good evening from los angeles. i'm tavis smiley. tonight, first a conversation with journalist martin wolf considered by many to be one of the world's most(ú influential writers on the economy, associate editor at the "financial times" of london and latest text "the shifts and the shocks" what we learned and have still to learn from the financial crisis. and then we'll turn to a conversation with dancer and choreographer sharna burgess, my dancing partner recently on "dancing with the stars." she danced on broadway and the closing summer olympic ceremonies in her native australia. among her partners, andy d yy d keyshawn johnson and charlie white. those conversations coming up right now. ♪

>> and by contributions to your pbs station, from viewers like you. thank you. ♪ >> martin wolf, associate editor of the "financial times" at london, called the world's most influential economic writer and clom is considered required reading 6"6 the financial elit. his new book "the shifts and the shocks," what we learned and have still to learn from the

financial crisis. he call the 2008 clam teralamit most complete breakdown we have ever seen, even greater than the depression of the 1930s. martin wolf, an honor to have you on this program. >> it is a great pleasure. >> let me jump right in. even worse than the depression of the 1930s? >> i said the financial breakdown was worse. the economic consequences in the '30s was, of course, vastly greater. this time we knew how to respond as it were in the macro economy, but in dealing with the collapse, we responded with very powerful monetary and fiscal tools. that got the economy recovering, but the financial system wascd essentially completely taken over by the central banks. it was a total rescue of the system, which ceased to function. and if we hadn't acted in the way we did, all the governments together in october and november, december of 2008, i think the result would have been at least as bad as the great

depression. >> what does your research say to you after these years now, as to how this happened and why this happened? >> well it is a gcomplicated story. it is two processes. the entry of china into the world, the emergence of huge savings surpluses coming from the emerging countries, into the developed countries, so u.s. running huge current account deficits, spending more than its income. the federal reserve acting to support that by with loose monetary policies. that's where the global side, increasing inequality is part of that too. and then we liberalize the financial sector, we encouraged it, again, across the world, but particularly here, to take on more risk, to lend to housing, to leverage out the whole economy and itself, with almost no capital. regulatory oversight collapsed. so the money that was coming in from china, from other savers,

was greaossly misallocated and create a fragile financial sector. and then when house prices on which this was all built started to fall, 2005, 6, 7, started falling everywhere, actually, but particularly here, this whole house of cards collapsed, people suddenly realized that the collapse6e -- that the stoc against which all this lending occurred was nociy9 longer safe money started getting pulled back. we had the panic, the intered mery and we had this utter disaster in 2008. >> to what extent was this a shock given they are seldom predicted this was going to happen before it actually happened? >> well, it was a shock in that a few predicted it. i predicted some of it, but not the scale of the disaster because i didn't understand how fragile the financial sector had become. very few people predicted as it were the whole of it.

some people understood, i can mention some names, that the housing market will fall. some people understood that bits of the financial system were quite fragile. some people understood this global imbalance, but very few put the pieces together and above all crucially the top policymakers across the world, the heads of the finance ministries, the heads of the central bank, your chairman here, beni bernanke, but also or government, and their institutions, simple truth is they missed it completely. i think the more fundamental level they missed the possibility of it, and that is what is so frightening and that's why to me the book had to be written, this sort of analysis had to be made because they just didn't understand that the financial system had become inherently so fragile, so when house prices fell, they knew that was possible, not likely, they just didn't expect the financial sector to melt down in the way it did. >> is there less fragility in

the markets today in. >> that's one of the fundamental questions i asked. the answer is because people are more cautious and more worried, there is a bit more regulation, yes, i think there is somewhat less fragility, but one of my arguments is that in essence the financial sector we have today is the same as the one before. it is even more concentrated, that is to say the big banks are even bigger relative to the whole, really just as complicated as they ever were, unbelievably complicated structures, very difficult to manage, and impossible in my view to regulate. much too much weight is put on the hope that regulatory rules of various kinds will contain this, and i think that they're much too optimistic. so as we go forward, the memories of the crisis fade, with central bank wanting people to take more risks. why do you think they're pursuing the policies they're pursuing? they want people to take more risks. i'm concerned we'll end up

