WEBVTT - Kopi Time E069: Mark Sobel on the US, Germany, China, IMF

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<v Speaker 1>Hi you're listening to Kobe time, a podcast series on

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<v Speaker 1>markets and economies from DBS group research. I'm Taimur baig

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<v Speaker 1>chief economist. Welcome to our 69th episode,

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<v Speaker 1>I promised a deep dive in global macro in the

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<v Speaker 1>last episode and here we go. With great pleasure. We

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<v Speaker 1>welcome back Mark sobel to our podcast.

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<v Speaker 1>Mark is us chairman at official monetary and financial institutions forum,

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<v Speaker 1>better known as um 50.

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<v Speaker 1>He has been at the forefront of international financial diplomacy

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<v Speaker 1>for several decades,

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<v Speaker 1>Representing the us at the International Monetary Fund's executive report

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<v Speaker 1>till April 2018.

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<v Speaker 1>Prior to that, Mark was Treasury Deputy Assistant Secretary for

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<v Speaker 1>International Monetary and Financial Policy. Between 2000 early 2015

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<v Speaker 1>he helped lead Treasury preparations for G seven and G

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<v Speaker 1>20 Finance Minister and Central Bank governor meetings, formulating us

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<v Speaker 1>positions in the I. M f coordinated

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<v Speaker 1>treasury and regulatory agencies work in the financial stability board

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<v Speaker 1>as well.

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<v Speaker 1>Mark, welcome back to Kobe tai,

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<v Speaker 2>thank you for having me. I'm flattered that anybody would

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<v Speaker 2>want to hear my views a second time. So how

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<v Speaker 2>can I help you today?

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<v Speaker 1>Well, you were highly articulate and present in your last appearance.

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<v Speaker 1>I expect nothing less this time either. Um Mark, you

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<v Speaker 1>came to the show exactly a year ago and the

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<v Speaker 1>biden administration was just getting going at that time.

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<v Speaker 1>A year has gone by and we have been vaccinated, boosted,

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<v Speaker 1>gone from delta to omicron

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<v Speaker 1>And on the legislative side, the 1.9 trillion American rescue

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<v Speaker 1>bill passed successfully through Congress, as did the 1.2 trillion

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<v Speaker 1>bipartisan infrastructure bill.

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<v Speaker 1>The Fed

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<v Speaker 1>until now has kept extraordinary accommodation in place

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<v Speaker 1>and as a result, we've got tons of job creation,

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<v Speaker 1>wage growth and also inflation.

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<v Speaker 1>So let's start with that. What's your take on all this?

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<v Speaker 2>Well, thank you again. Um

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<v Speaker 2>you just painted a semi positive picture. I agree with that.

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<v Speaker 2>There's tremendous pessimism division in our country at this time.

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<v Speaker 2>Um But I I think as you look back on

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<v Speaker 2>the past year,

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<v Speaker 2>there are good reasons to be sanguine and see the

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<v Speaker 2>big picture as positive

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<v Speaker 2>with astronautics of course. And we'll come back to those.

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<v Speaker 2>Um You said that the vaccines came online. This was

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<v Speaker 2>a

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<v Speaker 2>modern miracle of science that so many people were vaccinated

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<v Speaker 2>so quickly and

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<v Speaker 2>could have been far worse, especially when you look at

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<v Speaker 2>other plagues in history.

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<v Speaker 2>Um, us GDP is above its pre pandemic level. It's

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<v Speaker 2>close to potential unemployment's 4%, it was 15% I think

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<v Speaker 2>at the peak of the crisis.

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<v Speaker 2>Uh

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<v Speaker 2>there are lots of debates about the biden team, but

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<v Speaker 2>um

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<v Speaker 2>it's much more cooperative and multilateral internationally.

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<v Speaker 2>Um

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<v Speaker 2>I'm sure we'll have words about china and Russia as

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<v Speaker 2>well where

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<v Speaker 2>it isn't so hunky dory, but okay.

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<v Speaker 2>Um

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<v Speaker 2>and

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<v Speaker 2>notwithstanding the political divisiveness in this country,

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<v Speaker 2>even under the trump administration, there were two fiscal bills passed,

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<v Speaker 2>working with between the democrats and the republicans, you just mentioned,

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<v Speaker 2>um the

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<v Speaker 2>um

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<v Speaker 2>biden bills,

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<v Speaker 2>The 1.9 trillion bill. So the us has managed to

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<v Speaker 2>use fiscal policy to compensate for a massive shortfall and

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<v Speaker 2>private demand and if anything, we overdid it.

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<v Speaker 2>Um, and the over

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<v Speaker 2>Being overdone as seen in the excess savings that Americans have.

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<v Speaker 2>This 2.5 trillion I think, which is a little bit

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<v Speaker 2>more than 10% of GDP I guess

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<v Speaker 2>Now I believe that the 1.9 trillion bill could have

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<v Speaker 2>been better targeted and means tested, especially on the personal

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<v Speaker 2>checks

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<v Speaker 2>and the state and local government support.

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<v Speaker 2>But it did provide support for americans and we don't

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<v Speaker 2>have the extensive automatic stabilizers that the Europeans have

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<v Speaker 2>and

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<v Speaker 2>you know, um as our Congress habitually proves, um

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<v Speaker 2>bismarck talked about sausage making the legislation well, it's not

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<v Speaker 2>a pretty process.

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<v Speaker 2>The infrastructure bill is a great accomplishment. Um, it's one

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<v Speaker 2>that eluded Obama and trump administrations. We need it, we

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<v Speaker 2>need it to be done well.

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<v Speaker 2>Um, it will only unfurl

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<v Speaker 2>over a long

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<v Speaker 2>time.

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<v Speaker 2>Of course there are

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<v Speaker 2>are caveats to this positive story. Um you know, we'll

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<v Speaker 2>come back to high us inflation.

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<v Speaker 2>Um,

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<v Speaker 2>we um

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<v Speaker 2>as I said, we're a very divided society over how

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<v Speaker 2>to respond to

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<v Speaker 2>the pandemic. These

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<v Speaker 2>epic fights about masks versus not masks.

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<v Speaker 2>Um

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<v Speaker 2>there's this question of the great resignation where we just

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<v Speaker 2>had great job numbers and who knows what they mean

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<v Speaker 2>for labor force participation, but labor force participation

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<v Speaker 2>appears to be down.

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<v Speaker 2>Um we have supply chain vulnerabilities. Um, and who knows

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<v Speaker 2>uh, about

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<v Speaker 2>with those

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<v Speaker 2>where those will head.

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<v Speaker 2>Um,

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<v Speaker 2>the

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<v Speaker 2>labor share of income doesn't seem to be rising yet.

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<v Speaker 2>So you hear about big wage gains, but given the

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<v Speaker 2>inflation and the wages don't seem to be keeping up.

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<v Speaker 2>So um,

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<v Speaker 2>putting it all together, I think we've done a good

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<v Speaker 2>job and mending the pandemic damage. We've helped protect the vulnerable,

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<v Speaker 2>We've made some good strides forward in our social safety net.

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<v Speaker 2>We maintained some demand.

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<v Speaker 2>Um, and I think we were right to use fiscal

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<v Speaker 2>policy to extend accommodation,

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<v Speaker 2>um,

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<v Speaker 2>even if it was too much of a good thing.

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<v Speaker 2>Um, so you know,

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<v Speaker 2>announce I'm positive notwithstanding

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<v Speaker 2>Some of the kind of the negative mood one detects

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<v Speaker 2>in America these days.

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<v Speaker 1>Mark I, I take your point entirely, I mean, a

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<v Speaker 1>year ago things were not looking that great. And now

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<v Speaker 1>it's like, you know, Janet Yellen's dream, high pressure economy,

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<v Speaker 1>lots of inflation, lots of job growth and lots of

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<v Speaker 1>employment now we're talking about

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<v Speaker 1>five, wage growth being not enough to keep pace with inflation. Well,

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<v Speaker 1>that of course

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<v Speaker 1>is not the best thing in the world you want

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<v Speaker 1>real wage growth to take place, but at the same

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<v Speaker 1>time it creates this

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<v Speaker 1>massive nominal expansion of the economy, which is in the

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<v Speaker 1>short term helps address debt issues,

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<v Speaker 1>creates, you know, margin for companies and so on. So

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<v Speaker 1>I can't really see um, it's the developments fully congruent with,

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<v Speaker 1>you know, the dismal ratings that the government gets right now,

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<v Speaker 1>but the administration gets right now.

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<v Speaker 1>Of course

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<v Speaker 1>This takes us to the natural transition towards inflation mark,

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<v Speaker 1>looking at 2022,

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<v Speaker 1>That's issue # one, the first four or five weeks

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<v Speaker 1>of this year has been entirely driven by that narrative.

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<v Speaker 1>How strong will the Fed go and how will the

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<v Speaker 1>whole world sort of adjust to this regime of higher

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<v Speaker 1>interest rates?

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<v Speaker 1>And we're seeing the Bank of England move, we're seeing

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<v Speaker 1>even the CCB which was like, you know,

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<v Speaker 1>completely in a stupor now trying to suggest that, you know,

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<v Speaker 1>somebody real normalization is warranted there. So and and of

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<v Speaker 1>course within the U. S. Former officials, current officials have

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<v Speaker 1>varying views on the transience of inflation on the Fed

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<v Speaker 1>being ahead of the curve or not.

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<v Speaker 1>Your former colleague Larry Summers wrote an article in the

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<v Speaker 1>Washington post a series of many articles that he has written,

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<v Speaker 1>basically saying that the Fed has sort of dropped the

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<v Speaker 1>ball to some extent.

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<v Speaker 1>I want to hear your view both on inflation as

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<v Speaker 1>well as you know where the Fed is going.

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<v Speaker 2>Okay, well this is a can of worms and I

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<v Speaker 2>think one needs to demonstrate great humility in this terrain

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<v Speaker 2>and I think critics don't exhibit sufficient humility.

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<v Speaker 2>There's so much, we don't know, there's so much the

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<v Speaker 2>Fed doesn't know,

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<v Speaker 2>you know, there's no pandemic playbook for the Fed or

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<v Speaker 2>crystal ball on what's going to happen with the pandemic

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<v Speaker 2>um

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<v Speaker 2>supply chains is not something anybody any economist is an

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<v Speaker 2>expert

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<v Speaker 2>in

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<v Speaker 2>and

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<v Speaker 2>one doesn't really fully understand this skew or the the

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<v Speaker 2>shift in the relative prices between services and durables

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<v Speaker 2>and whatnot and

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<v Speaker 2>and then we have energy prices

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<v Speaker 2>up and down but mainly up.

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<v Speaker 2>Um So a lot of the mainstream forecasts for the U. S.

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<v Speaker 2>Have fourth over 4th 22 inflation um going to the

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<v Speaker 2>2.5 to 3% range

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<v Speaker 2>Further towards 2% in 2023.

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<v Speaker 2>But inflation forecasts keep getting marked up including core prices

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<v Speaker 2>and the risks are to the upside. I think most

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<v Speaker 2>people would say

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<v Speaker 2>you know, we've had some

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<v Speaker 2>anomalous things pushing up prices in the US everybody always

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<v Speaker 2>mentions used car prices.

