 I'm Larry Michele, I'm the president of the Economic Policy Institute. I want to welcome all those here, as well as those over the web who are watching us. We're very privileged today to have Paul Krugman come talk about his new book. The first thing I'm going to do is go over sort of the choreography of the event, which is, first Paul's going to talk, then there's going to be some questions and answers to be able to ask a question. You have to fill out the cards that were on the chairs. And then our very able staff will at some point collect the cards. And our very able acting research director, Josh Bivens, will then, after Paul is done, ask the questions from the cards. After the Q&A, we will have book signing. There's opportunities for those who are here to buy the book. Those who are on the web, click on some bookstore that you can buy the book at. Have it be a union bookstore. Don't go to Amazon. Okay, we're very glad to have Paul, just to say a minute. One of the things obviously that led him to write this book is a great passion about the harm of the jobs crisis. This is a passion that we at EPI very much have shared with Paul. We were recommending stimulus in September 2007, which you might note is actually three months before the recession, trying to get the House of Representatives to in fact start thinking about what to do because we already knew that the unemployment rate was rising and what was coming. This, we've treated it as he does as a 10 alarm fire. That means you do everything you can to address it. It is priority number one in economics. It is something that we have to address and we can't let go. It's also true that the unemployment rate now is the unemployment rate that African Americans have in the best of times. So what that means is that even when we get the national unemployment rate down, we shouldn't forget that there's going to be groups of people that have unemployment that is still exceedingly high and we need policies that address both lowering overall unemployment but that also gets more equity in employment. Just to say something about Paul, other than this shared passion, we really admire the way he never lets go with this issue. As an enthusiastic reader of everything Paul writes, it's always there. We appreciate that he names names. He's got an edge. We think of ourselves as a think tank that does great research, but is willing to have a bit of an edge. We appreciate that he's both analytical, passionate, and a great writer, and without further ado, Paul Krugman. Well, I figure out this technology which is really only works properly for teenagers, but okay. So let me say just what a privilege it is to be here and you know, EPI has been, it's always been doing great work, but again, in this crisis, it's one of the great sources of light and hope and hammering on the facts and good people. This is the best place I think I could be to at least start trying to get these ideas across in Washington. So, the question is why this book? Why have a book on the situation right now? And part of the answer is that it is, as Tharnes says, ten alarm fires, the magnitude of the disaster tends to get forgotten. We're asking, you know, is the unemployment report a little bit better, a little bit worse than we expected this month, but the ongoing disaster is huge. So Pew just came out this morning with their latest update on long term, on very long term unemployment, more than a year. 3.9 million Americans have been out of work for more than a year. That's not counting the people who are driven out of the labor force. That's a human disaster, it's corrosive, not just for the present, but for the future. A lot of those people, if this goes on, are never going to be back in the labor force. This is going to do enormous damage to our nation. And it's not a question of, will we have a double-dip recession? I don't know, doesn't matter. The point is, the damage continues right now. Young people, so I wrote about that for Monday, the statistics tell the tale, but you have to think of what's behind it. This is a terrible, terrible environment for young people trying to start their working lives. And we know from evidence of past slumps, which were nothing like as severe as this, but that will scar their careers for their entire lives. And it's going to, again, that also hurts us as a nation in the long term. Today's young person trying to get started is tomorrow's part of the tax base. So this is all going to be bad for us in the long run. Of course, I write about this all the time, so why a book? And part of the answer is that the way I, my usual stuff, which is writing columns, writing blog posts, I think it's great. I think we actually have better economic discourse than we've ever had because of the availability of these new media and because we have good people writing about these things. But there is a feeling I have a lot of time when doing this. I am playing a kind of game of whack-a-mole that every time I make one argument, somebody will raise an objection, which I have already answered. But it wasn't a different article. There is a problem of length limit, problem of anyway, even if blog posts are a great communications medium. But