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Why Italy’s Workforce Crisis Is Likely to Get Worse · Stephanomics

• 0:06
  Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
• 0:08
  Speaker 1: global economy to you. And one feature of the global
• 0:11
  Speaker 1: economy that's fairly new for anyone under the age of
• 0:14
  Speaker 1: forty is inflation. I've been talking to the Italian economist
• 0:18
  Speaker 1: Neurio Ribini, doctor Doom himself about the different forces that
• 0:22
  Speaker 1: are driving price is higher in Europe and the US,
• 0:25
  Speaker 1: and what the effort to control inflation will do to
• 0:28
  Speaker 1: the global economy. You can hear that chat in just
• 0:31
  Speaker 1: a few minutes. But first we're going to Italy, a
• 0:34
  Speaker 1: country once again cropping up in conversations about a possible
• 0:38
  Speaker 1: crisis in the Eurozone. Now you don't have to worry,
• 0:40
  Speaker 1: it's not happening yet, but there is a fear that
• 0:43
  Speaker 1: as interest rates go up across Europe that's still very
• 0:46
  Speaker 1: debt laid in economy will find it increasingly difficult to
• 0:50
  Speaker 1: make the sums add up. So it matters to all
• 0:53
  Speaker 1: of us if Italy can't grow fast enough to stay
• 0:55
  Speaker 1: on top of its accumulated debt in the years to come,
• 0:58
  Speaker 1: it's not going to grow much at all if it
• 1:00
  Speaker 1: can't coax more of its people back into work. Here
• 1:04
  Speaker 1: has Bloomberg's economy reporter in Rome, Alsanda Miliaccio mort Italy's
• 1:24
  Speaker 1: job market is currently very complex and it doesn't easily
• 1:27
  Speaker 1: allow you to return to work once you've exited. This
• 1:31
  Speaker 1: is very discouraging and really quite sad. That was bat
• 1:39
  Speaker 1: She might sound harmless enough, but the Governor of the
• 1:42
  Speaker 1: Bank of Italy believes she represents one of the biggest
• 1:45
  Speaker 1: threats facing the Italian economy, an army of people who
• 1:49
  Speaker 1: neither have a job nor are looking for one. In
• 1:53
  Speaker 1: early March, speaking in front of the country's economically in
• 1:55
  Speaker 1: the gold painted Shareholders Hall of the Bank of Italy,
• 1:58
  Speaker 1: Governor in Natio Vis offered a long list of problems
• 2:02
  Speaker 1: facing his country, but the most bleak was the two
• 2:06
  Speaker 1: point six million people available for employment but not searching
• 2:10
  Speaker 1: for jobs. That's more than the actual number of job seekers.
• 2:16
  Speaker 1: Policies for planning immgrestion flows, training intuition are lacking. The
• 2:22
  Speaker 1: labor market participation rate is among the lowest, especially in
• 2:26
  Speaker 1: southern Italy. Those figures said Italy apart from all its
• 2:30
  Speaker 1: European peers, even Spain, where there are more unemployed people
• 2:34
  Speaker 1: but almost all of them are actively seeking work. That
• 2:37
  Speaker 1: means there's huge potential in the economy that isn't being unlocked.
• 2:41
  Speaker 1: It also means productivity could improve, especially in the country's
• 2:45
  Speaker 1: southern regions, where unemployment figures are often double those on
• 2:48
  Speaker 1: the rest of Italy. In that same speech, Governor Visco
• 2:52
  Speaker 1: said the country needs to find solutions, particularly in light
• 2:55
  Speaker 1: of a population that is both aging and shrinking of
• 3:00
  Speaker 1: the phatoric train and overcoming the factors that in the
• 3:03
  Speaker 1: prolutivity growth has become even more necessary given the demographic
• 3:09
  Speaker 1: projections which point to a downward trend in the labor
• 3:13
  Speaker 1: force that can only partly be counted by an improvement
• 3:18
  Speaker 1: in the immigration balance and by an increase in labor
• 3:22
  Speaker 1: market participation. Most present projections show that over the next
• 3:29
  Speaker 1: fifteen years, the population aged fifteen to sixty four will
• 3:34
  Speaker 1: fall by percent, or about five million people, half of
• 3:39
  Speaker 1: wound in the south. Unlocking that job's potential trapped in
• 3:45
  Speaker 1: the inertia of the Eurozone's third biggest economy is key
• 3:48
  Speaker 1: to Italyast future prosperity. Some of the problems, the governor said,
• 3:52
  Speaker 1: is schooling and a low skilled labor force. According to
• 3:56
  Speaker 1: Andre Apprenticeship, professor of Innovation Management and rector of Lewis
• 3:59
  Speaker 1: Universe City in Rome, many people have absolute skills and
• 4:03
  Speaker 1: are not sure how to retrain themselves. He also believes
• 4:07
  Speaker 1: young people often don't have the right mindset they need
• 4:10
  Speaker 1: to learn how to learn in order to face a
• 4:14
  Speaker 1: rapidly changing world. I mean this is not just the
• 4:19
  Speaker 1: usual problem of market and demands, and also the idea
• 4:23
  Speaker 1: of throwing money at the issue do not address it fully.