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<v Speaker 2>It's hard to continue that hard to continue seeing that

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<v Speaker 2>happening at such a pace. But then again

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<v Speaker 2>um

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<v Speaker 2>rentals and other things maybe adjusting upward.

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<v Speaker 2>Um, and who knows what's gonna go on with the

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<v Speaker 2>pandemic and supply chain issues. Um,

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<v Speaker 2>so I think as you alluded, you know, some people

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<v Speaker 2>emphasize supply, other people emphasize demand. I think the argument

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<v Speaker 2>on the demand side is if the economy

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<v Speaker 2>is has

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<v Speaker 2>a fixed potential and then you inject

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<v Speaker 2>tons of stimulus in the economy that takes it beyond

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<v Speaker 2>its potential. It just builds up prices

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<v Speaker 2>um

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<v Speaker 2>and you get inflation.

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<v Speaker 2>Um So both monetary and fiscal policy have contributed to

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<v Speaker 2>inflation from that standpoint and we'll need to play a

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<v Speaker 2>role in its withdrawal

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<v Speaker 2>but if the issue is more about supply or relative

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<v Speaker 2>price shifts

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<v Speaker 2>um then I guess there's a question about how much

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<v Speaker 2>monetary policy can deal with the matter and how much

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<v Speaker 2>of a forceful role do you

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<v Speaker 2>apply ascribed to monetary policy to deal with a supply

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<v Speaker 2>demand imbalance?

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<v Speaker 2>Um But then again you have to be worried well

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<v Speaker 2>if it persists, will this cause uh expectations to be

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<v Speaker 2>de anchored and will this cause a wage price pile

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<v Speaker 2>and all that?

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<v Speaker 2>Um

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<v Speaker 2>So um

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<v Speaker 2>now

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<v Speaker 2>this year I know

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<v Speaker 2>fiscal is gonna turn consolidated. So I think if we

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<v Speaker 2>had a 12% of GDP deficit last year, a lot

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<v Speaker 2>of the estimates this year are kind of around 56%

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<v Speaker 2>something like that. So that will

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<v Speaker 2>take quite a bit of a demand out of the economy.

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<v Speaker 2>You know, I'm not worried about our ability to finance

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<v Speaker 2>ourselves etcetera

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<v Speaker 2>et cetera.

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<v Speaker 2>Um But on monetary policy again, well it can't fix

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<v Speaker 2>supply chain issues, it can address demand. We're we're in

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<v Speaker 2>uncharted water.

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<v Speaker 2>Um

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<v Speaker 2>At this point

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<v Speaker 2>yeah

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<v Speaker 2>the Fed seems to be signaling for

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<v Speaker 2>hikes this year or so. They've speeded up the balance sheet.

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<v Speaker 2>Um

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<v Speaker 2>The ending of tapering.

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<v Speaker 2>Um

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<v Speaker 2>Mhm.

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<v Speaker 2>We haven't seen what their bounce sheet plans will be

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<v Speaker 2>but a lot of people think there's going to be

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<v Speaker 2>a good bit of bounce sheet reduction this year, they

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<v Speaker 2>have said it will be

0:12:28.340 --> 0:12:29.900
<v Speaker 2>um faster.

0:12:30.440 --> 0:12:32.980
<v Speaker 2>Um And the Fed has said it's going to be

0:12:32.980 --> 0:12:36.760
<v Speaker 2>data dependent which is appropriate because the data are very

0:12:36.770 --> 0:12:38.449
<v Speaker 2>uncertain

0:12:38.840 --> 0:12:41.600
<v Speaker 2>and that will leave the door open to more than

0:12:41.600 --> 0:12:45.650
<v Speaker 2>four hikes or less than four hikes if needed.

0:12:46.440 --> 0:12:49.500
<v Speaker 2>Um I can't really say if I think if I

0:12:49.500 --> 0:12:53.740
<v Speaker 2>know whether inflation is 50 demand, 50% demand, 50% supply

0:12:53.740 --> 0:12:56.959
<v Speaker 2>or 70, 30, 3070 or or whatnot.

0:12:57.640 --> 0:12:58.860
<v Speaker 2>Um So I think

0:12:59.840 --> 0:13:02.720
<v Speaker 2>you know every meeting should be live if needed and

0:13:02.720 --> 0:13:06.949
<v Speaker 2>uh and we'll see what gets done. Um Let's just

0:13:06.950 --> 0:13:07.460
<v Speaker 2>say

0:13:08.040 --> 0:13:10.410
<v Speaker 2>I think it's hard being a central banker these days

0:13:10.420 --> 0:13:13.130
<v Speaker 2>um and I would want to have to be jay

0:13:13.130 --> 0:13:16.020
<v Speaker 2>Powell having to go before the cameras all the time

0:13:16.020 --> 0:13:16.650
<v Speaker 2>with

0:13:17.340 --> 0:13:20.250
<v Speaker 2>1000 critics waiting in the wings

0:13:20.840 --> 0:13:21.990
<v Speaker 2>but

0:13:21.990 --> 0:13:24.560
<v Speaker 1>he's of course promised to be humble and nimble, which

0:13:24.559 --> 0:13:28.660
<v Speaker 1>I think is something that you would endorse. Um Mark

0:13:29.370 --> 0:13:31.340
<v Speaker 2>actually one other thing, can I say, one other thing

0:13:31.350 --> 0:13:35.360
<v Speaker 2>um It's about financial conditions in the U. S. Um

0:13:35.940 --> 0:13:36.970
<v Speaker 2>I should have said this,

0:13:37.740 --> 0:13:41.840
<v Speaker 2>you know, I think financial conditions indices are very imperfect

0:13:41.850 --> 0:13:45.150
<v Speaker 2>and whatnot. But I think they they provide useful information

0:13:45.740 --> 0:13:46.250
<v Speaker 2>um

0:13:47.740 --> 0:13:48.660
<v Speaker 2>and

0:13:49.040 --> 0:13:49.660
<v Speaker 2>you know,

0:13:50.740 --> 0:13:53.840
<v Speaker 2>equities have come down in recent weeks but I think

0:13:53.840 --> 0:13:56.350
<v Speaker 2>they're pretty stretched probably still

0:13:56.840 --> 0:14:02.199
<v Speaker 2>Um we've seen the short rates move up considerably two

0:14:02.200 --> 0:14:06.130
<v Speaker 2>years for example, but the 10 year that's up but

0:14:06.140 --> 0:14:06.860
<v Speaker 2>uh

0:14:07.340 --> 0:14:11.050
<v Speaker 2>I wouldn't say I'd say moderately so real rates remain

0:14:11.050 --> 0:14:12.260
<v Speaker 2>very negative.

0:14:12.640 --> 0:14:16.030
<v Speaker 2>You know, fx is less important component of financial conditions

0:14:16.030 --> 0:14:18.309
<v Speaker 2>index for the U. S. And for others because we're

0:14:18.309 --> 0:14:19.060
<v Speaker 2>such a closed

0:14:19.440 --> 0:14:20.360
<v Speaker 2>economy.

0:14:21.040 --> 0:14:22.450
<v Speaker 2>Um And

0:14:22.840 --> 0:14:26.740
<v Speaker 2>I see financial conditions still is overly accommodated. And I

0:14:26.740 --> 0:14:29.350
<v Speaker 2>also do think that the Fed in recent years

0:14:29.840 --> 0:14:33.090
<v Speaker 2>has perhaps overly.

0:14:34.040 --> 0:14:37.460
<v Speaker 2>Do I dare say coddled markets through its various puts.

0:14:38.040 --> 0:14:40.990
<v Speaker 2>Um And so I think the market's need to take

0:14:40.990 --> 0:14:44.340
<v Speaker 2>on board to a greater extent the evolving shifts in

0:14:44.340 --> 0:14:46.560
<v Speaker 2>the monetary policy landscape.

0:14:46.940 --> 0:14:47.360
<v Speaker 2>So

0:14:48.040 --> 0:14:48.550
<v Speaker 2>back to you.

0:14:48.940 --> 0:14:52.210
<v Speaker 1>So to follow ups to that first, as you know

0:14:52.220 --> 0:14:54.420
<v Speaker 1>as we speak, we're speaking in the first week of

0:14:54.420 --> 0:14:59.290
<v Speaker 1>february 2nd to february, the the Atlanta Fed now cast

0:14:59.290 --> 0:15:02.430
<v Speaker 1>suggests that you know thanks to the surgeon omicron, the

0:15:02.440 --> 0:15:05.090
<v Speaker 1>current run rate for the G. D. P. Is probably

0:15:05.090 --> 0:15:06.160
<v Speaker 1>close to zero.

0:15:06.440 --> 0:15:08.940
<v Speaker 1>It'll probably come back and snap back very quickly.

0:15:09.140 --> 0:15:12.420
<v Speaker 1>But activities did get disrupted in the first few months

0:15:12.420 --> 0:15:13.850
<v Speaker 1>of the first few weeks of the year.

0:15:14.240 --> 0:15:15.920
<v Speaker 1>Uh and then this is happening at a time when

0:15:15.920 --> 0:15:19.190
<v Speaker 1>inflation is running at 7%. So we're already at a

0:15:19.190 --> 0:15:21.530
<v Speaker 1>bit of a weird combination like a misery index if

0:15:21.530 --> 0:15:22.980
<v Speaker 1>you will with such as that. You know, things are

0:15:22.980 --> 0:15:25.000
<v Speaker 1>pretty bad. I mean you could argue that you know

0:15:25.000 --> 0:15:27.670
<v Speaker 1>by the time the quarter ends it'll be not as

0:15:27.670 --> 0:15:29.860
<v Speaker 1>miserable growth will pick back and pick up.

0:15:30.340 --> 0:15:34.310
<v Speaker 1>But is there a risk if the Fed indeed has

0:15:34.310 --> 0:15:37.860
<v Speaker 1>to signal four or five rate hikes that the market's

0:15:37.870 --> 0:15:41.060
<v Speaker 1>ability to absorb that or the economy's ability to absorb

0:15:41.060 --> 0:15:43.989
<v Speaker 1>that is not there. And then we end up with

0:15:44.000 --> 0:15:46.750
<v Speaker 1>a bit of a stagflation scenario where

0:15:47.040 --> 0:15:49.910
<v Speaker 1>growth is low inflation is high and that's basically the

0:15:49.910 --> 0:15:50.960
<v Speaker 1>worst of all worlds.

0:15:54.940 --> 0:15:58.030
<v Speaker 2>You know, growth always bounces around from quarter to quarter

0:15:58.030 --> 0:16:00.060
<v Speaker 2>and we did have,

0:16:00.940 --> 0:16:04.150
<v Speaker 2>oh macron and the like. So

0:16:05.640 --> 0:16:07.280
<v Speaker 2>You know, I guess the question you have to ask

0:16:07.280 --> 0:16:11.720
<v Speaker 2>yourself is, what's your outlook for 2022? Um you know,

0:16:11.730 --> 0:16:15.830
<v Speaker 2>you know I see forecasts 3-4 I think is the

0:16:15.830 --> 0:16:17.160
<v Speaker 2>number and

0:16:18.440 --> 0:16:21.160
<v Speaker 2>unemployment 4%.

