Inflation is not rising prices. Rising prices are what inflation does. In this third lesson of a four part economics series, Lawrence W. Reed, president emeritus of the Foundation for Economic Education, walks Jenny Beth Martin through money and inflation from the first coins to the Federal Reserve, and makes one argument the whole way: when a government prints too much money, everything priced in that money goes up, and the grocer who changes the sticker is not the one who did it. Reed starts with what money is, a medium of exchange, a middleman that makes trades possible that barter never could, and why it is different from every other good. Double the supply of shoes and a nation is richer. Double the supply of money and you have only doubled the claims on the same wealth. His coat check ticket makes the point in thirty seconds. Then the history: seashells, wampum, tobacco, cattle and cigarettes; the first standardized coins around 650 BC; Rome pulling the silver out of its coinage; the Constitution's gold and silver clause; and April 1933, when Franklin Roosevelt gave Americans until May 1 to turn in their gold under penalty of a 10,000 dollar fine or ten years in prison. Then the definition. Call inflation rising prices and business gets blamed. Call it an increase in the quantity of money and the question becomes who prints it. Jack Kemp's rule: wet streets don't cause rain. Learn more at teapartypatriots.org and jennybethshow.com.
Guest: Lawrence W. Reed is president emeritus of the Foundation for Economic Education, an economist who has led three think tanks and taught economics at the university level, and the author of nine books including Was Jesus a Socialist? This is the third of his four economics lessons with Jenny Beth Martin, following the fundamentals and capitalism versus socialism, and it is the one about money.
Key topics:
• What money is, why it is a middleman rather than a good, and why its supply has to stay scarce
• The coat check ticket: what happens when the attendant prints more tickets than there are coats
• Seashells, wampum, tobacco, cattle, rats and cigarettes, and why gold and silver won
• Coins standardized around 650 BC, Rome's debasement, and the English kings who fought over honest money
• The Constitution's gold and silver clause and the Gold Standard Act of 1900
• 1933: Roosevelt orders Americans to turn in their gold by May 1
• Dimes and quarters were 90 percent silver until 1964
• What inflation actually is, and why changing the definition changes who gets blamed
• Jack Kemp: wet streets don't cause rain
• France, 1715 to 1720: John Law and the first paper hyperinflation
• The Specie Resumption Act of 1875 and the return to gold
• Hamilton's central bank, Andrew Jackson's veto, and the one year America had zero national debt
• Booms and busts come from erratic monetary policy, not from capitalism
• The lockdown checks, the Inflation Reduction Act, and the fix for affordability
Timestamps:
00:00 — Cold open: affordability, money and inflation
00:38 — Part three of four: Lawrence Reed returns
01:26 — What is money? A medium of exchange, a middleman
04:37 — Why money is different from every other good
05:52 — The coat check ticket
07:34 — Money versus barter: the corn farmer and the oats
09:44 — Was money invented?
10:59 — Seashells, wampum, tobacco, cattle and cigarettes
12:50 — When gold and silver became money
14:10 — 650 BC: the first standardized coins
15:09 — Every government has an insatiable appetite for revenue
17:04 — The Henrys of England and honest money
18:01 — How America's gold standard worked
19:44 — 1900: the dollar defined as one twentieth of an ounce of gold
20:49 — What is fiat money?
22:11 — Dimes and quarters were 90 percent silver until 1964
23:41 — Bolivia, 1985: Reed inside a runaway inflation
24:59 — Jimmy Carter and double digit inflation
25:34 — What is the Federal Reserve?
26:55 — 1933: Roosevelt seized your gold
28:38 — What is inflation? Change the definition, change the blame
30:33 — Jack Kemp: wet streets don't cause rain
32:21 — France, 1715: John Law and the first paper hyperinflation
35:03 — Back to sound money: the Specie Resumption Act of 1875
36:42 — Hamilton's first central bank
38:04 — Andrew Jackson versus Nicholas Biddle
38:39 — The one year with zero national debt
39:21 — What if we had no central bank?
40:57 — Booms and busts come from erratic monetary policy
43:23 — How overprinting interferes with supply and demand
43:56 — False signals: printed money and interest rates
45:26 — The Federal Reserve at 113 years
47:24 — Rising prices are a monetary phenomenon
48:29 — The lockdown checks and the Inflation Reduction Act
50:03 — Leadership, courage and the hangover
53:17 — Reagan and Thatcher stuck it out
55:21 — Put the heat on Congress: stop spending
56:45 — The Appropriations Committee member who did not know what to do with us
57:27 — Be the leaders we are looking for
57:59 — Next: myths and misconceptions in economics
Links mentioned:
jennybethshow.com
teapartypatriots.org