WEBVTT - Bretton Woods at 75 and the Other Mexico Border Crisis 0:00:03.360 --> 0:00:06.680 Hello, Welcome to Stephanomics, the podcast that brings the global 0:00:06.720 --> 0:00:15.319 economy to you. I have to tell you this is 0:00:15.360 --> 0:00:18.320 the last episode of this series. We're packing a lot in. 0:00:18.640 --> 0:00:21.880 I'm recording from the historic Mount Washington Hotel in Breton 0:00:21.880 --> 0:00:24.440 Woods in New Hampshire, where I've been at an eclectic 0:00:24.480 --> 0:00:29.320 gathering of intellectuals and finance folks commemorating the anniversary of 0:00:29.360 --> 0:00:32.279 that famous Breton Woods Conference when the Allied Powers got 0:00:32.320 --> 0:00:34.960 together after World War Two to set down the rules 0:00:35.000 --> 0:00:38.040 for a new world economic order, and they created key 0:00:38.040 --> 0:00:40.760 institutions like the International Monetary Fund and the World Bank. 0:00:41.520 --> 0:00:44.120 Later you'll hear me chatting with a former US executive 0:00:44.159 --> 0:00:46.800 director of the IMAT about the kind of global economic 0:00:46.840 --> 0:00:50.080 cooperation we need today. I also caught up with the 0:00:50.120 --> 0:00:54.760 economist Neurial Rubini. We talked about why he hates cryptocurrencies 0:00:55.080 --> 0:00:58.720 and what's going to cause the next financial crisis. But first, 0:00:58.960 --> 0:01:00.960 we have the battle over the future of the global 0:01:01.000 --> 0:01:04.959 economy that's happening right now on the Mexican border. You'll 0:01:05.000 --> 0:01:09.080 remember President Trump shocked everyone threatening to slap big tariffs 0:01:09.080 --> 0:01:11.440 on Mexico for failing to stop the flow of Central 0:01:11.480 --> 0:01:15.400 American migrants from south to north. Now, after emergency talks, 0:01:15.440 --> 0:01:19.000 the Americans gave the Mexican President, Andres Manuel Lopez, a 0:01:19.120 --> 0:01:23.120 bred known by his initials Amblow, forty five days to 0:01:23.200 --> 0:01:26.560 do better tackling the problem. He's now sent a new 0:01:26.560 --> 0:01:30.080 federal force down to police the country's porous and geographically 0:01:30.240 --> 0:01:34.280 messy border with Guatemala, where people and goods have previously 0:01:34.400 --> 0:01:39.000 flowed freely. Bloomberg Economy reporter Eric Martin decided to go 0:01:39.120 --> 0:01:51.680 see what was happening here. On the banks of the 0:01:51.680 --> 0:01:55.920 Succa River. There's a constant buzz of activity. Locals make 0:01:55.960 --> 0:01:58.760 their living haulling goods onto rickety rafts made a fly 0:01:58.840 --> 0:02:03.040 within rubber tires. The cargo depends on the direction from 0:02:03.040 --> 0:02:06.280 Mexico to Guatemala. It's usually kinds of cooking oil or 0:02:06.320 --> 0:02:10.160 bags of rice. Having the other way, it's mostly people, 0:02:10.919 --> 0:02:14.080 many of them are bound for the US. All of it, 0:02:14.360 --> 0:02:19.079 technically speaking, is illegal. Still, the customs and immigration officials 0:02:19.120 --> 0:02:22.800 patrolling the international bridge have ignored it. That has helped 0:02:22.840 --> 0:02:25.240 make the river a key economic hub in the poorest 0:02:25.280 --> 0:02:33.640 region in Mexico. They Errta Alicia Flentis has been running 0:02:33.639 --> 0:02:36.320 a supply store in the Mexican border town of Sida 0:02:36.360 --> 0:02:39.640 didlgo for the past four decades. She told me that 0:02:39.639 --> 0:02:42.560 the river Contraband is the only source of jobs for 0:02:42.680 --> 0:02:46.160 towns on both the Mexican and Guatemalan sides of the 0:02:46.240 --> 0:02:52.840 river want that hand. Everyone lives off of this. What 0:02:53.000 --> 0:02:56.519 happens if it's gone, forget it? Everyone would be poor. 0:02:57.040 --> 0:03:02.760 The merchandise needs to continue to flow, but this river 0:03:02.840 --> 0:03:06.880 trade may not last much longer. Last month, the first 0:03:06.919 --> 0:03:09.840 of thousands of National Guard troops arrived as part of 0:03:09.880 --> 0:03:19.600 omlo's plans. The soldiers came with their m sixteens and 0:03:19.639 --> 0:03:23.200 told us that they didn't want us to work. Rooster 0:03:23.560 --> 0:03:26.040 is a thirty one year old raft captain who didn't 0:03:26.080 --> 0:03:28.480 want to give me his real name for fear of reprisals. 