So, welcome to the next talk. Hackers one way or the other. Our three speakers have looked into the security of the telemetrics infrastructure. So, this is all about how to access the data and how to protect it from access. So, the left-hand speaker is Martin. He actually spoke to the German parliament about these health systems and we have next in the centre Zierlich who was also an advisor in the German parliament on this very topic and on the certification of the system. And lastly, Siebock is also an expert on these matters. So, a big round of applause for our speakers. I'm glad that so many of you at this early hour showed up for this talk about the patients file. I assume that many of you don't actually know what that patients file is supposed to be. The patients file is coming, that's for sure. And to just bring you up to date, there'll be a short introduction about what the electronic patient file is supposed to be. The electronic patients file is a digital patient book which for the time of one's life all contains all health data, allergies, health data, blood data, previous treatments and prescriptions and all in one place and it's transparent for the patient because the patient alone has insight into the data and they alone have control over the data and determine who has access to the data. Using the patient file, patients can administrate the data securely online effectively and all the information is always available in every life situation in exchange with your partners which eases the exchange of data with your partners in health enormously. The electronic patient file from the 1st of January 2020. We network the health service securely, gamatic, the company behind it. This electronic patients file is not yet another app, not yet another patients file as we've seen last year, but it is the patient file, the electronic patients file that is required by social legislation has to be provided to everyone to use for the whole life for storing health data and that of course leads to several questions. For one, we would like to provide means of storing health data for the time of one's life which is extra images, doctors, letters, laboratory results and all that is supposed to be administrated in this file and the patient is supposed to have sovereign control, exclusive control about who has access so it has to be secure. Can that work? No, someone replied. Sorry, very important. Whether it works or not, we have to satisfy these requirements. Liability, so violations in individual cases are, cannot be permitted. So, if we're thinking about bank account access where monetary values are dealt with, you make tolerate individual violations, but here each violation is unacceptable. This is what one of the data protection commissions from one of the German states has said and it's not new that we have high requirements here. Even our health minister, Jens Spahn, has realized this. He said that particularly data security is the Achilles heel of this project because if any violations occur then the acceptance of this application, every new upcoming application of electronic health services will be ruined and that will threaten the trust between patient and doctor in surgery hours as well if any violations occur. But health minister Spahn also says that he wants to speed up the process, hackers or not. And because this is kind of ambivalent, we thought we'd give it a closer look and to understand more closely and evaluate the security, we have to read the 10,000 page specification which you can all download on the website of the GMATIC company which deals with. So that's the specifications by the company, but also their own specifications, but also these from all the various institutions that we have in the health sector. So we read all these, not all of them, but we glanced through them and we then produced this fantastic graphics here to show you how this patient looks like. First of all, the in short person of which there are 73 million has their electronic health card. Most of you will know these and you have the card and you have a device to read it which may be an NFC-capable smartphone if the card becomes NFC-capable. And with that over the internet the patient can access through a gateway an underlying file system. And in this file system the health data is supposed to be to reside for the duration of one's life, but it's going to be encrypted and talk here is about end-to-end encryption and the key to that data is also stored in this filing system, but don't laugh yet, that key is encrypted. It's encrypted and that is all justified somehow, but the question is we haven't solved the problem. Where is the key? Where is the key? For the key is now the problem. And for that we have to look a bit further. Through this we are connected to the telematics infrastructure and that infrastructure is the central network of to which now 115 doctors, 115,000 doctors surgeries, but also pharmacies, hospitals and all other institutes are going to be connected. They call it a special VPN network with its own trust space and this institution supplies the following two services. The key generation service one and the key generation service two. These services generate keys for us and these are authorized keys. So with our health card we have to go to these key generation services and retrieve those blue authorized keys by authorizing as authorized people and we then take these keys and with that we decrypt this pink file key and then we can access the data for the doctors practice that wants to access the same data to for example add new data and doctors letter or a little bit more to result. So for them from the other side it looks quite different but a specific device for accessing has to be used. Every doctor surgery is connected to this telematics infrastructure needs a so-called connector that's a special VPN router with special functionality which gives access to this protected network and while the in short person uses their health card to authorize to this network and get and generate their keys the doctors will use their practice ID their health practitioner ID to access the system. So this is symmetric both patients and doctors have chip cards which they use to identify and authorize with the system and to simply to depict the risks in a simplified way let's just look at the numbers here we have 73 million installed people with about four suppliers of the patient file which are currently in the process of development because it's supposed to be available in a few months and there is one central telematics infrastructure and then of course there are 115,000 doctor surgeries doctors practices that are connected now and we estimate that ultimately it will be about 170,000 and the processes how these chip cards are distributed are processes run by the central telematics infrastructure and the problem with the key generation service is that the in short person or the doctor will only identify with their card and then receive a key so the problem is that we are still hearing about end-to-end encryptions but the key is no longer under the control of the in short person so if you can identify for example with a successor card you get access you get the key and therefore access to the data and even the german authority for security in information technology the agency the federal agency has said that if the authentication procedure could be broken then the cryptographic means and the whole data will be accessible and the gamatic company deduces from that that the correctness of the process of issuing the cards is the basic precondition for the secure operating of this service now card issuing process which means the transfer of a real existing person or a legal person a doctor's practice into the digital sphere and to ensure that securely you have to satisfy the following condition you have to identify the person in short people doctors doctors practices have to be identified securely and the attributes whether they are an authorized practice or an in short person with a certain insured person's number these data have to be confirmed in a legally safe way and and the handover of the key the connection from the identity to the key has to be securely and has to be very very viable and that makes the system secure because only then will the card be safely and only in the hands of the authorized people and the gamatic company knows this too and they talk a lot about the high requirements for the identification process it has to be reliable it has to be necessary it has to be it's a precondition and all that now what kinds of identities are there we've seen three cards already we have the insured person's card the practice card with the health practitioners card and then we have the connect of these the pn router and all these carry cryptographic identities in the form of certificates and private keys which are stored on chips and private and cards and what we did is we looked at the question whether the issuing process is safe because this is the central point of attack if we want to attack if if it's if the authentications here's the end to end encryption then we will attack the authentication process is that possible yeah thank you martin yeah i wanted to tell you about how we actually met so so last year or maybe this year we had there was this problem that this whole infrastructure was um was really pushed onto people and people were fined if they didn't implement the system and i was very upset about it and i wrote a letter and then basically to solve this issue we made we got to know each other and looked at to the different parts of the system so if you look at these different cards then so one when you want if you want to have one of these then you have to go online to one of the different providers so we chose the one that had a form that you can just fill out and you have to provide different data points and these five data points are the ones that are being actually checked so the the idea of the company medical company your birthday the the number of the doctor last name and profession um so this looks like this and the birth date is the only piece of information that is not included on every receipt that you get from your doctor so this is the only missing information that's not easily obtainable and of course yes so birth date is not a big secret and and sometimes you also get the city of birth so you can easily just take that information enter it and then the kv checks okay does this uh this is this is correct and then we get this um yeah this card and no it doesn't get sent to the doctor no no no that would be stupid if the doctor got it you can actually specify a delivery address and that's where it arrives and and if there's no one at home at the delivery address you can also specify that it should be delivered to the postal office if the recipient is not there and this looks like this and you have to activate this online there's another form for this for this you need this pin um letter and with this we could activate the pass and and then we registered the card and we could obtain the basic information of patients what can you do with this card if you want to do evil things well you have unrestricted accession access to the telematic infrastructure which means you have circumvented this safety infrastructure or security infrastructure and you have access to different applications and you have access to medical records about medications that people take and you have access to that and i can in the near future receive messages and sign in the name of the doctor that i stole his identity from um yeah and there was also this other talk about pdf for trees so where's the problem so there are three providers and they sent out these cards in the same way so we tested one provider and it was not a big problem to just redirect the card but media design has issued over 80 000 institute passports and potentially there were some um compromised certificates that had to be withdrawn um and lastly um there was an insufficient specification of uh these guidelines and the gematic then approved this process and the trust service provider without really looking at the way they worked but that's just one type of a health card now