in the mick so the ongoing euro crisis but at the time icelanders were wondering, maybe we should get rid of the krone. we don't necessarily needed to be a country and maintain our economy. again that sounds dated and they are happy they don't have the euro but at the time that was part of the conversation so i went over there with a woman who designed iceland's national bank notes and talking about this heritage of them holding your hand. its physical of money of course gleick one of the last touchstones of national identity. and yet she had some very practical things to say when it comes to the fate of money and what it means to their nation. so anyway, i am pursuing all of these different angles. the last one i will touch on is the psychology question and circles back to the credit card effect on how we are wishing to be hypnotized really by credit cards and spend more instead of using cash and our biases for

physical money. there's this great study that i discussed in the book by these researchers at the university of minnesota and i will tell you about it just briefly. they split their subject into two separate groups and this half of the room they asked people to count out just rectangular slips of paper, maybe in the same dimension of bank notes let's say. no artistry or no images or whatever. this site has regular cash. it's not even your own money. they are just touching the stuff and then they asked both people to put their hands in a tub of hot water and report back to the researchers how hot they think it is and how much pain they are experiencing. and tuesdays fiscally different margin according to the editors of science, the group that just handled the cash, they are somehow immune to the temperature in and the pain because they said it's not that hot and it does not hurt that much so in the way those of us

who were kind of cashless future and busiest, these were the hurdles that we have to surmount. difficult to say the least. so, how do we get there? we can't have it cashless future tomorrow. we have millions of people who depend on cash tips for the lion's share of income. this idea of not screen the 99% to the benefit of a 1% so until you can deal with tipping waiters and bellmen and porters at the airport etc. you can get rid of cash. another reason that people bring up is what he going to do when the electricity is off not just for an hour but for three days. people have earthquake preparedness kits and the red cross will tell you, have cash on hand and have some low value bills in your stash. i love this idea of a cashless future and i'm interested in it, but i'm not going to not follow that recommendation of what to

have in my emergency preparedness kit. not quite yet. but what you are seeing is, is really cash is undergoing this kind of death by a thousand cuts. we don't know but his cut number 890 or 952 just yet but it's happening and it won't be any kind of real active decision on the part of government or anyone really. it will be pushed to the margins by new technology. so one is new technology in the mobilephone especially. in part of the book, i traveled to india to look at this idea, something i've never had any understanding of before a launch into this project and this is the idea that caches the enemy of the poor. it is most punitive for those people who don't have much of it. and it sounded so counterintuitive at first that i needed to follow around and economists from the gates foundation to get him to explain it to me clearly. but in short the issue is for those of us lucky enough to live

in a wealthier country and earn a paycheck, we can toggle between money in electronic form and money in its physical form as we see fit. i don't like cash that much. i don't use it very much. if you really like using cash and want to wander to an atm tonight and use cash to pay for dinner, terrific. when you are poor and you are trapped, only using cash, you are excluded from the formal economy in ways that are crippling and they are especially crippling because you can't brace for financial shock. you can't save in the way that people need to save. if they have any hope of not just climbing out of poverty but staying out of poverty. and what is happening now is a lot of development experts are encouraging this idea to get people transacting with their phones so that they don't need the cash, because when you have cash on hand, or stuffed under a bed, not only is all of your wealth, however much or however little, can be lost overnight in

a flood or a fire, and earthquake. the other problem is everyone around you is making claims on that money. you are trying to save so for as we cling to cash a little bit or because the tricks of plays on our mind. the poor are essentially are opposite. caches turbo liquid. they can hold onto his. they can't hold onto it because a drunk uncle is making claims on a cash or an abusive spouses making claims on that cash and usually parenthetically in developing parts of the world as the women who are looking after the household funds. so those are the most terrible examples of people making claims on their money. but then you even have legitimate once or you have a neighbor who need some aspirin or you have somebody who needs a new pair of shoes for their kids. it's hard to say no, especially in a very tightknit urban slum for example and yet you are trying to save to send a son or daughter to school in 10 months or by some farm equipment in 15 months, and he cannot save cash.

everyone is trying to get people involved in banking, not in the sort of abuse of wall street ceo sense of banking. just the old-fashioned stuff, a safe place to store your wealth. the gates foundation thought put $500 million into this program to support innovation in this area and i flew to india to interview a guy to see what this was like. how has this changed he said i used to have to read the bus, today's there, today's back to deliver a small amount of money to his grandmother. that's four days of income generation loss. he has to pay someone to look after his shop. the wealth that may be still hidden somewhere in the shop is now in jeopardy. now he basically sends a text message to his granny in the countryside and she wonders to a kiosk, where the merchant is essentially part of this huge network of merchants involved in the system and she shows -- and there is a click back and forth and she can cash out.

i asked her about the security concerns at all of you will wonder back and he looked like he i was from mars. did you just listen to the value of proposition? that was pretty illuminating and suddenly the pulled me into a much more substantive area of discussion. i like talking about the germs on banknotes and i like talking about wishing my barista was grabbing hand sanitizer and all the rest of it but when you're talking about fighting poverty, now it's a different book frankly. so, the further reading, you have this war against cash in one huge front as the technology. the other side that i tried to jump into in the book are these alternative currency -- community currency, alternative and virtual currency. you have all heard bits of this idea out there. into a lot of people it sounds kooky at first and that is a testament testament to sort of the achievement of the u.s. dollar and being pretty much

everywhere accepted except on an airplane. the reality is that these things are real money with when talking about this coin. you have heard of crypto currency and i'm talking about berkshires in western massachusetts, irksome pound is another one circulating in london. they are everywhere and they are sprouting up and they are real money. this gets to the idea that, what is money exactly? money is only an idea. if you and i agree tomorrow that this bottle of suntan lotion isn't a sufficient medium of exchange in you believe it will hold value and you could trade it tomorrow to obtain something else you want, it's money. and so that is what these alternative currencies are doing. they also have this idea that you know, it's time to end the government monopoly on issuing national currency, and again you see this really diverse group of people who are excited about this idea. definitely get the one guy who will read about it and fall under that umbrella.

you know they believe the federal reserve is inflating the dollar to high hell and that they are going to bring us all down and hyperinflation is eight months away. then you also get the sort of hyperprogressive, let's live on a coup bullets keep our money local because better to buy from the furniture maker on main street or the bookstore in your neighborhood then to buy a sofa on crate & barrel.com paid for with a visa card that is shipped overseas and made in india. and so those two groups are coming together on this alternative currency idea. so from a writing perspective, it's really fertile terrain because here you have people who are not just interested in what is money and how does the monetary system work. of these are people who have been said, do you know what? i think i will sit down and come up with something better. so right away, as a writer you are looking around for interesting characters and you find some really wild lands.

so i would like to read to you a little bit of a chapter of the book about one such gentleman. he's in a little trouble with a lot right now, but we can talk about that. on a sunny october morning, bernard von nothaus shoots west out of honolulu in a beige toyota camry. he has a habit of seeking eye contact, which right now means looking over at me and as he rambles through his rambling monologue with each each had turned the car swerved, but von nothaus always manages to return his attention to the highway summit just fast enough to the car back into line. he may be an enemy of safe driving, but von nothaus hardly looks like the domestic terrorist at that the federal prosecutors say he is. he wears a black and vanilla hawaiian shirt, tucked into light pleaded pants with a thin

black belt. his delicate wire rimmed glasses frame a narrow, almost gaunt face and his hair is, curls up in a wave of gray and silver that he pulls into a tiny ponytail. aside from some arthritis for 67-year-old man who calls himself the monetary architect, makes a point of mentioning his good health in light of the decades of motorcycling, freewheeling romantic exploits and bountiful drug consumption, all of which he recalls often and fondly. i never expected to live as long really, i mean we once drove a truck into the lobby of the hotel. after von nothaus finally accept the idea that i'm not an undercover fbi agent, which takes a while, he is smiling and magnanimous. had in his speech although saturated with shouting and f. bombs, also contains a hearty dose of self-deprecation and hawaii isms, mellow, cool, mahalo.

giving an overall impression of a dude in pervious distress which is remarkable considering that he is facing criminal charges for conspiracy, counterfeiting, mail fraud and get this, you have to quote this one, one count of uttering, passing in attempting to other and pass silver coins in resemblance of genuine u.s. coins and denominations of $5 or greater. he has lost her temporary loss possession of hundreds of thousands of dollars worth of other people's money come including his own mothers and one of his sidekicks has been in jail for more than two years. two months before i met him, von nothaus himself was incarcerated for five nights after violating the terms of his bail that allowed him to hunker down in hawaii while awaiting trial. pass pearl harbor return or through the town. a passive chinese food restaurant called the golden

coin before entering a small industrial park. von nothaus pulls into a space next to a tampa building that is part factory, part warehouse. yellow hibiscus blossoms intermingled with a chain-link the chain-link fence across the street. inside the greedy owner of pacific -- but gregory who melds precious metal in to wired sheet material used for making jewelry. the machining shop filled with rolling dice. what we have come to see as the six football machine set in the corner nickname hammer. it looks like a three-ton hourglass. this is the tool of von nothaus's trade or good looks fantastic. i could kiss this baby, he says and then he does, wrapping his arms around one of the presses that collins. according to the fbi and federal prosecutors this point press is the mechanical accomplice to von nothaus's crimes.

by now, he says i'm not allowed to meant anything and he holds his hands together. this sanction is another term of his bail as her unannounced visits from a parole officer. coins of ice in a part of von nothaus's life. growing up outside of kansas city, he inherited a modest collection of his grandfathers and his mother instilled in him a respect for the value of silver. giving him sober coins as gifts and lecturing him about the medals penchant for appreciation. i saved every one of those real silver quarters he said, referring to u.s. mint quarters that before 1965 contains 90% real silver. von nothaus runs a custom minting business called aware of hawaiian mint company, producing merchandise for war veterans, country clubs and historical societies, academic institutions and anyone else willing to pay for specialized coins or medallions. none of this is illegal. over the years von nothaus's

business has produced coins celebrating huang stated commemorating icons of writing history by captain james kirk and king, mas alluding and marking the 50th and 70th anniversary of the attack on pearl harbor. back at the mill, as if i could see some of the coins, the hawaii dollar in particular. it is one of the coins that got von nothaus in trouble although i don't recommend using the word coins in front of him. do not call than coins. coins are made and issued by the government. do i look like the government to you? the whole idea of this private voluntary barter real value currency is that it is not the government, never call it a coin. i am permitted however to call its pieces, species silver or liberty jars.

addiction gymnastics are ridiculous because obviously the coins, get von nothaus's and usual unusual legal chase rest partly on parking such terminology not to mention the use of the symbol the dollar symbol and miniscule numerals pressed into coins. for charges that include quite it, no detail is too arcane. a moment later gregory returns from his office with a small box containing a dozen plastic cases. at each housing a single coin. he hands me one. the picture is of hawaii king, a how may have standing proudly in warrior headrest, armory says if he's about to address his loyal subjects. turning it over to inspect the other side, i read hawaii dollar across the top. hawaii states in the middle of the image with the words liberty dollar on the left and $20 on the right below the seal. $20, one ounce of pure silver

minted in the usa. so this was minted here on this camera, right? von nothaus notts. then he hands me another one. the king again and the coin is the same size, weight and composition. turning it over revealed an image of a traditional polynesian boat and the state motto in large capital letters which translates, the life of the land is perpetuated by righteousness. this coin is also stamped with one ounce pure silver are hm rail hawaiian mint but here is the -- no denomination, no dollar symbol and no decoration of value. this one with this boat is a collectible. i hold the two silver pieces in the palm of each hand as if they are hacks might offer some clue as to their variable consequence then i placed the two side-by-side on the table. alleged counterfeit on the left, knickknack on the right.

that is what they are fighting over. do i look like a counterfeiter to you? i will stop there. thank you very much. [applause] so i have cruised through a lot of different ideas there but hopefully we can get some competition going and you can hurl some criticism at me for this idea that cashless this would be good. >> are talking about the barista and tipping people and how caches so important in our society and how did you go about doing this? >> largely successful. again i'm not a waiter.

it's a different game and a not so -- game if i needed for income. i didn't go to the chinese restaurant that only takes cash. i had to pay over and above the price of a doughnut one time at a doughnut shop because i had a credit card. as a scrooge running by the same lemonade stand in the summertime 11 days in a row. one time trying to hop a train into manhattan i could not pay the new jersey transit train conductor, bound for the economic center of the universe with anything but this filthy old paper. and then when i got to india, the whole experiment went on hold before even left the airport. i'm not going to be able to anything they're outside my hotel room if i don't have some cash. that was a reminder of how far certain places in the world have to go. to rent a taxi or to pay my translator or buy a souvenir or a bottle of water, anything. that was five or six days without. there was a babysitter incident

and i almost convinced her debt to hurry up and establish a paypal account. [laughter] check is still kind of paper money so i felt like that would be a copout. the idea here was not like this was a crazy brave participatory journalism lining up against the -- it was much more at the soundtrack to my ear. just give me think about this and even if i'm sitting in a coffee shop writing i start noticing the trucks park somewhere, driving by or the atm machine on my street that looks like it's straight out of 1982 as far as technological innovation goes. so just kept me mulling the topic. i discuss it in the book. i feel like it adds to the conversation but at other points, don't think the reader wants to hear me talk about trying to find a parking meter that accepts a credit card so i was a little more sparse but with that now and then.

said that the government has control over the money and there's this tremendous power. it's the banks that have control of credit cards, and i would rather trust the government than trust the banks. so you know we look at fees for this and peace for that so here you would be totally at the mercy of what i see as an unscrupulous banking industry. >> i think that's fair number one i think we need regulators and if you believe in betting governments as a that's a problem because how can moderators do that their thing. i further a lot and i trust government more than i trust banks. but i also wonder if the rivers could happen. once we get rid of cash, most people aren't really using it anyway. banks are critical of them but most people are still saving their money in electronic form. unless you have three cases full

of cash under your bed and i just don't know it, so we are engaged with them. that is not to give them a pass. that's to say that maybe actually once we say goodbye to cash, people will become a little bit more savvy about the come essentially the friction in their economic lives and where it's coming from. and so with one bank is charging you this fee and another one is charging you this be and another one discloses this wonderfully detailed privacy policy and their one hasn't, people will seek out i think the ones that are better and same with a mobile phone companies. if you are dropping, people are sending money back and forth is one thing to drop the call and have to dial someone back if you drop my money, my value that i have worked so hard for, never going to go back to that service and the companies that are starting that stuff, i think they are getting it, that the bar is pretty high in the need to provide a safe and robust system for consumers. but you know, there is ample reason to be skeptical of the

banks. i don't think this ideas about ending national currencies per se, but i think of caches marginalized so far are ready and if we do a real accounting across government agencies of how much cash actually cost, the treasury makes money by issuing money for all of us but then they are not talking to the fbi about hunting down money launderers. the secret service told me, former agent told me 90% of their workload is not protecting the highest office in the land. it's hunting down meth heads who after four nights without sleep decide that they are going to bleach 5-dollar bills and try to print the bills and $20 maybe they buy some gas and they get caught. this is 90% of the secret service workload. there is a way to trim government expenditures a little bit. so i once this accounting across the crux of agencies will see cash a little bit differently.

