WEBVTT - Surveillance: Alan Greenspan

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<v Speaker 1>Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane.

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<v Speaker 1>Always with Michael McKee daily we bring you insight from

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<v Speaker 1>the best in economics, finance, investment, and international relations. Find

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<v Speaker 1>Bloomberg Surveillance on iTunes, SoundCloud, Bloomberg dot Com, and of

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<v Speaker 1>course on the Bloomberg Let's get right to it here.

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<v Speaker 1>He needs no introduction. Alan Greenspan is uh the former

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<v Speaker 1>chairman of the Fellow Reserve System. And I think many

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<v Speaker 1>of you know without question is recent caution on the economy,

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<v Speaker 1>and yet everything has changed. Did you fall off your

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<v Speaker 1>couch on Friday? Could you not play tennis Saturday morning?

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<v Speaker 1>You were so shocked by the outcome in the United Kingdom?

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<v Speaker 1>What I play terrible tennis? You play terrible tennis in

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<v Speaker 1>honor of what was going on because you couldn't see

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<v Speaker 1>the ball. Let me let me go to your book,

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<v Speaker 1>The Age of Turbulence. There is an age of church

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<v Speaker 1>turbulence right now. And I think of a chapter you

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<v Speaker 1>had there on China, the choices that await China. What

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<v Speaker 1>are the choices that await the United Kingdom and the

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<v Speaker 1>new Prime Minister. Well, I think they obviously made a

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<v Speaker 1>terrible mistake because they had presumed that if they were

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<v Speaker 1>to have the referendum that it would be closed issues

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<v Speaker 1>very quickly, and that the political problems that they had

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<v Speaker 1>internally as a consequence of the minority that they thought

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<v Speaker 1>would be pushed aside. They were mistaken. Prime Minister has

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<v Speaker 1>lost his job, Cominant obviously going to lose their job.

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<v Speaker 1>It's a terrible outcome in all respects. It didn't have

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<v Speaker 1>to happen. I always thought that the real problem in

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<v Speaker 1>Europe was the Euro, which I've always thought was basically

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<v Speaker 1>an unstable currency, can't exist permanently in the existing structure.

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<v Speaker 1>It never entered my mind that Sterling was an issue

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<v Speaker 1>because it's a floating currency and Britain isn't was was

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<v Speaker 1>in fairly good shape economically. If your attention is on Europe,

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<v Speaker 1>what would you request from Chancellor Miracle and what would

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<v Speaker 1>you request from Brussels? Well, I'm not in a physician

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<v Speaker 1>to request that. Would like to know? Now I think

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<v Speaker 1>what is Let me start off what I think ought

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<v Speaker 1>to happen with respect to the Euro. First of all,

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<v Speaker 1>the Euro was being pulled apart basically by the continued

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<v Speaker 1>existence of Grace Greece in the in the euro structure.

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<v Speaker 1>Poice got in by mistake or should say, miscalculation of

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<v Speaker 1>some of the data they submitted for purposes of entering

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<v Speaker 1>the Euro. It became very clear when the next government,

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<v Speaker 1>Greek Greek government showed up that the data which had

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<v Speaker 1>been submitted were just not accurate. They have been a

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<v Speaker 1>throne in the side of the whole eurostructure ever since.

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<v Speaker 1>They should never have been in the Euro. They should

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<v Speaker 1>get out as soon as possible if you want to

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<v Speaker 1>sustain the fundamental euro structure. The difficulty of the Euro

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<v Speaker 1>is one we were all aware of very early on.

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<v Speaker 1>I sat in on the early stages of the development

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<v Speaker 1>of the new currency, before they had the name Euro.

