Speaker 1: Hello, Welcome to Stephanomics, the podcast that brings the global
Speaker 1: economy to you. I have to tell you this is
Speaker 1: the last episode of this series. We're packing a lot in.
Speaker 1: I'm recording from the historic Mount Washington Hotel in Breton
Speaker 1: Woods in New Hampshire, where I've been at an eclectic
Speaker 1: gathering of intellectuals and finance folks commemorating the anniversary of
Speaker 1: that famous Breton Woods Conference when the Allied Powers got
Speaker 1: together after World War Two to set down the rules
Speaker 1: for a new world economic order, and they created key
Speaker 1: institutions like the International Monetary Fund and the World Bank.
Speaker 1: Later you'll hear me chatting with a former US executive
Speaker 1: director of the IMAT about the kind of global economic
Speaker 1: cooperation we need today. I also caught up with the
Speaker 1: economist Neurial Rubini. We talked about why he hates cryptocurrencies
Speaker 1: and what's going to cause the next financial crisis. But first,
Speaker 1: we have the battle over the future of the global
Speaker 1: economy that's happening right now on the Mexican border. You'll
Speaker 1: remember President Trump shocked everyone threatening to slap big tariffs
Speaker 1: on Mexico for failing to stop the flow of Central
Speaker 1: American migrants from south to north. Now, after emergency talks,
Speaker 1: the Americans gave the Mexican President, Andres Manuel Lopez, a
Speaker 1: bred known by his initials Amblow, forty five days to
Speaker 1: do better tackling the problem. He's now sent a new
Speaker 1: federal force down to police the country's porous and geographically
Speaker 1: messy border with Guatemala, where people and goods have previously
Speaker 1: flowed freely. Bloomberg Economy reporter Eric Martin decided to go
Speaker 1: see what was happening here. On the banks of the
Speaker 1: Succa River. There's a constant buzz of activity. Locals make
Speaker 1: their living haulling goods onto rickety rafts made a fly
Speaker 1: within rubber tires. The cargo depends on the direction from
Speaker 1: Mexico to Guatemala. It's usually kinds of cooking oil or
Speaker 1: bags of rice. Having the other way, it's mostly people,
Speaker 1: many of them are bound for the US. All of it,
Speaker 1: technically speaking, is illegal. Still, the customs and immigration officials
Speaker 1: patrolling the international bridge have ignored it. That has helped
Speaker 1: make the river a key economic hub in the poorest
Speaker 1: region in Mexico. They Errta Alicia Flentis has been running
Speaker 1: a supply store in the Mexican border town of Sida
Speaker 1: didlgo for the past four decades. She told me that
Speaker 1: the river Contraband is the only source of jobs for
Speaker 1: towns on both the Mexican and Guatemalan sides of the
Speaker 1: river want that hand. Everyone lives off of this. What
Speaker 1: happens if it's gone, forget it? Everyone would be poor.
Speaker 1: The merchandise needs to continue to flow, but this river
Speaker 1: trade may not last much longer. Last month, the first
Speaker 1: of thousands of National Guard troops arrived as part of
Speaker 1: omlo's plans. The soldiers came with their m sixteens and
Speaker 1: told us that they didn't want us to work. Rooster
Speaker 1: is a thirty one year old raft captain who didn't
Speaker 1: want to give me his real name for fear of reprisals.
Speaker 1: He's been making a living moving goods and people across
Speaker 1: the river for the past death. If they make it
Speaker 1: more difficult for us to transport merchandise, we need to
Speaker 1: figure out how to resolve the problem. The new show
Speaker 1: of force on the border is meant to stem the
Speaker 1: tide of migrants escaping violence and poverty in Central America.
Speaker 1: Among them is main Orgean, a nineteen year old Honduran
Speaker 1: migrant who told me he's making his second attempt in
Speaker 1: less than a week to reach the US. I was
Speaker 1: reported a week ago and I started to come back
Speaker 1: the same day. There's no work where I leave. The
Speaker 1: migrants crossing the river are for the most part from Guatemala,
Speaker 1: El savor And and Duras, but people from Haiti, Cuba, Africa,
Speaker 1: and even India have recently begun appearing in greater numbers.
