The Exchanges

Q I have to ask, we, we just mentioned, you know, you're being a father and your son. Did that impact how you brought up your son and being a father yourself in terms of the conversations you have around the dinner table?

A Yeah, it was a part of, uh, my kids, uh, upbringing. Sometimes it worked better, sometimes it worked, uh, worse. When my daughter Ruthie was four or five, I, um, needed to get a taxi, and a taxi didn't come to my house when I wanted it, and I said, damn it, that's what you get with a Monopoly cab company. And Ruthie said, what's a monopoly, Daddy? And I said, well, it's when there's no competition, and she didn't understand, and so I wanted to explain it to her, so I said, Ruthie, what would you do if you went to a toy store, and they didn't have the toy you wanted, and they were really mean to you? And I was hoping for the answer. Well, I go to a different toy store so I could explain to her about competition. But in fact, she said, well, then I'd steal their toys. Um, maybe Ruthie learned something out of that whole conversation, but I sort of learned something about how people react to market mechanisms.

AI assessment note: “Yeah, it was a part of, uh, my kids, uh, upbringing.”

Q UK. Um, final one before we do a quick fire, but we mentioned Jack Ma, we mentioned China there. I'm just fascinated. When you analyze the next five years for China, Xi Jinping's got, you know, a lot on his plate. How do you analyze the next five years for China? And given what we said there about, you know, the challenges for Europe, how do you think about them?

A It could be a difficult five years for China. Uh, look, uh, what makes, what makes GDP? What makes an economy? It's people and it's capital. China has more desire for capital flight than any country ever has in the history of the world. It's controlled If it wasn't controlled, there would be staggering capital flight from China. And the number of babies born in China has fallen by just about half in the last six years. And so if you're thinking about a society where people don't want to have children and they want to take their capital out, that's a judge, that's a society He's showing a lack of confidence, and if a country's own people aren't confident, I'm not sure why I should be.

AI assessment note: “It could be a difficult five years for China.”

Q You said about renouncing US citizenship there, and it made me think about kind of actually the, the US dollar itself as the reserve currency. Interesting mind I have. How do you think about the demise of the US dollar as the reserve currency state? And do you think people are getting ahead of themselves in their negativity and pessimism?

A I think they are. Um, If countries have lost their reserve currency status like Britain, it's the least of their problems. Britain lost the pound special role after it stopped being a superpower and stopped being an effectively functional economy. So we may make serious enough mistakes as a country that people no longer want to hold the dollar, but if we make mistakes that grave, the fact that people aren't rushing for dollars will be the least of our problems. I also think that if you want to get out of the dollar, you have to get into some other currency, and there's a lot that's problematic Um, about, uh, other currencies. It's a joke, but not without some element of truth to say that Europe's a museum, Japan's a nursing home, China's a jail, and Bitcoin's an experiment. And so I think the dollar has a lot of the kind of advantages that the English language has. It's right now kind of where everybody else is, and so that makes it where everybody wants to be. So if we don't make grave mistakes, I think the dollar's gonna remain the world's reserve currency.

AI assessment note: “I think they are.”

Q You said about renouncing US citizenship there, and it made me think about kind of actually the, the US dollar itself as the reserve currency. Interesting mind I have. How do you think about the demise of the US dollar as the reserve currency state? And do you think people are getting ahead of themselves in their negativity and pessimism?

A I think they are. Um, If countries have lost their reserve currency status like Britain, it's the least of their problems. Britain lost the pound special role after it stopped being a superpower and stopped being an effectively functional economy. So we may make serious enough mistakes as a country that people no longer want to hold the dollar, but if we make mistakes that grave, the fact that people aren't rushing for dollars will be the least of our problems. I also think that if you want to get out of the dollar, you have to get into some other currency, and there's a lot that's problematic Um, about, uh, other currencies. It's a joke, but not without some element of truth to say that Europe's a museum, Japan's a nursing home, China's a jail, and Bitcoin's an experiment. And so I think the dollar has a lot of the kind of advantages that the English language has. It's right now kind of where everybody else is, and so that makes it where everybody wants to be. So if we don't make grave mistakes, I think the dollar's gonna remain the world's reserve currency.

AI assessment note: “I think they are.”

