hello everyone my name is Sor Madan and I'm very happy to welcome you all to the next talk in our investing series I couldn't be more pleased than to have here in person none other than James Grant uh Mr Grant uh has a lot of uh accolades and accomplishments that I'm going to talk about but just to give you a little bit of a flavor uh he has he has a fantastic uh personality and a charm with on liners he comes up with them um magically so before this talk uh we came here to this room for the talk he was telling me he said I'll I'll explain investing to you in one sentence and he said uh brilliant investing is when everybody agrees with you and he paused for like you know 5 seconds and said later and uh and today he's going to share with us a tale of what he calls the Forgotten depression the forget the Forgotten depression tells of the slump of 1920 and 21 with high unemployment collapse in commodity prices upsurge in bankruptcies and a sharp break in stock prices unlike the Great Depression the 1920 Affair was over in 18 months what do you think the Federal Reserve did how much did they lower interest rates by well the fact is they actually raised interest rates and and this is this is puzzling right what explains the brevity of this depression considering the act the actions of the policy makers and and and and Jim is here to help in person to help us unravel and deconstruct what really happened behind the scenes so Mr Grant James Grant is the founder and editor of Grants interest rate Observer a twice monthly Journal of financial markets he is the author of works of History example money of the Mind borrowing and lending in America from the Civil War to Michael milcon and biographies another example John Adams party of one his journalism has appeared in the Wall Street Journal The Claremont Review of Books and Foreign Affairs his television appearances include 60 Minutes Charlie Rose and a 10e stint On The Wall Street week with Louis Razer so without any further Ado ladies and Gentlemen please join me in welcoming the one and only James Grant well I I thank you and I thank Google and I thank the uh worldwide television audience um you know uh um I'm going to uh stop displaying the merchandise so but thank you for the the thought um you know I I may I begin by U inviting you to uh imagine that we are removed in time to the late 17th century and um it's about 1685 and uh and um and you are in a London coffee house and you see two of your acquaintances uh uh one is Sir Isaac Newton um uh and the other is Sir William Petty now Petty will turn out to be one of the the founders of modern economics and of course Newton's reputation preceded him even then uh smart cookies both of them and U uh each as you knew intutive was on the verge of something wonderful in his respective discipline um imagine now that you a citizen of the 17th century are transported in time and in life to the present day and you are informed the physicists have recently discovered the God particle uh whereas the economists who in 2008 failed to predict the biggest cyclical event of their professional lives are debated the efficacy of 0% rates or is it negative per rates or is it something else um plainly uh physics has made a different kind of contribution to Human Society than economics has so I I stand before you in a most unlikely setting in which to propose the thesis that uh in matters of money and credit the world has gone not ahead but rather behind U if there's any audience in institution that ought to be skeptical of a claim that progress is not uh inevitable and wondrous and irrepressible it surely must be this Splendid company uh but nonetheless that is my thesis I submit to you the progress at least in the physical sciences is cumulative we stand on the shoulders of giants uh in economics and finance progress is rather cyclical we um we forward we go back but we keep on stepping on the same rake um and in the 4 hours given to me today so generously by the company I I'm going to try to persuade you that we are in fact stepping on the rake of money now it's a curious thing about money we spend uh as now as you can tell I'm not an employee of Google you might infer by the fact I did not get the memorandum about dress today I'm on Wall Street and people in my neck of the wood spend their entire lives trying to accumulate a dollar bills but I warrant to you that not a single one of my dollar I was going to say grubbing my dollar accumulating Wall Street friends has devoted more than a few odd minutes in the course of his or her career to thinking about the nature of that piece of paper that he or she has uh invested so many heartbeats in accumulating um you know a bond is a promise to pay money you've heard about bonds of course the debt instruments but what what is money what is uh um so uh um uh Chicago Cubs fans um and now the world is full of them might be wondering about life the last time their team was this good that was 1908 famously the Cubs have been unsuccessful since that time they won the World Series 1908 and uh to set out a marker in time I am going to describe the financial and credit Arrangements prevailing the last time the Cubs on the World Series with the present day which is perspectively the next time the Cubs are going to go someplace besides home in October the year is 1908 and here is the way the world worked with respect to money and credit with regard to money the dollar was defined um as a weight of something tangible uh gold uh $20.60 odd cents got you an ounce uh that was written into the law the dollar was convertible into gold at the option of the holder of