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tv   Book TV  CSPAN  September 1, 2013 10:00pm-11:01pm EDT

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conversation going. throughout the month, we'll post discussion questionses, thring -- link to the interviews. booktv continues with meredith whitney. she talk about the relative nonimpact of the housing crisis in north dakota, indiana, and texas. ..
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>> the stock's eight 7% the ceo was fired a few days later and she became instantly renowned around the rubbishy has been around a lot longer. in 2005 you put out a report about the housing market we were headed for subscribe to the we just loaded up on so much debt that we were headed to unprecedented credit losses in 2005 well
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before anyone said the word bubble with the housing market after college 2007 she went on to make other calls about ups and lehman brothers said bank of america. i don't think hsbc. [laughter] but that landed near death on our cover of "fortune" magazine in 2008. things have not been the same for her since i would say but after that to turn the focus on another area of the economy of the trouble zone of stay in municipal finances working on a report in 2010 called tragedy of the comments how this was the next big danger area in that those that had over leveraged and have gone down
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the same path as the banks. she turn this report into a book called "fate of the states" the new geography of american prosperity." which is actually a more optimistic look at future of prosperity in this country and it has a lot of the novel and interesting ideas and that would lead to wealth of meredith a. and why do we start just talk about defeases the country is reorienting terms of who will do well in who will not. what does that look like you and why? >> it may not seem obvious to some people but it was the natural progression from need -- for me because i was driven by mortgage and had so much exposure in specific
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regions of the country that metal so that certain consumers were being targeted and had disproportionately more leverage than others in the country and in addition just like certain banks and individuals thought the home prices would never go down because they hadn't since the great depression, local governments were betting on the same things you almost saw a double leverage in the system with the individual coverage and then that the state puts audio through the current and future tax bill. it does make a very difficult to grow for an economy to move and be flexible. so in mid 2008 i would refer to the doom and gloom that is not my natural
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personality. [laughter] if i am so smart i should focus on the u.s. economy and look at how it would grow but it was clear it would not grow up in the way it had no past not in areas that were so beholden to do real estate or consumer the phrygian you have to appreciate for 2530 years the greatest export in the united states was leverage and housing so this is a profound change i wanted to find a resource i could compare state by state and it did not exist i looked through all three agencies everything i possibly find so i started to assemble a myself that is why the report from 2010 was so
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overwhelming and i looked at things like demographic trends how did the consumer look? what business is more in certain states in how they were growing or not growing because consumer spending unflawed -- influenced also to give a couple of statistics that i continue to find fascinating that consumer spending growth is growing 30% faster in the center of the country than on the coast why? because people have jobs and not over leveraged so that continues into a cyclical styled momentum creating more jobs in more consumer spending in more investment in this subject is so loaded it starts on the economic basis but goes to social services and education and poverty the most interesting
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thing i have never worked odd so when new areas are strong they invest in education. not by coincidence there are more job opportunities and more corporations want to move to those areas so that constitutionally it is discretionary that is education so use the high rate of unemployment that cut back on education on and why dash and social programs at the exact wrong time so this will affect us in profound ways you talk about minot north dakota you talk about how i even things are around the country with the
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metric great but tell us what you thought about that. >> guest: in this particular case a company moved out of this town because it could not find enough employees to fill the job. not even if available employees of certain areas than other areas with still double digit unemployment levels that is not counting the underemployed are those who are out looking for jobs. is a bifurcated economy and growing with that have us and have nots the united states has been as successful as it has been from the expanding middle class that is happening and contracting in other parts another factoid in 2006
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areas of 26% of gdp it is extraordinary how quickly things are changing in our economic strength goes from one certain area into others in the chains almost every level, operate as a country. >> one reason wrist a coded does well is part of the new growth area so what degree is it the organic raw materials for fiscal management? >> that is a great question. without a doubt his enormous challenge from the national gas revolution the energy revolution but there other
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things that are happening to which are you have the derivative defect production cost for manufacturers finally becoming more competitive in the west and other parts of the world so chemical companies say it cost 20% of the production cost of the u.s. as a dozen years of not only american companies move backed by your people and companies -- european committees -- companies moving back as well so now manufacturing jobs are coming back almost as powerfully as they left that is a bullish sign the of fact is that historically these regions were agrarian based so if you think of the cyclical locality so they
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have run with a conservative discipline in did not have the access baked into the and taliban programs or general government spending programs like california had think of the difference california until to three years ago had 150 years of uninterrupted population growth so they could spend a and do whatever the want. another stay at that incredible economic report. oklahoma clearly did not have the boom or the bust and operates at a lower debt level with the tighter discipline. >> host: what about new york? verge of a stanford york state court in new york city? >> a thank you have new york
