Transcripts For CSPAN2 Discussion On Economic Growth 20160611

[inaudible] [inaudible] [inaudible] and that concludes our live coverage from lit fest in chicago for day one. Well be back again live on sundays. Now, if you missed any of the events we covered today, theyll only air beginning at midnight eastern. [inaudible] book tv tapes hundreds of authors throughout country all year long. Heres a look at some of the empts well be covering this week on monday at Barnes Noble Book sell rs in maryland former Washington Post reporter dale quinton will be discussing his latest book one month of murder. About a homicide squad in maryland. Tuesday at the new york union with league in manhattan, syndicated radio host eric argues that america has moved away from the founders original ideas on liberty and justice. That same evening hair Harvard Bookstore talking about the impact of fracking on l environment and public health. And on wednesday at kramer books in washington, d. 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Eastern and at 10 on booktv afterwars program, senator Barbara Boxer talks about her book, the art of tough with senator amy and finish up our programming at 11 with manuel her book is this brave any world. That all happens tonight on cspan twos booktv and first up mary. Were going to get started. Theres a lot of books to mention i want to make sure i get them right. Sorry were starting a little late. Thanks for all being here and thanks especially to folks on our scout steve forbes and george guilder pleased that youre here. The last, been a lot of talk about over the last generation. Even last 40 years really highlights the challenges of measuring economic values and a lot of people take the view that there hasnt been much progress. Much rosen income. Academic stagnation over that period and i often try to put the lie to that assertion by asking people whether theyre low income, high income raise your happened if you want to go back to 1975. And they usually arent a lot of takers. But one thing is undenial over o the last ten or 15 yearses, we truly have been living through a period of time economic stagnation and peter joined the Cato Institute and trying to explore reasons for this growth slowdown. Published two book us i have them ebooks one is understanding growth slowdown. And another is reviving Economic Growth. For the first time weve had a tenyear period in which real gdp growth has not reached 3 in any single year. And at the time i joined kato i was hope powerful because during the period of my lifetime and lived through two time of economic stagnation or sharp economic contraction,s its created a lot of pressure, tension, and anxiety that often has been the impetus of cause on the change of policy front, and i think over the last few months ive realized that i was correct in expecting that economic anxiety would create some turmoil and stimulate some change. I was wrong because its not kind of change that i had anticipated. Clearly rlg really luck to have three gentleman today that i dont think need much much an intrux but try to provide one. Between them i think theyve written more books than ive ever read. But i think its a great opportunity for each of them to comment on their views of how were going to revive Economic Growth in the United States and there shall continue the course of progress and prosperity our nation has enjoyed for such a long period of time, and they each have books that have been released recently. That actually speak to this i spoke with a donor to cato recently and he has a son who will be starting college in the fall. And he told me that he was considering attendingcato university this summer. So that his son could be inok inoculated in college before he attended. When i was getting ready for college, i need such inoculation but in senior year of my high school days, george guilder bock wealth poverty was release ed and during the summer between high school and college i read it. And it gave me no or shortage of ammo to use against the marks as professor i encountered when i attended School Including in classes as capitalism and its critics. I think things have changed some things havent changed i think faculty at the university was the same it was at that time. But i felt that in my classes we were able to engage in lively debate and disagree without fearing as many students do today that it can hurt their grades. And a transcript and disagreement is not permitted. So i actually thank you george for providing me so many of ammo to use against fraternity brothers, professors and others with whom i didnt who Department Agree with me on the case for enterprise and free markets. Ammo started at cato. Rntion thanks so much for that. Thanks so much for that. Gormings book is the scamgdz of money. Were delighted i think one of the ysdz that cato promoted for a long time is that the fiat money system and power of the Federal Reserve is a great threat not only to our economic well being. But to our freedom and cato held a prominent annual monetary conference thats coordinated by our Vice President jim dorn and we start for monetary and financial at tiffs to highlight these risks and to promote free market allative to our Current System so george east book is very important and timely in addition steves last book i believe was similar topic highlights the threat that lack of sound money poses to our country so those are both tremendous contributions to popular literature. I told steve earlier that for most of my life ive not been affiliated with other major party but that in late 1995 i registered republican so that in the 1996 connecticut primary, i could cast my first primary vote for Steve Steve Forbes for president. Steve replied that he wishes a lot more people [laughter] registered and voted for him. But even in defeat he made great contributions to the debate and the the case for freedom and enterprise, sound money, and a flat tax, and he is still at work. His book that he wrote with Elizabeth Ames reviving america how appealing obamacare replacing the tax code, and reforming the fed will restore hope and prosperity. And i think he did does a fantac job really prioritizing three key areas particularly areas such as health care and money where many of the problems are actually created by Government Intervention and for some reason the prescription that many people suggest is more Government Intervention. Finally mark we know as an academic professor an author economist, but many also know as the freedomfest which he accurately called World Largest gathering of