1 00:00:08,480 --> 00:00:11,879 Speaker 1: Hello, and welcome to a special holiday episode of Stephanomics. 2 00:00:12,280 --> 00:00:14,000 Speaker 1: Whether you like it or not, you're probably not going 3 00:00:14,040 --> 00:00:16,960 Speaker 1: to forget this Christmas. I hope wherever you are you're 4 00:00:17,000 --> 00:00:20,200 Speaker 1: safe and hopeful for the year to come. I was 5 00:00:20,200 --> 00:00:23,159 Speaker 1: going to say it can't be worse than but that 6 00:00:23,200 --> 00:00:26,720 Speaker 1: feels like a mistake. Instead, let me just welcome to Stephanomics. 7 00:00:26,760 --> 00:00:29,760 Speaker 1: One of the more interesting minds in British policymaking of 8 00:00:29,800 --> 00:00:32,160 Speaker 1: the last few years, the Chief Economist of the Bank 9 00:00:32,159 --> 00:00:39,200 Speaker 1: of England, Andy Holding. I hope we can get into 10 00:00:39,240 --> 00:00:42,240 Speaker 1: an interesting conversation not just about this incredible year twenty 11 00:00:43,120 --> 00:00:46,320 Speaker 1: but what lies ahead for the world and also maybe 12 00:00:46,479 --> 00:00:51,200 Speaker 1: for economists and policymakers. And we have actually next week 13 00:00:51,240 --> 00:00:54,360 Speaker 1: on the show, I'm going to be talking to Bloomberg 14 00:00:54,360 --> 00:00:58,120 Speaker 1: correspondence about twenty and thinking about the year ahead. And 15 00:00:58,120 --> 00:01:00,960 Speaker 1: I'm going to start by asking them what their most 16 00:01:01,520 --> 00:01:06,280 Speaker 1: memorable moment of was, what, what was? What's going to 17 00:01:06,360 --> 00:01:10,160 Speaker 1: stand out for you? Do you think? Thanks? Thanks that 18 00:01:10,240 --> 00:01:12,640 Speaker 1: kind of reduction. A Merry Christmas to to you and 19 00:01:12,680 --> 00:01:15,479 Speaker 1: everyone else well with support for choice art. With this year, 20 00:01:16,120 --> 00:01:20,520 Speaker 1: memorable events, as often happens at Christis time, have come 21 00:01:21,280 --> 00:01:23,720 Speaker 1: thick and fast, but from a polentially very long list, 22 00:01:24,600 --> 00:01:27,280 Speaker 1: I would say the one of the signature moments of 23 00:01:27,319 --> 00:01:31,480 Speaker 1: the year would be back in March, when everything was 24 00:01:31,480 --> 00:01:35,640 Speaker 1: really kind of kicking off, not least in financial markets, 25 00:01:35,680 --> 00:01:42,200 Speaker 1: and we saw within financial markets people moving away even 26 00:01:42,400 --> 00:01:46,640 Speaker 1: from the on the face of its safest sets of 27 00:01:46,640 --> 00:01:49,760 Speaker 1: assets on the planet, you know, government securities in the 28 00:01:49,840 --> 00:01:54,840 Speaker 1: major advanced economies, and into cash, the so called dash 29 00:01:54,920 --> 00:01:59,120 Speaker 1: for cash. And that was a pretty sobering moment, a 30 00:01:59,120 --> 00:02:02,320 Speaker 1: pretty surprising moment, a pretty scary moment all the ess is, 31 00:02:03,000 --> 00:02:07,320 Speaker 1: and of course elicited in response a big policy reaction 32 00:02:07,440 --> 00:02:10,640 Speaker 1: from central banks globally to try and staunch that that 33 00:02:10,800 --> 00:02:13,639 Speaker 1: dash for cash, I'd say, in what has been a 34 00:02:14,040 --> 00:02:18,519 Speaker 1: memorable for all the wrong reasons. Yeah, that event, above 35 00:02:18,560 --> 00:02:21,120 Speaker 1: all others, will probably stick with me for quite some time. 36 00:02:21,840 --> 00:02:24,400 Speaker 1: As you said, there was a remarkable response to that 37 00:02:24,440 --> 00:02:27,280 Speaker 1: from central banks, and then ultimately a big fiscal response 38 00:02:27,320 --> 00:02:29,080 Speaker 1: from governments to the crisis. I'm not going to I 39 00:02:29,080 --> 00:02:30,840 Speaker 1: don't want to dwell too much on what's happened in 40 00:02:30,840 --> 00:02:35,280 Speaker 1: the past, but as one of the many people who 41 00:02:35,360 --> 00:02:40,120 Speaker 1: had wondered about the possible policy space room for policymakers 42 00:02:40,160 --> 00:02:42,959 Speaker 1: to respond to the next crisis. You know, over the 43 00:02:43,040 --> 00:02:45,520 Speaker 1: last few years, given how much we've had to do 44 00:02:45,600 --> 00:02:47,840 Speaker 1: after the global financial crisis, and how hard it had 45 00:02:47,840 --> 00:02:52,200 Speaker 1: been to unwind that support, especially coming from from central banks, 46 00:02:52,320 --> 00:02:54,679 Speaker 1: were you sort of pleasantly surprised that there was still 47 00:02:54,760 --> 00:02:57,440 Speaker 1: quite a lot of ammunition that central banks and others 48 00:02:57,440 --> 00:03:02,160 Speaker 1: could bring to bear. I think I was pleasantly prize that, Um, 49 00:03:02,560 --> 00:03:04,800 Speaker 1: we've learned some of the lessons from the earlier crisis. 50 00:03:05,280 --> 00:03:11,040 Speaker 1: I think central banks and governments too had um you 51 00:03:11,080 --> 00:03:13,519 Speaker 1: know that their twitch muscle have been developed, their policy 52 00:03:13,520 --> 00:03:16,960 Speaker 1: twitch muscle have been developed during the last crisis, and 53 00:03:17,080 --> 00:03:20,360 Speaker 1: that meant I think were much better prepared this time 54 00:03:21,000 --> 00:03:26,240 Speaker 1: to act at real pace and to act at real scale. 55 00:03:26,360 --> 00:03:28,639 Speaker 1: And it's been both. I mean, let's at the Bank 56 00:03:28,639 --> 00:03:34,000 Speaker 1: of England by home institution, we've announced more quee this 57 00:03:34,080 --> 00:03:37,560 Speaker 1: year in the ten months since the crisis started as 58 00:03:37,600 --> 00:03:42,640 Speaker 1: we carried out in the preceding ten years. So that 59 00:03:42,840 --> 00:03:46,960 Speaker 1: is so bring backdrop as well. But I think crucially 60 00:03:47,600 --> 00:03:52,680 Speaker 1: and crucially different than ten years ago, we've had fiscal 61 00:03:52,800 --> 00:03:57,240 Speaker 1: and military acting in partnership at scale and at speed, 62 00:03:57,280 --> 00:04:00,280 Speaker 1: and that doubling of the dose I think has made 63 00:04:00,280 --> 00:04:04,280 Speaker 1: a crucial difference, and a necessary difference given the pace 64 00:04:04,360 --> 00:04:07,520 Speaker 1: and scalle the crisis we've had. Were you talking about doses? 