• 4:29
  Speaker 1: So my understanding and fact my proposal will be to
• 4:32
  Speaker 1: rethink the way we to education, because since they know
• 4:36
  Speaker 1: the age of people will lengthen we need to make
• 4:39
  Speaker 1: sure that students and the phone people we learn to
• 4:43
  Speaker 1: learn new jobs. So a shift from content to methods
• 4:49
  Speaker 1: to learn new jobs and invent new ones, or at
• 4:52
  Speaker 1: least craft them. According to the Bagaries of the market.
• 4:56
  Speaker 1: Adapting to the changing labor market has been a challenge
• 4:59
  Speaker 1: for Beatrica, a forty nine year old who has struggled
• 5:02
  Speaker 1: to find a job since losing hers at an insurance
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  Speaker 1: company in Rome during job cuts in two thousand eighteen.
• 5:08
  Speaker 1: Currently helping a friend with childcare, she says she may
• 5:11
  Speaker 1: try to return to the fray of seeking work later
• 5:14
  Speaker 1: this year. After the pandemic struck, it got harder to
• 5:20
  Speaker 1: find work at my skill level, and in the end
• 5:23
  Speaker 1: I ended up helping out a friend with her kids,
• 5:25
  Speaker 1: so I wasn't able to get back into the job market.
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  Speaker 1: It's a pity because I have other abilities and think
• 5:30
  Speaker 1: it's a waste of both potential for me, because I
• 5:33
  Speaker 1: have a great desire to work and for the country.
• 5:43
  Speaker 1: Millions of people flocked to Italy at this time of
• 5:45
  Speaker 1: year to enjoy la dolce vita, whether it's closed, the cars,
• 5:50
  Speaker 1: the food. Probably no country has done a better job
• 5:53
  Speaker 1: of exporting its culture to the rest of the world.
• 5:56
  Speaker 1: But if it can't find a way to sell its
• 5:58
  Speaker 1: economy to its own city, isn't the next few years
• 6:02
  Speaker 1: are going to be bleak. Indeed, in Rome, I'm alissandremactual
• 6:07
  Speaker 1: form News. We have a few minutes now to discuss
• 6:25
  Speaker 1: Italy's plight with Rosam. She's an economist and lecturer in
• 6:31
  Speaker 1: public policy at Rome's Louis University and an advisor to
• 6:37
  Speaker 1: the O E c. D. Rosa, Maria, thank you very
• 6:39
  Speaker 1: much for joining us, and we heard they're about the
• 6:42
  Speaker 1: army of people in Italy who are of working age
• 6:44
  Speaker 1: but are not looking for work. Now, as you know,
• 6:48
  Speaker 1: there has been a lot of discussion in the US
• 6:51
  Speaker 1: and in Europe about the so called Great Resignation. How
• 6:55
  Speaker 1: much of this Italian problem is related to the COVID
• 6:59
  Speaker 1: pandemic and how much is due to more homegrown issues
• 7:03
  Speaker 1: in Italy. Thank you Stephanie for having me and for
• 7:06
  Speaker 1: discussing that is very interesting topic. The Great resignation vary
• 7:10
  Speaker 1: with something that's happening in Italy. But the problem of
• 7:15
  Speaker 1: high in activity in the labor market is a longstanding
• 7:19
  Speaker 1: problem and it's quite structural. But if you unpack this
• 7:23
  Speaker 1: very large number in Italy is the most reason that
• 7:25
  Speaker 1: I got from to thousand nineteen so well before COVID,
• 7:30
  Speaker 1: and we noticed that the largest percentage, like thirty eight
• 7:34
  Speaker 1: point three percent is people in education. And you will
• 7:37
  Speaker 1: consis think that a lot of people study in Italy.
• 7:40
  Speaker 1: But then if you then look at variables about tertiary
• 7:43
  Speaker 1: education attainment or pizza results for high school, it's actually
• 7:48
  Speaker 1: not the case. Italians don't obtain more degrees than other countries.
