One of the most common questions I get asked is, you know, how do I start day trading? So what me and my mentor about it for our viewers on YouTube is create a free mentorship course that reveals our 12 secrets that every single brand new day trader should know before they get started. But please take note that there is limited seating every single week. So please reserve your spot at myinvestingclub.co. Link is in the description.  Alrighty. Yeah. So I mean, this, I mean, just really in the last couple of weeks, it's been, I think, I mean, let's be honest, if you're along the last like three kind of three, two, three months have been pretty challenging, but kind of especially challenging in the last kind of three weeks before we had this flurry of moves. But yeah, this week was definitely a little tight chain, right? Like the longs definitely got a little, you know, kind of a breath of pressure this week.  I mean, he recovered, but he, I think he's still got caught both days.   Just getting caught like this week has been definitely tougher for short sellers. I mean, for long, it's been great. Like, I've had a great time this week, but I definitely know it's been challenging for some shorts. And the thing is for newer longs who were not, for newer longs that were not kind of ready for the switch and let's be face it, not, not everyone is going to, you know, some, some people are quicker adapters than other and that's by design. That's not like by intelligence or anything like that.  And I'm actually normally one of those people. I think what happened to me is I took like, I took Friday off and the weekend and Monday. So I came in super fresh and Tuesday was really good.  And I was like, Oh, so this is how it is. But maybe it was like this Wednesday, you know, I couldn't see maybe it was like this Friday and Monday too. And so I kind of came in, I was lucky in the fact that I actually took some time off and, but yeah, normally I'm more of a slow, like, Hey, like, I want the market to be really good, um, before I kind of start dropping my guard and getting a little bit more aggressive. And that's it. So it's okay.  It's just, you can't stay that way forever.  You're always chasing your tail. You have to, you know, you can be slow to adapt, you can be cautious, but not too slow. And so it's okay.  It's like, Oh, like, Hey, I didn't just get dumped on or something like that. Like, Oh, Hey, this one didn't just stop like they happen. So that's okay. And just getting small ones just kind of builds that confidence up. And then you can kind of just, you can just build into it. Like I said, I actually think I got a little bit lucky because I happened to take two days off and I kind of had five days at the end of the weekend. So no, yeah, exactly. No, bro, I 100% said that I was like, dude, I took a short on Thursday for Wednesday. I was like, I took a, I finally took a short and I'm just like, I'm like, I'm taking it like, like, now it's when it's going to change back. I did like, I had that back thought of me. I took a short and I was like, yep. Okay. Mark, it's going to change. No, exactly.  And look at NRXP. Yeah, dude. Anyway, so we're going to do it.  It's not going away.  There we go. Now it'll go away. I'm going to deal with it. It's not hiding. So I did it. Nope, that didn't do it. Show video. You know what I mean? That, that, that really wouldn't look that good. Like for it to get down here, like five 20 and it kind of stays a little bit healthy. Right.  So I wouldn't be afraid to put it there because I know stores would be attacking that, that area for a cover. Right. I could put the order there, but, you know, unless it bounced back right away, you know, I'd be selling some of that. Like if I got five, 25, 10 and five, I'd probably be selling some back at five 20, just because of, I didn't, you know, I wouldn't have wanted it to get all the way to five. That's how I'm visualizing this. What, what will the chart look like? Oh, that's funny there. Um, what would the chart look like, you know, given certain candles and ranges, um, that are seen, but I'm so slow at these, we'll do Lex. Um, and, oh, that's the last one. I don't want to go over it. And she's a meme stock. I'll do, I'll do this one shortly. AMC should never be, um, AMC should never be, uh, targeted as a low meaning fruit. These meme stocks, you should never treat them as a low meaning fruit. They're just, low meaning fruit is like a day two continuation play for small caps. Right. There's really no low hanging fruit in large capital. Um, Lex. So I'm guessing it's this day that we're talking about. So again, let's go through the motions for Lex. What do we got here? So we know coming into the day that we had like eight 80s, you know, an eight 80 kind of nine-ish level, a nine 50 level. You know, somewhere right around there. Oh, and that's it. That's all we get. That's all the info. So that's all the daily info that we get. So, you know, we kind of pop in this pre-market. Um, and it's funny, like the market is kind of opening right here, right? Right at this eight 80 nine level. So thank you so much for watching our video. If you want to see more of our videos, please subscribe to our YouTube channel by clicking the button here. We do our best to post a new video every single day. If you have any questions about AMC or any general trading questions, please text us using the number here. Also stay up to date by watching some of our most recent videos right over here.


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Okay, it's my distinct pleasure to introduce the Rothbard lecturer. I was sent a book last year, maybe two years ago, maybe a year ago by Robert Higgs to review for the Independent Journal of Political Economy, and it had the great title, The Global Curse of the Federal Reserve. So of course I wanted to review it, but then I saw the subtitle that said, A Second Monitorist Revolution, I think the subtitle was, but which was explained in the book in a way that made it more innocuous than it initially sounded to me. So the 2013 Murray N. Rothbard Memorial Lecture is sponsored by Helio Beltrao and will be presented by Dr. Brendan Brown. Dr. Brown is a widely followed market economist. He has authored many books on international financial topics including monetary problems in the U.S., Europe, and Japan, and asset market pricing in a global context. His most recent book, which has just been published in its second edition, is the aptly titled The Global Curse of the Federal Reserve with a new subtitle. It's a wonderful read and I highly recommend it. Copies are available in our bookstore downstairs. Dr. Brown was awarded a Ph.D. by the London School of Economics and an MBA by the University of Chicago. He is currently Executive Director and Head of Economic Research at Mitsubishi Securities International. So I present to you Dr. Brown. Well, thank you very much for your kind introduction, Professor Solano, and for inviting me here today. And your previous talk is an excellent introduction to what I have to say today, which really is how could a Second Monitorist Revolution gain from the insights of the Austrian School and make up for the flaws of the First Monitorist Revolution, which I think we would all agree has failed by this point. And I hope you don't find what I have to say heretical in any way, and it's very much drawing on the Austrian tradition. So the subject for global curse of the Federal Reserve, first of all, what do I mean by the curse? At first blush, you might think for curses the fact that the dollar today, compared to what it was worth when the Federal Reserve opened its doors in 1913, is only about 3% of a real value. So the world has been