1 00:00:00,080 --> 00:00:05,960 Speaker 1: M. This is Mesters in Business with very Results on 2 00:00:06,200 --> 00:00:10,720 Speaker 1: Bloomberg Radio. This week on the podcast, I have another 3 00:00:10,800 --> 00:00:16,160 Speaker 1: extra special guest. Edward Chancellor is a legend amongst financial 4 00:00:16,239 --> 00:00:20,840 Speaker 1: journalists and historians. His book on the History of Speculation 5 00:00:21,079 --> 00:00:26,760 Speaker 1: and Manias and Bubbles Devil Takes the Hindmost is just legendary. 6 00:00:26,800 --> 00:00:30,760 Speaker 1: It is the full history of financial speculation. His latest 7 00:00:30,800 --> 00:00:34,720 Speaker 1: book could not be more timely, The Price of Time, 8 00:00:35,000 --> 00:00:38,320 Speaker 1: The Real Story of Interest. It's all about the history 9 00:00:38,360 --> 00:00:44,440 Speaker 1: of interest rates, money lending, investing, speculation, funded by banks 10 00:00:44,560 --> 00:00:50,000 Speaker 1: and loans and credit. According to Chancellor, interest is the 11 00:00:50,159 --> 00:00:55,240 Speaker 1: single most important feature of finance, both ancient and modern, 12 00:00:55,880 --> 00:01:01,520 Speaker 1: and it's how we allow transactions to take place across time. 13 00:01:02,240 --> 00:01:06,679 Speaker 1: I found this conversation to be fascinating, informative. He is 14 00:01:06,760 --> 00:01:09,920 Speaker 1: a one of a kind and I'm confident you will 15 00:01:09,920 --> 00:01:12,400 Speaker 1: find this to be fascinating also. With no further ado 16 00:01:13,080 --> 00:01:17,600 Speaker 1: my conversation with Edward Chancellor. Let's start with your background 17 00:01:17,840 --> 00:01:21,560 Speaker 1: in academia. So you study history at Trinity College. What 18 00:01:21,840 --> 00:01:26,360 Speaker 1: is a Master of Philosophy in Enlightenment UM and history 19 00:01:26,400 --> 00:01:29,720 Speaker 1: from Oxford? Am I mangling that? In American what we 20 00:01:29,840 --> 00:01:32,880 Speaker 1: called it m phillis is a shorter version of a 21 00:01:32,959 --> 00:01:38,720 Speaker 1: doctorate or de phil. Read a research paper and you know, 22 00:01:38,840 --> 00:01:40,880 Speaker 1: and one had exams at the same time. It was 23 00:01:40,920 --> 00:01:43,680 Speaker 1: originally created as a sort of academic teaching degree, but 24 00:01:43,760 --> 00:01:47,400 Speaker 1: then got somewhat usurped by the PhD. And that was 25 00:01:47,480 --> 00:01:49,920 Speaker 1: where I was going to go. It looks like you 26 00:01:49,960 --> 00:01:52,800 Speaker 1: were setting yourself up for a career as an academic. 27 00:01:53,400 --> 00:01:56,200 Speaker 1: I thought about it, and then I was invited with 28 00:01:56,240 --> 00:01:59,840 Speaker 1: the other graduate students to my history professor's how it's 29 00:02:00,000 --> 00:02:04,440 Speaker 1: the outskirts of Cambridge, and I thought, well, this is 30 00:02:04,520 --> 00:02:09,240 Speaker 1: where this is where the guy who's you know, he's 31 00:02:09,280 --> 00:02:11,959 Speaker 1: got to the top at Oxford, Liz, I'm going to 32 00:02:12,000 --> 00:02:13,640 Speaker 1: go and get a job in the city of London. 33 00:02:14,280 --> 00:02:17,440 Speaker 1: So that's what I did, and I sort of didn't. 34 00:02:18,000 --> 00:02:21,799 Speaker 1: My thinking on leaving you, on leaving academia is that 35 00:02:22,520 --> 00:02:23,920 Speaker 1: if I need to earn a living, I might as 36 00:02:23,919 --> 00:02:26,079 Speaker 1: well make money from money, which is, you know, what 37 00:02:26,120 --> 00:02:30,240 Speaker 1: Aristotle disapproved. So it was a sort of anti Aristotelian 38 00:02:30,320 --> 00:02:33,880 Speaker 1: act of going into the city. That's really interesting. So 39 00:02:34,760 --> 00:02:37,840 Speaker 1: you go into the city of London, and is that 40 00:02:37,960 --> 00:02:40,919 Speaker 1: where you began at Lazard Brothers or part of your career. 41 00:02:40,960 --> 00:02:44,920 Speaker 1: I started at Lazard's no relationship to the US Lazar 42 00:02:45,360 --> 00:02:48,680 Speaker 1: They're all they called it Las Brothers in London, last 43 00:02:48,760 --> 00:02:52,160 Speaker 1: Fare and in Paris and that's out Frere here. So 44 00:02:52,280 --> 00:02:54,840 Speaker 1: they've now all been drawn together. But when I was there, 45 00:02:54,840 --> 00:02:58,000 Speaker 1: there were sort of interconnected shareholdings that were joining the 46 00:02:58,080 --> 00:03:03,480 Speaker 1: different branches together. Uh. I went into what's called corporate finance. 47 00:03:03,639 --> 00:03:05,200 Speaker 1: You know people would see now a sort of m 48 00:03:05,240 --> 00:03:08,720 Speaker 1: and a department in the in London that had to 49 00:03:08,760 --> 00:03:11,959 Speaker 1: be pretty busy time. Well, I was actually in a 50 00:03:12,040 --> 00:03:15,239 Speaker 1: sort of subgroup there which was called corporate Strategy. We 51 00:03:15,360 --> 00:03:19,880 Speaker 1: were sort of doing. Our job was basically to give 52 00:03:19,960 --> 00:03:23,440 Speaker 1: sort of a strategic advice to Lazard clans which would 53 00:03:24,000 --> 00:03:30,200 Speaker 1: generate capital raising, mergers and debt financing for these companies. 54 00:03:30,280 --> 00:03:34,280 Speaker 1: It was sort of self interested advice. But I didn't 55 00:03:34,360 --> 00:03:36,520 Speaker 1: last very long there because I thought I didn't like 56 00:03:36,680 --> 00:03:39,520 Speaker 1: corporate finance as sort of I felt they were sort 57 00:03:39,560 --> 00:03:46,040 Speaker 1: of ruthless, cynical, always looking for a deal. And I 58 00:03:46,080 --> 00:03:47,960 Speaker 1: remember once, you know, one of my colleges says that 59 00:03:49,920 --> 00:03:53,520 Speaker 1: a friend, one of the French Lazard Frere partners was 60 00:03:53,640 --> 00:03:56,600 Speaker 1: asked by a sort of junior how much should we 61 00:03:56,960 --> 00:04:00,560 Speaker 1: tell our plant to bid? And the French partners said 62 00:04:00,600 --> 00:04:06,400 Speaker 1: the price is right, which Earth's our client say. There's 63 00:04:06,400 --> 00:04:09,680 Speaker 1: a lot of cynicism in corporate finance. I didn't find 64 00:04:09,720 --> 00:04:13,800 Speaker 1: it intellectually interesting. You know, you had all those deal 65 00:04:13,880 --> 00:04:17,960 Speaker 1: books you can imagine, and tedious, not not thrilling, And 66 00:04:18,000 --> 00:04:21,600 Speaker 1: I was a sort of grunt level sure, and um 67 00:04:22,400 --> 00:04:24,800 Speaker 1: I came to the point where I thought, well, I'd 68 00:04:24,880 --> 00:04:29,240 Speaker 1: sooner be driving a bus and continuous. So how did 69 00:04:29,320 --> 00:04:33,200 Speaker 1: you transition from Lazard to g MR. It wasn't a 70 00:04:33,360 --> 00:04:37,039 Speaker 1: straight path. I When I was at Lasar's, I heard 71 00:04:37,480 --> 00:04:39,880 Speaker 1: you can't work in finance without people talking about the 72 00:04:39,960 --> 00:04:43,520 Speaker 1: great speculative bubbles of the past. So people we would 73 00:04:43,600 --> 00:04:46,680 Speaker 1: mention the sort of British railway man near the eighteen forties, 74 00:04:46,760 --> 00:04:51,719 Speaker 1: and Tulip Maine and so forth. And I I left 75 00:04:52,440 --> 00:04:54,600 Speaker 1: with no more money than I had when I came in, 76 00:04:55,520 --> 00:04:58,280 Speaker 1: and I decided I would write a history of financial 77 00:04:58,360 --> 00:05:03,280 Speaker 1: speculation of my own bat. I mean, I've read the 78 00:05:03,320 --> 00:05:06,440 Speaker 1: other stuff in your Kindleberger, Braith and that sort of stuff, 79 00:05:06,720 --> 00:05:09,120 Speaker 1: and I still felt there was run to write a 80 00:05:09,200 --> 00:05:12,480 Speaker 1: new book. The space had not been mine to exhaust 81 00:05:12,600 --> 00:05:15,000 Speaker 1: I think. I think Kendleberger is very good, but if 82 00:05:15,040 --> 00:05:18,080 Speaker 1: you're in he's writing a sort of taxonomy of the bubble, 83 00:05:18,240 --> 00:05:21,799 Speaker 1: And as an historian, I wanted to write the narrative 84 00:05:21,880 --> 00:05:24,640 Speaker 1: of the bubble. Now you're probably wearing a Charles McKay's 85 00:05:24,680 --> 00:05:30,680 Speaker 1: extraordinary popular I mean, that's your eighteen forties narrative, and 86 00:05:30,800 --> 00:05:35,480 Speaker 1: it's highly inaccurate, and yeah, it's full of sort of 87 00:05:35,560 --> 00:05:39,200 Speaker 1: ledgen me talks about the black che lip and stories 88 00:05:39,240 --> 00:05:42,960 Speaker 1: of people bite you know, people biting them in with 89 00:05:43,040 --> 00:05:46,160 Speaker 1: the tulip beell. He talks about you know, sailor coming 90 00:05:46,200 --> 00:05:49,680 Speaker 1: along and mistaking a tulip bull for an onion and 91 00:05:49,760 --> 00:05:52,600 Speaker 1: eating in it and it turning out to be a 92 00:05:53,680 --> 00:05:58,120 Speaker 1: you know, a red tulip bulb worth thousands of Amsterdam 93 00:05:58,320 --> 00:06:02,920 Speaker 1: town house. And um, McKay is also from a sort 94 00:06:02,920 --> 00:06:05,359 Speaker 1: of investment perspective. You don't really get a proper picture 95 00:06:05,400 --> 00:06:08,360 Speaker 1: what's going on. Um, So in some ways I was 96 00:06:08,440 --> 00:06:11,880 Speaker 1: sort of writing and then obviously McCary writing here, and 97 00:06:12,000 --> 00:06:15,240 Speaker 1: he covered Mainia, south Sea Bubble and the Sippy bubble, 98 00:06:15,480 --> 00:06:18,280 Speaker 1: so I thought one could write a sort of arc 99 00:06:18,360 --> 00:06:22,600 Speaker 1: of financial speculation up to the current day. And then 100 00:06:22,680 --> 00:06:26,360 Speaker 1: in the course of writing it, the dot com bubble 101 00:06:27,200 --> 00:06:30,480 Speaker 1: started to form. So that made it more pressing and 102 00:06:30,560 --> 00:06:34,640 Speaker 1: in a way more interesting because you could when I 103 00:06:34,760 --> 00:06:37,960 Speaker 1: see it in real time exact but also you could 104 00:06:38,000 --> 00:06:42,640 Speaker 1: see these parallels. So I was writing about the British 105 00:06:43,360 --> 00:06:48,480 Speaker 1: railway Mania. Railways were this revolutionary technology that was going 106 00:06:48,520 --> 00:06:51,240 Speaker 1: to change the world, going to change civilization, the speed 107 00:06:51,360 --> 00:06:54,760 Speaker 1: with which and roughly at the same time, remember Mary 108 00:06:54,839 --> 00:06:58,280 Speaker 1: Meeker at Morgan standing right with the Internet report that 109 00:06:58,400 --> 00:07:01,440 Speaker 1: was being sold in barn some Noble in ninety six, 110 00:07:02,120 --> 00:07:04,960 Speaker 1: and you know I read the book, but also in 111 00:07:05,160 --> 00:07:08,920 Speaker 1: some journalism ninety in the f T saying hey, you know, 112 00:07:09,720 --> 00:07:13,800 Speaker 1: this internet stuff looks a lot like the railway main 113 00:07:13,880 --> 00:07:21,040 Speaker 1: near of and hadn't really started getting going. As a reminder, 114 00:07:21,360 --> 00:07:28,160 Speaker 1: Alan Greenspan's infamous irrational Zuberan speech was late in December. Yeah, 115 00:07:28,280 --> 00:07:30,600 Speaker 1: and it we were really just ramping up for the 116 00:07:30,680 --> 00:07:34,040 Speaker 1: next couple of years. Yes, So the book comes out 117 00:07:34,440 --> 00:07:39,000 Speaker 1: I think June, is that right, correct? That that's fairly 118 00:07:39,080 --> 00:07:42,120 Speaker 1: auspicious time. So it came out with Faris Strauss and 119 00:07:42,240 --> 00:07:45,280 Speaker 1: Cheru here, and I said to Jonathan Classy, the editor, 120 00:07:46,200 --> 00:07:50,720 Speaker 1: you've got to get this out quickly, and FSD, to 121 00:07:50,800 --> 00:07:54,200 Speaker 1: their credit, reduced the publication time from their normal one 122 00:07:54,280 --> 00:07:58,200 Speaker 1: year to six months. You still had, you know, fifteen months. Well, 123 00:07:58,240 --> 00:08:01,880 Speaker 1: let's say June, you had nine months before things really 124 00:08:02,080 --> 00:08:05,119 Speaker 1: topped out. Yeah. Well, as you know, bearish messages often 125 00:08:05,400 --> 00:08:10,080 Speaker 1: type early, even it was it better to have left 126 00:08:10,560 --> 00:08:12,720 Speaker 1: the publication date later? I don't know. I mean you 127 00:08:12,720 --> 00:08:17,440 Speaker 1: remember a bit later. Robert Stiller's Irrational Exuberance came out 128 00:08:17,640 --> 00:08:20,040 Speaker 1: two thousand, right, Yeah, so I was probably a sort 129 00:08:20,040 --> 00:08:23,840 Speaker 1: of eight nine months before. But it's a book. It's 130 00:08:23,920 --> 00:08:26,679 Speaker 1: not you know, you're not picking the top or bottom. 