1 00:00:11,119 --> 00:00:14,680 Speaker 1: Hello, and welcome to another episode of the All Thoughts podcast. 2 00:00:14,800 --> 00:00:17,920 Speaker 1: I'm Tracy all the way, and I'm Joe. Wasn't thal 3 00:00:19,440 --> 00:00:23,320 Speaker 1: so Joe. One of the really interesting things about our 4 00:00:23,720 --> 00:00:30,200 Speaker 1: current economic situation is that we basically have a recession 5 00:00:30,680 --> 00:00:35,720 Speaker 1: that's been induced by policy, albeit not necessarily economic policy, 6 00:00:35,840 --> 00:00:40,639 Speaker 1: but by policy in general. This fact makes understanding this 7 00:00:40,720 --> 00:00:44,960 Speaker 1: moment in the economy very bizarre. It's not like anything 8 00:00:45,000 --> 00:00:48,160 Speaker 1: that we've ever seen before, in part because of exactly 9 00:00:48,360 --> 00:00:51,239 Speaker 1: what you just identified, which is that a lot of 10 00:00:51,720 --> 00:00:55,880 Speaker 1: the slowdown that we've seen in economic activity was completely 11 00:00:55,920 --> 00:00:59,040 Speaker 1: by design, and it's hard to think of any previous 12 00:00:59,080 --> 00:01:03,360 Speaker 1: comparison that the works as an analogy. Yeah, exactly. So 13 00:01:04,040 --> 00:01:08,759 Speaker 1: along with this policy induced recession, we also have the 14 00:01:08,800 --> 00:01:14,520 Speaker 1: fact that the economic contraction has been much much stronger 15 00:01:14,600 --> 00:01:18,280 Speaker 1: or starker than we've seen in recent years. Like I 16 00:01:18,280 --> 00:01:20,640 Speaker 1: think plenty of people have pointed out at this point 17 00:01:20,720 --> 00:01:24,200 Speaker 1: that it's probably the biggest stop to economic activity that 18 00:01:24,240 --> 00:01:27,800 Speaker 1: we've seen either since World War Two or the Great Depression, 19 00:01:28,040 --> 00:01:32,600 Speaker 1: so eclipsing the Great Financial Crisis of two thousand eight definitely. 20 00:01:32,920 --> 00:01:35,080 Speaker 1: But the other thing that goes along with that, and 21 00:01:35,120 --> 00:01:37,119 Speaker 1: I guess that This is what we're going to talk about, 22 00:01:37,240 --> 00:01:41,040 Speaker 1: is because so much of the slowdown was by design, 23 00:01:41,400 --> 00:01:44,800 Speaker 1: and obviously it wasn't all uh done by um law. 24 00:01:44,840 --> 00:01:47,440 Speaker 1: I mean, people naturally change their behavior in response to 25 00:01:47,480 --> 00:01:50,920 Speaker 1: the virus, but so many policy changes were by design 26 00:01:51,120 --> 00:01:54,320 Speaker 1: to slow the spread of the virus. We also saw 27 00:01:54,360 --> 00:01:58,440 Speaker 1: a sort of near real time policy response to that 28 00:01:58,600 --> 00:02:01,760 Speaker 1: because leaders of policy makers sort of recognizing that they're 29 00:02:01,760 --> 00:02:03,800 Speaker 1: going to tell people to stay home, they're going to 30 00:02:03,880 --> 00:02:07,040 Speaker 1: tell people to not travel and so forth, then the 31 00:02:07,080 --> 00:02:13,800 Speaker 1: economy automatically along with that needs a lot of support. Right. Well, 32 00:02:13,840 --> 00:02:16,160 Speaker 1: we can argue whether or not central banks were sort 33 00:02:16,160 --> 00:02:19,040 Speaker 1: of the grown ups in the policy room in this 34 00:02:19,120 --> 00:02:21,560 Speaker 1: particular instance, but you're right. We are going to talk 35 00:02:21,560 --> 00:02:25,520 Speaker 1: about the central bank policy response on this particular episode, 36 00:02:25,720 --> 00:02:28,680 Speaker 1: and we have the perfect person to do it, someone 37 00:02:28,680 --> 00:02:32,560 Speaker 1: who's been on all thoughts before, actually the Economic Advisor 38 00:02:32,720 --> 00:02:36,559 Speaker 1: and head of research over at the Bank for International Settlements, 39 00:02:36,840 --> 00:02:39,960 Speaker 1: Hyon Song shin Hian. Thank you so much for coming 40 00:02:39,960 --> 00:02:44,880 Speaker 1: on again. Hi, true, it's good to be bad. Thanks 41 00:02:44,919 --> 00:02:48,040 Speaker 1: for the invitation. So I should just mention that a 42 00:02:48,080 --> 00:02:50,960 Speaker 1: lot of this conversation is pegged to the most recent 43 00:02:51,000 --> 00:02:54,560 Speaker 1: report out of the b I S. That really describes 44 00:02:55,120 --> 00:02:58,840 Speaker 1: both the depth of the economic contraction that we've seen 45 00:02:58,919 --> 00:03:02,960 Speaker 1: in recent months and also the policy response. Um. If 46 00:03:03,000 --> 00:03:09,000 Speaker 1: you just sum up from a policy perspective, what's um 47 00:03:09,280 --> 00:03:13,920 Speaker 1: would have struck you the most? What stood out? Oh boy? UM? Well, 48 00:03:14,040 --> 00:03:16,760 Speaker 1: you know it's um. It's a defining moment for the 49 00:03:16,760 --> 00:03:19,799 Speaker 1: global economy. Ratsey, I think it's We've never seen anything 50 00:03:19,840 --> 00:03:23,880 Speaker 1: like it. It's the you know, three big shots rolled 51 00:03:23,880 --> 00:03:26,280 Speaker 1: into one. I mean, first of all, let's not forget 52 00:03:26,400 --> 00:03:30,640 Speaker 1: it's it's a health crisis. It is a pandemic. And then, 53 00:03:30,680 --> 00:03:34,400 Speaker 1: as you said, there was also the economic sudden stop 54 00:03:35,000 --> 00:03:37,640 Speaker 1: that was partly in use by the lockdowns, but also 55 00:03:37,840 --> 00:03:41,560 Speaker 1: it also arises from their changes in the way people behaved. 56 00:03:42,800 --> 00:03:45,080 Speaker 1: And then on top of all that, we had the 57 00:03:45,840 --> 00:03:49,080 Speaker 1: cute form of a financial crisis back that you know, 58 00:03:49,120 --> 00:03:53,520 Speaker 1: back in March, when the financial system basically throws up 59 00:03:53,560 --> 00:03:57,040 Speaker 1: and U and the center backs had to really enter 60 00:03:57,640 --> 00:04:03,600 Speaker 1: to to try and unfreeze the financial system. So obviously, 61 00:04:03,720 --> 00:04:08,000 Speaker 1: one of the advantages arguably that policy makers had going 62 00:04:08,040 --> 00:04:12,720 Speaker 1: into this crisis was that in the last crisis, central 63 00:04:12,720 --> 00:04:16,040 Speaker 1: bankers did a lot of innovation in terms of coming 64 00:04:16,120 --> 00:04:19,520 Speaker 1: up with new policy tools to ease the strain on 65 00:04:19,560 --> 00:04:23,080 Speaker 1: the financial system. How much did that help them being 66 00:04:23,120 --> 00:04:25,440 Speaker 1: able to build upon the work of what was done 67 00:04:25,480 --> 00:04:27,680 Speaker 1: in two thousand and eight and two thousand nine and 68 00:04:27,800 --> 00:04:30,040 Speaker 1: sort of what would you say were the I guess 69 00:04:30,279 --> 00:04:34,839 Speaker 1: key policy innovations this time around, that our brand new 70 00:04:34,880 --> 00:04:39,040 Speaker 1: tools in the toolkit that central bankers now can theoretically 71 00:04:39,720 --> 00:04:43,840 Speaker 1: reach back towards if needed. Yeah, so I think that's 72 00:04:43,880 --> 00:04:46,680 Speaker 1: a very good question. I think one big difference between 73 00:04:46,720 --> 00:04:50,320 Speaker 1: what happened this year and back in two thousand night 74 00:04:50,480 --> 00:04:53,400 Speaker 1: was in the back in two thousand Night, uh, the 75 00:04:53,440 --> 00:04:57,719 Speaker 1: banking sect, the financial system was the epicenter of the crisis, 76 00:04:57,760 --> 00:04:59,360 Speaker 1: and then the and then the raid to call me 77 00:05:00,040 --> 00:05:04,359 Speaker 1: off at the aftershocks of the contraction and the and 78 00:05:04,480 --> 00:05:07,960 Speaker 1: the stress in the financial system. I think what's different 79 00:05:08,000 --> 00:05:13,000 Speaker 1: this time around is that the shock came from from 80 00:05:13,040 --> 00:05:17,040 Speaker 1: outside the financial system, and what that meant was that 81 00:05:17,160 --> 00:05:22,600 Speaker 1: the remedial measures also had to be somewhat different. Now. UM, 82 00:05:22,800 --> 00:05:26,880 Speaker 1: I think the same set of tools that we used 83 00:05:26,920 --> 00:05:29,880 Speaker 1: in two thousand and eight again prove you know, very 84 00:05:29,960 --> 00:05:35,080 Speaker 1: useful in in fact, many of the liquidity facilities well 85 00:05:35,160 --> 00:05:37,960 Speaker 1: already on you know, on the shelf, although you could 86 00:05:37,960 --> 00:05:42,400 Speaker 1: just dust those off and then and then we employ them. 87 00:05:42,400 --> 00:05:45,320 Speaker 1: But I think the difference this time around is that 88 00:05:45,440 --> 00:05:48,360 Speaker 1: because it's something that hits the really call me, rather 89 00:05:48,400 --> 00:05:50,960 Speaker 1: than something that hits the banking system, there are a 90 00:05:51,000 --> 00:05:54,880 Speaker 1: fewer tools if you like to to reach those at 91 00:05:54,880 --> 00:05:57,560 Speaker 1: the receiving end, those at the acute receiving end of 92 00:05:57,600 --> 00:06:01,840 Speaker 1: the crisis. For example, for the baking system, the central 93 00:06:01,839 --> 00:06:06,440 Speaker 1: Bank has direct leaders of policy intervention. When you get 94 00:06:06,480 --> 00:06:10,800 Speaker 1: to the banking system and you can extend liquidity to 95 00:06:10,920 --> 00:06:16,320 Speaker 1: the banks, you can also use your authority as the supervisors, 96 00:06:16,600 --> 00:06:19,039 Speaker 1: and you know there are there are direct leaders that 97 00:06:19,200 --> 00:06:23,520 Speaker 1: you can use to alleviate the stress. Now this time around, 98 00:06:23,800 --> 00:06:26,559 Speaker 1: the people who were really at the sharp end were 99 00:06:27,200 --> 00:06:32,200 Speaker 1: you know, order individuals and small businesses that's suddenly solve. 