65 00:04:07,560 --> 00:04:13,520 Speaker 1: Of course, We're now watching vaccinations go forth across the UK, 66 00:04:14,560 --> 00:04:18,320 Speaker 1: the US, surely other countries to follow. We've already had 67 00:04:18,360 --> 00:04:21,719 Speaker 1: a lot of people vaccinated in China. How much of 68 00:04:21,760 --> 00:04:23,760 Speaker 1: a bounce back do you think we'll see from that? 69 00:04:23,800 --> 00:04:27,280 Speaker 1: Do you think will be surprised by how quickly economies 70 00:04:27,320 --> 00:04:30,120 Speaker 1: bounced back? Well? I think near term, very near term, 71 00:04:30,160 --> 00:04:34,479 Speaker 1: the next quarter or two, as the vaccine rolls out, 72 00:04:35,360 --> 00:04:38,080 Speaker 1: it's going to remain a bumpy ride. Not as bumpy 73 00:04:38,120 --> 00:04:40,720 Speaker 1: as earlier this year, but bumping on the less because 74 00:04:40,720 --> 00:04:44,680 Speaker 1: we see virus cases on the rise, we see restrictions 75 00:04:44,839 --> 00:04:48,080 Speaker 1: on the rise, and some of that stop go cycling 76 00:04:48,080 --> 00:04:50,039 Speaker 1: we've seen this year. I think we'll persist very near 77 00:04:50,200 --> 00:04:53,640 Speaker 1: term as we move into let's say the second quarter, 78 00:04:53,720 --> 00:04:59,119 Speaker 1: certainly the second half of next year. UM I could 79 00:04:59,120 --> 00:05:02,719 Speaker 1: well imagine, uh, not so much a relief rally, we've 80 00:05:02,880 --> 00:05:05,040 Speaker 1: seen that in financial markets, but a kind of relief 81 00:05:05,080 --> 00:05:10,839 Speaker 1: recovery as the virus risk dissipate. Now the key question 82 00:05:10,920 --> 00:05:16,280 Speaker 1: for me is at what pace. Um, will we see 83 00:05:16,520 --> 00:05:22,600 Speaker 1: behavior you know, only gradually drift back, as after the 84 00:05:22,600 --> 00:05:26,440 Speaker 1: global financial crisis, or as after the Great depressions? Say? 85 00:05:27,600 --> 00:05:32,560 Speaker 1: Or will we see more of a snapback in behaviors, 86 00:05:32,680 --> 00:05:37,800 Speaker 1: in sentiment, in socializing, in spending lots of s's in 87 00:05:37,839 --> 00:05:41,200 Speaker 1: the sentences today? UM? I don't know. I think the 88 00:05:41,279 --> 00:05:44,360 Speaker 1: jury is out on that. UM. I think this has 89 00:05:44,360 --> 00:05:47,920 Speaker 1: been a different sort of crisis, with a different sort 90 00:05:47,960 --> 00:05:50,640 Speaker 1: of source, And therefore I think there at least the 91 00:05:50,839 --> 00:05:55,240 Speaker 1: potential the prospect of us being in World two and 92 00:05:55,560 --> 00:05:59,320 Speaker 1: of a not quite as sharp as the fall, but 93 00:05:59,440 --> 00:06:04,080 Speaker 1: nonetheless a much sharper than we'd no ordinarily expect. When 94 00:06:04,160 --> 00:06:07,320 Speaker 1: you speak to people, you can almost taste that pent 95 00:06:07,440 --> 00:06:10,920 Speaker 1: up demand, that desire to get back to something closer 96 00:06:10,960 --> 00:06:14,599 Speaker 1: to normality, And that would certainly be my hope and 97 00:06:14,640 --> 00:06:18,200 Speaker 1: perhaps even my expectation, For we spent the whole year 98 00:06:18,240 --> 00:06:20,680 Speaker 1: of central banks always do saying how uncertain things are. 99 00:06:21,080 --> 00:06:24,960 Speaker 1: But things really are uncertain, and especially very near term. 100 00:06:25,000 --> 00:06:28,719 Speaker 1: Funnily enough, the further you appear into the future right now, 101 00:06:28,839 --> 00:06:31,640 Speaker 1: in a way, the clearer things are becoming. Now in 102 00:06:31,680 --> 00:06:33,440 Speaker 1: the light of the vaccine new so I feel much 103 00:06:33,480 --> 00:06:40,600 Speaker 1: more confident about H two than I do about Q one, 104 00:06:40,600 --> 00:06:45,720 Speaker 1: which is unusual but should be encouraging because you know, 105 00:06:46,120 --> 00:06:57,320 Speaker 1: the plans do now look sunny. I tried to mention 106 00:06:57,360 --> 00:07:00,440 Speaker 1: the word Brexit and things. I'm sure we'll continue to 107 00:07:00,440 --> 00:07:03,880 Speaker 1: be uncertain for some time around that, but looking at 108 00:07:05,240 --> 00:07:09,279 Speaker 1: brexit short term impact as an economist, you know, we've 109 00:07:09,320 --> 00:07:11,800 Speaker 1: obviously the Bank of England, everyone has had their own 110 00:07:11,920 --> 00:07:15,200 Speaker 1: estimates about the short and longer term impact of certain 111 00:07:15,600 --> 00:07:19,600 Speaker 1: whatever range of arrangements with the European Union, and there's 112 00:07:19,640 --> 00:07:22,640 Speaker 1: been plenty of discussion around that. Of course, when it 113 00:07:22,680 --> 00:07:25,200 Speaker 1: actually happens, we should be able to see to get 114 00:07:25,240 --> 00:07:28,560 Speaker 1: an answer to what the impact by me start to 115 00:07:28,640 --> 00:07:31,400 Speaker 1: isolate some of these consequences. Is COVID going to make 116 00:07:31,440 --> 00:07:34,000 Speaker 1: that completely impossible that we will be no clearer in 117 00:07:34,080 --> 00:07:37,120 Speaker 1: six months time what the short term impact of Brexit 118 00:07:37,240 --> 00:07:41,239 Speaker 1: was than we were right now. Well, I think COVID 119 00:07:42,200 --> 00:07:44,440 Speaker 1: makes it tricky getting a reader anything at the moment 120 00:07:44,440 --> 00:07:48,440 Speaker 1: economically beyond COVID itself. But I do think, you know, 121 00:07:48,640 --> 00:07:50,280 Speaker 1: and we'll see what comes to passing that in the 122 00:07:50,320 --> 00:07:53,400 Speaker 1: dos and weeks ahead. On that front, I don't think 123 00:07:53,400 --> 00:07:57,720 Speaker 1: there will be any have any problems identifying um what 124 00:07:57,840 --> 00:08:01,360 Speaker 1: frictional effects leaving the Customs Union, which of course will 125 00:08:01,400 --> 00:08:03,800 Speaker 1: happen come what may at the end of this year, 126 00:08:04,520 --> 00:08:09,400 Speaker 1: will have upon trade, on the movement of goods and 127 00:08:09,440 --> 00:08:13,040 Speaker 1: services and of people. Think that would be very visible, 128 00:08:13,720 --> 00:08:18,240 Speaker 1: but COVID is already caused these enormous shortages and backlogs 129 00:08:18,280 --> 00:08:20,800 Speaker 1: at DOT at ports all over the world, so in 130 00:08:20,840 --> 00:08:23,400 Speaker 1: the sense even that is harder to see. It's true 131 00:08:23,400 --> 00:08:26,040 Speaker 1: that in lots of ports, including some UK ones at 132 00:08:26,040 --> 00:08:30,080 Speaker 1: Southampton and Felix Stowe, there have been um frictions there 133 00:08:30,080 --> 00:08:33,040 Speaker 1: frictions that actually are complete unrelated to BRECKX are largely 134 00:08:33,080 --> 00:08:36,040 Speaker 1: unrelated to Brexit in the sense that they're to do 135 00:08:36,160 --> 00:08:40,640 Speaker 1: with the asynchronous pattern of recovery, with China recovering far 136 00:08:40,720 --> 00:08:46,000 Speaker 1: more rapidly than say that the UK, and that means, 137 00:08:46,040 --> 00:08:51,360 Speaker 1: as you know, lots of empty containers stacked up at 138 00:08:51,400 --> 00:08:55,560 Speaker 1: ports in the UK not yet ready for a return journey. 139 00:08:56,080 --> 00:08:58,439 Speaker 1: But I do think when it comes to the Brexit 140 00:08:58,440 --> 00:09:01,480 Speaker 1: effects that will show up in a what different and 141 00:09:01,559 --> 00:09:05,400 Speaker 1: a somewhat different way, identifying that effect will be very clear. 