>> as my mother used to say she was 15 when she was

married and never went to high school she would say years later jacket you're so smart how come you are not rich crack scientist who working on that. [laughter] i have a pretty good day today pry was driving i stop at mcdonald's for lunch and by a happy meal as i usually do. and what do i find? the nobel peace prize. [laughter] and the other nobel peace prize winners? am i feel they one? heisman trophy winner? i was hoping for was the nobel prize in economics now plan venturing into the field. i have not done anything in economics or cure the world financial crisis but i thought about it. about that would be good enough but not yet. but i try to answer the

basic questions and 2,008 what caused the economic derailment? what made the economic engine go off the track? i read every single book literally with the panic or meltdown in the title. i do most of the reading at night it is like watching the exorcist before going to bed. i had to stop. although that had a happier ending. i kept asking myself, i wanted too really find out the answer because the answer i was getting was so superficial. then i bought hank paulson spoke on the brink he was the secretary the treasury and his daily routine had to be much like the one that is described opening then use paper is what is this? i don't agree with everything for much of what paulson did but i think history will judge him well because he was probably the

right person in that job at the time. it was a hellacious job and he had a lot of tough decisions to make and he did that very systematically. lehman brothers. sorry. [laughter] actually was not quite that way but that's what people think. in 2008 and paulson and the middle of the meltdown he goes to a meeting in washington and says what went wrong? morgan stanley, a heads of goldman sachs, heads of jpmorgan chase, , etc. come here is what they tell him. things you could find on the editorial page of "usa today." they are not interesting. lack of transparency. lack of discipline. unmanageable risk. uncontrolled hedge funds and the one that i like best, agreed.

[laughter] i will buy that. none of these are wrong. it is just that none of them ask the most preliminary question not why did the train go off the tracks but why was the train on the tracks of the first place? not only that but why was our trained the biggest and brightest and shiny as most comfortable trained in the world? the biggest brightest shiniest rein in the world for the last thousand years? these are questions they don't ask. the next question, who is our and we and a group created this economic civilization? but with the parallel the answer is that question is judeo-christian culture it

is the only answer to that question then to find out how they built that civilization men to call and answers in the way back i checked with a friend of mine, mr. peabody. sherman and mr. peabody. we go way back. rocky and the bull winkle fans probably remember us. i found myself eventually to be able to answer the question and i would give you milestones along the way. those who are the smartest will answer the questions before i get to them. before we get to, 1250 working back starting with

19931907. little trickier. 1834. 1454. 11 '05 3580. then we go back to 1250. i will trace the history of what they do in the book of our economic civilization their credit and debit because basically that is what built this civilization and what it took it down. it took it down a notch. curious lead 1250 bc the first prohibition a number in the civilized world against use three that is really just lending and interest what banks do today, but in 1250, it was the first culture to ban use

three -- use three was jewish culture, moses. he says the foul lends money too any of my people that all shall not be to him a user of but they shall lay upon him usury. in all other civil associate -- civilizations were fine with lending and interest so when economist look back and say this is crazy. how can you have the investment oriented culture if you pay an interest? but not asking the question they should be asking why did this culture thrived and all others go by the wayside? what happens if you violate

in babylon? if you violate a law in israel you lose your soul. as going forward you may be self discipline to and trying to do the right thing because god wants you to do the right thing. there are eternal consequences far worse the $1,000 fine from the irs. kind of like the year colored water. [laughter] never got the they needed something to drink and it was there. >> the ironic question of course, is one that would ban usury in 1500 years become the poster children for that very act. how is it that that is the

question that has to be asked? it comes down to a second look at the bible, deuteronomy and all throughout the bible and old testament nehemiah, i say at , that deuteronomy allows a loophole. jewish culture you cannot lend it to your brother-in-law of in charge interest. you would be today. here is 11 -- 1,000 back plus 100 your sister were never talk to you again. this did not cause them problems in the ancient

world and the next date is 35 baby. -- s.a. day? anybody old enough to remember? 35 a.d. staal is on his way to damascus and a board said a couple-- later when saul begins to regain his senses, this man as much as an instrument for the gentiles and their kings and before the people of israel. this means there are no more strangers not everyone is part of his family. the praise unto stranger would become the most politically historical consequential word to set them on the road of division between them and christians for the next 1500 years although it would be synergistic antagonism they would use each other along

the way. something else happened a few years earlier jesus said we're all in the same family and maybe said that a couple times in two ancient culture that certainly in the middle east if you want to get rid of your wife even in jewish culture, they would disown that her and say i am no longer mary by jesus says sen matthew 196 let no man put asunder which god has joined together. marriage would become the great single building block of economics civilization that is why the family is so essentials of everything a right about in this book everybody knows what happened 1105? ohio? spain?

the spanish retake toledo they take spain back a bit by bit from the islamic culture that had taken over the peninsula. richard rubenstein is the author of their saddles children the outcome of the gathering that took place of arabic dollars and jewish scholars with the acute source of embarrassment for many modernist and what happens, the muslims and the conquest of the will mediterranean sea had been taking bits of culture from all over and preserving it and saving and transmitting it too arabic and they say a lot of the greek civilization and picked up the indian numeral sam brought them back and the number zero which is critical.

