Sterile Money, Fiat Sex: The End of Growth, in One Lesson | Catherine Pakaluk
Summary
Core Thesis: The speaker draws a structural analogy between fiat money and modern contraception, arguing both sever mediums from their productive ends, leading to long-run social and economic damage.
Monetary Regime: Extended discussion of central banking, the end of Bretton Woods, the Nixon shock, and how monetary inflation and policy-driven rates distort savings, investment, and growth.
Interest Rates: Analysis of negative rates, including Rogoff’s “Curse of Cash,” highlighting the role of eliminating cash to enable deeper policy penetration and its implications for time preference.
Demographics: Emphasis on demographic decline and low fertility as demand-driven, not cost-driven, with technology enabling separation of sex from procreation and accelerating below-replacement trends.
Debt Dynamics: Highlights compounding demographic debt and national debt, declining marginal productivity of debt, and risks to pay-as-you-go entitlements and long-term GDP growth.
Gold Discipline: Repeated references to the gold standard as monetary discipline, contrasting commodity-linked money with today’s fiat regime, while noting a return is unlikely.
Policy Implications: Skepticism toward big-state fixes such as pronatalist subsidies or negative-rate stimulus, arguing they deepen distortions rather than solve root causes.
Investment Angle: No specific stocks were pitched; the focus is on macro themes—fiat money, central banking, and demographic decline—as key long-run risk factors for markets.
Transcript
Thank you again. Um it is uh just a delight to be with you and to have the opportunity to deliver the Henry Hlett memorial lecture. Like many of you, I presume I cut my teeth on economics in one lesson. Hllett's broader work shaped my thinking through the great economic debates of the 20th century. Uh you know, he was watching them as they were unfolding and writing about them. So it was like just a tremendous uh grace to read those things. But I think for me it's it's Hasllet as a stylist whose legacy most inspires. Um I think of economics as a philosophy with consequences. It matters very much whether you form a sound conception of property, exchange, money and profit. Uh so you know in contrast with the political theorists with whom I constantly have beefs and the philosophers uh to whom I'm I'm married to one of them uh economists really need to get it right. They need to communicate what's right about things. So no one did this better than than Hasllett. Uh all right well it will be plain from my title. In fact once my title is spoken I probably don't need to continue. I think that that's the sort of the whole that is the whole lesson right there. Uh, but it will be plain from my title that I aim to put before you a provocative analogy. It's a little early in the morning for a provocative analogy, but maybe maybe you um have been up longer than I have. Um, this is new work for me and it's, you know, sort of developing, but it's been uh birthed by ideas that emerged after the publication of my book uh just two years ago. So, right or wrong, I think what you're about to see or or listen to will be hard to unsee. Um, and maybe you can help me uh refine it over time. Before I arrived at this title, uh, sterile money and fiat sex, I considered another one uh, called the curious case of demand for children. In my book, uh, Hannah's children, I argued that the fertility crisis is, um, really a demand story. It's not a supply story, which is the one you hear about most of the time. Um, I argued that the richest, most reproductively enabled people in human history were probably not failing to reproduce because having children was just too expensive. Demand for children, it seemed to me, had collapsed. And the evidence is is plain. This is not the time to make that argument in full. But births tend to rise with falling incomes. Fiscal nudges don't work. Birth rates are collapsing everywhere where people are wealthy and where people are poor. Generous welfare states don't seem to make a difference. Um, and the decisive shift to below replacement fertility coincided not with a big cost shock, and we could debate that a little bit. There's a a flavor of cost shock there, but really with the atomic advance in contraceptive technology in 1960. So, I strained as I was trying to explain. I mean, I I covered this in about three pages in my book, so that wasn't what I was showing up to say, but as I went around speaking, I realized people didn't understand what it meant to describe a demand demand story. Um, this is the problem we have trying to teach economics. it turns out to be a lot harder. I think you got the point. But so I was struggling to find ways to explain to the general public what it means to say that demand for children has collapsed. And finally after about a year I hit on the horse analogy uh or the automobile analogy. So the Model T was introduced in 1908 um and it's tremendously popular. Uh the diffusion of Model T's around the country, it's it's actually stunning. I thought it would be a good analogy and I went back and looked and I realized it's just a tremendous analogy. Um but the casualty of course after the model T was introduced was the horse. So uh the so the model T was introduced in 1908 the population of horses peaked in the United States. When 1910 it is it's it's stunning right it's absolutely stunning. So by 1917 so just less than 10 years there were no horses left in New York City. That's a stunning collapse in demand for horses right? Uh so today the only people who have horses are those people who really love them and are willing to pay the price. The what I call the horse enthusiasts like horse love. Maybe some of you are horse enthusiasts. I'm not. Um for everyone else a horse is just a liability. Um and this is sort of what's happened with children. So I I like to say three successive blows uh eroded demand for children. Um the first is just you know tremendous economic growth which reduced the need for household labor. The second is a kind of slate of welfare state policies especially public pensions which reduce the need for old age support. And the third are the contraceptive technologies which occurred in sort of three waves. I'll review those in a little bit. In the 1860s or 1870s, the 1930s and then the 1960s and these reduced the need for children in order to couple up. So coupling up seems just as desirable as ever. Um but childladen coupling not as much. Obviously, effective contraceptives allow people to choose a desired amount of sexual congress separately from a desired amount of children. So, there are two goods entering the choice basket where by nature there used to be just one. Before modern contraceptives, if you wanted sexual congress, you had to accept at least a few kids. What we've observed is as this unbundling took place, uh in terms of the demand, sexual congress wins. There's a lot more of it uh than before the contraceptive revolution. More partners, earlier initi earlier initiation, and more Congress in relationships that might previously have limited it because it was costly. And as I was studying these things, uh there it was in plain sight. I thought by the end of the 20th century, uh sex had become pretty cheap, nearly free. Uh but the fruits of it had collapsed. The total fertility rate was roughly hald. The analogy wasn't perfect, I suppose, but it sure looked like an inflationary phenomenon. So, think of what comes next as a kind of love letter from someone who didn't didn't study money seriously to to people who do. So, that's that's what you're going to get. Um, okay. So, I didn't used to be interested in money. Um, I remember in college when I switched to economics, my grandmother asked me what stocks to pick and I And I remember scoffing at her, hey, hey, you know, you know, economics isn't about money, right? Or stocks. It's about human behavior. I was really well I was I was totally in it. And I said, and of course, I mean, I was receiving a fairly mainstream education. Money isn't even in the models, right? So money just drops out, right? It's the numerator. Just cancel it out. And I thought, well, you know, proudly like the real action is human agency. So I was really, I thought, you know, economics was going to town. And I couldn't believe she wanted to know about money. Eventually, I went to graduate school ostensibly to study growth. I was convinced at this point that market mechanisms and strong institutions were the path to lifting families out of poverty. I was certainly skeptical at this point already of what we have been what would have been called economist misadventures in economic development, but I uh certainly had read um sorry, I had not yet at this ter at this point heard the term market process. So uh and I had no exposure to Austrian economics. Uh I had read Julian Simon and so in my own term I would say I knew from Julian Simon that there was like a population process. So that's my term. He doesn't say this but of course the basic idea is that more people looks like scarcity and a problem but prices rise, innovation responds and ultimately we we get greater abundance just like a population process. And this seemed almost obviously correct to me. uh and I wondered why it was so difficult for people to understand that and of course this is like the 1990s and people are still worried about famine and exploding population uh broadly. So uh I wanted to know what the connection was between economic growth and population growth. So went to graduate school and ultimately um found a little refu refuge in at that time applied micro after learning there was no field where I could read Hayek. I' I'd read a little bit of you know what I thought of as like great economics. Um I didn't know it was called Austrian but I remember asking around like what like which field is doing Hayek? They just looked at me like who's Hayek? So I thought like well all right if I want to study basic things I guess I could do micro. I spent a little bit of time in in macro classes and I thought that was a nightmare. Um so now now I know why. All right. Anyway, I had questions and money wasn't part of this. Um but actually almost almost two decades later a friend she finished gradu graduate school started teaching a friend of mine invited me to a symposium on sound money and trade and the work of Ferdinand Galani um the great uh Neapolitan pro prodigy who wrote at the age of 21 the treatis on money delamoneta um basically I thought this would be very boring so this was 10 years ago in the summer of 2016 and this symposium was held at Jackal Island yes that Jackal island where the plan for the creation of the the the central bank was hatched. So I agreed to go because my friend asked me and I thought like well I'm an economist after all. I should know something about money. This will probably be terrible. U but I was obviously mistaken. So I leaped through Dela Boneta and I thought, "Oh my gosh, this is amazing stuff. I've never thought about the nature of money. What even is it? What is its purpose? What kind of a thing is it? Where does it come from?" And I began to see that money is not some sort of accident of exchange. is a specific kind of thing that could be defined. It could be based or debased. It does real work. And here it seemed to me in Galani's text was an on-ramp to understanding the non-neutrality of money without giving up on the free market convictions uh that I believed were were true and correct. And as you know, most mainstream economics programs unwittingly or not advance a conception of monetary neutrality. So this encounter with Kalani wetted my appetite. How had I missed this? I thought like what was I doing like all those years in in school? What was I to make of a standard PhD education that didn't think money was serious enough to teach seriously? I had certainly not become an expert like one symposium, but I had certainly become wiser to the defects of my own education. So the next time I had an opportunity to attend a conference on money, I didn't hesitate. So, Galani had taken me back to the beginningish treatments of money. And the next one was on Ken Rogoff's curse of cash. So, more modern treatment. Um, if you don't know, don't remember this fine text. Uh, Rogoff argues for the phasing out of paper currency. Large denomination bills first and then smaller denominations over time. You know, the normal arguments. I mean, right, cash is bad. People evade taxes with cash. their criminals use cash. Um, anonymous people use cash and all those things are bad. So, we should, you know, eliminate large denomination bills. I mean, this was sort of the beginning of the argument. And then the real agenda emerged, which was negative interest rates. Um, and then I was like, I was sitting up. I was like, oh, oh, okay. Um, because the rest of that