Latest / Trumponomics / Bretton Woods at 75 and the Other Mexico Border Crisis

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Bretton Woods at 75 and the Other Mexico Border Crisis · Trumponomics

• 0:03
  Speaker 1: Hello, Welcome to Stephanomics, the podcast that brings the global
• 0:06
  Speaker 1: economy to you. I have to tell you this is
• 0:15
  Speaker 1: the last episode of this series. We're packing a lot in.
• 0:18
  Speaker 1: I'm recording from the historic Mount Washington Hotel in Breton
• 0:21
  Speaker 1: Woods in New Hampshire, where I've been at an eclectic
• 0:24
  Speaker 1: gathering of intellectuals and finance folks commemorating the anniversary of
• 0:29
  Speaker 1: that famous Breton Woods Conference when the Allied Powers got
• 0:32
  Speaker 1: together after World War Two to set down the rules
• 0:35
  Speaker 1: for a new world economic order, and they created key
• 0:38
  Speaker 1: institutions like the International Monetary Fund and the World Bank.
• 0:41
  Speaker 1: Later you'll hear me chatting with a former US executive
• 0:44
  Speaker 1: director of the IMAT about the kind of global economic
• 0:46
  Speaker 1: cooperation we need today. I also caught up with the
• 0:50
  Speaker 1: economist Neurial Rubini. We talked about why he hates cryptocurrencies
• 0:55
  Speaker 1: and what's going to cause the next financial crisis. But first,
• 0:58
  Speaker 1: we have the battle over the future of the global
• 1:01
  Speaker 1: economy that's happening right now on the Mexican border. You'll
• 1:05
  Speaker 1: remember President Trump shocked everyone threatening to slap big tariffs
• 1:09
  Speaker 1: on Mexico for failing to stop the flow of Central
• 1:11
  Speaker 1: American migrants from south to north. Now, after emergency talks,
• 1:15
  Speaker 1: the Americans gave the Mexican President, Andres Manuel Lopez, a
• 1:19
  Speaker 1: bred known by his initials Amblow, forty five days to
• 1:23
  Speaker 1: do better tackling the problem. He's now sent a new
• 1:26
  Speaker 1: federal force down to police the country's porous and geographically
• 1:30
  Speaker 1: messy border with Guatemala, where people and goods have previously
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  Speaker 1: flowed freely. Bloomberg Economy reporter Eric Martin decided to go
• 1:39
  Speaker 1: see what was happening here. On the banks of the
• 1:51
  Speaker 1: Succa River. There's a constant buzz of activity. Locals make
• 1:55
  Speaker 1: their living haulling goods onto rickety rafts made a fly
• 1:58
  Speaker 1: within rubber tires. The cargo depends on the direction from
• 2:03
  Speaker 1: Mexico to Guatemala. It's usually kinds of cooking oil or
• 2:06
  Speaker 1: bags of rice. Having the other way, it's mostly people,
• 2:10
  Speaker 1: many of them are bound for the US. All of it,
• 2:14
  Speaker 1: technically speaking, is illegal. Still, the customs and immigration officials
• 2:19
  Speaker 1: patrolling the international bridge have ignored it. That has helped
• 2:22
  Speaker 1: make the river a key economic hub in the poorest
• 2:25
  Speaker 1: region in Mexico. They Errta Alicia Flentis has been running
• 2:33
  Speaker 1: a supply store in the Mexican border town of Sida
• 2:36
  Speaker 1: didlgo for the past four decades. She told me that
• 2:39
  Speaker 1: the river Contraband is the only source of jobs for
• 2:42
  Speaker 1: towns on both the Mexican and Guatemalan sides of the
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  Speaker 1: river want that hand. Everyone lives off of this. What
• 2:53
  Speaker 1: happens if it's gone, forget it? Everyone would be poor.
• 2:57
  Speaker 1: The merchandise needs to continue to flow, but this river
• 3:02
  Speaker 1: trade may not last much longer. Last month, the first
• 3:06
  Speaker 1: of thousands of National Guard troops arrived as part of
• 3:09
  Speaker 1: omlo's plans. The soldiers came with their m sixteens and
• 3:19
  Speaker 1: told us that they didn't want us to work. Rooster
• 3:23
  Speaker 1: is a thirty one year old raft captain who didn't
• 3:26
  Speaker 1: want to give me his real name for fear of reprisals.
• 3:29
  Speaker 1: He's been making a living moving goods and people across
• 3:32
  Speaker 1: the river for the past death. If they make it
• 3:36
  Speaker 1: more difficult for us to transport merchandise, we need to
• 3:39
  Speaker 1: figure out how to resolve the problem. The new show
• 3:47
  Speaker 1: of force on the border is meant to stem the
• 3:49
  Speaker 1: tide of migrants escaping violence and poverty in Central America.
