At 93, he provides razor-sharp insights into the current crisis in this interview in Japan’s Asahi Shinbum (via Mark Thoma).
I think it is definitely the worst crisis since the 1929-1939 Great Depression, both in America and globally, and I think it was an unnecessary breakdown as there was no need for America to have a meltdown.
When George W. Bush became president in 2001, he inherited a country with quite sound (fundamentals) from President Bill Clinton with an overbalanced budget. … George Bush will go down in the history books as the worst president that America has had in more than 200 years. And, that couldn’t have happened if the voters had not moved to the right …
One is the Iraq war, which is a disaster. It’s as bad as the Vietnam War and the Vietnam War entangled four or five presidents and there was no victory. … But the other reason is because people on Main Street in America are hurting. The reason they’re hurting goes back to 1995 when Alan Greenspan, as the chairman of the Federal Reserve Board, made no efforts to curb the stock market bubble.
So the American electorate is very unhappy. Free trade and globalization add to world productivity. It also adds to the potential standard of living of many people, but unequally … The whole history of capitalism has had up-bubbles in real estate and down-bubbles after something different. This time the new fiendish Frankenstein monsters of financial engineering blinded the eyes and the minds of everybody. The CEOs and the chief financial officers are the most surprised people. Nobody learned any lesson from Long-Term Capital Management. And what happens with this “new financial engineering” is an incredible “super over-leveraging” and you don’t even know you’re doing it. You know, it’s as if you’ve been blindfolded. And nobody learned any lesson from that. … And this all could happen only because Bush, with his “compassionate capitalism” appointed incompetent people …
This is a new crisis because if you look at its bottom it says, “Made in America” (laughter). It’s not Thailand. It’s not Mexico. It’s not Argentina. It’s America. And, of course, it spread from there. Could you believe that the whole country of Iceland is bankrupt? Icelanders were the happiest people two years ago. They’re the unhappiest people today. …
Rome was not built in one day, and Franklin Roosevelt did not get full employment. It took about seven years. Now I don’t say it’ll take seven years this time, but it won’t be done with a balanced budget and it won’t be done with “inflation targeting” …
Spending in the direction of the poor part of the population (is important) because those are the people who are most likely to re-spend. If you primarily spend in the direction of your millionaires, that won’t make any difference.