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This was a fun discussion about the dirty money in politics.

Transcript and MP3 after the jump

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TRANSCRIPT: Barry Ritholtz on Radio Free Dylan

Episode 52 – Barry Ritholtz, CEO of FusionIQ, The Big Picture blog and author of Bailout Nation: How Greed and Easy Money Corruputed Wall and Shook the World Economy
Recently we talked to Chris Whalen who asserted that until we take a hard line on the debt ceiling, we will never be able to force the necessary restructuring on global debt, U.S. debt, banking reform, and all other underlying factors — from the healthcare system to the wars — until we actually call out the government or force a crisis on the government effectively to do with these things. To get another opinion, we talked to one of our favorite analysts on the subject, Barry Ritholtz of FusionIQ and The Big Picture blog. Take a listen to the conversation here:


DYLAN: Welcome to Episode 52 of Radio Free Dylan, joining the show today, one of my favorites on the subject of money, investment, and banking system in America, Barry Ritholtz. He’s the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.” Check it out if you haven’t already. You can also check out his blog everyday; it is sensational. It is called the Big Picture at, R-I-T-H-O-L-T-Z dot com, or you can follow him on Twitter @Ritholtz. And it’s nice to see you again.

BARRY: Good to see you.

DYLAN: Yesterday, we talked with Chris Whalen, or recently we talked to Chris Whalen who asserted that until we take a hard line on something like the debt ceiling, we will never be able to force the necessary restructuring on global debt, U.S. debt, banking reform, and all other underlying factors from the healthcare system to the wars, for that matter, until we actually call out the government or force a crisis on the government effectively to do with these things. Do you agree with that?

BARRY: Well, it’s a really interesting perspective, and, you know, every time I think, “Gee, I’m really getting too cynical,” I speak to a buddy like Chris and realize, “Wow, I’m not even remotely.” That’s a viewpoint that says, “Congress is so screwed up; Washington, DC is such a debacle.” The public likes being lied; they don’t want to make tough decisions that we need a full-blown crisis regardless of the consequences in order to get things done. And I hope he’s wrong. I understand where he’s coming from. The negative ramifications of the U.S. bumping up against its debt ceiling, not being able make payments on treasuries, on notes. You know, the U.S., it has – it’s called the exorbitant privilege, “the exorbitant privilege” of having the world’s reserve currency. There are certain obligations that go with that along with a number of benefits. We don’t make a payment; we miss something. It’s not like, “All right, I’ll pay Mastercard next month and I’ll be caught up.” You know, we already had the warning that there’s a negative outlook to the U.S. as AAA. Very desirable AAA rating is only 14 of 16 countries in the world that have that. The UK was put on a negative outlook 18 months ago and then upgraded not too long ago. The problem is their upgrade was based on austerity measures, which is now about to push Finland into recession. And that seems to be the disingenuous approach that a lot of people, not Chris, but a lot of people in DC have taken. Instead of being honest with the public, it’s a lot of scare tactics and the deficit is a great example of that.

DYLAN: The interesting thing is Chris uses the exact same point that you just used, which is the responsibility and the privilege and the reality, however you want to characterize it, of the fact that the U.S. dollar is the trading chip by which all things on the earth moved around –

BARRY: Any commodity, just everything

DYLAN: whatever it is.

BARRY: is measured against the dollar.

DYLAN: And so his argument is because we have that advantage, because our creditors, whether it’s the banks or China or anybody else or traders around the world, and I don’t mean financial traders, I mean trading partners around the world, have no alternative to the dollar as it stands right now no matter what. Back to the argument that that is the leverage by which, if you look at the colossal dysfunction in the debate around healthcare, in the debate around banking, in the debate around energy, in the debate around the wars, and the debate around international, and the debate around our trade policies, that we have to take advantage of the fact that we do have effectively this “too big to fail” status as a country to say, “You know what, we will not raise the debt ceiling and we’ll use the leverage of the fact that we’re too big to fail to force the restructure.”

BARRY: Look, in the 17th century, Spain was too big to fail. They were the leading economy in the world, and they failed. And then in the 18th century, it was France, and then in the 19th century it was England and now the United Kingdom. And now the 20th century was the U.S. century, and here we are in the beginning of the 21st century. I don’t think there’s any nation on earth that’s too big to fail. And by the way, if you look at those countries, they’re in their post-Empire phase and they’re doing fine. It would be healthy, at least in my opinion, to put the U.S. in the post-Empire footing. There’s no reason why the U.S. defense budget has to be the equivalent of the next 20 countries in the world. That includes Russia, that includes China, that includes North Korea; combined, our defense budget is bigger than the next one. We’re providing defense services to Japan, we’re providing defense services to Europe.

DYLAN: Germany.

BARRY: Go down the list, Korea. There’s just we can’t afford that.

DYLAN: Isn’t that Chris’ point? We won’t deal with that problem.

