 Well, it's interesting, I was talking to David Gordon, I'm sure that's the name a lot of you know in the room, a couple weeks ago, and it's getting harder and harder to plan events like these in terms of having a topic, because the news cycle is intensified and accelerated so much, especially in the era of Trump and social media, that you plan a topic a couple months out and reserve a room like this, and God knows what you're gonna wake up to that morning in the newspaper. And what we wake up to this morning is bombs away in Syria. So I'm sure there's some opinions about that in the room. But as David Gordon points out, you know this requirement that we always wake up and look at the news and look to Washington D.C. to find out what's happening in our lives is really a symptom of a sickness in our society, a politicization of our society. Everything's political. And as David points out, it makes us more concerned with what's happening in the national and international scene and less concerned about what's happening in our personal lives, with our families, in our own towns, et cetera. So it's actually, I think, a bad trend for America. And if we think about it, today's topic is evergreen. We're talking about Trump's economy. Of course, it's something that affects all of us. In many senses, war is separate from economics. If we think about politics as the use of force, it's forcing people to do things, to abide by laws and rules they might not want to voluntarily. Well, war is the complete breakdown of the marketplace. It represents human beings dealing with each other in the ultimate involuntary way, by bombing and killing and maiming. So while it certainly has an impact on the economy, from my perspective, war in and of itself, and I include bombing another country, an act of war, is not economics per se. But when we get back to Trump's economy and we think about it, I think most people in this room would agree that we have some very serious structural problems with the US economy, even though there seems to be kind of a mania of a boom going on at the time. I think most people in this room would agree that we have serious problems with the US federal debt, with deficits, with entitlements, with the dollar, et cetera. But what's so interesting about Trump is that, and I can't say this is a mistake on his part. I'd say it's more just his nature. If you recall, last year he was crowing about some of the highs in the equity stock markets and taking credit for these things. And as we all know, everyone in this room understands that the stock market prices today are the result of many, many years, many, many decades, even of monetary and fiscal policy, and Trump had very little to do with any of it. And of course the problem with taking credit for it is that if there is a downturn or during his four or eight years in office, and he has to take blame for that, at least presumably. And looking back the other day, there's really only a couple of presidents in the 20th century anyway who have endured a full eight-year term without an economic downturn. So I think Mr. Trump is putting himself at risk by taking credit for it. So the topic I had for you today was just tongue in cheek about a modest proposal, which is of course from Jonathan Swift's great essay. And the reason I bring it up as a satirical point is that while the things I'm going to suggest might aid the US economy today are modest and commonsensical in many ways, the likelihood of them actually happening is probably as remote as what Jonathan Swift talked about that we will be baking or boiling or broiling or otherwise eating children anytime soon. I hope that's a long way off at any rate. But while we talk about structural problems with the US economy, they're really almost beyond politics today. I don't believe having spent some time in Washington DC working for Ron Paul that there are political solutions to our economic problems anymore. If you look at how Congress functions, if you look at the way the committees tasked with spending and budgeting function, if you look at how politics involves itself in all of this, and if you look at how the Federal Reserve Bank operates, there really aren't ready political solutions to these problems, but there are economic and mathematical solutions to these problems if we did have the political will. The question is whether we do and whether we'll be forced to take action by some calamitous problem in the US rather than taking action now to try to stave off some of these problems. So I'm sure some of you in the room who are older might have heard of an economist named Herbert Stein. He worked for President Nixon in the 1970s. He was part of Nixon's Council of Economic Advisers, which is kind of a cheerleading squad for presidents. They're tasked with putting out data that shows whoever's the current president is doing a great job with the economy. And in a sense, he might be most famous for his son, Ben Stein. I'm sure some of you know that name in this room. He had a show called Win Ben Stein's Money, and he was a famous character in the movie, Ferris Bueller's Day Off. So anyway, Ben Stein's dad was an economist, and I'm sure quite a brilliant one. And during the late 60s and early 70s, when Nixon was president, people were very concerned with this balance of payments deficit we had with some of our importing partners in the rest of the