1 00:00:00,160 --> 00:00:02,920 Speaker 1: The title of the world's most powerful people will soon 2 00:00:03,000 --> 00:00:06,600 Speaker 1: be up for grabs. No, we're not talking about elections 3 00:00:06,640 --> 00:00:09,600 Speaker 1: in the US or Germany or what's happening behind the 4 00:00:09,600 --> 00:00:13,280 Speaker 1: scenes with China's Communist Party. Since this is a podcast 5 00:00:13,320 --> 00:00:17,360 Speaker 1: about global economics, you might guess that we are referring to, Yes, 6 00:00:17,680 --> 00:00:21,200 Speaker 1: the heads of the world's major central banks, the people 7 00:00:21,200 --> 00:00:24,360 Speaker 1: who essentially control the price of money, which affects the 8 00:00:24,360 --> 00:00:27,319 Speaker 1: prices of just about everything else people buy and sell. 9 00:00:28,120 --> 00:00:30,800 Speaker 1: So who are these people and what's going to happen 10 00:00:30,800 --> 00:00:44,720 Speaker 1: to them? Let's find out today on Benchmark. I'm Scott 11 00:00:44,800 --> 00:00:47,920 Speaker 1: Landman and economics editor with Bloomberg and Washington. You know, 12 00:00:48,000 --> 00:00:51,559 Speaker 1: I'm Daniel Most, Global economics rode for Bloomberg View in 13 00:00:51,640 --> 00:00:54,639 Speaker 1: New York. So, Dan, we spent a lot of time 14 00:00:54,640 --> 00:00:57,639 Speaker 1: in our careers covering central banking. Uh, there have been 15 00:00:57,720 --> 00:00:59,840 Speaker 1: times when it was pretty exciting, times when it was 16 00:01:00,000 --> 00:01:03,600 Speaker 1: it boring. But what makes the next two years exciting? Well, 17 00:01:03,600 --> 00:01:06,959 Speaker 1: There's been a lot of discussion about President Donald Trump's 18 00:01:07,000 --> 00:01:11,200 Speaker 1: ability to reshape the Federal Reserve given the vacancies that 19 00:01:11,240 --> 00:01:14,800 Speaker 1: are coming up. But the much broader picture is in 20 00:01:14,840 --> 00:01:18,560 Speaker 1: the next couple of years we could potentially see new 21 00:01:18,760 --> 00:01:23,520 Speaker 1: heads of central banks in every major economy. Janet Yellen's 22 00:01:23,640 --> 00:01:28,199 Speaker 1: term is up in February. Two months later, Hirohiko Coroda's 23 00:01:28,319 --> 00:01:32,480 Speaker 1: term finishes in April in London. Bank of England Governor 24 00:01:32,520 --> 00:01:37,399 Speaker 1: Mark Karney departs in as does Mario Dragi, head of 25 00:01:37,400 --> 00:01:41,560 Speaker 1: the European Central Bank. And then there's the perennial speculation 26 00:01:41,640 --> 00:01:45,800 Speaker 1: regarding the future of China central bank government. Big questions 27 00:01:46,000 --> 00:01:48,520 Speaker 1: how many of them will keep their jobs, and if 28 00:01:48,560 --> 00:01:52,400 Speaker 1: they depart, what will be their legacies and what kind 29 00:01:52,440 --> 00:01:55,960 Speaker 1: of people will replace them. Well, fortunately we have just 30 00:01:56,000 --> 00:01:58,920 Speaker 1: the right person to discuss this. Let's bring him in. 31 00:01:59,000 --> 00:02:02,559 Speaker 1: Adam poson Is is probably better situated than just about 32 00:02:02,560 --> 00:02:05,400 Speaker 1: anybody to talk about this topic. He's been in the 33 00:02:05,480 --> 00:02:08,359 Speaker 1: room as a policymaker at the Bank of England. He's 34 00:02:08,400 --> 00:02:10,600 Speaker 1: worked at the FED and co authored a book on 35 00:02:10,720 --> 00:02:14,800 Speaker 1: inflation targeting with former FED chair Ben Bernanke. He even 36 00:02:14,840 --> 00:02:19,280 Speaker 1: wrote a book about Japan's economy, and since early he's 37 00:02:19,320 --> 00:02:23,760 Speaker 1: been president of the Peterson Institute for International Economics in Washington, 38 00:02:24,120 --> 00:02:27,000 Speaker 1: where it's basically his full time job to keep abreast 39 00:02:27,040 --> 00:02:30,560 Speaker 1: of world economic affairs. Adam thanks for joining us today 40 00:02:30,639 --> 00:02:33,680 Speaker 1: on the road from London. No, thank you