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<v Speaker 1>The basic purpose was essentially to foster the question of

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<v Speaker 1>European integration politically and not necessarily otherwise. Chairman, Mr Charman,

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<v Speaker 1>you said a little earlier, and you have said in

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<v Speaker 1>the past, that the Euro has become something of a

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<v Speaker 1>failed experiment. Here does that suggest that you think the

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<v Speaker 1>British are right to be concerned about being in the

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<v Speaker 1>European Union, leave aside the damage that may be caused

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<v Speaker 1>by leaving, but do you have any sympathy for the

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<v Speaker 1>idea that they're better off outside. No, there's a fundamental

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<v Speaker 1>difference between being in a structure or everybody is forced

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<v Speaker 1>into the same currency, irrespective of differentials and culture, economic

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<v Speaker 1>status and a variety of other things. The the EU

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<v Speaker 1>is fundamentally a very good idea. It's a free zone.

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<v Speaker 1>It's a free trade zone structure which we need an

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<v Speaker 1>awful lot of. So that the choice of Britain to

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<v Speaker 1>stay in the EU and get out of the Eurozone

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<v Speaker 1>was I thought the most sensible action I could be taken.

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<v Speaker 1>And Gordon Brown, who was instrumental in that decision, I

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<v Speaker 1>think ought to be distressed by what is going on?

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<v Speaker 1>Is I know he is? Well, the question comes up

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<v Speaker 1>if the euro Zone itself is failed experiment, and one

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<v Speaker 1>of the problems they have is the lack of a

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<v Speaker 1>fiscal authority, the only way they can get there is

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<v Speaker 1>to centralize more power in Brussels, which is exactly what

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<v Speaker 1>the United Kingdom doesn't want. Well, but the problem with

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<v Speaker 1>the Euro isn't going to be solved by that. The

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<v Speaker 1>problem with the Euro is a much more fundamentally difficult one,

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<v Speaker 1>which is which is going to arise fairly Surely, let

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<v Speaker 1>me suggest something that nobody discusses as the police, and

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<v Speaker 1>I think it ought to be discussed if the Federal

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<v Speaker 1>Reserve were, for example, I should say, uh, if the

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<v Speaker 1>Federal Reserve were to run into financial trouble uh, and

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<v Speaker 1>the dollar were very extreme case, the sovereign credit of

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<v Speaker 1>the dollar back, I should say, so, which the Treasury

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<v Speaker 1>Department would back up the fellow reserved and there'd be

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<v Speaker 1>no problem. There is no backup on the European Central Bank.

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<v Speaker 1>I mean theoretically the Master Treaty has got means by

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<v Speaker 1>which they would be financed that they got in the trouble,

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<v Speaker 1>but that's not going to That speaks to the fractious

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<v Speaker 1>nature here, and it speaks to I think Barry I

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<v Speaker 1>could Green at Berkeley talking about the exorbitant privilege. Where's

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<v Speaker 1>the leadership to drive a solution. We've been saying this

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<v Speaker 1>now for four and five days. We remember Valeriees you

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<v Speaker 1>started to staying Charles de gaul at an hour of Germany,

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<v Speaker 1>I believe it named Greenspan from the United States, do

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<v Speaker 1>you observe leaders that can make tough decisions as the

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<v Speaker 1>acclaimed Chancellor miracle was made, well, yeah, I mean Tony

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<v Speaker 1>Blair and Gordon Brown made they're not in office right now,

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<v Speaker 1>you know, and I don't see anybody to match them.

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<v Speaker 1>So the basic problem is it's very difficult for somebody

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<v Speaker 1>from the United States no longer in government, I don't

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<v Speaker 1>have direct daily contact as I did for years. You've

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<v Speaker 1>not been speaking with Mr Trump recently. No, we may

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<v Speaker 1>want to get back to that. We'll get back to

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<v Speaker 1>the little later. If you were still at defended, you

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<v Speaker 1>going to your office street on Friday, how do you

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<v Speaker 1>think about it? As a central banker? You lived through

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<v Speaker 1>market meltdowns before. What's the first thing you do? What

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<v Speaker 1>do you what kind of conditions within your bank do

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<v Speaker 1>you try to establish? Well, the first thing I would

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<v Speaker 1>ask is what is the cause of the problem. Trying

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<v Speaker 1>to ameliorate the symptoms of the problem, there's never a

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<v Speaker 1>successful course because it doesn't get at the route issue.

