 Yn gyfnod, ddweud o'r cyllid yn rhan i'r rhan o'r rhan o'r ymddangos. Wrth gwrs, rydw i'n gweithio'r tympor yn St Petersburg, ond rhan o'r cyllid yn gyfrannu, ac yn ystod yn ymddangos fel yng ngyfnol yn London. Yn gweithio'r amser am Ymddangos, a rydw i'n ddaf yn ysgrifennu Adwm Smith. Yn gweithio'r gweithio'r tympor yn ysgrifennu, sy'n gweithio'r cyllid yn ysgrifennu. Roeddym yn dangos i'r wyf meddwl yma. That's part of the court's ends. This indeed is the oldest building in the court's ends. Dates from 1570. You may have noticed some scaffolding outside. This is not because buildings of this age need repair from time to time. But because we've decided to replace it with something more rational. Eynrand, rydw i chi'n gweld, yn ffamol yw'r Rhwng Adam Smith. Ond yn rhaid, mae'n ddwy'r Rhwng Adam Smith yn 2005, ymlaen i'r llwyr o'r ddwyllfa ym Mhwysig i'w rhai i'r unrhyw unrhyw ymlaen i'w anfersyl. Byddwn ni'n rhaid i'r unrhyw ymlaen i'r unrhyw ymlaen i'r anfersyl Group 두 into lectures, which have become an年 Nas annual fixture. I should say that tonight lectures, like all of the others have been made possible by my good friend, charlie barnet. on the front row. So, thank you very much. The format is that we will have a talk until we'll that we will have short questions on the Yn 8.15 oes cyflawn hefyd, ac ydych yn ymaddag i chi i gweithio'r dweud yerithau o Gymru cringr y gallwn dyna y bobl sydd yn gallu'r bobl. Oeddwn yn gweithio am y dweud yr arsiau a'r ei ddechrau, byddwch bod ychydig yn gwneud o'r lle i gynghor suddenlyaeth, a roeddwn yn cael ei gynhyrch yn gyhoeddau y parlymystau a'r Gweithniadau a'r cyfrifiadau, mae yna ynsterio y flid. ac mae'n gweithio i ni'n gweithio ar y cyfnod 9 o'r clwg. Yr ysgol yma yma yn Yaron Brook, ynghylch yn ymddi'r llyfr yw'r Eyn Rand Institut, yw ymddi'r ymddi'r Llyfr, ond mae'r ymddi'r llyfr yn ymddi'r llyfr. Mae'n gweithio yn Ysraele, ac mae'n gweithio yn Ysraele yn ymddi'r llyfr, oedd mae'n gweithio yn ymddi'r llyfr. Felly mae'n gweithio, mae'n gweithio yn ymddi'r llyfr yn ymddi'r llyfr, a ddod yn ymddi'r llyfr yn ymddi'r llyfr, ond mae'n gweithio'n bwysig, ac mae'n gweithio, ac yn ymddi'r llyfr, ac mae'n gweithio'n profiad ymddi'r llyfr yn Ysraele. Mae'n wedi gweld cyflwylo yn Ffobb, hanfodol Llyfr yn Ysraele a dwi'n amlwg. Yn ymddi'r llyfr, of a couple of books called Free Market Revolution, How Ayn Rand's Ideas Can End Big Government, can't be bad, and most recently Equal is Unfair, the misguided fight against income inequality. He has co-founded a private equity and hedge fund manager, which is entirely appropriate for this evening, because his topic for this evening is the Morality of Finance. Aaron Brook. Thank you. Thank you, Eamon. Thank you, Mattson, wherever you are out there. And thank you to the Adam Smith Institute, which has been a friend not only to Ayn Rand, but a friend to the Ayn Rand Institute, and to me personally for many years now, so it's always been a pleasure to work with you. And wow, look at this place. Isn't this amazing? I can just see Shylock up here trying to defend himself. I think this is where Shakespeare's Tempest was premiered. Somebody told me in this room, but it deserves Shylock. I'm just curious, how many in the room work in the finance industry if I could just get a show of hands? Quite a few, but I'd say half, maybe a little bit more than half. And to a large extent, I think tonight's talk is for you. This is a moral defence. I hope you will take it as a moral defence of what you do. Because throughout history, you've been called evil, blood-sucking, money-grubbing parasites. Authorities in the Middle Ages damned you as, quote, spiders, toads, and all creatures diabolical. Medieval artists think Dante's Inferno placed you in the seventh rung of hell with a bag of gold around your neck pulling you down into the fire. That's financiers. Your actions were sinful according to the Catholic Church and, quote, a great huge monster like a werewolf, according to Martin Luther. In the 20th century, both left, wing, and, often the Christian right, hate you. The writer Ezra Pound, the American writer Ezra Pound, described the work of financiers as, quote, the core of evil, the burning hell without let-up. Shakespeare, of course, in his famous play, The Merchant of Venice, portrays you as an evil, lustful... It's a great play, by the way. If you haven't seen The Merchant of Venice, go see it. It is fabulous, and there's actually a movie of it with Al Pacino playing Shylock, which is terrific. But it's not just Shakespeare. It's Dickens and Dostoevsky and pretty much any modern book, literature or popular fiction. The villains are almost always financiers who are condemned as useless, overpaid, paper-shuffling parasites. Now, this has been true not just of literature. Philosophers have condemned you. Economists often condemn you. Even those who advocate for free markets often say, yes, but with finance, we need to regulate you a little bit. We need to control you. If you look at murders on television, this is a great statistic. In American television, I'm not sure what the statistic would look like on British television. But if you look at murders on television, do you know that 52% of all murders on television are committed by successful businessmen? Most of whom are financiers. I don't know if you know the percentage in real life. It's really, really small, well below 1% of crimes that are actually committed by those people. But this is the portrayal, the popular portrayal, the common portrayal, the historical portrayal of finance has been as bad leachers, as bad human beings, as horrible, greedy monsters. And what an injustice this is. Because indeed, there is no developed country in the world that does not have a developed, sophisticated, robust financial industry. And there is a direct cause of relationship between having financiers, having bankers, having a sophisticated industry and financial and economic growth and wealth creation. There's not been a period of history where there was wealth without finance. Finance and financiers and financial institutions and financial markets at the heart of all economic development. All you have to do is look today at somewhere like Silicon Valley. And yeah, we focus on the entrepreneurs. But think of all the financiers that had to make those entrepreneurs possible. Think of all the venture capitalists who go unnamed, who took money and made massive investments in all these successful startups. And by the way, for every one of those successful startups lost money on about nine of their investments. There is no area of business, there is no area of industry, there is no area of production where financiers have not been at the heart, at the core helping and spurring it along. So the question we want to ask tonight is why are they so hated? And is there an actual model of defense for what they do given their success, I guess. So I think there are three reasons, three reasons for the for the fact that financiers are as hated as they are. I think the first is just sheer ignorance. People just don't understand. Finance is hard, it's complicated and it's very poorly explained. And people just don't understand. They see financiers sitting in fancy offices and going about to meetings and shuffling papers or today shuffling emails and they say, what do they actually do? Right? If you see an entrepreneur let's say Bill Gates so you can see what they actually did, they created the software and I used that software and cool, I get it, I get why this is productive. But what are derivatives have to do with this and what are hedge funds have to do with it and why is private equity have to do with any of this? That just seems like shuffling money and it's making money from money. That seems wrong in some way. So people are just ignorant of the very facts. And there's a wonderful quotation that illustrates this from Thomas Wolff's The Bonfire of the Vanities. I don't know how many of you read The Bonfire of the Valities a best-selling book in the 1980s and it was about a Bond's Trader not just any Bond's Trader, about the master of the universe. One could even think it was about a little bit hints of Michael Milkin in its portrayal. But in the book this master of the universe this all-knowing financier has to explain what he does to his young daughter. So this is the exchange between them, the daughter asking what he does and he says I'm a Bond Trader and she says well what's a Bond? So this is his attempt to explain what it is that he does. A Bond is a way of loading people money. Let's say you want to build a road and it's not a little road but a big highway like the highway we took to Maine last summer or you want to build a big hospital well that requires a lot of money, more money than you could ever get going to the bank. So what you do is you issue what are called Bond's you build roads and hospitals daddy that's what you do no I don't actually build them I handle the Bond's and the Bond's are what make it possible you help build them well in a way which ones which ones? You said roads and hospitals well not anyone