Scott, Thank 41 00:02:33,680 --> 00:02:37,200 Speaker 1: you Daniel. Nice introduction, I hope to help Adam. Why 42 00:02:37,240 --> 00:02:41,080 Speaker 1: should the average person in the US, the UK, Germany 43 00:02:41,200 --> 00:02:44,120 Speaker 1: or Japan care about who's the head of their central bank. 44 00:02:45,200 --> 00:02:48,239 Speaker 1: The fundamental reason is, even if not the most powerful 45 00:02:48,320 --> 00:02:51,880 Speaker 1: economic person in the world, he or she who runs 46 00:02:51,880 --> 00:02:55,160 Speaker 1: one of these major central banks has a lot to 47 00:02:55,240 --> 00:02:57,880 Speaker 1: do with the well being of every household and every 48 00:02:57,919 --> 00:03:00,480 Speaker 1: business in the economy. And if you're running the US 49 00:03:00,560 --> 00:03:03,680 Speaker 1: Central Bank and to lesser degree, the European CenTra Bank, 50 00:03:04,080 --> 00:03:06,680 Speaker 1: you have an effect on the well being and every 51 00:03:06,680 --> 00:03:10,079 Speaker 1: household around the world, at least that's part of global markets. 52 00:03:10,919 --> 00:03:14,000 Speaker 1: You the people who run these central banks become important 53 00:03:14,040 --> 00:03:17,920 Speaker 1: in two senses. First, they have to help set the 54 00:03:17,960 --> 00:03:21,200 Speaker 1: agenda and and move They are committees mostly that run 55 00:03:21,240 --> 00:03:24,959 Speaker 1: these banks, but then move the committee to making decisions 56 00:03:25,040 --> 00:03:27,800 Speaker 1: day to day on what's important, what the state of 57 00:03:27,800 --> 00:03:30,919 Speaker 1: the economy is, how to calm things down, how to 58 00:03:30,960 --> 00:03:34,400 Speaker 1: speed things up. And they have some tools that approximately 59 00:03:34,480 --> 00:03:37,720 Speaker 1: let them do this, like interest rates or in crisis times, 60 00:03:37,760 --> 00:03:41,360 Speaker 1: purchases of government securities. The second way in which they 61 00:03:41,400 --> 00:03:44,040 Speaker 1: matter is if God forbid there is a crisis, as 62 00:03:44,720 --> 00:03:47,840 Speaker 1: the US and the UK and Europe went through in 63 00:03:47,880 --> 00:03:51,160 Speaker 1: two thousand eight two thousand nine. You want someone who 64 00:03:51,240 --> 00:03:55,120 Speaker 1: is creative and flexible and strong enough to take action. 65 00:03:55,800 --> 00:03:58,600 Speaker 1: Keying off of that the main suspense. Now we might 66 00:03:58,600 --> 00:04:03,000 Speaker 1: not have a crisis. But here in Washington, we're pondering 67 00:04:03,000 --> 00:04:06,040 Speaker 1: who's going to be head of the Federal Reserve once 68 00:04:06,200 --> 00:04:10,120 Speaker 1: Janet Yellin's for your term is up in February. What's 69 00:04:10,120 --> 00:04:12,360 Speaker 1: your take on that? Do you think she's going to 70 00:04:12,360 --> 00:04:14,920 Speaker 1: be reappointed by President Trump or is he going to 71 00:04:14,960 --> 00:04:17,599 Speaker 1: be uh? Is he going to pick someone else like 72 00:04:17,680 --> 00:04:22,360 Speaker 1: his economic advisor Gary Cone, uh former Fed Governor Kevin Warsh. 73 00:04:22,920 --> 00:04:25,320 Speaker 1: How do you see this shaking out and how's that 74 00:04:25,360 --> 00:04:28,520 Speaker 1: going to affect the economy depending on what happens. Well, 75 00:04:28,600 --> 00:04:32,640 Speaker 1: your Bloomberg colleagues had a piece a couple of weeks 76 00:04:32,640 --> 00:04:35,080 Speaker 1: ago with sort of the six leading names that made 77 00:04:35,120 --> 00:04:38,160 Speaker 1: sense to me, and so I put things in three categories. 