Charlie Rose 与 Joseph Stiglitz 的访谈（2010年3月2日），有关 Stiglitz 的新书 Freefall 。

CHARLIE ROSE: Joseph Stiglitz is here. He served as one of President Clinton’s top advisors and as chief economist at the World Bank. Today, he’s advising the Greek government as it faces a debt crisis that has rattled the European markets. Earlier in his career he was part of a team that won the Nobel Prize in economics in 2001.

His new book is called “Freefall: America, Free Markets, and the Sinking of the World Economy.” In this he writes that he fears the country faces a far longer and deeper recession with a financial system that is more vulnerable to another crisis.

Give me a sense of where you think we are.

JOSEPH STIGLITZ: Well, we’ve been brought back from the brink, but we’re not out of the woods. And let me tell you why I think we are still in a — you might say a precarious position.

While growth is starting to resume, it’s not likely to be sustained. It’s likely to get much weaker. But the core problems are two. First, a very high level of unemployment. More than one out of six Americans would like a full-time job and can’t get it. This includes people who have jobs but are working part time, can’t get a real job.

And 40 percent, more than 40 percent of those who are unemployed today are long-term unemployed, unemployed for more than six months. That’s so important because the longer you’re unemployed, you drain your cash reserves.

And particularly for young people, a period of should be building up skills, those skills, their training becomes weakened. And we know from previous downturns in the United States and elsewhere that young people who have experienced, or other people who’ve experience protracted periods of unemployment are much harder to bring back into the labor force. And when they do, their wages are markedly lower.

And then there’s the problem with the foreclosure, which is what started the crisis in the first place. The pace of foreclosures is expected to be higher in 2010 than in 2008 and ‘09. We’ve done nothing about the — almost nothing about the underwater mortgages where they owe more money than —

CHARLIE ROSE: Than the house is worth.

JOSEPH STIGLITZ: — than the house is worth. And more than 25 percent of those with mortgages are now underwater.

Now, there’s some additional problems that we’re about to face. Commercial real estate, about a half trillion dollars commercial real estate has to be rolled over.

CHARLIE ROSE: We have loans that are coming due, and they’ve got to —

JOSEPH STIGLITZ: — be rolled over somehow. Many of those are underwater. Many of those are securitized, and those are very difficult to roll over.

In the old days where you had conventional banking, the banks might have rolled them over holding their nose and closing their eyes in the view that — with the view that maybe with luck somewhere down the road things will get better.

Bank examiners, supervisors, are less willing to engage in what’s called forbearance because they’ve been very criticized for having not done their job in the last five years. And with securitization, it’s almost impossible to roll over these underwater mortgages.

The first of these problems came to the fore in the bankruptcy of Cifizen. And that was a multiple dollar failure.

CHARLIE ROSE: By one of the most reputable land development and real estate firms in the city of New York, and then when it came time to pay the loan, they couldn’t do it.

JOSEPH STIGLITZ: And that’s symptomatic of what we’re about to see over and over again.

Two more problems, if you’re not feeling bad enough. The states have a shortfall of about

CHARLIE ROSE: The states?

JOSEPH STIGLITZ: The states — of $200 billion a year in revenues, down from what it would normally be because of the recession. And the states — many of the states depend very heavily on property taxes. The states have balanced budget frameworks, which means that when the revenues go down, they either have to cut expenditures or raise taxes. That’s equivalent to a negative stimulus.

And so far the federal government’s been picking up about a third of that gap, but with the stimulus coming to an end in 2011, the question is, what will happen.

I just came back from California where you see the future, in a way — teachers, university professors on furlough two days a month on the way to being laid off. And, you know, a whole set of problems in a number of other states.

So these are among the sort of clouds hanging on the horizon —

CHARLIE ROSE: And so therefore you believe the consequences of all these things are?

JOSEPH STIGLITZ: That the economy will not be able to sustain the growth that we’ve seen in the last two quarters. There will be a marked slowdown, possibly into actually a double dip, which is another recession.

But the bottom line is for what most people care about, jobs, growth will be too slow to provide new jobs for the new entrants in the labor force, and certainly too slow reduce the unemployment from the very high level that it is.

So it’s going to be a lot of stress both in the labor market and the housing market unless we do something more than we’ve been doing.

CHARLIE ROSE: And what would that be?