• 3:54
  Speaker 1: Among them is main Orgean, a nineteen year old Honduran
• 3:57
  Speaker 1: migrant who told me he's making his second attempt in
• 4:00
  Speaker 1: less than a week to reach the US. I was
• 4:05
  Speaker 1: reported a week ago and I started to come back
• 4:08
  Speaker 1: the same day. There's no work where I leave. The
• 4:21
  Speaker 1: migrants crossing the river are for the most part from Guatemala,
• 4:25
  Speaker 1: El savor And and Duras, but people from Haiti, Cuba, Africa,
• 4:29
  Speaker 1: and even India have recently begun appearing in greater numbers.
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  Speaker 1: Many arrived to Central America or South America by plain
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  Speaker 1: and then crossed through Mexico. Bumblow admits that parts of
• 4:40
  Speaker 1: Mexico's seven dred mile frontier with Guatemala and Belize aren't
• 4:44
  Speaker 1: well policed, and he's promised to secure them. His efforts
• 4:48
  Speaker 1: have started to pay off, at least from the u
• 4:49
  Speaker 1: S perspective. Customs and Border Protection seven July that the
• 4:54
  Speaker 1: number of people stopped at the border fell twenty eight
• 4:57
  Speaker 1: percent from May to June. All the numbers tend to
• 5:00
  Speaker 1: decline in the summer, that's more than the usual drop.
• 5:04
  Speaker 1: Trump at least seems pleased he should regret up from
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  Speaker 1: Mexico because the Mexican people very midst with all of
• 5:12
  Speaker 1: these tens of thousands of people, hundreds of thousands of
• 5:15
  Speaker 1: people walking through Mexico. Despite President Trump's enthusiasm, there are
• 5:21
  Speaker 1: many people who are skeptical about whether Mexico can stop
• 5:24
  Speaker 1: migrants in the long term. Among them, as Duncan would,
• 5:28
  Speaker 1: he's the director of the Mexico Institute at the Woodrow
• 5:30
  Speaker 1: Wilson International Center for Scholars in Washington. He's been studying
• 5:34
  Speaker 1: Mexico for more than two decades. Mexico is now become
• 5:38
  Speaker 1: a much more difficult piece of terrain to to to
• 5:42
  Speaker 1: get across, so I think that that will provide a
• 5:44
  Speaker 1: terrant effect in the in the short term, but in
• 5:47
  Speaker 1: the long term, I feel as though we're going to
• 5:50
  Speaker 1: see similar numbers of migrants coming through Mexico. They will
• 5:54
  Speaker 1: learn to get around the various checkpoints. Mexican soldier has
• 5:59
  Speaker 1: visited the Chats River a week after the government promised
• 6:02
  Speaker 1: to step up efforts to patrol the border, but locals
• 6:05
  Speaker 1: told me they quickly withdrew arguments with the raft operators
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  Speaker 1: threatened to spill over into violence. Mexico is likely to
• 6:12
  Speaker 1: face more challenges as it attempts to balance the protection
• 6:15
  Speaker 1: of human rights against the pressure from the American government.
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  Speaker 1: It's understandable why we saw the calls from the United
• 6:22
  Speaker 1: States government for Mexico to do more. What I think
• 6:26
  Speaker 1: is perhaps a mistake is to push so much of
• 6:30
  Speaker 1: the burden onto Mexico at a time when Mexico has
• 6:34
  Speaker 1: severe financial and fiscal restrictions. Mexico's economy is showing signs
• 6:43
  Speaker 1: of weakness after years of modest if unspectacular growth. GDP
• 6:48
  Speaker 1: is slowing thanks in part to Trump's unpredictable behavior. Threatening
• 6:53
  Speaker 1: to rip up NAFTA and imposed tariffs have hurt investor confidence.
• 6:58
  Speaker 1: While Trump has been focused on undock minted migration, the
• 7:01
  Speaker 1: levels of people arriving to the US are actually below
• 7:04
  Speaker 1: the records from a decade ago. In recent years, as
• 7:08
  Speaker 1: many Mexicans have returned to Mexico as left for the US. Now,
• 7:12
  Speaker 1: there's a risk that Trump's pressure causes the country's economy
• 7:16
  Speaker 1: to weaken. That could results in fewer jobs in poor
• 7:19
  Speaker 1: communities like those in Chiapas, and force more Mexicans to
• 7:23
  Speaker 1: join Hondurans, Salvadorans, and Guatemalans in seeking work in the US.
