Transcripts For CSPAN2 The Euro 20161029

Long friendship with convicted murder and inmate. Thats just a few of the programs youll see on book tv this weekend. For a complete television schedule, booktv. Org. Book tv, 48 hours of nonfiction books and authors, television for serious readers. Now we kick off the weekend with Nobel Prize Winner author, joe ve discussing the most recan he be the book the euro. [inaudible conversations] good evening, ladies and gentlemen, welcome to barns noble web sighs. Has written for vanity fair, politico, harper. He brings us today his new book the euro, how a common currency threatens the future of europe, can the euro be saved. After laying there the european inflation mandate and explaining how policies specially towards crisis countries have further exposed the zones flaw design, mr. Stiglitz outlines steps forward, a well managed end to the single Car Insurance you euro experiment or a bold new system dubbed the flexible euro. Reviews call this urgent of compelling interest to economists and policy maker. Without further due please join me in welcoming author stigletz. Its a real pressure to be here again. Maybe i should begin why should an american write about europe, doesnt america have problems of its own that should get our attention . Well, actually, i think there are a number of reasons. I will come at the end why its important ft. United for the United States. We like interesting experiments even when they arent really great ideas. Oh, okay. Thank you. So what i said one of the reasons economists like me are interested in the euro is its an interesting experiment and even if it was a foolish experiment, we dont have many experiences in economics and this is on a grand scale. Unfortunately, even though it was founded as i will explain in a few minutes with the best of intentions, one cant base a grand experiment having as much implications for so many people just on a vision aye idea when asked to Pay Attention to the laws of economics and you cant just repeal them and the political leader who help found the euro didnt really understand that. I think they didnt unfortunately this is a serious accusation. They didnt really understand economics. It was influenced in a sense by some ideas that were very prevalent at the time. This was the beginning of the 90s after the end of the cold war and the belief that markets were really triumph and worked well and particularly part of the belief prevalent at the time that if only government did its part, the market would take care of everything else. The idea is all the government had to do two things, make sure there werent too big of a deficit. Thats a theme even in america. Keep your deficit low and keep inflation low. So the European Central bank mandate was to keep inflation low and they had a set of restrictions on the members of the eu, euro zone, to keep their deficits low. If you did those two things, the market would take care of everything else. It would guaranty success. Well, we know, we should have known even then that those ideas were wrong, that when the as the crisis evolved, it where you know wasnt just greece. But spain and ireland had actually a surplus before the crisis. The sighs crisis had deficits and debt. It wasnt the idea that keeping deficits and debts low would make sure that you have a wellperforming economy and you wouldnt have crisis, its absolutely wrong, the remarkable thing is years after germany doesnt understand this. They still think the mistake they made at the beginning that the flawed idea of what was required is what they ought to do and they doubled down on a bad idea and so they told all the countries what you have to do is maintain Even Stronger fiscal and hasnt worked. I sometimes think if the euro had been founded a few years later after the east asia crisis, nobody would have i shouldnt say nobody. Nobody would have had that idea crisis where governments had low inflation, no deficits and so that crisis which is was the biggest crisis up to that point, to the 2008 crisis. That crisis was really caused by misbehaved markets and so we now know that markets can often behave very badly and that is what happened in spain and ireland and elsewhere. So it is interesting that how how prnt idea like the euro founded at a particular time, the very time it was founded it had such an influence in the design and the consequences would happen. There were a couple of reasons why i was interested in studying the euro. One of them is globalization. The euro is a form of integration of a large number of countries in europe and bringing them closer together but there are many other forms of economic integration and i think that the real mistake was that particular form of integration, you have financial, you have lots of forms of integration. They thought that critical at their history it was sharing a common currency and as i will explain, that was a mistake, but a more general policemen in globalization is a mismatch in economic of politics. The pace of the politics, then you can get disastrous outcomes and we see that here in the quite and in the context in some of the trade integration that weve had and finally, a single Financial Market is a single currency is about finance and finance, we all know, is an area you ideology plays an important role, where things often dont work very well. So trying to understand what is going on in the euro helps bring out some insights into Financial Markets. So let me go back to the founding of the euro. It was conceived of the best of intentions not as an economic project. If you turn to economists, they would have said this is not a good idea. If you turned to economists, they would have said this is not a good idea. It was a political idea. But the politics wasnt really enough to get the project done. So