131 00:08:26,720 --> 00:08:31,160 Speaker 1: A book is a multi year process, and it's you know, 132 00:08:31,720 --> 00:08:34,360 Speaker 1: it could have been down thirty six thousand, which came 133 00:08:34,400 --> 00:08:38,040 Speaker 1: out around the same time I I were. The first 134 00:08:38,080 --> 00:08:42,880 Speaker 1: thing I spoke at was a Goldman Sachs asset management conference, 135 00:08:43,320 --> 00:08:47,559 Speaker 1: strange enough, in a place called Carefree Arizona, and the 136 00:08:48,240 --> 00:08:51,280 Speaker 1: thirty six thousand people were there, and I was saying, 137 00:08:51,480 --> 00:08:53,120 Speaker 1: this is a great bubble which is about but this 138 00:08:53,200 --> 00:08:58,120 Speaker 1: would have been in late and I said, you know, 139 00:08:58,400 --> 00:09:02,040 Speaker 1: we're hearing Carefree Arizona. But around the corner is a 140 00:09:02,080 --> 00:09:06,160 Speaker 1: place called Truth or Consequences. And you know, perhaps we 141 00:09:06,240 --> 00:09:09,480 Speaker 1: should really be meeting there. You can imagine you give 142 00:09:09,960 --> 00:09:16,800 Speaker 1: a bearish message at a bullish investment conference and no 143 00:09:17,000 --> 00:09:19,599 Speaker 1: one listen to you, and not a single one of 144 00:09:19,679 --> 00:09:22,720 Speaker 1: the partners or anyone like that thanked me or really 145 00:09:23,120 --> 00:09:24,920 Speaker 1: viewed for the talk. It was. It was just, you know, 146 00:09:25,040 --> 00:09:28,560 Speaker 1: completely I felt completely blank. But actually I'm later met 147 00:09:28,840 --> 00:09:32,400 Speaker 1: one of the diathetic six thousand people, Kevin has I 148 00:09:32,440 --> 00:09:34,679 Speaker 1: met him. He's actually very nice fellow. And he did 149 00:09:35,280 --> 00:09:38,040 Speaker 1: when I met him, let's say in two thousand and ten, 150 00:09:39,000 --> 00:09:43,920 Speaker 1: he acknowledged that they've got things wrong. James Glassman and 151 00:09:44,200 --> 00:09:47,800 Speaker 1: Kevin Hasset has it now not too long ago, just 152 00:09:48,040 --> 00:09:53,520 Speaker 1: before the pre pandemic period. Like Lates, they kind of 153 00:09:53,640 --> 00:09:56,920 Speaker 1: came out when the Alford's crossed thirty six thousand, maybe 154 00:09:56,960 --> 00:10:00,720 Speaker 1: it was one um, they kind of came out and said, see, 155 00:10:00,840 --> 00:10:04,760 Speaker 1: we told you. And it's like, you know, if you 156 00:10:04,840 --> 00:10:07,240 Speaker 1: write a book dow a hundred thousand, well, I guess 157 00:10:07,280 --> 00:10:10,000 Speaker 1: you just got to come back in sixty years say 158 00:10:10,040 --> 00:10:12,920 Speaker 1: I told you so. But twenty three years later, you 159 00:10:12,960 --> 00:10:16,240 Speaker 1: don't get credit for saying you could buy starts right 160 00:10:16,360 --> 00:10:19,040 Speaker 1: here right before they collapse. But the other point is 161 00:10:19,120 --> 00:10:23,360 Speaker 1: that when when people saying, oh well, and I think 162 00:10:23,559 --> 00:10:28,800 Speaker 1: Wolf Street Journal had an editorial, that's how you know 163 00:10:28,880 --> 00:10:30,920 Speaker 1: it's going to be Yeah. But then if you look 164 00:10:30,960 --> 00:10:33,600 Speaker 1: at the valuation the market at the time, the market 165 00:10:33,800 --> 00:10:36,559 Speaker 1: was the US market at the end of last year, 166 00:10:37,000 --> 00:10:38,920 Speaker 1: So probably where on the what we call the shill 167 00:10:38,960 --> 00:10:43,120 Speaker 1: Ape ratio, the cyclically adjusted price Sarnings ratio, which is 168 00:10:43,200 --> 00:10:45,880 Speaker 1: the sort of most reliable long term valuation measure, it 169 00:10:46,000 --> 00:10:48,320 Speaker 1: was at its highest level at the end of last 170 00:10:48,440 --> 00:10:52,640 Speaker 1: year than at any point apart from the last stages 171 00:10:52,720 --> 00:10:56,880 Speaker 1: of the dot com bob, higher than in n UM 172 00:10:57,240 --> 00:11:01,760 Speaker 1: and higher in the nineties from markets expensive um. And 173 00:11:02,040 --> 00:11:04,760 Speaker 1: you know what we also know, these of us who 174 00:11:04,800 --> 00:11:09,600 Speaker 1: worked in investment, is that your future returns inversely related 175 00:11:09,720 --> 00:11:12,679 Speaker 1: to the valuation level. So perhaps every time we get 176 00:11:12,760 --> 00:11:16,920 Speaker 1: to thirty six thousand, you can expect a long period 177 00:11:16,960 --> 00:11:19,719 Speaker 1: of decline. I mean, in the end, inflation will and 178 00:11:19,840 --> 00:11:22,280 Speaker 1: accrued earnings will mean that we'll get to thirty six 179 00:11:22,360 --> 00:11:25,920 Speaker 1: thousand one day on a sustained basis, but just probably 180 00:11:25,960 --> 00:11:29,000 Speaker 1: not the next decade or so. That's interesting. So you 181 00:11:29,120 --> 00:11:32,360 Speaker 1: write the book, it's published, a great acclaim. How did 182 00:11:32,440 --> 00:11:36,559 Speaker 1: you go from that and other writings to GMR. So 183 00:11:38,880 --> 00:11:44,240 Speaker 1: the quant shops, Jeremy Grant and GMO, Rob Arnard, First 184 00:11:44,280 --> 00:11:48,679 Speaker 1: Quadrant and our research affiliates Clive as News a QR, 185 00:11:48,880 --> 00:11:52,360 Speaker 1: a q R. They were in trouble. They were not 186 00:11:52,480 --> 00:11:56,360 Speaker 1: buying into the TMT bubble. They were buying their beloved 187 00:11:56,440 --> 00:11:59,840 Speaker 1: value stocks and nay one was everyone just saying they 188 00:12:00,480 --> 00:12:04,440 Speaker 1: idiotic quantz and that that approach was no longer to work. 189 00:12:04,520 --> 00:12:06,959 Speaker 1: So then they found that they saw this book came 190 00:12:07,000 --> 00:12:10,880 Speaker 1: out saying look the you'll be right eventually, and then 191 00:12:10,920 --> 00:12:13,160 Speaker 1: they looked at the dot com bubble looks a lot 192 00:12:13,280 --> 00:12:17,120 Speaker 1: like these historical bubble. So all of them independently, Jeremy 193 00:12:17,320 --> 00:12:21,000 Speaker 1: rob Cliff read the book and got in touch with me, 194 00:12:22,000 --> 00:12:27,480 Speaker 1: and Jeremy became you know, I became more of a friend, 195 00:12:27,520 --> 00:12:29,120 Speaker 1: but I didn't go straight into g m O. I 196 00:12:30,000 --> 00:12:34,360 Speaker 1: then I was doing journalism for Breaking Views, which was 197 00:12:34,400 --> 00:12:38,120 Speaker 1: the sort of dot com startup f x f T 198 00:12:38,360 --> 00:12:44,160 Speaker 1: people now owned by Reuters, and started doing some and 199 00:12:44,200 --> 00:12:48,640 Speaker 1: then I did some research for Crispin Odu, London hedge 200 00:12:48,679 --> 00:12:53,280 Speaker 1: fund guy, and so Crispin and I were having lunch 201 00:12:53,360 --> 00:12:57,920 Speaker 1: in late two thousand three, Crispin said. We were talking 202 00:12:57,960 --> 00:13:00,559 Speaker 1: about what was going on in the markets and world, 203 00:13:01,320 --> 00:13:05,760 Speaker 1: and Crispin's I said, it's really all about credit. And 204 00:13:05,880 --> 00:13:08,320 Speaker 1: I said, yeah, I agree, And he said, well, why 205 00:13:08,360 --> 00:13:11,839 Speaker 1: didn't I just pay you to write a report and 206 00:13:12,040 --> 00:13:14,839 Speaker 1: to analyze what's going on. So I spent next sort 207 00:13:14,880 --> 00:13:17,079 Speaker 1: of nine months looking at what was going on in 208 00:13:17,120 --> 00:13:19,559 Speaker 1: the US and the UK and the credit boom and 209 00:13:19,640 --> 00:13:24,199 Speaker 1: real estate boom and development of you know of securitized 210 00:13:24,280 --> 00:13:28,760 Speaker 1: lending and sub prime so forth. And then I put 211 00:13:28,920 --> 00:13:31,280 Speaker 1: that out. I said, I did that for Crispin, but 212 00:13:31,320 --> 00:13:34,800 Speaker 1: I also sold it as a report, but not for 213 00:13:34,880 --> 00:13:38,240 Speaker 1: wide distribution, sort of thousand dollars a shot, and that 214 00:13:38,320 --> 00:13:41,120 Speaker 1: went to a sort of a few people. I gave 215 00:13:41,160 --> 00:13:45,520 Speaker 1: a copy to Jeremy as a present, and then I 216 00:13:45,600 --> 00:13:47,679 Speaker 1: was having lunch Jeremy and Boston. I was. I was 217 00:13:47,760 --> 00:13:50,480 Speaker 1: working for Breaking Views in New York and we were 218 00:13:50,679 --> 00:13:53,240 Speaker 1: we were returning to England after copy years. I was 219 00:13:53,280 --> 00:13:57,960 Speaker 1: having lunch Jeremy and the In um summer two thousand seven, 220 00:13:58,040 --> 00:14:00,840 Speaker 1: just after the best terms, hedge funds started blowing up, 221 00:14:01,440 --> 00:14:05,360 Speaker 1: and Jeremy said, well, at least there's enough structural redundancy 222 00:14:05,480 --> 00:14:09,360 Speaker 1: in the banking system, and I said, what the hell 223 00:14:09,520 --> 00:14:13,600 Speaker 1: makes you think that? And what was his response? Well, 224 00:14:13,840 --> 00:14:17,880 Speaker 1: he sort of he thought about it, and then I 225 00:14:18,000 --> 00:14:20,240 Speaker 1: went home. I went we have a house in Cape Cord, 226 00:14:20,280 --> 00:14:22,760 Speaker 1: and I went to Jeremy Cord and said, would you 227 00:14:22,840 --> 00:14:27,120 Speaker 1: like to join the AST allocation team? And it's a 228 00:14:27,200 --> 00:14:31,320 Speaker 1: hard thing to say no to? Why, I said non initially, um, 229 00:14:31,920 --> 00:14:34,720 Speaker 1: and then went back to England. Then he called again 230 00:14:35,720 --> 00:14:38,720 Speaker 1: and you know, because he's investors sometimes say lights throw 231 00:14:38,840 --> 00:14:41,760 Speaker 1: job office around them, very serious. And then he called 232 00:14:41,760 --> 00:14:44,600 Speaker 1: a couple of months later, and then I decided, yeah, 233 00:14:44,880 --> 00:14:48,080 Speaker 1: I would take it. And Jeremy wanted a obviously I've 234 00:14:48,080 --> 00:14:51,800 Speaker 1: done a lot of work on the credit boom, but 235 00:14:51,920 --> 00:14:54,640 Speaker 1: he also wanted sort of and not I said, you know, 236 00:14:54,720 --> 00:14:58,600 Speaker 1: to Jeremy, I'm not a quant and a lot of 237 00:14:58,760 --> 00:15:02,440 Speaker 1: GMO is, so to speak, quanti filled with quants quantza 238 00:15:03,000 --> 00:15:06,400 Speaker 1: and Jeremy said, I'm not a quant either, So he 239 00:15:06,520 --> 00:15:10,840 Speaker 1: wanted a sort of non