1 00:00:11,760 --> 00:00:15,120 Speaker 1: Hello, and welcome to another episode of the Odd Thoughts Podcast. 2 00:00:15,200 --> 00:00:19,840 Speaker 1: I'm Tracy Alloway and I'm Joe. Wasn't all so Joe, 3 00:00:20,000 --> 00:00:22,840 Speaker 1: I think? Uh oh, I'm trying to remember now. It 4 00:00:22,880 --> 00:00:26,599 Speaker 1: must have been maybe four or six weeks ago. You 5 00:00:26,680 --> 00:00:30,920 Speaker 1: were away and I recorded an Odd Lots all by myself, 6 00:00:31,000 --> 00:00:33,479 Speaker 1: and I felt really bad because it was a really 7 00:00:33,560 --> 00:00:35,600 Speaker 1: good episode. I think you would have enjoyed it. It 8 00:00:35,720 --> 00:00:38,520 Speaker 1: was the one with mittwo Galate and we were talking 9 00:00:38,520 --> 00:00:42,320 Speaker 1: about debt defaults. Yeah, Tracy, I was sad to have 10 00:00:42,400 --> 00:00:44,040 Speaker 1: missed that one. I mean, I don't think you should 11 00:00:44,080 --> 00:00:46,680 Speaker 1: feel bad per se that you did it alone without me, 12 00:00:46,840 --> 00:00:50,920 Speaker 1: because you know, it's sort of occasionally I'll do one solo, 13 00:00:51,000 --> 00:00:52,760 Speaker 1: you do one solo, we pick up for each other. 14 00:00:53,200 --> 00:00:56,720 Speaker 1: But I do like that topic a lot, and so yes, 15 00:00:56,800 --> 00:00:58,880 Speaker 1: I wish I had been part of it. Well. As 16 00:00:58,960 --> 00:01:01,560 Speaker 1: my personal gift to you, we are going to do 17 00:01:01,600 --> 00:01:06,520 Speaker 1: a sort of Redux episode. We're not talking about defaults 18 00:01:06,640 --> 00:01:09,520 Speaker 1: or sovereign debt restructurings in general. We're going to talk 19 00:01:09,520 --> 00:01:14,319 Speaker 1: about one very very specific instance of a debt default. 20 00:01:14,360 --> 00:01:18,360 Speaker 1: In fact, it's probably one of the most famous of 21 00:01:18,440 --> 00:01:20,960 Speaker 1: all time. It's certainly one of the biggest. In fact, 22 00:01:21,240 --> 00:01:23,920 Speaker 1: depending on your definition of debt defaults and how you 23 00:01:23,959 --> 00:01:27,199 Speaker 1: actually measure it, it is the biggest one of all time? 24 00:01:27,400 --> 00:01:29,240 Speaker 1: Do you know what it is? No, So I was 25 00:01:29,280 --> 00:01:32,000 Speaker 1: just gonna say, this is really embarrassing to me because 26 00:01:32,680 --> 00:01:35,880 Speaker 1: I know which one we're doing, And if someone had said, 27 00:01:35,880 --> 00:01:39,280 Speaker 1: what is the biggest sovereign debt default of all time? 28 00:01:39,880 --> 00:01:42,200 Speaker 1: You say, oh, this is the most famous one. I 29 00:01:42,240 --> 00:01:44,039 Speaker 1: don't even know if this one would have occurred to me. 30 00:01:44,600 --> 00:01:48,520 Speaker 1: So I'm kind of embarrassed by the fact that I 31 00:01:48,560 --> 00:01:52,560 Speaker 1: apparently didn't even know in advance what the most famous 32 00:01:52,560 --> 00:01:56,040 Speaker 1: of the category was. Yeah, I think most people would 33 00:01:56,040 --> 00:01:59,280 Speaker 1: probably you'd say Argentina, wouldn't you. I think you say, 34 00:01:59,320 --> 00:02:03,680 Speaker 1: are Yeah, I might have said Russia in the late nineties. 35 00:02:04,320 --> 00:02:07,840 Speaker 1: Oh yeah, okay, well that's closer. It is. It's Russia, 36 00:02:08,400 --> 00:02:12,280 Speaker 1: but it's Russia in the early nineteen hundreds. So it's 37 00:02:12,360 --> 00:02:18,160 Speaker 1: the famous uh nineteen eighteen repudiation of Russian debt once 38 00:02:18,240 --> 00:02:22,720 Speaker 1: the Russian Revolution happened. And it's a really interesting moment 39 00:02:22,840 --> 00:02:26,280 Speaker 1: in time in international finance because it touches on all 40 00:02:26,320 --> 00:02:28,560 Speaker 1: these themes that you and I like to talk about 41 00:02:28,880 --> 00:02:32,800 Speaker 1: one of them is bubbles, right, Russia issued an incredible 42 00:02:32,880 --> 00:02:35,760 Speaker 1: amount of debt in the run up to nineteen eighteen, 43 00:02:35,880 --> 00:02:38,360 Speaker 1: loads of people bought it, and then suddenly the whole 44 00:02:38,360 --> 00:02:42,240 Speaker 1: thing collapsed. But the other really interesting idea here is 45 00:02:42,639 --> 00:02:45,880 Speaker 1: the sort of notion of a safe asset that suddenly 46 00:02:45,919 --> 00:02:49,160 Speaker 1: becomes not so safe. There's a moment in time when 47 00:02:49,240 --> 00:02:53,360 Speaker 1: Russian sovereign debt was considered you know, really really pristine, 48 00:02:53,400 --> 00:02:56,960 Speaker 1: almost like US treasuries today. And the other big theme 49 00:02:57,160 --> 00:03:01,919 Speaker 1: has to be the politicization of it, or the ideology 50 00:03:01,919 --> 00:03:04,000 Speaker 1: behind debt. And that's something that you and I have 51 00:03:04,200 --> 00:03:06,720 Speaker 1: touched on at one point or another, in fact, maybe 52 00:03:06,760 --> 00:03:11,120 Speaker 1: most recently with modern monetary theory. I'm I'm very excited 53 00:03:11,160 --> 00:03:13,440 Speaker 1: about this for all of the reasons you laid out. 54 00:03:13,440 --> 00:03:16,120 Speaker 1: So who are we talking to? So today's Odd Lots 55 00:03:16,200 --> 00:03:19,840 Speaker 1: guest is Hassan Malik. He is the author of Bankers 56 00:03:19,840 --> 00:03:23,760 Speaker 1: and Bolsheviks, International Finance and the Russian Revolution, and he 57 00:03:23,880 --> 00:03:27,320 Speaker 1: is also an emerging markets hedge fund analysts. So, Hassan, 58 00:03:27,520 --> 00:03:29,880 Speaker 1: thank you so much for coming on. Thanks guys, thanks 59 00:03:29,919 --> 00:03:32,680 Speaker 1: for having me. So this book was a really, really 60 00:03:32,760 --> 00:03:36,320 Speaker 1: great read. I'm just wondering why did you decide to 61 00:03:36,440 --> 00:03:41,440 Speaker 1: focus on this particular episode of international finance. It goes 62 00:03:41,520 --> 00:03:44,320 Speaker 1: back to my days working at an investment bank in 63 00:03:44,760 --> 00:03:48,440 Speaker 1: Moscow and really living in the center of the Russian capital. 