1 00:00:11,320 --> 00:00:14,800 Speaker 1: Hello, and welcome to another episode of the All Thoughts podcast. 2 00:00:14,920 --> 00:00:19,320 Speaker 1: I'm Tracy Allaway and I'm Joe Wisental. So, Joe, I 3 00:00:19,360 --> 00:00:24,360 Speaker 1: feel like there's a bit of a consensus emerging that maybe, 4 00:00:24,640 --> 00:00:29,400 Speaker 1: in the midst of the biggest economic crisis in decades, 5 00:00:29,840 --> 00:00:34,040 Speaker 1: and in the midst of rising death toll from coronavirus, 6 00:00:34,120 --> 00:00:37,919 Speaker 1: that there might be a greater role for the government. 7 00:00:38,640 --> 00:00:42,920 Speaker 1: Does it feel like that, Yeah, absolutely, I mean, of course, 8 00:00:43,120 --> 00:00:45,960 Speaker 1: you know, there's a public health crisis, uh, and so 9 00:00:46,560 --> 00:00:49,880 Speaker 1: it can't really be addressed in a compelling way without 10 00:00:49,960 --> 00:00:54,040 Speaker 1: some sort of broader government plan. But from an economic perspective, 11 00:00:54,400 --> 00:00:57,480 Speaker 1: and this is something that we've been talking about a lot, 12 00:00:57,520 --> 00:01:01,279 Speaker 1: and I think it is huge ramification the degree to 13 00:01:01,320 --> 00:01:06,160 Speaker 1: which government, both in terms of spending and also in 14 00:01:06,280 --> 00:01:10,440 Speaker 1: terms of thinking about their sort of domestic industrial strategy. 15 00:01:10,600 --> 00:01:14,080 Speaker 1: This crisis has really, uh really brought forth a lot 16 00:01:14,120 --> 00:01:16,760 Speaker 1: of talk about how important that role is, right, what 17 00:01:16,840 --> 00:01:19,640 Speaker 1: the potential role is. And it can fall under a 18 00:01:19,640 --> 00:01:22,000 Speaker 1: bunch of labels. One of them, of course, is modern 19 00:01:22,000 --> 00:01:25,399 Speaker 1: monetary theory, so I went ahead and said it. The 20 00:01:25,440 --> 00:01:29,200 Speaker 1: other one is fiscal stimulus. Exactly how does the government 21 00:01:29,319 --> 00:01:35,520 Speaker 1: insert itself to try to break our current economic cycle 22 00:01:35,840 --> 00:01:40,200 Speaker 1: downward spiral. But I feel like whenever we have these conversations, 23 00:01:40,200 --> 00:01:42,440 Speaker 1: we talk about there is a role for government, but 24 00:01:42,520 --> 00:01:47,319 Speaker 1: we don't often talk about what that government itself could 25 00:01:47,640 --> 00:01:50,920 Speaker 1: and should book Like, Yeah, that's absolutely true. I mean 26 00:01:50,960 --> 00:01:52,680 Speaker 1: I do think, you know, this is sort of the 27 00:01:52,720 --> 00:01:56,440 Speaker 1: big question, but what that really looks like? How much 28 00:01:57,040 --> 00:02:02,920 Speaker 1: should spending be used to permanently provide a safety net, 29 00:02:02,960 --> 00:02:07,800 Speaker 1: to permanently provide more spending to lower income households? These 30 00:02:07,840 --> 00:02:10,720 Speaker 1: are huge questions. I mean, hey, we don't really know 31 00:02:10,760 --> 00:02:13,079 Speaker 1: if the momentum that we see on government spending will 32 00:02:13,080 --> 00:02:16,280 Speaker 1: really last, but even if it does, the future feels 33 00:02:16,360 --> 00:02:19,000 Speaker 1: very wide open on what the sort of the new 34 00:02:19,040 --> 00:02:22,640 Speaker 1: economic consensus could look like. And part of it is 35 00:02:22,720 --> 00:02:28,040 Speaker 1: stuff like free market capitalism versus central planning from the government. 36 00:02:28,280 --> 00:02:31,000 Speaker 1: That's kind of obvious, but some of it goes, I 37 00:02:31,040 --> 00:02:33,959 Speaker 1: think even deeper than that, and we start talking about 38 00:02:35,080 --> 00:02:38,400 Speaker 1: freedom of the individual and what sort of rights should 39 00:02:38,440 --> 00:02:42,320 Speaker 1: people have under a government that's trying to guarantee or 40 00:02:42,480 --> 00:02:46,960 Speaker 1: secure a particular economic future. Yeah. It's kind of a 41 00:02:46,960 --> 00:02:50,519 Speaker 1: weird point, isn't it. Because there is this growing consensus 42 00:02:50,520 --> 00:02:54,600 Speaker 1: about the need for more government activity. And yet, you know, 43 00:02:54,680 --> 00:02:57,760 Speaker 1: at least in the US context, whether it's on the 44 00:02:57,919 --> 00:03:01,360 Speaker 1: right or the left, you know, just straordinary amount of 45 00:03:01,400 --> 00:03:07,040 Speaker 1: skepticism about government in different ways. It's different on either side, 46 00:03:07,720 --> 00:03:10,600 Speaker 1: but there is this weird tension between how much the 47 00:03:10,680 --> 00:03:14,679 Speaker 1: government is thought to need to do versus the confidence 48 00:03:14,720 --> 00:03:19,160 Speaker 1: that people have in government to do anything effectively. Yeah, exactly. 49 00:03:19,360 --> 00:03:23,240 Speaker 1: So today we're going to be diving deep, deep, deep 50 00:03:23,320 --> 00:03:26,520 Speaker 1: into that question, and we're going to talk with Victor Schutz. 51 00:03:26,639 --> 00:03:29,800 Speaker 1: He's the head of Asia strategy over at mcquarie. He 52 00:03:29,880 --> 00:03:32,919 Speaker 1: actually has a new book out which is all about 53 00:03:32,919 --> 00:03:36,680 Speaker 1: this topic. It's called The Great Rupture, Three Empires, Four 54 00:03:36,680 --> 00:03:40,080 Speaker 1: Turning Points, and the Future of Humanity. So I just 55 00:03:40,080 --> 00:03:42,040 Speaker 1: want to say one quick thing, which is that I 56 00:03:42,080 --> 00:03:45,760 Speaker 1: wasn't here for that last episode, that interview that you 57 00:03:45,800 --> 00:03:48,400 Speaker 1: did with Victor last year, so I listened to it 58 00:03:48,680 --> 00:03:51,400 Speaker 1: this morning is part of the prep and I was like, wow, 59 00:03:51,440 --> 00:03:54,400 Speaker 1: this is a topic that the interview that you guys 60 00:03:54,400 --> 00:03:56,680 Speaker 1: did was extremely timely in the head of the curve 61 00:03:56,720 --> 00:03:58,880 Speaker 1: because it felt like you guys were talking about this 62 00:03:59,000 --> 00:04:02,440 Speaker 1: at the end of last year. Now everyone's talking about it, 63 00:04:02,680 --> 00:04:05,119 Speaker 1: so that got me super impressed, and I was very 64 00:04:05,240 --> 00:04:08,600 Speaker 1: I'm very excited for this conversation. Ah, thank you, Joe. 65 00:04:08,880 --> 00:04:11,440 Speaker 1: I do do better on this podcast when you're not here. 66 00:04:11,480 --> 00:04:16,440 Speaker 1: It's true. Okay, let's bring on. I'm just kidding. Let's 67 00:04:16,440 --> 00:04:18,919 Speaker 1: bring on Victor. Victor. It's so good to have you again. 68 00:04:19,480 --> 00:04:22,000 Speaker 1: Thanks very much, Tracy, and I'm very happy to be here. 69 00:04:23,000 --> 00:04:26,040 Speaker 1: So one thing I've always wondered. You know, I said, 70 00:04:26,040 --> 00:04:27,680 Speaker 1: you're one of my favorite analysts. But one of the 71 00:04:27,720 --> 00:04:30,159 Speaker 1: things I really like about your research is there's always 72 00:04:30,160 --> 00:04:32,560 Speaker 1: a touch of history to it and always a touch 73 00:04:32,560 --> 00:04:37,400 Speaker 1: of philosophy. You're sort of like this philosophy philosophical analyst 74 00:04:37,480 --> 00:04:41,560 Speaker 1: of philosopher, king of the cell side. I guess how 75 00:04:41,600 --> 00:04:45,240 Speaker 1: did you develop this unique approach. Well, it's a it's 76 00:04:45,240 --> 00:04:48,400 Speaker 1: a good question. Um. I was born in the Old 77 00:04:48,440 --> 00:04:52,520 Speaker 1: Soviet Union. I sort of grew up in the communist system. 