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Speaker 1: This is Masters in Business with Barry Ridholts on Boomberg Radio.

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Speaker 1: This week on the podcast, I have an extra special guest.

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Speaker 1: His name is Binya apple Bound, and he is quite

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Speaker 1: the expert on central banks and their policy and the

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Speaker 1: history of economists UH in America. UH. Both his book

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Speaker 1: and our conversation is quite fascinating. It traces the pivot

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Speaker 1: in American history from where economists are really part of

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Speaker 1: a softer social science and not really thought of as

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Speaker 1: a heart science and don't have a whole lot of

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Speaker 1: influence at most levels of government or the monetary apparatus,

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Speaker 1: to the point in let's call it the nineteen eighties

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Speaker 1: where all of that changes, UM, maybe even in the

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Speaker 1: nineteen seventies, where where there was some influence on presidents

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Speaker 1: and some major policies, and the past fifty years can

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Speaker 1: really be thought of as the economist hour. How the

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Speaker 1: economic class has economist class has very much influenced public policy, politics,

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Speaker 1: fiscal policy, UM. Just pretty much the entire of American

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Speaker 1: society can trace a lot of what's taken place UH

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Speaker 1: to the economists and their influence, which appears to be

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Speaker 1: coming full circle and starting to wane. So I found

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Speaker 1: this conversation to be absolutely fascinating as I did the book,

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Speaker 1: and I think you will as well. So, with no

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Speaker 1: further ado, my conversation with Binya Applemum, this is Masters

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Speaker 1: in Business with Barry Ridholts on Bloomberg Radio. My special

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Speaker 1: guest today is Binya Applebaum. He is the lead writer

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Speaker 1: on business and economics for the editorial board of The

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Speaker 1: New York Times, where he has worked since He is

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Speaker 1: the author of a new book, The Economists, Our False Profits,

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Speaker 1: Free Markets, and the Fracture of Society. Benya Applebaum, Welcome

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Speaker 1: to Bloomberg. Thanks, it's great to be here. Let's start

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Speaker 1: with your career. Where where did you begin as a

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Speaker 1: writer out of college? My first job was at the

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Speaker 1: Florida Times Union in Jacksonville, Florida. I covered the news

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Speaker 1: beat in a county outside of Jacksonville. The news beat

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Speaker 1: meant anything that happened was my problem ad to write

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Speaker 1: about it. So that includes crimes and crime, government, forest fires,

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Speaker 1: county fairs, school board meetings, you name it. It was

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Speaker 1: my problem. When did you first start focusing on economics

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Speaker 1: and business? After Jacksonville, I moved to the Charlotte Observer

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Speaker 1: and the managing editor called me in one day and

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Speaker 1: asked me if I wanted to cover banking, and I

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Speaker 1: was a little skeptical, but he told me, Hey, you're

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Speaker 1: the new banking reporter. So that's that's how it began.

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Speaker 1: Did you have any academic background or any training in

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Speaker 1: this or did they just throw you in? No? I

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Speaker 1: didn't really. I got thrown in blind. I didn't know

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Speaker 1: much about the subject at all. It was really one

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Speaker 1: of the things I love about journalism is the opportunity

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Speaker 1: to learn and to study as you work, and so

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Speaker 1: it really was an immersion experience. I learned as I

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Speaker 1: as I worked. So what was the process like becoming

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Speaker 1: I'm looking for the right word. Maybe it's a depth

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Speaker 1: at covering banks because they're kind of a squishy, yeah

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Speaker 1: group to pin down. It's not the easiest topic to cover.

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Speaker 1: First story ever wrote I didn't get the millions and

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Speaker 1: the billions straight, so there was there was a learning curve,

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Speaker 1: for sure. It was fascinating, you know, Charlotte. In those years,

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Speaker 1: Bank of America and Lacovia were both there and and

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Speaker 1: warring with each other, and I was sort of the

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Speaker 1: center of this rapidly growing industry. And it was completely

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Speaker 1: fascinating to be there and to be writing about it.

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Speaker 1: And now that's become sort of the southern headquarters of

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Speaker 1: the banking industry, hasn't it. Yeah, it really is. It's

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Speaker 1: a remarkable story how Charlotte came to be a financial center,

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Speaker 1: really interesting story. But but to be there in that

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Speaker 1: financial center with all of these bankers sort of trying

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Speaker 1: to figure out the path of the industry and innovating

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Speaker 1: and competing, it was. It was an exciting place to be.

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Speaker 1: So from covering banks in Charlotte, that's not a giant

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Speaker 1: leap to covering the biggest bank of all the Federal Reserve?

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Speaker 1: How did that transition happened? So it basically evolved through

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Speaker 1: the financial crisis. I spent a lot of my time

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Speaker 1: in Charlotte writing about mortgages and the financial crisis, went

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Speaker 1: to the Boston Globe, where I continued to do that.

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Speaker 1: Then came to the Washington Post the week that Fannie

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Speaker 1: and Freddie were taken over by the government as the

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Speaker 1: paper's national banking reporter, and I covered the financial crisis

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Speaker 1: for the next eighteen months. About two months after I

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Speaker 1: got to the Washington Post, the paper sent my wife

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Speaker 1: a box of chocolates with a note saying, you know,

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Speaker 1: we're sorry you haven't seen been your recently. Maybe again someday.

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Speaker 1: So that was an intense period. Uh. And then I

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Speaker 1: came to the Times in initially to cover financial regulation,

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Speaker 1: but then was asked to move over to the Federal

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Speaker 1: Reserve as as Dodd Frank came into law and and

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Speaker 1: those issues started to settle down a little bit. So

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Speaker 1: inven I basically began covering the Fed and monetary policy.

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Speaker 1: And what was that like, all of a sudden, now

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Speaker 1: you're the New York Times reporter for the Federal Reserve.

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Speaker 1: That must have been quite heady, A ton of access

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Speaker 1: I assume to seeing your FED people, governors and chairman

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Speaker 1: and others. What what was that like? Yeah, you feel

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Speaker 1: a real responsibility. I don't know if I felt so

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Speaker 1: much heady as as sort of a little scared at first,

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Speaker 1: because a lot of people are counting on you to

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Speaker 1: accurately represent what the FED intends to do, what it's communicating,

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Speaker 1: and you do have a lot of access that the

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Speaker 1: FED takes very seriously its efforts to communicate and and

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Speaker 1: to convey its messages. And one of the ways it

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Speaker 1: does that. One of the primary ways it does that

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Speaker 1: is through big media outlets like the Times or the

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Speaker 1: Journal or Bloomberg. And it works very hard to explain

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Speaker 1: itself to people like me, people in my job. And

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Speaker 1: so yeah, you do get to spend a lot of

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Speaker 1: time with the leading figures and monetary policy talking to them,

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Speaker 1: picking their brains, trying to understand what a thinking. It's

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Speaker 1: frankly fascinating. Uh And and it was really an interesting experience, particularly,

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Speaker 1: you know, when the FED was in the middle of

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Speaker 1: this sort of tumult and trying to figure out how

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Speaker 1: to deal with a new set of economic circumstances. So

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Speaker 1: this new transparency, as some have called it, is very

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Speaker 1: much a sea change from what the world was like

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Speaker 1: forty years ago. There were no press releases. There certainly

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Speaker 1: wasn't a press conference. The fed open market activity can

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Speaker 1: effectively be seen in how prices on the short end

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Speaker 1: of the bond market would move. That was pretty much

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Speaker 1: the only way anyone had an idea that the FED

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Speaker 1: was doing anything. How different is it today then, when

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Speaker 1: they seem to be cloaked in in mystery and secrecy.

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Speaker 1: So I wasn't around back then, but I think that

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Speaker 1: A big part of the change is how much the

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Speaker 1: FED is communicating directly with the public. If you go

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Speaker 1: back four years ago, the person who had my job

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Speaker 1: was still spending a significant amount of time with Paul Volker,

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Speaker 1: had access to him, was hearing his thoughts, uh had

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Speaker 1: the opportunity to question him directly. But that wasn't happening

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Speaker 1: in a televised news conference. Volker wasn't going out there

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Speaker 1: and talking directly to the public on sixty minutes, or

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Speaker 1: you know, holding town hall forums or you know, all

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Speaker 1: of these innovations and FED policy that we've seen in

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Speaker 1: recent decades. So part of what happened at the FED

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Speaker 1: as that so many other institutions, is they realized, you know,

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Speaker 1: they could step out from behind the curtain and control

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Speaker 1: their own communications, speak directly to their audience. And obviously

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Speaker 1: they're doing that much more aggressively than ever before. I

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Speaker 1: don't recall Vulcan tweeting a whole lot. That wasn't He

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Speaker 1: wasn't big on that. But Jay Powell doesn't tweet either,

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Speaker 1: So maybe that's that the next FED chair will move

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Speaker 1: on to Twitter. Maybe, But there are a bunch of

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Speaker 1: Federal Reserve researchers and if you look, if you go

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Speaker 1: through any of the regional FEDS or the main FED,

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Speaker 1: there's a ton of stuff. It's a ton of content

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Speaker 1: they generate um that works. It's well into Twitter and

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Speaker 1: the blogosphere and eventually in the mainstream media. So it's

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Speaker 1: not like the FED is remotely quiet. They are very

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Speaker 1: active in to communicate their messages. And to be clear,

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Speaker 1: there was an intellectual revolution the FED at you know,

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Speaker 1: forty years ago again really believed that there was some

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Speaker 1: value and mystery that you didn't want to be too clear,

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Speaker 1: that you didn't want to tell the public exactly what

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Speaker 1: was about to happen. And there's just been this sea change,

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Speaker 1: you know. Ben Bernankie famously said that of monetary policy

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Speaker 1: is communications is managing expectations. That idea that the fed's

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Speaker 1: primary job is to communicate and to communicate clearly is

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Speaker 1: a new thing in the world, and they're doing it

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Speaker 1: in every way they can. So as you said, they're

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Speaker 1: on Twitter, h FED presidents wander around giving public speeches

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Speaker 1: all the time. There's a sense that some of this

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Speaker 1: is a bit of a cacophony, and and sometimes the

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Speaker 1: message gets lost in the noise. But they're trying that

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Speaker 1: this is now clearly the goal in a way that

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Speaker 1: it wasn't in an earlier era. So your colleague at

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Speaker 1: the Times wrote a fascinating piece in the headline was

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Speaker 1: a President at war with his FED chief, five decades

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Speaker 1: before Trump. The takeaway to me was, Hey, presidents have

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Speaker 1: been pressuring and arguing with FED chairs for a long time.

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Speaker 1: Only they kind of did it quietly and behind closed doors.

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Speaker 1: What what's your read of the battle between Trump and Powell,

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Speaker 1: the President and the FED chair And how different is

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Speaker 1: this than previous relationships. So that story is about President

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Speaker 1: Lyndon Johnson summoning William mc chesney Martin, the chairman of

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Speaker 1: the FED in the late nineteen sixties, to his Texas

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Speaker 1: ranch and literally shoving him against a wall and yelling

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Speaker 1: at him for daring to raise interest rates. So love,

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Speaker 1: our boys are dying in Vietnam because of you. Yeah,

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Speaker 1: well not really, but it certainly is. The President says

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Speaker 1: that to you, it should get your attention, and it did,

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Speaker 1: and it did so clearly. You know, if you go

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Speaker 1: back historically, the FED was essentially an arm of the

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Speaker 1: Treasury Department during World War Two, and uh, you know,

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Speaker 1: presidents in that era clearly thought of the FED as

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Speaker 1: taking instructions from them, and they were not afraid to

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Speaker 1: issue those instructions. And through Johnson and through Nixon and

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Speaker 1: even into Reagan arrow we have examples of presidents, as

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Speaker 1: you say, behind the scenes, but quite explicitly, directly and confrontationally,

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Speaker 1: putting pressure on the FED. I do think that there

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Speaker 1: was a change beginning in the eighties, but really taking

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Speaker 1: hold in the nine nineties where presidents concluded that that

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Speaker 1: things worked out better if you left the FED alone.

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Speaker 1: Not not that they changed their mind about wanting the

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Speaker 1: FED to deliver the best outcomes, but that they were

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Speaker 1: convinced that if you gave it a little bit of space,

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Speaker 1: a little bit of independence, that would be better for

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Speaker 1: the economy, both in the medium term and in the

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Speaker 1: long term. And so there was less of that kind

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Speaker 1: of communication. And I do think that we're now seeing

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Speaker 1: a reversion to an earlier pattern in which the Trump

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Speaker 1: administration is, you know, emulating much earlier presidential administrations in

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Speaker 1: in sort of explicitly telling the FED what it wants

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Speaker 1: and pressuring the FED to do it. And that's something

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Speaker 1: we have not seen in a long time. So so

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Speaker 1: I find this whole thing ironic for a couple of reasons. First, Um,

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Speaker 1: when he was a citizen citizen, Trump was complaining that

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Speaker 1: Yellen was keeping rates too low. She he I believe

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Speaker 1: the interview was she should be ashamed of herself, which

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Speaker 1: is kind of ironic because when her term came up

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Speaker 1: for renewal, he decided not to reappoint her, probably the

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Speaker 1: most devish member of all the people on the FED

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Speaker 1: that he could have put as as chair and he

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Speaker 1: put Um Clarida and Jerome Powell as as vice chairman

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Speaker 1: and chairman. I've argued they are certainly more hawkish than Yelling.

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Speaker 1: Is this now the Trump's Fed? Or is this still

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Speaker 1: an independent Fed? I think it is an independent institution

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Speaker 1: in part because Trump, as you say, was not hugely

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Speaker 1: intelligent about who he picked to run it. If he

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Speaker 1: had clear goals, if he wanted easy policy, he should

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Speaker 1: have picked policymakers who agreed with him. And to be fair,

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Speaker 1: To be fair, Yelling is short, and he said she

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Speaker 1: was too short. People think I make that up when

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Speaker 1: I say that, but he said that, and he said

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Speaker 1: it wasn't even behind closed doors. He said it publicly,

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Speaker 1: which is kind of kind of shocking, so he replaced

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Speaker 1: a dove with People have pushed back on me calling

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Speaker 1: Powell hawk. He certainly was more hawkish than Yelling. Is

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Speaker 1: that a fair I think that is fair. I would

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Speaker 1: not call him a hawk. I think, you know, you

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Speaker 1: don't want to overstate. And and we've seen the Fed

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Speaker 1: just cut rates. We've seen him, you know, talking about

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Speaker 1: his commitment to drive down unemployment and to create jobs.