specifically you go to Maine? Now in the background of course his parents are there giggling and finding this very amusing the whole phenomena of this. No not the and then his mother steps in I think you're in over your head Sherman Now of course his wife then steps in and explains what Bond traders really do to the daughter and this is a classic Daddy doesn't build the roads or hospitals and he doesn't help build them but he does handle the Bond's for the people who raise the money Bond's the little girl says yes just imagine that a Bond is a slice of cake and you didn't bake the cake but every time you hand somebody a slice of a cake a tiny little bit comes off like a little crumb and you can keep that everybody's having a good time at this explanation little crumbs the girl says yes says his wife or you have to imagine little crumbs but a lot of little crumbs if you pass around enough slices of cake then pretty soon you have enough crumbs to make your own gigantic cake so notice I mean I love the cake illusion you know and if you heard my inequality talk I talk about there about the pie illusion because they're so they're exactly the way people talk about the pie illusion and about production and about finance because they want to make it clear to you that it's zero sum all your daddy does he doesn't bake the cake he doesn't make the cake all he does is he gets a little crumbs and he doesn't really do anything he just distributes the slices of cake which he didn't build which he didn't make and those crumbs can make you rich if you get enough of those crumbs and the whole point is to make the case that he's just a paper shuffling parasite he hasn't really done anybody can distribute a cake anybody can slice a cake and hand the pieces out there's no attempt no attempt to provide an actual productive reason for what he does and why he earns the kind of money that he does so those of you in finance would probably appreciate that quote I'm sure you could do a better job explaining to your daughter hopefully what it is you actually do but even in this book about the master of the universe this is the best that they could come up with so I think one we don't understand the actual productive value that financiers actually contribute two we don't know the history and this is a much broader statement it goes beyond finance we don't know history we just don't you know in my view maybe the most important era in human history certainly from a production perspective from a wealth perspective is the 19th century the industrial revolution we know almost nothing about the industrial revolution our kids in school don't study it and if they do study it or they study it but then they learn what do they learn pollution, child labor and I don't know some other horrible thing about what happened during the 19th century which and if you're confused about pollution and child labor in the 19th century please ask me in the Q&A I love to give answers about that but do you know do you know that what the wealth of the average wealth of people was before the industrial revolution so the United Nations the United Nations defines extreme poverty now I don't usually quote the United Nations but the numbers here are just too good extreme poverty is below $3 a day what was the average earnings income of people before the industrial revolution well below $3 a day well below $3 a day indeed about 95% of human population on earth including western Europe and the United States was making less than $3 a day now I'm not cheating this is inflation adjusted so this is today's dollars imagine all of you what it would be like to live on $3 a day and we're talking about not just the period just before the industrial revolution we're talking about 10,000 years of human history for 10,000 years people do not really earn more than $3 a day I mean things got a little bit better under Rome or Greece and then they got worse under the middle ages and then they got a little bit better in the renaissance but generally things were pretty rough life expectancy under 40 right what did children do I guess I'm answering the question from the Q&A before the industrial revolution they died more than 50% of all children before they didn't make age 10 and they worked from sunrise to sunset on the farm there was no schooling there were very few periods in human history where children actually went to school that is a modern phenomena and of course we judge all of history based on our standards today so here's this period 19th century period where incomes shoot through the roof life expectancy shoots through the roof by every measure of human prosperity we do fantastic during this period and we know nothing about it so we know very little about history and the history of finance is a piece of that and then finally we have had no moral defense not only of financiers but of what financiers actually deal with the idea of making money indeed making money profit has always been deemed suspect at best evil at worst so we don't know what they do we don't know the history and how they've contributed to anything and we're suspicious of them because it's the one profession that actually makes money is what you do it's not that you're making money by selling a product you're making money when you go to work as a financier what you're supposed to do is take money and use it to make money that's essential characteristic so I'm going to try to cover all three the productive we're going to do very little history there's no time and we will end with them all but let me encourage you to buy my book because there I go into a lot more detail about all of these all of these issues so let's start with how finance actually enriches the world and for some of you this might be pretty basic but I think it's good for everybody to hear it again how does finance actually enrich the world what is the core function of financial institutions financiers financial markets the core function is to make possible saving and to convert those savings into investments that's a core function of finance is to make it possible for human beings to save money and saving is crucial for human life it makes possible long term thinking it makes possible long term planning it makes possible the reduction of risk I'm not living from paycheck to paycheck I've got some money in the bank or I've got some money invested away so for the savor this is crucial for a successful happy prosperous life if you think about what money represents what money represents money represents our effort money represents our time money represents our energy our productive energy and when we save that money we are saving productive energy we are making it possible for us to start a business to buy a house to consume to live now think about what saving was like before financial institutions you'd stick it in the mattress and if somebody stole it it was gone you had no security it didn't accumulate it was just whatever you put away in the mattress that was your saving now today well maybe not exactly today but generally over the last 200 years we've had the ability to put money away and actually get a return to see it compound year after year and actually grow and if we invested wisely it could actually grow quite fast and provide good retirement provide for starting a real business provide again for life for living but how does that happen imagine a world in which you know you want a return on your money but there are no financial institutions and there are no financial markets so you might go and you might find a local businessman who is looking for funds and you might negotiate some deal with them and you invest in their business but that's hard you have to go and choose who needs money you have to find them you then have to assess the riskiness of the investment you then have to make sure that you have enough money for the loan they might be looking for more or they might be looking for less than what you actually want to invest it's hard for you to control the risk because you're putting all your money in one basket right to one investment it's most impossible to do and as a consequence when you don't have financial institutions what really happens is people put money in the mattress they don't earn a return because it's way too difficult and hard what do financiers do financiers make it possible for you to invest in them one place call it a bank gives you some kind of interest forget that they don't today I didn't envision negative interest rates I don't think anybody in finance has envisioned negative interest rates it's a phenomenon of the modern world you put the money in the bank or in a mutual fund or in some other financial instrument and you can put a lump sum and all you have to worry about is the riskiness of this one financial institution and then what does this financial institution do? it turns around and makes those investments that you would have liked to have made it is specialized in assessing risk in assessing the character of the person they are giving the money to they are specialized in making good investments this is what a stock market