64 00:03:48,520 --> 00:03:51,160 Speaker 1: I was walking around every day and struck by the 65 00:03:51,240 --> 00:03:56,200 Speaker 1: degree to which banks from before the revolution are present 66 00:03:56,240 --> 00:03:58,600 Speaker 1: in the built environment in the city center, be it 67 00:03:58,880 --> 00:04:02,320 Speaker 1: the Lubyanka which is the former headquarters of the KGB, 68 00:04:03,080 --> 00:04:08,320 Speaker 1: be its old bran bank branches that are repurposed as 69 00:04:08,360 --> 00:04:11,880 Speaker 1: modern retail or office space. And really, when I was 70 00:04:11,960 --> 00:04:15,280 Speaker 1: in graduate school and studying financial history, what really struck 71 00:04:15,320 --> 00:04:18,400 Speaker 1: me as the degree to which this financial past of 72 00:04:18,480 --> 00:04:22,240 Speaker 1: Russia was largely unremarked in the histories that we we 73 00:04:22,320 --> 00:04:25,920 Speaker 1: have of the of of that time period. Yeah, Tracy 74 00:04:26,200 --> 00:04:29,720 Speaker 1: lead in with, oh, this is the most famous debt 75 00:04:29,760 --> 00:04:32,520 Speaker 1: default of all time. So I'm glad that there's at 76 00:04:32,560 --> 00:04:35,120 Speaker 1: least some people who have, you know, forgotten about this 77 00:04:35,200 --> 00:04:38,840 Speaker 1: period who I imagine, like me, this episode would not 78 00:04:38,920 --> 00:04:42,680 Speaker 1: have been top of mind when thinking about debt default. 79 00:04:43,080 --> 00:04:46,960 Speaker 1: But before we get to the default, obviously, what was 80 00:04:47,040 --> 00:04:51,719 Speaker 1: it about Russia at the time that caused so much 81 00:04:51,760 --> 00:04:55,000 Speaker 1: money to pour into their and for their government bonds 82 00:04:55,240 --> 00:04:58,719 Speaker 1: to be seen as you know, a relative safe haven asset. 83 00:04:59,760 --> 00:05:03,880 Speaker 1: So Russia was in many ways the emerging market boom 84 00:05:03,960 --> 00:05:07,080 Speaker 1: story of the time. The Russian government was actively tapping 85 00:05:07,080 --> 00:05:10,680 Speaker 1: the international bond market to build up gold reserves so 86 00:05:10,720 --> 00:05:13,000 Speaker 1: that it could go on to the goal standard, and 87 00:05:13,080 --> 00:05:17,600 Speaker 1: also to help finance and industrialization drive, led principally by 88 00:05:17,640 --> 00:05:21,279 Speaker 1: the railroad industry. It really was, in many ways, not 89 00:05:21,480 --> 00:05:25,560 Speaker 1: unlike China today, both a massive player in the emerging 90 00:05:25,560 --> 00:05:30,520 Speaker 1: markets markets finance story, as well as a geopolitically speaking, 91 00:05:30,560 --> 00:05:33,880 Speaker 1: a great power at the center of European and indeed 92 00:05:33,920 --> 00:05:38,160 Speaker 1: global power politics. Right. So you mentioned the geopolitical aspect 93 00:05:38,200 --> 00:05:41,000 Speaker 1: of all of this. Talk to us about who exactly 94 00:05:41,640 --> 00:05:45,440 Speaker 1: was buying the debt that Russia was selling, because you know, 95 00:05:45,520 --> 00:05:48,160 Speaker 1: obviously it's an emerging market play, lots of people want 96 00:05:48,200 --> 00:05:50,239 Speaker 1: a piece of that. But you talk a lot about 97 00:05:50,279 --> 00:05:54,320 Speaker 1: the political dimension of the foreign investors who were basically 98 00:05:54,560 --> 00:05:58,600 Speaker 1: funding the Russian government at this point. Right. So, basically 99 00:05:58,640 --> 00:06:01,679 Speaker 1: what was happening at the time was Germany was rising, 100 00:06:02,200 --> 00:06:07,000 Speaker 1: and this was a story that was complicating the European 101 00:06:07,240 --> 00:06:11,440 Speaker 1: balance of power in diplomatic and geopolitical terms. Now, at 102 00:06:11,440 --> 00:06:14,600 Speaker 1: the time, France had the highest savings rate in Europe, 103 00:06:14,680 --> 00:06:18,600 Speaker 1: and France was threatened by a rising Germany, which had 104 00:06:18,600 --> 00:06:21,640 Speaker 1: had fought a war with in the late nineteenth century. 105 00:06:22,120 --> 00:06:25,440 Speaker 1: Russia in in similar Vein was eyeing what was happening 106 00:06:25,440 --> 00:06:28,080 Speaker 1: in Germany with some concern in various circles of the 107 00:06:28,120 --> 00:06:32,600 Speaker 1: Russian government. And so this is really what under scored 108 00:06:32,880 --> 00:06:36,359 Speaker 1: uh not only a diplomatic but a financial alliance between 109 00:06:36,760 --> 00:06:40,120 Speaker 1: the Russian and French governments. And ultimately what this led 110 00:06:40,160 --> 00:06:43,680 Speaker 1: to was a huge amount of retail money moving into 111 00:06:43,760 --> 00:06:46,960 Speaker 1: Russian bonds that were perceived at the time to be 112 00:06:47,560 --> 00:06:51,120 Speaker 1: very safe, investment grade assets. And so that's in some 113 00:06:51,160 --> 00:06:53,240 Speaker 1: ways one of the big contrasts with the present day 114 00:06:53,240 --> 00:06:57,720 Speaker 1: emerging markets boom, insofar as it was really French individual 115 00:06:57,800 --> 00:07:01,120 Speaker 1: savers and then over time their counterparts in Britain and 116 00:07:01,160 --> 00:07:03,840 Speaker 1: elsewhere in the West, that we're investing in Russian government 117 00:07:04,279 --> 00:07:08,039 Speaker 1: and corporate securities over the course of the late nineteenth 118 00:07:08,040 --> 00:07:11,120 Speaker 1: and early twentieth centuries. I'm something that I'm interested in 119 00:07:11,240 --> 00:07:14,920 Speaker 1: is the idea of government debt just or just this 120 00:07:15,000 --> 00:07:18,600 Speaker 1: idea of safe haven assets. It always kind of feels 121 00:07:18,640 --> 00:07:20,720 Speaker 1: modern to me. And I think about the U. S 122 00:07:20,760 --> 00:07:23,680 Speaker 1: Treasury market, and there's all kinds of very good reasons 123 00:07:24,000 --> 00:07:28,160 Speaker 1: why we price everything or so many bonds, whether it's 124 00:07:28,200 --> 00:07:32,520 Speaker 1: a foreign debt or private credit markets, there's a spread 125 00:07:32,560 --> 00:07:35,520 Speaker 1: to US treasuries and that's a common way to sort 126 00:07:35,520 --> 00:07:40,360 Speaker 1: of measure the perceived risky nous of any other asset class. 