100 00:06:32,600 --> 00:06:35,719 Speaker 1: Their cash flow just just dry up. And you know, 101 00:06:35,720 --> 00:06:38,719 Speaker 1: if you need groceries, if you need to have you know, 102 00:06:38,839 --> 00:06:42,159 Speaker 1: urgent central spending, it's not going to be enough to 103 00:06:42,240 --> 00:06:45,080 Speaker 1: have the old tools. So I think what we needed 104 00:06:45,120 --> 00:06:47,840 Speaker 1: to do this time around, what central banks and also 105 00:06:48,279 --> 00:06:52,039 Speaker 1: fiscal authorities needed to do this time around, was to 106 00:06:52,120 --> 00:06:57,279 Speaker 1: innovate really beyond the tools that we had in the 107 00:06:57,400 --> 00:07:00,760 Speaker 1: in the Great Financial Crisis. So this is a point 108 00:07:00,800 --> 00:07:03,760 Speaker 1: that I actually wanted to discuss with you. So it 109 00:07:03,800 --> 00:07:07,640 Speaker 1: feels like central banks are are pretty good at solving 110 00:07:08,520 --> 00:07:13,160 Speaker 1: liquidity problems. You know, they can extend short term credit 111 00:07:13,280 --> 00:07:19,160 Speaker 1: to sort of bridge certain gaps between revenue and expenses. 112 00:07:19,200 --> 00:07:23,040 Speaker 1: But it also feels like central banks aren't necessarily that 113 00:07:23,240 --> 00:07:28,520 Speaker 1: good at solving threats to solvency, and in the current crisis, 114 00:07:28,680 --> 00:07:33,880 Speaker 1: arguably solvency is a bigger issue. So what's the challenge 115 00:07:33,920 --> 00:07:37,120 Speaker 1: facing central banks when it comes to liquidity versus solvency 116 00:07:37,160 --> 00:07:40,280 Speaker 1: and what can they do on the ladder? Yeah, and 117 00:07:40,960 --> 00:07:43,920 Speaker 1: that's the really important question to see. I think what 118 00:07:43,960 --> 00:07:46,600 Speaker 1: we can say is where at the at the end 119 00:07:46,640 --> 00:07:48,440 Speaker 1: of the acute phase, we're at the end of the 120 00:07:48,480 --> 00:07:52,640 Speaker 1: liquidity phase. Uh. Back in March and early April, we 121 00:07:52,680 --> 00:07:56,280 Speaker 1: did see a lot of stress in in the financial market. 122 00:07:56,920 --> 00:07:59,160 Speaker 1: Let's start in the banking sector, because I think we 123 00:07:59,840 --> 00:08:02,400 Speaker 1: did a lot in the in the intervening news to 124 00:08:02,600 --> 00:08:06,360 Speaker 1: threaten the bands. But we did see market based finance 125 00:08:06,400 --> 00:08:10,320 Speaker 1: brief example, and that's both in in the thincom market 126 00:08:10,320 --> 00:08:14,480 Speaker 1: but also through market based intermediaries like the my market 127 00:08:14,520 --> 00:08:16,960 Speaker 1: fund ease year this time around is how do you 128 00:08:17,000 --> 00:08:21,680 Speaker 1: get the financial resources to the people really in need? 129 00:08:22,120 --> 00:08:25,320 Speaker 1: You know, at the at the acute end of the 130 00:08:25,800 --> 00:08:28,640 Speaker 1: of the shop, I think we we saw quite a 131 00:08:28,640 --> 00:08:31,240 Speaker 1: lot of ingenuity and in the an imagination from the 132 00:08:31,320 --> 00:08:35,240 Speaker 1: point of view of the fiscal authorities, the fiscal packages 133 00:08:35,280 --> 00:08:37,480 Speaker 1: that have been done a lot that have been unveiled 134 00:08:37,520 --> 00:08:40,640 Speaker 1: have been really very large in historical context. And just 135 00:08:40,720 --> 00:08:44,480 Speaker 1: to give you an order of magnitude, the budgetary announcements 136 00:08:44,480 --> 00:08:47,520 Speaker 1: in advanced economies is of the order of ten percent 137 00:08:47,600 --> 00:08:50,880 Speaker 1: of GDP in the last few weeks. And then you 138 00:08:50,960 --> 00:08:54,720 Speaker 1: add on top of that guarantees and funding schemes that 139 00:08:54,880 --> 00:08:58,120 Speaker 1: are of a similar order. Magnitudes have tended to lp extent. 140 00:08:58,920 --> 00:09:02,520 Speaker 1: So just say, have something like TWENTDP from the the 141 00:09:02,520 --> 00:09:07,199 Speaker 1: advanced economies, and it's much smaller in the emerging markets. 142 00:09:07,640 --> 00:09:11,400 Speaker 1: It's more like three percent plus another three percent in 143 00:09:11,400 --> 00:09:14,439 Speaker 1: the guarantees. And we can get to that later. But 144 00:09:14,559 --> 00:09:16,559 Speaker 1: these two has been how do you get the money 145 00:09:16,720 --> 00:09:19,599 Speaker 1: to those in need quickers? And here I think we 146 00:09:19,679 --> 00:09:22,800 Speaker 1: have seen quite a bit of diversity. And you saw 147 00:09:22,920 --> 00:09:24,960 Speaker 1: that one of the chapters in the report this year 148 00:09:25,840 --> 00:09:29,199 Speaker 1: is about the payment system and about the role of 149 00:09:29,280 --> 00:09:32,120 Speaker 1: the central bank and putting in place an efficient and 150 00:09:32,200 --> 00:09:35,600 Speaker 1: cost effective payment system. I think what we did see 151 00:09:35,679 --> 00:09:39,480 Speaker 1: is that those countries that had payment systems where you 152 00:09:39,520 --> 00:09:43,040 Speaker 1: can get the money down the line to those in 153 00:09:43,120 --> 00:09:46,640 Speaker 1: greatest need also did the best in terms of you know, 154 00:09:46,679 --> 00:09:52,280 Speaker 1: dispersing the transfers in the most efficient way. Now, we, 155 00:09:52,520 --> 00:09:55,880 Speaker 1: as you said earlier, we are now at a phase 156 00:09:55,920 --> 00:10:00,800 Speaker 1: where the initial liquidity stress. As as part us, you know, 157 00:10:00,840 --> 00:10:04,560 Speaker 1: we're looking ahead to potentially a period when we will 158 00:10:04,600 --> 00:10:11,080 Speaker 1: see a lot more failures of businesses and insolvencies. And 159 00:10:11,120 --> 00:10:14,440 Speaker 1: I think here the you know, the limits of you know, 160 00:10:14,520 --> 00:10:19,600 Speaker 1: just lending to tide over a period of aliquidity. Clearly, 161 00:10:20,440 --> 00:10:21,800 Speaker 1: you know, we will look to see the limits of 162 00:10:21,840 --> 00:10:25,360 Speaker 1: that kind of you know role. Although having said that, 163 00:10:26,000 --> 00:10:28,640 Speaker 1: you know, even for the fiscal support, what you need 164 00:10:28,679 --> 00:10:32,160 Speaker 1: to do for that is to have a financial system 165 00:10:32,200 --> 00:10:36,880 Speaker 1: that can that can absorb the additional you know financing 166 00:10:37,520 --> 00:10:39,400 Speaker 1: you know, through the bond market for example, through the 167 00:10:39,559 --> 00:10:42,800 Speaker 1: through the government bond market that can supportext for spending. 168 00:10:43,320 --> 00:10:46,240 Speaker 1: Who keeps the financial system on an even keel, you 169 00:10:46,320 --> 00:10:50,000 Speaker 1: will need they center back to play pretty important smoothing 170 00:10:50,120 --> 00:10:52,400 Speaker 1: role there as well. So I think there is still 171 00:10:52,400 --> 00:10:56,800 Speaker 1: a role for central banks going forward, but the batton 172 00:10:56,880 --> 00:10:59,199 Speaker 1: has to go over to the fiscal authority. It is 173 00:10:59,320 --> 00:11:02,960 Speaker 1: much more. This is really a key thing. And we 174 00:11:03,040 --> 00:11:06,360 Speaker 1: talk a lot about central bank independence, and you hear 175 00:11:06,400 --> 00:11:08,640 Speaker 1: that term a lot, and I think one of the 176 00:11:08,720 --> 00:11:11,760 Speaker 1: things that I sent is that the meaning of that 177 00:11:11,880 --> 00:11:14,840 Speaker 1: term has changed so that at one point it was like, Okay, 178 00:11:15,120 --> 00:11:19,120 Speaker 1: central banks aren't going to be beholden to political pressure 179 00:11:19,280 --> 00:11:21,960 Speaker 1: and they can fight inflation even if that's not popular. 