Speaker 1: Many arrived to Central America or South America by plain
Speaker 1: and then crossed through Mexico. Bumblow admits that parts of
Speaker 1: Mexico's seven dred mile frontier with Guatemala and Belize aren't
Speaker 1: well policed, and he's promised to secure them. His efforts
Speaker 1: have started to pay off, at least from the u
Speaker 1: S perspective. Customs and Border Protection seven July that the
Speaker 1: number of people stopped at the border fell twenty eight
Speaker 1: percent from May to June. All the numbers tend to
Speaker 1: decline in the summer, that's more than the usual drop.
Speaker 1: Trump at least seems pleased he should regret up from
Speaker 1: Mexico because the Mexican people very midst with all of
Speaker 1: these tens of thousands of people, hundreds of thousands of
Speaker 1: people walking through Mexico. Despite President Trump's enthusiasm, there are
Speaker 1: many people who are skeptical about whether Mexico can stop
Speaker 1: migrants in the long term. Among them, as Duncan would,
Speaker 1: he's the director of the Mexico Institute at the Woodrow
Speaker 1: Wilson International Center for Scholars in Washington. He's been studying
Speaker 1: Mexico for more than two decades. Mexico is now become
Speaker 1: a much more difficult piece of terrain to to to
Speaker 1: get across, so I think that that will provide a
Speaker 1: terrant effect in the in the short term, but in
Speaker 1: the long term, I feel as though we're going to
Speaker 1: see similar numbers of migrants coming through Mexico. They will
Speaker 1: learn to get around the various checkpoints. Mexican soldier has
Speaker 1: visited the Chats River a week after the government promised
Speaker 1: to step up efforts to patrol the border, but locals
Speaker 1: told me they quickly withdrew arguments with the raft operators
Speaker 1: threatened to spill over into violence. Mexico is likely to
Speaker 1: face more challenges as it attempts to balance the protection
Speaker 1: of human rights against the pressure from the American government.
Speaker 1: It's understandable why we saw the calls from the United
Speaker 1: States government for Mexico to do more. What I think
Speaker 1: is perhaps a mistake is to push so much of
Speaker 1: the burden onto Mexico at a time when Mexico has
Speaker 1: severe financial and fiscal restrictions. Mexico's economy is showing signs
Speaker 1: of weakness after years of modest if unspectacular growth. GDP
Speaker 1: is slowing thanks in part to Trump's unpredictable behavior. Threatening
Speaker 1: to rip up NAFTA and imposed tariffs have hurt investor confidence.
Speaker 1: While Trump has been focused on undock minted migration, the
Speaker 1: levels of people arriving to the US are actually below
Speaker 1: the records from a decade ago. In recent years, as
Speaker 1: many Mexicans have returned to Mexico as left for the US. Now,
Speaker 1: there's a risk that Trump's pressure causes the country's economy
Speaker 1: to weaken. That could results in fewer jobs in poor
Speaker 1: communities like those in Chiapas, and force more Mexicans to
Speaker 1: join Hondurans, Salvadorans, and Guatemalans in seeking work in the US.
Speaker 1: Here's duncan Wood again. Overall, the deterrent measures that we're
Speaker 1: seeing being put in place by Mexico are probably not sustainable.
Speaker 1: So ultimately, I think this provides a short term solution
Speaker 1: at the very best, and we're likely to see that
Speaker 1: in the medium to long term. The problem continues as
Speaker 1: long as the underlying fundamental crisis in Central America is there.
