Professor Stiglitz’ Nobel credentials really shine with his current understanding of the U.S. economy in this interview with Charlie, which took place last month. They discuss many issues, including LIBOR, derivatives, European banks, too big to fail, the fiscal cliff, and his new book, The Price of Inequality. He also claims many of the 1 percent are rent seekers.
We once had dinner with him just after he was appointed President Clinton’s chief economist in 1993. He asked, “what does Wall Street want”? We replied, “lower taxes.” His reply? “You’re not going to get that!”
Money quotes from the interview,
There are two big gaps in our economy relative to, say, 2007, before crisis. One is real estate… Now real estate investment is half of what it was. No way is that going to recover soon… The second part of the problem is consumption…Before the crisis we were saving close to zero out of our disposable income. That wasn’t sustainable…but it sustained the economy… Once in awhile you hear…the consumers coming back..that’s not the basis of sustained long-term growth..with consumption weak and investment in real estate weak it’s very hard to get a robust economy…
It [housing] may be leveling off and it may even turn up a little bit, but were not going to go back to anywhere near where we were because that was a distorted economy. The bubble was a distorted economy. We might feel relaxed we have hit bottom…but that’s still not clear because there is a massive amount of foreclosures down the line.
At about 22:30 minutes he touches on one of our favorite topics of how technology is creating the structural transformation of moving the labor force from a manufacturing economy into service industries. Gotta love dismal scientists!
Click here for full interview
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