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What Will Cause The Next Recession - Joseph Stiglitz On Trump's Protectionism - YouTube
Channel: CNBC
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There are several problems
facing the global economy.
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I think it's fairly clear that there
is going to be a gross slowdown
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that the economy was given what is
now generally called a sugar high
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by the combination of a tax reform
bill in December of 2017 and then
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the expenditure increases in January
2018 creating a very large
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increase in the deficit when the
deficit was already very large and
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that provided some short term
stimulus to the economy.
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It was not well-designed and the
money didn't go into long term
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investment it went
into share buybacks.
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The result of all that is
it didn't provide the foundations of
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sustainable growth.
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There are several problems
facing the global economy.
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Europe. remains very weak.
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Part of the reason has to do
with some fundamental flaws in the euro.
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Their political problems.
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Italy has not had growth and the
euro doesn't have -- give it a
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framework within which
to restore growth.
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So you're really having
near stagnation in Europe.
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Meanwhile China is
also having problems.
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What I describe what's going on
is that they alternate putting their
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foot on the accelerator and then on
the brake because the only way
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they goose their economy
is through debt.
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I don't see the basis
of stable growth in China.
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The third obvious concern is
Trump's protectionism and we're talking
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about China.
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We're talking about a trade
war with Europe over automobiles.
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We're talking about sort of the global
rules based system which he has
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systematically attacked.
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The WTO this year will wind
up without having an effective appellate
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body because the United States refuses
to allow new judges to be
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elected. So the WTO which was the
basis of the rules based global
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system is is going
to be facing difficulties.
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So all these are significant
headwinds confronting the global economy
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and we're part of
the global economy.
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So we will feel some of the
bumps that we ourselves have created.
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Many of us who were critics of
the WTO and I think correctly didn't
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really appreciate the virtues of the
WTO until we actually confronted
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the reality of a
world without rules.
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You can't imagine how any
economy American economy could operate
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without the rule of law it's sort
a the foundation of our economy of
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our society.
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We talked about the
rule all the time.
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The same thing
actually applies internationally.
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You need a rule of law.
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It's much more bare bones rule of
law and that's what the WTO
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provided. Some of the rules
were not well designed.
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There were rules that were written
by the advanced countries for
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their corporate interests.
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And that's really been my.
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complaint. that to to a large
extent the rules were dictated by
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American and European corporations.
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For instance access to drugs.
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They made it more difficult to
get access to lifesaving drugs drove
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the prices of drugs up and it
seemed so unfair that we had an
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international regime which allowed
the advanced countries to
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subsidize their agriculture
goods like cotton.
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Billions of dollars going to a
few thousand maybe twenty five
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thousand rich American cotton farmers
putting deeper into poverty
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tens of millions of people in Africa to
India and to me I found that
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abhorrent. And so that's
what I criticized.
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Manufacturing is not going to come
back to the United States.
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We're not going to recreate the golden
era of capitalism the 1950s or
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60s. Even if China didn't export
as much manufacturers goods to us
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we're not going to make mostly
apparel in the United States.
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We're going to be importing it from
Vietnam or Bangladesh and to the
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extent that manufacturing goes back
the United States would process
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which is called on-shoring.
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It's going to be robots.
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It's not going to be jobs in
the Midwest isn't jobs in South
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Carolina. So in the end for all
the rhetoric Trump is not delivering
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. Manufacturing jobs have come back
a little bit as our economy
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recovers from that long
and great recession.
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Some of those jobs are coming back
and I think there's more that we
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can do to bring them back.
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But the basis of that is going
to be research is going to be
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strengthening our universities.
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But these are the things that
Trump is trying to undermine.
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He's trying to defund research to
defund the policies that actually
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bring those jobs back in a sustainable
way and make sure that the
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industrial jobs that are brought
back are really good jobs.
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What Trump did was to recognize that
we have not managed the process
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of structural transformation
of our economy.
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We were going from a manufacturing
economy into a service economy
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into an innovation economy and
the process of deindustrialization
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associated both with globalization and
with technological change is a
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difficult process and we left a lot
of people without help to move
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into the new economy.
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You see it in so many dimensions.
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We didn't give them the education
that they needed but Trump
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University is not the kind
of education they need.
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They need real education and we've been
cutting back on the kinds of
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real education they need.
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So while he grass you might say
that the despair you grasp the
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concerns he's a populist in the
sense there are no real solutions
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that he's offering and
actually made things worse.
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I'm not a big UBI person.
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I understand that there are some
advantages to providing a single
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program guaranteeing a basic income to
everybody but to me the basic
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responsibility of our society of our
government is to make sure that
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there's a job for everybody who's
able and willing to work.