BARRY: I’m sympathetic with that, but at a certain point, you know, we have – I don’t think we’ve had an honest, legitimate debate about the budget yet. It’s been Populist extremism run amuck, it’s been demagoguery. Let’s go through defense, let’s go through Social Security, let’s go through Medicare. Social Security is my favorite thing to talk about in terms of deficits because it’s been running at a surplus for decades and it can run for of surplus for another century. You have to raise retirement age. The retirement age that was put in place 80 years ago, you know, everybody’s lifespan has gone up dramatically; that has to adjust. That’s number one. Number 2, guys like you and I, we’re going to get means tested, we’re not going to quality for Social Security. I think we can live with that. And number three, you get capped at $106,000 and change a year. Once you hit that payroll number, you don’t pay any more taxes. So the joke is Warren Buffet or Bill Gates on January 1, they’re done paying into Social Security. There are some people advocating making it unlimited. Look, that’s going to double, that’s going to go to $250,000 and then maybe 10, 20 years from now it will go to $500,000. But you do those three things, you means test, you raise the retirement age, you take the cap. Social Security is good for centuries.

DYLAN: But what do you see as the – in other words, if Chris is – let’s say Chris is more a radical view which is they’re not going to do Social Security, they’re not going to do defense –

BARRY: They have too, though.

DYLAN: They’re not going to do banks unless they are forced to, and the only way to force them to is this. How do you see a pass to resolution on some of those issues absent a crisis catalyst of some sort.

BARRY: You know, he and I have talked about this and one of the – we had a conversation I want to say yesterday or Monday, I don’t remember what day it was. It was probably Monday. And we talked about this and I was astonished at how completely and totally – this was on the Ryan Plan whose numbers were put together by the Heritage Foundation, and it turned out that they’re completely full of shit. They cooked the books, they made it up, and the only reason anyone found this out is at the end of the Ryan forecast, unemployment drops to 2.8%. Unheard of, ridiculous. And when the Heritage Foundation was asked how you got to these numbers, they kind of stammered and [inaudible 07:24] and Chris and I talked about this and he says, “Now you’re aware of the Washington problem, which is everybody in DC is a paid liar.” And if – we’re not talking about a lawyer whose job it is to zealously defend his client in court –

DYLAN: Tobacco or whatever.

BARRY: What we’re talking about are people who you shoot sodium pentathol into them and they would say, “Oh yeah, of course there’s global warming. Of course we can manage the debt. Of course these tax cuts are expensive. Of course that 2.8% is nonsense, but I’m paid to bullshit, and I make a nice living doing it, so that’s what I do.” And it wasn’t that way several decades ago that the loyal opposition and honest and fair debate, that seems to have disappeared and I’m less cynical than Chris, I think what –

DYLAN: It doesn’t sound like it.

BARRY: What I think – but these are just facts. You can make intelligent policy, you can’t discuss this unless you have the facts in front of you. I think what resolves this is getting the dirty money out of politics. And I’ve come to the conclusion that the only way to do that is a constitutional amendment mandating public funding of elections and you get Goldman Sachs out of politics and you get the rest of the bankers out politics –

DYLAN: And the unions and the health companies –

BARRY: And you get the unions out and you get – look, there was just something from – I mentioned it in the LinkFest today, the Center for Responsible Lending said the auto dealers managed to get exempt from the financial consumer finance board so that the extra fees and add-ons and undisclosed costs to auto loans are worth $25 billion a year in their pockets from the consumers not disclosed, not – it doesn’t meet any federal regulations because they’re out greasing the palms. Now, this is you would think that any politician that can’t get elected and on that sort of mom-and-pop Main Street issue, how can you not, and yet it manages the dirty money. So to me, to get to any of these issues, you have to get this money out of politics. And that may sound a little naïve, but everything I come back to, the bailouts, the tax cuts, the wars, all these things are only possible if you have dishonest, you know, P.J. O’Rourke called them a Parliament of Whores, and you can’t improve upon that. When people will do anything for money, you end up with the sort of financial problems we have today. If you don’t get the dirty money out of the system, you can’t get clean policy.

DYLAN: What do you think has been the barrier? Because what you just said, I think, is something that is largely easily understood. I think a kindergartner could understand that. I actually think it is largely perceived and, in many cases, believed by a huge percentage of the American people who’ve had even a more modest opportunity to look at these issues. And yet the Democrats, nowhere on that issue, the Republicans, nowhere on that issue, which that’s not surprising because they’re on the take, they’re the whores that we were referring to.

BARRY: That’s right.

DYLAN: But, also we are not seeing outside activists – I spend a lot of time talking about it; a couple of other folks do. But you don’t see the mainstream media saying the root of our evil is this, whether it’s Fox, MSNBC, or anybody else. You don’t see the New York Times or the Wall Street Journal saying the reason we’ve got this deficit, the reason we have this dysfunction, these wars, all the things you just talked about, is because of the dirty money. I think about the guy who’s an alcoholic with a drinking problem and his wife has left him and he’s having problems with his job and his kids don’t talk to him and all these different things, and he walks around saying, “Oh, I don’t know why my kids don’t talk to me. I can’t understand why my wife left me. I’m having a hard time at work.” And people, “Oh, if you work harder, maybe if you’re nicer to your wife,” or whatever, but no one actually gets the fact that, “Hang on a second, maybe if you didn’t drink a bottle of Jack Daniels every night, the problems that you’re having with your wife, your job, and your children might go away,” which is exactly your point. Maybe if you stopped drinking, in this case taking dirty money, everything from healthcare to defense would diminish.

