being that this is our last chance to gettogether before the big event early in november that you're all, i'm sure, terribly excitedabout, interested in. the issues, as you all know have a great dealto do with grabbing people's "equipment" and other such matters. i'm sure you've been hearing about it lastfour or five days. if you have not seen the little clip of thecomedian samantha bee and how she handles it, that would be the one to look at. the combination of insightful criticism andhumor is unmatched. she is, she's really becoming a remarkablecomedian, but she did a wonderful job
on all of that. but here's what i want to talk about. it's mostly some things that are presentedin the mass media in ways i find bizarre. let's start with donald trump not payingfederal income taxes for 20 years, or whatever exactly the number is. it doesn't matter. this is an issue that, obviously, mrs. clintonthinks she can make hay with and probably is. but the economics of it - you should all beaware - this is not new. this is not unusual.
this is not peculiar to mr. trump. every wealthy institution in this country- individual and corporate - makes use of that particular provision of the income taxlaw in this country. if you have a loss, you are allowed to carryit forward. in other words, you are allowed - let's sayyou have the loss of $1 million. but your income isn't anywhere near like that. maybe your income is $100,000 a year, butyou have a loss of $1 million. you are allowed to take a good portion ofthat and use it this year to lower your tax bill because you had a loss, you can reduceyour taxable income.
but if you don't use up the whole million- because you don't make a million in a year - whatever part of that million you didn'tuse this year, you can use next year. and the year after and the year after. and everybody does. mr. trump did what everybody does. i'm not saying it's a good thing or a badthing, but the notion that there's something extraordinary or unusual about what mr. trumpdid is simply wrong. it is usual. it is normal.
it is how businesses have, for a long time,saved on their taxes. some of you may have noticed in years past there'd be a scandal that when it would be revealed that, i don't know, general electric had only paid 2% of its profits in taxes in 2012. or general motors... that because they alldid that. and it gets very creative because if you havea good accountant, the losses you can claim can be - i'll use a technical term - "padded". exaggerated. enhanced. in all kinds of ways, because your lossesare often kind of hard to nail down, and a
creative accountant can be very creative,justifying an enormous fee, by getting you an even larger, more enormous write off, it's called. by taking an immense loss and then using it to cancel your taxes for as many years as it's useful for you to do that. so, whatever you think of mr. trump - that'snot my point here - but the notion that this is a dereliction of duty... i noticed some reporters saying "most americans, when polled say 'it's your civic duty to pay taxes..." they may say it, but that's either then dishonest or ignorant. because this has been a long tradition.
this is done all the time. if i had more time, and if you're interestedi'll do it on another occasion, i'll go through with you a whole list of tax deductions andtax exemptions that businesses and rich people make use of all the time. would you be interested in that? [group] yes. [wolff] good. i'll do that. i'm going to give you one that you shouldenjoy.
ready? here goes: you're very wealthy. you want to avoid taxes. those two things usually go together. here's what you do. you buy a picasso painting. now you have a picasso painting. it's worth - i don't know - $10 million or$20 million, whatever they go for these days. and you can now enter into the following arrangement.
you give the painting to your favorite university. and you get the university's art departmentto certify the value of the painting. yes. quietly giggle. now we have established that the gift is worth- hmm - $30 million because now that it's been shown in the hall of great studies hereat yale university, why it's become better known and the $20 million you paid has alreadytransmogrified into $30 million, having been... and a famous art professor, who works in thesame department, published an article last month in the atlantic magazine about the spectacularcolor combinations that pablo used when he made...
you get the picture? now it's $30 million. you make a contract with yale that works asfollows: you give it to yale and yale lends it back to you under a contract that specifiesit sits on your park avenue apartment 'til the day you die. you keep the painting. you have it. you show it, which is why you bought it. but you get the $30 million write off now.
because you gave it to them now. so, for the next years that it hangs in yourhallway, it's doing you a double service. not only can you show your best friends andcustomers that you are rich enough to have a picasso, but you don't pay any taxes betweennow and the time the picasso goes to that college, which is when you die. that's all legal. you don't pay any taxes. you don't lose the painting. and, when you die, yale gets it.
that's, of course, very valuable because yaledoesn't pay any taxes anyway. ever. to anybody. i could go on and on. there are certain kinds of land you can buythat has certain properties. there are certain kinds of farms you can run. farms upon which nobody ever plows anything,no one ever grows anything. it's a farm. and you have three of your cousins run experimentson the farm, whereupon it becomes a loss that
you can take against your income. and what do you do on the farm? well, four weekends a year you go with friendsand you have a wonderful weekend at the farm, hosted by your three cousins who... get the picture? all that's paid for by uncle sam, becauseyou don't pay any taxes. this is a loss. you're running an experimental farm even thoughyou can't spell the word 'farm'. that's four letters - hard.
okay. the tax law has been written and perfectedover the years. the inheritance law, for example, that oldpart of american history, we used to have an inheritance law. it used to be a law premised on the followingsimple principle: everybody should have an equal start in life. and we don't - we're born, i assume all ofus have this in common - we were born, and we should all be kind of racing to achieve whatever it is we're interested in from a simple, level playing field, you know, from the same place.
so the idea was, it wouldn't be fair if rockefeller'skid and you were starting at the same point with the same effort, because clearly he hadresources you didn't. so, we said as a nation, you can keep whatyou accumulate in your life, but when you die, the government takes the bulk of it becausethat way your children haven't the big advantage over the children of everybody else, sincethere's no rhyme or reason for that to be the case, since the children had nothing todo with the parents who gave them life. okay? so it was an idea of an equalizer. and it existed in the united states in manyparts of the country.
it existed in federal law. the states have inheritance taxes; the federalgovernment has inheritance taxes. other countries have them. but we've been getting rid of them. and that is now, for example, i believe currentlaw it's a couple in the united states can leave about $10 million to somebody before any federal income tax - inheritance tax - kicks in. what that does, is makes sure that the richstay that way generation after generation. it avoids the leveling. by the way, that idea of taking it is notjust in order that we all have a level playing
field, but it is hallowed in most religions. some of you know the concept of "jubilee"that exists in a number of religious traditions - both christian and jewish, i think, andmaybe others i'm not familiar with. that comes from ancient practices, where inorder to avoid the community ripping itself apart between rich and poor, every few years,the elders of the tribe or of the region would reshuffle the land. everybody would get a new and different pieceof land that they would be able to farm and raise, so that the good land that was in thehands of one family, moved to the hands of another family.
they kind of started all over again - a leveling,an equal - that's why it has this very interesting name, jubilee. because people celebrated! because they were going to be given anotherchance to have a community that was roughly equal, rather than the inequality. so all of that is wrapped up in the inheritancetax. we don't have much of an inheritance tax. there are a dozen ways to get out of inheritancetaxes. and the very taxes don't kick in until afterthe first $10 million.
so many of you can now relax. the $10 million you're planning to get orleave to somebody goes through without any federal inheritance tax what-so-ever. and, i believe, mr. trump has promised - ifhe wins the election - to enlarge it. i don't know what hillary clinton's positionis, but she's certainly not been a champion of not doing what's been done over the lastfew years, which covers much of the campaign that way. perhaps the biggest issues that are not beingdealt with by these candidates in this election, are the ones that are the most important.