127 00:07:40,440 --> 00:07:44,520 Speaker 1: When did this concept of safe haven assets emerge? And 128 00:07:44,600 --> 00:07:47,480 Speaker 1: you know, thinking back to retail investors in the early 129 00:07:47,560 --> 00:07:50,880 Speaker 1: part of the twentieth century, when did these ideas like 130 00:07:50,960 --> 00:07:54,800 Speaker 1: start to form about what was safe asset and how 131 00:07:54,880 --> 00:07:57,640 Speaker 1: much part of one's portfolio one might want to allocate 132 00:07:57,680 --> 00:08:00,560 Speaker 1: to them. Well, it's it's a great question, and it's 133 00:08:00,600 --> 00:08:03,480 Speaker 1: fundamental to kind of this this story of the Russian 134 00:08:03,520 --> 00:08:06,400 Speaker 1: and other emerging markets booms. I suppose it goes back 135 00:08:06,520 --> 00:08:11,520 Speaker 1: to the first times people started thinking about investing outside 136 00:08:11,520 --> 00:08:15,240 Speaker 1: their own home markets. And in that sense, as emerging 137 00:08:15,280 --> 00:08:19,160 Speaker 1: markets deepened in the late nineteenth and early twentieth centuries, 138 00:08:19,560 --> 00:08:23,240 Speaker 1: a hierarchy began to form of which markets were perceived 139 00:08:23,280 --> 00:08:26,400 Speaker 1: as riskier versus those which were perceived as closer to home, 140 00:08:26,560 --> 00:08:29,880 Speaker 1: both physically and in terms of a risk profile. And 141 00:08:29,920 --> 00:08:32,760 Speaker 1: in that sense, Russia was very much seen as a 142 00:08:32,800 --> 00:08:38,400 Speaker 1: quote unquote European great power country. It wasn't seen as 143 00:08:38,520 --> 00:08:43,280 Speaker 1: some semi colonial domain out in Asia or Africa. It 144 00:08:43,320 --> 00:08:46,599 Speaker 1: was seen very close both physically and in terms of 145 00:08:46,640 --> 00:08:50,320 Speaker 1: the risk profile to core European economies such as Britain, 146 00:08:50,360 --> 00:08:53,720 Speaker 1: France or Germany. So there are all these characters in 147 00:08:53,760 --> 00:08:58,440 Speaker 1: your book that are strategically fueling what's eventually going to 148 00:08:58,559 --> 00:09:02,600 Speaker 1: become a Russian debt bubble. On the Russia side, there's 149 00:09:02,760 --> 00:09:06,679 Speaker 1: a relatively well known finance minister, and then there are 150 00:09:06,720 --> 00:09:09,880 Speaker 1: all these i guess lesser known bankers from London and 151 00:09:09,960 --> 00:09:14,120 Speaker 1: Paris who are sort of deployed to start making these investments. 152 00:09:14,600 --> 00:09:18,359 Speaker 1: Talk to us about the actual people, you call them gatekeepers, 153 00:09:18,960 --> 00:09:23,840 Speaker 1: the gatekeepers to Russian debt investment. Yeah. So this is 154 00:09:23,840 --> 00:09:27,080 Speaker 1: a concept that I borrowed from a scholar and sovereign 155 00:09:27,080 --> 00:09:28,880 Speaker 1: debt by the name of Mark Flandre, and I think 156 00:09:28,880 --> 00:09:33,320 Speaker 1: he very aptly described the way capital markets worked, both 157 00:09:33,320 --> 00:09:35,720 Speaker 1: in the past and the present. That is, even though 158 00:09:35,760 --> 00:09:40,439 Speaker 1: you have debtors and and savers, the process of channeling 159 00:09:40,520 --> 00:09:43,440 Speaker 1: those flows of capital happens, of course through the banks 160 00:09:43,440 --> 00:09:46,640 Speaker 1: and the bankers and the and the investment managers that 161 00:09:46,760 --> 00:09:49,160 Speaker 1: are present both in current markets as well as in 162 00:09:49,200 --> 00:09:52,000 Speaker 1: the past. And that to me was a very interesting 163 00:09:52,600 --> 00:09:56,720 Speaker 1: nexus of people because they were ultimately individuals with all 164 00:09:56,800 --> 00:10:01,720 Speaker 1: the biases and the prejudices and the imperfections of of 165 00:10:01,720 --> 00:10:05,040 Speaker 1: of individual human beings. And that's really why I wrote 166 00:10:05,080 --> 00:10:07,520 Speaker 1: this as a as a history book, as a story 167 00:10:07,559 --> 00:10:11,720 Speaker 1: of people trying to feel their way through very difficult 168 00:10:11,760 --> 00:10:15,200 Speaker 1: and imperfect markets at at really a pivotal moment in 169 00:10:15,240 --> 00:10:17,360 Speaker 1: world history. So one of the things that comes out, 170 00:10:17,440 --> 00:10:21,400 Speaker 1: for example, is the degree to which national biases and 171 00:10:21,440 --> 00:10:25,040 Speaker 1: patriotism at a time of geopolitical tension and ultimately war, 172 00:10:25,679 --> 00:10:28,520 Speaker 1: fed through to investment decision making, and how this wasn't 173 00:10:28,559 --> 00:10:32,800 Speaker 1: just a story of clinical analyzes of of balance sheets 174 00:10:32,920 --> 00:10:37,440 Speaker 1: or of macroeconomic accounts, but rather also of humans trying 175 00:10:37,480 --> 00:10:42,439 Speaker 1: to think their way through very confusing and fuzzy market environments. 176 00:10:42,840 --> 00:10:46,920 Speaker 1: You talk about these gatekeepers, but what specifically were the 177 00:10:47,000 --> 00:10:51,280 Speaker 1: decisions that they made that we're so pivotal in getting 178 00:10:51,559 --> 00:10:55,120 Speaker 1: flow funds to Russia. So there were several um In 179 00:10:55,200 --> 00:10:57,640 Speaker 1: one instance in early nineteen o six, when the Russian 180 00:10:57,679 --> 00:11:00,480 Speaker 1: government was really on the ropes financially aking, and on 181 00:11:00,520 --> 00:11:04,480 Speaker 1: the verge of having to suspend convertibility of of rubles 182 00:11:04,480 --> 00:11:08,320 Speaker 1: into gold, the bankers stepped in with a very key loan, 183 00:11:08,360 --> 00:11:11,560 Speaker 1: which at the time was the largest ever recorded in history. 184 00:11:12,000 --> 00:11:16,480 Speaker 1: And this really happens because of two bankers, in particular 185 00:11:16,600 --> 00:11:20,600 Speaker 1: in Paris and London respectively, who had cultivated relations with 186 00:11:20,679 --> 00:11:24,400 Speaker 1: the Russian finance Ministry, which the ministry levered to great 187 00:11:24,400 --> 00:11:28,360 Speaker 1: effects in nine six. Another example is the opening of 188 00:11:28,400 --> 00:11:31,680 Speaker 1: the first branch of what is now City Group in 189 00:11:31,800 --> 00:11:35,719 Speaker 1: Russia in early nineteen seventeen, the very year of the revolution. 