The Future of Money with Tyler Cowen and Randall Kroszner

Good evening. Sorry about that pregnant pause. I'm Niamh King. I'm the Vice President for Programs here at the Chicago Council, and you're all very welcome. We're delighted to have Randy Kroszner back on our stage and also Tyler Cowen, who'll be joining us in a moment. First off, I'd like to thank our sponsor for this. Zurich is an absolutely fabulous sponsor for the series. We have a large group from Zurich here in attendance, if they made it through the cold and the Teachers, I believe, are outside wreaking havoc with our traffic. Thank you very much for coming, and thanks for your support. This program will be livestreamed, and the audio will— video will be available on the web tomorrow— tonight, if you miss it tonight, if your friends do. Please silence your phones, though. You can use your social media, but make sure your phones are silenced. Couple of upcoming programs that might be of interest. February 8th, we have Isaac Stonefish, who'll be coming to talk about China's foreign policy. February 16th, we're delighted to welcome the Australian Minister for Trade. He'll be talking about Asia and Australia in the 21st century. And then the next two installments of the Global Economy, we'll welcome Luigi Zingales on February 23rd talking about the future of Europe. And on March 24th, we'll have Mervyn King back who will be on the future of the global economy with Bethany McLean of Vanity Fair. And one other interesting add, so you can save the date now, is we'll be hosting the former Greek Finance Minister Yanis Varoufakis. We'll be hosting him at the end of April, so keep an eye out for that. As many of you know, Council programs are membership supported. Thanks a million to all of you who are already members. And if you're not a member, they start at $100, but exciting news, you may have heard that the Chicago Council was named the number one think tank to watch by the influential University of Pennsylvania's 2015 Global Go-To Think Tank Index. So now we have 25% off for YPs and general members from now until February 12th. There's a special flyer on your chair about that. I'll be back up for Q&A, but now if you'll help me in joining to the stage— joining me in welcoming to the stage Will Trimble, who is the Chief of Staff to the Chairman of North America Zurich Insurance Group and our sponsor tonight. Thanks, Will.

Wow, what a bunch of important topics in the future of money today, right? Believe me, it's something that I want to communicate to our shareholders that we're pursuing doing, getting more and more of every day for them. But ladies and gentlemen, on behalf of Zurich and the Chicago Council on Global Affairs, I'd like to thank you all for joining us for this event this evening, the first of which in the 2016 Global Economy Series. Zurich's very pleased to support this ongoing series to discuss such important topics. This past fall, we were delighted to host Ms. Gillian Tett, who coincidentally I just moderated a panel with our chairman at the annual meeting in Davos on the transformation of finance, and also former Federal Reserve Bank Chairman Ben Bernanke in a conversation with Martin Wolf on the global financial crisis. We also hosted Dr. Glenn Hubbard, the Dean of Columbia University Business School, on the future prospects of U.S. economic growth. Tonight, we are particularly delighted to welcome Professors Tyler Cowen and Randall Kroszner to discuss their perspectives on the implications of the rapid evolution occurring in money and finance. As you may know, disruptive technologies and innovations continue to transform the world of finance as we know it. Particularly with insurance, it's really forced us to think about other stakeholders and other members of the insurance ecosystem. Traditionally, we would think about carriers, brokers, most important being our customer, government regulators, and then our service providers, which were technology providers. More and more often now, we've seen players in the financial tech space make real moves, some purchasing insurance companies to the tune of a billion dollars at a time. Breaking down our insurance value chain and looking at how these innovative applications will impact our service and our value propositions is an important thing that we face, not in 5 years, but now. The impact is real. We're seeing advancements in artificial intelligence and the application of blockchain coming to stead in the next, next years, if not months. So we're very fortunate to have Professors Cowen and Kroszner with us this evening, and we look forward to their insights on these highly relevant and timely issues. You have their full bios in your chairs, but let me highlight a few of their achievements. Dr. Cowen currently is the Holbert L. Harris Chair of Economics, as well as Chairman and General Director of the Mercatus Center at George Ma— George Mason. He is co-author of the blog Marginal Revolution and co-founder of the online education platform Marginal Revolution University. Professor Cowen writes regularly for several publications, including the New York Times and Wall Street Journal, among others. In 2011, Foreign Policy honored him as one of the top 100 global thinkers., and The Economist magazine named him one of the most influential economists of the last decade. He currently serves on the advisory board of the Paulson Institute and the World Economic— oh, sorry. Dr. Randall Kroszner, the Norman B. Robbins Professor of Economics at the University of Chicago Booth School of Business. He currently serves on the advisory board of the Paulson Institute and on the World Economic Forum's Global Agenda Council. On the Global Financial System, who probably had a thing or two to— in terms of planning for that panel on the future role of the financial industry. He previously served as a governor of the Federal Reserve System, taking the leading role in developing responses to the financial crisis, and also served as a member of the President's Council on Economic Advisers. Dr. Kroszner received the Battle Prize for best corporate finance paper in the Journal of Finance. And his recent book, Nobel Laureate Robert Shiller, Reforming the U.S. Financial Regulation, was on the Washington Post bestseller list. Professors Cowen and Kroszner are longtime friends. They were debate partners in high school, which makes this very appropriate, and also wrote a book together on monetary economics. Ladies and gentlemen, please join me in welcoming our guests.

We're going to do a bit of a dialogue and a bit of a mutual interview, and we're gonna run the broad sweep of world history. We're gonna close with prospects for the global economy, but I'd like to start off with a question about the past. So when Randy and I were debate partners in high school, that was 1976, we had a debate plan targeted toward lowering the rate of inflation and controlling the money supply. And in the early 1990s, as was mentioned, we wrote a book together on monetary economics. Now, since then, what is it, Randy, that has surprised you about how economies have evolved with respect to money, and what is it that's really met your expectations?

So, as Tyler said, we've been thinking about these issues for 30, 40 years. It's really quite amazing. And when we were thinking about this in the 1970s and 1980s, the key thing was to try to control inflation. Inflation was out of control in so many countries. The Fed was seen as having lost control of inflation, not focusing on inflation. There were so many things that were drawing concerns, or so many countries that were having very high inflation, and the key issue was how do we control inflation? And the thing that's really surprising now, 30, 40 years later, is that's not the issue in most countries. The issue now is how do we get to a 2% inflation target? It had been imposed in many countries, the 2% inflation target was imposed by the legislature on the central bank to try to rein them in. And now, most countries can't even achieve 2% inflation. And despite the Fed having $4.5 trillion on their balance sheet, 25% of GDP, the Bank of Japan Japan probably now has about 60% of GDP of assets on its balance sheet, and it's still barely being able to fight deflation, no less get to its 2% inflation goal. So that's something that I don't think I would have anticipated 30, 40 years ago, that things would be so different, that not only would we be able to control inflation and sort of have central banks on a better path to not have high inflation,. But now the challenge is trying to prevent deflation and trying to prevent— get inflation to 2%. But what do you think, Tyler?

