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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.

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Speaker 2: I'm Tracy Allaway.

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Speaker 3: And I'm Joe. Wasn't thal Joe.

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Speaker 2: We're here in London, Dyll in London, Still in London.

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Speaker 2: It's been interesting. I think I've mentioned so. I obviously

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Speaker 2: I went to university here, got my first job here,

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Speaker 2: first at Bloomberg. I left very quickly and joined the

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Speaker 2: Ft and I was here for like ten years and

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Speaker 2: met my husband here. So I've just been walking around

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Speaker 2: the city this week, just feeling very nostalgic about everything.

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Speaker 3: This is a very weird time to be in London.

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Speaker 3: For one thing, I have to say, like the whole

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Speaker 3: time zone thing really messes me up. But like I'm like,

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Speaker 3: you know, v the concept of time zone still blows

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Speaker 3: my mind a little bit.

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Speaker 2: As an American, and I'm not surprised to hear you obvious.

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Speaker 3: It's like I can't believe the market's still open. But also,

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Speaker 3: you know, we're at a time where changing perceptions towards

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Speaker 3: the US are a big story. And normally, if I'm

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Speaker 3: being honest, if I could be a sort of rude

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Speaker 3: American for a moment.

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Speaker 2: Always to global.

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Speaker 3: Perceptions of the US are not typically a very big

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Speaker 3: deal to me. They're not something that I think about

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Speaker 3: very often, except in so far as we're in a

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Speaker 3: period where our president claims to want to be doing

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Speaker 3: trade deals with the rest of the world, at which

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Speaker 3: point these elected leaders around the world have domestic constituencies

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Speaker 3: that they have to be accountable to, and as such,

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Speaker 3: perhaps we're in a period where perceptions of the US

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Speaker 3: actually substantively matter.

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Speaker 2: Well, here's the other thing I was thinking about. I

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Speaker 2: was walking past my old university, and I was thinking,

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Speaker 2: both you and I did international relations, yeah, And I

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Speaker 2: was thinking how amazingly irrelevant that degree has become. And

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Speaker 2: I was thinking back to the reading list we had

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Speaker 2: in the early two thousands about like implementing globalization and

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Speaker 2: globalization colin the Way Forward and things like that. So

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Speaker 2: much of that just feels completely off the table at

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Speaker 2: this moment.

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Speaker 3: We all these like these hopes for like various multilateral

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Speaker 3: agreements and we're going to sign and now the plan

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Speaker 3: is to sign you know, bilateral agreements with seventy different

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Speaker 3: nations in ninety.

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Speaker 2: Dews while insulting them on a daily basis.

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Speaker 3: While insulting them.

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Speaker 2: I mean, come on, okay, So I'm trying to unify

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Speaker 2: all these different themes. My former employer, the future of globalization,

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Speaker 2: the fact that we're here in London at a time

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Speaker 2: when Europe US relationships really seem to be in the

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Speaker 2: gutter in many ways. So we have the perfect guest.

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Speaker 2: We do have, truly the perfect guest we're going to

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Speaker 2: be speaking with. Martin Wolfe is, of course, the chief

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Speaker 2: economics commentator over at the FT, sometimes described as the

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Speaker 2: most important economics commentator in Britain, which, given that the

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Speaker 2: UK exports a lot of commentators, is really saying something.

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Speaker 2: Also the author of book on globalization, of course, although

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Speaker 2: as I understand it, your feelings have evolved over the years.

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Speaker 2: So Martin, welcome to the show. Thanks so much for

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Speaker 2: coming on.

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Speaker 4: It's a pleasure to be here in beautiful London, which

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Speaker 4: feels very pleasingly away from the US.

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Speaker 3: Yes, yes, we're setting the tone for the contry.

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Speaker 2: Yeah, there we go. Is it amazing to be an

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Speaker 2: economics commentator in the current environment or is it incredibly

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Speaker 2: depressing in the sense that you know, we're seeing a

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Speaker 2: lot of new and interesting ideas. I'm doing air quotes.

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Speaker 2: Although I'm on a podcast new and interesting ideas coming

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Speaker 2: out of certain administrations about how economics works and how

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Speaker 2: it could theoretically work, and at the same time you're

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Speaker 2: seeing the tearing down of a lot of established norms

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Speaker 2: and principles from traditional economics. There's a lot to write about.

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Speaker 4: Yes, this is a question that a lot of people

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Speaker 4: ask me during the financial crisis when it was really

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Speaker 4: at its worst and look very very frightening, which is

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Speaker 4: in a very different way that closest to what in

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Speaker 4: my professional crea to what we're experiencing now. My answer

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Speaker 4: used to be, I divide myself into two people as

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Speaker 4: an economist and commentator. It was the best spirit of

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Speaker 4: my life as a father and a grandparent. Grandfather terrified

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Speaker 4: the wits out of me, and I would say the

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Speaker 4: same now, but probably even more so.

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Speaker 3: By the way, this is kind of like me and Tracy,

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Speaker 3: except Tracy is the side of.

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Speaker 2: You I totally embody the anxiousness, and Joe is basically

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Speaker 2: the exhilaration that things are happening.

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Speaker 3: But I said this in a recent review, You're like, Oh,

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Speaker 3: I just get so excited. I just love seeing the

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Speaker 3: lung and I feel like I wanted to wish. I'm

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Speaker 3: taking a moment to hedge that I actually do have

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Speaker 3: a person side. I have not just someone who stares

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Speaker 3: at a screen all day, and I do genuinely care

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Speaker 3: about the actual sort of health of the world.

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Speaker 2: You feel you have to announce that publicly. Slightly worrying, Joe,

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Speaker 2: but good. It's good to know, you know.

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Speaker 3: There's a part of me that thinks this is a

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Speaker 3: bigger story in many respects than the Great Financial Crisis,

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Speaker 3: because in retrospect, although the Great Financial Crisis or the

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Speaker 3: global I forget what we call it, global fundinancial crisis

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Speaker 3: was enormous and maybe once in a century it was

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Speaker 3: a very big bank run. In bank runs happened from

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Speaker 3: time to time. They're not that unusual, and there's a playbook,

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Speaker 3: and you backed up the banks and you do some

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Speaker 3: Kinsian fiscal policies. This feels like to me right now

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Speaker 3: is something that could metastasize into a truly bigger story

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Speaker 3: in terms of the lasting imprint it has on the world.

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Speaker 4: I think that's very plausible now. During the Financial crisis,

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Speaker 4: I didn't view it quite this way, partly because I

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Speaker 4: know a lot of economic history and not least because

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Speaker 4: my parents were from continental Europe and escape from the

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Speaker 4: most obvious consequence of the Great financial crash, which was

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Speaker 4: the Great Depression and Hitler. In history, we have mostly

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Speaker 4: survived huge financial crises, but sometimes people don't deal with

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Speaker 4: the bank rum. And the most famous case obviously in

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Speaker 4: history was what happened in the thirties, and it led

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Speaker 4: the Federal Reserve completely failed to deal with it in

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Speaker 4: any sensible way, and it led to the Great Depression,

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Speaker 4: which was the biggest economic downturn in sort of modern

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Speaker 4: history of the last two centuries. And that led absolutely clearly,

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Speaker 4: it's a theme of one of my books, or part

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Speaker 4: of the theme with one of my books, to the

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Speaker 4: election of Adolf Hitler, and that led to certain other

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Speaker 4: events like World War two and the death of sixty

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Speaker 4: million people and so forth. So during the financial crisis,

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Speaker 4: I was really frightened now that they did do the

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Speaker 4: sensible things, all the things I wrote at the time

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Speaker 4: they should do. So I feel very happy about that.

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Speaker 4: They went back to Walter Badghocks, who knew how to

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Speaker 4: deal with these things, and that's in fine now. Right now,

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Speaker 4: I would agree with you, certainly, this is a bigger event,

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Speaker 4: because it's a fundamental undoing of the world economic order

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Speaker 4: as created after the Second World War. It is I

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Speaker 4: think also in the backdrop, a fundamental remaking of the

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Speaker 4: American Republic. And right now, of course it involves a

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Speaker 4: because it's both of these, and because of the extraordinary

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Speaker 4: role the US has played in the world since the

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Speaker 4: Second World War, since forty one. Really, with Paul Harbor,

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Speaker 4: it really means a remaking of the entire world order.

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Speaker 4: So we right now, I think the most important thing

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Speaker 4: that I say when anybody asks me what's going to

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Speaker 4: happen next, is I really don't know, because nobody can.

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Speaker 2: Since you brought up the economic policy of the nineteen thirties,

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Speaker 2: and since Joe is currently reading Adam Twos's Wages of Destruction,

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Speaker 2: and everyone who has interacted with Joe over the past

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Speaker 2: two weeks that you are reading about it.

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Speaker 3: So what I do I tell everyone reading Adam Owes.

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Speaker 2: You a commission at this point, because you are literally like, Hi,

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Speaker 2: I'm Joseph Eisenthaal. Have you read the Good Book of

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Speaker 2: Wages of Destruction? Like this is Joe right now? Talk

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Speaker 2: to us a little bit more about any parallels you're

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Speaker 2: seeing between the current economic environment, or I guess the

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Speaker 2: grievances felt by American policy makers versus what we saw

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Speaker 2: in the nineteen thirties.

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Speaker 4: I think that what is striking to me is the differences.

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Speaker 4: I do argue in the book I wrote, the Crisis

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Speaker 4: of Democratic Capitalism, which you certainly should read.

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Speaker 2: Well it's on the list, is.

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Speaker 4: This idea that the global financial crisis was a very

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Speaker 4: big shock. It had quite long lasting effects, notably so

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Speaker 4: in the US, and I argue in that book that

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Speaker 4: one of the reasons, probably the main reasons that the

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Speaker 4: Republicans Party, when they start realizing what had happened, shifted

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Speaker 4: from Mitt Romney to Donald Trump as the candidate, which

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Speaker 4: was an enormous revolutionary change, is that shock had, as

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Speaker 4: it percolated through, helped a very large number of relatively conservative,

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Speaker 4: middle class Americans feel that this Reaganite stuff about free

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Speaker 4: markets and so forth was, to put it bluntly, crap,

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Speaker 4: because these people are led them down the path and

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Speaker 4: they wanted somebody to embody their ideology. Their attitudes very

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Speaker 4: reactioning ones, in my view, but not with that economic baggage,

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Speaker 4: and Trump was the perfect person. So in that sense,

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Speaker 4: I do think the global financial crisis, it's a theme

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Speaker 4: of my book. It's not the only reason. The industrialization

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Speaker 4: and other themes which Trump plays with are also important,

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Speaker 4: and I have a long discussion that going back to

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Speaker 4: the seventies. But that big shock I think played a

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Speaker 4: very big part in shifting the Republican Party in the

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Speaker 4: populist nationalist direction, and that's of course why we are

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Speaker 4: where we are now. So in that sense, I think

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Speaker 4: there is a link. But of course, and this is

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Speaker 4: the contrast for the reasons we've discussed in the end,

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Speaker 4: the policy makers involved basically under the Obama administration, many

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Speaker 4: of whom might of course know, some of them are

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Speaker 4: quite good friends. They did manage it in the way

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Speaker 4: it wasn't managed in the thirties, So there was a

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Speaker 4: fairly quick recovery. The financial sector was put back on

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Speaker 4: its feet, though within the immense amount of federal support,

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Speaker 4: and the economy is recovered. And what is striking about

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Speaker 4: this revolutionary moment in economic policy we're seeing It is

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Speaker 4: I think sort of unique, and I don't fully understand it.

