The Scandal of Money: Why Wall Street Recovers but the Economy Never Does - George Gilder (2016)

Notes

PROLOGUE: WINNING THE DEBATE

1.Robert L. Bartley, The Seven Fat Years, and How to Do It Again (New York, NY: The Free Press, 1992).

2.Robert J. Samuelson, “The Startup Slump,” Washington Post, December 22, 2015. Citing a National Bureau of Economic Research paper, Samuelson reports a “double-whammy”: a 37 percent decline in the proportion of start-ups—from 13 percent of all firms in the late 1980s to 8 percent in 2011—and a decline in their rate of growth to a level below the growth rate of older companies, which in turn have slowed their investment in new plants and equipment. He concludes, “Compared to the past, companies seem more reluctant to invest in the future.”

3.Nassim Nicholas Taleb and Mark Spitznagel, in a blog post at CNN’s Global Public Square from October 2012, estimate that $2.2 trillion was paid to bankers, chiefly in bonuses, in the United States alone between June 2000 and June 2007, and they project the total to rise to (very roughly) $5 trillion over the course of the decade. “Bankers used leverage to increase profitability and exploited the backstop of public guarantees. The profits largely flow to the employees [i.e., the bankers], while the losses are defrayed by the taxpayers and shareholders and even retirees (through artificially low interest rates). The Fed also provided $1.2 trillion in loans to banks (mostly secret at the time).”

4.Carmen M. Reinhart and Kenneth Rogoff, This Time Is Different: Eight Centuries of Financial Folly (Princeton, NJ: Princeton University Press, 2011).

5.Mark Skousen, Vienna & Chicago, Friends or Foes? A Tale of Two Schools of Free-Market Economics (Washington, DC: Capital Press, 2005). Skousen superbly covers the canonical sources of Austrian and Chicago economic thought. See also Robert P. Murphy and Donald J. Boudreaux, Choice: Cooperation, Enterprise and Human Action (Oakland, CA: Independent Institute, 2015). For the definitive texts, see Ludwig von Mises, Human Action, and Friedrich Hayek, The Road to Serfdom, both available in many editions.

6.Daniel Kahneman, Thinking, Fast and Slow (New York, NY: Farrar, Straus and Giroux, 2011). The Israeli cognitive psychologist Amos Tversky was his collaborator.

CHAPTER 1: THE DREAM AND THE DOLLAR

1.Louis Simpson, “In California,” in The Owner of the House: New Collected Poems, 1940–2001 (Rochester, NY: BOA Editions, 2003), 173.

2.“There was virtually no growth before 1750, and thus there is no guarantee that growth will continue indefinitely. Rather, the paper suggests that the rapid progress made over the past 250 years could well turn out to be a unique episode in human history.” Robert J. Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” working paper no. 18315, National Bureau of Economic Research, August 2012. In early 2016, Gordon expanded these themes into a widely touted and conscientious tome, The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War (Princeton, NJ: Princeton University Press, 2016). Though full of intriguing insights, it finally founders on its mostly academic sources and becomes merely the most definitively and exhaustively mounted alibi for socialist slowdown. It frets about “inequality,” “global warming,” and other facets of spurious conventional wisdom, but fails to ascribe any role to monopoly money or to luddite control of the government and the academy.

3.Lawrence Summers, “Reflections on the Productivity Slowdown,” keynote address, Peterson Institute for International Economics, Washington, DC, November 16, 2015. Summers here offers second thoughts about his earlier endorsement of the “secular stagnation” thesis. Now he asks how skilled labor and new technology could be displacing so many workers if productivity were not increasing. He also asked his audience how many would trade their healthcare in 2015 for the allegedly much cheaper healthcare in 1950. Since everyone refused the offer, Summers concludes that, adjusted for quality, healthcare has not risen in price. Thus productivity in healthcare has improved far more than the measured gains. See also Bret Swanson, “Moore’s Law and the Productivity Paradox,” AEIdeas (blog), November 25, 2015, https://www.aei.org/publication/moores-law-and-the-productivity-paradox/.

4.Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University, Belknap Press, 2014).

5.Ta-Nehisi Coates, Between the World and Me (New York, NY: Spiegel and Grau, 2015). See also Kyle Smith, “The Hard Untruths of Ta-Nehisi Coates: A Bestselling Polemic Riven with Hatred Thrills the Liberal Elite,” Commentary, October 2015, pp. 20–25.