BARRY: And the friends in your analogy are the enablers is what the 12-step folks call it, and when you mentioned the mainstream media, NBC, Fox, the whole run, when you – all the parties that are involved in this, you know, they’re grand enablers. There’s an old line, and I know I’m getting this wrong, which is, “It’s hard to convince a man of the truth when his livelihood depends on not believing that.” And so you have an entire universe of lobbyists, you have an entire universe of companies, of both media, and at a certain point once you figure out how it’s wired, how the system is wired, now you’re a defender of that system because while it may not work for the country, it works for you. So if you’re GE paying next to no taxes, if you’re – you know, there was just an article –

DYLAN: If you’re a union rep who has huge advantages in healthcare for your members but only as long as the employer-based system exists –

BARRY: That’s right.

DYLAN: Because if they get rid of the employer-based system, the union’s relevance to their members and their quality healthcare goes away because all of a sudden the recruiting vehicle –

BARRY: But that’s been going away naturally. That’s the great irony – you know, in the book, I mentioned the Chrysler bailout 1980, the big three or big two-and-a-half if we want to include Chrysler, they had a 75% market share of domestic cars sold in the U.S., of total cars sold domestically, and there was almost two million members. And here it is 30 years later, their market share has dropped way below 50% and we’re down to 300,000 UAW members, between 200,000 and 300,000. So despite the bailouts and despite this, unions are no longer the force they once were. I don’t get all bent out of shape about unions –

DYLAN: And I’m not – I was just making the point of their impact on the healthcare situation.

BARRY: Because to me they’re just – they’re such a relatively – right, they had an impact on the GM –

DYLAN: They kept employer-based healthcare.

BARRY: They had – absolutely, there’s not doubt they had an impact on that. The thing that I find most disappointing about the era we live in is the lack of leadership. So there was just something on about Donald Trump talking about birthers and you know forget Trump and his hair or whatever that thing on his head is, but I want to see some adult step up and say, “Look, we have a lot of real important problems facing us; this is a nonissue,” if you want – and Bobby Jindal actually came close. I’m like, “Wow, this is going to be an adult conversation,” and then at the last minute he sort of back away and says, “You know I take the President at his word.” No, no, no, step up and lead and say, “This is bullshit, let’s talk about we still have high unemployment, we still have a tremendous amount of leverage in the system, we still have a huge housing problem, let’s fix this. And if you’re going to focus on that, you’re wasting time and energy that could be put to better use.” And, you know, the Democrats also have not really stepped up and led on a lot of these issues. It’s enormously disappointing that there is no Ronald Reagan, there is no John F. Kennedy. For a moment it looked like Obama was going to possibly rise to that mantled, but that moment seems to have passed. So to me, from a political perspective, and I’m an independent; I throw rocks at both sides. It’s disappointing that there’s not even anybody to root for. And so, again, I try not to be cynical.

DYLAN: I agree.

BARRY: What Chris said I think is really cynical, “Hey, let it all blow up and we’ll worry about fixing – picking up the pieces afterwards.” I think Alan Greenspan, by the way, said something very serious before the – similar before the dot-com collapse in 2000, “Oh, it’s easy to clean up after.” I think the costs and the ramifications of cleaning up, allowing the debt ceiling to lapse, would be really, really substantial. And what happened in ’95 was a drop in the bucket. It’s a whole different universe today. I don’t think it is even comparable. It would be really, really damaging.

DYLAN: What would happen?

BARRY: What would happen? All right, so the AAA rating would be put at risk, which means we’re now funding a huge deficit, a huge ongoing debt, which by the way has been ballooning for three decades. This isn’t anything new. This exploded and in fact, the fascinating about Reagan’s era is he reduced the deficit pretty dramatically by raising taxes. You know, he had huge tax cut, especially the top rate was almost 90%, brought the way down, and then slowly brought things up in order bring in more revenue. I think he was the last serious Republican that was willing to say, “Hey, sometimes, you know, it it’s not just spending; it’s income also. You’ve got to raise –“ you know, they called them revenue enhancers, taxes were a dirty word, but they actually did it. You don’t see that going on anymore. And the Democrats are nearly as bad as the Republicans in terms of – I give Obama credit for saying we have to raise taxes on the highest earners. But if we were really adults, if we were going to have a mature conversation, you would look at the United States versus the rest of the western world and say, “Hey, we have amongst the lowest net taxes and yet we’re spending more than everybody else; it’s time for some shared sacrifice, everybody has to kick in a little more, everybody has to consume a little less in terms of government services, and that’s how you get the deficit under control. This, “I don’t want to cut anything and I don’t want to raise taxes and let’s magically fix the deficit” is silly and it’s childlike and we really need to move past that.

