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Speaker 1: Well, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisenthal and I'm Tracy halliway, so, Tracy. I

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Speaker 1: have to say that throughout this whole crisis, there has

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Speaker 1: been sort of one genre of article or one genre

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Speaker 1: of discussion that I've never really been comfortable with, and

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Speaker 1: that is people making really big picture forecasts or statements

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Speaker 1: about sort of the future of the world. I guess, yeah,

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Speaker 1: I get what you mean. It feels like a little

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Speaker 1: bit early to be jumping to discussing the second order effects,

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Speaker 1: right like, there's so much to talk about right now

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Speaker 1: as these things are actually unfolded. Yeah, exactly. And of course,

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Speaker 1: one of the big questions that's out there and that

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Speaker 1: everyone wants to have a view on, and I'm guilty

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Speaker 1: of it two and I've written about it and I've

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Speaker 1: talked about it, is what happened with sort of globalization,

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Speaker 1: what happened with the future of the dollar and the

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Speaker 1: US is a pre eminent role in the global financial system.

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Speaker 1: We sort of talked about it a little bit with

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Speaker 1: Adam too, talked about it with other um with other

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Speaker 1: people as well, and it's of course incredibly intriguing to discuss,

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Speaker 1: but we still we just don't know anything. Uh. Yeah,

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Speaker 1: I think that's true, And it definitely falls into one

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Speaker 1: of those sort of big picture things um that people

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Speaker 1: are are talking about at the moment um, and it's

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Speaker 1: something that we've sort of discussed on various episodes before, right. Uh.

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Speaker 1: Dollar dominance has definitely been a theme for the past

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Speaker 1: year or so on our show. Exactly, you sound a

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Speaker 1: little skeptical, like when I was like, Oh, I don't

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Speaker 1: think we should have, you know, the big picture future conversations.

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Speaker 1: You seem a little skeptical of mine. I get it.

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Speaker 1: I mean I don't think anyone really knows at the moment,

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Speaker 1: so it's a lot of it is speculation. But also

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Speaker 1: markets are always board looking, so I kind of get

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Speaker 1: why people are naturally tempted to be looking at those

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Speaker 1: big picture topics. Yeah. I guess you have to do that.

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Speaker 1: So anyway, we're not going to make it big. We're

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Speaker 1: not trying to make a big forecast here today, but

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Speaker 1: as we talk about globalization, as we talk about the dollar,

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Speaker 1: I do think it is useful to at least kind

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Speaker 1: of understand how we got to the current system, what

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Speaker 1: the current setup is, and what's actually, yeah, basically understand

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Speaker 1: the current world order and how we got here. Yeah,

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Speaker 1: I think that that's a great idea. And the dollar

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Speaker 1: is so much a part of the global financial system

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Speaker 1: that we sort of take it for granted. But it's

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Speaker 1: definitely worthwhile to step back for a second and think, like, well,

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Speaker 1: how did we get into a position where emerging markets

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Speaker 1: are all like rushing to issue billions of dollars worth

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Speaker 1: of dollars denominated debt? How did we get to a

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Speaker 1: position where all of trade finances basically denominated in dollars?

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Speaker 1: Why has that happened? Right? Exactly right? And you know,

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Speaker 1: there's a lot of misconceptions about all of this, how

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Speaker 1: trade works, who benefits from the strong dollar or who

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Speaker 1: benefits from the dollars per eminent role. We often hear

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Speaker 1: of the U s is ability to issue dollars as

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Speaker 1: quote a privilege. Um, but it's not. It's not really

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Speaker 1: that clear. We talked about this a little bit recently

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Speaker 1: on an episode with Matt Klein, But the sort of

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Speaker 1: the preference of different actors within the global economy regarding

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Speaker 1: the current arrangement is not as as clean as one

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Speaker 1: might was. One might right, and there is an argument

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Speaker 1: that pops up every once in a while that having

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Speaker 1: the dollars so enmeshed in the financial system can actually

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Speaker 1: be a negative for the US, and we've seen that

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Speaker 1: crop up, I guess most recently with you know, people

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Speaker 1: talk about the FED being the world central banker. Does

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Speaker 1: that sort of constrain um what it can do at

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Speaker 1: times like this and even before then? So yeah, definitely

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Speaker 1: worth talking about. Okay, So today we are going to

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Speaker 1: talk about that, and we have a recent guest we

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Speaker 1: actually talked about talked with him several weeks ago about

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Speaker 1: municipal debt. But he is the co author of a

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Speaker 1: recent essay titled the Class Politics of the Dollar System

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Speaker 1: for the website Phenomenal World. He is a Yakov Fagan.

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Speaker 1: He's the associate director of the Future of Capitalism Program

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Speaker 1: at the Burgrowing Institute. And we're going to talk about

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Speaker 1: how we got to this, uh the state, how the

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Speaker 1: dollar got to the state, and who really benefits from it,

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Speaker 1: who gets hurt from it, and what it really means

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Speaker 1: to preserve it. So, uh, Yakov, thank you very much,

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Speaker 1: uh for joining us. I should know that your co author,

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Speaker 1: Dominic couldn't make it unfortunately. Today but I'm glad we

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Speaker 1: have you. Why don't you start by telling us what

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Speaker 1: you are the big picture of what your goal was

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Speaker 1: with this essay, the class politics of the dollar system

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Speaker 1: and sort of what that means to you. Yeah, well,

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Speaker 1: this say, it was kind of a really long time coming. Um,

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Speaker 1: and I really the person, the two people, the three

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Speaker 1: people I should probably thank the most for kind of

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Speaker 1: making this as a happen. Our Dominic who kind of

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Speaker 1: got us to write it, uh, and the James Family

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Speaker 1: Institute obviously for publishing yet. But there's also someone else

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Speaker 1: in the background of this essay who is Nils Gilman,

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Speaker 1: who is my boss at the Burgruin Institute. And over

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Speaker 1: the year i've worked with him, we've had this, you know,

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Speaker 1: very long conversation about, you know, why does the world

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Speaker 1: use the dollar and why is it a problem? And he,

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Speaker 1: you know, he's not a specialist in international finance and

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Speaker 1: this stuff is really technical, and I've spent like quite

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Speaker 1: a long time kind of in a conversation with him,

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Speaker 1: like kind of pouring this stuff out right. Eventually told

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Speaker 1: me you need to write this essay up right, You

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Speaker 1: need to write an essay that just gives a literature

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Speaker 1: review essentially of this kind of point of view of

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Speaker 1: what the dollar system is politically and why it's not

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Speaker 1: necessarily you know, a very clear cut America versus the

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Speaker 1: world story, and so eventually this got written up, right,

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Speaker 1: And that's the kind of story we're trying to tell.