free minds which takes place in las vegas every summer. Delighted to have mark here. I mentioned that the outset that while we can agree that theres been income and economic stag nation of late, the measurement problems with reflected in our economic aggregate, i think do fool us because there are many things that arent captured in gdp and i again reject assertion that americanss really have any income level have experienced stagnation in their well being in their lives in the last four years. Mark has proposed and now has an updated version at least an alternative to Gross Domestic Product as a measure of our economy. And its proposed a alternative called gross output. Im going to let mark explain it because one of the reasons rational he gives for it being a improved and accepted version of the measure of the economys prns is that it is now published convertly by the government along with the gdp figure quoit an achievement but libertarians we dont necessarily take Government Action as a as an endorsement. So im looking forward to his remarks explaining some of the work hes done in developing and promoting more effective measures of Economic Performance and we will proceed with the speakerses in the reverse order by which i introduce them. So please join me in offering a warm welcome to cato mark. Peter your comments about slow Economic Growth and the fact that we havent experienced 3 growth and sometimes reminds me of this, this program that george w. Bush set up called the 4 growth plan. And when i talked to the organizer of it, i said 4 growth plan now did he mean growth of the economy or o growth of government . So she didnt appreciate that comment. But unfortunately under george w. Bush economy never did using standard gdp statistics never did grow never did grow 4 during entire year of full employment. So kind of unfortunate. What id like to talk today is what had peter mentioned gross output. I think its a very important statistic. And the fact my main thesis is that gross output or go as we call it offers a better, more comprehensive picture of the economy. Is a powerful Unifying Force between accounting, finance, and economics. It links micro and in many ways go is missing piece of what had the elitist economist calls the prosperity puzzle which had their latest issue and interesting they talk pate in there about problems with gdp which im sure is will come up in this discussion. But in in case, my argument that this is a unifying approach that its a more comprehensive picture of the economy had its a tall order and so like to get started. I actually see it as a paradigm shift in the way we treat mac koa economics. So we start off with basic what is is gdp and supposed to measure, annual spepgding one way to look at it in the economy. Consumer, government, and business c plus i plus g is the way they normally talk about it in classes. And theres a problem with gdp a lot of problems with gdp but one i want to focus in particular is according to gdp statistics what u drives the economy . And so what we find out what we break it down, you see that had it breaks into Consumer Spending as the biggest sector of the economy. Government spending second, and business spending poor third and what does that say in terms of policy implication thats the issue. And of course because Consumer Spending represents such twothirds basically of gdp you get the media constantly making, creating a myth thats one of the most common myths in economics. And this is an example of it from the wall street journal. You got it from all of the cases Household Spending generates twothirds of total economic output. Says the wall street journal so steady spending gains that is Consumer Spending gains should translate into Economic Growth. If only consumers would spend more thats all it takes. And, of course, you have New York Times Consumer Spending makes up 7 7 of the economy and driving growth during economic roifers and finally another one from wall street journal consumers are are the engine of the u. S. Economy. Consumers not producers, not entrepreneurs. Consumers accounting for 77. Of the economy so you can see the problem thats inherent with using gdp as a statistic. It is this are we coming to an accurate conclusion is our question. So we have to ask ourselves a question what is missing from gdp . Well, again gdp is c plus i plus g18. 6 trillion my is that the economy . So we break it down into consumption 66 , 12. 4 trillion dollars. Investment and free tradein, so what is missing in gdp . This is the surprise factor. The supply chain. Gdp does not major the supply chain and it does not measure all the business spending, the bw spending to bring products to their final use. You see gdp just measures value of finished goods and services. Your clothes, your shoes, the internet. All, everything that were enjoying right now. This cup of water. Thats all counted in gdp but the spending by business to get you to the finished products is left out. And that is its achilles heel in in ways and a look at the supply chain in which ive been measuring in which the government is measuring. Bureau of Economic Analysis 20. 3 trillion. Its more than Consumer Spending which 12. 4 and more than Government Spending and more than fixed see the eye part is fixed investment. Now, what is gross output . Well it can be for those of you economist and urban fishers equation of exchange is measures total transactions. Its also a measure of high acts triangles, and so this is taken from prices and production and this great book that frieda wrote in 1931 when he was lecturing at the London School of economic hads. And theres a picture of the triangle that he used now it was purely theoretical with no breakdown and no statistics backing it. It was pure theory and it has had a rough road of acceptance. But what im suggesting is that high x triangle is being measured today now by the government. And this is a fantastic break through, and im pleased that this program here today is taking place in the high auditorium so appropriate considering that government is now measuring high ax triangle so we know the background of kayak i thought i would post this up her and particularly hes no more for his book the road to surf them in the constitution of liberty but hes also author of this microeconomic work which has had porld the foundation of my own o work and the structure production called prices and production accomplished accompli have a First Edition signed by kentucky yak. Today ive come out or o fair books has published his two essays on the Business Cycle