professor susan crawford discusses her book, fiber, the coming tech revolution and why america might miss it. >> there will be no wire better than fiber that will emerge over the next few decades and we are right now leaving behind a lot of the country when it comes to great communications capacity and as a nation we're falling behind in the global race to be the places where new ideas come from. >> watch "the communicators" tonight at 8:00 eastern on c-span2. >> the senate confirmation hearings for william barr to be next attorney general of the united states begin on tuesday at 9:30 a.m. eastern. president trump nominated him to replace jeff sessions. william barr is now of counsel the law firm of kirk lynn and ellis watch the

confirmation process for attorney general nominee william barr live tuesday at :30 a.m. eastern on c-span3. >> this week on "q&a," author and columnist james grant. he talked about the state of the u.s. economy and the threat posed by our ever-expanding national debt. host: james grant, when will you start worrying about the 21 1/2 at least trillion dollars in debt? guest: oh, i got a started running on this. i started in 1968. i must confess, brian, seemingly without the british although i know the british are coming with respect to the

debt? brian: what way will we see it because it doesn't seem anyone cares? james: it's a cold button issue. it's remarkable way back when -- who was the -- well, ross perot was running for president and he called the public debt the crazy aunt in the era. in the 1990's people did talk about it. it turns out the debt was not such a problem because as recently as 1998 bill clinton said he could see the possibility of extinguishing every last penny of it by the year 2015 but nonetheless in the 1990's people talked about it. they stopped talking about it fairly recently which on wall street is always a good sign that something is possibly about to happen. when people lose interest in a

particular company or a topic or a trade that's a starting point for at least investigating. when it's something in the papers and the tip on the tongue, it's generally a good reason to stay away. we now have the pregnant silence with respect to the public debt. brian: what do you do about living? james: i write about markets. brian: how can you see that? james: brian, all you have to do is subscribe. the e written recently for most distinguished "weekly standard." i wrote on the public debt. i write books for the claremont review and i publish a book every now and then so some of my stuff is in the public domain. writing about markets.

brian: what does it cost? james: about $1,300. brian: what do we get? james: we try to identify all that's good and many things that are bad. want the best and the worst as investments. one would sell the worst and buy the best so we are looking for things that are out of favor, cheap and therefore as desirable as investments. we are looking at things on the contrary are overpriced, overhyped, possibly corrupted in some fashion and those one ould sell. monetary affairs, meaning the dollar, the rate of inflation, interest rates and the like. brian: why did you start the newsletter and when? james: i started it 35 years ago. 35. i had a tough time at barrons. my then employer, there was one

of these kind of spiteful political arguments in the staff and i was alongside of it which by the way is not the time tested reason at the start of business. i dare say i'm going to guess it was not because of some tiff c-span was started. that was, i am afraid, rather uncompelling reason for my leaving and i thought, well, i got to go work for someone or do i? i didn't especially want to be rewritten by the editors forms or "fortune" or "the wall street journal" as good as they were and are. set off on the preliminary list comprehension. it turns out, brian, the world has a great deal to read. brian: was there ever a time in 35 years you did think it would not make it? james: yeah. there were three years i didn't take a salary.

brian: three years? james: my wife was an investment banker for behman. there was a time in the mid 1980's i took the envelope to be mailed to the then ex-about 40 subscribers and left those stamped envelopes in the ackseat of a taxi cab. there went the liquidity of the business right there. unfortunately, i would say, we surmounted these growing pains and now, look, it's ok. brian: what would an average reader be, what would they do for a living? james: for average, they buy low and sell high. for a living. we have many who are not, who invest for their own account, independently. it's principally a publication for people who have a serious interest in investing.