0:03:29.480 --> 0:03:32.560 He's been making a living moving goods and people across 0:03:32.600 --> 0:03:36.640 the river for the past death. If they make it 0:03:36.680 --> 0:03:39.800 more difficult for us to transport merchandise, we need to 0:03:39.800 --> 0:03:47.560 figure out how to resolve the problem. The new show 0:03:47.560 --> 0:03:49.680 of force on the border is meant to stem the 0:03:49.720 --> 0:03:53.280 tide of migrants escaping violence and poverty in Central America. 0:03:54.120 --> 0:03:57.320 Among them is main Orgean, a nineteen year old Honduran 0:03:57.360 --> 0:04:00.080 migrant who told me he's making his second attempt in 0:04:00.200 --> 0:04:05.480 less than a week to reach the US. I was 0:04:05.520 --> 0:04:08.160 reported a week ago and I started to come back 0:04:08.200 --> 0:04:21.520 the same day. There's no work where I leave. The 0:04:21.640 --> 0:04:24.800 migrants crossing the river are for the most part from Guatemala, 0:04:25.000 --> 0:04:29.720 El savor And and Duras, but people from Haiti, Cuba, Africa, 0:04:29.880 --> 0:04:32.839 and even India have recently begun appearing in greater numbers. 0:04:33.680 --> 0:04:36.600 Many arrived to Central America or South America by plain 0:04:36.920 --> 0:04:40.479 and then crossed through Mexico. Bumblow admits that parts of 0:04:40.520 --> 0:04:44.200 Mexico's seven dred mile frontier with Guatemala and Belize aren't 0:04:44.200 --> 0:04:48.000 well policed, and he's promised to secure them. His efforts 0:04:48.000 --> 0:04:49.839 have started to pay off, at least from the u 0:04:49.920 --> 0:04:54.240 S perspective. Customs and Border Protection seven July that the 0:04:54.320 --> 0:04:57.560 number of people stopped at the border fell twenty eight 0:04:57.560 --> 0:05:00.880 percent from May to June. All the numbers tend to 0:05:00.920 --> 0:05:03.679 decline in the summer, that's more than the usual drop. 0:05:04.880 --> 0:05:08.280 Trump at least seems pleased he should regret up from 0:05:08.360 --> 0:05:12.000 Mexico because the Mexican people very midst with all of 0:05:12.080 --> 0:05:15.599 these tens of thousands of people, hundreds of thousands of 0:05:15.640 --> 0:05:21.000 people walking through Mexico. Despite President Trump's enthusiasm, there are 0:05:21.040 --> 0:05:23.960 many people who are skeptical about whether Mexico can stop 0:05:24.000 --> 0:05:27.400 migrants in the long term. Among them, as Duncan would, 0:05:28.200 --> 0:05:30.800 he's the director of the Mexico Institute at the Woodrow 0:05:30.800 --> 0:05:34.880 Wilson International Center for Scholars in Washington. He's been studying 0:05:34.920 --> 0:05:38.240 Mexico for more than two decades. Mexico is now become 0:05:38.279 --> 0:05:42.039 a much more difficult piece of terrain to to to 0:05:42.120 --> 0:05:44.680 get across, so I think that that will provide a 0:05:44.800 --> 0:05:47.359 terrant effect in the in the short term, but in 0:05:47.400 --> 0:05:50.080 the long term, I feel as though we're going to 0:05:50.160 --> 0:05:54.120 see similar numbers of migrants coming through Mexico. They will 0:05:54.200 --> 0:05:59.359 learn to get around the various checkpoints. Mexican soldier has 0:05:59.440 --> 0:06:02.400 visited the Chats River a week after the government promised 0:06:02.440 --> 0:06:05.200 to step up efforts to patrol the border, but locals 0:06:05.200 --> 0:06:08.800 told me they quickly withdrew arguments with the raft operators 0:06:08.880 --> 0:06:12.400 threatened to spill over into violence. Mexico is likely to 0:06:12.440 --> 0:06:15.200 face more challenges as it attempts to balance the protection 0:06:15.200 --> 0:06:18.040 of human rights against the pressure from the American government. 0:06:19.000 --> 0:06:22.760 It's understandable why we saw the calls from the United 0:06:22.760 --> 0:06:26.040 States government for Mexico to do more. What I think 0:06:26.920 --> 0:06:30.960 is perhaps a mistake is to push so much of 0:06:30.960 --> 0:06:34.359 the burden onto Mexico at a time when Mexico has 0:06:34.760 --> 0:06:43.320 severe financial and fiscal restrictions. Mexico's economy is showing signs 0:06:43.320 --> 0:06:48.120 of weakness after years of modest if unspectacular growth. GDP 0:06:48.320 --> 0:06:53.200 is slowing thanks in part to Trump's unpredictable behavior. Threatening 0:06:53.240 --> 0:06:57.200 to rip up NAFTA and imposed tariffs have hurt investor confidence. 