WEBVTT - Central Bankers Should've Been More Aggressive, Rogoff Says 0:00:00.240 --> 0:00:04.040 Runt you by Bank of America Mary Lynch with virtual reality, 0:00:04.320 --> 0:00:09.719 virtually everything will change. Discover opportunities in a transforming world. 0:00:10.119 --> 0:00:14.440 Be of a, mL dot Com, slash VR, Mary Lynch, 0:00:14.520 --> 0:00:29.240 Pierced Fenner and Smith Incorporated. Welcome to the Bloomberg Surveillance Podcast. 0:00:29.280 --> 0:00:32.760 I'm Tom Keene with David Gura. Daily we bring you 0:00:32.840 --> 0:00:37.640 insight from the best of economics, finance, investment and international relations. 0:00:38.120 --> 0:00:43.640 Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, Bloomberg dot Com, 0:00:43.640 --> 0:00:51.400 and of course on the Bloomberg Market. Sist all summity 0:00:51.440 --> 0:00:53.760 in weekend this morning, as the Bank of Japan kept 0:00:53.760 --> 0:00:56.440 its lunchist in this program on changed to make a 0:00:56.560 --> 0:00:59.080 got a boost. As a result, will Central Bank also 0:00:59.120 --> 0:01:02.440 pushed back the projected timing for reaching it's two percent 0:01:02.480 --> 0:01:05.080 inflation target for a six time or for more. We're 0:01:05.120 --> 0:01:08.640 joined by Kathy mat Suey Goldman Sachs, Japan Vice President 0:01:08.680 --> 0:01:11.560 and chief Equity stretches to here in London, we still 0:01:11.600 --> 0:01:14.200 have Richard turning Blackbrock. Cathy, great to have you on 0:01:14.200 --> 0:01:16.800 the program. What do you make of the challenges for 0:01:16.840 --> 0:01:19.400 the b o j What is their number one question 0:01:19.480 --> 0:01:22.959 that investors want answered, is it inflation or is it 0:01:23.000 --> 0:01:25.920 just simply well Governor Croda stay on after his term 0:01:26.000 --> 0:01:31.680 ends in two thousand and eighteen. Well, I think the 0:01:31.720 --> 0:01:34.759 top of mind question for many investors that we speak 0:01:34.840 --> 0:01:39.600 with is UH, what is the kind of the endgame 0:01:39.720 --> 0:01:45.120 for this so called yield curve control, quantitative easing framework 0:01:45.200 --> 0:01:49.120 and asset purchase program. Of course, you mentioned the other question, 0:01:49.160 --> 0:01:52.680 which is will Coroda stay on as central bank governor 0:01:52.720 --> 0:01:58.000 here post his UH expiration of next April? But the 0:01:58.080 --> 0:02:01.320 number one question is how much longer can the Banque 0:02:01.320 --> 0:02:05.280 of Japan sustain the current program? For what it's worth, 0:02:05.320 --> 0:02:09.320 our view is because they've set their inflation target quite 0:02:09.400 --> 0:02:13.040 high and ambitious at two percent, it is quite likely 0:02:13.520 --> 0:02:17.400 that they will persist with the current framework, including both 0:02:18.000 --> 0:02:20.920 yield curve control as well as the asset purchases that 0:02:21.000 --> 0:02:24.800 they are currently executing. Having said that, we are also 0:02:24.840 --> 0:02:27.040 of the view that there are some signs of UH 0:02:27.160 --> 0:02:30.680 of inflation beginning to creep through some green shoots. Wages 0:02:30.720 --> 0:02:33.799 are beginning to pick up, Inflation expectations are creeping a 0:02:33.840 --> 0:02:37.320 little bit higher, while not the two percent that the 0:02:37.320 --> 0:02:40.000 Bank of Japan is aiming for, we are definitely going 0:02:40.040 --> 0:02:43.280 to start to see some increasing signs of inflation, we 0:02:43.360 --> 0:02:45.680 think in the next six to twelve months down the road. 0:02:46.520 --> 0:02:49.079 But yeah, by again delaying the time for hitting their 0:02:49.120 --> 0:02:51.679 price targets where their price goals, is the bo J 0:02:51.840 --> 0:02:55.839 effectively acknowledging that they'll need to continue easing for many 0:02:55.919 --> 0:02:59.840 years to come. It would appear so UM and so 0:03:00.240 --> 0:03:02.120 we don't know exactly how long that will be. And 0:03:02.160 --> 0:03:04.920 again a lot will ride on whether KROTA stays or 0:03:05.000 --> 0:03:08.160 leaves post next spring. But for the time being, the 0:03:08.200 --> 0:03:11.600 fact that they did delay or postpone