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tv   Book Discussion on Lost Decades  CSPAN  December 21, 2015 12:59am-1:30am EST

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>> host: i can't think of a better place to end this because that is a very forward-looking idea and so thank you so much for this this has been a great conversation for me to be part of and you have inspired me and i think we will look forward to whatever the next chapter is and what you are working on. thank you very much. >> that was "after words" booktv signature program which offers the latest nonfiction books are interviewed. watch past programs online at booktv.org. >> your book lost decades the making of america's debt crisis and the long recovery, how big is the u.s. debt and who owns it and what do we mean by owns?
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>> guest: >> the u.s. debt is like $14 trillion into this may be in terms of publicly held debt about 7% of gdp. ..
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>> >> that is a lot but not as problematic as certain times with what the corporations owe each other but some households get into trouble and that ripples through the economy. and that washes out.
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with institutions and households had counted on in they cannot get it back. and they have borrowed money they cannot pay back results in a real debt crisis. >> talk about public that does that include future social security medicare payments? >> no. and in general losses between the u.s. federal government civic what is the treasury? rebecca security your liability of the federal government directly issued by u.s. treasury. by rabbi the federal government.
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>> if we in but invest in a pension we are in a person me hold the u.s. treasury's of messages the irish it is invested but the savings bonds would be the closest many employees are interested in. but how does that operate? the chinese for a long time a lot more than they were importing most of it was in the form of dollars.
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in the affair and a lot more from their exports in june could keep the currency but what they do is with the big dollar reserves with the dollar assets that in some ways are the safest basket of the world and they're easy to get it -- in now because they are liquid.
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like saudi arabia in into weight. >> as any economist is that a bad thing for the united states? to make it is a dead bad thing for china but at a rapid pace. in those foray a good chunk of time. they slow down. with the big risk taking the dollar hereabout is the foreign exchange reserves. so in some sense we get what we wanted. to accumulate debt at a less
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rapid pace. in that over time has ramifications. than the price of treasuries will be lower. bet that is the tendency. that puts pressure on interest rates. but the tide led your book lost decades what happened in 2008? >> but the key idea to put forward with the acronym in
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with the mortgage-backed securities owen's single underlying story. for whatever reasons those that pushed through that sometimes the times are different in the can manage indeed efficient way. to say we all barrault much more have computers to manage risk and derivatives to help us manage risk sold the idea just to borrow more
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is it like used to be and that is a very dangerous idea. because you get into trouble when you borrow a lot that doesn't look like it will be repaid is only. easily. the banks loaned a and borrowed. in part because the regulations because they were outdated. so a combination of deregulation and the barking and the spending spree
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encourages more borrowing with a neutral innovation. in all leads to an increase in their work to intelligent work. it ended its unraveling. >> but the political response calling from sheila bair and president bush, did they get their right? >> once bernanke in the federal reserve acted that the doctoral thesis had to do with the great depression.
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that is because of the collapse of the banking sector. and those that talked about the monetary to make sure that lindane continues. the bush administration pushed through but in terms of fiscal policy the bail was important because a reassure the financial sector that the banking system would continue.
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the banks have been holding lots of assets that were more valuable than they originally thought. for it is like the is on the banks in japan for a while. and it took awhile to make them solvent. economic ruin the cannot -- economy without a financial system. >> host: was that economic downturn natural? >> you'll is savvy vince that will push them down or up you don't want to think of them as mechanical but
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this recovery is unnaturally long my view would be at some time in from that combination overseas so the big question is now what can the federal reserve do? the other question is is it the culmination of world events? most of the time we think about moving along if this
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is the new case of a slowdown precipitates it is a new configuration. >> has it been affected? is it important? >> the meaning prospects the first big one was the reinvestment act in 2009 that was day countercyclical move. the was the shepard movement from the stimulus.
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otherwise we could have been mired in a great to larger recession. to mitigate the pain and suffering. so that legislation in that past so that is important to with a longer-term. it reduces the incentive for banks to puts their own shareholders that is what got them into a trouble before but with dodd/frank
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in the rubric that made the banking system lot more stable with basl iii and we think those sectors it is likely the next problem is we did not expect that. but the main line banks that were the main problem in response to the great depression but did you have a whole set of problems because individuals and firms in bakes have looked away with financial
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innovations had invaded their way. they put a whole set of regulations the people are always looking for a higher rate of return. that is the hazard to try to keep up. >> host: is that the message of the people that read lost decades to take away? >> you cannot just say we have a crisis and move:. they are examples where individual households or
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banks all want to leverage up in the they want to borrow a lot and there is a tendency in the short term incentive to say there is no trouble. but it will linden somebody else's lap in the future and other household will say i will get out before it crashes. or a tendency that times are different now. we are smarter than we used to be. i think the main point is if you borrow all lot is on the leverage a lot than inevitably it will come around and it will be inflicted on innocent bystanders.