brian: why did you write a book about john adams? james: i wrote a book impjohn adams because i could not stand the financial markets in the late 1990's. there's another good reason not to write a book. but from the time i was in college i have been smitten by john adams, by his bloody mindedness, by his high-mindedness, by his selflessness, by his uninextinguishable patriotism. did i mention bloody mindedness? i thought to myself around 1997, you know what i'm going to do? i'm going to step away nights, weekends, the fourth of july, i'm going to step away from wall street and i'm going to ndertake this great project. i -- i, the interest rate observer, will write about the life of john adams and it was

called "party of one" alluded to his bloody mindedness. i had a great -- well, i think as you appreciate, it's ever so much better to have written than to write. i look back with that project with great pleasure and pride. i so enjoyed his bigraphical company. when you write a biogy you are in the company of -- biography you are in the company of that individual. he never leaves your side. he goes with you nights and weekends. my family was sickened of the presence of john adams. i never did. i certainly got tired of typing, but as to his company i never tired of him. brian: who introduced you to john adams? james: i suppose a librarian in indiana. i guess. brian: i saw robert farrell --

the well-known -- i suppose deceased historian, has been on this program and was your professor. what do you remember of robert farrell? james: we were sitting in a big lecture hall in indiana with smaller than 500 people. it was springtime. the windows were open. third avenue if in fact that's a geographical fact. headway travelled thoroughfare in bloomington. a car boomed by, a mustang, all hopped up mustang and made its presence known and professor farrell, casting a disapproving glance at this very loud vehicle, self-important vehicle, turned around to the class and ruminated. "i wonder how many books the cost of that car would

buy?" i so loved this man i had the privilege of writing his obituary for "the wall street journal" and he was a lifelong mentor. i dearly loved him. brian: what was special about him? james: his generosity with respect to his students, and his tireless scholarship. he wrote 60 or 70 published books. he never quit. and he would write these monographs that were published y the university of kansas and by the established book reviews but some of them were newsbreaking. i'm not sure if you interviewed him before or after his monograph on douglas macarthur but he'd rather prove that douglas macarthur was kind of a fake with regard to congressional medal of honor citation. first world war. i think i am getting my facts right.

but he did have the good on douglas macarthur. he was a remarkable scholar and most generous professor. brian: how does someone born in the new york city area find their way to indiana university? james: you may not know, brian, i am a french horn player or was. i was very serious about it. i joined the navy when i was 17 and two days old. i joined the navy reserve. two years act of service. i chose to take those two years after one semester at college. during which i played french horn rather seriously. went to the navey. came back. i will pick up where i left off. i got admitted to this mecca of french horn playing music school in bloomington, indiana, indiana university, so i drove -- i am not sure how you got around after the navy, brian, but i bought a 1957 mercedes-benz 190-sl. can you imagine the prospect of

a veteran, mind you, with that kind of automobile? well, i drove up to bloomington, indiana, and dropped in the music department. i announced to my professor, i have been accepted as a french horn player. oh, really? i've never been. a most downcasting and rather deflating at the beginning and i only lasted about six months among these truly talented musicians. i was very nearly talented myself. i was diligent which is a difference as you know. brian: by the way, what impacted -- how many years in the navy? james: two. well, we -- you have been quoted as saying your naval experience -- and you had five years. i was an army guy. went in -- james: well, i was two years active. it because such a formative experience.

my goodness. it's something you never do again. brian: what years were you in the navy? james: 1965-1967. brian: did you go near vietnam? james: near but not in. difference between -- i tell eople when they at least express democratic tude for my service i tell them seriously and truly i would have been at greater risk driving the family ford fairlane on the long island expressway than i was nning a .38 caliber aircraft gun onboard the u.s.s. hornet. we never got shot at. three or four of my friends were aboard the hornet. west pac, south vietnam, north vietnam. we watched the soviet ships delivering the missiles that shot down americans. it was an important experience. it was not a dangerous one. anyway, so with that said, we

got back to long beach, california, home port. we felt that some of us ought to do more for this war. we didn't closely read the state department handouts that were on the ship's library, the sea token venges that got us in this thing, that was above our pay grade. three, four of our friends reenlisted for the shipbuilder, privilege mind you, four another four years for swift boats. that was the -- another aspect of the navy in those days. brian: another name in your book is jacques barzun? james: yeah. god -- brian: who was he? james: he was a great scholar of the history of culture. nd he wrote such things as darwin, marx, wagner. i had the great pleasure of

taking a class, one semester. that's when i got to indiana. i took a two-year course on something called international relations. i never discovered what it was about it exactly but i was able to read books for two years and the most pleasureable of that reading was "under the -- under the tutoring of jacques who seems to know everything about - he was present for the opening nightivity firebird in paris. think 1913. there was a notorious opening performance. anyway, who was this man, this contemporary of stravinsky and so many 20th century cultural figures.