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<v Speaker 1>Nobody is getting at the route issue that confronts all

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<v Speaker 1>of the developing world, which is which is the cause

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<v Speaker 1>of the problem now, because what is happening is productivity growth,

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<v Speaker 1>as you know, for I think more than two thirds

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<v Speaker 1>of the O E C D countries is in fact

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<v Speaker 1>it's more than two herds. UH has been running at

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<v Speaker 1>less than a half a percent per year for five years.

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<v Speaker 1>That means incomes of stagnating. And you see that in

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<v Speaker 1>real disposable income across England just like this. Absolutely, and

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<v Speaker 1>you know what I'm about to say. This is a

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<v Speaker 1>problem which is not strictly in the United States, right,

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<v Speaker 1>but as as I said, by all the O e

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<v Speaker 1>c D countries and what that is doing is creating

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<v Speaker 1>a general stagnation in the developed countries which is caught,

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<v Speaker 1>which is causing desperation on the part of their electorate.

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<v Speaker 1>I want to go to the economic point of the

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<v Speaker 1>last number of days people linking currency into interest rate,

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<v Speaker 1>into inflation, into declining g d P. And it shows

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<v Speaker 1>within a reduced current account deficit for the United Kingdom.

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<v Speaker 1>And maybe you bring up the idea of a phrase

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<v Speaker 1>from another time twin deficits greater fiscal deficit. Tell us

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<v Speaker 1>your experience with a nation that has to work with

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<v Speaker 1>a rapidly worsening current account deficit. Well, usually the problem

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<v Speaker 1>which you have is only two choices. One, you flood

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<v Speaker 1>the particular problem with reserve violences of some form or another,

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<v Speaker 1>irrespective of what it's coming from or to, you allow

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<v Speaker 1>the currencies to float. The first is obviously a desirable

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<v Speaker 1>one if it works, but it's a risky one and

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<v Speaker 1>you're always better off to allow the markets to run

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<v Speaker 1>that course. In other words, free up the currencies, free

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<v Speaker 1>up very much that the actions which will allow a

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<v Speaker 1>prices to move. If you try to stop prices, you're

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<v Speaker 1>going to create huge problems, and that has always been

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<v Speaker 1>my view as to what should be done. Is there

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<v Speaker 1>a risk though, in the UK situation, to doing that

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<v Speaker 1>when you have a seven percent current account deficits. Uh,

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<v Speaker 1>there's a risk in doing anything. The question is what's

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<v Speaker 1>the least worst risk? What is it right now? I

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<v Speaker 1>would say I wouldn't be that concerned about the currency

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<v Speaker 1>because it's not all that much you're going to be

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<v Speaker 1>able to do about it. I think the vulnerable institution

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<v Speaker 1>right now is the Eurozone because as I said before,

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<v Speaker 1>there is no backup to the e c B yet.

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<v Speaker 1>European central bank assets, which had gotten up to the

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<v Speaker 1>high level and then came all the way back down,

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<v Speaker 1>has now come all the way back to the height

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<v Speaker 1>of where they were. That raises a serious question is

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<v Speaker 1>what happens if all of a sudden the Euro ceases

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<v Speaker 1>to be a hard currency. It happens overnight. Uh, there

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<v Speaker 1>will be very significant difficulty as far as I can see.

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<v Speaker 1>And I think the thing to do is what they

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<v Speaker 1>should have been doing a long time ago, get grease

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<v Speaker 1>out because that there are a toxic liability sitting in

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<v Speaker 1>the middle of a very important economic But is it

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<v Speaker 1>just Greece or would you have to get rid of

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<v Speaker 1>Portugal or maybe even Italy? I think it depends undone.