What's really surprised me is how much the rate of productivity growth and monetary policy interact. So if I go back to the '70s or even the '90s, at that time I tended to think of the rate of productivity growth as pretty close to a constant, fairly automatic. But if we look at actual data, we see, for instance, in this country, the median wage or median household income was higher in 1999 than it is today. And this, I think, matters for monetary policy in a few ways. It makes it harder to generate credit, but I think more importantly, it changes the political economy of inflation. So, in the 1970s, we had a model that the government would push for too much inflation, maybe for seniorage or because they felt it would stimulate the economy for some kind of Keynesian reason. Today, people are much more afraid of their real wages falling, and some of that fear is irrational, but some of it is rooted in actual experience of stagnant or even falling real wages. And when people are afraid of their real wage falling, they become much more skittish about inflation. We're also an older society, and I think older people tend to be more opposed to inflation, again, perhaps more than is rational. So the political economy has swung to the point where for the Fed to achieve 2% inflation, it might have to shoot for 3% or maybe even 4%.. And that's now politically unacceptable, whereas in the 1970s it would have been a kind of wonder perhaps to get the rate of inflation down to such a low level. But Randy, what do you think has been the fundamental shift between now and then that's changed so many things?

Yeah, so certainly we see, just as I said, very, very different outcomes that way. I think we certainly have seen a dramatic change. We've had different waves of productivity growth, so we had sort of very low productivity growth in the '70s, then it seemed to be much higher, and now there's a concern that we're stagnating, not only in the US but around the world, whether it's in China, the UK, in many countries. And so I think that's one of the key challenges going forward, is trying to think about, you know, what can be done. Well, one, whether anything can be done. Is it just something that we happen to be lucky that, you know, in some period of time there are some inventions that then lead to a lot of follow-ons that lead to very high productivity growth, and then some periods we're lucky in finding things, some periods we're not, or whether it's something that is much more conscious that we can have various policies that will help to promote that. Obviously, that's some of the stuff that's coming up in the political campaigns, how can we kind of generate more growth in the economy, and I think it ultimately comes down to thinking about productivity because— Demographics are largely fixed. You can't do that much about that. You've got— we've got an aging population. I mean, like in China, they had one-child policy. Now they're relaxing that, so they have some policy tool there, but the impact isn't going to be for a generation, even if that— if they do get a large response in terms of fertility. So really, the main thing that you can do related to economic growth is productivity and— one of the key questions is, can tax policy, can other types of policy really help to promote that, or is it something that it just happens and it's sort of outside of really anyone's control? I don't know, what do you think about that? I mean, Tyler's written a whole book on low-hanging fruit and thinking about productivity, so I know he's thought a lot about this.

There's a secular decline in rates of return on safe assets since the 1980s. So what you could get on a money market fund back then to what you can get on a money market fund or some other relatively safe investment now That basically is a line sloping downwards. People sometimes blame this on the Fed. I think that is, for the most part, a misunderstanding. But the problem is this: as rates of return in your economy become lower, and then you have a Fed which is also trying to lower them a bit as part of its stimulating monetary policy, you run the risk of what was called a liquidity trap. And Randy and I wrote about this in our book in the 1990s.. And when you have this liquidity trap, it's at least harder for the Fed to get a higher rate of inflation, or harder for the ECB to get a higher rate of inflation, because just swapping money for Treasury bills, it's like swapping two $5 bills for a $10. It doesn't have that large an impact on the economy. So to get the rate of inflation to be higher, central banks have to do something a bit more novel, a bit more startling, but they are by their nature these days fairly fairly conservative institutions, probably should be fairly conservative institutions. And we're caught in this trap where we want our central banks to do something a bit radical, but for the last 30 years we've been building them so that they can't do radical things. And now, in a sense, we're asking the impossible from them. But Randy, as someone who's been on the Fed Board, how do you see this tension? Do you think the Fed could get us to, say, a 2.5% inflation rate if it wanted to? Would this help the economy and where does all this stand?

Oh, that's a lot of questions.

That's a lot of questions. Lot of questions.

We expect a lot of answers.

Uh-oh.

See, some things haven't changed.

So, let's see, the first one was, could the Fed, the Fed has had a 2% target, some people call it a ceiling, that's debatable, but they've mostly come in below 2% lately. Would having a rate higher than 2% stimulate the economy? Can the Fed do it, and can the Fed do it within the range of what is considered acceptable for the Fed to do?

Yeah, I think, because this gets at what we were talking about before, the whole DNA of central banks over the last few decades was reformulated to try to prevent them from having high inflation, and now it's exactly the opposite. We're back to our early 1930s of trying to prevent deflation or prevent very low inflation from occurring. And so I think in principle, central banks can still generate inflation. I mean, this gets into— this is one of the fundamental issues in monetary policy that's been debated for decades, if not centuries, exactly what Tyler was talking about. So what is it special about central banks? How can they generate inflation? Well, they're providing something that's different than— asset that's different than other assets. But if you have the same rate of return on money as you do on bonds, then those assets may not be all that different. This was, you know, a lot of people talked about the so-called zero lower bound on money, and so— sorry, zero lower bound on interest. But we now know that we can go below that because it's not just the rate of interest that's relevant for money, but also the convenience use of it. And so people are willing to accept a negative rate of return on government bonds, and we see that— I mean, this is one of the other things that's really odd. 30 years ago, I would have never thought that we'd be seeing widespread negative rates of return on bonds. So Germany is borrowing, you know, out to 5 years in negative rates of return. Many other countries of Europe are negative. Switzerland Some companies like Nestlé in Switzerland are borrowing at negative rates of return. It's just so hard to understand that. And so it sort of gets at this fundamental issue of, well, what's money and what's bonds? And then how can the Fed, or how can any central bank try to affect the price level? Because if you get into one of these liquidity trap kinds of things, people will just hold more and more. The old idea was, well, you get a zero rate of return on cash,, and so people hold more and more of it. But now what central banks are trying to do is push that down to be negative. You still can't quite do that on currency, but you can do it on other things, like the reserves. And so that's what central banks are trying to do. And I think using these kinds of things, if they were to sort of commit to say, we really wanted a higher rate of inflation— I'm not saying that they will do it or that they should do it.. But, you know, in principle, could they? I think they could, but it's going to take an enormous amount of effort, and it's going to take a long time before they're believed because they've spent the last 3 decades trying to be believed that they're not going to push inflation much above 2%. They've now been talking about trying to get back to 2%. They haven't been successful in doing that over the last 6 or 7 years. So in order to actually get above 2%, they're going to have to undertake fairly extreme actions, which I think would not be politically palatable today.

