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Speaker 1: You just just have to get up every morning six o'clock

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Speaker 1: and clean the newspaper. I'm going to work down the

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Speaker 1: mill fourteen now the day, week and week up for

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Speaker 1: sixpence per week. And when we got home, Oh, Dad

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Speaker 1: would slash us to sleep with his belt. Luxury. We

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Speaker 1: used to have to get out of the lake at

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Speaker 1: three o'clock in the morning, clean the lake. It's hand

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Speaker 1: full of what gravel work twenty a day at millfortuping

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Speaker 1: some muntiple. Mom and dad would beat us around the

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Speaker 1: end and neck with a broken bottle if we were lucky.

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Speaker 1: Are you Try and tell the young people of today

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Speaker 1: that and they won't believe you. Hello, and welcome to Stephanomics,

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Speaker 1: the podcast that brings the global economy and a bit

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Speaker 1: of Monty Python. You don't know how lucky you are.

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Speaker 1: People said that to their children and grandchildren all time

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Speaker 1: when I was growing up. Not anymore. Whether it's climate change,

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Speaker 1: the economic impact of COVID, or the aging of the

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Speaker 1: popular nation, collectively, the world's running up some pretty big

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Speaker 1: bills right now. Young people feel they're already paying more

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Speaker 1: than their fair share. In a few minutes, the economist

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Speaker 1: Charles Goodheart and managed prad and tell us what they

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Speaker 1: think the future is going to look like as the

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Speaker 1: population gets older. Spoiler alert, inflation makes a comeback and

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Speaker 1: that's the easy part. We also have one more snippet

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Speaker 1: from the Bloomberg New Economy Forum, former Bank of England

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Speaker 1: Governor Mark Carney talking about how the world of finance

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Speaker 1: is going to help all of us get to zero

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Speaker 1: carbon But first, an up close and personal look at

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Speaker 1: that generational divide we're seeing across the economy. From our

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Speaker 1: twenty something reporter apprentice, Eileen Bank. That's the sound of

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Speaker 1: young people in the center of the northern English city

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Speaker 1: of Liverpool last month, as the bars of the COVID

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Speaker 1: hit city closed for the final time before a new

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Speaker 1: round of restrictions. Large groups of revelers crowded onto the streets,

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Speaker 1: hugging and chanting in process as police tried to enforce

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Speaker 1: social distancing. Such scenes when Liverpool's hospitals were overwhelmed by

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Speaker 1: the virus drew condemnation from many, But as the pandemic

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Speaker 1: drags on, there's a deeper frustration building among young people,

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Speaker 1: which is harder to dismiss. The hard reality is that

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Speaker 1: the people at Grace's risk of dying from the virus

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Speaker 1: are those of retirement age. But the economic disaster of

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Speaker 1: COVID is disproportionately affecting the young and may do for

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Speaker 1: many years to come. COVID is absolutely the exacerbated these inequalities.

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Speaker 1: That's still Filipovitch, the millennial author of Okay, Boomer, Let's Talk.

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Speaker 1: Job losses in the US have been overwhelmingly concentrated among

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Speaker 1: young people, and among millennials in particular. It's a similar

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Speaker 1: story across the globe. At the height of the pandemic,

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Speaker 1: unemployment for Americans aged twenty to twenty four was more

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Speaker 1: than ten percentage points higher than for any other age group,

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Speaker 1: and young people are star seeing to get resent, full

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Speaker 1: of restrictions, designs to protect others as they see their

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Speaker 1: opportunities dwindling. Think about which industry has got hurt hardest

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Speaker 1: because of COVID, and you know the attendant shutdowns, you know,

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Speaker 1: and it's things like restaurants, bars, travel. All of those

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Speaker 1: industries are dominated by young people. Young people, millennials and

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Speaker 1: Gen zeers who are bartenders and waiters and restaurants staff.

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Speaker 1: Those joining the labor market for the first time may

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Speaker 1: see their careers derailed for years because they have to

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Speaker 1: settle for a job outside their chosen field or get

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Speaker 1: stuck in unemployment. In Germany and Switzerland, lots of people

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Speaker 1: are concerned that the billions of dollars the government su

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Speaker 1: spending today will have to be paid back down the road,

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Speaker 1: forcing economic opportunity in the process. Tilman Kuban leaves the

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Speaker 1: youth arm of the German Chancellor Angela Merkel's party. He

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Speaker 1: says young people are the triple losers of the crisis

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Speaker 1: because it's costing them in terms of education, social opportunities

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Speaker 1: and future government benefits. Let's go, let's see that's um.

