Why the Stock Market Hasn’t Crashed Yet - with Paul Krugman

You like Miami?

>> No, I don't like Miami.

>> Same. I don't know what the is going on there.

>> It's It's not my favorite place. But,

you know, there was a quote, there was an article about, you know, Wall Street types trying to move to Florida. One of

them said that the problem with moving to Florida is that you have to live in Florida.

>> Nobel Prize winning economist Paul Krugman wrote for the New York Times for 25 years. But those stuff shirts at the

25 years. But those stuff shirts at the times just couldn't handle the heat from those Krugman takes, the fire he was spitting. So he left last year for

spitting. So he left last year for Substack where he can let his freak flag fly. So I asked Professor Krugman to

fly. So I asked Professor Krugman to come on the show to help me make sense of the economic chaos President Trump is unleashing on the country and the world.

I also asked him his thoughts on crypto.

>> I think crypto is basically a scam.

>> Whether the Nobel Prize for economics is basically just a kid's choice award for intellectuals.

>> You get a surfboard.

>> And if he's getting in touch with his inner Chapo trap house on Substack.

Paul, are you team Luigi or what?

lay your daddy.

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You were at a at a huge institution for two and a half decades and now we get to see Kugman unleashed. This goes pretty hard in the paint. Uh this the title of this on your substack is health insurance is a racket.

>> Um I think I would have been able to say that for 24 years at the times. Not sure

in the last year I would have gotten away with it.

>> I mean would they have let you ran that photo?

>> Well Christ I mean that is crazy. I mean, I don't approve of of murder, but uh right >> um but you know, you one of the rules of

of you know, blogging and now substacking is pick an eye grabbing picture is part of the Right. Right.

>> You know, part of the service. Let's

zoom out literally.

>> Yeah. So, this is planet Earth.

>> Okay. We live here allegedly.

>> Yeah.

And the economy happens here.

What is the economy? Alfred Marshall,

great uh Victorian economist said that it's it's the ordinary business of life.

It's if you like, it's the least interesting part of what human beings do. It's getting and spending, producing

do. It's getting and spending, producing stuff, selling it, buying stuff. It's

the kind of, you know, relatively materialistic side of life, but it's just or, you know, there there's no hard and fast line between economics and other stuff, but it generally speaking,

if it involves producing or buying or selling, uh, then then it's economics as the economy. Every time I listen to a

the economy. Every time I listen to a president over the course of history, they always talk about economic growth.

>> The fastest pace of economic growth in this country in nearly four decades.

>> We've seen the fastest economic growth in over a decade. the fastest economic growth in more than 30 years.

>> 4% economic growth.

>> Americans can be confident about our economic growth.

>> But apparently the economy is supposed to just grow forever.

>> Yeah, you >> but this same this stays the same size.

>> Yeah, that is less of a paradox than you think because the economy is we define economic growth by the value of stuff

which is not the same as the volume of stuff. Britain uh emits less carbon

stuff. Britain uh emits less carbon dioxide per capita than it did in the 50s, the 1850s.

A modern economy can run with very low emissions. We have the technology to do

emissions. We have the technology to do that and it produces all this valuable stuff. So there's no one toone link

stuff. So there's no one toone link between economic growth and consumption of resources or damage to the environment. In some ways you can

environment. In some ways you can actually in some ways economic growth makes it easier to to have a clean economy because we can afford to do things to to clean it up. So that's sort

of you know finite planet how can we have infinite economic growth is missing the point that really economic growth can be qualitative instead of quantitative. You know, we say economic

quantitative. You know, we say economic growth, but we what we really mean is is a rising standard of living, better quality of life. And there's no reason we can't keep on improving the quality

of life uh but without, you know, on a finite planet. Now, the problem is that

finite planet. Now, the problem is that that takes policies. You need to do it right. But it can be done. Sometimes

right. But it can be done. Sometimes

when I watch the news I'll hear newscasters also say economists say >> economists say >> economists say many economists say economists say no economist say >> economist say economist say economist say >> so many economists say

>> economists all say >> every economist in the country says >> when people hear economists say should they see it as fact or as opinion

>> well that's a favorite beef of mine and in general it really really depends unfortunately you need some guidance as

to who to believe and who to trust. Uh

if it's a economist who works for a highly politicized think tank, >> no. If it's an economist who works for

>> no. If it's an economist who works for Wall Street, well, there are some I trust and some who are basically uh selling stock. So, it's uh there are

selling stock. So, it's uh there are certainly a bunch of there are a lot of really good economists in America, in the world. and uh uh the trouble I guess

the world. and uh uh the trouble I guess for everybody else is to know who they are.