JOSEPH STIGLITZ: Well, that comes to the view, I think we need a second stimulus. We need a large second stimulus. A lot of deficit hawks are around there saying we can’t afford it. And I would say we can’t afford not to do it. And, you know —

CHARLIE ROSE: You have to put people to work first and then you can worry about the deficit.

JOSEPH STIGLITZ: Moreover, it was the shortsightedness of the banks that got us into this trouble. We ought to be looking not at the deficit but the long-term debt.

If we take — if a large fraction of this money goes into investments — education, technology, infrastructure — and we under-invested in the all these areas for years, all we need is a return of about five percent or six percent, and then we get more tax revenue from the growth in the short run, we get more tax revenue from the growth in the long run from these productive investments, and our long-term national debt will be lower as a result of running a deficit today.

And that’s what we should be focusing on.

CHARLIE ROSE: What size stimulus are you talking about?

JOSEPH STIGLITZ: Well, the way I like to think about it is the size ought to be appropriate for the depth of the downturn. So, for instance, one of the key pieces of what I’ve been calling for is making up for the shortfall in revenues of the states.

So right now that shortfall is about $200 billion. If our economy remains weak, we’re going to have to make up for that. If the economy recovers, then the amount of money we have to put in would be that much less.

And if I were an optimist I would say it’s going to recover, but I don’t know, and I’m a little bit of a pessimist seeing the kinds of problems that we face.

CHARLIE ROSE: Some argue that we should have had a much larger stimulus — Paul Krugman for example. You’re in the same camp.

JOSEPH STIGLITZ: That’s right. That’s one of the points I said in “Freefall.” And even the president’s chairman of the council of economic advisors is said to have —

CHARLIE ROSE: Christina Romer.

JOSEPH STIGLITZ: Christina Romer said we needed $1.2 trillion. And what we’ve seen since then has been very clear they were optimistic about where we were going.

And it’s a really important point here. The stimulus has worked. A lot of people have looked and said unemployment has gone up and that proves the stimulus hasn’t worked. No, the stimulus worked. But if we hadn’t had the stimulus we would have had, say, 12 percent unemployment instead of 10 percent.

CHARLIE ROSE: OK, but then they argue you could have designed a better stimulus.

JOSEPH STIGLITZ: That’s right. Again, something I say in my book. Clearly we could have done it. The big mistake we made was the tax cut. We knew from the experiment we did in February, 2008, the Bush tax cut, with the overhang of debt and with the uncertainty in the job market people would save a large fraction.

It makes them feel good, it’s important for their sense of well-being, but the nature of a stimulus is it has to stimulate. That means you have to have spending. And so a very large fraction of Americans have saved a significant part of that stimulus.

The other part that I think was a mistake was we didn’t give enough aid to the states in the way I described. And so you have this picture across the United States while the government — the federal government is putting money in, they’re contracting.

CHARLIE ROSE: Here’s what I don’t understand. Larry Summers early on — and I realize you and Larry have had —

JOSEPH STIGLITZ: Discussions.

(LAUGHTER)

CHARLIE ROSE: Discussions, yes, have had intense discussions — said early on “timely, temporary, targeted” for stimulus. So that idea was out there. Were these targeted?

JOSEPH STIGLITZ: They were reasonably targeted, but not as targeted as they should have been.

CHARLIE ROSE: OK. You would have spent more money on jobs that would really train people for the future?

JOSEPH STIGLITZ: Exactly. And — that’s a long-run vision — and a recognition of the problem of the states that I talked about. And that is a way of putting money into the banks of the economy very quickly without creating a new bureaucracy because if you don’t put the money there they have to lay off workers.

And in a recession is exactly time that there’s so many demands. And people — young people who can’t get a job want a place in a university. They want to be able to at least build up their skills.

CHARLIE ROSE: Right.

JOSEPH STIGLITZ: And the universities are contracting. It just doesn’t make any sense.

CHARLIE ROSE: I hear time and time again that the president made a mistake when he said we’re going to engage with the stimulus program and in other programs — education, climate change, and health care, that he should have said the issue is jobs, jobs, jobs. Do you buy that argument?

JOSEPH STIGLITZ: Not really, because the problem wasn’t lack of focus. The problem was a program that was not as strong as it should have been.

CHARLIE ROSE: Because of congress?