world. So Herbert Stein came up with what's now called Stein's Law, which is if something cannot go on forever, it will stop. But then I was pretty good to have a law named out here. I mean, I don't have a PhD in econ, but I think I could have come up with that one all on my own, but I'm not an economist, and I'm not part of the Council of Economic Advisers, so it's Stein's Law. So what he meant to say was that a deficit in balance of payments could not be sustained. And so while he wasn't talking about what we as liberty minded people might think of as what's going to come, if government keeps doing to us what it's doing to us, I think it's an apt tool for us to think about. Because if we look at what the federal government's doing, if we look at what the US Federal Reserve and other central banks around the world are doing, I think that the current fiscal and monetary regime cannot be sustained. I think there's no way, no how, that this will go on much longer. The question, of course, is always how long? But before we get to doom and gloomy, I would like to point out that these problems, again, are very much of our own making. There's no reason we couldn't look at the United States of America, I assume most of us in the room are Americans, so that's our focus, and say on paper we couldn't continue to be and actually restore a sense of greatness to this creature. We actually still have one of the most educated workforces in the world. Despite all the problems with our K through 12, as we know, young people come from all over the world to go to what they consider the best universities here. We are still the unrivaled tech and software leader in the world. I think Congress might start going after Silicon Valley in some ways that aren't going to help, but nonetheless, at the moment, we still dominate software. We have abundant, sparsely populated land in this country. We have more arable land, farmable land in the United States than any other country on earth. About 17% of US acreage could be farmed theoretically, so we could easily feed ourselves and be an exporting bread basket to the world. We actually have 500 million acres of timber in the United States, which is more than during the colonial period, although forestry people will say that it's of a lesser quality today. But nonetheless, we have two huge coastlines that not only protect us, but also provide us with access to Pacific and European marketplaces. We have a very friendly neighbor to our north in Canada. We have a somewhat dysfunctional neighbor to our south in Mexico we're going to see, and we all sincerely hope that Mexico does not become another Venice whale. But nonetheless, I don't think any serious conflicts between our two countries are inevitable. And perhaps most importantly, we have huge amounts of cheap energy within the continental and US and Alaska in the form of oil and natural gas. As a matter of fact, during the Obama administration, the interior secretary announced it with the Bakken and shale formations that we found in the Dakotas and Montana. We actually have double the amount of oil we thought we had just 20 years ago. We have three times the amount of natural gas we thought we had. So this whole history we've had of meddling in the Middle East so that we could continue to have oil is just preposterous now when we look at how much energy we have in this country if we were just willing to exploit it. So again, our problems are very much of our own making. There's nothing inherent about the United States and its physical geography and its resources and its people that requires us to go into some sort of economic tailspin. I'm afraid it's what government's doing that makes that so likely. So I'd like to suggest in the time we have today this morning just three very immodest proposals for getting the U.S. economy in what I would consider what people in this room would consider some sort of sustainable track. And the first is very, very simple. We have to bring back something called interest rates. You ever heard of those? Well, they've actually existed for most of human history. And in a big picture sense, again, I'm not a wonk, I'm not an economist. Interest rates really represent a form of civilization itself. Throughout human history, people have tried to accumulate capital and leave something more to the next generation. This is the most natural and human instinct, especially when one has children and grandchildren that we can imagine. So as a result of that, we're all sitting in this beautiful room, in this beautiful restaurant, in this town with unimaginable wealth and energy and roads and healthcare and food and medicine all around us because previous generations accumulated more than they consumed. And one way you get people to do that is you pay them interest. You give them some money for saving money. You encourage them to do so. So I hope I'm not being hyperbolic when I say interest rates help drive civilization, in a sense. They're really the most important price in an economy. Everything flows from interest rates, from the cost of borrowing money to the cost of doing almost any kind of business. So this is really the fundamental starting point for building not only a real economy, but a real culture. And if you look just at the last 50 years, we used to have them. This is called the Fed funds rate, but it's a proxy of sorts for the commercial interest