Q Regardless of, like, whether it's fair or not, a question I have is, like, is it realistic, Larry? Because, like you said very accurately, a lot of our audience do take advantage of the benefits of moving abroad, moving to Lisbon, moving to Milan or Italy now where they have the great tax treatment. Is it even realistic when you can move and avoid taxes, bluntly?

A If you, uh, if you're an American citizen, You cannot avoid taxes by moving your global income. Wherever you are, if you are an American citizen, you can renounce your American citizenship. And there are a certain number of economic Benedict Arnold's who, uh, do just, uh, do just that. But most people don't want to renounce their American citizenship because it comes with a great deal of, uh, So, I don't think it is impractical. If you look, the economy grew faster. During the period several decades ago, when we had higher tax rates, then it has grown, uh, more recently. So I think the argument for cutting high tax rates is pretty much, uh, indefensible, starting from where we are. Now look, I am I am not someone who believes we should have a wealth tax. I am not someone who believes we should soak the rich. I am somebody who believes in creating opportunity rather than going to war with inequality, because I think if we had more entrepreneurs, more multi-billionaires like Steve Jobs or Bill Gates, That we would be a better country, but to suggest that somehow we can't Impose taxes at current levels, that we can't reform the estate tax to make the estate tax something that people pay rather than they're largely successful in, uh, avoiding. I think that's, uh, to be honest, kind of demagogic and contradicted by all the evidence, uh, that we have. Now, true, it's much easier For …

AI assessment note: “If you're an American citizen, You cannot avoid taxes by moving your global income.”

Q Larry, what would you do to find more revenue? The holy grail question.

A So the first thing I would do is enforce the tax law we have much better. We have a gap between taxes that are owed, that everybody agrees are owed under the current law, and taxes actually collected that will total eight trillion dollars over the next 10 years. Eight trillion dollars. And that's because we don't collect, we don't audit the vast majority The majority of even the wealthiest, uh, people. And so many of them just cheat. Uh, not most of them, not even, I shouldn't have said many, I should have said, um, a small number of them cheat, but it adds up to a lot of money. And we could deter that if we went back to auditing people, even at the rate that we did a decade ago. Um, and we have stopped, uh, doing, uh, doing that. So we need to beef up the IRS very substantially so it can collect taxes that are owed.

AI assessment note: “the first thing I would do is enforce the tax law we have much better.”

Q Can I ask, does that, does that really make that much of a difference, Larry? Forgive me, because in proportion to the spending and the needs, taxing your individuals who are evading, does it make a difference?

A A trillion dollars here, a trillion dollars there, pretty soon you're talking real money. And we could raise between half a trillion dollars and a trillion dollars, ah, that way. The business community was right to be very concerned that the corporate tax rate was too high a few years ago. But there was no need to take the corporate tax rate down into 21%. 25% For business. And the United States stands out right now for rejecting a global agreement that would have made it much more difficult for corporations to put their income in the Cayman Islands or Ireland. Avoid, uh, taxation. So we need global tax cooperation and reasonable, uh, corporate tax rates. There are also things that are frankly, uh, loopholes. I, I suspect many of the people who listen to your show, um, take advantage of carried interest. They engage in real estate exchanges, so-called like-kind real estate exchanges. You know, when carry interest is, gets capital gains tax treatment, even though it's compensation for working, really. If I sell a stock and buy a different stock, I have to pay capital gains tax on the stock I sell. If Donald Trump sells a property and, and exchanges that property for another property, he doesn't have to pay any capital gains tax. And that's not a reasonable, ah, tax provision. There are a variety of tax shelters where basically they make it possible Earn their living by trading a…

AI assessment note: “we could raise between half a trillion dollars and a trillion dollars, ah, that way.”

Q work my ass off. I have heart palpitations. I have psoriasis. I've developed an addiction to alcohol. Man, I've given my life for this, and I don't work 35 hours a week or 40 hours a week. I work 90, a hundred, and I have done for eight years, and now I get taxed 50% while my brother works half time. And he gets taxed 20%? That doesn't seem fair.