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Speaker 1: Those who are done with their training or their studies

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Speaker 1: now face a jobs market and the worst recession ever

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Speaker 1: in the history of the German Federal Republicans. On the

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Speaker 1: other side, there are the three hundred billion euros worth

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Speaker 1: of new debt that is being issued this year and next,

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Speaker 1: a new issuance of debt bigger than Germany has ever experienced.

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Speaker 1: The pile of debt is getting so big that our

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Speaker 1: generation can hardly stomach condom Manuel, as a twenty one

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Speaker 1: year old living in London, I can tell you that

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Speaker 1: the talk of war between generations didn't start with COVID nineteen.

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Speaker 1: My friends and I have had to enter the job

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Speaker 1: market burdened with student loans, struggling to get a foothold

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Speaker 1: in a property market where start homes cost nine times

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Speaker 1: average wages. Thanks to teenage activists Grassi Sumburg. We've also

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Speaker 1: seen mass strikes by school children and students over climate change,

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Speaker 1: all aimed at goding middle aged politicians to do something

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Speaker 1: about the global catastrophe that will overwhelmingly hit their children

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Speaker 1: and their children's children. Economists at Deutsche Bank have warned

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Speaker 1: that the pandemic is likely to only fuel this resentment

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Speaker 1: among generations. To see which age group is doing best,

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Speaker 1: let's look at wages. Ultimately, financial well being boils down

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Speaker 1: to the amount of money people have in their pockets.

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Speaker 1: Wage increases have been slowing across advanced economies, and the

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Speaker 1: upshot is that today's young people can no longer count

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Speaker 1: on outs earning their parents. So if you look at

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Speaker 1: cohorts that were born in the nineteen forties, more of them,

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Speaker 1: on average earn more than their parents did at at

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Speaker 1: the same name. That's Robert Manduka, a professor at the

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Speaker 1: University of Michigan, who has studied the decline and intergenerational mobility,

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Speaker 1: So they almost universally had this experience of upward mobility

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Speaker 1: where living standards were rising for everyone. Um, but that's

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Speaker 1: really changed over the past forty or fifty years. So

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Speaker 1: if you look instead of cohorts that were born in

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Speaker 1: the nineteen eighties, what we show is that on about

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Speaker 1: half of them of Americans born in the nineteen eighties

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Speaker 1: grew up to out earn their parents at age thirty.

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Speaker 1: He says, the phenomenon is strongest in the US, but

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Speaker 1: it's also evidence in other countries like the Netherlands and

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Speaker 1: the UK. Slowing economic growth is a factor, but rising

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Speaker 1: inequality is arguably an even bigger driver. So what we

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Speaker 1: show is that you know, the US and Norwegian GDP

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Speaker 1: in aggregate grew about the same rate over the past

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Speaker 1: thirty years, but incomes for thirty year olds kept up

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Speaker 1: with GDP to the large extent in Norway, but did

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Speaker 1: not in the United States. And so if if if

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Speaker 1: there had been sort of I guess you could say,

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Speaker 1: like intergenerational equity, if the if the games were being

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Speaker 1: shared across all age groups in the society, the US

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Speaker 1: upward mobility rate would have been um substantially higher, about

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Speaker 1: fifteen percentage points higher. Probably parts of the trouble boils

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Speaker 1: down to demographics. In many advanced economies, the working age

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Speaker 1: population is shrinking. That means that there were more older

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Speaker 1: roses relative to young ones, and spending on things like

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Speaker 1: state pensions can sum proportionately more government resources. Think about

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Speaker 1: the US, both Donald Trump and Joe Biden are over

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Speaker 1: the age of seventy. Author Jill Philipovitch thinks that this

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Speaker 1: is part of the problem. You have this disproportionate share

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Speaker 1: of power concentrated in the hands of older people, and

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Speaker 1: that means that the policies that younger people need for themselves,

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Speaker 1: for their families, for their children, um frankly, for the

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Speaker 1: future of planet Earth are not being They're not being implemented.

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Speaker 1: For Stanford University professor David Gersky, radical change is needed.

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Speaker 1: He urges a recent branch overhaul of social systems like

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Speaker 1: schools or the judiciary to ensure society becomes more acquisible.

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Speaker 1: That's will help the economy to who he says, I

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Speaker 1: would say that at least in the United States, but

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Speaker 1: I thinking all well off countries. We have a deep

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Speaker 1: commitment to providing opportunity to everyone, and a deep commitment

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Speaker 1: to the idea that it shouldn't be that opportunity is

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Speaker 1: only available to those who have the money to buy it,

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Speaker 1: buying into into into nice neighborhoods that have great schools,

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Speaker 1: providing that private education, that that, in the US case,

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Speaker 1: a ticket to success. That that that you know that

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Speaker 1: being able to buy opportunity is not part of the dream.

