thumbnail of Wall $treet Week with Louis Rukeyser; No. 1910; Galbraith on the Economy
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<v Narrator>Wall Street Week with Louis Rukeyser <v Narrator>is made possible by the financial support of viewers like you and <v Narrator>by Prudential-Bache Securities, the investment firm with rock solid resources <v Narrator>and market wise thinking in the business of making money. <v Narrator>Produced Friday, September 8, our panelists are Frank <v Narrator>Capiello, John Dessauer, and James Grant. <v Narrator>Tonight's special guest is John Kenneth Galbraith, Professor of <v Narrator>Economics, Emeritus, Harvard University. <v Louis Rukeyser>Good evening. I'm Louis Rukeyser. This is Wall Street Week. <v Louis Rukeyser>Welcome back. Well, this was the week of Labor Day, when every good politician <v Louis Rukeyser>makes a speech about the future productivity of America. <v Louis Rukeyser>However, hopes that these dreams would actually be realized anytime soon <v Louis Rukeyser>suffered a severe setback when Congress insisted on returning from its summer
<v Louis Rukeyser>recess and reconvening. <v Louis Rukeyser>Well, you can't have everything. <v Louis Rukeyser>The economists, for their part, had to work overtime to find any trend in the economy <v Louis Rukeyser>this week. First, they told us that things may be moving a hair faster <v Louis Rukeyser>than they had expected in their impeccable wisdom, citing some surprisingly <v Louis Rukeyser>perky statistics on retail sales and auto sales. <v Louis Rukeyser>This upbeat finding distressed many of the geniuses in the investment community <v Louis Rukeyser>who concluded that the Federal Reserve might decide that its tender ministrations <v Louis Rukeyser>were no longer required right now and stop lowering interest rates. <v Louis Rukeyser>These worries also appeared briefly to have infected the White House, where chief <v Louis Rukeyser>economic adviser Michael Boskin was quoted first as saying that the Fed <v Louis Rukeyser>should ease further. And then after Fed Chairman Alan Greenspan <v Louis Rukeyser>growled audibly as denying that he had ever expressed such an impudent <v Louis Rukeyser>thought. Mr. Boskin will be my guest later this month, and we'll try
<v Louis Rukeyser>to find out what he really thinks. <v Louis Rukeyser>But just when all the wise authorities had told us that the economy was a bubble <v Louis Rukeyser>again, came an end of the week report that consumer debt, 1 of the <v Louis Rukeyser>perennial worries on the American economic scene, had, in fact been reduced <v Louis Rukeyser>in July, an astounding development that had not occurred in any month since <v Louis Rukeyser>January 1987. <v Louis Rukeyser>So the same wizards who had been mumbling all week the economy's too strong, <v Louis Rukeyser>promptly shouted, "No, it isn't!" And raced to buy bonds, <v Louis Rukeyser>ever the haven of believers in economic weakness. <v Louis Rukeyser>Their latest profound judgment is guaranteed to last at least for the weekend. <v Louis Rukeyser>Indeed, this Labor Day week found all the financial markets laboring a bit <v Louis Rukeyser>themselves. While bonds encouraged by a husky dollar and <v Louis Rukeyser>the late report on lower consumer debt finished with a gain, stocks went <v Louis Rukeyser>down for the first time in 10 weeks. <v Louis Rukeyser>The 9-week string of consecutive advances, totaling more than 300
