That ive been thinking about for a really long time. Before i was a fulltime author, i was a High School Computer science teacher. I taught for 17 years at a high school in oakland, and i would teach in this really visual way. I would do a lot of drawing on the board to explain to my students. I always thought, man, a lot of this could really work well in a graphic novel series. I teamed up with a friend of mine named mike holmes, and together we are trying to introduce fundamental Computer Science concepts to middle school kids through comics. Host how did you go from a High School Teacher to a National Book award nominee . [laughter] guest its kind of crazy. Each when i was a fulltime teacher, i would do comics at night, in the morning, in the summers host did you think they could be published . Guest it was for me. Host really . Guest i never thought itd be a source of income. Some people, you know, play golf to relax, and that costs a lot of money. Im going to publish comics to relax. So to go from there to here has been a dream come true. Host when where was that moment when you said im done teaching, i think i can do this . Guest well, for a really long time i really i love teaching, you know . Im as much of a teacher as i am a cartoonist. So for a really long time, i tried to hang onto both. My last year at that school i was only teaching one period, but with the travel schedule that comes with being an author, it got too crazy. Id end up missing two or three sessions with my students, and i just couldnt hang on. Once things calm down, i want to get back into some sort of teaching environment. Host im going to put you on the spot. Two or three graphic novels that every kid should read. Guest i think smile is a great one for a younger student. My own daughters love that book. All of my kids, actually, but especially my daughters connect very well. Host whos the author . Raina [inaudible] and then if you only read one graphic novel ever, it should be mouth by art spiegelman. Host gene yang is the library of Congress National ambassador for young peoples literature, also coauthor of a new series of books called secret coders. Gene, thank you so much. Guest thank you. This was a pleasure. This is booktv on cspan2. Television for serious readers. Heres our prime time lineup. Tonight starting at 6 15, Jeremy Scahill and calf member bees of the intercept concern Staff Members of the intercept report on the u. S. Governments drone warfare program. At eight, mary roach talks about her book, grunt the curious science of humans at war. On aftercards at 9 p. M. Eastern, eric fehr recalls his time as an interrogator at abu ghraib prison. And at 10 p. M. , a look at the strained relationship between fdr and winston churchill. We wrap up our sunday prime time with John Hickenlooper at 11 00 eastern the colorado governor remembers his path to public office. That all happens tonight on cspan2s booktv. [inaudible conversations] were going to get started. I have a lot of books to mention, so i want to make sure i get them right. Sorry were starting late. Thanks for being here and especially to the folks on our panel, mark, george and steve, were really pleased that youre here. The last theres been a lot of talk about that over the last generation, maybe the last 40 years really highlights the challenges of measuring economic values. A lot of people take view that there hasnt been much progress, much growth in incomes, economic stagnation over that period of time. And i often try to put the lie to that assertion by asking people whether theyre low income, middle income, high income, raise your hand if you want to go back to 1975. And there usually arent a lot of takers. But one thing is undeniable over the last 10 or 15 years, we truly have been living through a period of economic stagnation. And im peter getler. I joined the Cato Institute a year ago as president. And over that time brink lindsay in particular has done a lot of work trying to explore the reasons for this growth slowdown. Hes published two books. I have them as books, theyre ebooks. One is understanding the growth slowdown, and another is reviving Economic Growth. For the first time in my life, we have had a tenyear period during which real gdp growth has not reached 3 in any single year. And at the time i joined cato 13 months ago, i was actually hopeful, because during the periods of my lifetime where weve lived through time of economic stagnation or sharp economic contraction, its created a lot of pressure, tension and anxiety that often has been the impetus for positive change in, on the 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 some, and stimulate some change. I was wrong because its not the kind of change that i had anticipated. Clearly. Really lucky to have three gentlemen here that i dont think really need much of an introduction, but ill try to provide one. Between them i think theyve probably written more books than ive ever read [laughter] but i think its a great opportunity for each of them to comment on, you know, their views on how were going to revive Economic Growth in the United States and thereby continue the course of progress and prosper the city that our nation has enjoyed prosperity that 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 attending Cato University this summer so that his son could be inoculated against what he was likely to learn from the economics professors in college before he attended. When i was getting ready for college, i didnt need such inoculation. But in the senior year of my high school days, george g with ilders book gilders book wealth and prover poverty was released, and during the summer i read it. It gave me no shortage of ammo to use against the marxist professors i encountered when i attended school, including in such classes as capitalism and its critics. I think things have changed. Some things havent changed. I think the philosophical makeup of the faculty at most universities is about the same as 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 their transcript and that disagreement is not permitted. So i actually thank you, chiang, for providing me george, for providing me so much ammo to use against fraternity brothers, professors and others with whom i didnt agree, who didnt agree with me in the case for enterprise and free markets. A lot of the ammo started at cato. Thanks so much for that. Thanks so much for that. Georges book is the scandal of money, and were delighted. I think one of the ideas that cato has promoted for a long time is the fact that our fiat money system and the power of the Federal Reserve is a great threat not only to our economic well being, but to how freedom. To our freedom. And thats one of the reasons that for 34 years cato has held a prominent annual monetary conference thats coordinated by our Vice President , jim dohrn. And that we started under the direction of our center for monetary and financial alternatives to highlight these risks and to promote free Market Alternatives to our current system. So georges book is very important and timely. In addition, steves last book, i believe, was a similar topic, highlighting the threat that the lack of sound money poses to our country. So those are both tremendous contributions to the popular literature. I told steve earlier that for most of my life ive not been affiliated with either 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 forbes for president. Steve replied that he wishes a lot more [laughter] registered and voted for him. But even in defeat, he made great contributions to the debate and the case for freedom, enterprise, sound money and a flat tax. And hes still at work. His book that he wrote with elizabeth ames, reviving america how repealing obamacare, replacing the tax code and reforming the fed will restore hope and prosperity. 