 I'm very honored to be invited to speak to this distinguished audience on this very important occasion and in this wonderful setting. Let me hasten to confess, especially because there is going to be Q and A, probably more Q than A later, let me confess that I'm not a Bastiai scholar nor a scholar of any kind. What I am is an admirer of Bastiai, a fan. I want to be like him when I grow up. Since confession is supposed to be good for the soul, let me confess that I'm here today as a free writer. My invitation about a year and a half ago resulted from an article on Bastiai published by the Federal Reserve Bank of Dallas. While the article was my idea, I was not the author. My colleague Bob Formaney wrote the article. Bob and my French colleague Irwin Quinton are here today to rescue me and keep me from drowning if I get out of the shallows and go beyond my depth to use a phrase that may be familiar to you. I might also say that my friend Dwight Lee is here. Dwight is the chair of free enterprise at my alma mater, the University of Georgia, but for the last two years he has spent one-twelfth of the year at the Dallas Fed, so we claim a little bit of him as well. My introduction to Bastiai as a student was snippets from the petition of the candle makers in economics textbooks. The brilliance of the petition still thrills and inspires me. I later read Joseph Schumpeter's famous put down of Bastiai as a brilliant economic journalist, but no economic theorist. This mean spirited assessment offended me at first, but at first I accepted it as gospel. After all, Schumpeter's history of economic analysis is a very thick book. It has gravitas. I don't give that much weight to fat books anymore. I prefer skinny books, but I was once young and impressionable. Let me say parenthetically that while Schumpeter had his faults, especially his less than optimistic view of the future of capitalism and his down his nose view of Bastiai, he was good in most respects, notably his focus on creative destruction and his focus on the crucial role of the entrepreneur. Regarding Schumpeter's negative view of Bastiai as a theorist, however, Henry Haslett said it best. He likened it to criticizing an apple tree for not bearing bananas. Haslett described Bastiai as an economic pamphleteer, the greatest exposure of economic fallacies, the most powerful champion of free trade on the European continent. He said that anyone who has ever read and understood Bastiai must be immune to the protectionist disease or the illusions of the welfare state, except in a very attenuated form. Bastiai killed protectionism and socialism with ridicule. Bastiai may have killed protectionism and socialism with ridicule, but I'm afraid that he forgot to drive a stake through their hearts. Of Bastiai as an economic pamphleteer, Haslett said that his contributions were, quote, no mean achievement, nothing to be treated patronizingly. Economics, he says, is preeminently a practical science. It does no good for its fundamental principles to be discovered unless they are applied and they will not be applied unless they are widely understood. I translate pamphleteer in today's language as an editorial writer, a talking head on TV, a teacher, an economic educator. We at the Dallas Fed have an active economic education program with publications, speeches, conferences, and workshops designed to help teachers teach economics. I tell those teachers that if Bastiai is not already their patron saint, he ought to be. Our article on Bastiai at the Dallas Fed was prepared for their benefit. In the same series, we also have articles on Hayek, Tocqueville, Haslett, and soon Schumpeter. While I no longer agree with the negative part of Schumpeter's assessment, I do base my admiration for Bastiai on his brilliance as an economic journalist or pamphleteer. As for any perceived shortcomings as an economic theorist, I wonder how many theorists have done the world as much good tolling on the frontiers of pure theory. Adam Smith taught us the advantages of trade. David Ricardo refined Smith's absolute advantage into more universally applicable comparative advantage. But I'll bet you can count such seminal contributions on your fingers and toes. At least as valuable as a practical matter is the ability to teach the lessons of good economics to real people and their political representatives, making sound economics interesting, readable, and understandable, and using it to shoot down dangerous myths and nonsense with wit, wisdom, and good humor. Someone must teach good economics in the language of the common man and make the world safer for sound economic policies, whether the common man be Jacques Bonhomme, aka James Goodfellow, John Bull, or Joe Sixpack in the US. In Texas, his name is Dicky Flatt to the sophisticated and Bubba to the rest of us, where I come from Bubba is not an acronym for the Boondesbach. The ability to move the frontier of economics closer to the people and the people closer to the frontier of economics should not be underestimated or undervalued. I try to make it my business to narrow that vast gap, at least to half vast. Schumpeter was half wrong about Bastille, but even if he had been totally right, Bastille would still be my hero. To be brutally honest about it, and speaking primarily from myself and not you, the intellectual bar that Schumpeter sets for pure theorist is set pretty high. Most of us by