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Speaker 1: Is it's very hard to pin down a national interest

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Speaker 1: in the world that's hybrid, as Perimery Lang would say, right,

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Speaker 1: it's a world in which there is a private system

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Speaker 1: that's really intermediating on an international level and a national

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Speaker 1: uh and the system in which nations are essentially creating

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Speaker 1: public goods called units of account, right, And that this

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Speaker 1: international system mediates this the hierarchy of these units of

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Speaker 1: account just as much as national power or dynamics do.

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Speaker 1: So walk us through that thesis, then you talk about

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Speaker 1: the political system or around the dollar, what is that exactly?

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Speaker 1: So our argument is that it's actually class right as

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Speaker 1: almost a or at least like social stratification, as a

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Speaker 1: kind of meta politics. Right, that the dollar is actually

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Speaker 1: pretty good for a large cross section of people, no

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Speaker 1: matter what their position in the global value chain or

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Speaker 1: in where they're located, and it's pretty bad for another

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Speaker 1: other cross sections. Again without considering international boundaries that they are,

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Speaker 1: it's pretty bad for a lot of people, no matter

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Speaker 1: where they're located or what part of the global value

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Speaker 1: chain there are. So this is similar. Again I mentioned

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Speaker 1: in the intro, we recently talked to Matt Klein, whose

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Speaker 1: new book also sort of explore some of these tensions.

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Speaker 1: That it doesn't really it's not really so much about

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Speaker 1: saying US verst China, or the dollar versus another currency,

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Speaker 1: but that there are people all different positions around the world,

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Speaker 1: in any country who benefit from the existing system, and

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Speaker 1: there are people all around the world who lose out

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Speaker 1: from the existing system. So let's start by talking about

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Speaker 1: in your you who benefits the most, what kind of

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Speaker 1: actors in the global economy benefit the most from the

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Speaker 1: dollar dominance? The role of the dollar. Well, you know,

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Speaker 1: the way we we put it is it's kind of elites,

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Speaker 1: especially rent taking elites within the United States, and it's

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Speaker 1: also elites, especially capital owning elites in the in other

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Speaker 1: countries are especially developing countries, where they are also rent

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Speaker 1: taking elites. I think that's a kind of running theme

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Speaker 1: through this is that this kind of the way this

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Speaker 1: system is evolved is really really encouraged rent taking. And

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Speaker 1: the people who don't benefit are obviously people who are

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Speaker 1: working people right, who have to do the work and

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Speaker 1: are either getting worse jobs or not picking up most

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Speaker 1: of the kind of surplus they're producing. Can you walk

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Speaker 1: us through the mechanics of how this benefits that sort

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Speaker 1: of global elite and hurts a lot of workers. I'm

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Speaker 1: iagine a lot of it has to do with the

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Speaker 1: sort of long run appreciation in the dollar. But just

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Speaker 1: walk us through exactly how you see that working? Well? Sure, Right,

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Speaker 1: So our story isn't as much based on appreciation or

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Speaker 1: at least in or at least day to day exchange rates.

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Speaker 1: That's a whole other conversation about how that's measured, but

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Speaker 1: more about structures and institutions. Right, what the global dollar

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Speaker 1: system does is give a privileged set of access to

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Speaker 1: the international right, And what I mean by that is

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Speaker 1: the ability to choose where your wealth is stored and

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Speaker 1: how you store it and what kind of returns. So yeah,

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Speaker 1: and that has long run consequences, right, So you have

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Speaker 1: these an argument, for example, Salton Posner has made that

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Speaker 1: a lot of offshore plumbing is that black hole he

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Speaker 1: refers to is actually because of the accumulation of really

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Speaker 1: wealthy entities, right looking for somewhere to go, and that's

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Speaker 1: not a privilege that most people can have access to, right,

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Speaker 1: I mean. And the other thing is, obviously, you know,

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Speaker 1: the exploitation of rents of corruption. There's a really great

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Speaker 1: book called Dictators Without Borders right by Alexander Cooley and

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Speaker 1: John Heathershaw, which really outlines how the internationalizization of the

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Speaker 1: dollar and the creation of international money centers actually enables

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Speaker 1: corruption in Central Asia and enables the suppression of democracy

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Speaker 1: in Central Asia because what these dictators are like strong men,

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Speaker 1: are able to do is partly out access to this

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Speaker 1: international system. So if you're within, if you're in say

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Speaker 1: an elite within the ruling base, you get to take

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Speaker 1: the your proceeds offshore. If you're not, you don't get

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Speaker 1: to do that, or you get prosecuted suddenly out of nowhere.

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Speaker 1: And that's a dynamic that's a possible with globalization. So

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Speaker 1: we hear during the boom or during the expansion, there

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Speaker 1: were all these stories about you know, Russian money or

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Speaker 1: Chinese money or whatever it was, flooding into dollar assets

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Speaker 1: or real estate um in the United States and California,

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Speaker 1: New York City, London, other sort of tier so called

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Speaker 1: Tier one cities. Essentially, this internationalized financial system again or

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Speaker 1: as you put it, available to some available to the

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Speaker 1: elites um and theoretically available for elites to dole out

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Speaker 1: access to. But that's clearly not something that say, a

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Speaker 1: typical Chinese person or a typical Russian could do with

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Speaker 1: their money. So it it creates on a large scale, right,

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Speaker 1: So it creates a domestic domestic bifurcation in all different

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Speaker 1: kinds of places. Not just yes, but what about the

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Speaker 1: impact act on UM I guess employment and the sort

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Speaker 1: of trade landscape. This is the overlap with Matt Klein's

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Speaker 1: argumentum from a couple episodes ago. But like, what does

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Speaker 1: the primacy of the dollar actually mean for the US

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Speaker 1: trade deficit and the structure of the labor market? Well,

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Speaker 1: I mean that's actually like straightforward Matt Klein's and Mike

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Speaker 1: Pettis's argument which this is really like almost a tribute

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Speaker 1: to right um. And it's like the simple accounting identity

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Speaker 1: right capital account surplus, current account deficit. So you're always