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city and the rest of new york state falafel of economic prosperity that is very dependent ec population declines not as extreme but pretty close to it as detroit i believe it is binghamton with its population since 1950 when you have not many jobs over there is an for social services that people rely on that they want to have in order to move their so it is very negative. new york has contracted with incredible foreign investment in a bluebird has
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done a great job trying to diversify the economy as much as the key and the you cannot compare what is going on it in the york city or upstate new york with american in space some. >> to real-estate prices tell a different story. tell us a little bit about detroit what about them a filing for bankruptcy? do you think this is something we will see that is locally centered around the country? >> how i look at this stage is how in the company's i think it gets better every year but the problem has it
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change. with a financial crisis through the end of 2008 i waited to the end to talk about bear stearns added the kit would be constructive for me to shoot down the company's walkover yes of of a but specific to day trait when i released my report detroit and several other large cities were on my radar screen so was i surprised? yes. when you involve the government being sometimes take long did you expect but detroit did not have enough
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revenue to cover their expenses so lot of this has been a decade in the making. looking back was the investment recovery act that gave states nearly $500 billion in that bought time but that did not change the structural problem of the city's. see you have issues if there was a 24 or 26 unemployed rate? and what i said that was so.radically different here in 2010 that had people a agree with me was that filled the ocean history would not be a good indicator that legally
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states give constitutional backing to their pensioners but not backing to anything else so for discretionary spending like education or any of those things as a taxpayer you feel you've paid many should get the services so i knew that taxpayers would take the first page of the loss would finally say enough is enough either those tax revenues don't support the expense or there with a wire they getting $0.100 on the dollar i get $0.50? new york with the bondholder get $0.100 and i get $0.50 worth of services? something would have to give.
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if something gave in detroit's klay -- case is sent a very important precedent across the country wine investor described it because it created important precedents. >> my book is called the end of the suburbs there is a part that there is a theory that the suburban development the tax structure is a ponzi scheme that the cost to put the infrastructure is in is not covered by the tax revenue the only way to cover it is more growth. this person in minnesota is a huge fan of yours he cannot believe licet i knew you and your his hero.
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are these issues exactly the same in the cities as the suburbs? and they consisted are slightly different? >> here is the danger for the suburbs. the state's are the house in the casino they control everything 35 +% of local money comes from state distribution and what has been so effective over the last year plus was cutting off money to localities and they don't have the many to meet the social services that are required. so they have to clap -- clap social services to close the
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library and the schools close the park so that has happened throughout the country. so localities rely on property taxes but this market just blasted so many parts of the u.s. economy is you cannot generate at the same time some of the localities did was a natural reaction to raise property taxes but it was a onetime fixes in social services are worse the property values have suffered, you'll pay more for a house in percentage with the services but then it is negative. >> host: we are now eking dalhousie recovery will we get it right this time to end up third in a situation like before?
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caduceus the future and do we need to prevent that rushing into home ownership as the end all and be all? >> guest: we have discussed that links the american dream being distorted the beginning of the 20th century to promote home ownership when my immigrant relatives came here to have a better life get a better job to have religious freedom that was distorted but it seemed like everybody was in on that politicians, corporate america 71% of u.s. gdp is
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driven by back i say this about your book you have one of the greatest paunches of u.s. government that entire environment post a 2008 housing policy has been an unmitigated disaster there are real structural problems that have not been addressed >> host: what is the biggest? >> government crowding out the mortgage market. with the perpetuation of fannie and freddie and the government agencies that are not creating a health the mortgage market so they have rebounded from extremely low levels you have strong root refinancing and government policy with assets purchase
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program that motivated more people these are the rich people in this has done nothing for the formation for the people to go out and buy a home eventually do household formation to zero out and buy homes said last week there was a startling statistic that 31 percent of the people between the ages of 18 and 31 our the highest on record the big and home and if you look at the nuts and bolts the mask does not work. with moderate and surprising discretionary spending that also explains most savings rate in a think there is so
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many structural problems that basically papers over a bad situation put the silver lining is 26 percent of the economy is not housing dependent it is growing like the merging markets hedged with the low rate interest-rate policy the last two and a half months while the fed talks about pulling back from raising rates or what that the virgin markets have been crushed not the u.s. economy you have the same group this save nominal gross with the inflation hedge i have never seen before in my career. there is enough good stuff going on to be excited about the u.s. economy but you have to know where to expect
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it. parts of the country better acting like nothing has changed homebuilders' own 45% it is another gimmick i want to stick to the structural problems first. >> i had more political support from this book and i thought i would really be in trouble but i have had the opposite response from the elected officials now hope we they have the political will. >> host: url a fundamental scowl to be honest she does talk with so many facts and details. i never told you before but it is true.