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Speaker 1: If we don't have equal opportunity, we're not living up

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Speaker 1: to one of the most profound commitments that that we

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Speaker 1: that we all think should be part in. First, what

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Speaker 1: what what? What? What a modern economy is about? COVID

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Speaker 1: is shaking up economies and societies. My generation has been

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Speaker 1: asked to stay home to protect older generations, and mostly

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Speaker 1: we have. Now maybe it's signs to think about how

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Speaker 1: to pay young people back. So that gave us a

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Speaker 1: sense of what the generational divide feels like today. But

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Speaker 1: what about the future. Well, two very distinguished economists have

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Speaker 1: a book out which claims demographic change is almost single

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Speaker 1: handedly going to turn everything we thought we knew about

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Speaker 1: the twenty one century economy on its head. Charles Goodheart

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Speaker 1: is former chief economist of the Bank of England, Emeritus

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Speaker 1: Professor of Economics at the London School of Economics, and

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Speaker 1: his co author Manage Pradan is the founder of Talking

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Speaker 1: Heads Macro and a former chief Global economist for Morgan Stanley.

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Speaker 1: That they're both on Stephanomics now, Charles, great to have

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Speaker 1: you here. Your book is called The Great Demographic Reversal.

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Speaker 1: What exactly do you see going into reverse in future

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Speaker 1: as a result of the world population getting older? Well,

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Speaker 1: two major trains are going to change. The first one

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Speaker 1: is a demographic change. Until very recently, what has happened

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Speaker 1: is that enormous all countries there has been an increase

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Speaker 1: in the size of the working population relative to the

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Speaker 1: those who are not working dependence as they are called,

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Speaker 1: the young up to the age of about twenty and

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Speaker 1: the retirees over the age of about sixty five. Now

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Speaker 1: the old and the unconsumed that they don't produce and

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Speaker 1: therefore they're inflationary almost by definition. And that means that

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Speaker 1: as the demographics change and the proportion of dependence ceases

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Speaker 1: to fall and now begins to rise very sharply as

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Speaker 1: an increasing proportion of the population get to the age

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Speaker 1: of over sixty five, what is going to happen is

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Speaker 1: that these trends is going to lead to greater inflation.

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Speaker 1: Now that is combined with the second trend, which is

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Speaker 1: that prior to about a few years ago, the world

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Speaker 1: was becoming more globalized in that production could move to

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Speaker 1: areas where previously were not included in the world's working system,

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Speaker 1: particularly China, which incorporates a quarter of the world's population

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Speaker 1: and a great deal of particularly manufacturing production when to

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Speaker 1: these low wage areas, and the union proportional workers and

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Speaker 1: unions has been going down steadily. This is effectively meant

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Speaker 1: that the bargaining power of labor has weakened more or

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Speaker 1: less continuously. Now, globalization is in retreat for obvious political

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Speaker 1: and other reasons, and that retreat has actually been re

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Speaker 1: emphasized by the effect of the COVID crisis. So globalization

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Speaker 1: is on the retreat, the dependency ratios are worsening, and

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Speaker 1: both of those are likely to bring about higher underlying

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Speaker 1: inflationary trends over future decades. You know, a lot of

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Speaker 1: people will say, as we got older, we've also been

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Speaker 1: told that we have to work longer, and doesn't that

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Speaker 1: offset this inflationary effect? Because if people are working until

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Speaker 1: they're seventy or seventy five. Then you might not see

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Speaker 1: a big change as big a change in the ratio

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Speaker 1: of of workers to non workers. Why why wouldn't that

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Speaker 1: help solve the problem. Well, until very recently, the trends

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Speaker 1: have been exactly the reverse, in that life expectancy has

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Speaker 1: been increasing much faster than any increase in the age

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Speaker 1: of retirement. That's now changing a bit. But I even so,

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Speaker 1: the increase in the number of the old is going

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Speaker 1: to be very rapid, and increasing the age of retirement

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Speaker 1: is politically extremely unpopular, and it is only introduced very

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Speaker 1: gradually and very gingerly and virtually every country, and even

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Speaker 1: in Putin's Russia, and Putin probably has a greater control

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Speaker 1: over his population than almost any other autocratic leader. His

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Speaker 1: attempt to raise the retirement age ran into such political

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Speaker 1: opposition that he was about the only thing that he

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Speaker 1: was forced to modify into an extent back track on. Um,

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Speaker 1: it's just politically extremely difficult. One quick thing I wanted

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Speaker 1: to add is that I think I think we also

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Speaker 1: have to take a look a slightly deeper look into

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Speaker 1: them demographic trends as well. For example, what is changing

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Speaker 1: now is that the number of people who are what

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Speaker 1: we would call the oldest all is increasing sharply, and

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Speaker 1: as that age group starts increasing, along with it comes

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Speaker 1: at the attendant increase in diseases like dementia that make

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Speaker 1: people unable to after themselves, and that means that an

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Speaker 1: increasing number of the labor force is going to start

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Speaker 1: looking after these people. Now, that's what Childs and I

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Speaker 1: would call socially productive activities, But in the true economic sense,

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Speaker 1: they are producing a product which is consumed by the old,

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Speaker 1: who then do not go on to produce anything else.

