1 00:00:02,720 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:08,320 --> 00:00:09,840 Speaker 2: The risk is duration. 3 00:00:10,360 --> 00:00:15,160 Speaker 1: If indeed this is a short conflict and normal traffic 4 00:00:15,920 --> 00:00:19,280 Speaker 1: resumes through the Strait of Hormuz, then I think this 5 00:00:19,320 --> 00:00:22,960 Speaker 1: will be a temporary setback, but not a recessionary shock. 6 00:00:23,480 --> 00:00:27,560 Speaker 1: Whereas if this strait of hormones shut down does persist 7 00:00:27,840 --> 00:00:31,600 Speaker 1: for a period of weeks or months, then it would 8 00:00:31,640 --> 00:00:35,159 Speaker 1: be a supply shock greater than that observed in nineteen 9 00:00:35,200 --> 00:00:45,280 Speaker 1: seventy three or nineteen seventy nine. 10 00:00:46,040 --> 00:00:49,000 Speaker 3: I'm Stephanie Flanders, head of Government and Economics at Bloomberg, 11 00:00:49,280 --> 00:00:51,600 Speaker 3: and this is Trumpnomics, the podcast that looks at the 12 00:00:51,640 --> 00:00:54,920 Speaker 3: economic world of Donald Trump, how he's already shaped the 13 00:00:54,920 --> 00:00:57,960 Speaker 3: global economy, and what on earth is going to happen next. 14 00:01:00,200 --> 00:01:03,160 Speaker 3: We've spent much of the past couple of weeks thinking 15 00:01:03,200 --> 00:01:06,200 Speaker 3: about the potential impacts of the crisis in Iran on 16 00:01:06,240 --> 00:01:10,119 Speaker 3: the global economy, for oil prices, on trade, for inflation. 17 00:01:10,800 --> 00:01:13,160 Speaker 3: We talked through a lot of those and even some 18 00:01:13,360 --> 00:01:15,880 Speaker 3: new ones, like the threat to water and even food 19 00:01:15,920 --> 00:01:19,479 Speaker 3: supplies in the Gulf, in detail in last week's episode 20 00:01:19,680 --> 00:01:22,959 Speaker 3: with two of my senior colleagues. But lurking beneath the 21 00:01:23,040 --> 00:01:25,679 Speaker 3: surface of all of these conversations is often the fear 22 00:01:25,720 --> 00:01:27,959 Speaker 3: that this shot will be enough to tip the whole 23 00:01:28,000 --> 00:01:32,280 Speaker 3: economy into recession. But one reassuring lesson of a new 24 00:01:32,400 --> 00:01:34,920 Speaker 3: study of recessions in the US and the UK over 25 00:01:34,959 --> 00:01:37,560 Speaker 3: the past two hundred and fifty years is it takes 26 00:01:37,560 --> 00:01:40,520 Speaker 3: a lot to do that. Doctor Tyler Goodspeed was acting 27 00:01:40,600 --> 00:01:43,560 Speaker 3: Chairman of the Council Economic Advisors at the tail end 28 00:01:43,600 --> 00:01:47,280 Speaker 3: of President Trump's first term, and since twenty twenty three 29 00:01:47,400 --> 00:01:50,600 Speaker 3: has been the chief economist at Exon Mobil. But somehow, 30 00:01:50,640 --> 00:01:53,040 Speaker 3: despite doing that job, he has managed to write a 31 00:01:53,040 --> 00:01:57,560 Speaker 3: book called Recession, The Real Reasons Economy Shrink and What 32 00:01:57,640 --> 00:02:00,920 Speaker 3: to Do about It. He finds in that book, as 33 00:02:00,960 --> 00:02:03,160 Speaker 3: Adam Smith once said, there is a lot of ruin 34 00:02:03,400 --> 00:02:06,520 Speaker 3: in a nation. It takes a lot of overlapping shocks 35 00:02:06,600 --> 00:02:10,560 Speaker 3: to tip an economic expansion into reverse. But pretty much 36 00:02:10,560 --> 00:02:13,680 Speaker 3: everything else we thought we knew about recessions he thinks 37 00:02:14,000 --> 00:02:17,079 Speaker 3: was wrong. Expansions don't die of old age, they don't 38 00:02:17,080 --> 00:02:19,920 Speaker 3: get more likely the longer an expansion continues. They're not 39 00:02:19,960 --> 00:02:24,360 Speaker 3: the inevitable punishment for an excessive boom, and they don't 40 00:02:24,600 --> 00:02:27,440 Speaker 3: cleanse the economy either of the bad decisions taken in 41 00:02:27,480 --> 00:02:30,480 Speaker 3: those booms, or make it easier for businesses to undergo 42 00:02:30,960 --> 00:02:35,800 Speaker 3: necessary restructuring. Perhaps most important, we haven't really got any 43 00:02:35,800 --> 00:02:39,639 Speaker 3: better at avoiding or shortening recessions in the past seventy 44 00:02:39,680 --> 00:02:42,600 Speaker 3: five years or so. But and this seems like an 45 00:02:42,680 --> 00:02:47,280 Speaker 3: important but the book does find that unexpected shocks can 46 00:02:47,320 --> 00:02:51,720 Speaker 3: play a big role in stopping an economy, especially those 47 00:02:51,760 --> 00:02:54,919 Speaker 3: involving food and energy. So all things considered, it seemed 48 00:02:54,919 --> 00:02:57,520 Speaker 3: like a good time to talk to doctor Goodspeed about 49 00:02:57,520 --> 00:02:59,240 Speaker 3: his book. Tyler, thank you very much for joining me. 50 00:02:59,280 --> 00:03:01,400 Speaker 3: You're in London, I'm in New York. I'm sorry about that, 51 00:03:01,400 --> 00:03:02,600 Speaker 3: but we appreciate you coming in. 52 00:03:02,720 --> 00:03:03,600 Speaker 2: It's great to be with you. 53 00:03:08,160 --> 00:03:11,040 Speaker 3: There's a lot of economic history in this book, and 54 00:03:11,280 --> 00:03:14,920 Speaker 3: conveniently for a sort of transatlantic podcast, it's drawing on 55 00:03:15,000 --> 00:03:19,080 Speaker 3: the history of both the UK and the US economy. 56 00:03:19,400 --> 00:03:20,079 Speaker 2: I can't help. 57 00:03:19,919 --> 00:03:22,280 Speaker 3: Wondering how you even found time to do this while 58 00:03:22,320 --> 00:03:26,079 Speaker 3: you were chief economist of a major global energy firm. 59 00:03:26,320 --> 00:03:30,920 Speaker 1: Fortunately, before joining Exxon, I was back in academia after 60 00:03:30,960 --> 00:03:33,160 Speaker 1: a few years in government, and so that was when 61 00:03:33,160 --> 00:03:35,160 Speaker 1: I did most of the grunt work for the project. 62 00:03:35,720 --> 00:03:38,960 Speaker 1: But that said, I'm very much looking forward to having 63 00:03:39,000 --> 00:03:40,320 Speaker 1: my evenings and weekends back. 64 00:03:40,960 --> 00:03:43,560 Speaker 3: Yeah, I'm sure I sort of summarized some of the 65 00:03:43,680 --> 00:03:46,560 Speaker 3: hard truths for economists who thought they understood the economy 66 00:03:46,600 --> 00:03:48,840 Speaker 3: that are in your book. Just tell us briefly what 67 00:03:48,880 --> 00:03:52,720 Speaker 3: you set out to do, and for you the more 68 00:03:52,760 --> 00:03:55,120 Speaker 3: surprising conclusions, and then we can unpack some of them. 69 00:03:56,080 --> 00:03:58,480 Speaker 1: So what I set out to do was to better 70 00:03:58,640 --> 00:04:03,440 Speaker 1: understand econo contractions, having just lived through one of the 71 00:04:03,440 --> 00:04:06,800 Speaker 1: sharpest economic contractions in US and UK history with the 72 00:04:06,800 --> 00:04:08,400 Speaker 1: twenty twenty pandemic recession. 