nobody reads or remembers them all. And so I think it was important to put the argument all in one place. And in some doing, I think I learned some things that make it a stronger argument. You can ask the question, does it matter? Aren't we so deadlocked politically that nothing matters? Say that the, yes, there's a lot of political. It's a horrible political situation too. The, if you want to ask what is the structural problem with the US economy? I'd say it's not a structural problem with the economy. It's a structural problem with our politics. And particularly the fact that we have one party that has gone completely off the deep end and is not interested at all in helping to run this country unless they get to run it all. But there is a lot of genuine confusion out there as well. And since we're at the naming names, you probably saw, or many of you may have seen, I went on this week, it was shown Sunday, though we actually taped it Friday. And I said, actually on set, as we walked off, I said we're doomed. And the reason was there you had a group of people who are not, one has been a Republican candidate, but it wasn't all just pure politics. And it was like the punchline for some kind of joke, right? Carly Fiorina thinks it's all about corporate tax rates. David Walker thinks it's all about entitlements. Eric Schmidt thinks it's all about the shortage of certain very narrow specialties of high skilled workers. Everybody had, basically everybody except Jennifer Granholm and me had their own thing. And it's not, if that's still going on, then we have a discussion that really needs to be improved. Because this is not, in fact, a crisis where you have a laundry list of things that are going wrong. This is a problem of there is not enough demand in this economy. Just plain, there is not enough demand, there's not enough spending. Of course, there are structural problems, there are always structural problems. There's always mismatch. That's nothing different. Actually, we even have, again, one of those things, I didn't have a chance to get in the book, but San Francisco Fed just did a study of mismatch in the labor market. And said, yes, there's significant mismatch between worker skills and employer needs, but there always is. And there's no hint in their data that it's gotten any worse. This is a problem of a lack of demand. And it is a problem that is not, in fact, hard to fix, except for the combination of politics and just intellectual confusion. So I use the word depression in the title of the book, advisedly. Partly, of course, just to get people's attention, which is important. You've got to do this. But also, because I think that is the right word to use. Recession has a technical meaning. It basically means a period when everything's going down. In many countries, it's defined as two quarters of GDP shrinkage, but the US is defined as whatever the Business Cycle Dating Committee says it is. But in practice, that means a period when stuff is going down. A depression is a period when stuff is down for an extended period. So the Great Depression, it's well, at 1929 to 1940, that includes two recessions and two recoveries. There were periods of up, there were actually periods of fairly fast growth between 33 and 37, but the fact of the matter is there was still mass unemployment all the way through. It was an economy that was not doing what it should have been doing, that was inflicting huge human suffering even when things were improving. And that's our situation right now. It's not as severe as the Great Depression. That's not a great standard, right? Not as bad as the Great Depression. It's not exactly a slogan on which you want to run, and it's plenty bad. In fact, for what it's worth, to the extent that we can retrocast and produce numbers comparable to those up to today, looks like the unemployment rate in modern standards in 1937 was about 9% by current standards. So we're actually not that much better, not significantly better than some parts of the Great Depression right now. The other thing about depressions is that the rules are very different. And the rules are very different largely because Uncle Ben can't easily change monetary policy. He can with difficulty do stuff, and I gave him a good hard kick for his own good over the weekend. But the inability to cut interest rates any further, short term interest rates, which are the ones that the Fed directly controls, changes everything. It means that a lot of things that would normally be at least arguably good things to do no longer become good things to do. So it becomes a world, I wrote this early on, and it's still true. A world in which virtue is vice and prudence is folly. In which doing things that sound virtuous are actually deeply destructive. And we've been doing those things that may sound good, but are actually deeply destructive. So whatever, when the Obama stimulus plan was announced. There's a lot of interesting, I think, willful rewriting of history. Read many, many articles and you'll see at least the implicit claim that all people like Larry or me were saying it would work. No, we weren't. We were, I was very, certainly publicly, very publicly tearing my hair out. Because