let's take the same type the health protection practitioner's card or the doctor's card if you apply for that one you need personal identification before that card will be delivered do you know you don't because there is the so-called bank identity procedure which i'm going to explain shortly uh briefly a doctor will at some point go to their institutional bank their professional bank which is a german pharmacist and and medical practitioner's bank bank open an account there or just show up there and and show their personal id their document document and then they will have passed the first stage of this identification procedure and an attacker will now go to one of these trust service providers media sign for example will enter the data of that practitioner and the bank will say yes we know that person we have an account for them and the um doctor's chamber will say yes we know this person who this person is registered as a particular practitioner of of some kind what does medi sign then do they will issue the the card and deliver it again uh delivery to some uh specific delivery address possibly a separate one and the pin letter will be sent to the same address if requested and this way we could again online activate this card and receive a valid user certificate and that requires a signature and i've just said where you get the doctor's numbers from the doctor's signature will be there too if you can read it at all in many cases it will be such as postal pickup pickup and post office the original doctor's signature will not be stalled anywhere so you can't really read a signature anyway that's not anyone's name so it will be quite easy to imitate this again where's the problem there are two providers and four verification procedures post identity and chamber identity are okay ish in terms of the specification the two procedures were two side two factor identification takes place are not working so well and these are the bank ident procedure and the pre chamber identification procedure where a two factor identification will take place so the doctor will show up show their identification and then later on someone will show up and say oh hello i am this practitioner and there is no way of linking these two identities and and match these and make sure that the person that is applying online is the one that showed up earlier to show their id and at medi sign 31 percent of the health particulars cards are obtained this way because it's so convenient i don't have any figures for the other suppliers and that gives us to our specialist for the gets us to our specialist for the patient's card and this way which we showed how we can easily obtain these two cards by doing some simple identity theft but there's still the health card missing in this and i googled how to see get a health card and fortunately obtained yeah and so i will tell you how to do this um so the health card is equivalent to the institute id card many of you will know this it's the central key to the telematic infrastructure and one central question was is the health card an id card or does it does it confirm the identity of the person or is it more like a strapping card some so what would be the consequence if it's not an identity card so because every doctor knows their um patients so why would it matter um and before the health card there was this electronic health card and it was mainly used for billing and this way the doctor could send the health insurances the medical bills but with the health card it's it's equivalent to the institute and medical professional cards and in the context of digitalization more more work and more more yeah more service is done in the context of electronic processing in also in legal terms paragraph 291a and even the location where where the patient pledged to donate their organs will be saved and of course it will be used as the central key to the patient medical data folder and there are also additional applications for instance like direct health insurances that don't have any offices for what patients can go to and in and even in individual cases it will not be possible to access the data there will be receipts and in those receipts there there'll be a statement which what the health insurances have uh paid in the last 18 months and uh and here we come back to what martin said the identity of the person who's affected has to be determined in advance before social data is being transmitted and this is quite different what you might know from different areas in other areas it might be sufficient to determine afterwards that something went wrong and then corrections can be made like if you have withdrawn too much money it can be uh corrected but when you transfer medical data you transfer knowledge and once and once yeah so the knowledge about what kind of treatments people people got what kind of medications you can't return this knowledge once um it falls in the wrong hands and therefore we talk about different different threats or different uh problems that occur when data data leakages happen and therefore it's important that it the data must be protected so that even in individual cases it cannot happen that that data gets lost um so which means that these procedures have to be absolutely watertight that this information cannot be obtained by illegal means and because it's such a central element right from the beginning um when the architecture the safety security architecture for this was designed that the safety level was set very very high even higher than financial systems and it was also determined that identities that um i use for these digital certificates have to be as high on the security level as these digital certificates and then it was determined that the old uh that the old procedures that handed out the old cards that these procedures are no longer sufficient or sufficiently secure and if for instance someone lost their card or if they changed the health insurance provider then a different then a different procedure had to be in place to ensure that the new card would have the required security level and and of course in the last couple of years people focused a lot on the technical um requirements but they are still the organizational procedures that had to be taken care of and in the year 2016 the cdu parliamentary party has um has given a talk so by kauder said that there is if there's only one in one single um accident with the medical data is sufficient to remove the trust that people have in the um medical system and therefore it is absolutely essential for the success of the system that the security is watertight and correct and so that it's very important to kauder that the people accept this system so we take took a closer look at this martin said that um the topic um was something that he dealt with several years so i looked at the years when i managed to use very simple methods to um get um health insurance cards so 2014 2015 2016 yeah last year i didn't do it um so it's like yeah again this year so it's really easy to get these easy to get these cards and the attack scenarios that we used do not differ by much and usually it's enough to just give a call to the health insurance and say hey i moved and then they sent me a new card and i did this for several years and now things have gotten more complicated and now to obtain a new card then one way is to change the address so there are two main attack scenarios so you could either change your address through the insured person or changing the address through the employee employer and and this data is being transmitted by the employer and there is so from the employer from the employer to the social security provider and the data that comes from the employer to the social insurance provider uh is assumed to be correct and valid also you have to take keep in mind or consider that uh if you look the respective guidelines if you read the respective guidelines you will find that identity the identity the student confirming identity has to have has to have education they have to have a security concept and it is automatically assumed that an employer will have all that and we we stepped away from we stepped back from from taking this kind of attack and focused on address change as an individual and we looked at how the AOK the most the Hessian yeah the Hessian AOK does this AOK being one of the the largest statutory health insurance provider and what are the guidelines that they have and here you can say for here you can see that for data protection reasons to prevent abuse from third parties the address has to be transmitted either in a letter or facts with and with a signature or in a scanned letter with a signature which is then emailed and the gain in security by scanning in a letter is small or none and it's not only enough to change the address that it can change the address no online you can you can actually change your address online and order a new insurance card in the same process as well so you have a very simple means of sending an email here with a non-binding kind of letter and then a few days later to that new address a new health card will be delivered and this health card as I said is the central point of access to the whole telematics infrastructure so that one weak point is the is the address change procedure which did not comply with security requirements and what has to be added here can you go back one slide please we have the statement by the health minister that this telematics infrastructure has to be introduced because fax is so insecure right or at least that it is more secure than fax so that brings us to a press release and doctors wrote that the telematics infrastructure is safer than fax right if you really want that okay you can agree to that but the funny thing is when christian applied for his new card he sent a fax now we have a statement by the another statutory health insurance provider a okay again but from a different part of germany from ryan land palatinate and they said that in the sense of custom oriented processes with a trust relationship poster just as have to be considered as valid okay you can say that and the this institution from from the state of ryan land palatinate said that uh an access to health data required and a previous identity verification we know that from next year access to health electronic health data is supposed to take place not one of you has gone through an identity very identity verification with their health insurance provider and this query to parliament was uh and this was a question that the tv station zdf handed into the health ministry and and the response was well the health insurance is weren't even complied to to close the security gap but the answer was they knew that in advance and this was as early as 2015 and nothing has changed yet okay okay we have so many slides right regarding the identity verification process for the health card we've said that the process that the health card includes a constitutes a limited proof of identity what is this 60 a limited identity proof identity does not exist a pin doesn't change that either prove your identity or you don't and to have these this card ready for use it has to be secured with an orderly identification proof of identity proof of identity if this okay i'll just have to step forward i have so many things to show sorry okay we will keep the rest for the q and a and move to the last part which is the connector and then come back to the overall bottom line that um so you could accuse us tell us that we've only looked at part of the technology and obtained part of the technology in the centerpiece as it's been called the connector this beautiful device which links doctors practices with the telematic infrastructure to look at that more closely of course you have to order it and obtain it and normally you can only get it in a package it's very expensive about 2000 euros which is not the amount that i wanted to spend as a hobbyist in it security but we found a supplier that will sell the connector individually and the procedure was rather simple it's just a fax the company and then it took a bit of time seriously come on three months delivery time that will give you a one-star rating okay then this connector was delivered