does not every company gets listed why? because not every company is worthy of getting listed has the potential to grow is justified in raising as much capital as a stock market can provide and every one of the areas of financial institutions of financiers the essential is that they are deploying all of our savings for productive purposes and what they are specializing in is evaluating those productive purposes making sure that they are really productive and assessing the riskiness of those proposals of those this is a crucial function within capitalism within any system of freedom think about what happens when we get rid of them and we centrally plan it all think about the kind of investments that happen when the government does it whether it's the white elephants in Japan when they decided they were going to become the world leaders in petrochemicals and the government funneled huge amounts of capital into petrochemicals and you can travel around Japan and see these massive plants that are empty and produced two, of course, the Soviet Union and all the waste and horrors that that entails one of the magical things is when you look at the financial markets and institutions is how good they are at what they do how often you get positive returns on your investments how often you're actually earning a return on your savings we take it for granted stock market goes up every year but none of that should be taken for granted that is a testament the fact that it goes up to the productive ability of the people running the companies but also to the productive ability of the people financing the people running the companies so financial markets, financiers connect savers connect savings to investment they turn savings they turn what we have decided we're going to postpone consumption the money we're not going to spend right now and turn that into productive investments in our economy and I don't know of a more crucial role than that in a free market now everybody benefits here the borrow benefits because they're getting a return the financier benefits because they're getting even a bigger return on what they're investing in and the person receiving the money on the production side the company now has capital to do what? hire people buy plant and equipment and actually go and make stuff and produce and create and build one of the great injustices and just mythologies that we have in the modern economic world is the idea that consumption drives an economy I mean it drives me nuts right so if only we handed out pieces of paper to people and they went out to shops and they bought stuff the economy would thrive but in real world where do you get the money in order to consume you have to work for it and if you're on welfare somebody else has to work for it and the money is stolen from them and given to you but somebody has to work for it so somebody has to produce so that there is money for you to consume and of course what are you consuming stuff that's being produced the fundamental in every economy is production indeed this economics should and must be the study of production under what conditions production happens and how do we optimize production consumption is easy give anybody a bunch of money and they'll go and consume that's not hard put them in a mall and it happens instantaneously production is hard production requires effort requires thinking it requires figuring out and creating values that people want values for other people who are willing to pay for those values more than what you put into it which is what a profit is the difference between what other people value your goods at and what it cost you to actually produce them so finances at the core of creating production which is at the core of economic activity there's no economic activity without the producer there are no employees until you have capital there's no factory until you have capital it's not it's never been the case and if somebody has a county example please share it but I've never seen a situation where labor just organically shows up and builds something all by themselves not now in the Q&A if you want to give me an example great just shows up and makes something that's never the case what actually happens is somebody has an idea and in order to deploy that idea in order to make the idea reality they have to go to a financier and raise some capital and then a capital is used to pay employees salaries because I don't know very many employees who are willing to work for years and years and years until the company has a profit for nothing they want to be paid whether the company is profitable or not who's paying them who's paying them while the company is not making any money how long does it take a biotech company to become profitable 20 years maybe 10 years, 15 years those scientists put aside physical labor those scientists they're working for free during that period and just waiting for the company to become profitable and then they'll just take a percentage of the profits right no they want their salaries so who's paying those salaries the finance guys, the capitalists they're paying the salaries they're paying the equipment, they're paying the rent they're paying it off and if you buy a tech half the time or maybe 80% of the time you never achieve profitability and you'll never get your money back you're counting on that one or you do and you make a lot of money on it to compensate for all the ones we didn't get any there is no production without the capitalist there is no production without the financier there are no jobs in an economy without finance there are no jobs without the Rothschilds and all the banks that surround us the banks create the jobs they need somebody who has an idea they need an entrepreneur but the entrepreneur by himself cannot create the jobs the jobs are created with a combination of an idea and money an idea and finance really what finance is about is a productive endeavour in the end of the day is an industry that matches talent or matches money with talent it finds the talent and invests in the talent maybe the most obvious case of that is the Silicon Valley is the venture capital community but everyone, every financier at some level or another is helping that process happen in Silicon Valley you come you pitch an idea most of the time they say no but even a stinky long head you know Steve Jobs who nobody wanted to be in the same room with because he never showered he didn't this is a true story and somebody saw the value of that idea and wrote him that first $50,000 check and then hundreds of thousands and then millions of dollars and today biggest company in the world all because one venture capitalist saw beyond the long hair and the hippie nature of Steve Jobs saw an idea, saw the potential as was willing to risk real money on that potential and he could have lost it all a number of times quite close to bankruptcy you're matching money with talent all finance does this of course now some of us in finance might be involved on the risk mitigation side and again I'm not going to get into a whole discussion of futures and derivatives you can ask me in the Q&A but what is that all that whole industry of derivatives exists to do to mitigate the risk of providing capital to mitigate the risk of doing business to mitigate the risk to creating goods and jobs and the wealth that again we all enjoy in a society so we match talent with money we reduce risk we increase liquidity which again provides more capital available to producers and on the other side of it finance also makes consumption possible consumption beyond our means I love consumption beyond my means I think it's cool right imagine if you had to wait now this is an American context I hope this works in England right imagine if you had to wait until you could buy your house for cash so every year you would put money aside and you put money aside and after 30 years you would buy your house your dream house but instead because of something called a mortgage some innovation somebody came up with about 100 years ago you can actually buy the house before you have the money to pay for it that is really cool you can enjoy this house for 30 years and then you own it fully who cares but you've enjoyed it for 30 years and you pay a little bit of interest for that enjoyment and we buy automobiles that way we use our credit cards in shopping malls the convenience of modern day consumption is just unbelievable all made possible by these paper shuffling greedy bastards right now everything I've described granted this is pretty simplified and pretty basic everything I described you could say that in the middle ages was not very well understood at the time of the Medici banks some people didn't really get finance they didn't get money they didn't get the relationship between how you could get money from money Aristotle called money baron and therefore you should not be allowed to receive interest on money because it didn't grow you get somebody a dollar and the dollar was still a dollar whereas for example if you gave somebody seeds plant seeds and you planted them something you