it was clear that it was way inadequate. Just from the numbers that were available even in January of 2009. And since early 2010, what we've actually done in this country and in Europe in different ways, but with actually not such different numbers. When all is said and done, we've actually done the reverse of stimulus. We've been doing austerity. We've had unprecedented fall in public employment. Unprecedented cutback in purchases of goods and services. Some transfer programs have expanded because so many people need them. So yes, we're spending more on food stamps and unemployment insurance. But that's not, that's only because we have so many people in desperation one way or another. And it's been all around destructive. It's not even positive on the fiscal side. You say, well, at least we're reducing the deficit, are we? We're shrinking the economy, it's making the budget revenues lower. We probably are getting some short run reduction in the deficit numbers, though much less than one for one. But we're also damaging the future. Those long-term unemployed, many of whom will never re-enter the labor force. Those young people who never get properly started on those careers, that's gonna hurt our future. And it's even in purely fiscal terms, that's gonna hurt our prospects for servicing the debt, which might have seemed like an outlandish position early on, but is at this point, it's pretty clear from the numbers. And now that he's a free man, even Larry Summers is saying that, along with Brad DeLong and a really excellent paper just recently. A lot of really bad, a lot of really bad economic advice and thinking going on, which needs to be shunned down. Part of it is this structural story. People keep on, there's kind of this insistence that it must be the case. That the unemployment is the result of deep underlying structural factors. There is no evidence for that. It's not too hard, actually Dean Baker, another comrade in arms on this stuff, had a fun blog post where he quoted the Washington Post about businesses saying that there are shortages of skilled labor even in despite high unemployment. And only at the end does he reveal it's actually, it's a story from the Washington Post in 1935. And I actually found similar things from other sources. People always say that at times of depression, but it's not true. Yes, there are mismatches, as I said, there are always mismatches between workers, but no more than usual, that's not what's going on here. Other bad economics, the turn to austerity which took place both intellectually and as a policy matter, and on both sides of the Atlantic, beginning in early 2010, was justified with amazing stuff. One important thing to understand all of this is that people like me are not preaching some outlandish radical economic theory. We're actually saying take your textbook seriously, take what we know, take what we learn from economics from 80 years of experience and apply it to the situation. It's just we don't often find ourselves in depression conditions, but we do have a pretty good guide to what works and what doesn't. But in the face of this, a lot of policy makers, a lot of pundits, chose to pull out of thin air some concepts that would justify doing the opposite of what actually more or less standard economists would say. So the notion that cutting spending which depresses the economy doesn't actually press the economy because somehow it improves confidence and leads to more spending. The notion that even though the numbers say that debt is not actually anything close to a pressing issue for the United States, that we can quite easily service the debt that we have and particularly we can quite easily service the debt that we're running up right now, not to say it's a good thing, but it's not a crisis issue, but inventing the notion that despite that logic, the markets are going to attack us any day now and you should believe that because the person saying it says it even though the markets don't seem to actually think so and are willing to lend the US government money long-term at very low interest rates. So I think my contribution to the English language, which will probably be the enduring legacy of all the stuff I've been doing, is I've introduced the character of the confidence fairy. People believing that you can slash spending, depress the economy, but it won't really be depressing because the confidence fairy will come in and, okay, and we've had a test. So you never get to do totally clean experiments in economics. It would be unethical to do totally clean experiments in economics. It would violate the Princeton research guidelines. But the human experimentation, there's a line and all of that about that. But we've conducted what is a damn good approximation to a controlled experiment. We didn't get to do a controlled experiment in stimulus because it was never enough, basically it was never enough even to offset the cutbacks at the state and local level. We've had one hell of an experiment in austerity and the results are in. If you do a scatter plot of the size of austerity measures in European countries versus the change in GDP, it is a downward-sloping line. It is, austerity has been contractionary