Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg,
Speaker 2: and this is trump Anomics, the podcast that looks at
Speaker 2: the economic world of Donald Trump, how he's already shaking
Speaker 2: up the global economy and modern earth is going to
Speaker 2: happen next this week, we have something a little different,
Speaker 2: a conversation with arguably the world's most famous business journalist
Speaker 2: about something big that happened nearly one hundred years ago
Speaker 2: but could very well be happening again. Thank you very much,
Speaker 2: Andrew Ross Sulkin for joining us.
Speaker 1: Thank you for having me. I'm excited to be here.
Speaker 2: It's quite unusual to have you, not least because you're
Speaker 2: a full time journalist for not just one, but two
Speaker 2: of our leading competitors, The Times and CNBC. But we're
Speaker 2: big enough to take it. But it's also quite rare
Speaker 2: to have someone who's primarily a business journalist. We most
Speaker 2: often have economic policy makers or economists, or political reporters
Speaker 2: for that matter, but you do, in your position, sit
Speaker 2: at the intersection of Wall Street and Washington and media,
Speaker 2: and that is where we're very interested in. We're there
Speaker 2: a lot and I guess most important for this conversation.
Speaker 2: You have written two cracking books about two moments in
Speaker 2: economic history that I'm really interested in, and I think
Speaker 2: many of our listeners are interested in the global financial crisis,
Speaker 2: Too Big to Fail and now most recently nineteen twenty nine.
Speaker 2: You know, obviously nineteen twenty nine and what came after.
Speaker 2: People are drawing more and more parallels with now. And
Speaker 2: we're recording this on Monday, the eighth of June. After
Speaker 2: what is I think now being referred to a healthy
Speaker 2: pullback in stocks, but obviously lots of discussion around how
Speaker 2: vulnerable this stock market might be. But I wanted to
Speaker 2: talk about the book in nineteen twenty nine first, because
Speaker 2: I have to admit, when I heard you were writing
Speaker 2: this book, I did wonder am I going to want
Speaker 2: to read another book on that topic. It's a fantastic
Speaker 2: moment in history if you're interested in economic history. But
Speaker 2: there have been a lot of books I think that
Speaker 2: I love the JK. Galbraith, The Great Crash. I think
Speaker 2: that's just like I've read that fabulous. I can't remember
Speaker 2: how many times. So why did you think there was
Speaker 2: a room for another book? If I can ask you
Speaker 2: the obvious question.
Speaker 1: Now, I, like you, had read a lot of the
Speaker 1: other books as well, and for whatever reason, most of
Speaker 1: the books that have been written about this period, to
Speaker 1: me were written by economists. They were written in a
Speaker 1: particular kind of style. And the kind of book that
Speaker 1: I always love to read more than any is the
Speaker 1: book that takes you inside the room with the characters,
Speaker 1: that doesn't treat things as economic systems or economic cycles
Speaker 1: so much as really examines the people who make decisions
Speaker 1: that I would argue drive the economic systems and economic cycles,
Speaker 1: and put you in a place where you can understand
Speaker 1: their motivations, their incentives, you can understand their morality, whether
Speaker 1: they were aligned or unaligned with reality. And so to me,
Speaker 1: I thought that was the opening. Could you write a
Speaker 1: character driven story that really puts you there in so
Speaker 1: that the reader, the public can really understand what was
Speaker 1: going on, not just in this sort of economic story,
Speaker 1: but in the personal story of these people. And the
Speaker 1: truth is that the challenge was trying to figure out
Speaker 1: could I find enough granular detail from diaries, from memos,
Speaker 1: from notes, from transcripts so that you really could feel
Speaker 1: like you were inside of their head.
Speaker 2: In famously, that is what you did. You were kind
Speaker 2: of the first draft of that bit of history for
Speaker 2: the global financial crisis, or that particular period where the
Speaker 2: bailout tart was being pulled together in two thousand and eight.
Speaker 2: You sort of think of the comparisons between those two books.
Speaker 2: I was talking to someone actually this weekend who happened
Speaker 2: to be quite a senior policy maker during the global
Speaker 2: financial crisis, and he had read nineteen twenty nine, and
Speaker 2: I said, what do you think of it? He was
Speaker 2: really impressed by the degree of detail, as you say,
Speaker 2: and the description of the characters. But he said, the
Speaker 2: real lesson was that it was no one's fault. And
Speaker 2: he didn't think that was true of the global financial crisis.
Speaker 2: But what was the big thing that you took away
Speaker 2: from it once you got to know all these characters?
Speaker 1: Oh goodness. Look, I'm a believer typically, and I probably
Speaker 1: believe this about two thousand and eight as well, not
Speaker 1: that it's nobody's fault, but in fact that when you
Speaker 1: have a crisis of this kind of magnitude, it's everybody's fault.