>> can you talk about the image of cash and organized crime and drugs? what about the people who have legitimate cash businesses and they declare 90% of what they make an hide the other 10%? do you have any idea what the value of that is? >> it is colossal. so the term of art is the tax gap, and no one knows what it is precisely because cash is anonymous. it also includes money that corporations hidta per season that is like tonic money. but a huge amount of that money i think in 2000, the most recent irs estimate for this and i think it was $300 billion. some people are talking, a guy and talking to in a couple of weeks, think it's up to have the chilean dollars. actually most americans today pay what they owe or what they think they owe, 85% of us.

it's just somewhat encouraging when it comes to civil society i think. but, that 15% and those people skimming off the top, hiding income and paying employees in cash and not filing matters and it matters for school funding and all of that. i think esparza language, tax gap has got to be the moralist boring descriptor of the most serious problem i've ever heard and they need marketing help on that. >> it happens -- you can get it on the irs web site and you are exactly the right ballpark, $400 billion. it takes them five years to do audits to actually get a sense for how large that problem is. none of that is the question -- >> we are kin. that's great.

>> the question is about the 150 billion. you said it's about 150 billion of all kinds of different expenditures. my question is, how lotus cashiers have to get before you really make a dent in it? you still have to pay the truck to, and empty -- and they start to make it, so does cash drop to 10%? what would make a dent in 150 million? >> i don't know. i think in sweden for example that the union of rank employees there who are so sick of robberies and the threat of robbers that they are lobbying the government to get rid of cash altogether. parenthetically they have gotten rid of coinage into the 50-cent piece equivalent. buzz countries of the world are getting rid of their penny in their nickel and here we are with the president and the land of lincoln in the white house a don't think it's going to happen anytime soon with a penny but other countries are looking at this and it's the banks who are saying we don't like cash.

it's expensive for us and it's dangerous for us and our customers don't really want and our employees certainly don't want it around. there might be a push from the banks, and then i think you know the other place is, the areas were cached has dug in its hills and tipping is a great example or public transit where you can't use some sort of device. he would be a fool to say we should get rid of cash tomorrow before there's a sufficient substitute or more likely substitutes for the tipping of a waiter. i just don't think, think it's a really short term due to think we can't come up with the technology. credit cards have been around for 20 or 25 years before people started to adopt them and trust them. that's not saying again that they are fail-safe for the industries of the most ethical we have ever seen, but obviously there is a value proposition for thousands and millions and millions of people who say yes, this is more convenient for me. so those are some ideas that

come to mind that yeah cash has dug in its heels so now it's our job to act like the airlines. the airline said, look, cash management for us is a problem and flight attendants are skimming off the top and it's filthy. i don't know how much of the germ factor mattered in that decision, so they said no. this is a cashless cabin and that confuses a lot of people. someone asked me if that was illegal the other day. which was interesting and so the shorthand answer obviously because they are still doing it, it's totally legal and you don't have to accept u.s. dollars prepayment. the idea being here that if you have a debt denominated in u.s. dollars, if i owe you $100 we agreed on the sale two weeks ago and it was denominated in dollars, when i come to pay you that you cannot say no i want uncut rubies. we are to have our deal but before you give me a graphic design consultation for $100 an hour, and you say oh by the way i only want to get paid in uncut rubies are donuts, whatever and i say yes, then we are fine.

that is what the airlines are doing. they are saying no more cash so there it eating away at cash is fungibility. you can use it anywhere except at 35,000 feet because it's like heaven up there. [laughter] >> there was a time before we had cash, and i wondered what you thought about or find out about the potential of the increase for decrease of bartering in this cashless system? >> so the question has to do with the potential for a bartering economy again. the first section of the book kind of zips through the history of how money was born and how the dollar as it has come to nab him about. for a long time people were bartering and this is the double quads event. you have a surplus of furs and i have lots of potatoes. i'm cold and you are hungry, hey we trade. then it becomes a problem when you want to buy something for

someone else and you don't want my potatoes and this is where money was born in this medium of exchange. the exciting thing about the digital age you can have now a central clearinghouse for people offering services so you can order and you're still bartering, but you can find each other. you don't have to have that double quads event of thin quinson sense of it because you can go to this place and if you're looking for someone to mow your lawn or if you are looking for a lawnmower you can go to this place and see if maybe you can find somebody in this network who is offering it in your offering something else so i think you can see a resurgence of barter potential. some of these alternative currencies are actually really just a souped-up version of barter anyway. not the virtual stuff like a million dollars in corn and all that but the central clearinghouse is exciting in that regard and you definitely see especially the kind of very far lefty community areas like

where i live in oregon in corvallis there is a very tightknit barter exchange for people trading this stuff. the problem is, it's like this chicken and egg issue. because if you go there and you don't want fresh bread and massage or graphic design service, which seems to be what everybody is offering in exchanges, but if you want to buy gas or pay your utility bill. they strangely enough only take u.s. dollar so there is still a ways to go. >> i think a couple hundred years of trading currency, deficiencies and the costs that have built up, but what about the risks and inefficiencies that might show up in a cashless society? >> the example is when china declares war or when the electricity grid is offer of her and your devices have all run out of power or the sun is

covered up because we cannot charge some of the solar devices, then you're in trouble and people will go back to something like that. there was a banking system in ireland and people started to circulate handwritten ious and they worked his money. even on california recently went bankrupt people were trading those ious from the state. they kind of worked. but i don't think it's the concern to pooh-pooh it to quickly. that thing said i do think once things are calamitous and the calamity is still enormous, you're probably not going to worried about the medium of exchange. you are going to be fighting for bullets and blankets and shelter like everybody else. the end of the world kind of stuff which is less interesting to me. [inaudible] >> epping counterfeiting in digital currency is a big

problem. how do you know if you have coined any spend it on something, the system is engineered to show that you spend it on that so you can't spend can spend it on something else. you relinquish it, but i think that is going to be a problem. i think concern about private, the private sector versus government could be an issue, depending if there's this great flowering of currency and a great flowering of payment devices, so instead of just mastercard, it's 35 companies. that sounds inconvenient and tell you remember your mobile phone, you can do conversions on-the-fly so if you want to be paid in a certain currency and i like to pay with a different currency, you can flip back and forth without what people perceive right now is to be a huge pain in the rear. i will think a little bit more about those inefficiencies. [inaudible] >> about getting rid of cash?

they make me off of it, right? i don't say that with any political agenda. people who are sort of conspiracy theorist think that is foreign relations stuff like they are ruling the world and against transfer to treasury at the end of the year. depending on your politics, that is ripping off the taxpayer or that his government raising revenue with which to spend on its citizens. so you know, i think the feds, they don't like money. in short, and they also know we need it now. for tipping for example etc.. it's also a great franchise. how can you not want to make money? it cost you 7 cents to make a buck, you just pocketed 92 cents. awesome. richard. >> assuming after the next election that we don't go back

on the gold standard, do you have any thoughts about what might happen to all that gold? >> well, no. it's interesting actually because on the one hand a lot of people laugh at the gold standard idea, but it is a weird footnote to the conversation that so many central banks hold so much gold. which i find kind of weird. but they might just holding onto it because of the commodities and it happens to be appreciating are trading right now. some people say silver gold. use that money for x whatever, might be. i've a feeling it will sit there and it would be too unsettling for people who don't have a good grasp of the monetary system and to still have this false understanding. they still drink -- think frankly the dollar's value is connected to gold somehow in and of course the dollar is only valuable because we believe it's valuable and still acceptable

because people think it's valuable and around and around you go. a lot of that language of religion goes under the book. i don't know what is going to happen to the gold. how could i? >> did you and in your research, cross family members and you know, i know people view cash because they don't want their spouses to know how they are spending money, and also having college-age kids. i have one son that is a broad and you can just see you know, where he is traveling and where he is going. basically he calls me up, hi mom, i'm italy and then i'm going to be in marrakesh where you can kind of see that. so i just wondered if some

people just like to hang onto cash because it might be that last privacy when he might have, not from the government brought from our own family. >> i think that is fair in in their two varieties to that question. won his tax evasion and buying foreign or presents for your mistress, less interesting. more interesting is an anonymous donation to charity for example or two by a valentine for yourself and you don't want them looking at your transaction. i think that is there in the way talk about this in the book is the difference between privacy and -- in some of this is just semantics with some of it isn't and i think a lot of people jumped to cash his defense saying no, no we need to protect their anonymity. what are you talking about? do you vote, do you have a license, to have a social security card? i would argue you don't actually deserve it and civil society that you're participating in playing by the rules. you are a known entity to a degree.

of course when he privacy concerns and we don't want google and face the gathering data about us in everything we do but i think is it's really bogus to say that wages are anonymity and there was nowhere in the constitution that says to live here, you know, you have the right to act like the unibomber minus the violence. it's not how it is. so i think there's this contract of participation. but you know a lot of people like cash for that and they are not necessarily doing things that are nefarious. in another reason to keep cash around, a lot of people say is encased to hold onto a tighter. i talk to people or the book from debtors anonymous. the beginning of every month they go to the bank and they take out just the right amount of money for rent, for utilities and for groceries, for some leisure and that's it. it helps people maintain discipline. that is an argument in cash's favor that again you can just

disregard that too quickly. but an idea that i try to bring up in the book is we can really have our biases for different kinds of money, so what i mean by that is, you know it is hard to break a 100-dollar bill. everybody knows that. with five, 20 sinner while it is the same as $100. economist will tell you it's exact same thing. everyone in their heart knows it's not about at all the same but in fact let's say you have something like an e-mail reminder that a bill is due in a few days. that is a technology solutions to help essentially make up for human frailty because people forget that they have something do our coffee pot that shuts off automatically so you don't earn down the house. this is a technology solution to protect us from ourselves essentially. and when it comes to dealing with cash, money more generally, think there are ways to re-create the pain and spending that we feel now with cash. that is how economists describe parting with a 100-dollar bill

and parting with electronic money. there is pain and spending our willingness to pay. they have all kinds of wacky terms. one additional example in that area is an app called mint.com. some of you may have heard of mint out there but every time you log onto mint on line earn your phone you see your networks across the top of the screen and if you are like a lot of americans that numbers and make it if number because you have a mortgage. there's got to be a significant influence on spending behavior just from seeing a negative network. every time you turn on your phone. a similar kind of influence on spending behavior that we get from just clinging to 100-dollar bills. is at the same? there is a great dissertation to be down there but what if you had benjamin franklin's face pop up on your phone every time he did something or you had to sing a song very loud before a transaction could go through or your teenager has to sing a song or call you before transaction could go through by using the

fun. we can come up with systems to make up for our biases and seo company we thought we love the penny and we should really keep it around and oh weave of cash. we should keep it around. to me that is kind of defeatist and another category people by the way who are serious -- furious with me. we can't get rid of the penny. what is this idea of getting rid of cash? maybe i'm not quite such a pessimist yet. >> sometimes i think this is a -- and i'm one of those people that just really, i think it's a horrible, i mean there are so many people, elderly people, poor people, more poor people that will grab their smartphones and make a transaction? there's a whole huge number of people out there that this idea of everything being done by

technology and if you walk by the lemonade stand and you are screwed, you are a scrooge if he cannot give people money. that is one of my joys in life. let me make the transaction and here is my phone. i mean it just feels incredibly classist. i don't is a -- although i would put that in there but not respectful of a whole huge segment of society. >> right, the poor. like this guy kumar who a feature in the book, this guy in india. >> or someone getting out of prison. >> there are 20 million people in this country you don't have a bank account so how are they going to do this stuff? what they have to do, because they are excluded from, they are excluded from having electronic money at all. they have to go to a check cashing service and they get

charged serious fees just to turn their money into cash. whereas, if they were included in banking, and included in basic financial services, they would not get screwed like that or when you talk to the gates foundation people about wanting to get financial services to the poor through their mobile phones, to me that is not at all classic, that idf financial inclusion. >> assuming they have a phone. >> they do. there about a billion people on earth right now who have a phone and don't have a bank account. they donate an apple iphone. they have these gp nokia phones. as anyone can tell you with a lot of these technologies, prices are plummeting and while the capabilities are skyrocketing. so i don't buy that argument that the everybody does not have a phone and the cost for that is only coming down. people in poor parts of the world are spending more on phones. they will spend first on a phone and then like medicines for their families, transportation.

the connectivity is important. [inaudible] >> more generally, i think the key here is that economists, development experts, they will tell you that this is a tool to enable people to climb out of poverty. that is what they're saying, and they think that is a pretty important distinction. but i hear you. people will still be excluded, especially the elderly who have a habit of just operating with cash, and the idea here is let's scrutinize the cost of cash a little bit more because it might actually be punitive for the elderly. in japan for example there are a couple of days here and all people receive their pensions, and the country has to flood the streets with police to meet and chat a while the old people who go to the banks and atms because right there at the atm they are going to to get raptors bundled into some ridiculous scam by a

people because they are holding all the cash. so i just don't think it's quite a classist idea and of course you cannot get rid of cash tomorrow because of the working-class for example, tipping in all of that. but it's simplistic to think that this is a classist idea. >> and talking about bartering in the different types of currencies that are being played with our being -- hot is that plan -- because i was just audited a few weeks ago. i don't quite remember all of this, but i think if i remember correctly, i am self-employed so we have a lot of things to talk about. he did and asked me if there's any bartering going on, so how does this play into that? the u.s. to declare income and alternative currencies on your taxes. i don't know exactly how they track that kind of stuff but you have to. and as long as you are doing

that -- speech at a measured against the dollar? >> , and most of them do. they often exchange rate with a dollar so that is not really a problem. with bartering think it is trickier. you probably have to estimate the cost of service or the products. it is messy. i don't want to be an accountant. way in the back. >> i've lived in this area for come ever since college actually, and the rents are extremely high, as anyone around here can tell you. and finally, i have saved enough to try and buy a place and i wanted to buy a place that would have some renters also. i managed that a little over 20 years ago, and -- monthly salary pretty much. now i'm trying to get a better salary, or rather, at a lower

rate, interest rate. they won't give it to me. although i have, not just the buildings, but i have arias which i don't want to take out on, and other investments, and right now, one of them i've applied at is the very same bank that i have my currents with and they won't issue a loan -- a lower interest rate. they want to see me take out or sell some investments, where it will get lost or at least not what i want to get on it. and show that his income. then they will give me a new mortgage at a lower interest rate and of course they have been paid automatically out of the same, out of the bank every

month, ever since they have handled my mortgage. i mean, probably, they're they are probably third one because interests have gone down and down. this would be the third time. >> it's ridiculous. >> yeah. i don't know what to say. it seems like that might be a little bit out of the scope of the cash versus electronic money conversation. >> and a sense, it makes me feel like i was among the bottom 5% or whatever you said, the people who live off cash. it is putting me in the same -- >> punitive. >> they know i have the investments and they have seen the statement that i get. .. minutes.

