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Milton Friedman - Understanding Inflation — Transcript

by LibertyPen · 1,881 words · 297 segments · language en · Watch on YouTube

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0:03[Music]
0:18the Sierra Nevada is in
0:20California 10,000 ft above sea
0:24level in the winter temperatures Dro to
0:2740 below zero
0:30in the summer the place bakes in the
0:33thin Mountain
0:34Air in this unlikely spot the town of
0:37bod sprang
0:39up in its day Bodi was filled with
0:42prostitutes drunkards and
0:45gamblers part of the colorful history of
0:48the American West
0:50[Music]
0:57[Music]
1:03a century ago this was a town of 10,000
1:08people what brought them
1:11here
1:13gold If This Were Real Gold people would
1:16be scrambling for it a series of gold
1:20strikes throughout the West brought
1:22people from all over the world all kinds
1:24of people they came here for one purpose
1:27and one purpose only to strike it rich
1:30quick but in the process they built
1:34towns cities in places where nobody
1:37would otherwise have dreamed of building
1:39a
1:40city gold built these cities and when
1:43the gold was exhausted the cities
1:45collapsed and became ghost towns many of
1:48the people who came here ended up the
1:51way they began broke and unhappy but a
1:53few struck at Rich for them gold was
1:57real wealth but was it for the world as
1:59a hole people couldn't eat the gold they
2:02couldn't wear the gold they couldn't
2:04live in houses made of gold because
2:06there was more gold they had to pay a
2:09little more gold to buy goods and
2:10services the prices of things in terms
2:13of gold went
2:15up at tremendous cost at sacrifice of
2:19lives people dug gold out of the bowels
2:22of the earth what happened to that
2:25gold eventually at long last it was
2:28transported to distant places only to be
2:31buried again under the
2:33ground this time in the vaults of banks
2:38throughout the
2:39world there's hardly anything that
2:42hasn't been used for money rock salt in
2:45Ethiopia brass rings in West Africa
2:49cowry shells in
2:50Uganda even a toy Cannon anything can be
2:54used as
2:55money crocodile money in Malaysia absurd
2:58isn't it
3:02that baguer Minority of the population
3:05that still smokes May recognize this
3:08stuff as the raw material from which
3:10their cigarettes are made but in the
3:12early days of the colonies long before
3:14the United States was established this
3:17was money it was a common money of
3:20Virginia Maryland and the Carolinas it
3:23was used for all sorts of things the
3:25legislature voted that it could be used
3:27legally to pay taxes it was used to buy
3:29food clothing and housing indeed one of
3:32the most interesting sites was to see
3:34the Husky young fellas at that time lug
3:37100 pounds of it down to the docks to
3:40pay the costs of the passage of the
3:43beautious young ladies who had come over
3:45from England to be their
3:47Brides now you know how money is there's
3:50a tendency for it to grow for more and
3:52more of it to be produced and that's
3:54what happened with his tobacco as more
3:56tobacco was produced there was more
3:58money and as always when there's more
4:00money prices went up inflation indeed at
4:03the very end of the process prices were
4:0540 times as high in terms of tobacco as
4:08they had been at the beginning of the
4:10process and as always when inflation
4:12occurs people complained and as always
4:15the legislature tried to do something
4:17and as always to very little Avail they
4:19prohibited certain classes of people
4:21from growing tobacco they tried to
4:23reduce the total amount of tobacco grown
4:25they required people to destroy part of
4:27their tobacco but it did no good good
4:30finally many people took it into their
4:32own hands and they went around
4:33destroying other people's tobacco fields
4:36that was too much and they passed a law
4:38making it a capital offense punishable
4:40by death to destroy somebody else's
4:43tobacco Gram's law one of the oldest
4:46laws in economics was well Illustrated
4:50that law says that cheap money drives
4:52out deer money and so it was with
4:54tobacco anybody who had a debt to pay of
4:57course tried to pay it in the worst
4:59quality of tobacco he had he saved the
5:01good tobacco to sell overseas for hard
5:04money the result was that bad money
5:07drove out good money finally almost a
5:11century after they had started using
5:13tobacco as money they established
5:16warehouses in which tobacco was
5:18deposited in barrels certified by an
5:21inspector according to his views as to
5:23its quality and quantity and they issued
5:26Warehouse certificates which people gave
5:29from one to another to pay for the bills
5:32that they
5:36accumulated these pieces of green
5:38printed paper are today's counterparts
5:41of those tobacco certificates except
5:43that they bear no relation to any
5:49[Music]
5:51commodity the fact is that most people
5:54enjoy the early stages of the
5:55inflationary
5:57process Britain in The Swinging 60s
6:01there was plenty of money around
6:03business was brisk jobs were plentiful
6:06and prices had not yet taken
6:09off everybody seemed happy at
6:13first but by the early '70s as the good
6:16time rolled along prices started to rise
6:19more and more
6:20rapidly soon some of these people were
6:23going to lose their
6:25jobs got
6:27it the party was coming to an end
6:29[Music]
6:33sh we're on top of the
6:37world the story is much the same in the
6:40United States only the process started a
6:43little later we've had one inflationary
6:45party after another yet we still can't
6:48seem to avoid them how
6:53come before every election our
6:55Representatives would like to make us