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  Speaker 1: It's just that it takes longer. One of the reason
• 7:57
  Speaker 1: is that school ages later and you finish the legal
• 8:00
  Speaker 1: age of studying after and also university the way structured
• 8:06
  Speaker 1: encouraged staying more year in education, and so I think
• 8:11
  Speaker 1: there is a structural problem with the education system. The
• 8:15
  Speaker 1: second larger percentage of people who are not actively searching
• 8:18
  Speaker 1: for a job in Italy, it's because of family reason
• 8:22
  Speaker 1: and it's striking Italy. I think it's the lowest female
• 8:26
  Speaker 1: labor market participation in Europe. And as a recent MoMA
• 8:32
  Speaker 1: discussing with moms as well as a scholar, I realized
• 8:36
  Speaker 1: very deeply that is strongly related to the fact that
• 8:40
  Speaker 1: welfare in Italy strongly realized and privately family provided solutions
• 8:47
  Speaker 1: one of the lowest provision of child care services. So
• 8:51
  Speaker 1: getting a kid, especially if you live in the south
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  Speaker 1: of Italy, really kicks you out of the market. Italy
• 8:57
  Speaker 1: is known for having an aging popular action and that
• 9:00
  Speaker 1: obviously affects the workforce directly because you have lots of
• 9:04
  Speaker 1: people retiring. But I guess there's also an indirect effect
• 9:09
  Speaker 1: because there's a lot of old people to look after. Yes,
• 9:12
  Speaker 1: there are more people to look after, so the elderly
• 9:15
  Speaker 1: who used to help families still do it a lot
• 9:18
  Speaker 1: in childcare now become part of the responsibilities of families
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  Speaker 1: and that means usually of women that have to require
• 9:27
  Speaker 1: more flexible contracts and take less less our, bring less
• 9:32
  Speaker 1: hour into the job market, and that usually makes it
• 9:35
  Speaker 1: much harder for them to find the proper location and
• 9:40
  Speaker 1: find the sustainable job. You and I have both even
• 9:45
  Speaker 1: just to negotiate this this meeting, we've both had our
• 9:48
  Speaker 1: family negage obligations to navigate. So we understand that pretty well.
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  Speaker 1: But does the government understand it? And people like the
• 9:56
  Speaker 1: Governor of the Bank of Italy understand that how you
• 10:00
  Speaker 1: could address this need for childcare? It sounds like more
• 10:04
  Speaker 1: than anything, so Italy is lacking behind and provide and
• 10:07
  Speaker 1: provision of childcare services. So and that's especially true in
• 10:12
  Speaker 1: southern part of Italy. And this is for more, let's say,
• 10:16
  Speaker 1: an adoptible discussion and some readings that by being a
• 10:20
  Speaker 1: mom and talking with other moms and even when they
• 10:23
  Speaker 1: can place their kids in childcare, which usually if public
• 10:29
  Speaker 1: close at four pm, that requires them to get a
• 10:33
  Speaker 1: part time or a quite flexible job. And that's not
• 10:37
  Speaker 1: the hr culture in Italy getting flexible jobs and not
• 10:42
  Speaker 1: I don't think even the COVID pandemic and all the
• 10:44
  Speaker 1: work from home solution has changed that. And also it's
• 10:49
  Speaker 1: a regulatory issue. We have a we are accountry with
• 10:53
  Speaker 1: very high taxes on income. So for somebody who hires
• 10:59
  Speaker 1: a person hiring a single person or two part time,
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  Speaker 1: it's very different. It's a rigid market with very small firms,
• 11:09
  Speaker 1: so usually part time jobs are not offered very easily.
• 11:14
  Speaker 1: Even though recent governments have tried to improve the all
• 11:18
  Speaker 1: active labor market services with this cent ridicule. Loo comment
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  Speaker 1: to hiring people to help unemployed people to get jobs,
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  Speaker 1: the results are quite uh striking for their ineffectiveness. So
• 11:32
  Speaker 1: I will tell you this. This job when I was younger,
• 11:34
  Speaker 1: my dad so you should go and register to the
• 11:37
  Speaker 1: unemployment office. And I was okay, I mean I don't
• 11:41
  Speaker 1: really know why, but if you say this is something
• 11:43
  Speaker 1: I just finished school, I should go there. I went
• 11:46
  Speaker 1: there and I told them about myself. So what's your
• 11:49
  Speaker 1: qualification and I said, well, I'm an economist and they
• 11:53
  Speaker 1: were like, I don't know what to do with that.
