Marriage on the oneyear anniversary of the Supreme Court ruling, and america has drifted from the founders original ideas of liberty and justice. And those are just a few of the authors on booktv this weekend. For a complete television schedule, go to booktv. Org. Booktv, 48 hours of nonfiction books and authors, television for serious readers. [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. Thanks for all being here, and thanks especially to the folks on our panel, mark, steve and george. 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 the view 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 them as books, theyre ebooks. One is understanding the growth slowdown and another is reviving Economic Growth. For the first time in my life, weve 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 and stimulate some change. I was wrong because its not the kind of change that i had anticipated. [laughter] clearly. Really lucky to have three gentlemen here today 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 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 Gilders book wealth and poverty was released, and during the summer between high school and college i read it. And 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, george, for providing me so much ammo to use against fraternity brotherses, professors and others with whom i didnt agree who didnt agree with me and 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 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 dorn, and that we started under the direction of our center for monetary and financial alternatives to highlight, highlight these risks and to promote free Market Alternatives to our current system. So georges book is very important and timely. In addition to 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. And i think he does a fantastic 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 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 takes place in las vegas every summer. Were delighted to have mark here. I mentioned at the outset that while we can agree that theres been income 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 of any income level have experienced stagnation in their well being, in their lives in the last 40 years. Mark has proposed and he now has an updated version at least last year of his book, the structure of production, an alternative to Gross Domestic Product as a measure of our economy. And has proposed an turn called gross output. Im going to let mark explain it because one of the reasons, rationales he gives for it bng an improved and accepted version of the measure of the economys performance is that its now published quarterly by the government along with the gdp figs which is figures which is quite an achievement by mark. But as libertarians, we dont necessarily take Government Action 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 speakers in the reverse order by which i introduced them. So, please join me in offering a warm welcome to cato for mark skousen. [applause] peter, your comments 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 growth plan. And when i i talked to the organizer of it, i said 4 growth plan, now, did he mean growth of the economy or growth of government . [laughter] so she didnt appreciate that comment. [laughter] but unfortunately, under george w. Bush the economy never did, using standard gdp statistics, never did grow more than never did grow 4 during the entire period of full employment. So 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 latest 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, plus, i plus 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 on in particular is according to gdp statistics, what drives the economy. Be and so what we find out that when you break down gdp and c plus i plus g, you see that it breaks into Consumer Spending as the biggest sector of the economy, 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 the 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 the 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 entrepreneur. 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 ask ourselves the question, what is missing from gdp . Well, again, gdp is c plus i plus g, it was 18. 6 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 missing in gdp . This is the surprise factor the supply chain. Gdp does not measure 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, the bea, 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 . Well, it can be for those of you who are economists and youre familiar with the Irving Fishers equation of exchange, it measures total transactions. Its also a measure of high yaks hayeks triangles. And 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 modernday 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 gdp. Well, the big news is in april 2014 the bureau of Economic Analysis which puts out gdp statistics 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 Landfeld whos the pioneer of the bea who says gross output is 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 are 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 equals 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 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, im delighted that bea has also introduced gross output by industry which allows economists to disaggregate the economy based on stages of production. So based on this announcement, i was 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 structure production. Basically, my book, the structure production, was, had virtually disappeared. Nobody was reading it. But suddenly when the government starts using the 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 ourselves, well, so 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 term, gdp declined 2 . Is that an accurate reflection of what happened during the Great 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 a 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 suddennenly business spending suddenly business spending, when you include the supply chain, nearly 60 of the economy. Consumer spending is now down to 32 . Instead of twothirds, its only a third, and Government Spending is 8. 