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>> host: what do you teach your at the university of wisconsin? and wed. >> guest: your students to leave with? >> international macroeconomics to both undergraduates in the economics department and the macro course to higher level students. though one thing i want them to know is to read what is going on in the world and what you have learned in class why is it certain individuals in richmond say what they say? verses what journalist said? used their mind to analyze and dissect the argument
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rather than somebody says something because they look authoritative i want them to question everything. >> host: why can a small country like greece affect our giant economy? >> met is an interesting question. there was an interesting statement about construction in the u.s. did people say the construction of housing is a small part of gdp so how does that affect us? but this interconnections matters in particular in the
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case of housing but people owed assets in and in the derivative was the value based on the house but those that had assets that were issued by greece. so they lose value. so there is a big ramification of the perception of net wealth. but with degrees -- greece the euro was built on the concept that every
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government is on sustainable finance but where it would get into trouble then would have to be bailed out that is written out of the charter of the year as some. so that forced the reassessment of what is possible. so what signals what could happen to the a others believe or ireland or spade or those other countries have problems with their finances but it is the signal if they have to be bailed out and what that means with the european currency. >> host: booktv on c-span2
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speaking with university of wisconsin professor. author of lost decades. they give. >> a polling advisor also the author of the new book addressing the deepest problems of the 21st century what is america's biggest problem right now? >> the main problems are not addressed to have a huge revolution remaking the country on technology common gender roles, immigration common the new majority has whole range of issues they want to address the tinkly have a corrupt american politics and doesn't really
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address the needs of the middle class. but i have to step back they are reacting to the short-term but they are a part of the huge changes that are changing america in a way that is very positive few countries in the world are is economically vibrant culturally. let's get migration in reaction. and may not look like that but this is a country-western diversity is part of our dna and very few countries is that the case. >> we tape this at a moment the country is to bear it -- debating syrian immigrants coming into the united states many have decided they don't want them in their state. how does that jive with the
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current policies? >> you have to have perspective how powerful immigration is in shapes america. one of the reasons we are economically dominant we have a revolution 37% to foreign-born. looked at places like california the nobel prize laureates are foreign-born. it is reshaping the dynamic through immigration probably the biggest change changing the electorate that is why you get the republicans to try to stop that from happening but i think we will see it will be shaped by diversity and immigration when the election is over and we look back we will
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find major parts of the republican party will like this country and we will see a different story long term. >> talk about technology being a major driver for change looking at the free trade agreement they talk about jobs what is the dichotomy. >> if you look at high tech and big data will look at productivity as growth in what is central to it and whole range of the immigration that is like the industrial revolution and it changed the country and brought great population but also great -- brought great poverty.
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because of the union movement to hebetude decades of reform so i am optimistic about america. i know we have declining wages, family breakdown but i also know it brings change to make it possible to be successful. >> are we in the second to gilded age? >> for sure but also in that era led get the city with this minimum-wage, is sick days and a variety of reforms in california and connecticut's it and what is happening in business as whole, the catholic church as they address problems of poverty so let's also
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recognize there is the process of reform. >> what about the baby boom generation? >> that is the biggest days that i talked about in the book to have these two revolutions where it all comes together the growth of the millenials in the metropolitan areas at the expense even of the suburbs. it is said change of attitude in that will drive the baby boom and that is a factor but what you will see is this growing population.
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>> what is the greatest difference between the two generations? >> everything. the baby boom has batf you can work for a single employer and the latter up pension will whole lot of stories that led america to think of itself as a robust country but the millenials no that is why they have a higher focus on quality of life they believe bin urban density half don't have a driver's license. two-thirds with college degrees have already moved to the fifth largest cities. they are moving. changing their values and where they live there not miserable.
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in some ways they are the most optimistic even though they have the worst shot they are pretty optimistic. >> thank you. >> the key for coming tonight.

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