definition don't have IQs, three standard deviations to the right of the mean, and thus don't qualify. What should we do? Do we tuck tail and watch daytime TV? Or do we try to bring the message from the mountaintop down to the folks in the valley? After all, even Moses was only a messenger. I may admire Bastille in part because I share his perceived limitations. As Clint Eastwood's dirty Harry says, a man's got to know his limitations. I find myself under the tall part of the IQ bell curve, hopefully right of center, but certainly with plenty of headroom. And frankly, for all our sakes, I'd rather have those in the right tail of the curve go into medical research rather than economic research. I want to live longer as well as better. Besides the headroom problem, I didn't have enough math before studying economics at the University of Georgia. So I didn't become a quantitative economist. I'm not sure I became a qualitative economist either, but whatever I became, I got over it eventually. I identify with Glenn Campbell, singer and expert guitar picker. When asked condescendingly, I assume, if he could read music, he said, yes, I can read music, but not enough to hurt my picking. That's my answer to. I can read economics, but not enough to hurt my picking. Not enough to crowd out personal observation and common sense, what we call horse sense in Texas and Georgia. One might say that I studied economics in English rather than math. The slow talking version of English spoken in the American South. Jacques, our conference organizer, asked me to speak slowly today because English is not the first language of many of you. Since I learned to talk in Georgia and refined my talking skills in Texas, some people would say English isn't my first language either. The advice to talk slow was good advice, but probably redundant. Of course, the downside of my southern roots is that they add stretch to my goal of being like Bostiai when I grow up. I'll have to be a southern fried version of a French satyrist. When I moved from the east coast of the U.S. to Texas 10 years ago, I learned a Texas saying. It says, no matter who says what, if it don't make sense, don't believe it. I've taken that advice to heart. Since then, I've tried to translate economic sense, which is often uncommon sense, which is often counterintuitive into common sense. As a result, many of my colleagues think that I have a good command of the obvious. But sometimes we must be reminded of the obvious. Obvious things like abundance is better than scarcity. More is better than less if you're talking about a good thing. We work to live rather than live to work. We produce to consume, not consume to produce. We export to import, not import to export. We should overcome obstacles and inefficiencies to create wealth and prosperity, not create obstacles and inefficiencies to make work. We should not break windows. That is a bad thing, not a good thing. Speaking of the broken window fallacy, Bastille taught us that perhaps the most obvious need of all is the need to consider the unseen as well as the seen. To consider not only what happens, but also what does not happen as a result of what happens. Now, I know you got that because you've heard it before. Closely related to the seen and the unseen, of course, is the half-truth and the whole truth, the short run and the long run, the effects on special interests and interested parties versus the overall effects on everyone. I think we owe a debt of gratitude to Henry Haslett, who fleshed out these Bastille concepts in economics in one lesson. Haslett does justice to Bastille, which is saying a lot. I try to emulate Bastille's willingness to state the obvious. For that reason, two of my favorite economists are former baseball player and manager, Yogi Berra, and comedian Richard Pryor. Yogi Berra has alleged to have said, you can observe a lot just by watching. And Richard Pryor once famously asked, who are you going to believe? Me or your own lying eyes. Those two taught me to believe my eyes. Bastille certainly observed a lot by watching. Empty docks and dried up commerce showed him directly the benefits of protection. As for abundance being preferable to scarcity, another of my favorite economists, the late actress and wit, Mae West, put it almost as well as Bastille when she said, too much of a good thing is just about right. A recent example of denying or ignoring scarcity is the electricity mess in California. Californians for years have demonstrated a love of power and a disdain for power plants. Preferring clean air, they have built little new power generating capacity in recent years. Then they deregulated a portion of their industry electricity market, but kept price controls at the consumer level. As the cost of generating electricity and buying it from non California sources rose, consumer price caps provided no market incentive for new supplies or reduced demand. They now want to fix the problem caused by consumer price controls, not by removing them, but by imposing similar controls on wholesale prices. Meanwhile, they want the federal government to force non California sources to sell them electricity at below market prices, at prices that are just and fair. Where is Bastille when you need him? Among the many reasons to admire Bastille and want to emulate him is his sense of humor. Everybody likes a good sense of humor if the joke is not directed