180 00:11:22,400 --> 00:11:26,480 Speaker 1: But I feel like lately that central bank independence mostly 181 00:11:26,600 --> 00:11:30,640 Speaker 1: means a technocratic institution that could just move really fast 182 00:11:30,720 --> 00:11:34,160 Speaker 1: while politicians debate things, So central bank could turn to 183 00:11:34,200 --> 00:11:37,920 Speaker 1: switch and to implement a new policy. Politics just doesn't 184 00:11:37,920 --> 00:11:41,440 Speaker 1: move at that speed. How much is the success of 185 00:11:41,440 --> 00:11:44,400 Speaker 1: the central banks really been about that? Just the fact 186 00:11:44,440 --> 00:11:47,480 Speaker 1: that not that they're doing on popular things, or that 187 00:11:47,520 --> 00:11:50,080 Speaker 1: they're not beholding to political whims, but just the fact 188 00:11:50,120 --> 00:11:54,520 Speaker 1: that they're designed to be sort of outside of day 189 00:11:54,520 --> 00:11:58,319 Speaker 1: to day, real life electoral politics. One of the remarkable 190 00:11:58,360 --> 00:12:01,920 Speaker 1: things is I'm around is how quickly the fiscal authorities 191 00:12:01,920 --> 00:12:04,040 Speaker 1: have actually moved. I mean, if you think about the 192 00:12:04,120 --> 00:12:09,240 Speaker 1: speed with which these fiscal packages were announced. It's really unprecedented. 193 00:12:09,600 --> 00:12:13,079 Speaker 1: And to that extent, I think the difference and speed 194 00:12:13,600 --> 00:12:15,800 Speaker 1: probably didn't hold this time around, although of course, you know, 195 00:12:15,840 --> 00:12:21,079 Speaker 1: fits about alleviating stress in the financial markets cleared the 196 00:12:21,120 --> 00:12:25,680 Speaker 1: center back with the UM as a participant in the 197 00:12:25,720 --> 00:12:28,760 Speaker 1: market itself and move much more quickly. But I think 198 00:12:28,840 --> 00:12:32,640 Speaker 1: in terms of independency, the keys you hear is that 199 00:12:33,440 --> 00:12:36,240 Speaker 1: when the center back plays your role in concert with 200 00:12:36,320 --> 00:12:39,400 Speaker 1: the fiscal authorities. I think the key is that the 201 00:12:39,760 --> 00:12:43,000 Speaker 1: central Bank is doing this in pursuit of this monetary 202 00:12:43,080 --> 00:12:48,079 Speaker 1: policy mandate, you know, rather than somehow subordinating monitory policy 203 00:12:48,160 --> 00:12:51,240 Speaker 1: too to to you know, to other goals. I think 204 00:12:51,480 --> 00:12:55,680 Speaker 1: independence is about you know that issue, are you subordinating 205 00:12:55,679 --> 00:12:59,480 Speaker 1: your monthorit policy goals to to some other to some 206 00:12:59,559 --> 00:13:04,040 Speaker 1: other did like in a fiscal sustainability And I think 207 00:13:04,080 --> 00:13:07,319 Speaker 1: there and we can think of independence in the broader context. 208 00:13:07,320 --> 00:13:09,800 Speaker 1: And after all, we have to think about the Center 209 00:13:09,840 --> 00:13:15,200 Speaker 1: Bank as a public institution that has to ultimately have 210 00:13:15,440 --> 00:13:19,240 Speaker 1: the to derive it. So far, uh, you know, the 211 00:13:19,280 --> 00:13:23,640 Speaker 1: destinacy from you know, from the elector as long as 212 00:13:22,880 --> 00:13:26,880 Speaker 1: the monetary policy mandate is here in the front of 213 00:13:26,880 --> 00:13:31,199 Speaker 1: your mind. I think the center bank should display as 214 00:13:31,280 --> 00:13:38,000 Speaker 1: much imagination and flexibility as it can. Sorry, but just 215 00:13:38,080 --> 00:13:40,400 Speaker 1: to back up for a second, can you maybe explain 216 00:13:40,840 --> 00:13:44,640 Speaker 1: the difference between what central banks are currently doing when 217 00:13:44,720 --> 00:13:48,760 Speaker 1: it comes to buying securities from the market versus what 218 00:13:48,800 --> 00:13:53,840 Speaker 1: people call direct monetary financing. Yeah, so I think, um, 219 00:13:53,960 --> 00:13:56,920 Speaker 1: you know, there's a term trace it called fiscal dominance, 220 00:13:57,120 --> 00:14:02,200 Speaker 1: which is the idea that monetary policy actions are subordinated 221 00:14:02,360 --> 00:14:06,680 Speaker 1: to fiscal policy. So if you're if you're somehow beholden 222 00:14:06,960 --> 00:14:11,720 Speaker 1: to a fiscal objective, and for example, if you work 223 00:14:11,800 --> 00:14:17,040 Speaker 1: to buy government bonds directly in the primary market, you know, 224 00:14:17,120 --> 00:14:20,640 Speaker 1: that could be a form of fiscal dominance. And indeed, 225 00:14:20,640 --> 00:14:25,760 Speaker 1: many central banks are prevented, you know, by the by 226 00:14:25,840 --> 00:14:29,400 Speaker 1: the laws that actually you know, government central banks from 227 00:14:29,440 --> 00:14:34,920 Speaker 1: engaging in um in primary market financial that the dividing 228 00:14:35,000 --> 00:14:38,520 Speaker 1: line gets a little bit more blurred when you're intervening 229 00:14:38,560 --> 00:14:41,960 Speaker 1: in the secondary market. So you're you're are you know, 230 00:14:42,000 --> 00:14:45,880 Speaker 1: buying government bonds in the open market. But then it 231 00:14:46,040 --> 00:14:50,520 Speaker 1: becomes uh, you know, more of a kind of technical distinction. 232 00:14:50,680 --> 00:14:53,520 Speaker 1: I think the the important thing is the intention with 233 00:14:53,640 --> 00:14:58,320 Speaker 1: which you you intervene. If it's to preserve, for example, 234 00:14:58,400 --> 00:15:02,000 Speaker 1: finance stability, make sure the bond market is working well. 235 00:15:03,160 --> 00:15:08,760 Speaker 1: You are preventing very uh you know, folloytile changes in 236 00:15:09,120 --> 00:15:12,960 Speaker 1: in donement, on yields. I mean, these are all very 237 00:15:13,000 --> 00:15:16,200 Speaker 1: often pursue into your monitor policy objective. The key thing 238 00:15:16,360 --> 00:15:20,760 Speaker 1: is that these interventions should be done with a view 239 00:15:20,880 --> 00:15:26,640 Speaker 1: towards eventual you know, disengagement, eventual exit. They'll be done 240 00:15:26,640 --> 00:15:44,560 Speaker 1: in a temporary way m M. You know, in March 241 00:15:44,960 --> 00:15:48,440 Speaker 1: during the peak of the panic. Of course, one way 242 00:15:48,440 --> 00:15:51,840 Speaker 1: to characterize what happened was we saw essentially an entire 243 00:15:51,960 --> 00:15:55,920 Speaker 1: run on the corporate system. That's why there had to 244 00:15:55,920 --> 00:15:59,920 Speaker 1: be this massive intervention. The dollar surged about nine percent 245 00:16:00,240 --> 00:16:03,400 Speaker 1: in the course of two weeks between the ninth of 246 00:16:03,440 --> 00:16:05,960 Speaker 1: the twenty three, which I imagine is probably one of 247 00:16:05,960 --> 00:16:09,600 Speaker 1: the fastest largest moves in history. As you say, we 248 00:16:09,640 --> 00:16:13,240 Speaker 1: don't really know what's going to happen economically, we don't know. 249 00:16:13,360 --> 00:16:18,120 Speaker 1: Fiscal authorities will do their part to keep creditors alive 250 00:16:18,520 --> 00:16:22,280 Speaker 1: to the degree they need to. But did the actions 251 00:16:22,360 --> 00:16:25,440 Speaker 1: that the central banks took, particularly the FED and backstopping 252 00:16:25,480 --> 00:16:29,200 Speaker 1: the corporate bond market setting up these even more aggressive 253 00:16:29,240 --> 00:16:33,080 Speaker 1: swap lines with other central banks around the world. Well, 254 00:16:33,120 --> 00:16:37,920 Speaker 1: those theoretically prevent us from seeing another similar sort of 255 00:16:38,000 --> 00:16:41,440 Speaker 1: like wholesale run on the system, regardless of what happens 256 00:16:42,080 --> 00:16:45,680 Speaker 1: with the trajectory of the economy. So I think what 257 00:16:45,760 --> 00:16:49,680 Speaker 1: we saw in it much was the was actually very 258 00:16:49,720 --> 00:16:53,040 Speaker 1: different from what we sool in some respects in two 259 00:16:53,080 --> 00:16:55,720 Speaker 1: thousand night. In two thousand night we had the episode 260 00:16:56,120 --> 00:16:59,360 Speaker 1: the crisis are on the backing system. It was the 261 00:16:59,640 --> 00:17:02,840 Speaker 1: stress in the banking system and the deleveraging and the 262 00:17:03,640 --> 00:17:08,080 Speaker 1: and the withdrawal of funding um between the interconnected parties 263 00:17:08,119 --> 00:17:11,760 Speaker 1: that that really drove that the stress. Then this time 264 00:17:12,240 --> 00:17:15,000 Speaker 1: we saw the stress very much in the in the 265 00:17:15,080 --> 00:17:18,280 Speaker 1: market based system, as you say, the We saw it 266 00:17:18,320 --> 00:17:20,680 Speaker 1: in the corporate fund market, We saw it in the 267 00:17:20,720 --> 00:17:25,080 Speaker 1: marketplace intermediaries, for example, in the money market funds. Because 268 00:17:25,080 --> 00:17:28,760 Speaker 1: dollar funding is so central to the functioning of the 269 00:17:28,760 --> 00:17:33,359 Speaker 1: global economy through dollar funding, it also spilled over to 270 00:17:34,200 --> 00:17:37,480 Speaker 1: emerging markets and and just dollar funding markets more generally. 