Latest / Trumponomics / Crisis Rock Stars Rate the World’s Response to Covid-19

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Crisis Rock Stars Rate the World’s Response to Covid-19 · Trumponomics

0:00
Speaker 1: I think the deep problem, the deep macro economic problem
0:04
Speaker 1: that the world has today is that savings are exceeding
0:10
Speaker 1: the natural level of private investment, leading to sluggish growth
0:15
Speaker 1: and lack of inflation. That is the world's fundamental problem,
0:19
Speaker 1: and it is not a problem that central banks can
0:23
Speaker 1: on their own resolve. Hello, Welcome to Stephanomics, the podcast
0:31
Speaker 1: that brings the global economy to you. And that was
0:34
Speaker 1: the economist, sometime Biden advisor and former U. S. Treasury
0:38
Speaker 1: Secretary Larry Sumrs. We have a world of economic wisdom
0:42
Speaker 1: and experience on the podcast this week courtesy of the
0:45
Speaker 1: Bloomberg New Economy Forum, which has just been held virtually
0:49
Speaker 1: over four days and multiple time zones. You'll get a
0:52
Speaker 1: sense of just how star studded it was when I
0:55
Speaker 1: tell you the head of the European Central Bank, Christine Laguard,
0:58
Speaker 1: spoke on the second day, and she was and even
1:00
Speaker 1: the headline act top of the bill was the Indian
1:03
Speaker 1: President Narindra Moody. On day three, it was the President
1:07
Speaker 1: of the European Commission. And after that Bill Gate, I
1:10
Speaker 1: didn't talk to any of them, but I did get
1:13
Speaker 1: to talk to the Irish Prime Minister or t Shock
1:16
Speaker 1: Mihal Martin about Brexit, the future of global trade, and
1:20
Speaker 1: where Joe Biden's Irish grandparents came from. You can hear
1:24
Speaker 1: some of that later, but we're going to devote most
1:26
Speaker 1: of the program to a debate about central banks with
1:29
Speaker 1: not one, not too but three former central bank governors.
1:34
Speaker 1: The ex Federal Reserve Chair Janet Yellen, the economist and
1:37
Speaker 1: former head of the Indian Central Bank, Ra Gram Rajan,
1:40
Speaker 1: and Lord Mervin King, governor of the Bank of England
1:43
Speaker 1: from two thousand and three until Oh yes, and Larry Summers.
1:48
Speaker 1: If you don't want to hear those four economic rock
1:50
Speaker 1: stars talk about the economic response to COVID and how
1:54
Speaker 1: central banks might do a better job of serving the
1:56
Speaker 1: whole economy, not just Wall Street. You should we really
2:00
Speaker 1: turn off now, but the rest of you sit back
2:03
Speaker 1: and enjoy the show. I want to spend a few
2:12
Speaker 1: minutes very briefly thinking about how central banks have responded
2:16
Speaker 1: to the pandemic, what's gone right, and maybe what needs
2:19
Speaker 1: to change. Janet Yellen, well, I think central banks of
2:24
Speaker 1: the developed countries have done a very good job of
2:28
Speaker 1: responding to the crisis. There could have been a financial
2:33
Speaker 1: market meltdown there was an overwhelming rush to the safety
2:37
Speaker 1: of cash in March. It threatened massive asset fire sales,
2:44
Speaker 1: which could have caused credit to dry up in the economy,
2:48
Speaker 1: and the FED and other central banks erected emergency liquidity
2:53
Speaker 1: and lending facilities that have really worked and kept credit
2:59
Speaker 1: of owing in the economy. Monetary policy in all the
3:04
Speaker 1: major central banks also became far more accommodative, lower policy rates,
3:11
Speaker 1: expanded asset purchases, forward guidence. In the US, both long
3:18
Speaker 1: and short term interest rates are near historic lows, and
3:23
Speaker 1: they worked to boost intrasensitive sectors. And even here you
3:28
Speaker 1: can see stronger housing in auto sales. But monetary policy
3:34
Speaker 1: has its limits, and the notion that the FED can
3:38
Speaker 1: do all that is required at this point to support
3:42
Speaker 1: the economy um is just wrong, and the FED is
3:47
Speaker 1: really pleading for fiscal relief. I believe it's essential. Lord King,
3:55
Speaker 1: I know you've been You've echoed some of what done
3:58
Speaker 1: it yet and has said in repeatedly saying central banks
4:01
Speaker 1: can't do everything. Do you think they've they've played the
4:04
Speaker 1: expectations game well in this in responding to the crisis,
4:08
Speaker 1: or have they set them too high? So I share
4:11