quantity view input into the 240 00:15:10,880 --> 00:15:17,720 Speaker 1: acid allocation process. And I assume that worked out pretty well. Um, yes, yes, 241 00:15:17,840 --> 00:15:20,920 Speaker 1: and they did. They did well during the financial crisis 242 00:15:22,000 --> 00:15:26,320 Speaker 1: thanks to me that they were well positions. Yeah, they 243 00:15:26,400 --> 00:15:30,160 Speaker 1: had you knew the ecty allocation. I mean, I didn't 244 00:15:30,160 --> 00:15:33,800 Speaker 1: want to blame my own trumpet too much because most 245 00:15:33,840 --> 00:15:38,600 Speaker 1: of the positions were in place. The quality funds, you know, 246 00:15:39,080 --> 00:15:45,440 Speaker 1: which more defensive and less leveraged and low allocation to 247 00:15:46,120 --> 00:15:50,160 Speaker 1: UM a relatively low allotaication to equities, and then the 248 00:15:50,240 --> 00:15:52,400 Speaker 1: hedge funds, you know, sort of long short positions have 249 00:15:52,520 --> 00:15:56,840 Speaker 1: benefited in the financial crisis. My only real contribution that 250 00:15:57,000 --> 00:16:00,400 Speaker 1: year was right at the beginning when I the first 251 00:16:00,440 --> 00:16:04,360 Speaker 1: week I joined GMO, I had written a piece in 252 00:16:04,480 --> 00:16:07,400 Speaker 1: an FT column I had at the time saying, don't 253 00:16:07,440 --> 00:16:11,200 Speaker 1: believe this story that emerging markets can decouple from the 254 00:16:11,240 --> 00:16:16,000 Speaker 1: rest of the world, and UM Jim was still sitting 255 00:16:16,160 --> 00:16:21,680 Speaker 1: on a massive emerging market the position in the asked 256 00:16:21,680 --> 00:16:25,000 Speaker 1: allocation team, and I tried to sort of chip away 257 00:16:26,160 --> 00:16:28,360 Speaker 1: that with Jeremy and not having much success. And then 258 00:16:29,000 --> 00:16:34,000 Speaker 1: a the c ls A Asian Economists called Jim Walker. 259 00:16:34,040 --> 00:16:36,520 Speaker 1: I didn't I ever came across him. He sort of 260 00:16:36,640 --> 00:16:40,480 Speaker 1: gottsman with a sort of voice like a Presbyterian minister. 261 00:16:41,560 --> 00:16:46,000 Speaker 1: He was also on the sort of anti decoupling story, 262 00:16:46,080 --> 00:16:48,800 Speaker 1: and he he was barish on him. And I dragged 263 00:16:48,960 --> 00:16:53,960 Speaker 1: Jeremy to Jim Walker, and he said that this scotsman 264 00:16:54,040 --> 00:16:57,160 Speaker 1: with his gloomy voice was more effective at persuading in 265 00:16:57,280 --> 00:17:01,280 Speaker 1: than I, with my language English drew. And then Jeremy 266 00:17:01,360 --> 00:17:05,919 Speaker 1: went out and sold all the emerging positions several billion dollars, 267 00:17:06,600 --> 00:17:09,880 Speaker 1: and within I didn't know two months, he brought them 268 00:17:10,320 --> 00:17:13,320 Speaker 1: back at half the price. So you earn your keeper, 269 00:17:13,600 --> 00:17:15,760 Speaker 1: I mean only by I think it was Jim Walker 270 00:17:15,800 --> 00:17:19,880 Speaker 1: who did the thing, but at least I got Jim. Yeah, 271 00:17:20,240 --> 00:17:22,040 Speaker 1: and that sort of I suppose I used to say 272 00:17:22,080 --> 00:17:25,280 Speaker 1: that sort of paid my way while I was there. 273 00:17:25,960 --> 00:17:29,879 Speaker 1: Absolutely fascinating. So let's talk about what's with this quote 274 00:17:29,920 --> 00:17:34,320 Speaker 1: that I like from a nineteenth century trader, James Keene. 275 00:17:35,000 --> 00:17:39,520 Speaker 1: All life is speculation. The spirit of speculation is born 276 00:17:39,640 --> 00:17:44,520 Speaker 1: with men. Tell us about that, huh, well, I mean 277 00:17:44,880 --> 00:17:49,560 Speaker 1: the act of speculation is to look out into the future. 278 00:17:49,600 --> 00:17:55,359 Speaker 1: The words speculator is um Latin and was a Roman 279 00:17:56,040 --> 00:17:59,000 Speaker 1: military guard whose job was to look out and see 280 00:17:59,040 --> 00:18:03,600 Speaker 1: whether the speculate on dangers with kind of out of 281 00:18:03,640 --> 00:18:06,879 Speaker 1: the hill um. And particularly when you get into what 282 00:18:07,600 --> 00:18:13,400 Speaker 1: financial markets, a capitalist world, you're always trying to anticipate 283 00:18:14,200 --> 00:18:17,720 Speaker 1: what's going on. Since in that sense you know, even 284 00:18:17,840 --> 00:18:26,040 Speaker 1: people who describe themselves as investors are also necessarily speculators. 285 00:18:26,400 --> 00:18:31,399 Speaker 1: But when we talk about speculation, we often talk about 286 00:18:31,480 --> 00:18:39,400 Speaker 1: sort of unfounded or irrational or dangerous gambling type tendencies. 287 00:18:39,880 --> 00:18:42,240 Speaker 1: So that leads me to the question, what is the 288 00:18:42,400 --> 00:18:48,560 Speaker 1: actual difference between speculation and investing? Clearly they're both a 289 00:18:48,760 --> 00:18:52,080 Speaker 1: gamble on the future. Is it about the amount of 290 00:18:52,320 --> 00:18:57,240 Speaker 1: risk taken and the psychology of the person involved, or 291 00:18:57,359 --> 00:19:00,920 Speaker 1: is it something a little more quantitative? You've read Sweds 292 00:19:01,080 --> 00:19:04,480 Speaker 1: where are all the customers yachts? And you remember there 293 00:19:04,560 --> 00:19:09,399 Speaker 1: he says, the difference between speculation and investment is that 294 00:19:10,359 --> 00:19:16,000 Speaker 1: speculation is an attempt, normally unsuccessful to turn a little 295 00:19:16,000 --> 00:19:19,280 Speaker 1: amount of money into a lot, whereas an investment as 296 00:19:19,280 --> 00:19:22,600 Speaker 1: an attempt normally successful to make sure a lot of 297 00:19:22,640 --> 00:19:26,119 Speaker 1: money doesn't doesn't become a little French wed? Right? Is 298 00:19:26,160 --> 00:19:29,800 Speaker 1: that a fred ready right? So um embedded in that 299 00:19:30,040 --> 00:19:33,280 Speaker 1: is the idea is that the speculator is going to 300 00:19:33,359 --> 00:19:37,200 Speaker 1: be taking more risk and and not concerned with preservation 301 00:19:37,240 --> 00:19:39,520 Speaker 1: of capital all the way an investor might be. Is 302 00:19:39,560 --> 00:19:43,880 Speaker 1: that so the speculator, now called the book devil, take 303 00:19:43,920 --> 00:19:48,320 Speaker 1: the highmost, And that is really reflection of the you know, 304 00:19:48,440 --> 00:19:52,080 Speaker 1: what they call the greater full theory of investment is 305 00:19:52,119 --> 00:19:56,840 Speaker 1: are by a shibu in new coin or a n 306 00:19:56,960 --> 00:20:00,320 Speaker 1: f T and sell it to you Barry when bike, 307 00:20:00,480 --> 00:20:02,840 Speaker 1: because I think Barry is a bigger sucker than I am, 308 00:20:03,480 --> 00:20:05,560 Speaker 1: and that he'll take it off me from a bigger prices. 309 00:20:05,920 --> 00:20:10,200 Speaker 1: That's a sort of Pondsi scheme or pyramid chain letter 310 00:20:10,520 --> 00:20:16,159 Speaker 1: dynamic to a speculative bubble. And the other aspect of 311 00:20:16,440 --> 00:20:23,600 Speaker 1: the speculator is he often gets lured into envisioning how 312 00:20:23,840 --> 00:20:28,119 Speaker 1: the world will be and gets drawn into these new technologies, 313 00:20:28,200 --> 00:20:32,480 Speaker 1: you know, whether it's you know, radios or cars in 314 00:20:32,560 --> 00:20:40,080 Speaker 1: the twenties, or internets, stocks in thees and various types 315 00:20:40,119 --> 00:20:42,200 Speaker 1: of you know, we'll think of all those SPACs and 316 00:20:42,840 --> 00:20:47,240 Speaker 1: rotric vehicles of the last couple of years. And the 317 00:20:47,880 --> 00:20:51,960 Speaker 1: speculator the trouble is that they look into the future 318 00:20:52,760 --> 00:20:57,120 Speaker 1: and they draw they imagine the future is actually much 319 00:20:57,280 --> 00:21:00,200 Speaker 1: closer than it turns out to be. And so you 320 00:21:00,280 --> 00:21:04,320 Speaker 1: could say that there operating with a sort of hyperbolically 321 00:21:04,480 --> 00:21:08,160 Speaker 1: discounting the future, or just say they have two low 322 00:21:08,280 --> 00:21:12,080 Speaker 1: discount rates, so they're drawing everything forward. And even with 323 00:21:12,160 --> 00:21:14,399 Speaker 1: the Internet, which as we know, established and change in 324 00:21:14,480 --> 00:21:18,760 Speaker 1: one's life within very short period of time. Even then, 325 00:21:19,600 --> 00:21:23,360 Speaker 1: you didn't stop the NASDAC coming down by more than cent, 326 00:21:23,960 --> 00:21:28,040 Speaker 1: a lot of these dot com businesses flaming out. But 327 00:21:28,200 --> 00:21:31,639 Speaker 1: by the way everybody talks about the Internet happening so quickly, 328 00:21:32,080 --> 00:21:37,000 Speaker 1: it began in THEES as a way to survive a 329 00:21:37,119 --> 00:21:41,199 Speaker 1: nuclear attack and be able to launch the retaliatory codes 330 00:21:41,600 --> 00:21:46,240 Speaker 1: through DARPA. So it took decades to be commercialized, in 331 00:21:46,359 --> 00:21:51,359 Speaker 1: more decades to become more broadly adopted. So if you 332 00:21:51,400 --> 00:21:55,240 Speaker 1: were an Internet investor in the late eighties or early nineties, 333 00:21:56,640 --> 00:22:00,640 Speaker 1: most of those companies didn't do well. But I didn't 334 00:22:00,720 --> 00:22:03,960 Speaker 1: cite and devil take the homemost was some research from 335 00:22:04,080 --> 00:22:08,520 Speaker 1: a guy I think he was at Bell Labs at 336 00:22:08,560 --> 00:22:13,119 Speaker 1: the time called Andrew Odslico, who is now at University Minnesota, 337 00:22:13,440 --> 00:22:19,240 Speaker 1: and he and a colleague worked out in that the 338 00:22:20,320 --> 00:22:26,600 Speaker 1: projections for Internet traffic growth, that that the likes of 339 00:22:26,760 --> 00:22:30,359 Speaker 1: world Com, the big telecoms company, was saying that the 340 00:22:30,440 --> 00:22:33,399 Speaker 1: Internet traffic growth was doubling every couple of months, and 341 00:22:33,600 --> 00:22:36,680 Speaker 1: Odico found out that actually the rate of growth was 342 00:22:37,480 --> 00:22:39,960 Speaker 1: slower than that. It's still doubling, but I think once 343 00:22:40,000 --> 00:22:43,560 Speaker 1: every six months or so, and the result was getting 344 00:22:44,320 --> 00:22:47,760 Speaker 1: in the mania. People get over fixated on growth, they 345 00:22:47,800 --> 00:22:52,040 Speaker 1: have growth projections, over optimistic growth projections. Then you get 346 00:22:52,080 --> 00:22:57,800 Speaker 1: the over investment, speculative companies raising money the overinvestment. And 347 00:22:57,840 --> 00:23:00,639 Speaker 1: then if you remember, after the dot com bust, you 348 00:23:00,800 --> 00:23:03,760 Speaker 1: had these miles and miles of so called dark fiber 349 00:23:03,840 --> 00:23:09,040 Speaker 1: because you had excess capacity uh in fibotic cable, which 350 00:23:09,119 --> 00:23:13,359 Speaker 1: I mean I saw commonly cited about excess capacity, and 351 00:23:13,480 --> 00:23:15,520 Speaker 1: that ran for several years, a bit like the sort 352 00:23:15,560 --> 00:23:19,240 Speaker 1: of if you think about it, the excess US home 353 00:23:19,320 --> 00:23:22,280 Speaker 1: building during the real estate bubble, which took you know, 354 00:23:23,520 --> 00:23:25,639 Speaker 1: when they're more than I think it really took from 355 00:23:25,720 --> 00:23:29,200 Speaker 1: two thousand and six to two tho twelve before that 356 00:23:30,200 --> 00:23:32,359 Speaker 1: excess build had really just worked his way out of 357 00:23:32,400 --> 00:23:34,800 Speaker 1: the system. And then the hangover from that is we 358 00:23:34,880 --> 00:23:38,240 Speaker 1: were underbuilding houses for the rest of the decade because 359 00:23:38,440 --> 00:23:41,760 Speaker 1: once bit and twice shy and then when suddenly there 360 00:23:41,840 --> 00:23:46,240 Speaker 1: was demand for houses, there's no inventory. There's a shortage. Yeah, 361 00:23:46,320 --> 00:23:49,040 Speaker 1: that's I mean, given now what we're going to get 362 00:23:49,080 --> 00:23:52,879 Speaker 1: around to later now that thirst year mortgage rate to 363 00:23:52,920 --> 00:23:56,400 Speaker 1: stubble I think the Americans are going to be grateful 364 00:23:56,440 --> 00:23:59,840 Speaker 1: that they didn't do that much building in the last 365 00:24:00,240 --> 00:24:03,240 Speaker 1: few years, because otherwise we would really have a replay 366 00:24:03,280 --> 00:24:06,320 Speaker 1: of two thousand seven eight. That's really quite fascinating. So 367 00:24:06,400 --> 00:24:11,040 Speaker 1: I mentioned earlier the book comes out in June, pretty 368 00:24:11,119 --> 00:24:15,719 Speaker 1: auspicious timing, but it raises the question, with the publication 369 00:24:15,800 --> 00:24:19,200 Speaker 1: of your new book, how often does history repeat itself? 