Excerpts from transcript
TERRY BELTON, J.P. Morgan Chase: Well, the -- Judy, the downgrade was a catalyst for, but it's a lot more -- it's about a lot more than that.
I think what the downgrade is highlighting to investors is that, on the fiscal policy side, the U.S. has run out of bullets. We -- what we really need is, we need near-term monetary stimulus and longer-term fiscal austerity. And I think what the market is concluding now is that near-term stimulus is not coming. We have run out of bullets on the monetary policy side for some time now. And we have been at zero interest rates. It now looks like we're there as well on the fiscal policy side. U.S. economic growth is very weak. And it's not clear to the markets how it's going to be revived.
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PAUL KRUGMAN, The New York Times: Oh, I mean, this is a -- everyone is looking and seeing a strong possibility of a global recession right now.
But I just want to follow up on what Terry said. What really -- I think -- let me translate it into my terms. The reason that the S&P downgrade mattered, if it did at all, is not that it made people think that U.S. debt was unsafe. In fact, people have piled into U.S. debt, right? Interest rates on U.S. government debt are at their lowest point since January 2009.
What the downgrade did is, it made people think that the U.S. government is now going to be hamstrung, not able to take action to prop up the economy, not because it can't actually finance the debt -- the spending, not because it's in real fiscal trouble, but because some guys at S&P by calling that downgrade have bullied the U.S. economy, have bullied the U.S. government into taking actions that are going to be the wrong thing to do.
So, this is not -- you know, the narrative which says that we have is a fiscal problem and that's the source of the difficulties is not at all right. What's actually happening is that the same people who have been urging us to take the wrong policies, to not focus on jobs first and deficits later, have now upped the ante. And that's making the economy look worse. And that's leading to this global crash.
Similar things are happening in Europe, and so we have a global downturn based not on -- again, not on real fiscal constraints, but on bad ideas being enforced by bad agencies like S&P.
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KENNETH ROGOFF, Harvard University: Well, I think the downgrade has had a big effect, although I beg to disagree with Paul. I think they called a spade a spade.
You look at the acrimony, the debt/deficit debacle, and it really hurt our institutions. And I don't see how they could have called it any other way. Certainly, markets are looking and seeing nobody home. And monetary policy has actually been getting tighter. And as Paul and Terry noted, fiscal policy looks like it's getting tighter.
But, more broadly, I think people see that they have continuously misdiagnosed this as a normal recession, when it's not. It's a long-term contraction. And they have tried conventional tools. And they need to do things to bring down this debt overhang of private debt, not just public debt.
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JUDY WOODRUFF (Newshour): Terry Belton, just quickly, what should Americans, ordinary Americans, be thinking at this point about the future?
TERRY BELTON: Well, I think -- I mean, it's not all doom and gloom. I think there are some good signs. We're seeing a little bit of signs of recovery in the labor market. The unemployment rate is still obviously very high, at -- above nine percent.
But we are seeing for the first time this summer labor market gains. We have -- jobless claims is down at the lowest level since April. Last month's payroll number was double what we had been getting the previous three months. Corporate profits are still good.
So we actually think we're -- we're through the worst. We had abysmal growth in the first half. It will be a little bit better in the second half. But, still, it's just not enough.
JUDY WOODRUFF: And, very quickly, Ken Rogoff, a word on, what should people think tonight?
KENNETH ROGOFF: Well, there's no two ways about it. It's a scary moment. And I think again this absence of credibility, no one to stand up and take charge, I would like to see it start with the central banks both in Europe and the United States moving decisively to make monetary conditions easier.
That may sound like heresy, but I really think it's a time for outside-the-box thinking.
Note the jest of the conversation in the video is, in the short term, our economy needs MORE stimulus, aka government spending.
Our National Debt (public debt) is a long term concern and needs solution down the line, after our economy recovers.
What has happened in the last few days are very bad ideas. Driven by people who do not understand our economy, the Tea Party fanatics. Just one of the WRONG ideas is you can solve our National Debt issue without increasing revenue.
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