the timeline for 0:03:11.720 --> 0:03:16.200 reaching their target inflation level, obviously the market is interpreting 0:03:16.200 --> 0:03:19.080 that as more for longer UH. And so I think 0:03:19.120 --> 0:03:22.000 we're seeing a divergence of central banks UH. The FED 0:03:22.080 --> 0:03:24.160 and the e c BE on the one hand, versus 0:03:24.200 --> 0:03:26.359 the Bank of Japan is probably going to continue this 0:03:26.960 --> 0:03:31.480 quite aggressive stimulus program at least for the foreseeable future. Kathy, 0:03:31.560 --> 0:03:33.320 good morning. I want to bring up a chart here. 0:03:33.400 --> 0:03:36.640 Let's bring it up right now. This is Japan nominal 0:03:36.880 --> 0:03:39.160 g d P. We've got Robert Schiller with us in 0:03:39.200 --> 0:03:42.920 the next hour, where there's acclaimed work with Professor Akerloff. 0:03:43.320 --> 0:03:47.880 Mr Janet yelling on animal spirit. The animal spirit Kathy 0:03:48.000 --> 0:03:51.360 is evaporated. Nominal g d P, which was really on 0:03:51.400 --> 0:03:55.040 an albionomics friendly trend. Here's the US hurdle rate of 0:03:55.120 --> 0:03:59.960 four percent nominal it's failed, it's rolled over. How critic 0:04:00.320 --> 0:04:07.200 is it that nominal GDP has rolled over? Um, it's obviously, 0:04:07.360 --> 0:04:10.119 you know, super critical because at the end of the day, 0:04:10.120 --> 0:04:13.280 I think corporate managers and mrs what another think in 0:04:13.600 --> 0:04:17.560 nominal terms as opposed to real terms. Right, uh So, clearly, 0:04:17.680 --> 0:04:19.599 you know, there has been an initial sort of jump 0:04:19.720 --> 0:04:24.239 start to getting the economy out of the getting growth 0:04:24.520 --> 0:04:27.520 to expand in all of that, but more needs to 0:04:27.600 --> 0:04:29.960 be done. And I think the concern of the markets 0:04:30.080 --> 0:04:33.520 is that the government currently in Japan may be distracted 0:04:33.520 --> 0:04:36.640 by other issues and needs to refocus its attention on 0:04:36.680 --> 0:04:39.720 the economy, stimulating the economy, trying to get those animal 0:04:39.760 --> 0:04:42.920 spirits to revive once again. Not to be fair, the 0:04:42.960 --> 0:04:46.280 corporate sector is in completely fine shape and we have 0:04:46.400 --> 0:04:50.760 record profits, record profit markets, record cash balances, so it's 0:04:50.760 --> 0:04:53.039 not as if there's no cash around. But you you're 0:04:53.040 --> 0:04:55.680 putting thing on the right point, which is where is 0:04:55.720 --> 0:04:58.680 the trigger, where's the catalyst to get corporate managers to 0:04:58.800 --> 0:05:02.080 deploy that cash into the real economy through capex and 0:05:02.120 --> 0:05:06.400 other means to lead to a virtuous cycle. But again, 0:05:06.960 --> 0:05:09.960 it's not as if everything is in inflation. And back 0:05:10.000 --> 0:05:12.000 to five years ago. We are a little much better 0:05:12.000 --> 0:05:14.440 place than we were five years ago, but more needs 0:05:14.440 --> 0:05:16.440 to be done to make sure the cycle is sustained. 0:05:16.880 --> 0:05:18.280 Go go back to this chart if you what, I 0:05:18.320 --> 0:05:20.680 want to do this on television, like it's Facebook Live 0:05:21.040 --> 0:05:23.720 right now. You're gonna see me make the sausage right now, 0:05:24.000 --> 0:05:27.359 which is the average twenty year line of nominal g 0:05:27.480 --> 0:05:30.040 d P. You can barely see it there. I'm gonna 0:05:30.080 --> 0:05:33.520 make it a big, bright, ugly red for you. Nominal 0:05:33.600 --> 0:05:38.599 GDP over two decades in Japan his flat line. So 0:05:38.680 --> 0:05:41.599 there you go, there's that red line right down by zero. 0:05:41.839 --> 0:05:46.160 I mean, is there any demand by society Kathy in 0:05:46.320 --> 0:05:51.080 Japan to jump start societal animal spirit? Are they all 0:05:51.120 --> 0:05:55.359 doing this for Honda and Toyota? Well, I think I 0:05:55.400 --> 0:05:58.280 think you have to think about this in terms of 0:05:58.760 --> 0:06:01.200 uh if. For example, if you look at the demographic 0:06:01.360 --> 0:06:03.400 I call it, the demograph would divide right the older 0:06:03.480 --> 0:06:08.080 