rates that you and I might pay. And really from the 50s all the way up until today, we've been in the 5% to 10% historical range, even in the 20th century of the United States. So what's really, really unusual is this right here. These roughly zero interest rates since the great crash of 2008. The thing about interest rates is you need market prices for money just like you need market prices for any other good or service in the economy. When you don't have market prices for money, when you in effect have a central bank setting interest rates, you have the opposite of markets. You have something called socialism. And so it's interesting to me that so many otherwise free market people, many of them on the right, don't object to monetary central planning, the idea of a central bank setting interest rates. So what we're looking at here, the federal funds rate is the rate at which commercial banks borrow from each other overnight if they need to fulfill their reserve requirements. Since the crash of 2008, I'm sure most of you know the Fed embarked on a program called Quantitative Easing which involved buying up a lot of treasury debt that banks own and unfortunately buying up worse than that. Mortgage portfolios, many of which had a lot of bad subprime toxic mortgages in them. And giving banks cash or at least balances with the Fed in exchange. So as a result of that, there's some steps to it but as a result of that banks are flush with reserve so they don't much need to borrow from each other overnight. And that's why the Fed's funds rate which we call here which the Fed targets, it doesn't set but it targets it among banks has been basically zero since the crash of 2008. It's starting to go up slightly. The other sort of fly in this ointment is that since 2008, commercial banks have been paid interest on the reserves that they just keep parked with the Fed currently 1.75%, one in three quarters. So that doesn't exactly encourage them to lend. So the result of all this is that we have a situation where David Stockman, I'm sure a name many of you know tells us we don't have any honest pricing of goods anywhere in the economy because this is the single most important price in the entire economy is rigged. So we don't really know what a barrel of oil or a bushel of wheat or a Honda Accord ought to cost. Which seems unusual to me because the Fed has distorted the single most important price in the entire economy that federal funds rate. And so I think we need this chart to understand really how historically unprecedented this is. I mean it really upends human nature in a sense because it turns savers into chumps. When the history of humanity is encouraging people to save for a better future either for themselves or for their kids. The other thing it does is it forces people to chase yields. I'm sure a lot of us in this room are investors. Well especially people who are older at a later point in life used to change their investments to a safer form that might not pay as high yields or dividends or interest but would be safer. Well you can't go and get a five or 10% any longer on a money market fund or a savings account. So you have people chasing yields and the way they do that is go buy stocks like Amazon where they think they're gonna have some capital gain on the other end as opposed to more conservative investments. So it changes the whole structure of how people look at investing and how they live their life. So how do we get back to real interest rates? Well here's who we're relying on. These young people, this is one of Janet Yellen's last days. These young people all work for the New York Fed. Apparently Janet Yellen liked to turn her collar up so this was kind of an homage to her. What you'll notice about here is the youth. The youthfulness of our economists at the New York Fed. And let me tell you something these are brilliant young men and women. They have PhDs in economics from the top schools and I'm not doubting or belittling for one moment their brain power. But what I am suggesting is that they don't know what interest rates are because they're too young. They don't understand that interest rates aren't some sort of policy tool. They're a price. They're something that ought to be set by the market as people have supply and demand. Some people wanna borrow money, some people wanna save and get paid for it. The other thing that some of them, certainly the ones under 30 have never seen a recession. A serious recession because they were too young during the crash of 2008. They weren't yet in their working lives. But even the ones under 40 never saw the era of Paul Volcker and high interest rates in the 1970s. So we have sort of a generational problem here in terms of trying to get people to understand interest rates. So the way we raise interest rates first and foremost is to get the Fed to stop its QE program which it promises to do. We won't know if it will. But this chart scares me maybe more than anything else as a parent and as someone who hopes to have a decent standard of living in my life and in my retirement. Because throughout the history of the Fed, even since it was created in the 1910s, the monetary base which is basically currency and circulation plus bank reserve. It's not the money supply per se, but it's one measure of how much money exists in the economy. And as we all know, having more money in the economy doesn't produce