Speaker 1: Migrants from Central America are fleeing some of the highest
Speaker 1: murder rates in the world. Many used to work in agriculture,
Speaker 1: but they've seen their crops devastated by climate change. Their
Speaker 1: government spend little on social services, citizens have few or
Speaker 1: no job opportunities, and plans to develop the region could
Speaker 1: take years. Ultimately, no amount of security on the Mexico
Speaker 1: Gualamala border is likely to stop undocumented migration as long
Speaker 1: as the economic attraction of the US remains. It would
Speaker 1: be ironic if Trump's heavy handed efforts to stop the
Speaker 1: flow of migrants end up driving even greater numbers to
Speaker 1: seek a better life north of the Mexican border. You
Speaker 1: heard there from one of the front lines in the
Speaker 1: battle over the future of the global economy. I had
Speaker 1: a chat here with Meg Lundziger, a former US executive
Speaker 1: director of the i m F who is now a
Speaker 1: public policy fellow at the Wilson Center in Washington. We
Speaker 1: started by talking about the spirit of Breton Woods and
Speaker 1: whether we could revive it to confront the big international
Speaker 1: economic challenges the world faces today. This is pretty amazing
Speaker 1: when you look back that these delegates committed their governments
Speaker 1: to treaty organizations, meaning you give up a little bit
Speaker 1: of sovereignty by signing on to a treaty. But they
Speaker 1: all got their home governments to ratify it. And these
Speaker 1: organizations have continued and have had to change in many,
Speaker 1: many different ways, but still been very effective over the
Speaker 1: years of dealing with crises. With that said, it's hard
Speaker 1: to predict the future and how we know today what's
Speaker 1: going to drive us to agree. We don't have that
Speaker 1: same sense of fear. In some respects, we are to
Speaker 1: because there are a lot of different things going on
Speaker 1: that create fear. But over all, in the political classes
Speaker 1: and the governments, there's not a unifying sense of what
Speaker 1: that overarching problem is and what we should do about it.
Speaker 1: And you see it every day in the press, you're
Speaker 1: reporting on it. Just how we all just see the
Speaker 1: world so completely different. I mean by we are our
Speaker 1: leaders and then there's very little chance that there would
Speaker 1: be anything this dramatic as the same as the Breton
Speaker 1: Woods institutions coming out. But that was one thing this
Speaker 1: volume that we put together at the Breton Woods Committee
Speaker 1: this year. If you read Paul Boker's first essay, it's
Speaker 1: all about the spirit of Breton Wood's not that he's
Speaker 1: urging global leaders to come up with a whole new system,
Speaker 1: but that he's urging them to remember, we need to
Speaker 1: cooperate if we're going to handle problems, if we're going
Speaker 1: to anticipate what's coming, if we're going to find ways
Speaker 1: to all be part of the solution, which at times
Speaker 1: means making a commitment to others so that you all benefit.
Speaker 1: And that's hard to find these days. And of course,
Speaker 1: as most people listening well know, but that's the former
Speaker 1: FED chair from from back in the eighties, Paul Worker.
Speaker 1: And we had a report this week from the Mexican
Speaker 1: border talking about the irony that you could have extent
Speaker 1: really strenuous efforts to cut down immigration and illegal immigration
Speaker 1: at the at the Mexican American border, with the Mexican
Speaker 1: government under great pressure from President Trump to do that.
Speaker 1: But at the same time President Trump's economic policies threatened
Speaker 1: to hurt the Mexican economy and actually push more people
Speaker 1: into trying to immigrate to the U. S Now. That's
Speaker 1: a long way, I mean, if you listen to the footage,
Speaker 1: is a long way from this sort of pleasant hotel
Speaker 1: at the top of the mountain. But it struck me
Speaker 1: that some of the issues involved in Donald Trump, donald
Speaker 1: Trump's policy on Mexico, on immigration and his success does
Speaker 1: symbolize some of the change in the environment since four
Speaker 1: you talked about fear being the animating factor for the leaders.