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Speaker 4: It depresses me because but I have to admit it,

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Speaker 4: the American economy has done better than any other developed

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Speaker 4: country since the pandemic. The pandemic was a shot, but

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Speaker 4: it's motoring. Real incomes have been rising rapidly. The job's

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Speaker 4: performance was exceptional. Now that's about as far as Germany

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Speaker 4: in the thirty three Is you going to imagine when

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Speaker 4: unemployed was twenty five percent and it was not much

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Speaker 4: of a welfare state. So the economic explanation in the

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Speaker 4: classic sense doesn't really work.

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Speaker 3: I've been thinking about exactly this because I have been

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Speaker 3: reading out of Jesus wag of Wages of Destruction, which

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Speaker 3: is the.

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Speaker 2: Martin sent him a copy of your book already he

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Speaker 2: will do the same.

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Speaker 3: Yeah, yeah, I'll plug it for two or three straight weeks.

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Speaker 3: But the only time that I you know, I have

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Speaker 3: very mixed feelings about all of this, because look, I'm

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Speaker 3: in these wonderful Bloomberg offices and I'm staying in a

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Speaker 3: nice hotel, and i have a job where I get

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Speaker 3: to type for a living. But like, America is an

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Speaker 3: incredibly rich country, and I was like, you know, the

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Speaker 3: distribution of financial assets in the United States is, as

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Speaker 3: everyone knows, extremely skewed to say, like the top one

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Speaker 3: percent or whatever. But the actual distribution of real resources

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Speaker 3: when you look at the size of American houses, when

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Speaker 3: you look at the number of people of cars, when

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Speaker 3: you look at the size of American refrigerators with ice

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Speaker 3: machines that typically work. America is an extraordinarily wealthy country

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Speaker 3: for a wide swath of the population. And so when

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Speaker 3: I read history in that respect, it doesn't read at

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Speaker 3: all to me like the actual real economic conditions that

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Speaker 3: I would say associated with the nineteen thirties.

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Speaker 4: I think that's absolutely right. Of course, it isn't, and

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Speaker 4: that's created a puzzle. Nonetheless, it seemed pretty clear, and

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Speaker 4: I referred to quite a bit of literature on that

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Speaker 4: in my book, that it's not surprising. People are very, very,

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Speaker 4: very concerned about their relative positions. People are very very

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Speaker 4: concerned about their security, that's their sense of security in

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Speaker 4: their positions. And those anxieties often related not just with

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Speaker 4: their economic positions, but also more broadly with their cultural positions.

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Speaker 4: And Americas are countries that's gone through some big revolutionary changes.

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Speaker 4: The industrialization PUTAVL is real. That's a transformation of many

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Speaker 4: many communities. The push for gender and racial equality is real,

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Speaker 4: and it clearly runs up against anxieties and hostility that

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Speaker 4: was also very very real the new economy. Well, you're

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Speaker 4: absolutely right, clearly right. But it's still true when I

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Speaker 4: go through America, and on many occasions I've Pardikhar and

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Speaker 4: gone across the country to place it like Erie, northern California,

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Speaker 4: way far north. There are lots of poor people in America,

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Speaker 4: and most Americans that I know and see them because

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Speaker 4: they fly over them, but I've actually driven across It's

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Speaker 4: there are lots of poor people, and people are frightened

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Speaker 4: of ending up there. In my view, they have a sense.

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Speaker 4: You know, I'm one real hospital medical problem away from bankruptcy.

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Speaker 4: So I think there is in an insecurity and anxiety

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Speaker 4: which comes up with these cultural and economic things mixed

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Speaker 4: up to which Trump addresses his appeal perfectly. He's the

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Speaker 4: perfect populist for America. And one of the things I've learned,

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Speaker 4: which is new because I've never lived through it with

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Speaker 4: a political demogogue like this, how incredibly good a brilliant

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Speaker 4: demogogue is at exploiting those resentments and offering himself up

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Speaker 4: as the solution to all this. And that's the way

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Speaker 4: I would now see this.

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Speaker 2: Speaking of resentments, I mean, it does seem if we

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Speaker 2: zoom out on an international scale, so away from the

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Speaker 2: domestic US economy. It does seem like the Trump administration's

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Speaker 2: major grievance is this idea that the US hasn't been

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Speaker 2: compensated enough for its role in the international financial system

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Speaker 2: and the fact that the dollar is a reserve currency

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Speaker 2: and all of that. And it's very difficult for me

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Speaker 2: to wrap my head around that particular position. Like, I

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Speaker 2: understand there are downsides and upsides to that special status,

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Speaker 2: but the Trump administration seems really committed to the idea

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Speaker 2: that this is a giant burden being carried by the

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Speaker 2: United States. What are your thoughts on that particular argument,

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Speaker 2: Like how true is that or like what are the

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Speaker 2: actual downsides? And then secondly, what do you think of

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Speaker 2: some of their policy proposals where they're trying to attend

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Speaker 2: to this issue and I guess alleviate some of their complaints.

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Speaker 4: Well, what's particularly puzzling about the position they've adopted is

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Speaker 4: that while they do think it's a terrible burden, they

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Speaker 4: want to cling on to it with all possible might.

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Speaker 4: I mean, the people who made the most sophisticated analysis

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Speaker 4: of this, and that's obviously not Donald Trump Stephen Mirran,

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Speaker 4: he's a chairman of the Council of Economic Advisors, sort

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Speaker 4: of make it clear we want to get rid of

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Speaker 4: all the costs or come to that in a moment,

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Speaker 4: but we definitely want to make the keep the dollar

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Speaker 4: as the world's dominant currency. They really want to have

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Speaker 4: their cake and eat it. Well, this is really quite

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Speaker 4: complicated with the right answer is half an hour, which

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Speaker 4: we don't have. So the summary of it, the argument

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Speaker 4: about whether the dollar is a burden or a privilege

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Speaker 4: has really been going on since the sixties, and it's

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Speaker 4: when I started studying economics, so I'm very familiar with it,

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Speaker 4: and it led to the first attempt to readjust the

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Speaker 4: cost of this, which is the closest parallels to what

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Speaker 4: we are seeing now, which is Nixon under Nixon, the

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Speaker 4: Nixon Shock of seventy one when he basically tried to

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Speaker 4: get the dollar devalued to sounds familiar, right, I Mean,

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Speaker 4: that's what one of the things they're trying to do

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Speaker 4: is to get everybody to appreciate their currencies against the dollar.

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Speaker 4: And the reason they needed to get the dollar devalued

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Speaker 4: is then is they had a fixture change rate system.

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Speaker 4: Obviously not the situation. Now the dollar was tied to gold.

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Speaker 4: The monetary policy of view as in no way represented

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Speaker 4: what you should do if you're on the gold standard.

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Speaker 4: One of my constant points is that lots of people

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Speaker 4: say going off gold in seventy one was the worst

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Speaker 4: thing that ever happened. But my argument is that US

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Speaker 4: was never really on gold. We can discuss that if

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Speaker 4: you want, rather remote from this, but the key point

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Speaker 4: is he imposed imputs charges. Sounds familiar, and he told

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Speaker 4: them those will remain until you revalue your currencies, and

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Speaker 4: indeed they did get them revalued. John Connolly, the Treasury

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Speaker 4: sectually famously said the dollar is our currency and your problem.

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Speaker 4: And so he sorted this out as it were, and

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Speaker 4: that ended up in the regime of generalized floating. So

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Speaker 4: got its way, But after that no real effort was

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Speaker 4: made to readjust it. What is true for reasons that

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Speaker 4: are linked to the Asian financial crisis of the late nineties.

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Speaker 4: After a lot, I won't go through the plaza to

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Speaker 4: the louver simply because well it's part of the story.

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Speaker 4: Of course, another period of similar problem arose. There to

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Speaker 4: two other periods when this problem re arose. The excessive

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Speaker 4: appreciation of the dollar from the American sense and the

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Speaker 4: sense that was leading to uncompetitiveness and that affected important

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Speaker 4: parts of the economy and something had to be done

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Speaker 4: about it. And so that was Nixon was the first one.

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Speaker 4: The second one was the Reagan era, and he introduced

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Speaker 4: has some similarities with subsequent developments, more recent developments. He

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Speaker 4: had Paul Volca running the FED, so hypertite monetary policy

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Speaker 4: and a floating exchange rate and a big fiscal expansion,

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Speaker 4: right tax cuts. The combination of very aggressive fiscal expansion

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Speaker 4: tite monetary policy is a classic combination in economics to

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Speaker 4: lead to an appreciation of the real exchange rate. And

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Speaker 4: it did. The trade deficit exploded, Japanese cars wiped out

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Speaker 4: American cars. There was hysteria about this. The Americans introduced

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Speaker 4: voluntary export restraint on pose them. Bob Leittheiser, interestingly was

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Speaker 4: a negotiator at that time and has echoes, doesn't it,

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Speaker 4: and finally got so this created so much protectionist pressure

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Speaker 4: in the United States that the Americans decided that they

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Speaker 4: needed to get the dollar dey valued, and that was

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Speaker 4: what the Plaza Cord was about. And then two three

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Speaker 4: years later, I think two years later the Louver Agreement,

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Speaker 4: they decided to stabilize it. So that was another example

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Speaker 4: of this concern about people want the dollar too much.

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Speaker 4: Want we want it to be the global currency, but

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Speaker 4: we don't want too much demand for dollar. The third episode,

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Speaker 4: the more recent one, is really very interesting. It's the

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Speaker 4: theme of my previous book, The Chips and the Shops,

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Speaker 4: which is about the financial crisis, is after the Asian

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Speaker 4: financial crisis, two things which came together happened. First with

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Speaker 4: the explosion of China onto the world markets and China's

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Speaker 4: massive accumulation of reserves as a byproduct with termination to

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Speaker 4: keep the remnant be fixed against the dollar, and that

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Speaker 4: led to the explosion of the Chinese current account surplus.

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Speaker 4: It reached a peak of ten percent of GDP in

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Speaker 4: two thousand and eight. And the other thing that happened,

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Speaker 4: which went parallels after the Asian financial crisis, every trading

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Speaker 4: power in Asia decided we could never let that happen again.

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Speaker 4: And what they thought had happened to them was running

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Speaker 4: a current account deficit, a big trade deficit, and borrowing

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Speaker 4: lots of dollars because they discovered well most of the

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Speaker 4: dollars they borrowed was from Western banks and mostly American bankers.

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Speaker 4: They ran and they didn't have a central bank. They

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Speaker 4: got print dollars. So when it they had a run,

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Speaker 4: their economies crashed. And so their conclusion us, we must

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Speaker 4: accumulate dollars without limit more or less and run chrent

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Speaker 4: account surpluses to accumulate these dollars. Those two things came

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Speaker 4: together and that led to an enormous expansion of the

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Speaker 4: US external deficit, and that in my view, directly led

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Speaker 4: to the global financial crisis. So these are the three

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Speaker 4: episodes all around this same problem of the dollar's role,

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Speaker 4: and that's not wrong. Now, the question is how you

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Speaker 4: manage it. It's not fundamentally a trade policy problem, pretty obviously,

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Speaker 4: it's an exchange rate compativeness and macroeconomic policy problem. Interacted

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Speaker 4: and reasonably sophisticated policy makers who handled the previous episodes.

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Speaker 4: In the end, the presidents all of listened largely to

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Speaker 4: relatively competent economists manage these episodes, including most notably the

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Speaker 4: global financial crisis, which is the biggest of these episodes.