JOSEPH STIGLITZ: One interpretation was a judgment about political feasibility. And my view on that was that if you compromise too much early and it turns out that you need more money later on, it would be difficult for you to accomplish what you really wanted. And that’s exactly the situation we’re now in, because it is now clear that we need a second stimulus, and many people are saying the stimulus didn’t work. So that was a political judgment that I think may have been flawed.

The second argument for why not enough was done in the area of mortgages and the banks, or not the right thing done in the area of mortgages and banks, was the influence of the financial sector that had gotten us into the trouble in the first place.

CHARLIE ROSE: You’re talking about the TARP program and the bank bailouts and the bailout of General Motors and Chrysler?

JOSEPH STIGLITZ: Yes, and in particular — for instance, one of the — a lot of people said why don’t you give more money to homeowners so that they can restructure their mortgages. Let’s have trickle-up economics.

CHARLIE ROSE: My impression is that banks are modifying mortgages. Am I completely wrong about that?

JOSEPH STIGLITZ: Very little.

CHARLIE ROSE: So it’s a good idea — they claim they’re doing it, but they’re not doing it enough?

JOSEPH STIGLITZ: And there’s one category which is a very important, the most important category where it’s almost not happening at all, and that’s the underwater mortgages. The one in four mortgages where they owe more money —

CHARLIE ROSE: Than the house is worth. What should be done about that?

JOSEPH STIGLITZ: Well, what I advocate is what I call a “homeowners’ chapter 11.” And chapter 11 is a provision of our bankruptcy code that allows a restructuring of debt that says that if you owe more money than the company is worth, you convert bondholders into shareholders, and the shareholders get wiped out.

CHARLIE ROSE: Is your voice heard in the White House because of the tension that has existed in your relationship with Larry Summers?

JOSEPH STIGLITZ: I don’t think that’s the issue at all. I think there was —

CHARLIE ROSE: What’s the issue?

JOSEPH STIGLITZ: The issue is the influence of the financial markets, of the people who at first succeed in getting deregulation.

CHARLIE ROSE: Right.

JOSEPH STIGLITZ: Then succeed in getting —

CHARLIE ROSE: OK, but let’s talk about it specifically. The people — are you talking about Larry Summers now who, because of his influence has — within the treasury with Bob Rubin — were able to get deregulation, were able to get Glass-Steagall repealed? Is that what we’re talking about?

JOSEPH STIGLITZ: That’s part of what we’re talking about. But it’s more pervasive than that, because it’s not only that they succeeded in getting this deregulation, you know, preventing regulation of the derivative, which the derivatives are what led to the problem at AIG, which cost American taxpayers so much money.

CHARLIE ROSE: And who was the woman that was surging them and trying to warn them?

JOSEPH STIGLITZ: Bjorn (ph), and she had said before the long-term capital management debacle —

CHARLIE ROSE: This was a debacle a number of years earlier.

JOSEPH STIGLITZ: That was back in 1998. The failure of one firm threatened to bring down the whole global financial market.

CHARLIE ROSE: And that was early warning.

JOSEPH STIGLITZ: That was an early warning. She said it before. She said after that, how can you doubt that? And yet they succeeded in not only not having the regulation but passing a law saying you could not regulate it.

CHARLIE ROSE: You have been much tougher than you are being here. You have said, for example, that Larry Summers and the Obama team are in the pockets of the banks and they need new faces who have no vested interest in the past.

You’re basically saying they came with a mindset to the Obama administration that was sort of — we want to make sure we take care of Wall Street so that when the time came and the crunch came and the emergency came they were not prepared for the kind of solutions that you believed were the right solution for the right moment.

JOSEPH STIGLITZ: That’s right. It’s a mindset —

CHARLIE ROSE: What’s the mindset?

JOSEPH STIGLITZ: Well, it’s the mindset that began with saying markets always work.

CHARLIE ROSE: Right.

JOSEPH STIGLITZ: And that Adam Smith’s idea that the invisible hand, the pursuit of self-interests would lead —

CHARLIE ROSE: So you’re saying there was no difference in their attitude about market than was, say, Alan Greenspan?

JOSEPH STIGLITZ: That’s right. There was a picture on “Time” that described the three of them as “The Committee to Save the World.” And the fact is they approached the problems of regulation and managing the monetary system in a very —

CHARLIE ROSE: Are we talking about Summers, Rubin, and Greenspan, or are we talking about whom?