grew out of those seeds you could demand more seeds in return but money would just stay the same and forever that was kind of the conception but since the middle ages economist after economist after economist they've explained these things and you can actually track the whole history of how they start to understand what financiers actually do and how finance actually creates production and makes us all wealthier and makes us all better off and for 100 years at least more like 150 200 years we have understood everything I've said so far there's no mystery to this so I get that some people just don't have an education in this and they're ignorant still about the virtues of finance but anybody who considers himself an intellectual anybody who studied a little bit of economics anybody who knows the history of economics of wealth creation has no excuse there's no excuse not to know this stuff there's no excuse not to understand how productively important what finance does is but now every crisis that happens is immediately blamed on financiers even before we know what happened we saw this in 2008 a very complex crisis with many subsidiary causes with a lot of things happening but the day Lehman went under capitalism had failed and financiers were at fault and Wall Street was to blame and we should put them in jail immediately the day after there wasn't even time to contemplate nobody looked at the data nobody looked at anything else we knew immediately, instinctually it's all financiers same with the great depression to this day we teach our kids that the great depression was caused by speculation on Wall Street now no even half decent economist actually believes that anymore an overwhelming majority of economists even those who tend to the left agree today that the great depression was not caused by Wall Street's speculation it was caused by multiple things again if you want to know but Federal Reserve and Central Banking and Gold had policies by Hoover and FDR and so on and so forth but it wasn't speculation on Wall Street that doesn't cause a great depression it doesn't cause a 2008 financial crisis I think the first Iron Man lecture was given here by John Allison the former CEO of BB&T who talked about the financial crisis one of the things he likes to say is it couldn't have been greed on Wall Street there was no more greed on Wall Street in 2007 than there was in 2004 than there was in 1994 there was no greed on Wall Street that's the job to make money for money that's the job title that's the job definition and it didn't change before 2008 so it doesn't matter what the actual facts are we again like to vilify these guys we like to vilify finance so this brings me to the point about history we just don't know it we don't know economic history we don't understand the evolution of economics we don't know we do know but most people don't know what caused the financial crisis and what caused the great depression and what caused the 19th century and what caused the great increase in wealth that we have seen over the last 250 years and if you don't know these things it's all just mumbo jumbo to you and as a consequence you get all these ignorant statements about financiers we don't understand what banks do we're suspicious of banks we're resentful of banks from the Medici's or really from the money changers the Jesus throughout of the temple all the way to the Medici's and the Rothschilds to the JP Morgan's of today we really don't understand the origins of the industrial revolution and the core important role that bankers and financiers play in making that possible it could not have happened without the capitalists this is why I by the way love the word capitalism I know there's some who don't like capitalism because Marx came up with the term who cares who came up with it it's a great term because at the core of free markets at the core of economic wealth creation at the core of economic progress is capital is the deployment of capital the selection of who to give the capital to and who to back and who not to back it's not an accident that the United States in order to develop during the 19th century had to import bankers from Europe because it didn't have any local JP Morgan is probably the best example of this one of the greatest bankers in history who seeded many of the great industries many of the great companies of the 19th century that created the foundation of American prosperity we don't understand even our modern day I used to teach during the 90s and kids used to come up to me and said 90s were a pretty good time stock market was going through the roof and there was a lot of prosperity and people felt rich and unemployment was a historical lows and people used to come to me and say who's responsible for these good times is it Bill Clinton or is it Alan Greenspan those are the choices and I used to say it can't be a politician the best they can do the best the politician can do is get barriers out of the way but they don't actually create anything barriers out of the way for whom it's the people who actually create the stuff that count and it can't be the chairman of the Federal Reserve because again you can ask me about this but all the Federal Reserve, all the central bank can do is be destructive it cannot actually be productive so who created the prosperity of the 1990s and some will say well it was Ronald Reagan and so on, again politicians that can't be the answer the name I gave for the prosperity of the 1990s and I stand by it is a guy who got sentenced to 10 years in jail for trumped up charges a guy who had to apologize for being a successful financier a guy who who's on who's back of Juliani made a political career and that person is Michael Milkin I don't know how many of you remember Michael Milkin one of my personal heroes Michael Milkin made it possible during the 1980s to completely restructure the American economy it is stunning to look at economic numbers not economic numbers at the macro level but at the micro level to look at their efficiencies to look at how they produced and what they made and how awful they were in the 1970s and how uncompetitive they were in the 1970s and then fast forward to the 1990s and look at those same companies or if they didn't exist which most of them didn't exist look at them in you and what made that transformation is Michael Milkin and people like Michael Milkin I mean where did Silicon Valley come from in the 1980s how did so much capital show up in Silicon Valley in the 1980s you know this is the era of the PC this is the era of early Steve Jobs this is the era of Bill Gates this is the era of Larry Ellison and Sun Microsystems and all the what now are considered relatively old technology companies but that really changed America it was by it was private equity firms it was leverage buyouts it was Michael Milkin unleishing the capitalist on the old industries that were not productive that were wasteful shutting them down but capital doesn't go to waste where did the capital go to it went from the rust belt to Silicon Valley the capital was redeployed from wasteful production to futuristic wealth creating innovative production Silicon Valley was made possible by the rust belt shutting down by shifting capital to its most productive use which is what finance and financiers do so well you cannot understand America's success economically over the last 30 years without understanding what Milkin and the hostile takeover artists like Carl Icahn who's still around did during that period and they are vilified and they've been criminalized Milkin served in jail exactly for them because of their success their unbelievable success transforming the American economy from a conglomerate-based economy unproductive to a focused lean incredibly productive industry world during the 1990s of course since then we passed laws to bring back the 1970s because we like it so much now there's one area in which you know capitalists or free marketers always criticize banks in financial markets and institutions because they seem to be so in bed with government and it's true I mean how many Goldman Sachs chairman have now been treasury secretaries of the United States and the Bolving Door I don't know what Trump had in mind in terms of the swamp but everybody surrounds Donald Trump today as from Goldman Sachs as every other person surrounded himself with Goldman Sachs people in the past it seems like there is this complete immersion between government and Wall Street now that is a justifiable criticism and many say well they rig the game so that they can make money and there's a certain truth to that but again you have to know history to understand where that comes from and I'm not going to go into the whole story but I mean from the beginning of time kings wanted to control banks why because that's where the money was and if you wanted to wage a war it was much easier to have the bank print the money for you and to create special rules for the bank so that you could go to war so government has always had an interest in finance and if the government shows an interest in you it's tough to