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Speaker 1: I don't think he's anybody's idea of a hawk. But

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Speaker 1: it's certainly the case that the easiest way to have

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Speaker 1: continued to pursue easy policy under Trump would have been

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Speaker 1: to keep Janet Yelling in place. It's not, you know,

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Speaker 1: and and and in the way that Trump made his

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Speaker 1: early appointments, he certainly didn't pick people who were particularly

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Speaker 1: minded to cut rates. There are clearly voices on the

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Speaker 1: FED who want lower rates than j Powell. And and

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Speaker 1: Trump you know, has both you know, bloviated publicly about

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Speaker 1: how much he wants that, but then when he's had

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Speaker 1: the opportunity to do something about it, he has consistently

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Speaker 1: not taken advantage of those opportunities. To be fair. You

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Speaker 1: see Jerome Pale, he looks good in the suit, he's

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Speaker 1: got a full head of hair. He looks very chairman like,

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Speaker 1: and I suspect that those elements way heavily in a

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Speaker 1: president who tends to be focused more on the optics

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Speaker 1: and the television announcement moment and may not pay as

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Speaker 1: much attention as you should to the specifics of the policies. Again, otherwise,

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Speaker 1: he would have kept the diminutive statured yelling in place

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Speaker 1: his chairperson. It is clear that the president views himself

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Speaker 1: as a casting director. Yes, that's a good way to

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Speaker 1: discuss it. So you mentioned the independence of the FED.

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Speaker 1: Are they truly independent? Especially, say what you will about Trump,

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Speaker 1: he is very effective as a communicator. He is a

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Speaker 1: very strong tactician. Maybe not the world's greatest strategist, but

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Speaker 1: in terms of getting what he wants now, he seems

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Speaker 1: to be pretty good at that. Not to act philosophical,

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Speaker 1: but nobody is truly independent, and the FED certainly is not.

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Speaker 1: I think what we can say about the FED is

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Speaker 1: that it has been provided with a degree of insulation

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Speaker 1: to allow it to make short term decisions on the

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Speaker 1: basis of technical considerations. But its goals are set by Congress,

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Speaker 1: its officials are selected by the President, it is subject

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Speaker 1: to political pressure in a wide variety of ways. It

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Speaker 1: clearly thinks about politics as part of the considerations that

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Speaker 1: inform the direction of monetary policy. It is very easy

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Speaker 1: to overstate what independence means. We were discussing earlier some

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Speaker 1: of the pressures on the FED UM from the President

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Speaker 1: and and the impact that has our markets. Let's talk

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Speaker 1: a little bit about the pressure of the markets on

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Speaker 1: the FED. By all measures, the US has the highest

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Speaker 1: interest rates UM as a central bank and as a

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Speaker 1: bond issuer in the developed world, be in the entire

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Speaker 1: UH investment grade world. How does that impact what the

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Speaker 1: FED does, both both market forces and what other central

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Speaker 1: banks do. I think there's two sort of dimensions to this.

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Speaker 1: The first is that since the financial crisis, we've seen

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Speaker 1: the FED embracing a responsibility for being the world's central bank.

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Speaker 1: That was certainly true in the immediate aftermath of the

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Speaker 1: financial crisis, where UH you know, a lot of the

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Speaker 1: crisis era programs that the FED put in place to

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Speaker 1: provide funding, we're really about funding the global financial system

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Speaker 1: more than about funding American financial institutions. Meaning the concern was,

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Speaker 1: all right, we're starting to thaw here, but the freeze

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Speaker 1: elsewhere can certainly reach back and send this back down

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Speaker 1: the rabbit hole again. Absolutely, And so you know, this

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Speaker 1: idea that the FED has a responsibility for keeping money pumping,

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Speaker 1: not just domestically but internationally is clearly a part of

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Speaker 1: the sort of the modern era FED, and it's thinking.

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Speaker 1: The other issue is that if you get too big

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Speaker 1: a gap between the United States and Europe, just as

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Speaker 1: you just suggested, or between the United States and the

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Speaker 1: rest of the world, it starts to put pressure on

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Speaker 1: both the FED and the American economy. It is difficult

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Speaker 1: to be raising rates when everybody else is cutting rates

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Speaker 1: and standing still and buying bonds. You just you can't

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Speaker 1: pull away that much from the pack. Uh. And and

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Speaker 1: we've seen that tension play out in recent years where

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Speaker 1: the FED has said, basically, listen, we think the American

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Speaker 1: economy is ready to you know, detach and and to

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Speaker 1: start growing again. And the mere fact that the rest

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Speaker 1: of the world was standing still ended up limiting the

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Speaker 1: Fed's ability to move rates. So what we saw happen

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Speaker 1: was all this given the yield differential between investment grade

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Speaker 1: treasuries and other sovereign investment grade papers, all this capital

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Speaker 1: comes flying into the United States to buy treasuries. It

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Speaker 1: makes the dollar much much stronger, which hurts US exports.

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Speaker 1: And and it's great if you go overseas and travel,

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Speaker 1: but if you're making products and you want to export them, Um,

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Speaker 1: it's an issue. Does that force the FED to say, hey,

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Speaker 1: we're out of line with the rest of the world

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Speaker 1: central banks. I don't think it's by itself a sufficient

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Speaker 1: factor to you know, move policy, but it's it's clearly

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Speaker 1: a consideration for some members of the FED more than others.

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Speaker 1: There are something Governor Lele Brainerd has been particularly vocal

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Speaker 1: about her you know, her interest in international factors and

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Speaker 1: her belief that they should influence the course of monetary policy.

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Speaker 1: It remains her of an active debate inside the FED

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Speaker 1: how much attention you pay to these considerations, But there's

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Speaker 1: no doubt that it matters, and that it is influencing

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Speaker 1: the course of monetary policy, and that the United States

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Speaker 1: is part of you know, the financial system is even

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Speaker 1: more integrated than the global economy, uh and the FED

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Speaker 1: operates in the financial system, and to the extent that

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Speaker 1: there is a divergence as we've seen between rates domestically

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Speaker 1: and rates and the rest of the world. It clearly

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Speaker 1: constrains the FEDS ability to act. So so let's talk

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Speaker 1: about that integration. That that's an interesting observation. The financial

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Speaker 1: world much more integrated than the economy. When we look

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Speaker 1: around international Japan has negative interest rates, Europe has some

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Speaker 1: very major countries with with negative interest rates. I've heard

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Speaker 1: some people make the argument that the US financial system

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Speaker 1: is built on positive interest rates, whether it's fractional lending

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Speaker 1: or mortgages or money market funds, we can't sustain negative rates.

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Speaker 1: Is that a concern at the Federal Reserve? What would

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Speaker 1: they do if negative rates came to America? It clearly

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Speaker 1: is a concern. I think people would have said the

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Speaker 1: same thing about Europe or Japan before they experienced, you know,

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Speaker 1: negative rates. That our understanding of modern finances predicated on

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Speaker 1: the assumption that you get a return, and the idea

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Speaker 1: that those returns are negative requires a lot of adjustments

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Speaker 1: in the mechanics of the system, in the way that

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Speaker 1: we think about the system, in the way that it functions.

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Speaker 1: I think, you know, no one knows is the answer.

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Speaker 1: It's a possibility that has to be unnerving because we've

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Speaker 1: never been there before, and I think we just cannot

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Speaker 1: anticipate all the consequences. So so Ben Bernanke very famously

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Speaker 1: apologized for some of the mistakes the FED UH made

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Speaker 1: way back when I believe he was talking to Milton

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Speaker 1: Friedman at the time. Is that right? Um? How often

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Speaker 1: does a central bank step forward and say, hey, we

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Speaker 1: were wrong about this, and here's how it's going to

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Speaker 1: change us going forward. That has been happening more lately,

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Speaker 1: I mean, as part of this new era of transparency

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Speaker 1: and clarity and communication, we have heard central bankers, particularly

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Speaker 1: here in the United States, critiquing their own performance more

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Speaker 1: publicly than was true in the past. UH. And that's

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Speaker 1: an interesting change and I think it's helpful. We heard

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Speaker 1: j Powell last year explaining, you know, what he thought

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Speaker 1: about the FEDS actions over the previous year, offering sort

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Speaker 1: of in December a post mortem on the year that

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Speaker 1: had been. That's something that it was unimaginable that Alan

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Speaker 1: Greenspan would have delivered a performance like that. So it's

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Speaker 1: a new thing to hear central banks talking this way

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Speaker 1: about their own performance, and frankly, I think it's beneficial.

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Speaker 1: I do recall Greenspan admitted that he discovered a flaw

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Speaker 1: in his philosophy, and some of the political cartoonists sort

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Speaker 1: of showed him on the steps of the roman Um

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Speaker 1: Senate with everything in in um uh just rumble, destructive,

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Speaker 1: crumbled pillars and it was just a mess. Um How

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Speaker 1: significant was green span ad minting error? And did that

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Speaker 1: have an impact on future FED chiefs? So if you

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Speaker 1: sort of stepped back for a moment, the FED, uh,

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Speaker 1: you know, in the nineteen sixties was still run by

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Speaker 1: financial market types. The economists played a very limited role

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Speaker 1: in the institution. The FED was essentially a part of

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Speaker 1: of the financial system and and and there were not

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Speaker 1: people like Alan Greenspan in charge. And what you get

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Speaker 1: over the succeeding decades is people like Paul Volker and

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Speaker 1: Alan Greenspan are elevated into positions of authority and they

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Speaker 1: see the mission of the Central Bank much more narrowly

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Speaker 1: that the FED was created to prevent financial crises. That's

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Speaker 1: why we decided to have a central bank post nineteen

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Speaker 1: o six. UM there was a big crisis, in large

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Speaker 1: part caused by um capital flows from big insurers in

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Speaker 1: the UK to the US and bank and we were

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Speaker 1: sort of operating UM with one arm behind our back

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Speaker 1: if other countries have central banks. So we know that's

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Speaker 1: exactly right, and so we decided to create this system

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Speaker 1: to serve as a backstop for our banks. Over time,

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Speaker 1: that mission gets minimized, and so in the VOLCA and

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Speaker 1: green Span eras the Fed's mission is transformed into inflation control,

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Speaker 1: the one thing it has to do is just keep

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Speaker 1: inflation slow and steady, and that will guarantee financial stability,

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Speaker 1: It will guarantee broad prosperity. It was like a magic pill.

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Speaker 1: The idea is, if you could just control inflation, and

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Speaker 1: this comes from Milton Friedman, if you could just control inflation,

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Speaker 1: everything else would fall into place. And so Alan Greenspan,

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Speaker 1: and he's been quite open about this, basically ignored financial regulation.

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Speaker 1: It wasn't that he thought markets were perfect that often

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Speaker 1: that's a bit of a caricature. What he thought is

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Speaker 1: that markets were better than regulation, that that markets would

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Speaker 1: do a better job, notwithstanding their flaws, than any human

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Speaker 1: effort to regulate markets. Uh. And the result of that

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Speaker 1: was a massive financial crisis. The FED was so grossly

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Speaker 1: indifferent to the misbehavior of the major financial institutions that

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Speaker 1: we all ended up paying a significant price for that.

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Speaker 1: And so I think it was important for green Spend

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Speaker 1: to come before Congress and under pressure say basically, yes,

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Speaker 1: I now acknowledge that when I said that financial institutions

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Speaker 1: would be sufficiently self interested not to crash themselves, not

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Speaker 1: to put themselves out of business, that I was wrong

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Speaker 1: in the sense that institutions, like all of us, make

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Speaker 1: bad choices and do things that are not ultimately in

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Speaker 1: our long term self interest, and that a number of

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Speaker 1: financial institutions behave so stupidly that they did put themselves

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Speaker 1: out of business. And he was saying, you know, as

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Speaker 1: far as that goes, right, I I blew it. Uh.

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Speaker 1: And I think the FED as a whole has taken

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Speaker 1: that lesson and said, you know what, actually we do

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Speaker 1: need financial regulation, and actually our mission does need to

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Speaker 1: be broader than just trying to control inflation. And so

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Speaker 1: this era in which economists sat at the FED and

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Speaker 1: focused on one number has come to an end. At J.

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Speaker 1: Pale is the first non economist to chair the FED

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Speaker 1: in in half a century. And uh. He is part

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Speaker 1: of this new era in which the FED has said, Okay,

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Speaker 1: yes we are responsible for financial stability, Yes we are

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Speaker 1: responsible for unemployment, and we're also responsible for inflation. But

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Speaker 1: it's not enough to just provide low inflation. So what

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Speaker 1: about the fact that there seems to be a focus

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Speaker 1: on risk assets as well? Is that really the proper

432
00:23:43,160 --> 00:23:46,439
Speaker 1: role of a central bank, I mean the FED. The

433
00:23:46,480 --> 00:23:49,560
Speaker 1: Fed's argument is basically that the FED cannot perform its

434
00:23:49,640 --> 00:23:52,920
Speaker 1: role without focusing on risk assets. That that essentially, if

435
00:23:52,960 --> 00:23:54,720
Speaker 1: one of the things you're trying to do is to

436
00:23:54,800 --> 00:23:58,520
Speaker 1: maintain financial stability, you know, the risks to stability are

437
00:23:58,520 --> 00:24:00,400
Speaker 1: going to come out of risk assets, and and you've

438
00:24:00,400 --> 00:24:01,920
Speaker 1: got to pay attention to them. And if you're not

439
00:24:01,960 --> 00:24:04,440
Speaker 1: paying attention to them, you're not doing your job. And

440
00:24:04,440 --> 00:24:07,439
Speaker 1: and you know, I mean, there are clearly people who

441
00:24:07,440 --> 00:24:10,000
Speaker 1: think the FED should still be more narrowly focused. But

442
00:24:10,240 --> 00:24:12,120
Speaker 1: you come out of two thousand and eight, you look around.

443
00:24:12,359 --> 00:24:14,560
Speaker 1: You know also, you know the two thousand one recession,

444
00:24:14,560 --> 00:24:16,800
Speaker 1: The last two times we've been down this mountain, it's

445
00:24:16,840 --> 00:24:20,119
Speaker 1: because of financial stability issues. I think there's a pretty

446
00:24:20,160 --> 00:24:22,639
Speaker 1: good case that the FED does need to have, you know,

447
00:24:22,720 --> 00:24:27,760
Speaker 1: a focus on on risk assets. Let's start with Milton Friedman.

448
00:24:28,119 --> 00:24:32,040
Speaker 1: You said he had a greater influence on American life

449
00:24:32,440 --> 00:24:36,600
Speaker 1: than any other economist explain. So again, backing up a

450
00:24:36,600 --> 00:24:38,440
Speaker 1: little bit, if you go back to the mid century,

451
00:24:38,480 --> 00:24:41,720
Speaker 1: economists were not and it's almost hard to convince people

452
00:24:41,720 --> 00:24:44,199
Speaker 1: that this is true, but they were not in the

453
00:24:44,240 --> 00:24:48,440
Speaker 1: halls of power. Presidents did not take their advice. President

454
00:24:48,520 --> 00:24:51,840
Speaker 1: Roosevelt referred to John Maynard Keyes as an impractical mathematician.

455
00:24:52,200 --> 00:24:55,880
Speaker 1: President Eisenhower warned against allowing technocrats to run the government.

456
00:24:56,359 --> 00:25:00,320
Speaker 1: The Supreme Court ruled that economic evidence was irrelevant. Uh.