>> Have you always felt a hesitance to make predictions as an economist? Because as

you know, one of the famous Krugman memes uh was your meme about the internet in 1998.

>> Although people don't know is that that was partially a joke. If you read the actual article, I was assigned to write as if I was looking back from a hundred years in the future. So, you were trolling and

>> I was trolling a little bit. I was

trying to get people's attention.

>> No, no, no. Because Paul, I've I've had egg certainly splattered on my face. I

don't know if you've seen this meme with me. It says Sega Saturn is the greatest

me. It says Sega Saturn is the greatest video game system ever. Nothing will

ever beat it. Trust me, bro. With the

zero.

>> Yeah. You know, I I was skeptical a bit about the potential of the internet. Uh

I was wrong on some of it. Although if

you actually look at the rise in living standards uh since the broadband became universal, it actually is kind of disappointing. The sort of

truth I'll never tell you is that uh if you're actually looking for the payoff to all of this high-tech, it's a little elusive.

>> Meaning the actual payout for technology and the internet >> if you actually look Yeah. If you

actually look at, you know, how much how much can an average worker afford to buy, that hasn't gone up all that much with all of this technology. Now, there

are some things that were not available before. You know, I I spend a lot of my

before. You know, I I spend a lot of my evenings watching live musical performances on on >> NPR Tiny Desk, >> of course, NPR, Tiny Desk, and then then I follow up the bands I like uh every

weekday. Substack post ends with a a

weekday. Substack post ends with a a musical clip. So there are some things

musical clip. So there are some things that that the internet has made possible but you know a lot of people were expecting a real boom in uh

manufacturing productivity or a real uh a real reduction in the cost of living relative to wages out of the internet and so far that hasn't happened.

>> Let's take a look in a snapshot of where we're at right now. The President Donald Trump promised that he was going to make America more affordable again.

>> How's that going?

>> Yeah, that's going badly. I mean the uh inflation has picked up some uh it will pick up more because all of all these tariffs are raising the cost of imported

goods. Um some of the other stuff we're

goods. Um some of the other stuff we're starting to see food prices tick up and it's going to get worse because of the deportations because who do you think picks crops in America? He had no plan

to do that. It was I'm going to magically make prices go down and in fact most of the things he's doing are going to make them go up.

>> Can I ask a question? Do prices ever go down? So, not to brag, um, I am a road

down? So, not to brag, um, I am a road comedian. I do both A, B, and C markets.

comedian. I do both A, B, and C markets.

No matter where I go in this great country, I'll hear three things.

>> The rent is too damn high.

Have you seen the price of gas?

And back in my day, a piece of candy used to be a nickel. Isn't inflation

always going to be a part of the equation? Meaning, candy's never going

equation? Meaning, candy's never going to be a nickel, you boomer. Yeah, it's

we haven't seen prices go down >> ever, right?

>> For well, you have to go back to the 19th century. We actually had deflation.

19th century. We actually had deflation.

Well, we had deflation in the 1930s, which was not fun. And we had deflation in the late 19th century, which was not fun. Uh, in general, it's kind of a

fun. Uh, in general, it's kind of a consensus among economists that a little bit of inflation is actually >> 2%, right?

>> Yeah. 2% is the is is the uh official target. And it was kind of a, you know,

target. And it was kind of a, you know, and there's a little bit of magic went into coming up with that number, but that the economy runs a little bit better with 2% inflation than it would with zero inflation. And falling prices

is a really bad thing. I mean, that that was a it was a plague. Japan had falling prices for a couple of decades. And

>> that's deflation. Correct.

>> Yeah. So overall prices, yeah, basically overall prices rise because in the end the Federal Reserve uh chooses to do its best to make sure

that they rise a little bit.

>> So when a politician repeatedly says, "I'm going to bring prices down." Yeah.

prices down." Yeah.

>> Is it just safe to say, "Don't believe it?"

it?" >> It's it's it's virtually impossible.

>> Yeah. Yeah, the only >> minus gas for some reason. Gas I've seen can skyrocket and then go back down and then skyrocket again. But pretty much everything else look a Snickers is going to be really expensive as time goes on.

That's what I've learned.

