Transcript: Thom Hartmann & Prof. Richard Wolff - The Economy and the Fed, what is next? August 26, 2011
Thom Hartmann: And welcome back, Thom Hartmann here with you and the chairman of the Federal Reserve, Ben Bernanke, came out this morning and delivered his comments and thoughts about, from the Fed meeting, what the Board of Governors has decided that they’re going to do, or is leaning toward doing. And some of it is cryptic, some of it is pretty explicit. Some of it seems like it might be a swipe at the republicans, although there was plenty of fodder from all sides. But let’s get an actual economist, an informed opinion on this. Professor Richard Wolff, visiting professor at the graduate program for international affairs at the New School University of New York, professor of economics emeritus at the University of Massachusetts Amherst, the author of numerous books including the brilliant “Capitalism Hits the Fan: The Global Economic Meltdown and What to do About it." His website, RDWolff.com, that’s with two F’s. and Professor Wolff, welcome back to the program.
Richard Wolff: Thank you very much for inviting me.
Thom Hartmann: What are your thoughts on what Chairman Bernanke said this morning and what does it mean for the future of, in particular over the next year or so, as the republicans are trying to crash the economy going into the elections, and then you know in the longer term.
Richard Wolff: Well I’m afraid that what Chairman Bernanke said was a great deal of very little. He repeated most of the kinds of things he’s been saying for quite a while. The market’s reacted positively apparently because they took, and this is a stretch, his refusal to do anything basically to improve the economic situation, as a sign that it wasn’t as terrible as some had thought it might be. The truth of the matter is that early in his speech Bernanke said, in an unusual admission, that everybody knows already that the economic recovery we’ve had has been no recovery at all. He stated flatly so everyone knows it that we still have not recovered the level of production of output of goods and services in the Untied States to the level it was before this crisis hit. And if you think of the trillions of dollars that were spent to “produce a recovery" and you think of the last two years when recovery was on every political and business leader’s lips, it is refreshing that he was at least able to set the record straight and explain that we may have spent trillions of dollars and we may have brought the stock market part of the way back, but for the vast mass of people and for the output of goods and services, we have lost pretty near five years of production. And the cost of that for years to come, that’s the real hard news. Beyond that, Bernanke said he’s sitting pat and waiting to see more and hopes that things will get better. A pretty sad performance.
Thom Hartmann: The, one of the things that he said was that he doesn’t expect inflation to be outside of, a problem, shall we say, and that therefore that satisfies one of the two mandates that he referred to. Of course the two mandates for the Fed are keep inflation low and keep unemployment low. Does, is, my assumption is that that’s being interpreted by the markets as he’s going to continue to keep, you know, giving basically free money to the banksters so that they can keep making money on Wall Street and that maybe some of that will trickle down to us but that might have been what boosted Wall Street, do you think?
Richard Wolff: Maybe, my guess is that they really don’t think much of this speech. They bounced a little. But the bouncing is no different from what it’s been for many of the days of the last several weeks so I don’t think there’s much going on there. I do think you’ve touched something though that is a little bit important. Yeah he said he doesn’t expect inflation to be a problem. But for the first time in many years three of the members of the federal reserve’s board of governors disagreed with him and they’ve been doing it publicly because they are fearful that the enormous increase in the quantity of money that has been thrown at banks, insurance companies, large corporations and so on does pose a threat of a rising in inflation which would drive up interest rates. They’re scared about that. And so his reassurances do not carry the weight that they might have because he has such disagreement openly inside the Federal Reserve.
Thom Hartmann: Would a cynical interpretation of what’s going on right now, that basically the Fed is going to use, basically the only tool that it has is low interest rates and buying bonds, you know, flooding the market with money or flooding the world with money, that they’re going to continue to do that, at least through 2013, code for at least until the next election. I know a lot of republicans were, Rick Perry came out and said you know if he does this, that, leading up to an election that’s tantamount to treason which was code for Rick Perry saying how dare he keep the economy from crashing, he should radically withdraw cash and crash the economy to hurt Barack Obama. Is this, is he walking a non-political line or is he, thoughts on that in general?
Richard Wolff: I think in general what he’s doing is letting you know that in the judgment of the monetary authority of the United States, the Federal Reserve, things look pretty grim on the other side of Washington at the congress and the president. There isn’t going to be a fiscal stimulus, that is there isn’t going to be either tax cuts or government spending that might help this economy. Mr. Bernanke repeatedly points the finger at the need for such a fiscal policy but clearly doesn’t believe it’s coming and so as you say correctly he has very little choice other than to keep interest rates low, provide cheap money to the banks and then hope that it, the benefits to banks and the stock market where banks play will trickle down.
And I’d like to underscore the importance of that phrase. Trickle down economics has been the name given starting back in the ‘30s for an economic policy that focuses on the people at the top. Help them, give them money, give them cheap money, give them stimulus, give them tarp, give them all the programs, and then the benefits will trickle down to everybody else. Well we’ve had that now for about four years and the trickle down has yet to appear. Fun was made of that in the 1930s as a silly idea that’s really a smoke screen for helping the people at the top. We now have concrete evidence for four years so it’s a little sad to see that if the fiscal system is gridlocked and the monetary system is run by Mr. Bernanke, it’s going to continue with the trickle down approach even though he admits at the beginning of his speech today that the past four years have not produced the recovery that they had hoped for.
Thom Hartmann: In his speech he says “Our K to 12 education system, despite it’s considerable strengths, poorly serves a substantial portion of our population. The cost of healthcare in the U.S. is the highest in the world without fully commensurate results, in terms of health outcomes. The quality of economic policy making," he says this is going to, long term he calls for an increased public investment, an encouraging, you know R & D. at the very end he says “The country would be well served by a better process for making fiscal decisions than negations that take place over the summer disrupted financial markets and probably the economy as well." Isn’t he basically calling out the republicans in congress?
Richard Wolff: Yes, you could interpret it that way. It’s a little sad to see him list things that he knows and everybody else knows are not only not being proposed by the president and the congress but the opposite. I mean just to give one example. Over the last two years over half a million public employees in the Untied States have been laid off their jobs by cities and states. And the largest single category of them is in the school systems, the education system. So not only is it a little silly to say how important it is that we beef up our educational system, the truth of the matter is we’re tearing it down, we’re diminishing it, we’re withdrawing resources from it. It is an absurd way to handle a short term problem because in effect it shoots you in the foot in terms of your long term hopes since everybody knows that the future of the U.S. depends more on the quality and education of its labor force than it does on anything else. He doesn’t have the political courage or standing to say it like it is so he has to do these circumlocutions. But yes, you can see that he wishes there would be more stimulus coming from the fiscal side and that puts more heat on the republicans than on the democrats. But they will, in their usual way, ignore what he has said now much as they have in the past.
Thom Hartmann: Mhm. And he also called for a balanced budget and so they will go off on that.
Richard Wolff: Absolutely.
Thom Hartmann: Professor Richard Wolff, thank you so much for being with us today, sir.
Richard Wolff: My pleasure, hope to talk to you again soon.
Thom Hartmann: Thank you, it’s always an honor to have you with us. Professor Richard Wolff, his website, RDWolff.com (with two F’s) and his book, which you must read is “Capitalism Hits The Fan: The Global Economic Meltdown and What To Do About It." We’ll be back on anything goes Friday with your calls and thoughts, stick around.
Transcribed by Suzanne Roberts, Portland Psychology Clinic.