457
00:25:00,359 --> 00:25:03,399
Speaker 1: Congress took testimony from economists, but it didn't take it

458
00:25:03,440 --> 00:25:09,639
Speaker 1: particularly seriously. There was this, uh, this sense that economists were, uh,

459
00:25:09,800 --> 00:25:14,320
Speaker 1: you know, not particularly interesting or helpful. Uh. And and

460
00:25:14,640 --> 00:25:18,200
Speaker 1: you know, places like the Federal Reserve didn't have economists

461
00:25:18,240 --> 00:25:20,880
Speaker 1: in positions of power. Uh. You know, places that are

462
00:25:20,920 --> 00:25:24,800
Speaker 1: now essentially economic institutions. Decisions that are now made by

463
00:25:24,880 --> 00:25:29,239
Speaker 1: economists did not involve economists until surprisingly recently. And it

464
00:25:29,280 --> 00:25:31,399
Speaker 1: was only really in the nineteen sixties and the nineteen

465
00:25:31,400 --> 00:25:34,240
Speaker 1: seventies that economists begin to play a larger role in

466
00:25:34,280 --> 00:25:37,840
Speaker 1: public policy. And one of the foremost figures in the

467
00:25:37,960 --> 00:25:40,600
Speaker 1: rise of the economists is Milton Friedman. And what he's

468
00:25:40,640 --> 00:25:43,439
Speaker 1: really associated with is the idea that you've got this

469
00:25:43,480 --> 00:25:46,000
Speaker 1: period of growth after World War Two. It's breaking down

470
00:25:46,040 --> 00:25:48,480
Speaker 1: by the late sixties, and Freedman comes forward and says,

471
00:25:48,760 --> 00:25:51,560
Speaker 1: the problem is that the government is overly involved in

472
00:25:51,560 --> 00:25:54,880
Speaker 1: the economy. We're not trusting markets enough. We're not allowing

473
00:25:54,960 --> 00:25:57,919
Speaker 1: markets uh a sufficient scope to sort of, you know,

474
00:25:57,960 --> 00:26:00,959
Speaker 1: allocate resources and produce growth. What we need to do

475
00:26:01,000 --> 00:26:03,679
Speaker 1: is get out of the way. We need to stop,

476
00:26:03,960 --> 00:26:06,520
Speaker 1: you know, reduce government spending. We need to cut taxes,

477
00:26:06,560 --> 00:26:09,040
Speaker 1: we need to roll back regulation, we need to you know,

478
00:26:09,119 --> 00:26:10,600
Speaker 1: have the FED. He wanted the Federal reserved to be

479
00:26:10,680 --> 00:26:12,720
Speaker 1: run by a computer program that would just you know,

480
00:26:12,800 --> 00:26:15,040
Speaker 1: increase the money supply at a slow and steady rate.

481
00:26:15,280 --> 00:26:19,399
Speaker 1: He wanted to minimize policymaking. That's what he thought was necessary.

482
00:26:19,640 --> 00:26:23,000
Speaker 1: And this was enormously influential. Much of the shift in

483
00:26:23,000 --> 00:26:25,520
Speaker 1: public policy over the second half of the twentieth century

484
00:26:25,720 --> 00:26:29,280
Speaker 1: can be traced directly to Milton Friedman's thinking in ways

485
00:26:29,320 --> 00:26:32,480
Speaker 1: great and small. So he's the father of the earned

486
00:26:32,520 --> 00:26:35,320
Speaker 1: income tax credit. He's the guy who convinced Richard Nixon

487
00:26:35,359 --> 00:26:37,840
Speaker 1: to end military conscription. People don't know this, which is

488
00:26:37,840 --> 00:26:40,520
Speaker 1: a fascinating part of the book. It's really quite fascinating,

489
00:26:40,640 --> 00:26:43,400
Speaker 1: and I was going through it, I think I understand

490
00:26:43,440 --> 00:26:45,560
Speaker 1: who Milton Friedman is. And I'm reading this and saying

491
00:26:45,560 --> 00:26:49,600
Speaker 1: to myself, wait, Milton Friedman convinced Richard Nixon to go

492
00:26:49,640 --> 00:26:54,359
Speaker 1: to an all voluntary army and raise the pay for soldiers.

493
00:26:54,400 --> 00:26:57,120
Speaker 1: That's an amazing story. It's an amazing story, and it's

494
00:26:57,119 --> 00:26:58,720
Speaker 1: the first chapter in the book because I think it's

495
00:26:58,720 --> 00:27:01,200
Speaker 1: such an amazing and little known story, and because it

496
00:27:01,240 --> 00:27:04,000
Speaker 1: sets a pattern. It was really the first instance of

497
00:27:04,040 --> 00:27:07,639
Speaker 1: these economists influencing policymaking in a in an area you

498
00:27:07,640 --> 00:27:10,639
Speaker 1: wouldn't have predicted. But they then come from that into

499
00:27:10,760 --> 00:27:14,120
Speaker 1: into much broader power, and and you know, they succeed

500
00:27:14,160 --> 00:27:17,000
Speaker 1: in deconstructing the post war global financial system, the Breton

501
00:27:17,000 --> 00:27:21,160
Speaker 1: Wood system, and replacing it with with market set exchange rates.

502
00:27:21,359 --> 00:27:24,840
Speaker 1: So across this whole waterfront of policy issues, if you

503
00:27:24,880 --> 00:27:26,720
Speaker 1: look at what changed in the second half of the

504
00:27:26,760 --> 00:27:29,440
Speaker 1: twentieth century and you say, where did that idea come from,

505
00:27:30,119 --> 00:27:32,560
Speaker 1: a surprising amount of the time the answer is that

506
00:27:32,640 --> 00:27:37,160
Speaker 1: idea came from Milton Freeman. So interestingly enough, a lot

507
00:27:37,240 --> 00:27:40,639
Speaker 1: of the ideas that he put forward seems to have

508
00:27:40,720 --> 00:27:43,720
Speaker 1: come full circle and seems to be falling a bit

509
00:27:43,800 --> 00:27:47,119
Speaker 1: out of favor. We're recording this the week the Business

510
00:27:47,200 --> 00:27:52,359
Speaker 1: round Table announced uh that they're replacing his concept of

511
00:27:52,480 --> 00:27:56,359
Speaker 1: shareholder value, that the sole purpose of a corporation is

512
00:27:56,400 --> 00:28:00,800
Speaker 1: to maximize profits on behalf of shareholders, with a concept

513
00:28:00,840 --> 00:28:06,080
Speaker 1: that's much broader stakeholder interests um The idea that Breton

514
00:28:06,119 --> 00:28:11,040
Speaker 1: woods and a global system where there's cooperation between different

515
00:28:11,359 --> 00:28:14,560
Speaker 1: countries seems to be getting replaced with a form of

516
00:28:14,640 --> 00:28:17,760
Speaker 1: economic populism. Not just here in the United States with

517
00:28:17,800 --> 00:28:20,399
Speaker 1: the election of Donald Trump. You have Boris Johnson in

518
00:28:20,440 --> 00:28:23,000
Speaker 1: the UK. There are all sorts of different people running

519
00:28:23,359 --> 00:28:25,520
Speaker 1: in Italy and Spain and Germany. There are a lot

520
00:28:25,520 --> 00:28:29,800
Speaker 1: of issues as to that post war era that Milton

521
00:28:29,880 --> 00:28:35,720
Speaker 1: Freeman influenced so much. Has his ideology run its course

522
00:28:36,200 --> 00:28:38,600
Speaker 1: or is this just a little mean reversion. You know,

523
00:28:38,640 --> 00:28:41,920
Speaker 1: economists said, listen, if you focus on efficiency, it will

524
00:28:42,000 --> 00:28:45,280
Speaker 1: increase growth. They said, don't worry about inequality. It's not

525
00:28:45,360 --> 00:28:48,240
Speaker 1: that bad. They said, you know, the more that we

526
00:28:48,400 --> 00:28:52,000
Speaker 1: rely on markets, the stronger democracy will become. They were

527
00:28:52,000 --> 00:28:54,520
Speaker 1: wrong about all of these things. Growth has slowed down

528
00:28:54,560 --> 00:28:56,800
Speaker 1: in the developed world. Inequality has turned out to be

529
00:28:56,840 --> 00:28:59,480
Speaker 1: a really big problem where we're just learning how bad

530
00:28:59,520 --> 00:29:03,040
Speaker 1: it is as the data piles up. Uh, and democracy

531
00:29:03,080 --> 00:29:06,680
Speaker 1: is being strained precisely by our reliance on markets. So

532
00:29:06,720 --> 00:29:09,560
Speaker 1: I think there's a recognition that, you know, this revolution

533
00:29:09,600 --> 00:29:12,680
Speaker 1: went way too far, and that the ideas espoused by

534
00:29:12,720 --> 00:29:16,320
Speaker 1: Milton Friedman, while they were necessary correctives to problems at

535
00:29:16,360 --> 00:29:20,760
Speaker 1: the time, uh, in some instances, UH, we're carried too far,

536
00:29:20,920 --> 00:29:23,360
Speaker 1: as is often the case, and that the pendulum needs

537
00:29:23,400 --> 00:29:27,280
Speaker 1: to swing back away from markets towards a recognition that

538
00:29:27,360 --> 00:29:30,280
Speaker 1: government has a valuable and viable role to play in

539
00:29:30,320 --> 00:29:34,080
Speaker 1: economic management, towards the recognition that inequalities a problem public

540
00:29:34,080 --> 00:29:36,640
Speaker 1: policy needs to address. I do think we're at the

541
00:29:36,800 --> 00:29:39,280
Speaker 1: end of what I call the economists our and the

542
00:29:39,360 --> 00:29:41,880
Speaker 1: question now is what takes its place. And hopefully the

543
00:29:41,880 --> 00:29:45,080
Speaker 1: answer is not the kind of unfettered populism that we've

544
00:29:45,080 --> 00:29:47,800
Speaker 1: seen in some countries. But if it's not going to

545
00:29:47,840 --> 00:29:50,920
Speaker 1: be that, it has to be something better than the

546
00:29:51,000 --> 00:29:53,920
Speaker 1: old nostrums about you know, trust the markets, everything will

547
00:29:53,960 --> 00:29:57,200
Speaker 1: be okay, because in fact, everything is not okay. So

548
00:29:57,680 --> 00:30:00,880
Speaker 1: I don't agree with everything Milton Friedman said, although I'm

549
00:30:00,880 --> 00:30:04,160
Speaker 1: fascinated by a lot of his work. The whole idea

550
00:30:04,200 --> 00:30:06,280
Speaker 1: we don't need an f D A. Sure a few

551
00:30:06,280 --> 00:30:09,680
Speaker 1: babies will die if the food or drug supply is poisoned,

552
00:30:09,920 --> 00:30:14,840
Speaker 1: but companies will quickly protect the reputation clearly absurd. However,

553
00:30:15,960 --> 00:30:20,040
Speaker 1: the defense of Freedman could be it's not that the

554
00:30:20,080 --> 00:30:23,880
Speaker 1: market forces have gone too far. It's that we've allowed

555
00:30:23,960 --> 00:30:28,240
Speaker 1: a chrony capitalism and a rentier system to come in

556
00:30:28,760 --> 00:30:33,920
Speaker 1: where the markets are being replaced by people related or

557
00:30:34,160 --> 00:30:40,120
Speaker 1: having a professional relationship with presidents and governors and mayors. Uh.

558
00:30:40,200 --> 00:30:42,600
Speaker 1: You look at what took place with the Amazon headquarters,

559
00:30:42,600 --> 00:30:44,680
Speaker 1: with New York, one of the biggest companies in the world.

560
00:30:45,320 --> 00:30:48,040
Speaker 1: Why do you need tax credits when you're not even

561
00:30:48,040 --> 00:30:51,080
Speaker 1: paying taxes in the first place. And if we had

562
00:30:51,080 --> 00:30:56,440
Speaker 1: a true market uh forces in place, uh, that this

563
00:30:56,640 --> 00:30:59,880
Speaker 1: inequality wouldn't have gone as far. My my favorite example

564
00:31:00,080 --> 00:31:02,840
Speaker 1: is if you own a football team, you don't need

565
00:31:02,920 --> 00:31:05,920
Speaker 1: me as a taxpayer to subsidize your for profit stadium.

566
00:31:06,240 --> 00:31:09,080
Speaker 1: Stop being a socialist, Go build your own stadium. But

567
00:31:10,120 --> 00:31:13,240
Speaker 1: you you give some money to a governor's race or

568
00:31:13,240 --> 00:31:16,040
Speaker 1: a mayor's campaign, and suddenly you get a billion dollar

569
00:31:16,160 --> 00:31:19,080
Speaker 1: tax credit. To build a stadium. How much of the

570
00:31:19,200 --> 00:31:23,400
Speaker 1: pushback to the ideas of Milton Friedman is this sort

571
00:31:23,440 --> 00:31:27,840
Speaker 1: of um bastardized form of capitalism, this chrony capitalism. So

572
00:31:27,840 --> 00:31:29,520
Speaker 1: I think it's kind of a false dichotomy. I think

573
00:31:29,560 --> 00:31:31,720
Speaker 1: you know, what's important to understand about markets is that

574
00:31:31,760 --> 00:31:34,280
Speaker 1: they are constructed by humans. And this would have been

575
00:31:34,320 --> 00:31:38,640
Speaker 1: obvious to our ancestors, who encountered markets as physically constrained

576
00:31:38,680 --> 00:31:40,920
Speaker 1: spaces in the middle of town that operated it to

577
00:31:41,000 --> 00:31:43,480
Speaker 1: find hours of bell rang to start at, a bell

578
00:31:43,560 --> 00:31:46,840
Speaker 1: rang to end it literally literally and and so markets.

579
00:31:46,880 --> 00:31:49,120
Speaker 1: They understood that a market was something they had made,

580
00:31:49,120 --> 00:31:51,720
Speaker 1: that had rules that were laid out by the town fathers,

581
00:31:51,760 --> 00:31:55,200
Speaker 1: and that it couldn't exist without those rules. Uh, markets

582
00:31:55,200 --> 00:31:58,160
Speaker 1: are now so pervasive. We live in a marketplace twenty

583
00:31:58,200 --> 00:32:02,520
Speaker 1: four seven, three sixty, and you've lost that understanding that

584
00:32:02,600 --> 00:32:07,200
Speaker 1: a market is inherently a regulated space. You're absolutely right.

585
00:32:07,200 --> 00:32:09,800
Speaker 1: We need markets, and indeed, much of what is wrong

586
00:32:09,840 --> 00:32:13,760
Speaker 1: with our economy is that markets are being impeded, distorted, uh,

587
00:32:13,840 --> 00:32:18,959
Speaker 1: constraint perverted. But that is not The corrective is not

588
00:32:19,040 --> 00:32:21,120
Speaker 1: to free the markets and return them to some kind

589
00:32:21,120 --> 00:32:24,440
Speaker 1: of natural state. The corrective is to regulate markets effectively.