they said, you know, what is the next stage in european immigration, they scratched their head and there are lots of different ideas you could have had, lots of Different Things and they said lets try this thing of a single currency after all on the other side of the land they have currency and theres a strong unit and that was where they went wrong. While it was a political project, the politics wasnt Strong Enough to do what was necessary to make that economic project work. So i will explain a little bit later on. We have 50 diverse states in the United States, actually the difference between the richest and the poorest states was not much different since disparity increased and since they opened up europe to the Eastern European countries, but we have a single works and works because we have a whole set of institutions that make our economy be a single economy. They dont they didnt put into place those institutions and the result of that was a political project which was supposed to bring prosperity and with that prosperity bring the countries close e together and they thought there would be positive political dynamic successful prosperity leading to more solidarity and political integration and its the opposite effect. Its been a disaster economically and that Economic Disaster has led to political divisiveness and making it more difficult to address the other issues which you have to adder together like the immigration crisis. So the question was, why has there been the failure of the euro and let me just say, i could go through the numbers about the extent to which the economy has not been performing well in the crisis countries like agrees greece, portugal and ireland. Unemployment in spain, things are getting really good, the Unemployment Rate is only 20 and youth unemployment is only 50 and thats because a lot one of the great parts about europe, you can move easily so the reason Unemployment Rate, youth Unemployment Rate is only 50 because a lot of the unemployed young people have moved elsewhere in europe. In greece youth unemployment is 60 . Gdp has gone down by 25 . No matter how you look at it, even the bestperforming country, germany, would be graded a d on any standard if you werent grading on a curve. If you look at whats happening to large parts of germany, large fractions of the economy are citizens are doing actually very, very badly, their incomes are going down. So from an economic point of view its clearly not worked. The reason is actually why is very simple. When you formed a single Car Insurance currency, two of the ways that economies and societies adjust when they get hit by a shock like the Global Financial crisis coming from the United States. You can lower your interest rate, you can lower your Exchange Rate and that lead to more exports and that helps your economy grow. So iceland, for instance, where its very small island, country, but iceland had one of the biggest crises. It had one of the most poorlybehaved Financial Sectors, but they recovered fairly quickly and one of the reasons they recovered is because they had a flexible Exchange Rate. They were not part of the europeo and then worst after they had taken away these two mechanisms of adjustment, they tied the hands of the European Countries further and said you cant stimulate the economy to fiscal policy. You cant have more than a 3 deficit and they said to the central bank, you have to focus on inflation. Even if theres a lot of unemployment, if youre worried about if theres any inclining of inflation so in 2011, they raised Interest Rates twice. So what i tried to explain is that in a sense, the europeo was flawed from birth and that goes to a major controversy going on about what went wrong in the europe, in the euro. Theres one group of people who say that the only problem is they did the wrong policies. They did the wrong thing and the fact is their policies couldnt have been worse. So it is true that theyve given a lot of bases for that as an explanation, you know, extremes of austerity and policies that they imposed in greece, some of them are really, really weird in the middle of the crisis, you know, the house is burning down, they have a debate, the group of three countries that dictate the policies to greece. They have a debate in which they discuss how old how old can milk be and still be called fresh. And the greeks say they like fresh milk and people from the rest well, the problem with your economy is you want milk thats only four days old to be called thresh, we think it should be tenday old milk that should become fresh. That became a controversy for a while. Can you imagine . The economy is going into depression and they are arguing how many days old milk should be. Of course, there was inkling about what this was about. Big dairies in netherland wanted to ship mill to be greece, it takes a few days, they wanted it call fresh milk so buyers wouldnt know whether its greek milk or dutch milk. Itwould worsen the situation in greek because the greek farmers income would go down. This was a policy design today hurt agrees and they were holding up money over issues like this. The european leaders, the troika wasnt doing the right thing but the basic idea, the basic feeling i argue that it was a struck choor of the euro zone itself because it took away adjustment mechanisms. Now, there are other things you do to adjust. You have to change relative Exchange Rates, matters, economists say its the real Exchange Rate, taking into account prices in the in two countries. So if you cant change the nominal Exchange Rate, the number of euros you get for a dollar, there are only two other you either have to lower the price in greece or raise the price in germany. Thats the only other way of going about tit. You can say it doesnt make any difference, well, yes, it