deprived of what could have been an ideal global standard and global money, a hard US dollar. But at second blush, I'm not dismissing that as a curse, but for curse, which concerns me in this book, is a second one. And that is the waves of irrational exuberance and depression, which the Fed has simulated through its life. And these waves of irrational depression and exuberance, or what has some similarities to what Austrian economists call asset price inflation and asset price deflation, but they're not identical, has exerted or caused huge destruction economically and in some senses politically. There's two main forms of destruction that have come from these waves, one well known to Austrian school economists, which is malinvestment and I don't have to spell out here. The second one, it has actually been touched on in some of the earlier sessions today, and that is the form of destruction in the form of creating sick appetite for equity risk. The fact that these waves, which create big booms and depressions occur. First of all, mean that investors over time require higher risk rewards to go into investments of risk. Secondly, in looking at the future, they perceive more risk than we otherwise would have done if we had a more stable background. So this ailing of equity risk appetite exerts a cost on economic welfare. I mean, if you consider two capitalist economies with the same endowments of labor and capital and natural resources, the one economy in which there's a healthy appetite for equity risk compared to the one in which there's a sick appetite for equity risk, the society in which there's a healthy appetite over the long run, not necessarily the short run because mistakes can make, Columbus can go to America and discover the wrong continent, but over the long run, you would expect for society which has the healthy appetite for equity risk to become the more prosperous. So I come next to what do I mean by waves of asset price inflation and asset price deflation or irrational exuberance and depression. I want to go one stage further back and quote J.S. Mill and Milton Friedman, of course, picked one phrase out of J.S. Mill and made it famous where Mill said that most of the time, if a machinery of money doesn't matter, but when the money machine gets out of control, then it throws a spanner into all the other machinery in the economy and causes them to go out of control also. I think in modern idiom, you would probably translate that or rephrase it as saying most of the time the software of money is unimportant, but if the software of money becomes corrupt, it infects all the other software which controls the prices in the economy and direct for market signals for the invisible forces, it infects those that causes them to go out of control and give the wrong price signals, especially in the capital markets which leads to a lot of economic pain and misallocation and non-optimal outcomes. Then going back to Milton Friedman, when he interprets this line from J.S. Mill, as Professor Solano said, I would guess that he very much meant goods and services inflation. What I try to add in my book to this is the second form of virus attack which comes from money getting out of control or being corrupted and that's asset price inflation. So it's two diseases, two monetary viruses that may be linked, that may both appear in the same cycle and they may not. One is for disease of asset price inflation, the other is for disease of goods and services inflation. When I talk about asset price inflation earlier on, I did talk about irrational exuberance and depression and I'm sure you're all aware of behavioral finance literature where these terms are used quite freely and by Professor Schiller in particular. I don't have any problem with, in fact I enjoy reading Professor Schiller's work very much in behavioral finance theorists, but what I'm constantly taken back by is that their analysis of how these irrational exuberance comes about, they completely miss out any monetary factor and I would argue or try to argue that the main factor behind these waves of irrational exuberance which Robert Schiller talks about is in fact monetary disequilibrium. And to describe what we mean by irrational exuberance or asset price inflation, it's a bit different from the Austrian's concept, you're all aware of here of whether it's capital to goods prices getting out of line with consumer goods prices. What I'm talking about here is more in terms of asset price inflation, irrational exuberance and I could describe this in two ways, one simplistic, one a bit more complicated. A simplistic way of describing asset price inflation is where investors are putting on some rose-colored spectacles which filter out for dangers and exaggerate for size of expected returns. If I was putting this more in terms of a sort of arrow state preference theory, I would say that irrational exuberance is where investors systematically are putting too much probability on the states of the world with good outcomes and too little probability on states of the world with bad outcomes. Friedman refers to the long lags between monetary disequilibrium and the monetary virus appearing in a form which can be diagnosed in the form of goods and services inflation but that lag is indeed even more serious when we come to a second monetary virus. I argue that by the time anyone can confidently say that the monetary virus of asset price inflation is there and demonstrated in a positive way which would be accepted unambiguously, the disease is probably long present and already had a very serious negative effect on the economy and by the time central banks or anyone else can make a definitive positive test to demonstrate that asset price inflation is present it's probably well on the way to turning itself into asset price deflation because asset price inflation unlike goods and services inflation does tend to mutate back into deflation without any action being taken and the reason why asset price inflation tends to go reverse itself is because of the features which are so well known to Austrian economists that you tend to get over investment, profit margins come down or if people are wearing rose colored spectacles and ignoring risks when any of these risks do occur they have a much more profound effect in shaking market prices back down to a very low level and that exerts a shock effect on the economy and you know the idea which we have so much in modern Federal Reserve thinking for the team of regulators or anyone else can somehow judge when asset price inflation is there and do something about it I think it's just totally pie in the sky and the history is full of examples of where asset price inflation by the time the central bank recognizes it's there they only make matters worse I'll quote you a few examples 1929 is one obvious example by the time of Federal Reserve in 1928-28 is confident about being asset price inflation it's already been there a long time Florida boom already moved into bust 18 months before the real estate cycle in the United States was already peaking in early or mid 1928 so by tightening policy by the time they recognize asset price inflation it was already bound to move on to asset price deflation and they only made the consequent recession worse you can quote the same example in Japan in the late 1980s where the Bank of Japan eventually starts tightening policy in 1988 well not 1988 the end of 1989 early 1990 when already golf course prices were beginning to tumble and the early signs of asset price inflation going to deflation were there and they end up turning it into a serious recession and I would argue the same thing actually happened under Bernanke in 2007 2008 and but I think