1 00:00:10,440 --> 00:00:14,800 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,840 --> 00:00:19,280 Speaker 1: I'm Joe Wisenthal and I'm Tracy Hallway. Tracy, I hate 3 00:00:19,320 --> 00:00:21,680 Speaker 1: to do this, but I have to try. I knew it. 4 00:00:21,840 --> 00:00:24,319 Speaker 1: I knew you were going to do this. I knew it. 5 00:00:25,160 --> 00:00:28,840 Speaker 1: I'll spare you, I'll spare you the effort. But yes, 6 00:00:29,320 --> 00:00:34,319 Speaker 1: there is a crisis that we haven't covered yet. I'm 7 00:00:34,360 --> 00:00:36,960 Speaker 1: never gonna let you forget the time when you said 8 00:00:37,000 --> 00:00:38,879 Speaker 1: that we had touched all the basis of this, when 9 00:00:38,880 --> 00:00:43,639 Speaker 1: they were clearly several several more major areas that we 10 00:00:44,240 --> 00:00:47,120 Speaker 1: had yet to discuss. Well, we're starting to get there 11 00:00:47,120 --> 00:00:52,559 Speaker 1: in terms of hitting all the really big themes I think. Okay, Okay, 12 00:00:52,600 --> 00:00:56,360 Speaker 1: I'm not going to result, but yes, go ahead. Of 13 00:00:56,440 --> 00:01:00,080 Speaker 1: the many crises will we be covering today, Okay, the 14 00:01:00,160 --> 00:01:03,240 Speaker 1: one that we definitely have not talked about yet is 15 00:01:03,400 --> 00:01:06,520 Speaker 1: emerging markets. And you know, there are all kinds of 16 00:01:06,600 --> 00:01:12,280 Speaker 1: aspects to a extraordinary economic disruption of this sort, the 17 00:01:12,319 --> 00:01:14,960 Speaker 1: likes of which we've never seen in terms of essentially 18 00:01:15,080 --> 00:01:20,399 Speaker 1: a mandated halt to so many businesses worldwide, But one 19 00:01:21,000 --> 00:01:27,840 Speaker 1: acute vulnerability point is obviously emerging markets. Countries whose economies 20 00:01:27,920 --> 00:01:32,920 Speaker 1: may rely on tourism or other exports to richer countries, 21 00:01:33,319 --> 00:01:36,440 Speaker 1: countries that have a lot of dollar denominated debts but 22 00:01:36,480 --> 00:01:40,520 Speaker 1: are suddenly finding it very difficult to acquire those dollars 23 00:01:40,560 --> 00:01:43,559 Speaker 1: in their normal means of business. This is a huge 24 00:01:43,600 --> 00:01:46,759 Speaker 1: shock domestically from many countries, but also a huge shock 25 00:01:46,880 --> 00:01:50,400 Speaker 1: to world trade. And of course emerging markets are sort 26 00:01:50,400 --> 00:01:55,840 Speaker 1: of necessarily the most the most at risk here, right, 27 00:01:55,880 --> 00:01:58,720 Speaker 1: So you have this perfect storm really of pressures on 28 00:01:58,760 --> 00:02:02,400 Speaker 1: emerging markets. You have up the big spike in the dollar, which, 29 00:02:02,440 --> 00:02:06,520 Speaker 1: as you mentioned, causes pain for emerging markets in different ways, 30 00:02:06,560 --> 00:02:08,959 Speaker 1: a bunch of different ways. You also have the contraction 31 00:02:09,000 --> 00:02:12,320 Speaker 1: in global trade. You have the fall in the oil price, 32 00:02:12,440 --> 00:02:16,320 Speaker 1: which is bad if you're an oil exporting developing nation. 33 00:02:16,840 --> 00:02:20,960 Speaker 1: And then of course you have the coronavirus pandemic itself, 34 00:02:21,040 --> 00:02:25,640 Speaker 1: which could disproportionately impact developing countries given that they have 35 00:02:25,760 --> 00:02:31,160 Speaker 1: fewer health resources, fewer financial resources, and different not really 36 00:02:31,240 --> 00:02:36,240 Speaker 1: ideal living conditions to actually battle the virus. So yeah, 37 00:02:36,360 --> 00:02:40,320 Speaker 1: it's it's a pretty bad mix for em at the moment. Right. 38 00:02:40,400 --> 00:02:42,280 Speaker 1: The way as you put it, there really is sort 39 00:02:42,320 --> 00:02:45,640 Speaker 1: of like just being buffeted on every side. Right now. 40 00:02:46,000 --> 00:02:49,799 Speaker 1: So our guests today, and I feel like our guest 41 00:02:49,840 --> 00:02:52,280 Speaker 1: today is yet another one of our recent guests that 42 00:02:52,600 --> 00:02:57,160 Speaker 1: deserves when we eventually get oddlock toade bags or something 43 00:02:57,160 --> 00:02:59,519 Speaker 1: like this, because this might be his fourth or fifth time. 44 00:03:00,160 --> 00:03:03,080 Speaker 1: We've talked to Dan Wing several times, We've talked to 45 00:03:03,200 --> 00:03:06,280 Speaker 1: Chris White several times, and of course our guests today, 46 00:03:06,600 --> 00:03:09,040 Speaker 1: Brad Setser, it's got to be at least this fifth 47 00:03:09,040 --> 00:03:12,640 Speaker 1: time talking to us since we launched the podcast. But 48 00:03:12,760 --> 00:03:16,919 Speaker 1: he has been tracking the e M angle very closely 49 00:03:17,000 --> 00:03:20,440 Speaker 1: and really has been uh for years, but UH now 50 00:03:20,840 --> 00:03:23,839 Speaker 1: sort of with this particular crisis, and so we'll sort 51 00:03:23,840 --> 00:03:27,880 Speaker 1: of get a broad overview of um the crisis facing 52 00:03:27,919 --> 00:03:30,480 Speaker 1: different e m s and what needs to be done 53 00:03:30,720 --> 00:03:34,560 Speaker 1: going forward. So, without further ado, Brad Setser, thank you 54 00:03:34,639 --> 00:03:38,080 Speaker 1: very much for joining us. That's a great pleasure. Brad. 55 00:03:38,200 --> 00:03:41,840 Speaker 1: Just sort of big picture if you, how does this 56 00:03:42,080 --> 00:03:45,720 Speaker 1: shock to the real economy for e MS as a whole? 57 00:03:45,760 --> 00:03:47,720 Speaker 1: And I know people always say you can't look at 58 00:03:48,000 --> 00:03:52,400 Speaker 1: ems as a whole, and every country has its unique situation, 59 00:03:52,480 --> 00:03:56,520 Speaker 1: but as a whole, how does it compare to prior 60 00:03:57,200 --> 00:04:00,720 Speaker 1: major downturns in global trade of the global economy, and 61 00:04:00,960 --> 00:04:06,600 Speaker 1: this this shock is clearly going to be significantly worse 62 00:04:07,080 --> 00:04:11,400 Speaker 1: than the two thousand and eight shock, the global financial crisis, 63 00:04:11,880 --> 00:04:15,400 Speaker 1: It's clearly going to be significantly worse than the Asian 64 00:04:15,400 --> 00:04:21,240 Speaker 1: financial crisis. I think this is across a range of measures. 65 00:04:21,279 --> 00:04:24,239 Speaker 1: You know, it is the biggest shock the emerging world 66 00:04:24,360 --> 00:04:27,480 Speaker 1: is faced in the last thirty years. Yeah, I think 67 00:04:27,520 --> 00:04:31,839 Speaker 1: I saw someone on Twitter describing the current economic situation 68 00:04:31,960 --> 00:04:34,640 Speaker 1: or the crisis is sort of like the Spanish flue 69 00:04:34,680 --> 00:04:38,279 Speaker 1: meets Great depression meets two thousand and eight financial crisis 70 00:04:38,400 --> 00:04:42,719 Speaker 1: meets Asia financial crisis, which is a pretty terrible mix 71 00:04:43,600 --> 00:04:45,839 Speaker 1: when it comes to e MS. What would you say 72 00:04:45,920 --> 00:04:50,320 Speaker 1: is the biggest pressure point at the moment, what's causing 73 00:04:50,320 --> 00:04:56,080 Speaker 1: the most pain? Well, I think there are two distinct 74 00:04:56,680 --> 00:05:03,480 Speaker 1: pressure points. One pressure point does the global financial crisis 75 00:05:03,520 --> 00:05:07,760 Speaker 1: analog pressure point? Those countries that have borrowed in dollars 76 00:05:08,680 --> 00:05:12,920 Speaker 1: or those countries that have a large dependence on foreign 77 00:05:12,960 --> 00:05:18,920 Speaker 1: investors holding their local currency debt have had difficulty borrowing 78 00:05:19,000 --> 00:05:23,200 Speaker 1: dollars and have had to manage a world where a 79 00:05:23,200 --> 00:05:26,960 Speaker 1: lot of foreign investors are pulling money out. And then 80 00:05:27,000 --> 00:05:32,599 Speaker 1: that's been combined with a shock to global trade, but 81 00:05:32,680 --> 00:05:37,040 Speaker 1: a particularly sharp shock to global trade and tourism and 82 00:05:37,880 --> 00:05:43,919 Speaker 1: global commodity prices, so symmetric fall and trade. Um it 83 00:05:43,960 --> 00:05:48,680 Speaker 1: obviously hurts activity, but it doesn't create gaps between exports 84 00:05:48,680 --> 00:05:52,120 Speaker 1: and imports. But if you're reliant on tourism and tourism 85 00:05:52,120 --> 00:05:54,720 Speaker 1: goes to zero, all of a sudden, you can't pay 86 00:05:54,760 --> 00:05:57,919 Speaker 1: your import bill. If you rely on oil exports, and 87 00:05:57,960 --> 00:06:01,680 Speaker 1: your break even used to be fifty or sixty, and 88 00:06:01,720 --> 00:06:05,120 Speaker 1: you can't get twenty dollars a barrel today for lower volumes, 89 00:06:05,680 --> 00:06:08,480 Speaker 1: all of a sudden, again you can't cover your imports. Though. 