>> thank you so much for having me here. one of most new york's distinguished institutions and it's a pleasure to speak you this evening. now history is more than anything storytelling, and i want to tell you some stories about the history of debt. i want to start though with the

story that, because of the recent past, should be all too familiar to you, a story of financial crisis. i have changed the names to dick and jane smith, but their story is all too real. like most stories, it's not just about the money, it's about love. it's about hope. it's about finding your place in the world, it's about growing up. dick and jane smith met shirley after they moved to the city. sparks flew, declarations of love were had. rings were exchanged and bows inevitably follow. ..

much cash so the states went to their local bank to see if they could get a mortgage and after a few calculations, the mortgage officer told him that once the air and they couldn't get enough to buy a house if they got in and our highest mortgage and paid back the interest and the principle every month. , the mortgage officer told them there was something new that makes their dreams come true, something that smart people use all the time, something called a balloon mortgage, something that

let them pay only interest on the mortgage and after two years they could refinance it. now, and let them buy a house immediately and sleep soundly in the knowledge that their household income had nowhere to go but up, just like the value of the house itself. when the time came a few years later to refinance it, he would be there. it wouldn't be a problem. they would just get a new loan and course the banker knew after they left that he had nothing to worry about. he could sleep soundly at night because he could resell the money and the debt and if anybody else and not worry about when people went to work james filled the house with fashionable contemporary furniture he bought on the installment plan. his father only paid cash for

cars but he got of loan and they didn't have a savings they did have a steady income. everything was working out. now, unfortunately this only lasted a little while. things very quickly began to go badly at this new high-tech firm at which he worked and the orders began to slow down and then suddenly everywhere all around them the house value began to plummet and the note came due on the house and they went to the bank to see if they could get refinancing, but they couldn't. a mortgage officer had been set and shortly thereafter he lost his job, too and when they came to repossess the house they couldn't sell their ipod, they couldn't sell the notebooks.

all those things didn't exist and given to be invented for another hundred years, because its 1932. the paying wealth between the summit of 1932, between the manufacturing job at general motors in flint michigan and today's technical jobs in silicon valley are unsettling, but the largest structural similarities between the 1920's and the present are truly terrifying. credit dismissed and millions of other americans at that time borrowed their way to the american dream and to the consumer credit made possible by the invention of new ways to repackage and sell individuals that in the the capitol market, and in both it was made possible by the credit that came crashing down and a financial cataclysm.

like the past decade, americans of the 1920's use credit to live beyond their means and the last 100 years inequality has peaked in the particular moments. 1928 to 2007. it is no coincidence that the highest areas of any quality have also coincided with wondering. why is this? the industrial economy based on mass production does require mass consumption. and at that moment there were two ways to pay for the consumption. either through credit or wages to keep the wheels of the industry turning. but more than just understanding these moments of inequality, we must also understand the moment of the relative ecology in the

post war. the debate could rest on the ways in which the federal government responded to the crash of 1929 and the subsequent great depression. now in the last few years journalists had spawn many towns about this novel and coming agreed the bankers supposedly recently invented. but the true origin of the crisis goes back to the great depression and the choices made in the aftermath of 29 because these policies used to solve that particular crisis which laid the foundation for the post prosperity and eventually the financial crisis with which we now gravel as it dissolves in the 1970's.

we recognize the differences between the 1920's and 2010's and also need to realize what is stunningly similar economic inequality, the need for profitable investment and a dividend housing boom dtca. one way to do this would be to bore you with lots of macroeconomics, talking about the ratio and things that are equivalent to a high school algebra class which would be very stunning. more than any graphing we should look at this picture. this picture i think explains everything about the world that was lost and the world of was made. this is a picture that would have gone in a small shop, mediator -- mabey grocery who didn't want to give credit to the customer. the owner of the shop could very easily point to this and say i

will not sell for credit. what's interesting about this picture is of course it's the opposite of what we think today. weeding out the stores that sell on credit, people who lend credit are prosperous, but this picture is exactly the opposite of that story. you look at it and you can see a man on the left,, ragged cut his hair like mine. a man consumed by anxiety from his own business. now, the other one, the fat man as we will call him settled for cash. he's busting at the seams. look at that. look at those jobs. they would envy those shops. look at them. something to behold. but behind their appearances was

a financial practice. this man sold on credit and might earn a little money to be paid back in the future to his customers of the grocery store and in return would have these iou's that pile up. on the other hand, you have a gentleman that only sells for cash. and look at him, the flower filled with money and possibly sushi. i want you to look at this picture not just for the fashion of course, but to understand the mirror image of what we thought today the office logic.

the skinny man would write your name on the ledger and he had to land. she had to lend to his customers to keep them coming back but he wouldn't make the money doing it. he might have charged a little extra of a credit crisis but it wasn't profitable. it wasn't something that he wanted to do it was something that he had to do. it was a bad business decision because a was his money out there. the money that cannot his own pocket no bank would lend him money. he couldn't resell the debt to someone else. loans were not commodities bought and sold as they are today businesses did not think that was a good investment. try to think that that way. that is exactly but it is for

those that own it. there wasn't a good use of this man's scarce capital. now there were forms of lending for instance the singer sewing machine that we have probably all heard of. they did offer credit all across america so people could buy their seven machines. now they did it not because they made any money on it and this is why it is a good example. they made money on the manufacturer of the sewing machines, they made the money on the lending, and this is why it is different in the world we live today. one of the questions is how did this world become inverted, how did this will become the opposite of what it was in the 19th century. that is how did that stop being personal so you could sell your the minute factory goods, how

did the debt become profitable in and of itself. and most importantly how did that become sellable and commodity have become an end of itself rather than being something we had to keep real things getting sold and made in the process of becoming an end of itself, how did the debt ultimately displace, replace the making of things? this is the story they tell. now, that went in the 19th century from being the province of loan sharks to board room investment bankers. and in this moment we began to see the connection between the indebtedness and the inequality. now, the common wisdom is of course that we began to borrow in the 1970's, the sense that it

became a morality in the consumers last ran amok and what changed in the 1970's wasn't that the american character changed. we were already and always will be lost for consumers. no, it was that the american paycheck changed. we stopped being able to pay back what we borrowed. the lending which it paid those 99% good postwar wages no longer did so, so the one per cent got better. then the one per cent was all the money saved up decided not to invest in businesses which is the only way to justify that kind of concentration of wealth. workers needed money because they got paid less and because they were paid less than 1% at a welcome audience to the loan.

in 1955 and 1969, you can see 47% rise in the real wage. it period with 41 years there's only 3% rise. the economy continues to grow and the wages stay like this and all that except the 3% shows the people of the top of the economy it's hard to understand and hard to believe that it was investment decisions that drove this transformation but this is how it works. it's the same decision you make when you are investing in a factory or farm and one of the key drivers in this moment was simply in that moment it became

more profitable to put a dollar into consumer debt than into a factory the right to lend that money you need the borrowers as well as lenders and people who wanted and needed to borrow all that money. you need mortgages, credit cards, car loans and the like, please is to invest. he needed that to be read sellable and the picture to turn upside down. you needed to the practice is to change and bartsow. so to borrow the book tells the story of where all those practices came from sometimes in the most unexpected of places at how the debt became a part of our lives and it explains for instance how the inventor of a modern car company henry ford also resisted and how gm embraces and nearly drove for

out of business and told the story of how they give the first credit card and why they succeeded in citibank and first and how target even then in the 1960's was called tarjay and how it and ann taylor used credit to destroy bloomingdale's. but all of that will be too much for one night and i promised to be quick so we can go out to dinner before the snow comes but i did want to take a second to talk about the safety of investment and debt and what it had changed in the 1970's to bring this back with a chance in a moment in the 1920's to bring back our new regime, so i want to talk about the mortgage-backed securities and i sure how these mortgage-backed

securities then called participation certificates funded the housing boom of the 1920's and this is how the banker was able to sleep at night after the collapse he knew the money could come back the mortgage debt securities are shunned by the market because the toxic gases that couldn't be resold as the house's offer closed on. so they were banned by the fed and ignored by the market in the 1930's only to be resurrected in the 1970's as a way to channel money into the inner city with no intentions conceived under the johnson administration that it was under nixon correctly under nixon secretary someone named george romney, father of a certain presidential candidate

and he wrote on the occasion or said on the occasion in 1970 of this jury first mortgage-backed securities being issued this had been marked a revolutionary step forward effort to increase the fund available for mortgage financing but in the figuring of the 2000's of prime lending program it fell apart as the predatory wonders and unscrupulous flippers from the first-time home buyers. the government found itself unable to resolve the house's that add to foreclosure. terse denying the problems romney was ultimately forced to freeze it in 1971 even as it's a particular lending program the mortgage-backed security blossomed the securitization

works as an instrument that connects local demand and global coupled the new kind of bonds that could find any kind of house, transform global financing heat it bypassed the traditional links to the two banks the would allow the money to come from anywhere like small-time banks to the union pension and european investors preferred all of them can buy american mortgages in your home town. and landing on houses at least middle class housing became easier than ever before and i was the problem. it wasn't the flip side of the urban crisis and didn't address the flip side of what was going wrong in the economy overall. the millions invested in mortgages in the dead and houses and unproductive houses was

money not invested in business. the differently the policymakers of the 60's and 70's called prosperity which was good jobs with its symptoms which is home ownership and for 40 years kept doing the same, finding new ways to put money in housing and credit cards while doing little to put money into the small and medium-sized businesses and the very things that would have created good jobs. even than the security's even then as they were being discriminated in our economy may seem confusing. they seem otherworldly and they seem mysterious and that is because they work. nobody knew except for the unknown. this is bad for freddie mac from 1984. and these are the loans, the cfo

of freddie mac on how to use the securitizations because these new mortgage-backed securities offered something to the 1%, offered them a safe place to put their money and get a little extra on the side and on this moment supply the demand for the mortgages and then for credit card debt furnished by these folks on the mission associates and hawken won the company's third and industry the gulf came from the mission associates. if i saw this it wouldn't make me want to invest in the freddie mac securities. it is terrified, but it would be fun aerating if it didn't end in tragedy and these developments were not inevitable. it wouldn't be the knowns that

made mortgage-backed securities after all. it was government policy, business policy and ultimately it was us allowing this to happen and doing so it became easier to invest in my credit card debt than and the small businesses. i want to give you a sense of that very first mortgage-backed security and where it came from as well. this is an advertisement from 1969 in the associated mortgage company who they were very proud of getting money into america's ghettos. these were the companies offered money in 1969, and these were the people on wall street that sold this committee's mortgage-backed bonds and the first debt issue in 1970, the name that should be familiar to us now it has always been a case there were connections of people on the ground and wall street,

wall street producing the bond for investments for the 1%. and for 40 years since 1970 this is far earlier than we imagined the had begun but even from the get go they were unstable and produced misery in our lives. they have never worked. for 40 years we kept doing the same thing trying to find new ways to funnel money into housing while also doing little to put money into growth even in places we wanted to help. the regulations made it harder to profit in ways that didn't help the many of the few were rolled back. profit was chosen over stability, finance was chosen over production. credit was chosen over wages, the memory of the depression and its causes or forgotten but let

us not forget again, let us remember not only the recent history the long history of credit in america. but first before we can remember we must understand, and right now i fear we do not understand. the current crisis is not the result of a few people breaking the rules. it is not the result of a few bad apples. was the rules themselves the were broken. most of the borrowers followed the rules and i don't just mean oh-la-la but the rules of the lives and what made for the responsible assault. they bought houses like responsible adults and they live inside their budget. they obeyed their budget. the scary thing about the recent crisis is that it resulted more from people doing what they were supposed to do than not, borrowing for houses, cars like

responsible adults. but no matter how the budget may be laid out, no matter how it helps you discipline expenses and will you spend your money on, it didn't discipline the world around you. it doesn't make the economy more orderly place. and as americans lost their jobs to the working class in the 70's and then to the middle class and 80's and 90's their work lives became ever more precarious and the budget ever more meaningless then of course had could even if they followed the budget it couldn't be sold because the crash. americans followed the rules just as they had done in the 1920's and even the bankers on the other side for the most part followed the rules. now there was fraud but it

wasn't just housing for the poor that cost it was for the middle class. it wasn't just a few bad bankers doing bad things with their money. those pension funds investing in the aaa found some, it was following the rules that got there and while the mix for a good morality play to say that it was bad people, it was also good people just doing their job, good people who fought they were helping us by the things we wanted and it was the good people following the law, good people following the rules on both sides and those rules that need to be changed so it doesn't matter if rules are broken they should have never been written that we in the first place. the idea that brought comfort because the system doesn't work. the fact of the rules themselves the were broken should comfort us actually because if it were

just human nature we couldn't change that but we can change the rule, law, the institution, the morrill prescription but we think about our lives and decide what economic actions through. people do bad things sometimes, but they will follow the rules and the rules need to be changed like they were changed in the 1930's to bring order and stability to the financial system so the work of making real things for real people can happen again. we can bring back prosperity because gnomes will work for us and not us for the gnomes. it's not just enough to stop like rahm needed what's not working. we also have to figure what what really does work and i hope this book will become part of that giving us a perspective, stories

to tell so we can understand what really happened. thank you in and look forward to your questions and the q&a. [applause] if there is no q&a then we can just go. [laughter] [inaudible] what do you see the new deal that might come to get us out of our current financial crisis? >> i think the most important thing to realize about the new deal is that fdr was no intellectual. he was not a consistent thinker. he tried but never came across, and i think whatever is interesting about the 1930's is

that it offers us a lot of different experiments, a lot of different ways of thinking about what is capitalism. on the one hand, you have people saying we should spend more money, tax payer money directly create more jobs. they're certainly was an aspect of that in the new deal and i write a lot about herald, the secretary of the interior, the head of the twa, a very good liberal. on the other hand, there's james moffett who ended up being the head of the fha. he was everybody in the liberals age, the incumbent of the state of new jersey, he was like a rich man's son, he was no part of what we imagined the new deal to be. now, unfortunately for this story, he and the fha could have a greater effect on the american economy. it was moffitt and the fha which created regulation that

channeled the capitol and the investment. they spent no money. a creative ways for the private couple sitting on the sideline like it is today to be invested at a profit to safely and for social purpose. at the time we desperately needed housing and we have enough housing in vegas right now but we desperately need the housing comes with a new deal can offer us both of them and when we imagine what kind of policies its creative thinking, creative thinking about what we want to do is not sufficient to say to capitalists to say what the profit, don't do that, just let us tax you and then spend it as you well. it is more powerful to be deterred domestic, to offer them a little bit of money. businessmen are terrified. they want to find ways to invest

their money and we can offer the least to do this. we can offer them to treat mortgage backed securities, business back securities and ways to securitized small and medium-size business. we can offer them ways to invest in the things that will benefit americans to create jobs. this is what i think is the great lesson of the new deal, to use policy and finance creatively to channel private capital into the social we desire and not say either or. either the market remains free or roughshod over us and our hopes and dreams and our lives or cash the crap out of each other, right? it's not an either or. we can make policies that will work, we can make policies that will bring growth back to make it possible for the small banks not just to invest in mortgage-backed securities investing in the credit card debt and all the things that

produce nothing investing again in our communities. >> what are the other types of securitization and mortgages that have developed like security is a medical receivables or exotic things. do those have the same risks as the mortgage-backed securities? or are they more like what you're saying investing in business. it's interesting because sometimes when i get the stock people say that all well and good but mortgages have something real based on housing, and when those loans to about you can always rissole the house. we all know it is the intrinsic value, right? that's a lesson you should take in the last few years.

