Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Joe Wisenthal and I'm Tracy Halloway. So, Tracy, I
Speaker 1: think we've been talking about it a lot on recent episodes,
Speaker 1: but we've had most of our episodes this year, they've
Speaker 1: kind of been gloomy or negative, just sort of we
Speaker 1: started the year like on a real uh, just sort
Speaker 1: of a down vibe. Wouldn't you say, maybe we're just
Speaker 1: capturing the zeitgeist. I don't know. Maybe, yeah, it could
Speaker 1: just be the sort of overall mood. But I think
Speaker 1: today is going to be a break for that. I
Speaker 1: think not only is today's episode hopefully not going to
Speaker 1: be depressing, but actually might be sort of very positive
Speaker 1: and uplifting and maybe even kind of heartwarming. Joe, let
Speaker 1: me tell you, I could use both, um, some heartwarming
Speaker 1: and some cheering up. So what are we talking about?
Speaker 1: So we're going to be talking to a fund manager,
Speaker 1: which I guess is not often the uh you think
Speaker 1: of when heartwarming or uplifting. But he's a really interesting writer,
Speaker 1: a really interesting thinker, and he's a writer and one
Speaker 1: of the things that he does is he um teaches
Speaker 1: his kids about finance, and teaches his kids about banking
Speaker 1: and interest rates and sort of complicated questions. Um, and
Speaker 1: he writes about these from time to time, these lessons
Speaker 1: that he teaches his his kids. I think anything with
Speaker 1: kids is sort of you know, heartwarming. Well, I was
Speaker 1: gonna say, does that mean we're going to get a
Speaker 1: bunch of really cute stories about how kids spend their
Speaker 1: allowance and that sort of thing, because I'd be up
Speaker 1: for that. I think that's basically going to be it.
Speaker 1: We're going to have an episode of cute stories about
Speaker 1: kids spending their allowance money more or less, but it's
Speaker 1: going to tell us something important about finance and money
Speaker 1: as well. Right, yeah, exactly. So. I think like most parents,
Speaker 1: you know, a lot of or a lot of parents
Speaker 1: might give their kids some sort of allowance, maybe a
Speaker 1: few dollars a week for taking out the trash or
Speaker 1: making their bed or anything. But of course, when a
Speaker 1: fund manager does it, especially one who's very into the
Speaker 1: theoretical constructs of the financial system, uh, they make it
Speaker 1: a little more interesting than just you know, a few
Speaker 1: dollars a week. They actually try to teach something profound
Speaker 1: and I just teach something, but potentially learn something through
Speaker 1: the process about how people think about money. Alright, so
Speaker 1: don't keep us in suspense. Who is it? All right? Today,
Speaker 1: we're going to be talking to Toby Nangle. He is
Speaker 1: the global co head of asset Allocation at Columbia thread
Speaker 1: Needle Asset Management, and we have him on the line,
Speaker 1: so let's bring him in. Toby, thank you very much
Speaker 1: for coming in today. Oh, thanks very much for having me,
Speaker 1: Joe and Dracy. It's great to be here. So first
Speaker 1: of all, who are you? Who are you? How many
Speaker 1: kids do you have? What do you do and how
Speaker 1: many kids do you have? And why do you why
Speaker 1: do you like to use spending money and allowances as
Speaker 1: a way of sort of exploring the financial system. Sure, okay,
Speaker 1: I've got three kids who are four, seven, and nine
Speaker 1: years old, and uh, that's a lot of kids. And
Speaker 1: I'm a fund manager, so I part of my day
Speaker 1: job is to think about how money works and and
Speaker 1: and that sort of thing. And actually, to be honest,
Speaker 1: I spent probably a lot of my career, as do
Speaker 1: most fund managers, not really thinking very much about money
Speaker 1: and just sort of taking it for granted. But probably
Speaker 1: over the past ten years I've been thinking more about
Speaker 1: money and asking lots of stupid questions, and suddenly I've
Speaker 1: got this captive audience to ask you the questions to
Speaker 1: in four of my kids. So why wouldn't I use them?