9 and i think he does a fantastic job really prioritizing three key areas, particularly areas such as Health Careand 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 skousen who we all know as an economist, an economics professor and author, but many also know as the impresario of freedom fest which he accurately calls the Worlds Largest gathering of free minds which aches place in las vegas takes place in las vegas every summer. Were delighted to have mark here. I mentioned at outset that while we can agree that there has been income and and economic stagnation of late, the measurement problems reflected in our economic aggregates, i think, do fool us because there are many things that arent captured in gdp. And i, again, reject the assertion that americans really at any income level have experienced stagnation in their well being n their lives in the last 40 years. Mark has proposed and he now has an updated version of his book released last year, the structure of production, an alternative to Gross Domestic Product as a measure of our economy. And he has proposed an alternative called gross output. Im going to let mark explain it because one of the reasons, rationale he gives for it being an improved and acceptedversion of, measure of the economys performance is that its now published quarterly by the government along with the gdp figures which is quite an achievement by mark. I remind him as libertarians, we dont necessarily take Government Action as an endorsement. So im looking forward to his remarks, exblaining some of the explaining some of the work hes developing in proto moting more effective measures of economic performance. And we will proceed with the speakers in the reverse order by which i introduced them. So please join me in offering a warm welcome to cato to mark skousen. [applause] peter, yourcomments about slow Economic Growth and the fact that we havent experienced 3 growth in some time reminds me of this program that george w. Bush set up called the 4 president growth plan. 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 growth of government . So she didnt appreciate that comment. But unfortunately, under george w. Bush the economy never did, using standard gdp that itsics, never statistics, never did grow more than, never did grow 4 during the entire period of full employment. Its kind of unfortunate. What id like to talk today is what peter mentioned, gross output. I think its a very important statistic, and, in fact, my main thesis is that gross output or g. O. 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 with macro, and it appeals to all the major schools of economics. In many ways g. O. Is the missing piece of what the elitist economist calls the prosperity puzzle which is their latest issue. And its interesting, they talk a lot in there about the problems with gdp which im sure will come up in this discussion. But in any case, my argument that this is a unifying approach, that its a more comprehensive picture of the economy, its a tall order. And so id like to get started. I actually see it as a paradigm shift in the way we treat macroeconomics. So we start off with basics, what is gdp, what is it supposed to measure. Annual spending is one way of looking at it in the economy. Consumers, government and business. C i g is the way they normally talk about it in classes. And theres a problem with gdp. Theres a lot of problems with gdp. But the one i want to focus in particular is according to gdp statistics, what drives the economy. And so what we find out that when you break down gdp in c president you see Government Spending second and business spending a poor third. And what does that say in terms of policy implications, you see . Thats the issue. And, of course, because Consumer Spending represents such twothirds, basically, of gdp, you get the media constantly making, creating a myth. Its one of most common myths in economics. And this is an example of it from the wall street journal. You get it from all the publications. Household spending generates more than 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 the new york times, Consumer Spending makes up more than 70 of economy. And it usually drives growth during economic recoveries. And finally another one from the wall street journal, consumers are the engine of the u. S. Economy. Consumers. Not producers. Not entrepreneurs. Consumers. Accounting for about 70 of the economy. So you can see the problem thats inherent with using gdp as a statistic. Is this, are we coming to an accurate conclusion, is our question. So we have to can ask ourselves the question, what is missing from gdp . Well, again, gdt is c i g in this 86 trillion economy. Is that the economy . So we break it down into consumption. 67 , 12. 4 trillion. Investment, 3 trillion and government 3. 2 trillion. So what is miss anything gdp . Missing in gdp . This is the surprise factor. The supply chain. Gdp does not measure the ply chain. It does not the supply chain. It does not measure all the business spending, the b to b spending to bring the products to their final use. You see, gdp just measures the value of finished goods and services. Your clothes, your shoes, the internet, all of 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 many ways. And look at the size of that supply chain which ive been measuring and now the government is measuring, be, bureau of Economic Analysis. 20. 3 trillion. Its more than Consumer Spending which is 12. 