[User] Please transcribe this text

[Assistant] That I could put up to one thousand numbers I could produce, except this will always produce ones without sevens because I'm not allowing seven in any of the positions. Whenever I put zeros in front, we just think of those as shorter numbers. And the zero zero zero just perfectly is the one thousand.


[User] Please transcribe this text

[Assistant] And so, the number of ways to build a number with this rule is 9 choices here times 9 choices here times 9 choices there. In other words, 9 cubed. Which is our 729.


[User] Please transcribe this text

[Assistant] Maybe just to conclude, I want to share a little bit of why I chose the number 7. Try this with your friends. This actually works much better in the Western world, because this is quite common.


[User] Please transcribe this text

[Assistant] What I mean is, if you ask people, choose a random number between 1 and 10. If you guess 7.


[User] Please transcribe this text

[Assistant] That's actually the most common number that people in the western world come up with.


[User] Please transcribe this text

[Assistant] It's not that all of them are with probability 110. So I chose 7 because 7 is the sort of number that


[User] Please transcribe this text

[Assistant] Well, it's the biggest prime one-digit number, and it's also one of the most common numbers that people think of.


[User] Please transcribe this text

[Assistant] The other part of this, the 9 cubed, is a lesson in combinatorics.


[User] Please transcribe this text

[Assistant] Oh god, I don't know. Wait a minute. Is this about my looks?


[User] Please transcribe this text

[Assistant] I've always looked up to the guardian angel of the slums. But that's your thing, grandma. Not mine.


[User] Please transcribe this text

[Assistant] That is worth travelling 17,000 kilometres for. Let me tell you. Delicious. Thank you.


[User] Please transcribe this text

[Assistant] You wanna win, then you gotta beat the people standing next to you.


[User] Please transcribe this text

[Assistant] You've got tiny teddies, you've got a quail egg, you've got little mini celery, little mini choy sum, mini turnips. Oh that's sick. You've got whitebait and mustard seed. Oh good job.


[User] Please transcribe this text

[Assistant] So Ben, you've got the moon box. Are you ready? Yep.


[User] Please transcribe this text

[Assistant] You also have your staples under the bench. And Jess, because you have that very special molecular mystery box, you've got a few extra molecular ingredients under your bench. You also get liquid nitrogen. Wow.


[User] Please transcribe this text

[Assistant] Whoever cooks the best dish goes into a very special challenge later on in the week.


[User] Please transcribe this text

[Assistant] Where you'll cook for a game-changing advantage.


[User] Please transcribe this text

[Assistant] The rest of you will go into today's invention test.


[User] Please transcribe this text

[Assistant] Did you know what you wanted to do when we popped the lid off that burn box? Clear idea?


[User] Please transcribe this text

[Assistant] You know why? It's all mucky. And some fish have bones that are muddy, and you don't use them for fish stock and stuff, so it's all coming out in the sauce.


[User] Please transcribe this text

[Assistant] It's a bit dirty, isn't it? Yeah, I'm not very happy with the... No, I wouldn't be happy with the...


[User] Please transcribe this text

[Assistant] Wow, what a fabulous cook. And it should be at this point in the competition. Remember, we're looking for the best dish and for the winner, that means the chance to get a game changing advantage. So stay tuned. First up, calm.


[User] Please transcribe this text

[Assistant] I love the cherry sorbet. Beautiful. Texture is delicious.


[User] Please transcribe this text

[Assistant] And also how it works together with the hazelnut praline snow. Just absolutely brilliant, I think it's perfect. And then you get a bit of fun smile on your face because there's popping candy in there as well. So another little kind of molecular tease.


[User] Please transcribe this text

[Assistant] I think it's beautiful, number one. And I mean, the fact that you've treated the ingredients with respect and you haven't denatured them, very impressive.


[User] Please transcribe this text

[Assistant] Than any of the ribs we've had. From some fancy places too.


[User] Please transcribe this text

[Assistant] I think they're delicious, because they're tender number one, which is great, and then they're charred, and then they're glazed, and that pineapple...


[User] Please transcribe this text

[Assistant] We're taking the reins off for today's invention test.


[User] Please transcribe this text

[Assistant] Today, there are no rules. It is the ultimate invention test.


[User] Please transcribe this text

[Assistant] So 75 minutes to cook anything you want, sweet or savoury. And guess what? Open pantry, gardens in play.


[User] Please transcribe this text

[Assistant] Is you'll end up in the pressure test tomorrow. A lot at stake. You got it?


[User] Please transcribe this text

[Assistant] We're hoping all these brilliant ideas and lots of these elements are all coming together beautifully. 30 minutes to go! Come on! Come on guys, fire up!


[User] Please transcribe this text

[Assistant] It's very well balanced, it's very clever. It was beautifully planned and beautifully thought out. I think it's delicious and at its heart, the really tasty part of it is it's a really good chocolate mousse with everything on top of it that goes together perfectly.


[User] Please transcribe this text

[Assistant] I think it's delicious, I think it's clever, but it's not quite a Negroni.


[User] Please transcribe this text

[Assistant] I think it looks, so far, fantastic. I don't know what it's gonna taste like, and I'm really interested because there was a big chunk of sponge in the bottom of there, and I'm a bit worried that it could be a bit dry, which would be a worry if the original dessert's very soupy. Okay.


[User] Please transcribe this text

[Assistant] That's interesting, isn't it? Number one, invention. Big thumbs up. Number two, milk skin, great. Beautiful texture, it's crunchy. Where it goes wrong for me, cake's really dry.


[User] Please transcribe this text

[Assistant] It just kind of soaks up everything and you're searching for something else. But it's not taking away anything from the fact that you went dessert. Unusual for you. You're taking it seriously this competition. You want to win it. You're just going to make sure that you iron out those problems because if you don't, you won't.


[User] Please transcribe this text

[Assistant] I'm not sure about a big chunk of crackling on top. How can you make a dessert with poor crackling?


[User] Please transcribe this text

[Assistant] And that ice cream is, I was trying to figure out, prosciutto and maple syrup, it's got this malty flavour. It's almost like Milo. So then the...


[User] Please transcribe this text

[Assistant] You see, no one who goes into the temple ever comes out again. No one.


[User] Please transcribe this text

[Assistant] And I'm wondering if you really want to take everyone to a place like that. You said it yourself.


[User] Please transcribe this text

[Assistant] Greetings, Mr. Director! Hmm, he doesn't he look quite right.


[User] Please transcribe this text

[Assistant] To stop you from going after Corneo or Shinra on your own. So he pinned it on Sam, knowing that your uncle would be okay shouldering the blame.


[User] Please transcribe this text

[Assistant] It's hard enough looking after these two with your help, but without it...


[User] Please transcribe this text

[Assistant] First time cooking in blacks. I got no immunity left. I'm stressed about it.


[User] Please transcribe this text

[Assistant] This could be my last day in the competition. So I'm focused on what is the reason I'm here for.


[User] Please transcribe this text

[Assistant] My food dream is to start a restaurant which incorporates Southeast Asian flavors and Indian food.


[User] Please transcribe this text

[Assistant] On my first elimination challenge, I have to cook snow eggs.


[User] Please transcribe this text

[Assistant] The shell around it represents the egg shell. The ice cream looks like a yolk.


[User] Please transcribe this text

[Assistant] And the meringue is the white of the actual egg. It looks so delicate.


[User] Please transcribe this text

[Assistant] Because I'm waiting for the morang to be done, so in the meanwhile, I'm- Oh good. That multitasking. That's good, isn't it? Once the morang is done, I will pipe the morang. Awesome. You enjoying this pressure test? I'm enjoying it, but at the same time, I've never done this kind of a wizard before.


[User] Please transcribe this text

[Assistant] Peter Gilmore saw my meringue and he tells me to start my meringue again. I go back to the recipe.


[User] Please transcribe this text

[Assistant] So I'm doing it one more time, I have enough.


[User] Please transcribe this text

[Assistant] 100 gram maltese syrup. I bring maltese and sugar to a boil to a golden color.


[User] Please transcribe this text

[Assistant] Once it reaches 170 degrees, put almonds in it. Quickly pour it over a silicone mat to make a spray lid. And let it cool down.


[User] Please transcribe this text

[Assistant] Break them into small pieces and bleach them into a fine dust.


[User] Please transcribe this text

[Assistant] Time has gone so quickly. Still got a few more things to do. I'm gonna motor and I'm not gonna stop. I'm just gonna keep on going. Come on, Smir. Quicker.


[User] Please transcribe this text

[Assistant] The meringue is supposed to be very nice and smooth, but my meringue is totally different.


[User] Please transcribe this text

[Assistant] You can really see the very grainy texture. I have no choice. I must use these morangs. My nerves are very high.


[User] Please transcribe this text

[Assistant] You need to lift it up, you slowly place them in the center. I don't have delicate hands. Definitely. I'll lose it now, mate.


[User] Please transcribe this text

[Assistant] They don't look at perfect as what Peter Gilmore have done. But all the elements are there. This is my first illumination.


[User] Please transcribe this text

[Assistant] Hopefully, it's not my last day in MasterChef Kitchen.


[User] Please transcribe this text

[Assistant] They'll be wondering, this guy can put such a beautiful dish.


[User] Please transcribe this text

[Assistant] They will be really amazed. You know what? I would love to have a restaurant of my own serving Indian and Southeast Asian food. And I also have another thing in mind that worked with the prison department in South Australia. I've seen two generations, three generations of families in the prison. They can't get any employment and they're coming back into the prison system.


[User] Please transcribe this text

[Assistant] That is very upsetting. If I could help them gaining employment in the food industry, that is something that I'm really looking forward to work.


[User] Please transcribe this text

[Assistant] For more educational videos, please visit www.SmartLearningForAll.com


[User] Please transcribe this text

[Assistant] Also, don't forget to subscribe to our YouTube channel.


[User] Please transcribe this text

[Assistant] I was thinking that there might be a bit of a problem with public image of doing all of these drastic changes so quickly.


[User] Please transcribe this text

[Assistant] Under normal conditions, it is difficult to dissolve excess carbon dioxide in water. Only a certain amount dissolves easily


[User] Please transcribe this text

[Assistant] After some time, most of the carbon dioxide gas escaped.


