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Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.

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Speaker 1: I'm Joe Wisn't All and I'm Tracy Allaway. Tracy, you know,

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Speaker 1: one of the big things, big themes I think that

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Speaker 1: has especially in the last year, pervaded our episodes. It's

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Speaker 1: really just this idea of like the forty year trend,

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Speaker 1: more or less starting in the in the early vulgar years,

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Speaker 1: years of declining rates, monetary policy dominant, and the question

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Speaker 1: now is are we at some sort of turn in

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Speaker 1: the direction of the economy, some meaningful sustaining change, you know,

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Speaker 1: how we approach economic policy. Yeah, I guess the low

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Speaker 1: rates aspect of it is still up for debate. But

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Speaker 1: certainly we have seen this talk of a handoff from

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Speaker 1: monetary policy to fiscal policy. There seems to be a

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Speaker 1: lot more room in certainly the US political landscape to

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Speaker 1: actually talk about things that the government could do on

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Speaker 1: this front in a way that got stamped out much

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Speaker 1: much more quickly um in earlier years. I think, yeah,

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Speaker 1: I think that's exactly right. I mean, like we look

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Speaker 1: back at this period and think so many of these

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Speaker 1: discussions they really do come back to politics, political choices,

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Speaker 1: and whether something is in the air, something in the water,

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Speaker 1: or something something fundamental shifting such that we can sort

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Speaker 1: of break out of the old expectations about what government

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Speaker 1: can and can't do, how much it can really spend,

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Speaker 1: and whether that will really produce a policy shift that

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Speaker 1: would meaningfully changing, Maybe would meaningfully result in higher rates,

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Speaker 1: maybe result in higher inflation, maybe result in higher sustained wages,

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Speaker 1: fuller employment, so far and so forth, all kinds of

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Speaker 1: questions like that. And so we seem to be at

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Speaker 1: a moment where a lot of these questions, a lot

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Speaker 1: of stuff that seemed impossible suddenly seemed possible. Yeah, there's

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Speaker 1: also an aspect of this that I think often gets missed,

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Speaker 1: which is, you know, people talk about the possibility of

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Speaker 1: the government doing more or being more involved in economic

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Speaker 1: policy and things like that, and they always frame it

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Speaker 1: like before the government wasn't involved at all. But of course,

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Speaker 1: the current system, even you know, even if you categorize

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Speaker 1: it as liberal or light touch or however you want

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Speaker 1: to put it, was devised by the government, Like the

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Speaker 1: actual economic system that we have in place was made

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Speaker 1: through political choices, and so there's a possibility that political

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Speaker 1: choices can change, and we can get something different. Yeah,

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Speaker 1: I think that's that's basically right. Like people have this idea, Okay,

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Speaker 1: there's some sort of state of economic neutrality, or the

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Speaker 1: government is hands off, another government will intervene in some way.

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Speaker 1: But of course that's set up that we had then,

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Speaker 1: or the setup that we have right now is also

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Speaker 1: just the result of perhaps a different set of policy choices,

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Speaker 1: and those political choices are of course subject to change,

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Speaker 1: and I think it's potentially happening right now. I should

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Speaker 1: note it's very important we're recording this March nine round,

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Speaker 1: six PM. There is a scheduled to be a vote tomorrow,

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Speaker 1: and hopefully that happens only so that we don't have

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Speaker 1: to re record this intro. But you know, the House

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Speaker 1: is scheduled to pass this one point nine trillion dollars

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Speaker 1: stimulus at the Senate passed just this weekend, which really

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Speaker 1: does open up this question of are we going to

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Speaker 1: do fiscal policy in a way the likes of which

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Speaker 1: we haven't seen? Yeah, I think that's fairy. So the

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Speaker 1: question really is are we at a turn here? We

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Speaker 1: have two great guests that I'm very excited to speak to,

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Speaker 1: and they'll help us think through the current policy stance

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Speaker 1: and the history and so forth. We're gonna be speaking

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Speaker 1: with Sconda m n ath. He's the research director at

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Speaker 1: Employee America as well as Mike Console, he's the director

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Speaker 1: at the Roosevelt Institute, and he is the author of

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Speaker 1: a new book, Freedom from the Market, America's fight to

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Speaker 1: liberate itself from the grip of the invisible hands. So

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Speaker 1: very excited to get his perspective. And I thought about

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Speaker 1: this discussion and that we should have this discussion actually

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Speaker 1: back in January because it was a tweet from Skanda

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Speaker 1: and he asked this question, um, which is is essentially,

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Speaker 1: are we at some structural break from neoliberalism in somewhere?

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Speaker 1: Are we at this trend break? And that really is

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Speaker 1: the key question. Did did something just turn? So let's

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Speaker 1: just start with that. We'll try to answer that right

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Speaker 1: off the bat. Are we at the structural break? So,

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Speaker 1: Mike and Sconda, thank you so much for joining us.

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Speaker 1: I really want to start with that term, that word neoliberalism,

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Speaker 1: because I mean, it's kind of a joke. I would say,

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Speaker 1: like on Twitter, people always use that word neoliberal, neoliberalism,

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Speaker 1: the neoliberal consensus without any sort of idea of what

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Speaker 1: we're actually talking about what that means. So I'd love

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Speaker 1: to get your perspective, and I'll start with you, Scanda,

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Speaker 1: both of you come in if you're like, what are

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Speaker 1: we actually talking about when we throw that term the

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Speaker 1: neoliberal consensus around? So thanks for having me. I think

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Speaker 1: I agree that it has been overused as a word

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Speaker 1: to just describe things people don't like, particularly from those

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Speaker 1: on the left. But at the same time, I do

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Speaker 1: think it also has some substantive meaning and does capture

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Speaker 1: a certain arc that you're referring to earlier. So if

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Speaker 1: we go back to some of the people who have

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Speaker 1: defined themselves as neoliberals, from people like Milton Friedman about

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Speaker 1: neoliberalism to Charles Peters he had a sort of Washington

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Speaker 1: Post op ed on neo liberalism in two If you

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Speaker 1: kind of try to find the common threads and where

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Speaker 1: this all fits, it start rooted in a skepticism of

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Speaker 1: democratic and political power in terms of organizing society. And

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Speaker 1: that's at least how I would if I really try

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Speaker 1: to break this down to some sort of crude shorthand,

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Speaker 1: it would be de emphasizing the democratic forms of power

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Speaker 1: and trying to rely more on markets and if you're

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Speaker 1: coming maybe a little bit more from the left, it's

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Speaker 1: probably a reliance on technocratic governance and maybe reliance on

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Speaker 1: academia to really solve some of these problems. If you

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Speaker 1: think about the FED and sort of it's arc in

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Speaker 1: terms of dominating macroeconomic policy making, the Fed's independence is

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Speaker 1: sort of this mix of markets and academics in the

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Speaker 1: sense the FED is trusted because they are the macroeconomic experts,

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Speaker 1: and at the same time they're also kind of relying

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Speaker 1: on the banking system to respond in a certain way

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Speaker 1: to their policies, and that is the way in which

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Speaker 1: you will get full employment and stable macroeconomic policy. So

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Speaker 1: it's really delegating out functions that were maybe thought of

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Speaker 1: as traditionally in the domain of Congress and the President

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Speaker 1: and really trying to rely more on technocracy and markets

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Speaker 1: to really organize that sort of part of society. Some

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Speaker 1: will disagree with this definition for sure. So Mike, I

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Speaker 1: want to ask you about something um that's Canada just said,

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Speaker 1: which is this idea of you know, a sort of

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Speaker 1: market based structure or markets dictating the ultimate outcome. Is

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Speaker 1: there a good historical example of that actually working well?

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Speaker 1: Because I think nowadays we're so used to talking about

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Speaker 1: you know, market based systems not really doing, um, what

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Speaker 1: people would like them to do, or not providing certain

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Speaker 1: you know, social needs in the way that some people

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Speaker 1: might have expected or at least would would aim for.

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Speaker 1: Is there an example in history where a market based

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Speaker 1: system worked and it was sort of, you know, the

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Speaker 1: pinnacle of neoliberal economic policy. Yeah. Sure. So just to

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Speaker 1: go back to what's Scanda said. One reason the terms

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Speaker 1: a little weird because the term liberal is a little

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Speaker 1: weird in US context because some people use it to

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Speaker 1: mean the New Deal and big activist government and the

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Speaker 1: great society. Other people tend to want it to mean

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Speaker 1: a more traditional what we might often call libertarian idea.

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Speaker 1: And what people often emphasizes knew about this classical liberalism

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Speaker 1: is the affirmative role of the state. Um that they,

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Speaker 1: the neo liberals, understood themselves, and you if you actually

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Speaker 1: read Higak and Freedmen, you'll see this pretty clearly. They

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Speaker 1: understand is an affirmative state building project, and the project

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Speaker 1: the goal of that project is to subordinate democracy to

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Speaker 1: the market and put in what the historian Quinn Slovenian

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Speaker 1: describes as encasement around the market to prevent it from

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Speaker 1: democratic challenges. So that's why sometimes the question about like

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Speaker 1: what's an example of like a neoliberal solution that work

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Speaker 1: is often a little weird because it's often in the

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Speaker 1: context of devolving, privatizing, voucherizing, or otherwise removing the publicness

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Speaker 1: of public institutions and public programs. Um. You know, there's

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Speaker 1: a lot of things that involved markets at work all

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Speaker 1: the time. Single payer healthcare involves a lot of markets

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Speaker 1: on the side of hiring doctors and buying bandages. What

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Speaker 1: is unique about is that it is removed from market dependency.

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Speaker 1: It's the big thing I try to go into my book,

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Speaker 1: um the market is how individuals intersect with healthcare under

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Speaker 1: single pair though obviously you know, even under even in

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Speaker 1: the UK, doctors are employed, they're employed by the state.

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Speaker 1: In that case, there's still markets and price mechanisms and

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Speaker 1: feedback and incentives. It's but your ability to access isn't

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Speaker 1: dependent on the logic of ability to pay and profit

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Speaker 1: seeking activity. So that's why, you know, there's a lot

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Speaker 1: of solutions that involve markets, and some things in which

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Speaker 1: markets which have existed before capitalism it will exist after

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Speaker 1: can play very important part of solutions. But it's the supremacy.

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Speaker 1: It's that it's the dominance of the market dependency in

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Speaker 1: the market logic. I think that catches people off guard.

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Speaker 1: Ins Earrah, did something happen? You know in the intro,

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Speaker 1: I was like, okay, forty years, forty years vulgar nineteen eighty.

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Speaker 1: Is that actually a meaningful turning point in your in

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Speaker 1: your book, Mike, or in the you know, when you

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Speaker 1: look at the history of economic thought and economic policy,

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Speaker 1: is that a real moment or is that kind of

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Speaker 1: an arbitrary thing that we identify Because the thirty year

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Speaker 1: yield peaked and then it started going down after his tenure. UH,

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Speaker 1: you know, there's a real emphasis to run the clock

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Speaker 1: back earlier. UM. A lot of deregulatory moves done under

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Speaker 1: President Carter, A lot of choices made about the nature

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Speaker 1: of corporate structure in the sixties and early seventies. I

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Speaker 1: think the shock of Vulcar was enough of a massive

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Speaker 1: change under which on the flip side of which UH,

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Speaker 1: and it ran concurrently with loring the top end marginal

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Speaker 1: tax rates. UH, A very increase in the decrease of unionization. UH,

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Speaker 1: the doubling of the rise of the shaff finance in

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Speaker 1: the economy. Um So, I think that it does mark

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Speaker 1: a break though, as is in the nature of scholarship.

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Speaker 1: You know, the more you look, the more you see things,

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Speaker 1: and you see connections running earlier. But I do think

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Speaker 1: in particularly in what we're talking about here in monetary policy,

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Speaker 1: in macro economics, there's definitely a shift where the FED

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Speaker 1: is viewed in a much different way, and the role

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Speaker 1: of economic theory and macroeconomics also changes pretty profoundly. Sorry,

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Speaker 1: can you elaborate on that point a little bit more?