590
00:32:24,720 --> 00:32:27,000
Speaker 1: The concentration of corporate power is a product of the

591
00:32:27,040 --> 00:32:31,040
Speaker 1: fact that we have abandoned antitrust enforcement. Uh. You know, uh,

592
00:32:31,080 --> 00:32:33,200
Speaker 1: the the issues that we have, you know, with labor

593
00:32:33,240 --> 00:32:34,960
Speaker 1: markets are are a function of the fact that we

594
00:32:35,000 --> 00:32:39,920
Speaker 1: allow corporations to prohibit workers from seeking jobs at other companies,

595
00:32:40,360 --> 00:32:42,720
Speaker 1: that we allow licensing boards to make sure that nobody

596
00:32:42,720 --> 00:32:46,440
Speaker 1: can become a cosmetologist. You know, these are failures of

597
00:32:46,760 --> 00:32:49,240
Speaker 1: the regulations. But the answer is not to do away

598
00:32:49,280 --> 00:32:52,360
Speaker 1: with regulation. The answer is to regulate wisely. And so

599
00:32:52,400 --> 00:32:54,920
Speaker 1: the problem with Milton Friedman is that he made the

600
00:32:55,040 --> 00:32:58,080
Speaker 1: argument that that you could just trust natural law basically

601
00:32:58,080 --> 00:33:00,479
Speaker 1: to take care of these problems, and we actually need

602
00:33:00,600 --> 00:33:03,960
Speaker 1: human laws. We actually need effective We need to make

603
00:33:04,000 --> 00:33:06,880
Speaker 1: decisions as a society about what we market, what we

604
00:33:06,920 --> 00:33:09,680
Speaker 1: want markets to do, and then we can structure markets

605
00:33:09,680 --> 00:33:11,840
Speaker 1: to achieve those goals. So so let me go to

606
00:33:11,880 --> 00:33:15,080
Speaker 1: a quote from the book where you you cite John

607
00:33:15,160 --> 00:33:19,080
Speaker 1: Kenneth Galbraith, and and I've always been fond of this quote.

608
00:33:19,120 --> 00:33:22,600
Speaker 1: What is called sound economics is very often what mirrors

609
00:33:22,640 --> 00:33:27,600
Speaker 1: the needs of the respectably affluent. Explain that it's a

610
00:33:27,680 --> 00:33:30,920
Speaker 1: fascinating into wonderful quote. I think Gobra's point, and it's

611
00:33:30,920 --> 00:33:35,240
Speaker 1: an important point, is that we often find that economics

612
00:33:35,280 --> 00:33:39,160
Speaker 1: and other academic disciplines uh serve the interests of the

613
00:33:39,200 --> 00:33:42,479
Speaker 1: wealthy and powerful. They end up explaining the things that

614
00:33:42,560 --> 00:33:45,080
Speaker 1: rich people want. So, you know, the rise, for example,

615
00:33:45,240 --> 00:33:48,680
Speaker 1: of the idea that corporations should be focused on maximizing

616
00:33:48,720 --> 00:33:54,400
Speaker 1: profits for shareholders was obviously very dear to shareholders who

617
00:33:54,440 --> 00:33:56,680
Speaker 1: had a lot of money to fund economists. You know,

618
00:33:56,680 --> 00:33:59,200
Speaker 1: there's this wonderful paper from the nineteen seventies that is

619
00:33:59,240 --> 00:34:01,320
Speaker 1: still regarded as you know, one of the most important

620
00:34:01,360 --> 00:34:03,840
Speaker 1: economic papers of all time, and what it basically says

621
00:34:03,960 --> 00:34:07,360
Speaker 1: is corporations are the apotheosis of capitalism. It's the best

622
00:34:07,360 --> 00:34:11,720
Speaker 1: way to allocate resources between workers and capitalists. It's great,

623
00:34:11,800 --> 00:34:15,239
Speaker 1: what a wonderful system. Was written by two very prominent economists,

624
00:34:15,239 --> 00:34:17,560
Speaker 1: and at the bottom it says, you know, this research

625
00:34:17,640 --> 00:34:20,759
Speaker 1: was funded by the Eli Lily corporation. Well, yeah, I

626
00:34:20,840 --> 00:34:23,879
Speaker 1: knew that Eli Lily thought that, but you know, and

627
00:34:23,880 --> 00:34:26,440
Speaker 1: and maybe those economists legitimately thought that too. But the

628
00:34:26,480 --> 00:34:28,839
Speaker 1: confluence of those two things is what you get A

629
00:34:28,880 --> 00:34:31,920
Speaker 1: lot of the time you get economists justifying the things

630
00:34:31,920 --> 00:34:34,719
Speaker 1: that are best for the wealthy. Um, I think you know,

631
00:34:34,760 --> 00:34:37,319
Speaker 1: God breath goes too far, both in terms of, you know,

632
00:34:37,480 --> 00:34:40,400
Speaker 1: saying that this is always the case, uh, and in

633
00:34:40,480 --> 00:34:43,080
Speaker 1: terms of suggesting that economists are always doing it for

634
00:34:43,120 --> 00:34:46,359
Speaker 1: the wrong reasons. They're clearly are times when uh, it's

635
00:34:46,400 --> 00:34:48,800
Speaker 1: a it's a good thing for society as a whole.

636
00:34:48,920 --> 00:34:51,200
Speaker 1: But you want to be looking at the whole pyramid.

637
00:34:51,239 --> 00:34:54,360
Speaker 1: It's not enough to just be uh, you know, writing

638
00:34:54,400 --> 00:34:56,239
Speaker 1: policies that help the people at the top. You want

639
00:34:56,280 --> 00:34:57,480
Speaker 1: to know that to be able at the middle and

640
00:34:57,560 --> 00:35:01,040
Speaker 1: at the bottom also are benefiting. And it's hard because

641
00:35:01,040 --> 00:35:04,000
Speaker 1: the people at the top undoubtedly have the loudest voices,

642
00:35:04,080 --> 00:35:06,880
Speaker 1: the most direct connection to the powerful people, the greatest

643
00:35:06,920 --> 00:35:09,600
Speaker 1: ability to influence the course of policy. And they'll stand

644
00:35:09,600 --> 00:35:11,200
Speaker 1: there and scream all day that if you just keep

645
00:35:11,239 --> 00:35:15,560
Speaker 1: cutting their taxes, growth will ensue. At some point, you know,

646
00:35:15,680 --> 00:35:18,160
Speaker 1: you want to start asking questions about why economists are

647
00:35:18,200 --> 00:35:21,239
Speaker 1: still willing to believe something that has been repeatedly disproved

648
00:35:21,320 --> 00:35:23,879
Speaker 1: for forty years now. So so when we make fun

649
00:35:23,920 --> 00:35:26,120
Speaker 1: of the economists at the FED who have been wrong,

650
00:35:26,520 --> 00:35:30,120
Speaker 1: really we should be making pointing out that the entire

651
00:35:30,400 --> 00:35:34,319
Speaker 1: economics class, the entire all the economists, most of them

652
00:35:34,320 --> 00:35:37,759
Speaker 1: didn't see the financial crisis coming. Uh, most of them

653
00:35:37,880 --> 00:35:42,400
Speaker 1: failed to see in real time the widely broadening economic

654
00:35:42,480 --> 00:35:46,000
Speaker 1: and inequality you mentioned. Why should we be paying much

655
00:35:46,040 --> 00:35:49,680
Speaker 1: attention to economists if if they're so bad at forecasting

656
00:35:49,680 --> 00:35:51,680
Speaker 1: the future and so first off, they are so bad

657
00:35:51,680 --> 00:35:53,520
Speaker 1: at forecasting the future. I mean, one of the things

658
00:35:53,600 --> 00:35:55,520
Speaker 1: I started in the book just because it amuses me,

659
00:35:55,600 --> 00:35:59,279
Speaker 1: is every decade, every generation of economists, you get some

660
00:35:59,400 --> 00:36:02,319
Speaker 1: very prominent into economists, often more than one, announcing that

661
00:36:02,360 --> 00:36:06,560
Speaker 1: the problem of recessions has been solved. It's just plateau.

662
00:36:07,160 --> 00:36:10,560
Speaker 1: That's just how is it that an economist can continue

663
00:36:10,560 --> 00:36:12,760
Speaker 1: to make this claim with any knowledge of the history

664
00:36:12,760 --> 00:36:15,040
Speaker 1: of the claims that have preceded their own. It's just

665
00:36:15,120 --> 00:36:18,120
Speaker 1: as mind blowing the arrogance of these claims. But you know, yeah,

666
00:36:18,120 --> 00:36:20,920
Speaker 1: so economists have problems. It's important to say that economists

667
00:36:20,960 --> 00:36:23,759
Speaker 1: are also really good at some things. Economics is a

668
00:36:23,840 --> 00:36:27,600
Speaker 1: wonderful system for disciplining choice making. It really helps you

669
00:36:27,680 --> 00:36:30,920
Speaker 1: to think carefully about costs and benefits. It forces you

670
00:36:31,760 --> 00:36:34,640
Speaker 1: to to put into a system and to model the

671
00:36:34,640 --> 00:36:38,759
Speaker 1: factors that you're considering, the pluses and the minuses. Uh.

672
00:36:38,800 --> 00:36:42,600
Speaker 1: It allows you to think systematically about choices. That's great.

673
00:36:43,280 --> 00:36:45,600
Speaker 1: Where I think we go wrong is in privileging the

674
00:36:45,680 --> 00:36:49,000
Speaker 1: views of economists about what the goals of policy should be.

675
00:36:49,200 --> 00:36:53,080
Speaker 1: There's no special reason to think that economists deserve a

676
00:36:53,160 --> 00:36:55,680
Speaker 1: greater hearing on that subject than anyone else. We as

677
00:36:55,719 --> 00:36:58,560
Speaker 1: a society can decide what goals we want to pursue,

678
00:36:58,680 --> 00:37:01,919
Speaker 1: and then economists have have the genuine ability to help

679
00:37:02,040 --> 00:37:05,160
Speaker 1: us get there. But this faith that they can predict

680
00:37:05,160 --> 00:37:09,280
Speaker 1: the future is badly misplaced. Uh. And and the credence

681
00:37:09,320 --> 00:37:12,800
Speaker 1: given to their priorities I think is badly misplaced as well.

682
00:37:13,160 --> 00:37:17,880
Speaker 1: My favorite quote from Joan Robinson is the purpose of

683
00:37:17,920 --> 00:37:22,480
Speaker 1: studying economics is not to acquire a ready made set

684
00:37:22,520 --> 00:37:26,040
Speaker 1: of answers to economic questions, but rather to learn how

685
00:37:26,080 --> 00:37:30,560
Speaker 1: to avoid being deceived by economists. And it's it's quite insightful.

686
00:37:31,040 --> 00:37:32,360
Speaker 1: Can you stick around a little bit? I have a

687
00:37:32,360 --> 00:37:35,720
Speaker 1: ton more questions. Absolutely. We have been speaking with Benya

688
00:37:35,840 --> 00:37:38,839
Speaker 1: apple Maam. He is a New York Times reporter on

689
00:37:38,920 --> 00:37:41,520
Speaker 1: the Federal Reserve and the author of a new book,

690
00:37:41,520 --> 00:37:45,320
Speaker 1: The Economists Our false profits, free markets, and the fracture

691
00:37:45,360 --> 00:37:48,759
Speaker 1: of society. If you enjoy this conversation, we'll be sure

692
00:37:48,760 --> 00:37:51,279
Speaker 1: and check out the podcast extras, where we keep the

693
00:37:51,320 --> 00:37:55,280
Speaker 1: tape rolling and continue discussing all things Central bank related.

694
00:37:55,680 --> 00:37:59,920
Speaker 1: You can find that at iTunes, Spotify, Google Podcast, Overcast, Stitcher,

695
00:38:00,320 --> 00:38:03,960
Speaker 1: wherever your final podcasts are sold. We love your comments,

696
00:38:04,000 --> 00:38:08,160
Speaker 1: feedback and suggestions right to us at m IB podcast

697
00:38:08,239 --> 00:38:11,480
Speaker 1: at Bloomberg dot net. Check out my weekly column on

698
00:38:11,520 --> 00:38:15,080
Speaker 1: Bloomberg dot com. Follow me on Twitter at Ridholt's sign

699
00:38:15,160 --> 00:38:18,480
Speaker 1: up for my daily reads at Ridholts dot com. I'm

700
00:38:18,560 --> 00:38:22,480
Speaker 1: Barry Riholts. You're listening to Masters in Business on Bloomberg Radio.

701
00:38:24,160 --> 00:38:26,480
Speaker 1: Welcome to the podcast, Benya, Thank you so much for

702
00:38:26,520 --> 00:38:30,360
Speaker 1: doing this. This is a subject that I find quite fascinating.

703
00:38:30,920 --> 00:38:33,760
Speaker 1: I think when we look at the list of people

704
00:38:34,400 --> 00:38:37,680
Speaker 1: and institutions that were to blame for the O eight

705
00:38:37,719 --> 00:38:41,520
Speaker 1: oh nine crisis, I can't help but think of Alan

706
00:38:41,560 --> 00:38:44,760
Speaker 1: greenspan as near the top of that list. It wasn't

707
00:38:44,840 --> 00:38:47,440
Speaker 1: just him. A lot of people did a lot of

708
00:38:47,440 --> 00:38:51,200
Speaker 1: really silly things which all came home to Rooster around

709
00:38:51,239 --> 00:38:54,600
Speaker 1: the same time. Um, but when you look at the

710
00:38:54,640 --> 00:38:59,759
Speaker 1: federal reserve. Who stands out as heroes of the institution,

711
00:38:59,840 --> 00:39:03,800
Speaker 1: and and who do you think are underrepresented in that

712
00:39:03,800 --> 00:39:06,319
Speaker 1: that pantheon. I want to start with the villain, because

713
00:39:06,320 --> 00:39:10,000
Speaker 1: you're right, Alan Greenspand took an oath to be what

714
00:39:10,080 --> 00:39:13,640
Speaker 1: was essentially the nation's chief financial regulator. And he says

715
00:39:13,880 --> 00:39:16,320
Speaker 1: that as he took that oath, he had in mind

716
00:39:16,480 --> 00:39:19,520
Speaker 1: that he did not mean it. And the fact that

717
00:39:19,560 --> 00:39:22,719
Speaker 1: he was willing to become the nation's top financial cop

718
00:39:22,800 --> 00:39:25,440
Speaker 1: with the intent of not doing the job, and and

719
00:39:25,520 --> 00:39:28,040
Speaker 1: worse than that, with the intent of preventing everyone else

720
00:39:28,080 --> 00:39:32,400
Speaker 1: from doing the job. I just think that even to

721
00:39:32,480 --> 00:39:36,080
Speaker 1: the extent that people have held him culpable for what

722
00:39:36,239 --> 00:39:38,960
Speaker 1: happened in two thousands and date, there is still not

723
00:39:39,120 --> 00:39:43,360
Speaker 1: a sufficient understanding of how bad and how devastating his

724
00:39:43,520 --> 00:39:46,840
Speaker 1: conduct as FED chair was for the American economy. So

725
00:39:46,880 --> 00:39:50,719
Speaker 1: that's number one as far as heroes go. I'm not

726
00:39:50,760 --> 00:39:52,840
Speaker 1: sure there's a lot of heroes at the FED. That

727
00:39:53,080 --> 00:39:58,319
Speaker 1: the group think around financial regulation was so pervasive in

728
00:39:58,360 --> 00:40:02,160
Speaker 1: those years that it was almost impossible to be a

729
00:40:02,280 --> 00:40:06,439
Speaker 1: voice in opposition to the prevailing consensus. Everybody knows the

730
00:40:06,520 --> 00:40:10,840
Speaker 1: famous story about Brooksley Borne, who has headed head of

731
00:40:10,840 --> 00:40:14,680
Speaker 1: the CFTC, sought to regulate derivatives and was slapped down

732
00:40:14,680 --> 00:40:18,680
Speaker 1: by who's who of Washington dignitaries, all very much against

733
00:40:19,040 --> 00:40:23,120
Speaker 1: regulation absolutely uh and and you know she is. It's

734
00:40:23,120 --> 00:40:26,560
Speaker 1: such a remarkable story because she tried, because she had

735
00:40:26,840 --> 00:40:31,080
Speaker 1: the wisdom to know that regulation was necessary and the

736
00:40:31,160 --> 00:40:34,520
Speaker 1: courage to try to implement it. But both of those

737
00:40:34,560 --> 00:40:37,560
Speaker 1: things were in very short supply in Washington in those years.