DYLAN: You referenced this earlier, the disingenuous Solution of austerity where, “Oh, we’ve got this big deficit, so what we’ll do is we’ll just cut social spending, which is a minute percentage of what our spend is to begin with, we won’t address healthcare reform, we won’t address a major global defense overhaul and reduction, we won’t address entitlements like Social Security; we will simply reduce social spending ala England ”

BARRY: And Ireland, and by the way –

DYLAN: What’s wrong with that?

BARRY: Well, first of all, if you look at those economies, they’re doing really poorly. You know, the fascinating thing, this has become an anti-Keynes – John Maynard Keynes was a brilliant economist and actually stock trader in the ‘20s, ‘30s, ’40, and the monetarists who rose up in opposition to him – I think a lot of people misunderstand Keynes. And what Keynes said is, “During an economic expansion, the government should be cutting spending and raising taxes and running a balanced budget.” But when you go into a real bad recession, well, that’s when the government should cut taxes and raise spending and substitute for the lack of government and consumer spending to sort of smooth that cycle out instead of having these high peaks and deep valleys. You’re going to make it a little softer and a little easier to bear. The problem is the way it’s been implemented over the past 50 years is while we increase spending and cut taxes when things were bad, but we never took it back when things were good. So no one wants to do the hard thing, and again, this is a lack of a mature conversation. The first person who started cutting spending and raising the taxes, his opponents would go crazy on him and that person would never get reelected again. So all we have are people who increase spending and cut taxes but never do anything to legitimately balance the budget. Forget NPR or Planned Parenthood, that’s 1/1000th of a percent of the overall budget. You know, what John Dillinger said is he robs banks because that’s where the money is. So in order to balance the budget, you have to raise taxes, because that’s where the money is, you have to cut the defense spending, you have to cut Social Security, you have to cut Medicare, but do it in a way that makes sense, and we haven’t had that conversation yet.

DYLAN: You write wonderfully on a regular basis on your blog, the Big Picture at Among some of your recent posts, you talk about Europe’s relationship with the banks and bailout relative to our own, and I want to read a little bit of this to the folks. You say, “In nations where bankers and their creditors were allowed to go belly up, the populace seems to be more satisfied with the outcome, and the politicians are mostly managing to retain their jobs. Tiny Iceland seems to be the only country that got this right,” and then you get into how Iceland obviously did a debt restructuring. Europeans are slowly figuring your right, that they got royally screwed by bankers, assuming bank debt, taking responsibility for bankers recklessness is simply not in the public’s interest. I wonder when American will reach the same conclusion. Don’t you think Americans have largely reached this conclusion? Maybe our politicians and our media has not.

BARRY: I’m not sure. I’m not sure. I go back and forth on this. You know, for a brief moment when the Tea Party first erupted, I thought that was a huge pushback against the bailout.

DYLAN: Me, too.

BARRY: And then somehow they got Jiu-Jitsu’d and it became something else entirely.

DYLAN: [cross-talking 20:32]

BARRY: I guess. And, you know, whatever your perspective on gay rights are, clearly it had nothing to do with the crisis, the financial crisis, and it has nothing to do with fixing – although some people in California have argued that if you legalize gay marriage it would cause a surge of economic activity, but the reality is –

DYLAN: Household formation in San Francisco.

BARRY: Yeah, it’s – but the reality is there was this glimmer and it was just completely derailed. And, you know, the Democrats and the Republicans jointly are part of the problem. I was hoping that that was –

DYLAN: But that doesn’t speak to the people. In other words, do you believe that the people – I mean this is obviously conjecture on our part, but do you believe that – you’re asserting that the people of Iceland, that the people of Western Europe –

BARRY: And Ireland, and Norway.

DYLAN: – and all the rest of it understand that the bankers screwed them, that they’re running a scam, and they’re not going to tolerate it, that the bank is there to serve the economy, that the country is not there to serve the banks.

BARRY: There’s a very different political debate that takes place in Europe. First of all, it’s a much older society than the United States, so it’s a little more mature. What I’ve found – you know, I was always taught that you never discussed religion or politics in the United States. In Europe, you could sit down with people of opposite political views and everybody will agree, at least more or less on the same facts, and the debate is more on philosophy and theory and if we do this, this will happen, no, if we do this, that will happen, and it’s just far more cosmopolitan and sophisticated than the crazy –

DYLAN: Fear-mongering.

BARRY: Yeah. Can I tell you something? I get emails everyday, you know, the Jews caused the credit crisis. I get that stuff constantly. And before that, I used to get my all-time favorite comment is an unspeakable word cause the credit crisis that came up on the blog. And it’s easy enough to screen that stuff out and not have it show up, but that’s the level of discourse. And in Europe, those are Arian extremists that aren’t part of the political debate. The debate, the conversations, the discussion is just a whole different level of sophistication. It’s very buzzword, bumper sticker based. There isn’t a lot of independent thought. You know, talk radio and talk television drive a ton of the conversation. I used to just see the same emails, it’s phrased ever so slightly different, over and over from different people, and it’s clear someone heard something that may or may not have been true, they repeated it and it was comforting for them so these things sort of went viral. You know, there’s a positive side to intelligence spreading through the internet, and the negative side is dumb things seem to find a home, and especially if there’s a cute buzzword involved, catch on. And so you get just mad, insane, foolishness, and –

DYLAN: Does this not get us back to Chris Whalen? Because of all these things, we must – or does it make your point which is you better not create a crisis because you have such a stupid or unsophisticated political debate that if you create a crisis, you’ll get a solution that is the worst solution you could every imagine because it will be the Jews fault, or whatever. In other words, instead of actually – the crisis, instead of catalyzing the sort of debate you just discussed in Europe, will catalyze a madness.