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Speaker 1: So I'm not sure we can call it economically productive.

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Speaker 1: So dire as the Huan population statistic projections are for demography,

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Speaker 1: they do not include that a larger part of the population,

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Speaker 1: and in fact an increasing one, will go towards these

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Speaker 1: socially but not economically productive activity. So the story is

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Speaker 1: actually a little bit more difficult than the statistics show.

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Speaker 1: I think it's interesting because a lot of people will say,

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Speaker 1: change when there's a lot more old people. Um, it's

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Speaker 1: wonderful to be able to sell lots of cruises and

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Speaker 1: other things to the newly retired or the fit retired.

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Speaker 1: But in general people feel like there is less consumption

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Speaker 1: from old people and that that could be a problem

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Speaker 1: of the economy. I guess your point is there's less

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Speaker 1: consumption in terms of things like going to restaurants and

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Speaker 1: other things. But at that crucial those last few years

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Speaker 1: if you're very old, can be enormously expensive and draining

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Speaker 1: of social resources. Yes, absolutely, if we accept the demographics.

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Speaker 1: There's another assumption that you make that we can't offset

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Speaker 1: this with faster productivity growth. You're assuming that the economies

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Speaker 1: which are older overall, the global economy that is older

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Speaker 1: is going to grow more slowly and have relatively relatively

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Speaker 1: low productivity. With that, I guess a lot of people

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Speaker 1: would say, well, hang on, we have all this innovation,

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Speaker 1: why why wouldn't we become more productive to compensate. Well,

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Speaker 1: to take one point, and some people think that robotics

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Speaker 1: can deal with the ILD, I can tell you that

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Speaker 1: that will not happen. And anyone who's been in a

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Speaker 1: demential ward, and unfortunately have been with my older brother,

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Speaker 1: knows perfectly well that what the old people really need

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Speaker 1: is emotional support and the emotional quotient of a robot

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Speaker 1: is exactly zero. Robots can help with certain repetitive physical tasks,

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Speaker 1: maybe like lifting people in and out of bath or

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Speaker 1: in and out of bed, but in terms of looking

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Speaker 1: after people with Parkinson's or dementia, the idea that robots

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Speaker 1: can do this and is just just it's just not true.

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Speaker 1: What we're going to need, unfortunately, in some ways in

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Speaker 1: future is much more of of the qualities that we

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Speaker 1: will need will be empathy and emotional support rather than

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Speaker 1: muscular strength. If I may once, it's going to add

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Speaker 1: is just related to the argument I was making earlier,

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Speaker 1: which is that we will need an increasing number of

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Speaker 1: firm people to look after the elderly. What Charles and

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Speaker 1: I are hoping for is that we do see job

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Speaker 1: destruction and other parts of the economy. In fact, we

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Speaker 1: depend on robotics and automation to get rid of repetitive

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Speaker 1: tasks in the manufacturing sector in parts of the services sector.

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Speaker 1: Without that, you would see a net decline in the

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Speaker 1: working age population at a much faster pace. So some

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Speaker 1: of the robotics and automation stories that are happening right

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Speaker 1: now are actually part and parcel of our thesis, without

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Speaker 1: which our thesis would be a lot scarier, if you will,

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Speaker 1: we need that job destruction. So that's fascinating. So when

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Speaker 1: people look at these jobs disappearing in all these interestries,

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Speaker 1: you're saying that can't happen fast enough because we don't

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Speaker 1: realize we've got this enormous need for jobs coming and

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Speaker 1: we need as much as many people as possible to

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Speaker 1: do those jobs. Exactly right. I mean, if you look

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Speaker 1: at how the National Healthcare Service has revealed itself to

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Speaker 1: be completely underfunded, the demands of the future looking after

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Speaker 1: the elderly are something that is simply not part of

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Speaker 1: the equation right now. We're only looking at one piece

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Speaker 1: of the puzzle, which is the automation part, but not

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Speaker 1: the other. But if you have a lot of people

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Speaker 1: moving in if what sound what your sounds like you're

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Speaker 1: talking about is a lot of people moving from the

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Speaker 1: private sector to the public sector, how does that get financed?