0:06:58.040 --> 0:07:01.440 While Trump has been focused on undock minted migration, the 0:07:01.560 --> 0:07:04.480 levels of people arriving to the US are actually below 0:07:04.560 --> 0:07:08.320 the records from a decade ago. In recent years, as 0:07:08.360 --> 0:07:12.800 many Mexicans have returned to Mexico as left for the US. Now, 0:07:12.960 --> 0:07:16.240 there's a risk that Trump's pressure causes the country's economy 0:07:16.240 --> 0:07:19.800 to weaken. That could results in fewer jobs in poor 0:07:19.840 --> 0:07:23.840 communities like those in Chiapas, and force more Mexicans to 0:07:23.960 --> 0:07:28.320 join Hondurans, Salvadorans, and Guatemalans in seeking work in the US. 0:07:28.960 --> 0:07:33.840 Here's duncan Wood again. Overall, the deterrent measures that we're 0:07:33.840 --> 0:07:37.320 seeing being put in place by Mexico are probably not sustainable. 0:07:37.880 --> 0:07:42.760 So ultimately, I think this provides a short term solution 0:07:42.800 --> 0:07:46.760 at the very best, and we're likely to see that 0:07:46.920 --> 0:07:50.040 in the medium to long term. The problem continues as 0:07:50.160 --> 0:07:55.320 long as the underlying fundamental crisis in Central America is there. 0:07:57.400 --> 0:08:00.360 Migrants from Central America are fleeing some of the highest 0:08:00.440 --> 0:08:04.160 murder rates in the world. Many used to work in agriculture, 0:08:04.200 --> 0:08:08.000 but they've seen their crops devastated by climate change. Their 0:08:08.080 --> 0:08:12.520 government spend little on social services, citizens have few or 0:08:12.560 --> 0:08:16.160 no job opportunities, and plans to develop the region could 0:08:16.160 --> 0:08:20.840 take years. Ultimately, no amount of security on the Mexico 0:08:20.880 --> 0:08:25.240 Gualamala border is likely to stop undocumented migration as long 0:08:25.280 --> 0:08:29.480 as the economic attraction of the US remains. It would 0:08:29.520 --> 0:08:32.559 be ironic if Trump's heavy handed efforts to stop the 0:08:32.600 --> 0:08:36.319 flow of migrants end up driving even greater numbers to 0:08:36.440 --> 0:08:55.280 seek a better life north of the Mexican border. You 0:08:55.400 --> 0:08:57.080 heard there from one of the front lines in the 0:08:57.120 --> 0:09:00.120 battle over the future of the global economy. I had 0:09:00.120 --> 0:09:03.040 a chat here with Meg Lundziger, a former US executive 0:09:03.080 --> 0:09:04.840 director of the i m F who is now a 0:09:04.880 --> 0:09:08.480 public policy fellow at the Wilson Center in Washington. We 0:09:08.600 --> 0:09:11.880 started by talking about the spirit of Breton Woods and 0:09:11.920 --> 0:09:15.000 whether we could revive it to confront the big international 0:09:15.000 --> 0:09:20.880 economic challenges the world faces today. This is pretty amazing 0:09:20.880 --> 0:09:24.960 when you look back that these delegates committed their governments 0:09:25.000 --> 0:09:27.920 to treaty organizations, meaning you give up a little bit 0:09:27.920 --> 0:09:31.280 of sovereignty by signing on to a treaty. But they 0:09:31.280 --> 0:09:35.720 all got their home governments to ratify it. And these 0:09:35.840 --> 0:09:38.960 organizations have continued and have had to change in many, 0:09:39.000 --> 0:09:43.000 many different ways, but still been very effective over the 0:09:43.080 --> 0:09:46.560 years of dealing with crises. With that said, it's hard 0:09:46.600 --> 0:09:50.880 to predict the future and how we know today what's 0:09:50.920 --> 0:09:52.960 going to drive us to agree. We don't have that 0:09:53.040 --> 0:09:55.360 same sense of fear. In some respects, we are to 0:09:55.520 --> 0:09:57.280 because there are a lot of different things going on 0:09:57.520 --> 0:10:01.600 that create fear. But over all, in the political classes 0:10:01.600 --> 0:10:04.840 and the governments, there's not