JOSEPH STIGLITZ: Well, that group, but there were others.

One of the things I think is important in this area is not just to focus on individuals but to focus on ideas, and these ideas were very pervasive.

One of my concerns has been not only did they bring in, in some sense, the wrong mindset but because they were so closely affiliated with the mistakes of the past, it would be very difficult to get confidence.

CHARLIE ROSE: With great respect for a Nobel laureate, some might argue that Joe Stiglitz is a little bit outside and he’s screaming a bit because those guys were brought inside and he wasn’t.

And he had a Nobel Prize, experience at the World Bank, and had written a number of books and was, you know, a distinguished professor. So therefore he had all the credentials to be on the inside and he wasn’t, and they were. So now he’s saying those guys had a mindset that prevented them from fixing the problem.

JOSEPH STIGLITZ: Well, I really didn’t want to go inside. I had been through that experience. It was a very exciting time.

CHARLIE ROSE: For Clinton.

JOSEPH STIGLITZ: Under President Clinton. It was a very exciting time.

CHARLIE ROSE: With Bob Rubin.

JOSEPH STIGLITZ: We often differed. I opposed the repeal of Glass-Steagall, he supported it.

But what has disturbed me is that others like Paul Volcker have been very — who share many of the same views, have been very — their views have been very reluctant to be heard.

CHARLIE ROSE: But they are heard now.

JOSEPH STIGLITZ: They are being heard, and that’s what I feel much better about.

CHARLIE ROSE: But being heard on one question, the big question of financial reform and the need for new kinds of regulation.

JOSEPH STIGLITZ: That’s right. And even that is not as much as I would — I think is necessary.

CHARLIE ROSE: OK.

JOSEPH STIGLITZ: We’re about a third of the way.

CHARLIE ROSE: What will be the two-thirds that are missing?

JOSEPH STIGLITZ: Well, for instance, Volcker has focused a great deal on making sure that the depository institutions, commercial banks, do not engage in proprietary trading, that they’re not too big to fail.

CHARLIE ROSE: That they don’t have hedge funds or private equity firms.

JOSEPH STIGLITZ: Exactly. I’ve also been concerned that you can have too big to fail institutions that are not deposit-taking institutions — investment banks, that once you separate the two, you can still —

CHARLIE ROSE: But he seems to be arguing to me and others that there’s no such thing as too big to fail if, in fact, you’re not a depository institution.

JOSEPH STIGLITZ: Yes. And that’s where, I think, we differ.

CHARLIE ROSE: OK, that’s one place you differ.

JOSEPH STIGLITZ: And so, for instance, we wound up bailing out AIG and we bailed out —

CHARLIE ROSE: Should we have bailed out AIG or should we — what was the alternative?

JOSEPH STIGLITZ: The alternative was to say let it go and if —

CHARLIE ROSE: What does “let it go” mean?

JOSEPH STIGLITZ: Let it go bankrupt.

CHARLIE ROSE: OK.

JOSEPH STIGLITZ: And if some parts of our financial institutions have problems, need money, like Goldman Sachs, then give them money — not give them money, lend then money in a way that will get back —

CHARLIE ROSE: In the same way they did with Citigroup? You lend them money for a piece of the equity, or just lend them money —

JOSEPH STIGLITZ: One of my criticisms is that when you give them money, you get back appropriate compensation. So the form would have been such as something like Warren Buffett. When he gave money to Goldman Sachs he got back warrants and preferred shares.

CHARLIE ROSE: And a 10 percent return.

JOSEPH STIGLITZ: And a very high return. And so we should have done just as well as Warren Buffett. Why can’t we negotiate terms — that was an arm’s length deal not affected by politics.

CHARLIE ROSE: So in other words, the United States government should have been a Warren Buffett negotiating the deals it made with commercial institutions, with financial institutions that were in trouble.

JOSEPH STIGLITZ: That’s right. And other countries have done a better job in providing money to their banks and getting back value than the United States. So that’s what we should have done there.

Another area that we need to do something about is do more in breaking up the too big to fail banks. I think, you know, the notion that these too big to fail banks can be trusted in any way seems to be — you know, the one thing economists agree on is that incentives matter. And if you have an incentive to engage in excessive risk taking, you will.