seemed kind of bizarre to me, but then I saw what was going on. If you eliminate hard cash and you then then you eliminate the last hedge against negative interest rates. So this kind of old idea that money is coined liberty. So I started to see okay all right so this cash thing is there's a there's a freedom problem here. Um and I had not yet at this point still had not yet encountered the Austrian theory of the business cycle but even I could see this paradox. I'm just this you know new person study like thinking about these things. I thought this is crazy stuff. So the idea that negative interest rate stimulus uh would be a kind of lastditch measure to get out of a stagnation itself uh caused by the overreach of um of government planning likely the symptom of two compounding debts which I'll refer to in a minute the demographic debt and the economic debt so or what we might call consumption separated from production and savings. So working through Roboth's text with uh critical scholars that I was learning from, I also saw for the first time that we have no reason to think um a baseline inflation of say one or two or 3% is really what it claims to be. Right? I had never considered this thought like oh we're doing fine 2%. Why should we expect the overall price level to be stable or rising? Um that problem had never occurred to me and it seemed to me much deeper than I had considered in the past. uh and so like little by little the various problems with the planned uh with planned money supply became more clear to me. So if Galani had opened my eyes to the nature of money, Rogoff then led me to wonder about sound money. Um so I began I began then to read a classic text that my education had neglected. Um, okay. Manger on money then led me to the whole of Manger's principles and at last I had in front of me the best explanation of the centrality of demand in economic value. Little by little this kind of re-education transformed my teaching. Right? So at some along the way I'm teaching and at somewhere in the process I realized I just had to throw away the standard textbooks. They weren't working. How could I teach economics without subjective value, property, money and exchange? And it's amazing when I tell people that those good treatments of those topics are not in a standard textbook. Most people kind of say, well, what is in the standard textbook? Like, well, not that. Okay. So, um, so I stopped teaching the standard textbooks. I began teaching price formation through one buyer and one seller and not through competitive uh, perfectly competitive markets. Uh, so little by little, I was sort of reading more and learning more. And while I was laboring to pass on to my students a better education than the one I had received, I was also laboring to make sense of a pile of qualitative data about childbearing, I had promised my publisher uh that I would offer insights about low birth rates by studying high ones. And there was a reason for that, which you don't need to hear. And I wasn't entirely certain what I was going to deliver. But there it was all along sort of look for the the sto the the demand story. Look for the story of purpose of human action. uh you can't explain a negative unless you first explain the positive. So now we're going to it's a little philosophical. What are the needs or the wants that children are fulfilling? So I realize that's the way I have to encounter this data. Um the reasons why people do a thing are more fundamental than the reasons why they do not do a thing. And this principle applies to goods and services as much as to children. Right? So think about incentives. What I had come to see is that money is property, not a stand-in for property, but property itself with a nature and a tilos or a purpose by nature. Inflation is possible only when new money enters the system in a way that violates that to that sort of purpose. Severed from the production of real goods through the market process. Of course, the scholastics uh learned this from new the new world. All these ships bringing gold and silver did not bring new wealth. actually just a decrease in the purchasing power of money and fiat money regimes make this kind of severance uh permanent and structural. So I wondered then as not a student of money, as a student of fertility, uh whether the inflationary phenomenon I had observed in the realm of sexual exchange had something of the same type of character, an adding of new exchanges without respecting this productive purpose. A process then I I would say if I just to to uh to put it in common, a process that severs the medium of exchange from the production. So there was rem there years ago I came across this remarkable essay by G GK Chesterton who you know love him and hate him sometimes depending on which part of him I'm reading. Um so maybe we maybe I could help uh figure out part of what's wrong with it. But he's got this great essay called sex and property actually where he grasps at this connection. There's sort of a medium of exchange commonality but he doesn't really know. So he contrasts an old in this essay he contrasts an old paganism which had gods of what? Gods of fertility and bounty and abundance with a new paganism he describes as exalting the desire that gets you to fertility behavior but doesn't exalt the fertility. Doesn't say like well yeah what you should really want to have is 15 children. So he uh he quotes Swinburn um in that text, mourning for an old paganism, a world uh and contrasting it with a world that rears not the bountiful token and spreads not the fatherly feast. He so Chesterton says, "Well, the new priests of the new paganism abolish the fatherhood and keep the feast." And then he goes on to say that the same perversion governs um contemporary use of property. You know, he's a distributivist, whatever that means. Uh he's he's sure something he's sure something is wrong with property, but he I just think he needed a little help. Uh narrowing of ownership to mere enjoyment or rights rather uh sort of severed from creative participation responsibility. He's grasping at this thing. It's not a it's not a it's not a um fully formed argument, but it's interesting. But in that essay, I came across this word token bears not the bountiful token. And that struck me. And so then I learned that the Greek word tokos, you probably all know this, the Greek word tokos means to bear. And it was widely used to mean both um offspring or children um and also interest on money. So this one word meant both things and it was widely used for both things. I thought like wow that's really interesting. Why? So the connection that Chesterton was reaching for was sort of already there in the old language. And so as I was working through this, these two threads both sort of on the one side money and on the other side babies became very difficult for me to keep apart in my head. So I kept wondering like how similar are these things? Um so what comes next is just an experiment. I'm just going to try to sketch this analogy plainly and put on the table. We can just look at it and see what good it is. So the the analogy that is captured in my one sentence title is that me money is a medium of exchange of property ordered to the uh increase of real goods and services and that sexual intercourse uh within the household is an exchange ordered to the increase of the human family. So both are media of exchange. It will take me a separate chapter to explain what exactly is being exchanged but both are ordered to increase. uh both have a natural kind of purpose um a purpose written into their nature that precedes human legislation and that both of them can be sort of effectively technologically or otherwise uh severed from that uh productive purpose. So the hypothesis of this lecture then is that this is not a loose metaphor that the connection connection is perhaps structural and maybe older than modern economics. We know that the Greek boy refers to the household. It's the root of economics. Aristotle's politics of course opens with the state not with the state but with the household as the fundamental unit of human cooperation. So the household is where money and sex meet. It's the site of both economic production and biological reproduction. Economics then at its root is the law of the household. So to do economics rightly is to understand the ordering of that place where earning and be getting exchange and increase are bound together. The ancient Greek connected money and fertility organically. Aristotle you know called money barren a tokos uh the negation of tokos. So the ancients seem to have understood that money was merely a medium of exchange of property. And they intuited that it was not the money itself the objective and seen thing that creates increase. And so far they were right. Money by itself is not the value. It's not the fruit of the exchange. Their understanding was built around sort of one part of the truth about money and maybe not the whole story. What the ancients missed is that money facilitates the increase of real value, a value that is of course subjective and unseen. They located then the problem in interest itself rather than in the separation of money from the market process. So um I'm going to do damage to the scholastic tradition because I'm going to try to do it in like three sentences which is like a big problem. But the scholastic tradition that followed u probably many of you know is a lot more sophisticated than modern tend to give it credit for the shallow version that sort of like the medievals thought all interest was sinful is probably wrong. The distinction uh sorry the tradition did draw a careful distinction rooted in the nature of the transaction. So money lent for a man's substance, bread or shelter is just consumed. It doesn't generate anything. So to ask for return where the money bore no fruit uh is, as Aquinus argued, to sell what doesn't exist. But money lent for a venture, a trading expedition, a risky enterprise, uh might bear productive increase, right? And the lender who risked his capital has a just claim to a share of it. And so the scholastics even got around to naming the lender's costs um the loss incurred by parting with his money dumm emergence and the profit forgone by lending rather than investing um lucress. So they were building a theory of risk and return um and distinguishing between money ordered to increase or used for increase and money uh severed from increase or just consumed. And this is sort of loosely the argument about fiat money. What the Scholastics obviously lacked was a complete theory of economic value. The distinction between value and exchange and value and use. They could not yet see that money is ordered to increase an actual property. Uh that its purpose or tilos is to facilitate real increase through voluntary exchange. That insight seems to have had to wait for the modern tradition for Smith um who magisterily teaches us that natural the system of natural liberty, sound money and commerce are ordered to the growth of the wealth of nations and then later to Manger who helped understand the under helped advance the understanding of price formation economic valuation. But now put these two threads together. So this is the claim or the hypothesis that there's some kind of unifying truth about money and sexual congress that undergards the traditional oos. So then economics rightly understood as the ordering of the household that includes both sound money and fruitful sexual exchange. Both are ordered to fruitfulness. They're meant for fruitfulness to tokos to this bearing or increase. And if you break them from their uh from their purpose you may damage their structure or their uh their role. So the two uh severances have a similar diagnostic character and I'll take this a little bit more slowly in a minute. Uh contraceptive technology did not create the low demand for children. It revealed it in the way that draining a lake reveals what's on the bottom. In the same way fiat money did not create the preference for consumption over savings, but it revealed and amplified it. So the hypothesis here sharpens the diagnosis about collapsing demand for children. When I said that there are at least three blows to the demand for children, reasons why people don't need or want children anymore. Um the first two are straightforward substitutions. Uh technology and then policy or the welfare state replace what children used to provide. The third blow however uh modern contraception is categorically different. It doesn't replace what children provide. It unbundles this decision revealing what the demand for children actually is once you strip away the bundled good. So sterile money and fiat sex are both sort of technologies of severance. And what they unmask in both cases is a preference for the immediate over the long term. The fruit without the bearing. So what happens when you break