1 00:00:09,440 --> 00:00:13,680 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:13,760 --> 00:00:17,479 Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. So, Tracy, I 3 00:00:17,480 --> 00:00:19,919 Speaker 1: think we've been talking about it a lot on recent episodes, 4 00:00:19,960 --> 00:00:23,320 Speaker 1: but we've had most of our episodes this year, they've 5 00:00:23,400 --> 00:00:26,799 Speaker 1: kind of been gloomy or negative, just sort of we 6 00:00:26,880 --> 00:00:29,280 Speaker 1: started the year like on a real uh, just sort 7 00:00:29,280 --> 00:00:32,040 Speaker 1: of a down vibe. Wouldn't you say, maybe we're just 8 00:00:32,159 --> 00:00:35,600 Speaker 1: capturing the zeitgeist. I don't know. Maybe, yeah, it could 9 00:00:35,600 --> 00:00:37,880 Speaker 1: just be the sort of overall mood. But I think 10 00:00:37,920 --> 00:00:41,400 Speaker 1: today is going to be a break for that. I 11 00:00:41,440 --> 00:00:46,720 Speaker 1: think not only is today's episode hopefully not going to 12 00:00:46,800 --> 00:00:50,280 Speaker 1: be depressing, but actually might be sort of very positive 13 00:00:50,520 --> 00:00:54,240 Speaker 1: and uplifting and maybe even kind of heartwarming. Joe, let 14 00:00:54,240 --> 00:00:57,320 Speaker 1: me tell you, I could use both, um, some heartwarming 15 00:00:57,440 --> 00:01:00,840 Speaker 1: and some cheering up. So what are we talking about? 16 00:01:01,400 --> 00:01:04,760 Speaker 1: So we're going to be talking to a fund manager, 17 00:01:05,160 --> 00:01:08,399 Speaker 1: which I guess is not often the uh you think 18 00:01:08,400 --> 00:01:14,400 Speaker 1: of when heartwarming or uplifting. But he's a really interesting writer, 19 00:01:14,560 --> 00:01:18,440 Speaker 1: a really interesting thinker, and he's a writer and one 20 00:01:18,440 --> 00:01:22,200 Speaker 1: of the things that he does is he um teaches 21 00:01:22,280 --> 00:01:26,720 Speaker 1: his kids about finance, and teaches his kids about banking 22 00:01:26,800 --> 00:01:30,560 Speaker 1: and interest rates and sort of complicated questions. Um, and 23 00:01:30,600 --> 00:01:33,480 Speaker 1: he writes about these from time to time, these lessons 24 00:01:33,520 --> 00:01:37,039 Speaker 1: that he teaches his his kids. I think anything with 25 00:01:37,120 --> 00:01:39,959 Speaker 1: kids is sort of you know, heartwarming. Well, I was 26 00:01:39,959 --> 00:01:41,520 Speaker 1: gonna say, does that mean we're going to get a 27 00:01:41,560 --> 00:01:44,560 Speaker 1: bunch of really cute stories about how kids spend their 28 00:01:44,600 --> 00:01:46,800 Speaker 1: allowance and that sort of thing, because I'd be up 29 00:01:46,840 --> 00:01:49,320 Speaker 1: for that. I think that's basically going to be it. 30 00:01:49,400 --> 00:01:53,240 Speaker 1: We're going to have an episode of cute stories about 31 00:01:53,320 --> 00:01:57,600 Speaker 1: kids spending their allowance money more or less, but it's 32 00:01:57,600 --> 00:02:00,360 Speaker 1: going to tell us something important about finance and money 33 00:02:00,360 --> 00:02:03,440 Speaker 1: as well. Right, yeah, exactly. So. I think like most parents, 34 00:02:03,920 --> 00:02:05,639 Speaker 1: you know, a lot of or a lot of parents 35 00:02:05,720 --> 00:02:08,440 Speaker 1: might give their kids some sort of allowance, maybe a 36 00:02:08,440 --> 00:02:10,760 Speaker 1: few dollars a week for taking out the trash or 37 00:02:10,800 --> 00:02:13,520 Speaker 1: making their bed or anything. But of course, when a 38 00:02:13,560 --> 00:02:17,000 Speaker 1: fund manager does it, especially one who's very into the 39 00:02:17,000 --> 00:02:20,800 Speaker 1: theoretical constructs of the financial system, uh, they make it 40 00:02:20,840 --> 00:02:23,720 Speaker 1: a little more interesting than just you know, a few 41 00:02:23,720 --> 00:02:27,239 Speaker 1: dollars a week. They actually try to teach something profound 42 00:02:27,280 --> 00:02:30,320 Speaker 1: and I just teach something, but potentially learn something through 43 00:02:30,360 --> 00:02:33,760 Speaker 1: the process about how people think about money. Alright, so 44 00:02:34,040 --> 00:02:37,080 Speaker 1: don't keep us in suspense. Who is it? All right? Today, 45 00:02:37,160 --> 00:02:40,080 Speaker 1: we're going to be talking to Toby Nangle. He is 46 00:02:40,120 --> 00:02:43,600 Speaker 1: the global co head of asset Allocation at Columbia thread 47 00:02:43,680 --> 00:02:47,359 Speaker 1: Needle Asset Management, and we have him on the line, 48 00:02:47,480 --> 00:02:59,600 Speaker 1: so let's bring him in. Toby, thank you very much 49 00:02:59,680 --> 00:03:02,560 Speaker 1: for coming in today. Oh, thanks very much for having me, 50 00:03:02,639 --> 00:03:05,920 Speaker 1: Joe and Dracy. It's great to be here. So first 51 00:03:05,919 --> 00:03:08,760 Speaker 1: of all, who are you? Who are you? How many 52 00:03:08,880 --> 00:03:11,600 Speaker 1: kids do you have? What do you do and how 53 00:03:11,600 --> 00:03:14,880 Speaker 1: many kids do you have? And why do you why 54 00:03:14,919 --> 00:03:19,120 Speaker 1: do you like to use spending money and allowances as 55 00:03:19,160 --> 00:03:23,280 Speaker 1: a way of sort of exploring the financial system. Sure, okay, 56 00:03:23,400 --> 00:03:25,919 Speaker 1: I've got three kids who are four, seven, and nine 57 00:03:25,960 --> 00:03:29,760 Speaker 1: years old, and uh, that's a lot of kids. And 58 00:03:29,800 --> 00:03:32,120 Speaker 1: I'm a fund manager, so I part of my day 59 00:03:32,200 --> 00:03:35,160 Speaker 1: job is to think about how money works and and 60 00:03:34,960 --> 00:03:37,280 Speaker 1: and that sort of thing. And actually, to be honest, 61 00:03:37,720 --> 00:03:39,800 Speaker 1: I spent probably a lot of my career, as do 62 00:03:39,920 --> 00:03:42,640 Speaker 1: most fund managers, not really thinking very much about money 63 00:03:42,640 --> 00:03:46,080 Speaker 1: and just sort of taking it for granted. But probably 64 00:03:46,120 --> 00:03:48,520 Speaker 1: over the past ten years I've been thinking more about 65 00:03:48,600 --> 00:03:52,240 Speaker 1: money and asking lots of stupid questions, and suddenly I've 66 00:03:52,240 --> 00:03:54,280 Speaker 1: got this captive audience to ask you the questions to 67 00:03:54,440 --> 00:03:57,040 Speaker 1: in four of my kids. So why wouldn't I use them? 68 00:03:57,360 --> 00:03:59,880 Speaker 1: I love that. Now, as you say, most fun manager 69 00:04:00,400 --> 00:04:04,240 Speaker 1: probably don't spend much time thinking about what money is 70 00:04:04,360 --> 00:04:06,680 Speaker 1: or how the financial system really works. I talked we 71 00:04:06,800 --> 00:04:09,640 Speaker 1: talked to fund managers all the time, and they talk 72 00:04:09,720 --> 00:04:14,240 Speaker 1: about this of that company or the shaveta, you know, commodity. 