• 7:28
  Speaker 1: Here's duncan Wood again. Overall, the deterrent measures that we're
• 7:33
  Speaker 1: seeing being put in place by Mexico are probably not sustainable.
• 7:37
  Speaker 1: So ultimately, I think this provides a short term solution
• 7:42
  Speaker 1: at the very best, and we're likely to see that
• 7:46
  Speaker 1: in the medium to long term. The problem continues as
• 7:50
  Speaker 1: long as the underlying fundamental crisis in Central America is there.
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  Speaker 1: Migrants from Central America are fleeing some of the highest
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  Speaker 1: murder rates in the world. Many used to work in agriculture,
• 8:04
  Speaker 1: but they've seen their crops devastated by climate change. Their
• 8:08
  Speaker 1: government spend little on social services, citizens have few or
• 8:12
  Speaker 1: no job opportunities, and plans to develop the region could
• 8:16
  Speaker 1: take years. Ultimately, no amount of security on the Mexico
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  Speaker 1: Gualamala border is likely to stop undocumented migration as long
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  Speaker 1: as the economic attraction of the US remains. It would
• 8:29
  Speaker 1: be ironic if Trump's heavy handed efforts to stop the
• 8:32
  Speaker 1: flow of migrants end up driving even greater numbers to
• 8:36
  Speaker 1: seek a better life north of the Mexican border. You
• 8:55
  Speaker 1: heard there from one of the front lines in the
• 8:57
  Speaker 1: battle over the future of the global economy. I had
• 9:00
  Speaker 1: a chat here with Meg Lundziger, a former US executive
• 9:03
  Speaker 1: director of the i m F who is now a
• 9:04
  Speaker 1: public policy fellow at the Wilson Center in Washington. We
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  Speaker 1: started by talking about the spirit of Breton Woods and
• 9:11
  Speaker 1: whether we could revive it to confront the big international
• 9:15
  Speaker 1: economic challenges the world faces today. This is pretty amazing
• 9:20
  Speaker 1: when you look back that these delegates committed their governments
• 9:25
  Speaker 1: to treaty organizations, meaning you give up a little bit
• 9:27
  Speaker 1: of sovereignty by signing on to a treaty. But they
• 9:31
  Speaker 1: all got their home governments to ratify it. And these
• 9:35
  Speaker 1: organizations have continued and have had to change in many,
• 9:39
  Speaker 1: many different ways, but still been very effective over the
• 9:43
  Speaker 1: years of dealing with crises. With that said, it's hard
• 9:46
  Speaker 1: to predict the future and how we know today what's
• 9:50
  Speaker 1: going to drive us to agree. We don't have that
• 9:53
  Speaker 1: same sense of fear. In some respects, we are to
• 9:55
  Speaker 1: because there are a lot of different things going on
• 9:57
  Speaker 1: that create fear. But over all, in the political classes
• 10:01
  Speaker 1: and the governments, there's not a unifying sense of what
• 10:04
  Speaker 1: that overarching problem is and what we should do about it.
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  Speaker 1: And you see it every day in the press, you're
• 10:09
  Speaker 1: reporting on it. Just how we all just see the
• 10:13
  Speaker 1: world so completely different. I mean by we are our
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  Speaker 1: leaders and then there's very little chance that there would
• 10:20
  Speaker 1: be anything this dramatic as the same as the Breton
• 10:23
  Speaker 1: Woods institutions coming out. But that was one thing this
• 10:26
  Speaker 1: volume that we put together at the Breton Woods Committee
• 10:29
  Speaker 1: this year. If you read Paul Boker's first essay, it's
• 10:34
  Speaker 1: all about the spirit of Breton Wood's not that he's
• 10:37
  Speaker 1: urging global leaders to come up with a whole new system,
• 10:40
  Speaker 1: but that he's urging them to remember, we need to
• 10:43
  Speaker 1: cooperate if we're going to handle problems, if we're going
• 10:46
  Speaker 1: to anticipate what's coming, if we're going to find ways
• 10:50
  Speaker 1: to all be part of the solution, which at times
• 10:53
  Speaker 1: means making a commitment to others so that you all benefit.
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  Speaker 1: And that's hard to find these days. And of course,
• 11:00
  Speaker 1: as most people listening well know, but that's the former
• 11:02
  Speaker 1: FED chair from from back in the eighties, Paul Worker.
• 11:06
  Speaker 1: And we had a report this week from the Mexican
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  Speaker 1: border talking about the irony that you could have extent
• 11:16
  Speaker 1: really strenuous efforts to cut down immigration and illegal immigration
• 11:20
  Speaker 1: at the at the Mexican American border, with the Mexican
• 11:24
  Speaker 1: government under great pressure from President Trump to do that.