and joined with christian and jewish scholars and translated into latin what happens after this is that islamic culture turns their back on the whole civilization and retrenched and stop growing and they lose interest and imam said don't pay attention is paid 10. -- to it. but the christian scholars took it and ran with it among aristotle who was a central figure in the mid -- medieval culture. anything good happening between 500 through 1500 they think they invented the world 1600 a.d.. the old thousand years of christian history? forget about it. they think that the

christians of that era were beginning to build to lay the foundation for the greatest economic civilization the world would never see. the money flowed and what happened to the cultures the institutions began to create the banking empire. like cannot write a book to there without the chapter looking at the paris hilton biography. they are everywhere. but of course, the family that really invented finance was there because they were there. the money was flowing through for malt of the outlying regions from the offices in taking care of the money they're doing this without interest and without the use of interest with the things that were considered okay much like sharia but

the world was changing. that is why richard rubin calls it the ku source of embarrassment. i don't think based on what he signed was the apologists being honest and objective said muslims that turn their back take of base will step in what islamic leaders have rejected. not even the first grade banking investigators they did two other things like double entry bookkeeping which is critically also introduced arabic numerals of course, taken from the indians but they had the number zero. and credit and calculating in roman numerals? have you tried it? it is impossible. that is what was happening.

one of the key people they took, the central person of this whole intellectual revival was aristotle. what they did instead of rejecting aristotle as pay again, they like the notion of reason and entered eight -- integrated that into his own world view they began to use the faith and reason were not enemies of rent incompatible you could find your way to guide their reason and faith and now centered their world and made it a loyally based world rational in where people were responsible for their own behavior. no place else like this on the universe and they began to prosper. looking back on that by 1581 the amazon starts a thriving brilliant civilization all of the great centers for catholic.

all parts of the whole christian down. beginning to master the world. they created other things. clocks. maritime devices, things that allow them to go out and go forward. by the way donte called aristotle the master of those who know. that is how much importance they put on aristotle. when donte goes into the inferno through the nine novels of bell, it is interesting what he finds their progress in the seventh circle munn of them are good. the first circle was where aristotle hangs out but the seventh circle the users.

he said why are they in the seventh circle of hell? and there really is not a good answer but he refers them to aristotle. if not for aristotle the christians probably would not have gotten deeply into the ban on usury and the relationships between jews and christians would be better but aristotle hated usury. virtual refers to aristotle and thus it is settled. but in the fourth circle of hell refined someone else who we do not even consider centers today that is part of our problem. the fourth circle who are the prada goals. -- prodigal. he describes them as we would people who borrow

shamelessly and spend recklessly without cause of worrying about if they could pay their money back. that is what a prodigal is and aristotle with the help of donte puts them in the fourth circle of hell it is a bad place to be. you are borrowing recklessly people who live circle so the hearing wonderfully because they are not putting enough people are behaving or regulating themselves they don't need extra o restraint and they say and i am paraphrasing a sign that they can exist that they force upon there will and appetite. the less there is within the more there will be without. in lieu of the moral codes we have extra regulations

and they don't work. let me jump ahead a little bit. 1454. gutenberg? 1454 a huge commission from the pope to print indulgence. the money is flowing and part of the economy. he takes his money in the 1455 and publishes the a gutenberg bible the song they could have happened in the christian world. because only here, china invented on power, the printing press but then nothing happens. but then inventing calendars and nothing happens. what is the difference? christian culture from these other ancient cultures

they're not more brilliant but only in christian europe you have the infrastructure to commercialize the invention so what you needed to do is several things and environment to encourage risk the christian churches never discouraged free enterprise you also need an environment where people behave themselves to where they can pay their bills and pay their debts and expect a level of enforcement. to treat people under the law and finally you need an investor and theology you can invest in a project with long as you take the risk and not get it back. but he borrowed money from his brother-in-law. and that is how with started to commercialize the product to take the invention and create an empire.

there is a lot of notion of what happened after that to the strain was such that the whole notion of the protestant ethic that they were so burdened by guilt and unable to confess that they became economically driven to prove they were among the elect and probably not that complicated going back there is probably simpler explanation only in that world to find the first serious theologian that interest is good and make such a lucid explanation for it fact hold church under his control begins to flourish no more so than in the netherlands were

virtually everything we know the stock market and a bear market the central bakes and the basic institutions that have gone forward from there. the phrase to become a bare the opposite of a bold in england here is a quote. when you are shorting the market sell the bare skin before catching the bear. that is what the shorts do. in 17th century netherlands they would sell the tulips before they have the bulbs that is a problem but it the futures market is a problem there for it was called the bearskin job and was shortened to the bear and bold 18 going on so that is how the terms materialize. i go into the etymology.

now i go to 1834 jumping ahead 400 years and it is fascinating what happens interesting coming up tomorrow a jackson this revolves around andrew jackson and the founding father here is what we know about and do jackson. he married a married woman and a shot people complained about it literally. did you know, that? some of the other nice things he has done, killed a lot of indians and took florida over because he wanted it without any permission and owned a lot of slaves and sent them on the trail of tears on the upside people believe in

small limited government and hard currency and the lack of a central bank and the individual responsibility. share all of these verses and ask yourself when democrats get together on jackson day, what do they celebrate? [laughter] at link in days you can say he freed the slaves but democrats? andrew jackson. he criticized and said the charity onto the trail of tears and believed then small central limited government what is the message? now they expanded do jefferson jackson days and they have many of the same from our perspective but i don't know. but he fought valiantly

against the second bank of the united states which was the first great central bank of america because they had 120 years earlier than renewed it in jackson fought it with everything he had and prevailed and it was a great triumph of one system already becoming corrupt because nicholas biddle was using it to elect his own friends. central banking has sent them. jumping ahead 1907 we have the point* of extraordinary growth during this period with long stretches of hard currency where gold and searle silver or gold alone are the only real basis of

the currency where there is no filed printing except for money goes crazy, a great immigration because serious new jobs in industries with doubling or tripling the population of the united states and creating the world's greatest civilization in this is all done without a central bank without a federal reserve for anything like that. it is our great was a fair point*. so that was chilly laissez-faire and the democrats were more than the republicans at the time. the great free marketers. it happens periodically pro-growth point* retrenchments at that time

the most powerful of our was an american was jpmorgan the panic hits and he walks down the street, wall street themselves the look at this and describe him as 30 feet tall. he was a little taller than average but he made such a presence. he walks down wall street and goes into the firm and pulls them out into the street like the heads of the ceos they may have called them president or chairman. pulls them together for a huge meeting and says we have got to fix this and solve this problem because there is no one to bail us out. if we don't stop the panic we will leave ourselves try. we have to get together and raise the capital and stop the flow right here. they did. he did it so successfully

that people said what happens when jpmorgan and goes away or dies? that led to the next one and to the subsidiary of 1910. this meeting in the primordial swamps of jekyll island in georgia has produced more conspiracy theories than any meeting that took place before. . .