with a vengeance. And it has been, in fact, the coefficient is 1.3. I mean, it's actually, it's a pretty tight relationship. And so we've just seen that the confidence very continues to not make an appearance. We've just seen a confirmation of a particular view of the way the economy works, which happens to be the view that those of us who have been pleading for more, not less government spending have held all along. There are other things we should be doing. As I said, I've been, I guess one thing just to say is that this is not something that came totally out of the blue. They, some of us, a long time back, almost 15 years ago, looked at what was happening in Japan and saw that as a cautionary tale. It did seem to say that you can, in fact, get into an economic trap where it's not so easy. You can't just rely on the central bank to get you out. And we saw that as a potential future for the United States. There was actually a little cluster at Princeton. Me, Mike Woodford, Lars Fenson, and Ben Bernanke all worried about this. And one of the possible actions was monetary policy. This is a time when adventurous, unconventional monetary policy can help. You wouldn't want to rely on it entirely, but it certainly can help. So as you know, I've been reminding Chairman Bernanke of what Professor Bernanke used to say. And Professor Bernanke was right. I want to say one last thing, and then throw it open. Why is this book different from any other book? There have been a lot of books on the crisis and a lot of really excellent books on the crisis. The great bulk of them have been backward looking. They've been, how did this happen? And either how did it happen in the bubble? What went down during the bubble? Or what did the Obama administration do? What were the fumbles? Whatever. And that's all worthy stuff. But there's also, there's two problems with that. One is that there is, and this is something I've noticed long before even we got to this, there is this tendency to focus, it's almost a prurient interest thing, to focus on the excesses of the boom. People love to dwell on the excesses of the boom, on the bad lending, on the irrational exuberance. They love to talk about all the things that foolish people did during the good years. Which is fine, but you should be focusing a lot on what happens afterwards and what you can do about it, and that tends to get shot down. So one of the John Maynard Keynes remains our best guide to lots of what he wrote applies verbatim to the situation we're in. And one of his great things was what he decided not to discuss in his theory. Not, or except briefly in a chapter near the end of his book. Which was he didn't try to talk about the business cycle. He didn't try to talk about why booms happen and why they're followed by busts. He said, okay, you've had the bust. You are now in a depression. What does it work and what can you do about it? And that is the most urgent question. You don't want to turn it into a morality play and focus on the excesses and get all obsessed with the crazy things people did. And then by implication suggest that the suffering that follows is right and appropriate. It isn't. It's not appropriate because there's no good reason to waste large amounts of your productive capital. Just of your productive capacity just because there were some excesses in the past. And it's not right because by and large the people who are suffering are not the people who engaged in the excesses to begin with. So this is, you really need to focus on that. And then the question now is not, I mean, it's interesting to ask how we got here. But the question is what do we do now? And this book, I need to say one more thing. One, and then I'll throw it up. One insight that really came to me in trying to put this book together. Is that there's a lot of water under the bridge since we were all desperately pleading for a better stimulus program back when the Obama administration was just moving in. And one of the things that happened is that we've had three years of policy moving in the wrong direction. Instead of stimulus, we've actually had austerity. And that means that actually the task of getting something moving now is much easier than it was then. We don't need to talk about shovel ready projects. We just need to talk about reversing that austerity that's taking place. We need to talk about rehiring those school teachers and resuming the road repair programs that have very visibly been neglected. Certainly in my state, I think just about every place else. We can, so I'd actually do some math there. Just by getting back to normal levels of state and local employment relative to population, you can get 1.3 million workers. You can add 1.3 million people to the employment right away. Just by getting back to normal levels of state and local spending on real goods and services, you can get 300 billion a year in aid to the economy. That's enough almost certainly to get us below 7% unemployment, to get us into a much, much better economic frame. So it's technically not hard. It's politically hard, no question about that. And there's an intellectual task because a lot of people have got their minds wrapped around this thing