through the very safe tnt delivery chain to just where the person of course always that image was from the leipzig conference center where we are now if you're watching from outside um now the central security function of the telematics infrastructure is depends on the security of the issuing of these cards and we've seen that all the issuing processes for any type of card are worthy of improvement and what does that mean for the first time this first this means that the huge promises that were made aren't really worth a lot and all they weren't very honest uh these promises that we would have a level of security that would be unique within europe the association of psychologists that said oh the chaos computer club wasn't able to hack it now therefore it is secure i don't know where they get this kind of statement from they shouldn't just release statements like that into the world it is very dangerous to make states like statements like that the health ministry the federal health ministry is of course absolutely convinced that it's secure and we all know that there is no absolute security and this is echoed by others so if you communicate something that is supposed to be useful please also point out the risks and don't talk about absolutes say that something can happen that you have access assessed the risks and that you are prepared for things to happen that you can mitigate the risks that you can mitigate the damages so that the user the patient can be protected and that is completely missing in this discussion that is dominated by absolutes and saying we are worldwide we're the best in the world and we are absolutely secure and we've seen maybe we're at top in leitzig maybe not but the mistakes that we've seen here they are not new the federal printers have known for years they've they've been publishing it in in their own expertise concerning their own products that the telematics infrastructure isn't that secure the german printers say the federal printer printing agency says that says that the delivery the issuance of these secure cards isn't that safe if it's sent by post you can own you just need to ask the postal service to forward your mail to another address and then you can receive these cards anywhere so if the knowledge is there where is the responsibility and we know that it's not just about the patient's file and and the the services that are accessed that we've heard of there are many many private suppliers that want to use this infrastructure to talk with their health protectionists to talk with patients and identify them and that of course won't all work if even the basic infrastructure isn't so corrupt so the idea is nice but then you have to do it right and that gets us to the positive aspects before we get down to the final bottom line because we have to say that there are some positive acts we I want to hand back to Ali for that and we see that the general law or the laws seem to be realistic and and we think that there is we've considered a good idea to use the state as as an authority to specify the infrastructure because without this infrastructure all the all the private companies have the same questions which is how how do how do I achieve that I bring real people who are legal entities who are who have medical records who who who do I manage how do I manage to bring them into the digital world and and this is and this central element of an identical digital identity this is quite challenging and and as a necessary measure to prevent risks and damage and the geometric has made some good decisions to reduce the attack surface and and also to to just to have measures to limit damage if a provider got compromised and and also defining that the level of protection is sufficiently high so that it's really like not like a payback card and we also saw that the health card is an id card and it must be treated that way and and it's really an organizational process to that have to be um admitted approved and and the people who are affected by these processes have to have to be protected and we have shown that it should not be done online because you can't guarantee the necessary protection and this will take a lot of time and I had many discussions and there is a certain degree of lack of responsibility because people think about technical solutions but they don't really think about an organizational responsibility and but this is really important because it's the people who exist in the real world and who are not just projections into a digital system that they are protected and we're almost at the end and this is a central statement and and so but this is a good summary um so these are the central statements in order to create a secure telematic infrastructure you need to have high standards for data protection and security highest protection and and and you need to make sure that there is absolutely no doubt when it comes to the identification of the patients who use these systems and and we also observed that the identification of the patients or the medical institutions actually does not happen when it comes to retrieving the cards or obtaining the cards yeah and you see it was actually too easy to find holes in the system and yeah so we had an easy time um getting our goals accomplished and but maybe next year we will have a greater challenge and then we will report about our success or lack of success next year so that's what i wish for for the year 2020 um so we want better security in these systems so we have a bit of time for questions thanks martin christian and andrei lovely talk if you have questions please line up behind the microphones or use the online option there are signal angels are there questions from the yes there are questions from the internet um question to martin is it possible to find doctors who are not connected to the telematic system so that it's only so that yeah so that there's only honorary um fine well this should be better answered by a doctor so over to christian yes there are doctors that have not been connected have not connected to the telematics infrastructure there are several initiatives of doctors that refuse to be connected and uh these deductions in fees they accept they pay for your data being secure uh i please google it i don't have the exact name ti i3 te free or something you'll find it thank you uh thanks for the talk in the video uh in the that he showed in the beginning it was claimed that the patient has full control but how does this work if the doctor has access to a key the patient has to give their consent through the app or through the card in the doctor's practice so the patient will come there and and and put in their card which they have or you will receive it soon and they this way they give the doctor access to the data for a certain amount of time which they can select and that gives the doctor access and the doctor uh will receive a key that is specifically encrypted for their authorization key and that is uh stored in the infrastructure that is technical i'm going to go into that later this is uh uh and kind of a question that is not so common yes thanks for all the work that you did for our society it's there the patient file is supposed to be voluntary it's an opt-in at least for now but there are various expert groups that demand this to be changed to an opt-out because otherwise not enough people will use this and and benefit from the positive effects and if you have this patient file and if you have the master there in nursery then you want to move over to an opt-out procedure which has happened in other countries too i think austria is using an opt-out and so is australia and i think that they were talking about an opt-out in early on i think the option would be there that it might be possible that we in germany we move to an opt-out procedure too and i would like to point to the fact that i still i'm still calling for this to remain an opt-in procedure um because if you don't have the time and the expertise to look at this in detail and and then uh the people that change it to an opt-out will have to take responsibility for the data which they which no one wants to do so let's stick with the opt with the opt-in procedure um i know that from healthcare that there is a big over taxation and because people can't catch up with all the documentation and all the bills and i would like i have the suspicion that if you don't use digitalization you will have much more overhead with all the paperwork um so do you think that there is a possibility to introduce digitalization that uh that's is fast but still safe and and that really is not too slow so that people don't have to do so much paperwork i agree i too work in hospitals uh uh sometimes in short-term contracts sometimes as a freelancer and through digitalization i have really experienced that time is being saved and more time can be spent with patients there are some minimal improvements for example x-rays which normally you would have on a singular piece of a file that they can now be sent uh but but the advance advances are small the promises are there if you digitalize you have more times for pay time for patients but the fact the claim that that really shows in the time can spend with patient patients i don't agree with and independent from this the patient's file is going to be a services file for the information of the patient themselves and whether that can have these revolutionary effects you don't know and i'm not going to evaluate these or judge this and uh there are some very positive effects that have been claimed and evaluated or will be evaluated but the risks should be made transparent as well and then you have to be able to to balance and and evaluate both sides and uh there are some applications such as secure communication between doctors so that they can set letters that could be implemented quite easily and that would be of a high benefit so there are applications that are of benefit but as we've heard multiple times a single failure would be enough to undermine trust and what we've done here you should really wonder whether you can't do better than this and of course you can do better than this and that's why we've laid down our suggestions and and maybe you should start with services that are not so not as critical as the patient's file such as inter communication between doctors and then go forward step by step and maybe that will work out do you support the current online petition against te1 the obligation the online petition against the telematics infrastructure obligation as far as i read it is not really founded with the arguments that we have given here um we we took a fairly agnostic approach as far as benefit is concerned and we looked at the risks only and the petition against the ti obligation which has several reasons are more concerned about liability not being resolved liability questions and and and and the benefit is also disclaimed and and you have to leave that perhaps to the experts and maybe christen christen can say something about that but i think we should move to the next question i would like to know if you know if there is something in the specification of the handling of the pin code because i had the experience that there was um a technical installation set up in and in a medical practice and they just shows a very very simple code that is easy to guess martin is the one that knows the specification by heart but yes i will say no uh in the health sector as you said bad passwords are being used and they are put in places where they shouldn't be put and there is a lot of work that should be done about that to get this thought of data security spreading in in practices and that's what something we are working on too and i have to say though that the requirements surely there the high the parameters are high but also those that are placed on doctors and and the higher these requirements requirements get uh then the not many people not many doctors will fulfill these requirements and the responsibility is shifted then as well so technologies their specifications are their implementation well is lacking is it possible for me as a medical practitioner or as a doctor against my identity being stolen it would be it would be very