73 00:04:08,920 --> 00:04:09,560 Speaker 2: And when I. 74 00:04:09,600 --> 00:04:13,800 Speaker 1: Started the project, I thought that was such a unique event, 75 00:04:13,920 --> 00:04:17,599 Speaker 1: such a unique shock. But as I got further into 76 00:04:17,600 --> 00:04:22,159 Speaker 1: the research, I realized that actually most recessions are about 77 00:04:22,360 --> 00:04:27,200 Speaker 1: adverse shocks that we could neither fully anticipate nor effectively 78 00:04:27,279 --> 00:04:31,400 Speaker 1: hedge against. One thing we often tell ourselves about recessions 79 00:04:31,920 --> 00:04:35,400 Speaker 1: is that they're inherently cyclical phenomena, that there's a boom 80 00:04:35,400 --> 00:04:39,920 Speaker 1: and then a bus, That there's some excess or malinvestment 81 00:04:40,320 --> 00:04:44,600 Speaker 1: or error in an economic expansion to which recession is 82 00:04:44,640 --> 00:04:49,120 Speaker 1: the inevitable and even necessary remedy. And there's a certain 83 00:04:49,160 --> 00:04:53,600 Speaker 1: moralizing to that story. But it's just not true. Economic recessions. 84 00:04:53,800 --> 00:04:57,440 Speaker 1: As Ben Bernanke put it, they're murdered. And over the 85 00:04:57,480 --> 00:05:00,920 Speaker 1: past few centuries, one of the shocks that we're potentially 86 00:05:00,960 --> 00:05:04,360 Speaker 1: living through right now, namely energy supply shocks, has been 87 00:05:05,000 --> 00:05:08,000 Speaker 1: a serial killer or serial accomplice to the murder of 88 00:05:08,120 --> 00:05:10,520 Speaker 1: otherwise healthy and innocent economic expansions. 89 00:05:10,800 --> 00:05:14,440 Speaker 3: That point of the inevitable consequence of booms. We do 90 00:05:14,520 --> 00:05:17,320 Speaker 3: tend to look back. I think, you know the nineteen 91 00:05:17,400 --> 00:05:20,400 Speaker 3: twenties or some of the financial manias that you read 92 00:05:20,440 --> 00:05:23,559 Speaker 3: about from earlier centuries, or even in the two thousand 93 00:05:23,600 --> 00:05:26,080 Speaker 3: and eight crisis, we tend to think that was a 94 00:05:26,080 --> 00:05:30,760 Speaker 3: banking crisis caused by a lot of excess in lending 95 00:05:30,760 --> 00:05:34,520 Speaker 3: in the financial sector. What piece of that is is wrong, 96 00:05:34,600 --> 00:05:36,880 Speaker 3: or at least it is not being properly described. 97 00:05:37,560 --> 00:05:41,680 Speaker 1: When you look at the height or speed of an 98 00:05:41,680 --> 00:05:45,560 Speaker 1: economic expansion, as measured, for example, by the volume of 99 00:05:45,600 --> 00:05:48,200 Speaker 1: bank lending or the increase in the volume of bank lending, 100 00:05:48,760 --> 00:05:52,760 Speaker 1: then under the boom bus hypothesis, the height or speed 101 00:05:53,279 --> 00:05:56,440 Speaker 1: of the increase in bank lending during an economic expansion 102 00:05:56,480 --> 00:05:59,680 Speaker 1: should predict the depth or speed or duration of the 103 00:05:59,720 --> 00:06:03,040 Speaker 1: subsequent recession and it simply doesn't. And the nineteen twenties 104 00:06:03,080 --> 00:06:05,080 Speaker 1: are actually a very interesting one because, first of all, 105 00:06:05,080 --> 00:06:07,960 Speaker 1: that was actually a very short expansion that preceded the 106 00:06:07,960 --> 00:06:10,680 Speaker 1: recession that began in the second half of nineteen twenty nine. 107 00:06:10,720 --> 00:06:13,400 Speaker 1: When you look at a lot of measures of economic activity, 108 00:06:13,720 --> 00:06:18,960 Speaker 1: including building activity, including investment, there were some large increases, 109 00:06:19,600 --> 00:06:24,480 Speaker 1: but it's in the context of a severe negative deviation 110 00:06:24,680 --> 00:06:30,159 Speaker 1: from trend during World War One, the subsequent recession, the 111 00:06:30,200 --> 00:06:34,960 Speaker 1: subsequent pandemic nineteen eighteen nineteen nineteen, nineteen twenty were very 112 00:06:34,960 --> 00:06:39,600 Speaker 1: difficult postwar years, characterized by shortages in the continued shortages 113 00:06:39,640 --> 00:06:43,280 Speaker 1: in the United Kingdom, by widespread strike activity in the 114 00:06:43,360 --> 00:06:46,560 Speaker 1: United States. So what you saw in the nineteen twenties 115 00:06:46,720 --> 00:06:49,680 Speaker 1: was to a large extent catchup for the growth and 116 00:06:49,800 --> 00:06:53,479 Speaker 1: increase in economic activity that didn't happen during that six 117 00:06:53,560 --> 00:06:55,760 Speaker 1: year period from nineteen fourteen to nineteen twenty. 118 00:06:55,960 --> 00:06:58,240 Speaker 3: The other thing that was interesting to me was the 119 00:06:58,279 --> 00:07:00,680 Speaker 3: thirties is the classic sort of caution tell especially if 120 00:07:00,720 --> 00:07:03,440 Speaker 3: you're an economist and you read the Knes General theory 121 00:07:03,560 --> 00:07:06,480 Speaker 3: and all that is all about something which you don't dispute, 122 00:07:06,480 --> 00:07:09,840 Speaker 3: which is that policy makers can definitely make recessions worse. 123 00:07:09,920 --> 00:07:13,160 Speaker 3: They can mismanage sort of the path into a recession. 124 00:07:13,600 --> 00:07:17,040 Speaker 3: But the conceit was that policy makers post World War 125 00:07:17,120 --> 00:07:20,840 Speaker 3: Two had got better at managing these things. Recessions were 126 00:07:20,920 --> 00:07:24,800 Speaker 3: less deep, was shorter. I guess we've already been questioning 127 00:07:24,840 --> 00:07:26,800 Speaker 3: that a little bit over over recent years, but you 128 00:07:26,920 --> 00:07:29,200 Speaker 3: find that's not even in the sort of post World 129 00:07:29,200 --> 00:07:31,880 Speaker 3: War two data for the UK or the US. 130 00:07:32,160 --> 00:07:35,080 Speaker 1: That's right, and just one moment on the nineteen thirties, 131 00:07:35,120 --> 00:07:38,000 Speaker 1: I think it's really important to remember just the volume 132 00:07:38,120 --> 00:07:41,760 Speaker 1: of severe shocks that hit the US economy, not so 133 00:07:41,800 --> 00:07:44,760 Speaker 1: much the UK economy between nineteen twenty nine and nineteen 134 00:07:44,840 --> 00:07:48,880 Speaker 1: thirty three, a massive increase in business taxation. You had 135 00:07:49,080 --> 00:07:53,720 Speaker 1: four distinct banking crises, three of which were actually highly 136 00:07:53,800 --> 00:07:56,440 Speaker 1: regional in nature, one of which, at least one of 137 00:07:56,480 --> 00:07:59,640 Speaker 1: which had to do with a once in a generation 138 00:08:00,280 --> 00:08:03,559 Speaker 1: drought throughout much of the US that was succeeded by 139 00:08:03,680 --> 00:08:07,520 Speaker 1: a plague of locusts of providential proportions that contributed to 140 00:08:07,520 --> 00:08:10,040 Speaker 1: a wave of bank failures. You had a tiff shock. 