Speaker 1: I love that. Now, as you say, most fun manager
Speaker 1: probably don't spend much time thinking about what money is
Speaker 1: or how the financial system really works. I talked we
Speaker 1: talked to fund managers all the time, and they talk
Speaker 1: about this of that company or the shaveta, you know, commodity.
Speaker 1: But before we even get to the you know, the
Speaker 1: lessons you teach your kids, why do you think this
Speaker 1: is an interesting avenue to explore? Um? Well, I think
Speaker 1: that in the era of heterodox monetary policy, then you
Speaker 1: can have all sorts of things which sounds quite scary
Speaker 1: or weird or wacky, which aren't actually really scary or
Speaker 1: wheel and wacky once you think about money a bit
Speaker 1: so because there can be something like helicopter money coming
Speaker 1: or when quantitive easing was first was first sort of
Speaker 1: there are a lot of like broken notes out there
Speaker 1: about how mr levels of hyperinflation we're going to come
Speaker 1: back because it was money printing, etcetera, etcetera, And you
Speaker 1: have to kind of start to think think about can
Speaker 1: this inter is this good advice or can it interfere
Speaker 1: with good decisions? So I think it was become incumbent
Speaker 1: upon everyone to think a little bit more about it.
Speaker 1: And there's this Chinese proverb which a friend of mine
Speaker 1: let me in on, which is a fish is the
Speaker 1: last and no water. And I think that's a lot
Speaker 1: of that's pretty true in the case of finance, folks
Speaker 1: and money. We're surrounded by what we think of it
Speaker 1: as something which is solid, but it's not. It's a
Speaker 1: social construct. It's something that we invent in different ways
Speaker 1: to do different things with. So Toby on that note,
Speaker 1: when you have um your four year old come up
Speaker 1: to you and ask you what is money? What exactly
Speaker 1: do you say to them? I hope you don't use
Speaker 1: words like heterodox right now? Well, to be fair, the
Speaker 1: four year old keeps out of it for now because
Speaker 1: I've started when they're five, So at five years old,
Speaker 1: they get a they get into the issue about money. Now.
Speaker 1: A lot of it was me asking them what do
Speaker 1: you think money is? And you know, how does it work? What,
Speaker 1: and then kind of doing that sort of annoying thing
Speaker 1: that kids do, uh, and which is to ask a
Speaker 1: question about the answer, and just keep on going and
Speaker 1: keeping on going and seeing if it got to the
Speaker 1: same sort of place that I went to, and by
Speaker 1: thinking about these thing more of from off it it does.
Speaker 1: These are pretty simple concepts when you once you sort
Speaker 1: of remember to forget all that you thought you knew.
Speaker 1: Uh So, you know, I think a lot of the
Speaker 1: time we think of money as as something like gold.
Speaker 1: You know, it's it's this this quantity of this physical thing.
Speaker 1: There's only a certain amount ofment. And the way in
Speaker 1: which we talk about budgets as adults, household budgets, that's
Speaker 1: based on the idea of a kind of a metalist
Speaker 1: view of worlds. So when we get down to five
Speaker 1: year old asking them what do you think money is?
Speaker 1: They say, right, well, it's it's a coin, you know,
Speaker 1: It's it's pretty straightforward. It's a coin. What do you
Speaker 1: do with it? Why? I exchange it for other things?