Speaker 1: much of what Janet has said, but I think to
4:14
Speaker 1: explain what's going wrong, I don't think central banks have
4:17
Speaker 1: explained clearly why expanding the money supply is the right
4:21
Speaker 1: sort of response to a shutdown of the economy created
4:24
Speaker 1: by governments different levels of governments in order to prevent
4:28
Speaker 1: the spread of COVID nineteen. This isn't a conventional recession,
4:33
Speaker 1: and as Janets said, the most important thing for central
4:36
Speaker 1: banks to do now is to say that this is
4:38
Speaker 1: a difficulty, a challenge which needs government response, not central
4:43
Speaker 1: bank response. And I don't think it's government response in
4:46
Speaker 1: the sense of general fiscal easy. I think it's a
4:50
Speaker 1: response that's required to support businesses until we get through
4:54
Speaker 1: this COVID nineteen episode, at which point we can then
4:59
Speaker 1: let the market econ and be discided which businesses will
5:02
Speaker 1: thrive and which will fail, which I don't think we
5:04
Speaker 1: can do at present. And I think that although the
5:07
Speaker 1: actions taken in March were clearly very important and central
5:11
Speaker 1: banks acted very promptly, does beg the question that, since
5:16
Speaker 1: markets have now calmed down, why that very significant liquidity
5:20
Speaker 1: injection hasn't been withdrawn. And I think what's needed as
5:24
Speaker 1: a proper narrative now to explain why these circumstances merit
5:29
Speaker 1: particular central bank responses. I think we have to get
5:32
Speaker 1: away from the idea that if anything goes wrong then
5:36
Speaker 1: central banks have to step in and throw money at
5:38
Speaker 1: the problem, right if you want to respond to what
5:42
Speaker 1: what Lord King has said. But I'm also wondering how
5:45
Speaker 1: emerging market central banks, you would say, have responded and
5:50
Speaker 1: matched that that challenge that that Mervin is outlined well.
5:54
Speaker 1: Janet talked about the advanced country central banks have done
5:58
Speaker 1: having done a fantasty job, and I think this did
6:01
Speaker 1: help many emerging markets which were subject to the same
6:04
Speaker 1: kind of stress that you saw in the beginning of
6:07
Speaker 1: the crisis in March, and the accommodative policies of the
6:12
Speaker 1: Federal Reserve the ECP Bank of Japan helped alleviate some
6:16
Speaker 1: of that e M stress. Also, emerging markets have adopted
6:22
Speaker 1: some of the tools from the Industrial country center bank
6:26
Speaker 1: toolkit to help their governments do the spending which has
6:30
Speaker 1: Merman said is extremely important to ensure the real economy
6:35
Speaker 1: doesn't collapse. That you you maintain the body economic by
6:39
Speaker 1: helping small and medium enterprises and helping households. That requires
6:43
Speaker 1: spending and central banks in Indonesia, Poland across the emerging
6:48
Speaker 1: world have supported their governments. The key question now, of course,
6:53
Speaker 1: is how do you sort of ensure that that bridge
6:56
Speaker 1: which was built to the end of the virus, it
6:59
Speaker 1: actually the extents that far and there are fears in
7:02
Speaker 1: industrial countries it may be too short. And emerging markets
7:06
Speaker 1: didn't build a pretty strong bit breach in the first
7:09
Speaker 1: place because they had very limited resources, and that means
7:13
Speaker 1: that there is far more stress which has built up
7:15
Speaker 1: within the system, which has been hidden by moratoria by
7:19
Speaker 1: payment sort of postponements, and that stress has to be
7:23
Speaker 1: dealt with. This is not a central bank problem. There's
7:26
Speaker 1: a problem of fixing the judicial system so that it
7:30
Speaker 1: can alleviate stress, fixing the you know, debt renegotiation system.
7:35
Speaker 1: And again I landed by saying, so far it's been
7:39
Speaker 1: very good. But whenever you get into these kinds of policies,
7:43
Speaker 1: exit is often a great issue. How do we exit
7:47
Speaker 1: without tanking the system? Once again, and it's too early
7:51
Speaker 1: to start thinking about about it, but it is a
7:54
Speaker 1: question which will face us down the line. Larice I was,
7:57
Speaker 1: let's take it just but if we take from the
7:59
Speaker 1: other three speakers, old has gone right in the major
8:02
Speaker 1: central banks response, But what would you have done differently?