i so loved his presence, his scholarly presence. i went to see him once. i got into my brooks brothers blazer, brand new, of course, tie, naturally, and i went to see professor barzun who had an office in one of the more dignified columbia buildings. this was at the time of the student riots, 1971 or something. only guy on campus wearing a necktie except for a couple of professors and professor received me. he was somewhat distant. and he didn't mean to be chilly or patronizing, but he came across as it. i asked him how he became self-read. he said, why? ead. so i've been reading. it was good advice. brian: why then or how then did you think you wanted to be a journalist, went to the baltimore sun for a while, what was the drive there? james: oh, i wanted to be in

the way of writing. and whether that was editing books which i thought about, writing for a newspaper, doing something else, i wanted to have something to do with the written word. in 1972, i applied to about 100 newspapers. it was not a very good year for journalism. by the way, there hasn't been great years for journalism as far as the growing concerns, newspapers' growing concerns but i applied to all these dozens of newspapers and the greatest of luck "the baltimore sun" said yes. it was the only one out of those 100 or so so i went there and got started writing about fires and writing obituaries nd covering other such things. brian: then from that to your own newsletter. james: yeah. brian: in all the time, 35 years doing your newsletter, what were the high moments, if you were pitching your newsletter, what were the high moments of where you predicted what the market would do?

james: our greatest i think moment was the events leading to and culminating in the soros trials of 2008. we had a very early read on what was going on in the housing business. we knew that houses were overpriced, that the mortgages had been packaged in such a way as to render them un-credit worthy. notorious collateralized debt obligations and mortgage-backed securities of one kind of another, the feats of financial engineering that turned out to not be feats at all. and thanks to such foreminded leaders as alan fornier, for example, we got an early reading of the immense documents that described the securities. these things could run for hundreds of pages. i sat my analyst, dan, down and i said, dan, plot one of these

tones on these desk i said, please study this and tell me what it says. he said, i can't figure it out. i said, a-ha, we have a story. not many people tried to figure it out but we think we did. and indeed, many of the things that we said on halfway came true in 2007, 2008, and then something else i'm proud of, we turned bullish on wall street in late 2008 into 2009. i have been quite fairly known over the years as someone who has way too many false positives testing for things that could go wrong. bearish probably too frequently ut we had a good 2007, 2008, 2009. brian: other than the market numbers, which have gone quite high since that time, what has happened to all of the language that we journalists

heard, the credit default swaps, the derivatives, all the different things that we talked about in 2007, 2008, have we recovered in that world? james: some of the esoteric things have come back and they y the designers say and in much safer forms, some of these structures have been retired for good. rian: like what? james: come to think of it, i'm going to withdraw that. i just heard that the collateralized bond obligation is back. there is something called the collateralized loan obligation which is a confection of bank loans. they are called leveraged loans. leveraged loan means debt. leverage means debt. it's like a -- it's like botanical garden. every garden is botanical. or existing houses.

all houses exist. so leverage loans are these things packaged with each other and you can get a different part of the loan. riskier part which they structure so there is a riskier segment or safer part. these things are back and they are meant to be safe now because they were safe in 2008. what's different is that the underwriting standards of these loans have diminished substantially and the c.l.o.'s, the collateralized loan obligations which think are not so safe even though they were safe then. brian: for the average person -- this isn't for the investor that's reading your newsletter -- who's cheating us? james: well, we are collectively. we are the willing or at least inattentive victims of what's going on wall street.

wall street is kind of out there what it does for a living. one branch, the investment management business, seeks to buy low, sell high. another branch, the investment -- the securities manufacturing arm, the investment bankers, bring various pieces of paper to market. they call them stocks, bonds, structures of one kind or another, and they want to sell you something. and then there's a third branch. the investment research branch and the investment research people are not exactly disinterested observers of the scene as grants strive to be these people are in fact partisans, they are selling something as well. so wall street means to sell you something. it falls to the customer to realize that and to be on one's guard. what one can't absolve wall street, wall street is eventually for a living.

