Rob Kall: That's not sustainable though, is it?
Paul Craig
Roberts: Of course it's -- What's not
sustainable? Bernanke's thing is not
sustainable. We got rid of the
problem. It was called "The Philips
Curves tradeoff," which results in stagflation.
The supply siders got rid of it.
Now, this doesn't mean supply side today is a solution, because in the
Reagan years, the economy wasn't offshored!
It was still here. ( laughs) And
so, if you could remove the barriers to investing and hiring, the economy would
pick up again.
And it did! In the 80s, in the
90s under Clinton (basically the continuation of Reagan's policies), we had
reasonable - twenty years. It was a lot
better than the 70s. Really, Carter was
destroyed by the -- he was a good man, he was probably one of the best we've had,
and he was destroyed by the stagflation.
He didn't have a solution. And that's
what Reagan did, he fixed that problem.
But now, you see, we've got other problem; and supply side economics or
'tax cuts,' (as a lot of people like to think of it as, which is a
gross-oversimplification), that can't deal with the labor arbitrage problem,
and with the fact that innovation and everything else follows manufacturing,
offshore. And it can't deal with the
deregulation of the financial system!
Reagan didn't repeal Glass-Steagall.
He didn't take the position limits off speculation. He didn't say "You can have whatever
debt-equity ratio you want." They didn't
let people got out and leverage an asset thirty of forty times. None of this would have been possible when I
was in the Treasury. So when you have
those kind of changes, that just completely goes far beyond the corrections
that we were able to make in the Reagan years.
It's just too big of a problem: such that the policy we used to fix the
policy of that time can't fix the much bigger problems now.
Rob Kall: Would you say that reinstating Glass-Steagall
would be a good step right now?
Paul Craig
Roberts: Oh sure, sure. Of course it would. But you see, they didn't do it, did they?
Rob Kall: No.
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