78 00:04:53,040 --> 00:04:56,839 Speaker 1: I migrated when I was around twenty. I moved to 79 00:04:56,880 --> 00:05:00,760 Speaker 1: Australia and I had a very classical I get economics 80 00:05:00,800 --> 00:05:04,440 Speaker 1: and finance education. I worked in the banking industry for 81 00:05:04,480 --> 00:05:09,200 Speaker 1: a long time in Russia, in Britain, in the US, 82 00:05:09,560 --> 00:05:13,760 Speaker 1: in Australia, in Hong Kong and China, covering variety of 83 00:05:13,839 --> 00:05:19,240 Speaker 1: areas from stocks and sectors to strategy to politics. UM. 84 00:05:19,279 --> 00:05:22,080 Speaker 1: And I guess it's sort of amalgamation of what I've 85 00:05:22,160 --> 00:05:25,240 Speaker 1: learned When I was younger, I used to specialize in 86 00:05:25,320 --> 00:05:29,440 Speaker 1: Marxist Leninism and all the way to a more classical 87 00:05:29,440 --> 00:05:33,120 Speaker 1: economics and monetarist economics. UM. I guess it's a blend 88 00:05:33,320 --> 00:05:36,200 Speaker 1: of all of those things have come together, and for 89 00:05:36,240 --> 00:05:40,920 Speaker 1: me personally, two thousand, two thousand one dot com crisis 90 00:05:41,120 --> 00:05:46,360 Speaker 1: and even more importantly two thousand eight global financial crisis 91 00:05:47,000 --> 00:05:51,880 Speaker 1: really brought at home that economics cannot be separated from politics, 92 00:05:52,320 --> 00:05:57,359 Speaker 1: finance cannot be separated from economics, market signals cannot be 93 00:05:57,480 --> 00:06:00,880 Speaker 1: separated from people or philosophy. And I guess over the 94 00:06:00,960 --> 00:06:05,200 Speaker 1: last ten ten to twelve years, my views UM kind 95 00:06:05,200 --> 00:06:09,280 Speaker 1: of evolved and hardened UH and become not just economics 96 00:06:09,279 --> 00:06:14,279 Speaker 1: and finance, but a bridge between that and UH and politics, philosophy, 97 00:06:14,480 --> 00:06:18,599 Speaker 1: and most importantly history. History really educates us and really 98 00:06:18,640 --> 00:06:22,200 Speaker 1: shapes us. So, as I was saying to Tracy, I 99 00:06:22,240 --> 00:06:27,800 Speaker 1: really enjoyed the conversation that you did last year because 100 00:06:27,839 --> 00:06:30,680 Speaker 1: it struck me as just incredibly timely because Okay, here 101 00:06:30,720 --> 00:06:32,640 Speaker 1: we have this crisis and a lot of people think 102 00:06:32,960 --> 00:06:35,800 Speaker 1: there's gonna be this new rethink about the economic consensus, 103 00:06:35,839 --> 00:06:40,200 Speaker 1: probably more government spending. You were talking about the rethink 104 00:06:40,600 --> 00:06:44,720 Speaker 1: the new consensus last year, even before this crisis. So 105 00:06:44,760 --> 00:06:48,800 Speaker 1: setting aside the coronavirus, what were you already seeing in 106 00:06:48,920 --> 00:06:52,359 Speaker 1: terms of the sort of shifting uh, shifting tectonic plate 107 00:06:52,520 --> 00:06:56,720 Speaker 1: towards a rethink about what what the government's role is 108 00:06:56,800 --> 00:07:00,920 Speaker 1: in the economy. Why was that already something happened in ee, Well, 109 00:07:01,200 --> 00:07:04,560 Speaker 1: you can actually go all the way to my first crisis. 110 00:07:04,680 --> 00:07:09,440 Speaker 1: I was a young analyst in Sydney, Australian seven during 111 00:07:09,520 --> 00:07:13,720 Speaker 1: the Black Monday, and that's where green spent put option 112 00:07:13,880 --> 00:07:17,280 Speaker 1: for the first time really appeared. And as we've gone 113 00:07:17,320 --> 00:07:23,640 Speaker 1: through nineties, whether it was seven, two thousand one, two 114 00:07:23,640 --> 00:07:28,320 Speaker 1: thousand eight, two thousand, fifteen, two thousand twenty, every time 115 00:07:28,440 --> 00:07:31,720 Speaker 1: we are in at the intersection or a t junction 116 00:07:32,080 --> 00:07:35,560 Speaker 1: and the question is raised, should we rebase our economies, 117 00:07:35,960 --> 00:07:40,360 Speaker 1: should we make them much more liberal capitalism economies? The 118 00:07:40,440 --> 00:07:45,280 Speaker 1: answer universally from people and politics is no. And the 119 00:07:45,320 --> 00:07:48,160 Speaker 1: reason it's no is because for the last thirty or 120 00:07:48,160 --> 00:07:51,640 Speaker 1: forty years, we really were growing much faster than our 121 00:07:51,640 --> 00:07:56,160 Speaker 1: productivity would allow. And how we finance that is primarily 122 00:07:56,200 --> 00:07:59,760 Speaker 1: by bringing future consumption to the present, and eventually we 123 00:08:00,160 --> 00:08:03,960 Speaker 1: to ourselves to asset prices. And then when you do that, 124 00:08:04,360 --> 00:08:08,440 Speaker 1: eventually neither central banks nor treasury departments can tolerate any 125 00:08:08,520 --> 00:08:12,480 Speaker 1: volatility at all. Zero volatility is your right answer. But 126 00:08:12,560 --> 00:08:16,800 Speaker 1: the problem with that is that monetary policies become incredibly, 127 00:08:16,840 --> 00:08:20,760 Speaker 1: incredibly toxic and the side effects are extreme. So what 128 00:08:20,840 --> 00:08:24,480 Speaker 1: I felt for the last five years at least possibly longer, 129 00:08:24,760 --> 00:08:28,400 Speaker 1: that we need to change policy tools. Either we allow 130 00:08:28,600 --> 00:08:32,400 Speaker 1: liberal capitalism to succeed, but that's going to be incredibly 131 00:08:32,480 --> 00:08:38,000 Speaker 1: painful because we will need to recognize decades of excesses. Alternatively, 132 00:08:38,080 --> 00:08:41,720 Speaker 1: we switched the tools are public sector is still critical, 133 00:08:42,040 --> 00:08:45,640 Speaker 1: but instead of using purely monetary levels, they're going to 134 00:08:45,840 --> 00:08:49,760 Speaker 1: use fiscal levels. They're going to be much more aggressive 135 00:08:49,920 --> 00:08:53,839 Speaker 1: in directing and managing cycles than what they were even 136 00:08:53,880 --> 00:08:57,120 Speaker 1: in the last sort of thirty or forty years. And 137 00:08:57,160 --> 00:08:58,720 Speaker 1: the way I tend to look at it, it's like 138 00:08:58,760 --> 00:09:03,000 Speaker 1: a bridge. We've got on that bridge in let's let's 139 00:09:03,000 --> 00:09:05,679 Speaker 1: call it. That's that's your deadline that that's your beginning. 140 00:09:06,040 --> 00:09:09,920 Speaker 1: For about thirty forty years, we essentially used monetary levers. 141 00:09:10,360 --> 00:09:13,480 Speaker 1: The next twenty or thirty years will be essentially fiscal 142 00:09:14,360 --> 00:09:18,040 Speaker 1: and m MT style policies. What lies on the other 143 00:09:18,120 --> 00:09:21,120 Speaker 1: side of the bridge twenty or thirty years from now, 144 00:09:21,480 --> 00:09:24,880 Speaker 1: nobody really knows, but my guess it will be nothing 145 00:09:25,000 --> 00:09:29,280 Speaker 1: like conventional capitalism. We can debate whether it's communism, whether 146 00:09:29,320 --> 00:09:32,679 Speaker 1: it's feudalism, whether it's a despotism. There is a variety 147 00:09:32,880 --> 00:09:35,520 Speaker 1: of labels and sort of use you can have, but 148 00:09:35,960 --> 00:09:39,000 Speaker 1: ultimately it's not going to be a liberal capitalism. And 149 00:09:39,040 --> 00:09:42,079 Speaker 1: the reason for that is very simple. As I said, 150 00:09:42,120 --> 00:09:45,880 Speaker 1: every time we have a choice, we prefer not to 151 00:09:45,920 --> 00:09:49,440 Speaker 1: have the adjustment. And so when people say I was 152 00:09:49,520 --> 00:09:52,720 Speaker 1: Green spent to blame for it? Was Bernaki blamed for it, 153 00:09:52,800 --> 00:09:56,640 Speaker 1: was Janet Ellen? My answer is no, it's you, it's us, 154 00:09:56,720 --> 00:09:59,560 Speaker 1: it's people. We buy in large, did not want to 155 00:09:59,559 --> 00:10:03,480 Speaker 1: have an ajustment, and politics delivered what we wanted, which 156 00:10:03,520 --> 00:10:08,600 Speaker 1: is wealth and income beyond our productivity. So every time 157 00:10:08,679 --> 00:10:11,560 Speaker 1: we're faced with the crisis or this sort of turning point, 158 00:10:12,120 --> 00:10:15,840 Speaker 1: it feels like we avoid that adjustment and policymakers sort 159 00:10:15,880 --> 00:10:18,959 Speaker 1: of turn inwards on themselves. I guess, can you give 160 00:10:19,040 --> 00:10:24,800 Speaker 1: us some historical examples that go beyond the nineties, because 161 00:10:24,840 --> 00:10:27,120 Speaker 1: I think this is the basis of your book. You 162 00:10:27,120 --> 00:10:31,760 Speaker 1: actually look at three empires, three major turning points, and 163 00:10:31,840 --> 00:10:35,840 Speaker 1: how those different authorities responded to the turning points. Can 164 00:10:35,880 --> 00:10:40,079 Speaker 1: you describe that? Yeah? Absolutely, Well, if you think of 165 00:10:40,120 --> 00:10:43,840 Speaker 1: the greatest quality that humans have, and that's quality to 166 00:10:43,960 --> 00:10:50,240 Speaker 1: resist change. Nobody wants change, and some societies are being very, 167 00:10:50,440 --> 00:10:54,360 Speaker 1: very resistant to change. And what the book describes are 168 00:10:54,360 --> 00:10:58,880 Speaker 1: the reason why China, Russian Empire, and the ultimates really 169 00:10:58,960 --> 00:11:04,360 Speaker 1: preferred stagnation and no change to embracing new things exploration, 170 00:11:04,480 --> 00:11:10,040 Speaker 1: scientific revolution, industrial revolutions. And it also discusses why Western Europe, 171 00:11:10,080 --> 00:11:14,720 Speaker 1: which is really a small rain swept peninsula of Eurasia, 172 00:11:14,960 --> 00:11:18,520 Speaker 1: decided to take a different course in the same sort 173 00:11:18,520 --> 00:11:22,600 Speaker 1: of five hundred years and as a result conquered the world. 174 00:11:22,960 --> 00:11:26,000 Speaker 1: So we have seen similar degree of resistance in the past, 175 00:11:26,280 --> 00:11:30,520 Speaker 1: and as I said, some societies really cannot overcome depth resistance. 