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Speaker 1: What do you mean when you say the FED is

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Speaker 1: viewed very differently now? It is? Um? Sure? So? You

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Speaker 1: know you can kick it to standard too if you

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Speaker 1: want to jump, And I don't want to dominate the conversation,

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Speaker 1: you sure so. I think the FED itself if you

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Speaker 1: think about the fifties, sixties, seventies, eighties, where what really

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Speaker 1: changed about the institutional centers of power on macro economic policy?

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Speaker 1: And if he's in sixties, the Council of Economic Advisors

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Speaker 1: is one of the key institutions we're thinking about like

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Speaker 1: what to do with macro economic policy. That's who kind

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Speaker 1: of Kennedy is leaning on for sort of passing tax cuts.

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Speaker 1: Um you see like little things that sort of sound

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Speaker 1: like like okay, tax cuts and sort of the Kennedy

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Speaker 1: years sort of you start to see some similar measures

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Speaker 1: sort of past the future kids. But really it's fiscal

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Speaker 1: policy that's sort of at the center of it. Monterary

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Speaker 1: policy is still doing some things around recessions and maybe

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Speaker 1: in some cases pretty critical, but like Bulker sort of

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Speaker 1: sort of crystallizes the sort of role of the FED

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Speaker 1: in this process that the FED is going to be

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Speaker 1: willing to hike rates to the point of putting people

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Speaker 1: out of work and causing a recession. I think there

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Speaker 1: are different different parts of different parts of the policy apparatus,

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Speaker 1: So if you step away from macro from a sect,

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Speaker 1: those breaks can happen at different times. I do think

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Speaker 1: in the case of when Reagan was elected and when

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Speaker 1: Carter was elected, they had certain ideas that were different

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Speaker 1: from their predecessors. So Carter more so than Linden, Lindon B. Johnson, UM,

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Speaker 1: Reagan more so than Nixon. So there were some shifts

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Speaker 1: in terms of the philosophy around how much do we

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Speaker 1: trust democratic forms of governance to really work? And look

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Speaker 1: For a lot of people who are already skeptical of

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Speaker 1: the state during the New Deal, is sort of natural

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Speaker 1: to sort of go along these lines. For a lot

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Speaker 1: of people who may have been more optimistic about what

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Speaker 1: democratic governance can achieve, you can look at, well, the

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Speaker 1: Vietnam War was going on. There's a lot of stuff

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Speaker 1: that the government's doing that sort of breeds mistrust for

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Speaker 1: rational reasons, for justifiable reasons, and that also helps to

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Speaker 1: sort of catalyze well, maybe government really shouldn't be doing this,

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Speaker 1: or if we're going to be doing this, we should

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Speaker 1: be doing it in a way that's really deferring to

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Speaker 1: the market and leaning on the market to find a solution.

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Speaker 1: And again it starts to really warp the set of

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Speaker 1: default rules around how we really structure all of these things.

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Speaker 1: The default rule is, let's first try to do this

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Speaker 1: through the market. Let's try to cut rates and hope

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Speaker 1: that banks and financial intermediaries lend more money, and then

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Speaker 1: if they lend more money, that will also help to

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Speaker 1: sort of get the economy on right footing Mill Freedman

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Speaker 1: was the one who said, I want to make the

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Speaker 1: FED into a computer. I want to turn all this

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Speaker 1: stuff into something automatic that we really can't lean on

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Speaker 1: sort of a lot of these self dealing politicians to

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Speaker 1: solve and so that I think is we're kind at

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Speaker 1: a sort of wits end on some of this stuff now,

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Speaker 1: because if you're leaning on interest rate policy to do

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Speaker 1: the work of macroeconomics tabilization, it's necessary, but it's not sufficient.

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Speaker 1: I guess that's the way I put it. Yeah, I'd

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Speaker 1: also just throw in that, you know, it's easy to

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Speaker 1: characaturize economists views about in this time period. I don't,

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Speaker 1: I don't want to do this, but I think there's

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Speaker 1: a genuine belief that the Federal Reserve had solved the

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Speaker 1: problem of the business cycle by solely intervening in short

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Speaker 1: term interest rates and communicating their path through inflation targeting

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Speaker 1: or some sort of medium term target you know, the

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Speaker 1: era of the Great Moderation I think gave intellectual bolsternus

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Speaker 1: to the or like help bolster that as a concept,

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Speaker 1: but evaporated in that is the notion of what the

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Speaker 1: FET is doing this to be the financial sector and

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Speaker 1: the way the FETE is really controlling the long term yields, uh,

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Speaker 1: you know, the long term interest rate, the end rate

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Speaker 1: at which individuals use interest rates and in access credit,

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Speaker 1: and the way the fiscal situation evolved, the interconnectedness of

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Speaker 1: Monterrey policy with all other fasts. The economy, which was

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Speaker 1: a very strong part of how World War Two was executed.

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Speaker 1: In its aftermath, it was kind of living memory in

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Speaker 1: that mid century period had evaporate into this much more ethereal,

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Speaker 1: like computerized mathematical sense of that you know, with this

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Speaker 1: small intervention, like the smallest intervention, the smallest cut you

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Speaker 1: could make, you could dictate the macro economy. And that's

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Speaker 1: what failed in the Great Recession. Though we spent a

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Speaker 1: decade trying to figure out what to make of that,

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Speaker 1: so that that seems like a good sort of turning

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Speaker 1: point to the sort of like the question or the

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Speaker 1: Asconda's tweet about is this the trend break now? And

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Speaker 1: it feels like that's sort of like great moderation triumphalism

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Speaker 1: we figured out really came to a crashing halt with

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Speaker 1: the financial crisis and two thousand eight, two thousand nine,

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Speaker 1: and then we had this like decade of still mostly

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Speaker 1: leaning on the FED in the Central Bank, even though

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Speaker 1: it guess by that point on some level, the idea

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Speaker 1: that we could control the economy through overnight short term

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Speaker 1: interest rates kind of discredited. Now we come to the

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Speaker 1: sort of the post virus period, and this question of

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Speaker 1: like is this is are we on the new thing? Is?

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Speaker 1: Are we finally ready to have a macro policy that

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Speaker 1: is truly like sort of like post fed in some sense.

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Speaker 1: So Scanda like start off, like you you posed that

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Speaker 1: thought on Twitter? Is this the trend, brake? What are

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Speaker 1: the sort of what's the affirmative argument for yes, this

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Speaker 1: is the meaningful the turn is here. So I think

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Speaker 1: just to go back to when I posted this tweet,

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Speaker 1: it's about a week after both the Georgia runoffs, and

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Speaker 1: I guess the the d C yes, um, sort of

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Speaker 1: the capital riots and so or what everyone could call it. Yes,

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Speaker 1: it's it's the insurrection. I think a lot of people

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Speaker 1: would focus obviously on January six person obvious reasons. I yeah,

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Speaker 1: just generally thinking more about the Georgia runoffs in the

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Speaker 1: sense that you actually had the stars aligned. And I

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Speaker 1: think I am generally someone who doesn't like to make

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Speaker 1: big calls because they're like, that's hard, and it's it's

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Speaker 1: it's something that I'm generally skeptical of when people do

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Speaker 1: you start to just like always say, this is the

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Speaker 1: big moment. But there's a lot of things that are

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Speaker 1: going for this moment that are not have not been

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Speaker 1: true for a long time. One is the political consensus

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Speaker 1: is in a very different place in the sense of

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Speaker 1: whether fiscal policy is warranted. In markets discussions, we've talked

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Speaker 1: about is this the moment where monetary policy hands off

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Speaker 1: to fiscal policy for quite some time now, It's been

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Speaker 1: about almost I would say it's almost a decade of

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Speaker 1: that kind of speak, where kind of saw that there

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Speaker 1: was a lot of focus on cutting the deficit ine

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Speaker 1: and it kind of just it was running on fumes.

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Speaker 1: There was a lot of hype about is this infrastructure week?

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Speaker 1: Is this the week when Trump is going to take

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Speaker 1: fiscal policy really seriously? That was the whole thrust of

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Speaker 1: the Trump trade in markets in November. I think you

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Speaker 1: in general people will say that largely underwhelming. You did

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Speaker 1: get tax cuts out of that, tax cuts that didn't

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Speaker 1: really move the needle on either inflation or growth in

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Speaker 1: a meaningful way, I would say. And so now we're

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Speaker 1: at this point where you have the political consensus there,

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Speaker 1: but you also have the legislative like capacity, where there

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Speaker 1: are fifty senators who can pass a reconciliation bill. And

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Speaker 1: while there is a lot of room between Bernie Sanders

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Speaker 1: and Joe Mansion, they're all pretty much on board with

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Speaker 1: the using fiscal policy pretty aggressively. They may have different

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Speaker 1: philosophies about how to fund certain policy measures, but they

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Speaker 1: are at least open to it. And that is different

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Speaker 1: from what you saw in previous instances when there was

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Speaker 1: one party in control of both the House, Senate and

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Speaker 1: the White House, where you had this sort of alignment

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Speaker 1: in terms of discull two thousand nine, but the people

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Speaker 1: didn't really believe that fiscal policy was the thing to do. Um.

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Speaker 1: I think people really undersell just how much of faith

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Speaker 1: there was that fiscal policy really isn't the right. Fiscal

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Speaker 1: policy isn't needed. Monetary policy will take care of it.

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Speaker 1: Let's focus on cutting the deficit. Let's try to cut

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Speaker 1: government spending where it's wasteful. Even among the Democratic Party,

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Speaker 1: which we think of is sort of more on the left.

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Speaker 1: So those stars have aligned on the legislative side, which

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Speaker 1: I don't think would have been true if Georgia Ronous

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Speaker 1: didn't go the way they did. So you need to

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Speaker 1: have that you kind of and now the question is

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Speaker 1: can you get responsiveness where people see that the AARP passes,

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Speaker 1: and then people see the benefits of it and think

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Speaker 1: this works. And then even people who are maybe a

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Speaker 1: little more skeptical of these measures start to think that

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Speaker 1: there is some sort of political incentive, some social incentive

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Speaker 1: to actually pursue these policies in the future. So if

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Speaker 1: people see this as a success, then I think it's

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Speaker 1: more replicable. Right now is sort of the testing ground

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Speaker 1: phase where this has past. We're gonna have to see

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Speaker 1: how people digest it. Do people blame the rescue package

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Speaker 1: as a sort of to create all these other problems,

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Speaker 1: or people are gonna say, actually, all these standards of

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Speaker 1: people standard of living have really improved in a material way.

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Speaker 1: And now I'm more inclined to vote for Joe Biden

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Speaker 1: and for Democrats because they passed this and it really

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Speaker 1: made my life better. We're gonna have to see you,

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Speaker 1: but I think the odds are better now than they

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Speaker 1: were even two months ago or a three months ago.