called high ax triangle an they ask me to write the introduction. But heres a modern day version of high ax triangle and shore four stage of production. Resources, production distribution, and final output so you can see gd sprks in there but then so are the stages, the supply chain prior to that with stages one, two, and three. So this is a great wie to capture universal four stage model of the economy. Every good service that you and i use has gone through resource, production stage, the distribution are or wholesale and resale stage and final use represented number four by gd rks. Well the big news in april 1914 bureau analysis that puts out gdp statistics has now started to measure great gross output and measure high ax triangle or o total transaction under or bonn fisher depending on how you want to look at it and we have steve who is pioneer of the director of the bea who said gross output has a perspective on the economy in powerful new set of tool and analysis one that is closer to the way many businesses see themselves. And isnt that true. Business sees themselves as producing, moving the product along the production process. And thats what gross output is measuring. So whats really interesting a lot of people havent noticed this. But wherever bea has a quarterly announcement of data which they did just recently, notice how they define, how they define gross, gdp. They define it in term was gross output first and subtract intermediate production, plus intermediate input equals gross output or another way of the way they define it, gdp is is gross output minus intermediate input so basically what theyre doing is getting you, the audience, the consumer of gdp statistics to get used to the idea of a what had i call a topline of National Income accounting and a bottom line. The bea also for those of us who are austrians who believe in disaggregating the economy and looking at industry by industry sector by sector. And delighted thatted bea introduced gross output by industry to dig segregate the economy and based on stages of production. So based on this announcement, i wrote a lead editorial commentary in april 2014 in the wall street journal at last a better economic measure. And they came out with a new third edition of my production. Basically my book structure of production was had virtually disappeared nobody was reading. But suddenly when the government starts using this statistic, it is come of obscurity and now it being used in in being read and what can we learn from the new go . K you may ask yourselves well so what . So what that theres a new statistic. Well first of all you can see that gross output from this statistic is much more volatile. Its a much better indicator of the Business Cycle. You can see here that gross output especially during the recession of 2008, 2009 how it dropped precipitously gdp in nominal terms declined 2 is that an ac rat reflection of what happened during the Great Recession . Not at all. But you can see in terms of gross output and see what happens in the intermediate stages,s thrftion a significant drop that is better evidence of what is going on. So according to new geo molds everything is in reverse. Remember in gdp Consumer Spending number one followed by government and bids now suddenly business spensdzing when you include supply chain is nearly 60 of the economy Consumer Spending is now down to 32 . Instead of twothirds its only a third. And goth spending is 8. 2 so when you see these two model next to each other. What do you see . Essentially what you see is that the business sector is by far the most important sector in the economy. And policy that steve forbes is talking about in his book and what George Gilder is talking about in his book focus on the business sector, the supply chain innovation, entrepreneurship, productivity. These are the factors, and now we have a model that is consistent with Economic Growth theory. Its also a support saves law steve says with g. O. , gdp monopoly will be broken as u. S. Government will provide official data on supply side of the economy and its structure. So we as supply sitars, austrian we have our own statistic. I know a lot of you dont like aggregate. But aggregates can tell you a lot. And i love this quote by larry, though, not one in a recognize it is, it is business not consumers that is the heart of the economy. When businesses produce profitably they create income producing jobs and then consumers spend. Profitable firms also purchase new equipment because they need to modernize and update tools, structures, and software. So this is a new approach, i call it and im not saying we place gp but saying its implement rei gross output you know how in a Financial Statement you have top and bottom line. My business students love this. So we have top and bottom line. Bottom line is earnings. Now finally economists have caught up after 100 years behind the times, have caught up with accounting and finance profession now we have a top and revenue and sales, our bottom line is gdp value added similar to gross profit in Financial Statements. And this is a quote here from three great economists including steven the bea director former bea director and bill who is from Yale University and dale at harvard say it is National Measure of the production sector while net gdp is proarpght as a measure many had of welfare both are required in a complete systems of accounts. Theres a general model of the economy, where you see the economy reaching final use. Gdp and then consumption when its used up and so this is again in my textbook a general model of the economy. I dont have time to go into that because ive run out of time. But if youre interested by the way in my power point because ive gone through pretty quickly maybe we can send it to attendees or acard to send you this power point to get you my basic points. G. O. Is integrated in textbook this is a sign of success so it is not just in my textbook which i was economic lodging but its also in mcconnell brew, number one textbook in the country. Although greg disputes that. And we have it in in john taylor textbook, and roger miller. So david coal lander so in all of the textbooks theres developing to be in all of the textbooks. Well, i have a few quotes here what oreses are say about the steve forbes have been supportive in Forbes Magazine feeling this is a greatly forward and National Income accounting and gilder suggestedt vital learning accumulating through process of production measured gross output. So i dont have time to read any of the other quotes. But we have academic