142 00:09:05,600 --> 00:09:10,360 Speaker 1: We've been doing intensive surveys of businesses, as have many 143 00:09:10,400 --> 00:09:14,080 Speaker 1: others to try and gauge the degree of preparedness. A 144 00:09:14,160 --> 00:09:16,920 Speaker 1: lot has been done, but there's still some residual uncertainty 145 00:09:16,960 --> 00:09:19,800 Speaker 1: that more needs to be done and that could make 146 00:09:19,880 --> 00:09:23,280 Speaker 1: for some frictional costs come the new year. As I say, 147 00:09:23,320 --> 00:09:27,199 Speaker 1: irrespective what deal ends up being done, I mean, funny enough. 148 00:09:27,240 --> 00:09:30,640 Speaker 1: One of the one of the benefits that very small 149 00:09:30,720 --> 00:09:34,360 Speaker 1: silver linings from this crisis has been that we know 150 00:09:34,440 --> 00:09:38,280 Speaker 1: that to become much more inquisitive about new sources of data, 151 00:09:38,920 --> 00:09:41,400 Speaker 1: including sources of data for example, about what is happening 152 00:09:41,440 --> 00:09:46,320 Speaker 1: around ports, how long are the lorry queues, how fast 153 00:09:46,559 --> 00:09:50,400 Speaker 1: is transport moving. We've used that for COVID purposes, and 154 00:09:50,480 --> 00:09:53,800 Speaker 1: this will serve useful double duty when it comes to 155 00:09:53,880 --> 00:09:57,000 Speaker 1: understanding the Brexit effects in a few weeks time. Well, 156 00:09:57,000 --> 00:09:59,640 Speaker 1: you give me a great opportunity to plug the Bloomberg 157 00:10:00,000 --> 00:10:04,600 Speaker 1: Economics is own daily activity indicators that we've we've produced 158 00:10:04,800 --> 00:10:07,679 Speaker 1: precisely to capture some of this very short term data 159 00:10:07,760 --> 00:10:11,520 Speaker 1: like the Google mobility data and restaurant bookings and indeed 160 00:10:11,559 --> 00:10:15,560 Speaker 1: port movements. We have got some satellite footage of sports 161 00:10:15,640 --> 00:10:17,880 Speaker 1: and things that we're bringing onto the Bloomberg terminal and 162 00:10:17,880 --> 00:10:19,839 Speaker 1: it is. You're quite right that it's come into its 163 00:10:19,880 --> 00:10:24,320 Speaker 1: own all those data sources. I don't want to go 164 00:10:24,440 --> 00:10:28,400 Speaker 1: into the all the sort of arguments that have happened 165 00:10:28,440 --> 00:10:30,600 Speaker 1: over Brexit or where we're going and everything else, but 166 00:10:30,640 --> 00:10:32,640 Speaker 1: I wonder, I mean, people from the outside. Certainly many 167 00:10:32,679 --> 00:10:35,920 Speaker 1: economists have always it's fair to say they've tended to 168 00:10:35,960 --> 00:10:38,600 Speaker 1: see this as a very odd move for a country 169 00:10:38,640 --> 00:10:41,559 Speaker 1: like the UK to make, just from a straight sort 170 00:10:41,600 --> 00:10:45,040 Speaker 1: of economic standpoint. But I noticed at least one Tyler 171 00:10:45,080 --> 00:10:48,120 Speaker 1: co And, who writes for Bloomberg, did a column the 172 00:10:48,120 --> 00:10:51,280 Speaker 1: other day suggesting that actually COVID had slightly changed his 173 00:10:51,360 --> 00:10:56,959 Speaker 1: mind about the pros and cons because of the great 174 00:10:57,000 --> 00:10:59,520 Speaker 1: emphasis that put on countries being able to be nimble. 175 00:11:00,160 --> 00:11:02,920 Speaker 1: I wonder whether the last few years had made you 176 00:11:03,000 --> 00:11:04,840 Speaker 1: think in a more in a just in a sort 177 00:11:04,840 --> 00:11:08,720 Speaker 1: of pure economic sense, taken a different view of the 178 00:11:08,800 --> 00:11:11,480 Speaker 1: costs and benefits of leaving a big trading block like 179 00:11:11,600 --> 00:11:15,640 Speaker 1: the EU. So I think even a pre COVID, even 180 00:11:15,679 --> 00:11:20,319 Speaker 1: pre Brexit, actually steph within the economics community, we were 181 00:11:20,400 --> 00:11:24,400 Speaker 1: slightly changing our tune when it came to thinking through 182 00:11:24,720 --> 00:11:28,360 Speaker 1: fully the costs and benefits of increasing globalization. I think 183 00:11:28,480 --> 00:11:33,200 Speaker 1: net overall, we'd sort of majored on the benefits, the 184 00:11:33,240 --> 00:11:35,400 Speaker 1: fruits of which tend to be spread quite widely and 185 00:11:35,480 --> 00:11:41,199 Speaker 1: quite thinly. That probably under emphasized the costs that were 186 00:11:41,240 --> 00:11:43,800 Speaker 1: felt by often a minority, but a very important minority, 187 00:11:43,840 --> 00:11:45,880 Speaker 1: because the costs were very large. So I think even 188 00:11:45,960 --> 00:11:50,439 Speaker 1: pre pre any recent events, there's been a bit of 189 00:11:50,440 --> 00:11:54,080 Speaker 1: an imbalance in the debate about the benefits of trade, 190 00:11:54,600 --> 00:11:58,400 Speaker 1: the distribution of of winners and losers, and that had 191 00:11:58,559 --> 00:12:03,760 Speaker 1: started to shape debate about trading a somewhat different way. 192 00:12:04,320 --> 00:12:07,600 Speaker 1: On top of that, we now get the COVID crisis, 193 00:12:07,880 --> 00:12:11,520 Speaker 1: and one of the big learnings from that was just 194 00:12:11,559 --> 00:12:17,679 Speaker 1: how quickly global supply chains fractured and broke, and just 195 00:12:17,800 --> 00:12:24,240 Speaker 1: how quickly nation states went to ground when facing situations 196 00:12:24,320 --> 00:12:28,040 Speaker 1: of acute stress. In some ways, this has very many 197 00:12:28,040 --> 00:12:30,840 Speaker 1: similarities the situation ten twelve years ago at the time 198 00:12:30,840 --> 00:12:34,920 Speaker 1: a global financial crisis, whether fractures were not in global 199 00:12:34,960 --> 00:12:38,880 Speaker 1: supply chains for goods and services but instead in global 200 00:12:38,920 --> 00:12:43,719 Speaker 1: credit chains for flows of flows of moneys, and the 201 00:12:43,800 --> 00:12:45,439 Speaker 1: lesson we took away from that, the key lesson we 202 00:12:45,480 --> 00:12:48,520 Speaker 1: took away from that was one of greater resilience within 203 00:12:48,559 --> 00:12:51,240 Speaker 1: the financial sector, and I hope one of the lessons 204 00:12:51,320 --> 00:12:53,960 Speaker 1: we take away from this COVID crisis is the need 205 00:12:54,000 --> 00:12:57,079 Speaker 1: for greater resilience, in this case in the non financial 206 00:12:57,559 --> 00:13:03,079 Speaker 1: parts of our economy. Me now to be clear by that, 207 00:13:03,280 --> 00:13:07,319 Speaker 1: I don't mean we should try and make everything at home. 208 00:13:08,160 --> 00:13:13,080 Speaker 1: We should honor shore everything that moves and moved to 209 00:13:13,280 --> 00:13:15,679 Speaker 1: quasi autargue when it comes to trade. That is not 210 00:13:15,720 --> 00:13:18,400 Speaker 1: the right message, as it was not the right lesson 211 00:13:18,440 --> 00:13:21,839 Speaker 1: to have learned from the global financial crisis. We have 212 00:13:21,920 --> 00:13:27,280 Speaker 1: preserved open and free and liberalized international financial system, and 213 00:13:27,320 --> 00:13:30,760 Speaker 1: that of course delivers great benefits. But we have an addition, 214 00:13:31,080 --> 00:13:35,040 Speaker 1: put much greater focus on the resilience through the domestic 215 00:13:35,080 --> 00:13:38,560 Speaker 1: resilience of our financial institutions. And that's a self same 216 00:13:38,600 --> 00:13:43,240 Speaker 1: debate we need to have about the non financial sector. Now, 217 00:13:43,280 --> 00:13:48,000 Speaker 1: this is not either or open or closed. This is 218 00:13:48,000 --> 00:13:52,280 Speaker 1: a situation where we're resilience calls for having both international 219 00:13:53,000 --> 00:13:57,520 Speaker 1: and domestic supply chains serving as insurance policy. This is 220 00:13:57,600 --> 00:14:01,719 Speaker 1: slightly different flavor of pobalization than the one we had 221 00:14:01,720 --> 00:14:05,320 Speaker 1: pre COVID. You talk about not about open and clothes. 