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Speaker 1: Even if you're moving the workers, how are you able

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Speaker 1: to pay for that shift into the public sector if

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Speaker 1: you've got a reduced private sector. That's a very good

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Speaker 1: question because if you look further forward, what you will

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Speaker 1: see is increasing costs of medicine, increasing costs of pensions,

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Speaker 1: incasing costs of public support for the old and that

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Speaker 1: is one of the factors which even before the COVID

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Speaker 1: pandemic hit, was driving expenditures, public sector expenditures up relative

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Speaker 1: to tax revenue, and that is going to be a problem.

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Speaker 1: One of the effects of all of this is going

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Speaker 1: to be that taxation is going to really have to

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Speaker 1: rise quite sharply. And here the difficulty is that, like

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Speaker 1: raising the retirement age, increasing taxation is very unpopular. If

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Speaker 1: we do not increase taxation relatively rapidly, the only real

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Speaker 1: way that we can then get out of this increase

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Speaker 1: in debts and deficit is actually through inflation. It's worth

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Speaker 1: spelling out. I mean, we spend some time on this

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Speaker 1: podcast talking about financial markets, although possibly less than than

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Speaker 1: other parts of Bloomberg, and we should probably make clear

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Speaker 1: that if you're right, an awful lot of people are

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Speaker 1: going to lose a lot of money based on the

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Speaker 1: current pricing of financial assets. It could just spell out, um,

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Speaker 1: how different your of the world is and the one

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Speaker 1: that's currently expressed in bond prices and the record low,

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Speaker 1: very long term interest rates, low record low interest rates

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Speaker 1: that are currently being charged to the governments all around

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Speaker 1: the world for borrowing, well, I think it couldn't be

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Speaker 1: more different. Just to give you a very quick preface

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Speaker 1: into the argument that comes in most people look at

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Speaker 1: tenure and twentie yields and they say, what's priced into

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Speaker 1: the markets is that inflation is never going to rise

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Speaker 1: and we are going to have law for longer. The

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Speaker 1: only question is whether real heels come up into slightly

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Speaker 1: positive territory or slightly negative territory because of the vagaries

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Speaker 1: of inflation. And so to be clear, that's also why

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Speaker 1: more long term mortgage rates are currently extremely low as well.

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Speaker 1: Everyone can borrow for a very long time at a

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Speaker 1: fixed rate which is extremely low. Correct. And it goes

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Speaker 1: beyond that also, I think, because it goes on to

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Speaker 1: a more nuanced argument that says, if inflation is not

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Speaker 1: part of the problem, then the central bank really does

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Speaker 1: not have a growth inflation trade off, which means every

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Speaker 1: time growth is in trouble, central banks can ease policy

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Speaker 1: and they don't really have to tighten, which means the

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Speaker 1: equity market can depend very solidly on a central bank

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Speaker 1: put in a way that just would not be possible

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Speaker 1: in an inflationary environment. And how has COVID change this Well,

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Speaker 1: it's actually fascinating because the COVID has led to two

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Speaker 1: very very different scenarios. Scenario one, which is the mainstream,

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Speaker 1: one is the resulting unemployment, the need for industrial adjustment,

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Speaker 1: and all that will keep inflation even lower for as

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Speaker 1: long as all that continues. The argument against that has

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Speaker 1: been that the massive policy expansion, both fiscal and monetary,

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Speaker 1: is going to mean that the inflationary pressures will occur

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Speaker 1: stronger and quicker than we had actually initially thought. We

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Speaker 1: are expanding the money supply, and we're expanding public sector

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Speaker 1: debt like crazy, and we won't stop until inflation actually

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Speaker 1: does hit sufficiently strongly to make everyone have to change

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Speaker 1: their tune. And the question, great question is when is

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Speaker 1: that going to be? What is going to be the

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Speaker 1: stronger force determining inflation in the next few years, unemployment

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Speaker 1: or monetary growth and expansionary policy, And we don't know.

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Speaker 1: We've never really been in a situation where the two

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Speaker 1: main determinants of inflation have been so strongly moving in

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Speaker 1: quite opposite directions. Just a final question, and without embarrassing Charles,

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Speaker 1: I would say, I'm glad that the whole podcast about

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Speaker 1: generational challenges. We have all generations represented on this program,

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Speaker 1: having started with someone in their twenties. But Eileen, who

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Speaker 1: spoke to us at the beginning of the program, feels

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Speaker 1: like many twenty somethings that quite already quite put upon

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Speaker 1: as a generation facing much tougher challenges financially than her

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Speaker 1: previous generations. What's the sort of single best way that

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Speaker 1: older generations could try and do right by people of

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Speaker 1: her age group. What's the thing that if we were

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Speaker 1: being selfless, or the exes and the baby boomers and

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Speaker 1: older people, what's the best thing that they could do

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Speaker 1: to make this scenario less painful. Well, in the very

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Speaker 1: short run, I get the vaccine through so that we