desirable to have more firewalls there such as if you apply for a card identity that you then only approve this new identity after some additional verification such as postal address you can verify postal address without showing an id uh maybe they should send the letter to the original address saying someone has requested an address change and you could do that with the health card uh the the doctor's card and uh concerning the patient's file something like this exists but maybe a second or third line of defense should be built in so that as soon as so that a compromised issuing process will not lead to the whole data being compromised but currently protections are very hard very difficult to make and what you have to call for is that in the application process and the delivery process of these identity documents a personal presence of the doctor should be required so at least for once the these people should go to their medical professional associations and at the receipt of the card they should be present and show their ID or maybe go to the same institution and the compliance with doctors there is not that high not as high as it should be um there just one comment uh about what has been said before and many health data are being sent on DVDs DVDs because that's apparently safe and i have actually one question what is with the basic data exchange or comparison does this work or um yeah does this work well uh this works is something i do in my daily work um concerning x-rays DVDs aren't as bad as all these pack servers that used to be open without any password you just had to know the URL so there's always a worse solution yeah and and the new solution does work another twitter question so does the patient um folder have a unique ID the patients will are identified in the patient's file through the insurance number and there is a central place that issues these patients numbers and we'll be able to talk about this every insured person has a lifelong unique ID insurance number which they will keep even if they change their health insurance providers so you have a record that is linked to one person but as we've shown today that leads to the fact that you are cannot be cannot rely on the person actually accessing this information because the handover process and the identification verification process do not ensure that it's the same person that has access to this in this access information um do you think the new german ID card would be a better choice than the health card i think there are several projects or predecessor projects pre-feeding projects about making the ID usable the general ID usable in the health service and there was a citizens portal that used this so yeah the electronic german ID was supposed to be it was an idea but but now we have the health service have their own public key infrastructure which is completely decoupled from from the electronic ID card and there's a reason for that because storing these insurance numbers is supposed to be separate and to change these specifications in such a way that the german ID stores the security access information and and have this kind of linking between these two is something that has many considerations and the decision was made not to do that and it's not enough to just identify yourself in the health sector and say i'm going to use my electronic identification process to prove my identity identity i also have to bring the information the attribute with whom i am insured and this information with whom i am insured is currently not possible to store on on the electronic id the german id is it is it somehow foreseen that are there any plans that for example my dentist has access to the complete folder or is it only restricted to the area to the part that is important to him well yes and no the original idea was that all the information selectively you could selectively release to the individual doctor so the one doctor only knows your venal diseases the dentist only knows your state of health of the state of your teeth but the health minister applied pressure to speed up the introduction process and because of course these processes of complicated they wanted to bring it down to an all or nothing release and what this will lead to we'll see in one year we know that the electronic patients file which will come in 2021 will be in all or nothing access so you'll have to consider whom you'll release this information to and you know with some certain procedures such as psychotherapy this is something that you as a patient as a patient would not go to a psychotherapist and ask them to put in a an expertise into the patient's file because other doctors would then see it and you have to know that this will not have any negative effects other doctors can see it and this rights management is supposed to be added in 2022 but we can't judge this because we haven't seen the specifications yet i'm sure it's been worked on still thank you very much for answering all these questions please a big round of applause for our speakers and thanks for listening to the translation we were listening to Sebelius


I want to say, first, this is actually a very important year for me, because it was 15 years ago. I'm tempted to say just 15 years ago, but that shows my age. But I was a student here at Mises University, sitting here in this very room, listening to actually a lot of the same professors you're listening to. At that time, I know there was a very promising young professor by the name of Robert Murphy, who I think was introduced right around that year on the faculty. So you see a lot of these people are still around. Pretty much anybody older than Bob Murphy was here as well. So it's great honor to join the faculty and to be here standing on this side of the podium rather than on the side you're on. It's also great honor for me to give this particular lecture. I love giving the lecture on money, because in large part, I decided to become an economist, because I decided I'd rather study money than have any. Yeah. My wife doesn't like that joke very much. Strikes a little too close to home. But the reality is that more seriously, I guess, I find money to be an extremely important topic. Because I believe that we, as humans, are best when we can relate to each other peacefully. And for us to relate to each other peacefully, what does that take? It takes first, we have to understand the benefits of peaceful relationships between people. And that's largely what Dr. Darba was talking about in her previous lecture, that we can benefit from interacting in this peaceful manner, trading with each other. But a second thing that it takes is us having relatively low costs of relating to each other peacefully. And that's where I think money really comes in and plays an important role in enabling trade to happen, and therefore making it more obvious and easier for us to get the benefits of relating to each other peacefully. So I think if we want to have a peaceful world, which is a goal that I think is worth striving for, we need to understand the role that money plays in that. And money is kind of odd as a topic, and that it's horribly misunderstood. And there are reasons for that. When I look at this money that I have here, I managed to leave my wallet in the room when I left this morning. So the only money I have is in Bobway dollars. It's not immediately obvious why this thing should be useful. It turns out this one isn't particularly useful right now. But why anything that looks like this? Why is this useful? Things like cars, those are fairly obviously useful. We should have those around. So we end up with people that begin to deny that there's any benefit at all for us to having a monetary economy. I have people like the Zeitgeist movement or the Venus project, declaring that we can just rely on technology to produce all the stuff that we need. And we'll just live great. We don't need money and profit or getting in the way, creating all these negative motives. I would suggest this comes from a fundamental misunderstanding of the role that money plays because it's actually not so obvious. So in order to understand that, let's first consider the alternatives. So we know what the monetary economy looks like. That's the one we live in. What else could we do? We could have a society where we just don't trade at all. So no trade whatsoever. So what we would call an autarkic society. Each of us just producing for our own consumption. So what does that look like? Well, I would submit that there are two possibilities. One possibility would be Star Trek. If you watch Star Trek, the next generation, for example, you have these replicators. It's just a hole in the wall, right? You walk up to it. T. Earl Grey, hot. And you discover that in the future, French people have British accents. But you can also get T. Earl Grey hot. Just materializes. I guess we do some kind of nuclear physics with the oxygen, nitrogen, and the atmosphere. And bam, there's T. Wow, that sounds great. It also sounds like not at all the world we live in, nothing close to what we live in. Even 3D printing, I don't know that I would want to drink 3D printed T. This does not sound possible. So I think much more likely we'd end up with is a world full of poverty. Because the reality is that most of us just do not have the capability to produce the things that we need to consume ourselves. My favorite example here, and those who have heard this lecture before, know what's coming, is my garden update, right?  It's not very big, right? But we just plant a few things and see what happens, is the idea. So I have a little strawberry patch, right? My strawberry patch. This year, we had a pretty good crop of strawberries. I think we got at least 12. None of them make it into the house because I have three children, right? So I take my six-year-old and four-year-old out to the backyard to play so they're not making more of a mess in the house. Oh, there's a strawberry. Son, it's not ready yet. It's only slightly pink. Oh, well. So I got to taste, I believe, half a strawberry this year. Then we also have another little patch where I'm growing cherry tomatoes. I have two cherry tomatoes that actually survived. Although I don't have any, those are the plants. We don't actually have cherry tomatoes yet. It's too early. I'm from Northern Ohio. Our planting season is just barely long enough that at the end of the season, I will get a cherry tomato or two off of these plants. That's it, right? We planted some radishes. Radishes have the great benefit. They grow pretty fast, right? But they have the detriment that I'm a terrible gardener and I grew them too close together, right? So I think we've gotten a total of a half-dozen radishes that are actually edible, right? We grew some peas or we got about a pot of peas. This is great. Now, I'm particularly proud this year, though, of two things, right? One, I have three apple trees in the backyard. They've finally matured to the point that I'm probably going to get a total of six apples off of them, assuming the bugs haven't eaten them during this week. I don't spray them. Again, I have kids and they're in the backyard by the apple trees. My wife won't let me spray them. So maybe six apples, maybe, right? Although the best thing this year are raspberries. The raspberries that I did not plant, I did not know they were there when we bought the house. They just kind of came up at the corner of the house and we've gotten pints and pints right off of this. Again, none of them making it into the house because, again, I have a four-year-old and six-year-old and they've decided that the best use for some of my tools is to be used as a shield to protect them from the thorns on the raspberry bushes so they can pick all the raspberries. Fortunately, though, I let the raspberry bushes grow tall so I can get some of them. I reach a little bit further in because I don't mind the prickles quite so much as my sons do and I'm a little bit taller than they are so I have had a few. This sounds pretty good. It's not bad for a garden. It's the kind of thing that I can grow in suburban Ohio. But how long could my family survive based on six radishes, a couple of cherry tomatoes that we'll get in a while, six apples, oh, what else?  