• 11:26
  Speaker 1: But at the same time President Trump's economic policies threatened
• 11:30
  Speaker 1: to hurt the Mexican economy and actually push more people
• 11:35
  Speaker 1: into trying to immigrate to the U. S Now. That's
• 11:38
  Speaker 1: a long way, I mean, if you listen to the footage,
• 11:40
  Speaker 1: is a long way from this sort of pleasant hotel
• 11:42
  Speaker 1: at the top of the mountain. But it struck me
• 11:44
  Speaker 1: that some of the issues involved in Donald Trump, donald
• 11:47
  Speaker 1: Trump's policy on Mexico, on immigration and his success does
• 11:53
  Speaker 1: symbolize some of the change in the environment since four
• 11:58
  Speaker 1: you talked about fear being the animating factor for the leaders.
• 12:03
  Speaker 1: Then you know, now instead of people being terrified of
• 12:05
  Speaker 1: economic nationalism and wanting never to have that conflict again,
• 12:10
  Speaker 1: you have globalization that people feel has not necessarily worked
• 12:15
  Speaker 1: for them. There's kind of a distance between these global
• 12:17
  Speaker 1: institutions and people in countries like the US and different
• 12:22
  Speaker 1: European countries, and you have US and you have immigration
• 12:26
  Speaker 1: figuring much more prominently than we might have thought. We
• 12:28
  Speaker 1: were very focused in when we think about globalization all
• 12:31
  Speaker 1: these years. We've been very focused on goods trade and
• 12:35
  Speaker 1: how do you deal with flows of money and maybe
• 12:37
  Speaker 1: do we not think enough about what flows of people
• 12:40
  Speaker 1: are going to mean for individual communities and for and
• 12:44
  Speaker 1: for our politics. We didn't think at all about that perfectly,
• 12:49
  Speaker 1: and it's certainly not the big migration flows that we've
• 12:52
  Speaker 1: all seen in our countries. I mean, why is the
• 12:54
  Speaker 1: UK leaving the EU? And immigration has been one of
• 12:58
  Speaker 1: the big reasons, and it's been a fear in in
• 13:01
  Speaker 1: the US too. It's a little hard for me because
• 13:03
  Speaker 1: I'm an immigrant to uh there's a lot of them about. Yeah,
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  Speaker 1: a lot of us are here and love this country
• 13:10
  Speaker 1: and have made it a home and wanted to do well.
• 13:13
  Speaker 1: So it's a little hard, you know. And I mean
• 13:15
  Speaker 1: the immigrants I see who are frankly taking care of
• 13:19
  Speaker 1: my lawn and cleaning my house. They're here and they're
• 13:21
  Speaker 1: working hard, and they're doing a lot of things that
• 13:24
  Speaker 1: many Americans really have no interest in doing. So I
• 13:28
  Speaker 1: welcome that they're here, they're working hard, and I think
• 13:32
  Speaker 1: the US has to be a little more open to this.
• 13:35
  Speaker 1: With that said, I guess a lot of people feel
• 13:38
  Speaker 1: jobs are being taken away. I'm not quite sure where
• 13:43
  Speaker 1: the jobs that have kept the middle class going, you know,
• 13:46
  Speaker 1: manufacturing services, that a whole lot of that is being
• 13:50
  Speaker 1: taken away by immigrants coming from Central America. I don't
• 13:54
  Speaker 1: get that sense. So At times, it's hard for me
• 13:57
  Speaker 1: to puzzle where this fear has come from. And sometimes
• 14:01
  Speaker 1: I feel like it's an overly manufactured fear on the
• 14:04
  Speaker 1: political classes on President Trump, that it's not really a
• 14:08
  Speaker 1: threat now. At the same time, we also have, because
• 14:12
  Speaker 1: of his announcements and policies, this effort of more to
• 14:15
  Speaker 1: come to the US the families get here before the
• 14:17
  Speaker 1: borders completely shut down. So we've kind of created this
• 14:21
  Speaker 1: conundrum for ourselves. And as you pointed out in the beginning,
• 14:27
  Speaker 1: by some of the other policies, we've made it more
• 14:31
  Speaker 1: difficult for these countries to thrive to grow, you know,
• 14:34
  Speaker 1: threatening to leave NAFTA. So of course that's going to
• 14:37
  Speaker 1: instead of ize more to come to the United States
• 14:40
  Speaker 1: for a better life. So I think there needs to
• 14:43
  Speaker 1: be a little bit deeper thinking of all the inner
• 14:45
  Speaker 1: linkages of the policies in this administration. Well, it's interesting
• 14:49
  Speaker 1: because we have One thing we heard about in this
• 14:51
  Speaker 1: conference is some of the history of the Britain was negotiations,
• 14:54
  Speaker 1: and it was this kind of cutthroat battle between the
• 14:57
  Speaker 1: American representative Harry Dexter White and the British representative John
• 15:02
  Speaker 1: Maynard Keynes. And there's plenty of books and and the
• 15:05
  Speaker 1: stories about their competition, but it was all about us,
• 15:10
  Speaker 1: about the US installing itself at the center of these
• 15:13
  Speaker 1: institutions and the center of the new system with everything
• 15:15
  Speaker 1: revolving around the dollar. And again, what strikes you as
• 15:19
  Speaker 1: a difference now is that's in a lot of the
• 15:23
  Speaker 1: conversations we have is about the absence of US leadership.