does because when you lower the prices in and wages in greece, greeks owe a lot of money in euros, if you lower their wages, what they owe becomes more burdensome, they cant back and they go into bankruptcy. So what is call internal devaluation, low eing the prices never works. The alternative was raising the prices in germany but then germany then tells a story, inflation is what brought on hitler, but thats made up history. The real history, of course, is anybody knows it was the Unemployment Rate. Large surpluses to pay the the penalties were imposed on germany in world war i which invaded against because they thought it would cause serious economic consequences. So it was these primary surpluses so the irony today that germany is insisting on greece having huge surpluses to repay the debts that they owe and not a surprise causing depression that i described before. So they realized that if you were going to have a diverse set of countries share common currency, it would be important over time to have them come closer and close e together and they talked about convergence but they let countries get further apart and now after 18 years of the euro, the rich countries got richer and the poor countries got poorer and it was predictable that this would happen. It was part of the structure. Why . There are lots of parts of this. Let me give you one example. One of the basic aspects of the euro zone was that money could move freely around europe. They thought that that would lead money to go from the rich countries to the poor countries. That was sort of the ideology and as you took economic principles you might actually believe that. Hopefully you dont allow people who take principal scores be in your polly making decision. Back in 20089, we had a Global Financial crisis, where did money flow after the crisis . United states, remember was the source of the crisis, our banks had mismanaged everything and where did money flow . To the United States. Why . A very simple reason because the United States had the deepest countries than any other country. I remember being a Conference Call after the lay Lehman Brothers went down and the question is how do we respond to the Bush Initiative to have 100 billion given to the banks, essentially a loan so it was the Democratic Party was trying to decide, obama is already the nominee, he was running for president , what should we do in response and there were mostly bankers on the Conference Call and their response why only 700 billion and the answer was, the answer was dont worry, the reason why it was only 100 billion because a trillion sounded too big but dont worry theres lots more money if you need it. It was very clear that treasury and the Federal Reserve were sub said ri of wall street. Money flowed towards the United States. Thats a general principal that behind any system theres a government. What made a lot of sense, a lot of people took money out of Spanish Banks and put it in german banks. What happened then, Spanish Banks cant lend money to Small Businesses in spain. Theres an enormous contraction of lending so spanish economy gets weaker and they cant bail out the banks, their ability bail out the banks goes even down and so more money leaves. Its a downward vicious circle. Thats a system that they created and the same thing about talented people, where are the talented, all the young talented people have left greece and spain and other countries. It is a system where the rich get richer and the poor get poorer and you get this kind of dye divergence. This is the basic problem. The question is what is to be done. To me theres two ways for, there either has to be more europe or less europe. Ie, the euro zone has to integrate more or it has to figure out ways of disintegrating. The if you think about what does it take to integrate more or what is the minimum necessary, a natural place to begin is what makes it possible for the 50 american states to share a common currency and one of the things its very easy to migrate from one place to another, if california has a problem, people move to other places. Theres a fundamental difference between migration in the United States and in europe, though, if everybody believes south dakota because there arent many jobs there, no one really cares a lot. I mean, a few people in south dakota do, but if everybody leaves greece, people are not going to be happy, at least the greeks are not going to be very happy. The nature of National Identity is really different and related to language making migration much more difficult, but far more important, other important parts are the fact that when washington mutual, one of our biggest banks went into trouble, it wasnt the state of washington that bailed out washington mutual, it was the federal government, fdic. So when we go into a recession we have a National Unemployment system so the cost of additional uninsurance is picked up nationally. So in europe its just the opposite, when a greek bank has a problem, greece has to bail it out and that weakness the greek government even more and they have to pay for their own unemployment insurance. They have the downward vicious circle. So that gives you a hint about what is required, one of the things you have to have is common deposit insurance because others money is going to leave the weak countries and go to the strong. But the idea of having, what they call a Banking Union is now accepted but germany says, not now. Sometime in the future, but, of course, the damage that is being done is going to be hard to reverse. When money leaves the spanish Banking System or the other Banking System, theyre not going to come back quickly and the same thing about the people. So one is a Banking Union, one of the things that europe did knowingly and i dont think many people realized it at