Even a bunch of raspberries didn't make it into the house. We're talking about a very small quantity of food. Now, naturally, some people may say, well, Professor, if you just learn more about how to garden, you might be able to survive, maybe. But the great benefit to the monetary economy is that I don't have to. I can use this as just a hobby, a kind of a fun thing that I can do while I'm out watching my kids play in the yard. That's it. The monetary economy has allowed me to specialize in something else. So I don't have to worry about whether I can grow all my own food.  Those six radishes aren't gonna last very long. Anyway, so what I would likely have, I suggest, if we relied on autarky, is what we have had throughout most of human history, even though we didn't have autarky through a lot of it. And that's widespread poverty. People barely surviving. And that's even with a little bit of the division of labor. So I actually suggest that the grand majority of humans that are alive today would probably die if we decided, even given the technology we have today, we just decided no more trade. That by itself would kill a great many of us, including at least five people. I know of all of whom live in my house. So that being the case, you can see where I certainly see a benefit to us having an economy where we actually trade with each other. I would prefer survival to not surviving. So there is another alternative. We don't have to rely purely on self-sufficiency. We could potentially just try trading goods for goods. So we have this barter kind of system. That's possibility. The barter turns out runs into two significant issues. The first is what we call it, the problem of the double coincidence of wants. Now double coincidence of wants is something you always have to have for a trade to occur. What that means is that double coincidence of wants. Okay, let's break it down. Double two, so we have two people here. Coincidence, now this is not just, oh, it's a coincidence, it's coinciding. So coinciding of what, of wants. So this means you have two people, or wants coincide, that is, I want what you have, you want what I have. So for example, perhaps you've been growing pears, well I've been growing apples. I decide I actually like pears better than apples, but I'm better at growing apples. So I take some of my apples, I offer them to you for pears, you say yes, this is great, I like apples, and make some apple pie or something like that. We trade, because I want the pears you have, you want the apples I have. This sounds pretty good. But then we start thinking about other possible trades that could happen. Because we know that in reality, I do not make my living as a farmer, or is running this very, very small three-tree apple orchard in my backyard, rather I make my living as an economist. I teach economics, that's really what they pay me to do. So if I want to survive as an economist, what do I have to do? Well I have to find a farmer that wants economics lessons. Now I used to suggest that there is no such person based on my experience, but one of the great benefits of YouTube is that lots of people can watch this lecture, including farmers who want lessons in economics. So I actually got an email this past spring, here I'm willing to give this advertisement. If you happen to be in Maine, Orchard Ridge Farms sent me an email and the subject was farmers who want lessons in economics. All right, so I don't think I'm going to be making it up to Maine any time soon, but if you happen to, there might be a possibility there, okay. All right, so there may be farmers out there that want economics lessons, but it turns out none of them happen to be in Northeast Ohio where I live. I'm really waiting for that next email, because I'm actually hoping for it at this point. But the point being, it's very difficult for us to find this kind of matching if we're going to be so specialized as we are in our modern economy, where I can actually make a living teaching economics. It's incredible, this is even possible, because it's not something that is obviously useful. Almost as obviously useful as this. But we have gotten to the point where people can develop these preferences for these very odd things. People can say, yeah, I want to spend a week in Auburn, Alabama in July learning about economics. This sounds great. We can develop these preferences and we can pursue them. It's not amazing. And you can also find people like me that can specialize in providing this as well. It's just a great thing. And I suspect in a barter system, it would be an extremely risky thing for me to try to specialize in economics lessons. So what would I do instead? I'd find something else where I could be more secure in knowing that people probably want it. I might actually plant some more apple trees in my backyard, try to weed the strawberry bed a little bit better, that kind of thing, because people need food.  So we'd have to simplify. We start thinking about the basic things that people want and would be willing to trade for. Because this double coincidence of wants is something that I have to be able to get from going to exchange. So I need to be very confident that the people that I'm going to exchange with are going to want what I have. So that'll change the things that I produce to have what they want. Turns out the monetary system solves this problem. Because everybody wants money. I want money. If you don't want your money, I'm willing to solve that problem for you. Well, everybody would like to have some more money. Now, whether we're willing to do what it takes to get it is another question. Well, we don't have to negotiate about the form of payment. I'm happy to accept dollars. I'll happily accept dollars for anything that I happen to provide for you. That's fine, as long as we negotiate the correct number of dollars, that's it. We don't have to worry about the form of payment at this point. The monetary system helps to solve that. Another way that we can put this is that the monetary system decreases the transaction cost, or the search cost. A lot of the cost involved with trade over the Miranda Barter system is finding that person who wants the thing you have and also happens to have the thing you want. That's a very time-consuming process if we're outside of an extremely simple economy. So if we want to have a developed economy like we do have and want to have it actually work, having some kind of common medium of exchange that basically everyone wants is going to help to solve this problem. A second issue that can arise potentially in a Barter system is the problem of divisibility. There are a number of goods that kind of have a natural unit, and if you try to go below that unit, you fundamentally change the nature of a good. So for example, I like to say two halves of a goat are not the same as one goat. There's a fundamental difference right between the two, which then creates an issue if I happen to be a goat herder and I want to get things. So I want to get some flour or something like that. I'm gonna end up with a lot of flour for that goat in all likelihood, unless I can divide that goat in half at which point the whole lost a substantial amount of value. Two halves of a goat are substantially different than the whole goat. So this divisibility issue that can arise, which if we have the right form of money, we can get around. So let's turn then, I think we're kind of maybe getting a sense of the types of things that money is going to help us with. So let's be more precise. First, defining what money is. Dr. Robot already did this, may as well repeat it, that is money is the commonly accepted or generally accepted medium of exchange. There's nothing inherent about this thing that would or would not make it money. Similarly, if it was a US dollar, there's nothing inherent about it that makes it money is the fact that it is generally accepted in exchange as a medium of exchange. Now what do we mean by a medium of exchange? Medium, what is medium? Well, my six-year-old understands what medium is. Medium is between things. There's hot, cold, and medium. Medium is in between. So medium of exchange, what is it? Well, it stands between two sides of the exchange. So on the one hand, I'm providing economics lessons. On the other hand, what I'd really like to have is shelter and food. But I don't trade these directly for one another. I do not offer economics lessons directly for food, for housing, these kinds of things. Rather, I offer my labor providing these economics lessons in exchange for money. Money then stands in between, or is it between the two sides of the exchange, and then I go out and spend the money to pay my mortgage to buy food and what have you. So it's a medium of exchange, stands between the two sides of this exchange. The original beginning and the final end. So we understand now that money is potentially useful. It helps us to avoid the poverty of autarky and also the limits that we would face under a barter system. But it's one thing to recognize that something is useful, and another thing to describe how it can actually happen. So we can recognize that elevators are useful, but that's different than understanding how you can build one. So how is it that money would arise? Even if we understand that it is a useful thing, how does money arise in the economy? Well, it all starts with somebody having the stroke of brilliance, right? So we go all the way back, we imagine a barter economy, things are relatively simple, right? And somebody decides that they're providing, say shoes or something like that, right? And they would really like to get a horse for transportation, right? The problem is that they can't find, right, somebody that raises horses that also wants shoes at the moment. All right, so what do they do? So, well, I don't particularly want bread, for example, I'm gluten intolerant. People are very aware of this in a very primitive economy. We know gluten intolerance, I'm sure.  All right, so they have this brilliant idea that it might be worthwhile for them to go out, exchange their shoes for bread, and then to take that bread and see if they can find somebody who raises horses that also wants bread. They expect this will be a little bit easier because more people want bread than shoes, not at any particular point in time, right? At that point, a medium of exchange has been born, right? As they have now decided that there's some good in this example, bread, that they're not directly trading for, they're not directly trading that away, that's not the thing they originated with, they're simply using it as a medium of exchange, standing between the two sides, the ultimate beginning and the ultimate end of the exchange for this person. So, someone has this stroke of brilliance and suddenly decides that they're willing to take bread in fact basically all the time because they find out it's very easy for them to get rid of bread. They figured this out, and they've reasoned their way through it. What does that do then? Well, now this person is someone that previously was not interested in bread, they couldn't eat it, but now is willing to accept it anyway. So bread just became more acceptable, which makes it all the more likely, all the more likely someone else is going to notice. I don't want bread myself, but lots of people do. In fact, one more person than before wants bread. Maybe I should start accepting it. So this idea of using this good and actually specifically this good, as the meat of exchange begins to spread right through the economy, making the good more and more acceptable, more and more likely to be noticed that it's acceptable until it finally becomes generally acceptable. And we would call it money at that point. Now, you may notice there is a certain vagueness, generally acceptable. At what point is that? Is it 75% of the economy? 80% of the economy? 