• 11:56
  Speaker 1: That was just right. That so that's something whatever I
• 12:03
  Speaker 1: told them, Well you can see that they can make
• 12:06
  Speaker 1: it if there's a job opening for like that. They're
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  Speaker 1: very very uneffective for these kind of jobs. Well, it
• 12:15
  Speaker 1: sounds like you get a particular perspective as an economist
• 12:18
  Speaker 1: from also living some of these situations. But I know
• 12:21
  Speaker 1: we're going to run out of time because your own
• 12:22
  Speaker 1: child is going to be coming back to the house.
• 12:24
  Speaker 1: So let me just ask you for people listening. We
• 12:26
  Speaker 1: often talk about because Italy has so much debt, and
• 12:29
  Speaker 1: people are starting to talk about, well, maybe it'll be
• 12:34
  Speaker 1: increasingly difficult for Italy to still service its debt pay
• 12:39
  Speaker 1: the interest on its debt because interesting rates are going up.
• 12:42
  Speaker 1: I don't want to get into all that, but if
• 12:44
  Speaker 1: there's not enough people willing to work who are inactive
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  Speaker 1: in Italy, how does that hurt Italy's economic situation and
• 12:54
  Speaker 1: potentially make it harder for the government to deal with
• 12:59
  Speaker 1: higher interest rate? What's the cost for the economy and
• 13:02
  Speaker 1: for growth. Well, I always think as a GDP as
• 13:06
  Speaker 1: the income of a family or a very large family.
• 13:09
  Speaker 1: If my income keeps shrinking, and of course I will
• 13:13
  Speaker 1: not be able to repay my mortgage. So this is
• 13:17
  Speaker 1: pretty much the situation in Italy. But I just want
• 13:19
  Speaker 1: to make one point. I really don't think that Italian
• 13:23
  Speaker 1: people who are inactive don't want to work. I think
• 13:27
  Speaker 1: they are not in the position to work. I think
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  Speaker 1: the Italian economic system is not able to accommodate and
• 13:33
  Speaker 1: give them a job, so they don't even botter registering
• 13:38
  Speaker 1: to the unemployment office. So because they know that it's
• 13:42
  Speaker 1: not going to be there, and they try informal ways
• 13:44
  Speaker 1: that they don't get there. And this is not sustainable
• 13:47
  Speaker 1: in the long term because basically you're taking off all
• 13:51
  Speaker 1: these energy and creativity and ability and getting get stay
• 13:55
  Speaker 1: stale and cold, and they're not going to be able
• 13:58
  Speaker 1: to contribute to what this country needs to go back
• 14:02
  Speaker 1: and to go back to a future of growth. And
• 14:06
  Speaker 1: you know, Italy has been stagnating for decades now and
• 14:09
  Speaker 1: the only solution is from the people. So we have
• 14:12
  Speaker 1: to find a solution that I think that our political
• 14:15
  Speaker 1: leaders need to find a way to understand what in
• 14:19
  Speaker 1: our institutional framework is letting all these energy and creativity
• 14:25
  Speaker 1: being chained and wasted instead of literally used. We mentioned
• 14:29
  Speaker 1: at the end of the piece because it's an interesting
• 14:32
  Speaker 1: puzzle for people in the rest of the world that
• 14:34
  Speaker 1: if you look, there's so much about Italian culture and
• 14:38
  Speaker 1: food that has taken over the world. You know, a
• 14:40
  Speaker 1: cappuccinos and uh, we aspire to kind of Italian standards
• 14:45
  Speaker 1: of design and the cars and adult vita and everyone
• 14:49
  Speaker 1: wants to go there on holiday, and yet somehow the
• 14:53
  Speaker 1: country has not managed to capture the benefits of that
• 14:56
  Speaker 1: global success in all its ideas. Isn't out of There's
• 15:00
  Speaker 1: also about companies seeing that potential that you're talking about,
• 15:04
  Speaker 1: that sort of on the sidelines, not able to be