>> Yeah, I mean the price of soybeans or the price of wheat fluctuate and to some extent that ends up in you know price of eggs has been a real roller coaster up and down. So, uh, they were up and then

and down. So, uh, they were up and then they were down and they're going up again. And that's because, uh, that's

again. And that's because, uh, that's the kind of market where they're really it it's just not like, uh, the market for, uh, streaming services or

something. And it's, uh, and, you know,

something. And it's, uh, and, you know, that's basically bird flu comes and goes and that's what's driving the price of eggs. So, but the overall cost of

eggs. So, but the overall cost of living, uh, your best guess is that that's going to rise 2% a year for the foreseeable future because the Federal

Reserve wants it to rise 2% a year for the foreseeable future. The only way that can change is if we get somebody like Donald Trump who gets his hands on monetary policy and decides that he

wants to, you know, roll the printing presses. any any politician who promises

presses. any any politician who promises to bring prices way down is either ignorant ignorant or lying or both.

>> I'm so glad that you mentioned the Fed and the president.

>> Two-part question. What is the Fed and why is it important that the Fed is independent from the president?

>> Okay, so basically the Fed controls the amount of money in circulation. Got it.

>> And the reason and that's has can have a tremendously powerful influence, right?

right? You know, if nor it depends on the circumstances, but you know, there have been times when the economy was terrible shape, 10% unemployment, and

the Fed said, "Okay, it's time to roll the printing presses." And the economy went zooming up, >> right?

>> Uh or when the Fed decides that we should suffer, which it sometimes does because they want to bring inflation down, we suffer. So, the Fed is enormously powerful. The reason that we

enormously powerful. The reason that we want to keep it quaiindependent, it's too easy to use. The problem with monetary policy is it's almost

frictionless. Uh other stuff, if you

frictionless. Uh other stuff, if you want to spend money or raise taxes uh or whatever, you have to pass legislation through Congress. It has to be debated.

through Congress. It has to be debated.

There's time, right, >> to think about it. The way that the Fed uh loosens monetary policy, the way the Fed reduces interest rates is a group of people get together, have a meeting in Washington for two days.

>> How many people is it? So, it's Jerome Powell and how many people?

>> Oh gosh, I should know the size of the open market committee and I don't. It's

they they call up the open market desk in New York.

>> Yeah.

>> And the open market desks uh actually at this point I think they just tap a few uh uh make make a few clicks on their computers to buy or sell treasury bills from banks. That's great.

from banks. That's great.

>> So, it's absolutely it's it's the easiest thing in the world. There's no

there's no um uh there's no friction.

There's no slowdown.

>> This sounds like this really does sound like some secret society stuff though because it's it's a small Clandiston meeting and it can shape >> monetary policy and economics for the country if not the world. Right.

>> Yeah. But it turned out that having a bunch of technocrats with a really strong professional ethos

um managing this thing was a way to preserve a fair bit of stability while also preserving a fair bit of flexibility. It's not nothing is

flexibility. It's not nothing is perfect, but that's a solution that has served us pretty well for, you know, for generations now. And uh you really we

generations now. And uh you really we know what happens if you don't do it.

You get Turkey where uh you know they you have a president who has uh people telling him what he wants to hear and >> Argentina as well.

>> Argentina um but the Turkish one is the most recent example. And by the time you know he was he finally said maybe these economists telling me I'm doing the wrong thing might know something. They

had 80% inflation.

>> Donald Trump is obsessed with the Fed and with interest rates. Yeah,

>> if it was up to him, he would basically have a thermostat on his desk in the Oval Office where he could just control interest rates. Why is it important that

interest rates. Why is it important that these two bodies be separate?

>> Well, if you like, our system is designed to protect us against uh people like Donald Trump. You deciding what the interest rate should be is something that at least requires you to have spent

some, you know, read some history, paid some attention to how the whole thing works. You don't want somebody who just

works. You don't want somebody who just believes what he wants to believe and is surrounded by people who tell him what he wants to hear um to be free to set

this very powerful policy tool wherever he feels like. If Trump policies are so bad, I keep reading how awful his economic policies are. And clearly kind

of in the vibes of our conversation right now, you're not a fan of his economic policies.

Why hasn't the stock market crashed?

>> Stock market, first of all, does what it's going to do. The uh um Paul Samuelson, one of my old mentors, uh uh famously said that the stock market had predicted nine of the last five

recessions, right? You know, the stock

recessions, right? You know, the stock market is is psychological. It's uh and one thing that Trump is doing is he's definitely cutting taxes on rich people,

which is good for the stock market. And

a lot of people believe that in the end he won't follow through on some of the worst stuff. And that you cannot

worst stuff. And that you cannot definitely look and say that markets don't believe that he's going to manage to take control of the Federal Reserve.

Uh I think the markets are probably wrong on that, but that's what the markets believe right now. Um what does that mean the markets believe?