Let's say I'm at the Fed, and for whatever reasons, Congress is not going to object. The Fed can announce it's shooting for 3% instead of 2%, and institutional requirements are changed, so now the Fed can do much more in the way of buying corporate bonds. Some people have even talked about the people's QE. Give money to people out there directly rather than just swapping assets with the financial sector. So the Fed would engage in a broader range of operations, make a public statement, 3%, in the newspapers, or the ECB. Why wouldn't people believe them? Why can't this work? You say a lot of effort. I know it's a lot of institutional risk, but isn't it just really a press release and changing a few rules?

But it's— It's gotta be believed, and that's really the key thing is the credibility of will people really believe that one, they want to do it, two, they will do it, and three, can they really do it? Do they have the ability to do it? Now clearly inflation's still with us, so if you go to Brazil, you see inflation at 10% and rising. Venezuela, very high. Argentina, Well, the old Statistics Bureau never printed above 9.9%, even though all the private sector people had said that inflation was 20 or 30%, so we're not quite sure what it was. So it's not like the technology has somehow changed that fundamentally central banks can't generate inflation anymore. Certainly we see examples that they can, and we've had in Africa, there's still a few countries have had very high inflation recently. So it's not that fundamentally things have changed, but I do think that in major countries, all this focus on inflation targeting and trying to build, really anchor expectations, try to get people to believe that central banks are not gonna go beyond that. If they said it, I'm not so sure it's just a press release. I think they have to really start doing things beyond just saying they want to do it, and then they have to, to achieve it. This has been one of the problems in Japan because, you know, Kuroda-san comes out and says, "I want 2% inflation. I'm gonna get there in 2 years." He significantly increases his asset purchases, buying equities, buying corporate bonds in addition to government bonds. The Bank of Japan's balance sheet is a much higher fraction of GDP than the Fed's balance sheet, but they've barely been able to prevent the deflation, no less get back to 2% inflation..

Let's consider another topic that was in our book from the '90s, and today it's called fintech, but financial innovation. So, we live in a world, we all have smartphones, they do phenomenal things for us, right? We're obsessed with them. But we're still writing, a lot of us, paper checks. The system still seems clunky. You stick your card in at the CVS with the chip, and you're not sure if it's going to work. It seems there's a lot more room to improve improve banking, finance, payments, something along those lines. And I guess we'll start with a question to you. Where do you think is the low-hanging fruit? What in fintech will revolutionize finance at the level of the payment system or our personal lives, and how's that gonna play itself out? Where are the gains?

So, I think we're at the stage where potentially we can get some benefits out of these things. I think there's still relatively early on. I think we're still not quite sure how it's going to work. People had a lot of faith in Bitcoin, and actually what's kind of funny is that a lot of the support for Bitcoin early on when it was created by, whether it was Satoshi or whether it was some group or whoever created Bitcoin, there was a lot of concern that central banks were out of control. They were buying all these assets, there was gonna be this explosive inflation, so we needed some sort of alternative. Something that you could really trust, technology. So, there would be a limited number of bitcoins, roughly 21 million, and so, and the technology would make sure that that's enforced. You couldn't trust the governments. And so, I think one of the reasons why it hasn't taken off is because you haven't seen the kind of, the high inflation that many people had expected from central banks. I also think that it just, there isn't enough trust in the system. It kind of gets back to what we were talking about before, Tyler Cowen, that what do people expect from Bitcoin? Do they expect that they can use it for a lot of transactions? Do they expect that their virtual currency will be safe? We've seen a lot of examples where it hasn't been safe, and things, Bitcoins that in principle can't be lost because you have this public ledger and every coin has a serial number associated with it, and then people in the network verify the existence of, and location of that serial number, but this is one of the problems with, there was an exchange called Mt. Gox where a lot of these things disappeared. Well, that wasn't supposed to happen, and so I think that was one of the reasons why people didn't have the, they don't have the faith that this is actually going to work. So, I think if you can overcome some of those credibility issues, if you can set up a legal framework where people understand how how these contracts are going to be enforced. It's not even clear in some countries whether they should be counted as an asset or whether it's counted as money. Most countries are counting it as an asset, so if they're capital gains, the tax authorities get to get some revenues out of that. But we don't have sort of the legal framework for it. It's unclear how you do the enforcement, and it's also unclear if you've got this sort of decentralized set of people who are supposedly verifying all the transactions, what is their incentive, what is their role, how is it going to work? But I know you've been thinking about this also, so I think you may have a little bit less, I mean, I think there's a lot of potential there, but I think you're a little sanguine than I am.

I'm in most ways a fintech pessimist, and I'd like you to talk me out of my fintech pessimism. Let me give you 2 or 3 quick reasons why I'm a fintech pessimist. First, these silly games I play with my credit card to get frequent flyer miles, which probably many of you do. It ultimately doesn't make economic sense. If different ways of paying cost different amounts, there should be differential prices. But as we all know, it's not just federal law, it is state law, which prevents us from moving to a more rational ways of pricing different means of payment. When I look at the financial sector, it's fairly highly concentrated, and a big part of doing well in the sector is managing relations with government. And again, state law matters here too. And even after the financial crisis, the big banks mostly have not gotten smaller. And if you look at the level of tech in those banks, just look at the ads those banks put out, you know, when they hire programmers, what programming languages they're asking for compared to, say, a contemporary hedge fund. It's a big difference. So I see it as not that competitive a sector, a lot of blockages to innovation, And my best guess is that 10 years from now, things won't be that much better than today. Bitcoin I view as fine, but I think it's a mostly mature technology used for evading capital controls, which I'm fine with. That's great. That's useful. But I don't think it will replace the dollar or the euro. I think most of all it lacks a killer app. But is there a way you can sell me on a big change in the next 10 years to talk me out of my fintech pessimism? Optimism.

Well, I think we haven't— I think you're right that you need to have the killer app for it or the use for it. So think about like the major technological innovation that came back in the late 1990s, early 2000s in payments.