a unifying sense of what 0:10:04.960 --> 0:10:07.800 that overarching problem is and what we should do about it. 0:10:07.840 --> 0:10:09.840 And you see it every day in the press, you're 0:10:09.880 --> 0:10:13.920 reporting on it. Just how we all just see the 0:10:13.920 --> 0:10:16.280 world so completely different. I mean by we are our 0:10:16.360 --> 0:10:20.400 leaders and then there's very little chance that there would 0:10:20.400 --> 0:10:23.880 be anything this dramatic as the same as the Breton 0:10:23.920 --> 0:10:26.760 Woods institutions coming out. But that was one thing this 0:10:26.920 --> 0:10:29.760 volume that we put together at the Breton Woods Committee 0:10:29.760 --> 0:10:34.280 this year. If you read Paul Boker's first essay, it's 0:10:34.280 --> 0:10:37.080 all about the spirit of Breton Wood's not that he's 0:10:37.200 --> 0:10:40.560 urging global leaders to come up with a whole new system, 0:10:40.679 --> 0:10:43.960 but that he's urging them to remember, we need to 0:10:43.960 --> 0:10:46.640 cooperate if we're going to handle problems, if we're going 0:10:46.679 --> 0:10:50.360 to anticipate what's coming, if we're going to find ways 0:10:50.400 --> 0:10:53.680 to all be part of the solution, which at times 0:10:53.720 --> 0:10:57.440 means making a commitment to others so that you all benefit. 0:10:57.679 --> 0:11:00.360 And that's hard to find these days. And of course, 0:11:00.360 --> 0:11:02.720 as most people listening well know, but that's the former 0:11:02.800 --> 0:11:05.720 FED chair from from back in the eighties, Paul Worker. 0:11:06.120 --> 0:11:10.000 And we had a report this week from the Mexican 0:11:10.080 --> 0:11:16.000 border talking about the irony that you could have extent 0:11:16.360 --> 0:11:20.720 really strenuous efforts to cut down immigration and illegal immigration 0:11:20.880 --> 0:11:24.040 at the at the Mexican American border, with the Mexican 0:11:24.080 --> 0:11:26.640 government under great pressure from President Trump to do that. 0:11:26.960 --> 0:11:30.599 But at the same time President Trump's economic policies threatened 0:11:30.679 --> 0:11:35.040 to hurt the Mexican economy and actually push more people 0:11:35.080 --> 0:11:38.079 into trying to immigrate to the U. S Now. That's 0:11:38.080 --> 0:11:40.439 a long way, I mean, if you listen to the footage, 0:11:40.520 --> 0:11:42.679 is a long way from this sort of pleasant hotel 0:11:42.720 --> 0:11:44.200 at the top of the mountain. But it struck me 0:11:44.960 --> 0:11:47.920 that some of the issues involved in Donald Trump, donald 0:11:47.960 --> 0:11:53.480 Trump's policy on Mexico, on immigration and his success does 0:11:53.559 --> 0:11:58.640 symbolize some of the change in the environment since four 0:11:58.840 --> 0:12:02.920 you talked about fear being the animating factor for the leaders. 0:12:03.040 --> 0:12:05.920 Then you know, now instead of people being terrified of 0:12:05.960 --> 0:12:09.480 economic nationalism and wanting never to have that conflict again, 0:12:10.760 --> 0:12:15.319 you have globalization that people feel has not necessarily worked 0:12:15.360 --> 0:12:17.560 for them. There's kind of a distance between these global 0:12:17.600 --> 0:12:22.200 institutions and people in countries like the US and different 0:12:22.240 --> 0:12:26.120 European countries, and you have US and you have immigration 0:12:26.320 --> 0:12:28.960 figuring much more prominently than we might have thought. We 0:12:28.960 --> 0:12:31.880 were very focused in when we think about globalization all 0:12:31.920 --> 0:12:34.800 these years. We've been very focused on goods trade and 0:12:35.240 --> 0:12:37.760 how do you deal with flows of money and maybe 0:12:37.800 --> 0:12:40.440 do we not think enough about what flows of people 0:12:40.520 --> 0:12:44.480 are going to mean for individual communities and for and 0:12:44.559 --> 0:12:48.680 for our politics. We didn't think at all about that perfectly, 0:12:49.160 --> 0:12:52.200 and it's certainly not the big migration flows that we've 0:12:52.200 --> 0:12:54.760 all seen in our countries. I mean, why is the 0:12:54.880 --> 0:12:58.360 UK leaving the EU? And immigration has been one of 0:12:58.400 --> 