176 00:11:31,000 --> 00:11:33,840 Speaker 1: And I described in the book the role the Mongols, 177 00:11:33,880 --> 00:11:37,240 Speaker 1: for example, played, the role the Black Desk played, the 178 00:11:37,360 --> 00:11:41,320 Speaker 1: role rejuvenation of human spirit in the fifteenth century played 179 00:11:41,679 --> 00:11:45,440 Speaker 1: But whatever the reasons were, Chinese never got off the 180 00:11:45,520 --> 00:11:50,280 Speaker 1: doomsday highway. Neither did the Russians. But Western Europe, prepared 181 00:11:50,320 --> 00:11:57,240 Speaker 1: to be flexible, prepared to exchange ideas, views, products, services, explore, 182 00:11:57,720 --> 00:12:03,679 Speaker 1: change things, enhanced Europe One and any European settlement, including 183 00:12:03,720 --> 00:12:07,559 Speaker 1: the United States, was part of that winning team. The 184 00:12:07,640 --> 00:12:12,160 Speaker 1: key question, however, now is whether, in fact, the same 185 00:12:12,320 --> 00:12:16,280 Speaker 1: recipe for success that ensured that the West is going 186 00:12:16,320 --> 00:12:20,079 Speaker 1: to be dominant is rapidly changing. And if it is changing, 187 00:12:20,840 --> 00:12:25,040 Speaker 1: is it possible that for the first time in five years, 188 00:12:25,240 --> 00:12:28,280 Speaker 1: East is much better structured to the world I had 189 00:12:29,080 --> 00:12:32,160 Speaker 1: and and part of that is the role of the government. 190 00:12:32,600 --> 00:12:35,560 Speaker 1: Part of that is a role of technology, and and 191 00:12:35,559 --> 00:12:38,000 Speaker 1: and and what role the place in our daily life. 192 00:12:38,440 --> 00:12:41,440 Speaker 1: Part of it is financialization that we have done over 193 00:12:41,440 --> 00:12:45,080 Speaker 1: the last thirty forty years. And that's really, I guess 194 00:12:45,120 --> 00:12:47,640 Speaker 1: the crux of the book. We know what succeeded in 195 00:12:47,640 --> 00:12:50,920 Speaker 1: the last five hundred years. We know why the West 196 00:12:51,000 --> 00:12:55,280 Speaker 1: was successful and why you know, Chang dynasty collapse. The 197 00:12:55,360 --> 00:12:58,240 Speaker 1: interesting saying is that are we changing now to a 198 00:12:58,360 --> 00:13:02,240 Speaker 1: stage that a different front rules and a different success 199 00:13:02,240 --> 00:13:19,160 Speaker 1: flammul level up life m M. One thing I keep 200 00:13:19,200 --> 00:13:21,640 Speaker 1: coming back to, and I you know, this is obviously 201 00:13:21,760 --> 00:13:25,160 Speaker 1: very sort of like big picture and thought provoking stuff, 202 00:13:25,840 --> 00:13:28,120 Speaker 1: but I always sort of end up like coming back 203 00:13:28,160 --> 00:13:31,960 Speaker 1: to this question in terms of like the markets ramifications 204 00:13:31,960 --> 00:13:34,480 Speaker 1: of a turn like we've had forty years or whatever 205 00:13:34,720 --> 00:13:39,920 Speaker 1: of this current economic consensus of almost entirely relying on 206 00:13:40,120 --> 00:13:44,800 Speaker 1: monetary authorities to uh stabilize the economy and now we've 207 00:13:44,840 --> 00:13:48,960 Speaker 1: gotten ourselves. And even I think Jay Polos acknowledged this 208 00:13:49,040 --> 00:13:52,199 Speaker 1: as a jackson the whole speech where it's all about 209 00:13:52,240 --> 00:13:55,680 Speaker 1: financial conditions and anytime there's any sort of deflation risk 210 00:13:56,000 --> 00:13:58,280 Speaker 1: because of all the leverage that's been built up, the 211 00:13:58,400 --> 00:14:01,160 Speaker 1: FED has can't tolerate that and to do a rate. 212 00:14:02,080 --> 00:14:04,480 Speaker 1: If we have this big shift, what is the new 213 00:14:04,559 --> 00:14:07,280 Speaker 1: sort of what does that mean for investors? Like does 214 00:14:07,320 --> 00:14:11,760 Speaker 1: that fundamentally change from your perspective, how investors should be 215 00:14:11,800 --> 00:14:17,479 Speaker 1: thinking about portfolio To answer your question, absolutely, investment strategies 216 00:14:17,840 --> 00:14:21,760 Speaker 1: are going to change. One of the big paradigms or 217 00:14:21,800 --> 00:14:26,280 Speaker 1: paradigm shifts UH that is likely to occur, and one 218 00:14:26,280 --> 00:14:29,040 Speaker 1: of the big questions that investors will have to consider 219 00:14:29,440 --> 00:14:32,920 Speaker 1: is whether we're shifting from a dec inflationary climate over 220 00:14:32,920 --> 00:14:36,120 Speaker 1: the last twenty or thirty years too much more inflationary. 221 00:14:36,480 --> 00:14:40,479 Speaker 1: And the reason why investors have such a difficulty deciding 222 00:14:40,560 --> 00:14:44,160 Speaker 1: what to do is it most market signals have died, 223 00:14:44,960 --> 00:14:47,200 Speaker 1: or if they have not died, they degraded to a 224 00:14:47,360 --> 00:14:52,880 Speaker 1: stage that they no longer have any meaning. So, for example, 225 00:14:53,000 --> 00:14:57,840 Speaker 1: when people worry about saints like yield curve, Now, what 226 00:14:57,960 --> 00:15:01,480 Speaker 1: message does a yield curve conveyed of the marketplace? If 227 00:15:01,560 --> 00:15:06,920 Speaker 1: central bank determines force, quantity, and price. The answer is none. 228 00:15:07,360 --> 00:15:10,240 Speaker 1: Why do we need prime dealers for when in fact 229 00:15:10,280 --> 00:15:14,320 Speaker 1: central banks determined posts, price, and quantity. Well, the answer, 230 00:15:14,360 --> 00:15:17,600 Speaker 1: we don't need them. Why do we need commercial banks? Well, 231 00:15:17,760 --> 00:15:21,800 Speaker 1: the answer we don't. So the problem for investors is 232 00:15:21,840 --> 00:15:26,720 Speaker 1: the playbook that they've used for decades no longer exists. 233 00:15:27,160 --> 00:15:31,600 Speaker 1: Market signals don't convey what they're supposed to convey. Reactions 234 00:15:31,600 --> 00:15:35,120 Speaker 1: in the marketplace are completely different. Again, that's a merger 235 00:15:35,120 --> 00:15:39,360 Speaker 1: of financialization and technology um And at the same time 236 00:15:39,400 --> 00:15:42,960 Speaker 1: they know that the environment is changing. State will be 237 00:15:43,040 --> 00:15:46,600 Speaker 1: driving and already is driving most of the business cycles. 238 00:15:46,800 --> 00:15:51,560 Speaker 1: State will determine capital market cycles. State will determine the 239 00:15:51,640 --> 00:15:55,040 Speaker 1: winners and losers. Now at that point, what do you 240 00:15:55,120 --> 00:15:58,040 Speaker 1: do as a fund manager? How do you position yourself? 241 00:15:58,720 --> 00:16:01,920 Speaker 1: Um And the answer that is, if you continue on 242 00:16:01,960 --> 00:16:06,800 Speaker 1: the current paths of using primarily monetary policy, interest rates 243 00:16:06,840 --> 00:16:11,160 Speaker 1: eventually will be negative everywhere because we must generate more 244 00:16:11,200 --> 00:16:15,119 Speaker 1: and more capital than what we need. What that implies 245 00:16:15,520 --> 00:16:18,360 Speaker 1: as interest rates go down, cost of equity goes down. 246 00:16:18,840 --> 00:16:22,760 Speaker 1: At that point, every company can beat for any project 247 00:16:22,800 --> 00:16:26,320 Speaker 1: because any project is viable. As I continue to compete, 248 00:16:26,480 --> 00:16:30,320 Speaker 1: return on projects decline, which means it brings cost of 249 00:16:30,320 --> 00:16:33,840 Speaker 1: equity even lower. At that point, you reach singularity. There 250 00:16:33,920 --> 00:16:36,800 Speaker 1: is no returns and there is no cost of capital. 251 00:16:37,320 --> 00:16:40,400 Speaker 1: Now what does it do to stocks? What does it 252 00:16:40,440 --> 00:16:43,240 Speaker 1: do to the bob market? Well, the ounce any case 253 00:16:43,280 --> 00:16:49,040 Speaker 1: of stocks, some become infinitely expensive, others just become average 254 00:16:49,200 --> 00:16:53,640 Speaker 1: and continue to degrade, and its stocks have become infinitely expensive, 255 00:16:53,800 --> 00:16:57,800 Speaker 1: just as quickly can fall down if suddenly they're no 256 00:16:57,840 --> 00:17:02,840 Speaker 1: longer capable of delivering growth rates. So how your structure 257 00:17:02,880 --> 00:17:06,040 Speaker 1: portfolio is different. It's no longer value versus growths, it's 258 00:17:06,080 --> 00:17:10,600 Speaker 1: no longer value versus quality. It's no longer defensive versus 259 00:17:10,640 --> 00:17:14,720 Speaker 1: north defense. It is no longer bay markets a bull markets. 260 00:17:14,760 --> 00:17:17,200 Speaker 1: We can now have a bay market in the afternoon 261 00:17:17,320 --> 00:17:19,919 Speaker 1: and a bull market in the morning, whereas in a 262 00:17:20,000 --> 00:17:24,000 Speaker 1: past bay markets would last five ten years. So it's 263 00:17:24,000 --> 00:17:27,439 Speaker 1: a completely different environment. Just on the notion of the 264 00:17:27,480 --> 00:17:31,760 Speaker 1: cost of capital declining, I mean, presumably that sort of 265 00:17:31,800 --> 00:17:37,520 Speaker 1: hastens the technological shift or the technological advances that have 266 00:17:37,600 --> 00:17:41,560 Speaker 1: led to or contributed to declining productivity in the first place. 