0:16:22.440 --> 0:16:23.850
<v Speaker 2>So uh

0:16:24.240 --> 0:16:29.630
<v Speaker 2>The misery index of 7-8% is pretty darn good, especially

0:16:29.630 --> 0:16:31.650
<v Speaker 2>when you compare it with

0:16:32.140 --> 0:16:34.960
<v Speaker 2>The 70s stagflation. So

0:16:35.540 --> 0:16:39.310
<v Speaker 2>so uh I'm perhaps a bit more upbeat on this

0:16:39.320 --> 0:16:41.470
<v Speaker 2>question than uh than you are

0:16:42.040 --> 0:16:42.210
<v Speaker 2>very

0:16:42.210 --> 0:16:42.460
<v Speaker 1>good.

0:16:42.840 --> 0:16:45.570
<v Speaker 1>And on the rule of the exchange rate you just

0:16:45.580 --> 0:16:48.980
<v Speaker 1>alluded to the the dollar not being a major factor

0:16:48.980 --> 0:16:53.180
<v Speaker 1>in terms of the financial conditions index. Um But higher

0:16:53.180 --> 0:16:53.970
<v Speaker 1>interest rates

0:16:54.540 --> 0:16:58.120
<v Speaker 1>ought to be associated with some degree of stronger U. S. Dollar,

0:16:58.120 --> 0:17:02.030
<v Speaker 1>which also means lower imported inflation. Is that a tool

0:17:02.030 --> 0:17:03.570
<v Speaker 1>that's useful for the Fed?

0:17:06.440 --> 0:17:06.950
<v Speaker 2>Uh

0:17:09.040 --> 0:17:10.949
<v Speaker 2>You know in the US we don't think about the

0:17:10.950 --> 0:17:13.659
<v Speaker 2>dollar as a tool. Um

0:17:14.540 --> 0:17:14.859
<v Speaker 2>Mhm.

0:17:15.640 --> 0:17:16.770
<v Speaker 2>The view is

0:17:17.540 --> 0:17:20.879
<v Speaker 2>the dollar floats. Let the markets float, There is information

0:17:20.880 --> 0:17:23.889
<v Speaker 2>to be gleaned from the dollar that obviously factors into

0:17:23.890 --> 0:17:25.760
<v Speaker 2>the way policymakers think about

0:17:26.440 --> 0:17:30.760
<v Speaker 2>um the stance of monetary policy or macro policy. But

0:17:31.340 --> 0:17:31.959
<v Speaker 2>um

0:17:33.040 --> 0:17:34.270
<v Speaker 2>you know I I don't,

0:17:34.640 --> 0:17:34.880
<v Speaker 2>yeah

0:17:36.240 --> 0:17:38.970
<v Speaker 2>there can be cases where

0:17:40.840 --> 0:17:45.700
<v Speaker 2>the dollar weighs more heavily on policymakers thinking I'm thinking

0:17:45.700 --> 0:17:49.580
<v Speaker 2>back to the global financial crisis when there were times

0:17:49.580 --> 0:17:52.280
<v Speaker 2>when the dollar was really really weak against the euro

0:17:52.280 --> 0:17:55.219
<v Speaker 2>and that might have constrained monetary policy options. But in

0:17:55.220 --> 0:17:56.670
<v Speaker 2>general um

0:17:57.040 --> 0:17:58.360
<v Speaker 2>I don't

0:17:58.740 --> 0:18:00.450
<v Speaker 2>I don't think so. And

0:18:01.440 --> 0:18:03.700
<v Speaker 2>you know, you could argue, well if us is raising

0:18:03.700 --> 0:18:07.260
<v Speaker 2>rates um that's going to uh

0:18:07.640 --> 0:18:09.560
<v Speaker 2>make the dollar go much higher.

0:18:10.140 --> 0:18:10.670
<v Speaker 2>But

0:18:11.140 --> 0:18:12.669
<v Speaker 2>you know, I I personally think

0:18:13.140 --> 0:18:16.230
<v Speaker 2>the dollar is a bit on the top heavy side.

0:18:16.240 --> 0:18:17.060
<v Speaker 2>Um

0:18:19.040 --> 0:18:20.170
<v Speaker 2>I think that when

0:18:21.440 --> 0:18:23.910
<v Speaker 2>the dollar does well when there's a big risk off

0:18:23.910 --> 0:18:27.220
<v Speaker 2>environment or there's a big risk on environment, but if

0:18:27.220 --> 0:18:29.560
<v Speaker 2>it's somewhere in between, I

0:18:30.040 --> 0:18:30.359
<v Speaker 2>think

0:18:30.840 --> 0:18:32.459
<v Speaker 2>conditions can be calm and

0:18:33.380 --> 0:18:37.060
<v Speaker 2>the dollar isn't going to be

0:18:37.940 --> 0:18:41.870
<v Speaker 2>substantially bit up. And let's remember we have a pretty

0:18:41.869 --> 0:18:45.879
<v Speaker 2>big current account deficit and that has to be financed.

0:18:45.890 --> 0:18:47.859
<v Speaker 2>So when I put it all together, I

0:18:48.840 --> 0:18:50.270
<v Speaker 2>I you know,

0:18:50.640 --> 0:18:53.610
<v Speaker 2>I always say nobody should ever make an exchange rate prediction,

0:18:53.609 --> 0:18:56.649
<v Speaker 2>anybody who does is a fool. But I kind of

0:18:56.660 --> 0:19:00.390
<v Speaker 2>being foolish think if the dollar range trades, I won't

0:19:00.390 --> 0:19:03.880
<v Speaker 2>be all that surprised this year.

0:19:03.890 --> 0:19:06.179
<v Speaker 1>I have to say Mark when you said that you

0:19:06.180 --> 0:19:08.740
<v Speaker 1>know in the US we don't really talk too much

0:19:08.740 --> 0:19:09.659
<v Speaker 1>about the dollar.

0:19:09.740 --> 0:19:12.660
<v Speaker 1>The former president did talk a lot about the U. S. Dollar.

0:19:12.670 --> 0:19:17.280
<v Speaker 1>I think he was very gung ho about a weak

0:19:17.280 --> 0:19:19.890
<v Speaker 1>dollar for most of his presidency. And then at the

0:19:19.900 --> 0:19:21.050
<v Speaker 1>end of flip

0:19:21.540 --> 0:19:22.220
<v Speaker 1>I

0:19:22.220 --> 0:19:25.700
<v Speaker 2>have to defend myself on that, you know, um The

0:19:25.710 --> 0:19:29.129
<v Speaker 2>period when I was a Treasury kind of running that

0:19:29.140 --> 0:19:30.660
<v Speaker 2>bit was

0:19:31.440 --> 0:19:36.430
<v Speaker 2>2000 2015. So II was of the view um that

0:19:36.440 --> 0:19:39.290
<v Speaker 2>you just don't talk about it and talking about it

0:19:39.290 --> 0:19:40.770
<v Speaker 2>all and get you in trouble.

0:19:41.140 --> 0:19:44.050
<v Speaker 2>And that was the constants of the

0:19:44.440 --> 0:19:48.960
<v Speaker 2>Bush and Obama administrations. So you're you are totally right.

0:19:49.340 --> 0:19:52.840
<v Speaker 2>Um And I'm reflecting my experience is indeed

0:19:52.850 --> 0:19:56.090
<v Speaker 1>indeed. I'd like to think that your experience is reflective

0:19:56.090 --> 0:19:59.670
<v Speaker 1>of the present administration to some extent and their policy framework.

0:19:59.680 --> 0:20:00.050
<v Speaker 1>Um

0:20:00.060 --> 0:20:00.810
<v Speaker 2>I think it is

0:20:00.820 --> 0:20:05.980
<v Speaker 1>indeed indeed. Um Okay fiscal. Um we had some momentum

0:20:05.980 --> 0:20:08.320
<v Speaker 1>building up for build back better but now it seems

0:20:08.320 --> 0:20:10.550
<v Speaker 1>to have sort of dissipated entirely.

0:20:10.740 --> 0:20:11.550
<v Speaker 1>Is that a big deal?

0:20:13.240 --> 0:20:14.050
<v Speaker 2>Um

0:20:16.340 --> 0:20:17.270
<v Speaker 2>So I think that

0:20:17.640 --> 0:20:17.960
<v Speaker 2>two

0:20:19.140 --> 0:20:21.360
<v Speaker 2>build back better in name

0:20:21.840 --> 0:20:25.170
<v Speaker 2>and current form is not going to happen.

0:20:26.040 --> 0:20:27.810
<v Speaker 2>Almost certainly dead

0:20:29.140 --> 0:20:31.060
<v Speaker 2>months and months of effort

0:20:31.740 --> 0:20:32.460
<v Speaker 2>and

0:20:32.840 --> 0:20:35.560
<v Speaker 2>um there we are. And

0:20:37.440 --> 0:20:40.860
<v Speaker 2>another complicating factor is that

0:20:41.540 --> 0:20:44.450
<v Speaker 2>there are a lot of legislative priorities so

0:20:46.740 --> 0:20:49.950
<v Speaker 2>we need another bill to keep the government open.

0:20:50.580 --> 0:20:52.260
<v Speaker 2>Um They're working on an

0:20:52.840 --> 0:20:55.450
<v Speaker 2>competitiveness bill that addresses china

0:20:57.060 --> 0:20:59.359
<v Speaker 2>there's going to be the supreme court vacancy.

0:21:00.040 --> 0:21:02.540
<v Speaker 2>Um So I one never knows what's going to happen

0:21:02.540 --> 0:21:04.060
<v Speaker 2>in D. C. Politics but if

0:21:04.640 --> 0:21:08.090
<v Speaker 2>Something is going to happen it will be scaled back.

0:21:08.100 --> 0:21:11.060
<v Speaker 2>Um I've heard some some of my friends who follow

0:21:11.060 --> 0:21:14.770
<v Speaker 2>the hill say you know something 500 billion to a trillion.

0:21:15.340 --> 0:21:18.550
<v Speaker 2>Um It certainly won't be what the progressives wanted.

0:21:19.340 --> 0:21:19.850
<v Speaker 2>Um

0:21:21.140 --> 0:21:25.690
<v Speaker 2>Now the politics are extraordinarily different difficult. The republicans will

0:21:25.690 --> 0:21:26.959
<v Speaker 2>oppose anything

0:21:28.160 --> 0:21:31.270
<v Speaker 2>in the Democratic Party. You have the splits between progressives

0:21:31.600 --> 0:21:35.159
<v Speaker 2>and centrists and differences over what should be emphasized.

0:21:36.040 --> 0:21:36.760
<v Speaker 2>Um

0:21:37.540 --> 0:21:38.460
<v Speaker 2>And

0:21:38.940 --> 0:21:41.060
<v Speaker 2>I have to say I think the democrats really

0:21:41.840 --> 0:21:45.859
<v Speaker 2>badly handled communications about the matter.

0:21:46.340 --> 0:21:49.850
<v Speaker 2>Alwyn heard it first was $3.5 trillion dollars

0:21:50.340 --> 0:21:51.960
<v Speaker 2>and uh

0:21:52.440 --> 0:21:55.390
<v Speaker 2>they didn't do a good job of getting into people's

0:21:55.400 --> 0:21:57.980
<v Speaker 2>psyche what's in the bill and why that would be

0:21:57.990 --> 0:21:59.160
<v Speaker 2>helpful to them.