190 00:11:36,360 --> 00:11:39,839 Speaker 1: And again reading the correspondence that the bank had internally, 191 00:11:40,240 --> 00:11:44,200 Speaker 1: it's very evident that this was a decision that came 192 00:11:44,320 --> 00:11:46,920 Speaker 1: to a large part because of the man on the 193 00:11:46,920 --> 00:11:50,480 Speaker 1: ground and his feelings about Russia and its prospects, not 194 00:11:50,559 --> 00:11:54,880 Speaker 1: only long term, but because of a sense of almost 195 00:11:54,880 --> 00:11:58,240 Speaker 1: responsibility on the part of the US towards Russia and 196 00:11:58,240 --> 00:12:01,000 Speaker 1: on the part of an American businessman to words his 197 00:12:01,080 --> 00:12:04,240 Speaker 1: Russian counterparts at a time of war. Yeah, I love 198 00:12:04,320 --> 00:12:07,080 Speaker 1: that anecdote because it's just amazing to think that City 199 00:12:07,440 --> 00:12:11,240 Speaker 1: was opening a branch on the eve of the Russian Revolution. 200 00:12:11,840 --> 00:12:14,280 Speaker 1: On that note, you know, you just mentioned the loan 201 00:12:14,520 --> 00:12:18,040 Speaker 1: that basically saved Russia in nineteen o five or nineteen 202 00:12:18,040 --> 00:12:24,720 Speaker 1: o six. Why did investors hold on for so long 203 00:12:24,840 --> 00:12:28,280 Speaker 1: and why didn't they push the Czarist government for more 204 00:12:28,360 --> 00:12:33,360 Speaker 1: reform after they extended that loan. It's a great question, 205 00:12:33,400 --> 00:12:37,560 Speaker 1: and it's got a very complicated dynamic behind it. In 206 00:12:37,679 --> 00:12:42,200 Speaker 1: one sense, there were conflicting arguments both in favor of 207 00:12:42,440 --> 00:12:45,520 Speaker 1: and against extending loans. One argument, of course, is it's 208 00:12:45,520 --> 00:12:51,440 Speaker 1: an anti democratic government and supporting them will just encourage 209 00:12:51,480 --> 00:12:55,280 Speaker 1: bad behavior, and other arguments counter to that was that 210 00:12:55,360 --> 00:13:00,440 Speaker 1: actually engagement is how one pushed development and ultimately a 211 00:13:00,440 --> 00:13:04,880 Speaker 1: better direction in Russian policymaking. The other story, of course here, 212 00:13:04,880 --> 00:13:07,559 Speaker 1: and this is where the gatekeepers were not just bankers 213 00:13:07,600 --> 00:13:11,040 Speaker 1: but also ministry officials in Russia itself, was that the 214 00:13:11,080 --> 00:13:16,120 Speaker 1: Russian government became very adept at leveraging the exposure that 215 00:13:16,200 --> 00:13:19,839 Speaker 1: foreign governments and banks had to the Russian economy to 216 00:13:19,960 --> 00:13:23,200 Speaker 1: great effects. So by the time the nineteen o six 217 00:13:23,320 --> 00:13:26,960 Speaker 1: loan came up for discussion, the French had already invested 218 00:13:27,000 --> 00:13:30,640 Speaker 1: so significantly into Russia that it really becomes a question 219 00:13:30,800 --> 00:13:33,079 Speaker 1: of whether it was the creditors that had more power 220 00:13:33,120 --> 00:13:53,319 Speaker 1: over the debtor or vice versa. I love Tracy's question 221 00:13:53,440 --> 00:13:56,760 Speaker 1: about why didn't the investors in these bonds pushed more 222 00:13:56,800 --> 00:13:59,520 Speaker 1: reform because it seems like such a modern question, And 223 00:13:59,559 --> 00:14:03,080 Speaker 1: I'm imagining like all the same reform talk we hear 224 00:14:03,120 --> 00:14:05,520 Speaker 1: about in E M these days, about like like with 225 00:14:05,600 --> 00:14:08,320 Speaker 1: the I M F. Yeah, and you know, cutting pension 226 00:14:08,360 --> 00:14:12,560 Speaker 1: obligations and privatizing state owned power plants and all these 227 00:14:12,559 --> 00:14:15,960 Speaker 1: things that constitute reform these days. What does that mean though, 228 00:14:16,000 --> 00:14:20,760 Speaker 1: Like what were the things that would have constituted reform 229 00:14:20,800 --> 00:14:23,240 Speaker 1: in the early nine hundred, Like, what was it? What 230 00:14:23,280 --> 00:14:26,080 Speaker 1: were the equivalent of those things? Well, it's funny you 231 00:14:26,080 --> 00:14:29,160 Speaker 1: you make the comparison with today, because in many ways, 232 00:14:29,360 --> 00:14:33,560 Speaker 1: a lot of the discussion points were very similar. The 233 00:14:33,640 --> 00:14:38,440 Speaker 1: same things that we think about as problematic in Russia 234 00:14:38,480 --> 00:14:41,040 Speaker 1: today and that are often ascribed to the Soviet past. 235 00:14:41,120 --> 00:14:46,520 Speaker 1: Things like corruption, bureaucracy, rule of law issues were things 236 00:14:46,560 --> 00:14:49,640 Speaker 1: that investors at the time we're talking about in Russia 237 00:14:49,840 --> 00:14:53,320 Speaker 1: with respect to the Czaris regime. And indeed, at the time, 238 00:14:53,680 --> 00:14:57,280 Speaker 1: as we got closer to nineteen seventeen, there was such 239 00:14:57,280 --> 00:15:00,960 Speaker 1: a frustration in foreign investment circles with Bizarus regime on 240 00:15:01,040 --> 00:15:05,720 Speaker 1: exactly these points, rule of law, bureaucracy, inefficient policy making, 241 00:15:06,200 --> 00:15:08,800 Speaker 1: that there was almost a pining for some sort of change, 242 00:15:09,280 --> 00:15:13,040 Speaker 1: and in some circles even an attraction towards the revolutionaries 243 00:15:13,040 --> 00:15:16,320 Speaker 1: because they promised something different. So in in the build 244 00:15:16,400 --> 00:15:20,680 Speaker 1: up to nineteen seventeen, nine eighteen, what were the signs 245 00:15:20,840 --> 00:15:25,040 Speaker 1: that trouble was brewing in the Russian debt market? What 246 00:15:25,120 --> 00:15:28,000 Speaker 1: were the signs that the bubble was going to burst? Well, 247 00:15:28,040 --> 00:15:31,560 Speaker 1: it's interesting because when the war breaks out in nineteen fourteen, 248 00:15:31,600 --> 00:15:34,640 Speaker 1: there's actually kind of a rally in the Russian economy 249 00:15:34,640 --> 00:15:37,160 Speaker 1: and financial markets, and this is partly because it kicked 250 00:15:37,160 --> 00:15:40,520 Speaker 1: off an industrial boom because of wartime production increases and whatnot. 