both at once? All right. So now I'm just going to do a quick review of the evidence. All right. The hypothesis predicts that severing money and sex from their productive tilos damages the household. Uh so history shows us that this severance happened not all at once but in served two consecutive stages. We'll just call it the great severance altogether. Stage one, the demographic record. The total fertility rate in the United States fell from about seven children in 1800 to about three and a half children by 1900. That's a having over the course of a century. And this decline um predates every modern policy intervention besides public pensions. It predates uh the modern welfare state. It predates women's suffrage. It coincides, however, with the mass production of the rubber condom. Um following Goodyear's discovery of um vulcanization in 1839. By the 1870s, rubber condoms were commercially available and increasingly affordable. People debate about whether it was the 1860s or the 1870s, uh when the working class was was diffusing these. Um, I'm going with the 1870s, but there's there's some debate. The technology was imperfect. This was not total severance, but it represented a first breach. Um, sex could now be partially separated from procreation at scale. So, to be sure, students of fertility in the room, uh, contraceptors are not the only change. Industrialization diminished the need for child labor. Declining infant mortality reduced the number of births needed to reach a desired family size. But the rubber condom is an often neglected part of the story. The demographic consequences were visible within a single generation. So by 1901, um, then Vice President Roosevelt identified the declining birth rate as the gravest problem facing the nation. I'm I'm not a big fan of this kind of catastrophic language either then or now, but I'm I'm reviewing this so that you sort of see that this was considered already in 1901 a big problem. Um so Roosevelt said is the gravest problem facing the nation among uh all the problems before us he said important though they may be are these are as nothing compared with the problem of the diminishing birth rate and all that it implies the alarm was you probably know this serious enough to acquire a name race suicide bound up obviously with shameful eugenic fads um and to generate then sustained public debate in the first decade of the 20th century by 1906 Roosevelt was delivering this warning from the floor of the Congress willful sterility he called it uh from the standpoint of the nation from the standpoint of the human race is a sin for which the penalty is national death race death a sin for which there's no atonement I mean this is like you terribly catastrophic stuff but it was uh people people cared a lot about this all right and then what happens next the latex condom comes around and this is available commercially by the early to mid 1930s and this marked a really great acceleration so latex was thinner stronger and had a shelf life of 5 years compared to 3 months. I had no idea about this. So, rubber condoms if you put them on the shelf like they weren't good after 3 months. I don't know how many like I don't know how many errors had to take place for people to figure this out. But anyway, um latex condoms lasted for 5 years on the shelves. Um so this is true. Um Young's Rubber Company was the manufacturer of the Trojan brand uh which dominated the American market uh by the mid1 1930s. Uh so contraceptive technology was becoming cheaper, more reliable and more widely distributed and fertility continued to fall. By the 1930s uh the total fertility rate in the United States hovered near replacement level. Um so notice again this kind of trend. The technology is not creating the demand shift but it's making new preferences actionable at progressively lower cost. Um so these are kind of habit like habits are being laid. uh few people accept the lo like the the theoretical logic of total separation like you just get married and not have kids like people didn't think that was a a good way to live widely but everybody was kind of beginning to live that way in the kind of practice which was very interesting um as early as 1908 there's a Cornell demographer at Cornell and he in 1908 he says uh his name is Walter Wilcox he says um one may observe uh that births have come under the control of human will and choice in a sense and to a degree never before true. And he projected um that if we follow current trends, there will be no children left within a century and a half. So I mean we're we're not exactly there. We are a century and a half about after Willox. Um but that that was what people were worried about. Okay. On the money side, you all know this, so I'm not going to spend a lot of time on this, but just thinking about the the pieces of severance that take place in that same era. This is kind of the stage one. The national banking acts of the 1860s. The plan for the central bank in 1910 at Jackal Island. Uh the consolidation of monetary authority. The um uh the Federal Reserve Act of 1913, the credit expansion of the 1920s um enabled by this new institutional apparatus which contributed to the speculative boom and subsequent collapse that produced the Great Depression. The classical gold standard already strained by the cost of the first world war did not survive the inter war period and of course 1944 Bretonwoods um establishes a new monetary order. Uh there's one degree of separation at this point from from commodity money which is not yet fiat but it's of course convertible for nobody except a few people few special people. Um so the parallel is kind of structural. In both of these domains, sex and money, uh there's a century of kind of incremental severance. Um laying foundations for a decisive break. And I like to say that the habits changed before the ideas did. Um no one is saying we we could just have to like we could have just money that's not backed at all, but like increasingly people are just behaving as if money is not backed, right? Um so the second stage looks um the second stage looks swift, total and nearly simultaneous. On the sex side, the oral contraceptive pill is approved in 1960. For the first time in human history, a technology existed that completely severed sexual congress from procreation completely. And importantly for the demog the the demographers who study this, it removed the choice about uh likely children from the heat of the moment. which is like different from condoms in that sense like so terms of human action very very different um the legal architecture then followed within a decade you have Griswald v Connecticut establishing a constitutional right to contraception for married couples v bar in 72 extending it to unmarried individuals and then row versus weight in in 1973 these decisions struck down certain state bans and regulations like why are they worth mentioning it's not just the technology because in some states the technologies were not supposed to be sold even if they were being sold. So you have this um legal regime um between you know 1965 and 1973 uh which you move where you move from state level toleration uh to a nationally protected right to the full apparatus of reproductive severance. The demographer Ron Maga um has described this inversion really well in terms of the decision-making of the household. And when I read this I thought that's really interesting. Um he said during the first era of fertility decline this the stage I mentioned before loosely from the 1860s to the 1960s the issue for married couples was to adopt contra when to start using contraception to stop the pregnancies. you got married, you had a couple kids, and they was like, "When when are we done?" That was the basic decision. But with the pill, because the nature of it was so different, um the basic decision became uh you got married, you were definitely contracepting, when do you stop contracepting and start having the first child? And from the perspective of the kind of costbenefit analysis, and if you think about the short-term long-term um implications, this becomes sort of devastating. like the the right time to start your family keeps keeps rising, right? Okay. So, um the demographic response to this bundle of things from 1960 to 1973 was really immediate. The total fertility fell from a post-war high of 3.65 to uh 1.74 in 1976. So, how many people here knew that we were way below replacement already in the middle of the 1970s? um it has never recovered since the mid1 1970s. Uh if you want to set aside the baby boom, you probably should, we all should set aside the baby boom as a reference point. The post 1960 decline fell well below the pre-war trend line. Um and so as of, you know, the latest data, we are now at about 1.59. Some will point to the modest rise in the total fertility rate in the 80s and the 90s as kind of like evidence that we weren't really settled at below replacement fertility. But, you know, that was an immigration um phenomenon. On the money side, of course, the decisive break comes in 1971, the Nixon shock. Um Bretton Wood system is finally finally finished. And for the first time in modern history, the world's reserve currency is backed then by nothing but the issuing government's promise of pure fiat and what I'm going to call sterile money. So these two breaks were total they occurred within 11 years of each other and each of them saw federal level decisions imposed on all on all states. Um each of them offered in a sense a kind of liberation from a like a natural constraint liberation from biological constraints. The constraints um the constraints imposed by monetary policy and fiscal expenditures um escape but sort of loosened from the discipline of gold. So it was kind of unthinkable or at least not justified in idea terms in stage one became routine and fairly foundational in stage two. Um we can review these two compounding debts and then I will turn to a little bit of the um the theory before I finish up um spend too much time here. So the demographic debt which we now experience uh quite quite severely. So this below replacement fertility across the developed world and of course you can see like country by country. I'm not reviewing that now. Um you do see that the diffusion of modern contraceptives is kind of like the the and the convergence to below replacement fertility is stunning right it took Mexico 50 years to do what it took the United States 200 years to do birth rate wise. Um so that's there's there's no place anywhere that has above replacement fertility at this point. Um okay so structural insolveny of course of every pay as you go entitlement program social security medic pensions all of these cannot be sustained uh without continued population growth. The monetary debt of course the national debt stood at about 48 billion in 1971 but as of today it stands at about 39 trillion a 95fold increase in 50 years. the um I love I love trying to figure out if you can count the money supply. She like kind of problems with this. I have a friend who since graduate schools worked at the at the Fed. Um and like this is like after co I said I said like what like do you guys even like you know what have you looked at the charts? I mean it's really bad. And he just looked at me like money supply like we we're not even interested in the money supply. Of course I was like well that's astonishing. He said well you know just it's just you know perturbations. It's it's it's stability. It's not the quantity of money. And I I guess at this point I understood what was going on, but I was stunned. Uh in any case, um the M2 money supply, if you're trying to count, has expanded from 36, sorry, 635 billion to 22 trillion over the same period of time, a 35-fold increase, which would I suppose be fine if like growth kind of moved at the same pace. But um debt of course has grown nearly three times as fast as the money supply which itself is growing far faster than real output. And these two debts reinforce each other. Um this deserves an entire manuscript and I would definitely point you to Jeff Daggner's um dissertation as a starting point. The way in which governments use fiat money to paper over demographic decline problems funding pensions and entitlements through borrowing rather than through the tax base of a growing population. and fiat money raises the cost of household formation as Joe mentioned this morning. Um, further depressing fertility, which is a point forever ignored by the big spending family policy crowd. Um, the headline GDP figures of course obscure the severity of deterioration. Average real GDP growth has fallen from about 4% or four and a half% in the 60s uh to under 2% in the 2000s. And even these figures overstate the productive capacity of the economy because they do not account for the debt required to generate them. Um Lacy Hunt has documented this uh beautifully. The