So, good morning everybody and thank you for your kind introduction and I hope you all have a good morning. I certainly enjoyed the dinner last night and I've been looking forward to address you here and as you heard, my name is Grete Farmo and I am the head of the United Nations Office of Project Services. You may have heard the acronym UNOPS before. If you haven't, it's fair, but I will try to tell you more about who we are and what we do and we are headquartered in Copenhagen. So already in that, you hear we are quite unique in the UN family. We're actually the only UN organization headquartered in Scandinavia. We are about 20 years of age and we are the operational arm of the UN. We are the agency that implements projects on behalf of, on request from others. Each year we work on some thousand projects in more than 80 countries and through this of course we have experience with policies and regulatory framework in around half of the countries of the world. We have experience with the banking systems, education levels, logistics, trust levels, cultural conditions, restraints, just name it. We stand out in the UN system in another way too. We are fully self-financed. We don't receive core funding. We don't receive grants. We don't even ask for it. We live of our competences, capacity and reputation and we are financed by a low percentage cut on the projects we implement. Of course we're a non-profit. Half of our work each year is implementing projects on behalf of the other UN organizations. The other half is done on requests from governments or financial institutions, the World Bank, other regional development banks, but we also work for foundations and increasingly also with a private sector. Our mandate allows us to do so. As I say, we didn't get the money. We got the mandate to work with partners from all parts of the public and private sector. Our engagement with the private sector is with corporations and investors who wish to invest and engage in developing countries and who are looking for a partner to implement projects and also help mitigating potential risks. And you may already wonder what's ahead of a UN organization that mainly works in non-OECD countries would have to say about innovation in the euro area. So let me explain. My message is the following. Innovation in Europe, of course, is important to Europe. But innovation in developing countries is also important for the developing countries themselves, certainly, but indeed also for Europe. These things are interlinked. And we are guided by the sustainable development goals that were adopted by all member states in the UN, autumn 2015. These goals are global. They are as binding on Germany, Norway that I come from, as they are on Myanmar, Tanzania and just name the country. So these are actually reflecting that we are in for sustainable development together. We sail the same ship. Oddly enough, the situation of the Nordic countries can serve as illustration also to my message. And today, international technology platforms often developed in big countries. And you referred to them yesterday in your introduction at the dinner, formed the backbone of growth, effectiveness, innovation and job creation in countries like the Nordics. So we have all heard about these big, broader platforms, technology platforms. How can they actually be used? And that's why I've taken some examples from the Nordics. Some years ago, I was told that Microsoft invested more in the Nordics than in any other region outside the US. We only count for 25 million people. So why was and is that the case? I can think of several reasons. The Nordics form a very solid testbed of innovation efforts. The Nordics were early adopters of technology years ago and have continued to be so. So as a driver of innovation, you get very quick responses to whether you have a good idea or not. I think it's also due to the high and even level of education, technical and linguistic skills. It is due to an effective and non-corrupt public sector allowing for speedy transition from idea to implementation. It's about permissions, licenses and approvals that are often delivered within hours where the same procedures may take months in other cultures and countries. It's also due to a management culture that encourages independent thinking and expression of opinions and ideas among staff. It actually removes obstacles to innovations. I dare say that a university or even two like the Stanford and Berkeley in California are not in themselves enough to create an environment for innovation, nor is a government-supported innovation hub providing incubation support through grants, offices or other incentives enough. Only when you get the right combination of these two and add a policy environment that encourages entrepreneurship and investors who accept the particular risks of innovation and don't punish failure, you may get a dynamic that may work. If the balance isn't right, there is a danger of wasting resources, by for example supporting lots of startups in a policy environment that hinders further growth through restrictive recruitment regulations or limits on immigration. I dare to use this example because it's so relevant. As I say, let's recall that Steve Jobs' father was a Syrian exile. Let us recognize the constructive role played by many governments. Most innovation initially occurs through public universities or through government-supported programs. Surprisingly, the one issue that does not seem to be crucial is tax breaks. No research and success factors for creating innovation clusters finds any significant correlation between success and lenient tax policies. While on the surface everyone is interested in a government-supported innovation hub, it will soon become apparent that private investors and governments may have different aims. Companies want quick returns and low taxes. Governments want stable employment and tax revenue. Pretending that this conflict doesn't exist doesn't help anyone. Also providing temporarily tax breaks in the hope of attracting investors also tends to backfire, since technology allows startups only established to move easily. So once you end the tax break, your investors might head somewhere else. And the raise to the bottom on tax incentives has proven to be a losing proposition for local and national governments in many places. In fact, some of the most successful clusters of innovation are indistinctly high-tax environments. So I cannot stand the temptation to use the Swedish example. Sweden is an unlikely success story. Not only are taxes high, but Scandinavia's well-developed welfare system has been accused of not being encouraging to innovation and entrepreneurship. And how wrong? Sweden has emerged as the center of music-related innovation and entrepreneurship. The reason for this is interesting and illustrative. Some in the audience seem to be old enough to remember the 1974 European Song Contest. Not everyone liked that kind of contests, but they would rather talk about it as kitsch, even bad taste, but they produced ABBA. And ABBA success could have been a one-hit wonder, but the very entrepreneurial people behind the group not only made ABBA into one of the most successful music groups of all time. They actually made the foundation for a whole industry of songwriting and paved the way for a long list of Swedish groups that made global successes. You may have heard about Rokset, Ace of Bass, The Cardigans, Nene Sherry, Swedish House Mafia. I could go on. Actually, the numbers are quite substantial. And this led again to a whole recording and music video industry growing up in Stockholm. It didn't take long before this bubbling of creativity went digital. Kassar, a music file-sharing site, started up as a Estonian-Swedish invention. Skype came soon afterwards. When the music industry realized it had to go digital, Sweden was very well placed to take advantage. Spotify became the result. Later came sound industries and soundtrack, just to mention a couple. And the ultimate proof, some would say, lies in the fact that stars like Pink, Kate Perry, Taylor Swift, all very well-recognized US names and, I would say, globally recognized artists, where do they go to get songs and lyrics? Stockholm. It is difficult to put a figure on the value of music-related industries and innovation as part of Sweden's total output, but it is very significant. Sweden's example gives us two important lessons. There are growth opportunities even in an industry in crisis, such as the global music industry. If you are innovative enough and can get ahead of the curve. And second, if you build on and nurture a natural or historical advantage in skills or resources, your chances of creating a successful innovation cluster are significantly higher. In other words, build on what is already there. And now, to why innovation in developing countries is possible and important for everybody. As of recently, UNOPS is developing innovation centers around the world. Together with our global innovation partners from education, incubation, investment and government, we set up and manage global innovation centers on behalf of local, regional or and national stakeholders. Our partners include MIT, our co-host today. We also have Columbia University on board. We are operating three global innovation centers in China at the moment, plus developing around 10 new global innovation centers in places like Dubai, Japan, Canada, Nepal, even in the Caribbean island states. And we are discussing with Pacific states who also would like the same things. And I wanted today to share with you some lessons we've learned along the way. The starting point for anyone wanting to create an innovation center is, as you may have noticed from my speech already, in my opinion, local. A local or national government wants to create