Speaker 1: Then you know, now instead of people being terrified of
Speaker 1: economic nationalism and wanting never to have that conflict again,
Speaker 1: you have globalization that people feel has not necessarily worked
Speaker 1: for them. There's kind of a distance between these global
Speaker 1: institutions and people in countries like the US and different
Speaker 1: European countries, and you have US and you have immigration
Speaker 1: figuring much more prominently than we might have thought. We
Speaker 1: were very focused in when we think about globalization all
Speaker 1: these years. We've been very focused on goods trade and
Speaker 1: how do you deal with flows of money and maybe
Speaker 1: do we not think enough about what flows of people
Speaker 1: are going to mean for individual communities and for and
Speaker 1: for our politics. We didn't think at all about that perfectly,
Speaker 1: and it's certainly not the big migration flows that we've
Speaker 1: all seen in our countries. I mean, why is the
Speaker 1: UK leaving the EU? And immigration has been one of
Speaker 1: the big reasons, and it's been a fear in in
Speaker 1: the US too. It's a little hard for me because
Speaker 1: I'm an immigrant to uh there's a lot of them about. Yeah,
Speaker 1: a lot of us are here and love this country
Speaker 1: and have made it a home and wanted to do well.
Speaker 1: So it's a little hard, you know. And I mean
Speaker 1: the immigrants I see who are frankly taking care of
Speaker 1: my lawn and cleaning my house. They're here and they're
Speaker 1: working hard, and they're doing a lot of things that
Speaker 1: many Americans really have no interest in doing. So I
Speaker 1: welcome that they're here, they're working hard, and I think
Speaker 1: the US has to be a little more open to this.
Speaker 1: With that said, I guess a lot of people feel
Speaker 1: jobs are being taken away. I'm not quite sure where
Speaker 1: the jobs that have kept the middle class going, you know,
Speaker 1: manufacturing services, that a whole lot of that is being
Speaker 1: taken away by immigrants coming from Central America. I don't
Speaker 1: get that sense. So At times, it's hard for me
Speaker 1: to puzzle where this fear has come from. And sometimes
Speaker 1: I feel like it's an overly manufactured fear on the
Speaker 1: political classes on President Trump, that it's not really a
Speaker 1: threat now. At the same time, we also have, because
Speaker 1: of his announcements and policies, this effort of more to
Speaker 1: come to the US the families get here before the
Speaker 1: borders completely shut down. So we've kind of created this
Speaker 1: conundrum for ourselves. And as you pointed out in the beginning,
Speaker 1: by some of the other policies, we've made it more
Speaker 1: difficult for these countries to thrive to grow, you know,
Speaker 1: threatening to leave NAFTA. So of course that's going to
Speaker 1: instead of ize more to come to the United States
Speaker 1: for a better life. So I think there needs to
Speaker 1: be a little bit deeper thinking of all the inner
Speaker 1: linkages of the policies in this administration. Well, it's interesting
Speaker 1: because we have One thing we heard about in this
Speaker 1: conference is some of the history of the Britain was negotiations,
Speaker 1: and it was this kind of cutthroat battle between the
Speaker 1: American representative Harry Dexter White and the British representative John
Speaker 1: Maynard Keynes. And there's plenty of books and and the
Speaker 1: stories about their competition, but it was all about us,
Speaker 1: about the US installing itself at the center of these
Speaker 1: institutions and the center of the new system with everything
Speaker 1: revolving around the dollar. And again, what strikes you as
Speaker 1: a difference now is that's in a lot of the
Speaker 1: conversations we have is about the absence of US leadership.
Speaker 1: You have institutions that were kind of established to give
Speaker 1: the US the ultimate decision making, the ultimate veto. Power
Speaker 1: used to sit there with your veto in the IMF.
Speaker 1: I don't think you used it very much, but people
Speaker 1: cared a lot about what you believe because you was
Speaker 1: the US. Um Do you think China is going to
Speaker 1: fill that vacuum of sort of international economic leadership? Apparently
Speaker 1: the they're very interested in this history about Breton Woods.
Speaker 1: They've been. We heard that the history of the negotiations
Speaker 1: they've been. They sold more copies in China of this
Speaker 1: American academics book than they have in the US. You know,
Speaker 1: that's very interesting, Stephanie, because in my experience, the Chinese
Speaker 1: want to be part of that, They want to be
Speaker 1: at the center of the system. They want to have
Speaker 1: a clear voice and the decision making in the system.
Speaker 1: But they don't really want to be number one. And
Speaker 1: I think it's because they recognize they're really not at
Speaker 1: the point where they can undertake that type of global leadership.