738
00:40:37,960 --> 00:40:41,000
Speaker 1: It was mostly people outside of Washington, outside of sort

739
00:40:41,040 --> 00:40:45,520
Speaker 1: of the conventional consensus, outside of the economics community, who

740
00:40:45,520 --> 00:40:47,680
Speaker 1: are willing to raise their hands and say, listen, there

741
00:40:47,719 --> 00:40:50,720
Speaker 1: are problems here. H. And you know, we're all familiar

742
00:40:50,719 --> 00:40:52,759
Speaker 1: with our people who followed this probably know some of

743
00:40:52,760 --> 00:40:55,800
Speaker 1: these names. But Raguajan is an economist too. Sure. Famously,

744
00:40:55,840 --> 00:40:59,160
Speaker 1: at the FEDS conference in Jackson Hole stood up and

745
00:40:59,320 --> 00:41:02,880
Speaker 1: said that, you know, maybe financial innovation was dangerous. Um.

746
00:41:02,920 --> 00:41:04,800
Speaker 1: You know, there were people at the FED at Grahamlet

747
00:41:04,840 --> 00:41:07,799
Speaker 1: who you know, raised concerns about the Fed's unwillingness to

748
00:41:07,840 --> 00:41:12,000
Speaker 1: regulate mortgage lending. Um. There are instances of people who

749
00:41:12,600 --> 00:41:15,480
Speaker 1: were willing to to raise these questions. But you know,

750
00:41:15,560 --> 00:41:17,239
Speaker 1: it's just when we're gonna look back on it. We're

751
00:41:17,239 --> 00:41:19,319
Speaker 1: gonna say, how did all of these people come to

752
00:41:19,360 --> 00:41:26,319
Speaker 1: believe this insane thing? Uh? So wholeheartedly, so completely? How

753
00:41:26,400 --> 00:41:29,000
Speaker 1: is it possible that they were all blind? Well, that's easy.

754
00:41:29,040 --> 00:41:32,080
Speaker 1: The history of humanity is the history of a series

755
00:41:32,120 --> 00:41:36,560
Speaker 1: of beliefs and false things that some last longer than others,

756
00:41:36,560 --> 00:41:40,759
Speaker 1: but ultimately are revealed as we become more knowledgeable and

757
00:41:40,800 --> 00:41:44,640
Speaker 1: more experienced and dare I say more enlightened. The question

758
00:41:44,760 --> 00:41:46,600
Speaker 1: is how long does it take for us to forget

759
00:41:46,960 --> 00:41:51,000
Speaker 1: and backslide? Because that seems to happen, um every generation.

760
00:41:51,400 --> 00:41:53,480
Speaker 1: So let me talk to you about a few other

761
00:41:54,000 --> 00:41:57,800
Speaker 1: people at the FED that I think are quite fascinating. Um,

762
00:41:57,880 --> 00:42:01,279
Speaker 1: you mentioned the Johnson ex Arians. I think it was

763
00:42:01,960 --> 00:42:05,120
Speaker 1: Paul Volker in his so he has a new book out,

764
00:42:05,200 --> 00:42:08,400
Speaker 1: but there was a bio he wrote autobiography in the

765
00:42:08,480 --> 00:42:12,560
Speaker 1: nineties and he I hope I'm not getting this wrong,

766
00:42:12,600 --> 00:42:18,280
Speaker 1: but he essentially describes getting called to the White House

767
00:42:18,320 --> 00:42:21,720
Speaker 1: to the map room. And the map room is notable

768
00:42:21,760 --> 00:42:24,440
Speaker 1: because there are no recording devices like there are in

769
00:42:24,440 --> 00:42:28,279
Speaker 1: the Oval Office. And I believe it was Baker and

770
00:42:28,360 --> 00:42:32,480
Speaker 1: President Reagan, and with Reagan sitting there, Baker says to

771
00:42:32,840 --> 00:42:36,760
Speaker 1: Paul Vocer, the President orders you to cut interest rates,

772
00:42:36,840 --> 00:42:40,000
Speaker 1: and Vulcar smiles and nods and says, how low do

773
00:42:40,040 --> 00:42:41,560
Speaker 1: you want them? Or what do you want and then

774
00:42:41,600 --> 00:42:43,920
Speaker 1: proceeds to go back to the office and explains to

775
00:42:43,920 --> 00:42:46,560
Speaker 1: everybody why rates are not only gonna go higher, they're

776
00:42:46,600 --> 00:42:49,719
Speaker 1: going much higher. Otherwise, these idiots left in their own

777
00:42:49,719 --> 00:42:52,880
Speaker 1: devices are gonna cause hyper inflation. It will be terrible.

778
00:42:53,280 --> 00:42:58,480
Speaker 1: So that was a fascinating conversation. U admission, um, what

779
00:42:58,520 --> 00:43:01,200
Speaker 1: are your thoughts on on Paul Oker and his role

780
00:43:01,400 --> 00:43:04,600
Speaker 1: within the Federal Reserve is a seminal figure in the

781
00:43:04,680 --> 00:43:06,719
Speaker 1: history of the Federal Reserve because he is the guy

782
00:43:06,800 --> 00:43:10,759
Speaker 1: who implements this shift in the FEDS approach to its job.

783
00:43:11,400 --> 00:43:14,759
Speaker 1: Prefall Vulcar, the FED, like most central banks around the world,

784
00:43:14,800 --> 00:43:18,480
Speaker 1: has a very broad conception of its economic responsibilities. It's

785
00:43:18,480 --> 00:43:22,879
Speaker 1: trying to minimize unemployment. It's trying to, you know, play

786
00:43:22,880 --> 00:43:26,280
Speaker 1: a role in currency markets. It sees a financial stability mandate.

787
00:43:26,440 --> 00:43:28,640
Speaker 1: And Vulcar is the beginning of this period in which

788
00:43:28,640 --> 00:43:31,719
Speaker 1: the Fed says, no, we have one job. Our job

789
00:43:31,840 --> 00:43:34,600
Speaker 1: is to control inflation, to stomp it out. We're gonna

790
00:43:34,640 --> 00:43:36,799
Speaker 1: do that as hard as we can. That's what the

791
00:43:36,800 --> 00:43:40,000
Speaker 1: FED does, and and he does that single mindedly and

792
00:43:40,120 --> 00:43:43,520
Speaker 1: successfully over the course of the nineteen eighties. Reagan's role

793
00:43:43,560 --> 00:43:46,920
Speaker 1: in it is really interesting and a complicated story. Uh.

794
00:43:46,960 --> 00:43:49,560
Speaker 1: There's a lot of moments that which Reagan is very

795
00:43:49,560 --> 00:43:52,480
Speaker 1: supportive of Vulcar. There are clearly times when when he

796
00:43:52,520 --> 00:43:56,120
Speaker 1: can't take it anymore, or at least his aids can't.

797
00:43:57,080 --> 00:44:00,640
Speaker 1: But but that relationship aside, it's very clear that Paul Woker,

798
00:44:01,239 --> 00:44:03,880
Speaker 1: you know, inaugurated a new era at the FED, a

799
00:44:03,920 --> 00:44:07,800
Speaker 1: period in which economists were making the decisions uh and

800
00:44:07,800 --> 00:44:11,719
Speaker 1: and their primary focus was on minimizing inflation. So is

801
00:44:11,760 --> 00:44:14,719
Speaker 1: it safe to say that the economic boom of the

802
00:44:14,760 --> 00:44:18,279
Speaker 1: nineteen eighties and nineties traces in large part back to

803
00:44:18,360 --> 00:44:20,520
Speaker 1: Paul Volker? As well as what are we coming up

804
00:44:20,520 --> 00:44:24,120
Speaker 1: on a forty year uh? Bullmarket in bonds? How much

805
00:44:24,160 --> 00:44:26,400
Speaker 1: of that is can we give credit to Vulcan? For

806
00:44:26,640 --> 00:44:29,080
Speaker 1: I think the bullmarket in bonds by all means make

807
00:44:29,239 --> 00:44:32,040
Speaker 1: Paul Volker the patron saint. As far as America's prosperity

808
00:44:32,040 --> 00:44:33,520
Speaker 1: in the eighties and nineties, I think there's a couple

809
00:44:33,560 --> 00:44:35,960
Speaker 1: of things that often get lost in that discussion. The

810
00:44:36,000 --> 00:44:40,320
Speaker 1: first is that, adjusting for population growth, economic growth in

811
00:44:40,360 --> 00:44:42,520
Speaker 1: the United States has declined in every decade since the

812
00:44:42,560 --> 00:44:45,960
Speaker 1: nineteen sixties. The eighties is remembered as this period of

813
00:44:46,040 --> 00:44:49,320
Speaker 1: rapid growth, but only because we had this sharp recession

814
00:44:49,400 --> 00:44:53,160
Speaker 1: and then rebounded from it. The seventies were not a

815
00:44:53,239 --> 00:44:56,400
Speaker 1: period of expansion or growth. It was stagflation. But the

816
00:44:56,400 --> 00:44:59,200
Speaker 1: economy grew faster in the nineteen seventies than it grew

817
00:44:59,200 --> 00:45:02,800
Speaker 1: in the nineteen eighties. Really, yes, the average annual average

818
00:45:02,840 --> 00:45:05,480
Speaker 1: growth in nineteen seventies was higher than in the nineteen eighties.

819
00:45:06,440 --> 00:45:08,920
Speaker 1: People look at the good years in the eighties and

820
00:45:08,920 --> 00:45:11,320
Speaker 1: they forget that Volker caused a bunch of bad years

821
00:45:11,320 --> 00:45:15,879
Speaker 1: at the outset, and maybe that was necessary to clear

822
00:45:15,920 --> 00:45:18,239
Speaker 1: the way for renewed prosperity. But the renewed prosperity was

823
00:45:18,280 --> 00:45:19,880
Speaker 1: not as good as what had come before. So I

824
00:45:19,880 --> 00:45:23,799
Speaker 1: think there is reason to wonder about our memories of

825
00:45:23,800 --> 00:45:26,080
Speaker 1: that period. The other thing that's really important, and this

826
00:45:26,160 --> 00:45:28,840
Speaker 1: particularly becomes true in the nineteen nineties, is that the

827
00:45:28,880 --> 00:45:32,360
Speaker 1: nineteen nineties really reaped the fruit of earlier periods. The

828
00:45:32,440 --> 00:45:35,640
Speaker 1: nineteen nineties happened because the federal government had invested massively

829
00:45:35,719 --> 00:45:39,480
Speaker 1: in technology UH and had built a new industry, a

830
00:45:39,560 --> 00:45:43,320
Speaker 1: new sector of the economy with public funding that it

831
00:45:43,400 --> 00:45:45,440
Speaker 1: then turned over to the private sector to exploit and

832
00:45:45,440 --> 00:45:48,480
Speaker 1: to realize. And that was great, and productivity rose, and

833
00:45:48,560 --> 00:45:51,440
Speaker 1: we had a genuine economic miracle. But the basis of

834
00:45:51,480 --> 00:45:54,320
Speaker 1: that miracle was the investment in earlier eras. And instead

835
00:45:54,320 --> 00:45:56,279
Speaker 1: of paying it forward, what the federal government did in

836
00:45:56,280 --> 00:45:58,880
Speaker 1: the nineteen nineties was to sharply reduce funding for the

837
00:45:58,880 --> 00:46:01,240
Speaker 1: things that had worked previous slee so that we weren't

838
00:46:01,280 --> 00:46:04,560
Speaker 1: funding new technology, we weren't funding infrastructure. And one of

839
00:46:04,600 --> 00:46:06,840
Speaker 1: the really important ones that people miss is when you

840
00:46:06,880 --> 00:46:09,440
Speaker 1: go into the nineteen nineties, the American adults who are

841
00:46:09,480 --> 00:46:11,880
Speaker 1: coming into the workforce in those years, the rate at

842
00:46:11,920 --> 00:46:14,800
Speaker 1: which they have college degrees is much higher than any

843
00:46:14,880 --> 00:46:18,439
Speaker 1: other developed nation. We had a huge educational advantage during

844
00:46:18,440 --> 00:46:21,880
Speaker 1: the nineteen nineties. At present, we've fallen off a cliff

845
00:46:22,040 --> 00:46:25,799
Speaker 1: were now below like thirteen other developed nations in the

846
00:46:25,840 --> 00:46:28,800
Speaker 1: share of our workforce that has college degrees. We've lost

847
00:46:28,840 --> 00:46:32,120
Speaker 1: that educational advantage. How do we gain it by massive

848
00:46:32,160 --> 00:46:35,440
Speaker 1: public investment in public education during the mid century. How

849
00:46:35,480 --> 00:46:38,920
Speaker 1: have we lost it by massive disinvestment in public education

850
00:46:39,040 --> 00:46:41,560
Speaker 1: during the nineteen nineties and since then. So I have

851
00:46:41,600 --> 00:46:43,640
Speaker 1: a little bit of an unusual view of the Clinton era.

852
00:46:43,719 --> 00:46:45,760
Speaker 1: I think it was a disaster for the American economy.