Speaker 1: What is interesting, by the way, to me about nineteen
Speaker 1: twenty nine, Oddly enough, when you get to this issue
Speaker 1: of fault or blame. If you read the diaries of
Speaker 1: people who lost a fortune in nineteen twenty nine, lost
Speaker 1: their home, had the margin call most of the diaries
Speaker 1: suggest that they blame themselves. They actually were not pointing fingers,
Speaker 1: They were not blaming others. They were saying, I shouldn't
Speaker 1: have done this. I had The phrase fomo didn't exist
Speaker 1: back then, but they all had fomo. They all this
Speaker 1: fear of missing out. And that was a real poll
Speaker 1: for so many people who got into the market for
Speaker 1: the very first time, and some of them felt that
Speaker 1: they got suckered a little bit by a broker or
Speaker 1: two who had peddled them something, but they really thought
Speaker 1: it was their own doing, which is so very different
Speaker 1: than the feelings in two thousand and eight, which was
Speaker 1: to finger point at everybody but yourself, I should say,
Speaker 1: just caveat in fairness. By the time we got in
Speaker 1: nineteen thirty two in the United States, if you read
Speaker 1: a lot of the same diaries, the finger pornting has
Speaker 1: now begun because we've now moved to a whole new
Speaker 1: level of unemployment twenty five percent unemployment in the United States,
Speaker 1: and the economy had faltered to such a point where
Speaker 1: I think everybody was just grasping it straw us. But
Speaker 1: in the immediate aftermath, in terms of faults, when you
Speaker 1: say who is to blame, people blame themselves.
Speaker 2: One of the things that people mean, I think when
Speaker 2: they say it wasn't their fault was that the system,
Speaker 2: you know, the Federal Reserve had barely just begun to exist.
Speaker 2: The infrastructure that is that was there to some extend
Speaker 2: in two thousand and eight, and then they had to
Speaker 2: kind of build some of their own things. All of
Speaker 2: that had yet to be built again. To me, in
Speaker 2: the mind of an economist or regulator.
Speaker 1: Literally no rules. Insider trading was legal, There was no
Speaker 1: sec the investment banks and commercial banks were attached at
Speaker 1: the hip. This was before Glass Steegel. There were no
Speaker 1: capital requirement rules from the Bank Act, which came in
Speaker 1: nineteen forty. None of it existed. And in fact, one
Speaker 1: of the things that fascinated me and I went searching
Speaker 1: for it. You know, today we look at a lot
Speaker 1: of the things that happened in the twenties and you say,
Speaker 1: this is clearly wrong. This is should be legal, if
Speaker 1: not immoral, And I was searching for somebody just one
Speaker 1: person who decided contemporaneously in the moment not to participate
Speaker 1: in some of the manipulation that was happening, and I
Speaker 1: couldn't find it. I thought there would be somebody who
Speaker 1: would be raising their hands saying, oh, I cannot be
Speaker 1: part of this wildness, is immoral behavior. But it wasn't
Speaker 1: the case. You know, the markets are a funny thing.
Speaker 1: It's always been this battle of wits, and when you
Speaker 1: have no rules. To the extent that there was manipulation,
Speaker 1: it was really people who thought that they were just
Speaker 1: outwitting the other side.
Speaker 2: If it's not against the law, then people do feel
Speaker 2: even if there's just something iffy about it, they will
Speaker 2: often feel completely justified.
Speaker 1: I think the truth is they don't question what they're
Speaker 1: doing because it gets back to this idea of wits
Speaker 1: or trying to outsmart the other person. If you think
Speaker 1: about it long enough, whoever is buying a stock in
Speaker 1: that moment has to think that they're smarter than the
Speaker 1: person selling them the stock, and whoever selling them the
Speaker 1: stock has to think that they are smarter in that
Speaker 1: moment than the person that happens to be buying the stock.
Speaker 1: And I think that's pretty much what the stock market is.
Speaker 1: And so when you think about how philosophically people think,
Speaker 1: they think they are in the business of outsmarting somebody else.
Speaker 2: And you write about in the book, there was quite
Speaker 2: a lot of discussion about should we clamp down on
Speaker 2: speculation everything else. All the discussion now is about removing
Speaker 2: guardrails and reducing regulation, freeing up banks, well, particularly from
Speaker 2: the ministration, but freeing up banks, not having crypto be
Speaker 2: subject to these regulations.