• 15:08
  Speaker 1: playing an active part in the economation. Shouldn't some of
• 15:11
  Speaker 1: these fantastic Italian companies be finding a way to employ
• 15:14
  Speaker 1: these people. I think that there is definitely a weakness
• 15:19
  Speaker 1: in the industrial structure of Italy and many firms are
• 15:25
  Speaker 1: too small to be updated, usually family runs, so they
• 15:29
  Speaker 1: don't have any managerial real managerial qualification, and that affects growth,
• 15:35
  Speaker 1: of course. But then as policy alious, you have to
• 15:38
  Speaker 1: step back and ask why Italian firms are not competing anymore,
• 15:44
  Speaker 1: are not growing anymore like they used to do in
• 15:47
  Speaker 1: the sixties and in the boom area. And as you
• 15:52
  Speaker 1: as you might know, Italy is one of the few
• 15:53
  Speaker 1: countries in which salaries are getting smaller instead of increasing
• 15:57
  Speaker 1: over time. And this is not because each worker is
• 16:02
  Speaker 1: paid less, just because Italian firm used to be on
• 16:05
  Speaker 1: the edge of the frontier of international competition. Now they
• 16:09
  Speaker 1: are shifting to business sectors that are less attractive, less innovative,
• 16:14
  Speaker 1: and can provide lower wages. And so definitely I think
• 16:18
  Speaker 1: there's a lacking of entrepreneurial and managerial current and ability
• 16:22
  Speaker 1: to grow. You're making the example of the cappuccino, but
• 16:26
  Speaker 1: the Italian style coffee has been made very popular in
• 16:29
  Speaker 1: the world by Starbucks, not by an Italian company who
• 16:33
  Speaker 1: then went back to meet to Milan and built a
• 16:36
  Speaker 1: museum of coffee. But that's pretty much it. Tall is
• 16:40
  Speaker 1: very beautiful to be in vacational. It seems like I
• 16:43
  Speaker 1: cannot be working on their owner. Thank you so much,
• 16:45
  Speaker 1: Rosa Maria. That's been wonderful. Now, something else that Italy
• 16:58
  Speaker 1: has been quite good at exporting to the rest of
• 17:00
  Speaker 1: world is economist Mario Drug was an export that went home.
• 17:05
  Speaker 1: Rabini still roams the world and is probably almost as
• 17:09
  Speaker 1: famous for his gloomy but often preseent analysis of what's
• 17:13
  Speaker 1: going on in the world. I had a conversation with
• 17:15
  Speaker 1: New Real at the catar Economic Forum the other day.
• 17:20
  Speaker 1: Here are the highlights we are seeing and experiencing something
• 17:24
  Speaker 1: we haven't experienced at least in many of the developed
• 17:29
  Speaker 1: economies for a long time inflation, significant inflation, and we're
• 17:34
  Speaker 1: using a phrase or a word that we haven't used
• 17:37
  Speaker 1: also for a long time stag inflation. So new Rabini.
• 17:43
  Speaker 1: You're not always known for your optimism about the global economy,
• 17:46
  Speaker 1: but listening to an interview you gave this morning, you
• 17:49
  Speaker 1: seem not just long term gloomy but short term gloomy.
• 17:53
  Speaker 1: You think we're headed inevitably for a recession. So I
• 17:56
  Speaker 1: guess my first question to you is is a hard
• 18:00
  Speaker 1: landing now inevitable? And if so, when did we go
• 18:05
  Speaker 1: past the point of no return? When did you think, oh,
• 18:08
  Speaker 1: this isn't going to end well. Well, people and myself
• 18:12
  Speaker 1: were old enough remember than d in seventies when you
• 18:16
  Speaker 1: had two major all sharks. They were in seventy three
• 18:20
  Speaker 1: between Israel and Arab States, and then in seventy these
• 18:24
  Speaker 1: labing revolution in Iran. They led to oil embargo, spike
• 18:28
  Speaker 1: in all prices, high inflation, and recession. And I think,
• 18:32
  Speaker 1: unfortunately this time around, we have both the man factors
• 18:37
  Speaker 1: and supply factors that are causing stagflation and high inflation.