0:13:01.360 the big reasons, and it's been a fear in in 0:13:01.400 --> 0:13:03.520 the US too. It's a little hard for me because 0:13:03.559 --> 0:13:07.400 I'm an immigrant to uh there's a lot of them about. Yeah, 0:13:07.400 --> 0:13:10.880 a lot of us are here and love this country 0:13:10.920 --> 0:13:13.240 and have made it a home and wanted to do well. 0:13:13.360 --> 0:13:15.480 So it's a little hard, you know. And I mean 0:13:15.559 --> 0:13:19.120 the immigrants I see who are frankly taking care of 0:13:19.160 --> 0:13:21.680 my lawn and cleaning my house. They're here and they're 0:13:21.720 --> 0:13:24.000 working hard, and they're doing a lot of things that 0:13:24.760 --> 0:13:28.320 many Americans really have no interest in doing. So I 0:13:28.480 --> 0:13:32.200 welcome that they're here, they're working hard, and I think 0:13:32.240 --> 0:13:35.200 the US has to be a little more open to this. 0:13:35.920 --> 0:13:38.400 With that said, I guess a lot of people feel 0:13:38.480 --> 0:13:42.280 jobs are being taken away. I'm not quite sure where 0:13:43.200 --> 0:13:46.720 the jobs that have kept the middle class going, you know, 0:13:46.840 --> 0:13:50.840 manufacturing services, that a whole lot of that is being 0:13:50.880 --> 0:13:54.880 taken away by immigrants coming from Central America. I don't 0:13:54.880 --> 0:13:57.160 get that sense. So At times, it's hard for me 0:13:57.200 --> 0:14:01.040 to puzzle where this fear has come from. And sometimes 0:14:01.080 --> 0:14:04.880 I feel like it's an overly manufactured fear on the 0:14:04.920 --> 0:14:08.920 political classes on President Trump, that it's not really a 0:14:08.960 --> 0:14:12.400 threat now. At the same time, we also have, because 0:14:12.440 --> 0:14:15.200 of his announcements and policies, this effort of more to 0:14:15.240 --> 0:14:17.640 come to the US the families get here before the 0:14:17.679 --> 0:14:21.600 borders completely shut down. So we've kind of created this 0:14:21.680 --> 0:14:26.120 conundrum for ourselves. And as you pointed out in the beginning, 0:14:27.280 --> 0:14:31.280 by some of the other policies, we've made it more 0:14:31.280 --> 0:14:34.240 difficult for these countries to thrive to grow, you know, 0:14:34.320 --> 0:14:37.440 threatening to leave NAFTA. So of course that's going to 0:14:37.480 --> 0:14:40.080 instead of ize more to come to the United States 0:14:40.080 --> 0:14:43.320 for a better life. So I think there needs to 0:14:43.360 --> 0:14:45.680 be a little bit deeper thinking of all the inner 0:14:45.680 --> 0:14:49.240 linkages of the policies in this administration. Well, it's interesting 0:14:49.280 --> 0:14:51.520 because we have One thing we heard about in this 0:14:51.640 --> 0:14:54.720 conference is some of the history of the Britain was negotiations, 0:14:54.960 --> 0:14:57.600 and it was this kind of cutthroat battle between the 0:14:57.640 --> 0:15:02.120 American representative Harry Dexter White and the British representative John 0:15:02.160 --> 0:15:05.400 Maynard Keynes. And there's plenty of books and and the 0:15:05.440 --> 0:15:10.240 stories about their competition, but it was all about us, 0:15:10.400 --> 0:15:13.400 about the US installing itself at the center of these 0:15:13.440 --> 0:15:15.800 institutions and the center of the new system with everything 0:15:15.880 --> 0:15:19.840 revolving around the dollar. And again, what strikes you as 0:15:19.880 --> 0:15:23.080 a difference now is that's in a lot of the 0:15:23.120 --> 0:15:26.200 conversations we have is about the absence of US leadership. 0:15:26.200 --> 0:15:28.520 You have institutions that were kind of established to give 0:15:28.560 --> 0:15:31.880 the US the ultimate decision making, the ultimate veto. Power 0:15:32.080 --> 0:15:34.080 used to sit there with your veto in the IMF. 0:15:34.080 --> 0:15:36.160 I don't think you used it very much, but people 0:15:36.240 --> 0:15:38.200 cared a lot about what you believe because you was 0:15:38.240 --> 0:15:41.640 the US. Um Do you think China is going to 0:15:42.240 --> 0:15:46.800 fill that vacuum of sort of international economic leadership? Apparently 0:15:46.840 --> 0:15:49.880 the they're very interested in this history about Breton Woods. 