at them. But Bastille satire transcended jokes. It was directed at bad ideas, not bad people. It was not mean spirited. A lesson our fellow travelers should know. As we say in Texas, he could step on your toes without messing up your shine. It amazes me how fresh and contemporary Bastille's writing sounds after 150 years and in a different language. The probability of the writing being that good must be multiplied by the probability of a good translation. With each probability presumably less than one, the fantastic outcome does seem to be a miracle. I almost got quantitative there. Not only does Bastille's writing sound modern, so do his topics. In the USA, we still hope for scarcity in the name of jobs. What I call the fallacy of job counting permeates and pollutes public policy. When I moved to Texas 10 years ago, two hot topics were the NAFTA debate and a big science project called a superconducting supercollider, which was supposed to be built underground near Dallas. I could never get straight what such a thing was or what it was supposed to do. Smart people assured me that it was a good thing. The problem for me was that press discussion about it was not about its merits, but about job creation. I guess it would have become even more valuable if they struck rock while digging. Digging with shovels or spoons, of course, and with the left hand only. The good guys finally won the NAFTA debate. In saying that, let me remind you that NAFTA is not a customs union. It reduces trade barriers among its members without increasing trade barriers against nonmembers. NAFTA has been hugely successful in increasing the volume of trade, especially between the U.S. and Mexico, taking advantage of comparative advantage. However, its old opponents are still opponents, trusting regulations and trade barriers more than liberty, self-interest, and competition. Of course, the confusion is compounded by the large and growing U.S. trade deficit. Deficits have minus signs, reflecting an excess of negative imports over positive exports. Even though double entry bookkeeping guarantees overall balance, someone always insists on drawing a horizontal line across the middle of the balance of payments and focusing on the half of the offsetting imbalances with the minus sign. After drawing a line through the balance of payments, they then want to draw a line in the sand. My solution is to stop keeping foreign trade statistics. We don't keep records on interstate trade between Texas and California, so we don't know which state has the deficit and which has the surplus, and we don't care. But if we kept the statistics, we would know, and the deficit state would do something foolish to correct its problem. The folly of trade accounting can be illustrated by a song by a genius Texas singer-songwriter and sculptor Terry Allen, which reminded me of Bastia's ship example. In his song, Terry Allen tells of a truckload of art to be delivered from New York City to California. The truck was filled with the most significant piles and influential heaps of artwork ever to be assembled in modern times, according to the song. But the truck turned over and rolled off the road and burned near the highway. It would have been a terrible sight if anyone had seen it, but in trade accounting terms, the outcome was ideal. New York exported the art. California didn't have to import it, and the wreck created work for the highway patrol. Speaking of trucks and trade, trucks are the main mode of transportation across the Texas-Mexico border, and truck traffic has boomed under NAFTA. But there is a natural barrier between Texas and Mexico, the Rio Grande River. So the trucks have to use the bridges over the Rio Grande. Bridges built presumably to facilitate the crossing. But while the bridges were made for crossing, the hundreds and hundreds of warehouses nearby were not. They were made for storing, that is, for not crossing, or at least not for crossing without stopping first. The warehouses have come about as laws were made to keep their trucks away from us and our trucks away from them. The way this works is long haul carriers headed south must unload their cargo into border warehouses. The cargo is later reloaded onto short haul carriers to cross the bridge and then unloaded so it can be reloaded onto yet another long haul carrier that takes the cargo into Mexico. The short haul carriers, of course, do not backhaul. They return empty in both directions, which doubles the number of crossings. Of course, all this activity creates jobs and local prosperity. You've heard some place of negative railroads. Well, on the Tex-Mex border we've got ourselves some negative bridges. I'm told it's worse on their side of the border than on our side. I'm glad to hear it. On the other hand, our side failed to live up to our agreement to permit Mexican trucks north of the border. Mexican trucks just aren't safe, don't you know? Just as Mexican avocados so fine south of the border just aren't much good north of the border. Luckily, our government is helping us make these judgments. Mexican sugar is another delicacy that the government has decided we don't need at current prices. Those prices are just too low. Making fun of international trade foibles is harvesting low hanging fruit. Even though Bastiai delivered what should have been the coup de gras to protectionism, it's always necessary to retake old ground over