73 00:04:14,280 --> 00:04:16,800 Speaker 1: But before we even get to the you know, the 74 00:04:16,880 --> 00:04:18,920 Speaker 1: lessons you teach your kids, why do you think this 75 00:04:19,040 --> 00:04:24,160 Speaker 1: is an interesting avenue to explore? Um? Well, I think 76 00:04:24,200 --> 00:04:27,719 Speaker 1: that in the era of heterodox monetary policy, then you 77 00:04:27,760 --> 00:04:30,440 Speaker 1: can have all sorts of things which sounds quite scary 78 00:04:31,400 --> 00:04:34,880 Speaker 1: or weird or wacky, which aren't actually really scary or 79 00:04:34,880 --> 00:04:36,800 Speaker 1: wheel and wacky once you think about money a bit 80 00:04:37,040 --> 00:04:39,880 Speaker 1: so because there can be something like helicopter money coming 81 00:04:40,000 --> 00:04:42,720 Speaker 1: or when quantitive easing was first was first sort of 82 00:04:42,880 --> 00:04:45,000 Speaker 1: there are a lot of like broken notes out there 83 00:04:45,040 --> 00:04:48,240 Speaker 1: about how mr levels of hyperinflation we're going to come 84 00:04:48,240 --> 00:04:51,080 Speaker 1: back because it was money printing, etcetera, etcetera, And you 85 00:04:51,120 --> 00:04:53,080 Speaker 1: have to kind of start to think think about can 86 00:04:53,160 --> 00:04:56,080 Speaker 1: this inter is this good advice or can it interfere 87 00:04:56,120 --> 00:04:59,680 Speaker 1: with good decisions? So I think it was become incumbent 88 00:04:59,760 --> 00:05:01,600 Speaker 1: upon everyone to think a little bit more about it. 89 00:05:01,920 --> 00:05:04,080 Speaker 1: And there's this Chinese proverb which a friend of mine 90 00:05:04,960 --> 00:05:07,280 Speaker 1: let me in on, which is a fish is the 91 00:05:07,360 --> 00:05:09,320 Speaker 1: last and no water. And I think that's a lot 92 00:05:09,360 --> 00:05:11,880 Speaker 1: of that's pretty true in the case of finance, folks 93 00:05:11,960 --> 00:05:14,200 Speaker 1: and money. We're surrounded by what we think of it 94 00:05:14,240 --> 00:05:16,000 Speaker 1: as something which is solid, but it's not. It's a 95 00:05:16,040 --> 00:05:18,920 Speaker 1: social construct. It's something that we invent in different ways 96 00:05:18,960 --> 00:05:21,760 Speaker 1: to do different things with. So Toby on that note, 97 00:05:21,839 --> 00:05:25,000 Speaker 1: when you have um your four year old come up 98 00:05:25,040 --> 00:05:28,800 Speaker 1: to you and ask you what is money? What exactly 99 00:05:28,839 --> 00:05:30,839 Speaker 1: do you say to them? I hope you don't use 100 00:05:30,880 --> 00:05:35,159 Speaker 1: words like heterodox right now? Well, to be fair, the 101 00:05:35,160 --> 00:05:37,040 Speaker 1: four year old keeps out of it for now because 102 00:05:37,040 --> 00:05:40,720 Speaker 1: I've started when they're five, So at five years old, 103 00:05:40,760 --> 00:05:43,360 Speaker 1: they get a they get into the issue about money. Now. 104 00:05:43,360 --> 00:05:44,880 Speaker 1: A lot of it was me asking them what do 105 00:05:44,920 --> 00:05:46,840 Speaker 1: you think money is? And you know, how does it work? What, 106 00:05:47,400 --> 00:05:49,760 Speaker 1: and then kind of doing that sort of annoying thing 107 00:05:49,800 --> 00:05:52,400 Speaker 1: that kids do, uh, and which is to ask a 108 00:05:52,480 --> 00:05:54,680 Speaker 1: question about the answer, and just keep on going and 109 00:05:54,720 --> 00:05:56,719 Speaker 1: keeping on going and seeing if it got to the 110 00:05:56,720 --> 00:05:58,920 Speaker 1: same sort of place that I went to, and by 111 00:05:58,920 --> 00:06:00,960 Speaker 1: thinking about these thing more of from off it it does. 112 00:06:01,320 --> 00:06:05,440 Speaker 1: These are pretty simple concepts when you once you sort 113 00:06:05,440 --> 00:06:08,159 Speaker 1: of remember to forget all that you thought you knew. 114 00:06:08,920 --> 00:06:11,120 Speaker 1: Uh So, you know, I think a lot of the 115 00:06:11,160 --> 00:06:14,120 Speaker 1: time we think of money as as something like gold. 116 00:06:14,240 --> 00:06:16,920 Speaker 1: You know, it's it's this this quantity of this physical thing. 117 00:06:16,960 --> 00:06:19,080 Speaker 1: There's only a certain amount ofment. And the way in 118 00:06:19,080 --> 00:06:23,840 Speaker 1: which we talk about budgets as adults, household budgets, that's 119 00:06:23,839 --> 00:06:26,240 Speaker 1: based on the idea of a kind of a metalist 120 00:06:26,320 --> 00:06:28,400 Speaker 1: view of worlds. So when we get down to five 121 00:06:28,480 --> 00:06:30,520 Speaker 1: year old asking them what do you think money is? 122 00:06:30,720 --> 00:06:33,080 Speaker 1: They say, right, well, it's it's a coin, you know, 123 00:06:33,200 --> 00:06:35,919 Speaker 1: It's it's pretty straightforward. It's a coin. What do you 124 00:06:35,920 --> 00:06:38,000 Speaker 1: do with it? Why? I exchange it for other things? 125 00:06:38,360 --> 00:06:40,960 Speaker 1: So how about what about money in a bank? What's 126 00:06:41,000 --> 00:06:42,800 Speaker 1: a bank? And so we can then start to have 127 00:06:42,839 --> 00:06:44,640 Speaker 1: a think about those sort of the questions. All right, 128 00:06:44,720 --> 00:06:49,080 Speaker 1: so let's dive into them. This issue we're talking about 129 00:06:49,200 --> 00:06:52,719 Speaker 1: the Bank of Toby and Angle, the depositors are your 130 00:06:52,760 --> 00:06:55,680 Speaker 1: seven and your nine year old. Something that you've written 131 00:06:55,720 --> 00:06:58,920 Speaker 1: about is this fact that probably almost nobody knows, which 132 00:06:58,960 --> 00:07:01,640 Speaker 1: is that we really use two kinds of money throughout 133 00:07:01,640 --> 00:07:06,520 Speaker 1: our lives. There's inside money and outside money. What do 134 00:07:06,680 --> 00:07:09,680 Speaker 1: these two different terms mean? And how do you convey 135 00:07:09,760 --> 00:07:13,000 Speaker 1: this to your kids? Okay, right, let's let's rewind a 136 00:07:13,000 --> 00:07:15,680 Speaker 1: second and then say, well, when I when I started, sorry, 137 00:07:15,680 --> 00:07:18,760 Speaker 1: when my kids became five, they started getting pocket money, 138 00:07:18,760 --> 00:07:20,800 Speaker 1: they didn't get it. But when they're under five, when 139 00:07:20,800 --> 00:07:23,960 Speaker 1: the five started getting pocket money, um, and they got 140 00:07:23,960 --> 00:07:26,200 Speaker 1: pocket money in the form of outside money, that is 141 00:07:26,200 --> 00:07:28,800 Speaker 1: to say, they've got coins, so a bunch of coins 142 00:07:28,840 --> 00:07:31,520 Speaker 1: every week. And what