declining marginal productivity of debt um in the U in the US were somewhere around 40 cents for each dollar of uh public and private debt generating about 40 cents of growth and falling in Japan which is further along the same road. Each dollar of debt generates about 27 cents of growth. And of course the debt to GDP ratio tells the story from the other direction. It fell from um 106% in 1946. You you show your students the the the graph. You go like what was that was a war. What was that? Was a war. And you go okay well what was what is this? Well it's not a war at all. What is what are we living through now? And of course like to say well now we're back at 120% from a trough of 23% in the early 1970s at the time of the severance. Um now we're at 120%ish and we're not in a war. I was going to say we're not in a war, but now I think I have to say we're in a war. So, so anyway, but the inflection point coincides precisely with the great severance. Um, the parallel on the sex side is equally striking. Um, I refer you here to UT Austin sociologist Mark McGner's uh kind of bracing Oxford Press monograph called Cheap Sex. The book is called Cheap Sex. And this is the the observation that sexual access has become more widely available at lower costs than at any point in human history. And so the data do confirm an expansion of sexual exchange lifetime average sexual partners rising from you know below five uh to approximately 11 in the in the 2010s. Uh and that's yeah that's the average the age of first intercourse declining steadily throughout the 20th century settling around 17 for cohorts born in the 1960s. Uh more exchange more volume and more access but the productive output which is children uh certainly collapsed. Um but there is no free lunch. This is the first lesson in any sound economics course and it is Hasllett's lesson restated. Negative interest rates ex attempt to extract growth from a stagnation produced by the very debts that cause uh caused by fiat money. Pronatalist subsidies I'm forever arguing against them financed by debt attempt to extract more births from a demand collapse produced by a technological shock that made children unnecessary. In both cases, the proposed big state interventions just deepen the distortion that they claim to cure. The promise of the great severance overall was more um more money without production, more consumption without saving, more present without future. But the bill comes due. You don't get more, you get less because you you paid for less. And that sort of is the end of growth in one lesson. Um so I just before finishing I want to bring you some uh some remarks from Shimper who uh seems to have seen a lot of things uh that we did not all see um ahead of time. So in in in 1942 in uh capitalism socialism and democracy there's this funny like not not frequently cited chapter called decomposition if you remember it. Um and the book is about of course whether capitalism will survive and the chapter is this chapter is not really about capitalism per se but it's what he calls external factors that will put create a pressure on capitalism and what happens to an economic civilization when the family dissolves. So Schubeter offers one of the most penetrating analyses of the great severance um 80 years before our vantage point. He begins with a bold claim. He says the family and the family home he writes used to be the mainspring of the typically bourgeoa kind of profit motive. Economists have not always given this due weight. He says he means that the self-interest we attribute to entrepreneurs and to capitalists the engine of growth in every classical and neocclassical model was never the self-interest of a detached individual. It was the self-interest of a man looking at the world, in his words, through the windows of a family home who means to work and save primarily for wife and children. Remove the wife and children and you just won't get the same economics. He argues you get, shudder says, a different kind of homoeconomicus who cares for different things and acts in different ways. The old type, the builder, the saver, the founder of dynasties, worked for a future he would not see. Um, the new type finds all of that completely irrational. This is Shimper's language. He has no reason to say beyond his own life expectation, and he drifts into an anti-saving state of mind. Shimper adds uh and this new man uh embraces with increasing readiness anti-saving theories that are indicative of a shortrun philosophy. Schimpeder describes how the economic man's time horizon shrinks to the length of his own life. He consumes rather than invests. accepts debt rather than equity uh rather than building equity. It's a theory of time preference uh applied to the family and it predicts exactly what the data show. Falling savings rates, rising debt, declining marginal productivity and a GDP growth rate uh falling for 60 years. On Schun betterer's account, capitalism itself produces these technologies of severance. Um, capitalist inventiveness, he said, produces contraceptive devices of increasing ingenuity and efficiency. Um, that overcome the resistance which the strongest impulse of man would otherwise have put up. At the same time, he says capitalist evolution decreases the desiraability of and provides alternative alternatives to the burgeois family home. So, the logic of the market, which you know, Shimper is not really against um gets imported into this most intimate decision a couple can face. And once it does, he says the balance the balance sheet of parenthood appears to come out negative because the heavy personal sacrifices that family ties um and especially parenthood entail are immediate and visible. Uh whereas the greatest rewards are not. So Shupeter's verdict was that the balance sheet is likely to be incomplete because um and perhaps even fundamentally wrong because the greatest asset the contribution of parenthood to what he call he calls normality to physical and moral health to our well-being um almost invariably escapes the rational search light of modern individuals. Um, all right. Um, I see uh I'm going to see see the I see that just about out of time. >> Okay. Okay. No, I'm close. Um, so I wanted then to turn to uh the money side and I wanted to quote um Hoseman who is not with us I I think but who I just had the pleasure of seeing in in Brussels. Um in the ethics of money production he diagnoses the same decomposition from the direction of monetary inflation. Fiat inflation, he says, is a powerhouse of social, economic, cultural, and spiritual destruction. In classical theory, interest rates coordinate time preferences across society, balancing present consumption against future uncertainty. But under fiat money, interest rates become these policy signals instead of prices. Coordination breaks down. And the parallel with contraception uh is precise. Just as the severance of sex from fertility does not create high time time preference so much as reveals it, removing um these natural consequences that used to override it. Fiat money does the same uh the same thing. Um of course, strictly speaking, the mechanism is central bank planned money supply, but fiat money uh makes this possible. When rates are held below their natural level, those with high time preference, Shimper's new man without wife and children can borrow cheaply and consume today. Um, Holman says, 'The young learn to live in the present and scorn those who try to teach them old-fashioned morality and thrift and the terminal diagnosis. He says, perennial inflation slowly but assuredly destroys the family. Taken together, the dissolution of the family destroys the motive to save and invest. Inflation of the currency via artificially low interest rates destroys the means. The great severance is not one cause in one domain, but two causes reinforcing themselves in the same household. the oos where money and sex were always joined in the OG micro foundations. The two causes seem to follow the same logic. The loosing of a bond of nature designed apparently like Odysius at his mast to save us from the lower part of our nature pref preferring cheap pleasures to the fineries of wife home and field. Hasllett defined morality as the subordination of immediate objectives to long-term ones. That is, I think, time preference stated as an ethical principle and it's exactly what both of these severances seem to attack. Um, fiat money rewards the borrower over the saver, the short-term over the long term, and uh, fiat sex rewards the consumer over the bearer of children, immediate over the generative. So Christopher Dawson the great English historian and humanist uh saw something like Hasllett. He said human culture is not instinctive. It has to be conquered by continuous moral effort which revolves the repression of natural instinct and the subordination and sacrifice of individual impulse to social purpose. Dawson argued um that the that the family becomes the dynamic principle of society and the source of social continuity precisely because it demands chastity, discipline, sacrifice and responsibility. Um and so if you remove the family in that sense you remove not just a social unit but the school where civilization is transmitted. In 1933, Dawson said, "Marriage is likely to marriage is likely, so this is 33, likely to lose all attractions for the young and the pleasure-loving and for the poor and the ambitious. The energy of youth will be devoted to contraceptive love, and only when men and women have become prosperous and middle-aged will they think seriously of settling down to rear a strictly limited family." Um, so that is not really a description of 1933, but it is a clinical summary of 2026. Okay, so just to uh just a couple of sentences to conclude. By now you have a fairly clear picture of what this lecture was about or has been about. But let me conclude by saying what is not about. Bless you. This uh this lecture is uh not about whether people should or shouldn't use birth control. Family size is a private matter and how couples achieve their preferred family size is none of my business or anyone else's. I'm asked this question often, especially in Catholic circles, and my answer is always the same. Rolling back the clock on contraceptives is not likely possible and probably not desirable. Um, besides, devices may soon be irrelevant to this story. Uh, because technology continues and always continues, right? We now know enough about female fertility that thoughtful men and women can plan sexual activity to avoid pregnancy without devices. Biotech wearables make it easier still. who has a ring. These rings track fertility. It's not likely that devices or not devices will go back to a time in which people would just have children in ignorance. And that's not something I would advocate for. Um, equally, these remarks are not offered as a simplistic call to return to a gold standard and free banking as if any such thing were at least easily possible. The monetary question like the demographic one will not likely be solved by turning back the clock. Um I say and I say this uh not without a very strong wish to see the enormous benefits of modernity amplified by the virtues of sound money for the goodness of humanity. Uh no the matter of this lecture is rather to inquire more deeply into the nature of things to trace connections and patterns which might have escaped our attention on the family side. Uh which is really all the business I have as a economist. Um I have consistently argued that the most powerful remedy available to us uh for this like low low growth of families is protecting the channels by which people receive information so sound information about the value of children and what Schumpeter called normality the rewards of family life that tend to escape the rational search light. Pronatalist subsidies do not do meaningful work and we can't afford them anyway. Um but narrative and testimony do work. On the money side, I suspect the paths to recovery similarly do not lie in the government framework. States and nations are not likely to give up monetary prerogatives easily. And so I'm just sort of waiting around for good people to continue to pursue private money challenges uh to the hegemony of public money. Just to conclude, I thought these reflections might suggest that the scripture passage, the love of money is the root of all evil, might not be the anti- capitalist slogan that people take it to be. It seems to me a warning against this kind of severance, against loving the medium while despising the fruit. The love of money as money detached from production is sterile. The love of sex as sex detached from bearing is a um also sterile. So Tokos names the fruit and the labor. It's hard to love the medium and refuse what it bears. So I think that the path to growth lies through a new science of bearing not pronatalism not uh pro markets but protocos. Thank you.