was a strong case to say that the oil price going up to $150 in the summer of 2008 was actually the last dying feature of asset price inflation which had already generally died in a whole lot of other markets and by acting against all prices at that level was just a classic case of panicking central banks responding to asset price inflation when it was already dying and making the subsequent recession even worse now I want to at this point just look at three from three channels which I suggest run from monetary disequilibrium to these waves of irrational exuberance what what's how does monetary disequilibrium create waves of irrational exuberance and I suggest three main forms now some of these may involve a degree of irrationality some of them may not the first the first channel is Sam and I think in many ways the most robust again challenge against challenges but you're assuming a lot of irrationality is Sam pegging and forward guidance of short-term rates modern central banks and the Federal Reserve by pegging short-term rates and announcing or implying where short-term rates are going to be going in the future have a very big effect on long-term interest rates that's quite different as I mentioned this morning from the situation under the gold standard where short-term rates pretty well oscillated around violently and long-term interest rates had a life of their own and were very much influenced by this sort of decentralized information effect which Austrian economists would applaud that all that's all broken under the sort of pegging of forward of short-term interest rates which reached a which became more and more or at certain times in the Federal Reserve history in the last 100 years has become very very substantial now when you have when the result of this is to bring long-term interest rates below neutral and below equilibrium level you get into an area of what Schiller describes as positive feedback loops the fact that there's a lot of froth and asset prices because the long-term rates are below neutral in turn tend to validate a speculative hypothesis which is out there you know I could borrow from minceki for example the idea or professor alibar University of Chicago the idea that at various times in markets there is speculative stories in some some I mean I can give you examples in the late 19 mid 1920s there was speculative hypothesis for Germany in the Weimar Republic was in a miracle economy we had the speculative hypothesis in the 90 in the 2000s that European monetary union was a miracle in which financial banks were going to have a huge new profit opportunity from this integrated European market now in normal rational mood these sort of speculative stories nobody would probably give more than 20 or 30 percent probability to them being true but when you have the central bank holding interest rates down and long-term interest rates getting below neutral then those speculative stories tend to get an inflated life of our own through through through the feedbacks of the positive feedback loops so that's one that's one that's one channel of monetary virus attack leading to asset price inflation the other the other two channels involve desperation at low real yields if interest rates are being held by the central bank at very low levels in real terms even if in line with neutral if investors have had no experience in the past to make up for that of price level falls as they normally would do in a monetary stable world where you had periods of price falls and price rises but all they can look forward to is price rises and income famine out of desperation they look for speculative stories to derive real yields and the third for third monetary channel is what I describe as inflation scare if central bank policy today isn't actually creating inflation but there's a danger that there may be high inflation several years in the future then investors again may respond in somewhat irrational way to seek out real yield now I would stress one other point that asset price inflation isn't affecting all markets at all times there has to be a speculative story so you know it's going fast forward to the present under the Bernanke QE policies after 2007 you know the the first speculative stories that emerge are those related to China because you have a coincidence of the QE policies starting off at the same time as China itself is having a massive massive monetary expansion so expect for speculative stories which catch on are those related to commodity prices emerging markets Brazil all the country's doing well out of China for none of them that in turn may fade and then the speculative story moves on to somewhere else so you do get you do tend to get these rotations of asset price inflation rather than all markets being affected at all times during this phase now I want to I want to review those ideas somewhat more in terms of the hundred year monetary disorder we've had under the Federal Reserve since 1913 asset price inflation to be accurate did not originate with the Federal Reserve and I must stress maybe at a point at this point you know many of you may be saying given the sort of views I'm expressing here why are we talking about monetary isn't coming back or anything else but I'm I'm putting this in the context of yes the international gold standard before 1914 may be the best although imperfect order that the world's come up with but once the world comes out of that semi-golden garden of Eden the cost of going back in again may be so exorbitant but it's impossible ever to get back in and of course one can argue about that but I suppose that's the sort of background hypothesis to some of what I'm writing about but so so the point I would stress here is that asset price inflation didn't originate with the Federal Reserve but the size of the waves and their frequency has got much larger under that institution's hundred-year monetary history and if you go back to the gold standard days there was although there were some large booms and busts I mean most most particularly there was that of 1907 of course you can trace for boom and bust of 1907 and the asset price inflation of a 1905 1906 period to the fact that you had a very rapid growth of gold gold stock in those years related to the new technology of mining gold so that was a form of disequilibrium growth of the monetary base which was feeding this asset price inflation process but in broad in broad terms through the gold standard world the gold standard world was a monetary system which had important checks and balances against the progress of asset price inflation I think one can essentially look at the gold standard world a pre-federal reserve system as a monetary base control system it was a monetary base control system where the fixed price of gold regulated for supply of monetary base aggregated across all countries which were on the gold standard there was free determination of interest rates price level fluctuated considerably up and down for a purpose and when I say for a purpose you know many people lose sight of a fact but one of the equilibrating mechanisms under the gold standard to all which guided the invisible hands towards creating business cycle recoveries was the perpetual expectation of prices going back to a constant level so if prices fell during the recession there was the expectation that prices would go back up again in the subsequent recovery and so combination of low prices now with high prices in the future meant that in fact you got for negative real interest rates which Bernanke so desperately tries to create today through hyped up inflation expectation so and the the the white noise that you got in the short-term interest rate markets through go temporary