BARRY: By the way, I don’t think the Europeans are any smarter than the Americans in general. I think the extremists in America seem to have found a certain resonance and are louder than their numbers suggest. So I want to make it clear, it’s not that Europeans are smarter or more mature than Americans, they’ve just over the years learned how to do the sort of debate, and look, World War II was fought on their front porch, so they’ve learned how to deal with the real crazies, and they marginalize the extremists. In the United States, we don’t marginalize extremists; they’re right there at the table with everybody else. So to go to Chris, look, I think Chris’ analysis is thoughtful, I just haven’t reach the point of maximum cynicism where I say, “You know, you’ve got to crash the bus off the cliff before we can rebuild it.” And that’s kind of the argument he’s making is if you don’t throw the whole system out of whack you’ll never be able to rebuild this. But that goes back to the dirty money. So let’s say he’s right. Let’s say we crash through debt ceiling, everything falls apart, so what are we going to have? It’s going to be put together by Goldman Sachs and Citigroup and –

DYLAN: Health insurers.

BARRY: Right. Look at who’s controlling D.C. That’s not the group I’m willing to have rebuild the system, especially since they were so opportunistic and did such a great job during the crisis. You know, the same people who captured trillions of dollars from the government are very likely to put together a system that is a corporatocracy, not a democracy. It’s a government for the corporation, not for the people, and that’s my concern. Until you fix campaign finance, the people at the controls just aren’t trustworthy. They’re being sold to the highest bidder so why do I want to wreck the system and let AIG and Goldman rebuild it. That’s not to your or my advantage. That’s not to 99% of the public’s advantage.

DYLAN: Barry Ritholtz, the Big Picture is the blog,, on Twitter at ritholtz, R-I-T-H-O-L-T-Z, and, again, the book, “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.” It’s always a pleasure, Barry. Thank you.

BARRY: Thanks for having me.

DYLAN: And we’ll be back right after this.

DYLAN: Welcome back to Radio Free Dylan. I want to leave you with one more comment from Barry because I think it’s incredibly relevant and necessary to understand what is going on here. And Barry references an old market strategist, Art Cashin who works at UBS, and it goes like this. He says, “UBS’s Art Cashin directs us to the economist Buttonwood column for an interesting take after the S&P downgrade. The debt in our system, going back to 2008 or beyond, has not been eliminated, and has merely been moved from the banks to the taxpayer. It’s three years since Bear Stearns was pushed into the arms of JPMorgan and the fundamental debt problem hasn’t been resolved. The debt has been moved around, but not eliminated. This is undoubtedly bought time, and I quite understand the point made frequently by my colleague, that government and central banks have acted to protect workers from losing their jobs and to prevent consumption from collapsing. In this, they have had a fair degree of success. But the debt is still there. It must either be eliminated by growth, inflation, the devaluation of our currency, or default. The U.S. has better growth prospects than most European nations and has the exorbitant privilege (as Barry said earlier) of issuing debt in the world’s reserve currency, which keeps its cost down. But it resembles one of those Greek myths when the hero’s power is accompanied by a curse, in this case a political system that is not designed for serious deficit cutting, a point made by S&P.” I thank you for listening to us today and spending some of your day with me. It’s a privilege to have that opportunity. My name is Dylan Ratigan and that will do it for Radio Free Dylan today and we’ll talk to you next time.

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Category: Credit, Media, Politics, Taxes and Policy

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32 Responses to “Podcast: Ritholtz on Radio Free Ratigan”

  1. DL says:

    “Chris Whalen … asserted that until we take a hard line on the debt ceiling, we will never be able to force the necessary restructuring on global debt, U.S. debt, banking reform, and all other underlying factors…”


    The response of the liberals to this is that there would be catastrophic consequences of refusing to raise the debt ceiling.

    I don’t see why the House couldn’t pass a bill which says that the interest on the debt gets paid, and the way it gets paid for is by a 0.2% across-the-board cut in everything else.

    Naturally, of course, the Senate will refuse to pass the bill. But it’ll then become their fault if the interest on the debt doesn’t get paid.

  2. A 0.2% across the board cut doesn’t exactly fix the structural problems with the US budget

  3. DL says:

    “Until you fix campaign finance, the people at the controls just aren’t trustworthy”.


    You’ll never get the money out of politics.

    Not now, not 100 years from now.

  4. DL says:

    A 0.2% accross-the-board cut (to pay the interest) will buy some time.