Speaker 1: So how about what about money in a bank? What's
Speaker 1: a bank? And so we can then start to have
Speaker 1: a think about those sort of the questions. All right,
Speaker 1: so let's dive into them. This issue we're talking about
Speaker 1: the Bank of Toby and Angle, the depositors are your
Speaker 1: seven and your nine year old. Something that you've written
Speaker 1: about is this fact that probably almost nobody knows, which
Speaker 1: is that we really use two kinds of money throughout
Speaker 1: our lives. There's inside money and outside money. What do
Speaker 1: these two different terms mean? And how do you convey
Speaker 1: this to your kids? Okay, right, let's let's rewind a
Speaker 1: second and then say, well, when I when I started, sorry,
Speaker 1: when my kids became five, they started getting pocket money,
Speaker 1: they didn't get it. But when they're under five, when
Speaker 1: the five started getting pocket money, um, and they got
Speaker 1: pocket money in the form of outside money, that is
Speaker 1: to say, they've got coins, so a bunch of coins
Speaker 1: every week. And what I found with after a while
Speaker 1: that they just spent these coins every week, which you'd say,
Speaker 1: fair enough, it's their pocket money, but to the point
Speaker 1: whereby they felt almost annoyed that they still had some
Speaker 1: money left that they hadn't spent, so they had to
Speaker 1: find something to spend it on. I thought, this is
Speaker 1: not the lesson really that I wanted to in part
Speaker 1: in giving people, you know, giving giving my kids pocket money,
Speaker 1: I wanted them to think about saving and you know,
Speaker 1: delay gratification. This kind of stuff, but I haven't really
Speaker 1: given them the instruments of doing so. And so, thinking
Speaker 1: back into our adult world, you know that one of
Speaker 1: the reasons why people do say is because they're they're
Speaker 1: saving up for something or other, and they're often using
Speaker 1: interest rates. And so I started thinking about, well, what
Speaker 1: what we might need to do is to have inside
Speaker 1: money as well as outside money, so not just coins,
Speaker 1: but also a bank. So we started up the an
Speaker 1: Angle Household Bank, which was a ledger, which and which
Speaker 1: attacks an interest rate every week. And you know, they're
Speaker 1: be a whole bunch of like behavioral psychology experiments over
Speaker 1: the decades, probably most famous with the Stanford Marshmallow experiment
Speaker 1: was thinking, like, you do you want to marshmalloon? Now
Speaker 1: do you want two in fifteen minutes if you wait
Speaker 1: for it? And these these all reveal really high internal
Speaker 1: rates of return that kids have. They have massive amounts
Speaker 1: of interest rates that they are required to to kind
Speaker 1: of delay consumption. So I get I give them ten
Speaker 1: percent a week on their balances. Uh, And I thought, well,
Speaker 1: we'll set down into train and see what happens and
Speaker 1: see whether they want to spend it on suites or
Speaker 1: whether they want to put it on the bank and
Speaker 1: get some some compound interest with the proviser. They can't
Speaker 1: spend their compound interests on suites, and it seemed to
Speaker 1: work quite well. So what exactly is the rate of
Speaker 1: saving versus they're spending? Um? Because, as you point out,
Speaker 1: like when you think of children, you don't necessarily think
Speaker 1: of comfort with delayed gratification. UM, So I'm curious to
Speaker 1: learn more of exactly how much they're spending versus saving. Yeah.
Speaker 1: I mean, my seven year old and nine year old
Speaker 1: have got really quite different savings habits, so that I
Speaker 1: was quite pleased for giving them this eyewateringly high level
Speaker 1: of interest did encourage them to save for a starter
Speaker 1: h and also kind of you know, I could talk
Speaker 1: to them about payday lending having those kind of rates
Speaker 1: in reverse if you like. So they're probably a bit
Speaker 1: frightened of that in terms of borrowing. Have you ever
Speaker 1: experimented with, um, changing the interest rate that you're paying
Speaker 1: to see their reaction? Yeah? Yeah, so my my my
Speaker 1: seven year old got really into saving and just saved
Speaker 1: and saved and saved, didn't spend a single penny on anything.
Speaker 1: Uh and uh, and I kind of you know, of
Speaker 1: course I did the math and saw that he was
Speaker 1: within about a year of owning my tire net worth,
Speaker 1: you know, with the com power combined interests and so
Speaker 1: so I kind of thought it was about the same
Speaker 1: time that the Swiss National Bank went into negative interest rates.
Speaker 1: So I discussed this move of movement in negative interest
Speaker 1: rates on the on the of the Swiss National Bank,
Speaker 1: and and they thought that the Swiss National Bank was
Speaker 1: really mean. I mean, it was like horrible, horrible institution.