jobs for its own population and tax revenue for itself. And it's a natural and a good starting point. The driver of innovation is the free pursuit of solutions to real needs. In a globalized world, those needs are rarely limited to a local context. Moreover, the major needs of today are linked to development challenges in developing countries. It is in Africa, the Caribbean, Latin America, the Middle East, Asia and the Pacific, where innovation and leapfrogging of all technologies could make the most change for good. Interestingly, these are also parts of the world where rapid growth markets lie. And with growth markets comes economic opportunities. And there are practically no limits to what we could do to improve the livelihoods of millions who are striving for a better life and to whom technology could make a huge difference. And remember that already many developing countries have already as many cell phones as they have people. So just imagine how the world will change when we create smartphone apps that can register new aids, tuberculosis or diabetes patients and even monitor their treatment. Can we, for instance, enable rural farmers to get bank accounts through their phones? When water containers can roll like wheelbarrows from well to home rather than being carried on the head or even easy to use computerized tax systems they could reduce corruption, increase tax revenue and assure taxpayers that their money is well spent. And imagine how rural teachers can widen the horizons of their students by stimulating their curiosity through accessing a universe of knowledge and learning available online. So the first lesson is to think globally, even when you act locally. Think about market opportunities that go far beyond your local context. And ICT technology is the key to scaling marketable products and services. So what is an innovation center and what does it take to establish one? From UNOPS perspective, an innovation center can start with attracting and co-locating talents, give them broadband and access to water and sanitation. One beauty of this is that it does not require a lot of financial muscle. We connect the talents. We nurture the incubators. We link up with the universities and it should, at the outset, not require even a lot of public sector involvement with respect to permits and licenses. Sounds easy, maybe difficult. But I also would like to remind us all about a statement that the earlier President Eisenhower in the US made, he was surprised to learn that half of all Americans were less than average intelligence. Well, maybe it should serve as a reminder that half of the world's population is more than average intelligent. So there are such vast human resources to tap and knowledge is not a scarce resource. There is enough for everybody. As connectivity opens new markets for new products, reduces waste and improves logistics, we in the developed world will increasingly see developing countries as our home markets. And the benefits will go both ways. So ladies and gentlemen, I've mentioned some of the lessons we are taking with us when we help countries establish incubators, innovation and entrepreneurial clusters. Of course, what we bring to the table is also to ensure that any project we manage is transparent, effectively managed, and has a global scope and reach. And our global innovation centers aim to establish a pioneering platform with a global innovative operational model. We connect people and encourage knowledge sharing across public and private sector. We build into these models, policies and practices that are known to stimulate innovation, good economics and growth. We also focus gender, minorities, youth and vulnerable groups. And we have just launched what we call a possibilities portal, where these groups more easily also can enter the great universe of innovation and test their ideas with partners. And we are very much looking forward to continue this journey. And we're willing and happy to be a partner of all who would like to contribute to the implementation of the Sustainable Development Goals, implying a sustainable future for all. Thank you very much. Thank you very much, Greta. We have a couple of minutes for one or two questions, if there's questions in the audience. On my own side, I mean, if I understand correctly, there are plans or already initiatives for global innovation centers in Japan, Vancouver, however not in continental Europe or even perhaps the whole of Europe. Is that by design or is more like there were no proposals so far, are there any plans to have also some innovation centers in Europe? Of course, this is very much managed by the demand. So working in non-OECD countries, I think it comes natural that our focal points have been not continental Europe or US, but it can be, I guess, placed in any parts of the world because what we want to do is to connect the partners. So working with technology, working with finance, working with education and making sure there is a good reach for the local community as well as communities in other parts of the world where we work. So sometimes, thinking of where we work out of Dubai, you can easily see how we can be easily reached from the Middle East and parts of Africa. Sometimes it would make sense to position something in Europe because it's easier to connect to Europe instead of going across, as is the case in Africa very often. So location is coming out of where we see the opportunities come together for both developed and developing markets and citizens from these countries and regions. Thank you. Can you hear me? Yep. So we're working with data concerning investment in Africa from the UNIDO, so Foreign Direct Investment, and we notice that perhaps you may have, maybe you might like to comment on this, differential returns to investment within Africa, so intra-African investment. So a South African investor investing, let's say, in sub-Saharan Africa might induce greater returns in terms of knowledge transfer, but also very tangible benefits. So help with product quality. Do you have in these incubators any evidence that the returns are very differential depending on who the link-up is with? The South-South investment is a very different story to North-South investment. Thank you. I think all investors would like to know the markets they are investing in. So we have been approached from a number of private investors who would like to understand more how to mitigate risks. A lot of companies are doing good business in Africa. A lot of companies are doing good business in any parts of the world. What we can help is understanding what it takes to do sustainable business in any parts of the world in a financial, environmental and social context. So we have established a social impact investing initiative where we would like to work with private sector and where we can help mitigate risk actually through providing our local knowledge about what it takes to establish business in the different markets. We also of course talk to governments about how to mitigate risk through actually using the official development aid even as a first loss risk. So it is local knowledge, it's about new financial instruments and it's about sustainable development. Sustainable development will of course require a return. Unless there is a return it will not be sustainable. But it needs to be sustainable in the social and environmental dimensions too. It's a long answer to your question but this is actually to try to help the understanding that we cannot deliver on the broader challenge of what it takes to do investments in a sound manner all over the world but we can actually help mitigate the risks in some of the projects where the investors approach us and find a way to do what they have planned to do. We can also bring other investors on board. Many investors don't like to go alone so we can bring more investors to the table and of course when you also bring if necessary ODA official development aid into projects it may also add the soft component that turns the investment from a no to a yes. And I think the sustainable development goals actually will require new thinking. What does it take to actually encourage investments in new parts of the world, new markets because the alternative is leaving people behind building an even bigger gap between developed and developing markets. Thank you very much. We have to stop here. Let me thank Greta again. Thank you. Thank you Don Cucati for the next session.


Good afternoon. For those who are new, I'm Dr. Theron Sherman, and in today's briefing, we will be discussing SCP-6742. This document does not contain any objectionable material, so let's begin. Item Number SCP-6742 Object Class Anomalous Correction Pending Special Containment Procedures SCP-6742 is to be kept in a low-risk anomalous item storage locker at Site-19.  The subject is holding a sign that reads, I'm with the Foundation. The inverse of the photograph has been marked 1 slash 1 7 with a ballpoint pen. When viewed by a Foundation employee, the subject of SCP-6742 will always appear to be looking directly at the viewer. No other anomalous phenomena have been observed during testing. Addendum 6742-A Discovery SCP-6742 was found in a locked box 3 km from Site-1. The contents of the box included a map of the world with several points crossed out, an empty briefcase, and SCP-6742. SCP-6742 was found in a folder containing an additional note reading, In case a Foundation takeover, use this to gain their trust. Addendum 6742-B Update 17th of June 2022 By order of O5, testing of SCP-6742 is to be discontinued. Additionally, SCP-6742 has been relocated to an undisclosed location under the purview of O5. Thank you for listening.  Please become a patron or visit our merch store at the link in our bio to support our work. Secure. Contain. Protect.