Speaker 1: Oh, we are dismantling the guardrails. I mean, it is
Speaker 1: happening right in front of us. You know, in the
Speaker 1: past week, I don't know if you saw Goldman Sachs
Speaker 1: and Morgan Stanley, which are underwriting the SpaceX IPO. Their
Speaker 1: analysts are now putting out research internally that's been used
Speaker 1: to sell to sell the IPO, that is bullish to
Speaker 1: the point that they're putting out projections about where this
Speaker 1: company could be in twenty thirty and twenty forty. But
Speaker 1: after the dot com bust, we actually changed the law
Speaker 1: so that bank analysts, who arguably were conflicted because of
Speaker 1: their relationship to the underwriter of a stock, we're limited
Speaker 1: in terms of what they could do. What they could
Speaker 1: say how the bank could use their research and things
Speaker 1: like that, and yet we've now changed the rules again
Speaker 1: all over. I think when you think about crypto whether
Speaker 1: or when you think about the idea that people are
Speaker 1: trying to tokenize different private investments or take private credit
Speaker 1: or private equity or venture capital and wrap it in
Speaker 1: a public wrapper that looks like a stock. I mean,
Speaker 1: all of these things are new innovations, and by the way,
Speaker 1: they may be good innovations to some degree, but they
Speaker 1: don't come with what I would imagine to be the
Speaker 1: requisite guard rails to prevent things from going over the
Speaker 1: cliff and the other pieces. You're bringing new investors in,
Speaker 1: and anytime you bring new investors into the market, there
Speaker 1: should be a little bit of handholding. Maybe that sounds paternalistic,
Speaker 1: but I think that's the lesson of the last hundred years.
Speaker 2: That's such a parallel with the democratization of finance that
Speaker 2: you saw in The Leader and the sort of late twenties.
Speaker 1: Late twenties. That phrase, by the way, democratization of finance
Speaker 1: was used repeatedly in the late twenties. By the way,
Speaker 1: it was just used last week by Jamie Diamond when
Speaker 1: he was talking about the SpaceX IPO and the idea
Speaker 1: that that particular IPO is now going to a lot,
Speaker 1: a lot more shares for retail investors than just about
Speaker 1: any IPO in history.
Speaker 2: And when you look at that history, it does seem
Speaker 2: to be just when you open up everything. We saw
Speaker 2: that four to one k's last year opened up to
Speaker 2: crypto and private equity is now more accessible, as you said,
Speaker 2: in various ways, and all of these IPO is coming
Speaker 2: down the track, and the big debate about when they
Speaker 2: can get into the indusicy. You must have been found
Speaker 2: it more and more uncanny looking at some of the dvs.
Speaker 1: But component parts. I mean, the last year, I even
Speaker 1: said the last five years. I remember when the game
Speaker 1: stop scenario was happening twenty twenty, twenty twenty one, I
Speaker 1: was thinking, oh my goodness, we are living in nineteen
Speaker 1: twenty nine, and there are so many elements to our
Speaker 1: market today that have these sort of eerie parallels. That's
Speaker 1: not to say that we're going to crash tomorrow, but
Speaker 1: it does suggest that memories are short, and if anything,
Speaker 1: the goal of this book I always think to myself
Speaker 1: was I never wanted to write a sequel too big
Speaker 1: to fail. I was considered this the prequel. So if
Speaker 1: you can remind people of what actually happened in the past,
Speaker 1: maybe it will prevent people from tipping over in the future.
Speaker 2: The other big parallel, obviously, is the role of technology.
Speaker 2: We talk about speculative fever, but it was around as now.
Speaker 2: A lot of it was around a real technological innovation,
Speaker 2: many technological innovations that were going to be pretty transformative
Speaker 2: for the economy. I mean, you had automobiles, you had
Speaker 2: radio electrification, all of it, people the Limberg boom, you know,
Speaker 2: people getting on planes. And yet even with a transformative technology,
Speaker 2: you still had, as you described, the RCA stock which
Speaker 2: rose enormously ended up at ninety seven percent.
Speaker 1: It was of its time.
Speaker 2: So how did you see that sort of parallel, because
Speaker 2: it seemed to me. I mean, one of the things
Speaker 2: I thought was very striking is that was a technology.
Speaker 2: We can talk about the now, the concentration of you know,
Speaker 2: how much of the returns in the stock market this year,
Speaker 2: and how much of the economy has been driven by
Speaker 2: the AI boom, but electrification, with probably some exceptions people,
Speaker 2: I assume we're pretty positive about this stuff. It was
Speaker 2: in liberating them, whereas this technology people are getting more
Speaker 2: and more frightened of maybe even angry about.
Speaker 1: Oh look, there's all sorts of questions about AI. But
Speaker 1: I do think that every time we've gone through a
Speaker 1: technological revolution, there has been a shocking amount of speculation.
Speaker 1: The question is not whether you can prevent speculation. I
Speaker 1: would argue to you, by the way, that you need
Speaker 1: speculation in the system. That speculation, to some degree built America.