6.Yuval Levin, “The Mobility Crisis,” Commentary, March 2015, pp. 12–20.

7.Kwasi Kwarteng, War and Gold: A 500-Year History of Empires, Adventures, and Debt (New York, NY: PublicAffairs, 2014), 219–20.

8.Peter Thiel with Blake Masters, Zero to One: Notes on Startups, or How to Build the Future (New York, NY: Crown Business, 2014), 5–11 and passim.

CHAPTER 2: JUSTICE BEFORE GROWTH

1.George Gilder, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World (Washington, DC: Regnery Publishing, 2013). See also Cesar Hidalgo, Why Information Grows: The Evolution of Order from Atoms to Economics (New York, NY: Basic Books, 2015). The MIT scholar offers a similar information theory of capitalism, with many ingenious refinements, that nonetheless goes astray from my point of view by identifying information with order. So does Matt Ridley, The Evolution of Everything: How New Ideas Emerge (New York, NY: HarperCollins, 2015). These brilliant men, ready to grasp ideas with prehensile mastery, come a cropper on the counterintuitive findings of information theory. Information is not order but its opposite. Order is the low-entropy carrier that makes it possible to identify information (and complexity) as disorder. Both Hidalgo and Ridley imagine that there is a conflict between evolution and the second law of thermodynamics, the entropy law. But both complex systems and entropy represent surprising deformations of order.

2.“Costs and the Experience Curve, Why Costs Go Down Forever,” chapter 2 of Bruce D. Henderson, The Logic of Business Strategy (Cambridge, MA: Ballinger Publishing, 1984), 47ff.

3.“The Six Epochs” and “The Law of Accelerating Returns,” chapters 1 and 2 of Ray Kurzweil, The Singularity Is Near (New York, NY: Viking, 2005), 7–34.

4.William D. Nordhaus, “Do Real-Output and Real-Wage Measures Capture Reality? The History of Lighting Suggests Not,” Cowles Foundation for Research in Economics at Yale University, 1998. This epochal paper was delivered first to the National Bureau of Economic Research in 1993. I first encountered it in David Warsh’s definitive Knowledge and the Wealth of Nations (New York, NY: W. W. Norton, 2007), 336.

5.Nicholas Eberstadt, “How the World Is Becoming More Equal,” Wall Street Journal, August 26, 2014. Eberstadt documents that globally life spans have never been so long and evenly distributed, with even China now reaching an average of longer than seventy years.

6.Thomas Sowell, “Income Distribution,” The Thomas Sowell Reader (New York, NY: Basic Books, 2011), 98–107.

7.Charles Gave, “Of Wicksell and Fed Fallacies,” Gavekal Research, September 4, 2014, p. 4.

CHAPTER 3: FRIEDMAN AND THE ENIGMA OF MONEY

1.Ronald I. McKinnon, Money and Capital in Economic Development (Washington, DC: Brookings Institution, 1973).

2.Milton Friedman, Capitalism and Freedom (Chicago, IL: University of Chicago Press, 1962); and Friedman, Free to Choose (New York, NY: Harcourt, 1980).

3.Economists tend to restrict velocity to GDP over the money supply, as if the public only contributed to “demand” by purchasing final products in GDP. But the public can also invest, speculate, or collect, and these actions are if anything more significant than mere spending.

4.“Gross Output provides an important new perspective on the economy; and one that is closer to the way many businesses see themselves,” says Steve Landefeld, director of the Bureau of Economic Analysis. The government began releasing this statistic in the spring of 2014. GDP measures the “use” economy, final goods and services, from grande lattes to automobiles to residential housing. GO includes the “make” economy—all the intermediate production of components and commodities that preceded the final sale. Although GO may seem to double count, adding the steel and plastic in the car to the final sale of the automobile, GDP arbitrarily treats human beings merely as final consumers of goods like food and fuel. Their more important role in the economy is as workers and producers using food and fuel to sustain themselves as producers of new goods and services, knowledge and learning.

5.“Monetary Rules Work and Discretion Doesn’t,” chapter 1 in John B. Taylor, First Principles: Five Keys to Restoring America’s Prosperity (New York, NY: W. W. Norton, 2012).

6.Ramesh Ponnuru and David Beckworth, “The Right Goal for Central Banks,” National Review, June 11, 2012, p. 36.