A So, first of all, you're, let's make sure we understand each other. Your brother gets taxed, gets taxed at a lower rate on, say, the first 100,000 dollars of income he earns, often get taxed at a lower rate on the first 100,000 dollars of income that you earn. The only difference is, That you seem to earn a lot more money than your brother, and on the extra money that you earn, you are paying a higher fraction of it, ah, to, ah, the, the government, and I guess I would ask you, does a marginal dollar mean more to somebody who has ten million dollars Or to somebody who has 10,000 dollars. And my guess is it means more to somebody who has 10,000 dollars. And so if we have to take some away, it's better to take some away from those who are less painful. And I will tell you that this is something that economists have studied a lot. I've With a lot of entrepreneurs. And yes, the way the United States was in the In the mid-sixties with 90% tax rates, crazy. The way the United States was in the mid-sixties and seventies, 70% tax rates, crazy. But do I think that the current top federal income tax rate of 37% really is working to discourage very heavily of work? I'm not sure that it is for very many people. Some people may actually work harder because they want to get to a certain level, and if taxes are higher, they have to work more, ah, to get to that level. One other thing, the big…

AI assessment note: “if we have to take some away, it's better to take some away from”

Q UK. Um, final one before we do a quick fire, but we mentioned Jack Ma, we mentioned China there. I'm just fascinated. When you analyze the next five years for China, Xi Jinping's got, you know, a lot on his plate. How do you analyze the next five years for China? And given what we said there about, you know, the challenges for Europe, how do you think about them?

A It could be a difficult five years for China. Uh, look, uh, what makes, what makes GDP? What makes an economy? It's people and it's capital. China has more desire for capital flight than any country ever has in the history of the world. It's controlled If it wasn't controlled, there would be staggering capital flight from China. And the number of babies born in China has fallen by just about half in the last six years. And so if you're thinking about a society where people don't want to have children and they want to take their capital out, that's a judge, that's a society He's showing a lack of confidence, and if a country's own people aren't confident, I'm not sure why I should be.

AI assessment note: “It could be a difficult five years for China. Uh, look, uh, what makes”

Q Larry, what would you do to find more revenue? The holy grail question.

A So the first thing I would do is enforce the tax law we have much better. We have a gap between taxes that are owed, that everybody agrees are owed under the current law, and taxes actually collected that will total eight trillion dollars over the next 10 years. Eight trillion dollars. And that's because we don't collect, we don't audit the vast majority The majority of even the wealthiest, uh, people. And so many of them just cheat. Uh, not most of them, not even, I shouldn't have said many, I should have said, um, a small number of them cheat, but it adds up to a lot of money. And we could deter that if we went back to auditing people, even at the rate that we did a decade ago. Um, and we have stopped, uh, doing, uh, doing that. So we need to beef up the IRS very substantially so it can collect taxes that are owed.

AI assessment note: “So the first thing I would do is enforce the tax law we have much better.”

Q Is there a way to manage inflation without the poorest parts of society being the most hit?

A The way to hit the poorest parts of society hardest is to not manage inflation. You and I can configure our financial affairs so we're hedged against inflation. We may even, by borrowing money, Be able to be beneficiaries of inflation as we pay it back in, uh, cheaper forms. So the most important thing we can do for the poor is to make sure that we are effectively, uh, managing inflation. As we do that, uh, it's terribly, terribly important that we have the right safety nets in place in terms of unemployment insurance. In terms of, uh, social support, uh, payments. But make no mistake, a failure to contain inflation Not focus on inflation. It is a determination to enable the shrewd and worldly to benefit, ah, at, ah, the expense of the people who are the backbone of our societies.

AI assessment note: “it's terribly, terribly important that we have the right safety nets in place”

Q If we think about, like, Volcker taking rates to, you know, 19, 20%, is there any incentive for the Fed or anyone else to raise interest rates to such a level which would cause such economic harm in, in the short term? Is there any incentive to, really?

A We're gonna have to raise interest rates higher than we would have if we raised them more promptly, and if we delay excessively, We will have to raise them even higher as a consequence of that delay. There's nothing in the current situation that says to me that, um, we need to get rates anywhere near where Volcker, uh, took them. But if we were to neglect this problem, For a decade during the seventies, we might get to, uh, such a, uh, such a point, but I think an important part, Henry, the reason we have independent central banks and we don't have the political process make the monetary policy decision is because we Need it to be taken with a view to the long run. In the short run, it's always easier to print more money and paper over problems. But when you keep doing that, you get into more and more trouble as people come to anticipate that inflation. And ultimately it's like being on a treadmill. You have to go faster and faster and You're getting any benefit from it. You're just, um, doing what's necessary, given people's, uh, expectations.