Walker for the Cardinals is someone to keep an eye on. Yeah, he just made his debut this year. I just seen Yeah, he is first career owner. Oh, did he? Oh, that's awesome. Well, it's highlighted on Twitter. I don't know It's like what like two games three games in the season so far.  Oh, no, Jacob ads. No All the fortnight ads you're gonna see now that's awesome next legends I'd watch it. I'd watch ads on Twitch just to see fortnight stuff. That's a big That was true. I don't think I could call you like Close to a friend You just have to be like an associate and acquaintance and a queen co-worker colleague. It's up Jacob We're just talking about that Jacob literally. Yeah, we were literally literally just talking about that new castles What up what up everybody how we doing today it's fine Wednesday it's up Elliot So that is you can chat what So what Brian taking the Rangers into we're down to just two teams left just the Brewers and the Cubs and stadium club Then we're into just contenders and limited tonight Did I do an extra two on all of my twenty-twenty twos the year 20,000 222 We got a special treat tonight everybody to So Kyle's roommate Austin hits one of these right here in our transcendent breaks From Friday and he gave us the green light to open this live We're gonna do it live gonna do it live So we're gonna go ahead and open this after the two stadium club breaks before we get into contenders We're gonna rip this transcendent for a card pack 2022 So Austin, hopefully we hit you something big hit a big super fractor. That would be sweet That would be cool And I just gotta get some of these breaks filled up tonight got a bunch of spots left and limited as well as Contenders tenders and be all full case tiered random team style Limited we got half case random teams and full case tiered random and division style a random division style Kyle is also over on drip tonight everybody if you are interested in a personal Kyle be rocking the The drip mojo, which will be fun. He's making his Personal debut over there, which will be good. So I know he's looking forward to that Got some orders in there already. So it's gonna be a good time Gonna be a good time got group breaks over here all night Five so we'll be starting in a couple of minutes actually Is he actually though? Yeah Stop Alvin How are we doing buddy got about five minutes we'll get started on the first stadium club break Drop you guys the link to that really quick hold on This Costs Jordan Walker with you. That'd be pretty cool. Yeah, that break ended up being three hours and 32 minutes Yesterday was all said and done I don't know if I want to go if Donnie's invited. Yeah, that's thanks and guys just the Cubs and Brewers Left in our first stadium club break here Cubs and I mean our second stadium club break first is sold out to thank you guys again for selling that one out That's pretty awesome Half case eight box break pick your team style my all-time favorite sports player Ray Lewis Matt would definitely be down to go. He's a Cardinals fan. Oh, yeah Ray Lewis my favorite all-time athlete Ray Lou Is it weird if I said tiger for the no, I don't think that's where I have all the athletes in the world I think that's legit. It's a that's a good pick. Honestly It's like the run he had in the early 2000s.  There was one I forget who it was There was some sort of like There's never been a player to win like back-to-back tournaments like defend their title. I forget which which tournament it was One of the more recent ones. I forget which one it was. I don't remember which tournament it was It was like I saw a stat. It was like with so-and-so golfer not winning so-and-so tournament That leaves only one player to ever defend their title on that tournament and it's Tiger Woods. I need it eight times It's unbelievable dude. I forget which one it was but I was like dude. That's an insane It might have been something like that with whoever lost the Arnold Palmer It was like there's only one player in history to defend their title of the Arnold Palmer And it was what's it called? Yeah, yeah, world golf championships world golf championships There's only been one player to defend their title and it's Tiger and he did it eight times That's so unfair bro, that's so unfair man Alvin selling us out on the second Stadium club. Thank you, buddy. Appreciate that Alvin. You're the man as always That doesn't even have to be said at this point. That is just assumed Alvin So we're sold out up until our first No, unfortunately, Elliot unless unless you bought one and in that case it would be done over on another channel One minute. We'll get going 4 59 and we'll get started in one minute. What's the For a second one second that's get started in just one minute beam team This one yeah, that's just like the base auto. That's the super that's the 1991 Stadium club variation and then there's duals as well our co-signers Good luck everybody, let's do it. What's going on everyone Sam here with late sports cards dripping 22 top stadium club chrome baseball Hobby eight box half case break number one pick your team style got a list of art names and our teams got a mere E With the blue jays Brad B Cubs Brian a with the white socks illegal with the pirates Daniel are with the Reds Daniel B with the Phillies got Jared M with the twins Greg M with the red socks and the Marlins and the Rangers Ian J Diamondbacks Jacob J with the Giants Jeffrey H Yankees John a with the Guardians Jordan N with the Padres we got KP AC with the Tigers and the Astros Lance H athletics Michael T with the Mets Nolito s with the rays Rain-C with the Cardinals Richard s with the Rockies Russell G with the Brewers show a with the Mariners Ty W with the Orioles Takumi o with the Braves Taylor s Royals Nationals young K with the Dodgers and This guy's name is it's characters in a different language with the Angels. Sorry guy comes in interrupts the random Yeah, can you do that real quick? Just copy that guy's name All right, good luck everybody Louise heal rookie Honest Wagner Nice orange to 25. There you go. Congrats on that one Pittsburgh. There you go illegal Louise Castillo and Jerry Tomek team of the future lube up There's our auto Stephen Kwan. Nice for the Guardians refractor auto Very cool Hit the Kwan, baby. We just hit the Kwan. Very nice Yvonne Castillo destiny Joe Adele Got nice destiny wave is Julio Rodriguez. Nice one there rookie Andre Dawson Bo Jackson who's that? team team Team team Padres Got Jake walking in here interrupting pick your teams Refractor Roy Campanella for the Dodgers can't be Andrew Heaney and Jose consaqle Very true Destiny Juan soda we got a wave at team of the future show head For the Angels Jared Walsh and Hank Aaron.  I love stating. This is like the luminance of yeah There's trophy hunters Clayton Kershaw Rhino and J rod rookie one-on-one big dumper portrait. Let's go dude That's what we need right there There's a blue a big poppy to one ninety nine nice one there for the red signs big poppy sliding I don't see that a lot Very good tossing the recap G to G good to go Team of the future Bobby Witt Gorge on the Denon Las newt by beaten team Anthony at Rizzo W. Riz See me the future of Bobby Witt Jr. Luke Voight Hans Krause refractor Rookie for the Phillies Hans Krause again and Craig Kimbrough Howard refractor for the Phyllis Tyler McGill and a Jim Palmer Trophy hunters big unit Randy Johnson Palacios and Justin Turner I think we're looking at one auto a box. Yep one on card for box quad. Great way to start with Stephen Kwan by the way Yeah, oh, yeah me interesting to see who's redemption This is this area so potentially wander and J rod being redemptions trophy hunters Juan Soto Joe Morgan and Team of the future of wander rookie Lucius Fox that is Refractor auto for the Nationals nice one there with those city connectors Very cool Joe Perez and Max Kepler Anthony Rizzo refractor for the Yankees. I don't think so. I don't think Matt pulled any today I have to look at what he pulled Fernando Tatis The chainsaw devil Chas McCormick for sports tonight all three basketball baseball hockey B&T and Bobby Witt Jr. You'll hear is Montero Matt didn't yeah, I assume tough Joshua. Yeah, I don't think Matt pulled any today Destiny jazz chiseled wave for Nino Tatis destiny Rush and that's good At least a lot before Beamed team Mookie. Oh, dude, we're all chased egg. Let's go. Oh, let's do it dude. I'll watch that Team in the future Kyle Tucker 25 nice, dude. Yeah, I saw the I saw the Ellis super Yeah, Drew Ellis. I think was the super he pulled Anthony Rizzo Was J rod a was here redemption or was he live at Joshua? Do you remember off top of your head? I don't know what the situation with him is in this one blue. Hey Sue Sanchez to 199 for the Marlins Shoahe and Josh Bell Redemption yeah, I assumed so Team in the future one Soto for the Padres that manning rookie Airson Bader is a yank. Nice Beamed team people on so for the Mets Jonathan Heasley or John Heasley Just John he's like the Dola. There's a blue Boba. Shet bow flows to 199 Yes, Winder O'Neill cruise rookie on top Clayton Kershaw refractor Luke Williams and Godzilla Masters has the like little part three challenge thing going on for that. I'd be cool, but may have already happened Yeah, it's either already happened or So saw there's something about bubble Watson different for to go on our second tiered random team break of Contenders basketball again, there's four to go on On those so let's get that filled on up brand new products just coming out today that with limited and