141 00:08:10,400 --> 00:08:12,440 Speaker 1: There was just a lot going on in the US 142 00:08:12,440 --> 00:08:16,320 Speaker 1: economy during that period. So yes, you were spot on 143 00:08:16,400 --> 00:08:20,320 Speaker 1: to highlight the conceit of a lot of postwar policy makers. 144 00:08:20,640 --> 00:08:22,520 Speaker 1: We saw this in the nineteen sixties again in the 145 00:08:22,560 --> 00:08:28,360 Speaker 1: nineteen nineties that they thought that because of the rollout 146 00:08:28,360 --> 00:08:31,240 Speaker 1: of automatic stabilizers a greater role for the state in 147 00:08:31,280 --> 00:08:35,559 Speaker 1: the economy, that recessions would become more rare and shallower. 148 00:08:36,160 --> 00:08:41,920 Speaker 1: The reality is that recession depth has been remarkably constant 149 00:08:42,000 --> 00:08:44,880 Speaker 1: over time, going all the way back to the seventeen hundreds. 150 00:08:44,920 --> 00:08:48,920 Speaker 1: Recession duration has been remarkably constant over time, going all 151 00:08:48,960 --> 00:08:51,920 Speaker 1: the way back to seventeen hundred. Most recessions are over 152 00:08:51,960 --> 00:08:55,120 Speaker 1: in about a year, and the vast majority within two years. 153 00:08:56,040 --> 00:09:00,360 Speaker 1: So what has changed is that expansions have had actually 154 00:09:00,480 --> 00:09:05,960 Speaker 1: gotten longer over time and recessions have actually become less frequent. However, 155 00:09:06,160 --> 00:09:10,760 Speaker 1: that is a very long run trend that goes back 156 00:09:10,800 --> 00:09:14,559 Speaker 1: to seventeen hundred and probably before, and you can statistically 157 00:09:14,640 --> 00:09:18,439 Speaker 1: test was there a particular point in time when economic 158 00:09:18,480 --> 00:09:24,800 Speaker 1: expansions transition to greater length, greater duration, and statistically there's 159 00:09:24,800 --> 00:09:27,360 Speaker 1: no clear breakpoint. So this is a long run, smooth 160 00:09:27,400 --> 00:09:29,440 Speaker 1: trend that goes back to the eighteenth century. 161 00:09:29,600 --> 00:09:31,439 Speaker 3: I promise we will get to some sort of positive 162 00:09:31,480 --> 00:09:35,120 Speaker 3: conclusion the lesser part of this conversation. But if you're 163 00:09:35,160 --> 00:09:37,120 Speaker 3: sort of thinking, oh, that you can learn about economics 164 00:09:37,360 --> 00:09:40,679 Speaker 3: and get better at doing things, it's not entirely encouraging. 165 00:09:40,800 --> 00:09:43,200 Speaker 3: Reading your book. One thing that you do highlight, and 166 00:09:43,240 --> 00:09:45,520 Speaker 3: you've already mentioned, actually some of the differences between the 167 00:09:45,600 --> 00:09:48,720 Speaker 3: UK and the US. I was sort of surprised to 168 00:09:48,840 --> 00:09:53,319 Speaker 3: see such a big difference between the two economies in 169 00:09:53,400 --> 00:09:55,840 Speaker 3: terms of the number of recessions. Having grown up in 170 00:09:55,840 --> 00:09:57,280 Speaker 3: the UK, we tend to think of it as rather 171 00:09:57,360 --> 00:10:00,000 Speaker 3: crisis prone and rather unsuccessful, and as you point out, 172 00:10:00,000 --> 00:10:03,480 Speaker 3: it has been quite unsuccessful. But it has been successful 173 00:10:03,559 --> 00:10:07,320 Speaker 3: at one thing, which is relative to America avoiding recessions. 174 00:10:07,360 --> 00:10:10,240 Speaker 3: What is the difference in terms of the likelihood of 175 00:10:10,240 --> 00:10:12,160 Speaker 3: having a recession between the UK and US. 176 00:10:12,280 --> 00:10:12,680 Speaker 2: You're right. 177 00:10:12,760 --> 00:10:16,440 Speaker 1: One of the fascinating findings in the book is just 178 00:10:16,559 --> 00:10:19,480 Speaker 1: how much more recession prone the United States has been 179 00:10:19,559 --> 00:10:21,719 Speaker 1: over the past two hundred and fifty years than the 180 00:10:21,800 --> 00:10:24,200 Speaker 1: United Kingdom, or how much less recession prone the United 181 00:10:24,240 --> 00:10:28,760 Speaker 1: Kingdom has been. And there are fundamentally two reasons for that. 182 00:10:29,640 --> 00:10:34,240 Speaker 1: One is that from eighteen twenty six onward, the United 183 00:10:34,360 --> 00:10:38,760 Speaker 1: Kingdom had a nationwide system of branch banking, so you 184 00:10:38,760 --> 00:10:42,520 Speaker 1: could operate multiple branches across the national economy. 185 00:10:42,720 --> 00:10:43,720 Speaker 2: And if you think. 186 00:10:43,520 --> 00:10:46,760 Speaker 1: About a large diversified economy, it's kind of like a 187 00:10:46,880 --> 00:10:50,680 Speaker 1: well diversified portfolio, so shocks in one area, one sector, 188 00:10:50,800 --> 00:10:53,920 Speaker 1: or one region can be offset by resilience in another. 189 00:10:54,559 --> 00:10:58,319 Speaker 1: In contrast, in the United States, for most of US history, 190 00:10:58,400 --> 00:11:02,240 Speaker 1: for domestic political economy reasons, not only could a bank 191 00:11:02,400 --> 00:11:06,400 Speaker 1: not operate across state lines, they could only operate one 192 00:11:06,520 --> 00:11:10,400 Speaker 1: location within a state. And what that meant was you 193 00:11:10,440 --> 00:11:15,040 Speaker 1: had tens of literally tens of thousands of small, undercapitalized 194 00:11:15,040 --> 00:11:20,360 Speaker 1: financial institutions that were insufficiently diversified, not only on the 195 00:11:20,400 --> 00:11:23,040 Speaker 1: asset side, so they're very exposed to local shocks, but 196 00:11:23,080 --> 00:11:27,840 Speaker 1: also their capital base was underdiversified because all the shareholders, 197 00:11:27,840 --> 00:11:30,160 Speaker 1: all the partners in the bank were also exposed to 198 00:11:30,160 --> 00:11:34,000 Speaker 1: the local economy. And that really only started to change 199 00:11:34,440 --> 00:11:36,640 Speaker 1: in the nineteen seventies of the nineteen eighties. Now, the 200 00:11:36,679 --> 00:11:41,880 Speaker 1: second reason for greater UK resilience in the face of 201 00:11:42,040 --> 00:11:46,920 Speaker 1: adverse recessionary shocks is that from nineteen twenty six to 202 00:11:47,040 --> 00:11:50,319 Speaker 1: nineteen seventy two, the UK economy went without a single 203 00:11:50,400 --> 00:11:54,560 Speaker 1: official coal strike, and during that period the United States 204 00:11:54,600 --> 00:11:58,640 Speaker 1: experienced multiple recessions that were oil induced nineteen forty eight, 205 00:11:58,760 --> 00:12:02,880 Speaker 1: nineteen fifty three, nineteen fifty, nineteen seventy and during that 206 00:12:03,000 --> 00:12:06,200 Speaker 1: time instead, the UK economy was just much more reliant 207 00:12:06,200 --> 00:12:09,640 Speaker 1: on coal. The UK economy had an abundant supply of 208 00:12:09,720 --> 00:12:12,680 Speaker 1: coal and it was their primary source of energy. 