4. Its more than Government Spending, its more than fixed. See, the i part is fixed investment. Now, what is gross output in well, it can be for those of you who are economists and youre familiar with Irving Fishers equation of exchange, it measures total transactions. Its also a measure of high yaks triang9s hayeks triangles. So this is taken from prices and production, this great book that Friedrich Hayek wrote in 1931 when he was lecturing at the London School of economics. And theres a picture of the triangle that he used. Now, it was purely theoretical. He has no breakdown, he has no statistics backing it. It was pure theory. And it has had a rough road of acceptance. But what im suggesting is that hayeks triangle is being measured today now by the government. And this is a fantastic breakthrough. And i am pleased that this program here today is taking place in the hayek auditorium. So appropriate considering the fact that the governments now measuring hayeks triangle. So we all know the background of Friedrich Hayek, i just thought i would post this up here. And particularly hes known more for his book the road to serfdom and the constitution of liberty, but he is also author of this macroeconomic work which formed the foundation of my own work in the structure production called prices and production published in 1931. I have a first edition, signed by Friedrich Hayek. Today ive come out, or laissezfaire books has published his two essays on the Business Cycle called hayeks triangles, and they asked me to write the introduction. But heres a modern day version of hayeks triangle where it shows the four stages of production, resources, production, distribution and final output. So you can see gdp is in there, but then so are the stages, the supply chain prior to that where we have stages one, two and three. So this is a great way for students to capture what hayeks triangle and what i call the four universal fourstage model of the economy. Every good and service that you and i use has gone through the resource stage, the production stage, the distribution or wholesale and retail stage and then to final use which is represented, number four, by g, the p. Well gdp. Well, the good news is in april 2014 the bureau of Economic Analysis has now started to measure gross output, a measure of hayeks triangle or total transactions under Irving Fisher depending on how you want to look at that. And we have steve land fed whos the pioneer as the director of the bea who said gross output provides an important new perspective on the economy and a powerful new set of tools, of 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 whenever the bea comes out with its quarterly announcements, release of gdp data which they did just recently, notice how they define, how they define gross gdp. They define it in terms of gross output first, and then they subtract out intermediate production. So gdp plus intermediate inputs equal withs gross output. Or another way, the way they define it, gdp 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 i call a top line 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 industrybyindustry, sector by sector, im delighted that the bea has also introduce canned gross output by industry which allowed economists to sis aggregate the economy and based on stages of production. So based on this announcement, or i was i wrote a lead editorial, commentary in april 2014 in the wall street journal. At last, a better economic measure x. They came out with a new third edition of my structure production. Basically, my book, the structure production, was had virtually disappeared. Nobody was reading it. But suddenly when the government starts using this statistic, it has come out of obscurity and now is being used in, and being read. And we have copies here for you to purchase after the presentation. Well, what can we learn from the new g. O. Statistic . 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 20082009, how it dropped precipitously. Gdp declined hardly at all. In nominal terms, gdp declined 2 . Is that an accurate reflection of what happened during the great recessionsome recession . Not at all. But you can see in terms of gross output, you can see what happened in the intermediate stages. There was a significant drop that is better evidence of what is going on. So according to the new model, the new g. O. Model, everything is in reverse. Remember in gdp Consumer Spending was number one followed by government and business. Now suddenly business spending, when you include the supply chain, is nearly 60 of the economy. Consumer spending is now down to 32 . Instead of twothirds, its only a third x. Government spending is 8. 2 . So when you see these two models next to each other, what do you see . Essentially, what you see is that business, 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 Gilders talking about in his book focus on business sector, the supply chain, innovation, entrepreneurship, productivity. These are factors. And now we have a model that is consistent with Economic Growth theory. Its also supports steve hankie says with g. O. , gdps monopoly will be broken as the u. S. Government will provide official data on the supply side of economy and its structure. So we as supply siders, austrians, we have our own statistic. Now, i know a lot of you dont like aggregates, but aggregates can tell you a lot. And i love this quote by larry kudlow. Though not one in a thousand recognizes it, it is business not consumers that is the heart of the economy. When businesses produce profitably, they create incomeproducing jobs, and then consumers spend. Profitable firms also purchase new equipment because they need to modernize and update all their tools, structures and software. So this is a new approach. I call it and im not saying replace g, the p, im saying saying gdp, im saying its complementary. Gross output, you know how in a Financial Statement you have top line and bottom line. Those of us in account, my students, my business students love this. We have top line, bottom line. Now finally economists have caught up, after a hundred years behind the times, have caught up with the accounting and finance professions. Now we have a top line and a bomb line. Our top line is gross output, revenue and sales. Our bottom line is gdp, valueadded. Similar the gross profit in Financial Statements. And this is a quote here from three gate economists three graipt economists including the bea director and bill nordhouse who is from Yale University who say gross outsutt the output is the natural measure of the production sector. Both are required in a complete systems of accounts. So heres a general model of the economy where you see the production side, the make economy, reaching final use. Gdp and then consumption when its used up. And is so this is, p bicep, in my textbooks a general model of the economy. I dont have time to go into that because ive run out of time. But youre interested, by way, in my powerpoint because ive gone through pretty quickly, maybe we can send it to the attendees, or they can give me a card, id be glad to send you this powerpoint to give you my basic points. When all of the textbooks developing to be in all of the textbook. I have a few quotes here. What others are saying about it. Steve forbes has been very supportive in forbes magazine. So, i dont have time to read any of the other quotes. We have the academic economists, we have business economists and so forth, recognizing the value of the structure of production. So, my baseic conclusion is simply the structure of production does matter. Thank you very much. [applause] wait for questions until the end. Mark, the government now pushing stimulating sales of the book. I assume that didnt have anything to do with your desire to public publish that. Otherwise considered rentseeking. Law of spy and law of supply and demand. 