stating Club Chrome All came out today, which is fantastic really fun release that a very unique Very different products coming out today, which is awesome green Mike Clevenger to 99 for the Padres Welker man match full cases as well that is Freddie Freeman, yep trophy hunters full cases of contenders Full 12 box cases. You got what 24 autos in that big on-card rookies pulled a lot of good names today Which is a lot of fun team of the future Austin Riley for the Braves CJ Abrams Brian de la Cruz Yeah, check it out. You guys are interested in some contenders. Like I said just came out today Bean team is Ronald Acuna wave destiny is jazz at shizzle. Sorry, Hunter Christian Hernandez or no Yeah, no pique Hernandez pique Hernandez my bad Cal Ripken jr. Gold 50 the Iron Man there you go Orioles. That's sweet Gold Iron Man Cal Ripken jr. 250 Drew Ellis. Yeah, Matt pulled Drew Ellis the guy in the Mariners Matt pulled that super today That's who it was There's a blue Kenley Jansen for the Braves the 199 Dolos Garcia Junior is a Trevor story refractor Kenley Jansen John means Cecil fielder. That is team of the future Sean Murphy pause and George Brown Team of the future Hunter Green rookie David Ortiz trophy hunters Ernie Clement Ernie Clement got traded Review picks I did not Joshua. Give me the rundown Give me the rundown their Jeter trophy hunters beam team miggy Rookie say a Suzuki Jeremy Pena rookie as well That's awesome. Meeple Welcome back in Ronald Acuna destiny and all the messy payload. What that's sick. We've got Curtis Terry refractor It's gonna be auto Josh Winder for the twins. Nice one there Minnesota on the refractor auto Josh Winder Ryan Pepio and You're done. Meeple get ready for a lot of inside jokes. Oh, yeah Absolutely, I love the hobby too man. I Know I like I just I had to go to I had to go to post office today to To pick up my male key. No, I turned eBay offer like about another. Oh, yeah, yeah about another 20 days I think I'm gonna be on vacation mode till I get everything set up and and There's John the India team of the future and I I had to get my male key So I have to change the locks because I'm in like one of those ones that it's like a neighborhood that has like Yeah, yeah, like the post office boxes. Yeah, it's like I'm John means to 199. I have like four packages of cards. I've been buying on Facebook and stuff coming in for eBay So I think I'm gonna go this week to do Wow, Holland messy Benzema Neymar Ronaldo Labandoski six-way jeez That's a price Harper Trophy Hunters. That's insane Yeah, I bought I've just been buying like people do like fire sales or just have like stuff for sale and on Facebook Juan Soto refractor Robin yeah, is it PC stuff or flip flip stuff? Yeah, some PC stuff like whenever I do that if they have like Raven stuff if I'm buying stuff to flip I'll just be like because it cuts down the cost not shipping to some degree, right? Carlos Correa because we think about it if you buy like if you pay $4 flat rate shipping like and then you buy an extra three cards. You essentially allocate the cost less and less of those shipping Destiny for Nana Tatis Jr. There's Adrian Payante Lente for the Cardinals nice one there So like basically what I'll always do too is like if I'm putting them into my spreadsheet of what I paid for something I'll just divide the cost of shipping by however many cards I bought and then add that in so usually it's like 23 cents It makes so it'll be like if I buy $40 cards and it's for it like for dollars to ship it just 44 divided by 40 and usually comes out a Very very small number right beam team Wanda Franco rookie my Frank Thomas rookie. That's awesome though Orange Emmanuel Rivera gold just kidding 36 to 25 gold Emmanuel Rivera rookie for the D-becks Very cool. I like it's been good so far. I'm big fan of stadium club. It's fantastic. Oh The cheap eBay shipping that is where I make my money, dude. That's Ken Griffey Jr. Because most of my stuff like a big majority of the stuff I sell is $20 and under and It helps so much dude to the future J rod The I know Josh where they got swept by the pirates that stinks the pirates stink Beamed team show it and a bean team wave of making The grom and Logan Gilbert Plus if you're buying stuff too, it makes it so much better because like you're not gonna buy a dollar card that costs five dollars a shit That's ludicrous, right Cody Belanger refractor Like piazza once I introduce that dude. I started doing so much more volume team of the future show that He was Monika and all that's fire, dude. That's an awesome pic. That's so cool Lou Bob and Josiah Gray penny sleeves toplers cards there. That's pretty solid Green is Adrian Peltray for the Rangers the 99 nice one there grads at Texas Can't touch this He's like a big thing like oh yeah, so there's like compilation on YouTube with people touching his head with can't touch this


I'm just going to show you this picture really fast and then we're going to go back to our drawings where we create the images. But just like the process of glycolysis had many steps, it was a cellular mechanism with many chemical reactions in it. And just like the citric acid cycle was this weird cycle where enzymes were facilitating these changes between these molecules and stuff was coming in and stuff was being burped out. That's what the Calvin cycle is. It's just a series of chemical reactions with a couple of different inputs and glucose as our output. Don't forget that it's a complex series of chemical reactions. But what I'm about to tell you? The way I'm going to draw it is what we're going to focus on in this class. So ATP and high energy electron carriers are required as fuel and I think, yes, all told to make one molecule of glucose it's going to take us 18 ATP molecules and it's going to take us 12 high energy electron carriers. The Calvin cycle, I'm going to draw it like, I don't know. I mean, it's a cycle. So it goes on forever and ever and round and round and round and actually all the pictures draw it. Not the way I just drew it. They draw it that way, whatever, however, whatever it's a circle that goes in a circle that has these inputs. The whole circle of chemical reactions has to happen six times. So in order to get one glucose molecule and each turn of the cycle adds in one carbon dioxide molecule. Okay, so I don't know if that sounded confusing inside my own head. 18 ATPs and 12 electron carriers or electron cars, that's in six turns of the cycle. It's going to go around six times and in all six turns we're going to use a total of 18 ATPs and 12 electron carriers. And that six turns results in one glucose molecule. Each turn we add one more carbon dioxide. So each turn adds one more CO2, which is why we need to have six turns because glucose has six carbons. So six times we have to take a carbon dioxide molecule of gas and turn it into solid matter, a carbon, a solid carbon structure. When we roll that thing through six times and we add six more carbons to this process, we're going to get glucose out on the other end. You can imagine there are multiple enzymes involved in this and I am going to give you the name of one of them. This enzyme is, I've heard it said that this enzyme is the most plentiful enzyme on the planet. I've also heard it said that this enzyme is the most important enzyme on the planet. When you think about being able to take carbon dioxide gas and turn it into sugar, glorious sugar that gives rise to all of our feasts, everything comes from that sugar, whether it was plant sugar, that a cow ate or that plant sugar that made beans, however, like whatever it all came from the sun and carbon dioxide gas. The enzyme's name is Rubisco and there's no planet on which I'm going to remember the actual name of this enzyme, but I'm going to say it out loud to you because I think this name is really cool. Rubisco is short for ribulose 1,5-bisphosphate carboxylase oxygenase. What do you say? Should we just call it Rubisco? I'm in. Rubisco is the enzyme that takes the carbon dioxide and connects it to this series of carbon reactions in the Calvin cycle. The carbon dioxide, okay, could you hear me thinking right there? I want to bring back something that I mentioned. I actually can't remember when I mentioned it, but I know I used this picture somewhere. I might have been in the water lecture. Do you remember talking about stomata? Stomata are leaf pores. Like they're these really cool structures on leaves of plants. They look like little mouths and they can open and that lets carbon dioxide in so we can make sugar or they can close and that means we're done making sugar and we're not going to let any more stuff in. In addition, this allows us to get rid of oxygen, remember that was produced from splitting water to replace electrons in photosystem 2. Oh my gosh.  I hope you feel like the pieces are coming together. In the next section, I did it again. I made us an animation to walk through the whole thing, to review the whole thing from start to finish and watch the pieces especially in the photosystems because I think that's the place where it's, I think it's the hardest to visualize.  This is just a series of chemical reactions. I can accept that there's chemical reactions happening. I'm cool with that. I can say what goes in, what comes out, like, yeah, yeah, yeah, that's cool with me. But that the energy and the electron transport chains, that's a little trickier for my brain to visualize. So let's do an animation review of the whole picture. And then we're going to end it up with how awesome oxygen is.