the paper currency um such seemed to be the logic of the Constitutional stipulations about money Article 1 Section 8 defined money is well talked about coining it and in that same constitutional breath Congress was given not only that right but also the duty to set weights and measures money was a weight and a measure money uh is today something very different it's become an instrument of national policy uh as to Credit in 1908 um uh the stockholders of a bank were responsible for its solvency which meant if an institution became impaired or insolvent the stockholders got a capital call that is the courts ordered them to Fork over the unpaid in portion of the par value Pro Raa so if you were um a bank stock investor and your bank hit the Rocks um the sheriff would come calling if you didn't uh heed the the first call from the court which seemed to make sense after all you the stockholder got the dividends when things were going well why shouldn't you be responsible for U the debts of the firm when things were not going well that was then uh individual responsibility in credit and money defined as an objective weight and an objective measure in the law so fast forward to today uh with respect to banking um despite or perhaps indeed a little bit because of the dodf Frank legislation even more are the biggest banks in the country UH responsibilities of the stock of the taxpayers uh risk to a great degree has been socialized removed from the provin of individual responsibility as to money way what is it exactly well it's not defined a dollar is what the mandarins at the Federal Reserve and with the market in concert with the central banks choose to make it um and here is here is a an observation concerning the uh uh the nature of of modern money Central Bank issued money uh uh so um since our sorrows of 2008 the world central banks have issued in the aggregate about 10 trillion worth of something called money it's it's I mean even a a gold bug such as myself would not disdain to pick up a $100 bill if you saw it ly on the sidewalk um but uh uh note the effort required to materialize $1 trillion in purchasing power the effort required is no greater and no less than that required to tap in anything on YouTube uh the cost of production of money is zero in times past the cost was subst Angel it required human labor to to uh uh to mine gold and silver um so the cost production is negligible the effort to recreate these units of currency is uh is negligible and uh uh all this uh we know I mean we we we somehow know it even if we don't actually know it we're aware that the uh money is is increasingly pixels uh no weight uh no corporeal substance it's it exists on the hard driver in the cloud we know that except here is here is a a story about U one of the uh not insignificant holders of American common Equity including um alphabet uh and apple and Exxon Mobile and uh uh Facebook and the like the holder in question is a Swiss National Bank the Central Bank of Switzerland the Gnomes owned Federal Reserve and um the Swiss National Bank like some sort of New York hedge fund files a 13f form every quarter 13f form with the SEC enumerates the filers Holdings of Common Stocks and gives them stock by stock and the Swiss National Banks filing is voluminous um and you look down you see all these individual names owns 100,000 shares of this 40,000 shares of that a million two where did the Swiss National Bank get the money to do this why why it created it it uh it manufactured it it materialized it conjured Swiss Franks with which to suppress The Unwanted appreciation of the Swiss frank against the Euro uh so it accumulates Euros with Franks that it invents for the purpose and with those Euros it buys dollars and with those dollars why it buys your company buys shares and great tech companies not so great industrial companies all ma all manner of companies 2600 different names in the 13f filing now there's nothing really different uh common stock versus uh bonds the world Central Bank of what like1 trillion dollar worth of bonds but to me the Vivid nature of present day money Conjuring of materialism ation of these units of digital script is ever so much more Vivid when you think about something for nothing and ladies and gentlemen the purchase of actual interest in productive American Enterprise is something and the currency with which those shares were purchased is in some sense nothing so um uh uh this talk as you can see is taking the form of a lamentation rather than like a like a a really helpful uh uh investment talk with qip numbers and ticker symbols and the like um but I I want to I wanted to emphasize I hope not to the point of onwe but still to emphasize uh my basic thesis which is that uh uh we are to a great degree uh the unthinking prisoners in a kind of Hall of Mirrors we are living in the world of the central banks and I only wish that more of us would speak up and protest um like where's the exit how do we get out of here what was the movie in which the um the protagonist lived in a world of u a TV set human ah yes right well that's that's our world in a way we we we live in a Hall of Mirrors and it's a very pleasurable Hall of Mirrors in so far as asset prices keep levit ating and and the rich keep getting rich nothing wrong with that I suppose if one is a member of that fraternity uh but it is a world of artifice now um I I claim to you in the early going that u in this most improbable setting of progress Innovation and uh and to be sure of imagination that uh that in the very important realm of finance and credit we are not progressing but rather retrogress how is