2 . So when you see these two molds 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 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, 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 the economy and its structure. So we as supply siders, austrians, we have our own statistic. I know a lot of you dont like aggregates, but aggregates can tell you a hot. 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 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 accounting, my students, my business students love this. So we have top line is and bottom line. Top line is sales and revenue, bottom line is earnings. Now, finally, economists have caught up after 900 years 100 years, behind the times have caught up with the accounting and finance professions. Now we have a top line, and we have a bottom line. Our top line is gross output, revenue and sales, our bottom line gdp, value added, similar to gross profit in Financial Statements. And this is a quote here from three great economiests including economists including the bea director, former bea director and bill nordhouse who is from Yale University who say gross output is the Natural Production of the sector while net output is appropriate as a measure of welfare. 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 so this is, again, in my textbooks 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 powerpoint because ive gone through pretty quickly maybe we can send it to the attendees or they can give me a card or whatever. Id be glad to send you this powerpoint to give you my basic points. G. O. Is being integrated in the textbooks. This is the sign of success. So its not just in my textbook which i have, economic logic, but its also in mcconnell brew, the number one textbook in the country although thats disputed. And we have it in john taylors textbook and roger leroy miller. And so and david colander. So its in all of the textbooks. Its developing to be in all of the textbooks. Well, i have a few quotes here, what others are saying about it. Steve forbes has been very supportive in Forbes Magazine feeling this is a great leap forward, and George Gilder has suggested that vital learning accumulates through all the processes of production measured in gross output. So i dont have time to read any of the other quotes, but we have academic economists, we have business economists and so forth recognizing the value of the structure of production. So my basic conclusion is simply the structure of production does matter. Thank you very much. [applause] were going to wait for questions until the end, although i will say, mark, since you pointed out that the government now publishing g. O. Stimulated sales of books, im assuming that didnt have anything to do with your desire for them to publish it, otherwise that would be wed probably count that as rent seeking. I think savelosssupply creates demand. Thats what i [laughter] mark, thank you so much. Please join me in giving a warm welcome to steve forbes. [applause] 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. [laughter] it just seems stuck in second gear. You get one good report followed birdies appointing report by disappointing report. Profits not what it should be, new business formations are not what they should be. The economy is in a rut. And theres a lot of talk these days about the new normal, that 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 force has come along and theres nothing we human beings can do about it. Its all nonsense. The rut that were in today which is having profound implications around the world, bad economies lead to bad politics, we see that everywhere around the world, it comes from mistakes. And the 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 reforms. Obviously, there are a lot of other things that have to be done, but you have to have priorities. So we prioritized on health care, on a 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, makes up almost 20 of the economy. But also its the most personal thing possible. Much more than taxes and the like. Health care for us, our families, our friends, our loved ones. So this leads to the question, why do we have a crisis in health care . You do better in this country than anywhere else in the world. Some say their too much demand. People are getting older, we want more Healthcare Services and prices keep going up and the system collapses. Step back and ask yourself, why is demand for healthcare considered a crisis . Demand for anything else is considered a great opportunity. People want more enlightenment, knumtwo would be glad to help out. Trying to make sure i have free lunch after this. In terms of apps, you want more apps, glad to help you out, more cards, write a manufacturer, glad to come to your assistance was wise demand for healthcare considered a demand disaster when anything else is considered a great opportunity. The answer is we dont have real free markets in healthcare. All thirdparty dominated. The Real Customers our government, Insurance Companies and employers. The patient is at the end of the line. The truth of it is, if you have grown up in the system you dont realize how peculiar it is, you go to a clinic or hospital and ask and advance what treatment is going to cost and get a strange look, one or two things, either you are uninsured or you are a lunatic. Why would you want to know the price . Dont worry about it, insurance will cover