Despite his slim appearance as a young man, Elvis had been a talented amateur boxer in his youth and even represented his school. This skill would come in handy during his film career where he was frequently required to get involved in a brawl. Elvis' mother, Gladys Pressley, died aged 46 in 1958. Although not seen in the film, Vernon Pressley, Elvis' father, remarried in 1960. Vernon died of a heart attack in June 1979 at the age of 63, less than two years after his son. The film had a 12 minute standing ovation at the Cannes Film Festival after the screening was over. Although it's never alluded to in the film, Elvis was actually a huge fan of technology and was one of the first people in the US to have an analog cell phone installed into his car and had one of the first Betamax video tape recorders in his home after they were introduced by Sony in 1975.


Okay, so I think we'll get started. So thank you everyone for attending. My name is Patrick Newman. I'm really excited to be presenting the first day of Mises University and to talk about banking. So I guess I'm the meat in the Klein sandwich.  So I'm in the middle. I'm supposed to keep everyone energized and really interested in the material before the pool party, I guess. So it's a tough task, but I think I can do it. All right, so what's this presentation about and why should I care? This is very important. Why are you here? Why, what is the material that we're gonna cover? Well, as the title of the lecture says, we're gonna go through banking. We're gonna go and do why banks exist, what purposes they serve in a market economy. We're going to go through the differences between loan banking and deposit banking. So these are two types of banking functions. We're going to go through, all right, which one of these affects the money supply? Which one of them does not affect the money supply? What roles do they serve, all right? We're going to talk about, well the answer is how deposit banking affects the money supply, particularly through the process what's known as credit expansion. We're going to talk about how free banking, so freely competing banks limits credit expansion. So under a fractional reserve system, we're gonna go through Mises and Rothbard's arguments about how competition will not just cause banks to endlessly increase the money supply, but it will actually cause them to be relatively restricted in how much they increase the money supply. In particular, we're going to go through what's known as the adverse clearing mechanism when we describe this process. So this is a very important mechanism in a market economy. A lot of economists, they don't talk about it, they don't understand it, and this is why we continually hear the same fallacies about freely competing monetary institutions, all right? And then lastly, we're gonna talk about how central banking affects the money supply. So we're going to bring in a central bank after we go through banking on the private market. We're going to go through banking into the market with government intervention. We're going to see how banking can strengthen what's known as bank cartels and lead to much larger increases in the money supply than what's possible under free banking, all right? And in doing so, we're going to go through the money multiplier process. So the step-by-step process of how money is created in the economy, including how money is created over the past two years, as I'm sure many of us know, the money supply has gone up, all right? So we've got a lot to cover. We've got 45 minutes, I think we'll get through it all. So we're gonna start off with what is money? Well, we know this from the last talk. It's a generally accepted meaning of exchange, all right? To sort of analyze this in a little bit more detail, we wanna split this up into, all right, well, what are the types of money? So we have what's known as money proper, okay? In money proper, we think of it as the base money. It's ultimately what we perceive as the foundation of the monetary economy. So we could have a commodity, such as gold and silver, or some form of cryptocurrency, all right? This is a good that people value, not just for its use in money, but because it also satisfies once. So gold and silver, it's rare, could be used for religious or ornamental purposes, et cetera. So gold has a value, all right? Aside from commodity money, we could have paper, which is made irredeemable by fiat, all right? This is our version, or the modern version of money proper, all right? This is the dollar bills, as we'll explain in a minute or so, all right? These dollar bills are not redeemable for anything, but we view them as the base of the monetary system, all right? So aside from money proper, we have money substitutes, all right? So a money substitute is a claim to a fixed amount of money proper. More specifically, it's a claim that the public always perceives as redeemable for a fixed amount of money proper. It doesn't have to be legally redeemable all the time for a fixed amount of money proper, just that the public has to perceive it, all right? So our bank accounts, we perceive that when we go to the bank, we need to spend money or withdraw money to get cash, money proper, we will be able to do so, all right? So examples of money substitutes include bank notes, bank deposits, and so on, all right? So I think it's helpful to illustrate what I mean by money proper in money substitute, which is why I've got some nice pictures here because pictures can always make bad presentations good. So we've got money proper back in the day, so this is under the gold standard, all right? This is a gold coin, it says $5, right? So we learned in the last talk that the dollar was defined as one-twentieth an ounce of gold. So this is one-fourth an ounce of gold, all right? This is $5. So that's the money proper. This used to be the money substitute, okay? This is an example of a bank note. This is the St. Nicholas Bank. Yes, St. Nicholas Santa Claus had his own bank back in the day. Where do you think he got all the money to make all the toys, right? It's not magic. It was the old fashioned way. And it says the St. Nicholas Bank will pay $5 to the bearer on demand. The public perceived that they could always redeem this for the money proper, all right? So again, this is what it says. Translate, the St. Nicholas Bank will pay $5, one-fourth an ounce of gold to the bearer on demand. So the money proper was the gold coins. The bank notes were not money proper. They were money substitutes because they could be redeemed for something else. Fast forward, 100 years or so. We're under the Federal Reserve System. So there are no more private bank notes. The central bank has taken control of the money supply. Only the central bank can issue notes, right? So the dollar bills we have, they always say Federal Reserve notes. Before we went, we'll say about 100 years ago, say 1922, you could have a $20 note. So $20 in gold coin, one ounce, payable to the bearer on demand. It was still redeemable for the money proper. By the time 1933 rolls around, conditions have changed. The contract has been altered. So we were just imposed upon us. So now we can no longer redeem our dollar bills for gold. It's just, that's what it is. It's what it is, all right? Now we've just got these things, right? They just say Federal Reserve note and they say $1. So if you go to a bank, you say, hi, I've got this note. I'd like to redeem it for a dollar.  You say, no, no, no, I don't think you understand. I'm referring to the money proper. They're gonna go, well, this is all we have. There's nothing else, it's just a dollar, right? We're completely removed from the monetary, excuse me, we're completely removed from a commodity money. So now the money substitutes would be, say, are the deposits we have at the banking system.  Most of us, we don't do that. We would instead have a debit card, all right? So a debit card, we could spend, we need to spend $50 at the grocery store. Well, just take out my debit card. I perceive that I can always redeem the money from this debit card. I could always get the money proper, the dollar bills from it, as does the various people who are selling goods, right? So this has now become the money substitute. Technically not the actual piece of plastic, but the money that, the account, the piece of plastic is linked to, all right? Okay, so we can now explain a little bit more about what a bank is. So a bank is an institution that makes loans and or issues money substitutes. This relates to the two functions of banking that we spoke about, all right? So the first function, making loans, this is called loan banking. As we'll see, loan banking does not involve any change in the money supply. It just simply involves a transfer of savings from one individual to another individual, all right? This is a very important function in a monetary economy. We cannot get by without loan banking, all right? The second function is called deposit banking. The issuance of money substitutes. As we'll see, there's a variety of reasons why people prefer money substitutes to money proper. The most basic reason is that money substitutes are much easier to carry, all right? And there's better, they're more secure, all right?  The cash in your wallet, you can't really cancel that. You just have to treat that as lost, all right? All right, so loan banking exists because financial intermediation lowers the cost of finding borrowers and lenders. Without a world of loan banking, let's say you had savings and you wanted to invest it. You got $1,000 in savings, you want to invest it. Well, how are you gonna find someone to borrow the money from you? You'd have to ask all your friends, you say, hey, I've got $1,000. Would you like to take out a loan from me? And your friends are gonna look at you kind of odd. You're gonna have to ask more friends. You might have to ask your family members and relatives and so on. It's gonna take a lot of time. Likewise, let's say you need to borrow money. You need $1,000 to meet some expenses or you're trying to start a business and so on. Well, without a bank, you'd have to go to all of your friends. You say, hey, I need $1,000. Can you lend me money? And you might find someone. You might fall into the wrong crowd of you're borrowing money from someone. You might have to be a criminal organization and so on. But this would be very costly. It'd spend a lot of time trying to find someone you engage in an arrangement with. Well, instead, you've got a bank. You need to borrow money. You can go to the bank. You can borrow money. You need to earn interest on your savings. Well, you can go to a bank and you can lend them money. Deposit banking exists because gold and silver coins or whatever other commodity we're using, they're cumbersome and they can be easily stolen.  