resist they show up with guns or swords as the case may be in a long time ago they show up with force they show up with coercion and that relationship there's no question that over time is corrupting of the business of the banking of the financiers there's no question that many of them manipulate the system and game the system and endorse continued cronyism into the future but one has to remember where it starts when government gets out of the way businesses are quite happy to run their business and not have to go groveling to Washington JP Morgan great American banker saved the US economy from a deep recession in 1907 basically single handedly he got other bankers into a room locked the door, cut a deal and saved the economy and for a while he was considered quite a hero until politicians thought about this more deeply and said wait a minute we're letting a banker have this much power we're letting a banker have this much control how dare he he's just an individual we're much more important and in 1913 JP Morgan gets dragged in front of congress in one of the most humiliating displays ever in America and gets accused of all kinds of things particularly about the 1907 crisis which he bailed the whole country out and out of those hearings came the Federal Reserve came central banking central banking is good not because anybody thinks central banking actually reduces the number of crises pretty much economic history suggests the opposite but because central banking allows the politicians, the government to now control to be the heroes and the villains to control that financial world that used to be dominated by JP Morgan and what's funny is and this leads to the moral issue when JP Morgan had power he had a lot of power on the financial markets and the US economy he had a lot of power and we don't trust power when it's in individual hands when it's in a businessman's hands so we want to get away from that that's why we have antitrust laws and all kinds of laws to make sure that individuals in business don't have too much power but we are quite happy to give politicians power and to give bureaucrats power because as much power on the financial industry that Morgan ever had the Federal Reserve has a thousand times more power over the financial industry a thousand times more power over the economy and nobody worries about that nobody's ever concerned about Alan Greenspan having too much power why? what is it about a JP Morgan that we don't trust that we don't believe in that we're worried about that we're suspicious of as a culture why is he doing what he's doing why did he bail out the economy in 1907 because he loves me and you and all of us no why did he do it because he wanted to make money because he was being selfish he was being self-interested he was doing it for himself and for JP Morgan and believe me the deals he cut were very beneficial to JP Morgan they came out of the crisis in good shape so we don't trust that but why do we trust Alan Greenspan or Ben Bernanke or Janet Yellen what's his name now Powell who's going to be the next one why do we trust him why do we trust that because they're not doing it for themselves they're doing it for the public interest they're doing it for the common good they're doing it for the country they really do love you so we don't trust self-interest therefore we don't trust profit we don't trust businessmen and of all businessmen the ones who are most obviously nakedly out for profit of financiers we believe in a collectivistic ethic in an ethic that says what's good is what's good what's the public good the common good and what's really good is not if you provide value all these businessmen and finance provide value at the end of the day what's really good is if you sacrifice is if you give without expecting a return is if you act selflessly the standard of morality that our culture has adopted is a standard of selflessness that is virtue that is good that's why we love philanthropists even though they don't change the world they have very little impact on the world but let's be real it's great but it doesn't change the world like a JP Morgan changed the world like a Bill Gates changed the world like a Steve Jobs changed the world business changes the world business makes people better billions of people but they do it for themselves and we cannot stand that so what we need from all defense and financeeers it's not just to understand the productive nature of what they do and the historical benefits we have all received from them we have to adopt a new ethic and that new ethic the only new ethic I know that does this is Ayn Rand's an ethic of rational self-interest and for those of you interested I recommend you read it's an individualistic ethic it's an ethic focused on human flourishing on what are the things that produce individual human flourishing individual happiness at the end of the day and if you look at bankers at financiers they are being incredibly good for human flourishing for my flourishing for each one of your flourishing and how do they do it they are optimizing their mind by choosing by figuring out who to invest in and who not to invest in who to support, who not to support they are incredibly productive they are rational and everything they do is based on the trader principle right they provide you with capital what do they get in return opportunity for much higher returns in the future you are better off and they are better off win-win so Ayn Rand's ethic of rational self-interest is an ethic of individual rationality individual productiveness and a trader principle for Ayn Rand to be moral is to maximize the win-win relationships you have in your life it's to think it's to produce and to trade with other human beings and profit the money that they make is at the end of the day an indication of how good you are at being a trader and how good you are at being a thinker and how good you are at being a producer how good you are at creating values that people love that people want that people are willing to pay for and their payment is an indication of how much they want it how much they desire it and how much good it does for their lives so profit is a symbol of virtue you know, honestly made productively made is a symbol of virtue it's a symbol of value creation it's a symbol of how much you have changed the world so for all those financiers in the room all those in the financial industry you are the makers and shapers of the modern industrial world of modern business without you, literally the world would collapse industry would collapse jobs would not exist the values that we all take for granted from my iPhone to the food that we eat would not be there you make the world turn the world that we live in possible and you should be proud of it and don't let anybody tell you otherwise thank you all thank you very much Yaron we have 20 minutes or so for questions short questions please or very short comments and only one question anybody who says I've got three questions is not going to get past the first one we have a roving microphone Eunice there I'll take a few in the same general area so I'll start at the front with these three gentlemen here could you start there Eunice I know who you are but could you say who you are my name is Sheldon Wilkie and I think my question refers to the 2008 financial crash I think one of the problems people have the anger amongst the general public that we are paying for the bankers mistakes in the sense of there was a massive bailout by government and I think that has annoyed the public no end and that is why we've seen the rise of Corwin everyone feels that we're paying for their mistakes and they should carry the can not the general public so I certainly agree with that the bailouts are wrong they're immoral they're taking money from some to the others but the real villains of the 2008 crisis are not bankers the cause that made the 2008 happen have nothing to do with bankers bankers were just doing what they were incentivised to do by politicians if you look at the core reasons for financial crisis and I've given a six hour course on this so I'm not going to repeat it but it's mistakes by the Federal Reserve and the English Central Bank and the European Central Bank and it's a creative inflation for two and a half years thus creating an environment in which everybody wanted to borrow money it's the fact that that money got funneled into housing because the US government on a massive scale unprecedented massive scale was subsidising housing and encourages us all to invest in housing it was very infantic criminal organizations that were fraudulent and yet nobody has been prosecuted there nobody has any problem with their bailout ..the fact that the people who ran them into the ground did nothing. Indeed, the two congressmen most responsible for the financial crisis in my book.. ..a Christopher Dodd and what's his name? Bonnie Frank. They get the bill that's going to fix it all named after them. So yes, the public is angered. Bank is being bailed out. What they should really be angry about is.. ddylai'r amser sy'n gwneud o'r economau