it, then we will say how much you owe. Just be passive about it. Another proof of it is the crummy us to 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, the robes they give you look like they came from a Salvation Army dump, dumpster, these things that humiliate you, cant get around you and the problems when you have this topdown system, thirdparty payer system, they always try to cure the problems with more regulations. Like whack him all. When a problem comes up you whack it and other problems come up, doctors, hospitals spend more time filling out forms than practicing medicine. That is why we have a doctor shortage no one is happy with the system we have today. Medical costs are still going up. Go to a hospital, that is bad enough, very unsatisfying experience. Do they talk to each other . Do specialists talk to each of the . Cant have this kind of medication, they give it to her anyway, it is not a satisfying experience. Deductibles under the obama healthcare exchanges, you may get the insurance but healthcare is more unaffordable than ever because you have 500,000 deductible. Not quite that bad but it has become out of reach. In a free market best practices are quickly imitated. Ipad, iphone comes along, samson and others always have a better device, you dont get that kind of thing. One quick example, Breast Cancer, youre supposed to have mammograms that discover Breast Cancer, turns out a woman has dense breast tissue and half the women do, mammograms dont discover it. They only discovered one fourth of the time. A new practice, new treatment called molecular breast imaging where they put a tracer in and it will find Breast Cancer and that is why many times a woman has a mammogram, you are great and a month later they find they have a tumor the size of a baseball. Why didnt they find it . You think Something Like this new way of discovering Breast Cancer, molecular breast imaging would be quickly imitated to say this is the way to go, so if you have a mammogram insist on mbi because otherwise you may miss it. The key thing with healthcare we outline in the book is getting the patient in control for the first time ever. The system came about because of wage and price control, couldnt pay people because of labor shortages because everyone was going in the Armed Services so they had to pay people in kind, governments that you could do it with the benefits rather than cash and after the war and the 50s, they embedded the thing. This crazy system today, the thing about free markets, always turn scarcity into abundance. The first one for motorola, 30 years ago the biggest, it weighed a brick, big as a shoebox, biggest battery life, 3093, they almost give them away depending on the plan you have, smartphone 100, down to 50, scarcity into abundance, how do we get that in healthcare . Basic reforms, one would be nationwide shopping for Health Insurance instead of state cartels, hundreds of Companies Compete for your business, equalized tax treatment. If they are selfemployed and businesses get a Tax Deduction why shouldnt patients and individuals have it or equalize it . How about transparency . Having clinics post prices for their services so one charges 3000 for an mri and another one 350. Requiring transparency on how many patients die from infections received after they are admitted to a hospital, a national scandal. No restaurant could get away with that. Chip only didnt kill anyone but the company took a huge hit, thousands of patients died unnecessarily. How about readmission rates . Choice of insurance . I dont need Pregnancy Services but i am forced to buy them. Do away with the individual mandates, do away with that, safety net, you can have more effective safety net like high risk pools, we have them in food, decide how food stands are administered but no one need stars, you have food stamps, food banks, the government doesnt run agriculture, it is involved in agriculture too much but thankfully doesnt run it. Then we would have no more obesity, we would all be starving unless you work for the government. That happened in russia and china. You can have real entrepreneurship, effective safety nest and healthcare. The second big reform, price is a burden, not just raising revenue but overtext, the federal income tax code, you know the litany. Abraham lincoln at gettysburg address defined the character of the american nation, all 272 words, the constitution, amendments, 7000 words, the bible, took centuries to put that together, 773,000 words, the lincoln tax code and the rules and regulations, 10 Million Words and rising. No one knows what is in it. You call the irs hotline if they dean to answer it or the third time they give you the wrong answer, many magazine several years ago did a survey, gave a hypothetical familys finances, 46 different taxpayers considered expert in the field, you know what they got back, 46 different returns, 46 estimates of tax liability, thousands of dollars in difference. The answer is, the answer is we have to jump this. It is beyond repair. I used to say we should bury the thing but im not sure they would be buried now. Replace it with a simple flat tax. Throw the whole thing out, have a single rate, generous exemptions, the plan we outline in the book, your first 52,000 of salary, free of federal income tax, 17 above that, no tax in savings, no death tax, you should be unmolested by the irs, same on the business side, reduce the rate from 35 to 17, dispensing capital expenditures, just do it and people say why not throw them a bone and have two tax rates . Some republicans propose, no you dont. You should have learned from 1986 with a little simplification, down to two rate, 28 , 15 , when you put two tax rates together it is like putting two rabbits together. They breed, they multiply and you saw what happened with that. Lets