Speaker 1: Do they want their currency? Do you want the M
Speaker 1: and B to become the global currency? No, they certainly don't.
Speaker 1: What do they do in their financial sector? They control things,
Speaker 1: They control inflows and outflows, They impose capital controls, they
Speaker 1: lift capital controls. Their monetary policy has zero independence, right,
Speaker 1: it's they're at the behest of the government whether they
Speaker 1: loosen the credit or tighten the credits. So um, I
Speaker 1: think China is nowhere in the position to undertake that
Speaker 1: leadership role in terms of guiding institutions or you know,
Speaker 1: pulling all these country reads together. And it's interesting though
Speaker 1: you do get international collaborations often when, as someone said
Speaker 1: to me, when you have politicians actually looking out of
Speaker 1: looking standing on a window ledge looking down, that's when
Speaker 1: they start to do serious looking down at the abyss.
Speaker 1: But even in our time in the late nineties in
Speaker 1: the U. S. Treasury, there was a kind of healthy
Speaker 1: competition among international leaders to have initiatives and policy proposals
Speaker 1: and then you come back from the summit and you
Speaker 1: say I have one with my proposal for development or
Speaker 1: this and that. I mean, it's amazing that that is
Speaker 1: not where the action is for most politicians. That's not
Speaker 1: going to help them domestically. And that's all that matters
Speaker 1: now is when the next domestic election, Right get the
Speaker 1: leadership of the Conservative Party, when the election in twenty
Speaker 1: right get a bigger majority in the parliament. So well,
Speaker 1: I fear they were surrounded by lots of people doing
Speaker 1: very exciting, innovative financial things. So we shouldn't sound too
Speaker 1: much like sort of middle aged people bemoaning that helped
Speaker 1: terrible world. There's been plenty of good thing LANs. Thank
Speaker 1: you very much. Well, thank you, Stephanie Pleasure. M here
Speaker 1: are Breton Woods. I bumped into another old friend, the
Speaker 1: economist new Or Rubini, who's a professor at m y
Speaker 1: U and head of Rubini Macro Associates. Recently he's been
Speaker 1: a very public critic of cryptocurrencies. Since the conference was
Speaker 1: organized by Bancor, a company heavily involved with cryptocurrencies, I
Speaker 1: wondered whether he was surprised to be invited. You've been
Speaker 1: coming out very strongly against digital currencies recently. Why why
Speaker 1: are you so worried about them? Well, I'm not actually
Speaker 1: worried about them. I think that the term cryptocurrencies is
Speaker 1: a misnomer. For something to be a currency has to
Speaker 1: be an account, a means of payment, stable store of value.
Speaker 1: Um not with this pricing anything in bitcoin or any
Speaker 1: other cryptocurrency. Bitcoin can only five transactions per second. The
Speaker 1: Visa network does twenty five thousand per seconds, and it's
Speaker 1: not the stable store of value because the price can
Speaker 1: go up or down twenty percent in a day. That's
Speaker 1: why even at the blockchain or crypto conferences where I go,
Speaker 1: they don't even accept their bitcoint for paymentality of the
Speaker 1: conference because the profit markin could be wiped out by
Speaker 1: a sudden movement of the price, So no merchant is
Speaker 1: going to be using it. So it's a misnumber. They're
Speaker 1: not really currencies that the bubble does venteen collapse into
Speaker 1: does eighteen. There's been a rally this year, but bitcoin
Speaker 1: is still more than fifty percent below the peak. The
Speaker 1: other top ten or eight percent belo peak, and I
Speaker 1: think there's a little bit of a fad. But in
Speaker 1: these crypto and quote currencies. They are not going anywhere.