8:07
Speaker 1: The big thing was preventing a financial collapse. The central
8:12
Speaker 1: banks acted definitively to do that. That's all that was
8:17
Speaker 1: ultimately historically important. The mistake is for them to vastly
8:23
Speaker 1: exaggerate their continuing relevance. They lack, starting at the zero
8:29
Speaker 1: bound where we are, the capacity to provide meaningful impetus
8:34
Speaker 1: to their economies in any way that is consistent with
8:38
Speaker 1: any concept of central bank functioning. They do not have
8:41
Speaker 1: the capacity to meaningfully affect the degree of inequality. They
8:46
Speaker 1: do not have the capacity to vaccinate people. They do
8:49
Speaker 1: not have the capacity to fight uh climate change, and
8:54
Speaker 1: they need to acknowledge the limitations of their influence in
8:59
Speaker 1: a clear your way, so there can be no pretending
9:03
Speaker 1: about what they're going to do, and that the authorities
9:06
Speaker 1: have the responsibilities they do. The central banks have also,
9:11
Speaker 1: in my view, not put adequate emphasis on the global
9:15
Speaker 1: dimensions of this problem. A striking feature of the contrast
9:20
Speaker 1: between this crisis and the last crisis is that the
9:24
Speaker 1: last crisis had a major response from the I m
9:27
Speaker 1: F issue in sevesdrs, big increases in lending from the
9:31
Speaker 1: World Bank that was driven by the global community. There
9:35
Speaker 1: has been no baldness at the global level comparable to
9:40
Speaker 1: the boldness at the national level, and that could get
9:44
Speaker 1: us in real trouble uh down the road, as ragou
9:48
Speaker 1: Uh points out, And frankly, the central bankers, because they
9:51
Speaker 1: want to curry domestic political favor in each country, have
9:56
Speaker 1: not had enough to say about that. Just to come
9:59
Speaker 1: back on Uh, you talk about a lack of boldness,
10:02
Speaker 1: I mean there's time. As you've proposed as one of
10:04
Speaker 1: the things that could happen to support the global system,
10:08
Speaker 1: a big new issuance of IMF Special drawing rights SDRs.
10:12
Speaker 1: We have to ask you, have you persuaded incoming President
10:16
Speaker 1: Joe Biden of back yet. I'll speak for themselves. I'm
10:20
Speaker 1: optimistic that the the US will not be the kind
10:23
Speaker 1: of block on that proposal that it has been before.
10:26
Speaker 1: And of course it's possible to do substantial things issuances
10:31
Speaker 1: of five billion dollars without congressional approval, So I'm optimistic
10:37
Speaker 1: that we'll see progress on that. But I think that
10:41
Speaker 1: unlike the central bankers of an earlier era, you have
10:45
Speaker 1: seen much less discussion in the Central banking uh community
10:51
Speaker 1: of the global imperative, particularly the challenges necessary if emerging
10:59
Speaker 1: markets are to avoid a wave of financial crises going forward,
11:04
Speaker 1: the issues associated with debt relief, and I think that's
11:09
Speaker 1: been unfortunate, and I have to say, I think it's
11:11
Speaker 1: been because the central banks have been excessively focused with
11:17
Speaker 1: their domestic politics, which leads them to talk about subjects
11:23
Speaker 1: like small business, like the environment, which are really not
11:27
Speaker 1: basically within their proper remit. John, Yeah, do you agree
11:39
Speaker 1: that that maybe Defense shouldn't be talking about needing to
11:43
Speaker 1: target the difference between black and white unemployment rates, for example,
11:48
Speaker 1: as it did in this summer, and shouldn't be engaging
11:51
Speaker 1: on this broader agenda's climate change. So the FIT is
11:56
Speaker 1: always operated under a dual mandate. It's inflation and maximum employment.
12:04
Speaker 1: And in this environment of very low inflation to low inflation,
12:10
Speaker 1: there's really no conflict whatever between these two goals. And
12:15
Speaker 1: the FED is really focused on trying to create a
12:19
Speaker 1: very strong job market, and I think that they have
12:23
Speaker 1: made that clear. I'm not sure everyone in the public
12:26
Speaker 1: on main street understands that, but full employment is a
12:32
Speaker 1: goal that they order to pursue. Um I agree with
12:35
Speaker 1: Larry that the effective lower bound. There's a big constraint.
12:40
Speaker 1: At this point, they're doing almost all they can do.