give you an example: today...today...12thof october, one of the largest banks in the world, the hsbc corporation - you know, theyhave offices all over the world, but all over new york, as well - issued for them what theycall a "red alert". that is the highest alert they have - ready?- for the imminence of a recession hitting the american and global economies. you ready? i can see from your faces, you don't knowanything about it, do you? well, that figures. who's going to tell you?
you think the two people running - excuseme, the four people running - for president of the united states - we pretend that thetwo of them who are running who aren't clinton and trump aren't there, but they're actuallythere as i assume many of you know - not a word. i mean, whoop, hey, what, whoop. by the way, last week, bank of america issuedpretty much the same thing. goldman sachs, about a week ago, pretty muchthe same thing. now if you live in a world economy, wheregoldman sachs, hsbc and bank of america have all issued dire warnings: of stock marketretrenchment - there are a lot of words for this - down drafts, retrenchments, recessions,depressions - there's lots of language for
this - you'd think that the candidates wouldbe saying "what're we going to do if this happens?" or "what are we doing to preventit?" or "what will i do if..." well, you know, nothing. and i would argue that if the economic issuesfacing the united states at this point are simply not figuring in the election betweenat least two major candidates. they're talking about other issues such asthose that samantha bee captured so well. but they're not talking about the fundamentaleconomic issues that the country faces. and i think that's - what do i say? - that's a tragedy.
it shows you that whoever you vote for willbe trying to figure out - probably poorly - when the excrement flies right into thecooling equipment what they should do. what they should do when this happens. when everything begins to dissolve, and allthe impacts. i'm going to come back to all that, becausethat's really what we're going to talk about a little bit later today: the economic issuesthat confront them. but, for now, i just want to let you knowin case it's occurred to you that this is an election campaign mostly focused on nottalking about the fundamental economic issues. that's what they have in common, and they go about it in different ways.
you may like one better than the other - but that's separate. they have in common that everything that'sfundamentally wrong in our economic system is just either not spoken about at all - suchas the items i've mentioned - or treated with a passing, trivial approach that's almost worse than not saying anything at all. to say that you're going to make sure thatthe middle class is "helped" in the future... what? you're dealing with a house on fire, and you'rethinking i'm going to watch about where i leave matchbooks. ugh.
the house is on fire. is it good to be careful about matchbooks? it is. but it's not adequate to what we've got here. you're going to do something to help the middleclass. that's wonderful. but we're beyond all of that. we really are beyond all of that. again, the statistics - i know i've repeatedthem but i don't believe it can be repeated
too much - 2015 was the first year in recordedhuman history that the 1% richest people on this planet, together, have more wealth thanthe other 99%. it's the first time that they went across. the 1% now has more than the other 99%. isn't that a fundamental issue that we oughtto address? especially since a disproportionate numberof the 1% are americans, are us citizens? or the other one from oxfam: that the 62 richestpeople in world - 62 individuals, 62 people - have more wealth than the bottom half ofthe planet's population, 3.5 billion people. these are staggering problems of social cohesion,of war and peace, of equity, of decency, and
i don't believe either of the major candidateshas said a word about it. so that's - these are fundamental issues,like the red alert of hsbc. aren't we, somehow, to address these kindsof issues? isn't that what a democratic society oughtto be doing when it decides which direction to endorse in its elections? we'll see after - when i see you all in november,as i hope i will, we will have a lot talk about in terms of its effect. let's then turn to some of the major issues. since i'm critical of the new york times fairlyoften, and i want to appreciate that the new
york times gives me as many opportunitiesas it does to do this, i want to be fair and talk about when they do something that isworth it. and in the issue dated october 9th - someof you may see, new york times, october 9th - there's an article by a very well-knownfood critic named michael pollan. p-o-l-l-a-n. written a lot of books about this. and i don't have the time to give it the attentioni want, but i do urge you to take - it's a good piece of work, nicely summarized. title of the thing is called "big food strikesback".
and the subtitle is fairly long, but i wantto read it to you because it'll tell you what the article does. when barak obama took office, activists hopedhis administration would fight for stronger regulation of corporate agriculture. eight years later, they're still waiting. and that's what the article demonstrates,pretty much. but here's what i wanted to drive home. there is now - and i know some of you participatedin this - there is an attempt to go in a different direction in our food system: organic food,locally-grown food, artisanal preparations
of food that respect various laws and theories. he does a wonderful job. he says that's now worth $50 billion, whichis a lot of money. it's a significant section of the - and youcan see it, if you go to even your bland, regular supermarket now has a little organic sectionor something. that's to compete with whole foods and allof that. but he also adds up the wealth of what hecalls big food, which is $1.5 trillion. once you understand that, then you're lookingat david and goliath here in terms of the struggle between the two, and that explainswhy mr. obama, who gets some credit for having
said things and maybe even tried - althoughin this article michelle obama gets more credit than he does, because of her effort aboutgardens and healthy eating and she was kind of in the forefront of that but they couldn't get anywhere and the article documents why that happened. but i wanted to... yeah. [male voice] (inaudible) [wolff] new york times;it's the sunday, you know, the glitzy magazine that the sunday times always has. [male voice] and that was october... [wolff] october 9th. october 9th new york times.
and there's a wonderful description of whatbig food is: a $1.5 trillion industry that grows, rears, slaughters, processes, imports, packages, and retails most of the food americans eat. four distinct levels. first, at the bottom, big agriculture, whichconsists "primarily of the corn-and-soybean...complex in the farm belt," as well as thegrowers of other so-called commodity crops and the small handful of companies that supplythese farmers with seeds and chemicals. so that's one, key component. in turn, big agriculture supplies the feedgrain for big meat. all the animals, funneled into the tiny numberof companies that ultimately process most
of the meat we eat. the third is the processed food corporations,the ones who basically convert corn and soybeans into everything else and fry it. and finally, at the top, the fourth one isthe supermarket retailers and the fast food franchisers who distribute it to all of us- this stuff. each of these sectors - pollan is really goodabout it - each of these sectors is dominated by a remarkably small number of gigantic firms. and he gives the statistics. in the case of food and agriculture, here'ssome of the numbers.
in beef, 82% of steers and heifers are processedby the top four companies. chicken: 53% by the top four companies. corn and soy processing: 85% is handled bythe top four companies. pesticides: 62%. seeds: 58% and on and on. it's the monopolization. really what one ought to say - he doesn'tquite say it here - is that, alongside the military-industrial complex that has playedsuch a crucial role in our economy and the medical- industrial complex, those four sectors: hospitals, doctors, drug companies and medical insurers.
we really have the food-industrial complex. a collection of four industries integratedand interdependent with one another, and each one dominated by a handful of companies, asis the case in medicine, increasingly, and is already the case in military production. so, if you're interested in this, it'll getyou depressed, because it shows that even with a president who had some commitment to it - or at least his wife had some commitment to it - they were unable to do much of anything. and the article is pretty clear about that. and at the very end, he goes through whathas been said or done by either clinton or
trump and predicts they won't even try whatobama tried and failed to do. but they won't even try. and so the prognosis, at this point, is thatthe only way - his conclusion is the only way change can come is if the mass of theamerican people just refuse to eat and to buy that stuff, because it's killing them. i assume i don't have to go through with youthe enormous portion of our medical bills that have to do with diet and diseases thatderive from diet, whether it's obesity or diabetes or all the other illnesses and medicalproblems that cost a fortune to deal with, but are significantly shaped by diet.