82.4% of the economy? Take a deep breath. We're not going to define that. It's just, it's something where there's going to be natural vagueness to this. It's commonly accepted. Is there a reasonable expectation if you have this good and you offer it to someone? They're not going to say, no, I don't want that good at all. Is that a reasonable expectation is really the question. So that's how money would expect to arise. Somebody has this entrepreneurial insight. They can take a good they don't want because they can get rid of it fairly easily. And this insight spreads throughout the economy. This then gives us the idea of where money demand comes from. People demand money. That is, we want to hold money because we can get rid of it easily. We know that others will accept it. It turns out this is an extremely important insight that Mises Slater pointed out in what he was called the regression theorem. So the question is, how do we explain the demand for money? If we believe that money is, this generally accepted medium of exchange, why do people want it? Well, they want it because it's accepted as a medium of exchange. I have a demand for money because it has value in exchange. But how do we determine the value of something in exchange? Okay, I think back to Dr. Herbner. You have the supply and the demand for this particular good, the interactions between the buyers and the sellers of this good, then arise market prices. The value in exchange. So you have to have a demand for the good for it to have a value in exchange. But for money, the demand for that good came from the fact that it has a value in exchange. So you have circular reasoning. This has been dubbed the Austrian circle. Well, Mises broke the Austrian circle because he said, no, we forget that time is a thing. Time actually exists. The reason that I am willing to accept dollars today is that I observed that they had a value yesterday. Well, the value yesterday is not based on the demand today. It's based on the demand yesterday. Okay, so we go back then. So the demand yesterday, where did that come from? The fact that we observed that it had a value the previous day. So two days ago, there was a value attached to money. We observed that, that then created a demand for money the next day, which is yesterday from today's point. So we can reason back through time. Now, at first we say, okay, so it's not quite circular once we add the time dimension, but it doesn't seem to help that much because we're just reasoning back one day to the previous. Value today because of demand today, demand today because of value yesterday, because of demand yesterday, because of value the day before, okay, where does this end? Well, ultimately it ends with that story we just told. That one person in the world of barter where we're exchanging goods because they have some kind of direct use value. Bread is actually useful, flour is actually useful, shoes are useful. We're exchanging goods for goods because I actually want specifically the good that you provide. We have that last day of barter where we already have a value in exchange for the good that eventually becomes money. So this value did not come from nowhere. It came from the fact that there is actually a value attached to that good in use. Now, we use this as an important insight because it tells us that we cannot start with something like this. Where some arbitrary person starts printing numbers on paper and declares that we should start exchanging with these things. Because as market participants we have no idea how to interpret this. Okay, so this is 10 trillion Zimbabwe dollars. What is, is that a pair of shoes that I should be able to get for that? Is that 15, I don't know, 15 quarts of strawberries, I don't know. We don't have any context for that. So it has to be something that already has a pre-established value in trade in the exchange of, in barter exchange, right? So that being the case, it tells us that originally money has to have been some kind of commodity. Something that had some direct use that people wanted it. Now we know over time, we have worked to this point where you can notice the Zimbabwe dollars are actually far more beautiful than American. It's not obvious what the direct use value is of this. How we got there, we'll get there. So it turns out, if we look historically, there's this process of money switching. It turns out the first thing that the market chooses as a money is not necessarily the best thing. That first entrepreneur that has an idea is not necessarily the person with the best idea. Fast ideas and good ideas are not always the same thing. So when we look historically, what we know is that fairly early on, it seems like cattle was used as money. And you can see a reasonable, there's a reasonable justification for this. One of the things you need to do with money is transport it to wherever you're going to be doing exchanges. Cattle has this great property that it has legs. So as long as you can keep them moving the right direction, which is a bit of work, keep them moving the right direction, you can get your cattle to market. So that's kind of a nice thing. But it turns out cattle has serious problems, especially the divisibility problem. Three quarters of a cow is obviously not the same as a whole cow, nor are four quarters of a cow the same as a whole cow. We can't really divide the thing. These are really big, bulky things. It limits the types of transactions, the size of transactions we want to do. So over time, we learn that cattle may not be the best money. So somebody else says, well, everybody else is using cattle, so I'll use cattle, but I think I'd also maybe like to use grain. Grain has kind of this nice property that it's not that hard to transport. You can put it into sacks and what have you. Put the sacks onto a cart, have the cattle take the cart. That's nice. You can maybe direct that a little bit more easily. And it's also much more divisible. So I can take this sack of grain, I can divide it up into very small amounts. And I can thereby do much smaller transactions. So we know, based on the evidence we have, there was this transition that went on. People moving from cattle to using grain instead. Now, once one person has this insight that they would rather use grain, other people start to catch on. So we see this switching. Moving from cattle, which we still have, obviously, we still use it in its direct use, but it falls out of monetary use as people begin to adopt grain instead. Now over time, we move away from grain right toward the precious metals, things like silver and gold. There's one problem we have with grain is that it stores reasonably well. But it doesn't store nearly as well as things like gold and silver. Gold and silver will make it between market days without any problem at all. Even if that market day happens to be once a year, not a problem if I have gold and silver. With grain, there are rats, there's rot that can cause problems. So we start moving away because I need to make it between market days. We also find out that metals have this nice property that are extremely valuable even in small quantities. So I don't have to have an entire load of, an entire cart load of grain. Not just a few coins is going to do. This makes it much easier for me to travel. It makes it perhaps much more secure as I can hide coins in my pocket. For example, I have not today. I left them all in my room. We all make mistakes. They're relatively easy to hide. That cart of grain, not so easy to hide. So it makes it more likely I might actually make it to the market. We'll get hijacked on the way. So we find that they're nice properties to things like precious metals. And that is where we've seen the market move. Whenever the market is left to choose what the money is going to be, we've tended to see a move toward things like precious metals. Turns out precious metals also have a number of other great properties. They're extremely valuable for their size and weight. That's nice. That makes them very portable. It also turns out they're very fungible. That is to say one unit is basically the same as any other. So as long as you control for quality, it doesn't matter whether I have this ounce of gold or that ounce of gold. I'm gonna just put the two together, not a big deal. This is not true for cattle. Any two cows can be remarkably different from one another, depending on things like age, size, and so on. Two ounces of gold, basically the same. So that's kind of nice. It also has mentioned durability as being a nice property. It's also very easy to divide and then undivided, which I don't think is an actual word, but I think you might get my meaning. So I can actually take a silver or gold coin, cut it up into eight pieces, and then mold those pieces back together without really losing much in the process. So it's very easy to divide. If I want to do a small exchange and if I want to do a large exchange, put those pieces back together without any problems. As this makes, it turns out, metals are very good money. So is there anything else we can do to perhaps improve on that? Well, it turns out we did see a move away from just these physical monetary metals, using those metals directly, to the rise of what we call money substitutes, which is something Dr. Herbner is going to talk more about in his lecture on fractional reserve banking, but I want to introduce the idea here. So the idea of a money substitute is that rather than trading you the coin itself, I trade you some claim to this coin. So for example, there might be somebody who'd specialize in providing a very secure place for me to store my gold coins, because I don't want people breaking into my house, taking all of my gold and silver. So I put it someplace more secure, where they have guards and what have you, perhaps safes and so on. They'll keep this safe, and then they issue me a certificate saying you have claim to however much gold you happen to put in. Well, then what I could do, as long as people trust the certificate, as long as the certificate is as good as the gold that is supposed to be backing it, people can just accept that. And it turns out these certificates have some very nice properties. They in fact have an even higher value to weight ratio, because they're as good as the gold, but paper is lighter than the gold itself. Also turns out a huge benefit is that they're quieter. Now, if you don't understand why being quiet is a benefit, you don't have children. But more seriously, when I'm on my way to market, I might try to keep my gold coins from banging against each other. This is hard to do, but I'm not so worried about two pieces of paper rubbing against each other. That's not going to alert anybody that wants to rob me along the highway, that I'm carrying money. You can hear the jingle of gold and silver coins. So there's actually a great security advantage if we have these certificates. You also have the nice benefit that you can do very large transactions with certificates. Just write a large number on there because I put a large amount in the bank as long as people trust it. This is going to work and it was going to undertake very large transactions very easily. Also very small transactions. We could in fact write a number on here that's extremely small. This is one one hundredth of an ounce of gold. Now you probably would not be able to exchange the certificate by itself for the gold, but you get a hundred of these certificates and you can get that ounce. That allows them for more divisibility so we can both scale down and scale up through the use of money certificates. This is very nice. So there are all kinds of benefits to providing and using these money substitutes. So how we got then from there to here, which I'll allow Dr. Herbner to tell part of this story, is that government got involved and broke the link between the certificates that are supposed to be backed by the physical currency, the metal right there and the metal itself. Over time we saw that development happen. So I'm not going to go into great detail on what happened there, but that is how it is that we can actually have paper money that does have value, or recognize value in exchange, because it was originally tied to gold, which does actually have direct use values. My wife assures me that gold does have direct use values. One of notation is important. We also know it has been historically very important religiously. Lots of religions attach significance to the precious metals, specifically gold and silver. So we have something that did have commodity value. Money