-- venal for a living. i think the trouble that lies not so much in wall street -- wall street is what it is. 's been a name either -- not good names -- infamous name. wall street is an epithet. mostly in american history, right? what we ought to be more on guard about are the institutions in the federal government that are valiantly benign in their intentions. the federal reserve, for example. the department of the treasury. the securities and exchange commission. these institutions set up as ben factors for the public and i think increasingly they are not so. i'll give you an example if you like. the federal reserve rode to our rescue in 2008. the fed, as it's family known,

imposed the lowest interest rates, by some measures, since at least the middle ages. by other measures, worldwide interest rates, all central banks imposed interest rates for the lowest in 3,000 years. what have these rates done? they have nudged investors into taking risks they might not have otherwise taken because you get nothing from the savings. getting nothing on a treasury bill or savings account, i think i will take the advice of then bernanke, the then chairman of the federal reserve in 2009, 2010, the russell index, baseball inside index, the smaller companies, kind of russell er stocks, has been doing as well said chairman bernanke in a "washington post" op-ed advising people they think they

should invest in stocks. stocks have been doing well. who will tell those previously riskover savers, well, it's time to get out? so you ask who were the culprits and i think the public in its inattention is one, is guilty to a degree of our financial -- collective financial sins. i think our financial stewards are guilty on wall street. i think that the government is guilty as well. so that means that nobody's guilty, right? [laughter] brian: you wrote in "the weekly standard" article that $7 trillion of gross federal debt came on the books in 1986 four years after the first. $5 trillion was the grand total in 1996, $10 trillion in 2008, nd $20 trillion in 2017.

i guess as a journalist i would say, how is that possible? ou said the first 193 years we didn't spend $1 trillion in debt for the first 193 years. how is it possible in the last 20 years this thing has gone completely -- james: well, it's the facility ofborrowing, the ease of borrowing. we live in a remarkable era. for one thing, the dollar is not a thing. it is increasingly a concept. you can fabricate a dollar for the cost of nothing. you type on the keyboard of the federal reserve and you can materialize dollars. it used to be until 1971 that a dollar was at least in law defined as a weight of something. hat something being gold

boullian. 3/5 of an ounce gold was a dollar. brian: why did nixon go off the gold standard? james: it was expedient to do so. since 1971 we have been able to materialize dollars ever so easily. and this facility has given us the means of borrowing and servicing the debt. so too has the collapse in interest rate since 2008. so, too, has the political doctrine, that the government ought to be active, it ought to be an interventionist government. it ought to be our help-meet. it ought to be catering to our needs. whether they are almost spiritual, the government ought to be there for us. that's the doctrine i say of statism and the federal doctrine statism -- brian: what does that mean, statism?

james: this comes from paul volcker autobiograffy. he describes washington, d.c. when he first got there to the federal reserve board in the 1970's i guess, 1960's, 1970's, washington had one four-star restaurant. it was a place mostly of middle grade civil servants. it had a certain charm about it. he said today washington is chock full of more fabulously rich people. they have more four-star restaurants. he says, i stay away. statism is the concept of ideas that mobilizes wealth in washington and imperils the legislation that has governed so much of our lives. remember vivian callums? she was a tax protester who got started in 1945.

-- 1946. in 1945 the war ended, world war ii ended and with it was going to end federal income tax withholding. that was a wartime emergency measure. so all businesses had to do the bookkeeping on behalf of the she was a ith -- dowdy connecticut entrepreneur. she said, why should i do the government's work? there is a constitutional provision against involuntary servitude. let's sue the fed, said she, and the i.r.s. had not cotton o this and the part it did not cotton was -- she lost this ballot, obviously. now all of us look forward to april 15 when the government will give us back some money and how grateful we are. vivian, before she died in 1975 said the internal revenue service, the tax code is a hydroheaded monster.