AI assessment note: “the reason we have independent central banks... is because we Need it to be taken with a view to the long run”

Q Can we increase interest rates at the level we need to without tanking the economy, Larry?

A I think that when you need to break the car and the car is going very fast, it may well be that you can't bring it down to a Stop were to sustainable speed without some real skidding and risk of accident. And I think we have worked our way into a position like that where my own view, and I've said this many times, is that what Samuel Johnson said about second marriage is true about soft landings. They represent the triumph of hope over experience, and I don't think we're likely to be able to bring inflation down to its target level without some kind of, ah, economic downturn. It doesn't mean the goal of policy should be to have an economic downturn, but it means to recognize reality. Sometimes a medicine that's necessary has unpleasant side effects. That doesn't mean the doctor who prescribes it wants to hurt you, but the doctor who prescribes it recognizes that if you don't take And you defer taking it, there's even going to be more pain and problem later. And I think the Fed was much too slow to make the necessary prescription, and therefore the economic disruption is going to be greater than it needed to be.

AI assessment note: “I don't think we're likely to be able to bring inflation down to its target level”

Q work my ass off. I have heart palpitations. I have psoriasis. I've developed an addiction to alcohol. Man, I've given my life for this, and I don't work 35 hours a week or 40 hours a week. I work 90, a hundred, and I have done for eight years, and now I get taxed 50% while my brother works half time. And he gets taxed 20%? That doesn't seem fair.

A So, first of all, you're, let's make sure we understand each other. Your brother gets taxed, gets taxed at a lower rate on, say, the first 100,000 dollars of income he earns, often get taxed at a lower rate on the first 100,000 dollars of income that you earn. The only difference is, That you seem to earn a lot more money than your brother, and on the extra money that you earn, you are paying a higher fraction of it, ah, to, ah, the, the government, and I guess I would ask you, does a marginal dollar mean more to somebody who has ten million dollars Or to somebody who has 10,000 dollars. And my guess is it means more to somebody who has 10,000 dollars. And so if we have to take some away, it's better to take some away from those who are less painful. And I will tell you that this is something that economists have studied a lot. I've With a lot of entrepreneurs. And yes, the way the United States was in the In the mid-sixties with 90% tax rates, crazy. The way the United States was in the mid-sixties and seventies, 70% tax rates, crazy. But do I think that the current top federal income tax rate of 37% really is working to discourage very heavily of work? I'm not sure that it is for very many people. Some people may actually work harder because they want to get to a certain level, and if taxes are higher, they have to work more, ah, to get to that level. One other thing, the big…

AI assessment note: “if we have to take some away, it's better to take some away”

Q If we think about, like, Volcker taking rates to, you know, 19, 20%, is there any incentive for the Fed or anyone else to raise interest rates to such a level which would cause such economic harm in, in the short term? Is there any incentive to, really?

A We're gonna have to raise interest rates higher than we would have if we raised them more promptly, and if we delay excessively, We will have to raise them even higher as a consequence of that delay. There's nothing in the current situation that says to me that, um, we need to get rates anywhere near where Volcker, uh, took them. But if we were to neglect this problem, For a decade during the seventies, we might get to, uh, such a, uh, such a point, but I think an important part, Henry, the reason we have independent central banks and we don't have the political process make the monetary policy decision is because we Need it to be taken with a view to the long run. In the short run, it's always easier to print more money and paper over problems. But when you keep doing that, you get into more and more trouble as people come to anticipate that inflation. And ultimately it's like being on a treadmill. You have to go faster and faster and You're getting any benefit from it. You're just, um, doing what's necessary, given people's, uh, expectations.

AI assessment note: “the reason we have independent central banks... is because we Need it to be taken with a view to the long run”

Q Regardless of, like, whether it's fair or not, a question I have is, like, is it realistic, Larry? Because, like you said very accurately, a lot of our audience do take advantage of the benefits of moving abroad, moving to Lisbon, moving to Milan or Italy now where they have the great tax treatment. Is it even realistic when you can move and avoid taxes, bluntly?