so, i guess the question is if it's not about the intrinsic value than what is the risk? and of course on the one hand, business people are not free creative, the mortgage-backed security was developed in concert with the federal government was used for consumers and was expanded incrementally as the of respect and it is a medical debt, credit card debt but those other kinds of debt outside of cars and houses are all on secure. there is nothing backing them except for your future income. that is what underpins these loans so why not invest instead in businesses, not crazy start-ups that just came out of the blue, that is for venture-capital wherever he went to college. a plumbing supply business, things that have been around to

make extra money. things that have defined profits come things which have standards defined by accounting to make something profitable, they are the backbone of the economy so there's a difference between different forms of debt. the distinction one might be between secured and unsecured the distinction and it is credit cards and we figured out ways to do but are there any other questions? >> mengin participation certificates being a kind of secure test mortgage. i was wondering if you could talk for a while about their origins and did it play a role in the great depression that comes to the realization they were not a good idea. estimate you know i like about this question it's a history

question and i historian so i appreciate that. let's talk about the history. their origins in the 19th century at the beginning of the book i talk about this, how ancient finances made in the west as a way to finance all those mortgages, and initially these kinds of mortgage bonds were sold to pay for people owning money in the west, and they were owned by two different kinds of institutions, banks and then things called bond houses that were active but mortgage companies today. they would lend the money and then they would sell the bond against the mortgage and if they couldn't be resold there was no secondary market. but what happened was in terms of the great depression at least in the housing crisis of the great depression it's like i said in the introduction, most of these houses had to be refinanced every three to five

years, so these balloon mortgages of the 1920's had to be refinanced for three to five years and then the idea is you could go to the bank and get another mortgage which is all well and good as long as your bank can find buyers for the bonds and after the crash within a couple of years, the buyers of the bonds were fewer and fewer and investors were holding back their capital and because of that the ex of the rate of the foreclosure rate which made people hold back their capital and accelerated the foreclosure rate which led to the crisis and its only in those moments where the government creates the home owners loan corporation to step in and issue new kinds of bonds that we stop the freefall in the market. such as the capture and i write about the stories and the compelling anecdotes. the author of the book its colorful and zinni and i highly recommend it. are there any other questions?

no? thank you so much for having me and coming this evening. i will be around for a littleis.

my great grandmother used to live down the street so it has a particularly special meaning for me. let me move to introducing our panel tonight i will start on the far side from me michael cooper is a national correspondent for "the new york times," the albany bureau chief and began his career at times as a night copyboy while he was in college. one shot his whole life, particularly impressive in the modern world. nearest to me, jared bernstein joins the center on the priority in may, 2011 as a senior fellow from 2009 until 2011, so most of the period he will be discussing tonight he was the chief economist and economic adviser

to the vice president of the united states. before that he was at the economic policy institute, and earlier chief economist at the u.s. department of labor. i take it had an immediate administration in that. last in the middle my colleague michael grabell has written a fabulous book money well spent if you haven't already read a strong strongly urge you to carry both evenhandedly and in the sunday review section of "the new york times." yesterday and we are very proud of his work not only for us but in this book. he's been a reporter since 2008 and earlier was a reporter at the news and hispanic twice finalist for the livingston award as the of the leading journalists in america. thank you for joining and i want to say that we are particularly honored to have in the audience

life and of our friend the former lieutenant governor of the state of new york so thank you all very much for coming and away we go. [applause] to three years ago today, discussed the american recovery and reinvestment act of 2009. it was about this time with a house that already passed a bill 3:30 p.m. we were waiting for senator sherrod brown of ohio to return from his mother's week in the senate the bill i think ) and ten, 10:30 p.m.. the bill contained about $3 billion of tax cuts about 200 billion a safety net spending for medicaid employment and food stamps for education

spending to state teachers' jobs and promote education reform but $200 billion for infrastructure and this is a combination of the shuttle ready highway and road projects and long-term investments and clean energy broadband electronic health records and electric cars and high-speed rail. overall it's estimated it will cost of $840 billion all these programs over time are the louisiana purchase, the manhattan project and the marshall plan to rebuild after world war ii of the emplacement so this felt like the new deal of the 21st century there's a lot of anticipation i think among reporters and among the public at a time we were losing several hundred thousand dollars a month we had a new president

coming in bringing a lot of coke gold of people for a bailout for the people this would be something to create jobs and help ordinary folks make ends meet after they had been hurt by the recessions of the anticipation three years later most of the money spent, the unemployment rate has been coming down somewhat in recent months to 8.3%, and for most the last two years we've sort of saw that at 9% unemployment. some are very pleased to be here with them and the panelists here dolph more into this issue this country and obsession in my life. very rare to be able to say that. so, let me start to explain the

theory behind the stimulus, what were the goals of the administration and some of the discussions going on in the transition team as it is coming together to restrict thank you for inviting me michael grabell for the important book. i wanted to start with something that the book doesn't go very deeply into, it's not so much the topic. the booklet said the program this macroeconomics behind all this we didn't promise there would be no mass on the exam so i want to give you a free simple formula that is actually quite elucidating in this context. output and gdp is the sum of the consumption that's about 70% of

the economy of investment about 12%, government spending and net exports, so the exports - what we import. i will say that again because this is kind of at the heart of the fundamental insight back in the 30's, consumption is the largest part of the economy, investment, so investment in factories and machines. government spending and net exports which is just export the stuff that we sell abroad. when you hit a recession, the consumption tends to stumble. and in fact one of the reasons why the recession has been so difficult and intractable and so long is that it's taken so long for the consumers to kind of get back into the game. a lot of this had to do with being so indebted. people may have heard the discussion about the leveraging cycle.

that is just saying consumers kind of have to spend them down their debt until they were able to start spending again. when consumers stumble because there is a shock to the economy and the bursting of the bubble and the great recession was very much that you heard from my statistics investors tend to sit on the sidelines because there is not much happening in terms of economic activity to decide the foreign sector for a minute the only game in town is g. c plus i plus g, c is on the map, ausley is on the map, it is left to g. to step in and still love wade. this was above very much the pressing economic and site of the keynesian in paris this iou's imperative is december 16th if i recall of the economic scene got together, the whole team got together with the new vice president-elect.

chicago, it was a snowy afternoon. i should have -- i went to chicago and i realized i forgot to wear a sport coat. i had a suit but i brought a sport coat and i should have brought one in honor of this event, and we began with christie roemer the president of the economic advisers taking this new president through the lead of the land, and going over the depth of what we were looking at and beginning to talk about how we were going to need a big stimulus. the -- so that this kind of a macroeconomic overview. i will stop now because we should mix it up but as we go along, we should perhaps talk

about what i think i found particularly interesting and important and useful in the book is on the implementation. on the case itself one of the most important economists of the 20th century of course didn't read much tall about the implementation. michael grabell has written a lot more about the implementation of the stimulus. in fact there's a famous letter that came to roosevelt once where he wrote about the cage and a half, he thought they should do and it kind of says railroads are really good and, you know, there's some other come against people tax cuts and things like that but, you know, what really matters is you get the money out there and of course he famously joked if you can't find anything else to do find one group of people to bury the money and another group of people to dig it up. so come a good joke, right, but if you're out there trying to implement this 800 plus billion

dollars stimulus that doesn't give you much guidance. so i thought it would be perhaps to try to mix in some of the macrowith the micro and talk about how the very simple arithmetic i think works prettye election in 2008 and spent the better time of a year-and-a-half with the candidates when i was looking for a job after the election and the president-elect around the time of the december

meeting and gave a speech and recorded a message explaining that he was planning to do the biggest infrastructure projects since the interstate highway system and so my editor said infrastructure is going to be huge, they will rebuild the country. let's take the beat and give it to you and you will write about rebuilding america with a giant infrastructure package, so after the election i took a little time off to get reacquainted with the family i hadn't seen for awhile, and as i was gone from work i slowly found it shrinking and shrinking because as the package came together, infrastructure became an ever smaller part of the policy and i remember when i first saw also built a life of this grant the tax cuts and then i saw there's going to go to the states and the safety net programs and i am thinking what am i going to write about here. by the time the bill passed infrastructure was a relatively small part of the bill that was sold as an infrastructure bill but it wasn't to rebuild the country. so within those parameters, i tried to look for things i

thought were the most interesting. i spent a lot of time writing about the efforts to build high-speed rail in america which sort of started out with a great fanfare but then our very in periled right now as we speak. and then i tried to find stories to talking little bit about what she was saying, how is this being implemented and what trends can we see, so i look for stories that are not just single stories of government money and this, but it's what it would mean. so, for instance, one of the problems i think implementing the stimulus is even of the federal government was trying to inject money into the economy and grow their equations, the states were cutting back and so the federal government was cutting federal taxes but the government was raising state taxes. the government was giving you some more infrastructure. the state government was paying of things were negating it so for that story i went to st. cloud minnesota or the vice president at a cabinet meeting because there was a company, st. cloud, that was going to -- huge we come under fire.

exactly. you were there. so it was when to benefit from $8.4 billion for transit, and was going to be great. what happened? before anything went further, chicago was so broke the to cancel their orders for the investors and they found they couldn't, the assembly line fast enough and they end up playing a tree under people including direct next to the vice president on the stage. i went to the unemployment office with him and it was a very vivid example of one hand giving into the river and taking away. and the challenges like that i try to illustrate by going around the country. >> can i make one substantive point? i'm not sure everyone is aware of this but the states have to balance their budget every year, and so bought federal government obviously to the is the budget today from the federal government doesn't have that country, it's one of the reasons why if the federal government, when i talk about that factor in that little summation i told you about before, why that is where

the attraction is is because the states will often act as michael just described pros cyclical, that is they will make a cycle actually worse. we talk about a shovel and we named it our partnership shall watch which they turned out to be like watching grass. but women to talk about what works well in this package, and there's a lot of good that the stimulus package did. we can start with officials and after it got going, you know, this was the only game in town for the construction industry. if you look at the consensus of the spending, the private sector, hospitals, universities, everything was going down except for the public construction, the road was about, you know,

keeping steady. as we didn't see a huge increase, but what we saw the of the struggle to get these projects funded and now had the stimulus money to keep the work moving. another thing to allow the folks to talk to them, there was about $50 billion for a thing called the state stabilization fund, which when you look at the numbers it saves about 300,000 teachers and support staff, and there is a lot of questions about new york city or other places have been able to stop the political cost of laying off tens of thousands of teachers, but certainly a lot of numbers get the pink slips to go away. things today like clean energy

with solar panel and wind farms, a lot of it is because the recovery act. i wrote a piece about the battery industry in the u.s.. electric cars and batteries have things going for them but they got a huge boost on the stimulus package, and in talking to the owners of the plant they almost all uniformly say if it wasn't for these overseas comes it is amazing to see people opening plants in the cell rather than china worker reva where they haven't been bailing out. so those are a few things i read about in the book where you didn't see a lot and i would like to hear from other panelists about what they thought. ..

>> but if u. p. -- a few places -- there were about $5 billion for temporary assistance for needy families. some of that money could be used for direct employment. i went to tennessee to a very poor town. this place had two major employers -- to auto plants, and

both of them had closed and gone to mexico. unemployment was about 25%, which was great depression level red there is nothing going on. there was nothing until you got to nashville. the government said i'm going to take this money, i'm going to give it to the county, and i'm going to tell them to create as many jobs as they can. if that means public sector, great. if it means private sector, that is great too. the milkshake place got to hire some workers, the hotel downtown got to hire eight or nine people. they had about 10 stimulus workers at my company and the

pies were really good. about a year later, unemployment was down to 14%. i checked back with people over time. i recently got a call from the mayor there. one of the auto plants is going to reopen with some workers. this is the case where there were some direct hires. a really kept the community together. now the community is going to pick up again. but that was the exception to the rule. >> i guess i don't -- what you just described is that exceptional, granting that there are problems but i know we're going to talk about. as in my experience, my experience was generally how things work out. you stole my idea about subsidized jobs. >> why were there not more

direct subsidized jobs? michael cooper is right. the most direct way to create jobs is direct job creation. another great economic insight. [laughter] >> a lot of what we did, and i think a lot of what stimulus is aimed towards, is to set the right incentives in place and cross your fingers and hope it works. i would argue that that is about one third of the stimulus. by the way, i was interested beside -- and you are at the heart of the journalistic story, so i trust your word over mine. i remember vividly a tax cut, which one third of it was, and was very important to get republican votes. but to this day, i believe that tax cuts are, in many ways, the least effective.

for a couple of reasons. first of all, remember that i was talking about leveraging. as idea that people were highly in debt and needed to pay down their debt or it well, if you pay down your debt, you're not doing anything about that 70-cent consumption part of the economy, so that's not really stimulate the economy. if you go out and shop and you buy imports, you are actually stimulating someone else's economy, not our economy. there is is -- there is a fair bit of leakage. i think the other two thirds were more effective in much the way as these guys talked about. i will say a couple more things. the bailout bill -- it is a very effective form of stimulus. i'm happy to say more about that

during q&a if you'd like. but i think that should be included in the discussion of market intervention -- government interventions in the face of market failure that work in an important way to our economy, today and in the future. i will read a couple of sentences from "money well spent? the truth behind the trillion-dollar stimulus, and the biggest economic recovery plan in history." the project is using historic funds across america. the stimulus played a role in every major product on the book. new york city, perfect example. the subway was first proposed in 1929, and although construction began in the 1970s, it wasn't until 2009 that work on underway with help from the stimulus. this book is replete with things that worked, and things that did not work.

that is why, in my view, it is an important book for the next time we are facing this kind of moment in our economic history. >> since we are in new york city, how many of you knew -- the brooklyn bridge is getting a fresh coat of paint. we are restoring the long island seawall. $500 million to the transit center, replacing the planks on the coney island boardwalk. does anyone know that these are stimulus related? i think one of the reasons that it is hard for people to -- i

mentioned the subway a couple times and people have really encountered me about this. this is not a stimulus problem. i think one of the reasons that they have the way they view things, the new deal projects or projects, we now have a formula that typically says 80% of the funds come from the federal government. 20% have to come from the state or locality. we now also have two make sure they have on financing -- there is a mix and also an intense number of years of employment that go on. in other communities, you can take this as an example.

technically it is the stimulus money, but you have a hard time getting people to recognize that because we have a deal and we -- in all fairness -- >> in all fairness, seven or 9 million? billions and billions. the whole line -- the new yorker's underpinning for it in one way or another. that is true of many of the big projects. they have money from all kinds of parts, state and local money. it is hard to think of these things merely in these projects. >> michael cooper's question is a very good one. why don't we get more direct on job creation? we are very interested in that, some of us, including the president. one of the things we recognize at the time was that there were about -- over 700,000 temporary workers employed by the federal

census. if you actually look at the job numbers in the summer of 2008, you will see a big spike in the public sector. those workers actually have to have an fbi clearance. there is a fairly rigorous process. and you thought, my goodness, that have been through all this. the unemployment rate is very high. can we find something else for these workers? by the way, this is part of direct job creation by the federal government. we do it every 10 years. we tried to find a project that would fit and work area it turned out to be very challenging. i think that the way that economists think -- you actually have a section in the book that you and i have talked about at this time. economists look askew at this

kind of bang. people worry about boondoggles. a lot of people think, well, why should i trust this person more than washington? it is not like it was in the new deal when you can send a bunch of guys out to a camp and say start building. there are a ton of barriers that you have to get over. there's a lot of questions that need to be answered before you can do this. and there is political concern. one of the ideas we have -- for some reason, i don't remember exactly why. for some reason, what you need to do every 10 years, it may have to do with gps -- you need to do census.