[User] Please transcribe this text

[Assistant] When the bottle is sealed, the undisturbed liquid has surface tension. In order to escape, the carbon dioxide molecules require energy to overcome the surface tension.


[User] Please transcribe this text

[Assistant] Now, when we shake the cold drink bottle before opening, the trapped carbon dioxide molecules get that required energy and they break free from the liquid's surface tension.


[User] Please transcribe this text

[Assistant] If you told me five years ago that today I'd be delivering a talk about our individual power to make a difference, I would have cringed. It was my job to study huge global systems.


[User] Please transcribe this text

[Assistant] I was a researcher at NASA using satellite data to study the big picture.


[User] Please transcribe this text

[Assistant] You can see a lot of things from space, like every ecosystem on earth being threatened from pretty much every angle.


[User] Please transcribe this text

[Assistant] And global inequality in air and water safety. These kinds of things would keep me up at night.


[User] Please transcribe this text

[Assistant] And then outside of work, I'd use this bird's eye view while thinking about our huge social structures like education and media and healthcare and it looked to me like they were all really struggling too, so.


[User] Please transcribe this text

[Assistant] I felt like the world was just trapped in this huge self-amplifying system that was just spiraling towards destruction.


[User] Please transcribe this text

[Assistant] And of course, I wanted to do something about this, and I felt so small and utterly powerless.


[User] Please transcribe this text

[Assistant] But I started to feel a little differently as my perspective shifted from the macro towards the micro. It began with bumblebees.


[User] Please transcribe this text

[Assistant] I was using satellite imagery and field research to study these amazing, cute pollinators, and to see how they were doing in the midst of their own environmental crisis in Southern California. And from the macro view, I saw


[User] Please transcribe this text

[Assistant] But on the ground, there were actually some small opportunities for optimism. These tiny patches of resources known as habitat fragments.


[User] Please transcribe this text

[Assistant] If the right kinds of plants were growing along the edges of a Costco parking lot,


[User] Please transcribe this text

[Assistant] And if in the neighborhoods nearby there were native plants in people's gardens and in the canyons that were too steep for people to put their suburbs in, there were native plants instead of grasses.


[User] Please transcribe this text

[Assistant] Then all of these in-between spaces would actually add up to create a network of habitat fragments. And this network meant that the bees could traverse through the concrete desert, feeding from and pollinating the native plants.


[User] Please transcribe this text

[Assistant] And these plants that the bees depend on and that the bees sustain are essential.


[User] Please transcribe this text

[Assistant] They stabilize our steep hillsides. They provide food and homes to thousands of amazing species of animals.


[User] Please transcribe this text

[Assistant] And critically, they're helping to curb our devastating cycle of wildfires by preventing the growth of those invasives, invasive grasses that fuel the vicious flames that we're all too familiar with.


[User] Please transcribe this text

[Assistant] It's a really vital and interconnected system, and some people could see how they were a part of it. And so they acted as habitat fragment gardeners.


[User] Please transcribe this text

[Assistant] They planted native plants in their yards, and they even were tending to the land in corporate parks and in public canyons. And in my research, I could actually see the impact that even one passionate gardener could make.


[User] Please transcribe this text

[Assistant] And then repeated across the region their habitat fragments for adding up to make a more resilient ecosystem.


[User] Please transcribe this text

[Assistant] Not a perfect system, not by a long shot, but at least a system that was less likely to totally collapse under impending pressures like further development and drought.


[User] Please transcribe this text

[Assistant] So I was looking at the world through this lens when I found myself in the waiting room of a public hospital in Brooklyn with my partner Charles. And we were sitting across from a group of teenagers who were slumped in their chairs and bored out of their minds and just refreshing their phones over and over again.


[User] Please transcribe this text

[Assistant] And in a neighborhood with some of the lowest high school graduation rates in the city,


[User] Please transcribe this text

[Assistant] So we did some research to see what kinds of resources could we add to spaces like this one that would make an impact. And we settled on museums.


[User] Please transcribe this text

[Assistant] Museums are the most trusted source of public information, more than the media and more than the government, but they also cluster in wealthier neighborhoods.


[User] Please transcribe this text

[Assistant] Even though these two burrows have almost the same size population.


[User] Please transcribe this text

[Assistant] And then, expensive tickets mean that a lot of people can't go to museums even if they live nearby, and these little injustices, they just go on and on and they add up to create sweeping inequalities in knowledge and empowerment.


[User] Please transcribe this text

[Assistant] Across the US, almost 90 percent of visitors to art museums are white.


[User] Please transcribe this text

[Assistant] And even at the Smithsonian's network of free museums, almost half of their adult visitors have graduate degrees, which like 10 percent of the broader population has. So it became clear to us that even though museums are these amazing


[User] Please transcribe this text

[Assistant] Educational and social resources, they're not reaching everyone. And a lot of museums are aware of this and they're trying to change it, but there's all these structural hurdles that are slowing them down. So we set out to create a distributed network of museum habitat fragments.


[User] Please transcribe this text

[Assistant] Working from a donated shipping container with the volunteer help of our friends and dozens of very generous scientists from all across the globe, we built our first prototype, the Smallest Mollusk Museum.


[User] Please transcribe this text

[Assistant] Mollusks are these tentacled, slimy shapeshifters like oysters and octopuses and the giant squid, and if you've ever seen an alien in a movie, then I'll bet you it was inspired by a mollusk.


[User] Please transcribe this text

[Assistant] Their slimy, sci-fi vibes make them really fun tour guides for a biology museum, and they can teach us about the systems that we all share with a wake-up call.


[User] Please transcribe this text

[Assistant] Of all the animal extinctions documented since the 1500s, more than 40 percent have been our friends the mollusks.


[User] Please transcribe this text

[Assistant] So we tested this museum across the city to see if it resonated with all kinds of visitors. And it did. People really liked learning from it.


[User] Please transcribe this text

[Assistant] So we built a fleet of tiny science museums, each one small enough to fit into pre-existing locations, with information dense enough that they could still pack a punch, and they're modular, so they can be distributed at a scale that can reach everyone.


[User] Please transcribe this text

[Assistant] And then we partnered with libraries and community centers and transit hubs and the public hospitals so that we could transform their in-between spaces into habitat fragments for social learning.


[User] Please transcribe this text

[Assistant] And fittingly, we named our fleet of museums Micro.


[User] Please transcribe this text

[Assistant] Even though each habitat fragment is small, it provides the essentials. It draws people in so that they can explore and learn together in a social way, and then distributed across the landscape, we're able to invite people everywhere into conversations around science.


[User] Please transcribe this text

[Assistant] When we partnered with a public hospital in the South Bronx, we became the Bronx's first and only science museum.


[User] Please transcribe this text

[Assistant] And the museum became so popular that we started hiring local students to be museum docents so they could lead tours and activities for all the talented kids. And


[User] Please transcribe this text

[Assistant] Every spark of curiosity that we're able to fuel and each new fact learned and every new friend made at the museum and every kid who can have a meaningful and important after-school job, it all contributes to a stronger system.


[User] Please transcribe this text

[Assistant] So today, I try to keep the micro view in mind. I'm always examining how small actions can add up to create shifts at the macro scale of systems. And honestly, I'm seeing a lot of really good things.


[User] Please transcribe this text

[Assistant] There are habitat fragments everywhere, nurtured by talented, passionate, strategic individuals and groups of all sizes who are building towards systems with more equal access to food and employment, health care, housing, political empowerment, education and healthy environments.


[User] Please transcribe this text

[Assistant] One by one, together, we're filling gaps, strengthening the systems that we're all a part of.


[User] Please transcribe this text

[Assistant] We have to work on the big institutions too, of course. It's just that they're so slow, and we're living in the midst of rapid change. It's a defining feature of our time.


[User] Please transcribe this text

[Assistant] So maybe in some cases, our small actions can be band-aids until the big guys catch up. But without us, what are they going to be catching up to? Am I still scared about the world? Yes.


[User] Please transcribe this text

[Assistant] That's why I'm talking to you. The world needs so many more habitat fragments.


[User] Please transcribe this text

[Assistant] So if you've been feeling overwhelmed or powerless lately, then I am asking you to please try this very small strategy on for size, and let's see how it goes.


[User] Please transcribe this text

[Assistant] Step one, zoom in. It's not one huge system that's just barreling unstoppably towards destruction. What we have are many overlapping systems, and the ways that they interact determine everything.


[User] Please transcribe this text

[Assistant] Step two, look for the resource gaps, because that's where you can make the biggest difference.


[User] Please transcribe this text

[Assistant] And do some research to understand how your ideas are going to interact with the systems that are already on the ground.


[User] Please transcribe this text

[Assistant] Step three, find the other habitat fragments. Find out how they can support you and how you can support them, because we're building a network together. And step four, transform your fragment.


[User] Please transcribe this text

[Assistant] Today takes place over two rounds. In round one, you'll face off against each other.


[User] Please transcribe this text

[Assistant] Come out victorious, you go into round two, we'll cook against the professional chef.


[User] Please transcribe this text

[Assistant] And a spot in finals week is yours. So what does round one hold for you?


[User] Please transcribe this text

[Assistant] Over the years the garden has been the key to the success of so many great master chef dishes. And today it will determine your success in round one. Because other than a handful of staples, you can only use what is in this garden.


[User] Please transcribe this text

[Assistant] Is it a full dish? That's a complete dish though. I just think, you know, when you come to eat it...


[User] Please transcribe this text

[Assistant] That's a complete dish though. Just a bit of bread, because there's going to be a lot of...


[User] Please transcribe this text

[Assistant] Garnt, congratulations, but you are still one cook away from what you really want. What you really need. That guaranteed place in finals week. Yep.


[User] Please transcribe this text

[Assistant] Behind us are two pantries. One is sweet and the other is savoury. You can choose whichever pantry you want. But you know what? Be careful what you wish for.


[User] Please transcribe this text

[Assistant] Because your choice isn't just between sweet ingredients and savory ingredients.


[User] Please transcribe this text

[Assistant] They're two cooks that know this kitchen just as well as you do. Randall? Randall? Randall? Please welcome


[User] Please transcribe this text

[Assistant] Matt Reynolds, fantastic to have you back in the kitchen. So many amazing memories of the food that you put up in this kitchen that provided, I think, an amazing backbone and foundation to where you are now.