sy'n gweithio'r cyfrifiadau sy'n gweithio'r cyfrifiadau. Mae ydych chi'n amlwg yw Bernanke a Allan Greenspan, o'i gwneud o'r ddisgu'r bank cyfrifiadau yn y peth i'r Udoedd. Ydych chi'n amlwg yw'r bank ac rwy'n amlwg yw'r bank gyda'r bank. Mae'r bank yn ni'n amlwg yw ben gyffredig ffyrdd yma, ddych chi'n amlwg yw bryd, rwy'n bryd, bydd o'r ffordd ffyrdd yn 1984 yna'n cael y bwysig yn dweud cyd-flusio'r cyd-flusio a'r amgylcheddio'r dynodau sy'n dweud y dyfodol i'w bwysig i'ch cyd-flusio'r ymddiannol. So efallai yw'r ysgrifennu y dynod yn gweithio'n gwybod yw'r rhaglen i'r ffail? Ond yn ddweud, o'r arweinydd rhai ychydig, rwy'n gobeithio'r ffailwch, o'r bwysigio ar bwysig i'r bwysig i'r bwysig, yna nid o beth ydych chi'n gobeithio'r blaen. yn oed o'r rhan oed o'r rhai oedd y rhan oedd y Ffedderwyr, y rhan oedd y Ffedderwyr, a'r rhan o'r rhan o'r rhan o'r rhaid o'i sgwlad o'r rhan o'r rhaglen. Mae'r rhaglen yn gweld yr oed, Sheldon? Anthony van der Elst. Mae'r iPhone yn ni'n gwneudio. Roeddwn i wneud chi'n ddigon i'r ffordd o'r cynnig ydych chi'n trwy'r cyfnodd yn ymwybod ddweud a'r cyfnodd yn gallu bysbwyllt yn dweud, yn cyfnodd yw'n cyd-fawr yn y gweithio'ch cyfnodd yn yr ymwybod o'r cyfnodd arno i'ch cyfnodd yn cyfnodd, a yn ymwysig, yn mynd i'r cyfnodd, os yw'r cyfnodd yn y cyfnodd yn y 19th century? Yn mynd i chi yw, dwi'n credu rydyn ni'n ddweud i chi'n gweithio'r cyfnodd yn China. It turns out your iPhone was made in about 40-60 different countries. If you actually look at the different components where they came from, where they were produced, how they were integrated and the amazing supply chain they brought them all together. Two in a sembol plant in China where they happen to put everything together. But it was made in all those 40 countries. And in all those 40 countries what the iPhone has done is created jobs. Jobs where jobs did not exist before. Felly, rwy'n ei ddechrau ddweud sicrhau o'r ibnod i'r ddweud ein Llyfrod Cysu Y Llyfridon ac mae'n mynd i'r ystyried a'r ddweud ond, a rydw i'r ddweud o'r Eu Llyfridon ac mae oed yn cael ei ddweud o'r cyfwyd Cysu a ddweud o'r drwyd a'rroedd yma, yn cael $5 o $10 o'n $10 o ddweud a'rrwyd. Yn i, dwi'n cael Ieddechrau'r rydw i ysgol thatiol, i ddweud os ystafodd, dda. In the 1960s, 60 million Chinese died of starvation. These are Chinese who come from the outskirts of China, from the rural areas of China where they have nothing. And they come and work, and they work hard. And from the wages they get, not only do they feed and house themselves, but they send money back to their family in those rural areas. And they learn a skill, and they get better at the skill, and they become more and more productive, and their wages rise. And in Asia, in China, we have seen the creation of a middle class that is more than 500 million people strong. If you've ever been to China, it's stunning, stunning what's going on. But you can't get to middle classhood unless you have a job. And when you're not very productive, you're not going to get a lot of wages. That's why children didn't make a lot of money. So you have to start somewhere. And you have to start in most of these countries with child labour because what's the alternative for the children? It's starvation. I mean we can sit here in Europe in our cushy middle class lifestyles and complain about children in China. But the alternative for those children is death. So they're working, not so much in China but Indonesia and other places, right? And as their parents get rich, what happens to those children? They take them out of the workforce and put them in schools. That's what happened in this country. It wasn't child labour laws that got rid of child labour. It was the wealth of parents that got rid of child labour. And it was the fact, how many of you managed people? Imagine managing a group of 12-year-olds. Not fun, not very productive. Children are not very productive. So it's the fact that those children were replaced by machines, by more productivity, that eliminated child labour. It wasn't, the laws came after. The laws, once the child labour was gone, the laws came about. So I'm a huge fan of labour in China and Indonesia and sweatshops. And any opportunity you can give people to have a job that is better than what they have right now that improves their lives, I'm all for that. Charlie Amos, Ardeglai. Would you be at all interested in abolishing limited liability and reintroducing the debt prison to ensure that people that make a loss actually have to pay the supplies back with the consequence of not doing so being stealing? So I was wondering what your thoughts were on that. No, because everybody who gives a business a loan where the business has limited liability knows the risk. There's no fraud going on here. When I lend money by buying a bond of Apple, I know that if Apple, you know, that Apple might not be able to pay me back. That's part of the rest. I have limited liability. I can't go to the shareholders. Indeed, I don't believe, as many libertarians believe, that limited liability is a state-created thing. Limited liability is a contract. The contract basically says, the corporation is a nexus of contracts. One of those contracts basically says you can lend money to the corporation, but the corporation in paying you back will not go to its shareholders. That's just a contractual agreement. And as long as it's open, as long as everybody knows what it is, what's the problem? Indeed, the system with limited liability functions beautifully. And people lose money because sometimes you lose. That's the risk that you take. That's the nature of being in business and being in finance. But I see nothing wrong. But good in limited liability, and I can go through a whole string of the benefits of limited liability relative to its cost. OK. I'm going to take some from this side now. There's somebody right at the wall there and some at the front. Let's do that first, yeah. First, thank you for your lecture. It was very insightful. Can you say who you are? Yes. My name is Alexandra Coshuta. And what I wanted to ask you about was what is your position towards what Milton Friedman called the negative income tax or some sort of universal basic subsidy, given the fact that maybe this new breed of creative destruction, automation of a different kind, of a more intelligent kind, will hollow out the less productive? This time we'll be right. We've been wrong for 200 years. But this time we've got it right. I'm not for it. I'm just asking what you think about it. I know. So what do I think of universal basic income or negative income tax or an equivalent of universal basic income? So I'm a little split on this, right? Because I can tell you one thing. The current welfare system is a disaster. It's corrupt. I think in the United States, in any given state, you might have 200 different welfare programs where you're receiving goodies from. And it's just a mess what it creates is hundreds of bureaucrats, a whole bureaucratic establishment that's engaged in welfare. So if you could get rid of all of that and simplify it with one payment and that's it, that's kind of appealing. However, I also think it's a disaster because what it does is it basically morally makes acceptable the idea that some people don't have to work, that some people are always going to live on the dole, that some people, and I think it's a disaster for them, not just for you who has to pay for it, but for people receiving it. Because as I talked about jobs, it's not just about making the money. The money is the least important thing about a job. The most important thing about the job is that it gives you self-esteem. It gives you the confidence that you can live on this earth, that you can produce the things that you need in order to consume, that you can take care of your family and the people you love. So by universal basic income we're basically telling a whole class of people, you're useless, so we're going to write you a check, don't worry about working, the robots are going to take it over anyway. And I think that's a horrific message to set. So I would like to replace the welfare state, but with nothing, not with a different welfare entitlement, not with a different welfare standard, even if it's more efficient, which it is. I only have one question, but first I'll answer yours. In the United States, almost all the fire departments have paid professionals working alongside volunteer labour. And accepting Colorado Springs, where their government reduction effort eliminated the fire departments in several neighbourhoods, and in Kansas similar things can be said about hospitals. But my question is to follow up on Milton Friedman's. Why was he more interested in the negative income tax or universal basic income instead of the earned income tax credit, which if you believe that extremes of everybody having all the wealth and everybody else having none is less productive than a normal distribution, such as we might see in nature. Why was Milton Friedman not in favour of the earned income tax credit? Well, I mean, the earned income tax credit is a form of a negative