    Another 0.2% cut after that will buy a little more time.

    (Of course, it won’t solve the problem).

  5. MikeW says:

    “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

    - Upton Sinclair

  6. RW says:

    Excellent interview. It helps to have a host who listens and responds thoughtfully too.

    I listen closely when Chris Whalen analyzes banks and banking, on the economy and fiscal policy not so much and that comment WRT gaming the debt ceiling is one reason why.

    Treasuries are so deeply and widely embedded in global finance and trade — collateral, reserves, (multiple) currencies, futures, business assets, retirement accounts, personal savings, every damn dollar in existence (8467 billion just in M2 for chrisakes) — that even a failed attempt to game treasury payments, delay principle due or what have you would have some pretty heavy duty repercussions and that ain’t no DFH fantasy either.

    Some of the same folks who like to invoke the confidence fairy every time there is a little uptick in interest rates or drop in the $USD are rooting for this kind of crap but they, and everyone else, would discover what a bear the real bitch the confidence fairy can be when the world gets a serious whiff of American stupid. It wouldn’t change the rotten culture inside the Beltway but it would change just about everything else financial that I can think of.

  7. elizzz says:

    Any chance, you – Barry – would run for President? I’d vote for you in a heartbeat.


    BR: Not a chance in hell

  8. mitchw says:

    The sound cuts out at minute 16. It’s ok, I can read.

  9. carleric says:

    Excellent interview and comments, especially in respectr to the “dirty money” in politics. I take your side I am just a little more crass and abrasive. Thanks.

  10. Ingolf Eide says:

    First time I’ve listened to one of these podcasts, Barry.

    You obviously don’t need me to tell you this, but it was excellent, a model (on both your parts) of the kind of open, truth seeking discussion whose absence in American politics you’re both lamenting.

    Very impressive, and thoroughly enjoyable.

  11. constantnormal says:

    Good interview, but the participants are (almost) as hopelessly deluded as the jokers in Congress and the White House.

    We are never going to clean up our act until we are forced to. And how will we be forced to? When neither side will give or even consider meaningful compromise (we’re there now) and Uncle Sam finally defaults, or the risk of default is seen by the rest of the world as being real enough that they do something about it.

    And what’s the first thing the rest of the world will do? Remove the USD as the global reserve currency. Nobody wants to be forced to use a currency whose issuing nation is crazy. Once that is done, we will be just a very large Iceland, with a currency that nobody wants, and a Feral Reserve that is wildly printing money to buy Treasury debt with. Holders of Treasuries will be dumping them for anything that is not tied to the USD. And this will all happen at electronic speed, once the global reserve currency is no longer the USD.

    And at that point, and only that point, will we finally see change. Too late, but it will finally begin.

  12. awells1902 says:

    When supreme court equates money with free speech (1st amendment) there is no way to fix it [money in politics] through constitutional process. I agree with everything that BR said, but I just do not see a way to get there.

  13. Greg0658 says:

    I would only consider a threat and a done deal on that Debt Ceiling IF
    Instruments of SHORTs (& whatever) on various inter-actions are not payable in US$s (& other currencies)
    wELL .. on those corporation stock certificates OK (I think)

    I just don’t think people should be able to reward themselves for this situation with those Instruments
    get a bugle and play a tune for millions (if some / enough will buy the jazz)

  14. Mbuna says:

    THE classic quote from this show for me- “Everyone in Washington is a paid liar”. It’s a good thing to remember.

  15. mathman says:

    It’s all about everyone going along with “the program”:

    Most of us out here in the world of the working poor can’t even afford to drive to work anymore.

  16. Bill Wilson says:

    This was a good list of recommendations:

    Ultimately, the system will only change if we demand better. We just have to start caring about the right things.

    There was a time when Presidents had affairs and no one cared. Now we do. It’s enough to prevent candidates from getting elected.

    What if, back in October of 2008, we had found out the Obama and McCain were wife swapping. The country may have elected a third party candidate.

    What if, back in October of 2008, we found out that Obama and McCain got huge donations from AIG. Oh yeah, we did, and no one cared. My point isn’t that we should be cynical and give up. If we just start caring about the right things, the system will be forced to change. Blogs like this one are a good starting point.

  17. JL says:


    I’m listening to you on Dylan Ratigan. Outstanding! Best interview I have heard in a while.


  18. Eckhart says:

    Dear Barry,

    I have been reading your blog since the early days of the Credit Crisis. I didn’t always agree with your stance during the crisis, probably because I was still too bullish on the way down, but I learned to respect your acumen and analytics over time. Now, almost 3 years later, I can say without a doubt that you my favorite blogger and political economy commentator out there, because you have your feet firmly planted on the ground, don’t let dogma and ideology impact your views and analysis, and have identified the real culprits of so many of our current problems in the US. Your comparison of US and European societies when it comes to discussing politics and religion was dead-on and it was great to see that I am not the only one who feels that way.

    would also add that the Credit Crisis has worsened the American immaturity in serious discussions and most definitely strengthened the voices of the extremes. I too am concerned about the fact right now that these extreme views are being spread like a virus and that the Internet has become a much more efficient carrier for this now than it was 5, 10 or 15 years ago. That is why I think your blog and your media appearances are so important – the silent, polite majority, which I think still exists, relies on you to continue to call it like you see it and to call bullshit on the liars on both sides of the aisle.