0:21:59.840 --> 0:22:00.459
<v Speaker 2>Um

0:22:01.640 --> 0:22:02.560
<v Speaker 2>And

0:22:05.640 --> 0:22:06.959
<v Speaker 2>I think that there was a

0:22:07.440 --> 0:22:10.260
<v Speaker 2>perception that it was a very activist bill

0:22:10.740 --> 0:22:14.609
<v Speaker 2>and given the current inflation situation um in America I

0:22:14.609 --> 0:22:17.750
<v Speaker 2>think many are just wary about the idea of activism

0:22:17.750 --> 0:22:18.960
<v Speaker 2>from the government.

0:22:19.540 --> 0:22:20.050
<v Speaker 2>Um

0:22:20.840 --> 0:22:22.850
<v Speaker 2>Now is it a big deal if it dies.

0:22:23.440 --> 0:22:23.950
<v Speaker 2>Um

0:22:25.140 --> 0:22:28.980
<v Speaker 2>So two answers to that one. Look it doesn't help

0:22:28.980 --> 0:22:30.560
<v Speaker 2>the president and his agenda.

0:22:31.540 --> 0:22:34.310
<v Speaker 2>Um If you can pull off something it's it's it'll

0:22:34.310 --> 0:22:35.560
<v Speaker 2>be a win, it'll be good.

0:22:36.240 --> 0:22:36.960
<v Speaker 2>Um

0:22:37.340 --> 0:22:40.460
<v Speaker 2>The perception that democrats are

0:22:41.540 --> 0:22:44.399
<v Speaker 2>at loggerheads with one another between the progressives and the

0:22:44.400 --> 0:22:46.480
<v Speaker 2>centrists is hardly helpful

0:22:46.940 --> 0:22:50.020
<v Speaker 2>and biden is pulling low and so when he doesn't

0:22:50.020 --> 0:22:51.670
<v Speaker 2>achieve his agenda that doesn't help him

0:22:52.540 --> 0:22:56.660
<v Speaker 2>now. beyond that. I think you're asking a question about

0:22:56.660 --> 0:22:57.550
<v Speaker 2>social preference

0:22:58.740 --> 0:23:03.050
<v Speaker 2>and you know in my view, I think initiatives like

0:23:03.050 --> 0:23:06.060
<v Speaker 2>child tax credit, universal pre k

0:23:06.540 --> 0:23:07.770
<v Speaker 2>childcare support,

0:23:08.970 --> 0:23:10.359
<v Speaker 2>paid family leave,

0:23:11.040 --> 0:23:13.600
<v Speaker 2>um more climate spending. I think there are issues that

0:23:13.609 --> 0:23:16.770
<v Speaker 2>the american people could get behind if

0:23:17.340 --> 0:23:21.270
<v Speaker 2>they were led um to do so um

0:23:21.640 --> 0:23:22.450
<v Speaker 2>properly.

0:23:23.040 --> 0:23:23.850
<v Speaker 2>Um

0:23:24.940 --> 0:23:27.350
<v Speaker 2>but again the odds don't seem to be on the

0:23:27.350 --> 0:23:29.350
<v Speaker 2>side of passage

0:23:29.740 --> 0:23:34.859
<v Speaker 2>of even a modified reduced bill at this point.

0:23:36.540 --> 0:23:39.630
<v Speaker 1>Right unfortunate, especially in the climate part, I was hoping

0:23:39.630 --> 0:23:42.790
<v Speaker 1>that this administration would be able to trickle charge some

0:23:42.790 --> 0:23:44.730
<v Speaker 1>of it. I know that there are some climate provisions

0:23:44.730 --> 0:23:45.860
<v Speaker 1>in the earlier two bills

0:23:46.240 --> 0:23:48.160
<v Speaker 1>but hopefully, you know

0:23:49.040 --> 0:23:51.350
<v Speaker 1>at some point, you know, some parts of this bill

0:23:51.890 --> 0:23:54.190
<v Speaker 1>can be put back and trained.

0:23:54.740 --> 0:23:58.450
<v Speaker 1>Um Mark, let's sort of you know, switch gear a

0:23:58.450 --> 0:24:01.060
<v Speaker 1>little bit and talk about international economics.

0:24:01.540 --> 0:24:04.440
<v Speaker 1>Um when the biden administration came to power, I think

0:24:04.450 --> 0:24:07.100
<v Speaker 1>we never really expected it to undo everything that the

0:24:07.100 --> 0:24:08.950
<v Speaker 1>trump administration do immediately.

0:24:09.640 --> 0:24:13.300
<v Speaker 1>But here has gone by trump era tariffs have not

0:24:13.300 --> 0:24:13.960
<v Speaker 1>been touched.

0:24:14.440 --> 0:24:18.369
<v Speaker 1>CPP Cp Tpp is not going anywhere as far as

0:24:18.369 --> 0:24:20.669
<v Speaker 1>the U. S. Is concerned, it's going ahead without the U. S.

0:24:21.340 --> 0:24:25.750
<v Speaker 1>And in the last two years, global coordination on vaccine

0:24:25.750 --> 0:24:28.000
<v Speaker 1>production and distribution which really ought to have been led

0:24:28.000 --> 0:24:28.859
<v Speaker 1>by the U. S.

0:24:29.240 --> 0:24:30.459
<v Speaker 1>Has been somewhat patchy,

0:24:31.040 --> 0:24:34.940
<v Speaker 1>am I being too pessimistic in my prognosis or or

0:24:34.940 --> 0:24:36.260
<v Speaker 1>this is how things have been.

0:24:38.740 --> 0:24:39.760
<v Speaker 2>Um

0:24:40.740 --> 0:24:41.760
<v Speaker 2>Well, uh

0:24:43.340 --> 0:24:46.050
<v Speaker 2>nobody who knows me has ever accused me of being

0:24:46.050 --> 0:24:50.189
<v Speaker 2>optimistic and cheery, but I'm going to say that I

0:24:50.190 --> 0:24:51.460
<v Speaker 2>think the

0:24:51.840 --> 0:24:54.060
<v Speaker 2>proverbial glass is more than half full.

0:24:55.540 --> 0:24:59.630
<v Speaker 2>So um in the world of international finance and diplomacy

0:24:59.640 --> 0:25:02.460
<v Speaker 2>tone matters. Um and let's

0:25:03.140 --> 0:25:03.860
<v Speaker 2>remember

0:25:04.440 --> 0:25:07.090
<v Speaker 2>that a little more than a year ago, our rhetoric

0:25:07.100 --> 0:25:10.640
<v Speaker 2>in the U. S. Was nativists, it was bilateral ist,

0:25:10.640 --> 0:25:12.360
<v Speaker 2>it was anti multilateralists.

0:25:12.840 --> 0:25:15.439
<v Speaker 2>We had a president who threw away a G seven

0:25:15.440 --> 0:25:16.460
<v Speaker 2>communique

0:25:17.040 --> 0:25:21.310
<v Speaker 2>ripped up international agreements, denigrated other countries with less than

0:25:21.310 --> 0:25:22.770
<v Speaker 2>polite words.

0:25:23.140 --> 0:25:26.720
<v Speaker 2>And, you know, our president and frankly preferred Vladimir Putin

0:25:26.720 --> 0:25:30.600
<v Speaker 2>and kim jong un to Angela Merkel and Justin Trudeau.

0:25:30.609 --> 0:25:32.770
<v Speaker 2>So um

0:25:33.640 --> 0:25:36.830
<v Speaker 2>that is gone, That tone is gone and rightly so.

0:25:36.840 --> 0:25:41.260
<v Speaker 2>Um biden and his team are working with others.

0:25:41.640 --> 0:25:43.170
<v Speaker 2>They're trying to be constructive.

0:25:43.640 --> 0:25:44.360
<v Speaker 2>Um

0:25:45.240 --> 0:25:47.430
<v Speaker 2>you know, look at the role they're playing and on

0:25:47.430 --> 0:25:51.659
<v Speaker 2>Russia and Ukraine and how closely they are working with others.

0:25:52.240 --> 0:25:54.400
<v Speaker 2>Um At this point, I mean, the West is more

0:25:54.400 --> 0:25:57.550
<v Speaker 2>unified now than it probably has been for for years.

0:25:58.340 --> 0:25:58.959
<v Speaker 2>Um

0:26:01.440 --> 0:26:05.130
<v Speaker 2>There have been some marginal moves on trade tensions. Um

0:26:05.140 --> 0:26:05.850
<v Speaker 2>you know, the

0:26:06.440 --> 0:26:06.860
<v Speaker 2>there

0:26:07.640 --> 0:26:08.270
<v Speaker 2>going

0:26:08.640 --> 0:26:13.340
<v Speaker 2>Airbus have a deal. The Treasury worked out the international

0:26:13.340 --> 0:26:18.300
<v Speaker 2>tax agreement, whether Congress passes, it is another question um

0:26:18.310 --> 0:26:22.160
<v Speaker 2>on financial sanctions. The biden team is working much more

0:26:22.160 --> 0:26:25.389
<v Speaker 2>closely with allies trying to work with them, especially on

0:26:25.390 --> 0:26:26.550
<v Speaker 2>the Russia Ukraine

0:26:27.040 --> 0:26:31.770
<v Speaker 2>um sanctions rather than following a unilateralist um

0:26:32.340 --> 0:26:33.169
<v Speaker 2>path.

0:26:33.540 --> 0:26:34.460
<v Speaker 2>And

0:26:34.840 --> 0:26:37.450
<v Speaker 2>they definitely are trying to

0:26:37.940 --> 0:26:43.670
<v Speaker 2>work more closely overseas on climate issues.

0:26:44.840 --> 0:26:46.880
<v Speaker 2>And then since I'm

0:26:47.740 --> 0:26:51.890
<v Speaker 2>old Treasury ex Treasury guy always have to say the U. S.

0:26:51.890 --> 0:26:56.379
<v Speaker 2>Remains a very open economy, very open financial system. The

0:26:56.380 --> 0:26:59.460
<v Speaker 2>strong U. S. Economy is imparting huge global demand and

0:27:00.140 --> 0:27:05.560
<v Speaker 2>I don't hear anybody complaining about that. So um

0:27:06.340 --> 0:27:08.949
<v Speaker 2>that said um

0:27:11.440 --> 0:27:13.859
<v Speaker 2>I think it's important americans do not want to be

0:27:13.859 --> 0:27:15.060
<v Speaker 2>the policeman of the world.

0:27:15.740 --> 0:27:18.460
<v Speaker 2>The afghan departure will reinforce that.

0:27:19.040 --> 0:27:26.280
<v Speaker 2>Um basically americans want to see our country's global footprint reduced.

0:27:26.290 --> 0:27:26.960
<v Speaker 2>Um

0:27:27.640 --> 0:27:31.359
<v Speaker 2>Now CP TPP um

0:27:32.040 --> 0:27:36.609
<v Speaker 2>is an example of less than desirable constancy between trump

0:27:36.609 --> 0:27:38.159
<v Speaker 2>and biden in my mind,

0:27:38.540 --> 0:27:40.160
<v Speaker 2>you'll get no argument from me.