90 00:06:08,960 --> 00:06:12,279 Speaker 1: So it's the combination of the financial shock and the 91 00:06:12,360 --> 00:06:16,760 Speaker 1: real shock, the real shock to trade, the shock to 92 00:06:16,839 --> 00:06:20,480 Speaker 1: health is almost certainly coming. But I think they're for 93 00:06:20,640 --> 00:06:25,320 Speaker 1: most emerging economies. That's uh something that I'll play out 94 00:06:25,320 --> 00:06:29,320 Speaker 1: over the next month before we go any further. A 95 00:06:29,320 --> 00:06:32,320 Speaker 1: little bit of housekeeping. Two points is a of course, 96 00:06:32,640 --> 00:06:34,880 Speaker 1: we've had bread on so many times. I didn't even 97 00:06:34,920 --> 00:06:37,920 Speaker 1: really properly introduce him in the beginning, but he is 98 00:06:37,960 --> 00:06:41,360 Speaker 1: a senior Fellow or the Council on Foreign Relations as 99 00:06:41,400 --> 00:06:44,480 Speaker 1: well as a senior adviser of EXANTE Data I just 100 00:06:44,560 --> 00:06:47,640 Speaker 1: feel like so hopefully most of our listeners have heard 101 00:06:47,640 --> 00:06:50,960 Speaker 1: Bread or followed him for a long time, but forgot 102 00:06:51,040 --> 00:06:53,880 Speaker 1: to do that. Also another crucial piece, we went the 103 00:06:54,360 --> 00:06:58,240 Speaker 1: we want the no introduction necessary route, which is which 104 00:06:58,279 --> 00:07:00,719 Speaker 1: is a form of praise really uh, and also another 105 00:07:00,760 --> 00:07:06,719 Speaker 1: crucial form of consideration. We're recording this April nine, twenty, 106 00:07:06,880 --> 00:07:09,360 Speaker 1: and we've been saying that a lot of we want 107 00:07:09,360 --> 00:07:12,080 Speaker 1: people to know exactly which day it's been recording because 108 00:07:12,920 --> 00:07:16,080 Speaker 1: things are moving so fast. But there's another special reason 109 00:07:16,520 --> 00:07:19,080 Speaker 1: it's important to bear in mind the day that we're 110 00:07:19,080 --> 00:07:22,960 Speaker 1: recording this, which is that next week, which is when 111 00:07:23,040 --> 00:07:26,560 Speaker 1: people will likely be listening to this is the I 112 00:07:26,760 --> 00:07:30,840 Speaker 1: m F Spring meetings, and those of course take on 113 00:07:31,200 --> 00:07:36,040 Speaker 1: new urgency in light of the sort of twin shocks 114 00:07:36,080 --> 00:07:39,400 Speaker 1: that Brad had this uh just described. So of course 115 00:07:39,400 --> 00:07:41,960 Speaker 1: we're recording this before those happened, and we don't know 116 00:07:42,000 --> 00:07:44,040 Speaker 1: what will have been announced by the time you're listening, 117 00:07:44,080 --> 00:07:46,880 Speaker 1: but sort of bread, uh, that gives us a chance 118 00:07:46,920 --> 00:07:51,360 Speaker 1: to pivot again sort of big picture, what is the 119 00:07:51,480 --> 00:07:56,120 Speaker 1: role of the I m F in alleviating some of 120 00:07:56,200 --> 00:07:59,640 Speaker 1: the acute crisis and what does it happen it's toolbox 121 00:08:00,040 --> 00:08:04,200 Speaker 1: when so many countries are all suffering at the exact 122 00:08:04,200 --> 00:08:08,640 Speaker 1: same time. The the i m S role broadly speaking, 123 00:08:09,400 --> 00:08:13,760 Speaker 1: is to lend reserves for an exchange reserves two countries 124 00:08:13,800 --> 00:08:17,200 Speaker 1: that don't have enough foreign exchange reserves, and that may 125 00:08:17,240 --> 00:08:21,280 Speaker 1: be countries that don't have enough foreign exchange reserves relative 126 00:08:21,440 --> 00:08:27,040 Speaker 1: to their short term debt that is coming due. Maybe 127 00:08:27,080 --> 00:08:30,920 Speaker 1: that countries that don't have enough foreign exchange reserves relative 128 00:08:31,000 --> 00:08:33,880 Speaker 1: to the number of foreign investors in their local markets 129 00:08:34,120 --> 00:08:36,480 Speaker 1: who want to get out. Or it may be that 130 00:08:36,600 --> 00:08:41,080 Speaker 1: countries that don't have enough foreign exchange reserves to cover 131 00:08:41,760 --> 00:08:46,040 Speaker 1: the fall off in their exports without reducing their imports 132 00:08:46,200 --> 00:08:49,920 Speaker 1: very dramatically. Now there's some details, you know, the i 133 00:08:50,040 --> 00:08:53,640 Speaker 1: m F can, in the process of providing balance of 134 00:08:53,679 --> 00:08:59,000 Speaker 1: payment support also provide budget financing, and that certainly will 135 00:09:00,280 --> 00:09:04,000 Speaker 1: have a role. But in general, the i m F 136 00:09:04,320 --> 00:09:08,880 Speaker 1: is a an institution that is designed to provide countries 137 00:09:08,920 --> 00:09:13,360 Speaker 1: that need reserves with reserves and to give lend people 138 00:09:13,440 --> 00:09:17,000 Speaker 1: reserves for longer periods of time and for a broader 139 00:09:17,040 --> 00:09:20,880 Speaker 1: set of uses. Then, say the kind of foreign exchange 140 00:09:21,400 --> 00:09:24,520 Speaker 1: which is provided through say the FED swap lines, which 141 00:09:24,600 --> 00:09:30,079 Speaker 1: is really short term lending to support short term funding 142 00:09:30,120 --> 00:09:32,600 Speaker 1: needs of banks. The I m F has a lot 143 00:09:32,600 --> 00:09:37,240 Speaker 1: more flexibility. It lends for several years, varies a little bit, 144 00:09:37,280 --> 00:09:42,920 Speaker 1: but it usually lends UH in conjunction with a program 145 00:09:42,960 --> 00:09:47,480 Speaker 1: of some reform and policy change. Now, look, we're in 146 00:09:47,520 --> 00:09:52,400 Speaker 1: a different world than the usual world the reforms or 147 00:09:52,480 --> 00:09:55,599 Speaker 1: policy changes that may go with I MF lending, and 148 00:09:56,000 --> 00:10:00,760 Speaker 1: in this context, maybe we the I m F asked 149 00:10:00,840 --> 00:10:03,600 Speaker 1: you to spend more on your public health system, or 150 00:10:03,640 --> 00:10:07,600 Speaker 1: the I m F ask you to increase the amount 151 00:10:07,640 --> 00:10:12,000 Speaker 1: of public spending to poor families. I don't think the 152 00:10:12,080 --> 00:10:16,479 Speaker 1: conditionality needs to be thought of as the traditional conditionality 153 00:10:16,800 --> 00:10:20,360 Speaker 1: in all cases, and that will be interesting to see 154 00:10:20,760 --> 00:10:23,040 Speaker 1: whether or not we get an element of that in 155 00:10:23,280 --> 00:10:26,840 Speaker 1: UH next week's I m F meetings. UM, just when 156 00:10:26,880 --> 00:10:31,400 Speaker 1: it comes to the state of effects reserves in emerging markets, 157 00:10:31,640 --> 00:10:33,960 Speaker 1: can you give us a sort of high level overview 158 00:10:33,960 --> 00:10:36,959 Speaker 1: of what those look like right now? Who is best 159 00:10:37,080 --> 00:10:41,520 Speaker 1: positioned in this environment and who is maybe UH warsaw 160 00:10:42,200 --> 00:10:45,160 Speaker 1: so sure. I mean, there are a set of emerging 161 00:10:45,200 --> 00:10:50,920 Speaker 1: economies that basically interact with the global economy as creditors. 162 00:10:51,840 --> 00:10:56,840 Speaker 1: They have more foreign assets than they have foreign liabilities, 163 00:10:58,040 --> 00:11:02,360 Speaker 1: and in many cases they have more liquid foreign exchange 164 00:11:02,360 --> 00:11:05,880 Speaker 1: reserves in their central bank, then they have external debt. 165 00:11:06,559 --> 00:11:12,360 Speaker 1: That is broadly a description of Korea, it's broadly a 166 00:11:12,400 --> 00:11:16,560 Speaker 1: description of China. It is certainly a description of Taiwan. 167 00:11:17,160 --> 00:11:21,240 Speaker 1: It is a description of Thailand. On the other end 168 00:11:21,280 --> 00:11:24,960 Speaker 1: of the spectrum are emerging markets that have almost no 169 00:11:25,120 --> 00:11:28,319 Speaker 1: reserves or almost no reserves that they haven't borrowed from 170 00:11:28,320 --> 00:11:33,559 Speaker 1: their own banks and have substantial external debts. The most 171 00:11:33,600 --> 00:11:38,680 Speaker 1: extreme cases leban On Earth, but Turkey falls in that category. 172 00:11:38,800 --> 00:11:42,679 Speaker 1: And then you have I think Argentina broadly speaking, as 173 00:11:42,720 --> 00:11:45,840 Speaker 1: we all know, falls in that category. And then you 174 00:11:45,920 --> 00:11:49,720 Speaker 1: have a set of countries in the middle countries that 175 00:11:49,800 --> 00:11:55,240 Speaker 1: do have reserves, that do have already pre negotiated credit 176 00:11:55,280 --> 00:11:59,880 Speaker 1: lines from the I m F, but have substantial external 177 00:12:00,040 --> 00:12:05,080 Speaker 1: act and it is possible that the withdrawal of foreign credit, 178 00:12:05,200 --> 00:12:09,240 Speaker 1: together with a loss of export receipts could leave them 179 00:12:09,400 --> 00:12:13,880 Speaker 1: short reserves. So those are countries like Colombia or Indonesia, 180 00:12:15,000 --> 00:12:19,320 Speaker 1: South Africa, uh and in bad states of the world, 181 00:12:20,520 --> 00:12:23,760 Speaker 1: even a country like Mexico, which is a special case 182 00:12:23,840 --> 00:12:26,880 Speaker 1: because of his relationship with the United States. And then 183 00:12:26,880 --> 00:12:32,360 Speaker 1: that same split is present amongst the oil exporting economies. 