222 00:14:05,360 --> 00:14:09,120 Speaker 1: Of course, the intriguing thing about the campaign campaign for 223 00:14:09,120 --> 00:14:11,480 Speaker 1: Brexit was that both arguments we used. It was used 224 00:14:11,480 --> 00:14:14,720 Speaker 1: as a reason for having more openness and also to 225 00:14:14,760 --> 00:14:17,080 Speaker 1: be more closed, and we've been working through some of 226 00:14:17,080 --> 00:14:21,840 Speaker 1: those contradictions over the last few years. You're you're getting 227 00:14:21,840 --> 00:14:27,600 Speaker 1: into the territory of broader lessons from the COVID experience 228 00:14:27,720 --> 00:14:31,960 Speaker 1: for the global policy maker. What are the what are 229 00:14:32,040 --> 00:14:33,560 Speaker 1: some of the or the one or two sort of 230 00:14:33,680 --> 00:14:35,760 Speaker 1: key takeaways for you in terms of how it could 231 00:14:35,800 --> 00:14:40,760 Speaker 1: affect policy in practice. So I think looking to next year, 232 00:14:41,800 --> 00:14:44,840 Speaker 1: there's going to be too at least two very crucial 233 00:14:44,880 --> 00:14:50,280 Speaker 1: pivots policy pivots going to be needed staff Um both 234 00:14:50,360 --> 00:14:52,800 Speaker 1: are You're going to need some fancy footwork to be 235 00:14:52,840 --> 00:14:55,520 Speaker 1: pulled off elegantly, but I hope they both can be. 236 00:14:55,560 --> 00:14:59,800 Speaker 1: I mean, the first is that will handoff between, if 237 00:14:59,800 --> 00:15:03,920 Speaker 1: you're like um, public sector demand and private sector demand. 238 00:15:04,560 --> 00:15:08,720 Speaker 1: So of necessity has been a year when the when 239 00:15:08,760 --> 00:15:12,080 Speaker 1: governments have had to have stood tall and of supported 240 00:15:12,160 --> 00:15:18,640 Speaker 1: demand near term consumption jobs incomes to keep economies afloat. 241 00:15:19,720 --> 00:15:22,720 Speaker 1: As as I hope happens, the recovery comes on stream 242 00:15:22,800 --> 00:15:25,880 Speaker 1: next year, there will then need to be a handover 243 00:15:26,200 --> 00:15:31,120 Speaker 1: as private sector demand picks up, and public sector demand 244 00:15:31,600 --> 00:15:37,160 Speaker 1: can then switch down, leave the accurate demand hopefully intact 245 00:15:37,160 --> 00:15:40,560 Speaker 1: and indeed rising. Getting the timing of that right is 246 00:15:40,560 --> 00:15:42,560 Speaker 1: going to be absolutely crucial for those of his in 247 00:15:42,600 --> 00:15:46,040 Speaker 1: the policy community. But actually there's a second pivot. Let's 248 00:15:46,120 --> 00:15:50,040 Speaker 1: let's discussed, but in some ways every bit as important. 249 00:15:50,440 --> 00:15:54,359 Speaker 1: But that's about the composition of demand as between consumption 250 00:15:54,480 --> 00:15:57,600 Speaker 1: versus investment on the part of both the private sector 251 00:15:58,120 --> 00:16:01,560 Speaker 1: and the public sector. This year has been a year 252 00:16:01,560 --> 00:16:07,200 Speaker 1: about keeping near term spending current spending up and investment 253 00:16:07,240 --> 00:16:10,200 Speaker 1: spending as understandably being the casualty of that given the 254 00:16:10,240 --> 00:16:15,080 Speaker 1: uncertainty about futured amount. But if we are indeed to 255 00:16:15,320 --> 00:16:20,560 Speaker 1: sustain the near term recovery, to sustain growth in productivity 256 00:16:20,560 --> 00:16:23,360 Speaker 1: and living standards, that investment will need to come back 257 00:16:23,480 --> 00:16:28,400 Speaker 1: on stream at pace supported by both the private sector 258 00:16:29,160 --> 00:16:33,560 Speaker 1: and by the public sector. And that switch from consumption 259 00:16:33,840 --> 00:16:37,640 Speaker 1: to investment, from spending for today to spending for tomorrow 260 00:16:38,000 --> 00:16:42,280 Speaker 1: is for me as important a policy pivot to bring 261 00:16:42,320 --> 00:16:46,880 Speaker 1: about with our fancy footwork during the course of next 262 00:16:46,960 --> 00:16:50,240 Speaker 1: year about building out the supply side of our economy, 263 00:16:50,240 --> 00:16:55,200 Speaker 1: about using the crisis opportunity to tackle some of those 264 00:16:55,280 --> 00:16:58,640 Speaker 1: long standard, deep seated fault lines in what might be 265 00:16:58,680 --> 00:17:02,760 Speaker 1: colloquially called the apply side of our economy, fault lines 266 00:17:03,400 --> 00:17:07,399 Speaker 1: that were yawning pre COVID and which have become of 267 00:17:07,440 --> 00:17:12,199 Speaker 1: anything larger still as a result of COVID. But I 268 00:17:12,240 --> 00:17:15,480 Speaker 1: mentioned at the start, you have tended to stray outside 269 00:17:15,520 --> 00:17:18,840 Speaker 1: some of the sort of traditional macroeconomic policy. You know, 270 00:17:18,920 --> 00:17:20,760 Speaker 1: you don't just when you give your speeches, you don't 271 00:17:20,760 --> 00:17:25,520 Speaker 1: always just talk about inflation and monetary policy. You've talked 272 00:17:25,560 --> 00:17:31,679 Speaker 1: about local economics and issues around fairness and equity. Do 273 00:17:31,720 --> 00:17:35,320 Speaker 1: you think there's a risk if if central banks are 274 00:17:35,320 --> 00:17:38,320 Speaker 1: inevitably going into this territory, because if you like, that's 275 00:17:38,400 --> 00:17:41,720 Speaker 1: kind of where the action is, and it's an important 276 00:17:41,760 --> 00:17:45,480 Speaker 1: part of how monetary policy works that it interacts with 277 00:17:45,600 --> 00:17:49,200 Speaker 1: these aspects of economies and societies. On the other hand, 278 00:17:49,240 --> 00:17:50,840 Speaker 1: it does take you out of your comfort zone and 279 00:17:50,880 --> 00:17:54,080 Speaker 1: potentially take you beyond what many people would say was 280 00:17:54,119 --> 00:17:57,480 Speaker 1: your mandate um do you how do you think about 281 00:17:57,520 --> 00:17:59,840 Speaker 1: that tension? You know that central banks are sort of 282 00:18:00,720 --> 00:18:03,679 Speaker 1: thinking about talking about more stuff, but actually still have 283 00:18:03,840 --> 00:18:07,800 Speaker 1: quite a strict, narrow mandate. Hen maybe two points on 284 00:18:07,840 --> 00:18:10,360 Speaker 1: that stuff and