78 00:04:38,640 --> 00:04:42,640 Speaker 1: There's the probability, the possibility that Janet yelling gets reappointed, 79 00:04:42,640 --> 00:04:45,560 Speaker 1: and actually, contrary to what some people think, I think 80 00:04:45,600 --> 00:04:48,239 Speaker 1: that would be the most hawkish, meaning the most likely 81 00:04:48,279 --> 00:04:51,520 Speaker 1: to raise rates, the most likely to worry about inflation 82 00:04:51,600 --> 00:04:53,880 Speaker 1: in the near term. But I think she has a 83 00:04:53,960 --> 00:04:58,200 Speaker 1: very small chance of being reappointed because she's not just 84 00:04:58,680 --> 00:05:02,240 Speaker 1: formerly a Democrat, but she's also someone who probably doesn't 85 00:05:02,240 --> 00:05:05,239 Speaker 1: want to deregulate financial markets as much as Mr Trump 86 00:05:05,279 --> 00:05:07,640 Speaker 1: would like. And so I put like a temper center 87 00:05:07,720 --> 00:05:10,840 Speaker 1: less chance on that. I put a sixty plus percent 88 00:05:10,920 --> 00:05:15,239 Speaker 1: chance that the president appoints one of the Republicans who's 89 00:05:15,320 --> 00:05:18,279 Speaker 1: been active either at the Federal Reserve or around the 90 00:05:18,279 --> 00:05:22,159 Speaker 1: Federal Reserve for a long time, and advised previous presidents 91 00:05:22,560 --> 00:05:26,599 Speaker 1: that list would include John Taylor, Kevin Walsh, Glenn Hubbard, 92 00:05:27,240 --> 00:05:29,919 Speaker 1: and I put like a sixty percent chance one of 93 00:05:29,960 --> 00:05:32,840 Speaker 1: those three would be picked. But that still leaves you 94 00:05:32,880 --> 00:05:35,320 Speaker 1: within our thirty percent. And this is what I worry 95 00:05:35,320 --> 00:05:38,840 Speaker 1: about in particular. On that list, there were two names 96 00:05:38,839 --> 00:05:41,799 Speaker 1: of people who are not economists, not even policy types, 97 00:05:42,000 --> 00:05:45,239 Speaker 1: to sort of general bankers or business people. And during 98 00:05:45,240 --> 00:05:49,799 Speaker 1: the campaign President Trump talked a few times about putting 99 00:05:49,800 --> 00:05:53,720 Speaker 1: a normal business person at the FED. Our experience in 100 00:05:53,880 --> 00:05:56,240 Speaker 1: history of doing that is very poor. Last time we 101 00:05:56,320 --> 00:05:58,279 Speaker 1: tried that with a man named g. William Miller in 102 00:05:58,279 --> 00:06:01,159 Speaker 1: the late seventies under Carter that turned into a near 103 00:06:01,160 --> 00:06:04,000 Speaker 1: disaster for the US in terms of high inflation and 104 00:06:04,680 --> 00:06:08,280 Speaker 1: variable currency value. So I hope the president doesn't do that, 105 00:06:08,320 --> 00:06:11,080 Speaker 1: but I can't rule it out. So two months later, 106 00:06:11,400 --> 00:06:15,160 Speaker 1: the Bank of Japan governor's term expired. Now, since the 107 00:06:15,160 --> 00:06:19,719 Speaker 1: Bank's gained independence in the late ninety nineties, no governor 108 00:06:19,760 --> 00:06:24,279 Speaker 1: has been reappointed. It's also true that Japan's economy, while 109 00:06:24,320 --> 00:06:28,159 Speaker 1: not awesome, he is looking relatively good right now. What 110 00:06:28,200 --> 00:06:30,360 Speaker 1: do you think is going to happen there? Well, I think, 111 00:06:30,400 --> 00:06:33,800 Speaker 1: and you're absolutely right, Um, Of all the central banks 112 00:06:33,839 --> 00:06:37,840 Speaker 1: you mentioned, I think at the start, I think Governor 113 00:06:37,920 --> 00:06:39,880 Speaker 1: Corona and the Bank of Japan are the one most 114 00:06:39,920 --> 00:06:43,200 Speaker 1: likely to have a reappointment. UM. Governor Crow is a 115 00:06:43,200 --> 00:06:45,920 Speaker 1: little bit on the older side, but he's still very active. 116 00:06:46,480 --> 00:06:48,880 Speaker 1: And as you rightly point out, if you look at 117 00:06:48,920 --> 00:06:52,760 Speaker 1: the data, UM, including things like per capita income growth, 118 00:06:52,800 --> 00:06:55,719 Speaker 1: which is basically the most the best single measure we 119 00:06:55,800 --> 00:06:59,720 Speaker 1: have of well being for macro economy, Japan has been 120 00:06:59,720 --> 00:07:03,080 Speaker 1: doing okay. It was obviously thrown off base by the 121 00:07:03,120 --> 00:07:06,240 Speaker 1: crisis in the North Atlantic, but it wasn't its own 122 00:07:06,279 --> 00:07:09,960 