6:58think we're getting a tax break break
7:00and they're able to do it while at the
7:03same time actually raising our taxes
7:06because of a bit of magic they have in
7:08their kit bag that magic is inflation
7:11they reduce the tax rates but the taxes
7:14we have to pay go up because we are
7:16automatically shoved into higher
7:18brackets by the effect of inflation a
7:21neat trick taxation without
7:24representation the more I
7:26work it seems like the more they take
7:29off of me
7:30I know if I work an extra day or two
7:32extra days what they take in federal
7:34income tax alone is is almost doubled
7:37because it apparently it puts you in a
7:39higher income tax bracket and it takes
7:40more off
7:42[Applause]
7:44you bump Crawford lives with his wife
7:46and three children in a suburb of
7:49Pittsburgh they're a fairly average
7:51American
7:51[Music]
7:53family don't slam the door daffne okay
7:57all right what are you doing making your
7:58favorite dick
8:00no we went to the Crawford's home after
8:02he'd spent a couple of days working out
8:05his federal and state income taxes for
8:07the year for our benefit he tried to
8:10estimate all the other taxes he had paid
8:12as
8:13well in the end though he didn't
8:16discover much that will surprise
8:19anybody inflation is going up
8:21everything's getting more expensive no
8:23matter what you do as soon as you walk
8:25out of the house everything going up
8:27your gas bills keep going up electric
8:30bills uh your
8:33gasoline uh you can name a thousand
8:35things that are going up just
8:36everything's going Sky High your food my
8:39wife goes to to the grocery store we
8:41used to live on say $60 or $50 every two
8:45weeks just for our basic food now it's
8:47$80 or $90 every two weeks things were
8:50just they're going out of sight as far
8:52as expense to live on like I say it's
8:55getting tough and and and seems like
8:57every month it gets worse and worse
9:00and I don't know where it's going to
9:02end at the end of the day I spent nearly
9:05$6,000 of my earnings on
9:10taxes that leaves me with a total of
9:14$122,000 to live
9:16on that might seem like a lot of money
9:19but five six years ago I was earning
9:24[Music]
9:25$112,000 how does taxation without
9:28representation really effect how much
9:30the Crawford family has left to spend
9:33after it's paid its income
9:36taxes well in 1972 Bob Crawford earned
9:40$122,000 some of that income was not
9:43subject to income tax after paying
9:45income tax on the rest he had this much
9:48left to spend 6 years later he was
9:51earning $188,000 a year by 1978 the
9:55amount free from tax was larger but he
9:58was now in a higher tax bracket so his
10:01taxes went up by a larger percentage
10:03than his income however those dollars
10:06weren't worth anything like as much even
10:08his wages let alone his income after
10:11taxes hadn't kept up with inflation his
10:14buying power was lower than before that
10:18is taxation without representation in
10:21practice we had number of you brothers
10:24that are sitting here today that were
10:25with us on that committee and uh I'd
10:28like to tell you one of the things there
10:31are many traditional scapegoats blamed
10:32for inflation how often have you heard
10:35inflation blamed on labor unions for
10:37pushing up wages workers of course don't
10:41agree but fellas this is not true this
10:44is sube this is a myth your wage rates
10:47are not creating
10:49inflation and he's
10:51right a serious higher wages are mostly
10:55a result of inflation rather than a
10:56cause of it Economist in this country
11:00indeed the impression that unions cause
11:02inflation arises partly because union
11:05wages are slow to react to inflation
11:07inflation and then there's pressure to
11:10catch up on a day-to-day basis trying to
11:12represent our own members that that in
11:14fact is not the
11:16case not only can we not play catchup we
11:20can't even
11:22maintain a wage rate commensurate with
11:26the cost of living that's going up in
11:27this country
11:33the reason we have inflation in the
11:35United States or for that matter
11:37anywhere in the world is because these
11:39pieces of paper and the accompanying
11:42book ENT or their counterparts in other
11:44nations are growing more rapidly than
11:47the quantity of goods and services
11:50produced the truth is inflation is made
11:54in one place and one place only here in
11:56Washington this is the only place where
11:59there are presses like this that turn
12:00out these pieces of paper we call money
12:03this is a place where the power resides
12:05to determine how rapidly the amount of
12:08money shall increase
12:30what happened to all that
12:32noise that's what would happen to
12:34inflation if we stopped letting the
12:37amount of money grow so rapidly this is
12:39not a new idea it's not a new cure it's
12:42not a new problem it's happened over and
12:44over again in history sometimes
12:46inflation has been cured this way on
12:48purpose sometimes it's happened by
12:50accident during the Civil War the north
12:54late in the Civil War overran the place
12:57in the South where the presses were
12:59setting up where the pieces of paper
13:02were being turned out prior to that
13:05point the South had had a very rapid
13:07inflation if my memory serves me right
13:10something like 4% a month it took the
13:12Confederacy something over 2 weeks to
13:14find a new place where they could set up
13:16their printing presses and start them
13:18going again during that 2E period
13:22inflation came to a
13:24hul after the 2 we period when the
13:26presses started running again inflation
13:29started up again it's that clear that
13:32straightforward

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