situation at the bottom we're still trying to maybe the same structure work, but in a much more complicated regulatory environment. >> what you say now is two questions again. one of them is if the banks were too big to fail then, why did we let them get bigger even after the collapse, number one. and number two, were this to happen again, and you just said a moment ago it could possibly happen once again, do you think the american people specifically would be as willing to bail them out a second time, not even a second time, but, again, i wouldn't say second time, but bail them out again. >> two fundamental questions. i think the overwhelming likelihood as i read the law in the public attitudes is they wouldn't bail them out again. and fortunately that comes to your first question, they are still too big to fail. and so let us suppose god forbid, as it were, we got into a situation when a number of enormous banks had to be rescued. and authorities basically said we can't do it. we'll let them fail. now, the optimistic view is that

this time we could as it were do what is now called resolution, what does this mean? it means you take the debt they owe to creditors, bond holders, you convert it into equity, you do it in a relatively smooth way and then they -- the bond holders become creditors and become equity holders and the institution is ongoing. that is the optimistic view, this might conceivably work, but most people look very carefully at incredibly complex company structures with hundreds of subsidiaries, this probably wouldn't work, you would dare pay another penny and it might be this time we do get the great depression. so my last chapter is actually titled, i think you probably get the reference, the fire next time, for exactly that reason, that because the public hates what happened, as tim geithner said, you have to do things people hate, you can't do them more than once, i think. i think that's it. but we haven't fixed the

problem. so the terror for me is the next time you won't rescue it and the next time you will get a great depression. >> i'm a huge fan of james -- >> one of the greatest books every >> great text by james baldwin. you mentioned a moment ago, i think you're right about this, i hope you're right about the fact that the american people won't bail them out if this were to happen a second time because we should have learned the lessons we haven't learned which we're talking about in a second, what we have not learned. but part of that anger and certainly part of the angst on the part of some which would lead to us not wanting to bail them out again is because nobody got punished the first time around. eric holder recently announced our attorney general as you know, he's going to step down. and i was asked the other night wh what kind of grade i gave him and i gave him a b. a lot of things he did good work on, but at the same timeya it wassen epic fail on the part of

the administration in my mind that they did not go after the financial ministry. what is your sense of how and why the banking industry got away with this? >> i say that from our perspective, the u.s. authorities were almost rather vigorous, they did much more than we have done, which is even more shameful. how do they get away with it? i think there are two reasons. how did they get the gangsters in the 30s? they had to go for tax fraud. actually pinning criminal penalties on -- on people operating in the core of the financial -- is incredibly difficult. truth is, i like to joke -- as i like to joke, not really a joke, the real problem before the crisis is what was legal. you see, it is not that obviously there was lots of law breaking, no doubt. there was lots of law breaking. a lot of it lower down in the financial sector. my sense of this, and i don't claim to be an expert on

american law, but most of what the core financial system did was legal. that's what terrifying. that's why they have gone for civil and it racked up, as you rightly say, in the end, the shareholders pay it and the customers. who else can? the management doesn't have that sort of money. the management and, of course, the traders who made the mistakes and all the rest, they walked away with lots of money. that tells you a lot about the compensation. so they didn't, and in some ways they couldn't, i think, deal with a sort of criminal aspects of this because most of it, as far as i can see, wasn't criminal. now, that, of course, does discuss the people and i understand this completely, they don't want to bail them out again and my guess is they won't bail them out next time. unfortunately that -- since the system is still fragile and this is the big point, when the whole banking sector goes down, one bank goes down on its own, it is not a big problem. if the whole banking sector goes down, they made this remark in

the column i wrote at the time, the road from wall street to main street is straight. so if the banks stop functioning, everybody knows it. because it is the life blood of an economy. this is the only sector apart from the nuclear power industry whose misdeeds or mistakes can damage the entire economic system. so if you stand back and say, we'll let it collapse, every innocent person will suffer, which is what -- millions and millions of completely innocent people, that's why governments are driven. what is the solution? i found the solution, in my view, to make the banking sector fundamentally much, much safer. that's what i argue in my book, it has to be derisked in a profound way and i think that can be done without sacrificing growth because if we look at it carefully, the banking sector as it is now doesn't really finance growth anyway. >> i hear that argument and i take the point that you're making and yet what angers many of us is that they hide behind that reality. they know that.