Speaker 1: fault and it was pretty resilient. There is a problem 123 00:07:09,960 --> 00:07:12,520 Speaker 1: in Japan, and it's something of a puzzle that inflation 124 00:07:12,560 --> 00:07:15,440 Speaker 1: hasn't gone up more than it has so far. But 125 00:07:15,600 --> 00:07:18,520 Speaker 1: Governor Krota has done pretty much everything that either the 126 00:07:18,600 --> 00:07:21,560 Speaker 1: outside economists or Prime Minister Abbe could have expected him 127 00:07:21,600 --> 00:07:23,760 Speaker 1: to do on inflation, and I think he'd continue to 128 00:07:23,760 --> 00:07:27,280 Speaker 1: do it. All right, that's two down. Let's go to 129 00:07:27,440 --> 00:07:30,600 Speaker 1: where you are right now, London. Bank of England. We 130 00:07:30,680 --> 00:07:34,520 Speaker 1: have Mark Karney. I don't think he's even British. You 131 00:07:34,560 --> 00:07:38,680 Speaker 1: didn't overlap with him directly in your service, but he 132 00:07:39,000 --> 00:07:43,880 Speaker 1: has made his position clear I believe on Brexit, and 133 00:07:44,000 --> 00:07:48,080 Speaker 1: he's going to step down in what do you make 134 00:07:48,160 --> 00:07:50,720 Speaker 1: of his tenure and what do you think is going 135 00:07:50,800 --> 00:07:53,560 Speaker 1: to happen once he leaves? What kind of person will 136 00:07:53,560 --> 00:07:58,520 Speaker 1: replace him? Governor Karney is a very almost larger than 137 00:07:58,640 --> 00:08:01,560 Speaker 1: life figure in the UK right now, but also in 138 00:08:01,640 --> 00:08:05,600 Speaker 1: central banking circles UM. He has also served as head 139 00:08:05,640 --> 00:08:09,440 Speaker 1: of the FSB, the Financial Stability Board, which is the 140 00:08:09,520 --> 00:08:15,080 Speaker 1: global coordinating body on financial regulation UM and he previously 141 00:08:15,120 --> 00:08:16,640 Speaker 1: was Governor of the Bank of Canada. And they are 142 00:08:16,760 --> 00:08:19,480 Speaker 1: very very few people in history you've been governor to 143 00:08:19,880 --> 00:08:22,880 Speaker 1: central banks. But as you point out Scott. This is 144 00:08:22,920 --> 00:08:26,320 Speaker 1: all taking place in the context of the British economy 145 00:08:26,400 --> 00:08:31,440 Speaker 1: exiting the European Union, which is a pretty disruptive and 146 00:08:31,680 --> 00:08:34,200 Speaker 1: most of us believe, including Governor Garney in a speech 147 00:08:34,440 --> 00:08:38,200 Speaker 1: a week ago, pretty negative development for the UK economy. 148 00:08:38,320 --> 00:08:40,000 Speaker 1: So and there are people who get angry when he 149 00:08:40,000 --> 00:08:42,079 Speaker 1: points that out. So he's gonna have a bit of 150 00:08:42,120 --> 00:08:45,600 Speaker 1: a rocky tenure for the remaining two years of his term. 151 00:08:45,640 --> 00:08:48,640 Speaker 1: I think despite that, if he announced that he wanted 152 00:08:48,679 --> 00:08:51,480 Speaker 1: to be extended, I bet people would extend him here, 153 00:08:51,520 --> 00:08:53,640 Speaker 1: but I think it is quite unlikely he will have 154 00:08:53,679 --> 00:08:58,679 Speaker 1: served a long period. But then it's very open season. Uh. 155 00:08:58,840 --> 00:09:02,559 Speaker 1: The governor of the Bank, Amngast, seemed to alternate often 156 00:09:02,640 --> 00:09:07,120 Speaker 1: between somebody promoting somebody inside who's been senior versus somebody 157 00:09:07,120 --> 00:09:11,840 Speaker 1: who has direct relevant experience but external. It's possible they 158 00:09:11,920 --> 00:09:15,000 Speaker 1: might go either way following Karney. They could promote one 159 00:09:15,000 --> 00:09:18,240 Speaker 1: of the current deputy governors because Carney didn't come up 160 00:09:18,280 --> 00:09:20,520 Speaker 1: through the bank, or they could promote someone from the 161 00:09:20,559 --> 00:09:23,559 Speaker 1: financial sector because Garney did come from a central bank. 162 00:09:23,920 --> 00:09:26,920 Speaker 1: I think there's uncertainty there. What