such a thing possible well I invite you to just to join with me in a kind of a intellectual or historical uh sidebar um uh the year is now 2012 and uh as I recall there was another presidential election I can't exactly recall the name of the Republican candidate uh something to do with Romney I think any case not entirely successful but before his political failure became common knowledge U there was a great commotion among the Republicans uh to uh uh to task the imminent Romney Administration with the duty of forming a commission to study alternatives to present day monetary Arrangements that is to say uh to do something about the Federal Reserve and this was called a gold commission the idea was to pick out the best aspects of the monetary regime of yesterday year and perhaps to uh find a way out of our um delightful that is for the asset portion holding of the community or delightful prison our money prison and this this little thought bubble of a gold commission was meant with uh polite smiles and in some cases outright derision uh by the sance in the economics profession especially the academic world and one of them I believe it might have been Larry summer said that as long as Republicans were thinking about gold they might as well investigate the possibilities of a commission to bring back witchcraft well I thought that was a little abroad and uh it set me thinking about an essay by Hugh Trevor rooper uh published some time ago there a delightful essay I commended to everyone who was in the business of improving the future and of seeing progress in action namely everyone in this room and it's called the European witch craze of the 16th and 17th centuries and in it the author Trevor rooper sends up a warning signal against the common presumption that The History of Thought traces a straight line from the darkness to the light uh far from it as he shows by Sting in evidence the outbreak of quote dark passions and inflammable credulity amidst the flowering of the Renaissance the belief in witches was not Trevor rer writes quote as the prophets of progress might suppose a lingering ancient Superstition only way waiting to dissolve it was a new explosive force constantly and fearfully expanding with a passage of time credulity in high places increased its engines of expression were made more terrible more victims were sacrificed to it the years 1550 to 1600 were worse than the years 1500 to 1550 and the years 1600 to 1650 more terrible still nor was The Craze entirely separable from the intellectual and spiritual life of those years it was forwarded by the cultivated popes of the Renaissance by the great Protestant reformers by the Saints of The Counter Reformation by the scholars lawyers and churchmen if those two centuries were an age of light we have to admit that in one respect at least the Dark Age was more civilized so it is possible it is possible for Forward Thinking intelligent and imaginative people to be in the thrall of something that's palpably false could that something today be the doctrines of our doctors of Economics I suggest to you that it is now um uh I think two Winters ago um I live in New York and uh and the uh uh on Friday in January the National Weather Service uh uh issued a forecast for a blizzard and not just any blizzard this was to have been the greatest blizzard in the history of New York C since the arrival of the Dutch that was okay by me I love blizzards and my wife and I made preparations for this Onslaught and we got ourselves a reservation at uh local restaurant with a great picture window and we arrived Monday the day of the forecast store Monday night to await this fabulous meteorological light show and uh uh as we uh sat down to dinner and had a drink and the evening wor we couldn't help but notice as the evening wore on that it wasn't snowing and uh uh you know it's it's a lot to ask of the scientists they write all the time uh the storm did land but 50 miles to the east but I got to thinking about the nature of a snowflake as beautiful as it is as I guess I was going to say as unique that's it is unique uh uh what snowflakes don't do is watch CNBC and having embibe the forecast do their best to confound it through contrary bloody-minded action that's what snowflakes don't do but we humans are exactly in that business tell us to tell us something that's going to happen why we make preparations and in the preparation we um uh uh we uh we destroy the forecast it's not going to happen because we have already taken the action that was predicted and maybe some other action besides now this speaks the the the um the nature of humanity and the nature of Prophecy speaks directly to the business model the people who make these trillion dollars of weightless non-corporeal money um I'm going to favor you with a uh you the Federal Reserve has its on its payroll 700 PhD economists 700 I'm going to say that you 701 or none it's not working and to get a taste of the the formative intellects at the Federal Reserve I invite you to visit any website with that lists the uh scholarly Productions of the employees here's one Computing Dynamic stochastic General equilibrium models with recursive preferences and stochastic volatility now if you say those words separately and read them backwards um well the General Dynamic stochastic equilibrium model uh was the model in place in 2006 and 2007 and indeed in 2003 4 and 5 um and notice that it did not uh it did not set up um any knowledge within the central bank of the oncoming events of 2008 none now um uh this is relevant because the uh the people in charge uh are indeed in charge they they they they