[User] Please transcribe this text

[Assistant] You've gone so far since you walked out of those doors and we couldn't be prouder of both of you.


[User] Please transcribe this text

[Assistant] A restaurant that was notoriously hard to make work, a really tough space, and you've turned it into this absolute delicious monster in Sunshine Beach. Just coming up to your first anniversary.


[User] Please transcribe this text

[Assistant] Amazing, isn't it? Absolutely amazing. Khan, you got skills, you're gonna need them.


[User] Please transcribe this text

[Assistant] What a fantastic day. I mean, I think you can feel the energy and the joy in the house having both Reynolds and Matt back here and I personally think Khan did exactly the right thing in picking Matt. What do you reckon, George?


[User] Please transcribe this text

[Assistant] Yeah, I agree. I think what's on the plate is great. There's a little bit of black vinegar in the sauce which balances out and kind of works with the richness of the fish. The mushrooms are lovely and kind of juicy, slightly slippery. The radish is an occasional bit of texture rather than the flavour, which I think is a really wise call. It's a strong dish.


[User] Please transcribe this text

[Assistant] That sauce is spectacular, because I agree, it's spicy, but it's sour, and it's a bittersweet, and it's just that lovely kind of, there's waves of flavours that come through, like a great Thai sauce does.


[User] Please transcribe this text

[Assistant] Can't we love that complex mushroom broth? 8 out of 10.


[User] Please transcribe this text

[Assistant] So Kalm, that means you have a score of 24 out of 30. Matt.


[User] Please transcribe this text

[Assistant] I think what we're so excited is when we see someone like you that's come that far and we look at Khan and we think, Khan, you can go there too. It's so exciting for us. So Maddy, thank you so much for coming in.


[User] Please transcribe this text

[Assistant] Ronald, doesn't matter where we go, whether it's Sydney, Chippendale, or whether it's maybe down here in Melbourne, we love what you and your brothers are doing now. It's inspirational to so many of our contestants, both past and present. Thank you so much for coming down. Thanks guys, appreciate it. Can't wait to see you guys soon.


[User] Please transcribe this text

[Assistant] Let's give Matt and Reynolds massive round of applause for giving out their time. Back to the kitchens, boys.


[User] Please transcribe this text

[Assistant] Yeaah, yeaah, I know. This is one of my favorite tricks.


[User] Please transcribe this text

[Assistant] Now, I bet you that the television will not switch on instantly after you clap.


[User] Please transcribe this text

[Assistant] Do you know why the sound took more time to reach the television?


[User] Please transcribe this text

[Assistant] During summer season, the temperature of air increases.


[User] Please transcribe this text

[Assistant] Hence, they vibrate faster, leading to increase in speed of sound.


[User] Please transcribe this text

[Assistant] With the decrease in temperature, the kinetic energy of the molecules also decreases.


[User] Please transcribe this text

[Assistant] As a result, the speed of sound decreases during winter season.


[User] Please transcribe this text

[Assistant] Can you drown in the Dead Sea? Your answer must be yes, right?


[User] Please transcribe this text

[Assistant] When an object is partly or wholly immersed in a fluid, an upward force is exerted by the fluid on that object.


[User] Please transcribe this text

[Assistant] This tendency of the fluid to exert an upward force on the object is called buoyancy or up thrust. This upward force is called buoyant force. So, do you finally get it?


[User] Please transcribe this text

[Assistant] So, if we can float on the Dead Sea, we are definitely not going to drown in it.


[User] Please transcribe this text

[Assistant] Urine consists of water, urea, uric acid and ions like calcium, sodium, oxalate and potassium.


[User] Please transcribe this text

[Assistant] So can I use it to build my house? Oh, just listen. Generally, the kidney stones are small.


[User] Please transcribe this text

[Assistant] Not at all. Ears basically help to hear. Besides this, big ears of an elephant also help it to regulate its body temperature. But how can ears help to regulate body temperature?


[User] Please transcribe this text

[Assistant] Due to metabolic activities or hot climate, sometimes heat in the blood can increase. Thus increasing the body temperature of the elephant.


[User] Please transcribe this text

[Assistant] Now, an elephant's big ears are filled with blood vessels which are very close to the surface of the skin. Hence, when blood having more amount of heat flows through the ears of the elephant, the heat from the blood escapes into the atmosphere, cooling the blood and in turn cooling the elephant.


[User] Please transcribe this text

[Assistant] Shall I call the fire brigade? Oh, just listen. Capsaicin present in spicy food is not necessarily bad for everybody. Only those people who have a low tolerance level or don't have a habit of eating spicy food can experience some problems like burning mouth, irritation of the stomach lining, heartburn, etc.


[User] Please transcribe this text

[Assistant] Let's play with a puzzle, a mystery, where we have an addition and a subtraction.


[User] Please transcribe this text

[Assistant] In this addition and subtraction, every A is the same digit. Every B is the same digit.


[User] Please transcribe this text

[Assistant] Every C is the same digit, and the D is its own digit.


[User] Please transcribe this text

[Assistant] It's its own digit because they're all different digits. And the question is, what are the digits? One way to do this is to try all the different ways of putting numbers inside here.


[User] Please transcribe this text

[Assistant] That will take you far too long because there are too many possibilities.


[User] Please transcribe this text

[Assistant] Whenever you look at a problem like this, you try to find some nice patterns or relationships between the digits.


[User] Please transcribe this text

[Assistant] For example, let's talk about some that you can see. If I look at this first one, for example,


[User] Please transcribe this text

[Assistant] So, it looks like the relationship between this A and this C is times 2.


[User] Please transcribe this text

[Assistant] I should say that's almost correct. You always have to be careful of things like carrying. Because, for example, if you had c plus c to be more than 10, that would add something here. So I'll write this approximately times 2. This is usually how I look at these problems.


[User] Please transcribe this text

[Assistant] So when I'm looking at these problems, I say I know that a and c are related by about a times 2.


[User] Please transcribe this text

[Assistant] Okay, actually with that alone, you can already get quite far on the problem.


[User] Please transcribe this text

[Assistant] If what you did is you said, let's just try the possibilities. If A is 1 and C is 2,


[User] Please transcribe this text

[Assistant] 12, 12, 2, and you can keep going. I'll tell you that will get stuck.


[User] Please transcribe this text

[Assistant] Instead what I want to say is that the secret to doing these kinds of questions


[User] Please transcribe this text

[Assistant] Is to keep looking and try to find all the information I can find about it.


[User] Please transcribe this text

[Assistant] It is like a mystery where you're finding clues and making deductions. Speaking of deductions, here is the minus. The end of the minus is a minus.


[User] Please transcribe this text

[Assistant] We always are afraid of carrying and borrowing, except that in the very last place, there


[User] Please transcribe this text

[Assistant] There's not actually going to be as big of a worry of something else having borrowed or carried it. Nothing will have borrowed or carried the A. So here I have some digits where A minus B is A.


[User] Please transcribe this text

[Assistant] And actually the only time this ever happens is if b is zero.


[User] Please transcribe this text

[Assistant] Because I have something minus something is the same digit. Even if you borrow from the next one, you will still not be able to get this. Unless B is zero.


[User] Please transcribe this text

[Assistant] Now can I see anything else? You see the theory here is if I can work from the parts that aren't interfered with from borrowing.


[User] Please transcribe this text

[Assistant] Then I can go farther, because I can immediately see that c plus c is supposed to be zero. Well, one thing that could be is what if c is zero?


[User] Please transcribe this text

[Assistant] That would get a bit messy because first of all, you'd have a zero here. But second of all, I'm guaranteed that they are different digits.


[User] Please transcribe this text

[Assistant] So what that means is that the c here, c plus c equals zero, that c has to be 5.


[User] Please transcribe this text

[Assistant] Now I suddenly have a lot of information about my problem. All the C's are 5's.


[User] Please transcribe this text

[Assistant] When I look at this, I'm very interested in finishing off the left, because there's only one letter left.


[User] Please transcribe this text

[Assistant] Actually, these are the same thing. It should be 25 plus 25 is 50. Which also makes sense. I said this is about times 2. So that means that A is a 2.


[User] Please transcribe this text

[Assistant] If A is 2, now I can finish almost the entire problem. This is a 2.


[User] Please transcribe this text

[Assistant] And so the only thing I have left to check is what happens to the D.


[User] Please transcribe this text

[Assistant] The final thing I always recommend whenever you do a question like this is to go back again and just make sure that everything is satisfied. Are A, B, C and D different digits? 0, 2, 3, 5? Yes, they are.


[User] Please transcribe this text

[Assistant] What are all the digits? The next thing I want to check is, do the additions and subtractions work? 25 plus 25, it's 50. 52 minus 20 is 32. And so we're done!


[User] Please transcribe this text

[Assistant] This is a question where if you do it the wrong way by trying a lot of things, it can take you a very long time.


[User] Please transcribe this text

[Assistant] Whereas on the other hand, the first thing you do is you look at it like a mystery and look for clues, especially working from the right hand side and back.


[User] Please transcribe this text

[Assistant] You might be able to deduce from one to another until there's actually no guessing at all in solving this mystery.


[User] Please transcribe this text

[Assistant] Good morning and welcome to Iceberg's dining room and bar at the beautiful Bondi. It does get much better than that, doesn't it?


[User] Please transcribe this text

[Assistant] And welcome Monty Kaludaric, he is the executive chef here at Icebergs.


[User] Please transcribe this text

[Assistant] To prep and cook your course for 30 diners. It's a staggered start. So Sashi, you'll be going first. Yes.


[User] Please transcribe this text

[Assistant] That means Ben, 30 minutes later, you'll be second cab off the rank. Jess, 30 minutes after Ben, and Khan, 30 minutes after Jess. Now, if you cook the best dish today, you are straight through to the semi-finals.


[User] Please transcribe this text

[Assistant] Monty, I hope you're ready for this. We're glad you're in the kitchen. Sashi, are you ready? Yes. Your time starts now.


[User] Please transcribe this text

[Assistant] Right, Ben, you're up. Fish boy. See you guys. Time to hit the kitchen, hit the pans, yeah?