0:27:40.740 --> 0:27:43.379
<v Speaker 2>I think the abandonment of TPP by the U. S.

0:27:43.380 --> 0:27:46.050
<v Speaker 2>Was a huge colossal mistake.

0:27:46.540 --> 0:27:49.379
<v Speaker 2>Um It hurt us in ASia and only seeds ground

0:27:49.380 --> 0:27:50.170
<v Speaker 2>to china

0:27:50.740 --> 0:27:54.199
<v Speaker 2>and um I'd like to see us return but I'm

0:27:54.200 --> 0:27:56.560
<v Speaker 2>not holding my breath over that.

0:27:57.240 --> 0:28:00.300
<v Speaker 2>Um It's just not gonna happen. The republicans aren't the

0:28:00.300 --> 0:28:02.900
<v Speaker 2>free trade party of the past. The democrats have their

0:28:02.900 --> 0:28:05.460
<v Speaker 2>own fissures on trade.

0:28:06.040 --> 0:28:06.760
<v Speaker 2>Um

0:28:07.240 --> 0:28:08.170
<v Speaker 2>And

0:28:08.740 --> 0:28:09.359
<v Speaker 2>so

0:28:10.440 --> 0:28:13.770
<v Speaker 2>so that's why I'm not even more effusive. But again

0:28:13.770 --> 0:28:15.270
<v Speaker 2>I do think that

0:28:15.740 --> 0:28:16.910
<v Speaker 2>the rest of the world should

0:28:18.340 --> 0:28:20.560
<v Speaker 2>feel positively about the change tenor

0:28:20.940 --> 0:28:24.570
<v Speaker 2>coming out of the United States on international diplomacy but

0:28:24.570 --> 0:28:24.720
<v Speaker 2>we

0:28:24.720 --> 0:28:27.490
<v Speaker 1>should not hold our breath on the trump era tariffs.

0:28:27.500 --> 0:28:28.350
<v Speaker 1>They're going to stay

0:28:29.640 --> 0:28:30.270
<v Speaker 2>um

0:28:33.540 --> 0:28:35.530
<v Speaker 2>I think there are a lot of people that would

0:28:35.530 --> 0:28:37.459
<v Speaker 2>like to um

0:28:38.240 --> 0:28:40.360
<v Speaker 2>chip away at them

0:28:40.740 --> 0:28:44.370
<v Speaker 2>move away from them, but they will do so very,

0:28:44.370 --> 0:28:47.160
<v Speaker 2>very hesitantly and

0:28:47.540 --> 0:28:50.910
<v Speaker 2>perhaps you'll see more exceptions and exclusions and things of

0:28:50.910 --> 0:28:54.820
<v Speaker 2>that nature. But it's it's not easy political sailing on

0:28:54.820 --> 0:28:57.160
<v Speaker 2>trade on the trade front, the United States at this

0:28:57.160 --> 0:28:59.060
<v Speaker 1>point. Right.

0:28:59.740 --> 0:29:02.760
<v Speaker 1>Um you recently wrote an article and I really, really

0:29:02.760 --> 0:29:05.700
<v Speaker 1>enjoyed it. It was a very provocative title. German and

0:29:05.700 --> 0:29:08.710
<v Speaker 1>chinese growth models are outdated. I wonder if it was

0:29:08.710 --> 0:29:12.340
<v Speaker 1>your editorial, you who came up with that title. Um

0:29:12.350 --> 0:29:16.790
<v Speaker 1>and let's begin with china, Haven't we been predicting china's

0:29:16.790 --> 0:29:18.270
<v Speaker 1>collapse for decades

0:29:18.640 --> 0:29:23.620
<v Speaker 1>and hasn't it's widely flagged structural challenges like excess investment, leverage,

0:29:23.620 --> 0:29:26.050
<v Speaker 1>overhang aging have been around for a while.

0:29:26.440 --> 0:29:29.350
<v Speaker 1>So why is this moment in China's economic history and

0:29:29.350 --> 0:29:30.160
<v Speaker 1>Inflection point?

0:29:32.540 --> 0:29:34.560
<v Speaker 2>Well, it'll come as a shock to you. But every

0:29:34.560 --> 0:29:36.290
<v Speaker 2>once in a while I can have a catchy thought

0:29:36.290 --> 0:29:37.400
<v Speaker 2>and I actually came up

0:29:37.410 --> 0:29:38.860
<v Speaker 1>with the title myself.

0:29:39.540 --> 0:29:43.040
<v Speaker 2>Um tough question. Fair question. And I'll bet you it's

0:29:43.040 --> 0:29:47.459
<v Speaker 2>really important question to Southeast Asia in particular.

0:29:48.340 --> 0:29:51.310
<v Speaker 2>I always think of the african proverb about when the

0:29:51.310 --> 0:29:54.150
<v Speaker 2>two elephants fight the grass gets stomped on and I'm

0:29:54.150 --> 0:29:58.560
<v Speaker 2>not calling Singapore grass, but you get the draft. Um,

0:30:00.640 --> 0:30:02.459
<v Speaker 2>So I want to start

0:30:03.940 --> 0:30:04.560
<v Speaker 2>um

0:30:06.640 --> 0:30:08.860
<v Speaker 2>in a different place. I want to ask, um,

0:30:09.840 --> 0:30:11.670
<v Speaker 2>a lot of people

0:30:17.340 --> 0:30:20.290
<v Speaker 2>ask, you know, why is the US being so hard.

0:30:20.640 --> 0:30:23.160
<v Speaker 2>And to me, I think

0:30:23.640 --> 0:30:26.760
<v Speaker 2>a fundamental question in thinking about

0:30:27.440 --> 0:30:32.060
<v Speaker 2>uh how china's approach to this administration and really

0:30:32.440 --> 0:30:33.760
<v Speaker 2>rests on the question of

0:30:34.240 --> 0:30:37.550
<v Speaker 2>how has china changed. President G is a very different

0:30:37.550 --> 0:30:42.630
<v Speaker 2>animal than his predecessors and much more authoritarian, much more status,

0:30:42.630 --> 0:30:43.860
<v Speaker 2>much more controlling,

0:30:44.900 --> 0:30:48.810
<v Speaker 2>putting power in the Communist Party, liberal reforms have been

0:30:48.810 --> 0:30:49.550
<v Speaker 2>set back.

0:30:50.240 --> 0:30:51.950
<v Speaker 2>Um and uh

0:30:53.040 --> 0:30:54.560
<v Speaker 2>so it's a much more

0:30:55.440 --> 0:30:58.690
<v Speaker 2>aggressive china in my view and a lot of the

0:30:58.690 --> 0:31:04.050
<v Speaker 2>concerns over industrial policy and technological theft etcetera etcetera quite valid.

0:31:04.660 --> 0:31:07.140
<v Speaker 2>These were concerns that were on the plate of the

0:31:07.140 --> 0:31:11.670
<v Speaker 2>Obama administration trump, put them on steroids and whatnot.

0:31:12.140 --> 0:31:12.950
<v Speaker 2>And um

0:31:14.940 --> 0:31:16.660
<v Speaker 2>you know, I think in the past when the two

0:31:16.660 --> 0:31:18.770
<v Speaker 2>of us have chatted, we've,

0:31:19.140 --> 0:31:21.420
<v Speaker 2>you know, you've wondered if the biden tone was that

0:31:21.420 --> 0:31:23.550
<v Speaker 2>different and

0:31:24.040 --> 0:31:25.860
<v Speaker 2>and I think that um

0:31:27.240 --> 0:31:30.560
<v Speaker 2>it is different but that a lot of the substance

0:31:30.570 --> 0:31:33.170
<v Speaker 2>very much remains um

0:31:34.840 --> 0:31:36.460
<v Speaker 2>the same. Um

0:31:38.640 --> 0:31:40.770
<v Speaker 2>now why is china

0:31:41.240 --> 0:31:42.650
<v Speaker 2>different um

0:31:43.640 --> 0:31:44.360
<v Speaker 2>now,

0:31:45.740 --> 0:31:49.140
<v Speaker 2>well I guess sometimes I think about stein's law, something

0:31:49.140 --> 0:31:51.260
<v Speaker 2>can't go on forever. It will stop.

0:31:51.840 --> 0:31:52.459
<v Speaker 2>Um

0:31:54.040 --> 0:31:59.170
<v Speaker 2>President G. himself said Chinese GDP would double by 2035.

0:31:59.840 --> 0:32:03.500
<v Speaker 2>Um so that means growth needs to average four and 3/4%

0:32:03.500 --> 0:32:06.180
<v Speaker 2>over this period, but if it's higher at the beginning

0:32:06.180 --> 0:32:08.560
<v Speaker 2>part it'll be lower at the

0:32:09.040 --> 0:32:11.350
<v Speaker 2>In the 2nd part of the period.

0:32:12.440 --> 0:32:13.160
<v Speaker 2>Um

0:32:14.140 --> 0:32:16.770
<v Speaker 2>I think there are other, I think there are reasons

0:32:16.770 --> 0:32:19.650
<v Speaker 2>why things are different now. I think first of all

0:32:19.660 --> 0:32:20.860
<v Speaker 2>the demographic

0:32:21.340 --> 0:32:24.160
<v Speaker 2>kink is soon upon china,

0:32:24.640 --> 0:32:27.810
<v Speaker 2>it wasn't a decade ago, but now it's beginning to

0:32:27.810 --> 0:32:28.660
<v Speaker 2>hit china,

0:32:29.840 --> 0:32:33.050
<v Speaker 2>china's heavily relied on trade in the past. Um

0:32:33.840 --> 0:32:34.550
<v Speaker 2>Yeah,

0:32:35.140 --> 0:32:38.140
<v Speaker 2>You and I both know in the early 2000s or 10%

0:32:38.140 --> 0:32:40.360
<v Speaker 2>of GDP current account surpluses now.

0:32:40.740 --> 0:32:41.360
<v Speaker 2>Um

0:32:41.840 --> 0:32:43.360
<v Speaker 2>the current account

0:32:43.840 --> 0:32:47.650
<v Speaker 2>Before the crisis was getting close to the balance, but

0:32:47.650 --> 0:32:52.000
<v Speaker 2>they still run a trade surplus now around 3% of

0:32:52.010 --> 0:32:56.260
<v Speaker 2>GDP and this isn't an $18 trillion dollar economy.

0:32:56.840 --> 0:32:57.770
<v Speaker 2>So, um,

0:32:58.440 --> 0:32:59.760
<v Speaker 2>I think that

0:33:00.240 --> 0:33:03.840
<v Speaker 2>global growth is gonna slower this decade. Um you know,

0:33:03.840 --> 0:33:05.670
<v Speaker 2>we see potential slowing in

0:33:07.440 --> 0:33:11.760
<v Speaker 2>fairly modest in europe and Japan, um

0:33:13.040 --> 0:33:14.770
<v Speaker 2>Under two in the us

0:33:16.440 --> 0:33:19.560
<v Speaker 2>china itself is slowing, so um

0:33:20.240 --> 0:33:20.660
<v Speaker 2>um

0:33:21.740 --> 0:33:24.330
<v Speaker 2>it just seems to me that china is the world's

0:33:24.330 --> 0:33:28.210
<v Speaker 2>number two economy now, it's global footprint is just way

0:33:28.210 --> 0:33:31.980
<v Speaker 2>too big for it to rely on the external sector

0:33:31.990 --> 0:33:36.260
<v Speaker 2>uh as a major support for growth and that if

0:33:36.260 --> 0:33:39.260
<v Speaker 2>it does, it's going to cause uh

0:33:39.740 --> 0:33:42.460
<v Speaker 2>ramping up of protectionist pressures around the world.

