners who are looking for profits and dividends and rate of return and stuff like that. But, and I think another way of looking at this, Scott, is what we haven't talked about is, uh, if these people are right, think about this, these people, meaning these people who attribute inflation, not to the government, but to the private sector.
Speaker 1 00:48:40 Uh, if you take their theory as true, we talked about this in the beginning. There's the diagnosis. What would the cure be? Well, their cure would be price controls. Their cure would be wage controls their cure. What else do they say? I, I read the other day, um, excess profits tax. Jimmy Carter imposed an excess profits tax on oil companies in the late seventies. But again, the idea, excess profits, uh, profits are too high. Why? Uh, because you're gain, you're gaining unfairly by, you know, rising oil prices or rising meat prices, and you didn't really earn that. You didn't build that, you didn't earn that. So we're gonna take it from you. We're gonna steal it from you. Um, all these kind of anti-market policies, uh, geared to shutting, in effect, shutting up the messenger. Remember I said that part of this is blaming the messenger, these price, um, chargers who were reflecting what the government did to money.
Speaker 1 00:49:41 They're the ones who are being, um, hurt and killed. And, uh, you know, or their policies trying to restrict what they do. That's what price, wage, and price controls are. I, I find it actually comforting that unlike the late seventies, most economists today do recoil at the idea of hearing anything about wage and price controls. They do seem to have learned the lesson that that only causes shortages and, uh, terrible dislocation of the economy. But at the same time, they're, they're not strict enough about a limiting the explanation of inflation to central bank policy. And as a result, they do feed the occasional calls for price controls. So, you know, unless they come around to strictly restricting their explanation to government misbehavior, we're always gonna face the possibility of price controls, uh, which are, uh, you know, the path to serfdom, really. Um, so put another way, if the proper, uh, causality of inflation were out there, what would we see?
Speaker 1 00:50:50 We would see central banks, first of all, let the minimum, uh, tie tying their hands in some way, making them follow some kind of rule, uh, about which they issue money. Uh, either a, uh, a fixed supply of money increase as Milton Friedman wanted as a mantras, or in the gold standard case of the gold standard, people saying, beyond the gold standard, or for those crypto people who say, beyond the crypto standard, be on the Bitcoin standard. But regardless, the point is, put some rules on the monetary rulers. And in the extreme case, of course, just getting rid of the rulers, recognizing that central banking is but central planning, applying to money and banking. And if economists figured out, you know, 30 years ago, that central planning Allah, the U S S R was a complete and utter failure, why would they retain central planning and money that they, in the, in the recognition properly, so that central planning was gonna wreck an economy? Why didn't they also say, well, central planning and money is gonna wreck money. And if anything, the rules, uh, uh, restraining central bank behavior have completely been jettisoned, uh, in the last, uh, few decades. There aren't any rules whatsoever that I can pinpoint restraining, uh, the monetary rulers.
Speaker 0 00:52:16 Uh, I know you're not primarily a historian. Uh, uh, it seems like through history, we've seen, uh, you know, out of control, inflation being almost the, a sign of the end of an empire Rome was freezing prices by the early fourth century.
Speaker 1 00:52:36 Yes, it is a part of, um, the end of empires. Yes, there's a history of this. It's not the only thing that ends them. Another thing that ends them, which, um, sad to say is going on, is foreign adventures, which drained the treasury. I mean, foreign military adventures that are not in the self-interest of the empire. But in the old days, empire meant, you know, um, being imperialistic all over the world. So they, they always face the danger. The Soviets faced this of, you know, you invade one more country, and it's the straw that broke the camel's back in their case, Afghanistan, but also in Rome. So part of it is monetary dissipation leading to price controls and wrecking the local economy. But the other one is your troops are all over the place, all over the globe, doing stuff that only drains your treasury and, and the vitality of your young men.
Speaker 1 00:53:31 And, uh, the last one also very topical, is borders, uh, barbarians at the gate, the famous phrase of the Romans going down, why would barbarians be at the gate and knock down the gate and come through the gate? That's called borders. And I'm no advocate of walls, and I'm no advocate of closing the border, but I'm now not a fan of, uh, open borders either. There should be an Ellis Island type managed border system in the us, uh, which we don't have, which is sad. But yeah, those three elements, Scott, historically, I, I have found, uh, dissipate empires. Uh, the British went off the gold standard in 1914, and they were never the same. Then they nationalized every industry they could find after World War ii, and they went from being Great Britain to just plain old, uh, Britain. So really good point about the history of it. Scott Money does play a role here.