[User] Please transcribe this text

[Assistant] She's doing the main course, doing the meat, and cooking for 30 years. Probably the most outside of her comfort zone she's been.


[User] Please transcribe this text

[Assistant] I love the colors number one, uhm, but I love the presentation, just the confidence of having really


[User] Please transcribe this text

[Assistant] You know, what's that? One, two, three, four things on the plate, but so simply done, it's lovely.


[User] Please transcribe this text

[Assistant] This is Jessie, she decided to do beef celeriac puree, salsa verde and little blistered cherry tomatoes.


[User] Please transcribe this text

[Assistant] Wow. I don't know about beautiful Bondi. It's now dark and it's a wet and windy Bondi. And it was a great service and there was a great feeling in the room. But none of you are interested in that, are you?


[User] Please transcribe this text

[Assistant] Ben, you're on fish obviously. Jess, you're doing meat. She's happy about that, look at that. Khan, you're doing something sweet. Get your whites on, come and get them.


[User] Please transcribe this text

[Assistant] 15 minutes before service starts. That's you, Sashi.


[User] Please transcribe this text

[Assistant] The three of you need to be ready, yea. You need to fight for your place in that semi-final.


[User] Please transcribe this text

[Assistant] Welcome back. I want to make sure that you do something that I suggested you do at the first class when we were remote, but now that we're together I can emphasize it. And that is one of the best ways of learning.


[User] Please transcribe this text

[Assistant] is to talk to people who disagree with you.


[User] Please transcribe this text

[Assistant] And I know that since we were at Berkeley, it may be a little bit hard to find people who disagree with you. Uh, but please do. Seek them out. And when you do, uh, just listen.


[User] Please transcribe this text

[Assistant] And keep your minds and ears and sometimes your hearts open.


[User] Please transcribe this text

[Assistant] Because that's where you have to re-examine your beliefs. And you have to make sure that somebody else doesn't have somebody, something to contribute that might even convince you that you were wrong. In other words, an openness.


[User] Please transcribe this text

[Assistant] To alternative views is extremely important in terms of your education.


[User] Please transcribe this text

[Assistant] We did a lot of complicated things and it was hard for


[User] Please transcribe this text

[Assistant] Me. And if it's hard for me, it's obviously going to be hard for you. Uh, if we prevented all the hidden upward predistributions, maybe we would worry less about redistribution. Now I didn't say that directly to you last week, but that was one of the underlying themes.


[User] Please transcribe this text

[Assistant] Because remember two weeks ago we talked about market and government being inextricably related to one another?


[User] Please transcribe this text

[Assistant] Well, if you understood and followed the logic, there are a lot of predistributions that occur inside the market that are political, because the market's rules are determined by people, by public officials.


[User] Please transcribe this text

[Assistant] And the question that we examined a few weeks ago is, you know, who had the most influence over those public officials? Well, you get a lot of predistribution. If we didn't have to worry about the results of the predistribution, if we prevented all the hidden, upward predistributions, and we looked at a lot of those, then maybe we wouldn't have to worry quite as much about redistribution.


[User] Please transcribe this text

[Assistant] Both taxing and spending can be regressive or progressive, and you should know the meaning of those two terms and understand what I mean by spending


[User] Please transcribe this text

[Assistant] Could be progressive or regressive. Uh, and then, uh, note the difference between marginal and effective tax rates. We went through a lot of this last week. We don't have to repeat it right now.


[User] Please transcribe this text

[Assistant] And then consider all taxes. When you're talking about the regressivity or the progressivity of a tax system, make sure you look at every tax, not just the income tax, because there are a lot of other taxes, like the payroll tax, that are extremely important and are growing in importance.


[User] Please transcribe this text

[Assistant] Oh, and tax expenditures. We didn't really have a chance to get into tax expenditures. My favorite topic apart from the step-up basis at death rule. You remember that? I expect you to just get...


[User] Please transcribe this text

[Assistant] Maybe that would all change, and there is a possibility, huge possibility for change. Uh, remember we ended with this comparison, Berkeley and Stanford.


[User] Please transcribe this text

[Assistant] And I didn't really have a chance to get into it with you because we, the hour ended.


[User] Please transcribe this text

[Assistant] But the reason we were talking about that, and it may have been kind of out of, you may have said, what? This is random. Why are we talking about Berkeley and Stanford? Because we were talking about tax expenditures. And one tax expenditure is the charitable deduction. What is the charitable deduction? You can deduct from your income taxes,


[User] Please transcribe this text

[Assistant] Is Berkeley or Stanford a charity? Yes. There's a lot of indirect government help that goes to both of these places.


[User] Please transcribe this text

[Assistant] Berkeley has $350 million a year in direct subsidy from the state of California. Well, that's obvious because it's a public university. And that's what public universities get, is state subsidies. Uh, there are 31,000 undergraduates. We know that.


[User] Please transcribe this text

[Assistant] So the direct subsidy per undergraduate is about $11,290 and about 30% of our students here


[User] Please transcribe this text

[Assistant] 500 million dollars a year more than Berkeley in philanthropy. Charitable donations. Those charitable donations are a deductible


[User] Please transcribe this text

[Assistant] I was saying to Stanford, here is 200 million dollars more per year than Berkeley is getting.


[User] Please transcribe this text

[Assistant] There's 7,100 undergraduates, so the tax subsidy...


[User] Please transcribe this text

[Assistant] The charitable deduction tax subsidy is $28,000 more per undergraduate at Stanford.


[User] Please transcribe this text

[Assistant] Uh, so, and there's a, there are only 15% of, uh, the undergraduates are Pell Grant eligible. I just thought you might like this comparison. I mean, we're talking about inequality, and this is an example, everyday example of a big, big government subsidy going to a place that is not providing nearly the help or education to poor families. Just one example, just one example.


[User] Please transcribe this text

[Assistant] So today's outline, oh, you know, the other thing about this course that you already recognize, but I thought I'd just make it explicit.


[User] Please transcribe this text

[Assistant] Is that we are dealing with issues that are all around us every day. This is of course in not only what's happening,


[User] Please transcribe this text

[Assistant] But also understanding the context of what's happening. So we're going to be talking today about, guess what, inflation.


[User] Please transcribe this text

[Assistant] And those of you who looked at the consumer price index number that came out yesterday


[User] Please transcribe this text

[Assistant] Know that inflation is running about 7.9% on an annualized basis, which means that your dollars are


[User] Please transcribe this text

[Assistant] In terms of purchasing power, are shrinking. Everything is becoming more expensive. At a rate of 7.9% a year.


[User] Please transcribe this text

[Assistant] The typical American family is spending 63% of their budget on those three. And they're going up.


[User] Please transcribe this text

[Assistant] Faster than incomes are going up. Which means people are getting poorer.


[User] Please transcribe this text

[Assistant] We're gonna be talking about that. We're also going to be, uh, next week the Federal Reserve Board is meeting to decide whether to raise interest rates.


[User] Please transcribe this text

[Assistant] What does that mean? It means a lot. We're going to be talking about that today as well. Putting it all into context.


[User] Please transcribe this text

[Assistant] Inflation and recession. We're going to look at the business cycle, then we're going to be looking at fiscal policy.


[User] Please transcribe this text

[Assistant] You don't have to know what this is yet. In fact, if you already know everything about it, well, you think you do, you don't.


[User] Please transcribe this text

[Assistant] Then we're going to be looking at monetary policy, and then we're going to be looking at why tight labor markets are good for people at the bottom. You don't even know yet exactly what a tight labor market is, I hope.


[User] Please transcribe this text

[Assistant] And then we're gonna look at the big switcheroo, which you certainly don't know what that I'm talking about.


[User] Please transcribe this text

[Assistant] Your grasp of macroeconomics is A, quite good, B, fair, C, poor, D, awful. What is macroeconomics? Go.


[User] Please transcribe this text

[Assistant] And let's see if we can get you, it's not, this is not a complicated analytic question.


[User] Please transcribe this text

[Assistant] I mean, you just, this is, this, there's no right answer. Again, nobody's gonna know. This is, this is confidential. Only the CIA has any record of what you have decided today. Okay, let's see what you think.


[User] Please transcribe this text

[Assistant] Alright, uh, so most of you have taken, you've taken a course, uh, you've been exposed to it, you have not taken a course, uh, and uh, about 24% of you poor, you would say, but about 28% of you, you've taken a course in it, and you think you understand it, but let me just say, even to those 28%,


[User] Please transcribe this text

[Assistant] We're going to approach macroeconomics from an angle, from a lens that we don't approach it from.


[User] Please transcribe this text

[Assistant] Here in Berkeley in macroeconomics classes. We're going to be looking at the distributional consequences of macroeconomics. Very important.


[User] Please transcribe this text

[Assistant] And every time today, just like the tax discussion we had last week, every time you start feeling, well this is pretty abstract, I want you to remind yourself, even if I don't remind you, we're talking about consequences for real people. Family. Real world. Tangible.


[User] Please transcribe this text

[Assistant] Consequences in terms of their lives and what they can afford.


[User] Please transcribe this text

[Assistant] What I want to start with is inflation and recession. And we call it the business cycle.


[User] Please transcribe this text

[Assistant] We call it the business cycle because basically there is a cycle of


[User] Please transcribe this text

[Assistant] The economy doing wonderfully well and then doing a little bit too well and going into inflation and then falling into recession.


[User] Please transcribe this text

[Assistant] The business cycle is not just an automatic thing. We have just been through a pandemic business cycle.


[User] Please transcribe this text

[Assistant] By a pandemic business cycle, I mean


[User] Please transcribe this text

[Assistant] We're still applicable, and are still applicable, but the major variable had to do with a pandemic. And I'll get to that. I'll explain this. Just bear this in mind.


[User] Please transcribe this text

[Assistant] So here is the business cycle there over here on the left is the


[User] Please transcribe this text

[Assistant] No, we're not going to talk about that right yet. What's the main reason normally?


[User] Please transcribe this text

[Assistant] For the ups and downs. Businesses become too optimistic during upturns and create too much capacity and then have to reverse course. Or B, consumers spend too much during upturns until they're so deep in debt, they have to reverse course. Or is it C, government spends too much in good times and then must pull away, pull way back as budget deficits mount. Or D, oh, here's the pandemic. Pandemics come along and disrupt the economy.