gold shortages helped insulate for long-term bond markets from getting infected through any manipulation going on in short-term interest rate markets so all of us all of us helped restrain asset price inflation waves from coming about although nonetheless it did sometimes come about but I would argue and this is an empirical assertion I guess that the waves will have been much more violent since the Federal Reserve opened its doors no sooner of course did refed open its doors in 1913 when the gold gold standard disintegrated somewhat paradoxically if you look at for history of a Federal Reserve during the First World War Brian who had been I think one of the leading opponents of gold in the US immediately advocated in 1914 during a crisis for the Federal Reserve or the US should leave a gold standard whilst people like Benjamin Strong and Warburg who were in the Federal Reserve were very much of opinion that the dollar should be still be backed by gold and it was very dangerous to go over to fiat money one of the paradoxes of monetary history of course if the US had followed Brian and the taken the dollar temporarily off-gold there probably wouldn't have been the high inflation and asset price inflation that actually occurred from 1914 to 1917 because these gold inflows essentially the on-tone paths dumped their gold in the US and basically levied in inflation tax in the US through creating inflation to pay for the war so if instead they followed the example of Switzerland in Europe at the time which actually in similar circumstances of neutrality broke for link of a frank with with gold and had much less inflation than the United States but I don't want to get way late into that it's a fascinating description for any of you want to look as to what how the Fed operated during the First World War and in some in some degree affected the possibility of peace being reached in 1916 or not but I want to go fast forward to the 1921 to 1929 period and we sort of covered this this morning where Friedman and Schwarz described that as a high tide of a Federal Reserve it's a it's a very important historical episode because it's critical I think in examining that period to draw out the lessons for monetarism which weren't drawn out by the first generation of monetarist because quite evidently as the Austrian schooled make make very clear and Rothbard in particular the the it was a fixing of manipulation of interest rates and the too rapid growth of monetary base during that period which contributed to the waves of a huge wave of Russian exuberance and of course the biggest asset price inflation of all was arguably in the German credit market from because from 1924 onwards Germany was part of the dollar area having fixed the Reich marked the dollar in 1924 and with interest rates well below equilibrium levels in the United States US investors were very keen to get a higher yield which they did in Germany and the speculative hypothesis which went along with that was Vivaima Republic and the economic miracle which was taking place if you look at real estate prices in Berlin going up by a factor of five or six during just five years from 1924 to 2029 it's fairly evident what all all this where where where where this was leading and then inevitably the asset price inflation turns to asset price deflation and and the second largest economy in on the earth Germany at that time goes into default and that creates for feedback and that so intensifies for great depression in 1931 my next example of asset price inflation is actually in some ways closer to the situation we have today although I would stress and I later on if I have a chance I'll go into a bit more there was some dissimilarities this is in a period 1935 to 1937 1935 to 1936 if you look at it the monetary base in the US went up in pretty similar fashion to what it's done under Ben Bernanke in the last two or three years but of course it wasn't an explicit policy action it was in response to gold inflows coming in and being monetized but but this period of exceptionally low interest rates together with the big rise in prices and concern about inflation ahead did drive a process of asset price inflation stock markets doubled in about 18 months from 30 late 1935 to the end of 1936 investors put on their rose colored spectacles they ignored the fact that that geopolitical skies were darkening and that's an actually one interesting point in Lionel Robbins book that he mentions already that in mid 1930s many firms were holding back on investment because they were concerned about the risk of World War something which Keynesians completely miss out when they describe World War two as a saviour of a US economy it's quite the other way around but and they were they were the investors were also ignoring the fact that the gold block broke up in Europe in 1936 meaning that the dollar was suddenly shooting up again in the devaluation come to an end but by the time we get into early 1937 and the Supreme Court rules in favor of a Wagner act and rules votes one is landslide victory at the end of 36 eventually reality catches up the the spectacle the rose colored spectacles break and in about four months from spring 1937 you get a 40% fall in the stock market and the rules felt recession which is even more severe than that of 1929 to 1930 so that's an example of which bears some similarities to present situation now I'm going fast forward here I'm not going to spend much time on the World War two situation but I think it's possible to look at the Martin period of the Federal Reserve Martin becoming Fed chairman in I think 1952 or somewhere there around and this was a period of just before I do that I'll just make one comment you know many people say or the point's been put forward now how how is the Fed going to extricate itself from this extraordinary monetary policy it's been followed and how can it decontrol the bond market after this long period of manipulation and some optimistic commentators say well look the Fed managed to and the government decontrolled long-term interest rates in 1953 and yet there wasn't any great calamity but of course what you had in 1953 onwards was an economic boom an economic miracle with Germany growing 10% per annum Japan growing 10% per annum and a huge productivity growth spurt in the in the United States and you would think that given given this growth spurt everywhere and productivity miracle on any Austrian view of monetary stability of course the price level should have been falling in the United States through through the 19 late 1950s and early 1960s instead of which it was rising at around 2% and briefly somewhat lower and to give credit where credits do you actually if you go back in that literature and I'm not sure whether it's on the von Mises Institute website or not Arthur Burns did write a book in the late 1950s attacking with that for pursuing an inflationary policy and saying what price level should be stable but of course for corollary of that the Fed under Martin pursuing inflation in the middle of once in a century economic miracle was asset price inflation this was a period of this was a period of Buffett making his fortune the real estate Titans making their fortune it was the period of the the huge equity market speculation equity markets tripling and as you would expect this asset price inflation merged moved on to asset price deflation in 1969 with the fantastic fall in the market which and in real estate markets which then Arthur Burns was called in by Nixon to try to reverse which he did for a few years but then ended up with an even bigger crash in 1973 you then you then go further forward with that history to currency war machine being very much part