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Speaker 1: I should say, the sense that like, we actually have

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Speaker 1: a package on the table that's historic in nature and

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Speaker 1: the kind that even Paul Krugman is like, this is efficient,

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Speaker 1: this is sufficient to actually get us out of the

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Speaker 1: current run. So, um, I think that's meaningful. So I

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Speaker 1: just want to dwell on this point a little bit,

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Speaker 1: because you know, like Joe and I were disgusting in

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Speaker 1: the intro, these are all ultimately political choices, and so

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Speaker 1: I think it's worth spending time on how the political

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Speaker 1: consensus actually shifts. But what are the conditions in place

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Speaker 1: in that allowed this potential shift, or at least this

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Speaker 1: testing of a new type of policy to actually be

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Speaker 1: put in motion. And how were they different to previous

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Speaker 1: economic crises like two thousand eight, where we did see

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Speaker 1: a lot of popular outrage about things that had happened,

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Speaker 1: and we did see some cries for help to offset

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Speaker 1: mortgages and things like that, but they didn't really lead

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Speaker 1: to a big break in the consensus. Um, Mike, maybe

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Speaker 1: this one's for you. Yeah. Absolutely. Um. So two things

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Speaker 1: jump out that are different right now than we're different

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Speaker 1: in the last decade. Let's let's stick with inside kind

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Speaker 1: of like the center left technocracy and especially within the

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Speaker 1: Democratic Party, because I think it's very easy to say

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Speaker 1: it's the tea Party, it's austerity it's the hypocrisy and

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Speaker 1: the dead on the right. But the reason a lot

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Speaker 1: of the stuff failed to take ignition in two thousand

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Speaker 1: nine was because it was coming from inside that administration

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Speaker 1: of President Obama's early years. And one is that you

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Speaker 1: had in two thousand nine, you had a White House

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Speaker 1: in a center left technocracy that walked in thinking that

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Speaker 1: the deficit was a fund like an existential threat to

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Speaker 1: the economy. UM That the trade deficit, that we were

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Speaker 1: borrowing too much from China, we're on borrow of time,

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Speaker 1: that there is a bond market bubble, that fundamentally the

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Speaker 1: long term debt was a serious impediment to dealing with

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Speaker 1: short and medium term processes. And I want to emphasize

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Speaker 1: this was not like a set of trade offs where

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Speaker 1: it's like, well, you know, maybe we might spend too

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Speaker 1: much on net interest payment or something like that. Um

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Speaker 1: That they really was concerned that the government might not

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Speaker 1: be able to issue bonds, or that there would be

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Speaker 1: some sort of catastrophe or something that fundamentally lowered the

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Speaker 1: long term growth potential United States. The famous rand heard

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Speaker 1: Rogoff Cliff, there's all kinds of inner inner workings around

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Speaker 1: this kind of stuff. And if you weren't there, actually

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Speaker 1: had to go back and remember, because I was like,

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Speaker 1: I was there, but it was really hysterical. If you

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Speaker 1: go back and read some of that stuff and that's gone,

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Speaker 1: that's not there. Now. There's a lot of different flowers

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Speaker 1: that have gotten us there. Um. But the idea that

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Speaker 1: the deficit could be an investment, that the deficit is

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Speaker 1: fundamentally under our control and poses whatever problems we wanted

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Speaker 1: to or that inflict. In the MMT version, that inflation

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Speaker 1: is the real check we need to watch for um.

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Speaker 1: All of that bolstered by the fact that interest rates

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Speaker 1: did in fact decline while inflation was under trend um

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Speaker 1: utterly discredited that regime that was like really powerful at

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Speaker 1: the time. Um. So when people think of the dead

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Speaker 1: deff set Um, they're thinking one of like the fact

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Speaker 1: that there's stuff that we need to do and there's

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Speaker 1: an opportunity to do it, and the problems that could

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Speaker 1: arise from large scale death sits further down the road

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Speaker 1: are more manageable and more of a gradual and long

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Speaker 1: term problem as opposed to some sort of catastrophe. That's

432
00:23:32,920 --> 00:23:34,840
Speaker 1: one The second and I remember this quite well as

433
00:23:34,880 --> 00:23:38,800
Speaker 1: in a lot of center left technocrats thought that unemployment

434
00:23:38,880 --> 00:23:41,200
Speaker 1: could fundamentally not get a little five percent for anas

435
00:23:41,280 --> 00:23:43,639
Speaker 1: the same period of time, maybe four and a half percent.

436
00:23:44,200 --> 00:23:45,920
Speaker 1: This blew up in a lot of different ways. In

437
00:23:45,960 --> 00:23:49,560
Speaker 1: the context of the primary. There's an economist named Gerald

438
00:23:49,600 --> 00:23:53,119
Speaker 1: Freedman who said that unemployment could get dramatically lower for

439
00:23:53,160 --> 00:23:56,000
Speaker 1: a long period of times associated with the Bernie Sanders campaign.

440
00:23:56,320 --> 00:23:58,239
Speaker 1: There's a lot of fighting about it, but a lot

441
00:23:58,320 --> 00:24:00,400
Speaker 1: of people put in the center left world put their

442
00:24:00,400 --> 00:24:02,800
Speaker 1: cards on the table and said, we were near full

443
00:24:02,840 --> 00:24:05,720
Speaker 1: employment in where it was about four point nine percent

444
00:24:05,800 --> 00:24:09,000
Speaker 1: or something like that. We got unemployment below four percent

445
00:24:09,119 --> 00:24:11,480
Speaker 1: for two years, at three and a half percent for

446
00:24:11,600 --> 00:24:15,280
Speaker 1: six months basically before COVID had and there is every

447
00:24:15,320 --> 00:24:17,399
Speaker 1: indication that it was going to continue to improve on

448
00:24:17,440 --> 00:24:20,560
Speaker 1: the participation side. That I think blindside a lot of

449
00:24:20,600 --> 00:24:22,760
Speaker 1: people because if you're thinking there's one and a half

450
00:24:22,840 --> 00:24:24,760
Speaker 1: percent to the labor force that could have been employed

451
00:24:24,800 --> 00:24:28,000
Speaker 1: at any moment with no downside. Um, you know, Donald

452
00:24:28,040 --> 00:24:31,920
Speaker 1: Trump was winning on polling for the economy going into

453
00:24:31,920 --> 00:24:36,520
Speaker 1: the election. That's like probably in large part because you

454
00:24:36,640 --> 00:24:40,280
Speaker 1: had sustained low wage growth for the which you had

455
00:24:40,320 --> 00:24:43,240
Speaker 1: not seen in generation. You know, labor markets expanding which

456
00:24:43,240 --> 00:24:45,879
Speaker 1: way in ways that is not seen except for a

457
00:24:46,040 --> 00:24:48,320
Speaker 1: brief period in the late nineties, and here was much

458
00:24:48,400 --> 00:24:51,240
Speaker 1: more sustained. So the idea that you could aim big

459
00:24:51,480 --> 00:24:54,280
Speaker 1: and the economists who want to say that there's some

460
00:24:54,400 --> 00:24:56,960
Speaker 1: sort of upper limit and if unemployment gets too low,

461
00:24:57,119 --> 00:25:00,159
Speaker 1: everything's going to go sideways. That's been discredit in a

462
00:25:00,280 --> 00:25:04,080
Speaker 1: pretty profound way. And those are both things electives listened

463
00:25:04,080 --> 00:25:06,960
Speaker 1: to because they pay consequences for unemployment being too high.

464
00:25:07,240 --> 00:25:09,879
Speaker 1: They pay consequences when they didn't increase the deficit and

465
00:25:09,960 --> 00:25:14,720
Speaker 1: the early tens and only saw like the fact that

466
00:25:15,040 --> 00:25:16,760
Speaker 1: you know, they didn't get any upside and there was

467
00:25:16,760 --> 00:25:19,880
Speaker 1: a lot of downside, both politically and economically. So both

468
00:25:19,920 --> 00:25:24,040
Speaker 1: those things, I think we're important changes that are hopefully

469
00:25:24,080 --> 00:25:26,560
Speaker 1: going to play out and sustain themselves in the years ahead.

470
00:25:27,040 --> 00:25:28,680
Speaker 1: It's you want to come in on that looks like

471
00:25:28,720 --> 00:25:31,080
Speaker 1: you're going to say something. Yeah, So I just to

472
00:25:31,440 --> 00:25:34,119
Speaker 1: tack onto what Mike said, as I agree wholeheartedly on

473
00:25:34,240 --> 00:25:37,480
Speaker 1: both points. A lot of those instincts of the twenty

474
00:25:37,560 --> 00:25:41,880
Speaker 1: tens were also rooted in trying to replicate the nineteen nineties.

475
00:25:42,200 --> 00:25:44,680
Speaker 1: If we think about what people saw as the sort

476
00:25:44,720 --> 00:25:49,040
Speaker 1: of brief success of high wage growth, economy, low unemployment

477
00:25:49,320 --> 00:25:53,160
Speaker 1: in the final two years of the nine two thousand expansion.

478
00:25:53,600 --> 00:25:55,280
Speaker 1: That was a period in which there was a lot

479
00:25:55,359 --> 00:25:58,920
Speaker 1: of um focus on deficit reduction and the sort of

480
00:25:59,000 --> 00:26:02,080
Speaker 1: private sector will sort of solve for itself and if

481
00:26:02,119 --> 00:26:03,680
Speaker 1: we just do the same things, if we cut the

482
00:26:03,760 --> 00:26:05,920
Speaker 1: focus on cutting the deficit, the federal keep rates low,

483
00:26:06,400 --> 00:26:08,480
Speaker 1: and then things were solved for themselves. Twenty tens is

484
00:26:08,520 --> 00:26:11,840
Speaker 1: a big rejection of that, because yes, actually the deficit

485
00:26:11,920 --> 00:26:14,720
Speaker 1: did go down over the course of the tents, despite

486
00:26:14,760 --> 00:26:18,320
Speaker 1: that you did not have a robust recovery. And when

487
00:26:18,480 --> 00:26:24,000
Speaker 1: a lot of especially technocratic Democrats are technocratic liberals to talk,

488
00:26:24,240 --> 00:26:27,760
Speaker 1: Larry Summers, Paul Krugman were people who were initially very

489
00:26:28,320 --> 00:26:32,880
Speaker 1: supportive of ambitious fiscal policy and then in especially after

490
00:26:32,920 --> 00:26:35,880
Speaker 1: Trump was elected, talked about how now is the time

491
00:26:35,920 --> 00:26:38,840
Speaker 1: for deficit reduction. They were critical of the tax cuts

492
00:26:38,880 --> 00:26:41,800
Speaker 1: from the standpoint that they would overheat the economy and

493
00:26:41,920 --> 00:26:46,359
Speaker 1: so it would actually create inflation, and that was pretty

494
00:26:46,400 --> 00:26:48,879
Speaker 1: clearly disproven. Right, like, yes, the tax cuts, we can

495
00:26:49,240 --> 00:26:52,000
Speaker 1: probably agree that that didn't really change the regime of

496
00:26:52,119 --> 00:26:55,440
Speaker 1: growth in a meaningful way, and yet it also didn't

497
00:26:55,440 --> 00:26:58,359
Speaker 1: also change the regime of inflation itself. So something about

498
00:26:58,640 --> 00:27:02,480
Speaker 1: deficits causing inflation, deficits being unsustainable, some of this just

499
00:27:02,560 --> 00:27:04,119
Speaker 1: doesn't add up. So I think there's a lot of

500
00:27:04,240 --> 00:27:05,960
Speaker 1: learning that happened, especially on the back half of the

501
00:27:06,000 --> 00:27:09,000
Speaker 1: decade for people who really bought into these frameworks, and

502
00:27:09,000 --> 00:27:11,960
Speaker 1: then you kind of look back and you say, that

503
00:27:12,080 --> 00:27:14,200
Speaker 1: was a really slow recovery. Do we really have to

504
00:27:14,240 --> 00:27:16,320
Speaker 1: do all of this stuff? And a lot of that

505
00:27:16,440 --> 00:27:18,720
Speaker 1: was also the byproduct of sort of there's a lot

506
00:27:18,720 --> 00:27:22,159
Speaker 1: of obstructionism, and how do you avoid that obstruction is

507
00:27:22,240 --> 00:27:24,560
Speaker 1: um maybe with a more ambitious stimulus than do thousand

508
00:27:24,640 --> 00:27:27,160
Speaker 1: nine and ten. So the lessons kind of have come

509
00:27:27,240 --> 00:27:30,240
Speaker 1: from sort of first realizing that the ninety nineties there's

510
00:27:30,359 --> 00:27:31,879
Speaker 1: a lot about that which was not going to be

511
00:27:32,000 --> 00:27:35,440
Speaker 1: replicable very easily, especially when you have this sort of

512
00:27:35,680 --> 00:27:38,280
Speaker 1: balance sheet recession of the two thousand nine two intent scenario,

513
00:27:38,640 --> 00:27:41,480
Speaker 1: and now you see there's just if you're going to

514
00:27:41,560 --> 00:27:43,760
Speaker 1: take Vienna, take Vienna, this sort of the attitude the

515
00:27:43,800 --> 00:27:46,199
Speaker 1: Biden administrations taking now we're like, we want to make

516
00:27:46,240 --> 00:27:50,760
Speaker 1: sure that the we use this opportunity to actually legislate

517
00:27:51,119 --> 00:27:54,520
Speaker 1: as much as needed, um and not just try to

518
00:27:54,600 --> 00:27:56,879
Speaker 1: toggle at the edges the way I think people like