[User] Please transcribe this text

[Assistant] What's the major, usual reason for the business cycle? Go. Uh, it's a little bit of A. It's a little bit of B. It's a little bit of C.


[User] Please transcribe this text

[Assistant] And now it's D. In other words, this is a trick question. It's sort of all of these


[User] Please transcribe this text

[Assistant] But let me explain why it's all of these. So the way you envision this,


[User] Please transcribe this text

[Assistant] As you have the productive capacity of a nation.


[User] Please transcribe this text

[Assistant] How much can a nation produce? How much can the United States produce?


[User] Please transcribe this text

[Assistant] And it's people, how much can they produce, how productive are they, offices, factories, laboratories, infrastructure, technology, equipment, all of the things that are productive, that is the productive capacity of a nation at any individual time.


[User] Please transcribe this text

[Assistant] Demand for goods and services including public goods such as we might say education or the environment.


[User] Please transcribe this text

[Assistant] And that is symbolized by our little hand here. Consumers, government, exports and business. These are all demand. This is demand on the capacity of the economy to produce.


[User] Please transcribe this text

[Assistant] And then you have when more demand than capacity, prices rise. Now this should be intuitively obvious to you.


[User] Please transcribe this text

[Assistant] Because if you've got just a certain number of things, and you and your, let's just take the example of you and your friends all want, and they're scarce, you might bid up the price. No, I want that, I want that. And I'm, but you see, when you have a scarcity, prices go up because prices are bid up.


[User] Please transcribe this text

[Assistant] So consumers, government, exports, and business all are bidding up the price of the productive capacity.


[User] Please transcribe this text

[Assistant] Now when you have less demand than capacity, that is more


[User] Please transcribe this text

[Assistant] Supply than demand, you get the opposite effect.


[User] Please transcribe this text

[Assistant] You get basically not only prices maybe stop growing, but also people stop having jobs. There's a lot of excess capacity.


[User] Please transcribe this text

[Assistant] There's a lot of office space that goes unused, underutilized, or space in factories. Things start closing.


[User] Please transcribe this text

[Assistant] Retail businesses. Now, why this is interesting now is that the pandemic that we all went through, and are still to some extent going through, that pandemic started, you remember, it seems like ancient history,


[User] Please transcribe this text

[Assistant] In February of 2020, and what happened? The economy went into a recession. Because demand suddenly dropped.


[User] Please transcribe this text

[Assistant] You still had a lot of supply, I mean you still had factories, you still had retail establishments, you still had hotels and businesses and restaurants, but nobody wanted to buy, nobody wanted to go, everybody got very scared. When people get scared, they stop buying, and so you had a recession.


[User] Please transcribe this text

[Assistant] Demand dropped, but all that capacity was still there. What does that mean? A lot of people lost their job.


[User] Please transcribe this text

[Assistant] A lot of retail businesses went out of business. A lot of restaurants and hotels had to close. A lot of factories went idle. That was a recession.


[User] Please transcribe this text

[Assistant] Demand dropped, but the supply was still there. Initially, the supply is still there.


[User] Please transcribe this text

[Assistant] But then what happened two years later? Well, two years later, the opposite happened.


[User] Please transcribe this text

[Assistant] You've got demand coming back because there's a lot of pent up demand. People have not bought a lot of stuff they would like to buy. In fact,


[User] Please transcribe this text

[Assistant] They still can't feel comfortable necessarily going into movies or taking a lot of plane trips, but they have a little bit of money they've saved up, they haven't spent very much, and so there's a lot of demand, but you don't yet have the supply cranked up because the supply shrank.


[User] Please transcribe this text

[Assistant] And so what happens when you've got a lot of demand and you have inadequate supply to meet that demand? Inflation. Hello? This is not rocket science.


[User] Please transcribe this text

[Assistant] The inflation we are now seeing is to some extent the other side of the same coin of the recession we went into in 2020. Now, why does this intersect with this class?


[User] Please transcribe this text

[Assistant] The first people to lose their jobs


[User] Please transcribe this text

[Assistant] Those people who are thought of by employers as being fairly fungible, they are out of work first.


[User] Please transcribe this text

[Assistant] And now you would think that they would be the first ones to be rehired. No, they are among the last to be rehired. First fired, last rehired, but they also are casualties of some government policies that we will examine today.


[User] Please transcribe this text

[Assistant] Recessions cause unemployment especially among the bottom half. And here we can see, starting in 1950,


[User] Please transcribe this text

[Assistant] Starting in 1950, extending to 2020, you can see here, these vertical lines are recession. And you can see with every recession, what happens, you've got people losing their jobs. Here in 2020, look what happened. Boom.


[User] Please transcribe this text

[Assistant] And the unemployment by race, because there are a disproportionate number of people of color who are in the bottom half or the bottom two thirds, you can see that unemployment takes a big toll


[User] Please transcribe this text

[Assistant] Business cycle in terms of recessions on black and Hispanic people.


[User] Please transcribe this text

[Assistant] It takes a toll on everybody, but disproportionately on Black and Hispanic people.


[User] Please transcribe this text

[Assistant] In February to May 2020, we saw this in a big way.


[User] Please transcribe this text

[Assistant] Because you can see that between February and May 2020, we all lived through it. White men, certainly, their unemployment


[User] Please transcribe this text

[Assistant] Increased dramatically, but look what happened to white women. Well, their unemployment level increased even more dramatically. If you're a black man or a black woman or Hispanic man or Hispanic woman, you're


[User] Please transcribe this text

[Assistant] Jobs, you lost your job, the chance that you lost your job, much greater. Is this because of systemic racism?


[User] Please transcribe this text

[Assistant] Well, maybe a piece of it, but it depends on how you define systemic racism. A lot of it is just because, or I shouldn't say just because, a lot of it is because a disproportionate number of people who are poor are black and Hispanic. And that itself is probably the result of


[User] Please transcribe this text

[Assistant] systemic racism. We will be talking about that, by the way, next week.


[User] Please transcribe this text

[Assistant] Which gets us to fiscal policy. Fiscal policy. You hear that word all the time. Fiscal policy. When I was in the Clinton administration, uh, we


[User] Please transcribe this text

[Assistant] We got there. Bill Clinton wanted to do a lot of investing. He wanted to do a lot of investing in education and basic research and I had written a book called The Work of Nations and he actually


[User] Please transcribe this text

[Assistant] He had read it, I mean I was, well he's an old friend, and I pushed it into his hands, so he had no choice. But when he got to be president, uh, he, uh, he invited, he asked me to be head of his


[User] Please transcribe this text

[Assistant] Economic transition team. I didn't know what an economic transition team was.


[User] Please transcribe this text

[Assistant] I was teaching at the time. In fact, I didn't even know, I was, I, I knew that he was running for president, obviously, and I knew that he was elected, uh, but I was teaching the day when he, you know, the day after the election, and I was, I was, I was in the middle of, of, of a very intense discussion with students, and somebody came into the classroom


[User] Please transcribe this text

[Assistant] And I said, I'm sorry, I am teaching. And the person said, well, the president is on the phone. And I said, well, I'm teaching.


[User] Please transcribe this text

[Assistant] And the person said, well, it's the President-elect. Oh, I said, well, that's a big difference.


[User] Please transcribe this text

[Assistant] I went, uh, and I said, excuse me, and I went, uhm, and said, I said, Bill, because I knew him as Bill. And, uh, I said, Bill, you were just elected president. And he said, yeaah.


[User] Please transcribe this text

[Assistant] Why did I feel dumb? Well, you know, I didn't know, you know, you don't know what to say at times like that.


[User] Please transcribe this text

[Assistant] Uh, and he said, Bob, you have to imagine a southern, you know, Arkansas accent. Bob, I want you to come down and run my economic transition team. And I said, but, but Bill, I'm, I'm, I'm teaching. He said, Bob, I really need you.


[User] Please transcribe this text

[Assistant] I went back to the class and I said, I know we're in the middle of the semester and I said this to another class I was teaching as well. I said, really, I apologize. I, you know, the president, the new president, the president-elect just asked me to come down to Arkansas to run his economic transition team and then people started asking me, well, what is an economic transition team? And I said, I have no idea. But I, everybody, you know, I got


[User] Please transcribe this text

[Assistant] Quote-unquote permission from the students and Dean, and everyone was very excited, and I went down to Arkansas. Little Rock.


[User] Please transcribe this text

[Assistant] And I went to the governor's mansion and I said, uh, I'm here. And he said, well, can you kind of figure out what I should do about the economy?


[User] Please transcribe this text

[Assistant] And so I kind of rounded up the people who had been his economic advisors, besides me, during the campaign.


[User] Please transcribe this text

[Assistant] And, uh, we had a meeting on the phone, we didn't have Zoom, but we had a phone meeting, I said, well, let's, he would like to know what we have to do.


[User] Please transcribe this text

[Assistant] You know, he's gonna be president, uh, actually take the reign. He's going into the Oval Office. He will be inaugurated.


[User] Please transcribe this text

[Assistant] Uh, in January, so we, and he's gonna have an economic policy.


[User] Please transcribe this text

[Assistant] And then I divided the team up into different groups. One group would be fiscal policy, another group would be monetary policy, another group would be investment, public investments. I tried to, I tried to give very, parcel out the work.


[User] Please transcribe this text

[Assistant] George H.W. Bush's administration had hidden


[User] Please transcribe this text

[Assistant] From us, and from the public, obviously, a lot of data.


[User] Please transcribe this text

[Assistant] That we had to track down. Fiscal policy. Fiscal policy. What is, what do I mean? The basic idea, in recessionary periods with high unemployment, that is too little demand to absorb capacity, you need expansive fiscal policy. That is, you need to increase spending and lower taxes. That's the idea of fiscal policy as a balance wheel.


[User] Please transcribe this text

[Assistant] And similarly, when inflation looms, that's too much demand for capacity, you need a constrictive fiscal policy. You've got to cut spending and increase taxes. At least that's what the theory would tell us.


[User] Please transcribe this text

[Assistant] By the way, who sets fiscal policy? Is it A, the Federal Reserve, B, the Congressional Budget Office, C,


[User] Please transcribe this text

[Assistant] Congress and the President, or D, the Office of Management and the Budget.