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<v Speaker 1>In other words, theoretically, if you asked me, what would

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<v Speaker 1>the euro Zone basically exist up? Uh, German On, the Netherlands, Finland,

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<v Speaker 1>all currencies, Which the best way to put it is

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<v Speaker 1>when the crosses happens, they all move together. Then are

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<v Speaker 1>we seeing a death forget about the European experimental moonaise action.

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<v Speaker 1>Are we seeing a death of the Washington consensus? Here

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<v Speaker 1>Atlantic Charter to President Bush seniors work with goad and trade.

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<v Speaker 1>Is this referendum the first signal of the death of

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<v Speaker 1>your Washington Consensus? Well, it's too soon to say. And

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<v Speaker 1>incidentally death is too strong a word. It's absolutely needs readjustment.

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<v Speaker 1>I mean, the euro Zone cannot go on structurally the

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<v Speaker 1>way it's put together now, It's fundamentally the Northern States

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<v Speaker 1>of the Eurozone funding the Southern States, and the result

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<v Speaker 1>of that is, UH, you have an unstable system which

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<v Speaker 1>cannot go on indefinitely and you need current. If you're

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<v Speaker 1>going to put more than one currency together, it has

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<v Speaker 1>to have a similar culture. You cannot have inter differential cultures.

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<v Speaker 1>And now you know the argument I used to get

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<v Speaker 1>is that when the Europe comes in, UH, the Italians

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<v Speaker 1>would behave like Germans. They never did from day one?

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<v Speaker 1>Is the United Kingdom a differential culture from Germany most

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<v Speaker 1>certainly in the sense that UH in other kingdom is

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<v Speaker 1>sort of it's hard to define it. It's not it's

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<v Speaker 1>coming off of generations. I was squeezing down from British Empire.

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<v Speaker 1>British Empire in nineteen thirteen was at its peak and

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<v Speaker 1>the world were one very great damage. World War two

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<v Speaker 1>obviously a significant and h or not from Margaret Thatcher

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<v Speaker 1>coming in. UH. Once you did and do did what

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<v Speaker 1>she did, it wouldn't be in as good shape as

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<v Speaker 1>it is today. And remember that when Labor came in

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<v Speaker 1>after Thatcher, Tony Blair and Gordon Brown didn't change anything

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<v Speaker 1>what Thatcher did. What can the next president due to

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<v Speaker 1>assist Europe with these immense challenges. Lord Brown of British

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<v Speaker 1>Petroleum is adamant that the United Kingdom had to remain

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<v Speaker 1>because of tensions from seventy years ago, the outcome of

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<v Speaker 1>World War Two. How can we assist Europe stay away

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<v Speaker 1>from those primeval tensions? I wish I knew the answer

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<v Speaker 1>to that question. We're dealing now in the very early

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<v Speaker 1>day age of a crisis which has got a way

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<v Speaker 1>to low. I mean, this is justice is we've triggered

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<v Speaker 1>a series of events here which when Scotland, Scotland goes

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<v Speaker 1>Northern Ireland. To be clear, you're predicting that Scotland back

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<v Speaker 1>to seventeen I believe oh three will leave the United Kingdom. Yes,

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<v Speaker 1>in Northern Ireland as well well, Northern Ireland probably. See,

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<v Speaker 1>you've got the same, not the same type of problem. Uh.

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<v Speaker 1>Remember Scotland wanted to become an independent nation because it

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<v Speaker 1>had all that oil in the North Sea. By the

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<v Speaker 1>time they finally got to the referendum that the whole

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<v Speaker 1>reserve was almost gone. It has gone now. So the

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<v Speaker 1>economic problems that Scotland's going to run into when if

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<v Speaker 1>it I say, when it moves, I'm going to be

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<v Speaker 1>very difficult. I think because they don't realize the extinct

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<v Speaker 1>to which White All is funding them, and it's going

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<v Speaker 1>to be it's going to be a lot of wrenching

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<v Speaker 1>things are going around. I want to tease forward to

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<v Speaker 1>our next section. We've got about two more minutes, your Chairman,

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<v Speaker 1>and will move on the more mundane ideas. Where are

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<v Speaker 1>we in the debate the battle of rules versus discretion?