as well as you know it and i know it. >> it is a moral hazard. it is why they do what they do. we have -- i call it the faustian bargain with banking. we have become dependent on a gigantic, immensely leveraged, fragile system we can't do without, and we can't regulate. it is a horrendous situation to be in.! and that is, in my view, we have not changed with the regulatory steps. >> made all the worse by the fact that big money and big banks own and run washington. >> that is an argument you can certainly make. i can't possibly comment. you know better than i do. let me offer this as an exit question, i'm fascinated by your insight and the shifts and the shocks. in closing, what have we still not learned? >> i think the fundamental thing is exactly what i said. we think that the same old system with lots of regulation can fix it. my view is there has to be vastly more shareholder equity in the system that we have to insist that banks go back to the

sort of leverage they had a century ago, which means massive reduction in leverage. so they can't bear losses, so they actually are capable of bearing losses. in addition, they have to continue to hold much higher reserves than they're lending, so that there is no question from the point of view of even big deposits. you got to get a situation where the panic is reduced. if the panic is reduced, then it is possible to deal with individual banks, let them fail without worrying about the system. so essentially it is a massive project of making the sector less risky and then moving finance in the other direction, which you won't have time to discuss, which make the whole system safer. the banking sector is too big, too leveraged and it is not giving the service that the public needs, and that's true here, true for us, true everywhere. >> his column is a must read copy and so is his new text, the shifts and the shocks, what we have learned and have still to

learn from the financial crisis, written by the one and only martin wolf. mr. wolf, on the program. >> great pleasure. >> thank you, sir. coming up, my "dancing with the stars" partner, sharna burgess. should be fascinating. stick with us. >> in my opinion, anyone who has ever said dancing is easy has never tried to dance. especially in competition. but sharna burgess, my wonderful partner and choreographer from "dancing with the stars" at least made it fun and adventure ous for me, even if she couldn't make it easy for me. she has been dancing since she was just 5 years old, winning international dance competitions since she was 8. danced on broadway, performed the closing ceremony for the wonderful sydney olympics and for "dancing with the stars" she has taught andy dick, keyshawn johnson, charlie white and tried to teach me to move to dance. let's take a look.

♪ ♪ you are my treasure you are my treasure ♪ ♪ you are my treasure you, you, you ♪ ♪ oh, no, no you, you, you ♪ ♪ oh, no, no ♪ dance, dance, dance ♪ >> so you tried to teach me. >> i tried. we succeeded, though. i mean, come on. in such a short space of time, you literally went from no dance steps to killing the foxtrot, and really doing your thing for that cha-cha. >> i hated that foxtrot from day one, as you'll recall.

you know this. >> i know. >> i hated this frame, which i still try to work on, i still got it. not sausages, steaks, you said. these are sausages, don't do this on foxtrot. steaks. steaks behind your back. i hated the foxtrot to begin with. but the more i got into it, i fell in love with it. i liked the foxtrot. everywhere i've gone, people say, you got robbed, you got robbed. at the airport, i've been on book tour -- you got robbed, robbed. not really robbed. i think what happened to us is people saw this book tour was so grueling, and i said this the or day, if i were a fan, i might ot because il, couldn't dance, because i went back and looked at this, the week we got kicked off, there were three people with the same score as we did, and one person with a lower score than we had, and we still, you know gorkt eliminate , got . i think the fans saw we didn't have the time to commit to it. if you're a fan of the show, you want to see people who have the time to commit to it.

that's my assessment, i could be wrong about it. >> i think our fans are such avid fans, they vote every week. if they see you can't put in the time they put in, they'll support someone who iszr0y givit 100%. that's sad to say, because you were giving it 200%, just we had those couple more weeks where we had to split our time and then we would have been golden. >> i was trying to do two more weeks of the book tour. if we can get through two more weeks, i could be in town regularly and work at it. when you first started dancing as a child, you started dancing at 5, winning competitions at 8, were told repeatedly that a dance career for you was unrealistic. they were wrong. but what were they basing that on, that you were -- >> coming from australia, there is not much of a dance industry there. i don't think my family necessarily wanted me to move away. and, you know, you never see -- especially before "dancing with the stars," you never really saw a dancer career as something in the spotlight or something that

could be a great long-term thing. you always see it has an expiry date. but what i learned early on you don't just dream about being a dancer, you dream about being a choreographer, a director, the next thing. i was very adamant this is what i needed to do and what i wanted and my parents certainly didn't understand. but came to accept it. i packed my bags at 18 and went to london and said see you later, i'm chasing my dreams and certainly very proud of me now for doing so. >> at one point, i learned when we were rehearsing, you had major injuries that you thought would end your dancing career. >> yes. and it was truly devastating. i was 15 years old, i was representing australia at the world championships, and i danced in the semifinal and came down in the jive and something went wrong in my knee. and when i came off the floor, it had blown up. i got taken to the first aid, and the guy couldn't really speak much english but told me i needed to have sixs weeks off e dance floor so it could heal.