magically more goods and services. It just means more money. No new Honda Accords. So throughout all of its feted life, the Federal Reserve money supply grew slowly, slowly, slowly, slowly, slowly. And let's not forget, this isn't any old money supply. This is the world's reserve currency money supply. This is the currency that most of the world uses to settle payments. This is the currency that most of the world uses to buy oil from OPEC. So this is an Argentina's currency, or Zimbabwe's currency, is the US dollar. And all of a sudden with the crash of 2008, we all know the story. The Federal Reserve went into hyperdrive and more than quadrupled the amount of base money, at least the amount sitting in bank reserves in less than a decade. They recapitalized the banks. They bailed them out. Wouldn't you love it if your company's base savings account could be quadrupled from the Fed and you could sell them a bunch of worthless accounts receivable from your customers in exchange and that you'd be recapitalized because there's a recession? That'd be pretty nice. That's a business I want to be in. So what we don't know is how this is going to end. This is unprecedented. But what this represents is the Fed buying up treasuries from banks and worse, and worse debt. If this works, if a central bank can just buy up the bad assets of its banks and recapitalize them when there's an economic crisis, Hans-Hurman Hoppe asked the question, why doesn't every central bank on earth just do this? When are they all just do this? But what really needs to change about this and it needs to be unwound and it's not gonna be pretty, they claim that they're gonna start unwinding it slowly by letting some of these treasuries mature by selling them in the private market. We need to end this concept of too big to fail and we need to tell the rest of the world and the US Congress said, hey, the Fed is not gonna provide a marketplace for treasury debt. You gotta go buy it. And then interest rates reflect what the rest of the world thinks interest rates on debt ought to be. I should say treasury debt. You know, when it comes to doing away with too big to fail, we have a great example of this in actual practice and that's in the tiny nation of Iceland. 320,000 people, most of whom live in Reykjavik. During the run up to the crash of 2008, Iceland was one of the hottest jurisdictions in Europe. You had money pouring into Iceland from all over especially in terms of money pouring into the three biggest Icelandic banks. At one point they held assets that were 10 times Iceland's GDP. And what they did with it was a lot like what US banks did with it, they went crazy. They went on a global real estate spending spree and they financed a bunch of vanity projects. And then 2008 came along and these three banks were deeply underwater. And Iceland did what the ECB and the US Fed would not do with their own banks said, we're gonna let you fail. And these three Icelandic banks went under and there's a monument to all this. This is the Harpa Symphony Hall in Reykjavik. The largest glass structure in Europe. I guess it's beautiful if that's your sort of thing. Not my cup of tea, but it stands even today as an absolute monument to bank greed during that period running up to 2008. And they were supposed to be a development all around it in terms of shops and hotels and restaurants. Never materialized, the Icelandic government had to actually come in and finish it. But what's so interesting is those three banks were allowed to default on their debt. There was no state bailout. And I'm not gonna kid you, there was a very ugly fallouts as a result of this. The stock market in Iceland fell 95%, something like 60% of bank balance sheets were written off. Bank assets just written off. Interest rates were hiked to 18% during the worst of it. And actually a majority of businesses in Iceland went bankrupt during this period. And this was no great libertarian moment. The Icelandic government Institute of Capital Controls, for example. But what's so interesting is that these three banks went into bankruptcy and the management got fired. And new people came in. The boards were fired. And their business and personal debts were all restructured in bankruptcy. And a lot of European creditors and investors in these banks, you know what happened to them? They took a haircut. They lost some money. They invested in profligate banks and they lost some money as a result. In the midst of all this, the Icelandic currency was allowed to devalue by about 60%, which effectively lowered wages, which allowed Icelandic business to get back on its feet relatively quickly. And this is a cautionary tale for all those European countries that joined the Euro. You give up your currency, you can't just let it float into value like that if it needs to. Today, Iceland is one of the fastest-growing economies in the world. Its IMF emergency loan was paid off a couple of years early. It has GDP growth of greater than 4% in recent years. It has low unemployment and low inflation. So bankruptcy and liquidation, ladies and gentlemen, is how you fix bubbles. Not this monetary engineering. The crash is actually the cure that you have to endure. It's not the illness that you need to treat. So to do this, of course, to allow interest rates to rise, which I think is sorely needed, there's price to be paid for that, and we'll all feel