and over. I'm always looking for the right rhetoric to win the trade argument once and for all. My favorite post-Bastiai line comes from Henry George, who pointed out that protectionists want to do to their own country during peacetime what the country's enemies want to do to it during wartime, i.e. close its borders to imports. During the NAFTA debates, I decided to try to emulate Bastiai's use of satire in the cause of free trade. At the time, country music icon Merle Haggard had a song on the radio titled Rainbow Stew, which describes his version of utopia. One of the verses goes like this. When they find out how to burn water and the gasoline car is gone, when an airplane flies without any fuel and the sunlight heats our home, one of these days when the air clears up and the sun comes shining through, we'll all be drinking that free bubble up and eating that rainbow stew. I wrote an op-ed piece, a pamphlet, I guess you would say, titled Free Trade and Rainbow Stew that questioned Tong and Cheek, the loss of jobs if Merle's fantasy came true. If we did not want cheaper goods from Mexico, then surely we would not want water and sunlight powering our cars and heating our homes. Think of all the lost jobs in the West Texas oil fields. Three national newspapers turned down my little masterpiece, two without comment, and the third on the grounds that its readers might not realize that it was intended as satire. But I had fallen in love with the title Free Trade and Rainbow Stew, and I was determined to get it in print, so much so that I shortened the piece and made the satire much less subtle, and a newspaper in Austin, Texas, printed it. But they changed my title, so much for my brief fling as the busty eye of Texas. Now while we all have country music on our minds, I should point out that I get much of my wisdom from country music. Much country music is done with three guitar chords. A while back, I heard a song titled Three Chords and the Truth. In it, Sarah Evans sings, he changed my mind with three chords and the truth. I immediately, as you would, thought of the difficulty free traders have had changing, doubting minds on free trade. We've had the truth since Adam Smith. What we've always needed are the right three chords. That reminds me of a story about Mark Twain and his wife, who wanted to help him stop swearing. To show him how bad his swearing sounded, she imitated him using every expletive she could think of. When she finished, Twain told her that she had the words, but not the music. More than anyone else on the planet, when it comes to individual freedom and liberty, Claude Federique Bustier had the words and he had the music. Thank you very much. Those of you who have questions, just please go to the mic in the center of the aisle. Thank you. You acknowledge that when governments depress prices of electricity below their market level, that the result is shortages and power outages and so forth, rotating power outages. You could have easily said that when governments elevate prices above their market level, such as the ex-Republican senator from Vermont wants to do with milk, the result is poor producers remaining in production and consumers suffering with high prices. I'm just wondering if you would apply that to government control of interest rates and of the money supply and of when the interest rates are pushed below their clearing price, the clearing price of loanable funds, that there will be market distortions just as when they're elevated above the market clearing price. I figured that'd be the third question, not the first one. If that were asked in other forums, I think I would be able to answer it to their satisfaction. I'm probably not going to be able to answer it to yours. With regard to price fixing on money, interest rates, for many years we had in our country regulation queue, which was a fixed price on what banks and other financial institutions could pay for deposits. It did cause a good many distortions and it eventually was removed. We have gone through successive rounds of deregulation in financial markets over recent years. Obviously we haven't completed that. It used to be when the demand for money was fairly stable and its velocity was either stable or at least predictable that you could conduct monetary policy through control of the quantity of money, however you defined it. Hopefully that will be the case again someday. Meanwhile, the demand has become very unstable and so has velocity and therefore a quantity theory approach to money is not very practical. So we are conducting monetary policy by entering the market for short-term government securities and buying and selling government securities in a way that hits a target rate for Fed funds. Fed funds being the overnight rate that banks charge each other for overnight funds. So you could say that on the extremely short end, i.e. overnight end of the maturity spectrum, the Fed is engaged in something akin to price fixing. That's the only place though that prices are fixed. All other interest rates and all other financial variables are set by the market. If you show us later how we can free those overnight Fed funds rate and still be a force for stability, maybe we can work on not finishing the job. Yes, ma'am? This is really a huge question and I'll let you answer it any way you like but I'm just wondering when you get together with Alan Greenspan, who's an