And you say, all right, I'd like to buy two pounds of chicken, some rice, et cetera. It'd take a lot of effort to carry around those gold coins. Nowadays, even with cash, you still don't do that. If you need to make a large transaction, you need to purchase a car. You're not gonna have a huge bag of cash, right? It would be hard to carry around and if you lose that money, you're out of luck. Banknotes are much easier to carry. So back in the day, private banknotes were used primarily for small transactions, whereas debit cards or checks, et cetera, those can be precisely divided and they also require verification. So if they get stolen, your money is safe. Or if someone has access to your debit card, you can easily cancel it. These are very important features that, very important functions, excuse me, that modern society could not get by without. Just as so modern society cannot rely on barter, modern society requires loan banks and deposit banks. All right, so let's analyze these types of banking practices a little bit more in depth, right? So in order to do so, I'm going to use what's known as a T-account or a balance sheet. I'm gonna go through, okay, how banks will actually record the process of them making loans, them accepting deposits, and so on. So let's start with loan banking. We're gonna keep the example simple and we're going to see how this process works. All right, so let's assume we're on the gold standard. All right, we're gonna go back to the good old days. I'm saying this not because this isn't relevant for a non-gold standard, but I'm saying this because I think this will better help illuminate the processes that are going on here. So let's say we've got a young, enterprising, intelligent entrepreneur, say one Patrick Newman, and he's going to start a bank, he's going to decrease his consumption spending by $10,000, and he starts a bank with his savings. So we've got the Newman bank right here, we've got assets equals equity plus liability, so assets are things that you own, liabilities are what you owe, and equity is what's left over, so it's net worth. So we're going to abstract from the building of the bank, the actual building where the bank is located, any of the personnel, all the expenses, the vault, and so on, we're just gonna look at the actual financial transactions going on here. I have created my bank under the assets column, I have gold, that's worth $10,000, and under the equity and liabilities column, I have just equity, net worth. I haven't done anything with the money. So these two sides of the financial ledgers, so to speak, they always have the balance out. If they're not balancing out, that means something's wrong, someone's cooking the books, you gotta find out what's going on, but whenever you add something, you've always gotta add something to the other side, and the exact same thing when you take something off. So we're going to assume that I've got my bank set up, and now I'm going to try to make money. This balance sheet right now, I'm not making any money, I've just got gold sitting in a vault. I want to now use these savings to actually start to make some money, in particular I'm going to make a loan that I can earn interest from. So let's say the Newman bank makes a loan to one Jonathan, trust him, I would say Jonathan, he's a good guy, so we've got a new balance sheet here. So the main thing that's happened is on the left side, gold has gone down by $9,000, and in place of that I've got an IOU from Jonathan. This is an obligation, it's valued at $9,000 right now, in the future say one year, however long the loan is, Jonathan's going to pay me back $9,000 plus interest. This is now something that I can make money from. So once again, 10,000 is equal to 10,000, at the end of this transaction, assuming Jonathan pays me back, I will have $10,000 in change. This is how I'm able to embark upon a profitable business. All right, fairly simple here, right? Nothing too complicated that's going on. Just something that I want to point out is that the money supply has not changed. Only a change in cash balances, right? The Newman bank's cash balance has gone down, right? Or in particular, initially the person putting the money in the bank, such as me, my cash balance has gone down, while Jonathan's has gone up. There's been no change in the money supply. So we can make this a little bit more complicated by supposing that the Newman bank is not only going to lend money, but it's going to borrow money, right? So the Newman bank is going to borrow money from people in the economy and going to turn around and then lend it. Now, why would they do that? Well, the idea is, say, they're going to borrow $5,000 from a Ludwig, right? And they're going to pay Ludwig in one year, 3% interest. Well, the Newman bank's going to turn around and then lend that $5,000 at 5% interest, right? They're going to make money from doing so. This is not, I'm not exploiting Ludwig for the person who the money's being lent to. This is a normal process of financial intermediation. The Newman bank is undergoing the costs involved in this process of finding borrowers and lenders, right? So suppose the Newman bank borrows $5,000 from Ludwig in the form of certificate of deposits, type of financial instrument I will talk about in a second. All right, so here's what the balance sheet looks like now. Now, on the right side, liabilities, there is a certificate of deposit, a COD, to Ludwig for $5,000. That means is that in one year, I will have to pay Ludwig $5,000 plus interest, right? On the other side, the asset side, I have an IOU from whomever the Newman bank is lending the money to, say the Mises Institute, right? So borrows money from Ludwig, turns around and then lends that money to the Mises Institute, okay? So now the balance sheet of the Newman bank has increased from $10,000 to $15,000, okay? It's important to note that the COD, the certificate of deposit, even though it's got the word deposit in it, it's a little confusing, it's not a money substitute, right? Ludwig, when he puts his money in this type of financial instrument, he cannot spend it. He has relinquished his ability to spend the money. He is channeling his savings through the Newman bank, okay? And what that means is that the, I'm sorry, so the Newman bank then makes a $5,000 loan to the Mises Institute, just showed that. What that means is the money supply remains constant because all that happens is Ludwig's cash balance has gone down by $5,000, while the Mises Institute's cash balance has gone up by $5,000. And at the end of this transaction, the Mises Institute will repay the Newman bank, right? And then the Newman bank will repay Ludwig, right? And everyone's happy, everyone benefits from this. The Newman bank in particular is gonna make a slight profit on the transaction, right? So loan banking has proceeded in this fashion for hundreds of years, sometimes the loans are successful, sometimes the loans aren't successful. That's just a normal process of entrepreneurship, figuring out who are good lenders, who are good borrowers, so on and so forth, okay? So we can now move on to deposit banking. Much more prominent feature of the monetary economy I wanna talk about, especially because it relates to monetary policy and central banking and so on. So we're going to shift gears, we're going to look at a deposit bank. Now in reality, throughout history, most banks have combined both functions. There's been some types of just pure loan banks. Historically those were called investment banks. Really most modern banks are both engaged in deposit banking as well as loan banking. So we're gonna start over, have a complete clean balance sheet, right? And we're gonna see how this process unfolds, right? So suppose Bob, one Bob, deposits $10,000 of gold at the Newman bank, right? Why would Bob do this? Well again, Bob wants to store his money at the bank, he doesn't wanna have to deal with the difficulty of carrying around these coins. He doesn't wanna have to deal with the potential threat, or I guess the problem where his money could get stolen. This is completely normal behavior to deposit $10,000 of gold at the Newman bank. Here's what the balance sheet looks like, okay? We're going to abstract from the equity in the Newman bank. Again, I'm just starting over a simplified balance sheet. On the right side, we've got the deposit to Bob, and that's $10,000, that's a liability. On the left side, we've got $10,000 in gold. In particular, we've got $10,000 in gold reserves. So things are a little bit different right now, which is why it's important to go through what's happening, right? Though unlike the certificate of deposit, deposit in this sense, such as a checking deposit or a demand deposit, as they're often called, is a money substitute, okay? Bob can spend it. He gets an account that he could write a check on for $6,000, for $4,000, whatever, and he could spend it at a store, or he could redeem it for the money proper. He says, you know what, I actually wanna now hold some of my money in the form of gold, right? Bob could also convert it into banknotes. Let's say he doesn't wanna make all of his transactions with a checkbook or a debit card, right? He could use banknotes to purchase goods at the store, and all this would mean is that if Bob