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. Put no matter how you measure the economy, theres no getting around it than to say it sucks. It just seems stuck in second gear. You get one good report followed by disappointing reports. Profits arent what they should be. Investment is not what it should be. Business formations is not what they should be. The economy is in rut. Theres a lot of talk about the new normal. 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 again. Talks about secular stagnation as if some alien forces comes along and theres nothing we can do about it. Nonsense. The rut were in today, having profound implications around the world. Bad economies lead to bad politics. See that everywhere around the world. Comes from mistakes. The nice thing about economic in errors theying can be corrected. In our book we focused on three big reforms. Obviously a lot of other things have to be done but you have to have priorities so we prioritize on health care, new tax code and getting our Monetary System back on track for the first time in almost half a century. Health care is an obvious one. 20 of the economy and the most personal thing possible, much more than taxes and the like. Health care for us, our friends, families and this leads to the question i would we have cries in health care. Not the quality of health care in the country, overall its the best in the world. You can see it in cancer survival rates. Western europe, has many fine medical institutions but in terms of survive rates that is five year, i had it several years ago. In terms of five years, you can do much better in this country than anywhere necessary the world. Some say its because theres too much demand. People like me are getting older and want more health care services, therefore the prices keep going up and the system goes why is the demand for health care considered a crisis whereas the demand for anything in the economy is considered a great opportunity . People want more enlightenment. And in terms of appses. Want nor apps . Glad to help you. Want more cars . Do it ready to your assistance, why is demand for health care considered a we dont have three markets health care. All third party dominates. The Real Customers are government, Insurance Companies and employers. The patient is at the end of the line. Proof of it is, having green witch the system, we dont realeyes how peculiar it is. You go to a clinic and hospital and ask in advance how much the treatment will cost and you get a strange look. Either youre uninsure or a lunatic. Why do you want to know the price . Dont worry about it. Insurance will cover and it then well tell you much you owe. The other proves the crumbest in america wouldnt put you in a the room with another guest, sick guest, with a kurt to an in between, which they routinely do in hospital. Robes. Going to a hospital. They look like the robes like the came from a Salvation Army dump. A dumpster. These things that humiliate you. And you see it in so the problems, when you have this topdown system, thirdparty pair system, soviet style system, they try to cure the problems with more regulations. Its like whackamole. One problem comes up, you whack it. Another problem, whack, whack, whack. Why doctors and hospitals spend more time filling out forms rather than practicing medicine. No one is happy with the system today. Medical costs still going up. Go to a hospital, thats bad enough, but people say its a very unsatisfying experience. You wonder, do the hospitallists talk to each other, n and tell you, you cant have this kind of medication and they give it to her anyway. But deduct issues on the socalled obama healthcare exchanges. You may get the insurance but as health care becomes more unaffordable than ever because you have 500,000 deductible. Its not that bald but its out of reach. Ipad, iphone comes along, samsung and others say we have a better device. You dont get that kind of thing in hospitals. One quick example. Breast cancer. Supposed to have mammograms to discuss Breast Cancer. Turns out a woman has dense breast tissue, and half of the women do, in the mammogram and the socalled improvements on it dont discover it. They only discover it onefourth of the time. Theres a new practice out there, new treatment called mow electric rahr breast imaging and they put a tracer in and will find Breast Cancer. Thats why many times a woman has a mammogram and they say you look great, and a month later they found out they have a tumor the size of a baseball. You think Something Like this new way of discovering Breast Cancer, mbi, which may in a handful of others have been push, would be quickly imitated. No. If you have a mammogram, ladies, insist on mbi. Otherwise you may miss it. So the key thing is, in healthcare is getting the patient in control again for the first time ever. The system came about because of world war ii, wage and price controls. They couldnt pay people because the labor shortages because everyone was in the armed services. So they had to pay people in kind. The government said you can do it with benefits rather than cash. After the war in the 50s, the irs made a tax ruling that imbedded the thing. So we had this crazy system today. So the thing about free markets, always turns scarcity into abundance. You see it in what we used to call cell phones. The first one from motorola, big as a brick. Big as a shoe box. 40minute battery life. First one, thousand 995. N. O. W. There are billions around the world ask they almost give them away. Smartphone, 100, about to good down to 50. Scarcity to abundance. How do we get that in health care . We outline basic reforms. One us nationwide shopping for Health Insurance instead of state cartels, have hundreds of Companies Compete for your business. Equalite treatment. If a business gets how about transparency. Hospitals and clinics post prices for their services. One charges 2,000 for an mr and i another one 350. How about requiring transparency on how much patients die from infections received after their admitted to a hospital. Its a national scandal. No restaurant could get away with that. Chipotle didnt kill anyone, thankfully, but the stock and company took a huge hit. Yet thousands of patients die unnecessarily in our hospitals. How about readmission race. How about choice of insurance . I dont need pregnancy services, thank you very minute, but im forced to buy them. Absolutely crazy do with a away the individual mandate and with the employer mandate and safety nets . You can have more effective safety nets, just highrisk pools. We have it in food. Put aside how food stamps are administered about no one need staff in the countrile you have food stamps, food banks, government doesnt run agriculture; if they ran it would we all be starving unless you worked for the government. But thats what happened in russia and china. So you can have a real entrepreneurship, effective safety nets in health care. Taxes, the second biggest reform, a burden that not just raising revenue. Were overtaxed and the biest is the federal income tax code. The lilt any, abraham lincolns gettysburg address, the american nation, all of 272 words. The constitution, amendments, 7,000 words. The bible, took centuries to put that together. 