0:16:29.280 --> 0:16:31.440
<v Speaker 1>Give us an update on where that is is we

0:16:31.600 --> 0:16:35.800
<v Speaker 1>prepare for our next discussion. I'd say that discretion has

0:16:37.600 --> 0:16:41.320
<v Speaker 1>one the day because every time you're trying to lock

0:16:41.400 --> 0:16:46.760
<v Speaker 1>in some rules, uh, you get them locked in incorrectly

0:16:46.800 --> 0:16:51.320
<v Speaker 1>because you can't anticipate how the market's going to behave Well,

0:16:51.360 --> 0:16:54.400
<v Speaker 1>there's still a movement on Capitol Hill to try to

0:16:54.840 --> 0:16:58.320
<v Speaker 1>put the Federal Reserve into a rules based procedure. What

0:16:58.480 --> 0:17:03.880
<v Speaker 1>would happen if that were to pass, Well, we would

0:17:03.880 --> 0:17:10.440
<v Speaker 1>find ourselves trying to support the currency in an unsupportable position.

0:17:10.600 --> 0:17:12.960
<v Speaker 1>Is it the legislative version of going back on the

0:17:12.960 --> 0:17:16.080
<v Speaker 1>gold standard? No? If he went back on the gold

0:17:16.119 --> 0:17:21.679
<v Speaker 1>standard and we adhered to the actual structure of the

0:17:21.720 --> 0:17:26.840
<v Speaker 1>gold standard as it existed, say, prior to we'd be

0:17:26.880 --> 0:17:32.080
<v Speaker 1>fun Remember that the period eighteen seventy thirteen was one

0:17:32.080 --> 0:17:36.679
<v Speaker 1>of the most progressive periods economically that we've had in

0:17:36.720 --> 0:17:40.840
<v Speaker 1>the United States, and that was a golden period of

0:17:41.320 --> 0:17:45.840
<v Speaker 1>the gold standard. So I think that it's I mean,

0:17:45.920 --> 0:17:49.800
<v Speaker 1>I'm known as a gold bug and everyone laughs at me.

0:17:50.600 --> 0:17:55.840
<v Speaker 1>But well, why the Central Bank's own goal? Now, Well,

0:17:55.840 --> 0:17:57.639
<v Speaker 1>we're gonna come back on that. We could talk forever

0:17:57.680 --> 0:18:08.399
<v Speaker 1>about this. Alan Greenspan gold with us today. Mike, why

0:18:08.440 --> 0:18:10.960
<v Speaker 1>didn't you start with the army Greenspan's thoughts on the

0:18:11.040 --> 0:18:14.760
<v Speaker 1>why we're here? Well, that's an interesting question because you

0:18:14.880 --> 0:18:18.000
<v Speaker 1>have noted and back in March when Tom and I

0:18:18.080 --> 0:18:20.399
<v Speaker 1>last spoke with you, you know it at the time

0:18:20.760 --> 0:18:25.640
<v Speaker 1>that there is something beyond the individual day to day

0:18:25.640 --> 0:18:29.040
<v Speaker 1>news that we are watching. It. It's a deterioration in

0:18:29.560 --> 0:18:33.199
<v Speaker 1>the standards of living that people have these days. That

0:18:33.320 --> 0:18:36.359
<v Speaker 1>is around the world, it's global, and that is leading

0:18:36.400 --> 0:18:40.080
<v Speaker 1>to symptoms like what we're seeing in the United Kingdom

0:18:40.320 --> 0:18:44.159
<v Speaker 1>that aren't the cause themselves. Well, I think the problems

0:18:44.280 --> 0:18:48.000
<v Speaker 1>that we have, as I mentioned before, is the fact

0:18:48.080 --> 0:18:52.639
<v Speaker 1>that well, what's what's You know, it's often useful to

0:18:52.760 --> 0:18:57.600
<v Speaker 1>start with the end result and go back causation in reverse.