267 00:17:42,080 --> 00:17:46,560 Speaker 1: So I imagine you kind of get a cycle where 268 00:17:46,560 --> 00:17:50,480 Speaker 1: the cost of capital goes lower, technology improves, and I 269 00:17:50,520 --> 00:17:56,600 Speaker 1: guess um, dissatisfaction with employment and the general state of 270 00:17:56,640 --> 00:18:00,960 Speaker 1: affairs kind of increases. Yes. Absolutely, the way I look 271 00:18:01,000 --> 00:18:06,720 Speaker 1: at it, financialization is like pouring oil on the bonfire 272 00:18:07,000 --> 00:18:11,399 Speaker 1: of information age. Technology is a human spirit, it's a 273 00:18:11,560 --> 00:18:16,080 Speaker 1: human ingenuity. But the speed with which technology progresses depends 274 00:18:16,080 --> 00:18:19,120 Speaker 1: on the cost of capital. The lower your cost of capital, 275 00:18:19,320 --> 00:18:23,000 Speaker 1: the faster it grows. And as it grows faster and faster, 276 00:18:23,160 --> 00:18:27,399 Speaker 1: it's started disintermediating people from fruits of their labor. It 277 00:18:27,480 --> 00:18:32,879 Speaker 1: start disintermediating corporates from their products, their brands, their distribution systems. 278 00:18:33,200 --> 00:18:39,639 Speaker 1: It started increasing disinflationary pressure. So the dissatisfaction in the 279 00:18:39,760 --> 00:18:43,320 Speaker 1: society increases. And what I do I call it in 280 00:18:43,359 --> 00:18:47,920 Speaker 1: the book Fujiwarre effect, which is a merger of two hurricanes. 281 00:18:48,480 --> 00:18:52,119 Speaker 1: One hurricane is a human spirit, which is technology, but 282 00:18:52,200 --> 00:18:55,720 Speaker 1: the other hurricane is financialization. Is what we have done 283 00:18:56,040 --> 00:18:58,880 Speaker 1: over the last thirty or forty years. And those two 284 00:18:59,000 --> 00:19:04,080 Speaker 1: hurricanes continue to merge and reinforce each other and strengthen 285 00:19:04,240 --> 00:19:06,720 Speaker 1: as we go forward. As I said, one of those 286 00:19:06,800 --> 00:19:11,000 Speaker 1: hurricanes is the good saying, it's our ingenuity, but the 287 00:19:11,040 --> 00:19:14,000 Speaker 1: other one is a self inflicted wound. We did not 288 00:19:14,200 --> 00:19:19,719 Speaker 1: have to have financialization. Those two working together do several saints. 289 00:19:20,119 --> 00:19:23,200 Speaker 1: Number one, they reduce the cost of capital of the time. 290 00:19:23,560 --> 00:19:28,800 Speaker 1: Number two, they accelerate disintermediation of society. Number three, they 291 00:19:28,960 --> 00:19:33,560 Speaker 1: cause income and wealth inequalities to skyrocket. It creates social 292 00:19:33,640 --> 00:19:37,960 Speaker 1: geopolitical pressures. It's quite deadly. And if you think of 293 00:19:38,080 --> 00:19:42,320 Speaker 1: m MT policies or government policies, the objective of those 294 00:19:42,359 --> 00:19:47,000 Speaker 1: policies is not to restore liberal capitalism. The objective of 295 00:19:47,000 --> 00:19:50,719 Speaker 1: those policies to reduce the speed with which we're falling 296 00:19:50,760 --> 00:19:56,240 Speaker 1: to zero. So here's here's the question that I thought 297 00:19:56,280 --> 00:19:59,320 Speaker 1: of earlier, and you answer there sort of reminded me 298 00:19:59,400 --> 00:20:02,480 Speaker 1: of it. But what is the value of these labels 299 00:20:02,520 --> 00:20:06,920 Speaker 1: of saying, Okay, this is capitalism, this is communism, this 300 00:20:07,040 --> 00:20:11,320 Speaker 1: is socialism, this is something else. Do we need to 301 00:20:11,880 --> 00:20:14,760 Speaker 1: have words? Or if we have an economy in which 302 00:20:14,760 --> 00:20:18,440 Speaker 1: the government plays a much more robust role in spending money, 303 00:20:19,080 --> 00:20:22,879 Speaker 1: uh to without the business cycles, whatever it is, is 304 00:20:22,920 --> 00:20:26,800 Speaker 1: it important that we label it? Does that necessarily help 305 00:20:26,880 --> 00:20:29,879 Speaker 1: us understand this or could there just be like a 306 00:20:29,880 --> 00:20:32,320 Speaker 1: blend of different models and it's you know, kind of 307 00:20:32,600 --> 00:20:35,760 Speaker 1: free markets but also with more regulation and so forth. Well, 308 00:20:35,840 --> 00:20:38,480 Speaker 1: you you know, you're absolutely right. If you think of 309 00:20:38,520 --> 00:20:42,440 Speaker 1: the United States in nineties fifties, and for a chunk 310 00:20:42,480 --> 00:20:46,720 Speaker 1: of nineteen sixties as well, it was incredibly constrained society 311 00:20:46,880 --> 00:20:51,080 Speaker 1: post economically, financially, and politically. If you think of Europe 312 00:20:51,160 --> 00:20:56,160 Speaker 1: in nineties fifties, it was incredibly constraint. Nobody would recognize 313 00:20:56,200 --> 00:21:00,000 Speaker 1: those societies as liberal capitalism. In other what the premus 314 00:21:00,119 --> 00:21:03,400 Speaker 1: of the private sector. The premise of the private sector 315 00:21:03,480 --> 00:21:08,359 Speaker 1: signals the government essentially stands aside and create environment in 316 00:21:08,440 --> 00:21:14,080 Speaker 1: which businesses are prosper or fail. That was not nineteen fifties, 317 00:21:14,320 --> 00:21:16,520 Speaker 1: and so the way look at it, we're going closer 318 00:21:16,880 --> 00:21:21,679 Speaker 1: to nine fifties and sixties than we are to. But 319 00:21:21,920 --> 00:21:25,879 Speaker 1: there is a twist, and the twist is that technology 320 00:21:26,000 --> 00:21:32,760 Speaker 1: now allows us to create totalitarian dictatorships that no longer 321 00:21:32,800 --> 00:21:39,000 Speaker 1: will suffer from shortage of ideas, from shortage of wealth, productivity, 322 00:21:39,119 --> 00:21:43,120 Speaker 1: or anything else. In the past, a totalitarian system such 323 00:21:43,160 --> 00:21:47,400 Speaker 1: as imperial China or the Soviet Union, where a sort 324 00:21:47,400 --> 00:21:50,800 Speaker 1: of places of stagnation, where places of lack of growth, 325 00:21:51,000 --> 00:21:56,280 Speaker 1: lack of opportunity. The technology now can create societies that 326 00:21:56,720 --> 00:22:02,120 Speaker 1: are illiberal, some potentially quite at all, but nevertheless society 327 00:22:02,200 --> 00:22:07,080 Speaker 1: is that will not suffer from stignation as set of ideas, inventiveness, growth, 328 00:22:07,200 --> 00:22:10,720 Speaker 1: or anything else. And that's one of the lessons from 329 00:22:10,760 --> 00:22:13,640 Speaker 1: the book is to say that as we go over 330 00:22:13,680 --> 00:22:17,000 Speaker 1: the next couple of decades, it is quite possible that 331 00:22:17,080 --> 00:22:20,400 Speaker 1: not only we will not have what we recognize as 332 00:22:20,480 --> 00:22:23,399 Speaker 1: liberal capitalists, that it's going to be much closer to 333 00:22:23,600 --> 00:22:27,840 Speaker 1: nies and sixties, where the government will be directing capital, 334 00:22:28,240 --> 00:22:32,600 Speaker 1: where regulatory structures will be much stricter than what they 335 00:22:32,600 --> 00:22:36,600 Speaker 1: are today. But in addition to that, at least part 336 00:22:36,640 --> 00:22:38,919 Speaker 1: of the world that maybe big chunks of the world 337 00:22:39,560 --> 00:22:44,439 Speaker 1: will decide that personal freedom is also optional. It is 338 00:22:44,480 --> 00:22:49,159 Speaker 1: not actually necessary for your success. Um, can you elaborate 339 00:22:49,200 --> 00:22:53,160 Speaker 1: on that last point? So not actually necessary for your success, 340 00:22:53,280 --> 00:22:57,560 Speaker 1: But I guess the question is it necessary for your happiness? 