to do this is what we are going to do. we are going to replace jpmorgan with the federal reserve bank and then they do something that has become familiar to us especially in the last six months is that they set up astroturf headquarters where they go out and they think that they are a grassroots organization and hire people to represent the organization and the people who are hiring the people to represent a don't know they hired did two of the six guys who wrote the plan and it is all done through separate fusion. they know people won't accept the central bank so they say we have to give it at least the illusion of decentralization for which we have to thank the federal reserve bank as part of that, the illusion and because all along they knew that they admitted the plant-- invented

the plan and the real power in the federal reserve wouldn't be in the regional banks. wouldn't even be in washington. would be in the federal reserve bank of new york and they knew if they could put a morgan guy in charge of that they would control it and that is exactly what they did. in 1913 early in the year jpmorgan-- later in the year woodrow wilson signed into law the federal reserve act of the united states, 1913. and in the process of doing it, he thinks he is taking away the power of wall street, but he is not. do you know what he is taking away? the responsibility. they knew it. wilson didn't. what they would walk away with is the power and what the federal government would walk away with is the responsibility, and you have to hand it to the guys. it was a brilliant plan and they pulled it off. whether it was good for the united states, i said this three years ago people would say how

could he be possibly against the federal reserve and people today are beginning to rethink that especially the whole alleviation of responsibility. it is being alleviated at every culture by the way. not just at the top but at the bottom. we are inventing these installment installment plans and various ways to postpone debt. that is beginning to seep into the culture. by 1928, installment buying has become all the rage in the united states. i talk about it in the book at both levels at the top in the bottom because they are going to me pretty soon. 1933 pretty obvious what happens. you have the stock market crash in 1929. the stock market crashes don't necessarily lead to depression. we had a tremendous stock market crash in 1987 and it righted itself but in 1929, herbert hoover was president. calvin coolidge called herbert hoover mr. wonderful and calvin coolidge was, my model president who believed according to amity shlaes, religion long ago

determined the world would be better if they involve themselves less than that to me was what depression led to. hoover however was mr. active. police called him a wonder boy. he said he never stopped giving me advice and all of it was bad as the secretary of commerce. he was the first secretary of commerce, the first government official to insist the government had the responsibility to put people in homes and make programs to facilitate that. this all started under hoover. he was a total activist or go all the activity he did, starting with the depression, starting with the crash was wrong. it was a disaster smoot-hawley tariff. he would browbeat banks into keeping interest rates low. he would browbeat the employers into keeping people on the job. he tried to rally wall street and push it and all this was running contrary to what he

should have led to his coolidge and harding had done earlier in the decade when there is a recession in 1921, just let it play itself out. there's a sharp market crash in 20 and by 21 it was over. hoover aggravated it in now, and we hear this locally on the radio and everyplace else, hoover was a laissez-faire president. nonsense. progressive. 1933 as you know fdr takes over. fdr makes as someone described to me as fdr went to hoover what obama is to push. those of them are somewhat interventionist. they were succeeded by people who were usually interventionist who wanted to re-create government. fdr takes over 1933. and the first thing he does is, does this sound familiar? he nationalizes the banks. we just take them over. there is no authority for that but he takes them over anyhow and that he bans the private ownership of gold, 10 years in prison if you own gold in 1934.

everyone had to give up their gold. by the way if you have goldie had better keep it hidden. you see history repeating itself here. fdr, although we had a good temperament for the job and in some sense provided some level of solis to the people he was utterly capricious. he would do things whimsically that would affect the entire world economy. for instance henry morgan bell talks about going into set the price of gold one day and fdr says i think there should be 21 cents. an ounce. and, morgenthau says y. 21 cents? fdr says well, for he is a lucky number and seven is a lucky number in three times seven is 21, 21 cents. literally this is how he did this. this by the way, the market crash followed a whole decade of

real economic growth. this was not just a bubble. it would introduce automobiles, radios. what happened is the federal reserve turned a rally into a run by jacking with the interest rates right beforehand, and no one saw this. they didn't-- they had no experience. we don't have that excuse now. they had no experience with a crisis of this gravity so they jacked around with it until 1939 morgenthau seven years into the new deal is talking to congress and he is saying, seven years later we have accomplished nothing. this is morgenthau before congress and he gave congress an unlucky number. the unlucky number that year with 17. 17 was what? the unemployment rate in 1939. seven years into the depression. it would not go below 10% until 1941 and that was because of world war ii. we celebrated the new deal and

then we put obama's picture on the cover of "time" magazine as the new fdr. we will do herself into historical ignorance on the subject. i have a sense of the reality that conflicts with it, and in the 80's i was a fulbright besser in france and part of my job, this is run by the state department. we would go to individual cities and talk about the american studies. the theme in the 80's during the reagan administration when the state department has a will of its own. doesn't care who is in office because it had an agenda and it is going to push it and the theme that year was the new deal. i showed this movie on the new deal and then i was talking to the french audience about how wonderful fdr and the new deal were. that was my-- so i go to this town in strasburg. anyone ever been to strasburg? a beautiful city. it is a tragic city. it is then marched through more