wants to convert his deposit into banknotes, say $5,000 into banknotes, well, the Newman Bank would just have now $5,000 in the form of a deposit, and $5,000 in the form of banknotes, right? Nothing too complicated there, all right? It's important to note that, at least so far, the money supply has not changed, only the composition of Bob's cash balance. Just to reiterate this point, I believe it was mentioned in the last lecture, a cash balance does not just refer to the money you have as cash or as a wallet, right? I have my wallet, I've got a cash balance, excuse me, I've got $60 in cash, that's not my cash balance, right? The cash balance is all of the money that you could spend, right? So it also includes the $4 or $5 million I have in my checking account at Bank of America, okay? All right, so to make sure we're all paying attention, don't worry, inflation hasn't gotten that bad yet, so we're gonna, okay. All right, so a couple other things to point out, make sure we're understanding what's going on here. So right now the Newman Bank operates with at a 100% reserve ratio, right? Because that gold is in gold reserves, right? Because Bob might wanna redeem some of his deposit for gold, so now the Newman Bank has to have gold on hand in order to be able to satisfy Bob's desire, right? So the 100% reserve ratio, a reserve ratio is equal to reserves divided by deposits or notes, if we had them in this example, times 100, right? So it's 10,000 divided by 10,000 times 100 equals 100%, right? So from this very simple example, we know a couple things, right? First, we know that Austrians can do math, right? And the second thing we know is that there's been no credit expansion, no change in the money supply as of yet, right? Okay, so all money substitutes are what Mises called money certificates. That means there's a one-to-one correspondence between the money substitute and the money certificate. In a sense, they're just almost a receipt or a warehouse receipt, maybe not legally but economically, right? The Bob can just go to the bank, redeem $1, $2, $9,000, $10,000 for whatever amount of gold he wants and he will be able to do so, okay? All right, but the process doesn't stop there. In particular, the Newman Bank needs to make money, right? Because the Newman Bank has accepted this, this gold deposit. The Newman Bank has to provide various services to Bob, such as allowing him to spend the money, allowing him to redeem the money. There's the cost of storage, right? Having guards around the bank vault, all sorts of technology, other stuff. There's gotta be a way for the Newman Bank to make money on this. So what the Newman Bank is going to do, at least in the modern economy, is the Newman Bank's gonna make a loan, right? Now we'll see that in reality, they're not gonna make a $90,000 loan to Jim, right? It's gonna be a different amount, but we're gonna see how this example unfolds. So the Newman Bank will make a $90,000 loan to Jim, right? Here's what's gonna happen. The Newman Bank will open up a deposit for Jim, right? So it's saying, all right, we're going to make you a loan for the amount of $90,000. We're just going to open up an account for you, and you will be able to spend this money according to the terms of the loan, say Jim needs this to start a business. So we'll sign a contract and say, all right, you'll get $90,000. You have to pay us back, the Newman Bank, $90,000 plus interest, a certain amount of time in the future. On the other hand, the Newman Bank receives an IOU from Jim, right? This is valuable, right? Because this could be, in a sense, sold on the market to other banks, this will earn interest, right? This is important. This is a profit-making activity, right? Now the balance sheet has increased from $10,000 to $100,000, right? Once again, both sides balance each other out. What the Newman Bank has done is it's engaged in credit expansion. It's increased the money supply by making loans, right? This is different than under loan banking, because under loan banking, only the composition of cash balances changed, or someone's cash balance went up, someone's cash balance went down. Now under deposit banking, the bank has literally increased the money supply in the form of a loan, right? Because this loan can be redeemed for gold, right? By Jim or by whoever else has this deposit, right? As well as Bob, right? Bob can still redeem his deposit for gold, right? So the money supply has increased, right? This is a fairly large increase in the money supply, at least just based off of our simple example. We'll see how this actually won't occur on the market, right? We just have to follow the logic through here, right? Though $100,000 are money substitutes, the public perceives these as always being redeemable for gold. But only $10,000 are money certificates, because there's only $10,000 in reserve. The rest are unbacked money substitutes as they're called, and they're what's known as fiduciary media, okay? So the money substitutes in the economy are always equal to the money certificates plus the fiduciary media in economy, right? In an economy with fractional reserve banking as we have here, there will be fiduciary media. It just won't be a perfect correspondence between the money certificates and money substitutes, all right? So this bank, as you said, is engaging in fractional reserve banking. It's operating at a 10% fractional reserve ratio, right? There's $10,000 in gold. There's $100,000 in money substitutes, right? So something important to note is that sometimes this is known, this is called, this is fraudulent. Oh, the Newman Bank is not able to satisfy all withdraws, so it's engaging in some sort of malfeasance here, something's going on. Well, how these contracts legally are arranged is they're in the form of what's known as a call loan. Even though the public perceives them as always being redeemable, right? They perceive them as warehouse receipts economically. Legally, they are loans, right? Legally, they are a form of a loan, okay? It's important to note, right? So what's also important to note is the Newman Bank cannot meet all potential withdraws, but it estimates it will never have to. So yes, in theory, $100,000 worth of money substitutes could end up at the Newman Bank's door and it won't obviously have the money, so it would go bankrupt. It would have to sell assets for gold or it would have to close its doors. When a bank has enough reserves to meet current demand for money proper, it's what's known as liquid, okay? Banks always want to be liquid. If they don't have enough money, they're going to be illiquid, okay? They're gonna have to do something in order to acquire money or as I said, they're going to go bankrupt, right? So banks are always going to try to be liquid if they're not liquid, then they're in trouble. So every bank, every fracturer's reserve bank is always facing the potential threat of being liquid, but it makes an entrepreneurial estimation as to how much its customers will actually want in gold and silver. This is similar to a airline company. They're gonna issue out more airline tickets than seats are available because they estimate that some people won't show up or an insurance company is going to grant out, in theory, grant out more types of fire policies for fire insurance than the money it has available. So if the entire town of Auburn burns up, the local fire insurance companies will go bankrupt, right? But they just estimated that won't happen, okay? All right, so you might say, well, wait a second. Mainstream economist says, well, if banks can increase the money supply, they're gonna do so endlessly. They can just literally engage in credit expansion as you've shown, and the money supply will go up. Bank assets will balloon from $10,000 to $100,000, so on and so forth. All right, just print the money out of thin air. Back in the day, this was called wildcat banking. So there are articles on this continually. Old myths die hard, so the idea was in the 1800s, these fly-by banks would be created where the wildcats roamed out in the boonies, and they would issue a bunch of money. The money supply would shoot up, and then they would close their doors and quickly skip town, right? And the public would be bamboozled. And we've heard the same thing regarding cryptocurrency, oh, all these crypto exchanges, they're just like the modern day form of a wildcat bank. So the first thing I did is, when I was working on these slides, I said, all right, I have to find a picture of a wildcat bank. Who's a wildcat banker, right? So I go on Google, I type in wildcatbanker. I get this, all right, it's a cat. He's a banker, he says, you silly upstarts, only we bankers can make money from thin air. I guess this is a wildcat bank. This is a wildcat banker, he's running the institution. This wasn't exactly what I was looking for, but anyway, something to keep in mind, right? In reality, there is no wildcat banking would not occur on the free market, okay? To the extent it did occur, and the quantitative effects of this are greatly overstated in the past, it was due to government intervention, right? In reality, as the Austrian economists, Samesis and Rothbard and others have explained, is that competition is going to limit credit expansion, right? This is because of the adverse clearing mechanism. So credit expansion will cause an outflow of reserves. So if one bank actually does expand the money supply by $90,000, as we'll see, given its gold reserves, it would quickly go bankrupt, okay? So the fact that there are multiple banks eager to redeem other banks' money substitutes for the real deal for money proper really limits credit expansion on a free market, okay? So let's look at this process in a little bit more detail. So let's say if the Newman bank makes the $90,000 loan, it's gonna go bankrupt, now why is this? Because let's say Jim is gonna spend the money, he needs to expand his business, he's gonna spend the money at Ace Hardware, Ace Hardware receives Jim's debit card transaction, and it's then going to deposit the money at