251 00:15:40,920 --> 00:15:43,120 Speaker 1: And so really the first couple of years of the war, 252 00:15:43,240 --> 00:15:45,640 Speaker 1: you see the spreads the that is, the yields on 253 00:15:45,760 --> 00:15:50,640 Speaker 1: Russian government bonds relative to the the investment grade benchmark, 254 00:15:50,680 --> 00:15:53,880 Speaker 1: which was British treasuries at the time, shrink to multi 255 00:15:54,040 --> 00:15:57,720 Speaker 1: year and even multi decade lows in just weeks and 256 00:15:57,840 --> 00:16:01,600 Speaker 1: months before the the wheel really came off in Russia. 257 00:16:01,760 --> 00:16:05,760 Speaker 1: And eventually what you started to see worth indicators in 258 00:16:05,800 --> 00:16:08,560 Speaker 1: the real economies start to turn over. If you look 259 00:16:08,600 --> 00:16:11,240 Speaker 1: at the primary market data from when the Russian government 260 00:16:11,280 --> 00:16:15,160 Speaker 1: was issuing new bonds into the market despite their attempts 261 00:16:15,160 --> 00:16:19,480 Speaker 1: at financial repression, you start to see more onerous terms 262 00:16:19,480 --> 00:16:21,480 Speaker 1: that the debt markets are inflicting on the on the 263 00:16:21,560 --> 00:16:24,960 Speaker 1: Russian government. But really, until very very quite late in 264 00:16:25,000 --> 00:16:29,120 Speaker 1: the game, bond market participants weren't really showing signs of alarm. 265 00:16:29,160 --> 00:16:31,280 Speaker 1: In fact, one of the things that I was shocked 266 00:16:31,320 --> 00:16:34,080 Speaker 1: by was that even after the moment of default, when 267 00:16:34,080 --> 00:16:38,080 Speaker 1: the yields explode, they explode quite dramatically, But when you 268 00:16:38,120 --> 00:16:41,800 Speaker 1: compare them to relatively recent defaults that had happened in 269 00:16:41,840 --> 00:16:45,480 Speaker 1: the time and in Argentina and Greece, the spreads hadn't 270 00:16:45,480 --> 00:16:48,280 Speaker 1: been blown out to those levels, which indicated to me 271 00:16:48,360 --> 00:16:51,360 Speaker 1: that investors still held out more hope in Russia even 272 00:16:51,400 --> 00:16:54,400 Speaker 1: after the communists takeover than they had held out in 273 00:16:54,480 --> 00:16:57,440 Speaker 1: Greece and Argentina in the late nineteenth century. It is 274 00:16:57,640 --> 00:17:01,160 Speaker 1: pretty remarkable I think back, you know, to some of 275 00:17:01,160 --> 00:17:05,600 Speaker 1: these more recent defaults. Like obviously, people, you know, we 276 00:17:05,680 --> 00:17:09,119 Speaker 1: recognize the various political things that go on in these 277 00:17:09,160 --> 00:17:12,560 Speaker 1: countries that precede the default, but there's a lot of 278 00:17:12,600 --> 00:17:17,240 Speaker 1: focus still despite that, on sort of pure attempts to 279 00:17:17,359 --> 00:17:21,600 Speaker 1: quantify debt sustainability within any of these countries, and they 280 00:17:21,640 --> 00:17:25,560 Speaker 1: fixate on, you know, debt to GDP and primary surpluses 281 00:17:25,640 --> 00:17:29,679 Speaker 1: or primary deficits or cyclically adjusted surpluses, these sort of 282 00:17:29,760 --> 00:17:34,360 Speaker 1: attempts to, yeah, just put into numbers how sustainable a 283 00:17:34,359 --> 00:17:37,639 Speaker 1: country's debt is. And I'm always sort of skeptical about 284 00:17:37,680 --> 00:17:41,080 Speaker 1: the value of those numbers in the modern situation. But 285 00:17:41,160 --> 00:17:44,320 Speaker 1: I'm curious, like what the tensions and the lead up 286 00:17:44,320 --> 00:17:48,440 Speaker 1: to the Russian default tells us about what indicators are 287 00:17:48,520 --> 00:17:52,159 Speaker 1: actually of any use when trying to assess that the 288 00:17:52,320 --> 00:17:55,760 Speaker 1: end game is NI. Yeah, that's that's a great question. 289 00:17:55,800 --> 00:17:58,960 Speaker 1: I mean. One of the things that is different from 290 00:17:59,320 --> 00:18:01,720 Speaker 1: in the past key versus today, is at the time, 291 00:18:02,359 --> 00:18:06,280 Speaker 1: the macroeconomic accounts were both simpler and different in terms 292 00:18:06,280 --> 00:18:09,080 Speaker 1: of what investors would look at. So, for example, they 293 00:18:09,080 --> 00:18:12,560 Speaker 1: didn't have access to statistics like GDP because they weren't 294 00:18:12,560 --> 00:18:15,800 Speaker 1: really thought of in those terms back then. What they 295 00:18:15,840 --> 00:18:19,840 Speaker 1: did look at, not unlike today, are things like export 296 00:18:19,960 --> 00:18:22,800 Speaker 1: numbers and and a rough proxy for the current account 297 00:18:22,840 --> 00:18:27,120 Speaker 1: position in a country. There was a consciousness about the 298 00:18:27,240 --> 00:18:29,879 Speaker 1: level of debt, both in in absolute terms and in 299 00:18:29,960 --> 00:18:33,080 Speaker 1: relative terms. But I have to say the Russian finance 300 00:18:33,160 --> 00:18:37,679 Speaker 1: ministry did a good number by shifting the the accounting 301 00:18:37,680 --> 00:18:41,800 Speaker 1: around such that they created two different budgets, an ordinary 302 00:18:41,880 --> 00:18:46,199 Speaker 1: quote unquote budget and extraordinary budget. And there was a 303 00:18:46,280 --> 00:18:50,200 Speaker 1: lively debate in investment circles about which numbers investors should 304 00:18:50,240 --> 00:18:53,960 Speaker 1: be looking at. And also another complicating factor was at 305 00:18:54,000 --> 00:18:56,959 Speaker 1: the time of war, investors that may have looked at 306 00:18:57,000 --> 00:19:02,119 Speaker 1: hard nosed analyzes of raw numbers started also including in 307 00:19:02,160 --> 00:19:06,159 Speaker 1: their thinking things like Russia's alliance with the West at 308 00:19:06,160 --> 00:19:08,640 Speaker 1: the time of the war and the long term prospects 309 00:19:08,640 --> 00:19:10,920 Speaker 1: of Russia, saying that even if right now things look 310 00:19:11,040 --> 00:19:14,520 Speaker 1: rather stressed over the next hundred years, say, Russia still 311 00:19:14,560 --> 00:19:17,119 Speaker 1: has a good future ahead of it, which brings to 312 00:19:17,119 --> 00:19:21,480 Speaker 1: to mind the saying that every long term investment is 313 00:19:21,520 --> 00:19:25,480 Speaker 1: really a speculation gone bad. It's almost like an intangible 314 00:19:25,520 --> 00:19:28,240 Speaker 1: asset for a company, right you're sort of factoring the 315 00:19:28,359 --> 00:19:32,840 Speaker 1: sort of I guess, like aura around the country. Okay, 316 00:19:32,840 --> 00:19:37,200 Speaker 1: So Hassan talked to us about the moment of debt repudiation. 