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Speaker 4: The basic point here is yes management of a global

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Speaker 4: system in which the money in the system, which is

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Speaker 4: the dollar is produced by one country does lead to

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Speaker 4: very significant instabilities, which is why intelligent people have thought

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Speaker 4: about this, have quite logically said, we'd have a better

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Speaker 4: economy if we had a world currency, but we don't

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Speaker 4: know how to produce a world currency. The Europeans created

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Speaker 4: the Europe for this reason. Within Europe. I won't go

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Speaker 4: into the question of whether it worked, but the point

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Speaker 4: is there is a problem here. Now. The problem is

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Speaker 4: how you manage it without blowing up the system. A

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Speaker 4: trade war with everybody at the same time won't solve

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Speaker 4: the problem because underneath it, it's a currency and macroeconomic policy problem.

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Speaker 4: And I think this mainly nowadays relates to the role

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Speaker 4: of China in the system. They're not wrong about that.

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Speaker 4: I've written quite a lot about this, but unfortunately, the

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Speaker 4: way the US is going about it, I don't see

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Speaker 4: how they're going to get to a resolution. But in

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Speaker 4: the end, the US has to decide do we really

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Speaker 4: like having the dollars the global currency pulse.

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Speaker 2: They do.

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Speaker 4: It gives an enormous power, It makes borrowing much cheaper.

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Speaker 4: It allows the biggest economy in the world to run

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Speaker 4: ridiculously large fiscal deficits six percent of GDP at full

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Speaker 4: employment with an explosive debt because everybody is invested in

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Speaker 4: holding dollars, and that gives the American policy makers spectacular

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Speaker 4: room for maneuver. They can have guns and butter and

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Speaker 4: they've done it many times, and periodically they get very

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Speaker 4: upset about it, but it's a choice they made after

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Speaker 4: the war. They could stop it, but they would lose

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Speaker 4: an awful lot in the process of the idea that

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Speaker 4: it's an unambiguous loss to the US. As has just

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Speaker 4: been pointed out, the US is despite this terrible burden

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Speaker 4: that they are whining about, an immensely rich and powerful

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Speaker 4: country which can spend more than its income indefinitely and

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Speaker 4: it's not going to go bankrupt. So from our point

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Speaker 4: of view, particularly speaking is a British person who knows

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Speaker 4: what happened when we lost this all those Sterling crisis

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Speaker 4: when I was growing up in the fifties and sixties.

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Speaker 4: Obviously we're all about losing that very very undesirable because

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Speaker 4: people ran from sterling and we couldn't run fiscal deficits

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Speaker 4: of six percent of GDP. We would blow up let's

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Speaker 4: trust ride, So we would say, stop complaining, guys, you're rich,

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Speaker 4: you're fat, and your currency is basically safe unless you

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Speaker 4: screw up monstrously, So why are you screwing up monstrously?

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Speaker 4: That's where we are now.

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Speaker 2: Joe, Can I just say that was such a treat

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Speaker 2: Martin Wolf on the three defining moments of the development

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Speaker 2: of the global dollar reserve system, absolutely amazing, fantastic.

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Speaker 3: I just have one question. Could you give us, like

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Speaker 3: the thirty second version of why we weren't on the

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Speaker 3: gold standard prior to nineteen seventy one, because I think

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Speaker 3: listeners be curious about that.

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Speaker 4: Well, okay, well that's a very one kitchen. I'll just start.

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Speaker 4: The gold standard required a very strong relationship. I'll go back, really,

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Speaker 4: let's go back how the gold standard operated was defined

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Speaker 4: by all people, not an economist, but David Hume, the

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Speaker 4: great Scottish philosopher, one of the great geniuses in the

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Speaker 4: middle of the eighteenth century, when he explained very simply,

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Speaker 4: imagine gold is your currency. In that stage, gold pretty

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Speaker 4: well was the currency, though there was and so if

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Speaker 4: you ran a balance of payments deficit, you finance your

435
00:24:40,040 --> 00:24:44,239
Speaker 4: deficit with exports of gold. And what that did is

436
00:24:44,520 --> 00:24:47,560
Speaker 4: as the goal was disappearing from you you were being

437
00:24:47,680 --> 00:24:52,560
Speaker 4: demonetized and the money in the economy was shrinking, and

438
00:24:52,600 --> 00:24:55,000
Speaker 4: so what you had to do is lower your prices go.

439
00:24:55,720 --> 00:24:58,840
Speaker 4: He was a moneitorist, as all economists were, and I

440
00:24:58,920 --> 00:25:02,399
Speaker 4: still am in some ways. And so prices are just downward.

441
00:25:02,480 --> 00:25:04,920
Speaker 4: That makes you more competitive, and that will adjust the

442
00:25:04,960 --> 00:25:07,280
Speaker 4: balance of payments and will move into surplus. That's how

443
00:25:07,320 --> 00:25:10,520
Speaker 4: it's supposed to work. So if you're on the gold

444
00:25:10,520 --> 00:25:13,679
Speaker 4: standard properly, and you have a currency linked to gold

445
00:25:13,720 --> 00:25:16,720
Speaker 4: with a fixed price, which Sterling had the four nineteen

446
00:25:16,800 --> 00:25:19,040
Speaker 4: thirty one, well we'll go into the history of Sterling

447
00:25:19,080 --> 00:25:22,320
Speaker 4: and gold, and the US was supposed to have until

448
00:25:22,359 --> 00:25:27,320
Speaker 4: seventy one. Then if there's a gold drain, you're exporting

449
00:25:27,400 --> 00:25:33,359
Speaker 4: gold to satisfy creditors who accumulating claims upon you. Your

450
00:25:33,600 --> 00:25:38,800
Speaker 4: monetary based shrinks. So your monetary policy should tighten automatically,

451
00:25:39,240 --> 00:25:43,719
Speaker 4: and that will introduce deflationary pressure in your economy, and

452
00:25:43,800 --> 00:25:47,959
Speaker 4: your price level will fall, and that will equibrilate equilibrate it.

453
00:25:48,320 --> 00:25:51,080
Speaker 4: So in the late sixties and early seventies, let's take

454
00:25:51,119 --> 00:25:54,120
Speaker 4: this episode, the US ran a huge current account deficit

455
00:25:54,280 --> 00:25:57,320
Speaker 4: and the main reason was they decided to finance the

456
00:25:57,400 --> 00:26:01,159
Speaker 4: Vietnam War by increasing the fiscal deficit, so they created

457
00:26:01,240 --> 00:26:04,520
Speaker 4: access demand in the US. That created inflationary pressure in

458
00:26:04,560 --> 00:26:06,520
Speaker 4: the US that went on for quite a long time

459
00:26:06,600 --> 00:26:09,640
Speaker 4: and a huge current account deficit. But they didn't want

460
00:26:09,680 --> 00:26:14,080
Speaker 4: to allow the FED to start tightening monetary policy and

461
00:26:14,119 --> 00:26:17,920
Speaker 4: deflating the American economy to reduce the prize level. They

462
00:26:18,000 --> 00:26:20,879
Speaker 4: were very happy running these huge current account deficits, and

463
00:26:20,920 --> 00:26:23,320
Speaker 4: that made, of course, the rest of the world was

464
00:26:23,359 --> 00:26:28,120
Speaker 4: accumulating dollar claims at a very rapid base, particularly the Germans,

465
00:26:28,119 --> 00:26:30,879
Speaker 4: the Japanese and so forth. And after a while while

466
00:26:31,280 --> 00:26:34,040
Speaker 4: they started on France and they started saying, we don't

467
00:26:34,040 --> 00:26:36,399
Speaker 4: want all these dollars, we want our real stuff, and

468
00:26:36,440 --> 00:26:40,080
Speaker 4: they started converting their dollars for gold, and that's when

469
00:26:40,119 --> 00:26:43,520
Speaker 4: the drain on Fort Nosk happened. And then the US

470
00:26:43,560 --> 00:26:46,159
Speaker 4: had a very simple choice. It was pretty obvious. We

471
00:26:46,160 --> 00:26:48,040
Speaker 4: were discussing it when I was a student in the

472
00:26:48,240 --> 00:26:53,440
Speaker 4: late sixties. They could ignore this and the goal would disappear,

473
00:26:53,560 --> 00:26:55,719
Speaker 4: and then they would have to go off gold. They

474
00:26:55,720 --> 00:26:59,280
Speaker 4: could reprice gold, which they didn't want to do because

475
00:26:59,280 --> 00:27:01,840
Speaker 4: it was a recognition of failure, or they could go

476
00:27:01,880 --> 00:27:05,080
Speaker 4: off the gold standard, and the one thing they didn't

477
00:27:05,119 --> 00:27:07,600
Speaker 4: want to do was deflate the economy. That meant they

478
00:27:07,600 --> 00:27:09,960
Speaker 4: were ignoring the rules of the gold standard. The rules

479
00:27:10,000 --> 00:27:12,919
Speaker 4: of the gold standard were, if you were losing gold,

480
00:27:13,040 --> 00:27:16,600
Speaker 4: you had to deflate your economy to make it competitive

481
00:27:16,680 --> 00:27:20,360
Speaker 4: again by lowering your dollar prices in a fixed rate regime.

482
00:27:20,960 --> 00:27:24,959
Speaker 4: And at these crucial moments, this crucial moment, they chose

483
00:27:25,080 --> 00:27:28,040
Speaker 4: not to do that. So the regime collapsed and in

484
00:27:28,080 --> 00:27:31,119
Speaker 4: the Great Depression, by the way, even more important, they

485
00:27:31,160 --> 00:27:34,600
Speaker 4: failed to do the reverse. At that stage, they had

486
00:27:34,600 --> 00:27:39,080
Speaker 4: a huge current account surplus. America was very very competitive,

487
00:27:39,440 --> 00:27:44,360
Speaker 4: and the US was of course price level was collapsing,

488
00:27:45,080 --> 00:27:48,159
Speaker 4: so it was becoming even more competitive, and that was

489
00:27:48,200 --> 00:27:51,120
Speaker 4: exporting the depression to the whole world through the gold

490
00:27:51,160 --> 00:27:53,960
Speaker 4: standard system. And so what the US should have been

491
00:27:53,960 --> 00:27:57,760
Speaker 4: doing instead of allowing the money supply to collapse. Friedman

492
00:27:57,840 --> 00:28:01,359
Speaker 4: of course wrote classically about this his book with Anna Schwartz.

493
00:28:01,400 --> 00:28:04,240
Speaker 4: They should have been expanding the money supply like crazy.

494
00:28:04,320 --> 00:28:07,400
Speaker 4: So this was the inverse that was the first Great crisis.

495
00:28:07,520 --> 00:28:10,119
Speaker 4: What I discussed earlier was the second crisis of the

496
00:28:10,119 --> 00:28:13,359
Speaker 4: gold standard in the twentieth century. So in the Great Depression.

497
00:28:13,680 --> 00:28:16,600
Speaker 4: The US failed to follow gold standard rules, which was

498
00:28:16,880 --> 00:28:20,160
Speaker 4: precisely when they had a huge garret account surplus and

499
00:28:20,359 --> 00:28:25,720
Speaker 4: they had this immensely strong position in the gold inflow,

500
00:28:26,040 --> 00:28:31,359
Speaker 4: they were not pursuing massively expansionary monetary policy. On the contrary,

501
00:28:31,359 --> 00:28:34,960
Speaker 4: they were pursuing massively contractiony monetary policy, making it all

502
00:28:34,960 --> 00:28:37,280
Speaker 4: worse and the price level was collapsing in the US.