Sterile Money, Fiat Sex: The End of Growth, in One Lesson | Catherine Pakaluk
Summary
Transcript
Thank you again. Um it is uh just a delight to be with you and to have the opportunity to deliver the Henry Hlett memorial lecture. Like many of you, I presume I cut my teeth on economics in one lesson. Hllett's broader work shaped my thinking through the great economic debates of the 20th century. Uh you know, he was watching them as they were unfolding and writing about them. So it was like just a tremendous uh grace to read those things. But I think for me it's it's Hasllet as a stylist whose legacy most inspires. Um I think of economics as a philosophy with consequences. It matters very much whether you form a sound conception of property, exchange, money and profit. Uh so you know in contrast with the political theorists with whom I constantly have beefs and the philosophers uh to whom I'm I'm married to one of them uh economists really need to get it right. They need to communicate what's right about things. So no one did this better than than Hasllett. Uh all right well it will be plain from my title. In fact once my title is spoken I probably don't need to continue. I think that that's the sort of the whole that is the whole lesson right there. Uh, but it will be plain from my title that I aim to put before you a provocative analogy. It's a little early in the morning for a provocative analogy, but maybe maybe you um have been up longer than I have. Um, this is new work for me and it's, you know, sort of developing, but it's been uh birthed by ideas that emerged after the publication of my book uh just two years ago. So, right or wrong, I think what you're about to see or or listen to will be hard to unsee. Um, and maybe you can help me uh refine it over time. Before I arrived at this title, uh, sterile money and fiat sex, I considered another one uh, called the curious case of demand for children. In my book, uh, Hannah's children, I argued that the fertility crisis is, um, really a demand story. It's not a supply story, which is the one you hear about most of the time. Um, I argued that the richest, most reproductively enabled people in human history were probably not failing to reproduce because having children was just too expensive. Demand for children, it seemed to me, had collapsed. And the evidence is is plain. This is not the time to make that argument in full. But births tend to rise with falling incomes. Fiscal nudges don't work. Birth rates are collapsing everywhere where people are wealthy and where people are poor. Generous welfare states don't seem to make a difference. Um, and the decisive shift to below replacement fertility coincided not with a big cost shock, and we could debate that a little bit. There's a a flavor of cost shock there, but really with the atomic advance in contraceptive technology in 1960. So, I strained as I was trying to explain. I mean, I I covered this in about three pages in my book, so that wasn't what I was showing up to say, but as I went around speaking, I realized people didn't understand what it meant to describe a demand demand story. Um, this is the problem we have trying to teach economics. it turns out to be a lot harder. I think you got the point. But so I was struggling to find ways to explain to the general public what it means to say that demand for children has collapsed. And finally after about a year I hit on the horse analogy uh or the automobile analogy. So the Model T was introduced in 1908 um and it's tremendously popular. Uh the diffusion of Model T's around the country, it's it's actually stunning. I thought it would be a good analogy and I went back and looked and I realized it's just a tremendous analogy. Um but the casualty of course after the model T was introduced was the horse. So uh the so the model T was introduced in 1908 the population of horses peaked in the United States. When 1910 it is it's it's stunning right it's absolutely stunning. So by 1917 so just less than 10 years there were no horses left in New York City. That's a stunning collapse in demand for horses right? Uh so today the only people who have horses are those people who really love them and are willing to pay the price. The what I call the horse enthusiasts like horse love. Maybe some of you are horse enthusiasts. I'm not. Um for everyone else a horse is just a liability. Um and this is sort of what's happened with children. So I I like to say three successive blows uh eroded demand for children. Um the first is just you know tremendous economic growth which reduced the need for household labor. The second is a kind of slate of welfare state policies especially public pensions which reduce the need for old age support. And the third are the contraceptive technologies which occurred in sort of three waves. I'll review those in a little bit. In the 1860s or 1870s, the 1930s and then the 1960s and these reduced the need for children in order to couple up. So coupling up seems just as desirable as ever. Um but childladen coupling not as much. Obviously, effective contraceptives allow people to choose a desired amount of sexual congress separately from a desired amount of children. So, there are two goods entering the choice basket where by nature there used to be just one. Before modern contraceptives, if you wanted sexual congress, you had to accept at least a few kids. What we've observed is as this unbundling took place, uh in terms of the demand, sexual congress wins. There's a lot more of it uh than before the contraceptive revolution. More partners, earlier initi earlier initiation, and more Congress in relationships that might previously have limited it because it was costly. And as I was studying these things, uh there it was in plain sight. I thought by the end of the 20th century, uh sex had become pretty cheap, nearly free. Uh but the fruits of it had collapsed. The total fertility rate was roughly hald. The analogy wasn't perfect, I suppose, but it sure looked like an inflationary phenomenon. So, think of what comes next as a kind of love letter from someone who didn't didn't study money seriously to to people who do. So, that's that's what you're going to get. Um, okay. So, I didn't used to be interested in money. Um, I remember in college when I switched to economics, my grandmother asked me what stocks to pick and I And I remember scoffing at her, hey, hey, you know, you know, economics isn't about money, right? Or stocks. It's about human behavior. I was really well I was I was totally in it. And I said, and of course, I mean, I was receiving a fairly mainstream education. Money isn't even in the models, right? So money just drops out, right? It's the numerator. Just cancel it out. And I thought, well, you know, proudly like the real action is human agency. So I was really, I thought, you know, economics was going to town. And I couldn't believe she wanted to know about money. Eventually, I went to graduate school ostensibly to study growth. I was convinced at this point that market mechanisms and strong institutions were the path to lifting families out of poverty. I was certainly skeptical at this point already of what we have been what would have been called economist misadventures in economic development, but I uh certainly had read um sorry, I had not yet at this ter at this point heard the term market process. So uh and I had no exposure to Austrian economics. Uh I had read Julian Simon and so in my own term I would say I knew from Julian Simon that there was like a population process. So that's my term. He doesn't say this but of course the basic idea is that more people looks like scarcity and a problem but prices rise, innovation responds and ultimately we we get greater abundance just like a population process. And this seemed almost obviously correct to me. uh and I wondered why it was so difficult for people to understand that and of course this is like the 1990s and people are still worried about famine and exploding population uh broadly. So uh I wanted to know what the connection was between economic growth and population growth. So went to graduate school and ultimately um found a little refu refuge in at that time applied micro after learning there was no field where I could read Hayek. I' I'd read a little bit of you know what I thought of as like great economics. Um I didn't know it was called Austrian but I remember asking around like what like which field is doing Hayek? They just looked at me like who's Hayek? So I thought like well all right if I want to study basic things I guess I could do micro. I spent a little bit of time in in macro classes and I thought that was a nightmare. Um so now now I know why. All right. Anyway, I had questions and money wasn't part of this. Um but actually almost almost two decades later a friend she finished gradu graduate school started teaching a friend of mine invited me to a symposium on sound money and trade and the work of Ferdinand Galani um the great uh Neapolitan pro prodigy who wrote at the age of 21 the treatis on money delamoneta um basically I thought this would be very boring so this was 10 years ago in the summer of 2016 and this symposium was held at Jackal Island yes that Jackal island where the plan for the creation of the the the central bank was hatched. So I agreed to go because my friend asked me and I thought like well I'm an economist after all. I should know something about money. This will probably be terrible. U but I was obviously mistaken. So I leaped through Dela Boneta and I thought, "Oh my gosh, this is amazing stuff. I've never thought about the nature of money. What even is it? What is its purpose? What kind of a thing is it? Where does it come from?" And I began to see that money is not some sort of accident of exchange. is a specific kind of thing that could be defined. It could be based or debased. It does real work. And here it seemed to me in Galani's text was an on-ramp to understanding the non-neutrality of money without giving up on the free market convictions uh that I believed were were true and correct. And as you know, most mainstream economics programs unwittingly or not advance a conception of monetary neutrality. So this encounter with Kalani wetted my appetite. How had I missed this? I thought like what was I doing like all those years in in school? What was I to make of a standard PhD education that didn't think money was serious enough to teach seriously? I had certainly not become an expert like one symposium, but I had certainly become wiser to the defects of my own education. So the next time I had an opportunity to attend a conference on money, I didn't hesitate. So, Galani had taken me back to the beginningish treatments of money. And the next one was on Ken Rogoff's curse of cash. So, more modern treatment. Um, if you don't know, don't remember this fine text. Uh, Rogoff argues for the phasing out of paper currency. Large denomination bills first and then smaller denominations over time. You know, the normal arguments. I mean, right, cash is bad. People evade taxes with cash. their criminals use cash. Um, anonymous people use cash and all those things are bad. So, we should, you know, eliminate large denomination bills. I mean, this was sort of the beginning of the argument. And then the real agenda emerged, which was negative interest rates. Um, and then I was like, I was sitting up. I was like, oh, oh, okay. Um, because the rest of that seemed kind of bizarre to me, but then I saw what was going on. If you eliminate hard cash and you then then you eliminate the last hedge against negative interest rates. So this kind of old idea that money is coined liberty. So I started to see okay all right so this cash thing is there's a there's a freedom problem here. Um and I had not yet at this point still had not yet encountered the Austrian theory of the business cycle but even I could see this paradox. I'm just this you know new person study like thinking about these things. I thought this is crazy stuff. So the idea that negative interest rate stimulus uh would be a kind of lastditch measure to get out of a stagnation itself uh caused by the overreach of um of government planning likely the symptom of two compounding debts which I'll refer to in a minute the demographic debt and the economic debt so or what we might call consumption separated from production and savings. So working through Roboth's text with uh critical scholars that I was learning from, I also saw for the first time that we have no reason to think um a baseline inflation of say one