Speaker 1: They're useless, and I think there's a bigger, fading blockchain that,
Speaker 1: in my view, is the most over hyped technology uine
Speaker 1: history and no better than the glorified than spreadsheet. But
Speaker 1: that's a different story. We talked last in last week's podcast,
Speaker 1: we actually talked to the French finance Minister, Brunda Lamaire
Speaker 1: about Libra and the extraordinary amount of attention that the
Speaker 1: G seven finance ministers, the G twenty you mentioned, President
Speaker 1: Trump have all been talking about this one proposal by
Speaker 1: one company. Do you think librastor justifies the amount of
Speaker 1: attention it is getting to some extent. First of all,
Speaker 1: again they pretended it's going to be a blockchain tool,
Speaker 1: but it's not. It's going to be fully centralized. So
Speaker 1: this is a gimmick as a way to try to
Speaker 1: avoid the unquote regulation and so on. Secondly, you know
Speaker 1: there are two billion users on Facebook, most of them
Speaker 1: are only mos. Anybody can sign up with fake name.
Speaker 1: I suppose that you sign up and then you can
Speaker 1: take some of these libra from US and send it
Speaker 1: to Panama or any other shore financial center. And again,
Speaker 1: all the rules about anti money laundering or not your customers.
Speaker 1: I've breached that, of course, you know, uh, financial officials
Speaker 1: are worried about it. This is not the little bit
Speaker 1: small cryptoscam. You know, one of the largest company the
Speaker 1: world wants to create essentially a money function without having
Speaker 1: a banking license, without proper anti money laundering, without proper
Speaker 1: not your customer stuff. And they're saying we're not going
Speaker 1: to allow it, rightly so, and it was striking the
Speaker 1: Facebook literature about this. And of course they always say
Speaker 1: they're only going to have a small number of votes
Speaker 1: in this, It's going to be a lot of other
Speaker 1: players if it goes ahead. UM, I share some of
Speaker 1: your skepticism, but it's extraordinary when you look at they're
Speaker 1: what they're claiming about it. They'll say, they say, you
Speaker 1: should be able to it should be just as easy
Speaker 1: to transfer money wherever you are in the world to
Speaker 1: wherever in the world. You shouldn't have any any borders,
Speaker 1: And that does seem an extraordinary thing that you would
Speaker 1: expect to be able to do that without any of
Speaker 1: the normal obstacles to cross border banking or any of
Speaker 1: those things. And I've heard you talk quite a lot
Speaker 1: about what the seeds are for the next global financial
Speaker 1: crisis and how soon that might be coming. I mean, finally,
Speaker 1: if you think about how that might play out and
Speaker 1: those kind of environments, it's really when that happens, it's
Speaker 1: really important to have some kind of global cooperation. Do
Speaker 1: you think we're not going to see that at this time?
Speaker 1: Or we will still have the right kind of collaboration
Speaker 1: between central banks even if governments are more adults with
Speaker 1: one another. Well, if the next crisis occurs because of
Speaker 1: a combination of excessive credit than that and some shocks
Speaker 1: and things like a trade or attack or between US
Speaker 1: and China could be triggering of it, or another old
Speaker 1: shock if us in Iran go to work would be
Speaker 1: the trigger of it. I think that first of all,
Speaker 1: we'll have less cooperation in the past, but also the
Speaker 1: national policies are going to be more constrained compared to
Speaker 1: the past. You know, fiscal policies constrained because now deficit
Speaker 1: debts are higher than before. More of their policies constrained
Speaker 1: because we don't have much headroom. You know, the fathers
Speaker 1: two and fifty business points of rate cuts before they
Speaker 1: go to zero. While in Europe, e c B smb
Speaker 1: Rigs Bank or in Japan the boj are already negative rates.
Speaker 1: They can go a little more negative, but not much more.
Speaker 1: And the ability to backstop and bail out banks, corporates
Speaker 1: or even houshold is constrained for two reasons. One is,
Speaker 1: there is now a political backlash against building out the
Speaker 1: bank as well as treat the city the corporations, so
Speaker 1: I don't think it's going to be as easy. And secondly,
Speaker 1: you know there's this doom look between banks and the
Speaker 1: sovereigns Summings are so indebted that a lot of their
Speaker 1: death is at the hands of the banks, and the
Speaker 1: banks are themselves fragile because of the exposure to the
Speaker 1: sovereign and therefore this doom look between some of the
Speaker 1: banks implies that's going to be very hard to have
Speaker 1: the same backstop of the financial system we got during
Speaker 1: the global financial crisis. So when the stuff is going
Speaker 1: to hit the fan, Unfortunately, compared to ten years ago
Speaker 1: when we had all the policy bulleis, we've is a
Speaker 1: lot of them mount the physical credit backstre bailed out
Speaker 1: this time around is going to constrained becauseine God's going
Speaker 1: to go from the International Motri Fund to the European
Speaker 1: Central Bank. Do you think she can hold together the
Speaker 1: Eurozone through the next recession or potentially crisis the way
Speaker 1: that Mary drug has I think it's an excellent choice.