7.“Should We Worry about US Velocity?,” chapter 9 in Louis-Vincent Gave, Too Different for Comfort (Hong Kong: Gavekal Books, 2014). See also Charles Gave, “A Fisherian Take on Velocity,” Gavekal Research, October 11, 2013.

8.Louis-Vincent Gave, Too Different for Comfort, 49.

9.Lewis Lehrman, “Jacques Rueff, the Age of Inflation, and the True Gold Standard,” speech, Assemble Nationale, November 7, 1996. See also Lehrman, Money, Gold and History (New York, NY: Lehrman Institute, 2013), 147. Lehrman has been the single most persistent and resourceful advocate of what he terms the “true gold standard” in his book by that name: True Gold Standard (New York, NY: Lehrman Institute, 2012). He quotes Keynes, who in 1922 declared: “If the gold standard could be reintroduced . . . we all believe that the reform would promote trade and production like nothing else, but also stimulate international credit and transfers of capital to where they are the most useful. One of the greatest elements of uncertainty would be suppressed.”

10.Milton Friedman, interview in the Financial Times, San Francisco, CA, June 28, 2003.

CHAPTER 4: THE CHINESE CHALLENGE

1.David Stockman, “The Great China Ponzi—an Economic and Financial Trainwreck Which Will Rattle the World,” David Stockman’s Contra Corner, August 16, 2015, http://davidstockmanscontracorner.com/the-great-china-ponzi-an-economic-and-financial-trainwreck-which-will-rattle-the-world/; and Stockman, “China’s Monumental Ponzi: Here’s How It Unravels,” David Stockman’s Contra Corner, March 31, 2014, http://davidstockmanscontracorner.com/chinas-monumental-ponzi-heres-how-it-unravels/.

2.George Gilder, “Let a Billion Flowers Bloom,” in David Boaz, ed., Toward Liberty: The Idea That Is Changing the World (Washington, DC: Cato Institute, 2002), 180–81.

3.Purchasing power parity calculations, widely criticized as inaccurate, showed China as the largest economy in 2014, though by per capita standards the United States remained more than 40 percent ahead in 2015. In a world with no reliable monetary standard, purchasing power parity is the only way to compare different economies. Economists evidently agree that currency prices fail to gauge actual values.

4.These statistics comparing foreign exchange market (forex) trading with total stock market and goods and services trade are calculated from the total of daily foreign exchange transactions published every three years by the Bank for International Settlements (BIS). This number is then compared to global international stock market trading and goods and services trade divided by the number of days. Kenichi Ohmae of McKinsey & Company wrote a book titled The Borderless World (New York, NY: HarperCollins, 1990) at a time when trading volume was $600 billion a day, compared with related goods and services trade of $600 billion yearly: “No one can argue that FX trading is still a mere adjunct to other forms of economic activity. It is an end in itself.”

5.“Twenty First Century Capitalism,” chapter 17 in Nathan K. Lewis, Gold: The Monetary Polaris (New Berlin, NY: Canyon Maple Publishing, 2013), 271–80.

6.“Estimates by several analysts show that China’s gold imports are heading for an annual total of close to 2,100 tonnes” compared to previous leader India’s 1000 tons. Taki Tsaklanos, “China and India Hoarding Massive Amounts of Gold,” Financial Sense, January 18, 2015.

7.Stockman, “The Great China Ponzi.”

8.Charles Gave et al., Our Brave New World (Hong Kong: Gavekal Research, 2005), 74 and passim. Since 2005, Chinese urban incomes have soared again.

CHAPTER 5: THE HIGH COST OF BAD MONEY

1.Peter Schiff, The Real Crash: America’s Coming Bankruptcy (New York, NY: St. Martin’s Press, 2012).

2.Eswar S. Prasad, The Dollar Trap: How the U.S. Dollar Tightened Its Grip on Global Finance (Princeton, NJ: Princeton University Press, 2014), 18 and passim.

3.Paul Krugman, End This Depression Now (New York, NY: W. W. Norton, 2012).

4.Ibid.

5.Ibid.

6.Robert J. Gordon, “Is U.S. Economic Growth Over? Faltering Innovation Confronts the Six Headwinds,” working paper no. 18315, National Bureau of Economic Research, August 2012. See also Lawrence Summers, “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound,” keynote address, National Association of Business Economists’ Policy Conference, February 24, 2014, which focuses on the impotence of expansionary monetary policy when interest rates approach zero.