or two or 3% is really what it claims to be. Right? I had never considered this thought like oh we're doing fine 2%. Why should we expect the overall price level to be stable or rising? Um that problem had never occurred to me and it seemed to me much deeper than I had considered in the past. uh and so like little by little the various problems with the planned uh with planned money supply became more clear to me. So if Galani had opened my eyes to the nature of money, Rogoff then led me to wonder about sound money. Um so I began I began then to read a classic text that my education had neglected. Um, okay. Manger on money then led me to the whole of Manger's principles and at last I had in front of me the best explanation of the centrality of demand in economic value. Little by little this kind of re-education transformed my teaching. Right? So at some along the way I'm teaching and at somewhere in the process I realized I just had to throw away the standard textbooks. They weren't working. How could I teach economics without subjective value, property, money and exchange? And it's amazing when I tell people that those good treatments of those topics are not in a standard textbook. Most people kind of say, well, what is in the standard textbook? Like, well, not that. Okay. So, um, so I stopped teaching the standard textbooks. I began teaching price formation through one buyer and one seller and not through competitive uh, perfectly competitive markets. Uh, so little by little, I was sort of reading more and learning more. And while I was laboring to pass on to my students a better education than the one I had received, I was also laboring to make sense of a pile of qualitative data about childbearing, I had promised my publisher uh that I would offer insights about low birth rates by studying high ones. And there was a reason for that, which you don't need to hear. And I wasn't entirely certain what I was going to deliver. But there it was all along sort of look for the the sto the the demand story. Look for the story of purpose of human action. uh you can't explain a negative unless you first explain the positive. So now we're going to it's a little philosophical. What are the needs or the wants that children are fulfilling? So I realize that's the way I have to encounter this data. Um the reasons why people do a thing are more fundamental than the reasons why they do not do a thing. And this principle applies to goods and services as much as to children. Right? So think about incentives. What I had come to see is that money is property, not a stand-in for property, but property itself with a nature and a tilos or a purpose by nature. Inflation is possible only when new money enters the system in a way that violates that to that sort of purpose. Severed from the production of real goods through the market process. Of course, the scholastics uh learned this from new the new world. All these ships bringing gold and silver did not bring new wealth. actually just a decrease in the purchasing power of money and fiat money regimes make this kind of severance uh permanent and structural. So I wondered then as not a student of money, as a student of fertility, uh whether the inflationary phenomenon I had observed in the realm of sexual exchange had something of the same type of character, an adding of new exchanges without respecting this productive purpose. A process then I I would say if I just to to uh to put it in common, a process that severs the medium of exchange from the production. So there was rem there years ago I came across this remarkable essay by G GK Chesterton who you know love him and hate him sometimes depending on which part of him I'm reading. Um so maybe we maybe I could help uh figure out part of what's wrong with it. But he's got this great essay called sex and property actually where he grasps at this connection. There's sort of a medium of exchange commonality but he doesn't really know. So he contrasts an old in this essay he contrasts an old paganism which had gods of what? Gods of fertility and bounty and abundance with a new paganism he describes as exalting the desire that gets you to fertility behavior but doesn't exalt the fertility. Doesn't say like well yeah what you should really want to have is 15 children. So he uh he quotes Swinburn um in that text, mourning for an old paganism, a world uh and contrasting it with a world that rears not the bountiful token and spreads not the fatherly feast. He so Chesterton says, "Well, the new priests of the new paganism abolish the fatherhood and keep the feast." And then he goes on to say that the same perversion governs um contemporary use of property. You know, he's a distributivist, whatever that means. Uh he's he's sure something he's sure something is wrong with property, but he I just think he needed a little help. Uh narrowing of ownership to mere enjoyment or rights rather uh sort of severed from creative participation responsibility. He's grasping at this thing. It's not a it's not a it's not a um fully formed argument, but it's interesting. But in that essay, I came across this word token bears not the bountiful token. And that struck me. And so then I learned that the Greek word tokos, you probably all know this, the Greek word tokos means to bear. And it was widely used to mean both um offspring or children um and also interest on money. So this one word meant both things and it was widely used for both things. I thought like wow that's really interesting. Why? So the connection that Chesterton was reaching for was sort of already there in the old language. And so as I was working through this, these two threads both sort of on the one side money and on the other side babies became very difficult for me to keep apart in my head. So I kept wondering like how similar are these things? Um so what comes next is just an experiment. I'm just going to try to sketch this analogy plainly and put on the table. We can just look at it and see what good it is. So the the analogy that is captured in my one sentence title is that me money is a medium of exchange of property ordered to the uh increase of real goods and services and that sexual intercourse uh within the household is an exchange ordered to the increase of the human family. So both are media of exchange. It will take me a separate chapter to explain what exactly is being exchanged but both are ordered to increase. uh both have a natural kind of purpose um a purpose written into their nature that precedes human legislation and that both of them can be sort of effectively technologically or otherwise uh severed from that uh productive purpose. So the hypothesis of this lecture then is that this is not a loose metaphor that the connection connection is perhaps structural and maybe older than modern economics. We know that the Greek boy refers to the household. It's the root of economics. Aristotle's politics of course opens with the state not with the state but with the household as the fundamental unit of human cooperation. So the household is where money and sex meet. It's the site of both economic production and biological reproduction. Economics then at its root is the law of the household. So to do economics rightly is to understand the ordering of that place where earning and be getting exchange and increase are bound together. The ancient Greek connected money and fertility organically. Aristotle you know called money barren a tokos uh the negation of tokos. So the ancients seem to have understood that money was merely a medium of exchange of property. And they intuited that it was not the money itself the objective and seen thing that creates increase. And so far they were right. Money by itself is not the value. It's not the fruit of the exchange. Their understanding was built around sort of one part of the truth about money and maybe not the whole story. What the ancients missed is that money facilitates the increase of real value, a value that is of course subjective and unseen. They located then the problem in interest itself rather than in the separation of money from the market process. So um I'm going to do damage to the scholastic tradition because I'm going to try to do it in like three sentences which is like a big problem. But the scholastic tradition that followed u probably many of you know is a lot more sophisticated than modern tend to give it credit for the shallow version that sort of like the medievals thought all interest was sinful is probably wrong. The distinction uh sorry the tradition did draw a careful distinction rooted in the nature of the transaction. So money lent for a man's substance, bread or shelter is just consumed. It doesn't generate anything. So to ask for return where the money bore no fruit uh is, as Aquinus argued, to sell what doesn't exist. But money lent for a venture, a trading expedition, a risky enterprise, uh might bear productive increase, right? And the lender who risked his capital has a just claim to a share of it. And so the scholastics even got around to naming the lender's costs um the loss incurred by parting with his money dumm emergence and the profit forgone by lending rather than investing um lucress. So they were building a theory of risk and return um and distinguishing between money ordered to increase or used for increase and money uh severed from increase or just consumed. And this is sort of loosely the argument about fiat money. What the Scholastics obviously lacked was a complete theory of economic value. The distinction between value and exchange and value and use. They could not yet see that money is ordered to increase an actual property. Uh that its purpose or tilos is to facilitate real increase through voluntary exchange. That insight seems to have had to wait for the modern tradition for Smith um who magisterily teaches us that natural the system of natural liberty, sound money and commerce are ordered to the growth of the wealth of nations and then later to Manger who helped understand the under helped advance the understanding of price formation economic valuation. But now put these two threads together. So this is the claim or the hypothesis that there's some kind of unifying truth about money and sexual congress that undergards the traditional oos. So then economics rightly understood as the ordering of the household that includes both sound money and fruitful sexual exchange. Both are ordered to fruitfulness. They're meant for fruitfulness to tokos to this bearing or increase. And if you break them from their uh from their purpose you may damage their structure or their uh their role. So the two uh severances have a similar diagnostic character and I'll take this a little bit more slowly in a minute. Uh contraceptive technology did not create the low demand for children. It revealed it in the way that draining a lake reveals what's on the bottom. In the same way fiat money did not create the preference for consumption over savings, but it revealed and amplified it. So the hypothesis here sharpens the diagnosis about collapsing demand for children. When I said that there are at least three blows to the demand for children, reasons why people don't need or want children anymore. Um the first two are straightforward substitutions. Uh technology and then policy or the welfare state replace what children used to provide. The third blow however uh modern contraception is categorically different. It doesn't replace what children provide. It unbundles this decision revealing what the demand for children actually is once you strip away the bundled good. So sterile money and fiat sex are both sort of technologies of severance. And what they unmask in both cases is a preference for the immediate over the long term. The fruit without the bearing. So what happens when you break both at once? All right. So now I'm just going to do a quick review of the evidence. All right. The hypothesis predicts that severing money and sex from their productive tilos damages the household. Uh so history shows us that this severance happened not all at once but in served two consecutive stages. We'll just call it the great severance altogether. Stage one, the demographic record. The total fertility rate in the United States fell from about seven children in 1800 to about three and a half children by 1900. That's a having over the course of a century. And this decline um predates every modern policy intervention besides public pensions. It predates uh the modern welfare state. It predates women's suffrage. It coincides, however, with