184 00:12:32,760 --> 00:12:36,000 Speaker 1: Saudi Arabian Russia, the two biggest, both have about a 185 00:12:36,000 --> 00:12:40,839 Speaker 1: half trillion in reserves. That's enough that they can broadly 186 00:12:40,920 --> 00:12:46,360 Speaker 1: speaking cover their imports this year even if oil doesn't rebound, 187 00:12:46,720 --> 00:12:49,400 Speaker 1: and still have enough reserves so there's no real threat 188 00:12:49,440 --> 00:12:53,040 Speaker 1: to financial studaility. But then there are much weaker oil 189 00:12:53,080 --> 00:12:59,959 Speaker 1: exporting economies Algeria, Oman and Goal and Nigeria, almost Ecuador obvious. 190 00:13:00,480 --> 00:13:03,760 Speaker 1: The list goes on and on, and those countries broadly 191 00:13:03,800 --> 00:13:08,160 Speaker 1: speaking lack enough for an exchange info to pay their 192 00:13:08,200 --> 00:13:11,480 Speaker 1: foreign debts. Right now, I have a question that might 193 00:13:11,480 --> 00:13:14,920 Speaker 1: be a little stupid and it's not facetious, but I 194 00:13:14,960 --> 00:13:18,400 Speaker 1: think some people might interpret it as such. Does a 195 00:13:18,480 --> 00:13:24,720 Speaker 1: country like Argentina, which has spent years of being sort 196 00:13:24,760 --> 00:13:28,360 Speaker 1: of closet disconnected already from the global financial system due 197 00:13:28,400 --> 00:13:31,120 Speaker 1: to all of its defaults, is this less of a 198 00:13:31,200 --> 00:13:33,600 Speaker 1: shock in a weird way to them because this is 199 00:13:33,640 --> 00:13:38,840 Speaker 1: sort of business as usual. Yes, I think that's right. Actually, um, 200 00:13:38,880 --> 00:13:41,880 Speaker 1: it's less of a shock because even before the coronavirus, 201 00:13:42,480 --> 00:13:46,760 Speaker 1: Argentina was seeking at debt restructuring for all of its 202 00:13:46,760 --> 00:13:50,680 Speaker 1: external debt and that debt restructuring was going to involve 203 00:13:50,720 --> 00:13:55,560 Speaker 1: almost no near term payments, so you know, essentially they 204 00:13:55,760 --> 00:14:02,280 Speaker 1: they their creditors were already anticipating a deep loss and 205 00:14:02,360 --> 00:14:06,040 Speaker 1: no near term cash flow. It's also a smaller shock 206 00:14:06,920 --> 00:14:10,040 Speaker 1: just because of the structure of Argentina's exports. To be honest, 207 00:14:11,320 --> 00:14:17,120 Speaker 1: Argentina exports soybeans, wheat, and beef. And if you think 208 00:14:17,160 --> 00:14:20,640 Speaker 1: of the kind of trade that is likely to see 209 00:14:20,640 --> 00:14:27,040 Speaker 1: the least disruption, that's trade in in basic foods. And 210 00:14:27,200 --> 00:14:32,520 Speaker 1: while soy is an input into the production of chicken 211 00:14:32,560 --> 00:14:35,840 Speaker 1: and pork, it's a pretty important input, and so therefore 212 00:14:36,400 --> 00:14:40,760 Speaker 1: Argentina's trade is going to see somewhat less disruption. So 213 00:14:40,800 --> 00:14:45,119 Speaker 1: I think both on the financial side, you know, Argentina 214 00:14:45,840 --> 00:14:50,920 Speaker 1: was already essentially heading to default, already not going to 215 00:14:51,000 --> 00:14:54,680 Speaker 1: be paying, already reliant on the I m F, and 216 00:14:54,760 --> 00:14:57,520 Speaker 1: on the current account side, they happen to be in 217 00:14:57,560 --> 00:15:02,120 Speaker 1: a position where there's a re reasonable basis for thinking 218 00:15:02,160 --> 00:15:05,080 Speaker 1: that Belsia smaller loss and exports. Yeah, but you can 219 00:15:05,080 --> 00:15:08,720 Speaker 1: look at other countries like Lebanon, which is very reliant 220 00:15:08,760 --> 00:15:13,160 Speaker 1: on tourism and remittances and faces an even bigger problem 221 00:15:13,160 --> 00:15:18,320 Speaker 1: even though they too essentially entered the coronavirus shock in 222 00:15:18,400 --> 00:15:21,720 Speaker 1: default right, we actually have an All Lots episode with 223 00:15:21,760 --> 00:15:26,920 Speaker 1: Paul McNamara talking specifically about the situation in Lebanon from 224 00:15:26,960 --> 00:15:29,280 Speaker 1: a few months ago. And I don't think things have 225 00:15:29,960 --> 00:15:33,800 Speaker 1: improved since then. Um I wanted to go back just 226 00:15:33,840 --> 00:15:37,120 Speaker 1: to the idea of the external debt and emerging markets. 227 00:15:37,160 --> 00:15:40,680 Speaker 1: It's not like this hasn't been on people's radars before. 228 00:15:41,240 --> 00:15:44,200 Speaker 1: You know, we saw the Bank for International Settlements, for instance, 229 00:15:44,200 --> 00:15:47,160 Speaker 1: writing over and over and over that dollar denominated borrowing 230 00:15:47,920 --> 00:15:52,360 Speaker 1: was a potential vulnerability in emerging market and now it 231 00:15:52,400 --> 00:15:55,520 Speaker 1: seems like it could really come back to haunt them. 232 00:15:56,200 --> 00:15:59,360 Speaker 1: We did see some emerging market economies that did try 233 00:15:59,400 --> 00:16:04,440 Speaker 1: to borrow more through domestic currency bonds. Has that helped 234 00:16:04,440 --> 00:16:09,040 Speaker 1: them at all? Yes? Uh, you know, I think it 235 00:16:09,280 --> 00:16:15,240 Speaker 1: obviously helps if your currency falls, if your debt is 236 00:16:15,240 --> 00:16:18,760 Speaker 1: denominated in your own currency, If you're debt denominated and 237 00:16:19,160 --> 00:16:22,080 Speaker 1: foreign currency, the real burden of that debt goes up. 238 00:16:23,120 --> 00:16:26,240 Speaker 1: It hasn't been a panaceat the fact that a lot 239 00:16:26,280 --> 00:16:30,840 Speaker 1: of foreign investors were holding local currency debt meant that 240 00:16:30,920 --> 00:16:34,400 Speaker 1: they were more exposed to currency moves. And in their 241 00:16:34,440 --> 00:16:39,000 Speaker 1: efforts to limit their exposure, two further falls in the 242 00:16:39,040 --> 00:16:43,000 Speaker 1: currency they would sell, and that puts the pressure on 243 00:16:43,040 --> 00:16:46,160 Speaker 1: the local bond market. It puts pressure obviously on the 244 00:16:46,200 --> 00:16:51,400 Speaker 1: exchange rate. So in that sense, it became an amplifier 245 00:16:52,120 --> 00:16:55,240 Speaker 1: of the a lot of the currency moves, but in 246 00:16:55,240 --> 00:16:58,200 Speaker 1: a sort of strange way, it amplifies those moves, which 247 00:16:58,240 --> 00:17:02,840 Speaker 1: is bad, but it makes a country itself less vulnerable 248 00:17:03,400 --> 00:17:08,359 Speaker 1: to the impact of an undervalued currency. But it clearly 249 00:17:08,480 --> 00:17:14,160 Speaker 1: has introduced a new new type of dynamic into the market. Uh, 250 00:17:14,200 --> 00:17:17,119 Speaker 1: and that dynamic can in its own way be destabilized 251 00:17:28,280 --> 00:17:32,680 Speaker 1: m so Bron. Obviously, one of the questions out there 252 00:17:33,080 --> 00:17:36,920 Speaker 1: is we don't really know, and that everyone just started 253 00:17:36,920 --> 00:17:41,800 Speaker 1: guessing what post crisis economic behavior will look like. Presumably 254 00:17:41,920 --> 00:17:44,840 Speaker 1: some tourism will come back, but we don't know how 255 00:17:44,840 --> 00:17:49,359 Speaker 1: many years it will take for tourism to return to, say, 256 00:17:49,440 --> 00:17:52,600 Speaker 1: twenty nine levels, or people to be comfortable traveling at 257 00:17:52,600 --> 00:17:55,160 Speaker 1: the same degree they did. We don't know the degree 258 00:17:55,240 --> 00:17:58,560 Speaker 1: to which a rich country like the US may choose 259 00:17:58,600 --> 00:18:04,000 Speaker 1: to prior ties importing fewer things, especially after what we've 260 00:18:04,040 --> 00:18:07,040 Speaker 1: seen in terms of shortages of masks and ventilators and 261 00:18:07,080 --> 00:18:11,399 Speaker 1: other sort of basic equipment. Will this, in your view, 262 00:18:12,040 --> 00:18:16,560 Speaker 1: create a rethink about these sort of financial and growth 263 00:18:16,600 --> 00:18:20,159 Speaker 1: models that EMS have currently undertaken in terms of the 264 00:18:20,200 --> 00:18:25,720 Speaker 1: presumption that tourist revenue or export revenue UH just might 265 00:18:25,840 --> 00:18:28,600 Speaker 1: not be there again. And how much could we plausibly 266 00:18:28,680 --> 00:18:31,840 Speaker 1: expect to see that all change. You know, I think 267 00:18:31,880 --> 00:18:35,480 Speaker 1: it's it's a good question, it's a hard question. I think. 268 00:18:36,320 --> 00:18:40,960 Speaker 1: I think you're right to say that those emerging markets 269 00:18:40,960 --> 00:18:48,640 Speaker 1: that were most reliant on tourism face a particularly difficult challenge. 