341 00:22:57,640 --> 00:23:00,880 Speaker 1: And if the thing we're trying to solve is resolve 342 00:23:01,760 --> 00:23:05,960 Speaker 1: is um people's relationship with labor and how happy they 343 00:23:06,000 --> 00:23:10,920 Speaker 1: feel in their jobs, then then doesn't that become important? Yes, 344 00:23:10,960 --> 00:23:14,439 Speaker 1: it does. But one of the things to remember, of course, 345 00:23:14,720 --> 00:23:18,359 Speaker 1: is that labor is becoming less and less critical most 346 00:23:18,400 --> 00:23:23,000 Speaker 1: marginal utility and marginal returns, and labor has been declining 347 00:23:23,160 --> 00:23:28,480 Speaker 1: for two decades and that decline is accelerating. Many professions 348 00:23:28,480 --> 00:23:31,280 Speaker 1: are no longer exist anything like what they used to 349 00:23:31,359 --> 00:23:34,639 Speaker 1: twenty or thirty years ago. Over the next two decades, 350 00:23:34,720 --> 00:23:37,880 Speaker 1: whether you are truck driver, whether your plumber, whether your 351 00:23:38,000 --> 00:23:41,680 Speaker 1: PhD in computer science, you will feel the same pressure 352 00:23:41,720 --> 00:23:44,920 Speaker 1: of irrelevancy, or the same pressure that you're no longer 353 00:23:45,000 --> 00:23:49,320 Speaker 1: contributing what you used to contribute. So one of the 354 00:23:49,400 --> 00:23:54,600 Speaker 1: saints that societies are trying to understand it what is 355 00:23:54,640 --> 00:23:58,760 Speaker 1: the role of labor in industrial age? In the ninety century, 356 00:23:58,840 --> 00:24:02,879 Speaker 1: it was very straightforl labor was a critical productivity driver 357 00:24:03,240 --> 00:24:06,240 Speaker 1: and needed to be trained and skilled to hire and 358 00:24:06,400 --> 00:24:10,280 Speaker 1: high level to grow productivity. In the twenty one century, 359 00:24:10,359 --> 00:24:13,239 Speaker 1: that is no longer, so labor is no longer the 360 00:24:13,359 --> 00:24:17,720 Speaker 1: key productivity driver. The same happens was capital. If you 361 00:24:17,800 --> 00:24:22,119 Speaker 1: think of nineteen twenty century, capital generally was scarce. It 362 00:24:22,200 --> 00:24:26,080 Speaker 1: needed to be allocated carefully to whatever utilization people want 363 00:24:26,119 --> 00:24:28,840 Speaker 1: to do. That's why we have a DCF model and 364 00:24:28,960 --> 00:24:32,640 Speaker 1: capital as a pricing model. Most of our activities were 365 00:24:32,760 --> 00:24:36,959 Speaker 1: highly capital intensive. Today most of our activities are not 366 00:24:37,080 --> 00:24:41,359 Speaker 1: capital intensive at all. We have a surplus of capital. 367 00:24:41,440 --> 00:24:43,800 Speaker 1: We are drowning in capital. We have at least five 368 00:24:43,800 --> 00:24:47,040 Speaker 1: ten times more than we need, and that's as a 369 00:24:47,080 --> 00:24:50,600 Speaker 1: result of our financialization. And at the same time, as 370 00:24:50,600 --> 00:24:54,080 Speaker 1: I said, the need for capital is declining and so 371 00:24:54,240 --> 00:24:57,600 Speaker 1: cost of capital continues to fall. But in addition to that, 372 00:24:57,960 --> 00:25:01,280 Speaker 1: the nature of capital is also changed. In the past, 373 00:25:01,440 --> 00:25:05,040 Speaker 1: it was a hard capital, it was roads, factories, machinery, 374 00:25:05,440 --> 00:25:12,320 Speaker 1: plant Today it's mostly intangible capital. It's a software, digital capital, 375 00:25:12,440 --> 00:25:16,360 Speaker 1: social capital. Now the heart and soft capital have different 376 00:25:16,760 --> 00:25:21,040 Speaker 1: different properties and they behave differently, and so you find 377 00:25:21,160 --> 00:25:26,960 Speaker 1: compared to industrial capitalism what you can argue industrial societies, 378 00:25:27,359 --> 00:25:32,480 Speaker 1: not only labor or nature of labor changes dramatically, but 379 00:25:32,560 --> 00:25:36,720 Speaker 1: in addition, nature in demand for capital also changes. Now, 380 00:25:36,760 --> 00:25:39,960 Speaker 1: if you don't have free labor selling services in the 381 00:25:40,119 --> 00:25:45,320 Speaker 1: free market in order to maintain their upkeep and life expenses, 382 00:25:45,640 --> 00:25:48,600 Speaker 1: and if you don't have capital as a critical part 383 00:25:48,640 --> 00:25:51,560 Speaker 1: of your system, it is no longer capitalism as we 384 00:25:51,640 --> 00:25:54,439 Speaker 1: know it. Now you can call it variety of ways. 385 00:25:54,520 --> 00:25:57,960 Speaker 1: As I said, you can put various labels, and eventually 386 00:25:58,119 --> 00:26:02,600 Speaker 1: different countries will find different relationships, but they will be different. So, 387 00:26:02,840 --> 00:26:06,840 Speaker 1: if you are a human being, how do you find happiness? 388 00:26:07,840 --> 00:26:10,800 Speaker 1: If it's not through work, if it is not through money, 389 00:26:11,400 --> 00:26:14,880 Speaker 1: if it is not through power, What gives you happeness? 390 00:26:14,960 --> 00:26:18,639 Speaker 1: And can society delivered that happeness. That's where you're go 391 00:26:18,720 --> 00:26:23,160 Speaker 1: into the ideas of universal or basic income guarantees. That's 392 00:26:23,160 --> 00:26:27,720 Speaker 1: where you get two ideas of how educational and skilling 393 00:26:27,800 --> 00:26:30,399 Speaker 1: systems are going to change. That's where you've got too 394 00:26:30,440 --> 00:26:35,280 Speaker 1: many other ideas of building a different society funded by 395 00:26:35,400 --> 00:26:39,119 Speaker 1: the state, because private sector will never fund any of 396 00:26:39,160 --> 00:26:42,439 Speaker 1: that and will never be prepared to do so. And 397 00:26:42,560 --> 00:26:46,000 Speaker 1: that's why the way describe it. Whether you look at 398 00:26:46,119 --> 00:26:49,320 Speaker 1: m MT, whether you look at perpetuals, whether you look 399 00:26:49,320 --> 00:26:53,080 Speaker 1: at other Neo Kinsian models, whatever your model is, the 400 00:26:53,160 --> 00:26:56,640 Speaker 1: objective of the government is to reduce the pace at 401 00:26:56,680 --> 00:26:59,639 Speaker 1: which we go to zero. It's not to create inflation. 402 00:26:59,800 --> 00:27:02,280 Speaker 1: It's not to reflate the debt away, it's not to 403 00:27:02,400 --> 00:27:06,000 Speaker 1: inflate the dead away. It is purely to reduce the 404 00:27:06,119 --> 00:27:14,280 Speaker 1: speed with which post value of capital and labor decline. 405 00:27:25,800 --> 00:27:29,520 Speaker 1: So you said companies will never step in to provide 406 00:27:29,720 --> 00:27:33,560 Speaker 1: those sorts of services, things like teaching people new skills 407 00:27:34,000 --> 00:27:37,399 Speaker 1: that might be essential in this new technology driven age. 408 00:27:37,680 --> 00:27:40,399 Speaker 1: But why do you think that is? Because I know 409 00:27:40,480 --> 00:27:45,240 Speaker 1: there are some visions of our future. I mean, I 410 00:27:45,240 --> 00:27:48,359 Speaker 1: mean Margaret Atwood's books kind of spring to mind, or 411 00:27:48,400 --> 00:27:51,800 Speaker 1: one of them does, where she envisions companies as taking 412 00:27:51,920 --> 00:27:56,560 Speaker 1: over the role of the government and providing security services, 413 00:27:56,640 --> 00:28:01,000 Speaker 1: health services, educational services for their respective employee. Is because 414 00:28:01,040 --> 00:28:03,560 Speaker 1: governments won't step in to do it. So why are 415 00:28:03,600 --> 00:28:06,440 Speaker 1: you convinced that it's going to be governments and not 416 00:28:06,800 --> 00:28:10,199 Speaker 1: corporate entities that take this on. I basically said, not 417 00:28:10,280 --> 00:28:13,160 Speaker 1: so much. Take it on funded pay for it. If 418 00:28:13,200 --> 00:28:17,160 Speaker 1: you think called bell laps. Bell laps in nineteen fifties 419 00:28:17,240 --> 00:28:21,879 Speaker 1: forties fifties six is invented almost everything we use today. 420 00:28:22,119 --> 00:28:25,240 Speaker 1: Bell laps were private, but they were fully funded by 421 00:28:25,280 --> 00:28:29,080 Speaker 1: the federal government. Federal government in the US in sixties 422 00:28:29,160 --> 00:28:33,600 Speaker 1: used to spend two of GDP on basic scientific research. 423 00:28:34,040 --> 00:28:37,159 Speaker 1: Today that number is down to point six point seven, 424 00:28:37,840 --> 00:28:41,160 Speaker 1: and even that is grossly exaggerated because a lot of 425 00:28:41,320 --> 00:28:44,880 Speaker 1: senal funding is really applied. So the way I look 426 00:28:44,920 --> 00:28:50,200 Speaker 1: at a private sector, private sector never invents private sector innovates, 427 00:28:50,280 --> 00:28:53,880 Speaker 1: and there's a big difference, and so inventions always have 428 00:28:54,000 --> 00:28:58,360 Speaker 1: to come from the public sector. Innovation always have to 429 00:28:58,480 --> 00:29:01,400 Speaker 1: come from the private sector, and so you have a 430 00:29:01,440 --> 00:29:04,240 Speaker 1: combination of the two. I mean, one of the classic 431 00:29:04,360 --> 00:29:08,200 Speaker 1: questions is if a private company discovered, for far, private 432 00:29:08,200 --> 00:29:12,240 Speaker 1: pharmaceutical company discovered that a certain product or a certain 433 00:29:12,320 --> 00:29:16,200 Speaker 1: drug works incredibly well, but it will benefit their competitor, 434 00:29:16,320 --> 00:29:19,960 Speaker 1: not themselves, would they develop that drug? And the answer 435 00:29:20,120 --> 00:29:22,920 Speaker 1: largely is known. So there is a whole range of 436 00:29:22,960 --> 00:29:28,240 Speaker 1: activities from community support to basic income guarantee consumption support 437 00:29:28,480 --> 00:29:32,200 Speaker 1: to some of the infrastructure, to basic scientific R and 438 00:29:32,280 --> 00:29:36,560 Speaker 1: D thinks like rescuing NASA and NIH and CDC and 439 00:29:36,640 --> 00:29:40,280 Speaker 1: the rest of it. That is a rule for the government, 440 00:29:40,560 --> 00:29:44,640 Speaker 1: and the government does it generally better than the private sector. 