271 00:17:38,480 --> 00:17:42,159 Speaker 1: And what the FED did back in March was in 272 00:17:42,200 --> 00:17:46,560 Speaker 1: a way the classic the playbook, where you you intervene, 273 00:17:46,640 --> 00:17:53,159 Speaker 1: you provide liquidity against collateral and also through the central 274 00:17:53,160 --> 00:17:57,639 Speaker 1: bank swap lines against the collateral provided by other central banks. 275 00:17:57,720 --> 00:18:01,040 Speaker 1: You alleviate the stress and the the dollar funding market 276 00:18:01,080 --> 00:18:03,800 Speaker 1: as well. So you know, we've gone through that initial phase. 277 00:18:04,520 --> 00:18:07,239 Speaker 1: I don't think we can rule out another flare up, 278 00:18:07,280 --> 00:18:09,199 Speaker 1: but I think it seems for the moment we have 279 00:18:10,000 --> 00:18:13,359 Speaker 1: we have got over that initial acute phase. But I 280 00:18:13,359 --> 00:18:15,800 Speaker 1: think we have learned some lessons this time around, for example, 281 00:18:15,880 --> 00:18:20,560 Speaker 1: how the dollar funding market and the short term funding 282 00:18:20,600 --> 00:18:23,600 Speaker 1: market through for example, the money market funds through commercial 283 00:18:23,640 --> 00:18:28,879 Speaker 1: paper that all interacts with the drawing and credit lines 284 00:18:29,000 --> 00:18:32,080 Speaker 1: on the banking system, if they all interact, so I 285 00:18:32,080 --> 00:18:35,119 Speaker 1: think we've we've learned a lot. I think we we 286 00:18:35,280 --> 00:18:38,960 Speaker 1: managed to sail through that initial period quite well. I 287 00:18:39,000 --> 00:18:44,040 Speaker 1: think one thing that's been quite hopeful has been how 288 00:18:44,080 --> 00:18:47,399 Speaker 1: resilient the emerging markets have been this time around. What 289 00:18:47,480 --> 00:18:50,040 Speaker 1: we saw was that in spite of the initial very 290 00:18:50,080 --> 00:18:56,399 Speaker 1: sharp phase of stress in March, emerging markets have fed 291 00:18:56,520 --> 00:19:00,840 Speaker 1: reasonably well. The emerging market at a local con of 292 00:19:00,880 --> 00:19:04,439 Speaker 1: the bond markets have really come back back strongly. I 293 00:19:04,480 --> 00:19:08,120 Speaker 1: think it is a testament to the to the resilience 294 00:19:08,200 --> 00:19:11,040 Speaker 1: that emerging market, or far it has also built up 295 00:19:11,760 --> 00:19:16,400 Speaker 1: through both accumulation of reserves, but also weaning themselves off 296 00:19:16,720 --> 00:19:22,159 Speaker 1: the dollar based instruments of the borrowing in dollars and 297 00:19:22,560 --> 00:19:28,240 Speaker 1: increasingly financing themselves through the local currency. Stoppering involved this students, 298 00:19:28,280 --> 00:19:31,240 Speaker 1: and I think that's been I think a very good 299 00:19:31,320 --> 00:19:34,439 Speaker 1: lesson to learn from the center step. I wanted to 300 00:19:34,440 --> 00:19:37,199 Speaker 1: ask you about this actually, because you know, we have 301 00:19:37,280 --> 00:19:41,240 Speaker 1: seen emerging markets sell a lot of debt in recent 302 00:19:41,280 --> 00:19:44,720 Speaker 1: your some in in hard currency i e. U A stollars, 303 00:19:44,800 --> 00:19:49,640 Speaker 1: nominated in some local currencies. And there's a bit um 304 00:19:49,680 --> 00:19:51,879 Speaker 1: in the most recent b I S report where they 305 00:19:51,880 --> 00:19:58,160 Speaker 1: talk about the idea that currency mismatches have basically been 306 00:19:58,200 --> 00:20:03,080 Speaker 1: shifted from borrow as two wonders i e. To foreign investors. So, 307 00:20:04,480 --> 00:20:08,480 Speaker 1: considering the most recent experience UM and the economic crisis 308 00:20:08,520 --> 00:20:11,520 Speaker 1: where we did have a lot of currency disruptions, do 309 00:20:11,560 --> 00:20:15,439 Speaker 1: you think investors are going to be more reluctant to 310 00:20:15,840 --> 00:20:20,200 Speaker 1: fund emerging markets going forward, especially if they don't get 311 00:20:20,240 --> 00:20:23,520 Speaker 1: the same kinds of returns that they've grown used to 312 00:20:23,560 --> 00:20:27,840 Speaker 1: in recent years. Yeah. I think I think one thing 313 00:20:27,920 --> 00:20:31,159 Speaker 1: we we need to bear in mind is that in 314 00:20:31,200 --> 00:20:34,320 Speaker 1: the sovereign bond markets, so in the in the emerging 315 00:20:34,359 --> 00:20:38,840 Speaker 1: market sovereign bonds issue is around age percent of the 316 00:20:38,880 --> 00:20:42,320 Speaker 1: issues is in local currency. So in that respect, we 317 00:20:42,400 --> 00:20:45,399 Speaker 1: are willing to really past the you know, the era 318 00:20:45,520 --> 00:20:48,640 Speaker 1: of original sin so called, which is the idea that 319 00:20:49,359 --> 00:20:52,119 Speaker 1: emerging market borrowers, if they want to borrow from foreigners, 320 00:20:52,200 --> 00:20:54,520 Speaker 1: have to borrow in the hard currency. I think we're 321 00:20:54,560 --> 00:20:57,760 Speaker 1: going throughly over that. What we've seen is the emerging 322 00:20:57,800 --> 00:21:01,679 Speaker 1: market governments at least have been a to borrow in 323 00:21:01,800 --> 00:21:05,200 Speaker 1: domestic currency to the extent that of the sovereign bond 324 00:21:05,240 --> 00:21:10,080 Speaker 1: market is is in local currency. But that doesn't actually 325 00:21:10,840 --> 00:21:13,280 Speaker 1: guarantee though, is that the you know, whoever buys a 326 00:21:13,359 --> 00:21:18,440 Speaker 1: level currency sovereign bonds will be able to hold onto 327 00:21:18,480 --> 00:21:21,760 Speaker 1: them during periods of stress. Because during periods of stress, 328 00:21:21,840 --> 00:21:25,520 Speaker 1: it may be that for a portfolio manager that has 329 00:21:26,480 --> 00:21:30,439 Speaker 1: portfolio these emerging market bonds, other risk and sprects may 330 00:21:30,520 --> 00:21:34,360 Speaker 1: kick in so you can have a diversified portfolio. Oh, 331 00:21:34,520 --> 00:21:38,400 Speaker 1: let's say, you know, corporate bonds and emerging mounket level 332 00:21:38,440 --> 00:21:42,560 Speaker 1: currency bonds. A period of stress will tighten conditions. You know, 333 00:21:42,680 --> 00:21:47,440 Speaker 1: your own risk appetite will diminish as well, which means 334 00:21:47,480 --> 00:21:52,080 Speaker 1: that things that you would previously have been happy to hold, 335 00:21:52,400 --> 00:21:54,560 Speaker 1: you will rather not hold at that point. And if 336 00:21:54,560 --> 00:22:00,280 Speaker 1: that occurs simultaneously across the whole way, that investors could 337 00:22:00,320 --> 00:22:04,280 Speaker 1: see a more concertain round of selling. And I think 338 00:22:04,280 --> 00:22:07,560 Speaker 1: this is the kind of dynamic that you know, we 339 00:22:07,640 --> 00:22:11,240 Speaker 1: have to watch out for, and that although the emerging 340 00:22:11,280 --> 00:22:15,800 Speaker 1: market government has been able to borrow in domestic currency, 341 00:22:15,920 --> 00:22:21,560 Speaker 1: the investors may be dollar based investors or Euro based investors, 342 00:22:21,880 --> 00:22:25,920 Speaker 1: other investors that have obligations in to their policy holders 343 00:22:26,080 --> 00:22:30,879 Speaker 1: or to their beneficiaries in hard currency. And so unless 344 00:22:30,920 --> 00:22:35,120 Speaker 1: you've somehow hedged beforehand, when you've gone into douce earning 345 00:22:35,119 --> 00:22:40,760 Speaker 1: market local currency bonds, which typically investors don't, we will 346 00:22:40,840 --> 00:22:43,440 Speaker 1: have a currency mismatch, you know, from the investors point 347 00:22:43,440 --> 00:22:46,840 Speaker 1: of view. And typically this is the first, you know, 348 00:22:46,840 --> 00:22:49,840 Speaker 1: as a class that comes on the studying pressure. So 349 00:22:49,880 --> 00:22:52,880 Speaker 1: I think the lesson here is it's not only enough 350 00:22:53,080 --> 00:22:55,640 Speaker 1: just to borrow in your domestic currency. You really need 351 00:22:55,680 --> 00:22:58,800 Speaker 1: to think about, you know, how you can develop a 352 00:22:59,520 --> 00:23:03,159 Speaker 1: you know, a even liquid market where the investors are 353 00:23:03,160 --> 00:23:06,359 Speaker 1: also quite sticky. Now it has to be said that 354 00:23:06,400 --> 00:23:09,720 Speaker 1: the investors, I think they there has always been an 355 00:23:09,720 --> 00:23:14,000 Speaker 1: element of you know, the ciplicality, and during the height 356 00:23:14,080 --> 00:23:16,159 Speaker 1: of the crisis back in the March, you know, there 357 00:23:16,240 --> 00:23:19,040 Speaker 1: was some very good picking. I think that's when although 358 00:23:19,080 --> 00:23:21,960 Speaker 1: the investors came back in the spreads a lot back 359 00:23:22,000 --> 00:23:26,000 Speaker 1: to where they were before the March um you know, 360 00:23:26,040 --> 00:23:29,119 Speaker 1: Spress episode. So there is still a little bit of 361 00:23:29,119 --> 00:23:31,879 Speaker 1: the gap there. But I think the lesson here, I 362 00:23:31,880 --> 00:23:36,600 Speaker 1: think is, yes, you should. You know you can. You 363 00:23:36,600 --> 00:23:40,040 Speaker 1: can increase resilience by borrowing in the domestic currency, But 364 00:23:40,119 --> 00:23:42,880 Speaker 1: the exchange rate matters a lot because the exchange rate 365 00:23:43,080 --> 00:23:48,280 Speaker 1: does tend to amplify the games and losses for the investors. 