i had torn something. i found out that i made the final. of course, at 15, i saw nothing else except that final. and i was, like, do whatever we need to do, make it happen, let's go. so they drained the fluid out of my knee, put cortisone in it, which was the biggest most frightening needle i've seen in my life, acupuncture in certain places and basically got through half of dancing and had to get carried off the floor because i then snapped two ligaments in half, and destroyed all of the meniscus on one side of my knee, which to this day i still don't have. and it went from six months in an ankle to a hip brace or anke toll thi le to thigh brace and two years off the dance floor for me because it was hard to find a partner at that point in such a shortage of male dancerers in australia. >> two years off the floor, why come back? >> i missed it. it was all of a sudden, you know, my whole dance career as a kid, my parents had been, you know, if you want this, we'll do this, and pus;zhcp me and with

the time spent in it, and then i had the time off and i was a normal kid for a while and i got to sleep at a friend's house and all the silly things you think are important at that age. and all of a sudden, almost 18, i thought, no, i miss it. i want this. this is my dream. i can't let go of this. and it definitely at that point became my choice and i said to my mom and dad, i'm not happy if i don't do this. i finished high school, packed bags and went to london. >> i've been asked a thousand times on the road on the book tour, what i enjoyed most about the experience. i said to people consistently, you know, that the thing i u actually being in rehearsal and watching you on the spot choreograph things. and you would try something and i would try it and you say, no, that's not going to work. >> that's not the one. >> as my friend danny said, that ain't the answer to the prayer. so that's not going to work. one day you tried to get me to kick and you didn't like my kick. and you said, do it like michael

jackson. i said, like michael jackson? you took the kick out and we tried something else. but watching you choreograorpho the spot and make it work for us, you're not just a dancer, you're a choreographer, you're still choreographing numbers for the dancers on the show. >> i was always good at it. even as a kid, i was making up my own dance routines and watching my friends and family sit in the living room and watch my dance routine. it wasn't until i started touring around 20 where i had creative freedom to, you know, create six, eight counts over here and explore different dance styles and found my love for commercial dance and hip-hop and contemporary. i started to blend all those styles together and really create my own thing. and i just found that i loved music, i loved telling stories

to songs and i loved creating a picture and a little monvie moment that people can sit down and get lost in for the minute, minute and a half, whatever it is. to me, it is one of my favorite things in the world is the creative process of putting something together. i love even the frustration of5 no, it is not working, and finding what it is, because to me at the end of the day, there is such a reward in seeing the final product. but it is certainly something i discovered in my early '20s and i have built on and loved ever since. >> question quick, so "dancing with the stars" is now in the 19th season them may make it to 20, who knows, won't be on forever. no show runs on forever. it won't be on forever. you won't be on there forever, it is not going to run for time eternal. what do you want to do with this dance experience and the choreography and what is the big goal for you? >> i certainly want to always build on choreography. i love working in film and

choreographing goes hand and hand with me. i would love to do more of that choreographing for film. i've only had the opportunity to do one movie so far. and eventually take it to creative directing. i love thinking on big scales for tours and things like that. but i also love to host. i love talking to people. i love being in front of the camera. i would love to always be involved with the arts somehow. you know, especially dancing, choreography and through hosting it. even hosting a show like "dancing with the stars," being involved with it that way, i certainly enjoy it. but dancing and choreography will never be out of my life. it is there forever. >> before pbs gets any ideas of moving me out of the way for you, you got to go now. you got to go now. i love you, thanks for coming by. thank you for one great joys of my life. the experience of doing that for a few weeks and learning was so much fun for me. and i did something i had never

done before and it was because of you that it worked out so well, so thank you. >> that's our show tonight. thanks for watching. as always, keep the faith. for more information on today's show, visit tavis smiley at pbs.org. >> i'm tavis smiley, join me next time for a conversation with vanessa williams starring in "a trip to bountiful." that's next time. we'll see you then.

>> and for contributions to your pbs station, from viewers like you. thank you.

>> charlie: well come to the program. we begin this evening with part two of my conversation with mikhail khodorkovsky. >> if ukraine will be a successful country from an economic standpoint, then this will have a very serious impact on the readiness of russians for a change of regime themselves. if russia is -- if ukraine is not successful, this will be an additional argument for not changing the existing leadership in the country. putin understands this perfectly well, and it's precisely for this reason that ukraine's success on its path of