have power in particular they have a power over this seemingly most pedestrian thing called the rate of interest now I speak perhaps with a little bit of Edge on this my publication is called grants interest rate Observer like what are we going to see is more interest rates I've got interest rates were great I remember we had them in 200 or 1984 um but we don't have them much anymore they are so small one can barely see them um and uh and in that fact lies a great deal of uh of what lies much of what can explain present day financial affairs um you know interest rates are prices uh critical prices we use them uh to set investment hurdle rates and to uh and to calibrate risk and to would discount projected future cash flows they are probably the most critical prices in finance yet they are under the thumb um of the central banks of the world um self-awareness is not the strongest suit of our monetary mandarins uh Ben banki who Now is working for Pimco uh is kind of a capital introduction professional he helps people invest in bonds was as you know the the Federal Reserve chairman before Janet Yellen and uh in the day he when he was in office he gave a series of talks in the public interest at uh I think George Washington University in the District of Columbia and U in one of these potted talks about the modern history of American economics he said U you know 1971 that was a that was the year in which for the first time in a non-w wartime setting the federal government imposed price controls very bad thing terrible thing because after all he said u in so many words uh prices are the signals the kind of traffic signals of a market economy if you if you make them all red or all green through Federal Fiat why traffic piles up the intersections and that's dangerous and inefficient and you can't prices he said in so many words must be discovered not administered this from the man who was went on to execute uh quantitative easing and 0% rates and negative well now they're talking about negative rates uh so I think that the um uh that the the critical failure of the present regime in money is the conceit uh that it is better for us that prices these critical prices be be administered rather than discovered um a long time ago in the anals of this a long since I started talking it seems like a long time um to me if not to you um uh my host made kind reference to this product and uh this uh book is a history of the depression that people generally don't talk about it was the one that uh uh that seemingly as the title says with some journalistic license healed itself the depression healed itself the um uh the uh outlines of the troubles uh took this form an industrial production down about 30% between 1920 and 21 from Peak to trough unemployment certainly in the double digits it was not registered but registered but certainly severe stock market almost down by half commodity prices down by 40 odd per. uh corporate profits down 90% it was it was something and the government met this with a balanced budget and uh and as you have heard with with higher not lower interest rates which was perhaps a mistake but still what proceeded to happen was that markets adjusted um and uh and prices fell wages fell and because wages could fall uh profit margins were restored at lower levels of selling prices so prices came down wages came down too equilibrium was restored at lower levels of activity and because things were cheap uh profit seeking individuals uh sought opportunities and they sent money here for that very purpose um the gold price was fixed but the cost of mining it fell and because the cost of mining it fell profit margins for the miners increased and they proceeded to produce more of what in a depression the world needs more of which is money so automatic forces or quasi automatic forces in the marketplace proceeded to do what uh what government action in this particular long running cycle has been long running has it not have so far signally fail to do so um uh you know I I uh in summary I my lamentation is not about uh investing which I think is a is a great calling nor is it about the United States of America which is uh a pretty good place to live but rather it is uh uh the the persistent and after the passage of so much time almost the unnoticed substitution of the visible hand for the much more effective invisible one that Adam Smith talked about um I hope I have not held out the notion of of a free market and of price Discovery as a new kind of Garden of Eden for it was certainly not in the 20s about which I wrote um this is after all Humanity we're talking about you know if things were so easy would would be a great deal richer I'll say in conclusion now um you know you you look around this wonderful campus you see the Fantastic things that you all have given to the world uh the world has purchased quite properly um uh but you wonder where were our forbears all this time uh let us imagine uh that the year is two 45 BC or whatever the year was that Cleopatra died and uh and one of our public spirited altruistic um handmaidens uh made a deposit of the equivalent of $100 in the Bank of perpetuity buying an eternal CD to compound at 2% per uh and that sum of money let us continue to imagine we left undisturbed to the present day now that would be something let's see let's uh this is Google we can calculate this Mally I'll do it for you when you can join me we'll compare notes to and see what we want to do is uh 2% compounded annually of 2045 yet uh do it per capita 7.6 billion people in the face of the Earth that take care of the three yes 5.3 billion per Earthling if if