it is 1,700 pages. just how long the tax runs today is a matter of some contention. you can't go wrong when you say 1,700 pages. that's -- you can't go wrong when you say 75,000 pages. that is statism. the all-enveloping grip of the government on our lives. brian: you wrote in that article, if statism is the debt facilitating doctrine of the left, growth is the debt-rationalizing ideology of the right. pro-growth conservatives preach correctly that only a strong economy can produce the goods and services with which to meet tomorrow's vast entitlement bills. these happy fiscal warriors forgot that the government has a balance sheet as well as an income statement. they carelessly overlook the risk that the worsening federal finances themselves could undermine economic growth. how? how can it undermine economic

growth? james: well in 1978 the u.s. gent went a crisis of confidence. that's to say the foreigners lost their confidence in us. this was during the carter administration. rate of inflation -- you are much too young. you can look it up. the rate of inflation was nearing double digits. it had not yet achieved that dubious level. and the treasury deficit was then seemingly to run amuck. there was no discipline in american policymaking. the u.s. had abrogated five years earlier its promise to pay gold on demand. for dollars. and generally speaking american was in bad odor in europe on the level of finance. and the u.s. could -- we had difficulty financing our debt. then, the debt, mind you, was one half or 40% of what it is now.

brian: percentage basis? james: yeah. people talk about these things and it's somewhat tedious to go into too much detail. if you were to look at the debt that's in the hands of the public, not the debt that the federal government holds on one hand and counts its liability on the other. if you x that out and just look at the debt that you and i might hold, for example, foreigners might hold, even the federal reserve, debt in the hand of the public, that was like, i don't know, 35% of g.d.p. now it's -- i don't know -- whatever it is, 75%. people will tell you today, oh, debt is not a problem, brian, until it reaches some threshold. they'll say 102% of g.d.p. no. the debt is a problem when our lone us -- loan

us. brian: i don't know the latest numbers, the number of dollars on the average person's credit card or the average family, $9,000. james: i don't know that figure. brian: does that sound bad, good, or indifferent? does it matter? james: i guess when seeking to determine whether debt is a a lot, a little or just right, you always look at the capacity of the service. what i do know that the average american have difficulty coming up with $400, $500 in the event of an emergency. so as a nation we are rather short of walking around money. so $9,000, if that's the figure does sound a little steep. brian: what are the warning signs that things are going in the wrong direction for you? brian: when the interest rate that america pays in relation for its debt in relation to the interest rate that other

countries pay to service their debt, when that -- when our rate rises relative to others, that's one warning sign. brian: above them? james: we are above the rate the germans pavement we are even above i think at this -- as we sit here, the rate the italians pay. the italians are having difficulty within europe financing their debt. although that rate has been suppressed by the exertions of the european central bank, their own federal reserve has een suppressing rates in italy and europe. the dollar exchange rate, too, if it weakens inexplicably, it might be a sign that the world is tiring of servicing our substantial debt. brian: explain the federal reserve. if i go to federal reserve it's right there on constitution avenue in washington. is there money in the basement? james: no. brian: this sounds silly. where is the money?

james: that's the best question this fiscal year. the money is now -- well, there are two kinds of money. there is the legacy kind, we'll call it, that's gold bouillon. and there is a great deal stacked in the federal basement of new york and you can visit that gold. brian: why new york? james: the federal reserve bank of new york is kind of the -- it's the headquarters of the true financial arm of the fed. washington is the administrative center. ashington is where the great -- governors -- the federal reserve open market will meet policy. to determine they will sit around the big table and noodle over interest rates. that's one form of money. if you want gold it's in new york. that's one form of money. some of it is in fort knox.

the farm gold is in new york. brian: do we know how much that is worth? james: i do not. brian: it used to be, what, $35 to the ounce or something like that? james: right. it's closer to $1,200 or something to the ounce today as we sit here. it is worth a lot of money easy said fast. that's the material kind. but far more consequential to the world these things is the immaterial kind. these are the digital entries into the federal reserve books. they are weightless. as i say, they cost nothing to produce, and they are really the substantial dollars in the world. we also have paper money, of 10's , $100 and the 50's, and most of it circulates outside the united states. a substantial portion circulates in foreign countries. brian: you are saying literally -- you used the world fabricated -- you move the