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Speaker 1: going to have a situation in which you know, the

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Speaker 1: US trade deficit is negative as long as there's this

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Speaker 1: giant desire for US dollar based assets, and not only

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Speaker 1: US dollar based assets, you know, created in the US,

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Speaker 1: but offshore, that eventually we'll have to come at some

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Speaker 1: point onto the into the continental US. So the current

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Speaker 1: account will become a positive, but it's not even a

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Speaker 1: full reflection of the demand of for US dollars to

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Speaker 1: some extent, right, and that will create a trade deficit,

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Speaker 1: and that will create We think that probably has something

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Speaker 1: to do with the fact that non tradeable goods, in

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Speaker 1: particular services, right have appreciated so much more in the

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Speaker 1: United States. And this is a kind of global phenomenon,

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Speaker 1: but it's much more extreme in the United States. They

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Speaker 1: have appreciated much more than tradeable goods, and that is

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Speaker 1: incredibly difficult for the average household, right. And you know,

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Speaker 1: I don't think there's any particular magic to manufacturing jobs,

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Speaker 1: but it has made it has had, you know, especially

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Speaker 1: regional consequences for manufacturing industries. Though to me, it's not

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Speaker 1: as important what people do. It's that they're compensated fairly

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Speaker 1: for what they do. And so it's not just manufacturing,

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Speaker 1: it's the higher dynamic of the economy changes and you know,

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Speaker 1: I use the term Dutch disease kind of as a joke,

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Speaker 1: but there is a kind of political story to Dutch

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Speaker 1: disease about elites who gain their incomes more and more

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Speaker 1: of from rents, and then a kind of service economy

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Speaker 1: that lives off of the needs to the need to

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Speaker 1: service those elites in whatever way they need to be

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Speaker 1: serviced as creating extreme inequality and bifurcation and economy. And

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Speaker 1: I think that's pretty obvious for the US, let alone,

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Speaker 1: the fact that the same studies say that really lowers

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Speaker 1: the quality of governance. Can you remind people what Dutch

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Speaker 1: disease traditionally is within usually an E M commodities contexts,

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Speaker 1: Like you hear it within say a country that has

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Speaker 1: a huge oil or copper export. What the traditional use

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Speaker 1: of that term is, and sort of expelicate a little

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Speaker 1: bit what you mean by how it applies in the

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Speaker 1: U S contact. Yeah, Well, like the term Dutch disease,

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Speaker 1: and you know, usually m term is if you have

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Speaker 1: a country that suddenly finds, let's say, a bunch of

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Speaker 1: oil or any other valuable resource, and that really makes

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Speaker 1: the economy's exports dominated by that resource. That really pushes

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Speaker 1: up the value of their currency, and because of that

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Speaker 1: currency value, that increasing currency value, it crowds out all

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Speaker 1: other industries and eventually that has you know, all kinds

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Speaker 1: of problems for development, but it also creates political problems

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Speaker 1: in which you do have an increasingly small rents seeking

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Speaker 1: elite or right that controls that resource that's making most

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Speaker 1: of the income. So because and all the other industries

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Speaker 1: are crowded out, so you get an economy that's really

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Speaker 1: focused on one industry with a lot of the capital

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Speaker 1: flowing to one set of people, and everyone else working towards,

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Speaker 1: you know, working for those people are not working very well.

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Speaker 1: There was a second part to that question, right what

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Speaker 1: what it means for the United States? And that's you know,

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Speaker 1: the joke we had and it's almost like a joke

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Speaker 1: actually came from ft Alphaville post by Brandon Greely. We

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Speaker 1: both liked its, like we should kind of think about

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Speaker 1: this further. Is the United States exports its debt and

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Speaker 1: its currency, which is somewhat a form of credit. You're

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Speaker 1: painting a sort of maybe negative isn't the right word,

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Speaker 1: but clearly we're focused on the drawbacks of having a

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Speaker 1: dollar dominant dominant system. Are there any benefits to the

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Speaker 1: US um from having the green back so en meshed

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Speaker 1: in the financial system. They're obviously tons of benefits to this,

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Speaker 1: right for the United States. One is, you know, the

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Speaker 1: political power what people call infrastructural power around kind of

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Speaker 1: the keynodes of this global financial system that's sit in

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Speaker 1: the US. We don't think that's necessarily the primary motivation

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Speaker 1: for how this system comes about or why it continues

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Speaker 1: to operate, but there's obvious advantages in terms of what

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Speaker 1: sanctions regimes can do in terms and in terms of

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Speaker 1: what you know, other political benefits to that or geostrategic ones.

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Speaker 1: There's also you know the big economic benefit right and

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Speaker 1: consequences that you know, you can run a massive of

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Speaker 1: deficit and it won't really matter, right. There's this question

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Speaker 1: of you know, deficit finance or serviles finance. Whether that's

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Speaker 1: a universal feature of the like deficits not mattering or not,

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Speaker 1: that's an open question. But I think they certainly don't

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Speaker 1: matter that much for the United States. And because of that, like,

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Speaker 1: we kind of argue that the deficits should be seen

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Speaker 1: as a public resource, right because that is to be redistributed.

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Speaker 1: So in some ways our deficits, like the redistribution of

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Speaker 1: our deficits should be thought of as our Norwegian oil fund.

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Speaker 1: M Yeah, that's a really interesting point. I mean, I know,

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Speaker 1: I I'm seeing people um argue that the US should

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Speaker 1: have like our equivalent of a sovereign wealth fund or

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Speaker 1: or the Alaskan Oil Fund or something like that, but

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Speaker 1: this isn't I'm at one of those people apparently, Like

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Speaker 1: especially we I think at burg Ruin we actually kind

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Speaker 1: of do advocate that, and especially on a state level,

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Speaker 1: but we think it's really appropriate for states, for example,

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Speaker 1: and should be done on both the state and national level.

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Speaker 1: Well explained further, like what is the model like if

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Speaker 1: if the deficit is sort of our asset, if it's

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Speaker 1: our equivalent of the Norwegian oil fund, what do we

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Speaker 1: what would also be the benefit from a more explicit

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Speaker 1: uh state level or national sort of sovereign wealth. Well,

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Speaker 1: I think those are some what different questions. I mean,

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Speaker 1: for the United States, it's obviously not going to be

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Speaker 1: a natural resource. Is going to be the ownership of

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Speaker 1: financial assets, right, and because of those inflows, those financial

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Speaker 1: assets will be very valuable on some level. And you know,

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Speaker 1: there's I think a very good argument for the state

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Speaker 1: owning some of them, especially given the fact that in

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Speaker 1: some like the big assets in the United States, for example,

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Speaker 1: the tech companies, you know, they were developed largely with

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Speaker 1: taxpayer money and and because and with like public investment.