• 15:26
  Speaker 1: You have institutions that were kind of established to give
• 15:28
  Speaker 1: the US the ultimate decision making, the ultimate veto. Power
• 15:32
  Speaker 1: used to sit there with your veto in the IMF.
• 15:34
  Speaker 1: I don't think you used it very much, but people
• 15:36
  Speaker 1: cared a lot about what you believe because you was
• 15:38
  Speaker 1: the US. Um Do you think China is going to
• 15:42
  Speaker 1: fill that vacuum of sort of international economic leadership? Apparently
• 15:46
  Speaker 1: the they're very interested in this history about Breton Woods.
• 15:49
  Speaker 1: They've been. We heard that the history of the negotiations
• 15:53
  Speaker 1: they've been. They sold more copies in China of this
• 15:56
  Speaker 1: American academics book than they have in the US. You know,
• 16:00
  Speaker 1: that's very interesting, Stephanie, because in my experience, the Chinese
• 16:07
  Speaker 1: want to be part of that, They want to be
• 16:08
  Speaker 1: at the center of the system. They want to have
• 16:10
  Speaker 1: a clear voice and the decision making in the system.
• 16:13
  Speaker 1: But they don't really want to be number one. And
• 16:16
  Speaker 1: I think it's because they recognize they're really not at
• 16:19
  Speaker 1: the point where they can undertake that type of global leadership.
• 16:24
  Speaker 1: Do they want their currency? Do you want the M
• 16:26
  Speaker 1: and B to become the global currency? No, they certainly don't.
• 16:31
  Speaker 1: What do they do in their financial sector? They control things,
• 16:33
  Speaker 1: They control inflows and outflows, They impose capital controls, they
• 16:37
  Speaker 1: lift capital controls. Their monetary policy has zero independence, right,
• 16:42
  Speaker 1: it's they're at the behest of the government whether they
• 16:45
  Speaker 1: loosen the credit or tighten the credits. So um, I
• 16:49
  Speaker 1: think China is nowhere in the position to undertake that
• 16:54
  Speaker 1: leadership role in terms of guiding institutions or you know,
• 16:58
  Speaker 1: pulling all these country reads together. And it's interesting though
• 17:02
  Speaker 1: you do get international collaborations often when, as someone said
• 17:06
  Speaker 1: to me, when you have politicians actually looking out of
• 17:10
  Speaker 1: looking standing on a window ledge looking down, that's when
• 17:12
  Speaker 1: they start to do serious looking down at the abyss.
• 17:16
  Speaker 1: But even in our time in the late nineties in
• 17:19
  Speaker 1: the U. S. Treasury, there was a kind of healthy
• 17:22
  Speaker 1: competition among international leaders to have initiatives and policy proposals
• 17:27
  Speaker 1: and then you come back from the summit and you
• 17:28
  Speaker 1: say I have one with my proposal for development or
• 17:31
  Speaker 1: this and that. I mean, it's amazing that that is
• 17:33
  Speaker 1: not where the action is for most politicians. That's not
• 17:37
  Speaker 1: going to help them domestically. And that's all that matters
• 17:39
  Speaker 1: now is when the next domestic election, Right get the
• 17:43
  Speaker 1: leadership of the Conservative Party, when the election in twenty
• 17:47
  Speaker 1: right get a bigger majority in the parliament. So well,
• 17:51
  Speaker 1: I fear they were surrounded by lots of people doing
• 17:53
  Speaker 1: very exciting, innovative financial things. So we shouldn't sound too
• 17:56
  Speaker 1: much like sort of middle aged people bemoaning that helped
• 18:00
  Speaker 1: terrible world. There's been plenty of good thing LANs. Thank
• 18:04
  Speaker 1: you very much. Well, thank you, Stephanie Pleasure. M here
• 18:15
  Speaker 1: are Breton Woods. I bumped into another old friend, the
• 18:17
  Speaker 1: economist new Or Rubini, who's a professor at m y
• 18:20
  Speaker 1: U and head of Rubini Macro Associates. Recently he's been
• 18:24
  Speaker 1: a very public critic of cryptocurrencies. Since the conference was
• 18:29
  Speaker 1: organized by Bancor, a company heavily involved with cryptocurrencies, I
• 18:33
  Speaker 1: wondered whether he was surprised to be invited. You've been
• 18:37
  Speaker 1: coming out very strongly against digital currencies recently. Why why
• 18:42
  Speaker 1: are you so worried about them? Well, I'm not actually
• 18:45
  Speaker 1: worried about them. I think that the term cryptocurrencies is
• 18:50
  Speaker 1: a misnomer. For something to be a currency has to
• 18:53
  Speaker 1: be an account, a means of payment, stable store of value.