[User] Please transcribe this text

[Assistant] You can make a decision. You can just decide in your head. You can use this as a guide. Uh, and, well, who sets fiscal policy? Well, basically, it is...


[User] Please transcribe this text

[Assistant] Congress and the President. Because Congress and the President decide on spending. And fiscal policy is about spending. Government spending.


[User] Please transcribe this text

[Assistant] John Maynard Keynes, not an American, he was from England, and he understood something, that when there was inadequate demand, as there was during the Great Depression, then government had to step in to be the buyer of last resort.


[User] Please transcribe this text

[Assistant] In order to just get people back to work, in order to put money in people's pockets so they can turn around and buy stuff. Now this sounds obvious, but it was not obvious at the time.


[User] Please transcribe this text

[Assistant] And John Maynard Keynes, so the story goes, met with Franklin D. Roosevelt in Washington in the Oval Office, and it was a very cordial meeting. Uh, but Keynes sort of


[User] Please transcribe this text

[Assistant] I never heard him, but he kind of mumbled, apparently.


[User] Please transcribe this text

[Assistant] And you know, if you're English, I don't mean this in a derogatory way.


[User] Please transcribe this text

[Assistant] Uh, but if you're English and you mumble, you'd rather just whatever, well, you'd just be supplied with, you know, and Franklin D. Roosevelt,


[User] Please transcribe this text

[Assistant] The president understood anything I said. And FDR said to his aide, I didn't understand anything he said. So, Keynes did not necessarily influence


[User] Please transcribe this text

[Assistant] Franklin D. Roosevelt or even his economic advisors. What really got us out of the Great Depression was World War II.


[User] Please transcribe this text

[Assistant] Because World War II demanded spending by the government on such a huge scale.


[User] Please transcribe this text

[Assistant] That everybody, almost everybody who could work was put to work. And that meant that they got money. There was money in their pockets. Government went deep into debt, but it didn't matter. John Maynard Keynes said, you know, it's more important to get the economy going and getting money into people's pockets than worrying about debt.


[User] Please transcribe this text

[Assistant] Which of these is the most true of expansive? That's what we're now talking about. Expansive fiscal policy. A. It increases the public debt and risks inflation. A. That's A. B.


[User] Please transcribe this text

[Assistant] It reduces demand, which prevents inflation, or C, it crowds out public-private investment, or D, it stimulates demand, which creates jobs and boosts wages. We ought to think about this a little bit, because this is a hotly debated, it was, still is, to some extent, a contested issue. The dominant view, the dominant view is D, it stimulates demand.


[User] Please transcribe this text

[Assistant] And for the reasons that I already mentioned about who is first to be fired and who is really burdened by recessions and depressions, most of, almost of everybody, you can see why it's relevant to what we are talking about in this court.


[User] Please transcribe this text

[Assistant] Of all the things going on with pandemics and Ukraine and everything else, the government debt is something that you spend a lot of time worrying about. My father, by the way, was a die-hard Republican. Uh, didn't think much of Roosevelt. And when I was a little tyke, I mean even littler than I am now,


[User] Please transcribe this text

[Assistant] My father, my father said, uh, Bobby. He called me Bobby. I was about seven, I think. Six or seven. He said Bobby.


[User] Please transcribe this text

[Assistant] You and your children and your children's children will be paying down the debt created by Franklin D. Roosevelt.


[User] Please transcribe this text

[Assistant] Well, I didn't know what a debt was, but I had nightmares. I, I thought, I mean, I really, I thought about this, this huge, awful thing called the debt that I, and my children, and my children's children, and everybody would be paying it down, and Franklin D. Roosevelt created this, and uh, well, it turned out,


[User] Please transcribe this text

[Assistant] My father, who was right about many things, was wrong about this.


[User] Please transcribe this text

[Assistant] Because the debt that Franklin D. Roosevelt created was paid down very fast because the economy grew so fast at the end of the Second World War.


[User] Please transcribe this text

[Assistant] World War II, this is Franklin D. Roosevelt's death, and this is when my father told me that I and my children, my children's children, by the way, my granddaughter has not once mentioned FDR's death.


[User] Please transcribe this text

[Assistant] She's not worried about it. My two boys never, when they were growing up, they never worried about it. Uh, because you see what happened is that ratio of debt to GDP to the economy kept on dropping. Why did it drop? Not because the debt went down, but because the ratio, the economy kept on growing so fast. And now we are back up to around here.


[User] Please transcribe this text

[Assistant] Well, maybe we should if the ratio looks like it's getting worse and worse.


[User] Please transcribe this text

[Assistant] But even a high debt GDP ratio needs to be understood in dynamic terms. This would be the argument. Is the ratio growing or declining? Well, it is now growing. Well, that's a worry.


[User] Please transcribe this text

[Assistant] I don't mean you should stay up at night, I mean there are a lot of other things to worry about, but that's at least something that you might want to consider.


[User] Please transcribe this text

[Assistant] Will reducing the debt now cause an austerity trap? Now this is important to understand. If, for example, we


[User] Please transcribe this text

[Assistant] Decided, we as the United States decided we were going to raise taxes and cut spending.


[User] Please transcribe this text

[Assistant] And slow the economy down by raising taxes and cutting spending right now. Not really much political interest in doing that, but this is what some people are saying we should do. If we did that,


[User] Please transcribe this text

[Assistant] Maybe, maybe the economy would stop growing.


[User] Please transcribe this text

[Assistant] And maybe the ratio of the debt to the GDP would worsen.


[User] Please transcribe this text

[Assistant] Do you understand what I'm getting at? We have to look at the denominator.


[User] Please transcribe this text

[Assistant] What's most likely to happen if the government debt gets very high?


[User] Please transcribe this text

[Assistant] Is it A, the dollar ceases to be the world's dominant reserve currency?


[User] Please transcribe this text

[Assistant] Or B, domestic crisis begin to rising in anticipation of the value of the dollar dropping. That's inflation. Or C, private investment is crowded out. Or D, nothing! We shouldn't worry about the federal debt.


[User] Please transcribe this text

[Assistant] So what smokes most likely to happen if the government debt gets very high? What do you think? Go.


[User] Please transcribe this text

[Assistant] Okay, let's uh, let's stop there and let's see what you think.


[User] Please transcribe this text

[Assistant] Most of you, that is 61% of you, think it's B, and that is the dominant view of macroeconomists. That is, the big problem is inflation. Or it would be even more inflation than we have right now.


[User] Please transcribe this text

[Assistant] And there's some economists who say one of the reasons we have so much inflation right now is there has been so much spending. Particularly spending related to COVID.


[User] Please transcribe this text

[Assistant] Now here's another point, and this is very relevant for our class. Not all government spending is the same. There is spending on past obligations.


[User] Please transcribe this text

[Assistant] Like social security. Things that government is obligated to. I mentioned this last week.


[User] Please transcribe this text

[Assistant] Government has got to honor its past obligations. There is also spending


[User] Please transcribe this text

[Assistant] On current needs, individuals and families in need, uh, there is a third category, spending on stabilizers.


[User] Please transcribe this text

[Assistant] Stabilizers. By stabilizers, I mean things like unemployment insurance.


[User] Please transcribe this text

[Assistant] That helps when the economy is going into recession, helps prevent the economy from going too deep into recession, that is really


[User] Please transcribe this text

[Assistant] Not only helping individuals, but helping put money in the pockets of a lot of people so people can continue to spend and keep the economy going. A stabilizer, it's called. Automatic stabilizer, if it's an income support during recessions. And then there's spending on future productivity.


[User] Please transcribe this text

[Assistant] That are really public investments, like education and infrastructure and basic research and development. If you didn't do this spending, it would harm the denominator that I was talking about before, that is economic growth.


[User] Please transcribe this text

[Assistant] Government spending on automatic stabilizers, you can see, is exactly related to recessions.


[User] Please transcribe this text

[Assistant] This is the COVID-19 pandemic. Oh, by the way, the last time the government had a surplus, an actual surplus, in terms of a budget surplus, was 2001.


[User] Please transcribe this text

[Assistant] I can't tell you the number of times I sat in both the Oval Office, the Roosevelt Room, the Cabinet Room, with the President, the Vice President, or with other cabinet members in the 90s, and everybody


[User] Please transcribe this text

[Assistant] Was worried about the budget deficit. Budget deficit. Budget better. That's all anybody talked about. Uh, because you see


[User] Please transcribe this text

[Assistant] That's all that the media we're focusing on.


[User] Please transcribe this text

[Assistant] And the opposition party, that is the Republican party, that's how they were attacking the president.


[User] Please transcribe this text

[Assistant] I kept on saying, why are we worried about the budget deficit? It's more important to make investments in education and job training. More important to help people in need. Much more important to make investments in infrastructure. Don't worry about the budget deficit. Do you know how many times I said that? Maybe 3,000 times? Do you know how many times I was listened to? Zero.


[User] Please transcribe this text

[Assistant] $1.9 trillion relief package. It extended and raised federal unemployment benefits. $300 per week, ending in September.


[User] Please transcribe this text

[Assistant] Go. Let's see where you are. Okay, well.


[User] Please transcribe this text

[Assistant] So, so about, uh, 30% of you wish you were on vacation. That's gonna happen. It really will happen.


[User] Please transcribe this text

[Assistant] Uh, but most of you be, most of you are, are, are fine. A few of you say easy peasy. But most of you, see my challenge,


[User] Please transcribe this text

[Assistant] Uh, really, in this part of the course, with regard to taxes, macroeconomic policy, other things we're gonna get into, is, I wanna make it, I wanna make, I wanna challenge you, but I don't want to challenge you too much. I don't want you to tune out.


[User] Please transcribe this text

[Assistant] Okay, monetary policy. Now we've already talked about fiscal policy. One way of envisioning this is that there are two pedals, there are two gas pedals, and there are two brake pedals.


[User] Please transcribe this text

[Assistant] One of the gas pedals is fiscal policy, another is monetary policy. One of the brakes is fiscal policy, the other brake is monetary policy. In other words, fiscal and monetary policy can either be accelerators or brakes. And there are two of them.