853
00:46:45,800 --> 00:46:48,840
Speaker 1: I think they basically harvested all of the trees that

854
00:46:48,880 --> 00:46:51,640
Speaker 1: had been planted in earlier eras and forgot to plant

855
00:46:51,680 --> 00:46:54,960
Speaker 1: any new ones. Quite quite interesting, you know, when I

856
00:46:55,040 --> 00:46:59,080
Speaker 1: look at that era of eighties and nineties, everybody immediately

857
00:46:59,080 --> 00:47:01,600
Speaker 1: thinks of the inter net. But if you want to

858
00:47:01,640 --> 00:47:06,520
Speaker 1: see some other government sponsored programs, or the outgrowth of

859
00:47:06,840 --> 00:47:11,120
Speaker 1: NASA and the Space race, semi conductors trace the White

860
00:47:11,160 --> 00:47:14,919
Speaker 1: Way back to to that. Everything on the computer side,

861
00:47:14,960 --> 00:47:18,600
Speaker 1: everything mobile, the GPS and satellites, and any sort of

862
00:47:18,600 --> 00:47:21,320
Speaker 1: communication that came out of that, all of that comes

863
00:47:21,360 --> 00:47:24,520
Speaker 1: from original government research. Absolutely. And another thing about semi

864
00:47:24,520 --> 00:47:26,960
Speaker 1: conductors that people don't know, which is very relevant to

865
00:47:27,000 --> 00:47:31,280
Speaker 1: this conversation, when when when A T and T invented

866
00:47:31,320 --> 00:47:35,280
Speaker 1: the semi conductor, the government forced it to share the technology.

867
00:47:35,280 --> 00:47:38,040
Speaker 1: A T and T literally held seminars where it invited

868
00:47:38,080 --> 00:47:41,040
Speaker 1: its competitors rival firms to come to New York for

869
00:47:41,239 --> 00:47:45,880
Speaker 1: training in how to make semi conductors because the government,

870
00:47:45,880 --> 00:47:48,560
Speaker 1: as part of its antitrust program at the time, was

871
00:47:48,640 --> 00:47:53,000
Speaker 1: committed to ensuring that large corporations couldn't monopolize important technologies.

872
00:47:53,160 --> 00:47:56,120
Speaker 1: So it forced the sharing of semi conductors. And you

873
00:47:56,160 --> 00:47:59,280
Speaker 1: know what you get from that is personal computers, Intel

874
00:47:59,360 --> 00:48:01,600
Speaker 1: and a thing where there's a chip involved. And I

875
00:48:01,680 --> 00:48:05,440
Speaker 1: think computer cars are now the second largest consumer of chips.

876
00:48:05,440 --> 00:48:09,280
Speaker 1: It's incredible. It forced IBM to share, uh, the ability

877
00:48:09,320 --> 00:48:11,600
Speaker 1: to write software, and one of the first companies to

878
00:48:11,640 --> 00:48:15,239
Speaker 1: take advantage of a company called Microsoft, forced Microsoft to

879
00:48:15,320 --> 00:48:18,520
Speaker 1: like Google onto its machines. Nobody is forcing Google to

880
00:48:18,520 --> 00:48:21,239
Speaker 1: make way for the next competitor. Um. So you know,

881
00:48:21,320 --> 00:48:23,640
Speaker 1: once again, you've got a role the government played for

882
00:48:23,680 --> 00:48:27,960
Speaker 1: a long time in enforcing antitrust rules in making space

883
00:48:28,040 --> 00:48:31,680
Speaker 1: for new companies that it's no longer playing. It's another

884
00:48:31,719 --> 00:48:36,520
Speaker 1: example of this phenomenon that is quite horrifying, because nothing

885
00:48:36,600 --> 00:48:40,080
Speaker 1: worse than eating your own uh, your own seed corn

886
00:48:40,080 --> 00:48:43,800
Speaker 1: when it comes to that. Um. So, so you start

887
00:48:43,880 --> 00:48:45,560
Speaker 1: the book, I have to come back to this because

888
00:48:45,600 --> 00:48:48,120
Speaker 1: I find it fastening, and you start the book during

889
00:48:48,239 --> 00:48:53,000
Speaker 1: Nixon's presidency, is that because of the shift that Milton

890
00:48:53,040 --> 00:48:57,319
Speaker 1: Friedman represented or was it really where the post war

891
00:48:57,440 --> 00:49:01,279
Speaker 1: period pivots towards the modern ear. It's both things, right.

892
00:49:01,320 --> 00:49:04,439
Speaker 1: So you see that this era, what the French called

893
00:49:04,440 --> 00:49:07,600
Speaker 1: the thirty glorious years after World War Two, is coming

894
00:49:07,640 --> 00:49:10,840
Speaker 1: to an end. Growth is faltering. Policymakers are casting about

895
00:49:11,120 --> 00:49:14,279
Speaker 1: for alternatives for answers and the answer that they find.

896
00:49:14,320 --> 00:49:16,600
Speaker 1: Milton Freeman famously says that, you know, the way that

897
00:49:16,640 --> 00:49:19,480
Speaker 1: you convince policymakers is by stocking the fridge with options,

898
00:49:19,480 --> 00:49:21,440
Speaker 1: so that you know when they need something when they

899
00:49:21,440 --> 00:49:23,239
Speaker 1: go there, they opened the door. There it is, and

900
00:49:23,239 --> 00:49:26,520
Speaker 1: and his ideas were there. And so you know, beginning

901
00:49:26,640 --> 00:49:29,080
Speaker 1: in the late sixties and the early seventies, really beginning

902
00:49:29,080 --> 00:49:32,600
Speaker 1: in the Nixon administration, these ideas become influential and we

903
00:49:32,760 --> 00:49:35,000
Speaker 1: enter a new period in policy, a new period in

904
00:49:35,040 --> 00:49:38,200
Speaker 1: economic history. And that's really the focus of this book

905
00:49:38,239 --> 00:49:40,879
Speaker 1: is the revolution that began in those years, that that

906
00:49:41,080 --> 00:49:45,960
Speaker 1: began with economists taking over the asylum, no longer technocrats

907
00:49:46,160 --> 00:49:50,239
Speaker 1: or or non economic actors. And I have to tell you,

908
00:49:50,320 --> 00:49:52,840
Speaker 1: I found the book to be, uh, each chapter is

909
00:49:52,920 --> 00:49:54,880
Speaker 1: really very distinct, and I found the book to be

910
00:49:54,920 --> 00:49:58,600
Speaker 1: a very um enjoyable read. So one of the things

911
00:49:58,640 --> 00:50:03,839
Speaker 1: that that only tangentially gets discussed is the issue of

912
00:50:04,000 --> 00:50:08,080
Speaker 1: fiscal policy and how it affects monetary policy. There's an

913
00:50:08,200 --> 00:50:11,480
Speaker 1: argument to be made that following the O eight o

914
00:50:11,640 --> 00:50:16,799
Speaker 1: nine crisis, UH, there was a political response from the

915
00:50:16,840 --> 00:50:20,560
Speaker 1: Mitch McConnell's of the world, which was, we don't care

916
00:50:20,560 --> 00:50:23,440
Speaker 1: so much about you know, the country. We want to

917
00:50:23,480 --> 00:50:25,840
Speaker 1: just make sure this president is a one term president.

918
00:50:25,920 --> 00:50:29,640
Speaker 1: He literally uh mentioned our our job one is to

919
00:50:29,680 --> 00:50:32,520
Speaker 1: make sure this president doesn't get reelected. And so the

920
00:50:32,560 --> 00:50:38,600
Speaker 1: fiscal stimulus was really narrow temporary tax cuts, temporary extension

921
00:50:38,840 --> 00:50:42,600
Speaker 1: of unemployment benefits, and a couple of hundred billion dollars

922
00:50:43,280 --> 00:50:46,840
Speaker 1: UH in shovel ready infrastructure. The argument has been made,

923
00:50:47,239 --> 00:50:49,600
Speaker 1: following a crisis that size, this should have been a

924
00:50:49,640 --> 00:50:54,080
Speaker 1: two three four trillion dollar stimulus plan. So, so the

925
00:50:54,080 --> 00:50:57,720
Speaker 1: first question is how much did the lack of fiscal

926
00:50:57,800 --> 00:51:02,759
Speaker 1: response force a monetary response, and and is that the

927
00:51:02,840 --> 00:51:04,960
Speaker 1: role of the FED is that the proper role the

928
00:51:05,000 --> 00:51:07,239
Speaker 1: central bank should play. Yeah, so, I mean, as you said,

929
00:51:07,239 --> 00:51:10,320
Speaker 1: I think it's well documented that this was the Republican strategy.

930
00:51:10,320 --> 00:51:14,440
Speaker 1: Politically speaking, it also reflected an economic philosophy. Again that

931
00:51:14,520 --> 00:51:17,600
Speaker 1: goes back to Milton Friedman that said monetary policy is

932
00:51:17,640 --> 00:51:23,480
Speaker 1: the only effective lever for for for improving economic conditions.

933
00:51:23,520 --> 00:51:26,600
Speaker 1: That part of his central goal in the mid century

934
00:51:26,880 --> 00:51:30,960
Speaker 1: was to convince policymakers to stop using fiscal policy to

935
00:51:31,040 --> 00:51:34,880
Speaker 1: respond to recessions, to abandon the idea that government spending

936
00:51:35,040 --> 00:51:38,719
Speaker 1: or tax cuts could help. He argued that that was

937
00:51:38,840 --> 00:51:41,920
Speaker 1: always going to be damaging to the economy in the

938
00:51:41,920 --> 00:51:44,160
Speaker 1: long run and therefore should not be attempted. In the

939
00:51:44,160 --> 00:51:47,760
Speaker 1: short run. Monetary policy was primary. And you can trace

940
00:51:47,880 --> 00:51:51,719
Speaker 1: the rise of this idea through the famous you know,

941
00:51:51,800 --> 00:51:55,720
Speaker 1: the Paul Samuelson, the great mid century economists who dominated

942
00:51:55,760 --> 00:51:59,200
Speaker 1: the market for economics textbooks, uh, you know, released a

943
00:51:59,200 --> 00:52:01,720
Speaker 1: new addition every few years, and you can actually watch

944
00:52:01,719 --> 00:52:05,440
Speaker 1: economic ideas evolve. The consensus, the mainstream wisdom is sort

945
00:52:05,480 --> 00:52:08,160
Speaker 1: of charted in those books, and you can follow, you know,

946
00:52:08,280 --> 00:52:11,320
Speaker 1: from the sixties when Samuelson is saying fiscal policy is

947
00:52:11,360 --> 00:52:14,440
Speaker 1: really important, through the seventies when he says monterary policy

948
00:52:14,520 --> 00:52:17,200
Speaker 1: is also important, into the eighties when he says, actually

949
00:52:17,239 --> 00:52:20,840
Speaker 1: physical policy isn't important at all. Only monetary policy is important.

950
00:52:21,160 --> 00:52:23,799
Speaker 1: That is the victory of Milton Friedman, and so there's

951
00:52:23,840 --> 00:52:27,600
Speaker 1: this intellectual groundwork that's laid to say, basically, you know,

952
00:52:27,719 --> 00:52:30,120
Speaker 1: government spending doesn't actually help, so we're not going to

953
00:52:30,239 --> 00:52:33,040
Speaker 1: do it. That's politically convenient for the Republicans, but they

954
00:52:33,040 --> 00:52:35,759
Speaker 1: also have this intellectual foundation that they can stand on

955
00:52:36,120 --> 00:52:38,759
Speaker 1: in making that argument, in arguing that, you know, the

956
00:52:38,760 --> 00:52:41,680
Speaker 1: government should not do more. This was even more pronounced

957
00:52:41,680 --> 00:52:44,000
Speaker 1: in Europe and even more harmful there. I think there's

958
00:52:44,000 --> 00:52:46,920
Speaker 1: no question that a greater fiscal policy response was necessary

959
00:52:46,960 --> 00:52:49,600
Speaker 1: and would have been helpful. So you mentioned Europe, Look

960
00:52:49,640 --> 00:52:54,200
Speaker 1: what took place in the UK where they forget fiscal stimulus,

961
00:52:54,200 --> 00:52:57,239
Speaker 1: they want on full austerity. The argument is not only

962
00:52:57,280 --> 00:53:00,480
Speaker 1: did it not help, it made the situation worse. It

963
00:53:00,480 --> 00:53:04,480
Speaker 1: it hurt the GDP there her job creation, and ultimately

964
00:53:04,719 --> 00:53:09,640
Speaker 1: led to some degree to the rise of popularism and Brexit. Absolutely.

965
00:53:09,680 --> 00:53:12,160
Speaker 1: I mean, I think you know we've seen this, This

966
00:53:12,280 --> 00:53:16,280
Speaker 1: denigration of government, this sense that government does nothing productive

967
00:53:16,320 --> 00:53:19,759
Speaker 1: and that the best government is the smallest government, is

968
00:53:19,840 --> 00:53:22,360
Speaker 1: really problematic. It is clear that there is such a

969
00:53:22,400 --> 00:53:24,840
Speaker 1: thing as too much government. It is clear that spending

970
00:53:24,920 --> 00:53:29,880
Speaker 1: can be excessive or wasteful, that it can create problematic incentives.

971
00:53:29,920 --> 00:53:32,439
Speaker 1: These things are all true, but it is also clear

972
00:53:32,480 --> 00:53:34,640
Speaker 1: that you can have too little and that you can

973
00:53:34,760 --> 00:53:38,560
Speaker 1: cut too much, particularly during periods of economic difficulty, and

974
00:53:38,560 --> 00:53:40,640
Speaker 1: and Britain is living evidence of it. I mean, they've

975
00:53:40,719 --> 00:53:45,120
Speaker 1: really damaged their economy, the viability of their polity, their

976
00:53:45,160 --> 00:53:48,200
Speaker 1: future prospects. I would not want to be the parent

977
00:53:48,280 --> 00:53:50,840
Speaker 1: of a young child in Britain right now. Really that

978
00:53:50,840 --> 00:53:54,880
Speaker 1: that's that's a serious statement. Um, So what about here

979
00:53:54,880 --> 00:53:58,960
Speaker 1: in the United States? We're seeing fiscal stimulus, but not

980
00:53:59,280 --> 00:54:02,920
Speaker 1: in terms of government spending an infrastructure, but rather in

981
00:54:03,040 --> 00:54:07,319
Speaker 1: terms of tax cuts and reduce government role. How does

982
00:54:07,360 --> 00:54:11,200
Speaker 1: that play out here relative to the EU or UK?

983
00:54:11,719 --> 00:54:14,520
Speaker 1: So tax cuts as an incentive, as a stimulus programmer

984
00:54:14,600 --> 00:54:17,480
Speaker 1: kind of second best and and politically they've been much

985
00:54:17,520 --> 00:54:19,880
Speaker 1: more palatable, and so we've tended to rely on them

986
00:54:19,920 --> 00:54:22,919
Speaker 1: in recent decades. They help, they don't help as much.