I found with after a while 143 00:07:32,040 --> 00:07:34,440 Speaker 1: that they just spent these coins every week, which you'd say, 144 00:07:34,440 --> 00:07:36,560 Speaker 1: fair enough, it's their pocket money, but to the point 145 00:07:36,600 --> 00:07:39,760 Speaker 1: whereby they felt almost annoyed that they still had some 146 00:07:39,840 --> 00:07:41,560 Speaker 1: money left that they hadn't spent, so they had to 147 00:07:41,600 --> 00:07:44,120 Speaker 1: find something to spend it on. I thought, this is 148 00:07:44,120 --> 00:07:47,520 Speaker 1: not the lesson really that I wanted to in part 149 00:07:47,640 --> 00:07:50,600 Speaker 1: in giving people, you know, giving giving my kids pocket money, 150 00:07:50,640 --> 00:07:53,240 Speaker 1: I wanted them to think about saving and you know, 151 00:07:53,360 --> 00:07:55,600 Speaker 1: delay gratification. This kind of stuff, but I haven't really 152 00:07:55,600 --> 00:07:58,240 Speaker 1: given them the instruments of doing so. And so, thinking 153 00:07:58,240 --> 00:08:00,880 Speaker 1: back into our adult world, you know that one of 154 00:08:00,880 --> 00:08:04,480 Speaker 1: the reasons why people do say is because they're they're 155 00:08:04,480 --> 00:08:07,000 Speaker 1: saving up for something or other, and they're often using 156 00:08:07,040 --> 00:08:09,960 Speaker 1: interest rates. And so I started thinking about, well, what 157 00:08:09,960 --> 00:08:12,200 Speaker 1: what we might need to do is to have inside 158 00:08:12,240 --> 00:08:14,520 Speaker 1: money as well as outside money, so not just coins, 159 00:08:14,600 --> 00:08:17,680 Speaker 1: but also a bank. So we started up the an 160 00:08:17,720 --> 00:08:22,720 Speaker 1: Angle Household Bank, which was a ledger, which and which 161 00:08:22,760 --> 00:08:25,840 Speaker 1: attacks an interest rate every week. And you know, they're 162 00:08:25,880 --> 00:08:28,920 Speaker 1: be a whole bunch of like behavioral psychology experiments over 163 00:08:28,920 --> 00:08:32,840 Speaker 1: the decades, probably most famous with the Stanford Marshmallow experiment 164 00:08:32,920 --> 00:08:34,560 Speaker 1: was thinking, like, you do you want to marshmalloon? Now 165 00:08:34,600 --> 00:08:36,280 Speaker 1: do you want two in fifteen minutes if you wait 166 00:08:36,320 --> 00:08:40,040 Speaker 1: for it? And these these all reveal really high internal 167 00:08:40,120 --> 00:08:42,800 Speaker 1: rates of return that kids have. They have massive amounts 168 00:08:42,800 --> 00:08:45,079 Speaker 1: of interest rates that they are required to to kind 169 00:08:45,080 --> 00:08:47,280 Speaker 1: of delay consumption. So I get I give them ten 170 00:08:47,320 --> 00:08:51,199 Speaker 1: percent a week on their balances. Uh, And I thought, well, 171 00:08:51,200 --> 00:08:53,240 Speaker 1: we'll set down into train and see what happens and 172 00:08:53,280 --> 00:08:55,360 Speaker 1: see whether they want to spend it on suites or 173 00:08:55,400 --> 00:08:57,560 Speaker 1: whether they want to put it on the bank and 174 00:08:57,640 --> 00:09:01,120 Speaker 1: get some some compound interest with the proviser. They can't 175 00:09:01,160 --> 00:09:04,040 Speaker 1: spend their compound interests on suites, and it seemed to 176 00:09:04,040 --> 00:09:08,160 Speaker 1: work quite well. So what exactly is the rate of 177 00:09:08,280 --> 00:09:12,280 Speaker 1: saving versus they're spending? Um? Because, as you point out, 178 00:09:12,320 --> 00:09:15,600 Speaker 1: like when you think of children, you don't necessarily think 179 00:09:15,679 --> 00:09:20,280 Speaker 1: of comfort with delayed gratification. UM, So I'm curious to 180 00:09:20,360 --> 00:09:24,280 Speaker 1: learn more of exactly how much they're spending versus saving. Yeah. 181 00:09:24,360 --> 00:09:26,280 Speaker 1: I mean, my seven year old and nine year old 182 00:09:26,320 --> 00:09:28,920 Speaker 1: have got really quite different savings habits, so that I 183 00:09:28,960 --> 00:09:31,640 Speaker 1: was quite pleased for giving them this eyewateringly high level 184 00:09:31,679 --> 00:09:34,000 Speaker 1: of interest did encourage them to save for a starter 185 00:09:34,800 --> 00:09:36,720 Speaker 1: h and also kind of you know, I could talk 186 00:09:36,720 --> 00:09:41,080 Speaker 1: to them about payday lending having those kind of rates 187 00:09:41,120 --> 00:09:43,559 Speaker 1: in reverse if you like. So they're probably a bit 188 00:09:43,559 --> 00:09:45,880 Speaker 1: frightened of that in terms of borrowing. Have you ever 189 00:09:45,960 --> 00:09:49,640 Speaker 1: experimented with, um, changing the interest rate that you're paying 190 00:09:49,720 --> 00:09:54,000 Speaker 1: to see their reaction? Yeah? Yeah, so my my my 191 00:09:54,080 --> 00:09:56,720 Speaker 1: seven year old got really into saving and just saved 192 00:09:56,720 --> 00:09:59,920 Speaker 1: and saved and saved, didn't spend a single penny on anything. 193 00:10:00,520 --> 00:10:03,400 Speaker 1: Uh and uh, and I kind of you know, of 194 00:10:03,400 --> 00:10:05,280 Speaker 1: course I did the math and saw that he was 195 00:10:05,440 --> 00:10:07,840 Speaker 1: within about a year of owning my tire net worth, 196 00:10:07,880 --> 00:10:11,319 Speaker 1: you know, with the com power combined interests and so 197 00:10:11,320 --> 00:10:13,080 Speaker 1: so I kind of thought it was about the same 198 00:10:13,200 --> 00:10:16,280 Speaker 1: time that the Swiss National Bank went into negative interest rates. 199 00:10:16,640 --> 00:10:20,120 Speaker 1: So I discussed this move of movement in negative interest 200 00:10:20,200 --> 00:10:22,480 Speaker 1: rates on the on the of the Swiss National Bank, 201 00:10:22,559 --> 00:10:25,040 Speaker 1: and and they thought that the Swiss National Bank was 202 00:10:25,160 --> 00:10:28,679 Speaker 1: really mean. I mean, it was like horrible, horrible institution. 