<v Louis Rukeyser>points on the Dow Jones Industrials was the longest such unbroken string since <v Louis Rukeyser>1965. And it caused some neophytes to conclude that they would never <v Louis Rukeyser>again be a losing week for stocks for the rest of this century. <v Louis Rukeyser>This forecast turned out to be somewhat exaggerated. <v Louis Rukeyser>Whether this was just an expectable pause for breath or the start of something more <v Louis Rukeyser>ominous, we will labor to tell you tonight. <v Louis Rukeyser>And my guest will be a man who has seen many a financial fit and start, including <v Louis Rukeyser>the 1 he wrote about in his book called The Great Crash. <v Louis Rukeyser>The always distinguished and always controversial economist, John Kenneth Galbraith. <v Louis Rukeyser>But first, let's see what happened in an undistinguished week in Wall Street. <v Louis Rukeyser>And as the Dow Jones Industrial Average indicates, the best thing that can be said about <v Louis Rukeyser>this trading week is that it lasted only 4 days. <v Louis Rukeyser>On ho-hum trading and near tangible uneasiness, the Dow <v Louis Rukeyser>went down for the first time since June, losing 42 and a half points
<v Louis Rukeyser>to close at 2709 point 5 4. <v Louis Rukeyser>The broader market indexes generally followed suit, though less dramatically, <v Louis Rukeyser>and the American exchange composite actually rose to its second highest reading <v Louis Rukeyser>ever, none of which impresses our elves, whose technical market index <v Louis Rukeyser>remains bearish at minus 3. <v Louis Rukeyser>With inflation appearing to be back under control and the US dollar defying all <v Louis Rukeyser>efforts, including our government's, to bring it down, there was no discernable <v Louis Rukeyser>reason to buy the precious metals and they retreated again. <v Louis Rukeyser>And here are 2 questions for you: do you like your job? <v Louis Rukeyser>And if so, how old are you anyhow? <v Louis Rukeyser>A Gallup poll reported that most full time workers are mostly satisfied with their jobs, <v Louis Rukeyser>but there was a much higher degree of grumbling among those born since World War <v Louis Rukeyser>2. Frank Cappiello, are you happy in your work? <v Frank Capiello>Oh, yes, definitely. Yeah, been a very pleasant experience. <v Frank Capiello>[laughs].
<v Louis Rukeyser>What do you- what do you think? Market just pausing for breath? <v Frank Capiello>I think it is pausing for breath. But I also think that we're going through a rolling <v Frank Capiello>correction in terms of groups. We've pierced the bubble of one of the fastest <v Frank Capiello>rising groups recently, the airlines, and they're cooling off. <v Frank Capiello>The cyclical stocks seem to have flattened out and a new group has replaced <v Frank Capiello>those. And I guess you'd call that sort of interest, maybe not interest-sensitive, but <v Frank Capiello>interest related. The new highs this week were Sallie Mae and Fannie <v Frank Capiello>Mae, 2 rather attractive ladies, both of which are interests- sort of related <v Frank Capiello>to interest rates. <v Louis Rukeyser>Isn't there also some feeling that they may be beneficiaries of the savings and loan <v Louis Rukeyser>bailout? <v Frank Capiello>Absolutely. Yeah. And that's gonna be an improvement, too. <v Louis Rukeyser>Well, I have no objection to a rolling correction as long as we don't get steamrollered. <v Louis Rukeyser>How do we avoid that? <v Frank Capiello>Well, I think what we'll be dealing with is something coming out of a hundred, maybe a <v Frank Capiello>hundred and 50 points on the Dow. It's not going to be anything earthshaking, but it's <v Frank Capiello>really going to be important to be in the right groups. <v Frank Capiello>You are going to have to move around a little bit. <v Frank Capiello>And this is the kind of market where the average persons should stay- stay out until the <v Frank Capiello>clear trend is sort of set going back up again.