the mass production of the rubber condom. Um following Goodyear's discovery of um vulcanization in 1839. By the 1870s, rubber condoms were commercially available and increasingly affordable. People debate about whether it was the 1860s or the 1870s, uh when the working class was was diffusing these. Um, I'm going with the 1870s, but there's there's some debate. The technology was imperfect. This was not total severance, but it represented a first breach. Um, sex could now be partially separated from procreation at scale. So, to be sure, students of fertility in the room, uh, contraceptors are not the only change. Industrialization diminished the need for child labor. Declining infant mortality reduced the number of births needed to reach a desired family size. But the rubber condom is an often neglected part of the story. The demographic consequences were visible within a single generation. So by 1901, um, then Vice President Roosevelt identified the declining birth rate as the gravest problem facing the nation. I'm I'm not a big fan of this kind of catastrophic language either then or now, but I'm I'm reviewing this so that you sort of see that this was considered already in 1901 a big problem. Um so Roosevelt said is the gravest problem facing the nation among uh all the problems before us he said important though they may be are these are as nothing compared with the problem of the diminishing birth rate and all that it implies the alarm was you probably know this serious enough to acquire a name race suicide bound up obviously with shameful eugenic fads um and to generate then sustained public debate in the first decade of the 20th century by 1906 Roosevelt was delivering this warning from the floor of the Congress willful sterility he called it uh from the standpoint of the nation from the standpoint of the human race is a sin for which the penalty is national death race death a sin for which there's no atonement I mean this is like you terribly catastrophic stuff but it was uh people people cared a lot about this all right and then what happens next the latex condom comes around and this is available commercially by the early to mid 1930s and this marked a really great acceleration so latex was thinner stronger and had a shelf life of 5 years compared to 3 months. I had no idea about this. So, rubber condoms if you put them on the shelf like they weren't good after 3 months. I don't know how many like I don't know how many errors had to take place for people to figure this out. But anyway, um latex condoms lasted for 5 years on the shelves. Um so this is true. Um Young's Rubber Company was the manufacturer of the Trojan brand uh which dominated the American market uh by the mid1 1930s. Uh so contraceptive technology was becoming cheaper, more reliable and more widely distributed and fertility continued to fall. By the 1930s uh the total fertility rate in the United States hovered near replacement level. Um so notice again this kind of trend. The technology is not creating the demand shift but it's making new preferences actionable at progressively lower cost. Um so these are kind of habit like habits are being laid. uh few people accept the lo like the the theoretical logic of total separation like you just get married and not have kids like people didn't think that was a a good way to live widely but everybody was kind of beginning to live that way in the kind of practice which was very interesting um as early as 1908 there's a Cornell demographer at Cornell and he in 1908 he says uh his name is Walter Wilcox he says um one may observe uh that births have come under the control of human will and choice in a sense and to a degree never before true. And he projected um that if we follow current trends, there will be no children left within a century and a half. So I mean we're we're not exactly there. We are a century and a half about after Willox. Um but that that was what people were worried about. Okay. On the money side, you all know this, so I'm not going to spend a lot of time on this, but just thinking about the the pieces of severance that take place in that same era. This is kind of the stage one. The national banking acts of the 1860s. The plan for the central bank in 1910 at Jackal Island. Uh the consolidation of monetary authority. The um uh the Federal Reserve Act of 1913, the credit expansion of the 1920s um enabled by this new institutional apparatus which contributed to the speculative boom and subsequent collapse that produced the Great Depression. The classical gold standard already strained by the cost of the first world war did not survive the inter war period and of course 1944 Bretonwoods um establishes a new monetary order. Uh there's one degree of separation at this point from from commodity money which is not yet fiat but it's of course convertible for nobody except a few people few special people. Um so the parallel is kind of structural. In both of these domains, sex and money, uh there's a century of kind of incremental severance. Um laying foundations for a decisive break. And I like to say that the habits changed before the ideas did. Um no one is saying we we could just have to like we could have just money that's not backed at all, but like increasingly people are just behaving as if money is not backed, right? Um so the second stage looks um the second stage looks swift, total and nearly simultaneous. On the sex side, the oral contraceptive pill is approved in 1960. For the first time in human history, a technology existed that completely severed sexual congress from procreation completely. And importantly for the demog the the demographers who study this, it removed the choice about uh likely children from the heat of the moment. which is like different from condoms in that sense like so terms of human action very very different um the legal architecture then followed within a decade you have Griswald v Connecticut establishing a constitutional right to contraception for married couples v bar in 72 extending it to unmarried individuals and then row versus weight in in 1973 these decisions struck down certain state bans and regulations like why are they worth mentioning it's not just the technology because in some states the technologies were not supposed to be sold even if they were being sold. So you have this um legal regime um between you know 1965 and 1973 uh which you move where you move from state level toleration uh to a nationally protected right to the full apparatus of reproductive severance. The demographer Ron Maga um has described this inversion really well in terms of the decision-making of the household. And when I read this I thought that's really interesting. Um he said during the first era of fertility decline this the stage I mentioned before loosely from the 1860s to the 1960s the issue for married couples was to adopt contra when to start using contraception to stop the pregnancies. you got married, you had a couple kids, and they was like, "When when are we done?" That was the basic decision. But with the pill, because the nature of it was so different, um the basic decision became uh you got married, you were definitely contracepting, when do you stop contracepting and start having the first child? And from the perspective of the kind of costbenefit analysis, and if you think about the short-term long-term um implications, this becomes sort of devastating. like the the right time to start your family keeps keeps rising, right? Okay. So, um the demographic response to this bundle of things from 1960 to 1973 was really immediate. The total fertility fell from a post-war high of 3.65 to uh 1.74 in 1976. So, how many people here knew that we were way below replacement already in the middle of the 1970s? um it has never recovered since the mid1 1970s. Uh if you want to set aside the baby boom, you probably should, we all should set aside the baby boom as a reference point. The post 1960 decline fell well below the pre-war trend line. Um and so as of, you know, the latest data, we are now at about 1.59. Some will point to the modest rise in the total fertility rate in the 80s and the 90s as kind of like evidence that we weren't really settled at below replacement fertility. But, you know, that was an immigration um phenomenon. On the money side, of course, the decisive break comes in 1971, the Nixon shock. Um Bretton Wood system is finally finally finished. And for the first time in modern history, the world's reserve currency is backed then by nothing but the issuing government's promise of pure fiat and what I'm going to call sterile money. So these two breaks were total they occurred within 11 years of each other and each of them saw federal level decisions imposed on all on all states. Um each of them offered in a sense a kind of liberation from a like a natural constraint liberation from biological constraints. The constraints um the constraints imposed by monetary policy and fiscal expenditures um escape but sort of loosened from the discipline of gold. So it was kind of unthinkable or at least not justified in idea terms in stage one became routine and fairly foundational in stage two. Um we can review these two compounding debts and then I will turn to a little bit of the um the theory before I finish up um spend too much time here. So the demographic debt which we now experience uh quite quite severely. So this below replacement fertility across the developed world and of course you can see like country by country. I'm not reviewing that now. Um you do see that the diffusion of modern contraceptives is kind of like the the and the convergence to below replacement fertility is stunning right it took Mexico 50 years to do what it took the United States 200 years to do birth rate wise. Um so that's there's there's no place anywhere that has above replacement fertility at this point. Um okay so structural insolveny of course of every pay as you go entitlement program social security medic pensions all of these cannot be sustained uh without continued population growth. The monetary debt of course the national debt stood at about 48 billion in 1971 but as of today it stands at about 39 trillion a 95fold increase in 50 years. the um I love I love trying to figure out if you can count the money supply. She like kind of problems with this. I have a friend who since graduate schools worked at the at the Fed. Um and like this is like after co I said I said like what like do you guys even like you know what have you looked at the charts? I mean it's really bad. And he just looked at me like money supply like we we're not even interested in the money supply. Of course I was like well that's astonishing. He said well you know just it's just you know perturbations. It's it's it's stability. It's not the quantity of money. And I I guess at this point I understood what was going on, but I was stunned. Uh in any case, um the M2 money supply, if you're trying to count, has expanded from 36, sorry, 635 billion to 22 trillion over the same period of time, a 35-fold increase, which would I suppose be fine if like growth kind of moved at the same pace. But um debt of course has grown nearly three times as fast as the money supply which itself is growing far faster than real output. And these two debts reinforce each other. Um this deserves an entire manuscript and I would definitely point you to Jeff Daggner's um dissertation as a starting point. The way in which governments use fiat money to paper over demographic decline problems funding pensions and entitlements through borrowing rather than through the tax base of a growing population. and fiat money raises the cost of household formation as Joe mentioned this morning. Um, further depressing fertility, which is a point forever ignored by the big spending family policy crowd. Um, the headline GDP figures of course obscure the severity of deterioration. Average real GDP growth has fallen from about 4% or four and a half% in the 60s uh to under 2% in the 2000s. And even these figures overstate the productive capacity of the economy because they do not account for the debt required to generate them. Um Lacy Hunt has documented this uh beautifully. The declining marginal productivity of debt um in the U in the US were somewhere around 40 cents for each dollar of uh public and private debt generating about 40 cents of growth and falling in Japan which is further along the same road. Each dollar of debt generates about 27 cents of growth. And of course the debt to GDP ratio tells the story from the other direction. It fell