much beyond what it found and had in mind what they had in mind for capitalism was a system which promotes competition, promotes creative destruction, promotes charm and instead we have a distorted form where the average person in america and, in fact, across the western world feels that the system is almost rigged against them. one of the basic pieces of capitalism is that it should at least give the sense that there's going to be equality of opportunity. i think the average american today feels that that is not even a quality of opportunity for them let alone the fact, of course, capitalism naturally gravitates itself to inequality of outcomes but that supposed to be based on -- so in short i think what's gone wrong with capitalism today is that it is being really distorted as argue in the book that the cities of government actions have led to a capitalist

from today that is have much different from what its founders have in mind. ... tendency, bail out companies at the slightest hint of trouble. the tendency to manage or micromanage the business cycle. and of course, in all this is also the role of the us federal reserve when it seems so acutely sensitive to even small fluctuations in the stock market, you know that it's become this sort of asymmetry that on the upside people are allowed to gain. on the downside, no one is really allowed to fail. so we have had a socialization of risk that's happened across the system. so you borrow this phrase from bernie sanders in your book and you use it quite well where you say, we have what is right now socialism for the rich and competition or capital ism for

the poor. you into a bunch of details about why that's true to an extent. but then you of course, finish it off with a massive amount then you finish it off with a massive amount -- a large amount of the welfare state that exists which is mostly for middle class people, the poor and other types of people who are not the rich. to takem away the question have from this who isn't covered by bailouts in the united states? how true is bernie's statement really? signed the half truth. it's true we have socialism for the rich even the welfare state in terms of that they need to get like all of the benefits or

giveaways as well. it has become socialized risk for everyone. the most galling part of that is the rich are also getting socialized by the government. if any company or large corporate is on the verge of failure, the government stands ready to bill that company out. and that is something that's very new because back in the grand old days of american capitalism you did not have this format were companieshe would gt bailed out by the american government. the first big bailout of an financial institution happened in 1984 with that of continental illinois. before that in the 50s, 60s and even 70s when the idea it was suggested american government should bail out any company or financial institution in trouble, it would be met with

huge resistance in washington but that is not the way america is. you've had this ready change situation or every company feels with the bailout. the person in the middle class or the poor families feel if they're getting fresh bailouts what aboutd me? even they are getting government aid and support for the most galling aspect is when it is applied to the rich. which is become a modern-day trickle-down economics. when you bail out these big largeat corporation the justification given that if you don't do that it will lead to complete economic collapse and a lot of people being laid off. the problem isme it's a very self-fulfilling argument when out these very rich companies even last year you had the bailout over a silicon

valley bank. and it's really problematic. it makes everyone seem entitled theyey deserve government suppot and they deserve to bailed out. >> is quite a change in bail out cultural and franklin roosevelt was governor of new york the t legislature proposed a system of deposit insurance for depositors. fdr when he was governor oppose that. in his folksy way he talked about moral hazards. about how having this guarantee for depositors would make them a little lazy in choosing banks that were soundha as a result ty would choose banks who gave them higher interest rates because if they lost the money the government would bail them out. i have heard moral hazards throughout my education, throughout my career up through 2008s bailout on the financial crisis. but i have not heard it said in the last decade or so what

happened to the term? what happened to the idea that bailouts and shielding people from their own mistakes would lead them to make more risky choices for more mistakes? what happened to this idea? >> the american economy is doing fine then why should be worry about moral hazards? if all these bailouts have not led to a crisis why it should be be worried about it? that's one of the big issues i address in the book. there's a real price to that bailouts and what you call that moral hazard problem. if you look at the american, the key to economic is through productivity but productivity in the american economy would link the decline in productivity.

promotes a lot of the big companies is moral hazard tired and still. it is a policymaker all of these peoplet keep telling us about moral hazard. it is not led to any problem in the american economy. that is the link i make. no comment has led to a problem. it's much more insidious. most policymakers tend to view problems as an abandon crisis, in your face crisis. the government was facing a fiscal crisis or running out money to bail out companies and that was not working it would be this is aem problem. i say a promise much more insidious it has led to a decline in the number of stops in america that has been declining for the last few decades right up until the

pandemic. it's matched by a decline in productivity in the american economy. the moral hazard is a real problem. it's happening the crisis or the policymakers have stopped talking about that. the average american, as i've argued in the book ispp very unhappy at the state of the american economy today. for the average person even though they don't think of this isng it moral hazard, somethings not working for them in the way the american economy is delivering. >> you spent some time quoting joseph the late austrian economist who among his many achievements coined the term creative destruction. the idea that market competition and evolution in the market would lead out a lot of

unproductive firms, firms that do not innovate and free up those resources that are constrained and trapped to go to firms and entrepreneurs are more productive and utilize those more effectively and efficiently basically younger and have new ideas. this process destroys companies and causes economic problems and dislocation employment. the ultimate result is more creativity, more expansion more growth. what you write about which quite eloquently describes how policymakers have replace the system that created destruction. create a system of a zombie firm. the form supported by the government that do not innovate. most importantly in places like japan and europe. now it is spread to the u.s. what you think about zombies what's the role of zombies how