12:43
Speaker 1: They need fiscal policy to help, but UM, when they
12:47
Speaker 1: talk about inequality and the disproportionate burdens on minority workers,
12:54
Speaker 1: what they can do is to try to pursue the
12:58
Speaker 1: strongest possible job market, because when they're successful at that,
13:03
Speaker 1: as they were prior to the pandemic with unemployment, it
13:09
Speaker 1: a fifty year lower three and a half percent that
13:13
Speaker 1: brings benefits, particularly to less skilled and minority workers. When
13:19
Speaker 1: job markets are really tight, we saw wages rising most
13:23
Speaker 1: rapidly at the bottom of the wage distribution, UM workers
13:28
Speaker 1: being pulled off to this off from the sidelines. Coming
13:32
Speaker 1: back into the labor market, firms finding it incredibly difficult
13:38
Speaker 1: to hire lowering qualifications, engaging in their own training to
13:44
Speaker 1: bring people up to speed, UM willing to hire people
13:49
Speaker 1: that with a weak labor market, their resumes would have ended,
13:54
Speaker 1: wouldn't have been looked at it all. And the FED
13:58
Speaker 1: has recently revised its framework UM for conducting monetary policy
14:04
Speaker 1: and emphasized that full employment is a broadened inclusive goal,
14:09
Speaker 1: and they've changed their operating strategy to and because of
14:15
Speaker 1: the importance of the effective lower band to pursue that
14:19
Speaker 1: with vigor and I think that's appropriate, and I think
14:22
Speaker 1: it's the strongest contribution that central banks can make to
14:29
Speaker 1: UM trying to deal within equality. They don't have other tools.
14:34
Speaker 1: Can I just see whether we're in agreement? I am
14:37
Speaker 1: pent in agree with the agreement with you on the
14:41
Speaker 1: absolute importance of maximizing employment in the current context when
14:46
Speaker 1: there's no real danger of getting inflation to an excessive level.
14:51
Speaker 1: I am in a hundred agreement with you that maximizing
14:56
Speaker 1: employment is the best social program of all and confers
15:00
Speaker 1: all sorts of benefits. But don't we think that central
15:05
Speaker 1: banks really need to be careful about holding out the
15:10
Speaker 1: idea that they are relevant to sectoral issues involving differentials
15:16
Speaker 1: between one sector and another, or structural issues like environmental protection.
15:23
Speaker 1: Would you agree, for example, that any idea that the
15:27
Speaker 1: BED should make special efforts to buy green bonds is
15:30
Speaker 1: a confusion? So UM, I don't think. I've never heard
15:35
Speaker 1: the FIT say that they're trying to target the unemployment
15:39
Speaker 1: rates or situations of any particular group in the tight
15:44
Speaker 1: labor market. The gaps I think between UM, for example,
15:50
Speaker 1: the unemployment rates of minorities and white skins to narrow.
15:55
Speaker 1: I don't think there's anything they can do on that
15:59
Speaker 1: front beyond a generally strong labor market. So it would
16:04
Speaker 1: be a mistake, I think, to say we're targeting the
16:08
Speaker 1: unemployment rate of any particular groups. And on sustainable UM goals,
16:15
Speaker 1: I think it does make sense for in supervision to
16:21
Speaker 1: be taking the risks from climate change, both climate related
16:27
Speaker 1: risks and the risks of changes and prices um and
16:31
Speaker 1: stranded assets as countries adopt meaningful climate policy, to consider
16:38
Speaker 1: that as a risk to banking organizations, and to do
16:42
Speaker 1: stress tests to look at that. But of course we
16:45
Speaker 1: need public policy oriented toward making a big difference on
16:50
Speaker 1: climate change, and I agree with you that is not
16:53
Speaker 1: something central banks can be asked to accomplish. Not the Kate.
16:58
Speaker 1: We remember the title of this is about main Street
17:01
Speaker 1: or Wall Street. Given what what Larry has said, do
17:05
Speaker 1: you think that central Banks or the Bank of England
17:08
Speaker 1: or other central banks have done enough to show that
17:11
Speaker 1: they're supporting main Street not just Wall Street. Do you
17:14
Speaker 1: worry about the fact that they are perceived to be
17:17
Speaker 1: propping up asset prices as a main tool of policy
17:21
Speaker 1: at the moment. Well, I am concerned that the fact
17:27
Speaker 1: that the narrative about why monetary using has been so
17:30
Speaker 1: strong in these particular circumstances, that narrative hasn't been made clear.
17:36
Speaker 1: So it's not surprising that some people have gone away
17:38
Speaker 1: with the impression that the objective of central banks is
17:42
Speaker 1: to support asset prices. I don't think that is their objective,
17:45
Speaker 1: but I think I can see why some people might
17:48
Speaker 1: think it. I think Chaney is very compelling in arguing
17:52
Speaker 1: that the dual mandate for the FED allows the FED
17:55
Speaker 1: to pursue strategies that will maximize employment. And it's reasonable
17:59
Speaker 1: to argue you and to explain why that strategy will
18:03
Speaker 1: have benefits, for why the constituencies in the country, not
18:07
Speaker 1: just the aggregate, but individual groups would benefit. To Larry Summers,
18:13
Speaker 1: in the response to this great need, the popular need
18:17
Speaker 1: to show that the policy is more inclusive, that globalization
18:20
Speaker 1: could be more inclusive, and to the long list of
18:23
Speaker 1: things that you said that central banks are impotent about,
18:26
Speaker 1: could be just to say central bank's main role now
18:29
Speaker 1: is just to make large scale fiscal action affordable, just
18:33
Speaker 1: as they effectively have this year by keeping rates low,
18:36
Speaker 1: making it possible for governments to borrow. Should they just
18:38
Speaker 1: recognize that that is their main role at this point.