7.Peter Thiel with Blake Masters, Zero to One: Notes on Startups, or How to Build the Future (New York, NY: Crown Business, 2014), 193. For my time-sensitive money, this is the most original and interesting book ever written on business strategy. (Its chief rival is the more technical Innovators’ Dilemma by Clayton Christensen.)

8.Nassim Nicholas Taleb and Mark Spitznagel, “The Great Bank Robbery,” Global Public Square, CNN, October 2011.

9.David Malpass, speech to the Needham Growth Conference, New York, January 15, 2015. As Malpass points out, zero interest rates mean free money, and “when anything is free it is allocated by queue and only the privileged folk at the front of the line get any.”

10.Charles Gave, “Poverty Matters for Capitalists,” GavekalDragonomics (Hong Kong: Gavekal Global Research, July 9, 2014), 1–6.

CHAPTER 6: MONEY IN INFORMATION THEORY

1.Michael Lewis, Flash Boys: A Wall Street Revolt (New York, NY: W. W. Norton, 2014).

2.Sir John Craig, The Mint (Cambridge: Cambridge University Press, 1953), 198 and passim.

3.Nick Gillespie, “FreedomFest Interview with George Gilder,” ReasonTV, August 12, 2014.

4.These themes are the subject of Knowledge and PowerThe Information Theory of Capitalism and How It Is Revolutionizing Our World (Washington, DC: Regnery, 2013).

5.Kwasi Kwarteng, War and Gold: A 500-Year History of Empires, Adventures, and Debt (New York, NY: PublicAffairs, 2014), 361–62.

6.“The World’s Experience with Gold Standard Systems,” chapter 5 in Nathan K. Lewis, Gold: The Monetary Polaris (New Berlin, NY: Canyon Maple Publishing, 2013).

7.“How We Got Here,” chapter 1 in Steve Forbes and Elizabeth Ames, Money: How the Destruction of the Dollar Threatens the Global Economy—and What We Can Do about It (New York, NY: McGraw Hill, 2014), 7–24.

8.Lewis, Gold.

9.Takashi Kiuchi, The Terra TRC White Paper, originally published February 27, 2004, and subsequently updated. These numbers are tabulated every three years by the Bank for International Settlements.

10.IDC Financial Insights, Worldwide Banking IT Spending Guide (Farmingham, MA: IDC Corporate USA).

11.“The United States’ Experience with Gold Standard Systems,” chapter 3 in Lewis, Gold, 64–85.

CHAPTER 7: WHAT BITCOIN CAN TEACH

1.“Twenty-First Century Capitalism,” chapter 17 in Nathan K. Lewis, Gold: The Monetary Polaris (New Berlin, NY: Canyon Maple Publishing, 2013), 271–80.

2.“E-Commerce Speeds Up, Hits Record High Share of Retail Sales,” MarketWatch (blog), August 15, 2014, http://blogs.marketwatch.com/capitolreport/2014/08/15/e-commerce-speeds-up-hits-record-high-share-of-retail-sales/.

3.Susan Vranica, “The Secret about On-Line Ad Traffic, One-Third is Bogus,” Wall Street Journal, March 23, 2014, http://www.wsj.com/articles/SB10001424052702304026304579453253860786362.

4.Nick Szabo, “Macroscale Replicator,” October 19, 1995.

5.Szabo’s blog, Unenumerated, is published online by Forbes.com. All the quotations here are from the Unenumerated archive.

6.Richard Vigilante, personal communication.

CHAPTER 8: WHERE “HAYEKS” GO WRONG

1.Ferdinando M. Ametrano, “Hayek Money: The Cryptocurrency Price Stability Solution,” Social Science Research Network, revised July 5, 2015, http://ssrn.com/abstract=2425270, 54. Ametrano’s paper was shortlisted as a finalist for the Blockchain Awards, category Visionary Academic Paper, at the Bitcoin Foundation Conference 2014, but it lost to Nakamoto’s original breakthrough paper.

2.Ibid., 5–6.

3.Ibid., 10.

4.Ibid., 20; and Friedrich A. Hayek, Denationalization of Money—The Argument Refined, 3rd ed. (London: The Institute of Economic Affairs, 1990).

5.Ametrano, “Hayek Money,” 20.

6.Ametrano, presentation to the Central Bank of Italy, June 9, 2014.