370 00:24:19,320 --> 00:24:24,200 Speaker 1: Are all of these bubbles and manias and collapses? Is 371 00:24:24,320 --> 00:24:29,760 Speaker 1: it pretty much the same playbook that just substitute internet 372 00:24:30,119 --> 00:24:36,400 Speaker 1: for railroads, substitute houses for telegrams? Do do all these 373 00:24:36,440 --> 00:24:40,359 Speaker 1: things just follow the same sort of cycle just forward 374 00:24:40,400 --> 00:24:44,600 Speaker 1: in history? Well, Jim Grant has a comment that, as 375 00:24:44,640 --> 00:24:49,280 Speaker 1: he says, well with stepping on the same rake. And 376 00:24:49,400 --> 00:24:52,960 Speaker 1: I have a friend of mine financial structures. It's in 377 00:24:53,080 --> 00:24:56,880 Speaker 1: Edinburgh called Russell Napier runs. Oh, I know the name 378 00:24:56,960 --> 00:24:59,840 Speaker 1: he wrote a book on. He wrote a book called 379 00:24:59,880 --> 00:25:02,440 Speaker 1: The Anatomy Are the Bear That's right, the excellent book. 380 00:25:03,000 --> 00:25:05,920 Speaker 1: He has a financial library in Edinburgh called the Library 381 00:25:05,960 --> 00:25:09,640 Speaker 1: of Mistakes. And the idea is that you can learn 382 00:25:09,680 --> 00:25:12,600 Speaker 1: everything you need to know in finance for an investment 383 00:25:12,680 --> 00:25:15,760 Speaker 1: career by actually working out the mistakes people have made, 384 00:25:15,920 --> 00:25:17,840 Speaker 1: and that does seem to be yes, a sort of 385 00:25:18,119 --> 00:25:22,960 Speaker 1: similar pattern, although I should add that you know, it 386 00:25:23,000 --> 00:25:26,320 Speaker 1: certainly doesn't help you on the short side betting against 387 00:25:26,359 --> 00:25:29,840 Speaker 1: spective bubbles. When I was at GMO, we colleague and 388 00:25:30,440 --> 00:25:34,680 Speaker 1: I ran a sort of quantitative analysis of aspective bubbles 389 00:25:34,720 --> 00:25:38,600 Speaker 1: and we we crunch released my assistant did ten thousand 390 00:25:38,760 --> 00:25:43,160 Speaker 1: years of data of various commodity markets and real estate 391 00:25:43,240 --> 00:25:47,320 Speaker 1: markets and stock markets around the world. And what we 392 00:25:47,480 --> 00:25:54,360 Speaker 1: found is that bubbles are indeterminate in length and they 393 00:25:54,640 --> 00:25:59,800 Speaker 1: also intertermined as to how high they can go. So 394 00:26:00,000 --> 00:26:02,160 Speaker 1: if you don't know how long the bubble is going 395 00:26:02,200 --> 00:26:06,000 Speaker 1: to last and how high it's going to to rise, 396 00:26:07,040 --> 00:26:09,800 Speaker 1: then you might be able to identify a bubble. And 397 00:26:09,920 --> 00:26:13,160 Speaker 1: I don't think that's frankly that hard, and I think 398 00:26:13,200 --> 00:26:15,680 Speaker 1: that's useful. If you're just you know, a long only investor, 399 00:26:15,760 --> 00:26:17,879 Speaker 1: you can stay out of the bubble market. But the 400 00:26:18,000 --> 00:26:21,440 Speaker 1: timing on the downside is really difficult. Yeah, and think 401 00:26:21,480 --> 00:26:23,440 Speaker 1: what we've been you know, look at the last decade 402 00:26:23,520 --> 00:26:27,720 Speaker 1: we had. You know, people were talking about dot com 403 00:26:28,000 --> 00:26:33,000 Speaker 1: two point zero back in if remember and you know, 404 00:26:33,320 --> 00:26:35,639 Speaker 1: I actually one of my last projects that gm A 405 00:26:35,800 --> 00:26:38,320 Speaker 1: was to do a sort of to look at what 406 00:26:38,520 --> 00:26:42,240 Speaker 1: was going on from economic sentiment perspective, looking at various 407 00:26:42,280 --> 00:26:46,639 Speaker 1: different measures in a bull bear ratio, amount of margin, 408 00:26:46,760 --> 00:26:49,080 Speaker 1: loans and the system. I can't quite remember what they were, 409 00:26:49,520 --> 00:26:51,280 Speaker 1: but only I put them all together and it looked, 410 00:26:51,400 --> 00:26:55,400 Speaker 1: you know, that speculative sentiment was very inflated in twenty 411 00:26:56,720 --> 00:26:59,679 Speaker 1: and actually I presented this to Jimmy Clans and Jeremy 412 00:26:59,720 --> 00:27:01,760 Speaker 1: got up had said, I think the boom mark it 413 00:27:01,840 --> 00:27:04,520 Speaker 1: has lot good to run. And the other day he 414 00:27:04,640 --> 00:27:07,800 Speaker 1: was tweaking my names by saying, you know, reminding me 415 00:27:08,000 --> 00:27:11,040 Speaker 1: that that I had been barished and that he'd been 416 00:27:11,080 --> 00:27:15,359 Speaker 1: a relatively bullish But Katie knew there was another seven 417 00:27:15,520 --> 00:27:19,720 Speaker 1: years and it got pretty um. What happened in was 418 00:27:20,160 --> 00:27:24,560 Speaker 1: nothing like you know, it was off. I mean, by 419 00:27:24,600 --> 00:27:27,399 Speaker 1: the way I have. My partner, Michael Batnick wrote a 420 00:27:27,480 --> 00:27:33,119 Speaker 1: book that your colleague Russell Napier would really appreciate, called 421 00:27:33,440 --> 00:27:38,639 Speaker 1: Big Mistakes, The Best Investor and Their Worst Investments, And 422 00:27:38,760 --> 00:27:41,879 Speaker 1: he went through the history of George Soros and Warren 423 00:27:41,960 --> 00:27:46,840 Speaker 1: Buffett and all these you know, legendary investors and their 424 00:27:46,960 --> 00:27:49,600 Speaker 1: giant mistakes and what they learned from them. I'll send 425 00:27:49,600 --> 00:27:52,399 Speaker 1: you guys a copy. You'll appreciate it. And that definitely 426 00:27:52,600 --> 00:27:55,280 Speaker 1: belongs to the Library of Mistakes. Yes, for sure, it's 427 00:27:55,359 --> 00:27:59,920 Speaker 1: literally exactly what he was discussing. So again we see 428 00:28:00,119 --> 00:28:03,600 Speaker 1: auspicious timing on your part to put out a book 429 00:28:03,640 --> 00:28:08,240 Speaker 1: on interest rates in the middle of the most rapid 430 00:28:08,680 --> 00:28:12,720 Speaker 1: increase in inflation since you know, the nineteen eighties, the 431 00:28:13,040 --> 00:28:17,080 Speaker 1: fastest rising set of rates from central banks. I think 432 00:28:17,119 --> 00:28:19,440 Speaker 1: you could say, ever from zero to three and a 433 00:28:19,480 --> 00:28:21,560 Speaker 1: half on the way to four or four and a 434 00:28:21,600 --> 00:28:25,560 Speaker 1: half percent. Your timing is quite auspicious. When did you 435 00:28:25,640 --> 00:28:28,840 Speaker 1: first start thinking about maybe it's time to write a 436 00:28:28,880 --> 00:28:32,840 Speaker 1: book about interest rates? Well, quite a long time ago, 437 00:28:33,119 --> 00:28:36,520 Speaker 1: I think I. I got interested in the whole subject 438 00:28:36,560 --> 00:28:39,320 Speaker 1: about a decade ago, and I felt when I did 439 00:28:39,400 --> 00:28:43,120 Speaker 1: this work on the credit boom before the financial crisis, 440 00:28:43,520 --> 00:28:46,960 Speaker 1: I belonged to the school the thought that when the 441 00:28:47,000 --> 00:28:50,040 Speaker 1: Greenspan Fed took us FED funds right down to one 442 00:28:50,080 --> 00:28:53,800 Speaker 1: per cent after the dot com bust, that ignited in 443 00:28:53,920 --> 00:28:57,800 Speaker 1: my mind the Rita's tate bubble obviously a giant factor. 444 00:28:57,880 --> 00:29:00,680 Speaker 1: Has anyone actually made a case to say no, no 445 00:29:00,880 --> 00:29:04,840 Speaker 1: keeping rates under two percent for three years and under 446 00:29:04,920 --> 00:29:07,920 Speaker 1: one percent for a year had no impact on real estate. 447 00:29:08,040 --> 00:29:10,800 Speaker 1: I mean it's not the only factor, but it's pretty 448 00:29:10,840 --> 00:29:13,320 Speaker 1: hard to say, oh no, not relevant. Whether you know 449 00:29:13,400 --> 00:29:18,960 Speaker 1: the FED under Nobel Lauriate Banankey, don't we all know 450 00:29:19,120 --> 00:29:22,520 Speaker 1: that's nonsense? They yeah. I mean I think I write 451 00:29:22,520 --> 00:29:27,080 Speaker 1: about that in this new book, where money flows off 452 00:29:27,120 --> 00:29:30,520 Speaker 1: to the emerging markets when dollar rates are low, and 453 00:29:30,640 --> 00:29:34,600 Speaker 1: then it comes back because these guys they're not saving, 454 00:29:35,000 --> 00:29:40,120 Speaker 1: they're actually just buying long dollars and they're buying them 455 00:29:40,160 --> 00:29:43,760 Speaker 1: to manipulate their currency in China most of all. Um. 456 00:29:43,960 --> 00:29:46,360 Speaker 1: But then you know, I suppose difference between Banankee me 457 00:29:46,520 --> 00:29:50,040 Speaker 1: is that blanc has a sort of abstract view of economics. 458 00:29:50,080 --> 00:29:52,160 Speaker 1: Was I trying to look at what's going on in 459 00:29:52,280 --> 00:29:56,360 Speaker 1: the real financial world. Although to be fair for an academic, 460 00:29:56,560 --> 00:30:00,160 Speaker 1: he actually got to put his theories into practice, is 461 00:30:00,240 --> 00:30:05,200 Speaker 1: fed yea yes, And that's um problematum. I mean you 462 00:30:06,360 --> 00:30:12,040 Speaker 1: you remember it was in Milton Friedman's birthday and right 463 00:30:12,440 --> 00:30:16,880 Speaker 1: when it pass two Freedman's ninety birthday party in the FED, 464 00:30:17,680 --> 00:30:22,480 Speaker 1: Bananci says, you know, facetiously to Freedman, apologizing for the 465 00:30:22,560 --> 00:30:26,360 Speaker 1: Great Depression on behalf of the Federal Reserve and ensuring 466 00:30:26,440 --> 00:30:28,840 Speaker 1: that it won't happen again. And then, you know, five 467 00:30:28,920 --> 00:30:32,800 Speaker 1: years later we get melt down. You know that Bananchi 468 00:30:32,840 --> 00:30:36,800 Speaker 1: in the Fed had, in particular Bananche you know, had 469 00:30:37,000 --> 00:30:40,920 Speaker 1: no inkling of what was about to happen. And then 470 00:30:41,280 --> 00:30:45,600 Speaker 1: we didn't get a great depression, but we then got 471 00:30:45,760 --> 00:30:51,080 Speaker 1: into this era of extremely low interest rates and of 472 00:30:51,320 --> 00:30:56,120 Speaker 1: quantitative easing, and that was associated with a period of 473 00:30:56,280 --> 00:31:01,400 Speaker 1: what they call secular stagnation or extremely low growth, and 474 00:31:01,520 --> 00:31:05,080 Speaker 1: we never really got out of that until the pandemic. 