503
00:28:37,520 --> 00:28:39,560
Speaker 4: So again they failed to follow the rules of the

504
00:28:39,560 --> 00:28:42,360
Speaker 4: gold standard. The US showed itself and like the UK

505
00:28:42,520 --> 00:28:45,040
Speaker 4: in the long period it ran the gold standard a

506
00:28:45,080 --> 00:28:50,040
Speaker 4: country incapable of allowing the foreign position basically the balance

507
00:28:50,080 --> 00:28:55,040
Speaker 4: of payments to force its monetary policy in directions either

508
00:28:55,080 --> 00:28:59,480
Speaker 4: expantory or contractionary. So my view is that the gold

509
00:28:59,520 --> 00:29:03,040
Speaker 4: standard under the US from the twenties onwards, that was

510
00:29:03,080 --> 00:29:05,840
Speaker 4: basically when it shifted from a sterling base to a

511
00:29:05,880 --> 00:29:08,840
Speaker 4: dollar based gold standard. The US never followed the rules

512
00:29:08,880 --> 00:29:12,920
Speaker 4: of the gold standards. In two colossal episodes, it ignored them.

513
00:29:13,120 --> 00:29:15,920
Speaker 4: So of course the gold stander collapsed, and all these

514
00:29:15,960 --> 00:29:19,280
Speaker 4: whining about this again is ridiculous because the US has

515
00:29:19,520 --> 00:29:22,120
Speaker 4: never had any intention and that's what we're seeing now

516
00:29:22,240 --> 00:29:27,280
Speaker 4: of allow any international rules of greed rules from actually

517
00:29:27,440 --> 00:29:30,040
Speaker 4: forcing it to do something it didn't really want to do.

518
00:29:46,200 --> 00:29:49,840
Speaker 2: We could happily just keep asking you questions about, you know,

519
00:29:50,280 --> 00:29:52,640
Speaker 2: financial history, but since we are in London and there

520
00:29:52,680 --> 00:29:54,080
Speaker 2: is a lot going on, I feel like I have

521
00:29:54,160 --> 00:29:57,600
Speaker 2: to ask at least one UK specific question. So I

522
00:29:57,680 --> 00:30:00,520
Speaker 2: met with some friends of mine from universe. I've been

523
00:30:00,520 --> 00:30:03,239
Speaker 2: meeting with them like over the past few days. All

524
00:30:03,280 --> 00:30:05,840
Speaker 2: of them are professionals, seem to be doing pretty well

525
00:30:05,840 --> 00:30:10,000
Speaker 2: in their career, but the discussion always ended up centering

526
00:30:10,280 --> 00:30:14,280
Speaker 2: on salaries and real wages. I knew the UK had

527
00:30:14,280 --> 00:30:16,680
Speaker 2: a productivity problem and a real wage problem, but I

528
00:30:16,720 --> 00:30:20,160
Speaker 2: was surprised to hear the extent of it, at least

529
00:30:20,200 --> 00:30:23,320
Speaker 2: according to some of my friends. What's going on there?

530
00:30:23,400 --> 00:30:24,400
Speaker 2: Why has this happened?

531
00:30:25,480 --> 00:30:28,600
Speaker 4: I think that I like what we've been discussing so far.

532
00:30:28,760 --> 00:30:31,479
Speaker 4: This is one of the great puzzles. Actually, I call

533
00:30:31,560 --> 00:30:34,080
Speaker 4: about this very very recently on based on recent work,

534
00:30:34,600 --> 00:30:37,200
Speaker 4: and it's not unique to the UK, though I will

535
00:30:37,200 --> 00:30:41,720
Speaker 4: describe one aspect which is an outlier up to two

536
00:30:41,760 --> 00:30:44,760
Speaker 4: thousand and eight, so from about nineteen ninety two thousand

537
00:30:44,760 --> 00:30:48,040
Speaker 4: and eight, so after the Thatcher Revolution two two thousand

538
00:30:48,080 --> 00:30:52,480
Speaker 4: and eight, British productivity growth was really pretty strong. So

539
00:30:52,600 --> 00:30:57,080
Speaker 4: between nineteen ninety and two thousand and eight, output ahead

540
00:30:57,160 --> 00:31:00,880
Speaker 4: in the British economy rose by I think it was

541
00:31:00,880 --> 00:31:04,200
Speaker 4: about thirty eight percent, which is pretty good over a

542
00:31:04,200 --> 00:31:07,600
Speaker 4: period of seventeen years. It was around two percent a year,

543
00:31:07,920 --> 00:31:11,720
Speaker 4: and that was much better than our European peers and

544
00:31:12,280 --> 00:31:15,120
Speaker 4: quite a notable improvement of what had happened in the

545
00:31:15,120 --> 00:31:17,600
Speaker 4: seventies and eighty so we felt pretty happy we were

546
00:31:17,640 --> 00:31:21,640
Speaker 4: catching up again. Since then, since two thousand and eight,

547
00:31:22,040 --> 00:31:25,000
Speaker 4: OURPA behead has gone up over the entire period by

548
00:31:25,240 --> 00:31:28,240
Speaker 4: a little over five percent. Just think of that contrast.

549
00:31:28,240 --> 00:31:33,800
Speaker 4: It's dramatic. Now. ALP behead in other European countries has

550
00:31:33,840 --> 00:31:37,040
Speaker 4: not been much better over that period, but they were

551
00:31:37,080 --> 00:31:40,920
Speaker 4: already doing relatively poorly before two thousand and eight. The

552
00:31:41,040 --> 00:31:44,040
Speaker 4: slowdown in the UK has been greater than anywhere else.

553
00:31:44,480 --> 00:31:46,640
Speaker 4: Up to two thousand and eight, we were doing about

554
00:31:46,680 --> 00:31:48,440
Speaker 4: as well as the US, and since then we've been

555
00:31:48,480 --> 00:31:50,680
Speaker 4: in a different class. So it should be saying if

556
00:31:50,680 --> 00:31:53,000
Speaker 4: you look at the whole period since two thousand and eight,

557
00:31:53,080 --> 00:31:55,840
Speaker 4: the US has actually been doing worse than in the

558
00:31:55,840 --> 00:31:59,320
Speaker 4: previous period the US looks so great because everybody else

559
00:31:59,320 --> 00:32:03,280
Speaker 4: has been doing so badly. So the question is why

560
00:32:03,280 --> 00:32:07,040
Speaker 4: has this collapse in the UK happened? And I honestly

561
00:32:07,200 --> 00:32:11,120
Speaker 4: think we can think of lots of possible explanations, but

562
00:32:11,680 --> 00:32:15,320
Speaker 4: we don't fully understand it. You can't identify it in

563
00:32:15,480 --> 00:32:18,080
Speaker 4: just one sector. Though there are some sectors which are

564
00:32:18,080 --> 00:32:21,760
Speaker 4: particularly important. It seems to have happened in most sectors.

565
00:32:22,760 --> 00:32:25,440
Speaker 4: Our investment rate is very low, but it's always been

566
00:32:25,520 --> 00:32:29,000
Speaker 4: relatively low, so it's difficult to say the change there

567
00:32:29,120 --> 00:32:31,880
Speaker 4: is decisive. There are some aspects of the public sector

568
00:32:31,920 --> 00:32:35,080
Speaker 4: which clearly are important. The weakening and decline of the

569
00:32:35,920 --> 00:32:39,040
Speaker 4: oil and gas sector is important. The fact that the

570
00:32:39,080 --> 00:32:41,680
Speaker 4: financial sector has never been as dynamic as it was

571
00:32:41,720 --> 00:32:44,960
Speaker 4: before two thousand and seven and eight is important. But

572
00:32:45,120 --> 00:32:48,160
Speaker 4: the extent of the decline and what is essentially the

573
00:32:48,280 --> 00:32:51,200
Speaker 4: loss of dynamism in British capitalism, if you just look

574
00:32:51,240 --> 00:32:53,320
Speaker 4: at the foot seat, look at the stock market, in

575
00:32:53,920 --> 00:32:57,640
Speaker 4: most of the companies there are old and dying. We

576
00:32:57,720 --> 00:33:01,320
Speaker 4: don't fully understand. It is no doubt that the complete

577
00:33:01,360 --> 00:33:05,760
Speaker 4: absence of a dynamic, technological, high tech sector is important.

578
00:33:06,120 --> 00:33:08,200
Speaker 4: When you start looking at the detail, though, and that

579
00:33:08,280 --> 00:33:10,920
Speaker 4: was very interesting in this column, and the work I

580
00:33:11,160 --> 00:33:14,320
Speaker 4: did in this column is it's pretty clear that an

581
00:33:14,360 --> 00:33:17,280
Speaker 4: even bigger difference is in the use of technology in

582
00:33:17,320 --> 00:33:20,400
Speaker 4: the rest of the economy compared with the US. So

583
00:33:20,600 --> 00:33:23,840
Speaker 4: I think that we can see what's happened. There's been

584
00:33:23,880 --> 00:33:27,000
Speaker 4: a general loss of dynamism in the private sector, but

585
00:33:27,120 --> 00:33:30,840
Speaker 4: it's very difficult to ascribe into specific policy changes because

586
00:33:30,840 --> 00:33:34,080
Speaker 4: there really haven't been dramatic once we very much the

587
00:33:34,200 --> 00:33:38,520
Speaker 4: tax regulatory system is much like it was before. What

588
00:33:38,680 --> 00:33:41,720
Speaker 4: looks like is that there's sort of just dying. And

589
00:33:41,840 --> 00:33:45,479
Speaker 4: this is sort of a European wide problem in too so.

590
00:33:46,080 --> 00:33:51,360
Speaker 4: And of course if productivity growth disappears, re waged growth stops,

591
00:33:51,400 --> 00:33:56,240
Speaker 4: because in the end, the real wages are incredibly highly correlated,

592
00:33:56,320 --> 00:34:00,000
Speaker 4: not perfectly with the rate of growth productivity in the economy.

593
00:34:00,200 --> 00:34:01,719
Speaker 4: The same is true for the US if you look

594
00:34:01,760 --> 00:34:05,640
Speaker 4: at long periods, distribution matters a little. But Paul Gruman

595
00:34:05,680 --> 00:34:09,120
Speaker 4: actually said this, well, a long time ago, productivity is

596
00:34:09,200 --> 00:34:13,280
Speaker 4: and everything, but it's almost everything. So the basic answer

597
00:34:13,320 --> 00:34:16,919
Speaker 4: to this question is we know, as it were, what

598
00:34:17,000 --> 00:34:21,200
Speaker 4: the proximate cause is, but we don't know why it's happened. Fully,

599
00:34:21,320 --> 00:34:24,120
Speaker 4: I have lots of theories, but we don't really know

600
00:34:24,360 --> 00:34:27,520
Speaker 4: why this has happened. And it's a general European problem

601
00:34:27,680 --> 00:34:32,440
Speaker 4: to some degree. Also in East Asia Japan is noticeable,

602
00:34:32,600 --> 00:34:35,760
Speaker 4: though actually in the recent past pandemic post pandemic period,

603
00:34:36,000 --> 00:34:38,160
Speaker 4: Japan has done relatively well.