it's a perfectly it's a good challenge, UM. 285 00:18:11,160 --> 00:18:14,560 Speaker 1: I mean on the core mandates, um, they have never 286 00:18:14,600 --> 00:18:19,240 Speaker 1: been more important than now. So without financial stability, this 287 00:18:19,359 --> 00:18:22,639 Speaker 1: awful crisis would have been much worse. And when it 288 00:18:22,640 --> 00:18:27,400 Speaker 1: comes to the montrely side of our mandate, absolutely crucial 289 00:18:27,960 --> 00:18:31,080 Speaker 1: if we enter that there's sunny uplands next year, the 290 00:18:31,119 --> 00:18:35,320 Speaker 1: recovery next year, that there is an absolute laser focus 291 00:18:35,440 --> 00:18:39,359 Speaker 1: on our core inflation mandates because absolutely last thing the 292 00:18:39,400 --> 00:18:44,879 Speaker 1: world needs right now it's a nasty inflation surprise. So 293 00:18:45,000 --> 00:18:49,639 Speaker 1: core mandates never been more important than now, um, particularly 294 00:18:49,680 --> 00:18:55,600 Speaker 1: as we enter the recovery phase. Equally, there are indisputably 295 00:18:56,480 --> 00:19:01,119 Speaker 1: these mega trends, these meta forces, aping the path of 296 00:19:01,119 --> 00:19:06,840 Speaker 1: our economies, of our jobs, markets, of our businesses. Right now. 297 00:19:06,880 --> 00:19:11,280 Speaker 1: You mentioned a few of them. Issues around the spatial 298 00:19:11,320 --> 00:19:19,040 Speaker 1: distribution of activity, issues around um inequality imbalances be they 299 00:19:19,160 --> 00:19:24,480 Speaker 1: income or wealth, or generational issues around the potential fruits 300 00:19:24,560 --> 00:19:30,040 Speaker 1: of technological innovation. Those are shaping our economies in ways 301 00:19:30,440 --> 00:19:34,880 Speaker 1: that central banks simply cannot afford to overlook or ignore, 302 00:19:35,000 --> 00:19:37,600 Speaker 1: by and large, by and large, climate with another one. 303 00:19:37,640 --> 00:19:40,480 Speaker 1: Of course, by and large, these aren't things that we 304 00:19:40,520 --> 00:19:42,919 Speaker 1: are central bankers with our meager set of tools, can 305 00:19:42,920 --> 00:19:47,520 Speaker 1: actually influence their structural things. But are these things crucial 306 00:19:48,200 --> 00:19:51,720 Speaker 1: in doing the day job of keeping the economy strong unstable, 307 00:19:52,000 --> 00:19:54,200 Speaker 1: of reshaping the financial system in the way that keep 308 00:19:54,200 --> 00:19:57,720 Speaker 1: it keep it strong unstable, in setting the appropriate level 309 00:19:57,720 --> 00:20:03,160 Speaker 1: of interest rates to keep the economy growing. Absolutely they are. 310 00:20:03,240 --> 00:20:05,280 Speaker 1: If you look at the factors, for example, have driven 311 00:20:05,359 --> 00:20:11,000 Speaker 1: down levels of global real interest rates over time, the 312 00:20:11,760 --> 00:20:14,359 Speaker 1: list there is exactly the list that we've just recounted, 313 00:20:15,359 --> 00:20:20,879 Speaker 1: issues of demography, or inequality or technology. So for me, 314 00:20:20,960 --> 00:20:24,280 Speaker 1: these are very much in mandate because without a deep 315 00:20:24,280 --> 00:20:26,960 Speaker 1: and rich understanding of those things as central bankers, we 316 00:20:27,040 --> 00:20:30,159 Speaker 1: will set policy wrong and the economy will suffers a consequence. 317 00:20:30,480 --> 00:20:32,800 Speaker 1: You talked about the avoid the importance of avoiding an 318 00:20:32,800 --> 00:20:35,800 Speaker 1: inflation surprise in the short term. You know, the Bank 319 00:20:35,840 --> 00:20:40,400 Speaker 1: of England has has looked through jumps up an inflation 320 00:20:40,480 --> 00:20:43,560 Speaker 1: that have come from specific causes over the last few years, 321 00:20:43,560 --> 00:20:46,159 Speaker 1: whether it's increases in tax rates or changes in the 322 00:20:46,240 --> 00:20:50,680 Speaker 1: value of the pound. Do you think that if there's 323 00:20:50,680 --> 00:20:54,439 Speaker 1: a if there's a bounce up an inflation that seems 324 00:20:54,520 --> 00:20:58,639 Speaker 1: very associated with the immediate bounce back from COVID. Is 325 00:20:58,680 --> 00:21:00,560 Speaker 1: that something you would look through in the same way, 326 00:21:00,600 --> 00:21:03,479 Speaker 1: do you think? I think this has to be very 327 00:21:03,560 --> 00:21:07,520 Speaker 1: much a case by case uh A lot hinges on 328 00:21:07,760 --> 00:21:12,640 Speaker 1: how how short to miss short, and how temporary is temporary. Um. 329 00:21:12,720 --> 00:21:15,400 Speaker 1: There are certain you know, for forces and factors which 330 00:21:15,440 --> 00:21:19,560 Speaker 1: you expect to have a very temporary effect, For example, 331 00:21:19,640 --> 00:21:22,680 Speaker 1: shifts in indirect taxes the like of which we've seen 332 00:21:22,720 --> 00:21:27,120 Speaker 1: a number of countries, including the UK, shifts in oil prices, 333 00:21:27,119 --> 00:21:30,880 Speaker 1: even shifts in the exchange rate. UM. There are other 334 00:21:30,960 --> 00:21:35,120 Speaker 1: shifts on the supply side of the economy whose effects 335 00:21:35,119 --> 00:21:39,879 Speaker 1: can be slightly longer lived in their impact on inflation. 336 00:21:40,040 --> 00:21:43,280 Speaker 1: So while I think you know it's likely that very 337 00:21:43,280 --> 00:21:46,440 Speaker 1: any very temporary spike in inflation would be looked through 338 00:21:47,640 --> 00:21:50,359 Speaker 1: in a situation where there's still a significant output gap 339 00:21:50,680 --> 00:21:55,520 Speaker 1: in many economies, we'd be super vigilant, you know, with 340 00:21:55,600 --> 00:21:58,480 Speaker 1: so much monetary stimulus and fiscal stimulus having been put 341 00:21:58,480 --> 00:22:01,960 Speaker 1: in the system that doesn't show up in any more 342 00:22:02,080 --> 00:22:09,280 Speaker 1: medium term measures of inflation expectations, because what can even 343 00:22:09,320 --> 00:22:12,440 Speaker 1: appear on the face of it to be a temporary 344 00:22:12,480 --> 00:22:16,320 Speaker 1: effect if it affects expectations, could easily get locked in 345 00:22:16,440 --> 00:22:18,679 Speaker 1: and we're not there at the moment. I hope we 346 00:22:18,720 --> 00:22:21,280 Speaker 1: don't get there, but it's definitely a risk we need 347 00:22:21,320 --> 00:22:24,680 Speaker 1: to pay account of. Just going back to climate change, 348 00:22:24,720 --> 00:22:28,080 Speaker 1: because you mentioned how that might affect lots of things 349 00:22:28,119 --> 00:22:31,520 Speaker 1: that the central banks are interested in. There has obviously 350 00:22:31,520 --> 00:22:33,840 Speaker 1: been quite a lively debate about how much central banks 351 00:22:33,840 --> 00:22:37,960 Speaker 1: should have climate the climate change of gender in their 352 00:22:37,960 --> 00:22:42,240 Speaker 1: mandate and have it actually affect, for example, the bombs 353 00:22:42,320 --> 00:22:44,680 Speaker 1: that they purchase when they're