ostensible objectivist free market person, what kind of discussions do you have? Are there ever any really honest discussions about the fact that you should abolish the Fed if you were a true free marketeer? You said there's only one element that's controlled that's like being a little bit of a prostitute. Actually I think you can be a little bit of a prostitute. You just can't be a little bit pregnant. We have honest discussions but never quite that honest to tell you the truth. What's the answer? Well I could I could elaborate but not to anyone's satisfaction in here. Bastiai taught us that you you should look at what happens and what is but you should also look at what would be, what could be, if what is was not. Having a central bank with Alan Greenspan at the head of it may not be the ideal but it's a least worst situation to say the least. Jose Cordero from Venezuela. I had the pleasure to meet you last year in the dollarization conference that you organized in the Federalist, the Dallas Reserve. I'm working on dollarization in Latin America and in the Balkans. Actually in the Balkans it is a marketization, euroization and I think this is an interesting discussion now that the euro is coming up and I also see it at the worst evil. You know at least in Latin America I want the dollar because certainly it's better than the currencies we have. Okay we can eliminate our problems and then pass them on to you. So anyway what is your view because this morning coming up with some Swedes they said no we don't want the euro and all of that but I think it's a political reality. I mean this is something that is going to happen. So knowing that as a fact and also the yeah in five months so what do you see is going to happen with the money the future of the money and with dollarization in Latin America? Well as you know very well one interesting wrinkle on on that is that Mr. Covello of Argentina who is the author of the original currency board system that pegged the Argentine peso one for one with the dollar about ten years ago is now proposing that they that they tie the peso to a combination of the dollar and the euro. It's hard for me to imagine how that that could work but I hope something works well for them because they've had a very hard time of it. My position on dollarization is that it's none of my business. I grew up in in college reading Milton Friedman and was pretty much persuaded of the advantages of floating exchange rates. In recent years I've come to believe that floating exchange rates are still best between major currencies that have a history of stability. If you don't have that precondition tying your currency to something stable probably is the preferable option. Whether it be something like gold or something like the dollar. Right now the dollars as good as gold are a little bit better but that's not likely to always be the case. Countries that have a that do not have a long history of stable currencies and low inflation should consider the option of dollarizing of tying their currency either tying their currency to the dollar or preferably adopting the dollars their own own currency. They can do that without US permission. They probably would be happier doing it without US permission than negotiating it with the US. As you know Connie Mack who is retired now senator from Florida did have a bill before Congress that would compensate countries that dollarize for some of their lost senior age. Basically he would give about 80 or 90 percent of the value of the lost senior age to them as a contribution because we would have increased senior age because of more outstanding dollars. That's the kind of arrangement that that would require negotiation between the countries but any small country that would like to have the Federal Reserve conducting its monetary policy for them rather than doing their own could achieve that by dollarizing and I don't want to stand up here with the press president and say I'm encouraging it but I wouldn't discourage it it's really seriously none of my business it's it's up to them. Yes yesterday we were confronted with the attack group the Communist group that was at the meeting with the Bastiat presentation. They were big on a gentleman I guess he was a economist from Chicago School called Tobin and he's advocating apparently a tax on arbitrageers who punish countries for their bad policies in effect lowering the value of the bot or the mark or the frunk whatever it is and they want to use that money apparently to fund international organizations such as the UN for relief and things like that. Do you have any comments on I guess would be called the Tobin tax? Yeah no I really don't know enough about it to comment on it. I gather it's just a a small per unit tax on a lot of units that would generate a lot of money that has from time to time been suggested in the U.S. and I believe I'm correct in saying the Fed has always been against it. I believe it came to the attention of the Senate Banking Committee not long ago and it's then chairman Senator Phil Graham of Texas was decidedly against it but because of price fixing of milk in Vermont he's no longer the the the chairman of the Senate Banking Committee and that has changed hands and and taxes like that could possibly get get attention in the future but no I would not be for for such a tax. Would Bastiant what would he say from your understanding of tax money