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And if we had a job with decent
pay for everybody able and willing to
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work then the concerns about
UBI wouldn't be there.
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We will still need of course
to have social protection systems for
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the disabled for you know a whole
set of people who can't work but
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that should be the core of a
program that provides a system of social
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protection for our society.
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It's especially important for two reasons I
think and I may be a
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little old fashioned on this.
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I think there's a certain dignity
from work younger students say oh
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there can be a lot of dignity
from meditation and from other ways of
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spending time.
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But I think for most people there will
be a real desire to work and
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this will be a
big challenge going forward.
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We don't know exactly when driverless
cars and trucks are going to
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arrive. We know that even high
tech jobs like radiologists are not
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immune. Computerized radiology is actually
better than most humans.
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So there's a lot of areas where
machines in one way or another will
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be not only stronger can do
data processing faster but actually can
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learn in certain limited domains and
even be creative in certain
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ways.
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So this is going to be one of
the big challenges of the next quarter
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century. I titled my book
people power and profits.
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It was trying to say the only
balance is going to be mass movements
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people engaged in politics because in the
end the way our economy and
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the way our society functions is
determined by rules that are set
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publicly. There is a real concern
that the problems of inequality
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that I've been so concerned with for
so long will be getting worse.
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And part of the reason
is the problems of unemployment
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that it could give rise to but also
part of it is the ability of A.I.
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in the new technologies to
be more efficient in exploitation.
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They can target prices at
exactly what each person pays.
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It actually undermines the basis of
a market economy as we've known
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it in the past a price
system where your standard courses in
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economics. It's about how prices make
sure that the marginal benefit
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of a good is the
same for all individuals.
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The marginal cost is the same in
all uses of production but with the
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new technologies everybody's paying
a different price.
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Every firm is paying a different
price and it actually undermines the
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efficiency of the market economy and
it takes we call economist
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called producer surplus surplus from individuals
and adds it to the
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profits of some of the
wealthiest people in the country.
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Over the last 40 years
corporate power profits have been
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driving the rules.
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We've become a more corrupt politics
more money driven politics and
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we've lost the balance
in our politics.
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Not surprising given that we've lost
the balance in our politics
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we've lost the balance
in our economics.
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There's been an erosion or evisceration
of worker power over the last
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50 years.
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We have to get the
rules of globalization right.
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They've contributed to the weakening
of worker bargaining power.
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We have problems in our corporate
governance where CEOs are taking a
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larger and larger share of the
corporate pie and dancing themselves
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at the expense of their
workers and of investment.
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And that's one of the reasons why
investment rate is so low and our
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overall growth rate is so low.
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Now when it comes to
the particular problem of innovation.
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I think we have to realize at
the core of our innovation system is
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government funded basic research
and government funded education
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programs. And those are absolutely
essential for making a dynamic
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economy. The irony is that while the
basis of all the innovation our
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economy is government funded.
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too little of the proceeds
go back to the public.
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So there has to be a better
sharing of the proceeds of the innovation
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and that may be done through
taxation and may be done through
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adjustment of our
intellectual property regime.
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There are many ways to do it.
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It may turn out to to
vary across industry and over time.
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But what is very clear is there
has to be a better system of
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sharing of these proceeds.
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I've been a great advocate of
moving to an electronic payments
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mechanism. There are a
lot of efficiencies.
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I think we can actually have a
better regulated economy if we add all
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the data in real time
knowing what people are spending.
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It would enable the Federal Reserve
to actually set interest rates in
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a much more efficient way.
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We would have I
think better macroeconomic management.
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It also would curb some of
the illicit economic activities and it
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disturbs me a great deal.
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The attention that was
given to crypto currencies.
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because those were moving things off
of a transparent platform into a
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dark platform.
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We know about the role of
real estate and money laundering.
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We know from the paradise papers and
the Panama Papers the extent of
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this money laundering.
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We know from research in recent
years for instance the work of
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Gabriel Zucman the large percentage of
global wealth that is held in
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these dark havens.
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So if we want a more
efficient economy without these illicit
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activities I think we're going to have
to move to more of an
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electronic payments mechanism and we will have
to figure a way out to
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have the transparency of electronic
payments mechanism without the
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dangers of the surveillance
and the surveillance state.
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We have a very good currency.
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So far the currency has been
run in a very stable way.
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There is no need for anybody to
go to a cryptocurrency you know in
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our standard courses in economics we
talk about the attributes of a
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good currency and the US
dollar has all those attributes.
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The crypto currencies do
not have those attributes.
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I actually think we should
shut down the crypto currencies.
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