441 00:29:44,880 --> 00:29:48,880 Speaker 1: So this idea that whatever problem you have, that private 442 00:29:48,880 --> 00:29:53,000 Speaker 1: sector solution is always the best is really a relatively 443 00:29:53,040 --> 00:29:55,960 Speaker 1: new idea. It only came in in late seventies. If 444 00:29:55,960 --> 00:29:59,320 Speaker 1: you go back the fifties and sixties, neither John Maynard 445 00:29:59,400 --> 00:30:03,280 Speaker 1: Ken's John Gilbride felt that there was a huge difference 446 00:30:03,360 --> 00:30:06,600 Speaker 1: between a private and public sector. So when I talk 447 00:30:06,680 --> 00:30:10,360 Speaker 1: about public sector, what I mean they're going to initiate it, 448 00:30:11,160 --> 00:30:14,400 Speaker 1: they're gonna fund it, they're going to find They're going 449 00:30:14,440 --> 00:30:19,760 Speaker 1: to create regulatory structures around it to encourage and sometimes 450 00:30:19,800 --> 00:30:24,480 Speaker 1: compel the private sector to participate in those projects in 451 00:30:24,600 --> 00:30:28,160 Speaker 1: and in those endeavors. I think the time of creating 452 00:30:28,200 --> 00:30:32,560 Speaker 1: British Layland, of British steel, on nationalizing Amtrak, that that 453 00:30:32,640 --> 00:30:35,880 Speaker 1: sort of time is gone. I don't think anybody will 454 00:30:35,880 --> 00:30:39,080 Speaker 1: try to do that. But the private sector will be courseted, 455 00:30:39,320 --> 00:30:42,920 Speaker 1: it will be regulated, capital will be directed in a 456 00:30:43,000 --> 00:30:46,840 Speaker 1: certain fashion, and the government increasingly will be doing it. 457 00:30:47,040 --> 00:30:50,800 Speaker 1: But as I said, the alternative is if you continue 458 00:30:50,840 --> 00:30:53,760 Speaker 1: to use monetary tools the way we have done over 459 00:30:53,840 --> 00:30:57,600 Speaker 1: the last thirty or forty years, disinflation will get stronger, 460 00:30:57,920 --> 00:31:01,720 Speaker 1: grows will get narrower, and we income in well cite 461 00:31:01,760 --> 00:31:07,880 Speaker 1: equalities will continue to rise. Eventually societies will simply blow up, 462 00:31:08,400 --> 00:31:12,280 Speaker 1: and so there is really no choice but to adopt 463 00:31:12,400 --> 00:31:15,520 Speaker 1: a different strategy. You probably remember in one of my 464 00:31:15,640 --> 00:31:20,720 Speaker 1: reports I outlined two or three alternatives. One is a war. 465 00:31:21,560 --> 00:31:27,160 Speaker 1: War is capable of destroying excess capital access resources. The 466 00:31:27,200 --> 00:31:29,520 Speaker 1: other one is to send some of the resources to 467 00:31:29,560 --> 00:31:34,120 Speaker 1: another planet, uh, and basically exit the existing system. But 468 00:31:34,200 --> 00:31:37,520 Speaker 1: the only other third alternative to me is a more 469 00:31:37,520 --> 00:31:41,800 Speaker 1: aggressive stance by the public sector. I don't think private 470 00:31:41,800 --> 00:31:46,720 Speaker 1: sector is capable anymore of actually reversing what occurred over 471 00:31:46,760 --> 00:31:50,120 Speaker 1: the last four decades. Uh. This is such great stuff, 472 00:31:50,120 --> 00:31:52,400 Speaker 1: and I have like a million thoughts, but you know, 473 00:31:52,520 --> 00:31:54,800 Speaker 1: sort of big picture. And I mentioned at the beginning 474 00:31:54,960 --> 00:31:59,080 Speaker 1: that you anticipated a lot of the debate the mainstream 475 00:31:59,160 --> 00:32:02,760 Speaker 1: is having today in the coronavirus praises. Last year during 476 00:32:02,840 --> 00:32:07,320 Speaker 1: your last interview, this area of the government funding basic 477 00:32:07,440 --> 00:32:10,680 Speaker 1: research obviously another area that's coming back into vogue with 478 00:32:10,800 --> 00:32:13,440 Speaker 1: the hunt for a vaccine and all the money that's 479 00:32:13,480 --> 00:32:17,240 Speaker 1: being spent there. In general, would you say, this crisis 480 00:32:17,480 --> 00:32:22,840 Speaker 1: has mostly just accelerated the trends and accelerated your thesis 481 00:32:22,840 --> 00:32:26,800 Speaker 1: about where things were going. Absolutely, and that's what I find. 482 00:32:26,920 --> 00:32:30,720 Speaker 1: Every time we have a crisis, we have acceleration. If 483 00:32:30,720 --> 00:32:33,760 Speaker 1: it goes through history and you say, why didn't people 484 00:32:33,840 --> 00:32:36,480 Speaker 1: do things that they were supposed to do? If you 485 00:32:36,560 --> 00:32:39,720 Speaker 1: go to you know, Alexander the first start of Russia 486 00:32:39,840 --> 00:32:42,920 Speaker 1: in eighteen o one, didn't you served them was a 487 00:32:42,960 --> 00:32:46,800 Speaker 1: bad say he knew it was holding back Russia? Why 488 00:32:46,840 --> 00:32:51,400 Speaker 1: didn't he do something about And generally speaking, people don't 489 00:32:51,520 --> 00:32:55,200 Speaker 1: do things and leslie have to unless there is absolutely 490 00:32:55,240 --> 00:32:59,120 Speaker 1: no alternative. And what happens every time we come to 491 00:32:59,200 --> 00:33:02,160 Speaker 1: this t junk and every time we have come to intersection, 492 00:33:02,960 --> 00:33:07,440 Speaker 1: we need to make a decision. And so the importance 493 00:33:07,480 --> 00:33:11,000 Speaker 1: of fiscal policy has already been on the horizon for 494 00:33:11,120 --> 00:33:14,440 Speaker 1: at least the last five or six years. In fact, 495 00:33:14,600 --> 00:33:16,479 Speaker 1: look at it, for the last five years we've been 496 00:33:16,520 --> 00:33:21,200 Speaker 1: tolerating much higher deficits than we would have tolerated ten 497 00:33:21,280 --> 00:33:24,280 Speaker 1: or fifteen years ago. In fact, the markets were encouraging 498 00:33:24,800 --> 00:33:29,000 Speaker 1: higher deficits. So this this shift from monetary to fiscal 499 00:33:29,200 --> 00:33:32,240 Speaker 1: policy has already been on the goal at least the 500 00:33:32,320 --> 00:33:35,760 Speaker 1: last five or six years. What coronavirus has done to 501 00:33:35,840 --> 00:33:40,880 Speaker 1: fiscal policy is what global financial crisis have done to 502 00:33:41,000 --> 00:33:46,480 Speaker 1: monetary policy. It accelerated it um and doesn't mean that 503 00:33:46,480 --> 00:33:48,880 Speaker 1: that we already at the stage that people are prepared 504 00:33:48,920 --> 00:33:53,160 Speaker 1: to accept a very close coordination of fiscal and monetary policy, 505 00:33:53,400 --> 00:33:57,400 Speaker 1: a fusion or emerger of fiscal and monetary policy into 506 00:33:57,520 --> 00:34:00,160 Speaker 1: m MTY or something else. Well, the answer is no. 507 00:34:00,600 --> 00:34:03,520 Speaker 1: As you earlier on said Joe, people are reluctant to 508 00:34:03,640 --> 00:34:08,200 Speaker 1: accept that the core premise of their livelihood. In other words, 509 00:34:08,440 --> 00:34:12,319 Speaker 1: private sector is dominant. It's always better to have Walts creators. 510 00:34:12,960 --> 00:34:17,040 Speaker 1: Private sector solution always better that to change that takes 511 00:34:17,080 --> 00:34:19,520 Speaker 1: time and so and so the way the way I 512 00:34:19,560 --> 00:34:23,240 Speaker 1: look at it, we probably need another crisis. It doesn't 513 00:34:23,320 --> 00:34:26,840 Speaker 1: matter whether it's men made or nature made. It doesn't 514 00:34:26,840 --> 00:34:29,799 Speaker 1: really matter where it comes wrong. But and the next 515 00:34:29,800 --> 00:34:32,439 Speaker 1: crisis will happen sometime over the next two or three 516 00:34:32,480 --> 00:34:35,160 Speaker 1: or four or five years. And when it does happen, 517 00:34:35,680 --> 00:34:38,719 Speaker 1: then all the ideas were discussing now, whether it's a 518 00:34:38,760 --> 00:34:43,239 Speaker 1: regulatory changes, educational changes, health care changes, m MT and 519 00:34:43,320 --> 00:34:46,360 Speaker 1: how the government gets funded, all of that will fuse. 520 00:34:46,760 --> 00:34:49,279 Speaker 1: It's like a broken volt. Whether you're twenty five or 521 00:34:49,280 --> 00:34:52,560 Speaker 1: forty five, your your bold takes time to fuse. That's 522 00:34:52,600 --> 00:34:55,040 Speaker 1: exactly what's going to happen. And I think at that 523 00:34:55,120 --> 00:34:59,280 Speaker 1: point in time everybody will accept it. And when people 524 00:34:59,360 --> 00:35:02,040 Speaker 1: say it's going to be terrible it's going to be 525 00:35:02,200 --> 00:35:05,799 Speaker 1: hyper inflation, No, it doesn't need to be. Or it's 526 00:35:05,800 --> 00:35:09,680 Speaker 1: going to be a runaway wasteful spending. Again, it can be, 527 00:35:09,880 --> 00:35:12,359 Speaker 1: but it doesn't have to be. Uh. And in fact, 528 00:35:12,440 --> 00:35:15,840 Speaker 1: I would argue for bulk of the population, it's probably 529 00:35:15,840 --> 00:35:18,279 Speaker 1: going to be a much better world. And that's the 530 00:35:18,360 --> 00:35:22,960 Speaker 1: idea to reduce social tension. The whole purpose of shifting 531 00:35:23,000 --> 00:35:27,240 Speaker 1: policy tools is to quiet in societies down and reduce 532 00:35:27,400 --> 00:35:30,960 Speaker 1: the degree of geopolitical or social tension. Do we really 533 00:35:31,000 --> 00:35:33,560 Speaker 1: need another crisis? And for I would I would love 534 00:35:33,680 --> 00:35:37,080 Speaker 1: like a longer break from crisis. Can we maybe wait 535 00:35:37,200 --> 00:35:40,719 Speaker 1: like ten years for the oven? Yes, I usually say. 536 00:35:40,760 --> 00:35:43,759 Speaker 1: I usually say to my clients that, And I think 537 00:35:43,800 --> 00:35:46,120 Speaker 1: I mentioned in the book as well that if I 538 00:35:46,160 --> 00:35:50,120 Speaker 1: could just go back toies and liberal capitalism that I 539 00:35:50,200 --> 00:35:53,360 Speaker 1: used to enjoy so much, I will do it. But 540 00:35:53,440 --> 00:35:56,160 Speaker 1: the problem is you can't you can't go backwards. You 541 00:35:56,160 --> 00:35:59,520 Speaker 1: can only go forwards. And remember Mike Bears at the bridge. 