<v Louis Rukeyser>I mentioned that the geniuses in the bond market, which of course in dollars is much <v Louis Rukeyser>bigger than the stock market, were absolutely confused this week. <v Louis Rukeyser>So would you, un-confuse them- are the rates going up or down? <v Frank Capiello>Well, rates are not going to go up and the trend will probably be down over the next 6 <v Frank Capiello>months. But I would not be a buyer of bonds because I think this is the time <v Frank Capiello>when the stock market's going to divorce itself from the bond market. <v Frank Capiello>You're not going to make much money on bonds in the next 12 months. <v Frank Capiello>You're probably gonna make a lot of money on stocks. <v Louis Rukeyser>Jim Grant, when someone says you're probably gonna make a lot of money in stocks, I turn <v Louis Rukeyser>to you, [James laughs] confident that those words will soon be balanced-. <v James Grant>Which- which stocks? I'll give you a list. <v Louis Rukeyser>This- the strength of the market this year has somewhat surprised you, has it not? <v James Grant>[Laughs] A bit. <v Louis Rukeyser>Do you think this can go on much longer? <v James Grant>Well, I've often said that it's going to end in 1986. <v James Grant>So um I suppose-. <v Louis Rukeyser>And if 1986 ever comes back, you may be right. <v Louis Rukeyser>But what do you make of the present situation? <v James Grant>Well, I think it's certainly notable that the pillar <v James Grant>on which so many of these stocks is standing, there's this pillar of speculative
<v James Grant>credit is beginning to crumble. The junk bond market is a disaster. <v James Grant>Well, that's overdrawn. The junk bond market is- is- is- is in bad <v James Grant>a condition as the stock market seems to be as good a condition. <v James Grant>And um more and more you find that there is a kind of default du jour, <v James Grant>big issue is shot and taken out and shot and uh and the spreads <v James Grant>between speculative grade debt and treasury debt are ever widening, even as the common <v James Grant>stocks of debt laden companies go up. <v James Grant>So there is a massive divergence in the public's mind and the industrial market's mind <v James Grant>between the stocks of precariously financed companies and the bonds and the bonds are <v James Grant>going down. <v Louis Rukeyser>Is it fair to say that you are not the financial advisor to Merv Griffin? <v Louis Rukeyser>[laughs]. <v James Grant>He couldn't afford me. <v Louis Rukeyser>How does- not anymore. <v Louis Rukeyser>How does the average person deal with this if they if they buy bonds, at what level of <v Louis Rukeyser>quality would you haven't stopped buying bonds? <v James Grant>I would kind of start and stop at triple-A.
<v James Grant>There is- there is, I think so much yet- there's so much damage <v James Grant>yet to be done in the speculative area that you are not yet paid for the risk. <v James Grant>So I would recommend short maturities and government <v James Grant>securities at that. <v Louis Rukeyser>John Dessauer, what do you make of what you've heard so far? <v John Dessauer>Well, I kind of came out in favor of Frank's opinion, and I'm not too worried about the <v John Dessauer>total level of debt. I mean, we're in this period between August and October and 2 years <v John Dessauer>ago that wasn't- uh didn't end up in a very nice way come October 20th, <v John Dessauer>'87, so they're gonna be a lot of nervous people around. <v John Dessauer>The fear of the debt was the same then, same now. <v John Dessauer>But there are a couple of differences that impress me. <v John Dessauer>And 1 of them is this very strong U.S. <v John Dessauer>dollar. 2 years ago, the dollar was going the other way. <v John Dessauer>Now it's too strong. And I think if it breaks above 2 to 1 against the mark, and it's <v John Dessauer>right on the threshold of doing that now, that that that may force Alan Greenspan and the <v John Dessauer>boys down at the Fed to bring interest rates down a notch, I think that would help the <v John Dessauer>stock market and ease a lot of fears. <v Louis Rukeyser>So the thing in your judgment that may induce them to lower rates is not a failing
<v Louis Rukeyser>economy, but a strong dollar. <v John Dessauer>I believe Alan Greenspan in that gang when they say they don't want a recession, because <v John Dessauer>I think, you know, some of the problems that Jim points out are an insurance policy, in <v John Dessauer>other words, we all know might what would happen if we had a serious recession, and so <v John Dessauer>nobody wants 1. And a strong dollar is one of the things that could tip things a little <v John Dessauer>bit too far in the direction of recession. <v John Dessauer>So I think Alan Greenspan and company would react, and they really want to keep <v John Dessauer>the economy growing. They don't want to create a recession. <v Louis Rukeyser>All righty. Now, this is the point in the program when we normally pause for a round of <v Louis Rukeyser>viewer questions. Tonight, though, we're saving that time for more questions of my guest, <v Louis Rukeyser>who offers us a lifetime of experience at giving provocative answers. <v Louis Rukeyser>Next week, though, we'll be back to our usual tricks. <v Louis Rukeyser>So send us your own money questions to Wall Street Week, Owings Mills, Maryland, 2 <v Louis Rukeyser>1 1 1 7. That's Wall Street Week, Owings Mills, Maryland, 2 1 <v Louis Rukeyser>1 1 7. Now, before we meet tonight's special guest, let's take a look at some <v Louis Rukeyser>of the wit, language, and insight he has given us in 24 elegantly
