Ourselves. A sizable chunk is owed to foreigners that which if you want the candidates, did the chinese and the various Oil Exporters. How do you quantify that . What is considered u. S. Debt . Guest thats a complicated question. Most of the numbers you hear is debt owed by the u. S. Government. Theres a lot of other bad including debt and household to banks, corporations, other corporations and Financial Institutions. And so, if i were to add up all the debt all the debt, would be sort of double counting. Most of the time we talk about the night that. In terms of all private individuals and government. And that works out Something Like that the moment 25 of gdp. Thats a lot. But in another south is not as problematic at certain times. The question is not that bad and certain times they get into trouble and theyre unable to pay their debt to become insolvent. We cant just say this is all dead here and that sort of all washes out. The first time that lead to crises. Institutions and households are counted on having assets loaned money to somebody and they taken it back. Corporations or firms have borrowed money and make him pay it back and that results in a real debt crisis. Host lets talk about public debt. When you talk about 14 trillion the public that, does not include future Social Security and medicare payments, things like that . Guest no, it doesnt. If the treasuries that are out there. In general but im going to do is map out what is the train accounts within the u. S. Federal government. So it is really the house and in that of the public. Host professor, what is the treasury . Guest Treasury Security reliability of the federal government directly issued by the u. S. Treasury. Bond owed by the federal government. Host do you own treasuries . Do i own treasuries . Guest anything like that would indirectly own treasuries. The whole certain amount of government treasuries. I dont have anything. Typically we tell unless you have been in some ira invested in some other fund. Host the university of wisconsin, doesnt hold treasury . Guest i dont know. But not the university itself, the Retirement Systems at its employees are invested in. Host we say the chinese are buying our debt. But as that mean . How does that operate . Guest the chinese for a long time or exporting a lot more than they were importing and a word as a country earn proceeds in the form of dollars. Most of the goods they sell are invoiced in dollars so they can receive 10. And the question then is if they are earning a lot more from exports than they are spending on imported goods, they will have a pile exchange accumulating. You can keep in currency, but you get zero interest and practical. What you do typically is held in the form of treasuries. When you hear somebody say that while lots of treasuries or they have big dollar reserves, essentially they say that they are Holding Dollar assets mostly in the form of treasuries because treasuries are in some ways the safest path that. We havent defaulted for a long time on treasury, the u. S. Government are easy to get in and out of. So in some sense the ideal form in which to say this and thats why the chinese then our exporters like saudi arabia and kuwait would have their Foreign Exchange reserves in the form of treasuries. Host as an economist, decided that mean for the u. S. . Guest i dont think its necessarily that thing that china holds them. We capson have in the rest of the world accumulate at a rapid pace. Its accumulating debt at a rapid pace. This process is underway for a good chunk of time due to the 20,001,990s are still in doubt. One of the big earthshaking things that you dont hear about very much right now is chinas actually running down the Foreign Exchange reserves. That is sharp, sharp break with what has happened over the past 15 years. And so, we are getting in some sense what we wanted the u. S. Government as a share of gdp accumulating debt at the pace, but its also the case for the rest of the world is in finding as many treasuries as it used to. That overtime has ramifications for Interest Rates we pay. If they buy less our treasuries, relative to anything else the price of treasuries will be lower and that higher Interest Rates. Theres many going on at the same time, but that is the tendency emerging Market Countries including china and Oil Exporters tend to accumulate fewer treasuries, that will put upward pressure on Interest Rates not too has been a change in the past eight years or Interest Rate path, including u. S. Government debt is unnaturally low. Host the title of your book is lost decades. What happened in 2008 and house of ripple . Guest thats a great question. The key idea to Jeffrey Friedman i put forward is through all this welter acronyms like ceos in mortgagebacked securities and all these other terms theres basically one single underlining story that is actually repeated over and over again throughout history. That is for whatever reason government either encouraged to run their own push through increased borrowing. Sometimes it is in the belief that the times are different and we can manage the increased borrowing in an efficient way in a safe way. So Alan Greenspan sometime in the mid2007 we are all borrowing much more, but we are in essence a lot smarter than we used to be. We have computers to manage risk. We have any