Speaker 0 00:54:26 That's great. Uh, again, if, uh, you do wanna raise your hand, there's still time left. Uh, I still have a couple of more, um, I don't know if Rand directly said this, but it seems like I've heard some, uh, define greed as a desire for the unearned. Is that fair?
Speaker 1 00:54:47 Yeah, I have heard that, and I don't think it's worth, um, going there, um, on the same grounds that she said, I'm gonna defend selfishness, uh, even though the polite phrase seems to be self-interest. So my strategy has been to do the same thing with greed, to treat it as a smear and a derogatory presentation by those who hate egoism anyway. Um, and so to find, I, I didn't quite, I wasn't quite aware of what you said about other objectives, but I think within our, uh, corner of the world to have pro capitalists and those who understand Francisco's money, speech, and Atlas shrug, the money is the root of all good. To have them, um, slicing the deck and saying, well, I'll accept selfishness, but not greed. I think on, on the surface, I would say that's a mistake. Um, now to the general public, I think, or if you look up in dictionaries, greed is sometimes I have defined as a getting or wanting more than you deserve.
Speaker 1 00:55:57 Uh, now that interests me from the standpoint of deserve and dessert has to do with earned. And we're okay with, uh, you know, outsized gains that people get that are earned. And, but greed, to me is the motive. And, um, you know, so long as it's not the motive that says, and I've never seen it defined this way, actually, it's not defined typically even by the enemies as the motive to gain at other's expense. You do not see that you, you simply see greed as this person really, really, really, really wants a huge gain. Okay? <laugh>. Okay. As some people you meet in college and elsewhere, and they'll, you ask them whether they wanna do for a living, and some of them will say, I wanna be a millionaire. You know, now where they, and the other one will say, I wanna be a starving artist and be the best, uh, painter, you know, on Cape Cod or something like that.
Speaker 1 00:56:51 But I realize I'm not gonna make any money, is the first person greedy? And the second one isn't? They're both, you could say rationally self-interested. Um, but, uh, for those who want a <laugh>, for those who want a kind of artistic Hollywood take on this, I actually love, and I play it for students all the time. I actually like the, um, the scene in Wall Street where Michael Douglas is addressing the shareholder group of, I think it was Tel Dark Paper or something like that. It's a famous scene in the 1987 movie. Um, and it starts with, greed is good, but he goes on to say, greed captures, and I'm, I'm paraphrasing a little bit and crystallizes or something, the desire in human beings to achieve health wealth. He names a bunch of things. Love, and what's wrong with that? Greed is good, and here's why. And none of it, none of that talk, um, uh, refers to doing it to harm others. Other parts of the movie do suggest that <laugh>, but the, i, I highly recommend it's only about a five minute take. I highly recommend everyone go to YouTube, put in Michael Douglas Greed speech, um, wall Street, 1987. It's really, really well done and really well scripted. I believe he took the phrase from Ivan Bosky, who was a, uh, a Wall Street trader in the eighties.
Speaker 0 00:58:27 I remember it well. It's a classic. Well, this, uh, this has been a lot of, uh, great information. I'm glad that you, uh, spoke about it. You, um, touched on central banking and, uh, on, uh, Tuesday of next week, the 22nd, you are gonna be hosting a Morals and Markets at, uh, 8:00 PM Eastern on the nefarious purpose of Central Banking. I'm really looking forward to that one. And then, uh, also we've got, uh, on the Wednesday the 23rd at 5:00 PM Eastern, the Atlas Society asks Stephanie Slay. That'll be, uh, c e o Jennifer Grossman Jag, uh, doing that interview. Looking forward to that. Uh, but again, uh, thank you everyone for joining us. Everyone who listened or participated, um, I'm Scott Schiff with the Atlas Society. Uh, there's a link above if you care to make a tax free donation. Uh, we certainly appreciate it. So, uh, we look forward to seeing you, uh, next week at our events. Thanks again, everybody. Take care.
Speaker 5 00:59:43 Thank you, Scott. Thank you everyone.