475 00:31:05,520 --> 00:31:07,440 Speaker 1: Well we didn't get out. I mean, the pandemic was 476 00:31:07,560 --> 00:31:10,680 Speaker 1: just the last gasp when they went back to quantity 477 00:31:10,680 --> 00:31:15,120 Speaker 1: of easing and they really became into the House of Lords. 478 00:31:15,240 --> 00:31:19,040 Speaker 1: British House of Lords rate a report on quantity easing lastly, 479 00:31:19,080 --> 00:31:25,960 Speaker 1: which they called a dangerous addiction, and Bnanche introduced the 480 00:31:26,960 --> 00:31:32,800 Speaker 1: this financial dope and I went off to work for 481 00:31:32,960 --> 00:31:35,840 Speaker 1: hedge funds or whatever he does nowadays. He's a consultant. 482 00:31:36,000 --> 00:31:40,400 Speaker 1: He's a consultant, right, they consult So let's bring us 483 00:31:40,440 --> 00:31:43,040 Speaker 1: back to the book, which is really quite fascinating. You 484 00:31:43,200 --> 00:31:46,680 Speaker 1: start in Babylon with the origins of interest, and you 485 00:31:46,760 --> 00:31:50,360 Speaker 1: go straight through the most recent boom and bust. How 486 00:31:50,520 --> 00:31:56,600 Speaker 1: did the concept of paying interest on money begin? Well, 487 00:31:57,320 --> 00:32:00,920 Speaker 1: what we know is an interest is a very old 488 00:32:00,960 --> 00:32:05,800 Speaker 1: phenomenon five millennia at least before Babela. I mean, well, 489 00:32:06,560 --> 00:32:10,440 Speaker 1: if you look at the words in in the ancient languages, 490 00:32:10,560 --> 00:32:16,280 Speaker 1: including Assyrian and Greek and Latin and Egyptian, all the 491 00:32:16,400 --> 00:32:22,200 Speaker 1: words for for interest a link to calves and lambs 492 00:32:22,360 --> 00:32:27,960 Speaker 1: and kid goats. So there is this sense that interest 493 00:32:28,800 --> 00:32:33,560 Speaker 1: must have existed in prehistoric societies. And the idea was, 494 00:32:33,680 --> 00:32:39,040 Speaker 1: you know, I'll lend you my cow, but a year later, 495 00:32:39,120 --> 00:32:40,920 Speaker 1: I want the cow and a calf back, and you 496 00:32:41,040 --> 00:32:45,280 Speaker 1: can keep if it has you can keep the milk. 497 00:32:45,360 --> 00:32:47,760 Speaker 1: Now you can keep the extra cars. And actually, as 498 00:32:47,800 --> 00:32:49,959 Speaker 1: I sit in the book, you know the Americans were 499 00:32:50,040 --> 00:32:53,560 Speaker 1: still in at the beginning of the twentieth century. They 500 00:32:53,960 --> 00:32:57,040 Speaker 1: out in the Midwest or whatever. People were still lending 501 00:32:57,760 --> 00:33:03,040 Speaker 1: livestock and demanding interest payments in the offspring of the livestock. 502 00:33:03,600 --> 00:33:06,000 Speaker 1: That I think is the origin. And then, as I say, 503 00:33:06,320 --> 00:33:11,560 Speaker 1: in ancient Mesopotamia, these which had large cities and trading 504 00:33:11,720 --> 00:33:14,720 Speaker 1: quite in a way, quite capitalistic and you can see 505 00:33:14,840 --> 00:33:19,040 Speaker 1: that interest was used on loans, contains a sort of 506 00:33:19,120 --> 00:33:23,200 Speaker 1: risk factor that people were you were using borrowing and 507 00:33:23,320 --> 00:33:29,320 Speaker 1: paying interest to finance shipping ventures, to finance local local 508 00:33:29,440 --> 00:33:33,720 Speaker 1: businesses and trade crafts, and also you know, for for 509 00:33:33,960 --> 00:33:37,760 Speaker 1: financing the purchase of houses. So you see that in 510 00:33:37,840 --> 00:33:39,880 Speaker 1: this sort of proto what you might call a proto 511 00:33:39,960 --> 00:33:45,920 Speaker 1: capitalistic society, interest is serving a number of different important functions. 512 00:33:46,400 --> 00:33:50,320 Speaker 1: And my my reason for going back to that point 513 00:33:51,160 --> 00:33:55,720 Speaker 1: is to is to try and underline how how important 514 00:33:56,920 --> 00:34:01,160 Speaker 1: the function of interest is um if the the Yale 515 00:34:01,280 --> 00:34:05,360 Speaker 1: historian William Gertzman says that the invention of interest is 516 00:34:05,440 --> 00:34:09,560 Speaker 1: the most important finds invention in the history of finance 517 00:34:09,840 --> 00:34:16,240 Speaker 1: because it allows people to transact across time. And my thought, 518 00:34:16,400 --> 00:34:18,279 Speaker 1: you know, when I was doing this work, is we're 519 00:34:18,280 --> 00:34:24,120 Speaker 1: at a moment of zero interest and of negative interest 520 00:34:24,280 --> 00:34:29,120 Speaker 1: in many countries, and that the zero negative interests with 521 00:34:29,239 --> 00:34:32,799 Speaker 1: the sort of second most important development in the history 522 00:34:32,800 --> 00:34:37,680 Speaker 1: of finance and possibly the most to my mind, worrying development. 523 00:34:38,719 --> 00:34:41,000 Speaker 1: We're going to talk more about negative interest rates in 524 00:34:41,080 --> 00:34:45,239 Speaker 1: a moment, but I have to reference the title of 525 00:34:45,280 --> 00:34:49,800 Speaker 1: the book The Price of Time. Interest and interest rates 526 00:34:50,320 --> 00:34:54,800 Speaker 1: are all about being able to engage in commercial transactions 527 00:34:55,600 --> 00:35:01,520 Speaker 1: over time. Essentially, that's what interest rates allow. So time 528 00:35:01,840 --> 00:35:06,640 Speaker 1: has Ben Franklin says, is money. Time is valuable. Time 529 00:35:06,760 --> 00:35:14,479 Speaker 1: is our most precious possession, and we must use time well. 530 00:35:15,400 --> 00:35:19,719 Speaker 1: All our economic actions are taking a place across time, 531 00:35:20,200 --> 00:35:23,600 Speaker 1: and we need to sort of coordinate those actions. How 532 00:35:23,719 --> 00:35:26,560 Speaker 1: much are we going to save, how much we're going 533 00:35:26,640 --> 00:35:29,680 Speaker 1: to invest, what type of investments we're going to make, 534 00:35:30,040 --> 00:35:34,120 Speaker 1: what valuations will be placed upon the house that we're purchasing, 535 00:35:34,800 --> 00:35:37,000 Speaker 1: whether you should we invest in this country, how much 536 00:35:37,080 --> 00:35:41,000 Speaker 1: risk should we take? All all these factors have an 537 00:35:41,080 --> 00:35:47,040 Speaker 1: interest rate embedded in them, and um. The American economist 538 00:35:47,760 --> 00:35:55,439 Speaker 1: Irving Fisher says that interest is an omnipresent phenomenon. And really, 539 00:35:55,560 --> 00:35:58,520 Speaker 1: what I'm trying to do with this book is to 540 00:35:58,760 --> 00:36:06,320 Speaker 1: take this oldest of financial institutions, this omnipresent phenomenon that 541 00:36:06,480 --> 00:36:11,799 Speaker 1: to my mind, had been neglected and by modern economists 542 00:36:11,800 --> 00:36:14,239 Speaker 1: who who really just see interest as a lever to 543 00:36:14,360 --> 00:36:21,040 Speaker 1: control inflation and ignore these other functions. And thrust of 544 00:36:21,080 --> 00:36:23,520 Speaker 1: the argument of the second half of the book is 545 00:36:24,600 --> 00:36:28,080 Speaker 1: that the when the central banks focused only on using 546 00:36:28,120 --> 00:36:33,279 Speaker 1: the interest to prevent the price level from falling after 547 00:36:33,480 --> 00:36:38,160 Speaker 1: the global financial crisis. They neglected the impact the saving 548 00:36:38,280 --> 00:36:43,719 Speaker 1: has on valuations, on the allocation of capital, on savings 549 00:36:43,840 --> 00:36:47,640 Speaker 1: and pensions, on the amount of risk taking, and on 550 00:36:48,280 --> 00:36:52,600 Speaker 1: capital flows and the direction of capital flows. And in 551 00:36:52,719 --> 00:36:56,239 Speaker 1: each of these other areas we see any chronicle in 552 00:36:56,280 --> 00:37:02,759 Speaker 1: the book problems building up. So if you take, for instance, valuation, 553 00:37:03,400 --> 00:37:08,000 Speaker 1: we just discuss you discussed earlier how valuation of the 554 00:37:08,080 --> 00:37:10,040 Speaker 1: U S stock market was very high last year. But 555 00:37:10,440 --> 00:37:14,439 Speaker 1: aggregate household wealth that the Fed actually gathers the data 556 00:37:15,880 --> 00:37:20,000 Speaker 1: six times GDP against an average of for in a 557 00:37:20,000 --> 00:37:23,200 Speaker 1: half times GDP. And what you can see if you 558 00:37:23,320 --> 00:37:25,239 Speaker 1: chart them, and I showed chart in the book, is 559 00:37:25,320 --> 00:37:27,879 Speaker 1: I share the household wealth with the Fed funds rate, 560 00:37:28,280 --> 00:37:31,040 Speaker 1: and each time the Fed funds rate goes down, the 561 00:37:31,160 --> 00:37:33,879 Speaker 1: household wealth sort of pushes higher and higher and higher. 562 00:37:34,400 --> 00:37:39,359 Speaker 1: So that's obviously a source of instability because then when 563 00:37:39,440 --> 00:37:42,919 Speaker 1: you raise rates, hey press to the markets come down 564 00:37:43,680 --> 00:37:49,000 Speaker 1: in tandem, where the bond stocks, everything bubble gives way 565 00:37:49,040 --> 00:37:53,560 Speaker 1: to the everything bust. So clearly, the cover of the 566 00:37:53,640 --> 00:37:59,480 Speaker 1: book has an hour glass showing time slowly seeping away. 567 00:38:00,120 --> 00:38:05,400 Speaker 1: How important is time to those of us working in 568 00:38:05,640 --> 00:38:10,759 Speaker 1: finance and engaging in transactions where capital is put it 569 00:38:11,080 --> 00:38:14,480 Speaker 1: at risk. Well, I mean it's vitally import First, I'd 570 00:38:14,520 --> 00:38:19,720 Speaker 1: say time is important to all human beings. And what's 571 00:38:19,760 --> 00:38:25,360 Speaker 1: called time preference, people's tendency to prefer the present to 572 00:38:25,480 --> 00:38:28,760 Speaker 1: the future, to disc what we call discount the future. 573 00:38:29,400 --> 00:38:32,960 Speaker 1: It appears to be a universal phenomenon, just people. Some 574 00:38:33,120 --> 00:38:36,680 Speaker 1: people are. Another way to take talking about is impatience. 575 00:38:37,239 --> 00:38:41,200 Speaker 1: Some people are more impatient than others. That say, everyone 576 00:38:41,360 --> 00:38:48,239 Speaker 1: has their own um internal interest or discount rate in finance. 