18:43
Speaker 1: I wouldn't put it that way. I would put it
18:45
Speaker 1: that their main role is to support stable, non inflationary
18:50
Speaker 1: economic growth, and I think for the foreseeable future that's
18:55
Speaker 1: likely to involve keeping interest rates at very low levels.
18:59
Speaker 1: I think the deep problem, the deep macroeconomic problem that
19:03
Speaker 1: the world has today is that savings are exceeding the
19:10
Speaker 1: natural level of private investment, putting downwards pressure on interest
19:14
Speaker 1: rates to near zero real interest rate or below UH
19:17
Speaker 1: levels and leading to sluggish growth and lack of inflation.
19:22
Speaker 1: And that is the world's fundamental problem. And it is
19:26
Speaker 1: not a problem that central banks can on their own resolve.
19:30
Speaker 1: It is a problem that central banks can acknowledge. Is
19:34
Speaker 1: Janet certainly has in her period in the period after
19:39
Speaker 1: she left office in very strong and clear ways as
19:42
Speaker 1: the evidence has become UH clearer. But they need to
19:46
Speaker 1: point up this as a problem, recognize that it has
19:50
Speaker 1: important implications for fiscal policy, that it has important implications
19:55
Speaker 1: for the ways in which governments manage their debts, and
19:58
Speaker 1: that they are prepared UH to UH do their part.
20:04
Speaker 1: Doesn't necessarily mean explosions in debt, but it does mean
20:08
Speaker 1: careful thought about a range of fiscal and structural policies.
20:13
Speaker 1: But we do need to recognize that Whereas from the
20:17
Speaker 1: period from the late nineteen seventies until the early two thousands,
20:22
Speaker 1: the central macroeconomic problems were the temptation to inflate and
20:27
Speaker 1: the crowding out of private investment by budget deficits, today
20:32
Speaker 1: the central problem is absorbing all the savings in a
20:36
Speaker 1: healthy way so that we have strong economic growth and
20:40
Speaker 1: we don't have huge leverage and huge financial bubbles. And
20:45
Speaker 1: that is a fundamentally different macro economic problem. The calls
20:50
Speaker 1: for fundamentally different macro economic strategies, of which there may
20:55
Speaker 1: be a role for inflation targeting, but it is largely
20:59
Speaker 1: beside the point in a world where the real problem
21:02
Speaker 1: is insufficient price inflation and excessive asset price inflation, and
21:08
Speaker 1: we need to adjust central banks paradigm to take account
21:13
Speaker 1: of uh those realities. Look, if I can say one
21:16
Speaker 1: more thing, the world's financial leaders said after Dodd Frank
21:23
Speaker 1: was passed, after the Financial Stavility Forum did all its things,
21:28
Speaker 1: that we now had a much healthier financial system that
21:32
Speaker 1: could continue to function without large scale bailouts less than
21:37
Speaker 1: five years after that was definitively proclaimed. We've had the
21:41
Speaker 1: biggest set of actions directed at propping up the financial
21:45
Speaker 1: system in UH global history. And while it's looking okay
21:50
Speaker 1: right now, as Ragou said, we're not sure that even
21:54
Speaker 1: what we've done is going to be enough to hold.
21:57
Speaker 1: That suggests the need for a great, all a fundamental rethinking.
22:02
Speaker 1: John Yellen, what's your response to what what Larry was
22:05
Speaker 1: just saying? Well, I agree very much with Larry. I
22:09
Speaker 1: think he gave an excellent description of what the core
22:13
Speaker 1: problem is that the developed world faces. That there is
22:19
Speaker 1: a glood of saving and a shortage of investment. And
22:24
Speaker 1: that's why the effect of lower bound is such an
22:28
Speaker 1: important constraint. And it's what really means that we have
22:33
Speaker 1: to have fiscal policy, structural policy, and things other than
22:38
Speaker 1: just relying on central banks UM to UH keep healthy
22:46
Speaker 1: growth with low inflation UM. I think central banks need
22:52
Speaker 1: to do what they can, but then not overstate UM
22:57
Speaker 1: what it's possible for them to do UH to FED
23:01
Speaker 1: his recently concluded its strategic policy review and made adjustments
23:08
Speaker 1: to UM its monetary policy strategy, adopting a system called
23:15
Speaker 1: flexible average inflation targeting. I think this is an appropriate change.