It was PayPal.

And so the idea that Peter Thiel and others had was they were going to displace government currency and have a whole new currency that comes in.

In.

So they didn't quite achieve that, but they achieved an alternative payments mechanism that is still used today. You didn't need to have sort of high inflation for people to use this alternative. You just had high fees and inconvenience from these other means. So I think that's an example where you can see this technological innovation using the internet allowed people to create a new payment system. Has it completely transformed finance? Is it a perfect system of finance? No, but it's one that exists and is widely used.

But keep in mind, it's not that new. So, I use PayPal all the time. It's a better web interface than my bank. My PayPal payment goes through my bank account. It goes through my BB&T account. No problem for me. The PayPal interface, especially with eBay, is much easier to use than what BB&T does for me. But it's really just a piggyback and a slightly better website it hasn't really changed that much, or do you think I'm missing something about PayPal?

Well, I think it's given people an alternative. So, I mean, and talking about the killer app, one of the things that was crucial for the early success of PayPal was eBay, because you had a lot of people who were not organized merchants, who didn't have credit, their accounts with credit card companies. They could use credit cards, but they didn't have any means for accepting credit credit cards, so you didn't really have anything that was catering to sort of one-off people who wanted to sell their Beanie Babies or whatever. They might just do that once, so they're not going to become a merchant and set up all the— go through all the fixed cost of joining the Visa card network. So, it fit very nicely with that and allowed individuals to do payments much more easily. And so, I think you may be able to develop something like that. Actually, this gets back to some of the stuff that we had written in our book from 30 years ago that some— actually, we were looking at some history of economic thought on this where people had talked about each person as their own bank. And so, in some sense, what PayPal allowed is, even though you're still using the overall, the general payment system, it allowed individuals to connect into that in a way that they they couldn't before. They can operate like merchants without having to be merchants. And so, I think that there's a potential for the blockchain technology to be able to do something like that going forward.

The potential killer app for Bitcoin, in my opinion, if there is one, is Africa. And I mean Africa in particular. Almost everyone in Africa is used to using a cell phone to make payments. And other payment systems are very poorly developed, and the rest of the legal infrastructure in many places tends to be poorly developed. So if Bitcoin is gonna transform anywhere, I think it will be there. But there's this funny tension in Bitcoin which I think people have not come to terms with. That in the world of Bitcoin and the blockchain, things are decided by people on the chain. The chain has the last word. And there's something about the chain having the last word that stands at tension with our legal system. So, the way the American and most European other legal systems work, institutions want to close out deals, they want to avoid certain kinds of ambiguity, they want to be able to shut the door and declare something finished and done. In a payment system where the people on the blockchain always have the last word and there's no further recourse, I simply think that at a large scale, you're finding, or would find, institutions deciding to say, well, for saving 2%, we don't want to use the blockchain because the legal issues involved in that, even if we don't think they're practical problems, don't mesh well with our notion of fiduciary responsibility. And I think that will remain a barrier for some while to come.

Yeah, I think the legal uncertainty is the key thing. And this is sort of a classic issue of, you know, you have to have proper rule of law, and the legal framework isn't there. As I said, some countries it's a currency, some countries it's an asset, so different systems treat it different ways. It's not clear what the legal obligations of the so-called verifiers in the system, they're called the miners in the system, where they will be paid in a small fraction of a Bitcoin in order to do the verification of the transactions. And so it's— the system is certainly not there yet, and I think in some sense the innovation is going to have to come on the legal side, a very, very clear legal framework for being able to use these, to know who, you know, how— who you would go to if something went wrong, and I think that's going to be crucial, probably more crucial than the technological developments themselves.

Legal uncertainty brings us to our next topic, China. Are you a China optimist or China pessimist? What's going on now and what variables should we watch to see how that's going to unfold?

Ah, okay. Now I have to be able to give questions to you first.

Absolutely, you can, if you want me to answer that first.

Why don't I put this one back on you since I've started the other ones.

I'm a medium to long run China optimist. Two things to me that are striking about China, obviously it has scale, that's, That's well known, but I think scale is becoming more important in the world for a lot of key sectors, and you see America's dominance in the tech sector as supporting this, and China will take on a role comparable to America in the tech world because of its scale. Investment in human capital, China has done very well, and although Chinese will swear to you the opposite, I actually think Chinese society is relatively meritocratic, and yes, I know all about the princelings and the corruptions, and the Communist Party, but you speak to people in high-ranking jobs in China and generally they are very, very, very smart people. If you are a smart person from a rural part of China, can you get ahead? Mostly the answer is typically yes. So for those reasons, I'm a long-run China optimist, but I'm typically considered a short-run China pessimist. In my opinion, their rate of growth has been slowing for about 4 years. They now probably have a debt-to-GDP ratio of over 300%. They are way off track in terms of using more and more debt to have stimulus. They have significant excess capacity. They are unwilling to have many layoffs or to let state-owned enterprises go bankrupt, and that is fundamental to their political economy. I don't expect a huge explosion of the kind we saw in the Asian financial crisis of 1997, But my fear is China will sink into a short-term kind of stagnation by not allowing any adjustments, by doubling down on all their bets, by exhausting their reserves to defend undefendable prices in a variety of markets, and by postponing or abandoning notions of reform. So I've been wondering if it might not be possible that China hits zero rate of growth, don't trust any of their published numbers, and no, I don't think a growing service sector is gonna save them, and then very slowly recover from that. That in a nutshell is how I tend to view China. There's more to say, but give us your take, Randy.

Well, actually, I just wanna pursue that a little bit. So how do they make that transition to the intermediate and longer-run optimism? So if they're having all these short-run challenges, and I agree the short-run challenges are very, very real, how do they avoid the implosion? And how does the party stay in power, or do you get a political transition also with growth that goes down to zero?

I don't quite mean this as a prediction, but when people predict the party will fall out of power, I would just say I don't see a particular reason to believe that. In the absence of such a reason, I would expect the status quo to continue. But China will grow out of its frozen— what will become its frozen stagnating mess. Just by growing in other directions. And I don't think they'll ever really solve the problems they have now, but slowly they will create jobs in other sectors and they will just leave those problems behind and over the course of a generation, in essence, evolve a new economy and still always have excess capacity in a lot of areas. It simply will matter a lot less 20 years from now when they've grown in other areas. And that's a slow, painful way to adjust, Arguably, they would do better to take a lot more pain now and allow some bubbles to pop. They're desperately afraid of capital flight. By some estimates, a trillion dollars has left China over the last year. Now, not all of that trillion is bad. Some of it is a natural rebalancing that they actually should be investing more abroad. We don't know how much of it is good and how much of it is bad. But a trillion dollars leaving your country in a year, running down your foreign exchange reserves, lying about all your numbers, sending a lot of your wealthiest people to jail, kidnapping people in Hong Kong and Thailand. You add up all those pieces and I find it very hard not to be worried. But again, you have a different take?