    Thank you again,


  19. tude says:

    Reading/listening to you gives me hope…until I realize how much of a minority I am (and you are).

    I hope I can convince just one other person I know to listen to this, but I doubt it.

  20. KJ Foehr says:

    @ DL :

    “You’ll never get the money out of politics.
    Not now, not 100 years from now.”

    I understand your sentiment, but we can’t give up; this is too important. If a minority of people, such as the Tea Party, can get 60 representatives elected in a single election and change the debate in Washington, then we can the big money out of politics.

    We CAN do this.

    If enough people want it bad enough, I have NO doubt we can do it. It doesn’t take a majority, only an active minority.

    What it takes is activism, organization, and commitment to change.

    We still have the power of the ballot, money can and influence it, but people protesting in the streets can effectively counter that money. Look what happened in Wisconsin. The people finally stood up, protested, took legal action and are having success in doing so.

    As LBJ said to MLK, supposedly, “Make me do it.” That was not a dare, that was a statement of political reality. It meant, if you take to the streets and march all across this country, I will have the political capital I need to make get the Voting Rights Act passed.

    Also see what some people are doing now on this issue.

    Activism worked in the 1960s, and it can work now.

  21. “The retirement age that was put in place 80 years ago, you know, everybody’s lifespan has gone up dramatically; that has to adjust. ”

    But the work week hasn’t shrunk at all, while during the 80 years prior to the retirement age being put in place the work week shrunk dramatically — from about 60 hours to about 40 hours. By my math, that’s an extra year’s leisure for every two years worked or an extra 20 years for a 40 years in the workplace. It may be the Luddite fallacy to say technological change reduces employment (increases unemployment), but, as far as I can tell, technological change did reduce hours worked during the 80 years between the Civil War and WWII. What would have happened to unemployment rates had the work week not shrunk? With increased productivity, how can anything close to full employment be maintained if people don’t either enjoy longer weekends or longer retirements?

    The people are living longer so they need to retire later argument sounds like a canard to me, and I wonder why people refuse to think for themselves when I hear them make the argument without mentioning technological change, productivity, unemployment and the length of the work week. I apologize if you’ve addressed it elsewhere and didn’t want to waste time on a settled issue. I’m also aware that I may be missing something obvious and using the comments to demonstrate my own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge.

  22. GrafSchweik says:

    Barry, you may never run for 1600 Pennsylvania Avenue, but I will still be writing your name on the dotted line next year anyway. Fortunately for you, I don’t have the time or resources to launch a write-in campaign.

    constantnormal – great short summary and mega thanks for the ‘Feral Reserve’ endorphin boost! That’s gone straight to my active vocabulary–and you will get credit!

    Eckhart– I’ll be quoting you from now on when I recommend The Big Picture to friends and acquaintances — except for one point: the silent polite majority no longer exists.

    We’ve been in a slow motion cultural revolution for over 40 years whose course has been far more skillfully charted than anything Lenin, Adolph or Mao ever dreamed of.

    We now have at least 3 states, Wisconsin, Michigan and Maine, where backdoor fascism is being established, following the Italian model, by GOP governors and legislatures, sans the black shirts. Michigan is understandable. But Wisconsin? Maine?? That makes me think that more states are likely to follow.

    Someone contributed a comment here last year about a Russian friend who escaped Moscow in the late 80s and with gumption and hard work made it professionally in NYC. By mid W, she was going crazy at the cognitive dissonance in the circles she moved in.

    If I remember correctly, he quoted her as saying “In Moscow we knew we were being lied to….” Here highly educated professionals not only do not understand that they are being lied to, they cannot see how they are being lied to. They cannot even conceive that they would be lied to.

    My brother’s been dating a highly skilled and experienced employment lawyer with an A list of clients. Her firm has a majority of Harvard College and Harvard Law grads with most of the rest from elite schools. His experiences in those circles correlate exactly with that Russian emigre’s. They may not watch Fox News, but how well informed are you going to be if you only watch CNN, CNBC and NBC or ABC or CBS?

    Even the News Hour and NPR are not what they once were. I tuned them out a long time ago. Fortunately for him she pays attention and is waking up [I gave her Bailout Nation for Christmas]. But that’s not the case with her colleagues, clients or the denizens of the other firms she deals with.

    From top to bottom, North to South, East to West, America is doing “Stupid” big time. [Thanks, RW-- a good summary for my friends and relations still lost in fantasy land]

    Best to batten down the hatches and keep the powder dry… very rough seas are ahead.