• 18:42
  Speaker 1: On the the men side, of course, we had loose
• 18:44
  Speaker 1: monitor and physical policies during COVID with excess savings are
• 18:48
  Speaker 1: now leading to pend up demand, But there were a
• 18:51
  Speaker 1: series of negative supply shocks, first impact of COVID lockdown,
• 18:56
  Speaker 1: the inductual supply of labor plobal supply chain prob limbs,
• 19:00
  Speaker 1: but easy with also to other negative supply sharks, the
• 19:04
  Speaker 1: brutal Russian invasion of Ukraine, rising energy prices, food fertilizers,
• 19:09
  Speaker 1: and industrial metals. And now the zero COVID policy of
• 19:13
  Speaker 1: China's leading to slow down growth of China and further
• 19:17
  Speaker 1: bottlenecks on the global supply. So we have a situation
• 19:20
  Speaker 1: similar to the seven is excessive agree demand and negative
• 19:24
  Speaker 1: supply sharks. Now, central banks hope that they can raise
• 19:27
  Speaker 1: rates just enough to slow down economy to bring back
• 19:31
  Speaker 1: inflation to but the history of the last forty years
• 19:36
  Speaker 1: suggests that whenever at least in the US inflation is
• 19:40
  Speaker 1: above five percent and right now is eight and a half,
• 19:43
  Speaker 1: and when unemployment is below five percent right now is
• 19:46
  Speaker 1: three and a half, any attempt by the Fed to
• 19:49
  Speaker 1: essentially raise rates to fight inflation causes a hard landing
• 19:53
  Speaker 1: rather than a soft landing. That's why my baseline scenario
• 19:57
  Speaker 1: right now is of hard landing for the US for
• 20:00
  Speaker 1: the Eurozone, for the UK and most advanced economies. Well,
• 20:03
  Speaker 1: I was going to ask you quickly about that. So
• 20:05
  Speaker 1: as far as your concern, the recession that we would
• 20:07
  Speaker 1: see in the US will inevitably be followed by or
• 20:12
  Speaker 1: come with the recession elsewhere. Well, it's gonna be followed
• 20:16
  Speaker 1: by recession elsewhere for two series of reasons. First of all,
• 20:20
  Speaker 1: when the US needs is the rest of the world
• 20:22
  Speaker 1: that gets it, called US is large enough that what
• 20:25
  Speaker 1: happens economically, as in terms of financial markets in US
• 20:29
  Speaker 1: that affects the global economy to the same factors that
• 20:32
  Speaker 1: are leading to recession US are occurring also in the Eurozone, Europe,
• 20:37
  Speaker 1: and the United Kingdom. If anything, Actually, I would say
• 20:41
  Speaker 1: Europe is more exposed to Russia in terms of energy.
• 20:45
  Speaker 1: Europe is more exposed to the slow that of China,
• 20:48
  Speaker 1: given trade with China, the US falling in value and
• 20:51
  Speaker 1: that inflationary and the recovery of Europe was more annavy
• 20:55
  Speaker 1: than the United States. So in some sense, Europe, Eurozone
• 20:59
  Speaker 1: and UK has fragile, if not more fragile then the
• 21:02
  Speaker 1: United States. We have some understanding about what the FED
• 21:05
  Speaker 1: is going to do. But would you say that Europe
• 21:10
  Speaker 1: potentially has more or less room in terms of the
• 21:14
  Speaker 1: central bank response. I mean they don't face the same
• 21:16
  Speaker 1: kind of demand issue. Well. In terms of levels of
• 21:20
  Speaker 1: inflation rates, the levels in the Eurozone right now are
• 21:24
  Speaker 1: as eyes the United States. Um in the UK is
• 21:29
  Speaker 1: even worse than that. Among advanced economy is the only
• 21:32
  Speaker 1: one that has much lower inflation is still Japan. That
• 21:36
  Speaker 1: explains why the BOJ policy is very different. And it's
• 21:40
  Speaker 1: true that the nature of inflation and Europe may be
• 21:43
  Speaker 1: slightly different. More exposure to energy and Russia more of
• 21:49
  Speaker 1: headline inflation rather than core because of that, slightly less
• 21:53
  Speaker 1: strong wage dynamics, more supply shocks rather than aggregate am shocks.
• 22:01
  Speaker 1: But in a world where you have this stack fraationary shock,
• 22:04
  Speaker 1: whether you're the Fed, d c B, the b O A,
• 22:07
  Speaker 1: SMB R, r b A, you name it, you're in
• 22:10
  Speaker 1: trouble because whenever you have the stacflationary shocks, inflation is higher,
• 22:15
  Speaker 1: growth is lower. If you care about inflation and not
• 22:19
  Speaker 1: the anchoring inflation expectation, you have to exit and normalize
• 22:24
  Speaker 1: sooner and faster. But that increases the risk of a
• 22:26
  Speaker 1: hard learning and if instead you care also, but economic
• 22:30
  Speaker 1: growth and you'll normalize more slowly. Then the risk is
• 22:34
  Speaker 1: that you're gonna have the anchoring of inflation expectation, and
• 22:38
  Speaker 1: whether the shock is supply or the man, in some
• 22:41
  Speaker 1: sense it doesn't matter even in the presence of a
• 22:43
  Speaker 1: supply shock, like we learned from the seventies, if you
• 22:46
  Speaker 1: don't fight inflation, inflation expectation getting the anchored, and you
• 22:51
  Speaker 1: end up with stackflation, not just with inflation but also recession.