>> Well, we can look at interest rates. If

you really thought that we were going to turn into Turkey or Argentina, then 10-year interest rates should be going through the roof, and they're not. The

main thing I think to say about the economy, you always need to remember that uh you know, we've got something like 160 million workers.

GDP uh is $30 trillion. Uh it takes a lot. You need it. It takes really major

lot. You need it. It takes really major stupidity to really wreck an economy that size and we're working on it.

>> If Yeah. So, if Donald Trump could control interest rates, what would that do to the stock market?

>> I I think that the markets would uh panic pretty soon. I mean, if he if he really gets to uh I I think the markets are insufficiently worried, but okay, more than you want to know, but right now

>> No, please tell me more more.

>> It's it's uh it look it looks like Trump is failing to fire Lisa Cook. Um he's

going to appoint somebody probably appoint somebody really not too bright as Federal Reserve chairman to replace Jay Powell but the chairman is not a dictator. There is this committee that

dictator. There is this committee that votes and whoever he appoints is very likely to be outvoted whenever he tries to do irresponsible stuff. So people are kind of betting that despite all of the

craziness that they won't actually >> So is the Fed kind of like the Supreme Court but he actually has less say on the Fed than he does on the Supreme Court.

>> Yeah. I I always used to say that the Fed is kind of like the Supreme Court that it's in fact the it is designed to be, you know, ultimately accountable to the voters, but very ultimately and with

a lot of insulation. And yeah, the the uh at this point the Fed is is acting a lot more like what it's supposed to be than the Supreme Court is, >> right? Because obviously presidents can

>> right? Because obviously presidents can famously get Supreme Court justices appointed, but the president can't do that with the Fed. Correct.

>> No. Um ultimately he does. I mean, it's uh it's a little complicated the the whole thing, but if you had a president who stayed in office for 20 years, he would eventually have a Federal Reserve

board that was and and a open market committee, which is not quite the same thing, but o eventually the whole Fed system would be at his beck and call, but that's not but it takes a long time.

I feel like there's two conversations happening in regards to the economy. And

I think it's between the asset class, basically people who have enough money to own stocks, whether that's fang or the S&P 500 or just basic index funds, and then the non-asset class, people

that are literally putting together money for rent, a car note, and groceries. Is there a disconnect between

groceries. Is there a disconnect between the two people talking? Look, the

economy is not the same for everybody.

In fact, one of the hallmarks of America since the 70s has been rising inequality uh where the the top, you know, what we

call the 1%, but when people say the 1% what they're their mental picture is really like more the 0.01% is the very wealthy are just have had incredible gains. And then there's the sort of

gains. And then there's the sort of typical worker who probably has over the

last 40 years seen uh his or her wages grow faster than inflation but not by that much. Now during the Biden years

that much. Now during the Biden years when everybody was so angry, there was actually really big wage gains for workers near the bottom. Actually the

bottom half of of US workers were doing really well. Now, that's gone into

really well. Now, that's gone into reverse lately, but you know, there are periods when when it it's not always the case that the rich get richer and the poor get poorer. Sometimes, uh, it goes

the other way. Um,

>> so you're saying there are times where the poor do get richer.

>> Oh, yeah. I mean, of course, there there's this miraculous thing that happened in the 1940s, you when we somehow came out of World War II. Uh,

you know, I grew up in a middle class society. the I grew up in the in the 50s

society. the I grew up in the in the 50s and 60s and in a in a world where where plumbers uh made as much or more than middle middle managers and where there

were very few extremely rich people.

>> That society didn't evolve gradually.

That society uh was created rather abruptly by FDR mostly during World War II and it stuck for about 30 years. So

um but uh so there that was a tremendous equalization, the great compression we call it. Uh it can't happen. You know,

call it. Uh it can't happen. You know,

it's I would love to see another great compression happen, but it it not not not under the current administration.

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Donald Trump promised that he would bring manufacturing back to the United States of America. How's that going?

>> Well, he's, you know, manufacturing employment is declining so far on on his watch. And look, it fundamentally can't

watch. And look, it fundamentally can't be done. the re the main reason we don't

be done. the re the main reason we don't have a lot of manufacturing jobs anymore is that we and we're just very efficient at producing manufactured goods and it

doesn't take a lot of people in manufacturing. Uh so we're an economy

manufacturing. Uh so we're an economy where jobs are in other things that and that's okay. You know what happened to

that's okay. You know what happened to farming? There are you know hardly any

farming? There are you know hardly any farmers left in America really. There's

a whole lot fewer cashiers than there used to be. uh that's okay because people can find other stuff. It's only

making sure not that you have particular jobs, but that there are enough jobs in total and that they pay decent wages.