income tax, and it was inspired by Milton Friedman's idea of a negative income tax. No, it's a negative paywall tax, I agree, but it was inspired by his idea of a negative income tax. I don't know how he differentiated between the two and why he wanted one over the other, but I believe I don't agree with you about this idea that in unfettered capitalism, what you get is all the wealth goes to a few people. I think that's nonsense, and again, one of those Marxist predictions that never happened and never will happen, and the economic theory suggests that it cannot happen, and in reality it doesn't. And I recommend my other book, Equal is Unfair, if you're interested in a discussion, in a detailed discussion of the whole inequality debate. But Milton Friedman, I think, was very concerned about how to create politically palatable, minimizing distortions in the marketplace programs. So the negative income tax for him was a way to, there was politically palatable to give people a little bit of welfare without doing too much, more efficient, more productive, and while not distorting the free market, which I think it does, I think, though, that it has other negative consequences, as explained about UBI. Is somebody in the middle there? Yeah, Tom, I think. Yeah, and Tom Burroughs, I'm one of those wealth management journalists. A question about insider dealing. One of my favorite speeches in any Hollywood movie is when Michael Douglas gives his famous greedy good speech at the Roosevelt Hotel, to be exact. And I once likened it as iron-rand on acid in terms of its brilliance of that speech. I want to ask you about insider dealing. What's your view about it? Should they be legalized? Should they be up to individual exchanges to decide as to whether certain forms of transactions should be on or off? I mean, what's your view about insider dealing in general? Well, let me first say something about Michael Douglas' speech, because it is a brilliant speech, and true from the first word to the last word, 100% true. And what's amazing is it's in the voice of the villain. He's the bad guy, and it's purposefully done. Right? Because the audience assumes everything he said was wrong, because he's the villain. And not only that, as soon as he finishes, I mean, Oliver Stone is a brilliant movie maker. As soon as he finishes, I don't know if you remember what song comes on. I mean, the camera switches to the SEC investigating him, that's the first scene after he finishes his speech, and a song comes on. It's Frank Sinatra. Let us dance among the stars. In other words, this is all frivolous nonsense. That's the kind of emotional response that Oliver Stone is trying to evoke, even though, as you say, the speech is brilliant. Later on, Michael Douglas gives his real speech, where he says we financiers, it's all zero sum, everything we make is somebody else's expenses. If I make, it means you lose, which is the real Michael Douglas speech, which is what really represents Oliver Stone's view of finance and of that character. I agree with you, I think, in terms of insider trading. Insider trading should not be criminalized. It should be up to the exchanges and up to the relationship between shareholders and management. So it's obvious that you never want the CEO to short his own shares, right? Because that creates some pretty perverse incentives. But there's law in the books that would protect you from doing that, like fiduciary duty. It would violate his fiduciary duty to maximize shareholder wealth. So you don't need a whole new set of laws to prevent him from shorting his own stock. You could also have, if you believe that insider trading was bad and there's conflicting literature on this, you could have shareholders right into the contract when they hide the CEO you cannot trade in the stock I think the more interesting solution is if you had different exchanges, have different insider trading regimes and let them compete. So you want to list at the NYC, we don't allow any insider trading, we're very strict about this and we have very strict rules, but in the NASDAQ we're kind of loose about it. You want to try inside a trade fine. And let's see who wins, right? Let's see what regime actually works. This is not something that you can abstractly figure out in a wide context and it might be different for different industries, it might be different. It's like accounting standards. I don't believe in accounting standards dictated from the top. I believe they should be competing accounting standards and exchanges can adopt particular accounting standards that are different than other exchanges and we'd have a much more competitive, vibrant, I think corporate governance world than we do today. I think corporate governance is stifling, it's destructive to productivity the way it's structured today. I had a very unfortunate friend who was a dealer and he was at lunch and was given some very sensitive market information, quite illegally. But then he was conflicted because there was one regulation saying he had to tell his clients that he knew this and another one saying if he did tell his clients that would be inside a trading. So he went to jail whichever way, very unfortunate. Anyway, let's... He's out now, thank goodness. Right, let's go to the extreme far left. No, no, no, not there, even further. Further, no. There we go. Or if you're looking from your side it might be the extreme far right. Thank you, Michael. My question is a bit of a follow-on from the previous question. You mentioned that Michael Milken was one of your heroes and you also said that what he had gone to prison for was being successful. I mean he actually went to prison for securities fraud. And inside his dealing was suspected but that's not... in part the plea bargain didn't come up. So if we just look at the securities fraud that he actually went in part, he was fined I think $400 million for that bit alone, was ripping off basically investors with warrants by investing him with his... So I get the question. I disagree with all that. It's not true that he was convicted of security fraud. He was convicted of five accounts. I think three of them were tax related. Two of them were kind of security fraud but minor violations in which everybody in the past had gotten a slap on the wrist and a fine and the judge said I'm going to make an example of you for 10 years in jail. But more than that Michael Milken didn't go to court because the SEC basically told him that if he dragged this out they would go after his brother they would go after his father they would drag his entire family into court. They were out to destroy him. The best book on Michael Milken ever written is a book called Paycheck by Dinah Feishel who is a professor of law at Chicago University I encourage you but nothing Michael Milken did was at the expense of shareholders with the expense of people he had a fiduciary responsibility towards. Okay, well sorry to come back on that point that's what you're saying according to the court or the court of particular point in time and what he actually pleaded to was on the 400 million dollar minor security violations 600 million dollar fine is hardly a minor violation so someone who pleads and agrees to that is not exactly like a parking ticket and in terms of that 400 million dollar fine what it actually was was warrants that he'd given in part to his family members as opposed to the end investors now according to that I think I'd like to see that you should be able to rip off investors I do not believe any of those counts were legitimate I do not believe Michael Milken did anything wrong I believe that he pleaded because so many businessmen in this room probably know that when the government comes after you and with criminal prosecution it's much easier to plead than to fight and the cost to Michael Milken it was easier for him to cut a deal and I think it's one of the great tragedies of the late 20th century the fact that Michael Milken didn't go to court didn't stand up to them and didn't prove the allegations false and instead settled but so many businesses, by that standard every one of the banks that cuts a deal with the regulators is criminally you already assume they're guilty I always assume that they're innocent and that these bastards at the government are going after them and using the guns that they have to force them into a plea which is exactly what they do why did JP Morgan have more fines against post financial crisis than any other bank when JP Morgan had no losses during the financial crisis had a clean portfolio did everything kind of right was brilliantly managed but it paid the biggest fines the only reason is is that JP Morgan was the only bank CEO other than John Allison to criticize Dodd Frank and to personally criticize Barack Obama and you don't do that and if you do that, the regulators are coming after you why did one of the rating agencies get a huge fine and the other two not get big fines because it was the only rating agency that lowered the ratings for U.S. government bonds but they acted exactly the same as the other rating agencies when