uh that sum of money had uh been left undisturbed unlikely probably during the Black Death somebody might have made a withdrawal and if the bank of perpetuity had in fact been Perpetual unlikely given the nature of Leverage financial institutions they're always toppling over aren't they and U uh unlikely given the the very human animal himself or herself we in fact I'm not that good with money but we can with we can be better and it seems to me that the way forward is the paradoxical means of stepping backward and reclaiming the institutions that worked so well the last time the Cubs were in the world series or wanted so uh that's my speech thank you so much we were having a brief conversation before the talk began and you shared a couple of anecdotes uh which I thought would be very interesting for this audience so let me start with one if if I may uh you guys got a shout out in the movie The Big Short and you were mentioning to me that you know during those days you got a big pile of documents in the mail and you had a chemical engineer working with you and you asked him uh you know what did you make out of this this material and they said I didn't understand them and your reaction was yeah we got a story no it didn't make any sense to him again his name is Dan gerner and uh very smart guy and as I said as you said a chemical engineer from uh his earlier life and um by no means intimidated by uh complexity and these documents were run thousands of pages very complex uh but knowing that we didn't know knowing there was something wrong set us on the road to persistent persistence which is always a good road to be on unless it ends to a wi but a dead end which sometimes happens too but we persisted and looked at more of these things and came to see that uh uh there was actually no there there and uh and one of the ways in which we came understand that we're on the right track is is the uh is the push back and the friction that we encountered on Wall Street from the stories we wrote they were hostile to you well they were they were I well hostile yeah they were Bring It On well if yeah if if we had been wrong it would have been gertner's fault but as it were we were right so U but once we were we were summoned over to a friendly talking to with standard and pores the rating agency who wanted to us to understand just how very wrong wrong we were and how uh uh and how U unhelpful we were being to the situation and then we really knew we were right so uh you know did did additional evidence come in and sort of help you refine the theory like you know what are some signals and the reason I'm asking is in terms of a lot of your audience here and U you know on the video on YouTube is going to be people who are engaged in investing possibly like is there some sort of pattern recognition that uh one can employ to be cautious yeah yeah well you know this this it's a it's a wonderful question to which there really is no answer one can uh you know one sees recurring patterns in finance uh um uh I I think with respect to uh to the Federal Reserve to the central banks to the nature of money to interest rates I think there is setting up one of the great dramatic moments in finance and people there are upwards of of uh of9 trillion doll worth of Securities in the world that yield less than nothing these are debt instruments promises to pay money undefined and you the investor pay the issuer for the privilege of you can say this as many times as you want it still won't make any sense um and I think I have in my very hand I have a um a quot I do I have a quotation from the financial times very distinguished London newspaper that distills the mindset of the market today with respect to uh investing in fixed income uh quote uh this is uh from the April 15th Edition quote some banks Pension funds and insurers must buy safe government debt irrespective of the price close quote now is is any investment asset intrinsically safe is it intrinsically anything I mean um okay let me invite you to go back to uh in time 1984 1984 so uh uh interest rates spent the years 1946 to 1981 one going up they went from 22% at the low in the spring of 1946 to 15% uh in the fall of 1981 15% you could have invested in 15% 30-year US Treasury Securities non-callable for 25 years Equity returns with no equity risk and you know who wanted that about nobody because they had had 35 years of experience with falling bond prices and Rising interest rates meaning losses uh so uh interest rates began to come down Paul vulker was then at the head of the Federal Reserve and it seems as if he were making good on his vow to kill inflation Dead uh through the the mighty blunt edged instrument of of uh of of tight money it seem as if he were on his way to achieving this and then comes the spring of 1984 and for whatever set of reasons and there are always pretexts on Wall Street you can always make a story about something happened but what did happen is that interest rates went back up again and for just a moment in the spring of 1984 not so many years ago you could have invested at 14% for 25 years in US Treasury Securities that was the what Wall Street Calls the retest of the lows of return to the low of price the high of yield that was on offer in the spring of 1984 and again very few takers I was there and we chronicled this and you can't you could be sure you thought nobody knew that the a new cycle in interest rates was beginning that would last more than 30 years which this one has 1981 to date of of very low rates and now people can't get enough of Securities in which you pay them so you ask about pattern recognition