trying to push money into 354 00:22:44,720 --> 00:22:48,600 Speaker 1: the economy through quantity divis ng um Lord Nick Stern 355 00:22:48,880 --> 00:22:51,720 Speaker 1: said on this show he thought it was absolutely part 356 00:22:51,720 --> 00:22:54,879 Speaker 1: of their purview because one of the jobs of a 357 00:22:54,880 --> 00:22:57,400 Speaker 1: central bank is to pursue the sort of broader economic 358 00:22:57,440 --> 00:23:00,280 Speaker 1: objectives of a country. But we've also had Harry some 359 00:23:00,520 --> 00:23:02,959 Speaker 1: Is saying that they should clear stay out of it, 360 00:23:03,040 --> 00:23:05,880 Speaker 1: stay out of these kind of claiming that they can 361 00:23:05,920 --> 00:23:09,359 Speaker 1: affect these things, and the German Central Bank governor doesn't 362 00:23:09,359 --> 00:23:12,560 Speaker 1: like it either. What do you think, well, I mean, 363 00:23:12,560 --> 00:23:14,560 Speaker 1: you absolutely right. It take the Bank of England's mandate 364 00:23:14,560 --> 00:23:17,919 Speaker 1: that within that we have a responsibility both when we're 365 00:23:17,920 --> 00:23:21,359 Speaker 1: setting monetary policy and financial stability policy to support the 366 00:23:21,440 --> 00:23:24,440 Speaker 1: government the UK government's policy economic policies, one of which 367 00:23:24,480 --> 00:23:28,760 Speaker 1: is a net zero target by UM. Now we don't 368 00:23:28,840 --> 00:23:34,440 Speaker 1: have is an explicit climate mandate. And indeed that what 369 00:23:34,480 --> 00:23:39,679 Speaker 1: we can do our central banks to address climate risks, 370 00:23:39,760 --> 00:23:44,399 Speaker 1: at least with our own portfolios is relatively limitedless in 371 00:23:44,400 --> 00:23:47,600 Speaker 1: the Bank of England we have about twenty billion pounds 372 00:23:47,600 --> 00:23:52,040 Speaker 1: sterling of corporate bonds. That's a pretty modest portfolio. Shifting 373 00:23:52,040 --> 00:23:56,160 Speaker 1: that around is very much marginalia. When it terms comes 374 00:23:56,200 --> 00:24:00,920 Speaker 1: to risk pricing of dirty or clean ass it's can 375 00:24:01,000 --> 00:24:05,800 Speaker 1: we should? We have a somewhat broader role when it 376 00:24:05,840 --> 00:24:10,320 Speaker 1: comes to thinking about risks being run across the global 377 00:24:10,359 --> 00:24:13,880 Speaker 1: financial system or the domestic financials. Yes, yes we yes 378 00:24:13,920 --> 00:24:16,440 Speaker 1: we can, and yes we should and yes we are 379 00:24:16,880 --> 00:24:20,480 Speaker 1: when it comes to better understanding those risks, shining a 380 00:24:20,560 --> 00:24:24,920 Speaker 1: searchlight on those risks and asking financial firms to manage 381 00:24:25,320 --> 00:24:30,199 Speaker 1: those climate risks in a more upfront and forth right 382 00:24:30,200 --> 00:24:32,600 Speaker 1: way than having the past. And that's a role we've 383 00:24:32,640 --> 00:24:34,639 Speaker 1: been playing for the last several years now. Indeed, I 384 00:24:34,680 --> 00:24:36,920 Speaker 1: think the banking and probably played a pretty prominent role 385 00:24:37,280 --> 00:24:40,520 Speaker 1: under Mark Kearney and putting that on global central banks agenda. 386 00:24:41,000 --> 00:24:43,720 Speaker 1: For me, it's absolutely right and proper that it's on 387 00:24:44,600 --> 00:24:49,480 Speaker 1: our agenda, and we play our part, our classic um 388 00:24:49,920 --> 00:24:54,080 Speaker 1: catalytic role with the private sector in getting them to 389 00:24:54,320 --> 00:24:58,560 Speaker 1: pay proper attention to these risks and to manage them 390 00:24:58,600 --> 00:25:01,760 Speaker 1: in a way that supports the broader climate agenda than 391 00:25:01,760 --> 00:25:04,440 Speaker 1: Next and others have been promoting for for so many years, 392 00:25:04,440 --> 00:25:20,359 Speaker 1: and very successfully. You have touched on inclusive inclusivity inequality. 393 00:25:20,760 --> 00:25:23,880 Speaker 1: We know that this crisis has had a very unequal 394 00:25:23,920 --> 00:25:27,000 Speaker 1: impact on the population, and you've even got a big 395 00:25:27,080 --> 00:25:30,520 Speaker 1: chunk of the population potentially benefiting from not just the 396 00:25:30,560 --> 00:25:32,879 Speaker 1: money that's gone into the economy from the government, but 397 00:25:32,960 --> 00:25:36,520 Speaker 1: also the fact that financial markets have bounced back um 398 00:25:36,560 --> 00:25:41,760 Speaker 1: so quickly. You know it has, because it's been increasingly 399 00:25:41,800 --> 00:25:44,679 Speaker 1: clear and I think a concern to some people in 400 00:25:44,760 --> 00:25:50,080 Speaker 1: central banks how central bank policy has become associated with 401 00:25:50,280 --> 00:25:55,240 Speaker 1: rising wealth inequality, rightly or wrongly, because such a big 402 00:25:55,320 --> 00:25:58,439 Speaker 1: lever of policy has been increasing asset prices, and of 403 00:25:58,480 --> 00:26:01,840 Speaker 1: course we have generally rich people who have the most assets. 404 00:26:03,080 --> 00:26:07,040 Speaker 1: Do you feel a little bit better about the money 405 00:26:07,119 --> 00:26:09,600 Speaker 1: that the Bank of England and others have pumped into 406 00:26:09,640 --> 00:26:12,679 Speaker 1: the economy this time around, in that so much of 407 00:26:12,720 --> 00:26:16,000 Speaker 1: it was also along going alongside a big fiscal expansion. 408 00:26:16,280 --> 00:26:19,040 Speaker 1: Does that feel like I feel like it's going to 409 00:26:19,119 --> 00:26:22,600 Speaker 1: have a better impact in terms of the gap between 410 00:26:22,720 --> 00:26:26,480 Speaker 1: rich and poor to you? Or is it much more complicated? No? 411 00:26:26,600 --> 00:26:29,080 Speaker 1: I think absolutely that we've had a you know this, 412 00:26:29,240 --> 00:26:35,679 Speaker 1: this physical monetary partnership has certainly and surely has helped. 413 00:26:35,800 --> 00:26:39,480 Speaker 1: I mean, the truth be told, central bank tools haven't 414 00:26:39,520 --> 00:26:44,160 Speaker 1: got surgical precision when it comes to tackling differences across 415 00:26:44,200 --> 00:26:48,760 Speaker 1: different cohorts of the economy, whereas physical tools do, and 416 00:26:48,760 --> 00:26:51,520 Speaker 1: indeed have been used during the course of this year 417 00:26:51,880 --> 00:26:55,800 Speaker 1: to support those their incomes, their jobs that were most 418 00:26:56,080 --> 00:26:58,680 Speaker 1: in need. And that is any that's a very sensible 419 00:26:58,720 --> 00:27:03,560 Speaker 1: assignment of tools, with monthly policy to an extent, playing 420 00:27:03,560 --> 00:27:07,600 Speaker 1: second fil and supporting ACRID demand alongside fiscal policy in 421 00:27:07,600 --> 00:27:11,040 Speaker 1: the front line supporting ACRID demand, and within that supporting 422 00:27:11,280 --> 00:27:15,000 Speaker 1: the parts of ACRID demand that have been hardest hit. 423 00:27:15,280 --> 00:27:19,840 Speaker 1: Truth be