<v Louis Rukeyser>crafted and invariably controversial books over the past 50 years. <v Louis Rukeyser>Here, for example, is John Kenneth Galbraith on money: "Most things <v Louis Rukeyser>in life are important only to those who have them. <v Louis Rukeyser>Money, in contrast, is equally important to those who have it and those who don't." <v Louis Rukeyser>And here's his view on those responsible for economic policy: "The task <v Louis Rukeyser>attracts a very low level of talent. <v Louis Rukeyser>1 that is protected in its highly imperfect profession by the mystery that is thought to <v Louis Rukeyser>unfold the subject of economics in general and of money in particular. <v Louis Rukeyser>Inadequacy is protected further by the fact that failure is almost never <v Louis Rukeyser>at cost to those responsible." He said this about the stock <v Louis Rukeyser>market: "The stock market is inherently unstable. <v Louis Rukeyser>The instability being related to its superbly orchestrated ability to attract <v Louis Rukeyser>people with a promise of effortless riches, give them a taste of such gains, <v Louis Rukeyser>give them the promise of a great deal more gain, persuade them that it is rewarding their
<v Louis Rukeyser>financial acuity, or that of the people who are managing their money, and then <v Louis Rukeyser>usually after overcoming some preliminary setbacks which greatly add to <v Louis Rukeyser>the general state of confidence, destroy these illusions in 1 mortal thud." <v Louis Rukeyser>Indeed, he wrote of market disasters: "What is necessary for a new disaster <v Louis Rukeyser>is only for memories of the last 1 to fade, and no one knows how long that takes." <v Louis Rukeyser>On the other hand, he has kind words for optimists: "Courage <v Louis Rukeyser>is required of the man who, when things are good, says so. <v Louis Rukeyser>Historians rejoice in crucifying the false prophet of the millennium. <v Louis Rukeyser>They never dwell on the mistake of the man who wrongly predicted Armageddon." <v Louis Rukeyser>Business executives often think of Galbraith as an egghead leftist. <v Louis Rukeyser>He doesn't speak too well of them either: "He is the kind of free enterpriser <v Louis Rukeyser>who is steadfast in his faith up to the very point where money may be made or lost, <v Louis Rukeyser>then, like most others, he rushes hell for breakfast to the government.
<v Louis Rukeyser>Wouldn't you prefer an honest socialist?" Would America really be better <v Louis Rukeyser>off with an honest socialist? <v Louis Rukeyser>And just what does John Kenneth Galbraith think of what's going on in this country today? <v Louis Rukeyser>For some thoughts on that, let's go over now and meet tonight's special guest, John <v Louis Rukeyser>Kenneth Galbraith. <v Louis Rukeyser>And welcome. We're just delighted you're here. <v John Kenneth Galbraith>Very nice to be here, Lou. <v John Kenneth Galbraith>What an impressive- what an impressive gathering you have here <v John Kenneth Galbraith>this evening. <v Louis Rukeyser>More so right now. I first met Ken Galbraith nearly 27 years ago when he was <v Louis Rukeyser>ambassador to India, and I was a foreign correspondent stationed there. <v Louis Rukeyser>He was, as usual, creating interest and controversy wherever he went: as Harvard <v Louis Rukeyser>professor, as bestselling author, and as a tireless advocate of causes usually <v Louis Rukeyser>on the left of American politics. <v Louis Rukeyser>The Canadian-born economist has won friends, even among those who disagreed with him <v Louis Rukeyser>because of his wit and engaging prose. <v Louis Rukeyser>Professor Galbraith will be 81 next month, and it's a pleasure to welcome him here
<v Louis Rukeyser>tonight. Ken, you've never lost faith in the power of government <v Louis Rukeyser>to cure economic ills, but most of the country apparently has. <v Louis Rukeyser>How do you explain that? <v John Kenneth Galbraith>Oh, there's no- no doubt about that, Lou. <v John Kenneth Galbraith>My generation is responsible through the <v John Kenneth Galbraith>Keynesian revolution, the welfare revolution. <v John Kenneth Galbraith>A great many Americans, a majority of Americans have become comfortable, <v John Kenneth Galbraith>happy, and inevitably conservative, <v John Kenneth Galbraith>least those that vote. And no one notices <v John Kenneth Galbraith>that while people have lost faith in government, as you say, <v John Kenneth Galbraith>that doesn't apply to when some measure of affluence is involved. <v John Kenneth Galbraith>There's been no loss of faith in government when it comes to bailing out those S&Ls?, <v John Kenneth Galbraith>low loss of faith in government as far as Social Security is concerned.