the Bank of Salerno, okay? Very prestigious rival bank to the Bank of Newman. The bank owners are friends, they're not that good of friends, okay? What's gonna happen is the owner of the Bank of Salerno is going to present the obligation to Patrick Newman for redemption in gold. Hi, you've got this $90,000 check, I want the real deal, all right? Give me $90,000 in gold coins. The Newman bank doesn't have that, it's only got $10,000, all right? And so the Newman bank would go bankrupt, all right? So far from increasing the money supply endlessly, free banking on the free market severely limits credit expansion, all right? Okay, so competition severely limits credit expansion, this is something that continually needs to be repeated, all right, so Austrians were very big on competition, not only for the production of ordinary goods, but also in the monetary sphere, all right? You might say, well, wait a second, what if banks form a cartel to coordinate credit expansion? So what happens if the Newman bank, the owner of the Newman bank and the bank of Solerno, they really are that good of friends, okay? And they say, all right, look, you scratch my back and I'll scratch your back. I won't redeem your money substitutes for gold if you don't redeem my money substitutes for gold, all right? Now, what would happen is this would fail because of what's known as internal and external pressure, okay? Internal pressure refers to cheating among members of the cartel, all right? So even though the Newman bank and the bank of Solerno made this agreement the next day, several months later, et cetera, we could secretly cheat, okay? This happens all the time of cartels. And then there's external pressure in the form of other banks in the domestic economy, in different countries, so foreign banks, et cetera, they're going to want to redeem the money substitutes for gold, okay? So the cartels to solve this problem of credit expansion, at least on the free market, they're not effective, all right? So how could a banking cartel become effective, all right? Well, enter the central bank, all right? The central bank will basically help bankers increase credit expansion. A modern central bank has five important characteristics, all right? It's got a monopoly on note issuance, banks cannot issue private notes anymore. Only the central bank can. And then usually what happens is that these notes are no longer even redeemable in gold, right? Federal Reserve is created in 1913. Well, just 20 years later, we're off the gold standard. Domestic gold standard, at least. It's also a bankers bank where now banks hold their reserves at the central bank. So the Newman bank is going to store all of its gold reserves at the Federal Reserve, let's say. It's also going to be a regulator, a regulator of reserve requirements for various commercial banks, all right? It's going to be a lender of last resort, all right? So if banks are experiencing difficulties in satisfying customers' demands for money proper, they're going to be able to turn to the bank, all right? Actually, they're going to be able to turn to the central bank, all right? And the central bank will be able to provide them the money they need. And then last but not least, it's a conductor of monetary policy. So it can, central banks will try to change the money supply and interest rates in order to stabilize or try to stabilize economic activity, all right? So central banking strengthens bank cartels by easily increasing bank reserves, all right? So now what the central bank can do is it can print money out of thin air. It will, it does not hold the gold reserve, all right? It can just literally create money and it can provide this money to banks. So it can provide dollar bills to banks and they can use that to now increase their amount of loans, right? To engage in credit expansion. All right, so the modern central bank has four tools it uses to affect economic activity. It can engage in open market operations. This is the buying and selling of assets from a bank. So buying and selling of government securities, right? And it can give banks money for the assets it has. The discount window, it can lend banks money. It can charge them a discount rate, all right? It can set reserve requirements. So instead of banks deciding what reserve ratio they wanna hold, the central bank can say, all right, well now you only have to hold 5% reserves or 2% reserves, or as in the modern economy it's basically 0%, right? The central bank has that power, okay? And then lastly, it could pay interest on bank reserves held at the central bank. This is a relatively new monetary tool. It was very prevalent in the 2010s, okay? But ever since COVID, we've kinda just switched back to the central bank, just buys a bunch of stuff on the open market and lends money to banks, right? So just simpler times, you could say, all right? All right, so we'll finish up by briefly looking at open market operations in the so-called money multiplier. So this is actually how the process of how the money supply increases under a fractional reserve system, okay? So as we're going to see, it's not going to occur, what's not gonna happen is that one bank will just make a loan much larger than the increase in reserves it held. Instead it's going to be a much smaller step-by-step process. All right, so open market operations explain. Let's say we've got the Federal Reserve, the institution we all know and love here at the Mises Institute. It writes a $1,000 check to bond dealers, let's say Powell and Sons, and it prints money out of thin air. So Powell and Sons will take this check and it will deposit it at the Newman Bank. We've got the Newman Bank, here's its balance sheet right here, assets, it's got reserves of $1,000. It has deposited this at the Fed, right? It's not shown, under its liabilities it's got a deposit to Powell and Sons for $1,000. Once again, $1,000, $1,000, everything's balanced out. So the Newman Bank will only engage in credit expansion by the following amount, by the change in reserves it's gotten, so $1,000 times one minus the reserve requirement. And let's say the Federal Reserve sets the reserve requirement at 10%. So what that means is now the Newman Bank will expand credit by $900, $1,000 times 0.9. And let's say it makes a loan to Bernanke and Co. So another esteemed institution. So what's going to happen is we've got an updated balance sheet, so the Newman Bank will have a deposit to Bernanke and Co on the right side and then on the left side it's gonna get an IOU from Bernanke and Co. So it's got $1,900 on the left side and $1,900 on the right side. Everything, once again, balances out. That should strictly say $900 equals 1,000 times 0.9 on the slide over there. So what's gonna happen? What would actually happen in this situation? So now when the Bank of Salerno redeems we'll just follow through the process that say that Bernanke and Co. Spends the money at Ace Hardware and Ace Hardware, deposits at the banks at the Bank of Salerno. Now when the Bank of Salerno goes to the Newman Bank with a $900 obligation, there will be enough reserves. $1,000. So what will happen is then the deposit to Bernanke and Co. will get canceled out and the reserves will go down by $900. So we're back to $1,000. But the Newman Bank wants to do this because again, it's making loans, it's earning interest and so on. The process though does not end there. The Bank of Salerno is going to expand credit by the same formula, $900 times 0.9, that's $810. The next bank, Herbner and Rittenauer Incorporated follows with the same, following the same formula that's $729, so on and so forth. So the money supply is increasing in a step-by-step process. Each bank is increasing the money supply by a smaller and smaller amount. Initially, money supply went up by $1,000, then it went up by $900, then it went up by $810, $729, and so on. And we could say this is equal to the formula change in reserves times one divided by the reserve ratio equals $10,000. So the central bank could just increase as much money as it wants to, just pump in more reserves. Magic, just like that. So with each new loan from credit expansion, the money supply increases. And it's injected into the economy at a specific point, raising prices and changing production unevenly in a step-by-step fashion. All right, so when the money supply increases, it doesn't just raise prices proportionally, it raises some prices more than others, so prices rise unevenly. But the important thing to remember is this, we've covered a lot of material in this talk, the important thing to remember is this, when the money supply goes up, prices will go up. This is a forgotten truth in economics, apparently. Now this is something Austrians have to teach people are really more specifically central bankers again. So don't forget that prices go up. So if you increase the money supply through credit expansion by more than 40% over two years, which is what we did, prices, consumer prices are going to rise by at least 9%. Now that might confuse some people, but the basic point is this, you cannot get rid of scarcity. You cannot just print more money and not expect it to increase the demand for goods and drive up prices. Okay, that's a consequence of the banking system. You might learn it's due to supply shocks or corporate greed, but price rise is due to that, that statistic there. Okay, so I think with that I will end. Thank you for listening. For more, I encourage you to read Murray Rothbard's Mystery of Banking and Bob Murphy's Understanding Money Mechanics. Thank you so much.


I couldn't see the people suffering and be quiet, so I wanted to be the voice as well. Why don't I help? I wanted to help the people, and that's how I got involved in human rights. I sent reports, we do complain, you don't complain. This is how we are working now. I mean, for the people in the ground, any, for example, any statement which comes from a special reportar, a special procedure, or even from the UN itself, it gives them hope. I really love what I do, and I feel proud of myself.