7.George Gilder, Telecosm: The World after Bandwidth Abundance (New York, NY: Simon & Schuster, 2002).

8.Board of Governors of the Federal Reserve System, “Current FAQs: Informing the Public about the Federal Reserve,” http://www.federalreserve.gov/faqs/faq.htm.

9.Richard Vigilante, personal communication.

10.Hayek, “A Free-Market Monetary System,” lecture at the Gold and Monetary Conference, New Orleans, LA, November 10, 1977, Journal of Libertarian Studies 3, no. 1.

11.Satoshi Nakamoto, “Bitcoin: A Peer-to-Peer Electronic Cash System,” Bitcoin.org, 2008.

12.George Sammon, speech to CoinAgenda, Las Vegas, October 2014.

CHAPTER 9: THE PIKETTY-TURNER THESIS

1.Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University, Belknap Press, 2014).

2.“The Scandal of Money,” chapter 12 in George Gilder, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World (Washington, DC: Regnery Publishing, 2013), 113–23.

3.Adair Turner, Between Debt and the Devil: Money, Credit, and Fixing Global Finance (Princeton, NJ: Princeton University Press, 2016).

4.Joseph E. Stiglitz, Globalization and Its Discontents (New York, NY: W. W. Norton, 2002); and Paul Krugman, The Return of Depression Economics and the Crisis of 2008 (New York, NY: W. W. Norton, 2013).

5.“I don’t particularly feel like defending currency speculation. I consider it a necessary evil. I think it is better than currency restrictions, but a unified currency would be even better [my italics]. . . . When speculators profit, the authorities have failed in some way or another. But they don’t like to admit failure; they would rather call for speculators to be hung from lampposts than to engage in a little bit of soul searching to see what they did wrong.” George Soros, Soros on Soros: Staying Ahead of the Curve (New York, NY: John Wiley & Sons, 1995).

6.Turner, Between Debt and the Devil, 19–20.

7.Henry George, Progress and PovertyAn Inquiry into the Cause of Industrial Depressions and of Increase of Want with Increase of Wealth . . . The Remedy (New York, NY: Robert Schalkenbach Foundation, 1979).

8.Turner, Between Debt and the Devil, 73, 176, 180.

CHAPTER 10: HYPERTROPHY OF FINANCE

1.Ronald McKinnon, Money in International Exchange: The Convertible Currency System (New York, NY: Oxford University Press, 1979), 3 and passim. Writing in 1978, just seven years after Nixon rescinded Bretton Woods, the Stanford economist showed that various currency cocktails, such as the International Monetary Fund’s then-heralded “special drawing rights,” could not address any real monetary problems and that commodity baskets (whether “full bodied” or fractionally reserved) would serve no purpose either, despite their cumbersome and costly practicalities. He demonstrated convincingly that gold and the dollar are the real alternatives.

I emerged from this definitive early text with the belief that control of money as a key facet of sovereignty is a treacherous temptation, since “monetary policies” by definition create “noise” in the market. They use distortions of currency as a unit of account in order to hedge, spur, subsidize, or channel economic activity in directions favored by the government and banking sectors.

2.Commodity HQ, “Top 7 Buffett Quotes on Gold Investing,” Minyanville, October 3, 2012, http://www.minyanville.com/trading-and-investing/commodities/articles/Warren-Buffett-brka-gold-investing-investing/10/3/2012/id/44617.

3.Christopher Shea, “Survey: No Support for Gold Standard among Top Economists,” Ideas Market (blog), Wall Street Journal, January 23, 2012, http://blogs.wsj.com/ideas-market/2012/01/23/survey-no-support-for-gold-standard-among-top-economists/.

4.Milton Friedman and Anna Jacobson Schwartz, A Monetary History of the United States, 1867–1960 (Princeton, NJ: Princeton University Press, 1963). See also “Reflections on a Monetary History,” in The Indispensable Milton Friedman: Essays on Politics and Economics, Lanny Ebenstein, ed. (Washington, DC: Regnery, 2012), 229–32.

5.Ben Bernanke and Harold James, “The Gold Standard, Deflation, and Financial Crisis in the Great Depression: An International Comparison,” in Financial Markets and Financial Crises, R. Glenn Hubbard, ed. (Chicago, IL: University of Chicago Press, 1991), 33–68.