<v John Kenneth Galbraith>Farmers are still committed to a very great faith in government for maintaining price <v John Kenneth Galbraith>supports and farm income. <v John Kenneth Galbraith>So uh I don't want to correct you, Lou. <v John Kenneth Galbraith>I know that that you will get even next time when I'm not here. <v John Kenneth Galbraith>But I would point out that the faith in government <v John Kenneth Galbraith>is still very high, except as regards the most unfortunate <v John Kenneth Galbraith>of our people. And I would like to see a little more faith as there as- as <v John Kenneth Galbraith>regards them. <v Louis Rukeyser>Not only do I not dispute you, I quite agree that the search for government aid seems to <v Louis Rukeyser>be near universal. Would you have not given the S&Ls the aid they requested, though? <v John Kenneth Galbraith>I would not have deregulated them and invited the kind of <v John Kenneth Galbraith>insanity that has made necessary this bailout. <v John Kenneth Galbraith>I would go back and <v John Kenneth Galbraith>remind you of that error. <v John Kenneth Galbraith>As I reminded myself of some writing at that time.
<v Louis Rukeyser>Would you not have bailed out Chrysler? <v John Kenneth Galbraith>I had testified against it at that time. <v John Kenneth Galbraith>I testified against bailing out both Chrysler and Lockheed. <v John Kenneth Galbraith>But I did it really, particularly in the case <v John Kenneth Galbraith>of Lockheed, because there were conservatives on the- on the committee <v John Kenneth Galbraith>who were committed to it. And I- and I was so pleased <v John Kenneth Galbraith>to go and talk about something which gave them real inner <v John Kenneth Galbraith>sorrow that I couldn't resist it. <v John Kenneth Galbraith>I remember coming out- can I tell a story? <v Louis Rukeyser>Please. <v John Kenneth Galbraith>I remember coming out of that hearing. <v John Kenneth Galbraith>And I had circulated my statement in advance and ran into Barry Goldwater and he stopped. <v John Kenneth Galbraith>And he said, Ken, I've just read that statement of yours and I agree with it. <v John Kenneth Galbraith>And I said, Well, Senator, I now have doubts. <v John Kenneth Galbraith>I want to reappraise my decision. [laughs] <v Louis Rukeyser>If, as you've just suggested to us, the reason for what you would interpret as a <v Louis Rukeyser>conservative turn in America is, in fact, the affluence that was produced by
<v Louis Rukeyser>government policies earlier. <v Louis Rukeyser>How do you- <v John Kenneth Galbraith>By my generation. <v Louis Rukeyser>Understood. <v John Kenneth Galbraith>Don't- don't omit that. <v Louis Rukeyser>Absolutely. By the- by the geniuses of your generation. <v Louis Rukeyser>How do you explain the apparent turn in the same direction toward freer <v Louis Rukeyser>markets, toward capitalism, even behind the Iron Curtain where affluence is not a <v Louis Rukeyser>problem? <v John Kenneth Galbraith>Oh, I think there's a very different situation there. <v John Kenneth Galbraith>I- a very serious point. <v John Kenneth Galbraith>These countries- socialism behind the Iron Curtain worked very well <v John Kenneth Galbraith>when it was satisfying primitive lives, when it was building heavy industry. <v John Kenneth Galbraith>After all, it built the second greatest industrial system in the world in the Soviet <v John Kenneth Galbraith>Union. But that socialism does not work <v John Kenneth Galbraith>for the mo- the command structure of the economy, the planned <v John Kenneth Galbraith>economy does not work when you've got to the great multiplicity, <v John Kenneth Galbraith>variety and change- constant change of <v John Kenneth Galbraith>the consumer economy. And as those countries have moved into the consumers goods economy,