366 00:23:48,400 --> 00:23:51,840 Speaker 1: And it's really the investors behavior which you really need 367 00:23:51,880 --> 00:23:55,280 Speaker 1: to know factor in when you try and you know, 368 00:23:55,320 --> 00:23:58,040 Speaker 1: look ahead what might be happened in the market. You know, 369 00:23:58,119 --> 00:24:02,119 Speaker 1: you talk about the the liquidity demands on investors. I 370 00:24:02,119 --> 00:24:04,879 Speaker 1: mean that got so intense in March, and we we 371 00:24:05,000 --> 00:24:09,320 Speaker 1: talked about this on some prior episodes that even treasury holders, 372 00:24:09,640 --> 00:24:13,359 Speaker 1: holders of the safest asset class of the entire world, 373 00:24:13,440 --> 00:24:18,080 Speaker 1: even they got into a squeeze, particularly relative value hedge funds. 374 00:24:18,240 --> 00:24:21,439 Speaker 1: The FED had to step into provide liquidity to that market. 375 00:24:22,160 --> 00:24:24,480 Speaker 1: Is that a situation that in your view will now 376 00:24:24,560 --> 00:24:28,359 Speaker 1: that the FED has gone there to ease liquidity strangers there, 377 00:24:28,760 --> 00:24:31,719 Speaker 1: that that is the type of liquidity strain that's not 378 00:24:31,840 --> 00:24:34,320 Speaker 1: likely to come up again now that we've seen what 379 00:24:34,359 --> 00:24:38,520 Speaker 1: the FED is um willing to do. Yeah, I think 380 00:24:38,520 --> 00:24:41,800 Speaker 1: the fed's intervention in March was was really important to 381 00:24:42,600 --> 00:24:46,040 Speaker 1: well for the stress in the treasury market. Uh. There 382 00:24:46,119 --> 00:24:51,440 Speaker 1: was some specific you know, structural issues uh back in March, 383 00:24:51,520 --> 00:24:55,240 Speaker 1: and there were these relative value traders who were quite 384 00:24:55,280 --> 00:24:59,280 Speaker 1: important doing the cash because author tries. Yeah, there were 385 00:24:59,359 --> 00:25:03,440 Speaker 1: shades of LTCM there as well, where if you're doing 386 00:25:03,440 --> 00:25:06,639 Speaker 1: a relative value trade and the trade moves against you, 387 00:25:06,920 --> 00:25:10,680 Speaker 1: then then you're somehow forced to unwind, which tends to 388 00:25:10,720 --> 00:25:15,560 Speaker 1: widen the the spread that you're to trade in. What 389 00:25:15,600 --> 00:25:18,640 Speaker 1: Defense did was to go in and uh and interview directly, 390 00:25:19,440 --> 00:25:25,240 Speaker 1: uh and purchase the trades directly. The dealers also had 391 00:25:25,680 --> 00:25:28,159 Speaker 1: issues to do with you know, their balan she was 392 00:25:28,640 --> 00:25:32,600 Speaker 1: was already quite large that they had limited capacity to 393 00:25:32,640 --> 00:25:35,800 Speaker 1: absorb you know, these sales. And on top of all this, 394 00:25:36,320 --> 00:25:40,400 Speaker 1: in a dolliver strengthening and emerging market, central banks were 395 00:25:40,480 --> 00:25:43,679 Speaker 1: also trying to you know, secure dollar equality, and so 396 00:25:43,760 --> 00:25:47,280 Speaker 1: there was some sale pressure coming from emerging market you know, 397 00:25:47,280 --> 00:25:50,480 Speaker 1: authorities as well. So it all came together back in March. 398 00:25:50,760 --> 00:25:53,520 Speaker 1: I think we've you know, we've seen that, you know, 399 00:25:53,600 --> 00:25:58,480 Speaker 1: through the fed's intervention that that period passed. I think 400 00:25:58,560 --> 00:26:00,800 Speaker 1: we we also learned lessons on, you know, some of 401 00:26:00,800 --> 00:26:05,680 Speaker 1: the some of the pitfalls of trying to you're trying 402 00:26:05,720 --> 00:26:08,000 Speaker 1: to say in these kind of written run and valley trades, 403 00:26:08,480 --> 00:26:11,760 Speaker 1: when when the spreads gets very tight, and some of 404 00:26:11,760 --> 00:26:16,880 Speaker 1: the potential potential reversals that could come when these things 405 00:26:16,880 --> 00:26:19,240 Speaker 1: are on wild. I think this is still something that 406 00:26:19,280 --> 00:26:22,600 Speaker 1: we need to keep the clothes eye on. And I 407 00:26:22,640 --> 00:26:26,280 Speaker 1: think it's certainly because the treasury market is, if you like, 408 00:26:26,440 --> 00:26:30,720 Speaker 1: the corner stone of the of the financial markets more generally, 409 00:26:30,720 --> 00:26:34,280 Speaker 1: it is the benchmark security after all. I think it's 410 00:26:34,320 --> 00:26:40,159 Speaker 1: a very important market to be functioning well. So the 411 00:26:40,240 --> 00:26:43,760 Speaker 1: b i S is often called the central banks bank. 412 00:26:44,200 --> 00:26:48,160 Speaker 1: I'm just wondering, was there anything about the policy response 413 00:26:48,320 --> 00:26:51,640 Speaker 1: that we've seen over the past few months that surprised 414 00:26:51,680 --> 00:26:55,359 Speaker 1: you when it came to central banks. But I suppose, 415 00:26:55,400 --> 00:26:57,439 Speaker 1: you know, we could we could widen that question, Tracy. 416 00:26:57,720 --> 00:26:59,280 Speaker 1: You know, let me just repeat the point that I 417 00:26:59,359 --> 00:27:04,600 Speaker 1: made earlier this time around, the really welcome surprise was 418 00:27:04,640 --> 00:27:08,440 Speaker 1: how quickly the fiscal authorities were able to move and 419 00:27:09,200 --> 00:27:12,320 Speaker 1: able to put in place really very large, you know, 420 00:27:12,440 --> 00:27:17,040 Speaker 1: physical packages very quickly. It still took a little bit 421 00:27:17,040 --> 00:27:19,800 Speaker 1: of time for that money to reach you know, those 422 00:27:19,920 --> 00:27:22,440 Speaker 1: most in need. And I think the payment system is 423 00:27:22,520 --> 00:27:25,400 Speaker 1: very important for that, and the central back to read 424 00:27:25,680 --> 00:27:30,760 Speaker 1: you know, quite poor to keeping the payment system you know, 425 00:27:30,800 --> 00:27:33,119 Speaker 1: working well. So I think these central backs played a 426 00:27:33,200 --> 00:27:37,200 Speaker 1: very important role in that too. But in general, given 427 00:27:37,440 --> 00:27:42,040 Speaker 1: how unusual and how on the precedented this this crisis is, 428 00:27:42,800 --> 00:27:45,240 Speaker 1: I think we have to read be you know, using 429 00:27:46,240 --> 00:27:49,240 Speaker 1: our you know, the best you know, full looking analysm 430 00:27:49,359 --> 00:27:51,960 Speaker 1: capacity that we have, and try and sort of figure 431 00:27:52,000 --> 00:27:55,360 Speaker 1: things things out, you know, before they happen, and try 432 00:27:55,400 --> 00:27:58,520 Speaker 1: and anticipate things now. I think one thing that is 433 00:27:58,600 --> 00:28:02,040 Speaker 1: very important to say is, you know, initially people thought 434 00:28:02,080 --> 00:28:04,919 Speaker 1: that this could be a V shaped recovery, where you know, 435 00:28:05,119 --> 00:28:08,760 Speaker 1: this could be something like a suspended animation where we 436 00:28:08,800 --> 00:28:11,560 Speaker 1: can just you know, stop everything, stopped the clock for 437 00:28:11,600 --> 00:28:15,240 Speaker 1: a few weeks, and then come back clearly that that 438 00:28:15,320 --> 00:28:17,800 Speaker 1: wasn't the case. And I think it's in retrospect that's 439 00:28:18,320 --> 00:28:21,280 Speaker 1: not a surprise, because the economy is not just an 440 00:28:21,320 --> 00:28:25,119 Speaker 1: atomistic collection of individuals. It is you think about all 441 00:28:25,160 --> 00:28:31,480 