209 00:12:12,800 --> 00:12:15,000 Speaker 3: So it's partly that, and I guess we can't really 210 00:12:15,040 --> 00:12:18,720 Speaker 3: congratulate ourselves on having been more efficient at avoiding recessions. 211 00:12:18,840 --> 00:12:21,480 Speaker 3: One thing that was striking to me was despite having 212 00:12:21,880 --> 00:12:24,480 Speaker 3: this might be self evident to some people, despite having 213 00:12:24,679 --> 00:12:28,319 Speaker 3: much more successfully avoiding recessions than the US, it has 214 00:12:28,360 --> 00:12:31,679 Speaker 3: not been a more successful economy over this period. Quite 215 00:12:31,720 --> 00:12:35,040 Speaker 3: a large gap in living standards opened up in the 216 00:12:35,040 --> 00:12:37,440 Speaker 3: first part of the twentieth century and has got quite 217 00:12:37,440 --> 00:12:40,280 Speaker 3: a lot larger in the last few years. So, you know, 218 00:12:40,320 --> 00:12:42,600 Speaker 3: the other great thing that policy makers tend to say 219 00:12:42,640 --> 00:12:44,840 Speaker 3: is well that one of the most important things you 220 00:12:44,920 --> 00:12:47,680 Speaker 3: can do is avoid You should try and keep the 221 00:12:47,720 --> 00:12:50,559 Speaker 3: economy running stably, even if it's growing a bit more slowly, 222 00:12:50,640 --> 00:12:56,160 Speaker 3: because it's avoiding recessions that really helps you maintain living standards. 223 00:12:56,800 --> 00:12:59,480 Speaker 3: That doesn't seem to be borne out either by your 224 00:12:59,480 --> 00:13:01,640 Speaker 3: comparison between the two countries. 225 00:13:01,720 --> 00:13:02,400 Speaker 2: Not at all. 226 00:13:02,559 --> 00:13:06,880 Speaker 1: In terms of the policy maker endeavor to prevent recessions, 227 00:13:07,600 --> 00:13:11,319 Speaker 1: it's inevitably going to be a vain attempt because recessions 228 00:13:11,320 --> 00:13:14,040 Speaker 1: will continue to happen because history continues to happen. There 229 00:13:14,080 --> 00:13:18,199 Speaker 1: has never been an immortal economic expansion. And as you note, 230 00:13:18,840 --> 00:13:21,560 Speaker 1: the UK is about thirty percent poor per person. 231 00:13:21,679 --> 00:13:23,400 Speaker 3: I think that's actually it's quite a lot bigger now. 232 00:13:23,440 --> 00:13:24,839 Speaker 3: I think I was looking at the day to other 233 00:13:24,920 --> 00:13:27,000 Speaker 3: I think it's forty or fifty percent poor because of 234 00:13:27,000 --> 00:13:27,920 Speaker 3: the last twenty years. 235 00:13:28,040 --> 00:13:28,880 Speaker 2: Yeah, and has. 236 00:13:28,800 --> 00:13:31,160 Speaker 1: Long been substantially poorer than the United States. So I 237 00:13:31,200 --> 00:13:34,800 Speaker 1: think that's an important lesson that the majority of years 238 00:13:34,920 --> 00:13:38,880 Speaker 1: in which an economy expands matter much more than the 239 00:13:38,880 --> 00:13:41,560 Speaker 1: minority of years in which it contracts. And so what 240 00:13:41,600 --> 00:13:44,080 Speaker 1: policy makers should be focusing on if they want to 241 00:13:44,080 --> 00:13:49,520 Speaker 1: increase human prosperity and flourishing is focusing on increasing the 242 00:13:49,559 --> 00:13:51,960 Speaker 1: pace of growth during the periods of expansion. 243 00:13:52,400 --> 00:13:55,160 Speaker 3: So let's sort of think more about the current moment. 244 00:13:55,280 --> 00:13:57,960 Speaker 3: You obviously had a peer where you were sitting in 245 00:13:58,000 --> 00:14:00,800 Speaker 3: the White House and the Council of Economic could just 246 00:14:00,840 --> 00:14:03,760 Speaker 3: looking at the time that you were running the Council 247 00:14:04,120 --> 00:14:06,920 Speaker 3: was as COVID hit the economy. So I guess, as 248 00:14:06,960 --> 00:14:08,760 Speaker 3: you say, that was kind of a searing experience that 249 00:14:08,840 --> 00:14:11,320 Speaker 3: made you want to think more about the causes of recessions. 250 00:14:11,720 --> 00:14:13,800 Speaker 3: But if you were there now, how would you be 251 00:14:13,840 --> 00:14:16,760 Speaker 3: thinking about the risks from this crisis in the Middle 252 00:14:16,800 --> 00:14:20,400 Speaker 3: East and indeed the other potential risks on the horizon. 253 00:14:21,080 --> 00:14:23,160 Speaker 2: So I think the risk is duration. 254 00:14:23,680 --> 00:14:27,720 Speaker 1: If indeed this is a short conflict and it is 255 00:14:27,800 --> 00:14:33,160 Speaker 1: contained and normal traffic resumes through the strait of hormones, 256 00:14:33,560 --> 00:14:36,600 Speaker 1: then I think this will be a temporary setback, but 257 00:14:36,960 --> 00:14:40,520 Speaker 1: not a recessionary shock. But if this does persist for 258 00:14:40,600 --> 00:14:44,800 Speaker 1: several weeks, then it does have a nineteen seventy three 259 00:14:45,040 --> 00:14:49,440 Speaker 1: nineteen seventy nine feel to it, where actual physical barrels 260 00:14:49,760 --> 00:14:53,120 Speaker 1: are removed from global supply. A lot of traders on 261 00:14:53,200 --> 00:14:57,640 Speaker 1: trading floors today probably don't have a memory of episodes 262 00:14:57,680 --> 00:15:00,840 Speaker 1: of energy supply shocks where there was actually a apply shock, 263 00:15:01,120 --> 00:15:04,160 Speaker 1: physical barrels, physical cubic feet of gas that were removed 264 00:15:04,160 --> 00:15:08,080 Speaker 1: from global markets. Twenty twenty two, there was a fear 265 00:15:08,120 --> 00:15:10,840 Speaker 1: of that, but what ended up happening was a remarkable 266 00:15:10,880 --> 00:15:14,560 Speaker 1: reconfiguration of global liquid flows and global gas flows. There 267 00:15:14,560 --> 00:15:18,080 Speaker 1: were some transition costs, but there wasn't much disruption to 268 00:15:18,120 --> 00:15:22,080 Speaker 1: the actual supply, Whereas if this strait of Hormuz shut 269 00:15:22,120 --> 00:15:25,760 Speaker 1: down does persist for a period of weeks or months, 270 00:15:26,440 --> 00:15:30,320 Speaker 1: then it would be a supply shock greater than that 271 00:15:30,440 --> 00:15:44,200 Speaker 1: observed in nineteen seventy three or nineteen seventy nine. 272 00:15:45,240 --> 00:15:47,600 Speaker 3: You're sitting in an oil company, but