Paul Samuelson

Here are some bits from a very interesting interview in October 2008 of Paul Samuelson by a Japanese newspaper. Samuelson was the leading post-WWII economist and his textbook taught a generation of economists. He may be very aged now but this interview proves that his mind is still keen:

Question: The current global financial crisis is said to be the worst since the Great Depression. What is your view?

Answer: I think it is definitely the worst crisis since the 1929-1939 Great Depression, both in America and globally, and I think it was an unnecessary breakdown as there was no need for America to have a meltdown.

When George W. Bush became president in 2001, he inherited a country with quite sound (fundamentals) from President Bill Clinton with an overbalanced budget.

Now this does not mean that there were not problems ahead ... (there had been problems) ever since 1981 when President Ronald Reagan took office.

He was not a bad movie star but he brought into power a swing to the right. This is what we call "extreme right, supply side economics." And, from 1981 we trace the acceleration of the huge yearly balance-of-payments deficit of the United States, which is still going on.

...

Q: How much of an impact will the global financial crisis have on the Nov. 4 elections in the United States?

A: Now, Bush has done everything wrong in eight years. I'm not going to discuss Iraq or Iran or Afghanistan or North Korea. I'm an economist. I'm not an expert on geopolitics. But, he has lowered America's leadership role in the world greatly and maybe permanently.

Voters are going to repudiate him and in all likelihood both Houses of Congress will be strongly controlled by the Democratic Party. This already happened after his first term in office. But this is almost the first time the Democrats have come back since Ronald Reagan's time, since 1981 to 1988.

George Bush will go down in the history books as the worst president that America has had in more than 200 years. And, that couldn't have happened if the voters had not moved to the right.

Now, aside from economics, which is my speciality ... President (Lyndon Baines) Johnson introduced Civil Rights ... equality in the law for black Americans. Immediately, all of the Democrats in the solid South moved to the Republican Party and that's part of the reason that for most of the last 28 years, since Ronald Reagan came to power, the Democrats have been the minority party.

I think after November that will change and it will change for two quite different reasons, both very important.

One is the Iraq war, which is a disaster. It's as bad as the Vietnam War and the Vietnam War entangled four or five presidents and there was no victory, and there can't be in the end a victory in Iraq and in neighboring places. Well, people don't like to see every night on television, a list of names of the new dead soldiers. So that alone would hurt Bush's reputation and his power.

But the other reason is because people on Main Street in America are hurting. The reason they're hurting goes back to 1995 when Alan Greenspan, as the chairman of the Federal Reserve Board, made no efforts to curb the stock market bubble.

So the American electorate is very unhappy. Free trade and globalization add to world productivity. It also adds to the potential standard of living of many people, but unequally.

So, if Bush had been as wise as Clinton, you still would have from free trade a worsening of the situation of the lower middle-classes compared to the upper middle-classes and the very rich.

Adding to that, we had what Bush called "compassionate conservatism," which is generous to millionaires and helping to make them billionaires. The trouble is, it is ungenerous to people below the middle. So with this meltdown November's election should certainly go toward the Democrats.

...

Q: You have experienced and studied the Great Depression. What is the difference between the Great Depression and the current financial crisis?

A: Well, the present one in America is still primarily a Wall Street phenomenon. But right behind that is going to be a Main Street downturn, because all of the swollen population, aged 50 to 65, have lost from these subprime ridiculous mortgages.

They've lost much of what they're going to need to retire. And when I say "lost," it's not something that the government can stuff back in. It's gone. And, it all traces to bad deregulation, to incompetent appointments, to conflict-of-interests appointments.

Harvey Pitt, the first head of the SEC for George W. Bush was a lawyer to the four big accounting firms. The four big accounting firms do not deal from an honest deck of cards. They have tricks to keep things off the balance sheet and so forth. And, these are the new fiendish Frankenstein monsters (laughter).