Speaker 1: the relationships there between suppliers, customers, the workers. Think about 442 00:28:31,560 --> 00:28:35,640 Speaker 1: even for one firm, all the history of these very 443 00:28:35,720 --> 00:28:40,520 Speaker 1: complex web of interconnections that actually sustain you know, the 444 00:28:40,560 --> 00:28:45,200 Speaker 1: local economy. If you have a wave of failures that 445 00:28:45,280 --> 00:28:51,200 Speaker 1: destroy you know, these very complex web of interconnected relationships, 446 00:28:51,480 --> 00:28:55,840 Speaker 1: you're actually destroying the fabric of you know, what makes 447 00:28:55,840 --> 00:28:58,600 Speaker 1: the economy tip. And so I think from the very 448 00:28:58,680 --> 00:29:02,880 Speaker 1: beginning there was really uh, you know, imperative to make 449 00:29:02,920 --> 00:29:09,840 Speaker 1: sure that as well as flattening the mortality of of individuals, 450 00:29:10,200 --> 00:29:13,040 Speaker 1: you really needed to flatten the mortality of firms as well, 451 00:29:13,080 --> 00:29:17,440 Speaker 1: because you want to preserve those you know, those complex 452 00:29:17,480 --> 00:29:21,360 Speaker 1: where with interactions into connections, so that once you emerge 453 00:29:21,400 --> 00:29:24,640 Speaker 1: from all this, you can then restart the economy on 454 00:29:25,120 --> 00:29:28,960 Speaker 1: you know, something like the older you know, set of relationships. Otherwise, 455 00:29:29,640 --> 00:29:33,360 Speaker 1: once you know, dissolve these relationships, you really are starting 456 00:29:33,400 --> 00:29:36,320 Speaker 1: from from square while because it takes such a long 457 00:29:36,400 --> 00:29:40,600 Speaker 1: time to re establish these you know, the way of relationships, 458 00:29:40,600 --> 00:29:42,880 Speaker 1: you're going to take a very long time. So the 459 00:29:42,920 --> 00:29:46,880 Speaker 1: speed of recovery is going to be be that much slower. 460 00:29:47,160 --> 00:29:49,680 Speaker 1: So I think the you know, the task going forward 461 00:29:49,840 --> 00:29:54,360 Speaker 1: is you know, having preserved that much of the social 462 00:29:54,400 --> 00:29:57,960 Speaker 1: fabric as possible, there will kind of time when when 463 00:29:58,040 --> 00:30:00,960 Speaker 1: when you read now then need to think about, you know, 464 00:30:00,960 --> 00:30:03,240 Speaker 1: which are the Bible firms, which are the ones that 465 00:30:03,840 --> 00:30:07,000 Speaker 1: should go through it awfully, uh, you know process of 466 00:30:07,080 --> 00:30:11,320 Speaker 1: backcropt seat, and you should do it in a way 467 00:30:11,440 --> 00:30:15,320 Speaker 1: when you can do it away from you know, stress 468 00:30:15,360 --> 00:30:19,680 Speaker 1: situations where you're forced to shut down Bible firms. So 469 00:30:19,720 --> 00:30:22,600 Speaker 1: I think that part still needs to be done. I 470 00:30:22,600 --> 00:30:24,760 Speaker 1: think it's been a very good collaboration. It's been a 471 00:30:24,880 --> 00:30:28,400 Speaker 1: very good collective effort, I would say on the part 472 00:30:28,400 --> 00:30:30,680 Speaker 1: of the authorities. But it's not just central backs. So 473 00:30:30,840 --> 00:30:33,640 Speaker 1: in all these CenTra bags food to play a key role, 474 00:30:34,520 --> 00:30:36,240 Speaker 1: you know, it's been a team effort with the fiscal 475 00:30:36,320 --> 00:30:55,120 Speaker 1: authorities as well. M M. I'm gonna ask you about 476 00:30:55,120 --> 00:30:58,400 Speaker 1: something that calls back to the last time we had 477 00:30:58,480 --> 00:31:01,920 Speaker 1: you on the podcast, and that was about the centrality 478 00:31:01,960 --> 00:31:05,560 Speaker 1: of the dollar and the dollar and global trade, and 479 00:31:06,000 --> 00:31:09,360 Speaker 1: we talked about the sort of decade of dollar strength 480 00:31:09,560 --> 00:31:14,160 Speaker 1: and sluggish global trade hasn't been prior to this crisis 481 00:31:14,200 --> 00:31:19,120 Speaker 1: wasn't a good decade, largely for emerging markets. So far, 482 00:31:19,200 --> 00:31:23,000 Speaker 1: we've seen, obviously, nothing that's really shaken the sent the 483 00:31:23,040 --> 00:31:25,440 Speaker 1: foundations of the dollar, and of course we already talked 484 00:31:25,480 --> 00:31:29,480 Speaker 1: about the huge flight to dollars in March. Has anything 485 00:31:30,640 --> 00:31:34,520 Speaker 1: that you've seen over the last few months, however, changed 486 00:31:35,000 --> 00:31:37,760 Speaker 1: the long term future story at all? Is there any 487 00:31:37,800 --> 00:31:40,840 Speaker 1: reason to think that we've sown the seeds in some 488 00:31:40,920 --> 00:31:44,920 Speaker 1: way for some sort of new currency or new trading 489 00:31:45,120 --> 00:31:49,000 Speaker 1: order sort of in the medium to long term. I 490 00:31:49,040 --> 00:31:52,720 Speaker 1: think the short housers, no, Joe. I think the the 491 00:31:52,800 --> 00:31:55,480 Speaker 1: thing to bear in mind is the pre evidence of 492 00:31:55,480 --> 00:31:59,360 Speaker 1: the dollar is not just about the strength of the 493 00:31:59,440 --> 00:32:02,400 Speaker 1: United State. It it's also about the fact that the 494 00:32:02,440 --> 00:32:05,080 Speaker 1: financial system, you know, is what is the weird economy 495 00:32:05,360 --> 00:32:11,160 Speaker 1: is is a web of contractual relationships and a lot 496 00:32:11,200 --> 00:32:15,400 Speaker 1: of those contracts are denominated in dollars. And so what 497 00:32:15,520 --> 00:32:19,200 Speaker 1: this sets up is a is a collective action problem. 498 00:32:19,280 --> 00:32:24,240 Speaker 1: It's a coordination problem where if everyone else is is 499 00:32:24,760 --> 00:32:28,920 Speaker 1: contracting in U S dollars, then you know you are 500 00:32:29,720 --> 00:32:33,080 Speaker 1: best off also following you know that convention, I mean 501 00:32:33,160 --> 00:32:35,200 Speaker 1: it is it is a coordination game in that respect, 502 00:32:35,240 --> 00:32:38,840 Speaker 1: and so all parts of both the financial system, real economy, 503 00:32:38,880 --> 00:32:42,680 Speaker 1: trade financing, you know, they all mutually support each other 504 00:32:42,720 --> 00:32:45,320 Speaker 1: in that respect. And I think, you know, the actions 505 00:32:45,320 --> 00:32:48,160 Speaker 1: of the FED this time around with the swap arrangements 506 00:32:48,200 --> 00:32:51,560 Speaker 1: and also the the repo arrangements that the FED is 507 00:32:51,600 --> 00:32:55,560 Speaker 1: also rolled out this time around, called FEMA visibly, the 508 00:32:57,000 --> 00:32:59,680 Speaker 1: of the central banks who could post treasury collateral. I 509 00:32:59,680 --> 00:33:04,400 Speaker 1: think these actions, well, the dollar you know, stress condition 510 00:33:04,520 --> 00:33:08,440 Speaker 1: very early. I think it reassures these dollars in that respect. 511 00:33:09,200 --> 00:33:12,040 Speaker 1: Now over the very very long term, I mean, there 512 00:33:12,080 --> 00:33:15,800 Speaker 1: may be some some shifts. I think this is where 513 00:33:15,800 --> 00:33:18,120 Speaker 1: the historians have a lot to say. Um, you know, 514 00:33:18,160 --> 00:33:21,680 Speaker 1: over the centuries, you know, the you know, these centrality 515 00:33:21,720 --> 00:33:26,040 Speaker 1: of one currency or another, they do change. But in 516 00:33:26,120 --> 00:33:29,560 Speaker 1: the full single future, I don't think so. I think, 517 00:33:29,760 --> 00:33:34,000 Speaker 1: you know, still all the points point to the dollar 518 00:33:34,120 --> 00:33:38,560 Speaker 1: continuing to play a very pivotal role. So here and 519 00:33:38,720 --> 00:33:42,120 Speaker 1: one of the shots of everything that we've been talking 520 00:33:42,120 --> 00:33:47,680 Speaker 1: about is basically, not only will there be higher indebtedness 521 00:33:47,800 --> 00:33:52,520 Speaker 1: um for economies, but also that you know, arguably with 522 00:33:52,880 --> 00:33:56,440 Speaker 1: quasi m m T or you know, more physical stimulus 523 00:33:56,480 --> 00:33:59,160 Speaker 1: in general, there's going to be a tighter grip from 524 00:33:59,200 --> 00:34:03,600 Speaker 1: governments in the book sector on the private economy. What 525 00:34:03,640 --> 00:34:08,040 Speaker 1: does that mean going forward? For economy? Is going forward? 