Speaker 1: I mean, it really did. I was just talking to
Speaker 1: Jeff Bezos about two weeks ago. We were talking about
Speaker 1: whether we were in a bubble, and he was making
Speaker 1: the argument that when you think about sort of the
Speaker 1: progress technological progress of humanity, it has almost invariably come
Speaker 1: with a bubble, even if you go back and look
Speaker 1: at the biotech bubble, the most recent one. And anytime
Speaker 1: there's a bubble, there's lots of good investment and lots
Speaker 1: of bad investment. Questions, can you avoid it from becoming
Speaker 1: too much? But I think you almost have to embrace
Speaker 1: some semblance of it, as sort of backwards sounding as
Speaker 1: that may very well be.
Speaker 2: As an economist, you know, that was one of the
Speaker 2: big lessons. You know, this thing that still debated about
Speaker 2: whether Alan Greenspan was right to say easier to clean
Speaker 2: up after a bubble is burst than to try and
Speaker 2: stop it going up. You basically still believe that, even
Speaker 2: though we went through.
Speaker 1: I believe it. I I just think that the question
Speaker 1: is can you prevent the bubble from getting too big?
Speaker 1: And can you actually prevent a bubble on the front end.
Speaker 1: So there's always two sort of big policy choices when
Speaker 1: a crisis comes. One is can you prevent it from
Speaker 1: happening at all? And if you can't prevent it from
Speaker 1: happening at all and it does pop, then what you
Speaker 1: do about it. I think that we could do a
Speaker 1: better job on the front end, and I know we
Speaker 1: could do a better job on the back end. But
Speaker 1: the idea of eliminating these bubbles entirely, I think is
Speaker 1: a misguided effort.
Speaker 2: Ultimately, I think that's probably right, but I think that is.
Speaker 1: Not politically popular thing to say no.
Speaker 2: But I think it's more again with the sort of
Speaker 2: economics hat on, what you care about is not the
Speaker 2: speculation or even the bubble, but whether it infects the
Speaker 2: broader economy. And that's obviously what you saw in the
Speaker 2: thirties and that was because of the failure of credit
Speaker 2: and all of these things. You know, if you look
Speaker 2: nineteen eighty seven, which was the kind of famously the
Speaker 2: first time sort of in modern times where you'd have
Speaker 2: that sort of spiral of selling that people experienced, by
Speaker 2: the end of there was no impact on the economy.
Speaker 2: The market was barely affected by the end of the year.
Speaker 2: Even the bursting of the tech bubble in lots of countries,
Speaker 2: there was no recession. There was a very mild recession
Speaker 2: in the US. So a lot of it is about leverage,
Speaker 2: and you can reduce the amount of leverage that is
Speaker 2: built into a bubble or that speculator way.
Speaker 1: And I'm going to argue against my own book for
Speaker 1: a moment, you could make the same nineteen eighty seven
Speaker 1: argument to some degree about nineteen twenty nine. By the
Speaker 1: end of the year, if you had closed your eyes
Speaker 1: and didn't know what happened during the year, the stock
Speaker 1: market looked like it had only fallen seventeen percent, And
Speaker 1: if you just looked at it that way, you'd say, oh,
Speaker 1: not a big deal, what a blip. The problem was
Speaker 1: that ordinary Americans had gone to their brokerage house and
Speaker 1: we're giving. They were getting ten to one leverage, and
Speaker 1: so when the fifty percent decline happened between October and November,
Speaker 1: it wasn't that they could ride it out. It was
Speaker 1: that the banks were calling and taking their homes. So
Speaker 1: it is interesting sort of how you can ride out
Speaker 1: or not a crisis, and then that crisis what it
Speaker 1: does to confidence, which to me is ultimately the first
Speaker 1: domino and a sequence of dominoes that leads to the
Speaker 1: Great Depression. It was not preordained in nineteen twenty nine
Speaker 1: that you ultimately had to get to a nineteen thirty
Speaker 1: two style twenty five percent unemployment Great Depression.
Speaker 2: Because everybody's talking about how dependent the economy is on
Speaker 2: the AI boom and or expectations around AI and the
Speaker 2: productivity associated with that. And I think we just model
Speaker 2: to your point as a twenty percent fall in the SMP,
Speaker 2: which is kind of similar to the tech bubble. But
Speaker 2: then that also affecting investment in the US, physical investment,
Speaker 2: which is obviously so much in AI now, and general
Speaker 2: confidence and credit. If you source that I kind of declined.
Speaker 2: Do you worry about it infecting me?
Speaker 1: I worry, but I worry about two things. In the
Speaker 1: context of AI, I worry about are we in an
Speaker 1: AI bubble, and that everybody can't afford effectively all the
Speaker 1: infrastructure investment and everything else that comes along with that,
Speaker 1: and it somehow pops along the way people don't find
Speaker 1: the productivity that they were hoping for. Whether it's some
Speaker 1: kind of technological shift that allows all these models to
Speaker 1: work without all of the chips and data centers on
Speaker 1: one end. But I also worry about what happens in success,
Speaker 1: and I don't know if you've modeled that out, because
Speaker 1: in success it probably means that we have to have
Speaker 1: a shocking amount of unemployment. I would think to make
Speaker 1: up to make those productivity means that would be necessary
Speaker 1: to justify those valuations, a lot of people would have
Speaker 1: to lose their jobs. Now, if so many people lose
Speaker 1: their jobs, who is going to pay for all of
Speaker 1: this stuff? So to me, there's sort of a double
Speaker 1: edged bubble in the AI world that is different than
Speaker 1: some of the previous ones we've lived through.
