Oren Cass

uh of this and today oh special thing tonight uh the halftime of the podcast uh we're gonna have someone do a halftime show entirely in latvian they're just gonna sing i'm still recovering from just the the anger and outrage that the right expressed over a fun musical before the center

They've gotten so weak, so thin, so feeble that they can't go 15 minutes without hearing a country song. It just, it hurts them. It hurts the country. It hurts the foundation that we were built upon to have something like that. My favorite was, somebody mentioned, you know,

Trump on huomaamassa, että koko asia on suomalaisena, ja sinä tiedät, että nimi paikasta, jossa elät, tiedät, millaista kieltä se on perustunut. Mar-a-Lago, kyllä, se ei ole Lontoon, isäni. Mutta menemme lisäämään tärkeimpiin asioihin. Sinä tiedät, että luin kirjan,

just recently that I've been waiting for so long to read as coming from someone from the right, which was about how our economy has been overfinancialized, that the financial services has become too large a part and it's hurting ultimately the bottom line. And I'm sure that there are 50 years of left-wing economists out there who saw the article and just rolled their eyes and thought, yeah,

finally, but I was excited to see it and to see that it was written by our old pal, friend of the show. It's a title not bestowed often. Friend of the show, and he is joining us today to discuss this article and to discuss these larger issues in general that an over-financialization of the economy may portend for the future stability of our economy. So I'm delighted to welcome back Oren Kass,

Ladies and gentlemen, please allow me to reintroduce himself. His name is Oren Kass. Oren Kass. Oren, it's so nice to see you again. You are the chief economist at American Compass. And that is a self-imposed title? Imposed is good, yes. Self-imposed.

Yksityiskohtaisen ekonomistin ja Amerikan Kompassin järjestäjä ja New York Timesin puheenjohtaja, josta haluan puhua. Olet viime aikoina kirjoittanut opettia New York Timesin. Se on opettia, jota olen odotellut jo monta vuotta.

who is classified as more on the right. So to get into it, I want you to briefly explain. It was about the idea that the financialization of our economy is a net negative. But I want you to give just sort of a brief description of this op-ed and sort of what motivated you to write it.

Kyllä. Kiitos, että olit katsomassa minua. Nämä ovat aina paljon hauskaa. Aina. Finanssialisaatio, luulen, että meidän pitäisi suorittaa sen alkuun. Se on tietenkin, ja siinä on kaikenlaisia teknologisia definiitioita, mutta tietenkin se tarkoittaa kasvavaa roolta finanssaalisten markkinoiden kanssa ekonomiin, jossa ne jatkuvat itseään. Ihmiset aloittavat transaktioita, rejiggereitä, järjestää yrityksiä ja ottaa kasvua ulos.

Not with any effort to create anything valuable in the real world, simply to generate more cash out of the activity. Give some examples of what financialization specifically, what that might be.

Kyllä. Se näkyy paljon Wall Street-yhteyksissä, jos ajattelee heijastumista tai yksityisyhteyksistä. Usein he saavat paljon rahaa, ja on mielenkiintoista, mistä rahaa tulee. Sitten he käyvät katsomaan asioita, joita he ajattelevat, että he voivat ostaa yhdessä ja myöntää yhdessä.

So if you're a hedge fund, right, in the case of what's called a high frequency trading hedge fund, you don't even care what you're buying and selling. You're literally building bigger fiber optic cables to try to race your trades to the floor faster so that you can get out in front of whoever else is bidding on them. You make a teeny teeny little bit on millions of transactions and ta-da, you've generated a profit. You haven't actually...

done anything useful. You've just extracted value from somewhere else. If you're a private equity firm, in a lot of cases what you're trying to do is say, let's go out and find a series of smaller businesses. Maybe they're privately run. Maybe the people running them aren't even just maximizing profit. Maybe they're veterinarian clinics, let's say, or nursing homes. Can you buy up a bunch of them, combine them together,

Maybe squeeze the customers a little harder, squeeze the workers a little harder, get more cash out of it. Now you have a profit. Now could you sell it to someone else? When you talk about financial engineering, can you do what's called a capital restructuring? So add a lot more debt to it so that you can earn more money. Now you've also added more risk, which means if something goes wrong, it turns out firms bought by private equity funds are five to ten more times likely to go bankrupt.

Well, if you're a private equity fund, okay, well, if I buy 100, I'm okay with a bunch of them going bankrupt. I can generate more profit on balance from taking more risk, even though, of course, all the workers at the firms that went bankrupt only had the one job. And so you see in financial markets a lot of this kind of activity happening.

Mielestäni on tärkeää sanoa, että taloudelliset markkinat ovat tärkeitä. Mielestäni kapitalismi on hienoa. Yksityiskohtaisesti ekonomistit, sanoisin, että se on se asia. Se idea, että haluaisit saada pankkaita ja muita, jotka saavat ihmisten saavutuksia, saavat kapitalia ja löytävät hyödyllisiä tavoitteita, on erittäin tärkeää. He tarvitsevat palautetta siihen, että he tekevät sitä. Minulla ei ole mitään ongelmia, jos joku tekee hyvää elämää, tulee rikossa tekemään sitä.

Problem is that the share of the activity on Wall Street and financial markets that actually represents productive investment, actually causing anybody to build anything new and useful in the world, keeps going down. Even as financial markets, the financial sector as a share of our economy keeps getting bigger, bigger share of GDP, the biggest source of corporate profits, the number one place that people from top business schools go to, that keeps getting bigger.

And yet in parallel, the actual amount of real investment happening in our economy keeps going down. Right. And so that's the disconnect that, first of all, I think is just, that is a problem in and of itself, but it also then obviously has incredible consequences for the real economy, for the country as we experience it. And this is, I think, a generally a critique that has been leveled more on the left, would you say, that that is, and so...

You, I think, are more associated with the right. And I guess my question is, do you still have an office where you are? Or have they, once they read this op-ed, did they put you in the mop room? Do you have a window, I guess? Well, as you can see, I have lovely windows behind me. I figured they weren't, that's not your real office. No, no, this is my office. I'm out in the woods. We have a lot of snow on the ground. But no, the nice thing about being chief economist is, I guess you can say whatever you want.

um but it takes its own terms is financialization is it a perversion of what sort of the the markets is the critique that uh first of all why do you think it happened why do you think that these financializations grew faster than what you would consider to be the economy of real things jobs and industrial policy and those kinds of things what