203 00:10:29,440 --> 00:10:31,120 Speaker 1: But then also discussed that I was going to put 204 00:10:31,160 --> 00:10:33,000 Speaker 1: through an interest rate change as well, and put through 205 00:10:33,000 --> 00:10:36,679 Speaker 1: a tiered interest rate change to reduce savings. So if 206 00:10:36,679 --> 00:10:38,839 Speaker 1: you get up to fifty pounds, you get zero on 207 00:10:38,960 --> 00:10:41,680 Speaker 1: that first fifty pounds and then it starts again. And 208 00:10:41,800 --> 00:10:44,199 Speaker 1: that kind of changed my my behavior of my nine 209 00:10:44,280 --> 00:10:47,440 Speaker 1: year old who never saves beyond fifty pounds ever, and 210 00:10:47,520 --> 00:10:51,040 Speaker 1: my seven year old he just still determinedly saves a lot, 211 00:10:51,280 --> 00:10:53,280 Speaker 1: but still you know, by the occasional sweet from now 212 00:10:53,440 --> 00:10:55,880 Speaker 1: now and again, but is really kind of target saving 213 00:10:56,040 --> 00:10:58,160 Speaker 1: with the dream of one day buying an iPad, which 214 00:10:58,240 --> 00:11:01,960 Speaker 1: maybe several years away. I love that at least in 215 00:11:02,000 --> 00:11:05,400 Speaker 1: the bank of Nngle there's a relationship, a clear relationship 216 00:11:05,440 --> 00:11:08,360 Speaker 1: between rates and savings since in the real world, you know, 217 00:11:08,760 --> 00:11:11,520 Speaker 1: central banks are still trying to fiddle with that and 218 00:11:11,559 --> 00:11:14,240 Speaker 1: get it just right. Before we move on to the 219 00:11:14,280 --> 00:11:18,400 Speaker 1: next point, I still think if you can explain, maybe 220 00:11:18,440 --> 00:11:21,679 Speaker 1: even perhaps for a level above seven and nine year olds, 221 00:11:21,720 --> 00:11:24,920 Speaker 1: this distinction between outside money and inside money, I still 222 00:11:24,960 --> 00:11:27,760 Speaker 1: think very few people would even realize that there are 223 00:11:27,760 --> 00:11:30,520 Speaker 1: two different things. But as you say, you know, the 224 00:11:30,559 --> 00:11:33,520 Speaker 1: two different kinds of money, coins versus the money in 225 00:11:33,600 --> 00:11:35,800 Speaker 1: your bank are as different as oil and water. Not 226 00:11:35,880 --> 00:11:38,560 Speaker 1: only are they different, but they actually never even mix. 227 00:11:38,679 --> 00:11:41,040 Speaker 1: Can you just explain that a little for them. Yeah, sure, 228 00:11:41,080 --> 00:11:43,040 Speaker 1: I mean, it's it is. It is an amazing kind 229 00:11:43,080 --> 00:11:45,480 Speaker 1: of revelation once you kind of think about these things 230 00:11:45,480 --> 00:11:49,439 Speaker 1: a bit. That's and actually Hodgin Chang, who's an academic 231 00:11:49,440 --> 00:11:52,360 Speaker 1: at Cambridge University, put it really nicely that banking is 232 00:11:52,480 --> 00:11:55,880 Speaker 1: essentially a confidence trick, but a socially useful one. Insofar 233 00:11:55,920 --> 00:11:58,120 Speaker 1: as I still tend to think, even though I know 234 00:11:58,240 --> 00:12:00,280 Speaker 1: this distinction, that the money in the bank is still 235 00:12:00,400 --> 00:12:02,600 Speaker 1: kind of like real money. It's still notes and coins, 236 00:12:02,640 --> 00:12:04,280 Speaker 1: but in a form of a bank. I know I've 237 00:12:04,360 --> 00:12:07,400 Speaker 1: lent to the bank that this money. But actually, when 238 00:12:07,640 --> 00:12:11,520 Speaker 1: when the bank lends someone money, it's basically lending you 239 00:12:11,720 --> 00:12:15,960 Speaker 1: a deposit. So if you're X y Z bank and 240 00:12:16,280 --> 00:12:17,920 Speaker 1: and I come to you and I say, can I 241 00:12:17,920 --> 00:12:20,840 Speaker 1: borrow you know, a hundred pounds or hundred dollars, you 242 00:12:20,880 --> 00:12:23,240 Speaker 1: say sure, and you create this deposit for a hundred 243 00:12:23,280 --> 00:12:26,360 Speaker 1: pounds or hundred dollars uh, And then I've got I've 244 00:12:26,360 --> 00:12:29,920 Speaker 1: got this deposit, which itself is simply just an entry 245 00:12:29,920 --> 00:12:31,640 Speaker 1: in the bank's book. And then I've got a loan, 246 00:12:32,240 --> 00:12:34,520 Speaker 1: which is another entry in the bank's book, and I 247 00:12:34,559 --> 00:12:39,439 Speaker 1: can spend that deposit by usually buying something from someone 248 00:12:39,480 --> 00:12:41,760 Speaker 1: else you might bank, either with X y Z bank 249 00:12:41,840 --> 00:12:44,080 Speaker 1: or another bank, which can then and then kind of 250 00:12:44,400 --> 00:12:47,960 Speaker 1: relay the payments through the inter banking system. Um. So 251 00:12:48,040 --> 00:12:52,640 Speaker 1: that actually by borrowing money, the money is created out 252 00:12:52,640 --> 00:12:55,720 Speaker 1: of out of nothing by the private sector banking system. 253 00:12:55,760 --> 00:12:58,600 Speaker 1: And most of the money, in fact, almost all of 254 00:12:58,640 --> 00:13:01,000 Speaker 1: the money that we think we have of is this 255 00:13:01,600 --> 00:13:05,160 Speaker 1: is this inside money that's inside the system. And we 256 00:13:05,200 --> 00:13:07,080 Speaker 1: all know that if everyone tried to get their money 257 00:13:07,080 --> 00:13:08,640 Speaker 1: out of the bank at the same time, the banks 258 00:13:08,679 --> 00:13:13,079 Speaker 1: would collapse. There'd be a run on banks. But one 259 00:13:13,440 --> 00:13:16,520 Speaker 1: of three reasons is because there just isn't enough outside money. 260 00:13:16,559 --> 00:13:18,679 Speaker 1: It's not because the banks have done anything foolish with it, 261 00:13:18,720 --> 00:13:23,200 Speaker 1: but it simply doesn't exist for them to transfer into 262 00:13:23,200 --> 00:13:26,120 Speaker 1: outside money. You mentioned, um at the beginning of our 263 00:13:26,160 --> 00:13:31,480 Speaker 1: discussion that thinking about money from perspective of children, and 264 00:13:31,520 --> 00:13:35,920 Speaker 1: also using this inside outside framework can help explain some 265 00:13:36,040 --> 00:13:39,280 Speaker 1: of the weirder things that have been happening in terms 266 00:13:39,360 --> 00:13:43,199 Speaker 1: of monetary policy over the past few years. For instance, 267 00:13:43,480 --> 00:13:46,600 Speaker 1: you know when QUI, when quantitative using was first announced, 268 00:13:46,800 --> 00:13:49,120 Speaker 1: we had a whole bunch of people um talking about 269 00:13:49,120 --> 00:13:53,160 Speaker 1: the inflationary effects, and then when helicopter money started to 270 00:13:53,200 --> 00:13:57,360 Speaker 1: be discussed, Um, that inflation talk kind of went into overdrive. 