yeah and one of the patterns that recurs is is is extremes of of behavior and perception that you feel are almost Supernatural in their error you can't believe that people in 19879 8081 were watching bond yields go up from 9% 10% when vulker came in October 6 1979 he gives a talk press conference to Saturday emergency meeting on Saturday and he announces that owing to the crisis of inflation and of the dollar that he vuler personally is going to oversee the lightning of money such that he is going to ring inflation by its neck what words do that affect so that was the announcement of intent at that moment long data treasuries were yielding 9% as I say by the time he demonstrated to the satisfaction of the investment community that he was serious they went to 15% that was that was the that was the um the degree of of of mistrust of the institution of Central Banking in the early 1980s compare and contrast the present day The Economist at the FED to a man and to a woman virtually missed as I say the biggest event of their professional lives yet they have come out of this crisis with greater power greater regulatory power greater power over interest rates they have been the instruments of the levitation of Financial assets through their talk and through their action stock prices have gone up and up cap rates on real estate come down and down interest rates down and down the world of assets thanks them profusely but it's a truism that the future promises lower Returns the higher the price in the present uh it's a truism that is hard to act upon if you're an investor got to feels good when going up Charlie Munger says something that cannot go on forever has to come to an end what does he mean well that is entirely true that but I'm here to tell you I think Charlie's Got a few years on me but I um uh uh um I've been in situations and have been wrong enough on some things that it seems if things can't go on forever can and do so you know you've powerfully made the point of the you know the so-called invisible hand becoming very visible and you also referred to one of the previous presidential campaigns um you know what's the solution um some say break up the big Banks um others have other Solutions proposed what do you think is is the way out I think constructive retrogression in our institutions I what I would like to see is first and foremost individual responsibility being restored to Wall Street mhm um you know there's only there there's one uh financial institution in New York City that did not take money from the treasury took no tar money took no bail out of any kind and was visible virtually invisible 2008 that was Brown Brothers Herman which was founded at the time the City Bank was Brown Brothers as a general partnership and organization meaning that the general partners are themselves personally responsible uh in a pra fashion for the debts of the firm it means not just that they their stock goes to zero but they lose their matis their golden retriever their house everything they have skin in the game more than that yeah so I so it's you don't I mean it would be nice to my mind to go back to stockholders liability but but without being punitive one should insist that the people who enjoy the upside ought to be personally responsible in in a leverage Financial setting for the downside the downside is is not just affects them but affects all of us so number one I think is is to is to get away from socialized risk which is uh which I think is corrupting to The Republic and certainly it's corrupting to finance and then I think we have to get away from uh from the PHD standard of monetary management the the discretionary rule by by uh people who as well intended and as well credentialed as they are are the practitioners of a pseudo science I mean they say for instance they say for instance that prices must go up 2% a year that's the the verdict of the people who run monetary why why who says oh they say but they don't explain is it just not possible that by creating the extra credit with which to try to force prices in general higher they create an increment of credit that does great damage to the structure of things in finance and in the real world I mean is it possible that by doing this they create bubbles in real estate for in San Francisco and in New York real estate values are back to levels at which from which they plummeted in 2006 and 7 so are we really mean is this really The Way Forward uh this command and control regime you know the people tax the proponents of of of of of of a new gold standard they tax them with u that it is an anachronism well it does sound as if it were uh why not bring back the the Cutthroat raay with the seant you know um uh except there is a rather subtle distinction between things and methods as in methods of money what the price Mech the goal standard is about a defined monetary unit that is a weight in a measure MH and um and around that defined weight in a measure people through collaborative means in markets through the social media of markets work out their own salvation now that is that sounds kind of contemporary right and if you cast at the present day arrangements as command and control one thinks not of the enlightened 21st century but rather of say Poland in 1957 or something right that's command and control so I would say that the anachronism is really on the part of those who would defend rule by these these I think they are intellectual Pretenders and I think it's high time the that smart people began to look into the science of economics and say or what what are we talking about if this if if the rigor of science