often than your average high school football field. older people who have been there for a while had seen a lot in not all of it was good. so i get to the talk and i show the movie and at the end of the movie the most poignant scene in the movie all these okies fill up their model a's in their model t.'s and they drive off to california and then the new deal -- law, blah, blah. i am taking questions at the end my french was not all that good. this one old guy raises his hand. he must have been 80 years old. i said yes and i call on him. he said mr. cashill, during the depression, he goes carp poor people-- they had cars? they had cars, yeah. they built this great commercial civilization and what we were celebrating was not the civilization we have built by the government intervention that

kept its oppressed for 10 years. that is why we are still celebrating 40 or 50 years, still celebrating today and it is crazy but that is the way it happened. and that is part of our legacy, that once we understand ourselves better we can. richard nixon is elected president and inaugurated in 1969 on january 20. of the homeownership rate in 1969 is 65%. it has been steadily increasing from 1945. up, up, up. everyone believes and i believe, we probably all believed ownership -- might homeownership is a good thing and the president had been pushing it ever since hoover really. fdr did, truman did, eisenhower did, va loans, fha loans etc.. 65% in 1969. something else happened in 1969

and that is california passes and some of you were there probably, for the first time no-fault divorce. california celebrated that by going out and getting divorced in record numbers. in 1970 there were more divorces in california than there were marriages in 1960. in the middle of the country if you get divorced you will a mended and in california gives celebrated. it becomes part of the culture. hollywood had been doing this forever and they had long since left the moral capability of telling people that marriage is good. they long forgotten what jesus had told them 2000 years before, let no man dare asunder what god has joined together. in 1980, though divorce rate in california, for some reason they thought no fault divorce would cause a decline but he didn't. in 1982 you know how many people got divorced in california in one year? 276-- 276,000 people.

they solve the problem of divorce records by stopping keeping records. they were so embarrassed by it all in virtually every state in america had also adopted the california model so no no-fault divorce became a nationwide craze. in the 70s and '80s people rushed out and indulge. a lot of people i no, there were a lot of people that had tragedies and sometimes it was inevitable or a consequence of life but in california became a ritual, a rite of passage so marriage became something is sort of entered into for a while and then moved on. there were so many other distractions there that it became like a national phenomenon. now, this is happening and no one is paying attention to its consequences on the economy. it is really shocking how little attention people pay to the effect of divorce, not only divorce, but single parenthood. because people, when the culture

loses its faith in marriage it no longer has the will or the ability to tell the underclass that marriage is good and we have begun to see incredible spikes of single parenthood especially among minority cultures, especially the black culture where it went from something like 15% in 1950 to 75% by 1980, just astonishing. so what happens in 1993 we jump ahead. bill clinton is inaugurated president. the homeownership rate in 1993, after 24 pretty prosperous years , especially the reagan years and the bush years. there was a good steady growth in the economy, more jobs, more money, the standard of living was much higher. in 1993 bill clinton is inaugurated and the homeownership rate is lower than it was when richard nixon was inaugurated 24 years earlier. because the administration

looked around and like all presidents they wanted to put people in homes. clinton was an number cruncher from the word go. he that is how he got elected. he wants to put people in homes and create jobs. those were the days, weren't they? but when they look at the numbers they say, why has the homeownership rate gone down? they refuse to look at the real reason. and that is the family had crumbled underneath the homeownership rates. we didn't have ozzie and harriet living in houses. we had decrypts living in these houses. i don't know who were living in these houses. people were owning homes who had no right to belong in homes. these are the people who were moving into the whole market. and you look at the numbers. it is inevitable. a single parent makes 20% of the

income of a married couple. a divorced mother makes 40% of the income of a married couple. the homeownership rate in 1993 for married couples was 85%. there is no problem there. this is maxed out. if we had been a nation of married couples, moving forward there would have been no economic crisis. there would have been no sub-prime crisis. none of that would have happened but instead, the homeownership rate for single parents was less than 50%. that was pulling the whole number down and instead of saying gosh, what could cause this? why don't we work on fortifying marriages? when we work on keeping couples together? why do we work on giving couples who have worked hard an opportunity to buy a home? they looked around and said, who can we blame? the federal reserve did a study in 1991 that provided all the ammunition the administration needed. what they did is they studied rates, i believe for fha loans,

the rate of approval if you were are looking for government assistance loans, and for white families became men, they were getting loans that 77%. black families who came in were getting under 61% so they looked at the numbers and said, the only reason the homeownership rate isn't growing is because of racism. what else could it possibly be? they didn't look at the credit history of the people who were being accepted or rejected. they didn't look at the family structure underlying those differences. that is what it truly was. it wasn't in rates, it was in family structure. it headlined in places like "usa today". not all homeowners are created equal or even "the wall street journal," it is more of what you look like when you apply for your credit. nonsense. banks have no interest in turning people down who are going to repay the loan but have every interest in the world of turning people down who aren't. when you look at what happened after that, every organ of

government, and media, even industry after a wild were telling would-be homeowners, get a house, get a house, get it quick, get it no matter how you can get it. i found it 1992 article from the "new york times." in which they are talking about a.c.o.r.n.. it is this wonderful new rejuvenating organization, bringing equity to the housing market. in 1991, they had a two-day takeover of the house banking committee and the newspapers celebrated it. isn't that cool? is is not need? remember when dissent was patriotic? this was like a year ago, wasn't it? a year and a half ago was patriotic. in 1991 it was wonderful. you and your buddies would come in and throw everything around and you get on the front page of the "new york times" is good