it's not the only thing that creates them,but it is a significant player. here with a little bit better news, the cityof berlin. why am i bringing that up? well, an interesting article recently in thefinancial times - the british newspaper not given to left-wing exuberance, at least notthat i've noticed - is struck by the difference between london and berlin on this issue: gentrification. the process in the city, in which people witha lot of money want to establish a residence for a variety of reasons in a fun place tobe. london is a fun place to be, if you're rich.
new york is a fun place to be. san francisco is a fun place to be. berlin is a fun place to be. so if you're rich and you want to be wherethe fun is, you need to get an apartment there. and there's a limited number of these apartments. and poor people have the bad taste to livein them. and so, in order to make room for the wealthypeople who want a nice apartment, you've got to get rid of the middle- and lower-incomepeople who are in there now. fortunately, we have an institution called"the market".
one, which we are taught at an early age torevere and to respect as an "allocator" of scarce resources. so, if housing is scarce, the way the marketallocates it is, the price keeps rising. the rich ones come in and bid a higher pricefor the apartment, and the lower-income people match the bid the first time it goes up - becausethey want to stay there - and then as it keeps going up, because the rich people have moremoney to bid with than the poor, the way a market works, it allocates this scarce resourceto the one with the most money. right? you all - that's what markets do.
they allocate things to people with the mostmoney. the market is not interested in where yougot the money, how you got the money, what you're planning to do with the object - doesn'tmatter at all. you got the money, or you don't got the money. and if you got the money, you get the apartment. and if you don't got the money, you get tosleep in a tent. that's if you have enough money to buy a tent. if you don't - by the way, i travelled thislast week up and down inside san francisco. every time i drove under an elevated highway,and they still have a bunch of those, i was
treated to tent colonies. lots of them. that probably exists in new york, but i haven'tseen it. but in san francisco, you can't miss it. it's everywhere. these are tents, and outside the tent is alittle cooking area, where you see people with a little charcoal or wood making a fireand cooking whatever it is they are. and they're about two feet from the highway,where cars are zipping by. whole families with children, how they keepthe children out of the road, i don't know,
they probably don't all that well. anyway, gentrification is the big problem. san francisco is probably the worst placeright now in the whole united states. the prices there, which we could see whenwe walked around, are really - even for a new yorker, which i am - i was impressed. things are really... houses that look like, ten years ago, if you'doffered the owner $50,000 for that house, they would have kissed you and signed on theline immediately. those are now going for $1 million.
i mean it is really wild, very wild, evenby new york standards. london is very famous for this. berlin is not having it. and the financial times writes about this,saying - gee, almost wistfully in the financial times, by the way, there's a story october10 in the financial times, if you're interested. germany: berlin's war on gentrification. as demand booms, officials want to preventthe city turning into another london. this is the financial times headline. what they're systematically doing, is usinglaws on the books in germany, but also using
"creative" - it's a wonderful word - creativeinterpretations of german law. in other words, they're making stuff up asthey go in order to prevent this. i thought you might be interested. councillors on the city council of berlin- the parliament that runs the city - discovered - this is the language of the financial times- discovered an obscure legal tool, known as a "pre-emptive right of purchase". it allows the berlin government to swoop inand stop buildings from being sold to private investors. they recently bought a house, and there'sa description of it, for รข‚¬3.7 million, immediately sold it to a state-owned housing company.
it is now a public housing project and allof the tenants in it are going to stay. they don't have to leave; their rents willnot be raised, etc., etc., etc. "we have to do something to save public housingand ensure that the social structure of these neighborhoods isn't completely destroyed,"says hans panhoff, the kreutzberg councillor. if you know berlin, kreutzberg is a centerof artists and foreigners, turks and others, who come to berlin. and it is an area that is the prime kind oftarget for gentrification. and nor is this an isolated incident; the aim is to prevent germany's capital endingup with the same kind of housing crisis as london.
we want berlin to remain a place where averageearners can afford to live. the authorities are enacting a whole host of measures. they have reinforced rent control. they have banned luxury rennovations - whichis one of the ways you may it unaffordable - and they have kicked out airbnb. cannot do airbnb. done. they will not allow it, because that's anotherway of getting it. and they are raising taxes to deter foreigninvestors.
you can't - if you're not german - you cannotcome in and buy, as an investment, apartments in berlin. the reason i mention it to you, is that alot of the times, gentrification is dealt with - here in the united states - as a kindof law of nature. you know, it rains certain days; what areyou going to do? be angry at the sky? it doesn't make much sense. it rains. and so it is that gentrification happens.
the neighborhoods that once were full of little,lovely shops and artists and now has 800 duane reades, one after the other, interspersedwith 800 spas where you can get your nails done, you know, you know. but there are parts of the world that arefighting against that, and they are being very creative and, so far, quite successful. next item. i have to bring these kinds of stories to you because of the lesson i think they teach. so this comes from an interesting businesspublication. some of you have asked me to let you knowwhere this stuff comes from, so i'm doing
more of that. this comes from a publication called businessinsider. you can get that on the internet; it's available. and so this is a story from the 11th of - yesterday- 11th of october. headline: sears, macy's and jcpenney are fuelinga $48 billion crisis in the retail industry. okay, what is this about? well, on the surface, here's the story. hundreds - and, over the next year or twoit'll be thousands - of malls, shopping malls, retail shopping malls are collapsing acrossthe united states.
big time. those of you who live in new york city maynot - we don't have that many of that sort of thing, so you don't see it quite, but immediately,if you travel to the suburbs, malls are everywhere. they define the boundaries and so forth. give you an idea: the three countries in theworld that have the most malls are the united states, canada and australia. everybody else has a lot less. the united states is number one. i want you to be proud.
number one. we have 23.5 square feet of retail space perperson - man, woman and child. think about that. twenty-five square feet for every man, womanand baby in the country. number two is canada. it has 16.4. that's a lot less. that's a third less. no.
per person; so it's adjusted per person. i mean, it's true they have less people, butit's a per person measure. and the third one is australia, with 11. others are all less. so we are in a world of our own. we built malls like there's no tomorrow. we live in a country that's full of malls. and they're dying in huge numbers. the us, according to business insider - it'sa business magazine - you'll love the words that
business journalists come up with - the usis over-saturated with shopping malls. over-saturated. and it's very serious for two reasons: (1)when a major store like sears, macy's and jcpenney - which are called "anchor stores"- they are the anchor of a mall. it's only because a mall can get one of thebig ones, that the little ones that group around it, you know, the chinese restaurantand the greeting card "shoppe" and ye olde cheesy crap and all that can be around it,because the customers come in to get their stuff at the sears, the macy's, the jcpenney. because these big companies are in terribletrouble - sears barely exists any more - they
are collapsing the malls, because it turnsout that many of the smaller companies starting a few years ago inserted clauses into theirleases which said "in the event that one of the big ones - the anchor - leaves or closes,we don't have any obligation any more to stay here. our leases are invalidated. we're not stuck with obligations." so the minute one of these big ones leavesnow, the mall is defunct, because little ones are freed, in a way, from their obligations,because they knew they couldn't survive once that big one closed down, especially if theycan't resell them. but here's where it gets even more dangerous.