• 22:55
  Speaker 1: And I would say U D C B is as
• 22:58
  Speaker 1: much in a pickle as the FED given the exposure
• 23:01
  Speaker 1: to Rush, are given exposure to China, given the more
• 23:04
  Speaker 1: an emic recovery, given that the US falling in value,
• 23:08
  Speaker 1: and therefor you're gonna have more important inflation. So the
• 23:11
  Speaker 1: problems are similar. And when you think about the sort
• 23:14
  Speaker 1: of global knock on effects of this, or we would
• 23:17
  Speaker 1: call it the spillovers we had years after the global
• 23:20
  Speaker 1: financial crisis where we talked about currency wars, and the
• 23:22
  Speaker 1: game in currency wars to was to depreciate your currency
• 23:26
  Speaker 1: and try and import some inflation because inflation was too low.
• 23:29
  Speaker 1: What's the risk now or how much are we already
• 23:31
  Speaker 1: seeing the reverse of that? The stronger the US in
• 23:36
  Speaker 1: effect trying to export inflation through a stronger dollar. Yeah,
• 23:40
  Speaker 1: as stronger dollar implies that inflation is higher in Europe,
• 23:44
  Speaker 1: is the inflation is higher in other advanced economies. More importantly,
• 23:48
  Speaker 1: inflation is also much higher in emerging markets. We're spoken
• 23:52
  Speaker 1: about advanced economies about in some sense the situation of
• 23:56
  Speaker 1: emerging market is more difficult. Of course, you have to
• 23:58
  Speaker 1: make a caveat there are some emerging markets that are
• 24:02
  Speaker 1: energy and or commodity exporters. Those are doing well, like
• 24:06
  Speaker 1: in the region that there are some emerging markets that
• 24:09
  Speaker 1: have stronger macroeconomic fundamentals with lower inflation. But you know,
• 24:14
  Speaker 1: the typical em that is net commoted importer. Now it's
• 24:18
  Speaker 1: facing raising rates in the United States with weakening of
• 24:22
  Speaker 1: their currencies. That lead is too higher inflation and with
• 24:25
  Speaker 1: higher borrowing costs. It has in terms of trade shock
• 24:29
  Speaker 1: because especially in Asia, but also in many other emerging markets,
• 24:33
  Speaker 1: there are net commodity importers, and for them, the rise
• 24:36
  Speaker 1: in energy, food fertilized and that the metal is a
• 24:40
  Speaker 1: major economic shock. Of course, if you're in very poor countries,
• 24:43
  Speaker 1: you get to the point in which they have to
• 24:45
  Speaker 1: worry about hunger, if not famines like in Sub Saudan Africa.
• 24:49
  Speaker 1: And the third shock for emerging market is the slow
• 24:52
  Speaker 1: down of China that is now significantly also affecting negatively
• 24:56
  Speaker 1: especial economic growth in Asia that is connected to the
• 24:59
  Speaker 1: glo sub black chains of of China. So you got
• 25:02
  Speaker 1: the fat shock, you get the dollar shock, you get
• 25:06
  Speaker 1: the terms of straight shock, you get the China shock.
• 25:08
  Speaker 1: So that's why folks at the World Bank of the
• 25:11
  Speaker 1: MF say, for many emergent markets of poor country this
• 25:14
  Speaker 1: is not a COVID recession, is a near depression that
• 25:18
  Speaker 1: they have to worry about. I knew we're going to
• 25:20
  Speaker 1: run out of time, but you have spoken quite a
• 25:22
  Speaker 1: lot about crypto in the past, and I was interested
• 25:25
  Speaker 1: given it's been a pretty turbulent ride for a lot
• 25:29
  Speaker 1: of the crypto occurrencies in the last few months. How
• 25:32
  Speaker 1: how are you looking at the the future? Was it
• 25:35
  Speaker 1: a fat or is it the future? Or are you
• 25:37
  Speaker 1: changing your view? Well, from the peak of the last November,
• 25:42
  Speaker 1: Bitcoin has lost about of its value. Other cryptocurrency have
• 25:48
  Speaker 1: lost eight of them. You know that study suggest that
• 25:53
  Speaker 1: of all I c o s were scams of one
• 25:55
  Speaker 1: sort or another. I think, however, the most important point
• 25:58
  Speaker 1: is that calling cryptocurrencies currencies is a missnumber. Anybody who
• 26:03
  Speaker 1: knows about monetary theory and policy like his excellency, and
• 26:08
  Speaker 1: knows that for something to be money, orcurrency is to
• 26:11
  Speaker 1: be unit of account. Nothing is a price, and bitcoin
• 26:14
  Speaker 1: it has to be a scalable um means of payment.