the time they created the sovereign debt crisis. When you borrow money in a currency that you dont control, theres always a risk of you not being able to repay. United states will never have a sovereign debt crisis like that which is appeared in europe because we owe we owe a lot of money but what do we owe it in . In dollars. Now, only trump doesnt understand this. [laughter] so if we need to pay it, what do we do . We print more dollars. Its only if theres the Printing Presses break down or we have in electricity or you can imagine the disaster of that kind but it was almost unimaginable. But in europe they created a situation where greece and spain are borrowing in a currency thats not under their control so they created for the first time the kind to solve debt crisis in recent years so to address that you need like a common borrowing framework and you have to have industrial policies that allow the weaker countries to catch up to the stronger. You have to have a Solidarity Fund and so forth. Most importantly, you need a system of adjustment so that countries like germany that have big surpluses raise their spending, raise prices so the system adjusts when you have this fixed Exchange Rate where you dont have the ability to adjust through Exchange Rate. So creating doing what is necessary to make the euro work is not a lot. Its not a lot economically but seems to be more than possible politically. Nothing like the degree of unity of economic integration, political integration we have in the United States, but germany keeps saying, we are not a transfer union. Europe is not a transfer intun which means we dont share risks with other people, we dont bail out other countries. Irony is while they say that because of the policies they wound occupy bailing out so they borne greater costs as they take the stance of not doing it. They wound up paying a price for their you might say their stance of not, so if thats not possible, what the other ideas. The other is amical divorce. How you separate the Different Countries maybe in two or three different units and not have to go to the different 19 currencies before. The depressions are costly. And the people are bearing a high price. The final idea that was referred in the flexible euro to different halfway house, the basic idea is you might keep the idea of a single currency trying to keep the advances that theyve had so far but recognize that they put the car before the horse. In other words, they werent ready to have the single currency and what i describe is a particular way where they could go actually test whether they have that, they could get stability among Exchange Rates and if they succeeded in creating institutions, then they could go sometime in the distant future to have single currency. Well, where would this all go . You know, forecasting politics is more difficult than forecasting economics. But unfortunately if i were to give a forecast this is not going toned very pretty because i dont think any of the three alternatives i described is likely to be undertaken. The most likely course is the current course, its a kind of brinkmanship and the danger of brinkmanship is that eventually you go over the brink and there are it will be interaction between markets and politics, we saw in brexit what can you have large numbers of disaffected people. The euro has not been working. If youve been in the depression for a long time and youre a young person in one of the countries an Unemployment Rate is 50 , youre unhappy and what they are jeopardizing is not only their Economy Today but their economy in the future. Finally, let me say why should we care about all of this, theres not much we can do about this but we should care and there are several reasons. Europe is facing a large number of problems, theyre at the cutting edge of the global migration crisis and the euro has made it very difficult for them to address this migration crisis. One of the reasons why it makes it so difficult is if youre a migrant, where do you wanting to, do you wanting to a country with 50 unemployment or 25 unemployment. All the migrants wanting to to the few countries that have low Unemployment Rate and that puts enormous burden on a relatively few countries and that starts generating resentment of unfair burden sharing. So the dysfunctional europe is making dysfunctional euro is making it more difficult for them to address the problems, the other problems they face. And the world more generally faces a whole set of global, economic, political, social problems, Climate Change and europe has been, you know, issues of human rights and europe has been one of the loudest voices on the right side on most of those issues and a divided europe and a europe that is trying to solve the totally unnecessary problem of the single currency is not going to be able to as forceful in addressing these global issues. So with that, let me just open it up for questions. And ive got a q a mic. Just raise your hand and i will come to you. I have two quick questions. One is, do you think ta ireland is being refuse to go take the back taxes otherred by am . And the second question is if hillary would have you for treasury secretary, would you accept . Let me answer the first question and i did i was on irish radio on that issue. Basically apple was cheating. It wasnt paying the taxes that it owed. This is a global problem and its another aspect of globalization that has not been working very well. But in this particular aspect of cheating ireland was a coconspirator. So what happened was very simple. Apple claimed that all the profits they made in all of their european operations were result of the activities that were occurring in ireland by a few people working in ireland and within ireland they said, actually, most of that has to do with the home