it turns out that $48 billion in loans weretaken out by the developers of the malls - because, in america, nothing happens unlessyou borrow money for it. well, the malls' falling apart means theycan't pay the loans off. so all of the institutions stuck with theseloans - pension funds, folks, that are the ways that working people have had their moneyinvested so that when they reach 65, they can be retired. well, if your pension fund lent money to themalls, the money's not going to be there for you, because the malls can't pay. it is being looked at now as a dangerous situationwith similarities to the sub-prime mortgage
crisis, when another group of debts couldnot be paid off. a recent analysis, just to give you an idea,from credit suisse - one of the biggest global banks - said that about 200 shopping mallsare at risk of shutting down if sears continues its current schedule of closing stores. why do i bring this to you? because of all these details? this is more evidence we don't have a recovery. there's no recovery. these stores are - these malls are dying,because there's nobody in there to buy this stuff.
we're going to come back to that in a littlebit later, because that's the core of what i'm going to do with you today, but this is more evidence we're not in a recovery. our economy hasn't - yes sir [male voice] how much of that is due to how many people shop on the internet? [wolff] yeah, that's part of the story, absolutely... if i had more time, it is not just people not having the money and not being able borrow, but it's also the shift to the internet. and if those of you who follow this stuffwith what amazon is able to deliver in the way of quick service and quick deliver andlow prices, you're creating an industry that basically makes these enormous investmentsin the malls unviable. but the next time, please remember these stories.
because the next time someone tells you thecapitalist system is a genius in helping us decide where to invest money. the genius had us invest in more malls than anyone else on the planet and we're dying now economically. because that was a crappy investment and what should happen now is some way to manage this process. all those buildings. all those parking lots. all those structures. nothing has been... we're going to internetand that stuff just sits there literally just rotting in the sun.
there are now hundreds of these malls thatsit there - a little bit like the auto factories in detroit with the weeds growing up in theparking lot - and nothing - just waste, waste, waste. capitalism and its genius for investing. that's an example of that genius. okay, next. give you one of these stories that gets meangry, so i relieve my anger by telling you all about it. this is about a colleague of mine, a professorof economics at princeton. that's in new jersey.
but not in newark or camden or... it's not like that. it's in a very nice, rural place. very wealthy. they have a professor there named alan krueger. he's very well known. he was assistant us secretary of treasury underpresident obama and chairman of the council of economic advisors, so he's a well-connectedelite... and he has a paper that he's actually givingthis week up, i believe, in boston. it's a conference at the federal reserve bankof boston, october 14 and 15.
give you a hint: quote. the conference is called "the elusive greatrecovery." that's a synonym for "no recovery". but, it sounds much better with it's an "elusivegreat recovery". causes and implications for future businesscycle dynamics. only professors write like that, which iswhy their students do not read these papers. so he is upset. what is he upset about? we currently have the largest share of americanmen between the ages of 25 and 54 who aren't
in the labor force. that is, they're not looking for a job. they're out. you know, these are the "prime working ages"of adults, and these are the male half of the population. we have more of them not looking for work- disconnected from the whole work experience - than we had in any record that the unitedstates as a country has kept. and mr. krueger had done research. and here's what he discovered.
half - nearly half - of the prime age nlfs- that stands for "not in labor force - that's another thing professors of economics. if you can take an obvious term and reduceit to an obscure set of letters, you're already halfway home, you know. i learned that early on, which is why i'vebeen such a success in all of this. anyway. nearly half of prime age nlfs (men) take - he'svery excited about this - pain medication on a daily basis. and, in two-thirds of cases, they take prescriptionpain medication.
this is in krueger's paper, which is, by theway, carries the title "where have all the workers gone?" and here comes his suggestion for what todo. krueger argues that his findings justify expandinghealth insurance coverage under the affordable care act - that's obamacare - to positivelyaffect the health of prime age men. in particular, he writes, pain managementinterventions could potentially be helpful. aldous huxley, for those of you who remember- this is soma. these men are miserable. these men are out of it.
these men see no hope. they see no future. they have no job. they don't know where to turn. fill them up with medication. take care of them. zone them out. professor krueger. there's no criticism of a system that doesthat.
there's no criticism of the nature of thequality, of the quantity of the jobs that are offered to these people. there's no investigation of what made thembehave in this unusual way. no, no, no. we know they're suffering. they have pain. so they need drugs. what could be more obvious? as i like to sometimes say, if we had moretime, i'd stop here and we'd play the national anthem
- and then continue. but we don't, so we don't, so i won't. next. last month, the obama administration - i'msure this had nothing to do with the election - the obama administration issued a white paper. here it is. the paper is white. and it has the seal of the president of theunited states right here, and the date september 2016.
and it's called "the economic record of theobama administration: progress reducing inequality". this would be the equivalent of the stateof new jersey issuing a white paper dedicated to the governor on how to properly run bridges. by governor krispy kreme, as he is known tohis admirers in a state where he couldn't get elected to anything ever again. because it isn't actually weird. this is a wonderful illustration of the self-referentialbubble within which this campaign and the political life of the united states is nowconducted. small groups of people, talking to each othera great deal, comfortable with the stories
and myths they exchange, and utterly disconnectedand don't need to connect to what the mass of people might be worried about or thinkingor caring much about. so here's a paper in which the obama administrationsays that they have done more to reduce inequality than any administrations since the 1960s. which is probably true. it's just - that's not a big standard to worryabout. for the last 40 years, the direction in thiscountry has been more and more and more inequality. so doing - what they're really saying is "we'renot as bad as all of them". which may be true; i can't do the work todetermine that.
but i was struck by the stretch they use. for example, much of the reduction in inequalityis not actually about taxes or government spending, it's about the affordable care act,because you make people pay at the higher ranges, then you give insurance to peoplewho didn't have it. so, depending on how you count that - whichis of course a fuzzy area - you can make the case that's it's a bit of a equilibrator, thathealth insurance, obamacare. and they make the most of that, trying todig out as much as they can. but, towards the end, even they - eager asthey are to make themselves look good in the final months of his presidency - i will readto you what, at the end, they say buried at
the bottom. you'll love the language. "much more work remains to reverse the decades-longincrease in inequality." you betcha. much more work needs to be done. from, yes: that's ms. palin's. i try to quote her every chance i get. "from 1979 to 2007, the share of after-taxincome received by the bottom quintile of households" - that's the bottom 20% - "fellby nearly a quarter and the share received
by the top 1% more than doubled." those are the kinds of numbers about inequality. what he - what the obama administration did,given that, is not worth a white paper. all that they really can say, and all thatthey feel they need to say, is that we weren't as bad as all of our predessors. and, if you think about it, that's the electioncampaign. each of the two people trying to say to theirfolks "i'm not as bad as him" or "i'm not as bad as her" and, depending on where youlive in the country and who you're talking to, that's it.