270 00:18:49,240 --> 00:18:55,080 Speaker 1: You know, those emerging economies most reliant on oil also 271 00:18:55,200 --> 00:18:59,920 Speaker 1: potentially face a long run challenge. Depends on them. It's 272 00:19:00,040 --> 00:19:02,760 Speaker 1: tint to which oil demand rebounds and where the long 273 00:19:02,840 --> 00:19:06,640 Speaker 1: run price settles. But you could imagine this not being 274 00:19:06,720 --> 00:19:14,320 Speaker 1: a temporary shock, UH. And then manufacturing heavy East Asia 275 00:19:14,800 --> 00:19:18,160 Speaker 1: does face a shock to their growth models. In China, 276 00:19:18,200 --> 00:19:23,720 Speaker 1: in particular, if the world moves away from a model 277 00:19:23,800 --> 00:19:27,200 Speaker 1: of what you might call full globalization, which would be 278 00:19:27,920 --> 00:19:30,440 Speaker 1: if all of our phones come from China and all 279 00:19:30,440 --> 00:19:34,200 Speaker 1: of our personal protective equipment comes from China. That's fine, 280 00:19:35,119 --> 00:19:39,440 Speaker 1: that's more efficient to a world where there's more desire 281 00:19:39,560 --> 00:19:45,080 Speaker 1: for at least regionalization of supply chains, if not nationalization, 282 00:19:45,680 --> 00:19:50,040 Speaker 1: and a much higher point priority on resilience. Resilience can 283 00:19:50,040 --> 00:19:56,040 Speaker 1: mean bigger stockpiles, but resilience can also mean local manufacturers 284 00:19:56,080 --> 00:20:00,320 Speaker 1: who have the capacity to ramp up production in bad 285 00:20:00,359 --> 00:20:05,280 Speaker 1: states of the world. So I do think that there 286 00:20:05,320 --> 00:20:11,960 Speaker 1: will be some very significant challenges in some cases that 287 00:20:12,040 --> 00:20:16,800 Speaker 1: may create new opportunities. You know, a world where there 288 00:20:16,880 --> 00:20:21,720 Speaker 1: is more regionalization of supply chains, particularly in North America, 289 00:20:22,359 --> 00:20:24,920 Speaker 1: would arguably be good good for Mexico at the expense 290 00:20:24,920 --> 00:20:29,800 Speaker 1: of China, and it would help Mexico manage the loss 291 00:20:30,800 --> 00:20:35,480 Speaker 1: of oil export revenue and the tax revenue that Mexico 292 00:20:35,560 --> 00:20:40,040 Speaker 1: has historically gotten from its oil production. But it does 293 00:20:40,160 --> 00:20:46,359 Speaker 1: imply some important long run adjustments on the part of 294 00:20:46,400 --> 00:20:53,240 Speaker 1: many economies. Speaking of long run adjustments, we're talking a 295 00:20:53,240 --> 00:20:57,920 Speaker 1: lot about the vulnerability of emerging markets that have borrowed 296 00:20:58,320 --> 00:21:01,240 Speaker 1: in dollars, the attempts to shift away from that little 297 00:21:01,280 --> 00:21:05,679 Speaker 1: bit and issue more local currency debt. Would you expect 298 00:21:06,160 --> 00:21:10,679 Speaker 1: the current crisis to lead to a significant shift in 299 00:21:10,720 --> 00:21:15,560 Speaker 1: the relationship between emerging markets and the US dollar. Would 300 00:21:15,560 --> 00:21:24,080 Speaker 1: more em countries potentially try to move away from dollar dependence. Well, 301 00:21:24,240 --> 00:21:27,920 Speaker 1: it's it's it's hard to move away from dollar dependence 302 00:21:27,960 --> 00:21:30,680 Speaker 1: if creditors still want to lend to you in dollars. 303 00:21:30,800 --> 00:21:35,520 Speaker 1: And given the volatility and emerging currencies, I can see 304 00:21:35,880 --> 00:21:40,440 Speaker 1: in some sense more pressure for those economies who want 305 00:21:40,480 --> 00:21:44,320 Speaker 1: to still borrow to borrow in hard currency just because 306 00:21:44,480 --> 00:21:48,000 Speaker 1: the creditor side may be less willing to take local 307 00:21:48,040 --> 00:21:52,680 Speaker 1: currency risk. We don't know, um, you know what. I 308 00:21:53,000 --> 00:21:57,680 Speaker 1: think the general move is likely to be towards more 309 00:21:57,800 --> 00:22:03,879 Speaker 1: resilient balance sheets across the board, to higher reserves, less 310 00:22:04,000 --> 00:22:08,280 Speaker 1: external debt, and in a world of less external debt 311 00:22:08,280 --> 00:22:13,840 Speaker 1: if you can manage it, less hard currency debt. The 312 00:22:13,880 --> 00:22:17,199 Speaker 1: countervailing pressure and all of that is that there are 313 00:22:17,200 --> 00:22:20,120 Speaker 1: a set of countries that really don't want to adjust 314 00:22:20,320 --> 00:22:22,760 Speaker 1: in the near term, and they may go out and 315 00:22:22,760 --> 00:22:24,600 Speaker 1: borrow an awful lot of dollars. I'm thinking of a 316 00:22:24,600 --> 00:22:30,240 Speaker 1: country like Saudi Arabia, which has a choice threefold joys. 317 00:22:30,240 --> 00:22:33,280 Speaker 1: It can either reduce its imports to reflect lower levels 318 00:22:33,600 --> 00:22:40,000 Speaker 1: of oil exports lower revenues from oil oil exports, or 319 00:22:40,040 --> 00:22:44,920 Speaker 1: it can maintain as imports relatively high levels and make 320 00:22:45,000 --> 00:22:47,919 Speaker 1: up for the deficit and foreign exchange by borrowing, probably 321 00:22:47,920 --> 00:22:51,959 Speaker 1: in dollars, or it can run down its reserves. So 322 00:22:52,000 --> 00:22:54,040 Speaker 1: I would think that, you know, for Saudi Arabia, the 323 00:22:54,119 --> 00:22:58,280 Speaker 1: easiest choice might well be more borrowing and a less 324 00:22:58,320 --> 00:23:02,680 Speaker 1: resilient balance sheet. So I think the response will vary. 325 00:23:03,240 --> 00:23:08,960 Speaker 1: But the basic lesson here is that only emerging economies 326 00:23:09,000 --> 00:23:14,400 Speaker 1: with fortress like external balance sheets, uh, we'll be able 327 00:23:14,480 --> 00:23:18,000 Speaker 1: to come off relatively well. So I think the pressure 328 00:23:18,200 --> 00:23:21,560 Speaker 1: general direction of pressure will be towards more fortress like 329 00:23:22,240 --> 00:23:24,400 Speaker 1: balance sheets. And one of the reasons why I think 330 00:23:24,440 --> 00:23:27,800 Speaker 1: it's important that the i m F be very aggressive 331 00:23:27,880 --> 00:23:33,400 Speaker 1: in some ways very generous in its response, because if 332 00:23:33,440 --> 00:23:37,040 Speaker 1: every country wants to have a fortress balance sheet, that 333 00:23:37,160 --> 00:23:42,240 Speaker 1: introduces inefficiencies of its own um and so you would 334 00:23:42,280 --> 00:23:48,040 Speaker 1: want in some sense insurance mechanisms to help absorb true 335 00:23:48,119 --> 00:23:51,600 Speaker 1: exogenous shocks so that every country in the world doesn't 336 00:23:51,600 --> 00:23:54,919 Speaker 1: try to self insure. And in principle that's to the 337 00:23:55,000 --> 00:23:57,720 Speaker 1: role that the I m F and the other multilaterals 338 00:23:58,000 --> 00:24:03,840 Speaker 1: could play. Speaking of countries that have fortress balance sheets 339 00:24:03,880 --> 00:24:06,840 Speaker 1: that we haven't really talked about much, obviously China, which 340 00:24:06,880 --> 00:24:11,399 Speaker 1: still has an extraordinary mono foreign reserves and has shown 341 00:24:11,440 --> 00:24:15,159 Speaker 1: the ability to sort of withstand the acute phase of 342 00:24:15,200 --> 00:24:20,800 Speaker 1: this crisis and use domestic firepower to maintain its economy. 343 00:24:20,880 --> 00:24:25,240 Speaker 1: It appears to be coming back online. Nonetheless, it's going 344 00:24:25,280 --> 00:24:29,000 Speaker 1: to face pressure, particularly if there is any sort of 345 00:24:29,480 --> 00:24:33,920 Speaker 1: you know, modest deglobalization, because again exports and so forth, 346 00:24:34,359 --> 00:24:38,159 Speaker 1: what do you see as potential course shifts that we 347 00:24:38,200 --> 00:24:42,119 Speaker 1: could be looking for it from the sort of Chinese 348 00:24:42,280 --> 00:24:45,920 Speaker 1: economic model going forward. So I think, you know, there's 349 00:24:47,440 --> 00:24:54,520 Speaker 1: a couple of powerful offsetting forces that are impacting uh, 350 00:24:54,800 --> 00:25:00,520 Speaker 1: China and China's external position right now. One is the 351 00:25:00,600 --> 00:25:05,000 Speaker 1: broad contraction and all trade, which hurts China because China 352 00:25:05,040 --> 00:25:07,960 Speaker 1: trades a lot, probably hurts activity as much as it 353 00:25:08,040 --> 00:25:11,679 Speaker 1: hurts the balance of payments. And then China, because it 354 00:25:11,760 --> 00:25:15,159 Speaker 1: is the world's biggest commodity importer, stands to be the 355 00:25:15,200 --> 00:25:20,160 Speaker 1: biggest winner from lower oil prices. And because China has 356 00:25:20,200 --> 00:25:25,639 Speaker 1: been such a huge source of tourists. The lockdown and 357 00:25:25,720 --> 00:25:33,320 Speaker 1: they fall in tourism has significantly reduced China's imports, and 358 00:25:33,359 --> 00:25:38,800 Speaker 1: therefore it works to improve China's balance payments. So in 359 00:25:38,880 --> 00:25:42,320 Speaker 1: the short run, I don't actually see any pressure on 360 00:25:42,480 --> 00:25:47,159 Speaker 1: China's balance of payments. If anything, I think as China's exports, 361 00:25:47,640 --> 00:25:50,720 Speaker 1: particularly of medical equipment, ramp up, and as the full 362 00:25:50,760 --> 00:25:54,880 Speaker 1: impact of lower oil prices shows up in China's import data, 363 00:25:55,280 --> 00:25:58,639 Speaker 1: China's surplus, in my view, is likely to rise, but 364 00:25:58,920 --> 00:26:02,440 Speaker 1: that rise will um with less activity. It's going to 365 00:26:02,520 --> 00:26:06,160 Speaker 1: be an increase in your surplus when you're exporting less 366 00:26:06,160 --> 00:26:11,280 Speaker 1: and importing less. So there is still a shock two 367 00:26:11,680 --> 00:26:16,200 Speaker 1: China's economy. And there's obviously been a shock to China's 368 00:26:16,200 --> 00:26:21,760 Speaker 1: economy from the measures that China has taken to slow 369 00:26:21,920 --> 00:26:26,760 Speaker 1: the spread of the virus internally. And I think now China, 370 00:26:26,960 --> 00:26:33,800 Speaker 1: broadly speaking, confronts a choice between two different growth models. 