0:18:59.040 --> 0:19:04.200
<v Speaker 1>What we see is a desperate population out there everywhere.

0:19:04.200 --> 0:19:06.920
<v Speaker 1>We're seeing it in the United States. You can see

0:19:06.920 --> 0:19:12.600
<v Speaker 1>it all during our election period. It's a fear, it's

0:19:12.600 --> 0:19:16.680
<v Speaker 1>a desperation. They're looking for somebody to come and help

0:19:16.720 --> 0:19:21.000
<v Speaker 1>them out. That is a similar that This is basically

0:19:21.000 --> 0:19:25.520
<v Speaker 1>what Brexit has been all around. We're seeing it in

0:19:25.560 --> 0:19:32.120
<v Speaker 1>Europe generally. And so the question is why, well nobody

0:19:32.160 --> 0:19:36.000
<v Speaker 1>wishes to discuss this because it's politically very difficult to

0:19:36.080 --> 0:19:39.320
<v Speaker 1>discuss because nobody knows what to do about it in

0:19:39.400 --> 0:19:44.040
<v Speaker 1>the United States, which is not by itself by any means.

0:19:44.040 --> 0:19:47.560
<v Speaker 1>In fact, the US is better, it is best to

0:19:47.560 --> 0:19:51.640
<v Speaker 1>talk about because our data system is better. But when

0:19:51.640 --> 0:19:55.119
<v Speaker 1>I'm about to tell you exists pretty much throughout the

0:19:55.160 --> 0:20:01.480
<v Speaker 1>developed world, and that is that as the populations age

0:20:02.119 --> 0:20:05.920
<v Speaker 1>and they all are now in their baby boom period

0:20:06.119 --> 0:20:11.720
<v Speaker 1>and they're going into retirement, that is creating a major

0:20:11.880 --> 0:20:17.040
<v Speaker 1>fiscal problem in all of these countries. And the issue

0:20:17.200 --> 0:20:22.800
<v Speaker 1>is essentially that entitlements, which are entitlements, are legal issues.

0:20:22.840 --> 0:20:25.600
<v Speaker 1>They have nothing to do with the economics. You reach

0:20:25.640 --> 0:20:28.840
<v Speaker 1>a certain age, or you're ill or something of that age,

0:20:29.080 --> 0:20:33.280
<v Speaker 1>you're entitled to certain expenditures out of the budget without

0:20:33.400 --> 0:20:37.200
<v Speaker 1>any reference to how it's going to be funded. Where

0:20:37.200 --> 0:20:42.159
<v Speaker 1>the productivity levels are now, we're lucky to get something

0:20:42.200 --> 0:20:46.080
<v Speaker 1>even close to two percent annual growth rate, and that

0:20:46.240 --> 0:20:50.160
<v Speaker 1>annual growth rate of two is not adequate to finance

0:20:50.760 --> 0:20:55.160
<v Speaker 1>the exist in your experience, can policy makers are adjust

0:20:55.240 --> 0:21:01.680
<v Speaker 1>productivity higher? No? Oh, they can indirectly, I'm are if

0:21:01.720 --> 0:21:05.280
<v Speaker 1>they were to slow down the rate of growth of

0:21:05.520 --> 0:21:12.200
<v Speaker 1>entitlements and enabled remember what's happening, which is a remarkable

0:21:12.240 --> 0:21:17.080
<v Speaker 1>statistic for the United States, The sum of gross domestic

0:21:17.160 --> 0:21:23.320
<v Speaker 1>savings plus entitlements as a percent of GDP is flat

0:21:23.440 --> 0:21:29.200
<v Speaker 1>for a half century. That means that basically every dollar

0:21:29.400 --> 0:21:34.800
<v Speaker 1>of entitlement crowds out crowds out one dollar gross savings.