told, I was comfortable about our monthly policy 424 00:27:19,840 --> 00:27:23,760 Speaker 1: actions even before this COVID crisis. Very seriously, I should 425 00:27:23,760 --> 00:27:31,120 Speaker 1: say the question of has have our actions worsened inequalities 426 00:27:31,160 --> 00:27:35,000 Speaker 1: of society, whether those are income or wealth, or generational 427 00:27:35,400 --> 00:27:38,960 Speaker 1: or spatial and I've cut the data every which way, 428 00:27:40,200 --> 00:27:43,080 Speaker 1: almost house held by a household actually to try and 429 00:27:43,160 --> 00:27:46,520 Speaker 1: engage with that question. I mean, what I conclude from 430 00:27:46,560 --> 00:27:50,320 Speaker 1: that research is the reason I can sleep at night 431 00:27:52,040 --> 00:27:56,240 Speaker 1: is because I'm pretty confident that without the monthly response 432 00:27:56,320 --> 00:27:58,920 Speaker 1: that we saw here in the UK would have seen 433 00:27:59,240 --> 00:28:00,840 Speaker 1: you know, anyway, betwe in three quarters of a million 434 00:28:00,880 --> 00:28:03,760 Speaker 1: and a million more jobs having been lost, and of 435 00:28:03,760 --> 00:28:07,480 Speaker 1: course those jobs would have been lost disproportionately among the 436 00:28:07,520 --> 00:28:12,879 Speaker 1: poorer people in society. And if you work through both 437 00:28:12,960 --> 00:28:16,320 Speaker 1: the jobs channel and the asset price and income and 438 00:28:16,640 --> 00:28:19,679 Speaker 1: wealth channel that you mentioned, the net effect of our 439 00:28:19,680 --> 00:28:24,240 Speaker 1: montreactions has not, in fact been to worsen inequalities of 440 00:28:24,400 --> 00:28:30,120 Speaker 1: income or wealth, or indeed even generationally either. And while 441 00:28:30,119 --> 00:28:32,800 Speaker 1: our tools, I say, aren't best equipped to tackle those 442 00:28:32,840 --> 00:28:37,320 Speaker 1: problems anyway, as best I can tell, both pre COVID 443 00:28:37,480 --> 00:28:43,520 Speaker 1: and post COVID monetary policy central banks haven't made what 444 00:28:43,720 --> 00:28:47,000 Speaker 1: is no, without question, a difficult in a quality situation 445 00:28:47,840 --> 00:28:50,600 Speaker 1: any worse. That is not the same as saying, to 446 00:28:50,680 --> 00:28:54,600 Speaker 1: be clear, I don't think those problems haven't been made 447 00:28:54,600 --> 00:28:58,600 Speaker 1: worse by the crisis. They surely have. Certainly, income and 448 00:28:58,640 --> 00:29:03,040 Speaker 1: wealth wise and must certainly generationally as well. And that's 449 00:29:03,080 --> 00:29:07,680 Speaker 1: why those structural questions, as supply side questions are ones 450 00:29:07,760 --> 00:29:11,920 Speaker 1: that the politic community collectively including central banks, need to 451 00:29:11,960 --> 00:29:15,400 Speaker 1: really get onto with. As I said, renewed zeal And 452 00:29:15,560 --> 00:29:18,760 Speaker 1: force come the second half of next year. I guess, however, 453 00:29:18,800 --> 00:29:21,200 Speaker 1: you look at the data, though, we have had yet 454 00:29:21,240 --> 00:29:26,480 Speaker 1: another year when Wall Street, broadly conceived, has done a 455 00:29:26,560 --> 00:29:29,200 Speaker 1: lot better than Main Street. You know, the financial markets 456 00:29:29,200 --> 00:29:31,280 Speaker 1: have had a much better year of it, and indeed 457 00:29:31,280 --> 00:29:33,320 Speaker 1: a lot of financial institutions have had a much better 458 00:29:33,400 --> 00:29:36,920 Speaker 1: year of it. Then you might have anticipated for the 459 00:29:36,960 --> 00:29:41,440 Speaker 1: worst recession in living memory across industrial economies. So I 460 00:29:41,560 --> 00:29:44,120 Speaker 1: just I mean, how sustainable do you think it is 461 00:29:44,160 --> 00:29:46,600 Speaker 1: to year after year to continue to have that gulf 462 00:29:46,600 --> 00:29:50,760 Speaker 1: between the two. Well, I'm hoping that one step is 463 00:29:50,760 --> 00:29:52,880 Speaker 1: the year when the gulf begins to be closed. We've 464 00:29:52,880 --> 00:29:57,320 Speaker 1: been saying that for years. Well, this time, this time, 465 00:29:57,360 --> 00:30:01,280 Speaker 1: I'll be right, right. I mean, there are very good 466 00:30:01,280 --> 00:30:06,080 Speaker 1: reasons to I think, to expect, with the fantastic vaccine 467 00:30:06,120 --> 00:30:09,600 Speaker 1: news and with the support from policy in place in 468 00:30:09,640 --> 00:30:12,960 Speaker 1: the tank already to think that that next year we'll 469 00:30:13,000 --> 00:30:16,400 Speaker 1: see a reverse or a sharp reversal. I hope in 470 00:30:16,440 --> 00:30:19,960 Speaker 1: our economic fortune, so particularly those who may have lost 471 00:30:20,040 --> 00:30:23,960 Speaker 1: their job, that they're able to return to work at speed. 472 00:30:23,960 --> 00:30:27,840 Speaker 1: That's a crucial thing for avoiding those long term scarring effects. 473 00:30:27,840 --> 00:30:30,479 Speaker 1: That that's a near term prognosis. And for me, there 474 00:30:30,640 --> 00:30:34,600 Speaker 1: there are plenty of positives there. But it's necessary, but 475 00:30:34,640 --> 00:30:38,800 Speaker 1: by no means sufficient for growing living standards, for growing 476 00:30:38,840 --> 00:30:43,440 Speaker 1: productivity over the medium term. It wasn't enough pre COVID, 477 00:30:43,560 --> 00:30:45,360 Speaker 1: and it certainly has not will not be enough in 478 00:30:45,360 --> 00:30:47,760 Speaker 1: the light of COVID. And that's why this other agenda 479 00:30:48,440 --> 00:30:53,719 Speaker 1: really comes in tackling those structural fault lines. Ultimately, staff 480 00:30:54,320 --> 00:30:57,400 Speaker 1: will be the thing that closes those gaps between the 481 00:30:57,560 --> 00:31:00,480 Speaker 1: best off and the less and at least well off, 482 00:31:00,600 --> 00:31:03,920 Speaker 1: or between if you like Wall Street and Main Street. 483 00:31:03,960 --> 00:31:07,560 Speaker 1: The truth is, and this is a crucial point, those 484 00:31:07,880 --> 00:31:16,160 Speaker 1: fault lines, those inequalities, um are not irreducible. That we 485 00:31:16,240 --> 00:31:22,479 Speaker 1: know from past experience. They are amenable to purposive policy action, 486 00:31:22,560 --> 00:31:27,320 Speaker 1: the right type of purposive policy action on innovation, on skills, 487 00:31:27,520 --> 00:31:31,400 Speaker 1: on infrastructure, And my hope for twenty three one would 488 00:31:31,440 --> 00:31:34,880 Speaker 1: be that those things got another fair hearing and a 489 00:31:34,920 --> 00:31:37,800 Speaker 1: big push because ultimately that will that will close the 490 00:31:37,840 --> 00:31:41,920 Speaker 1: gaps you've rightly identified. Okay, I'm going to put you 491 00:31:41,960 --> 00:31:44,640 Speaker 1: on the spot and ask you the same question that 492 00:31:44,680 --> 00:31:48,920 Speaker 1: I'm going to ask the brainy correspondence next week. What's 493 00:31:48,960 --> 00:31:52,280 Speaker 1: your