does pression create destruction because that? first you have to decide what is a zombie company. these are definitions used by institutions such as a bank. these are defined as companies that have not earned enough profits to make interest statements for three years in a row. they go back to the marker to borrow and keep themselves alive. that's designed as a zombie company. this became popular in japan in the 1919 when the japanese economy was slowing down in the 1990s was a big rise in the number of zombie companies over classified as zombie companies in japan. the american media include a publication such as the "new york times," would almost walk visit phenomena in japan singly zombie companies are being kept

alive because of the no interest rate. america does not do this. at that point in time the number of zombie companies in america was roughly about 2% of the total number of listed companies in america. to date the number of companies that can be club classified as zombie companies is some close to 20% of the total. a massive explosion and across the western world. so in terms of that's what happened to have these easy money policies, very low interest rate for a long period of time has caplets a zombie companiess in america. when that happens is keeping alive the deadwood. we keep alive so much deadwood you are keeping out new companies for coming in. you're keeping out new startups from prospering.

we have seen an image of that which is a number of startups in america has been declining over the period of time. there is a price to be paid when these pulses are pursued pretty keeping alive existing companies built optically good at keeping these existing companies even though their nonprofit their inefficient by every metric. keeping alive those here keeping alive the job losses are so bad what's happening you're choking new competition for your choking new companies are being formed. that shows up in the declining number of start up companies in america. that's what we do in this book often can be insidious. not apparent that in your face if you look beneath the hood you see this to all the policies. quick to write about this in a lot of detail. the price is lower growth in the

long-term. less income growth, less economic mobility as a result of a lot of these policies per the federal reserve plays a large role in your book and other central banks two. how does the fed, through its monetary policy or other policies create the system of low growth and mall investment. an investment in zombie firms and keep them going? bucks ifck you trace back the fe and this is where i say a lot of people take back the incredible free market in the 1980s. yet we look at the role of the fed, there is a shift in it back in 1987. the stock market had a big crash in octoberer of 1987. at that point in time alan greenspan, the fed chair for the first time became the head of the central bank. to say we are going to intervene

in s a way to help prop up stock prices to cut interestt rates to rescue the stock market that point in time. that's not done so explicitly before and america's financial history.y. once they did that came to be known on the upside people are allowed to benefit and make money. on the downside this came up the federal reserve had your back. the market fell too much the fed would intervene to prop up the stock market. after that we sought play itself out repeatedly the fed became very conscious of the stock market and led to this asymmetrical risk a. on the upside people were free to speculate or do what they wanted. on the downside the fed would be there to protect that capitol.

i think that is what has led to this feeling that you can make as much money as you want the upside or the downside the fed will be there. when you have that that leads to people making their decisions accordingly. when they are going to sort of feel their losses are going to be socialized. but the prophets are prophet to capitalize it. >> you are a fund manager. you work in finance. you've seen this play out from the inside. you sort of have embraced the austrian business cycle of boom and bust causedy by monetary policyd went in your career, wn did you have this moment where you realize what was going on? i assume giving your front row seat you have some moment or

some time when you became convinced of this thesis. >> exactly. it happened over time. started out in my childhood. i trace it back to the 1980s. i grew up in india which was in a very socialistst country. and i saw that for me capitalism and america was all about giving more economic freedom. so, it started out to look for capitalism became for a sense of.so with the government being rules. i think there's a rule for the government to be played for the government needs to provide a welfare state the government needs intervene in crises. they keep on increasing and the government now started to do is what sort of got to me. the american brand of capitalism was.

a couple of things that disturbed me. one was in 2010 even want to economic recovery we felt that could put as much money in the system as was required to prop up the economy. which is to throw all sorts of money at the economy. all because it feels consumer price inflation defines in a very narrow way. what asset price inflation what about property prices are surging? it puts homes outside the reach of the average american. that's the first moment in 2010 when i felt something was wrong. then the idea of this book really took hold in the pandemic. at the time of the pandemic the

american government decided to shut businesses down. fine, it was a crisis. and then, to compensate for that throughout incredible amount of stimulus. who is benefiting from the stimulus? a lot of stimulus checks endedeo up in people's pockets who were earning more than $100,000 a year. to say they are propping up an unseasonednf market was buying commercial paper off tripoli, credit quality such as berkshire hathaway and all these t other corporations. and then you had this incredible explosion of wealth which took place with people shuttered at home. the stock market just surged in thee billionaire or wealth which

took place in the year 2020 was extraordinary. people are sitting at home. you shut the economy down. but the stock market is surging. all of these billionaires were there sitting at home. because the amount of money being injected into the system is unprecedented. got me thinking what's happened to capitalism? this, is an economy and the country, and america so optimistic on pretty came to this country. i wrote such optimistic things about this country. i saw the way capitalism was being distorted and connectedh t with the fact in 2020 the average american is not feeling satisfied. today we have in 2024 the top 20% of americans see they are doing wellll. they are stressed out in terms of their incomes getting squeezed. the gettinge squeezed by the hh