Speaker 2: And that was a little bit while I was trying
Speaker 2: to get to about the unpopularity, because I do think
Speaker 2: there's a possibility that you get the backlash before the
Speaker 2: product of it.
Speaker 1: I mean, one of the ways it's having it right now.
Speaker 2: One of the ways the bubbles might burst. You probably
Speaker 2: saw there was an NBC poll that's like, now AI
Speaker 2: is more unpopular than Donald Trump and Ice, but still
Speaker 2: just slightly. The only things that are more unpopular than
Speaker 2: AI now is Rahm and the Democratic Party.
Speaker 1: I mean, look at look at all of those commencement speeches. Yeah,
Speaker 1: in the United States in the last couple of weeks,
Speaker 1: every time the word AI was uttered, you know, the
Speaker 1: kids were booing, and they were booing because they're demonstrably
Speaker 1: worried about their own future and you and that is visceral.
Speaker 1: You can feel it when you talk to these young people.
Speaker 2: I mean, is that what could potentially be the trigger
Speaker 2: for the bubble bursting. If it actually looks like it's
Speaker 2: not going to be politically tolerable to have the kind
Speaker 2: of productivity growth or at least in the on the
Speaker 2: timeframe that's needed for these valuations, people start to question,
Speaker 2: you know, if you have regulation coming in, if it's
Speaker 2: just not going to be possible to realize all of
Speaker 2: these miracles. Is that the thing that people could say, oh,
Speaker 2: hang on, this isn't going to happen, not because it
Speaker 2: couldn't happen, but because politically it's going to be impossible.
Speaker 1: If it's going to be politically impossible, I actually wonder
Speaker 1: whether technologically it's not going to happen as fast as
Speaker 1: people think. You know, Bloomberg just did a conference where
Speaker 1: they spoke with dari Amude's sister and she asked to
Speaker 1: unemployment and here's anthropic. They're going public very soon. They've
Speaker 1: they've warned people that you know, there's going to be
Speaker 1: massive job losses. And she was asked, quite directly, does
Speaker 1: she think that there's been job losses yet, and effectively said, no, yes,
Speaker 1: we've seen job lossing nowouncements and things like that, and
Speaker 1: even companies like Square under Jack Dorsey have said we're
Speaker 1: laying off people because of AI. But I think most
Speaker 1: people have yet to find actually the Roi on Ai,
Speaker 1: the Roi on Ai so much so that they are
Speaker 1: firing people.
Speaker 2: No. I think that's what we find as well. And
Speaker 2: we also we do all these things on passing the
Speaker 2: earning statements and other things, and you know, there does
Speaker 2: seem to be a lot of kind of AI washing
Speaker 2: and you don't want to say restructuring you say, you know,
Speaker 2: we're discovering all these benefits from AI thinking about how that,
Speaker 2: however it happens if you do have a crash or
Speaker 2: a financial crisis related to all the things that we've
Speaker 2: talked about. I was really struck, and this may be
Speaker 2: partly from my perspective, because I saw a sort of
Speaker 2: dry run for the global financial crisis sitting in the
Speaker 2: US Treasury dealing with Asia Financial Crisis and LTCM back
Speaker 2: in the late nineties. Because I was talking to you,
Speaker 2: I went back to the Too Big To and reading
Speaker 2: that description of these policy makers, many of them, like
Speaker 2: Tim Geitner, had basically been lifelong public service, just grappling
Speaker 2: with what the facts were and trying to come up
Speaker 2: with the right plan and then managing just about to
Speaker 2: get bipartisan support to do things. And that seemed almost
Speaker 2: as far away in history as the nineteen twenty nine.
Speaker 2: It feels like a completely another world, certainly another Washington.
Speaker 2: So when you are writing your book about the next crash,
Speaker 2: what's the policy making piece going to look like? Because
Speaker 2: it doesn't feel like it's going to look like that.
Speaker 1: Okay, So here's to me the scariest part. The scariest
Speaker 1: part is that Ben Bernank wrote the playbook in two
Speaker 1: thousand and eight about what to do in a financial crisis.
Speaker 1: You missed it on the front end, what do you
Speaker 1: do on the back end? The back end is you
Speaker 1: write the check. You write lots and lots of big checks.