773,000 word. Federal income tax code and the rules and regulations, over 10 millions ofs and rising. Nobody knows what is in it. You call the irs hotline if they answer it, they give you the wrong answer, money magazine did a survey, gave a hypothetical familys finances, numbers, to 46 different tax preparers, people considered experts in the field. They got back 46 different returns, 46 different estimates of the familys tax liability, thousands of dollars of difference. So the answer is, the answer is, we got to junk this thing it is beyond repair, and i dont we used to say we should bury that thing but im not sear the epa would allow it to be buried now its so toxic, and replace it with a simple flat tax. Throw the whole thing out, have a single rate. Generous for children and the plan in the book, the first 50 of your family of four first 52,800 of stallry, flee of federal income tax. Only 17 above that. No tax on savings no death taxes. Should be allowed to leave your inheritance. On the business side, routes the rate from 35 to 17. Just do it. People say, oh, why not just throw them a bone and have two tax breaks, three tax rates. Some of the republicans proposed. You dont. We should have learned from 1986 when we had at bit of simplification, got it down to two rates, 28 , 15 . When you put two tax rates together, its like putting two rabbits together. They breed. They multiply. And you saw what happened with that. So least just go to a single rate. And this is and 40 countries have done this and jurisdictions have done this, and the real thing is, this is a moral thing. The opportunity costs. Irs estimates they spend 6 billion hours a year fill ought tax forms. Experts estimate we spent 200 billion to 10 billion a year to conform. Going back years, add up all the millions of hours and dollars and brain power, and think if that had gone to new products, new services, new medical devices, cures for disease, how much better and richer our lives would be instead a source of corruption that brings out the worst in everybody. The third big reform is not the most exciting thing. Monetary policy. Not 50 shades of grey. Not like going nicked naked n the jungle but it is crew. Why . Because this is how we make progress in the world, transacting with each other, buying and selling. We do it billions of times a day. Money makes that interaction easier. Progress easier to achieve. Rather than trying to do barter. Money think of money like a claim checky. Go to a restaurant and think your coat and get a token piece of paper that is worthless but a claim on a real product. Money is a claim on products and services. It works because it is based on trust. Money measures value. The way clocks measure time, scales measure weight, rulers measure space. And so the thing is, it works best when it has a fictioned value. A fixed value. Imagine if the Federal Reserve was in time of the time bureau and decided to float the clock. Life would we chaotic. Imagine if you go to the supermarket and want to buy a pound of cheese, and time changes each day. You buy a gallon of gasoline, you assume the amount of the gal is nat changing. Macbakeing a cake. Says bake the batter 30 minute, you have to figure it are those nominal minutes, inflation adjust edmund, new york minute, mexican minute . Thats what they do. Investing is risky enough but if you dont know what youre going to get back. It hurts investment which is a key to future prosperity. So the fact the dollar may be going up or down is like a watch, you either too fast or too slow. The Federal Reserve today is acting like the soviet union. It thinks it can control the economy by trying to control Interest Rates and trying to control money. Its been as donald trump would say, a disaster. Take zero Interest Rates. That is price control. You know, better than anyone else, what rent control can do and what price control can to do the market. Theyve doesnt it to the credit markets. Made it easy for government to borrow, cheap for Big Companies taborer rove but mall and new businesses and household one statistic, the past five years exbetween 2001 to 02014. Credit to government crew grew 37 . Detroit corporations, 32 , credit to Small Businesses and households, six percent. Pathetic. In the environment we have today, very difficult. Very difficult for Small Businesses businesses to get reliable lines of credit, which is why apple, 200 billion cash. Goes out and for rows tens of billions in the bond market because they can. Its cheap. They buy in stock. Not very good use of capital. Exon borrowed 12 billion to buy stock and pay dividends. Not the best use of capital. We have to go to a Gold Standard. Why . Because gold keeps its value better than anything else. We did it for 180 years. When you see the price nugget wait, thats the dollar fluctuating. Gold is like a ruler, 12 inches in a foot, 60 minutes in an hour. Have a fixed value, like 16ounces in a pound. Youll see the economy start to really prosper. In the meantime, since thats going to take a lot of intellectual work to get that done, even though we did it for 180 years, lets have real Interest Rates in the market again. Instead of these bureaucrats setting Interest Rates. Let the price be set be people, borrows and lenders. And the government seizes assets, turn that into creating future prosperity for all of it. Thank you very much. In. [applause] thank you, steve. I heard you say many times that Monetary Policy is crucial, and ive also heard you say when people start discussing the topic, its usually a signal for folks to go to sleep or leave the group. And your good humor, common sense, is really great. I think it helps a lot of people get the message. George, please join me in offering a warm welcome to George Gilder. [applause] thank you. Great to be in the hayak auditorium. The quote at the beginning of the scandal of money is from hayak, and 