• 18:58
  Speaker 1: Um not with this pricing anything in bitcoin or any
• 19:01
  Speaker 1: other cryptocurrency. Bitcoin can only five transactions per second. The
• 19:07
  Speaker 1: Visa network does twenty five thousand per seconds, and it's
• 19:11
  Speaker 1: not the stable store of value because the price can
• 19:14
  Speaker 1: go up or down twenty percent in a day. That's
• 19:16
  Speaker 1: why even at the blockchain or crypto conferences where I go,
• 19:20
  Speaker 1: they don't even accept their bitcoint for paymentality of the
• 19:22
  Speaker 1: conference because the profit markin could be wiped out by
• 19:25
  Speaker 1: a sudden movement of the price, So no merchant is
• 19:28
  Speaker 1: going to be using it. So it's a misnumber. They're
• 19:31
  Speaker 1: not really currencies that the bubble does venteen collapse into
• 19:36
  Speaker 1: does eighteen. There's been a rally this year, but bitcoin
• 19:40
  Speaker 1: is still more than fifty percent below the peak. The
• 19:42
  Speaker 1: other top ten or eight percent belo peak, and I
• 19:46
  Speaker 1: think there's a little bit of a fad. But in
• 19:49
  Speaker 1: these crypto and quote currencies. They are not going anywhere.
• 19:52
  Speaker 1: They're useless, and I think there's a bigger, fading blockchain that,
• 19:55
  Speaker 1: in my view, is the most over hyped technology uine
• 19:59
  Speaker 1: history and no better than the glorified than spreadsheet. But
• 20:02
  Speaker 1: that's a different story. We talked last in last week's podcast,
• 20:06
  Speaker 1: we actually talked to the French finance Minister, Brunda Lamaire
• 20:09
  Speaker 1: about Libra and the extraordinary amount of attention that the
• 20:12
  Speaker 1: G seven finance ministers, the G twenty you mentioned, President
• 20:16
  Speaker 1: Trump have all been talking about this one proposal by
• 20:19
  Speaker 1: one company. Do you think librastor justifies the amount of
• 20:24
  Speaker 1: attention it is getting to some extent. First of all,
• 20:29
  Speaker 1: again they pretended it's going to be a blockchain tool,
• 20:32
  Speaker 1: but it's not. It's going to be fully centralized. So
• 20:35
  Speaker 1: this is a gimmick as a way to try to
• 20:37
  Speaker 1: avoid the unquote regulation and so on. Secondly, you know
• 20:43
  Speaker 1: there are two billion users on Facebook, most of them
• 20:45
  Speaker 1: are only mos. Anybody can sign up with fake name.
• 20:48
  Speaker 1: I suppose that you sign up and then you can
• 20:50
  Speaker 1: take some of these libra from US and send it
• 20:53
  Speaker 1: to Panama or any other shore financial center. And again,
• 20:56
  Speaker 1: all the rules about anti money laundering or not your customers.