577 00:38:48,360 --> 00:38:54,320 Speaker 1: All finance is about transacting across times, load lending, investing, 578 00:38:54,400 --> 00:38:59,880 Speaker 1: and so forth. It's it's absolutely essential. There's no active 579 00:39:00,200 --> 00:39:03,640 Speaker 1: in finance that doesn't involve an interest rate. And I mean, 580 00:39:03,680 --> 00:39:06,520 Speaker 1: I cite a description of you know, the failure of 581 00:39:06,640 --> 00:39:10,240 Speaker 1: the Soviet economy. Even if you have a Soviet planned economy, 582 00:39:10,960 --> 00:39:15,319 Speaker 1: you need to allocate resources across time, and if you're 583 00:39:15,360 --> 00:39:20,240 Speaker 1: not guided by the interest rates, which the Soviets weren't, 584 00:39:20,560 --> 00:39:24,120 Speaker 1: you're going to have these misallocations of capital that eventually 585 00:39:24,200 --> 00:39:26,800 Speaker 1: clog up the system. So let's talk about that. I 586 00:39:26,880 --> 00:39:30,520 Speaker 1: love this quote. Interest rates are the most important signal 587 00:39:30,719 --> 00:39:35,560 Speaker 1: in a market based economy and the universal price affecting 588 00:39:35,600 --> 00:39:39,799 Speaker 1: all others. You're suggesting because that signal was missing from 589 00:39:39,840 --> 00:39:44,160 Speaker 1: the Soviet economy, it eventually crashed and burnt, Yeah, among 590 00:39:44,239 --> 00:39:47,840 Speaker 1: other reasons. What I'm saying. What I'm saying is that 591 00:39:48,200 --> 00:39:51,839 Speaker 1: every suscept because it's innate human, because you know, all 592 00:39:52,000 --> 00:39:55,560 Speaker 1: humans are constrained by their mortality. All actions take place, 593 00:39:55,800 --> 00:39:58,880 Speaker 1: economic actions take place across time that even if you 594 00:39:59,040 --> 00:40:03,319 Speaker 1: didn't have a capitalist or market economy, something would need 595 00:40:03,400 --> 00:40:07,040 Speaker 1: to rational to direct your resources or direct your behavior 596 00:40:07,080 --> 00:40:10,520 Speaker 1: across time. In a way, it's more explicit in a 597 00:40:10,600 --> 00:40:14,400 Speaker 1: capitalist economy because you're paying a certain rate of interest 598 00:40:14,520 --> 00:40:18,640 Speaker 1: on your loan, or you have a certain required hurdle 599 00:40:18,760 --> 00:40:22,840 Speaker 1: rate on your investment, or you're applying a certain discount 600 00:40:23,239 --> 00:40:26,880 Speaker 1: in the valuation of an asset. So in that sense, 601 00:40:27,120 --> 00:40:29,640 Speaker 1: you know the time value of money. It is this 602 00:40:29,760 --> 00:40:33,360 Speaker 1: sort of first thing one learns in finance. So prior 603 00:40:33,480 --> 00:40:39,000 Speaker 1: to the financial crisis, I never thought about zero interest rates, 604 00:40:39,080 --> 00:40:42,759 Speaker 1: and I certainly never thought about negative interest rates. That 605 00:40:43,200 --> 00:40:47,960 Speaker 1: the decade that followed that seem to have create all 606 00:40:48,040 --> 00:40:51,680 Speaker 1: of these negative rates. How do they affect economies? How 607 00:40:51,719 --> 00:40:54,520 Speaker 1: do they affect trade, and how do they affect the consumer? 608 00:40:55,120 --> 00:40:58,800 Speaker 1: So the zero rate leads to these build ups of 609 00:40:59,280 --> 00:41:06,680 Speaker 1: financial instability and at the same time contributes to a 610 00:41:06,760 --> 00:41:10,360 Speaker 1: misallocation of capital. But you're not getting any yield on 611 00:41:10,640 --> 00:41:13,359 Speaker 1: fixed income, so you tend to go to more speculative 612 00:41:13,600 --> 00:41:17,760 Speaker 1: Exactly the whole TEENA. There is no alternal of exact. 613 00:41:18,920 --> 00:41:22,600 Speaker 1: I cite you know the the English nineteent century finance 614 00:41:22,640 --> 00:41:25,480 Speaker 1: wright Award Badget where he says John bulls, you know, 615 00:41:25,520 --> 00:41:28,480 Speaker 1: the eponymous englishman John Bull can stand many things, but 616 00:41:28,560 --> 00:41:31,920 Speaker 1: he cannot stand two percent. And you know when people, 617 00:41:32,120 --> 00:41:34,920 Speaker 1: you know, we talked about yield chasing or or carry 618 00:41:35,000 --> 00:41:39,279 Speaker 1: trading when rates very low with the negative rates. Do 619 00:41:39,360 --> 00:41:43,120 Speaker 1: you remember the argument negative rates was that they were 620 00:41:43,160 --> 00:41:46,720 Speaker 1: going to turbo charge the economist. This was a phrase 621 00:41:46,760 --> 00:41:49,359 Speaker 1: who was by Ken Rogoff, the Harvard economist who read 622 00:41:49,400 --> 00:41:52,800 Speaker 1: a book called The Curse of Cash in twenty I 623 00:41:52,840 --> 00:41:55,960 Speaker 1: think twenties sixteen, where he argued, you know that you 624 00:41:56,040 --> 00:41:57,600 Speaker 1: need to get rid of cash so that we could 625 00:41:57,640 --> 00:42:00,920 Speaker 1: have properly negative rates. Well, the way I see negative 626 00:42:01,040 --> 00:42:04,840 Speaker 1: rate is it's it's a tax on capital which is 627 00:42:04,920 --> 00:42:10,240 Speaker 1: instituted by an unelected bank central bank or policy maker 628 00:42:10,600 --> 00:42:15,120 Speaker 1: without anyone, without anyone voting for it. These people who 629 00:42:15,160 --> 00:42:17,719 Speaker 1: wanted us all to have accounts with the central bank, 630 00:42:17,800 --> 00:42:20,239 Speaker 1: with the central bank, you know, having an authority just 631 00:42:20,360 --> 00:42:22,920 Speaker 1: takes much of our capital away. It seemed to undermine 632 00:42:23,560 --> 00:42:27,440 Speaker 1: property rights. But leaving aside that, where we've seen in 633 00:42:27,560 --> 00:42:31,600 Speaker 1: place like Japan and Europe, there was no turbot charging 634 00:42:32,440 --> 00:42:35,760 Speaker 1: of the economies. In fact, as you know, banks can't 635 00:42:36,280 --> 00:42:41,040 Speaker 1: make money at negative rates and they are reluctant to lend. 636 00:42:41,160 --> 00:42:44,200 Speaker 1: This is the point that Bill Gross, pimco's formers or 637 00:42:44,320 --> 00:42:47,919 Speaker 1: bond king, was making very early on in the era 638 00:42:48,040 --> 00:42:50,160 Speaker 1: of zero rates. So you know, he says it's sort 639 00:42:50,160 --> 00:42:52,920 Speaker 1: of created as it was like sort of you leukemia 640 00:42:53,080 --> 00:42:56,080 Speaker 1: in the financial system, the negative rates that destroyed the 641 00:42:56,200 --> 00:42:58,800 Speaker 1: vitality of the banking system. But he said, you know, 642 00:42:59,360 --> 00:43:03,799 Speaker 1: he says, um, you need positive carry for the financial 643 00:43:03,920 --> 00:43:07,319 Speaker 1: system to carry on making leans. Now negative rates makes 644 00:43:07,360 --> 00:43:09,680 Speaker 1: thing a lot worse. I mean, what you saw when 645 00:43:09,760 --> 00:43:13,040 Speaker 1: the Japanese went over to negative rates in you know, 646 00:43:13,080 --> 00:43:16,000 Speaker 1: there were articles in the newspaper about Japanese, you know, 647 00:43:16,239 --> 00:43:19,320 Speaker 1: buying safes to store their money. And one of the 648 00:43:19,440 --> 00:43:22,360 Speaker 1: large German banks also announced that it was going to 649 00:43:22,400 --> 00:43:25,960 Speaker 1: be storing cash, and then you get these absurdities. So 650 00:43:26,120 --> 00:43:28,879 Speaker 1: the note, I don't think it's impetus to credit growth, 651 00:43:29,080 --> 00:43:34,000 Speaker 1: but you have these absurdities like Danish home buyers actually 652 00:43:34,080 --> 00:43:37,960 Speaker 1: receiving payments on their mortgages, so you're having a transfer 653 00:43:38,120 --> 00:43:45,120 Speaker 1: of wealth from savers to borrowers. And then which makes 654 00:43:45,200 --> 00:43:47,279 Speaker 1: no sense. No, no, I mean that we've been living 655 00:43:47,280 --> 00:43:50,040 Speaker 1: in Alice in Wonderland world, you know, I mean, I 656 00:43:50,120 --> 00:43:52,919 Speaker 1: think you know it's it's just a Lewis Carroll world. 657 00:43:53,000 --> 00:43:57,120 Speaker 1: And nobody. I mentioned somewhere that long dated Japanese bonds 658 00:43:57,160 --> 00:44:01,839 Speaker 1: at negative yields, that some jab his life insurance guy 659 00:44:01,920 --> 00:44:06,919 Speaker 1: who says that yields state matter, and people were buy 660 00:44:07,800 --> 00:44:11,759 Speaker 1: buying long dated bonds a negative yields in anticipation of 661 00:44:11,880 --> 00:44:15,560 Speaker 1: them going along of yields getting lower, and therefore you 662 00:44:15,640 --> 00:44:20,440 Speaker 1: could get capital gains from bonds with negative yields, and 663 00:44:20,520 --> 00:44:23,440 Speaker 1: if you wanted income, you had to buy equities. How 664 00:44:23,560 --> 00:44:26,360 Speaker 1: is that any different than the people buying, you know, 665 00:44:26,520 --> 00:44:28,279 Speaker 1: some of the coins you mentioned, or the n f 666 00:44:28,400 --> 00:44:31,919 Speaker 1: T s. You're buying a negative yielding instrument. I'll give 667 00:44:31,960 --> 00:44:34,400 Speaker 1: you a hundred dollars for a century and in a 668 00:44:34,480 --> 00:44:37,600 Speaker 1: hundred years give me back ninety eight dollars. How is 669 00:44:37,680 --> 00:44:41,040 Speaker 1: that any different than buying an n F Take well, 670 00:44:41,239 --> 00:44:44,080 Speaker 1: I mean you're right, other than you get yours. I 671 00:44:44,080 --> 00:44:45,879 Speaker 1: mean you've got the credit of the government. But look 672 00:44:45,920 --> 00:44:49,520 Speaker 1: look at what happened in the guilts market recently, okay 673 00:44:49,640 --> 00:44:54,480 Speaker 1: quite recently. So you had these long dated index link guilts, 674 00:44:55,040 --> 00:44:59,160 Speaker 1: the one I side linker, so they equipment of a 675 00:44:59,239 --> 00:45:02,320 Speaker 1: fifty year by and here in the US, but actually 676 00:45:02,840 --> 00:45:06,560 Speaker 1: trading on a negative yield at last year of two 677 00:45:06,560 --> 00:45:09,399 Speaker 1: and a half percent. Been trading down for a long 678 00:45:09,520 --> 00:45:15,600 Speaker 1: time this year that bond has lost its value at 679 00:45:15,640 --> 00:45:18,799 Speaker 1: the trough before the Bank of England intervened to try 680 00:45:18,840 --> 00:45:21,520 Speaker 1: and sort of stop the guilt's market completely blaying apart. 681 00:45:22,400 --> 00:45:27,080 Speaker 1: It was it was yielding to redemption one point one. 682 00:45:28,960 --> 00:45:32,840 Speaker 1: You blew of capital to end up with an asset 683 00:45:33,360 --> 00:45:36,800 Speaker 1: with an expected real return held to redemption of just 684 00:45:37,000 --> 00:45:40,160 Speaker 1: over one per cent doesn't sound like a great trade 685 00:45:40,239 --> 00:45:43,800 Speaker 1: to me. It was a trade that, as you know, 686 00:45:43,960 --> 00:45:48,080 Speaker 1: the UK pension funds engaged in to the tune of 687 00:45:48,320 --> 00:45:52,680 Speaker 1: hundreds of billions of of pounds. And to make things 688 00:45:52,760 --> 00:45:56,440 Speaker 1: more interesting. They use leverage too, So there there is 689 00:45:56,480 --> 00:45:59,560 Speaker 1: a sort of really a story for our times of 690 00:46:00,040 --> 00:46:04,160 Speaker 1: pension funds induced to because of the low interest rates 691 00:46:04,239 --> 00:46:07,840 Speaker 1: and because that made you know, affected there the present 692 00:46:07,920 --> 00:46:10,959 Speaker 1: value of their liability says your discount rate. Again, they're 693 00:46:11,000 --> 00:46:13,640 Speaker 1: forced to go in and do sort of water badge 694 00:46:13,680 --> 00:46:17,360 Speaker 1: that type stupid things of leveraging up these long dated 695 00:46:17,400 --> 00:46:19,960 Speaker 1: bonds while at the same time owning stuff that you 696 00:46:20,040 --> 00:46:22,600 Speaker 1: know would have had a higher return, but then getting 697 00:46:22,640 --> 00:46:25,279 Speaker 1: into a mess. So let's talk about what's been going 698 00:46:25,360 --> 00:46:28,080 Speaker 1: on around the world, and here in the United States 699 00:46:28,200 --> 00:46:32,200 Speaker 1: we have inflation at its highest level in forty years. 700 00:46:33,160 --> 00:46:37,080 Speaker 1: How much blame do you assign to central banks for 701 00:46:37,560 --> 00:46:43,960 Speaker 1: the current circumstances. How significant were those quantitative easing and 702 00:46:44,120 --> 00:46:49,640 Speaker 1: zero interest rate policies to the current spade of inflation? 