it if it's allowed to happen. And one price is that we have to look at this and understand that it's never gonna be paid in any meaningful way. This is the U.S. federal government debt. U.S. public debt. I like that word like it's ours. But as you can see, wheels that were set in motion way back in the 30s, Social Security, other programs and the 60s, great society programs, start reaping what they've sown as we get into the 70s and 80s. The government starts spending more than it takes it in taxes year after year after year after year. Reagan comes into office, the debt is one trillion. Reagan leaves office, it's three trillion. So that's Reagan's limited government for you. And it grows and it grows and it grows and it grows and it grows. And then come the crash of 2008, it goes parabolic. So ladies and gentlemen, the whole world knows that this is not gonna be paid. And if any business operated itself in this manner, I think you would want junk bond rates before you invested in it. So the question becomes, why shouldn't treasury holders, and I'm sure there are plenty of them in this room, I have them in one of my Vanguard accounts, are gonna have to take a haircut. This is who owns all that debt that we saw accumulated on the earlier slide. And what's so interesting about it is a fair amount of this debt we sort of owe to ourselves. There's a portion that the Fed owns. The Social Security Trust Fund owns a bit, quite a bit. Civil Service programs own a bit and the Fed owns quite a bit. So really about a third of this debt could be written off and just the Social Security funds and the Office of Personal Management which is federal employees. And the Federal Reserve, that third could just simply be written off. We owe it to ourselves in a sense. And those programs, Social Security and Medicare are deeply insolvented in any actuarial sense anyway. So what I'm suggesting is that we give people a haircut. You invested in Uncle Sam and it was a bad investment. And it's funding and fueling a lot of very bad programs and I think in my opinion a very bad foreign policy. So not only do they need to take a haircut and not only in a sense, investors should bear this risk rather than taxpayers or Americans, especially young Americans as a whole. But more than anything, it has to happen because if interest rates are permitted to rise, just historical averages between five and 10% like we saw earlier, would quickly cause the interest payments on the federal debt every year. In other words, what Congress has to budget every year for payments on Treasury debt could go to a trillion dollars very quickly if interest rates were just normal between five and 10%. That would be the single biggest line item in the budget and that would make Congress very, very unhappy and it would make them very, very unpopular. So just in terms of interest rates rising, I think that mechanically speaking you almost have to cut Treasury debt as a result. And so ladies and gentlemen, I'm just gonna say that in conclusion, what we're facing in this country in terms of future payments, what we've promised people about Social Security and Medicare, represents what an economist named Lawrence Kotnikoff calls the fiscal gap. So the gap between what we've promised we're gonna pay people in Social Security and Medicare and other entitlements in the future, we, the federal government. And what we're likely to take in in taxes in those same years, you can do a discounted analysis and find a number. The gap between those two numbers is $200 trillion. $200 trillion with a T. And the economist who's worked this out is not some raving libertarian or conservative by any means, he's a very sober guy. So that means that people are never going to be meaningfully paid entitlements in the future. So we might as well get to it. But I'll leave you with this. We look at some of these structural problems in the U.S. economy. We could talk about this stuff all day. I apologize for the brevity of it. And even if we don't do earnestly some of the things I've suggested today, if we just make ourselves about 10% better than all the other countries in this world, we could have an economy that just walks away. If we're a little bit less profligate with our dollar, if we are a little bit more sensible with our tax and regulatory policy, if we just sort to de-escalate some of the wars we're in and have a saner foreign policy, in a increasingly global world, capital and human beings move around a lot more. And the rest of the world would reward us if we just instituted a measure, just a measure of fiscal and monetary sanity in the equation without even going as whole hog some of my modest suggestions today because all the economies in the world are really comparative. And there's an economist named Dan Mitchell who'll tell you, yeah, we've been building up this debt. Yeah, we've been building up the monetary base, but we just don't know. The U.S. dollar is still the least dirty shirt in the laundry. This could go on another 40 years. But I certainly, as someone with children, would rather start tackling these problems now rather than later. I feel that we have an obligation to do so. And more importantly, we could still save them off. There's still plenty of hope for the U.S. economy. And I think a lot of that hope is sitting among like-minded people right here in this room. So with that, thank you very much.