go to a single rate. 40 countries have done this and jurisdictions have done this and the real thing is this is a moral thing. Think of the opportunity cost. We sent 6 billion hours a year filling out tax forms. Experts estimate we spent 300 billion conforming this monstrosity. Go back 20 years, add up to tens of billions of hours, trillions of dollars and brainpower in this useless activity and think if that had gone to new products and services, new medical devices, new cures for diseases how much better and richer our lives would be instead of a source of corruption it brings out the worst in everything. The third big reform is not the most exciting thing, Monetary Policy. It is not 50 shades of gray, not like going naked in the jungle, not the most exciting thing in the world but it is absolutely crucial because this is how we make progress in the world, transacting with each other, interacting with each other, buying and selling with each other, we do it billions of times a day. Money make that interaction easier. Progress easier to achieve rather than trying to do barter. Think of money like you would a claim check. You go to a restaurant, check your coat, get a token piece of paper, piece of plastic. In and of itself is worthless but claim on real product, money is a claim on product and services, it works because it is based on trust. Money measures value the way clocks measure time, skills measure weight, rulers measure space. It works best when it has fixed value. Imagine the Federal Reserve was in charge of the time euro and decided to flood the clock, 60 minutes an hour, one day, 48 the next day, 96 the day after. Life would be chaotic. Imagine going to the supermarket and want to buy a pound of cheese and it changes each day, you buy a gallon of gasoline, you assume the amount is not changing each day. Imagine baking a cake under this new regime, takes 30 minutes. Does that mean nominal minutes, inflation of justice minutes, dc minute, new york minute, mexican minute . It would be chaotic but that is what they do. Investing is risky enough when you dont know what youre going to get back. It hurts investment which is the key to future prosperity. And the fact the dollar might be going up or down is like a clock or watch, too faster too slow. Neither one will help you much. Federal reserve is acting like the soviet union. It thinks it can control the economy by controlling Interest Rate and trying to control money. It has been as donald trump would say a disaster. Take 0 Interest Rates. That is price control. You know better than anyone what rent control can do and what price control do to the form of the market. They have done it to the credit markets, made it easy for government to borrow, cheap for Big Companies to borrow, small and new businesses, let me give you one statistic. The past 5 years, government grew 37 , credits corporations 32 , credit to Small Businesses and households 6 . Absolutely pathetic. In the environment we have today especially hyper bank regulation, very difficult for Small Business to get reliable lines of credit which is why apple, 200 billion cash goes out and borrows tens of billions of the bond market because they can. It is cheap so they buy the stock, shareholders, not good use of capital. Exxon borrowed 12 billion to buy in stock and pay dividends. Not the best use of capital. Ultimately we have to go to a Gold Standard because gold keeps its Intrinsic Value better than anyone else. When you see price fluctuate that is the dollar fluctuating, not the Intrinsic Value of gold. Gold is like a ruler, 12 inches in a foot, 60 minutes an hour, fix it, have fixed value, 16 ounces a pound, you will see the economy start to prosper. In the meantime since that takes a lot of intellectual work to get that done even though we did it for 180 years in the meantime lets have real Interest Rates in the market again instead of these bureaucrats, let the price beset by free lenders and reduce the Federal Reserve portfolio, 4 trillion which they seized from the economy. Return that flow as bonds mature into the Financial System and have free people determine where the capital goes and create the future of prosperity for all of us, thank you very much. [applause] thank you. I have heard you say many times Monetary Policy is crucial. I also heard you say when people start discussing it, folks go to sleep or leave the group. Your exposition, the common sense is really great. It helps people get the message. George, please join me in offering a warm welcome to George Gilder. [applause] thank you. Great to be in this auditorium. The quote at the beginning of the scandal of money why wall street recovers but the economy never does is from hayek, it says the route and source of all monetary evil is the government monopoly and control of money. This is the part of the message steve just gave and the heart of the message of the scandal of money why wall street recovers but the economy never does. Mark skousens redefinition of Economic Statistics goes deeper than even he has fully explained because his key thesis is goods and services are not final product. 