6.Walter B. Wriston, The Twilight of Sovereignty: How the Information Revolution Is Transforming Our World (New York, NY: Scribner, 1992; Replica Books, Lord and Taylor, Bridgewater, NJ: 1997), 9, 59–62, and passim. Wriston beat Thomas Friedman to all the crucial insights of The World Is Flat by fifteen years.

7.Ibid., 9.

8.“OTC Foreign Exchange Turnover by Instrument, Counterparty and Currency in April 2013, ‘Net-Net’ Basis, Total Reported Transactions in All Currencies,” in Bank for International Settlements, Triennial Central Bank Survey: Global Foreign Exchange Market Turnover in 2013 (Switzerland: 2014).

9.Eric Janszen, The Postcatastrophe Economy: Rebuilding America and Avoiding the Next Bubble (New York, NY: Portfolio, 2010), 36ff.

CHAPTER 11: MAIN STREET PUSHED ASIDE

1.Robert J. Samuelson, “Obama’s Economic Choices Leaving His Successor Horrible Hurdles,” Washington Post, September 14, 2015.

2.Samuelson, “Remarkably, Fannie Mae and Freddie Mac’s Importance Today Is Unparalleled,” Washington Post, November 16, 2015.

3.“[W]e . . . describe the economy as the system by which people accumulate knowledge and knowhow to create packets of physical order, or products, that augment our capacity to accumulate more knowledge and knowhow. . . . The finiteness of human beings and of the networks we form limits our ability to accumulate and transmit knowledge and knowhow, leading to spatial accumulations . . . that result in global inequality. . . . Silicon Valley’s knowledge and knowhow are not contained in a collection of perennially unemployed experts but rather in the experts working in firms that participate in the design and development of software and hardware.” Cesar Hidalgo, Why Information Grows: The Evolution of Order, from Atoms to Economies (New York, NY: Basic Books, 2015), 8, 142, and passim.

4.Charles Gave et al., Our Brave New World (Hong Kong: Gavekal Research, 2005) offers the definitive exposition of the rising role and dominance of the “platform company” model.

5.Nick Bilton, “Is Silicon Valley in Another Tech Bubble?,” Vanity Fair, September 2015.

6.Marc A. Miles, “The Fed’s Zero Interest Rate Policies Amount to a War on Jobs,” Forbes, June 4, 2013, http://www.forbes.com/sites/realspin/2013/06/04/the-feds-zero-interest-rate-policies-amount-to-a-war-on-jobs/#2715e4857a0b72333a807421.

7.David Malpass, “Pro-Growth Tools for the Frozen Fed,” Wall Street Journal, October 6, 2015.

CHAPTER 12: WALL STREET SELLS ITS SOUL

1.Mike Konczal, “The Devastating Lifelong Consequences of Student Debt,” New Republic, June 24, 2014. See also Bill Walton, On Common Ground, interview with George Gilder.

2.Peter Thiel with Blake Masters, Zero to One: Notes on Startups, or How to Build the Future (New York, NY: Crown Business, 2014), 89–90; and George Gilder, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World (Washington, DC: Regnery Publishing, 2013), 29–33. The figures on jobs contribution from venture capital vary from 11 percent to 17 percent, but since the epochs of slavery and socialism all jobs have stemmed from the process of knowledge accumulation and learning, which is the focus of venture investment.

3.Charles Gave, “Indexation=Parasitism,” GavekalDragonomics (Hong Kong: Gavekal Research, July 15, 2014), 1.

4.John C. Bogle, The Clash of Cultures: Investment vs. Speculation (New York, NY: John Wiley and Sons, 2012). Bogle astonishingly sees the culture of investment as index funds and the culture of speculation as actively managed capital.

5.Nassim Nicholas Taleb and Mark Spitznagel, blog post, Global Public Square, CNN, October 2012.

6.Ibid.

7.Robert Laughlin, A Different Universe (New York, NY: Basic Books, 2006).

8.Robert J. Gordon, The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (Princeton, NJ: Princeton University Press, 2016).

9.Walter Bagehot, Lombard Street: A Description of the Money Market (London: Henry S. King, 1873), text available at the Library of Economics and Liberty, chapter I, paragraph 4 (http://www.econlib.org/library/Bagehot/bagLom1.html#).