604
00:34:39,560 --> 00:34:41,920
Speaker 2: Since you mentioned Europe, one of the things people are

605
00:34:41,920 --> 00:34:45,080
Speaker 2: getting excited about now is the idea that maybe the

606
00:34:45,200 --> 00:34:49,239
Speaker 2: teriff w US isolationist policy is going to be this

607
00:34:49,320 --> 00:34:53,080
Speaker 2: big catalyst for Europe. And we've seen European mainland stocks

608
00:34:53,120 --> 00:34:56,920
Speaker 2: certainly go up recently. People are getting excited about finally

609
00:34:56,960 --> 00:34:58,719
Speaker 2: we're going to have, you know, maybe the prospect of

610
00:34:58,760 --> 00:35:01,920
Speaker 2: some real fiscal integration, or if not real physical integration,

611
00:35:02,000 --> 00:35:04,759
Speaker 2: at least a lot more fiscal spending on things like

612
00:35:04,840 --> 00:35:08,480
Speaker 2: defense and stuff like that. Is that a realistic possibility

613
00:35:08,520 --> 00:35:09,040
Speaker 2: in your view?

614
00:35:10,080 --> 00:35:13,840
Speaker 4: Well, and just to support this, even though it's partly

615
00:35:13,880 --> 00:35:18,040
Speaker 4: an economic shock which the Trump administration has given Europe

616
00:35:18,120 --> 00:35:21,920
Speaker 4: to big sharks, it's created a sort of security panic.

617
00:35:22,200 --> 00:35:26,120
Speaker 4: Is NATO over and that was particularly focused on the

618
00:35:26,120 --> 00:35:29,960
Speaker 4: issue of support for Ukraine and an economic shock, which

619
00:35:30,280 --> 00:35:36,880
Speaker 4: was the proposal now withdrawn for another eighty odd days

620
00:35:37,320 --> 00:35:40,560
Speaker 4: of penal tariffs twenty four percent. I can't remember what

621
00:35:40,600 --> 00:35:44,000
Speaker 4: exactly the figure for the EU was, somewhere in that range.

622
00:35:44,200 --> 00:35:46,279
Speaker 4: Do you have the two together. This is a crisis.

623
00:35:46,640 --> 00:35:50,960
Speaker 4: So if not now when, If you believe, as John Maney,

624
00:35:51,040 --> 00:35:53,600
Speaker 4: one of the great founding fathers of the EU said,

625
00:35:53,840 --> 00:35:56,600
Speaker 4: that Europe is born in crisis, this is a big crisis.

626
00:35:56,800 --> 00:36:00,600
Speaker 4: The world order is being transformed, and the crucial ally,

627
00:36:01,520 --> 00:36:04,720
Speaker 4: the country on which we're heavily dependent, has got absent,

628
00:36:04,960 --> 00:36:09,360
Speaker 4: as it were, possibly even hostile. So that's the plus side. Yes,

629
00:36:09,440 --> 00:36:13,160
Speaker 4: they really ought to respond. The obstacles to change are

630
00:36:13,200 --> 00:36:17,520
Speaker 4: also very very big. Europe is fragmented. It doesn't have

631
00:36:18,120 --> 00:36:21,680
Speaker 4: a genuine people. The brexitters were right when they always

632
00:36:21,680 --> 00:36:24,880
Speaker 4: said Europe doesn't have a demos, it doesn't have a people.

633
00:36:25,200 --> 00:36:28,800
Speaker 4: It has people's it's not surprising. Look, you know, the

634
00:36:28,920 --> 00:36:32,080
Speaker 4: Roman Empire disappeared fifteen hundred years ago and Europe has

635
00:36:32,120 --> 00:36:36,399
Speaker 4: effectively been dis divided ever since, except under the Catholic Church,

636
00:36:36,440 --> 00:36:38,960
Speaker 4: and we know where that ended up in the sixteenth century.

637
00:36:39,120 --> 00:36:44,840
Speaker 4: So the answer is that I don't know whether this

638
00:36:45,040 --> 00:36:50,080
Speaker 4: crisis is big enough to force the source of changes economically,

639
00:36:50,120 --> 00:36:53,200
Speaker 4: which Mario Dragi wrote about in his report or politically

640
00:36:53,480 --> 00:36:57,000
Speaker 4: to deal with the security questions. I tend to be

641
00:36:57,080 --> 00:37:00,960
Speaker 4: skeptical simply because I know how big these challenges will be,

642
00:37:01,040 --> 00:37:04,279
Speaker 4: in how much resistance there has been to every other

643
00:37:04,440 --> 00:37:08,360
Speaker 4: necessary change. I think the crisis may have to get bigger.

644
00:37:08,560 --> 00:37:10,920
Speaker 4: But I don't rule out the possibility that the crisis

645
00:37:10,960 --> 00:37:14,640
Speaker 4: will get bigger, because if you ask me what will

646
00:37:14,680 --> 00:37:17,360
Speaker 4: the American policy look like a year from now, I

647
00:37:17,360 --> 00:37:20,040
Speaker 4: have absolutely no idea, but it could be much more

648
00:37:20,040 --> 00:37:22,920
Speaker 4: hostile than it is now. It's quite thickly possible, in

649
00:37:22,920 --> 00:37:26,040
Speaker 4: which case maybe the Europeans really will be forced. At

650
00:37:26,080 --> 00:37:30,279
Speaker 4: the moment it looks like individual nation state response, not collective,

651
00:37:30,640 --> 00:37:34,080
Speaker 4: and they're the One really big change I think is

652
00:37:34,120 --> 00:37:38,160
Speaker 4: that the Germans are panicking, and Germany, in the center

653
00:37:38,200 --> 00:37:41,040
Speaker 4: of Europe, is always prone to feeling insecure. That's part

654
00:37:41,040 --> 00:37:44,319
Speaker 4: of its history. And I think it's pretty clear that

655
00:37:44,360 --> 00:37:47,719
Speaker 4: the new government coming in will be much more aggressive

656
00:37:47,760 --> 00:37:52,160
Speaker 4: on economic policy. It's forgotten the debt break nonsense. It

657
00:37:52,480 --> 00:37:56,360
Speaker 4: clearly will mount a pretty big defense build up. It

658
00:37:56,400 --> 00:37:59,480
Speaker 4: will become a much stronger motor of demand and all

659
00:37:59,520 --> 00:38:01,960
Speaker 4: on its ow. Though it can't carry the whole of Europe.

660
00:38:02,040 --> 00:38:04,400
Speaker 4: That will make a big difference. But I think in

661
00:38:04,480 --> 00:38:08,400
Speaker 4: the end, at least in the next few years, we

662
00:38:08,440 --> 00:38:12,200
Speaker 4: should trust more and what individual nations, above all Germany do.

663
00:38:12,480 --> 00:38:15,160
Speaker 4: It's much more difficult for France, which is also very

664
00:38:15,160 --> 00:38:18,360
Speaker 4: divided politically. Remember there's a very big what i' referred

665
00:38:18,360 --> 00:38:21,759
Speaker 4: to as fifth column, a Putinist fifth column in Europe,

666
00:38:22,000 --> 00:38:26,279
Speaker 4: and France is usually fiscally constrained, unlike Germany. So I'm

667
00:38:26,360 --> 00:38:29,960
Speaker 4: modestly optimistic about the near term, but a really big

668
00:38:30,080 --> 00:38:50,359
Speaker 4: leap into Union. I don't see the idea of.

669
00:38:51,800 --> 00:38:54,920
Speaker 3: Ninety days and the US is going to sign all

670
00:38:55,000 --> 00:38:58,080
Speaker 3: of these by letter or trade deals with partners all

671
00:38:58,120 --> 00:39:02,879
Speaker 3: around the world strikes me absurd on its face. I mean, these,

672
00:39:02,920 --> 00:39:05,719
Speaker 3: you know, trade deals take years and years to negotiate,

673
00:39:05,800 --> 00:39:10,040
Speaker 3: and especially the limited constraints whatever I strike to me

674
00:39:10,080 --> 00:39:14,440
Speaker 3: as I'm certain, nonetheless I mentioned in the beginning. You know, normally,

675
00:39:15,120 --> 00:39:18,560
Speaker 3: I'm sorry, I would not typically care, how you know,

676
00:39:18,600 --> 00:39:21,520
Speaker 3: the approval ratings of the United States and Sweden or

677
00:39:21,560 --> 00:39:24,960
Speaker 3: Denmark do not typically particularly interest me. But in an

678
00:39:25,080 --> 00:39:29,480
Speaker 3: environment of attempting to do deals, it strikes me as

679
00:39:29,560 --> 00:39:31,960
Speaker 3: very relevant that the leaders of these countries have to

680
00:39:32,000 --> 00:39:34,960
Speaker 3: be accountable to the individuals who elected them. Talk to

681
00:39:35,040 --> 00:39:38,920
Speaker 3: us about the mood either among the elites who are

682
00:39:38,920 --> 00:39:42,560
Speaker 3: going to be involved in these theoretical negotiations which I

683
00:39:42,560 --> 00:39:46,480
Speaker 3: don't even know if they're existing, and the impulse to

684
00:39:46,680 --> 00:39:50,359
Speaker 3: try to rectify and to try to come with two

685
00:39:50,400 --> 00:39:53,480
Speaker 3: friendly relations with the new administration in the United States

686
00:39:53,520 --> 00:39:55,480
Speaker 3: right now, how bad is it and how much of

687
00:39:55,480 --> 00:39:59,400
Speaker 3: a hindrance is that to achieving something that resembles a

688
00:39:59,480 --> 00:40:00,319
Speaker 3: happy out come.

689
00:40:01,560 --> 00:40:04,880
Speaker 4: So I think this has to be broken down also

690
00:40:05,080 --> 00:40:09,640
Speaker 4: to several elements. Countries will want to reach a deal

691
00:40:09,640 --> 00:40:13,200
Speaker 4: with you. The US is very important. It's a very important

692
00:40:13,280 --> 00:40:17,080
Speaker 4: partner in terms of both security and trade, and the

693
00:40:17,400 --> 00:40:20,960
Speaker 4: administration is correct that these are linked in people's perceptions,

694
00:40:21,120 --> 00:40:25,760
Speaker 4: and this is particularly true for the Asians broadly defined,

695
00:40:25,800 --> 00:40:29,680
Speaker 4: particularly East Asians and Europeans. So they will want to

696
00:40:29,719 --> 00:40:32,799
Speaker 4: reach a deal if they can. The second issue, which

697
00:40:32,840 --> 00:40:36,840
Speaker 4: is really important is they will need to feel that

698
00:40:36,920 --> 00:40:41,480
Speaker 4: this is a deal and this is about trust. Particularly

699
00:40:41,520 --> 00:40:44,000
Speaker 4: it's got politically painful aspects to it. I'll come to

700
00:40:44,040 --> 00:40:47,000
Speaker 4: the substance of the deal in the next is they

701
00:40:47,000 --> 00:40:48,600
Speaker 4: will need to feel that the US is going to

702
00:40:48,600 --> 00:40:52,759
Speaker 4: stick with it, and there's no doubt whether in a

703
00:40:52,800 --> 00:40:55,640
Speaker 4: way I think for policymakers who are reasonably professional, whether

704
00:40:55,680 --> 00:40:58,320
Speaker 4: you like the country or not is not that important.

705
00:40:58,680 --> 00:41:03,000
Speaker 4: Though obviously the people really ate the Yanks. It's going

706
00:41:03,080 --> 00:41:06,480
Speaker 4: to become more difficult. But the crucial question they have

707
00:41:06,719 --> 00:41:08,799
Speaker 4: is can we trust that we're not going to go

708
00:41:08,880 --> 00:41:10,080
Speaker 4: through this every week?

709
00:41:10,200 --> 00:41:10,560
Speaker 3: Are we?