0:33:43.240 --> 0:33:43.860
<v Speaker 2>Um

0:33:44.940 --> 0:33:46.350
<v Speaker 2>the

0:33:46.740 --> 0:33:49.900
<v Speaker 2>china economists often say that much of the growth over

0:33:49.900 --> 0:33:52.660
<v Speaker 2>the last two decades was driven by the absorption of

0:33:52.660 --> 0:33:53.360
<v Speaker 2>rural labor.

0:33:54.140 --> 0:33:54.670
<v Speaker 2>Um

0:33:55.440 --> 0:33:58.020
<v Speaker 2>I don't know if that process is complete, but many

0:33:58.030 --> 0:34:01.860
<v Speaker 2>experts say it is largely uh completed

0:34:02.340 --> 0:34:06.620
<v Speaker 2>chinese growth has relied on savings and investment, high levels

0:34:06.630 --> 0:34:07.260
<v Speaker 2>of them

0:34:07.940 --> 0:34:11.960
<v Speaker 2>And the efficiency of investment is plummeted. So basically it's

0:34:11.960 --> 0:34:15.150
<v Speaker 2>taking over 7% of GDP and investment these days to

0:34:15.150 --> 0:34:16.759
<v Speaker 2>generate 1% point

0:34:17.239 --> 0:34:17.960
<v Speaker 2>of growth

0:34:18.340 --> 0:34:19.560
<v Speaker 2>um that was

0:34:20.340 --> 0:34:22.260
<v Speaker 2>3-5%,,

0:34:22.739 --> 0:34:25.670
<v Speaker 2>you know, many seven a decade ago or so.

0:34:27.140 --> 0:34:27.670
<v Speaker 2>Um

0:34:28.040 --> 0:34:30.969
<v Speaker 2>Much of the investment has run through large state owned

0:34:30.980 --> 0:34:36.259
<v Speaker 2>um commercial banks um to going to S. O. E. S.

0:34:37.640 --> 0:34:39.049
<v Speaker 2>And um

0:34:40.140 --> 0:34:43.560
<v Speaker 2>meanwhile the government is cracking down on the private sector

0:34:45.540 --> 0:34:47.940
<v Speaker 2>At a time when according to the recent IMF article

0:34:47.940 --> 0:34:51.620
<v Speaker 2>for report on China that the total fact TFT total

0:34:51.620 --> 0:34:54.170
<v Speaker 2>factor productivity growth is under 1%.

0:34:55.239 --> 0:34:55.750
<v Speaker 2>Um

0:34:56.739 --> 0:34:57.359
<v Speaker 2>and

0:34:57.739 --> 0:34:59.390
<v Speaker 2>I'm one who believes that the private sector is a

0:34:59.390 --> 0:35:02.260
<v Speaker 2>better engine for growth and state owned enterprises.

0:35:02.739 --> 0:35:07.560
<v Speaker 2>Um So I don't see that as auguring well for growth.

0:35:08.040 --> 0:35:10.450
<v Speaker 2>Um debt and leverage our high the authorities want to

0:35:10.450 --> 0:35:11.669
<v Speaker 2>seem seem

0:35:12.040 --> 0:35:15.210
<v Speaker 2>to be wanting to crack down on debt and leverage.

0:35:15.210 --> 0:35:17.629
<v Speaker 2>They know that if they do so to forcefully it's

0:35:17.630 --> 0:35:18.460
<v Speaker 2>going to

0:35:18.940 --> 0:35:22.029
<v Speaker 2>um further cause growth diploma. So they let their foot

0:35:22.030 --> 0:35:24.960
<v Speaker 2>off the pedal a little bit. But the overall trend

0:35:24.960 --> 0:35:26.860
<v Speaker 2>towards restraint I think is there

0:35:27.640 --> 0:35:28.259
<v Speaker 2>um

0:35:29.239 --> 0:35:31.460
<v Speaker 2>weaknesses in the real estate sector,

0:35:33.840 --> 0:35:35.060
<v Speaker 2>even if managed

0:35:35.440 --> 0:35:39.110
<v Speaker 2>Financially are going to have to put a crimp on

0:35:39.120 --> 0:35:41.470
<v Speaker 2>a growth. It's 30% of GDP

0:35:42.239 --> 0:35:42.859
<v Speaker 2>um

0:35:46.540 --> 0:35:50.319
<v Speaker 2>consumption growth. So china wants to transition to consumption and

0:35:50.320 --> 0:35:51.460
<v Speaker 2>services led growth.

0:35:51.940 --> 0:35:54.850
<v Speaker 2>But consumption remains very low.

0:35:55.340 --> 0:35:57.770
<v Speaker 2>I think fiscal policy could play a

0:35:57.780 --> 0:35:58.600
<v Speaker 1>role in

0:35:58.600 --> 0:36:01.640
<v Speaker 2>helping build the social safety net to a greater extent

0:36:01.640 --> 0:36:02.239
<v Speaker 2>in china,

0:36:02.630 --> 0:36:05.469
<v Speaker 2>but again, I think that the overall direction of fiscal

0:36:05.469 --> 0:36:08.540
<v Speaker 2>policy is modestly

0:36:09.530 --> 0:36:11.050
<v Speaker 2>in restraining.

0:36:12.030 --> 0:36:12.540
<v Speaker 2>Um,

0:36:13.430 --> 0:36:16.140
<v Speaker 2>so, um, when I put it all together, um, I

0:36:16.140 --> 0:36:20.690
<v Speaker 2>think that the future growth drivers could face a challenge

0:36:20.700 --> 0:36:23.450
<v Speaker 2>and um, I kind of wonder whether

0:36:24.130 --> 0:36:26.860
<v Speaker 2>china's and this is other analysts have raised this point.

0:36:26.860 --> 0:36:30.040
<v Speaker 2>You know, we'll be able to escape this middle income trap.

0:36:30.630 --> 0:36:34.000
<v Speaker 2>So I hope that well, and of course, coming back

0:36:34.000 --> 0:36:34.950
<v Speaker 2>to where I started

0:36:35.630 --> 0:36:37.750
<v Speaker 2>us, china tensions,

0:36:38.230 --> 0:36:43.050
<v Speaker 2>geopolitical tensions are not going to improve the picture.

0:36:43.430 --> 0:36:44.839
<v Speaker 2>So when you put it all together,

0:36:45.330 --> 0:36:48.960
<v Speaker 2>that's why I think this time may be different.

0:36:49.730 --> 0:36:53.359
<v Speaker 1>Okay, fair enough. And your article was about both Germany

0:36:53.370 --> 0:36:56.410
<v Speaker 1>and china because you talked about Germany sort of history

0:36:56.410 --> 0:36:57.650
<v Speaker 1>of focusing on

0:36:58.030 --> 0:37:02.010
<v Speaker 1>heavy industry and and large enterprises and in the context

0:37:02.010 --> 0:37:05.990
<v Speaker 1>of Germany who provided a playbook for economic revitalization for

0:37:05.989 --> 0:37:10.320
<v Speaker 1>the shows government, you talked about climate change digitalization, infrastructure

0:37:10.320 --> 0:37:13.350
<v Speaker 1>investment are three areas where they can push for growth.

0:37:13.730 --> 0:37:16.170
<v Speaker 1>So, in the context of Germany, my question is, do

0:37:16.170 --> 0:37:18.920
<v Speaker 1>you think they can deliver and also in the context

0:37:18.920 --> 0:37:19.550
<v Speaker 1>of china,

0:37:20.030 --> 0:37:21.740
<v Speaker 1>why can china grow through

0:37:22.130 --> 0:37:23.750
<v Speaker 1>climate and digitalization.

0:37:27.230 --> 0:37:28.660
<v Speaker 2>Okay, um,

0:37:29.430 --> 0:37:32.660
<v Speaker 2>so yes, the article postulated that Germany has traditionally been

0:37:32.660 --> 0:37:34.250
<v Speaker 2>an export led economy

0:37:34.730 --> 0:37:38.740
<v Speaker 2>and we still see that in this massive current account surpluses,

0:37:38.750 --> 0:37:40.550
<v Speaker 2>savings is quite high,

0:37:40.930 --> 0:37:46.480
<v Speaker 2>personal corporate and even public in recent years, while investments

0:37:46.480 --> 0:37:47.250
<v Speaker 2>been restrained

0:37:48.030 --> 0:37:51.450
<v Speaker 2>and um, I also noted in the piece that Germany's

0:37:51.450 --> 0:37:55.140
<v Speaker 2>automotive industry has played a huge role in the economy's

0:37:55.150 --> 0:37:56.460
<v Speaker 2>growth

0:37:58.030 --> 0:38:02.780
<v Speaker 2>and it may face difficult transition periods with the electrification

0:38:02.780 --> 0:38:04.540
<v Speaker 2>of cars and whatnot.

0:38:05.620 --> 0:38:06.150
<v Speaker 2>Um,

0:38:07.520 --> 0:38:11.180
<v Speaker 2>and then, as you said to help stimulate domestic demand

0:38:11.180 --> 0:38:12.400
<v Speaker 2>growth reduce its

0:38:14.760 --> 0:38:16.150
<v Speaker 2>external dependence

0:38:16.520 --> 0:38:18.820
<v Speaker 2>at the time of a slowing global economy, which we

0:38:18.830 --> 0:38:19.840
<v Speaker 2>just discussed,

0:38:20.320 --> 0:38:22.940
<v Speaker 2>um, I observed that the new government could help modernize

0:38:22.940 --> 0:38:26.310
<v Speaker 2>growth model and support the economy through investment in climate

0:38:26.310 --> 0:38:28.239
<v Speaker 2>digitalization and infrastructure.

0:38:28.920 --> 0:38:32.760
<v Speaker 2>And let's give the Germans credit. The Schultz team understands

0:38:32.760 --> 0:38:33.150
<v Speaker 2>this

0:38:33.520 --> 0:38:37.330
<v Speaker 2>and they have even articulated this vision.

0:38:37.920 --> 0:38:41.240
<v Speaker 2>Uh, one should never underestimate the ability of the german

0:38:41.239 --> 0:38:46.090
<v Speaker 2>economy to adjust. You know what it did after reunification

0:38:46.090 --> 0:38:47.750
<v Speaker 2>was quite impressive.

0:38:48.520 --> 0:38:49.030
<v Speaker 2>Um,

0:38:49.420 --> 0:38:51.969
<v Speaker 2>you know, the greens are in power now and definitely

0:38:51.969 --> 0:38:53.830
<v Speaker 2>have a climate agenda and the like

0:38:54.719 --> 0:38:55.140
<v Speaker 2>now

0:38:55.620 --> 0:38:58.540
<v Speaker 2>you asked, I mean, is this going to, will they

0:38:58.540 --> 0:38:59.450
<v Speaker 2>carry through on it?