317 00:19:37,359 --> 00:19:40,800 Speaker 1: You know, we're building up to nineteen eighteen. What was 318 00:19:40,880 --> 00:19:45,960 Speaker 1: the decision making process that went into, ultimately the decision 319 00:19:46,040 --> 00:19:49,200 Speaker 1: to just repudiate all the debt that had been issued 320 00:19:49,280 --> 00:19:52,240 Speaker 1: under the Czar's government. So one of the things that 321 00:19:52,320 --> 00:19:55,199 Speaker 1: really struck me when I was reading through all the 322 00:19:55,280 --> 00:19:58,560 Speaker 1: archival material on this was the degree to which this 323 00:19:58,840 --> 00:20:03,440 Speaker 1: was a a very complicated decision. There is a tendency 324 00:20:03,480 --> 00:20:06,240 Speaker 1: in the histories that have come out on this period 325 00:20:06,280 --> 00:20:09,560 Speaker 1: to just write this off as of course the Communists 326 00:20:09,560 --> 00:20:12,639 Speaker 1: came in and of course they defaulted. In reality, it 327 00:20:12,720 --> 00:20:17,000 Speaker 1: was a very complicated decision because, yes, the communists hated 328 00:20:17,280 --> 00:20:20,440 Speaker 1: the bankers and the financiers and the capitalists, but there 329 00:20:20,440 --> 00:20:23,160 Speaker 1: were also some so there was, you know, this ideological 330 00:20:23,200 --> 00:20:26,840 Speaker 1: backdrop to it, but there was also some very practical considerations. 331 00:20:26,840 --> 00:20:29,960 Speaker 1: So one of the things was the revolutionaries basically had 332 00:20:30,000 --> 00:20:33,120 Speaker 1: their support in urban centers, and many of them were 333 00:20:33,119 --> 00:20:35,800 Speaker 1: really not representative of Russia as a whole, which was 334 00:20:35,800 --> 00:20:38,680 Speaker 1: still a very agrarian country. So coming in and talking 335 00:20:38,680 --> 00:20:42,280 Speaker 1: about repudiating the debts was a very shrewd way of 336 00:20:42,480 --> 00:20:46,600 Speaker 1: building support amongst the peasantry, which had run up mortgage 337 00:20:46,640 --> 00:20:49,800 Speaker 1: debts in the process of land reform that had preceded 338 00:20:49,840 --> 00:20:53,959 Speaker 1: the revolution. There's also the counter factual situation, which is 339 00:20:54,480 --> 00:20:58,920 Speaker 1: that if the Bolshevik Revolution had not succeeded in late 340 00:20:59,000 --> 00:21:02,480 Speaker 1: nineteen seventeen, and there's plenty of reason to argue that 341 00:21:02,520 --> 00:21:05,040 Speaker 1: it could not have succeeded in a different scenario because 342 00:21:05,040 --> 00:21:07,359 Speaker 1: it was such a closely run thing. You have to 343 00:21:07,400 --> 00:21:10,679 Speaker 1: ask yourself what would a different government have done. And 344 00:21:10,720 --> 00:21:12,600 Speaker 1: one of the arguments that I make in the book 345 00:21:12,840 --> 00:21:15,000 Speaker 1: is that if you look at the numbers, and if 346 00:21:15,040 --> 00:21:17,520 Speaker 1: you look at the situation and how badly the Russian 347 00:21:17,520 --> 00:21:21,080 Speaker 1: economy had started to perform by late nineteen seventeen, that 348 00:21:21,200 --> 00:21:26,320 Speaker 1: even a more pro western, even a more liberal government 349 00:21:26,840 --> 00:21:30,520 Speaker 1: at the time, would have had to default. And so it's, yes, 350 00:21:30,680 --> 00:21:34,280 Speaker 1: partly a story of this ideology, but partly it's also 351 00:21:34,520 --> 00:21:37,159 Speaker 1: a story of practicality. And the other thing that I 352 00:21:37,160 --> 00:21:39,399 Speaker 1: would say is that at the time that the Bolshicks 353 00:21:39,480 --> 00:21:43,480 Speaker 1: came in, they really inherited the keys to essentially the 354 00:21:43,560 --> 00:21:46,360 Speaker 1: largest country on Earth, and they were so taken up 355 00:21:46,840 --> 00:21:50,720 Speaker 1: by the mechanics of running this large country that it 356 00:21:50,760 --> 00:21:54,479 Speaker 1: took quite some time. Took a number of weeks before 357 00:21:54,520 --> 00:21:58,320 Speaker 1: they were actually able to issue a decree repudiating the 358 00:21:58,400 --> 00:22:01,440 Speaker 1: debts which also created its own levels of confusion and 359 00:22:01,440 --> 00:22:04,560 Speaker 1: and and uncertainty in the market. I know we talked 360 00:22:04,560 --> 00:22:07,479 Speaker 1: about how big this was, but what are the numbers, like, 361 00:22:07,680 --> 00:22:10,679 Speaker 1: how big was Russia, you know, in terms of the 362 00:22:10,840 --> 00:22:13,639 Speaker 1: nominal amount of outstanding debt and how much of a 363 00:22:13,760 --> 00:22:16,840 Speaker 1: slice of the credit markets or sovereign bond market were 364 00:22:16,880 --> 00:22:20,399 Speaker 1: they at the time? Right, so they were the largest 365 00:22:20,480 --> 00:22:23,639 Speaker 1: international debtor on a net basis on the eve of 366 00:22:23,680 --> 00:22:26,399 Speaker 1: the war. The US was larger on a growth basis, 367 00:22:26,480 --> 00:22:28,159 Speaker 1: but they would then re export a lot of the 368 00:22:28,200 --> 00:22:32,120 Speaker 1: capital elsewhere in frankly and emerging markets. If you look 369 00:22:32,160 --> 00:22:35,760 Speaker 1: at default in roughly contemporary terms and sort of late 370 00:22:37,359 --> 00:22:40,920 Speaker 1: sort of dollars, you're looking at at a default size 371 00:22:41,119 --> 00:22:45,240 Speaker 1: that can easily be put at three