0:15:49.960 --> 0:15:53.320 They've been. We heard that the history of the negotiations 0:15:53.360 --> 0:15:55.840 they've been. They sold more copies in China of this 0:15:56.000 --> 0:16:00.720 American academics book than they have in the US. You know, 0:16:00.880 --> 0:16:06.240 that's very interesting, Stephanie, because in my experience, the Chinese 0:16:07.200 --> 0:16:08.640 want to be part of that, They want to be 0:16:08.680 --> 0:16:10.600 at the center of the system. They want to have 0:16:10.640 --> 0:16:13.520 a clear voice and the decision making in the system. 0:16:13.520 --> 0:16:16.400 But they don't really want to be number one. And 0:16:16.440 --> 0:16:19.400 I think it's because they recognize they're really not at 0:16:19.400 --> 0:16:24.200 the point where they can undertake that type of global leadership. 0:16:24.600 --> 0:16:26.760 Do they want their currency? Do you want the M 0:16:26.840 --> 0:16:30.960 and B to become the global currency? No, they certainly don't. 0:16:31.000 --> 0:16:33.600 What do they do in their financial sector? They control things, 0:16:33.960 --> 0:16:37.720 They control inflows and outflows, They impose capital controls, they 0:16:37.760 --> 0:16:42.800 lift capital controls. Their monetary policy has zero independence, right, 0:16:42.880 --> 0:16:45.720 it's they're at the behest of the government whether they 0:16:45.760 --> 0:16:49.320 loosen the credit or tighten the credits. So um, I 0:16:49.360 --> 0:16:54.200 think China is nowhere in the position to undertake that 0:16:54.400 --> 0:16:58.360 leadership role in terms of guiding institutions or you know, 0:16:58.480 --> 0:17:02.120 pulling all these country reads together. And it's interesting though 0:17:02.320 --> 0:17:06.840 you do get international collaborations often when, as someone said 0:17:06.840 --> 0:17:09.720 to me, when you have politicians actually looking out of 0:17:10.000 --> 0:17:12.520 looking standing on a window ledge looking down, that's when 0:17:12.560 --> 0:17:16.600 they start to do serious looking down at the abyss. 0:17:16.800 --> 0:17:19.040 But even in our time in the late nineties in 0:17:19.080 --> 0:17:21.960 the U. S. Treasury, there was a kind of healthy 0:17:22.000 --> 0:17:26.959 competition among international leaders to have initiatives and policy proposals 0:17:27.000 --> 0:17:28.600 and then you come back from the summit and you 0:17:28.680 --> 0:17:31.119 say I have one with my proposal for development or 0:17:31.160 --> 0:17:33.200 this and that. I mean, it's amazing that that is 0:17:33.680 --> 0:17:37.320 not where the action is for most politicians. That's not 0:17:37.359 --> 0:17:39.760 going to help them domestically. And that's all that matters 0:17:39.800 --> 0:17:43.040 now is when the next domestic election, Right get the 0:17:43.119 --> 0:17:46.320 leadership of the Conservative Party, when the election in twenty 0:17:47.359 --> 0:17:51.359 right get a bigger majority in the parliament. So well, 0:17:51.560 --> 0:17:53.680 I fear they were surrounded by lots of people doing 0:17:53.760 --> 0:17:56.600 very exciting, innovative financial things. So we shouldn't sound too 0:17:56.680 --> 0:18:00.520 much like sort of middle aged people bemoaning that helped 0:18:00.640 --> 0:18:04.240 terrible world. There's been plenty of good thing LANs. Thank 0:18:04.280 --> 0:18:15.440 you very much. Well, thank you, Stephanie Pleasure. M here 0:18:15.440 --> 0:18:17.879 are Breton Woods. I bumped into another old friend, the 0:18:17.920 --> 0:18:20.680 economist new Or Rubini, who's a professor at m y 0:18:20.760 --> 0:18:24.600 U and head of Rubini Macro Associates. Recently he's been 0:18:24.640 --> 0:18:29.119 a very public critic of cryptocurrencies. Since the conference was 0:18:29.280 --> 0:18:33.639 organized by Bancor, a company heavily involved with cryptocurrencies, I 0:18:33.680 --> 0:18:37.119 wondered whether he was surprised to be invited. You've been 0:18:37.160 --> 0:18:42.240 coming out very strongly against digital currencies recently. Why why 0:18:42.280 --> 0:18:45.680 are you so worried about them? Well, I'm not actually 0:18:45.680 --> 0:18:50.040 worried about them. I think that the term cryptocurrencies is 0:18:50.119 --> 0:18:53.399 a misnomer. For something to be a currency has to 0:18:53.440 --> 0:18:58.200 be an account, a means of payment, stable store of value. 