371 00:26:33,960 --> 00:26:39,240 Speaker 1: I don't think going back to the two thousand seven, 372 00:26:39,320 --> 00:26:43,120 Speaker 1: two thousand and eight export driven growth model is a 373 00:26:43,240 --> 00:26:48,320 Speaker 1: viable option in today's world. That would be a world 374 00:26:48,359 --> 00:26:51,440 Speaker 1: where China's current account surplus goes to like ten percent 375 00:26:51,520 --> 00:26:54,800 Speaker 1: of Chinese GDP or a jillion dollars and the world 376 00:26:54,840 --> 00:26:59,639 Speaker 1: becomes more dependent on Chinese manufacturing. I think there's fairly 377 00:26:59,640 --> 00:27:02,840 Speaker 1: obvious as reasons why that's not a politically or our 378 00:27:03,000 --> 00:27:07,360 Speaker 1: economically acceptable outcome right now. So then China either has 379 00:27:07,400 --> 00:27:14,399 Speaker 1: to maintain domestic dynamism through a very high level of investment, 380 00:27:14,480 --> 00:27:18,320 Speaker 1: and that has been done through a mix of loose 381 00:27:18,359 --> 00:27:24,040 Speaker 1: credit for state sponsored firms, a lot of government sponsored 382 00:27:24,080 --> 00:27:31,000 Speaker 1: industrial policy projects UH, and then a lot of quasi 383 00:27:31,040 --> 00:27:35,520 Speaker 1: public investment often done by local governments, all the things 384 00:27:35,600 --> 00:27:37,919 Speaker 1: we used to spend all sorts of time talking about. 385 00:27:38,920 --> 00:27:41,440 Speaker 1: There's no reason why I, given China's high savings rate, 386 00:27:41,480 --> 00:27:45,280 Speaker 1: it couldn't try to do that yet again and generate 387 00:27:45,760 --> 00:27:49,719 Speaker 1: a bit of a recovery using the tried and true 388 00:27:50,280 --> 00:27:57,480 Speaker 1: Chinese investment from above growth model. The alternative and when 389 00:27:57,520 --> 00:28:02,600 Speaker 1: I'm personally drawn to is a world where China radically 390 00:28:02,760 --> 00:28:08,359 Speaker 1: reforms it's UH system of tax and the system of spending. 391 00:28:08,960 --> 00:28:13,440 Speaker 1: China actually has an incredibly regressive tax system. China collects 392 00:28:13,480 --> 00:28:16,720 Speaker 1: one point three percentage points of its GDP and income tax, 393 00:28:17,160 --> 00:28:20,919 Speaker 1: which is a extremely low number in the US. And 394 00:28:20,960 --> 00:28:23,480 Speaker 1: you know we aren't we aren't considered a high tax country. 395 00:28:23,680 --> 00:28:26,160 Speaker 1: We get ten percent of GDP from personal income tax, 396 00:28:26,280 --> 00:28:28,760 Speaker 1: so China is a k one eighth of our level. 397 00:28:29,560 --> 00:28:34,120 Speaker 1: The system of social contributions has a very high minimum 398 00:28:34,160 --> 00:28:37,960 Speaker 1: contribution for urban workers, which means that in a lot 399 00:28:37,960 --> 00:28:42,080 Speaker 1: of cases the poorer, you are, the bigger your tax burden. 400 00:28:42,880 --> 00:28:46,360 Speaker 1: And then world workers with those who lack the right 401 00:28:46,440 --> 00:28:52,280 Speaker 1: huko household residency don't pay into the system of social contributions. 402 00:28:52,680 --> 00:28:56,280 Speaker 1: They're lower cost to the employer, but they also don't 403 00:28:56,280 --> 00:29:00,920 Speaker 1: get urban social benefits. So a system we're trying to 404 00:29:01,000 --> 00:29:06,240 Speaker 1: reformed as taxation and really quite radically much bigger collections 405 00:29:06,240 --> 00:29:10,800 Speaker 1: from income tax, completely rethought, distribution of the burden of 406 00:29:10,840 --> 00:29:15,800 Speaker 1: social contributions, subsidy income subsidies for low wage work like 407 00:29:16,000 --> 00:29:18,560 Speaker 1: we have in the US through the earned income tax credit, 408 00:29:19,200 --> 00:29:24,920 Speaker 1: combined with much more spending on public health, much less 409 00:29:25,040 --> 00:29:30,320 Speaker 1: of out of pocket expense for Chinese workers who seek 410 00:29:30,840 --> 00:29:35,600 Speaker 1: routine medical care, and an expansion of social benefits so 411 00:29:35,680 --> 00:29:39,280 Speaker 1: that migrant workers can send their children to school where 412 00:29:39,280 --> 00:29:42,960 Speaker 1: they work, rather than having to have them educated where 413 00:29:42,960 --> 00:29:47,240 Speaker 1: they're from and live with their grandparents. That kind of 414 00:29:47,320 --> 00:29:53,000 Speaker 1: deep transformation, UH faces enormous resistance, but I think that's 415 00:29:53,040 --> 00:29:56,320 Speaker 1: by far the best pass forward China, and I think 416 00:29:56,360 --> 00:30:01,120 Speaker 1: it's got some really positive externalities for the world. A 417 00:30:01,200 --> 00:30:04,560 Speaker 1: lot more investment in public health in China sounds like 418 00:30:04,640 --> 00:30:09,840 Speaker 1: something that would have been great to have done five 419 00:30:09,960 --> 00:30:13,120 Speaker 1: years ago. Brad. Just going back to the world of 420 00:30:13,160 --> 00:30:16,239 Speaker 1: emerging markets as a whole, and I know we're not 421 00:30:16,280 --> 00:30:19,400 Speaker 1: supposed to treat it as one big, homogeneous block, but 422 00:30:19,760 --> 00:30:25,840 Speaker 1: I'm wondering if there's an indicator or one lynchpin that 423 00:30:25,920 --> 00:30:30,160 Speaker 1: you are currently watching to gauge just how bad the 424 00:30:30,560 --> 00:30:34,720 Speaker 1: difficulties or the crisis in them could actually get. I'm 425 00:30:34,720 --> 00:30:38,959 Speaker 1: not really watching one, I think you know. I'm watching 426 00:30:39,000 --> 00:30:43,880 Speaker 1: the oil price knowing that it splits emerging economies into 427 00:30:43,880 --> 00:30:47,960 Speaker 1: winners and losers. But the more extreme the move and 428 00:30:48,000 --> 00:30:52,640 Speaker 1: the longer the move, the deeper the loss and the losers. UH. 429 00:30:52,680 --> 00:30:56,440 Speaker 1: And then you know, any any index of the dollar 430 00:30:56,840 --> 00:31:01,960 Speaker 1: against a basket of emerging arc of currencies that excludes China, 431 00:31:02,400 --> 00:31:05,960 Speaker 1: I think is a good proxy for stress. The i 432 00:31:06,200 --> 00:31:09,560 Speaker 1: f S capital flow data, high frequency capital flow data, 433 00:31:09,720 --> 00:31:13,360 Speaker 1: is now widely followed and they've done a really good job. 434 00:31:13,920 --> 00:31:18,200 Speaker 1: And I also watched that rathlessly. So following on Tracy's 435 00:31:18,760 --> 00:31:22,440 Speaker 1: question about UH E M as a whole, and as 436 00:31:22,480 --> 00:31:25,080 Speaker 1: we're talking about in the beginning, people will be listening 437 00:31:25,120 --> 00:31:29,320 Speaker 1: to this at the UH sort of during the period 438 00:31:29,440 --> 00:31:31,920 Speaker 1: of the I m F Spring meeting, and you've talked 439 00:31:32,160 --> 00:31:35,240 Speaker 1: sort of generally about the need for the I m 440 00:31:35,320 --> 00:31:37,479 Speaker 1: F to be generous here and what it can do 441 00:31:37,640 --> 00:31:42,120 Speaker 1: and sort of providing reserves. What has it already done, 442 00:31:42,160 --> 00:31:46,960 Speaker 1: and what specifically insert it's toolbox should it do that 443 00:31:47,000 --> 00:31:49,960 Speaker 1: it's never done before, if it's a crisis that it's 444 00:31:50,000 --> 00:31:53,000 Speaker 1: never experienced on this scale, And how is the I 445 00:31:53,160 --> 00:31:57,400 Speaker 1: m F itself liquidity or capital constraint because I don't 446 00:31:57,400 --> 00:32:00,840 Speaker 1: think I have a great feel for the IMF's own 447 00:32:00,920 --> 00:32:05,200 Speaker 1: constraints where they come from, and how how aggressive the 448 00:32:05,680 --> 00:32:08,680 Speaker 1: sort of the natural limitations on its own ability to 449 00:32:08,680 --> 00:32:11,880 Speaker 1: be aggressive. Sure, So I mean I think what the 450 00:32:11,920 --> 00:32:16,880 Speaker 1: I m F is now doing is is it has 451 00:32:16,920 --> 00:32:22,760 Speaker 1: a set of rapid financing instruments that are generally give 452 00:32:23,000 --> 00:32:27,280 Speaker 1: countries low levels of access, but they get the access 453 00:32:27,480 --> 00:32:31,120 Speaker 1: very quickly and an enormous number of countries. I think 454 00:32:31,120 --> 00:32:33,520 Speaker 1: it's apposed to the idea of applied for access to 455 00:32:33,600 --> 00:32:40,000 Speaker 1: these rapid financing vehicles, which will get somewhere between fifty 456 00:32:40,040 --> 00:32:43,520 Speaker 1: and hundred billion dollars out the door. And then the 457 00:32:43,560 --> 00:32:48,160 Speaker 1: I m F has pre existing credit lines with Mexico 458 00:32:48,240 --> 00:32:52,480 Speaker 1: and Colombia. Those lines haven't been drawn, but they are available, 459 00:32:52,800 --> 00:32:55,560 Speaker 1: so that would sort of define I think the I 460 00:32:55,720 --> 00:33:00,520 Speaker 1: MS existing response to think about what the more the 461 00:33:00,560 --> 00:33:02,760 Speaker 1: I m F could do. I guess it probably helps 462 00:33:02,800 --> 00:33:07,280 Speaker 1: to start by talking about the I m F liquidity position. 