do you think the 163 00:09:26,960 --> 00:09:29,920 Speaker 1: effects will be on the UK economy and the approach 164 00:09:30,000 --> 00:09:33,000 Speaker 1: to Brexit. You know what would be your best guess 165 00:09:33,000 --> 00:09:36,800 Speaker 1: on that. My best guess is that the Brexit is 166 00:09:36,880 --> 00:09:40,080 Speaker 1: creating a lot of uncertainty, not just sort of about 167 00:09:40,080 --> 00:09:43,880 Speaker 1: what happens in these famous negotiations between the UK and 168 00:09:43,880 --> 00:09:47,760 Speaker 1: the European Union, but fundamentally going forward. That it means 169 00:09:47,800 --> 00:09:51,040 Speaker 1: the UK's place in the world economically and how much 170 00:09:51,040 --> 00:09:53,160 Speaker 1: investment it will get and who it will trade with 171 00:09:53,200 --> 00:09:56,880 Speaker 1: are fundamentally more uncertain for a long time. And so 172 00:09:57,520 --> 00:09:59,600 Speaker 1: in the next couple of years, and whoever succeeds Governor 173 00:09:59,640 --> 00:10:02,440 Speaker 1: Karney after that, they're gonna have to cope with the 174 00:10:02,520 --> 00:10:04,920 Speaker 1: UK economy. It's more like the nineteen seventies and the 175 00:10:05,000 --> 00:10:08,480 Speaker 1: nineteen nineties, meaning a lot more fluctuation in exchange rate, 176 00:10:08,520 --> 00:10:10,760 Speaker 1: which we're already seeing, a lot more up and down 177 00:10:10,760 --> 00:10:14,040 Speaker 1: in the inflation rate, which again we're already seeing probably 178 00:10:14,040 --> 00:10:17,160 Speaker 1: a slower average growth rate going forward, which Governor Carney 179 00:10:17,200 --> 00:10:19,080 Speaker 1: spoke about recently at the I m F and which 180 00:10:19,080 --> 00:10:22,200 Speaker 1: I agree. It's gonna be a time of tough choices 181 00:10:22,559 --> 00:10:26,520 Speaker 1: and the fear is just like when Carter appointed g 182 00:10:26,640 --> 00:10:30,319 Speaker 1: William Miller or Nixon appointed Art Burns in the seventies 183 00:10:30,800 --> 00:10:34,679 Speaker 1: that the government will try to pick somebody who is 184 00:10:34,720 --> 00:10:37,760 Speaker 1: more to their taste and less about standing up to 185 00:10:37,800 --> 00:10:42,199 Speaker 1: the tough things. We'll see what happens, Prime Minister Jeremy Colbyn. 186 00:10:42,920 --> 00:10:47,760 Speaker 1: One seen inconceivable, now seen entirely possible. Is that the 187 00:10:47,840 --> 00:10:51,480 Speaker 1: fact to X in this discussion. Yeah, thank you for 188 00:10:51,559 --> 00:10:54,640 Speaker 1: making me spell it out, Daniel Um. I mean, I 189 00:10:54,720 --> 00:10:59,600 Speaker 1: don't have terribly much partisan preference for the current government 190 00:10:59,640 --> 00:11:03,320 Speaker 1: of Visa May versus the potential government of Jeremy Corbyn 191 00:11:03,480 --> 00:11:07,560 Speaker 1: or their associated versions of their parties. But I do think, 192 00:11:07,679 --> 00:11:11,560 Speaker 1: given Um leader of the Opposition, Corbyn's repeated statements of 193 00:11:11,679 --> 00:11:15,520 Speaker 1: his beliefs about the economy, that they could potentially end 194 00:11:15,559 --> 00:11:19,760 Speaker 1: up with someone rather strange if he's picking who's the 195 00:11:19,800 --> 00:11:21,920 Speaker 1: next governor of the Bank of England. There are good 196 00:11:22,000 --> 00:11:26,200 Speaker 1: economists who support the Labor Government and the Labor Party 197 00:11:26,200 --> 00:11:29,120 Speaker 1: in the past, and and good policymakers. I'm not saying 198 00:11:29,120 --> 00:11:32,440 Speaker 1: it's impossible, but as was seen in some of his 199 00:11:32,520 --> 00:11:34,880 Speaker 1: remarks on the economy in general having to do with 200 00:11:35,720 --> 00:11:38,280 Speaker 1: what he calls People's qui, which sometimes sort of cites 201 00:11:38,400 --> 00:11:42,680 Speaker 1: me or renationalizing certain industries these are things. They're not 202 00:11:42,720 --> 00:11:46,960 Speaker 1: necessarily bad ideas, but they're indicative of a worldview that's 203 00:11:47,000 --> 00:11:51,720 Speaker 1: probably very interventionist and probably very big change from the 204 00:11:51,720 --> 00:11:54,360 Speaker 1: current way the Bank of England operates. Next up on 205 00:11:54,400 --> 00:11:59,680 Speaker 1: the ticket, European Central Bank Mario Drags term ends twenty 206 00:11:59,760 --> 00:12:05,160 Speaker 1: nine contain he, unlike the others, is term limited and 207 00:12:05,200 --> 00:12:08,680 Speaker 1: this is also subject to the vagaries of EU politics, 208 00:12:08,800 --> 00:12:11,240 Speaker 1: the bargaining. What do you think is going to happen there? 209 00:12:11,880 --> 00:12:13,880 Speaker 1: I think that's exactly right now, you know, I mean, 210 00:12:13,880 --> 00:12:17,000 Speaker 1: we people have to recognize not only is it certain 211 00:12:17,040 --> 00:12:19,280 Speaker 1: that Drag does not continue as President of the European 212 00:12:19,320 --> 00:12:23,080 Speaker 1: Central Bank, but that the chances of a big change 213 00:12:23,360 --> 00:12:27,280 Speaker 1: are are quite large. This is partly because in some 214 00:12:27,320 --> 00:12:30,240 Speaker 1: sense Drag has arguably had the most difficult job of 215 00:12:30,320 --> 00:12:33,640 Speaker 1: any of the central bank governors, because what you referred 216 00:12:33,640 --> 00:12:36,480 Speaker 1: to as the vagaries of the European Union. You have 217 00:12:36,600 --> 00:12:39,600 Speaker 1: a very very large committee twenty seven excuse me, not 218 00:12:39,679 --> 00:12:42,840 Speaker 1: twenty seven members but UM seventeen euro members plus six 219 00:12:42,880 --> 00:12:46,000 Speaker 1: members of the board UM running the e c B, 220 00:12:46,160 --> 00:12:48,120 Speaker 1: and he has to marshal that. And there are some 221 00:12:48,440 --> 00:12:54,160 Speaker 1: very very deep ideological divides and national divides in Europe. 222 00:12:54,240 --> 00:12:56,720 Speaker 1: Over how the e c B should respond to the 223 00:12:56,960 --> 00:13:00,760 Speaker 1: persistent unemployment in Southern Europe, how they should respond if 224 00:13:00,760 --> 00:13:04,520 Speaker 1: there's another crisis in Portugal and Greece. How seriously should 225 00:13:04,520 --> 00:13:07,000 Speaker 1: they take the target of two percent inflation as a 226 00:13:07,040 --> 00:13:11,320 Speaker 1: cap rather than as a long term average. So in 227 00:13:11,320 --> 00:13:14,080 Speaker 1: a sense, this is the most as without the respect 228 00:13:14,120 --> 00:13:15,920 Speaker 1: of my friends at the bank hang and this is 229 00:13:15,960 --> 00:13:18,920 Speaker 1: the most consequential appointment because it could have the biggest 230 00:13:18,920 --> 00:13:24,000 Speaker 1: shift the German government. The German people have in a 231 00:13:24,080 --> 00:13:27,920 Speaker 1: sense the most voting power because they're the biggest economy 232 00:13:27,960 --> 00:13:32,040 Speaker 1: and the most influential in Europe, and they have to 233 00:13:32,280 --> 00:13:36,559 Speaker 1: date uh not insisted that the German be the head 234 00:13:36,679 --> 00:13:39,160 Speaker 1: of the e c B, even though the e c B, 235 00:13:39,400 --> 00:13:43,160 Speaker 1: or perhaps because the ECB is in Frankfurt, and because 236 00:13:43,200 --> 00:13:45,880 Speaker 1: it's modeled on their former central bank or their current 237 00:13:45,880 --> 00:13:48,440 Speaker 1: center bank, but they no longer running things central bank 238 00:13:48,520 --> 00:13:52,920 Speaker 1: the Bundesbank. Anyway, long story short, the real question is 239 00:13:52,920 --> 00:13:55,520 Speaker 1: do they appoint the current head of the Bundesbank yans 240 00:13:55,600 --> 00:13:58,760 Speaker 1: Viedman to succeed dragging and that would be to make 241 00:13:58,800 --> 00:14:03,000 Speaker 1: an American analogy, that would be taking someone more extreme 242 00:14:03,360 --> 00:14:09,680 Speaker 1: on rules and anti inflation and