of the Federal Reserve apparatus once you have a floating exchange rate currency war machine becomes very much a feature and I would highlight the example which maybe is very often glossed over or maybe not recognized but one of the biggest courier currency warriors was none other than Paul Volcker you know Paul Volcker started as Treasury under its secretary in the Nixon administration going around all the capitals in Europe arguing and and implementing big dollar devaluation which leads on to the inflation of 1970s then he comes in in 1980 81 runs basically two-year so-called monetary policy and then abandons it and of course the pressures by the mid 1980s 1985 were huge on trade protection and essentially Volcker goes along with the idea that the dollar has to be devalued and there's a trade and currency war against Japan and Germany but in doing that of course we fed had to do its bit in implementing a currency war machine of keeping interest rates way below neutral which is what happens and you get the great asset price inflation in the United States from late 1980s the real the the equity market bubble and bust of 1987 real estate markets and of course all of this rolls on to Japan and as a separate note on Japan I would say if you look at a 40-year history of Japan since 1970 Japan has essentially had to deal in very difficult circumstances with the Federal Reserve curse you know and the and each time they each time they each time they respond to the curse by deciding the best way to bring the end down is to copy what the Fed's doing but by copying what the Fed's doing we end up with an even bigger economic calamity in our own countries so in the early 1970s the Bank of Japan follows with the reluctantly the the Nixon and Burns fed into inflationary policies and end up with 30% inflation in Japan by the mid 1970s they follow Volcker into lower interest rates in the late 1980s and end up with a gigantic credit bubble and then of course in the early 2000s with the with the Clinton war not not to the sorry the bush currency war and they end up bringing interest rates down to zero and monetary base expansion and we end up with a gigantic yen carry trade bubble which leads to an overextension of an export sector malinvestment and it all comes apart in 2007 2008 so in the time I have left I want to maybe stop the history and come on to two big questions how to cure the curse and what to is it going to be cured is very prospective it really is going to be cured and I suggest for six step six steps towards curing the curse one inflation targeting has to be dropped altogether in faith in favor of a general aim of price level stability over a very long run such as one had such as one had under the gold standard secondly no more deflation phobia monetary rules in so far as they are adopted as part of a second monetarist revolution must be designed so as to mean a fall in prices during bouts of productivity growth such as one had in 1920s or 1950s or in the 1990s with that matter third we have to stop all manipulation of long-term interest rates and the benankeite bond market manipulator has to be smashed up fourth restore monetary base to a pivot of a monetary system now restoring monetary base to a pivot of a monetary system means abandoning paying interest rate any interest on reserves and getting back to a fairly high level of reserve requirements because you have a trivially low level of reserve requirements then having a stable x percent rule for monetary base expansion doesn't really give you any assurance of overall monetary stability fifth eliminate Orwellian monetary history especially the chapters and the Great Depression and Japan's great deflation which never existed I mean if you look at Japan's deflation so called price level in 2010 or sorry 2012 in Japan is pretty well the same as what it was in 1992 on some measures and if you look at the hedonic price adjusted series it may be down 10 or 13 percent but if you'd had a hedonic price adjustment during with gold standard years the price level would have been falling over time so Japan hasn't had any great deflation its problems lie elsewhere which is beyond today's talk but six six step and a key step in how to cure the curse is to acknowledge asset price inflation as a deadly virus of economy which can only be spread by monetary disorder the only way you get to large asset price inflations is by monetary disorder and the best way of preventing these waves of irrational exuberance and depression getting very large you can't eliminate them all together is to stick rigorously to a monetary stability order you can't having teams of regulators thinking they can spot it in advance is just completely futile and lastly I come to when when will the cure come well I think a key point here is the cure is not going to come from within the Federal Reserve Federal Reserve now is a more than possibly any time in its hundred-year life packed by political appointees who are all there or ignoring one or two members who really don't have any power so if it's going to be any monetary reform it has to be led by political forces which regain ascendancy in the widest scene and are then able to reform or abolish or whatever the Federal Reserve second point is the second monetary revolutionaries have to learn what went wrong with the first monetary revolution and I would suggest that unfortunately as Professor Salerno started to outline some of these routes misleadingly some of these routes do go back to Milton Friedman's teachings bananquism has to be obliterated you know the three the three the three for three features of bananquism currency war machine bond manipulation machine and virtual monetary helicopters they have to go and and when I when I'm talking about virtual monetary helicopters that's actually quite an important point because today's monetary base expansion by the Fed is not real monetary base expansion what we have today is the Fed is essentially the government US government is essentially issuing two forms it's financing itself by issuing two forms of Treasury bills one is to be Treasury bill for an Anki which is issued at a gift bonus rate for the big banks to buy and there's another category of Treasury bill the ordinary Treasury bill which is just for you and me which is issued at zero so of course for banks are going in to buy the B Treasury bills at 25 basis points and issue deposits of zero to everybody else that's fantastic arbitrage so the government's basically funding itself by issuing these B Treasury bills and the rest is just funny bookkeeping the fact that the Fed may be buying long-term bonds and using B Treasury bills who really cares the government is financing itself with floating rate Treasury bills but in the process giving a bonus for banks that's that's that could all be unwound tomorrow if B Treasury bills came to an end and the interest rate paid on B Treasury bills was the same as for everybody else you would get massive disintimidation from the banks it probably wouldn't affect the outlook for credit or anything else very much although it might have some psychological effect because the the second component of binankeism which is a bond market manipulate it does depend on a whole lot of psychological effects included amongst those is a lot of investors believing that there is a lot of money printing going on the and this brings me to a last point talking about second monastery's revolution I think it was Napoleon who said for the biggest for the main quality he looked for when he chose generals or field marshals was luck much it's much better to have a lucky lucky general than a excellent general so clearly you know whether it was ever a prospect of a second monastery's revolution taking place depends on luck and I mean by luck does for scenario of 1937 which is a very lightly scenario for how this is all going to end up happened before or after an election and then you have to ask you know even if it happens before an election is is the way when the next crisis happens in the next depression or recession is it going to lead on to a monetarist revolution or is it going to lead on to rb economics and the road to socialism and I'm not going to answer that question because I have to remain optimistic and thank you very much for your attention