Japanese cohorts who are retired no more you know, earned income, 0:06:08.120 --> 0:06:11.520 but they're trying to live off their savings. Frankly, for them, 0:06:11.640 --> 0:06:14.840 deflation is the best thing since life, because deflation means 0:06:15.000 --> 0:06:17.760 they can stretch their savings, right, Versus those that are 0:06:17.760 --> 0:06:20.640 not retired, they're younger, they're seeing their wages a stagnant 0:06:20.680 --> 0:06:23.400 or falling. So it's been this real battle between these 0:06:23.400 --> 0:06:27.000 two cohorts. Uh And we had seen, of course the dominant, 0:06:27.000 --> 0:06:29.640 that the former group really winning the game. But now 0:06:29.680 --> 0:06:32.120 the other group is now beginning to raise its voices 0:06:32.120 --> 0:06:33.920 and say, look, this is not good for us, it's 0:06:33.920 --> 0:06:36.560 not good for posterity. We really need to change the 0:06:36.640 --> 0:06:39.800 dynamic here. So again I think you're painting a picture 0:06:39.839 --> 0:06:43.360 that is exactly why albinomics came came through, right, It's 0:06:43.400 --> 0:06:46.680 exactly why the society said enough is enough. We made 0:06:46.720 --> 0:06:49.520 the sort of the retired community happy for a while, 0:06:49.680 --> 0:06:52.520 but this is really terrible for our future. Again, the 0:06:52.600 --> 0:06:54.520 verdict is still out whether this is going to be 0:06:54.560 --> 0:06:58.320 sustainable and successful sufficiently, but at least I think they've 0:06:58.360 --> 0:07:01.000 come to recognize as a society that we can't just 0:07:01.279 --> 0:07:03.480 you know, sort of cater to that formal move any longer. 0:07:15.400 --> 0:07:16.720 I cannot throw off as a mention here in our 0:07:16.680 --> 0:07:18.760 Bloomberg and Lemons your studios in New York. Great to 0:07:18.800 --> 0:07:22.760 have you applies. Let me start by asking you to 0:07:22.760 --> 0:07:24.440 respond to what we're seeing here out of Brussels, the 0:07:24.760 --> 0:07:27.520 beginnings of these negotiations between the the U and the 0:07:27.600 --> 0:07:30.640 UK obviously early stages here yet, but in terms of 0:07:30.720 --> 0:07:33.000 what's what the flashpoints are, what the big issues are, 0:07:33.960 --> 0:07:35.360 how do you respond to it? To what we're hearing 0:07:35.360 --> 0:07:37.800 here about sort of the issue of citizens rights in 0:07:37.800 --> 0:07:39.240 the UK and how being an issue that's going to 0:07:39.280 --> 0:07:42.840 be going forward. I don't even know where to start. 0:07:42.880 --> 0:07:46.440 I wonder what I would say that the sort of 0:07:46.520 --> 0:07:49.680 damocles as hanging over the UK here with this bracts 0:07:49.760 --> 0:07:52.840 that they haven't begun to feel the effects, particularly the 0:07:52.880 --> 0:07:56.160 financial sector. If they have to move twenty percent of 0:07:56.200 --> 0:08:00.160 the financial sector out of London, it's going to be very, 0:08:00.240 --> 0:08:04.160 very painful for the UK economy. I think they'll come 0:08:04.200 --> 0:08:09.480 to some kind of reasonable agreement on citizenship and citizens rights, 0:08:09.480 --> 0:08:13.640 but I don't know. Tor resume had this disastrous election, uh, 0:08:13.800 --> 0:08:16.720 will the government fall? I mean, it's hard to see 0:08:16.760 --> 0:08:19.720 how long they can last when they don't really have 0:08:19.880 --> 0:08:25.320 the power to negotiate and whether the very thin working 0:08:25.360 --> 0:08:29.160 majority they have will fray. So it's very very hard 0:08:29.280 --> 0:08:31.680 for her to, uh, you know, really come to a 0:08:31.760 --> 0:08:35.079 deal here. And yet the clock is ticking. We had 0:08:35.080 --> 0:08:37.959 this ECB form a couple of weeks back in Central Portugal, 0:08:37.960 --> 0:08:39.800 and you had a number of central bankers talking about 0:08:40.640 --> 0:08:43.600 working together, collaborate, that collaboration cooperation. I suppose you could say, 0:08:43.800 --> 0:08:45.760 among them, what did you make of what came out 0:08:45.760 --> 0:08:49.960 of that meeting in Central Well, obviously, you know, the 0:08:49.960 --> 0:08:53.280 most striking thing was what Mario Droggy said the markets 0:08:53.520 --> 0:08:57.760 paid attention to. But there is a lot of exchange 0:08:57.760 --> 0:09:00.440 of ideas across central banks. They're all seeing the same thing. 