The role of inequality in the recovery

>>> what sustains in particular the american economy , people on the top spend smaller fraction than those at the bottom. so when you move money from the bottom to the mid toll the taupe overall spending gets constrained. with that kunld of recovery, not is surprise. people invest when there's a return, and if there's no return, if there's know demand if you can't sell your groups.

>> that was another nobel laureate . we've been racking them up recently. making a case about how inequality is standing in the way of recoverry. all the liberals were --

>> i realize afterward the title of the blog should have been "i'll do anything for joe, but i won't do that." it's not a terrible thing. my argument is two things. one is that at any given point in time richer people save more than poor people . people who are rich are temporarily rich. in time we have gotten richer as kahntry but savings rates have not gone up. right now savings rates are higher but they're actually still low by historical standards. i just have -- i have a hard time making that the story. the corporate -- the corporate profits thing is the story. the money is disappearing into a sinkhole. yeah. dean has been arguing that excess saving is not our problem and i was sort of picking up from him.

>> actually i take a different position. i think stick lits was onto something. we did see the reintroduce. you dead did see a rise in profit sharing . paul is absolutely right. my argument is we had a different regime, that what we had was the fed lowered interest rates . they felt comfortable lowering interest rates . he wasn't wired. he said this many, many times some of what they did, the way it ended up boosting the economy is boost asset prices we had the stock bubble in the '90s, housing bubble in the last decade. that led to this wealth effect on consumption. we did see the consumption and low savings rate and lower at the peak of the housing bubble but that was driven by the bubbles. i don't want to put words in joe's mouth. i don't know if that's what stiglitz had in mind but i tlink's a story there.

>> it's been sort of a weird continue yags and discontinuity with those trends which is we have inequalities there, record profits. we don't have any replacing asset bubble, right? there's nothing like the tech boom and there's nothing like housing and so this is now kind of what -- increasingly this is what recovery or the normal is in the absence of the kind of injection of an asset bubble we had in the past.

>> i do thing it's important to remember sometimes inequality comes out of policy decisions and i don't think we can let the administration off the hook. the best way to summarize it. the technicals are, listen, we were really easy on the banks and then we took it. instead what we did is we slowed them and it was another give away to the banks and it was another way to make sure that they could get back up on their feet but then they doend lend out to the american public. i think that's going to be a big part of the legacy.

>> this is one thing that obama bobbled or geithner bobbled on their own. the mortgage relief program was a total bust. the money was there. they just didn't use it because they were so afraid that someone would accuse them of having benefitted some undeserved people and those people, right? undeserving people that happened to be not white that they didn't do much mortgage relief.

>> the question is -- i talked about hem a ton. but the question is there a causal link between that aspect of the recovery and the shape of the distribution of the recovery now, right? which is to say is it the case that because hamp was handled the way it was and assisting them in the deleveraging and banks did get assisted you can draw a direct cause.

>> i think it's very hard to say. suppose we let the market run the course? let's imagine we had the free market fundamentals out there. citigroup is out of business, morgan stanley is out of business. i don't know if we would have had the tidal wave of bringing down everything. most people would have a lot less money but what does it look like. part of the story here we should be jumping up and down. of course, paul is. we have all these people unemployed. the first stimulus passed was at and bush was in the white house . if we had let the dominos fall we'd be in a different world and the people in power and money would be less happy.

>> one authentic that's very clear is that this rising inequality changes the political equality. i think it's okay because nobody they know is hurting, right?

>> there's distance.

>> right. it's remarkable how in some ways the story of the recovery keeps being jobs, jobs, jobs, is a problem, huge amount of joblessness, declining wage, flat lining personal income, and then washington conversations drifting way from it and strong be wrenched back and then drifting away and then having to be wrenched back.

>> that's what happen whence you have a campaign finance regime where you can dollar for dollar translate that.

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