CHAPTER 13: A WRINKLE IN TIME

1.Alan Turing, Systems of Logic Based on Ordinals, quoted in George Dyson, Turing’s Cathedral (New York, NY: Pantheon Books, 2012), 252. See also Gregory J. Chaitin, Thinking about Gödel and Turing: Essays on Complexity, 1970–2007 (Hackensack, NJ: World Scientific Publishing, 2007).

2.Ludwig von Mises as quoted in Israel M. Kirzner, Ludwig von Mises (Wilmington, DE: ISI Books, 2001), 72.

3.“Life’s Irreducible Structure,” chapter 14 in Michael Polanyi, Knowing and Being: Essays by Michael Polanyi (Chicago, IL: University of Chicago Press, 1969), 225–39.

4.Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014), 264 and passim.

5.Adolf Hitler, Mein Kampf, chapter 12, as examined in “The Economics of Hate,” chapter 5 in George Gilder, The Israel Test: Why the World’s Most Besieged State Is a Beacon of Freedom and Hope for the World Economy (New York, NY: Encounter Books, 2012), 63–71.

6.Sadi Carnot et al., Reflections on the Motive Power of Fire (New York, NY: John Wiley & Sons, 1897 edition), http://books.google.com/books?id=tgdJAAAAIAAJ.

7.Nicholas Georgescu-Roegen, The Entropy Law and the Economic Process (Cambridge, MA: Harvard University Press, 1971). The new Malthusians make the argument that the ecological costs of capitalism, measurable through the entropy law, nullify net profits and thus render the system “unsustainable.”

8.Cesar Hidalgo’s mostly definitive Why Information Grows: The Evolution of Order, from Atoms to Economies (New York, NY: Basic Books, 2015) presents Ludwig Boltzmann as an advocate of information as order. But information theory treats information as disorder—unexpected rather than predictable results, measured by entropy, which in the theories of both Boltzmann and Shannon is the opposite of order.

9.Hubert P. Yockey, Information Theory, Evolution, and the Origin of Life (Cambridge: Cambridge University Press, 2005), 166.

10.“The Knowledge Horizon,” chapter 24 in Gilder, Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World (Washington, DC: Regnery Publishing, 2013), 257–72.

11.Dennis W. Sciama, The Unity of the Universe (Garden City, NY: Doubleday Anchor Books, 1959).

12.Robert P. Crease, World in the Balance: The Historic Quest for an Absolute System of Measurement (New York, NY: W. W. Norton, 2011), 261–64.

13.Richard Vigilante, personal communication.

CHAPTER 14: RESTORING REAL MONEY

1.Friedrich Hayek, “Toward a Free Market Monetary System,” in James A. Dorn and Anna J. Schwartz, eds., The Search for Stable Money (Chicago, IL: University of Chicago Press, 1987), 383.

2.Arnold Kling, “Turning Guns to Butter: How Postwar America Brought the Boys Home without Bringing the Economy Down,” Reason, October 12, 2010. Kling’s larger theory is expounded in his definitive Unchecked and Unbalanced: How the Discrepancy between Knowledge and Power Caused the Financial Crisis and Threatens Democracy (Lanham, MD: Rowman & Littlefield, 2010). See also Robert Higgs, “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War,” Independent Review, no. 4 (1997): 561–90.

3.Ed Conway, The Summit: Bretton Woods 1944: J. M. Keynes and the Reshaping of the Global Economy (New York, NY: Pegasus Books, 2015), epilogue.

4.Maurice McTigue, “Rolling Back Government, Lessons from New Zealand,” Hillsdale College Imprimis 33, no. 4 (April 2004).

5.George Gilder, The Israel Test: Why the World’s Most Besieged State Is a Beacon of Freedom and Hope for the World Economy (New York, NY: Encounter Books, 2012).

6.Steve Forbes with Elizabeth Ames, Reviving America: How Repealing Obamacare, Replacing the Tax Code, and Reforming the Fed will Restore Hope and Prosperity (New York, NY: McGraw Hill Education, 2016), 124 and passim.

7.Metcalfe’s Law ordains that the power and value of a network rises roughly by the square of the number of compatible devices linked to it.

8.Judy Shelton, Fixing the Dollar Now: Why U.S. Money Lost Its Integrity and How We Can Restore It (Washington, DC: Atlas Economic Research Foundation, 2011).

9.Ibid., 40–44.

10.Ibid., 48, citing Alan Greenspan, “Can the U.S. Return to a Gold Standard?,” Wall Street Journal, September 1, 1981.