And the question there is whether the failure of this institution engaging in financial activities would send significant ripples through the economy that anybody could say to us if you don’t save that institution it will have sufficient consequences through the financial system.

You know, there are other set of issues with General Motors for jobs —

CHARLIE ROSE: And how do you measure that?

JOSEPH STIGLITZ: Well, that’s not an easy question, but there are models that can look at what happens if you pull out one institution out of the financial web. One of the big advances in recent years in research, particularly the Bank of England, have been to look at these networks of financial interdependence. Some of my own research is actually focused on exactly that kind of question.

CHARLIE ROSE: I think government of the Bank of England, Mervin King — is that his name?

JOSEPH STIGLITZ: Yes.

CHARLIE ROSE: Is in favor of breaking up the banks.

JOSEPH STIGLITZ: Yes, he says, and I agree, if you’re too big to fail you’re too big to be.

(LAUGHTER)

CHARLIE ROSE: And you buy that.

JOSEPH STIGLITZ: I buy that.

CHARLIE ROSE: Universal banks is not by definition a bad idea, is it?

JOSEPH STIGLITZ: I think what you have to look at in the context of the American economy are the costs versus the benefits.

CHARLIE ROSE: Right.

JOSEPH STIGLITZ: There are some benefits, but what we’ve seen are the costs far outweigh those benefits.

An important point to remember is the services that they provide won’t disappear. They will be provided, but organized differently.

CHARLIE ROSE: And more efficiently.

JOSEPH STIGLITZ: And I think more efficiently.

And the point is right now we can’t — the big banks are effectively subsidized and they have a competitive advantage not based on greater efficiency, but the fact is that because everybody knows they’re too big to fail they can get capital at a lower interest rate, and that gives them a big advantage over every smaller institution.

CHARLIE ROSE: You believe that the American capitalist system should look much more like the European Scandinavian model, which is sometimes called “capitalism with a human face.”

JOSEPH STIGLITZ: That’s right.

CHARLIE ROSE: What do you mean?

JOSEPH STIGLITZ: There are a couple of dimensions of this. One is we have to recognize that we need to get a balance between the market and the government. And the government plays an important role not just in restraining bad behavior but also promoting innovation. The Internet, which has transformed our society, was financed by —

CHARLIE ROSE: By the government.

JOSEPH STIGLITZ: By the government.

CHARLIE ROSE: The Pentagon, in fact.

JOSEPH STIGLITZ: The revolutions in biology that are extending our lives begin with basic research that is funded by the government. So that —

CHARLIE ROSE: And done at the university level and at NIH and wherever.

JOSEPH STIGLITZ: So that gives you an important constructive role for government.

CHARLIE ROSE: But we already do that, don’t we?

JOSEPH STIGLITZ: But part of the debate is the extent to which we do it. Part of the debate is the extent to which we — the role of the government in restraining the bad behavior, the regulation that we talked about in the financial sector.

So that’s part of our debate. And then the other part of the debate is the extent of social protections that you provide.

CHARLIE ROSE: The safety net.

JOSEPH STIGLITZ: The safety net. And that —

CHARLIE ROSE: So therefore has France — being exhibit one — been better off in the economic crisis than we have because they had more influence of the state in their economy and had a firmer safety net?

JOSEPH STIGLITZ: Yes, both France and Germany have — you know, they’ve been very badly hit, but on the other hand, the amount of suffering of the individuals has not been as bad.

I’ll give you one example. One of the things that we’re now — a number of places are beginning to imitate in the United States is where they put people into part-time work so that they share the work. They’ve recognized the system isn’t working well, and that rather than having, as the United States, one out of six Americans — one out of ten Americans who can’t get a job, what they’re doing is sharing the work more broadly.

CHARLIE ROSE: All right, let me just continue down this. You suggest that capitalism has some moral failings.

JOSEPH STIGLITZ: An example, for instance, was in the financial market the —

CHARLIE ROSE: “Moral depravity of the financial sector,” I think, is the term you used.

JOSEPH STIGLITZ: Yes. And the example I give is the discovery that was made a few years ago that there was money at the bottom of the pyramid and they did everything they could to move that money from the bottom of the pyramid to the top, including predatory lending, the credit card abuses.