office and then the European Commissioner, you know, pretending a little bit that she was shocked, she was shocked that discover that they had no employees in the home office that was the source of all the profits of all apple in all of europe. And so she just said one simple thing, you know, im just enforcing a rule, european rules, its not changing the law, all this stuff about changing the rules, when ireland joined europe, eu, it said we agree to obey by european law and one of european laws is you can give special deals. This was a special deal. They kept it secret. I will tell you why they kept it secret. They kept it secret until they did the investigation and said they you did this special deal, you have to pay 12 and a half percent, which is the tax rate already very low on the profits and we are not attacking your tax rate but if the profits were made in ireland, you have to tax they didnt say whether the profits were really there. That was cheating. It was a windfall to ireland because ireland helped cooperate in moving all the money, the claim profits to ireland. Now, the reason they kept it secret is if they had publicized this and made it available to everybody, no european country, no American Company operating in europe would have any profits in europe. And that would be a political scandal. Now, what does the secretary of treasury in the u. S. Say about that, he says, well, eventually apple was plan to go bring some of those profits back to the United States and when we bring those profits back to the United States they should be taxed in the United States. If the profits originated from activities in the United States but if they originated from prior, europe should be getting the profits. His answer he says, if they tax it, we cant tax it because its doubled tax. Theres a fundamental flaw in our tax system but the answer is a simple one, you need taxation based on the economic activity, profits generated from the activity that occurs in that jurisdiction, there are problems of figuring that out but what was clear it wasnt the home office with no employees that generate all the profits and it wasnt even ireland that generated and apple should just say, you know what, we were cheating but thats the way everybody else does it and rather than being honest they try to be shocked about what happened. A question over here. I also we wanted to say in a sense representing upper west siders, we appreciate you coming to this barns noble for those who never leave neighborhood. [laughter] so place in soho or washed, Something Like that. [laughter] i wonder, theres a laboratory of sorts for the kinds of things that youre speaking about now. I think most people would acknowledge that brexit was mostly politically driven. Can you speculate on one would expect to see economically, whether the steps, and what will have to the uk . I think the troubles in the euro zone did contribute to brexit because if you were on one side of the channel looking across to europe, you saw two things going on, you saw a dysfunctional europe and you saw in particular germany dominating everybody else, kind of in euro leader, just spain 20 unemployment and the European Commission said your deficits are still too high, you need to have another dose of austerity. Now, in terms of economically theres a lot of uncertainty going forward. A lot of people thought it was going to be calamity overnight, that has proven to be wrong. It still may be bad going forward. There are a lot of companies who said we wont invest given the uncertainty, but the analogy that i think may help a little bit canada and the United States have good economic relations, we both prosper pretty well. Theres canadians here. And i think most can canadians thing they do well without sharing a common currency with the United States and part of the single parkt and theres free flow of goods, we dont have free throw of people but if you have relatively easy. But i dont think on either side the strong views that our two economies would do a lot better if we formed a single economic unit and that sort of gives you, yeah, there maybe some advantages and some disadvantages. Im not as pessimistic as the a lot of. I think the real implication is political. The worry is it begins the process of european disintegration and there was this niew. Bring things closer together and thats one of the reasons why people are afraid of letting two of the europeo, but one points that i argue is that in fact, if you want to save the european project, you probably should let the euro go. Im from europe. I wonder why you focus on the dysfunction of the euro, there was no political will to create a system supporting the european integration economic integration. So i would rather say that europe was dysfunctioning and not euro and what would have happened if we have not had the euro and what would have happened with the small economy . It would have been more disastrous after the lehman scandal here and so whats whats your reaction on that and second on the brexit, i think its good that they leave because why did have Financial Sector in new york who is running the dollar and the financial strength of the United States while london is the same function in europe but they didnt move to the euro so why should they not had stayed in the euro. So the first question is a really important one because when we talk about describe what happens, the economists always say what would have happened otherwise, the question here is in effect, if they hadnt had the europe would things have been better or worse and the argument in the book is very clear. Things would have been better. The euro has really made things worse and in the book, would i argue is that the euro actually created some of the imbalances that led to the crisis in europe in the