theories about how to tour a drink how to tour a drink you at risk how to do with brisket with derivatives that can help us manage risk. So the idea we could just borrow more is not as scary as it used to be. Our view is that its a very dangerous idea and the particularly dangerous idea because you get into trouble when we borrow a lot and the environment changes and a lot of borrowing we paid easily as them. Thats 2008. The household or with housing prices that would keep on going up. Inmates and survival. The banks loaned and they also borrowed Financial Institutions are a to evade regulations because regulations were updated with respect to how much you had to hold in reserve as capital. You had a combination of financial deregulation, a direct government intervention. You have the Government Health embarking on a spending spree after the 2001 tax cut. We cut taxes again in 2003 and then encouraged more borrowing. We had financial innovation and all these three things led to an increase in bahrain but all such is that the economy and it all worked fantastically until it didnt work. People said lets reassess the housing is going up. The securities we issued, i dont if they were quite as much as we thought or regulators thought and this whole unraveling and writers. Host the political response to two the political response to 2008, ben bernanke, henry paulson, sheila bair, president , did they get it right . Guest once the crisis unfolded, ben bernanke and the Federal Reserve acted correct way and that is no small measure in part that bernanke had to deal with the Great Depression and the fact he worked out a new interpretation of why the Great Depression was so severe now is because of the collapse of the banking sector. The view was slightly a big part share from the dominant fears associated bush had talked about the influence is good is that you really to rescue the Financial System and mixture of landing continuous and gives them a lot of credit. The Bush Administration did push through a small stimulus package in 2008 and that probably helps a bit. Really in terms of fiscal policy, and t. A. R. P. , which was the big love was incredibly important because of reassured people in the Financial Sector along with Federal Reserve action from our reassured people that the Banking System was going to continue. Tariq was a recapitalization of the Banking System. Theyve been holding lots of assets that suddenly were less valuable than i originally thought. If that happens efficiently, banks are insolvent and either shut down for a continuance on the banks like they did in japan for a while. So you need somebody to come in to provide funds and make those banks solvent. That is what the u. S. Government did. If it hadnt, and i with the Financial System would ground to a halt eventually. You wouldnt immediately, but it was stop lending. You can run an economy without a Financial System is working. Host professor chinn, recessions and economic downturns natural . Their natural because hell always have a confluence of those strike economies to push them down or up. So cycles are going to occur. At the moment you hear people saying this recovery is unnaturally long, longer than the average and so it must come to an end. My view would be some time either the Federal Reserve acts in ways that tips the economy into recession or some shark strikes the forces of opinions or some combination overseas just induces the economy to tip into negative growth pattern. The question now, one is hopeful the Federal Reserve do and will appeal to manage to slow the economy down. But is there active. The other question that the Federal Reserve precipitates movements in recessions, the combination of world events from our being there with them. Most of the time we think about the United States moving along its own path and not be driven. If this is a new case for china and china slowdown precipitate the greater slowdown which is transmitted to the u. S. Is a new consideration in the world economy. Host was the legislative response since 2008, has it been in effect is, some of the new restrictions, the new laws put in place, are they important for stabilization of economy . Guest so there are many full aspects of the legislative response. You know, the first big one was the ara, american recovery and reinvestment act implemented in 2009 analysis pics countercyclical move as the economy was going down, and there is the upward movement from the stimulus and that was one of the most important things to push the economy in the right direction. Otherwise i admired a much longer recession. Most of the effects of that have petered out, but that mitigated a lot of the pain and suffering. The other innovations or legislation passed i think of more law haitian and that is the. Frank legislation. So that is important in so far as it reduces the incentives to offer above average, that is to borrow up in large amounts, only putting in a little bit of their shareholders money and borrow up using a shortterm financial market, which those are the two sort of things that got them into trouble before. I think with implementation and the sort of International Regulations on thinking, what are called the rubric of basel threes could make the Banking System a lot more stable. There still remains a symbol to the regulation of the International System and i would say one of the things is a fix problems and the fact there is where we stand the problems. It is likely that the next we see his places that we didnt expect or didnt apply regulations. 