from um 106% in 1946. You you show your students the the the graph. You go like what was that was a war. What was that? Was a war. And you go okay well what was what is this? Well it's not a war at all. What is what are we living through now? And of course like to say well now we're back at 120% from a trough of 23% in the early 1970s at the time of the severance. Um now we're at 120%ish and we're not in a war. I was going to say we're not in a war, but now I think I have to say we're in a war. So, so anyway, but the inflection point coincides precisely with the great severance. Um, the parallel on the sex side is equally striking. Um, I refer you here to UT Austin sociologist Mark McGner's uh kind of bracing Oxford Press monograph called Cheap Sex. The book is called Cheap Sex. And this is the the observation that sexual access has become more widely available at lower costs than at any point in human history. And so the data do confirm an expansion of sexual exchange lifetime average sexual partners rising from you know below five uh to approximately 11 in the in the 2010s. Uh and that's yeah that's the average the age of first intercourse declining steadily throughout the 20th century settling around 17 for cohorts born in the 1960s. Uh more exchange more volume and more access but the productive output which is children uh certainly collapsed. Um but there is no free lunch. This is the first lesson in any sound economics course and it is Hasllett's lesson restated. Negative interest rates ex attempt to extract growth from a stagnation produced by the very debts that cause uh caused by fiat money. Pronatalist subsidies I'm forever arguing against them financed by debt attempt to extract more births from a demand collapse produced by a technological shock that made children unnecessary. In both cases, the proposed big state interventions just deepen the distortion that they claim to cure. The promise of the great severance overall was more um more money without production, more consumption without saving, more present without future. But the bill comes due. You don't get more, you get less because you you paid for less. And that sort of is the end of growth in one lesson. Um so I just before finishing I want to bring you some uh some remarks from Shimper who uh seems to have seen a lot of things uh that we did not all see um ahead of time. So in in in 1942 in uh capitalism socialism and democracy there's this funny like not not frequently cited chapter called decomposition if you remember it. Um and the book is about of course whether capitalism will survive and the chapter is this chapter is not really about capitalism per se but it's what he calls external factors that will put create a pressure on capitalism and what happens to an economic civilization when the family dissolves. So Schubeter offers one of the most penetrating analyses of the great severance um 80 years before our vantage point. He begins with a bold claim. He says the family and the family home he writes used to be the mainspring of the typically bourgeoa kind of profit motive. Economists have not always given this due weight. He says he means that the self-interest we attribute to entrepreneurs and to capitalists the engine of growth in every classical and neocclassical model was never the self-interest of a detached individual. It was the self-interest of a man looking at the world, in his words, through the windows of a family home who means to work and save primarily for wife and children. Remove the wife and children and you just won't get the same economics. He argues you get, shudder says, a different kind of homoeconomicus who cares for different things and acts in different ways. The old type, the builder, the saver, the founder of dynasties, worked for a future he would not see. Um, the new type finds all of that completely irrational. This is Shimper's language. He has no reason to say beyond his own life expectation, and he drifts into an anti-saving state of mind. Shimper adds uh and this new man uh embraces with increasing readiness anti-saving theories that are indicative of a shortrun philosophy. Schimpeder describes how the economic man's time horizon shrinks to the length of his own life. He consumes rather than invests. accepts debt rather than equity uh rather than building equity. It's a theory of time preference uh applied to the family and it predicts exactly what the data show. Falling savings rates, rising debt, declining marginal productivity and a GDP growth rate uh falling for 60 years. On Schun betterer's account, capitalism itself produces these technologies of severance. Um, capitalist inventiveness, he said, produces contraceptive devices of increasing ingenuity and efficiency. Um, that overcome the resistance which the strongest impulse of man would otherwise have put up. At the same time, he says capitalist evolution decreases the desiraability of and provides alternative alternatives to the burgeois family home. So, the logic of the market, which you know, Shimper is not really against um gets imported into this most intimate decision a couple can face. And once it does, he says the balance the balance sheet of parenthood appears to come out negative because the heavy personal sacrifices that family ties um and especially parenthood entail are immediate and visible. Uh whereas the greatest rewards are not. So Shupeter's verdict was that the balance sheet is likely to be incomplete because um and perhaps even fundamentally wrong because the greatest asset the contribution of parenthood to what he call he calls normality to physical and moral health to our well-being um almost invariably escapes the rational search light of modern individuals. Um, all right. Um, I see uh I'm going to see see the I see that just about out of time. >> Okay. Okay. No, I'm close. Um, so I wanted then to turn to uh the money side and I wanted to quote um Hoseman who is not with us I I think but who I just had the pleasure of seeing in in Brussels. Um in the ethics of money production he diagnoses the same decomposition from the direction of monetary inflation. Fiat inflation, he says, is a powerhouse of social, economic, cultural, and spiritual destruction. In classical theory, interest rates coordinate time preferences across society, balancing present consumption against future uncertainty. But under fiat money, interest rates become these policy signals instead of prices. Coordination breaks down. And the parallel with contraception uh is precise. Just as the severance of sex from fertility does not create high time time preference so much as reveals it, removing um these natural consequences that used to override it. Fiat money does the same uh the same thing. Um of course, strictly speaking, the mechanism is central bank planned money supply, but fiat money uh makes this possible. When rates are held below their natural level, those with high time preference, Shimper's new man without wife and children can borrow cheaply and consume today. Um, Holman says, 'The young learn to live in the present and scorn those who try to teach them old-fashioned morality and thrift and the terminal diagnosis. He says, perennial inflation slowly but assuredly destroys the family. Taken together, the dissolution of the family destroys the motive to save and invest. Inflation of the currency via artificially low interest rates destroys the means. The great severance is not one cause in one domain, but two causes reinforcing themselves in the same household. the oos where money and sex were always joined in the OG micro foundations. The two causes seem to follow the same logic. The loosing of a bond of nature designed apparently like Odysius at his mast to save us from the lower part of our nature pref preferring cheap pleasures to the fineries of wife home and field. Hasllett defined morality as the subordination of immediate objectives to long-term ones. That is, I think, time preference stated as an ethical principle and it's exactly what both of these severances seem to attack. Um, fiat money rewards the borrower over the saver, the short-term over the long term, and uh, fiat sex rewards the consumer over the bearer of children, immediate over the generative. So Christopher Dawson the great English historian and humanist uh saw something like Hasllett. He said human culture is not instinctive. It has to be conquered by continuous moral effort which revolves the repression of natural instinct and the subordination and sacrifice of individual impulse to social purpose. Dawson argued um that the that the family becomes the dynamic principle of society and the source of social continuity precisely because it demands chastity, discipline, sacrifice and responsibility. Um and so if you remove the family in that sense you remove not just a social unit but the school where civilization is transmitted. In 1933, Dawson said, "Marriage is likely to marriage is likely, so this is 33, likely to lose all attractions for the young and the pleasure-loving and for the poor and the ambitious. The energy of youth will be devoted to contraceptive love, and only when men and women have become prosperous and middle-aged will they think seriously of settling down to rear a strictly limited family." Um, so that is not really a description of 1933, but it is a clinical summary of 2026. Okay, so just to uh just a couple of sentences to conclude. By now you have a fairly clear picture of what this lecture was about or has been about. But let me conclude by saying what is not about. Bless you. This uh this lecture is uh not about whether people should or shouldn't use birth control. Family size is a private matter and how couples achieve their preferred family size is none of my business or anyone else's. I'm asked this question often, especially in Catholic circles, and my answer is always the same. Rolling back the clock on contraceptives is not likely possible and probably not desirable. Um, besides, devices may soon be irrelevant to this story. Uh, because technology continues and always continues, right? We now know enough about female fertility that thoughtful men and women can plan sexual activity to avoid pregnancy without devices. Biotech wearables make it easier still. who has a ring. These rings track fertility. It's not likely that devices or not devices will go back to a time in which people would just have children in ignorance. And that's not something I would advocate for. Um, equally, these remarks are not offered as a simplistic call to return to a gold standard and free banking as if any such thing were at least easily possible. The monetary question like the demographic one will not likely be solved by turning back the clock. Um I say and I say this uh not without a very strong wish to see the enormous benefits of modernity amplified by the virtues of sound money for the goodness of humanity. Uh no the matter of this lecture is rather to inquire more deeply into the nature of things to trace connections and patterns which might have escaped our attention on the family side. Uh which is really all the business I have as a economist. Um I have consistently argued that the most powerful remedy available to us uh for this like low low growth of families is protecting the channels by which people receive information so sound information about the value of children and what Schumpeter called normality the rewards of family life that tend to escape the rational search light. Pronatalist subsidies do not do meaningful work and we can't afford them anyway. Um but narrative and testimony do work. On the money side, I suspect the paths to recovery similarly do not lie in the government framework. States and nations are not likely to give up monetary prerogatives easily. And so I'm just sort of waiting around for good people to continue to pursue private money challenges uh to the hegemony of public money. Just to conclude, I thought these reflections might suggest that the scripture passage, the love of money is the root of all evil, might not be the anti- capitalist slogan that people take it to be. It seems to me a warning against this kind of severance, against loving the medium while despising the fruit. The love of money as money detached from production is sterile. The love of sex as sex detached from bearing is a um also sterile. So Tokos names the fruit and the labor. It's hard to love the medium and refuse what it bears. So I think that the path to growth lies through a new science of bearing not pronatalism not uh pro markets but protocos. Thank you.