you know there 273 00:15:47,600 --> 00:15:51,280 Speaker 3: has been a big shift in the administration's approach to 274 00:15:52,080 --> 00:15:57,280 Speaker 3: energy transition, alternative sources of energy, and that could potentially 275 00:15:57,320 --> 00:15:59,840 Speaker 3: set the US, in terms of its kind of energy 276 00:16:00,120 --> 00:16:02,720 Speaker 3: model for its economy, on quite a different path from 277 00:16:02,800 --> 00:16:05,080 Speaker 3: the rest of the world. How do you think about 278 00:16:05,080 --> 00:16:08,240 Speaker 3: that in terms of obviously, the US has a lot 279 00:16:08,240 --> 00:16:10,520 Speaker 3: of its own supply now that it didn't have in 280 00:16:10,560 --> 00:16:12,920 Speaker 3: the nineteen seventies, and we've talked in the last week, 281 00:16:12,960 --> 00:16:16,560 Speaker 3: we were talking about how that makes the US less 282 00:16:16,920 --> 00:16:20,160 Speaker 3: vulnerable in many ways. But do you think the sort 283 00:16:20,200 --> 00:16:22,440 Speaker 3: of impact of this kind of crisis in ten or 284 00:16:22,440 --> 00:16:24,600 Speaker 3: twenty years time is going to be quite different just 285 00:16:24,640 --> 00:16:30,880 Speaker 3: because of the approach to their energy supplies that different 286 00:16:30,880 --> 00:16:34,240 Speaker 3: economies are taking. Some countries may just be entirely reliant 287 00:16:34,280 --> 00:16:37,760 Speaker 3: on renewables and not so susceptible to these kind of 288 00:16:37,760 --> 00:16:41,480 Speaker 3: shocks in ten or twenty years time, whereas the US 289 00:16:41,560 --> 00:16:43,680 Speaker 3: will have its own supplies but will be reliant on 290 00:16:43,760 --> 00:16:46,080 Speaker 3: kind of fixed supplies or fossil fuels at least if 291 00:16:46,080 --> 00:16:47,240 Speaker 3: we continue on this path. 292 00:16:47,560 --> 00:16:48,560 Speaker 2: That's a great question. 293 00:16:49,320 --> 00:16:53,120 Speaker 1: The thing about the energy industry is that it is 294 00:16:53,160 --> 00:16:56,920 Speaker 1: an industry with a very long investment horizon. So the 295 00:16:56,920 --> 00:17:00,480 Speaker 1: company I work for, we every year produce a long 296 00:17:00,560 --> 00:17:04,119 Speaker 1: run global economic outlook that we actually make it publicly available, 297 00:17:04,520 --> 00:17:08,800 Speaker 1: and it is our best projection of what we think 298 00:17:08,840 --> 00:17:11,880 Speaker 1: the world looks like in twenty fifty, what the world's 299 00:17:12,000 --> 00:17:16,399 Speaker 1: energy demand is, and how that composition changes by twenty 300 00:17:16,440 --> 00:17:21,000 Speaker 1: fifty from twenty twenty five. In response to this shock, 301 00:17:21,400 --> 00:17:24,639 Speaker 1: following on the twenty twenty two shock, following on the 302 00:17:24,760 --> 00:17:29,520 Speaker 1: pandemic shock, I suspect it will prompt both companies and 303 00:17:29,760 --> 00:17:33,840 Speaker 1: countries to think more a bit more in terms of insurance. 304 00:17:34,640 --> 00:17:39,159 Speaker 1: What is the probability that supply is unavailable, What is 305 00:17:39,200 --> 00:17:43,280 Speaker 1: the cost to me in the event of that supply unavailability, and. 306 00:17:43,160 --> 00:17:45,760 Speaker 2: How does the dot products of those two. 307 00:17:45,680 --> 00:17:48,400 Speaker 1: Numbers compare to the premium I would have to pay 308 00:17:48,800 --> 00:17:52,720 Speaker 1: to effectively ensure against that loss. So for some countries, 309 00:17:53,000 --> 00:17:57,760 Speaker 1: for some companies, that might mean investing in energy sources 310 00:17:58,280 --> 00:18:00,680 Speaker 1: that would not become unavailable in the event of a 311 00:18:00,760 --> 00:18:01,680 Speaker 1: geopolitical shock. 312 00:18:01,920 --> 00:18:03,280 Speaker 3: One of the big lessons that comes out of your 313 00:18:03,280 --> 00:18:07,280 Speaker 3: book is that, as you point out and show very 314 00:18:07,280 --> 00:18:10,960 Speaker 3: clearly and the numbers, expansions don't die of old age. 315 00:18:11,400 --> 00:18:14,199 Speaker 3: So we shouldn't just inevitably expect them just because an 316 00:18:14,240 --> 00:18:18,480 Speaker 3: expansion is of a certain age, and specifically they stop 317 00:18:18,600 --> 00:18:26,040 Speaker 3: because of an unanticipated stopping of key supports for the expansion. 318 00:18:26,560 --> 00:18:29,600 Speaker 3: We've talked about energy as one source of that. We've 319 00:18:29,640 --> 00:18:32,880 Speaker 3: also had quite a lot of shocks to global trade 320 00:18:33,160 --> 00:18:36,600 Speaker 3: over the last year from the president's announcement of tariffs, 321 00:18:36,640 --> 00:18:37,960 Speaker 3: and then some of them have gone in place, some 322 00:18:38,000 --> 00:18:39,520 Speaker 3: of them have not been in place. Now the Supreme 323 00:18:39,560 --> 00:18:43,119 Speaker 3: Court has ruled a whole chunk of them to be unconstitutional, 324 00:18:43,320 --> 00:18:48,400 Speaker 3: but they're going to be recreated in different ways. If 325 00:18:48,400 --> 00:18:50,879 Speaker 3: you're looking at the sort of broad range of shocks 326 00:18:50,880 --> 00:18:53,560 Speaker 3: facing the economy, we're also looking at a very hard 327 00:18:53,600 --> 00:19:00,000 Speaker 3: to predict potential revolution in business practices thanks to AI. 328 00:19:00,880 --> 00:19:05,520 Speaker 3: Thinking about this work of your book, how concerned are you, 329 00:19:05,600 --> 00:19:07,119 Speaker 3: What are the key things that you'll focus on, and 330 00:19:07,160 --> 00:19:09,199 Speaker 3: what do you think the administration should be doing to 331 00:19:09,640 --> 00:19:14,000 Speaker 3: help sustain the expansion or avoid that kind of unexpected shot. 332 00:19:15,080 --> 00:19:18,320 Speaker 1: So, in terms of the conventional subjects suspects that you 333 00:19:18,720 --> 00:19:21,120 Speaker 1: hear a lot of in the financial press, an AI 334 00:19:21,200 --> 00:19:23,960 Speaker 1: boom gone bus, I think that on the basis of 335 00:19:24,040 --> 00:19:28,040 Speaker 1: history that an AI expansion is more likely to be 336 00:19:28,080 --> 00:19:31,600 Speaker 1: a casualty of a recessionary shock than a cause thereof 337 00:19:32,359 --> 00:19:34,600 Speaker 1: everyone calls the two thousand and one recession the dot 338 00:19:34,640 --> 00:19:38,400 Speaker 1: com recession. The decline in Nasdaq stocks was just one 339 00:19:38,440 --> 00:19:41,280 Speaker 1: of at least four shocks impacting the US economy in 340 00:19:41,280 --> 00:19:44,280 Speaker 1: two thousand and one, and I argue is the least important. 