vote for me, because i'm not as bad as theother one. that's this. like me, because i may not have done anythingabout the basic inequality that has gotten worse for 40 years, but i wasn't as bad asall those others. which may be true. speeding up. one of you asked me, i think two monthsago, so i did the work. a woman named elise gould, who does a great deal of good research and who works for something called the economic policy institute in washington,d.c.
and all of this kind of research is on theirwebsite, epi.org. you can go there and find it. this is dated october 7th, this month, andhere's what she did. she measured what has happened to public school teachers since the crash of 2008 in the united states. so, since 2008, the enrollments of kids inour public schools have gone up. that's despite the fact we're having a growthof charter schools - you all know what that is - nonetheless, they're still not a big factor. so there's still a growth in the enrollmentof public school kids. so they have grown over the last eight years.
but the number of employed people in publicschools has dropped in america by 214,000. all right? okay, so you're talking here about - i'lldo the numbers - 4,000 per state, roughly. four thousand teachers, mostly teachers, butother personnel in the schools. so you have a society which has gone through a crash in 2008 and which has decided that one of the ways to cope with the crash is to getrid of school teachers and school personnel - 200,000 of them. so we've got more kids in the school and lesspeople to work with them on their education. that's crazy.
this country needs now - more than ever - to "compete," we're told, in the world of other countries in the world of the europeans, and of the chinese and the japanese and the brazilians and all the parts of the world are working hard to be economicallysuccessful. one of the most important ways you areeconomically successful is in terms of the number, the quantity and the quality of thepeople coming out of your school system in terms of their brainpower, their skills, theirmotivations, all the rest. what kind of a society suffering from a temporarycollapse of capitalism of the last eight years would find it in its heart to try to solvethe problem of a collapsed capitalism by shooting itself in the foot in terms of the futureof its own working class?
it's almost as though you're seeing a numberthat suggests that this isn't the working class for the people that run this society. why not constrict the education of the youngpeople here? you're not expecting to employ them anyway. you're expecting to employ people in otherparts of the world who are cheaper, anyway. why should you spend money training peoplein this country who you really don't have an interest in? if you actually did think that the futureof the united states depends on the quality and the quantity of its labor force - whichis what we teach in the university, in economics
departments - you couldn't possibly do this. this is stupid. this is self-destructive. this makes no sense. and i'm not even talking about what the impactis on the 200-and-x-thousand families whose jobs have disappeared in school systems thathave crunched down. by the way, all the numbers bear this out. the average size of the class is larger thanit was eight years ago in terms of the number of students each teacher is supposed to service,etc.
the extracurricular activities are being crunched. on and on and on and on. very bizarre and dangerous and makes one askabout what's going on. okay, the last short one before we get intothe major one. this is from - what's this from? well, i guess this is from... yeah, this mustbe from - bloomberg. bloomberg, so that's also a very importantsource of everyday economic news. just go 'bloomberg...' and you get tons ofstuff there and it's free and it's pretty up-to-date.
here's what they show. and see? one more way of getting at the economic conditions. our assets as a nation, the age of our capitalstock - you know the machines, the equipment, the vehicle fleets - it is, on average, oldertoday than it has been since the 1940s. it's very interesting what we have in thiscountry. we have an enormous building of industrialcapacity in the years immediately after world war ii, the recovery from the war, the recoveryfrom the great depression. but we have not kept up the re-building withreplacing old equipment with new equipment.
the problem is, the rest of the world - whichcame after us - has done that. so all the machines - i'm exaggerating, buti'll give you an idea - the machines are younger in many parts of the world, particularly inasia. and so you're beginning to sense that theproducers - say of clothing that we're all wearing - do they have some factories in thewestern hemisphere? they do, but they're very old, so they aremoving production to parts where they can start afresh. therefore, the capacity to produce, if there's a robust market, if people are buying, well then they'll keep the old factories going and they'llproduce shirts here, too.
but the minute there's a reduction, the minutethere are problems in purchasing, they're going to close the least efficient, olderequipment in order to favor the lower-cost, more profitable, newer equipment. and this article bloomberg does shows thatour assets - both public and private - are getting older and older. and i notice from the graph - very interesting- in world war ii, the depression and world war ii, as private companies cut back investment,the government came in and did a lot of investing. whereas, in the current crisis, that hasn't happened. the government - it's not roosevelt, it'swhat we've had, bush and obama - and they
weren't able to do any of this. another example: housing. housing is older now than it has been since1939. the average age of a house that an americanlives in is older now than it has been at any time since 1939. and that's also a sign that people are not- remember you hear about building and home builders, yeah, they're building, but they'rebuilding a relatively small number of houses for those who can buy them now. meanwhile, the average age - what most peoplelive in houses - is getting older and older.
and that has something to do with no recovery. you can't deal with this. you haven't got the money to really build a whole new network of housing for the american people. the money isn't there, the economic base isn'tthere, and as this article says, america is aging in more ways than one. in other words, it isn't the age of the averageperson, but that the infrastructure of production is also getting older and older, and thatmeans less able to compete with the rest of the world, which is not going through thissituation. it makes a funny comment at the end, thisarticle.
i'll read it to you. "somethings..." no, wait. "running counter to the trend, americans haven'tbeen enthusiastic about replacing their vehicles. driving down the average age to a more thantwo-decade low of 3.9 years. that's been a boon to auto makers, who'veseen their sales and profits swell in recent years." so americans are making sure their cars areyoung. but their homes aren't. and that's usually the sign of a society thatcan't sustain the biggest expenditures of
life, and so focuses on more and more on thosethat they can. it's a society trying to keep up almost theillusion of prosperity and letting the house go. it's a little bit like public authoritiesnot maintaining the bridges and the roads until, literally, the car crashes into thelake because they haven't maintained it. all right. let me turn then to the bigger issues of alooming capitalist crisis. i hate to do this - i do not enjoy bringingyou gloomy news. so i try to lighten it up with humor. on the other hand, as i've told you many times,if the gloomy news is troubling, go home,
turn on the television and you will not havethis problem. all the stations will be competing to giveyou details about what donald trump said this morning. and that's much more fun to pay attentionto than all this stuff. as you know - or if you don't, let me remindyou - when the crash happens in 2008, the capitalist crash - second worst in the history of capitalism, second only to the great depression of the 1930s, as i've talked about several times. when that happened, the basic decision ofthe people who run the major capitalist countries in the world - europe, japan, the united statesand so on - did a temporary and a long-term
fix, which they hoped would work. the temporary fix was a stimulus plan. it had other names in different countries,but here in the united states, it was called a stimulus plan. the first one was by george bush in the lastmonths of his presidency in 2008, the summer, late summer of 2008. and the second one was early in 2009 whenpresident obama became president. obama's was significantly larger than bush'sbecause, by early 2009 the depths and seriousness of the crisis was more acceptable and moreunderstood than it had been bush.
bush kept trying to say, if you remember,"this will pass. it's not a major thing. it'll get taken care of." by early 2009, nobody believed that any more. plus, bush was gone, there was a new president, there was a lot of hope - hope and change and all the rest - that something would happen. so a big stimulus was undertaken. by stimulus, i mean the government comes inand spends a ton of money. it's very important that... this is not complicated.