>> Hypothetically, would it be bad if the US dollar was no longer the world's reserve currency?

>> For the US, it would matter hardly at all. People think people think that it's

all. People think people think that it's a tre tremendous privilege and it's not really worth all that much to the US. I

mean, a lot of those Benjamins, a lot of those $100 bills are being held by, you know, drug lords and whatever around the world, and that's like a zero interest.

>> Paul, I told you I like tipping people out with it. I am not a drug lord.

>> Okay. But, um, it's not really all that important. You know, Britain, the

important. You know, Britain, the British pound used to be a global currency and that sort of went away in the late 1960s and early 1970s. And you

look for evidence that that hurt Britain and you don't find it. But what is really important is it is really important for the world to have something that everybody accepts. Uh

another one of my old teachers Charlie Kindleberger had this great essay comparing the use of the dollar in world commerce to the use of English as an international language. It's uh you know

international language. It's uh you know it's kind of nice if you're those of us who are uh monolingual in English. It's

kind of nice that everybody in the world sort of speaks English. But the main thing is it's important that there be an international language and the dollar plays a really important role because it

is the universally accepted you know standard you know you can put up US treasury bills as collateral for anything and that that's a reduces friction makes the world business no work I mean

>> so it's not in the best interest for the United States as a country if Bitcoin were to become the world reserve currency >> that ain't going to happen uh because Bitcoin is the whole point about the dollar is it's the easy to use and

Bitcoin is not easy to use. But whatever

it is, the No, the the >> Paul, I don't want to get me'd. The

Bitcoin boys have already come after me.

I don't want to get me, please.

>> Hey, I've I've made some money off off crypto because I get invited to crypto conferences as a designated enemy and get paid a fee.

>> Oh [ __ ] In Bitcoin, in BTC?

>> No. In in in dollars. I am not going to take BTC.

>> Got to take BTC on the speaking gig.

>> No. people who are serious about this stuff, which kind of includes me because I one of one of the things I worked at for decades. Uh the real risk is not

for decades. Uh the real risk is not that something replaces the dollar, but that nothing does.

>> What is your take on crypto and where do you see it going?

>> I think crypto is basically a scam.

>> Oh, you agree with Talib open Ponzi, but Talib's now adjusted his take on that?

>> No, I I we can document. I mean, there there are there is essentially no legitimate use for crypto and nobody's using it for anything legitimate. uh

fewer than 2% of of Americans have ever made a payment in crypto. It's purely a speculative asset or a vehicle for for crime. It's used for money laundering

crime. It's used for money laundering and extortion and blackmail. Um and uh blackmail.

>> Well, if you want to blackmail somebody, you want to be able to, you know, have a non or a difficult to trace payment, you get you demand that you be paid in Bitcoin.

>> But but for real, you mean like organized crime? So you're saying like

organized crime? So you're saying like ISIS and >> actually North Korea has done a lot of uh has made extensive use of Bitcoin to extract uh to steal money.

>> So you're saying al-Qaeda and Venezuelan gangs are just in their crypto wallets exchanging BTC.

>> Well, actually they're mostly using Tether. They're mostly using stable

Tether. They're mostly using stable coins these days. But yeah, but no, I they uh I know a consulting firm that had their computers ransomware and the

they paid and they were and the payment wasn't BTC. So um uh it's

wasn't BTC. So um uh it's the it's the most amazing thing. you can

not find any I've been in many many meetings where we actually me and my friends uh my economist friends you know as sympathetically as possible ask

explain to us what function what legitimate function does this stuff serve and have never gotten an answer.

Well, if it's so bad why will the comments of this video be filled with people screaming at us calling us idiots?

>> Oh, because it's a cult. Um and the fact of the matter is the price has gone up.

So people who bought in early feel very smart and uh but there's a uh you know my my line about about crypto is that it's a it's technobabble plus

libertarian derp and uh that's pretty much it still but it's people are very passionate about it. Every time a left-leaning politician suggests that

raising taxes would be beneficial to the general public, a lot of business owners and people that live in Greenwich start screaming and say, "They are leaving.

>> I'm out."

>> I suppose at sufficiently high tax rates, people would move. But, you know, um part of my part of what I I like to say when people first of all, people say they're going to leave and mostly they don't.

>> Oh, is this like my friends in 2016 when Trump won and they said they're going to Canada? some of that.

Canada? some of that.

>> And I'm like, Brandon, you're not going to Canada.