703 00:46:51,000 --> 00:46:52,879 Speaker 1: What do you think? I mean, pretty significant. I think 704 00:46:52,920 --> 00:46:56,799 Speaker 1: it's one of many things, but obviously a very big one. Yeah, 705 00:46:56,800 --> 00:47:00,759 Speaker 1: I mean, the inflation is complex phenomenon, right, But we 706 00:47:00,880 --> 00:47:05,960 Speaker 1: had massive fiscal stimulus, then the closing and reopening, but 707 00:47:06,320 --> 00:47:10,080 Speaker 1: within the long standing environment of zero for a decade. Yes, 708 00:47:10,160 --> 00:47:13,840 Speaker 1: so I think you know mentioned quantity easing becoming a 709 00:47:13,920 --> 00:47:18,760 Speaker 1: dangerous addiction. Initially, the quantity of easing after financial crisis 710 00:47:19,480 --> 00:47:22,080 Speaker 1: was a time where the sort of financial system was 711 00:47:22,280 --> 00:47:25,680 Speaker 1: de leveraging, the money wasn't really making its way to 712 00:47:26,320 --> 00:47:30,480 Speaker 1: main street. Beside main street was high unemployment and so 713 00:47:30,600 --> 00:47:36,040 Speaker 1: and so forth. Um, it's different when with the lockdowns 714 00:47:36,719 --> 00:47:39,560 Speaker 1: and not just the US, Britain and around the world, 715 00:47:39,680 --> 00:47:41,759 Speaker 1: around the world, you had you know, I think eight 716 00:47:41,880 --> 00:47:45,840 Speaker 1: trillion dollars of central bank quee or balance cheat expansion 717 00:47:46,120 --> 00:47:52,560 Speaker 1: and roughly dollar for dollar increase in government spending, right, 718 00:47:52,680 --> 00:47:55,239 Speaker 1: what's it? And then you know, obviously you people were 719 00:47:55,320 --> 00:48:00,080 Speaker 1: just staying at home with their stimmy checks and a 720 00:48:00,920 --> 00:48:03,640 Speaker 1: they were going out and you know, buy meme stocks, 721 00:48:04,239 --> 00:48:07,960 Speaker 1: having you know, looked up on wolf Street bets which 722 00:48:08,040 --> 00:48:13,160 Speaker 1: stocks to be targeting and and borrowing at two from 723 00:48:13,280 --> 00:48:16,480 Speaker 1: robin Hood. And so here's the question. If artificially low 724 00:48:16,600 --> 00:48:20,960 Speaker 1: rates helped get us into this mess, will raising rates 725 00:48:21,400 --> 00:48:25,279 Speaker 1: help get us out of this mess? Now? I'll tell 726 00:48:25,280 --> 00:48:28,560 Speaker 1: you what I mean. The thrust of the book is 727 00:48:28,640 --> 00:48:34,040 Speaker 1: that you've got yourself into a paris position. Too much debt, 728 00:48:34,760 --> 00:48:41,759 Speaker 1: too much risk taking, over inflated valuations, too little real savings, 729 00:48:42,160 --> 00:48:48,040 Speaker 1: too much financial engineering, and too little real investment, and 730 00:48:48,400 --> 00:48:52,279 Speaker 1: once you're in that position, it's very difficult to get 731 00:48:52,360 --> 00:48:55,640 Speaker 1: out of it. Durber. After the financial crisis, that was 732 00:48:56,120 --> 00:48:59,840 Speaker 1: commonly used this phrase kicking the can. And you know, 733 00:49:00,280 --> 00:49:02,520 Speaker 1: really for the last you know, you could save. The 734 00:49:02,600 --> 00:49:06,560 Speaker 1: last twenty five years or so, we've been kicking the can. 735 00:49:07,520 --> 00:49:11,760 Speaker 1: And now we've reached the point where we have in platient, 736 00:49:11,800 --> 00:49:15,000 Speaker 1: as we say, and it's more difficult for the central 737 00:49:15,040 --> 00:49:18,959 Speaker 1: banks to come in and kick the can any further 738 00:49:19,080 --> 00:49:22,120 Speaker 1: because you know they're in danger of losing credibility. The 739 00:49:22,239 --> 00:49:25,440 Speaker 1: can is kicking back. Can got bigger. It's like a 740 00:49:25,560 --> 00:49:28,319 Speaker 1: sort of quantum can. Each time you kick it gets 741 00:49:28,360 --> 00:49:30,120 Speaker 1: bigger and bigger and bigger, and they were now sort 742 00:49:30,120 --> 00:49:33,840 Speaker 1: of sitting under a massive can. So I want to 743 00:49:33,960 --> 00:49:38,239 Speaker 1: roll back to the financial crisis because I suspect I'm 744 00:49:38,280 --> 00:49:40,239 Speaker 1: reading between the lines a little bit, or maybe not 745 00:49:40,440 --> 00:49:43,960 Speaker 1: so much. When we rescued a lot of the banks 746 00:49:44,160 --> 00:49:47,919 Speaker 1: and then kept rates very low for the next seven 747 00:49:48,000 --> 00:49:52,759 Speaker 1: eight years, we ignored some of the things we had 748 00:49:52,840 --> 00:49:59,680 Speaker 1: learned previously. When we go back to Walter Badgett, shouldn't 749 00:49:59,719 --> 00:50:02,560 Speaker 1: we have taking these banks and allowed them to go 750 00:50:02,719 --> 00:50:07,040 Speaker 1: to that lovely building with the columns downtown, the bankruptcy court, 751 00:50:07,480 --> 00:50:10,960 Speaker 1: and allow all these banks to you know, wipe out 752 00:50:11,080 --> 00:50:14,800 Speaker 1: the equity holders, give the bond holders a haircut, and 753 00:50:15,080 --> 00:50:17,439 Speaker 1: clean up their balance sheets and send them back into 754 00:50:17,480 --> 00:50:21,239 Speaker 1: the world revitalized like the zombie banks. We kept on 755 00:50:21,360 --> 00:50:26,680 Speaker 1: life support of low rates. Wasn't fixing one problem, eventually 756 00:50:26,719 --> 00:50:30,160 Speaker 1: setting us up for the next problem. I think, well, uh, 757 00:50:30,280 --> 00:50:33,919 Speaker 1: you know, the policymakers say, and central banks they say, 758 00:50:34,080 --> 00:50:37,560 Speaker 1: there was no alternative, and if you criticize us, you 759 00:50:37,640 --> 00:50:42,480 Speaker 1: were wishing another great depression. But in fact, actually I said, 760 00:50:42,880 --> 00:50:45,040 Speaker 1: right towards the end of the book, the case of 761 00:50:45,560 --> 00:50:48,920 Speaker 1: Iceland as a counter of factual, because what happened in Iceland, 762 00:50:49,239 --> 00:50:55,399 Speaker 1: Icelanders went completely crazy. Yes, and you remember that that debt, 763 00:50:55,520 --> 00:50:58,600 Speaker 1: with foreign debt with ten times GDP, that current gut 764 00:50:58,680 --> 00:51:02,960 Speaker 1: deficit to GDP. You know, they've completely given up fishing. 765 00:51:03,000 --> 00:51:06,360 Speaker 1: They'd all turn into bankers and then it blew. But 766 00:51:06,520 --> 00:51:08,600 Speaker 1: Iceland was not part of the EU say, no one 767 00:51:08,719 --> 00:51:12,320 Speaker 1: was really coming to their rescue. The FED didn't offer 768 00:51:12,480 --> 00:51:17,040 Speaker 1: you credit lines, dollar swaps to the Icelandic Central Bank, 769 00:51:17,360 --> 00:51:20,359 Speaker 1: and so poor Iceland was just left on its own 770 00:51:20,920 --> 00:51:23,600 Speaker 1: And what's interesting is they sort of followed that course 771 00:51:24,080 --> 00:51:26,759 Speaker 1: that you described, and the big banks went past. They 772 00:51:26,880 --> 00:51:32,840 Speaker 1: put into receivership. Domestic depositors were protected the mortgage borrowers 773 00:51:33,440 --> 00:51:37,120 Speaker 1: who interest rates went up, but mortgage borrowers were protected 774 00:51:37,200 --> 00:51:40,759 Speaker 1: by giving taxation relief on their interest payments. And the 775 00:51:40,880 --> 00:51:46,359 Speaker 1: foreign debt was defaulted on and currency decline. There were 776 00:51:46,440 --> 00:51:50,359 Speaker 1: capital controls, but after a few years capital controls were 777 00:51:50,400 --> 00:51:54,200 Speaker 1: taken off. And this is what's most interesting, is that 778 00:51:54,719 --> 00:52:00,280 Speaker 1: the Icelandic economy transformed away from finance to war wards 779 00:52:00,680 --> 00:52:05,880 Speaker 1: tourism and technology as well. So you had this Schumpeterian 780 00:52:06,640 --> 00:52:11,640 Speaker 1: creative destruction. The government debt relative to g d P 781 00:52:12,320 --> 00:52:18,360 Speaker 1: came down, the economy within six or seven years, Iceland 782 00:52:18,480 --> 00:52:22,319 Speaker 1: was growing, had recovered all its losses and was growing 783 00:52:22,400 --> 00:52:28,000 Speaker 1: faster than any other European country. So making the creditors 784 00:52:28,520 --> 00:52:31,600 Speaker 1: take a haircut, forcing them take out that goes back 785 00:52:31,680 --> 00:52:37,279 Speaker 1: to these ancient Mesopotamian practices of of debt jubilees. That's 786 00:52:37,320 --> 00:52:40,120 Speaker 1: that they originated the debt jubilee, the giving up the 787 00:52:40,360 --> 00:52:44,239 Speaker 1: writing off of debt, which also the Egyptians and the 788 00:52:44,360 --> 00:52:47,120 Speaker 1: Israelites did so, and that's seen as a sort of 789 00:52:47,239 --> 00:52:49,839 Speaker 1: left wing idea, but I don't think it. Essay has 790 00:52:49,880 --> 00:52:53,600 Speaker 1: to be if you've made loans that are bad loans, 791 00:52:54,080 --> 00:52:57,600 Speaker 1: then it's right that the creditor should take a haircut. 792 00:52:58,440 --> 00:53:02,040 Speaker 1: And hence bankruptcy courts exist for a reason, right they shouldn't. 793 00:53:02,520 --> 00:53:04,719 Speaker 1: They're not just there to show off the architecture of 794 00:53:04,760 --> 00:53:08,200 Speaker 1: those columns. I never, as I mentioned in the book, 795 00:53:08,760 --> 00:53:12,160 Speaker 1: the insolvency rates was sort of absurdly lit. We talked 796 00:53:12,160 --> 00:53:15,040 Speaker 1: about the Great Depression. The new headlines were, oh, you know, 797 00:53:15,160 --> 00:53:18,960 Speaker 1: the worst financial the worst crisis, it's the Great Depression. 798 00:53:19,040 --> 00:53:21,239 Speaker 1: It was called the Great Recession. And then actually you 799 00:53:21,320 --> 00:53:25,120 Speaker 1: look at insolvencies, they were lower than the insolvancies after 800 00:53:25,239 --> 00:53:28,920 Speaker 1: the dot com bust or the insolvencies after the savings 801 00:53:28,960 --> 00:53:33,720 Speaker 1: and loan crisis of the early You didn't get your bankruptcy. Instead, 802 00:53:33,760 --> 00:53:35,840 Speaker 1: you get the zombies. And the zombies are sort of 803 00:53:36,000 --> 00:53:39,000 Speaker 1: living dead, which is sort of death to a capitalist 804 00:53:39,040 --> 00:53:42,520 Speaker 1: economy because they don't you know, they discourage entrepreneurs, they 805 00:53:42,600 --> 00:53:46,920 Speaker 1: discourage investment, they discourage productivity growth, no doubt about that. 806 00:53:47,239 --> 00:53:53,440 Speaker 1: And there are you know, ramifications and unanticipated consequences that 807 00:53:53,520 --> 00:53:57,000 Speaker 1: we're still living with to this day. Whether it's a 808 00:53:57,160 --> 00:54:00,440 Speaker 1: very low growth rate that be got a rise of 809 00:54:00,480 --> 00:54:04,959 Speaker 1: authoritarianism both here and abroad, you can trace that back 810 00:54:05,080 --> 00:54:11,319 Speaker 1: to not allowing the banks to go through that process. Yeah, 811 00:54:11,400 --> 00:54:14,719 Speaker 1: well I do. In my chapter the book ends with 812 00:54:14,880 --> 00:54:19,440 Speaker 1: it called the New Road Serfdom and the argument channeling 813 00:54:19,520 --> 00:54:24,759 Speaker 1: High Friedrich High, the Austin economist philosopher, and he read 814 00:54:24,840 --> 00:54:27,719 Speaker 1: a book in the Second Mold War thinking that the 815 00:54:28,040 --> 00:54:31,880 Speaker 1: advance of the state during the war into the economy 816 00:54:31,920 --> 00:54:34,640 Speaker 1: and into people's lives was not going to retreat, and 817 00:54:34,719 --> 00:54:39,360 Speaker 1: it wasn't really right. There wasn't a retreat. But my argument, 818 00:54:39,760 --> 00:54:44,560 Speaker 1: drawing on High, is that if you take away the 819 00:54:44,760 --> 00:54:49,880 Speaker 1: universal price, the price of interest that guides the captive system, 820 00:54:50,719 --> 00:54:54,320 Speaker 1: then the system will fail. And the more system fails, 821 00:54:55,120 --> 00:54:59,520 Speaker 1: the more the authorities have to come in to prop 822 00:54:59,640 --> 00:55:04,360 Speaker 1: things up, until you get a position where you're no 823 00:55:04,480 --> 00:55:06,920 Speaker 1: longer in a way have a capitalist society. And I 824 00:55:07,000 --> 00:55:10,880 Speaker 1: suppose that's that that you know the juncture we are today. 