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. A professor at mit summed it up better than i did. He said when an expensive car crashes into a wall, all its value disappears even though every atom and molecule remains. Value is information. That is another hayek point. The car is knowledge. I say all wealth is essentially knowledge. The neanderthal in his cave had all the Material Resources we have today. The difference between our age and the stone age is entirely the increase of knowledge. This gives us a further insight because if wealth is knowledge, what is growth . I have been studying business progress for years and through the leading consultants in boston i spent a lot of time with bain and company and they have documented learning curves across the economy, everything from eggs to insurance policies, transistors to software codes. Learning curve ordained with every doubling of total units, approximately a 30 reduction in cost. Learning curves are ubiquitous across the economy, knowledge, wealth is knowledge, growth is learning, that is what it is. These are the real final products, knowledge and learning. Knowledge and learning does not only happen in the consumption of a hamburger. The consumption of a hamburger, consumption of housing, consumption of transportation, clothing, whatever it is all endows human beings with the capability to create, to learn, to expand knowledge, to expand wealth. This is what geo represents. All left learning at every step in the process, 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 . This has been quite an enigma for me for a long time. I have been somewhat distracted by various commodity theories of money that believe somehow money is really the value of money stems from its value as jewelry, the gold is valuable because it is jewelry. Money is valuable because it is really jewelry. My friend richard vigilante says no, jewelry is valuable because it is really money. Why is money valuable . Money is valuable because it represents time in the economy. When you add 0 Interest Rates for example, you essentially are zeroing out time. Everything slows down. Jim grant describes it as throwing away the clock in a basketball game. Everything slows down, nobody scores. Everything slows down when Interest Rates are zeroed out. Money is time. It forces entrepreneurs to allocate, to prioritize, to invest in one thing rather than another. Without Interest Rates everything can go forward, with infinite time everything is possible and this is the vision that currently governs the theft. This is why the return to gold is so critical. Gold is really time. By happenstance throughout history, as mining year has advanced, technology for extracting gold has advanced, the gold has become more widely distributed, more attenuated and deeper, essentially the cost, the time to extract the gold has remained reasonably constant for centuries so gold has become the source of time in the economy, measured through time. This is really the heart of what money is. What we are experiencing today, is a war against time. Central banks of the world. It explains the great slow down, but really began with the abandonment in 1971. When everything began to slow down. The signal which hayek insisted upon was critical, the price signals conferred by money were debauched. Money became rather than a measuring stick as steve described it it became a magic wand. All these magic wands for the government, you cant have real Growth Without knowledge and learning and knowledge and learning depends on real information rather than this serious manipulations of the fed who try essentially to fool entrepreneurs into making imprudent decisions. When we say going to the Gold Standard we are not necessarily speaking about going back to everything. This is going forward. The Gold Standard in conjunction with a new Global Economy opened up by the internet is a uniquely powerful element in the history of the world. The bit coin block change transformed not just potential for global money and potential innovation and security. The swift network, the Central Nervous system of the banks. 60 million extracted in bangladesh. The centralized model of security is bankrupt, the centralized model of money can work. The bit coin block chain imparts security not through concealment and centralization but transparency and distribution and half the computers in the world take over the public ledger of transactions so we integrate Gold Standard with it coin standard which was explicitly based on time and they converge, provided the fight to stop title 2 domination of the internet, reduction of the internet to public utility, aggregations of lawyers converge at every node to specify prices which is the meaning of the title to internet, provided we preserve the Global Internet and allow it to prosper, can evolve, even if we cant vin weber, Gold Standard legislation that was introduced in 1984 and the last great hope for actually and acting connection between gold and the dollar. Money is time, time is real, time cant be manipulated, cant be hoarded or redistributed, time is what remains scarce when Everything Else in capitalism becomes abundant but the abundance of capitalism is contingent on the integrity of the information that governs it, knowledge and processes of knowledge and learning that underlie it. This introduction of the gross output model is crucial, it shows consumption doesnt drive the economy, human creativity drives the economy and that is tremendous insight and tremendous advantage. [applause] or smack thank you, george. I have to paraphrase. It is a paradox that puzzled many of us that so many who see themselves as adherence to free markets accept central planning. To convince people of that paradox and consistency. It will help the cause. We will open it up to questions. Presentations at cato, the moderators prerogative and ask the first question i wont do that out of consideration for the audience and opportunity to ask questions. Those who do ask questions please be as considerate of your fellow audience members and be concise, way to be called on and exercise, folks appear can hear you and folks listening on the internet can hear you as well. State your name and affiliation and offer a concise question that is the form of a question. Lets start in the front. Thank you. I want to talk about healthcare. I am an advisor, i agree with you transparency in prices is important and outcomes is equally important in our view to the care of patients. Some of the things you