The point I was making here was that, well, one of the criticisms — and I think a justified criticism — of the financial sector was that it didn’t manage risk-taking well. It didn’t allocate capital to where it was best used. But it went beyond that.

CHARLIE ROSE: But when you get to that point, that’s where people in the financial community come back, push back to you and others, and Paul Volcker as well.

They’re saying the kind of financial reform you’re talking about, too big to fail and all that was not the problem. The problem was leverage and risk and the capital requirements. If those had been enforced you wouldn’t have had the problem. And you’re not going to solve the problem, they argue, by some elimination of proprietary trading.

JOSEPH STIGLITZ: There’s no single thing that is going to solve this kind of problem.

CHARLIE ROSE: Right, the potential of another crisis.

JOSEPH STIGLITZ: Of another crisis. I agree absolutely we have to do something about leverage. You have to do something about hidden leverage, which was part of what the credit default swaps were all about. So I agree with them on that.

But conflicts of interest are what caused problems. The conflicts of interest were en route of the Enron, World.com scandals.

CHARLIE ROSE: But that’s just fraud and corruption.

JOSEPH STIGLITZ: But that fraud and corruption undermine confidence in the market economy and contribute, contribute — I don’t say — contribute to an economic downturn when it exists on the scale that it did in the United States.

CHARLIE ROSE: You don’t think globalization is such a great idea.

JOSEPH STIGLITZ: Well, actually what I said is globalization can be a very positive thing if it’s managed well.

CHARLIE ROSE: And so what is wrong about globalization as it exists today?

JOSEPH STIGLITZ: Well, let me give you one example. What we did when we talked about globalization is we talked about unfettered capital markets moving across borders with very little regulation. The result of that is that you can have a country with inadequate — a very small country with inadequate regulation putting in jeopardy savers, individuals all over the world.

Iceland is an example. So that’s an example where people in the U.K., people in the Netherlands suffered. And now it’s coming back, now people in Iceland are suffering from globalization. They were told let our banks — let your banks become global marketplaces, you’ll all benefit. What they’re seeing is they’re being asked to mortgage their future for generations to come.

They’re probably going to vote against it on Saturday, but that’s — that is an example of globalization that has not been managed well.

CHARLIE ROSE: You think Greece will be all right in the end?

JOSEPH STIGLITZ: Yes. I think that Europe is going to come —

CHARLIE ROSE: To the rescue.

JOSEPH STIGLITZ: — to the rescue. And let me make it clear. When you use the word “rescue,” the fact is that Greece with its debt to GDP income ratio of 120 percent is perfectly capable —

CHARLIE ROSE: Debt to GDP.

JOSEPH STIGLITZ: Debt to GDP — of make it’s — fulfilling its commitments. When you face a speculative attack and interest rates soar, then you have a problem. And I think Europe realizes that that’s what this is.

CHARLIE ROSE: If they don’t act it will spread to other places like Spain and Portugal and maybe even Italy.

JOSEPH STIGLITZ: Exactly. So what is at stake here is the integrity of the Euro and European Union, which is why I felt so confident that they would eventually come to the rescue.

CHARLIE ROSE: One of the reasons I like you so much is you have opinions and you have ideas, and they are interesting and controversial. You’re not thrilled by the World Bank or the IMF.

JOSEPH STIGLITZ: Well, the IMF has changed a little bit.

CHARLIE ROSE: So they’re more to your liking?

JOSEPH STIGLITZ: They’ve reformed to a considerable degree.

CHARLIE ROSE: Meaning they’re not creating such tough standards to receive their money?

JOSEPH STIGLITZ: That’s right. Or to put it the way I would put it —

(LAUGHTER)

CHARLIE ROSE: Which is a better way.

JOSEPH STIGLITZ: In the East Asia crisis, they demanded what we call pro-cyclical policies that converted downturns into recessions, recessions into depressions. If you look at their programs more recently, most of them have been much less in that way. Some of them have actually been very, very helpful.

So I think that’s part of the change of — in the global debate, and that’s why many people in Greece say if Europe doesn’t come to itself, the IMF is not necessarily that bad of an alternative.

CHARLIE ROSE: You’re not thrilled by the dollar remaining the reserve currency of the world.

JOSEPH STIGLITZ: No.

CHARLIE ROSE: That puts you and the president of France in the same boat.

JOSEPH STIGLITZ: A dollar-based reserve system is not working. It’s fraying.