what's your wild card for the next year or 494 00:31:52,320 --> 00:31:56,000 Speaker 1: two something? You know, this time a year ago, none 495 00:31:56,000 --> 00:31:59,800 Speaker 1: of us, certainly the equivalent podcast, we did not see 496 00:32:00,040 --> 00:32:03,920 Speaker 1: COVID coming. Um. What do you think we might be 497 00:32:03,960 --> 00:32:06,040 Speaker 1: talking about over the next year or two a lot 498 00:32:06,040 --> 00:32:09,280 Speaker 1: more than we are now? Well, I think, and I 499 00:32:09,320 --> 00:32:12,720 Speaker 1: hope actually that that um, for all the right reasons 500 00:32:12,760 --> 00:32:14,720 Speaker 1: that inflation is a more central part of our narrative 501 00:32:15,800 --> 00:32:19,720 Speaker 1: as financial market participants are central banks. Um. Of the 502 00:32:19,800 --> 00:32:24,160 Speaker 1: right reasons inflation returning to target, remaining at target. UM. 503 00:32:24,200 --> 00:32:28,560 Speaker 1: But for me, the real wild card would be productivity perspectively, 504 00:32:28,840 --> 00:32:32,600 Speaker 1: So we had this crisis, you know, globally with productivity 505 00:32:32,680 --> 00:32:37,400 Speaker 1: laid low. A bunch of reasons for that, which I 506 00:32:37,440 --> 00:32:40,400 Speaker 1: won't rehearse because many of the listeners will know about 507 00:32:40,440 --> 00:32:44,560 Speaker 1: them already. I think there's a chance, steph that some 508 00:32:44,600 --> 00:32:48,280 Speaker 1: of the structural shifts brought about, behavioral shifts brought about 509 00:32:48,280 --> 00:32:51,840 Speaker 1: by COVID might be a factor, perhaps even a key 510 00:32:51,880 --> 00:32:57,880 Speaker 1: factor that reverses the fortunes of global productivity in the 511 00:32:58,000 --> 00:33:00,760 Speaker 1: years ahead. The truth is often a cessity. This year 512 00:33:01,240 --> 00:33:05,960 Speaker 1: many businesses have had to get themselves digitally match fit. 513 00:33:05,960 --> 00:33:08,440 Speaker 1: There shouldn't been matched fit previously, but now of necessity 514 00:33:08,480 --> 00:33:11,280 Speaker 1: they have been. They've had to, and so two of 515 00:33:11,320 --> 00:33:15,760 Speaker 1: their workers. And I think that might lead to a 516 00:33:16,640 --> 00:33:21,360 Speaker 1: quite striking change in business models. That the if you like, 517 00:33:21,440 --> 00:33:25,520 Speaker 1: the optimal capital to labor ratio within many firms might 518 00:33:25,560 --> 00:33:31,320 Speaker 1: be altered decisively in ways that are positive productivity. I 519 00:33:31,320 --> 00:33:34,880 Speaker 1: think where it comes to the way we work, how 520 00:33:34,960 --> 00:33:37,760 Speaker 1: we work, you know, the truth is pre COVID we 521 00:33:37,760 --> 00:33:41,440 Speaker 1: were stuck in this rather odd equilibrium where many of 522 00:33:41,520 --> 00:33:45,160 Speaker 1: us spent too many of our working hours doing the 523 00:33:45,280 --> 00:33:51,160 Speaker 1: most unproductive and the worst paid work ever invented, namely commuting. 524 00:33:51,200 --> 00:33:54,600 Speaker 1: Because of course that's what commuting is. It's unpaid, unproductive work. 525 00:33:55,040 --> 00:33:57,720 Speaker 1: If many of us will do less of that unpaid, 526 00:33:57,840 --> 00:34:02,479 Speaker 1: unproductive work, that too, ought to be a boon for 527 00:34:02,560 --> 00:34:08,040 Speaker 1: activity and for productivity. So I think there are within 528 00:34:08,680 --> 00:34:12,760 Speaker 1: you know, there's lots of reasons to be cautious, lots 529 00:34:12,800 --> 00:34:16,879 Speaker 1: of reasons that's something that could go wrong. But when 530 00:34:16,920 --> 00:34:21,440 Speaker 1: it comes to those behavioral shifts and their consequences for 531 00:34:21,520 --> 00:34:25,040 Speaker 1: how we work, how we run businesses, I think many 532 00:34:25,080 --> 00:34:30,759 Speaker 1: of those could could if we're if we're canny, be 533 00:34:30,800 --> 00:34:35,600 Speaker 1: a productivity positive and could leaders to tackle decisively what 534 00:34:35,680 --> 00:34:42,000 Speaker 1: has been a longstanding productivity puzzle. There's laid behind many 535 00:34:42,000 --> 00:34:45,759 Speaker 1: of those rising equalities that you mentioned earlier on I'm 536 00:34:45,800 --> 00:34:48,080 Speaker 1: very glad you say that I had the same debate 537 00:34:48,120 --> 00:34:50,719 Speaker 1: with our economists because I had to force them to 538 00:34:50,760 --> 00:34:54,279 Speaker 1: put a positive productivity shock in their scenarios as one 539 00:34:54,320 --> 00:34:56,560 Speaker 1: of their scenarios. Coming out of this, we've had so 540 00:34:56,680 --> 00:35:00,560 Speaker 1: much discussion of our poor productivity globally making not making 541 00:35:00,600 --> 00:35:03,520 Speaker 1: more stuff with the same number of people, um that 542 00:35:03,880 --> 00:35:06,120 Speaker 1: it's almost hard for them to compute that we might 543 00:35:06,160 --> 00:35:07,759 Speaker 1: have good news. But I think you might be right. 544 00:35:07,880 --> 00:35:09,319 Speaker 1: The other thing I liked about what you said it 545 00:35:09,320 --> 00:35:11,160 Speaker 1: shows what the true central banker you are. That what 546 00:35:11,200 --> 00:35:13,640 Speaker 1: you want for Christmas is inflation on target? What more 547 00:35:13,640 --> 00:35:18,719 Speaker 1: can you are andy holding. I don't know who'll be 548 00:35:18,760 --> 00:35:22,520 Speaker 1: listening to this, but if you are out there having 549 00:35:22,560 --> 00:35:24,279 Speaker 1: felt that you've already had far too much of your 550 00:35:24,320 --> 00:35:26,640 Speaker 1: closest and nearest family over the Christmas period and you've 551 00:35:26,680 --> 00:35:30,200 Speaker 1: taken refuge in this conversation. I hope it did the 552 00:35:30,280 --> 00:35:32,280 Speaker 1: job and thank you very much. To the chief Economists 553 00:35:32,280 --> 00:35:43,560 Speaker 1: of the Bank of England, Andy holding Thanks thanks for 554 00:35:43,600 --> 00:35:47,680 Speaker 1: listening to Stephanomics. We'll be back with another special edition 555 00:35:47,719 --> 00:35:52,160 Speaker 1: next week, looking ahead to one the meantime, remember you 556 00:35:52,160 --> 00:35:55,080 Speaker 1: can always find us on the Bloomberg Terminal, website, app 557 00:35:55,200 --> 00:35:57,600 Speaker 1: or wherever you get your podcast, and for more news 558 00:35:57,640 --> 00:36:00,880 Speaker 1: and analysis from Bloomberg Economics, you can follow at Economics 559 00:36:01,040 --> 00:36:05,160 Speaker 1: on Twitter. This episode was produced, as ever by Magnus Hendrickson, 560 00:36:05,400 --> 00:36:07,600 Speaker 1: with special thanks to Andy Holdane and everyone at the 561 00:36:07,600 --> 00:36:10,640 Speaker 1: Bank of England Press Office. Lucy Meekin is the executive 562 00:36:10,640 --> 00:36:14,000 Speaker 1: producer of Stephanomics and the head of Bloomberg Podcast is 563 00:36:14,000 --> 00:36:16,360 Speaker 1: Francesca leaving h