519
00:27:57,320 --> 00:28:00,639
Speaker 1: Marry Summers Olivia Blanchard are really worried, well, what if

520
00:28:00,680 --> 00:28:02,600
Speaker 1: this is too much? I think that's something they do

521
00:28:02,680 --> 00:28:04,840
Speaker 1: not want to ask that question if you just read

522
00:28:04,880 --> 00:28:06,639
Speaker 1: from the tea leaves of what the Biden administration and

523
00:28:06,960 --> 00:28:24,800
Speaker 1: senior Democrats are saying now. So, first of all, I

524
00:28:24,840 --> 00:28:26,960
Speaker 1: want to say I find some of these your answers,

525
00:28:27,000 --> 00:28:28,760
Speaker 1: both of your answer to be kind of heartening, because

526
00:28:28,800 --> 00:28:32,600
Speaker 1: like this idea that maybe evidence changes people's minds, I've

527
00:28:32,600 --> 00:28:35,280
Speaker 1: always been sort of skeptical of that premise, but maybe

528
00:28:35,440 --> 00:28:39,560
Speaker 1: it actually does. You know, Uh, Scotty, you mentioned um Olivier,

529
00:28:39,800 --> 00:28:42,959
Speaker 1: Blanchard and some of these sort of like um grand

530
00:28:43,080 --> 00:28:46,240
Speaker 1: names and economics. But I'm also thinking, like one of

531
00:28:46,280 --> 00:28:48,680
Speaker 1: the figures that we saw in the last ten years

532
00:28:48,800 --> 00:28:51,280
Speaker 1: was this incredible like opening up of the playing field

533
00:28:51,320 --> 00:28:56,840
Speaker 1: of who like got to talk about economics and uh, Mike,

534
00:28:57,320 --> 00:29:00,680
Speaker 1: you know, like I've been following your writing and tweets

535
00:29:00,760 --> 00:29:03,480
Speaker 1: for like probably literally like twelve years now, Like you're

536
00:29:03,520 --> 00:29:06,320
Speaker 1: blogging back in two thousand and eight, scanda. You've been

537
00:29:06,680 --> 00:29:09,880
Speaker 1: talking for a while like pseudonymously now more prominently, but

538
00:29:10,000 --> 00:29:13,320
Speaker 1: like anyone can talk now there's a lot on Twitter,

539
00:29:13,640 --> 00:29:16,520
Speaker 1: and um we it's been noted that actually the Biden

540
00:29:16,520 --> 00:29:20,600
Speaker 1: administration has recruited like a bunch of like prominent like

541
00:29:20,720 --> 00:29:23,480
Speaker 1: sort of like Twitter voices to like do policy. And

542
00:29:23,600 --> 00:29:26,040
Speaker 1: I'm curious, like in a real sense, like how much

543
00:29:26,120 --> 00:29:28,840
Speaker 1: has this opening up of like who got to a pint?

544
00:29:28,880 --> 00:29:32,000
Speaker 1: And maybe you didn't need to be at a university anymore,

545
00:29:32,480 --> 00:29:34,240
Speaker 1: maybe you don't need to be like you know some

546
00:29:34,480 --> 00:29:37,360
Speaker 1: like uh, you know, big person at the IMF or

547
00:29:37,400 --> 00:29:40,000
Speaker 1: something like that. How much has this opening up of

548
00:29:40,680 --> 00:29:43,480
Speaker 1: who gets the right to talk in a pine sort

549
00:29:43,520 --> 00:29:46,520
Speaker 1: of benefactor that changed the debate in this sort of

550
00:29:46,600 --> 00:29:50,440
Speaker 1: like decade between the Great Financial Crisis and the COVID crisis.

551
00:29:51,080 --> 00:29:53,880
Speaker 1: I'll jump at first and to say, um, we saw

552
00:29:53,960 --> 00:29:56,600
Speaker 1: this with the financial crisis, where a lot of people

553
00:29:56,680 --> 00:30:01,520
Speaker 1: turned to the blogosphere of amateur financial experts who are

554
00:30:01,520 --> 00:30:05,160
Speaker 1: often uh writing under pseudonyms, as I was at the time,

555
00:30:05,240 --> 00:30:08,160
Speaker 1: and many other people um to kind of understand it

556
00:30:08,200 --> 00:30:10,880
Speaker 1: in real time because the experts were caught not understanding

557
00:30:10,920 --> 00:30:14,000
Speaker 1: what was happening, and I think that same kind of

558
00:30:14,160 --> 00:30:17,720
Speaker 1: instinct of because it's not. If you experience the economic

559
00:30:18,120 --> 00:30:22,240
Speaker 1: sphere online and Twitter, on sub stack on other places,

560
00:30:22,760 --> 00:30:25,720
Speaker 1: you'll notice that it's a it's an evolving argument with

561
00:30:25,840 --> 00:30:28,800
Speaker 1: a lot of evidence and a lot of careful policing

562
00:30:28,840 --> 00:30:31,840
Speaker 1: of how people are not policing them like like don't

563
00:30:31,840 --> 00:30:33,880
Speaker 1: say that kind of way, but like and like building

564
00:30:33,960 --> 00:30:36,280
Speaker 1: better arguments and really putting the evidence to the to

565
00:30:36,400 --> 00:30:39,760
Speaker 1: the front in a way that the research process doesn't

566
00:30:39,800 --> 00:30:42,360
Speaker 1: really do this very well. Um, a lot of the

567
00:30:42,440 --> 00:30:46,600
Speaker 1: stuff we write and talk about who is unemployed? What

568
00:30:46,800 --> 00:30:50,640
Speaker 1: is the sense in which inflation is a worry? That's

569
00:30:50,680 --> 00:30:52,680
Speaker 1: not the kind of stuff academics can get tenure on,

570
00:30:52,840 --> 00:30:56,280
Speaker 1: though it's essential for the policymaking space, so it fills

571
00:30:56,440 --> 00:30:59,720
Speaker 1: it fills the marketing that's poorly served. And it's also

572
00:30:59,800 --> 00:31:02,760
Speaker 1: like the best arguments really do evolve pretty pretty quickly

573
00:31:02,880 --> 00:31:05,760
Speaker 1: up the chain. And there's still on cost of meritocracy

574
00:31:05,800 --> 00:31:08,240
Speaker 1: because like that's a lie, but like there's a way

575
00:31:08,320 --> 00:31:11,240
Speaker 1: in which people can really step up to the moment

576
00:31:11,440 --> 00:31:14,880
Speaker 1: and it really does get arguments out there that are

577
00:31:15,000 --> 00:31:18,120
Speaker 1: not seen very well or don't transfer themselves very well

578
00:31:18,200 --> 00:31:21,440
Speaker 1: through the way the Academy produces research. If I were

579
00:31:21,520 --> 00:31:24,440
Speaker 1: to just tack on a little bit on the sort

580
00:31:24,480 --> 00:31:28,160
Speaker 1: of how people revise their priors and how do we

581
00:31:28,240 --> 00:31:31,320
Speaker 1: actually learn and make course corrections. A lot of what

582
00:31:31,480 --> 00:31:33,640
Speaker 1: you're talking about on the Twitter, on the sort of

583
00:31:33,720 --> 00:31:38,080
Speaker 1: Twitter discourse and how people sort of can everyone can

584
00:31:38,120 --> 00:31:41,640
Speaker 1: speak is sort of what the intuition behind sort of

585
00:31:41,680 --> 00:31:44,520
Speaker 1: democratic governance is supposed to capture. That this is a

586
00:31:44,600 --> 00:31:47,440
Speaker 1: way to solve problems in a way that's actually responsive

587
00:31:47,480 --> 00:31:50,040
Speaker 1: to a lot of people's interests that end can't easily

588
00:31:50,080 --> 00:31:53,040
Speaker 1: be solved by the market or by experts um In

589
00:31:53,120 --> 00:31:56,280
Speaker 1: some ways, actually, I'm very stunned by how a lot

590
00:31:56,360 --> 00:31:59,320
Speaker 1: of the same actors who were policing the use of

591
00:31:59,400 --> 00:32:02,800
Speaker 1: fiscal poll see in the early are still the same

592
00:32:02,840 --> 00:32:05,000
Speaker 1: actor experts who are trying to police fiscal policy now.

593
00:32:05,000 --> 00:32:08,040
Speaker 1: They're just not as effective, right, And so the same

594
00:32:08,360 --> 00:32:10,800
Speaker 1: same characters are there, They're just not as effective. So

595
00:32:10,920 --> 00:32:13,640
Speaker 1: that in some ways other people are being elevated, and

596
00:32:13,720 --> 00:32:16,760
Speaker 1: why are they being elevated is a good question. In

597
00:32:16,840 --> 00:32:19,400
Speaker 1: some ways it's as more of a small d democratic

598
00:32:19,800 --> 00:32:22,360
Speaker 1: governance question. It's also something that I think you can

599
00:32:22,400 --> 00:32:24,040
Speaker 1: see even in markets. One of like sort of the

600
00:32:24,080 --> 00:32:27,040
Speaker 1: strengths I would say, of certain types of market structures

601
00:32:27,080 --> 00:32:29,680
Speaker 1: and market governance is the ability to recognize when things

602
00:32:29,720 --> 00:32:32,920
Speaker 1: are not going according to your hypothesis. Right. You can

603
00:32:32,960 --> 00:32:36,200
Speaker 1: actually see how things change and say this doesn't fit

604
00:32:36,280 --> 00:32:38,240
Speaker 1: the theory or my hypothesis. I have to revise it.

605
00:32:38,640 --> 00:32:41,600
Speaker 1: And market participants, I would say, if lar it has

606
00:32:41,680 --> 00:32:43,600
Speaker 1: been a little bit ahead of the sort of highbrow

607
00:32:43,680 --> 00:32:46,520
Speaker 1: academics in terms of just understanding, Okay, we're at low

608
00:32:46,560 --> 00:32:50,920
Speaker 1: interest rates right now, and now what's next. Because really

609
00:32:51,000 --> 00:32:54,880
Speaker 1: monetary policy has some certain limit functional limits on what

610
00:32:55,000 --> 00:32:56,960
Speaker 1: it can do. We're going to have to have some

611
00:32:57,080 --> 00:32:59,680
Speaker 1: kind of fiscal moment. This has been sort of consensus

612
00:32:59,760 --> 00:33:02,680
Speaker 1: for some time. I would say it Markets themselves don't

613
00:33:02,680 --> 00:33:04,680
Speaker 1: solve that problem, though, right. You actually do need to

614
00:33:04,760 --> 00:33:07,680
Speaker 1: have certain types of political structures in place to actually

615
00:33:07,680 --> 00:33:11,000
Speaker 1: try to solve them, and you need hope. Democratic democracy

616
00:33:11,080 --> 00:33:13,120
Speaker 1: kind of has its share of burdens, but it also

617
00:33:13,160 --> 00:33:14,680
Speaker 1: has its to share of strengths in terms of being

618
00:33:14,680 --> 00:33:17,480
Speaker 1: able to respond to the moment and not take the

619
00:33:17,560 --> 00:33:21,320
Speaker 1: deferential trust the experts or trust the market approach and

620
00:33:21,560 --> 00:33:24,280
Speaker 1: actually say there's something going on here that we need

621
00:33:24,360 --> 00:33:27,960
Speaker 1: to rapidly revise. I kind of think least there's something

622
00:33:28,000 --> 00:33:30,600
Speaker 1: about the like discourse on social media. It's a very

623
00:33:30,720 --> 00:33:35,200
Speaker 1: flat culture that it can actually um allow for a

624
00:33:35,240 --> 00:33:37,280
Speaker 1: lot of different people from a lot of different backgrounds

625
00:33:37,600 --> 00:33:39,719
Speaker 1: to really check each other on what they're what are

626
00:33:39,720 --> 00:33:42,760
Speaker 1: the claims being made, doesn't actually fit the facts, make

627
00:33:42,760 --> 00:33:45,840
Speaker 1: sure you're not making obvious descriptive errors. Uh, and that

628
00:33:45,960 --> 00:33:48,120
Speaker 1: kind of discourse. There's a lot of toxicity on Twitter too,

629
00:33:48,280 --> 00:33:50,360
Speaker 1: but at least if you can avoid the to toxicity,

630
00:33:50,400 --> 00:33:53,160
Speaker 1: there is some room for that kind of deliberative, open

631
00:33:53,240 --> 00:33:56,680
Speaker 1: minded discourse. You have to deloc hunted out where you

632
00:33:56,680 --> 00:34:00,320
Speaker 1: can find it. Can I ask you both of question

633
00:34:01,560 --> 00:34:05,880
Speaker 1: as hosts you are are are well known finance professionals.