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going back to home ownership the part of the young people is fascinating that they're not leaving there parents' homes impacting the whole housing market literally the home builders are building extra suites so the young adult children can live at home with their own insurance the in-laws week is now being built for the children so this problem will be with us for quite some time. the hall motorship rate in your report -- home ownership rate went from 64% at 69% and nobody said it was crazy at the time and now here we are 2013 it exploded down as 65 where is it going? is it a permanent had new
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normal or will let bounce around? >> guest: so controversial but my housing call if you look at the correlation between home prices with any other variable was home ownership rate suggests that simple supply demand dynamic was close as 70% now hovering around 65% you always think it will overshoot the to the down side it is taking town but the foreclosure is down but you still have high inventory the mortgage market is now working with -- not workingman you have those lenders that want to make mortgage loans so how
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can it possibly go up? i think directionally could only go down by a boy is believed the affordability index not a lot of people credit the bottom title think it tells you that much. >> we were writing or books around the same time she got hers a couple months ahead of me every couple minutes we would get on the phone issue within days and give me advice in saving you get here you will notice this and sure enough i did. it was great to have you as a sounding board and it was great to hear you as an analyst the researcher and data person to see you go through the process that turns the information into a story and a narrative so was
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that a challenge for you? you had two years' worth of data and then more on top of that how did you meet that challenge to turn that into a book? >> i dramatically underestimated whole book writing process it is really hard to write an interesting book. i was sure that i would be accused of writing not it interesting research report but to put that into a book which the whole point was to empower people who don't read my research those who are smart about a ton of things but have never thought about this before i hadn't before 2008 so i would call leigh gallagher i
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would be so out at a loss of you were so called a gracious say no please listen to me because you will get to this we were so supportive is really, really hard he and it is a long the process because for me i have a day job live do this on the weekend and at night yet it is never good enough. key findings that interesting but my book is only 300 pages it changed my view about whole writing process i am very glad i did it i don't think i will be in a rush to do it again but i of glad i did it. number one is because it is such an incredibly important issue from a competitive steel point i could not
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believe i was the only one riding this way again about such a powerful subject injustice began of five years during the state's issue the calls that were so controversial and a few years later there is nothing controversial about it. the trace files for vagrancy now it is not that controversial a topic anymore. what this does to the country into the social divide a and class divided embraced abide is enormously important for people to learn about. >> host: if anybody has questions get them ready we will come right back but i and assessed with the
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writing process your firm that you were the seal and has many employees when did you fit that did? warnings? what was the witching hour? >> i thought the process would be easy to work with writers entered my research over to them if it would work out well that did not work so i ended up bombing out critical mass said shaping that it was just getting the volume down into the theme i want to work with those teams are very important so i had all the
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research done but it was getting into a story that works another mutual friend of ours who had written a story cave in and helped me at the end and was so enormously helpful and fun to work with so then it is always easier to edit somebody else's work he would edit my work and i would edit his so that is what created the book. >> you got the indoctrination into journalism welcome to writing. >> it is not easy. [laughter] this is why the stereotypes of the writer is so fraught. "this is it" you really experience it because you did write yourself with his help that the and but you did do a lot of the work
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yourself and i commend you for that. >> the easiest parts were getting the interesting stuff about the states but the hardest was righty anything about myself i was entirely uncomfortable, and had done a number of offers to write a book after the financial crisis and they had no interest but i believe in this topic and john forced me to put stuff about myself that was very uncomfortable with. >> i put a lot of my own childhood into the suburbs but that was my favorite maybe i am more of a narcissist. [laughter] >> in your research stage
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you figure the savings-and-loan collapse? maybe you were too young but did you discover why it happened? >>. >> that was due to regulatory reform that allowed the market to become more concentrated the whole point was to promote home ownership but that went on steroids saw a the end of the second or third chapter with the analysis of the united states how we're the only market in the world with a 30 year mortgage why we have that makes monthly payments loader does that make sense? probably not indigos through
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all of that's. i also go into from the mid-90s through 2007 at least we had them as regional banks but with the interlay -- a state baking laws teams you had so much consolidation the big banks this supermarket was not only originating products but also selling them and selling them around the world is easier than originating so they would buy more and more if you look at merrill or ubs during that time it was not the deaf there were not originators the citigroup was the same way and that is a preview of what happened
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in the l 90s then it made a difference of leverage with two or three times the leverage in the 2000 period during the s&l crisis that is the short and sweet version the housing crisis we are not out of it and that started 2006. >> do think we have a steady enough to make sure it will not happen again? >> no. absolutely not. you have one trend, the consumer side over 32 percent of americans either have no access are limited access to the banking system so 20 percent of americans with home-equity your mortgage relationships have been
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kicked out of the system. imagine 20% of baking accounts are in the shadow of the market that slows down to a snail's pace the what has caught up is the commercial lending market the junk-bond market that is out of control right now. i don't think the impact will be as prolific if you look bad-- severity issue of the housing industry but bubbles all over the place to the lending market in the bond market they will be problematic the biggest is how we weeder cells from low interest-rate environment.