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Speaker 1: So I think the state should re recouping some of

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Speaker 1: that some of that value that is actually quite related

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Speaker 1: to that. But I don't necessarily think that's the same

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Speaker 1: motivation as something like a Norwegian oil fund or a

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Speaker 1: you know, the Singapore sovereign wealth funds, or any of

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Speaker 1: the sovereign wealth funds you see, which are really investing

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Speaker 1: into some kind of resource, right in an export driven economy.

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Speaker 1: So in Singapore it's really like the manipulation of the

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Speaker 1: their own currency, right and right, so that's a resource

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Speaker 1: they're invent sting in by sending the money outside. Same

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Speaker 1: thing with Norway, right, Norway is actually you know, mostly invested,

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Speaker 1: is largely investing outside as well as inside with the

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Speaker 1: influence they get it from oil. So I think the

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Speaker 1: United States should be doing the same in a variety

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Speaker 1: of ways. Right, State governments should be considering using them

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Speaker 1: because they are you know, not you know, as we

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Speaker 1: talked about before, they aren't financially, they aren't financially sovereign

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Speaker 1: in the same way the national government is. But even

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Speaker 1: on a national level, there's been so much investment into

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Speaker 1: valuable companies right by the public, by the state, and

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Speaker 1: even you know, there is a story that some of

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Speaker 1: these assets are actually you know, not I wouldn't say overvalue,

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Speaker 1: but the value of those assets are kind of larger

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Speaker 1: because of the you know, big capital inflows the US gets,

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Speaker 1: so the state should get us cut of that in

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Speaker 1: that way. But I think in order to control this

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Speaker 1: particular phenomenon, I think borrowing is actually much more you know,

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Speaker 1: borrowing or printing money, or however you put it. Using

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Speaker 1: the deficit as a sovereign wealth fun equivalent is much

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Speaker 1: more effective then a sovereign wealth fund would be for

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Speaker 1: the same purpose, precisely because we wouldn't be using a

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Speaker 1: sovereign wealth fund in the United States the exact same

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Speaker 1: way as Sat Norway, your Singapore does. It's not the equivalent. Um.

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Speaker 1: I want to get back to the deficit idea because

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Speaker 1: I guess in talking about the drawbacks of dollar dominance

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Speaker 1: for the US, the subtext here is that, well, maybe

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Speaker 1: there would be benefits if we had system that was

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Speaker 1: less reliant on the dollar. But how do you stack

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Speaker 1: up those benefits versus having the privilege of being able

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Speaker 1: to not really you know, pay that much attention to

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Speaker 1: your deficit, or at least not worry that much about

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Speaker 1: it in the same way that say, an emerging market

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Speaker 1: would you know, That's the thing. I am not sure

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Speaker 1: I think the dollar system has to be bad. I

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Speaker 1: think there are a variety of ways of structuring the

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Speaker 1: dollar system. And really, when we get to our alternatives

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Speaker 1: at the bottom of the paper, you know, we're not

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Speaker 1: talking about Bancorp. We think it's you know, bancor is

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Speaker 1: a great idea that King's plan probably would have created

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Speaker 1: a better world, But we're not getting there anytime soon,

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Speaker 1: and we don't think the dollar is going to be

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Speaker 1: necessarily you know, replaced any time soon. So I think

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Speaker 1: the question is more important. The more important question is

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Speaker 1: how do we live with this system that has been

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Speaker 1: created by a privatized international you know space, right, And

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Speaker 1: this is where I put my historian hat on and

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Speaker 1: tell you that, you know, for in global history, or

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Speaker 1: at least the study of like global society and global politics,

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Speaker 1: there's a very strong and I think correct argument that

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Speaker 1: empire and international space comes before the nation state, and

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Speaker 1: we don't really have a tool of governing the international space,

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Speaker 1: right so where we might be stuck with this thing.

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Speaker 1: The point is how to fix it? So I mean domestically,

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Speaker 1: it does mean using the deficit as an explicit redistributive

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Speaker 1: tool and also an explicit development tool, which is why

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Speaker 1: we are such big fans of, you know, the creation

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Speaker 1: of these like systems of development banks or neo are

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Speaker 1: reconstruction Finance Corporation which would be able to leverage some

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Speaker 1: of this stuff right in into productive investment, right because

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Speaker 1: we have very low infrastructure capacity right now, so that's

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Speaker 1: an easy thing to do for example, right and it

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Speaker 1: would improve equity by create and by creating well paying jobs.

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Speaker 1: And we probably will have to run a permanent fiscal

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Speaker 1: policy I think, in order to create that. That's domestically,

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Speaker 1: I think internationally, there a variety of ways of fixing it.

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Speaker 1: There's this, you know, there's been some suggestions by you know,

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Speaker 1: Nathan Tankers, another popular guest on your show, and also

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Speaker 1: that has been taken up either directly or just in

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Speaker 1: parallel by Gordon Brown and a large in a letter.

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Speaker 1: Actually our Institute helped you know, put together, which would

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Speaker 1: be to give the I m F swap lines to

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Speaker 1: give the SDRs dollar like you know dollar like backing.

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Speaker 1: Our big one is that we think this can also

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Speaker 1: be done somewhat you know laterally by the United States

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Speaker 1: by integrating swap agreements right into trade agreements. Right, that

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Speaker 1: would argue that in exchange for maintaining a reasonable traits

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Speaker 1: UH current account surplus UH surplus or deficit across this

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Speaker 1: like free trade zone, you would have a guarantee that

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Speaker 1: your currency will be backed by a FED swap line

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Speaker 1: in the event of a currency crisis, And that's a

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Speaker 1: win win for everyone, right. And it's actually pretty interesting,

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Speaker 1: right because it's I mean, there can be other conditions

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Speaker 1: attached to that, involving good governance, like good macroeconomic macroprudential policy.