supposedly hawkish like John Taylor, 243 00:14:09,760 --> 00:14:13,720 Speaker 1: but more extreme than that to replace Jennet Yellen. And 244 00:14:13,760 --> 00:14:17,280 Speaker 1: that's a very big swing with potentially very big consequences, 245 00:14:17,320 --> 00:14:21,480 Speaker 1: And does the German election we've just had playing to 246 00:14:21,560 --> 00:14:24,960 Speaker 1: this at all. In my view, it makes it slightly 247 00:14:25,040 --> 00:14:29,200 Speaker 1: more likely that you get um. I think Chancellor Merkel 248 00:14:29,800 --> 00:14:33,640 Speaker 1: is a consummate politician, as we've seen, despite the election results, 249 00:14:33,680 --> 00:14:35,360 Speaker 1: she's very much in the sense of a lot of 250 00:14:35,360 --> 00:14:39,080 Speaker 1: other top politicians that she everything is a bargain. I mean, 251 00:14:39,080 --> 00:14:41,120 Speaker 1: there are certain moral lines she won't cross, like with 252 00:14:41,160 --> 00:14:44,520 Speaker 1: Russia immigrants, but beyond that, everything is a bargain. You 253 00:14:44,560 --> 00:14:46,880 Speaker 1: can trade off stuff. So she's not going to come 254 00:14:46,920 --> 00:14:50,360 Speaker 1: out early and say I insisted the Videman or a 255 00:14:50,440 --> 00:14:53,640 Speaker 1: German be the b bcb president. What she's gonna do 256 00:14:53,800 --> 00:14:56,800 Speaker 1: is wait until late in the game and when Druggist 257 00:14:56,840 --> 00:14:59,200 Speaker 1: term is nearly up and see what she can get 258 00:14:59,240 --> 00:15:01,160 Speaker 1: for it. And if somebody makes her an offer, well 259 00:15:01,160 --> 00:15:05,680 Speaker 1: we want the bank the France president instead, and will say, well, 260 00:15:05,720 --> 00:15:07,960 Speaker 1: what are you gonna give me? And we'll see. But 261 00:15:08,160 --> 00:15:10,920 Speaker 1: the ultimately the election I think makes it more likely 262 00:15:11,000 --> 00:15:13,360 Speaker 1: that she pushes a bit at the end for Viteman, 263 00:15:13,880 --> 00:15:17,880 Speaker 1: because then she's giving something to the so called liberals, 264 00:15:17,920 --> 00:15:20,520 Speaker 1: the Free Democratic Party and the right wing of her 265 00:15:20,560 --> 00:15:24,000 Speaker 1: party in Germany. She's pushing a German forward who will 266 00:15:24,040 --> 00:15:27,720 Speaker 1: be tougher in theory on the Greeks and the Portuguese 267 00:15:27,840 --> 00:15:31,640 Speaker 1: and the Spanish and especially the Italians. And so I 268 00:15:31,640 --> 00:15:35,320 Speaker 1: think she mildly favors that, but it's more that she 269 00:15:35,400 --> 00:15:39,440 Speaker 1: will earn points with her own domestic constituencies without having 270 00:15:39,480 --> 00:15:44,240 Speaker 1: giving anything up by doing that. One last question, Adam, 271 00:15:44,280 --> 00:15:46,920 Speaker 1: going back to where we started, how much power do 272 00:15:47,000 --> 00:15:50,360 Speaker 1: these central bankers really have or are they hostage to 273 00:15:50,560 --> 00:15:55,640 Speaker 1: global economic forces that are really bigger than them? I think, 274 00:15:55,680 --> 00:15:58,160 Speaker 1: though it's a bit dicey Scott, I kind of make 275 00:15:58,160 --> 00:16:02,400 Speaker 1: an analogy to a general. You know, a general. If 276 00:16:02,440 --> 00:16:05,840 Speaker 1: you're in charge of a big army, big military, and 277 00:16:05,880 --> 00:16:09,080 Speaker 1: it's well equipped and your enemy isn't anywhere near as big, 278 00:16:09,160 --> 00:16:12,440 Speaker 1: you will usually win. And some generals will win more 279 00:16:12,520 --> 00:16:15,680 Speaker 1: or less quickly, with more or less losses. And there's 280 00:16:15,720 --> 00:16:18,720 Speaker 1: been this sense, particularly in the late nineties early two thousands, 281 00:16:18,960 --> 00:16:21,560 Speaker 1: with people like Greenspan at the FED or Burvin King 282 00:16:21,600 --> 00:16:23,840 Speaker 1: at the Bank of England that central markers could just 283 