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>> i don't know if you were offered the opportunity to follow-up with 60 minutes what would you like to say? >> my "60 minutes" interview was 90 minutes i think they aired three minutes of it. i don't have a control of their editing process but hopefully i have given some sense of what is so much bigger than one specific market. so much of the american economy the taxpayer experience, a mortar experience cover children children, people living on retirement benefits is a
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factor in that. i did not ask leigh gallagher the questions should ask me before the interview i think it is it important initiative to say it happened it was something different than what i said in the interview is. >> did your book you talk about low debt and low taxes and spending that they're not sure they will grow faster in the future that you have to foster education id innovation infrastructure but in the '70s they had no debt and taxes they're more like a goal of a and
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singapore. >> i will give you some numbers if you look 2008, 2009 the texas economy has grown, over 14 percent, north dakota 44% come all the regions have grown exponential parts of other parts of the country and also what you see is companies moving into these areas. by the way every 60 years u.s. economy goes through this transformation that is a great testament to its resilience but the u.s. economy has never been more mobile sealock key and schuster live places you don't need to be on the
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system as you did in the 1700s you don't need to be by the coal producer you could be much more mobile if you think about it with the energy revolution but think of california tech companies so many have built facilities not because of energy but it is easier in texas and california has become so prohibitive the states are competing more aggressively than they ever have to attract businesses and what i originally thought back in 2010 i had no idea i would create a book but for businesses to compare and contrast with a wood want to invest to build
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facilities. it is absolutely happening there is more and more evidence showing the growth is absolutely overweighted over the coastal states but the point of education is spot on. areas of the country that have low high-school graduation rates you don't have the infrastructure you would want but they also have from the highest revenue surpluses going into investing with those projects so if i would attract you to my state if it is wyoming, they will attract your business a much larger income-tax i have stated the art schools because of all of my natural gas exposure.
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it is a redistribution of opportunity for the west which is pretty romantic. >> with the golden classic glass-steagall why won't they put that back in? >> called for is the advocate to recreate but i don't think his is happening with that black-and-white fashion where you have the laws that separate commercial banking and consumer banking but what is happening in did different way is one of my favorite
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people is the fed president of kansas city tom donate that is having institutions be specialized and when not we have the best system in the world so as capital markets has been one of our best exports that everyone agrees with that but it you have now capital requirements keeping certain banks out so effectively you do with the hard way in the they serve fighting with the regulators to finagle but we are going in the direction if that banks like kidder not. they don't like it but or not. >> on the flip side they're very successful to get the big banks to get smaller but they are preventing small banks from getting bigger we
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need as many americans to have access to fair credit in the banking system as possible that as well lubricates the system. >> do you find it politically and financial institutions are more difficult to price for consumer right risk post foreclosure crisis or credit-card crisis? if so will that replay with the state's going into default with financial institutions having relationships no competing to get a discount and how will that play all politically? >> that will be very messy. i had written extensively how dangerous the regulators
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have been with ideas and institutions with consumer credit so in 2009 it completely eliminated the lender's ability if you're not a public institution will not take the risk and $2 trillion of available credit taken out of the system is not constructive that is not the 7 trillion that was charged off so there has to be some type of happy medium but the worst unintended consequences that shadow lending industry it is emerging in people were getting credit talk about a
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theory of displease me a close one door someone will open another a and charged for me so you have more regulation driving consumer lending through the rest -- less regulated market it is dangerous and unfortunate in the drives me nuts the with the state's i think the municipal bond industry it is dirty, opaque, a correction it is associated with all the time. what happening then you have those in the industry what ends up happening now there well-capitalized the state's
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municipalities will sue the bank so for five years ago line in the league -- maligned -- milan, italy but they jpmorgan we did not know what we we're doing that to have a tightly controlled market with very little transparency is a hornet's nest for some really messy lawsuits because they will go where there is many. >> there is a lot of discussion who will run the federal reserve what do you think would be best for the economy? [laughter]