• 21:00
  Speaker 1: I've breached that, of course, you know, uh, financial officials
• 21:04
  Speaker 1: are worried about it. This is not the little bit
• 21:06
  Speaker 1: small cryptoscam. You know, one of the largest company the
• 21:10
  Speaker 1: world wants to create essentially a money function without having
• 21:16
  Speaker 1: a banking license, without proper anti money laundering, without proper
• 21:21
  Speaker 1: not your customer stuff. And they're saying we're not going
• 21:23
  Speaker 1: to allow it, rightly so, and it was striking the
• 21:27
  Speaker 1: Facebook literature about this. And of course they always say
• 21:30
  Speaker 1: they're only going to have a small number of votes
• 21:31
  Speaker 1: in this, It's going to be a lot of other
• 21:34
  Speaker 1: players if it goes ahead. UM, I share some of
• 21:37
  Speaker 1: your skepticism, but it's extraordinary when you look at they're
• 21:40
  Speaker 1: what they're claiming about it. They'll say, they say, you
• 21:43
  Speaker 1: should be able to it should be just as easy
• 21:45
  Speaker 1: to transfer money wherever you are in the world to
• 21:48
  Speaker 1: wherever in the world. You shouldn't have any any borders,
• 21:51
  Speaker 1: And that does seem an extraordinary thing that you would
• 21:54
  Speaker 1: expect to be able to do that without any of
• 21:55
  Speaker 1: the normal obstacles to cross border banking or any of
• 22:00
  Speaker 1: those things. And I've heard you talk quite a lot
• 22:03
  Speaker 1: about what the seeds are for the next global financial
• 22:06
  Speaker 1: crisis and how soon that might be coming. I mean, finally,
• 22:09
  Speaker 1: if you think about how that might play out and
• 22:13
  Speaker 1: those kind of environments, it's really when that happens, it's
• 22:16
  Speaker 1: really important to have some kind of global cooperation. Do
• 22:20
  Speaker 1: you think we're not going to see that at this time?
• 22:22
  Speaker 1: Or we will still have the right kind of collaboration
• 22:24
  Speaker 1: between central banks even if governments are more adults with
• 22:27
  Speaker 1: one another. Well, if the next crisis occurs because of
• 22:32
  Speaker 1: a combination of excessive credit than that and some shocks
• 22:35
  Speaker 1: and things like a trade or attack or between US
• 22:38
  Speaker 1: and China could be triggering of it, or another old
• 22:41
  Speaker 1: shock if us in Iran go to work would be
• 22:44
  Speaker 1: the trigger of it. I think that first of all,
• 22:47
  Speaker 1: we'll have less cooperation in the past, but also the
• 22:51
  Speaker 1: national policies are going to be more constrained compared to
• 22:53
  Speaker 1: the past. You know, fiscal policies constrained because now deficit
• 22:57
  Speaker 1: debts are higher than before. More of their policies constrained
• 23:01
  Speaker 1: because we don't have much headroom. You know, the fathers
• 23:04
  Speaker 1: two and fifty business points of rate cuts before they
• 23:07
  Speaker 1: go to zero. While in Europe, e c B smb
• 23:11
  Speaker 1: Rigs Bank or in Japan the boj are already negative rates.
• 23:15
  Speaker 1: They can go a little more negative, but not much more.
• 23:18
  Speaker 1: And the ability to backstop and bail out banks, corporates
• 23:21
  Speaker 1: or even houshold is constrained for two reasons. One is,
• 23:25
  Speaker 1: there is now a political backlash against building out the
• 23:27
  Speaker 1: bank as well as treat the city the corporations, so
• 23:31
  Speaker 1: I don't think it's going to be as easy. And secondly,
• 23:33
  Speaker 1: you know there's this doom look between banks and the
• 23:36
  Speaker 1: sovereigns Summings are so indebted that a lot of their
• 23:39
  Speaker 1: death is at the hands of the banks, and the
• 23:41
  Speaker 1: banks are themselves fragile because of the exposure to the
• 23:44
  Speaker 1: sovereign and therefore this doom look between some of the
• 23:47
  Speaker 1: banks implies that's going to be very hard to have
• 23:49
  Speaker 1: the same backstop of the financial system we got during
• 23:52
  Speaker 1: the global financial crisis. So when the stuff is going
• 23:55
  Speaker 1: to hit the fan, Unfortunately, compared to ten years ago
• 23:58
  Speaker 1: when we had all the policy bulleis, we've is a
• 24:00
  Speaker 1: lot of them mount the physical credit backstre bailed out
• 24:03
  Speaker 1: this time around is going to constrained becauseine God's going
• 24:06
  Speaker 1: to go from the International Motri Fund to the European
• 24:08
  Speaker 1: Central Bank. Do you think she can hold together the
• 24:10
  Speaker 1: Eurozone through the next recession or potentially crisis the way
• 24:15
  Speaker 1: that Mary drug has I think it's an excellent choice.
• 24:19
  Speaker 1: She's eminently qualified. A great respect for her, and she,
• 24:24
  Speaker 1: like Mary Drugg, is certainly committed to do whatever it
• 24:28
  Speaker 1: takes to keep the Eurozone together. But there are things
• 24:31
  Speaker 1: that are not under the control of the CB. Say
• 24:33
  Speaker 1: suppose that during the next crisis, Italy the output collapses
• 24:39
  Speaker 1: as it is already now in a recession. Lefts and
• 24:41
  Speaker 1: let's go essentially higher and higher. Italy with the publish
• 24:46
  Speaker 1: government is doing policy of nose terity and or reform.