634
00:34:06,120 --> 00:34:09,120
Speaker 1: Do you know J Powell's burner account? You don't have

635
00:34:09,160 --> 00:34:11,239
Speaker 1: to tell us who it is. I forget. At some

636
00:34:11,400 --> 00:34:16,439
Speaker 1: point I knew, and it doesn't follow me, So I've

637
00:34:16,480 --> 00:34:18,840
Speaker 1: forgotten who If it followed me, I'm sure I remember

638
00:34:18,920 --> 00:34:20,759
Speaker 1: now I really don't want to know, because if it

639
00:34:20,760 --> 00:34:27,520
Speaker 1: didn't follow me, iast Okay, Okay, so this is a

640
00:34:27,560 --> 00:34:29,719
Speaker 1: really interesting conversation, but I want to try to put

641
00:34:29,880 --> 00:34:32,800
Speaker 1: some of it into I guess more concrete practice. So

642
00:34:33,040 --> 00:34:38,160
Speaker 1: we agreed that there's this potential break. The moment is now, UM,

643
00:34:38,320 --> 00:34:41,440
Speaker 1: we're testing a bunch of new policies. What are some

644
00:34:41,600 --> 00:34:46,920
Speaker 1: of the like actual um examples of this new thinking

645
00:34:47,400 --> 00:34:50,000
Speaker 1: that are being put into place and that you are

646
00:34:50,040 --> 00:34:53,120
Speaker 1: watching as a test case? And I'm curious also, how

647
00:34:53,200 --> 00:34:58,040
Speaker 1: do you evaluate the success of those programs, Like what

648
00:34:58,320 --> 00:35:02,200
Speaker 1: would count as a accessible sort of instance of this

649
00:35:02,360 --> 00:35:08,520
Speaker 1: new thinking. I think the Rescue package is probably going

650
00:35:08,600 --> 00:35:11,840
Speaker 1: to determine whether this thing can actually be replicable, right

651
00:35:11,920 --> 00:35:14,720
Speaker 1: in terms of are we going to see that people

652
00:35:14,800 --> 00:35:17,759
Speaker 1: think this works? I think CARES in some ways also

653
00:35:17,840 --> 00:35:21,480
Speaker 1: showed that ultimately people like the stimmy money, right, they

654
00:35:21,560 --> 00:35:24,880
Speaker 1: like the checks. They a lot of people really appreciated

655
00:35:24,920 --> 00:35:28,080
Speaker 1: the six dollars that came with you. I there were

656
00:35:28,120 --> 00:35:31,560
Speaker 1: aspects of p P P was quite popular for small businesses.

657
00:35:31,680 --> 00:35:34,760
Speaker 1: So there are policy solutions that came out of Congress

658
00:35:34,800 --> 00:35:37,799
Speaker 1: that had some individual success. Whether people think other parts

659
00:35:37,840 --> 00:35:41,360
Speaker 1: of CARES are good or bad, the implementation being sub standard,

660
00:35:41,960 --> 00:35:44,000
Speaker 1: there was at least the prospect that this can work.

661
00:35:44,480 --> 00:35:47,759
Speaker 1: If you start to see that the rescue package one

662
00:35:48,040 --> 00:35:50,959
Speaker 1: you can actually say that it helped and people really

663
00:35:51,040 --> 00:35:54,400
Speaker 1: digested as working. Like the Recovery Act of two thousand

664
00:35:54,480 --> 00:35:57,600
Speaker 1: nine was pretty big for its time, and at the

665
00:35:57,640 --> 00:35:59,520
Speaker 1: same time it was not nearly enough, and it was

666
00:35:59,640 --> 00:36:01,800
Speaker 1: very easy to say it really just led to a

667
00:36:01,880 --> 00:36:06,080
Speaker 1: bunch of cylindra boondoggles. It's a bunch of waste to

668
00:36:06,120 --> 00:36:08,719
Speaker 1: see the economy is still struggling to recovery. That's how

669
00:36:08,800 --> 00:36:12,440
Speaker 1: you know that fiscal stimulus doesn't work. The counter factual

670
00:36:12,480 --> 00:36:14,799
Speaker 1: would have been worse. But people don't think in terms

671
00:36:14,840 --> 00:36:17,160
Speaker 1: of counter factuals, at least in terms of their intuitions.

672
00:36:17,440 --> 00:36:19,440
Speaker 1: So if you if it actually helps to shape people's

673
00:36:19,480 --> 00:36:22,839
Speaker 1: intuitions to wanting to into the to the point where

674
00:36:22,880 --> 00:36:25,640
Speaker 1: you actually want to do this again, maybe not in

675
00:36:25,719 --> 00:36:29,520
Speaker 1: the exact one point nine trillion unpaid for spending, but

676
00:36:29,719 --> 00:36:33,240
Speaker 1: rather we can find other solutions that work for fiscal policy,

677
00:36:33,480 --> 00:36:36,480
Speaker 1: that meet the moment and meet what's needed. I think

678
00:36:36,560 --> 00:36:39,880
Speaker 1: that starts to change people's perceptions about what's possible. Um

679
00:36:40,120 --> 00:36:43,680
Speaker 1: there's a certain feedback loop. That's especially if Republicans, maybe

680
00:36:43,719 --> 00:36:46,000
Speaker 1: on the next go around, start to see that actually

681
00:36:46,080 --> 00:36:48,279
Speaker 1: this worked, we probably should have either been part of

682
00:36:48,280 --> 00:36:50,640
Speaker 1: the solution or be willing to offer a more compelling

683
00:36:50,719 --> 00:36:52,960
Speaker 1: counter offer. Those are the kinds of things where I'd

684
00:36:52,960 --> 00:36:57,320
Speaker 1: say something's changing, where people want to actually govern and

685
00:36:57,480 --> 00:37:00,120
Speaker 1: not just sort of delegate or hope and try us

686
00:37:00,200 --> 00:37:02,840
Speaker 1: that the market or some experts will come up with

687
00:37:02,880 --> 00:37:06,480
Speaker 1: the right answers later down the line. Yeah, some things

688
00:37:06,560 --> 00:37:08,840
Speaker 1: I'm watching for last year in this year. One is

689
00:37:08,960 --> 00:37:12,160
Speaker 1: um that we reduced poverty in the middle of the crisis,

690
00:37:12,200 --> 00:37:16,440
Speaker 1: and quarter two of last year unemployment was probably twenty percent.

691
00:37:16,560 --> 00:37:19,440
Speaker 1: We were probably technically in a depression, UM, but the

692
00:37:19,560 --> 00:37:23,000
Speaker 1: fiscal policy was able to reduce poverty, and we're going

693
00:37:23,080 --> 00:37:25,560
Speaker 1: to cut child poverty in half this year and then

694
00:37:25,640 --> 00:37:27,839
Speaker 1: hopefully in the program that evolves and becomes much more

695
00:37:27,920 --> 00:37:30,440
Speaker 1: clear and straightforward. You know, the fact that even in

696
00:37:30,600 --> 00:37:33,000
Speaker 1: very difficult economic times, the level of poverty as a

697
00:37:33,040 --> 00:37:36,440
Speaker 1: policy choice, I think was shown last year is reflected

698
00:37:36,480 --> 00:37:39,120
Speaker 1: in the bill this year. UM. Last year, the Final

699
00:37:39,160 --> 00:37:43,240
Speaker 1: Reserve intervening directly into credit uh and interest rate policy

700
00:37:43,360 --> 00:37:46,560
Speaker 1: on the long end of the curve for municipalities, for corporations,

701
00:37:46,600 --> 00:37:49,080
Speaker 1: for the secondary bond market. A lot of controversy, a

702
00:37:49,120 --> 00:37:51,120
Speaker 1: lot of fighting about it, but it showed that the

703
00:37:51,200 --> 00:37:54,520
Speaker 1: FED is already thinking and will continue to evolve to

704
00:37:54,640 --> 00:37:58,640
Speaker 1: think way beyond just short term interest rates and some

705
00:37:58,800 --> 00:38:02,400
Speaker 1: guidance on the long end that will have important consequences

706
00:38:02,440 --> 00:38:05,000
Speaker 1: for climate change, as the Federal almost certainly have to

707
00:38:05,080 --> 00:38:08,080
Speaker 1: be directly or indirectly involved with the funneling of credit

708
00:38:08,120 --> 00:38:12,400
Speaker 1: towards green energy products and our green energy investment in infrastructure.

709
00:38:13,080 --> 00:38:15,040
Speaker 1: The overhaul that happened in the FED last year, we're

710
00:38:15,080 --> 00:38:17,680
Speaker 1: still learning it, we're still figuring it out. Um. But

711
00:38:17,840 --> 00:38:20,040
Speaker 1: that's going to be with us for some time as well.

712
00:38:20,680 --> 00:38:25,360
Speaker 1: This year. I think if you actually get the economy

713
00:38:25,480 --> 00:38:28,560
Speaker 1: back to trend at the end of next year, UM,

714
00:38:28,760 --> 00:38:31,719
Speaker 1: you've basically disproven the theory of history sists and the

715
00:38:31,800 --> 00:38:34,279
Speaker 1: idea that we need to understand that every recessions would

716
00:38:34,280 --> 00:38:36,359
Speaker 1: have a built in downward curve. And then you can

717
00:38:36,400 --> 00:38:39,160
Speaker 1: put pressure on the idea of potential output in the

718
00:38:39,200 --> 00:38:42,200
Speaker 1: way it's deployed classically. UM. The idea that you know,

719
00:38:42,840 --> 00:38:47,080
Speaker 1: overheating economy has positive spillovers that can increase productive capacity,

720
00:38:47,320 --> 00:38:50,040
Speaker 1: which makes sense intuitively, but doesn't fit well into the

721
00:38:50,560 --> 00:38:54,239
Speaker 1: you know, the nuts and bolts and models of neoclassical economics.

722
00:38:54,360 --> 00:38:56,799
Speaker 1: So I think, um, it's already like it's it's going

723
00:38:56,840 --> 00:38:58,560
Speaker 1: to take some time to like see all the things

724
00:38:58,600 --> 00:39:01,960
Speaker 1: that are different. But even the fact that you a

725
00:39:02,040 --> 00:39:04,160
Speaker 1: lot of politicians that talked about we need to do more,

726
00:39:04,719 --> 00:39:07,480
Speaker 1: the risk of doing too much is less than doing

727
00:39:07,520 --> 00:39:09,840
Speaker 1: too little. We need to overshoot. I thought that was

728
00:39:09,880 --> 00:39:11,480
Speaker 1: like a metaphor when they were saying that they are

729
00:39:11,480 --> 00:39:12,960
Speaker 1: actually going to try to do it. They're going to

730
00:39:13,000 --> 00:39:15,360
Speaker 1: try to shoot for potential output and they'll probably hit it.

731
00:39:16,080 --> 00:39:18,880
Speaker 1: Or the way it is defined on the books at

732
00:39:18,920 --> 00:39:22,520
Speaker 1: the CBO, which is already kind of a mess. If successful,

733
00:39:22,600 --> 00:39:25,719
Speaker 1: that just will throw in a completely different way about

734
00:39:25,760 --> 00:39:28,760
Speaker 1: the idea that we should be responding much more quickly

735
00:39:28,800 --> 00:39:31,839
Speaker 1: and rapidly to recessions rather than something that largely world

736
00:39:31,880 --> 00:39:36,239
Speaker 1: work itself out with sometimes. So those are all encouraging developments. Um.