341 00:19:44,560 --> 00:19:47,680 Speaker 1: The most important were the terrorist attacks of September eleventh, 342 00:19:48,040 --> 00:19:51,000 Speaker 1: and in fact, all of the output decline during that 343 00:19:51,040 --> 00:19:53,320 Speaker 1: two thousand and one recession was in the quarter that 344 00:19:53,400 --> 00:19:57,879 Speaker 1: included those devastating attacks. When there was widespread fear, we 345 00:19:57,960 --> 00:20:01,480 Speaker 1: grounded the entire US air fleet, we close US airspace. 346 00:20:01,880 --> 00:20:04,840 Speaker 1: There was a sharp fall in consumer suspending because everyone 347 00:20:04,960 --> 00:20:08,879 Speaker 1: was afraid rightfully. So without the nine to eleven attacks, 348 00:20:09,320 --> 00:20:11,960 Speaker 1: the US economy probably would have continued to almost certainly 349 00:20:12,000 --> 00:20:15,760 Speaker 1: would have continued to expand during that roughly eight month 350 00:20:15,760 --> 00:20:18,879 Speaker 1: two quarter recession, and in fact, over the whole of 351 00:20:18,920 --> 00:20:21,359 Speaker 1: that recession, the US economy did expand by about point 352 00:20:21,359 --> 00:20:25,200 Speaker 1: six point seven percentage points. In terms of today's environment, 353 00:20:26,000 --> 00:20:29,920 Speaker 1: one of the things that you learn studying historic recessions 354 00:20:30,119 --> 00:20:34,199 Speaker 1: is that oftentimes a shock to a specific sector is 355 00:20:34,240 --> 00:20:38,840 Speaker 1: more important than big macro shocks because some sectors have 356 00:20:39,040 --> 00:20:41,199 Speaker 1: very high linkages to the rest of the economy and 357 00:20:41,240 --> 00:20:45,520 Speaker 1: it's very difficult for producers and households to find substitutes 358 00:20:45,560 --> 00:20:47,680 Speaker 1: for that product. So energy is of course the one 359 00:20:47,680 --> 00:20:50,920 Speaker 1: we've talked a lot about, but another one today would 360 00:20:51,000 --> 00:20:54,159 Speaker 1: probably be rare earth elements, those seventeen elements on your 361 00:20:54,200 --> 00:20:59,760 Speaker 1: periodic table. China last year threatened to impose strict export 362 00:21:00,000 --> 00:21:03,480 Speaker 1: restrictions on their exports of rare earth elements. 363 00:21:03,560 --> 00:21:05,680 Speaker 2: That is currently suspended until November. 364 00:21:06,240 --> 00:21:09,719 Speaker 1: I think if something like that were to be imposed 365 00:21:10,119 --> 00:21:14,960 Speaker 1: and really enforced, that would potentially be a recessionary shock. 366 00:21:15,440 --> 00:21:19,359 Speaker 1: Another one is there's currently a bill in Congress. I 367 00:21:19,359 --> 00:21:22,520 Speaker 1: think it has a very low probability of passage, but 368 00:21:22,640 --> 00:21:25,359 Speaker 1: it would impose an interest rate cap on credit cards. 369 00:21:25,760 --> 00:21:29,000 Speaker 1: What would probably happen in that event would be that 370 00:21:29,080 --> 00:21:32,280 Speaker 1: credit card companies would cancel accounts and massively curtail the 371 00:21:32,320 --> 00:21:36,600 Speaker 1: extension of credit to consumers. We observed just such a 372 00:21:36,680 --> 00:21:39,840 Speaker 1: shock in nineteen forty eight, almost observed the shock. It 373 00:21:39,880 --> 00:21:42,760 Speaker 1: was the threat of the imposition in nineteen seventy and 374 00:21:42,800 --> 00:21:45,840 Speaker 1: then in nineteen eighty President Carter did indeed invoke his 375 00:21:45,880 --> 00:21:50,439 Speaker 1: authority to impose credit controls, and those were accomplices to 376 00:21:50,520 --> 00:21:53,520 Speaker 1: the murder of the expansions that were then underway in 377 00:21:53,520 --> 00:21:54,480 Speaker 1: all three instances. 378 00:21:54,840 --> 00:21:57,600 Speaker 3: So it's interesting because that bill obviously is inspired by 379 00:21:57,800 --> 00:22:00,679 Speaker 3: the President focusing on that as an aspect of the 380 00:22:00,680 --> 00:22:03,399 Speaker 3: affordability crisis. So you would have been sitting in the 381 00:22:03,400 --> 00:22:05,560 Speaker 3: White House saying this is really not and you would 382 00:22:05,560 --> 00:22:07,960 Speaker 3: be you would have I think ninety five percent of 383 00:22:07,960 --> 00:22:11,399 Speaker 3: economists on your side in saying this is not a 384 00:22:11,400 --> 00:22:14,920 Speaker 3: good idea. The things that you've listed you say we 385 00:22:14,920 --> 00:22:17,479 Speaker 3: should be worried about. I think you're quite right, and 386 00:22:17,520 --> 00:22:20,680 Speaker 3: we are now all much more focused on our reliance 387 00:22:20,680 --> 00:22:24,440 Speaker 3: on these quite obscure rare earths and how that could 388 00:22:24,440 --> 00:22:27,720 Speaker 3: feed into any number of bits of the global supply chain. 389 00:22:28,240 --> 00:22:32,879 Speaker 3: You've also highlighted how a terrorist attack is obviously by definition, 390 00:22:33,000 --> 00:22:37,080 Speaker 3: can be an unexpected and widespread shock to the economy. 391 00:22:37,359 --> 00:22:39,520 Speaker 3: The other one that comes through very strongly in your 392 00:22:39,520 --> 00:22:43,919 Speaker 3: book the frequent references to locusts, is climate shocks and 393 00:22:43,960 --> 00:22:47,000 Speaker 3: particularly food shocks, which we've obviously seen a lot of 394 00:22:47,440 --> 00:22:49,480 Speaker 3: in the last few years. And actually you do remind me, 395 00:22:49,560 --> 00:22:52,159 Speaker 3: I mean that in the lower Angles Wilder books the 396 00:22:52,160 --> 00:22:56,960 Speaker 3: book is that it features the locusts just descending onto 397 00:22:57,000 --> 00:23:00,800 Speaker 3: their crop. It's heartbreaking, but I recommend that to anyone 398 00:23:00,840 --> 00:23:04,480 Speaker 3: because it just feels very real. Those kind of climate shocks, 399 00:23:04,760 --> 00:23:08,600 Speaker 3: a climate related shocks are becoming more frequent. If you 400 00:23:08,680 --> 00:23:12,159 Speaker 3: looked at the world today, it does seem like all 401 00:23:12,200 --> 00:23:16,600 Speaker 3: three of those things. Shocks to unexpected commodities, potential for 402 00:23:16,720 --> 00:23:20,520 Speaker 3: terrorist attacks even on US soil, and a rising number 403 00:23:20,600 --> 00:23:25,160 Speaker 3: of extreme weather climate shocks. Do you think the administration 404 00:23:25,320 --> 00:23:29,359 Speaker 3: is do you think this second Trump administration is doing 405 00:23:29,400 --> 00:23:33,040 Speaker 3: their best to reduce the risk of those things or 406 00:23:33,080 --> 00:23:34,240 Speaker 3: prepare for them for that matter. 