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Speaker 1: can all go back to some normality. The young can

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Speaker 1: enjoy university again, and my grandchildren now in university, and

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Speaker 1: it's not what it should be, nor of course is

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Speaker 1: the drug market where you should be. So that the

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Speaker 1: first short run need is to get the vaccine distributed

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Speaker 1: and get back to normality and allow the young and

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Speaker 1: reasonable life again. They have been worse hit by the

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Speaker 1: pandemic probably than any other group except perhaps the over eighties,

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Speaker 1: who are so vulnerable in the longer term. I have

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Speaker 1: to say that I really rather wish that the future

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Speaker 1: that we paint does not come about for one reason

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Speaker 1: or another, because it is actually going to be really

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Speaker 1: quite difficult to maneuver our way through. I fear that

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Speaker 1: we're going back to something rather akin to the stag

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Speaker 1: clation of the nine seventies for quite a long time,

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Speaker 1: and in a much worse condition than we were then,

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Speaker 1: because the underlying debt ratios have become so much worse. Uh.

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Speaker 1: I think that I would in some ways respond to

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Speaker 1: you along what the Irishman is always space to have said.

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Speaker 1: I wouldn't. I would rather not have started from here. Charles,

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Speaker 1: good up, Thank you very much. I didn't promise you.

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Speaker 1: One more slice of the Bloomberg New Economy Forum. Here's

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Speaker 1: Mark Connie, former Bank of England governor, now you n

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Speaker 1: Special Envoy for Climate Action, talking to my colleague, the

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Speaker 1: Bloomberg television host Alex Steele. But how to make all

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Speaker 1: finance sustainable? Finance? Mark, there's been data that says that

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Speaker 1: total required investment in the energy sector is going to

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Speaker 1: be three and a half trillion dollars a year, and

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Speaker 1: a lot of that going to say carbon capture to

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Speaker 1: decarbonize the world. Tell me how we get there? Well, uh,

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Speaker 1: and that data is right, and that's just energy really,

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Speaker 1: it's energy infrastructure, and then there's a decarbonization above and

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Speaker 1: beyond that in other sectors of the econ to me,

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Speaker 1: So we need a whole economy transition. We need to

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Speaker 1: mainstream sustainable finance. We need to ultimately get to a

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Speaker 1: point where every financial decision is taking climate change into

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Speaker 1: account the impact on the transition. And we actually dropped

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Speaker 1: the adjectives sustainable because it's just what finance professionals do.

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Speaker 1: So we're gonna get to sort of the policy part

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Speaker 1: of it in a second. But financial flows are really important,

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Speaker 1: and the private sector money is going to be key.

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Speaker 1: How do we get more money from the private sector? Well,

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Speaker 1: I think we What we're working to do is with

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Speaker 1: the private sector to put in place the information, um,

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Speaker 1: the tools, and the markets that are needed in order

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Speaker 1: to do this. The information. It starts with reporting, and

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Speaker 1: it's the TCFD reporting making it mandatory, so all companies

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Speaker 1: reporting their climate risk. That's something actually Mike Bloomberg spearheaded

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Speaker 1: five years ago. It's moving into mainstream. We wanted everywhere

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Speaker 1: by COP twenty. Secondly, on the risk side, we need

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Speaker 1: the banks to look at the risks around the climate transition,

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Speaker 1: which then flipped to opportunities. On the opportunity side, it's

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Speaker 1: really about looking for a transition plans from all companies

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Speaker 1: and backing those who are part of the solution and

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Speaker 1: taking capital away from those who are part of the problem.

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Speaker 1: That's how you mainstream. One last point, and I know

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Speaker 1: we'll get to this, is it's very important to also

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Speaker 1: help build those nature based solution and carbon offset markets

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Speaker 1: as well. That's a missing market and it should be

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Speaker 1: measured in the ten civilians a here. How long do

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Speaker 1: we have and how long is that going to take?

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Speaker 1: How long? Well, we don't have a lot of time

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Speaker 1: at the moment with the carbon budget on where we're

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Speaker 1: headed somewhere between ten and twenty years, depending on how

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00:28:31,400 --> 00:28:33,920
Speaker 1: you measure it. So we need to act now and

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00:28:33,960 --> 00:28:36,800
Speaker 1: we need to buy some time. That's part of what

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00:28:36,960 --> 00:28:41,120
Speaker 1: offsets will do for us UM. But also we need

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Speaker 1: to invest now. I mean we're we're touch what we're

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Speaker 1: going to be coming out of the health and economic crisis. Uh,

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00:28:47,440 --> 00:28:49,840
Speaker 1: the question is what direction are we pointing our economies?