0:09:00.559 --> 0:09:03.000 And the biggest thing in the world over the last 0:09:03.080 --> 0:09:06.000 five or ten years has been the steady drop in 0:09:06.840 --> 0:09:11.640 the inflation adjusted interest rate. For everybody, they weren't expecting it, 0:09:11.640 --> 0:09:14.760 it was. It's it's a couple percent lower than it was, 0:09:14.960 --> 0:09:17.520 you know, at the start of the financial crisis, and 0:09:17.559 --> 0:09:21.119 it's lasted and I don't know if it will stay. 0:09:21.160 --> 0:09:24.160 But obviously, if you're talking about raising interest rates, but 0:09:24.840 --> 0:09:27.040 the you know, the rate of interest, that kind of 0:09:27.080 --> 0:09:30.440 clears the market when you adjust for inflation hasn't been rising, 0:09:30.760 --> 0:09:33.800 they won't, So I think that's gonna as that continues 0:09:33.840 --> 0:09:37.080 to get pushed out the day of quote unquote normalization 0:09:37.120 --> 0:09:40.320 of interest rates. They're all going so they're all seeing 0:09:40.360 --> 0:09:42.720 the same thing. Hey, interest rates were a lot higher 0:09:43.240 --> 0:09:45.800 ten years ago, but where are they going now? There 0:09:45.880 --> 0:09:48.240 was a moment of misinterpretation, I suppose you could call it. 0:09:48.320 --> 0:09:50.920 During that that form, the market seem to misunderstand what 0:09:51.080 --> 0:09:54.560 Mario jogging intended to to say, how how big an 0:09:54.559 --> 0:09:57.079 issue steal this communication by central margages. We push a 0:09:57.120 --> 0:09:59.079 head here to a news conference from the the prison 0:09:59.120 --> 0:10:02.080 of the ECB later this morning. Are you satisfied with 0:10:02.080 --> 0:10:06.520 the green to which central bankers are communicating their policy positions. Well, 0:10:06.679 --> 0:10:09.360 they each have different challenges. So in the case of 0:10:09.400 --> 0:10:13.040 Mario dragging, the European Central Bank is both fiscal policy 0:10:13.280 --> 0:10:16.360 and monetary policy for the Eurozone, and yet he has 0:10:16.400 --> 0:10:19.960 to couch it in this language about inflation, the quantitative 0:10:20.040 --> 0:10:23.480 easing and the slowing quantitative easing. It's not about inflation. 0:10:23.920 --> 0:10:28.000 It's about propping up bonds in Portugal, Italy and the 0:10:28.000 --> 0:10:31.160 rest of Europe. And if the Eurozone can't step in 0:10:31.200 --> 0:10:33.800 to do something. Maybe the new French president will be 0:10:33.840 --> 0:10:37.320 able to catalyze something. It's a problem in the US. Actually, 0:10:37.320 --> 0:10:40.520 I think the interesting problem is it does matter what 0:10:40.559 --> 0:10:43.160 people think you're going to do two years from now, 0:10:43.240 --> 0:10:46.280 five years now, but the Fed doesn't even know what 0:10:46.400 --> 0:10:49.000 its constitution is going to be. Two years, five years 0:10:49.000 --> 0:10:53.079 from now. We have this uh, you know, disruptive president 0:10:53.480 --> 0:10:55.920 the Federal Reserve, you know, puts on a brave face. 0:10:56.040 --> 0:10:59.520 Nothing's going to change whoever your points. He'll just get 0:10:59.559 --> 0:11:03.480 you know, institutionalized into the fat way of doing things. 0:11:03.520 --> 0:11:06.120 But the President Trump does an enormous power to appoint 0:11:06.160 --> 0:11:08.760 people can roll off with us with Harvard University, Good 0:11:08.800 --> 0:11:12.160 morning everyone, Green on the screen features up one, Features 0:11:12.200 --> 0:11:15.600 up eleven is David mentions Mr Drog will have a 0:11:15.679 --> 0:11:20.000 sporting morning, will of course have his important press conference 0:11:20.040 --> 0:11:23.280 in Q and a always a raft of headlines out 0:11:24.240 --> 0:11:27.560 with Mr Drog. I want to get one monetary question 0:11:27.559 --> 0:11:30.200 in before we talk about and celebrate my book of 0:11:30.240 --> 0:11:33.920 the year, the Curse of Cash from last year, and 0:11:34.000 --> 0:11:37.760 I've felt Rogueff you