going to an international organization but unrelated to any group in other words it wouldn't be tied to the French economy wouldn't be tried to any company would be just monies for an international thing. Well I suspect he would not be highly in favor of it. Hector Nopari from Peru what's your opinion for the future of the money the electronic money please. For decades now people have been saying we're on the verge of eliminating paper and going to all electronic money sort of like the Brazilian economy it's always the economy of the future. There is a new book out by Martin Mayer called the Fed and I think that today I've got a book review coming out in the Financial Times and one of the criticisms of the Fed by Martin Mayer was that the Fed has has hampered the transition away from paper toward all electronic money. My answer to that is that right now the current system however you describe it does reflect the real costs of all the alternatives because to the extent that the Fed is involved in it we have to charge for our services and recover our costs so it does reflect current costs and it reflects current public acceptance and non-acceptance. So what we have right now is what the market is producing and in my review of the book I just say that it would be the height of arrogance for the Fed to try to substitute its view of what the money system should be in the future for the public's view. However there there does continue to be very slowly a movement toward more electronics. The percentage gains are very high but the base is small. The paper based system is still growing at very small rates but the base is very large but what we have and what we will get will reflect what you and I vote for with our own reveal preferences. You said that the only thing the Federal Reserve now controls are the federal funds rates and the discount rate but basically the federal funds rate and that the only rate that it controls right the only rate that it really controls that matters well what are you afraid of if you stop controlling that rate what is really the issue there suppose you stop controlling the overnight federal funds rate what are you afraid what would happen. I'm not sure if it would depend on when we stopped doing that if we started doing something else if we stopped doing that and started again just trying to control the rate of growth of the overall money supply I wouldn't be very afraid I think that might might work out fairly well. Another alternative is to quit controlling that and start pinging your currency to some commodity like gold that wouldn't scare me to death either but I must say that to be for the gold standard because it's sort of natural and isn't isn't controlled by the government is giving up a lot of efficiency because I think that the that the Fed and some other central banks can make the money supply grow at a beneficial rate possibly better than gold can be discovered and dug out of the ground. Just sort of as a follow-on question suppose you just increase the money supply at the same rate as the GDP and without trying to regulate any rates at all. Well that's that's approximately the way it would be done Milton Friedman used to say three percent a year per quarter per month per week and per day is three percent or so was using a definition of money that was very narrow you'd have to you'd have to settle on your definition of money and then settle on your rate but it's a very it's a very reasonable approach to take. It's pretty much the approach that the Fed tried to move to in 1979 when we went off gold and Paul Volcker convened that Saturday FOMC meeting. We had been trying to control the money supply through interest rates up until that time. The decision was made to quit worrying about interest rates and just control money. Interest rates of course went to twenty one and a half percent which was much higher than anybody dreamed they would but it was a reflection of the enormous demands that was causing us to miss our money target prior to that but no controlling money in lieu of controlling a short term interest rate I would not really quarrel with. Some economists have written about free banking or free market banking in which the money is tied to something like gold and you also then have private banks able to issue their own private notes as happened in several countries such as Scotland and do you think this would provide the flexibility that you were talking about because the there would be the real money which would be gold and then there'd be money substitutes private bank notes convertible into bank into gold or other bank notes. You're talking about a gold standard with very few rules on banks. Yeah with banks not not controlled by the central bank able to issue private bank notes which could expand according to market demand but probably not beyond that because of the we give ability to go. I'm not an expert on free banking so I can't anytime somebody ask a free banking question they've always written a book on the subject and I'm always I'm always at a disadvantage. Alan Greenspan and some of his speeches has has given sort of a positive nod in the direction of free banking. So as a conceptual thing I think it's it's not very opposed. I think it's just sort of a practical thing. I mean if it's going to be done in the context of going back to a gold standard I think the first first set of hurdles was how