inflation he had. there's a feeling they are benefiting. all of this through liquidity and incredible increase in property prices. it is put in a new home for the average american out of reach. that's when i made the connection the post fears pandemic. >> there are three different major causes we talked about the first two. hugeil bailouts in government spending. concentrated on bailing out a lot of individuals and firms. your federal monetary policy for the federal reserve the other when you discuss at length in your book is regulation. it seems like the thread that ties all of these together is

the government is trying to protect people from the consequences of their own. how does regulation fit in this model of yours? bucks we say in the book the road is paved with good intentions. every time you see a problem you think we need to regulate this or that. those regulations end up hurting the averageso person benefiting the entrance particularly the big businesses. so first let's look at the numbers. if explosion in new regulations over the last couple of decades. the american government today 3000 new regulations a year. that's been going on for the

last couple of decades, with massive pace of increasing regulation how many regulations withdrawn over this time. over the last 20 years i've withdrawn 20 regulations in total. look at the asymmetry that is happened. don't open a new restaurant to start your own fund you have to do with new regulations now. my experience i know for a fact the cost of setting up a new fund management operation is eight times larger than itrs was 20 years ago. who benefits from all of this? if you are a big business with the cost of meeting these new regulations is still relatively small. if you are a new startup with a

small or medium-size business costs arere incredible to meet e new regulations. secondly the same big companies lobby in washington given their power and the money from such a way that benefits them. the biggest lobbyists in washington tend too be the big tech companies. the average person this seems onerous in many ways. the cost of gone up a lot. therefore you have the decline in new companies being formed in america. even for the average employee this means a lot to lose today according to some studies the average person spends 16% of the time at work red tape to meet the regulatory requirements. can you imagine 16% of the time it's being spent on those

factors in costing the americanl economy and the average employee spending time doing these things. i tried to show the regulation states concerning the average person. with the money part. >> it is certainly about 16%. it certainly feels like a lot more somer of the most boring work you are ever going to do in your job. you hit on something right there which is the influence of large firms and guiding the creation of these new regulations. to punish implicitly or explicitly to punish the competitors economist called it regulatory capture. this is my libertarian angle coming out here.

if you have a government that's going to be involved and regulatingnd portions of the economy through creative regulations or running a welfare state they're going to move visitaround trillions of hundref billions of dollars and haven't regulations that impact firms and individuals on every level. it seems almost politically impossible to avoid a situation where you're not going to get a large amount regulatory capture. so what kind of hope do we have for trying to put the genie back in the bottle or at least build a wall around it?ll >> to put this out in the public sphere to raise awareness. on the first is to diagnose the problem. because today the solution many people offer put in more

regulation as i show most horrible thing you can see it's playing a whack a mole which would put something down something elseir pops up somewhe else. the first thing we have to do is make people aware. that is what i tried to do in this book. you have some of the arguments out there in the public sphere about the fed's role. about regulation and stuff. to show in a systematic way over the last century has gotten bigger and bigger over, time wt are the negative consequences of that already? part of the problem is many people and focused this constant

which is all we need to increase the government increasing debt and deficit may lead to a crisis someday. that has not happened. unfortunately the argument to be discredited. all of the people keep fear mongering about these debt and deficits. some people are worried about it.te you have economists on the left saying how we increase government spending and deaf and deficit nothing has happened. america is beyond this. it's a world's biggest financial superpower. people keep pilingp in dollars keep coming and to strengthen ourr economy. what i'm trying to do in the book is these government habits over time extend beyond government spending it's about regulation, it bailouts about

the business cycle across the curve on what are the negative consequences that have already happened? the average person feels they cannot move up the ladder only 35% feel they're going to be better off than their parent close to 70 or 80% of the average american is a very depressing feeling. as to make the connection why are feeling so depressed that the superficial level things appear fine. that's the condition trying to make in this book first ship to make people aware of the problem otherwise will keep doubling

down and doing the same thing that got us into this pessimism today. >> you grew up in india. you will, over the course of your life have seen economic policy transformed. a much more open free market. not as much as either of us would like. certainly in the right direction. the problem in the rest of the world in the early 1980s the u.s. a radical laissez-faire free market free trade free immigration where everything went into this radical laissez-faire model of capitalism. you see nowadays right-wingers is embracing a lot of big government policies to some aspects of planning industrial

policy people in the left like bernie sandals, aoc and others are saying we have tried this radical policy recently or less 4050 years. it is not led to the outcomes we want but you are writing your book very convincingly we did not have this. i believe you use the term more of a revolution in terminology or idea rather than actual policy. >> again it is important to look at the evidence i have come from a space but i'm very driven by data i look at the evidence. how does it gain ground we are in this liberal era where the market are rule and conquer people's lives. there were a few free market