  23. primordial_ooze says:

    Barry, I do think you are one of the best because of your rationality and steadfastness. I too think the root cause is the money in our political system. I just don’t see how it will change. The money is everywhere, from the federal down to the state/county/town level. Just look at what happened in Jefferson County, Alabama with JP Morgan. I don’t want the system to crash either, but think it will because nothing will be done to stop it. That will be the opportunity to change the system. You are correct that if that opportunity isn’t used for real change then the system will just be started up again by the very interests that brought it down, but I feel that is our only chance.

  24. James says:

    For a moment it looked like Obama was going to possibly rise to that mantled, but that moment seems to have passed. So to me, from a political perspective, and I’m an independent; I throw rocks at both sides. It’s disappointing that there’s not even anybody to root for. And so, again, I try not to be cynical.

    Great interview that expresses sentiments that resonate with a lot of people, BR.

  25. Bill Wilson says:

    As a condition of raising the debt ceiling, I’d like to see plan put in place to reduce our debt and deficits over time. Raise the ceiling with a real plan to make it the last time.

    It’s very true that we’ve been practicing Keynes on a credit card. If we could start from scratch, I’d like to see a balanced budget amendment with a provision that year over year revenue increases are put in a rainy day fund. So the 2010 budget would be based on 2009 tax collections, and anything extra gets saved for recessions. We’d be allowed to spend the money when year over year revenues decline.

    I’m a believer in unemployment benefits, health care benefits, social security, and the FDIC. I think those things ease the pain of business cycle contractions, and even help to put a floor under the economy. I’m not a believer that all government spending is good during recessions. We need to be smarter about how we use our limited resources.

  26. constantnormal says:

    mitchw Says: April 22nd, 2011 at 9:17 pm

    The sound cuts out at minute 16. It’s ok, I can read.

    … for those who prefer to have the audio version, doing other things as foreground tasks …

    It looks like iTunes has the full program, from the size of the (downloading) files … Chris Whalen, too.

  27. DeDude says:

    As usual I agree with most of your comments. However, I will take exception to the idea of increasing the SS retirement age. You are looking at the wrong end of the problem. The financial end can be solved by increasing taxes and applying them to higher income and more types of income (including to capital gains) – as well as by making the benefit formula more progressive and reducing payments to high income retired people. There is no need to increase the retirement age to deal with the financial problem, and it would be counterproductive. We do not want to force people to work longer, because we already have a huge excess of labor and not enough work for them to do before the current retirement age. This is especially the case for low level manual jobs. Look at the unemployment amongst high school graduates and drop-outs. If we cut away social security from these people in their late sixties they would be forced to desperately look for work at an age when nobody want them. That would push wages for that group further down and hurt both them and the economy by widening the income gap.

  28. [...] we discussed last week with Dylan, if we were serious about deficit reduction, we would be cutting spending EVERYWHERE and RAISING [...]

  29. BR,

    you know, with this .. “…Right. Look at who’s controlling D.C. That’s not the group I’m willing to have rebuild the system, especially since they were so opportunistic and did such a great job during the crisis. You know, the same people who captured trillions of dollars from the government are very likely to put together a system that is a corporatocracy, not a democracy. It’s a government for the corporation, not for the people, and that’s my concern. Until you fix campaign finance, the people at the controls just aren’t trustworthy. They’re being sold to the highest bidder so why do I want to wreck the system and let AIG and Goldman rebuild it. That’s not to your or my advantage. That’s not to 99% of the public’s advantage…”

    you may want to rethink that..

    If .. “…They’re being sold to the highest bidder…” (Parliament of Whores-estilio), Then, how does this .. “…fix campaign finance…” happen?

    In the meantime, until that dilemma, somehow, ‘corrects itself’, you may want to warm up the pipes to get ready to belt out some of..'Toole/impossibledream-lyrics.htm

  30. Greg0658 says:

    about 15m into Chris Whalen’s 20 minutes:
    this comment got me ruffed – Chirs: “this Democrat from Chicago (potusBHO) had such an opportunity to restructure a lot”
    Chris: “It is the responsibility of the Congress to force the Administration to have this discussion”
    & a bit earlier
    Chris “We have to show the same leadership, because if we fix the U.S., if we even changed a trend direction”
    & the Volker quote: “The growing question is whether the exceptional role of the dollar can be maintained. The growing sense around much of the world is that we have lost both relative economic strength and, more important, we have lost a coherent successful governing model to be emulated by the rest of the world. Instead, we’re faced with broken financial markets, underperformance of our economy, and a fractious political climate.”

    please … POTUS runs Bartertown … PAAALEASSSSSE

  31. Greg0658 says:

    the hair is gonna send a bill to the world for the sale taxes on 11 new aircraft carriers .. I can’t figure – how to itemize that invoice?

    I’ll high5 and support – money out of elections – socialize that cost – but a doctor turned politician – or other flunks in the King game (like me even) – I wish we could have a superior informed populace* and Facebook style policy frame’g – and lawyers hired to write the code … gotta have a good policy to start with – them coders “Your Fired” – IF – you missed the point of the populace – back to ambulance chasing with you

    *coda – thats kind of a scary thought – really – these days

  32. [...] the podcast I did with Dylan Ratigan last week, I mentioned we needed a Constitutional amendment mandating [...]