00:16:23,960 --> 00:16:27,880 Speaker 1: make things happen, but it's really they were up against 284 00:16:28,200 --> 00:16:31,160 Speaker 1: much smaller armies. I don't mean literally in size, but 285 00:16:31,240 --> 00:16:33,520 Speaker 1: the challenges that were up against in part through luck, 286 00:16:33,800 --> 00:16:36,600 Speaker 1: we're just not as great. So in the end, you 287 00:16:36,640 --> 00:16:38,920 Speaker 1: can't fight the FED. If the Fed wants something to 288 00:16:38,960 --> 00:16:42,080 Speaker 1: happen over time, they generally will be able to make 289 00:16:42,120 --> 00:16:46,840 Speaker 1: it happen. But there's a lot more uncertainty about which 290 00:16:46,920 --> 00:16:50,600 Speaker 1: tools work, how dependable they are, how much you have 291 00:16:50,720 --> 00:16:53,920 Speaker 1: to do then there used to be. And also like 292 00:16:54,000 --> 00:16:58,240 Speaker 1: with generals after the Vietnam, more with central bankers after 293 00:16:58,400 --> 00:17:01,920 Speaker 1: the global financial crisis, there's a lot less trust in them. Uh, 294 00:17:01,960 --> 00:17:05,879 Speaker 1: they're experts, their technocrats. They mostly want to do the 295 00:17:05,960 --> 00:17:09,600 Speaker 1: right thing for the right reasons. But understandably the public 296 00:17:09,680 --> 00:17:12,200 Speaker 1: is not as willing to just turn over the fate 297 00:17:12,240 --> 00:17:15,280 Speaker 1: of their in this case, economy to them without check. 298 00:17:16,240 --> 00:17:20,800 Speaker 1: And that's part of why, particularly the Bank of Japan 299 00:17:21,040 --> 00:17:23,040 Speaker 1: or the Bank of England is going to have an 300 00:17:23,080 --> 00:17:27,320 Speaker 1: easier ride because their publics, for whatever reason, seem to 301 00:17:27,359 --> 00:17:31,720 Speaker 1: have more faith despite their respective crises in the central banks, 302 00:17:31,720 --> 00:17:35,120 Speaker 1: whereas in the US environment the Federal Reservice very much 303 00:17:35,160 --> 00:17:40,280 Speaker 1: under suspicion in Congress in some parts of the country politically, 304 00:17:40,480 --> 00:17:44,160 Speaker 1: and I'm not saying that's justified. I'm saying it's understandable 305 00:17:44,320 --> 00:17:47,760 Speaker 1: and that's the reality. So like generals after Vietnam, central 306 00:17:47,760 --> 00:17:49,640 Speaker 1: bankers after the crisis are going to have to try 307 00:17:49,640 --> 00:17:53,159 Speaker 1: to bring people on board and not be too aggressive 308 00:17:53,320 --> 00:17:56,800 Speaker 1: because they may lose the support they need. Adam, thank 309 00:17:56,840 --> 00:17:58,359 Speaker 1: you so much for joining us today. That's been a 310 00:17:58,400 --> 00:18:02,159 Speaker 1: really fascinating conversation. And in the meantime, Will White for 311 00:18:02,200 --> 00:18:06,520 Speaker 1: the ken Burns documentary on the Central Bank is with 312 00:18:06,640 --> 00:18:09,879 Speaker 1: an audience one tenth of the ken Burns audience sounds great. 313 00:18:12,600 --> 00:18:15,040 Speaker 1: Benchmark will be back next week and until then, you 314 00:18:15,040 --> 00:18:18,080 Speaker 1: can find us on the Bloomberg terminal, Bloomberg dot Com, 315 00:18:18,080 --> 00:18:21,560 Speaker 1: our Bloomberg app, as well as on Apple Podcasts, pocket Casts, 316 00:18:21,600 --> 00:18:24,240 Speaker 1: and Stitcher. While you're there, take a minute to rate 317 00:18:24,280 --> 00:18:26,719 Speaker 1: and review the show so more listeners can find us, 318 00:18:27,119 --> 00:18:29,200 Speaker 1: and please let us know what you've thought of the show. 319 00:18:29,320 --> 00:18:32,520 Speaker 1: You can follow me on Twitter at at Scott Landman 320 00:18:33,000 --> 00:18:37,360 Speaker 1: Dan you are at Moss Underscore Echo, and Adam our 321 00:18:37,400 --> 00:18:40,920 Speaker 1: guest is at at Adam Posen. Benchmark is produced by 322 00:18:40,920 --> 00:18:43,760 Speaker 1: Sarah Patterson, thanks for listening, See you next time.