<v John Kenneth Galbraith>they have had no real alternative to the market. <v John Kenneth Galbraith>I know that you read Marx regularly and you may have- <v Louis Rukeyser>A few words before going to bed every night. <v John Kenneth Galbraith>I know that you have never encountered anything in Marx which suggested that well styled <v John Kenneth Galbraith>women's clothing and cosmetics and automobiles would be <v John Kenneth Galbraith>objects of proletarian demand. <v John Kenneth Galbraith>And that is what has happened. And for that, the markets is <v John Kenneth Galbraith>the only available mechanism. <v Louis Rukeyser>Another reason for disliking Marx. <v Louis Rukeyser>Now, let me ask you about George Bush. <v Louis Rukeyser>You were not a great fan of his predecessor. What do you think of George Bush? <v John Kenneth Galbraith>Well, George Bush is bringing a- uh <v John Kenneth Galbraith>something that is not entirely new, but he certainly has a strong commitment to <v John Kenneth Galbraith>it. And that is to assume that almost any problem will lend <v John Kenneth Galbraith>itself to a really good speech. <v John Kenneth Galbraith>We've had the most wonderful example of that in the last week with the drug problem.
<v John Kenneth Galbraith>Which uh involves nothing new, but did produce <v John Kenneth Galbraith>a really eloquent speech. And I understand the president's not going out and making some <v John Kenneth Galbraith>more of them. <v Louis Rukeyser>Is it your view then that he hasn't done much? <v John Kenneth Galbraith>I would not on this program want to make any partisan comment, but if you insist on <v John Kenneth Galbraith>the point, I'll agree. <v Louis Rukeyser>How do you explain the fact that Ronald Reagan, who stood for most of things you have <v Louis Rukeyser>opposed, left office with such popularity? <v John Kenneth Galbraith>Oh, no question about that. It was Ronald Reagan was our first <v John Kenneth Galbraith>president in our great theatrical tradition: uh <v John Kenneth Galbraith>Hollywood. And he did a magnificent job of substituting <v John Kenneth Galbraith>the script for the reality. Uh this is- this is <v John Kenneth Galbraith>his lifetime commitment, his lifetime achievement. <v John Kenneth Galbraith>But now we're beginning to see in the S&L bailout <v John Kenneth Galbraith>and in HUD and the Pentagon scandals
<v John Kenneth Galbraith>and they of course, the continuing deficit, the problems <v John Kenneth Galbraith>of our central cities, the legacy of Ronald Reagan. <v John Kenneth Galbraith>We're beginning, in other words, to have moved from Ronald Reagan's wonderful script <v John Kenneth Galbraith>to the considerably sadder reality, a very serious point. <v Louis Rukeyser>Did you anticipate a generation ago that complaining about the deficit would become a <v Louis Rukeyser>Democratic Party issue? <v John Kenneth Galbraith>Uh. Yes, I uh- I'm a fiscal conservative <v John Kenneth Galbraith>when a conservative- conservatism is required. <v John Kenneth Galbraith>There certainly are times when you want to expand the economy <v John Kenneth Galbraith>with an excess of with- with- with a substantive contribution <v John Kenneth Galbraith>by the government to demand. And there are times when you want to put that into reverse. <v John Kenneth Galbraith>I would like to see the deficit substantially reduced. <v Louis Rukeyser>We have a supply of excellent panelists here tonight, so I demand that they now ask you <v Louis Rukeyser>some questions.