0:21:35.920 --> 0:21:39.199
<v Speaker 1>The gross savings adjusted for the current account balance, is

0:21:39.240 --> 0:21:43.960
<v Speaker 1>that what gross domestic investment is. But critically, your tenure shows,

0:21:44.200 --> 0:21:46.680
<v Speaker 1>and I think of Tip O'Neill as well, Speaker O'Neill,

0:21:47.280 --> 0:21:51.359
<v Speaker 1>nothing gets done without crisis. Do you just does Alan

0:21:51.400 --> 0:21:54.720
<v Speaker 1>Greenspan just wait for the next crisis the Capitol Hill

0:21:54.800 --> 0:21:59.240
<v Speaker 1>dozens I said in a book I finished recently. Since

0:21:59.359 --> 0:22:01.080
<v Speaker 1>I don't know how it's going to resolve, but there's

0:22:01.080 --> 0:22:02.879
<v Speaker 1>going to be a crisis. She said that in the

0:22:02.960 --> 0:22:10.440
<v Speaker 1>last book, and he was right. Well, these solutions come

0:22:10.480 --> 0:22:15.280
<v Speaker 1>on the fiscal side, yes, how and it's not like

0:22:16.000 --> 0:22:20.440
<v Speaker 1>people on Capitol Hill or people in Westminster don't know

0:22:20.960 --> 0:22:23.760
<v Speaker 1>what to do. They don't want to do it. What's

0:22:23.760 --> 0:22:27.000
<v Speaker 1>the communication? How do you tell them? How do you

0:22:27.040 --> 0:22:30.680
<v Speaker 1>get through to them about these issues? This is one

0:22:30.720 --> 0:22:36.040
<v Speaker 1>of the great problems of democracy and it goes back

0:22:36.080 --> 0:22:40.080
<v Speaker 1>to the founding fathers. How do you handle a situation

0:22:40.160 --> 0:22:46.000
<v Speaker 1>like this? And it's very troublesome, but eventually you get

0:22:46.000 --> 0:22:50.200
<v Speaker 1>things like Margaret Thatcher showing up in Britain. Their their

0:22:50.240 --> 0:22:54.000
<v Speaker 1>situation is far worse than honest. And what she did

0:22:54.480 --> 0:22:58.560
<v Speaker 1>is she turned it all around essentially by as I

0:22:58.640 --> 0:23:06.280
<v Speaker 1>remember it, Uh, the the minors we're going to strike.

0:23:07.200 --> 0:23:09.440
<v Speaker 1>And she decided that she knew they were going to

0:23:09.520 --> 0:23:13.919
<v Speaker 1>strike since at that point the government owned the coal mines.

0:23:14.680 --> 0:23:18.439
<v Speaker 1>She built up a huge inventory so that when they

0:23:18.480 --> 0:23:22.320
<v Speaker 1>went on strike there was enough call in Britain so

0:23:22.440 --> 0:23:31.520
<v Speaker 1>that eventually the the whole union structure collapsed. That put

0:23:31.640 --> 0:23:37.680
<v Speaker 1>her on a whole different Uh. She changed, She fundamentally

0:23:37.840 --> 0:23:42.280
<v Speaker 1>changed Britain to this day. I mean the fact that

0:23:42.320 --> 0:23:45.720
<v Speaker 1>we're doing so well in the EU is not altogether

0:23:45.840 --> 0:23:48.919
<v Speaker 1>clear that it is the EU or whether it was

0:23:48.960 --> 0:23:54.640
<v Speaker 1>Margaret Thatcher. What do we need then an accident of history? Uh?