407 00:23:34,760 --> 00:23:37,160 Speaker 1: Something that really surprised me in the course of the research, 408 00:23:37,200 --> 00:23:40,679 Speaker 1: which is the number of occasions on which the Eighth 409 00:23:40,720 --> 00:23:45,080 Speaker 1: Plague of Egypt really disrupted the American economy, So eighteen 410 00:23:45,119 --> 00:23:48,320 Speaker 1: fifty seven, eighteen seventy three, and nineteen thirty one during 411 00:23:48,320 --> 00:23:52,120 Speaker 1: the Great Depression, locus plagues of providential proportions. 412 00:23:52,480 --> 00:23:53,480 Speaker 2: And everyone talked. 413 00:23:53,240 --> 00:23:56,440 Speaker 1: In eighteen seventy three about a railroad boom gone bus, 414 00:23:56,480 --> 00:24:00,520 Speaker 1: but really that was a devastating plague of Locus. One 415 00:24:00,640 --> 00:24:04,359 Speaker 1: swarm in eighteen seventy five was the was greater in 416 00:24:04,440 --> 00:24:06,360 Speaker 1: size than the state of California. 417 00:24:06,520 --> 00:24:07,320 Speaker 2: If you look. 418 00:24:07,240 --> 00:24:12,240 Speaker 1: Historically, adverse winter weather events, particularly winter weather events but 419 00:24:12,320 --> 00:24:16,920 Speaker 1: also drought, were major contributors to recessions on both sides 420 00:24:16,920 --> 00:24:20,240 Speaker 1: of the Atlantic, particularly in the eighteenth century, but extending 421 00:24:20,760 --> 00:24:23,960 Speaker 1: into the well into the nineteenth century and even the 422 00:24:24,040 --> 00:24:28,639 Speaker 1: UK recession. One of their longest, actually their longest in 423 00:24:28,800 --> 00:24:31,960 Speaker 1: history was a very protracted recession from nineteen forty three 424 00:24:32,000 --> 00:24:34,800 Speaker 1: to nineteen forty seven. It probably would have been a 425 00:24:34,880 --> 00:24:38,600 Speaker 1: year shorter were it not for an extreme winter weather 426 00:24:38,640 --> 00:24:42,480 Speaker 1: event in nineteen forty six forty seven. Coal was frozen 427 00:24:42,520 --> 00:24:45,800 Speaker 1: at the pits, the trains couldn't move, and then comes 428 00:24:45,840 --> 00:24:48,880 Speaker 1: spring the ground was still frozen. So then when there 429 00:24:48,880 --> 00:24:54,840 Speaker 1: were torrential rains, you had widespread catastrophic flooding. The administration 430 00:24:55,760 --> 00:24:59,280 Speaker 1: currently it is something that they are having to deal 431 00:24:59,320 --> 00:25:03,560 Speaker 1: with because we just had severe winter weather events, multiple 432 00:25:03,560 --> 00:25:06,520 Speaker 1: severe winter weather events in the United States. I don't 433 00:25:06,560 --> 00:25:10,600 Speaker 1: think that those will be of recessionary magnitude. But as 434 00:25:10,640 --> 00:25:13,480 Speaker 1: you pointed out, the one thing that the book demonstrates 435 00:25:13,560 --> 00:25:16,840 Speaker 1: is that sometimes economic expansions can die execution by a 436 00:25:16,920 --> 00:25:19,760 Speaker 1: thousand cuts. So there will probably be will have been 437 00:25:19,840 --> 00:25:23,080 Speaker 1: a material impact on employment and output in January and 438 00:25:23,119 --> 00:25:26,560 Speaker 1: February with those with winter weather events. I can't forecast 439 00:25:26,640 --> 00:25:31,200 Speaker 1: the future frequency or severity of adverse winter weather events, 440 00:25:31,560 --> 00:25:34,120 Speaker 1: but I can say historically they were contributors. 441 00:25:34,400 --> 00:25:37,440 Speaker 3: This is not about climate change, and I'm not particularly 442 00:25:37,480 --> 00:25:39,720 Speaker 3: focused on it in this podcast, but it's it's a 443 00:25:39,840 --> 00:25:43,439 Speaker 3: very striking lesson of your book. We forget often the 444 00:25:43,600 --> 00:25:47,040 Speaker 3: role of climate and those kind of basic conditions for 445 00:25:47,160 --> 00:25:50,800 Speaker 3: life in different economies, how that can feat sudden changes 446 00:25:50,840 --> 00:25:54,919 Speaker 3: in that due to climate or weather can put economies 447 00:25:54,960 --> 00:25:58,159 Speaker 3: on very bad trajectories, and it just sort of seems odd. 448 00:25:58,240 --> 00:26:00,240 Speaker 3: Everything that you said is quite consistent with what the 449 00:26:00,240 --> 00:26:04,160 Speaker 3: administration is doing, except for that piece of actually giving 450 00:26:04,240 --> 00:26:07,760 Speaker 3: up on any effort really to slow the pace of 451 00:26:07,800 --> 00:26:10,680 Speaker 3: climate change, and if anything accelerating, you know, by sort 452 00:26:10,680 --> 00:26:13,000 Speaker 3: of doubling down on fossil fuels. I like, except that 453 00:26:13,040 --> 00:26:15,879 Speaker 3: you are in your chief eclovist of EXOM, do you 454 00:26:15,920 --> 00:26:19,760 Speaker 3: feel at all uncomfortable about that, having done your having 455 00:26:19,800 --> 00:26:22,679 Speaker 3: done your study, that we're just deciding it's all going 456 00:26:22,760 --> 00:26:24,560 Speaker 3: to be an act of God rather than something that 457 00:26:24,600 --> 00:26:27,760 Speaker 3: we could potentially at least slow the pace of energy. 458 00:26:27,760 --> 00:26:31,160 Speaker 1: Companies, as I said, are making investments for the long run, 459 00:26:31,359 --> 00:26:35,040 Speaker 1: and so in our latest global outlook, we still have 460 00:26:35,160 --> 00:26:38,280 Speaker 1: wind and solar growing the fastest in US power jen 461 00:26:38,840 --> 00:26:42,520 Speaker 1: empower gen globally and also in US Powergen. So if 462 00:26:42,520 --> 00:26:45,879 Speaker 1: you look at the global energy stack, twenty twenty five 463 00:26:46,359 --> 00:26:48,560 Speaker 1: was a nice round number year for us to look 464 00:26:48,600 --> 00:26:51,880 Speaker 1: back on how we did forecasting back in twenty fifteen, 465 00:26:51,880 --> 00:26:54,959 Speaker 1: and when you think about everything that happened to global 466 00:26:55,040 --> 00:26:58,119 Speaker 1: energy markets since twenty fifteen. We had the Climate Accords 467 00:26:58,160 --> 00:27:02,520 Speaker 1: and then subsequent regional climate initiatives. We had major technological 468 00:27:02,520 --> 00:27:05,800 Speaker 1: improvements as certain technologies came down their cost curves. We 469 00:27:05,880 --> 00:27:09,399 Speaker 1: had a pandemic, We had the Russian invasion of Ukraine, 470 00:27:09,440 --> 00:27:12,040 Speaker 1: and yet if you look at that global energy stack, 471 00:27:12,600 --> 00:27:17,760 Speaker 1: it shows remarkable fidelity to trend. People often don't understand 472 00:27:17,880 --> 00:27:22,080 Speaker 1: just how massive the energy system is. It moves slowly 473 00:27:22,600 --> 00:27:25,679 Speaker 1: and it adheres to long run trend pretty faithfully. 