710
00:41:10,800 --> 00:41:13,239
Speaker 4: And at the moment they're not sure if they won't

711
00:41:13,239 --> 00:41:14,959
Speaker 4: have to do it every week. And there's no doubt

712
00:41:15,120 --> 00:41:17,600
Speaker 4: in this regard that the treatment of Canada has been

713
00:41:17,680 --> 00:41:20,600
Speaker 4: quite a shock. Yeah, you know, that really came out

714
00:41:20,640 --> 00:41:24,200
Speaker 4: of the blue sky. I was always pretty pessimistic about

715
00:41:24,200 --> 00:41:27,080
Speaker 4: what the Trump adminissian would do, but this has been

716
00:41:27,360 --> 00:41:29,000
Speaker 4: really quite out of left field.

717
00:41:29,320 --> 00:41:29,839
Speaker 2: And the.

718
00:41:31,760 --> 00:41:35,080
Speaker 4: Well, Greenland, yes, but Greenland is less important than Canada's

719
00:41:35,120 --> 00:41:39,600
Speaker 4: a real long term ally friend. You Trump himself signed

720
00:41:39,960 --> 00:41:44,000
Speaker 4: the United States, Mexico and Canada agreement and then sort

721
00:41:44,000 --> 00:41:46,359
Speaker 4: of blew it up, So that makes do we trust them?

722
00:41:46,880 --> 00:41:51,359
Speaker 4: The third is obviously you can't do a detailed trade deal,

723
00:41:51,920 --> 00:41:53,919
Speaker 4: and they seem to have an ambition to somehow link

724
00:41:53,960 --> 00:41:58,399
Speaker 4: the currency with it. I have absolutely no idea what's

725
00:41:58,440 --> 00:42:01,240
Speaker 4: going on in these discussions. No nobody, i think, seems

726
00:42:01,280 --> 00:42:05,359
Speaker 4: to do and that seems to know in detail. But

727
00:42:05,440 --> 00:42:08,600
Speaker 4: there is something that somebody suggested to me and I've

728
00:42:08,640 --> 00:42:12,920
Speaker 4: been thinking about that the Americans might be saying, which

729
00:42:13,560 --> 00:42:18,560
Speaker 4: might fit into their general theme. Assume that all this

730
00:42:18,719 --> 00:42:22,360
Speaker 4: smoke and mirrors is basically a cover for the complete

731
00:42:22,400 --> 00:42:25,359
Speaker 4: decoupling of the world from China. China, that's all they're

732
00:42:25,400 --> 00:42:25,960
Speaker 4: trying to do.

733
00:42:26,200 --> 00:42:29,399
Speaker 3: And this is as you're willing to be part of their.

734
00:42:29,400 --> 00:42:34,360
Speaker 4: Deal and having frightened people and shaken them enough with

735
00:42:34,440 --> 00:42:39,680
Speaker 4: these absolutely ridiculous bilateral tariffs nonsense, which everybody can see

736
00:42:39,719 --> 00:42:42,920
Speaker 4: is an unworkable way of running world trade. Discuss that too,

737
00:42:42,920 --> 00:42:45,920
Speaker 4: but that's a different matter. So basically what the US,

738
00:42:45,960 --> 00:42:48,120
Speaker 4: let's suppose the US comes up is that we will

739
00:42:48,160 --> 00:42:51,360
Speaker 4: go back to the status quo anti if you follow

740
00:42:51,440 --> 00:42:55,799
Speaker 4: our tariffs on China, right, that's the deal, and we

741
00:42:55,880 --> 00:42:59,399
Speaker 4: promise again this come back to the trust if we're

742
00:42:59,400 --> 00:43:02,600
Speaker 4: going to comple completely burn our boats with China. And

743
00:43:02,640 --> 00:43:07,480
Speaker 4: it's particularly applies to some of the Europeans and Japan

744
00:43:07,880 --> 00:43:10,600
Speaker 4: in all the countries in the region, we really have

745
00:43:10,719 --> 00:43:15,279
Speaker 4: to trust America. So it's a very big ask. But

746
00:43:15,440 --> 00:43:20,719
Speaker 4: that's a deal that maybe quite a few countries would

747
00:43:20,760 --> 00:43:24,840
Speaker 4: be willing to sign, but I certainly wouldn't guarantee it because,

748
00:43:25,080 --> 00:43:28,000
Speaker 4: as I said, it's a tremendous cost. They all know

749
00:43:28,200 --> 00:43:31,920
Speaker 4: China is an immense and rising power for many countries.

750
00:43:31,960 --> 00:43:35,759
Speaker 4: It's their most important trading partner. For most countries they

751
00:43:35,880 --> 00:43:39,080
Speaker 4: trade with the US. Though important. Isn't that europe can

752
00:43:39,120 --> 00:43:41,799
Speaker 4: survive without it? Let's be clear. I mean, we are

753
00:43:41,880 --> 00:43:44,760
Speaker 4: real adjustment, but it's not. You know, the most important

754
00:43:44,760 --> 00:43:48,680
Speaker 4: trading partners are themselves, if I remember, they trade more

755
00:43:48,719 --> 00:43:51,800
Speaker 4: with the UK than the US, so they can survive.

756
00:43:53,000 --> 00:43:55,680
Speaker 4: But if the US is really after getting everybody else

757
00:43:55,719 --> 00:43:59,040
Speaker 4: to break with China and or agreeing that they're going

758
00:43:59,080 --> 00:44:01,160
Speaker 4: to go on the holding the dog they are getting to,

759
00:44:01,160 --> 00:44:03,120
Speaker 4: they're not going to crease their reserves. Europeans don't have

760
00:44:03,200 --> 00:44:07,080
Speaker 4: much anyway. But I could imagine a very simple deal

761
00:44:07,239 --> 00:44:10,640
Speaker 4: like this might work with quite a few countries, but

762
00:44:10,760 --> 00:44:15,759
Speaker 4: it won't work with everybody, and it will shatter the world.

763
00:44:15,360 --> 00:44:15,960
Speaker 3: But it leads.

764
00:44:16,000 --> 00:44:19,200
Speaker 4: It sort of makes if you think that really what

765
00:44:19,320 --> 00:44:23,600
Speaker 4: the US is about is breaking China, which I don't

766
00:44:23,600 --> 00:44:26,040
Speaker 4: think they can achieve by the way, I don't think.

767
00:44:26,440 --> 00:44:29,080
Speaker 4: I think China will survive perfectly well, but the it's

768
00:44:29,120 --> 00:44:32,560
Speaker 4: another matter. But then I can see something might come

769
00:44:32,600 --> 00:44:34,840
Speaker 4: out of it. But if they're really trying to negotia

770
00:44:34,840 --> 00:44:37,920
Speaker 4: to a real trade deal with every single country and

771
00:44:37,960 --> 00:44:41,320
Speaker 4: it's all going to be different, that's completely impossible.

772
00:44:41,520 --> 00:44:45,160
Speaker 3: Tracy. There's a good article yesterday on the Bloomberg Trump

773
00:44:45,160 --> 00:44:48,560
Speaker 3: putting pressure on the Hungarians say, because there's a hunger

774
00:44:48,719 --> 00:44:52,320
Speaker 3: is a huge destination for like real capital influence from China.

775
00:44:52,440 --> 00:44:55,200
Speaker 3: Like Nick Denton, we'll talk about it. There's uid factor,

776
00:44:55,360 --> 00:44:57,839
Speaker 3: is there, so like the pressure there and you know

777
00:44:58,000 --> 00:45:00,399
Speaker 3: Orbit is like a Trump guy, et cetera. So these

778
00:45:00,400 --> 00:45:02,200
Speaker 3: are really interesting tensions.

779
00:45:02,440 --> 00:45:05,560
Speaker 4: Well, Auburn has a very bad economy. He runs his

780
00:45:05,719 --> 00:45:08,600
Speaker 4: system as a crony capitalist system. It surprise and Brides

781
00:45:08,640 --> 00:45:12,000
Speaker 4: doesn't work very well. He's desperate and the Chinese know

782
00:45:12,120 --> 00:45:14,760
Speaker 4: he's desperate, and the Chinese are very clever. So he's

783
00:45:14,800 --> 00:45:17,200
Speaker 4: playing both sides. My feelings, it couldn't happen to a

784
00:45:17,280 --> 00:45:21,080
Speaker 4: nicer man to be squeezed by the too, the totalitarian

785
00:45:21,160 --> 00:45:24,840
Speaker 4: system and the authoritarian system. At the same time, Victor

786
00:45:24,880 --> 00:45:26,000
Speaker 4: Oben deserves it.

787
00:45:26,680 --> 00:45:28,840
Speaker 2: So I'm just going to ask one more question, the

788
00:45:28,880 --> 00:45:32,040
Speaker 2: most important one. You know, we started this discussion talking

789
00:45:32,080 --> 00:45:36,239
Speaker 2: about the development of our current bout of political populism

790
00:45:36,400 --> 00:45:40,680
Speaker 2: in the States on behalf of my dad, who believes

791
00:45:40,680 --> 00:45:43,880
Speaker 2: that the Bank for International Settlements is secretly ruling the world.

792
00:45:44,760 --> 00:45:47,480
Speaker 2: Can you please tell him what actually happens at Builderberg.

793
00:45:47,960 --> 00:45:49,000
Speaker 2: You've been there right.

794
00:45:48,920 --> 00:45:51,520
Speaker 4: Well, there are two very different themes.

795
00:45:51,680 --> 00:45:53,960
Speaker 2: Yes, I realized, but it sounds.

796
00:45:53,680 --> 00:45:56,200
Speaker 4: As though your dad, I am shocked to know, is

797
00:45:56,280 --> 00:46:00,400
Speaker 4: one of these American conspiracy theorists. Yes, to put it wildly,

798
00:46:00,600 --> 00:46:04,000
Speaker 4: Bildeberg and the BIS are two completely separate institutions to

799
00:46:04,080 --> 00:46:09,040
Speaker 4: do completely separate things. And all I can say, having

800
00:46:09,120 --> 00:46:12,880
Speaker 4: followed the BIS pretty closely for a very long time,

801
00:46:13,360 --> 00:46:17,319
Speaker 4: they might wish to be bavel, but they surely are not.

802
00:46:17,960 --> 00:46:20,279
Speaker 4: And one of the best examples of this I will

803
00:46:20,280 --> 00:46:23,839
Speaker 4: give you of their failure. I like evidence, right, strange thing.