• 26:19
  Speaker 1: With bitcoin you can do seven transactions for cycles. With
• 26:22
  Speaker 1: the Visa network you can make fifty. It has to
• 26:26
  Speaker 1: be a stable store of value. Here you have an
• 26:29
  Speaker 1: asset can go up and downe in value overnight by
• 26:33
  Speaker 1: not even crypt or conforences accept big one as a
• 26:36
  Speaker 1: means of payment or a store of value and has
• 26:39
  Speaker 1: to be a single numera so you can price the
• 26:43
  Speaker 1: raty price of goods and services. If every good and
• 26:46
  Speaker 1: services different talken, it's like going back to barter, or
• 26:49
  Speaker 1: you cannot even see their realty price. So calling them
• 26:53
  Speaker 1: currencies is really a missnumber. But if it was a misunderstanding,
• 26:56
  Speaker 1: what's happened in the last few months of people will
• 26:59
  Speaker 1: people come to their sense? Is do you think, well,
• 27:01
  Speaker 1: there was a huge bible, there was a fear of
• 27:03
  Speaker 1: missing out, there were ponds of schemes, many people about
• 27:07
  Speaker 1: their peak, and now they've lost effortune whether in the
• 27:11
  Speaker 1: cryptocurrency crypto assets defiance on I think that's in this space.
• 27:16
  Speaker 1: If you want stuff that's going to be not vapor,
• 27:19
  Speaker 1: where you need to find asset back tokens on one
• 27:23
  Speaker 1: sort or another that are backed by real assets or
• 27:26
  Speaker 1: financial assets. Otherwise those that are based on essentially vapor
• 27:30
  Speaker 1: where are going to be disappearing over time. I hesitate
• 27:34
  Speaker 1: to ask this final question to you, Nual, but I
• 27:35
  Speaker 1: was looking at my notes, and the last time we spoke,
• 27:38
  Speaker 1: which was more or less in the middle of COVID,
• 27:42
  Speaker 1: you were predicting that there would be some inflation coming
• 27:47
  Speaker 1: out of COVID that would cause policy mistakes and you
• 27:52
  Speaker 1: would then have a ten year depression in most of
• 27:54
  Speaker 1: the world economy. People take, are we more or less
• 27:57
  Speaker 1: on course for that or can we expect something lightly better? UM.
• 28:01
  Speaker 1: I certainly worry about stack fish in the short run.
• 28:05
  Speaker 1: But the thing that the factors that might lead into
• 28:08
  Speaker 1: mediocre growth are not just short term. If you look
• 28:11
  Speaker 1: at medium term, there whole series of other negative supply shocks.
• 28:15
  Speaker 1: We have the globalization and protection is we're restoring of
• 28:19
  Speaker 1: manufacturing from low cost by cost. You have aging of populations,
• 28:24
  Speaker 1: You have a restriction to migration. You have this decoupling
• 28:28
  Speaker 1: between US and China. You have global climate change in
• 28:31
  Speaker 1: many channels is stactulationally reducing growth and increasing cost of production.
• 28:37
  Speaker 1: You have unfortunately recurrent pandemics. You have cyber warfare. You
• 28:41
  Speaker 1: have a backlash against income and wealth inequality. You have
• 28:44
  Speaker 1: the weaponization of the US dollar. These are all factors
• 28:48
  Speaker 1: that are not short term, that over time may reduce growth,
• 28:52
  Speaker 1: increase cost of production and being stag fationary. So unless
• 28:55
  Speaker 1: we're addressed this issue, we could end up not with
• 28:58
  Speaker 1: a mild recession about something more like depression. We've inflation,
• 29:03
  Speaker 1: men get deeper, slack inflation redes Yes, ladies and gentlemen,
• 29:08
  Speaker 1: dr do thank you very much. Well, that's it for
• 29:17
  Speaker 1: this episode of Stephanomics. Will be back next week, but
• 29:19
  Speaker 1: in the meantime, do please rate the show if you
• 29:22
  Speaker 1: like it, and check out the Bloomberg News website for
• 29:25
  Speaker 1: more economic news and views on the global economy. You
• 29:28
  Speaker 1: can also follow at economics on Twitter. This episode was
• 29:32
  Speaker 1: produced by Summer Sadi and Young Young, with special thanks
• 29:35
  Speaker 1: to Nuriel Roubini, the Catar Economic Forum, Rosa Mariaetti and
• 29:39
  Speaker 1: Alessandra Meliaccio. Mike Sasso is the executive producer of Stephanomics
• 30:00
  Speaker 1: THO