2008 wasnt the main line bags and 1830s. The response is probably the Great Depression. Then we encountered a whole set of problems in the Financial System because individuals and firms and banks and other institutions have worked their way or the term of financial innovation that have innovated away around the regulation that with a minimal a whole set of regulations now safer for a period of time. More robust, more stable. But people are always looking around for a way of evading the regulation so they can get a higher rate of return and at the same time impose risks upon the greater Financial System. And that is the hazard. Regulators keep on having to try to keep up with those who are trying to evade regulations. Host is that the message you want people who read transport to take away . Guest that is exactly one of him. You cant just say weve had one big crisis can we fix those, now mo vaughn. Histories complete examples where individual household, firms, banks about whatever ill want to leverage up to bat the way of making higher return. They want to borrow a lot and theres a tendency because it induces in the short term a period of one of growth. Theres always incentive to say theres no trouble. Theres no problem at this point. A politician malan somebody elses lap. If im a household, you might say all get out before everything crashes. Where there is a tendency to say times are different now. We are just smarter or more nimble than we used to be. The old rules still apply. I think our main point is made to a large extent is still apply. If you borrow a lot from the blabber july, inevitably some correction will come around and a lot of pain is going to be inflict did and many times innocent bystanders. Host ledoux teaching at the university of wisconsin and what do you want your student after a semester with you believe it . Guest i teach mostly macroeconomics. To both undergraduate and their department. I teach an International Macro cores to masters level Students School of public affairs. The thing i want them to know is to read about what is going on in the world and incorporate what youve learned in class to analyze why is it that things are the way they are. Why is it that certain individuals in positions of management and Financial Firms say what they say versus what people in positions would say versus what journalism of today. In particular, to use their mind, what is being stated and argued rather than taking for granted because they look authoritative. Only that. I want them to question everything and use their minds to analyze what is going on. Host all right. Macroeconomics. Why can a small country like greece effect our giant economy in the u. S. . Guest that is an interesting question. Let me give you an analog kid there was an interesting statement made about the construction in the u. S. In 2008. People would say construction of housing only accounts for a small portion of gdp. How can it affect the rest of the economy . I think what weve learned over the past eight, nine years his interconnections matter and in particular in the case of housing, it wasnt just the actual act of building housing, but the fact people owned assets that were involved in housing warehouse says and that assets were derived or derivatives have their value on the basis. The case of greece, lots of private individuals had asset there issued by the greek government or by a greece private individuals. And so, those holdings lose value as you think they are less able to pay. There is a big ramification for peoples portfolios over substance of that wealth. That is one instance. In the case of greece, there was another set of concerns, one of which is that the hero was built on the concept that no government could default. Every government was going to embark on the path of sustainable finances. The very fact a country was in your area would get into trouble and none would have to be valid out, which is again that is put out of the charter for the eurozone. So that is of course the reassessment of what is possible. If you think about it not just greece, it signals what could happen to the other periphery countries. Portugal, italy, ireland and spain. Those other countries had problems with their finances. And its not just going out. The signal that we cant about whether those countries could pay a similar problem has to be bailed out and what that means for the sustainable idea of the single european current day. Host you were watching both tv on cspan2. We been talking with university of wisconsin professor trained to hear hes the coauthor of this book, lost decades the making of americas debt crisis and the long recovery. Thank you, professor. Guest thank you. Host radio talkshow host mark levin says this book will make you squirm and make you think. The operas radio show talk show host steve deace. Discard that is a good device to tell some inconvenient truths on trade truths, but to do it in a way that may seem more entertaining and less confrontational, that may cause people to take a look at what is happening to the culture albeit from another point of view. Host what are some