spend a lot of Matthew moments 0:11:37.840 --> 0:11:44.439 on this strange word. Expectations are expectations different today because 0:11:44.480 --> 0:11:48.800 of technology, because of speed of news, speed of transfer, 0:11:49.280 --> 0:11:53.800 maybe because of a smarter household, of smarter consumer. Our 0:11:53.920 --> 0:11:59.439 expectations different now than Obsfeld Rogueff of another time and place. Well, 0:11:59.440 --> 0:12:02.360 I sort of expectations of what I think they were 0:12:02.360 --> 0:12:06.000 pretty sophisticated for a long time, but inflations become something 0:12:06.000 --> 0:12:10.079 of a mystery. I think, what's going on with inflations? 0:12:10.120 --> 0:12:13.760 The world's adjusting to this ever lower lowering share of 0:12:13.840 --> 0:12:17.400 labor that's putting downwardressure on wages. And if wages aren't 0:12:17.400 --> 0:12:20.680 going up, there's not a lot of pressure on firms prices. 0:12:20.720 --> 0:12:23.720 That may turn around at some point, but it hasn't, 0:12:23.960 --> 0:12:27.080 and that's that's mystified. How do you respond to Professor 0:12:27.160 --> 0:12:30.400 Roach of Yale University, Steve Roach, the great of invented 0:12:30.440 --> 0:12:34.400 Morgan Stanley economics, who says part of that inflation is 0:12:34.559 --> 0:12:38.199 asset inflation. Should we have a central bank that looks 0:12:38.280 --> 0:12:44.640 not only at inflation and jobs but also at asset dynamics? Well, 0:12:44.679 --> 0:12:47.880 so that's an age old question. Ben Bernanke addressed this 0:12:47.960 --> 0:12:50.800 a lot. He had a very decisive answer no, And 0:12:50.840 --> 0:12:54.520 that's the classic central bank answers we care about asset 0:12:54.559 --> 0:12:58.360 price inflation to the extent if stock prices go up 0:12:58.400 --> 0:13:02.000 and people spend more money, it's upward pressure on output inflation. 0:13:02.320 --> 0:13:05.560 But we don't care about the stock prices themselves. We 0:13:05.600 --> 0:13:08.000 don't know what they should be. But in the case 0:13:08.040 --> 0:13:12.119 of housing and debt fueled housing, it's a little trickier 0:13:12.160 --> 0:13:15.120 because housing is often at the central center of financial crisis. 0:13:15.200 --> 0:13:19.120 Canada recently raised its interest rate, pointing at housing. Um, 0:13:20.000 --> 0:13:21.959 you've got the safe box here with the cash, and 0:13:22.200 --> 0:13:24.600 on the cover of the new course of cash. If 0:13:24.640 --> 0:13:28.640 the death threats slowed down, Uh, yeah, they've slowed down 0:13:28.679 --> 0:13:31.880 a little bit. Although I just got one the other day. 0:13:32.280 --> 0:13:34.400 Just go on the other day. Do you have security 0:13:34.440 --> 0:13:37.280 up at Harvard like the president has two blocks over 0:13:37.320 --> 0:13:40.960 from us. I have had some of the people across 0:13:41.000 --> 0:13:43.480 the half of me wonder if they should move their office. 0:13:44.120 --> 0:13:47.599 If somebody walks into their office my mistake now and 0:13:47.679 --> 0:13:51.120 asks their me. But no, I think in the in 0:13:51.200 --> 0:13:54.319 the new paperback that I put out, first of all, 0:13:54.320 --> 0:13:57.560 I extended the title to make it clear that my 0:13:57.679 --> 0:13:59.800 policy is not getting rid of cash, which it says 0:13:59.800 --> 0:14:03.840 on page one, page two about my policy is more 0:14:03.920 --> 0:14:07.760 about come on, cut to chase every building contractor hate 0:14:07.800 --> 0:14:11.240 your guns because they love being paid under the table 0:14:11.320 --> 0:14:14.960 in cash. The construction industry is a big user of 0:14:15.040 --> 0:14:17.280 cash worldwide. There are lots of studies. I mean, I 0:14:17.280 --> 0:14:20.440 don't mean to pick on contractors have it and they're safe. 0:14:20.520 --> 0:14:23.240 And I mean, David, you're doing something over in Brooklyn 0:14:23.280 --> 0:14:27.160 on the man's so you pay the rule of the 0:14:27.160 --> 0:14:29.280 neighborhood and seriously you go to you're going to India, 0:14:29.760 --> 0:14:32.320 by the way. I don't have a moral thing about this. 0:14:32.400 --> 0:14:36.560 I mean I use cash. People my generation