Speaker 1: You flood the zone with money. And he had done
Speaker 1: his dissertation at Princeton on the Great Depression, saw that
Speaker 1: they did not act at the time, and so he
Speaker 1: did and we saw that that worked. Now, it was
Speaker 1: not a politically popular thing to do, but I think
Speaker 1: from a technocratic standpoint you would argue it was a
Speaker 1: resounding success. We then did it again, interestingly during the pandemic,
Speaker 1: and nobody batted an eyelash. In fact, I remember being
Speaker 1: so surprised we were bailing out airlines, and I thought
Speaker 1: to myself, I've lived through this before. People we used
Speaker 1: to protest in the streets about bailing out the banks airlines.
Speaker 1: Nobody has a problem with the difference between two thousand
Speaker 1: and eight and twenty twenty. Twenty twenty one was the
Speaker 1: ballots were for everybody. If you wanted to bail out
Speaker 1: of some sort, there was a loan for you. And
Speaker 1: so I think we now have this playbook. We think
Speaker 1: we know what to do, and the lesson is write
Speaker 1: the check. Now. The problem is, the next time we
Speaker 1: have to write a check, I imagine it will have to
Speaker 1: be for three, four or five trillion dollars with a T.
Speaker 1: And it may be that there's bipartisan support for check
Speaker 1: writing at that point, because people will say, it seems
Speaker 1: to work, let's do it again. What I don't know
Speaker 1: is whether you believe that there is some invisible line
Speaker 1: that lives inside the bond market that turned into a
Speaker 1: red line, and the investor class around the world says, no,
Speaker 1: mass we're not doing this anymore.
Speaker 2: Which arguably they're already doing a little bit with us.
Speaker 1: Look, I thought that this invisible line would have been
Speaker 1: a red line twenty years ago. So it's very hard
Speaker 1: for me to predict what the bond market will do
Speaker 1: in this regard. But that to me is the biggest word.
Speaker 1: You know, people talk about corporate debt and leverage, and
Speaker 1: that's a that's a huge concern always, But I do
Speaker 1: wonder whether sovereign debt becomes the next big issue. Back
Speaker 1: in nineteen twenty nine, for what it's worth, we had
Speaker 1: a budget surplus.
Speaker 2: Yeah, also last time I was at US Treasury, but
Speaker 2: I don't think that wasn't correlated, but it was two thousand,
Speaker 2: was the last time you had had a US surplus.
Speaker 2: I guess there's another element of this was relating those two.
Speaker 2: You might have a crash that no one understands because
Speaker 2: everything has been so overtaken by black box AI. Banks
Speaker 2: have adopted all these things, and obviously that was a
Speaker 2: feature of the global financial crisis, that there were these
Speaker 2: instruments that even the heads of the banks that had
Speaker 2: the most exposure to them didn't really understand how they work.
Speaker 2: But that's true to a much greater extent. Potentially if
Speaker 2: you start having even more kind of automated AI enabled trading.
Speaker 1: Oh goodness, yes, So we might wait.
Speaker 2: Long enough, the next crisis might be one that just
Speaker 2: nobody even understands how to stop.
Speaker 1: That might be. That's a book, that's a horror story.
Speaker 2: We were talking about this at the start, because you
Speaker 2: do feature the journalists in your book, and I had
Speaker 2: a sort of personal interest because my grandfather, Clauk Coben,
Speaker 2: who was Times correspondent in the late twenties and thirties
Speaker 2: in Washington and New York. You feature a great story.
Speaker 1: And he wrote a tremendous memoir.
Speaker 2: Several memoirs are there. They feature a lot of the
Speaker 2: same stories.
Speaker 1: One of those stories I had to include in the
Speaker 1: book because it was just such an extraordinary moment where
Speaker 1: he's literally on the street as the crash is taking place,
Speaker 1: and he ends up at a home down near Washington.
Speaker 2: Square Park of one of the financiers.
Speaker 1: One of the major financiers, the Spires. And you see
Speaker 1: the sort of upstairs, downstairs element of all this because
Speaker 1: in the kitchen, literally the staff has their own ticker
Speaker 1: tape and they're literally trading in the kitchen. I mean,
Speaker 1: just to me, said spoke so much about sort of
Speaker 1: what had happened to the culture in New York City
Speaker 1: at that moment.
Speaker 2: They're sort of braving going out upstairs to ask him
Speaker 2: what's going to happen. But when you're really you use
Speaker 2: quite a lot of the sort of journalists of the time,
Speaker 2: and you've paint some of the sort of portraits. Obviously,
Speaker 2: what striking about business journalism then versus now, we like
Speaker 2: to think was that that was also deeply corrupt. I
Speaker 2: think they're codily correct. The equivalent of the deal book.
Speaker 2: They were taking payments for pushing stocks in their goodness.