Well, welcome. So why am I here? We could have kept the secret. We didn't have to tell you anything, but we need your help. So I'm here to tell you more about what we're doing, how you can play a part if you choose to, and also get ready because it's coming. We heard it this morning. It's not if. It's when it's inevitable. So as Harry said, I'm David DeBarre. I work for Exxomo Research and Engineering Company. About seven years ago, I met two guys, came to my site. Steve Bitar and Don Bertuzzi-Tak, we've heard them speak before about OPA and our ideas, and they started speaking to me and I thought, this is crazy, but I am in. I want to do this. I had just done a migration project to the latest and greatest of a particular vendor, and I did not like the process. I had spent a good six and a half months of 12-hour days trying to make it work and telling my managers and all that it will work, trust me. And so when we started talking about what this program was all about and it was about many things initially, this was one that definitely hit it for me. So I'm here to tell you a little bit about where we've been and where we're headed and why. That's not good. We'll do one at a time. How about that? Okay, so ExxonMobil many years ago, seven or more actually, recognized the business problem, that we had a lot of obsolete equipment because think about it, we all put in our control systems in the 80s and we promised our managers, they're going to last 30 years. So 30 years from 1980 is 2010. Uh-oh. Maybe we didn't think we'd be around when this day happened. So the project itself, we decided to focus only on the DCS and the PLC parts of the system. We have specifically decided not to address safety systems. We do know that some of the technologies that we propose and ideas that we have might extend to the safety system, but we also know safety systems generally have a higher bar to clear and it's very important that the vendors who produce those systems do things that are prudent. But we have this problem with the DCS and the PLC systems that we really needed to solve. So think about it. They talk about digitization is happening. We started 35 years ago and we put in all kinds of computers. The problem is we didn't need cybersecurity because it wasn't connected to anything and that technology we implemented was going to be there for 30 years. Well, over the last 30 years, we have wished for better technology and now, of course, we're needing to do something about the old technology. So, you know, many of you will recognize some of these pain points. We want more innovation. We want to lower the life cycle cost. We want to get more benefit. This sounds very familiar to just about every business conversation. In the last two days, I've heard it repeated and repeated and this is very important to us. We also recognize that some of the problem is commercial. Some of it is technical. And so what we propose is maybe we just make a step change here and do things a little differently because if we start replicating the behaviors of the past 30 years from now, some young engineer we're going to hire next year is going to be at the end of their career asking, why did they not solve this problem? So that's our why. So I like that I have seen this picture like four times in the last two days. Some of the speakers have sort of scrubbed the words off of it, but I can see it. You can see the gold color is the new stuff in our opinion. A revision to what we might call the Purdue model or the ISA model, pick your choice. And we use the ISA model for our references, but the DCN, of course, is a small device. We consider it a small device. I have no problem with somebody wanting a DCN as a thousand channels, but I want one that's somewhere around a dozen because I think of it in terms of scope of failure. And if I can reduce the scope of failure and I don't have a control that fails a thousand loops, my process might keep running. The operators usually can deal with small scopes of failure. We also said the DCN ought to be able to do more than just basic regulatory control. The applications that we think about trying to run extend from fast historians. We have people talking about data analytics, Azure at the edge I see in the press. So everybody's thinking about what they can do with an edge device. Well, it's got to be more than just a single purpose appliance. Of course, at the top, we need server class equipment. A lot of us run our innovations there now. We call it the layer three in the model. That's where all the innovation happens, generally a Windows server type environment, but not necessarily. And there again, we say, well, why couldn't we run some control there as well and just talk to some I.O. somewhere in the field? And of course, the tide altogether is a real-time bus. And I made this point last year. If you look at it, we've represented all the equipment we use today as participants in this world. But we've also taken them out from underneath the DCS. They are peers on a network. The data is democratized. I say we put the distributed back into distributed control. Some of these systems need to talk to systems that aren't an operator's problem, which is the process control system. They're going to talk to equipment health or some other business system. And so this model fits that. The data can talk to a control system and operator, or it can go around them and go to the cloud or go to the business system or wherever it might be needed. It's not hindered. I call the DCS sometimes as a pinch point for data. So this is the overall architecture that we envision. Now, this is a concept. It's not how to build it. I think we talk about the Purdue model, and a lot of people went and built systems based on the framework. This is not a absolutely an architecture that we say, go build it like this. We don't want that. We want people to figure out what standards play, how we can achieve the results we're after in a flatter model. Okay. So we did our proof of concept, and I was here last year, and I got to tell everybody how that went, and it was a success. We took 10 different vendors, and we mixed the pieces parts together. We even used some of our DCN concept stuff to form the simulation layer to feed. We actually used physical wires just to prove there wasn't smoke and mirrors. We simulated, so it was all in a lab. We did really use real devices, but they were not as industrial as probably we would all like. But we did do a fired heater process, and we were able to simulate it. We did some advanced controls. We tested out a couple HMI's. We did some simple historian work, and we were demonstrating some capabilities with the system, particularly some attributes we were interested in. So in this, as you can see, we used three different DCNs. We actually used about 50 devices, so it was a big pile of them. I did have a picture last year. If you look it up, you'll see it sort of on the wall. We did use open standards communications of OPC UA and DDS, and we interchanged them just to see how well that worked. And of course, the 10 different vendors, and we do thank them for