No problem at all. No problem at all. No, certainly I think that the short run is incredibly challenging. But I, and I'll come back to this on the transition because I think Getting back to what we were talking about before, ultimately economic growth is about the number of hours worked and the output per hour, productivity. And so people have often been quite astonished at the China growth miracle, and I'm a University of Chicago economist, so central planning is not something that is in my bones, but I'm also a University of Chicago economist and I have to look at the data, and they have grown very, very rapidly for a very sustained period of time. And so trying to unpack that, trying to understand that, and also trying to understand what's going on with the slowdown now, because some people said, oh well, the new regime, they're just not as competent as the old regime. I think it's a much more difficult problem because it is a much larger economy, but also I think the fundamental shocks are different. So they were getting positive shocks from, to the tune of 20 to 25 million people a year coming in from from the hinterlands to the coastal regions and to the cities. And so, just think about that. If you get 20 to 25 million people who effectively weren't part of the economy— yes, they were part of China, but they were really just subsistence farmers in the hinterlands— they're now coming into an economy that is going to be doing a lot of exporting, be going to integrate with the rest of the world, and so they're going to be producing things., and they're going to be working a lot of hours. And so you in some sense don't have to do that much in terms of productivity growth or sort of allocating your capital correctly to get high productivity growth, to get high growth for a long period of time if you can continue to get 20 to 25 million people coming in every year into— effectively into your economy. And so I think the Chinese were very fortunate in having that. I mean, it's been a great thing. I mean, literally millions of people, tens of millions, hundreds of millions of people, actually hundreds of millions of people have been brought out of poverty because of this, and so I think that's a spectacular thing. But how did the Chinese do it? Well, they started building things in the cities and along the coastal region. So it wasn't that they had the plan exactly right. All you had to do was build a bridge somewhere around Shanghai and they will come. They also had a lot of means to control where people would go. Go because you have to have a— effectively you have to have a permit to move into a particular city, and so they could encourage people to move to particular places. And so, you know, you build a bridge, you build a road there, well, maybe it's not being used this year, but when you have so many people coming in, it's going to be used, and so you're going to get some reasonable productivity out of that kind of investment. But now I think it's become more difficult. China has passed its peak working-age population. Because of the one-child policy, they're gonna have very, very rapid aging of their population. And so I think the problem is gonna become more and more difficult. Yes, they've relaxed the one-child policy. Maybe in 20 years they'll be able to address this, but they're gonna age very rapidly over the next 20 years. They're gonna have a much slower growth of their population, so they really need to have much higher productivity growth over the next, you know, 10 years or so, and exactly as I agree with Tyler that I think they're not getting the reforms they need, and that's why I think it's gonna become more difficult over time. So rather than being more optimistic over the intermediate to longer run, I think it's gonna be more difficult over the intermediate to longer run.

So what's the variable or two you would track to see how well China's doing over the next 5, 10 years? What would you look at?

Well, just to be contrary, since Tyler had said, you know, let's not worry about the service sector kinds of things, I actually think there is something valuable in looking at that because I think there has been this transition from an export and investment economy to a domestic consumption economy. Not complete, not nowhere near where we are in the US, but I mean, if you think about how we made the transition after Great Depression and World War II, it was a consumption boom, and we had people buying houses, cars, refrigerators, and we had 70 years of very, very rapid growth of consumption. So that can, without dramatic— we had some increase in population, not dramatic increases in population, but some increase in population. And so that's a path that they could have, and so I think I think that the consumption is important because I think that, you know, what people have been using as alternative means of measuring Chinese GDP, looking at boxcar loadings and other things that are very closely related to exports and industrial production, those are significantly lower, and I think that's right. They're not doing nearly as much of that as they once did, but I still think that they're making a transition to the service sector.. So that would be one of the key things that I would look at. And there are a lot of not only government statistics but private statistics. TAIJIN does their survey of services production managers, their PMI for services and such. So I think there's some reliability of that data, and I think just anecdotally in visits there, there's something there. So I think that would be one thing that I think is very important, but you have a different view of that, so that's why That's why I in particular picked that one.

I would second what you say there, but two other variables I follow or try to follow. The first is Chinese air pollution, which is just awful if you've ever been there. It's an indicator of how well can they solve the kinds of problems they're not used to solving. So I treat that as a leading indicator for how well they'll do for a lot of other things. The second question is, and we don't know, How much— what's the quality of human capital left in the Chinese countryside? So there are many anecdotal reports that those still living in the Chinese countryside have had problems either with malnutrition or the parents being absent, and that in terms of potential for education, ambition, other metrics of achievement, that it's not like the Chinese who have already moved to the cities. Now, I'm not telling you that's true. I'm telling you we We don't know. But I think for the Chinese long run, it's a critical variable, how much human capital still in the countryside. It's not discussed very much. I don't think we're about to know, but that in fact may be the key. Now, in dialogues that I do, there's actually a tradition— most of you don't know it— but to switch in the middle and have a brief interlude where the two of us ask each other their views on what might be underrated or overrated. This is kind of a quick fun session. And I'm gonna start by asking Randy a few, not even necessarily about money. But Randy, here's the first one. Michelin-starred restaurants, overrated or underrated?

Overrated.

Tell us why.

So, well, I guess I should say it depends where. So I think, like in Chicago, I don't think there's a close correlation between the, what I would consider the quality of the restaurant than the Michelin star. I think they're very good in Paris and in France. I think in other countries it's not a very good metric.

The city of Los Angeles, overrated or underrated?

Underrated. I think LA has a bad history, and I think it's really overcoming that. I think it's really —been not only a West Coast financial capital and has done well with that, but also it's no longer a one-industry town. It used to be all about just the movie industry, but they have diversified significantly. There are a lot of different arts areas. The arts community there is very, very strong. They have excellent universities, and so I think they have really really come into their own over the last decade.

The economy of Germany, overrated or underrated?