guys, because you are liberating the housing market from the entrenched race of glasses. now, the "new york times" is writing about this and here is what they say in 1992. no one who gets a mortgage ever has to go beyond the philadelphia a.c.o.r.n. office. like this is a good thing. the times times then highlights a.c.o.r.n. borrowers do not speak english. no credit history or this one i like best, had to sign x for their name. they are celebrating this. of these are the same people who 10 or 15 years later would be criticizing wall street for getting involved in the business. and, during the course, this was what the word sub-prime meant. sub-prime is not a kind of a long comment is the kind of a borrower. there's a thing called-- your credit score comes from an acronym for the fair housing corporation. it is based on your history. if your credit score is a bug

six-- above 650 you are a prime our war and people want to lend your money as you pay your loans and they made money on interest. if you are below 650 you were a sub-prime borrower and know what wanted to lend you money because she didn't pay your money back in if they let you money they would charge a higher interest rate to compensate for the fact that a whole bunch of you weren't going to pay the loans back. starting in the late 1990s sub-prime borrowers became rock stars. everyone wanted sub-prime borrowers probably because the government was forcing banks and lending industries to give loans to sub-prime borrowers. the government was forcing fannie mae and freddie mac to approve these loans. the media were celebrating all of this well all of that was going on. in the meantime no one was watching what was happening. and it wasn't good. there was a major cultural change that had gone on at the same time. if you remember back in 1300 if

you were prodigal, you were a sinner. in the year 2000 if you were prodigal and you default on their homeland you borrow recklessly and moving move into a 400,000-dollar house on a $2000 month salary, wall street was shocked when millions of people were missing their first payment. and they are missing their first payment. this is a bad sign. this is not a good sign missing their first payment. particles were no longer sinners. no more particles in 2000. they were victims. now there is a home of victim class. you watch any show on tv, they are a victim. bottom line, i'm not going to go into the whole history of the meltdown. it is too involved into tricky but the one final note i will leave you with is this. biblically literate among you might hear in the homebuilding mania occurred an echo of building projects and some of you will know where i'm reciting this from. they said one to another, go,

let us make bricks and burn them thoroughly and they had brick for stone and they said, go, let us build us a city and a tower whose top may reach into heaven. in the first years of the 21st century, this babble like effort would promise affordable housing for everyone regardless of income or character, debt obligation should they choose one of them with a package sold without risk. it was built under the guise that there would be no risk. all would prosper and everyone would be like a god. unfortunately like the folks in babble, the language had been compounded in they did not understand one another's speech and at this point let me tickle my financial adviser for helping me understand this because the language in the stuff is impenetrable. but even the ceos did not understand what their workers were doing.

they didn't know what a collateralized debt obligation was or a credit default swap. all these financial estimates were being created. they were being created to minimize risk. that was the weird thing but they were building a tower with the financial equivalent of chinese wallboard and in 2008 made it finally rotted from underneath and collapsed. the underneath wasn't the economy. if i could paraphrase james carville and conclude right here, it is the culture, stupid. thank you and i will take some questions if you would like. [applause] who wants to be a star? >> would you comment on the unfunded obligations of social security and medicare? >> it is overrated, it is overestimated. we can guarantee that until the year 2030 it will be able to at

least get 76 cents back on your dollar. i said i don't think that was part of my contract. that is where we are headed. that is what will happen. that will be the compromise. there is not enough money but they have already figured that out. that was the first time i had heard that and it intrigued me because we thought all along, this was another idea, social security, that we would have whatever we put in, but we have will not so don't count on it. come on -3/4 of it. any other questions? yes, sir. back here. >> i didn't hear you mention anything about the artificially low interest rate also. >> greenspan when he retired alan greenspan retired in 2006. he was hailed as the world's greatest hero. by 2008 he was the ghost of the financial world. the reason was he kept interest rates artificially low for probably two or three years.

there was a recent board and a lot of it that came out of september 112 mac and they fact that bush inherited a recession but the state of affairs in 2001 was a recession aggravated by september 11 which led to the low interest rate, but which encourage people to come in on these adjustable-rate mortgages. we would get maybe 4% interest and then it would just adjust with, when the interest went back up to regular levels and then when it goes up three or 4% of people find themselves unable to afford their homes. then of course they are all victims. they didn't know. how were they to know? they should've known. if you are buying a house, if you are not wise enough to figure out if you can afford it or not afforded, you shouldn't be in that house. sorry, don't mean to be judgmental but it is true. >> one of the questions that comes to my mind is like a knuckle holly, you never get on the road to recovery and tell you recognize the alcoholic in

what he is doing wrong. are we recognizing the things we have done? we don't see any real taking a blame like guys by barney frank who are primary instigators in the short run. are we actually going to change until we define what the problem is? i am wondering, is this knowledge getting out there so we can turn it around? >> when i win the nobel prize for economics next year it will be better but it is a perfect question and the unfortunate answer is, as far as i can see there is absolutely no recognition of the cultural problems that underlay this whole mess. i see no recognition at all. and it is unfortunate because the president is in a good position as a very good family man, and he should be a role model in that regard. he is not using that, the model he could use to tell people hey, get married, stay married, build a nest egg and then buy a home. we are not hearing that at all.

let alone, and the fixes we are hearing are so superficial and so wrong. i am optimistic about the state of america but i'm not optimistic about the state of america in the next two or three years. >> you missed a step, you get married, yet children, build a nest egg and then you meet tony will rest out. >> you double the size of your lot. use-- there are short comes for some of us but not all of us. other questions? comments? longing for mother? not that you are missing your mother but you might be. back here. >> to the lenders see the housing crash coming and if their businesses to make make money, did they see it coming and was it because of the government involvement? would that make it difficult for them to do anything or to react properly? >> that is a good question.