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 that steve just gave and its the heart of the message of the scandal of money. And thousands redefinition of economic statistics, goes deeper than he has explained. His key thesis is that goods and services are not final products. The final product is the human being and his creativity and the 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 i up better than i did. He said when an expensive car that Cesar Hill Dale go is his name. He says when an expensive car crashes into a wall, all its value disappears. Even though every atom and molecule remains. Value is information. Thats another hayak point. A car is knowledge. I say, all wealth is essentially knowledge. The neanderthal in his cage had all the re material resource wes have today. The difference between our image and the stone age is entirely the increase of knowledge. This gives us a further insight because if wealth is knowledge, what is growth . Ive been studying business, progress, for years. Its true of the leading consultants in boston. I spent a lot of time with bane and company, and they have documented learning curves across the economy, from everything from eggs to insurance policies, transistors to software codes, and learning curves ordains that with every doubling of total units theres approximately a 20 to 30 of reduction in cost. Learning curves are ubiquitous across the economy, and so knowledge 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 only in the consumption of the hamburger. The consumption of the hamburger, the consumption of housing, the consumption of transportation, clothing, whatever it is, all endows human beings with the capability to create, to learn, to expand knowledge, to expand wealth. So, this is the this is what represents all the learning at every step in the process. Its not restricted to the final output. Its 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 this has been quite an enigma for me for a long time, and ive been somewhat distracted by various commodity theories of money that believe that somehow money is really the value of money stems from its value as jewelry. Gold is valuable because its really jewelry. Thus money is valuable because its really jewelry mitchell friend, richard, said, no, jewelry is valuable because it is really money. Why is money valuable . Money is valuable because its kind. Represents kind 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, everything is closed down, nobody scores. Everything slows down when the value of with interest raters are zeroed out. Money is time. Its what forces entrepreneurs to allocate, to prioritize, to invest in one thing rather than another. Without Interest Rates, you have just everything can go forward because with infinite time, everything is 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 goaled is gold is really time. By happenstance throughout history, the mining is has advanced. As technology for extracting gold is advanced, the gold has become more widely distributed, more attenuated and deeper, and so essentially the cost of time to distract the gold remains reasonably constant for centuries. Gold has must become the source of time in the economy. Measured through time, and this is really the heart of what money is. Money is time, and what we really are experiencing today is a war against time. Conducted by all the Central Banks of the world. It explains the great slowdown in growth really began with the abandonment of woods in 1971 when when we entered the everything began to slow down because the signal of which hayak insist upon was critical of the price signals con federal by money were debached. And money became, rather than a measuring stick, as steve described is, it became a magic wand. And all these magic wands for the government, and all these you cant have real Growth Without knowledge and learning, and knowledge and learning depends on real information rather than on furious manipulations of the fed, who try to essentially fool entrepreneurs into making imprudent decisions. So, when we say going to the Gold Standard, we arent necessarily speaking about going back to anything. This is going forward. The Gold Standard in conjunction with the Global Economy opened up by the internet is a uniquely powerful, new element in the history of the world. The bitcoin transformed not just as a potential for global money but also the potential for innovation in securities. The Swift Network was hacked. The Swift Network is the Central Nervous system of our banks. And it got hacked. 60 million distracted in bangladesh. And the centraliked model centralized model of security is bankrupt. It doesnt work, anymore than the centralized model of money can work. And the coin block chain imparts security, not through concealment and centralization but through transparency and distribution. Hack half the commuters in the world to take over the black chain and change the public ledger of transaction. So we can now integrate the Gold Standard with the bitcoin standard, which is explicitly based on time and they converge, and provided that they win the fight to stop tight 2 domination of the title 2 domination of the internet, to a public facility, where aggregations of lawyers converge at every node and control and specify prices, which is the meaning of a title 2 internet. It provided we preserve the Global Internet and allow it to prosper. I believe that a Gold Standard can evolve, even if we cant go back to the kempgingrichwebber Gold Standard legislation that was introduced in 1984, and the was the last for actually enacting a connection between gold and the dollar. So, money is time, and time is real, and time cant be manipulated. It cant be hoarded. It cant be redistributed. It is time is what remains scarce when Everything Else in capitalism becomes abundant. But the abundance of capitalism is contingent on the integrate of the information that governs it. The knowledge, the process of knowledge and learning that underlie it and embody it. So all of this production of the gross output model is crucial, because not not so much because it shows that consumption doesnt drive the economy, human creativity drives the economy. And i think that is a tremendous insight and a tremendous advance. Thank you. [applause] thank you, george. One of the quotes in your book i have to paraphrase but its a paradox that always puzzle many of us, that so many who see themselves as adherents to free market set Central Planning in the monetary realm. And to extent we can convince people of that paradox and inconsistency, i think it will help our cause. I want to open it up to questions. When im at presentations at cato the mod rayor says theyre going to ask the first question. Im not going to do that out of consideration of the audience. Id like you ha of the opportunity to ask questions so those who