A If you, uh, if you're an American citizen, You cannot avoid taxes by moving your global income. Wherever you are, if you are an American citizen, you can renounce your American citizenship. And there are a certain number of economic Benedict Arnold's who, uh, do just, uh, do just that. But most people don't want to renounce their American citizenship because it comes with a great deal of, uh, So, I don't think it is impractical. If you look, the economy grew faster. During the period several decades ago, when we had higher tax rates, then it has grown, uh, more recently. So I think the argument for cutting high tax rates is pretty much, uh, indefensible, starting from where we are. Now look, I am I am not someone who believes we should have a wealth tax. I am not someone who believes we should soak the rich. I am somebody who believes in creating opportunity rather than going to war with inequality, because I think if we had more entrepreneurs, more multi-billionaires like Steve Jobs or Bill Gates, That we would be a better country, but to suggest that somehow we can't Impose taxes at current levels, that we can't reform the estate tax to make the estate tax something that people pay rather than they're largely successful in, uh, avoiding. I think that's, uh, to be honest, kind of demagogic and contradicted by all the evidence, uh, that we have. Now, true, it's much easier For …

AI assessment note: “If you're an American citizen, You cannot avoid taxes by moving your global income.”

Q Is there a way to manage inflation without the poorest parts of society being the most hit?

A The way to hit the poorest parts of society hardest is to not manage inflation. You and I can configure our financial affairs so we're hedged against inflation. We may even, by borrowing money, Be able to be beneficiaries of inflation as we pay it back in, uh, cheaper forms. So the most important thing we can do for the poor is to make sure that we are effectively, uh, managing inflation. As we do that, uh, it's terribly, terribly important that we have the right safety nets in place in terms of unemployment insurance. In terms of, uh, social support, uh, payments. But make no mistake, a failure to contain inflation Not focus on inflation. It is a determination to enable the shrewd and worldly to benefit, ah, at, ah, the expense of the people who are the backbone of our societies.

AI assessment note: “it's terribly, terribly important that we have the right safety nets in place”

Q Can we increase interest rates at the level we need to without tanking the economy, Larry?

A I think that when you need to break the car and the car is going very fast, it may well be that you can't bring it down to a Stop were to sustainable speed without some real skidding and risk of accident. And I think we have worked our way into a position like that where my own view, and I've said this many times, is that what Samuel Johnson said about second marriage is true about soft landings. They represent the triumph of hope over experience, and I don't think we're likely to be able to bring inflation down to its target level without some kind of, ah, economic downturn. It doesn't mean the goal of policy should be to have an economic downturn, but it means to recognize reality. Sometimes a medicine that's necessary has unpleasant side effects. That doesn't mean the doctor who prescribes it wants to hurt you, but the doctor who prescribes it recognizes that if you don't take And you defer taking it, there's even going to be more pain and problem later. And I think the Fed was much too slow to make the necessary prescription, and therefore the economic disruption is going to be greater than it needed to be.

AI assessment note: “I don't think we're likely to be able to bring inflation down without an economic downturn”

Q Speaking of being on that treadmill, a blunt question, Larry, and forgive me for it. What's the path out of the U.S. indebtedness? It feels like the treadmill that we can't get off. What's the path out of U.S. indebtedness? At the next fiscal cliff, I think there's four, 34 trillion of debt and growing. How do you think about that?

A So first of all, I think we need to put it in perspective. A growing company can have a permanently growing debt. A growing economy can have a permanently growing, uh, government, uh, debt. A company probably wouldn't think about its debt by comparing its, uh, debt, uh, To its earnings, It would probably be much more likely to compare its debt service to its cash flow or to compare its debt to its, to the market value of its equity. If you look at the U.S. US debt right now, well, the debt ratio is very high. The debt service ratio is much less exorbitant. The value of all our tax collections. That's also lower. And so I think that one needs to keep the problem in some perspective, but ultimately we are on an unsustainable path. And my view is that we're going to have to raise revenues quite substantially because I don't think there's going to be a lot of scope For cutting spending, given the way in which our population is aging, given the way the price of healthcare rises to other things, given that interest rates are more likely to go up than down, given that our national security needs are likely increasing. So I think as a country, we're going to have to find ways to, uh, increase, uh, Of a political process to accept.

AI assessment note: “my view is that we're going to have to raise revenues quite substantially”

Q Can I ask, does that, does that really make that much of a difference, Larry? Forgive me, because in proportion to the spending and the needs, taxing your individuals who are evading, does it make a difference?