entirely the wrong way. But that's why we write books. And with that, I'll throw it open. So if people could write down questions they had on the cards on the seat and start passing them forward, and we'll have some EPI staff collect them from you at the front, if I could have some staff. And then while that happens, I will go ahead and ask a couple questions. So my first one is going to be completely countered to the spirit at the end of your talk and purely backward looking and assigning blame and casting dispersion. I'm all for that too. I mean, it's just a secondary priority, but aspersions are enjoyable. But it's mostly spurred by there have been a couple articles that have popped up and they seem to pop up about once a year and they talk about how good TARP was. And TARP was unpopular, but that's only because the public are kind of grubby populace and don't understand the issue. And so I'm wondering, you know, given that a lot of the horror shows scenarios that TARP was supposed to stop was actually stopped by the Fed. Given that TARP is wildly unpopular and gotten merged with the stimulus in people's mind and made it that much harder to do more support for the economy. I mean, marginal cost versus benefit of TARP? I don't think you dared, given the way the world was in the fall of 2008, I don't think you dared not have something like TARP. I mean, we now know that maybe it wasn't as crucial as it seems, but, you know, there was a backstopping that went on. So I don't think in conscience you could have actually chosen not to do that. It was something like that was necessary. And yeah, it's been merged, but that's partly so it's been merged in the public mind with the stimulus, which is a really bad thing. But that I think could have been mitigated in other ways. What I wanted, argued for at great length in all the right places, was that TARP, to have TARP, but have more strings. That there, I still believe you could have found a way to put at least one major bank into receivership as a condition for aid. It was tricky, but lots of tricky things have happened, and I think it could have been done. And it would have done that, it would serve two purposes. One, it would have served to encourage the others, and the other is that it would have done a lot to diffuse the public perception that this was all just a big giveaway to the bankers. So I would have done TARP with strings, but I would have done TARP, but it would have been a much tougher deal for the people on the receiving end than what we actually got. Okay, so totally random picking here. Looks like a game of solitaire, okay. That's right. So it's part of the problem of the recession capital allocation by our financial markets. Money extracted by LBOs from the real economy may not go back to the real economy, but instead stays on Wall Street and is invested in financial products, etc. I think that would also be part of the recession as well as maybe the lead up to the recession as well. I'm not sure, I mean I think there's, I'm not sure that that is actually the story right now. I think there was clearly some misallocation of capital of savings, a lot of misallocation. I mean we had all this wonderful structure of modern sophisticated finance that was supposed to make it possible to do all kinds of great channelling of money into productive channels and instead it went to pay for condos in Miami. That's kind of not what we had in mind and so that's certainly part of the story. I don't think it's part of the story of why we're in this right now. I think the, if you actually quite ask why we were, why we don't recover, you would point more to the overhang of household debt that was left behind by the bubble. Now the bubble was certainly facilitated by all those financial wheeling and dealing which concealed the risks and so on, but it probably had multiple causes and that's the story right now. Actually this is another thing I want to say. We also focus a lot too much in our discussions on the financial sector's problems. And it's true that the heat of the crisis was very much about a breakdown of the financial system. And there was a period from September 15th, 2008 till about late March of 2009 when financial markets were really, really disrupted. I've been calling it the oh god we're all going to die period. And it was a, but that's long since gone and yet we don't have a strong recovery. It's just telling you that the underlying problem is much more about things like household debt than it is about financial sector. The financial sector went bluey, went crazy, but it was pretty much bailed out. And the fact that marriage is debt was not enough. So how do you see the link between rising inequality that preceded both the Great Depression and the Great Recession? Is there a mechanical economic link or are they both a function of something else like financial deregulation? Do they just make policy that much harder because of polarization? How do you see those three, those things going together? Yeah, okay, that's a, so this is, this is, you know, when I used to give occasional public talks about inequality before the crisis, they'd always be, and I say, you know, we've reached levels of inequality