• 24:50
  Speaker 1: They're not going to qualify for the European bailout mechanism
• 24:54
  Speaker 1: that are the es M, nor for what is called
• 24:57
  Speaker 1: the o MT that is the bailout package that the CBS,
• 25:01
  Speaker 1: because the condition for the o m T is essentially
• 25:04
  Speaker 1: that the country is under effectively a program I m
• 25:07
  Speaker 1: F style of program hosterity and the form. And They're
• 25:10
  Speaker 1: big problem with Italy is that Greece was easy problem
• 25:14
  Speaker 1: to want a billion euro public that and there was
• 25:17
  Speaker 1: a troya program two billion euro could back stop both
• 25:20
  Speaker 1: Greece and its own creditors. But Italy is too big
• 25:23
  Speaker 1: to fail but also too big to be saved. The
• 25:26
  Speaker 1: Italian public that there's two point three treat on euros,
• 25:28
  Speaker 1: so there is no MF or EU or CP or
• 25:31
  Speaker 1: troya program can back stop Italy. So if if something
• 25:35
  Speaker 1: were to happen in Italy, either the Italian decide to
• 25:37
  Speaker 1: tighten their belts like risk it in the game of
• 25:40
  Speaker 1: Chicken in two thousands and fifteen gris blinked, or otherwise
• 25:44
  Speaker 1: Italy may jump off the cliff and live the Eurozone,
• 25:47
  Speaker 1: and that may provide an existential threat to the Eurozone itself.
• 25:50
  Speaker 1: We don't know what's gonna happen, but at some point
• 25:53
  Speaker 1: there will be a clash between Italy and not just
• 25:55
  Speaker 1: the you, but before even the uth within Italy in
• 25:58
  Speaker 1: the markets when the same, so there'll be a sunden
• 26:00
  Speaker 1: stop money. It is going to fly out of the banks,
• 26:03
  Speaker 1: run on the banks, around on public debt and anything.
• 26:06
  Speaker 1: Decide this is what we want or we're going to
• 26:08
  Speaker 1: accept the constraints are being in a monetary game with
• 26:11
  Speaker 1: a common currency. We don't know what's going to be
• 26:13
  Speaker 1: the endgame of that particular drama of that slow motion
• 26:17
  Speaker 1: train rack. But we may have a slamotion trainbreck right,
• 26:20
  Speaker 1: so we've got to watch a surprise bubbles and Italy
• 26:24
  Speaker 1: like a hawk to see what's coming next, and US
• 26:27
  Speaker 1: and China and US. Yes, but Italy, that whole in
• 26:31
  Speaker 1: the Eurozone that still is there even though there're supposedly
• 26:34
  Speaker 1: it's been been fixed. You're quite right that that is
• 26:39
  Speaker 1: the key issue that any country that would qualify if
• 26:42
  Speaker 1: you have a run, a really existential run on the
• 26:44
  Speaker 1: on the currency, or a panic around Italy, it would
• 26:48
  Speaker 1: still have to qualify for that support to get. So
• 26:51
  Speaker 1: you face exactly the same issue. It's too big to fail,
• 26:53
  Speaker 1: but potentially too big to say nobly. Thanks very much.
• 26:56
  Speaker 1: It's been pouring rain in Britain woods up in the
• 26:59
  Speaker 1: New Hampshire Mountain the last day or so, but I
• 27:01
  Speaker 1: think the liquidity but the sun's finally coming out so
• 27:05
  Speaker 1: we should get some fresh air. Thank you. Thanks for
• 27:11
  Speaker 1: listening to our first season of Stephanomics. We'll be back
• 27:14
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• 27:18
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• 27:24
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• 27:26
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• 27:29
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• 27:32
  Speaker 1: follow our Economics on Twitter, and you can also find
• 27:35
  Speaker 1: me on at my Stephanomics. The Mexico story in this
• 27:39
  Speaker 1: episode was reported and written by Eric Martin. It was
• 27:43
  Speaker 1: produced by Magnus Hendrickson and edited by Bruce Douglas. Eric's
• 27:47
  Speaker 1: original story on this topic was edited by Anne Riffenberg
• 27:50
  Speaker 1: and David Papadopoulos. Special thanks to the organizers of the
• 27:53
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• 28:00
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• 28:05
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• 28:09
  Speaker 1: Francesco Levy. M