<v Frank Capiello>Professor, 1 of the big problems we've had in the past 20 years is Japan. <v Frank Capiello>They continue to dominate our markets. <v Frank Capiello>They buy our companies. <v Frank Capiello>Will that continue? Is there anything America can do to prevent this or slow <v Frank Capiello>it? <v John Kenneth Galbraith>Well, this is related and of course, to the deficit, isn't it? <v John Kenneth Galbraith>We're putting uh- we have the 2 twin deficits, <v John Kenneth Galbraith>which is very large measure to go- go together. <v John Kenneth Galbraith>The budget deficit, high interest rates, they- <v John Kenneth Galbraith>flow that they passed effect of that on the strength of the dollar <v John Kenneth Galbraith>and the resulting trade deficit. <v John Kenneth Galbraith>And I would- I would think that the most important <v John Kenneth Galbraith>thing we do- I've long felt the most important thing we need to do is put our own fiscal <v John Kenneth Galbraith>house in order. Now, beyond that, we have to recognize <v John Kenneth Galbraith>that there is a more fundamental development here. <v John Kenneth Galbraith>For the last hundred, 150 years, there has been certainly
<v John Kenneth Galbraith>this tendency for work labor intensive <v John Kenneth Galbraith>manufacturing, mass manufacturing to move from the old countries to <v John Kenneth Galbraith>the new. It moved from Europe to the United States, moved to the United States to Japan. <v John Kenneth Galbraith>And one can't go out to Japan now without seeing that it is moving now on to Korea, <v John Kenneth Galbraith>Taiwan, Malaysia, so that there is a broad movement there, <v John Kenneth Galbraith>which I am forced to say we probably have to accept. <v James Grant>Professor Galbraith, Robert Heil- <v John Kenneth Galbraith>I must say, I dealt with him very well. <v James Grant>You did very well. <v Frank Capiello>Cooled me off, right? <v James Grant>Robert Heilbroner, like you, a man of the left who can write, said recently that in the <v James Grant>75-year race between capitalism and socialism, that capitalism had finally won. <v James Grant>Do you agree? <v John Kenneth Galbraith>Well, I wouldn't put it quite those terms. <v John Kenneth Galbraith>I would say that what has happened, <v John Kenneth Galbraith>and I feel very strongly about this is that both socialism and
<v John Kenneth Galbraith>capitalism have discovered that the old ideology, <v John Kenneth Galbraith>the old rigorous rules do not hold. <v John Kenneth Galbraith>We have discovered that there are some things which must be done <v John Kenneth Galbraith>by the state. That must- there were some steps that must be taken <v John Kenneth Galbraith>in the direction of greater social concerns. <v John Kenneth Galbraith>And- and the socialist countries have discovered, as I was <v John Kenneth Galbraith>instructing, Lou, just a little while ago, that socialism <v John Kenneth Galbraith>does not work for the diverse changing consumers goods economy <v John Kenneth Galbraith>and those that- that I would- that is the way I would put this- that the uh discovery. <v John Kenneth Galbraith>Rather than in terms of the conflict between <v John Kenneth Galbraith>structure, I think one has to go beyond that. <v John Dessauer>Professor, we've got the dollar very strong this week. <v John Dessauer>And for some time now, the central bank keep trying to calm the currency markets down, <v John Dessauer>almost as a throwback to the days of the gold standard. <v John Dessauer>Is this a good idea or should we all be going our own way, let the currency go its own
<v John Dessauer>way? <v John Kenneth Galbraith>I have very little confidence in what central banks can do. <v John Kenneth Galbraith>Among other things, if they buy dollars and have to sell them later, they lose <v John Kenneth Galbraith>money. And central banks don't like to do that, oddly enough. <v John Kenneth Galbraith>And the uh extent of central bank intervention is small <v John Kenneth Galbraith>quantitatively in relationship to the much larger influences of <v John Kenneth Galbraith>trade and capital movements that affect the dollar. <v John Kenneth Galbraith>So while I appreciate the delight which my fellow economists <v John Kenneth Galbraith>have and talking about that matter, I don't take it seriously. <v Louis Rukeyser>Ken, we have less than a minute left. You have written acutely over the years about the <v Louis Rukeyser>instability of the stock market. We've had evidence of that fairly recently, but <v Louis Rukeyser>you in fact keep a large body of your own life savings there, do you not? <v John Kenneth Galbraith>I think the most- this is a good point to end on. <v John Kenneth Galbraith>The most important thing to know about the stock market is that theologically <v John Kenneth Galbraith>we must believe it is perfect. <v John Kenneth Galbraith>And in fact, there are large elements of lunacy there.