not seen since 1929. And there will always be some of the, and say, oh, 1929, and I kind of brushed them off. And what do you know? Turns out that it was the precursor to another depression. The channels are not that, are not as clear in the causation as I'd like to. It's not, you know, I get too deep into the weeds here, but the simple stories are not that easy to tell. We were not, we were not obviously suffering from underconsumption. We were suffering arguably from lower income households piling up too much debt because of the problems caused by inequality. We were, inequality was partly caused, a significant, a quite significant part of the top end was about financial deregulation. And conversely, the pressures from the empowered elite probably reinforced financial deregulation. So you ask the question, you know, financial deregulation was actually a series of disasters almost from day one, right? Savings and loan crisis started at even, to some extent, the third world debt crisis of the 80s, all represented early disasters of deregulation. So why did we keep on doing it? And the answer has to be at least in part that they may have been disasters for the economy at large, but not for certain people. But I think the main story now, the main thing about inequality now is that it is, in a couple of ways, contributing to our inability to deal with this. Political polarization is a large part of it. And the degradation of economic discussion. I mean, if we, if we'd had this crisis in 1971, when Richard Nixon had just declared, I am now a Keynesian, I think we would have responded pretty effectively. We would have had quite a lot of bipartisanship and saying we need to deal with this. We would have had quite a lot of intellectual agreement on what needed to be done. So what happened to all of that? Well, the bipartisanship, the possibility of it went away with political polarization, which is closely, you know, mathematically, to inequality. That's a, that's a, as good a relationship as you're going to find anywhere in social science. And then the, if you look at what's happened to our economic discussion, you found that what was a sensible consensus about the way the economy worked, a set of views that actually has performed very well in this crisis. If you took, sorry, economic, but if you had an ISLM liquidity trap view of the way the world works, you've been calling it almost entirely right since this crisis began. And yet that was rejected and you have, there's stuff that goes on inside the economics profession, but even more broadly, you have a whole lot of crank and charlatan doctrines, to quote Greg Mancuk from his younger days, which have now become the more or less the official line of half the political spectrum. What do we know about these crank doctrines? They were always the doctrines that, that certain billionaires liked. And what, what you've basically had is that, that the, that, that bad economics that appealed to the, to the self-interest and, and maybe the, the vanity of, of a few very rich people has now become mainstreamed because those very rich people are richer than ever. And they've essentially bought control of a large part of the political process. Does expansionary monetary policy fuel asset bubbles like the housing crisis? What does that say for the mix of monetary and fiscal policy? And what signs would you look for that signal the limits of expanding US public debt to fight the recession? Wow. Okay. So expansionary, do, do we think that, that the Fed caused the housing bubble and thereby that, that too low interest rates led to, to this disaster? Couple of reasons to think not. So I, I, I've never bought that story. I'm not, you know, totally hardline against it, but I don't think it fits the facts. The, you could do a number of different ways, but, but low interest rates don't, don't mean that you have to have this kind of explosion of debt to levels never, never before seen or not seen since the 1920s actually. The real interest rates were lower in the 70s than they were in, in the, in the early 90s. That there, this is not, it's not clear that the, that things were, were further out of whack than normal this time. What you had this time, however, was the previous times when we had very low real interest rates were, were, when you still had effective regulation of the financial system. So I would say that, that if, if that's the, the, the, the difference, the reason we, we were vulnerable to that kind of bubble was because of deregulation. And by, by and large, you know, if you have a, an economic system that has catastrophic crises if the management of the central bank is a little bit too relaxed for a couple of years, then that's not a workable economic system. You have to have a system that is robust to, to, to the human failings of, of the monitoring managers. So that's, that would be my story. And so I also mentioned that, you know, you have these twin, in, in the build up to the crisis, the United States and Europe are basically twins, you know, basically Spain is Florida, Ireland and Nevada look identical, except unless you look out the window. And the, and the Europeans, European Central Bank was never as