Speaker 1: She's eminently qualified. A great respect for her, and she,
Speaker 1: like Mary Drugg, is certainly committed to do whatever it
Speaker 1: takes to keep the Eurozone together. But there are things
Speaker 1: that are not under the control of the CB. Say
Speaker 1: suppose that during the next crisis, Italy the output collapses
Speaker 1: as it is already now in a recession. Lefts and
Speaker 1: let's go essentially higher and higher. Italy with the publish
Speaker 1: government is doing policy of nose terity and or reform.
Speaker 1: They're not going to qualify for the European bailout mechanism
Speaker 1: that are the es M, nor for what is called
Speaker 1: the o MT that is the bailout package that the CBS,
Speaker 1: because the condition for the o m T is essentially
Speaker 1: that the country is under effectively a program I m
Speaker 1: F style of program hosterity and the form. And They're
Speaker 1: big problem with Italy is that Greece was easy problem
Speaker 1: to want a billion euro public that and there was
Speaker 1: a troya program two billion euro could back stop both
Speaker 1: Greece and its own creditors. But Italy is too big
Speaker 1: to fail but also too big to be saved. The
Speaker 1: Italian public that there's two point three treat on euros,
Speaker 1: so there is no MF or EU or CP or
Speaker 1: troya program can back stop Italy. So if if something
Speaker 1: were to happen in Italy, either the Italian decide to
Speaker 1: tighten their belts like risk it in the game of
Speaker 1: Chicken in two thousands and fifteen gris blinked, or otherwise
Speaker 1: Italy may jump off the cliff and live the Eurozone,
Speaker 1: and that may provide an existential threat to the Eurozone itself.
Speaker 1: We don't know what's gonna happen, but at some point
Speaker 1: there will be a clash between Italy and not just
Speaker 1: the you, but before even the uth within Italy in
Speaker 1: the markets when the same, so there'll be a sunden
Speaker 1: stop money. It is going to fly out of the banks,
Speaker 1: run on the banks, around on public debt and anything.
Speaker 1: Decide this is what we want or we're going to
Speaker 1: accept the constraints are being in a monetary game with
Speaker 1: a common currency. We don't know what's going to be
Speaker 1: the endgame of that particular drama of that slow motion
Speaker 1: train rack. But we may have a slamotion trainbreck right,
Speaker 1: so we've got to watch a surprise bubbles and Italy
Speaker 1: like a hawk to see what's coming next, and US
Speaker 1: and China and US. Yes, but Italy, that whole in
Speaker 1: the Eurozone that still is there even though there're supposedly
Speaker 1: it's been been fixed. You're quite right that that is
Speaker 1: the key issue that any country that would qualify if
Speaker 1: you have a run, a really existential run on the
Speaker 1: on the currency, or a panic around Italy, it would
Speaker 1: still have to qualify for that support to get. So
Speaker 1: you face exactly the same issue. It's too big to fail,
Speaker 1: but potentially too big to say nobly. Thanks very much.
Speaker 1: It's been pouring rain in Britain woods up in the
Speaker 1: New Hampshire Mountain the last day or so, but I
Speaker 1: think the liquidity but the sun's finally coming out so
Speaker 1: we should get some fresh air. Thank you. Thanks for
Speaker 1: listening to our first season of Stephanomics. We'll be back
Speaker 1: in October, but if you're just discovering our show now,
Speaker 1: you can find past episodes on the Bloomberg Terminal website,
Speaker 1: app or wherever you get your podcast we'd love it
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