do ask questions, please be as considerate of your fellow audience members and be concise. Please wait to be called on and recognized. Wait for the microphone so the folks up here can hear you and the folks listening on the internet can hear you as well. State your name and affiliation and please offer a concise question that is actually in form of a question. So start right here in front. Thank you. Thank you all for your comments. I want to talk about healthcare. Im lou, im an adviser to the i agree with you, mr. Forbes, that transsharon si of price is important. But frankly, outcome is equally important and pour important to the care of patients, particular hi hospitals. This question i have for you is that actually some of the payers, private Insurance Companies, are actually promoting and sending patients to where the best care is given without interfering with the clinical decision of doctors, bleach it or not. The question i have for you is could you comment on the fact of outcomes measures being the importance of the decision as to where we send our patients for care . I think the way you phrase the question, where we send patients in a true free market, you have the information on where best care is available. Metrics would be created to give them a more sophisticated information on particular outcomes. What happened with Breast Cancer is a scandal in terms of people dying in hospitals blahs of infections because of infection receivedded that are avoidable. Its an absolute scandal. Rather than hoping the insurers getting the light, like they did a few years ago with electronic records, every business in the world has had electronic records. Your local dry cleaner for 30 years. The reason because of thirdparty pair you didnt get it in health care and when they did it, they did it soviet style, one size fits all and its been a disaster. So i think the key is all the proposals we should make is to how to empower patients to make more decisions and then providers will quickly adhere to it, and if they dont, people wont go there. They dont have to go there they dont have too be directed there. And that is truly the way to go. Instead of a topdown saying, okay, lets have outcome orient markets, very, very swiftly, because again, health care is so personal. And i just give you one example. I mentioned about Breast Cancer. Theres a chain in pennsylvania called gisinger. They put in equivalent of a warranty. Legally they cant call it that but in effect if they botch your knee operation, the next one is on them. Whereas under the normal system we have today, we go back to paying it even though it was not done right the first time. How many hospital chains have put in the equivalent of warranties . You can count them on a single hand in a normal free market that would be quickly imitate ordinary you wouldnt get the customers so lets get the patient in charge and a lot of these things well find, like electronic records and Better Outcomes would happen naturally. The only place wayne advertise exist in health care is they amputate the wrong arm, theyll amputate the other for free. Or operate on the wrong side of the brain. Sure. The gentleman in the middle. Thank you. Max papis, longtime Cato Institute employee, currently economic adviser to ted cruz. George in your book, one of the most interesting parts was about the financialization of the u. S. Economy, and what that has meant to triangle of how you describe it, wall street, main street, and Silicon Valley and its implications for Economic Growth. Could you talk about that a little, please. I think the ultimate scandal of money is what is used as the alternative is a Gold Standard. Thats floethe currencies, and floating currencies today and there will be a new accounting next month or so from the bureau of international settlement. The latest estimates are 5. 2 trillion 5. 3 trillion a day. This is 26 times all of global gdp. Its 73 times all global output of goods and services. Its a scandal. And its all conducted by ten backs. They conduct 77 of the currency trading. And its 98 is speculative. Its just a complete failure. The chinese are accused of manipulating currencies because they refuse to float, they fixed on the dollar. Thus enabling their miracles of Economic Growth. And what is happening is we have created a closed loop economy with between the Obama Administration and the fed, and essentially startups, Small Businesses, main street, and shoved aside, and 62 of the feds money creation goes back to the treasury, the other twothirds, most goes to the current Big Companies, buying up their own securities for stock market cosmetics, or buying up their rivals. There are now twice as manies ipos in china as there are in the United States. This is a real catastrophe and its why we need a big change right now. Gentleman near the rear. Peter, harvard institute. National tax limitation foundation. Id like to hear from steve forbes and George Gilder about the concrete policy steps that need to be taken to restore the golds standard. Those who are advising president of the United States, what would you tell them needs to be done step by step . Well, the first thing is they want to do it. And then the other thing is, will they know how to do it . The wood standard we didnt, which is why we wrecked the system and falling for the false god that if we manipulate money we can get easy prosperity. So, you start right away by freeing Interest Rates. They say, oh, that will disrupt the markets. No, the market is already disrupted. Remember peter earhart, 1940s, economic director in occupied germany. Overnight he proposed doing away with rationing. They said its a disaster. Americans said it would be a disaster, and earhart replied, my advisers say it will be a disaster. He did it anyway and within days shelfs of German Stores started to fill up with food,so the miracle began to free Interest Rates at the beginning. The other thing is to announce and make it the case thats positive for the economy because then you can get credit markets starting to work again. The second thing is start winding down the feds bloated portfolio. People can determine where they should go. Then on the Gold Standardor, can say, by a date certain well fix it. Pick a price. 