has to do with its predictive value if if if you know if and if you miss the biggest snowstorm not by 50 miles but by 5,000 miles MH shouldn't we at least have a congressional hearing y so let me I mean I'm going to try and lighten up the mood here a little bit I know you're all fired up uh so um I was asking you about your you had a degree in international Affairs right and you know talk about pretense no MBA right no no MBA I'm like the uh the guy in Nashville who says uh can you read music no with that that shouldn't that doesn't hold me back I so when I asked you you know how did one thing lead to another and where you are and you mentioned you asked me I grew up in North India and his he he retorted he said what what did you think were the odds of you working in a company in Sunnyville called alphabet and uh so you were talking about serendipity right and you also mentioned to me that there's this huge Obsession about you know longevity at the risk of quality and happiness in life uh what did you mean by that well I'm I'm going to uh unless it's a breach of copyright I'm very sensitive on copyright actually but I will I will investigate the copyright implications of my promise to forward you a piece that appeared in London spectator a couple of weeks ago it was a marvelous piece it was written by an octogenarian I think who said U that here he is uh having achieved the the modern be all and end all which is to have achieved a certain age you know he has not died it his uh um has Ally allotted three score and 10 but he has lived beyond that he maybe he might be 90 and he says by the way it's not so hot and he enumerates um his ailments and his infirmities and his deficiencies and he says um he says uh no he says uh to young people no eat drink and be merry know that he said he's not talking about debok he's talking about living in the moment without uh a contemporary Obsession uh with things that if you are unlucky will land you at the age of 97 so uh he said that in closing he a a a very very powerful line or two I he said when I look back in my life he says the things that make me smile things give me pleasure when I I drank too much and smoked too much and and climbed too high and fell too far and try too hard yeah so go for it Google thank you this this fantastic so we're open for questions uh folks yeah uh thank you Mr Grant for coming to speak to us today uh so a few days ago uh maybe a couple of days ago Donald Trump uh talked about essentially defaulting on uh like government US Government debt and I was kind of surprised that the markets didn't seem to react at all um to that at all uh do you think that as we get closer to a possible Trump presidency that uh this might actually sort of slay one of the Sacred cows well Donald Trump speaks with authority in the matter of default dozens of companies of course hundreds have defaulted once uh in modern times uh uh many fewer defaed twice uh uh many fewer still still three and four times Trump's Resort and Casino Atlantic city holds the the indoor record for having defaulted five times so this man speaks with with authority on the matter now um by way of historical uh preface the United States has defaulted we defaulted on promise to pay our debts in gold in 1933 and 34 that was known in the city of London as the American default and again in 1971 when Nixon uh said that no more would we honor promises to redeem dollars at $35 to the ounce of gold so that was default number two um and there is a uh a default uh built into the monetary method of of achieving or trying to achieve 2% inflation per year over the course of a 30-year Bond of course 2% loss of purchasing power every year adds up and you're not looking at much in the way of return and purchasing power for the so there there there's so default is a defined term now I think appr propo of Donald Trump's remarks on Monday so you have to keep up we can that on Monday afternoon every day is in an adventure in his policymaking um but you know he's all about negotiating um so I don't I mean I I I think that uh the way the way to think about the debt predict the American public debt I I I suggest you visit the KO Institute website there's a a free analysis available by a very good thinker named Jeffrey myon m o n and in it in this analysis he uh he says let's take the present value of American government promises to pay that is the policies in place now especially Medical Care Social Security let us assume those go forward as now budgeted for 75 years and let us compare the present value of expected tax revenues using assumptions which of course might be errant and compare those two the present value of expected outlays and the present value of expected income for the government and the difference is in a present value is $120 trillion that's the whole so that's what they call in the trade unsustainable unless something is done now Donald Trump is wants more Medical Care he wants to make America great you have to be healthy so he wants more of this this stuff and and uh and I dare say that his life Democratic sparring partner is going to want more as well so the the question of to me about default is is rather more nuanced than than the Trump Resort in Casino simply not paying and getting really clever lawyers to to rewrite the the covenants uh but I think that that some adjustment in our debt burden is in our future either through I don't know through something uh and perhaps through inflation or perhaps through negotiation uh how do you feel about an AIT of the fed and if that were to happen what are your hopes or fears about what might be discovered and