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Speaker 1: That's a good way to sequence that because there most

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Speaker 1: of the time their currency crisis is you're trying, like

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Speaker 1: the I m F comes in and it does, it's

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Speaker 1: trying to do all these austerity based reforms that don't

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Speaker 1: really work and they actually make things worse. So if

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Speaker 1: you could incentivize some good macro prudential policy at the

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Speaker 1: start of an agreement, right, is much more effective than

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Speaker 1: doing it at the worst time possible when you need

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Speaker 1: to rebuild a country's demand. Right. So I think that's

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Speaker 1: a really great way of doing it. And I think

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Speaker 1: because the system has evolved to give the US this

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Speaker 1: ridiculous infrastructural power, it should be an onus of the U. S.

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Speaker 1: Government to think this way. So just to roll it

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Speaker 1: all together, I guess the idea is that rather than

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Speaker 1: dismantle dollar dominance, which is something that people have been

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Speaker 1: talking about and to some extent, trying to do for

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Speaker 1: decades now. Um also to Joe's point in the intro,

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Speaker 1: people are talking about it again now and it's entirely

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Speaker 1: unclear whether or not the current crisis is actually going

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Speaker 1: to lead to that outcome. But rather than try to

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Speaker 1: get rid of dollar dominance, the idea here is to

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Speaker 1: try to use it differently in order to sort of

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Speaker 1: compensate for the downsides of that dollar dominance. So try

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Speaker 1: to redistribute the deficit for your idea and sort of

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Speaker 1: offset um or increase economic productivity of the US. Is

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Speaker 1: that right, Yes, yes, absolutely, and increase the you know,

432
00:27:03,359 --> 00:27:06,720
Speaker 1: equity of the world that as a whole right, I

433
00:27:06,720 --> 00:27:10,080
Speaker 1: think instead of dismantling a system, which is very difficult,

434
00:27:10,720 --> 00:27:13,480
Speaker 1: and I don't think we necessarily I think the whole

435
00:27:13,520 --> 00:27:18,439
Speaker 1: point of the essay, right is that it's not a

436
00:27:18,480 --> 00:27:23,359
Speaker 1: political decision, it's a politically economic decision. It's very hard

437
00:27:23,440 --> 00:27:28,800
Speaker 1: to dismiss dismantle a system, right that's not been necessarily

438
00:27:29,080 --> 00:27:32,280
Speaker 1: created with a purpose, but has emerged out of you know,

439
00:27:32,520 --> 00:27:37,879
Speaker 1: underlying class and economic phenomena. So a better way to

440
00:27:37,960 --> 00:27:43,120
Speaker 1: do this right would be to manage the system. It's

441
00:27:43,119 --> 00:27:46,639
Speaker 1: hard to get there without an intermediate step of managing

442
00:27:46,720 --> 00:27:50,280
Speaker 1: the system that exists, rather than tearing it down. So,

443
00:27:50,480 --> 00:27:52,040
Speaker 1: like I said at the intro, I think it's always

444
00:27:52,119 --> 00:27:57,320
Speaker 1: very dicey two. Look at what we've experienced just over

445
00:27:57,359 --> 00:28:00,200
Speaker 1: the last two months were recording this on me Earth

446
00:28:00,280 --> 00:28:02,760
Speaker 1: or maybe the last three months, and try to make

447
00:28:02,800 --> 00:28:06,280
Speaker 1: some broad proclamations about what the future will look like.

448
00:28:06,320 --> 00:28:09,800
Speaker 1: So we want to do that. But in your view,

449
00:28:10,960 --> 00:28:15,000
Speaker 1: the stresses that we've seen on the system so far,

450
00:28:16,080 --> 00:28:22,919
Speaker 1: do you see tensions building that could materially change that?

451
00:28:23,040 --> 00:28:25,679
Speaker 1: At least are are pressuring the system in such a

452
00:28:25,680 --> 00:28:28,399
Speaker 1: way that we could get some sort of meaningful change.

453
00:28:28,760 --> 00:28:31,080
Speaker 1: Either of it's sort of the end of this current

454
00:28:31,280 --> 00:28:36,080
Speaker 1: dollar system or some sort of rearrangement of it so

455
00:28:36,119 --> 00:28:39,080
Speaker 1: that the benefits of it can be spread more equitably.

456
00:28:39,160 --> 00:28:42,080
Speaker 1: Do the do the stresses and political pressures and the

457
00:28:42,080 --> 00:28:45,440
Speaker 1: economic pressures that we're seeing all around the world potentially

458
00:28:45,480 --> 00:28:48,400
Speaker 1: move the ball in one direction or another in your view?

459
00:28:49,320 --> 00:28:53,000
Speaker 1: So this is the interesting part is I'm actually not

460
00:28:53,160 --> 00:28:56,800
Speaker 1: sure from the point of view of the people who

461
00:28:56,800 --> 00:29:00,239
Speaker 1: can make a difference right now, that there is that

462
00:29:00,360 --> 00:29:04,200
Speaker 1: much stress on the system. Right, the system is operating

463
00:29:04,200 --> 00:29:09,800
Speaker 1: in many ways the way it should operate, given how

464
00:29:09,840 --> 00:29:15,080
Speaker 1: it's evolved. Right, who is loup, who is winning and

465
00:29:15,120 --> 00:29:18,760
Speaker 1: who is losing from it? Right? And the people who

466
00:29:18,800 --> 00:29:21,120
Speaker 1: can make a change for the most part, are winning

467
00:29:21,160 --> 00:29:23,680
Speaker 1: from it now. I think in the long run, maybe

468
00:29:23,720 --> 00:29:27,239
Speaker 1: that's not sustainable for those them, and that in the

469
00:29:27,240 --> 00:29:29,600
Speaker 1: long run they should be thinking of like, can we

470
00:29:29,680 --> 00:29:34,080
Speaker 1: really go on with such a bifurcating world that is happening,

471
00:29:34,080 --> 00:29:37,720
Speaker 1: you know, both within and without our borders, and that

472
00:29:37,880 --> 00:29:41,760
Speaker 1: maybe maybe there would be someone out there with the

473
00:29:41,800 --> 00:29:45,760
Speaker 1: political will, especially you know, in the United States, to

474
00:29:45,880 --> 00:29:49,240
Speaker 1: put this at the forefront and really do something about it.