first place so that, for instance, one of the in combination with some of the ideology that was prevalent at the time and the market failures that are pervasive. So for instance, when they formed the euro, a lot of people in the Financial Markets thought they had taken away or had taken away Exchange Rate risk, the risk of relative price of different currencies, but they hadnt taken away other kind of commercial sovereign risks but they didnt, you know, markets you cant say how could they think that, well, markets are really stupid as we know and so what happened is money flowed in to spain, and to portugal and to greece and to ireland, created real estate bubbles, all kind of problems, the euro facilitated that and that the euro facilitated creating the crisis that have been so difficult to deal with. You should really be worried. There were building more homes in spain than the rest of europe put together and clearly something was odd. Who do you think we are to be smarter than the market . And the euro in a Single Market had made it easy from all the money to germany to flow south of the border into and you know where the greek bailout went to, spanish and british banks. Money that went up and went down again. It was a charade in that sense. I feel very strongly that the euro facilitated creating the imbalances that led to the crisis and has made it more difficult for the countries to respond. Now, there are a few smaller countries where the balance of cost and benefits maybe somewhat different but overall for the euro zone as a whole, you can see how badly they been formed and the countries of member zone and countries in europe that are not a member of the euro zone and you see very clearly the countries that were not members of the euro zone have done better than the countries that are members of the euro zone. Yes, clearly the boogie man here is the germans and i am not going say that. We dont have to blame them for everything. [laughter] i wonder about the german experiment before the euro which was the integration to have east and the west and as i remember it under those circumstances, the germans basically raised the financial level of the east from the money from the west which would be a different kind of model, historical model for what could have happened in europe and a, do you think thats true and b, why do you think theyve ignored that model which is more recent andriy vert it to kind of historical paranoia of hitler. We have made our share and now, you know, so a solidarity. A solidarity with the rest of germany but not the kind of economic solidarity with the rest of europe. The designers of the euro, if their motivation is more political than economic as you suggested, could we look at the euro as a lathe day marshal plan, an attempt to control by Financial Markets by banks to extend their control, marshal plan on the surface is always great stuff but the real purpose of the Marshall Plan were a matter of controlling europe. No, i think that the real motive was that they thought that this would bring more prosperity and more economic integration and more political solidarity. Thats one of the things i try to point out in the book. A set of ideas of what it takes to make an economic work. It just so happened that their ideas were wrong and theyre paying a high price for it but it was that, a very simplistic set of ideas about what would make europe prosper and enable a single currency to work. It was informed by a political dynamic because they thought once they committed themselves to a single currency, the political will to make sure it works would be Strong Enough for them to do the next stages in the project. They would realize if they didnt do it, there would be severe consequences. That would be the engine that would make a series of reforms and that would then be part of the process of generating Stronger Economic and political integration that. Political theory didnt work out just like the economic theory didnt work out. You suggested what is to be done, how how would Something Like dispensing welfare, providing for the worst off. We dont know any way, any mechanisms by which this is done anding in like solidarity but theres not enough for governance grounding. At various times there have been ideas like a european unemployment fund, funded out of common money or a european wide fund for Small Businesses and recognizing what i described before that in the crisis countries lending has collapsed because the banks have had to contract, so they recognize there are things along that prosperity but after talking about it, they havent been able to do that so far. Currency valuations have never worked. Im in favor in many cases. I know, thats why im bringing it up. If that was the case argentina and brazil would be the richest countries in the world and obviously theyre not. Is that the end of the question . Thats my first question. Okay. The issue is the following that in some countries when you devalue, when you import a lot of goods, your price level goes up and the effect of the value gets eroded by inflation so you dont get real devaluation, you get nomna devaluation. When asked what happened you mentioned argentina, in 2002 after their crisis, before they had paid the value with argentina peso to the u. S. Dollar and unemployment is 25 . They devalued an defaulted and the result of it was that they had the fastest economic growth, almost ever. They became the second Fastest Growing country in the world after china from then into the Global Financial crisis of 2008. So to me that is a wonderful example of devaluation working. There are other cases where it hasnt worked for exactly the reason i have said before. My second point is i my second point is i dont believe generally speaking there is such a thing of market failures. What