was based on that. Then we had this paper that was attached to it, break the link, people are used to the paper. So we continue to use that. So we have some idea where we started, how we got to where we are. Now if we had that market economy, how does money production work? Because this is one of the things that I think we as people that would advocate having an actually market based money tend to get slammed on a lot. Oh well, how is it even possible that the market could potentially produce money? We produce shoes and we do okay. In our market based system, we all seem to eat fairly well. Why can't we handle money? Let's get into the details of how money production would work. So let's suppose that people decide that we want to hold more money. For whatever reason. Perhaps we're feeling very uncertain about the future and I know that money is a generally accepted means of exchange, it's going to keep my possibilities open in the future so I'd like to hold more of that and I'm willing to give up some consumption right now in order to hold more money. So what happens? Naturally, if this is a widespread phenomenon, there's an increase in the demand for money. Which means people are holding onto money for longer, we're not spending it quite so easily and we're more eager to provide, say our labor to sell off various goods that we have and so on in order to get that money. If we flip that around, what does that mean for the demand of supply for goods? People are supplying goods to try to get the money in exchange and the demand for goods has been pushed down as we're trying to hold on to our money rather than spend it. So we see a general drop in prices for most goods as people are wanting to hold money instead. The flip side of this is that money is now much more valuable. I can buy more goods with any particular ounce of gold or ounce of silver than I could before as in money terms prices have dropped. This is nice. Now what does this mean for production though? So if I'm a producer of money, I've just seen that all of my costs of producing, say gold coins have fallen. I can get labor more cheaply, for example. I can get the presses more cheaply in order to mint these coins and so on. Okay, that means it's going to be more profitable for me to go out and produce more of whatever the money happens to be. So in response to this increase in demand, we'd expect entrepreneurs to recognize this profit opportunity and then to seize it. Are they going to start producing more of what people want? And this is the way we expect most goods are going to work in terms of production. People want more of the good, that drives up the value of that good relative to other goods. People see this profit opportunity, produce more of that good and seize it. So we'd expect money to operate exactly the same way and to do so very naturally just based on the entrepreneurial insights that money producers would have. As they notice that people want the good they're producing and want it in a way that makes it more profitable for them to produce it. And so in some ways money is special. In other ways, money is not at all special. In production, money acts like anything else if we are based on a market economy. Now this is very different from the economy in which we live now. We don't have this market-based money. Instead, we have money that is controlled by central banks. So the fiat money, how will this production happen? It's a matter of policy. It's really up to nowadays Jerome Powell and his friends at the Federal Reserve decide how many dollars are we going to produce? In this case, they're trying to use the number of dollars to manipulate what interest rates are, but they're making ultimately the decision. How many dollars are we going to produce and let out there into the economy through the banking system? It's not obvious that they're going to respond to money demand increasing or decreasing by producing more or less money. Maybe they will, maybe they won't. It's not so obvious that they have the incentive to any of the case. Now, when we talk about these changes then in money supply, it can be very tempting for us to just in some sense look at the end result. So is it valuable for us to have more money around when we're talking about paper money like this? Well, the typical answer would say, well, not really, because if we double the amount of money supply, what would we expect to happen? Prices are basically going to double. Prices basically double and we have twice as much money. I'm no better off. I buy the same stuff as before. I have twice as much money. My income is twice as high, but everything costs twice as much. So it doesn't seem like there's any benefit whatsoever to increasing or decreasing the money supply. But what if we get down to the individual level? Is there a benefit if I was allowed to just start producing dollars? Would there be a benefit to me of printing off billions of dollars in my garage? I suspect the answer is yes. Because that increase in prices is not immediate. It's not even. I can print off this billion dollars if it all goes into my pocket. I'm going to be substantially better off. My mortgage will get paid off. I'm going to be able to buy all the strawberries my kids want to eat, almost. I will get a substantial benefit and I can go out and I can buy stuff before prices have increased. This is what we would call a canteone effect. That is that we recognize that money comes into the economy at a specific point and then it spreads out from there, which in turn changes the relative prices of goods. So those that get the money first are the first ones to spend it. They can actually benefit. The things that they spend the money on will find increases in prices. That means that people that sell those goods will also benefit as the good that they sell just increased in price before most goods in the economy. So they would also get a benefit. Meanwhile, the poor person at the end of the line, that's the last one to get that money, watches the prices of everything else, increase, well the amount of money they have does not. So they are made poor. So while we know that we look at the total amount of wealth, having more money is not beneficial, but creating that money is beneficial for the one doing the creating. And it's to the detriment then of those at the end of the line. So when we look at, say, how money enters our economy, who is it that gets the money first? See, well the Federal Reserve creates it. A lot of that money ends up nowadays going to the federal government. They lend it to them so they can spend it. So they could potentially benefit from money creation as well as the banking system. Also is the first in line to get this money. And then the people that would borrow this money from the banking system. So people that are taking out mortgages to buy houses, people that are taking out student loans, people that are paid by people that are taking out student loans. I actually like increases in money from a personal career standpoint. A lot of my students have loans. So these are the people that will be at the front of the line. And you look in any major city. Look at the skyscrapers. How many of them are banks? Generally at least one. I've been to a lot of medium-sized cities and there's always a bank. Banks' name at the top of one of these skyscrapers, often more than one. If it's not a bank, it might be an insurance company or somebody else very closely connected with the financial system. So we can see a lot of that wealth is being created by this redistribution of how money is entering our economy. Now I wanna then, before we have to close, deal with where things go really, really wrong. There's a reason that I brought my Zimbabwe dollars. I was not planning to spend these in the bookstore. Kind of wonder what I'd get if I did, but anyway. So what about when things go really, really wrong? So it turns out that when we have a fiat system where we no longer have to worry about the fact that our paper money is backed by some kind of metal that might have to redeem the paper money for, that changes the calculus of money production and its profitability. I just looked up, as I was preparing this lecture, the cost of producing various American currency. It turns out a $1 bill costs 5.6 cents to produce. Which means you're looking at a profit margin of about 94%, between 94 and 95% profit margin every time you print a dollar bill. A $10 bill costs 11 cents to produce. 99.8% is that, no, no, my math is wrong. I'm an Austrian. 98% okay, so like a 98% profit margin. I'm really thinking about repurposing my printer. $20 bills, I thought this was fascinating, okay. 11 cents for a $10 bill, 10.8 cents for a $20 bill. The fact that $10 bills are still being printed proves that we do not have profit maximization going on in our monetary production. So 10.8 cents for a $20 bill. What does that mean? That means it's going to continue to be profitable to produce these $20 bills till they lose something like what? 90-something percent of their value, right. Wow, so what can happen? Actually I have $180 trillion up here. But we know, in the extreme case, what happens? Now historically, we know that hyperinflation, or this case where we have this enormous increase in prices driven by an enormous increase in the money supply, and like anything else, right, on production money's not that different with supply and demand, money's not that different. Increase the supply a lot, you're gonna lose a lot of the value for anything, right. Also true for money, right. So what happens? We often find that governments are into trouble over their finances, right. They want to spend a lot, because spending is very popular, right. People love welfare programs, because it makes them feel good, right. People love, at least in the US, we love getting involved in wars for some reason. I don't know exactly why, it makes us feel patriotic or something, right. So we love getting involved in these extremely expensive things, right. The problem is that if we fund them by taxes, right. Taxes are outrageously unpopular. Nobody wants to be the person paying the taxes, right. So we love taxing the 1% because 99% of us aren't in it. That's it, right. So taxes are outrageously unpopular if we're going to actually try to raise the money that we need in order to fund these enormously expensive programs. So what are the other options? Well, we can borrow, and that can work for a while, as long as people trust you might pay them back. In the US, we've been relatively fortunate that people seem to trust we're going to pay them back and we have a good history of that. But eventually you'll run out of that, right. People begin to realize that you're in fact never running a surplus. They're continuously having to borrow more and more and more to fund these programs. These are apparently not self-funding, right. This is not a profitable way for me to invest for the future. So eventually borrowing runs out. Then what do you do? Well, you take control of money production. So you have the central bank, right. Produce a lot of money that you can go out and spend. This is brilliant, right. Because you're not having to tax anybody, you're not relying on people trusting you to pay them back, right. So let's produce a lot of money to fund all these programs we want to fund. Of course, as we do this, the supply of money went up and it has lost some value. Now we can break down hyperinflation into three stages. It's in the first stage. We have this increase in money supply. Historically, this has been generally to fund government deficits. Governments, you know, not bringing up in taxes so we just print the difference. So if an increase in the money supply that would tend to drive down the value of money. But there's a second thing that tends to happen in this first phase. That is that people notice, right. The value of money is dropping. Flip side of that, right. Is that the prices of most goods are increasing. As we notice this, I think this is kind of weird. But we know the way prices work. Typically, what goes up must come down, right. So, all right, today gas is really expensive. I'm gonna hold off for tomorrow. It'll probably come back down a few cents, right. So