Getting off Track

This video from ReasonTV shows you an interview with John B.taylor about his book Getting off Track.

Getting off Track Reason TV John B. Taylor Michael: Hi I’m Michael Moynihan with Reason TV and today we’re talking to John B. Taylor author of Getting off Track government actions and interventions caused prolonged and worsened with natural crisis. John is a professor at Stanford University and fellow at the Hoover Institution. John, give us a rough idea of the premise of this book and why this seems to go against the general conventional media wisdom about the financial crisis? John: Well the conventional wisdom is market screwed up and need to have a lot of regulation and rarely is the role of government mentioned and of a positive way of maybe having caused this so what I did is look at the data, looked at the numbers didn’t really try to look for a particular reason but it kept popping up in each case government seem to be there trying to do too much frequently trying to intervene too much and actually made things worse and that’s what I found. Michael: Give us an example of a government intervention that either created or helped create or even prolong the crisis? John: Well I think the easiest example is to go back to last fall when you had this panic and the markets crashed and you had there you see the government coming forth with a huge package 700 billion dollars and the secretary of treasury and the chamber of the federation reserve going to the banking committee and with only 2-1/2 pages of legislation. Kind of talking the economy down in order to attract interest and people are kind shocked quite frankly and I think that had a lot to do with the lack of trust, the lack of confidence and people realized that one didn’t have much of a plan at that point and try tried to intervene but made it look… Michael: Yeah what do you make of the current situation, the bailouts, the trillions of dollars that are being thrown to guide us where? John: Well ironically it’s just more of the same, you know, basically but instead of looking at what is actually happening with these government interventions you just doing them some more and so this large stimulus package 787 billion dollars doesn’t do much to stimulate the economy. We tried that last year, had a big stimulus package in 2008, it didn’t’ work. We’re doing it again. Now we’ll plan to deal with the banks and how to articulate them very clearly. The uncertainty again tanks the market so it’s really a continuation in some sense even worse. Michael: I mean is there inevitability about the rebound of the American economy and if that does take place let’s say in the next couple of years does it are we in a difficult position as relatively food market people that the Obama administration and it’s supporters will take credit for the recovery of American economy? John: It’s a possibility and it’s always a possibility to say this work that didn’t work and not looking at the data. I hope people look at the numbers because you can really find out what’s going on so I just listen to somebody say something, look what actually happened it’s pretty convincing to me. Michael: We have 5 chapters here and every one of them is pretty much a question, what caused the financial crisis is chapter 1-15 pages could you give it to us in a couple of seconds? John: Monetary access is the Federal Reserve that took the interest rate down to very low levels 1% kept it there for a long time that generated a housing boom because interest rates were so low. Housing boom inevitably brings a Boston all the foreclosures and all of the bad debt that comes from that so monetary access is. Michael: Second chapter is another 10 to 15 pages of what prolonged the crisis? John: Prolonging the simple thing is missed diagnosed. It’s like a patient comes in got cancer. The doctor says you got a digestive problem treats it with something to give the indigestion and the cancer gets worse and in this case the misdiagnosis was that they thought it was just acquitted, not enough money in fact there was a problem in the banks. Banks had problems on their balance sheets. Michael: Let me skip ahead to the forth chapter which is a bit of a positive mode. What went right in the two decades before the crisis I can imagine anything going right on the economy at all but two decades before things are going swimming, right? John: Absolutely you know you think about it, it was the economist called this period the great moderation or the long boom because long expansions and really short recessions people forget what big recessions were but since the early 80s all the way through actually now this is serious recession very smooth times and again not a lot of intervention kind of a hands off policy in any respects monetary policy following pretty clear guidelines, a lot of deregulation policies of freed up markets. Lower tax rates, it’s all those things which generated a consistently strong economy for almost five years at least 2 decades. Michael: So now we are in a difficulty we’re in D.C a danger that we are going to have you know obviously the amount of government differential we’ve had in the past couple of months is frightening. New regulation bad policy what do you see as the idiotic solutions that people are trying to put? John: I’m very concerned with that because again my story here isn’t told very much, the story government was really at the center of this and causing the problems because usually there’s a problem with the market so we go to do even more of these things. You now president Obama talking about the all new solutions is government and so I’m worried quite frankly we’re going to be doing the wrong thing for a while it’s going to take awhile to get back on track you now. It took when Reagan came in early 80s that was getting back on track issue it doesn’t even have good performance in the 70s high inflation a lot of instability so it’s going to take some effort in the love communication and showing people that in fact the second role with the market system a lot of intervention causes problems. Michael: Thank you John for coming by thanks for talking to us. John: Yeah enjoy. Michael: And everyone should go out and pick up Getting off Track which is available Amazon.com and for Reason.TV I’m Michael Moynihan.