Speaker 1: But then also discussed that I was going to put
Speaker 1: through an interest rate change as well, and put through
Speaker 1: a tiered interest rate change to reduce savings. So if
Speaker 1: you get up to fifty pounds, you get zero on
Speaker 1: that first fifty pounds and then it starts again. And
Speaker 1: that kind of changed my my behavior of my nine
Speaker 1: year old who never saves beyond fifty pounds ever, and
Speaker 1: my seven year old he just still determinedly saves a lot,
Speaker 1: but still you know, by the occasional sweet from now
Speaker 1: now and again, but is really kind of target saving
Speaker 1: with the dream of one day buying an iPad, which
Speaker 1: maybe several years away. I love that at least in
Speaker 1: the bank of Nngle there's a relationship, a clear relationship
Speaker 1: between rates and savings since in the real world, you know,
Speaker 1: central banks are still trying to fiddle with that and
Speaker 1: get it just right. Before we move on to the
Speaker 1: next point, I still think if you can explain, maybe
Speaker 1: even perhaps for a level above seven and nine year olds,
Speaker 1: this distinction between outside money and inside money, I still
Speaker 1: think very few people would even realize that there are
Speaker 1: two different things. But as you say, you know, the
Speaker 1: two different kinds of money, coins versus the money in
Speaker 1: your bank are as different as oil and water. Not
Speaker 1: only are they different, but they actually never even mix.
Speaker 1: Can you just explain that a little for them. Yeah, sure,
Speaker 1: I mean, it's it is. It is an amazing kind
Speaker 1: of revelation once you kind of think about these things
Speaker 1: a bit. That's and actually Hodgin Chang, who's an academic
Speaker 1: at Cambridge University, put it really nicely that banking is
Speaker 1: essentially a confidence trick, but a socially useful one. Insofar
Speaker 1: as I still tend to think, even though I know
Speaker 1: this distinction, that the money in the bank is still
Speaker 1: kind of like real money. It's still notes and coins,
Speaker 1: but in a form of a bank. I know I've
Speaker 1: lent to the bank that this money. But actually, when
Speaker 1: when the bank lends someone money, it's basically lending you
Speaker 1: a deposit. So if you're X y Z bank and
Speaker 1: and I come to you and I say, can I
Speaker 1: borrow you know, a hundred pounds or hundred dollars, you
Speaker 1: say sure, and you create this deposit for a hundred
Speaker 1: pounds or hundred dollars uh, And then I've got I've
Speaker 1: got this deposit, which itself is simply just an entry
Speaker 1: in the bank's book. And then I've got a loan,
Speaker 1: which is another entry in the bank's book, and I
Speaker 1: can spend that deposit by usually buying something from someone
Speaker 1: else you might bank, either with X y Z bank
Speaker 1: or another bank, which can then and then kind of
Speaker 1: relay the payments through the inter banking system. Um. So
Speaker 1: that actually by borrowing money, the money is created out
Speaker 1: of out of nothing by the private sector banking system.
Speaker 1: And most of the money, in fact, almost all of
Speaker 1: the money that we think we have of is this
Speaker 1: is this inside money that's inside the system. And we
Speaker 1: all know that if everyone tried to get their money
Speaker 1: out of the bank at the same time, the banks
Speaker 1: would collapse. There'd be a run on banks. But one
Speaker 1: of three reasons is because there just isn't enough outside money.
Speaker 1: It's not because the banks have done anything foolish with it,
Speaker 1: but it simply doesn't exist for them to transfer into
Speaker 1: outside money. You mentioned, um at the beginning of our
Speaker 1: discussion that thinking about money from perspective of children, and
Speaker 1: also using this inside outside framework can help explain some
Speaker 1: of the weirder things that have been happening in terms
Speaker 1: of monetary policy over the past few years. For instance,
Speaker 1: you know when QUI, when quantitative using was first announced,
Speaker 1: we had a whole bunch of people um talking about
Speaker 1: the inflationary effects, and then when helicopter money started to
Speaker 1: be discussed, Um, that inflation talk kind of went into overdrive.
Speaker 1: What can we learn from the Bank of Toby n
Speaker 1: Angle when it comes to unconventional monetary policy? Well, I
Speaker 1: guess you know the way in which I can think
Speaker 1: of of the Bank of Toby n Angle as a
Speaker 1: bunch of credits that my kids have. So actually, when
Speaker 1: when we started, when they said so if I give
Speaker 1: you my fift p where are you going to put it?