804
00:46:24,400 --> 00:46:26,840
Speaker 4: Up to two thousand and seven, the chief economists of

805
00:46:26,880 --> 00:46:29,680
Speaker 4: the BIS was a very dear friend of mine whom

806
00:46:29,680 --> 00:46:33,080
Speaker 4: I much admired, Bill White, a Canadian, and he was

807
00:46:33,239 --> 00:46:37,680
Speaker 4: arguing against all the central banks, particularly Green Spans fed

808
00:46:38,239 --> 00:46:41,200
Speaker 4: that monitor and then Ben Bernanke's fed the monetary policy

809
00:46:41,760 --> 00:46:45,480
Speaker 4: was far too loose, that as a result, the financial

810
00:46:45,480 --> 00:46:50,040
Speaker 4: sector was going completely crazy, and that if they didn't

811
00:46:50,320 --> 00:46:53,839
Speaker 4: do something about this, they were going to end up

812
00:46:53,880 --> 00:46:57,000
Speaker 4: with a whacking great financial crisis. And the BIS did

813
00:46:57,000 --> 00:47:04,160
Speaker 4: a wonderful job of warning people and nobody listened, which

814
00:47:04,200 --> 00:47:07,440
Speaker 4: would suggest to me it's probably the clearest evidence that

815
00:47:07,520 --> 00:47:10,719
Speaker 4: they don't run the world. And also quite possibly if

816
00:47:10,760 --> 00:47:12,920
Speaker 4: they had run the world, and I wrote a bit

817
00:47:12,960 --> 00:47:14,200
Speaker 4: about that in the time, I think it was a

818
00:47:14,239 --> 00:47:17,280
Speaker 4: bit more complicated even than that, linked to the balance

819
00:47:17,320 --> 00:47:19,640
Speaker 4: of payments and so forth. If they had, we were

820
00:47:19,719 --> 00:47:22,560
Speaker 4: might be in great much greater shape, better shape now

821
00:47:22,680 --> 00:47:26,360
Speaker 4: and Trump would now be president. And so if only

822
00:47:26,480 --> 00:47:31,000
Speaker 4: the BIS run the world is my answer. Builderberg was

823
00:47:31,160 --> 00:47:36,680
Speaker 4: just a very meeting of business people, politicians and so forth,

824
00:47:36,719 --> 00:47:40,000
Speaker 4: created by the Dutch of all people, heartily the world's

825
00:47:40,080 --> 00:47:43,640
Speaker 4: greatest enemy of freedom and so forth, I might say,

826
00:47:43,640 --> 00:47:47,240
Speaker 4: even the inventors of modern capitalism at a national level,

827
00:47:47,840 --> 00:47:52,640
Speaker 4: and because they thought after the Second World War we

828
00:47:52,760 --> 00:47:57,000
Speaker 4: needed it informal meetings among elites. Yes, there are elites,

829
00:47:57,360 --> 00:48:01,400
Speaker 4: to keep the Transatlantique relationship it working. That was what

830
00:48:01,520 --> 00:48:04,120
Speaker 4: it was for and it was set up by the

831
00:48:04,320 --> 00:48:10,200
Speaker 4: Dutch royal family to make this work. And I was many,

832
00:48:10,200 --> 00:48:12,439
Speaker 4: many of meetings in Builderberg. I'm very proud of that.

833
00:48:12,680 --> 00:48:16,440
Speaker 4: They were fascinating discussions in which people said things that

834
00:48:16,480 --> 00:48:19,359
Speaker 4: would never, I think have been said in public, and

835
00:48:19,360 --> 00:48:22,200
Speaker 4: from which I learned hugely. The greatest example to me,

836
00:48:22,239 --> 00:48:26,400
Speaker 4: which is unbelievable, was the relationships between the Americans and

837
00:48:26,440 --> 00:48:29,840
Speaker 4: the Europeans, particularly the French, in the lead up to

838
00:48:29,840 --> 00:48:32,520
Speaker 4: the Iraq War, when it became perfectly obvious that the

839
00:48:32,600 --> 00:48:37,640
Speaker 4: US was crazy. Another example alas again, if Bilderberg meeting

840
00:48:37,719 --> 00:48:41,200
Speaker 4: had been as powerful as everybody thinks it would, Trump

841
00:48:41,239 --> 00:48:46,239
Speaker 4: would never have happened, because that's exactly precisely what Berg

842
00:48:46,400 --> 00:48:47,360
Speaker 4: was trying to prevent.

843
00:48:48,080 --> 00:48:50,640
Speaker 2: I will communicate this to my dad. I'm not sure.

844
00:48:53,320 --> 00:48:55,719
Speaker 4: All I can say is Builderberg and the BIS have

845
00:48:55,840 --> 00:49:00,279
Speaker 4: been astoundingly unsuccessful what they wanted to achieve.

846
00:49:00,640 --> 00:49:02,359
Speaker 3: I just have one last question. It kind of goes

847
00:49:02,400 --> 00:49:04,760
Speaker 3: back to Tracy when we were talking about the dollar,

848
00:49:05,120 --> 00:49:07,920
Speaker 3: and you know, and you talked about the mechanics of

849
00:49:07,960 --> 00:49:11,120
Speaker 3: the old gold system in which you deflate your economy

850
00:49:11,120 --> 00:49:14,320
Speaker 3: and your experts become more competitive One of the things

851
00:49:14,360 --> 00:49:16,960
Speaker 3: that is a recurring theme on this podcast is that

852
00:49:17,040 --> 00:49:19,880
Speaker 3: when it comes you talked about the industrialization, when it

853
00:49:19,920 --> 00:49:23,960
Speaker 3: comes to industrial capacity or even construction capacity, sometimes talk

854
00:49:24,320 --> 00:49:28,200
Speaker 3: about nuclear the US is out of practice that setting

855
00:49:28,280 --> 00:49:32,719
Speaker 3: aside exchange rates, et cetera, That that institutional muscle to

856
00:49:32,760 --> 00:49:35,960
Speaker 3: build a new nuclear plant or to build a very

857
00:49:36,040 --> 00:49:40,560
Speaker 3: you know, productive new Carl ev line, a T shirt factory,

858
00:49:40,560 --> 00:49:42,799
Speaker 3: given a T shirt factory, we're out of practice. And

859
00:49:42,840 --> 00:49:46,120
Speaker 3: it makes me wonder like our exchangery is really even

860
00:49:46,160 --> 00:49:50,000
Speaker 3: an important lever in the modern economy when we think

861
00:49:50,040 --> 00:49:52,440
Speaker 3: about it, and you know, there's so much about network

862
00:49:52,440 --> 00:49:55,239
Speaker 3: effects at San Francisco, there's only one San Francisco, and

863
00:49:55,239 --> 00:49:58,120
Speaker 3: there's only one Shenzend et cetera. Just putting on your

864
00:49:58,200 --> 00:50:04,000
Speaker 3: purely economics commentary, hat do you see exchange rates as

865
00:50:04,040 --> 00:50:07,840
Speaker 3: being particularly important in the modern economy to think about

866
00:50:08,000 --> 00:50:09,320
Speaker 3: the distribution of production?

867
00:50:10,320 --> 00:50:13,560
Speaker 4: The short answer is no, they're not completely unimportant. I mean,

868
00:50:13,560 --> 00:50:17,040
Speaker 4: if you want to have the capacity to build infrastructure, yeah,

869
00:50:17,120 --> 00:50:20,040
Speaker 4: it's a good idea to build infrastructure. And anyone who

870
00:50:20,120 --> 00:50:23,319
Speaker 4: wanders around the US a lot realizes you haven't been

871
00:50:23,400 --> 00:50:25,920
Speaker 4: If you've been wandering around China and wondering around the

872
00:50:26,000 --> 00:50:30,880
Speaker 4: US as I have in the last No, it's because

873
00:50:30,920 --> 00:50:34,120
Speaker 4: you decided to waste your money on tax cuts instead

874
00:50:34,160 --> 00:50:37,120
Speaker 4: of build things. When did you last build a nuclear

875
00:50:37,120 --> 00:50:37,720
Speaker 4: power station?

876
00:50:39,239 --> 00:50:41,319
Speaker 3: You know, there was the vote, the voter, but yeah,

877
00:50:41,400 --> 00:50:44,400
Speaker 3: other than the one in Georgia, Yes, so it's a

878
00:50:44,440 --> 00:50:44,959
Speaker 3: long time.

879
00:50:45,080 --> 00:50:47,279
Speaker 4: When did you last build major roads? What happened to

880
00:50:47,320 --> 00:50:50,160
Speaker 4: your fist high speed trains, your subways?

881
00:50:50,320 --> 00:50:51,399
Speaker 3: I mean, that's not a doult.

882
00:50:52,480 --> 00:50:56,160
Speaker 4: That's because the Chinese invests forty percent of GDP, you

883
00:50:56,200 --> 00:51:01,840
Speaker 4: invest about twenty difference, Yes, and they invested in infrastructure

884
00:51:01,920 --> 00:51:05,120
Speaker 4: to make them a modern economy, so they have stupendous

885
00:51:05,160 --> 00:51:07,600
Speaker 4: capacity to build infrastruture. Do you want to invest forty

886
00:51:07,640 --> 00:51:08,400
Speaker 4: percent of GDP?

887
00:51:08,520 --> 00:51:08,799
Speaker 3: You can.

888
00:51:08,880 --> 00:51:11,680
Speaker 4: All you have to do is cut consumption by twenty

889
00:51:11,680 --> 00:51:16,600
Speaker 4: percent of GDP. Good luck with that jumps So obviously

890
00:51:16,640 --> 00:51:21,240
Speaker 4: not the industrialization. Every developed world country is de industrializing

891
00:51:21,640 --> 00:51:26,960
Speaker 4: because why consumers aren't spending much as much as before

892
00:51:27,120 --> 00:51:31,359
Speaker 4: on manufacturers because it's a very rich country and every

893
00:51:31,400 --> 00:51:34,799
Speaker 4: American has every machine you can imagine, So it's just

894
00:51:34,880 --> 00:51:40,400
Speaker 4: replacement stuff. The replacement demand for iPhones is there.

895
00:51:40,200 --> 00:51:40,880
Speaker 2: But it's small.

896
00:51:41,280 --> 00:51:43,640
Speaker 4: So in the end, of course you're not. Now it

897
00:51:43,719 --> 00:51:48,080
Speaker 4: is true, you could be making more of your consumption

898
00:51:48,480 --> 00:51:52,640
Speaker 4: at home. That would possibly raise the share of manufacturing

899
00:51:52,719 --> 00:51:56,040
Speaker 4: USGDP by three percentage points at most of you eliminated

900
00:51:56,080 --> 00:51:59,480
Speaker 4: the deficit, maybe four maximum five. That's all going to

901
00:51:59,480 --> 00:52:04,600
Speaker 4: fundamental transform industrial capacity because unlike China, which is still

902
00:52:04,600 --> 00:52:07,399
Speaker 4: a very poor country where people are still buying their

903
00:52:07,400 --> 00:52:10,800
Speaker 4: first car, their first everything, the US doesn't have the deviton.

904
00:52:10,840 --> 00:52:15,040
Speaker 4: And of course Chinese wages are genuinely cheaper, much cheaper

905
00:52:15,120 --> 00:52:18,360
Speaker 4: because it's much poorer. Do you want to be that poor?

906
00:52:18,680 --> 00:52:22,160
Speaker 4: So no, of course these are real forces. Of course,

907
00:52:22,440 --> 00:52:24,759
Speaker 4: the trade service of China is I think a bit

908
00:52:24,760 --> 00:52:28,160
Speaker 4: of a disruptive factor, and I've argued for twenty years

909
00:52:28,160 --> 00:52:31,160
Speaker 4: something should be done about it. But the idea that's

910
00:52:31,239 --> 00:52:34,840
Speaker 4: the principal problem of the US and of de industrialization

911
00:52:34,920 --> 00:52:35,960
Speaker 4: in the US, it's just.

912
00:52:36,080 --> 00:52:38,600
Speaker 3: Nonsense, Tracy. I just got a new fridge with a

913
00:52:38,640 --> 00:52:41,680
Speaker 3: working ice maker. I'm not signing up for a big

914
00:52:41,719 --> 00:52:44,080
Speaker 3: consumption decrease. I'm just putting it out there.

915
00:52:44,120 --> 00:52:46,160
Speaker 2: Aren't you going to have to buy another fridge with

916
00:52:46,239 --> 00:52:49,120
Speaker 2: a working ice sensor? In like a month or ye.

917
00:52:49,400 --> 00:52:50,279
Speaker 3: Sure does never work.