[User] Please transcribe this text

[Assistant] When demand is less than capacity, the Federal Reserve reduces interest rates to stimulate more demand.


[User] Please transcribe this text

[Assistant] When inflation looms, the Fed increases interest rates to slow demand.


[User] Please transcribe this text

[Assistant] This is the most important building in Washington. This is not the Capitol building. It's not Congress. It is the Federal Reserve. It's on Constitution Avenue.


[User] Please transcribe this text

[Assistant] To 1948, I believe those are the dates, uh, for a very long time. Marinette Echols is a fascinating person. I wrote a part of a book about him. Nobody read it.


[User] Please transcribe this text

[Assistant] But I did meet, uh, his granddaughter.


[User] Please transcribe this text

[Assistant] He, in 1929, he went to Washington to testify. Now, nobody knew what was going on. You know, suddenly, the bottom dropped out of the economy.


[User] Please transcribe this text

[Assistant] Uh, and the stock market went, you know, it just, it just went to hell.


[User] Please transcribe this text

[Assistant] Uh, and the entire economy was tumbling into territory nobody understood. Nobody knew why. Mariner Eccles went to Washington. He was a Westerner, a Western businessman.


[User] Please transcribe this text

[Assistant] He was a Mormon. He didn't really know Washington.


[User] Please transcribe this text

[Assistant] And he testified before Congress, and he said, well, what we really do need is major spending.


[User] Please transcribe this text

[Assistant] And we need major public works, major infrastructure spending. We need spending on something that might be, we might term sort of social insurance for people. In other words, Mariner Eccles in 1929 went to Washington and he gave Congress a blueprint for the entire New Deal. This is before Franklin D. Roosevelt even became president. He was a remarkable man. And the building is named after him.


[User] Please transcribe this text

[Assistant] And why is it the most important building in Washington?


[User] Please transcribe this text

[Assistant] Well next week the Federal Reserve's Open Market Committee is going to meet next Wednesday and Thursday.


[User] Please transcribe this text

[Assistant] Everybody in American business, everybody on Wall Street, everybody who pays attention to the economy is going to wait with faded breath to hear what the Federal Reserve's Open Market Committee decides. There are 12 members, 7 members of the Board of Governors of the Federal Reserve System, President of New York Fed,


[User] Please transcribe this text

[Assistant] Four of the remaining eleven Federal Reserve bank presidents. There are Federal Reserve banks all over the United States.


[User] Please transcribe this text

[Assistant] The question is how much does it slow the economy? Does it push the economy into recession?


[User] Please transcribe this text

[Assistant] Millions of people are going to lose their job. Even raising interest rates a little bit.


[User] Please transcribe this text

[Assistant] More expensive. It's more expensive for anybody to get a loan. Interest rates are higher, it's harder to get a loan.


[User] Please transcribe this text

[Assistant] It means that if you have a variable rate, interest rate on your mortgage, you have to pay more for your mortgage. That's going to be really hard for a lot of people. If you have a,


[User] Please transcribe this text

[Assistant] An automobile loan, or if you want to get an auto loan, it's gonna be harder for you to get it and pay for it and afford it. And the people who are going to be paying more are a lot of the people we've been discussing in this course. Now they're being hurt by inflation too. In fact, arguably, they're being hurt more than anybody else by inflation.


[User] Please transcribe this text

[Assistant] Because their dollars, remember inflation is pretty regressive.


[User] Please transcribe this text

[Assistant] Uh, this man is Horatio Alger A. B. Alan Greenspan C. Ben Bernanke D. Paul Volcker E. Al Dunlop What do you say? Go.


[User] Please transcribe this text

[Assistant] And the reason I want you to know these people.


[User] Please transcribe this text

[Assistant] It's because these are very powerful players in wealth and poverty in America.


[User] Please transcribe this text

[Assistant] So let's, uh, let's see, let's stop the bidding and let's see what you think, who you think he is.


[User] Please transcribe this text

[Assistant] Uh, because he's definitely not Horatio Alger. Green Alan Greenspan, most of you think he is. No, he's not. Ben Bernanke, no, he's not. Uh, he's not Al Dunlop. He is Paul Booker.


[User] Please transcribe this text

[Assistant] That's what he said. Those were his words. I'm gonna break the back of inflation. Well he did. He raised interest rates so high that he not only broke the back of inflation, but he broke the economy. He brought the economy into a recession. A deep recession.


[User] Please transcribe this text

[Assistant] And he did something else, because presidents are blamed for


[User] Please transcribe this text

[Assistant] Chairman of the Federal Reserve Board have much more influence of the economy than presidents, but because of what Paul Volcker did, he ended Jimmy Carter's presidency.


[User] Please transcribe this text

[Assistant] Paul Volcker, as you can see, he smoked cigars. What you can't see is that he was about six foot eight. I had a couple of times that I met him at


[User] Please transcribe this text

[Assistant] Receptions. Washington reception. By the way, I hate reception. I hate reception.


[User] Please transcribe this text

[Assistant] And when you're a cabinet secretary or you're another official in Washington, you just have to go to all sorts of receptions. And I would go to receptions, and Paul Volcker was there, and I would try to talk with him. And literally, I would talk like this. I wouldn't hear a word he said. He wouldn't hear anything I said. But, uh, but that's what he did.


[User] Please transcribe this text

[Assistant] He broke the back of double-digit inflation, ended Jimmy Carter's presidency. That's, see what you can see here.


[User] Please transcribe this text

[Assistant] That is what member banks of the Federal Reserve System charge each other for overnight loans. This is how they control interest rates. And look at what he did. Interest rates went through the roof.


[User] Please transcribe this text

[Assistant] And the economy plunged deep into recession. A lot of people lost their jobs.


[User] Please transcribe this text

[Assistant] The Fed running a big experiment. This man is A. Horatio Alger B. Alan Greenspan B. Ben Bernanke. C. Gerald D. Gerald Ford Allen Allen. Go. Okay, let's end the bidding into here and see what you think.


[User] Please transcribe this text

[Assistant] Now why am I, why do I want you to know who these people are? Again, I want to stress this. One of the problems in our democracy


[User] Please transcribe this text

[Assistant] Is that people often don't know where power lies. And one of the subtexts and subthemes in this course is you need to know about power.


[User] Please transcribe this text

[Assistant] You need to know the underlying realities of how the system actually works.


[User] Please transcribe this text

[Assistant] The Chairman of the Federal Reserve, or Chairwomen of the Federal Reserve, have extraordinary power.


[User] Please transcribe this text

[Assistant] Was chairman of the Federal Reserve when I was in the cabinet. And he used to send signals. It's, it's sort of un...


[User] Please transcribe this text

[Assistant] So he would send signals, and those signals to Bill Clinton were, if you don't bring down the budget deficit, I'm going to hike interest rates. And if I hike interest rates, you're not going to be re-elected president in 1996.


[User] Please transcribe this text

[Assistant] Just to get to know him, I invited, well, I practically invited myself to breakfast. You know, the Federal Reserve has its own dining room. It has its own budget.


[User] Please transcribe this text

[Assistant] I mean the Federal Reserve doesn't depend on Congress for an appropriation because the Federal Reserve makes money. It literally makes money. It decides how much money there is going to be. So the Federal Reserve, in effect, pays itself and I thought, well, why not have breakfast?


[User] Please transcribe this text

[Assistant] So I, I called his office and, and said, you know, I'd love to have breakfast. And he invited me over to breakfast. Almost nobody gets in the Federal Reserve to have breakfast. I did. And I can tell you, I can tell you, it's very luxurious. I mean, you walk in and, well,


[User] Please transcribe this text

[Assistant] Uh, and Alan Greenspan, I mean, you know, the heavy, heavy cutlery and these kind of linen napkins, those heavy linen napkins, and just, uh, I mean, the best orange juice I've ever had in my life. I mean, it was not just freshly squeezed, it was squeezed almost in front of me. And Alan Greenspan, a very nice gentleman, a follower of Ayn Rand,


[User] Please transcribe this text

[Assistant] We didn't see eye to eye politically, necessarily, but we had a very, very good discussion. Alan Greenspan was particularly powerful as a chair. The chair meets with the Open Market Committee, but the chair has so much power because the chair gets information.


[User] Please transcribe this text

[Assistant] How did Alan Greenspan get all that power? How did Alan Greenspan know so much about the economy? He knew things about the economy that nobody else did. Well, I began to understand.


[User] Please transcribe this text

[Assistant] You see, long about the time I met with Alan Greenspan.


[User] Please transcribe this text

[Assistant] Newt Gingrich and Bill Clinton were locked in a fight over the budget, leading to a closure of the government.


[User] Please transcribe this text

[Assistant] Now just before the government closed, and that was miserable, I mean, a closure of the government because there's no money officially to pay employees means that I as labor secretary and everybody else who was the secretary of any department had to tell their employees to go home and we don't know when you're coming back and we don't know if you're gonna ever be paid. You're certainly not gonna be paid for the days you lose. I mean, it was miserable. But I got a note from Alan Greenspan. And he said, whatever you do, don't


[User] Please transcribe this text

[Assistant] Why, who is Cindy? And what do you, why do you care about Cindy? Well, I did some investigating. It turns out that Cindy was the first person in the department, in the Bureau of Labor Statistics, to get the data on unemployment for the month before.


[User] Please transcribe this text

[Assistant] And Cindy, this is very carefully guarded information because if you had, if you knew what the unemployment rate was going to be before it was announced,


[User] Please transcribe this text

[Assistant] You know, you could make bets, you could, you could actually, uh, do very well in the stock market.


[User] Please transcribe this text

[Assistant] So it has to be very, very carefully guarded. Cindy was, had been at the department for 30 years. Cindy knew what the unemployment rate was going to be before it was announced, and she would tell Alan Greenspan.


[User] Please transcribe this text

[Assistant] Alan Greenspan had moles all over the federal government. I'm telling you things that I probably shouldn't tell you.