it came to the mortgage crisis but the regulators weighed after them for them daring to lower the government bonds when the government bonds should have been lowered in the rating so I'm sorry, I don't trust the court system anymore I don't trust prosecutors anymore I certainly don't trust the attorney generals I've seen personally what they do and how they vindictive they are and how anti-justice and rule of law they are so the fact that somebody settles you know, it's sad but I don't assume that they're guilty at all I'm going to take three very, very speedy last questions and I'm going to take them together so Erin can round up Gentleman there, then the gentleman in blue and then the gentleman right in the middle there Very quick question about a specific market and maybe you can give a general answer to it so talk about the foreign exchange market $5.5 trillion a day traded on the foreign exchange market while trade international trade drop on your foot even software is less than a tenth of that so your topic is about ethics in markets and morality in markets so where do you draw the line so where is it just moving money for no real purpose high frequency trading for example so we have almost $6 trillion a day traded every day is this moral, is this ethical okay, we got it Gentleman in blue, come on run, run, run, Jonas okay Thank you, my name's David Millan I just hope you could explain an apparent inconsistency if I understood your theme correctly banking and finance promote all the good things in life government promotes the bad things in life and then subsequently you told us that all US governments have been advised by alumni of Goldman Sachs Do you see any contradiction in that? Gentleman there Last question Nicholas Pynne Bring to mind what you said in the first half of your lecture about central bankers Do you approve a quantitative easing? Of what? I didn't understand quantitative easing Let's see if we can put these all together When you see large markets like high frequency trading and foreign exchange where large volumes of money are transacting without any obvious although I think there are some productive benefits You got to really think why is this happening? Because in a rational market it wouldn't make any sense for money to just be found for no apparent reason And whenever you do that and this goes I guess to the point earlier what you discover is some government regulation that has created this market High frequency trading is a great example of this particularly in the United States It used to be that you traded stocks in NYC and different stocks in the Nasdaq and different stocks in Philadelphia and different stocks in different exchanges But there was a regulation that basically said you have to be able to trade all the stocks and all the exchanges for no apparent reason a complete violation of property rights a complete abrogation of what it meant to have different exchanges And now suddenly you had arbitrage opportunities because in fractional of seconds there were differences between how the stock traded in Philadelphia and how the stock traded in New York and you could make a little bit of money by taking advantage of that of that That wouldn't come about in a free market That can only exist because some central plan thinks he's smart and these are kind of the unintended consequences of that Now I would add that what high frequency traders also do is provide massive liquidity By the way, how much does it cost you to trade a stock today? How many cents? Nothing almost, it's almost zero The transaction cost of trading a stock today is almost zero What was the transaction cost of trading a stock in the 1970s? It could have been $50 So what high frequency trading or similar things have done is massively increased liquidity and dramatically lowered the cost of trading stocks which I think is a benefit at the end of the day Ffarn exchange If we want to go global gold standard there would be a Ffarn exchange trading market like there is today You know what was done with Nixon going off the gold standard and basically turning all currencies into floating currencies It's created this opportunity and people are taking advantage of it Now again, I think there's a productive purpose there What George Soros did to the pound years and years ago was very healthy ultimately for the English economy What hedge funds do to currencies when they move and they put pressure, for example, in the Asian economies in 1998 to completely reform themselves There was market discipline on economies out of control of governments that are out of control which brings me to the question of my opinion of government I have a generally very very low opinion of all governments today I think government is a necessary good but it is today being so abused that almost everything they do is tinged with horror So Government is, according to George Washington's second inaugural address Government is a gun Government is force Government is coercion There is no role for force, coercion and a gun in market transactions You don't need it for insider trading You don't need it to arbitrate between a trade between two individuals What you need a gun for is to protect us from crooks Now I would have some respect for these people if they caught Bernie Madoff Remember people I have a hard time calling the people but the people at SEC were so busy reading my 13Ds and my 13Gs and how much I traded in this stock and how much I traded in that stock and what my intentions were which are all legitimate to any time to investigate Bernie Madoff They got a stack of papers like this from a hedge fund manager who was doing exactly the pyramid scheme that Bernie Madoff was engaged in and they ignored it or they went and superficially looked at his books and did nothing The one job Government has is to catch crooks and criminals and to put them in jail The one job that it has is to get real fraudsters and put them away is to protect me from the Bernie Madoffs in the world and they can do that and you can't blame them for not doing it because they're too busy investigating all of us It's like the NSA is too busy listening in this room to actually catch a terrorist The SEC is too busy looking at all of your papers to actually catch a Bernie Madoff So it's not that I object to Government I object to the Government we have today which have taken, brought a gun brought force, brought coercion brought the authority into places that it does not belong in ways that are horrific If you're in the financial industry and I know many of you are there are tons and tons and tons of regulations that you have to abide by that do actual zero benefit to the world out there that don't help you that don't help your customers that don't help your clients that are just there for the real paper shufflers for the real parasites at the SEC and the English regulatory bodies to keep their jobs and to embolden the power-lusting over the real productive people in this economy which are the financiers and the business people and the reason it makes me mad is because business is such a beautiful thing finance is such a beautiful thing left alone we change the world we build economic powerhouses we actually increase the standard of living or being of humanity a billion people have come out of poverty over the last 30 years not because of regulators not because of government not because of bureaucrats but because of businessmen in China and India and places like that that is so beautiful to see human beings rise up and be successful and create wealth and live a good life and then to watch that destroyed literally destroyed like in the case of Michael Milken by putting the most productive in jail the most able in jail it just rips me apart but yes I despise government as it is today and I love finance I love production I love productivity, I love businessmen because they make my life better and what was the last question I can't remember Quantitative easing very quickly Quantitative easing I don't believe this should be a Federal Reserve I believe in private banking quantitative easing I think was a massive central planning scheme to try to manage the economy there was a huge liquidity crunch they had increased liquidity in the markets and maybe that was the only way they could do it but they overran it, they overdid it and I think unwinding it is going to be messy and I'm not a fan but I'm not a fan of central banking I mean I think anything a central bank does is ultimately flawed, why? because it's a central planned plan the only good indication of how much money should be in an economy or what interest rate should be at is the supply and demand of loanable funds savings and demand for loans it should be a market transaction that determines interest rates and it should be the private circulation of money through private incentives and profit and finances that determine the supply of money and as soon as you put a central planner in in any area whether it's finance or anything else, you mess it up so it's not that I blame central bankers I think anything they do would be flawed thank you all