526 00:34:08,120 --> 00:34:13,239 Speaker 1: You basically anticipated my question. We were both thinking Hi 527 00:34:13,320 --> 00:34:17,040 Speaker 1: for you too. I'm so glad. It's a very good question. UM. 528 00:34:17,160 --> 00:34:21,600 Speaker 1: I think you know one one very interesting fact and 529 00:34:21,640 --> 00:34:23,839 Speaker 1: that this is something that I mentioned earlier. One very 530 00:34:23,880 --> 00:34:26,960 Speaker 1: interesting fact is the advanced economies have been able to 531 00:34:27,080 --> 00:34:31,440 Speaker 1: roll out very large fiscal packages, both budgetry and in 532 00:34:31,560 --> 00:34:35,759 Speaker 1: terms of funding and guarantees. In terms of budget three 533 00:34:35,760 --> 00:34:39,799 Speaker 1: measures another twelve percent in terms of funding and guarantees. 534 00:34:40,360 --> 00:34:42,239 Speaker 1: So that's for the advanced economies. If you look at 535 00:34:42,280 --> 00:34:46,280 Speaker 1: the emerging markets, it's been far smaller. The budgetry measures 536 00:34:46,280 --> 00:34:49,480 Speaker 1: are on the order of three percent the PDP and 537 00:34:49,520 --> 00:34:52,520 Speaker 1: the guarantees and funding um is more like two to 538 00:34:52,600 --> 00:34:56,000 Speaker 1: three percent. I think it's interesting to you to ask 539 00:34:56,080 --> 00:35:00,200 Speaker 1: why there is that difference, and you know, partly the 540 00:35:00,320 --> 00:35:04,640 Speaker 1: incidence of COVID nineteen and that you know was different 541 00:35:04,680 --> 00:35:07,640 Speaker 1: in the early stages. Will now you know, we see 542 00:35:07,719 --> 00:35:10,759 Speaker 1: Latin America being being hit very hard. So I don't 543 00:35:10,800 --> 00:35:15,680 Speaker 1: think it's the like the shock from big pandemic itself. 544 00:35:16,280 --> 00:35:18,920 Speaker 1: I think you have to search for the reason and 545 00:35:19,040 --> 00:35:22,960 Speaker 1: how much the market is willing to absorb in terms 546 00:35:23,000 --> 00:35:26,000 Speaker 1: of government that that has to come onto the market 547 00:35:26,040 --> 00:35:30,200 Speaker 1: in order to finance and spending. The really topical issues 548 00:35:30,280 --> 00:35:34,839 Speaker 1: can in central banks finance the fiscal expenditure through monetary financing, 549 00:35:35,560 --> 00:35:37,319 Speaker 1: I think they're you know, from if we look at 550 00:35:37,320 --> 00:35:40,000 Speaker 1: the emerging markets, and of course emerging markets have a 551 00:35:40,080 --> 00:35:43,960 Speaker 1: very long experience of this. When governments trying to do this, 552 00:35:44,040 --> 00:35:48,480 Speaker 1: when central banks trying to use monetary financing in a 553 00:35:48,560 --> 00:35:51,880 Speaker 1: very aggressive way, what do you find is typically the 554 00:35:51,960 --> 00:35:54,680 Speaker 1: exchange rate is going to be under a lot of pressure. 555 00:35:55,239 --> 00:35:57,840 Speaker 1: That makes sense because if you try and finance spending 556 00:35:58,680 --> 00:36:03,200 Speaker 1: by taking on you know, through reserves, so through deposits 557 00:36:03,200 --> 00:36:06,640 Speaker 1: of commercial banks at the at the center back, and 558 00:36:06,920 --> 00:36:10,200 Speaker 1: unless you're somehow remunerating those reserves, there's going to be 559 00:36:10,719 --> 00:36:13,640 Speaker 1: in a portfolio shift where the commercial banks are not 560 00:36:14,360 --> 00:36:17,279 Speaker 1: happy to behold the reserve. You know, they will look 561 00:36:17,320 --> 00:36:20,160 Speaker 1: for the dollars and what you see is a very 562 00:36:20,200 --> 00:36:24,239 Speaker 1: sharp depreciation of domestic currency. And we have a very 563 00:36:24,280 --> 00:36:28,080 Speaker 1: sharp depreciation like that. What you see is inflation picking 564 00:36:28,120 --> 00:36:32,840 Speaker 1: up pretty quickly. So it's not the usual trainables inflation 565 00:36:32,880 --> 00:36:37,719 Speaker 1: where the ex gender depreciation then leads to a more 566 00:36:37,760 --> 00:36:41,279 Speaker 1: expensive important song. And it's more that once you have 567 00:36:41,400 --> 00:36:43,960 Speaker 1: a very sharp deppreciation of the currency, it actually shapes 568 00:36:44,000 --> 00:36:47,480 Speaker 1: the confidence in the monitor system and this leads to 569 00:36:47,680 --> 00:36:54,320 Speaker 1: a more generalized pick up in in uncertainty, more generalized 570 00:36:54,360 --> 00:36:58,239 Speaker 1: pick up in inflation. And this is typically how you 571 00:36:58,280 --> 00:37:00,880 Speaker 1: know you would see that the kind of episode of 572 00:37:00,920 --> 00:37:05,759 Speaker 1: monetary financing ending up where you have inflation of picking 573 00:37:05,800 --> 00:37:09,560 Speaker 1: up very very fast. Knowing all this, knowing all this, 574 00:37:10,320 --> 00:37:14,520 Speaker 1: the emerging markets tend to be very cautious about pushing 575 00:37:15,280 --> 00:37:19,759 Speaker 1: monetary financing and instead they tend to rely much more 576 00:37:19,920 --> 00:37:24,080 Speaker 1: on governments issuing government bonds and financing it through the 577 00:37:24,560 --> 00:37:27,480 Speaker 1: through the conventional way. But now if you try and 578 00:37:27,520 --> 00:37:30,560 Speaker 1: do that, the question is how much appetite is there 579 00:37:30,560 --> 00:37:33,800 Speaker 1: in the markets to absorb all this new issuers. And 580 00:37:33,840 --> 00:37:35,840 Speaker 1: I think, and this is going back to an earlier 581 00:37:35,840 --> 00:37:40,640 Speaker 1: discussion about about the original sin and about the appetite 582 00:37:40,640 --> 00:37:44,440 Speaker 1: of global investors. Unless you have a very large domestic 583 00:37:44,480 --> 00:37:48,520 Speaker 1: investor base again to absorb absorble is there's going to 584 00:37:48,560 --> 00:37:50,839 Speaker 1: be a limited appetite. So I think what we can 585 00:37:51,120 --> 00:37:55,919 Speaker 1: say is emerging markets, knowing all this they've anticipated that 586 00:37:56,120 --> 00:38:00,120 Speaker 1: there is a limited amount of fiscal space that they have, 587 00:38:01,280 --> 00:38:05,799 Speaker 1: and although of course they could use the money, they 588 00:38:05,880 --> 00:38:09,840 Speaker 1: they think that you know, discretion is the is the 589 00:38:09,960 --> 00:38:13,239 Speaker 1: more you know, prudent strategy, and this is what's what's 590 00:38:13,239 --> 00:38:16,320 Speaker 1: holding them back. Now. I think for the advanced economies 591 00:38:16,400 --> 00:38:20,440 Speaker 1: that they clearly have a lot more space. And if 592 00:38:20,520 --> 00:38:24,440 Speaker 1: you're a central bank that actually is the guardian of 593 00:38:24,520 --> 00:38:27,640 Speaker 1: the reserve currency, then of course you have even more spects. 594 00:38:28,680 --> 00:38:30,560 Speaker 1: But I think in the end, I don't think that 595 00:38:32,040 --> 00:38:34,680 Speaker 1: there are no constraints whatsoever. I mean, there are constraints, 596 00:38:34,719 --> 00:38:38,400 Speaker 1: it's just that for the FED, for example, those constraints 597 00:38:38,760 --> 00:38:42,520 Speaker 1: are not really very visible, um you know, at the 598 00:38:42,920 --> 00:38:44,800 Speaker 1: at the level of you know, these kind of even 599 00:38:45,080 --> 00:38:48,080 Speaker 1: as large as these expenditures are, they're not really something 600 00:38:48,120 --> 00:38:50,439 Speaker 1: that's going to growing expect. So I mean, in the 601 00:38:50,480 --> 00:38:53,640 Speaker 1: in the M M T discussion you have in the US, 602 00:38:53,719 --> 00:38:56,120 Speaker 1: I find that discussion a little bit parochial, if finally 603 00:38:56,200 --> 00:38:58,560 Speaker 1: say so, in that it is very much a kind 604 00:38:58,600 --> 00:39:03,279 Speaker 1: of a US enter discussion, when in fact, you know, 605 00:39:03,320 --> 00:39:06,120 Speaker 1: the ft is not your typical center back. I mean, 606 00:39:06,160 --> 00:39:09,960 Speaker 1: the ft is a very very special center back, which 607 00:39:10,040 --> 00:39:14,759 Speaker 1: issues the you know, the pre eminent reserve currency in 608 00:39:14,760 --> 00:39:18,400 Speaker 1: the world, and so it's always useful. And I would urge, 609 00:39:18,960 --> 00:39:21,040 Speaker 1: you know, my communes in the US to to just 610 00:39:21,160 --> 00:39:25,480 Speaker 1: cast an eye throughout history and through to the emerging 611 00:39:25,520 --> 00:39:28,600 Speaker 1: markets just to see, you know, what their experiences a been. 612 00:39:29,480 --> 00:39:34,000 Speaker 1: And you know there is a baton sheet constraint. It's 613 00:39:34,000 --> 00:39:36,279 Speaker 1: a consultative and batty constraint. Then you've got to think 614 00:39:36,280 --> 00:39:40,359 Speaker 1: about the center back and the government together. But it's 615 00:39:40,520 --> 00:39:46,799 Speaker 1: still there. It's not that, you know, it's somehow disappeared. Well, 616 00:39:46,880 --> 00:39:48,799 Speaker 1: let the records show that I didn't. I am not 617 00:39:48,960 --> 00:39:52,400 Speaker 1: the one who brought up M M T on this episode. 