[User] Please transcribe this text

[Assistant] But this is how government works. And this is, this is, he was no, he was doing nothing illegal. He developed these sources of information. All of them enhanced his power. And Alan Greenspan actually did something that I found to be remarkably important. He did an experiment. Experiment that revealed a great deal. As demand picked up in the mid-1990s,


[User] Please transcribe this text

[Assistant] The Fed under Alan Greenspan barely raised rates. Now, I want to make sure you understand what I just said. Normally, as demand picks up from a recession, as we go into an expansion,


[User] Please transcribe this text

[Assistant] Normally, the rule had been that the Fed will raise rates if unemployment gets below a certain level. In fact, economists used to call it


[User] Please transcribe this text

[Assistant] The non-accelerating inflationary rate of unemployment.


[User] Please transcribe this text

[Assistant] Because Alan Greenspan was data driven. He was not a theorist.


[User] Please transcribe this text

[Assistant] What he told me over lunch, over breakfast, and what I was actually very interested in was that


[User] Please transcribe this text

[Assistant] The economy was less prone to inflation than it used to be because workers had very little


[User] Please transcribe this text

[Assistant] Union membership, as we've talked about in this course, had shrunk dramatically, so workers could not dictate their wages. There used to be something called wage price inflation, but Alan Greenspan knew that was no longer the case. He also knew something else, and that was that in this modern global economy,


[User] Please transcribe this text

[Assistant] If there is more and more demand on companies for production those companies can get


[User] Please transcribe this text

[Assistant] Goods, components, and supplies from abroad.


[User] Please transcribe this text

[Assistant] Made no sense. You could run the economy without inflation at a lower rate of unemployment.


[User] Please transcribe this text

[Assistant] Now to me that made a great deal of sense what Alan Greenspan was saying. It also meant that a lot of people who were in the bottom 20%, 30%, 40% of the income spectrum, they would not lose their jobs. They would not be drafted into the fight against inflation. Which had been the case before.


[User] Please transcribe this text

[Assistant] It contributed to a huge increase in jobs in the 1990s, so it really wasn't my doing, although I claimed it with you.


[User] Please transcribe this text

[Assistant] And what we see here is the unemployment rate dropping dramatically in the 1990s as the economy grew.


[User] Please transcribe this text

[Assistant] That means that a lot of people in the bottom 20, 30, 40 percent had jobs. Not only did they have jobs,


[User] Please transcribe this text

[Assistant] But median incomes started to grow as well because the demand for workers picked up.


[User] Please transcribe this text

[Assistant] This was one of the first times in a 40 year period where the median income actually grew because


[User] Please transcribe this text

[Assistant] Essentially, unemployment got down to below 3%. When unemployment gets down to below 3%, employers really need people, and what are they willing to do? They're willing to train people, they will send vans out to neighborhoods that never are, are ever here from employers.


[User] Please transcribe this text

[Assistant] In order to try to get people to come to work, they will do everything they can to get workers. That 3% unemployment rate seems to be almost the magical rate at which you begin to raise incomes. Particularly people who are among the most vulnerable in society. And I'm not going to go through this with you. I will tell you, his name is not Antonin Scalia or Robert Rubin.


[User] Please transcribe this text

[Assistant] It is not Lawrence, Lawrence Summers, it is Ben Bernanke. And Ben Bernanke was at the Fed when


[User] Please transcribe this text

[Assistant] We had the explosion of 2008. The financial meltdown. What did Ben Bernanke do? Why do I even present him to you as a very important figure in wealth and poverty?


[User] Please transcribe this text

[Assistant] Because he kept interest rates extraordinarily low.


[User] Please transcribe this text

[Assistant] After the crisis of 2008, Ben Bernanke's Fed cut interest rates to zero!


[User] Please transcribe this text

[Assistant] Ben Bernanke said, look it, we can't afford to have this many people out of work.


[User] Please transcribe this text

[Assistant] And we're gonna just take a chance. We're gonna go to zero. And we're also going to do something else.


[User] Please transcribe this text

[Assistant] The money supply. Now I don't want to get into the weeds here with you, but I want you to just understand the concept. What Bernanke was doing was radically, radically pushing on the accelerator.


[User] Please transcribe this text

[Assistant] Of monetary policy. Not fiscal policy, we're talking about monetary policy.


[User] Please transcribe this text

[Assistant] I also want to make sure you understand how significant this all is for the subject of this course.


[User] Please transcribe this text

[Assistant] We're talking about people's lives. They don't understand. They are not, they, you know, most people are not paying attention to the interest rates. They don't know what's happening in the Federal Reserve Open Market Committee. They will not know what's happening next Wednesday or Thursday. But what it does is going to affect millions of people's lives.


[User] Please transcribe this text

[Assistant] Which of these is the most true of expansive monetary policy that is prolonged near zero interest rates? A. Does it encourage inflation?


[User] Please transcribe this text

[Assistant] B. Does it bolster the stock market and enrich the already rich? C. It stimulates demand, which creates jobs, especially for the bottom half. D. It may mean the Fed runs out of ammunition for the next downturn. Well, we've already gone through this, I'm not going to ask you to do this, but it is


[User] Please transcribe this text

[Assistant] Jerome Palacani, Ellen, was a faculty member here at Berkeley. You know that.


[User] Please transcribe this text

[Assistant] And she is now Secretary of the Treasury. Jerome Powell. Rates have been near zero.


[User] Please transcribe this text

[Assistant] Do we have to raise interest rates? Or will supply automatically catch up with demand? Do we have to slow the economy? Or will the economy automatically quicken?


[User] Please transcribe this text

[Assistant] Now that's partly an empirical question, but it is also a value-laden question. How worried are you about slowing the economy and causing a real risk of a recession? Especially now with the war in Ukraine.


[User] Please transcribe this text

[Assistant] There are too many variables. You've gotta make educated guesses.


[User] Please transcribe this text

[Assistant] Again, here you can see how low interest rates have been. Federal funds rate. What happens now? We'll find out. The official rate of unemployment.


[User] Please transcribe this text

[Assistant] Well, you can see what happened to unemployment, but now unemployment is coming, employment is coming back.


[User] Please transcribe this text

[Assistant] Should the Fed now raise rates? Yes! Inflation is getting out of control. Or B, no! Unemployment is still too high, and workers still haven't gotten much of a raise. Well, what do you think? Okay, let's see what you think.


[User] Please transcribe this text

[Assistant] Well, it's not overwhelming. About 58% of you say, no, unemployment is still too high.


[User] Please transcribe this text

[Assistant] But about 41% of you say, yes, inflation is getting out of control. Again, as I want to emphasize with you, there is no


[User] Please transcribe this text

[Assistant] Absolute right answer is a matter of weighing and balancing imperfect information, but values also play a role here.


[User] Please transcribe this text

[Assistant] And let's make sure we understand the main reason inflation is surging now.


[User] Please transcribe this text

[Assistant] Is it because oil and gas prices are rising as a result of the war in Ukraine? Or because B, the pandemic has generated large pent-up demand for goods? Or C, the end of the pandemic has created supply bottlenecks around the world? Or D, monopolistic corporations are finding it easy to raise prices? I'm not going to even ask you to do this, because to some extent it's all of the above. The real interesting question is, what


[User] Please transcribe this text

[Assistant] I would give maybe a small bit to A, because that's really just started. B, I would say yes, that's really big, but that's temporary, because as people spend


[User] Please transcribe this text

[Assistant] And get the goods they need and ship back to services.


[User] Please transcribe this text

[Assistant] Where most people have been spending most of their money most of their lives, the demand is going to get back to normal.


[User] Please transcribe this text

[Assistant] And what about, see, the end of the pandemic has created supply bottlenecks around the world? Yes, absolutely, but those supply bottlenecks are eventually going to be overcome as more and more supply is added to the world.


[User] Please transcribe this text

[Assistant] And D, monopolistic corporations are finding it easy to raise prices. Yes, I think that's a bigger issue than a lot of people are paying attention to.


[User] Please transcribe this text

[Assistant] Because normally, you see, if corporations were in normal competition,


[User] Please transcribe this text

[Assistant] And we've talked about this a little bit a couple of weeks ago, if, if companies were in competition with each other.


[User] Please transcribe this text

[Assistant] You would expect that they would do everything possible to avoid losing customers.


[User] Please transcribe this text

[Assistant] Which means that as they paid more for their supplies and components,


[User] Please transcribe this text

[Assistant] those costs rather than passing them on to their customers in the form of higher price.


[User] Please transcribe this text

[Assistant] And one reason they're not doing it is they're not really facing very intense competition. There's a lot of monopoly out there.


[User] Please transcribe this text

[Assistant] The problem is you can't really deal with this as an inflation fighting measure because you need antitrust laws and those take a long time. Those are very difficult to implement.


[User] Please transcribe this text

[Assistant] So here's a gun, I'm not going to ask you to do this, but who's most likely to be drafted into the fight against inflation? Well, it is C, the poorest 10%. Actually, the poorest half. Who will, are more likely to lose their jobs.


[User] Please transcribe this text

[Assistant] So overview, the dominant view is expansive fiscal monetary policies increase aggregate demand toward the economy's productive capacity which causes employers to hire more people.


[User] Please transcribe this text

[Assistant] Including low-skilled people in the bottom half of the income distribution, forcing employers to recruit and retrain them and then retain them and therefore pay them higher wages. Tight labor markets also have an effect on reducing racial inequality. The racial gap in unemployment begins to close when you have a tight labor market.


[User] Please transcribe this text

[Assistant] The racial wage gap begins to close with a tight labor market.


[User] Please transcribe this text

[Assistant] So, that means expansionary fiscal and monetary policy leading to tight labor markets helps reduce income inequality.


[User] Please transcribe this text

[Assistant] And inflation may force the Fed to raise interest rates, slow the economy, and hurt lower income people. So on which side should policymakers err? It is not clear.


[User] Please transcribe this text

[Assistant] Which is best? It depends on, to some extent, your reading of the data and also your own values. Which gets me to the big switcheroo. Wealthy Americans.


[User] Please transcribe this text

[Assistant] The highest marginal tax rate was, under Dwight Eisenhower, was over 90%, and the effective highest tax rate, even after all the tax credits and deductions, was probably close to 50%, pretty high.


[User] Please transcribe this text

[Assistant] So, wealthy Americans are no longer financing the federal government through their taxes. How are they financing the federal government?


[User] Please transcribe this text

[Assistant] They're financing the federal government by lending the federal government money.