23:22
Speaker 1: It somewhat improves the scope for monetary policy to support
23:27
Speaker 1: the economy when short term interest rates are often constrained
23:32
Speaker 1: by the effect of lower bound I think it's helpful
23:36
Speaker 1: in preventing a cycle of falling inflation feeding falling inflation expectations.
23:44
Speaker 1: But well, I strongly believe central banks need to be
23:48
Speaker 1: independent and need to do everything they can. The changes
23:52
Speaker 1: they've made, they're not a game changer from the point
23:55
Speaker 1: of view of secular stagnation and bottom line, I agree
23:59
Speaker 1: with Ring on which which required it's a lot about
24:04
Speaker 1: the importance of fiscal policy at this moment. I have
24:07
Speaker 1: to ask you, would you like to be more closely
24:10
Speaker 1: involved in that as a treasury Treasury secretary for the
24:13
Speaker 1: new administration. I don't have anything for you, and that
24:17
Speaker 1: I'm sorry you don't think you'd be a good Treasury secretary?
24:21
Speaker 1: Could I ask you that? I could probably ask the
24:23
Speaker 1: rest of the panel that for other people to decide.
24:26
Speaker 1: I think, yeah, she would be a great Treasury secretary.
24:30
Speaker 1: But let let me talk about another issue, which is
24:34
Speaker 1: related to Larry's secular stagnation idea. I mean, in some sense,
24:39
Speaker 1: the hope for the world was that fast growing emerging
24:43
Speaker 1: markets and developing countries would provide that demand, which sorely
24:47
Speaker 1: seems lacking at the aggregate level. One of the big
24:50
Speaker 1: concerns we should have with this pandemic is how much
24:53
Speaker 1: scarring has gone on in those economies because they haven't
24:57
Speaker 1: had the ability to provide the kind of fiscal as
25:00
Speaker 1: well as credit support and industrial countries have. So my
25:03
Speaker 1: worry is, apart from the North Asian economies which seem
25:07
Speaker 1: to have come out quite well from this crisis, many
25:10
Speaker 1: countries in Latin America, Africa, South Asia are going to
25:14
Speaker 1: suffer some diminishing in growth potential going forward, coupled with
25:19
Speaker 1: some of the impediments to create that we see. I
25:22
Speaker 1: think this is a cause for concern for the global economy.
25:25
Speaker 1: It's something that we should very much work very hard
25:29
Speaker 1: over the next few years to try and reverse. And
25:32
Speaker 1: that's where Larry's called for global sort of leadership I
25:35
Speaker 1: think makes a huge is a huge importance. We all
25:40
Speaker 1: talk about cooperating with China on the most important global issues,
25:45
Speaker 1: there needs to be cooperation with China on the whole
25:49
Speaker 1: set of issues around support for emerging markets. If central
25:55
Speaker 1: banks could explain, not that they can do it, but
26:00
Speaker 1: that ultimately the financial stability of all the institutions they're
26:04
Speaker 1: responsible for, the financial stability of their economies depends much
26:10
Speaker 1: more urgently on achieving successful global cooperation than it does
26:16
Speaker 1: on anything else. If they could make that case, they
26:21
Speaker 1: would be making a much greater contribution to the current
26:24
Speaker 1: global moment than they currently are. I agree with Mervin,
26:29
Speaker 1: but I think the world looks to the central banking
26:32
Speaker 1: community two explain the nature of the macro economic challenges
26:39
Speaker 1: before it, even if the central banks themselves lack the
26:43
Speaker 1: tools to deal with it. And if the central banking
26:46
Speaker 1: community can explain, as Janet uh just is is. I
26:50
Speaker 1: tried to um a little bit in talking about the
26:54
Speaker 1: absorption of saving problem. If that problem can be laid
26:58
Speaker 1: out clearly, that is the first step. It's not doesn't
27:02
Speaker 1: solve it to lay it out clearly, but it's a
27:04
Speaker 1: crucial step towards the whole range of measures. And you're
27:08
Speaker 1: absolutely right, Mervin, that it involves a million different things
27:12
Speaker 1: that are necessary to resolve it. But first we need
27:15
Speaker 1: to to find that problem, and that's something central banks
27:18
Speaker 1: can surely do. Lord Mervin King Ragan, Janet Yellen and
27:23
Speaker 1: Larry Summers. Thank you very much. We could end the
27:34
Speaker 1: podcast there, but I wanted to give you a short
27:37
Speaker 1: taste of my conversation with the Irish tea shop or
27:39
Speaker 1: Prime Minister Mihal Martin. He'd recently had a warm phone
27:43
Speaker 1: conversation with President elect Joe Biden and I couldn't resist
27:46
Speaker 1: asking him about that. But come January one, the UK
27:50
Speaker 1: will no longer be trading on the rules it had
27:52
Speaker 1: while it was inside the European Union. It will be
27:55
Speaker 1: fully out and with six weeks to go, we still
27:59
Speaker 1: don't know what comes next. We do know that Ireland
28:03
Speaker 1: is stuck in the middle and has a huge stake
28:05
Speaker 1: in what happens. I started by asking him whether he
28:08
Speaker 1: thought these last minute negotiations we're going to produce a deal.