542 00:36:00,040 --> 00:36:02,760 Speaker 1: In the bridge, we passed the first part of the bridge, 543 00:36:02,760 --> 00:36:05,279 Speaker 1: which was monetory. We are now on the second part 544 00:36:05,360 --> 00:36:08,680 Speaker 1: of that bridge. That bridge will go on for several decades. 545 00:36:09,040 --> 00:36:11,000 Speaker 1: As I said, at the end of the bridge, at 546 00:36:11,040 --> 00:36:13,960 Speaker 1: different world looms. And one of the things I discussed 547 00:36:13,960 --> 00:36:16,400 Speaker 1: in the book what that world would look like. What 548 00:36:16,520 --> 00:36:19,160 Speaker 1: will be the right policies to make sure that it's 549 00:36:19,200 --> 00:36:23,120 Speaker 1: not disruptive enough for all of us that we don't 550 00:36:23,200 --> 00:36:27,640 Speaker 1: have war, we don't have conflict, we don't have extreme inequalities. 551 00:36:27,920 --> 00:36:30,600 Speaker 1: And so we are on that bridge. Now on that bridge, 552 00:36:30,680 --> 00:36:34,040 Speaker 1: the life will change gradually more and more. As I said, 553 00:36:34,200 --> 00:36:37,879 Speaker 1: a number of policies will change. Clearly, taxation policies will 554 00:36:37,960 --> 00:36:41,880 Speaker 1: change massively, whether it's a corporate taxation, whether it's closure 555 00:36:41,880 --> 00:36:46,680 Speaker 1: of the loopholes, whether it's rules regarding CEO compensation, whether 556 00:36:46,719 --> 00:36:49,600 Speaker 1: it's ability to do share by backs. There will be 557 00:36:49,640 --> 00:36:53,200 Speaker 1: other rules that will change. Capital gains tax wealth taxes, 558 00:36:53,560 --> 00:36:57,280 Speaker 1: mentioned taxes, and a lot of those taxes will believed 559 00:36:57,800 --> 00:37:01,160 Speaker 1: not to finance government. I think the government will get 560 00:37:01,200 --> 00:37:06,120 Speaker 1: financed mostly through central banks. As what's happening today. I 561 00:37:06,160 --> 00:37:09,040 Speaker 1: think all of those policies will be introduced to make 562 00:37:09,120 --> 00:37:12,680 Speaker 1: a fairer society. So, in other words, the way I 563 00:37:12,719 --> 00:37:16,799 Speaker 1: look at it, baby boomers, like myself wanted to be independent. 564 00:37:17,360 --> 00:37:20,399 Speaker 1: Baby Boomers wanted to tell the government, we don't want 565 00:37:20,440 --> 00:37:23,520 Speaker 1: to leave me alone, let me do what I want 566 00:37:23,560 --> 00:37:27,680 Speaker 1: to do. And baby boomers created Ronald Reagan and Magnufacturer 567 00:37:27,680 --> 00:37:30,520 Speaker 1: and Milton Friedman and the rest of it. The new 568 00:37:30,600 --> 00:37:35,440 Speaker 1: millennium and Z generations are are different. They're asking for 569 00:37:35,560 --> 00:37:38,440 Speaker 1: different things, they're looking for different things. And so what 570 00:37:38,640 --> 00:37:44,319 Speaker 1: you find the new generation values fairness, their value equality. Well, 571 00:37:44,360 --> 00:37:50,239 Speaker 1: the older generation valued choice, freedom, efficiency. Now those two 572 00:37:50,320 --> 00:37:54,160 Speaker 1: concepts iron conflict. And remember in the US, within the 573 00:37:54,200 --> 00:37:57,960 Speaker 1: next five seven years, millenniums and Z generation will be 574 00:37:58,400 --> 00:38:02,960 Speaker 1: the electoral majority. And when they are, fairness and equality 575 00:38:03,080 --> 00:38:06,359 Speaker 1: will really trump efficiency. And I don't mean to use 576 00:38:06,360 --> 00:38:12,880 Speaker 1: the world trump, but really will will exceed efficiency, um, freedom, choice, 577 00:38:13,160 --> 00:38:16,560 Speaker 1: all these things that Baby boomers and ex generation really 578 00:38:16,680 --> 00:38:19,160 Speaker 1: believed in. In love and it's not it's not gonna 579 00:38:19,160 --> 00:38:21,200 Speaker 1: be easy for a number of people who are somewhat 580 00:38:21,239 --> 00:38:24,920 Speaker 1: older to accept that the world has changed. But by 581 00:38:24,960 --> 00:38:27,799 Speaker 1: the way. The same happened in nineteen fifties. As they said, 582 00:38:27,840 --> 00:38:30,640 Speaker 1: if you go back to nineteen fifties, if you have 583 00:38:30,760 --> 00:38:33,479 Speaker 1: a different view, you could be sacked from your job. 584 00:38:33,880 --> 00:38:36,080 Speaker 1: If you go back to nineteen fifties, if you do 585 00:38:36,160 --> 00:38:39,839 Speaker 1: not believe in ideology of the United States, you can 586 00:38:39,880 --> 00:38:42,759 Speaker 1: be deported, or you can lose your job. If you 587 00:38:42,800 --> 00:38:48,400 Speaker 1: have any devions either political or sexual or whatever, or religious, again, 588 00:38:48,760 --> 00:38:51,000 Speaker 1: you did not have a good life. And so there 589 00:38:51,000 --> 00:38:53,960 Speaker 1: were many periods in the past that those sorts of 590 00:38:54,040 --> 00:38:59,960 Speaker 1: generational changes created societies that strove to be fairer, more equal, 591 00:39:00,400 --> 00:39:04,719 Speaker 1: but gave you less freedom, less opportunity. And that's a 592 00:39:04,800 --> 00:39:09,000 Speaker 1: question in the book, is to say, between changing generations, 593 00:39:09,080 --> 00:39:13,279 Speaker 1: between technology and financialization, how much freedom can we keep? 594 00:39:14,239 --> 00:39:18,120 Speaker 1: Just going back to uh, the markets right now, so 595 00:39:18,360 --> 00:39:21,239 Speaker 1: I'm looking at a chart of the spire and we're 596 00:39:21,440 --> 00:39:27,000 Speaker 1: not that far away from the pre March peak in 597 00:39:27,040 --> 00:39:30,560 Speaker 1: the market. When when you see what's happening in global 598 00:39:30,640 --> 00:39:36,879 Speaker 1: markets in asset prices, how does that fit into your 599 00:39:37,000 --> 00:39:41,200 Speaker 1: framework of thinking about things? Well, you have to remember 600 00:39:41,280 --> 00:39:46,239 Speaker 1: that we are still financialized. We're highly financialized globally. The 601 00:39:46,360 --> 00:39:49,279 Speaker 1: debt to GDPs in excessive three to one. In a 602 00:39:49,360 --> 00:39:51,719 Speaker 1: number of countries it's as high as five to one. 603 00:39:52,000 --> 00:39:55,400 Speaker 1: But if you think of value of financial instruments, not debt, 604 00:39:56,000 --> 00:40:00,879 Speaker 1: real financialization is at least five ten times GDP. Now 605 00:40:00,960 --> 00:40:04,400 Speaker 1: that's why interest rates cannot go up. But it also 606 00:40:04,520 --> 00:40:09,880 Speaker 1: means that we're all committed to asset prices. Uh consumer 607 00:40:09,960 --> 00:40:15,120 Speaker 1: decision whether to splash or to say, corporate decision whether 608 00:40:15,200 --> 00:40:18,200 Speaker 1: to do share buy backs or to do investments are 609 00:40:18,239 --> 00:40:22,360 Speaker 1: now increasingly driven by asset classes. Now, what that implies 610 00:40:22,440 --> 00:40:27,360 Speaker 1: the policymakers central banks, treasury departments, ministries of finance is 611 00:40:27,400 --> 00:40:32,200 Speaker 1: that you can't allow holistically defined asset prices to contract 612 00:40:32,480 --> 00:40:35,920 Speaker 1: because as soon as you have those contractions, real life 613 00:40:36,080 --> 00:40:39,799 Speaker 1: impact for people living under the cloud of finance are 614 00:40:39,840 --> 00:40:42,600 Speaker 1: going to be terrible, are going to be devastating. And 615 00:40:42,680 --> 00:40:46,160 Speaker 1: so what you do You make sure that Humpty Dumpty 616 00:40:46,239 --> 00:40:49,000 Speaker 1: stays on the wall. And the only way to do 617 00:40:49,080 --> 00:40:53,200 Speaker 1: it is to continue to generate more liquidity than what 618 00:40:53,360 --> 00:40:57,239 Speaker 1: you require, more capital than you require, and at the 619 00:40:57,280 --> 00:41:01,400 Speaker 1: same time very rapidly act to suppress us any sign 620 00:41:01,400 --> 00:41:06,120 Speaker 1: of molatility or spreads. And given that finance has different 621 00:41:06,200 --> 00:41:09,600 Speaker 1: rules to economies, people saying that finance and economics are 622 00:41:09,600 --> 00:41:13,440 Speaker 1: the same thing. They're not. They're completely two different beasts. 