do you get to the gold standard and then after that you can you can start freeing up the banking system but I must say that under the gold standard banking was not all that all that stable and practiced through their all of history. Yes sir. Yeah I guess I'm wanting to rub it in a little bit more. Now I agree with Fred to carry it further but I don't see why when you when you spoke of the gold standard you've spoken of governments tying their currency to to a commodity or something like that and and I'm suggesting that it not be that way that governments are not having currency not being in charge of the currency as Fred suggested it be currency be created by private banks as needed only as a means of making it more convenient for the exchange of commodities which need didn't necessarily be gold or gold only. We've had bimetalism for most of most of economic history and there's no reason why that where there couldn't be other commodity bases. Simply get government out of control of money altogether and allow people to issue notes and and if if there's a if there's a greater demand for some commodity basis to be used as currency allow you know the price will the price of the commodity will rise to fill that demand you don't need to worry about oh can we mine enough and so forth. I think probably American Airlines frequent flyer miles are going to be our private money. John Kingman from Costa Rica I work in the mining business and we're pretty good with my colleagues at engaging in wild speculation about the nature and consequences of central bank loans to outfits like Barrett mining and others can you comment on that whole business. No I don't know anything about it the the Fed does not make any any loans to anyone other than financial institutions and in the U.S. so we don't have any central bank loans like that. Sorry to interrupt. No these are loans of physical gold. They're claimed essentially short selling. No I don't know anything about it. The New York Fed has a lot of gold in its vaults that's owned by foreign countries. All the U.S. gold buried at Fort Knox and that's about my extent of knowledge of gold. Why don't you give us some credit for the gold price being fairly stable and low for the last several years which is some sort of suggestion that that the dollar is as good as gold. What is the likelihood that the Fed or that the government would sell off the gold that's in Fort Knox. Oh I don't I don't know. It would be all right with me it's not doing anybody any good there that I know of. If you have it with you or know it by heart could you tell us the words to your country song to my what to your your take off your satire of the country song you mentioned. Oh rain goes to yes I well I just read all I know about it there. It's a song by Merle Haggard you can find that in any decent record store. I'm sorry I was your your essay I was wondering if you either knew it by heart or had it with you and could read it to us. The essay that you wrote that you got published. Oh no I don't have that it was it was about that long and it was published by the Austin newspaper because of all the newspapers I sent it to they're the only ones I think that had ever heard of Merle Haggard. This thing's going downhill Mary Lou. Do you have any influence on economic decisions in neighboring states mainly Arizona New Mexico and so forth. As far as our legislators and their interaction with Mexico the border problems that you kind of know the Dallas Fed has a very friendly relationship with the Bank of Mexico the central bank down there but we don't we don't even get involved in US politics much less foreign politics. Is this working. Yes it is. I had a question actually. Is there any relationship between what the Fed has to do with currencies and with central government controlling the internet. Not to my knowledge now. What is your opinion of the WTO and GATT. Well I think the the initials WTO standing for the World Trade Organization that's sort of an unfortunate name back when it was GATT the general agreement on tariffs and trade it didn't seem to arouse such strong feelings. I basically am for free trade and I guess in today's world as it is now you need to have some rules of the game for free trade and if you're going to have some rules of the game you probably need some place to go to try to get those rules enforced or changed interpreted and so forth. For that reason I would think that some organization like GATT our WTO if it didn't exist probably would have to be created. I do not believe that the WTO is some sort of super national agency that's taking over the world and controlling all of the countries. I'd be against it if I thought it was doing that. We went a few and we lose a few and some that we lose we deserve to lose. For example it's not WTO I guess it was the administrative thing on NAFTA ruled against the U.S. on trucks Mexican trucks in the U.S. we clearly as far as I can tell broke our word on that and broke the agreement on that. Yes ma'am. You seem to be defending the Federal Reserve of the United States and you know that's who writes my check. I understand. I understand. I have you know in my from my limited highly ignorant point of view have felt that at rare moments in the past that Ellen Greenspan was doing a good job. I mean I live in the United States and I'm well off so you know I'm sort of pleased. But isn't this like an