737
00:39:36,880 --> 00:39:39,759
Speaker 1: The you know, some people have really been emphasizing the

738
00:39:40,680 --> 00:39:44,920
Speaker 1: balance sheet nature of repairing balance sheets that's embedded in

739
00:39:44,960 --> 00:39:47,840
Speaker 1: the American recovery plan. Um, you know, fixing the balance

740
00:39:47,880 --> 00:39:53,200
Speaker 1: sheets of transit, higher add pensions, state and municipalities, things

741
00:39:53,280 --> 00:39:56,520
Speaker 1: that tend to get scaled down and never recover in

742
00:39:56,640 --> 00:39:59,680
Speaker 1: a air quote recovery a lot of those political problems

743
00:39:59,680 --> 00:40:02,560
Speaker 1: are going to disappear in a few weeks, um, provided

744
00:40:02,600 --> 00:40:05,359
Speaker 1: to passes the House. So um, that's going to open

745
00:40:05,440 --> 00:40:07,040
Speaker 1: up a lot of space. So I think there's a

746
00:40:07,160 --> 00:40:08,920
Speaker 1: lot of new frontiers and we don't even there's so

747
00:40:09,000 --> 00:40:10,560
Speaker 1: much going on, we don't even know them all yet.

748
00:40:10,640 --> 00:40:28,400
Speaker 1: But I think they're all encouraging for a better So

749
00:40:28,800 --> 00:40:31,160
Speaker 1: in a second, I want to pivot real quickly at

750
00:40:31,160 --> 00:40:33,480
Speaker 1: the end of the conversation and turn this into an

751
00:40:33,480 --> 00:40:36,520
Speaker 1: episode about semiconductors for our semi Conductor series and talk

752
00:40:36,520 --> 00:40:40,240
Speaker 1: about industrial policy. But before we do that real quickly,

753
00:40:40,840 --> 00:40:43,440
Speaker 1: you know, we we've we've told a lot about fiscal policy,

754
00:40:43,480 --> 00:40:46,160
Speaker 1: and that's basically been our discussion. There has been also

755
00:40:46,200 --> 00:40:49,000
Speaker 1: a pivot at the FED itself, and there was there

756
00:40:49,080 --> 00:40:52,160
Speaker 1: was this framework review over the last several years, announced

757
00:40:52,200 --> 00:40:56,359
Speaker 1: in August that they are committing to not preemptively fight

758
00:40:56,480 --> 00:40:59,360
Speaker 1: inflation actually sort of like let things run hot in

759
00:40:59,400 --> 00:41:02,399
Speaker 1: a way they had been. German Powell talks a lot

760
00:41:02,560 --> 00:41:06,239
Speaker 1: about not just using some sort of headline unemployment rate

761
00:41:06,360 --> 00:41:09,279
Speaker 1: to judge when we're at full employment, but also like

762
00:41:09,440 --> 00:41:12,200
Speaker 1: really look at like are the gains of employment being

763
00:41:12,280 --> 00:41:16,319
Speaker 1: spread to minority groups, previous groups which previously didn't enjoy

764
00:41:16,400 --> 00:41:18,960
Speaker 1: the fruits of recovery at the same way. I don't know,

765
00:41:19,040 --> 00:41:20,600
Speaker 1: one of you want to like talk a little bit

766
00:41:20,640 --> 00:41:24,440
Speaker 1: about like there has been an intellectual evolution even at

767
00:41:24,480 --> 00:41:29,759
Speaker 1: the Central Bank aside from the politics of expansionary fiscal policy. Yeah,

768
00:41:29,920 --> 00:41:33,920
Speaker 1: I think that the FEDS Framework Review and it's subsequent

769
00:41:34,000 --> 00:41:39,759
Speaker 1: forward guidance policy in September of really indicative of that

770
00:41:40,000 --> 00:41:44,960
Speaker 1: major shift in the sense that they won started to say, actually,

771
00:41:45,040 --> 00:41:47,480
Speaker 1: we don't need to target a specific unemployment rate or

772
00:41:47,560 --> 00:41:51,200
Speaker 1: target a specific level of employment. We actually should be

773
00:41:51,440 --> 00:41:55,840
Speaker 1: always aiming at least for employment improvement, and we should

774
00:41:55,880 --> 00:41:58,560
Speaker 1: never be saying, actually, there's too much employment in the economy.

775
00:41:58,640 --> 00:42:01,200
Speaker 1: The problem if inflations of problem. Inflation is a problem,

776
00:42:01,239 --> 00:42:03,040
Speaker 1: but that's not the same thing. That's a really big

777
00:42:03,080 --> 00:42:05,760
Speaker 1: shift from the world we lived in the seventies, eighties,

778
00:42:05,800 --> 00:42:09,560
Speaker 1: and nineties and even beyond that, where everyone in sort

779
00:42:09,600 --> 00:42:12,439
Speaker 1: of the world of sort of economics said, well, okay,

780
00:42:12,480 --> 00:42:14,160
Speaker 1: but once you get below a certain level of unemployment,

781
00:42:14,160 --> 00:42:16,319
Speaker 1: all you're gonna get as much of inflation. So let's

782
00:42:16,360 --> 00:42:18,319
Speaker 1: just try to like get it right on a pin

783
00:42:18,840 --> 00:42:21,040
Speaker 1: that's changed to where there is like an openness to

784
00:42:21,239 --> 00:42:23,040
Speaker 1: we don't really know where these things are, and we

785
00:42:23,120 --> 00:42:25,160
Speaker 1: really don't want to do any harm, and we actually

786
00:42:25,239 --> 00:42:28,279
Speaker 1: want to let sort of the economy show what it's

787
00:42:28,320 --> 00:42:32,960
Speaker 1: capable of. In some ways what J. Powell's own statements

788
00:42:33,239 --> 00:42:37,360
Speaker 1: subsequent of the Framework Review, we're really focused on, Hey, Congress,

789
00:42:37,680 --> 00:42:39,920
Speaker 1: you have the spending authority, we have the lending authority.

790
00:42:40,000 --> 00:42:43,760
Speaker 1: The spending authority is actually much more powerful for shaping

791
00:42:43,880 --> 00:42:47,560
Speaker 1: a lot of these outcomes. That is itself an inversion

792
00:42:47,680 --> 00:42:50,240
Speaker 1: of what you saw in the ES when green Span

793
00:42:50,760 --> 00:42:54,640
Speaker 1: was hiking rates and at the same time talking about

794
00:42:54,760 --> 00:42:57,560
Speaker 1: how there are bond market vigilantes so Clinton should not

795
00:42:57,680 --> 00:43:00,719
Speaker 1: be so ambitious about fiscal policy. So that contrast is

796
00:43:00,880 --> 00:43:04,520
Speaker 1: very vivid. The Framework Review itself and i'd say J.

797
00:43:04,640 --> 00:43:09,080
Speaker 1: Palis statements are both revealing of that sort of shift

798
00:43:09,120 --> 00:43:11,800
Speaker 1: towards actually, we do need Congress. We're not going to

799
00:43:11,880 --> 00:43:13,880
Speaker 1: solve this thing on our own. We're going to have

800
00:43:13,960 --> 00:43:16,240
Speaker 1: to have some flexibility and not just try to target

801
00:43:16,280 --> 00:43:18,560
Speaker 1: a specific level of unemployment or a target a specific

802
00:43:18,640 --> 00:43:21,239
Speaker 1: level of inflation. So there's just a little more flexibility

803
00:43:21,320 --> 00:43:23,880
Speaker 1: on that side, and that that shows there like some

804
00:43:24,000 --> 00:43:26,640
Speaker 1: level of institutional learning and that's good, um. And from

805
00:43:26,680 --> 00:43:28,759
Speaker 1: there it's about are we going to learn more? Are

806
00:43:28,800 --> 00:43:31,360
Speaker 1: we actually going to try? And it's it's gonna be

807
00:43:31,440 --> 00:43:33,120
Speaker 1: hard right in some sense. It's because there is still

808
00:43:33,400 --> 00:43:36,279
Speaker 1: all sorts of conflicts intensions, and it may not be

809
00:43:36,400 --> 00:43:38,640
Speaker 1: the case that people learn all the right lessons at

810
00:43:38,680 --> 00:43:41,600
Speaker 1: the right times. Um. But there's at least now I

811
00:43:41,680 --> 00:43:43,759
Speaker 1: said that there's a chance to really test some of

812
00:43:43,800 --> 00:43:46,480
Speaker 1: this stuff out in terms of we are seeing ambitious

813
00:43:46,480 --> 00:43:51,399
Speaker 1: fiscal policy, cooperative monetary policy, no like limiting constraints that way.

814
00:43:52,719 --> 00:43:56,560
Speaker 1: Can I ask one quick question before um? We continue

815
00:43:57,040 --> 00:44:01,480
Speaker 1: are never ending semiconductor series. But the recent backup in

816
00:44:01,640 --> 00:44:04,799
Speaker 1: bond yields, I've seen a few people characterize that as

817
00:44:04,920 --> 00:44:08,719
Speaker 1: the beginning of you know, pushback from the bond vigilantes,

818
00:44:08,760 --> 00:44:11,799
Speaker 1: which I don't exactly agree with. But I'm curious if

819
00:44:11,880 --> 00:44:15,840
Speaker 1: you have opinions on why we're getting that backup in

820
00:44:16,000 --> 00:44:19,000
Speaker 1: yields at a time when you know, central banks more

821
00:44:19,040 --> 00:44:22,960
Speaker 1: or law or less are promising to keep benchmark rates

822
00:44:23,000 --> 00:44:26,120
Speaker 1: pretty low. Is that all um? The work of I

823
00:44:26,160 --> 00:44:29,600
Speaker 1: guess the market adapting to this idea of more fiscal stimulus,

824
00:44:31,160 --> 00:44:34,279
Speaker 1: I'll jump in first year. I think that the sort

825
00:44:34,280 --> 00:44:37,040
Speaker 1: of bond market backup you've seen right now has also

826
00:44:37,120 --> 00:44:40,280
Speaker 1: coincided with especially since the Georgia runoff's a marginally stronger

827
00:44:40,360 --> 00:44:45,120
Speaker 1: dollar and sort of in general equity rally has largely continued.

828
00:44:45,800 --> 00:44:48,160
Speaker 1: And so in light of that's that's all consistent with

829
00:44:48,239 --> 00:44:52,120
Speaker 1: a repricing of US growth to my mind, and there's

830
00:44:52,600 --> 00:44:56,279
Speaker 1: think about the guidance is rooted in outcomes. The rooted

831
00:44:56,320 --> 00:44:59,319
Speaker 1: and outcomes about maximum employment and sort of achieving at

832
00:44:59,360 --> 00:45:02,160
Speaker 1: least two percent inflation for a twelve month period. So

833
00:45:02,320 --> 00:45:04,759
Speaker 1: those two things are really we don't know what time

834
00:45:04,840 --> 00:45:07,400
Speaker 1: it's going to take to achieve that, on what dimensions

835
00:45:07,480 --> 00:45:10,719
Speaker 1: is maximum employment really been achieved, and how that can

836
00:45:10,840 --> 00:45:13,040
Speaker 1: change itself over time. So there are a lot of

837
00:45:13,080 --> 00:45:16,400
Speaker 1: open questions that are not strictly about timeline. We are

838
00:45:16,480 --> 00:45:19,440
Speaker 1: also giving every ourselves every opportunity both through the sort

839
00:45:19,440 --> 00:45:22,520
Speaker 1: of vaccine distribution and through the fiscal ambition we're seeing

840
00:45:22,600 --> 00:45:26,400
Speaker 1: right now of actually achieving robust growth, getting back to

841
00:45:26,440 --> 00:45:29,480
Speaker 1: at least the pre pandemic labor market on a sort

842
00:45:29,480 --> 00:45:33,640
Speaker 1: of reasonable time horizon, and that those are also very

843
00:45:33,760 --> 00:45:36,360
Speaker 1: encouraging about what the growth trajectory looks like. Not just

844
00:45:39,760 --> 00:45:42,160
Speaker 1: so with all of that in place, I think that

845
00:45:42,239 --> 00:45:45,799
Speaker 1: the bond markets in general curves deepens whenever you see

846
00:45:46,200 --> 00:45:48,359
Speaker 1: sort of low interest rates and you're kind of coming

847
00:45:48,400 --> 00:45:52,040
Speaker 1: out of a um. You've already cut interest rates. Now