Speaker 1: There were journalists who were clearly on the payroll, I
Speaker 1: mean literally taking money. Throughout there would be these manipulative
Speaker 1: efforts called pool operations, where a couple of wealthy investors
Speaker 1: would get together and say we're going to run up
Speaker 1: the price of a stock over the next two weeks,
Speaker 1: and one of the things they would do in the
Speaker 1: process is payoff some journalists to tell them that the
Speaker 1: stock was going to be on the move for this reason.
Speaker 1: For that reason, what was interesting is some of these
Speaker 1: manipulative efforts were done almost in public, meaning people knew
Speaker 1: that there was an operation. I put air quotes around
Speaker 1: the word operation in a stock. They knew that there
Speaker 1: was going there's this effort to push up and people
Speaker 1: wanted to play in that, meaning they weren't.
Speaker 2: They just thought they would get out.
Speaker 1: They thought if they could get in and off the
Speaker 1: train before the train went over the cliff, that they
Speaker 1: would make a small fortune. And so there was this
Speaker 1: sort of bizarre speculatve everything. By the way, it feels
Speaker 1: very similar to what's going on with meme coins and
Speaker 1: crypto in certain ways, and things like that.
Speaker 2: Obviously, like people at Bloomberg, you consider that you're playing
Speaker 2: it straight. I think probably as very much parallel to
Speaker 2: Bloomberg and maybe not some other parts of media at
Speaker 2: the moment. Just you know, the Trump administration, no matter
Speaker 2: what it is, you're playing it straight. And I think
Speaker 2: trying to do part of your thing is the capacity
Speaker 2: to be in the room to be trusted by these
Speaker 2: major business players. But we are in quite extreme times
Speaker 2: and the the line between public and private and the
Speaker 2: things that business leaders are getting involved in or justifying
Speaker 2: to themselves is kind of different, maybe from ten or
Speaker 2: twenty years ago.
Speaker 1: Look, I actually think you talked about two thousand and eight.
Speaker 1: I don't know if you agree with what I'm about
Speaker 1: to say. I think ever since two thousand and eight,
Speaker 1: every single business leader has become a politician. They spend
Speaker 1: more and more of their time either in Washington, d c.
Speaker 1: Or in Brussels or here in London, or they're going
Speaker 1: to Beijing. They have become diplomatic. Go look at the
Speaker 1: trip that President Trump did with President Chijingping and all
Speaker 1: of the CEOs who were led over there. By the way,
Speaker 1: very similar to nineteen twenty nine when Thomas Lamont, who
Speaker 1: was running JP Morgan at the time, and all of
Speaker 1: these CEOs are sent to Germany. I'm sorry to Paris
Speaker 1: to deal with the German reparations. I mean, it really
Speaker 1: just gives you a sense of how business almost has
Speaker 1: eclipsed the classic politician in every politician now thinks they're
Speaker 1: a CEO too.
Speaker 2: But in this Trump administration that has become there is
Speaker 2: a lot more to be gained from just speaking a
Speaker 2: lot to Donald Trump. Being on the right side of
Speaker 2: Donald Trump. I mean that line. It's not just that
Speaker 2: it's quite good to go on a go along with
Speaker 2: him on the plane in the summit, is you actually
Speaker 2: kind of have to go, and if you do go,
Speaker 2: you may get this very direct reward for your company,
Speaker 2: and if you don't.
Speaker 1: My job is to put a spotlight on the decisions
Speaker 1: and machinations that are taking place behind the scenes that
Speaker 1: are politically driven. I mean, how many times have I
Speaker 1: had to write or talk about Tim Cook's role at
Speaker 1: Apple and the various things that Apple has done. We've
Speaker 1: spent the last couple of months talking about tariffs and
Speaker 1: how every company in America has been silenced. We talk
Speaker 1: about doing interviews with CEOs asking about tariffs, and they
Speaker 1: quiet down very quickly.
Speaker 2: We had that with rare Earth. Actually we wanted to
Speaker 2: have when it was becoming clear that the Chinese, having
Speaker 2: imposed that restriction on rare earth, was affecting a lot
Speaker 2: of companies, I was saying, we must be able to
Speaker 2: find a company that's affected by this, and nobody wanted
Speaker 2: to say nobody. We finally managed to get.
Speaker 1: Show me. The real proof of the silencing of corporate
Speaker 1: America from a political standpoint is if you go look
Speaker 1: right after the Supreme Court struck down the tariff regime
Speaker 1: that the administration had put in place, very few of
Speaker 1: the big companies I'm talking about Apple and Amazons even
Speaker 1: tried to seek refunds at the time, refunds that they
Speaker 1: were entitled to. Now they ultimately Apple, I believe has
Speaker 1: and as has so many others. But I remember interviewing
Speaker 1: the president, President Trump about this, and I said to him,
Speaker 1: do you realize that there are a number of large
Speaker 1: American companies that are not seeking refunds because they fear
Speaker 1: offending you, they fear retaliation. And he said something to
Speaker 1: the effect of, I'm honored to hear that. And I
Speaker 1: will remember those companies that don't seek the refunds.