economists, we have business comeses, and so forth recognizing that value of the structure of production. So my basicon luges is basically strufer production does matter. Structure of production does matter. Were going to wait for questions until the end although ill say mark since you point out now stimulated sales a book. Im assuming that didnt have anything to do withier desire for them to publish and and count that as rent seeking. It stays while supply creates demand thats what i mark thanks so much and now a warm welcome to steve forbes. Thank you. Thank you very much peter. Thank you cato congratulations mark on measuring the whole economy instead of just part of the economy. But no matter how you measure the economy, theres no getting around it today, it sucks. It seems statistic in second gear. You get one good report followed by disaa pointing report profits arent what they should be. Business investment not what it should be. New business formations are are not what they should be. The economy is in a rut. And theres a lot of talk these day about the new normal. So we must accept this below average situation. Larry summers former treasury secretary former harvard president who knows what hell be if the democrats get in talks about secular stagnation as if some alien forces come along and theres nothing we human beings can to about it. Its all nonsense. The rut that were in today which is having proked to implication around the world of bad economies lead to bad politic we see that everywhere around the world. It comes from mistakes. And then nice thing about policy errors is they can be corrected. Those errors can be corrected. And thats why we wrote the book reviving america we focus on three big perform. Obviously, there are a lot of other things that have to be done but you have to have priority so prioritize in Health Care New tax code and get our Monetary System become on track in over half a century. Health care is an obvious o one makes up 20 of the economy. Also its the most personal thing possible. Much more than taxes in the like, health care for us for our families, our friends. Our loved ones, so this leads to the question why do we have a crisis in health care . Its not the quality of health care in this country overall its the best in the world. You can see it in cancer survival rates. Western europe as many fine medical institutions. But in terms of survival rates that is five years i had it several years ago. Terms of five years. You do much better in this country than you do anywhere else in the world. Some say its because theres too much demand. People like me are getting older and we want more Health Care Services therefore prices keep going up and system goes. So just step back for a minute and ask yourselves why is demand for health care considered a crisis . Where as demand nor anything else in this economy is considered a great opportunity of people want or more enlightenment and would be good to help out good peter a little sucking up. Trying to mawk sure i get my free lunch after this. And then you want or more apps like to help you out and cars to manufactures glad to come to your assistance so why is demand for health care considered a disaster as demand for anything else in this economy is considered a great opportunity. Answer is we dont have real free markets in health care. Its all third party dominated. Real customers are government, insurance appears and employers. Be ebe patient is at the end of the line of proof of it is because weve grown up with this system you go to a clinic or o hospital and you ask in advance what the treatment is going to cost. Get a strange look. Means one of two things. Either youre uninsured or youre a lunatic why would you want to know the price . Whats it to you. Dont worry about it. Then well tell you how much you at the end of the thing but proof it is another proof it is, the crumbiest motel in america. Wouldnt dare put you in a room with another guest, a sick guest with a curtain in between as they routinely do in a hospital. Robes you go to a hospital they look like the robe they give you, look like they came from a Salvation Army dump. You know, dumpster that these things that humiliate you cant get around and then you see, so problems with this third party paying system is they always try to cure problem with more regulations. But its like whack mole whack whack why doctors in hospitals spend more time throwing the forms than practicing medicine. Why were having a doctor shortage no one is happy with the system we have today. Medical costs are still going up. You go to a hospital, and thats bad enough. But people its a very unsatisfying experience. You wonder as hospitallists specialists talk to each other and until he cant have this kind of medication they give it to her that i. Its unsatisfying experience. But deductible under skated Obama Health Care exchange hads yes you may get the insurance, but health care as we come from more unaffordable than ever with a 5,000 deductible but become out of o reach. And so normally in a free market best practices are quickly imitated you know ipad. Iphone comes along. Samsung and others say we have a better device more improved device. You dont get that kind of thing in a hospital but one quick example. Breast cancer. Youre supposed to have mammograms but if they have dense breast it tissue and they dont discover it but only discover it onefourth of the time. Theres a new prabt out there new, new treatment called ma neck particular breast image with a tracer in and it will find Breast Cancer in women. Thats why many times a woman has a mammogram says youre great. And then a month later find out they have a tiewrmt size of a baseball. Why didnt they find it because now you would think Something Like this new way of discovering Breast Cancer molecular imaging ob pirks and handful of others sposhing quickly imitate it and say this is the way to go. No, so if you have a mammogram ladies insist on mbi otherwise you may miss it so key thing is in health care, key thing is when we outline it in the book is getting the patient in control again for the first time as you know the system came about because world war ii wage and price control couldnt pay people because labor shortages because everyone wases going in arm services young people. So theyve had pay people in kind gosh egovernment said you could do it with benefit instead of cash and after war in 50s irs made a tax ruling that em embedded thing so you have a crazy system todays. So thing about free market is always turn scarcity into a