billion dollars. But really, 372 00:22:45,280 --> 00:22:49,959 Speaker 1: given the size of Russia's economy and given the size 373 00:22:50,000 --> 00:22:52,080 Speaker 1: of the debt at the time, if you translated to 374 00:22:52,240 --> 00:22:56,359 Speaker 1: some other inflation metrics, you could easily make the argument 375 00:22:56,400 --> 00:22:58,800 Speaker 1: that this was on the scale of a trillion dollar default, 376 00:22:59,600 --> 00:23:04,520 Speaker 1: which underscores the gap between Russia nineteen eighteen and Greece 377 00:23:04,560 --> 00:23:07,960 Speaker 1: and Argentina more recently. What were then the knock on 378 00:23:08,000 --> 00:23:10,880 Speaker 1: effect for the bag holders, so to speak, because even 379 00:23:10,920 --> 00:23:14,119 Speaker 1: with Greece, which was, you know, so much smaller, there 380 00:23:14,160 --> 00:23:18,320 Speaker 1: are all these fears about contagion throughout the entire financial system, 381 00:23:18,400 --> 00:23:22,680 Speaker 1: and that the system couldn't handle an outright Greek default. 382 00:23:23,000 --> 00:23:26,320 Speaker 1: What happened with the holders and who bore the brunt 383 00:23:26,320 --> 00:23:29,920 Speaker 1: of it? Well, really, this is one of the tragic stories, 384 00:23:30,040 --> 00:23:32,640 Speaker 1: is that a lot of the people that got hit 385 00:23:32,680 --> 00:23:35,360 Speaker 1: by this were ordinary savers in the West. I mean 386 00:23:35,440 --> 00:23:38,679 Speaker 1: when I when I talked to my French colleagues in 387 00:23:38,720 --> 00:23:42,800 Speaker 1: the markets today, many of them have stories of grandparents 388 00:23:42,800 --> 00:23:46,360 Speaker 1: and great grandparents who are rendered destitute by the default. 389 00:23:46,720 --> 00:23:50,280 Speaker 1: There's to this day internet for a of descendants of 390 00:23:50,320 --> 00:23:54,080 Speaker 1: French bond holders that are still demanding restitution. There were 391 00:23:54,080 --> 00:23:57,680 Speaker 1: a series of deals that were done, so in one 392 00:23:57,720 --> 00:24:03,200 Speaker 1: deal that was consummated in six bondholders essentially got four 393 00:24:03,280 --> 00:24:07,359 Speaker 1: cents on the dollar um. None of this was inflation adjusted, 394 00:24:07,680 --> 00:24:09,639 Speaker 1: and so really it was a story of individuals that 395 00:24:09,760 --> 00:24:12,160 Speaker 1: lost out rather than the big institutions. And of course 396 00:24:12,200 --> 00:24:16,359 Speaker 1: the biggest sufferers were people in Russia themselves, who entered 397 00:24:16,400 --> 00:24:20,160 Speaker 1: this sort of monetary twilight zone of a collapsing real 398 00:24:20,160 --> 00:24:24,960 Speaker 1: economy and hyper inflation. So, Hassan, what's the big takeaway 399 00:24:25,280 --> 00:24:29,520 Speaker 1: for emerging market debt? Can you say that all bonds 400 00:24:29,560 --> 00:24:33,320 Speaker 1: are all debt is political or ideological or is that 401 00:24:33,400 --> 00:24:39,719 Speaker 1: just exacerbated with this particular example in financial history because 402 00:24:39,760 --> 00:24:43,840 Speaker 1: we're talking about you know, Bolsheviks versus capitalists. Basically, well, 403 00:24:43,880 --> 00:24:45,680 Speaker 1: I think you're you hit the nail on the head 404 00:24:45,680 --> 00:24:48,040 Speaker 1: and in talking about the political dimension, and that I 405 00:24:48,080 --> 00:24:50,960 Speaker 1: think is the key takeaway is that all debt is 406 00:24:51,040 --> 00:24:55,760 Speaker 1: ultimately political. In fact, some historians have talked about debt 407 00:24:55,920 --> 00:25:00,000 Speaker 1: markets being the crucible of of democracy in history really 408 00:25:00,480 --> 00:25:03,480 Speaker 1: around the world. I think the lesson that I took 409 00:25:03,520 --> 00:25:07,200 Speaker 1: away as as from an investment standpoint is that as 410 00:25:07,240 --> 00:25:11,399 Speaker 1: important as the hard numbers analysis, thinking about balance of 411 00:25:11,440 --> 00:25:16,639 Speaker 1: payments and GDP growth trajectories and whatnot, are the political 412 00:25:16,680 --> 00:25:19,960 Speaker 1: dimension is so crucial, and in particular in emerging markets. 413 00:25:20,520 --> 00:25:23,200 Speaker 1: Investing is not something that happens in a vacuum. It's 414 00:25:23,240 --> 00:25:28,360 Speaker 1: not just a clinical scientific process. When one is deploying 415 00:25:28,440 --> 00:25:33,399 Speaker 1: capital in an emerging market, one is often taking, whether 416 00:25:33,560 --> 00:25:38,760 Speaker 1: explicitly or implicitly, um sides in a in a political spectrum, 417 00:25:38,800 --> 00:25:41,440 Speaker 1: and it's very important to be conscious of what those 418 00:25:41,960 --> 00:25:46,000 Speaker 1: investments represent in that context. I'm afraid we're going to 419 00:25:46,080 --> 00:25:47,960 Speaker 1: have to leave it there. But that was a really 420 00:25:48,040 --> 00:25:53,159 Speaker 1: fascinating conversation that was Hasan Malik, the author of Bankers 421 00:25:53,280 --> 00:25:57,080 Speaker 1: and Bolsheviks, thank you so much for coming on. Thank you, 422 00:25:57,200 --> 00:26:15,080 Speaker 1: thank you for having me. Yea so Joe. I really 423 00:26:15,119 --> 00:26:18,760 Speaker 1: enjoyed that conversation, and I hope you did too. Oh, 424 00:26:18,800 --> 00:26:21,480 Speaker 1: I love that conversation. The first thing we have to 425 00:26:21,560 --> 00:26:26,680 Speaker 1: do is find one of these people that still holds 426 00:26:26,760 --> 00:26:30,879 Speaker 1: some pre revolution Russian debt and do it a follow 427 00:26:30,960 --> 00:26:34,720 Speaker 1: up episode on the ongoing legal fight to get remuneration 428 00:26:34,760 --> 00:26:37,320 Speaker 1: that we have to do that. Hassan actually mentions this 429 00:26:37,600 --> 00:26:40,560 Speaker 1: in the book, but there are internet forums for French 430 00:26:40,960 --> 00:26:44,400 Speaker 1: holders of Russian debt still to this day. It's amazing. 