825 00:55:10,920 --> 00:55:14,840 Speaker 1: Are are we going to sort of go through the 826 00:55:14,960 --> 00:55:18,399 Speaker 1: problems of adjusting from the low rates to normal rates 827 00:55:18,719 --> 00:55:21,960 Speaker 1: whatever you know, whatever that takes, or are we going 828 00:55:22,040 --> 00:55:24,840 Speaker 1: to just shift into a sort of a different type 829 00:55:24,880 --> 00:55:30,320 Speaker 1: of paradigm in which the state allocates capital and control. 830 00:55:30,400 --> 00:55:33,160 Speaker 1: Saying that I'm not saying that we're going down that route. 831 00:55:33,160 --> 00:55:37,319 Speaker 1: I'm just raising the question that how it talks about 832 00:55:37,360 --> 00:55:41,920 Speaker 1: people sort of stumbling progressing without really no real intention 833 00:55:42,680 --> 00:55:46,160 Speaker 1: blind progression, and one senses that there's sort of been 834 00:55:46,200 --> 00:55:49,760 Speaker 1: a blind progression, and no one, I mean, there's absolute 835 00:55:49,800 --> 00:55:52,080 Speaker 1: clear to me that no one in any position authority 836 00:55:52,719 --> 00:55:57,640 Speaker 1: considered the actual ramifications of monetary policy and of these 837 00:55:57,719 --> 00:56:01,000 Speaker 1: low rates quite fascinating. I only have you for a 838 00:56:01,080 --> 00:56:03,040 Speaker 1: few more minutes before we have to send you off 839 00:56:03,080 --> 00:56:06,240 Speaker 1: to the airport, So let's blow through these five questions 840 00:56:06,320 --> 00:56:09,840 Speaker 1: in in a few minutes. Starting with tell us, what 841 00:56:10,120 --> 00:56:13,560 Speaker 1: kept you entertained during the pandemic? What were you listening 842 00:56:13,600 --> 00:56:17,480 Speaker 1: to or watching? Well, we watched Succession and we watched 843 00:56:17,520 --> 00:56:21,680 Speaker 1: them the other HBO, the White Lotus, I watched White Lotus, 844 00:56:22,239 --> 00:56:27,440 Speaker 1: I watched UM the you know the TV this series, 845 00:56:27,520 --> 00:56:29,680 Speaker 1: A Game of Thrinds. We watched a lot of Game 846 00:56:29,760 --> 00:56:32,960 Speaker 1: of Thrinds. Tell Us about some of your mentors who 847 00:56:33,080 --> 00:56:38,120 Speaker 1: helped to shape your career? Well, when I was writing 848 00:56:38,520 --> 00:56:42,640 Speaker 1: Devitah miss I went to see Charles Kendall Berger outside 849 00:56:43,800 --> 00:56:49,440 Speaker 1: outside Cambridge, Massachusetts. Crispino Do who I mentioned, commissioned me 850 00:56:49,560 --> 00:56:52,480 Speaker 1: to do that work on the credit, which has been 851 00:56:52,600 --> 00:56:56,280 Speaker 1: very useful for me. Another investment from Marathon Asset Management. 852 00:56:56,360 --> 00:56:58,839 Speaker 1: A friend they're called Charles Carter. I edited a couple 853 00:56:58,840 --> 00:57:01,000 Speaker 1: of books for them on something cool, the capital cycle 854 00:57:01,120 --> 00:57:04,000 Speaker 1: theory of investment, which has been sort of quite important 855 00:57:04,040 --> 00:57:08,200 Speaker 1: to me. And then Jeremy Grantham at GMO has has 856 00:57:08,239 --> 00:57:11,239 Speaker 1: been my mentor. I'd say that's an impressive list. Let's 857 00:57:11,280 --> 00:57:14,000 Speaker 1: talk about other books in addition to what you've written. 858 00:57:14,440 --> 00:57:16,120 Speaker 1: What are some of your favorites and what are you 859 00:57:16,200 --> 00:57:19,360 Speaker 1: reading now? My wife and I get it into quite 860 00:57:19,400 --> 00:57:25,000 Speaker 1: a lot. And my favorite novelist is Arcane Narayan, who 861 00:57:25,120 --> 00:57:29,040 Speaker 1: Graham Green said was the best writer in the English language. 862 00:57:29,960 --> 00:57:34,000 Speaker 1: Now actually open, I start that book with an epigraph 863 00:57:34,120 --> 00:57:39,480 Speaker 1: of from Narayan's The Financial Expert. On the sort of 864 00:57:39,520 --> 00:57:47,000 Speaker 1: Indian thing. I've been reading these colonial thrillers set in Nies, 865 00:57:47,080 --> 00:57:52,120 Speaker 1: Calcutta by an Indian Scottish writer called Maka g. I 866 00:57:52,120 --> 00:57:55,000 Speaker 1: can't quite remember his first name. They're pretty good, have 867 00:57:55,120 --> 00:57:59,160 Speaker 1: you can't cause Bacliff Smill, the the actless Smill, you know, 868 00:57:59,320 --> 00:58:03,000 Speaker 1: is the an agent scientists who who writes about energy 869 00:58:03,040 --> 00:58:06,840 Speaker 1: and civilization and has written Last year I read a 870 00:58:06,880 --> 00:58:10,920 Speaker 1: book called The Great Transition, and this year he's written 871 00:58:10,960 --> 00:58:14,800 Speaker 1: a book about called How the World Really Works. And 872 00:58:14,960 --> 00:58:18,440 Speaker 1: smills argument is, you know, it is to look at 873 00:58:18,520 --> 00:58:22,920 Speaker 1: how mankind's move from one energy source to another. I 874 00:58:23,040 --> 00:58:26,080 Speaker 1: think that ye Bill Gates says he's his favorite. I 875 00:58:26,120 --> 00:58:29,760 Speaker 1: don't think that's a recommendationally interesting Our last two questions, 876 00:58:30,040 --> 00:58:32,320 Speaker 1: what sort of advice would you give to a recent 877 00:58:32,440 --> 00:58:36,760 Speaker 1: college graduate who was interested in a career in either history, 878 00:58:36,920 --> 00:58:43,960 Speaker 1: journalism or finance? Sort of almost think again. I mean, 879 00:58:44,000 --> 00:58:46,760 Speaker 1: I don't think academia is placed to go into now. 880 00:58:47,480 --> 00:58:51,960 Speaker 1: Journalism is much less in My grandfather worked at Reuter's. 881 00:58:52,040 --> 00:58:55,160 Speaker 1: You know, he was Shanghai bureau chief in the nine thirties, 882 00:58:56,280 --> 00:58:59,920 Speaker 1: and in those days you could earn a decent live 883 00:59:00,040 --> 00:59:02,000 Speaker 1: being and have a decent career and jury it's it's 884 00:59:02,000 --> 00:59:04,080 Speaker 1: hard way in Bloomberg. You know that guys here have 885 00:59:04,160 --> 00:59:08,600 Speaker 1: paid reasonable financial journalism pays most other journalism doesn't pay. 886 00:59:08,760 --> 00:59:10,600 Speaker 1: So I probably say, if we're going to go into journalism, 887 00:59:10,720 --> 00:59:17,400 Speaker 1: do financial journalism and in finance. Huh. You know again, 888 00:59:17,480 --> 00:59:21,640 Speaker 1: I in my view, I went into finance, as I say, 889 00:59:21,680 --> 00:59:26,040 Speaker 1: almost cynically, it actually then became a calling for me 890 00:59:26,160 --> 00:59:30,000 Speaker 1: because I actually turned out to be genuinely interested in 891 00:59:30,160 --> 00:59:33,320 Speaker 1: finance and finance history. You know, people have drawn into 892 00:59:33,360 --> 00:59:36,040 Speaker 1: finance because you know, people are paid better, and we've 893 00:59:36,080 --> 00:59:39,320 Speaker 1: had the financial sector growing and the market's rising. Now 894 00:59:39,440 --> 00:59:42,560 Speaker 1: if we've reached a cusp and the markets are going 895 00:59:42,640 --> 00:59:45,400 Speaker 1: to be not rising any future, they're actually that sort 896 00:59:45,440 --> 00:59:48,960 Speaker 1: of premium that you learned from finance is perhaps not 897 00:59:49,040 --> 00:59:51,800 Speaker 1: going to be there. And I say, if I was 898 00:59:51,880 --> 00:59:54,160 Speaker 1: sort of recommending so and I and said they want 899 00:59:54,200 --> 00:59:57,520 Speaker 1: to go in investment, I would say, you know, are 900 00:59:57,600 --> 01:00:03,720 Speaker 1: you sure your talents caren't be used more beneficially elsewhere, 901 01:00:04,160 --> 01:00:06,439 Speaker 1: Because if you think you're just going to enter into 902 01:00:06,520 --> 01:00:09,880 Speaker 1: this sector because you're going to be paid five to 903 01:00:09,960 --> 01:00:14,400 Speaker 1: ten times more than anyone else than the average, then 904 01:00:14,720 --> 01:00:16,320 Speaker 1: I wouldn't be sure that that's going to be the 905 01:00:16,400 --> 01:00:19,040 Speaker 1: case going forward. In our final question, what do you 906 01:00:19,120 --> 01:00:24,080 Speaker 1: know about the world of speculation bubbles, interest rates today? 907 01:00:24,200 --> 01:00:26,760 Speaker 1: You wish you knew thirty or forty years or so 908 01:00:26,920 --> 01:00:32,080 Speaker 1: ago when you were first starting out, huh, well I didn't. 909 01:00:32,520 --> 01:00:34,960 Speaker 1: I didn't know anything. I mean, I didn't know anything. 910 01:00:35,160 --> 01:00:41,040 Speaker 1: Then it's we've been living through the most extraordinary period 911 01:00:41,200 --> 01:00:43,040 Speaker 1: we knew we had. I used to think the dot 912 01:00:43,120 --> 01:00:48,160 Speaker 1: com bubble was amazing. It was until we supersized. No, 913 01:00:48,600 --> 01:00:50,520 Speaker 1: I think that, And then I thought, you know, wow, 914 01:00:50,560 --> 01:00:54,720 Speaker 1: I wasn't the security subprime security, so that was extraordinary. 915 01:00:55,040 --> 01:00:57,360 Speaker 1: And then you know, we had, you know, the pandemic 916 01:00:58,640 --> 01:01:02,160 Speaker 1: everything bubble, and you know, we have lived through the 917 01:01:02,520 --> 01:01:06,400 Speaker 1: most extraordinary period in the history of finance. I had 918 01:01:06,880 --> 01:01:09,479 Speaker 1: no idea that that was going to be the case 919 01:01:09,520 --> 01:01:13,520 Speaker 1: when I started my career. Absolutely fascinating. Thank you Edward 920 01:01:13,600 --> 01:01:16,040 Speaker 1: for being so generous with your time. We have been 921 01:01:16,160 --> 01:01:20,880 Speaker 1: speaking with Edward Chancellor, author of Devil Takes the Hindmost 922 01:01:21,080 --> 01:01:24,800 Speaker 1: and The Price of Time, The Real Story of Interest. 923 01:01:25,400 --> 01:01:28,160 Speaker 1: If you enjoy this conversation, well, be sure and check 924 01:01:28,200 --> 01:01:30,840 Speaker 1: out any of the four hundred and fifty or so 925 01:01:31,080 --> 01:01:36,480 Speaker 1: conversations we've had previously. You can find those at Spotify, iTunes, 926 01:01:36,600 --> 01:01:42,200 Speaker 1: Bloomberg YouTube, wherever you feed your podcast fix. We love 927 01:01:42,240 --> 01:01:45,800 Speaker 1: your comments, feedback and suggestions. Write to us at m 928 01:01:45,880 --> 01:01:49,200 Speaker 1: IB podcast at Bloomberg dot net. Sign up for my 929 01:01:49,400 --> 01:01:52,200 Speaker 1: daily reading list at ridolts dot com, follow me on 930 01:01:52,280 --> 01:01:55,320 Speaker 1: Twitter at ridolts. I would be remiss if I did 931 01:01:55,400 --> 01:01:57,440 Speaker 1: not thank the crack team that helps us with these 932 01:01:57,520 --> 01:02:02,440 Speaker 1: conversations together each week. Sarah Livesey is my audio engineer. 933 01:02:02,600 --> 01:02:06,920 Speaker 1: Attica Valbrunn is my project manager. Jean Rousso runs our research. 934 01:02:07,320 --> 01:02:11,200 Speaker 1: Paris World is my producer. I'm Barry Results. You've been 935 01:02:11,240 --> 01:02:14,480 Speaker 1: listening to Master's in Business on Bloomberg Radio