>> Yeah. And even even just moving from I mean it does there are a few very rich people have left London for Milan because they they the Brits changed

their their tax privileges. Uh that sort of thing does happen. A few uh Wall Street guys have moved to Miami.

Although uh there were a lot of predictions that the whole thing was going to move down Miami.

>> What?

>> You like Miami?

>> No, I don't like Miami.

>> Same. I don't know what the [ __ ] is going on there.

>> Well, my my favorite quote.

>> I have a show in a couple weeks. I still

don't know what the [ __ ] is going on.

>> There was a guy. Yeah, it's the whole It's It's not my favorite place, but you know, there was a quote. There was an article about, you know, Wall Street types trying to move to Florida. One of

them said that the problem with moving to Florida is that you have to live in Florida. When people say, you know, you

Florida. When people say, you know, you got to keep taxes low for incentives. I

like to talk about, you know, so I live in New York City.

>> Yeah. which means that, you know, and I've done well, so I'm I'm in the top federal tax bracket, plus there's this New York state tax, plus there's the city tax, and put it all together, and

I've got a marginal tax rate. An extra

dollar I make, probably about 55 cents of it goes to to government. So, and

that's true of anybody who's sort of upper upper middle class, anyone in the three or four top percent in, you know, in in New York City, um, who has earned income. I'm not talking about private

income. I'm not talking about private equity or hedge fund guys, but you know, like like the movie Wall Street, 400,000 a year working wall street stiff. Um,

and you've all noticed how slowmoving and lazy people are in New York because, you know, why bother to work hard given the tax? Well, obviously not, right?

the tax? Well, obviously not, right?

Obvious rates at the level sort of 55% tax rate on on upper income, earned income New Yorkers is not enough to really make people stop working. So high

taxes and you know I remember AOC getting a lot of grief because she said that the top tax rate should be 70%. And

you know ignorant let well she actually was talking to my friend Joe Stiglets who's one of the world's greatest economists who has this very carefully sourced you know researched paper on

what is the optimal tax rate on top incomes and the paper actually says 73%.

So this was this is actually good economics says that yeah we should you don't want to soak the rich so much that it's really not worth at all striving but but the you know when somebody says

that terrible things will happen if you raise taxes on the rich you might want to consider the source.

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Code Han, for 15% off. I grew up during a time when it was all about quote free trade and quote free trade agreements.

What the [ __ ] is free trade? Oh, no.

That's I don't think free trade is a particularly abstrous concept. It means

that you don't pay a tax when you cross the border. Uh when you bring stuff

the border. Uh when you bring stuff across the border. I mean uh there there's free trade. Look, I just spent some time in the Netherlands. Lovely

place by the way. And Roderdam is one of the world's great ports. And um a lot of stuff is unloaded at Rotterdam and then

taken by train or truck on into Germany.

Um there's no tax levied when a train or when when a truck crosses. In fact,

there's nothing when you cross the the Dutch German border. It's just open and that's that's free trade. So there's

free trade between the Netherlands and Germany. Um there's mostly or there was

Germany. Um there's mostly or there was mostly free trade between the US, Canada, and Mexico. there no tariffs on most stuff that that crossed our borders. So you see it as generally

borders. So you see it as generally positive. Yes. I mean with with

positive. Yes. I mean with with exceptions there are and there have always been um you know there there are the people who put together the system

were not stupid. Uh I think they may have been a little too optimistic, but um there's a both in US law and in the general agreement on tariffs and trade

which we were which we're massively in violation of but anyway um article 22 basically says that uh forget everything else we said if if there's a national security concern you can do what you

need to do. We should have been protecting rare earth's production. We

shouldn't have allowed to China to be producing all the rare earths uh for the world. Um

world. Um >> I mean there's been some pretty dark examples. I remember in the late 90s

examples. I remember in the late 90s South Africa was trying to import cheap generic AIDS drugs, but a major pharmaceutical company backed by the American government fought to protect their patents through the World Trade

Organization.

>> Yeah. in a free trade agreement called the quote trade related aspects of intellectual property rights and as a result millions of people died.

>> Yeah. No, there have been that but that wasn't really about free trade. That was

about uh you know but wasn't it?

>> No, that was that's that's what's happened is a lot of free trade stuff got perverted. I I used to teach them

got perverted. I I used to teach them about this. Uh uh

about this. Uh uh >> but you you supported free trade, right?