I'm sixty 0:14:36.600 --> 0:14:39.600 four use cash. I use cash. But I think the 0:14:39.680 --> 0:14:44.040 question is scale. Uh, you know how ordinary people use 0:14:44.120 --> 0:14:47.200 cash for whatever reason. I don't have a moral thing 0:14:47.240 --> 0:14:50.040 about this, but we're a lot of the cash is 0:14:50.120 --> 0:14:53.800 using big dealings and huge cach like kill gardens on 0:14:53.880 --> 0:14:56.000 top of his roof and the sweet green over here, 0:14:56.000 --> 0:14:58.480 where I can use cash by a salad tongue. Well, 0:14:58.520 --> 0:15:03.840 that's a different matter, is David. I mentioned your year 0:15:03.880 --> 0:15:06.080 off to India. What will be your message to Indian 0:15:06.240 --> 0:15:11.560 financial leaders about their experiment with the curse of cash? Quickly? Unfortunately? Well, 0:15:11.680 --> 0:15:15.240 I think whenever you're speaking to the India audience, it's 0:15:15.640 --> 0:15:19.240 they move very slowly. Actually normally normally they're moving in 0:15:19.240 --> 0:15:22.720 the right direction, but very slowly. And you you say, well, 0:15:22.720 --> 0:15:24.720 if you moved a little faster, it would be even better. 0:15:25.280 --> 0:15:27.560 In the case of this one, they moved way too fast. 0:15:27.640 --> 0:15:31.160 David gerin time came with kenro of Harvard University and 0:15:31.240 --> 0:15:34.080 celebration of my book of the Year last year, The 0:15:34.120 --> 0:15:37.960 Curse of Cash Out in paperback with an important update 0:15:38.040 --> 0:15:40.760 on India. Professor I cut you off at our last 0:15:41.080 --> 0:15:43.960 section on the India. What can the United States? What 0:15:44.000 --> 0:15:47.400 can Europe learn about trying to deal with corruption and 0:15:47.520 --> 0:15:52.040 cash within the new Indian experiment? Well, I think India 0:15:52.120 --> 0:15:54.760 is innovated in a lot of ways to try to 0:15:55.240 --> 0:15:58.880 have financial inclusion. Um, something I don't think we could 0:15:58.880 --> 0:16:01.440 do in the United States, although it probably happened someday. 0:16:01.720 --> 0:16:05.880 Is they have taken biometric data for now over one 0:16:05.920 --> 0:16:08.520 point one billion Indians and they're moving to do the 0:16:08.560 --> 0:16:12.520 rest and you get basically a free debit account when 0:16:12.520 --> 0:16:16.160 you get to do that. It's made financial inclusion very easy. 0:16:16.280 --> 0:16:19.960 And uh, they've also done things like make it impossible 0:16:20.040 --> 0:16:23.760 to pay certain kinds of license fees in cash you 0:16:23.920 --> 0:16:26.320 have to pay online. It's a big source of corruption. 0:16:26.600 --> 0:16:30.400 They haven't done that with houses. Apartments and houses routinely 0:16:30.480 --> 0:16:33.720 trade for cash, and India it's an enormous source of corruption. 0:16:34.120 --> 0:16:37.359 But they're trying to approach these things. There's many, many dimensions. 0:16:37.800 --> 0:16:40.840 I think the demonetization, which is MODI called it was 0:16:40.960 --> 0:16:44.800 very theatric and maybe highlighted these things. I think he 0:16:45.200 --> 0:16:48.400 did it way too fast. I say you should take 0:16:48.440 --> 0:16:51.120 five to seven years. He did it in a few hours. 0:16:51.680 --> 0:16:53.240 I don't think they did it the right way. I 0:16:53.240 --> 0:16:56.840 think that was counterproductive. But the larger picture, they've done 0:16:56.840 --> 0:16:59.000 a lot of good things. Ken, we are ten years 0:16:59.040 --> 0:17:02.720 on from a financial crisis. You are exceptionally generous with 0:17:02.800 --> 0:17:06.240 your time with Bloomberg on the economy and Bloomberg surveillance 0:17:06.520 --> 0:17:09.399 and the heat of two thousand and seven and two 0:17:09.400 --> 0:17:12.159 thousand eight. Of course you did your iconic book with 0:17:12.280 --> 0:17:16.920 Carmen Reinhardt. This time is different, Where this time is different? 