Speaker 2: I listened to your Jeff Bessel's interview and he did
Speaker 2: that he cited in his optimism about the US, and
Speaker 2: obviously this is also I mean, we are talking about
Speaker 2: all these things. This is a moment where there's enormous
Speaker 2: certainly a lot more wisiting in London now, a lot
Speaker 2: more optimism about the US economically than there is about
Speaker 2: the UK or Europe. And he cited that classic fact
Speaker 2: about sort of in the early nineteen hundreds, Argentina's incompa
Speaker 2: head and the US income ahead were the same, and
Speaker 2: then you've seen this massive vergence. And I don't know
Speaker 2: about you, but when I was listening to it, I
Speaker 2: was sort of thinking to myself, it's funny that he
Speaker 2: uses that example, because we have seen this economic divergence.
Speaker 2: And he said that was to do with the US
Speaker 2: system and all of these things that were attractive about
Speaker 2: the US. How damaging is it ultimately for the business environment,
Speaker 2: for risk taking, for innovation in the US, for US capitalism.
Speaker 2: If maybe economically it's still diverging from Argentina, but politically
Speaker 2: we seem to be kind of becoming more and more
Speaker 2: like that kind of vision of Latin American populism.
Speaker 1: Oh look, I think the political polarization is so extreme
Speaker 1: and I don't see it getting better anytime soon. I
Speaker 1: can't even I hate to say it. I want to
Speaker 1: be an optimist. I can't fathom what it is that
Speaker 1: brings both sides to a different place. And I think
Speaker 1: so much of it is emanating from a sense of
Speaker 1: economic inequality and really the difference between labor and capital
Speaker 1: and how that at the import of capital is now
Speaker 1: taking far priority over labor, and what that does to
Speaker 1: the polarization long term. I think that underneath even the
Speaker 1: conversation I was having with Jeff Besis.
Speaker 2: That's symbolized by these kind of I mean, we are
Speaker 2: becoming more oligarchic in our economy. And then there also
Speaker 2: there's a sort of a sense of that's spilling over
Speaker 2: into the nature of our politics and the.
Speaker 1: Way Washington's spilled over, because what you now have is
Speaker 1: that money has completely infected the politics. I don't think
Speaker 1: there's a question that money is now influencing politics in
Speaker 1: a way that we've never seen before, and so that's
Speaker 1: part of the doom loop or the spiral. How do
Speaker 1: you get out of that spiral. I do not know
Speaker 1: the answer to that, because I can't imagine that the oligarchs,
Speaker 1: the folks with the money, are ever going to be
Speaker 1: advocating to undo that influence.
Speaker 2: I feel like this is a terrible note on which
Speaker 2: to end, so I'm trying to think of a better way.
Speaker 2: We sort of talked semi jokingly about you not wanting
Speaker 2: to write another book about about this period or about
Speaker 2: about another c But what does that look like? I mean,
Speaker 2: politics was not as polarized going into nineteen twenty nine,
Speaker 2: certainly not going into the global financial crisis. How does
Speaker 2: that play into those.
Speaker 1: I think you go back in nineteen twenty nine, and
Speaker 1: the politics were shockingly polarized. One of the reasons that
Speaker 1: the government didn't take the steps it probably should have
Speaker 1: was because of the transfer of power between Hoover and
Speaker 1: Roosevelt and how much they disliked each other on a
Speaker 1: personal level, and the politics of that moment as well.
Speaker 1: So I think we've seen this movie before, and the
Speaker 1: question is can we take lessons from nineteen twenty nine
Speaker 1: and try to apply them to today? Because I think
Speaker 1: if we actually did, if we actually sat back and
Speaker 1: thought about it long enough we could avoid the next
Speaker 1: nineteen twenty.
Speaker 2: Nine Okay, slightly more hopeful. Note, well, I guess even
Speaker 2: if we are going heading for another crisis and we're
Speaker 2: not sure how we're got to get out talk, we
Speaker 2: know that you will write an excellent book about it. So,
Speaker 2: Andrew Ross Sorkin, thank you very much. That was fun.
Speaker 1: Thank you, thank you.
Speaker 2: Thanks for listening to Trumpnomics from Bloomberg. It was hosted
Speaker 2: by me Stephanie Flanders, and I was joined by The
Speaker 2: New York Times columnist and CNBC anchor journalist Andrew Ross Sorkin.
Speaker 2: Trumponomics was produced by Samasadi and Moses And with help
Speaker 2: from Amy Keen, and sound design was by Blake Maples
Speaker 2: and Kelly Garry. Please to help others find us, rate
Speaker 2: and review Trumpnomics highly wherever you listen