918
00:52:50,360 --> 00:52:52,319
Speaker 4: Well, that works if you can scrap you buy a

919
00:52:52,360 --> 00:52:55,160
Speaker 4: fridge every year and scrap it and make sure it's

920
00:52:55,200 --> 00:53:01,680
Speaker 4: an America made fridge contribute sumpject. But obviously, if you

921
00:53:01,800 --> 00:53:04,960
Speaker 4: smash domestic consumption in the US, that's not going to

922
00:53:05,000 --> 00:53:08,680
Speaker 4: do much for domestic manufacturing. It will shift, however, to

923
00:53:08,760 --> 00:53:11,640
Speaker 4: the sort of products that go into investment. It is

924
00:53:11,640 --> 00:53:15,480
Speaker 4: perhaps important to remember the composition of demand is very

925
00:53:15,480 --> 00:53:18,799
Speaker 4: important in determining the sorts of stuff you make. But

926
00:53:18,880 --> 00:53:21,280
Speaker 4: as somebody you've said when you talked about T shirt,

927
00:53:21,440 --> 00:53:23,759
Speaker 4: does the US really want to go back to being

928
00:53:23,800 --> 00:53:26,120
Speaker 4: the T shirt hob of the world? And I mean,

929
00:53:26,160 --> 00:53:27,520
Speaker 4: it's just ridiculous, isn't it.

930
00:53:27,680 --> 00:53:29,839
Speaker 2: This is the thing that I really don't get about

931
00:53:29,840 --> 00:53:32,440
Speaker 2: the push for the weaker dollar. It's like we're gonna

932
00:53:32,680 --> 00:53:37,200
Speaker 2: trade off slower growth for a few T shirt factories

933
00:53:37,239 --> 00:53:42,800
Speaker 2: potentially and a very slight, like I guess accounting effect

934
00:53:42,800 --> 00:53:45,760
Speaker 2: from the exchange rate. It doesn't seem like the best

935
00:53:45,760 --> 00:53:48,839
Speaker 2: deal to me, But here we are. Martin Wolf, thank

936
00:53:48,880 --> 00:53:51,640
Speaker 2: you so much for coming on all thoughts. Yeah, I

937
00:53:51,719 --> 00:53:52,440
Speaker 2: really enjoyed that.

938
00:53:52,760 --> 00:53:53,640
Speaker 3: Really that was great.

939
00:53:53,840 --> 00:54:07,359
Speaker 5: Thank you, Joe.

940
00:54:07,360 --> 00:54:08,160
Speaker 2: That was so much fun.

941
00:54:08,239 --> 00:54:11,120
Speaker 3: That made the whole trip to London basically. I mean,

942
00:54:11,120 --> 00:54:13,319
Speaker 3: I imagine if we had cajoled him, we could have

943
00:54:13,680 --> 00:54:15,680
Speaker 3: gotten him eventually to come out of zoom. But I

944
00:54:15,680 --> 00:54:17,560
Speaker 3: feel like that made the whole trip to worth it.

945
00:54:17,560 --> 00:54:20,440
Speaker 2: It was definitely better in person. And I have to say,

946
00:54:20,680 --> 00:54:23,359
Speaker 2: when I used to work at the Ft, Martin was there.

947
00:54:23,760 --> 00:54:26,080
Speaker 2: I never spoke to him. I wasn't like important enough

948
00:54:26,120 --> 00:54:29,000
Speaker 2: to interact with one of our best columnists, but I

949
00:54:29,040 --> 00:54:32,040
Speaker 2: remember I used to see him like in the FT

950
00:54:32,280 --> 00:54:37,239
Speaker 2: cafeteria with like twelve different newspapers spread out in front

951
00:54:37,280 --> 00:54:39,400
Speaker 2: of him, and I was always like, oh, there's Martin

952
00:54:39,440 --> 00:54:41,600
Speaker 2: Wolf thinking deep thoughts about the woe, and.

953
00:54:41,560 --> 00:54:44,360
Speaker 3: There was you know, I'll say two things, one macro

954
00:54:45,200 --> 00:54:50,200
Speaker 3: thought and one micro thought, which is Martin yet another

955
00:54:50,440 --> 00:54:55,840
Speaker 3: example of someone who is interesting because he knows specific details,

956
00:54:55,880 --> 00:54:58,040
Speaker 3: which I'm always trying to hammer home, like people who

957
00:54:58,080 --> 00:55:03,080
Speaker 3: know actual dates and figure et cetera. They're always smarter

958
00:55:03,360 --> 00:55:06,439
Speaker 3: and better thinkers than the people who don't commit those

959
00:55:06,440 --> 00:55:08,600
Speaker 3: things to memory. And then the micro thing is I'm

960
00:55:08,600 --> 00:55:11,520
Speaker 3: really just like interested in this idea that there used

961
00:55:11,560 --> 00:55:17,400
Speaker 3: to be a world economy in which things adjust right that. Okay,

962
00:55:18,200 --> 00:55:22,279
Speaker 3: you export your gold, you have deflation, your competitive your

963
00:55:22,400 --> 00:55:26,239
Speaker 3: domestic industry is more competitive, you get sales globally, and

964
00:55:26,280 --> 00:55:29,160
Speaker 3: then you know, you reflate your economy, et cetera. I

965
00:55:29,280 --> 00:55:32,719
Speaker 3: just do not right now believe the world works like

966
00:55:32,800 --> 00:55:36,479
Speaker 3: that in such a way that suddenly the US would

967
00:55:36,520 --> 00:55:43,080
Speaker 3: become a competitive manufacturer of goods simply by dint of

968
00:55:43,120 --> 00:55:44,360
Speaker 3: having a weaker dollars.

969
00:55:44,440 --> 00:55:47,520
Speaker 2: Yeah, and certainly not as quickly as certain US policy

970
00:55:47,520 --> 00:55:50,279
Speaker 2: makers seem to think it could happen. Right Well, the

971
00:55:50,320 --> 00:55:51,960
Speaker 2: other thing I would just say is it's good to

972
00:55:52,000 --> 00:55:54,760
Speaker 2: talk to Martin for many many reasons, Yes, but also

973
00:55:54,800 --> 00:55:57,600
Speaker 2: I think he's sort of representative of the fairly like

974
00:55:57,760 --> 00:56:01,839
Speaker 2: baseline view among European policy about everything that's going on

975
00:56:01,960 --> 00:56:06,280
Speaker 2: right now. And his point about making trade deals yeah

976
00:56:06,320 --> 00:56:08,719
Speaker 2: with the US at the moment, I mean, I think

977
00:56:08,760 --> 00:56:11,080
Speaker 2: that's like the realistic position that a lot of people

978
00:56:11,120 --> 00:56:11,600
Speaker 2: are taking.

979
00:56:11,760 --> 00:56:14,160
Speaker 3: It's interesting because one of the things that I've been

980
00:56:14,160 --> 00:56:16,840
Speaker 3: wondering about, so like that chart that Donald Trump showed

981
00:56:16,880 --> 00:56:20,160
Speaker 3: on April second, was complete nonsense. The board, Yeah, the

982
00:56:20,200 --> 00:56:23,120
Speaker 3: board that change the world, the Liberation Day board. So

983
00:56:23,160 --> 00:56:25,799
Speaker 3: it's like, what is the ask because it's obviously not

984
00:56:27,400 --> 00:56:30,279
Speaker 3: lower tariffs or lower non tariff trade bearers, because that's

985
00:56:30,320 --> 00:56:34,600
Speaker 3: all fabricated it is, and people are converging on the idea.

986
00:56:34,640 --> 00:56:39,080
Speaker 3: The only realistic ask is asking other countries to truly

987
00:56:39,120 --> 00:56:42,560
Speaker 3: break their relationship with China. And it's interesting that Martin

988
00:56:42,600 --> 00:56:44,560
Speaker 3: thinks that there could be a number of them who

989
00:56:44,600 --> 00:56:48,200
Speaker 3: actually would be willing to sign up for that, that

990
00:56:48,280 --> 00:56:52,240
Speaker 3: the price of free trade with the US is much

991
00:56:52,320 --> 00:56:55,640
Speaker 3: more restrictive trade with China.

992
00:56:55,680 --> 00:56:57,839
Speaker 2: I'm glad you also brought up Hungary because I feel

993
00:56:57,840 --> 00:56:59,719
Speaker 2: like that's going to be a really interesting test case

994
00:56:59,760 --> 00:57:02,279
Speaker 2: to because you know, if anyone is going to walk

995
00:57:02,320 --> 00:57:05,799
Speaker 2: away from China because the US is telling them to effectively,

996
00:57:05,840 --> 00:57:07,480
Speaker 2: it seems like it might be Hunger, could.

997
00:57:07,320 --> 00:57:12,719
Speaker 3: Be except that they're such a destination for Chinese capital investments.

998
00:57:13,120 --> 00:57:15,480
Speaker 3: There was so much in that conversation. There are other

999
00:57:15,520 --> 00:57:18,680
Speaker 3: things that I probably wanted to mention and pull out,

1000
00:57:18,680 --> 00:57:20,800
Speaker 3: but all the listeners heard them. So those are the

1001
00:57:20,840 --> 00:57:21,640
Speaker 3: things that said.

1002
00:57:21,520 --> 00:57:24,440
Speaker 2: Up, let's go to Nando's instead. Okay, shall we leave

1003
00:57:24,440 --> 00:57:24,640
Speaker 2: it there?

1004
00:57:24,760 --> 00:57:25,480
Speaker 3: Let's leave it there.

1005
00:57:25,560 --> 00:57:27,840
Speaker 2: This has been another episode of the Odd Thoughts podcast.

1006
00:57:27,960 --> 00:57:31,200
Speaker 2: I'm Tracy Alloway. You can follow me at Tracy Alloway and.

1007
00:57:31,160 --> 00:57:34,040
Speaker 3: I'm Joe Wisenthal. You can follow me at the Stalwart.

1008
00:57:34,280 --> 00:57:38,080
Speaker 3: You can follow an automated feed of Martin's columns at

1009
00:57:38,080 --> 00:57:42,000
Speaker 3: the Ft at Martin Wolf Underscore, follow our producers Carmen

1010
00:57:42,120 --> 00:57:45,800
Speaker 3: Rodriguez at Carman Erman dash El Bennett at Dashbot and

1011
00:57:45,880 --> 00:57:48,560
Speaker 3: kel Brooks and Kilbrooks. And thank you to our London

1012
00:57:48,600 --> 00:57:52,520
Speaker 3: producer Moses Onam, who made this episode happen. More Odd

1013
00:57:52,600 --> 00:57:55,440
Speaker 3: Laws content go to Bloomberg dot com slash odd Lots,

1014
00:57:55,440 --> 00:57:58,400
Speaker 3: where we have a daily newsletter and all of our episodes,

1015
00:57:58,800 --> 00:58:01,280
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1016
00:58:01,320 --> 00:58:04,480
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1017
00:58:04,520 --> 00:58:05,720
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1018
00:58:05,320 --> 00:58:07,440
Speaker 2: And if you enjoy odd Lots, if you like it

1019
00:58:07,520 --> 00:58:09,680
Speaker 2: when we take these trips to London to speak to

1020
00:58:09,720 --> 00:58:12,080
Speaker 2: people like Martin Wolf, then please leave us a positive

1021
00:58:12,080 --> 00:58:15,360
Speaker 2: review on your favorite podcast platform. And remember, if you

1022
00:58:15,400 --> 00:58:17,960
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1023
00:58:17,960 --> 00:58:21,080
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1024
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1025
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