431 00:26:45,000 --> 00:26:47,000 Speaker 1: There's gotta be like some lawyer involved with it. So 432 00:26:47,080 --> 00:26:50,359 Speaker 1: let's let's try to book that person. Seriously. Yeah, But 433 00:26:50,440 --> 00:26:54,679 Speaker 1: the reason I found that whole conversation so interesting is because, 434 00:26:55,119 --> 00:26:57,080 Speaker 1: as I mentioned in the intro, it touches on a 435 00:26:57,160 --> 00:26:59,119 Speaker 1: number of things that that you and I like to 436 00:26:59,160 --> 00:27:02,560 Speaker 1: talk about, such as when bubbles burst and what the 437 00:27:02,600 --> 00:27:05,399 Speaker 1: sort of turning point or warning signs are. But I 438 00:27:05,440 --> 00:27:08,800 Speaker 1: think Hassan also does a really good job of talking 439 00:27:08,840 --> 00:27:12,520 Speaker 1: about the sort of individual and personal decisions that go 440 00:27:12,720 --> 00:27:17,639 Speaker 1: into fueling, in this case, a sovereign debt bubble. Yeah, totally. 441 00:27:17,720 --> 00:27:20,440 Speaker 1: I mean I think, you know, this is something that 442 00:27:21,119 --> 00:27:23,240 Speaker 1: I know I talk about a lot, We've brought up 443 00:27:23,280 --> 00:27:25,640 Speaker 1: a lot, but you know, we tend to just see 444 00:27:25,640 --> 00:27:29,760 Speaker 1: all these assets as prices on the screen, you know, 445 00:27:29,800 --> 00:27:32,000 Speaker 1: even with the debt today. But it's important to remember 446 00:27:32,000 --> 00:27:34,000 Speaker 1: that it's like our actual human beings who have to 447 00:27:34,119 --> 00:27:37,800 Speaker 1: make the decision to invest in something, or human being 448 00:27:38,000 --> 00:27:40,480 Speaker 1: who has to go out and make the sales pitch. 449 00:27:40,520 --> 00:27:42,320 Speaker 1: And we still have that where we have you know, 450 00:27:42,520 --> 00:27:45,200 Speaker 1: finance minister of some country will come to New York 451 00:27:45,240 --> 00:27:48,640 Speaker 1: and meet with investors and explain why they should invest. 452 00:27:48,720 --> 00:27:52,399 Speaker 1: And so understanding that a country is more than just 453 00:27:52,520 --> 00:27:55,800 Speaker 1: the sum of its statistical parts, but that people actually 454 00:27:55,840 --> 00:27:58,160 Speaker 1: have to go out and flog this stuff and make 455 00:27:58,200 --> 00:28:01,879 Speaker 1: decisions and make deals is sort of an essential element 456 00:28:01,960 --> 00:28:04,880 Speaker 1: to this. And just in general, I always love when 457 00:28:04,920 --> 00:28:08,840 Speaker 1: we talk about stories that remind us how things that 458 00:28:08,920 --> 00:28:11,600 Speaker 1: we think of as sort of modern and finance really 459 00:28:11,640 --> 00:28:15,440 Speaker 1: aren't that modern. So the idea of allocation to uh 460 00:28:15,520 --> 00:28:19,000 Speaker 1: safe haven assets, or thinking about the spread of Russian 461 00:28:19,040 --> 00:28:21,960 Speaker 1: debt to uh great a British debt at the time, 462 00:28:22,320 --> 00:28:25,119 Speaker 1: just sort of all these things that feel extremely modern 463 00:28:25,160 --> 00:28:28,240 Speaker 1: but have been around forever. Absolutely. So one other thing 464 00:28:28,320 --> 00:28:31,880 Speaker 1: it really reminds you of is the sort of idea 465 00:28:31,960 --> 00:28:36,000 Speaker 1: of weaponizing debt as well. So, you know, bankers obviously 466 00:28:36,040 --> 00:28:38,360 Speaker 1: go into a country and they're trying to make investments 467 00:28:38,400 --> 00:28:40,960 Speaker 1: and make some money, but a lot of what went 468 00:28:41,000 --> 00:28:45,400 Speaker 1: on with Russia took place among Russian politicians, who either 469 00:28:45,720 --> 00:28:50,520 Speaker 1: use the debt to fund their various expansion plans, or 470 00:28:50,800 --> 00:28:53,560 Speaker 1: in the case of the Bolsheviks, they basically weaponized debt 471 00:28:53,800 --> 00:28:58,880 Speaker 1: by undermining the provisional government's attempts to sell it domestically. 472 00:28:59,040 --> 00:29:01,320 Speaker 1: So they're all these sort of push and pull factors 473 00:29:01,360 --> 00:29:03,800 Speaker 1: that are just really really interesting. And I don't think 474 00:29:04,400 --> 00:29:06,560 Speaker 1: you're right. We don't think about that enough. You know, 475 00:29:06,600 --> 00:29:09,160 Speaker 1: in retrospect, it seems hard to believe, But I love 476 00:29:09,200 --> 00:29:12,040 Speaker 1: that detail about how even after they came to power, 477 00:29:12,640 --> 00:29:15,120 Speaker 1: there was still like a fair amount of confidence among 478 00:29:15,160 --> 00:29:17,360 Speaker 1: the dead holders that that it would be okay, and 479 00:29:17,400 --> 00:29:21,600 Speaker 1: that spreads hadn't really winded that much. By historical standards, 480 00:29:21,600 --> 00:29:24,640 Speaker 1: So you know, it seems absurd in retrospect that would 481 00:29:24,640 --> 00:29:26,800 Speaker 1: have been the case, but it's just how you never know, 482 00:29:27,080 --> 00:29:31,120 Speaker 1: and it was still worthwhile opening a city branch in Moscow. 483 00:29:33,240 --> 00:29:36,080 Speaker 1: This has been another episode of the Odd Thoughts podcast. 484 00:29:36,200 --> 00:29:39,160 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 485 00:29:39,160 --> 00:29:43,040 Speaker 1: Tracy Alloway, and also like to send a thank you 486 00:29:43,280 --> 00:29:47,280 Speaker 1: to our Bloomberg colleague who suggested we interview Hassan. That's 487 00:29:47,320 --> 00:29:50,960 Speaker 1: Gregor Stewart Hunter. You can follow him on Twitter at 488 00:29:51,080 --> 00:29:54,240 Speaker 1: Gregor Hunter. And I'm Joe Why Isn't All? You can 489 00:29:54,280 --> 00:29:57,160 Speaker 1: follow me on Twitter at the Stalwart, and you should 490 00:29:57,200 --> 00:30:01,160 Speaker 1: definitely follow our guests on Twitter. Hassan Mollett, He's at 491 00:30:01,400 --> 00:30:04,840 Speaker 1: h Malik h and be sure to follow our producers 492 00:30:04,960 --> 00:30:09,000 Speaker 1: Toe for Foreheads He's at forehas T and Laura Carlson. 493 00:30:09,160 --> 00:30:12,720 Speaker 1: She's at Laura M. Carlson. And don't forget to follow 494 00:30:12,760 --> 00:30:16,800 Speaker 1: the Bloomberg head of podcast, Francesca Levy at Francesca Goodey. 495 00:30:17,120 --> 00:30:17,880 Speaker 1: Thanks for listening.