28:17
Speaker 1: I would still hope there will be a comprehensive trade deal,
28:19
Speaker 1: but it will be challenging my sense of if there's
28:22
Speaker 1: a political will in the United Kingdom to get a
28:26
Speaker 1: Brexit deal done, then it will happen. I think the
28:28
Speaker 1: European Union want a deal of that. I'm clear not
28:32
Speaker 1: an advanced but it's our view and it's Ireland's as
28:36
Speaker 1: a member state that is in the interests of our
28:40
Speaker 1: citizens and respect of economies to get a deal that
28:43
Speaker 1: makes sense, and no deal would be very damaging to
28:46
Speaker 1: our respective economies. Logic dictates we should we do. We
28:49
Speaker 1: should do everything we pass we can to get a deal.
28:51
Speaker 1: It's a responsible thing as politicians to do in behalf
28:53
Speaker 1: of the citizens that we represent. We now have an
28:56
Speaker 1: incoming US president who has made very clear his views
29:00
Speaker 1: on the Good Friday Agreement and the importance of their
29:03
Speaker 1: not being a hard border between Northern Ireland and Ireland.
29:07
Speaker 1: Do you think that changes the calculus? Do you think
29:09
Speaker 1: that makes it more likely that Boris Johnson would compromise
29:13
Speaker 1: with the EU? I think it's it's held when I
29:16
Speaker 1: spoke to Joe Biden during the week, very warm, clearly
29:22
Speaker 1: very proud of his Irish heritage, and it makes no
29:24
Speaker 1: secret of that, and we're looking forward to his presidency
29:27
Speaker 1: to be frank from that perspective. But in the more
29:30
Speaker 1: broader issue is the prospects of a Biden presidency being
29:34
Speaker 1: more multilateral in its trust in it and its impulse.
29:37
Speaker 1: That was careful my conversation with the President elect that
29:40
Speaker 1: he was going to engage with Europe now that could
29:42
Speaker 1: That's probably more significant in terms of the impact on
29:44
Speaker 1: the UK's response, because it seems to me that the
29:47
Speaker 1: United Kingdom values its relationship with the United States and
29:50
Speaker 1: vice versa. I think President Biden would too, and so
29:54
Speaker 1: therefore I think the US the new presidency would prefer
29:58
Speaker 1: a deal between Europe in the UK. I think UK
30:01
Speaker 1: is conscious of that, and the president of Lex three
30:06
Speaker 1: climate change, I think Boris Johnson would like him in
30:08
Speaker 1: Gasgow for example, for the cops. So I can see
30:11
Speaker 1: an alignment of of interests here sparked by the President's
30:16
Speaker 1: commitment to montinaturalism and to resetting. If you like the
30:19
Speaker 1: sets of relationships between the US and Europe that might
30:22
Speaker 1: be better, that are wight enhanced, the prospects of a deal,
30:27
Speaker 1: weld broaden it out of it. I mean, you say, itself,
30:29
Speaker 1: it's going to be a shock when we even if
30:32
Speaker 1: you had a deal, it's a big change from what
30:34
Speaker 1: we have before. And the deal itself is not like
30:37
Speaker 1: it is likely to be quite thin compared to what
30:39
Speaker 1: might have been expected. If we're thinking about global cooperation
30:43
Speaker 1: and inspiring more negotiation on trade globally, I mean, are
30:48
Speaker 1: there any positive lessons from this negotiation for the rest
30:51
Speaker 1: of the world or all Are they all negative? I
30:54
Speaker 1: think the the important lesson is I don't engage in
30:58
Speaker 1: any sort of knee jerk reactions to anything, and don't
31:02
Speaker 1: start announcing things or doing things without adequate preparation in advance.