inconvenient truths . Guest unless we return to our constitutional form of government in this generation or unless we see some form of moral and virtual revival like the great awakening that sort of gave her to liberty in our civilization in the first place, we might be totally in error vocally screwed. The course that we are currently on. This book is sort of humorous, although at times and battling morning. Its like a rose and that the danger ahead. Turn back now. Host without giving away the ending, how does the nefarious plot form . Guest it is a contemporary all mosh to the classic blunders. In this book, dean and general from hal was tasked with destroying the United States over a century ago. Now you so confident his clan has worked. He names names, and talks about philosophies, institutions, movements they either started, corrupt did for coop that in order to accomplish the demise of the United States as a superpower. He so confident that is written in is written about his book in vivid detail. Reconnects every. And the inability to believe that its true, to think this is paranoia from the conspiracy, this can be read as how he will contest his master that we are done in this plan actually works. Host steve deace has appeared on cspan many times. If you are listening in iowa, he recognized the voice from his radio talkshow. What prompted you to write a book . Guest i was in the shower getting ready to do pr for my last book, rules for patriot in this idea popped in my head. My best or worst idea was to go in the shower because its the only place on earth were not talking to somebody or my cell phone is not going off. I was in the shower. This idea came to me. This book is dedicated to the useful out there, especially those of you unaware we were using you all along we turned out to be the most useful of them all, lowered nefarious here that was sort of the mustard seed that the rest of this book came from. If you look throughout the history of western civilization, thereve been great examples of all to read caricatures or carrots yours to tell cultures truths that maybe if you put your own name on it that they might be offended by it. What is the greatest examples, sir thomas more utopia which was a rebuke of the monarchy and what was happening in the culture at the time. They eventually did earn him at the stake it by writing it official in the book he took yet, he escaped persecution originally got people to listen to his ideas. This is a way to get around Political Correctness and maybe some of the last about that between ideological dividing line in to objectively look at whats become of us as a people and where we are going if we dont turn back. Host ben shapiro says that steve deace new but gives a raw satirical look at the future that faces america should kidneys down the path of unchecked leftism. Mr. Steve deace, or talking to you in early march era cpac. If you were to write a story about this election season so far, what would you entitle it . What would you write . Guest instead of primary colors it would be paradigm shift. You are watching a massive paradigm shift happened in the American Public to read. What is happening is an existential revolt happening within the conservative movement and within the Republican Party. There is no question the Republican Party as has been known since George Herbert walker bush left the stage. If you look at the history of the party, one of these things is not like the other. Nixon, ford, reagan, bush, dole, mccain. The one that sticks out is reagan. The rest of the party has traditionally been this sort of right of center small progressive corporatist planning Political Party except for the era of reagan and most of the conservative races tired of it in the last drive really is what happened with romney losing in 2012 and a Massive Gains republicans have in the 2014 midterms and literally nothing to show for it was delivered. Thats why as we sit here in early march, two candidates who are dramatically different people. Donald trump is running essentially a form of white nationalism. Concerning the dixiecrat platform. They are running on conservatism. They have traditions that built america. Those two individuals who are saying that the voters are the two most outside the republican mainstream blowing away the field in her neck in neck in the delegate count at this point because they represent the biggest paradigm shift. The debate in the Republican Party the rest of the way should there even be a Republican Party and if there should be wished that instead of cronyism in corporatism, which path should i pursue . What trump is advocating, sort of a return to white nationalists, dixiecrat sort of americanism or should it be a truly conservative party trying to conserve the value to make this country exceptional in the first race. Host a radio talkshow host and author translates a nefarious plot is his most recent book. When i tune in on break and come it is usually authors sharing your releases. Watching the tv is the best television are breeders. They can have a longer conversation adult into their subject. Booktv weekends bring you out there after all there after author of the work of fascinating people. And the cspan fan. [inaudible conversations] [inaudible conversations]
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