-- a census of buildings. instead of a census of people, a census of buildings. so maybe we could have guys and gals doing a census of buildings. and some of them said no, we can't. so to this day i don't think that would've been such a bad thing by the stretch of the imagination. but there is the offense and he worry about it in that context. >> the word boondoggle comes from the hearing held in new york city about the new deal with they grill people about what they were spending money

on. they had a crafts teacher there, where he taught people how to make boondoggles. the next day "the new york times" had a big headline in the front page. it was teacher in question, boondoggles made. [laughter] >> then president roosevelt said if i had to boondoggle my way out of this depression, i would do it. something like $1.5 million -- >> if i could interject here, i remember one day picking up usa today while i was helping to implement the recovery act. i read that recovery project causes traffic jam.

this is a project that i generally thought was a good idea. it was an article complaining about the traffic jam. i was with a couple of journalists appear. i want to ask something i've been meaning to for a while. is there, in your objective view, any kind of bias -- pressure internally or externally, to write about the recovery act from a negative perspective? i say that as someone who used to go to the pressroom everyday. i used to do that once or twice. the sense that you were just trying to be as everyone and pull the wool over their eyes. it has led me to wonder if there is really a negative bias. >> i think there is a negative bias. i don't think it's the press, i think it is human nature. in this room, probably two

thirds of you have read dante's inferno. roughly 1% of you had read [inaudible]. you probably read paradise lost, but you probably haven't read paradise regained. the other part of it is that there is the function of the press were your time to look at public money and money well spent or not. that said, there are plenty of stories that i wrote that i think we are probably -- i did another story -- they direct work project in mississippi where haley barbour was running for candidacy. he also did jerk genesee --

>> i think you need to report back to the public -- you hear one side but this demonstration will put out. and you will hear from the other side. you want to make sure that you have the right view. the administration has the time for the american people. as a journalist, you have to provide the caveats and be sure about the paragraph in the story. you also don't want to be cynical. you still want to look for at those great stories, but there is a sense that there is a really great thing that we need to happen, like what we saw before, because otherwise when the government is doing its job

-- the government is supposed to be doing its job. whereas before we were looking at -- you want to have the public hear what they are not getting anywhere else. we need to talk to the public at press conferences, interviews, through the white house website, and through twitter feeds. get the message out to the public. >> early on the white house put out a very early list of stimulus projects. similarly, on the other side, you had john mccain and tom broker, sometimes those lists would fall up under scrutiny. sometimes they have to tell the story the best they could. sometimes that meant bad news

for the white house. >> and i think the two of you have been extremely fair. i am not criticizing you are at i would say -- i would not be so quick to stipulate that a new story that says the government did something right -- i actually think there is a real sense of surprise to the people if the government did something well. i'm not necessarily talking about people in this room or the city, but there are a lot of people who just don't believe the government can do anything right. they're also a lot of people who don't know what the government is doing. you read this article yesterday, i hope you read this in the sunday times about this. a lot of people, when push came to shove, admitted -- they like a lot of the things it is doing for me.

>> at the time they were pushing the stimulus and put pressure on congress and everyday people were getting back to work -- and it's going to be a problem. there needs to be a story that less than 6% had projects for approval in the state government. i don't think the administration like it. this guy went on television to rebut it on several television stations. >> 125%. >> it turned out later that there was a math error, less than 5%. [laughter] >> is this money going where it needs to go? that is what it really was. >> let's move to the other side

of this and talk about what things went well. we said something about boondoggles. let's talk about that. there are two ways of looking at it. the one that gets most attention with the classic boondoggle story -- the headline the divisors were worried about said that people have accountability. $92,000 went from the army corps of engineers to pay for costumes for something called water the safety doctor this was a mascot to teach about water safety to kids. but, at the same time, they did

have hundreds of people. we had a 27% unemployment rate. so a lot of issues, i think, in looking at the stimulus -- our investment -- like cilantro, that will continue to help her clean energy policy for a long time. where we saw this general high-speed rail in reference to the groups -- as soon as everyone thinks about amtrak. it is not in check. as soon as the american public sees the train, there will be ways of people wanting to have one in their city. this point of how to we get this train, what is the best place to

have this. the two places where we saw stimulus money was orlando -- tampa to orlando. tampa to orlando was rated the top group. in effort to get the money out the door for the stimulus -- the first place they went to was san jose. the san fernando valley, where the authority said we are not going to run any trained doctor until we can [inaudible] to the city. soon other is a question about high-speed rail in the country.

>> first, remember writing a story early on that boondoggles are in the eye of the holder. when you go back to the depression, or member finding some reports by a guy out west and he said wherever he went, he showed them that there were no boondoggles in their town. but if you went to the next town, you could see the outrageous things they were spending money on. another example i like to think of is turtle tunnel in florida that got some money. >> that is something my kids really like. >> they knew right where the place was that the turtles would migrate. it was the most gruesome website imaginable. it was pure turtle carnage. people have different ideas.

they wanted the stimulus to spur economic activity, and i saw that -- i would to akron ohio, where they were going to use infrastructure money on the suicide bridge. akron had a bridge that was called the all-america bridge in honor of an all-american city. the bridge went into a fork at the bottom. a psychologist called it a suicide magnet. people would just go to this bridge and kill themselves. they used about $1 million to build a fence. the mayor got unbelievable heat for this. there was a recall election. there were other issues too, but this was a factor in the recall election. our member talking to one person who was glad that the reelection was being done. on the other side him a this was a very conservative person who

just thought it was the worst waste of money. he said, i take it personally. i own property in average, it went through the roof. it just kind of shows the idea. the bigger question is when you talk about money, it is more productive to build houses. the thing i try to look at his was this money being spent on useful things for the economy? i think they chose -- the florida quarter -- the state owned all the land. it could be done quickly. even though it didn't make sense to most people about high-speed rail, there was a lot of information on it. i went on the floor to check this out. it really was a flawed plan in a lot of ways. i drove the route of the realm -- the rail.

it took me 90 minutes. the rail would've been 60 minutes. it went from the orlando airport to downtown tampa. but it did not go to the tampa airport. you could not use it to get from plane to plane. i took the bus to orlando comeau which would add an hour to your trip. i thought maybe it is for the tourists at disney world. so i thought what is it like? i tried to go by public transportation and it took for buses and three and a half hours to get from tampa to clearwater beach where i finally got my sandwich. and it was a 90 dollar cab ride home. they all have businesses downtown. they'll have good transit. you don't need to get up the train without a car -- get on the subway, get on the bus, get in the taxi and get where you're going in new york.

in orlando, you can't -- in the situation -- he would need a car. in wisconsin, you would need conventional money for rail speed in that state. in cleveland, columbus, a lot of that money kept getting redirected to florida. then break in florida pulled the plug on that. in some ways, this was something that excited rail advocates so much. at the same time, it was ultimately determined as lost opportunity. there were so many inconsistencies that you don't have the advantage of having one big object read.

>> i have a different viewpoint. i think it is import to understand what was going on in the economy in 2008 and 2009 -- to some extent, to this day. we still have 4% -- 40% that have been jobless for least six months. that is the highest unemployment that has ever been. we have five and a half million people stuck in long-term unemployment for months. in a good market, there is one or two. in this market there is 7%. we have to create jobs. it would've been best if we could have created the best jobs

-- a shiny high-speed rail going from the best place to the next best place. we have tried to do some of that the best we could. the book gives a good story on where we succeeded and failed. but when people are unemployed, it is not just that they are losing a month of honor payment or that the economy is losing billions of dollars that day. they're losing it forever. resources are gone forever. you can't get that back. that is a turbo ways. if it was recognized, it could be avoided. just sit on your hands and wait for the economy to get better? now. instead of just sacrificing weeks and here's and hours of people's lives when they could

be in play, try to find something for them to do. it would be optimal for them to have at least something. someone who has -- and i'll use this example of things that were -- i actually did go to a diner that was near one of our construction sites. i asked them, have you heard anybody ask? and he said, absolutely. so you might find jobs we don't think -- that these two do not think are the best economic investments. there is a multiplier effect. jobs create more activity in the economy down the line. i think he was right. >> we were going to do question and answer period i think we still have enough time. ten minutes. i think we go until 8:00 o'clock. it is important that when we

answer a question, that you wait for the microphone to come here. that way you can be recorded and listen to yourself again. [laughter] >> thank you. i wanted to ask about lost opportunities of them. i was wondering whether this administration is particularly telling the story. and number two, [inaudible question] back in round 2004 estimated -- there was something about one to $2 trillion with infrastructure repair maintenance, bridges need to be done. the stimulus was mostly bad and

not much else, would that have been very much of an impact economically. >> that is a good question. civil engineers updated it right around the time it was passing to try to influence the debate in washington. they gave american and the structure a great d. they said that we needed to bring american infrastructure into a better state. when you think about transit, there was a point for billion dollars for transit. i think the dot admitted that it would take $75 billion just to take the seven biggest, oldest, systems -- transit systems and bring them into a state of repair. just getting the signals working in everything up and running. so that is $75 billion.

the water infrastructure, which we haven't talked about much, it is a terminus opportunity. how do you rebuild these ancient systems? was money similar for that, but if you use the water metaphor, a drop in the bucket. these things take a long time. as he said, it turned out that it had to be a terminus time before any these projects -- we had environmental impact problems and contracting bids -- the part that would've been the most popular politically, i think, the administration talked a little bit about constrained. it could be too slow to get people back to work. >> that is all true. by the way, it is the american society of civil engineers that did it. i think it is actually rigorous. i have a friend, though, that

says never ask your barber if you need a haircut. [laughter] >> the only thing i have to add to michael cooper is this idea that we did a bad job of promoting our publishers, it is not for me to say that i was out there trying to put them. i am sure that i did not do as good of a job as they could have or should have. i am sure that's true. i will say that people -- normal people -- don't do counterfactual is. by that i mean that we did the stimulus program -- and there's nothing you can say to prove me wrong. that was the absolute that we encounter. the idea that the unemployment rate would've gone up more -- as much as two percentage points

more -- this something that independent analysts have found again in crunching the numbers based on the kind of modeling i described. also the type of numbers that michael cites in his books. once people have in their heads that they did this and things got worse, i think that our presentation was challenged. i am not excusing us, but i think that that was part of it. >> there were a couple of things where -- a couple of things that the administration was doing. her were a lot of events for groundbreaking or along the lines of infrastructure. i think the idea was that people were not going to recognize [inaudible]. again, a concrete example. i think when we realized in

retrospect that there were parts that were more visible -- it was good tax cuts in food stamps creating a multiplier effect and creating jobs for a supermarket cashier. we never knew where the pleasant whenever the entire day and walk people through this process -- where they could've shown different people whose jobs could have been saved. there seems to be more than ever to focusing on the people. where the teachers job who will be saved. you're the cop's job will be saved in. >> two added little bit, i did a story in the midterm election. i went to north carolina, and i was thinking that the president has just cut income taxes for 95% of americans. it was a hundred and $6 billion. i've been round to people in the

midst of the campaign and said, what did president obama do for your taxes? and almost everyone said that he raised taxes. and to be fair, they were paying some more taxes. but none of them knew -- and part of it was the administration and the reasoning that we send people a rebate check. they won't notice it in their count each week tom and it will be more inclined to spend it. in terms of people noticing it, it worked early and late. but in terms of people spending it, it did not. [laughter] >> it was one of the reasons people didn't realize their taxes went down.

>> [inaudible question] -- some construction and that they were hiring chinese workers. -- blue-collar workers. >> the one i recall, in the book i focus on a guy who was a typical person who worked for the same company for 35 years, ended up living the american dream.

one of the questions was how my going to get a job as a construction worker? i have been working the same kind of job over the years. there was a lot of efforts. i think that green for all -- blue-green along the lines of the group. we have expectations of people being trained in jobs. the president always says boyd, girl, boy, girl, right? [laughter] >> [inaudible question] >> you had a very good point

about this when we were talking. i think initially they were very supportive but the governors were doing this. what we have seen now, the governors have very low approval ratings. michael covered this -- >> about the democrats? is that the one? >> you have a lot of republican governors that were saying -- >> oh, right. i wrote a lot of work and governors criticizing the stimulus. rick perry completely -- there was an easily accepted letter where he was begging the

president some money down that way. people have documented that the stimulus actually closed a big hole in the texas budget. that sour politicians on both sides to do more of this. michael wrote about the contractionary stuff still going on at the state level. every month we have private-sector jobs, we are laying off teachers and construction workers. hundreds of thousands of public sector workers continue to lose their jobs. state budgets are still strapped. the budget that he raised today has something like $35 billion of funds for teacher preservation, and it is not going anywhere. one of the reasons is because they're up against and democrats are fed up providing money -- i

don't think it's good economics. i guess i can emphasize with the politics. >> when they think of governor scott in wisconsin, they don't think of railroads. they think of unions. early on we were talking about rails and stimulus, but then everything got overturned. it is hard to decipher. >> back their? >> instead of characterizing what happened in 2008 is a recession in historical terms, -- [inaudible question]

there were many things responsible leading to regulation of the financial -- [inaudible question] the long-term serious problem in which 44 million americans -- [inaudible question] -- and the fundamental limit problem has not been addressed. do you think the stimulus -- [inaudible question] i can type from the state point of view, that the stimulus has now fallen, -- quick thought.