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>> might bias would be thomas honig but i think it will be larry summers. >> thank you. that was an excellent presentation. thank you. we will have the authors sign books in we will see you next week. >> the united states of paranoia here is a book the
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author is jesse walker for a reason or american is a paranoid people? >> it is part of america for as long as there has been come i cannot speak to the and reported i assume it was there in the colonial days it is filled with political theories the conspiracy theories i've no more than in the other country the book is about the america for all i know the french are paranoid but. >> just because you're paranoid does not mean you're not being followed so is there legitimacy? >> people do conspire that is part of life one reason well we'll always have conspiracy theories are conspiracies it is not like the fear of vampires dying
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out there are always examples i have a chapter after watergate revelations came out about the cia and fbi and irs who has come up again recently but what else to try to do is look at the conspiracy theories that say nothing true about the object butter still considered true of the anxiety and that people that it doesn'ttcc list people feel the reason to believe it. >> host: a contemporary example? >> all sorts that involve plotted against americans will naturally appealed to people who feel like they are losing control over their lives or the
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metaphorical way even if it wasn't directed by 13 people in a secret room but the a dia that white doctors would inject black babies with aids but it could catch on because those that had abusive treatment at the hands of white doctors and also powerful people have conspiracy theories as well it is not the nature of the french put the spectrum in the center said they have all these examples of people that are very much afraid and they were worried that
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the slaves were conspiring and then rebeling so we had trouble discerning sometimes which ones were real and which ones for the slave masters getting along? >> what about the contemporary neither levin conspiracy theory of building seven? deal look at that? >> briefly but i cite a couple of discussions but couple of discussions but there is a lot of talk -- a lot of talk they're interesting also a sideshow because someone could spill coffee neece weeder and then they thought would after -- anthrax but now we commit back to say it was a little over the top navy we saw
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something in the mailbox it turned out to be somebody science project action after the world trade center may be that neighborhood was not the preferred target but better safe than sorry but but maybe to think to confiscated just in case but that is the paranoia that i discuss in the book because it is easy to say look at the crazy people in there are crazy folks in that book but all sorts of everyday people who watch c-span, they can be gotten a different times then realized later it was over the top. >> host: the revelations of the nsa and the irs
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should they be paranoid? >> i don't encourage people because certainly it is good to be skeptical in ibm good -- all for good solid investigative reporting. >> host: what of your favorite conspiracy's from our history? >> so many interesting things are what you would not expect like john quincy adams was a freemason that there is a'' said the election of 1832 that no matter who wins the election i don't remember the exact phrase with the encroaching
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power budget to discuss the less familiar figure but certainly interesting to read about was a man in the '70s said that he would tell the very elaborate stories from the rockefellers to denny's with the collective meaning this is nine rand was to be a communist which have been he went to jail but that is a colorful story itself but then the into the mainstream in the '80s and people went to jail in
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serious news programs did not go as far but actually came pretty close at times. >> host: andrew jackson was part of a conspiracy theory? >> i open the book with him he survived an assassination attack richard lawrence tried to shoot him and afterwards he became convinced the senate race had hired the assassin at the same time they thought maybe it was a false flag attacked in that is why the guns didn't fire and it was never proven but he ended up dying decades later but it when you read those accounts
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it sounds like the suspicion after the jfk assassination. >> host: when jfk was assassinated what happened with this country in regard to paranoia? >> people were already paranoid there was a fear of the radical right that was building there is a belief that lee harvey oswald that turned out to be a communist but then other people said they would plug into the cold war fear then the theories that would start to come up you could actually get fearful that after all the other things to talk
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about the urban riots they would pile one on top of another. >> host: what is your day job? >> book editor of "reason" magazine so i am doing for previews and doing other editing and also freelancing for other places. >> host: what are the upcoming book titles? >> we just had our 45th year anniversary issue we asked a number of people eager scholars were the two best books in your field that have come now in the last 45 years we got some good answers and people can go to visa in doubt, --
11:00 pm it will be on the newsstands. >> host: this is your second book conspiracy theory. jesse walker is the author ian here is the cover. . .


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