0:39:00.719 --> 0:39:04.550
<v Speaker 2>And I think it could be quite challenging for them

0:39:04.550 --> 0:39:05.250
<v Speaker 2>to do so.

0:39:05.719 --> 0:39:06.250
<v Speaker 2>Um,

0:39:07.120 --> 0:39:09.580
<v Speaker 2>german fiscal behavior is

0:39:11.320 --> 0:39:12.340
<v Speaker 2>conservative

0:39:14.219 --> 0:39:15.450
<v Speaker 2>perhaps

0:39:16.020 --> 0:39:19.830
<v Speaker 2>from the standpoint of many americans, excessively conservative.

0:39:20.219 --> 0:39:22.959
<v Speaker 2>Of course, one could always ask who are we americans

0:39:22.960 --> 0:39:25.190
<v Speaker 2>given the way we run our fiscal policy to comment

0:39:25.190 --> 0:39:26.340
<v Speaker 2>on anybody else's.

0:39:26.719 --> 0:39:28.150
<v Speaker 2>Um, but

0:39:28.719 --> 0:39:32.140
<v Speaker 2>and they deserve good credit um

0:39:33.320 --> 0:39:35.150
<v Speaker 2>for their commitment to financial stability,

0:39:35.719 --> 0:39:38.780
<v Speaker 2>but with negative real interest rates and huge investment needs,

0:39:38.780 --> 0:39:41.120
<v Speaker 2>it would be a good time to step up investments

0:39:41.130 --> 0:39:42.140
<v Speaker 2>in these areas,

0:39:42.520 --> 0:39:46.969
<v Speaker 2>but I think that there are constrained by their conservativism

0:39:46.980 --> 0:39:48.940
<v Speaker 2>and then the debt break laws

0:39:49.320 --> 0:39:51.420
<v Speaker 2>and well I think they can find some ways to

0:39:51.420 --> 0:39:55.110
<v Speaker 2>work around the debt break, they're going to face political

0:39:55.110 --> 0:39:57.029
<v Speaker 2>and other constraints in doing so.

0:39:57.620 --> 0:39:59.150
<v Speaker 2>So I expect them to do more.

0:40:00.410 --> 0:40:04.330
<v Speaker 2>Um but I'm doubtful about a significant ramp up.

0:40:04.810 --> 0:40:05.440
<v Speaker 2>Um

0:40:05.910 --> 0:40:09.770
<v Speaker 2>You know, let's just say the current-account surpluses 7% now.

0:40:09.770 --> 0:40:12.740
<v Speaker 2>So that means the savings investment imbalance is 7%.

0:40:13.210 --> 0:40:17.320
<v Speaker 2>So let's say um they step up public uh

0:40:17.910 --> 0:40:18.779
<v Speaker 2>deceiving,

0:40:19.210 --> 0:40:22.239
<v Speaker 2>let's say the current account goes from 7 to 5%.

0:40:22.250 --> 0:40:24.130
<v Speaker 2>Um You know, is is that

0:40:25.210 --> 0:40:27.130
<v Speaker 2>is that such an epic change?

0:40:27.910 --> 0:40:32.279
<v Speaker 2>Um and in those circumstances will still be relying excessively

0:40:32.290 --> 0:40:33.239
<v Speaker 2>on

0:40:33.610 --> 0:40:37.529
<v Speaker 2>demand from elsewhere to support the german economy.

0:40:38.110 --> 0:40:40.620
<v Speaker 2>Um So I think they're going to be politically hand

0:40:40.620 --> 0:40:41.440
<v Speaker 2>strung Now

0:40:42.110 --> 0:40:45.129
<v Speaker 2>you then just ask me, well why can't this be

0:40:45.130 --> 0:40:47.140
<v Speaker 2>china's playbook? And

0:40:48.710 --> 0:40:49.330
<v Speaker 2>and

0:40:50.410 --> 0:40:52.980
<v Speaker 2>I think implicitly you're asking me why why do I

0:40:52.980 --> 0:40:55.850
<v Speaker 2>think it could work for Germany but not for china.

0:40:55.860 --> 0:40:56.530
<v Speaker 2>Um

0:40:57.710 --> 0:41:02.440
<v Speaker 2>So this can indeed be china's playbook. Um

0:41:03.810 --> 0:41:04.320
<v Speaker 2>And

0:41:05.310 --> 0:41:07.620
<v Speaker 2>you know, if you haven't read the china article for,

0:41:07.620 --> 0:41:09.720
<v Speaker 2>it's worth reading it, but it describes some of the

0:41:09.719 --> 0:41:12.530
<v Speaker 2>playbooks that china has in these areas.

0:41:13.210 --> 0:41:13.930
<v Speaker 2>Um

0:41:15.310 --> 0:41:16.239
<v Speaker 2>And uh

0:41:16.910 --> 0:41:18.020
<v Speaker 2>you know, it's kind of hard

0:41:18.510 --> 0:41:21.450
<v Speaker 2>one might imagine why why are you talking about infrastructure

0:41:21.450 --> 0:41:24.650
<v Speaker 2>in china because if you've gone to chinese airports or

0:41:24.650 --> 0:41:28.640
<v Speaker 2>written train from Beijing to shanghai, you think well pretty

0:41:28.640 --> 0:41:31.640
<v Speaker 2>darn good infrastructure certainly relative to the United States.

0:41:32.310 --> 0:41:32.730
<v Speaker 2>Um

0:41:34.210 --> 0:41:36.520
<v Speaker 2>I guess at the end of the day um

0:41:37.520 --> 0:41:41.230
<v Speaker 2>I mentioned g cracking down in the private sector, she

0:41:41.239 --> 0:41:44.520
<v Speaker 2>being more controlling, more authoritarian,

0:41:44.910 --> 0:41:48.140
<v Speaker 2>the party playing a greater role in the economy.

0:41:48.610 --> 0:41:52.480
<v Speaker 2>And as an american, I have an innate,

0:41:53.210 --> 0:41:57.740
<v Speaker 2>greater faith in the private sector to deliver innovation than government,

0:41:58.310 --> 0:42:01.180
<v Speaker 2>even if the government, even if governments have a role

0:42:01.180 --> 0:42:07.340
<v Speaker 2>to play in helping catalyze um processes of R and

0:42:07.340 --> 0:42:08.319
<v Speaker 2>D etcetera.

0:42:09.000 --> 0:42:10.020
<v Speaker 2>And um

0:42:10.500 --> 0:42:13.520
<v Speaker 2>and again I I think china is changing

0:42:14.000 --> 0:42:15.520
<v Speaker 2>and um

0:42:20.900 --> 0:42:23.020
<v Speaker 2>I think that in the end

0:42:23.500 --> 0:42:28.270
<v Speaker 2>this direction is going to weaken China's growth potential and productivity.

0:42:28.450 --> 0:42:29.730
<v Speaker 2>So it comes down to

0:42:30.100 --> 0:42:31.219
<v Speaker 2>the role of the state

0:42:32.100 --> 0:42:33.230
<v Speaker 2>I guess in my mind,

0:42:34.100 --> 0:42:36.950
<v Speaker 1>Mark, I'll share with you two anecdotes. So I spoke

0:42:36.950 --> 0:42:40.720
<v Speaker 1>with David Victor who's a professor at UcsD used to

0:42:40.719 --> 0:42:43.930
<v Speaker 1>be the climate adviser for Pete bulleted during his campaign run.

0:42:44.400 --> 0:42:49.160
<v Speaker 1>And David's argument was that, you know, basic mainstream economics

0:42:49.170 --> 0:42:51.759
<v Speaker 1>sort of, you know, falls short in terms of you know,

0:42:51.760 --> 0:42:54.120
<v Speaker 1>how to deal with climate change. And the

0:42:54.500 --> 0:42:58.310
<v Speaker 1>general observation that economists are making on the climate change side,

0:42:58.320 --> 0:43:00.399
<v Speaker 1>it has to be top down coming from the government

0:43:00.400 --> 0:43:05.000
<v Speaker 1>whether it is carbon pricing or upgrading the infrastructure to

0:43:05.010 --> 0:43:06.819
<v Speaker 1>deal with climate change and renewables.

0:43:07.200 --> 0:43:08.920
<v Speaker 1>And the second anecdote that I want to share with

0:43:08.920 --> 0:43:10.500
<v Speaker 1>you is that, you know, when I spoke with joon

0:43:10.500 --> 0:43:13.790
<v Speaker 1>ma who's used to be PBOC chief economist and now

0:43:13.800 --> 0:43:17.900
<v Speaker 1>represents china in the G 20 climate change roundtable and

0:43:17.910 --> 0:43:20.120
<v Speaker 1>june sort of, you know, models that

0:43:20.700 --> 0:43:23.430
<v Speaker 1>Over 5% of GDP and will

0:43:24.100 --> 0:43:28.640
<v Speaker 1>expenditure is needed by china to reach 2060 0 goals.

0:43:28.640 --> 0:43:32.540
<v Speaker 1>So that's you know, trillions of dollars, literally that china's

0:43:32.540 --> 0:43:35.129
<v Speaker 1>public and private sector would have to put aside for

0:43:35.140 --> 0:43:38.320
<v Speaker 1>again the green transition. So it seems to me that

0:43:39.000 --> 0:43:42.719
<v Speaker 1>the zeitgeist of climate change seem to suggest that it

0:43:42.719 --> 0:43:44.819
<v Speaker 1>should be a top down uh

0:43:45.400 --> 0:43:48.520
<v Speaker 1>project and china seems to be following along that

0:43:48.900 --> 0:43:52.529
<v Speaker 1>which most Western climate economists would argue that is the

0:43:52.530 --> 0:43:55.220
<v Speaker 1>right way to go about it. Not necessarily allow the

0:43:55.219 --> 0:43:57.569
<v Speaker 1>private sector to figure out how to internalize all these

0:43:57.570 --> 0:43:59.610
<v Speaker 1>negative externalities from climate change, but

0:44:00.190 --> 0:44:02.350
<v Speaker 1>let the government sort of dictate what the price of

0:44:02.350 --> 0:44:05.710
<v Speaker 1>carbon should be and how the transition timetable should be.

0:44:06.090 --> 0:44:08.900
<v Speaker 1>Um So that was, you know, just my two cents that,

0:44:08.910 --> 0:44:09.530
<v Speaker 1>you know,

0:44:09.540 --> 0:44:12.779
<v Speaker 2>that's fair, it's fair to say that the government has

0:44:12.780 --> 0:44:14.720
<v Speaker 2>to create the kind of the

0:44:15.190 --> 0:44:20.750
<v Speaker 2>the incentive framework. So carbon pricing and regulation and the like,

0:44:20.760 --> 0:44:21.610
<v Speaker 2>but at that point,

0:44:21.989 --> 0:44:23.100
<v Speaker 2>you know, I think

0:44:23.590 --> 0:44:26.259
<v Speaker 2>the private sector is going to have to take over

0:44:26.260 --> 0:44:26.800
<v Speaker 2>and

0:44:27.190 --> 0:44:30.620
<v Speaker 2>we'll see, we'll see how china does. I wish them

0:44:30.620 --> 0:44:31.600
<v Speaker 2>the best and

0:44:32.090 --> 0:44:33.890
<v Speaker 2>I wish my country would

0:44:34.590 --> 0:44:37.610
<v Speaker 2>be much more proactive in this area as well.