618 00:39:52,800 --> 00:39:56,160 Speaker 1: Whether there is a whether there's no constraint, whether the 619 00:39:57,040 --> 00:40:01,160 Speaker 1: wherever the constraint is, it does appear at rich countries. 620 00:40:01,360 --> 00:40:07,160 Speaker 1: Wealthy countries do have some more space, arguably substantially more space. 621 00:40:07,200 --> 00:40:09,520 Speaker 1: We don't know exactly where the line is. Regardless, they 622 00:40:09,560 --> 00:40:13,520 Speaker 1: do more space than they've used. And as you mentioned 623 00:40:13,520 --> 00:40:17,600 Speaker 1: in earlier on in the discussion that it there's probably 624 00:40:17,640 --> 00:40:20,759 Speaker 1: the surprise has been the degree to which fiscal authorities 625 00:40:20,800 --> 00:40:24,359 Speaker 1: moved extremely fastest time around. Do you think in the 626 00:40:24,360 --> 00:40:28,879 Speaker 1: medium or short term that were likely to see them 627 00:40:29,080 --> 00:40:31,920 Speaker 1: push or explore the limits of that space, or do 628 00:40:31,960 --> 00:40:34,960 Speaker 1: you think that they'll sort of very quickly retreat to Okay, 629 00:40:35,000 --> 00:40:37,160 Speaker 1: that was a one off. We're not going to keep 630 00:40:37,400 --> 00:40:39,720 Speaker 1: doing this, and really we're going to let the task 631 00:40:39,760 --> 00:40:46,000 Speaker 1: of macroeconomic stabilization go back to the monetary authority. I 632 00:40:46,000 --> 00:40:49,120 Speaker 1: think that pretty much depends on how they really called 633 00:40:49,160 --> 00:40:54,480 Speaker 1: me evolved. I think if all goose the fun um 634 00:40:54,640 --> 00:40:56,839 Speaker 1: and we do see it rise and recovered from here, 635 00:40:57,000 --> 00:41:01,120 Speaker 1: I think the very aggressive the the intervention will have 636 00:41:01,239 --> 00:41:04,000 Speaker 1: been a one off. I think that's the good scenario, 637 00:41:04,920 --> 00:41:06,839 Speaker 1: and then we go and then we can go back 638 00:41:06,840 --> 00:41:10,440 Speaker 1: to something which is more like normal. But if we 639 00:41:10,600 --> 00:41:15,920 Speaker 1: see a second way, if we see the pandemics somehow 640 00:41:16,160 --> 00:41:20,520 Speaker 1: sort of lingering and and reaking you know, more damage, 641 00:41:21,239 --> 00:41:23,120 Speaker 1: then I think we may need to you know, dip 642 00:41:23,200 --> 00:41:26,080 Speaker 1: further into these other you know, these other policy tools, 643 00:41:26,080 --> 00:41:29,560 Speaker 1: so that I think remains to be seen. I think, 644 00:41:29,920 --> 00:41:32,839 Speaker 1: you know, we just have to be prepared for all 645 00:41:32,920 --> 00:41:36,840 Speaker 1: these eventualities. Well here, and it's always really great having 646 00:41:36,840 --> 00:41:39,719 Speaker 1: you on the podcast. Thank you so much for coming on. 647 00:41:40,880 --> 00:41:43,960 Speaker 1: Thanks Crazy, Thanks Joe. It's it's always it's always a 648 00:41:43,960 --> 00:41:59,719 Speaker 1: pleasure to going again, thank you. It's great, So Joe. 649 00:41:59,760 --> 00:42:01,480 Speaker 1: I'm know I was the one to bring up m 650 00:42:01,600 --> 00:42:04,439 Speaker 1: MT in this episode, but I only did it because 651 00:42:04,440 --> 00:42:08,040 Speaker 1: I was preempting your question. I wasn't. I mean, I 652 00:42:08,120 --> 00:42:09,920 Speaker 1: wasn't going to ask about m m T or anything 653 00:42:09,920 --> 00:42:11,920 Speaker 1: like that. But I do think that they have question 654 00:42:12,360 --> 00:42:16,080 Speaker 1: of is this going to be a shift in terms 655 00:42:16,080 --> 00:42:19,560 Speaker 1: of work fiscal policymakers feel they really have responsibility to 656 00:42:19,640 --> 00:42:22,560 Speaker 1: boost the economy or well they quickly go back to saying, 657 00:42:22,600 --> 00:42:25,359 Speaker 1: you know, that's the central banks job. I think it's 658 00:42:25,360 --> 00:42:28,080 Speaker 1: one of the biggest questions period in terms of thinking 659 00:42:28,120 --> 00:42:31,640 Speaker 1: about what the economy and various asset classes will do 660 00:42:32,320 --> 00:42:36,080 Speaker 1: in the short and medium term. Yeah, I agree. I mean, also, 661 00:42:36,120 --> 00:42:38,279 Speaker 1: one of the things that we're probably going to learn 662 00:42:38,320 --> 00:42:41,280 Speaker 1: from this crisis is just how much more fiscal space 663 00:42:41,800 --> 00:42:46,280 Speaker 1: developed nations, and specifically the US have versus emerging markets, 664 00:42:46,280 --> 00:42:50,520 Speaker 1: which is, you know, terrible and ironic at the same time, 665 00:42:50,560 --> 00:42:56,040 Speaker 1: because emerging markets arguably need more monetary help to find 666 00:42:56,200 --> 00:43:00,879 Speaker 1: the coronavirus than than the US. Yeah, that is one 667 00:43:00,880 --> 00:43:04,000 Speaker 1: of the perverse things that there's no substitute in this 668 00:43:04,200 --> 00:43:09,520 Speaker 1: crisis for spending a lot of money investing in well, 669 00:43:09,560 --> 00:43:11,680 Speaker 1: he spending money to so people can pay their bills 670 00:43:12,040 --> 00:43:15,520 Speaker 1: and be building out the infrastructure to fight the virus. 671 00:43:15,520 --> 00:43:17,840 Speaker 1: And some countries have the resources to do it and 672 00:43:18,200 --> 00:43:20,680 Speaker 1: some don't. I guess that's always the case, but it 673 00:43:20,760 --> 00:43:24,560 Speaker 1: really is clear in a sort of fast moving acute 674 00:43:24,560 --> 00:43:29,520 Speaker 1: crisis that gap. Yeah, I guess. You know, people within 675 00:43:29,680 --> 00:43:32,640 Speaker 1: countries have been talking about the potential for the coronavirus 676 00:43:32,640 --> 00:43:37,080 Speaker 1: to sort of accelerate inequality dynamics that we're already present 677 00:43:37,160 --> 00:43:39,320 Speaker 1: in society, and I have a feeling that we're probably 678 00:43:39,320 --> 00:43:43,239 Speaker 1: going to see that same trend on a sort of 679 00:43:43,320 --> 00:43:48,080 Speaker 1: international level. So inequality between emerging markets versus developed markets 680 00:43:48,080 --> 00:43:51,360 Speaker 1: has just been an increase, partially because of the the 681 00:43:51,440 --> 00:43:54,840 Speaker 1: sort of dynamic with investors that human was also describing. 682 00:43:55,200 --> 00:43:57,239 Speaker 1: I do think and it's something that we should keep 683 00:43:57,280 --> 00:44:01,160 Speaker 1: exploring that the length of time it takes us to 684 00:44:01,280 --> 00:44:05,160 Speaker 1: return to something resembling normal is going to be really important. 685 00:44:05,160 --> 00:44:08,440 Speaker 1: Like if in the US it looks like unemployment is 686 00:44:08,480 --> 00:44:11,879 Speaker 1: going to continue to trend down for a while, then 687 00:44:11,920 --> 00:44:14,560 Speaker 1: we can just go back to maybe the old ways. 688 00:44:15,000 --> 00:44:17,040 Speaker 1: But if it, you know, if we're still here a 689 00:44:17,080 --> 00:44:20,359 Speaker 1: year from now, an unemployment is in the teens, then 690 00:44:20,400 --> 00:44:23,160 Speaker 1: I think like that really raises the odds of like 691 00:44:23,200 --> 00:44:28,359 Speaker 1: a potential for like radical policymakers, just radical policies, because 692 00:44:28,400 --> 00:44:30,680 Speaker 1: I think the political pressure to do something about that, 693 00:44:30,880 --> 00:44:35,720 Speaker 1: we'll just get absolutely immense. The longer sustained, the longer 694 00:44:35,760 --> 00:44:40,560 Speaker 1: we have essentially depression level economic activity. Yeah, I think 695 00:44:40,600 --> 00:44:44,360 Speaker 1: that's fair. So well, well we can be in a 696 00:44:44,440 --> 00:44:48,360 Speaker 1: year or so. Sounds good talk about this. Okay, this 697 00:44:48,440 --> 00:44:51,440 Speaker 1: has been another episode of the All Thoughts podcast. I'm 698 00:44:51,480 --> 00:44:54,480 Speaker 1: Tracy Alloway. You can follow me on Twitter at Tracy 699 00:44:54,480 --> 00:44:57,520 Speaker 1: Alloway and I'm Joe wisn't Thal. You could follow me 700 00:44:57,760 --> 00:45:00,799 Speaker 1: at the Stalwart and follow our guests on Twitter. Huen 701 00:45:00,920 --> 00:45:05,400 Speaker 1: song Shin He's at song Shin. Follow our producer Laura Carlson. 702 00:45:05,600 --> 00:45:08,880 Speaker 1: She's at Laura M. Carlson. Follow the Bloomberg head of podcast, 703 00:45:08,960 --> 00:45:12,759 Speaker 1: Francesca Levi at Francesca Today, as well as all of 704 00:45:12,800 --> 00:45:15,480 Speaker 1: the podcasts that we produce here at Bloomberg under the 705 00:45:15,560 --> 00:45:18,240 Speaker 1: handle at podcasts. Thanks for listening.