this is not simple. mass of people are losing their jobs. if they haven't lost their jobs, they're fearfulthey're going to, so nobody's spending any money and the economy is tanking. nobody. the stores can't sell anything, the factoriesdon't have any orders to produce, because nobody will buy. so the private sector is falling apart - bigtime - and so the government steps in and - very simple - the government will spend,because it has to make up what the private
sector isn't spending. the private sector, basically, collapses. businesses collapse, they lay off hundredsof thousands - remember those months where people were losing jobs five, six hundredthousand a month, etc., etc.? businesses closing, cutting back, laying offworkers, so those people don't buy anything. they're terrified. they're traumatized. they have no money or they're worried thatthey're not going to have it very long. so they don't buy.
in comes the government to buy for them. in other words, the government is going tokeep the economy going by being a mass purchaser. that's all this ever meant - stimulus. so here obama, for example, started, you know, fixing roads, giving money to the states, so that they could fix roads or plow things, or- it doesn't even matter, you know? boost spending. spend. go out there and spend money. and where did the government get the money?
if it's going to spend like crazy when theprivate sector isn't, you realize you've got a problem. because with the private sector collapse,nobody's paying taxes, right? all those unemployed people, they don't paytaxes. all those business reductions mean they paylower taxes. so just as less money is coming into the government,it is going to spend like crazy. that's a problem. if you have less money coming in then youspend more - ne-zhe-zhe - there's a problem. how do you solve this problem?
you borrow the money. well, where do you borrow the money from,if you're the government of the united states? you go to two places: first, you go to theprivate sector, the rich people who of course are not investing in business because businessis collapsing. they're not going to invest. they're not going to hire more workers. they're not going to hire more inputs. they're not going to expand the factory, because the reality is they can't sell what they're already producing. so they're sitting on an enormous amount ofmoney, which they are not going to invest.
which is the problem! by them not investing, they're not buyingstuff and they're not hiring people. so they're sitting on the money. so the government comes to them and says,"lend us the money. we'll spend it. and it's a good thing for you, mr. capitalist- or ms. capitalist - because here's the game: you're in trouble because the private sectoris falling apart. you can't sell what you produce. you can't hire anybody.
we're going to save you. you lend us the money you're not spending. we'll spend it on the stuff you produce andwe'll pay you interest for letting us do that for you." we need a moment now, for the national anthem. this is an extraordinary way of solving a problem - by rewarding the people who created the problem. and that's what we do. that's how it's done. of course, there's an alternative. the government could come in to all the rich people and say "this is a crisis you brought on.
so if you've got a lot of money that you'renot spending because the economy's no good, and it's not good because you made all kindsof decisions that led us to this point, we're going to tax the money from you and then we'llspend it. we'll help you; we'll spend it. but we're not going to also pay you interestto allow us to help you. that's a little much." but, fortunately, we don't have anybody inpolitical power who would do that. that's why we're choosing between trump and clinton and not between stein and johnson. because those other ones might actually comeup with an idea like that.
like taxing the rich when they have messedeverything up rather than rewarding them. anyway, the government borrows from the rich,spends all that money to keep the economy going, whereupon the rich get scared, having lent all that money to the government which has rescued them. worried that the government may not pay them back. may default on those enormous loans that theyjust made to the government to use the money to save them. so they say to the government, "hey, hey, hey! we need to see some clear signs that you'regoing to pay back all of the deficits that you ran."
the implication being that the governmentdid something wrong by borrowing all that money to save them. they just got saved and now they're attackingthe saviors for having spent more than they ought to. but they spent it on you. how did you get to this craziness? that, the answer is, is the genius of capitalism. that's what we do. yes!
you're enjoying it, that's good. listen. you either going to laugh at this or you'regoing to cry. so the laughter is probably the better bet here. so the stimulus helped, but it immediatelygot shut down because the people who had lent didn't want to see more, didn't want to see a government that was unable to pay back. so what is the longer term way that you're going to keep the economy going? if the stimulus happens at the initial pointand gets us back to an okay situation but can't be continued?
in every country, that stimulus was endorsedby everybody to get us out of the collapse and then immediately turned around and shutdown. the shutting down of the stimulus, that'scalled "austerity". austerity comes immediately after the stimulus. immediately after the government spends afortune which all of the supporters of austerity voted for. then they immediately turn around and say"no more of that." it's like, you know, wealthy people who gentrifya neighborhood. they come into the neighborhood and now theywant the little shops that they came into
the neighborhood for to be preserved. they don't want anybody else to come. then they discover that gentrification doesn'twork like that. they have to move to a new neighborhood wherethe same thing happens. so what happens to keep the support of theeconomy going? well, starting in 2009 and -10, no more stimulus. the alternative is "monetary policy". what does that mean? well, in this country, it's called "quantitativeeasing".
don't worry about the name. it's very simple. you flood the economy with money. the central bank just prints it, which, youknow, that's what they do. again just if all of you remember: how isit decided how many $100 bills...or $50... how is it decided how much money there is? americans have fantasies about this that are extraordinary. they're right up there with sexual fantasies. the sheer variety is stunning, okay?
here's how it works: the federal reserve - thatlittle body you read about from time to time, whose president, whose chair is now janetyellen, you see her name around - they sit around and they decide how much money to print. that's it, folks. they sit around and they decide. twelve of them. the board of governors and mrs. yellen. and they sit around and they say "let's see. first question: do we want more money or less?"
they discuss. they decide. let's say they decided more, because theydid now. so then the next question is "how much more?"and then they have a conversation and they decide that. then mrs. yellen says "thank you," they allgo off and play golf. she calls the mint and says "roll 'em!". that's it. there's no mystery; there's no nothing.
you can't do that. they'll arrest you if you make money yourself. the only other people who can make money arebanks. banks make money by giving you a little electronic notification in your account. you go and have a conversation. you have a conversation with a bank officerin one of those desks with the fake flowers in the back - you know, that. you sit down and have a conversation withthis person. you try to imagine what kind of a life itis to have these conversations all day.
you get over that. you agree on something. you're taking out a loan. "great," they say, "here it is." they credit your account at the bank with$10,000 - that's the loan you asked for. you now have $10,000 worth of checks to goout and buy things. they work like money; they are money. the government prints and you make loans. that's how money is created.
no mystery. is there somebody who sits in the sky andallows us to make more or less money? do we have to worry that the money we havehas some relationship to gold? what determines the amount of money? whatever these people's conversations result in. and they're mighty free to do whatever theywant. they don't need congress's approval, theydon't need the president's approval and they don't need your approval. so we began a program, as did many other countries,to pump up the money supply.
to pump money into the hands of everybodywe could get it into. in the hopes - that was the idea - by the way, quantitative easing: making it easier for large quantities of moneyto get into the economy. that's all it means. that's what we did. for example, the federal reserve lowered theinterest rate to make it easier for everybody to borrow. borrow what? the new money.