31:06
Speaker 1: I mean, these are very very weighty issues. They're complex,
31:08
Speaker 1: they have a lot of unintended consequences um and they
31:12
Speaker 1: affect people's lives and livelihoods fairly significant as we know. Well.
31:16
Speaker 1: I would hope but that the election of President Biden
31:19
Speaker 1: as well as that we would move to a more
31:21
Speaker 1: open trading prospective. And I think, you know, we're all
31:27
Speaker 1: perplexed at times as to what UK would decide to
31:30
Speaker 1: leave one of the largest trading blots in the world,
31:35
Speaker 1: which has brought about significant economic advancement for all of
31:38
Speaker 1: our economies in Europe. So I think our lessons to
31:41
Speaker 1: be learned in terms of the basic principles that that
31:44
Speaker 1: really power in economy, and I think we need to
31:49
Speaker 1: be very conscious of that and reverse any move towards
31:52
Speaker 1: protectionism and move towards an open trading environment. Obviously, we've
31:57
Speaker 1: had a second wave of COVID coming a US Europe
32:00
Speaker 1: in the last couple of months are in high frequency
32:03
Speaker 1: indicators of the economy show that that is causing a
32:07
Speaker 1: double dick in many economies in terms of activity. How
32:12
Speaker 1: hopeful are you that we can have a faster recovery
32:15
Speaker 1: this time around and maybe even still see that v
32:18
Speaker 1: shape recovery that people have talked about. I think the
32:22
Speaker 1: success or otherwise of vaccines is going to be a
32:24
Speaker 1: very important story from two dozen twenty one um and
32:29
Speaker 1: from the Irish perspective, we we we moved early on
32:31
Speaker 1: the second wave, so we're I think the second lowest
32:35
Speaker 1: incidents in Europe. Now we're doing very well in terms
32:38
Speaker 1: of a downward trajectory of cases, downward in numbers in
32:42
Speaker 1: hospital and I see you. I think in the early
32:45
Speaker 1: part of the tournament twenty one, depending on the efficacy
32:48
Speaker 1: of vaccines as the marriage, I think the by the
32:53
Speaker 1: middle of two dozen twenty one, it could be better
32:55
Speaker 1: than we might have anticipated. And but I think we're
33:00
Speaker 1: we're learning a lot more about the virus that will
33:03
Speaker 1: inform how we exit this level five of restrictions and
33:07
Speaker 1: how long we can protect livelihoods as well as lives,
33:10
Speaker 1: and that's important and to get people back working again
33:12
Speaker 1: in certain sectors travel, tourism, aviation, hospitality. Those are the
33:17
Speaker 1: sectors that I mean that that have been hardest hit.
33:20
Speaker 1: We believe all those sectors can come back much more strongly,
33:23
Speaker 1: more quickly. And finally, just to go back to President Biden,
33:27
Speaker 1: you said yourself, he's one of the presidents who American
33:29
Speaker 1: presidents who is long boasted of his Irish roots. Do
33:33
Speaker 1: you think it's impossible that the Irish, the special relationship
33:37
Speaker 1: that America has with the European country will be with
33:40
Speaker 1: Ireland under President Biden, not the UK. Well, I think
33:44
Speaker 1: he values his relationship with the UK, but there's no
33:46
Speaker 1: question for my conversation last week, he loves Ireland. He's
33:50
Speaker 1: very proud of his Irish heritage. Even in our conversation
33:53
Speaker 1: we spoke about his his great grandparents and his grandparents
33:57
Speaker 1: home in County leve and in in Mail and I
34:01
Speaker 1: said to him, look, we'd like to see you an
34:02
Speaker 1: aranand and he said, you're not going to be able
34:03
Speaker 1: to start me from coming. El Martin, thank you very much,
34:07
Speaker 1: You're very welcome. Indeed, thanks for listening to Stephanomics. We'll
34:17
Speaker 1: be back next week with more on the ground reporting
34:19
Speaker 1: and analysis on anything we think you might want to
34:22
Speaker 1: hear about. Remember you can always find us on the
34:25
Speaker 1: Bloomberg Terminal, website, app, or wherever you get your podcasts.
34:29
Speaker 1: And for more news and analysis from Bloomberg Economics, you
34:31
Speaker 1: should follow at Economics on Twitter. This episode was produced
34:36
Speaker 1: by Magnus Hendrickson, with special thanks to t Shop, Michael Martin,
34:41
Speaker 1: Larry Summers, rum Rajan Janet Yellen, Lord, Mervin King, and
34:47
Speaker 1: Cat Glass. Lucy Meekin is the executive producer of Stephanomics
34:52
Speaker 1: and the head of Bloomberg Podcast is Francesca Levi. Four
35:01
Speaker 1: th