i do believe is that the politicians make promises and they muck up the markets. Well, the i dont know what you call the 2008 crisis where the banks, you know, had lent money to people who they preyed on poor people and they lent on money to people who couldnt repay. That was clearly a failure of markets and and when economists use market failure, they use it in a more generic way, not just the most obvious failure like our banking failure, they use it whenever they say adam smith talked about how markets lead as if invisible hand of wellbeing of society and really our belief in that, adam smiths ideas thats the police chief of belief of market economy. Theres a large body of work that shows that often that is not true. Whenever theres imperfect information, whenever theres imperfect competition, imperfect risk markets, almost always thats not true. So what thats why theres a whole set of why government has to take certain actions. No government has ever failed on the scale of our Financial Markets. Just keep that in mind. The story that youre telling seems to be about policies that did not perform the way that they were advertised as performing. So the question is what needs to happen for for politicians to not to be able to enact policies that dont behave the way that they say they are. That is that everybody understands what a policy will do if enacted . Well, first thing i do want to comment, i should one of the consequences of these policies is theres not only a greater disparity between rich and poor countries in europe but greater inequality in most of the countries in europe. It had a disastrous effect on poverty and the numbers in countries like greece and spain are just a disaster, spain was oneover the countries where inequality was coming down before the crisis. In some ways a Success Story and now thats not true. So these policies have very large distribution consequences. There is no easy way to prevent this kind these kinds of huge mistakes other than what i hope is one of the reasons i wrote the book, which is that, you know, it was based on some politician having some misguided idea about economics and it was not it was always a topdown agenda. That was one of the problems of the europe. Whenever they put it to the vote, the people voted against it. It was a topdown agenda and not enough public discussion of the underlying economic ideas and i think one of the reasons i wrote the book is that i hope that there will be more discussion of the basic ideas and part of the basic idea is this belief that markets work on their own and that all you needed to do was to make sure inflation was low and people had deficits countries had deficits low and the market will take care of the rest. And this is a tremendous testimony. The euro is tremendous testimony that the fact that those simplistic ideas are not only wrong but theyre really, really dangerous. What will happen if it collapses, there is a party that will do very well if it collapses. It wants to have a referendum. If polls say it is in a position to win. And and that is a run on the economy that will lead to the end of the euro. What will have to happen, a country that is proeuro will face that kind of crisis almost surely. It will impose capital controls and banking controls. Those were a bad idea, people thought. Today even the imf adore the idea of capital control. We know a lot more about how to impose those in the way that are least disturbing. Not 0 disturbance. People have a lot of experience with those kind of controls. That is what will happen. You are worried, get your money out now. I was intrigued by one idea in your book about exports broken. Will the National Government saturate between export and import to create something . How will that create supply and demand of services . I thought that was an interesting idea. One of the problems, 35 years ago they opened up Capital Markets very freely. The idea was capital flows would help stabilize the economy. What we learned in the last 35 years is that is not true. They are destabilizing and countries wind up with large trade deficits, there is a large trade surplus, countries in Southern Europe have trade deficits. One idea to these global imbalances, one of the things people worry about before the 2008 crisis, disorderly unwinding of trade balances, you have to borrow, finance and increase debt to be unsustainable, one way of dealing with that was this idea whenever you export you get a trade which gives you the import, the same value but it is createable. If somebody wants to import they have to buy a trade shed and you have free market for these trade sheds. And supplies thing supplying trade shifts and what will happen . Equal supply, when will the medieval supply, supply imports and that is an automatic way of celebrating the trade account as we call it, to make sure there is not excessive no more than 20 trade deficit or more than this surplus. You dont need an exact balance. You dont want more than a 20 deficit for 20 surplus, what it is is a marketbased way of ensuring you dont have excessive trade deficits or surpluses. It is not a government thing that is valuable or that valuable which has been the problem with the system of restricting imports, the government winds up having to allocate these, they are very complicated. And the way it works is that will ensure imports equal export, so this is an idea that Warren Buffett had. It is not a leftwing idea. People looked, conservatives, people in left of center have supported this kind of idea for adjusting our trade account. Final comments . A good question, always on the upper west side. [applause] thank you, ladies and gentlemen. Please remain seated. We have the first two stand up this way. You can have a copy, if you dont, this is just for crowd control. Line up right