That one I'll say overrated. So everything else was underrated. So they have benefited enormously from being in the euro. There's always a lot of this hand-wringing about, well, the Germans, taxpayers shouldn't be paying for the lazy Greeks or the lazy this, the lazy that. The euro is much, much weaker than the Deutsche Mark would be, and that has been a dramatic help for German exports, and Germany is a very, very open economy. You know, in the US, exports are 10, 15% of GDP. In China, it's only like 15, 20%. We always think of China as a very open economy. In Germany, it's about 50%, so, so much of the German economy is dependent upon on exports, and so having a much weaker currency than they otherwise would is a big positive, and so I think they've had a lot of benefits from that, and so even though the economy has done well and they've done a lot of structural reforms which help them, I think it's a bit overrated because of the help from the otherwise weaker currency.

Overrated or underrated, Elvis Presley? Underrated. I love Elvis. You try me.

Okay, for countries. Indonesia.

Economy of Indonesia. It's not yet a true nation. So, I'm a big believer in coherent nation-states. France has a lot of bad economic policies, but it's a coherent nation-state. So is the United States. I don't see that Indonesia has achieved that. They're still highly resource-dependent. I think a lot of the Asian economies, including Indonesia, have had very serious productivity problems in their service sector. And I think the world as a whole is undergoing what Dani Rodrik has called a kind of premature deindustrialization. So manufacturing just doesn't create as many jobs as it used to. And what I see them having looking forward is a stagnant and corrupt services sector, little potential for manufacturing exports, resource Prices are low now, and I just don't quite see what budges in that equation.

So we've known each other since the 1970s, and we went together to see the original Star Wars. So what do you think of the new Star Wars? Underrated, overrated? I have to say overrated.

It will be the highest-grossing movie of all time in nominal terms, to go back to inflation. This is a session on money. But for me, it was too derivative. It was like watching a recent Rolling Stones concert and not being able to tell if it was a tribute band or not. And I understand why they did it. It was a brilliant profit-maximizing move to bring in a whole new generation and show them all the icons, but I found it dramatically flat. And then when you have millennial Darth Vader, Billie Eilish, boyfriend from girls. I'm sorry, I laughed.

All right, and then cities, since we're talking about money.

Zurich. Zurich is an underrated city, but a highly expensive city. There's a problem of purchasing power parity in Zurich. There are not enough safe assets in the world, going back to our money theme, and Swiss exports and also Swiss tourism take a big hit because of this. So not enough people get to Zurich because it costs so much, but its art scene is incredible. For opera, it's a very good city. If you ask what is within a 2-hour drive or train ride of Zurich, the lake is beautiful. You go off to the east, there's Wallenstadt, Austria, Liechtenstein, all kinds of wonderful things. It's one of the best, most livable cities in the world, but a cup of coffee and a piece of toast can cost you 40 bucks. I'm still gonna say underrated because I love it.

Alright, and then David Bowie, underrated, overrated?

You know, I'm reluctant to not fully praise the recently departed, but I actually think Bowie is a bit overrated. I think he was a truly brilliant commercial marketer, founder of Bowie Bonds, A financial instrument which had a AAA rating. Can you believe that now? Well, actually, I think probably you can. But I think when you get past his best album or two, and for me that would be Ziggy Stardust and some of the songs of that period, Space Oddity is a brilliant song, Changes is a brilliant song, but I feel he did a lot where he became the iconic representation of a phase of music for commercial reasons, and I'm just not sure it will be seen as aesthetically important, say, 30 years from now. And again, I feel a little bad saying that, but I actually think he's a wee bit overrated compared to, say, Beatles, Bob Dylan, a number of other creators. All right, now let's get back to money.

But I, so I want to come back to think about the future of money, in particular thinking of about some issues in exchange rates. Sure. So let's talk about China for a little bit, about what happened with the recent devaluation, where that is going to go, what's your view on that, and you were also talking about Bitcoin as something that is used for capital flight. Obviously, a lot of Chinese are using, are transforming renminbi into Bitcoin to try to get out of the freedom be. So, one, where do you see the Chinese doing with their exchange rate, and how will that be related to some of these fintech things about using fintech for capital flight?

If you look at other emerging economies, as you all probably know, most of their currencies have gone down 10 to 20% against the US dollar in recent memory. So, what you might call a kind of simple naive prediction, I'm not saying it's true, I'm just saying it's a starting point point for thinking about the question is to think the same has to happen to the Chinese currency because they're not really growing at 6.5%. We don't know the number, but we know that's not true. So that would imply that the currency will weaken quite a bit more at some time. There's a lot of strong downward pressure. The government does absolutely everything it can to stop that. They blame George Soros for the problems of the nation. Of 1.3 billion people. And I think there's two views. One view is they're determined to do everything they can. They will choke off phony invoicing of exports through Hong Kong and all other channels. They've already increased reporting requirements for currency transactions, trade transactions. And that— this first view is to believe they can shut down enough capital flight if they have to and shut down or control enough markets, and the currency will go down a bit more, but not too much more, 'cause they're just deathly afraid of capital flight. That's one view. Another view is that the whole thing has to pop. They've already gone through reserves at a rate much higher than people thought, several hundred billion. They started with $4 trillion, an incredible number, but that is not actually a big number. I know it sounds insane, but in per capita terms, or relative to GDP, it's not nearly as big as it sounds. And the thing about having a stash like that, it's a bit like a college endowment. You can't just go out and spend it at Macy's when you feel like it. So insofar as the Chinese run that down, people lose confidence in them and there's even more capital flight. So the other view is there's gonna be a big pop in the currency and, you know, one Sunday night you'll learn it's gonna be 10, 15% lower the next day. And that will be this huge shock for the global economy, and no one knows how bad or not bad that will be. So I go back and forth between those two points of view. In the fall, I definitely thought the latter. Today, their ability to put, you know, all their fingers in multiple holes in the dyke seems a little bit bigger than I thought, so I'm back to I don't know. But that's what I think, you know, are the options before us. Your take?