848
00:45:52,160 --> 00:45:54,600
Speaker 1: the question is what's the time horizon by which you

849
00:45:54,640 --> 00:45:57,560
Speaker 1: actually get the recovery where interest rate policy might be

850
00:45:57,760 --> 00:46:00,680
Speaker 1: more in question, and especially since defends not going to

851
00:46:00,719 --> 00:46:04,239
Speaker 1: cut rates negative anytime, seeing it looks like there is

852
00:46:04,280 --> 00:46:08,200
Speaker 1: sort of an asymmetry that the market is repricing quite understandably,

853
00:46:08,360 --> 00:46:12,279
Speaker 1: maybe even a little belatedly. Yeah, on the belatedly point,

854
00:46:12,320 --> 00:46:14,000
Speaker 1: I had a right up for the day after the

855
00:46:14,040 --> 00:46:16,720
Speaker 1: election about if there was a jump in bond yields

856
00:46:16,840 --> 00:46:20,759
Speaker 1: on trifecta in early November, what would you know how

857
00:46:20,800 --> 00:46:24,800
Speaker 1: to understand that as essentially a pricing an investment package

858
00:46:25,239 --> 00:46:27,600
Speaker 1: in the same way the Trump administration. When Trump was elected,

859
00:46:27,760 --> 00:46:29,640
Speaker 1: and that was a pretty surprise event, I think for

860
00:46:29,680 --> 00:46:32,879
Speaker 1: the market, you saw a run up though his term

861
00:46:33,640 --> 00:46:37,840
Speaker 1: before COVID. His term before COVID, yields were at the

862
00:46:37,880 --> 00:46:39,640
Speaker 1: same rate, if not lower, depending on when you went in,

863
00:46:39,719 --> 00:46:42,360
Speaker 1: how you measure it UM because of the fact that

864
00:46:42,400 --> 00:46:44,720
Speaker 1: the Democrats in control the Senate, because of the contested

865
00:46:44,800 --> 00:46:47,880
Speaker 1: nature of the presidential election. You know, it wasn't until

866
00:46:48,040 --> 00:46:50,920
Speaker 1: mid January even had a sense that the Democrats could

867
00:46:50,920 --> 00:46:53,800
Speaker 1: pass something, and up until a few weeks ago, the

868
00:46:53,840 --> 00:46:55,520
Speaker 1: idea that it would be too trillion and be this

869
00:46:55,640 --> 00:46:58,040
Speaker 1: really major fiscal push. I don't think it was quite

870
00:46:58,120 --> 00:47:01,520
Speaker 1: as processor apprentiated. So some of that's just readjusting for

871
00:47:02,000 --> 00:47:04,400
Speaker 1: what is about to happen, which I think is appropriating

872
00:47:04,440 --> 00:47:07,160
Speaker 1: good and still on a long term timeline, it's still

873
00:47:07,680 --> 00:47:11,080
Speaker 1: rates are incredibly low UM and the capacity is far

874
00:47:11,160 --> 00:47:15,719
Speaker 1: beyond what we can imagine right before we go. I

875
00:47:15,840 --> 00:47:19,520
Speaker 1: do want to continue de facto our semiconductor series, and

876
00:47:19,560 --> 00:47:21,680
Speaker 1: the reason it's relevant is because there is this big

877
00:47:21,760 --> 00:47:25,279
Speaker 1: discussion about the role of industrial policy and whether the

878
00:47:25,400 --> 00:47:30,760
Speaker 1: US can, through policy UM actually sort of restore domestic

879
00:47:30,840 --> 00:47:34,920
Speaker 1: semiconductor manufacturing. We're experiencing the shortages, odd lots listeners, no

880
00:47:35,040 --> 00:47:37,560
Speaker 1: well and Scanda. You wrote about that, and so I

881
00:47:37,600 --> 00:47:39,240
Speaker 1: want to get you know, you're sort of like brief

882
00:47:39,320 --> 00:47:41,840
Speaker 1: thoughts on what it would take. And then Mike, I

883
00:47:41,880 --> 00:47:44,759
Speaker 1: would like to get your lots like from the historical perspective,

884
00:47:45,719 --> 00:47:49,400
Speaker 1: from your research industrial policy, not leaving it up to

885
00:47:49,480 --> 00:47:51,840
Speaker 1: the invisible hand all the time. What a sort of

886
00:47:51,920 --> 00:47:56,320
Speaker 1: history tell us about when the political will manifest to

887
00:47:57,000 --> 00:48:02,000
Speaker 1: create a you know, do industrial policy created domestic industry? Yeah?

888
00:48:02,320 --> 00:48:06,839
Speaker 1: So I I along with my colleague Alex Williams, wrote

889
00:48:06,920 --> 00:48:11,560
Speaker 1: a piece about what we've seen more recently reveals how

890
00:48:11,840 --> 00:48:16,239
Speaker 1: demand helps unlock some of the supply um and capacity

891
00:48:16,760 --> 00:48:20,040
Speaker 1: that otherwise wouldn't exist. So we had really low investment

892
00:48:20,040 --> 00:48:22,680
Speaker 1: in a lot of high tech equipment for about two

893
00:48:22,760 --> 00:48:26,719
Speaker 1: decades following the tech bust, or sort of after two

894
00:48:26,760 --> 00:48:29,480
Speaker 1: thousand and a lot of people were saying, Oh, that's

895
00:48:29,480 --> 00:48:33,400
Speaker 1: weak peractivity. Oh that's weak investment. It's something structural, it's globalization,

896
00:48:33,520 --> 00:48:36,040
Speaker 1: it's inequality, it's all of these things. And I mean,

897
00:48:36,360 --> 00:48:38,200
Speaker 1: there's no The problem with a lot of these arguments

898
00:48:38,320 --> 00:48:40,719
Speaker 1: is really hard to pin down how much of it

899
00:48:40,880 --> 00:48:44,560
Speaker 1: is globalization, how much of it is business model shifts um.

900
00:48:45,000 --> 00:48:47,000
Speaker 1: And yet what we found was when we actually did

901
00:48:47,080 --> 00:48:48,840
Speaker 1: do aggressive fiscal policy in the US was not the

902
00:48:48,880 --> 00:48:50,920
Speaker 1: only one to do aggressive policy, at least in the

903
00:48:50,960 --> 00:48:53,840
Speaker 1: outset of the coronavirus response, because you actually saw that

904
00:48:54,000 --> 00:48:57,000
Speaker 1: demand for high tech equipment was sort of historically strong.

905
00:48:57,080 --> 00:49:01,640
Speaker 1: We broke out of this and has semi conductor manufacturing

906
00:49:01,719 --> 00:49:05,080
Speaker 1: is called off side off sides, UM call it globally,

907
00:49:05,480 --> 00:49:08,200
Speaker 1: and the US like what you've seen is there's been

908
00:49:08,200 --> 00:49:12,279
Speaker 1: this underutilization of capacity for since the two thousand and

909
00:49:12,480 --> 00:49:15,640
Speaker 1: that just didn't recover on its own, and now Washington

910
00:49:15,760 --> 00:49:18,200
Speaker 1: sort of like is in a position where we've got

911
00:49:18,280 --> 00:49:19,880
Speaker 1: to do something. We've got to figure out how to

912
00:49:20,239 --> 00:49:22,800
Speaker 1: actually have the capacity that we want to have, and

913
00:49:22,920 --> 00:49:25,319
Speaker 1: that itself is a conscious choice, right, and ultimately if

914
00:49:25,320 --> 00:49:27,680
Speaker 1: you just leave it up to the market, it's hard

915
00:49:27,800 --> 00:49:31,440
Speaker 1: for that the certainty to exist for manufacturing capacity to

916
00:49:31,480 --> 00:49:33,320
Speaker 1: actually be in place. I think there's something on a

917
00:49:33,360 --> 00:49:36,120
Speaker 1: previous episode of yours Um that Willy she said that

918
00:49:36,200 --> 00:49:38,759
Speaker 1: really wrung true to me, which was, you actually do

919
00:49:38,920 --> 00:49:40,840
Speaker 1: need some stability on the demand side. You need some

920
00:49:40,920 --> 00:49:44,680
Speaker 1: stability and scalability, and that requires making sure there's enough

921
00:49:44,680 --> 00:49:46,879
Speaker 1: purchasing power in the economy to make sure that there

922
00:49:46,920 --> 00:49:51,240
Speaker 1: are mechanisms for coordination. Because there's just a certain amount

923
00:49:51,239 --> 00:49:53,920
Speaker 1: of certainty that you can get from the government that's

924
00:49:53,960 --> 00:49:59,040
Speaker 1: really hard to replicate just in the private sector. Alone. UM.

925
00:49:59,160 --> 00:50:00,960
Speaker 1: I don't have a lot that to that, because I,

926
00:50:01,120 --> 00:50:02,840
Speaker 1: you know, I only know the semi connected from what

927
00:50:02,960 --> 00:50:05,160
Speaker 1: I hear from you guys and and read from Scanda.

928
00:50:05,960 --> 00:50:07,719
Speaker 1: The one thing that really jumps out to me is

929
00:50:07,800 --> 00:50:10,759
Speaker 1: that if this boom is at the level that it

930
00:50:11,000 --> 00:50:14,160
Speaker 1: very well could be, UM, it might change the way

931
00:50:14,239 --> 00:50:17,759
Speaker 1: we talk about economic policy making in a very profound way,

932
00:50:17,920 --> 00:50:21,759
Speaker 1: because if you actually get unemployment down that rapidly, you

933
00:50:21,840 --> 00:50:25,280
Speaker 1: might be able to tackle issues around decarbonization much easier

934
00:50:25,320 --> 00:50:28,560
Speaker 1: because there's just gonna be such voracious demand for workers. UM,

935
00:50:28,680 --> 00:50:32,080
Speaker 1: you could talk about changing the nature of supply lines,

936
00:50:32,280 --> 00:50:35,719
Speaker 1: changing the nature of the way business supply change and

937
00:50:35,800 --> 00:50:40,040
Speaker 1: conduct is done, and really investing in manufacturing and other

938
00:50:40,200 --> 00:50:42,960
Speaker 1: forms of on showing UM in a way that I

939
00:50:43,040 --> 00:50:46,520
Speaker 1: don't think you would have the political or economic will.

940
00:50:47,160 --> 00:50:49,719
Speaker 1: When unemployment is quite high and the recovery is quite

941
00:50:49,760 --> 00:50:53,080
Speaker 1: slow and everyone is thinking very zero sum, you might

942
00:50:53,200 --> 00:50:55,799
Speaker 1: actually be able to think much more concretely about how

943
00:50:55,840 --> 00:50:58,400
Speaker 1: to push the productive frontier of the economy in a

944
00:50:58,520 --> 00:51:02,719
Speaker 1: way coinciding strong labor as opposed to thinking about that

945
00:51:02,960 --> 00:51:05,880
Speaker 1: in periods of weak labor demand and weak labor power.

946
00:51:06,080 --> 00:51:08,560
Speaker 1: So I'm really excited to see where all this goes,

947
00:51:08,600 --> 00:51:10,880
Speaker 1: because I think it's gonna be a set of conversations

948
00:51:10,960 --> 00:51:15,320
Speaker 1: that's going to change so many things. Well, Mike, AND's Gonda,

949
00:51:15,520 --> 00:51:18,239
Speaker 1: thank you so much for coming on. There's such a

950
00:51:19,000 --> 00:51:21,960
Speaker 1: such a you know, important timely discussion. Both of you,

951
00:51:22,120 --> 00:51:25,800
Speaker 1: great perspective, and we'll have you on in a forty

952
00:51:25,880 --> 00:51:28,200
Speaker 1: years and we'll see, uh, we'll see. If I just

953
00:51:28,280 --> 00:51:31,560
Speaker 1: didn't turn out to be a real turning point, I

954
00:51:31,600 --> 00:51:35,040
Speaker 1: will totally take you over. Thank you, take care, Thanks

955
00:51:35,080 --> 00:51:50,520
Speaker 1: so much, Tracy. You know, I didn't say it in

956
00:51:50,560 --> 00:51:52,560
Speaker 1: the beginning, and I but I realized something. You know,

957
00:51:52,600 --> 00:51:55,640
Speaker 1: I mentioned that, Um, that's Gonda tweet about is this

958
00:51:55,760 --> 00:51:58,840
Speaker 1: a trend break in neoliberalism. What's interesting is he was

959
00:51:59,239 --> 00:52:03,520
Speaker 1: retweeting a tweet from the Chamber of Commerce where they

960
00:52:03,760 --> 00:52:08,239
Speaker 1: endorsed a massive stimulus program. And I think that's kind

961
00:52:08,280 --> 00:52:11,320
Speaker 1: of like what's interesting too is like it really is

962
00:52:11,440 --> 00:52:15,360
Speaker 1: like Bernie Sanders on one end right now and the

963
00:52:15,440 --> 00:52:18,080
Speaker 1: Chamber of Commerce, which historically, up until recently I think

964
00:52:18,120 --> 00:52:21,600
Speaker 1: would have been pretty associated with like the Republican Party.