463 00:33:08,080 --> 00:33:11,760 Speaker 1: The I m S capital position isn't a real constraint. 464 00:33:12,040 --> 00:33:15,720 Speaker 1: The World Bank runs on a capital model. The I 465 00:33:15,880 --> 00:33:19,160 Speaker 1: m F runs on a quota model, and it sets 466 00:33:19,160 --> 00:33:21,920 Speaker 1: aside loan loss reserves and the like. But essentially the 467 00:33:21,960 --> 00:33:25,680 Speaker 1: I m F takes contributions, it doesn't lever them up 468 00:33:25,680 --> 00:33:28,640 Speaker 1: in the outside market, and then it lends them out. 469 00:33:28,880 --> 00:33:32,959 Speaker 1: Because it is the preferred creditor, it historically has always 470 00:33:32,960 --> 00:33:37,920 Speaker 1: been paid. So it doesn't operate on a capital model 471 00:33:38,040 --> 00:33:41,600 Speaker 1: where it has to use in a small amount of 472 00:33:41,640 --> 00:33:45,320 Speaker 1: equity capital support a broad amount of lending. It operates 473 00:33:45,320 --> 00:33:49,480 Speaker 1: more on a pooling model, whereby contributions from its members 474 00:33:49,480 --> 00:33:52,680 Speaker 1: are pooled and lent out, and the fact that it 475 00:33:52,840 --> 00:33:54,960 Speaker 1: defaulting on the I m F is defaulting on the 476 00:33:55,000 --> 00:33:59,600 Speaker 1: world effectively assures payment. The IMF now has about six 477 00:34:00,080 --> 00:34:06,440 Speaker 1: billion and quota resources permanent contributions. It's lent out about 478 00:34:06,480 --> 00:34:09,719 Speaker 1: two d and not all of the quota contributions are 479 00:34:09,760 --> 00:34:13,400 Speaker 1: what the I m F calls usable. Some countries contributing 480 00:34:13,440 --> 00:34:17,200 Speaker 1: their own currency and it's not very practical to lend 481 00:34:17,239 --> 00:34:21,200 Speaker 1: that out. In addition, the i m F now has 482 00:34:22,160 --> 00:34:29,200 Speaker 1: two billion supplemental credit line from many of its members, 483 00:34:29,239 --> 00:34:32,239 Speaker 1: called the New Arrangement to Borrow, which allows the guy 484 00:34:32,360 --> 00:34:35,480 Speaker 1: m have to borrow from a subset of its membership 485 00:34:35,520 --> 00:34:41,319 Speaker 1: to increase its lending capacity that is already expected to 486 00:34:41,400 --> 00:34:45,480 Speaker 1: go to around fifty billion at the end of this year. 487 00:34:46,040 --> 00:34:49,040 Speaker 1: A lot of people ted Truman leading the way of 488 00:34:49,160 --> 00:34:52,440 Speaker 1: said that this should be accelerated, and I hope that 489 00:34:52,520 --> 00:34:55,560 Speaker 1: has agreed at the meetings next week. The US already 490 00:34:55,600 --> 00:35:01,560 Speaker 1: has approval from Congress to bring forward the US contribution 491 00:35:01,640 --> 00:35:03,920 Speaker 1: to the New Arrangements to Borrow, so it's just a 492 00:35:03,920 --> 00:35:08,120 Speaker 1: matter of getting all the needed improvements. And then there's 493 00:35:08,440 --> 00:35:12,280 Speaker 1: a final backup credit line, a set of bilateral loans 494 00:35:12,360 --> 00:35:15,319 Speaker 1: from members of the i m F that is now 495 00:35:15,440 --> 00:35:18,399 Speaker 1: four billion, but it is set to fall the two 496 00:35:18,800 --> 00:35:24,640 Speaker 1: billions when the New Arrangement to Borrow expands, and a 497 00:35:24,680 --> 00:35:27,600 Speaker 1: lot of people have suggested, hey, in the face of 498 00:35:27,640 --> 00:35:32,160 Speaker 1: a global crisis, why bring this backup line of credit 499 00:35:32,200 --> 00:35:35,040 Speaker 1: down keep it at its current level of four hundred. 500 00:35:35,640 --> 00:35:38,319 Speaker 1: So if the I m F were to agree at 501 00:35:38,360 --> 00:35:42,920 Speaker 1: the meetings, or as members were to agree two bring 502 00:35:43,000 --> 00:35:45,759 Speaker 1: forward the expansion of the new arrangement to borrow and 503 00:35:45,880 --> 00:35:51,319 Speaker 1: keep the current bilateral lines available, then the I m 504 00:35:51,400 --> 00:35:55,239 Speaker 1: F would really have close to a trillion dollars in 505 00:35:55,360 --> 00:35:58,920 Speaker 1: new lending capacity on top of the two billion or 506 00:35:58,960 --> 00:36:02,360 Speaker 1: so that has already comitted. The precise amount that's already 507 00:36:02,360 --> 00:36:05,560 Speaker 1: committed that's going to change more of these rapid instruments 508 00:36:05,600 --> 00:36:10,120 Speaker 1: are approved, so that gives you a ballpark estimate of 509 00:36:10,160 --> 00:36:13,160 Speaker 1: the size. Now, there's one other thing the IMF can do, 510 00:36:13,400 --> 00:36:21,560 Speaker 1: which is a little complex and generates a lot of controversy, 511 00:36:21,680 --> 00:36:25,719 Speaker 1: and it's called an SDR allocation. The SDR is the 512 00:36:25,760 --> 00:36:28,640 Speaker 1: I m S unit of account. It's basically a basket 513 00:36:28,680 --> 00:36:33,839 Speaker 1: of the world's biggest currencies, mostly dollars in euros, and 514 00:36:33,960 --> 00:36:38,800 Speaker 1: the i m F, thanks to John Maynard Keynes, has 515 00:36:38,920 --> 00:36:43,479 Speaker 1: the authority to give all of its members SDRs, which 516 00:36:43,560 --> 00:36:48,919 Speaker 1: act as reserves. It's called an SDR allocation. And right 517 00:36:48,960 --> 00:36:53,360 Speaker 1: now the IMF could provide a five dred billion SDR 518 00:36:53,400 --> 00:36:58,400 Speaker 1: allocation with the support of the U S administration, but 519 00:36:58,640 --> 00:37:02,799 Speaker 1: without a congressional vote anything more, much more than that 520 00:37:02,840 --> 00:37:05,840 Speaker 1: would require a congressional vote. Now, the I m F 521 00:37:06,200 --> 00:37:08,600 Speaker 1: has kind of indicated that they're not going to push 522 00:37:08,640 --> 00:37:12,120 Speaker 1: this right now, which I think is a mistake. I 523 00:37:12,239 --> 00:37:15,520 Speaker 1: presume that's because the US has indicated it doesn't support 524 00:37:15,560 --> 00:37:18,520 Speaker 1: it right now, which I also think is a mistake. 525 00:37:19,239 --> 00:37:22,200 Speaker 1: This is a time when I think almost all countries 526 00:37:22,239 --> 00:37:25,680 Speaker 1: around the world do need more reserves, and this is 527 00:37:25,719 --> 00:37:28,920 Speaker 1: a way of getting those reserves out into the system 528 00:37:29,040 --> 00:37:33,799 Speaker 1: very quickly. So the special drawing rights issue has sort 529 00:37:33,840 --> 00:37:36,200 Speaker 1: of been on the radar for years and years. Now, 530 00:37:36,280 --> 00:37:38,200 Speaker 1: why do you see Why do you think there's so 531 00:37:38,280 --> 00:37:42,239 Speaker 1: much resistance to it? I mean, it is kind of 532 00:37:42,239 --> 00:37:45,360 Speaker 1: global money creation, and a lot of people don't like 533 00:37:45,480 --> 00:37:49,600 Speaker 1: the idea of an international institution create global money or 534 00:37:50,000 --> 00:37:54,640 Speaker 1: reserves for an exchange reserves. Uh. And then it's not targeted, 535 00:37:54,760 --> 00:37:58,280 Speaker 1: so it goes to all members. That includes some members 536 00:37:58,280 --> 00:38:02,280 Speaker 1: of the United States doesn't like. But you know, hey, 537 00:38:02,400 --> 00:38:05,840 Speaker 1: I've noted the biggest beneficiary is actually the United States. 