A A trillion dollars here, a trillion dollars there, pretty soon you're talking real money. And we could raise between half a trillion dollars and a trillion dollars, ah, that way. The business community was right to be very concerned that the corporate tax rate was too high a few years ago. But there was no need to take the corporate tax rate down into 21%. 25% For business. And the United States stands out right now for rejecting a global agreement that would have made it much more difficult for corporations to put their income in the Cayman Islands or Ireland. Avoid, uh, taxation. So we need global tax cooperation and reasonable, uh, corporate tax rates. There are also things that are frankly, uh, loopholes. I, I suspect many of the people who listen to your show, um, take advantage of carried interest. They engage in real estate exchanges, so-called like-kind real estate exchanges. You know, when carry interest is, gets capital gains tax treatment, even though it's compensation for working, really. If I sell a stock and buy a different stock, I have to pay capital gains tax on the stock I sell. If Donald Trump sells a property and, and exchanges that property for another property, he doesn't have to pay any capital gains tax. And that's not a reasonable, ah, tax provision. There are a variety of tax shelters where basically they make it possible Earn their living by trading a…

AI assessment note: “we could raise between half a trillion dollars and a trillion dollars, ah, that way.”

Q There's so many things for me to unpack there. Number one, when you say about kind of bad, uh, inflation targeting, what makes good versus bad inflation targeting? Given, given the transient nature of the future, is it not fundamentally the most challenging thing to do well?

A Yeah, it's very hard to do of the economic forecast. And my view in 2021 was when we had massive budget deficits, 14% of GDP, when they were saying they were going to keep interest rates at zero for three, four years. And when they were buying up every bond in sight, it was kind of predictable that that would all be inflationary. But they wanted to do it. They were still fighting the last, uh, war, and they convinced themselves, as contrary evidence developed, that it was all temporary transient stuff, rather than being willing to be realistic about uncongenial beliefs. As a policy maker is you have to not get confused about what you want and what is. And I think the Fed got itself convinced that things were much more under control than they in fact were.

AI assessment note: “As a policy maker is you have to not get confused about what you want”

Q Speaking of being on that treadmill, a blunt question, Larry, and forgive me for it. What's the path out of the U.S. indebtedness? It feels like the treadmill that we can't get off. What's the path out of U.S. indebtedness? At the next fiscal cliff, I think there's four, 34 trillion of debt and growing. How do you think about that?

A So first of all, I think we need to put it in perspective. A growing company can have a permanently growing debt. A growing economy can have a permanently growing, uh, government, uh, debt. A company probably wouldn't think about its debt by comparing its, uh, debt, uh, To its earnings, It would probably be much more likely to compare its debt service to its cash flow or to compare its debt to its, to the market value of its equity. If you look at the U.S. US debt right now, well, the debt ratio is very high. The debt service ratio is much less exorbitant. The value of all our tax collections. That's also lower. And so I think that one needs to keep the problem in some perspective, but ultimately we are on an unsustainable path. And my view is that we're going to have to raise revenues quite substantially because I don't think there's going to be a lot of scope For cutting spending, given the way in which our population is aging, given the way the price of healthcare rises to other things, given that interest rates are more likely to go up than down, given that our national security needs are likely increasing. So I think as a country, we're going to have to find ways to, uh, increase, uh, Of a political process to accept.

AI assessment note: “we're going to have to raise revenues quite substantially”

Q How do you think about the next five years for Europe, Larry? I'm fascinated. You said about it there as a museum, uh, probably a very beautiful museum, um, but how do you think about the next five years for Europe? I'm fascinated.

A Look, I think Europe's challenge is to catch the waves of innovation. You think about entrepreneurship. If you think about great companies that have been created in the last, uh, 25 years, Europe It has not been a creator, uh, and scalar of great enterprises. If one thinks about the whole information technology wave, one thinks about American companies, one thinks about Chinese companies, one thinks about Israeli, uh, companies. One, there are European That you can think of, but not very many and not in proportion to, uh, the scale of, uh, the European economy. And I don't know what part of that is a reflection of the way the financial system is structured with a lot of emphasis on large, relatively bureaucratic banks. I don't know how much of that is a culture in the educational system that disproportionately focuses away from science and math, uh, subjects and that tends to be disciplined and to discourage iconoclasm. I don't know what the roots Whether it has to do with regulation that makes fluidity and flexibility very difficult. You know, no one would check into a hotel if they thought they might not be allowed to check out. And people are very reluctant to hire other people when they think they won't be able to fire them if it doesn't I didn't. Capitalism regulation. Some of it comes from, ah, culture that means that at least for the last generation, or probably more tha…

AI assessment note: “I think Europe's challenge is to catch the waves of innovation.”