budget you see cell phone you know first one for mote role la 30 years because of a brick. Big as a shoe box, 40 minute battery life first one now there are billions of them around the world and almost give them away dpepgd on plan that you have. Smartphone 100 about to go down to 50. Into abundance u how do we get that and outline basic reform. One would be nationwide shopping for Health Insurance instead of having all of these state cartels. Have hundreds of Companies Compete for your business equalize tax treatment a selfemployed and tax business gets a Tax Deduction why shoct patient and individuals have it. And how about transparency and having hospital post prices and clinics post prices for all of their services. So charges 2,000 for mri and another 350. How about requiring transparency on how many patients died from infections received after theyre admitted to a hospital. Its a national scandal. No restaurants can get away with that chipotle didnt kill anyone thankfully but stock and company took a huge hit yet thousands of patients die unnecessarily in our hospitals. How about readmission rates, choice of insurance i dont mean Pregnant Services thank you very much but forced to buy them absolutely crazy. Do away with individual mandate. Do away with the employer mandates, and safety nets you yu can have more safety net especially high risk food and decide how food stamps are administered but nobody needs to starve in this country. You have food stamp and vofdz too much in agriculture, but thankfully it dupght run it if government ran agriculture we would have more obesity and starving unless you work for the government but thats what happened in russia, china so you cant have a real entrepreneurship effective safety net and health care. Taxes you all know second big reform, price in aburden is raising revenue over tax in the biggest abomination is federal income tax code. You know litany abraham link address and capture american nation all of 272 words. Constitution amendment it is over 7,000 words. Bible took centuries to put that together. 7703 words. Federal income tax code and attendant rules and tax over and rising nobody knows whats in it. You call the irs hot line or third time they giveout wrong answer. Money magazine several years ago did a survey. Gave a hypothetical family sentences number to tax prepares they considered expert in the field got back. You know what they got back 46 different returns. 46 different estimate of the tax liability. And thousands a dollars of difference so answer is. The answer is weve got to jump this thing. It is beyond repair, and i dont we used to say we should buried thing but not allowed to be buried so toxic, and replace it with a simple flat back. Throw the whole thing. Have a single rate. At the children and plan in the book verse 50 of your family of or four and 800,000 of salary freef central income tax only 17 above that no tax on savings no death taxes should be allowed to leave the world unasktsed by irs. And just do it and people say oh, why not just throw them a bone and have two, three tax rates some of the republicans propose. No you dont. We should have learned when we have simplification down to two rates. 15, 28 . Ladies and gentlemen when you put two tax rates together, its like putting two racket rabbits together they breed. They multiply so to a single rate. 40 countries and jurisdiction have done this and real thing is ms a moral thing think of the opportunity costs. Now irs estimates we spend 6 billion filling out tax form. Experts estimate 303 billion con formal of this monstrosity but adds up billions, trillions of dollars off the immense brain power this in the useless corrupting complex an if they think that gone to new product, medical devices new cure for disease it how much better and richer our lives would be. Instead of corruption that brings out worst in everything. Third big reform is not the most exciting thing Monetary Policy. Its not fifty shades of grey. Not like going naked in the jungle not the most exciting thing in the world. But its absolutely crucial . Why . Because this is how we make progress in the world. Transacting with each other. Interacting with each other buying and selling and do it billionses of times a day. Money makes that interaction easier. Progress easier to achieve. Rather than trying to do brr. Think of money like you would a claim check. Be to restaurant and check your coat you get a token piece of paper. Piece of plastic that is worthless but a claim on a real product money. Claim is on product and services. Work because its based on u trust are. So money measures value. The way clocks measure time, scales measure weight rulers measure space and so the thing is, that works best when it has a fixed value. Think of it imagine the Federal Reserve was in charge of the time bureau and decided to float the clock say 60 minute an hour. 48 a minute and day after life could be chaotic imagine if you go to the supermarket want to buy a pounds of cheese. Pound changes each day. You have that gallon of gasoline you assume amount of the gallon is not changing each day. So imagine bake ac cake with batter 30 minutes. Nominal or adjusted d. C. Minute, a mexican minute. Be chaotic but thats what they do. Investing risky enough but 100 cent dollar. 10 dollar. A key to future prosperity. And so the fact that dollar may be going up or down like a clock, watch and see too fast or o too slow neither will help you very much. Federal reserve we outis line is acting like soviet union. Things that control the economy by trying to control Interest Rates and trying to control money been as donald trump would say a disaster. Takes zero Interest Rates that is price control. You know better than anyone else what rent and price control can do to deform a market. Theyve done it in credit market and made it easy for government to borrow. Cheap for Big Companies to borrow and small and new businesses household it is let me [sound of gunfire] you one statistic. The past five years between 2027 and 2013 credit to Small Business and households 6 . Absolutely pathetic on environment we have today especially with hyperbank regulation very difficult. Very difficult for Small Business to get reliable line of credit. Which is why apple 200 billion cash borrows in the market because they can and cheap, and great for apple shareholder and not good use of exxon but buy in stock and pay in dividends not best use of capitol. We have to go to a gold . And why because gold keeps us better than anything else. We did it 18 years when you see price