0:23:55.119 --> 0:24:00.520
<v Speaker 1>Probably I don't see because Uh. And then added states

0:24:02.320 --> 0:24:07.680
<v Speaker 1>social benefits, which is the more generic term or entitlements

0:24:08.160 --> 0:24:12.480
<v Speaker 1>UM are considered the third rail of American politics. You

0:24:13.600 --> 0:24:18.840
<v Speaker 1>you touch them, and you lose. Now that is a

0:24:18.920 --> 0:24:22.520
<v Speaker 1>general view. The Republicans I want to touch it. The

0:24:22.600 --> 0:24:24.840
<v Speaker 1>Democrats that want to touch it, they don't even want

0:24:24.880 --> 0:24:28.280
<v Speaker 1>to talk about it. This is what the election should

0:24:28.280 --> 0:24:32.200
<v Speaker 1>be all about. In the United States. You will never

0:24:32.359 --> 0:24:35.040
<v Speaker 1>hear one word from you. Alan Greenspan with US is

0:24:35.080 --> 0:24:39.000
<v Speaker 1>Bloomberg Radio and Bloomberg Television worldwide. One question, if I

0:24:39.080 --> 0:24:42.560
<v Speaker 1>made to stay away from Fed policy negative interest rates,

0:24:42.640 --> 0:24:44.720
<v Speaker 1>I don't believe they are in your textbook. At n

0:24:44.840 --> 0:24:48.520
<v Speaker 1>y U, we are learning about negative interest rates. What

0:24:48.640 --> 0:24:51.720
<v Speaker 1>have you observed and what will we see if we

0:24:51.760 --> 0:24:56.120
<v Speaker 1>see even deeper negative interest rates in the coming months. Well,

0:24:56.240 --> 0:25:00.680
<v Speaker 1>let's understand where negative interest rates come from. Uh. If

0:25:00.720 --> 0:25:05.800
<v Speaker 1>you go back and look at the period when say

0:25:05.800 --> 0:25:11.640
<v Speaker 1>that the US ten year note was five or thereabouts,

0:25:12.520 --> 0:25:17.760
<v Speaker 1>or when the normal relationship existed, negative rates would not exist.

0:25:18.680 --> 0:25:23.399
<v Speaker 1>But if you take, for example, when they emerge, you

0:25:23.600 --> 0:25:31.399
<v Speaker 1>have let's see five ten years ago the Swiss frank

0:25:33.160 --> 0:25:37.480
<v Speaker 1>I should say that the yield on Swiss long term

0:25:37.560 --> 0:25:45.200
<v Speaker 1>debt would be two three basis points under for example

0:25:45.400 --> 0:25:50.520
<v Speaker 1>Italy Italy or rather less desirable, and that spread would

0:25:50.560 --> 0:25:53.760
<v Speaker 1>move up and down. And now it's broken. Well, no,

0:25:53.920 --> 0:25:57.639
<v Speaker 1>it hasn't broken. What happened is that if the overall

0:25:58.000 --> 0:26:02.160
<v Speaker 1>rate comes down, then in order to keep that spread,

0:26:03.200 --> 0:26:07.159
<v Speaker 1>the Swiss Francaster go negative. And so that what you

0:26:07.280 --> 0:26:11.560
<v Speaker 1>have is that now they're gonna start they're gonna stop

0:26:11.600 --> 0:26:14.159
<v Speaker 1>them at stock up on currency, and that's gonna make

0:26:14.200 --> 0:26:16.480
<v Speaker 1>a difference. We've run out of time. We could go forever,

0:26:16.560 --> 0:26:19.199
<v Speaker 1>particularly on the United Kingdom. Allen green Span, thank you

0:26:19.280 --> 0:26:22.920
<v Speaker 1>so much for joining us today here on Bloomberg Radio

0:26:22.960 --> 0:26:27.600
<v Speaker 1>and Bloomberg Television. Alan Greenspan on the United Kingdom and

0:26:27.640 --> 0:26:32.920
<v Speaker 1>on our American economics. Thanks for listening to the Bloomberg

0:26:32.960 --> 0:26:38.520
<v Speaker 1>Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud,

0:26:38.840 --> 0:26:42.800
<v Speaker 1>or whichever podcast platform you prefer. I'm on Twitter at

0:26:42.840 --> 0:26:47.639
<v Speaker 1>Tom Keane. Michael McKee is at Economy before the podcast.

0:26:47.720 --> 0:26:51.200
<v Speaker 1>You can always catch us worldwide. I'm Bloomberg Radio