Speaker 1: I said, well, I'm going to spend it, thank you,
Speaker 1: And they're like no, no, no, no, But seriously, like
Speaker 1: where are you going to put it? Is it in
Speaker 1: a jar or is it in your pocket? I said no, seriously,
Speaker 1: I'm going to go and spend it. You know, you've
Speaker 1: lent me this money and I've I've got and spend it.
Speaker 1: But nevertheless, they have assets in the form of of um,
Speaker 1: you know, this liability that I've incurred. And if we
Speaker 1: start to think about like increasing the liability that I
Speaker 1: have because their assets are going up, does this become
Speaker 1: inflationary because they've got more assets which they can't translate
Speaker 1: into into into actually spending without without me being able
Speaker 1: to also access that. I mean, it's can get a
Speaker 1: little bit kind of tricky. So let's take it back
Speaker 1: into the real world and think about say quantity US
Speaker 1: and and UH and helicopter money. I guess taking this
Speaker 1: whole idea of inside out my outside money a step further,
Speaker 1: you'd say, well, you know, if outside money is basically
Speaker 1: money that governments invent to pay their bills and then
Speaker 1: like give value to you by demanding taxes that are
Speaker 1: to be paid in it in punishment of administered violence,
Speaker 1: which is basically what outside money is, then you say, well,
Speaker 1: why why did governments borrow money at all? What why
Speaker 1: is government debt in existence? And the answer kind of
Speaker 1: comes back in terms of, well, it comes back in
Speaker 1: order to keep keep outside money, that is to say,
Speaker 1: government money, give it some value. Can either be taxed
Speaker 1: away to keep its stock from exploding on the upside,
Speaker 1: or it can be borrowed back from the people or
Speaker 1: other people to whom it's it's given in the first place.
Speaker 1: And so government debt becomes an instrument of monetary sterilization
Speaker 1: on the part of the government, simply in the same
Speaker 1: way that taxation is an implement of sterilization. Monetary sterilization
Speaker 1: and part of the on the government. So we think
Speaker 1: about okay, well, quantitybiz and what's that. That's the government
Speaker 1: buying back or an agent of the government buying back. Uh.
Speaker 1: These sterilization instruments, that is to say, debt in exchange
Speaker 1: for zero duration instruments, that is to say, government money
Speaker 1: or outside money. And when is that dangerous? Well, that
Speaker 1: can be dangerous if people start to spend it a lot.
Speaker 1: But what happens then you can just unwind it in
Speaker 1: order to control the quantity of of of of outside money.
Speaker 1: But it isn't something which necessarily leads us down there
Speaker 1: the exploding credit. This is kind of like this is
Speaker 1: kind of the second huge revelation already. So first we
Speaker 1: have this revelation that the money in our pocket and
Speaker 1: the money in our bank are two totally separate things.
Speaker 1: And then you have this and then also this idea
Speaker 1: that the government doesn't really borrow, and it doesn't really
Speaker 1: in the way we think of borrowing, and it doesn't
Speaker 1: raise taxes for the purpose that it rate that we
Speaker 1: think it raises taxes for. Rather, the taxes are raised
Speaker 1: as a creating value for the for its currency. Yeah,
Speaker 1: I mean, I think that's right. I think both government
Speaker 1: governments both borrow and tax in order to keep its
Speaker 1: currency give it, give it its currency some value and
Speaker 1: some stability absolutely, which which kind of gets into a
Speaker 1: distributional issues. Why would you tax rather than borrow? You know,
Speaker 1: there are all sorts of distribution issues that come off that,
Speaker 1: and all this kind of flows from just thinking about
Speaker 1: how money works. Really, let's talk about you talk learned
Speaker 1: some lessons about household political economy. You wrote a post
Speaker 1: on your blog about sort of what you've learned about
Speaker 1: inequality and some of picketty is theories. What what did
Speaker 1: you learn from doing that? Is picketty big in the
Speaker 1: Nangle household among the five to nine year old demographic,
Speaker 1: I'm curious, um, not in the five to nine year
Speaker 1: old no, but but you know when when when I
Speaker 1: start to like put through, you know, after the Swiss
Speaker 1: National Bank moved to negative rates and started to change
Speaker 1: interest rates, I started having a chat to them about
Speaker 1: so if I change interest rates, you know what, what
Speaker 1: do you think the impact is going to be for you?