475
00:29:49,400 --> 00:29:53,160
Speaker 1: Right for the good of the many. But until you

476
00:29:53,280 --> 00:29:57,360
Speaker 1: have such a change, until you really have a you know,

477
00:29:57,720 --> 00:30:00,840
Speaker 1: a set of governments that are interested in the common good,

478
00:30:01,880 --> 00:30:04,720
Speaker 1: I'm not sure the system will change because for the

479
00:30:04,760 --> 00:30:08,400
Speaker 1: long term, it's operating exactly as it's designed to operate.

480
00:30:08,480 --> 00:30:12,959
Speaker 1: It's well, I wouldn't say designed, but it's reflecting the

481
00:30:13,080 --> 00:30:19,040
Speaker 1: underlying distributions of surplus let's say, that have allowed it

482
00:30:19,040 --> 00:30:23,400
Speaker 1: to operate before. So on that note, if we all

483
00:30:23,400 --> 00:30:25,920
Speaker 1: agree that it's difficult to change that system because you

484
00:30:25,960 --> 00:30:29,600
Speaker 1: sort of have um invested or interests who are invested

485
00:30:29,640 --> 00:30:34,800
Speaker 1: in it, how do you go about actually building grassroots support,

486
00:30:35,200 --> 00:30:38,120
Speaker 1: I guess for for modifying it, Like, how would you

487
00:30:38,160 --> 00:30:41,640
Speaker 1: do that? You've written an essay, but what would be

488
00:30:41,680 --> 00:30:46,880
Speaker 1: the next steps? You know, I kind of wish I knew. Um.

489
00:30:46,920 --> 00:30:49,440
Speaker 1: If I did know, I'd be doing it much more.

490
00:30:49,880 --> 00:30:52,360
Speaker 1: I mean, I think this essay and whatever else I'm writing,

491
00:30:52,360 --> 00:30:54,920
Speaker 1: because at least step one of it, right, because you know,

492
00:30:55,280 --> 00:30:57,960
Speaker 1: you talk to you know, anyone, you talk to your

493
00:30:58,000 --> 00:31:01,960
Speaker 1: family members, you talk to your ends about this, You

494
00:31:02,040 --> 00:31:04,800
Speaker 1: talk to even colleagues right that are senior from you,

495
00:31:04,840 --> 00:31:08,800
Speaker 1: who don't specialize or think about these particular issues, and

496
00:31:08,880 --> 00:31:13,400
Speaker 1: it's an absolute mystery to people. Right, and then when

497
00:31:13,440 --> 00:31:17,000
Speaker 1: you start talking about it in kind of more approachable terms,

498
00:31:17,040 --> 00:31:18,640
Speaker 1: and I'm not sure if I did that or not,

499
00:31:18,680 --> 00:31:22,560
Speaker 1: but I tried, you know, then people go, you know,

500
00:31:22,960 --> 00:31:25,280
Speaker 1: why do we have this system? So it's gonna take

501
00:31:25,280 --> 00:31:27,520
Speaker 1: political organizing at the end, and it's going to take

502
00:31:27,560 --> 00:31:30,560
Speaker 1: a very difficult kind of political organizing that might not

503
00:31:30,680 --> 00:31:36,800
Speaker 1: just be national but transnational. And you know, it would

504
00:31:36,800 --> 00:31:39,200
Speaker 1: be great if that worked. I'm not sure I'm the

505
00:31:39,280 --> 00:31:41,320
Speaker 1: right person or anyone is the right person. We know

506
00:31:41,520 --> 00:31:44,440
Speaker 1: is the right person to do that, but I don't

507
00:31:44,800 --> 00:31:47,160
Speaker 1: or even if it will depend it's definitely not dependent

508
00:31:47,160 --> 00:31:49,920
Speaker 1: on a single person. It will depend on a movement, right,

509
00:31:50,760 --> 00:31:53,040
Speaker 1: But that's the you know, the only way to do

510
00:31:53,080 --> 00:31:56,720
Speaker 1: this is to think about this with some intent, you know,

511
00:31:57,520 --> 00:32:00,840
Speaker 1: well just to I mean just to this was kind

512
00:32:00,840 --> 00:32:02,640
Speaker 1: of what I was going to get out with My

513
00:32:02,760 --> 00:32:04,880
Speaker 1: question is like and we again talked about this on

514
00:32:04,960 --> 00:32:07,719
Speaker 1: mad Klient. With mad Klient, there is some sort of

515
00:32:07,760 --> 00:32:12,600
Speaker 1: like theory that the election of Donald Trump was an

516
00:32:12,640 --> 00:32:16,040
Speaker 1: implicit or it had the potential to be sort of

517
00:32:16,080 --> 00:32:20,200
Speaker 1: an implicit rejection of this system. He did well among

518
00:32:20,800 --> 00:32:26,240
Speaker 1: the sense the populations that haven't benefited. You mentioned sort

519
00:32:26,240 --> 00:32:30,880
Speaker 1: of regional manufacturing, the people who have not thrived in globalization.

520
00:32:31,360 --> 00:32:34,800
Speaker 1: It was not a political movement that was a rejection

521
00:32:34,840 --> 00:32:37,400
Speaker 1: of the dollar system. It was just maybe, uh, some

522
00:32:37,600 --> 00:32:42,560
Speaker 1: consequences of trajectories of you as economics and and of

523
00:32:42,560 --> 00:32:45,200
Speaker 1: course we haven't really seen any meaningful changes. He's done

524
00:32:45,240 --> 00:32:47,840
Speaker 1: some things on trade with China, but nothing like that

525
00:32:48,040 --> 00:32:52,040
Speaker 1: substantive and a lot of leaps. Like Donald Trump very much.

526
00:32:52,360 --> 00:32:55,120
Speaker 1: But could it be that the rejection of this system

527
00:32:55,360 --> 00:33:01,600
Speaker 1: or the change just comes through lots of domestic changes

528
00:33:01,680 --> 00:33:03,560
Speaker 1: such as what we're seeing at US, but all around

529
00:33:03,600 --> 00:33:07,320
Speaker 1: the world. Yes, someone level you can like you can

530
00:33:07,440 --> 00:33:10,160
Speaker 1: argue that Donald Trump, and to an extent, I don't

531
00:33:10,320 --> 00:33:12,960
Speaker 1: think that's the reason Trump was elected. I think the

532
00:33:13,040 --> 00:33:16,320
Speaker 1: reason Trump was elected is overdetermined. There were so many

533
00:33:16,360 --> 00:33:22,400
Speaker 1: factors behind it. But yeah, obviously that's one reason was,

534
00:33:22,680 --> 00:33:25,160
Speaker 1: you know, the rejection of the harms of this system.