I support actual free trade but not this is this is this is protecting monopoly patent rights which is not about free trade and we have look we we have

something um >> uh CAFTA Central American Free Trade Agreement and you take a look at it turns out it has nothing to do with free trade it's mostly about in fact

pharmaceutical companies protecting their patents so no that that is not that's not what I've ever been for >> so you're making a distinction between free trade in these actual free trade agreements slash and >> there's a lot of things that are called

free trade agreements that are really not about free trade >> yeah because it feels kind of [ __ ] up >> but but some of them are >> and I don't know is there another way to say that I don't know it feels kind of [ __ ] up >> no and I wrote that I wrote I just I don't know how to even articulate it just feels

>> No it is a lot of it is [ __ ] up but mostly what it is is it's it's uh wolves and sheep's clothing you have something that is really about protecting the interests of some

>> uh interest group that's being sold under the banner of free trade you know if if You ask, do I think that Bangladesh ought to be able to sell garments in the United States without

facing high tariffs? Yes, I do because Bangladesh is a desperately poor country and this is what they live on. Do I

think that US pharmaceutical companies or whatever and there's no there not really any countries. But do I think that multinational pharmaceutical companies should be able to charge uh nosebleleed prices for drugs in the

third world? No. And that's not at all

third world? No. And that's not at all the same thing.

>> I have a question. Does capitalism and authoritarianism go together? Because in

the 90s there was this narrative that China was going to open itself up to American markets and American businesses. And once there was economic

businesses. And once there was economic freedom, political freedom would be right around the corner. Free trade,

>> right?

>> China, bam. Yeah. Um, democracy. I never bought

bam. Yeah. Um, democracy. I never bought that. And I think I'm on record as

that. And I think I'm on record as having never bought that. And there was a lot of nonsense about all this. Now

the real stuff is way back going all the way back to FDR. Uh the US has had the belief that that uh international trade

can be good for peace. That by binding countries together uh through lots of trading links you make it harder for them to go to war with each other and that it can be a

force uh for peace. the the European Union was originally about harnessing economic interests to basically make it very hard for France and Germany ever to

have another war and that has kind of worked.

>> You really believe that? You think KFC is the path to peace?

>> Well, not so much KFC, but uh the coal and steel community making sure that that uh German steel mills or French steel mills relied on German coal and vice versa actually did help prevent

wars in Europe. Um none of this is guaranteed. who does seen that uh um and

guaranteed. who does seen that uh um and I think a lot of people underestimated the extent to which all the old you know all the old evils

are still possible. I mean who who imagined Ukraine uh the Ukraine war as a as a real possibility in the 21st century. So all the old stuff can still

century. So all the old stuff can still happen but that doesn't mean that it's completely wrong either. I do think that we you know Europe is a is a success story. Economic integration of Europe

story. Economic integration of Europe hasn't worked for everybody. hasn't

worked but it at Europe used to be always on the verge of another war and now it's really hard to think of that in Europe. So it you know you you

Europe. So it you know you you humility I think I said that before in this conversation you know have some humility the the idea that trade can be

something that helps with peace is valid. The idea that free trade brings

valid. The idea that free trade brings democracy sort of like mechanically and automatically of course not >> right. So are you kind of saying that

>> right. So are you kind of saying that hey authoritarianism and capitalism can they can run both programs in parallel?

>> Oh no actually what's really kind of what people don't get I mean capitalism doesn't guarantee uh and free markets don't guarantee democracy uh

authoritarianism and uh and free markets don't nyx but it's the it's the other way around. It's not

that free markets destroy authoritarianism. is the

authoritarianism. is the authoritarianism ends up destroying free markets. Any system where there's really

markets. Any system where there's really no kind of rule of law, any democratic process always ends up being crony capitalism.

>> But isn't China incredibly successful over the past half century to century?

>> Yeah. And China, but you know, they it is worth saying that China is uh they're still like a third of uh of our

productivity. So it it's doubtful

productivity. So it it's doubtful whether they can get so far along. But

it's also true that it partially depends on the sophistication and what what you see and you can see that happening in America right now. You know, corporate types who backed Trump because they

think he's going to be cut their taxes and it's good. They're going to find out that uh they don't own him, he owns them. And so they're already starting to

them. And so they're already starting to find that out. And uh you eventually end up oligarchs who who back an autocrat uh

and then decide hey I'm an oligarch uh I am going to throw my own weight around to end up falling out of windows.

>> Well you don't think that these oligarchs aren't going to stand up for democracy. I mean listen Kla Harris just

democracy. I mean listen Kla Harris just went on MSNBC and she had some pretty powerful words for Rachel Matto. But

I've worked closely with the private sector over many years and I always believed that if push came to shove

those titans of industry would be guard rails for our democracy for the importance of sustaining

democratic institutions.

And one by one by one they have been silent they have been you know yes I use the word feckless.