1100, 1200, and then make it very clear that by pulling away regulation, right now with banks, you try make a loan today you have to justify six ways to sunday. We deregulated the Transportation System in the country in the late 70s, under a democrat. Have to do the same thing in the banking sectorment one of the most wonderful things that happened, beautiful things that happened recently, is when the courts ruled in favor of metlife and all of this regulators who moved into metlife had to leave the free meals and free offices, and we need to do that with the economy. Right now the fed doesnt get multipliers. Just gets sterilized. So, start with those, and just announce a date certain, both ons rates and going to gold, and then in terms then the other thing it can do, peter, is remove all the barriers to alternative currency, regulatory barriers. That way if the government starts to misbehave you do it. If somebody comes up with something better, the government cant block it. So unleash human ingenuity and who knows what will happen. I knew what would happen i would be on the list of the richest people. But let the thing unleash. The faster, the better. Its not complicated. I think well be mostly pleasantly surprised how equipmently we come back to life again. Like watering a garden. Plants grow when they have water. Youre already at the top of the list with your knowledge, steve. Id like to make a comment on that because i think from a practical point of view, studying a specific price for gold would not work. I disagree with steve a little bit on this. Think it should be used as an indicator as to whether were too inflation area or two deflation area. The idea in monetary policies is to provide stability. You want to provide basic stability, and milton freemans approval was with that global mind. This problem was, the money supply. That was his biggest problem because of deregulation, m1, m2, m3, m4, decided on m2, and m2 has been moving relatively stable even throughout the financial crisis of 2008, which is quite interesting. The biggest problem i like to see gold as an indicator. Youite as an indicator. If its drifting upwards that suggests maybe too much inflation. You need to pull back. But one of the problems, steve, with the fixed price is that then the price falls below the price, then you should be accommodating and the feds should be expansionary. The problem is youre overshooting so you become expansionary and then gold shoots above your market price and then your restrictive, and then move it back down again. Hopefully you would come toward a stabilizing point of view, but the problem is, the overshooting problem with gold. Gold is not directly tied only to the dollar. Its tied to other currency. So the val tilt of gold is a volatility of gold is a problem with setting a specific target price, which is a unfortunately a moving target. Its a moving target when you have floating rates and a nonGold Standard. Never had the problem under the glassiccal Gold Standard. If other currencies fluctuate its because theyre misbehaving which is why a classic Gold Standard when people saw how well it was working for us, they adopted their own version. So the volatility comes from the lack over having specificity. And in terms of trying to control the money supply issue think its preposterous. What you call the restaurant theory of economics. The Restaurant Owner notices that customers check coat, which means more customers so he feel if he creates more coat check, that will stimulate production of more coats and more people come to the restaurant. Its backward. The money reflects people producing products and services, not the other way around. Thats where keynes was profoundly wrong. So get 60 minutes in the hour and the hour wont fluctuate. Its the viscosity of money. Freedman believed that it was a constant and turnover over the money can be predict, but turnover is controlled by us, by all those old people, producing general output and that cant be controlled by the feds. By the way in terms of marketing, even better thing is gross dome domestic intend did tour. I go into how to take advantage of that. Me question is, at cato no fan of monetary authorities, opines that even if you set strict cob straints cop constraints on the monetary you can have problems if the Fiscal Authority is unconstrained. He lays the problems of the European Central bank down to this exist. So give you propose the constraints of a Gold Standard upon the monetary authority, i suggest that you are curing a symptom and not the underlying problem, which is fiscal europes problems are structural. Fiscal and regulatory. And the idea that manipulating money, sort of like manipulating the number of minutes in an hour, is going to cure those structural problems is preposterous. They cant. Illinois if you take the word greece and translate into english you get illinois, and but no one suggests seriously that if illinois left the dollar zone its problems would be cured. Lets have an illinois peso. No. That would compound it. So those are structural problems. Nothing to do with the the euro has been mismanaged but the euro itself is not a problem but trying to use the euro to overcome the structural problems not to mention thedat tax increases that put in greece and elsewhere, is a real problem, just as in this country. So having a stable measure of money having an unstable measure of money is not going to overcome the problems you have of hyper regulation, overtaxation, and all the antigrowth talk about obamas obama talks about the republicans war on women. How about president obamas war on prosperity, which is the real problem. So having a steady measure of something, makeing it unsteady, is not going cure the real structural problems that driscoll and others refer to. I add also that has made a good point the euro is acting like a Gold Standard, and so it is causing greece and other countries, who are fiscally irresponsible, to suffer as a result of this, and get their act together. Thats what the Gold Standard does when you overuse your debt and tax system and the euro is the Gold Standard, and so a lot of economists, by the way, argue that one of the reasons that we they note that the countries that went off the Gold Standard first, during the great depression, recovered more quickly. An interesting argument that is worth looking at. I think thats what greece is thinking of, thinking, oh, we can go off the euro and, therefore, we can recover more quickly. Thats the basis of that argument. By the way, on thinking that steady money works, just ask brazil how well that works. Argentina how well that has worked, zimbabwe, how well that has worked. Countries that have steady currencies do better over time than those that dont have steady kush currencies. Not to get into the discussion of the depression, those that cheapen their money, all that did was get a bigger policy going where aall went off their currencies and the 30s was a miserable decade. You can cheat, get a little leap forward, and others follow, and youre back to where you were. Its a mistake anyway to think that the key function of money is to register something called inflation or deflation. Its to give signals of information, and in europe, the euro isnt gold. The euro is a manipulated currency, dominated by socialist regime. And so it falsifies the information that guides entrepreneur creativity. And thats why it doesnt work. Its not because it misjudged collective level of prices,