anomaly. Aren't you afraid that you know maybe a couple of decades down the road this whole system will be taken over by all kinds of idiots. I'm sorry I'm not really doing justice to my thoughts. But how long can this go on. I mean you know here that's all the socialists that I've ever known say well it would work if we only had good people. So here's the Federal Reserve with good people making smart decisions. How long is this going to last. But it does have a lot of checks and balances. The 7 members of the Board of Governors in Washington their terms are staggered so that if they serve out their terms they can't all be appointed by the same president. Of course that system is flawed because the salaries are so low they can't serve out their terms unless they're wealthy before they arrive. The other voting members on the FOMC the the 12 Reserve Bank presidents are are chosen by the local boards of directors of the Reserve Banks and their local communities and they have to be ratified by the Board of Governors. The Governors have to be ratified by the Senate. So there are some checks and balances in the system that that would keep it from going so extremely in the direction you're talking about unless the whole country has already gotten there first then then it would be dragged along as well. I don't have any good answers for that. During your tenure at the Dallas Fed you've sponsored and overseen very creative and I think pioneering research particularly by Mike Cox and Rick Ohm on the manner in which the free market promotes in a shrimp attire way improved increasingly improved living standards of Americans and people who live under market systems. I'm curious about the response particularly of your Fed colleagues elsewhere and other US Federal Reserve Banks to that research and to the extent to which the Dallas Fed promotes it. That's a thank you for that question. The Dallas Fed in 1992 did its annual report essay on what we call the churn which was basically Schumpeter's creative destruction and we used a lot of real world examples and we've had a succession of those kinds of articles and we have become known by those. I have tried to attach my president's letter do something personally say something personal about the various topics. For example in the churn I pointed out that my great-grandfather and my grandfather were blacksmiths put out of work by the automobile but my dad started out in a small service station and built a truck stop. So he got a job from the industry that put his dad out of business. Dad was doing really well then they put I-75 about 18 miles east of the truck stop and it dried up. It's sitting empty right now and I'm making my living doing something I can't even explain to you. So it has been very personal. The serious economists in the Federal Reserve system look down their nose a little bit at our series of essays. They say it's anecdotal stuff. My answer to that is life is just one anecdote after another. Life is anecdotal but they look down their nose just a little bit at our stuff as saying it's not really all that serious research. But they're a little bit envious too because it gets a lot of attention and a lot of people like it a lot. My colleagues think that I'm a little bit off the wall a little bit crazy with some of the things I put in there. For example, two years ago I put a picture of myself at Adam Smith's grave and Buddy Holly's grave and Sam Houston's grave. Next year it may be Bostia's event last night. Alan Greenspan has not said anything critical and the other governors have not said anything critical at least to my face. They tolerate us. I think we're a little bit off the wall. A little bit envious of us. Envious I believe as well. We'll make this the last question, Bill. Sorry, Dagen. One of the things that seems to really upset the kind of people who greeted us last night at our meeting is that with world capital markets being as flexible as they are, currency traders like Shoros can go say, oh, the people in Malaysia are mistreating me. I'm going to take my money out of there and go away and suddenly the economy collapses because the political manipulations that they've been doing have assumed a certain amount of stability and it goes away. How much is the Fed being driven now by U.S. internal economic needs and how much is it being driven towards stability by the world capital markets forcing it to behave? The official line, which is the truth, is that we base monetary policy on U.S. needs, not on foreign needs. However, exchange rates are important and world interest rate levels are important. So to the extent that foreign economic developments have an impact on the U.S. economy, they're taken into account. But we don't base monetary policy on anything other than U.S. developments. The bond vigilantes have been taking the law into their own hands in this country for a long time and you're describing the foreign exchange vigilantes and the hedge fund vigilantes. That's probably a good thing because their view of the way the world ought to be pretty much coincides with our view of the way the world ought to be. Certainly the Internet and other information technologies are reducing the power of governments and central banks relative to the individual. And so that's probably a good thing. And on a final note, I stopped beating my wife about three years ago. Thank you very much. Thank you very much.