their participation in that successful proof of concept. So why did we do a proof of concept? Well, we've been told some things were impossible or very hard to do, and so we decided to test it ourselves. Specifically, we were interested in things like interoperability, because integration is expensive. And if I don't have to work so hard at integration, I can make it easier. So if I use standards, maybe interoperability is really easy to do. Sometimes integration is painful as well, as some of us who've worked in the industry know. Some days it doesn't work so well. So interchangeability was another idea we had, because these devices have a different lifetime. We have measured some of our instrument, where it'll probably last 80 or 100 years, but we know the processors are not going to, and the applications are somewhere in the middle. So I am either stuck on the same platform without taking advantage of things like Moore's Law, or I can change the platform and keep my software. So interchangeability is a pretty powerful thing. And we know companies go out of business, companies change names, companies get bought, new competitors come in. Why can't we use them? Interchangeability will give us that. Another attribute that we did was some portability things. So we did configuration and application portability. And so there's a subtle difference there. Configuration portability allows us to keep our engineering and all the money we've spent developing applications. If we could just transfer them from one system to another in some standard form, we wouldn't have to re-engineer. To some extent, you could argue this is the challenge we face when we upgrade our equipment. If we could just simply do some sort of export and import, some minor translation maybe, it should work. In the application world, we would like to have a common environment. So if I could run my application on different platforms, then I get a common environment. And the nice thing is that helps with interchangeability as well. Because if someday device A dies and I have none in the warehouse, but I have a device B and it is adequate to the task, then portability will allow me to install my application on device B, get back up and running, start making money again because that's what the companies and business do. Make the products, stay online, keep making money. We also did some tests of the network throughput. We did some comparison. It was a very simple comparison, so I don't want to make too strong a case here. But the one thing we will say is that there's no one size fits all solution. Everything has its own niche. It was designed to solve a certain problem. So in some cases, we would like to use different methods for communication. But we do want them to be standards-based, not proprietary. Another thing we did was some advanced control. And we were able to demonstrate some control algorithms that we could run at one second or better. And today, those things tend to run in the 15 to 30 second range. So sitting on the same network, talking the same communications protocol, using these very powerful edge devices actually, we were able to show some real benefit possibility there. And so this is some of the why we started this whole thing. We did a proof of concept to show that one, it can be done. Two, that we see benefit potential. Can we realize it? And we've shown that. And so last year, we came and told you about the success that we had with Lockheed Martin in this process. It was very good. And we're very happy with that. So let's talk about the timeline of our project, our program actually. So we started with the proof of concept and that's done now. The prototype has started and that's where we take what we learned in the proof of concept and we apply it to a pilot unit. It is a process, a small one. It has real hydrocarbons. It has real pressures and temperatures of a process nature. It's not simulated. It's the real thing. It has a safety system.  If anybody can find the flaws or the mistakes we've made, it will be an operator for sure. So we're going to move on past prototype and do a test bed. And for the test bed, we're going to, we have recruited some collaboration partners. And the goal behind this is to push the R&D forward, learn more about how to develop a system using a heterogeneous set of components, how to implement a standards-based open, secure, interoperable system and process control system as we've described it. And then we want our collaboration partners along with what we'll do. We're going to go all separate and do our own industrial field trials. And the industrial field trial idea is basically, let's get this stuff, we call it technically ready. Can we use it in our processes? Can we use this on our projects? Is this a choice we have? And so that's the process that we're commencing at this point. As you can see to the left, we've had various partners in the process. The proof of concept, it was Lockheed Martin Next, I'm mobile in the 10 suppliers. For the prototype, we have Lockheed Martin. We recruited Wood as a more field-oriented system integrator and also to sort of cold eyes review, we call it. We'll get a feedback from what they think about this system. And of course, we have a new set of suppliers. I'll show you in a few minutes who they are. For the test bed, we're looking at system integrators more suppliers because we're going to need more suppliers. And of course the collaboration partners. When we go to the field trials, obviously everybody's going to need some system integration. We're going to need some products and we'll go do our own thing. We did agree that we're going to share the information so that everybody benefits from the usage of an OPA type system. Obviously what people do with their system is their own business. So underneath all of this you'll see that the OPA forum is developing standards along the way. And we feel that since we never wanted this to be an ExxonMobil only system, it has to be driven by standards and has to be agreed upon. It needs to be a commercial available system pretty much to everybody. Therefore, the forum was started with the founders and we were one of them. And a lot of people have joined since we're up above 80 now. A bunch of end users, suppliers, vendors, academics, other interested parties, all trying to make a standard of standards that we can have a system built from. So the business guide was released early last year and that sort of describes the roles in the marketplace and people can figure out which roles they might want to play and how the interrelationship between them might work. And that's very important because we need the marketplace. We need our vendors to stay in business. We need them to stay profitable and everybody needs to know what role they might play. Just last week we announced the release of the version one standard from OPA. So we're dealing a lot with interoperability there. And later this year we're looking at the version two and following that with the version three, they will build upon each other and continue to expand the focus of what OPA thinks the system might be. And we feel that once it's version three is tested, then that will be sort of the minimum set of standards necessary to build an OPA conformance system. We have conformance processes that are being developed, some procurement items that are being discussed in terms of how this will work or how it should work. Version three is not the last version because it's designed to be evergreen therefore as technologies change or as other things need to be addressed, there will be a version four, a version five, version six. Maybe there ought to be a dot dot dot down at the bottom. So that's sort of