expansionary as the Fed. So that's clearly telling you that something else was going on. Fiscal, yeah. Look for some hint that the markets were at least marginally worried. That would be one, one way to look at it. And you can also, you can do the arithmetic, actually, you know, ask, does taking reasonable projections about real interest rates and, and the actual cost of servicing that does this look like a crushing burden? Not, not just, there's a lot of kind of personal, there's an argument, there's a line from other sorts, but the argument for personal incredulity. I can't believe that we can have debt of more than 100% of GDP without a financial crisis. Well, that's fine, but why do you believe that? Britain had debt that was more than 100% of GDP for most of the 20th century. Japan, people have been calling the imminent debt crisis in Japan since, since 2000. And have people who bet on it have, have lost their shirts again and again. It's, it's been called the trade of death, betting on, on the coming Japanese debt crisis. Last I looked, their, their 10 year rate was under 9, under 0.9%. There's a lot more resilience for a country that has its own currency, borrows in its own currency. There's a lot more resilience. So, you know, call me back when we're at 150% of GDP and, and we can talk about it. Oh, one more thing to add. Sorry, long answers to short questions. Even if you're worried, what on earth would make you think that slashing spending in the current environment is going to do you any good? All right, it's, actually, let me tell you, I did read it yesterday, which was an interesting experience. And, and someone I actually asked the question, how much would we have to cut spending to balance the budget if we were going to do it just by cutting spending? And what would the effect be on the economy if we did? So, we have, we can actually answer that reasonably well. We can, we have some notion that you use those, that European experience, to ask how much, how much actual deficit improvement do you get from, from top line austerity? Once you take into account the effect on the economy. And so, I came up with something like this, to eliminate a trillion dollar deficit, we'd probably have to cut spending by at least $1.5 trillion, because you'd be depressing revenue. That would in turn, that's 10% of GDP, that would in turn shrink the economy by about 13%, given the best estimates we've got as a multiplier. So, we would be driving unemployment up to 15% or more. We'd be putting 12 or 13 million people out of work. You know, that's, this is not, this is not a strategy, this is not going to happen. And, and when people say, oh, we really have to worry about that debt limit, you have to ask, well, why, why, even if you're worried, you're, you're, are you proposing anything that wouldn't actually make the situation worse, as far as I can tell, they aren't. What do you think about the debate about the financial transactions tax in Europe during the last couple months? Is that a hopeful sign? Should the US follow the lead? Yeah, I think it's a good, I mean, I'm not sure that a lot of what went wrong is, there is this tendency to focus on hot money, and financial transactions tax discourages that, encourages people to invest a little bit longer term. Now, hot money is not actually at the core of the crisis. I mean, the core of the crisis, the core of where we are now is actually long-term borrowing. It's, it's mortgages, not, not, not speculators moving their money back in, in over, over a millisecond. But that said, hot, hot money has clearly been a destabilizing force. Financial transactions tax is a way of raising money that is, oh, for the long term, that's probably a good thing. There is essentially no evidence that these hyper-reactive superfluid financial markets we've created over the past 30 years are doing anybody any good except for, except for a handful of traders. So for, I'm all, I'm all for it. I don't think it's going to solve a lot of problems, but it's, it's a good thing. Why aren't economists speaking out more unanimously or at least in greater consensus for, for good policies? Are they too afraid? Do they dislike controversy? Are they too removed from the real world? All of the above. Solting. No, there's a whole bunch of stuff that's going on. One, one is people, this is not, gosh, the amount, the amount, there are not many, there are not many people in my profession who would particularly enjoy getting the e-mail and the voicemail as I get in an ordinary day, right? It's just, you'd have to, for the first couple of years I was pretty, you know, I've learned to roll with it, but it's pretty shocking. It's an ugly world out there and you can understand why people are reluctant to get too engaged, especially if they want to be doing fundamental research. There's a lot of politicization. A lot of, you know, that's America today. There's so much political polarization, so much politicization that people find themselves, you know, or choose to, well, like my friend Brad DeLong says, play for team Republican. I guess there are some who play for team Democrat, but I don't think it's anything like the same thing again. The parties are not