987
00:54:23,400 --> 00:54:26,640
Speaker 1: The Trump administration actually has increased spending, particularly on defense,

988
00:54:26,640 --> 00:54:30,399
Speaker 1: pretty significantly. H And that how significantly How much as

989
00:54:30,480 --> 00:54:33,720
Speaker 1: the defense uptick actually been I don't have the numbers

990
00:54:33,760 --> 00:54:35,920
Speaker 1: in front of me, but but government spending is actually

991
00:54:35,920 --> 00:54:38,680
Speaker 1: if you look at the stimulus during the Trump here's

992
00:54:39,280 --> 00:54:42,440
Speaker 1: the fiscal side boost and spending is pretty close to

993
00:54:42,480 --> 00:54:45,960
Speaker 1: equivalent to the boost that you get from the tax cuts.

994
00:54:46,480 --> 00:54:48,759
Speaker 1: There's been a big increase in federal spending. It's gone

995
00:54:48,800 --> 00:54:50,320
Speaker 1: a little bit under the radar screen, but it's a

996
00:54:50,360 --> 00:54:53,520
Speaker 1: big deal. We used to call that weaponized Keensianism. I

997
00:54:53,520 --> 00:54:56,719
Speaker 1: don't know if people still use that phrase, but you know,

998
00:54:56,800 --> 00:54:58,520
Speaker 1: under rigg and a lot of money poured into the

999
00:54:58,560 --> 00:55:03,319
Speaker 1: military helped bankrupt the USSR because their system wasn't as

1000
00:55:03,360 --> 00:55:06,160
Speaker 1: efficient as ours. Yeah, I mean, it's a long standing

1001
00:55:06,280 --> 00:55:08,600
Speaker 1: feature of our economy and and it's sort of a

1002
00:55:08,680 --> 00:55:10,360
Speaker 1: thing we can all agree to spend money on. It

1003
00:55:10,360 --> 00:55:13,960
Speaker 1: has some real utility, but it's not as beneficial as

1004
00:55:14,000 --> 00:55:18,640
Speaker 1: building roads or building you know, broadband infrastructure, or investing

1005
00:55:18,640 --> 00:55:22,040
Speaker 1: in schools. It's the second best kind of spending. A

1006
00:55:22,040 --> 00:55:24,040
Speaker 1: lot of the money goes overseas, a lot of it

1007
00:55:24,080 --> 00:55:26,000
Speaker 1: gets put into things like bombs that blow up and

1008
00:55:26,000 --> 00:55:29,200
Speaker 1: don't leave anything positive behind. It's not the greatest way

1009
00:55:29,200 --> 00:55:31,480
Speaker 1: to spend money. It's better than nothing. It's not the

1010
00:55:31,520 --> 00:55:35,160
Speaker 1: interstate highway system in terms of generating a multiplier effect.

1011
00:55:35,239 --> 00:55:38,959
Speaker 1: That's right, so so that that's quite interesting. So, give,

1012
00:55:39,200 --> 00:55:42,440
Speaker 1: given the lack of of fiscal stimulus, what is the

1013
00:55:42,560 --> 00:55:46,239
Speaker 1: role of the Federal Reserve in a post crisis era?

1014
00:55:46,360 --> 00:55:48,600
Speaker 1: So the Fed got left in this uncomfortable position where

1015
00:55:48,600 --> 00:55:50,200
Speaker 1: it was the only game in town. The only people

1016
00:55:50,200 --> 00:55:54,360
Speaker 1: who were willing to do more to engage the needs

1017
00:55:54,400 --> 00:55:57,040
Speaker 1: of the economy were Federal Reserve policymakers and so they

1018
00:55:57,120 --> 00:56:00,200
Speaker 1: threw everything they could at the problem, not necessarily as

1019
00:56:00,239 --> 00:56:02,640
Speaker 1: quickly as they should have, but they cut rates to zero,

1020
00:56:02,880 --> 00:56:05,400
Speaker 1: and then they started buying bonds in large quantities. They

1021
00:56:05,400 --> 00:56:08,000
Speaker 1: were trying, but the reality is that they were never

1022
00:56:08,000 --> 00:56:11,880
Speaker 1: going to succeed completely. They could not buy themselves revive

1023
00:56:12,400 --> 00:56:15,520
Speaker 1: the economy. They did what they could. What they did

1024
00:56:15,600 --> 00:56:19,439
Speaker 1: was important. Um, but I think one takeaway from this

1025
00:56:19,560 --> 00:56:23,120
Speaker 1: past decade should be that that, uh, you know, fiscal

1026
00:56:23,160 --> 00:56:26,360
Speaker 1: policy turns out to be really important. So one of

1027
00:56:26,480 --> 00:56:32,280
Speaker 1: the more interesting and intriguing aspects of modern monetary theory,

1028
00:56:32,400 --> 00:56:35,160
Speaker 1: or m m T as it's called, is that we

1029
00:56:35,320 --> 00:56:39,040
Speaker 1: could do an infrastructure build of a few trillion dollars

1030
00:56:39,680 --> 00:56:44,400
Speaker 1: by having the Treasury issue infrastructure bonds to fund it,

1031
00:56:44,800 --> 00:56:47,000
Speaker 1: put it out there, and then let the Fed Reserve

1032
00:56:47,640 --> 00:56:51,680
Speaker 1: use those bonds purchase those bonds as their QUEI uh,

1033
00:56:51,680 --> 00:56:55,719
Speaker 1: and everybody's happy, the budget's balanced. The FED is basically

1034
00:56:55,960 --> 00:56:59,239
Speaker 1: now in charge of fiscal and monetary policy. What are

1035
00:56:59,239 --> 00:57:01,279
Speaker 1: your thoughts on that? So it's not clear to me

1036
00:57:01,320 --> 00:57:04,920
Speaker 1: that there is a theory, a clear theory in m

1037
00:57:05,000 --> 00:57:08,320
Speaker 1: m T, or at least I haven't encountered a consensus

1038
00:57:08,320 --> 00:57:10,520
Speaker 1: description of what that would be. But let me say this.

1039
00:57:10,960 --> 00:57:13,920
Speaker 1: It is clear that the United States has fiscal space

1040
00:57:14,000 --> 00:57:17,280
Speaker 1: at present to spend more money, and if that money

1041
00:57:17,320 --> 00:57:19,960
Speaker 1: is spent wisely, it is likely that we would recoup

1042
00:57:19,960 --> 00:57:23,480
Speaker 1: a return on that investment. That if we invest in infrastructure,

1043
00:57:23,520 --> 00:57:26,360
Speaker 1: if we invest in education, if we invest in you know,

1044
00:57:26,480 --> 00:57:29,880
Speaker 1: these kinds of improvements that over time our economy will

1045
00:57:29,920 --> 00:57:33,600
Speaker 1: grow fast enough, uh, you know, to make those worthwhile

1046
00:57:33,720 --> 00:57:36,640
Speaker 1: uses of public resources we can borrow at low rates

1047
00:57:36,720 --> 00:57:38,720
Speaker 1: right now, we'd be well advised to do so. I

1048
00:57:38,760 --> 00:57:41,000
Speaker 1: don't think you need to necessarily wander into some of

1049
00:57:41,000 --> 00:57:43,560
Speaker 1: the more extreme claims of m m T to accept

1050
00:57:43,680 --> 00:57:46,560
Speaker 1: that basic set of premises about what is possible and

1051
00:57:46,640 --> 00:57:50,040
Speaker 1: desirable at present. Alright, So, so I'm gonna throw a

1052
00:57:50,040 --> 00:57:52,280
Speaker 1: curve ball at you right now, because what you just

1053
00:57:52,360 --> 00:57:58,840
Speaker 1: said jogged my thought process. One of the nominees for

1054
00:57:58,920 --> 00:58:03,360
Speaker 1: president tags you and say and says, I really want

1055
00:58:03,360 --> 00:58:06,240
Speaker 1: to shake things up. What should I say to the

1056
00:58:06,280 --> 00:58:12,360
Speaker 1: American public about infrastructure spending, about US reinvesting in our future,

1057
00:58:12,800 --> 00:58:17,200
Speaker 1: and about teeing up the rest of the twenty one century?

1058
00:58:18,040 --> 00:58:21,840
Speaker 1: As for America as an economic leader, what advice would

1059
00:58:21,840 --> 00:58:24,440
Speaker 1: you give that person? I'll say two things about that.

1060
00:58:24,560 --> 00:58:27,880
Speaker 1: The first is that a lot of Americans find themselves

1061
00:58:27,880 --> 00:58:31,160
Speaker 1: looking with envy at the success of uh, you know,

1062
00:58:31,240 --> 00:58:34,880
Speaker 1: Asian countries that have managed rapid economic growth in recent decades.

1063
00:58:35,160 --> 00:58:37,320
Speaker 1: A very important thing to know about that is that

1064
00:58:37,560 --> 00:58:41,040
Speaker 1: those countries took the recipe from the United States. We

1065
00:58:41,080 --> 00:58:44,200
Speaker 1: invented this formula. We invented this formula of investing in

1066
00:58:44,240 --> 00:58:50,400
Speaker 1: domestic manufacturing, investing in education, growing in industrial base, cultivating

1067
00:58:50,400 --> 00:58:55,360
Speaker 1: export industries. These were American innovations, and and they have

1068
00:58:55,400 --> 00:58:57,040
Speaker 1: spread to the rest of the world and been used

1069
00:58:57,080 --> 00:59:01,200
Speaker 1: successfully by other countries. UH. The lesson of recent decades

1070
00:59:01,400 --> 00:59:04,280
Speaker 1: is that, UH, that type of investment, that type of

1071
00:59:04,280 --> 00:59:08,480
Speaker 1: concerted effort, is productive and beneficial if it's well managed. UH.

1072
00:59:08,560 --> 00:59:10,720
Speaker 1: And so I think, you know, we need to get

1073
00:59:10,760 --> 00:59:12,840
Speaker 1: back to the things that have worked for America in

1074
00:59:12,880 --> 00:59:15,960
Speaker 1: the past. Uh. You know, if you look at our

1075
00:59:16,200 --> 00:59:19,200
Speaker 1: golden age in the mid century, Uh, it had a

1076
00:59:19,240 --> 00:59:21,800
Speaker 1: lot to do with the way that government policy was managed.

1077
00:59:21,880 --> 00:59:24,480
Speaker 1: And and we do well not to go back to

1078
00:59:24,520 --> 00:59:26,480
Speaker 1: that and its entirety, because there are problems with it

1079
00:59:26,480 --> 00:59:29,520
Speaker 1: and it broke down. Uh, And it's important to recognize

1080
00:59:29,560 --> 00:59:32,760
Speaker 1: that it did so. But there are some valuable lessons there. Um.

1081
00:59:32,800 --> 00:59:34,919
Speaker 1: But this is a little bit of avoiding the question.

1082
00:59:34,920 --> 00:59:38,760
Speaker 1: But let me tell you my barometer for a presidential candidate. Uh,

1083
00:59:38,840 --> 00:59:42,480
Speaker 1: the American that the iconic American worker is not a

1084
00:59:42,520 --> 00:59:46,200
Speaker 1: steel worker today, it's it's a woman who's providing home

1085
00:59:46,240 --> 00:59:49,600
Speaker 1: health care services for an AGA for an aging baby boomer.

1086
00:59:49,880 --> 00:59:52,600
Speaker 1: That is the rapid that's the most rapidly growing sector

1087
00:59:52,640 --> 00:59:56,280
Speaker 1: of employment. That is the identity of the American blue

1088
00:59:56,280 --> 00:59:58,760
Speaker 1: collar worker. And the question is what are we doing

1089
00:59:58,800 --> 01:00:01,640
Speaker 1: to improve their life because they're making something very close

1090
01:00:01,680 --> 01:00:04,320
Speaker 1: to minimum wage, they work on too horrible conditions, they

1091
01:00:04,360 --> 01:00:08,320
Speaker 1: don't have benefits, they don't have vacation time, they're easily

1092
01:00:08,400 --> 01:00:11,960
Speaker 1: fired and replaced. Their life is not what it should be.

1093
01:00:12,080 --> 01:00:14,040
Speaker 1: That they're not living the American dream, and they have

1094
01:00:14,080 --> 01:00:16,800
Speaker 1: no opportunity to live the American dream. And so for me,

1095
01:00:17,240 --> 01:00:20,160
Speaker 1: the standard frinding presidential candidate is, what are your policies

1096
01:00:20,200 --> 01:00:23,720
Speaker 1: going to do to improve the life of a forty

1097
01:00:23,760 --> 01:00:27,160
Speaker 1: five year old home health care worker? Because that person

1098
01:00:27,240 --> 01:00:31,080
Speaker 1: is the person who needs our help right now. Quite fascinating.

1099
01:00:31,600 --> 01:00:34,840
Speaker 1: So let's jump to our favorite questions that we ask

1100
01:00:35,040 --> 01:00:38,680
Speaker 1: all of our guests, sort of our speed rounds on.

1101
01:00:38,920 --> 01:00:41,160
Speaker 1: Let me jump right into this. What was the first

1102
01:00:41,200 --> 01:00:44,680
Speaker 1: car you've ever owned? Your making model? I don't know

1103
01:00:44,720 --> 01:00:46,720
Speaker 1: what year it was. It was an old Ford Escort,

1104
01:00:46,720 --> 01:00:48,640
Speaker 1: old red Ford Escort that my father gave me when

1105
01:00:48,640 --> 01:00:50,919
Speaker 1: I graduated from college. It had been his commute car,

1106
01:00:51,000 --> 01:00:55,000
Speaker 1: and I inherited it and drove it until it was total. Uh,

1107
01:00:55,080 --> 01:00:58,800
Speaker 1: tell us the most important thing people don't know about,

1108
01:00:58,840 --> 01:01:03,000
Speaker 1: binya apple Bound. Wow, the most important thing. I don't

1109
01:01:03,040 --> 01:01:06,080
Speaker 1: even know how to answer that question. Um, how about

1110
01:01:06,120 --> 01:01:09,280
Speaker 1: your mentors? Tell us who your early mentors were. You know,

1111
01:01:09,440 --> 01:01:12,720
Speaker 1: I was really lucky to work for some great editors

1112
01:01:12,720 --> 01:01:14,880
Speaker 1: and to work with some great colleagues at the Charlotte Observer.

1113
01:01:14,920 --> 01:01:17,480
Speaker 1: That's where I think I really grew up as a journalist.