Speaker 1: And my my nine year old, who targets saved to
Speaker 1: a certain level and then spend it on stuff, knows
Speaker 1: if you like her own reaction function to these things,
Speaker 1: and was kind of outraged at the idea that there
Speaker 1: could be higher rates when I then talked about reversing
Speaker 1: it because from her perspective, she would not be a
Speaker 1: beneficiary of this, and so that would increase your inequality
Speaker 1: within the n Angol Children household. Whereas my my seven
Speaker 1: year old, he knew it would be wrong to have
Speaker 1: higher rates because he knew he'd be benefiting it, and
Speaker 1: he knew they'd also be calls on on his his
Speaker 1: largest from other parts of the n Angle family. House
Speaker 1: that so he does already kind of like buy the
Speaker 1: four year old toys because he realizes in such a
Speaker 1: good situation that he should like distribute this scale at
Speaker 1: this wealth across grassyrest skill quaver parenting questions. So I
Speaker 1: have a one year old daughter, so I won't I'm
Speaker 1: not going to be doing any of these experiments for
Speaker 1: a few years yet. But do you ever worry that
Speaker 1: your kids are just going to be like so much more,
Speaker 1: so much smarter and savvier than all the other kids
Speaker 1: in school, and that they're just, oh my god, clearly
Speaker 1: like those kids, that your kids are just going to
Speaker 1: be like running circles around all the other kids in school, Like,
Speaker 1: do you worry they're just going to be you know,
Speaker 1: it's almost almost too too too smart for their own good.
Speaker 1: I honestly say, I that doesn't keep me awake a night.
Speaker 1: So I have a question that you kind of started
Speaker 1: to get to it with the inequality stuff. But, um,
Speaker 1: you know, we're clearly talking about young children and young
Speaker 1: children's attitudes towards basic interest rates. Um, but you've pointed
Speaker 1: out more than once that people's attitude two rates tends
Speaker 1: to change depending on what age they are so demographics
Speaker 1: ends up being a really really big fa actor in
Speaker 1: all of this that doesn't necessarily get the attention it
Speaker 1: might deserve. Yeah, no, I think I think that's right.
Speaker 1: In fact, you know, after after a couple of years
Speaker 1: of experimenting with my children are and interest rates and
Speaker 1: banks and are like and thinking about how their reaction
Speaker 1: functions change as savers and like, and thinking about that
Speaker 1: into the real world, there actually tend to be some
Speaker 1: some potentially really quite big research questions that aren't addressed.
Speaker 1: That is to say, most economic frameworks, it all models
Speaker 1: used by central banks quite rightly for many years, have
Speaker 1: ever assumed that there is a negative relationship between you know,
Speaker 1: rates and spending, so higher rates would discourage borrowing and
Speaker 1: encourage saving. But there are there are big cohorts who
Speaker 1: don't really have the access to to borrow at those rates,
Speaker 1: so they can't borrow more when it's lower and less
Speaker 1: when it's higher. Now, some of that financially excluded people,
Speaker 1: so which which within the economic sense tend to be
Speaker 1: relatively marginal. But then increasingly you have demography playing a part,
Speaker 1: as you say, Tracy, So with a whole bunch of
Speaker 1: people getting older, how do you debt finance retirement, you know,
Speaker 1: I mean you're you're saving specifically in order to spend
Speaker 1: when you're in retirement or in the UK context where
Speaker 1: they've been caps put on household borrowing rates as and
Speaker 1: multiples of income, you increasingly have to save up a
Speaker 1: huge proportion of your disposal income to get a deposit
Speaker 1: for a property. So I saw something out by Residential
Speaker 1: Analysts Limited which was saying that, you know, the average
Speaker 1: deposit for first time byron in London is now a
Speaker 1: hundred and fifty percent of salary, whereas you know, twenty
Speaker 1: years ago it was about ten percent of salary. So
Speaker 1: you have to save up all this amount, and so
Speaker 1: you maybe because your target saving for either retirement or
Speaker 1: property purchase. Um then then the relationship for big cohorts
Speaker 1: of the population starts to flip and they become more
Speaker 1: like my kids rather than sort of traditional actors in
Speaker 1: econom makes sense this point, and you've talked about you've
Speaker 1: been writing about this recently strikes me as incredibly important
Speaker 1: and potentially significant for understanding sort of things that have
Speaker 1: gone on and major developed economies over the last few years.