<v John Kenneth Galbraith>And the recognition of lunacy is something which can be personally <v John Kenneth Galbraith>quite rewarding. <v Speaker>[laughter]. <v Louis Rukeyser>And you invest for, one takes it, for the longer term. <v John Kenneth Galbraith>Uh I invest on the assumption of market imperfection. <v John Kenneth Galbraith>But, I don't get- I actually I- I- I leave much of my uh uh <v John Kenneth Galbraith>life accumulation, which is not all that great, to other people. <v Louis Rukeyser>Thanks very much, John Kenneth Galbraith. <v Louis Rukeyser>A pleasure, as always, to hear from you. <v Louis Rukeyser>Hope you'll be back next week. Then my guests will be one of Wall Street's most <v Louis Rukeyser>influential analysts, Robert S. Solomon Jr., who runs the stock research department at <v Louis Rukeyser>Solomon Brothers. And he's going to be giving us his forecast, which I assure you, <v Louis Rukeyser>everybody's brother and sister will want to hear. <v Louis Rukeyser>You might have seen Wall Street Week. I'm Louis Rukeyser. <v Louis Rukeyser>Good night. <v Speaker>[music plays] <v Narrator>Wall Street Week with Louis Rukeyser <v Narrator>has been made possible by the financial support of viewers like you and <v Narrator>by Prudential-Bache Securities, the investment firm with rock-solid resources and
Wall $treet Week with Louis Rukeyser
Episode Number
No. 1910
Galbraith on the Economy
Producing Organization
Maryland Center for Public Broadcasting
Contributing Organization
Maryland Public Television (Owings Mills, Maryland)
The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia (Athens, Georgia)
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Episode Description
Panelists include Frank Capiello, John Dessauer, and James Grant.
Series Description
"Wall $treet Week with Louis Rukeyser is now in its twentieth season on public broadcasting. This series was not only the first on network television, but is still the most popular in the field of business journalism. "In fact, the program has more viewers than The Wall Street Journal has readers. For two decades, the program has presented a veritable who's who in economics, business, finance and the markets, and we believe it should be recognized not only as a trailblazer, but as a continuing source of essential economic and business thought. "Mr. Rukeyser is the dean of public affairs hosts on public television and has interviewed nearly every opinion leader in his thirty-five years in journalism. "The program enclosed, which was broadcast last September, featured the noted economist John Kenneth Galbraith, and its another in our continuing attempts to present the widest array of economic and business thought."--1989 Peabody Number entry form.
Broadcast Date
Created Date
Asset type
Talk Show
Media type
Moving Image
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Copyright Holder: MPT
Producing Organization: Maryland Center for Public Broadcasting
AAPB Contributor Holdings
Maryland Public Television
Identifier: cpb-aacip-546cf9eb543 (Filename)
Format: Betacam
Generation: Master
Duration: 00:26:46
The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia
Identifier: cpb-aacip-40d3285d52f (Filename)
Format: U-matic
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Chicago: “Wall $treet Week with Louis Rukeyser; No. 1910; Galbraith on the Economy,” 1989-09-08, Maryland Public Television, The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC, accessed June 28, 2022,
MLA: “Wall $treet Week with Louis Rukeyser; No. 1910; Galbraith on the Economy.” 1989-09-08. Maryland Public Television, The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Web. June 28, 2022. <>.
APA: Wall $treet Week with Louis Rukeyser; No. 1910; Galbraith on the Economy. Boston, MA: Maryland Public Television, The Walter J. Brown Media Archives & Peabody Awards Collection at the University of Georgia, American Archive of Public Broadcasting (GBH and the Library of Congress), Boston, MA and Washington, DC. Retrieved from