Yeah, and then thinking about, you know, thinking about the future of money, a lot of people have said, ah, well, well, the renminbi will challenge the dollar, and that it was crucial for them to get into the special drawing rights of the IMF, and then once they have that, that's the necessary condition, and they can then go forward, and everyone will be using renminbi for international transactions rather than dollars. I just don't buy that, and I use the analogy of, and I was saying this before the recent crisis issues you've raised, but I use the analogy of Japan. So think back, really Japan was sort of the China of 30, 40 years ago. It became the world's second largest economy, growing really rapidly, everyone thought they had to learn Japanese, and they were this export powerhouse, gonna take everything over. The yen became part of the special drawing rights of the IMF, and no one used the yen internationally. Why not? Well, people didn't trust the Bank of Japan. It was a very opaque institution. There were very poorly developed domestic financial markets in Japan, and basically, they're still pretty poorly developed today. Basically, you have the banks, in particular the Postal Savings Bank, a large government bank, although finally being privatized, just buying Japanese government debt, and there really was not a rich domestic market. If you were contracting for, in international transactions, you wanna make sure that you have some understanding of the policy framework, and you wanna make sure that you have some ability to hedge, and you think that the markets are gonna be deep and liquid. That was not the case in Japan, and so the Japanese yen never internationalized. Fast forward to China today, so even independent of the recent challenges that they had, they don't have deep rich domestic financial markets, certainly no, not deep rich corporate bond markets. Those don't exist. They were trying to develop those, and I think they're trying to develop those more, but there are major challenges there. There's not really a government bond market in the same way that there is in the US or even in Japan. The hedging instruments aren't there. There, and there's a lot of wariness of— by the Chinese of using these instruments. You have differences between onshore and offshore and interventions that seem to come without much explanation. It's not a situation where people are going to, from the outside, have confidence and say, "Aha, I'm going to set my contracts for the next 20 years in this currency." You need to have that. Japan didn't have that, and they were a very different kind of economy than— well, I should say a very different kind of political system and different kinds of institutions than China today, but there was the same opacity that both of them have, the lack of clarity of policy framework, and that's been a problem. The euro was trying to internationalize, but now it's the same issues there of uncertainty about the policy framework, that's not gonna be challenging the dollar. So I just don't, you know, in thinking about the future of money, I just don't see the renminbi challenging the dollar anytime soon. I don't see the euro challenging the dollar anytime soon. And though I do think that there can be some payments innovations, I don't see Bitcoin challenging the dollar anytime soon. So I think the future of money, whether we like it or not, is probably going to be the US dollar for quite some time.

Global economy as a whole, where are you optimistic about?

And so I think, so we'll conclude on this. I'll put it back to you and then we'll—

One minute apiece, you first.

All right. So India is the shining star. Now that's not just because my other co-author, Raghuram Rajan, is the head of the central bank there, but they have a young population, one of the very few countries that has that, a young growing population. That's an incredible asset when the rest of the world is aging. They're finally getting their policy frameworks together in terms of the central bank as well as a little— there's a lot of issues on the fiscal side. Modi is trying to do some reforms, but at least they don't seem to be going backwards. I know they haven't made a lot of progress forward, and so that's where I'm most optimistic in the world economy.

India, we agree. South Asia, a bit more generally, but also North America. I'll conclude by saying the big story of the next 20 years will be geopolitical Political risk, not our topic tonight, but where's the one place in the world that doesn't have too much of it? Right here. Let's all be grateful for being Americans. Thank you, Randy.

All right, thank you, Tyler.

Thanks, Randy and Tyler. Now we'd like to go out to the audience for questions. Please raise your arm, wait for the mic, and make sure your question's a question or the exquisitely concise over-under. Thank you for introducing that to our audience. I love it. Yeah, why don't we start off in the back right there with the lady in the third row from the back.

Hi, Professor Krueger and distinguished economists. So my question is related to the fiscal conditions in United States. As you know, our national debt is already surpassing the size of our economy. And the CBO recently released a report that including the future liabilities, the situation seems to be very dire. And considering the liabilities with Social Security, Medicaid, and Medicare is expected to grow at an exponential rate in coming decades. So my question is, do you see that as a concerning issue for the stability of our nation and also the stability of— the financial system and our currency.

Do you want to take a few questions? Because I see a lot of hands go up.

You could just answer concisely and we can go through them if you'd like.

Thanks. Big concern, but we're saving on interest rates and a bit on healthcare costs. We'll muddle through, it'll be ugly, and we'll do the right thing at the last possible moment and we'll hate ourselves for it.

But I won't hate Tyler Cowen. I agree, I think it's unsustainable. I think everyone agrees that it's unsustainable, but at what point is the question called and that things come down? Part of it is we're in a really problematic situation, but exactly as Tyler had said, if you look at China, they've got 300% debt to GDP. Japan is 250% debt to GDP, so we're looking relatively good even though our long run is really problematic. And this again comes where the demographics are very important. We've got to address this stuff. Addressing it sooner rather than later is much better. We're not so good at addressing it sooner rather than later.

Thanks. Next question right up here, please. Phil Levy, our senior fellow in the global economy.

Thank you both. I wanted to come back to the currency discussion but a different angle on it, which is that if you look at the dollar against —major currencies over the last couple years. It's up about 26%. What do you see that doing to the U.S. economy, to what the Fed is going to do, and to maybe discontent about currency manipulation? So just quickly on that, as talking about before, the U.S. is not that open of an economy. Not that there are barriers to trade, but trade is, what, 12% of— exports are about 12% of GDP, something like that. And so it has an impact on the export sector. But actually getting back to the use of the dollar as the reserve currency, there's an excellent paper presented by one of my former colleagues who's now at Harvard, but she used to be at Chicago, Gopinath, at the Jackson Hole Conference this year. The high fraction of world trade that is invoiced in dollars. And so as long as a lot of the exports are invoiced in dollars, that is not going to have as much of an impact because the pricing is in dollars rather than in the local currency. So it's not, you know, it's a challenge for our export sector, but I think it's much less of a challenge for us than if the euro were to increase for Germany. Tyler Cowen. Next question.

Okay, great. Next question. Yeah, right here please, Terry Diamond.

Over the last several years, I haven't been able to come to grips with what was more likely to happen, inflation or deflation. Do you see— might we be seeing some of each depending upon what sector of the economy we're in? And also, could you just list some of the unintended consequence you might see from central banks' actions over the last 6 or 7 years?

I'll answer the first half. I think the variance of inflation has gone up. So the price of information— there's been very radical deflation over the last 10 years, and still every year, how readily you can get to information. So if you're a person who loves information, your real wage has actually gone up an incredible amount since the iPhone, for instance, or since the iPad.

Since the Drudge Report. Since the Drudge Report.

But you look at a simple question, what does it cost to buy a home in an above average school district in a typical American city? That's gone through the roof. So it matters more than ever before, sort of where you are in life and what you want for whether we're seeing inflation or deflation.