538 00:38:06,640 --> 00:38:10,560 Speaker 1: And given how creative the Treasury has been recently in 539 00:38:10,760 --> 00:38:13,600 Speaker 1: using the Exchange Stabilization Fund, which is the United States 540 00:38:13,640 --> 00:38:18,759 Speaker 1: owned reserves to backstop FED lending, it's kind of pennywise, 541 00:38:18,800 --> 00:38:23,960 Speaker 1: but pound foolish to get obsessed about Iran's small str 542 00:38:24,000 --> 00:38:29,560 Speaker 1: allocation and deny yourself a much bigger str allocation, which 543 00:38:29,640 --> 00:38:32,680 Speaker 1: you've already shown in the US IS case. You know 544 00:38:32,760 --> 00:38:37,960 Speaker 1: how to use um and use effectively, uh and creatively. 545 00:38:38,440 --> 00:38:41,759 Speaker 1: But those are the kinds of arguments. It is an 546 00:38:41,800 --> 00:38:47,759 Speaker 1: increase in everyone's reserves in proportion to their quote our 547 00:38:47,840 --> 00:38:51,640 Speaker 1: contribution to the if. Before we go, I want to 548 00:38:51,680 --> 00:38:53,840 Speaker 1: go back real quickly to what we were talking about 549 00:38:53,960 --> 00:38:59,400 Speaker 1: before with regards to the potential path of Chinese reforms 550 00:38:59,440 --> 00:39:02,279 Speaker 1: that they could take. You sort of stressed that this 551 00:39:02,320 --> 00:39:08,920 Speaker 1: would be a good opportunity to re rethink there's domestic redistribution. 552 00:39:09,000 --> 00:39:12,120 Speaker 1: That's something we've talked about with Michael Pettis in the 553 00:39:12,200 --> 00:39:15,399 Speaker 1: past as well. If we were to see a more 554 00:39:15,680 --> 00:39:20,640 Speaker 1: robust sort of Chinese household sector, basically more buying power 555 00:39:21,040 --> 00:39:26,800 Speaker 1: among the lower and middle classes, presumably more external demand 556 00:39:26,880 --> 00:39:30,439 Speaker 1: for goods, could this, in theory be the beginning of 557 00:39:30,600 --> 00:39:35,200 Speaker 1: a further internationalization of the Chinese u N in terms 558 00:39:35,200 --> 00:39:37,640 Speaker 1: of the sort of need to If there were domestic 559 00:39:37,640 --> 00:39:40,960 Speaker 1: buyers of all kinds of goods, not just commodities and 560 00:39:41,000 --> 00:39:45,880 Speaker 1: not just tourists. Could this begin to accelerate that process, 561 00:39:46,760 --> 00:39:49,200 Speaker 1: and it could be part of that. There's I don't 562 00:39:49,239 --> 00:39:55,000 Speaker 1: think there's a direct line between the reforms to China's 563 00:39:55,080 --> 00:39:59,239 Speaker 1: taxation and public spending that I've called for and a 564 00:39:59,360 --> 00:40:04,480 Speaker 1: broader global role for China's currency. The broader global role 565 00:40:04,600 --> 00:40:09,560 Speaker 1: depends to some degree on the willingness of the world 566 00:40:09,680 --> 00:40:13,480 Speaker 1: to hold you on denominated assets. See and why denominated assets. 567 00:40:14,080 --> 00:40:17,880 Speaker 1: That's partially a function of China's exchange rate choices, partially 568 00:40:17,920 --> 00:40:20,399 Speaker 1: a function of the people's confidence that if you put 569 00:40:20,400 --> 00:40:23,320 Speaker 1: money into China you can get it out in times 570 00:40:23,360 --> 00:40:27,480 Speaker 1: of stress, and partially a function of, you know, kind 571 00:40:27,480 --> 00:40:31,360 Speaker 1: of the broader utility of the Chinese yuan and settling 572 00:40:31,360 --> 00:40:35,719 Speaker 1: global transactions. And right now, you know trade between Africa 573 00:40:35,840 --> 00:40:40,840 Speaker 1: and Europe is not denominated in Chinese yuan. It's denominated 574 00:40:40,880 --> 00:40:43,920 Speaker 1: in dollars. And I still think it's more likely if 575 00:40:43,960 --> 00:40:46,799 Speaker 1: there's a change, the change will be two towards more 576 00:40:46,880 --> 00:40:50,760 Speaker 1: trade denominated in euros than two a ard more trade 577 00:40:50,800 --> 00:40:56,799 Speaker 1: donominate and you want outside of trade with China's immediate neighbors. Now, 578 00:40:57,000 --> 00:41:00,560 Speaker 1: one thing that I would note here is a China 579 00:41:00,640 --> 00:41:05,080 Speaker 1: that has a more consumer oriented economy is in some 580 00:41:05,120 --> 00:41:10,480 Speaker 1: ways a China that needs to trade less. China is 581 00:41:10,600 --> 00:41:15,360 Speaker 1: perfectly capable of making its own consumer goods. It tends 582 00:41:15,360 --> 00:41:20,200 Speaker 1: to import investment goods and tends to import commodities. So 583 00:41:20,280 --> 00:41:23,440 Speaker 1: I don't necessarily think this is a China that is 584 00:41:24,560 --> 00:41:28,960 Speaker 1: out in the global market sucking in consumer goods from 585 00:41:28,960 --> 00:41:31,640 Speaker 1: the rest of the world. I think it's more likely 586 00:41:31,680 --> 00:41:34,400 Speaker 1: that is it is a China that imports less and 587 00:41:34,440 --> 00:41:38,879 Speaker 1: the China that also exports less, and that would be 588 00:41:39,000 --> 00:41:46,040 Speaker 1: kind of consistent with She's vision and china national self reliance. 589 00:41:46,600 --> 00:41:50,160 Speaker 1: But it's also consistent with a desire on the part 590 00:41:50,160 --> 00:41:53,439 Speaker 1: of many of China's current big trading partners or more 591 00:41:53,520 --> 00:41:57,560 Speaker 1: resilience and more diversity in their supply chains. Um. So 592 00:41:57,640 --> 00:42:02,240 Speaker 1: I can imagine it being part of somewhat less globalized world, 593 00:42:02,840 --> 00:42:05,520 Speaker 1: and in that world there may be less pressure to 594 00:42:05,600 --> 00:42:09,640 Speaker 1: move away from the vale uh brand. Finally, then to 595 00:42:09,760 --> 00:42:12,760 Speaker 1: that point, I mean, again, we don't know what the 596 00:42:12,760 --> 00:42:16,840 Speaker 1: future policy have looked like. Uh would you would you 597 00:42:16,880 --> 00:42:20,040 Speaker 1: say the US is in that situation where if political 598 00:42:20,160 --> 00:42:24,760 Speaker 1: leaders chose to, it could more or less close itself 599 00:42:24,800 --> 00:42:26,919 Speaker 1: off to the world from a trade standpoint in terms 600 00:42:26,960 --> 00:42:30,239 Speaker 1: of adequate domestic demand and capability of building the things 601 00:42:30,239 --> 00:42:34,799 Speaker 1: that needs well, I mean right now, the US is well. 602 00:42:34,840 --> 00:42:37,160 Speaker 1: I shouldn't say right now, I say, you know, over 603 00:42:37,200 --> 00:42:43,480 Speaker 1: the past twenty years, the US has generated surplus domestic 604 00:42:43,520 --> 00:42:45,920 Speaker 1: demand which it has shared with the world. That's what 605 00:42:46,520 --> 00:42:51,719 Speaker 1: ongoing trade deficits mean. Uh. And as a result, the 606 00:42:51,840 --> 00:42:57,080 Speaker 1: US has less robust and well developed supply chains and 607 00:42:57,120 --> 00:43:01,960 Speaker 1: a lot of industries uh, some of our big trade competitors. 608 00:43:02,440 --> 00:43:04,960 Speaker 1: And one thing which probably should get more attention going 609 00:43:05,000 --> 00:43:11,880 Speaker 1: forward is that our biggest export industry by far, particularly 610 00:43:11,920 --> 00:43:17,080 Speaker 1: when you look at exports outside of the immediate neighborhood 611 00:43:17,160 --> 00:43:22,720 Speaker 1: of Canada and Mexico, is aircraft UH. And one sector 612 00:43:22,800 --> 00:43:27,120 Speaker 1: that is likely to have a persistent to climb his aircraft. 613 00:43:28,400 --> 00:43:33,640 Speaker 1: Less tourism equals less travel equals less demand for planes, 614 00:43:34,360 --> 00:43:39,920 Speaker 1: and then going has some self created problems as well. 615 00:43:40,440 --> 00:43:44,280 Speaker 1: So in that sense, the US does space a challenge 616 00:43:44,320 --> 00:43:48,440 Speaker 1: of offsetting the loss of a big export sector, not 617 00:43:48,560 --> 00:43:52,720 Speaker 1: the loss, but reduction in size of this very large 618 00:43:52,760 --> 00:43:57,360 Speaker 1: exports sector, and making that up with new domestic sectors 619 00:43:57,440 --> 00:44:01,080 Speaker 1: or new exports sectors. But the bigger point is that 620 00:44:01,160 --> 00:44:06,279 Speaker 1: the bigger your home market. In general, the less absolute 621 00:44:06,400 --> 00:44:09,799 Speaker 1: need you have to trade is I think true, but 622 00:44:09,880 --> 00:44:13,320 Speaker 1: that doesn't mean that shutting yourself off from trade doesn't 623 00:44:13,320 --> 00:44:17,040 Speaker 1: still have cost. And I think the challenge is kind 624 00:44:17,080 --> 00:44:22,680 Speaker 1: of finding the right balance going forward between resilience UH 625 00:44:22,719 --> 00:44:28,879 Speaker 1: and the advantages and efficiencies created by integration. I think 626 00:44:28,960 --> 00:44:33,239 Speaker 1: that there will be a shift towards greater priority on resilience, 627 00:44:33,280 --> 00:44:35,880 Speaker 1: and there should be. I certainly think the U S 628 00:44:35,880 --> 00:44:39,240 Speaker 1: should get rid of the tax incentives that now encourage 629 00:44:39,280 --> 00:44:43,520 Speaker 1: the offshoring of pharmaceutical production. That's a separate issue. And 630 00:44:43,640 --> 00:44:47,759 Speaker 1: you know, as the world moves towards the higher priority 631 00:44:47,800 --> 00:44:50,880 Speaker 1: on resilience, there will be a little bit less emphasis 632 00:44:50,920 --> 00:44:54,440 Speaker 1: on efficiency. But in my view it's not you don't 633 00:44:54,440 --> 00:45:00,720 Speaker 1: go to absolute resilience and give up all efficiency from trade, 634 00:45:01,320 --> 00:45:05,440 Speaker 1: nor do you remain in the world or any efficiency, 635 00:45:06,080 --> 00:45:11,960 Speaker 1: including the less savory tax efficiencies that many companies now 636 00:45:12,000 --> 00:45:15,960 Speaker 1: exploit through their global supply chain, are tolerated and encouraged. 