it is so often misunderstood. the blame comes down to lenders, but there is a very good book on the history of countrywide which was the biggest of the mortgage brokers and angela mattila who was the ceo, deeply believed realizing the dreams for these people and they were so myopic. they refused. when i was doing the research for my california book in 2006, i did a whole thing on the breakout of affordability index. and here is how bad it was. in kansas city in 2006 for instance a family of median income could afford to buy 87% of the homes in the marketplace. do you understand that? if you made $56,000 a year you could look at seven out of eight homes in the market and think you have a shot at buying them. in los angeles in 2060 know what the number was? 2%. a decade earlier it had been 50%

so you went from being able to buy one out of every two houses in 1995 to being able to buy one out of every 50, and when i was looking at those numbers i'm thinking where they going to find new buyers? i didn't realize at the time i was running this how they were finding new buyers and they were downgrading, downgrading to what was the could buy a home. at the end of the day in california, you didn't even have to be a citizen. you didn't have to show income. they had self-report-- self recorded loans. i have a two or 300,000-dollar bond. you are thinking the market is going to always go up so i could buy it, flip it and make $50,000 in pay off my credit cards and walk away. you would think they saw that coming but they did not come and they didn't even see it in that industry and wall street didn't see it at all. to a certain degree wall street was a victim of this mess although if you are investing a trillion dollars a day, ignorance is no excuse. i want to thank you overcoming.

icier waiters are getting ready in the background. jim, thank you for your help and all of you have a happy day today or codas been a memorable day in our annual history. thank you yurko. [applause] there will be books over here to sign. thank you, thank you. >> jack cashill is the author of blinked and what is the matter with california? he writes regularly for world net daily. for more information, visit cashill.com.

>> matthew crawford would you do for a living? >> a number of things. one of them is fix motorcycles and that is kind of what the book is about. the more broadly, it is an attempt to speak up for the manual trade and that that can be a life that is worth choosing. >> where's your motorcycle shop? >> in richmond, virginia. >> what is it called? >> shot go moto. i work on japanese and european bikes and british bikes as well. these are mostly vintage bikes, vintage cachet that makes people willing to spend some money on them, and it is a very small operation. >> any reason in particular you don't work on harley's? >> yeah, people asked me sometimes why i don't work on harleys and what i generally say is that i work on motorcycles,

not lifestyles. i'm just not qualified to help them with their lifestyle issues so it is beyond my competence. >> what is soul craft? >> actually, the title of the book was a play on the title of the book i george will that came out 20 years ago. his was statecraft as soul craft and i thought it was kind of funny to replace shop craft was statecraft. i guess he would define it as something like education, the forming of the soul. >> what does that mean? >> well, we often think of education as in narrow terms as acquiring maybe a narrow and instead of technical skill, but i think most people would agree that education entails-- education of the affection,

actually can be connected to the acquiring of their own technical skills and that is something i explore in the book, how becoming competent at building things and fixing things can actually cultivate certain virtues that we normally think of this ethical virtues. >> such as? >> individual responsibility. when you are dealing with material stuff, you generally lets you know right away if you have gotten something wrong, and the stakes can be quite hi. in fixing people's motorcycles, if you fix the wrong you could get her somebody heard or you could get hurt yourself. there is a kind of keen awareness of catastrophe is it possibility that is always hovering over your shoulder. and it tends to make you get absorbed in your work in a kind of heedful way that i like.

>> what was the theme of your ph.d. thesis? >> it was on a chance political thought. there is no real connection between that and this book in case you were going to ask. >> i want to ask how you go from a ph.d. thesis to the head of a think-tank in washington, to running a motorcycle shop? >> it is not a normal career craft. speedy right. it is actually not quite as bizarre as many people seem to think. i keep hearing some people who are sort of refugees from either academia or some kind of certain knowledge work and they are doing things in the trade. there are quite a few of them out there and it would be great to hear from them. in my own case, i tried to get

an academic job, and did not. there is such a glut of ph.d.'s, as you probably know. i did land a job with a think-tank. >> which one? >> i'm not going to say. i hated it from day one. >> why? >> well, this was a policy organization and like any such place, it has taken certain positions. and so there were some facts that we were more fond of than other facts, so the job sometimes seem to require that i read backwards as it were, from some desired conclusion to a suitable premise. as the bigger head of this think-tank, i found myself making arguments that i didn't really buy myself, and that was a moralizing. by contrast, in fixing

motorcycles, you answer to standards that really aren't open to controversy or interpretation. the bike either starts and runs right or doesn't. so, i like that about it. you might say that the mac s quotient is quite low. it serves as a kind of check on your own subjectivity you might say because you do have this external objective standard. >> of our think-tanks important to our system of governance in america? >> i frankly don't understand what they think-tank is as-- is supposed to be. it is often, what you have is, speaking in general here, they will serve interests of one sort or another whether ideological or material but have to present

what they do in terms of science, and that is you know, some of them do very valuable work. at my own case, i felt like there was a certain cognitive style that was demanded in this environment, and the style demanded that i project an image of rationality, but not indulge too much an actual reasoning because it could lead often the wrong direction. so, it was sort of,-- it was not at all like genuine academic inquiry and in that sense it was quite disillusioning. whereas fixing motorcycles is genuinely rational, often frustrating but never a rational. >> what is. >> meaning it has some element of randomness and it is a term that aristotle uses to describe medicine.