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Speaker 1: We're going to point towards sustainable growth, huge investment. You

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Speaker 1: rightly started with that alex huge numbers for investment. That's

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00:28:57,520 --> 00:29:01,440
Speaker 1: capital intensive, it's job heavy. UM. Having that information now

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00:29:01,680 --> 00:29:05,280
Speaker 1: so companies and investors can put money to work is critical.

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00:29:06,000 --> 00:29:09,360
Speaker 1: So what role then does policy play in that? UM?

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00:29:09,520 --> 00:29:12,280
Speaker 1: We just had election obviously here in the US. UM,

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Speaker 1: what's the role of public policy? Yeah, so I think

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00:29:15,840 --> 00:29:18,120
Speaker 1: there's a couple of roles. One and I wouldn't under

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00:29:18,320 --> 00:29:21,880
Speaker 1: understate this. First bit is set the direction. So one

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Speaker 1: of the one of the planks of President elect Biden

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00:29:25,280 --> 00:29:28,240
Speaker 1: platform was the US is going to move to clean

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Speaker 1: energy and net zero by So you set the direction. Secondly,

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Speaker 1: you put in place the frameworks that are necessary that

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Speaker 1: that information for investors to make the decision, and you

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Speaker 1: also have credible regulatory policy. So you're you're showing the

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Speaker 1: direction of the economy more hydrogen, you know, zero mission vehicles,

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00:29:49,320 --> 00:29:52,640
Speaker 1: moving towards electrifying more of the economy and moving economy

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00:29:52,880 --> 00:29:56,960
Speaker 1: or sorry the elector electricity sector in generation towards renewables.

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Speaker 1: All of those things send signals to investors, provide the

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00:30:00,520 --> 00:30:03,440
Speaker 1: information as well, and gets money moving. So that's what

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Speaker 1: government has to start with the objective, fill in with

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Speaker 1: the framing, and then candidly get out of the way

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00:30:09,480 --> 00:30:13,320
Speaker 1: so the private sector figures out where to go. Has

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Speaker 1: COVID helped or hurt that? I think you know, if

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00:30:16,280 --> 00:30:18,160
Speaker 1: you'd asked me that question ten months ago or nine

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Speaker 1: months ago and it started, I've i've I would have hatched.

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Speaker 1: Like a good central banker, I would have told you

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00:30:22,280 --> 00:30:26,840
Speaker 1: both sides of uh is in Absolutely it is. It

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00:30:26,880 --> 00:30:29,840
Speaker 1: has helped because it's forced a couple of things. One

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00:30:29,960 --> 00:30:33,240
Speaker 1: is a social reset. You know, we've all sort of

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00:30:33,280 --> 00:30:35,600
Speaker 1: stepped back and thought, well, what are some of our priorities.

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Speaker 1: Resilience for our economy, sustainability, solidarity, all these aspects, but

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Speaker 1: also strategic resets for companies because look, there are a

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00:30:44,000 --> 00:30:47,680
Speaker 1: few companies and they've benefited through valuations that were well

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00:30:47,800 --> 00:30:51,520
Speaker 1: positioned for the shifts that covids brought on. But most

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00:30:51,640 --> 00:30:54,880
Speaker 1: companies are having to change their strategies, re optimized given

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00:30:54,920 --> 00:30:58,480
Speaker 1: what's happened. As they reoptimize, if they're in one of

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00:30:58,520 --> 00:31:01,400
Speaker 1: a hundred and twenty six trees now not including the

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00:31:01,480 --> 00:31:05,240
Speaker 1: US yet, but countries that have a net zero strategy,

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00:31:05,520 --> 00:31:07,440
Speaker 1: if you want to be around for the long term,

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00:31:07,480 --> 00:31:10,280
Speaker 1: you're gonna have a net zero strategy. That helps because

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00:31:10,320 --> 00:31:13,760
Speaker 1: it it brings forward the investment that we need to

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00:31:13,760 --> 00:31:15,720
Speaker 1: get to where we need to go. So we have

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Speaker 1: public policy, we have private money, and I just want

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00:31:18,120 --> 00:31:20,720
Speaker 1: to get your take on what central banks can do

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00:31:20,880 --> 00:31:23,560
Speaker 1: to help this or not. The FED recently joined the

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00:31:23,600 --> 00:31:26,400
Speaker 1: Network for Greening the Financial System. They will late to

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00:31:26,400 --> 00:31:28,680
Speaker 1: the party, but is there a role for central banks here?