were seeing, some of the payers by the Insurance Companies are promoting ansending patients the way best care is given around, the question i have for you is can you comment on the fact that outcomes measured the important decision as to where we send our patients for care . The way you phrased the question, where we send patients, in a true freemarket patients would quickly have the information on where best care is available. That is truly the way to go instead of saying outcome oriented. Markets will do outcome oriented so quickly. I will just give you one example. Theres a chain in pennsylvania called geisinger, they put on equivalent of a warranty. Legally they cant do that. In case they botched your knee operation, the any objection next one is on them. How many hospital chains have put the equivalent warranties . You can count them on a single hand whereas in a normal free market that would be imitated or you wouldnt get the customers. Lets get the patient in charge. Because its about them. The only place warranties exist is if they amputate the wrong arm they will amputate the other for free. [laughter] thank you, matt papas, the most important thing is u. S. Economy and what that meant to the triangle and implications for Economic Growth. Could you talk a little bit about that, please . The ultimate scandal of money is what is used as alternatives to the Gold Standard, thats floating currencies, and floating currencies today, theyll be a new accounting in this next month or so from the bureau of International Settlements but the latest estimates are 5. 3 trillion a day, this is 26 times all of global gdp. Its 73 times of all global output goods and services. Its a scandal and all conducted by 10 banks, they conduct 77 of the this currency trading and its 920 is speculative. Chinese are accused of manipulating currencies. Enabling their miracles of Economic Growth and whats happening is weve created a closed loop economy with between the Obama Administration and the fed and essentially startups, Small Businesses, main street has been shoved aside and 62 of the feds money creation goes back to the treasury, the other the other twothirds, most of it goes to this carnival of Big Companies, buying up their own securities for stock market cosmetics and or buying up their rivals. Theyre now twice as many 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. The gentleman near the rear. Peter farrara, department of institute, i would like to hear from steve forbes and george about what are the concrete steps, if you were advising the president of the United States, what would you tell him that needs to be done step by step . Well, the first thing is if they want to do it and the other thing is will they know how to do it. We didnt. Thats why we reckon the system. So you start right away by freeing Interest Rates. Now, they say, thatll disrupt the markets. No, the market is already disrupted. Remember peter in the late 1940s, economic director in occupied germany and overnight he proposed doing away with rationing, they said thats a disaster, the american said it would be a disaster and my advisers tell me the same thing. He did it anyway. Freed up within any days, the shelves started filling up with food. The other thing to announcand make it the case that thats positive for the economy because then you can get credit markets starting to grow again. The second thing is start winding down the feds portfolio, let the resources go back to the free economy where people can determine where they should go rather than the fed determine rrg they should go. On the Gold Standard, you should say by a day certain we are going to fix it, 1100, 1200, and make it very cleas by pulling away regulation, right now with banks you try to make a loan today you have to justify six ways to sunday. We deregulated the Transportation System in this country in the late 10s, began under a democrat. You have to do the same thing in a banking sector. One of the most wonderful things, trump call it beautiful things that happened recently was when courts ruled in favor of met life start with those and announce a date certain, Interest Rates and go to gold and then the other thing they could do, peter, is remove all the barriers to alternative currencies, regulatory barriers, that day if the government starts to misbehave you can do it and if somebody comes up with something better, the government cant block it. If i knew what would happen i would be in the forbes 400 list. Remove the barriers, so the faster the better, its not complicated. Just do it and i think will be mostly pleasantly surprised about how quickly we come back to life again. Plants grow when they have water. Youre at the top of the list with your knowledge, steve. I would like to make a comment on that because i think from a practical point of view setting a specific price for goal would not work. I disagree with steve a little bit on this. I think it should be used as indicator as to whether whether we are too inflationary, the idea in Monetary Policy is to provide stability, thats you want to provide basic stability and melton freemans rule what. That goal in mind. With deregulation is it m1, m2, m3, m4, pretty much decided on m2 and as a matter of fact m2 has been moving relatively stable even the financial crisis of 2008 which is quite interesting. The biggest problem i would like to see gold as indicator, you used it as indicator, that suggests maybe too much inflation, you need to pull back, but one of the problems, steve, with the fixed price is that then if the price falls below the price then you should be accommodating and the feds should be expansionary, the problem is gold is constantly overshooting one way or another, so you become expansionary and then gold goes above your market price and shoots way above it and theyre