decimal point? james: yeah. brian: that simple? james: yeah. ask them to demonstrate the creation of a billion dollars and it wouldn't take them a second. brian: if we went there and said, show me the billion dollars they'd have to show you a piece of paper? james: no. brian, piece of paper is rather old school. brian: digital readout? james: so since -- since the year 2007 the fed has materialized out of the thinnest of air about -- more than $4 trillion. world central banks collectively has materialized upwards of $10 trillion. and they could -- if alexa had been in business then it could have spoken the commands rather han having to type them. brian: could you explain quantitative easing that we went through in the last 10

years and what is it and was there real money involved and what happened to it? james: well, quantitative easing is that fancy term describing materialization of dollars that didn't exist before the federal reserve typed them into existence. now, it works this way. so the federal reserve will say to jpmorgan, we are buying from you, if you will sell us, $1 billion of treasury bills. and morgan will say, if the price is right we'll do it. the fed will say the price is right. done. so the fed will pay for those $1 billion of treasury bills by crediting jpmorgan's account at the fed. jpmorgan has an account at the fed just like you and i might have an account at jpmorgan. and the $1 billion did not exist until the federal reserve ped it into jpmorgan's entry

in the fed. brian: who can have an account at the fed? james: banks, principally. brian: any bank? james: no. there's a select several dozen. they are called primary dealers. so it's a coatry. safe word. brian: explain somebody that saves, they don't do the market, which doesn't help you, if they save and the interest rate is .4% on their savings account but the bank is getting that money at what rate and they -- is it in that that the public subsidizes the bank in order they can loan money at a -- low rate to the james: well, the public has been subsidizing the banking system for a long time.

way back when in 1984 the continental bank of illinois failed and the government refused to allow it to actually go broke and to be liquidated and that was the first iteration of the doctrine, first application of the doctrine too big to fail. that banks, are protected by the government because of the nature of their business. that is dealers in debt. what banks do is borrow from you and me and they lend to dealers in debt. the government has determined that they are too important to our financial lives to be allowed to fail. that's one element of the subsidy. another element recently in the past 10 years is the suppression of interest rates, giving banks a fatter margin so they can borrow from you and me. we are depositors. we are lending money to the bank. they are borrowing from us. they borrow at a cheap rate. the rate is much as or as

little as nothing. getting no money -- substantially no money in our deposits within the last 10 years. the banks don't get no interest when they buy or lend securities. so the fed has been rebuilding the deleted coffers of these banks, lo these postcrisis years by fixing it so the banks can earn what is called a spread. between what you and i earn on our deposits on the one hand and what banks earn by buying treasury bills, lending to a business on the other. brian: so if i said, let's go to washington and go to the social security administration, i want to see where the money is, what would happen? what would you find there? james: i think would you get a quizzical glance. i don't think the social security administration -- oh, yes, the social security administration does have a trust fund. and that trust fund is the collection of i.o.u.'s that the

social leaves at the security administration when it spirits away the dollars we remit to the government to satisfy our taxes. brian: there's no money really there? james: treasury securities. you'll hear people contend and they do have a point that the social security administration's i.o.u.'s the treasury leaves there with them -- after are, they are no different than bonds. promises to pay. in a way i think it's a bit of selfish myself. what happens when we pay into the social security administration is that we send our money as if we were servicing a life insurance account, annuity. that's the optics. we send our money there and the social security administration saves it but actually it delivers it to the treasury and the treasury pays the soldiers, the sailors, the pensioners of

all kinds. it buys $50 toilet seats, whatever it's buying these days. it leaves with the social security administration chits or i.o.u.'s you put in a coffee can. say you spirit some of your spouse's egg money. honey, i took the 20 just for the day. that's how it works for the trust fund. brian: what about medicare? james: ditto. brian: where is the crisis down the road if there is one now that we -- everything is done digitally? james: i am running out of time and answers. the crisis is, yes, here is the timing of the crisis. i say it happened about 35 years ago. i appeared what early in this. starting in the mid 1980's grants, my publication, produced mock perspectives for the treasury. if you are a bond issuer, the s.e.c. must issue a

perspective. it lays the facts of your business, tells the risk factors. i did this because i thought e treasury was getting out ahead of itself. this was 1985, 1986. i i am the leading person to ask when the crisis -- one of the reasons it will not happen i can give you plenty of those. you hear a lot of people say -- i mentioned our friend the conservatives who are always invoking roe not to worry about this. our friends at the wall street journal will say, there will be no crisis. the dollar is the reserve's currency. we have the strongest economy. we are the fastest growth. we are exceptional people. we are the world's destination for talent and capital and i would dis-- i would agree with lmost all of much of that.