271 00:13:57,840 --> 00:14:02,360 Speaker 1: What can we learn from the Bank of Toby n 272 00:14:02,360 --> 00:14:07,640 Speaker 1: Angle when it comes to unconventional monetary policy? Well, I 273 00:14:07,640 --> 00:14:10,680 Speaker 1: guess you know the way in which I can think 274 00:14:10,679 --> 00:14:13,720 Speaker 1: of of the Bank of Toby n Angle as a 275 00:14:13,760 --> 00:14:17,079 Speaker 1: bunch of credits that my kids have. So actually, when 276 00:14:17,080 --> 00:14:19,640 Speaker 1: when we started, when they said so if I give 277 00:14:19,680 --> 00:14:22,240 Speaker 1: you my fift p where are you going to put it? 278 00:14:22,640 --> 00:14:25,200 Speaker 1: I said, well, I'm going to spend it, thank you, 279 00:14:25,240 --> 00:14:27,040 Speaker 1: And they're like no, no, no, no, But seriously, like 280 00:14:27,920 --> 00:14:29,040 Speaker 1: where are you going to put it? Is it in 281 00:14:29,040 --> 00:14:31,480 Speaker 1: a jar or is it in your pocket? I said no, seriously, 282 00:14:31,520 --> 00:14:33,280 Speaker 1: I'm going to go and spend it. You know, you've 283 00:14:33,360 --> 00:14:35,400 Speaker 1: lent me this money and I've I've got and spend it. 284 00:14:36,200 --> 00:14:39,680 Speaker 1: But nevertheless, they have assets in the form of of um, 285 00:14:39,920 --> 00:14:42,920 Speaker 1: you know, this liability that I've incurred. And if we 286 00:14:42,960 --> 00:14:46,360 Speaker 1: start to think about like increasing the liability that I 287 00:14:46,440 --> 00:14:49,320 Speaker 1: have because their assets are going up, does this become 288 00:14:49,360 --> 00:14:52,720 Speaker 1: inflationary because they've got more assets which they can't translate 289 00:14:52,800 --> 00:14:57,400 Speaker 1: into into into actually spending without without me being able 290 00:14:57,480 --> 00:15:00,520 Speaker 1: to also access that. I mean, it's can get a 291 00:15:00,520 --> 00:15:03,080 Speaker 1: little bit kind of tricky. So let's take it back 292 00:15:03,080 --> 00:15:04,920 Speaker 1: into the real world and think about say quantity US 293 00:15:05,160 --> 00:15:10,240 Speaker 1: and and UH and helicopter money. I guess taking this 294 00:15:10,320 --> 00:15:13,280 Speaker 1: whole idea of inside out my outside money a step further, 295 00:15:13,640 --> 00:15:16,840 Speaker 1: you'd say, well, you know, if outside money is basically 296 00:15:16,920 --> 00:15:20,120 Speaker 1: money that governments invent to pay their bills and then 297 00:15:20,160 --> 00:15:23,760 Speaker 1: like give value to you by demanding taxes that are 298 00:15:23,800 --> 00:15:26,440 Speaker 1: to be paid in it in punishment of administered violence, 299 00:15:26,440 --> 00:15:29,760 Speaker 1: which is basically what outside money is, then you say, well, 300 00:15:29,920 --> 00:15:33,320 Speaker 1: why why did governments borrow money at all? What why 301 00:15:33,440 --> 00:15:37,160 Speaker 1: is government debt in existence? And the answer kind of 302 00:15:37,160 --> 00:15:39,640 Speaker 1: comes back in terms of, well, it comes back in 303 00:15:39,760 --> 00:15:43,160 Speaker 1: order to keep keep outside money, that is to say, 304 00:15:43,400 --> 00:15:46,040 Speaker 1: government money, give it some value. Can either be taxed 305 00:15:46,040 --> 00:15:48,960 Speaker 1: away to keep its stock from exploding on the upside, 306 00:15:49,280 --> 00:15:52,080 Speaker 1: or it can be borrowed back from the people or 307 00:15:52,080 --> 00:15:54,560 Speaker 1: other people to whom it's it's given in the first place. 308 00:15:54,800 --> 00:15:59,600 Speaker 1: And so government debt becomes an instrument of monetary sterilization 309 00:16:00,400 --> 00:16:02,680 Speaker 1: on the part of the government, simply in the same 310 00:16:02,720 --> 00:16:06,760 Speaker 1: way that taxation is an implement of sterilization. Monetary sterilization 311 00:16:06,760 --> 00:16:08,760 Speaker 1: and part of the on the government. So we think 312 00:16:08,760 --> 00:16:12,200 Speaker 1: about okay, well, quantitybiz and what's that. That's the government 313 00:16:12,240 --> 00:16:15,480 Speaker 1: buying back or an agent of the government buying back. Uh. 314 00:16:15,840 --> 00:16:19,600 Speaker 1: These sterilization instruments, that is to say, debt in exchange 315 00:16:19,640 --> 00:16:23,320 Speaker 1: for zero duration instruments, that is to say, government money 316 00:16:23,440 --> 00:16:26,960 Speaker 1: or outside money. And when is that dangerous? Well, that 317 00:16:27,000 --> 00:16:29,760 Speaker 1: can be dangerous if people start to spend it a lot. 318 00:16:29,840 --> 00:16:32,600 Speaker 1: But what happens then you can just unwind it in 319 00:16:32,720 --> 00:16:35,960 Speaker 1: order to control the quantity of of of of outside money. 320 00:16:35,960 --> 00:16:38,240 Speaker 1: But it isn't something which necessarily leads us down there 321 00:16:38,800 --> 00:16:42,480 Speaker 1: the exploding credit. This is kind of like this is 322 00:16:42,560 --> 00:16:45,360 Speaker 1: kind of the second huge revelation already. So first we 323 00:16:45,400 --> 00:16:48,680 Speaker 1: have this revelation that the money in our pocket and 324 00:16:48,720 --> 00:16:51,280 Speaker 1: the money in our bank are two totally separate things. 325 00:16:51,800 --> 00:16:54,800 Speaker 1: And then you have this and then also this idea 326 00:16:54,920 --> 00:16:58,520 Speaker 1: that the government doesn't really borrow, and it doesn't really 327 00:16:58,760 --> 00:17:00,760 Speaker 1: in the way we think of borrowing, and it doesn't 328 00:17:00,800 --> 00:17:03,760 Speaker 1: raise taxes for the purpose that it rate that we 329 00:17:03,800 --> 00:17:08,600 Speaker 1: think it raises taxes for. Rather, the taxes are raised 330 00:17:08,720 --> 00:17:12,840 Speaker 1: as a creating value for the for its currency. Yeah, 331 00:17:12,880 --> 00:17:14,719 Speaker 1: I mean, I think that's right. I think both government 332 00:17:15,400 --> 00:17:19,160 Speaker 1: governments both borrow and tax in order to keep its 333 00:17:19,200 --> 00:17:22,000 Speaker 1: currency give it, give it its currency some value and 334 00:17:22,040 --> 00:17:25,359 Speaker 1: some stability absolutely, which which kind of gets into a 335 00:17:25,400 --> 00:17:27,879 Speaker 1: distributional issues. Why would you tax rather than borrow? You know, 336 00:17:28,160 --> 00:17:30,320 Speaker 1: there are all sorts of distribution issues that come off that, 337 00:17:30,359 --> 00:17:32,040 Speaker 1: and all this kind of flows from just thinking about 338 00:17:32,040 --> 00:17:35,880 Speaker 1: how money works. Really, let's talk about you talk learned 339 00:17:35,920 --> 00:17:40,560 Speaker 1: some lessons about household political economy. You wrote a post 340 00:17:40,720 --> 00:17:43,639 Speaker 1: on your blog about sort of what you've learned about 341 00:17:43,680 --> 00:17:47,879 Speaker 1: inequality and some of picketty is theories. What what did 342 00:17:47,920 --> 00:17:50,600 Speaker 1: you learn from doing that? Is picketty big in the 343 00:17:50,680 --> 00:17:53,960 Speaker 1: Nangle household among the five to nine year old demographic, 344 00:17:54,000 --> 00:17:57,760 Speaker 1: I'm curious, um, not in the five to nine year 345 00:17:57,800 --> 00:17:59,720 Speaker 1: old no, but but you know when when when I 346 00:17:59,760 --> 00:18:01,920 Speaker 1: start to like put through, you know, after the Swiss 347 00:18:01,960 --> 00:18:05,000 Speaker 1: National Bank moved to negative rates and started to change 348 00:18:05,000 --> 00:18:07,119 Speaker 1: interest rates, I started having a chat to them about 349 00:18:07,560 --> 00:18:09,199 Speaker 1: so if I change interest rates, you know what, what 350 00:18:09,240 --> 00:18:10,719 Speaker 1: do you think the impact is going to be for you? 351 00:18:11,119 --> 00:18:13,760 Speaker 1: And my my nine year old, who targets saved to 352 00:18:13,760 --> 00:18:17,760 Speaker 1: a certain level and then spend it on stuff, knows 353 00:18:18,119 --> 00:18:21,480 Speaker 1: if you like her own reaction function to these things, 354 00:18:21,480 --> 00:18:24,480 Speaker 1: and was kind of outraged at the idea that there 355 00:18:24,480 --> 00:18:27,520 Speaker 1: could be higher rates when I then talked about reversing 356 00:18:27,520 --> 00:18:29,560 Speaker 1: it because from her perspective, she would not be a 357 00:18:29,600 --> 00:18:32,240 Speaker 1: beneficiary of this, and so that would increase your inequality 358 00:18:32,320 --> 00:18:35,840 Speaker 1: within the n Angol Children household. Whereas my my seven 359 00:18:35,880 --> 00:18:38,359 Speaker 1: year old, he knew it would be wrong to have 360 00:18:38,440 --> 00:18:40,879 Speaker 1: higher rates because he knew he'd be benefiting it, and 361 00:18:40,920 --> 00:18:44,840 Speaker 1: he knew they'd also be calls on on his his 362 00:18:44,960 --> 00:18:47,560 Speaker 1: largest from other parts of the n Angle family. House 363 00:18:47,600 --> 00:18:49,800 Speaker 1: that so he does already kind of like buy the 364 00:18:49,800 --> 00:18:52,760 Speaker 1: four year old toys because he realizes in such a 365 00:18:52,760 --> 00:18:56,359 Speaker 1: good situation that he should like distribute this scale at 366 00:18:56,440 --> 00:19:00,280 Speaker 1: this wealth across grassyrest skill quaver parenting questions. So I 367 00:19:00,320 --> 00:19:03,280 Speaker 1: have a one year old daughter, so I won't I'm 368 00:19:03,359 --> 00:19:05,520 Speaker 1: not going to be doing any of these experiments for 369 00:19:05,560 --> 00:19:07,679 Speaker 1: a few years yet. But do you ever worry that 370 00:19:07,760 --> 00:19:09,880 Speaker 1: your kids are just going to be like so much more, 371 00:19:10,119 --> 00:19:13,080 Speaker 1: so much smarter and savvier than all the other kids 372 00:19:13,080 --> 00:19:17,959 Speaker 1: in school, and that they're just, oh my god, clearly 373 00:19:18,000 --> 00:19:19,720 Speaker 1: like those kids, that your kids are just going to 374 00:19:19,760 --> 00:19:23,320 Speaker 1: be like running circles around all the other kids in school, Like, 375 00:19:23,400 --> 00:19:24,800 Speaker 1: do you worry they're just going to be you know, 376 00:19:24,840 --> 00:19:28,280 Speaker 1: it's almost almost too too too smart for their own good. 377 00:19:28,840 --> 00:19:32,080 Speaker 1: I honestly say, I that doesn't keep me awake a night. 378 00:19:34,920 --> 00:19:37,240 Speaker 1: So I have a question that you kind of started 379 00:19:37,280 --> 00:19:40,600 Speaker 1: to get to it with the inequality stuff. But, um, 380 00:19:40,640 --> 00:19:44,200 Speaker 1: you know, we're clearly talking about young children and young 381 00:19:44,280 --> 00:19:48,719 Speaker 1: children's attitudes towards basic interest rates. Um, but you've pointed 382 00:19:48,720 --> 00:19:53,720 Speaker 1: out more than once that people's attitude two rates tends 383 00:19:53,760 --> 00:19:57,440 Speaker 1: to change depending on what age they are so demographics 384 00:19:57,520 --> 00:20:00,959 Speaker 1: ends up being a really really big fa actor in 385 00:20:01,000 --> 00:20:04,760 Speaker 1: all of this that doesn't necessarily get the attention it 386 00:20:04,880 --> 00:20:07,720 Speaker 1: might deserve. Yeah, no, I think I think that's right. 387 00:20:07,760 --> 00:20:10,880 Speaker 1: In fact, you know, after after a couple of years 388 00:20:10,920 --> 00:20:14,800 Speaker 1: of experimenting with my children are and interest rates and 389 00:20:15,119 --> 00:20:17,320 Speaker 1: banks and are like and thinking about how their reaction 390 00:20:17,359 --> 00:20:20,359 Speaker 1: functions change as savers and like, and thinking about that 391 00:20:20,440 --> 00:20:23,240 Speaker 1: into the real world, there actually tend to be some 392 00:20:23,920 --> 00:20:27,240 Speaker 1: some potentially really quite big research questions that aren't addressed. 393 00:20:28,080 --> 00:20:32,159 Speaker 1: That is to say, most economic frameworks, it all models 394 00:20:32,240 --> 00:20:35,359 Speaker 1: used by central banks quite rightly for many years, have 395 00:20:35,440 --> 00:20:38,280 Speaker 1: ever assumed that there is a negative relationship between you know, 396 00:20:38,640 --> 00:20:42,000 Speaker 1: rates and spending, so higher rates would discourage borrowing and 397 00:20:42,080 --> 00:20:44,800 Speaker 1: encourage saving. But there are there are big cohorts who 398 00:20:44,880 --> 00:20:48,880 Speaker 1: don't really have the access to to borrow at those rates, 399 00:20:48,920 --> 00:20:51,080 Speaker 1: so they can't borrow more when it's lower and less 400 00:20:51,080 --> 00:20:54,159 Speaker 1: when it's higher. Now, some of that financially excluded people, 401 00:20:54,320 --> 00:20:58,520 Speaker 1: so which which within the economic sense tend to be 402 00:20:58,880 --> 00:21:04,040 Speaker 1: relatively marginal. But then increasingly you have demography playing a part, 403 00:21:04,040 --> 00:21:06,919 Speaker 1: as you say, Tracy, So with a whole bunch of 404 00:21:06,920 --> 00:21:10,399 Speaker 1: people getting older, how do you debt finance retirement, you know, 405 00:21:10,480 --> 00:21:13,840 Speaker 1: I mean you're you're saving specifically in order to spend 406 00:21:14,160 --> 00:21:18,120 Speaker 1: when you're in retirement or in the UK context where 407 00:21:18,160 --> 00:21:22,040 Speaker 1: they've been caps put on household borrowing rates as and 408 00:21:22,119 --> 00:21:26,160 Speaker 1: multiples of income, you increasingly have to save up a 409 00:21:26,240 --> 00:21:29,440 Speaker 1: huge proportion of your disposal income to get a deposit 410 00:21:29,480 --> 00:21:33,160 Speaker 1: for a property. So I saw something out by Residential 411 00:21:33,160 --> 00:21:37,080 Speaker 1: Analysts Limited which was saying that, you know, the average 412 00:21:37,119 --> 00:21:39,840 Speaker 1: deposit for first time byron in London is now a 413 00:21:39,920 --> 00:21:42,520 Speaker 1: hundred and fifty percent of salary, whereas you know, twenty 414 00:21:42,600 --> 00:21:44,959 Speaker 1: years ago it was about ten percent of salary. So 415 00:21:45,080 --> 00:21:47,000 Speaker 1: you have to save up all this amount, and so 416 00:21:47,080 --> 00:21:50,119 Speaker 1: you maybe because your target saving for either retirement or 417 00:21:50,160 --> 00:21:54,960 Speaker 1: property purchase. Um then then the relationship for big cohorts 418 00:21:54,960 --> 00:21:56,879 Speaker 1: of the population starts to flip and they become more 419 00:21:56,920 --> 00:21:59,800 Speaker 1: like my kids rather than sort of traditional actors in 420 00:22:00,040 --> 00:22:02,640 Speaker 1: econom makes sense this point, and you've talked about you've 421 00:22:02,640 --> 00:22:07,560 Speaker 1: been writing about this recently strikes me as incredibly important 422 00:22:07,600 --> 00:22:11,840 Speaker 1: and potentially significant for understanding sort of things that have 423 00:22:11,920 --> 00:22:14,720 Speaker 1: gone on and major developed economies over the last few years. 