535
00:33:25,200 --> 00:33:29,239
Speaker 1: But the problem is we're talking about trade, right, Like

536
00:33:29,360 --> 00:33:33,400
Speaker 1: one thing I always try to get across in these discussions.

537
00:33:33,440 --> 00:33:35,880
Speaker 1: This trade is only one element of this and it's

538
00:33:35,880 --> 00:33:37,760
Speaker 1: like a balloon, right if you shut it down in

539
00:33:37,840 --> 00:33:41,560
Speaker 1: one place, it will come out of another place. I

540
00:33:41,600 --> 00:33:46,600
Speaker 1: don't know exactly how you politicize it, but you need

541
00:33:46,640 --> 00:33:49,480
Speaker 1: to politicize it systemically, and you know, there have been

542
00:33:49,520 --> 00:33:53,480
Speaker 1: there has been some attempt. There's the Baldwin Holly Act

543
00:33:53,600 --> 00:33:55,960
Speaker 1: that Mike Pettis is behind, and I think it will

544
00:33:55,960 --> 00:33:57,880
Speaker 1: work to a certain extent, but I think it has,

545
00:33:58,080 --> 00:34:01,080
Speaker 1: you know, big downsides. It just my actually might reintroduce

546
00:34:01,120 --> 00:34:04,160
Speaker 1: a lot of very risky financial practices as we've seen

547
00:34:04,760 --> 00:34:09,040
Speaker 1: during the Alae crisis. Right, Um, so I think there

548
00:34:09,040 --> 00:34:11,960
Speaker 1: are that's one way of getting at it. I think

549
00:34:12,000 --> 00:34:16,200
Speaker 1: we've introduced a more internationalist way to try to get

550
00:34:16,239 --> 00:34:20,879
Speaker 1: at it. And I think hopefully some people who want

551
00:34:20,960 --> 00:34:24,279
Speaker 1: to do politics and start thinking in this way and

552
00:34:24,440 --> 00:34:28,920
Speaker 1: you know, start to actually you know, inform and build

553
00:34:28,960 --> 00:34:31,799
Speaker 1: up systems like this. And maybe that's not for us

554
00:34:31,840 --> 00:34:34,920
Speaker 1: to do. You know, we're we we writ we're writers,

555
00:34:34,960 --> 00:34:37,840
Speaker 1: were intellectuals, you know, we're analysts. Our job is to

556
00:34:38,400 --> 00:34:41,120
Speaker 1: try to speak to those in power and tell them, hey,

557
00:34:41,200 --> 00:34:43,560
Speaker 1: it's not working, thinking to think about it in a

558
00:34:43,560 --> 00:34:47,840
Speaker 1: different way. Well, Yaka Fagin, really great having you on

559
00:34:48,080 --> 00:34:52,240
Speaker 1: a phenomenal essay. I strongly would encourage people to uh

560
00:34:52,360 --> 00:34:54,920
Speaker 1: go check it out. It's at the website phenomenal world

561
00:34:55,000 --> 00:34:58,759
Speaker 1: dot org. The Class Politics of the Dollar System. Um,

562
00:34:59,040 --> 00:35:01,799
Speaker 1: thanks for joining us, Thank you for having me. I

563
00:35:01,800 --> 00:35:17,439
Speaker 1: think chacough, that was great, Tracy. I love talking with

564
00:35:18,000 --> 00:35:21,440
Speaker 1: Yakov again. I think this there is so much talk

565
00:35:21,840 --> 00:35:25,919
Speaker 1: about the dollar and who had benefits, and so much

566
00:35:25,960 --> 00:35:30,600
Speaker 1: of it is so like simplistic, and it's it's extremely complicated,

567
00:35:30,680 --> 00:35:33,560
Speaker 1: like what the dollar system means and really who benefits

568
00:35:33,600 --> 00:35:36,520
Speaker 1: from Yeah, it's definitely it's sort of like a middle

569
00:35:36,840 --> 00:35:39,879
Speaker 1: path in thinking about dollar dominance. But I have to say,

570
00:35:39,960 --> 00:35:43,000
Speaker 1: for someone who started this episode talking about how they

571
00:35:43,040 --> 00:35:46,080
Speaker 1: don't like big picture ideas, this seems like a pretty

572
00:35:46,120 --> 00:35:50,000
Speaker 1: big picture idea, does it not. No, I love big

573
00:35:50,040 --> 00:35:52,080
Speaker 1: don't get me wrong, I love big picture ideas. I

574
00:35:52,080 --> 00:35:54,000
Speaker 1: think maybe what I was saying it was like I

575
00:35:54,000 --> 00:35:56,680
Speaker 1: don't like big picture like prediction, right, Maybe that's that's

576
00:35:56,680 --> 00:35:59,080
Speaker 1: what I meant. Okay, I don't know big picture like

577
00:35:59,080 --> 00:36:01,440
Speaker 1: we're all about that here, but I just mean, like, oh,

578
00:36:01,520 --> 00:36:04,000
Speaker 1: the world that we're never going to go back to

579
00:36:04,239 --> 00:36:05,840
Speaker 1: X or we're never going to trade with China the

580
00:36:05,880 --> 00:36:08,600
Speaker 1: same again, or whatever it is, we're gonna on shore

581
00:36:08,640 --> 00:36:11,640
Speaker 1: all of our manufacturing because we had a shortage mask.

582
00:36:12,320 --> 00:36:14,120
Speaker 1: That's the kind of stuff Like it's like, let's just

583
00:36:14,160 --> 00:36:17,720
Speaker 1: wait a few months. Yeah, okay, well, this definitely isn't

584
00:36:18,120 --> 00:36:21,360
Speaker 1: a prediction. In fact, I mean, Yakof was pretty upfront

585
00:36:21,400 --> 00:36:25,760
Speaker 1: and talking about how this is all a very conceptual idea, um,

586
00:36:25,800 --> 00:36:28,920
Speaker 1: and he isn't really sure how to get it done politically.

587
00:36:28,960 --> 00:36:31,280
Speaker 1: But I think I think also when we talk about

588
00:36:31,280 --> 00:36:33,799
Speaker 1: this kind of stuff, and you know, I sometimes think

589
00:36:33,800 --> 00:36:37,080
Speaker 1: about this in connection with modern monetary theory as well.