that is the anthem of, also, an entitled people. i'm now going to quote some facts and figures which would describe many a debtor in the world but not necessarily the world's foremost financial superpower. all right. bank of america has recently done a ranking of 45 countries according to the size of their government budget deficits and their trade deficit. these twin deficits. the government internal deficit by the government and the trade deficit of 45 countries. the united states ranks ahead of argentina, but behind brazil, pakistan, and a couple others. all right. this is -- let's see what's else. brian: this is the way it's now?

james: it is the way it's now. why is that? how do we do it? the u.s. produces much less than it consumes. it has done so for many decades. in return for the goods we import, net the goods we export -- we pay for these goods with -- and service with dollar bills, right? we print these dollars or the distinguished gentleman from ties them and with these dollars we service the debt. so the way it works is this way. so foreign countries send us stuff. we pay for it with dollars. they get the dollars. in return they oblige us by uying our treasury i.o.u.'s. brian: that's how china owns $1 trillion and japan owns $1 trillion? james: isn't that lovely? that's a great system. bear in mind, the cost of producing these dollars is nothing. the cost of making things, that's not insubstantial, right? o people are -- if you are a

calamityy -- calamity howler, if they say, jim, will you tell us more slowly what's wrong with this? it's a great system, right? it's great system until our creditors decide they want no more part of it. the united states -- it's not as if we have been doing this without cost or without a bump in the road these 200 or whatever years. we defaulted -- we, the american people, defaulted on our debts in 1814. of course, the british just burned washington. that was a fact. we defaulted in 1933. we refused to pay gold $4 as promised at a certain rate. defaulted again promising but not delivering to pay gold $4 in 1971. and i say we defaulted during the 1970's by submitting to an -- a very lent inflation that

reduced the purchasing power of the dollars that we -- with which we service debts. much to the disadvantage of our lenders. way back when, way back during the time of the french revolution, there was a wise chap, i believe an accountant of some kind. i would sooner have a mortgage on a garden than a loan to a government. and what he meant was that governments are amoral with respect to their debt. now, many of us individuals and businesses are similarly amoral. but governments pay when it's expedient. expedient to pay. but will it be expedient if and when interest rates go up? when the cost of servicing the debt, let us say, imagine it's a time when it's higher than defense budget, when it's higher than social security, ill it be expedient?

brian: if you are a saver, do you worry that the banks will not have enough money? they recognize what -- i mean, there's $250,000 limit that the fdic has and all that. james: i'm going to say that they will always be enough dollars. the question is what will those dollars buy. the united states government pulled out every stop in 2008 to make sure there were enough dollars. i was reviewing some of this the other day. we were writing about general electric. general electric, going into the crisis was a a.a.a. rated company. it was the greatest -- had the greatest balance sheet of any industrial company except it turns out it didn't.

it was funding itself with an imprudently large volume of short dated loans called commercial paper which you had to roll over every 90 days or so but it turned out no one was willing to roll those loans over for g.e. during the height of the crisis. so -- brian: what do they do, they call the loan? james: no, they call the government. the fdic of all in congressional institutions was one of the federalagencies that leapt to the rescue of the then a.a.a. rated g.e. that is how extreme and extraordinary an intervention. people say, it won't happen next time. oh yeah, it will happen next time. i don't think the banks will not have dollars to pay us. i think the fed are certainly furnish the dollars. you earlier recited the series of milestones, if that's the

193 to get to $1 trillion. next trillion -- this year in this time of ostensibly bounding prosperity, we are expected to run a deficit in excess of $1 trillion, and the tab on the public debt will be well in excess of $1 trillion. . . what is so significant about this perspective $1 trillion increment to the gross debt this year is that it got no air time during the midterm elections of 2018. nobody said a word. it was the cold button issue of the election.