fluctuate thats that not the value of gold. Gold is like a ruler like 12 in a foot or 60 minutes an hour. Fix to have a fix value like 16 ounces in a powbd youll see this economy start to really prosper and did it for 180 years meantime lets have real Interest Rates in the market again. Instead of these bureaucrats set Interest Rates let the price be set by people free borrow, lenders set that price and reduce of the portfolio 4 trillion which they cease from the economy. Cease those assets return that, let that blow off as these bonds mature in to the Financial System and three people determine where capitol goes in creating future prosperity for awful all of us. Thank you very much. [applause] thank you steve. I heard you say many times that Monetary Policy is kriewrnl. And crucial and heard you say when people start discussing topic thats a signal for tokes to either go to sleep or leave the group. And you know your exposition and good common sense helps people really get the message. George please join me in offering a warm welcome to george guildman. Well, thank you. Its great to be in high auditorium, my quote at the beginning of the scandal from are u money is from hiak an it says the root and source of all monetary evil is the government monopoly and control of money. And this is the part of the message steve just gave and its the heart of the message of the scandal. And mark read that definition of Economic Statistics goes deeper than even he has fully explained i think. Because his key thesis is that goods and services are not final product. The final product is the human being and creativity in image of his creator those are the final products. And they are measured through information theory as knowledge. Wealth is knowledge. Professor at m. I. T. Recently summed it up better than i did i think. He said that when an expensive car that caesar is his name and he said when had an expensive car crashes into a wall, all its value disappears even though every atom and molecule remains. Value is information thats another high point. The car is knowledge. And i say all wealth is essentially knowledge. Some will put it the neanderthal in his case had all resource that we have today that differs between our age and stone age is entirely the increase of knowledge. But this gives us a further insight because if wealth is knowledge, what is growth . Ive been studying business progress for years through the leading consultant in bos to know ive spend a lot of time with bain and company and theyve documented from everything through eggs to software codes, and learning curve ordains that with every doubling and toalings unit theres approximately a 20 to 30 reduction and cost. So learns curves ubiquitous with the economy and wealth is knowledge. Growth is learning. Thats what it is. And this is the real these are the real final products. Theyre knowledge and learning. And knowledge and learning does not happen had only in the consumption of a hamburger. The consumption of the hamburger consumption of housing, the con consumes of housing within clothing all endows human beings with capability to create, to learn. To expand knowledge, to expand wealth. So this is the this is what go represents. G. O. Represents all learning, every step in the process. Its not restricted to the final output. It proceeds through the entire economy of learning and knowledge. But if learning is growth and growth is learning and knowledge is wealth. What is money . And has this has been quite witn enigma for me for a long time and ive been somewhat descrabted by various commodity theory was money that believe that somehow money is really the value of money stems from its value is jewelry. And gold is valuable because its really jewelry. Thats money is valuable because its really jewelry. Well my friend richard said no jewelry is valuable because its really money. And why is money valuable . Money is valuable because its kind. It represents time in the economy. And when you have zero Interest Rates for example, you essentially are zeroing out time. Everything slows down. Jim grant describes it as throwing away the clock. And a basketball game not everyone lows down, not everyone scores. Everything slows down when the value of with Interest Rates are zeroed out. Money is time. Its what forces entrepreneurs to allocate, to prioritize to invest and one thing rather than another. Without Interest Rates, you have just everything can go forward because with infinite time everythings possible and this is really the vision that currently governs the fed. So this is why the return as we say to gold is so critical because gold is really time. By happenstance, throughout history, the mining as mining gear has advanced, as the technology for extracting gold has advanced, the gold has become more widely distributed more attenuated and deeper, and so essentially the cost, time to extract the gold is remained reasonably constant for centuries. So gold has thus become the source of time in the economy. They measured through time. And this is really the heart of what money is. Money is time and what we really are experiencing today is is a war against time. Conducted by all essential bank of the world and it explains the great slowdown in growth that really began with the abandonment eve brenton wood in 1971 when we entered the kade and everything began to slow down because of the signal of which had insisted upon was critical of them price signals conferred by money were debotched, and money became rather than a measuring stick as steve describes it. It bill a magic wand. And all of these magic wand for the government and all of these and you cant have real Growth Without knowledge and learning and knowledge and learning depends on real information rather than on this furious manipulation of the fed who try to essentially try to fool entrepreneurs into making prudent decisions. But when we say going to parking lot Gold Standard, we arent necessarily speaking about going back to anything. This is going forward. The Gold Standard in conjunction with the new Global Economy opened up by the internet is is a u uniquely powerful new element in the history of the world. The bit coin block chain transforms not just for global money, but also the potential for innovation and security. The Swift Network got cracked. Got hacked. The Swift Network is the strals melanonervous system of our banks, and it got hack haded 60 Million Dollars extracted in bangladesh. And the centralized model of security is bankrupt it doesnt work anymore than centralized model of money can work, and