>> Wow.

>> She dropped the f- word.

>> Yeah.

>> Did you think those titans of industry were going to stand up and be the guardrails?

>> I I guess I've read more history than she has.

>> No. I I I I didn't think uh >> shots fired. Krugman.

>> No. Well, sorry. But we know we we we know what happened with with with Putin and the oligarchs. We know what happened in Hungary. And the one thing, you know,

in Hungary. And the one thing, you know, is that the uh the the the wealthy elite never stands up. They're they're the last people you can count on.

>> Do you want to do the lightning round?

>> What?

>> We always end with the lightning round.

>> Okay. I don't know what that is, but that's fine.

>> All right.

>> Do tax cuts pay for themselves?

>> No. If rich people give money to poor people, does it make society as a whole more rich or more poor?

>> Mostly richer. Why do Republicans only care about deficits and debt when they're not in power?

>> They don't care about deficits and debt.

They care about trying to prevent Democrats from spending money on helping people. What's more important for

people. What's more important for economists? Being respected by other

economists? Being respected by other economists or being right?

>> Oh, some of both. I'm afraid, you know, we're human beings. Nim Taleb says, "You're a BS vendor that will not deadlift. Will you deadlift against

deadlift. Will you deadlift against him?" It doesn't seem to me to be a

him?" It doesn't seem to me to be a really good way to settle intellectual arguments.

>> I mean, what's really great about deadlifting is you can do uh one rep max. You're going to take four to five

max. You're going to take four to five minutes off before you get to the next set. Have it out.

set. Have it out.

>> Yeah.

>> Then get back to it.

>> What is the best measure of whether an economy is working? Justice or

efficiency?

>> Oh, I would say neither. I mean,

economies don't have to be certainly efficiency is not enough. You can have an efficient economy where all the money goes to one person. Um but justice, you can have a very just but also very poor

economy. Um the the measure of economy

economy. Um the the measure of economy is is does it give people good lives?

Why is it that when businesses get free stuff from the government, it's called an incentive? But when poor people get

an incentive? But when poor people get free stuff from the government, it's called a handout.

>> Yeah. Well, who pays? Who makes

political contributions? who's uh who's on the other end of the revolving door uh for for pe for people in politics, you know, maximum cynicism is totally appropriate here.

>> Does economics deserve to have a Nobel Prize or is it basically a kids choice award for intellectuals?

>> I have mixed feelings about the Nobel in economics. I mean most of the Nobel

economics. I mean most of the Nobel prizes uh you know leaving out present company have been for actually valuable contributions. Some of them have been a

contributions. Some of them have been a little bit funny, but you know, when I look at, you know, Claudia Golden do getting a Nobel for really telling us

the story about uh women's work, um that certainly deserves some kind of prize. So, you know, why not?

prize. So, you know, why not?

>> Can I make a pitch?

>> Yeah.

>> So, I have two Peabodies. I definitely

don't deserve them. It's for excellence in radio and television, two things that don't exist anymore. But I would happily take a Nickelodeon's kid choice award.

Number one, my kids would think it's so [ __ ] cool. Number two, the possibility of getting slimed on television. And number three, you get a

television. And number three, you get a surfboard.

Supreme Court Judge Lewis Brandy Swan said, quote, "We may have democracy or we may have wealth concentrated in the hands of a few, but we can't have both."

Do you think capitalism and democracy are compatible? Yes or no?

are compatible? Yes or no?

>> Modified limited uh capitalism.

>> Yes or no? Paul,

>> no. Capitalism, yes, but not without limits. I mean, we had for a good long

limits. I mean, we had for a good long stretch combination of progressive taxation, estate taxes, strong unions.

That was still capitalism, but it was also democracy. It's when you have But

also democracy. It's when you have But no, I don't think we can have people as rich as uh Elon Musk and Larry Ellison and still sustain a democratic system.

>> Are you optimistic about the future or not?

>> No, I'm actually quite terrified on multiple fronts. I'm terrified about the

multiple fronts. I'm terrified about the fate of democracy. I'm terrified about climate change. Um I just uh um you

climate change. Um I just uh um you know, you can't you can't just roll over and and and and hide under the bed. But

uh no, I'm I'm I'm uh extremely extremely worried.

>> Paul, you got to start deadlifting and you got to start getting after it, big dog, cuz the fight continues and we need that dog in you.

>> Oh, I run. Does that do it?

>> No, I I need progressive weight training.

>> Okay, >> Paul Krugman, thank you so much.

>> Thank you. Hurry right away. No delay.

Make your daddy glad. You have your last