http://www.pbs.org/moyers/journal/09192008/watch2.html(snip)
BILL MOYERS: But as we speak, central banks are pouring billions of dollars into the global economy. Is this a palliative or is this a panacea?
KEVIN PHILLIPS: Oh, I think it's a tricky game. In one respect, they want to make a lot of money available to make it easier to get lending unfrozen. The second thing they want to do is support the dollar, which is under enormous pressure now because people say it's not a store house of anything. If you want to keep your money safe, put it in gold. So they're worried about the huge rise that gold had in this week.
So I think what we're looking at here is an attempt really like a drunk will feel better and get over his hangover better sometimes just by having more liquor. And I think what we're seeing with the actions of the Federal Reserve Board is the people who are the arsonists, the people who pumped it all up, who blew up the bubble are now racing to show up in firemen's hats and say, "We're gonna solve it. We're gonna take care of all this. Oh, and by the way, we're gonna keep pumping in the gasoline that we pumped in before that made a good flame." But, you know, nobody knows that.
BILL MOYERS: Are you suggesting that the best thing to do is let the house burn down and build it over again?
KEVIN PHILLIPS: I would say, first of all, you never should have blown the bubble this way. If we could invent a time machine and go back and cure it that would be the best economics of all. Having blown it up, I think the case is that they should have accepted more of the tough medicine beginning last year and not tried to rescue every stray tentacle of the financial octopus-
BILL MOYERS: But they didn't. We don't have a time-
KEVIN PHILLIPS: They didn't. No.
BILL MOYERS: So here we are. Where are we?
KEVIN PHILLIPS:
Where we are, in my opinion, is about halfway through. Halfway through the serious part.BILL MOYERS: Halfway to the bottom?
KEVIN PHILLIPS: It depends what you use in terms of bottom. I mean, in some ways, real estate prices were lower in 1936, '37 than they were in 1929 or '30. So I'm not sure exactly what you use as the measurement, real estate, the stock market. But it's a package which Americans have to understand is going to be awful. We're probably going to wind up nationally losing 20 to 30 percent of the average value of homes.
The stock market will — right now it's in the middle 10,000s. The people who were nervous but not super bears expect that the Dow will go back down into the 9,000s. But what people have to remember is that in 2000 the Dow was 11,700. If you take off where it's lost since then and you adjust for inflation, you're looking at a 30 to 40 percent decline. So houses are matched in a way by what's happening in stocks.
BILL MOYERS: So we're all going to be poor? Well, not all-
KEVIN PHILLIPS: Well, we're not all going to be poor because there are people in Wall Street who've used all this new technology basically to bet the other way. I mean, one of the things that finance can do now, it can bet on anything. It's like Las Vegas merged with insurance and real estate people. And they have figured out new ways to gamble. And they can gamble on how many people in Ohio are going to lose their shirt.
BILL MOYERS: So who do you trust anymore? I mean, you write in your book that the most worrisome thing is the extent of official understatement and misstatement, the preference for minimizing how many problems there are and how interconnected they are.
KEVIN PHILLIPS: Well, just to give you an example of how many there are, Alan Greenspan has finally decided to admit, you know, this may be one of those once-a-century biggies. Well, what makes it fascinating is that I sometimes use the description "seven sharks." There are seven sharks in the tank with the economy.
And the first is financialization because we're so dependent on this industry that's sort of half lost its marbles. The second is that you have this huge buildup of debt, absolutely unprecedented anywhere in the world. The third is you've now got home prices collapsing. The fourth is you've got global commodity inflation building up.
The fifth is you've got flawed and deceptive government economics statistics. The sixth is that you've got what they call peak oil where the world is, to some extent, running out of oil. So it's not just commodity inflation, it's a shortage of oil. And then the last thing is the collapsing dollar. Now, whenever you get this sort of package in one decade, you got a big one. And when Greenspan says it's a once a century, I think it's another variation but on a par with the Thirties.
BILL MOYERS: What do you think when you hear John McCain and Secretary Paulson say that the fundamentals, however, are solid?
KEVIN PHILLIPS: Well, John McCain once said he didn't know anything about economics. And half the time what he says, you know, proves that on a day-by-day basis. I don't think we have a sound economy at all. Not remotely at this point. I mean, there are, like, ten yardsticks I could use. Paulson is your typical Treasury Secretary guy that has to deal with it. And everybody knows he has to exaggerate. He has to say all the Hoover type stuff about how strong the economy is and the recession's going to be over in three months and that sort of stuff. I don't really credit these people very much. But, frankly, I don't credit the Democrats either.
(snip)
BILL MOYERS: But we are going to have a new president in January, no matter how despairing people may be about that. What is the first thing you would find convincing if he did it to meet this meltdown, this issue, this crisis?
KEVIN PHILLIPS: Well, I guess I would without talking out of school particularly, Obama told me one time he read some of my books. So I would be very interested and impressed if he in January started to say something has really gone wrong in this country. And I'm not sure that I or anybody else can turn it around. But we borrowed so much money.
We've let this Las Vegas version of what used to be ordinary banks in our ordinary hometowns go berserk. Our currency is having enormous problems. People are losing their homes. We've got to face up to what our problems are and talk about how this happened. Who did it? Why? Who made the money?
Well, I think if he were to start talking about I'd take him seriously. But I think half of Washington would have a problem in their stomach needing quick relief, let me put it that way. Cause you don't rock that boat. You pretend that it's a sound economy. And if it's not sound, it's nothing that the old Democratic elixir can't fix, you know? Old New Deal in a bottle. We'll have a couple of swigs and you'll be happy again. I don't expect him to level.
BILL MOYERS: But is it conceivable to you that a John McCain might have gotten the message now to see what's at stake in the presidency that he would hold if he is elected and that he might actually turn out to be a reformer?
KEVIN PHILLIPS: Well, I think there's some element there in contrast to what you've sort of osmose at the Harvard Law School, what you osmose in a naval family I think would be much less sycophancy toward Wall Street and the money crowd. So I think McCain has that. On the other hand, he doesn't have any knowledge. Anybody who thought that Phil Gramm was somebody who could instruct you in fairness to ordinary people and your — this is the guy, "Nation of Whiners" remember Phil.
BILL MOYERS: Yeah.
KEVIN PHILLIPS: So I'm very dubious. I think part of McCain would probably feel like his father and grandfather, the naval officers. But, you know, he's a Republican. He'd have a Republican package.
BILL MOYERS: The book is BAD MONEY: RECKLESS FINANCE, FAILED POLITICS, AND THE GLOBAL CRISIS OF AMERICAN CAPITALISM. And as I said at the beginning of this interview, if you have to read one book, this is the one to do it. Kevin Phillips, thanks very much for being with me.
KEVIN PHILLIPS: Good to see you.
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