the bit coin chain in part security not through concealment and centralization but through transparency and distribution, you have to hack had half the computers in the world to take over the black exchange the public ledger of transaction. So we can now integrate with the bit coin standard which is explicitly based on time and they common converge and provide that dan wins this fight to stop title two domination of the internet reduction of the internet to pathetic public utility. Where aggregation of lawyers converge at every node and control and specify prices which is the meaning of a title two internet. Money is time and time is real. Time cannot be manipulated it cannot be redistributed redistributed, time is what remains scarce when Everything Else with capitalism becomes abundant. But the abundance of capitalism is contingent on the integrity of the information that governs it like the knowledge or the process and learning that underlie and embody it. So the introduction of this model is crucial because not so much that it shows consumption drives the economy but human creativity drives the economy and i think that is a tremendous advance and insight. [applause] one of the quotations in your book i have to paraphrase but it is a paradox that has always puzzled many of us that so many who see themselves benefits to the free market except Central Planning that is really incredible until you can convince people of that paradox i want to open to questions often the moderator said they will invoke the moderators prerogative with the first question. I will not do that out of consideration for the audience and what you to have an opportunity so if you do want to ask questions please me considerate of your fellow audience members and be concise way to be recognized and wait for the microphone so we can hear you. State your name and affiliation and offer a concise question in the form of a question. Thanks for your comments i want to talk about health care and an adviser and a gray with you that transparency is important but frankly the outcomes is equally important and more in my a view to the hospitals so some of the things that we are seeing is that some of the pairs of private Insurance Companies are actually promoting where the best care is giving without interfering with the different decision of dr. So could you comment on the fact of the outcomes are the measures as to where we send our patients for care . I think the way you phrase the question where to be said that patients . And a true free market patients would quickly have the information on where best care is available the metrics would be created to give them more sophisticated information on their particular outcomes but what has happened with Breast Cancer is a scandal in terms of people dying in hospitals because of infections received that our avoidable. It is an absolute scandal. Instead of hoping that insurance gets the light like with electronic records every business in the role this had electronic records for 20 or 30 years but because of thirdparty payer you didnt get in and then it was sovietstyle with onesizefitsall and it was a disaster so the key is how do we power information and patients to make more decisions and providers will quickly get here to it and if they dont people want to go there. They dont have to and that is truly the way to go instead of the top down to say have outcome oriented markets because health care is so personal and with just one example mentioned about Breast Cancer there is a chain in pennsylvania that several years ago they put in this day bader it m. Messing up the next one is on them under the normal system we pay even though wasnt done right the first time how many hospital chains have put in four limited warranties . You can count on a single hand the free market would be quickly imitated or you would not get the customers so get the patient in charge with the things you find desirable like electronic records and that would happen naturally because it is about them senate to replace warranties existed they amputate the wrong are they will amputate either one for free. [laughter] i am one time Cato Institute employed now adviser with ted cruz i felt one of the most interesting parts was about the for evangelization of the u. S. Economy and what that meant to the triangle of wall street and main street and Silicon Valley and the implications could you talk about that . I think yeltsin is scandal of money is used as the alternative to the Gold Standard. That is floating currencies and floating currencies today with the new accounting in the next month from the bureau of International Settlements but the best estimates are 5. 2 trillion per day and this is 26 times all of coble gdp. 73 times all global output of goods and services. It is a scandal and it is all conducted by about 10 banks that conduct 77 of this currency trading and 98 percent is speculative. It is a complete failure that the chinese are accused of manipulating currency because they refuse to float and be fixed on the dollar thus enabling their miracles of Economic Growth but what is happening is we have created a closed loop economy between the Obama Administration and the feds and essentially start off Small Businesses and main street has been shoved aside and 62 percent of the feds money creation goes back to the treasury of the other twothirds most goes to the carnival of Big Companies buying up their own securities like the stock market and their rivals there are now twice as many ipo in china as in the United States this is a real catastrophe and why we need a big change right now. From the National Tax Limitation foundation but what are the concrete steps that need to be taken to restore the Gold Standard if you were advising the president what would you tell him he needs to be done . First that they want to do it and will they know how . With redwoods we didnt fit its which is why we messed up the system thinking we could get date easy prosperity so you start right away with free Interest Rates they say that will disrupted know it is already disrupted in the late 40s economic director that occupied germany overnight he propose to do away with rationing they said it is a disaster the american said it would be a disaster he said might advisers tell me the same thing he did it anyway and within days the show started to fill up in the german miracle began so free Interest Rates is the beginning also make it the case that is positive because then credit markets will start to work again. Second, start winding down the floated portfolio let those resources go back into the economy so the people determined instead of a fed. Then with a Gold Standard you can see by this date we will fix it. Pick a price. 