474 00:27:25,960 --> 00:27:29,720 Speaker 3: So whatever the trend that we saw of greater diversification, 475 00:27:29,800 --> 00:27:33,199 Speaker 3: you think in general you'd expect that to continue and 476 00:27:33,320 --> 00:27:37,879 Speaker 3: not be subject to short term changes in individual countries' policies. 477 00:27:38,000 --> 00:27:40,280 Speaker 3: So I'm just trying to understand what you were saying. 478 00:27:40,320 --> 00:27:43,680 Speaker 1: The global energy mix will look more diversified in twenty 479 00:27:43,800 --> 00:27:46,679 Speaker 1: fifty than in twenty twenty five. It will have a 480 00:27:46,720 --> 00:27:51,080 Speaker 1: greater role for a variable renewable energy. What's interesting in 481 00:27:51,200 --> 00:27:54,040 Speaker 1: terms of the long sweep of history is I would 482 00:27:54,080 --> 00:27:58,000 Speaker 1: actually a symbol some of these shocks in a broader 483 00:27:58,160 --> 00:28:01,800 Speaker 1: environmental bucket. So you mentioned the providential plague of locusts 484 00:28:02,000 --> 00:28:04,800 Speaker 1: several of them, but there are also shocks like one 485 00:28:04,840 --> 00:28:07,000 Speaker 1: we just went through, which is a pandemic, which was 486 00:28:07,040 --> 00:28:09,760 Speaker 1: a contributor to recessions on both sides of the Atlantic 487 00:28:09,840 --> 00:28:13,639 Speaker 1: in nineteen eighteen. And I would add one more shock 488 00:28:14,240 --> 00:28:17,119 Speaker 1: that was a contributor to recessions on both sides of 489 00:28:17,119 --> 00:28:20,960 Speaker 1: the Atlantic in eighteen fifteen sixteen, and then again in 490 00:28:20,960 --> 00:28:25,399 Speaker 1: the eighteen eighties, namely the eruption of Mount Tambora and 491 00:28:25,440 --> 00:28:29,960 Speaker 1: the eruption of Mount Krakta. Both of those resulted in 492 00:28:30,280 --> 00:28:34,920 Speaker 1: pretty devastating weather effects across the globe. Eighteen sixteen was 493 00:28:35,000 --> 00:28:37,320 Speaker 1: known as the year without a Summer because it's so 494 00:28:37,440 --> 00:28:42,680 Speaker 1: devastated crop yields and in terms of tail risk events. 495 00:28:43,240 --> 00:28:45,479 Speaker 1: One thing that was on my mind after writing this 496 00:28:45,520 --> 00:28:48,000 Speaker 1: book was, it's been a while since we've had one 497 00:28:48,000 --> 00:28:49,480 Speaker 1: of those eruptions. 498 00:28:50,000 --> 00:28:51,800 Speaker 3: But hang on, does that say you're going to have 499 00:28:51,840 --> 00:28:54,160 Speaker 3: to do another book about whether or not there are 500 00:28:54,280 --> 00:28:58,160 Speaker 3: inevitable cycles in those kind of events. Having established that 501 00:28:58,200 --> 00:29:02,360 Speaker 3: there aren't inevitable cycles in recessions, do you think maybe 502 00:29:02,360 --> 00:29:05,120 Speaker 3: we should be looking for patterns on the in earthquakes 503 00:29:05,160 --> 00:29:06,240 Speaker 3: and volcanoes. 504 00:29:06,640 --> 00:29:09,160 Speaker 1: You'd have to consult a geologist whether they occur with 505 00:29:09,240 --> 00:29:12,240 Speaker 1: a periodicity. But it just was something that struck me, 506 00:29:12,400 --> 00:29:17,160 Speaker 1: is that those were major global recessionary events. We've had Pinatubo, 507 00:29:17,360 --> 00:29:20,520 Speaker 1: we've had the Icelandic volcano, but nothing on the scale 508 00:29:20,560 --> 00:29:24,680 Speaker 1: of an eighteen fifteen Mountain Bora or eighteen eighties Krakatoa. 509 00:29:24,800 --> 00:29:27,480 Speaker 3: Okay, so I'm not sure if we should be reassured 510 00:29:27,480 --> 00:29:32,040 Speaker 3: by this conversation or not. As long as this particular 511 00:29:32,160 --> 00:29:37,080 Speaker 3: energy crisis doesn't last too long, we shouldn't be too 512 00:29:37,120 --> 00:29:40,640 Speaker 3: worried about whether that's going to cause by itself recession, 513 00:29:40,720 --> 00:29:45,400 Speaker 3: And we shouldn't worry, according to you, about the AI 514 00:29:45,720 --> 00:29:50,000 Speaker 3: boom inevitably sowing the seeds of its destruction. But there's 515 00:29:50,040 --> 00:29:55,920 Speaker 3: still wide range of pandemics, volcanoes, earthquakes, and other shocking 516 00:29:55,960 --> 00:29:58,000 Speaker 3: events that we could think about and could happen at 517 00:29:58,000 --> 00:29:58,440 Speaker 3: any time. 518 00:29:58,640 --> 00:30:00,960 Speaker 1: I would conclude on an after nat note that as 519 00:30:00,960 --> 00:30:06,680 Speaker 1: I observed, we have gradually steadily over time gotten better 520 00:30:06,800 --> 00:30:09,840 Speaker 1: at absorbing the kinds of shocks that historically would have 521 00:30:09,920 --> 00:30:14,600 Speaker 1: resulted in recession. Harvest failures were perennial contributors to economic 522 00:30:14,680 --> 00:30:17,840 Speaker 1: recession in the eighteenth century of the nineteenth century. Now 523 00:30:17,880 --> 00:30:21,640 Speaker 1: we have my more diversified global supplies, so we've been 524 00:30:21,720 --> 00:30:25,440 Speaker 1: learning how to better deal with recessionary shocks, and expansions 525 00:30:25,440 --> 00:30:27,600 Speaker 1: have been getting longer. So I would end on an 526 00:30:27,640 --> 00:30:32,440 Speaker 1: optimistic note and also again remind folks that what ultimately 527 00:30:32,440 --> 00:30:36,880 Speaker 1: matters more for long term prosperity is raising that pace 528 00:30:36,920 --> 00:30:39,480 Speaker 1: of growth during economic expansions. 529 00:30:39,400 --> 00:30:41,880 Speaker 3: Doctor Tyler Goodspeed, that's a great note on which to end. 530 00:30:41,880 --> 00:30:49,360 Speaker 3: Thank you very much, Thank you, thanks for listening to 531 00:30:49,320 --> 00:30:52,320 Speaker 3: Trumpnomics from Bloomberg. It was hosted by me Stephanie Flanders, 532 00:30:52,640 --> 00:30:55,840 Speaker 3: and I was joined by the economist and author Dr 533 00:30:55,880 --> 00:31:00,720 Speaker 3: Tyler Goodspeed. Trump Pnomics was produced by Samasadi Moses and 534 00:31:01,360 --> 00:31:04,280 Speaker 3: with help this week from Amy Keane and kle Brooks. 535 00:31:04,680 --> 00:31:07,240 Speaker 3: Sound design was by Blake Maples. To help others find 536 00:31:07,280 --> 00:31:10,040 Speaker 3: the show, please rate and review us highly wherever you 537 00:31:10,080 --> 00:31:13,080 Speaker 3: listen to podcasts. I was looking on Apple podcasts the 538 00:31:13,160 --> 00:31:15,640 Speaker 3: other day and really there's a lot fewer people who've 539 00:31:15,640 --> 00:31:18,160 Speaker 3: given reviews than listen to this show. So I would 540 00:31:18,240 --> 00:31:21,480 Speaker 3: encourage you to rock up and give us a nice 541 00:31:21,600 --> 00:31:22,080 Speaker 3: five star