Speaker 1: I mean, this idea, if you're you know as you say,
Speaker 1: the traditional way of talking about it, low rates that
Speaker 1: encourages you to save less and to spend more and
Speaker 1: boost the economy. But on the flip side, if you're
Speaker 1: say fifty years old, and you want to retire some
Speaker 1: time in the next ten to fifteen years, and you
Speaker 1: want to have a certain amount of money to be
Speaker 1: able to draw on every year during your retirement, low
Speaker 1: rates actually encourage forces you, essentially, is what you're saying,
Speaker 1: to put more in retirement, because if you're getting paid
Speaker 1: less on your investment assets, you basically have to compensate
Speaker 1: for that by socking away each more. It seems like
Speaker 1: a huge deal in terms of thinking about what we've seen.
Speaker 1: I I think that potentially it's quite big. But at
Speaker 1: the same time, it's important not to overstate the fact
Speaker 1: that actually low rates do you mean that businesses can
Speaker 1: often access finance more cheaply and they might be able
Speaker 1: to employ more unemployed people than they would otherwise do,
Speaker 1: So that there, you know, there are swings and roundabouts here.
Speaker 1: I I did have a chat with some folks just
Speaker 1: to kind of clarify that central banks. Do you think
Speaker 1: about things as a kind of infinitely lived um agents
Speaker 1: who can you know, borrow her and save at the
Speaker 1: similar kind of rate rather than necessarily accounting for the
Speaker 1: humpson demography or macro potential changes. So so maybe there's
Speaker 1: something in that, but it's it's all a little bit speculive,
Speaker 1: and as I say, it's a sort of thing which
Speaker 1: would I think be deliver interesting research questions that people
Speaker 1: can do some proper data analysis on. But as it is,
Speaker 1: it just feels intuitively important. As you say, I agree
Speaker 1: with you, Toby. Can we put you on the spot
Speaker 1: and can we ask you to sort of bring all
Speaker 1: this together, Um, you know, your theory of inside and
Speaker 1: outside money, the bank of Toby Nangle within your household,
Speaker 1: your children's reaction to interest rates, and give us your
Speaker 1: verdict on the success of low rates and unconventional monetary
Speaker 1: policy over the past six or seven years. Oh, I know,
Speaker 1: I'm sorry. Yeah, I mean I would say that my
Speaker 1: verdict on unconventional policy rates would be that, or rather
Speaker 1: unconventioned much policy was that, you know, QUE one when
Speaker 1: it came out was absolutely absolutely needed. It was a
Speaker 1: cute liquidity crisis that faced global financial system, and so
Speaker 1: allowing there to be sufficient liquidity in the system, so
Speaker 1: that the the so that if you like, the inside
Speaker 1: money banking system didn't just fall apart and everything that
Speaker 1: we think of his money just disappear. That was really important.
Speaker 1: Once we went on to QB two, QB three and
Speaker 1: the like that those if that seemed to be more
Speaker 1: about what a condoci call the portfolio balance effect, that
Speaker 1: is to say, target high levels of asset prices and
Speaker 1: trying to force people away from uh certain types of
Speaker 1: assets into other types of assets. And I think the
Speaker 1: results and add are pretty a pretty mixed. All the
Speaker 1: work seems to suggest that it was only successful in part.
Speaker 1: And I think that you know, some of the some
Speaker 1: of the stuff I've looked at with my kids and
Speaker 1: uh and demography more widely would suggest that for any
Speaker 1: kind of target savers, then uh than then long rates
Speaker 1: or rather interest rates start to look like what's sort
Speaker 1: of as a gift in good that is to say,
Speaker 1: the higher things going price, the more you need of it,
Speaker 1: which would be a was saying the lower rates, the
Speaker 1: more the more you have to save. But then in
Speaker 1: the background to all that, you've got this kind of
Speaker 1: secularly falling real rate which seems to equate inflation and
Speaker 1: and I'd put that more down to some some issues
Speaker 1: with globalization rather than anything else that's going on in
Speaker 1: the world. So and I think that bids turning. Alright,
Speaker 1: final question, and then we have to wrap up. Are
Speaker 1: you planning any more experiment or potential policy innovations that
Speaker 1: we should be watching for at the Bank of n Angle?