623 00:41:14,000 --> 00:41:17,400 Speaker 1: Eventually finance cannot survive with out the economy, but for 624 00:41:17,560 --> 00:41:21,560 Speaker 1: years decades they do not obey the same rules. And 625 00:41:21,640 --> 00:41:25,560 Speaker 1: so the objectives of central banks is not specific level 626 00:41:25,560 --> 00:41:30,279 Speaker 1: of s ANDP. The objective is to reduce molatilities and 627 00:41:30,440 --> 00:41:34,520 Speaker 1: shrink the spreads. And because cloud of finance is based 628 00:41:34,560 --> 00:41:38,440 Speaker 1: on digits, it's not based on factories or roads. You 629 00:41:38,520 --> 00:41:42,279 Speaker 1: can change narrative in a matter of seconds. That's why 630 00:41:42,320 --> 00:41:45,319 Speaker 1: we have the fastest bear markets and the fastest bull 631 00:41:45,360 --> 00:41:49,040 Speaker 1: markets right now. Because you can change the narrative, you 632 00:41:49,080 --> 00:41:52,520 Speaker 1: can change communication in a matter of seconds. And that's 633 00:41:52,560 --> 00:41:54,800 Speaker 1: why I said earlier we can have a bear market 634 00:41:54,840 --> 00:41:57,280 Speaker 1: in the afternoon and a bull market in the morning 635 00:41:57,840 --> 00:42:00,880 Speaker 1: because none of it is real. It bits in the sky, 636 00:42:00,960 --> 00:42:04,719 Speaker 1: its numbers. But those numbers are very important if you 637 00:42:04,800 --> 00:42:08,000 Speaker 1: don't look after them. Which you find is that people 638 00:42:08,080 --> 00:42:11,320 Speaker 1: under that that live on the ground, that going to work, 639 00:42:11,640 --> 00:42:15,200 Speaker 1: feeding their children, living in their houses, they're going to suffer. 640 00:42:15,600 --> 00:42:18,680 Speaker 1: And and so to me, central banks are caught an 641 00:42:18,680 --> 00:42:23,960 Speaker 1: impossible dilever that people are demanding wealth, their demanding income, 642 00:42:24,160 --> 00:42:28,680 Speaker 1: financial markets demanding growth, and they mass delivered because the 643 00:42:28,719 --> 00:42:32,880 Speaker 1: alternatives are will be far, far worse. And so the 644 00:42:32,960 --> 00:42:37,319 Speaker 1: only way out of this dilemma either you allow productivity 645 00:42:37,360 --> 00:42:40,759 Speaker 1: to mushroom massively, and we believe it's going to take 646 00:42:40,840 --> 00:42:45,279 Speaker 1: several decades before productivity will sustainably rise, so that's not 647 00:42:45,360 --> 00:42:50,800 Speaker 1: really an option. Alternatively, you change the policy tools. Instead 648 00:42:50,800 --> 00:42:55,280 Speaker 1: of using laboratory tools, you start using fiscally oriented tools, 649 00:42:55,440 --> 00:42:59,759 Speaker 1: which much more focused and less wasteful, although as I 650 00:42:59,800 --> 00:43:03,920 Speaker 1: say earlier, you can scraw up anything, and fiscal tools, 651 00:43:04,080 --> 00:43:08,759 Speaker 1: particularly in combination was monetary, are very dangerous and not 652 00:43:09,000 --> 00:43:14,960 Speaker 1: many countries can actually pursue those policies. Victor, absolutely fantastic 653 00:43:15,160 --> 00:43:18,560 Speaker 1: having you on the show. As always, I love that 654 00:43:18,640 --> 00:43:21,680 Speaker 1: there's an analyst out there who's sort of thinking these 655 00:43:21,719 --> 00:43:25,120 Speaker 1: big picture questions about what our political systems and monetary 656 00:43:25,160 --> 00:43:28,000 Speaker 1: and economic systems might and could and should look like 657 00:43:28,160 --> 00:43:30,960 Speaker 1: and how they sort of fit into I guess, the 658 00:43:31,080 --> 00:43:35,800 Speaker 1: meaning of human life making people happy. Um, thank you again, 659 00:43:35,960 --> 00:43:51,239 Speaker 1: Thank you very much, Thanks Victor, and that was fantastic. Joe, 660 00:43:51,280 --> 00:43:53,440 Speaker 1: did you enjoy that conversation. I'm glad you got to 661 00:43:53,920 --> 00:43:57,480 Speaker 1: play into one of the Victor Schwetz Interviews that was 662 00:43:57,560 --> 00:43:59,680 Speaker 1: so good and kind of like, I'm glad I missed 663 00:43:59,680 --> 00:44:02,080 Speaker 1: the last one so I could just like listen to 664 00:44:02,120 --> 00:44:04,319 Speaker 1: the old one and be a fan and then get 665 00:44:04,320 --> 00:44:07,480 Speaker 1: really excited about this one. It was great, and I 666 00:44:07,520 --> 00:44:11,200 Speaker 1: feel like nobody has sort of as well as he 667 00:44:11,280 --> 00:44:14,359 Speaker 1: can tie all of these big themes together, because there's 668 00:44:14,400 --> 00:44:19,000 Speaker 1: a lot going on. Obviously, politics is one, the financialization 669 00:44:19,080 --> 00:44:22,000 Speaker 1: of the economy is another, this sort of accelerant effect 670 00:44:22,080 --> 00:44:26,160 Speaker 1: of the inequality derived from our focus on monetary policy, 671 00:44:26,640 --> 00:44:28,840 Speaker 1: the sort of m MT ideas of leaving more on 672 00:44:28,880 --> 00:44:31,680 Speaker 1: fiscal and I think he really pulls them all together 673 00:44:31,760 --> 00:44:37,000 Speaker 1: extremely well, especially his point about sort of generational attitude 674 00:44:37,080 --> 00:44:40,839 Speaker 1: changes and how that it affects the policy mix that 675 00:44:40,920 --> 00:44:45,200 Speaker 1: people voters are going to prefer just just great stuff. Yeah, 676 00:44:45,280 --> 00:44:47,439 Speaker 1: And I think what I really like about the way 677 00:44:47,480 --> 00:44:50,920 Speaker 1: he's thinking about things is it's sort of it brings 678 00:44:50,960 --> 00:44:54,280 Speaker 1: the focus back to politics, which I think has always 679 00:44:54,280 --> 00:44:58,120 Speaker 1: been my one criticism of m m T is that 680 00:44:58,200 --> 00:45:02,080 Speaker 1: if we agree that, you know, the only thing binding 681 00:45:02,840 --> 00:45:07,160 Speaker 1: government debt is inflation, the government still has to make 682 00:45:07,280 --> 00:45:10,360 Speaker 1: a decision about issuing new debt and where it's going 683 00:45:10,400 --> 00:45:13,120 Speaker 1: to spend it. So it always comes down to politics 684 00:45:13,920 --> 00:45:17,040 Speaker 1: history in some respects, and I feel like Victor's starting 685 00:45:17,080 --> 00:45:20,400 Speaker 1: point is always politics and history and how that feeds 686 00:45:20,400 --> 00:45:23,480 Speaker 1: into economics. So I really like that framework. Now I 687 00:45:23,560 --> 00:45:28,000 Speaker 1: completely agree. I think, you know, to some extent, markets 688 00:45:29,040 --> 00:45:32,640 Speaker 1: have always been their downstreaming from politics, and that if 689 00:45:33,080 --> 00:45:36,720 Speaker 1: an attempt to separate them has always been very arbitrary. 690 00:45:36,760 --> 00:45:41,200 Speaker 1: But I think Victor is right that going forward that 691 00:45:41,280 --> 00:45:44,400 Speaker 1: link is going to be extremely clear to people. What 692 00:45:44,400 --> 00:45:47,120 Speaker 1: what will the next stimulus bill look like? What will 693 00:45:47,200 --> 00:45:50,040 Speaker 1: the next president if we get a different president, if 694 00:45:50,080 --> 00:45:52,440 Speaker 1: it's Biden or even if it's Trump, whatever, Like, what 695 00:45:52,560 --> 00:45:57,080 Speaker 1: will they decide in terms of permanently changing how we trade, 696 00:45:57,280 --> 00:46:01,400 Speaker 1: permanently changing the tax code, thinking about fiscal transference. Like, 697 00:46:01,680 --> 00:46:03,400 Speaker 1: these things are gonna be really real, and if you 698 00:46:03,400 --> 00:46:05,840 Speaker 1: want to understand them, you have to be sort of 699 00:46:05,840 --> 00:46:11,600 Speaker 1: a big consumer of economic political analysis. Yeah. Absolutely, Well, 700 00:46:11,640 --> 00:46:14,040 Speaker 1: we'll have to get Victor back on in in a 701 00:46:14,120 --> 00:46:17,400 Speaker 1: year's time to discuss what's happened in the interim, But 702 00:46:17,719 --> 00:46:21,359 Speaker 1: shall we leave it there for now? Okay, this has 703 00:46:21,400 --> 00:46:24,880 Speaker 1: been another episode of the All Thoughts podcast. I'm Tracy Alloway. 704 00:46:24,960 --> 00:46:28,040 Speaker 1: You can follow me on Twitter at Tracy Alloway and 705 00:46:28,080 --> 00:46:31,200 Speaker 1: I'm Joe Wisenthal. You could follow me on Twitter at 706 00:46:31,200 --> 00:46:36,160 Speaker 1: The Stalwart. Follow our producer Laura Carlson at Laura M. Carlson. 707 00:46:36,400 --> 00:46:40,400 Speaker 1: Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today, 708 00:46:40,840 --> 00:46:43,560 Speaker 1: and check out all of our podcasts at Bloomberg onto 709 00:46:43,560 --> 00:47:01,719 Speaker 1: the handle at podcasts. Thanks for listening to