1100 or 1200 but then by pulling away regulation right now with the bank to try to make a loan you have to justify it six ways to send a weedy regulated the Transportation System in the late 70s under a democrat we have to do the same thing with the Banking Sector one of the most wonderful things that happens trumpets it is beautiful was when the courts ruled in favor of metlife with all those regulators have moved into there had to leave the free offices in the free meals harassing them saving us from them and we need to do that with the rest of the economy right now doesnt get multiplied to the monetary theory it is just paralyzed so start with those in just announce a date certain for Interest Rates and then the other thing they can do, peter is remove the barriers to alternative currencies. Absolutely. That way if the government starts to misbehave you can do it if somebody comes up with Something Better the government cannot block it so let human ingenuity giddily stand who knows what will happen if i knew i would be on the forbes 400 list for rich people. [laughter] to collect data unleashed and remove the barrier the faster the better it isnt complicated just do it and we will be pleasantly surprised how quickly we come back to life just like water in the garden. You are already at the top of the list with your knowledge. From a practical point of view if you set a specific price for gold would not work i do disagree a little bit with him on this side do think it should be used as an indicator as to whether we are to inflationary or deflationary bet with Monetary Policy provide stability want to provide basic stability and Milton Friedman rule always was with that goal in mind but the problem was what about the money supply . That was his biggest problem with the regulation and as a matter of fact they have been moving relatively stable throughout the financial crisis of 2008 which is quite interesting but the biggest problem i like to see gold as an indicator if you use it as an indicator drifting upwards thats just too much inflation you need to pull back but one of their problems with a fixed price is if it falls below, then you should be accommodating and the fed should be expansionary budget gold is constantly overshooting one way or another city become expansionary than gold goes above the market price then you are restrictive and move it back down, hopefully would come towards stabilizing point of view but the problem is by overshooting gold is not directly tied only to the dollar also into other currencies so that volatility is a problem with a specific target price unfortunately it is of moving target. Is a moving target with the floating rates he never have that under the classical Gold Standard under Bretton Woods if you fix it then the other currencies fluctuate that is because they are misbehaving why in the classical Gold Standard they saw how well it was working for as they all adopted their own version so you had very little volatility so no need for currency trading so that comes from the lack of having the specificity. And terms of trying to control the money supply it is preposterous of the restaurant period economics the Restaurant Owner notices that a customer checks their coat said he thinks if he has marco checks that will stimulate the production of more croats and the more people come to the restaurant. That is backwards money reflects people producing products and services not the other way around that is where keynes is wrong and just look at a velocity of money. All over the place. Get it fixed like 60 minutes in the hour and the tower would not fluctuate. This was freedmans big error. He did not believe that velocity was a constant and netted only works with the assumption that velocity turning over the money could be predicted but turnover is controlled by all of the gold people producing general output and that cannot be controlled by the fed. By the way in terms of marks even better was a gross domestic expenditure you should read his paper on that that get some of the of flaws of the Gold Standard that talks about it is even better in terms of measuring. With my new introduction i go into how to take advantage of that. I am from George Mason University economics department. Cato is no fan of centralized Monitory Authority but even if you set strict constraints you can have Serious Problems with the Fiscal Authority when that is relatively unconstrained and he lays the problem of the European Central bank down precisely to this issue. So given that you impose those constraints of the Gold Standard upon the Monetary Authority i suggest you are carrying a symptom and not the underlying problem which is distilled fiscal profligacy. Europes problems are structural and regulatory and fiscal the ada to manipulate money were the number of minutes in an hour will cure those structural problems is preposterous they cannot. Illinois if you take the word greece if you translate into english to get illinois. [laughter] but no one suggests seriously that illinois left the dollars shown that the problems would be cured. That is like the illinois peso. That would compound it so he is right those are structural problems by talking about the role being mismanaged but the euro itself is not the problem but trying to use it to overcome the structural problems not to mention the idiot tax increases is the real problem so having a stable measure of money for the unstable will not overcome the problems of hyper regulation and over taxation and all of the antigrowth. Obama talks about the republican war on women but what about obama as war our prosperity . That is the real problem. Having a steady measure making it unsteady will not cure the structural problems that has been referred to. And i would add the issue in spain that the bureau is acting like the Gold Standard so it is causing greece and other countries to be fiscally irresponsible to suffer as a result to get their act together that is what the Gold Standard does when you over use your debt with the tax system and the euro is the Gold Standard so a lot of economists by the way argue that one of the reasons they note to the countries that went off first during the Great Depression recovered more quickly is an interesting argument that is worth looking at that is what greases thinking we can go off the euro and recover more quickly. That is the basis of that argument