>> the answer is that if we had known how deep and long this recession would have been, one thing is -- and it came up during this conversation and also through this book -- the public would not have worried so much. it turns up that we actually needed these projects to come not just the first year, but the second and third years as well. we absolutely wanted to get a stimulus and the dollars out the door as quickly as possible.

we did so with the tax cuts and state is covertly. the fact that the infrastructure trip longer, turned out to be commonly understood. in terms of whether we would've done a lot more stimulus, which is a common discussion. i know lots of economists -- a very corruptly say that the whole is much deeper. people like me knew it was much deeper, why did you do more from the beginning? i think that is pretty reasonable. there were two constraints -- big constraints that in my view -- it really could not have turned out much differently in that regard. one was just the magnet. we have never had anything close to this magnet. 200 billion -- the idea that you were going to do an $800 billion stimulus was just shocking to a lot of the members that were

going to have to work for it. secondly, there are implementation challenges. we really did have to implement this in a way that balanced speed and transparency and accountability. you really do worry about walking through the fire. >> one of the things i learned over the last few years, it is a test of how federalism works. i think you could argue in many ways it's sort of fails that test. if you take the federal government -- they want to set up eight transportation policy -- whether or not you think a good plan, the idea is a national network. who has to build a? the states have to build it. all of the states planned and wanted to build these railroads. suddenly you can't get from chicago to st. paul, minneapolis, because her snow line that goes from milwaukee, to madison.

>> or member reading that the chinese decided they were going to build a high-speed rail. i am not saying i was envious as an economist or anything like that, but i am saying that the federalist issue is real. >> and the issue of china is not that they are just building high-speed railroad lines quickly, it is also like the solyndra problem, where the ministers are not criticized for putting all this money into a solar company that went elian. part of the reason they went belly up was because they try to provide cheaper solar panels. >> the question i am talking about today -- if you like that question is always raised in the beginning. a lot of people go in with

$1.2 trillion -- and in my interviews it is true. people for reluctant and had their arms turned to agree to it. the real question is why his administration -- when they knew things were going south -- got involved and had 60 votes -- 60 democrats in the senate -- [inaudible] deficit reduction. why didn't the administration take advantage of the opportunity to enact. >> i can answer that. it had to do with this guided deficit operation. this guided -- this guided deficit budget operation. there were a lot of people who

have a very irrational fear of budget deficits at a time like this in a very poor understanding of the fact that temporary spending is not related to budget efforts. in 2014, the 840 billion recovery act will account for less than half a% of gdp in terms of its addition to the -- let me say again. in 2014, the recovery act will add less than half a% of gdp for the budget deficit. the stuff that drives the budget deficit is the stuff that stays in their. the bush tax cuts are the best example. over the longer term, it is unsustainable health care costs. economy is beginning to look a little better. the gdp began to grow in the second half of 2009. it has been growing ever since.

until we continue to be more -- one of the reasons i am very oppressed by the president and his budget, is because it does have a good stimulus impulse in there. were things beginning to get better and people beginning to get nervous, the idea did not have as much traction as it should have. >> [inaudible question]

>> [inaudible question]

>> well, you know this book is all about the first part of your question. it is all about the down on the ground granular look at the implementation of the stimulus. i said earlier, was the economic rationale. it is academic. it is certainly nothing i would say. i think if you actually look at my work while i was in the white house, it was much more so. i wrote a series in the huffington post. they were all -- obviously interesting stories -- very much in the spirit of your question. as far as why we would do more direct hiring, i tried to ask --

answer that question. i very much agree that that was by definiestion. i very much agree that that was by definition on track. we actually got to be close. we were retaining jobs of teachers and so on. beyond that, you have some of the problems that michael cooper pointed out earlier. it is just not as easy to do that kind of thing now. >> another part of that question. i can see what your perspective now was. as michael pointed out in the book. the administration really let congress draft a law of the package and then they stepped in and tweak it. congressional democrats and congressional replicants -- do you think in retrospect it would have been more effective to put out a marker as to the original

role? >> i don't think it would've turned out as differently as you think. the formula is still there. i think politically, getting it over a top bar. it was not exactly like congress was lining up democrats to get behind it. i think politically it would have been as well. that said, you make a trade off. i have seen it happen with the dodd-frank act, the stimulus, -- when you try to get it over the bar, and you leave work to regulators and legislators are area. >> we are going to wrap up here. there is a question about why haven't we seen the [inaudible] -- supporting the --

>> quicksort. >> if you look at the numbers, there are 300,000 jobs saved. it has slowly gone down with the stimulus for education jobs. jobs came in and provided some of that funding. i think this morning there was something like 111,000 jobs been supported by that. there is a big question -- 250,000 fewer public education jobs right now than there were in 2009. but you haven't seen a dramatic drop off. the question is what happens when all of this gives con -- cut off?

that is what i want to make clear. the only way you can have a great impact with the stimulus funding -- one example where we saw a lot of impact was in south carolina. it was to have a cold war nuclear plant it had to be cleaned up. the money comes in, within months, they have 3000 or 4000 people working at the plant. you can see the activity at a local bar and grill. can see the impact in the permits and hotels. there are several impacts you can see. several impacts that happen locally. but it is hard to find ones that would have this kind of impact. >> let me get back to my point part of it is the way that it works. part of it is the states and

what they decided to the money. the formula is for a competent. how much you give to the federal government and how much you get back. the oil industry -- they got a lot of highway money for that. the point i made before, washington county -- [inaudible] live without

physical money. this event from the harvard store in cambridge massachusetts is an hour. [applause] >> thank you all for being here. to delve into this conversation about money, i thought it might be helpful to tell you a little bit about all of the people who have -- with me right now and this idea that cash might be gone someday. i think this is a helpful way to touch on some of the themes that i was going to introduce in the book and then after a short reading we can do some q&a. okay, so the angry people. what happened to me for five

years ago is, i, like many people getting interested in the cost of manufacturing pennies and nickels, but some which some people might know right now cost 2.5 cents to make a penny, so it costs a lot more than the value stamped into the object itself. nichols right now are around 10 cents per nickel, which is, i mean it's almost like you have to say it again. 10 cents for a nickel. i was seeing this in the news and a lot of people in a group called citizens to retire the pennies were getting mocked on the colbert report in the wall street general so those of us have sort of irrational streak say it's crazy but on the other hand we understood while it's not necessarily going to get anywhere. then i started looking into the cost of cash or more broadly in society and i proposed to edit this idea that maybe we could put together a short essay saying let's get rid of cash altogether. so much of our lives are moving to the digital round.

movies, music, books sometimes for some of us. why not cash? this is a technology also and yet it is quite analog. so we published this little essay and people go bananas. so this is sort of peculiar inconsistency number one about our world, is that cash to this great extent, we have pushed it to the margins of our everyday lives already, unless you are a serial tax evader here. you are probably not paying your rent or your mortgage with a fistful of cash let alone your car payments or buying a sofa or a new sweater or even dinner tonight. it's also not really part of the modern economy in an enormous way. most transactions now in most of the money zipping around the globe is on computers anyway and yet a few pseudo-formally or pseudo-officially or publicly suggest, well maybe it's time

has come. people go crazy, so the haters. where they coming from? they're coming from every ideological and political position on the spectrum. so first is sort of the, you will have to pry it from my cold dead hands. this is kind of your militiamen set. they don't want to be connected to the government. they want transactions being anonymous and then you have this nco yuan hyperdrive. everyone has submitted to the idea that let tronic money in our lives is useful. we have a bank account of maybe the credit card, not alike tronie money in general but most of us have given us to this idea and if you say let's use cash from everyone says well, big brother might be watching down the banks in the credit card companies are going to be monitoring all of my transactions. you are deliberateness worlds they get this kind of recoil response. another group you have, less of them, sort of impassioned, but i

hear from a lot of people, i don't know, there's just something about the physical. there's just something about the physical. a lot of people who don't love e-books frankly. they love to hold something and you know i think embedded in that response is also a much more sincere concern that people seem to hang onto cash more tightly and we can talk about this a little bit more but the credit card effect catalyzes spending and that is a huge problem for a lot of people. americans right now or in the hook for about $800 billion in credit card debt, so not small numbers at all. some of the other haters. i assume a lot of mafioso and drug dealers out there don't like a very much because cash of course is the currency of crime. they are not letting me e-mail per se but i will let you know if they stop by my house or anything like that. so on the cost of cash a little bit, before he tell you a little bit more about what is actually

in this book, hugo from the penny in the nickel and then use them up to the 100-dollar bill and the 50-dollar bill, and right now, roughly speaking no one knows the exact numbers. cash management in the u.s. is about $150 billion a year. so that is three times the budget of the department of education, so what is cash management? that is making it available to you at the register, at the atm and even at the atm in some far long corner of the country. what that number doesn't include is anything to do with crime, so there were 10,000 bank robberies in 2009 in 2010. that is just people going after statistical stuff. of course there is electronic crimes and there is financial crime in cyberspace. that is not really in this conversation per se. that is a huge cost and you have to pay the cops to go after those folks who have to pay to prosecute the men incarcerate them. we the taxpayers, we are funding

the war on drugs. the drug lords, they love benjamins. that is how they transact, and so you see these cops circling back against us are on us. so these are one of the ideas i wanted to suggest in this book, cash. who doesn't love it to a certain extent? of course i want to make a pile of it and you want a big pile of it in a way, but when you scrutinize cash for the length of time that i did in 12,000 feet up you see it has as much wider cost that no one would ever really consider even as a vector for transmission. at this point i'm kind of the germ of pope and you have an unhealthy caches get but still it's an issue. so these are the ideas i wanted to presume an early on in this project i really thought, this is kind of going to be a cross between a valentine for cash and a eulogy. is on its way out and that

punchy wire tone, here we go. and i really started writing just about this wreck thank you or slips of paper and little mellow -- metal plugs and that would be the extent of it. but as soon as you start to wonder more about where cash comes from and what it means and what the places in our lives you can't help but touch on it. many of these are questions about why caches history, but the gold standard, about national currencies. when i was composing this project, one of my friends said you have to steer clear of central banks. you don't want to be the guy that is writing, great advice, great advice. you just have to shape your narrative and the reality is you cannot talk about cash in any intelligent way without talking about where it comes from, where it's born so this is another angle that i wanted to take. then of course there's the technology side to things too and we'll talk a little bit more about mobile phone technology

and what that means especially in poorer parts of the world. suddenly it's kind of going off in all these different directions. what i wanted to do as best i did was kind of keep the lens on wondering about, okay what is money, what is cash, what is value? how did things things work and trying to come back to the tactile stuff so what i mean by that is, i flew to iceland to do a postmortem on the financial collapse that they experienced a couple of years ago. so if this is unfamiliar to anyone here, i had what is today the biggest banking collapse in the history of humanity. overnight their stock lost 90% of its value and the icelandic currency lost two-thirds of its value overnight. so i went over there to explore this idea but again just wondering about the cash and the national currency. what does it mean to be a country and what is it mean to have your own money and at the time, this might signed incredibly dated because we are in the mick so the ongoing euro

crisis but at the time icelanders were wondering, maybe we should get rid of the krone. we don't necessarily needed to be a country and maintain our economy. again that sounds dated and they are happy they don't have the euro but at the time that was part of the conversation so i went over there with a woman who designed iceland's national bank notes and talking about this heritage of them holding your hand. its physical of money of course gleick one of the last touchstones of national identity. and yet she had some very practical things to say when it comes to the fate of money and what it means to their nation. so anyway, i am pursuing all of these different angles. the last one i will touch on is the psychology question and circles back to the credit card effect on how we are wishing to be hypnotized really by credit cards and spend more instead of using cash and our biases for physical money.

there's this great study that i discussed in the book by these researchers at the university of minnesota and i will tell you about it just briefly. they split their subject into two separate groups and this half of the room they asked people to count out just rectangular slips of paper, maybe in the same dimension of bank notes let's say. no artistry or no images or whatever. this site has regular cash. it's not even your own money. they are just touching the stuff and then they asked both people to put their hands in a tub of hot water and report back to the researchers how hot they think it is and how much pain they are experiencing. and tuesdays fiscally different margin according to the editors of science, the group that just handled the cash, they are somehow immune to the temperature in and the pain because they said it's not that hot and it does not hurt that much so in the way those of us who were kind of cashless future

and busiest, these were the hurdles that we have to surmount. difficult to say the least. so, how do we get there? we can't have it cashless future tomorrow. we have millions of people who depend on cash tips for the lion's share of income. this idea of not screen the 99% to the benefit of a 1% so until you can deal with tipping waiters and bellmen and porters at the airport etc. you can get rid of cash. another reason that people bring up is what he going to do when the electricity is off not just for an hour but for three days. people have earthquake preparedness kits and the red cross will tell you, have cash on hand and have some low value bills in your stash. i love this idea of a cashless future and i'm interested in it, but i'm not going to not follow that recommendation of what to have in my emergency preparedness kit.

not quite yet. but what you are seeing is, is really cash is undergoing this kind of death by a thousand cuts. we don't know but his cut number 890 or 952 just yet but it's happening and it won't be any kind of real active decision on the part of government or anyone really. it will be pushed to the margins by new technology. so one is new technology in the mobilephone especially. in part of the book, i traveled to india to look at this idea, something i've never had any understanding of before a launch into this project and this is the idea that caches the enemy of the poor. it is most punitive for those people who don't have much of it. and it sounded so counterintuitive at first that i needed to follow around and economists from the gates foundation to get him to explain it to me clearly. but in short the issue is for those of us lucky enough to live in a wealthier country and earn a paycheck, we can toggle

between money in electronic form and money in its physical form as we see fit. i don't like cash that much. i don't use it very much. if you really like using cash and want to wander to an atm tonight and use cash to pay for dinner, terrific. when you are poor and you are trapped, only using cash, you are excluded from the formal economy in ways that are crippling and they are especially crippling because you can't brace for financial shock. you can't save in the way that people need to save. if they have any hope of not just climbing out of poverty but staying out of poverty. and what is happening now is a lot of development experts are encouraging this idea to get people transacting with their phones so that they don't need the cash, because when you have cash on hand, or stuffed under a bed, not only is all of your wealth, however much or however little, can be lost overnight in a flood or a fire, and earthquake.