it. We have our program. We are tying ourselves to the forums standards, standard of standards for the OPA system. And we're creating a plan that we can get to what we call technical readiness, which means it's an option for our business to use for projects. So it went too far. Again, this thing's got a hair trigger. So these are our collaboration partners. These folks have signed up to work with us and help us push the R&D forward. And someday do a field trial of some kind. They may be ahead of us. They may be behind us. It doesn't matter. They'll be ready when they're ready. Obviously, the field trials will need system integrators. We probably can't all use the same ones. So there's a marketplace there. We're obviously going to need products to use as well. Software and hardware. And so we will commence this process somewhat in parallel with the prototype. But the prototype will, it's pretty much a static design right now. So it's not going to evolve. It's not pushing the R&D too far forward right now. This is where we're going to push the R&D for with our new friends. By the way, this is not a complete list. We are still considering additions to our collaboration agreements. We would like to prioritize on broadening industry participation and maybe geography. But if you have an interest, you need to speak up because it can't stay open forever. All right. So this is our prototype system architecture. And you might recognize it looks a lot like the POCR architecture. But I'll say it was simplified. This is a real instantiation, so it's not test a lot of things. It pretty much is, let's find something that will work. Find some vendors who are more in the marketplace today versus some of the things that we hand built for the lab environment of the POC. And so I'll go ahead and show you who those vendors are. So our pilot system is a small system. And I'll just give you a scale of it. It's around 140 IO. That's the hard IO. It's obviously got a lot of intermediate signals as most control systems have. It's around 30 loops. So it's not big. There is some cascade. It's not really I'll call it high-end advanced control type stuff. It is real hydrocarbons at elevated temperatures and pressures of the nature of the pilot runs. And this one, of course, is the ExxonMobil working with Lockheed Martin and Wood to make it real. The vendors have provided some components and we are in the process of integrating them right now. We hope to have this in front of an operator running the pilot unit in maybe the third quarter of this year. So that's our plan. We'll see. I'm still looking for Murphy in the org chart. So what do we change? Well, like I said, it's a little constrained over what the POC was because POC was R&D. We were just blue sky trying to figure out how things could work. And now we need to make a system that an operator will like and enjoy and not be mad at us for making them suffer through a shift. And so we've gone to more commercially available products from companies in our world. Tried to stay away from lab equipment, if you will. I maintain there's nothing wrong with a Raspberry Pi, but it's the generic one the kids use in middle school for robot camp. They're not made for industrial use. Very powerful, though. In the communications world, we have moved to using Modbus TCP. And it has to do with being compliant with our existing systems. Because although we're taking out a DCS system, we are replacing an existing DCS system with this. It does have some interfaces in Modbus is a standard use. So we converted over to using Modbus for that. And of course, we did simplify by just going with a OPC UA as well. In the software side, we had used some utilities, some freeware, some open source stuff and the proof of concept. And we decided to go test software development kits that are available as well. So these are more commercial products. I'll say they're probably a little more robust, but they do cost money. In the historian world, we had substituted for just simple data recording. We're going to use the OSI Pi. We're going to integrate that with our HMI and other things that are going on. We added alarms and messaging. So in the POC, there were no alarms, which was kind of fun.  We had to tune everything. What was really good about the simulator is it said explosion at one point. But if you really tried hard, it said big explosion. We got the tuning down. It works pretty good when you tune it. The cybersecurity is an area that we are pushing the envelope because we really didn't test much of that in the proof of concept either. And so we're talking about things like device authentication, route of trust, certificates and role-based security and for software and implementing an honest zones and conduits, NIST framework style network. It adds a lot of interesting network equipment to your world to do this, but we decided it's a perfect time to give it a shot because this world is coming to us. Any of you have been to the cybersecurity presentations, it's coming. Just get used to it. So we figured we'd give it a try. It was a little too much for the POC. We had to prove that just the basics would work. Our crazy ideas were actually capable of doing. I guess, and lastly, in the ARTAC world, this system is going to be online for a fairly short period of time, measured in months. It's not years. It's not going to sit around a long time. And so we made an economic choice and I don't mean that in a negative way. It's simpler to just do a simple VMware based system. So we ended up with just a Dell server and we didn't use the Wind River stuff that we'd used in the POC. In the test bed, we think we're going back to that world to test out their high availability ideas. So those are the kind of things that we'll look at. But for the prototype, it's to be run by an operator reliably, perform the functions of a control system, and show that it can be done. So this is my last slide. So basically, the why we're doing this, we could wait for vendors. We could wait for the world to change. We want to answer our business problem and we need to make a bigger change. We think that our progressing the R&D helps people see that it's possible. We can demonstrate to ourselves that we can actually generate the benefit we think is available. The OPA form, of course, is tasked with the idea of creating a system, a standard of standards that define what an OPA system would be and is capable of. That's very important. And to make that successful, we really need more participants. We need end users to decide they want to participate. We need suppliers and vendors and other interested parties to help us. We have to identify standards. We have to figure out if they're good enough. We have to figure out how to test them for conformance. We have to make sure that it's something that can be built. It has to work for all the various industries that it might serve. I can speak for the oil and gas chemical world, but I don't speak for pharmaceuticals, metals and mining, food, other people who might use this. We need the assistance from everybody, actually. We obviously need vendors to provide software and hardware components for usage in the system as well. We hope that vendors are, even if they're not telling us about it, out there trying it in their own labs. And if you want to talk to us about it, we're open to have that conversation. And if you're interested in helping the open forum, we do have the open group booth outside. They tell me it's the last one. And Mike Hickey will help you out if your organization is interested in joining up with this and coming to our meetings and helping us get there. It's important stuff. With that, I thank you for your time and attention.