424 00:22:14,760 --> 00:22:17,120 Speaker 1: I mean, this idea, if you're you know as you say, 425 00:22:17,160 --> 00:22:20,760 Speaker 1: the traditional way of talking about it, low rates that 426 00:22:20,880 --> 00:22:23,679 Speaker 1: encourages you to save less and to spend more and 427 00:22:23,680 --> 00:22:27,160 Speaker 1: boost the economy. But on the flip side, if you're 428 00:22:27,240 --> 00:22:29,919 Speaker 1: say fifty years old, and you want to retire some 429 00:22:29,960 --> 00:22:33,239 Speaker 1: time in the next ten to fifteen years, and you 430 00:22:33,280 --> 00:22:35,480 Speaker 1: want to have a certain amount of money to be 431 00:22:35,520 --> 00:22:39,560 Speaker 1: able to draw on every year during your retirement, low 432 00:22:39,680 --> 00:22:43,560 Speaker 1: rates actually encourage forces you, essentially, is what you're saying, 433 00:22:43,800 --> 00:22:46,760 Speaker 1: to put more in retirement, because if you're getting paid 434 00:22:46,840 --> 00:22:50,400 Speaker 1: less on your investment assets, you basically have to compensate 435 00:22:50,640 --> 00:22:53,639 Speaker 1: for that by socking away each more. It seems like 436 00:22:53,680 --> 00:22:56,440 Speaker 1: a huge deal in terms of thinking about what we've seen. 437 00:22:56,960 --> 00:23:00,159 Speaker 1: I I think that potentially it's quite big. But at 438 00:23:00,200 --> 00:23:02,240 Speaker 1: the same time, it's important not to overstate the fact 439 00:23:02,320 --> 00:23:06,680 Speaker 1: that actually low rates do you mean that businesses can 440 00:23:06,720 --> 00:23:09,640 Speaker 1: often access finance more cheaply and they might be able 441 00:23:09,640 --> 00:23:13,359 Speaker 1: to employ more unemployed people than they would otherwise do, 442 00:23:13,640 --> 00:23:15,760 Speaker 1: So that there, you know, there are swings and roundabouts here. 443 00:23:16,160 --> 00:23:19,520 Speaker 1: I I did have a chat with some folks just 444 00:23:19,600 --> 00:23:21,920 Speaker 1: to kind of clarify that central banks. Do you think 445 00:23:21,920 --> 00:23:25,720 Speaker 1: about things as a kind of infinitely lived um agents 446 00:23:25,760 --> 00:23:27,960 Speaker 1: who can you know, borrow her and save at the 447 00:23:27,960 --> 00:23:30,639 Speaker 1: similar kind of rate rather than necessarily accounting for the 448 00:23:30,720 --> 00:23:34,120 Speaker 1: humpson demography or macro potential changes. So so maybe there's 449 00:23:34,160 --> 00:23:36,680 Speaker 1: something in that, but it's it's all a little bit speculive, 450 00:23:36,680 --> 00:23:38,200 Speaker 1: and as I say, it's a sort of thing which 451 00:23:38,240 --> 00:23:41,960 Speaker 1: would I think be deliver interesting research questions that people 452 00:23:41,960 --> 00:23:44,560 Speaker 1: can do some proper data analysis on. But as it is, 453 00:23:44,600 --> 00:23:47,480 Speaker 1: it just feels intuitively important. As you say, I agree 454 00:23:47,480 --> 00:23:49,960 Speaker 1: with you, Toby. Can we put you on the spot 455 00:23:49,960 --> 00:23:51,760 Speaker 1: and can we ask you to sort of bring all 456 00:23:51,800 --> 00:23:55,000 Speaker 1: this together, Um, you know, your theory of inside and 457 00:23:55,040 --> 00:23:58,600 Speaker 1: outside money, the bank of Toby Nangle within your household, 458 00:23:58,640 --> 00:24:02,120 Speaker 1: your children's reaction to interest rates, and give us your 459 00:24:02,359 --> 00:24:06,639 Speaker 1: verdict on the success of low rates and unconventional monetary 460 00:24:06,680 --> 00:24:12,199 Speaker 1: policy over the past six or seven years. Oh, I know, 461 00:24:12,280 --> 00:24:17,439 Speaker 1: I'm sorry. Yeah, I mean I would say that my 462 00:24:17,640 --> 00:24:21,560 Speaker 1: verdict on unconventional policy rates would be that, or rather 463 00:24:21,640 --> 00:24:24,440 Speaker 1: unconventioned much policy was that, you know, QUE one when 464 00:24:24,480 --> 00:24:28,240 Speaker 1: it came out was absolutely absolutely needed. It was a 465 00:24:28,760 --> 00:24:33,440 Speaker 1: cute liquidity crisis that faced global financial system, and so 466 00:24:34,080 --> 00:24:36,840 Speaker 1: allowing there to be sufficient liquidity in the system, so 467 00:24:36,880 --> 00:24:39,680 Speaker 1: that the the so that if you like, the inside 468 00:24:39,720 --> 00:24:43,719 Speaker 1: money banking system didn't just fall apart and everything that 469 00:24:43,800 --> 00:24:48,359 Speaker 1: we think of his money just disappear. That was really important. 470 00:24:48,960 --> 00:24:51,679 Speaker 1: Once we went on to QB two, QB three and 471 00:24:51,720 --> 00:24:55,120 Speaker 1: the like that those if that seemed to be more 472 00:24:55,160 --> 00:24:58,320 Speaker 1: about what a condoci call the portfolio balance effect, that 473 00:24:58,440 --> 00:25:01,679 Speaker 1: is to say, target high levels of asset prices and 474 00:25:01,720 --> 00:25:05,359 Speaker 1: trying to force people away from uh certain types of 475 00:25:05,400 --> 00:25:07,520 Speaker 1: assets into other types of assets. And I think the 476 00:25:07,560 --> 00:25:11,199 Speaker 1: results and add are pretty a pretty mixed. All the 477 00:25:11,240 --> 00:25:14,639 Speaker 1: work seems to suggest that it was only successful in part. 478 00:25:15,200 --> 00:25:17,679 Speaker 1: And I think that you know, some of the some 479 00:25:17,720 --> 00:25:20,199 Speaker 1: of the stuff I've looked at with my kids and 480 00:25:20,920 --> 00:25:25,040 Speaker 1: uh and demography more widely would suggest that for any 481 00:25:25,080 --> 00:25:28,920 Speaker 1: kind of target savers, then uh than then long rates 482 00:25:29,160 --> 00:25:32,040 Speaker 1: or rather interest rates start to look like what's sort 483 00:25:32,040 --> 00:25:34,160 Speaker 1: of as a gift in good that is to say, 484 00:25:34,400 --> 00:25:36,840 Speaker 1: the higher things going price, the more you need of it, 485 00:25:37,000 --> 00:25:39,680 Speaker 1: which would be a was saying the lower rates, the 486 00:25:39,760 --> 00:25:42,399 Speaker 1: more the more you have to save. But then in 487 00:25:42,440 --> 00:25:44,280 Speaker 1: the background to all that, you've got this kind of 488 00:25:44,320 --> 00:25:49,040 Speaker 1: secularly falling real rate which seems to equate inflation and 489 00:25:49,040 --> 00:25:52,200 Speaker 1: and I'd put that more down to some some issues 490 00:25:52,280 --> 00:25:54,679 Speaker 1: with globalization rather than anything else that's going on in 491 00:25:54,680 --> 00:25:57,600 Speaker 1: the world. So and I think that bids turning. Alright, 492 00:25:57,800 --> 00:26:01,960 Speaker 1: final question, and then we have to wrap up. Are 493 00:26:02,000 --> 00:26:07,000 Speaker 1: you planning any more experiment or potential policy innovations that 494 00:26:07,040 --> 00:26:09,720 Speaker 1: we should be watching for at the Bank of n Angle? 