0:17:17.040 --> 0:17:21.720 Down ten years, what have you learned well? I mean, 0:17:21.960 --> 0:17:26.280 first I want to say, when academic study these things, 0:17:26.280 --> 0:17:30.240 they do it forever. Ben Bernanke wrote a path breaking 0:17:30.280 --> 0:17:34.119 paper reinterpreting the Great Depression in a way, we still 0:17:34.119 --> 0:17:38.440 think it's important fifty years after it happened. Barry Ikens 0:17:38.560 --> 0:17:41.560 Green's book on the gold standard ten years after that, 0:17:42.119 --> 0:17:47.720 so there's constant rethinking of this. Uh, but I think 0:17:47.880 --> 0:17:51.040 it's still pretty robust. The results that Reinhardt and I 0:17:51.119 --> 0:17:54.000 got from this time is different, which shows that the 0:17:54.119 --> 0:17:58.480 run up to a financial crisis has pretty similar characteristics 0:17:58.480 --> 0:18:03.080 across time, across country, and it's never that painless. That 0:18:03.200 --> 0:18:07.040 is debated. There are papers by Michael Porto, David and 0:18:07.080 --> 0:18:10.160 Christina Romer who say, well, depends on what you call 0:18:10.160 --> 0:18:14.400 a financial crisis. I think we're focusing on deep systemic 0:18:14.480 --> 0:18:17.479 ones that have a big effect on the economy as 0:18:17.520 --> 0:18:20.720 opposed to more minor ones. Did we do okay? Did 0:18:20.720 --> 0:18:24.119 the United States all the jumpeter of Harvard? Did we 0:18:24.240 --> 0:18:28.520 clear our markets better than others? Oh? I think the 0:18:28.600 --> 0:18:34.159 United States did very well not to have a great depression, 0:18:34.440 --> 0:18:40.080 and they, you know, certainly behaved very courageously and remarkably. 0:18:40.440 --> 0:18:44.879 Ben BERNANKI of course widely celebrated President Obama. Uh, you know, 0:18:45.040 --> 0:18:48.520 his actions helped a lot. But George Bush also was 0:18:48.680 --> 0:18:54.120 very courageous going on with a fifty billion dollars stimulus right, 0:18:54.480 --> 0:18:57.159 you know, pretty quickly, contrary to like what all his 0:18:57.240 --> 0:19:00.600 beliefs and statements were, so they were very flexible. There's 0:19:00.600 --> 0:19:03.879 a lot of sort of Monday morning quarterbacking about what 0:19:03.920 --> 0:19:06.439 they should have done better. I think everyone agrees they 0:19:06.440 --> 0:19:11.840 should have done more infrastructure, they should have kept stimulus 0:19:11.880 --> 0:19:16.280 going longer. But I think people forget that the forecasts 0:19:16.320 --> 0:19:19.600 that were coming out from the FED, from Wall Street, 0:19:19.640 --> 0:19:23.560 from everyone where that the Reinhardt rogue off was not 0:19:23.640 --> 0:19:25.679 going to happen. It was going to be much faster. 0:19:26.040 --> 0:19:28.679 And the White House and the Congress, we're looking at 0:19:28.720 --> 0:19:32.040 this and saying, well, why are we doing crazy things? 0:19:32.040 --> 0:19:34.920 That things are going to get better? And as aggressive 0:19:34.920 --> 0:19:37.840 as monetary policy was, I think it could have been 0:19:37.880 --> 0:19:40.600 more aggressive. I think they were a little bit too 0:19:40.640 --> 0:19:45.800 concerned with maintaining inflation not going up, and not looking, 0:19:45.920 --> 0:19:48.920 you know, at really what the core problem was. Very quickly, 0:19:49.000 --> 0:19:50.960 you have but three seconds left. I wanted to sort 0:19:50.960 --> 0:19:52.960 of how your expectations for growth or your sense of 0:19:53.000 --> 0:19:55.560 where the U. S. Economy is going has changed in 0:19:55.640 --> 0:19:57.560 light of the disruptiveness. I think that was the word 0:19:57.600 --> 0:20:00.199 you used of of this president. How have you reavalid 0:20:00.040 --> 0:20:02.960 where you think things are heading well. I think for 0:20:03.040 --> 0:20:08.439 the moment it's just growth deferred and not reversed. I 0:20:08.480 --> 0:20:12.600 think the US economy is fundamentally very strong, and if 0:20:12.640 --> 0:20:16.239 the President of the Senate and President Congress don't end 0:20:16.280 --> 0:20:19.960 up doing much, it could be a lot worse. Um So, 0:20:20.240 --> 0:20:23.239 I do think productivity will start to improve. I do 0:20:23.320 --> 0:20:26.080 think investment will start to come back. We've gone on 0:20:26.119 --> 0:20:28.959 this long trend, but at least part of that the 0:20:29.000 --> 0:20:32.119 aftermath of the financial crisis, there's this view of Robert Gordon, 0:20:32.320 --> 0:20:36.480 We're not inventing anything anymore. I think that will look 0:20:36.560 --> 0:20:39.680 ridiculous in ten years. Can congratulations In my book of 0:20:39.720 --> 0:20:42.720 the Year last year, the Curse of Cash still most 0:20:42.880 --> 0:20:46.320 current out in paperback. Can't say enough about it, The 0:20:46.400 --> 0:20:56.720 Curse of Cash. This is Bloomer Brunts you by Bank 0:20:56.760 --> 0:21:01.480 of America Mary Lynch. With virtual reality, virtual everything will change. 