Speaker 1: What's what's on the roadmap? I haven't got anything. I
Speaker 1: haven't got anything planned. But if anyone's got any good
Speaker 1: ideas which won't upset them too much, then please please
Speaker 1: tweet them to me at Toby Underscore. All right, Well,
Speaker 1: on that note, you should follow Toby Nangle at at
Speaker 1: Toby Underscore and and you should read all about his
Speaker 1: experiments at his blog Principles and Interest dot WordPress dot com.
Speaker 1: Toby Nangle, Global cohead of Asset Allocation at Columbia thread
Speaker 1: Needle Asset Management. Absolutely great to talk to you and
Speaker 1: have you on the podcast. Thanks for having me, well, Tracy,
Speaker 1: did that lift your mood and break the streak of
Speaker 1: negative episodes that we've had sufficiently? Uh? Yeah, it did.
Speaker 1: It made me laugh pretty hard. Um, particularly the bit
Speaker 1: where you uh subconsciously let people know that you worry
Speaker 1: that your child is going to be too smart. I enjoyed. No,
Speaker 1: I'm not worried about that. But when now you started
Speaker 1: hearing these things, I was like, oh God, these kids
Speaker 1: are going to be like way more savvy than anyone
Speaker 1: they go to school with. But no, I swear I
Speaker 1: never that. It didn't cross my mind. Okay, on a
Speaker 1: serious note, though, I mean, I thought that was a
Speaker 1: really really fun framing of what can be a quite
Speaker 1: geeky topic that we tend to discuss quite a lot
Speaker 1: on the show, which is what is money? Yeah? No,
Speaker 1: I I totally agree, and it's um yeah, no, I
Speaker 1: love all those points and we we as you say,
Speaker 1: we've hit them in different aspects before and we'll probably
Speaker 1: talk about them again. But what really is the banking system?
Speaker 1: Where do where does money come from? Why do we
Speaker 1: have access? And stuff like that. But I think that
Speaker 1: really is is sort of great framing that makes a
Speaker 1: lot of these things that are sort of theoretical abstract
Speaker 1: very concrete. Yeah, and talking about it through the eyes
Speaker 1: of kids kind of brings home the behavioral aspect of
Speaker 1: interest rates and money. Like you know when people talk
Speaker 1: about negative rates, there's just an emotion involved there there's
Speaker 1: kind of a sense of unfairness, and that really comes
Speaker 1: through when you're talking about seven or nine year olds. Right, yeah,
Speaker 1: that's absolutely right. And you know, you sort of have
Speaker 1: this thing in the real world where central banks might
Speaker 1: cut rates to zero or negative and then people complain,
Speaker 1: and then economists say, but you really shouldn't complain because
Speaker 1: it's going to stimulate borrowing and that's to me a consumption.
Speaker 1: But that doesn't change the fact that still that upsets
Speaker 1: people in the real world, and you can't just abstract
Speaker 1: it away by saying it's irrational, because ultimately the economy
Speaker 1: is just full of people. Yeah, exactly. Ultimately it runs
Speaker 1: on what people do, right, Yeah, and I am going
Speaker 1: to uh, I am inspired to financial experiments when my
Speaker 1: own kids get okay, I like that idea of waiting
Speaker 1: until they're five though. Alright, so let's see, in four
Speaker 1: years we'll be doing an Odd Lots episode about introducing
Speaker 1: your daughter to the concept of money, right exactly, follow
Speaker 1: up episode. I look forward to that. All right. This
Speaker 1: has been another episode of the Odd Lots Podcast. Thanks
Speaker 1: for listening. I'm Joe wi Isn't thal. You can follow
Speaker 1: me on Twitter at the Stalwart and I'm Tracy Alloway.
Speaker 1: I'm on Twitter at Tracy Alloway. And you can follow
Speaker 1: Toby as we mentioned on Twitter at Toby Underscore in