637 00:45:16,400 --> 00:45:20,440 Speaker 1: So getting that new balance right to me as a 638 00:45:19,640 --> 00:45:27,719 Speaker 1: h policy imperative for the next three years. Brad, thank 639 00:45:27,719 --> 00:45:31,439 Speaker 1: you so much for joining us Thursday. Fantastic conversation and 640 00:45:31,960 --> 00:45:34,719 Speaker 1: I'm sure we'll have you back on again before too long. 641 00:45:35,719 --> 00:45:48,560 Speaker 1: Very good, we'll get that too, right, you know, Tracy. Obviously, 642 00:45:48,560 --> 00:45:52,600 Speaker 1: when we book Brad, I think, uh, the focus was 643 00:45:52,680 --> 00:45:55,080 Speaker 1: to some extent, Okay, what's the e m angle on 644 00:45:55,120 --> 00:45:57,680 Speaker 1: this crisis, and we certainly hit that. But I don't 645 00:45:57,680 --> 00:46:01,960 Speaker 1: think there's anyone we talked to regularly the that's capable 646 00:46:02,120 --> 00:46:06,000 Speaker 1: of pulling in so many different threads and connecting it 647 00:46:06,040 --> 00:46:09,520 Speaker 1: all together, including at the end, how US tax policy 648 00:46:09,600 --> 00:46:13,200 Speaker 1: encourage the offshoring of pharmaceutical manufacturer and how that's coming 649 00:46:13,600 --> 00:46:15,400 Speaker 1: to haunt the US in the past. There's no one 650 00:46:15,440 --> 00:46:18,520 Speaker 1: who can pull it together like Brad. Yeah, Brad has 651 00:46:18,520 --> 00:46:23,680 Speaker 1: an uncanny ability to really get to the biggest themes 652 00:46:23,719 --> 00:46:26,880 Speaker 1: possible in a given subject. So he's basically talking about 653 00:46:26,920 --> 00:46:32,000 Speaker 1: rebalancing the entire US economy and also the Chinese economy, 654 00:46:32,120 --> 00:46:36,480 Speaker 1: and obviously that's a big deal. I think a lot 655 00:46:36,520 --> 00:46:39,480 Speaker 1: about how we're probably going to see pressure to do 656 00:46:39,560 --> 00:46:43,400 Speaker 1: this at the same time that the government is dealing 657 00:46:43,520 --> 00:46:47,120 Speaker 1: with the coronavirus. So the US government and also potentially 658 00:46:47,160 --> 00:46:50,360 Speaker 1: emerging market economies are basically going to be under pressure 659 00:46:50,520 --> 00:46:54,360 Speaker 1: to reform their economies or change them in some really 660 00:46:54,400 --> 00:46:57,480 Speaker 1: really big ways at the same time that all the 661 00:46:57,560 --> 00:47:00,879 Speaker 1: virus drama is happening, and I sometimes wonder what that 662 00:47:00,920 --> 00:47:03,239 Speaker 1: mix is going to look like and whether or not 663 00:47:03,280 --> 00:47:06,200 Speaker 1: they're going to be able to get the balance right, 664 00:47:06,280 --> 00:47:12,320 Speaker 1: as Brad put it, when they're under that kind of pressure. Yeah, No, absolutely, 665 00:47:12,400 --> 00:47:15,400 Speaker 1: all kinds of interesting things here. I think, like you know, 666 00:47:15,440 --> 00:47:18,520 Speaker 1: when I think about crises more broadly, and you and 667 00:47:18,560 --> 00:47:21,960 Speaker 1: I have talked about this, having followed the last crisis, 668 00:47:22,239 --> 00:47:26,560 Speaker 1: is crises create moments where people sort of rethink everything, 669 00:47:26,880 --> 00:47:30,279 Speaker 1: business models and growth models and so forth. And just 670 00:47:30,360 --> 00:47:33,440 Speaker 1: the speeded severity of this one and the fact that 671 00:47:33,920 --> 00:47:38,560 Speaker 1: literally virtually nobody is unaffected by it, I think lends 672 00:47:38,600 --> 00:47:41,480 Speaker 1: itself to that. So all these questions about how much 673 00:47:41,480 --> 00:47:44,799 Speaker 1: should we trade, how much should we depend on external financing, 674 00:47:45,320 --> 00:47:48,360 Speaker 1: everything is now sort of up for debate in a 675 00:47:48,360 --> 00:47:51,439 Speaker 1: way that it hasn't really been in quite a while. Yeah, 676 00:47:51,560 --> 00:47:55,319 Speaker 1: with big crises come big questions, I guess, and one 677 00:47:55,360 --> 00:47:57,560 Speaker 1: of those has got to be about the role of 678 00:47:57,920 --> 00:48:02,319 Speaker 1: a staller and whether or not plays too central a 679 00:48:02,480 --> 00:48:05,839 Speaker 1: role in the global financial system. And I suspect we're 680 00:48:05,840 --> 00:48:09,439 Speaker 1: going to end up talking about that again very very soon. Yeah, 681 00:48:09,480 --> 00:48:12,960 Speaker 1: and it's important because people, you know, people are always 682 00:48:12,960 --> 00:48:16,360 Speaker 1: coloring for the demise of like that the dollar is 683 00:48:16,360 --> 00:48:18,320 Speaker 1: going to go down. And I think, you know, the 684 00:48:18,400 --> 00:48:21,319 Speaker 1: point that I've tried to make and others is not 685 00:48:21,480 --> 00:48:24,560 Speaker 1: that like the will may contribute to the demise of 686 00:48:24,719 --> 00:48:26,759 Speaker 1: the dollar. It's not what people think, like they look 687 00:48:26,800 --> 00:48:29,120 Speaker 1: at we're spending all this money, or the fan is 688 00:48:29,160 --> 00:48:32,200 Speaker 1: expanding the balance sheet by trillions of dollars. I think 689 00:48:32,280 --> 00:48:34,040 Speaker 1: it really is going to come down much more to 690 00:48:34,080 --> 00:48:38,040 Speaker 1: these questions about how much do countries want to be 691 00:48:38,080 --> 00:48:41,960 Speaker 1: interdependent on the on each other? From the US from 692 00:48:42,000 --> 00:48:45,799 Speaker 1: a real good perspective, from other countries, from a financing perspective, 693 00:48:46,280 --> 00:48:48,839 Speaker 1: do we want to become a little less interdependent on 694 00:48:48,880 --> 00:48:53,160 Speaker 1: each other? That question maybe what sort of determined whether 695 00:48:53,239 --> 00:48:56,160 Speaker 1: the dollar takes on some sort of diminished role in 696 00:48:56,160 --> 00:49:00,160 Speaker 1: the future than it has today. Yeah. Absolutely, And I 697 00:49:00,160 --> 00:49:03,600 Speaker 1: guess also whether or not the Federal Reserve is happy 698 00:49:03,719 --> 00:49:06,360 Speaker 1: to be playing the role of the world's central banker, 699 00:49:06,480 --> 00:49:09,960 Speaker 1: although I got to say recently it seems like it 700 00:49:10,040 --> 00:49:13,520 Speaker 1: is so Yes, that's sort of a step change in 701 00:49:13,840 --> 00:49:16,760 Speaker 1: the central banks behavior. So lots to talk about there 702 00:49:16,800 --> 00:49:21,400 Speaker 1: an endless stream of major market crises for us to 703 00:49:21,520 --> 00:49:24,239 Speaker 1: delve into. Joe, you know, I was thinking though, like 704 00:49:24,280 --> 00:49:28,000 Speaker 1: at the end with Brad, because it was so comprehensive. 705 00:49:28,040 --> 00:49:30,879 Speaker 1: It's like, maybe we're getting to the point of where 706 00:49:30,920 --> 00:49:33,040 Speaker 1: relation the big ones. I'm sure there's like ten more 707 00:49:33,080 --> 00:49:35,560 Speaker 1: really big ones we haven't here yet, but maybe we're 708 00:49:35,600 --> 00:49:38,799 Speaker 1: sort of rounding the corner a little bit in terms 709 00:49:38,840 --> 00:49:42,319 Speaker 1: of the extremely big themes. You will never let me 710 00:49:42,360 --> 00:49:48,560 Speaker 1: forget this, will you? No? Okay, this has been another 711 00:49:48,640 --> 00:49:52,000 Speaker 1: episode of the Odd Thoughts Podcast. I'm Tracy Alloway. You 712 00:49:52,040 --> 00:49:56,080 Speaker 1: can follow me on Twitter at Tracy Alloway and I'm 713 00:49:56,160 --> 00:49:58,960 Speaker 1: Joe Wisn't thought. You should follow me on Twitter, or 714 00:49:59,040 --> 00:50:02,440 Speaker 1: you can follow me on Twitter at the Stalwart. And 715 00:50:02,600 --> 00:50:06,000 Speaker 1: you should follow our guest on Twitter, Brad said sir. 716 00:50:06,200 --> 00:50:09,920 Speaker 1: He's Brad Underscore, said ser and be sure to follow 717 00:50:09,920 --> 00:50:13,480 Speaker 1: our producer on Twitter, Laura Carlson. She's at Laura M. 718 00:50:13,480 --> 00:50:17,440 Speaker 1: Carlson followed the Bloomberg head of podcast Francesco Levi at 719 00:50:17,480 --> 00:50:20,719 Speaker 1: Francesca Today, as well as all of the Bloomberg podcasts 720 00:50:21,239 --> 00:50:24,160 Speaker 1: under the handle at podcasts. Thanks for listening.