we see people try to cut back on their spending, flip side of this. They're holding on to their money for longer. So an increase in the supply of money. At the same time, there's a somewhat offsetting increase in the demand for money. So money doesn't lose value really quickly in that first stage. There's a little bit of demand for it. But eventually people realize this is a continuous thing, right. That money is losing value, perhaps slowly, but it's continuously losing value over time. That means it doesn't actually make sense, right. For them to hold onto their money and wait for prices to drop back down to normal. Rather, I want to spend the money now before prices rise even more as I know they will do in the future. So then in the second stage, we still have these deficits we have to fund, right. More supply of money is coming out there into the economy. But now people don't believe the money is going to regain the lost value. They believe it's going to continue to lose value and perhaps do so faster. As a result, people begin to divest themselves of their monetary holdings. So demand for money falls. The demand for something falls while the supply is increasing, right. That's a real strong reason for it to lose value relatively quickly. And that is exactly what happens in the second stage. We see a rapid decrease in the value of money. Flip side of that. Huge increases in prices for most goods. Then we enter the third stage. The third stage is where people realize that money is losing its value so, so quickly. It's just not worth holding at all, right. We have the flight to real values. This is sometimes called, right. So I'm willing now to get rid of money just to get anything else, right. Because by itself, right. This is actually a very beautiful piece of paper. But I don't know that I'd want to spend 10 trillion dollars for it, right. Right, so I want to get rid of it. I'd rather have another toaster. I guess I'm actually the toaster that I have might break or something. I'd rather have another pair of shoes because I run through shoes really fast. I might, I'd rather have more toys for my kids because sure, they don't have enough toys already. So we just want to get rid of the money as fast as we possibly can. And as that is happening, we have basically the demand for money has fallen virtually to zero. People don't want to hold it at all, right. At which point it basically loses all of its value and it can, it stops being able to function as a medium of exchange. People are unwilling to take it anymore. That's the point where we've destroyed the monetary system, right. And we have thereby lost all the benefits that it has provided, right. So just a few takeaways now that I see that I'm out of time. First, remember the big point, right. And that is that money is easing trade between people. It's making it easier for us to do exchange. Therefore easier for us to interact with each other in a peaceable way, right. Money does not require government. In fact, it has to arise on the market for it to have any value in exchange whatsoever. And then finally, the government mismanagement of money can completely destroy it. And thereby lose us a great deal of benefit. A couple of books that I'll recommend. One, if you want to read more about this. The Mystery of Banking by Murray Rothbard is very good. It's very easy to understand. I've used that as a textbook before. Also, The Theory of Money and Credit by Mises is very good, but I will say Mises is a challenging read, right. So if you want to read The Theory of Money and Credit, I highly recommend reading it with a study guide. There's a study guide written by a very brilliant economist.  I mean, I can use the qualifier. Robert Murphy wrote that study guide, right. So I highly recommend reading it alongside that. Or it's very easy to get some basic stuff that he does, they're wrong. Well, thank you very much. Thank you.


We really specifically address each individual according to their strengths and needs and in creating an intentional community It's what we often come back to and when we talk about our school community We call it an intentional community because we inform and educate all the students around the challenges that people face when they experience oppression abuse or discrimination and the population has a huge amount of empathy and Usually their lived experiences of trauma have given them a broader bandwidth in which to see the world so there's a lot of wisdom and a lot of felt sense of experience that They can see and relate to one another and that peer acceptance of knowing They're all here because they've been been through and survived adverse experiences creates a community of understanding and empathy and for the most part We have a very peaceful accepting regulated environment


I've been reading the comments section of my videos and it seems like a lot of you want to know how you can sort the colors by the sequence they were added and as well as by the timestamp of the data. So the thing is, when I come to my application here and I click new, I say black, 0, 0, 0, you can see that black just appears in the middle, it doesn't have any specific order that it's following, it doesn't appear at the top. So what we're going to do is we're going to sort our data here so that the newest data is on the top and the oldest is at the bottom. Now the thing about Firestore is that Firestore doesn't automatically keep track of your data's timestamp for you so whenever you create or update a document, you have to keep track of the timestamp yourself. So what we can do is we can go to our handle new function here, I'm going to space this out a little and you see now a payload here, instead of just having the name and value of the color, I'm going to add another field here that says timestamp, timestamp and then we're going to get server timestamp. So server timestamp is a function, that's why I'm putting the parentheses there because I'm executing this function and this function is something that you can get from Firebase slash Firestore. So I'm going to import that, server timestamp. So what I can do is I can create black again, actually let's create gray this time. I'm going to look for a gray color right here and let's create gray, let's put this in. You can see that gray appears there and if I look at the ID, the ID is wxme. So this is gray, you can see that we have the timestamp field now. So this is something that the other colors don't have. We have this in gray because gray is the newly created color and I've updated the code so that it stores the timestamp in which this color was created. But right now we're not doing anything with that field, although we are keeping track of the timestamp in which the colors were created, we're not doing anything with that at the moment. So let's go to our code in app.js and in use effect on snapshot. So on snapshot is where we are getting the data, we're fetching the data from the database and what I'm going to change about this is I'm going to change the way we write this code. So we are going to tell Firestore that we want to query the data based on the timestamp. And to do that, we're going to use something called query and query is something that we have learned in the previous video where I went through how you can delete documents based on the document name, the color name. So to do that, I'm going to change the syntax of this a little bit. I'm going to use the standard arrow function. I'm going to paste it on snapshot back in there. Of course, we need to return the unsubscription function here to use effect so that we can unsubscribe to this socket whenever the component amounts. The next thing I'm going to do is write a query so we can specify our order. So const q equals to a query and the query takes in a collection reference in the first argument. So I'm going to put the collection reference there and then I'm going to put the queries variable here q. If you want this to be clearer, you can actually take out the collection reference and put it in its own variable. Collection ref equals to this and then, you know, you can put in your collection ref here. Then of course, I'm going to put in order by order by is another function that you can get from firestore. We're going to order by the timestamp, which is the name of the field, the name of the property and as well as the order. So I'm going to order this in the descending order and it's underlined in red right now because I have to import query and order by from firestore. So import query and import order by. So now let's take a look at what this looks like in our react application. So you can see that the only color I have here is gray and that's because gray is the only color that has the timestamp. So if I look at the other colors here, you can see that there's no timestamp in those colors and because we are getting this query and we're ordering it by the timestamp, if you don't have the timestamp, then firestore just won't return that document to you. So we can create new documents here. So I can create like red and then you can say F00 and you can create green, which is 0F0 and then you can create blue and then 00F. You can see that the newest document is always on top and the oldest document is at the bottom. So our application is partially done here, but the thing is when I edit red and I give it the exact same value, you can see it disappears. So red disappears and doesn't show up. And the reason for that is because when I go and find for red, if I can look for it here, there, red, and you can see that this document here no longer has the server timestamp property here after I've modified it using the edit link here. And the reason for that is because if I look at the code, I go to my details and I go to handle edit and you can see that here I'm using set doc. And what set doc does is that it overrides the existing document with this new document that you're passing in. In this case, it's my object that only has name and value. It doesn't have a server timestamp here. That's why we are overriding the existing document and this new document doesn't have a server timestamp. So what I can do is I can change set doc to update doc. And what update doc does differently is that update doc only changes the specific properties here that you specified and it doesn't override the entire document. So the server timestamp will be left alone. It won't be touched. So let's see if I can edit green here and green and let's say 0F0 and you can see that I hit enter and green stays there. I can recreate red, of course, now I can say F00 and I can try to edit red here. And red stays there. It doesn't get deleted and the server timestamp doesn't change. But the thing you're going to notice is that if I edit green or I edit blue, like if I edit blue right now, blue just stays there. It doesn't change. It doesn't move up to the top of the list. Even though I've just edited this and blue is now the newest edited document. So what I can do is I can add a server timestamp here that says timestamp and server timestamp. This is inside of the handle edit function. So whenever I edit the document, it's going to update the timestamp property as well. So let's try this again. I'm going to edit blue and hopefully blue will show up at the top of the list. So blue, blue, and you can see that now blue is going to be at the top of the list. And if I edit gray, let's look at the gray again. Let's put this here. Gray is now at the top of the list. Now before I end the video, I'm going to show you another thing that you can do. That is you can change the order. So you can change it from descending to ascending. Then now gray should happen to be at the bottom of the list. So you can change the order as well. I'm going to change this back to descending so you can see gray goes back up to the top. Now as usual, the code for this is going to be in our GitHub repository. You can change the branch to our current video, which is part five. And then you can also go to the playlist in which I have all of my React Firebase Firestore videos. And finally, if you have any questions, feel free to leave them in the comments. I'll do my best to help you out and I will see you in the next video.