Q There's so many things for me to unpack there. Number one, when you say about kind of bad, uh, inflation targeting, what makes good versus bad inflation targeting? Given, given the transient nature of the future, is it not fundamentally the most challenging thing to do well?

A Yeah, it's very hard to do of the economic forecast. And my view in 2021 was when we had massive budget deficits, 14% of GDP, when they were saying they were going to keep interest rates at zero for three, four years. And when they were buying up every bond in sight, it was kind of predictable that that would all be inflationary. But they wanted to do it. They were still fighting the last, uh, war, and they convinced themselves, as contrary evidence developed, that it was all temporary transient stuff, rather than being willing to be realistic about uncongenial beliefs. As a policy maker is you have to not get confused about what you want and what is. And I think the Fed got itself convinced that things were much more under control than they in fact were.

AI assessment note: “Yeah, it's very hard to do of the economic forecast.”

Q It's not, and you do that in the form of taxes, and I mean, you perfectly teed me up, Larry, because that was my question, which is, why do the IMF and governments still stick with conventional fiscal rules that constrain public sector growth, enhancing spending?

A Well, I'm not sure what the rules you quite have in mind are, but I do think that It's appropriate to pay attention to the growth of debt. Uh, as I said, some growth of debt can be okay, but debt that is growing faster than income, when income's at doing its best, that's likely to be, uh, problematic. And I think that the need is going to be More revenue in the United States. I think there's some good ways to, uh, to do that, but I certainly don't think we should be putting any arbitrary ceiling on the level of government spending, given the magnitude of both national security needs in our country and social needs in our country.

AI assessment note: “I do think that It's appropriate to pay attention to the growth of debt.”

Q How do you think about the next five years for Europe, Larry? I'm fascinated. You said about it there as a museum, uh, probably a very beautiful museum, um, but how do you think about the next five years for Europe? I'm fascinated.

A Look, I think Europe's challenge is to catch the waves of innovation. You think about entrepreneurship. If you think about great companies that have been created in the last, uh, 25 years, Europe It has not been a creator, uh, and scalar of great enterprises. If one thinks about the whole information technology wave, one thinks about American companies, one thinks about Chinese companies, one thinks about Israeli, uh, companies. One, there are European That you can think of, but not very many and not in proportion to, uh, the scale of, uh, the European economy. And I don't know what part of that is a reflection of the way the financial system is structured with a lot of emphasis on large, relatively bureaucratic banks. I don't know how much of that is a culture in the educational system that disproportionately focuses away from science and math, uh, subjects and that tends to be disciplined and to discourage iconoclasm. I don't know what the roots Whether it has to do with regulation that makes fluidity and flexibility very difficult. You know, no one would check into a hotel if they thought they might not be allowed to check out. And people are very reluctant to hire other people when they think they won't be able to fire them if it doesn't I didn't. Capitalism regulation. Some of it comes from, ah, culture that means that at least for the last generation, or probably more tha…

AI assessment note: “I think Europe's challenge is to catch the waves of innovation.”

Q It's not, and you do that in the form of taxes, and I mean, you perfectly teed me up, Larry, because that was my question, which is, why do the IMF and governments still stick with conventional fiscal rules that constrain public sector growth, enhancing spending?

A Well, I'm not sure what the rules you quite have in mind are, but I do think that It's appropriate to pay attention to the growth of debt. Uh, as I said, some growth of debt can be okay, but debt that is growing faster than income, when income's at doing its best, that's likely to be, uh, problematic. And I think that the need is going to be More revenue in the United States. I think there's some good ways to, uh, to do that, but I certainly don't think we should be putting any arbitrary ceiling on the level of government spending, given the magnitude of both national security needs in our country and social needs in our country.

AI assessment note: “I'm not sure what the rules you quite have in mind are”