0:44:37.989 --> 0:44:38.799
<v Speaker 1>Right.

0:44:39.190 --> 0:44:42.550
<v Speaker 1>Um Mark both you and I have spent some years

0:44:42.550 --> 0:44:44.180
<v Speaker 1>of our lives in the I? M f so I

0:44:44.180 --> 0:44:46.850
<v Speaker 1>want to end this discussion asking you a question on

0:44:46.850 --> 0:44:47.500
<v Speaker 1>the I. M. F.

0:44:47.989 --> 0:44:50.880
<v Speaker 1>Recently I had martin mull highs and on my podcast,

0:44:50.880 --> 0:44:53.350
<v Speaker 1>martin used to be the director of the Strategic Policy

0:44:53.350 --> 0:44:55.719
<v Speaker 1>Review Department in the I. M. F. Recently retired

0:44:56.090 --> 0:45:00.500
<v Speaker 1>and he seemed to be a bit uneasy about a

0:45:00.989 --> 0:45:04.710
<v Speaker 1>middle of the road conservative multilateral organization like the IMF

0:45:05.090 --> 0:45:09.239
<v Speaker 1>being increasingly tasked with dealing with climate change issues or

0:45:09.239 --> 0:45:13.219
<v Speaker 1>gender or inequality and so on. So martin of course

0:45:13.219 --> 0:45:16.390
<v Speaker 1>thinks these are important issues. It just feels that the I. M. F.

0:45:16.390 --> 0:45:20.150
<v Speaker 1>Has been successful, being narrow and focused on balance of

0:45:20.150 --> 0:45:23.300
<v Speaker 1>payments on fiscal and that's where

0:45:23.390 --> 0:45:25.190
<v Speaker 1>most of the energy of the organization should be

0:45:25.489 --> 0:45:26.420
<v Speaker 1>your thoughts.

0:45:30.590 --> 0:45:32.810
<v Speaker 2>So this is complicated terrain,

0:45:34.290 --> 0:45:38.940
<v Speaker 2>martin mull horizon is a wonderful thoughtful individual and uh

0:45:38.950 --> 0:45:40.800
<v Speaker 2>I commend you for having him,

0:45:41.489 --> 0:45:42.920
<v Speaker 2>I'm sure he was a great guest.

0:45:43.390 --> 0:45:43.920
<v Speaker 2>Um

0:45:44.489 --> 0:45:45.510
<v Speaker 2>So um

0:45:47.690 --> 0:45:52.420
<v Speaker 2>let me just make one general observation which martin wouldn't make,

0:45:52.420 --> 0:45:54.969
<v Speaker 2>but it would be kind of observation somebody like me

0:45:54.969 --> 0:45:58.950
<v Speaker 2>would make because um I wasn't an I. M. F. Staff,

0:45:58.950 --> 0:45:59.510
<v Speaker 2>I was,

0:46:00.080 --> 0:46:00.710
<v Speaker 2>I have

0:46:01.280 --> 0:46:02.710
<v Speaker 2>representing a shareholder

0:46:03.680 --> 0:46:04.210
<v Speaker 2>and

0:46:04.780 --> 0:46:05.910
<v Speaker 2>you know, ultimately

0:46:06.580 --> 0:46:09.300
<v Speaker 2>the IMF is a shareholder organization.

0:46:09.880 --> 0:46:11.200
<v Speaker 2>Um It's

0:46:12.980 --> 0:46:14.210
<v Speaker 2>remained relevant

0:46:14.680 --> 0:46:17.710
<v Speaker 2>and been successful because it has adapted to what

0:46:18.880 --> 0:46:20.590
<v Speaker 2>shareholders wanted over time.

0:46:21.680 --> 0:46:22.490
<v Speaker 2>You know, we

0:46:25.380 --> 0:46:27.790
<v Speaker 2>the soviet union collapses, we throw the I? M f

0:46:27.790 --> 0:46:30.050
<v Speaker 2>in there to do all the economic research and that's

0:46:30.050 --> 0:46:32.719
<v Speaker 2>what the shareholders wanted. We wanted the I. M. F.

0:46:32.719 --> 0:46:34.589
<v Speaker 2>To get involved in um

0:46:34.980 --> 0:46:37.100
<v Speaker 2>you know, dealing with debt issues

0:46:37.580 --> 0:46:40.360
<v Speaker 2>solving emerging market debt crisis, we wanted the IMF to

0:46:40.360 --> 0:46:42.200
<v Speaker 2>go into low income countries, so

0:46:42.580 --> 0:46:43.299
<v Speaker 2>so it doesn't,

0:46:43.680 --> 0:46:48.320
<v Speaker 2>so it is responsive to shareholders and um

0:46:48.330 --> 0:46:49.509
<v Speaker 1>the whole world disease

0:46:49.510 --> 0:46:52.200
<v Speaker 2>with climate issues, for example,

0:46:53.580 --> 0:46:54.989
<v Speaker 2>um these days, so,

0:46:55.480 --> 0:46:56.799
<v Speaker 2>you know, I think it's appropriate

0:46:57.880 --> 0:47:00.210
<v Speaker 2>for the IMF to be head in this direction,

0:47:01.080 --> 0:47:02.000
<v Speaker 2>so long as it's

0:47:02.880 --> 0:47:06.500
<v Speaker 2>consistent with its mandate and done in a reasonable way.

0:47:07.480 --> 0:47:07.990
<v Speaker 2>Um

0:47:08.480 --> 0:47:09.200
<v Speaker 2>So,

0:47:10.480 --> 0:47:11.590
<v Speaker 2>you know, what is,

0:47:12.480 --> 0:47:13.640
<v Speaker 2>what is reasonable?

0:47:17.480 --> 0:47:20.730
<v Speaker 2>Well, research is one thing, I'm research by the I. M. F.

0:47:20.730 --> 0:47:23.900
<v Speaker 2>On carbon pricing, I think it's been very good and useful.

0:47:24.580 --> 0:47:25.090
<v Speaker 2>Um

0:47:28.780 --> 0:47:29.410
<v Speaker 2>Climate

0:47:30.380 --> 0:47:34.150
<v Speaker 2>can be a macro critical issue, you can imagine small

0:47:34.150 --> 0:47:35.630
<v Speaker 2>island economy,

0:47:36.680 --> 0:47:39.200
<v Speaker 2>this is something they've got to factor into their

0:47:39.780 --> 0:47:41.400
<v Speaker 2>um budget.

0:47:42.239 --> 0:47:43.100
<v Speaker 2>Um And

0:47:43.580 --> 0:47:46.450
<v Speaker 2>you know, everybody jokes that the IMF stands for, it's

0:47:46.450 --> 0:47:47.299
<v Speaker 2>mostly

0:47:47.780 --> 0:47:48.410
<v Speaker 2>fiscal.

0:47:48.780 --> 0:47:49.500
<v Speaker 2>Um

0:47:50.880 --> 0:47:51.500
<v Speaker 2>So

0:47:54.780 --> 0:47:55.800
<v Speaker 2>I I think that

0:47:57.380 --> 0:48:01.360
<v Speaker 2>if it's defined in this macro critical way to use

0:48:01.360 --> 0:48:06.620
<v Speaker 2>a somewhat nebulous but semi meaningful term in the context

0:48:06.620 --> 0:48:07.400
<v Speaker 2>of the IMF

0:48:07.969 --> 0:48:09.590
<v Speaker 2>there is a role for climate,

0:48:10.270 --> 0:48:12.090
<v Speaker 2>there may be a role for equity, I

0:48:12.670 --> 0:48:16.500
<v Speaker 2>less convinced of that, but but there are no doubt

0:48:16.510 --> 0:48:18.090
<v Speaker 2>important issues

0:48:18.469 --> 0:48:19.000
<v Speaker 2>there.

0:48:19.670 --> 0:48:20.200
<v Speaker 2>Um

0:48:20.870 --> 0:48:21.700
<v Speaker 2>So

0:48:23.469 --> 0:48:27.000
<v Speaker 2>again, it should be consistent with the mandate. Um

0:48:27.469 --> 0:48:29.580
<v Speaker 2>You know, the fund should not be doing what the

0:48:29.580 --> 0:48:32.500
<v Speaker 2>World Bank does. The IMF should be focused on

0:48:32.969 --> 0:48:37.770
<v Speaker 2>stabilization, it should be focused on the relevant structural reforms

0:48:37.770 --> 0:48:40.200
<v Speaker 2>that go along with areas like fiscal

0:48:40.570 --> 0:48:41.290
<v Speaker 2>um

0:48:41.870 --> 0:48:42.580
<v Speaker 2>yeah

0:48:43.670 --> 0:48:44.390
<v Speaker 2>et cetera.

0:48:44.969 --> 0:48:46.500
<v Speaker 2>But I but I think that

0:48:47.170 --> 0:48:48.190
<v Speaker 2>it can play

0:48:49.170 --> 0:48:50.000
<v Speaker 2>a role.

0:48:50.670 --> 0:48:51.500
<v Speaker 2>Um

0:48:52.870 --> 0:48:55.380
<v Speaker 2>it's not black or white, it's a shade of gray

0:48:55.380 --> 0:48:58.390
<v Speaker 2>and uh you know whether it's uh

0:48:59.370 --> 0:49:02.600
<v Speaker 2>charcoal or light, I think that's an issue that still

0:49:02.600 --> 0:49:04.400
<v Speaker 2>needs to be sorted out.

0:49:05.570 --> 0:49:06.080
<v Speaker 2>Mm hmm.

0:49:06.469 --> 0:49:10.100
<v Speaker 1>Very, very nuanced. That's great. Thank you so much mark

0:49:10.100 --> 0:49:11.590
<v Speaker 1>for your time and insights.

0:49:13.469 --> 0:49:17.350
<v Speaker 2>It's been fun. Always a pleasure to see you. And

0:49:17.350 --> 0:49:19.490
<v Speaker 2>uh hopefully the next time I see you we will

0:49:19.489 --> 0:49:22.420
<v Speaker 2>not have a 12 or 13 our bridge between us.

0:49:22.830 --> 0:49:25.140
<v Speaker 1>It will be wonderful and I look forward to that.

0:49:25.140 --> 0:49:26.190
<v Speaker 1>Hopefully in april

0:49:26.670 --> 0:49:29.830
<v Speaker 1>let me also thank our listeners. On a concluding note,

0:49:29.900 --> 0:49:33.149
<v Speaker 1>Kobe time was produced by martin Tuckey daisy Sharma and

0:49:33.150 --> 0:49:35.090
<v Speaker 1>violently provided additional assistance.

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<v Speaker 1>It is for information only and does not represent any

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<v Speaker 1>trade ideas or recommendations.

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<v Speaker 1>All 69 episodes of copy time are available on youtube

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<v Speaker 1>and on all major podcast platforms including apple google and Spotify.

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<v Speaker 1>As for our research publications, webinars and live streams. You

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<v Speaker 1>can find them all by googling DBS Research library, have

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<v Speaker 1>a great day