the other problem is everyone around you is making claims on that money. you are trying to save so for as we cling to cash a little bit or because the tricks of plays on our mind. the poor are essentially are opposite. caches turbo liquid. they can hold onto his. they can't hold onto it because a drunk uncle is making claims on a cash or an abusive spouses making claims on that cash and usually parenthetically in developing parts of the world as the women who are looking after the household funds. so those are the most terrible examples of people making claims on their money. but then you even have legitimate once or you have a neighbor who need some aspirin or you have somebody who needs a new pair of shoes for their kids. it's hard to say no, especially in a very tightknit urban slum for example and yet you are trying to save to send a son or daughter to school in 10 months or by some farm equipment in 15 months, and he cannot save cash. everyone is trying to get people involved in banking, not in the

sort of abuse of wall street ceo sense of banking. just the old-fashioned stuff, a safe place to store your wealth. the gates foundation thought put $500 million into this program to support innovation in this area and i flew to india to interview a guy to see what this was like. how has this changed his life? he said i used to have to read the bus, today's there, today's back to deliver a small amount of money to his grandmother. that's four days of income generation loss. he has to pay someone to look after his shop. the wealth that may be still hidden somewhere in the shop is now in jeopardy. now he basically sends a text message to his granny in the countryside and she wonders to a kiosk, where the merchant is essentially part of this huge network of merchants involved in the system and she shows -- and there is a click back and forth and she can cash out. i asked her about the security concerns at all of you will wonder back and he looked like

he i was from mars. did you just listen to the value of proposition? that was pretty illuminating and suddenly the pulled me into a much more substantive area of discussion. i like talking about the germs on banknotes and i like talking about wishing my barista was grabbing hand sanitizer and all the rest of it but when you're talking about fighting poverty, now it's a different book frankly. so, the further reading, you have this war against cash in one huge front as the technology. the other side that i tried to jump into in the book are these alternative currency -- community currency, alternative and virtual currency. you have all heard bits of this idea out there. into a lot of people it sounds kooky at first and that is a testament testament to sort of the achievement of the u.s. dollar and being pretty much everywhere accepted except on an airplane. the reality is that these things

are real money with when talking about this coin. you have heard of crypto currency and i'm talking about berkshires in western massachusetts, irksome pound is another one circulating in london. they are everywhere and they are sprouting up and they are real money. this gets to the idea that, what is money exactly? money is only an idea. if you and i agree tomorrow that this bottle of suntan lotion isn't a sufficient medium of exchange in you believe it will hold value and you could trade it tomorrow to obtain something else you want, it's money. and so that is what these alternative currencies are doing. they also have this idea that you know, it's time to end the government monopoly on issuing national currency, and again you see this really diverse group of people who are excited about this idea. definitely get the one guy who will read about it and fall under that umbrella. you know they believe the federal reserve is inflating the dollar to high hell and that

they are going to bring us all down and hyperinflation is eight months away. then you also get the sort of hyperprogressive, let's live on a coup bullets keep our money local because better to buy from the furniture maker on main street or the bookstore in your neighborhood then to buy a sofa on crate & barrel.com paid for with a visa card that is shipped overseas and made in india. and so those two groups are coming together on this alternative currency idea. so from a writing perspective, it's really fertile terrain because here you have people who are not just interested in what is money and how does the monetary system work. of these are people who have been said, do you know what? i think i will sit down and come up with something better. so right away, as a writer you are looking around for interesting characters and you find some really wild lands. so i would like to read to you a

little bit of a chapter of the book about one such gentleman. he's in a little trouble with a lot right now, but we can talk about that. on a sunny october morning, bernard von nothaus shoots west out of honolulu in a beige toyota camry. he has a habit of seeking eye contact, which right now means looking over at me and as he rambles through his rambling monologue with each each had turned the car swerved, but von nothaus always manages to return his attention to the highway summit just fast enough to the car back into line. he may be an enemy of safe driving, but von nothaus hardly looks like the domestic terrorist at that the federal prosecutors say he is. he wears a black and vanilla hawaiian shirt, tucked into light pleaded pants with a thin black belt. his delicate wire rimmed glasses

frame a narrow, almost gaunt face and his hair is, curls up in a wave of gray and silver that he pulls into a tiny ponytail. aside from some arthritis for 67-year-old man who calls himself the monetary architect, makes a point of mentioning his good health in light of the decades of motorcycling, freewheeling romantic exploits and bountiful drug consumption, all of which he recalls often and fondly. i never expected to live as long really, i mean we once drove a truck into the lobby of the hotel. after von nothaus finally accept the idea that i'm not an undercover fbi agent, which takes a while, he is smiling and magnanimous. had in his speech although saturated with shouting and f. bombs, also contains a hearty dose of self-deprecation and hawaii isms, mellow, cool, mahalo. giving an overall impression of a dude in pervious distress which is remarkable considering

that he is facing criminal charges for conspiracy, counterfeiting, mail fraud and get this, you have to quote this one, one count of uttering, passing in attempting to other and pass silver coins in resemblance of genuine u.s. coins and denominations of $5 or greater. he has lost her temporary loss possession of hundreds of thousands of dollars worth of other people's money come including his own mothers and one of his sidekicks has been in jail for more than two years. two months before i met him, von nothaus himself was incarcerated for five nights after violating the terms of his bail that allowed him to hunker down in hawaii while awaiting trial. pass pearl harbor return or through the town. a passive chinese food restaurant called the golden coin before entering a small industrial park.

von nothaus pulls into a space next to a tampa building that is part factory, part warehouse. yellow hibiscus blossoms intermingled with a chain-link the chain-link fence across the street. inside the greedy owner of pacific -- but gregory who melds precious metal in to wired sheet material used for making jewelry. the machining shop filled with rolling dice. what we have come to see as the six football machine set in the corner nickname hammer. it looks like a three-ton hourglass. this is the tool of von nothaus's trade or good looks fantastic. i could kiss this baby, he says and then he does, wrapping his arms around one of the presses that collins. according to the fbi and federal prosecutors this point press is the mechanical accomplice to von nothaus's crimes. by now, he says i'm not allowed to meant anything and he holds his hands together.

this sanction is another term of his bail as her unannounced visits from a parole officer. coins of ice in a part of von nothaus's life. growing up outside of kansas city, he inherited a modest collection of his grandfathers and his mother instilled in him a respect for the value of silver. giving him sober coins as gifts and lecturing him about the medals penchant for appreciation. i saved every one of those real silver quarters he said, referring to u.s. mint quarters that before 1965 contains 90% real silver. von nothaus runs a custom minting business called aware of hawaiian mint company, producing merchandise for war veterans, country clubs and historical societies, academic institutions and anyone else willing to pay for specialized coins or medallions. none of this is illegal. over the years von nothaus's

business has produced coins celebrating huang stated commemorating icons of writing history by captain james kirk and king, mas alluding and marking the 50th and 70th anniversary of the attack on pearl harbor. back at the mill, as if i could see some of the coins, the hawaii dollar in particular. it is one of the coins that got von nothaus in trouble although i don't recommend using the word coins in front of him. do not call than coins. coins are made and issued by the government. do i look like the government to you? the whole idea of this private voluntary barter real value currency is that it is not the government, never call it a coin. i am permitted however to call its pieces, species silver or liberty jars. addiction gymnastics are ridiculous because obviously the

coins, get von nothaus's and usual unusual legal chase rest partly on parking such terminology not to mention the use of the symbol the dollar symbol and miniscule numerals pressed into coins. for charges that include quite it, no detail is too arcane. a moment later gregory returns from his office with a small box containing a dozen plastic cases. at each housing a single coin. he hands me one. the picture is of hawaii king, a how may have standing proudly in warrior headrest, armory says if he's about to address his loyal subjects. turning it over to inspect the other side, i read hawaii dollar across the top. hawaii states in the middle of the image with the words liberty dollar on the left and $20 on the right below the seal. $20, one ounce of pure silver minted in the usa. so this was minted here on this

camera, right? von nothaus notts. then he hands me another one. the king again and the coin is the same size, weight and composition. turning it over revealed an image of a traditional polynesian boat and the state motto in large capital letters which translates, the life of the land is perpetuated by righteousness. this coin is also stamped with one ounce pure silver are hm rail hawaiian mint but here is the -- no denomination, no dollar symbol and no decoration of value. this one with this boat is a collectible. i hold the two silver pieces in the palm of each hand as if they are hacks might offer some clue as to their variable consequence then i placed the two side-by-side on the table. alleged counterfeit on the left, knickknack on the right.

that is what they are fighting over. do i look like a counterfeiter to you? i will stop there. thank you very much. [applause] so i have cruised through a lot of different ideas there but hopefully we can get some competition going and you can hurl some criticism at me for this idea that cashless this would be good. >> are talking about the barista and tipping people and how caches so important in our society and how did you go about doing this? >> largely successful. again i'm not a waiter. it's a different game and a not

so -- game if i needed for income. i didn't go to the chinese restaurant that only takes cash. i had to pay over and above the price of a doughnut one time at a doughnut shop because i had a credit card. as a scrooge running by the same lemonade stand in the summertime 11 days in a row. one time trying to hop a train into manhattan i could not pay the new jersey transit train conductor, bound for the economic center of the universe with anything but this filthy old paper. and then when i got to india, the whole experiment went on hold before even left the airport. i'm not going to be able to anything they're outside my hotel room if i don't have some cash. that was a reminder of how far certain places in the world have to go. to rent a taxi or to pay my translator or buy a souvenir or a bottle of water, anything. that was five or six days without. there was a babysitter incident and i almost convinced her debt to hurry up and establish a

paypal account. [laughter] check is still kind of paper money so i felt like that would be a copout. the idea here was not like this was a crazy brave participatory journalism lining up against the -- it was much more at the soundtrack to my ear. just give me think about this and even if i'm sitting in a coffee shop writing i start noticing the trucks park somewhere, driving by or the atm machine on my street that looks like it's straight out of 1982 as far as technological innovation goes. so just kept me mulling the topic. i discuss it in the book. i feel like it adds to the conversation but at other points, don't think the reader wants to hear me talk about trying to find a parking meter that accepts a credit card so i was a little more sparse but with that now and then.

said that the government has control over the money and there's this tremendous power. it's the banks that have control of credit cards, and i would rather trust the government than trust the banks. so you know we look at fees for this and peace for that so here you would be totally at the mercy of what i see as an unscrupulous banking industry. >> i think that's fair number one i think we need regulators and if you believe in betting governments as a that's a problem because how can moderators do that their thing. i further a lot and i trust government more than i trust banks. but i also wonder if the rivers could happen. once we get rid of cash, most people aren't really using it anyway. banks are critical of them but most people are still saving their money in electronic form. unless you have three cases full of cash under your bed and i just don't know it, so we are

engaged with them. that is not to give them a pass. that's to say that maybe actually once we say goodbye to cash, people will become a little bit more savvy about the come essentially the friction in their economic lives and where it's coming from. and so with one bank is charging you this fee and another one is charging you this be and another one discloses this wonderfully detailed privacy policy and their one hasn't, people will seek out i think the ones that are better and same with a mobile phone companies. if you are dropping, people are sending money back and forth is one thing to drop the call and have to dial someone back if you drop my money, my value that i have worked so hard for, never going to go back to that service and the companies that are starting that stuff, i think they are getting it, that the bar is pretty high in the need to provide a safe and robust system for consumers. but you know, there is ample reason to be skeptical of the banks. i don't think this ideas about

ending national currencies per se, but i think of caches marginalized so far are ready and if we do a real accounting across government agencies of how much cash actually cost, the treasury makes money by issuing money for all of us but then they are not talking to the fbi about hunting down money launderers. the secret service told me, former agent told me 90% of their workload is not protecting the highest office in the land. it's hunting down meth heads who after four nights without sleep decide that they are going to bleach 5-dollar bills and try to print the bills and $20 maybe they buy some gas and they get caught. this is 90% of the secret service workload. there is a way to trim government expenditures a little bit. so i once this accounting across the crux of agencies will see cash a little bit differently. >> can you talk about the image of cash and organized crime and

drugs? what about the people who have legitimate cash businesses and they declare 90% of what they make an hide the other 10%? do you have any idea what the value of that is? >> it is colossal. so the term of art is the tax gap, and no one knows what it is precisely because cash is anonymous. it also includes money that corporations hidta per season that is like tonic money. but a huge amount of that money i think in 2000, the most recent irs estimate for this and i think it was $300 billion. some people are talking, a guy and talking to in a couple of weeks, think it's up to have the chilean dollars. actually most americans today pay what they owe or what they think they owe, 85% of us. it's just somewhat encouraging

when it comes to civil society i think. but, that 15% and those people skimming off the top, hiding income and paying employees in cash and not filing matters and it matters for school funding and all of that. i think esparza language, tax gap has got to be the moralist boring descriptor of the most serious problem i've ever heard and they need marketing help on that. >> it happens -- you can get it on the irs web site and you are exactly the right ballpark, $400 billion. it takes them five years to do audits to actually get a sense for how large that problem is. none of that is the question -- >> we are kin. that's great. >> the question is about the 150 billion. you said it's about 150 billion

of all kinds of different expenditures. my question is, how lotus cashiers have to get before you really make a dent in it? you still have to pay the truck to, and empty -- and they start to make it, so does cash drop to 10%? what would make a dent in 150 million? >> i don't know. i think in sweden for example that the union of rank employees there who are so sick of robberies and the threat of robbers that they are lobbying the government to get rid of cash altogether. parenthetically they have gotten rid of coinage into the 50-cent piece equivalent. buzz countries of the world are getting rid of their penny in their nickel and here we are with the president and the land of lincoln in the white house a don't think it's going to happen anytime soon with a penny but other countries are looking at this and it's the banks who are saying we don't like cash. it's expensive for us and it's dangerous for us and our

customers don't really want and our employees certainly don't want it around. there might be a push from the banks, and then i think you know the other place is, the areas were cached has dug in its hills and tipping is a great example or public transit where you can't use some sort of device. he would be a fool to say we should get rid of cash tomorrow before there's a sufficient substitute or more likely substitutes for the tipping of a waiter. i just don't think, think it's a really short term due to think we can't come up with the technology. credit cards have been around for 20 or 25 years before people started to adopt them and trust them. that's not saying again that they are fail-safe for the industries of the most ethical we have ever seen, but obviously there is a value proposition for thousands and millions and millions of people who say yes, this is more convenient for me. so those are some ideas that come to mind that yeah cash has dug in its heels so now it's our

job to act like the airlines. the airline said, look, cash management for us is a problem and flight attendants are skimming off the top and it's filthy. i don't know how much of the germ factor mattered in that decision, so they said no. this is a cashless cabin and that confuses a lot of people. someone asked me if that was illegal the other day. which was interesting and so the shorthand answer obviously because they are still doing it, it's totally legal and you don't have to accept u.s. dollars prepayment. the idea being here that if you have a debt denominated in u.s. dollars, if i owe you $100 we agreed on the sale two weeks ago and it was denominated in dollars, when i come to pay you that you cannot say no i want uncut rubies. we are to have our deal but before you give me a graphic design consultation for $100 an hour, and you say oh by the way i only want to get paid in uncut rubies are donuts, whatever and i say yes, then we are fine. that is what the airlines are