i find that significant. we have become very complacent with this debt and our tolerance for what creditors are doing. brian: you hear constantly than members of congress are short-term fingers in the senate and the house, and they'll be gone by the time the problems come and they can can spend this money and not worry about it. we're at a period where -- you said in your article, we are sending out more money than we are taking in. 55% of americans get money from the government in some form of a check. james: i think the politicians are working on the incentives in front of them. people don't much care about the gross public debt. ross perot proved that in his own way. i'm telling you that on wall street, it is the least interesting and negotiable piece of information that you can produce for your readers or your clients. you cannot make a dime on the fact that the public debt will be whatever it is going to be.

in fairness to the doubters, the government's cost of borrowing is only slightly over 2% on average. these are not crisis-level rates. in a way, they are depression level rates, but they do not reflect one iota of a apprehension about the credit of the nited states of america. it would be asking a great deal for a politician to take a stand on an issue that is exacting so little pain. so evident, but little pain. 7brian: only a little bit of time left. you have four children. where did you meet your wife? james: at the baltimore sun. brian: what was she doing that? james:she was the fashion editor. because she was beautiful, but that was then. nowadays, as the professional she has since become, she got an mba, an

md, and is a practicing neurologist and grandmother of three. that is patricia kavanaugh. brian: practices in brooklyn? how did she make that move from fashion editor to medical doctor? james: on merit. she woke up one day and said, i think i will become a doctor. she foreshadowed this by subscribing to the new england journal of medicine. i new how seriously she took it. because i was filling out in jest the card that said what is your specialty? she was like 28. i believe that you are a a neurosurgeon. the look on her face told me she was very serious. we had four kids at home. it is the most impossible idea she has ever had. she decided to go to medical school and she

began it take premed science courses. i vividly recall organic chemistry. brian: where did she go to med school? james: the albert einstein school of medicine. brian: your kids, any of them in your business? james: three of the four are and one is going to divinity school at duke. brian: are they in your company? james: one is, an alumnus of my chap. charlie. he said he wanted to get a real job at the wall street journal. what could he have meant by that? brian: how many people do you have in your company? james: seven. brian: it is $1300 per year if somebody wants to subscribe to grant's interest rate rober. james: correct. brian: where did the name come from? james: we did not poll it. brian: did you just write it down? james: the word grant came to me spontaneously. brian: i understand --

it's hard to remember -- james: of all the four names in the world you wanted, why these? the observer word is significant because i observed, even then, i saw even then, that the future is a closed book. while one can observe how the future is being happenedy capped, one can cannot accept out of error conceit or of presume to predict. it is difficult or impossible to predict, but we have observed and to a degree anticipated these three, five years. brian: i want to get together on this piece. it's november 5, 20 -- james: we have several issues of grants for free. they are welcomed to the website. brian: i got online, there is a video of your wife

talking about -- she does a lot with parkinson's and alzheimer's. james: did i mention she's an entrepreneur? she is developing a walker. she just returned from china trying to get it produced. brian: if you could not be what you are, what would ou be? would the french horn still play a little role? james: i would be a professional scholar of samuel johnson. i believe the best book in the language is boswell's life of johnson. i go to sleep sometimes -- life of johnson is on tape. it's like 40 hours. it is a perfect thing to go to sleep to, because it is a succession of anecdotes and quotations. i turn this thing on. it is like a dog going to sleep. like an alarm clock.

i go to sleep listening to this wonderful english actor reading johnson, boswell, other voices. that's what i am doing around 10:00 p.m. every evening. brian: next book for you? james: i don't know. watching television at the oment. my next book is the life of walter badget, who is a vig torian figure, an economist, and who wrote the doctrine for central bankers, part of which dock strin is implemented to this day. brian: it comes out in july. our guest is james grant who has a periodical called the grant interest rate observer. james: thank you. national cable satellite corp. 2019] [captions copyright national cable satellite corp. 2019] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. sit ncicap.org]

>> for free transcripts or give us your comments about this program, visit us at "q&a."org. "q&a" programs are also available at c-span podcast. >> next sunday on "q&a," author and journalist, patricia miller, talks about her book bringing down the colonel. about a late 19th century sex scandal that culminated in a lawsuit against a sitting kentucky congressman by his former mistress. that's "q&a" next sunday at 8:00 p.m. eastern and pacific here on c-span. >> on