1114
01:01:17,560 --> 01:01:20,840
Speaker 1: And so my editor there Patrick Scott and Ted Melnick,

1115
01:01:20,880 --> 01:01:22,920
Speaker 1: who was the data guy there who I collaborated with

1116
01:01:22,960 --> 01:01:25,920
Speaker 1: on a series of projects. I really feel like, you know,

1117
01:01:26,400 --> 01:01:30,480
Speaker 1: I learned journalism and grew up as a person in Charlotte,

1118
01:01:30,520 --> 01:01:32,800
Speaker 1: and so i'm I'm indebted to the folks I worked

1119
01:01:32,840 --> 01:01:36,840
Speaker 1: for and worked with at The Observer. Any particular authors

1120
01:01:37,040 --> 01:01:41,320
Speaker 1: or journalists who influenced your approach to covering the Federal Reserve,

1121
01:01:41,800 --> 01:01:44,560
Speaker 1: covering the FED specifically, I mean, I think Greg it

1122
01:01:44,800 --> 01:01:46,680
Speaker 1: is kind of the gold standard in our r. I

1123
01:01:46,720 --> 01:01:50,800
Speaker 1: think his his understanding of monetary policy and his clarity

1124
01:01:51,440 --> 01:01:54,440
Speaker 1: as a journalist are just things that I admire enormously.

1125
01:01:55,080 --> 01:01:58,200
Speaker 1: And um full disclosure, he took me to task for

1126
01:01:58,280 --> 01:02:02,120
Speaker 1: calling um Rome pal hawk. I really should have said,

1127
01:02:02,200 --> 01:02:05,800
Speaker 1: Jerome Pale is more hawk ish than yelling. She's not.

1128
01:02:05,960 --> 01:02:09,320
Speaker 1: He's not a pure hawk. So Greg, here's your Mia

1129
01:02:09,400 --> 01:02:15,800
Speaker 1: Kalpa live and in public. Um everybody's favorite question. Tell

1130
01:02:15,840 --> 01:02:17,760
Speaker 1: us some of your favorite books. What do you read?

1131
01:02:17,840 --> 01:02:21,760
Speaker 1: Be they FED or economics related or not? Fiction or nonfiction?

1132
01:02:22,280 --> 01:02:24,720
Speaker 1: So I read a lot about you know, the ft

1133
01:02:24,800 --> 01:02:27,200
Speaker 1: and monetary policy, but you know that's not necessarily the

1134
01:02:27,240 --> 01:02:30,600
Speaker 1: most enjoyable stuff that I read. Uh I love history,

1135
01:02:30,720 --> 01:02:33,800
Speaker 1: you know. I My approach to to writing deeply influenced

1136
01:02:33,840 --> 01:02:38,400
Speaker 1: by historians like Daniel Borstein and fernand Brodel, who who saw,

1137
01:02:38,920 --> 01:02:42,440
Speaker 1: you know, economics and history has integrated. I'm very frustrated

1138
01:02:42,440 --> 01:02:45,640
Speaker 1: in general that historians pay very little attention to economics

1139
01:02:45,840 --> 01:02:48,240
Speaker 1: and that economists pay very little attention to history. So

1140
01:02:48,320 --> 01:02:50,840
Speaker 1: people who work at the intersection of those two things,

1141
01:02:50,880 --> 01:02:53,680
Speaker 1: who see the connections, who understand how much history has

1142
01:02:53,720 --> 01:02:57,120
Speaker 1: been shaped by economic forces, who understand how much economics

1143
01:02:57,160 --> 01:03:00,480
Speaker 1: exists in a historical context, those, to me are are

1144
01:03:00,600 --> 01:03:02,840
Speaker 1: the people that I admire and love reading. Give us

1145
01:03:02,840 --> 01:03:05,680
Speaker 1: some book titles. Everybody wants a good book recommendation. Well,

1146
01:03:05,680 --> 01:03:08,440
Speaker 1: you know, Fernan Brod I wrote this series of three books,

1147
01:03:10,040 --> 01:03:12,160
Speaker 1: The Wheels of Commerce maybe is the first of them.

1148
01:03:12,600 --> 01:03:14,640
Speaker 1: You can find them, but they're basically is history of

1149
01:03:14,640 --> 01:03:19,000
Speaker 1: of Europe's rise into the modern era. Just fascinating books

1150
01:03:19,040 --> 01:03:21,760
Speaker 1: that that integrate economics and history in a way that

1151
01:03:22,080 --> 01:03:25,480
Speaker 1: you know, at the time was unprecedented and remains deeply influential.

1152
01:03:25,920 --> 01:03:28,960
Speaker 1: Uh So, I love those books. Daniel Borstian's trilogy on

1153
01:03:29,000 --> 01:03:32,280
Speaker 1: the American Experience just a wonderful history of of the

1154
01:03:32,360 --> 01:03:35,520
Speaker 1: United States that again has this capacity to tell our

1155
01:03:35,680 --> 01:03:38,280
Speaker 1: story much of what is so innovative and important about

1156
01:03:38,280 --> 01:03:40,920
Speaker 1: America as its rise as a commercial power and a

1157
01:03:40,920 --> 01:03:44,480
Speaker 1: commercial innovator. And he really captures that aspect of the

1158
01:03:44,520 --> 01:03:47,520
Speaker 1: American experience in a way that I think most historians

1159
01:03:47,520 --> 01:03:50,240
Speaker 1: failed to do. Uh, tell us about a time you

1160
01:03:50,440 --> 01:03:54,120
Speaker 1: failed and what you learned from the experience. I already

1161
01:03:54,120 --> 01:03:57,280
Speaker 1: mentioned my my inability to get millions and billions straight

1162
01:03:57,320 --> 01:04:00,200
Speaker 1: in my first banking story, you know, and I know

1163
01:04:00,240 --> 01:04:02,000
Speaker 1: I think you know again to go back to Charlotte.

1164
01:04:02,480 --> 01:04:05,240
Speaker 1: You know, the importance of making sure that all the

1165
01:04:05,280 --> 01:04:07,080
Speaker 1: facts are right in a story is something that as

1166
01:04:07,080 --> 01:04:09,280
Speaker 1: a young journalist I didn't do. I didn't have a

1167
01:04:09,360 --> 01:04:11,360
Speaker 1: high enough batting average. And you know, I had an

1168
01:04:11,440 --> 01:04:12,760
Speaker 1: editor who told me, you know, if you get one

1169
01:04:12,800 --> 01:04:15,360
Speaker 1: thing wrong, even if it's a small thing, the credibility

1170
01:04:15,360 --> 01:04:18,720
Speaker 1: of your entire story is lost. And and understanding that

1171
01:04:18,800 --> 01:04:22,440
Speaker 1: and internalizing that was was a very important step in

1172
01:04:22,440 --> 01:04:24,840
Speaker 1: in my development. What do you do for fun to

1173
01:04:24,920 --> 01:04:27,120
Speaker 1: either relax or get out of the office. What do

1174
01:04:27,200 --> 01:04:29,480
Speaker 1: you do when you're not in front of a computer writing?

1175
01:04:29,840 --> 01:04:32,880
Speaker 1: I love reading. I guess that's probably already clear. I

1176
01:04:32,960 --> 01:04:35,480
Speaker 1: like running. I have two young kids, and I love

1177
01:04:35,520 --> 01:04:38,240
Speaker 1: spending time with them. That's that's pretty much a full life.

1178
01:04:39,000 --> 01:04:41,640
Speaker 1: With regards to the Federal Reserve, what are you most

1179
01:04:41,800 --> 01:04:45,280
Speaker 1: optimistic about today and what are you most pessimistic about?

1180
01:04:46,640 --> 01:04:48,680
Speaker 1: So I think that the FED has undergone a really

1181
01:04:48,720 --> 01:04:52,560
Speaker 1: important evolution in recent years, that it has embraced a

1182
01:04:52,600 --> 01:04:56,760
Speaker 1: broader set of responsibilities. That it seems to recognize that,

1183
01:04:57,080 --> 01:04:59,760
Speaker 1: you know, it can't simply pursue lower inflation without regard

1184
01:04:59,800 --> 01:05:03,320
Speaker 1: to the consequences for American workers. That it can't ignore

1185
01:05:03,400 --> 01:05:07,120
Speaker 1: finantal regulation without regard to the consequences for all of us.

1186
01:05:07,160 --> 01:05:09,800
Speaker 1: That's really important. And I'm optimistic that the VET is

1187
01:05:09,840 --> 01:05:13,200
Speaker 1: going to move forward, uh, you know, with those things

1188
01:05:13,200 --> 01:05:15,280
Speaker 1: in mind, and that that will give it a better

1189
01:05:15,360 --> 01:05:19,000
Speaker 1: chance of of producing good results over time. On the

1190
01:05:19,000 --> 01:05:21,439
Speaker 1: flip side, you've got to be a little concerned about

1191
01:05:21,480 --> 01:05:24,680
Speaker 1: the feds room for maneuver rates are very low while

1192
01:05:24,920 --> 01:05:27,320
Speaker 1: the economy is growing. There's not much room to cut

1193
01:05:27,440 --> 01:05:30,200
Speaker 1: rates when the next downturn comes. Uh. You know, they

1194
01:05:30,200 --> 01:05:33,080
Speaker 1: can do some bond buying, but a not totally clear

1195
01:05:33,080 --> 01:05:35,600
Speaker 1: how much that helps and be uh, you know, there

1196
01:05:35,600 --> 01:05:39,040
Speaker 1: are limits on that too. I think there's reason to

1197
01:05:39,080 --> 01:05:41,479
Speaker 1: be worried about the FEDS capacity to help if things

1198
01:05:41,520 --> 01:05:44,400
Speaker 1: go south, and reason to be worried about the willingness

1199
01:05:44,480 --> 01:05:48,240
Speaker 1: of fiscal policy makers to step in. What sort of

1200
01:05:48,280 --> 01:05:51,280
Speaker 1: advice would you give a millennial or recent college grad

1201
01:05:51,360 --> 01:05:55,440
Speaker 1: who was just starting their career and interested in either

1202
01:05:55,960 --> 01:06:00,160
Speaker 1: journalism or central bank and economic coverage, So if you're

1203
01:06:00,160 --> 01:06:03,400
Speaker 1: specifically interested in writing about business and economics, I think

1204
01:06:03,440 --> 01:06:07,080
Speaker 1: one thing that has changed in journalism in recent decades

1205
01:06:07,720 --> 01:06:09,680
Speaker 1: is that it was once the case that the journalism

1206
01:06:09,720 --> 01:06:12,920
Speaker 1: was much more stenographic. Your job was to sort of

1207
01:06:13,360 --> 01:06:16,280
Speaker 1: transfer the things that important people said to your readers

1208
01:06:16,880 --> 01:06:21,600
Speaker 1: with relatively little intermediation. There's a real priority now on expertise.

1209
01:06:21,840 --> 01:06:24,600
Speaker 1: You really need to know your subject, and so if

1210
01:06:24,640 --> 01:06:27,880
Speaker 1: you know what subject that is, you will serve your

1211
01:06:27,920 --> 01:06:31,000
Speaker 1: cause by by studying it and trying to master it

1212
01:06:31,040 --> 01:06:34,680
Speaker 1: and becoming deeply versed. The best journalists, the ones that

1213
01:06:34,760 --> 01:06:38,160
Speaker 1: I follow most closely, the ones who most regularly illuminate

1214
01:06:38,200 --> 01:06:42,800
Speaker 1: issues for me, tend to be really not just really smart,

1215
01:06:42,840 --> 01:06:46,280
Speaker 1: but really well versed in their subject, really careful about

1216
01:06:46,280 --> 01:06:49,840
Speaker 1: the details. And that's hard, and it takes time, but

1217
01:06:49,840 --> 01:06:52,680
Speaker 1: but it will give you a competitive advantage. And our

1218
01:06:52,720 --> 01:06:55,480
Speaker 1: final question, what is it that you know about the

1219
01:06:55,520 --> 01:07:00,000
Speaker 1: world of finance and central banking today that you wish

1220
01:07:00,080 --> 01:07:02,240
Speaker 1: you knew twenty five or so years ago when you

1221
01:07:02,280 --> 01:07:05,800
Speaker 1: were first getting started. Yeah, I mean, I guess you know.

1222
01:07:05,840 --> 01:07:07,920
Speaker 1: One thing you learn is you get inside any system

1223
01:07:08,040 --> 01:07:10,000
Speaker 1: is how much of it is a little random, how

1224
01:07:10,080 --> 01:07:12,880
Speaker 1: much of it is is sort of arbitrary, and and

1225
01:07:13,040 --> 01:07:15,400
Speaker 1: things that you assume must have sort of a clear

1226
01:07:15,440 --> 01:07:18,680
Speaker 1: and logical explanation turn out to not not actually operate

1227
01:07:18,760 --> 01:07:22,240
Speaker 1: that way. So just I think to you know, have

1228
01:07:22,760 --> 01:07:25,880
Speaker 1: understood that this is true of just adulthood in general.

1229
01:07:25,960 --> 01:07:28,600
Speaker 1: Like you think that there's a reason for everything, and

1230
01:07:28,720 --> 01:07:30,680
Speaker 1: then you know, you become an adult and it turns

1231
01:07:30,720 --> 01:07:32,680
Speaker 1: out that a lot of things just happened. So just

1232
01:07:33,160 --> 01:07:36,680
Speaker 1: randomness sits out there. Yeah, quite quite interesting. We have

1233
01:07:36,800 --> 01:07:40,280
Speaker 1: been speaking with Benya Applebaum. He is a lead writer

1234
01:07:40,440 --> 01:07:43,600
Speaker 1: on business and economics for the editorial board of The

1235
01:07:43,600 --> 01:07:45,880
Speaker 1: New York Times and the author of the new book

1236
01:07:46,160 --> 01:07:50,280
Speaker 1: The Economists Hours, False Profits, Free Markets, and the Fracture

1237
01:07:50,440 --> 01:07:54,440
Speaker 1: of Society. If you enjoy this conversation, well, have a

1238
01:07:54,480 --> 01:07:56,440
Speaker 1: look up an inch or down an inch on Apple

1239
01:07:56,480 --> 01:07:59,440
Speaker 1: iTunes and you could see all of the previous two

1240
01:07:59,520 --> 01:08:03,280
Speaker 1: hundred and fifth ye or so podcasts and interviews we've

1241
01:08:03,320 --> 01:08:07,280
Speaker 1: done over the past five years. We love your comments,

1242
01:08:07,320 --> 01:08:12,000
Speaker 1: feedback and suggestions right to us at m IB podcast

1243
01:08:12,080 --> 01:08:14,720
Speaker 1: at Bloomberg dot net. Feel free to go to Apple

1244
01:08:14,800 --> 01:08:18,640
Speaker 1: iTunes and give us a review if you enjoyed this conversation.

1245
01:08:19,240 --> 01:08:21,559
Speaker 1: Uh I would be remiss if I did not thank

1246
01:08:21,600 --> 01:08:24,240
Speaker 1: the crack staff that helps put this together each week.

1247
01:08:24,720 --> 01:08:27,560
Speaker 1: Michael bat Nick is my head of research Atika V

1248
01:08:27,560 --> 01:08:32,080
Speaker 1: Album Run is our project director. Michael Boyle is my producer.

1249
01:08:32,640 --> 01:08:36,040
Speaker 1: I'm Barry Retults. You've been listening to Masters in Business

1250
01:08:36,400 --> 01:08:37,519
Speaker 1: on Bloomberg Radio