CHARLIE ROSE: And they’re going down to Brazil and doing some interesting things to sort of —

JOSEPH STIGLITZ: And they’re very worried, and you can understand that, that with the buildup of the —

CHARLIE ROSE: Go ahead.

JOSEPH STIGLITZ: With the buildup of the U.S. debt and the blowing up of the balance sheet of the Fed, they’re worried that the value of their huge holdings of U.S. dollars will be diminished in one way or another. So China, for instance, has $2.3 trillion of reserves.

CHARLIE ROSE: Two billion dollars a day.

JOSEPH STIGLITZ: And it is estimated somewhere between around two-thirds of that is probably in dollars, and they worry that the current system puts them at great risk.

So there’s a demand by the countries that hold large amounts of reserves to move to an alternative system. And other countries have expressed a view this way. They say in a 21st century, to have the currency of one country be the basis of a global financial system doesn’t make a lot of sense.

CHARLIE ROSE: You’d like to see a government bank.

JOSEPH STIGLITZ: I point out in the book that if you had taken that $700 billion that went into TARP and used just a fraction of that to create a new institution to provide money to, say, small or medium-size enterprises, we would have had a flow of new credit that is so essential to getting the American economy going again.

Instead we focused on the past. We focused on institutions that have proven themselves not having done an adequate job in allocating capital. They’re focusing on dealing with past mistakes.

And one of the basic lessons in economics is bygones should be bygones. And unfortunately it’s very hard to get existing institutions to do that. And that was just one — it was a way of thinking about what we might have done that would have —

CHARLIE ROSE: So it wasn’t so much a prescription for the future. It’s looking at the past and figuring out what might have been a better try go at solving the problem.

JOSEPH STIGLITZ: Exactly.

CHARLIE ROSE: But how about nationalization? Do you think we should have had more nationalization, as your Nobel colleague Paul Krugman suggested, even if it was temporary?

JOSEPH STIGLITZ: That’s not the word I would have used. I would have used the word “conservatorship.” I would have said playing by the rules of capitalism.

CHARLIE ROSE: Yes.

JOSEPH STIGLITZ: The rules of capitalism say that if somebody owes more money than they can pay, a firm owes more money than it can pay, it goes into bankruptcy, which means the shareholders get wiped out, the bondholders become the new shareholders. That’s the rules of capitalism.

We suspended those rules. Now, in the case of banks, there’s a couple particular provisions. The first is that you don’t wait until the company’s absolutely bankrupt before you do something. You want to make sure that you’re not left holding the bag.

And secondly, the government has a special role because the government ensures the deposits. So if it goes belly up, the taxpayer, FDIC, winds up filling the hole.

And that gives it — those are the only differences between that and ordinary bankruptcy. So that’s what I wanted them to do. If they had done that, they would not have needed the huge amounts of taxpayer money.

CHARLIE ROSE: Do you think they’ll get some of it back?

JOSEPH STIGLITZ: Oh, they’ll get some of the money bank. But the numbers look like very clearly that there will be a significant shortfall, over $100 billion, and most of those calculations do not really provide — talk about appropriate compensation for what we call the time value of money, the risk that we bore.

And so when you say we got the money back, we should have gotten far more than the money back given the risk that we bore.

CHARLIE ROSE: You have an international reputation, are known well around the world, and with admiration. You also saw the kinds of factors coming together that created the crisis that we had to go through. Do you believe that if you had had power to go with your observation you would have been able to prevent the crisis?

JOSEPH STIGLITZ: I think we could have made sure that it was much less deep than it currently is. We might have been able to prevent it.

And why that’s so relevant to the current policy debate is that right now our financial sector is in some ways more dysfunctional than it was in 2007.

And so as I look at where we are unless, we make some very significant reforms in both the structure of the financial sector and the regulation of the financial sector, I think there is a significant risk that we will some time — five years, ten years — face another crisis of the kind that we’ve just been through.

CHARLIE ROSE: Joseph Stiglitz, won the Nobel Prize in economics. “Freefall: American, Free Markets, and the Sinking of the World Economy.” Thank you. Pleasure to see you.

JOSEPH STIGLITZ: Thank you. Nice to see you.

CHARLIE ROSE: Back in a moment. Stay with us.

www.charlierose.com/view/content/10885