965
00:52:22,400 --> 00:52:24,279
Speaker 1: I think that really sort of is like what sort

966
00:52:24,280 --> 00:52:27,080
Speaker 1: of captures this idea that's like something seems to be

967
00:52:27,160 --> 00:52:32,279
Speaker 1: shifting here, right, I think, so m how to put this?

968
00:52:32,520 --> 00:52:34,880
Speaker 1: So one thing I've been thinking a lot about is

969
00:52:35,360 --> 00:52:40,920
Speaker 1: so the recession from the coronavirus was an unusual recession

970
00:52:41,200 --> 00:52:44,280
Speaker 1: in so many ways, not just because of the policy response,

971
00:52:44,360 --> 00:52:49,000
Speaker 1: but because in some ways it was a government manufactured recession.

972
00:52:49,080 --> 00:52:50,960
Speaker 1: And what I mean by that is, you know, the

973
00:52:51,080 --> 00:52:55,520
Speaker 1: reason everything kind of stopped was because we had restrictions

974
00:52:55,680 --> 00:52:57,680
Speaker 1: on where people could go and what they could do,

975
00:52:57,840 --> 00:53:00,359
Speaker 1: and people were scared of leaving their houses as well,

976
00:53:00,560 --> 00:53:02,920
Speaker 1: um independent of the government. But the point is it

977
00:53:03,040 --> 00:53:06,960
Speaker 1: was sort of a policy led recession, and so I

978
00:53:07,080 --> 00:53:10,400
Speaker 1: often wonder if that's what was needed in order to

979
00:53:10,680 --> 00:53:16,279
Speaker 1: create root for you know, more policy focused economic solutions,

980
00:53:16,400 --> 00:53:19,800
Speaker 1: like if this was really the perfect condition for that

981
00:53:19,960 --> 00:53:23,439
Speaker 1: experiment to happen. I still think, like some people would

982
00:53:23,520 --> 00:53:26,200
Speaker 1: dispute this idea that it was the lockdowns rather than

983
00:53:26,239 --> 00:53:31,520
Speaker 1: the virus itself. But I will say there was this

984
00:53:31,680 --> 00:53:35,360
Speaker 1: perception back in a year ago basically that this was

985
00:53:35,480 --> 00:53:38,160
Speaker 1: nobody's fault, and I think that was sort of new

986
00:53:38,520 --> 00:53:40,640
Speaker 1: because you know, like in the last crisis, you know,

987
00:53:40,760 --> 00:53:43,360
Speaker 1: there's you could run the left, you could blame the banks,

988
00:53:43,920 --> 00:53:46,040
Speaker 1: and then you had the tea party and the famous

989
00:53:46,120 --> 00:53:48,759
Speaker 1: Rick Santelly rant It's like your neighbor borrowed too much

990
00:53:48,800 --> 00:53:50,840
Speaker 1: for their homes. So there was like a lot of

991
00:53:50,960 --> 00:53:53,600
Speaker 1: blame for it, and I think that was probably a

992
00:53:53,680 --> 00:53:57,600
Speaker 1: contributor to the sort of failure to get a lot

993
00:53:57,640 --> 00:54:00,560
Speaker 1: of political will to really fight the downturn. There was

994
00:54:00,800 --> 00:54:03,880
Speaker 1: very quickly emerged a consensus like this is really no

995
00:54:03,960 --> 00:54:06,640
Speaker 1: one's fault. No business actually like deserves to go out

996
00:54:06,680 --> 00:54:10,480
Speaker 1: of business because we have a pandemic. No one really

997
00:54:10,560 --> 00:54:13,279
Speaker 1: deserves to lose their job because of this. And as such,

998
00:54:13,360 --> 00:54:17,040
Speaker 1: I do think that that created some some political space

999
00:54:17,160 --> 00:54:20,080
Speaker 1: to do exactly what you just said. Yeah, I think

1000
00:54:20,160 --> 00:54:23,080
Speaker 1: that's exactly right. And the other thing um And I

1001
00:54:23,120 --> 00:54:25,520
Speaker 1: think it was Scanda who touched on this towards the end,

1002
00:54:25,640 --> 00:54:28,640
Speaker 1: or maybe it was Mike Um about this sort of

1003
00:54:28,719 --> 00:54:32,279
Speaker 1: demand side of the equation and the idea that this

1004
00:54:32,520 --> 00:54:35,960
Speaker 1: is something that people are finally recognizing is actually quite important.

1005
00:54:36,239 --> 00:54:39,880
Speaker 1: You have to have, if not robust demand, at least

1006
00:54:40,120 --> 00:54:43,759
Speaker 1: a reasonably stable level of demand in order to make

1007
00:54:43,840 --> 00:54:46,200
Speaker 1: a lot of these policies work. And I think that's

1008
00:54:46,239 --> 00:54:49,600
Speaker 1: where the stimulus checks came in last year, and that's

1009
00:54:49,600 --> 00:54:53,600
Speaker 1: where we're probably seeing a pretty big perception shift as well. Yeah,

1010
00:54:53,680 --> 00:54:55,759
Speaker 1: and I'll just say, like, this was a point I

1011
00:54:55,840 --> 00:54:58,600
Speaker 1: really had not thought of as much until Scanda pointed out.

1012
00:54:58,640 --> 00:55:03,200
Speaker 1: It's like you have the botential for actual policy, popular policy.

1013
00:55:03,239 --> 00:55:05,640
Speaker 1: I mean, CARES was popular. People like getting the one

1014
00:55:05,680 --> 00:55:10,279
Speaker 1: off checks, the the the expanded unemployment was powerful, and

1015
00:55:10,400 --> 00:55:13,200
Speaker 1: p PP was powerful, and I think people look at

1016
00:55:13,280 --> 00:55:16,319
Speaker 1: that and unlike say the two thousand nine response, which

1017
00:55:16,400 --> 00:55:19,200
Speaker 1: left to salar taste in people's mouth, It's like, we

1018
00:55:19,400 --> 00:55:22,920
Speaker 1: like this, we like the government having stepped in. Of

1019
00:55:23,040 --> 00:55:26,080
Speaker 1: course not everyone isn't, but this was generally like a

1020
00:55:26,160 --> 00:55:29,920
Speaker 1: pretty popular thing. The current stimulus is popular, and so

1021
00:55:30,040 --> 00:55:34,960
Speaker 1: you do have this potential for self sustaining political change

1022
00:55:35,680 --> 00:55:40,120
Speaker 1: if this gathers steam such that acts like the stimulus,

1023
00:55:40,200 --> 00:55:44,000
Speaker 1: acts like CARES actually encourage politicians to do more of

1024
00:55:44,080 --> 00:55:47,799
Speaker 1: the sort of responsive policy in future downturns. And that's

1025
00:55:47,800 --> 00:55:50,839
Speaker 1: how you get potentially the trend to break, Because one

1026
00:55:50,880 --> 00:55:53,759
Speaker 1: stimulus deal is not going to really like break a

1027
00:55:53,880 --> 00:55:57,600
Speaker 1: big trend, but it changed in the politics around fiscal

1028
00:55:57,680 --> 00:56:03,000
Speaker 1: expansion or around industrial policy could actually break the trend. Yeah, well,

1029
00:56:03,080 --> 00:56:06,160
Speaker 1: it does remind me a lot about UM. So, of course,

1030
00:56:06,200 --> 00:56:08,480
Speaker 1: there are a lot of studies about why people why

1031
00:56:08,560 --> 00:56:11,160
Speaker 1: some people in the U S didn't like social programs

1032
00:56:11,320 --> 00:56:12,920
Speaker 1: UM for a very long time, and one of the

1033
00:56:13,000 --> 00:56:15,799
Speaker 1: things that always cropped up was this idea of relativism.

1034
00:56:15,920 --> 00:56:19,279
Speaker 1: So you know, this person got five and I haven't

1035
00:56:19,320 --> 00:56:21,959
Speaker 1: got anything from the U. S. Government, and they're living

1036
00:56:22,000 --> 00:56:25,319
Speaker 1: off of wldchair effect checks and it's really unfair, blah

1037
00:56:25,360 --> 00:56:29,400
Speaker 1: blah blah. But I think just by dint of the

1038
00:56:29,480 --> 00:56:32,520
Speaker 1: fact that the stimulus checks went out to a lot

1039
00:56:32,880 --> 00:56:35,279
Speaker 1: of people, I think that could end up being the

1040
00:56:35,320 --> 00:56:38,360
Speaker 1: great equalizer, right, Like so many more people now have

1041
00:56:38,560 --> 00:56:43,120
Speaker 1: had personal experience of a social safety net in one

1042
00:56:43,200 --> 00:56:46,120
Speaker 1: form or another. Yeah, no, totally right. Uh. I think

1043
00:56:46,160 --> 00:56:48,520
Speaker 1: it's gonna be a fascinating thing. I mean, we'll see

1044
00:56:48,760 --> 00:56:52,959
Speaker 1: what the aftermath of this bill is. But um, again,

1045
00:56:53,040 --> 00:56:55,600
Speaker 1: if it leaves a positive taste in people's mouth, that

1046
00:56:55,800 --> 00:56:58,840
Speaker 1: changes how politicians react, and you could really that's how

1047
00:56:58,880 --> 00:57:01,880
Speaker 1: you get your your trend, your trend to break the

1048
00:57:02,040 --> 00:57:05,080
Speaker 1: end of neoliberalism. Maybe I do think. I know, um,

1049
00:57:05,440 --> 00:57:07,719
Speaker 1: it's always a risk to mark big turning points, but

1050
00:57:07,800 --> 00:57:09,800
Speaker 1: I do think this theme is one that's going to

1051
00:57:10,000 --> 00:57:12,040
Speaker 1: We're definitely going to be talking about it in forty

1052
00:57:12,120 --> 00:57:15,920
Speaker 1: years time. I feel like that's true. Alright, um, so

1053
00:57:16,120 --> 00:57:19,000
Speaker 1: we've booked an episode for four decades. Hence, all right,

1054
00:57:19,360 --> 00:57:22,200
Speaker 1: this has been another episode of the All Thoughts Podcast.

1055
00:57:22,320 --> 00:57:25,040
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at

1056
00:57:25,080 --> 00:57:27,760
Speaker 1: Tracy Alloway, and I'm Joey Isn't Though. You can follow

1057
00:57:27,840 --> 00:57:31,640
Speaker 1: me on Twitter at the Stalwart. Follow our guests on Twitter.

1058
00:57:31,760 --> 00:57:35,560
Speaker 1: It's Gondam and he's at Irving Swisher on Twitter, and

1059
00:57:35,760 --> 00:57:39,680
Speaker 1: Mike Console he's at Roardy Bomb on Twitter. Follow our

1060
00:57:39,720 --> 00:57:43,440
Speaker 1: producer Laura Carlson. She's at Laura M. Carlson. Follow the

1061
00:57:43,480 --> 00:57:47,480
Speaker 1: Bloomberg head of podcast, Francesca Levi at Francesca Today, and

1062
00:57:47,840 --> 00:57:50,680
Speaker 1: check out all of our podcasts at Bloomberg under the

1063
00:57:50,760 --> 00:58:08,440
Speaker 1: handle A Podcasts. Thanks for listening to