your restrictive and 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 also tied to other currencies, so the volatility of gold is a problem with setting a specific target price which is a move unfortunately a moving target. Its a moving target when you have a floating rates in the nonGold Standard, you never had the problem under the classical Gold Standard, you never had the problem when theyre misbehaving by the rules. Theyre misbehaving which is why under the classical Gold Standard, when people saw how well it was working for us and the brits, they all adopted their own for it. I just think its preposterous. The Restaurant Owner notices that a customers check coats, which means more customers and he creates more coat checks, thatll stimulate the production of more coats and therefore more people come to the restaurant, no, its backwards, money reflecting peoples producing moneys and services, thats where cain was profoundly wrong and they looked at velocity of money all over the place, so get it fixed like 60 minutes in an hour and the hour wont fluctuate anymore. Its now the scarcity of money. This was friedmans big he did believe that velocity was definitely a constant and modernism only works on the assumption that velocity turnover of the money can be predicted, but turnover is controlled by us, by all those gold people producing general output and that cant be controlled by the fed. By the way, in terms of marks things or growth expenditure, you should read the paper on it that gets the flaws on the Gold Standard that you talk about gde in terms better than go. I go into how to take advantage of that, yeah. Gentleman in the front row. Austin middle town from George Mason University economics department. My question is here at cato has no fan of centralized monotair authorities opine that is even if you sat strict constrains upon the Monetary Authority you can have Serious Problems when the Fiscal Authority is relatively unconstrained and that this is he lays the problems of the European Central bank down to precisely this issue, so given that you impose the constraints of Gold Standard upon the Monetary Authority, i suggest that you are curing a symptom and not the underlying problem, which is fiscal prophesy. The idea that manipulating money, like manipulating the minutes per hour is going to cure is preposterous. They cant. In illinois if you translate in english, you get illinois. [laughter] no one suggest that is if illinois left the dollar zone that its problem would be cured. Those are structural problems. Nothing to do with the well, the euro has been mismanaged but the euro of itself is not the problem, but trying to use the euro to overcome these structural problems, not the mention the idiot tax increases they put in greece and elsewhere is the real problem. Just as in this country, so having having a stable measure of money, having unstable measure of money is not going to overcome the problems you have of hyperregulation, overtaxation and all the antigrowth, they talk about obamas obama talks about republicans war on women, how about president obama war on prosperity which is the real problem, so having a steady measure of something, making it unsteady is not going to cure those very real structural problems that others refer to. And i would add also that jesus soto in spain made a very good point on this that the gold and 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 in 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 Great Depression recovered quickly. Its an interesting argument that is worth looking at and i think thats what greece is looking at thinking we can go off the euro and therefore we can recover more quickly. Thats the basis for that argument. By the way, on thinking that unsteady money, works, just ask brazil how well that works, argentina how well that is works, zimbabwe, countries that have steady currencies do better over time than those who dont have steady currencies. Not to get into the discussion of the depression, but those who cheapen their money all that did was get a bigger policy going where they all went off and the 30s overall 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 and in europe, the euro isnt gold, the euro is a manipulated currencies dominated by socialist regime and so its false fies the information that guides entrepreneurial creativity and thats why it doesnt work, its not because that it will misjudge collective level of prices which almost impossible to compute any way. All you have to do is look at the price of oil, we went off the rails because the price is going up. Terrible inflations concurred, oil crashes to 10 a barrel. Texas goes into a depression. The agriculture economy goes under depression. Unstable money and we saw in the last decade, unstable money is like virus in the computer, it corrupts the information, georges point. I think we are going to leave it there, i usually eat at noon. It feels like im running on the 12minute hour that steve referenced to. [laughter] i want to say what steve started off on the remarks and reject the idea that we somehow have to get used to a reduced level of growth or reduced level of prosperity because the fact that we are living through this difficult time really is a result of serious policy errors that are all related to a reduced level of freedom. So obviously something that we believe very strongly here at cato. I want to thank you all for being here. I want to specially thank those of you in the audience who were sponsored of cato, its your generosity that makes our work possible and specially want to thank the three presenters today, all of whom have books available outside for for purchase and i would encourage you to do so. Gentlemen, thank you so much for being here. Thank you. 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