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00:31:29,120 --> 00:31:31,760
Speaker 1: There's absolutely a role, which is why the FED is joining,

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00:31:31,800 --> 00:31:34,000
Speaker 1: and I'm very much a salute by share of quarrels

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00:31:34,040 --> 00:31:37,520
Speaker 1: for that announcement. Um. Look, there's a few things central

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00:31:37,520 --> 00:31:39,880
Speaker 1: banks can do, and as you know, Alex, central banks

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00:31:40,280 --> 00:31:43,320
Speaker 1: vary by jurisdiction. Some have more powers than others. But

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00:31:43,400 --> 00:31:46,600
Speaker 1: if you oversee the banking system, what a central bank

494
00:31:46,640 --> 00:31:49,160
Speaker 1: can do is ask the banks, have you thought about

495
00:31:49,200 --> 00:31:52,240
Speaker 1: where your exposures are and where your opportunities are as

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00:31:52,240 --> 00:31:54,480
Speaker 1: we transition towards net zero. That's something the Bank of

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00:31:54,520 --> 00:31:56,400
Speaker 1: England's doing. You can take it all the way to

498
00:31:56,600 --> 00:31:59,440
Speaker 1: conducting climate stress tests, which eighteen of the world's major

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00:31:59,440 --> 00:32:01,920
Speaker 1: central banks are doing. You can also start to think

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00:32:01,960 --> 00:32:05,640
Speaker 1: about your collateral policy over time because ultimately, um, you know,

501
00:32:05,960 --> 00:32:09,480
Speaker 1: again speaking like a central banker, badgets uh. Victim is

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00:32:09,520 --> 00:32:12,640
Speaker 1: you lend against good collateral. Well, in a world where

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00:32:12,640 --> 00:32:17,000
Speaker 1: you're transitioning towards net zero, good collateral is consistent with

504
00:32:17,080 --> 00:32:20,160
Speaker 1: that transition, and that's something the CPS looking at, other

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00:32:20,200 --> 00:32:22,000
Speaker 1: central banks are looking at. So there's a range of

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00:32:22,000 --> 00:32:25,360
Speaker 1: things we can do in the end, though we're not

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00:32:25,400 --> 00:32:28,320
Speaker 1: going to set carbon policy or climate policy. Governments are

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00:32:28,360 --> 00:32:30,440
Speaker 1: going to do that and the private sector is going

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00:32:30,440 --> 00:32:34,280
Speaker 1: to provide us. One last question on this um can

510
00:32:34,360 --> 00:32:36,960
Speaker 1: we do it without China? How key is China going

511
00:32:37,000 --> 00:32:39,880
Speaker 1: to be in all this? China's key to virtually everything

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00:32:39,920 --> 00:32:42,040
Speaker 1: in the in the world, just as United States is

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00:32:42,080 --> 00:32:46,000
Speaker 1: and European Union is UM and was very significant a

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00:32:46,000 --> 00:32:50,560
Speaker 1: few weeks ago when President g announced China zero objective.

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00:32:50,720 --> 00:32:53,640
Speaker 1: China is one of the biggest producers of electric vehicles,

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00:32:53,640 --> 00:32:56,280
Speaker 1: of wind and solar um. They have to do a

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00:32:56,360 --> 00:32:58,000
Speaker 1: lot more. They know they have to do a lot more,

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00:32:58,040 --> 00:33:02,040
Speaker 1: but they will be essential as all major economies will be.

519
00:33:02,160 --> 00:33:04,560
Speaker 1: And that's part of what the UK has to do

520
00:33:04,600 --> 00:33:07,760
Speaker 1: in partnership within lye is for cop over the course

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00:33:07,800 --> 00:33:17,800
Speaker 1: of the next twelve months. Thanks for listening to Stephanomics.

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00:33:17,800 --> 00:33:19,560
Speaker 1: We'll be back next week with more on the ground

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00:33:19,640 --> 00:33:22,800
Speaker 1: reporting and analysis, and remember you can always find us

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00:33:22,800 --> 00:33:25,800
Speaker 1: on the Bloomberg Terminal, website, app, or wherever you get

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00:33:25,840 --> 00:33:29,920
Speaker 1: your podcast. This episode was produced by Magnus Hendrickson, with

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00:33:30,080 --> 00:33:35,800
Speaker 1: special thanks to Monty Python, Eileen Bagbo, Catherine Bosley, Nimrod, Allen,

527
00:33:36,080 --> 00:33:41,480
Speaker 1: Charles goodheart Man, Alex Steele, and Mark Kearney. I should

528
00:33:41,480 --> 00:33:45,120
Speaker 1: add that ju Lynn and prim Turi helped out with

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00:33:45,200 --> 00:33:47,080
Speaker 1: end the current piece of Asia last week and didn't

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00:33:47,080 --> 00:33:49,280
Speaker 1: get a mention. Sorry about that and thank you to

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Speaker 1: them too. Lucy Meekin is the executive producer of Stephanomics

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00:33:53,600 --> 00:34:00,600
Speaker 1: and the head of Bloomberg Podcast is Francesca leaving the