0:18:58.920 --> 0:19:01.480 Um not with this pricing anything in bitcoin or any 0:19:01.480 --> 0:19:06.960 other cryptocurrency. Bitcoin can only five transactions per second. The 0:19:07.080 --> 0:19:11.120 Visa network does twenty five thousand per seconds, and it's 0:19:11.160 --> 0:19:14.159 not the stable store of value because the price can 0:19:14.200 --> 0:19:16.880 go up or down twenty percent in a day. That's 0:19:16.880 --> 0:19:19.600 why even at the blockchain or crypto conferences where I go, 0:19:20.080 --> 0:19:22.879 they don't even accept their bitcoint for paymentality of the 0:19:22.920 --> 0:19:25.800 conference because the profit markin could be wiped out by 0:19:25.800 --> 0:19:28.600 a sudden movement of the price, So no merchant is 0:19:28.600 --> 0:19:31.640 going to be using it. So it's a misnumber. They're 0:19:31.680 --> 0:19:36.720 not really currencies that the bubble does venteen collapse into 0:19:36.720 --> 0:19:39.879 does eighteen. There's been a rally this year, but bitcoin 0:19:40.000 --> 0:19:42.760 is still more than fifty percent below the peak. The 0:19:42.800 --> 0:19:46.280 other top ten or eight percent belo peak, and I 0:19:46.280 --> 0:19:48.639 think there's a little bit of a fad. But in 0:19:49.320 --> 0:19:52.600 these crypto and quote currencies. They are not going anywhere. 0:19:52.680 --> 0:19:55.760 They're useless, and I think there's a bigger, fading blockchain that, 0:19:55.840 --> 0:19:59.160 in my view, is the most over hyped technology uine 0:19:59.240 --> 0:20:02.399 history and no better than the glorified than spreadsheet. But 0:20:02.440 --> 0:20:06.760 that's a different story. We talked last in last week's podcast, 0:20:06.800 --> 0:20:09.359 we actually talked to the French finance Minister, Brunda Lamaire 0:20:09.440 --> 0:20:12.840 about Libra and the extraordinary amount of attention that the 0:20:12.840 --> 0:20:16.119 G seven finance ministers, the G twenty you mentioned, President 0:20:16.160 --> 0:20:19.400 Trump have all been talking about this one proposal by 0:20:19.480 --> 0:20:24.359 one company. Do you think librastor justifies the amount of 0:20:24.560 --> 0:20:28.720 attention it is getting to some extent. First of all, 0:20:29.480 --> 0:20:32.760 again they pretended it's going to be a blockchain tool, 0:20:32.840 --> 0:20:35.640 but it's not. It's going to be fully centralized. So 0:20:35.960 --> 0:20:37.840 this is a gimmick as a way to try to 0:20:37.880 --> 0:20:43.159 avoid the unquote regulation and so on. Secondly, you know 0:20:43.160 --> 0:20:45.680 there are two billion users on Facebook, most of them 0:20:45.680 --> 0:20:48.120 are only mos. Anybody can sign up with fake name. 0:20:48.720 --> 0:20:50.480 I suppose that you sign up and then you can 0:20:50.520 --> 0:20:53.359 take some of these libra from US and send it 0:20:53.400 --> 0:20:56.600 to Panama or any other shore financial center. And again, 0:20:56.640 --> 0:20:59.760 all the rules about anti money laundering or not your customers. 0:21:00.080 --> 0:21:04.520 I've breached that, of course, you know, uh, financial officials 0:21:04.560 --> 0:21:06.520 are worried about it. This is not the little bit 0:21:06.640 --> 0:21:10.399 small cryptoscam. You know, one of the largest company the 0:21:10.480 --> 0:21:16.840 world wants to create essentially a money function without having 0:21:16.840 --> 0:21:20.959 a banking license, without proper anti money laundering, without proper 0:21:21.359 --> 0:21:23.520 not your customer stuff. And they're saying we're not going 0:21:23.560 --> 0:21:27.119 to allow it, rightly so, and it was striking the 0:21:27.160 --> 0:21:30.200 Facebook literature about this. And of course they always say 0:21:30.240 --> 0:21:31.880 they're only going to have a small number of votes 0:21:31.880 --> 0:21:34.040 in this, It's going to be a lot of other 0:21:34.119 --> 0:21:37.359 players if it goes ahead. UM, I share some of 0:21:37.400 --> 0:21:40.240 your skepticism, but it's extraordinary when you look at they're 0:21:40.320 --> 0:21:43.080 what they're claiming about it. They'll say, they say, you 0:21:43.080 --> 0:21:45.520 should be able to it should be just as easy 0:21:45.600 --> 0:21:48.679 to transfer money wherever you are in the world to 0:21:48.720 --> 0:21:51.360 wherever in the world. You shouldn't have any any borders, 0:21:51.840 --> 0:21:54.160 And that does seem an extraordinary thing that you would 0:21:54.160 --> 0:21:55.919 expect to be able to do that without any of 0:21:55.960 --> 0:22:00.399 the normal obstacles to cross border banking or any of 0:22:00.400 --> 0:22:03.120 those things. And I've heard you talk quite a lot 0:22:03.160 --> 0:22:06.440 about what the seeds are for the next global financial 0:22:06.440 --> 0:22:09.800 crisis and how soon that might be coming. I mean, finally, 0:22:09.840 --> 0:22:13.560 if you think about how that might play out and 0:22:13.640 --> 0:22:16.680 those kind of environments, it's really when that happens, it's 0:22:16.720 --> 0:22:20.000 really important to have some kind of global cooperation. Do 0:22:20.080 --> 0:22:21.919 you think we're not going to see that at this time? 0:22:22.040 --> 0:22:24.240 Or we will still have the right kind of collaboration 0:22:24.280 --> 0:22:27.760 between central banks even if governments are more adults with 0:22:27.800 --> 0:22:32.119 one another. Well, if the next crisis occurs because of 0:22:32.119 --> 0:22:35.600 a combination of excessive credit than that and some shocks 0:22:35.640 --> 0:22:38.840 and things like a trade or attack or between US 0:22:38.920 --> 0:22:41.760 and China could be triggering of it, or another old 0:22:41.800 --> 0:22:44.600 shock if us in Iran go to work would be 0:22:44.600 --> 0:22:47.000 the trigger of it. I think that first of all, 0:22:47.640 --> 0:22:51.040 we'll have less cooperation in the past, but also the 0:22:51.240 --> 0:22:53.800 national policies are going to be more constrained compared to 0:22:53.840 --> 0:22:57.800 the past. You know, fiscal policies constrained because now deficit 0:22:57.840 --> 0:23:01.440 debts are higher than before. More of their policies constrained 0:23:01.440 --> 0:23:04.200 because we don't have much headroom. You know, the fathers 0:23:04.520 --> 0:23:07.919 two and fifty business points of rate cuts before they 0:23:07.920 --> 0:23:11.119 go to zero. While in Europe, e c B smb 0:23:11.760 --> 0:23:14.879 Rigs Bank or in Japan the boj are already negative rates. 0:23:15.080 --> 0:23:17.720 They can go a little more negative, but not much more. 0:23:18.400 --> 0:23:21.600 And the ability to backstop and bail out banks, corporates 0:23:21.640 --> 0:23:25.000 or even houshold is constrained for two reasons. One is, 0:23:25.040 --> 0:23:27.879 there is now a political backlash against building out the 0:23:27.920 --> 0:23:31.159 bank as well as treat the city the corporations, so 0:23:31.200 --> 0:23:33.720 I don't think it's going to be as easy. And secondly, 0:23:33.760 --> 0:23:36.399 you know there's this doom look between banks and the 0:23:36.440 --> 0:23:39.600 sovereigns Summings are so indebted that a lot of their 0:23:39.640 --> 0:23:41.200 death is at the hands of the banks, and the 0:23:41.240 --> 0:23:44.439 banks are themselves fragile because of the exposure to the 0:23:44.480 --> 0:23:47.399 sovereign and therefore this doom look between some of the 0:23:47.440 --> 0:23:49.720 banks implies that's going to be very hard to have 0:23:49.840 --> 0:23:52.720 the same backstop of the financial system we got during 0:23:52.720 --> 0:23:55.520 the global financial crisis. So when the stuff is going 0:23:55.560 --> 0:23:58.320 to hit the fan, Unfortunately, compared to ten years ago 0:23:58.359 --> 0:24:00.200 when we had all the policy bulleis, we've is a 0:24:00.240 --> 0:24:03.120 lot of them mount the physical credit backstre bailed out 0:24:03.400 --> 0:24:06.000 this time around is going to constrained becauseine God's going 0:24:06.040 --> 0:24:08.400 to go from the International Motri Fund to the European 0:24:08.480 --> 0:24:10.720 Central Bank. Do you think she can hold together the 0:24:10.760 --> 0:24:15.600 Eurozone through the next recession or potentially crisis the way 0:24:15.600 --> 0:24:19.760