495 00:26:10,080 --> 00:26:14,600 Speaker 1: What's what's on the roadmap? I haven't got anything. I 496 00:26:14,600 --> 00:26:17,040 Speaker 1: haven't got anything planned. But if anyone's got any good 497 00:26:17,040 --> 00:26:21,359 Speaker 1: ideas which won't upset them too much, then please please 498 00:26:21,359 --> 00:26:24,960 Speaker 1: tweet them to me at Toby Underscore. All right, Well, 499 00:26:25,520 --> 00:26:29,680 Speaker 1: on that note, you should follow Toby Nangle at at 500 00:26:29,720 --> 00:26:33,080 Speaker 1: Toby Underscore and and you should read all about his 501 00:26:33,160 --> 00:26:37,320 Speaker 1: experiments at his blog Principles and Interest dot WordPress dot com. 502 00:26:37,359 --> 00:26:41,400 Speaker 1: Toby Nangle, Global cohead of Asset Allocation at Columbia thread 503 00:26:41,440 --> 00:26:44,560 Speaker 1: Needle Asset Management. Absolutely great to talk to you and 504 00:26:44,600 --> 00:26:57,480 Speaker 1: have you on the podcast. Thanks for having me, well, Tracy, 505 00:26:58,000 --> 00:27:01,359 Speaker 1: did that lift your mood and break the streak of 506 00:27:01,440 --> 00:27:05,480 Speaker 1: negative episodes that we've had sufficiently? Uh? Yeah, it did. 507 00:27:05,680 --> 00:27:08,680 Speaker 1: It made me laugh pretty hard. Um, particularly the bit 508 00:27:08,720 --> 00:27:13,080 Speaker 1: where you uh subconsciously let people know that you worry 509 00:27:13,119 --> 00:27:16,240 Speaker 1: that your child is going to be too smart. I enjoyed. No, 510 00:27:16,920 --> 00:27:19,439 Speaker 1: I'm not worried about that. But when now you started 511 00:27:19,520 --> 00:27:21,720 Speaker 1: hearing these things, I was like, oh God, these kids 512 00:27:21,720 --> 00:27:24,439 Speaker 1: are going to be like way more savvy than anyone 513 00:27:24,480 --> 00:27:26,240 Speaker 1: they go to school with. But no, I swear I 514 00:27:26,359 --> 00:27:30,560 Speaker 1: never that. It didn't cross my mind. Okay, on a 515 00:27:30,640 --> 00:27:32,600 Speaker 1: serious note, though, I mean, I thought that was a 516 00:27:32,640 --> 00:27:36,200 Speaker 1: really really fun framing of what can be a quite 517 00:27:36,240 --> 00:27:39,000 Speaker 1: geeky topic that we tend to discuss quite a lot 518 00:27:39,040 --> 00:27:41,840 Speaker 1: on the show, which is what is money? Yeah? No, 519 00:27:42,000 --> 00:27:46,520 Speaker 1: I I totally agree, and it's um yeah, no, I 520 00:27:46,720 --> 00:27:49,080 Speaker 1: love all those points and we we as you say, 521 00:27:49,119 --> 00:27:52,720 Speaker 1: we've hit them in different aspects before and we'll probably 522 00:27:53,240 --> 00:27:56,840 Speaker 1: talk about them again. But what really is the banking system? 523 00:27:56,840 --> 00:27:59,440 Speaker 1: Where do where does money come from? Why do we 524 00:27:59,640 --> 00:28:01,760 Speaker 1: have access? And stuff like that. But I think that 525 00:28:01,920 --> 00:28:04,520 Speaker 1: really is is sort of great framing that makes a 526 00:28:04,560 --> 00:28:07,879 Speaker 1: lot of these things that are sort of theoretical abstract 527 00:28:08,040 --> 00:28:11,200 Speaker 1: very concrete. Yeah, and talking about it through the eyes 528 00:28:11,240 --> 00:28:15,199 Speaker 1: of kids kind of brings home the behavioral aspect of 529 00:28:15,280 --> 00:28:18,360 Speaker 1: interest rates and money. Like you know when people talk 530 00:28:18,400 --> 00:28:22,800 Speaker 1: about negative rates, there's just an emotion involved there there's 531 00:28:22,920 --> 00:28:25,919 Speaker 1: kind of a sense of unfairness, and that really comes 532 00:28:25,960 --> 00:28:29,760 Speaker 1: through when you're talking about seven or nine year olds. Right, yeah, 533 00:28:29,800 --> 00:28:32,119 Speaker 1: that's absolutely right. And you know, you sort of have 534 00:28:32,280 --> 00:28:35,200 Speaker 1: this thing in the real world where central banks might 535 00:28:35,200 --> 00:28:38,560 Speaker 1: cut rates to zero or negative and then people complain, 536 00:28:39,080 --> 00:28:41,880 Speaker 1: and then economists say, but you really shouldn't complain because 537 00:28:41,880 --> 00:28:44,880 Speaker 1: it's going to stimulate borrowing and that's to me a consumption. 538 00:28:45,080 --> 00:28:47,960 Speaker 1: But that doesn't change the fact that still that upsets 539 00:28:47,960 --> 00:28:50,960 Speaker 1: people in the real world, and you can't just abstract 540 00:28:51,040 --> 00:28:54,360 Speaker 1: it away by saying it's irrational, because ultimately the economy 541 00:28:54,400 --> 00:28:57,800 Speaker 1: is just full of people. Yeah, exactly. Ultimately it runs 542 00:28:57,840 --> 00:29:01,400 Speaker 1: on what people do, right, Yeah, and I am going 543 00:29:01,520 --> 00:29:06,720 Speaker 1: to uh, I am inspired to financial experiments when my 544 00:29:06,760 --> 00:29:09,080 Speaker 1: own kids get okay, I like that idea of waiting 545 00:29:09,120 --> 00:29:12,280 Speaker 1: until they're five though. Alright, so let's see, in four 546 00:29:12,400 --> 00:29:16,280 Speaker 1: years we'll be doing an Odd Lots episode about introducing 547 00:29:16,480 --> 00:29:20,520 Speaker 1: your daughter to the concept of money, right exactly, follow 548 00:29:20,640 --> 00:29:23,040 Speaker 1: up episode. I look forward to that. All right. This 549 00:29:23,080 --> 00:29:26,640 Speaker 1: has been another episode of the Odd Lots Podcast. Thanks 550 00:29:26,640 --> 00:29:29,080 Speaker 1: for listening. I'm Joe wi Isn't thal. You can follow 551 00:29:29,080 --> 00:29:32,360 Speaker 1: me on Twitter at the Stalwart and I'm Tracy Alloway. 552 00:29:32,400 --> 00:29:35,640 Speaker 1: I'm on Twitter at Tracy Alloway. And you can follow 553 00:29:35,680 --> 00:29:39,600 Speaker 1: Toby as we mentioned on Twitter at Toby Underscore in