no problem. and the government itself started buying allkinds of securities in the market. government securities, private securities- the government just printed the money and bought the stuff. so we flooded the economies of the world with money. and the interest rates went very low. and the hope was, the hope was that this wouldkeep the economies going. it didn't. the recovery has still not happened, evenhere in the united states, which has had a
bit of the better situation than the europeansor the japanese, who are in real trouble. i mean, we are too, but they're in worse trouble- both of them. the chinese, that's different. they're at a different stage of their economicdevelopment; they're chugging along. they're doing a pretty good job. it infuriates the new york times, which cannot publish an article that's good about china, no matter what happens. for the new york times, the cold war has neverended, and for many others, it hasn't either. you can see that again in the current shenaniganswith putin and russia and china and syria,
which is scarily close to warfare on certaindays, when you pick up the paper. but excepting those things, this is a systemthat hasn't worked. [voice] (inaudible) [wolff] yes, well, we're going to get to that. so the money came in - tons of money was created - but it didn't lead to businesses hiring workers. it didn't lead to production. it didn't lead to the recovery of a functioningeconomy. where did the money go? the people who got the money - the bankers,the people who deal with the government in money - they are now confronted with a new problem.
interest rates were so low, interest rateswere so low, that they had no place to invest profitably. try to imagine a bank - i know it's hard forsome of you, i can imagine - sloshing around with huge amounts of money. that was their problem. where to put it? you can't lend it to the people, because peoplewon't borrow any more. they can't afford what they've got in theway of debts. the mass of people, not in this country - they'redone.
and many, many corporations, they're not goingto borrow in order to expand production. that would be crazy. you wouldn't want to borrow money, expandproduction, when you can't sell what you already have been producing. so where did the money go? one: stock market. okay, we'll start buying stocks. and, if i buy stocks and drive up the pricea little bit, then you can come along and say "well, i can do that, too."
so the prices of the stock market get bidup and it's self-reinforcing, because the money you invest in the stock, will give you a profitif someone comes along and buys it at a higher price from you - who's doing the same thingwith the sloshing money that you did. that can go on for a while. but what it is, is stock prices rising, butno longer connected to anything real being produced. if you read what i mentioned to you before:the hsbc "red alert" today, bank of america last week, the goldman sachs - that's whatthey're all saying. this is not a stock market that's going tosurvive because it's got no connection between these rising prices - which make stock holders wealthy - has no rela...
nothing is being produced. there's no work being done. there's millions of people not even in thelabor force - they've given up, all those paying the workers. hold it, hold it. but something did happen. around the world, as interest rates came down,every company in trouble anywhere in the world had a lifeline. it could now borrow money at virtually no cost.
interest rates are close to zero. that means a corporation go out and borrow$100,000,000 and it doesn't cost them anything. no interest rate. one-half of 1% or less. so all over the world, particularly in "thirdworld" countries - asia, africa, latin america - every company in difficulty that couldn'tsell its stuff could borrow to keep itself going. we, today, have the highest rate of debt,relative to gdp around the world. we never had it before. the level of debt of our corporations is wild,because they borrowed.
that was a side-effect of these low interest rates. they all borrowed. but they didn't borrow to produce anything. what did they borrow for? to merge with one another. that was a way of making money. because you would borrow it at no cost. you'd buy the other company, particularlyyour own competitor, and then you wouldn't need two headquarters, would you?
you wouldn't need two sets of executives. you wouldn't need two of those lovely buildingswith the lovely shrubbery in the front and all that crap that big corporations love to do. you wouldn't need two of them. you just need one. you'd save a lot of money. you'd fire all the middle managers and a wholelot of the truck drivers and the two... you'd save. that would be a way of making money.
there'd be no point in growing production,because there's nothing in that, but saving, unifying, mergers, acquisitions, playing inthe stock market. that. or, here's another one: playing in the realestate market. go buy an apartment in san francisco. buy one in london. and have somebody come along who's borrowed money just like you - buy it from you at a 10% increase. oh, great! now you go buy another one and ano...
there we go. the money found its way into gentrification, into mergers and acquisitions, and to a level of debt. well, now here's the problem. if there's a recession, if there's a down-turn- particularly a stiff one - these companies can't pay back those debts. the debts are too high. they can't get through - even in a small down-turn,because they are loaded up with debt that has to be serviced. they have to pay the interest.
they have to pay back amortization - the bit-by-bitrepayment - they can't do it. and that's one of the reasons hsbc and goldmansachs are scared to death, because they can see if we have a down-turn now, the debt loadcarried by corporations around the world can't handle a reduction in the flow of revenuethat they have. they will default on these debts. and then we will have catastrophe. number two. by the way, this goes back to the beginningof tonight. is this being discussed by our leading candidates for...
not a word. they're not troubled. they're trying to figure out what, exactly,mr. trump said on that bus with that other jerk... that's the exciting thing. [female voice] does that mean we have a false economy? [wolff] not so much a false economy, but afalse - more consciousness. it's a consciousness in the society that ourpolitical problems don't have anything to do with this.
that either this isn't happening, a kind ofdenial, or, if it is happening, it's like a snow storm. it just happens. there's no point in getting all excited. we're going to have three of them every winter,and there's one of them. it's a kind of fatalism, a resignation, arefusal to say "wow! what could we do?" it's like giving up. [female voice] (inaudible)...stock prices... (inaudible) [wolff] yes. that is.
you could use the phrase "a false level" - afalse price level - an unsustainable price level. let me just bring it to an end and then we'lldeal with the question. [male voice] what about investing in treasuries? [wolff] yes, that's perfectly nice to do, but in order for there to be treasuries to invest in, the government has to borrow. treasuries are when the government borrows. but the government isn't borrowing more andmore, because that's their prohibition on - we have a deficit, we have to reduce it. obama's time has been reducing.
[male voice] corporations buying treasuriesand getting money, profits, from it? [wolff] yeah, but if the government doesn'tissue the treasury, it's not available. we have a problem. we don't have enough treasuries in the united states. we don't issue them. but hear me out; you'll see where we're going. so, where are we now? the flooding of money has produced not onlynot-the-recovery, but produced all these by-products of inflated real estate prices, inflated stock prices...
this is scary. what are we going to do? and now governments are beginning to decideit's so bad, that maybe we'll have to go back and begin to do more stimulus - the very thingwe didn't want to do in the last eight years. and now you see in britain, in europe, inthe united states more and more talk about well, maybe, the government is going to haveto borrow again a vast amount of money and stimulate, because nothing else seems to be working. so you're going to see a debate - by the way,when the government spends money, it's called "fiscal policy".
when government pumps in money, it's called "monetary policy" for those of you who are interested. you're going to be seeing discussions aboutrebuilding our cities, rebuilding our infrastructure. because this is government spending directly,because all this indirect money - manipulation - hasn't worked out. last point for today. [male voice] could you tell us again the distinctionagain between monetary and fiscal..? [wolff] monetary policy is how the federal reservemanipulates the money system of america. fiscal policy is how the congress raises taxesand spends money. a stimulus program is something congress does.