this way. Thank you so much. You are watching booktv on cspan2, television for serious readers would hear the look at what is on prime time tonight. We kick off the evening at 7 20 p. M. Eastern. That all happens tonight on cspan2s booktv. After the spread of the cotton gin in the 1790s the cotton trade exploded. The us exported half 1 Million Pounds of cotton 1800, exporting 2 billion pounds by 1860. Cotton represented 60 of what the us was exporting to the world and 40 going out of new york so it was a huge deal was the next biggest commodity was tobacco, less than 10 so cotton threads tied new york and the south together in a long codependent relationship. The plantation south and new york city grew up together. The explosive growth of the cotton plantation straight across the south, the deep south was largely funded by new york banks because that is where the banks were. New york made merchants supply the planters with everything from pianos and plowshares to the clothes they put on their slaves. New york not only shifted a significant portion of cotton but new york harbor was where those ships came back filled with European Gear and that made new york important to washington dc or Washington City as people called it back then. It had a big impact on the federal government because there were large portions of revenue from the Customs House in new york harbor. There was a period the federal budget comes from the Customs House in new york city. It wasnt just bankers and shipping magnets who profited in new york city, thousands of workers were directly or indirectly profiting from cotton. Dockworkers obviously but also people in the shops, people who worked in the motels and restaurants and brothels, lots of southerners and plantation owners 3 new york city as their home away from home in summer months and in various ways everyone was dependent on maintaining the cotton trade, they saw in their best interest to maintain the plantation system and slavery. New york workers fear of the 404 Million People enslaved in the south were suddenly set free they would take jobs away. The big iron he is the 12,000 free blacks in new york city, the exact opposite was going on. Whites took their jobs, threw them out of the unions, so there wasnt going to be a problem. Because of cotton and those guys, Enormous Economic tie to the cotton south, the majority of new yorkers, not all new yorkers but majority of new yorkers were prosouth and antiabolition. They were what people called copper, northerners sympathetic to the south. It is worth mentioning new york was a major northern hub of the Transatlantic Slave Trade, a direct sector on slavery because slaves are not being brought into the United States by that point but there was a Huge International Transatlantic Slave Trade, ships out of new york picking people up in africa and taking them to be slaves in cuba and brazil, Congress Declared this piracy which is a hanging offense as early as 1820 and everyone turned a blind eye and it was open secret that new yorkers were investing in slave ships and the profits were enormous. Many slave ships were fitted out in new york harbor and sailed out of new york harbor under the eyes of the harbormasters. If they were caught, the slave ships captains which didnt happen very often, the u. S. Navy with a dozen ships, the atlantic is pretty big, if a slave ship captain got caught which didnt happen very often and brought back to new york for trial, it was very, very rare for him to get convicted. More than half the time they never made it to the trial, just allowed them to go to jail, judges injuries were notoriously lenient with them. If they were convicted and sentenced to anything it would be two or four months in jail. In fact a long history of new yorks involvement in the Transatlantic Slave Trade only one slave ship captain was ever hanged for it and that was because he had the bad luck to get caught after lincoln was in the white house and the civil war started so the politics had shifted. You can watch this and other programs online at booktv. Org. Booktv tapes hundreds of other programs throughout the country all year long. Here is a look at some of the events we are covering this week that on monday Northwestern University professors Robert Gordon will debate the future of the us economy in the Chicago Council on global affairs. Tuesday in austin, texas, military historian James Hornfisher will examine Us Operations in the pacific during world war ii focusing on the invasion of the Mariana Islands in june 1944. On wednesday at the New York Public Library in manhattan, Jonathan Rhodes will weigh in on issues he argues cities will face in the future including how they insecurity and income any quality, also that evening at word bookstore in brooklyn, richard snows recounting of the creation of the union armys iron worship, the monitor and how it changed naval warfare. Thursday at the Carnegie Library of the pittsburgh, s l christ, Senior Writer of Sports Illustrated will look at the demise of the Steel Industry in aliquippa, pennsylvania through the lens of high school football. Next saturday and sunday we will be live from the texas book festival in austin with author talks including former attorney general alberto gonzales, orange is the new black actress diane guerrero, former secret Service Agent glenn hill and much more. That is a look at other programs booktv is covering this week. Many events open to the public. William domnarski has been lawyer and legal rights for 30 years and out of three previous books and the nature of practicing law, jd from the university of Connecticut School of law, teaching english from university of california riverside. Richard posner, united w senior lecturer at the university of chicago law school, joining conversation tonight by tom