so, the doctor is dealing with bodies, which he did not make himself, unlike the builder who builds the house. if you are building a house, every element you can sort of see and place deliberately. if the building falls down you can say in retrospect that the builder didn't know what he was doing. but a doctor deals with failure every day, even an excellent dr. he is dealing with materials that aren't fully within his mastery. the reason i think that is important, for one thing it parallels mechanical work and the important point here is that working with things that resists complete mastery in that way i think tends to jason and easy fantasy of mastery that is really pervasive in modern

culture. we often view technology as a kind of magical thing that empowers us in various ways. where is the person who actually fixes the has a very different kind of relationship to it. the more solid sort of command based on real understanding but paradoxically i think it also jason's this kind of self absorbed demand it of mastery that permeates consumer culture. speedy right that those belong to a certain order of society, people who make big decisions that affect all of us, don't seem to have much sense of their own fallibility. >> do you agree? >> i would just like you to explain that a little bit more. >> i was wrapping up the book, that was at the end of the book

where i quoted they are just as the financial crisis was becoming this extraordinary thing that seemed to call into question a lot of the suppositions we have had about our culture, and there was this revelation i think that whole swaths of the economy were predicated on a kind of parallel universe that had kind of taken leave from reality. and i think the irresponsibility that we now see was going on on wall street, not for example but the central theme here, was facilitated by kind of abstraction from this primary kind of economic activity that wall street was tracking. there were so many layers of slicing and dicing the securitized things that i think it allowed people in out world

to be very removed from the consequences of their actions. and so, you know, maybe if the people enough position had spent the summers learning a trade and mashed-- smashed their thumbs a few times with a hammer, and maybe it would have cultivated a bit more of an ethic of individual responsibility. >> what do you mean when you write that people who promote free markets forget that we need free men? >> yeah. i think we developed a kind of fetish of free-market and alas, i don't no, 30 years. you can locate it variously, but i think the reason we ought to care about free markets is that

what we really want is a well formed people who are capable of independent reasoning and although economic independence. when capitol gets so concentrated that it preempts opportunities for self-employment, by people in small business, small tradesmen, or small shopkeepers, then you really have the kind of concentration of power of the sword that conservatives haven't been sufficiently tended to. we worry about the concentration of governmental power but not about the concentration of capital, and sort of commercial power. if you think about it, so much of our lives are kind of ordered by economic forces more than by government forces, so it seems an oversight that people--

people obviously have taken up very much in the last two years i think. there is a lot of fresh thinking about this. >> who is allen blinder and why do you quote cam? >> he is an economist at princeton. he has made a very interesting argument about-- he argues that the distinction emerging in the labor market is not the conventional one, those with more education than those with less. rather, it is between those who have a servers that can be delivered over a wire versus those who service has to be delivered on-site or in person. and a letter are more secure. they can outsource to distant countries, so that beef was that you can't hammer a nail over the

internet whereas radiologists for example now find themselves competing with radiologist in india does it can be transmitted electronically. 30 years ago, we learned that anything that can be put in a box and then on a container ship is going to be made wherever labor is cheapest which turned out to not be here, in china and in the last year similar logic has emerged with intellectual labor, the threat of outsourcing, programmers, editors. but the indians can't fix your car for you because they are in india. so, trades that have to be better tied to concrete science have a certain security to them that makes them attractive. >> and he also says we are just at the beginning of this trend. speedy yeah. he seems to be seeing a very large disruption in the economy and this is all based on an article in foreign affairs he

wrote that other economists have taken up this insight. and the upside seems to be that for years we have been telling young people that a four year degree is the force to financial security. it remains true that those with a four year degree earn more, quite a bit here -- not more than those without. you have to aggregate categories a little bit. if you compare a person a gets a four year degree in sociology compared to a person a gets his masters in electricians, you compare there and come by over 10 years down the road i think you'll find electrician does pretty well. >> what are your thoughts about higher education in the states today? worthwhile? >> i am a huge fan of learning. there is occasionally confusion that they be the book is an

anti-intellectual statement. it is not at all. there are great reasons to go to college i think. if you can spare for years and the money to do it. it is great but it is also true the life of the minds doesn't take place only on college campuses. both because in fact you can read challenging books outside of college but more importantly work itself can be, and i mean working in the trade, can be intellectually very demanding and stimulating, so i am really trying to defend the life of the mind by pointing out that it can be connected to real things. so i see this book is really continuous with my love of higher education, provided that we don't sell students a kind of

hill of goods and push them into it for the wrong reasons, and also people are two different kinds of work. we have developed a kind of educational monoculture i think where just about every kid gets hustled off to college and then on to a certain track and we end up working in a cubicle. i think the truth is some people, including some who are plenty smart, would rather be learning to build things are fixed things and they should honor that. >> what do you think when you hear the phrase knowledge-based society or information age? >> you know, it is partly hype i think. we have had this idea that i think the rows in the '90s that somehow we are going to be gliding around in a pure information economy.

accordingly, shop classes were pretty widely dismantled in the '90s to make room for computer classes. i first became aware of this issue when i realized that there was a glut of shop equipment on ebay, the milling machines, table saws, metal ways-- lathes and i guess the reason it was disturbing to see the this stuff sitting in warehouses was that the disappearance of those tools from our common education i think is the first step toward a wider ignorance of things, how they are made and how to repair them. and, parallel to that there is in fact a kind of design philosophy that emerged, where the point seems to be behind the works. for example if you lift the hood

on some cars now, there is essentially another hood under the hood. i am not sure what the thinking is. maybe that the site of an alternator would offend us somehow. so it has become harder to get a handle on your own stuff and be self-reliant. there are certain changes changes in material culture. some high-end cars now don't even have a dipstick, so you couldn't check your own oil level if you wanted to. i no i am not the only person that is a little creeped out by this. some cars if your order level gets low you were sent an e-mail from someplace. now, if you go down that thread a little bit, it used to be in addition to a dipstick you have something called an idiot light. it was called an idiot light for a reason. we had a harsh judgment of