doing. they are saying no more cash so there it eating away at cash is fungibility. you can use it anywhere except at 35,000 feet because it's like heaven up there. [laughter] >> there was a time before we had cash, and i wondered what you thought about or find out about the potential of the increase for decrease of bartering in this cashless system? >> so the question has to do with the potential for a bartering economy again. the first section of the book kind of zips through the history of how money was born and how the dollar as it has come to nab him about. for a long time people were bartering and this is the double quads event. you have a surplus of furs and i have lots of potatoes. i'm cold and you are hungry, hey we trade. then it becomes a problem when you want to buy something for someone else and you don't want my potatoes and this is where

money was born in this medium of exchange. the exciting thing about the digital age you can have now a central clearinghouse for people offering services so you can order and you're still bartering, but you can find each other. you don't have to have that double quads event of thin quinson sense of it because you can go to this place and if you're looking for someone to mow your lawn or if you are looking for a lawnmower you can go to this place and see if maybe you can find somebody in this network who is offering it in your offering something else so i think you can see a resurgence of barter potential. some of these alternative currencies are actually really just a souped-up version of barter anyway. not the virtual stuff like a million dollars in corn and all that but the central clearinghouse is exciting in that regard and you definitely see especially the kind of very far lefty community areas like where i live in oregon in

corvallis there is a very tightknit barter exchange for people trading this stuff. the problem is, it's like this chicken and egg issue. because if you go there and you don't want fresh bread and massage or graphic design service, which seems to be what everybody is offering in exchanges, but if you want to buy gas or pay your utility bill. they strangely enough only take u.s. dollar so there is still a ways to go. >> i think a couple hundred years of trading currency, deficiencies and the costs that have built up, but what about the risks and inefficiencies that might show up in a cashless society? >> the example is when china declares war or when the electricity grid is offer of her and your devices have all run out of power or the sun is covered up because we cannot

charge some of the solar devices, then you're in trouble and people will go back to something like that. there was a banking system in ireland and people started to circulate handwritten ious and they worked his money. even on california recently went bankrupt people were trading those ious from the state. they kind of worked. but i don't think it's the concern to pooh-pooh it to quickly. that thing said i do think once things are calamitous and the calamity is still enormous, you're probably not going to worried about the medium of exchange. you are going to be fighting for bullets and blankets and shelter like everybody else. the end of the world kind of stuff which is less interesting to me. [inaudible] >> epping counterfeiting in digital currency is a big problem. how do you know if you have

coined any spend it on something, the system is engineered to show that you spend it on that so you can't spend can spend it on something else. you relinquish it, but i think that is going to be a problem. i think concern about private, the private sector versus government could be an issue, depending if there's this great flowering of currency and a great flowering of payment devices, so instead of just mastercard, it's 35 companies. that sounds inconvenient and tell you remember your mobile phone, you can do conversions on-the-fly so if you want to be paid in a certain currency and i like to pay with a different currency, you can flip back and forth without what people perceive right now is to be a huge pain in the rear. i will think a little bit more about those inefficiencies. [inaudible] >> about getting rid of cash? they make me off of it, right?

i don't say that with any political agenda. people who are sort of conspiracy theorist think that is foreign relations stuff like they are ruling the world and against transfer to treasury at the end of the year. depending on your politics, that is ripping off the taxpayer or that his government raising revenue with which to spend on its citizens. so you know, i think the feds, they don't like money. in short, and they also know we need it now. for tipping for example etc.. it's also a great franchise. how can you not want to make money? it cost you 7 cents to make a buck, you just pocketed 92 cents. awesome. richard. >> assuming after the next election that we don't go back on the gold standard, do you have any thoughts about what

might happen to all that gold? >> well, no. it's interesting actually because on the one hand a lot of people laugh at the gold standard idea, but it is a weird footnote to the conversation that so many central banks hold so much gold. which i find kind of weird. but they might just holding onto it because of the commodities and it happens to be appreciating are trading right now. some people say silver gold. use that money for x whatever, might be. i've a feeling it will sit there and it would be too unsettling for people who don't have a good grasp of the monetary system and to still have this false understanding. they still drink -- think frankly the dollar's value is connected to gold somehow in and of course the dollar is only valuable because we believe it's valuable and still acceptable because people think it's valuable and around and around you go. a lot of that language of

religion goes under the book. i don't know what is going to happen to the gold. how could i? >> did you and in your research, cross family members and you know, i know people view cash because they don't want their spouses to know how they are spending money, and also having college-age kids. i have one son that is a broad and you can just see you know, where he is traveling and where he is going. basically he calls me up, hi mom, i'm italy and then i'm going to be in marrakesh where you can kind of see that. so i just wondered if some people just like to hang onto cash because it might be that

last privacy when he might have, not from the government brought from our own family. >> i think that is fair in in their two varieties to that question. won his tax evasion and buying foreign or presents for your mistress, less interesting. more interesting is an anonymous donation to charity for example or two by a valentine for yourself and you don't want them looking at your transaction. i think that is there in the way talk about this in the book is the difference between privacy and -- in some of this is just semantics with some of it isn't and i think a lot of people jumped to cash his defense saying no, no we need to protect their anonymity. what are you talking about? do you vote, do you have a license, to have a social security card? i would argue you don't actually deserve it and civil society that you're participating in playing by the rules. you are a known entity to a degree. of course when he privacy concerns and we don't want google and face the gathering

data about us in everything we do but i think is it's really bogus to say that wages are anonymity and there was nowhere in the constitution that says to live here, you know, you have the right to act like the unibomber minus the violence. it's not how it is. so i think there's this contract of participation. but you know a lot of people like cash for that and they are not necessarily doing things that are nefarious. in another reason to keep cash around, a lot of people say is encased to hold onto a tighter. i talk to people or the book from debtors anonymous. the beginning of every month they go to the bank and they take out just the right amount of money for rent, for utilities and for groceries, for some leisure and that's it. it helps people maintain discipline. that is an argument in cash's favor that again you can just disregard that too quickly. but an idea that i try to bring up in the book is we can really

have our biases for different kinds of money, so what i mean by that is, you know it is hard to break a 100-dollar bill. everybody knows that. with five, 20 sinner while it is the same as $100. economist will tell you it's exact same thing. everyone in their heart knows it's not about at all the same but in fact let's say you have something like an e-mail reminder that a bill is due in a few days. that is a technology solutions to help essentially make up for human frailty because people forget that they have something do our coffee pot that shuts off automatically so you don't earn down the house. this is a technology solution to protect us from ourselves essentially. and when it comes to dealing with cash, money more generally, think there are ways to re-create the pain and spending that we feel now with cash. that is how economists describe parting with a 100-dollar bill and parting with electronic money. there is pain and spending our

willingness to pay. they have all kinds of wacky terms. one additional example in that area is an app called mint.com. some of you may have heard of mint out there but every time you log onto mint on line earn your phone you see your networks across the top of the screen and if you are like a lot of americans that numbers and make it if number because you have a mortgage. there's got to be a significant influence on spending behavior just from seeing a negative network. every time you turn on your phone. a similar kind of influence on spending behavior that we get from just clinging to 100-dollar bills. is at the same? there is a great dissertation to be down there but what if you had benjamin franklin's face pop up on your phone every time he did something or you had to sing a song very loud before a transaction could go through or your teenager has to sing a song or call you before transaction could go through by using the fun. we can come up with systems to

make up for our biases and seo company we thought we love the penny and we should really keep it around and oh weave of cash. we should keep it around. to me that is kind of defeatist and another category people by the way who are serious -- furious with me. we can't get rid of the penny. what is this idea of getting rid of cash? maybe i'm not quite such a pessimist yet. >> sometimes i think this is a -- and i'm one of those people that just really, i think it's a horrible, i mean there are so many people, elderly people, poor people, more poor people that will grab their smartphones and make a transaction? there's a whole huge number of people out there that this idea of everything being done by technology and if you walk by the lemonade stand and you are

screwed, you are a scrooge if he cannot give people money. that is one of my joys in life. let me make the transaction and here is my phone. i mean it just feels incredibly classist. i don't is a -- although i would put that in there but not respectful of a whole huge segment of society. >> right, the poor. like this guy kumar who a feature in the book, this guy in india. >> or someone getting out of prison. >> there are 20 million people in this country you don't have a bank account so how are they going to do this stuff? what they have to do, because they are excluded from, they are excluded from having electronic money at all. they have to go to a check cashing service and they get charged serious fees just to

turn their money into cash. whereas, if they were included in banking, and included in basic financial services, they would not get screwed like that or when you talk to the gates foundation people about wanting to get financial services to the poor through their mobile phones, to me that is not at all classic, that idf financial inclusion. >> assuming they have a phone. >> they do. there about a billion people on earth right now who have a phone and don't have a bank account. they donate an apple iphone. they have these gp nokia phones. as anyone can tell you with a lot of these technologies, prices are plummeting and while the capabilities are skyrocketing. so i don't buy that argument that the everybody does not have a phone and the cost for that is only coming down. people in poor parts of the world are spending more on phones. they will spend first on a phone and then like medicines for their families, transportation. the connectivity is important.

[inaudible] >> more generally, i think the key here is that economists, development experts, they will tell you that this is a tool to enable people to climb out of poverty. that is what they're saying, and they think that is a pretty important distinction. but i hear you. people will still be excluded, especially the elderly who have a habit of just operating with cash, and the idea here is let's scrutinize the cost of cash a little bit more because it might actually be punitive for the elderly. in japan for example there are a couple of days here and all people receive their pensions, and the country has to flood the streets with police to meet and chat a while the old people who go to the banks and atms because right there at the atm they are going to to get raptors bundled into some ridiculous scam by a people because they are holding all the cash. so i just don't think it's quite

a classist idea and of course you cannot get rid of cash tomorrow because of the working-class for example, tipping in all of that. but it's simplistic to think that this is a classist idea. >> and talking about bartering in the different types of currencies that are being played with our being -- hot is that plan -- because i was just audited a few weeks ago. i don't quite remember all of this, but i think if i remember correctly, i am self-employed so we have a lot of things to talk about. he did and asked me if there's any bartering going on, so how does this play into that? the u.s. to declare income and alternative currencies on your taxes. i don't know exactly how they track that kind of stuff but you have to. and as long as you are doing

that -- speech at a measured against the dollar? >> , and most of them do. they often exchange rate with a dollar so that is not really a problem. with bartering think it is trickier. you probably have to estimate the cost of service or the products. it is messy. i don't want to be an accountant. way in the back. >> i've lived in this area for come ever since college actually, and the rents are extremely high, as anyone around here can tell you. and finally, i have saved enough to try and buy a place and i wanted to buy a place that would have some renters also. i managed that a little over 20 years ago, and -- monthly salary pretty much. now i'm trying to get a better salary, or rather, at a lower rate, interest rate. they won't give it to me.

although i have, not just the buildings, but i have arias which i don't want to take out on, and other investments, and right now, one of them i've applied at is the very same bank that i have my currents with and they won't issue a loan -- a lower interest rate. they want to see me take out or sell some investments, where it will get lost or at least not what i want to get on it. and show that his income. then they will give me a new mortgage at a lower interest rate and of course they have been paid automatically out of the same, out of the bank every month, ever since they have handled my mortgage.

i mean, probably, they're they are probably third one because interests have gone down and down. this would be the third time. >> it's ridiculous. >> yeah. i don't know what to say. it seems like that might be a little bit out of the scope of the cash versus electronic money conversation. >> and a sense, it makes me feel like i was among the bottom 5% or whatever you said, the people who live off cash. it is putting me in the same -- >> punitive. >> they know i have the investments and they have seen the statement that i get. .. minutes.

>> thank you so much for having

me here. one of most new york's distinguished institutions and it's a pleasure to speak you this evening. now history is more than anything storytelling, and i want to tell you some stories about the history of debt. i want to start though with the story that, because of the recent past, should be all too familiar to you, a story of financial crisis. i have changed the names to dick and jane smith, but their story is all too real. like most stories, it's not just about the money, it's about love. it's about hope. it's about finding your place in the world, it's about growing up. dick and jane smith met shirley after they moved to the city. sparks flew, declarations of love were had. rings were exchanged and bows

inevitably follow. .. much cash so the states went to their local bank to see if they could get a mortgage and after a few calculations, the mortgage officer told him that once the air and they couldn't get enough to buy a house if they got in

and our highest mortgage and paid back the interest and the principle every month. , the mortgage officer told them there was something new that makes their dreams come true, something that smart people use all the time, something called a balloon mortgage, something that let them pay only interest on the mortgage and after two years they could refinance it. now, and let them buy a house immediately and sleep soundly in the knowledge that their household income had nowhere to go but up, just like the value of the house itself. when the time came a few years later to refinance it, he would be there. it wouldn't be a problem. they would just get a new loan and course the banker knew after they left that he had nothing to worry about. he could sleep soundly at night because he could resell the money and the debt and if

anybody else and not worry about when people went to work james filled the house with fashionable contemporary furniture he bought on the installment plan. his father only paid cash for cars but he got of loan and they didn't have a savings they did have a steady income. everything was working out. now, unfortunately this only lasted a little while. things very quickly began to go badly at this new high-tech firm at which he worked and the orders began to slow down and then suddenly everywhere all around them the house value began to plummet and the note came due on the house and they went to the bank to see if they could get refinancing, but they

couldn't. a mortgage officer had been set and shortly thereafter he lost his job, too and when they came to repossess the house they couldn't sell their ipod, they couldn't sell the notebooks. all those things didn't exist and given to be invented for another hundred years, because its 1932. the paying wealth between the summit of 1932, between the manufacturing job at general motors in flint michigan and today's technical jobs in silicon valley are unsettling, but the largest structural similarities between the 1920's and the present are truly terrifying. credit dismissed and millions of other americans at that time borrowed their way to the american dream and to the

consumer credit made possible by the invention of new ways to repackage and sell individuals that in the the capitol market, and in both it was made possible by the credit that came crashing down and a financial cataclysm. like the past decade, americans of the 1920's use credit to live beyond their means and the last 100 years inequality has peaked in the particular moments. 1928 to 2007. it is no coincidence that the highest areas of any quality have also coincided with wondering. why is this? the industrial economy based on mass production does require mass consumption. and at that moment there were

two ways to pay for the consumption. either through credit or wages to keep the wheels of the industry turning. but more than just understanding these moments of inequality, we must also understand the moment of the relative ecology in the post war. the debate could rest on the ways in which the federal government responded to the crash of 1929 and the subsequent great depression. now in the last few years journalists had spawn many towns about this novel and coming agreed the bankers supposedly recently invented. but the true origin of the crisis goes back to the great depression and the choices made in the aftermath of 29 because these policies used to solve

that particular crisis which laid the foundation for the post prosperity and eventually the financial crisis with which we now gravel as it dissolves in the 1970's. we recognize the differences between the 1920's and 2010's and also need to realize what is stunningly similar economic inequality, the need for profitable investment and a dividend housing boom dtca. one way to do this would be to bore you with lots of macroeconomics, talking about the ratio and things that are equivalent to a high school algebra class which would be very stunning. more than any graphing we should look at this picture. this picture i think explains everything about t