symmetric here. So people whose underlying model of the economy, as far as I can tell, is not so different from mine, find ways to side with the Republicans even when they're talking obvious nonsense. There's a structure of incentives at all levels. There's consulting, there's think tanks, there's, I've been black bull from Jackson Hole since I criticized Alan Greenspan in 2001. If you want to go to that meeting, even when they devoted one session, I'm not bitter about this because I don't care, but it's just funny. They had one devoted to new economic geography and I was not invited. That's how these things work. So it's a whole set of, and it's sad because this is where, you know, if ever there was a time when some clear declaration of basic principles would be really helpful. Now is it. Some of us talk quite a lot about how given the current way that policy is discussed, Milton Friedman would be on the left of the political debate. That tells you how far we've degenerated. So I think I'm just going to do one more and then we'll move on to book signing. Two more. You mentioned this a little bit, but just a couple more words maybe. How helpful or harmful, I think you think helpful, has sort of the rise of blogs and the internet and all that been for the quality of discourse. And how do you explain, if you can, the fact that the quality of economic argument and credential are seeming to be pretty uncorrelated these days when it comes to economics? Yeah. So the first part, I think it's been spectacular. I mean whether it's doing it good for the world, I don't know. That's always the problem here. But no, the quality, the sort of real time economic discussion that's been going on these past several years is awesomely good. I mean there are some people saying really bad, stupid things, but there always are. But the ability of people who are honestly and intelligently trying to grapple with what's going on to interact with others able to follow has been amazing. I think we're kind of living in an Athens of a cyberspatial mind or something when it comes to economics these past years. Small consolation for the enormous amount of human mystery, but it's actually been pretty good. It's not uncorrelated. My sense is that the best econobloggers, they may not always have the sterling academic credentials, but there are people who are well versed, who are sophisticated in it. But we've also had this, I wrote about it in The Times Magazine way back when, macroeconomics, the macroeconomics profession. A large part of it went seriously off the rails. And one of the virtues I think actually of this more open discussion is that it's easier to see that. There's a lot more visibility of what the actual quality of the arguments are. And you can see just how bad some of the arguments that have become professionally prominent, that have become stepping stones to promotion and tenure actually really are in practice. And I guess the last one to be forward looking like you urged at the end of your talk. What needs to happen over the next couple of years, and I guess as importantly, how can anyone who is not kind of in the political elite or even econobloggers, how can they help make that happen, if at all? Okay, so I'm not a total pessimist. I actually think that there are natural healing forces slowly working in the economy. Household debt coming down a little bit in absolute terms and more substantially relative to income. So that debt overhang is slowly being worked off. The housing, we had a great overbuilding of housing, but we built no houses basically for six years. So we're in some ways the conditions are there for recovery. And so we will probably, we will have a gradually, in the long run we will recover from this. In the long run we are all dead, but we can move it on. Only a modest improvement in policy could accelerate that. And so I can see how this could be not too bad a story over the next five years. The public, you know, think about it. Occupy Wall Street was incredibly scrappy, somewhat inchoate thing, and yet it changed the conversation enormously. So having people one way or another through demonstrations, through letter writing campaigns, basically say, hey, we don't believe what, we don't accept what this privileged circle of insiders who have been wrong about everything has to say can have a big impact. And if I'm going to say that wearing one of my hats, journalists are much more thin skinned by lawyers than you would imagine. I mean, I've got a skin like a rhinoceros now, but people, they are shocked to have letters from the public saying, why aren't you telling the truth about this? And they get upset, but their reporting also improves afterwards. So I think actually ordinary citizens can have more impact than they think on the way we discuss these things and ultimately on the kinds of policies we have. Great. Great. So here's the jail. We're going to let people line up on the aisle if you have a book and you would like Paul to sign it. Then please line up. If you don't have a book to sign, then you have to go out there and get a book. And thank you very much. Thank you for joining us over the web. Thank you for coming. Come back to www.epi.org anytime.