anyone who was so uninvolved in their own car that they let it get to the point that their light is coming on. but there is some weird cultural logic whereby idiocy, that is a lack of involvement, gets recast as something desired. it meant technological progress and of course it is a kind of progress. you no longer have to mess around with a dipstick send dirty rags, but i also want to notice that there is a kind of moral education that is tacit in material culture that can go in various directions, so the way things are going currently it also often feels like the modern personality is getting reformed on the basis of passivity and dependence. there are fewer occasions to be directly responsible for your own physical environment, and

with that i think comes less expectation of responsibility. >> how many of your customers know that you have written a bestseller? >> word has gotten out for the most part. >> do you have the book displayed in the front window of your shop or for sale? >> know i don't but it has good -- been good for business. i have a nice waiting list. >> when did you decide to write this? are you surprised at how it took off? >> i am very surprised. i started an article that i wrote and didn't think it would go any further but the response was really, it was widely and appreciatively read, the article that is. so, the opportunity to turn it into a book was presented to me and i thought it would be a nice

idea of. >> hasn't been picked up by business organizations or personnel directors or managers to give to their. >> not that i know of. >> any business schools using it? >> i have heard from a couple of professors who think about assigning it in their classes. >> what do you think about that? is it a how-to manual? speeding no, it is not a how-to manual. it is deeply critical of the very idea of management actually as a kind of science of manipulation, which has taken uncanny form in recent decades. >> such as? >> well, now the manager appears not so much as a straightforward boss but is a kind of therapist or life coach, a kind of smarmy

quality to a lot of contemporary management. it often-- i know mostly from reading so geological literature on management, i have not been subjected to that in recent years, but the picture that emerges is that it is like authority can't present itself straightforwardly as authority. it has to present itself as a sort of friendly volunteerism, very egalitarian which i think makes it all the more kind of creepy. >> what about politics? how would "shop class as soulcraft," how could you tie it into. >> doesn't really teach to

politics, republicans versus democrats, on that level but i do try to articulate at the very end and just in the resist sketch something like a progressive republicanism, small r here, that would take its bearings from our shared capacity to realize what is best in the human condition, and with attentiveness to how that is very much a function of the economy, in other words being able to find good work and they are being a place for that and the economy and take that as a touchstone for politics insofar as our political decisions that affect the economy, so in other words, it came from entrepreneurship and making that

viable. i have to say that one thing that is quite important for that is health care. i would not have been able to go into business if it weren't for the fact that my wife had a job with health care, and i think there are a lot of people out there who that is the stumbling block. >> you can read his book or he will fix your motorcycle, "shop class as soulcraft" an inquiry into the value of work by matthew crawford.

>> we are here at this year's conference talking with the matthew spalding, the author of "we still hold these truths." can you tell me what was the most enjoyable part about writing this book? >> the best thing i liked about it is i love history and the book largely tells stories about how the american founders thought to their own experience, both before, immediately after entering their revolution and presented these four principles that they put into the document of the american founding, equality, consent, natural rights, religious liberty of property, rule of law, constitutionalism. how did they come up with these ideas? wooded it mean for them and trying to run a revolution and putting that in story form and telling how it all came together as opposed to an abstract discussion or legalistic. it is a great story.

>> what is it that is being rediscovered as you say in the title, rediscovering our principle's. >> we have forgotten some things about it, but what do i mean by rediscover is to rediscover how these principles, these ideas, these concepts are actually the core of what we are as a nation and how it defines us as not merely historical stuff. it is not merely about guys who wear three cornered hats. that is very nice but these are actual questions about what america means today. it puts american history on the left in the right in and between. it is a long debate, an ongoing debate about what those things mean today. the american founders were very cognizant of that as well, and they made claims about that and the discussion today is our choice and society in terms of where we are going or where we are headed, right now there is a lot of discussion about what the future looks like. my mind sets up a choice on

different notions of what these principles mean today. a lot of times talking about what founders thought and what regressive as a man of modern liberalism howard explains those principles and how we might understand about how this discussion is playing out in american politics over the course of of the 20th century. >> what inspired you to take this on? >> the practical answer to that is that there wasn't really one book that did this. there are a lot of wonderful books to talk about from a historical point of view, biographies. the heritage foundation and congress and other public figures. i travel a lot and there was no one book i could.people to that laid out the story, this forum. i finally was convinced it to write it myself. >> would you say that it is sort of like a manifesto or does it differ from that?

>> differs. when you think of a manifesto you think of something that starts today. here is what we stand for today and what we are going to do. this is a different book. what i tried to do here is to peg this as a founders principle in the declaration, the constitution and try to understand what they understood. and take that that is their perspective and then step back and look at the debate today in light of facts. from that you get a good sense of where we are relative to those principles which they thought were self evident and permit. >> does the book contain any criticism of the principles themselves or the formulation of the constitution? >> it raises some important questions which were law. the most serious one to think there was the question of human slavery in violation of the principle quality but i do address those things. my ideas to address these very

clearly, and all, but to honestly think how they thought through what were very difficult problems than they understood them as difficult problems. when you think through that, the point of view of the problem, but get what they accomplish in light of that you really learn how these principles operate. in that sense you are rediscovering them. none of these are easy things that they apply directly. it is hard, but it makes you think about what these principles which have to do with the key questions of humanity, what are we relative to each other? what is the role of government? what does it mean to have religious liberty? what is the constitution for? these are the questions we face today and seeing it through the generation which stop these things through very deeply and wrote about them and put them into these documents is a great opportunity to think about them anew in light of our own circumstances. >> who are some of the other authors at heritag