590
00:36:37,080 --> 00:36:39,960
Speaker 1: But if we say that, you know, the thing that

591
00:36:40,000 --> 00:36:42,520
Speaker 1: we thought was a problem isn't actually the problem. The

592
00:36:42,560 --> 00:36:46,120
Speaker 1: problem is politics. I'm not sure that gets us very far.

593
00:36:46,440 --> 00:36:48,840
Speaker 1: Like that's the sticking point, and that seems to be

594
00:36:48,880 --> 00:36:50,960
Speaker 1: the most difficult thing of all. Yeah. I had to

595
00:36:51,000 --> 00:36:53,880
Speaker 1: have fun too, which is that if you have a

596
00:36:53,920 --> 00:36:58,920
Speaker 1: set of people who broadly benefit from the existing system,

597
00:36:58,960 --> 00:37:02,600
Speaker 1: and those existing people are the ones who are in

598
00:37:02,719 --> 00:37:07,759
Speaker 1: position to rewrite laws or change how society operates, you

599
00:37:07,840 --> 00:37:11,440
Speaker 1: do run into this situation and it's like, okay, well, like,

600
00:37:11,600 --> 00:37:13,920
Speaker 1: so who where does the political catalyst come from? And

601
00:37:13,960 --> 00:37:16,160
Speaker 1: I thought that your question to that is really important,

602
00:37:16,640 --> 00:37:20,360
Speaker 1: And you know, there's there's really no obvious, uh answer

603
00:37:20,400 --> 00:37:22,120
Speaker 1: to that at all. And it's again, as you say,

604
00:37:22,160 --> 00:37:25,920
Speaker 1: with modern monetary theory, it's like, okay, so we can

605
00:37:26,000 --> 00:37:27,880
Speaker 1: spend more and do a lot more with a fiscal

606
00:37:27,920 --> 00:37:31,840
Speaker 1: policy than maybe a lot of mainstream views would suggest,

607
00:37:32,360 --> 00:37:35,279
Speaker 1: but that doesn't give us any answers to how we

608
00:37:35,320 --> 00:37:39,000
Speaker 1: actually get people to vote for That's exactly it. But

609
00:37:39,239 --> 00:37:41,800
Speaker 1: like someone has to actually vote to spend the money,

610
00:37:42,160 --> 00:37:45,799
Speaker 1: even if in theory fiscal governments or have much more

611
00:37:45,800 --> 00:37:49,400
Speaker 1: flexibility on fiscal policy than people really. But I do

612
00:37:49,520 --> 00:37:52,840
Speaker 1: like the idea of UM sort of using the deficit

613
00:37:52,960 --> 00:37:58,480
Speaker 1: to redistribute to UM to America. I guess like that's

614
00:37:58,480 --> 00:38:01,040
Speaker 1: an intriguing thing, and if it sort of offset some

615
00:38:01,080 --> 00:38:03,800
Speaker 1: of the negative side effects that we've seen from dollar dominance,

616
00:38:03,840 --> 00:38:06,279
Speaker 1: you know, UM, the expansion of the trade deficit, and

617
00:38:06,320 --> 00:38:09,839
Speaker 1: the idea that the US is biggest export is dollar

618
00:38:09,920 --> 00:38:14,680
Speaker 1: denominated financial assets versus something more tangible, like I don't know,

619
00:38:14,719 --> 00:38:19,320
Speaker 1: widgets or something. That's an intriguing idea, I think definitely.

620
00:38:19,360 --> 00:38:22,120
Speaker 1: And again, like the Alaska State Oil Fund and everyone

621
00:38:22,120 --> 00:38:25,360
Speaker 1: who's a citizen of Alaska gets a check to benefit

622
00:38:25,400 --> 00:38:27,960
Speaker 1: from that, and so you could theoretically apply that model

623
00:38:28,000 --> 00:38:30,399
Speaker 1: to the US as a as a whole, in which

624
00:38:30,480 --> 00:38:32,920
Speaker 1: the idea is like, Okay, well, the US is a

625
00:38:32,920 --> 00:38:36,520
Speaker 1: major exporter of dollar and dollar assets, so let's use that.

626
00:38:37,120 --> 00:38:42,439
Speaker 1: Let's use that national asset to distribute money more aggressively domestic. Yeah,

627
00:38:42,600 --> 00:38:45,719
Speaker 1: should we leave it there? Let's see it there. Okay.

628
00:38:46,280 --> 00:38:49,280
Speaker 1: This has been another episode of the All Thoughts podcast.

629
00:38:49,360 --> 00:38:51,960
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

630
00:38:51,960 --> 00:38:55,440
Speaker 1: Tracy Alloway and I'm Jolly Isn't Though. You can follow

631
00:38:55,480 --> 00:38:58,520
Speaker 1: me on Twitter at the Stalwart. And you should follow

632
00:38:58,560 --> 00:39:01,680
Speaker 1: our guests on Twitter. Yeah, go Fagan. He's on Twitter

633
00:39:01,800 --> 00:39:05,240
Speaker 1: at Buddy Yakov and follow his co author. We couldn't

634
00:39:05,280 --> 00:39:08,760
Speaker 1: have him today, but he's also great. Uh. Dominic Loisder

635
00:39:09,160 --> 00:39:12,920
Speaker 1: He's at Dominic Lois And you should also follow the

636
00:39:13,040 --> 00:39:16,719
Speaker 1: Jane Family Institute, which published the essay. Everyone should really

637
00:39:16,760 --> 00:39:20,360
Speaker 1: go check it out. They are at Jane Family and

638
00:39:20,520 --> 00:39:26,440
Speaker 1: followed the Burgruin Institute. Yakov's employer at Burgruin Instant. And

639
00:39:26,520 --> 00:39:29,680
Speaker 1: follow our producer on Twitter, Laura Carlson. She's at Laura

640
00:39:29,719 --> 00:39:33,359
Speaker 1: and Carlson. The Bloomberg had a podcast Francesco Leaning at

641
00:39:33,400 --> 00:39:37,160
Speaker 1: Francesco Today as well as all of the Bloomberg podcast

642
00:39:37,280 --> 00:39:40,840
Speaker 1: Check him out under the handle at podcasts. Thanks for listening.

643
00:40:00,440 --> 00:40:05,440
Speaker 1: The yet E