what action might be taken as a result of that yeah there's I think the the uh the audit ought to um look at not only the the balance sheet in the finances which I I guess are kind of okay although awfully big trillions upon trillions but I think I think an audit ought to ought to go into the uh uh the the assumptions and the analyses that inform the fed's actions I think the more sunlight on this institution the better I mean the FED uh ought to be regarded as as as a vast Government monopoly and what every Monopoly needs is competition so as much as I'd like to see an audit in the FED I would also like to see um a simple change in the tax system such that uh silver and gold would not be taxed as a collectible but rather we treat it as money in the tax system uh whereby gold could compete in the open market for monetary Allegiance there's a company called U gold money which is kind of a like a Bitcoin thing and it's a very small caliber Enterprise at the moment but why not give it a chance let's let's see what people choose um so I yes a of the fed the more sunlight the better and competition please um yeah I know a lot of the uh the liberal intelligencia like Lawrence Summers make fun of the gold standard compared to Witchcraft and I'm curious how in practice would you bring it back what would be the steps you would take what would be the outcomes Etc yeah it's a it's a big question and I won't tax you in the audience with things that uh uh that details which I I'm not sure I can do a very good job explaining but but I think the the essence would be to uh to Define money as a material object as a weight in a measure and this could be done through uh and to fix uh currency values internationally so you have to coordinate uh among leading countries and to restore fixed exchange rates which after all were the regime in place from the founding really in this country the founding to 1971 um the the our experience with with with pure fiat currency and with floating exchange rates dates only really to 1971 so it's a very small experiment in the long running history of money uh I think a lot of people are hung up on the uh on the evident and acronis of people walking around with a bunch of gold in their pocket and I and they wouldn't they even in the 19th century they didn't banknotes were were portable light there was a a panic in the city of London in 1825 and uh and the authorities to kind of to uh uh to uh intervene and to quell this gave the bank of England permission to issue one pound notes previously they could not do that they only sovereign gold coins one pound worth each little tiny things and um and and people were glad for it and they didn't really what what gold does is serve to to Anchor value and in this day and age when um uh when your phone is your bank and your brokerage account and um and so many other things you can um uh you could deal in in in Gold electronically it's infinitely divisible in weight it's one of it's one of its many monetary features so um I I think what gold would do would be would be the effect would be would be to create an objective around which prices would move rather than now changing the value of money so that prices and wages don't have to move now that that that is a would be a change that the that the American people would would have to choose to accept or not it's it's rather a big change but you know we we have we have borne uh seven or eight years of the sleepwalking one and a half% growth is something wrong and I think uh you in the course of auditing the FED let's audit our intellects let us audit the ideas by which we live and see if we can't do better I think at least some serious investigation into the nature of money and nature of credit might help us improve our Lots do you think Ron Paul has been suppressed by the powers that be because well I mean he this is what he speaks as as you well know right because he would want to make you in his in admin he would want you to be in his administration so we fell a couple of electoral votes sh on that one yeah but but right I I realized that I realized that but if he was going to have one right so my question is you know I lived overseas in Europe for many years like you couldn't even get any information on Ron Paul there I had to I was an English teacher at the time for for Bankers actually and they wanted to know about him right and but even here in America like he gets a lot of uh people want following him but like the media squelches him I I well I think Ron Paul is regarded in the mainstream media as a crank that is a fact um but one of the things that uh that uh the worldwide web has opened up is alternative methods of of uh media of Journalism of information and I mean try to suppress something I mean I guess okay Facebook maybe is is is trending the wrong things I read in the paper but you know I think that is evanescent I think that that the world finds out I I think that uh people know everything they want to know about Ron I mean I don't think there's a conspiracy of Silence um I think there is a blockheaded misperception of the way our financial affairs are ordered and the ideas that inform them and so how do you how do you deal with that I think you get better ideas you you you get up off your Duff and try to to make things better which is um it it sound doesn't sound very um imminently successful but um uh in short I I don't I don't think there's I don't think there's a program against Ron Paul I think Ron Paul personally is actually irrepressible Jim thank you so much for being so candid and sharing your thoughts with us we appreciate it very much thank you