On the unintended consequences, a lot of people have talked about potential for asset price dislocations, and certainly we're seeing a lot of volatility right now. But what was unusual is that if you look back over the last few years, volatility was extraordinarily low. I think it didn't make sense for it to be so low then because it seemed like everyone was saying, oh, well, the Fed and other central banks will be able to take care of everything. They're taking out all the downside risk. We'll just be able to grow smoothly forever. I think people are starting to realize that that's not necessarily the case and trying to see, well, exactly how is this going is going to work, we really don't know. And I think that's some of what we're seeing manifest. We're seeing some particular challenges like slowdown in growth in China, which has a lot of consequences, which is then saying, well, maybe it's going to be more difficult to have a smooth exit.

Okay, next question, please. Yeah, the gentleman right there, please. Thank you.

Will you ever see volatility classed as an asset? Could you repeat that? Will you ever see volatility classed as an asset? The VIX index and everything based on that?

I mean, certainly people do go long and short vol. I mean, there are a lot of hedge funds and others who do that. Whether it will be— I'm not quite sure what it means to have it classed as an asset. I mean, it is something that you can trade like one of these indices of volatility, the VIX, on the exchange., but I think that is something that deserves more attention. It's something we don't really understand. As I said, we have this incredibly low volat— measured volatility, which I think is much lower than I— what seemed reasonable to me. It's now gone up. Is this the reasonable level of it? I'm not really quite sure.

There are fewer assets than we think will exist. That's a puzzle. We don't know why, but a lot of them fail to survive or become liquid. Second, a lot of people's intuitions are about the volatilities of particular things, not about volatility per se. So, as Randy pointed out, you can trade VIX now, but I'm not sure that's the future for the trading of volatility. It's really intuitions about more concrete things that are where I think most of the liquidity is.

Great. And there was another gentleman too, right back there, who had a question, please.

Overrated or underrated? Crowdfunding.

Overrated. I don't think— I think it's useful in some areas, but I don't think that is going to be the transformative innovation in fintech.

The first movers have a huge advantage. Those returns will be competed away over time. It'll get really tough. I agree with Randy.

Okay, next. Wow, this is quick tonight. Right here, please.

Speaking about Kylo Ren and—

Can you speak into the mic, please?

Speaking of Star Wars, David Bowie, and the future of money and volatility, could you talk about how you see just mainstream entertainment and how you see that changing, given how profitable Disney and Marvel properties are right now?

Thanks. I've become much more pessimistic about a lot of mainstream entertainment. And what I blame actually is Facebook. So many fewer things today are culturally central than was the case before. So media has been picked apart. Uh, what people really care about is relating to their friends. So when Randy and I were growing up, like, one of us would go over the other's house, we'd listen to an album by The Clash or Bruce Springsteen. People would use music as a social bond. Now you use Facebook, other social media, your smartphone as social bonding. And we're learning that a lot of culture was based on a cross-subsidy, and what people really wanted from that culture, we're supplying directly. So I think most Hollywood movies now, they're tentpole, way too attached to repeated franchises, a lot less creativity than in the '70s. Sorry if I sound like an old person, but I'm convinced it's true. Music, more good pop songs than ever before, incredible talent, but no or few really important groups. Groups, Kanye maybe, Kendrick Lamar, okay, but it's not like it used to be. Visual arts is a vital area. TV, never been better. It's incredible, gonna get much better yet. Live sports seems to be robust. Overall, I'm not pessimistic, but we've seen big areas take critical hits. The book is surviving. E-books probably have peaked. People are buying longer books than ever before, and people love reading the physical book, that will persist. Your answer?

What could I possibly add to that?

All right, right over here, the woman please, and right there with the black dress, thank you. You spoke a little bit about productivity, TFP. Can you comment on the Internet of Things? Do you think that smart houses, self-driving cars, how is this going to affect our TFP, or total factor productivity, productivity going forward?

This is a real challenge for measurement because so much— it's so difficult to measure the benefits, the gains that we get. We used to think that GDP was— we always knew that GDP didn't reflect people's utility, and ultimately we care about people's utility and welfare, but we thought it was sort of a reasonable proxy. Now I think the distance between the two is getting greater and greater. And I think, you know, what you're talking about is one of those things where it's going to be very difficult to capture that in terms of measurement, even though it may be making people better off and increasing their welfare and utility. It may be very difficult to see that.

Self-driving cars will happen, but the difficulties in mapping the territory are much greater than most people think. They will be big gains if we let people go to sleep in the back seat. Small gains if we make people sit by the wheel pretending to do this. So far we're at the latter stage. Over time, I think the elderly will demand the nap in the backseat and it will change.

That's us, the elderly.

But it's not just around the corner. Smart home? I guess I'm a little more skeptical. I fear a home that records what I say. And this to me is dystopia. I do want something about my systems to record my health and monitor my products and see how well I'm doing. That to me is a big gain. The rest I'm suspicious. I don't want to just talk to my stove. I don't— again, I really don't want my voice recorded. So open question.

I spent a lot of time in Washington and often it is like speaking to a stove.

And let's take the lady also to the other side of the woman with the black dress, just on the other side. Thanks.

My question was closely related, actually, which is how do you measure the—

or what do you see as the relationship between productivity and the digital revolution information systems, information technology? How are those—

do you see that there have been large increases in productivity created from the digital world and information technology?

We as economists don't understand it very well, so I'm giving you now my personal opinion. This is not science. Science doesn't know. My personal opinion is something between 10 to 20% of our population is wildly better off in an unmeasured way because we love and use information. That's probably a lot of you in this room. For a lot of the rest of the population, information technology has made it easier to trade with lower-wage labor, and in some ways, if not made them worse off, but at least slowed what would have been an increase in their wages. And you look at some of the problems in American politics and the disquietude and the discontent, and I think actually a lot of it indirectly has to do with IT. And a lot of people really haven't seen much in way of gains at all, but I stress that is my opinion. Randy? Yeah, I think—

so the measurement is extremely difficult. I do think— I very much agree with Tyler. I think it's wildly uneven in the distribution of who is benefiting from these things and who isn't, and I think that's one of the things that's coming out in some of these debates on inequality. So it's not only the wages that you're receiving, it's what you're able to do with the wages that you you have. You know, as Tyler had said, for, you know, younger people who are on Facebook all the time, that's very inexpensive. You don't need a lot of income in order to generate a lot of utility of interacting with your friends and getting information in. But if you're in the more traditional economy, you're facing far more challenges. And I think we're seeing a lot of that challenge with the— on uneven distribution of the gains manifest in some of these discussions. And we haven't been able to capture that. It's just very, very difficult for us to capture.

Ladies and gentlemen, unfortunately that's all we have time for, but please join me in thanking Tyler and Randy for a wonderful program this evening.