it pumps purchasing into the economy. the federal reserve doesn't purchase, it pumpsmoney into the economy hoping other people will use that to make the purchases. the private sector doesn't like the governmentto come in, because the government's a competitor. and the american people, seeing the governmentkeeping the economy floating, are going to be given the idea that the government is thesolution and private enterprise is the problem. that's not good for them. they don't want that. they want monetary policy, because that'sthe government working deals out with the
banks and that's another private sector, sothere isn't the government directly getting its hands in there. the government is always an option in a capitalistsystem. and that freaks out the private sector, becausethere's then the risk the mass of people will say "let's have the government do it. it works out better for us." there's a very dangerous direction for thingsto go. that's a political issue. here's the underlying problem, as profoundas anything i've told you about.
that's why it's at the end. over the last 30 years, and continuing sincethe crash of 2008, the gap between rich and poor has gotten worse and worse. this is extremely important, because the morewealth that is concentrated in rich people, the less that is available to the mass of people. the mass of people take the money they earn and spend it. the really rich earn a great deal of moneythat they do not spend. i mean, how many yachts can you have? how many meals can you eat?
seriously. so if you're bill gates, you can't consume$50 billion. you can't. so you save it. but the more you put wealth concentrated inrich people, the less demand for goods and services there is, because they can't. and, if you keep doing it for four or five decades- which is what we've done - you're getting to a point now where the mass of people can'tconsume what the economy has built itself up to be able to produce.
it can't. in the 1970s, we began with that problem. we solved it by having everybody borrow to spend. keep up your spending by filling up your creditcard balances, by borrowing for your house, by borrowing for your car, and - in the last20 years - by borrowing for your college kid. if you want to see how this works, china today. china today is pressuring its population tobegin using credit cards - like americans. because they're trying to shift their economyfrom a dependence on exports - which is a chinese story to this day - to become an economydependent on its own people.
but its own people can't afford to buy anything. but on credit, they could. so they're now going down that path with allthe dangers that implies. but, here in this country, we're... the massof working people's wages are going nowhere. the mass of working people can not borrow any more. they can't afford the debts they already carry. so there's no way to solve the problem. the government has to come in and spend, butthat freaks out the business community, which doesn't want to see the government borrowingmore than it can pay back.
because, remember friends, if the governmentcan't pay it back, then the rich people say "we lent you all this money; you have to payus back." and the government says, "well, if we haveto pay you back - since the economy isn't generating income for us - then the only waywe can pay you back is to lay off the fire fighters, and the cops, and the teachers. and, by not paying them, using the money insteadto pay off the debt." you all know what i'm talking about, becauseright now, puerto rico is in the depths of this disaster. they borrowed for 50 years - a cozy deal betweenthe banks in new york and the leaders of the
puerto rican government who got together andgave each other loans. the banks made a ton of money, the politicianslooked good to their people because they had all this money, and now it has to be paid back. and the banks demand it and the puerto ricangovernment - the very head of it, this summer, gets on television and says "we can't pay." or, to say the same thing in another way,the only way we can pay back these bankers is if i close the university of puerto rico,if i shut down, you know, the water system and i cut the schools. and if i do that, the people of puerto ricowill change the game.
the business community doesn't... they don'tknow where to go. we are at a time of global capitalist crisis. the very solutions it found - like easy money - have come back to bite the system in the rear end. the unintended - the undesired - consequences are now accumulating and the play - what to do? how to go? - is being constricted and constrainedin every way. and i believe, without being mystical, i believethat somewhere in the american mentality - deflected and confused and distorted as the media andothers make it - somewhere, they "get it". that we're confronted by these two - i'm tryingto be polite - these two candidates. is this really... is this the best that thiscountry can do, these two?
these two? wow! and i think a large number of americans - we'llsee what the votes look like - a large number of americans are shaking their head and theyknow, somewhere, that there's a disconnect between this theater that we have every daynow and the problems that are part of our lives that we're living through. it's an extraordinary coming to a crunch. capitalism is just a system - just a particularway of doing things. here's my conclusion.
slavery was another kind of economic system. feudalism was another kind of economic system. in slavery, one person was literally the propertyof another - like a donkey, or a machine. it existed in many parts of the world, forhundreds and in some cases thousands of years. it is a system that was born, that evolved over time, and then it died. it was over. pushed away; it finished. feudalism came afterwards. in feudalism, the lord and the serf - instead of themaster and the slave, the lord and the serf.
a different relationship. it was born, it evolved, it died. the logical expectation is that capitalismwas born, evolved and dot, dot, dot. and the question that - once you understand- then the question has to be asked now, but always, is that what's happening? is it over? what in the world would that mean? where do we go next? what's the alternative?
because, you know, the end of slavery wasn't peaceful. and the end of feudalism wasn't. that's when capitalism was born in europe. remember? remember the young capitalist businessmenand bankers of france, they took the louis and they took him to a place and they separatedhim from his head. and that was the kind of a very symbolic endof feudalism. they never quite recovered from that activity. so, it's a tough situation.
and i think - obviously i don't know what'sgoing to happen any better than anybody else does. i can't predict the future - but i cantell you, i've never seen this system that i've been studying all my life in this levelof... it's like a chess game that's been reducedto only a few pieces left, and you realize that the guy or the woman that you're playingwith knows how to play this better than you do, because there are no moves left. every time you think of going this way, orthat - but each time you think of a move to make, you can see how the other player isgoing to get you that way. and i notice among my friends who are right-wingers- economists - or center, or lefties like
me, we don't agree on how we got into thismess and we don't agree on how to get out of it. but we do agree that none of us have everseen an economic system boxed in the way this one has boxed itself in. and, of course, the scary risk is that whenyou're squeezed like that, when you're blocked, you take extreme measures. wars are ways of getting out of this kindof situation. fascism - a radical top-down reorganizationof the economy is a temptation, and you see right-wing political movements and partiesin our country and - excuse me - in many other countries beginning to...
berlin, which is doing these interesting things about gentrification, had an election two weeks ago. and, in that election, the left they cameout really strong. the "die linke partei" was the biggest gainerin that. all the other parties basically shrank. the most "left" party in germany now - that,i believe 17-18% of the vote, yes, very big and the right-wing party got about 15% ofthe vote, so that's significant for them - but you're seeing, as we are in this country,too, you're seeing a kind of polarization and the consensus the last 50 years afterworld war ii is dissolving. it's dissolving everywhere, and quickly.
the teachers in chicago came "this close"yesterday to going out on strike again. you see everywhere - and by the way, theydidn't go out on strike because mayor emanuel rahm emanuel caved in on a number of the basicissues that were raised there, which is - his political life is also coming to an end. governor krispy kreme is fading fast. the stunning former mayor of this city, whoreally continues to delight, mr. giuliani - but you can see the desperation that's writtenacross these. anyway, folks, we've come to the end. i hope it's been entertaining, but i'm evenmore concerned that you get a feeling for
- both in the little things we do at the beginning,but in the larger ones - and it's hard to do in the amount of time we have to get asense of the squeezed position. you are not living in an economic system that'sgot everything under control. it isn't under control. it's falling apart. and the effort to tell you it isn't fallingapart, which is half of what this election is about, shouldn't fool you. nothing is going to be solved in the nextthree weeks. nothing.
not by these two. and so we're going to be confronted with theseissues that we've talked about in a very stark way and a system that has run out of waysof coping. and that's going to make the months aheadvery tumultuous.
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