0:21:01.920 --> 0:21:06.520 Discover opportunities in a transforming world, be of a mL 0:21:06.600 --> 0:21:12.199 dot Com, slash VR, Mary Lynch, Pierce Fenner and Smith Incorporated. 0:21:17.480 --> 0:21:20.320 We've had a wonderful week on a housing Jonathan Miller 0:21:20.400 --> 0:21:23.760 joined us, who is truly the smartest guy on per 0:21:23.880 --> 0:21:28.800 square foot in the major cities Uh. Doug Duncan joined 0:21:28.840 --> 0:21:33.760 his studios in in his little cases. UH from Fannie 0:21:33.760 --> 0:21:37.639 May and now the academic authority were the late Carl 0:21:37.760 --> 0:21:41.600 Case of Wellesley and Harvard, Robert Scholler, the laureate from Yale. 0:21:42.240 --> 0:21:47.200 On a housing Bob Shower, Why isn't there affordable housing 0:21:47.720 --> 0:21:55.760 across much of California? Well? Uh, I would say restrictions 0:21:55.760 --> 0:22:01.360 on supply. There's two kinds of restrictions as natural restriction uh, 0:22:01.520 --> 0:22:06.160 the mountains the ocean that limits building. But then there's 0:22:06.200 --> 0:22:13.200 other restrictions which are human created. Uh. And people are 0:22:13.240 --> 0:22:19.240 resistant to new construction. Uh. It's still possible in California, 0:22:19.840 --> 0:22:24.160 but people don't people existing homeowners don't want it. What 0:22:24.160 --> 0:22:27.680 what determines where there is affordable housing? Is it geographies 0:22:27.720 --> 0:22:30.879 You've just mentioned the mountains, the oceans, etcetera. Or is 0:22:30.920 --> 0:22:32.359 it something more than that when you look at the 0:22:32.359 --> 0:22:34.120 world and you look at where you can find affordable 0:22:34.160 --> 0:22:40.119 housing in major cities. Yeah, there's evidence that geography matters. 0:22:40.760 --> 0:22:43.760 So part of it is you know, San Francisco is 0:22:43.760 --> 0:22:47.560 on a on a sort of peninsula around the Bay. 0:22:47.840 --> 0:22:52.320 Uh that limits uh, limits construction, and cities like that 0:22:52.840 --> 0:22:57.359 do have higher prices. That's a fact of life. Uh. 0:22:57.480 --> 0:23:01.520 Then the question is what other factors? Well, the other 0:23:01.560 --> 0:23:06.440 factors are people preserving neighborhoods. And also there's a kind 0:23:06.440 --> 0:23:10.800 of a coordination problem. How can we what people like 0:23:11.000 --> 0:23:13.880 urban living? The problem is there isn't enough of it? 0:23:14.600 --> 0:23:18.800 How can we start new city centers? That's that's a difficult, 0:23:19.440 --> 0:23:23.760 difficult thing to do. It does happen eventually, It was 0:23:23.800 --> 0:23:26.760 a long lag. Let's let's chew on that or congitate 0:23:26.800 --> 0:23:29.000 on it. There, How how do you begin to do that? 0:23:29.040 --> 0:23:31.280 As you think about that, as we hear stories of 0:23:32.000 --> 0:23:35.680 companies moving to new cities, new towns and and intending 0:23:35.720 --> 0:23:38.280 to grow. What what kick starts that kind of growth? 0:23:38.280 --> 0:23:39.800 It does take a long time, as you say, but 0:23:39.840 --> 0:23:43.679 what are the catalysts that make it work? Well? I 0:23:43.720 --> 0:23:46.919 think it has something to do with civic spirit, with 0:23:47.000 --> 0:23:51.240 people who who think about what to do with our city, 0:23:51.320 --> 0:23:57.960 people who plan, uh, and a general atmosphere of cooperation. 0:23:58.280 --> 0:24:01.800 So for example, Stanford can etiquette to go back fifty 0:24:01.840 --> 0:24:05.920 to a hundred years, it was an industrial town. Uh, 0:24:06.119 --> 0:24:09.119 the industry started moving out. We were losing jobs to 0:24:09.280 --> 0:24:13.159